UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION

Transcription

1 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION In Re: Case No US AIRWAYS GROUP, INC., et al., IN PROCEEDINGS UNDER CHAPTER 11 (Jointly Administered) Debtors. Stephen S. Mitchell UNITED STATES BANKRUPTCY JUDGE FIRST INTERIM APPLICATION FOR ALLOWANCE OF COMPENSATION AND REIMBURSEMENT OF EXPENSES INCURRED BY FTI CONSULTING, INC. AS RESTRUCTURING ADVISORS AND ACCOUNTANTS TO THE DEBTORS FOR THE PERIOD AUGUST 12, 2002 THROUGH NOVEMBER 30, 2002 Name of Applicant: FTI Consulting, Inc. Authorized to Provide Professional Services to: US Airways Group, Inc., et al. 1 Date of Retention Order: Order entered August 12, 2002 PricewaterhouseCoopers LLP Order entered September 30, 2002 FTI Consulting, Inc. as successor in interest Period for which compensation and reimbursement is sought: August 12, 2002 through November 30, 2002 Amount of Compensation requested: $4,000, Amount of Expense Reimbursement requested: $ 507, This is an (a): X interim final application 1 US Airways Group, Inc., US Airways, Inc., Allegheny Airlines, Inc., PSA Airlines, Inc., Piedmont Airlines, Inc., MidAtlantic Airways, Inc., US Airways Leasing and Sales, Inc., Material Services Company, Inc.

2 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION In Re: Case No US AIRWAYS GROUP, INC., et al., IN PROCEEDINGS UNDER CHAPTER 11 (Jointly Administered) Debtors. Stephen S. Mitchell UNITED STATES BANKRUPTCY JUDGE FIRST INTERIM APPLICATION FOR ALLOWANCE OF COMPENSATION AND REIMBURSEMENT OF EXPENSES INCURRED BY FTI CONSULTING, INC. AS RESTRUCTURING ADVISORS AND ACCOUNTANTS TO THE DEBTORS FOR THE PERIOD AUGUST 12, 2002 THROUGH NOVEMBER 30, 2002 Application INDEX Exhibits A. Monthly Summary of Fees and Expenses B. Summary of Fees By Professional C. Monthly Summary of Billed Fees and by Project Category D. Summary of and Fees by Professional by Project Category E. Monthly Summary of Expenses by Category F. Summary of Expenses by Professional by Category G. Final Order Authorizing the Employment and Retention of FTI Consulting, Inc. as Restructuring Advisors and Accountants to the Debtors H. August 12 31, 2002 Monthly Fee Statement (fee and expense detail) I. September 1 30, 2002 Monthly Fee Statement (fee and expense detail) J. October 1 31, 2002 Monthly Fee Statement (fee and expense detail) K. November 1 30, 2002 Monthly Fee Statement (fee and expense detail) Pursuant to the Administrative Order Pursuant to 11 U.S.C. 105(a) and 331 Establishing Procedures For Interim Compensation and Reimbursement of Expenses of Professionals ( Administrative Order ) dated September 6, 2002, FTI Consulting, Inc. is filing this Application with this Court, including Exhibits A-K. FTI Consulting, Inc. is serving this Application on all parties in interest ( Parties In Interest ) referenced in the Administrative Order.

3 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION In Re: Case No US AIRWAYS GROUP, INC., et al., IN PROCEEDINGS UNDER CHAPTER 11 (Jointly Administered) Debtors. Stephen S. Mitchell UNITED STATES BANKRUPTCY JUDGE FIRST INTERIM APPLICATION FOR ALLOWANCE OF COMPENSATION AND REIMBURSEMENT OF EXPENSES INCURRED BY FTI CONSULTING, INC. AS RESTRUCTURING ADVISORS AND ACCOUNTANTS TO THE DEBTORS FOR THE PERIOD AUGUST 12, 2002 THROUGH NOVEMBER 30, 2002 FTI Consulting, Inc., (hereinafter referred to as FTI or the Applicant ) moves pursuant to Sections 330 and 331 of Title 11 of the United States Bankruptcy Code (the Bankruptcy Code ), Rule 2016 of the Federal Rules of Bankruptcy Procedure, and the Administrative Order establishing Procedures for Interim Compensation and Reimbursement of Expenses of Professionals, dated September 6, 2002 (the Administrative Order ), for an Order awarding reasonable interim compensation for professional services rendered as Restructuring Advisors and Accountants to the Debtors in the amount of $4,000, together with reimbursement for actual and necessary expenses in the amount of $507, for the period of August 12, 2002 ( the Petition Date ) through November 30, 2002, inclusive (the First Interim Fee Period or the Application Period ). In support of this application, FTI represents as follows: OVERVIEW 1. This Chapter 11 case commenced with the filing by the Debtors of a Voluntary Petition for Relief under Chapter 11 of the Bankruptcy Code on August 11, 2002 in the United States Bankruptcy Court, Eastern District of Virginia, Alexandria Division (the "Court"). 1

