US Airways Skadden Arps Final Fee Application.Pdf

IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION

In re: ) Case No. 02-83984(SSM) ) Jointly Administered US AIRWAYS GROUP, INC., et al., ) Chapter 11 ) Hon. Stephen S. Mitchell Reorganized Debtors. )

SECOND AND FINAL APPLICATION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP AND ITS AFFILIATED LAW PRACTICE ENTITIES, COUNSEL TO THE DEBTORS-IN-POSSESSION, SEEKING ALLOWANCE AND PAYMENT OF INTERIM COMPENSATION AND REIMBURSEMENT OF EXPENSES UNDER 11 U.S.C. §§ 330 AND 331 FOR THE PERIOD DECEMBER 1, 2002, THROUGH MARCH 31, 2003, AND FINAL APPROVAL OF THE FIRST INTERIM APPLICATION

Name of Applicant: Skadden, Arps, Slate, Meagher & Flom LLP and its Affiliated Law Practice Entities

Authorized to Provide Professional Services to: US Airways Group, Inc. and the Affiliate Debtors

Date of Retention Order: August 12, 2002

Period for W hich Compensation and Reimbursement Are Sought: August 11, 2002, through March 31, 2003

Amount of Compensation Sought as Actual, Reasonable, and Necessary: $18,362,359

Amount of Expense Reimbursement Sought as Actual, Reasonable, and Necessary: $1,478,781

Voluntary Reductions: Monthly Fee Statements: $2,188,365 First Fee Application: $ 47,205 Final Fee Application: $ 50,514 Total Reductions: $2,286,084

This is an/(a): Interim X Final Application.

Aggregate Amounts Paid to Date: $17,169,8481

1 Skadden currently holds $267,811 in surplus Effective Date payments. See infra note 5.

IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION

In re: ) Case No. 02-83984(SSM) ) Jointly Administered US AIRWAYS GROUP, INC., et al., ) Chapter 11 ) Hon. Stephen S. Mitchell Reorganized Debtors. ) ) )

Skadden, Arps, Slate, Meagher & Flom LLP and its affiliated law practice entities ("Skadden"), counsel for US Airways Group, Inc. ("Group") and seven of its subsidiaries and affiliates (the "Affiliate Debtors"),2 reorganized debtors in the above-captioned cases (collectively the " Reorganized Debtors," "US Air- ways," or the "Company")3 in the above-captioned cases (the "Chapter 11 Cases"),

2 The Reorganized 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.

3 During the periods prior to March 31, 2003, prior to the Company's emergence from Chapter 11, the Reorganized Debtors are referred herein as the "Debtors." submits this second and final application (the "Final Application") seeking final allowance and payment of compensation and reimbursement of expenses under 11

U.S.C. §§ 330 and 331 for the period from December 1, 2002, through March 31,

2003 (the "Second Application Period"), in the amount of $11,100,249 in fees and in the amount of $856,311 in charges and disbursements, and for the entire period of these Chapter 11 Cases, August 11, 2002, through March 31, 2003 (the "Case

Period") in the amount of $18,362,359 in fees and in the amount of $1,478,781 in charges and disbursements. As described more fully below, these amounts reflect voluntary reductions of fees, charges and disbursements of $2,286,084, or over

10.3%.4 Accordingly, after taking into account payments previously made by the

Debtors, Skadden seeks payment of $2,671,292 in full settlement of the amounts accrued through March 31, 2003. Skadden submits this Final Application for (a) allowance of compensation for professional services rendered by Skadden to the

Debtors and (b) reimbursement of actual and necessary charges and disbursements incurred by Skadden in the rendition of required professional services on behalf of the Debtors. In support of this Final Application, Skadden represents as follows:

4As described more fully in paragraph 12 below, in addition to the voluntary fee reductions undertaken by Skadden, Skadden also has agreed voluntarily to waive its right to request a fee enhancement from the Debtors.

2 BACKGROUND

1. On August 11, 2002 (the "Petition Date"), Group and each of the

Affiliate Debtors filed voluntary petitions in this Court for reorganization relief under title 11 of the United States Code, 11 U.S.C. §§ 101–1330, as amended (the "Bank- ruptcy Code").

2. On the Petition Date, this Court entered orders providing for the joint administration of the Chapter 11 Cases, and these Cases were consolidated for procedural purposes only. Between the Petition Date and March 31, 2003 (the

"Effective Date"), the Debtors continued to operate their businesses and manage their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the

Bankruptcy Code.

3. On August 16, 2002, the United States Trustee (the "Trustee") appointed the Official Committee of Unsecured Creditors (the "Creditors' Commit- tee" or "Committee") in these Chapter 11 Cases.

4. On December 20, 2002, the Debtors filed their Disclosure

Statement with Respect to Joint Plan of Reorganization of US Airways Group, Inc. and Its Affiliated Debtors and Debtors-in-Possession (the “Disclosure Statement”).

5. This Court entered its Findings of Fact, Conclusions of Law, and Order Under 11 U.S.C. §§ 1129(a) and (b) and Fed. R. Bankr. P. 3020 Confirm- ing the First Amended Joint Plan of Reorganization of US Airways Group, Inc. and

3 its Affiliated Debtors and Debtors-in-Possession, as Modified (the “Confirmation

Order”), on March 18, 2003.

6. The First Amended Joint Plan of Reorganization of US Airways

Group, Inc. and Its Affiliated Debtors and Debtors-in-Possession, as Modified (the

"Plan"), became effective on March 31, 2003.

7. This Court has jurisdiction over this Application pursuant to 28

U.S.C. §§ 157 and 1334. This is a core proceeding within the meaning of 28 U.S.C.

§ 157(b)(2). Venue of these cases in this district is proper pursuant to 28 U.S.C.

§§ 1408 and 1409.

8. The statutory predicates for the relief requested herein are sections 330 and 331 of the Bankruptcy Code and Rule 2016 of the Federal Rules of

Bankruptcy Procedure.

RETENTION OF SKADDEN

9. On the Petition Date, the Debtors applied to this Court for an order approving the retention of Skadden as their restructuring and bankruptcy counsel (the "Retention Application") to perform legal services under a general retainer that was necessary to enable the Debtors faithfully to execute their duties as debtors-in-possession. On August 12, 2002, this Court entered an order (the "Reten-

4 tion Order")5 authorizing the Debtors to employ Skadden as their counsel under the terms set forth in the Retention Application.

10. In the Retention Application, the Debtors disclosed that

Skadden's fees for professional services were based on Skadden's guideline hourly rates, which are periodically adjusted. The Debtors also disclosed in the Retention

Application that Skadden's charges and disbursements were invoiced pursuant to

Skadden's Policy Statement Concerning Charges and Disbursements, a copy of which is attached to the Engagement Agreement. As described in the Retention

Application, certain charges and disbursements are not charged separately under the bundled rate structure.

11. Other than an arrangement between Skadden, Arps, Slate,

Meagher & Flom, LLP and its affiliated law practices and their members, there is no agreement or understanding between Skadden and any person for the sharing of compensation to be received for services rendered in this case.

12. The Retention Order incorporates the terms of an engagement agreement dated as of April 16, 2002 (the "Engagement Agreement"), between

Skadden and the Debtors; a copy of the Engagement Agreement is attached as

5 A copy of the Retention Application, the supporting affidavit, the Retention Order and a supplemental affidavit filed on January 22, 2003, are attached hereto as Exhibit A. These materials include factual information regarding the experience and standing at the bar of certain of Skadden's senior attorneys.

5 Exhibit A to the affidavit supporting the Retention Application. In the Engagement

Agreement, Skadden agreed to provide periodic fee accommodations with respect to the scope and type of matters regularly worked on for the Company in an aggregate amount of up to 10%. The Engagement Agreement also contemplated that Skadden would be entitled to seek a value-added fee enhancement as part of its engagement if its performance as Debtors' counsel so warranted. While Skadden believes that its services during the Chapter 11 Cases warrant such a fee enhancement, Skadden has decided to waive any such enhancement as part of Skadden continuing commitment to the Company's restructuring efforts.

FEE PROCEDURES AND MONTHLY FEE STATEMENTS

13. On September 10, 2002, this Court entered an Administrative

Order Pursuant To 11 U.S.C. §§ 105(a) And 331 Establishing Procedures For Interim

Compensation And Reimbursement Of Expenses Of Professionals (the "Administra- tive Order").

14. In order to minimize costs to the Debtors' estates and avoid duplicative efforts in the review of fee applications filed in these Chapter 11 Cases, the Debtors, the Committee, and the Trustee agreed to the formation of a joint fee review committee (the "Fee Review Committee") to review, comment on, and, if necessary, object to the various fee applications filed in these Chapter 11 Cases. On

August 16, 2002, this Court entered a final administrative order authorizing the

6 establishment of the Fee Review Committee. During the Case Period, the Debtors worked with the Creditors' Committee and the Trustee to establish a fee review protocol for these Chapter 11 Cases. The Fee Review Committee met and agreed to follow an approved protocol (the "Fee Review Protocol") in these Chapter 11 Cases.

One aspect of the Fee Review Protocol instituted a series of procedures (the

"Monthly Statement Procedures") with regard to the submission and review of each monthly fee statement (each a "Monthly Statement") before any Monthly Statement was paid to professionals working on these Chapter 11 Cases. Pursuant to such

Monthly Statement procedures, all Monthly Statements submitted by Skadden have been reviewed by the Fee Review Committee. Skadden has submitted Monthly

Statements totaling $19,938,859 and has received $17,169,848 on account of such statements, which, in accordance with the Administrative Order, consists of 85% of fees requested and 100% of charges and disbursements requested.6

6 With respect to the March, 2003 Monthly Statement, pursuant to the Confir- mation Order, Skadden estimated that the statement for March, 2003 would be in the amount of $4,043,953 for professional fees and $545,350 for charges and disbursements (after extending financial accommodations of approximately $449,000 or about 10% of incurred professional fees as an accommodation in connection with the estimate). Based on the estimate, the Company paid to Skadden on the Effective Date the amount of $3,982,710 (which was net of the 15% Fee Holdback) and deposited the amount of $606,593 in a holdback escrow account. Based on the actual fees, charges and disbursements incurred, the Effective Date Payment to Skadden should have been $3,714,899 and the payment on account of March, 2003 to the holdback escrow account should have been $588,928. As a result, Skadden (continued...)

7 15. Pursuant to paragraph 2(1) and 2(4) of the Administrative

Order, on January 16, 2003, Skadden submitted its First Interim Application of

Skadden, Arps, Slate, Meagher & Flom LLP and Its Affiliated Law Practice Entities,

Counsel to the Debtors-In-Possession, Seeking Allowance and Payment of Interim

Compensation and Reimbursement of Expenses Under 11 U.S.C. §§ 330 and 331

(the "First Fee Application") (Docket #2018). For the period covered by the First

Fee Application (the "First Fee Application Period"), Skadden requested interim allowance of $7,262,110 in fees calculated at the applicable guideline hourly billing rates of the firm's personnel who had worked on the Chapter 11 Cases and $622,470 in charges and disbursements actually and necessarily incurred by Skadden while providing services to the Debtors during the First Fee Application Period. Consistent with Skadden's practices, the First Fee Application reflected a voluntary reduction of fees by $906,773, or approximately 11.2%, and a voluntary reduction of the charges and disbursements by $56,715, or approximately 8.4%, for a total reduction of

$963,488 for items Skadden normally would bill its clients. Due to the fast-track

6(...continued) has held the surplus paid to it of $267,811 pending the Court's ruling on this Final Fee Application. Accordingly, if this Final Application is approved, there will be an amount returnable to the Company from the holdback escrow account in the amount of $285,836 (e.g., the sum of $267,811 already paid to Skadden that will not need to be paid again from the holdback escrow account plus the amount of $18,205 representing the overfunding of the holdback escrow account based on Skadden's estimate).

8 nature of these Chapter 11 Cases, which has been described by BankruptcyData.com

as the fastest Chapter 11 reorganization by a large, publicly traded company, and

resultant restrictions on available court time, the Debtors did not ask the Court to

conduct a hearing to consider the First Fee Application. Accordingly, Skadden

incorporates the First Fee Application herein by reference.

OVERVIEW OF US AIRWAYS GROUP, INC. AND EVENTS LEADING TO CHAPTER 11 FILINGS

16. US Airways is the largest air carrier east of the Mississippi, where more than 60% of the U.S. population resides, and operates the seventh largest airline in the United States and the fourteenth largest airline in the world with

approximately 40,000 full-time and part-time employees as of the Petition Date.

During 2001, the Debtors, which provide air transportation, cargo, and other trans-

portation-related services, carried approximately 56 million passengers and generated

operating revenues of approximately $8.3 billion for the year ended December 31,

2001. The Debtors' Chapter 11 petitions, as amended, listed assets of approximately

$7.81 billion and liabilities of approximately $10.65 billion on a consolidated basis.

17. The Debtors' decision to commence these Chapter 11 Cases was

based on a combination of factors. From 1996 through 1999, the Debtors generated

over $2 billion in net profits, but 1999 was the Company's last profitable fiscal year

based on recurring earnings. In the years leading up to the Petition Date, the Debtors'

profitability was significantly eroded by competitive pressures (including the

9 incursion of both regional jets and low-cost carriers into the Debtors' operating territories), unfavorable economic trends, and rising fuel and labor costs. The May

2000 proposed merger of United Airlines and the Company was designed to address this profitability erosion by adding the Company into a global network. During the merger period, which ended in the termination of the agreement after failing to receive approval from the U.S. Department of Justice in late July 2001, the Company was precluded from restructuring its operations as a stand-alone carrier. Following the merger termination, the Company embarked on a staged, stand-alone restructuring plan to fix the airline; the plan was preempted by the September 11th terrorists attacks.

18. US Airways was the airline most significantly affected by the events of September 11. Not only were the Debtors' operations shut down entirely for three days in September, but Ronald Reagan Washington National Airport, where the Debtors are the largest carrier, was closed until October 4, 2001. Service was not fully restored until May 2002. In addition, the East Coast in general was the part of the country most affected in the aftermath of the attacks. The Debtors compete heavily with trains and automobiles as a result of their short-haul network and were more affected than other airlines. The increased airport security charges and procedures resulting from the September 11 attacks have also had a disproportionate impact on short-haul travel. Excluding unusual items, the Debtors lost $552 million

10 in the fourth quarter of 2001 and $269 million in the first quarter of 2002, significantly worse results than would have been experienced absent the attacks.

19. In response to these adverse events, the Company implemented a plan to stabilize the airline and return it to profitability. To assist the Company in achieving its restructuring goals, Skadden organized and deployed a corporate restructuring team at the Company's headquarters in Arlington, Virginia in late April

2002. The Company initially sought to achieve their restructuring goals through an out-of-court restructuring, but, recognizing the difficulty of achieving its restructuring goals outside of Chapter 11, the Company, with the assistance of Skadden and its other restructuring advisors, began preparing for a possible Chapter 11 filing.

Skadden assisted the Company in both the out-of-court and the potential Chapter 11 restructuring efforts.

20. The Company's restructuring plan first required significant cost savings, approximately $1.3 billion, from key constituent groups including employees, vendors, aircraft lessors, and other groups. Second, the plan sought to boost revenues and enhance competitiveness by the increased use of regional jets to service markets in an efficient manner. Finally, the Company sought to enhance revenues by entering into a strategic alliance for code sharing with other domestic and international airlines. To obtain sufficient liquidity to implement the restructuring plan, the

Debtors, with the assistance of Skadden and the Company's other restructuring

11 advisors, sought and obtained conditional approval for a $1 billion loan, $900

million of which would be guaranteed (the "ATSB Loan Guarantee") by the federal

government, from the Air Transportation Stabilization Board (the "ATSB").

21. While the Company was able successfully to negotiate cost savings from many of its employee groups, the Company determined that it was unlikely to conclude consensual negotiations with all of the remaining labor groups, various vendors, aircraft lessors, and financiers in a time frame necessary to complete an out-of-court restructuring. Faced with declining seasonal revenues, the Company decided to commence the Chapter 11 Cases to maximize its liquidity position and its prospects for a successful reorganization.

22. As the likelihood of a Chapter 11 filing became more probable

during the summer months of 2002, the Company, along with Skadden and its other

restructuring advisors, expanded its focus to include preparation for such a filing, and

the Skadden team worked with teams of other professionals to prepare an $8 billion

revenue company with nearly 40,000 employees for such a filing. During this

preparation period, it became clear that, in order to maximize the value of the

Debtors' assets and to provide the best possible recovery to all parties in interest, the

Debtors' stay in Chapter 11 would have to be kept as short as possible. Accordingly

Skadden assisted the Company in preparing for a "fast-track" Chapter 11 filing with

12 the goal of allowing the Debtors to emerge from Chapter 11 in the first quarter of

2003.

23. On August 11, 2002, the Debtors, after consultation with their

boards of directors, Skadden, and the Debtors' other advisors, filed voluntary Chapter

11 petitions for Group and the Affiliate Debtors in the U.S. Bankruptcy Court for the

Eastern District of Virginia. As was widely reported in the media, the filing caused

little disruption to the Debtors' business operations.

SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE PERIOD

24. Upon the filing of the petitions, US Airways became one of the

largest airline Chapter 11 cases in the history of the American bankruptcy system.

These Chapter 11 Cases also represent the largest Chapter 11 cases ever filed in the

Eastern District of Virginia. The Debtors' schedules and statements contain nearly

2,500 pages of information, listing over 100,000 creditors and nearly 7,000 executory contracts. Claim notices were mailed to over 100,000 entities. During the Second

Application Period, over 1,700 items were docketed in these Chapter 11 Cases, and, as of the last day of the Case Period, over 3,100 items had been docketed.

25. There are almost 300 parties on the service lists in these Chapter

11 Cases. There have been more than 250 matters disposed of during the course of seven omnibus hearings during the Case Period, an average of 35 matters per hearing. Skadden has logged and responded to thousands of letters, e-mails, and

13 telephone calls to its dedicated US Airways voicemail box, and has successfully negotiated with a myriad of aircraft financing parties the consensual resolution of hundreds of aircraft-related pleadings.

