UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2009
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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US Airways Group,
Inc.
(Exact name of registrant as
specified in its charter)
(Commission File
No. 1-8444)
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Delaware
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54-1194634
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(State or other Jurisdiction
of
Incorporation or Organization)
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(IRS Employer
Identification No.)
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111 West Rio Salado
Parkway, Tempe, Arizona 85281
(Address of principal executive
offices, including zip code)
(480) 693-0800
(Registrants telephone
number, including area code)
Securities registered pursuant
to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.01 par value
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New York Stock Exchange
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Securities registered pursuant
to Section 12(g) of the Act: None
US Airways, Inc.
(Exact name of registrant as
specified in its charter)
(Commission File
No. 1-8442)
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Delaware
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53-0218143
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(State or other Jurisdiction
of
Incorporation or Organization)
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(IRS Employer
Identification No.)
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111 West Rio Salado
Parkway, Tempe, Arizona 85281
(Address of principal executive
offices, including zip code)
(480) 693-0800
(Registrants telephone
number, including area code)
Securities registered pursuant
to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined by Rule 405 of the Securities
Act.
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US Airways Group, Inc.
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Yes
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US Airways, Inc.
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Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act.
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US Airways Group, Inc.
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Yes
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US Airways, Inc.
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Indicate by check mark whether each registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether each registrant has submitted
electronically and posted on its corporate website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
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US Airways Group, Inc.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do
not check if a smaller reporting company)
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US Airways, Inc.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do
not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange Act).
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US Airways Group, Inc.
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US Airways, Inc.
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The aggregate market value of common stock held by
non-affiliates of US Airways Group, Inc. as of June 30,
2009 was approximately $319 million.
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12,
13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a court.
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US Airways Group, Inc.
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US Airways, Inc.
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As of February 12, 2010, there were 161,118,427 shares
of US Airways Group, Inc. common stock outstanding.
As of February 12, 2010, US Airways, Inc. had
1,000 shares of common stock outstanding, all of which were
held by US Airways Group, Inc.
DOCUMENTS INCORPORATED BY
REFERENCE
Portions of the proxy statement related to US Airways Group,
Inc.s 2010 Annual Meeting of Stockholders, which proxy
statement will be filed under the Securities Exchange Act of
1934 within 120 days of the end of US Airways Group,
Inc.s fiscal year ended December 31, 2009, are
incorporated by reference into Part III of this Annual
Report on
Form 10-K.
US
Airways Group, Inc.
US Airways, Inc.
Form 10-K
Year Ended December 31, 2009
Table of
Contents
2
This combined Annual Report on
Form 10-K
is filed by US Airways Group, Inc. (US Airways
Group) and its wholly owned subsidiary US Airways, Inc.
(US Airways). References in this Annual Report on
Form 10-K
to we, us, our and the
Company refer to US Airways Group and its
consolidated subsidiaries.
Note
Concerning Forward-Looking Statements
Certain of the statements contained in this report should be
considered forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements may be identified by words such
as may, will, expect,
intend, anticipate, believe,
estimate, plan, project,
could, should, and continue
and similar terms used in connection with statements regarding,
among others, our outlook, expected fuel costs, the revenue
environment, and our expected financial performance. These
statements include, but are not limited to, statements about
future financial and operating results, our plans, objectives,
expectations and intentions and other statements that are not
historical facts. These statements are based upon the current
beliefs and expectations of management and are subject to
significant risks and uncertainties that could cause our actual
results and financial position to differ materially from these
statements. These risks and uncertainties include, but are not
limited to, those described below under Part I,
Item 1A, Risk Factors and the following:
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the impact of significant operating losses in the future;
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downturns in economic conditions and their impact on passenger
demand and related revenues;
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increased costs of financing, a reduction in the availability of
financing and fluctuations in interest rates;
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our high level of fixed obligations and our ability to fund
general corporate requirements, obtain additional financing and
respond to competitive developments;
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any failure to comply with the liquidity covenants contained in
our financing arrangements;
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the impact of the price and availability of fuel and significant
disruptions in the supply of aircraft fuel;
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provisions in our credit card processing and other commercial
agreements that may affect our liquidity;
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the impact of union disputes, employee strikes and other
labor-related disruptions;
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our inability to maintain labor costs at competitive levels;
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our reliance on third-party regional operators or third-party
service providers;
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our reliance on automated systems and the impact of any failure
or disruption of these systems;
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the impact of changes to our business model;
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competitive practices in the industry, including the impact of
industry consolidation;
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the loss of key personnel or our ability to attract and retain
qualified personnel;
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the impact of conflicts overseas or terrorist attacks, and the
impact of ongoing security concerns;
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changes in government legislation and regulation;
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our ability to operate and grow our route network;
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the impact of environmental laws and regulations;
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costs of ongoing data security compliance requirements and the
impact of any data security breach;
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interruptions or disruptions in service at one or more of our
hub airports;
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the impact of any accident involving our aircraft or the
aircraft of our regional operators;
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delays in scheduled aircraft deliveries or other loss of
anticipated fleet capacity;
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the impact of weather conditions and seasonality of airline
travel;
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the cyclical nature of the airline industry;
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the impact of possible future increases in insurance costs and
disruptions to insurance markets;
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the impact of global events that affect travel behavior, such as
an outbreak of a contagious disease;
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the impact of foreign currency exchange rate fluctuations;
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our ability to use NOLs and certain other tax
attributes; and
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other risks and uncertainties listed from time to time in our
reports to and filings with the Securities and Exchange
Commission.
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All of the forward-looking statements are qualified in their
entirety by reference to the factors discussed in Part I,
Item 1A, Risk Factors and elsewhere in this
Annual Report on
Form 10-K.
There may be other factors of which we are not currently aware
that may affect matters discussed in the forward-looking
statements and may also cause actual results to differ
materially from those discussed. We assume no obligation to
publicly update or supplement any forward-looking statement to
reflect actual results, changes in assumptions or changes in
other factors affecting these estimates other than as required
by law. Any forward-looking statements speak only as of the date
of this Annual Report on
Form 10-K
or as of the dates indicated in the statements.
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PART I
Overview
US Airways Group, a Delaware corporation, is a holding company
whose primary business activity is the operation of a major
network air carrier through its wholly owned subsidiaries US
Airways, Piedmont Airlines, Inc. (Piedmont), PSA
Airlines, Inc. (PSA), Material Services Company,
Inc. (MSC) and Airways Assurance Limited
(AAL). MSC and AAL operate in support of our airline
subsidiaries in areas such as the procurement of aviation fuel
and insurance. US Airways Group was formed in 1982, and its
origins trace back to the formation of All American Aviation in
1939. US Airways, a Delaware corporation, was formed in 1982.
Effective upon US Airways Groups emergence from bankruptcy
on September 27, 2005, US Airways Group merged with America
West Holdings Corporation (America West Holdings),
with US Airways Group as the surviving corporation.
Our principal executive offices are located at 111 West Rio
Salado Parkway, Tempe, Arizona 85281. Our telephone number is
(480) 693-0800,
and our internet address is www.usairways.com.
Information contained on our website is not and should not be
deemed a part of this report or any other report or filing filed
with or furnished to the Securities and Exchange Commission
(SEC).
Available
Information
You may read and copy any materials US Airways Group or US
Airways files with the SEC at the SECs Public Reference
Room at 100 F Street, NE, Washington, DC 20549. You
may obtain information on the operation of the Public Reference
Room by calling the SEC at
1-800-SEC-0330.
A copy of this Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act are available
free of charge at www.usairways.com as soon as reasonably
practicable after we electronically file such material with, or
furnish it to, the SEC.
The U.S.
Airline Industry
The airline industry in the United States was severely impacted
in 2009 by the global economic recession. Passenger demand, as
reported by the Air Transport Association (ATA),
declined severely in 2009 as compared to 2008. Despite capacity
cuts put in place to help offset the decline in demand for air
travel, industry revenues were adversely affected by severe fare
discounting by carriers to stimulate demand. Business bookings,
which typically drive stronger yields, declined sharply in 2009
as companies cut costs by reducing their travel budgets in
response to the economic recession. ATA reported yields for
U.S. airlines declined by 13% in 2009 as compared to 2008
while U.S. airline passenger revenues were down 18% for
fiscal year 2009, which represented the largest decline on
record, exceeding the 14% decline observed from 2000 to 2001.
International markets were more severely impacted by the
economic slowdown than domestic markets. This was a result of
international traffics greater reliance on business
travel, particularly premium business and first class seating,
to drive profitability. Additionally, there was capacity
expansion overseas during the past several years, which the
U.S. industry reduced by only 6% in 2009 as compared to
domestic capacity reductions of 7%. The contraction of business
spending also significantly impacted cargo demand.
During times of weak travel demand, falling fuel prices have
historically served as a natural hedge. Although the price of
crude oil was down substantially in 2009 from its record high of
$147 per barrel in July 2008, it remained volatile and did not
fully offset the negative economic impact to passenger demand.
During 2009, the price of crude oil on a per barrel basis ranged
from a high of $81.03 to a low of $34.03, and closed at $79.39
on December 31, 2009. The volatility in oil prices made the
use of hedging positions by airlines to contain fuel costs
either expensive (call options) or risky due to counterparty
cash collateral requirements (collars and swaps).
Accordingly, in 2009 the industry focused on conserving and
building cash and matching capacity to demand. In the latter
part of 2009, credit and equity markets were increasingly open
to airlines and several U.S. airlines raised
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cash to enhance liquidity through a number of initiatives such
as traditional public stock and debt issuances, asset sales,
asset sale-leasebacks and transactions with co-branded credit
card issuers.
Airline
Operations
We operate the fifth largest airline in the United States as
measured by domestic revenue passenger miles (RPMs)
and available seat miles (ASMs). We have hubs in
Charlotte, Philadelphia and Phoenix and a focus city at Ronald
Reagan Washington National Airport. We offer scheduled passenger
service on more than 3,000 flights daily to more than 190
communities in the United States, Canada, Mexico, Europe, the
Middle East, the Caribbean, Central and South America. We also
have an established East Coast route network, including the US
Airways Shuttle service, with a substantial presence at
Washington National Airport. We had approximately
51 million passengers boarding our mainline flights in
2009. During 2009, our mainline operation provided regularly
scheduled service or seasonal service at 138 airports while the
US Airways Express network served 152 airports in the United
States, Canada and Mexico, including 75 airports also served by
our mainline operation. US Airways Express air carriers had
approximately 27 million passengers boarding their planes
in 2009. As of December 31, 2009, we operated 349 mainline
jets and are supported by our regional airline subsidiaries and
affiliates operating as US Airways Express either under capacity
purchase or prorate agreements, which operated approximately
236 regional jets and 60 turboprops.
For information regarding US Airways Groups and US
Airways operating segments and operating revenue in
principal geographic areas, see Notes 13 and 12,
respectively, to their respective financial statements included
in Items 8A and 8B of this Annual Report on
Form 10-K.
In October 2009, we announced the realignment of our operations
to focus on our core network strengths, which include our hubs
in Charlotte, Philadelphia and Phoenix and our focus city at
Washington National Airport. These four cities, as well as our
popular hourly Shuttle service between LaGuardia, Boston and
Washington National airports, will serve as the cornerstone of
our network and by the end of 2010 are expected to represent 99%
of our ASMs versus approximately 93% in 2009. Changes to
facilitate this strategy include reducing daily departures from
Las Vegas, closing stations in Colorado Springs and Wichita,
redeploying our E190 fleet to routes between Boston and
Philadelphia and the Boston-LaGuardia leg of the Shuttle,
suspending five European destinations, returning our
Philadelphia-Beijing route authority, rightsizing our crew bases
at our hubs and focus city and closing crew bases in Boston,
LaGuardia and Las Vegas. In connection with the realignment of
our operations, we will reduce staffing by approximately 1,000
positions across our system during the first half of 2010. These
reductions include approximately 600 airport passenger and ramp
service positions, approximately 200 pilot positions and
approximately 150 flight attendant positions. We believe that by
concentrating on our strengths and eliminating unprofitable
flying we will be better positioned to return US Airways to
profitability.
In August 2009, US Airways Group and US Airways entered into a
mutual asset purchase and sale agreement with Delta Air Lines,
Inc. (Delta). Pursuant to the agreement, US Airways
would transfer to Delta certain assets related to flight
operations at LaGuardia Airport in New York, including 125 pairs
of slots currently used to provide US Airways Express service at
LaGuardia. Delta would transfer to US Airways certain assets
related to flight operations at Washington National Airport,
including 42 pairs of slots, and the authority to serve Sao
Paulo, Brazil and Tokyo, Japan. One slot equals one take-off or
landing, and each pair of slots equals one roundtrip flight. The
agreement is structured as two simultaneous asset sales and is
expected to be cash neutral to US Airways. The closing of the
transactions under the agreement is subject to certain closing
conditions, including approvals from a number of government
agencies, including the U.S. Department of Justice, the
U.S. Department of Transportation (DOT), the
Federal Aviation Administration (FAA) and The Port
Authority of New York and New Jersey. If approved, this
transaction will significantly increase our capacity in the
Washington, D.C. market and improve profitability.
On February 9, 2010, the DOT issued a proposed order
conditionally approving the transaction. The proposed order,
which is subject to a 30-day comment period, would require the
airlines to divest 20 of the 125 slot pairs involved at
LaGuardia and 14 of the 42 slot pairs at Washington National.
Delta and we are currently reviewing the DOTs proposed
order to determine next steps. However, we expect that if this
order is implemented as proposed the transaction will not go
forward.
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To address the weak revenue environment in 2009, we continued to
focus on matching capacity to demand and, as a result, our total
RPMs decreased 4.2% on 4.5% lower capacity as compared to 2008.
We achieved our 2009 capacity reductions through the sale of
aircraft, return of aircraft to lessors and reductions in
aircraft utilization. Despite the capacity reductions in 2009,
we increased service in certain markets. Domestically, we added
new non-stop service from our Charlotte hub to Honolulu, Hawaii.
Internationally, we added new service from our Philadelphia hub
to Oslo, Norway and Tel Aviv, Israel, service from our Charlotte
hub to Paris, France and Rio de Janeiro, Brazil and service from
our Phoenix hub to Montego Bay, Jamaica.
We continued our strong operational performance in 2009. Our
2009 on-time performance rate was 80.9% and ranked second among
the big five
hub-and-spoke
carriers as measured by the DOT Air Travel Consumer Report. Our
mishandled baggage ratio for 2009 improved 36.5% as compared to
2008. Our 2009 mishandled baggage ratio of 3.03 also ranked
second among the big five hub-and-spoke carriers as measured by
the DOT Air Travel Consumer Report. The combination of continued
strong on-time performance and fewer mishandled bags contributed
to 34.8% fewer reported customer complaints to the DOT in 2009
as compared to 2008.
Express
Operations
Certain air carriers have code share arrangements with us to
operate under the trade name US Airways Express.
Typically, under a code share arrangement, one air carrier
places its designator code and sells tickets on the flights of
another air carrier, which is referred to generically as its
code share partner. US Airways Express carriers are an integral
component of our operating network. We rely heavily on feeder
traffic from our US Airways Express partners, which carry
passengers to our hubs from low-density markets that are
uneconomical for us to serve with large jets. In addition, US
Airways Express operators offer complementary service in our
existing mainline markets by operating flights during off-peak
periods between mainline flights. During 2009, the US Airways
Express network served 152 airports in the continental United
States, Canada and Mexico, including 75 airports also served by
our mainline operation. During 2009, approximately
27 million passengers boarded US Airways Express air
carriers planes, approximately 42% of whom connected to or
from our mainline flights. Of these 27 million passengers,
approximately 8 million were enplaned by our wholly owned
regional airlines Piedmont and PSA, approximately
19 million were enplaned by third-party carriers operating
under capacity purchase agreements and less than 1 million
were enplaned by carriers operating under prorate agreements, as
described below.
The US Airways Express code share arrangements are in the form
of either capacity purchase or prorate agreements. The capacity
purchase agreements provide that all revenues, including
passenger, mail and freight revenues, go to us. In return, we
agree to pay predetermined fees to these airlines for operating
an
agreed-upon
number of aircraft, without regard to the number of passengers
on board. In addition, these agreements provide that certain
variable costs, such as airport landing fees and passenger
liability insurance, will be reimbursed 100% by us. We control
marketing, scheduling, ticketing, pricing and seat inventories.
Under the prorate agreements, the prorate carriers receive a
prorated share of ticket revenue and pay certain service fees to
us. The prorate carrier is responsible for pricing the local,
point to point markets to the extent that we do not have
competing existing service in that market. We are responsible
for pricing all other prorate carrier tickets. The prorate
carrier is also responsible for all costs incurred operating the
aircraft. All US Airways Express carriers use our reservation
systems and have logos, service marks, aircraft paint schemes
and uniforms similar to our mainline operation.
In January 2010, Mesa Air Group Inc. (Mesa) and its
subsidiary Mesa Airlines filed voluntary petitions for relief
under Chapter 11 of the Bankruptcy Code. At
December 31, 2009, Mesa Airlines operated 53 aircraft for
our Express passenger operations, representing over
$450 million in annual passenger revenues to us in 2009.
Mesa Airlines continues to operate aircraft on behalf of US
Airways Express in accordance with its capacity purchase
agreement. Mesa has stated publicly that it intends to operate
as normal during the pendency of its Chapter 11 case,
including its code share agreements with its partners including
US Airways. For more discussion, see Part 1, Item 1A,
Risk Factors If we incur problems with any
of our third-party regional operators or third-party service
providers, our operations could be adversely affected by a
resulting decline in revenue or negative public perception about
our services.
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The following table sets forth our US Airways Express code share
agreements and the number and type of aircraft operated under
those agreements at December 31, 2009.
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Number and Type
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Carrier
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Agreement Type
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of Aircraft
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PSA (1)
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Capacity Purchase
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49 regional jets
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Piedmont (1)
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Capacity Purchase
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44 turboprops
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Air Wisconsin Airlines Corporation
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Capacity Purchase
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70 regional jets
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Mesa Airlines, Inc.
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Capacity Purchase
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47 regional jets and 6 turboprops
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Chautauqua Airlines, Inc.
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Capacity Purchase
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9 regional jets
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Republic Airways
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Capacity Purchase
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58 regional jets
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Colgan Airlines, Inc.
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Prorate
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10 turboprops
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Trans States Airlines, Inc.
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Prorate
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3 regional jets
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(1) |
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PSA and Piedmont are wholly owned subsidiaries of US Airways
Group. |
Marketing
and Alliance Agreements with Other Airlines
We maintain alliance agreements with several leading domestic
and international carriers to give customers a greater choice of
destinations. Airline alliance agreements provide an array of
benefits that vary by partner. By code sharing, each airline is
able to offer additional destinations to its customers under its
flight designator code without materially increasing operating
expenses and capital expenditures. Through frequent flyer
arrangements, members are provided with extended networks for
earning and redeeming miles on partner carriers. US Airways Club
members also have access to certain partner carriers
airport lounges. We also benefit from the distribution strengths
of each of our partner carriers.
US Airways is a member of the Star Alliance, the worlds
largest airline alliance, which now has 26 member airlines
serving approximately 1,077 destinations in 175 countries.
Membership in the Star Alliance further enhances the value of
our domestic and international route network by allowing
customers wide access to the global marketplace. Expanded
benefits for customers include network expansion, frequent flyer
program benefits, airport lounge access, convenient
single-ticket pricing with electronic tickets, one-stop check-in
and coordinated baggage handling. We also have bilateral
marketing/code sharing agreements with Star Alliance members
United, Lufthansa, Spanair, bmi, TAP Portugal, Swiss
International, Asiana, Air New Zealand, Air China, Japans
ANA, Singapore Airlines and TACA. Other international code
sharing partners include Royal Jordanian Airlines, EVA Airways,
Qatar Airways and Virgin Atlantic Airways. Marketing/code
sharing agreements are maintained with two smaller regional
carriers in the Caribbean that operate collectively as the
GoCaribbean network. Each of these code share
agreements funnel international traffic onto our domestic
flights or support specific European and Caribbean markets in
which we operate. Domestically, we code share with Hawaiian
Airlines on intra-Hawaii flights.
Competition
in the Airline Industry
The markets in which we operate are highly competitive. Price
competition occurs on a
market-by-market
basis through price discounts, changes in pricing structures,
fare matching, target promotions and frequent flyer initiatives.
Airlines typically use discount fares and other promotions to
stimulate traffic during normally slack travel periods, or when
they begin service to new cities or have excess capacity, to
generate cash flow and maximize revenue per ASM and to
establish, increase or preserve market share. Discount and
promotional fares are generally non-refundable and may be
subject to various restrictions such as minimum stay
requirements, advance ticketing, limited seating and change
fees. We have often elected to match discount or promotional
fares initiated by other air carriers in certain markets in
order to compete in those markets. Most airlines will quickly
match price reductions in a particular market. Our ability to
compete on the basis of price is limited by our fixed costs and
depends on our ability to maintain our operating costs. Some of
our competitors have greater financial resources
and/or lower
cost structures than we do. In addition, recent years have seen
the entrance and growth of low-fare, low-cost competitors in
many of the markets in which we operate. These competitors
include Southwest, AirTran, JetBlue, Allegiant, Frontier and
Virgin America. These low cost carriers generally have lower
cost structures than US Airways.
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In addition to price competition, airlines compete for market
share by increasing the size of their route system and the
number of markets they serve. Airlines with international
operations are less exposed to domestic economic conditions and
may be able to offset less profitable domestic fares with more
profitable international fares. We also compete on the basis of
scheduling (frequency and flight times), availability of nonstop
flights, on-time performance, type of equipment, cabin
configuration, amenities provided to passengers, frequent flyer
programs, the automation of travel agent reservation systems,
on-board products, markets served and other services. We compete
with both major full service airlines and low-cost airlines
throughout our network.
Additionally, because we operate a significant number of flights
in the eastern United States, our average trip distance, or
stage length, is shorter than those of other major airlines.
This makes us more susceptible than other major airlines to
competition from surface transportation such as automobiles and
trains. Surface competition can be more significant during
economic downturns when consumers cut back on discretionary
spending.
Industry
Regulation and Airport Access
General
Our airline subsidiaries operate under certificates of public
convenience and necessity or certificates of commuter authority,
both of which are issued by the DOT. These certificates may be
altered, amended, modified or suspended by the DOT if the public
convenience and necessity so require, or may be revoked for
failure to comply with the terms and conditions of the
certificates.
Airlines are also regulated by the FAA, primarily in the areas
of flight operations, maintenance, ground facilities and other
operational and safety areas. Pursuant to these regulations, our
airline subsidiaries have FAA-approved maintenance programs for
each type of aircraft they operate. The programs provide for the
ongoing maintenance of such aircraft, ranging from periodic
routine inspections to major overhauls. From time to time, the
FAA issues airworthiness directives and other regulations
affecting our airline subsidiaries or one or more of the
aircraft types they operate. In recent years, for example, the
FAA has issued or proposed mandates relating to, among other
things, enhanced ground proximity warning systems, fuselage
pressure bulkhead reinforcement, fuselage lap joint inspection
rework, increased inspections and maintenance procedures to be
conducted on certain aircraft, increased cockpit security, fuel
tank flammability reductions and domestic reduced vertical
separation. Regulations of this sort tend to enhance safety and
increase operating costs.
Our airline subsidiaries are obligated to collect a federal
excise tax, commonly referred to as the ticket tax,
on domestic and international air transportation. Our airline
subsidiaries collect the ticket tax, along with certain other
U.S. and foreign taxes and user fees on air transportation,
and pass along the collected amounts to the appropriate
governmental agencies. Although these taxes are not our
operating expenses, they represent an additional cost to our
customers. There are a number of efforts in Congress to raise
different portions of the various taxes imposed on airlines and
their passengers.
Most major U.S. airports impose a passenger facility
charge. The ability of airlines to contest increases in this
charge is restricted by federal legislation, DOT regulations and
judicial decisions. With certain exceptions, air carriers pass
these charges on to passengers. However, our ability to pass
through passenger facility charges to our customers is subject
to various factors, including market conditions and competitive
factors. The current cap on the passenger facility charge is
$4.50 per passenger, although there are efforts to raise the cap
to a higher level before Congress.
On October 10, 2008, the FAA finalized new rules governing
flight operations at the three major New York airports. These
rules did not take effect because of a legal challenge, but the
FAA has pushed forward with a reduction in the number of flights
per hour at LaGuardia. Additionally, the DOT recently finalized
a policy change that will permit airports to charge
differentiated landing fees during congested periods, which
could impact our ability to serve certain markets in the future.
The new rule was challenged in court by the industry and
ultimately withdrawn by the FAA. The Obama Administration has
not yet articulated its policy concerning the New York area
airports. Depending on that policy, our ability to operate at
those airports or other constrained airports could be impacted.
The DOT has proposed several new initiatives concerning airline
obligations toward passengers. During 2008, the DOT finalized
rules pertaining to denied boarding compensation requiring
additional consumer disclosure and higher payments to
passengers. In addition, the DOT established a task force on
long on-board delays that resulted in
9
the issuance of a final report suggesting model contingency
plans for long on-board delays. Contemporaneous with the end of
the task force, the DOT issued proposed rules that would place
additional requirements on airlines concerning service
irregularities, consumer rights and contract of carriage
obligations. These new rules were recently finalized by the DOT
and take effect in April 2010. While we are preparing for the
implementation of these new rules, we are still evaluating what
the full impact of these rules will be on our operations.
Additional laws, regulations, taxes and policies have been
proposed or discussed from time to time, including recently
introduced federal legislation on a passenger bill of
rights, that, if adopted, could significantly further
increase the cost of airline operations or reduce revenues.
The DOT allows local airport authorities to implement procedures
designed to abate special noise problems, provided such
procedures do not unreasonably interfere with interstate or
foreign commerce or the national transportation system. Certain
locales, including Boston, Washington D.C., Chicago,
San Diego and San Francisco, among others, have
established airport restrictions to limit noise, including
restrictions on aircraft types to be used and limits on the
number of hourly or daily operations or the time of these
operations. In some instances, these restrictions have caused
curtailments in service or increases in operating costs, and
these restrictions could limit the ability of our airline
subsidiaries to expand their operations at the affected
airports. Authorities at other airports may adopt similar noise
regulations.
International
The availability of international routes to domestic air
carriers is regulated by agreements between the U.S. and
foreign governments. Changes in U.S. or foreign government
aviation policy could result in the alteration or termination of
these agreements and affect our international operations. We
could continue to see significant changes in terms of air
service between the United States and Europe as a result of the
implementation of the U.S. and the EU Air Transport
Agreement, generally referred to as the Open Skies Agreement,
which took effect in March 2008. The Open Skies Agreement
removes bilateral restrictions on the number of flights between
the U.S. and EU. One result of the Open Skies Agreements
has been applications before the DOT for antitrust immunity
between various domestic and international airlines. If granted,
antitrust immunity permits carriers to coordinate schedules,
pricing and other competitive aspects on international routes
to/from the United States. It is possible that the grant of
these immunities could have an impact on our international
operations.
Security
The Aviation and Transportation Security Act (the Aviation
Security Act) was enacted in November 2001. Under the
Aviation Security Act, substantially all aspects of civil
aviation security screening were federalized, and a new
Transportation Security Administration (the TSA)
under the DOT was created. The TSA was then transferred to the
Department of Homeland Security pursuant to the Homeland
Security Act of 2002. The Aviation Security Act, among other
matters, mandates improved flight deck security; carriage at no
charge of federal air marshals; enhanced security screening of
passengers, baggage, cargo, mail, employees and vendors;
enhanced security training; fingerprint-based background checks
of all employees and vendor employees with access to secure
areas of airports pursuant to regulations issued in connection
with the Aviation Security Act; and the provision of certain
passenger data to U.S. Customs and Border Protection.
Funding for the TSA is provided by a combination of air carrier
fees, passenger fees and taxpayer monies. A passenger
security fee, which is collected by air carriers from
their passengers, is currently set at a rate of $2.50 per flight
segment but not more than $10 per round trip. An air carrier
fee, or Aviation Security Infrastructure Fee (ASIF),
has also been imposed with an annual cap equivalent to the
amount that an individual air carrier paid in calendar year 2000
for the screening of passengers and property. The TSA may lift
this cap at any time and set a new higher fee for air carriers.
In 2009, we incurred expenses of $53 million for the ASIF,
including amounts paid by our wholly owned regional
subsidiaries, PSA and Piedmont, and amounts attributable to the
other regional carriers. Implementation of and compliance with
the requirements of the Aviation Security Act have resulted and
will continue to result in increased costs for us and our
passengers and has and will likely continue to result in service
disruptions and delays. As a result of competitive pressure, US
Airways and other airlines may be unable to recover all of these
additional security costs from passengers through increased
fares. In addition, we cannot forecast what new security and
safety requirements may be imposed in the future or the costs or
financial impact of complying with any such requirements.
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Civil
Reserve Air Fleet
We are a participant in the Civil Reserve Air Fleet program,
which is a voluntary program administered by the U.S. Air
Force Air Mobility Command. The General Services Administration
of the U.S. Government requires that airlines participate
in the Civil Reserve Air Fleet program in order to receive
U.S. Government business. We are reimbursed at compensatory
rates if aircraft are activated under the Civil Reserve Air
Fleet program or when participating in Department of Defense
business.
Environmental
The airline industry is also subject to increasingly stringent
federal, state and local laws aimed at protecting the
environment. Future regulatory developments and actions could
affect operations and increase operating costs for the airline
industry, including our airline subsidiaries.
Recently, climate change issues and greenhouse gas emissions
(including carbon) have attracted international and domestic
regulatory interest that may result in the imposition of
additional regulation on airlines. The U.S. Congress is
currently considering legislation on climate change. In June
2009, the U.S. House of Representatives passed a
comprehensive clean energy and climate bill (H.R. 2454, also
known as Waxman-Markey). In the Senate, the
Boxer-Kerry climate bill has been reported out of the Senate
Environment and Public Works Committee. These bills have a
variety of provisions and differences, but in substance they
both propose a cap and trade approach to greenhouse
gas regulation. Under such an approach, companies would be
required to hold sufficient emission allowances to cover their
greenhouse gas emissions. Over time, the total number of
allowances would be reduced or expire, thereby relying on
market-based incentives to allocate investment in emission
reductions across the economy. As the number of available
allowances declines, the cost would presumably increase. In
addition to the prospect of federal legislation, several states
have adopted or are in the process of adopting greenhouse gas
reporting or
cap-and-trade
programs.
Even without further federal legislation, the
U.S. Environmental Protection Agency (EPA) may
act to regulate greenhouse gas emissions. In December 2009, the
EPA issued its final Endangerment and Cause or Contribute
Findings for Greenhouse Gases, which became effective in January
2010. This regulatory finding sets the foundation for future EPA
greenhouse gas regulation under the Clean Air Act. The EPA also
promulgated a new greenhouse gas reporting rule, which became
effective in December 2009, and which requires facilities that
emit more than 25,000 tons per year of carbon dioxide-equivalent
emissions to prepare and file certain emission reports. Some of
our facilities may be covered by this rule. On February 3,
2009, the EPA adopted regulations implementing changes to the
renewable fuel standard program, which require an increasing
amount of renewable fuels in the nations transportation
fuel mix. The EPA is also considering additional regulatory
programs. Depending on the final outcome of this rulemaking,
some of our facilities may be subject to additional operating
and other permit requirements. As a result of these various
regulatory initiatives, our operating costs may increase in
compliance with these programs, although we are not situated
differently in this respect from our competitors in the industry.
In addition, the EU has adopted legislation to include aviation
within the EUs existing greenhouse gas emission trading
scheme effective in 2012. This legislation has been legally
challenged in the EU but we have had to begin to comply and
incurred additional compliance costs as a result of this
legislation. While we cannot yet determine what the final
regulatory scheme will be in the United States or in other areas
in which we do business, such climate change-related regulatory
activity in the future may adversely affect our business and
financial results.
For more discussion of environmental regulation, see
Part I, Item 1A, Risk Factors We
are subject to many forms of environmental regulation and may
incur substantial costs as a result.
Employees
and Labor Relations
Our businesses are labor intensive. In 2009, wages, salaries and
benefits were one of our largest expenses and represented
approximately 23% of our operating expenses. As of
December 31, 2009, US Airways employed approximately 31,300
active full-time equivalent employees, including approximately
4,100 pilots, 6,800 flight attendants, 6,200 passenger service
personnel, 6,100 fleet service personnel, 3,300 maintenance
personnel and
11
4,800 personnel in administrative and various other job
categories. Our Express subsidiaries, Piedmont and PSA, employed
approximately 4,700 active full-time equivalent employees,
including approximately 800 pilots, 400 flight attendants, 2,700
passenger service personnel, 400 maintenance personnel and
400 personnel in administrative and various other job
categories.
A large majority of the employees of the major airlines in the
United States are represented by labor unions. As of
December 31, 2009, approximately 87% of our active
employees were represented by various labor unions. Relations
between air carriers and labor unions in the United States are
governed by the Railway Labor Act (the RLA). Under
the RLA, collective bargaining agreements generally contain
amendable dates rather than expiration dates, and
the RLA requires that a carrier maintain the existing terms and
conditions of employment following the amendable date through a
multi-stage and usually lengthy series of bargaining processes
overseen by the National Mediation Board (NMB).
If no agreement is reached during direct negotiations between
the parties, either party may request the NMB to appoint a
federal mediator. The RLA prescribes no timetable for the direct
negotiation and mediation processes, and it is not unusual for
those processes to last for many months or even several years.
If no agreement is reached in mediation, the NMB in its
discretion may declare that an impasse exists and proffer
binding arbitration to the parties. Either party may decline to
submit to arbitration, and if arbitration is rejected by either
party, a
30-day
cooling off period commences. During or after that
period, a Presidential Emergency Board (PEB) may be
established, which examines the parties positions and
recommends a solution. The PEB process lasts for 30 days
and is followed by another
30-day
cooling off period. At the end of a cooling
off period, unless an agreement is reached or action is
taken by Congress, the labor organization may exercise
self-help, such as a strike, and the airline may
resort to its own self-help, including the
imposition of any or all of its proposed amendments and the
hiring of new employees to replace any striking workers.
Since the merger, we have been in the process of integrating the
labor agreements of US Airways and America West Airlines, Inc.
(AWA). Listed below are the integrated labor
agreements and the status of the US Airways and AWA labor
agreements that remain separate with their major domestic
employee groups.
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Contract
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Union
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Class or Craft
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Employees (1)
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Amendable Date
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Integrated labor agreements:
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International Association of Machinists & Aerospace
Workers (IAM)
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Fleet Service
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6,100
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12/31/2011
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Airline Customer Service Employee Association IBT
and CWA (the Association)
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Passenger Service
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6,200
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12/31/2011
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IAM
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Mechanics, Stock Clerks and Related
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3,300
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12/31/2011
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IAM
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Maintenance Training Instructors
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30
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12/31/2011
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Transport Workers Union (TWU)
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Dispatch
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200
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12/31/2009
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TWU
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Flight Crew Training Instructors
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100
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12/31/2011
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TWU
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Flight Simulator Engineers
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50
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12/31/2011
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US Airways:
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US Airline Pilots Association (USAPA)
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Pilots
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2,600
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12/31/2009
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(2)
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Association of Flight Attendants-CWA (AFA)
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Flight Attendants
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4,700
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12/31/2011
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(3)
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AWA:
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USAPA
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Pilots
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1,500
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12/30/2006
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(2)
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AFA
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Flight Attendants
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2,100
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05/04/2004
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(3)
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(1) |
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Approximate number of active full-time equivalent employees
covered by the contract as of December 31, 2009. |
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(2) |
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Pilots continue to work under the terms of their separate US
Airways and AWA collective bargaining agreements, as modified by
the transition agreements reached in connection with the merger. |
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(3) |
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In negotiations for a single labor agreement applicable to both
US Airways and AWA. On December 15, 2005, the NMB recessed
AFAs separate contract negotiations with AWA indefinitely.
Flight attendants continue to |
12
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work under the terms of their separate US Airways and AWA
collective bargaining agreements, as modified by the transition
agreements reached in connection with the merger. |
On April 18, 2008, the NMB certified USAPA as the
collective bargaining representative for the pilots of the
combined company, including pilot groups from both pre-merger
AWA and US Airways. Since that time, we have been engaged in
negotiations with USAPA over the terms of a single labor
agreement covering both groups. In the meantime, while those
negotiations are underway, each of the pilot groups continues to
be covered by the USAPA collective bargaining agreements
referenced above.
There are few remaining unrepresented employee groups that could
engage in organization efforts. We cannot predict the outcome of
any future efforts to organize those remaining employees or the
terms of any future labor agreements or the effect, if any, on
US Airways operations or financial performance. For more
discussion, see Part I, Item 1A, Risk
Factors Union disputes, employee strikes and
other labor-related disruptions may adversely affect our
operations.
Aviation
Fuel
The average cost of a gallon of aviation fuel for our mainline
and Express operations decreased 44.8% from 2008 to 2009, and
our total mainline and Express fuel expense decreased
$2.28 billion, or 48%, from 2008 to 2009. We estimate that
a one cent per gallon increase in aviation fuel prices would
result in a $14 million increase in annual fuel expense
based on our 2010 forecasted mainline and Express fuel
consumption.
Since the third quarter of 2008, we have not entered into any
new fuel hedging transactions and, as of December 31, 2009,
we had no remaining outstanding fuel hedging contracts. During
2009, 2008 and 2007, we recognized a net loss of
$7 million, a net loss of $356 million and a net gain
of $245 million, respectively, related to our fuel hedging
program.
The following table shows annual aircraft fuel consumption and
costs for our mainline operations for 2007 through 2009 (gallons
and aircraft fuel expense in millions):
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Average Price
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Aircraft Fuel
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Percentage of Total
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Year
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Gallons
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per Gallon (1)
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Expense (1)
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Operating Expenses
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2009
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1,069
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$
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1.74
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$
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1,863
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23.8
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%
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2008
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1,142
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3.17
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3,618
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33.3
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%
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2007
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1,195
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2.20
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2,630
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30.7
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%
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(1) |
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Includes fuel taxes and excludes the impact of fuel hedges. The
impact of fuel hedges is described in Part II, Item 7
under US Airways Groups Results of Operations
and US Airways Results of Operations. |
In addition, we incur fuel expenses related to our Express
operations. Total fuel expenses for US Airways Groups
wholly owned regional airlines and affiliate regional airlines
operating under capacity purchase agreements as US Airways
Express for the years ended December 31, 2009, 2008 and
2007 were $609 million, $1.14 billion and
$765 million, respectively.
