UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION In Re: Case No. 02-83984 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: $4,000,185.80 Amount of Expense Reimbursement requested: $ 507,618.58 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.
Transcript
UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION
In Re:
Case No. 02-83984
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: $4,000,185.80 Amount of Expense Reimbursement requested: $ 507,618.58 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.
UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION
In Re:
Case No. 02-83984
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
INDEX
Application Exhibits A. Monthly Summary of Total Fees and Expenses B. Summary of Fees By Professional C. Monthly Summary of Billed Fees and Hours by Project Category D. Summary of Hours 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.
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION
In Re:
Case No. 02-83984
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 $4,000,185.80 together with
reimbursement for actual and necessary expenses in the amount of $507,618.58 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").
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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, 2002.
This order was superceded, following the sale of PricewaterhouseCoopers’ Business Recovery
Services group to FTI Consulting, Inc., by an Order dated September 30, 2002. 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 $4,000,185.80 fee amount is $600,027.85 that represents the 15%
professional fee holdback referenced in the Administrative Order for the period August 12, 2002
through November 30, 2002. 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
$2,792,185.66 for fees and $407,317.06 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.
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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
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
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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
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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;
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(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
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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, 2002. 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
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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, 2002. 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, 2002.
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.
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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, 2002. 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, 2002.
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
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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.
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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
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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 $290.
8. 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 $25,839.30 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
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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, 2002. 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 2003.
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.
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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.
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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.
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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 $4,000,185.80 and reimbursement of necessary out-
of-pocket expenses in the full amount of $507,618.58 (ii) authorize payment in the amount of
$1,208,000.14 for services rendered and $100,301.52 for necessary out-of-pocket expenses
incurred, but not yet paid (reflecting the 15% holdback on professional fees for the period of
August 12, 2002 through November 30, 2002, as well as the full invoiced amount for the period
November 1 – 30, 2002) to the extent not paid by the Court hearing; and (iii) grant such other
and further relief as the Court deems just and proper.
January 15, 2003
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17
FTI CONSULTING, INC.
/s/ Randall S. Eisenberg_________________
Randall S. Eisenberg Senior Managing Director 1177 Avenue of the Americas New York, NY 10036 (646) 471-7514 Restructuring Advisors and Accountants to the Debtors John Wm. Butler, Jr. John K. Lyons SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive, Suite 2100 Chicago, Illinois 60606-1285 (312) 407-0700 -and- /s/ Douglas M. Foley _________________
Lawrence E. Rifken (VSB No. 29037) Douglas M. Foley (VSN No. 34364) McGUIREWOODS LLP 1750 Tysons Boulevard, Suite 1800 McLean, Virginia 22102-4215 (703) 712-5000 Attorneys for Debtors and Debtors-in-Possession
Holdback (Included in Unpaid Amount) 158,798.66$ 181,216.87$ 152,723.10$ 107,289.22$ 600,027.85$
Exhibit A
US AIRWAYS GROUP, INC.
Monthly Summary of Total Fees and ExpensesFor the Period Covering August 12, 2002 through November 30, 2002
FTI Consulting, Inc. A - 2
EXHIBIT B
US AIRWAYS GROUP, INC., et al.,
SUMMARY OF FEES BY PROFESSIONAL
Summary of Fees By Professional
Name of Professional Person
Position of the Applicant, Number of Years in that Position, Prior Relevant Experience, Year of Obtaining License, Area of Expertise
Total Billed Hours
Total Compensation
Business Recovery Services ProfessionalsEisenberg, 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
$595 142.3 84,668.50