26. As described previously, one of the Debtors' primary restructuring goals during the Chapter 11 Cases was to implement its restructuring plan as quickly as possible in order to emerge from Chapter 11 no later than the end of the first quarter of 2003. Accordingly, during the Case Period, the Debtors and their

advisors, including Skadden,7 sought to achieve those aspects of their reorganization

efforts that they were unable to accomplish prior to the Petition Date and also dealt

with a number of issues that they had not expected, caused primarily by a continued

downturn in the worldwide economy. Skadden worked closely with the Company's

senior management and its other restructuring advisors to address these issues.

Indeed, the Debtors, with assistance from Skadden, were able to meet one of their

primary restructuring goals by emerging from Chapter 11 on March 31, 2003.

7 Skadden was one of a team of skilled professionals retained by the Debtors to assist in their reorganization efforts. Skadden's assistance to the Debtors during the Case Period generally was part of a collaborative effort with the Debtors' other retained professionals, including FTI Consulting, Inc., for- merly PricewaterhouseCoopers LLP, as restructuring advisors, KPMG LLP, as auditors and tax advisors, McGuireWoods LLP, as bankruptcy counsel, O’Melveny & Myers LLP, as special labor, regulatory, antitrust and litigation counsel and Seabury Advisors LLC, Seabury Securities LLC, Seabury Solutions LLC, Seabury Support Services LLC, as financial advisors, investment bankers and consultants.

14 Skadden helped the Debtors to achieve this goal through successful completion of a number of tasks, including, as described in more detail below, managing the legal aspects of: (a) addressing the Debtors' short-term liquidity needs; (b) identifying an equity sponsor for the Reorganized Debtors; (c) rationalizing the Debtors' aircraft fleet; (d) developing, filing, soliciting and confirming a consensual plan of reorganization and related disclosure statement; (e) resolving critical pension issues; (f) obtaining final approval of the ATSB Loan Guarantee; (g) arranging for supplemental exit financing; and (h) fulfilling all the conditions precedent to such Plan becom- ing effective — all within seven and a half months of the Petition Date.

A. Short-Term Liquidity

27. In the days prior to the Petition Date, Skadden devoted substantial time to assisting the Debtors' senior management team, finance personnel, and the Debtors' other business advisors in evaluating, from a legal perspective, the size of a debtor-in-possession financing facility and considering their options in obtaining such facility. During the Case Period, the Debtors, with the assistance of Skadden professionals, obtained a commitment for a $500 million senior secured debtor-in-possession financing facility (the "Original DIP Facility") to be provided by Credit Suisse First Boston, Cayman Islands Branch, and Bank of America, N.A., with participation from Texas Pacific Group ("TPG"). Given the Debtors' liquidity position in the days leading to the Petition Date, the loan documentation relating to

15 the Original DIP Facility was not finalized prior to the First-Day Hearing. In the weeks following the Petition Date and following the Court's interim approval of the

Original DIP Facility, Skadden, devoted a significant amount of resources to working with the Debtors and their lenders in negotiating and documenting the

Original DIP Facility. As the Court is aware, however, just three days prior to the final hearing on the Original DIP Facility, the Debtors accepted an offer by the

Retirement Systems of Alabama ("RSA") to replace the Original DIP Facility with a new facility as part of RSA's agreement to replace TPG as the stalking-horse bidder in the Debtors' search for a plan sponsor. Consequently, in three days of around-the- clock work, Skadden professionals assisted the Debtors in negotiating and documenting the new $500 million replacement credit facility (the "RSA DIP Facility"), which was approved by this Court on an interim basis on September 26, 2002, and on a final basis on November 7, 2002.

B. Plan Sponsor

28. In conjunction with the commencement of the Chapter 11 Cases, the Debtors announced their intention to identify an equity sponsor to provide additional liquidity to the Debtors following emergence from Chapter 11 reorganization. Skadden assisted the Debtors in identifying and arranging for a $200 million stalking-horse bid from TPG prior to the Petition Date and, following the filing, establishing bidding procedures to assist in the selection of competing bids for such

16 investment. Skadden spent a significant amount of time in the early stages of these cases finalizing the investment agreement with TPG and preparing for the competitive bidding process, including creation of a data room to allow potential bidders to conduct due diligence. Just three days prior to the hearing to approve the procedures for determining the highest and otherwise best offer to become the plan sponsor and to approve TPG as the stalking-horse bidder in such process, however, RSA offered to replace TPG as the stalking-horse bidder by agreeing to make an investment of

$240 million on nearly identical terms as those of TPG. The Debtors decided to accept this new offer and, consequently, simultaneously with the renegotiation of the new RSA DIP Facility, Skadden professionals assisted the Debtors in negotiating, drafting, and finalizing a new investment agreement with RSA prior to the hearing on September 26, 2002, at which this Court approved the bidding procedures and the

Debtors' replacement of TPG with RSA as the stalking-horse bidder. As this Court is aware, ultimately the Debtors entered into an agreement with RSA to finalize RSA’s role as Plan Sponsor.

C. Fleet Rationalization

29. Skadden professionals spent significant time and effort in assisting the Debtors in rationalizing the Debtors' aircraft fleet. As of the Petition

Date, the Debtors possessed 455 aircraft but were operating only approximately 311 of these aircraft and expected to reduce further that number during the Chapter 11

17 Cases. Accordingly Skadden professionals, throughout the Chapter 11 Cases, assisted the Debtors in analyzing the financing arrangements for each aircraft and worked to (a) develop a strategy for removing aircraft that no longer fit into the

Debtors' business operations and restructuring plan and (b) renegotiate or restructure the lease or mortgage agreements for the remaining aircraft. Skadden professionals accomplished these tasks, while working under the constraints of section 1110 of the

Bankruptcy Code, through the rejection or abandonment of approximately 95 unnecessary aircraft and the renegotiation and restructuring or modification of the financial arrangements for 279 aircraft, which currently comprise the Company's mainline fleet. Through these efforts, the Debtors have realized hundreds of million of dollars in cost savings.

30. In addition, Skadden professionals devoted a significant amount of time to document the agreements for restructuring the leases and mortgages on various aircraft, both in the mainline fleet and in the newer regional jet fleet.

Because of the complexity of such financial instruments, significant research, analysis, and drafting were required to allow the Debtors to terminate their old agreements and enter into new, revised agreements without any deleterious legal or tax implications.

18 D. The Plan of Reorganization

31. As the Court is also aware, one of the primary goals of the

Debtors' restructuring efforts was to implement the restructuring in a time frame that would allow the Debtors to emerge from the Chapter 11 Cases as soon as possible.

To that end, during the Case Period, Skadden professionals assisted the Debtors in the development, solicitation, confirmation and implementation of a plan of reorganization on a time table that allowed the Debtors to meet their stated goal of emerging from Chapter 11 in the first quarter of 2003. During the seven and one-half month duration of these Chapter 11 Cases, Skadden professionals devoted considerable time to analyzing and crafting such a plan and to negotiating, drafting the pleadings and implementing the component parts necessary to achieve such a goal. Skadden professionals assisted the Debtors in working closely with the Creditors' Committee, the ATSB, RSA and other parties-in-interest during the Case Period and were able thereby to reach agreement upon a consensual plan of reorganization, which was filed during the Second Application Period on December 20, 2002.

32. Solicitation and confirmation of the Plan, as in most bankrupt- cies, was a monumental task that required coordination of virtually all the stakeholders involved in the Chapter 11 Cases. The confirmation hearing, which occurred on March 18, 2003, required significant strategizing and preparation. In this regard,

Skadden professionals addressed successfully the myriad issues with which they

19 were confronted so that the Plan could be confirmed within the "fast-track" time frame dictated by the Debtors' restructuring goals. Despite the fact that more than

125 objections to confirmation were filed, with Skadden's assistance, the Debtors were able to resolve the vast majority of such objections and conduct a virtually uncontested confirmation hearing.

E. Resolution of Pension Issues

33. During the Case Period, Skadden professionals provided assistance to the Debtors with respect to resolving an unexpected shortfall in the funding of its employee pension plans, largely caused by a three-year downturn in the stock market. Resolution of this pension funding issue was a prerequisite to the

ATSB Loan and RSA's $240 million investment as Plan Sponsor. Through diligent effort, Skadden, along with the Debtors' other advisors, assisted the Debtors in analyzing and pursuing various strategies with respect to the pension funding shortfall.

34. With Skadden's assistance, the Debtors came to the conclusion late in the Case Period that the only viable solution was to distress terminate the pilots' defined benefit plan, and then create a follow-on defined contribution plan in order to make up a portion of the benefits that the pilots would lose as a result of the distress termination. Skadden professionals assisted the Debtors in completing numerous tasks during this process, including (a) negotiating a process with the

20 Pension Benefit Guarantee Corporation (the "PBGC") for distress termination of the pilots' pension plan; (b) extensively negotiating with the pilots' union representatives regarding such a distress termination and developing the follow-on, replacement defined contribution plan; and (c) when such negotiations did not produce a consensual resolution of the funding shortfall, conducting a four-day, contested, evidentiary hearing regarding the distress termination of the pilots' pension plan.

F. ATSB Loan Guarantee

35. One of the cornerstones of the Debtors' reorganization efforts was the $900 million guarantee of a $1 billion loan by the ATSB, which is being used as exit financing by the Reorganized Debtors. Through the assistance of

Skadden professionals and the Debtors' other restructuring advisors, the Debtors received conditional approval of the loan guarantee prior to the Petition Date. Such approval was conditioned upon the Debtors' ability to meet the terms of its restructuring proposal including, among other terms, obtaining significant cost savings from virtually every facet of the Debtors' business. During the Case Period, Skadden professionals devoted a significant amount of time and assistance to the Debtors as they worked with and gave information to the ATSB in order to demonstrate the

Debtors' ability to meet the conditions necessary for obtaining final approval of the loan guarantee. Such efforts by Skadden professionals included regular communica- tion with the ATSB members and their advisors and the preparation of frequent

21 presentations to such parties regarding the Debtors' recent financial performance and

the status of the Debtors' restructuring efforts.

36. Ultimately, the Debtors successfully demonstrated their ability

to meet the conditions necessary for the ATSB Loan, and Skadden professionals

invested significant resources in finalizing the related loan documentation required

for the ATSB loan. Such documentation was substantial in light of the multiple

financing and security agreements that were required of the Debtors and which had

to be drafted in a manner consistent with all their other financing facilities with non-

ATSB entities.

G. Settlement with GE

37. During the Second Application Period, Skadden professionals worked extensively with General Electric Capital Corporation, and certain of its

affiliates (collectively, the "GE Entities") to negotiate, document and obtain Court

approval of a global settlement to resolve all issues with the GE Entities and to

acknowledge, as the Debtors single largest creditor, the critical role that the GE

Entities would play in the Debtors' recovery plan. The GE Entities financed, or

provided guarantees of the financing of, 111 of the Debtors' aircraft prior to the

Petition Date. In addition, the GE Entities were critical vendors for the Debtors,

maintaining the engines for a large portion of the Debtors' aircraft fleet. The settle-

ment resolved many prepetition issues among the parties and also provided key

22 components of the Company's go-forward restructuring plan, including the provision of substantial amounts of leveraged lease equity financing on regional jets and a

$360 million exit liquidity facility. As a result of extensive efforts by Skadden and the Debtors' other professionals, such settlement was approved by this Court on

January 16, 2003.

H. Conditions to the Effective Date

38. Consistent with the Debtors' goal of emerging from Chapter 11 as soon as feasible, Skadden professionals worked intensively following the Confir- mation Hearing to allow the Debtors to emerge from Chapter 11 reorganization prior to the end of March, 2003. Accordingly, during the 12 days between the confirmation of the Plan and the Effective Date, Skadden, in nearly "around-the-clock" efforts, assisted the Debtors in ensuring that all the conditions required for such emergence were met. Specifically, Skadden Arps' professionals prepared, finalized and assisted the Debtors in executing a multitude of closing documents, including

SEC registration documents, the ATSB loan agreement and more than 200 ancillary documents.

REQUESTED FEES AND REIMBURSEMENT OF EXPENSES

39. Skadden played an important role in advising the Debtors with respect to implementing their restructuring strategy and completing their highly complex reorganization. As a result of its efforts during the Case Period, Skadden

23 seeks allowance of $18,362,359 in fees ($11,100,249 attributable to the Second

Application Period) calculated at the applicable guideline hourly billing rates of the

firm's personnel who worked on the Chapter 11 Cases, and $1,478,781 in charges

and disbursements ($856,311 attributable to the Second Application Period) actually

and necessarily incurred by Skadden while providing services to the Debtors during

the Case Period.

40. This Final Application reflects a voluntary reduction by

Skadden in connection with each Monthly Statement in the aggregate amount of

$2,188,365 ($1,328,797 attributable to the Second Application Period) and an

additional voluntary reduction in the amount of $47,205 in connection with the First

Fee Application and $50,514 in connection with this Final Application to reflect, among others, the elimination of all fees related to any timekeeper billing less than

$5,000 during the Case Period, the elimination of all fees related to any timekeeper billing less than $1,000 in any one Matter Category during the Case Period, and the elimination of all fees related to any Matter Category for which aggregate timekeeper billing was less than $10,000 during the Case Period. Accordingly, including the additional voluntary client accommodations, Skadden is voluntarily reducing its fees by $2,105,681 ($1,255,623 attributable to the Second Application Period), or approximately 10.3%, and its charges and disbursements by approximately $180,403

($123,688 attributable to the Second Application Period), or approximately 10.1%,

24 for a total reduction of $2,286,084 ($1,379,311 attributable to the Second Applica- tion Period) for items Skadden normally would bill its clients.8

41. In staffing this case, in budgeting and incurring charges and disbursements, and in preparing and submitting this Final Application, Skadden has been mindful of the need to be efficient, while at the same time providing full and vigorous representation to the Debtors. Skadden also has been especially cognizant of the standards established by the Fourth Circuit Court of Appeals and courts in this district for compensation of professionals and reimbursement of charges and disbursements. See Barber v. Kimbrell's Inc., 577 F.2d 216 (4th Cir. 1978), cert.

denied, 439 U.S. 934, 99 S. Ct. 329, 58 L. Ed. 2d 330 (1978); Anderson v. Morris,

658 F.2d 246 (4th Cir. 1981); In re Junco, Inc., 185 B.R. 215 (Bankr. E.D. Va.

1995); In re Great Sweats, Inc., 113 B.R. 240 (Bankr. E.D. Va. 1990) (on remand

from In re Great Sweats of Va., Inc., 109 B.R. 696 (E.D. Va. 1989)). As described in

detail herein, Skadden believes that the requests made in this Final Application

8 Skadden believes that the amounts requested in this Final Application are reasonable in relation to the services rendered. The amounts requested are already reduced to reflect the client accommodations described herein, which include a voluntary fee, charge and disbursement reduction in excess of 10% and a voluntary waiver of any fee enhancement. To the extent that a party objects to this Final Application, Skadden reserves the right to recapture such client accommodations and seek up to the full amount of fees actually incurred in connection with this engagement.

25 comply with this Court's standards in the context of the unique circumstances surrounding this unusually large and complex case.

SUMMARY OF SERVICES RENDERED BY SKADDEN DURING THE APPLICATION PERIOD

42. Throughout the Case Period, Skadden worked closely with the

Debtors and their advisors to administer these estates and maximize the return for estate creditors. These services were directed toward myriad tasks necessary to achieve this result. To meet the Debtors' needs, Skadden attorneys provided multidisciplinary services on a daily basis, often working nights and weekends.

Throughout this process, certain of the principal Skadden attorneys working on the

Chapter 11 Cases were required to devote the vast majority of their time to this matter, often to the exclusion of other clients. As a result of the efforts of the

Debtors and Skadden, the Debtors were successful in exiting Chapter 11 by their stated goal of the end of the first quarter of 2003.

43. At the commencement of the Chapter 11 Cases, Skadden created thirty-seven (37) different matter numbers or subject-matter categories (the "Matter

Categories") to which its professionals assigned the time billed by them; all of the

Matter Categories were related to the tasks performed by Skadden on behalf of the

Debtors.9 All Skadden professionals kept a contemporaneous record of the time

9 Exhibit B contains a table of all matter numbers used in these Chapter 11 Cases, as well as a description of certain business statistics of Skadden in these Chapter 11 Cases. Exhibits C and D contain summaries of requested (continued...)

26 spent rendering such services and, consistent with guidelines of the Office of the

United States Trustee, separated tasks in billing increments of one-tenth of an hour.

All of the services performed by Skadden have been legal in nature and necessary for the proper administration of the Chapter 11 Cases.

44. During the Case Period, Skadden devoted approximately 76.4% of its time to the following matters, each of which was responsible for fees in excess of $1,000,000 during the Case Period: Secured Claims (Aircraft), Financing/DIP and

Emergence, Reorganization Plan/Plan Sponsors, Tax Matters, Case Administration, and Employee Matters (Labor Relations).

45. Matters in which Skadden devoted approximately 20.7% of its time in the aggregate and billed between $100,000 and $1,000,000 in fees during the

Case Period are General Corporate Advice, Executory Contracts (General), Disclo- sure Statement/Voting Issues, Executory Contracts (Express), Creditor Meet- ings/Statutory Committees, Claims Administration (General), Nonworking Travel

Time, Secured Claims (General), Employee Matters (General), Leases (Real

Property) and Business Operations/Strategic Planning.

9(...continued) compensation organized by professional and matter number, respectively. The December 1, 2002 through March 31, 2003 Monthly Statements, separated by matter number, are attached hereto as Exhibit E. Monthly State- ments for the periods from August 11, 2002 through November 30, 2002 were submitted in appendices accompanying the First Fee Application.

27 46. The remainder of time billed by Skadden was devoted to the following matters, each of which was responsible for less than $100,000 during the

Case Period: Retention/Fee Matters/Objections (Other), Automatic Stay (Relief

Actions), Retention/Fee Matters (SASM&F), Vendor Matters, Credit Card Agree- ments, Environmental Matters, Reports and Schedules, Asset Analysis and Recov- ery, Litigation (General), Asset Dispositions, Claims Administration (Reclama- tion/Trust Funds) and Insurance.