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally
outside of our control. Accordingly, the price and availability
of aviation fuel, as well as other petroleum products, can be
unpredictable. Prices and availability may be affected by many
factors, including:
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the impact of global political instability on crude oil
production;
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unexpected changes to the availability of petroleum products due
to disruptions in distribution systems or refineries, as
evidenced in the third quarter of 2005 when Hurricane Katrina
and Hurricane Rita caused widespread disruption to oil
production, refinery operations and pipeline capacity along
certain portions of the U.S. Gulf Coast;
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unpredictable increases to crude oil demand due to weather or
the pace of economic growth;
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inventory levels of crude oil, refined products and natural
gas; and
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13
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other factors, such as the relative fluctuation in value between
the U.S. dollar and other major currencies and the
influence of speculative positions on the futures exchanges.
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Insurance
We maintain insurance of the types that we believe are customary
in the airline industry. Principal coverage includes liability
for injury to members of the public, including passengers,
damage to property of US Airways Group, its subsidiaries and
others, and loss of or damage to flight equipment, whether on
the ground or in flight. We also maintain other types of
insurance such as workers compensation and employers
liability, with limits and deductibles that we believe are
standard within the industry.
Since September 11, 2001, we and other airlines have been
unable to obtain coverage for liability to persons other than
employees and passengers for claims resulting from acts of
terrorism, war or similar events, which is called war risk
coverage, at reasonable rates from the commercial insurance
market. US Airways, therefore, purchased its war risk coverage
through a special program administered by the FAA, as have most
other U.S. airlines. The Emergency Wartime Supplemental
Appropriations Act extended this insurance protection until
August 2005. The program was subsequently extended, with the
same conditions and premiums, until August 31, 2010. If the
federal insurance program terminates, we would likely face a
material increase in the cost of war risk coverage, and because
of competitive pressures in the industry, our ability to pass
this additional cost to passengers may be limited.
Customer
Service
In 2009, we continued our commitment to running a successful
airline. One of the important ways we do this is by taking care
of our customers. We believe that our focus on excellent
customer service in every aspect of our operations, including
personnel, flight equipment, in-flight and ancillary amenities,
on-time performance, flight completion ratios and baggage
handling, will strengthen customer loyalty and attract new
customers.
Our 2009 on-time performance rate was 80.9% and ranked second
among the big five
hub-and-spoke
carriers as measured by the DOT Air Travel Consumer Report. Our
mishandled baggage ratio for 2009 improved 36.5% as compared to
2008. Our 2009 mishandled baggage ratio of 3.03 also ranked
second among the big five
hub-and-spoke
carriers as measured by the DOT Air Travel Consumer Report. The
combination of continued strong on-time performance and fewer
mishandled bags contributed to 34.8% fewer reported customer
complaints to the DOT in 2009 as compared to 2008.
We reported the following combined operating statistics to the
DOT for mainline operations for the years ended
December 31, 2009, 2008 and 2007:
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Full Year
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2009
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2008
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2007
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On-time performance (a)
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80.9
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80.1
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68.7
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Completion factor (b)
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98.8
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98.5
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98.2
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Mishandled baggage (c)
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3.03
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4.77
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8.47
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Customer complaints (d)
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1.31
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2.01
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3.16
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(a) |
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Percentage of reported flight operations arriving on time as
defined by the DOT. |
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(b) |
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Percentage of scheduled flight operations completed. |
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(c) |
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Rate of mishandled baggage reports per 1,000 passengers. |
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(d) |
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Rate of customer complaints filed with the DOT per 100,000
passengers. |
Frequent
Traveler Program
All major United States airlines offer frequent flyer programs
to encourage travel on their respective airlines and customer
loyalty. Our Dividend Miles frequent flyer program allows
participants to earn mileage credits for each paid flight
segment on US Airways, Star Alliance carriers and certain other
airlines that participate in the program. Participants flying in
first class or Envoy class may receive additional mileage
credits. Participants can also receive mileage credits through
special promotions that we periodically offer and may also earn
mileage credits by utilizing
14
certain credit cards and purchasing services from non-airline
partners such as hotels and rental car agencies. We sell mileage
credits to credit card companies, telephone companies, hotels,
car rental agencies and others that participate in the Dividend
Miles program. Mileage credits can be redeemed for travel awards
on US Airways, Star Alliance carriers or other participating
airlines.
We and the other participating airline partners limit the number
of seats per flight that are available for redemption by award
recipients by using various inventory management techniques.
Award travel for all but the highest-level Dividend Miles
participants is generally not permitted on blackout dates, which
correspond to certain holiday periods or peak travel dates. We
charge various fees for issuing awards dependent upon
destination and booking method and for issuing awards within
14 days of the travel date. We reserve the right to
terminate Dividend Miles or portions of the program at any time.
Program rules, partners, special offers, blackout dates, awards
and requisite mileage levels for awards are subject to change.
In 2009, we launched the new Dividend Miles Select program in
conjunction with certain of our co-branded credit cards.
Participants in this program are eligible to receive discounted
award travel and award processing fee waivers.
Ticket
Distribution
Passengers can book tickets for travel on US Airways through
several distribution channels including our direct website
(www.usairways.com), online travel agent sites (e.g., Orbitz,
Travelocity, Expedia and others), traditional travel agents,
reservations centers and airline ticket offices. Traditional
travel agencies use Global Distribution Systems
(GDSs), such as Sabre Travel
Network®,
to obtain their fare and inventory data from airlines. Bookings
made through these agencies result in a fee, referred to as a
GDS fee, that is charged to the airline. Bookings
made directly with an airline, through its reservation call
centers or website, do not generate a GDS fee. Travel agent
sites that connect directly to airline host systems, effectively
by-passing the traditional connection via GDSs, help us reduce
distribution costs. In 2009, we received 63% of our sales from
internet sites. Our website accounted for 27% of our sales,
while other internet sites accounted for 36% of our sales.
Internal channels of distribution account for 32% of our sales.
Seasonality
Our results are seasonal. Due to the greater demand for air and
leisure travel during the summer months, revenues in the airline
industry in the second and third quarters of the year tend to be
greater than revenues in the first and fourth quarters of the
year.
Pre-merger
US Airways Groups Chapter 11 Bankruptcy
Proceedings
On September 12, 2004, US Airways Group and its domestic
subsidiaries, US Airways, Piedmont, PSA and MSC (collectively,
the Debtors), filed voluntary petitions for relief
under Chapter 11 of the U.S. Bankruptcy Code (the
Bankruptcy Code) in the United States Bankruptcy
Court for the Eastern District of Virginia, Alexandria Division
(the Bankruptcy Court). On September 16, 2005,
the Bankruptcy Court confirmed the Debtors plan of
reorganization. Substantially all of the claims in the 2004
bankruptcy have been settled and the remaining claims, if paid
at all, will be paid out in common stock of the post-bankruptcy
US Airways Group at a small fraction of the actual claim amount.
However, the effects of these common stock distributions were
already reflected in our financial statements upon emergence
from bankruptcy and will not have any further impact on our
financial position or results of operations. We presently expect
the bankruptcy case to be closed during 2010.
15
Below are a series of risk factors that may affect our results
of operations or financial performance. We caution the reader
that these risk factors may not be exhaustive. We operate in a
continually changing business environment, and new risk factors
emerge from time to time. Management cannot predict such new
risk factors, nor can it assess the impact, if any, of these
risk factors on our business or the extent to which any factor
or combination of factors may impact our business.
Risk
Factors Relating to the Company and Industry Related
Risks
US
Airways Group could experience significant operating losses in
the future.
There are several reasons, including those addressed in these
risk factors, why US Airways Group might fail to achieve
profitability and might experience significant losses. In
particular, the weakened condition of the economy and the high
volatility of fuel prices have had and continue to have an
impact on our operating results, and overall worsening economic
conditions increase the risk that we will experience losses.
Downturns
in economic conditions adversely affect our
business.
Due to the discretionary nature of business and leisure travel
spending, airline industry revenues are heavily influenced by
the condition of the U.S. economy and economies in other
regions of the world. Unfavorable conditions in these broader
economies have resulted, and may continue to result, in
decreased passenger demand for air travel and changes in booking
practices, both of which in turn have had, and may continue to
have, a strong negative effect on our revenues. In addition,
during challenging economic times, actions by our competitors to
increase their revenues can have an adverse impact on our
revenues. See The airline industry is intensely
competitive and dynamic below. Certain contractual
obligations limit our ability to reduce the number of aircraft
in operation below certain levels. As a result, we may not be
able to optimize the number of aircraft in operation in response
to a decrease in passenger demand for air travel.
Increased
costs of financing, a reduction in the availability of financing
and fluctuations in interest rates could adversely affect our
liquidity, operating expenses and results.
Recent global market and economic conditions have been
unprecedented and challenging with tighter credit conditions.
Continued concerns about the systemic impact of inflation, the
availability and cost of credit, energy costs and geopolitical
issues, combined with declining business activity levels and
consumer confidence, increased unemployment and volatile oil
prices, have contributed to unprecedented levels of volatility
in the capital markets. As a result of these market conditions,
the cost and availability of credit have been and may continue
to be adversely affected by illiquid credit markets and wider
credit spreads. These changes in the domestic and global
financial markets may increase our costs of financing and
adversely affect our ability to obtain financing needed for the
acquisition of aircraft that we have contractual commitments to
purchase and for other types of financings we may seek in order
to raise capital or fund other types of obligations. Any
downgrades to our credit rating may likewise increase the cost
and reduce the availability of financings.
In addition, we have substantial non-cancelable commitments for
capital expenditures, including the acquisition of new aircraft
and related spare engines. Although we have in place financing
for the four aircraft scheduled for delivery in 2010 and
backstop financing for the remaining narrow body aircraft we
have on order, we have not yet secured financing commitments or
backstop financing for some of the widebody aircraft we have on
order, commencing with deliveries scheduled for 2013, and cannot
assure you of the availability or cost of that financing. If we
are not able to arrange financing for such aircraft at customary
advance rates and on terms and conditions acceptable to us, we
expect we would seek to negotiate deferrals of aircraft
deliveries with the manufacturer or financing at lower than
customary advance rates, or, if required, use cash from
operations or other sources to purchase the aircraft.
Further, a substantial portion of our indebtedness bears
interest at fluctuating interest rates. These are primarily
based on the London interbank offered rate for deposits of
U.S. dollars, or LIBOR. LIBOR tends to
fluctuate based on general economic conditions, general interest
rates, federal reserve rates and the supply of and demand for
16
credit in the London interbank market. We have not hedged our
interest rate exposure and, accordingly, our interest expense
for any particular period may fluctuate based on LIBOR and other
variable interest rates. To the extent these interest rates
increase, our interest expense will increase, in which event we
may have difficulties making interest payments and funding our
other fixed costs, and our available cash flow for general
corporate requirements may be adversely affected. See also the
discussion of interest rate risk in Part II, Item 7A,
Quantitative and Qualitative Disclosures About Market
Risk.
Our
high level of fixed obligations limits our ability to fund
general corporate requirements and obtain additional financing,
limits our flexibility in responding to competitive developments
and increases our vulnerability to adverse economic and industry
conditions.
We have a significant amount of fixed obligations, including
debt, aircraft leases and financings, aircraft purchase
commitments, leases and developments of airport and other
facilities and other cash obligations. We also have certain
guaranteed costs associated with our regional alliances. Our
existing indebtedness is secured by substantially all of our
assets.
As a result of the substantial fixed costs associated with these
obligations:
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a decrease in revenues results in a disproportionately greater
percentage decrease in earnings;
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we may not have sufficient liquidity to fund all of these fixed
costs if our revenues decline or costs increase; and
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we may have to use our working capital to fund these fixed costs
instead of funding general corporate requirements, including
capital expenditures.
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These obligations also impact our ability to obtain additional
financing, if needed, and our flexibility in the conduct of our
business.
Any
failure to comply with the liquidity covenants contained in our
financing arrangements would likely have a material adverse
effect on our business, financial condition and results of
operations.
The terms of our Citicorp credit facility and certain of our
other financing arrangements require us to maintain consolidated
unrestricted cash and cash equivalents of not less than
$850 million, with not less than $750 million (subject
to partial reductions upon certain reductions in the outstanding
principal amount of the loan) of that amount held in accounts
subject to control agreements.
Our ability to comply with these covenants while paying the
fixed costs associated with our contractual obligations and our
other expenses will depend on our operating performance and cash
flow, which are seasonal, as well as factors including fuel
costs and general economic and political conditions.
The factors affecting our liquidity (and our ability to comply
with related covenants) will remain subject to significant
fluctuations and uncertainties, many of which are outside our
control. Any breach of our liquidity covenants or failure to
timely pay our obligations could result in a variety of adverse
consequences, including the acceleration of our indebtedness,
the withholding of credit card proceeds by our credit card
processors and the exercise of remedies by our creditors and
lessors. In such a situation, it is unlikely that we would be
able to fulfill our contractual obligations, repay the
accelerated indebtedness, make required lease payments or
otherwise cover our fixed costs.
Our
business is dependent on the price and availability of aircraft
fuel. Continued periods of high volatility in fuel costs,
increased fuel prices and significant disruptions in the supply
of aircraft fuel could have a significant negative impact on our
operating results and liquidity.
Our operating results are significantly impacted by changes in
the availability, price volatility and the cost of aircraft
fuel, which represents one of the largest single cost items in
our business. Fuel prices have fluctuated substantially over the
past several years and sharply in the last year.
17
Because of the amount of fuel needed to operate our airline,
even a relatively small increase in the price of fuel can have a
significant adverse aggregate effect on our costs and liquidity.
Due to the competitive nature of the airline industry and
unpredictability of the market, we can offer no assurance that
we may be able to increase our fares, impose fuel surcharges or
otherwise increase revenues sufficiently to offset fuel price
increases.
Although we are currently able to obtain adequate supplies of
aircraft fuel, we cannot predict the future availability, price
volatility or cost of aircraft fuel. Natural disasters,
political disruptions or wars involving oil-producing countries,
changes in fuel-related governmental policy, the strength of the
U.S. dollar against foreign currencies, speculation in the
energy futures markets, changes in aircraft fuel production
capacity, environmental concerns and other unpredictable events
may result in fuel supply shortages, additional fuel price
volatility and cost increases in the future.
Historically, from time to time, we have entered into hedging
arrangements designed to protect against rising fuel costs.
Since the third quarter of 2008, we have not entered into any
new fuel hedging transactions and, as of December 31, 2009,
we had no remaining outstanding fuel hedging contracts. Our
ability to hedge in the future may be limited, particularly if
our financial condition provides insufficient liquidity to meet
counterparty collateral requirements. Our future fuel hedging
arrangements, if any, may not completely protect us against
price increases and may be limited in both volume of fuel and
duration. Also, a rapid decline in the price of fuel can
adversely impact our short-term liquidity as our hedge
counterparties require that we post collateral in the form of
cash or letters of credit when the projected future market price
of fuel drops below the strike price. See also the discussion in
Part II, Item 7A, Quantitative and
Qualitative Disclosures About Market Risk.
If our
financial condition worsens, provisions in our credit card
processing and other commercial agreements may adversely affect
our liquidity.
We have agreements with companies that process customer credit
card transactions for the sale of air travel and other services.
These agreements allow these processing companies, under certain
conditions, to hold an amount of our cash (referred to as a
holdback) equal to a portion of advance ticket sales
that have been processed by that company, but for which we have
not yet provided the air transportation. These holdback
requirements can be modified at the discretion of the processing
companies upon the occurrence of specific events, including
material adverse changes in our financial condition. An increase
in the current holdback balances to higher percentages up to and
including 100% of relevant advanced ticket sales could
materially reduce our liquidity. Likewise, other of our
commercial agreements contain provisions that allow other
entities to impose less favorable terms, including the
acceleration of amounts due, in the event of material adverse
changes in our financial condition.
Union
disputes, employee strikes and other labor-related disruptions
may adversely affect our operations.
Relations between air carriers and labor unions in the United
States are governed by the RLA. Under the RLA, collective
bargaining agreements generally contain amendable
dates rather than expiration dates, and the RLA requires
that a carrier maintain the existing terms and conditions of
employment following the amendable date through a multi-stage
and usually lengthy series of bargaining processes overseen by
the NMB.
If no agreement is reached during direct negotiations between
the parties, either party may request the NMB to appoint a
federal mediator. The RLA prescribes no timetable for the direct
negotiation and mediation processes, and it is not unusual for
those processes to last for many months or even several years.
If no agreement is reached in mediation, the NMB in its
discretion may declare that an impasse exists and proffer
binding arbitration to the parties. Either party may decline to
submit to arbitration, and if arbitration is rejected by either
party, a
30-day
cooling off period commences. During or after that
period, a Presidential Emergency Board (PEB) may be
established, which examines the parties positions and
recommends a solution. The PEB process lasts for 30 days
and is followed by another
30-day
cooling off period. At the end of a cooling
off period, unless an agreement is reached or action is
taken by Congress, the labor organization may exercise
self-help, such as a strike, which could adversely
affect our ability to conduct our business and our financial
performance.
Additionally, these processes do not apply to our current and
ongoing negotiations for post-merger integrated labor
agreements, and this means unions may not lawfully engage in
concerted refusals to work, such as strikes, slow-downs,
sick-outs or other similar activity, against us. Nonetheless,
after more than four years of negotiations
18
without a resolution to the bargaining issues that arose from
the merger, there is a risk that disgruntled employees, either
with or without union involvement, could engage in one or more
concerted refusals to work that could individually or
collectively harm the operation of our airline and impair our
financial performance. Likewise, employees represented by unions
that have reached post-merger integrated agreements could engage
in improper actions that disrupt our operations. We are also
involved in binding arbitrations regarding grievances under our
collective bargaining agreements, including but not limited to
issues related to wages and working conditions, which if
determined adversely against us could negatively affect our
ability to conduct our business and our financial performance.
The
inability to maintain labor costs at competitive levels could
harm our financial performance.
Currently, our labor costs are very competitive relative to the
other big five
hub-and-spoke
carriers. However, we cannot assure you that labor costs going
forward will remain competitive because some of our agreements
are amendable now and others may become amendable, competitors
may significantly reduce their labor costs or we may agree to
higher-cost provisions in our current labor negotiations.
Approximately 87% of the employees within US Airways Group are
represented for collective bargaining purposes by labor unions,
including unionized groups of our employees abroad. Some of our
unions have brought and may continue to bring grievances to
binding arbitration. Unions may also bring court actions and may
seek to compel us to engage in the bargaining processes where we
believe we have no such obligation. If successful, there is a
risk these judicial or arbitral avenues could create additional
costs that we did not anticipate.
If we
incur problems with any of our third-party regional operators or
third-party service providers, our operations could be adversely
affected by a resulting decline in revenue or negative public
perception about our services.
A significant portion of our regional operations are conducted
by third-party operators on our behalf, primarily under capacity
purchase agreements. Due to our reliance on third parties to
provide these essential services, we are subject to the risks of
disruptions to their operations, which may result from many of
the same risk factors disclosed in this report, such as the
impact of current economic conditions, and other risk factors,
such as a bankruptcy restructuring of the regional operators.
For example, in January 2010, Mesa Air Group Inc. and its
subsidiary Mesa Airlines filed voluntary petitions for relief
under Chapter 11 of the Bankruptcy Code. We cannot predict
whether Mesa Airlines will be successfully reorganized or any
other aspect of the pending bankruptcy case. At
December 31, 2009, Mesa Airlines operated 53 aircraft for
our Express passenger operations, representing over
$450 million in annual passenger revenues to us in 2009. In
addition, we may also experience disruption to our regional
operations if we terminate the capacity purchase agreement with
one or more of our current operators and transition the services
to another provider. As our regional segment provides revenues
to us directly and indirectly (by providing flow traffic to our
hubs), any significant disruption to our regional operations
would have a material adverse effect on our business, financial
condition and results of operations.
In addition, our reliance upon others to provide essential
services on behalf of our operations may result in our relative
inability to control the efficiency and timeliness of contract
services. We have entered into agreements with contractors to
provide various facilities and services required for our
operations, including Express flight operations, aircraft
maintenance, ground services and facilities, reservations and
baggage handling. Similar agreements may be entered into in any
new markets we decide to serve. These agreements are generally
subject to termination after notice by the third-party service
provider. We are also at risk should one of these service
providers cease operations, and there is no guarantee that we
could replace these providers on a timely basis with comparably
priced providers. Recent volatility in fuel prices, disruptions
to capital markets and the current economic downturn in general
have subjected certain of these third-party service providers to
strong financial pressures. Any material problems with the
efficiency and timeliness of contract services, resulting from
financial hardships or otherwise, could have a material adverse
effect on our business, financial condition and results of
operations.
19
We
rely heavily on automated systems to operate our business and
any failure or disruption of these systems could harm our
business.
To operate our business, we depend on automated systems,
including our computerized airline reservation systems, flight
operations systems, telecommunication systems, airport customer
self-service kiosks and websites. Our website and reservation
systems must be able to accommodate a high volume of traffic,
process transactions and deliver important flight information on
a timely and reliable basis. Substantial or repeated disruptions
or failures of any of these automated systems could impair our
operations, reduce the attractiveness of our services and could
result in lost revenues and increased costs. In addition, these
automated systems require periodic maintenance, upgrades and
replacements, and our business may be harmed if we fail to
properly maintain, upgrade or replace such systems.
Changes
to our business model that are designed to increase revenues may
not be successful and may cause operational difficulties or
decreased demand.
We have implemented several new measures designed to increase
revenue and offset costs. These measures include charging
separately for services that had previously been included within
the price of a ticket and increasing other pre-existing fees. We
may introduce additional initiatives in the future, however, as
time goes on, we expect that it will be more difficult to
identify and implement additional initiatives. We cannot assure
you that these new measures or any future initiatives will be
successful in increasing our revenues. Additionally, the
implementation of these initiatives creates logistical
challenges that could harm the operational performance of our
airline. Also, the new and increased fees might reduce the
demand for air travel on our airline or across the industry in
general, particularly as weakening economic conditions make our
customers more sensitive to increased travel costs.
The
airline industry is intensely competitive and
dynamic.
Our competitors include other major domestic airlines as well as
foreign, regional and new entrant airlines, some of which have
more financial resources or lower cost structures than ours, and
other forms of transportation, including rail and private
automobiles. In many of our markets we compete with at least one
low cost air carrier. Our revenues are sensitive to numerous
factors, and the actions of other carriers in the areas of
pricing, scheduling and promotions can have a substantial
adverse impact not only on our revenues but on overall industry
revenues. These factors may become even more significant in
periods when the industry experiences large losses, as airlines
under financial stress, or in bankruptcy, may institute pricing
structures intended to achieve near-term survival rather than
long-term viability. In addition, because a significant portion
of our traffic is short-haul travel, we are more susceptible
than other major airlines to competition from surface
transportation such as automobiles and trains.
Low cost carriers have a profound impact on industry revenues.
Using the advantage of low unit costs, these carriers offer
lower fares in order to shift demand from larger,
more-established airlines. Some low cost carriers, which have
cost structures lower than ours, have better financial
performance and significant numbers of aircraft on order for
delivery in the next few years. These low-cost carriers are
expected to continue to increase their market share through
growth and could continue to have an impact on the overall
performance of US Airways Group.
Additionally, if mergers or other forms of industry
consolidation including antitrust immunity grants take place, we
might or might not be included as a participant. Depending on
which carriers combine and which assets, if any, are sold or
otherwise transferred to other carriers in connection with such
combinations, our competitive position relative to the
post-combination carriers or other carriers that acquire such
assets could be harmed. In addition, as carriers combine through
traditional mergers or antitrust immunity grants, their route
networks might grow and result in greater overlap with our
network, which in turn could result in lower overall market
share and revenues for us. Such consolidation is not limited to
the U.S., but could include further consolidation among
international carriers in Europe and elsewhere.
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The
loss of key personnel upon whom we depend to operate our
business or the inability to attract additional qualified
personnel could adversely affect the results of our operations
or our financial performance.
We believe that our future success will depend in large part on
our ability to attract and retain highly qualified management,
technical and other personnel, particularly in light of
reductions in headcount associated with cost-saving measures
that we have implemented. We may not be successful in retaining
key personnel or in attracting and retaining other highly
qualified personnel. Any inability to retain or attract
significant numbers of qualified management and other personnel
could adversely affect our business.
We may
be adversely affected by conflicts overseas or terrorist
attacks; the travel industry continues to face ongoing security
concerns.
Acts of terrorism or fear of such attacks, including elevated
national threat warnings, wars or other military conflicts,
including the wars in Iraq and Afghanistan, may depress air
travel, particularly on international routes, and cause declines
in revenues and increases in costs. The attacks of
September 11, 2001 and continuing terrorist threats and
attempted attacks materially impacted and continue to impact air
travel. Increased security procedures introduced at airports
since the attacks and other such measures as may be introduced
in the future generate higher operating costs for airlines. The
Aviation Security Act mandates improved flight deck security;
deployment of federal air marshals on board flights; improved
airport perimeter access security; airline crew security
training; enhanced security screening of passengers, baggage,
cargo, mail, employees and vendors; enhanced training and
qualifications of security screening personnel; additional
provision of passenger data to U.S. Customs and enhanced
background checks. A concurrent increase in airport security
charges and procedures, such as restrictions on carry-on
baggage, has also had and may continue to have a
disproportionate impact on short-haul travel, which constitutes
a significant portion of our flying and revenue. We would also
be materially impacted in the event of further terrorist attacks
or perceived terrorist threats.
Changes
in government regulation could increase our operating costs and
limit our ability to conduct our business.
Airlines are subject to extensive regulatory requirements. In
the last several years, Congress has passed laws, and the DOT,
the FAA, the TSA and the Department of Homeland Security have
issued a number of directives and other regulations. These
requirements impose substantial costs on airlines. On
October 10, 2008, the FAA finalized new rules governing
flight operations at the three major New York airports. These
rules did not take effect because of a legal challenge, but the
FAA has pushed forward with a reduction in the number of flights
per hour at LaGuardia. The FAA is attempting to work with
carriers on a voluntary basis to implement its new lower
operations cap at LaGuardia. If this is not successful, the FAA
may resort to other methods to reduce congestion in New York.
Additionally, the DOT recently finalized a policy change that
will permit airports to charge differentiated landing fees
during congested periods, which could impact our ability to
serve certain markets in the future. The new rule is being
challenged in court by the industry. The Obama Administration
has not yet indicated how it intends to move forward on the
issue of congestion management in the New York region.
The FAA from time to time issues directives and other
regulations relating to the maintenance and operation of
aircraft that require significant expenditures or operational
restrictions. Some FAA requirements cover, among other things,
retirement of older aircraft, security measures, collision
avoidance systems, airborne windshear avoidance systems, noise
abatement, fuel tank inerting, crew scheduling and other
environmental concerns, aircraft operation and safety and
increased inspections and maintenance procedures to be conducted
on older aircraft. Our failure to timely comply with these
requirements can result in fines and other enforcement actions
by the FAA or other regulators. For example, on October 14,
2009, the FAA proposed a fine of $5.4 million with respect
to certain alleged violations and we are in discussions with the
agency regarding resolution of this matter. Additionally, new
proposals by the FAA to further regulate flight crew duty times
could increase our costs and reduce staffing flexibility.
Additional laws, regulations, taxes and policies have been
proposed or discussed from time to time, including recently
introduced federal legislation on a passenger bill of
rights, that, if adopted, could significantly increase the
cost of airline operations or reduce revenues. The state of New
Yorks attempt to adopt such a measure has been
successfully challenged by the airline industry. Other states,
however, are contemplating similar legislation. The
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DOT finalized rules requiring new procedures for customer
handling during long onboard delays, as well as additional
reporting requirements for airlines.
Finally, the ability of U.S. carriers to operate
international routes is subject to change because the applicable
arrangements between the U.S. and foreign governments may
be amended from time to time, or because appropriate slots or
facilities may not be available. We cannot assure you that laws
or regulations enacted in the future will not adversely affect
our operating costs. In addition, increased environmental
regulation, particularly in the EU, may increase costs or
restrict our operations.
Our
ability to operate and grow our route network in the future is
dependent on the availability of adequate facilities and
infrastructure throughout our system.
In order to operate our existing flight schedule and, where
appropriate, add service along new or existing routes, we must
be able to obtain adequate gates, ticketing facilities,
operations areas, slots (where applicable) and office space. For
example, at our largest hub airport, we are seeking to increase
international service despite challenging airport space
constraints. The nations aging air traffic control
infrastructure presents challenges as well. The ability of the
air traffic control system to handle traffic in high-density
areas where we have a large concentration of flights is critical
to our ability to operate our existing schedule. Also, as
airports around the world become more congested, we cannot
always be sure that our plans for new service can be implemented
in a commercially viable manner given operating constraints at
airports throughout our network.
We are subject to many forms of environmental regulation
and may incur substantial costs as a result.
We are subject to increasingly stringent federal, state, local
and foreign laws, regulations and ordinances relating to the
protection of the environment, including those relating to
emissions to the air, discharges to surface and subsurface
waters, safe drinking water, and the management of hazardous
substances, oils and waste materials. Compliance with all
environmental laws and regulations can require significant
expenditures.
Several U.S. airport authorities are actively engaged in
efforts to limit discharges of de-icing fluid (glycol) to local
groundwater, often by requiring airlines to participate in the
building or reconfiguring of airport de-icing facilities. Such
efforts are likely to impose additional costs and restrictions
on airlines using those airports. We do not believe, however,
that such environmental developments will have a material impact
on our capital expenditures or otherwise adversely affect our
operations, operating costs or competitive position.
We are also subject to other environmental laws and regulations,
including those that require us to remediate soil or groundwater
to meet certain objectives. Under federal law, generators of
waste materials, and owners or operators of facilities, can be
subject to liability for investigation and remediation costs at
locations that have been identified as requiring response
actions. We have liability for such costs at various sites,
although the future costs associated with the remediation
efforts are currently not expected to have a material adverse
affect on our business.
We have various leases and agreements with respect to real
property, tanks and pipelines with airports and other operators.
Under these leases and agreements, we have agreed to standard
language indemnifying the lessor or operator against
environmental liabilities associated with the real property or
operations described under the agreement, even if we are not the
party responsible for the initial event that caused the
environmental damage. We also participate in leases with other
airlines in fuel consortiums and fuel committees at airports,
where such indemnities are generally joint and several among the
participating airlines.
There is increasing global regulatory focus on climate change
and greenhouse gas emissions. In particular, the United States
and the EU have developed regulatory requirements that may
affect our business. The U.S. Congress is considering
climate-related legislation to reduce emissions of greenhouse
gases. Several states have also developed measures to regulate
emissions of greenhouse gases, primarily through the planned
development of greenhouse gas emissions inventories
and/or
regional greenhouse gas cap and trade programs. In late 2009 and
early 2010, the U.S. EPA adopted regulations requiring
reporting of greenhouse gas emissions from certain facilities,
updating the renewable fuels standard and is considering
additional regulation of greenhouse gases under the existing
federal Clean Air Act. In addition, the EU has adopted
legislation to include aviation within the EUs existing
greenhouse gas emission trading scheme effective in 2012. This
legislation has been legally challenged in the EU but we have
had to begin complying and incurred additional costs as a result
of this legislation.
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While we cannot yet determine what the final regulatory programs
will be in the United States, the EU or in other areas in which
we do business, such climate change-related regulatory activity
in the future may adversely affect our business and financial
results.
California is in the process of implementing environmental
provisions aimed at limiting emissions from motorized vehicles,
which may include some airline belt loaders and tugs and require
a change of ground service vehicles. The future costs associated
with replacing some or all of our ground fleets in California
cities are currently not expected to have a material adverse
affect on our business.
Governmental authorities in several U.S. and foreign cities
are also considering or have already implemented aircraft noise
reduction programs, including the imposition of nighttime
curfews and limitations on daytime take-offs and landings. We
have been able to accommodate local noise restrictions imposed
to date, but our operations could be adversely affected if
locally-imposed regulations become more restrictive or
widespread.
Ongoing
data security compliance requirements could increase our costs,
and any significant data breach could harm our business,
financial condition or results of operations.
Our business requires the appropriate and secure utilization of
customer and other sensitive information. We cannot be certain
that advances in criminal capabilities, discovery of new
vulnerabilities, attempts to exploit existing vulnerabilities in
our systems, data thefts, physical system or network break-ins
or inappropriate access, or other developments will not
compromise or breach the technology protecting the networks that
access and store database information. Furthermore, there has
been heightened legislative and regulatory focus on data
security in the U.S. and abroad (particularly in the EU),
including requirements for varying levels of customer
notification in the event of a data breach.
Many of our commercial partners, including credit card
companies, have imposed certain data security standards that we
must meet. In particular, we are required by the Payment Card
Industry Security Standards Council, founded by the credit card
companies, to comply with their highest level of data security
standards. While we continue our efforts to meet these
standards, new and revised standards may be imposed that may be
difficult for us to meet.
In addition to the Payment Card Industry Standards discussed
above, failure to comply with the other privacy and data use and
security requirements of our partners or related laws and
regulations to which we are subject may expose us to fines,
sanctions or other penalties, which could materially and
adversely affect our results of operations and overall business.
In addition, failure to address appropriately these issues could
also give rise to additional legal risks, which, in turn, could
increase the size and number of litigation claims and damages
asserted or subject us to enforcement actions, fines and
penalties and cause us to incur further related costs and
expenses.
Interruptions
or disruptions in service at one of our hub airports or our
focus city could have a material adverse impact on our
operations.
We operate principally through hubs in Charlotte, Philadelphia
and Phoenix and a focus city at Washington National Airport.
Substantially all of our flights either originate in or fly into
one of these locations. A significant interruption or disruption
in service at one of our hubs resulting from air traffic control
delays, weather conditions, natural disasters, growth
constraints, relations with third-party service providers,
failure of computer systems, labor relations, fuel supplies,
terrorist activities or otherwise could result in the
cancellation or delay of a significant portion of our flights
and, as a result, could have a severe impact on our business,
operations and financial performance.
We are
at risk of losses and adverse publicity stemming from any
accident involving any of our aircraft or the aircraft of our
regional operators.
If one of our aircraft, an aircraft that is operated under our
brand by one of our regional operators or an aircraft that is
operated by an airline that is one of our codeshare partners
were to be involved in an accident, we could be exposed to
significant tort liability. The insurance we carry to cover
damages arising from any future accidents may be inadequate. In
the event that our insurance is not adequate, we may be forced
to bear substantial losses from an accident. In addition, any
accident involving an aircraft that we operate, an aircraft that
is operated under our brand by one of our regional operators or
an aircraft that is operated by an airline that is one of our
codeshare partners could create a public perception that our
aircraft or those of our regional operators or codeshare
partners are not safe
23
or reliable, which could harm our reputation, result in air
travelers being reluctant to fly on our aircraft or those of our
regional operators or codeshare partners and adversely impact
our financial condition and operations.
Delays
in scheduled aircraft deliveries or other loss of anticipated
fleet capacity may adversely impact our operations and financial
results.
The success of our business depends on, among other things, the
ability to operate a certain number and type of aircraft. In
many cases, the aircraft we intend to operate are not yet in our
fleet, but we have contractual commitments to purchase or lease
them. If for any reason we were unable to accept or secure
deliveries of new aircraft on contractually scheduled delivery
dates, this could have a negative impact on our business,
operations and financial performance. Our failure to integrate
newly purchased aircraft into our fleet as planned might require
us to seek extensions of the terms for some leased aircraft.
Such unanticipated extensions may require us to operate existing
aircraft beyond the point at which it is economically optimal to
retire them, resulting in increased maintenance costs. If new
aircraft orders are not filled on a timely basis, we could face
higher monthly rental rates.
Our
business is subject to weather factors and seasonal variations
in airline travel, which cause our results to
fluctuate.
Our operations are vulnerable to severe weather conditions in
parts of our network that could disrupt service, create air
traffic control problems, decrease revenue and increase costs,
such as during hurricane season in the Caribbean and Southeast
United States, snow and severe winter weather in the Northeast
United States and thunderstorms in the Eastern United States. In
addition, the air travel business historically fluctuates on a
seasonal basis. Due to the greater demand for air and leisure
travel during the summer months, revenues in the airline
industry in the second and third quarters of the year tend to be
greater than revenues in the first and fourth quarters of the
year. Our results of operations will likely reflect weather
factors and seasonality, and therefore quarterly results are not
necessarily indicative of those for an entire year, and our
prior results are not necessarily indicative of our future
results.
Increases
in insurance costs or reductions in insurance coverage may
adversely impact our operations and financial
results.
The terrorist attacks of September 11, 2001 led to a
significant increase in insurance premiums and a decrease in the
insurance coverage available to commercial air carriers.
Accordingly, our insurance costs increased significantly and our
ability to continue to obtain insurance even at current prices
remains uncertain. In addition, we have obtained third-party war
risk (terrorism) insurance through a special program
administered by the FAA, resulting in lower premiums than if we
had obtained this insurance in the commercial insurance market.
The program has been extended, with the same conditions and
premiums, until August 31, 2010. If the federal insurance
program terminates, we would likely face a material increase in
the cost of war risk insurance. The failure of one or more of
our insurers could result in a lack of coverage for a period of
time. Additionally, severe disruptions in the domestic and
global financial markets could adversely impact the ratings and
survival of some insurers. Future downgrades in the ratings of
enough insurers could adversely impact both the availability of
appropriate insurance coverage and its cost. Because of
competitive pressures in our industry, our ability to pass
additional insurance costs to passengers is limited. As a
result, further increases in insurance costs or reductions in
available insurance coverage could have an adverse impact on our
financial results.
We may
be adversely affected by global events that affect travel
behavior.
Our revenue and results of operations may be adversely affected
by global events beyond our control. An outbreak of a contagious
disease such as Severe Acute Respiratory Syndrome
(SARS), H1N1 influenza virus, avian flu, or any
other influenza-type illness, if it were to persist for an
extended period, could again materially affect the airline
industry and us by reducing revenues and impacting travel
behavior.
We are
exposed to foreign currency exchange rate
fluctuations.
As we expand our international operations, we will have
significant operating revenues and expenses, as well as assets
and liabilities, denominated in foreign currencies. Fluctuations
in foreign currencies can significantly affect our operating
performance and the value of our assets and liabilities located
outside of the United States.
24
The
use of US Airways Groups net operating losses and certain
other tax attributes could be limited in the
future.
When a corporation undergoes an ownership change as
defined in Section 382 of the Internal Revenue Code, or
Section 382, a limitation is imposed on the
corporations future ability to utilize any net operating
losses, or NOLs, generated before the ownership change and
certain subsequently recognized built-in losses and
deductions, if any, existing as of the date of the ownership
change. We believe an ownership change as defined in
Section 382 occurred for US Airways Group in February 2007.
Since February 2007 there have been additional changes in the
ownership of US Airways Group that, if combined with
sufficiently large future changes in ownership, could result in
another ownership change as defined in
Section 382. Until US Airways Group has used all of its
existing NOLs, future shifts in ownership of US Airways
Groups common stock could result in new Section 382
limitations on the use of our NOLs as of the date of an
additional ownership change. For purposes of determining if an
ownership change has occurred, the right to convert convertible
notes into stock may be treated as if US Airways Group had
issued the underlying stock.