4 2. The Court authorized the employment of PricewaterhouseCoopers LLP as the Restructuring Advisors and Accountants for the Debtors and Debtors-In-Possession under Sections 327(e) and 1107 of the Bankruptcy Code by the Order entered on August 12, This order was superceded, following the sale of PricewaterhouseCoopers Business Recovery Services group to FTI Consulting, Inc., by an Order dated September 30, The Court authorized the employment of FTI Consulting, Inc. as Restructuring Advisors and Accountants for the Debtors and Debtors-In-Possession, as well as successor in interest to PricewaterhouseCoopers LLP, under Sections 327(e) and 1107 of the Bankruptcy Code by this Final Order entered on September 30, 2002 (the Final Order ). 3. This is FTI's first application for compensation and expense reimbursement filed in this case. No previous application for the fees and expenses requested herein has been filed prior with this or any other court. 4. Included in the $4,000, fee amount is $600, that represents the 15% professional fee holdback referenced in the Administrative Order for the period August 12, 2002 through November 30, FTI seeks interim allowance and payment of the fees and expenses in total, including the 15% holdback on professional fees. 5. As of the date hereof, pursuant to the Administrative Order, the Debtors have paid to FTI since the Petition Date payments in respect of the First Interim Fee Period totaling $2,792, for fees and $407, for expenses as detailed in Exhibit A. Prior to the Petition Date, FTI received and continues to hold a retainer from the Debtors in the amount of $500,000. SUMMARY OF SERVICES RENDERED BY APPLICANT 6. The Applicant has performed valuable services as Restructuring Advisors and Accountants to the Debtors. Summary descriptions of the services provided by category are provided below. 2

5 Category 1 Short-term Cash Management FTI assisted the Debtors in developing and implementing new post-petition cash-management procedures in accordance with chapter 11 requirements by; (a) notifying foreign and domestic banks and financial institutions of the Company s chapter 11 filing (relating to approximately 200 different accounts); (b) developing and implementing a correspondence log and communication procedure to ensure the timely resolution of issues related to the Company s bank accounts; (c) requesting cut-off statements from all of the Company s banks and financial institutions to facilitate the accounting cut-off as of the Chapter 11 filing date; (d) coordinating the tracking of all authorized pre-petition payments at US Airways, Inc. and its Express subsidiaries (including Allegheny Airlines, Inc., PSA Airlines, Inc., Piedmont Airlines, Inc., as well as Material Services Company, Inc.); (e) coordinating the approval and tracking of all authorized daily disbursements for each of the Express subsidiaries; and (f) developing a rolling 14-day cash requirement forecast for each of the Express subsidiaries to ensure timely payment of all post-petition obligations. Through these efforts, the Debtors were able to help the Company ensure adherence to Chapter 11 requirements concerning cash controls and better manage its daily disbursement process. Category 2 Post-Petition Accounting and Business Operations FTI assisted the Debtors to operate effectively in a post-petition business environment by developing and conducting training sessions for the Company s accounting staff to ensure proper adherence to Chapter 11 accounting requirements. In addition, FTI implemented controls and procedures to ensure proper classification of all pre- and post-petition vendor invoices and conducted rigorous testing (verified and tested approximately 500 invoices per week at US Airways, Inc. and the Debtors Express subsidiaries) to verify that the procedures were being followed properly in an effort to ensure that the Debtors did not make unauthorized pre-petition payments at US Airways, Inc. and the Debtors Express subsidiaries. FTI also assisted the Company s accounting staff with resolution of various accounting related issues as a result of the Chapter 11 filing, provided support for various day-to-day bookkeeping activities as well as 3

6 provided guidance and advice with respect to the closing of the books and records at month end, in accordance with Chapter 11 accounting requirements. FTI also participated in various Accounts Payable operational meetings to address and resolve vendor and internal process issues on a timely basis. Category 3 Financial Forecasting FTI assisted the Debtors in developing a 13-week cash flow analysis used to monitor and project the Debtors short-term cash flow position during the critical period immediately after the Chapter 11 filing. FTI assisted the Debtors in all aspects of this analysis, including but not limited to: (a) developing a process to maintain and update a rolling 13-week cash flow report on a weekly basis, including supporting analyses, footnotes and assumptions for each of the Debtors operating entities; (b) interviewing the Debtors personnel to evaluate assumptions used to forecast cash receipts and disbursements; (c) gathering actual cash flow data on a weekly basis for comparison to the 13-week cash flow projections for variance analysis; (d) assisting the Company with the reconciliation of the 13-week cash flow projections to the 18-month Financial Planning model; (e) assisting Allegheny Airlines, Inc. with the development and preparation of its 2003 budget; and (f) advising the Company in the development of various business plan assumptions related to the 18-month Financial Planning model. Through these efforts, the Debtors were able to more accurately project anticipated cash inflows and outflow requirements. Category 4 Operational Restructuring Initiatives / Contract Assumption-Rejection Analyses and Strategic Sourcing Initiatives FTI assisted the Debtor develop and implement various operational restructuring initiatives in an effort to reduce costs as a part of the overall restructuring goals. FTI assisted the Company with the development of an aircraft concessions model to help facilitate negotiations with lessors and other parties-in-interest as the Company attempted to reduce the size of its operating fleet and restructure its future aircraft debt obligations. The different types of aircraft and the unique characteristics of each agreement were taken into account during the development of the 4