MATTERS GREATER THAN $1,000,000

A. Secured Claims (Aircraft)

47. As noted above, one of the primary objectives of the Debtors during the Chapter 11 Cases was to rationalize their aircraft fleet. As of the Petition

Date, the Debtors' operating fleet consisted of 455 aircraft, of which 57 were not being utilized by the Debtors in their day-to-day business operations and were parked at a storage facility. Skadden professionals assisted the Debtors in undertaking a comprehensive review of the leases, mortgages, and other financing agreements related to each of the Debtors' aircraft. These financial agreements typically consist of hundreds of pages of documentation and are highly complex financial arrangements. Adding further complexity to these efforts were the constraints of section

1110 of the Bankruptcy Code. As this Court is well aware, notwithstanding the imposition of the automatic stay under section 362(a) of the Bankruptcy Code, the

Debtors' right to retain and operate certain aircraft, aircraft engines, and other

28 equipment that are defined in section 1110 of the Bankruptcy Code and that are

leased or subject to a security interest or conditional sale contract are specifically

governed by the terms and provisions of section 1110 of the Bankruptcy Code. That

section provides, in relevant part, that unless the Debtors, within 60 days after the

Petition Date ("Section 1110 Deadline"), agree to perform all of the obligations

("Section 1110 Agreement") under the lease, security agreement, or conditional sale

contract and cure all defaults thereunder (other than defaults constituting a breach of

provisions relating to the filing of the Chapter 11 Cases, the Debtors' insolvency, or

other financial condition of the Debtors) within the time specified in section 1110,

the right of the lessor, secured party, or conditional vendor to take possession of such

equipment in compliance with the provisions of the lease, security agreement, or

conditional sale contract and to enforce any of its other rights or remedies under such

lease, security agreement, or conditional sale contract is not limited or otherwise affected by the automatic stay, by any other provision of the Bankruptcy Code, or by any power of the Bankruptcy Court.

48. In order to allow the Debtors to achieve their fleet rationalization goals within the constraints of section 1110, Skadden professionals assisted the

Debtors in entering into various stipulations and agreements with their respective aircraft lenders/lessor and financiers including, but not limited to, stipulations to extend the Section 1110 Deadline ("Section 1110 Deadline Extensions") and Section

1110 Agreements in a highly compressed time frame. During the Case Period,

29 Skadden assisted the Debtors in rejecting or abandoning 92 aircraft. With respect to the remaining aircraft that are not subject to Section 1110 Deadline Extensions or

Section 1110 Agreements, as well as with aircraft procured for the Debtors' regional jet strategy, Skadden professionals assisted the Debtors in negotiating agreements with the applicable aircraft lenders/lessors and/or financiers with respect to such aircraft over the future disposition or use of such aircraft and the appropriate economic terms of such disposition or use. Skadden's work in enabling the Debtors to restructure successfully these obligations with respect to 363 aircraft will allow the

Reorganized Debtors to realize hundreds of millions of dollars in total cost savings.

49. The motions, procedures, and proposed disposition agreements prepared by Skadden professionals in connection with these aircraft matters required significant drafting and negotiations, and ultimately drew over 100 objections, the vast majority of which were either successfully resolved or overruled by this Court.

50. During the Case Period, the Skadden assisted the Debtors in negotiating a global settlement (the "Global Settlement") with its primary aircraft- related creditor, General Electric Capital Corporation ("GECC") and certain of its affiliates (collectively, the GE Entities) . GECC is the single largest creditor of the

Debtors. Together with GE Engine Services and other of its affiliates, GECC financed, or provided guarantees of the financing of, 111 of the Debtors’ aircraft.

GE Engine Services maintains the engines for Boeing 737, Boeing 767, and Airbus

A320 aircraft on a “power-by-the-hour” basis. The Global Settlement resolved all

30 issues with GECC and its affiliates and acknowledged the critical role that GECC would play in the Debtors’ recovery. Motions seeking approval of the Global

Settlement were filed shortly after the First Application Period and were approved by this Court during the Second Application Period. The Global Settlement was highly complex and contains debtor-in-possession financing transactions, exit financing transactions, and the modification and assumption of a number of executory contracts. More specifically, the debtor-in-possession financing transaction components of the Global Settlement include the following: (i) the creation of a debtor-in- possession liquidity facility of up to $120 million to be secured by the same collateral that secures the GECC 2001 Financing Agreement; and (ii) modification of a prepetition financing agreement to, among other terms, defer scheduled principal payments, provide for new advances in amounts equal to principal amortization payments previously made by the Debtors, and maintain the current interest rate.

The exit financing transaction components include the following: (i) the creation of an exit liquidity facility of up to $360 million that refinanced the obligations under the debtor-in-possession liquidity facility and provided additional liquidity to the

Reorganized Debtors since the consummation of the Plan and (ii) a commitment from GECC to provide $350 million of lease equity for the financing of regional jets.

The Global Settlement also includes the assumption of the Debtors' engine maintenance agreements (as modified) with GE Aircraft Engines and a settlement with

31 respect to 13 aircraft. Each component of the Global Settlement required significant time and attention by Skadden professionals.

51. In connection with the foregoing services, Skadden professionals during the Case Period expended 14,357.2 hours for which Skadden seeks compensation of $5,404,554. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit

E-1. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:10

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Ann H. Pollock $675 728.6 $495,448 1304.7 $880,713 Suling Lam $389 681.2 $269,075 1349.1 $525,407 Seth E. Jacobson $624 517.0 $323,124 659.5 $411,682 Robert P. Gal $291 769.0 $226,855 1331.3 $387,391 Gerard C. Martin $395 722.0 $285,191 875.7 $345,903 Dmitri E. Kovalenko $454 587.6 $267,358 751.4 $341,228 Todd Lloyd $295 856.8 $252,757 925.5 $273,023 John K. Lyons $505 101.9 $52,988 369.3 $186,576 Michael J. Winiger $240 543.5 $130,440 693.3 $166,168 Chris L. Dickerson $393 243.3 $96,103 381.9 $150,142 Marc R. Lawrence $327 222.4 $74,503 427.5 $139,628 Brooks T. Giles $375 351.3 $131,738 351.3 $131,738 Andre L. Zafrani $352 61.1 $22,914 324.3 $114,274 Randall G. R eese $290 144.2 $42,539 383.7 $111,406 Thomas W. Greaves $335 88.9 $29,782 224.2 $75,107 Steven P. Miriani $475 134.3 $63,793 153.2 $72,770

10 The Rate column that appears in all subsequent charts refers to the indicative billing rate of a professional throughout the full Case Period, and not the billing rate for any one application period. As set forth in the Engagement Letter, billing rates are periodically reviewed and revised.

32 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Patrick S. B elville $455 159.9 $72,755 159.9 $72,755 Jeffrey A. Greenb latt $415 168.1 $69,761 168.1 $69,761 Alexander W. Powell $368 73.8 $27,675 185.6 $68,277 Alesia Ranney-Marinelli $694 87.3 $60,673 93.9 $65,188 Glenn S. Walter $395 14.2 $5,894 132.7 $52,405 Anastasia Y. Koroleva $335 156.1 $52,294 156.1 $52,294 Monica M. Levy $238 70.0 $16,800 166.1 $39,539 Lucia E. Pascual $395 78.9 $31,166 78.9 $31,166 Mindy E. Nagorsky $375 72.8 $27,300 72.8 $27,300 John (Jack) Wm Butler, Jr. $712 16.4 $11,891 37.7 $26,829 Eric L. Cochran $680 29.3 $19,924 29.3 $19,924 Sara E. Wraight $239 38.9 $9,336 75.0 $17,942 Karen E. Walther $295 57.0 $16,815 57.0 $16,815 Christopher D. Sheaffer $295 51.8 $15,281 51.8 $15,281 David C. Reamer $545 0.0 $0 27.1 $14,770 Mary L. McD ermott $295 49.9 $14,721 49.9 $14,721 Edward J. Meehan $605 6.0 $3,750 23.6 $14,286 Alison M. Haan $240 54.7 $13,128 54.7 $13,128 William Pham $365 0.0 $0 35.7 $13,031 Han S. Rhee $240 53.8 $12,912 53.8 $12,912 Michelle A. Zam arin $373 0.0 $0 33.3 $12,437 Jessica L. DeBruin $335 36.0 $12,060 36.0 $12,060 Wei Chen $295 35.4 $10,443 35.4 $10,443 Steven J. Nagy $415 24.3 $10,085 24.3 $10,085 Christopher G. Athas $335 29.9 $10,017 29.9 $10,017 Carl R. Erdmann $485 18.9 $9,167 18.9 $9,167 Timothy P. Olson $395 0.0 $0 22.2 $8,769 Gregory A. Fernicola $680 12.3 $8,364 12.3 $8,364 Dietrich A. Loos $395 19.4 $7,663 19.4 $7,663 Sarah E. Freson $295 19.0 $5,605 19.0 $5,605 Emm anuelle T. Ejercito $265 0.0 $0 21.0 $5,565 Janet L. Dhillon $485 5.5 $2,668 5.5 $2,668 Cliff Gross $655 2.9 $1,900 2.9 $1,900 John P. Sheahan $395 3.5 $1,383 3.5 $1,383 John C. Jaye $395 3.0 $1,185 3.0 $1,185

33 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Darren E. Zeidel $395 0.0 $0 2.6 $1,027 Paraprofessionals at $195/hour $195 1250.6 $243,871 1314.3 $256,292 Paraprofessionals at $160/hour $160 133.4 $21,344 207.7 $33,232 Paraprofessionals at $130/hour $130 40.5 $5,265 185.4 $24,102 Paraprofessionals at $70/hour $70 133.0 $9,310 133.0 $9,310 Paraprofessionals at $150/hour $150 0.0 $0 12.0 $1,800 Grand Total $384 9759.6 $3,607,014 14357 .2 $5,404,554

B. Financing/DIP and Emergence

52. In the days prior to the Petition Date, Skadden devoted substantial time in assisting the Debtors in evaluating the size of the debtor-in-possession credit facility and analyzing their options in obtaining it. As part of the first-day orders, this Court granted interim approval of the Original DIP Facility. Given the

Debtors' liquidity position in the days leading to the Petition Date, the loan documentation relating to the Original DIP Facility was not finalized prior to the First-Day

Hearing. At such hearing, the Debtors obtained the interim authority to borrow up to

$75 million based solely on the terms of a term sheet for the Original DIP Facility presented to and approved by this Court. In the weeks following the Petition Date,

Skadden, therefore, devoted significant resources to working with the Debtors and their lenders in negotiating and documenting the Original DIP Facility.

53. On September 23, 2002, just three days prior to the final hearing on the Original DIP Facility, the Debtors announced their intention to enter into an investment agreement with RSA to replace TPG as the stalking-horse bidder.

34 Simultaneously, the Company accepted a commitment from RSA to replace the

Original DIP Facility with a new $500 million debtor-in-possession financing facility on substantially the same terms (the RSA DIP Facility). Skadden, working around the clock, assisted the Debtors in negotiating and documenting both the new investment agreement with RSA and the terms of the RSA DIP Facility. In addition, prior to the decision to replace the Original DIP Facility with the RSA DIP Facility,

Skadden had undertaken to resolve the numerous objections to entry of the final order approving the Original DIP Facility. Even after the decision to replace the

Original DIP Facility with the RSA DIP Facility had been made, because the RSA

DIP Facility was on substantially similar terms as the Original DIP Facility, Skadden attorneys continued to work to resolve the remaining objections. Skadden assisted the Debtors in negotiating successfully resolutions to all these matters and presenting to this Court an uncontested, agreed final order for entry. At hearings held on

September 26, 2002, this Court, among other rulings, granted interim approval of the

RSA DIP Facility. Following such hearing, Skadden worked to produce final documentation memorializing the RSA DIP Facility.

54. The documents evidencing the Original DIP Facility and the

RSA DIP Facility, including the final order entered by this Court on November 8,

2002, were especially voluminous and complex, including, among other things, borrowing base and financial covenant provisions. Both the Original DIP Facility and the RSA DIP Facility contained relatively unique features, including ensuring

35 compliance with section 1110 of the Bankruptcy Code and with the exclusion of

certain assets from the collateral package provided to the lenders. These provisions

were the focus of significant attention and input by the Creditors' Committee,

numerous Aircraft Creditors and other parties in interest. The relatively short time

frame available to Skadden to address the Original DIP Facility prior to the Petition

Date and the almost unheard-of task of negotiating, drafting, and consummating the

RSA DIP Facility and the new RSA plan sponsor investment agreement in a three-

day period, required Skadden to deploy a significant number of professionals to address all of the diligence, schedules, corporate documents, and other approvals and issues that needed to be addressed in connection with such agreements. As well,

Skadden attorneys communicated extensively with RSA's representative regarding the progress and status of the Chapter 11 Cases and the Debtors' achievement of the conditions set forth in the RSA Dip Facility throughout the Chapter 11 Cases.

55. During the Case Period, Skadden assisted the Debtors with their

negotiations with the ATSB in order to allow the Debtors to meet the conditions

necessary for final approval of the ATSB Loan Guarantee, one of the cornerstones of

the Debtors' emergence financing. To this end, throughout the Case Period, Skadden

attorneys communicated extensively with the ATSB's representatives regarding the

progress and status of the Chapter 11 Cases and the Debtors' achievement of the

conditions established by the ATSB for final approval of the ATSB Loan Guarantee.

In addition to regular telephonic communications, Skadden assisted the Debtors in

36 organizing periodic meetings with the ATSB and their professionals. These meetings allowed the Debtors to keep the ATSB members and their professionals informed as to the status of the Debtors' restructuring efforts, including the Debtors' most current financial performance, and to address any concerns that the ATSB had with respect to such efforts. Skadden assisted the Debtors in substantial preparation for these meetings, including the coordination of financial information and status reports regarding implementation of various restructuring efforts on which the ATSB

requested to be advised. In addition, as the Chapter 11 Cases came to completion

and the Debtors, with the assistance of Skadden and their other professionals,

achieved the milestones necessary for final approval and funding of the $1 billion

loan, Skadden professionals expended considerable time and effort negotiating,

finalizing and documenting the agreement and ancillary documents related to such

loan.

56. Finally, as previously described above with respect to Secured

Claims (Aircraft), Skadden professionals expended considerable effort in finalizing

the terms of the Global Settlement with GECC; a component of the settlement was a

$360 million exit liquidity facility.

57. In connection with the foregoing services, Skadden profession-

als expended 7,446.3 hours during the Case Period for which Skadden seeks com-

pensation of $2,723,241. Detailed time entries of each Skadden professional related

to these services are attached hereto as Exhibit E-2. A summary of the hours

37 incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Steven P. Miriani $463 474.4 $225,341 893.3 $413,352 Seth E. Jacobson $609 307.5 $192,189 590.7 $360,014 Thomas W. Greaves $325 641.6 $214,937 1037.4 $336,638 Gerard C. Martin $375 22.9 $9,046 482.6 $181,143 Gary M . Kravetz $430 193.6 $84,217 264.5 $113,783 Chris L. Dickerson $381 79.8 $31,522 269.3 $102,676 Stephanie L. Burch $455 179.1 $81,491 179.1 $81,491 Marc R. Lawrence $319 23.7 $7,940 187.3 $59,802 John (Jack) Wm Butler, Jr. $712 44.8 $32,481 79.8 $56,854 Charles M. Fox $650 0.0 $0 82.6 $53,690 Glenn S. Walter $391 8.0 $3,320 125.5 $49,013 Jason P. Ketchens $335 138.7 $46,465 138.7 $46,465 Jeffrey A. Greenb latt $399 52.8 $21,912 97.1 $38,746 Alesia Ranney-Marinelli $679 7.1 $4,934 55.6 $37,754 Anastasia Y. Koroleva $335 100.2 $33,567 100.2 $33,567 Kimberly A. Costello $240 131.9 $31,656 131.9 $31,656 James F. O'Rorke, Jr. $593 43.1 $25,645 50.1 $29,705 David D . Almroth $475 58.1 $27,598 58.1 $27,598 Neil M. Leff $680 38.5 $26,180 38.5 $26,180 Dietrich A. Loos $395 64.3 $25,399 64.3 $25,399 Glen F. Strong $415 60.8 $25,232 60.8 $25,232 Dmitri E. Kovalenko $428 19.4 $8,827 58.6 $25,095 John K. Lyons $503 28.8 $14,976 49.6 $24,960 Randall G. R eese $295 81.0 $23,896 81.0 $23,896 John C. Jaye $381 21.2 $8,374 60.5 $23,075 Peter M. Seka $485 34.4 $16,684 43.1 $20,903 Michael J. Winiger $236 0.0 $0 84.0 $19,831 David F. Kolin $476 16.2 $7,857 38.8 $18,479 Adam G. Young $295 57.4 $16,933 57.4 $16,933 Eric L. Cochran $658 11.5 $7,820 23.2 $15,261 Robert P. Gal $285 28.5 $8,408 51.9 $14,813

38 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Alexander W. Powell $330 0.0 $0 44.4 $14,652 Jonice Gray Tucker $295 0.0 $0 44.0 $12,980 Jeffrey Glekel $725 0.0 $0 16.5 $11,963 Patrick S. B elville $415 0.0 $0 23.8 $9,877 Mindy E. Nagorsky $375 23.1 $8,663 23.1 $8,663 John W. Lee $335 23.3 $7,806 23.3 $7,806 Cliff Gross $610 0.0 $0 11.7 $7,137 William R. Stewart, Jr. $230 0.0 $0 30.6 $7,038 Laurie S. Cohen $315 10.9 $3,652 22.3 $7,015 Joseph W. Halliday $725 9.2 $6,670 9.2 $6,670 Brian T. Henry $375 16.5 $6,188 16.5 $6,188 Jessica A. Hough $383 1.2 $498 15.8 $6,046 Van C. Durrer, II $474 2.5 $1,213 10.1 $4,785 Edward J. Meehan $580 0.0 $0 8.0 $4,640 Sara E. Wraight $240 13.6 $3,264 13.6 $3,264 Ronald J. Turiello, Jr. $395 0.0 $0 4.0 $1,580 Suling Lam $395 4.0 $1,580 4.0 $1,580 Mary L. McD ermott $295 4.3 $1,269 4.3 $1,269 Timothy P. Olson $435 2.8 $1,218 2.8 $1,218 Paraprofessionals at $195/hour $195 581.3 $113,356 797.0 $155,417 Paraprofessionals at $160/hour $160 189.5 $30,320 560.9 $89,744 Paraprofessionals at $70/hour $70 161.8 $11,326 161.8 $11,326 Paraprofessionals at $130/hour $130 30.2 $3,926 54.3 $7,059 Paraprofessionals at $150/hour $150 0.0 $0 8.8 $1,320 Grand Total $406 4043.5 $1,465,796 7446.3 $2,723,241

C. Reorganization Plan/Plan Sponsors

58. After careful consideration of all alternatives, the Debtors determined that the liquidity provided by an equity investment, together with the exit financing supported by the ATSB Loan Guarantee, would provide the basis for a plan of reorganization that would maximize value for the Debtors, their estates, their

39 creditors, and all other parties in interest and best position the Debtors to emerge from Chapter 11 as financially strong and competitive businesses. To this end, the

Debtors believed that the best way to obtain the highest and best offer for an equity investment was to obtain a “stalking horse” bid that would be subject to the Court’s supervised bidding process. Therefore, prior to and during the Case Period, Skadden attorneys devoted significant time to identifying an equity sponsor to provide the

Debtors with additional liquidity upon their emergence from Chapter 11.