Risks
Relating to Our Common Stock
The
price of our common stock has recently been and may in the
future be volatile.
The market price of our common stock may fluctuate substantially
due to a variety of factors, many of which are beyond our
control, including:
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our operating results failing to meet the expectations of
securities analysts or investors;
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changes in financial estimates or recommendations by securities
analysts;
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material announcements by us or our competitors;
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movements in fuel prices;
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new regulatory pronouncements and changes in regulatory
guidelines;
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general and industry-specific economic conditions;
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public sales of a substantial number of shares of our common
stock; and
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general market conditions.
|
Conversion
of our convertible notes will dilute the ownership interest of
existing stockholders and could adversely affect the market
price of our common stock.
The conversion of some or all of US Airways Groups
7% senior convertible notes due 2020 or 7.25% convertible
senior notes due 2014 will dilute the ownership interests of
existing stockholders. Any sales in the public market of the
common stock issuable upon such conversion could adversely
affect prevailing market prices of our common stock. In
addition, the existence of the convertible notes may encourage
short selling by market participants because the conversion of
the notes could depress the price of our common stock.
Certain
provisions of the amended and restated certificate of
incorporation and amended and restated bylaws of US Airways
Group make it difficult for stockholders to change the
composition of our board of directors and may discourage
takeover attempts that some of our stockholders might consider
beneficial.
Certain provisions of the amended and restated certificate of
incorporation and amended and restated bylaws of US Airways
Group may have the effect of delaying or preventing changes in
control if our board of directors determines that such changes
in control are not in the best interests of US Airways Group and
its stockholders. These provisions include, among other things,
the following:
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a classified board of directors with three-year staggered terms;
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advance notice procedures for stockholder proposals to be
considered at stockholders meetings;
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the ability of US Airways Groups board of directors to
fill vacancies on the board;
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a prohibition against stockholders taking action by written
consent;
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a prohibition against stockholders calling special meetings of
stockholders;
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25
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a requirement that holders of at least 80% of the voting power
of the shares entitled to vote in the election of directors
approve amendment of the amended and restated bylaws; and
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super-majority voting requirements to modify or amend specified
provisions of US Airways Groups amended and restated
certificate of incorporation.
|
These provisions are not intended to prevent a takeover, but are
intended to protect and maximize the value of US Airways
Groups stockholders interests. While these
provisions have the effect of encouraging persons seeking to
acquire control of our company to negotiate with our board of
directors, they could enable our board of directors to prevent a
transaction that some, or a majority, of our stockholders might
believe to be in their best interests and, in that case, may
prevent or discourage attempts to remove and replace incumbent
directors. In addition, US Airways Group is subject to the
provisions of Section 203 of the Delaware General
Corporation Law, which prohibits business combinations with
interested stockholders. Interested stockholders do not include
stockholders, such as our equity investors at the time of the
merger, whose acquisition of US Airways Groups securities
is approved by the board of directors prior to the investment
under Section 203.
Our
charter documents include provisions limiting voting and
ownership of our equity interests, which includes our common
stock and our convertible notes, by foreign
owners.
Our charter documents provide that, consistent with the
requirements of Subtitle VII of Title 49 of the United
States Code, as amended, or as the same may be from time to time
amended (the Aviation Act), any person or entity who
is not a citizen of the United States (as defined
under the Aviation Act and administrative interpretations issued
by the Department of Transportation, its predecessors and
successors, from time to time), including any agent, trustee or
representative of such person or entity (a
non-citizen), shall not own (beneficially or of
record)
and/or
control more than (a) 24.9% of the aggregate votes of all
of our outstanding equity securities (as defined, which
definition includes our capital stock, securities convertible
into or exchangeable for shares of our capital stock, including
our outstanding convertible notes, and any options, warrants or
other rights to acquire capital stock) (the voting cap
amount) or (b) 49.9% of our outstanding equity
securities (the absolute cap amount). If
non-citizens nonetheless at any time own
and/or
control more than the voting cap amount, the voting rights of
the equity securities in excess of the voting cap amount shall
be automatically suspended in accordance with the provisions of
our bylaws. Voting rights of equity securities, if any, owned
(beneficially or of record) by non-citizens shall be suspended
in reverse chronological order based upon the date of
registration in the foreign stock record. Further, if at any
time a transfer of equity securities to a non-citizen would
result in non-citizens owning more than the absolute cap amount,
such transfer shall be void and of no effect, in accordance with
provisions of our bylaws. Certificates for our equity securities
must bear a legend set forth in our amended and restated
certificate of incorporation stating that such equity securities
are subject to the foregoing restrictions. Under our bylaws, it
is the duty of each stockholder who is a non-citizen to register
his, her or its equity securities on our foreign stock record.
In addition, our bylaws provide that in the event that
non-citizens shall own (beneficially or of record) or have
voting control over any equity securities, the voting rights of
such persons shall be subject to automatic suspension to the
extent required to ensure that we are in compliance with
applicable provisions of law and regulations relating to
ownership or control of a United States air carrier. In the
event that we determine that the equity securities registered on
the foreign stock record or the stock records of the Company
exceed the absolute cap amount, sufficient shares shall be
removed from the foreign stock record and the stock records of
the Company so that the number of shares entered therein does
not exceed the absolute cap amount. Shares of equity securities
shall be removed from the foreign stock record and the stock
records of the Company in reverse chronological order based on
the date of registration in the foreign stock record and the
stock records of the Company.
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Item 1B.
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Unresolved
Staff Comments
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None.
26
Flight
Equipment
We operated a mainline fleet of 349 aircraft at the end of 2009,
down from a total of 354 mainline aircraft at the end of 2008.
During 2009, we removed 11 leased Boeing
757-200
aircraft, six leased Boeing
737-300
aircraft, seven leased Airbus A320 aircraft and six owned
Embraer 190 aircraft from our mainline operating fleet. We sold
10 of our Embraer 190 aircraft to Republic in 2009 and are
currently leasing back four of these aircraft for periods
ranging from one to five months. During 2009, we took delivery
of 18 Airbus A321 aircraft, five Airbus A330-200 aircraft and
two Airbus A320 aircraft. We are also supported by our regional
airline subsidiaries and affiliates operating as US Airways
Express either under capacity purchase or prorate agreements,
which operate approximately 236 regional jets and 60
turboprops.
US Airways has definitive purchase agreements with Airbus for
the acquisition of 134 aircraft, including 97 single-aisle
A320 family aircraft and 37 widebody aircraft (comprised of 22
A350 XWB aircraft and 15 A330-200 aircraft), of which 30
aircraft have been delivered through December 31, 2009.
Deliveries of the A320 family aircraft commenced during 2008
with the delivery of five A321 aircraft. As described above, in
2009 we took delivery of 18 Airbus A321 aircraft and two Airbus
A320 aircraft under our Amended and Restated Airbus A320 Family
Aircraft Purchase Agreement and five Airbus A330-200 aircraft
under our Airbus A330 Aircraft Purchase Agreement.
In November 2009, US Airways amended its purchase agreements
with Airbus to defer 54 aircraft originally scheduled for
delivery between 2010 and 2012 to 2013 and beyond. US Airways
now plans to take delivery of 28 Airbus aircraft between 2010
and 2012, consisting of four aircraft in 2010 (two A320 aircraft
and two A330 aircraft) and 24 A320 family aircraft in
2011-2012.
US Airways has financing commitments in place for all 28 of
these aircraft. In addition, commencement of US Airways
Airbus A350 XWB operations, with aircraft deliveries originally
scheduled to start in 2015, will now be postponed to 2017. The
aircraft deferrals will not significantly alter our capacity as
we are currently in the process of extending leases for certain
aircraft originally scheduled to be replaced during
2010-2012.
We intend to retain these aircraft until the rescheduled new
aircraft delivery dates.
As of December 31, 2009, our mainline operating fleet
consisted of the following aircraft:
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Owned/
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Aircraft Type
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Avg. Seats
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Mortgaged (1)
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Leased (2)
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Total
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Avg. Age
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A330-300
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293
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4
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5
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9
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9.3
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A330-200
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258
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2
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3
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5
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0.3
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A321
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183
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38
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13
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51
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5.0
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A320
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150
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9
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61
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70
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11.1
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A319
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124
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3
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90
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93
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9.2
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B767-200ER
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204
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10
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10
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20.4
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B757-200
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188
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3
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25
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28
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18.5
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B737-400
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144
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40
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40
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19.8
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B737-300
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131
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24
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24
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22.0
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ERJ 190
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99
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15
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4
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19
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2.1
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Total
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153
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74
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275
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349
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11.6
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(1) |
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All owned aircraft are pledged as collateral for various secured
financing agreements. |
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(2) |
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The terms of the leases expire between 2010 and 2024. |
As of December 31, 2009, our wholly owned regional airline
subsidiaries operated the following regional jet and turboprop
aircraft:
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Average Seat
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Average
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Aircraft Type
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Capacity
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Owned
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Leased (1)
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Total
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Age (years)
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CRJ-700
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70
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7
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7
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14
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5.3
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CRJ-200
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50
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12
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23
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35
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5.8
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De Havilland Dash 8-300
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50
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11
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11
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18.3
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De Havilland Dash 8-100
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37
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33
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33
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20.4
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|
|
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|
|
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Total
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|
48
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|
|
52
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41
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93
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12.4
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(1) |
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The terms of the leases expire between 2013 and 2022. |
27
We maintain inventories of spare engines, spare parts,
accessories and other maintenance supplies sufficient to support
our operating requirements.
The following table illustrates our committed orders and
scheduled lease expirations at December 31, 2009:
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2010
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2011
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2012
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2013
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2014
|
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Thereafter
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Firm orders remaining
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4
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12
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12
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21
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21
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34
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Scheduled mainline lease expirations
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33
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28
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26
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24
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14
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150
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Scheduled wholly owned Express subsidiaries lease expirations
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3
|
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3
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35
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See Notes 9 and 8, Commitments and
Contingencies in Part II, Items 8A and 8B,
respectively, for additional information on aircraft purchase
commitments.
Ground
Facilities
At each airport where we conduct flight operations, we lease
passenger and baggage handling space, generally from the airport
operator, but in some cases on a subleased basis from other
airlines. Our main operational facilities are located at our
hubs and focus city at the following airports: Charlotte,
Philadelphia, Phoenix and Washington National airports. At those
locations and in other cities we serve, we maintain
administrative offices, terminal, catering, cargo and other
airport facilities, training facilities, maintenance facilities
and other facilities, in each case as necessary to support our
operations in the particular city. Our Operations Control Center
is located in Pittsburgh, Pennsylvania, in a facility leased
from the Allegheny County Airport Authority.
Our corporate headquarters building is located in Tempe,
Arizona, and we have satellite facilities housing various
headquarter support functions in the surrounding metropolitan
area. The leases on these office facilities have expiration
dates ranging from 2013 to 2015.
Terminal
Construction Projects
We use public airports for our flight operations under lease
arrangements with the government entities that own or control
these airports. Airport authorities frequently require airlines
to execute long-term leases to assist in obtaining financing for
terminal and facility construction. Any future requirements for
new or improved airport facilities and passenger terminals at
airports in which our airline subsidiaries operate could result
in additional occupancy costs and long-term commitments.
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Item 3.
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Legal
Proceedings
|
On September 12, 2004, US Airways Group and its domestic
subsidiaries (collectively, the Reorganized Debtors)
filed voluntary petitions for relief under Chapter 11 of
the Bankruptcy Code in the United States Bankruptcy Court for
the Eastern District of Virginia, Alexandria Division (Case Nos.
04-13819-SSM
through
03-13823-SSM)
(the 2004 Bankruptcy). On September 16, 2005,
the Bankruptcy Court issued an order confirming the plan of
reorganization submitted by the Reorganized Debtors and on
September 27, 2005, the Reorganized Debtors emerged from
the 2004 Bankruptcy. The Bankruptcy Courts order
confirming the plan included a provision called the plan
injunction, which forever bars other parties from pursuing most
claims against the Reorganized Debtors that arose prior to
September 27, 2005 in any forum other than the Bankruptcy
Court. Substantially all of the claims in the 2004 Bankruptcy
have been settled and the remaining claims, if paid at all, will
be paid out in common stock of the post-bankruptcy US Airways
Group at a small fraction of the actual claim amount. However,
the effects of these common stock distributions were already
reflected in our financial statements upon emergence from
bankruptcy and will not have any further impact on our financial
position or results of operations. We presently expect the
bankruptcy case to be closed during 2010.
The Company
and/or its
subsidiaries are defendants in various pending lawsuits and
proceedings, and from time to time are subject to other claims
arising in the normal course of our business, many of which are
covered in whole or in part by insurance. The outcome of those
matters cannot be predicted with certainty at this time, but the
Company, having consulted with outside counsel, believes that
the ultimate disposition of these contingencies will not
materially affect its consolidated financial position or results
of operations.
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Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of security holders during
the fourth quarter of 2009.
28
PART II
Item 5. Market
for US Airways Groups Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Stock
Exchange Listing
Our common stock trades on the NYSE under the symbol
LCC. As of February 12, 2010, the closing price
of our common stock on the NYSE was $6.81. As of
February 12, 2010, there were 1,927 holders of record of
our common stock.
Market
Prices of Common Stock
The following table sets forth, for the periods indicated, the
high and low sale prices of our common stock on the NYSE:
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Year Ended
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December 31
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Period
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High
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Low
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2009
|
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Fourth Quarter
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$
|
5.40
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$
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2.82
|
|
|
|
|
|
Third Quarter
|
|
|
5.60
|
|
|
|
2.00
|
|
|
|
|
|
Second Quarter
|
|
|
5.35
|
|
|
|
2.11
|
|
|
|
|
|
First Quarter
|
|
|
9.70
|
|
|
|
1.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
Fourth Quarter
|
|
$
|
11.24
|
|
|
$
|
3.16
|
|
|
|
|
|
Third Quarter
|
|
|
10.46
|
|
|
|
1.45
|
|
|
|
|
|
Second Quarter
|
|
|
9.94
|
|
|
|
2.30
|
|
|
|
|
|
First Quarter
|
|
|
16.44
|
|
|
|
7.24
|
|
US Airways Group has not declared or paid cash or other
dividends on its common stock since 1990 and currently does not
intend to do so. Under the provisions of certain debt
agreements, including our secured loans, our ability to pay
dividends on or repurchase our common stock is restricted. Any
future determination to pay cash dividends will be at the
discretion of our board of directors, subject to applicable
limitations under Delaware law, and will depend upon our results
of operations, financial condition, contractual restrictions and
other factors deemed relevant by our board of directors.
Foreign
Ownership Restrictions
Under current federal law,
non-U.S. citizens
cannot own or control more than 25% of the outstanding voting
securities of a domestic air carrier. We believe that we were in
compliance with this statute during the time period covered by
this report.
29
Stock
Performance Graph
The following stock performance graph and related information
shall not be deemed soliciting material or
filed with the Securities and Exchange Commission,
nor shall such information be incorporated by reference into any
future filings under the Securities Act of 1933 or Securities
Act of 1934, each as amended, except to the extent that we
specifically incorporate it by reference into such filing.
The following stock performance graph compares our cumulative
total shareholder return on an annual basis on our common stock
with the cumulative total return on the Standard and Poors
500 Stock Index and the AMEX Airline Index from
September 27, 2005 (the date our stock began trading on the
NYSE under the symbol LCC after the merger) through
December 31, 2009. The comparison assumes $100 was invested
on September 27, 2005 in US Airways Group common stock and
in each of the foregoing indices and assumes reinvestment of
dividends. The stock performance shown on the graph below
represents historical stock performance and is not necessarily
indicative of future stock price performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/27/2005
|
|
|
12/31/2005
|
|
|
12/31/2006
|
|
|
12/31/2007
|
|
|
12/31/2008
|
|
|
12/31/2009
|
|
|
US Airways Group, Inc.
|
|
$
|
100
|
|
|
$
|
192
|
|
|
$
|
279
|
|
|
$
|
76
|
|
|
$
|
40
|
|
|
$
|
25
|
|
Amex Airline Index
|
|
|
100
|
|
|
|
133
|
|
|
|
142
|
|
|
|
84
|
|
|
|
59
|
|
|
|
82
|
|
S&P 500
|
|
|
100
|
|
|
|
103
|
|
|
|
117
|
|
|
|
121
|
|
|
|
74
|
|
|
|
92
|
|
30
Item 6. Selected
Financial Data
Selected
Consolidated Financial Data of US Airways Group
The selected consolidated financial data presented below under
the captions Consolidated statements of operations
data and Consolidated balance sheet data as of
and for the years ended December 31, 2005 to 2009 are
derived from the consolidated financial statements of US Airways
Group, which have been audited by KPMG LLP, an independent
registered public accounting firm. The full years 2009, 2008,
2007 and 2006 are comprised of the consolidated financial data
of US Airways Group. The 2005 consolidated financial data
presented includes the consolidated results of America West
Holdings for the 269 days through September 27, 2005,
the effective date of the merger, and the consolidated results
of US Airways Group and its subsidiaries, including US Airways,
America West Holdings and AWA, for the 96 days from
September 27, 2005 to December 31, 2005. The selected
consolidated financial data should be read in conjunction with
the consolidated financial statements for the respective
periods, the related notes and the related reports of US Airways
Groups independent registered public accounting firm.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In millions except share and per share data)
|
|
|
Consolidated statements of operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
10,458
|
|
|
$
|
12,118
|
|
|
$
|
11,700
|
|
|
$
|
11,557
|
|
|
$
|
5,069
|
|
Operating expenses (a)
|
|
|
10,340
|
|
|
|
13,918
|
|
|
|
11,167
|
|
|
|
10,999
|
|
|
|
5,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) (a)
|
|
|
118
|
|
|
|
(1,800
|
)
|
|
|
533
|
|
|
|
558
|
|
|
|
(217
|
)
|
Income (loss) before cumulative effect of change in accounting
principle (b)
|
|
|
(205
|
)
|
|
|
(2,215
|
)
|
|
|
423
|
|
|
|
285
|
|
|
|
(337
|
)
|
Cumulative effect of change in accounting principle, net (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
(202
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
|
$
|
423
|
|
|
$
|
286
|
|
|
$
|
(539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share before cumulative effect of
change in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
|
$
|
4.62
|
|
|
$
|
3.30
|
|
|
$
|
(10.70
|
)
|
Diluted
|
|
|
(1.54
|
)
|
|
|
(22.11
|
)
|
|
|
4.52
|
|
|
|
3.20
|
|
|
|
(10.70
|
)
|
Cumulative effect of change in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.01
|
|
|
$
|
(6.41
|
)
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
(6.41
|
)
|
Earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
|
$
|
4.62
|
|
|
$
|
3.31
|
|
|
$
|
(17.11
|
)
|
Diluted
|
|
|
(1.54
|
)
|
|
|
(22.11
|
)
|
|
|
4.52
|
|
|
|
3.21
|
|
|
|
(17.11
|
)
|
Shares used for computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
91,536
|
|
|
|
86,447
|
|
|
|
31,488
|
|
Diluted
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
95,603
|
|
|
|
93,821
|
|
|
|
31,488
|
|
Consolidated balance sheet data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,454
|
|
|
$
|
7,214
|
|
|
$
|
8,040
|
|
|
$
|
7,576
|
|
|
$
|
6,964
|
|
Long-term obligations, less current maturities (d)
|
|
|
4,643
|
|
|
|
4,281
|
|
|
|
3,654
|
|
|
|
3,454
|
|
|
|
3,366
|
|
Total stockholders equity (deficit)
|
|
|
(355
|
)
|
|
|
(494
|
)
|
|
|
1,455
|
|
|
|
990
|
|
|
|
465
|
|
|
|
|
(a) |
|
The 2009 period included $375 million of net unrealized
gains on fuel hedging instruments, $22 million in aircraft
costs as a result of our previously announced capacity
reductions, $16 million in non-cash impairment charges due
to the decline in fair value of certain indefinite lived
intangible assets associated with our international routes,
$11 million in severance and other charges, $6 million
in costs incurred related to our liquidity improvement program
and $3 million in non-cash charges related to the decline
in fair value of certain Express spare parts. |
|
|
|
|
|
The 2008 period included a $622 million non-cash charge to
write off all of the goodwill created by the merger of US
Airways Group and America West Holdings in September 2005, as
well as $496 million of net |
31
|
|
|
|
|
unrealized losses on fuel hedging instruments. In addition, the
2008 period included $35 million of merger-related
transition expenses, $18 million in non-cash charges
related to the decline in fair value of certain spare parts
associated with our Boeing 737 aircraft fleet and, as a result
of our capacity reductions, $14 million in aircraft costs
and $9 million in severance charges. |
|
|
|
The 2007 period included $187 million of net unrealized
gains on fuel hedging instruments, $7 million in tax
credits due to an IRS rule change allowing us to recover certain
fuel usage tax amounts for years
2003-2006,
$9 million of insurance settlement proceeds related to
business interruption and property damages incurred as a result
of Hurricane Katrina in 2005 and a $5 million Piedmont
pilot pension curtailment gain related to the FAA-mandated pilot
retirement age change. These credits were offset by
$99 million of merger-related transition expenses, a
$99 million charge for an increase to long-term disability
obligations for US Airways pilots as a result of the
FAA-mandated pilot retirement age change and $5 million in
charges related to reduced flying from Pittsburgh. |
|
|
|
The 2006 period included $131 million of merger-related
transition expenses and $70 million of net unrealized
losses on fuel hedging instruments, offset by a $90 million
gain associated with the return of equipment deposits upon
forgiveness of a loan and $14 million of gains associated
with the settlement of bankruptcy claims. |
|
|
|
The 2005 period included $28 million of merger-related
transition expenses, a $27 million loss on the
sale-leaseback of six Boeing
737-300
aircraft and two Boeing 757 aircraft, $7 million of
power-by-the-hour
program penalties associated with the return of certain leased
aircraft, $1 million of severance for terminated employees
resulting from the merger, a $1 million charge related to
aircraft removed from service and a $50 million charge
related to an amended Airbus purchase agreement, along with the
write off of $7 million in capitalized interest. The
$50 million charge was paid by means of set-off against
existing equipment purchase deposits held by Airbus. The 2005
period also included $4 million of net unrealized gains on
fuel hedging instruments. |
|
(b) |
|
The 2009 period included $49 million in non-cash charges
associated with the sale of 10 E190 aircraft and write off of
related debt discount and issuance costs, $10 million in
other-than-temporary
non-cash impairment charges for our investments in auction rate
securities and a $2 million non-cash asset impairment
charge. In addition, the period included a tax benefit of
$38 million. Of this amount, $21 million was due to a
non-cash income tax benefit related to gains recorded within
other comprehensive income. In addition, we recorded a
$14 million tax benefit related to a legislation change
allowing us to carry back 100% of 2008 Alternative Minimum Tax
liability (AMT) net operating losses, resulting in
the recovery of AMT amounts paid in prior years. We also
recognized a $3 million tax benefit related to the reversal
of the deferred tax liability associated with the indefinite
lived intangible assets that were impaired during 2009. |
|
|
|
The 2008 period included $214 million in
other-than-temporary
non-cash impairment charges for our investments in auction rate
securities as well as $7 million in write offs of debt
discount and debt issuance costs in connection with the
refinancing of certain aircraft equipment notes and certain loan
prepayments, offset by $8 million in gains on forgiveness
of debt. |
|
|
|
The 2007 period included an $18 million write off of debt
issuance costs in connection with the refinancing of the
$1.25 billion senior secured credit facility with General
Electric Capital Corporation (GECC), referred to as
the GE loan, in March 2007 and $10 million in
other-than-temporary
non-cash impairment charges for our investments in auction rate
securities, offset by a $17 million gain recognized on the
sale of stock in ARINC Incorporated. In addition, the period
also included a non-cash expense for income taxes of
$7 million related to the utilization of net operating loss
carryforwards (NOLs) acquired from US Airways. The
valuation allowance associated with these acquired NOLs was
recognized as a reduction of goodwill rather than a reduction in
tax expense. |
|
|
|
The 2006 period included a non-cash expense for income taxes of
$85 million related to the utilization of NOLs acquired
from US Airways. In addition, the period included
$6 million of prepayment penalties and $5 million in
accelerated amortization of debt issuance costs in connection
with the refinancing of the loan previously guaranteed by the
Air Transportation Stabilization Board (ATSB) and
two loans previously provided to AWA by GECC, $17 million
in payments in connection with the inducement to convert
$70 million of US Airways Groups 7% Senior
Convertible Notes to common stock and a $14 million |
32
|
|
|
|
|
write off of debt discount and issuance costs associated with
those converted notes, offset by $8 million of interest
income earned by AWA on certain prior year federal income tax
refunds. |
|
|
|
The 2005 period included an $8 million charge related to
the write off of the unamortized value of the ATSB warrants upon
their repurchase in October 2005 and an aggregate
$2 million write off of debt issuance costs associated with
the exchange of AWAs 7.25% Senior Exchangeable Notes
due 2023 and retirement of a portion of the loan formerly
guaranteed by the ATSB. In the fourth quarter of 2005, which was
subsequent to the effective date of the merger, US Airways
recorded $4 million of
mark-to-market
gains attributable to stock options in Sabre Inc.
(Sabre) and warrants in a number of
e-commerce
companies. |
|
(c) |
|
The 2006 period included a $1 million benefit which
represents the cumulative effect on the accumulated deficit of
the adoption of new share-based payment accounting guidance. The
adjustment reflects the impact of estimating future forfeitures
for previously recognized compensation expense. |
|
|
|
The 2005 period included a $202 million adjustment which
represents the cumulative effect on the accumulated deficit of
the adoption of the direct expense method of accounting for
major scheduled airframe, engine and certain component overhaul
costs as of January 1, 2005. |
|
(d) |
|
Includes debt, capital leases, postretirement benefits other
than pensions and employee benefit liabilities and other. |
Selected
Consolidated Financial Data of US Airways
The selected consolidated financial data presented below under
the captions Consolidated statements of operations
data and Consolidated balance sheet data as of
and for the years ended December 31, 2009, 2008, 2007 and
2006, three months ended December 31, 2005 and nine months
ended September 30, 2005 are derived from the consolidated
financial statements of US Airways, which have been audited by
KPMG LLP, an independent registered public accounting firm. In
2007, US Airways Group contributed 100% of its equity interest
in America West Holdings, the parent company of AWA, to US
Airways in connection with the combination of all mainline
operations under one FAA operating certificate. This
contribution is reflected in US Airways consolidated
financial statements as though the transfer had occurred at the
time of US Airways emergence from bankruptcy at the end of
September 2005. Thus, the full years 2009, 2008, 2007 and 2006
and three months ended December 31, 2005 are comprised of
the consolidated financial data of US Airways and America West
Holdings. The nine months ended September 30, 2005
consolidated financial data presented include the results of
only US Airways. The selected consolidated financial data should
be read in conjunction with the consolidated financial
statements for the respective periods, the related notes and the
related reports of US Airways independent registered
public accounting firm.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
Successor Company (a)
|
|
|
Company (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
|
(In millions)
|
|
|
Consolidated statements of operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
10,609
|
|
|
$
|
12,244
|
|
|
$
|
11,813
|
|
|
$
|
11,692
|
|
|
$
|
2,589
|
|
|
$
|
5,452
|
|
Operating expenses (b)
|
|
|
10,487
|
|
|
|
14,017
|
|
|
|
11,289
|
|
|
|
11,135
|
|
|
|
2,772
|
|
|
|
5,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) (b)
|
|
|
122
|
|
|
|
(1,773
|
)
|
|
|
524
|
|
|
|
557
|
|
|
|
(183
|
)
|
|
|
(142
|
)
|
Income (loss) before cumulative effect of change in accounting
principle (c)
|
|
|
(140
|
)
|
|
|
(2,148
|
)
|
|
|
478
|
|
|
|
348
|
|
|
|
(256
|
)
|
|
|
280
|
|
Cumulative effect of change in accounting principle, net (d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(140
|
)
|
|
$
|
(2,148
|
)
|
|
$
|
478
|
|
|
$
|
349
|
|
|
$
|
(256
|
)
|
|
$
|
280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Company (a)
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In millions)
|
|
|
Consolidated balance sheet data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,123
|
|
|
$
|
6,954
|
|
|
$
|
7,787
|
|
|
$
|
7,351
|
|
|
$
|
6,763
|
|
Long-term obligations, less current maturities (e)
|
|
|
3,266
|
|
|
|
2,867
|
|
|
|
2,013
|
|
|
|
2,131
|
|
|
|
3,238
|
|
Total stockholders equity (deficit)
|
|
|
255
|
|
|
|
(221
|
)
|
|
|
1,850
|
|
|
|
(461
|
)
|
|
|
(810
|
)
|
|
|
|
(a) |
|
In connection with emergence from bankruptcy in September 2005,
US Airways adopted fresh-start reporting. As a result of the
application of fresh-start reporting, the financial statements
after September 30, 2005 are not comparable with the
financial statements from periods prior to September 30,
2005. References to Successor Company refer to US
Airways on and after September 30, 2005, after the
application of fresh-start reporting for the bankruptcy. |
|
(b) |
|
The 2009 period included $375 million of net unrealized
gains on fuel hedging instruments, $22 million in aircraft
costs as a result of US Airways previously announced
capacity reductions, $16 million in non-cash impairment
charges due to the decline in fair value of certain indefinite
lived intangible assets associated with US Airways
international routes, $11 million in severance and other
charges and $6 million in costs incurred related to US
Airways liquidity improvement program. |
|
|
|
The 2008 period included a $622 million non-cash charge to
write off all of the goodwill created by the merger of US
Airways Group and America West Holdings in September 2005, as
well as $496 million of net unrealized losses on fuel
hedging instruments. In addition, the 2008 period included
$35 million of merger-related transition expenses,
$18 million in non-cash charges related to the decline in
fair value of certain spare parts associated with US
Airways Boeing 737 aircraft fleet and, as a result of US
Airways capacity reductions, $14 million in aircraft
costs and $9 million in severance charges. |
|
|
|
The 2007 period included $187 million of net unrealized
gains on fuel hedging instruments, $7 million in tax
credits due to an IRS rule change allowing US Airways to recover
certain fuel usage tax amounts for years
2003-2006
and $9 million of insurance settlement proceeds related to
business interruption and property damages incurred as a result
of Hurricane Katrina in 2005. These credits were offset by
$99 million of merger-related transition expenses, a
$99 million charge for an increase to long-term disability
obligations for US Airways pilots as a result of the
FAA-mandated pilot retirement age change and $4 million in
charges related to reduced flying from Pittsburgh. |
|
|
|
The 2006 period included $131 million of merger-related
transition expenses and $70 million of net unrealized
losses on fuel hedging instruments, offset by a $90 million
gain associated with the return of equipment deposits upon
forgiveness of a loan and $3 million of gains associated
with the settlement of bankruptcy claims. |
|
|
|
The period for the three months ended December 31, 2005
included $69 million of net unrealized losses on fuel
hedging instruments, $28 million of merger-related
transition expenses, $7 million of
power-by-the-hour
program penalties associated with the return of certain leased
aircraft and $1 million of severance costs for terminated
employees resulting from the merger. |
|
(c) |
|
The 2009 period included $49 million in non-cash charges
associated with the sale of 10 E190 aircraft and write off of
related debt discount and issuance costs, $10 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities and a $2 million non-cash asset
impairment charge. In addition, the period included a tax
benefit of $38 million. Of this amount, $21 million
was due to a non-cash income tax benefit related to gains
recorded within other comprehensive income. In addition, US
Airways recorded a $14 million tax benefit related to a
legislation change allowing it to carry back 100% of
2008 AMT net operating losses, resulting in the recovery of
AMT amounts paid in prior years. US Airways also recognized a
$3 million tax benefit related to the reversal of the
deferred tax liability associated with the indefinite lived
intangible assets that were impaired during 2009. |
|
|
|
The 2008 period included $214 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities as well as $6 million in write offs
of debt discount and debt |
34
|
|
|
|
|
issuance costs in connection with the refinancing of certain
aircraft equipment notes and a loan prepayment, offset by
$8 million in gains on forgiveness of debt. |
|
|
|
The 2007 period included a $17 million gain recognized on
the sale of stock in ARINC Incorporated, offset by
$10 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities. In addition, the period also included a
non-cash expense for income taxes of $7 million related to
the utilization of NOLs that were generated prior to the merger.
The decrease in the corresponding valuation allowance was
recognized as a reduction of goodwill rather than a reduction in
tax expense. |
|
|
|
The 2006 period included a non-cash expense for income taxes of
$85 million related to the utilization of NOLs that were
generated prior to the merger. In addition, the period included
$6 million of prepayment penalties and $5 million in
accelerated amortization of debt issuance costs in connection
with the refinancing of the loan previously guaranteed by the
ATSB and two loans previously provided to AWA by GECC, offset by
$8 million of interest income earned by AWA on certain
prior year federal income tax refunds. |
|
|
|
The period for the three months ended December 31, 2005
included an $8 million charge related to the write off of
the unamortized value of the ATSB warrants upon their repurchase
in October 2005 and an aggregate $2 million write off of
debt issuance costs associated with the exchange of AWAs
7.25% Senior Exchangeable Notes due 2023 and retirement of
a portion of the loan formerly guaranteed by the ATSB. US
Airways also recorded in this period $4 million of
mark-to-market
gains attributable to stock options in Sabre and warrants in a
number of
e-commerce
companies. |
|
|
|
The nine months ended September 30, 2005 included
reorganization items, which amounted to a $636 million net
gain. |
|
(d) |
|
The 2006 period included a $1 million benefit which
represents the cumulative effect on the accumulated deficit of
the adoption of new share-based payment accounting guidance. The
adjustment reflects the impact of estimating future forfeitures
for previously recognized compensation expense. |
|
(e) |
|
Includes debt, capital leases, postretirement benefits other
than pensions and employee benefit liabilities and other. |
Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations
Background
US Airways Group is a holding company whose primary business
activity is the operation of a major network air carrier through
its wholly owned subsidiaries US Airways, Piedmont, PSA, MSC and
AAL. Effective upon US Airways Groups emergence from
bankruptcy on September 27, 2005, US Airways Group merged
with America West Holdings, with US Airways Group as the
surviving corporation.
We operate the fifth largest airline in the United States as
measured by domestic RPMs and ASMs. We have hubs in Charlotte,
Philadelphia and Phoenix and a focus city at Ronald Reagan
Washington National Airport. We offer scheduled passenger
service on more than 3,000 flights daily to more than 190
communities in the United States, Canada, Mexico, Europe, the
Middle East, the Caribbean, Central and South America. We also
have an established East Coast route network, including the US
Airways Shuttle service, with a substantial presence at
Washington National Airport. We had approximately
51 million passengers boarding our mainline flights in
2009. As of December 31, 2009, we operated 349 mainline
jets and are supported by our regional airline subsidiaries and
affiliates operating as US Airways Express either under capacity
purchase or prorate agreements, which operated approximately 236
regional jets and 60 turboprops.
2009 Year
in Review
The U.S.
Airline Industry
The airline industry in the United States was severely impacted
in 2009 by the global economic recession. Passenger demand, as
reported by the Air Transport Association (ATA),
declined severely in 2009 as compared to 2008. Despite capacity
cuts put in place to help offset the decline in demand for air
travel, industry revenues were adversely affected by severe fare
discounting by carriers to stimulate demand. Business bookings,
which typically drive stronger yields, declined sharply in 2009
as companies cut costs by reducing their travel budgets in
response to
35
the economic recession. ATA reported yields for
U.S. airlines declined by 13% in 2009 as compared to 2008
while U.S. airline passenger revenues were down 18% for
fiscal year 2009, which represented the largest decline on
record, exceeding the 14% decline observed from 2000 to 2001.
International markets were more severely impacted by the
economic slowdown than domestic markets. This was a result of
international traffics greater reliance on business
travel, particularly premium business and first class seating,
to drive profitability. Additionally, there was capacity
expansion overseas during the past several years, which the
U.S. industry reduced by only 6% in 2009 as compared to
domestic capacity reductions of 7%. The contraction of business
spending also significantly impacted cargo demand.
During times of weak travel demand, falling fuel prices have
historically served as a natural hedge. Although the price of
crude oil was down substantially in 2009 from its record high of
$147 per barrel in July 2008, it remained volatile and did not
fully offset the negative economic impact to passenger demand.
During 2009, the price of crude oil on a per barrel basis ranged
from a high of $81.03 to a low of $34.03, and closed at $79.39
on December 31, 2009. The volatility in oil prices made the
use of hedging positions by airlines to contain fuel costs
either expensive (call options) or risky due to counterparty
cash collateral requirements (collars and swaps).
Accordingly, in 2009 the industry focused on conserving and
building cash and matching capacity to demand. In the latter
part of 2009, credit and equity markets were increasingly open
to airlines and several U.S. airlines raised cash to
enhance liquidity through a number of initiatives such as
traditional public stock and debt issuances, asset sales, asset
sale-leasebacks and transactions with co-branded credit card
issuers.
US
Airways
Financial
Results
US Airways Groups net loss for 2009 was $205 million,
or a loss of $1.54 per share, as compared to a net loss of
$2.22 billion, or $22.11 per share, in 2008. Similar to
other carriers in the U.S. airline industry, we experienced
significant declines in revenues as a result of the global
economic recession, which more than offset the benefits of
reduced fuel costs during 2009.
Revenue
The weak demand environment caused by the economic recession
resulted in a $1.81 billion, or 16.3%, decrease in mainline
and Express passenger revenues in 2009 on lower capacity as
compared to 2008. Our decline in passenger revenues was lower
than the U.S. industry average of 18% reported by ATA as
relative to the other U.S. legacy or big five
hub-and-spoke
carriers, our larger domestic presence meant our revenues were
less exposed to the more adverse effects of the economic
recession experienced in international markets. Our
international capacity represents approximately 22% of our total
ASMs. The industry took more aggressive corrective capacity
reductions domestically than it did internationally in 2009.
Our revenues also benefited from our new revenue initiatives
which generated $424 million in ancillary revenues for
2009. Given our shorter length of haul and domestic focus, we
believe these initiatives provided greater benefit to us than
our competitors. Ancillary revenues include first and second
checked bag service fees, processing fees for travel awards
issued through our Dividend Miles frequent traveler program, our
new Choice Seats program, and call center/airport ticketing
fees. As a result of new ancillary revenues, while our mainline
and Express PRASM was 10.88 cents in 2009, a 12.4% decline as
compared to 12.42 cents in 2008, our total revenue per available
seat mile (RASM) declined by a lower amount. RASM
was 12.29 cents in 2009, as compared to 13.6 cents in 2008,
representing only a 9.6% decline.