Gutzeit, Gina Senior Managing Director/Partner for 2.3 years, 14.4 years of prior relevant experience; CPA-NY-1986; Business Recovery Services
$550 574.9 316,195.00
Stegenga, Jeff Senior Managing Director/Partner for 4.0 years, 6.0 years of prior relevant experience; holds no licenses; Business Recovery Services
$550 2.0 1,100.00
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
$525 383.3 201,232.50
Yarbrough, Clifton Managing Director/Director for 3.0 years; 10.0 years of prior relevant experience; CPA-TX-1993; Business Recovery Services
$500 2.5 1,250.00
Gumbs, Sean Managing Director/Director for 0.5 years; 4.5 years of prior relevant experience; holds no licenses; Business Recovery Services
$475 110.5 52,487.50
McCreadie, Michael
Managing Director/Director for 2.5 years; 7.0 years of prior relevant experience; Certified Accountant - Australia - 1994; Business Recovery Services
$475 532.7 253,056.25
Gumbs, Sean Director/Manager for 1.5 years; 3.0 years of prior relevant experience; holds no licenses; Business Recovery Services
$450 6.0 2,700.00
Polli, Jennifer Director/Manager for 2.5 years; 1.8 years of prior relevant experience; holds no licenses; Business Recovery Services
$450 612.9 275,805.00
Rinaldi, Scott Director/Manager for 2.5 years; 3.0 years of prior relevant work experience; holds no licenses; Business Recovery Services
$450 676.2 304,290.00
Kuhn, Lisa Managing Director/Director for 0.5 years; 10.3 years of prior relevant experience; holds no licenses; Business Recovery Services
$425 68.5 30,825.00
Vallerie, James Managing Director/Director for 0.5 years; 9.5 years of prior relevant experience; holds no licenses; Business Recovery Services
$425 604.0 256,700.00
Yozzo, John Director/Manager for 1.8 years; 9.7 years of prior relevant experience; holds no licenses; Business Recovery Services
$400 3.2 1,280.00
Daversa, Aileen Director/Manager for 1.8 years; 7.0 years of prior relevant experience; CPA - 1998; Business Recovery Services
$370 197.2 72,964.00
Niles, Nathan Director/Manager for 0.5 years; 2.5 years of prior relevant experience; holds no licenses; Business Recovery Services
$370 24.4 9,028.00
Riccio, Gregg Director/Manager for 1.5 years; 6.0 years of prior relevant experience; holds no licenses; Business Recovery Services
$370 620.0 229,400.00
Higginbotham, Philip
Consultant/Senior Associate for 2.0 years; 5.0 years of prior relevant experience; holds no licenses, Business Recovery Services
$320 573.6 183,552.00
Hourly Billing Rate
EXHIBIT B
US AIRWAYS GROUP, INC.
For the Period Covering August 12, 2002 through November 30, 2002
FTI Consulting, Inc. B-1
Summary of Fees By Professional
Name of Professional Person
Position of the Applicant, Number of Years in that Position, Prior Relevant Experience, Year of Obtaining License, Area of Expertise
Total Billed Hours
Total Compensation
Hourly Billing Rate
EXHIBIT B
US AIRWAYS GROUP, INC.
For the Period Covering August 12, 2002 through November 30, 2002
Shih, Linda Consultant/Senior Associate for 2.1 years; 2.2 years of prior relevant experience; CPA-NY- 1999; Business Recovery Services
$320 540.1 172,832.00
Stewart, Patrick Consultant/Senior Associate for 2.0 years; 2.0 years of prior relevant experience; holds no licenses; Business Recovery Services
$320 203.7 65,184.00
Braswell, Greg Consultant/Senior Associate for 0.3 years; 2.0 years of prior relevant experience; holds no licenses; Business Recovery Services
$290 56.9 16,501.00
Frishberg, Rachel Consultant/Senior Associate for 1.5 years; 2.0 years of prior relevant experience; holds no licenses; Business Recovery Services
$290 8.4 2,436.00
Houle, Eric Consultant/Senior Associate for 0.5 years; 1.8 years prior relevant experience; holds no licenses; Business Recovery Services
$290 514.5 149,205.00
Manalo, Caroline Consultant/Senior Associate for 1.3 years; 1.3 years of prior relevant experience; holds no licenses; Business Recovery Services
$290 751.5 217,935.00
Montgomery, Robert
Consultant/Senior Associate for 3.5 years; no prior relevant experience; holds no licenses; Business Recovery Services
$290 39.0 11,310.00
Niles, Nathan Consultant/Senior Associate for 1.5 years; 1.0 years of prior relevant experience; holds no licenses; Business Recovery Services
$290 146.8 42,572.00
Stewart, Patrick Consultant/Senior Associate for 2.0 years; 2.0 years of prior relevant experience; holds no licenses; Business Recovery Services
$290 140.0 40,600.00
Ubelhor, Julia Consultant/Senior Associate for 1.8 years; 3.0 years of prior relevant experience; holds no licenses; Business Recovery Services
$290 719.5 208,640.50
Wu, Christine Consultant/Senior Associate for 1.3 years, 2.0 years prior experience; holds no licenses; Business Recovery Services
$290 716.3 207,727.00
Butt, Waqar Associate for 3.5 years; no prior relevant experience; holds no licenses; Business Recovery Services
$265 175.2 46,428.00
Kim, Sally Associate for 1.8 years; no prior relevant experience; holds no licenses; Business Recovery Services
$265 85.3 22,604.50
Martin, Kara Associate for 2.0 years; 1.5 years of prior relevant experience; holds no licenses; Business Recovery Services
$265 29.2 7,738.00
Russell, Hallie Associate for 2.3 years; no prior relevant experience; holds no licenses; Business Recovery Services
$265 689.3 182,664.50
Bellazain, Sheba Associate for 1.6 years; no prior relevant experience; holds no licenses; Business Recovery Services
$215 13.1 2,816.50
Braswell, Greg Associate for 2.0 years; no prior relevant experience; holds no licenses; Business Recovery Services
$215 22.1 4,751.50
Houle, Eric Associate for 1.8 years; no prior relevant experience; holds no licenses; Business Recovery Services
$215 144.9 31,153.50
FTI Consulting, Inc. B-2
Summary of Fees By Professional
Name of Professional Person
Position of the Applicant, Number of Years in that Position, Prior Relevant Experience, Year of Obtaining License, Area of Expertise
Total Billed Hours
Total Compensation
Hourly Billing Rate
EXHIBIT B
US AIRWAYS GROUP, INC.