59. Based on a review of potential equity sponsors, TPG emerged as the most likely candidate to act as a stalking horse bidder because of TPG’s ability and interest in making a large equity investment in the Debtors as well as TPG’s willingness to participate in the Original DIP Facility, as described above. After intense arms’ length negotiations, Group and TPG entered into the memorandum of understanding (the “TPG MOU”) offered by TPG under which, among other things,

TPG agreed to make a $200 million equity investment in the Reorganized Debtors

(the “TPG Investment”).

60. Under the TPG MOU, the Debtors and TPG agreed to bidding procedures (the “Bidding Procedures”) that the Debtors believed properly balanced the Debtors’ need to obtain the highest and best offer for an equity investment while encouraging TPG to act as a stalking horse and to participate in the Original DIP

Facility. Under the Bidding Procedures, any person other than TPG was permitted to make a competing proposal to fund a plan of reorganization for the Debtors. Again,

40 Skadden professionals expended considerable time in assisting the Debtors in the negotiation and documentation of such transaction.

61. As required by the Bidding Procedures, Skadden devoted significant time to the collection and organization of material financial data, agreements and other documents in a central location (the “Data Room”) in order to allow for its review by potential competitive bidders. In addition, Skadden attorneys took appropriate steps to safeguard the confidential or otherwise proprietary nature of such materials through the negotiation and drafting of confidentiality agreements with those entities that identified themselves to the Debtors as such potential bidders.

62. As noted previously, only days prior to the final hearing on the

Original DIP Facility and the TPG MOU, the Debtors received an offer from RSA to replace TPG as the “stalking horse” bidder. At such time, Skadden professionals undertook the formidable task of negotiating and documenting a new investment agreement with RSA in literally less than three days. On September 26, 2002, the

Debtors, after consultation with the Creditors’ Committee, designated RSA as the

Debtors’ proposed plan sponsor and entered into a definitive investment agreement with RSA, which superseded the TPG MOU (the “RSA Investment Agreement”).

Pursuant to the RSA Investment Agreement, RSA agreed to make the same investment in the Debtors as proposed by TPG under the TPG MOU with two material modifications: (i) RSA was willing to pay $40 million cash more than TPG under the TPG MOU and (ii) RSA was willing to undertake the transaction on a zero fee

41 basis. The RSA Investment Agreement was otherwise essentially identical to the

TPG MOU and, as with the TPG MOU, was subject to higher and better offers.

63. At hearings held on that same day, this Court authorized the

Debtors to designate RSA to replace TPG as its proposed plan of reorganization equity sponsor and enter into a definitive investment agreement under which RSA agreed to invest $240 million for a 37.5% ownership interest in the Reorganized

Debtors (the “RSA Investment”). Just as with the proposed TPG Investment, the

RSA Investment was subject to higher or otherwise better offers, to be solicited by the Debtors in accordance with the amended bidding procedures (the “Amended

Bidding Procedures”) approved by this Court. Accordingly, Skadden continued to maintain the Debtors’ Data Room and to conduct necessary diligence with respect to alternate equity investors.

64. The Amended Bidding Procedures established November 15,

2002 as the deadline for submission to the Debtors of competing plan proposals. No competing proposals were received by the Debtors and, as such, RSA was designated as the winning plan sponsor.

65. Having identified a Plan Sponsor, the Debtors, assisted by

Skadden professionals, next focused their effort in developing, negotiating and drafting a plan of reorganization that would allow the Company to successfully reorganize its business. To that end, Skadden attorneys devoted substantial time assisting the Debtors and their advisors with the formulation of a plan of reorganiza-

42 tion. Skadden attorneys participated in numerous plan of reorganization strategy

sessions with the Debtors' senior management and financial advisors. At these strategy sessions, Skadden advised the Debtors with respect to the legal requirements

of a plan of reorganization under the Bankruptcy Code, as well as the legal ramifica-

tions of various proposed plan structures. Skadden also met and worked with

representatives of the Creditors' Committee, RSA, the ATSB and other parties-in-

interest in order to consider such constituencies' comments regarding proposed plan

structures. These efforts, among others, allowed the Debtors, with Skadden's

assistance, to file the Plan and the Disclosure Statement on December 20, 2002,

shortly after the conclusion of the First Fee Application Period. Only five months

after the Petition Date, on January 17, 2003, this Court approved the Disclosure

Statement.

66. In late January, 2003, Skadden professionals and

paraprofessionals, along with the Debtors' balloting agent, Logan & Company, Inc.,

coordinated the mailing of solicitation materials and the Disclosure Statement to the

Debtors' creditors and equity holders to ensure proper receipt and compliance with

the solicitation procedures. Over 51,800 copies of the Disclosure Statement, the

Notice of Confirmation Hearing and the Solicitation Procedures Order were mailed

to parties in interest on January 31, 2003. With the solicitation package, such parties

either received a ballot or a notice as to why they were not entitled to vote on the

Plan.

43 67. The Plan was overwhelmingly accepted by all parties entitled to vote on the Plan, in all voting classes. Indeed, of all the impaired classes, over 80% of the ballots, by both numerosity and claim amount, voted in favor of the Plan.

68. Despite the distribution of Plan solicitation materials to more than 51,800 parties, only twenty-nine non-equity-based objections to confirmation of the Plan were filed. Skadden attorneys assisted the Debtors in resolving consensually many of the objections prior to the confirmation hearing with the objecting parties. This effort allowed the Debtors and their professionals to focus on

Plan confirmation and implementation issues, and saved the Debtors' estates from the costs that would have been incurred had these objections been litigated.

69. Skadden also devoted substantial time during the Case Period preparing for the hearing on confirmation of the Plan. Skadden spent time preparing numerous Court filings, appropriate affidavit testimony with respect to the Plan, and numerous exhibits to the Plan, and provided the Court, the Creditors' Committees, and other relevant parties in interest with appropriate information with respect to the

Plan.

70. This Court, at the March 18, 2003 Confirmation Hearing, confirmed the Plan.

71. Finally, Skadden assisted the Debtors with numerous tasks during the post-confirmation, pre-effective time period. These tasks included resolving issues arising under the securities laws, responding to inquiries regarding

44 Plan confirmation from various parties, drafting and filing various plan supplements and related items, and coordinating the foregoing through frequent discussions with representatives of the Debtors, the Creditors' Committee and others. Such an expedited reorganization process is, standing alone, a major accomplishment given the complexity of the Chapter 11 Cases and the many legal and business issues confronting the Debtors in connection therewith.

72. In connection with the foregoing services, Skadden professionals expended 5,801.1 hours during the Case Period for which Skadden seeks com-

pensation of $2,264,435. Detailed time entries of each Skadden professional related

to these services are attached hereto as Exhibit E-3. A summary of the hours

incurred and value of the services performed by each professional is provided in the

following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount John C. Jaye $388 550.8 $217,565 1054.7 $408,926 Timothy P. Olson $432 351.1 $152,729 466.6 $201,496 John K. Lyons $512 179.4 $93,288 281.2 $144,108 Patrick S. B elville $431 63.6 $28,938 322.4 $138,877 Seth E. Jacobson $608 112.6 $70,375 224.3 $136,394 Alesia Ranney-Marinelli $691 131.4 $91,324 169.3 $116,964 Eric L. Cochran $665 85.9 $58,412 175.5 $116,735 John (Jack) Wm Butler, Jr. $720 105.0 $76,125 133.2 $95,886 Andre L. Zafrani $375 202.1 $75,788 202.1 $75,788 Laurie S. Cohen $315 0.0 $0 212.7 $67,102 Randall G. R eese $295 141.0 $41,596 210.4 $62,039 Chris L. Dickerson $394 133.7 $52,812 148.4 $58,508 John W. Lee $335 162.4 $54,404 162.4 $54,404

45 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Edward J. Meehan $614 63.9 $39,938 85.5 $52,466 Sara E. Wraight $239 125.7 $30,168 164.9 $39,406 Glenn S. Walter $414 79.2 $32,868 92.1 $38,113 Christopher G. Athas $295 0.0 $0 128.0 $37,760 Lisa J. McLean $240 140.5 $33,720 140.5 $33,720 Monica M. Levy $238 108.9 $26,136 132.3 $31,518 Janet L. Dhillon $485 62.9 $30,507 62.9 $30,507 Cliff Gross $648 37.4 $24,496 44.2 $28,644 Gregory A. Fernicola $680 31.5 $21,420 31.5 $21,420 Seth J. Gerson $415 0.0 $0 49.2 $20,418 James D. Anderson $365 0.0 $0 51.5 $18,798 Peter M. Seka $470 0.0 $0 39.1 $18,377 Urfan M alik $335 50.3 $16,850 50.3 $16,850 Ann H. Pollock $680 24.6 $16,728 24.6 $16,728 Alexander W. Powell $375 37.6 $14,100 37.6 $14,100 Marc R. Lawrence $335 41.6 $13,936 41.6 $13,936 Sarah E. Freson $295 44.2 $13,039 44.2 $13,039 Peter A. Atkins $701 1.1 $798 11.2 $7,848 Michelle A. Zam arin $395 15.0 $5,925 15.0 $5,925 Obiamaka P. Okwumabua $395 13.8 $5,451 13.8 $5,451 Gerard C. Martin $395 10.7 $4,226 10.7 $4,226 Steven P. Miriani $475 6.2 $2,945 8.7 $4,132 Neil M. Leff $630 0.0 $0 3.8 $2,394 Mindy E. Nagorsky $375 6.2 $2,325 6.2 $2,325 Suling Lam $395 4.7 $1,857 4.7 $1,857 Paraprofessionals at $130/hour $130 82.9 $10,777 283.7 $36,881 Paraprofessionals at $160/hour $160 59.3 $9,488 193.2 $30,912 Paraprofessionals at $150/hour $150 0.0 $0 117.5 $17,625 Paraprofessionals at $195/hour $195 61.7 $12,032 63.5 $12,383 Paraprofessionals at $110/hour $110 0.0 $0 85.9 $9,449 Grand Total $414 3328.9 $1,383,086 5801.1 $2,264,435

46 D. Tax Matters

73. Throughout the Case Period, Skadden devoted time to assisting

the Debtors in handling the various tax issues that arose as part of the Chapter 11

Cases, including research on the relationship between the Bankruptcy Code and the

applicable local tax laws with respect to property and other federal and state tax

liabilities. In addition, Skadden professionals worked closely with the Debtors to respond to various inquiries by taxing authorities concerning numerous matters,

including payment pursuant to the "first day" order authorizing payment of certain

sales, use, and trust-fund taxes.

74. Of significant note, prior to the Petition Date, the Debtors were

concerned that they may not be able to utilize their net operating losses ("NOLs") to

offset future income tax liability. Skadden conducted substantial research regarding

the ability to establish claims and equity trading procedures. Following such

research, Skadden advised the Company regarding methods that may preserve the

Debtors' ability to utilize the NOLs under certain scenarios. Ultimately, Skadden

prepared a motion to establish procedures for the trading of certain large claims or

amounts of equity in order to implement such methods. This motion was the focus

of significant attention and input by this Court, the Creditors' Committee and various

holders of claims and equity interests. Skadden professionals expended a large

amount of time and effort addressing and responding to such concerns. Although a

handful of objections were filed with respect to this motion, Skadden succeeded in

47 negotiating resolutions to all of these matters and presenting to this Court an uncontested and agreed order for entry. Analysis regarding the use of such NOLs was required, and therefore, continued throughout the Case Period.

75. Skadden also assisted the Debtors with the analysis of taxation issues in connection with the various aircraft lease and mortgage transactions undertaken by the Debtors throughout the Chapter 11 Cases and the tax issues related to the Plan. To such end, Skadden attorneys participated in numerous meeting and teleconferences with various of the Debtors' employees, and conducted legal research regarding aircraft transaction and plan of reorganization tax issues. These efforts allowed Skadden attorneys to draft portions of the aircraft agreements and the

Disclosure Statement that explained the myriad tax implications of the Plan.

Skadden attorneys also devoted substantial time to an analysis of the tax ramifications regarding the implementation of the Plan.

76. Finally, Skadden attorneys assisted the Debtors in negotiating, resolving and settling the claims of the Internal Revenue Service (the "IRS") pursuant to an IRS audit of certain of the Company's tax structures.

77. In connection with the foregoing services, Skadden professionals expended 2,775.9 hours during the Case Period for which Skadden seeks compensation of $1,208,136. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-4. A summary of the hours

48 incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Jessica A. Hough $402 223.8 $92,878 621.3 $249,783 Cliff Gross $638 156.3 $102,377 383.8 $244,846 Peter M. Seka $480 180.7 $87,640 377.1 $181,113 Laura P. Regan $408 31.8 $13,833 330.9 $134,929 Troy L. Olsen $389 48.9 $19,316 288.5 $112,324 Mark Erwin $240 193.9 $46,536 193.9 $46,536 Patrick Evans $335 134.4 $45,025 134.4 $45,025 Jody J. Brewster $485 67.9 $32,932 90.8 $44,014 Richard Castanon $330 0.0 $0 98.8 $32,604 Janet L. Dhillon $485 46.5 $22,553 46.5 $22,553 Alesia Ranney-Marinelli $679 5.1 $3,545 28.8 $19,543 Edward J. Meehan $625 20.6 $12,875 29.5 $18,437 Kristin R. Keeling $240 0.0 $0 49.6 $11,904 Fred T. Goldberg, Jr. $718 0.0 $0 13.7 $9,834 David Polster $475 20.0 $9,500 20.0 $9,500 Chris L. Dickerson $377 7.7 $3,042 21.6 $8,152 John K. Lyons $480 0.0 $0 12.2 $5,856 Rena M . Samole $335 8.7 $2,915 8.7 $2,915 Marc R. Lawrence $295 0.0 $0 9.5 $2,803 Randall G. R eese $265 0.0 $0 6.2 $1,643 Timothy P. Olson $395 0.0 $0 3.5 $1,383 Darren E. Zeidel $365 0.0 $0 3.7 $1,351 Andre L. Zafrani $375 2.9 $1,088 2.9 $1,088 Grand Total $427 1149.2 $496,055 2775.9 $1,208,136

E. Case Administration

78. This particular category of time was comprised of matters relating to, among other things, (a) general communications with creditors and other parties in interest; (b) general case administration, including duties pertaining to

49 service of process and pleading and document management; (c) preparation for, and attendance at, court hearings; (d) general advice with respect to the prosecution of the

Chapter 11 Cases; and (e) general advice with respect to the rights and duties of debtors-in-possession in the administration of the Chapter 11 Cases.

79. Given the size and complexity of these Chapter 11 proceedings, the Debtors and Skadden were presented with a singularly unique set of challenges in managing the process, tracking motions filed by others, responding to inquiries from parties-in-interest, and maintaining organization and control over a case that could quickly have become a disorganized morass if attention were not provided to case administration matters on an almost continual, around-the-clock basis.

80. Thus, for instance, professionals from Skadden worked closely with the Debtors, this Court's Clerk's Office, representatives of this Court's Cham- bers, the United States Trustee's Office, the Debtors' notice and claims agent, the

Debtors' public relations advisors, and the Debtors' other advisors in coordinating the establishment and maintenance of a website, telephone hotline, and e-mail information sites to assist in responding to the numerous inquiries that the cases generated.

At the commencement of the case, Skadden established an "800" telephone "hotline" that provided basic information to callers and allowed them to leave messages that were returned by Skadden professionals. During the Case Period, hundreds of messages were submitted to the hotline. When necessary, Skadden professionals researched responses to each message and otherwise responded to all inquiries

50 tendered through the hotline. A considerable amount of time was devoted to these efforts.

81. To further assist parties involved in the Chapter 11 Cases,

Skadden also established and maintained an electronic mailbox at

[email protected]. During the Case Period, more than 1,000 e- mail messages were submitted to this mailbox. As with the hotline, responses to each message were researched (where appropriate) and responded to by Skadden professionals. Skadden also estimated that its professionals received more than

10,000 pieces of additional written correspondence, all of which were routed to appropriate professionals within Skadden and responded to either orally or in writing.

82. Skadden necessarily devoted significant resources responding to these matters. These efforts assured responsive answers to parties, ensured a smooth transition into, and through, Chapter 11 and assisted the Debtors and their estates by resolving numerous matters that otherwise may have resulted in pleadings filed with this Court.