Fuel
The average mainline and Express price per gallon of fuel
decreased 44.8% to $1.76 in 2009 from $3.18 in 2008. As a
result, our mainline and Express fuel expense for 2009 was
$2.28 billion, or 48%, lower than the 2008 period on 4.5%
lower capacity. Since the third quarter of 2008, we have not
entered into any new fuel hedging transactions and, as of
December 31, 2009, we had no remaining outstanding fuel
hedging contracts. Net losses associated with fuel hedging
transactions were $7 million in 2009, a decline of
$349 million from 2008. The year ended
36
December 31, 2009 included $382 million of net
realized losses, offset by $375 million of net unrealized
gains. The 2009 net unrealized gains represent the reversal
of prior year unrealized losses related to the hedge
transactions settling during the current year.
Capacity
and Cost Control
We remain committed to maintaining our low cost structure, which
we believe is necessary in an industry whose economic prospects
are heavily dependent upon two variables we cannot control: the
health of the economy and the price of fuel. In 2009, we
continued our practice of minimizing and deferring discretionary
expenditures whenever possible. We also controlled costs by
continuing to run a good operation. See the Customer
Service section below for a further discussion. Although
there are significant ongoing fixed costs that do not vary with
changes in capacity, we effectively managed our mainline
operating cost per available seat mile (CASM).
Excluding the effects of fuel and fuel hedging transactions as
well as the $622 million non-cash charge recorded in 2008
to write off all of the goodwill created by the merger of US
Airways Group and America West Holdings, our mainline CASM was
relatively constant year over year. Mainline CASM decreased 3.6
cents, or 24.6%, to 11.06 cents in 2009 from 14.66 cents in
2008. Decreases in fuel and fuel hedging costs represented 2.71
cents, or 75.4%, of the CASM decrease, while the non-cash charge
to write off goodwill represented 0.84 cents, or 23.3%, of the
year-over-year
decline.
To address the weak revenue environment in 2009, we continued to
focus on matching capacity to demand and, as a result, our total
RPMs decreased 4.2% on 4.5% lower capacity as compared to 2008.
We achieved our 2009 capacity reductions through the sale of
aircraft, return of aircraft to lessors and reductions in
aircraft utilization. As a result of this reduced flying, we
eliminated approximately 1,000 positions, including 400 flight
attendants and 600 airport employees, thereby reducing salary
expense in 2009 and going forward.
Customer Service
In 2009, we continued our commitment to running a successful
airline. One of the important ways we do this is by taking care
of our customers. We believe that our focus on excellent
customer service in every aspect of our operations, including
personnel, flight equipment, in-flight and ancillary amenities,
on-time performance, flight completion ratios and baggage
handling, will strengthen customer loyalty and attract new
customers.
Our 2009 on-time performance rate was 80.9% and ranked second
among the big five
hub-and-spoke
carriers as measured by the DOT Air Travel Consumer Report. Our
mishandled baggage ratio for 2009 improved 36.5% as compared to
2008. Our 2009 mishandled baggage ratio of 3.03 also ranked
second among the big five
hub-and-spoke
carriers as measured by the DOT Air Travel Consumer Report. The
combination of continued strong on-time performance and fewer
mishandled bags contributed to 34.8% fewer reported customer
complaints to the DOT in 2009 as compared to 2008.
We reported the following combined operating statistics to the
DOT for mainline operations for the years ended
December 31, 2009, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full Year
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
On-time performance (a)
|
|
|
80.9
|
|
|
|
80.1
|
|
|
|
68.7
|
|
Completion factor (b)
|
|
|
98.8
|
|
|
|
98.5
|
|
|
|
98.2
|
|
Mishandled baggage (c)
|
|
|
3.03
|
|
|
|
4.77
|
|
|
|
8.47
|
|
Customer complaints (d)
|
|
|
1.31
|
|
|
|
2.01
|
|
|
|
3.16
|
|
|
|
|
(a) |
|
Percentage of reported flight operations arriving on time as
defined by the DOT. |
|
(b) |
|
Percentage of scheduled flight operations completed. |
|
(c) |
|
Rate of mishandled baggage reports per 1,000 passengers. |
|
(d) |
|
Rate of customer complaints filed with the DOT per 100,000
passengers. |
37
Liquidity
Position
As of December 31, 2009, our cash, cash equivalents,
investments in marketable securities and restricted cash were
$1.98 billion, of which $480 million was restricted.
Our investments in marketable securities included
$203 million of auction rate securities that are classified
as noncurrent assets on our consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Cash, cash equivalents and short-term investments in marketable
securities
|
|
$
|
1,299
|
|
|
$
|
1,054
|
|
Short and long-term restricted cash
|
|
|
480
|
|
|
|
726
|
|
Long-term investments in marketable securities
|
|
|
203
|
|
|
|
187
|
|
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents, investments in marketable
securities and restricted cash
|
|
$
|
1,982
|
|
|
$
|
1,967
|
|
|
|
|
|
|
|
|
|
|
In addition to our capacity and cost control initiatives
described above, we took further action in 2009 to strengthen
and preserve our liquidity position. In the first nine months of
2009, we completed financing transactions generating
$486 million. These transactions included net proceeds from
public offerings of common stock and convertible notes of
$66 million and $168 million, respectively, in May,
and $137 million from an additional public offering of
common stock in September. The remaining $115 million
included proceeds from additional loans under a spare parts loan
agreement, a loan secured by certain airport landing slots and
an unsecured financing with one of our third-party Express
carriers.
In November 2009, we completed a series of transactions with key
business partners designed to improve our near-term and future
liquidity. Our actions included the deferral of 54 Airbus
aircraft previously scheduled for delivery between 2010 and 2012
that are now to be delivered in 2013 and beyond. These deferral
arrangements will reduce our aircraft capital expenditures over
the next three years by approximately $2.5 billion and
reduce near- and medium-term obligations to Airbus and others by
approximately $132 million. In addition to the aircraft
deferral, we arranged credit facilities in the amount of
$95 million and $180 million of aircraft financing
commitments for the 2010 deliveries. Also, we agreed with
Barclays Bank Delaware, our co-branded credit card provider, to
permanently lower the monthly unrestricted cash condition
precedent for the advance purchase of frequent flyer miles and
defer for 14 months the amortization of $200 million
advanced in connection with the previous purchase of miles. In
the aggregate, these transactions improved year-end 2009
liquidity by approximately $150 million and will generate
approximately $450 million of projected liquidity
improvements by the end of 2010.
Strategic
Initiatives
In 2009, we took the following actions which we believe will
position us for success and help return us to profitability as
the economy improves:
Delta
Slot Transaction
In August 2009, US Airways Group and US Airways entered into a
mutual asset purchase and sale agreement with Delta. Pursuant to
the agreement, US Airways would transfer to Delta certain assets
related to flight operations at LaGuardia Airport in New York,
including 125 pairs of slots currently used to provide US
Airways Express service at LaGuardia. Delta would transfer to US
Airways certain assets related to flight operations at
Washington National Airport, including 42 pairs of slots, and
the authority to serve Sao Paulo, Brazil and Tokyo, Japan. One
slot equals one take-off or landing, and each pair of slots
equals one roundtrip flight. The agreement is structured as two
simultaneous asset sales and is expected to be cash neutral to
US Airways. The closing of the transactions under the agreement
is subject to certain closing conditions, including approvals
from a number of government agencies, including the
U.S. Department of Justice, the DOT, the FAA and The Port
Authority of New York and New Jersey. If approved, this
transaction will significantly increase our capacity in the
Washington, D.C. market and improve profitability.
On February 9, 2010, the DOT issued a proposed order
conditionally approving the transaction. The proposed order,
which is subject to a 30-day comment period, would require the
airlines to divest 20 of the 125 slot pairs involved at
LaGuardia and 14 of the 42 slot pairs at Washington National.
Delta and we are currently reviewing the
38
DOTs proposed order to determine next steps. However, we
expect that if this order is implemented as proposed the
transaction will not go forward.
Operational
Realignment
In October 2009, we announced the realignment of our operations
to focus on our core network strengths, which include our hubs
in Charlotte, Philadelphia and Phoenix and our focus city at
Washington National Airport. These four cities, as well as our
popular hourly Shuttle service between LaGuardia, Boston and
Washington National airports, will serve as the cornerstone of
our network and by the end of 2010 are expected to represent 99%
of our ASMs versus approximately 93% in 2009. Changes to
facilitate this strategy include reducing daily departures from
Las Vegas, closing stations in Colorado Springs and Wichita,
redeploying our E190 fleet to routes between Boston and
Philadelphia and the Boston-LaGuardia leg of the Shuttle,
suspending five European destinations, returning our
Philadelphia-Beijing route authority, rightsizing our crew bases
at our hubs and focus city and closing crew bases in Boston,
LaGuardia and Las Vegas. In connection with the realignment of
our operations, we will reduce staffing by approximately 1,000
positions across our system during the first half of 2010. These
reductions include approximately 600 airport passenger and ramp
service positions, approximately 200 pilot positions and
approximately 150 flight attendant positions. We believe that by
concentrating on our strengths and eliminating unprofitable
flying we will be better positioned to return US Airways to
profitability.
2010
Outlook
As we begin 2010, it is difficult to predict the ongoing effects
of the global economic recession. We have taken numerous actions
to strengthen our current and future liquidity position. We have
significantly reduced our required capital expenditures for 2010
through 2012 and eliminated our need to access aircraft finance
markets in 2010. We believe that these actions coupled with our
operational realignment have well positioned us as the economy
recovers.
US
Airways Groups Results of Operations
In 2009, we realized operating income of $118 million and a
loss before income taxes of $243 million. We experienced
significant declines in revenues as a result of the global
economic recession, which more than offset the benefits of
reduced fuel costs during 2009. Our 2009 results were also
impacted by recognition of the following items:
|
|
|
|
|
$382 million of net realized losses on settled fuel hedging
instruments, offset by $375 million of net unrealized gains
resulting from the application of
mark-to-market
accounting for changes in the fair value of fuel hedging
instruments. In
mark-to-market
accounting, the unrealized losses recognized in prior periods
are reversed as hedge transactions are settled in the current
period. We were required to use
mark-to-market
accounting as our fuel hedging instruments did not meet the
requirements for hedge accounting. If these instruments had
qualified for hedge accounting treatment, any unrealized gains
or losses would have been recorded in other comprehensive
income, a component of stockholders equity;
|
|
|
|
$55 million of net special charges consisting of
$22 million in aircraft costs as a result of our previously
announced capacity reductions, $16 million in non-cash
impairment charges due to the decline in fair value of certain
indefinite lived intangible assets associated with our
international routes, $11 million in severance and other
charges and $6 million in costs incurred related to our
liquidity improvement program;
|
|
|
|
$3 million in non-cash charges related to the decline in
fair value of certain Express spare parts; and
|
|
|
|
$49 million in non-cash charges associated with the sale of
10 Embraer 190 aircraft and write off of related debt discount
and issuance costs, $10 million in
other-than-temporary
non-cash impairment charges for our investments in auction rate
securities and a $2 million non-cash asset impairment
charge, all included in nonoperating expense, net.
|
In 2008, we realized an operating loss of $1.8 billion and
a loss before income taxes of $2.22 billion. The 2008 loss
was driven by an average mainline and Express price per gallon
of fuel of $3.18 as well as a $622 million non-
39
cash charge to write off all of the goodwill created by the
merger of US Airways Group and America West Holdings in
September 2005. Our 2008 results were also impacted by
recognition of the following items:
|
|
|
|
|
$496 million of net unrealized losses resulting from the
application of
mark-to-market
accounting for changes in the fair value of fuel hedging
instruments, offset by $140 million of net realized gains
on settled fuel hedge transactions;
|
|
|
|
$76 million of net special charges consisting of
$35 million of merger-related transition expenses,
$18 million in non-cash charges related to the decline in
fair value of certain spare parts associated with our Boeing 737
aircraft fleet and, as a result of our capacity reductions,
$14 million in aircraft costs and $9 million in
severance charges; and
|
|
|
|
$214 million in
other-than-temporary
non-cash impairment charges for our investments in auction rate
securities as well as $7 million in write offs of debt
discount and debt issuance costs in connection with the
refinancing of certain aircraft equipment notes and certain loan
prepayments, offset by $8 million in gains on forgiveness
of debt, all included in nonoperating expense, net.
|
In 2007, we realized operating income of $533 million and
income before income taxes of $430 million. Our 2007
results were impacted by recognition of the following items:
|
|
|
|
|
$187 million of net unrealized gains resulting from the
application of
mark-to-market
accounting for changes in the fair value of fuel hedging
instruments as well as $58 million of net realized gains on
settled fuel hedge transactions;
|
|
|
|
$99 million of net special charges due to merger-related
transition expenses;
|
|
|
|
a $99 million charge for an increase to long-term
disability obligations for US Airways pilots as a result
of a change in the FAA-mandated retirement age for pilots from
60 to 65;
|
|
|
|
$7 million in tax credits due to an IRS rule change
allowing us to recover certain fuel usage tax amounts for years
2003-2006,
$9 million of insurance settlement proceeds related to
business interruption and property damages incurred as a result
of Hurricane Katrina in 2005 and a $5 million Piedmont
pilot pension curtailment gain related to the FAA-mandated pilot
retirement age change discussed above. These gains were offset
in part by $5 million in charges related to reduced flying
from Pittsburgh; and
|
|
|
|
an $18 million write off of debt issuance costs in
connection with the refinancing of the $1.25 billion GE
loan in March 2007 and $10 million in
other-than-temporary
non-cash impairment charges for our investments in auction rate
securities, offset by a $17 million gain recognized on the
sale of stock in ARINC Incorporated, all included in
nonoperating expense, net.
|
We reported a loss in 2009, which increased our NOLs. As of
December 31, 2009, we have approximately $2.13 billion
of gross NOLs to reduce future federal taxable income. All of
our NOLs are available to reduce federal taxable income in the
calendar year 2010. The NOLs expire during the years 2022
through 2029.
Our net deferred tax assets, which include $2.06 billion of
the NOLs, have been subject to a full valuation allowance. We
also have approximately $90 million of tax-effected state
NOLs at December 31, 2009. At December 31, 2009, the
federal and state valuation allowance is $546 million and
$77 million, respectively, all of which will reduce future
tax expense when recognized.
For the year ended December 31, 2009, we recorded a tax
benefit of $38 million. Of this amount, $21 million
was due to a non-cash income tax benefit related to gains
recorded within other comprehensive income. In addition, we
recorded a $14 million tax benefit related to a legislation
change allowing us to carry back 100% of 2008 AMT net
operating losses, resulting in the recovery of AMT amounts paid
in prior years. We also recognized a $3 million tax benefit
related to the reversal of the deferred tax liability associated
with the indefinite lived intangible assets that were impaired
during 2009.
For the year ended December 31, 2008, we reported a loss,
which increased our NOLs, and we did not record a tax provision.
40
For the year ended December 31, 2007, we utilized NOLs to
reduce our income tax obligation. Utilization of these NOLs
resulted in a corresponding decrease in the valuation allowance.
As this valuation allowance was established through the
recognition of tax expense, the decrease in valuation allowance
offsets the tax provision dollar for dollar. We recognized
$7 million of non-cash state income tax expense for the
year ended December 31, 2007, as we utilized NOLs that were
generated by US Airways prior to the merger. As these were
acquired NOLs, the accounting rules in place at that time
required that the decrease in the valuation allowance associated
with these NOLs reduce goodwill instead of the provision for
income taxes.
The table below sets forth our selected mainline and Express
operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
Percent
|
|
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
Change
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009-2008
|
|
|
2008-2007
|
|
|
Mainline
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
57,889
|
|
|
|
60,570
|
|
|
|
61,262
|
|
|
|
(4.4
|
)
|
|
|
(1.1
|
)
|
Available seat miles (millions) (b)
|
|
|
70,725
|
|
|
|
74,151
|
|
|
|
75,842
|
|
|
|
(4.6
|
)
|
|
|
(2.2
|
)
|
Passenger load factor (percent) (c)
|
|
|
81.9
|
|
|
|
81.7
|
|
|
|
80.8
|
|
|
|
0.2
|
pts
|
|
|
0.9
|
pts
|
Yield (cents) (d)
|
|
|
11.66
|
|
|
|
13.51
|
|
|
|
13.28
|
|
|
|
(13.7
|
)
|
|
|
1.7
|
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
9.55
|
|
|
|
11.04
|
|
|
|
10.73
|
|
|
|
(13.5
|
)
|
|
|
2.9
|
|
Operating cost per available seat mile (cents) (f)
|
|
|
11.06
|
|
|
|
14.66
|
|
|
|
11.30
|
|
|
|
(24.6
|
)
|
|
|
29.7
|
|
Passenger enplanements (thousands) (g)
|
|
|
51,016
|
|
|
|
54,820
|
|
|
|
57,871
|
|
|
|
(6.9
|
)
|
|
|
(5.3
|
)
|
Departures (thousands)
|
|
|
461
|
|
|
|
496
|
|
|
|
525
|
|
|
|
(7.1
|
)
|
|
|
(5.5
|
)
|
Aircraft at end of period
|
|
|
349
|
|
|
|
354
|
|
|
|
356
|
|
|
|
(1.4
|
)
|
|
|
(0.6
|
)
|
Block hours (thousands) (h)
|
|
|
1,224
|
|
|
|
1,300
|
|
|
|
1,343
|
|
|
|
(5.8
|
)
|
|
|
(3.3
|
)
|
Average stage length (miles) (i)
|
|
|
972
|
|
|
|
955
|
|
|
|
925
|
|
|
|
1.8
|
|
|
|
3.3
|
|
Average passenger journey (miles) (j)
|
|
|
1,637
|
|
|
|
1,554
|
|
|
|
1,489
|
|
|
|
5.4
|
|
|
|
4.4
|
|
Fuel consumption (gallons in millions)
|
|
|
1,069
|
|
|
|
1,142
|
|
|
|
1,195
|
|
|
|
(6.4
|
)
|
|
|
(4.4
|
)
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
1.74
|
|
|
|
3.17
|
|
|
|
2.20
|
|
|
|
(45.0
|
)
|
|
|
43.9
|
|
Full time equivalent employees at end of period
|
|
|
31,333
|
|
|
|
32,671
|
|
|
|
34,437
|
|
|
|
(4.1
|
)
|
|
|
(5.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express (k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
10,570
|
|
|
|
10,855
|
|
|
|
10,332
|
|
|
|
(2.6
|
)
|
|
|
5.1
|
|
Available seat miles (millions) (b)
|
|
|
14,367
|
|
|
|
14,953
|
|
|
|
14,159
|
|
|
|
(3.9
|
)
|
|
|
5.6
|
|
Passenger load factor (percent) (c)
|
|
|
73.6
|
|
|
|
72.6
|
|
|
|
73.0
|
|
|
|
1.0
|
pts
|
|
|
(0.4
|
) pts
|
Yield (cents) (d)
|
|
|
23.68
|
|
|
|
26.52
|
|
|
|
26.12
|
|
|
|
(10.7
|
)
|
|
|
1.6
|
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
17.42
|
|
|
|
19.26
|
|
|
|
19.06
|
|
|
|
(9.5
|
)
|
|
|
1.0
|
|
Operating cost per available seat mile (cents) (f)
|
|
|
17.53
|
|
|
|
20.39
|
|
|
|
18.32
|
|
|
|
(14.0
|
)
|
|
|
11.3
|
|
Passenger enplanements (thousands) (g)
|
|
|
26,949
|
|
|
|
26,732
|
|
|
|
25,748
|
|
|
|
0.8
|
|
|
|
3.8
|
|
Aircraft at end of period
|
|
|
283
|
|
|
|
296
|
|
|
|
286
|
|
|
|
(4.4
|
)
|
|
|
3.5
|
|
Fuel consumption (gallons in millions)
|
|
|
338
|
|
|
|
352
|
|
|
|
343
|
|
|
|
(3.8
|
)
|
|
|
2.7
|
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
1.80
|
|
|
|
3.23
|
|
|
|
2.23
|
|
|
|
(44.3
|
)
|
|
|
44.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mainline and Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
68,459
|
|
|
|
71,425
|
|
|
|
71,594
|
|
|
|
(4.2
|
)
|
|
|
(0.2
|
)
|
Available seat miles (millions) (b)
|
|
|
85,092
|
|
|
|
89,104
|
|
|
|
90,001
|
|
|
|
(4.5
|
)
|
|
|
(1.0
|
)
|
Passenger load factor (percent) (c)
|
|
|
80.5
|
|
|
|
80.2
|
|
|
|
79.5
|
|
|
|
0.3
|
pts
|
|
|
0.7
|
pts
|
Yield (cents) (d)
|
|
|
13.52
|
|
|
|
15.49
|
|
|
|
15.13
|
|
|
|
(12.7
|
)
|
|
|
2.4
|
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
10.88
|
|
|
|
12.42
|
|
|
|
12.04
|
|
|
|
(12.4
|
)
|
|
|
3.1
|
|
Total revenue per available seat mile (cents) (l)
|
|
|
12.29
|
|
|
|
13.60
|
|
|
|
13.00
|
|
|
|
(9.6
|
)
|
|
|
4.6
|
|
Passenger enplanements (thousands) (g)
|
|
|
77,965
|
|
|
|
81,552
|
|
|
|
83,619
|
|
|
|
(4.4
|
)
|
|
|
(2.5
|
)
|
Aircraft at end of period
|
|
|
632
|
|
|
|
650
|
|
|
|
642
|
|
|
|
(2.8
|
)
|
|
|
1.2
|
|
Fuel consumption (gallons in millions)
|
|
|
1,407
|
|
|
|
1,494
|
|
|
|
1,537
|
|
|
|
(5.8
|
)
|
|
|
(2.8
|
)
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
1.76
|
|
|
|
3.18
|
|
|
|
2.21
|
|
|
|
(44.8
|
)
|
|
|
44.1
|
|
41
|
|
|
(a) |
|
Revenue passenger mile (RPM) A basic
measure of sales volume. One RPM represents one passenger flown
one mile. |
|
(b) |
|
Available seat mile (ASM) A basic
measure of production. One ASM represents one seat flown one
mile. |
|
(c) |
|
Passenger load factor The percentage of available
seats that are filled with revenue passengers. |
|
(d) |
|
Yield A measure of airline revenue derived by
dividing passenger revenue by RPMs and expressed in cents per
mile. |
|
(e) |
|
Passenger revenue per available seat mile
(PRASM) Passenger revenues divided by
ASMs. |
|
(f) |
|
Operating cost per available seat mile
(CASM) Operating expenses divided by
ASMs. |
|
(g) |
|
Passenger enplanements The number of passengers on
board an aircraft, including local, connecting and through
passengers. |
|
(h) |
|
Block hours The hours measured from the moment an
aircraft first moves under its own power, including taxi time,
for the purposes of flight until the aircraft is docked at the
next point of landing and its power is shut down. |
|
(i) |
|
Average stage length The average of the distances
flown on each segment of every route. |
|
(j) |
|
Average passenger journey The average one-way trip
measured in miles for one passenger origination. |
|
(k) |
|
Express statistics include Piedmont and PSA, as well as
operating and financial results from capacity purchase
agreements with Air Wisconsin Airlines Corporation, Republic
Airways, Mesa Airlines, Inc. and Chautauqua Airlines, Inc. |
|
(l) |
|
Total revenue per available seat mile
(RASM) Total revenues divided by total
mainline and Express ASMs. |
2009
Compared With 2008
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline passenger
|
|
$
|
6,752
|
|
|
$
|
8,183
|
|
|
|
(17.5
|
)
|
Express passenger
|
|
|
2,503
|
|
|
|
2,879
|
|
|
|
(13.1
|
)
|
Cargo
|
|
|
100
|
|
|
|
144
|
|
|
|
(30.3
|
)
|
Other
|
|
|
1,103
|
|
|
|
912
|
|
|
|
20.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
10,458
|
|
|
$
|
12,118
|
|
|
|
(13.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues in 2009 were $10.46 billion as
compared to $12.12 billion in 2008, a decline of
$1.66 billion or 13.7%. Significant changes in the
components of operating revenues are as follows:
|
|
|
|
|
Mainline passenger revenues were $6.75 billion in 2009 as
compared to $8.18 billion in 2008. Mainline RPMs decreased
4.4% as mainline capacity, as measured by ASMs, decreased 4.6%,
resulting in a 0.2 point increase in load factor to 81.9%.
Mainline passenger yield decreased 13.7% to 11.66 cents in 2009
from 13.51 cents in 2008. Mainline PRASM decreased 13.5% to 9.55
cents in 2009 from 11.04 cents in 2008. Mainline yield and PRASM
decreased in 2009 due to the decline in passenger demand and
weak pricing environment driven by the global economic recession.
|
|
|
|
Express passenger revenues were $2.5 billion in 2009, a
decrease of $376 million from 2008. Express RPMs decreased
by 2.6% as Express capacity, as measured by ASMs, decreased
3.9%, resulting in a one point increase in load factor to 73.6%.
Express passenger yield decreased by 10.7% to 23.68 cents in
2009 from 26.52 cents in 2008. Express PRASM decreased 9.5% to
17.42 cents in 2009 from 19.26 cents in 2008. The decreases in
Express yield and PRASM were the result of the same passenger
demand declines and weak pricing environment discussed in
mainline passenger revenues above.
|
42
|
|
|
|
|
Cargo revenues were $100 million in 2009, a decrease of $44
million, or 30.3%, from 2008. The decrease in cargo revenues was
driven by declines in yield and freight volumes as a result of
the contraction of business spending in the current economic
environment as well as a decrease in fuel surcharges in 2009 as
compared to 2008.
|
|
|
|
Other revenues were $1.1 billion in 2009, an increase of
$191 million, or 20.9%, from 2008 primarily due to an
increase of $250 million generated by our first and second
checked bag fees, which were implemented in the second and third
quarters of 2008. This increase was offset in part by a decline
in the volume of passenger ticketing change fees and declines in
fuel sales to our pro-rate carriers through our MSC subsidiary
due to lower fuel prices in 2009.
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
$
|
1,863
|
|
|
$
|
3,618
|
|
|
|
(48.5
|
)
|
Loss (gain) on fuel hedging instruments, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
|
|
|
382
|
|
|
|
(140
|
)
|
|
|
nm
|
|
Unrealized
|
|
|
(375
|
)
|
|
|
496
|
|
|
|
nm
|
|
Salaries and related costs
|
|
|
2,165
|
|
|
|
2,231
|
|
|
|
(3.0
|
)
|
Aircraft rent
|
|
|
695
|
|
|
|
724
|
|
|
|
(4.0
|
)
|
Aircraft maintenance
|
|
|
700
|
|
|
|
783
|
|
|
|
(10.6
|
)
|
Other rent and landing fees
|
|
|
560
|
|
|
|
562
|
|
|
|
(0.5
|
)
|
Selling expenses
|
|
|
382
|
|
|
|
439
|
|
|
|
(13.0
|
)
|
Special items, net
|
|
|
55
|
|
|
|
76
|
|
|
|
(27.3
|
)
|
Depreciation and amortization
|
|
|
242
|
|
|
|
215
|
|
|
|
12.5
|
|
Goodwill impairment
|
|
|
|
|
|
|
622
|
|
|
|
nm
|
|
Other
|
|
|
1,152
|
|
|
|
1,243
|
|
|
|
(7.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline operating expenses
|
|
|
7,821
|
|
|
|
10,869
|
|
|
|
(28.0
|
)
|
Express expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
|
609
|
|
|
|
1,137
|
|
|
|
(46.4
|
)
|
Other
|
|
|
1,910
|
|
|
|
1,912
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Express expenses
|
|
|
2,519
|
|
|
|
3,049
|
|
|
|
(17.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
10,340
|
|
|
$
|
13,918
|
|
|
|
(25.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses were $10.34 billion in 2009, a
decrease of $3.58 billion or 25.7% compared to 2008.
Mainline operating expenses were $7.82 billion in 2009, a
decrease of $3.05 billion or 28% from 2008, while ASMs
decreased 4.6%.
Excluding the effects of fuel and fuel hedging transactions as
well as the $622 million non-cash charge recorded in 2008
to write off all of the goodwill created by the merger of US
Airways Group and America West Holdings, our mainline CASM was
relatively constant year over year. Mainline CASM decreased 3.6
cents, or 24.6%, to 11.06 cents in 2009 from 14.66 cents in
2008. Decreases in fuel and fuel hedging costs represented 2.71
cents, or 75.4%, of the CASM decrease, while the non-cash charge
to write off goodwill represented 0.84 cents, or 23.3%, of the
year-over-year
decline.
The 2009 period included $55 million of net special charges
consisting of $22 million in aircraft costs as a result of
our previously announced capacity reductions, $16 million
in non-cash impairment charges due to the decline in fair value
of certain indefinite lived intangible assets associated with
our international routes, $11 million in severance and
other charges and $6 million in costs incurred related to
our liquidity improvement program. This compares to net special
charges of $76 million in 2008, consisting of
$35 million of merger-related transition expenses,
$18 million in non-cash charges related to the decline in
the fair value of certain spare parts associated with our Boeing
737 aircraft fleet and, as a result of our capacity reductions,
$14 million in aircraft costs and $9 million in
severance charges.
43
The table below sets forth the major components of our mainline
CASM for the years ended December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Percent
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
(In cents)
|
|
|
|
|
|
Mainline CASM:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
|
2.64
|
|
|
|
4.88
|
|
|
|
(46.0
|
)
|
Loss on fuel hedging instruments, net
|
|
|
0.01
|
|
|
|
0.48
|
|
|
|
(97.8
|
)
|
Salaries and related costs
|
|
|
3.06
|
|
|
|
3.01
|
|
|
|
1.7
|
|
Aircraft rent
|
|
|
0.98
|
|
|
|
0.98
|
|
|
|
0.7
|
|
Aircraft maintenance
|
|
|
0.99
|
|
|
|
1.05
|
|
|
|
(6.2
|
)
|
Other rent and landing fees
|
|
|
0.79
|
|
|
|
0.76
|
|
|
|
4.4
|
|
Selling expenses
|
|
|
0.54
|
|
|
|
0.59
|
|
|
|
(8.8
|
)
|
Special items, net
|
|
|
0.08
|
|
|
|
0.10
|
|
|
|
(23.8
|
)
|
Depreciation and amortization
|
|
|
0.34
|
|
|
|
0.29
|
|
|
|
18.0
|
|
Goodwill impairment
|
|
|
|
|
|
|
0.84
|
|
|
|
nm
|
|
Other
|
|
|
1.63
|
|
|
|
1.68
|
|
|
|
(2.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline CASM
|
|
|
11.06
|
|
|
|
14.66
|
|
|
|
(24.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant changes in the components of mainline operating
expense per ASM are as follows:
|
|
|
|
|
Aircraft fuel and related taxes per ASM decreased 46% primarily
due to a 45% decrease in the average price per gallon of fuel to
$1.74 in 2009 from $3.17 in the 2008 period. A 6.4% decrease in
gallons of fuel consumed in 2009 on 4.6% lower capacity also
contributed to the decrease.
|
|
|
|
Loss on fuel hedging instruments, net per ASM was a loss of 0.01
cent in 2009 as compared to a loss of 0.48 cents in 2008. Since
the third quarter of 2008, we have not entered into any new fuel
hedging transactions and, as of December 31, 2009, we had
no remaining outstanding fuel hedging contracts. The net loss in
the 2009 period included realized losses of $382 million on
settled fuel hedging instruments, offset by $375 million of
net unrealized gains. The unrealized gains are the result of the
application of
mark-to-market
accounting in which unrealized losses recognized in prior
periods are reversed as hedge transactions are settled in the
current period. We recognized net losses from our fuel hedging
program in 2008 due to the significant decline in the price of
oil in the latter part of 2008, which generated unrealized
losses on certain open fuel hedge transactions as the price of
heating oil fell below the lower limit of our collar
transactions.
|
|
|
|
Aircraft maintenance expense per ASM decreased 6.2% due
principally to decreases in the number of engine overhauls
performed in 2009 as compared to 2008 as a result of the timing
of maintenance cycles.
|
|
|
|
Selling expenses per ASM decreased 8.8% due to lower credit card
fees, booking fees and commissions paid as a result of a decline
in the number and value of tickets sold resulting from the
weakened demand and pricing environment caused by the economic
recession.
|
|
|
|
Depreciation and amortization expense per ASM increased 18% due
to a net increase in owned aircraft, primarily driven by the
acquisition of 19 Airbus A320 family aircraft and two Airbus
A330 aircraft in 2009, which increased depreciation expense on
owned aircraft.
|
Total Express expenses decreased $530 million or 17.4% in
2009 to $2.52 billion from $3.05 billion in 2008. The
year-over-year
decrease was primarily driven by decreases in fuel costs.
Express fuel costs decreased $528 million as the average
fuel price per gallon decreased 44.3% from $3.23 in 2008 to
$1.80 in 2009. In addition, gallons of fuel consumed in 2009
decreased 3.8% on 3.9% lower capacity. Other Express expenses
decreased $2 million or 0.1% despite a 3.9% decrease in
Express ASMs due to certain fixed costs associated with our
capacity purchase agreements as well as certain contractual rate
increases with these carriers.
44
Nonoperating
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Nonoperating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
24
|
|
|
$
|
83
|
|
|
|
(71.5
|
)
|
Interest expense, net
|
|
|
(304
|
)
|
|
|
(258
|
)
|
|
|
17.9
|
|
Other, net
|
|
|
(81
|
)
|
|
|
(240
|
)
|
|
|
(66.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating expense, net
|
|
$
|
(361
|
)
|
|
$
|
(415
|
)
|
|
|
(13.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net nonoperating expense was $361 million in 2009 as
compared to $415 million in 2008. Interest income decreased
$59 million in 2009 due to lower average investment
balances and lower rates of return. Interest expense, net
increased $46 million due to an increase in the average
debt balance outstanding primarily as a result of financing
transactions completed in the fourth quarter of 2008 and in
2009, partially offset by reductions in average interest rates
associated with variable rate debt as compared to 2008.
Other nonoperating expense, net in 2009 included
$49 million in non-cash charges associated with the sale of
10 Embraer 190 aircraft and write off of related debt discount
and issuance costs, a $14 million loss on the sale of
certain aircraft equipment, $10 million in
other-than-temporary
non-cash impairment charges for our investments in auction rate
securities, $3 million in foreign currency losses and a
$2 million non-cash asset impairment charge. Other
nonoperating expense, net in 2008 included $214 million in
other-than-temporary
non-cash impairment charges for our investments in auction rate
securities, $25 million in foreign currency losses and
$7 million in write offs of debt discount and debt issuance
costs in connection with the refinancing of certain aircraft
equipment notes and certain loan prepayments, offset in part by
$8 million in gains on forgiveness of debt. The impairment
charges on auction rate securities are discussed in more detail
under Liquidity and Capital Resources.
2008
Compared With 2007
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline passenger
|
|
$
|
8,183
|
|
|
$
|
8,135
|
|
|
|
0.6
|
|
Express passenger
|
|
|
2,879
|
|
|
|
2,698
|
|
|
|
6.7
|
|
Cargo
|
|
|
144
|
|
|
|
138
|
|
|
|
3.7
|
|
Other
|
|
|
912
|
|
|
|
729
|
|
|
|
25.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
12,118
|
|
|
$
|
11,700
|
|
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues in 2008 were $12.12 billion as
compared to $11.7 billion in 2007. Significant changes in
the components of operating revenues are as follows:
|
|
|
|
|
Mainline passenger revenues were $8.18 billion in 2008, as
compared to $8.14 billion in 2007. Mainline RPMs decreased
1.1% as mainline capacity, as measured by ASMs, decreased 2.2%,
resulting in a 0.9 point increase in load factor to 81.7%.
Mainline passenger yield increased 1.7% to 13.51 cents in 2008
from 13.28 cents in 2007. Mainline PRASM increased 2.9% to 11.04
cents in 2008 from 10.73 cents in 2007. Mainline yield and PRASM
increased in 2008 due principally to strong passenger demand,
continued capacity and pricing discipline and fare increases in
substantially all markets during 2008.
|
|
|
|
Express passenger revenues were $2.88 billion in 2008, an
increase of $181 million from the 2007 period. Express
capacity, as measured by ASMs, increased 5.6% in 2008 due
principally to the
year-over-year
increase in capacity purchased from an affiliate Express
carrier. Express RPMs increased by 5.1% on this higher capacity
resulting in a 0.4 point decrease in load factor to 72.6%.
Express passenger yield increased by 1.6% to 26.52 cents in 2008
from 26.12 cents in 2007. Express PRASM increased 1% to 19.26
cents in 2008 from 19.06 cents in 2007. The increase in Express
yield and PRASM was the result of the same favorable industry
pricing environment discussed in the mainline operations above.
|
45
|
|
|
|
|
Other revenues were $912 million in 2008, an increase of
$183 million from 2007 primarily due to our new revenue
initiatives, principally our first and second checked bag fees,
which were implemented in the second and third quarters of 2008.
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
$
|
3,618
|
|
|
$
|
2,630
|
|
|
|
37.6
|
|
Loss (gain) on fuel hedging instruments, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
|
|
|
(140
|
)
|
|
|
(58
|
)
|
|
|
nm
|
|
Unrealized
|
|
|
496
|
|
|
|
(187
|
)
|
|
|
nm
|
|
Salaries and related costs
|
|
|
2,231
|
|
|
|
2,302
|
|
|
|
(3.1
|
)
|
Aircraft rent
|
|
|
724
|
|
|
|
727
|
|
|
|
(0.4
|
)
|
Aircraft maintenance
|
|
|
783
|
|
|
|
635
|
|
|
|
23.2
|
|
Other rent and landing fees
|
|
|
562
|
|
|
|
536
|
|
|
|
4.9
|
|
Selling expenses
|
|
|
439
|
|
|
|
453
|
|
|
|
(3.2
|
)
|
Special items, net
|
|
|
76
|
|
|
|
99
|
|
|
|
(23.2
|
)
|
Depreciation and amortization
|
|
|
215
|
|
|
|
189
|
|
|
|
13.7
|
|
Goodwill impairment
|
|
|
622
|
|
|
|
|
|
|
|
nm
|
|
Other
|
|
|
1,243
|
|
|
|
1,247
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline operating expenses
|
|
|
10,869
|
|
|
|
8,573
|
|
|
|
26.8
|
|
Express expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
|
1,137
|
|
|
|
765
|
|
|
|
48.6
|
|
Other
|
|
|
1,912
|
|
|
|
1,829
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Express operating expense
|
|
|
3,049
|
|
|
|
2,594
|
|
|
|
17.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
13,918
|
|
|
$
|
11,167
|
|
|
|
24.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses were $13.92 billion in 2008, an
increase of $2.75 billion or 24.6% compared to 2007.
Mainline operating expenses were $10.87 billion in 2008, an
increase of $2.3 billion or 26.8% from 2007, while ASMs
decreased 2.2%.