7 concessions model, which provided the Debtors with a more detailed analysis of its future aircraft debt obligations under varying scenarios. In addition, FTI assisted the Company with a Strategic Sourcing Initiative by helping the Company identify opportunities for reducing spending through either vendor consolidation, vendor renegotiations, outsourcing or in-sourcing certain services, or identifying alternate suppliers and seeking competitive bids. FTI completed a detailed analysis of historical spending by functional area, as well as by vendor and commodity, in order to identify and prioritize the potential areas for savings opportunities. In the process, FTI assisted the Company develop procedures for tracking progress and monitoring savings related to the various savings initiatives and distributed weekly status reports for management to monitor progress. FTI also created and populated a central database to capture all data related to the over 8,000 executory contracts held by the Company to facilitate the monitoring and tracking of assumption and / or rejection decisions. In addition, FTI has participated in meetings with Company personnel to assign responsibility for all contracts to various individuals and developed initial strategies to ensure that procedures are adhered to in relation to the assumption / rejection decision. These efforts will ultimately lead to the elimination of unfavorable contracts thereby reducing the cost structure of the Debtors. Category 5 Vendor Communications Room The Vendor Communication Room (the VCR ) was a critical component of the Debtors vendor communications and management strategy in the immediate post-petition operating environment. FTI assisted the Debtors to field, prioritize and respond to over 1,000 vendor issues during the Application Period on topics including terms renegotiations, general Chapter 11 questions, potential applicability of First Day Orders, and timeliness of post-petition payments. Vendor issues ranged in complexity from minor inquiries to potential major interruptions to operations and FTI helped the Debtors maintain positive working relationships with many of the vendors that responded with questions or concerns while minimizing disruptions to operations. FTI also assisted the Debtors in handling vendor requests regarding modification of post-petition trade terms as well as process and document approximately 300 trade term changes ensuring that 5

8 these changes were properly reflected in the Debtors accounts payable system in a timely manner. Other activities of FTI in this category included: (a) customizing a proprietary call and response tracking database to the Debtors specifications; (b) creating pre-defined and ad-hoc reports to manage the VCR on a daily basis; and (c) interacting with Debtor business and functional groups to resolve vendor issues such as trade term requests and shipping interruptions in a timely manner. Through these efforts, the Debtors were able to respond quickly to vendor concerns resulting in minimal disruption of daily business operations. These efforts also helped the Debtors maintain liquidity in the immediate post-petition period as the Debtors were successful in managing aggregate trade terms. To maximize the efficient administration of the estate, FTI trained and utilized key Debtor vendor management employees to work alongside its professionals in the VCR. Category 6 Bankruptcy Financial Reporting and Related Activities FTI held discussions with Debtors personnel and the U.S. Trustee in regards to monthly operating report requirements and other data requested by the U.S. Trustee, which included Debtors insurance certifications and consolidated tax returns. FTI analyzed local rules to ensure that the Debtors adhered to the U.S. Trustee s requirements for the monthly operating reports filed during this fee period. FTI also held discussions with the Debtors personnel and the U.S. Trustee concerning the filing of appropriate SEC documentation. FTI also assisted the Company with respect to various tax related issues as a result of the Chapter 11 filing and met with bankruptcy counsel to ensure appropriate actions were taken to remain in compliance with all local, state and federal taxing authorities. Category 7 Reclamation Claims FTI was instrumental to the Debtors in meeting the Court deadlines to respond to vendors filing reclamation claims. To meet these deadlines, FTI: (a) coordinated with the Debtors and the Debtors Counsel to define the process for responding to vendor reclamation claims; (b) reviewed and documented 65 vendor reclamation claims with an aggregate value of $5.7 million; 6

9 (c) analyzed all received reclamation claims to determine the face value of non-duplicate claim amounts; (d) participated on telephone calls with reclamation vendors or their representatives to discuss the reclamation process and / or specific details related to their specific demand; (e) coordinated with the Debtors and the Debtors Counsel to design the vendor reconciliation report to be submitted to claimants; and (f) participated on telephone calls with reclamation vendors or their representatives to attempt to reach agreement on allowable reclamation demands and negotiate settlements. Category 8 First Day Motions and Orders FTI assisted the Debtors by analyzing key first day motions to advise the Debtors on required monitoring activities and other Chapter 11 related matters. FTI also coordinated with the Debtors and the Debtors Counsel to administer and track pre-petition payments made pursuant to the First Day Orders granted by the Court by performing activities such as assisting the Debtors and Debtors Counsel to define and implement an internal approval process for payment of pre-petition amounts pursuant to First Day Orders. FTI s efforts in this category allowed the Debtors to transition to a post-petition operating environment with maximum efficiency. Category 9 Preparation of Information / Meeting with the Unsecured Creditors Committee and/or their Advisors FTI expended time in meetings with the Unsecured Creditors Committee (including the organizational meeting held on August 16, 2002), the Committees legal counsel and financial advisors. FTI assisted the Debtors in the preparation of numerous presentations to the Committee and responding to various information requests received from the Unsecured Creditors Committee s financial advisors on topics including, but not limited to, First Day Order compliance, reclamation procedures and statistics, short-term and long-term financial projections and an analysis of the Debtors Statements and Schedules. In addition, FTI assisted the Debtors with the development and compilation of a weekly flash report of financial, cash flow, and operating metrics for distribution to the Committee and their advisors, responded to various 7