83. In addition to communications matters, Skadden professionals maintained various files critical to enable Skadden and others to promptly address issues that arose during the Case Period. Skadden docketed all pleadings and orders filed in the Chapter 11 Cases and worked with the Debtors' notice and claims agent to ensure that entities entitled to notice were kept informed of significant events in

51 the Chapter 11 Cases. The efficient management of administrative matters in a

paper-intensive case of this size clearly is a significant task. Each week, the Debtors

and Skadden were inundated with hundreds of items of correspondence, documents,

requests, pleadings and other papers. As of the end of the Case Period, the pleadings

docket contained roughly 3,149 entries, meaning that, on average, over thirteen

pleadings were filed and docketed each day during the 232 days covered by the Case

Period.

84. Given this volume of activity, Skadden professionals implemented various procedures to create efficiencies in the management of the Chapter

11 Cases and to avoid unnecessary duplication of effort. For instance, Skadden designed notice and case management procedures that limited the notice of certain matters to those parties with the greatest interest in the day-to-day activities of the

Chapter 11 Cases. These notice procedures saved the estates hundreds of thousands of dollars in photocopying and delivery charges by limiting the notice of such matters, while still providing appropriate notice to pertinent parties in interest.

85. Despite the streamlined notice procedures authorized by this

Court, Skadden professionals were required to devote substantial attention to service and related matters in these cases. As of the end of the Case Period, there were nearly 205 law firms on the service lists in these cases. Skadden paraprofessionals

devoted a great deal of time updating and maintaining these lists to ensure proper

notice. To do so required the following: reviewing each pleading filed and updating

52 the entities that firms represented; reviewing all electronic and written correspondence to ensure all lists were accurate; and reviewing all notices of appearance that were not docketed in accordance with the procedures adopted by the Court in these cases to ensure that no party in interest was inadvertently excluded from a mailing.

86. Obviously, the great number of parties who appeared in these proceedings and the time-sensitive nature of many of the pleadings and replies that were filed required a great deal of coordinated effort among Skadden professionals.

There were many matters that required special notices of particular items that significantly expanded these duties.

87. In addition to communications and service matters, Skadden professionals also devoted significant time preparing for and attending the omnibus hearings that this Court established. The omnibus hearings streamlined the administration of these Chapter 11 Cases by establishing a schedule known to all parties in interest for Court hearings, thus eliminating unnecessary time and expenses spent appearing before the Court on numerous occasions each month; however, the internal coordination of motions, responses, objections, witnesses, and other related matters required close and careful attention by the entire Skadden team. Indeed, the monthly omnibus hearing agendas that Skadden prepared required significant attention by numerous Skadden professionals beginning weeks before each hearing. In most cases, a carefully coordinated team of Skadden attorneys attended the hearings in

53 order to meet with the dozens of parties in interest that appeared and to resolve as many issues as possible.

88. During the Case Period, there were seven omnibus and more than three significant off-omnibus hearings. Over 250 matters were scheduled at these hearings. As this Court is aware, the Debtors, with the assistance of Skadden and the Debtors' other professionals, succeeded in presenting the overwhelming majority of these matters as uncontested or resolved. There were very few contested matters in these proceedings, and even fewer that actually required contested evidentiary hearings. But for the coordinated efforts of Skadden and the Debtors' other professionals in connection with these hearings, this simply would not have been possible, and the Debtors would not have been able to emerge from Chapter 11 by their stated goal of the end of the first quarter of 2003.

89. Finally, on almost a daily basis, Skadden professionals advised the Company of the Debtors' rights and duties as debtors-in-possession, noting proscribed, permitted and required conduct. Skadden frequently advised the Com- pany with respect to specific business questions posed by management and by events occurring in the Chapter 11 Cases. Part of Skadden's advice in this regard involved the participation of Skadden in periodic planning and strategy conferences with the

Debtors' senior management team.

90. In order to assist the Debtors in performing their fiduciary duties, Skadden worked with the Debtors in implementing procedures for the

54 Debtors to operate their businesses in accordance with the requirements of the

Bankruptcy Code. Skadden reviewed certain of the Debtors' proposed expenditures, contractual relationships, dispositions of property and other transactions to aid the

Debtors in evaluating whether the contemplated transactions were within the ordinary course of business or were outside the ordinary course of business and thus required Court approval.

91. In connection with the foregoing services, Skadden professionals expended 4,693.9 hours during the Case Period for which Skadden seeks compensation of $1,140,545. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-5. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Andre L. Zafrani $355 131.1 $49,162 371.1 $131,823 Chris L. Dickerson $389 192.0 $75,840 313.9 $122,047 Glenn S. Walter $400 97.6 $40,505 293.5 $117,366 John K. Lyons $502 65.9 $34,268 214.7 $107,792 Monica M. Levy $238 164.5 $39,480 291.6 $69,468 Randall G. R eese $281 92.3 $27,229 229.5 $64,524 Timothy P. Olson $401 1.9 $827 109.5 $43,941 John (Jack) Wm Butler, Jr. $718 18.3 $13,268 36.1 $25,904 Sara E. Wraight $235 29.6 $7,104 68.4 $16,066 Marc R. Lawrence $335 9.2 $3,082 26.7 $8,944 Susan H . Martin $378 10.6 $4,187 23.6 $8,932 Edward J. Meehan $606 1.3 $813 5.1 $3,089 Alexander W. Powell $335 0.0 $0 9.0 $3,019

55 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Eric L. Cochran $630 0.0 $0 2.1 $1,323 Michelle A. Zam arin $365 0.0 $0 3.0 $1,095 Paraprofessionals at $130/hour $130 644.6 $83,798 1220.6 $158,678 Paraprofessionals at $195/hour $195 471.8 $92,001 636.3 $124,078 Paraprofessionals at $160/hour $160 237.9 $38,064 657.6 $105,216 Paraprofessionals at $150/hour $150 0.0 $0 181.6 $27,240 Grand Total $358 2168.6 $509,628 4693.9 $1,140,545

F. Employee Matters (Labor Relations)

92. The Debtors employed approximately 38,800 employees nationwide as of the Petition Date. USAI employed 32,800 full-time employees, including approximately 8,300 station personnel, 7,200 flight attendants, 6,200 mechanics and related personnel, 4,300 pilots, 2,300 reservations personnel, and

4,500 personnel in administrative and miscellaneous job categories. On a full-time basis, Group's remaining subsidiaries employed 6,000 employees, including approximately 3,500 station personnel, 1,100 pilots, 600 flight attendants, 500 mechanics and related personnel, and 300 personnel in administrative and miscellaneous job categories. Of those employees, approximately 34,400, or 88.6%, of the Debtors' active employees were covered by collective bargaining agreements with various labor unions.

93. Given the size of this workforce, the Debtors needed to devote significant attention to negotiating with unions and their representatives. While not acting as the Debtors' primary labor counsel, Skadden nonetheless worked with the

56 Debtors in connection with their negotiations with the unions in addressing various issues concerning the impact of the restructuring on the workforce.

94. Most significantly, Skadden attorneys were involved in addressing the complex pension funding issues facing the Debtors. Along with the Debtors’ other professionals, Skadden assisted in analyzing the Debtors’ benefit programs in order to ensure that the Debtors' employees benefits programs would continue, consistent with the financial requirements for a successful reorganization and would meet the requirements necessary for the Debtors to obtain the ATSB Loan Guaran- tee. When it became critical that the Debtors revamp the pilots' defined benefits pension, Skadden professionals provided substantive support to the Debtors in discussions with ALPA, their Plan Sponsor, RSA, as well as with the PBGC.

Further, under intense time pressure, in conjunction with O’Melveny & Myers,

Skadden assisted the Debtors with discovery and background work, and then filed and argued the Distress Termination motion, which this Court heard over four days during the course of the last two weeks of February, 2003. Skadden attorneys continued to support the Debtors in their discussions with various pilots' pension plan stakeholders through the end of the Case Period.

95. In connection with the foregoing services, Skadden professionals expended 2863.6 hours during the Case Period for which Skadden seeks compensation of $1,128,402. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-6. A summary of the hours incurred

57 and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount John (Jack) Wm Butler, Jr. $721 168.8 $122,380 199.3 $143,746 Glenn S. Walter $415 286.1 $118,732 289.6 $120,062 Edward J. Meehan $625 185.5 $115,937 185.5 $115,937 Janet L. Dhillon $485 236.5 $114,703 236.5 $114,703 Alexander W. Powell $375 258.3 $96,862 258.3 $96,862 Sarah E. Freson $295 311.0 $91,745 311.0 $91,745 John K. Lyons $519 160.4 $83,408 164.9 $85,568 Michelle A. Zam arin $395 112.5 $44,438 112.5 $44,438 Marc R. Lawrence $335 129.4 $43,349 129.4 $43,349 Brian Pomper $455 76.5 $34,808 76.5 $34,808 Alesia Ranney-Marinelli $695 46.1 $32,040 46.1 $32,040 Thomas A. Gilson $475 62.5 $29,687 62.5 $29,687 Susan K. DeClercq $375 76.8 $28,801 76.8 $28,801 Susan H . Martin $395 58.3 $23,029 58.3 $23,029 David S. McFarlane $455 28.1 $12,786 28.1 $12,786 Seth Goldman $240 30.3 $7,272 30.3 $7,272 John C. Jaye $395 16.5 $6,518 16.5 $6,518 Eric L. Cochran $680 6.9 $4,692 8.9 $6,052 Andre L. Zafrani $375 14.8 $5,550 14.8 $5,550 Chris L. Dickerson $395 7.9 $3,121 7.9 $3,121 Timothy P. Olson $435 6.3 $2,740 6.3 $2,740 Sara E. Wraight $240 11.0 $2,640 11.0 $2,640 Urfan M alik $335 6.4 $2,144 6.4 $2,144 Peter A. Atkins $725 2.9 $2,102 2.9 $2,102 Monica M. Levy $240 7.5 $1,800 7.5 $1,800 Cliff Gross $655 2.6 $1,703 2.6 $1,703 Gregory A. Fernicola $680 1.7 $1,156 1.7 $1,156 Paraprofessionals at $130/hour $130 478.0 $62,140 478.0 $62,140 Paraprofessionals at $195/hour $195 15.5 $3,023 15.5 $3,023 Paraprofessionals at $160/hour $160 18.0 $2,880 18.0 $2,880 Grand Total $430 2823.1 $1,102,186 2863.6 $1,128,402

58 MATTERS BETWEEN $100,000 AND $1,000,000

G. General Corporate Advice

96. During the Case Period, Skadden professionals attended monthly and special meetings of the Debtors' Board of Directors which required, among other things, working with the Debtors' other professionals and the Debtors' senior management to prepare detailed materials for distribution and discussion. In connection with these meetings and in the course of the Debtors' daily operations,

Skadden devoted a significant amount of time advising the Debtors' Board of

Directors on other general corporate governance matters in addition to general restructuring advice.

97. Also during the Case Period, Skadden professionals advised the

Debtors in connection with the preparation of the Debtors' regulatory filings, including the Debtors' Form 10-Qs for the quarters ended June 30, 2002, September

30, 2002, and December 31, 2002, and Form 10-K filed on March 27, 2003.

Skadden also assisted the Debtors in their other regulatory filings with the SEC, including the Debtors' Form 8-Ks, which were issued in connection with each of the

Debtors' monthly operating reports.

98. In connection with the foregoing services, Skadden professionals expended 1256.5 hours during the Case Period for which Skadden seeks compensation of $604,621. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-7. A summary of the hours incurred

59 and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Eric L. Cochran $671 158.9 $108,052 240.5 $161,475 John C. Jaye $390 202.7 $80,068 307.2 $119,927 Peter A. Atkins $718 53.0 $38,426 99.7 $71,564 John (Jack) Wm Butler, Jr. $717 30.1 $21,823 64.8 $46,468 Darren E. Zeidel $379 10.6 $4,187 113.7 $43,036 Patrick S. B elville $432 31.8 $14,469 76.9 $33,186 Alesia Ranney-Marinelli $683 13 $9,035 34.6 $23,638 Andre L. Zafrani $375 41.0 $15,376 53.2 $19,951 Brian A . Blitz $335 43.8 $14,673 43.8 $14,673 Lisa J. McLean $240 51.8 $12,432 51.8 $12,432 Neil M. Leff $680 16.1 $10,948 16.1 $10,948 Seth E. Jacobson $603 1.0 $625 15.5 $9,350 Laurie S. Cohen $295 0.0 $0 25.1 $7,405 James D. Anderson $395 13.2 $5,214 13.2 $5,214 Chris L. Dickerson $395 8.3 $3,278 11.6 $4,581 Suling Lam $365 0.0 $0 11.5 $4,198 Randall G. R eese $295 13.2 $3,894 13.2 $3,894 John K. Lyons $520 5.2 $2,704 5.2 $2,704 Mindy E. Nagorsky $375 6.1 $2,288 6.1 $2,288 Marc R. Lawrence $295 0.0 $0 5.0 $1,475 Paraprofessionals at $130/hour $130 2.1 $273 47.8 $6,214 Grand Total $442 701.9 $347,765 1256.5 $604,621

H. Executory Contracts (General)

99. The Debtors estimate that, as of the Petition Date, they were parties to thousands of executory contracts and leases of personal property. During the Case Period, Skadden professionals worked closely with dozens of internal and external representatives and employees of the Debtors in coordinating the review of

60 various executory contracts and in working with the Debtors' senior management and

business advisors in evaluating contracts and leases for assumption or rejection.

These efforts required close analysis of, among other things, cure amounts,

postpetition defaults, and other ramifications of rejection or assumption. This

analysis also required numerous meetings with the Debtors' business personnel

regarding appropriate proration of invoices and postpetition payment obligations, and

also required numerous meetings and calls with contract counterparties regarding

addenda, termination notices, and other issues.

100. During the Case Period, numerous motions were filed by the

Debtors and other parties in interest concerning various executory contracts. These motions included numerous motions filed by the Debtors requesting authority to

reject various contracts and equipment leases, resulting in total estimated savings to

these estates in the millions of dollars. These motions also included several motions

filed by counterparties to various contracts seeking to compel the Debtors to assume

or reject their contracts. As this Court is aware, absent exceptionally compelling

circumstances, the Debtors strongly resisted motions to compel. Skadden assisted the

Debtors in successfully negotiating resolutions to numerous of these motions, while

other motions were withdrawn on the basis of specific Plan-related provisions.

101. In connection with the foregoing services, Skadden profession-

als expended 1,388.9 hours during the Case Period for which Skadden seeks com-

pensation of $562,641. Detailed time entries of each Skadden professional related to

61 these services are attached hereto as Exhibit E-8. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Alexander W. Powell $375 106.6 $39,976 301.0 $112,876 Edward J. Meehan $625 55.1 $34,438 150.9 $94,312 Janet L. Dhillon $485 174.9 $84,827 174.9 $84,827 Andre L. Zafrani $365 30.9 $11,587 115.3 $42,076 Chris L. Dickerson $392 78.9 $31,167 104.3 $40,861 Sarah E. Freson $295 112.1 $33,070 112.1 $33,070 Michelle A. Zam arin $395 0.0 $0 83.2 $32,864 John K. Lyons $519 36.1 $18,772 58.6 $30,400 Glenn S. Walter $412 34.9 $14,485 41.3 $17,011 John (Jack) Wm Butler, Jr. $725 11.2 $8,121 18.0 $13,051 Randall G. R eese $286 25.4 $7,494 41.5 $11,859 Van C. Durrer, II $470 0.0 $0 23.9 $11,233 Sara E. Wraight $240 33.7 $8,088 33.7 $8,088 James S. Harrington $295 18.8 $5,546 18.8 $5,546 Monica M. Levy $236 6.9 $1,656 18.8 $4,442 Rena M . Samole $335 9.2 $3,082 9.2 $3,082 Alesia Ranney-Marinelli $695 4.3 $2,989 4.3 $2,989 Darren E. Zeidel $395 0.0 $0 4.5 $1,777 Marc R. Lawrence $335 4.1 $1,374 4.1 $1,374 Paraprofessionals at $195/hour $195 21.8 $4,251 21.8 $4,251 Paraprofessionals at $160/hour $160 6.0 $960 10.7 $1,712 Paraprofessionals at $130/hour $130 31.2 $4,056 38.0 $4,940 Grand Total $380 802.1 $315,939 1388.9 $562,641

I. Disclosure Statement/Voting Issues

102. During the Case Period, Skadden attorneys devoted substantial time to the preparation of the Disclosure Statement, and to evaluating various voting and tabulation issues with respect to the Plan. Skadden attorneys consulted with the

62 Debtors on a frequent basis to gather the information necessary to ensure that the

Disclosure Statement would include all factual and legal content necessary to satisfy

the "adequate information" requirement of section 1125 of the Bankruptcy Code.

Skadden attorneys were directed to review, analyze, research and prepare adequate

disclosures of subjects, including, without limitation, (a) the Debtors' corporate

structure and business operations, (b) the prepetition capital structure of the Debtors,

tracts, (f) tax issues, (g) classification issues, (h) solicitation procedures, and (i) notice issues. In preparing to draft the Disclosure Statement, Skadden attorneys reviewed numerous books and records and other documents regarding the Debtors, including various corporate documents, proofs of claim and transactional documents.

103. After reviewing such documents, Skadden professionals

assumed primary responsibility for drafting the Disclosure Statement. Skadden

attorneys worked closely with other professionals involved in the Chapter 11 Cases

in order to incorporate their comments and contributions to the Disclosure Statement.

Skadden also provided drafts of the Disclosure Statement to the Creditors' Commit-

tee prior to its filing. On December 20, 2002, the Debtors, with the assistance of

Skadden, filed the Disclosure Statement, which was subsequently approved by this

Court after hearing on January 16, 2003.

104. More significant, since the First Fee Application Period,

Skadden professionals invested significant effort producing the Plan solicitation

63 package and reviewing Plan solicitation and balloting issues, and coordinating process with Logan & Company, the Debtors' claims and noticing agent.