Mainline CASM increased 29.7% to 14.66 cents in 2008 from 11.3
cents in 2007. The 2008 period included a $622 million
non-cash charge to write off all of the goodwill created by the
merger of US Airways Group and America West Holdings in
September 2005, which contributed 0.84 cents to our mainline
CASM for 2008. The remaining
period-over-period
increase in CASM was driven principally by increases in aircraft
fuel costs ($988 million or 1.41 cents per ASM) and a net
loss on fuel hedging instruments ($356 million) in 2008
compared to a net gain ($245 million) in 2007, which
accounted for 0.8 cents per ASM.
The 2008 period also included $76 million of net special
charges, consisting of $35 million of merger-related
transition expenses, $18 million in non-cash charges
related to the decline in fair value of certain spare parts
associated with our Boeing 737 aircraft fleet and, as a result
of our capacity reductions, $14 million in aircraft costs
and $9 million in severance charges. This compares to net
special charges of $99 million in the 2007 period due to
merger-related transition expenses.
46
The table below sets forth the major components of our mainline
CASM for the years ended December 31, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Percent
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
|
(In cents)
|
|
|
|
|
|
Mainline CASM:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
|
4.88
|
|
|
|
3.47
|
|
|
|
40.7
|
|
Loss (gain) on fuel hedging instruments, net
|
|
|
0.48
|
|
|
|
(0.32
|
)
|
|
|
nm
|
|
Salaries and related costs
|
|
|
3.01
|
|
|
|
3.03
|
|
|
|
(0.8
|
)
|
Aircraft rent
|
|
|
0.98
|
|
|
|
0.96
|
|
|
|
2.2
|
|
Aircraft maintenance
|
|
|
1.05
|
|
|
|
0.84
|
|
|
|
25.4
|
|
Other rent and landing fees
|
|
|
0.76
|
|
|
|
0.70
|
|
|
|
7.6
|
|
Selling expenses
|
|
|
0.59
|
|
|
|
0.60
|
|
|
|
(1.2
|
)
|
Special items, net
|
|
|
0.10
|
|
|
|
0.13
|
|
|
|
(23.2
|
)
|
Depreciation and amortization
|
|
|
0.29
|
|
|
|
0.25
|
|
|
|
16.4
|
|
Goodwill impairment
|
|
|
0.84
|
|
|
|
|
|
|
|
nm
|
|
Other
|
|
|
1.68
|
|
|
|
1.64
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline CASM
|
|
|
14.66
|
|
|
|
11.30
|
|
|
|
29.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant changes in the components of mainline operating
expense per ASM are as follows:
|
|
|
|
|
Aircraft fuel and related taxes per ASM increased 40.7%
primarily due to a 43.9% increase in the average price per
gallon of fuel to a record high $3.17 in 2008 from $2.20 in
2007, offset by a 4.4% decrease in gallons consumed.
|
|
|
|
Loss (gain) on fuel hedging instruments, net per ASM fluctuated
from a gain of 0.32 cents in 2007 to a loss of 0.48 cents in
2008. The net loss in the 2008 period is the result of net
unrealized losses of $496 million on open fuel hedge
transactions, offset by $140 million of net realized gains
on settled fuel hedge transactions. We recognized net gains from
our fuel hedging program in the first half of 2008 as the price
of heating oil exceeded the upper limit on certain of our collar
transactions. However, the significant decline in the price of
oil in the latter part of 2008 generated unrealized losses on
certain open fuel hedge transactions as the price of heating oil
fell below the lower limit of those collar transactions.
|
|
|
|
Aircraft maintenance expense per ASM increased 25.4% due
principally to increases in the number of engine and landing
gear overhauls performed in 2008 as compared to 2007.
|
|
|
|
Other rent and landing fees per ASM increased 7.6% due primarily
to increases in rental rates at certain airports in 2008 as
compared to 2007.
|
|
|
|
Depreciation and amortization per ASM increased 16.4% due to the
acquisition of 14 Embraer aircraft and five Airbus aircraft in
2008, which increased depreciation expense on owned aircraft.
|
Total Express expenses increased 17.5% in 2008 to
$3.05 billion from $2.59 billion in 2007. Express fuel
costs increased $372 million as the average fuel price per
gallon increased 44.8% from $2.23 in 2007 to a record high $3.23
in 2008. Other Express operating expenses increased
$83 million year over year as a result of the 5.6% increase
in Express capacity in 2008.
Nonoperating
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Nonoperating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
83
|
|
|
$
|
172
|
|
|
|
(51.6
|
)
|
Interest expense, net
|
|
|
(258
|
)
|
|
|
(277
|
)
|
|
|
(6.9
|
)
|
Other, net
|
|
|
(240
|
)
|
|
|
2
|
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating expense, net
|
|
$
|
(415
|
)
|
|
$
|
(103
|
)
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
Net nonoperating expense was $415 million in 2008 as
compared to $103 million in 2007. Interest income decreased
$89 million in 2008 due to lower average investment
balances and lower rates of return. Interest expense, net
decreased $19 million due primarily to reductions in
average interest rates associated with variable rate debt,
partially offset by an increase in the average debt balance
outstanding as compared to the 2007 period.
Other nonoperating expense, net in 2008 included
$214 million in
other-than-temporary
non-cash impairment charges for our investments in auction rate
securities primarily due to the length of time and extent to
which the fair value has been less than cost for these
securities. We also recognized $25 million in foreign
currency losses and $7 million in write offs of debt
discount and debt issuance costs in connection with the
refinancing of certain aircraft equipment notes and certain loan
prepayments in connection with our 2008 financing transactions,
offset in part by $8 million in gains on forgiveness of
debt. Other nonoperating expense, net in 2007 included an
$18 million write off of debt issuance costs in connection
with the refinancing of the GE loan in March 2007 as well as
$10 million in
other-than-temporary
non-cash impairment charges for our investments in auction rate
securities, offset by a $17 million gain on the sale of
stock in ARINC Incorporated and $7 million in foreign
currency gains.
US
Airways Results of Operations
On September 26, 2007, as part of the integration efforts
following the merger, AWA surrendered its FAA operating
certificate. As a result, all mainline airline operations are
now being conducted under US Airways FAA operating
certificate. In connection with the combination of all mainline
airline operations under one FAA operating certificate, US
Airways Group contributed 100% of its equity interest in America
West Holdings, the parent company of AWA, to US Airways. As a
result, America West Holdings and AWA became wholly owned
subsidiaries of US Airways. In addition, AWA transferred
substantially all of its assets and liabilities to US Airways.
All off-balance sheet commitments of AWA were also transferred
to US Airways.
Transfers of assets between entities under common control are
accounted for similar to the pooling of interests method of
accounting. Under this method, the carrying amount of net assets
recognized in the balance sheets of each combining entity are
carried forward to the balance sheet of the combined entity, and
no other assets or liabilities are recognized as a result of the
contribution of shares. This managements discussion and
analysis of financial condition and results of operations is
presented as though the transfer had occurred at the time of US
Airways emergence from bankruptcy in September 2005.
In 2009, US Airways realized operating income of
$122 million and a loss before income taxes of
$178 million. US Airways experienced significant declines
in revenues as a result of the global economic recession, which
more than offset the benefits of reduced fuel costs during 2009.
US Airways 2009 results were also impacted by recognition
of the following items:
|
|
|
|
|
$382 million of net realized losses on settled fuel hedging
instruments, offset by $375 million of net unrealized gains
resulting from the application of
mark-to-market
accounting for changes in the fair value of fuel hedging
instruments. In
mark-to-market
accounting, the unrealized losses recognized in prior periods
are reversed as hedge transactions are settled in the current
period. US Airways was required to use
mark-to-market
accounting as its fuel hedging instruments did not meet the
requirements for hedge accounting. If these instruments had
qualified for hedge accounting treatment, any unrealized gains
or losses would have been recorded in other comprehensive
income, a component of stockholders equity;
|
|
|
|
$55 million of net special charges consisting of
$22 million in aircraft costs as a result of US
Airways previously announced capacity reductions,
$16 million in non-cash impairment charges due to the
decline in fair value of certain indefinite lived intangible
assets associated with US Airways international routes,
$11 million in severance and other charges and
$6 million in costs incurred related to US Airways
liquidity improvement program; and
|
|
|
|
$49 million in non-cash charges associated with the sale of
10 Embraer 190 aircraft and write off of related debt discount
and issuance costs, $10 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities and a $2 million non-cash asset
impairment charge, all included in nonoperating expense, net.
|
48
In 2008, US Airways realized an operating loss of
$1.77 billion and a loss before income taxes of
$2.15 billion. The 2008 loss was driven by an average
mainline and Express price per gallon of fuel of $3.18 as well
as a $622 million non-cash charge to write off all of the
goodwill created by the merger of US Airways Group and America
West Holdings in September 2005. US Airways 2008 results
were also impacted by recognition of the following items:
|
|
|
|
|
$496 million of net unrealized losses resulting from the
application of
mark-to-market
accounting for changes in the fair value of fuel hedging
instruments, offset by $140 million of net realized gains
on settled fuel hedge transactions;
|
|
|
|
$76 million of net special charges consisting of
$35 million of merger-related transition expenses,
$18 million in non-cash charges related to the decline in
fair value of certain spare parts associated with US
Airways Boeing 737 aircraft fleet and, as a result of US
Airways capacity reductions, $14 million in aircraft
costs and $9 million in severance charges; and
|
|
|
|
$214 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities as well as $6 million in write offs
of debt discount and debt issuance costs in connection with the
refinancing of certain aircraft equipment notes and a loan
prepayment, offset by $8 million in gains on forgiveness of
debt, all included in nonoperating expense, net.
|
In 2007, US Airways realized operating income of
$524 million and income before income taxes of
$485 million. US Airways 2007 results were impacted
by recognition of the following items:
|
|
|
|
|
$187 million of net unrealized gains resulting from the
application of
mark-to-market
accounting for changes in the fair value of fuel hedging
instruments as well as $58 million of net realized gains on
settled fuel hedge transactions;
|
|
|
|
$99 million of net special charges due to merger-related
transition expenses;
|
|
|
|
a $99 million charge for an increase to long-term
disability obligations for US Airways pilots as a result
of a change in the FAA-mandated retirement age for pilots from
60 to 65;
|
|
|
|
$7 million in tax credits due to an IRS rule change
allowing US Airways to recover certain fuel usage tax amounts
for years
2003-2006
and $9 million of insurance settlement proceeds related to
business interruption and property damages incurred as a result
of Hurricane Katrina in 2005. These gains were offset in part by
$4 million in charges related to reduced flying from
Pittsburgh; and
|
|
|
|
a $17 million gain recognized on the sale of stock in ARINC
Incorporated, offset by $10 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities, all included in nonoperating expense,
net.
|
US Airways reported a loss in 2009, which increased its NOLs. As
of December 31, 2009, US Airways has approximately
$2.05 billion of gross NOLs to reduce future federal
taxable income. All of US Airways NOLs are available to
reduce federal taxable income in the calendar year 2010. The
NOLs expire during the years 2022 through 2029.
US Airways net deferred tax assets, which include
$1.98 billion of the NOLs, have been subject to a full
valuation allowance. US Airways also has approximately
$86 million of tax-effected state NOLs at December 31,
2009. At December 31, 2009, the federal and state valuation
allowance is $575 million and $78 million,
respectively, all of which will reduce future tax expense when
recognized.
For the year ended December 31, 2009, US Airways recorded a
tax benefit of $38 million. Of this amount,
$21 million was due to a non-cash income tax benefit
related to gains recorded within other comprehensive income. In
addition, US Airways recorded a $14 million tax benefit
related to a legislation change allowing it to carry back 100%
of 2008 AMT net operating losses, resulting in the recovery
of AMT amounts paid in prior years. US Airways also recognized a
$3 million tax benefit related to the reversal of the
deferred tax liability associated with the indefinite lived
intangible assets that were impaired during 2009.
49
For the year ended December 31, 2008, US Airways reported a
loss, which increased its NOLs, and it did not record a tax
provision.
For the year ended December 31, 2007, US Airways utilized
NOLs to reduce its income tax obligation. Utilization of these
NOLs resulted in a corresponding decrease in the valuation
allowance. As this valuation allowance was established through
the recognition of tax expense, the decrease in valuation
allowance offsets the tax provision dollar for dollar. US
Airways recognized $7 million of non-cash state income tax
expense for the year ended December 31, 2007, as US Airways
utilized NOLs that were generated prior to the merger. As these
were acquired NOLs, the accounting rules in place at that time
required that the decrease in the valuation allowance associated
with these NOLs reduce goodwill instead of the provision for
income taxes.
The table below sets forth US Airways selected mainline
and Express operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
Percent
|
|
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
Change
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009-2008
|
|
|
2008-2007
|
|
|
Mainline
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
57,889
|
|
|
|
60,570
|
|
|
|
61,262
|
|
|
|
(4.4
|
)
|
|
|
(1.1
|
)
|
Available seat miles (millions) (b)
|
|
|
70,725
|
|
|
|
74,151
|
|
|
|
75,842
|
|
|
|
(4.6
|
)
|
|
|
(2.2
|
)
|
Passenger load factor (percent) (c)
|
|
|
81.9
|
|
|
|
81.7
|
|
|
|
80.8
|
|
|
|
0.2
|
pts
|
|
|
0.9
|
pts
|
Yield (cents) (d)
|
|
|
11.66
|
|
|
|
13.51
|
|
|
|
13.28
|
|
|
|
(13.7
|
)
|
|
|
1.7
|
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
9.55
|
|
|
|
11.04
|
|
|
|
10.73
|
|
|
|
(13.5
|
)
|
|
|
2.9
|
|
Aircraft at end of period
|
|
|
349
|
|
|
|
354
|
|
|
|
356
|
|
|
|
(1.4
|
)
|
|
|
(0.6
|
)
|
Fuel consumption (gallons in millions)
|
|
|
1,069
|
|
|
|
1,142
|
|
|
|
1,195
|
|
|
|
(6.4
|
)
|
|
|
(4.4
|
)
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
1.74
|
|
|
|
3.17
|
|
|
|
2.20
|
|
|
|
(45.0
|
)
|
|
|
43.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express (f)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
10,570
|
|
|
|
10,855
|
|
|
|
10,332
|
|
|
|
(2.6
|
)
|
|
|
5.1
|
|
Available seat miles (millions) (b)
|
|
|
14,367
|
|
|
|
14,953
|
|
|
|
14,159
|
|
|
|
(3.9
|
)
|
|
|
5.6
|
|
Passenger load factor (percent) (c)
|
|
|
73.6
|
|
|
|
72.6
|
|
|
|
73.0
|
|
|
|
1.0
|
pts
|
|
|
(0.4
|
) pts
|
Yield (cents) (d)
|
|
|
23.68
|
|
|
|
26.52
|
|
|
|
26.12
|
|
|
|
(10.7
|
)
|
|
|
1.6
|
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
17.42
|
|
|
|
19.26
|
|
|
|
19.06
|
|
|
|
(9.5
|
)
|
|
|
1.0
|
|
Aircraft at end of period
|
|
|
283
|
|
|
|
296
|
|
|
|
286
|
|
|
|
(4.4
|
)
|
|
|
3.5
|
|
Fuel consumption (gallons in millions)
|
|
|
338
|
|
|
|
352
|
|
|
|
343
|
|
|
|
(3.8
|
)
|
|
|
2.7
|
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
1.80
|
|
|
|
3.23
|
|
|
|
2.23
|
|
|
|
(44.3
|
)
|
|
|
44.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mainline and Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
68,459
|
|
|
|
71,425
|
|
|
|
71,594
|
|
|
|
(4.2
|
)
|
|
|
(0.2
|
)
|
Available seat miles (millions) (b)
|
|
|
85,092
|
|
|
|
89,104
|
|
|
|
90,001
|
|
|
|
(4.5
|
)
|
|
|
(1.0
|
)
|
Passenger load factor (percent) (c)
|
|
|
80.5
|
|
|
|
80.2
|
|
|
|
79.5
|
|
|
|
0.3
|
pts
|
|
|
0.7
|
pts
|
Yield (cents) (d)
|
|
|
13.52
|
|
|
|
15.49
|
|
|
|
15.13
|
|
|
|
(12.7
|
)
|
|
|
2.4
|
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
10.88
|
|
|
|
12.42
|
|
|
|
12.04
|
|
|
|
(12.4
|
)
|
|
|
3.1
|
|
Total revenue per available seat mile (cents) (g)
|
|
|
12.47
|
|
|
|
13.74
|
|
|
|
13.13
|
|
|
|
(9.3
|
)
|
|
|
4.7
|
|
Aircraft at end of period
|
|
|
632
|
|
|
|
650
|
|
|
|
642
|
|
|
|
(2.8
|
)
|
|
|
1.2
|
|
Fuel consumption (gallons in millions)
|
|
|
1,407
|
|
|
|
1,494
|
|
|
|
1,537
|
|
|
|
(5.8
|
)
|
|
|
(2.8
|
)
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
1.76
|
|
|
|
3.18
|
|
|
|
2.21
|
|
|
|
(44.8
|
)
|
|
|
44.1
|
|
|
|
|
(a) |
|
Revenue passenger mile (RPM) A basic
measure of sales volume. One RPM represents one passenger flown
one mile. |
|
(b) |
|
Available seat mile (ASM) A basic
measure of production. One ASM represents one seat flown one
mile. |
|
(c) |
|
Passenger load factor The percentage of available
seats that are filled with revenue passengers. |
50
|
|
|
(d) |
|
Yield A measure of airline revenue derived by
dividing passenger revenue by RPMs and expressed in cents per
mile. |
|
(e) |
|
Passenger revenue per available seat mile
(PRASM) Passenger revenues divided by
ASMs. |
|
(f) |
|
Express statistics include Piedmont and PSA, as well as
operating and financial results from capacity purchase
agreements with Air Wisconsin Airlines Corporation, Republic
Airways, Mesa Airlines, Inc. and Chautauqua Airlines, Inc. |
|
(g) |
|
Total revenue per available seat mile
(RASM) Total revenues divided by total
mainline and Express ASMs. |
2009
Compared With 2008
Operating Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline passenger
|
|
$
|
6,752
|
|
|
$
|
8,183
|
|
|
|
(17.5
|
)
|
Express passenger
|
|
|
2,503
|
|
|
|
2,879
|
|
|
|
(13.1
|
)
|
Cargo
|
|
|
100
|
|
|
|
144
|
|
|
|
(30.3
|
)
|
Other
|
|
|
1,254
|
|
|
|
1,038
|
|
|
|
20.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
10,609
|
|
|
$
|
12,244
|
|
|
|
(13.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues in 2009 were $10.61 billion as
compared to $12.24 billion in 2008, a decline of
$1.64 billion or 13.4%. Significant changes in the
components of operating revenues are as follows:
|
|
|
|
|
Mainline passenger revenues were $6.75 billion in 2009 as
compared to $8.18 billion in 2008. Mainline RPMs decreased
4.4% as mainline capacity, as measured by ASMs, decreased 4.6%,
resulting in a 0.2 point increase in load factor to 81.9%.
Mainline passenger yield decreased 13.7% to 11.66 cents in 2009
from 13.51 cents in 2008. Mainline PRASM decreased 13.5% to 9.55
cents in 2009 from 11.04 cents in 2008. Mainline yield and PRASM
decreased in 2009 due to the decline in passenger demand and
weak pricing environment driven by the global economic recession.
|
|
|
|
Express passenger revenues were $2.5 billion in 2009, a
decrease of $376 million from 2008. Express RPMs decreased
by 2.6% as Express capacity, as measured by ASMs, decreased
3.9%, resulting in a one point increase in load factor to 73.6%.
Express passenger yield decreased by 10.7% to 23.68 cents in
2009 from 26.52 cents in 2008. Express PRASM decreased 9.5% to
17.42 cents in 2009 from 19.26 cents in 2008. The decreases in
Express yield and PRASM were the result of the same passenger
demand declines and weak pricing environment discussed in
mainline passenger revenues above.
|
|
|
|
Cargo revenues were $100 million in 2009, a decrease of
$44 million, or 30.3%, from 2008. The decrease in cargo
revenues was driven by declines in yield and freight volumes as
a result of the contraction of business spending in the current
economic environment as well as a decrease in fuel surcharges in
2009 as compared to 2008.
|
|
|
|
Other revenues were $1.25 billion in 2009, an increase of
$216 million, or 20.8%, from 2008 primarily due to an
increase of $250 million generated by US Airways
first and second checked bag fees, which were implemented in the
second and third quarters of 2008. This increase was offset in
part by a decline in the volume of passenger ticketing change
fees.
|
51
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
$
|
1,863
|
|
|
$
|
3,618
|
|
|
|
(48.5
|
)
|
Loss (gain) on fuel hedging instruments, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
|
|
|
382
|
|
|
|
(140
|
)
|
|
|
nm
|
|
Unrealized
|
|
|
(375
|
)
|
|
|
496
|
|
|
|
nm
|
|
Salaries and related costs
|
|
|
2,165
|
|
|
|
2,231
|
|
|
|
(3.0
|
)
|
Aircraft rent
|
|
|
695
|
|
|
|
724
|
|
|
|
(4.0
|
)
|
Aircraft maintenance
|
|
|
700
|
|
|
|
783
|
|
|
|
(10.6
|
)
|
Other rent and landing fees
|
|
|
560
|
|
|
|
562
|
|
|
|
(0.5
|
)
|
Selling expenses
|
|
|
382
|
|
|
|
439
|
|
|
|
(13.0
|
)
|
Special items, net
|
|
|
55
|
|
|
|
76
|
|
|
|
(27.3
|
)
|
Depreciation and amortization
|
|
|
251
|
|
|
|
224
|
|
|
|
12.0
|
|
Goodwill impairment
|
|
|
|
|
|
|
622
|
|
|
|
nm
|
|
Other
|
|
|
1,181
|
|
|
|
1,243
|
|
|
|
(5.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline operating expenses
|
|
|
7,859
|
|
|
|
10,878
|
|
|
|
(27.8
|
)
|
Express expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
|
609
|
|
|
|
1,137
|
|
|
|
(46.4
|
)
|
Other
|
|
|
2,019
|
|
|
|
2,002
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Express expenses
|
|
|
2,628
|
|
|
|
3,139
|
|
|
|
(16.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
10,487
|
|
|
$
|
14,017
|
|
|
|
(25.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses were $10.49 billion in 2009, a
decrease of $3.53 billion or 25.2% compared to 2008.
Mainline operating expenses were $7.86 billion in 2009, a
decrease of $3.02 billion or 27.8% from 2008. The
period-over-period
decrease in mainline operating expenses was driven principally
by decreases in fuel costs ($1.76 billion) as well as a
decrease in the net losses on fuel hedging instruments
($349 million) in 2009 as compared to 2008. In addition,
the 2008 period included a $622 million non-cash charge to
write off all of the goodwill created by the merger of US
Airways Group and America West Holdings in September 2005.
The 2009 period included $55 million of net special charges
consisting of $22 million in aircraft costs as a result of
US Airways previously announced capacity reductions,
$16 million in non-cash impairment charges due to the
decline in fair value of certain indefinite lived intangible
assets associated with US Airways international routes,
$11 million in severance and other charges and
$6 million in costs incurred related to US Airways
liquidity improvement program. This compares to net special
charges of $76 million in 2008, consisting of
$35 million of merger-related transition expenses,
$18 million in non-cash charges related to the decline in
the fair value of certain spare parts associated with US
Airways Boeing 737 aircraft fleet and, as a result of US
Airways capacity reductions, $14 million in aircraft
costs and $9 million in severance charges.
Significant changes in the components of mainline operating
expense are as follows:
|
|
|
|
|
Aircraft fuel and related taxes decreased 48.5% primarily due to
a 45% decrease in the average price per gallon of fuel to $1.74
in 2009 from $3.17 in the 2008 period. A 6.4% decrease in
gallons of fuel consumed in 2009 on 4.6% lower capacity also
contributed to the decrease.
|
|
|
|
Loss on fuel hedging instruments, net was a loss of
$7 million in 2009 as compared to a loss of
$356 million in 2008. Since the third quarter of 2008, US
Airways has not entered into any new fuel hedging transactions
and, as of December 31, 2009, US Airways had no remaining
outstanding fuel hedging contracts. The net loss in the 2009
period included realized losses of $382 million on settled
fuel hedging instruments, offset by $375 million of net
unrealized gains. The unrealized gains are the result of the
application of
mark-to-market
accounting in which unrealized losses recognized in prior
periods are reversed as hedge transactions are settled in the
current period. US Airways recognized net losses from its fuel
hedging program in 2008 due to the significant decline in the
price of oil in the latter part of 2008, which generated
unrealized losses on certain open fuel hedge transactions as the
price of heating oil fell below the lower limit of its collar
transactions.
|
52
|
|
|
|
|
Aircraft maintenance expense decreased 10.6% due principally to
decreases in the number of engine overhauls performed in 2009 as
compared to 2008 as a result of the timing of maintenance cycles.
|
|
|
|
Selling expenses decreased 13% due to lower credit card fees,
booking fees and commissions paid as a result of a decline in
the number and value of tickets sold resulting from the weakened
demand and pricing environment caused by the economic recession.
|
|
|
|
Depreciation and amortization expense increased 12% due to a net
increase in owned aircraft, primarily driven by the acquisition
of 19 Airbus A320 family aircraft and two Airbus A330 aircraft
in 2009, which increased depreciation expense on owned aircraft.
|
Total Express expenses decreased $511 million or 16.3% in
2009 to $2.63 billion from $3.14 billion in 2008. The
year-over-year
decrease was primarily driven by decreases in fuel costs.
Express fuel costs decreased $528 million as the average
fuel price per gallon decreased 44.3% from $3.23 in 2008 to
$1.80 in 2009. In addition, gallons of fuel consumed in 2009
decreased 3.8% on 3.9% lower capacity. Other Express expenses
increased $17 million or 0.9% despite a 3.9% decrease in
Express ASMs due to certain fixed costs associated with our
capacity purchase agreements as well as certain contractual rate
increases with these carriers.
Nonoperating Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Nonoperating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
24
|
|
|
$
|
83
|
|
|
|
(71.5
|
)
|
Interest expense, net
|
|
|
(241
|
)
|
|
|
(218
|
)
|
|
|
10.7
|
|
Other, net
|
|
|
(83
|
)
|
|
|
(240
|
)
|
|
|
(65.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating expense, net
|
|
$
|
(300
|
)
|
|
$
|
(375
|
)
|
|
|
(20.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net nonoperating expense was $300 million in 2009 as
compared to $375 million in 2008. Interest income decreased
$59 million in 2009 due to lower average investment
balances and lower rates of return. Interest expense, net
increased $23 million due to an increase in the average
debt balance outstanding primarily as a result of financing
transactions completed in the fourth quarter of 2008 and in
2009, partially offset by reductions in average interest rates
associated with variable rate debt as compared to 2008.
Other nonoperating expense, net in 2009 included
$49 million in non-cash charges associated with the sale of
10 Embraer 190 aircraft and write off of related debt discount
and issuance costs, a $14 million loss on the sale of
certain aircraft equipment, $10 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities, $3 million in foreign currency
losses and a $2 million non-cash asset impairment charge.
Other nonoperating expense, net in 2008 included
$214 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities, $25 million in foreign currency
losses and $6 million in write offs of debt discount and
debt issuance costs in connection with the refinancing of
certain aircraft equipment notes and a loan prepayment, offset
in part by $8 million in gains on forgiveness of debt. The
impairment charges on auction rate securities are discussed in
more detail under Liquidity and Capital Resources.
53
2008
Compared With 2007
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline passenger
|
|
$
|
8,183
|
|
|
$
|
8,135
|
|
|
|
0.6
|
|
Express passenger
|
|
|
2,879
|
|
|
|
2,698
|
|
|
|
6.7
|
|
Cargo
|
|
|
144
|
|
|
|
138
|
|
|
|
3.7
|
|
Other
|
|
|
1,038
|
|
|
|
842
|
|
|
|
23.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
12,244
|
|
|
$
|
11,813
|
|
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues in 2008 were $12.24 billion as
compared to $11.81 billion in 2007. Significant changes in
the components of operating revenues are as follows:
|
|
|
|
|
Mainline passenger revenues were $8.18 billion in 2008, as
compared to $8.14 billion in 2007. Mainline RPMs decreased
1.1% as mainline capacity, as measured by ASMs, decreased 2.2%,
resulting in a 0.9 point increase in load factor to 81.7%.
Mainline passenger yield increased 1.7% to 13.51 cents in 2008
from 13.28 cents in 2007. Mainline PRASM increased 2.9% to 11.04
cents in 2008 from 10.73 cents in 2007. Mainline yield and PRASM
increased in 2008 due principally to strong passenger demand,
continued capacity and pricing discipline and fare increases in
substantially all markets during 2008.
|
|
|
|
Express passenger revenues were $2.88 billion in 2008, an
increase of $181 million from the 2007 period. Express
capacity, as measured by ASMs, increased 5.6% in 2008 due
principally to the
year-over-year
increase in capacity purchased from an affiliate Express
carrier. Express RPMs increased by 5.1% on this higher capacity
resulting in a 0.4 point decrease in load factor to 72.6%.
Express passenger yield increased by 1.6% to 26.52 cents in 2008
from 26.12 cents in 2007. Express PRASM increased 1% to 19.26
cents in 2008 from 19.06 cents in 2007. The increase in Express
yield and PRASM was the result of the same favorable industry
pricing environment discussed in the mainline operations above.
|
|
|
|
Other revenues were $1.04 billion in 2008, an increase of
$196 million from 2007 primarily due to US Airways
new revenue initiatives, principally its first and second
checked bag fees, which were implemented in the second and third
quarters of 2008.
|
54
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
$
|
3,618
|
|
|
$
|
2,630
|
|
|
|
37.6
|
|
Loss (gain) on fuel hedging instruments, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
|
|
|
(140
|
)
|
|
|
(58
|
)
|
|
|
nm
|
|
Unrealized
|
|
|
496
|
|
|
|
(187
|
)
|
|
|
nm
|
|
Salaries and related costs
|
|
|
2,231
|
|
|
|
2,302
|
|
|
|
(3.1
|
)
|
Aircraft rent
|
|
|
724
|
|
|
|
727
|
|
|
|
(0.4
|
)
|
Aircraft maintenance
|
|
|
783
|
|
|
|
635
|
|
|
|
23.2
|
|
Other rent and landing fees
|
|
|
562
|
|
|
|
536
|
|
|
|
4.9
|
|
Selling expenses
|
|
|
439
|
|
|
|
453
|
|
|
|
(3.2
|
)
|
Special items, net
|
|
|
76
|
|
|
|
99
|
|
|
|
(23.2
|
)
|
Depreciation and amortization
|
|
|
224
|
|
|
|
198
|
|
|
|
13.1
|
|
Goodwill impairment
|
|
|
622
|
|
|
|
|
|
|
|
nm
|
|
Other
|
|
|
1,243
|
|
|
|
1,227
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline operating expenses
|
|
|
10,878
|
|
|
|
8,562
|
|
|
|
27.1
|
|
Express expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
|
1,137
|
|
|
|
765
|
|
|
|
48.6
|
|
Other
|
|
|
2,002
|
|
|
|
1,962
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Express operating expense
|
|
|
3,139
|
|
|
|
2,727
|
|
|
|
15.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
14,017
|
|
|
$
|
11,289
|
|
|
|
24.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses were $14.02 billion in 2008, an
increase of $2.73 billion or 24.2% compared to 2007.
Mainline operating expenses were $10.88 billion in 2008, an
increase of $2.32 billion or 27.1% from 2007. The 2008
period included a $622 million non-cash charge to write off
all of the goodwill created by the merger of US Airways Group
and America West Holdings in September 2005. The remaining
period-over-period
increase in mainline operating expenses was driven principally
by increases in aircraft fuel costs ($988 million) and a
net loss on fuel hedging instruments ($356 million) in 2008
compared to a net gain ($245 million) in 2007.
The 2008 period also included $76 million of net special
charges, consisting of $35 million of merger-related
transition expenses, $18 million in non-cash charges
related to the decline in fair value of certain spare parts
associated with US Airways Boeing 737 aircraft fleet and,
as a result of US Airways capacity reductions,
$14 million in aircraft costs and $9 million in
severance charges. This compares to net special charges of
$99 million in the 2007 period due to merger-related
transition expenses.
Significant changes in the components of mainline operating
expenses are as follows:
|
|
|
|
|
Aircraft fuel and related taxes increased 37.6% primarily due to
a 43.9% increase in the average price per gallon of fuel to a
record high $3.17 in 2008 from $2.20 in 2007, offset by a 4.4%
decrease in gallons consumed.
|
|
|
|
Loss (gain) on fuel hedging instruments, net fluctuated from a
net gain of $245 million in 2007 to a net loss of
$356 million in 2008. The net loss in the 2008 period is
the result of net unrealized losses of $496 million on open
fuel hedge transactions, offset by $140 million of net
realized gains on settled fuel hedge transactions. US Airways
recognized net gains from its fuel hedging program in the first
half of 2008 as the price of heating oil exceeded the upper
limit on certain of its collar transactions. However, the
significant decline in the price of oil in the latter part of
2008 generated unrealized losses on certain open fuel hedge
transactions as the price of heating oil fell below the lower
limit of those collar transactions.
|
|
|
|
Aircraft maintenance expense increased 23.2% due principally to
increases in the number of engine and landing gear overhauls
performed in 2008 as compared to 2007.
|
55
|
|
|
|
|
Other rent and landing fees increased 4.9% due primarily to
increases in rental rates at certain airports in 2008 as
compared to 2007.
|
|
|
|
Depreciation and amortization increased 13.1% due to the
acquisition of 14 Embraer aircraft and five Airbus aircraft in
2008, which increased depreciation expense on owned aircraft.
|
Total Express expenses increased 15.1% in 2008 to
$3.14 billion from $2.73 billion in 2007. Express fuel
costs increased $372 million as the average fuel price per
gallon increased 44.8% from $2.23 in 2007 to a record high $3.23
in 2008. Other Express operating expenses increased
$40 million year over year as a result of the 5.6% increase
in Express capacity in 2008, partially offset by a decrease in
amounts paid under capacity purchases with US Airways
Groups wholly owned Express carriers.
Nonoperating
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Nonoperating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
83
|
|
|
$
|
172
|
|
|
|
(51.6
|
)
|
Interest expense, net
|
|
|
(218
|
)
|
|
|
(229
|
)
|
|
|
(5.1
|
)
|
Other, net
|
|
|
(240
|
)
|
|
|
18
|
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating expense, net
|
|
$
|
(375
|
)
|
|
$
|
(39
|
)
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net nonoperating expense was $375 million in 2008 as
compared to $39 million in 2007. Interest income decreased
$89 million in 2008 due to lower average investment
balances and lower rates of return. Interest expense, net
decreased $11 million due primarily to reductions in
average interest rates associated with variable rate debt,
partially offset by an increase in the average debt balance
outstanding as compared to the 2007 period.
Other nonoperating expense, net in 2008 included
$214 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities primarily due to the length of time and
extent to which the fair value has been less than cost for these
securities. US Airways also recognized $25 million in
foreign currency losses and $6 million in write offs of
debt discount and debt issuance costs in connection with the
refinancing of certain aircraft equipment notes and a loan
prepayment in connection with US Airways 2008 financing
transactions, offset in part by $8 million in gains on
forgiveness of debt. Other nonoperating expense, net in 2007
included a $17 million gain on the sale of stock in ARINC
Incorporated as well as $7 million in foreign currency
gains, offset by $10 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities.
Liquidity
and Capital Resources
As of December 31, 2009, our cash, cash equivalents,
investments in marketable securities and restricted cash were
$1.98 billion, of which $480 million was restricted.
Our investments in marketable securities included
$203 million of auction rate securities at fair value
($347 million par value) that are classified as noncurrent
assets on our consolidated balance sheets.
Investments
in Marketable Securities
As of December 31, 2009, we held auction rate securities
totaling $347 million at par value, which are classified as
available-for-sale
securities and noncurrent assets on our consolidated balance
sheets. Contractual maturities for these auction rate securities
range from seven to 43 years, with 73% of our portfolio
maturing within the next 10 years (2016 2017),
19% maturing within the next 30 years (2033
2036) and 8% maturing thereafter (2049 2052).
With the liquidity issues experienced in the global credit and
capital markets, all of our auction rate securities have
experienced failed auctions since August 2007. The estimated
fair value of these auction rate securities no longer
approximates par value. At December 31 2009, the fair value of
our auction rate securities was $203 million.
During 2009, we sold certain investments in auction rate
securities for net proceeds of $32 million. Additionally,
we recorded net unrealized gains of $58 million in other
comprehensive income related to the increase in fair value
56
of certain investments in auction rate securities, as well as
$10 million in
other-than-temporary
impairment charges recorded in other nonoperating expense, net
related to the decline in fair value of certain investments in
auction rate securities.
We continue to monitor the market for auction rate securities
and consider its impact (if any) on the fair value of our
investments. If the current market conditions deteriorate, we
may be required to record additional impairment charges in other
nonoperating expense, net in future periods.
We believe that, based on our current unrestricted cash and cash
equivalents balance at December 31, 2009, the current lack
of liquidity in our investments in auction rate securities will
not have a material impact on our liquidity, our cash flow or
our ability to fund our operations.
Sources
and Uses of Cash
US
Airways Group
2009
Compared to 2008
Net cash provided by operating activities was $59 million
in 2009 as compared to net cash used in operating activities of
$980 million in 2008, a
period-over-period
improvement of $1.04 billion. Operating cash flows
significantly improved in 2009 due to the substantial reduction
in the cost of fuel offset by declines in revenues as a result
of the global economic recession. Our mainline and Express fuel
expense was $2.28 billion, or 48%, lower in 2009 as
compared to 2008 on 4.5% lower capacity. The weak demand
environment caused by the global economic recession resulted in
a $1.66 billion, or 13.7%, decline in total operating
revenues. In addition, operating cash flows in 2009 improved by
$321 million principally as a result of the wind down of
our fuel hedging program. In the latter part of 2008, we
recognized unrealized losses on certain open fuel hedge
transactions as the price of heating oil fell below the lower
limit of our collar transactions and caused us to use cash from
operations to collateralize our counterparties. Since the third
quarter of 2008, we have not entered into any new fuel hedging
transactions and, as of December 31, 2009, we had no
remaining outstanding fuel hedging contracts. Accordingly, our
2009 operating cash flows were not significantly impacted by
fuel hedging transactions as any hedges settling in 2009 had
been fully collateralized through the cash deposits posted
during 2008.
Net cash used in investing activities was $495 million and
$915 million in 2009 and 2008, respectively. Principal
investing activities in 2009 included expenditures for property
and equipment totaling $683 million primarily related to
the purchase of Airbus aircraft. These expenditures were offset
by $76 million in proceeds from the disposition of property
and equipment, a $60 million decrease in restricted cash
and $52 million of net proceeds from sales of investments
in marketable securities. Proceeds from the disposition of
property and equipment are comprised of proceeds from the swap
of one of our owned aircraft in exchange for the leased aircraft
involved in the Flight 1549 accident and sale-leaseback
transactions involving four aircraft and five engines.