For the Period Covering August 12, 2002 through November 30, 2002
Inouye, Katherine Associate for 2.5 years; no prior relevant experience; holds no licenses; Business Recovery Services
$215 25.7 5,525.50
Le, James Associate for 2.1 years; no prior relevant experience; holds no licenses; Business Recovery Services
$215 17.3 3,719.50
Belsh, Meir Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services
$185 8.3 1,535.50
Dana, Steven Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services
$185 680.9 125,966.50
DeCaro, Peter Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services
$185 623.7 115,384.50
Gildersleeve, Ryan Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services
$185 177.2 32,782.00
Goodman, James Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services
$185 30.0 5,550.00
Goodman, Victoria Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services
$185 199.4 36,889.00
Holbrook, Anthony
Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services
$185 660.2 122,137.00
Nugent, Megan Associate for 1.4 years; no prior relevant experience; holds no licenses; Business Recovery Services
$185 196.9 36,426.50
Robinson, Joshua Associate for 1.5 years; 1.5 years of prior relevant experience; holds no licenses; Business Recovery Services
$185 669.2 123,802.00
Tedeschi, Edmund Associate for 3.0 years; no prior relevant experience; CPA, PA-2001; Business Recovery Services
$185 289.3 66,312.50
Sub-Total Business Recovery Services Professionals 13,708.1 4,385,663.25
PricewaterhouseCoopers Tax Consulting Services ProfessionalsAeder, Mitch Partner for 4.5 years; 10.6 years of prior relevant experience; JD-1987,
LLM-1991, NY Bar 1988; Tax Consulting Services$595 2.9 1,725.50
Bissondial, Hardeo Partner for 4.5 years; 10 years of prior relevant experience; CPA-PA-1998; Tax Consulting Services
$595 25.9 14,964.25
Janowiecki, Martin
Partner for 8.1 years; 11.1 years of prior relevant experience; CPA-MD-1984, CPA-DC-1996, CPA-VA-1996; Tax Consulting Services
$595 3.0 1,785.00
Sommers, Kathy Director for 3.5 years; 22 years of prior relevant experience; holds no licenses; Tax Consulting Services
$595 1.0 595.00
Sarmasti, Vafa Senior Associate for 4.4 years; 2 years of prior relevant experience; holds no licences; Tax Consulting Services
$425 10.6 4,505.00
FTI Consulting, Inc. B-3
Summary of Fees By Professional
Name of Professional Person
Position of the Applicant, Number of Years in that Position, Prior Relevant Experience, Year of Obtaining License, Area of Expertise
Total Billed Hours
Total Compensation
Hourly Billing Rate
EXHIBIT B
US AIRWAYS GROUP, INC.
For the Period Covering August 12, 2002 through November 30, 2002
Repka, Michael Associate for 1.5 years; 0.5 years of prior relevant experience; holds no licences; Tax Consulting Services
$282 5.8 1,635.60
Patel, Ty Associate for 0.8 years; 1.6 years of prior relevant experience; holds no licences; Tax Consulting Services
$274 2.8 767.20
Jodz, Meghan Associate for 0.4 years; 2.0 years of prior relevant experience; CPA-VA-2002; Tax Consulting Services
Total Expenses 507,618.58$ 248,114.16$ 201,435.26$ 7,462.79$ 43,022.58$ 7,583.79$
EXHIBIT FUS AIRWAYS GROUP, INC.