To prepare for the process of soliciting votes with respect to the Plan and seeking approval of the Disclosure Statement, Skadden attorneys drafted notices for distribution and publication with respect to the Disclosure Statement and Plan confirmation hearings. Skadden attorneys also prepared the procedural foundation for soliciting votes from both creditors and equity security holders for acceptance or rejection of the Plan.

105. In connection with the foregoing services, Skadden professionals expended 1,341.5 hours during the Case Period for which Skadden seeks compensation of $548,822. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-9. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Timothy P. Olson $435 261.1 $113,579 297.5 $129,413 Andre L. Zafrani $375 170.1 $63,789 254.2 $95,326 John K. Lyons $520 110.0 $57,200 122.0 $63,440 Alesia Ranney-Marinelli $695 53.0 $36,836 53.0 $36,836 Glenn S. Walter $415 82.6 $34,279 88.4 $36,686 Peter M. Seka $485 72.4 $35,114 72.4 $35,114 Sara E. Wraight $240 122.5 $29,400 122.5 $29,400 John (Jack) Wm Butler, Jr. $725 33.7 $24,433 33.7 $24,433 Jessica A. Hough $415 53.2 $22,079 53.2 $22,079 John C. Jaye $395 8.6 $3,397 32.7 $12,916

64 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Monica M. Levy $240 51.1 $12,264 51.1 $12,264 Randall G. R eese $295 29.4 $8,674 29.4 $8,674 Ann H. Pollock $680 9.8 $6,664 9.8 $6,664 Cliff Gross $655 9.0 $5,895 9.0 $5,895 Eric L. Cochran $680 3.0 $2,040 6.9 $4,692 Mark Erwin $240 18.3 $4,392 18.3 $4,392 Edward J. Meehan $625 6.1 $3,813 6.1 $3,813 Chris L. Dickerson $395 6.0 $2,370 6.0 $2,370 Marc R. Lawrence $335 6.0 $2,010 6.0 $2,010 Paraprofessionals at $160/hour $160 31.7 $5,072 31.7 $5,072 Paraprofessionals at $195/hour $195 37.6 $7,333 37.6 $7,333 Grand Total $438 1175.2 $480,633 1341.5 $548,822

J. Executory Contracts (Express)

106. Four of the Debtors, which are wholly-owned subsidiaries of

Group, operate or are in the process of operating regional jet and turbo-prop commu- ter aircraft as US Airways Express carriers (the "Express Subsidiaries"). During the

Case Period, Skadden attorneys assisted the Debtors in dealing with numerous issues stemming from the Express Subsidiaries' executory contracts. These contracts pertain to almost all aspects of the Express Subsidiaries' businesses, including supply contracts for spare parts and equipment and repair contracts, which provide repair and maintenance services for the Express Subsidiaries' aircraft and related equipment.

107. During the Case Period, Skadden professionals worked closely with various contacts at the Express Subsidiaries in coordinating the review of various executory contracts in evaluating such contracts for assumption or rejection.

65 108. Additionally, as part of the Debtors restructuring strategy to add more regional jets to its business operations, Skadden assisted the Debtors in negotiating new contracts for express services with Midway Airlines and modifying existing contracts with the Debtors non-affiliated, independent, Express carriers.

109. Specifically, in October 2002, Skadden attorneys assisted the

Debtors in reaching an agreement with Mesa Air Group, Inc. ("Mesa") to fly up to 70 additional 50-seat regional jets as part of the US Airways Express network. Further, during the Application Period, Skadden also assisted the Debtors in negotiating the terms of an agreement with Midway Airlines to fly at least 18 50-seat regional jets.

Finally, during the Case Period, Skadden attorneys assisted the Debtors in entering into an agreement to fly an additional nine regional jet aircraft with Chautauqua

Airlines. Skadden attorneys drafted motions to enter into new agreements or to assume, as amended, jet services agreements with these regional carriers and assisted the Debtors in drafting and finalizing the agreements with these carriers. These agreements were highly complex, often involving financing, purchase and service arrangements, and, in the case of Midway, were further complicated by the fact that

Midway had also commenced Chapter 11 proceedings.

110. In connection with the foregoing services, Skadden professionals expended 1208.7 hours during the Case Period for which Skadden seeks compensation of $463,545. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-10. A summary of the hours incurred

66 and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Michelle A. Zam arin $395 195.6 $77,262 228.8 $90,376 Thomas W. Greaves $335 199.7 $66,900 248.4 $83,214 Steven P. Miriani $472 95.3 $45,268 121.9 $57,476 Glenn S. Walter $415 50.8 $21,082 96.9 $40,213 John C. Jaye $395 67.5 $26,663 78.1 $30,850 Patrick S. B elville $455 50.9 $23,160 50.9 $23,160 John K. Lyons $509 16.7 $8,684 43.5 $22,136 Darren E. Zeidel $395 8.2 $3,239 49.3 $19,473 Edward J. Meehan $625 23.3 $14,563 23.3 $14,563 Laura P. Regan $435 24.0 $10,440 24.0 $10,440 Urfan M alik $335 24.8 $8,308 24.8 $8,308 Sarah E. Freson $295 25.7 $7,582 25.7 $7,582 Seth E. Jacobson $625 6.0 $3,750 8.0 $5,000 Mark Erwin $240 20.2 $4,848 20.2 $4,848 Mindy E. Nagorsky $375 12.8 $4,800 12.8 $4,800 Marc R. Lawrence $335 11.0 $3,685 11.0 $3,685 Eric L. Cochran $680 0.0 $0 4.6 $3,128 Chris L. Dickerson $395 3.3 $1,304 7.9 $3,121 John (Jack) Wm Butler, Jr. $725 4.0 $2,900 4.0 $2,900 Cliff Gross $655 4.3 $2,817 4.3 $2,817 Susan H . Martin $395 6.0 $2,370 6.0 $2,370 Alesia Ranney-Marinelli $695 0.0 $0 2.5 $1,737 Jeffrey A. Greenb latt $415 4.1 $1,702 4.1 $1,702 Michael J. Winiger $240 5.4 $1,296 5.4 $1,296 Paraprofessionals at $195/hour $195 77.7 $15,152 77.7 $15,152 Paraprofessionals at $130/hour $130 24.6 $3,198 24.6 $3,198 Grand Total $429 961.9 $360,973 1,208.7 $463,545

67 K. Creditor Meetings/Statutory Committees

111. This category of time relates to meetings with various creditor constituencies, and, in particular, the Creditors' Committee and its financial advisors.

Thus, on August 20, 2002, shortly after commencement of these Chapter 11 Cases,

Skadden professionals advised the Debtors with respect to, and attended the organi- zational meeting conducted by, the Trustee, at which the Creditors' Committee was organized and retained counsel. Skadden also represented the Debtors at the section

341 meeting of creditors.

112. Shortly after formation of the Creditors' Committee and the appointment of Committee's professionals, Skadden assisted the Debtors in responding to information requests by the Committee's professionals pursuant to which the

Debtors provided substantial background information to educate the Committee on such matters as the Debtors' history, corporate structure and financial situation.

Throughout the Case Period, Skadden assisted the Debtors in working with the

Creditors' Committee and its professionals on continuing information and related requests.

113. In addition, throughout the Case Period, Skadden attorneys communicated extensively with the Committee's representatives regarding the progress and status of the Chapter 11 Cases. In addition to almost daily communications, Skadden organized and represented the Debtors at periodic meetings with the

Committee and its professionals throughout the Case Period. These meetings, nine

68 of which were held during the Case Period, allowed the Debtors to keep the Credi- tors' Committee members and its professionals informed as to upcoming issues, such as motions to be heard at the monthly omnibus hearings, the status of the Disclosure

Statement, the Plan and its solicitation and to address any concerns that the Creditors'

Committee had with respect to such issues. Skadden assisted the Debtors in substantial preparation for these meetings, including the coordination of financial information and status reports on implementation of various orders and relevant other matters.

114. The Debtors believe that these efforts to keep the Creditors'

Committee fully informed created a cooperative atmosphere and constructive working relationship that contributed to the success of these Chapter 11 Cases. Most issues were addressed and resolved out of Court without the need for unnecessary litigation between the Debtors and their creditor constituencies.

115. Furthermore, as the Court is aware, the Trustee received a number of requests regarding the formation of additional statutory committees in these Chapter 11 Cases, including a request to form an equity committee and a request to form a committee of participants in certain of the Debtors' public aircraft financing agreements. Skadden worked closely with the Company in order to provide the Trustee with the information necessary to respond to such requests.

116. In connection with the foregoing services, Skadden professionals expended 1045.6 hours during the Application Period for which Skadden seeks

69 compensation of $409,094. Detailed time entries of each Skadden professional

related to these services are attached hereto as Exhibit E-11. A summary of the hours

incurred and value of the services performed by each professional is provided in the

following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Chris L. Dickerson $388 96.6 $38,157 247.7 $96,209 John (Jack) Wm Butler, Jr. $712 39.6 $28,711 129.6 $92,278 Marc R. Lawrence $334 156.9 $52,562 268.2 $89,656 John K. Lyons $500 27.2 $14,144 111.7 $55,880 Timothy P. Olson $404 20.5 $8,918 87.9 $35,542 Glenn S. Walter $380 0.0 $0 24.9 $9,462 Randall G. R eese $265 0.0 $0 21.4 $5,671 Van C. Durrer, II $470 0.0 $0 6.1 $2,867 Patrick S. B elville $455 0.0 $0 4.9 $2,230 Paraprofessionals at $195/hour $195 4.2 $820 10.5 $2,048 Paraprofessionals at $130/hour $130 63.8 $8,294 132.7 $17,251 Grand Total $385 408.8 $151,606 1045.6 $409,094

L. Claims Administration (General)

117. Given the vast number of lenders, vendors, employees, litigation

claimants, stockholders, and other parties in interest in these proceedings, matters

pertaining to claims filing, review, and administration consumed considerable resources of the Debtors, Skadden, and a number of other professionals throughout these Chapter 11 Cases. During the Case Period, Skadden professionals prepared a motion for entry of an order setting the claims bar date, and also oversaw preparation of the notices and customized proof of claim forms to be used in these cases.

Skadden professionals also advised the Debtors on the scope of mail and publication

70 notice and maintenance of telephone hotlines with the Debtors' claims and notice agent.

118. As a result of these efforts, an order was entered setting the bar date for November 4, 2002. Skadden worked closely with the Debtors and their claims and notice agent in overseeing the dissemination of over 140,000 proof of claim forms and bar date notices. Throughout the Case Period, Skadden personnel responded to thousands of inquiries from potential claimants, many of them former

US Airways employees, regarding the claims filing process. Skadden also worked with the Debtors in responding to requests of certain vendors to reconcile claims where there were discrepancies between the Debtors' schedules and a vendor's books and records, or where the amounts listed in the schedules were identified as contingent. Where claims could not be reconciled, Skadden professionals further assisted the Debtors with the claims objections process. Finally, Skadden also worked diligently to ensure that all Governmental claims were resolved satisfactorily so as to allow for the confirmation of the Plan.

119. In connection with the foregoing services, Skadden professionals expended 985.3 hours during the Application Period for which Skadden seeks compensation of $375,067. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-12. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

71 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Sarah E. Freson $295 164.4 $48,498 191.2 $56,404 Edward J. Meehan $625 70.9 $44,312 89.2 $55,749 Alexander W. Powell $375 136.6 $51,225 136.6 $51,225 Alesia Ranney-Marinelli $695 51.8 $36,001 51.8 $36,001 Andre L. Zafrani $372 39.6 $14,850 73.1 $27,196 John K. Lyons $518 27.3 $14,196 41.7 $21,616 Glenn S. Walter $402 27.6 $11,454 49.5 $19,916 Janet L. Dhillon $485 40.9 $19,837 40.9 $19,837 Monica M. Levy $239 22.7 $5,448 68.9 $16,471 Timothy P. Olson $434 12.5 $5,438 33.2 $14,394 Sara E. Wraight $240 43.0 $10,320 43.0 $10,320 Chris L. Dickerson $393 17.2 $6,794 22.9 $9,009 Andrew M. Wright $335 20.1 $6,734 20.1 $6,734 Randall G. R eese $276 2.4 $708 22.3 $6,150 John (Jack) Wm Butler, Jr. $716 5.0 $3,625 7.3 $5,224 Seth E. Jacobson $625 2.5 $1,563 2.5 $1,563 Peter A. Atkins $725 1.6 $1,160 1.6 $1,160 Marc R. Lawrence $335 0.0 $0 3.4 $1,139 Paraprofessionals at $195/hour $195 17.9 $3,491 43.9 $8,561 Paraprofessionals at $160/hour $160 20.1 $3,216 30.4 $4,864 Paraprofessionals at $130/hour $130 11.8 $1,534 11.8 $1,534 Grand Total $408 735.9 $290,404 985.3 $375,067

M. Nonworking Travel Time

120. Because of the extensive breadth of services that Skadden provided the Debtors in these Chapter 11 Cases, Skadden drew upon the experience and talent of a number of professionals from its offices located in Chicago, Los

Angeles, New York and Washington, D.C. As this Court is aware, the Debtors are headquartered in Arlington, Virginia, a suburb of Washington, D.C., members of the

Creditors' Committee are based in New York and Washington, D.C., the Debtors

72 postpetition lenders are based in New York and Alabama, the ATSB is based in New

York and Washington, D.C., and the PBGC is based in Washington, D.C. As a consequence of these disparate locations, Skadden professionals frequently traveled among these and other locations as necessary to meet with the Debtors' Board of

Directors and senior management, creditor constituencies, and to attend Court hearings. Skadden's professionals who spent time traveling, but not otherwise working, allocated their time to this billing category.

121. Skadden professionals expended 1,354.7 hours during the Case

Period devoted to non-working travel time for which Skadden seeks compensation of

$291,236. This amount reflects a fifty percent (50%) reduction from Skadden's guideline hourly rates. Detailed time entries of each Skadden professional are attached hereto as Exhibit E-13. A summary of the hours incurred and value of the travel time for each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount John K. Lyons $254 105.8 $27,508 193.9 $49,192 John (Jack) Wm Butler, Jr. $358 61.4 $22,256 110.1 $39,394 Glenn S. Walter $202 78.2 $16,204 135.5 $27,310 Seth E. Jacobson $307 42.8 $13,374 74.9 $22,984 Chris L. Dickerson $195 51.4 $10,151 86.6 $16,898 Ann H. Pollock $337 17.2 $5,848 49.7 $16,727 Randall G. R eese $142 56.8 $8,377 104.7 $14,846 Timothy P. Olson $211 37.1 $8,069 63.9 $13,504 Andre L. Zafrani $181 42.8 $8,024 73.2 $13,248 Steven P. Miriani $232 40.2 $9,548 52.8 $12,257 Marc R. Lawrence $165 50.6 $8,475 72.4 $11,971 John C. Jaye $191 18.9 $3,733 42.5 $8,138

73 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Suling Lam $185 5.0 $988 36.9 $6,810 Sara E. Wraight $119 29.1 $3,492 35.2 $4,194 Gerard C. Martin $185 3.9 $770 21.8 $4,038 Peter A. Atkins $363 8.1 $2,937 10.0 $3,626 James D. Anderson $183 0.0 $0 16.4 $2,993 Monica M. Levy $119 20.3 $2,436 24.1 $2,873 Patrick S. B elville $216 4.4 $1,001 10.7 $2,309 Robert P. Gal $136 3.8 $560 16.9 $2,296 Eric L. Cochran $340 6.5 $2,210 6.5 $2,210 Van C. Durrer, II $235 0.0 $0 8.3 $1,951 Seth J. Gerson $208 0.0 $0 7.8 $1,619 Susan H . Martin $183 0.0 $0 6.2 $1,132 Edward J. Meehan $308 0.0 $0 3.5 $1,078 Paraprofessionals at $80/hour $80 24.5 $1,960 38.4 $3,072 Paraprofessionals at $98/hour $98 19.8 $1,931 19.8 $1,931 Paraprofessionals at $75/hour $75 0.0 $0 21.5 $1,612 Paraprofessionals at $97/hour $97 10.5 $1,023 10.5 $1,023 Grand Total $204 739.1 $160,875 1354.7 $291,236

N. Secured Claims (General)

122. During the Case Period, Skadden attorneys assisted the Debtors in dealing with a number of issues regarding secured claims against the Debtors, including the assertion of a number of mechanics liens and claims for set-off. In particular, during the Application Period, J.P. Morgan Trust Company, National

Association (“J.P. Morgan”), as trustee with respect to the $71,140,000 Special

Facility Revenue Bonds, Series 2000 (US Airways, Inc. Project) (the “Bonds”), issued by the Philadelphia Authority for Industrial Development, objected (the “J.P.

Morgan Objection”) to the Debtors’ first-day Motion for an Order Authorizing the

74 Payment of Certain Prepetition Claims of and Honoring Certain Contracts with

Outside Mechanics, Repairmen, Contractors and Shippers (Docket No. 15). In addition, HSBC Bank USA (“HSBC”), as successor-in-interest to J.P. Morgan, filed a Motion for Order Granting Relief from Automatic Stay (Docket Nos. 808, 812 and

813) with respect to certain proceeds of the Bonds which were held in trust by HSBC

(the “HSBC Motion”). As of the Petition Date, the amount of such proceeds was approximately $22 million. The Debtors filed an objection to the HSBC Motion and entered into extensive negotiations with HSBC, the ultimate product of which was a consensual resolution of both the J.P. Morgan Objection and the HSBC Motion.

Pursuant to the settlement, the Debtors were allowed to access $3 million of the proceeds of the Bonds, while the remaining proceeds were distributed to the holders of the Bonds. The hearings on December 11, 2002, and January 16, 2003, the related drafting of settlement papers and the final negotiations and filings all required the focus of a number of Skadden attorneys.