Restricted cash decreased during 2009 due to changes in the
amount of holdback held by certain credit card processors for
advance ticket sales for which we had not yet provided air
transportation. Principal investing activities in 2008 included
expenditures for property and equipment totaling
$1.07 billion, including the purchase of 14 Embraer
aircraft, five Airbus aircraft and a $139 million net
increase in equipment purchase deposits for aircraft on order,
as well as a $74 million increase in restricted cash, all
of which were offset in part by net sales of investments in
marketable securities of $206 million. The change in the
2008 restricted cash balance was due to changes in the amount of
holdback held by certain credit card processors.
Net cash provided by financing activities was $701 million
and $981 million for 2009 and 2008, respectively. Principal
financing activities in 2009 included proceeds from the issuance
of debt of $919 million, which primarily included the
financing associated with the purchase of Airbus aircraft, as
well as the issuance of $172 million of convertible notes,
additional loans under a spare parts loan agreement, a loan
secured by certain airport landing slots and an unsecured
financing with one of our third-party Express carriers. Debt
repayments totaled $407 million in 2009. Financing
activities in 2009 also included net proceeds from the issuance
of common stock of $66 million from a May 2009 public stock
offering of 17.5 million shares and $137 million from
a September 2009 public stock offering of 29 million
shares. Principal financing activities in 2008 included proceeds
from the issuance of debt of $1.59 billion, of which
$800 million was from the series of financing transactions
completed in October 2008,
57
including the Barclays pre-purchased miles, Airbus advance and
spare parts and engine loans. Proceeds also included the
financing associated with the purchase of 14 Embraer aircraft
and five Airbus aircraft and $145 million in proceeds from
the refinancing of certain aircraft equipment notes. Debt
repayments were $734 million, including a $400 million
paydown at par of our Citicorp credit facility, a
$100 million prepayment of certain indebtedness incurred as
part of our October 2008 financing transactions and
$97 million related to the $145 million aircraft
equipment note refinancing discussed above. Financing activities
in 2008 also included $179 million in net proceeds from the
issuance of common stock as a result of a public stock offering
of 21.85 million common shares during the third quarter of
2008.
2008
Compared to 2007
Net cash used in operating activities was $980 million in
2008 as compared to net cash provided by operating activities of
$451 million in 2007. The
period-over-period
decrease of $1.43 billion is due principally to our net
loss for 2008, which was driven by record high fuel prices. Our
mainline and Express fuel expense was $1.36 billion higher
in 2008 than in 2007 on slightly lower capacity. Additionally,
the 2008 period included operating cash outflows of
$321 million related to fuel hedging transactions versus
operating cash inflows of $106 million related to fuel
hedging transactions in the 2007 period. The substantial
decrease in the fuel prices in the latter part of 2008, while a
significant positive development, had the near-term liquidity
impact of reducing our operating cash flow as we were required
to use cash from operations to collateralize our counterparties
in connection with our fuel hedging positions. The increase in
fuel costs and fuel hedge collateral was partially offset by an
increase in revenue of $418 million due to a 3.1% increase
in mainline and Express PRASM and our new revenue initiatives
that went into effect in 2008.
Net cash used in investing activities was $915 million in
2008 as compared to net cash provided by investing activities of
$269 million in 2007. Principal investing activities in
2008 included expenditures for property and equipment totaling
$1.07 billion, including the purchase of 14 Embraer
aircraft, five Airbus aircraft and a $139 million net
increase in equipment purchase deposits for aircraft on order,
as well as a $74 million increase in restricted cash,
offset in part by net sales of investments in marketable
securities of $206 million. The change in the 2008
restricted cash balance was due to changes in the amount of
holdback held by certain credit card processors for advance
ticket sales for which we had not yet provided air
transportation. Principal investing activities in 2007 included
net sales of investments in marketable securities of
$612 million, a decrease in restricted cash of
$200 million and $56 million in proceeds from the sale
of investments in ARINC and Sabre, offset in part by
expenditures for property and equipment totaling
$603 million, including the purchase of nine Embraer
aircraft and a net increase in equipment purchase deposits of
$80 million. The net sales of investments in marketable
securities in 2007 were primarily certain auction rate
securities sold at par value in the third quarter of 2007. The
change in the 2007 restricted cash balance was due to changes in
the amount of holdback held by certain credit card processors.
Net cash provided by financing activities was $981 million
and $112 million in 2008 and 2007, respectively. Principal
financing activities in 2008 included proceeds from the issuance
of debt of $1.59 billion, of which $800 million was
from the series of financing transactions completed in October
2008, including the Barclays pre-purchased miles, Airbus advance
and spare parts and engine loans. Proceeds also included the
financing associated with the purchase of 14 Embraer aircraft
and five Airbus aircraft and $145 million in proceeds from
the refinancing of certain aircraft equipment notes. Debt
repayments were $734 million, including a $400 million
paydown at par of our Citicorp credit facility, a
$100 million prepayment of certain indebtedness incurred as
part of our October 2008 financing transactions and
$97 million related to the $145 million aircraft
equipment note refinancing discussed above. Financing activities
in 2008 also included $179 million in net proceeds from the
issuance of common stock as a result of a public stock offering
of 21.85 million common shares during the third quarter of
2008. Principal financing activities in 2007 included proceeds
from the issuance of debt of $1.8 billion, including
$1.6 billion generated from the Citicorp credit facility
and proceeds from property and equipment financings. Debt
repayments were $1.68 billion and, using the proceeds from
the Citicorp credit facility, included the repayment in full of
the balances outstanding on the $1.25 billion GE loan, the
Barclays Bank Delaware prepaid miles loan of $325 million
and a GECC credit facility of $19 million.
58
US
Airways
2009
Compared to 2008
Net cash provided by operating activities was $326 million
in 2009 as compared to net cash used in operating activities of
$1.03 billion in 2008, a
period-over-period
improvement of $1.35 billion. Operating cash flows
significantly improved in 2009 due to the substantial reduction
in the cost of fuel offset by declines in revenues as a result
of the global economic recession.. US Airways mainline and
Express fuel expense was $2.28 billion, or 48%, lower in
2009 as compared to 2008 on 4.5% lower capacity. The weak demand
environment caused by the global economic recession resulted in
a $1.64 billion, or 13.4%, decline in total operating
revenues. In addition, operating cash flows in 2009 improved by
$321 million principally as a result of the wind down of US
Airways fuel hedging program. In the latter part of 2008,
US Airways recognized unrealized losses on certain open fuel
hedge transactions as the price of heating oil fell below the
lower limit of US Airways collar transactions and caused
it to use cash from operations to collateralize our
counterparties. Since the third quarter of 2008, US Airways has
not entered into any new fuel hedging transactions and, as of
December 31, 2009, US Airways had no remaining outstanding
fuel hedging contracts. Accordingly, US Airways 2009
operating cash flows were not significantly impacted by fuel
hedging transactions as any hedges settling in 2009 had been
fully collateralized through the cash deposits posted during
2008.
Net cash used in investing activities was $489 million and
$889 million in 2009 and 2008, respectively. Principal
investing activities in 2009 included expenditures for property
and equipment totaling $677 million, primarily related to
the purchase of Airbus aircraft. These expenditures were offset
by $76 million in proceeds from the disposition of property
and equipment, a $60 million decrease in restricted cash
and $52 million of net proceeds from sales of investments
in marketable securities. Proceeds from the disposition of
property and equipment are comprised of proceeds from the swap
of one of US Airways owned aircraft in exchange for the
leased aircraft involved in the Flight 1549 accident and
sale-leaseback transactions involving four aircraft and five
engines. Restricted cash decreased during 2009 due to changes in
the amount of holdback held by certain credit card processors
for advance ticket sales for which US Airways had not yet
provided air transportation. Principal investing activities in
2008 included expenditures for property and equipment totaling
$1.04 billion, including the purchase of 14 Embraer
aircraft, five Airbus aircraft and a $139 million net
increase in equipment purchase deposits for aircraft on order,
as well as a $74 million increase in restricted cash, all
of which were offset in part by net sales of investments in
marketable securities of $206 million. The change in the
2008 restricted cash balance was due to changes in the amount of
holdback held by certain credit card processors.
Net cash provided by financing activities was $346 million
and $1 billion for 2009 and 2008, respectively. Principal
financing activities in 2009 included proceeds from the issuance
of debt of $747 million, which primarily included the
financing associated with the purchase of Airbus aircraft as
well as additional loans under a spare parts loan agreement, a
loan secured by certain airport landing slots and an unsecured
financing with one of US Airways third-party Express
carriers. Debt repayments totaled $391 million in 2009.
Principal financing activities in 2008 included proceeds from
the issuance of debt of $1.39 billion, of which
$600 million was from the series of financing transactions
completed in October 2008, including the Airbus advance and
spare parts and engine loans. Proceeds also included the
financing associated with the purchase of 14 Embraer aircraft
and five Airbus aircraft and $145 million in proceeds from
the refinancing of certain aircraft equipment notes. Debt
repayments were $318 million, including a $100 million
prepayment of certain indebtedness incurred as part of US
Airways October 2008 financing transactions and
$97 million related to the $145 million aircraft
equipment note refinancing discussed above.
2008
Compared to 2007
Net cash used in operating activities was $1.03 billion in
2008 as compared to net cash provided by operating activities of
$433 million in 2007. The
period-over-period
decrease of $1.46 billion is due principally to US
Airways net loss for 2008, which was driven by record high
fuel prices. US Airways mainline and Express fuel expense
was $1.36 billion higher in 2008 than in 2007 on slightly
lower capacity. Additionally, the 2008 period included operating
cash outflows of $321 million related to fuel hedging
transactions versus operating cash flows inflows of
$106 million related to fuel hedging transactions in the
2007 period. The substantial decrease in the fuel
59
prices in the latter part of 2008, while a significant positive
development, had the near-term liquidity impact of reducing US
Airways operating cash flow as US Airways was required to
use cash from operations to collateralize its counterparties in
connection with US Airways fuel hedging positions. The
increase in fuel costs and fuel hedge collateral was partially
offset by an increase in revenue of $431 million due to a
3.1% increase in mainline and Express PRASM and US Airways
new revenue initiatives that went into effect in 2008.
Net cash used in investing activities was $889 million in
2008 as compared to net cash provided by investing activities of
$306 million in 2007. Principal investing activities in
2008 included expenditures for property and equipment totaling
$1.04 billion, including the purchase of 14 Embraer
aircraft, five Airbus aircraft and a $139 million net
increase in equipment purchase deposits for aircraft on order,
as well as a $74 million increase in restricted cash,
offset in part by net sales of investments in marketable
securities of $206 million. The change in the 2008
restricted cash balance was due to changes in the amount of
holdback held by certain credit card processors for advance
ticket sales for which US Airways had not yet provided air
transportation. Principal investing activities in 2007 included
net sales of investments in marketable securities of
$612 million, a decrease in restricted cash of
$200 million and $56 million in proceeds from the sale
of investments in ARINC and Sabre, offset in part by
expenditures for property and equipment totaling
$566 million, including the purchase of nine Embraer
aircraft and a net increase in equipment purchase deposits of
$80 million. The net sales of investments in marketable
securities in 2007 were primarily certain auction rate
securities sold at par value in the third quarter of 2007. The
change in the 2007 restricted cash balance was due to changes in
the amount of holdback held by certain credit card processors.
Net cash provided by financing activities was $1 billion
and $90 million in 2008 and 2007, respectively. Principal
financing activities in 2008 included proceeds from the issuance
of debt of $1.39 billion, of which $600 million was
from the series of financing transactions completed in October
2008, including the Airbus advance and spare parts and engine
loans. Proceeds also included the financing associated with the
purchase of 14 Embraer aircraft and five Airbus aircraft and
$145 million in proceeds from the refinancing of certain
aircraft equipment notes. Debt repayments were
$318 million, including a $100 million prepayment of
certain indebtedness incurred as part of US Airways
October 2008 financing transactions and $97 million related
to the $145 million aircraft equipment note refinancing
discussed above. Principal financing activities in 2007 included
proceeds from the issuance of debt of $198 million to
finance the acquisition of property and equipment and total debt
repayments of $105 million.
Commitments
As of December 31, 2009, we had $4.79 billion of
long-term debt and capital leases (including current maturities
and before discount on debt).
Citicorp
Credit Facility
On March 23, 2007, US Airways Group entered into a term
loan credit facility with Citicorp North America, Inc., as
administrative agent, and a syndicate of lenders pursuant to
which US Airways Group borrowed an aggregate principal amount of
$1.6 billion. US Airways, AWA and certain other
subsidiaries of US Airways Group are guarantors of the Citicorp
credit facility.
The Citicorp credit facility bears interest at an index rate
plus an applicable index margin or, at our option, LIBOR plus an
applicable LIBOR margin for interest periods of one, two, three
or six months. The applicable index margin, subject to
adjustment, is 1.00%, 1.25% or 1.50% if the adjusted loan
balance is less than $600 million, between
$600 million and $1 billion, or greater than
$1 billion, respectively. The applicable LIBOR margin,
subject to adjustment, is 2.00%, 2.25% or 2.50% if the adjusted
loan balance is less than $600 million, between
$600 million and $1 billion, or greater than
$1 billion, respectively. In addition, interest on the
Citicorp credit facility may be adjusted based on the credit
rating for the Citicorp credit facility as follows: (i) if
the credit ratings of the Citicorp credit facility by
Moodys and S&P in effect as of the last day of the
most recently ended fiscal quarter are both at least one
subgrade better than the credit ratings in effect on
March 23, 2007, then (A) the applicable LIBOR margin
will be the lower of 2.25% and the rate otherwise applicable
based upon the adjusted Citicorp credit facility balance and
(B) the applicable index margin will be the lower of 1.25%
and the rate otherwise applicable based upon the Citicorp credit
facility principal balance, and (ii) if the credit ratings
of the Citicorp credit facility by Moodys and S&P in
effect as of the last day of the most recently ended fiscal
quarter are both at least two subgrades
60
better than the credit ratings in effect on March 23, 2007,
then (A) the applicable LIBOR margin will be 2.00% and
(B) the applicable index margin will be 1.00%. As of
December 31, 2009, the interest rate on the Citicorp credit
facility was 2.78% based on a 2.50% LIBOR margin.
The Citicorp credit facility matures on March 23, 2014, and
is repayable in seven annual installments with each of the first
six installments to be paid on each anniversary of the closing
date in an amount equal to 1% of the initial aggregate principal
amount of the loan and the final installment to be paid on the
maturity date in the amount of the full remaining balance of the
loan.
In addition, the Citicorp credit facility requires certain
mandatory prepayments upon the occurrence of specified events,
establishes certain financial covenants, including minimum cash
requirements and maintenance of certain minimum ratios, contains
customary affirmative covenants and negative covenants and
contains customary events of default. The Citicorp credit
facility requires us to maintain consolidated unrestricted cash
and cash equivalents of not less than $850 million, with
not less than $750 million (subject to partial reductions
upon certain reductions in the outstanding principal amount of
the loan) of that amount held in accounts subject to control
agreements, which would become restricted for use by us if
certain adverse events occur per the terms of the agreement. In
addition, the Citicorp credit facility amendment provides that
we may issue debt in the future with a second lien on the assets
pledged as collateral under the Citicorp credit facility. The
principal amount outstanding under the Citicorp credit facility
was $1.17 billion as of December 31, 2009. As of
December 31, 2009, we were in compliance with all debt
covenants under the amended credit facility.
7.25% Convertible
Senior Notes
In May 2009, US Airways Group issued $172 million aggregate
principal amount of 7.25% Convertible Senior Notes due 2014
(the 7.25% notes) for proceeds, net of
expenses, of approximately $168 million. The
7.25% notes bear interest at a rate of 7.25% per annum,
which shall be payable semi-annually in arrears on each May 15
and November 15. The 7.25% notes mature on
May 15, 2014.
Holders may convert their 7.25% notes at their option at
any time prior to the close of business on the second scheduled
trading day immediately preceding the maturity date for the
7.25% notes. Upon conversion, we will pay or deliver, as
the case may be, cash, shares of our common stock or a
combination thereof at our election. The initial conversion rate
for the 7.25% notes is 218.8184 shares of our common
stock per $1,000 principal amount of notes (equivalent to an
initial conversion price of $4.57 per share). Such conversion
rate is subject to adjustment in certain events.
If we undergo a fundamental change, holders may require us to
purchase all or a portion of their 7.25% notes for cash at
a price equal to 100% of the principal amount of the
7.25% notes to be purchased plus any accrued and unpaid
interest to, but excluding, the purchase date. A fundamental
change includes a person or group (other than us or our
subsidiaries) becoming the beneficial owner of more than 50% of
the voting power of our capital stock, certain merger or
combination transactions, a substantial turnover of our
directors, stockholder approval of our liquidation or
dissolution and US Airways Group common stock ceasing to be
listed on at least one national securities exchange.
The 7.25% notes rank equal in right of payment to all of
our other existing and future unsecured senior debt and senior
in right of payment to our debt that is expressly subordinated
to the 7.25% notes, if any. The 7.25% notes impose no
limit on the amount of debt we or our subsidiaries may incur.
The 7.25% notes are structurally subordinated to all debt
and other liabilities and commitments (including trade payables)
of our subsidiaries. The 7.25% notes are also effectively
junior to our secured debt, if any, to the extent of the value
of the assets securing such debt.
As the 7.25% notes can be settled in cash upon conversion,
for accounting purposes, the 7.25% notes were bifurcated
into a debt component that is initially recorded at fair value
and an equity component. In addition to the 7.25% coupon
interest, we expect to record non-cash interest expense of
$12 million in 2010, $16 million in 2011,
$22 million in 2012, $29 million in 2013 and
$13 million in 2014 representing the amortization of the
discounted carrying value of the 7.25% notes to face value
over the five-year term.
61
Other
2009 Financing Transactions
US Airways borrowed $825 million in 2009 to finance Airbus
aircraft deliveries through a combination of facility agreements
and manufacturer backstop financing. These financings bear
interest at a rate of LIBOR plus an applicable margin and
contain default provisions and other covenants that are typical
in the industry.
US Airways borrowed an additional $120 million in 2009
under its spare parts loan agreement. The spare parts loan
agreement bears interest at a rate of LIBOR plus a margin per
annum and is secured by a first priority security interest in
substantially all of US Airways rotable, repairable and
expendable aircraft spare parts. The spare parts loan agreement
matures on October 20, 2014.
In 2009, US Airways sold 10 of its Embraer 190 aircraft to
Republic. In connection with this transaction, Republic assumed
$216 million of debt outstanding on the 10 Embraer 190
aircraft and US Airways was released from its obligations
associated with the principal due under the debt. Additionally,
at the time of sale, US Airways had $35 million outstanding
under a loan from Republic (the Republic loan). The
Republic loan was scheduled to be repaid starting in January
2010 and fully repaid in October 2011. The full amount
outstanding under the Republic loan was applied to the purchase
price of the 10 aircraft.
US Airways Group is party to a co-branded credit card agreement
with Barclays Bank Delaware. The co-branded credit card
agreement provides for, among other things, the pre-purchase of
frequent flyer miles in an amount totaling $200 million.
Barclays has agreed that it will pre-purchase additional miles
on a monthly basis in an amount equal to the difference between
$200 million and the amount of unused miles then
outstanding. In November 2009, US Airways Group entered into an
amendment to its co-branded credit card agreement with Barclays.
Commencing in January 2012, the $200 million will be
reduced over a period of up to approximately two years. Among
the conditions to this monthly purchase of miles is a
requirement that US Airways Group maintain an unrestricted cash
balance, as defined in the agreement, of at least
$1.35 billion for the months of March through November and
$1.25 billion for the months of January, February and
December.
Credit
Card Processing Agreements
We have agreements with companies that process customer credit
card transactions for the sale of air travel and other services.
Credit card processors have financial risk associated with
tickets purchased for travel because, although the processor
generally forwards the cash related to the purchase to us soon
after the purchase is completed, the air travel generally occurs
after that time, and the processor may have liability if we do
not ultimately provide the air travel. Our agreements allow
these processing companies, under certain conditions, to hold an
amount of our cash (referred to as a holdback) equal
to a portion of advance ticket sales that have been processed by
that company, but for which we have not yet provided the air
transportation. These holdback requirements can be modified at
the discretion of the processing companies, up to the estimated
liability for future air travel purchased with the respective
credit cards, upon the occurrence of specified events, including
material adverse changes in our financial condition. The amount
that the processing companies may withhold also varies as a
result of changes in financial risk due to seasonal fluctuations
in ticket volume. Additional holdback requirements will reduce
our liquidity in the form of unrestricted cash and short-term
investments by the amount of the holdbacks.
Aircraft
and Engine Purchase Commitments
US Airways has definitive purchase agreements with Airbus for
the acquisition of 134 aircraft, including 97 single-aisle A320
family aircraft and 37 widebody aircraft (comprised of 22 A350
XWB aircraft and 15 A330-200 aircraft), of which 30 aircraft
have been delivered through December 31, 2009. Deliveries
of the A320 family aircraft commenced during 2008 with the
delivery of five A321 aircraft. During 2009, US Airways took
delivery of 18 Airbus A321 aircraft, five A330-200 aircraft and
two Airbus A320 aircraft. Of the 20 A320 family aircraft, 11
were financed using manufacturer backstop financing, eight were
financed through existing financing facilities and one was
financed through a leasing transaction. Of the five A330-200
aircraft, three were financed through leasing transactions and
two were financed through new loan agreements.
In November 2009, US Airways amended its purchase agreements
with Airbus to defer 54 aircraft originally scheduled for
delivery between 2010 and 2012 to 2013 and beyond. These
deferral arrangements will reduce our
62
aircraft capital expenditures over the next three years by
approximately $2.5 billion and reduce near- and medium-term
obligations to Airbus and others by approximately
$132 million. US Airways now plans to take delivery of 28
Airbus aircraft between 2010 and 2012, consisting of four
aircraft in 2010 (two A320 aircraft and two A330 aircraft) and
24 A320 family aircraft in
2011-2012.
In addition, commencement of US Airways Airbus A350 XWB
operations, with aircraft deliveries originally scheduled to
start in 2015, will now be postponed to 2017.
US Airways has agreements for the purchase of eight new IAE
V2500-A5 spare engines scheduled for delivery through 2014 for
use on the Airbus A320 family fleet, three new Trent 700 spare
engines scheduled for delivery through 2013 for use on the
Airbus A330-200 fleet and three new Trent XWB spare engines
scheduled for delivery in 2017 through 2019 for use on the
Airbus A350 XWB aircraft. US Airways has taken delivery of two
of the Trent 700 spare engines and one of the V2500-A5 spare
engines, which were financed through leasing transactions.
Under all of our aircraft and engine purchase agreements, our
total future commitments as of December 31, 2009 are
expected to be approximately $6.09 billion through 2019 as
follows: $296 million in 2010, $504 million in 2011,
$579 million in 2012, $1.15 billion in 2013,
$932 million in 2014 and $2.63 billion thereafter,
which includes predelivery deposits and payments. We have
financing commitments for all Airbus aircraft scheduled for
delivery during 2010 to 2012. See Part I,
Item 1A, Risk Factors Increased costs
of financing, a reduction in the availability of financing and
fluctuations in interest rates could adversely affect our
liquidity, operating expenses and results and
Our high level of fixed obligations limits our ability
to fund general corporate requirements and obtain additional
financing, limits our flexibility in responding to competitive
developments and increases our vulnerability to adverse economic
and industry conditions.
Covenants
and Credit Rating
In addition to the minimum cash balance requirements, our
long-term debt agreements contain various negative covenants
that restrict or limit our actions, including our ability to pay
dividends or make other restricted payments. Our long-term debt
agreements also generally contain cross-default provisions,
which may be triggered by defaults by us under other agreements
relating to indebtedness. See Part I, Item 1A,
Risk Factors Our high level of fixed
obligations limits our ability to fund general corporate
requirements and obtain additional financing, limits our
flexibility in responding to competitive developments and
increases our vulnerability to adverse economic and industry
conditions and Any failure to comply with the
liquidity covenants contained in our financing arrangements
would likely have a material adverse effect on our business,
financial condition and results of operations. As of
December 31, 2009, we and our subsidiaries were in
compliance with the covenants in our long-term debt agreements.
Our credit ratings, like those of most airlines, are relatively
low. The following table details our credit ratings as of
December 31, 2009:
|
|
|
|
|
|
|
|
|
S&P
|
|
Fitch
|
|
Moodys
|
|
|
Local Issuer
|
|
Issuer Default
|
|
Corporate
|
|
|
Credit Rating
|
|
Credit Rating
|
|
Family Rating
|
|
US Airways Group
|
|
B-
|
|
CCC
|
|
Caa1
|
US Airways
|
|
B-
|
|
*
|
|
*
|
|
|
|
(*) |
|
The credit agencies do not rate these categories for US Airways. |
A decrease in our credit ratings could cause our borrowing costs
to increase, which would increase our interest expense and could
affect our net income, and our credit ratings could adversely
affect our ability to obtain additional financing. If our
financial performance or industry conditions do not improve, we
may face future downgrades, which could further negatively
impact our borrowing costs and the prices of our equity or debt
securities. In addition, any downgrade of our credit ratings may
indicate a decline in our business and in our ability to satisfy
our obligations under our indebtedness.
Off-Balance
Sheet Arrangements
An off-balance sheet arrangement is any transaction, agreement
or other contractual arrangement involving an unconsolidated
entity under which a company has (1) made guarantees,
(2) a retained or a contingent interest in
63
transferred assets, (3) an obligation under derivative
instruments classified as equity or (4) any obligation
arising out of a material variable interest in an unconsolidated
entity that provides financing, liquidity, market risk or credit
risk support to us, or that engages in leasing, hedging or
research and development arrangements with us.
We have no off-balance sheet arrangements of the types described
in the first three categories above that we believe may have a
material current or future effect on financial condition,
liquidity or results of operations. Certain guarantees that we
do not expect to have a material current or future effect on
financial condition, liquidity or results of operations are
disclosed in Note 9(f) to the consolidated financial
statements of US Airways Group included in Item 8A of this
report and Note 8(f) to the consolidated financial
statements of US Airways included in Item 8B of this report.
Pass
Through Trusts
US Airways has obligations with respect to pass through trust
certificates, also known as Enhanced Equipment
Trust Certificates, or EETCs, issued by pass through trusts
to cover the financing of 19 owned aircraft, 114 leased aircraft
and three leased engines. These trusts are off-balance sheet
entities, the primary purpose of which is to finance the
acquisition of flight equipment. Rather than finance each
aircraft separately when such aircraft is purchased or
delivered, these trusts allowed US Airways to raise the
financing for several aircraft at one time and place such funds
in escrow pending the purchase or delivery of the relevant
aircraft. The trusts were also structured to provide for certain
credit enhancements, such as liquidity facilities to cover
certain interest payments, that reduce the risks to the
purchasers of the trust certificates and, as a result, reduce
the cost of aircraft financing to US Airways.
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at US Airways
election in connection with a mortgage financing of the aircraft
or by a separate owner trust in connection with a leveraged
lease financing of the aircraft. In the case of a leveraged
lease financing, the owner trust then leased the aircraft to US
Airways. In both cases, the equipment notes are secured by a
security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor are they
guaranteed by, US Airways Group or US Airways. However, in the
case of mortgage financings, the equipment notes issued to the
trusts are direct obligations of US Airways. As of
December 31, 2009, $505 million associated with these
mortgage financings is reflected as debt in the accompanying
consolidated balance sheet.
With respect to leveraged leases, US Airways evaluated whether
the leases had characteristics of a variable interest entity. US
Airways concluded the leasing entities met the criteria for
variable interest entities. US Airways then evaluated whether or
not it was the primary beneficiary by evaluating whether or not
it was exposed to the majority of the risks (expected losses) or
whether it receives the majority of the economic benefits
(expected residual returns) from the trusts activities. US
Airways does not provide residual value guarantees to the
bondholders or equity participants in the trusts. Each lease
does have a fixed price purchase option that allows US Airways
to purchase the aircraft near the end of the lease term.
However, the option price approximates an estimate of the
aircrafts fair value at the option date. Under this
feature, US Airways does not participate in any increases in the
value of the aircraft. US Airways concluded it was not the
primary beneficiary under these arrangements. Therefore, US
Airways accounts for its EETC leveraged lease financings as
operating leases. US Airways total future obligations
under these leveraged lease financings are $3.25 billion as
of December 31, 2009.
Special
Facility Revenue Bonds
US Airways guarantees the payment of principal and interest on
certain special facility revenue bonds issued by municipalities
to build or improve certain airport and maintenance facilities
which are leased to US Airways. Under such leases, US Airways is
required to make rental payments through 2023, sufficient to pay
maturing principal and interest payments on the related bonds.
As of December 31, 2009, the remaining lease payments
guaranteeing the principal and interest on these bonds are
$137 million, of which $34 million of these
obligations is accounted for as a capital lease and reflected as
debt in the accompanying consolidated balance sheet.
64
Jet
Service Agreements
Certain entities with which US Airways has capacity purchase
agreements are considered variable interest entities. In
connection with its restructuring and emergence from bankruptcy,
US Airways contracted with Air Wisconsin and Republic to
purchase a significant portion of these companies regional
jet capacity for a period of 10 years. US Airways has
determined that it is not the primary beneficiary of these
variable interest entities, based on cash flow analyses.
Additionally, US Airways has analyzed the arrangements with
other carriers with which US Airways has long-term capacity
purchase agreements and has concluded that it is not required to
consolidate any of the entities.
Contractual
Obligations
The following table provides details of our future cash
contractual obligations as of December 31, 2009
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
Total
|
|
|
US Airways Group (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt (2)
|
|
$
|
90
|
|
|
$
|
16
|
|
|
$
|
116
|
|
|
$
|
116
|
|
|
$
|
1,276
|
|
|
$
|
|
|
|
$
|
1,614
|
|
Interest obligations (3)
|
|
|
57
|
|
|
|
54
|
|
|
|
51
|
|
|
|
46
|
|
|
|
22
|
|
|
|
|
|
|
|
230
|
|
US Airways (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt and capital lease obligations (5) (6)
|
|
|
421
|
|
|
|
334
|
|
|
|
305
|
|
|
|
255
|
|
|
|
265
|
|
|
|
1,599
|
|
|
|
3,179
|
|
Interest obligations (3) (6)
|
|
|
152
|
|
|
|
156
|
|
|
|
147
|
|
|
|
104
|
|
|
|
88
|
|
|
|
387
|
|
|
|
1,034
|
|
Aircraft purchase and operating lease commitments (7)
|
|
|
1,360
|
|
|
|
1,443
|
|
|
|
1,441
|
|
|
|
1,860
|
|
|
|
1,571
|
|
|
|
5,815
|
|
|
|
13,490
|
|
Regional capacity purchase agreements (8)
|
|
|
1,013
|
|
|
|
1,032
|
|
|
|
900
|
|
|
|
772
|
|
|
|
771
|
|
|
|
2,347
|
|
|
|
6,835
|
|
Other US Airways Group subsidiaries (9)
|
|
|
11
|
|
|
|
9
|
|
|
|
9
|
|
|
|
7
|
|
|
|
6
|
|
|
|
1
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,104
|
|
|
$
|
3,044
|
|
|
$
|
2,969
|
|
|
$
|
3,160
|
|
|
$
|
3,999
|
|
|
$
|
10,149
|
|
|
$
|
26,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These commitments represent those specifically entered into by
US Airways Group or joint commitments entered into by US Airways
Group and US Airways under which each entity is jointly and
severally liable. |
|
(2) |
|
Excludes $173 million of unamortized debt discount as of
December 31, 2009. |
|
(3) |
|
For variable-rate debt, future interest obligations are shown
above using interest rates in effect as of December 31,
2009. |
|
(4) |
|
Commitments listed separately under US Airways and its wholly
owned subsidiaries represent commitments under agreements
entered into separately by those companies. |
|
(5) |
|
Excludes $94 million of unamortized debt discount as of
December 31, 2009. |
|
(6) |
|
Includes $505 million of future principal payments and
$219 million of future interest payments as of
December 31, 2009, respectively, related to pass through
trust certificates or EETCs associated with mortgage financings
for the purchase of certain aircraft as described above under
Off-Balance Sheet Arrangements and in Note 9(c)
to US Airways Groups and Note 8(c) to US Airways
consolidated financial statements in Item 8A and 8B of this
report, respectively. |
|
(7) |
|
Includes $3.25 billion of future minimum lease payments
related to EETC leveraged leased financings of certain aircraft
as of December 31, 2009, as described above under
Off-Balance Sheet Arrangements and in Note 9(c)
to US Airways Groups and Note 8(c) to US
Airways consolidated financial statements in Item 8A
and 8B of this report, respectively. |
|
(8) |
|
Represents minimum payments under capacity purchase agreements
with third-party Express carriers. |
|
(9) |
|
Represents operating lease commitments entered into by US
Airways Groups other airline subsidiaries Piedmont and PSA. |
65
We expect to fund these cash obligations from funds provided by
operations and future financings, if necessary. The cash
available to us from these sources, however, may not be
sufficient to cover these cash obligations because economic
factors may reduce the amount of cash generated by operations or
increase our costs. For instance, an economic downturn or
general global instability caused by military actions,
terrorism, disease outbreaks and natural disasters could reduce
the demand for air travel, which would reduce the amount of cash
generated by operations. An increase in our costs, either due to
an increase in borrowing costs caused by a reduction in our
credit rating or a general increase in interest rates or due to
an increase in the cost of fuel, maintenance, aircraft and
aircraft engines and parts, could decrease the amount of cash
available to cover the cash obligations. Moreover, the Citicorp
credit facility, our amended credit card agreement with Barclays
and certain of our other financing arrangements contain
significant minimum cash balance requirements. As a result, we
cannot use all of our available cash to fund operations, capital
expenditures and cash obligations without violating these
requirements.
Critical
Accounting Policies and Estimates
The preparation of our consolidated financial statements in
accordance with accounting principles generally accepted in the
United States requires that we make certain estimates and
assumptions that affect the reported amount of assets and
liabilities, revenues and expenses, and the disclosure of
contingent assets and liabilities at the date of our financial
statements. We believe our estimates and assumptions are
reasonable; however, actual results could differ from those
estimates. Critical accounting policies are defined as those
that are reflective of significant judgments and uncertainties
and potentially result in materially different results under
different assumptions and conditions. We have identified the
following critical accounting policies that impact the
preparation of our consolidated financial statements. See also
the summary of significant accounting policies included in the
notes to the financial statements under Items 8A and 8B of
this Annual Report on
Form 10-K
for additional discussion of the application of these estimates
and other accounting policies.
Passenger
Revenue
Passenger revenue is recognized when transportation is provided.
Ticket sales for transportation that has not yet been provided
are initially deferred and recorded as air traffic liability on
the consolidated balance sheets. The air traffic liability
represents tickets sold for future travel dates and estimated
future refunds and exchanges of tickets sold for past travel
dates. The balance in the air traffic liability fluctuates
throughout the year based on seasonal travel patterns and fare
sale activity. Our air traffic liability was $778 million
and $698 million as of December 31, 2009 and 2008,
respectively.
The majority of tickets sold are nonrefundable. A small
percentage of tickets, some of which are partially used tickets,
expire unused. Due to complex pricing structures, refund and
exchange policies, and interline agreements with other airlines,
certain amounts are recognized in revenue using estimates
regarding both the timing of the revenue recognition and the
amount of revenue to be recognized. These estimates are
generally based on the analysis of our historical data.
Estimated future refunds and exchanges included in the air
traffic liability are routinely evaluated based on subsequent
activity to validate the accuracy of our estimates. Holding
other factors constant, a 10% change in our estimate of the
amount refunded, exchanged or forfeited for 2009 would result in
a $29 million change in our passenger revenue, which
represents less than 1% of our passenger revenue.
Passenger traffic commissions and related fees are expensed when
the related revenue is recognized. Passenger traffic commissions
and related fees not yet recognized are included as a prepaid
expense.
Impairment
of Intangible and Other Assets
We assess the impairment of long-lived assets and intangible
assets whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. In addition, our
international route authorities and trademark intangible assets
are classified as indefinite lived assets and are reviewed for
impairment annually. Factors which could trigger an impairment
review include the following: significant changes in the manner
of use of the assets; significant underperformance relative to
historical or projected future operating results; or significant
negative industry or economic trends. An impairment has occurred
when the future undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount of
those items. Cash flow estimates are
66
based on historical results adjusted to reflect
managements best estimate of future market and operating
conditions. The net carrying value of assets not recoverable is
reduced to fair value. Estimates of fair value represent
managements best estimate based on appraisals, industry
trends and reference to market rates and transactions. Changes
in industry capacity and demand for air transportation can
significantly impact the fair value of aircraft and related
assets.
We performed the annual impairment test on our international
route authorities and trademarks during the fourth quarter of
2009. The fair values of international route authorities were
assessed using the market approach. The market approach took
into consideration relevant supply and demand factors at the
related airport locations as well as available market sale and
lease data. For trademarks, we utilized a form of the income
approach known as the relief-from-royalty method. As a result of
our annual impairment test on international route authorities,
we recorded a $16 million impairment charge related to the
decline in value of certain international routes. We will
perform our next annual impairment test on October 1, 2010.
Investments
in Marketable Securities
As of December 31, 2009, all noncurrent investments in
marketable securities, consisting entirely of auction rate
securities, are classified as available for sale. We determine
the appropriate classification of securities at the time of
purchase and re-evaluate such designation as of each balance
sheet date.
Our
available-for-sale
securities are measured at fair value on a recurring basis. Fair
value is an exit price, representing the amount that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. As such, fair
value is a market-based measurement that should be determined
based on assumptions that market participants would use in
pricing an asset or liability. We use a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair
value as follows:
|
|
|
|
Level 1.
|
Observable inputs such as quoted prices in active markets;
|
|
Level 2.
|
Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and
|
|
Level 3.
|
Unobservable inputs in which there is little or no market data,
which require the reporting entity to develop its own
assumptions.
|
We estimate the fair value of our auction rate securities based
on the following: (i) the underlying structure of each
security; (ii) the present value of future principal and
interest payments discounted at rates considered to reflect
current market conditions; (iii) consideration of the
probabilities of default, passing a future auction, or
repurchase at par for each period; and (iv) estimates of
the recovery rates in the event of default for each security.
These estimated fair values could change significantly based on
future market conditions.
We review declines in the fair value of our investments in
marketable securities to determine the classification of the
impairment as temporary or
other-than-temporary.