10 inquiries relating to the flash report, and participated in weekly conference calls to discuss the weekly results. FTI s efforts have assisted the Debtors in keeping the Committee and their representatives informed of new developments in the case and helped to maintain an effective working relationship with the Committee and their representatives by coordinating all information requests from the Committee s advisors, acting as the liaison to the Committee, as well as maintaining detailed workpapers of all information distributed to the Committee and its advisors. Category 10 Statements and Schedules FTI assisted the Debtors to prepare and file the Statement of Financial Affairs ( Statements ) and Schedule of Assets and Liabilities ( Schedules ), for each of the eight filing legal entities, with the Court on September 25, This combined submission contained approximately 2,500 pages and required close coordination between FTI, the Debtors counsel and various departments within the Debtors, including but not limited to general counsel s office, tax and financial reporting departments. The Debtors Schedules and Statements required significant effort due to the sheer magnitude of the data involved and the timeframe to complete. During the course of the Schedules and Statements documentation process, FTI: (a) participated in organizational meetings with the general counsel s office, tax and financial reporting groups to highlight the process and timeline for filing of the Schedules and Statements; (b) gathered data from various functional and business groups; (c) coordinated with the tax and financial reporting groups to define and execute the process for extracting specific asset data and directly attributable liability data for each of the legal entities to be scheduled separately; (d) developed a process to gather and reconcile information to the Debtors trial balance and balance sheets to ensure completeness of information scheduled; (e) conducted multiple status meetings, conference calls with the Debtors and Debtors counsel to raise or resolve issues related to the collection of data for the Statements and Schedules on a timely basis; (f) coordinated multiple rounds of reviews by US Airways analysts and management of each section within the Statements and Schedules; (g) worked with Debtors and Debtors Counsel to draft the Global 8

11 Notes for the Statements and Schedules for all scheduled entities, an integral part of the ultimate submission to the Court; and (h) coordinated the production of both paper and electronic versions of both draft versions and the final version of documents submitted to the Court on September 25, In addition, FTI compiled workpapers in support of the Statements and Schedules filed with the Bankruptcy court. FTI also assisted the Debtors to collect data to be filed as a supplement to the Statements and Schedules that was filed with the Court on December 2, FTI worked with the Debtors and the Noticing Agent to define data warehousing formats to facilitate the transfer of the liability data to be used for the claims noticing process. FTI s efforts were instrumental to the Debtors fulfilling the requirement for full and complete disclosure of its financial position as of the Petition Date. Category 11 Case Administration FTI expended time in the overall project planning, budgeting, and staffing of this engagement. In addition, FTI conducted periodic meetings with personnel involved in the Debtors reorganization to ensure clear communication on key activities and issues arising in the case. These necessary meetings have helped to maximize the efficient administration of the estate and helped to avoid duplication of effort by professionals involved in the case. These meetings and communications were essential to the efficient coordination of the activity of a multi-functional team, operating at times from various Debtor locations, ranging anywhere from approximately 20 to 35 professionals. Category 12 Preparation of Motions and for Court Hearings and Court Attendance FTI attended various Bankruptcy Court hearings (i.e. First Day hearing and each of the Omnibus hearings) to provide expert witness testimony, if necessary, and informational support to the Debtors and Debtors Counsel as needed on issues ranging from, but not limited to, negotiations with key vendors, contract assumption and rejection decisions, and objections to certain first day motions. FTI also reviewed various court documents including, but not limited to, Motions, Orders and bankruptcy court docket summaries. 9

12 Category 13 Fee Application and Fee Statement FTI expended resources required for the timely filing of monthly fee statements in accordance with the Administrative Order Pursuant to 11 U.S.C. Sections 105(a) and 331 Establishing Procedures For Interim Compensation and Reimbursement of Expenses of Professionals dated September 6, FTI s time expended in preparation of this First Interim Fee Application will be reflected in the Second Interim Fee Application. Category 14 Bankruptcy Tax-Related Issues In accordance with the Order Under Section 327(a) of the Bankruptcy Code Authorizing the Employment and Retention of FTI Consulting, Inc. as Restructuring Advisors and Accountants to the Debtors dated September 26, 2002 and signed by the Honorable Judge Stephen S. Mitchell, United States Bankruptcy Judge in the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria division, FTI was authorized to include certain services of PricewaterhouseCoopers ( PwC ) in FTI s fee statement related to the Debtors estates. During this fee period, PwC conducted research and discussions with the Debtors Tax group to help resolve a range of bankruptcy-related tax issues related to the Chapter 11 filing. Category 15 Preparation for and Attendance at the UCC 341(a) Meeting FTI assisted the Debtors prepare a presentation for the 341 (a) meeting held on October 22, In addition, FTI assisted the Debtors senior management prepare for the 341 (a) meeting as well as attend the meeting. Category 16 Preparation of Liquidation Analysis FTI assisted each of the Debtors in preparing a hypothetical Chapter 7 liquidation analysis for inclusion in the Debtors Disclosure Statement. FTI assisted in developing assumptions through consultation with the Debtor, its counsel and other advisors. In addition, FTI analyzed various third party appraisals and used the industry experience of the Debtors and its advisors to estimate liquidation values for the different types of assets of the Debtors companies. Finally, FTI 10