123. In connection with the foregoing services, Skadden professionals expended 660.1 hours during the Case Period for which Skadden seeks compensation of $235,388. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-14. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

75 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Sarah E. Freson $295 89.1 $26,285 303.3 $89,474 Edward J. Meehan $625 32.6 $20,376 89.6 $56,001 Randall G. R eese $275 9.7 $2,862 116.8 $32,123 John K. Lyons $520 22.7 $11,804 33.1 $17,212 Steven P. Miriani $469 0.0 $0 21.7 $10,182 Glenn S. Walter $406 2.0 $830 18.9 $7,665 Susan H . Martin $365 0.0 $0 12.4 $4,526 William R. Stewart, Jr. $230 0.0 $0 14.5 $3,335 Chris L. Dickerson $387 0.0 $0 7.4 $2,863 Mark Erwin $240 10.9 $2,616 10.9 $2,616 Seth E. Jacobson $625 0.0 $0 2.8 $1,750 Gerard C. Martin $395 4.4 $1,738 4.4 $1,738 Monica M. Levy $240 5.7 $1,368 5.7 $1,368 Alexander W. Powell $375 0.0 $0 3.2 $1,200 Patrick S. B elville $415 0.0 $0 2.5 $1,038 Andre L. Zafrani $330 0.0 $0 3.1 $1,023 Paraprofessionals at $130/hour $130 9.8 $1,274 9.8 $1,274 Grand Total $372 186.9 $69,153 660.1 $235,388

O. Employee Matters (General)

124. As discussed previously, the Debtors employed roughly 40,000 employees nationwide as of the Petition Date. The Debtors operate in a service- oriented industry and, as such, the Debtors consider their workforce to be one of their most valuable assets. Therefore, as the Court is aware, a significant aspect of the

Debtors' restructuring program was to conduct a labor-friendly Chapter 11 reorganization. Accordingly, throughout the Case Period, Skadden attorneys devoted considerable time in assisting the Debtors in ensuring that the Chapter 11 process had minimized adverse impact upon their employees.

76 125. Given the Debtors’ emphasis of reducing labor costs prior to and during the Case Period, the Debtors, after consultation with Skadden, determined not to implement a key employee retention program for their senior-level employees.

The Debtors also recognized the importance of retaining their management employees, each of whom possessed significant, unique knowledge of the Debtors’ operations and of the key factors for success in the airline industry. A loss of such key personnel could have had disastrous effects on the Debtors' ability to successfully accomplish their reorganization efforts while in Chapter 11.

126. Among other things, therefore, Skadden professionals negotiated and drafted a motion to assume certain prepetition and postpetition indemnification agreements in order to protect such key personnel from, among other things, claims that could be asserted against them in connection with actions taken in good faith and in the best interests of the Debtors. In accordance with the above discussion, the motion sought to provide certain minimal protections to these employees by indemnifying them for claims arising because of the myriad difficult business decisions that the Debtors’ restructuring efforts required.

127. This motion was objected to by several parties, thereby requir- ing Skadden to expend additional time and resources responding to such objections and attempting to consensually resolve the concerns of such parties. This Court entered an order granting the relief sought in the motion on November 8, 2002.

Following such order, Skadden professionals maintained a level of professional

77 support required for analysis and discussion of employment contracts used upon the

Debtors’ confirmation of their plan.

128. Finally, during the Second Application Period, Skadden attorneys devoted substantial time assisting the Debtors in formulating and seeking

Court approval for employee compensation programs, including a new, post-emergence stock option plan, intended to provide incentives for employees and help in employee retention during the implementation of the Debtors' post-confirmation business plan.

129. In connection with the foregoing services, Skadden professionals expended 441.8 hours during the Case Period for which Skadden seeks compensation of $197,368. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-15. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Alexander W. Powell $330 0.0 $0 139.7 $46,101 Neil M. Leff $676 35.0 $23,800 44.5 $30,095 John (Jack) Wm Butler, Jr. $712 19.2 $13,920 42.0 $29,919 Richard L. Brusca $630 0.0 $0 26.4 $16,632 Timothy P. Olson $395 0.0 $0 35.8 $14,141 Edward J. Meehan $580 0.0 $0 22.9 $13,282 John K. Lyons $489 1.3 $676 22.9 $11,196 Gail Ken dall $485 15.3 $7,421 15.3 $7,421 Chris L. Dickerson $395 2.4 $948 15.5 $6,122 Marc R. Lawrence $330 0.0 $0 16.6 $5,472

78 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Randall G. R eese $267 0.0 $0 19.3 $5,154 Glenn S. Walter $409 0.0 $0 8.9 $3,641 Alesia Ranney-Marinelli $695 2.4 $1,668 2.4 $1,668 Eric L. Cochran $680 2.0 $1,360 2.0 $1,360 Peter A. Atkins $725 1.5 $1,088 1.5 $1,088 Paraprofessionals at $195/hour $195 0.0 $0 10.5 $2,048 Paraprofessionals at $130/hour $130 0.0 $0 15.6 $2,028 Grand Total $478 79.1 $50,881 441.8 $197,368

P. Leases (Real Property)

130. Skadden worked closely with the Debtors on real property lease matters. These matters included (a) reviewing the Debtors' leases; (b) initially preserving the Debtors' right to assume and assign or reject such leases through an extension of the period within which the Debtors must assume or reject such leases under the Bankruptcy Code; and (c) conducting negotiations, drafting pleadings, and appearing for the Debtors at hearings relating to the rejection, assumption and assignment of leases and other matters concerning the disposition of the Debtors' nonresidential real property leases.

131. Skadden attorneys worked closely with the Debtors and the

Debtors' other advisors regarding the disposition of the Debtors' unexpired nonresidential real property leases. Furthermore, Skadden attorneys prepared the motions, exhibits and other pleadings necessary for filing with the Court to implement the

Debtors' business decisions relating to the disposition of these leases. In addition,

Skadden attorneys conducted research regarding the Debtors' ability to reject leases

79 and the economic consequences of the rejection of certain leases under the Bank- ruptcy Code. Finally, Skadden attorneys prepared for and attended court hearings regarding these real estate transactions.

132. In connection with the foregoing services, Skadden professionals expended 449.0 hours during the Application Period for which Skadden seeks compensation of $151,685. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-16. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Glenn S. Walter $414 83.6 $34,695 136.6 $56,557 Randall G. R eese $290 73.5 $21,683 130.6 $37,862 Chris L. Dickerson $390 27.2 $10,744 34.9 $13,600 Monica M. Levy $240 17.9 $4,296 50.6 $12,144 John K. Lyons $520 5.1 $2,652 13.9 $7,228 Seth Goldman $240 22.4 $5,376 22.4 $5,376 Alexander W. Powell $375 14.1 $5,287 14.1 $5,287 Sara E. Wraight $240 16.2 $3,888 16.2 $3,888 James F. O'Rorke, Jr. $580 0.0 $0 4.0 $2,320 Edward J. Meehan $625 3.1 $1,937 3.1 $1,937 Gerard C. Martin $395 4.9 $1,936 4.9 $1,936 Marc R. Lawrence $335 4.1 $1,374 4.1 $1,374 Paraprofessionals at $160/hour $160 6.1 $976 13.6 $2,176 Grand Total $370 278.2 $94,844 449.0 $151,685

Q. Business Operations/Strategic Planning

133. This particular billing category is comprised of time incurred by

Skadden professionals working with the Debtors in considering global restructuring

80 strategies and initiatives. Skadden professionals participated in numerous strategy sessions, meetings and calls to consider such major case issues as development of a comprehensive, go-forward restructuring business plan, and various scenarios, considerations, and ramifications regarding the Chapter 11 Cases' issues.

134. In connection with the foregoing services, Skadden professionals expended 145.3 hours during the Case Period for which Skadden seeks compensation of $100,613. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-17. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount John (Jack) Wm Butler, Jr. $715 56.8 $41,180 131.4 $94,006 Timothy P. Olson $435 1.8 $783 10.4 $4,524 James F. O'Rorke, Jr. $595 3.5 $2,083 3.5 $2,083 Grand Total $582 62.1 $44,046 145.3 $100,613

MATTERS UNDER $100,000

R. Retention/Fee Matters/Objections (Others)

135. Reorganization proceedings as large and complex as these

Chapter 11 Cases require the coordinated efforts of a number of restructuring advisors and professionals. To this end, Skadden professionals worked with the

Debtors and their other professionals in retaining such professionals in these Cases, including, among others, FTI Consulting, Inc., as restructuring advisors and accoun-

81 tants; KPMG LLP as auditors and tax advisors; O’Melveny & Myers LLP as special labor, regulatory, antitrust and litigation counsel; and Seabury Advisors LLC,

Seabury Securities LLC, Seabury Solutions LLC, Seabury Support Services LLC

(collectively, "Seabury"), as financial advisors, investment bankers, and consultants.

Skadden also assisted the Debtors in retaining Logan & Company, Inc. as claims and noticing agent. In addition, Skadden advised the Debtors in retaining, pursuant to a streamlined procedures order, 74 ordinary course professionals who provided the

Debtors with a host of non-restructuring legal, accounting and other professional services. Additionally, during the Case Period, Skadden attorneys prepared a motion and response to objections filed by the US Trustee and two other parties in interest and defended the Debtors' right to include indemnification provisions in certain of the Debtors' advisors.

136. In connection with the foregoing services, Skadden professionals expended 249.0 hours during the Case Period for which Skadden seeks compensation of $82,497. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-18. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Marc R. Lawrence $310 7.9 $2,647 108.1 $33,483 Susan H . Martin $365 0.0 $0 58.9 $21,499 Randall G. R eese $272 1.2 $354 20.3 $5,524

82 Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount John K. Lyons $520 1.0 $520 9.2 $4,784 Glenn S. Walter $380 0.0 $0 11.9 $4,522 Timothy P. Olson $408 0.0 $0 9.8 $4,003 John (Jack) Wm Butler, Jr. $706 0.0 $0 4.6 $3,248 Monica M. Levy $230 0.0 $0 5.4 $1,242 Chris L. Dickerson $365 0.0 $0 2.8 $1,022 Paraprofessionals at $160/hour $160 4.4 $704 9.7 $1,552 Paraprofessionals at $195/hour $195 3.2 $624 8.3 $1,618 Grand Total $356 17.7 $4,849 249.0 $82,497

S. Automatic Stay (Relief Actions)

137. As of the Petition Date, the Debtors were parties to a variety of litigation. Although the automatic stay of section 362 of the Bankruptcy Code prohibits parties from pursuing these claims during the Chapter 11 Cases, the

Debtors received numerous requests, including more than twenty motions, seeking modification of the stay in order to allow the claimants to proceed against the

Debtors in non-bankruptcy courts. Skadden professionals worked with the Debtors' legal department, other US Airways employees and the Debtors' insurance providers in crafting a procedure for modification of the stay where the claim in question was covered by the Debtors' insurance and, therefore, would not have any adverse effect on the Debtors' estates.

138. In connection with the foregoing services, Skadden professionals expended 240.2 hours during the Case Period for which Skadden seeks compensation of $79,637. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-19. A summary of the hours incurred

83 and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Sarah E. Freson $295 0.0 $0 89.6 $26,432 Glenn S. Walter $415 30.0 $12,450 35.1 $14,567 Sara E. Wraight $240 3.5 $840 39.3 $9,432 Timothy P. Olson $400 1.9 $827 15.2 $6,081 Edward J. Meehan $625 3.4 $2,125 8.4 $5,250 Alexander W. Powell $367 2.3 $863 14.0 $5,133 Monica M. Levy $240 21.0 $5,040 21.0 $5,040 Chris L. Dickerson $395 3.5 $1,383 11.6 $4,582 John K. Lyons $520 1.3 $676 6.0 $3,120 Grand Total $389 66.9 $24,204 240.2 $79,637

T. Retention/Fee Matters (SASM&F)

139. Skadden is one of the largest law firms in the world, with approximately 1,600 attorneys located in 22 offices in 11 nations. Because of the number of the Debtors' business relationships and the number of Skadden's business clients, Skadden has been required to spend time before and after the commencement of the Chapter 11 Cases with respect to retention and fee issues. In particular,

Skadden conducted an extensive relationship and disclosure search before being retained as Debtors' counsel. After such retention and during the Case Period,

Skadden supplemented its search results through distribution of a questionnaire to the firm's professionals worldwide. In addition, pursuant to the requirements of the

Administrative Order entered shortly after the Petition Date, Skadden prepared detailed monthly compensation packages for distribution in accordance with the

84 procedures established by Order, and further summarized the first of these Monthly

Statements in their First Fee Application.

140. In connection with the foregoing matters, Skadden professionals expended 197.6 hours during the Case Period for which Skadden seeks compensation of $778,826. Detailed time entries of each Skadden professional related to these matters are attached hereto as Exhibit E-20. A summary of the hours incurred and value of the matter by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Chris L. Dickerson $393 54.6 $21,567 58.4 $22,954 John (Jack) Wm Butler, Jr. $721 14.6 $10,585 26.0 $18,747 Susan H . Martin $395 35.5 $14,023 35.5 $14,023 Randall G. R eese $295 31.0 $9,146 40.8 $12,037 Sara E. Wraight $240 6.3 $1,512 16.2 $3,888 Andre L. Zafrani $375 9.2 $3,450 9.2 $3,450 Timothy P. Olson $435 0.0 $0 3.3 $1,436 Monica M. Levy $240 4.8 $1,152 4.8 $1,152 Marc R. Lawrence $335 0.0 $0 3.4 $1,139 Grand Total $381 156.0 $61,435 197.6 $78,826

U. Vendor Matters

141. The commencement of these Chapter 11 Cases, as with the commencement of any large Chapter 11 case, caused significant – yet unavoidable – disruption to the vendor supply network. To minimize the level of this disruption,

Skadden professionals worked closely with hundreds of the Debtors' employees and other personnel during the Case Period in implementing a series of programs designed to ensure as seamless a transition into and through Chapter 11 as possible

85 and to ensure that much needed supplies and airplane parts were available to the

Debtors throughout the Case Period.

142. In connection with the foregoing services, Skadden professionals expended 206.0 hours during the Case Period for which Skadden seeks compensation of $70,551. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-21. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Chris L. Dickerson $372 0.0 $0 62.3 $23,171 John K. Lyons $480 0.0 $0 43.5 $20,880 Glenn S. Walter $403 0.0 $0 25.1 $10,111 Randall G. R eese $283 3.3 $973 18.3 $5,188 Andre L. Zafrani $330 0.0 $0 14.0 $4,620 John (Jack) Wm Butler, Jr. $695 0.0 $0 1.8 $1,251 Paraprofessionals at $130/hour $130 0.0 $0 41.0 $5,330 Grand Total $385 3.3 $973 206.0 $70,551

V. Credit Card Agreements

143. Credit card sales represent the substantial majority of the

Debtors' total gross receipts. The Debtors have various agreements with credit card processors to collect and process credit card receivables. As the largest component of the Debtors' revenues, credit card sales are an absolutely essential component of the Debtors' business. Accordingly, Skadden took the lead in assisting the Debtors in obtaining several orders authorizing the Debtors to assume, as modified, contracts

86 with their credit card processors by negotiating the terms of the contract amendments and preparing the motions and related orders. This resulted in the Bankruptcy

Court, in four separate orders, authorizing the Debtors to assume modified credit card processing agreements with (i) Diners Club International Ltd., (ii) American

Express Travel Related Services Company, Inc., (iii) National Processing Company and National City Bank of Kentucky, and (iv) Discover Financial Services, Inc.

Further, the professionals at Skadden were an integral part of the credit card proces- sor qualification and negotiations in order to finalize appropriate credit card processing facilities for the Debtors upon their emergence from Chapter 11.

144. In connection with the foregoing services, Skadden professionals expended 134.6 hours during the Case Period for which Skadden seeks compensation of $61,501. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-22. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Van C. Durrer, II $474 19.7 $9,555 96.9 $45,906 Alexander W. Powell $330 0.0 $0 14.2 $4,686 John (Jack) Wm Butler, Jr. $695 0.0 $0 4.2 $2,919 Glenn S. Walter $389 0.0 $0 7.3 $2,840 Andre L. Zafrani $330 0.0 $0 8.6 $2,838 Eric L. Cochran $680 3.4 $2,312 3.4 $2,312 Grand Total $483 23.1 $11,867 134.6 $61,501

87 W. Environmental Matters

145. As a consequence of the Debtors restructuring various nonresidential real property leases, the Debtors were required to resolve various environmental issues arising from the Debtors' use of such lease facilities. These efforts required detail-oriented research and analyses in order for the Debtors to be in a position to resolve such issues in a manner most beneficial to their estates. Skadden professionals reviewed matters arising in Baltimore, Maryland; Delong, Indiana;

Miami, Florida; and the Port Authority of New York, among others, and worked on various documents, including loan and lease documents that were impacted by such environmental issues.

146. In connection with the foregoing services, Skadden professionals expended 102.8 hours during the Case Period for which Skadden seeks compensation of $60,274. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-23. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Kenneth Berlin $655 54.5 $35,698 54.5 $35,698 Don J. Frost, Jr. $520 13.1 $6,812 13.1 $6,812 John P. Sheahan $395 14.8 $5,846 14.8 $5,846 Alesia Ranney-Marinelli $695 7.5 $5,213 7.5 $5,213 John A. Amodeo $485 10.6 $5,141 10.6 $5,141 Eric L. Cochran $680 2.3 $1,564 2.3 $1,564 Grand Total $572 102.8 $60,274 102.8 $60,274

88 X. Reports and Schedules

147. There are a total of eight debtors in these jointly-administered

proceedings. During the Case Period, Skadden assisted the Debtors in working with the Trustee in preparing a consolidated set of Schedules for Group and all of the

Affiliate Debtors. Given the diverse assets, liabilities, and other obligations of the various Affiliate Debtors, however, and also given the need to provide precise

information concerning these various entities' financial and operating condition,

Skadden also worked closely with the Debtors' financial and tax personnel and the

Debtors' financial advisors in preparing separate sets of Schedules for Group and

each of the seven Affiliate Debtors.