A temporary impairment charge results in an unrealized loss
being recorded in the other comprehensive income component of
stockholders equity. An
other-than-temporary
impairment charge must be separated into the amount representing
the decrease in cash flows expected to be collected from a
security (referred to as credit losses) which is recognized in
earnings and the amount related to other factors (referred to as
noncredit losses) which is recognized in other comprehensive
income. This noncredit loss component of the impairment may only
be classified in other comprehensive income if both of the
following conditions are met (a) the holder of the security
concludes that it does not intend to sell the security and
(b) the holder concludes that it is more likely than not
that the holder will not be required to sell the security before
the security recovers its value. If these conditions are not
met, the noncredit loss must also be recognized in earnings. We
review our investments on an ongoing basis for indications of
possible impairment, and if impairment is identified, we
determine whether the impairment is temporary or
other-than-temporary.
Determination of whether the impairment is temporary or
other-than-temporary
requires significant judgment. The primary factors that we
consider in classifying the impairment include the extent and
period of time the fair value of each investment has declined
below its cost basis, the expected holding or recovery period
for each investment, and our intent and ability to hold each
investment until recovery. Subsequent increases in the fair
value of our investments in marketable securities are recorded
to other comprehensive income and accreted to interest income
over the period the gains are expected to be realized.
67
Refer to the Liquidity and Capital Resources section
for further discussion of our investments in marketable
securities.
Frequent
Traveler Program
The Dividend Miles frequent traveler program awards mileage
credits to passengers who fly on US Airways and Star Alliance
carriers and certain other partner airlines that participate in
our program. Mileage credits can be redeemed for travel on US
Airways or other participating partner airlines, in which case
we pay a fee. We use the incremental cost method to account for
the portion of our frequent traveler program liability related
to mileage credits earned by Dividend Miles members through
purchased flights. We have an obligation to provide future
travel when these mileage credits are redeemed and have
therefore recognized an expense and recorded a liability for
mileage credits outstanding.
The liability for outstanding mileage credits is valued based on
the estimated incremental cost of carrying one additional
passenger. Incremental cost includes unit costs incurred by us
for fuel, credit card fees, insurance, denied boarding
compensation, food and beverages as well as fees incurred when
travel awards are redeemed on partner airlines. In addition, we
also include in the determination of our incremental cost the
amount of redemption fees expected to be collected from Dividend
Miles members. These redemption fees reduce our incremental
cost. No profit or overhead margin is included in the accrual of
incremental cost.
Dividend Miles members may not reach the mileage credit
threshold required to redeem a travel award. Additionally,
outstanding mileage credits are subject to expiration if unused.
Therefore, in calculating the liability we estimate how many
mileage credits will never be redeemed for travel and exclude
those mileage credits from the estimate of the liability.
Estimates are also made for the number of miles that will be
used per award redemption and the number of travel awards that
will be redeemed on partner airlines. These estimates are based
on historical program experience as well as consideration of
enacted program changes, as applicable. Changes in the liability
resulting from members earning additional mileage credits or
changes in estimates are recorded in the statement of
operations. A change to certain estimates in the calculation of
incremental cost could have a material impact on the liability.
At December 31, 2009, we have assumed 11% of our future
travel award redemptions will be on partner airlines. A 1%
increase or decrease in the percentage of travel awards redeemed
on partner airlines would have an $8 million impact on the
liability as of December 31, 2009.
As of December 31, 2009, the incremental cost liability for
outstanding mileage credits expected to be redeemed for future
travel awards accrued on our balance sheet within other accrued
expenses was $130 million, representing 129.1 billion
mileage credits.
We also sell frequent flyer program mileage credits to
participating airline partners and non-airline business
partners. Revenue earned from selling these mileage credits to
other companies is recognized in two components. A portion of
the revenue from these sales is deferred, representing the
estimated fair value of the transportation component of the sold
mileage credits. The deferred revenue for the transportation
component is amortized on a straight-line basis over the period
in which the credits are expected to be redeemed for travel as
passenger revenue, which is currently estimated to be
28 months. The marketing component, which is earned at the
time the miles are sold, is recognized in other revenues at the
time of the sale. As of December 31, 2009, we had
$212 million in deferred revenue from the sale of mileage
credits included in other accrued expenses on our balance sheet.
A change to the estimated fair value of the transportation
component could have a significant impact on revenue. A 10%
increase or decrease in the estimated fair value of the
transportation component would have a $17 million impact on
revenue recognized in 2009.
The number of travel award redemptions during the year ended
December 31, 2009 was approximately 0.8 million,
representing approximately 4% of US Airways mainline RPMs
during that period. The use of inventory management techniques
minimizes the displacement of revenue passengers by passengers
traveling on award tickets.
68
Deferred
Tax Asset Valuation Allowance
At December 31, 2009, US Airways Group has a valuation
allowance against its net deferred tax assets. In assessing the
realizability of the deferred tax assets, we considered whether
it was more likely than not that some portion or all of the
deferred tax assets will be realized. NOLs generated in 2009
were also fully reserved by a valuation allowance.
Recent
Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 168, The FASB
Accounting Standards
Codificationtm
and the Hierarchy of Generally Accepted Accounting
Principles A Replacement of FASB Statement
No. 162. SFAS No. 168 establishes the FASB
Accounting Standards
Codificationtm
(the Codification or ASC) as the single
source of authoritative U.S. GAAP recognized by the FASB to
be applied by nongovernmental entities. Rules and interpretive
releases of the SEC under authority of federal securities laws
are also sources of authoritative U.S. GAAP for SEC
registrants. Effective July 1, 2009, the Codification
superseded all existing non-SEC accounting and reporting
standards.
In April 2009, the FASB issued FASB Staff Position
(FSP) Financial Accounting Standards
(FAS)
115-2 and
FAS 124-2,
Recognition and Presentation of
Other-Than-Temporary
Impairments, as adopted by the Codification on
July 1, 2009. This FSP changes existing guidance for
determining whether an impairment of debt securities is
other-than-temporary.
The FSP requires
other-than-temporary
impairments to be separated into the amount representing the
decrease in cash flows expected to be collected from a security
(referred to as credit losses) which is recognized in earnings
and the amount related to other factors (referred to as
noncredit losses) which is recognized in other comprehensive
income. This noncredit loss component of the impairment may only
be classified in other comprehensive income if both of the
following conditions are met (a) the holder of the security
concludes that it does not intend to sell the security and
(b) the holder concludes that it is more likely than not
that the holder will not be required to sell the security before
the security recovers its value. If these conditions are not
met, the noncredit loss must also be recognized in earnings.
When adopting the FSP, an entity is required to record a
cumulative effect adjustment as of the beginning of the period
of adoption to reclassify the noncredit component of a
previously recognized
other-than-temporary
impairment from retained earnings to accumulated other
comprehensive income. FSP
FAS 115-2
and
FAS 124-2
is effective for interim and annual periods ending after
June 15, 2009. We adopted FSP
FAS 115-2
and
FAS 124-2
as of April 1, 2009. We do not meet the conditions
necessary to recognize the noncredit loss component of our
auction rate securities in other comprehensive income.
Accordingly, we did not reclassify any previously recognized
other-than-temporary
impairment losses from retained earnings to accumulated other
comprehensive income and the adoption of FSP
FAS 115-2
and
FAS 124-2
had no material impact on our consolidated financial statements.
In June 2009, the FASB issued SFAS No. 167,
Amendments to FASB Interpretation (FIN)
No. 46(R), which was codified in December 2009 with
the issuance of Accounting Standards Update (ASU)
No. 2009-17,
Consolidations (Topic 810) Improvements to
Financial Reporting by Enterprises Involved with Variable
Interest Entities. ASU
No. 2009-17
changes how a reporting entity determines when an entity that is
insufficiently capitalized or is not controlled through voting
(or similar rights) should be consolidated. The determination of
whether a reporting entity is required to consolidate another
entity is based on, among other things, the other entitys
purpose and design and the reporting entitys ability to
direct the activities of the other entity that most
significantly impact the other entitys economic
performance. ASU
No. 2009-17
will require a reporting entity to provide additional
disclosures about its involvement with variable interest
entities and any significant changes in risk exposure due to
that involvement. A reporting entity will be required to
disclose how its involvement with a variable interest entity
affects the reporting entitys financial statements. ASU
No. 2009-17
is effective for fiscal years beginning after November 15,
2009, and interim periods within those fiscal years. We are
currently evaluating the requirements of ASU
No. 2009-17
and have not yet determined the impact on our consolidated
financial statements.
In October 2009, the FASB issued ASU
No. 2009-13,
Revenue Recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements. ASU
No. 2009-13
addresses the accounting for multiple-deliverable arrangements
to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit. This
guidance establishes a selling price hierarchy for determining
the selling price of a deliverable, which is based on:
69
(a) vendor-specific objective evidence;
(b) third-party evidence; or (c) estimates. This
guidance also eliminates the residual method of allocation and
requires that arrangement consideration be allocated at the
inception of the arrangement to all deliverables using the
relative selling price method. In addition, this guidance
significantly expands required disclosures related to a
vendors multiple-deliverable revenue arrangements. ASU
No. 2009-13
is effective prospectively for revenue arrangements entered into
or materially modified in fiscal years beginning on or after
June 15, 2010 and early adoption is permitted. A company
may elect, but will not be required, to adopt the amendments in
ASU
No. 2009-13
retrospectively for all prior periods. We are currently
evaluating the requirements of ASU
No. 2009-13
and have not yet determined the impact on our consolidated
financial statements.
Item 7A. Quantitative
and Qualitative Disclosures About Market Risk
Market
Risk Sensitive Instruments
Our primary market risk exposures include commodity price risk
(i.e., the price paid to obtain aviation fuel) and interest rate
risk. The potential impact of adverse increases in these risks
is discussed below. The following sensitivity analyses do not
consider the effects that an adverse change may have on the
overall economy nor do they consider additional actions we may
take to mitigate our exposure to these changes. Actual results
of changes in prices or rates may differ materially from the
following hypothetical results.
Commodity
Price Risk
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally
outside of our control. Accordingly, the price and availability
of aviation fuel, as well as other petroleum products, can be
unpredictable. Prices and availability may be affected by many
factors, including:
|
|
|
|
|
the impact of global political instability on crude production;
|
|
|
|
unexpected changes to the availability of petroleum products due
to disruptions in distribution systems or refineries as
evidenced in the third quarter of 2005 when Hurricane Katrina
and Hurricane Rita caused widespread disruption to oil
production, refinery operations and pipeline capacity along
certain portions of the U.S. Gulf Coast;
|
|
|
|
unpredicted increases to oil demand due to weather or the pace
of economic growth;
|
|
|
|
inventory levels of crude, refined products and natural
gas; and
|
|
|
|
other factors, such as the relative fluctuation in value between
the U.S. dollar and other major currencies and influence of
speculative positions on the futures exchanges.
|
Our 2010 forecasted mainline and Express fuel consumption is
approximately 1.42 billion gallons, and a one cent per
gallon increase in aviation fuel price results in a
$14 million annual increase in expense. Since the third
quarter of 2008, we have not entered into any new fuel hedging
transactions and, as of December 31, 2009, we had no
remaining outstanding fuel hedging contracts.
Interest
Rate Risk
Our exposure to interest rate risk relates primarily to our cash
equivalents, investment portfolios and variable rate debt
obligations. At December 31, 2009, our variable-rate
long-term debt obligations of approximately $3.33 billion
represented approximately 69% of our total long-term debt. If
interest rates increased 10% in 2009, the impact on our results
of operations would have been approximately $13 million of
additional interest expense. Additional information regarding
our debt obligations as of December 31, 2009 is as follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected Maturity Date
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fixed-rate debt
|
|
$
|
240
|
|
|
$
|
159
|
|
|
$
|
138
|
|
|
$
|
76
|
|
|
$
|
252
|
|
|
$
|
601
|
|
|
$
|
1,466
|
|
Weighted avg. interest rate
|
|
|
9.4
|
%
|
|
|
9.0
|
%
|
|
|
8.4
|
%
|
|
|
8.2
|
%
|
|
|
8.4
|
%
|
|
|
7.5
|
%
|
|
|
|
|
Variable-rate debt
|
|
$
|
271
|
|
|
$
|
191
|
|
|
$
|
283
|
|
|
$
|
295
|
|
|
$
|
1,289
|
|
|
$
|
998
|
|
|
$
|
3,327
|
|
Weighted avg. interest rate
|
|
|
3.9
|
%
|
|
|
3.8
|
%
|
|
|
3.7
|
%
|
|
|
3.5
|
%
|
|
|
3.5
|
%
|
|
|
3.7
|
%
|
|
|
|
|
70
US Airways Group and US Airways have total future aircraft and
spare engine purchase commitments of approximately
$6.09 billion. We expect to finance such commitments either
by entering into leases or debt agreements. Changes in interest
rates will impact the cost of such financings.
At December 31, 2009, included within our investment
portfolio are $347 million par value of investments in
auction rate securities. With the liquidity issues experienced
in the global credit and capital markets, all of our auction
rate securities have experienced failed auctions since August
2007. The estimated fair value of these auction rate securities
no longer approximates par value. As of December 31, 2009,
the fair value of our auction rate securities was
$203 million. We continue to monitor the market for auction
rate securities and consider its impact (if any) on the fair
value of our investments. If the current market conditions
deteriorate, we may be required to record additional impairment
charges in other nonoperating expense, net in future periods.
We believe that, based on our current unrestricted cash and cash
equivalents balance at December 31, 2009, the current lack
of liquidity in our investments in auction rate securities will
not have a material impact on our liquidity, our cash flow or
our ability to fund our operations. See Notes 6(b) and 5(b)
in Items 8A and 8B, respectively, of this report for
additional information.
71
Item 8A. Consolidated
Financial Statements and Supplementary Data of US Airways Group,
Inc.
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
US Airways Group, Inc.:
We have audited the accompanying consolidated balance sheets of
US Airways Group, Inc. and subsidiaries (the Company) as of
December 31, 2009 and 2008, and the related consolidated
statements of operations, stockholders equity (deficit),
and cash flows for each of the years in the three-year period
ended December 31, 2009. These consolidated financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of US Airways Group, Inc. and
subsidiaries as of December 31, 2009 and 2008, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2009, in
conformity with U.S. generally accepted accounting
principles.
As discussed in Note 7 to the consolidated financial
statements, the Company adopted the provisions of
SFAS No. 157, Fair Value Measurements (included
in FASB ASC Topic 320, Investments-Debt and Equity
Securities), as of January 1, 2008.
As discussed in Note 8 to the consolidated financial
statements, the Company adopted the measurement date provisions
of SFAS No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans
(included in FASB ASC Topic 960, Plan
Accounting Defined Benefit Pension Plans), as of
January 1, 2008.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
December 31, 2009, based on criteria established in
Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 16, 2010
expressed an unqualified opinion on the effectiveness of the
Companys internal control over financial reporting.
/s/ KPMG LLP
Phoenix, Arizona
February 16, 2010
72
US
Airways Group, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2009,
2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions, except share and per share amounts)
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline passenger
|
|
$
|
6,752
|
|
|
$
|
8,183
|
|
|
$
|
8,135
|
|
Express passenger
|
|
|
2,503
|
|
|
|
2,879
|
|
|
|
2,698
|
|
Cargo
|
|
|
100
|
|
|
|
144
|
|
|
|
138
|
|
Other
|
|
|
1,103
|
|
|
|
912
|
|
|
|
729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
10,458
|
|
|
|
12,118
|
|
|
|
11,700
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
|
1,863
|
|
|
|
3,618
|
|
|
|
2,630
|
|
Loss (gain) on fuel hedging instruments, net
|
|
|
7
|
|
|
|
356
|
|
|
|
(245
|
)
|
Salaries and related costs
|
|
|
2,165
|
|
|
|
2,231
|
|
|
|
2,302
|
|
Express expenses
|
|
|
2,519
|
|
|
|
3,049
|
|
|
|
2,594
|
|
Aircraft rent
|
|
|
695
|
|
|
|
724
|
|
|
|
727
|
|
Aircraft maintenance
|
|
|
700
|
|
|
|
783
|
|
|
|
635
|
|
Other rent and landing fees
|
|
|
560
|
|
|
|
562
|
|
|
|
536
|
|
Selling expenses
|
|
|
382
|
|
|
|
439
|
|
|
|
453
|
|
Special items, net
|
|
|
55
|
|
|
|
76
|
|
|
|
99
|
|
Depreciation and amortization
|
|
|
242
|
|
|
|
215
|
|
|
|
189
|
|
Goodwill impairment
|
|
|
|
|
|
|
622
|
|
|
|
|
|
Other
|
|
|
1,152
|
|
|
|
1,243
|
|
|
|
1,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
10,340
|
|
|
|
13,918
|
|
|
|
11,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
118
|
|
|
|
(1,800
|
)
|
|
|
533
|
|
Nonoperating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
24
|
|
|
|
83
|
|
|
|
172
|
|
Interest expense, net
|
|
|
(304
|
)
|
|
|
(258
|
)
|
|
|
(277
|
)
|
Other, net
|
|
|
(81
|
)
|
|
|
(240
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating expense, net
|
|
|
(361
|
)
|
|
|
(415
|
)
|
|
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(243
|
)
|
|
|
(2,215
|
)
|
|
|
430
|
|
Income tax provision (benefit)
|
|
|
(38
|
)
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
|
$
|
423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
|
$
|
4.62
|
|
Diluted earnings (loss) per share
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
|
$
|
4.52
|
|
Shares used for computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
91,536
|
|
Diluted
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
95,603
|
|
See accompanying notes to consolidated financial statements.
73
US
Airways Group, Inc.
Consolidated Balance Sheets
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions, except share
|
|
|
|
and per share amounts)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,299
|
|
|
$
|
1,034
|
|
Investments in marketable securities
|
|
|
|
|
|
|
20
|
|
Restricted cash
|
|
|
|
|
|
|
186
|
|
Accounts receivable, net
|
|
|
285
|
|
|
|
293
|
|
Materials and supplies, net
|
|
|
227
|
|
|
|
201
|
|
Prepaid expenses and other
|
|
|
520
|
|
|
|
684
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,331
|
|
|
|
2,418
|
|
Property and equipment
|
|
|
|
|
|
|
|
|
Flight equipment
|
|
|
3,852
|
|
|
|
3,157
|
|
Ground property and equipment
|
|
|
883
|
|
|
|
816
|
|
Less accumulated depreciation and amortization
|
|
|
(1,151
|
)
|
|
|
(954
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
3,584
|
|
|
|
3,019
|
|
Equipment purchase deposits
|
|
|
112
|
|
|
|
267
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
3,696
|
|
|
|
3,286
|
|
Other assets
|
|
|
|
|
|
|
|
|
Other intangibles, net of accumulated amortization of
$113 million and $87 million, respectively
|
|
|
503
|
|
|
|
545
|
|
Restricted cash
|
|
|
480
|
|
|
|
540
|
|
Investments in marketable securities
|
|
|
203
|
|
|
|
187
|
|
Other assets
|
|
|
241
|
|
|
|
238
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
1,427
|
|
|
|
1,510
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,454
|
|
|
$
|
7,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Current maturities of debt and capital leases
|
|
$
|
502
|
|
|
$
|
362
|
|
Accounts payable
|
|
|
337
|
|
|
|
797
|
|
Air traffic liability
|
|
|
778
|
|
|
|
698
|
|
Accrued compensation and vacation
|
|
|
178
|
|
|
|
158
|
|
Accrued taxes
|
|
|
141
|
|
|
|
142
|
|
Other accrued expenses
|
|
|
853
|
|
|
|
887
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,789
|
|
|
|
3,044
|
|
Noncurrent liabilities and deferred credits
|
|
|
|
|
|
|
|
|
Long-term debt and capital leases, net of current maturities
|
|
|
4,024
|
|
|
|
3,623
|
|
Deferred gains and credits, net
|
|
|
377
|
|
|
|
383
|
|
Postretirement benefits other than pensions
|
|
|
130
|
|
|
|
108
|
|
Employee benefit liabilities and other
|
|
|
489
|
|
|
|
550
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent liabilities and deferred credits
|
|
|
5,020
|
|
|
|
4,664
|
|
Commitments and contingencies (Note 9)
|
|
|
|
|
|
|
|
|
Stockholders deficit
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 400,000,000 shares
authorized, 161,520,457 and 161,102,833 shares issued and
outstanding at December 31, 2009; 200,000,000 shares
authorized, 114,527,377 and 114,113,384 shares issued and
outstanding at December 31, 2008
|
|
|
2
|
|
|
|
1
|
|
Additional paid-in capital
|
|
|
2,107
|
|
|
|
1,789
|
|
Accumulated other comprehensive income
|
|
|
90
|
|
|
|
65
|
|
Accumulated deficit
|
|
|
(2,541
|
)
|
|
|
(2,336
|
)
|
Treasury stock, common stock, 417,624 and 413,993 shares at
December 31, 2009 and 2008, respectively
|
|
|
(13
|
)
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders deficit
|
|
|
(355
|
)
|
|
|
(494
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit
|
|
$
|
7,454
|
|
|
$
|
7,214
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
74
US
Airways Group, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2009,
2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
|
$
|
423
|
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
267
|
|
|
|
240
|
|
|
|
212
|
|
Gain on curtailment of pension benefit
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
Loss on dispositions of property and equipment
|
|
|
61
|
|
|
|
7
|
|
|
|
1
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
Gain on sale of investments
|
|
|
|
|
|
|
(1
|
)
|
|
|
(17
|
)
|
Goodwill impairment
|
|
|
|
|
|
|
622
|
|
|
|
|
|
Auction rate security impairment
|
|
|
10
|
|
|
|
214
|
|
|
|
10
|
|
Asset impairment
|
|
|
21
|
|
|
|
13
|
|
|
|
|
|
Non-cash tax benefits
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
Utilization of acquired net operating loss carryforwards
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Change in fair value of fuel hedging instruments, net
|
|
|
(375
|
)
|
|
|
496
|
|
|
|
(187
|
)
|
Amortization of deferred credits and rent
|
|
|
(62
|
)
|
|
|
(41
|
)
|
|
|
(40
|
)
|
Amortization of debt discount and issuance costs
|
|
|
56
|
|
|
|
25
|
|
|
|
18
|
|
Amortization of actuarial gains
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
|
|
Stock-based compensation
|
|
|
20
|
|
|
|
34
|
|
|
|
32
|
|
Debt extinguishment costs
|
|
|
6
|
|
|
|
7
|
|
|
|
18
|
|
Other
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
186
|
|
|
|
(184
|
)
|
|
|
(1
|
)
|
Decrease in accounts receivable, net
|
|
|
8
|
|
|
|
74
|
|
|
|
14
|
|
Decrease (increase) in materials and supplies, net
|
|
|
(29
|
)
|
|
|
49
|
|
|
|
(18
|
)
|
Decrease (increase) in prepaid expenses and other
|
|
|
162
|
|
|
|
(259
|
)
|
|
|
(52
|
)
|
Decrease (increase) in other assets, net
|
|
|
(14
|
)
|
|
|
4
|
|
|
|
(5
|
)
|
Increase (decrease) in accounts payable
|
|
|
(78
|
)
|
|
|
96
|
|
|
|
(11
|
)
|
Increase (decrease) in air traffic liability
|
|
|
80
|
|
|
|
(134
|
)
|
|
|
(22
|
)
|
Increase (decrease) in accrued compensation and vacation
|
|
|
20
|
|
|
|
(67
|
)
|
|
|
(37
|
)
|
Decrease in accrued taxes
|
|
|
(1
|
)
|
|
|
(10
|
)
|
|
|
(29
|
)
|
Increase (decrease) in other liabilities
|
|
|
(36
|
)
|
|
|
60
|
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
59
|
|
|
|
(980
|
)
|
|
|
451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(683
|
)
|
|
|
(1,068
|
)
|
|
|
(603
|
)
|
Purchases of marketable securities
|
|
|
|
|
|
|
(299
|
)
|
|
|
(2,591
|
)
|
Sales of marketable securities
|
|
|
52
|
|
|
|
505
|
|
|
|
3,203
|
|
Proceeds from sale of other investments
|
|
|
|
|
|
|
4
|
|
|
|
56
|
|
Decrease (increase) in long-term restricted cash
|
|
|
60
|
|
|
|
(74
|
)
|
|
|
200
|
|
Proceeds from sale-leaseback transactions and dispositions of
property and equipment
|
|
|
76
|
|
|
|
17
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(495
|
)
|
|
|
(915
|
)
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of debt and capital lease obligations
|
|
|
(407
|
)
|
|
|
(734
|
)
|
|
|
(1,680
|
)
|
Proceeds from issuance of debt
|
|
|
919
|
|
|
|
1,586
|
|
|
|
1,798
|
|
Deferred financing costs
|
|
|
(14
|
)
|
|
|
(50
|
)
|
|
|
(9
|
)
|
Proceeds from issuance of common stock, net
|
|
|
203
|
|
|
|
179
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
701
|
|
|
|
981
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
265
|
|
|
|
(914
|
)
|
|
|
832
|
|
Cash and cash equivalents at beginning of year
|
|
|
1,034
|
|
|
|
1,948
|
|
|
|
1,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
1,299
|
|
|
$
|
1,034
|
|
|
$
|
1,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
75
US
Airways Group, Inc.
Consolidated Statements of Stockholders
Equity (Deficit)
For the Years Ended December 31, 2009,
2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income
|
|
|
Stock
|
|
|
Total
|
|
|
|
(In millions, except share amounts)
|
|
|
Balance at December 31, 2006
|
|
$
|
1
|
|
|
$
|
1,541
|
|
|
$
|
(542
|
)
|
|
$
|
3
|
|
|
$
|
(13
|
)
|
|
$
|
990
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
423
|
|
|
|
|
|
|
|
|
|
|
|
423
|
|
Issuance of 580,661 shares of common stock pursuant to
employee stock plans
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
Unrealized loss on
available-for-sale
securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48
|
)
|
|
|
|
|
|
|
(48
|
)
|
Pension and other postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
1
|
|
|
|
1,576
|
|
|
|
(119
|
)
|
|
|
10
|
|
|
|
(13
|
)
|
|
|
1,455
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(2,215
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,215
|
)
|
Issuance of 21,850,000 shares of common stock pursuant to a
public stock offering, net of offering costs
|
|
|
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179
|
|
Issuance of 398,820 shares of common stock pursuant to
employee stock plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
Recognition of previous unrealized loss on
available-for-sale
securities, net now deemed
other-than-temporary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
48
|
|
Effect of adopting the measurement date provisions of
employers accounting for other postretirement benefit plans
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Pension and other postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
1
|
|
|
|
1,789
|
|
|
|
(2,336
|
)
|
|
|
65
|
|
|
|
(13
|
)
|
|
|
(494
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(205
|
)
|
|
|
|
|
|
|
|
|
|
|
(205
|
)
|
Issuance of 46,495,790 shares of common stock pursuant to
public stock offerings, net of offering costs
|
|
|
1
|
|
|
|
202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203
|
|
Equity component of convertible debt issued
|
|
|
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96
|
|
Issuance of 497,290 shares of common stock and acquisition
of 3,631 shares of treasury stock pursuant to employee
stock plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
Net unrealized gain on
available-for-sale
securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
35
|
|
Pension and other postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
2
|
|
|
$
|
2,107
|
|
|
$
|
(2,541
|
)
|
|
$
|
90
|
|
|
$
|
(13
|
)
|
|
$
|
(355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
76
US
Airways Group, Inc.
Notes to Consolidated Financial Statements
|
|
1.
|
Basis of
Presentation and Summary of Significant Accounting
Policies
|
|
|
(a)
|
Nature
of Operations and Operating Environment
|
US Airways Group, Inc. (US Airways Group or the
Company), a Delaware corporation, is a holding
company whose primary business activity is the operation of a
major network air carrier through its wholly owned subsidiaries
US Airways, Inc. (US Airways), Piedmont Airlines,
Inc. (Piedmont), PSA Airlines, Inc.
(PSA), Material Services Company, Inc.
(MSC) and Airways Assurance Limited
(AAL). Effective upon US Airways Groups
emergence from bankruptcy on September 27, 2005, US Airways
Group merged with America West Holdings Corporation
(America West Holdings), with US Airways Group as
the surviving corporation.
The Company operates the fifth largest airline in the United
States as measured by domestic revenue passenger miles
(RPMs) and available seat miles (ASMs).
US Airways has hubs in Charlotte, Philadelphia and Phoenix and a
focus city at Ronald Reagan Washington National Airport. US
Airways offers scheduled passenger service on more than 3,000
flights daily to more than 190 communities in the United States,
Canada, Mexico, Europe, the Middle East, the Caribbean, Central
and South America. US Airways also has an established East Coast
route network, including the US Airways Shuttle service, with a
substantial presence at Washington National Airport. US Airways
had approximately 51 million passengers boarding its
mainline flights in 2009. During 2009, US Airways mainline
operation provided regularly scheduled service or seasonal
service at 138 airports, while the US Airways Express network
served 152 airports in the United States, Canada and Mexico,
including 75 airports also served by the mainline operation. US
Airways Express air carriers had approximately 27 million
passengers boarding their planes in 2009. As of
December 31, 2009, US Airways operated 349 mainline jets
and is supported by the Companys regional airline
subsidiaries and affiliates operating as US Airways Express
either under capacity purchase or prorate agreements, which
operated approximately 236 regional jets and 60 turboprops.
As of December 31, 2009, US Airways employed approximately
31,300 active full-time equivalent employees. The Companys
Express subsidiaries, Piedmont and PSA, employed approximately
4,700 active full-time equivalent employees. Approximately 87%
of employees are covered by collective bargaining agreements
with various labor unions. US Airways pilots and flight
attendants are currently working under the terms of their
respective US Airways or America West Airlines, Inc.
(AWA) collective bargaining agreements, as modified
by transition agreements reached in connection with the merger.
|
|
(b)
|
Basis
of Presentation
|
The accompanying consolidated financial statements include the
accounts of US Airways Group and its wholly owned subsidiaries.
The Company has the ability to move funds freely between its
operating subsidiaries to support operations. These transfers
are recognized as intercompany transactions. All significant
intercompany accounts and transactions have been eliminated.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. The principal areas of judgment
relate to passenger revenue recognition, impairment of
long-lived and intangible assets, valuation of investments in
marketable securities, the frequent traveler program and the
deferred tax asset valuation allowance.
The Company evaluated subsequent events through the date the
accompanying financial statements were issued, which was
February 16, 2010.
|
|
(c)
|
Cash
and Cash Equivalents
|
Cash equivalents consist primarily of cash in money market
securities and highly liquid debt instruments. All highly liquid
investments purchased within three months of maturity are
classified as cash equivalents. Cash
77
equivalents are stated at cost, which approximates fair value
due to the highly liquid nature and short-term maturities of the
underlying securities.
As of December 31, 2009 and 2008, the Companys cash
and cash equivalents are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash and money market funds
|
|
$
|
1,299
|
|
|
$
|
1,024
|
|
Corporate bonds
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
$
|
1,299
|
|
|
$
|
1,034
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
Investments
in Marketable Securities
|
All highly liquid investments with maturities greater than three
months but less than one year are classified as current
investments in marketable securities. Investments in marketable
securities classified as noncurrent assets on the Companys
balance sheet represent investments expected to be converted to
cash after 12 months. Debt securities, other than auction
rate securities, are classified as held to maturity.
Held-to-maturity
investments are carried at amortized cost, which approximates
fair value. Investments in auction rate securities are
classified as available for sale and recorded at fair value.
As of December 31, 2009 and 2008, the Companys
investments in marketable securities are classified as follows
(in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Held-to-maturity
securities:
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
|
|
|
$
|
20
|
|
|
|
|
|
|
|
|
|
|
Total investments in marketable securities-current
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
Auction rate securities
|
|
|
203
|
|
|
|
187
|
|
|
|
|
|
|
|
|
|
|
Total investments in marketable securities-noncurrent
|
|
$
|
203
|
|
|
$
|
187
|
|
|
|
|
|
|
|
|
|
|
See Note 6(b) for more information on the Companys
investments in marketable securities.
Restricted cash includes deposits in trust accounts primarily to
fund certain taxes and fees and workers compensation
claims, deposits securing certain letters of credit and surety
bonds and deposits held by institutions that process credit card
sales transactions. Restricted cash is stated at cost, which
approximates fair value.
|
|
(f)
|
Materials
and Supplies, Net
|
Inventories of materials and supplies are valued at the lower of
cost or fair value. Costs are determined using average costing
methods. An allowance for obsolescence is provided for flight
equipment expendable and repairable parts. These items are
generally charged to expense when issued for use. During 2009,
the Company recorded a $3 million write down related to
certain Express spare parts inventory to reflect lower of cost
or fair value. During 2008, the Company recorded a
$5 million write down related to its Boeing 737 spare parts
inventory to reflect lower of cost or fair value.
|
|
(g)
|
Property
and Equipment
|
Property and equipment are recorded at cost. Interest expense
related to the acquisition of certain property and equipment,
including aircraft purchase deposits, is capitalized as an
additional cost of the asset or as a leasehold improvement if
the asset is leased. Interest capitalized for the years ended
December 31, 2009, 2008 and 2007 was $10 million,
$6 million and $4 million, respectively. Property and
equipment is depreciated and amortized to residual values over
the estimated useful lives or the lease term, whichever is less,
using the straight-line method. Costs of major improvements that
enhance the usefulness of the asset are capitalized and
depreciated over the estimated useful life of the asset or the
modifications, whichever is less.
78
The estimated useful lives of owned aircraft, jet engines, other
flight equipment and rotable parts range from five to
30 years. Leasehold improvements relating to flight
equipment and other property on operating leases are amortized
over the life of the lease or the life of the asset, whichever
is shorter, on a straight-line basis. The estimated useful lives
for other owned property and equipment range from three to
12 years and range from 18 to 30 years for training
equipment and buildings.
The Company records impairment losses on long-lived assets used
in operations when events and circumstances indicate that the
assets might be impaired. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of
an asset to undiscounted future net cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less cost to
sell.
The Company recorded a $13 million impairment charge in
2008 related to the decline in the fair value of Boeing 737
rotable parts included in flight equipment on its consolidated
balance sheet. The Company recorded no impairment charges in the
years ended December 31, 2009 and 2007.
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. A valuation allowance is
established, if necessary, for the amount of any tax benefits
that, based on available evidence, are not expected to be
realized.
|
|
(i)
|
Goodwill
and Other Intangibles, Net
|
Goodwill
In 2008, the Company recorded a $622 million impairment
charge to write off all the goodwill created by the merger of US
Airways Group and America West Holdings in September 2005. The
Company performed an interim goodwill impairment test during
2008 as a result of a significant increase in fuel prices,
declines in the Companys stock price and mainline capacity
reductions, which led to no implied fair value of goodwill.
Other
intangible assets
Other intangible assets consist primarily of trademarks,
international route authorities, airport take-off and landing
slots and airport gates. Intangible assets with estimable useful
lives are amortized over their respective estimated useful lives
to their estimated residual values and reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. The following table
provides information relating to the Companys intangible
assets subject to amortization as of December 31, 2009 and
2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Airport take-off and landing slots
|
|
$
|
495
|
|
|
$
|
495
|
|
Airport gate leasehold rights
|
|
|
52
|
|
|
|
52
|
|
Accumulated amortization
|
|
|
(113
|
)
|
|
|
(87
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
434
|
|
|
$
|
460
|
|
|
|
|
|
|
|
|
|
|
The intangible assets subject to amortization generally are
amortized over 25 years for airport take-off and landing
slots and over the term of the lease for airport gate leasehold
rights on a straight-line basis and are included in depreciation
and amortization on the consolidated statements of operations.
For the years ended December 31, 2009, 2008 and 2007, the
Company recorded amortization expense of $26 million,
$25 million and $25 million, respectively, related to
its intangible assets. The Company expects to record annual
amortization expense of $26 million in 2010,
$23 million in year 2011, $22 million in year 2012,
$22 million in year 2013, $22 million in year 2014 and
$319 million thereafter related to these intangible assets.
79
Indefinite lived assets are not amortized but instead are
reviewed for impairment annually and more frequently if events
or circumstances indicate that the asset may be impaired. The
Company had $39 million and $55 million of
international route authorities as of December 31, 2009 and
2008, respectively. As of December 31, 2009 and 2008, the
Company had $30 million of trademarks on its balance sheets.
The Company performed the annual impairment test on its
international route authorities and trademarks during the fourth
quarter of 2009. The fair values of international route
authorities were assessed using the market approach. The market
approach took into consideration relevant supply and demand
factors at the related airport locations as well as available
market sale and lease data. For trademarks, the Company utilized
a form of the income approach known as the relief-from-royalty
method. As a result of the Companys annual impairment test
on its international route authorities, the Company recorded a
$16 million impairment charge related to the decline in
fair value of certain international routes. The Company will
perform its next annual impairment test on October 1, 2010.
Other assets consist of the following as of December 31,
2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Aircraft leasehold interest, net
|
|
$
|
77
|
|
|
$
|
83
|
|
Deferred rent
|
|
|
59
|
|
|
|
46
|
|
Debt issuance costs, net
|
|
|
58
|
|
|
|
57
|
|
Deposits
|
|
|
36
|
|
|
|
40
|
|
Long-term investments
|
|
|
9
|
|
|
|
11
|
|
Other
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
241
|
|
|
$
|
238
|
|
|
|
|
|
|
|
|
|
|
Aircraft leasehold interest, net represents assets established
for leasehold interests in aircraft subject to operating leases
with rental rates deemed to be below-market rates in connection
with the application of fresh-start reporting for US Airways
following its emergence from bankruptcy in September 2005. These
leasehold interests are amortized on a straight-line basis as an
increase to aircraft rent expense over the applicable remaining
lease periods. The Company expects to amortize $6 million
per year in 2010 to 2014 and $47 million thereafter to
aircraft rent expense related to these leasehold interests.
|
|
(k)
|
Frequent
Traveler Program
|
The Dividend Miles frequent traveler program awards mileage
credits to passengers who fly on US Airways and Star Alliance
carriers and certain other partner airlines that participate in
the Companys program. Mileage credits can be redeemed for
travel on US Airways or other participating partner airlines, in
which case the Company pays a fee. The Company uses the
incremental cost method to account for the portion of the
frequent traveler program liability related to mileage credits
earned by Dividend Miles members through purchased flights. The
liability for outstanding mileage credits is valued based on the
estimated incremental cost of carrying one additional passenger.
Incremental cost includes unit costs incurred by the Company for
fuel, credit card fees, insurance, denied boarding compensation,
food and beverages as well as fees incurred when travel awards
are redeemed on partner airlines. In addition, the Company also
includes in the determination of its incremental cost the amount
of redemption fees expected to be collected from Dividend Miles
members. These redemption fees reduce incremental cost. No
profit or overhead margin is included in the accrual of
incremental cost. As of December 31, 2009 and 2008, the
incremental cost liability for outstanding mileage credits
expected to be redeemed for future travel awards accrued on the
balance sheets within other accrued expenses was
$130 million and $151 million, respectively.