13 assisted in the estimation of claims under a hypothetical Chapter 7 liquidation based on an analysis of scheduled claims against the estate, filed claims, and claims that could arise as a result of liquidation, in order to evaluate the potential return to creditors in a hypothetical Chapter 7 liquidation scenario. Category 17 Plan of Reorganization / Disclosure Statement During this Application Period, FTI provided assistance to the Debtors and the Debtors Counsel in the preparation of an initial draft of the Company s Plan of Reorganization (the Plan ) and Disclosure Statement. The preparation of the Plan and Disclosure Statement represents a critical step for the Debtors to emerge from bankruptcy under the timeframe contemplated. FTI performed research on other airline industry disclosure statements and plans of reorganization in order to assist the Company complete their Plan and Disclosure Statement. In addition, FTI assisted the Company in the preparation and development of certain aspects of the Disclosure Statement such as the Fresh-Start balance. Category 18 Transition Activities FTI incurred time during this Application Period meeting with various Company personnel to transition various activities that had been performed by the FTI team to US Airways personnel for activities such as the following: (a) reviewing and compiling information for the monthly operating report in compliance with local bankruptcy rules; (b) performing analyses and testing to ensure pre- and post-petition vendor invoices are being identified, cut-off amounts are being calculated accurately, and are being recorded in the Debtors books and records correctly; (c) preparing and consolidating a rolling 13-week cash flow forecast for cash management; (d) coordinating and tracking authorized pre-petition payments made by US Airways, Inc. and the Express subsidiaries; and (e) completing and submitting a 14-day cash requirements forecast for each of the Express subsidiaries to ensure timely payment of post-petition obligations. In addition, FTI professionals participated in various meetings and conference calls with Company personnel to discuss various case management issues and other restructuring related case matters. 11

14 These meetings and discussions were deemed necessary to ensure clear communication between the Company and its advisors relating to case deadlines and milestones. Category 19 Claims Reconciliation FTI assisted in the development of a process and prepared a detailed timeline for the significant milestones related to claims reconciliation for these cases (the Debtors scheduled over 100,000 creditors in their Schedules of Assets and Liabilities and received over $60 billion of filed claims). FTI professionals participated in meetings with the Company s personnel, Company s counsel and Noticing Agent to discuss and resolve issues relating to the claims reconciliation process. FTI prepared a comprehensive training manual to provide instruction to the Company personnel that were assisting with the claims reconciliation process and conducted various training sessions with people from the accounts payable, treasury, tax, and legal departments. FTI prepared and installed (in coordination with Company personnel) a systems-based work environment, which includes a server and networked PCs, database software, and proprietary Claims Management System software to assist with the claims management and reconciliation process. In addition, the FTI claims reconciliation team prepared and modified various reports to provide management with status and progress reports on the claims reconciliation process. Finally, as the Debtors commenced the claims reconciliation process, FTI assisted the Company as it performed numerous claims reconciliations. Category 20 Travel FTI expended time in non-working travel time, charged to the Debtors, limited to 50% of actual flight time and other actual travel time to various client sites. 7. In addition to the description of services provided, Applicant s time records are summarized in Exhibits B D. Applicant s records show a total of 13,770.1 hours rendered for the Application Period. Each professional s time is summarized by every one-tenth of an hour 12

15 of work performed. Exhibit B provides a summary of fees by professional during the Application Period and Exhibit C provides a summary of the hours spent and time charged for each project category. Exhibit D summarizes the services rendered by FTI during the Application Period by professional and project category. The effective hourly average rate for the Application Period is approximately $ A summary of actual and necessary expenses incurred by expense category is included as Exhibit E. Exhibit F summarizes actual and necessary expenses incurred by professional. Detail descriptions of fees and actual and necessary expenses are included in the monthly fee statement excerpts, attached as Exhibits H - J for the Court. 9. FTI carefully reviewed all of its time records and has elected to make certain voluntary reductions to the fees it is requesting. These reductions resulted from eliminating time incurred that FTI believes to be valuable to the efficient and effective execution of its responsibilities, but recognizes that the direct benefit may be less than obvious. For this reason, and in a good faith effort to insure that FTI s compensation request represents proper value, FTI eliminated these fees and expenses from its request. Such voluntary reductions total $413,645 in professional fees and $25, in expenses incurred during the Application Period. The reductions are permanent, with prejudice, and indicate our best effort to ensure that our fees represent appropriate value. RELIEF REQUESTED 10. Section 330 of the Bankruptcy Code, as amended by the Bankruptcy Reform Act of 1994, governs compensation of professionals in a bankruptcy case and empowers the Court to award reasonable compensation for actual and necessary services and reimbursement for actual and necessary expenses. The time and fees incurred by FTI in rendering professional services on behalf of the Debtors should be considered in light of: (a) the novelty and complexity of issues presented and the amounts and results achieved; (b) the time and labor required; (c) the skills 13