148. In connection with the foregoing services, Skadden profession-

als expended 65.4 hours during the Case Period for which Skadden seeks compensa-

tion of $29,977. Detailed time entries of each Skadden professional related to these

services are attached hereto as Exhibit E-24. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Timothy P. Olson $395 0.0 $0 33.5 $13,233 John (Jack) Wm Butler, Jr. $695 0.0 $0 10.5 $7,298 John K. Lyons $490 2.3 $1,196 9.5 $4,652 Glenn S. Walter $415 8.3 $3,444 8.3 $3,444 Andre L. Zafrani $375 3.6 $1,350 3.6 $1,350 Grand Total $474 14.2 $5,990 65.4 $29,977

89 Y. Asset Analysis and Recovery

149. Skadden devoted time during the Case Period to analyzing issues related to the Debtors' recovery of various prepetition and postpetition amounts owed to the Debtors, including amounts owed by Dornier Aviation (North

America) Inc. ("DANA"), a supplier of spare parts and maintenance services, which also filed for Chapter 11 protection. In analyzing and prosecuting the Debtors' claims against DANA, Skadden attorneys reviewed various contracts and court pleadings and drafted pleadings, which were filed in DANA's Chapter 11 cases.

150. In connection with the foregoing services, Skadden professionals expended 71.80 hours during the Application Period for which Skadden seeks compensation of $27,205. Detailed time entries of each Skadden professional related to these services are attached hereto as Exhibit E-25. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Michelle A. Zam arin $365 0.0 $0 50.3 $18,360 Edward J. Meehan $625 0.0 $0 5.8 $3,625 Alexander W. Powell $330 0.0 $0 8.0 $2,640 Marc R. Lawrence $335 0.0 $0 7.7 $2,580 Grand Total $414 0.0 $0 71.8 $27,205

Z. Litigation (General)

151. During the Case Period, Skadden professionals were required to devote resources to various other litigation matters not within the purview of other

90 billing categories. Much of the activity in this billing category relates to efforts by

Skadden professionals to ensure that actions arising out of the everyday operations of

the Debtors do not distract the Debtors from their chief goal of successful emergence

from Chapter 11. These efforts included, among other things, extension of the

Debtors' deadline to remove certain state court actions to this Court, and resolution of

litigation commenced by others against the Debtors in non-bankruptcy fora.

152. In connection with the foregoing services, Skadden profession-

als expended 46.3 hours during the Case Period for which Skadden seeks compensa-

tion of $18,844. Detailed time entries of each Skadden professional related to these

services are attached hereto as Exhibit E-26. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Edward J. Meehan $625 12.0 $7,500 12.0 $7,500 Alexander W. Powell $345 5.4 $2,025 16.3 $5,622 Marc R. Lawrence $335 0.0 $0 10.3 $3,450 Sarah E. Freson $295 7.7 $2,272 7.7 $2,272 Grand Total $400 25.1 $11,797 46.3 $18,844

AA. Asset Dispositions

153. During the Case Period, Skadden attorneys provided advice to

the Debtors regarding the sale of certain assets including excess aircraft, aircraft

equipment and simulators. These assets dispositions were conducted in the ordinary

course of the Debtors' business and, as such, did not require Court approval, but such

91 sales were fully vetted with the Creditors' Committee and the Debtors postpetition

lenders. Through such sales, the Debtors realized in excess of $5 million for assets

that were otherwise non-performing, or in some instances cash-flow negative.

154. In connection with the foregoing services, Skadden profession-

als expended 43.7 hours during the Case Period for which Skadden seeks compensa-

tion of $16,913. Detailed time entries of each Skadden professional related to these

services are attached hereto as Exhibit E-27. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Andre L. Zafrani $375 0.0 $0 22.7 $8,512 Chris L. Dickerson $395 0.0 $0 7.9 $3,120 Susan H . Martin $395 7.7 $3,041 7.7 $3,041 Glenn S. Walter $415 5.4 $2,240 5.4 $2,240 Grand Total $395 13.1 $5,281 43.7 $16,913

AB. Claims Administration (Reclamation/Trust Fund)

155. Skadden professionals worked with the Debtors and their

business advisors in developing a global procedure for receiving, reviewing, re-

sponding to, and resolving reclamation demands. During the Case Period, the

Debtors received over 65 reclamation demands asserting aggregate reclamation

claims of approximately $5.7 million. Skadden professionals worked closely with

the Debtors and their business advisors in reviewing many of these demands.

Specifically, in response to such demands, Skadden professionals and the Debtors'

92 financial advisors developed a comprehensive process for responding to all reclama-

tion demands, evaluating any disagreements, and reaching agreed reclamation claim

amounts. As a result of such process, the Debtors were able to consensually resolve

each of the reclamation demands.

156. In connection with the foregoing services, Skadden profession-

als expended 40.0 hours during the Case Period for which Skadden seeks compensa-

tion of $14,153. Detailed time entries of each Skadden professional related to these

services are attached hereto as Exhibit E-28. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Susan H . Martin $367 2.1 $829 32.2 $11,816 Gerard C. Martin $395 0.0 $0 3.0 $1,185 Monica M. Levy $240 0.0 $0 4.8 $1,152 Grand Total $334 2.1 $829 40.0 $14,153

AC. Insurance

157. Skadden assisted the Debtors during the Case Period in connec-

tion with review of various insurance policies related to non-litigation matters.

Related to the foregoing services, Skadden professionals expended 36.6 hours during

the Case Period for which Skadden seeks compensation of $112,588. Detailed time

entries of each Skadden professional related to these services are attached hereto as

93 Exhibit E-29. A summary of the hours incurred and value of the services performed by each professional is provided in the following table:

Second Second Case Case Period Period Period Period Name Rate Hours Amount Hours Amount Timothy P. Olson $395 0.0 $0 17.9 $7,071 Marc R. Lawrence $295 0.0 $0 18.7 $5,517 Grand Total $345 0.0 $0 36.6 $12,588

RELIEF REQUESTED

158. In accordance with the Administrative Order, Skadden has submitted Monthly Statements for the period from August 11, 2002 through March

31, 2003, and now, in accordance with section 10.2(a) of the Plan, submits this second and final application covering the Case Period. Based on the firm's customary billing practices, the Debtors ordinarily would be billed a total of $20,468,040 for fees and $1,659,184 for charges and disbursements. In keeping with Skadden's commitment to carefully monitoring its fees, charges and disbursements, and based on various accommodations to the Debtors, however, Skadden voluntarily reduced its fees by $2,007,962, or approximately 10.0%, and its charges and disbursements by $180,403, or approximately 10.1%. As a result, the actual amount billed to the

Debtors was $18,460,078 for fees and $1,478,781 for charges and disbursements.

159. Moreover, as an additional accommodation, Skadden has voluntarily reduced the amount sought in connection with the First Fee Application in the amount of $47,205 and reduced the amount sought in connection with this

94 Final Application in the amount of $50,514 to reflect, among others, the elimination of all fees related to any timekeeper billing less than $5,000 during the Case Period, the elimination of all fees related to any timekeeper billing less than $1,000 in any one Matter Category during the Case Period, and the elimination of all fees related to any Matter Category for which aggregate timekeeper billing was less than $10,000 during the Case Period. As a result, the actual amount sought herein in is

$18,362,359 for fees. This represents a total reduction of $2,286,084, or approximately 10.1% for fees and expenses from those amounts that would customarily be charged.

160. The Administrative Order provides that in order to seek interim compensation, professionals must submit Monthly Statements to the Debtors, counsel for the Debtors’ postpetition lenders, counsel for the Committee, and the

Trustee. If no objection to a Monthly Statement is made within 20 days after service of the Statements, the Debtors are authorized to pay 85% of the fees requested (with the remaining 15% of the fees requested referred to herein as the "Holdback") and

100% of the charges and disbursements requested. In accordance with the Adminis- trative Order, Skadden has submitted Monthly Statements for each of the months covered by the Case Period.

161. With respect to the Monthly Statements covering the Case

Period and upon payment of the March monthly statement, Skadden will have received $15,691,067 on account of billed fees, $1,478,781 on account of billed

95 charges and disbursements, and will have accrued a Holdback in the amount of

$2,721,806. Skadden is requesting $2,671,292 in full settlement of the Holdback

accrued through March 31, 2003.11

A. Allowance of Professional Fees

162. During the Application Period, attorneys and paraprofessionals

at Skadden billed an aggregate of 49,649.4 hours reflected in this Final Application

working on matters concerning the Debtors' Reorganization Case.12 Of such time spent, 8,689.2 hours were spent by partners, 1,418.6 hours were spent by counsel,

31,437.1 hours were spent by associates, and 8,104.5 hours were spent by legal

assistants. A summary showing the name and position of each such partner, counsel,

associate and legal assistant, together with that person's date of admission to the bar

(as applicable), net hours during the Application Period, and hourly billing rate, is

provided as Exhibit C to this Final Application.13

11 As a result of a payment made to Skadden by the Company on the Effective Date in the amount of $3,982,710, Skadden has held a surplus amount of $267,811 pending the Court's ruling on this Final Fee Application. See supra note 5.

12 Skadden maintains records of the time it expended in the rendition of all professional services, which time records are made concurrently with the rendition of professional services.

13 In addition to the matter list, Exhibit B also sets forth the blended hourly rate and certain other business statistics associated with the Chapter 11 Cases.

96 B. Reimbursement of Charges and Disbursements

163. As disclosed in the Retention Application approved by this

Court, it is Skadden's standard policy to charge its clients in all areas of practice for certain charges and disbursements incurred in connection with such clients' cases.

The charges and disbursements charged to clients include, among others, charges for messenger services, photocopying, court fees, travel expenses, postage for large mailings, long distance telephone, computerized legal research, investigative searches, and other charges customarily billed by law firms. Certain charges and disbursements are not separately charged for under the bundled rate structure as described in the Engagement Agreement.

164. Skadden has attempted to minimize the charges and disbursements associated with the Debtors' Chapter 11 Cases, particularly for items such as reproduction and delivery, which have been lowered as a result of the restricted service list which Skadden proposed and the Court approved. During the Case

Period, Skadden disbursed the following sums for actual and necessary charges and disbursements in the rendition of professional services in the Chapter 11 Cases, and requests that it be reimbursed therefor:

Second Case Charges and Disbursements Incurred Period Period Travel Expenses ...... $ 363,244 $ 617,020 Reproduction and Document Preparation .... $ 220,980 $ 391,982 Courier, Express Delivery and Postage ...... $ 88,619 $ 163,407 Computer Legal Research ...... $ 100,427 $ 154,177 Telecommunications ...... $ 33,282 $ 57,916

97 Second Case Charges and Disbursements Incurred Period Period Outside Research ...... $ 11,122 $ 30,570 Court Reporting ...... $ 14,204 $ 17,885 Other ...... $ 15,154 $ 17,294 Filing/Court Fees ...... $ 4,607 $ 17,260 Professional Fees ...... $ 4,672 $ 11,270 Grand Total ...... $ 856,311 $ 1,478,781

165. The above charges and disbursements are reasonable and are consistent with those incurred by other Chapter 11 reorganization practitioners in other large, complex Chapter 11 reorganization cases in other Districts. Moreover,

Skadden believes that the unique size and complexity of these cases, including the terms of this Court's case management order which require, among other things, overnight delivery of most pleadings, warrant reimbursement of the foregoing charges and disbursements.

REASONABLENESS OF FEES, CHARGES AND DISBURSEMENTS

166. Under section 330 of the Bankruptcy Code, a Bankruptcy

Court may award to a professional employed by the estates "reasonable compensation for actual, necessary services" rendered by the professional, plus "reimbursement for actual, necessary expenses." See 11 U.S.C. § 330(a)(1). See generally

Barber v. Kimbrell's Inc., 577 F.2d 216 (4th Cir. 1978), cert. denied, 439 U.S. 934,

99 S. Ct. 329, 58 L. Ed. 2d 330 (1978); Anderson v. Morris, 658 F.2d 246 (4th Cir.

1981).

98 167. In determining the amount of "reasonable compensation," the

Court must consider the nature, extent, and value of the services, taking into account all relevant factors, including the time spent on such services; the rates charged for such services; whether the services were necessary and beneficial; whether the services were performed in a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed; and whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under the

Bankruptcy Code. See 11 U.S.C. § 330(a)(3).

168. The Fourth Circuit and courts in this district utilize a "lodestar" approach when assessing attorneys' fees. Under the "lodestar" approach, this

Court should consider the number of hours of service reasonably devoted to the case multiplied by the attorney's reasonable rates. Courts have used the twelve factors enumerated in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.

1974), to determine the reasonableness of an attorneys' fees.14 The Johnson twelve- factor test was adopted by the Fourth Circuit in Barber v. Kimbrell's, Inc., 577 F.2d

14 The twelve Johnson factors are (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation and ability of the attorneys; (10) the "undesirability" of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. Johnson, 488 F.2d at 717-19.

99 216, 226 (4th Cir. 1978), cert. denied, 439 U.S. 934, 99 S. Ct. 329, 58 L. Ed. 2d 330

(1978); Anderson v. Morris, 658 F.2d 246, 249 (4th Cir. 1981) (holding that once the

initial amount of the fee award is determined by using the "lodestar" approach and

the first five Johnson factors, "the court should adjust the fee on the basis of the other

factors, briefly explaining how they affected the award."); and Equal Employment

Opportunity Comm'n v. Service News Co., 898 F.2d 958 (4th Cir. 1990) (applying

this approach in a non-bankruptcy case). The "lodestar" approach encompassing the

use of the Johnson factors has also been adopted by courts in the Eastern District of

Virginia. See In re Great Sweats, Inc., 113 B.R. 240, 242 (Bankr. E.D. Va. 1990) (on

remand from In re Great Sweats of Va., Inc., 109 B.R. 696 (E.D. Va. 1989)); In re

Junco, Inc., 185 B.R. 215, 218 (Bankr. E.D. Va. 1995) (stating "[t]his analysis

involves a two-step process in which a professional's reasonable number of hours is

first multiplied by a reasonable hourly wage to produce a lodestar figure which then

may be adjusted up or down by utilizing several factors.").

169. In accordance with the factors enumerated in 11 U.S.C. § 330

and applicable case law, the amount requested herein by Skadden is fair and reason-

able, given: (i) the nature of the Chapter 11 Cases, (ii) the novelty and complexity of

the Chapter 11 Cases, (iii) the time and labor required to represent the Debtors

effectively, (iv) the time limitations imposed by the Chapter 11 Cases, (v) the nature

and extent of the services rendered, (vi) Skadden's experience, reputation and ability,

100 (vii) the value of Skadden's services, and (viii) the cost of comparable services other than in a case under the Bankruptcy Code.

A. Nature, Complexity, and Duration of Cases

170. As should be evident from the summary of Skadden's services as described above in this Final Application, the Debtors' Chapter 11 reorganization presented a particularly unique set of circumstances, and unquestionably is a large and complex case. The nature and complexity of the Chapter 11 Cases required

Skadden to develop case management and staffing solutions at every stage of the proceedings. These tasks have been particularly daunting in light of the Debtors' widespread operations and the "fast-track" nature of the cases. Skadden nonetheless assisted the Debtors by employing a streamlined case management structure that generally consisted of relatively small, core teams, and assigned various attorneys to other discrete tasks to avoid the performance of duplicative or unnecessary work.

171. Given the size of this case and the number of matters that continually needed to be addressed, there have been occasions when a number of

Skadden attorneys had to be present and had to participate in the discussions and negotiations. This was particularly true of meetings with the Creditors' Committee and also with respect to the monthly omnibus hearings. Skadden believes that, as evident by the summaries contained in this Final Application and the time entries attached hereto, it has articulated specific reasons for attendance by multiple attorneys on such occasions.

101 B. Experience of Skadden

172. The experience of Skadden's attorneys also has benefitted the

estates. Skadden is among the largest firms and has one of the largest restructuring

groups in the country. As more fully set forth in the Retention Application,

Skadden's restructuring attorneys and attorneys from other practice areas have

extensive knowledge and experience in dealing with the multitude and fast-paced

issues that arise in similar Chapter 11 proceedings. Accordingly, Skadden's depth of

experience in Chapter 11 matters insured that a number of pressing matters could be

addressed promptly. In addition, Skadden's commitment to monitoring the adminis-

trative expenses of the estates, including its own legal fees, was a constant element of

its representation of the Debtors. Indeed, this emphasis was manifested in Skadden

careful review of its fees, charges and disbursements and a voluntary client accom-

modation of $2,286,084.

C. Comparable Services

173. As this Court has pointed out, an award of compensation also must be based on the cost of comparable services other than in a bankruptcy case.

Skadden's rates are consistent with rates charged to other clients in non-bankruptcy matters. Moreover, its rate structure was disclosed clearly in its Retention Applica- tion, which the Court approved and as to which none of the major constituents

objected. The amounts sought by Skadden are consistent with the fees, charges and

disbursements incurred by other Chapter 11 debtors in cases of similar size, com-

102 plexity and duration. Accordingly, the cost of comparable services supports the

Final Application, and the services performed during the Case Period more than

warrant the allowance of compensation, particularly in view of the successful and

quick results achieved.

D. Compliance with Guidelines

174. Skadden believes that this Final Application, together with the

attachments hereto, substantially complies in all material respects with the Local

Rules and the United States Trustee Guidelines for Reviewing Applications for

Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. § 330 issued

January 30, 1996. Skadden also believes that this Final Application complies with the detailed standards established by this Court and the Fourth Circuit. To the extent this Final Application does not comply in every respect with the requirements of such guidelines, Skadden respectfully requests a waiver for any such technical non-compliance.

103 WHEREFORE, Skadden respectfully requests that the Court (a) enter an order allowing Final compensation of $18,362,359 to Skadden for professional services rendered as attorneys for the Debtors during the Application Period, plus reimbursement of actual and necessary charges and disbursements incurred in the sum of $1,478,781; (b) authorize and direct the Debtors to pay to Skadden the amount of $2,671,292 in full settlement of the Holdback accrued through March 31,

2002; and (c) grant it such other and further relief as is just and equitable under the circumstances.

Dated: Alexandria, Virginia Respectfully submitted, May 30, 2003

By: /s/ John Wm. Butler, Jr. 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