OUT-OF-POCKET EXPENSES BY PROFESSIONALFor the Period Covering August 12, 2002 through November 30, 2002
FTI Consulting, Inc. F - 2
EXHIBIT G
US AIRWAYS GROUP, INC., et al.,
FINAL ORDER AUTHORIZING THE EMLOYMENT AND RETENTIONOF FTI CONSULTING, INC. AS FINANCIAL
ADVISORS TO THE DEBTORS(Dated September 30, 2002)
John Wm. Butler, Jr. John K. Lyons SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive, Suite 2100 Chicago, Illinois 60606-1285 (312) 407-0700 Lawrence E. Rifken (VSB No. 29037) Douglas M. Foley (VSB No. 34364) McGUIREWOODS LLP 1750 Tysons Boulevard, Suite 1800 McLean, Virginia 22102-4215 (703) 712-5000 Attorneys for Debtors and Debtors-in-Possession
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION
In re: ) ) Case No. 02-83984-SSM US AIRWAYS GROUP, INC., et al., ) Jointly Administered ) Chapter 11 ) Hon. Stephen S. Mitchell
Debtors. )
ORDER APPROVING THE APPLICATION PURSUANT TO FED. R. BANKR. P.
2014(a) FOR ORDER UNDER SECTION 327(a) OF THE BANKRUPTCY
CODE AUTHORIZING THE EMPLOYMENT AND RETENTION OF FTI
CONSULTING, INC. (AS SUCCESSOR IN INTEREST TO THE
BUSINESS RECOVERY SERVICES PRACTICE OF
PRICEWATERHOUSECOOPERS LLP) AS RESTRUCTURING ADVISORS
AND ACCOUNTANTS TO THE DEBTORS
Upon the application (the “Application”)1 of US Airways Group, Inc. (“Group”)
and seven of its subsidiaries and affiliates (the “Affiliate Debtors”),2 debtors and debtors-
in-possession herein (collectively, the “Debtors,” and together with their non-debtor
1 Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Application hereto. 2 The Debtors are the following entities: 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. and Material Services Company, Inc.
affiliates and subsidiaries, the “Company”), for entry of an order pursuant to Federal Rule
of Bankruptcy Procedure 2014(a) (the “Bankruptcy Rules”) and section 327(a) of the
Bankruptcy Code and the Local Bankruptcy Rules for the Eastern District of Virginia
(the “Local Bankruptcy Rules”) authorizing the employment and retention of FTI
Consulting, Inc. (“FTI”) as restructuring advisors and accountants for the Debtors; and
upon the Declaration of Randall S. Eisenberg in support of the Application; and the Court
being satisfied with the representations made in the Application and Declaration that FTI
represents no interest adverse to any of the Debtors’ estates, that FTI is disinterested as
that term is defined in section 101(14) of the Bankruptcy Code, as modified by section
1107(b) of the Bankruptcy Code and that FTI’s employment is necessary and would be in
the best interests of each of the Debtors’ estates; and it appearing that proper and
adequate notice has been given and that no other or further notice is necessary; and upon
the record herein; and after due deliberation thereon; and good and sufficient cause
appearing therefore,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT:
1. The Application is GRANTED.
2. The Debtors’ employment of FTI as their restructuring advisors and
accountants, effective as of August 30, 2002, is approved under section 327(a)
of the Bankruptcy Code and Bankruptcy Rule 2014.
3. FTI shall be compensated in accordance with the standards and procedures set
forth in sections 330 and 331 of the Bankruptcy Code and all applicable
Bankruptcy Rules, Local Bankruptcy Rules, United States Trustee Guidelines
and further orders of this Court.
Dated: September ____, 2002 Alexandria, Virginia
______________________________________ STEPHEN S. MITCHELL UNITED STATES BANKRUPTCY JUDGE
WE ASK FOR THIS: John Wm. Butler, Jr. John K. Lyons SKADDEN, ARPS, SLATE, MEAGHER & FLOW (ILLINOIS) 333 West Wacker Drive, Suite 2100 Chicago, Illinois 60606-1285 (312) 407-0700
-and- /s/ Douglas M. Foley Lawrence E. Rifken (VSB No. 29037) Douglas M. Foley (VSB No. 34364) McGUIREWOODS LLP 1750 Tysons Boulevard, Suite 1800 McLean, Virginia 22102-4215 (703) 712-5000 Attorneys for Debtors and Debtors-in-Possession
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