16 required to properly perform the financial advisory services; (d) the customary fee to a client for the services rendered outside of bankruptcy; (e) the time constraints imposed by the urgency of the case; (f) the experience, reputation and ability of the professionals rendering services; (g) the efficient administration of the estate; and (h) the avoidance of duplicate fees. FTI believes that the consideration of these criteria more than justifies the compensation requested. a. Novelty and complexity of issues presented and the amounts and results achieved This case involved multi-faceted questions and issues regarding the complex legal structure of the Debtors with eight entities filing Chapter. As noted above, FTI assisted the Debtors in filing eight sets of the Statement of Financial Affairs and the Schedule of Assets and Liabilities with a combined 2,500 pages on September 25, FTI has been instrumental in assisting the Debtors maintain positive working relationships with its vendors with the help of the activity of the VCR and all of the restructuring initiatives being undertaken by the Company. In addition, FTI has played a key role in preparing and communicating important information to various parties-in-interest in these matters, such as the Unsecured Creditors Committee. FTI has also played a key role in helping the Debtors begin the time-consuming process of reconciling all of the claims it has received in the case. Overall, FTI asserts that the professional services provided have been invaluable to the timely progression of the proceedings, which is on a fast-track to confirm its Plan of Reorganization in March b. Time and labor required The time and labor expended by FTI has been commensurate with the size and complexity of the case. FTI made a dedicated effort to avoid duplication of effort and to leverage staff appropriately. The complex issues of the case required staff professionals to conference and collaborate at certain times to ensure the efficient allocation of resources and to plan strategies effectively. While essential to the effective administration of the engagement, to the extent possible these conferences were kept to a minimum. FTI kept management informed of its activities and has not commenced any work or analysis without the consent, knowledge and approval of the Debtors management team. 14

17 c. Skills required to properly perform the financial advisory services - FTI was instrumental in providing facts and reporting results that enabled the Debtors to make informed decisions on complex issues. The specialized and complex nature of these issues require professionals with demonstrated skill and experience to appropriately address the issues, and to provide relevant expert testimony if necessary. As such, FTI was required to utilize certain professionals with substantial experience and expertise for the work associated with this assignment. FTI has spent considerable time and resources over the past several years in developing and refining its reorganization experience, and the professionals who have worked on this case have demonstrated the skill required to provide the services necessary to assist the Debtors throughout these proceedings. d. Customary fee to a client for the services rendered outside of bankruptcy - The compensation requested in this Application reflects the usual and customary fees charged by FTI for similar services in this marketplace. The hourly fees charged to clients are dependent upon the experience of the individuals assigned to the engagement. The fees requested herein are not in excess of those charged to our non-bankruptcy clients. Upon FTI s knowledge and belief, the rates sought for approval herein are commensurate or below the usual and customary rates charged for services performed by comparable experts in bankruptcy cases. FTI s fees for performing services on behalf of the Debtors in this case are fixed at FTI s standard hourly rates and are not contingent on the results achieved. However, FTI s fees are contingent upon approval of the Court. e. Time constraints imposed by the urgency of the case With the goal publicly stated of maintaining these cases on the fast-track for emergence from Chapter 11, the case has moved rapidly, and at times required substantial effort by FTI in completing work to meet specific Court deadlines. An example, as noted above, includes FTI s efforts to meet the September 25, 2002 deadline set by the Court to complete the timely filing of SOFAs and SOALs for all entities. 15

18 f. Experience, reputation and ability of the professionals rendering services- The Debtors selected FTI due to the experience and expertise of its professionals both in bankruptcy proceedings and for its particular industry knowledge. The combination of FTI s industry expertise and bankruptcy experience has enabled the Debtors to make informed decisions during the proceedings. Over the past several years, FTI has been involved in numerous bankruptcy cases and, as a result, has many professionals and support staff who are extremely knowledgeable with respect to the specialized work and analyses required in a Chapter 11 proceeding. g. Efficient administration of the estate - The services in this case were rendered, whenever possible, by those professionals with the lowest billing rates and the degree of experience and specialization needed to perform the services required efficiently and properly. In addition, FTI sought Debtor personnel to assist with services whenever possible. For example, to maximize the administration of the estate, FTI trained and utilized several Debtor personnel to work alongside the professionals in the Claims Reconciliation process and in the Vendor Communication Room. h. The avoidance of duplicate fees - To the best of FTI s knowledge and belief, there has been no duplication of professional services rendered between FTI and any other professionals of the Bankruptcy estate. 11. Other than as it relates to services performed by PwC, no agreement or understanding exists between FTI and any other person for the sharing or division of compensation to be received by them for services rendered in or in connection with this case; and Applicant has not shared in the compensation of any other person in connection with this case. 12. Certain of FTI s time records and expenses for the First Interim Fee Period may not have been scheduled because they had not been tabulated or fully vouched at the time this application was prepared. FTI reserves the right to seek compensation for the time reflected in these records and reimbursement for expenses in a subsequent application, if necessary. 16

19 13. I have read this application and to the best of my knowledge, information and belief formed after reasonable inquiry, certify that it complies with the requirements of such applications and that the fees and disbursements sought are billed at rates in accordance with practices customarily employed by FTI Consulting, Inc. WHEREFORE, FTI Consulting, Inc. respectfully requests this Court to: (i) approve its First Interim Application for compensation for the period from August 12, 2002 through November 30, 2002 in full in the amount of $4,000, and reimbursement of necessary outof-pocket expenses in the full amount of $507, (ii) authorize payment in the amount of $1,208, for services rendered and $100, for necessary out-of-pocket expenses incurred, but not yet paid (reflecting the 15% holdback on professional fees for the period of August 12, 2002 through November 30, 2002, as well as the full invoiced amount for the period November 1 30, 2002) to the extent not paid by the Court hearing; and (iii) grant such other and further relief as the Court deems just and proper. January 15, 2003 [Balance of this page left blank intentionally.] 17

20 FTI CONSULTING, INC. /s/ Randall S. Eisenberg Randall S. Eisenberg Senior Managing Director 1177 Avenue of the Americas New York, NY (646) Restructuring Advisors and Accountants to the Debtors John Wm. Butler, Jr. John K. Lyons SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive, Suite 2100 Chicago, Illinois (312) and- /s/ Douglas M. Foley Lawrence E. Rifken (VSB No ) Douglas M. Foley (VSN No ) McGUIREWOODS LLP 1750 Tysons Boulevard, Suite 1800 McLean, Virginia (703) Attorneys for Debtors and Debtors-in-Possession 18

21 EXHIBIT A US AIRWAYS GROUP, INC., et al., MONTHLY SUMMARY OF TOTAL FEES AND EXPENSES

22 Exhibit A US AIRWAYS GROUP, INC. Monthly Summary of Fees and Expenses For the Period Covering August 12, 2002 through November 30, 2002 August 12-31, 2002 September 1-30, 2002 October 1-31, 2002 November 1-30, 2002 FEES Incurred $ 1,163, $ 1,337, $ 1,121, $ 791, $ 4,413, Voluntary Reduction (105,000.00) (129,500.00) (103,000.00) (76,145.00) (413,645.00) Voluntary Fee Reduction $ (105,000.00) $ (129,500.00) $ (103,000.00) $ (76,145.00) $ (413,645.00) Billed $ 1,058, $ 1,208, $ 1,018, $ 715, $ 4,000, Paid (899,859.09) (1,026,895.63) (865,430.94) - (2,792,185.66) Unpaid $ 158, $ 181, $ 152, $ 715, $ 1,208, Holdback (Included in Unpaid Amount) $ 158, $ 181, $ 152, $ 107, $ 600, EXPENSES Incurred $ 123, $ 162, $ 142, $ 104, $ 533, Expenses Not Billed (9,672.52) (6,000.00) (6,070.66) (4,096.12) (25,839.30) Billed $ 114, $ 156, $ 136, $ 100, $ 507, Paid (114,143.12) (156,668.07) (136,505.87) - (407,317.06) Unpaid $ - $ - $ - $ 100, $ 100, TOTALS Incurred $ 1,287, $ 1,500, $ 1,263, $ 895, $ 4,947, Voluntary Reduction (114,672.52) (135,500.00) (109,070.66) (80,241.12) (439,484.30) Billed $ 1,172, $ 1,364, $ 1,154, $ 815, $ 4,507, Paid (1,014,002.21) (1,183,563.70) (1,001,936.81) - (3,199,502.72) Unpaid $ 158, $ 181, $ 152, $ 815, $ 1,308, Holdback (Included in Unpaid Amount) $ 158, $ 181, $ 152, $ 107, $ 600, FTI Consulting, Inc. A - 2

23 EXHIBIT B US AIRWAYS GROUP, INC., et al., SUMMARY OF FEES BY PROFESSIONAL

24 EXHIBIT B US AIRWAYS GROUP, INC. Summary of Fees By Professional For the Period Covering August 12, 2002 through November 30, 2002 Name of Professional Person Position of the Applicant, Number of Years in that Position, Prior Relevant Experience, Year of Obtaining License, Area of Expertise Business Recovery Services Professionals Eisenberg, Randall Senior Managing Director/Partner for 4.8 years, 8.0 years of prior relevant experience; CPA-CA-1989, CPA-NY-1998, Certified Turnaround Professional; Business Recovery Services Gutzeit, Gina Senior Managing Director/Partner for 2.3 years, 14.4 years of prior relevant experience; CPA-NY-1986; Business Recovery Services Hourly Billing Rate Billed Compensation $ , $ , Stegenga, Jeff Senior Managing Director/Partner for 4.0 years, 6.0 years of prior relevant experience; holds no licenses; Business Recovery Services $ , Ozawa, Michael Senior Managing Director/Partner for 3.5 years; 1.5 years of prior relevant work experience; holds CPA, CIRA and Certified Fraud Examiner credentials; Business Recovery Services Yarbrough, Clifton Managing Director/Director for 3.0 years; 10.0 years of prior relevant experience; CPA-TX-1993; Business Recovery Services $ , $ , Gumbs, Sean McCreadie, Michael Gumbs, Sean Polli, Jennifer Rinaldi, Scott Kuhn, Lisa Vallerie, James Yozzo, John Daversa, Aileen Niles, Nathan Riccio, Gregg Higginbotham, Philip Managing Director/Director for 0.5 years; 4.5 years of prior relevant experience; holds no licenses; Business Recovery Services Managing Director/Director for 2.5 years; 7.0 years of prior relevant experience; Certified Accountant - Australia ; Business Recovery Services Director/Manager for 1.5 years; 3.0 years of prior relevant experience; holds no licenses; Business Recovery Services Director/Manager for 2.5 years; 1.8 years of prior relevant experience; holds no licenses; Business Recovery Services Director/Manager for 2.5 years; 3.0 years of prior relevant work experience; holds no licenses; Business Recovery Services Managing Director/Director for 0.5 years; 10.3 years of prior relevant experience; holds no licenses; Business Recovery Services Managing Director/Director for 0.5 years; 9.5 years of prior relevant experience; holds no licenses; Business Recovery Services Director/Manager for 1.8 years; 9.7 years of prior relevant experience; holds no licenses; Business Recovery Services Director/Manager for 1.8 years; 7.0 years of prior relevant experience; CPA ; Business Recovery Services Director/Manager for 0.5 years; 2.5 years of prior relevant experience; holds no licenses; Business Recovery Services Director/Manager for 1.5 years; 6.0 years of prior relevant experience; holds no licenses; Business Recovery Services Consultant/Senior Associate for 2.0 years; 5.0 years of prior relevant experience; holds no licenses, Business Recovery Services $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , FTI Consulting, Inc. B-1

25 EXHIBIT B US AIRWAYS GROUP, INC. Summary of Fees By Professional For the Period Covering August 12, 2002 through November 30, 2002 Name of Professional Person Shih, Linda Stewart, Patrick Braswell, Greg Frishberg, Rachel Houle, Eric Manalo, Caroline Montgomery, Robert Niles, Nathan Stewart, Patrick Ubelhor, Julia Wu, Christine Butt, Waqar Kim, Sally Martin, Kara Russell, Hallie Bellazain, Sheba Braswell, Greg Houle, Eric Position of the Applicant, Number of Years in that Position, Prior Relevant Experience, Year of Obtaining License, Area of Expertise Consultant/Senior Associate for 2.1 years; 2.2 years of prior relevant experience; CPA-NY- 1999; Business Recovery Services Consultant/Senior Associate for 2.0 years; 2.0 years of prior relevant experience; holds no licenses; Business Recovery Services Consultant/Senior Associate for 0.3 years; 2.0 years of prior relevant experience; holds no licenses; Business Recovery Services Consultant/Senior Associate for 1.5 years; 2.0 years of prior relevant experience; holds no licenses; Business Recovery Services Consultant/Senior Associate for 0.5 years; 1.8 years prior relevant experience; holds no licenses; Business Recovery Services Consultant/Senior Associate for 1.3 years; 1.3 years of prior relevant experience; holds no licenses; Business Recovery Services Consultant/Senior Associate for 3.5 years; no prior relevant experience; holds no licenses; Business Recovery Services Consultant/Senior Associate for 1.5 years; 1.0 years of prior relevant experience; holds no licenses; Business Recovery Services Consultant/Senior Associate for 2.0 years; 2.0 years of prior relevant experience; holds no licenses; Business Recovery Services Consultant/Senior Associate for 1.8 years; 3.0 years of prior relevant experience; holds no licenses; Business Recovery Services Consultant/Senior Associate for 1.3 years, 2.0 years prior experience; holds no licenses; Business Recovery Services Associate for 3.5 years; no prior relevant experience; holds no licenses; Business Recovery Services Associate for 1.8 years; no prior relevant experience; holds no licenses; Business Recovery Services Associate for 2.0 years; 1.5 years of prior relevant experience; holds no licenses; Business Recovery Services Associate for 2.3 years; no prior relevant experience; holds no licenses; Business Recovery Services Associate for 1.6 years; no prior relevant experience; holds no licenses; Business Recovery Services Associate for 2.0 years; no prior relevant experience; holds no licenses; Business Recovery Services Associate for 1.8 years; no prior relevant experience; holds no licenses; Business Recovery Services Hourly Billing Rate Billed Compensation $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , $ , FTI Consulting, Inc. B-2

26 EXHIBIT B US AIRWAYS GROUP, INC. Summary of Fees By Professional For the Period Covering August 12, 2002 through November 30, 2002 Name of Professional Person Inouye, Katherine Position of the Applicant, Number of Years in that Position, Prior Relevant Experience, Year of Obtaining License, Area of Expertise Associate for 2.5 years; no prior relevant experience; holds no licenses; Business Recovery Services Hourly Billing Rate Billed Compensation $ , Le, James Belsh, Meir Dana, Steven DeCaro, Peter Associate for 2.1 years; no prior relevant experience; holds no licenses; Business Recovery Services Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services $ , $ , $ , $ , Gildersleeve, Ryan Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services $ , Goodman, James Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services $ , Goodman, Victoria Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services $ , Holbrook, Anthony Nugent, Megan Robinson, Joshua Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services Associate for 1.5 years; 1.5 years of prior relevant experience; holds no licenses; Business Recovery Services $ , $ , $ , Tedeschi, Edmund Associate for 3.0 years; no prior relevant experience; CPA, PA-2001; Business Recovery Services $ , Sub- Business Recovery Services Professionals 13, ,385, PricewaterhouseCoopers Tax Consulting Services Professionals Aeder, Mitch Partner for 4.5 years; 10.6 years of prior relevant experience; JD-1987, LLM-1991, NY Bar 1988; Tax Consulting Services Bissondial, Hardeo Partner for 4.5 years; 10 years of prior relevant experience; CPA-PA- 1998; Tax Consulting Services $ , $ , Janowiecki, Martin Sommers, Kathy Sarmasti, Vafa Partner for 8.1 years; 11.1 years of prior relevant experience; CPA- MD-1984, CPA-DC-1996, CPA-VA-1996; Tax Consulting Services Director for 3.5 years; 22 years of prior relevant experience; holds no licenses; Tax Consulting Services Senior Associate for 4.4 years; 2 years of prior relevant experience; holds no licences; Tax Consulting Services $ , $ $ , FTI Consulting, Inc. B-3