The Company also sells frequent flyer program mileage credits to
participating airline partners and non-airline business
partners. Revenue earned from selling mileage credits to other
companies is recognized in two components. A portion of the
revenue from these sales is deferred, representing the estimated
fair value of the transportation component of the sold mileage
credits. The deferred revenue for the transportation component
is amortized on a straight-line basis over the period in which
the credits are expected to be redeemed for travel as passenger
revenue, which is currently estimated to be 28 months. The
marketing component, which is earned at the time the miles are
sold, is recognized in other revenues at the time of the sale.
As of December 31, 2009 and 2008,
80
the Company had $212 million and $240 million,
respectively, in deferred revenue from the sale of mileage
credits included in other accrued expenses on its consolidated
balance sheets.
|
|
(l)
|
Derivative
Instruments
|
The Company has from time to time utilized heating oil-based
derivative instruments to hedge a portion of its exposure to jet
fuel price increases. These instruments consisted of no premium
collars. All derivatives were marked to fair value on the
balance sheet with adjustments to fair value recorded in the
income statement. The Company does not purchase or hold any
derivative financial instruments for trading purposes. Since the
third quarter of 2008, the Company has not entered into any new
fuel hedging transactions and, as of December 31, 2009, the
Company had no remaining outstanding fuel hedging contracts. As
of December 31, 2008, the Company had open fuel hedging
instruments in place, which did not qualify for hedge
accounting. Accordingly, the derivative hedging instruments were
recorded as an asset or liability on the consolidated balance
sheets at fair value and any changes in fair value were recorded
as gains or losses on fuel hedging instruments, net in operating
expenses in the accompanying consolidated statements of
operations in the period of change. See Note 6(a) for
additional information on the Companys fuel hedging
instruments.
|
|
(m)
|
Deferred
Gains and Credits, Net
|
In 2005, the Companys co-branded credit card provider,
Barclays Bank Delaware, formerly Juniper Bank, paid AWA
$150 million in bonuses, consisting of a $20 million
bonus pursuant to AWAs original credit card agreement with
Juniper and a $130 million bonus following the
effectiveness of the merger, subject to certain conditions.
In the event Barclays, at its option, terminates the amended
agreement prior to March 31, 2013 due to the Companys
breach of its obligations under the amended credit card
agreement, or upon the occurrence of certain other events, then
the Company must repay a portion of the bonus, which declines
monthly according to a formula. The Company will have no
obligation to repay any portion of the bonus payments after
March 31, 2013.
At the time of payment, the entire $150 million was
recorded as deferred revenue. The Company began recognizing
revenue from the bonus payments on April 1, 2009. The
revenue from the bonus payments will be recognized on a
straight-line basis through March 31, 2017, the expiration
date of the amended Barclays co-branded credit card agreement.
In connection with fresh-start reporting and purchase accounting
for US Airways in 2005 and fresh-start reporting for AWA upon
emergence from bankruptcy in 1994, aircraft operating leases
were adjusted to fair value and deferred credits were
established in the accompanying consolidated balance sheets,
which represented the net present value of the difference
between the stated lease rates and the fair market rates. These
deferred credits are amortized on a straight-line basis as a
reduction in rent expense over the applicable lease periods. At
December 31, 2009 and 2008, the unamortized balance of the
deferred credits was $74 million and $93 million,
respectively. The Company expects to amortize $13 million
in 2010, $9 million in 2011, $9 million in 2012,
$7 million in 2013, $6 million in 2014 and
$30 million thereafter to aircraft rent expense related to
these leasehold interests.
Passenger
Revenue
Passenger revenue is recognized when transportation is provided.
Ticket sales for transportation that has not yet been provided
are initially recorded as air traffic liability on the
consolidated balance sheets. The air traffic liability
represents tickets sold for future travel dates and estimated
future refunds and exchanges of tickets sold for past travel
dates. The majority of tickets sold are nonrefundable. A small
percentage of tickets, some of which are partially used tickets,
expire unused. Due to complex pricing structures, refund and
exchange policies, and interline agreements with other airlines,
certain amounts are recognized in revenue using estimates
regarding both the timing of the revenue recognition and the
amount of revenue to be recognized. These estimates are
generally based on the analysis of the Companys historical
data. The Company and members of the airline industry have
consistently applied this accounting method to estimate revenue
from forfeited tickets at the date travel was to be provided.
Estimated future refunds and exchanges included in the air
traffic liability are routinely evaluated based on
81
subsequent activity to validate the accuracy of the
Companys estimates. Any adjustments resulting from
periodic evaluations of the estimated air traffic liability are
included in results of operations during the period in which the
evaluations are completed.
Passenger traffic commissions and related fees are expensed when
the related revenue is recognized. Passenger traffic commissions
and related fees not yet recognized are included as a prepaid
expense.
The Company purchases capacity, or ASMs, generated by the
Companys wholly owned regional air carriers and the
capacity of Air Wisconsin Airlines Corp. (Air
Wisconsin), Republic Airways Holdings
(Republic), Mesa Airlines, Inc. (Mesa)
and Chautauqua Airlines, Inc. (Chautauqua) in
certain markets. Air Wisconsin, Republic, Mesa and Chautauqua
operate regional jet aircraft in these markets as part of US
Airways Express. The Company classifies revenues related to
capacity purchase arrangements as Express passenger revenues.
Liabilities related to tickets sold for travel on these air
carriers are also included in the Companys air traffic
liability and are subsequently relieved in the same manner as
described above.
The Company collects various excise taxes on its ticket sales,
which are accounted for on a net basis.
Cargo
Revenue
Cargo revenue is recognized when shipping services for mail and
other cargo are provided.
Other
Revenue
Other revenue includes checked and excess baggage charges,
beverage sales, ticket change and service fees, commissions
earned on tickets sold for flights on other airlines and sales
of tour packages by the US Airways Vacations division, which are
recognized when the services are provided. Other revenues also
include processing fees for travel awards issued through the
Dividend Miles frequent traveler program and the marketing
component earned from selling mileage credits to partners, as
discussed in Note 1(k).
|
|
(o)
|
Maintenance
and Repair Costs
|
Maintenance and repair costs for owned and leased flight
equipment are charged to operating expense as incurred.
Selling expenses include commissions, credit card fees,
computerized reservations systems fees, advertising and
promotional expenses. Advertising and promotional expenses are
expensed when incurred. Advertising and promotional expenses for
the years ended December 31, 2009, 2008 and 2007 were
$11 million, $10 million and $16 million,
respectively.
|
|
(q)
|
Stock-based
Compensation
|
The Company accounts for its stock-based compensation expense
based on the fair value of the stock award at the time of grant,
which is recognized ratably over the vesting period of the stock
award. The fair value of stock options and stock appreciation
rights is estimated using a Black-Scholes option pricing model.
The fair value of restricted stock units is based on the market
price of the underlying shares of common stock on the date of
grant. See Note 15 for further discussion of stock-based
compensation.
82
Expenses associated with the Companys wholly owned
regional airlines and affiliate regional airlines operating as
US Airways Express are classified as Express expenses on the
consolidated statements of operations. Express expenses consist
of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Aircraft fuel and related taxes
|
|
$
|
609
|
|
|
$
|
1,137
|
|
|
$
|
765
|
|
Salaries and related costs
|
|
|
246
|
|
|
|
244
|
|
|
|
245
|
|
Capacity purchases
|
|
|
1,059
|
|
|
|
1,049
|
|
|
|
987
|
|
Aircraft rent
|
|
|
51
|
|
|
|
51
|
|
|
|
51
|
|
Aircraft maintenance
|
|
|
81
|
|
|
|
74
|
|
|
|
76
|
|
Other rent and landing fees
|
|
|
121
|
|
|
|
115
|
|
|
|
112
|
|
Selling expenses
|
|
|
154
|
|
|
|
163
|
|
|
|
157
|
|
Depreciation and amortization
|
|
|
25
|
|
|
|
25
|
|
|
|
23
|
|
Special items, net
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
170
|
|
|
|
191
|
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express expenses
|
|
$
|
2,519
|
|
|
$
|
3,049
|
|
|
$
|
2,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(s)
|
Recent
Accounting Pronouncements
|
In June 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 168, The FASB
Accounting Standards
Codificationtm
and the Hierarchy of Generally Accepted Accounting
Principles A Replacement of FASB Statement
No. 162. SFAS No. 168 establishes the FASB
Accounting Standards
Codificationtm
(the Codification or ASC) as the single
source of authoritative U.S. GAAP recognized by the FASB to
be applied by nongovernmental entities. Rules and interpretive
releases of the SEC under authority of federal securities laws
are also sources of authoritative U.S. GAAP for SEC
registrants. Effective July 1, 2009, the Codification
superseded all existing non-SEC accounting and reporting
standards.
In April 2009, the FASB issued FASB Staff Position
(FSP) Financial Accounting Standards
(FAS)
115-2 and
FAS 124-2,
Recognition and Presentation of
Other-Than-Temporary
Impairments, as adopted by the Codification on
July 1, 2009. This FSP changes existing guidance for
determining whether an impairment of debt securities is
other-than-temporary.
The FSP requires
other-than-temporary
impairments to be separated into the amount representing the
decrease in cash flows expected to be collected from a security
(referred to as credit losses) which is recognized in earnings
and the amount related to other factors (referred to as
noncredit losses) which is recognized in other comprehensive
income. This noncredit loss component of the impairment may only
be classified in other comprehensive income if both of the
following conditions are met (a) the holder of the security
concludes that it does not intend to sell the security and
(b) the holder concludes that it is more likely than not
that the holder will not be required to sell the security before
the security recovers its value. If these conditions are not
met, the noncredit loss must also be recognized in earnings.
When adopting the FSP, an entity is required to record a
cumulative effect adjustment as of the beginning of the period
of adoption to reclassify the noncredit component of a
previously recognized
other-than-temporary
impairment from retained earnings to accumulated other
comprehensive income. FSP
FAS 115-2
and
FAS 124-2
is effective for interim and annual periods ending after
June 15, 2009. The Company adopted FSP
FAS 115-2
and
FAS 124-2
as of April 1, 2009. The Company does not meet the
conditions necessary to recognize the noncredit loss component
of its auction rate securities in other comprehensive income.
Accordingly, the Company did not reclassify any previously
recognized
other-than-temporary
impairment losses from retained earnings to accumulated other
comprehensive income and the adoption of FSP
FAS 115-2
and
FAS 124-2
had no material impact on the Companys consolidated
financial statements.
In June 2009, the FASB issued SFAS No. 167,
Amendments to FASB Interpretation (FIN)
No. 46(R), which was codified in December 2009 with
the issuance of Accounting Standards Update (ASU)
No. 2009-17,
Consolidations (Topic 810) Improvements to
Financial Reporting by Enterprises Involved with Variable
Interest Entities. ASU
No. 2009-17
changes how a reporting entity determines when an entity that is
insufficiently capitalized or is not controlled through voting
(or similar rights) should be consolidated. The determination of
83
whether a reporting entity is required to consolidate another
entity is based on, among other things, the other entitys
purpose and design and the reporting entitys ability to
direct the activities of the other entity that most
significantly impact the other entitys economic
performance. ASU
No. 2009-17
will require a reporting entity to provide additional
disclosures about its involvement with variable interest
entities and any significant changes in risk exposure due to
that involvement. A reporting entity will be required to
disclose how its involvement with a variable interest entity
affects the reporting entitys financial statements. ASU
No. 2009-17
is effective for fiscal years beginning after November 15,
2009, and interim periods within those fiscal years. The Company
is currently evaluating the requirements of ASU
No. 2009-17
and has not yet determined the impact on its consolidated
financial statements.
In October 2009, the FASB issued ASU
No. 2009-13,
Revenue Recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements. ASU
No. 2009-13
addresses the accounting for multiple-deliverable arrangements
to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit. This
guidance establishes a selling price hierarchy for determining
the selling price of a deliverable, which is based on:
(a) vendor-specific objective evidence;
(b) third-party evidence; or (c) estimates. This
guidance also eliminates the residual method of allocation and
requires that arrangement consideration be allocated at the
inception of the arrangement to all deliverables using the
relative selling price method. In addition, this guidance
significantly expands required disclosures related to a
vendors multiple-deliverable revenue arrangements. ASU
No. 2009-13
is effective prospectively for revenue arrangements entered into
or materially modified in fiscal years beginning on or after
June 15, 2010 and early adoption is permitted. A company
may elect, but will not be required, to adopt the amendments in
ASU
No. 2009-13
retrospectively for all prior periods. The Company is currently
evaluating the requirements of ASU
No. 2009-13
and has not yet determined the impact on the Companys
consolidated financial statements.
Special items, net as shown on the consolidated statements of
operations include the following charges (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Aircraft costs (a)
|
|
$
|
22
|
|
|
$
|
14
|
|
|
$
|
|
|
Asset impairment charges (b)
|
|
|
16
|
|
|
|
18
|
|
|
|
|
|
Severance and other charges (c)
|
|
|
11
|
|
|
|
9
|
|
|
|
|
|
Liquidity improvement costs (d)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
Merger-related transition expenses (e)
|
|
|
|
|
|
|
35
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
55
|
|
|
$
|
76
|
|
|
$
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
In 2009 and 2008, the Company recorded $22 million and
$14 million, respectively, in aircraft costs as a result of
its previously announced capacity reductions. |
|
(b) |
|
In 2009, the Company recorded $16 million in non-cash
impairment charges due to the decline in fair value of certain
indefinite lived intangible assets associated with its
international routes. See Note 1(i) for further discussion
of these charges. In 2008, the Company recorded $18 million
in non-cash charges related to the decline in fair value of
certain spare parts associated with its Boeing 737 aircraft
fleet. See Notes 1(f) and 1(g) for further discussion of
these charges. |
|
(c) |
|
In 2009, the Company recorded $11 million in severance and
other charges. The Company expects $4 million will be
substantially paid by the end of the first quarter of 2010, with
the remaining balance scheduled for payment later in 2010. In
2008, the Company recorded $9 million in severance charges
as a result of its capacity reductions. |
|
(d) |
|
In 2009, the Company incurred $6 million in costs related
to its liquidity improvement program, which primarily consisted
of professional and legal fees. |
|
(e) |
|
In 2008, in connection with the effort to consolidate functions
and integrate the Companys organizations, procedures and
operations, the Company incurred $35 million of
merger-related transition expenses. These |
84
|
|
|
|
|
expenses included $12 million in uniform costs to
transition employees to the new US Airways uniforms;
$5 million in applicable employment tax expenses related to
contractual benefits granted to certain current and former
employees as a result of the merger; $6 million in
compensation expenses for equity awards granted in connection
with the merger to retain key employees through the integration
period; $5 million of aircraft livery costs;
$4 million in professional and technical fees related to
the integration of the Companys airline operations systems
and $3 million in other expenses. |
In 2007, the Company incurred $99 million of merger-related
transition expenses. These expenses included $13 million in
training and related expenses; $19 million in compensation
expenses for equity awards granted in connection with the merger
to retain key employees through the integration period;
$20 million of aircraft livery costs; $37 million in
professional and technical fees related to the integration of
the Companys airline operations systems; $1 million
in employee moving expenses; $4 million related to
reservation system migration expenses and $5 million of
other expenses.
|
|
3.
|
Earnings
(Loss) Per Common Share
|
Basic earnings (loss) per common share (EPS) is
computed on the basis of the weighted average number of shares
of common stock outstanding during the period. Diluted EPS is
computed on the basis of the weighted average number of shares
of common stock plus the effect of potentially dilutive shares
of common stock outstanding during the period using the treasury
stock method. Potentially dilutive shares include outstanding
employee stock options, employee stock appreciation rights,
employee restricted stock units and convertible debt. The
following table presents the computation of basic and diluted
EPS (in millions, except share and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
|
$
|
423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (in thousands)
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
91,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
|
$
|
4.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(205
|
)
|
|
|
(2,215
|
)
|
|
|
423
|
|
Interest expense on 7% senior convertible notes
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) for purposes of computing diluted earnings (loss)
per share
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
|
$
|
432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
91,536
|
|
Dilutive effect of stock awards
|
|
|
|
|
|
|
|
|
|
|
1,017
|
|
Assumed conversion of 7% senior convertible notes
|
|
|
|
|
|
|
|
|
|
|
3,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding as adjusted
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
95,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
|
$
|
4.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2009,
11,479,742 shares underlying stock options, stock
appreciation rights and restricted stock units were not included
in the computation of diluted EPS because inclusion of such
shares would be antidilutive or because the exercise prices were
greater than the average market price of common stock for the
period. In addition, 3,048,914 incremental shares from the
assumed conversion of the 7% Senior Convertible Notes due
2020 (the 7% notes) and 23,954,303 incremental
shares from the assumed conversion of the 7.25% Convertible
Senior Notes due 2014 (the 7.25% notes) were
excluded from the computation of diluted EPS due to their
antidilutive effect.
For the year ended December 31, 2008, 8,181,340 shares
underlying stock options, stock appreciation rights and
restricted stock units were not included in the computation of
diluted EPS because inclusion of such shares would be
antidilutive or because the exercise prices were greater than
the average market price of common stock for the
85
period. In addition, 3,048,914 incremental shares from assumed
conversion of the 7% notes were excluded from the
computation of diluted EPS due to their antidilutive effect.
For the year ended December 31, 2007, 2,916,762 shares
underlying stock options, stock appreciation rights and
restricted stock units were not included in the computation of
diluted EPS because inclusion of such shares would be
antidilutive or because the exercise prices were greater than
the average market price of common stock for the period.
The following table details the Companys debt (in
millions). Variable interest rates listed are the rates as of
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Secured
|
|
|
|
|
|
|
|
|
Citicorp North America loan, variable interest rate of 2.78%,
installments due through 2014 (a)
|
|
$
|
1,168
|
|
|
$
|
1,184
|
|
Equipment loans, aircraft pre-delivery payment financings and
other notes payable, fixed and variable interest rates ranging
from 1.63% to 10.28%, averaging 4.94%, maturing from 2010 to
2021 (b)
|
|
|
2,201
|
|
|
|
1,674
|
|
Aircraft enhanced equipment trust certificates
(EETCs), fixed interest rates ranging from 7.08% to
9.01%, averaging 7.79%, maturing from 2015 to 2022 (c)
|
|
|
505
|
|
|
|
540
|
|
Slot financing, fixed interest rate of 8.08%, interest only
payments until due in 2015 (d)
|
|
|
47
|
|
|
|
47
|
|
Capital lease obligations, interest rate of 8%, installments due
through 2021 (e)
|
|
|
37
|
|
|
|
39
|
|
Senior secured discount notes, variable interest rate of 8.39%,
due in 2010 (f)
|
|
|
32
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,990
|
|
|
|
3,516
|
|
Unsecured
|
|
|
|
|
|
|
|
|
Barclays prepaid miles, variable interest rate of 4.98%,
interest only payments (g)
|
|
|
200
|
|
|
|
200
|
|
Airbus advance, repayments beginning in 2010 through
2018 (h)
|
|
|
247
|
|
|
|
207
|
|
7% senior convertible notes, interest only payments until
due in 2020 (i)
|
|
|
74
|
|
|
|
74
|
|
7.25% convertible senior notes, interest only payments until due
in 2014 (j)
|
|
|
172
|
|
|
|
|
|
Engine maintenance notes (k)
|
|
|
36
|
|
|
|
72
|
|
Industrial development bonds, fixed interest rate of 6.3%,
interest only payments until due in 2023 (l)
|
|
|
29
|
|
|
|
29
|
|
Note payable to Pension Benefit Guaranty Corporation, fixed
interest rate of 6%, interest only payments until due in
2012 (m)
|
|
|
10
|
|
|
|
10
|
|
Other notes payable, due in 2010
|
|
|
35
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
803
|
|
|
|
637
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and capital lease obligations
|
|
|
4,793
|
|
|
|
4,153
|
|
Less: Total unamortized discount on debt
|
|
|
(267
|
)
|
|
|
(168
|
)
|
Current maturities, less $9 million and $10 million of
unamortized discount on debt at December 31, 2009 and
December 31, 2008, respectively
|
|
|
(502
|
)
|
|
|
(362
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital lease obligations, net of current
maturities
|
|
$
|
4,024
|
|
|
$
|
3,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
On March 23, 2007, US Airways Group entered into a term
loan credit facility with Citicorp North America, Inc., as
administrative agent, and a syndicate of lenders pursuant to
which US Airways Group borrowed an aggregate principal amount of
$1.6 billion. US Airways, AWA and certain other
subsidiaries of US Airways Group are guarantors of the Citicorp
credit facility. |
The Citicorp credit facility bears interest at an index rate
plus an applicable index margin or, at the Companys
option, LIBOR plus an applicable LIBOR margin for interest
periods of one, two, three or six months. The
86
applicable index margin, subject to adjustment, is 1.00%, 1.25%
or 1.50% if the adjusted loan balance is less than
$600 million, between $600 million and
$1 billion, or greater than $1 billion, respectively.
The applicable LIBOR margin, subject to adjustment, is 2.00%,
2.25% or 2.50% if the adjusted loan balance is less than
$600 million, between $600 million and
$1 billion, or greater than $1 billion, respectively.
In addition, interest on the Citicorp credit facility may be
adjusted based on the credit rating for the Citicorp credit
facility as follows: (i) if the credit ratings of the
Citicorp credit facility by Moodys and S&P in effect
as of the last day of the most recently ended fiscal quarter are
both at least one subgrade better than the credit ratings in
effect on March 23, 2007, then (A) the applicable
LIBOR margin will be the lower of 2.25% and the rate otherwise
applicable based upon the adjusted Citicorp credit facility
balance and (B) the applicable index margin will be the
lower of 1.25% and the rate otherwise applicable based upon the
Citicorp credit facility principal balance, and (ii) if the
credit ratings of the Citicorp credit facility by Moodys
and S&P in effect as of the last day of the most recently
ended fiscal quarter are both at least two subgrades better than
the credit ratings in effect on March 23, 2007, then
(A) the applicable LIBOR margin will be 2.00% and
(B) the applicable index margin will be 1.00%. As of
December 31, 2009, the interest rate on the Citicorp credit
facility was 2.78% based on a 2.50% LIBOR margin.
The Citicorp credit facility matures on March 23, 2014, and
is repayable in seven annual installments with each of the first
six installments to be paid on each anniversary of the closing
date in an amount equal to 1% of the initial aggregate principal
amount of the loan and the final installment to be paid on the
maturity date in the amount of the full remaining balance of the
loan.
In addition, the Citicorp credit facility requires certain
mandatory prepayments upon the occurrence of specified events,
establishes certain financial covenants, including minimum cash
requirements and maintenance of certain minimum ratios, contains
customary affirmative covenants and negative covenants and
contains customary events of default. The Citicorp credit
facility requires the Company to maintain consolidated
unrestricted cash and cash equivalents of not less than
$850 million, with not less than $750 million (subject
to partial reductions upon certain reductions in the outstanding
principal amount of the loan) of that amount held in accounts
subject to control agreements, which would become restricted for
use by the Company if certain adverse events occur per the terms
of the agreement. In addition, the Citicorp credit facility
amendment provides that the Company may issue debt in the future
with a second lien on the assets pledged as collateral under the
Citicorp credit facility.
(b) The following are the significant secured
financing agreements entered into in 2009:
US Airways borrowed $825 million in 2009 to finance Airbus
aircraft deliveries through a combination of facility agreements
and manufacturer backstop financing. These financings bear
interest at a rate of LIBOR plus an applicable margin and
contain default provisions and other covenants that are typical
in the industry.
US Airways borrowed an additional $120 million in 2009
under its spare parts loan agreement. The spare parts loan
agreement bears interest at a rate of LIBOR plus a margin per
annum and is secured by a first priority security interest in
substantially all of US Airways rotable, repairable and
expendable aircraft spare parts. The spare parts loan agreement
matures on October 20, 2014.
In 2009, US Airways sold 10 of its Embraer 190 aircraft to
Republic. In connection with this transaction, Republic assumed
$216 million of debt outstanding on the 10 Embraer 190
aircraft and US Airways was released from its obligations
associated with the debt assumed.
|
|
(c) |
The equipment notes underlying these EETCs are the direct
obligations of US Airways and cover the financing of 19
aircraft. See Note 9(c) for further discussion.
|
|
|
(d) |
In September 2005, US Airways entered into an agreement with
Republic to sell and leaseback certain of its commuter slots at
Ronald Reagan Washington National Airport and New York LaGuardia
Airport. US Airways continues to hold the right to repurchase
the slots anytime after the second anniversary of the slot
sale-leaseback transaction. These transactions were accounted
for as secured financings. Installments are due monthly through
2015. In December 2006, Republic and US Airways modified terms
of the agreement to conform to subsequent regulatory changes at
LaGuardia, and the LaGuardia slots were returned to US Airways.
The need for a subsequent modification was fully contemplated in
the original agreement.
|
87
|
|
(e) |
Capital lease obligations consist principally of certain airport
maintenance and facility leases which expire in 2018 and 2021.
|
|
|
(f) |
On December 27, 2004, AWA raised additional capital by
financing its Phoenix maintenance facility and flight training
center. The flight training center was previously unencumbered,
and the maintenance facility became unencumbered earlier in 2004
when AWA refinanced its term loan. Using its leasehold interest
in these two facilities as collateral, AWA, through a wholly
owned subsidiary named FTCHP LLC, raised $31 million
through the issuance of senior secured discount notes. The notes
were issued by FTCHP at a discount pursuant to the terms of a
senior secured term loan agreement among AWA, FTCHP, Heritage
Bank SSB, as administrative agent, Citibank, N.A., as the
initial lender, and the other lenders from time to time party
thereto. Citibank, N.A. subsequently assigned all of its
interests in the notes to third-party lenders.
|
AWA fully and unconditionally guaranteed the payment and
performance of FTCHPs obligations under the notes and the
loan agreement. The notes require aggregate principal payments
of $36 million with principal payments of $2 million
due on each of the first two anniversary dates and the remaining
principal amount due on the fifth anniversary date. The notes
may be prepaid in full at any time (subject to customary LIBOR
breakage costs) and in partial amounts of $2 million on the
third and fourth anniversary dates. The unpaid principal amount
of the notes bears interest based on LIBOR plus a margin subject
to adjustment based on a loan to collateral value ratio.
The loan agreement contains customary covenants applicable to
loans of this type, including obligations relating to the
preservation of the collateral and restrictions on the
activities of FTCHP. In addition, the loan agreement contains
events of default, including payment defaults, cross-defaults to
other debt of FTCHP, if any, breach of covenants, bankruptcy and
insolvency defaults and judgment defaults.
In connection with this financing, AWA sold all of its leasehold
interests in the maintenance facility and flight training center
to FTCHP and entered into subleases for the facilities with
FTCHP at lease rates expected to approximate the interest
payments due under the notes. In addition, AWA agreed to make
future capital contributions to FTCHP in amounts sufficient to
cover principal payments and other amounts owing pursuant to the
notes and the loan agreement. As part of the transfer of
substantially all of AWAs assets and liabilities to US
Airways in connection with the combination of all mainline
airline operations under one Federal Aviation Administration
(FAA) operating certificate on September 26,
2007, AWA assigned its subleases for the facilities with FTCHP
to US Airways. In addition, US Airways assumed all of the
obligations of AWA in connection with the financing and joined
the guarantee of the payment and performance of FTCHPs
obligations under the notes and the loan agreement. In 2009, the
maturity date of the loan agreement was extended to
March 31, 2010.
|
|
(g) |
US Airways Group is a party to a co-branded credit card
agreement with Barclays Bank Delaware. The co-branded credit
card agreement provides for, among other things, the
pre-purchase of frequent flyer miles in the aggregate amount of
$200 million, which amount was paid by Barclays in October
2008. The Company pays interest to Barclays on the outstanding
dollar amount of the pre-purchased miles at the rate of LIBOR
plus a margin. This transaction was treated as a financing
transaction for accounting purposes using an effective interest
rate commensurate with the Companys credit rating.
|
Barclays has agreed that for each month that specified
conditions are met it will pre-purchase additional miles on a
monthly basis in an amount equal to the difference between
$200 million and the amount of unused miles then
outstanding. Commencing in January 2012, the $200 million
will be reduced over a period of up to approximately two years.
Among the conditions to this monthly purchase of miles is a
requirement that US Airways Group maintain an unrestricted cash
balance, as defined in the agreement, of at least
$1.35 billion for the months of March through November and
$1.25 billion for the months of January, February and
December. The Company may repurchase any or all of the
pre-purchased miles at any time, from time to time, without
penalty. The agreement expires in 2017.
|
|
(h) |
On October 20, 2008, US Airways and Airbus entered into
amendments to the A320 Family Aircraft Purchase Agreement, the
A330 Aircraft Purchase Agreement, and the A350 XWB Purchase
Agreement. In exchange for US Airways agreement to enter
into these amendments, Airbus advanced US Airways
$200 million in
|
88
|
|
|
consideration of aircraft deliveries under the various related
purchase agreements. Under the terms of each of the amendments,
US Airways has agreed to maintain a level of unrestricted cash
in the same amount required by the Citicorp credit facility.
This transaction was treated as a financing transaction for
accounting purposes using an effective interest rate
commensurate with US Airways credit rating. There are no
stated interest payments.
|
|
|
(i) |
On September 30, 2005, US Airways Group issued
$144 million aggregate principal amount of the
7% notes for net proceeds of approximately
$139 million. The 7% notes are the Companys
senior unsecured obligations and rank equally in right of
payment to its other senior unsecured and unsubordinated
indebtedness and are effectively subordinated to its secured
indebtedness to the extent of the value of assets securing such
indebtedness. The 7% notes are fully and unconditionally
guaranteed, jointly and severally and on a senior subordinated
basis, by US Airways and AWA. The guarantees are the
guarantors unsecured obligations and rank equally in right
of payment to the other senior unsecured and unsubordinated
indebtedness of the guarantors and are effectively subordinated
to the guarantors secured indebtedness to the extent of
the value of assets securing such indebtedness.
|
The 7% notes bear interest at the rate of 7% per year
payable in cash semiannually in arrears on March 30 and
September 30 of each year, beginning March 30, 2006. The
7% notes mature on September 30, 2020.
Holders may convert, at any time prior to the earlier of the
business day prior to the redemption date and the second
business day preceding the maturity date, any outstanding notes
(or portions thereof) into shares of US Airways Group common
stock, at an initial conversion rate of 41.4508 shares of
US Airways Group common stock per $1,000 principal amount of
notes (equivalent to an initial conversion price of $24.12 per
share). If a holder elects to convert its notes in connection
with certain specified fundamental changes that occur prior to
October 5, 2015, the holder will be entitled to receive
additional shares of US Airways Group common stock as a
make-whole premium upon conversion. In lieu of delivery of
shares of US Airways Group common stock upon conversion of all
or any portion of the notes, the Company may elect to pay
holders surrendering notes for conversion, cash or a combination
of shares and cash.
Holders may require the Company to purchase for cash or shares
or a combination thereof, at the Companys election, all or
a portion of their 7% notes on September 30, 2010 and
September 30, 2015 at a purchase price equal to 100% of the
principal amount of the 7% notes to be repurchased plus
accrued and unpaid interest, if any, to the purchase date. In
addition, if the Company experiences a specified fundamental
change, holders may require the Company to purchase for cash,
shares or a combination thereof, at its election, all or a
portion of their 7% notes, subject to specified exceptions,
at a price equal to 100% of the principal amount of the
7% notes plus accrued and unpaid interest, if any, to the
purchase date. Prior to October 5, 2010, the 7% notes
will not be redeemable at the Companys option. The Company
may redeem all or a portion of the 7% notes at any time on
or after October 5, 2010, at a price equal to 100% of the
principal amount of the 7% notes plus accrued and unpaid
interest, if any, to the redemption date if the closing price of
US Airways Group common stock has exceeded 115% of the
conversion price for at least 20 trading days in the 30
consecutive trading day period ending on the trading day before
the date on which the Company mails the optional redemption
notice.
In 2006, $70 million of the $144 million outstanding
principal amount was converted into 2,909,636 shares of
common stock. In connection with the conversion, the Company
paid a premium of $17 million to the holders of the
converted notes, which was recorded in other nonoperating
expenses.
As the 7% notes can be settled in cash upon conversion, for
accounting purposes, the 7% notes were bifurcated into a
debt component that was initially recorded at fair value and an
equity component. The following table details the debt and
equity components recognized related to the 7% notes (in
millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
Principal amount of 7% senior convertible notes
|
|
$
|
74
|
|
|
$
|
74
|
|
Unamortized discount on debt
|
|
|
(5
|
)
|
|
|
(11
|
)
|
Net carrying amount of 7% senior convertible notes
|
|
|
69
|
|
|
|
63
|
|
Additional paid-in capital
|
|
|
40
|
|
|
|
40
|
|
89
At December 31, 2009, the remaining period over which the
unamortized discount will be recognized is nine months.
The following table details interest expense recognized related
to the 7% notes (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Contractual coupon interest
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
5
|
|
Amortization of discount
|
|
|
6
|
|
|
|
5
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
11
|
|
|
$
|
10
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009, the if-converted value of the
7% notes did not exceed the principal amount.
|
|
(j) |
In May 2009, US Airways Group issued $172 million aggregate
principal amount of the 7.25% notes for net proceeds of
approximately $168 million. The 7.25% notes bear
interest at a rate of 7.25% per annum, which shall be payable
semi-annually in arrears on each May 15 and November 15.
The 7.25% notes mature on May 15, 2014.
|
Holders may convert their 7.25% notes at their option at
any time prior to the close of business on the second scheduled
trading day immediately preceding the maturity date for the
7.25% notes. Upon conversion, the Company will pay or
deliver, as the case may be, cash, shares of US Airways Group
common stock or a combination thereof at the Companys
election. The initial conversion rate for the 7.25% notes
is 218.8184 shares of US Airways Group common stock per
$1,000 principal amount of notes (equivalent to an initial
conversion price of $4.57 per share). Such conversion rate is
subject to adjustment in certain events.
If the Company undergoes a fundamental change, holders may
require the Company to purchase all or a portion of their
7.25% notes for cash at a price equal to 100% of the
principal amount of the 7.25% notes to be purchased plus
any accrued and unpaid interest to, but excluding, the purchase
date. A fundamental change includes a person or group (other
than the Company or its subsidiaries) becoming the beneficial
owner of more than 50% of the voting power of the Companys
capital stock, certain merger or combination transactions, a
substantial turnover of the Companys directors,
stockholder approval of the liquidation or dissolution of the
Company and the Companys common stock ceasing to be listed
on at least one national securities exchange.
The 7.25% notes rank equal in right of payment to all of
the Companys other existing and future unsecured senior
debt and senior in right of payment to the Companys debt
that is expressly subordinated to the 7.25% notes, if any.
The 7.25% notes impose no limit on the amount of debt the
Company or its subsidiaries may incur. The 7.25% notes are
structurally subordinated to all debt and other liabilities and
commitments (including trade payables) of the Companys
subsidiaries. The 7.25% notes are also effectively junior
to the Companys secured debt, if any, to the extent of the
value of the assets securing such debt.
As the 7.25% notes can be settled in cash upon conversion,
for accounting purposes, the 7.25% notes were bifurcated
into a debt component that was initially recorded at fair value
and an equity component. The following table details the debt
and equity components recognized related to the 7.25% notes
(in millions):
|
|
|
|
|
|
|
December 31,
|
|
|
2009
|
|
Principal amount of 7.25% convertible senior notes
|
|
$
|
172
|
|
Unamortized discount on debt
|
|
|
(92
|
)
|
Net carrying amount of 7.25% convertible senior notes
|
|
|
80
|
|
Additional paid-in capital
|
|
|
96
|
|
At December 31, 2009, the remaining period over which the
unamortized discount will be recognized is 4.4 years.
90
The following table details interest expense recognized related
to the 7.25% notes (in millions):
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Contractual coupon interest
|
|
$
|
8
|
|
Amortization of discount
|
|
|
6
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
14
|
|
|
|
|
|
|
At December 31, 2009, the if-converted value of the
7.25% notes exceeded the principal amount by
$10 million.
|
|
(k) |
In December 2004, deferred charges under US Airways
maintenance agreements with GE Engine Services, Inc. were
converted into an unsecured term note. Interest on the note
accrues at LIBOR plus 4%, and became payable beginning in
January 2008, with principal and interest payments due in
48 monthly installments through 2011. The outstanding
balance on the note at December 31, 2009 was
$26 million at an interest rate of 4.5%.
|
In October 2008, US Airways entered into a promissory note with
GE Engine Services, Inc. pursuant to which maintenance payments
of up to $40 million due from October 2008 through March
2009 under US Airways Engine Service Agreement were
deferred. Interest on the note accrues at 14%, and the first of
12 monthly principal and interest payments commenced in
April 2009. The outstanding balance on the note at
December 31, 2009 was $10 million.
|
|
(l)
|
The industrial development revenue bonds are due April 2023.
Interest at 6.3% is payable semiannually on April 1 and
October 1. The bonds are subject to optional redemption
prior to the maturity date on or after April 1, 2008, in
whole or in part, on any interest payment date at the following
redemption prices: 102% on April 1 or October 1, 2008; 101%
on April 1 or October 1, 2009; and 100% on April 1,
2010 and thereafter.
|
|
(m)
|
In connection with US Airways Groups emergence from
bankruptcy in September 2005, it reached a settlement with the
Pension Benefit Guaranty Corporation (PBGC) related
to the termination of three of its defined benefit pension
plans. The settlement included the issuance of a
$10 million note which matures in 2012 and bears interest
at 6% payable annually in arrears.
|
Secured financings are collateralized by assets, primarily
aircraft, engines, simulators, rotable aircraft parts and hangar
and maintenance facilities. At December 31, 2009, the
estimated maturities of long-term debt and capital leases are as
follows (in millions):
|
|
|
|
|
2010
|
|
$
|
511
|
|
2011
|
|
|
350
|
|
2012
|
|
|
421
|
|
2013
|
|
|
371
|
|
2014
|
|
|
1,541
|
|
Thereafter
|
|
|
1,599
|
|
|
|
|
|
|
|
|
$
|
4,793
|
|
|
|
|
|
|
Certain of the Companys long-term debt agreements contain
significant minimum cash balance requirements and other
covenants with which the Company was in compliance at
December 31, 2009. Certain of the Companys long-term
debt agreements contain cross-default provisions, which may be
triggered by defaults by US Airways or US Airways Group under
other agreements relating to indebtedness.
The Company accounts for income taxes using the asset and
liability method. The Company files a consolidated federal
income tax return with its wholly owned subsidiaries. The
Company and its wholly owned subsidiaries allocate tax and tax
items, such as net operating losses (NOLs) and net
tax credits, between members of the group based on their
proportion of taxable income and other items. Accordingly, the
Companys tax expense is based on taxable income, taking
into consideration allocated tax loss carryforwards/carrybacks
and tax credit carryforwards.
91
The Company reported a loss in 2009, which increased its NOLs.
As of December 31, 2009, the Company has approximately
$2.13 billion of gross NOLs to reduce future federal
taxable income. All of the Companys NOLs are available to
reduce federal taxable income in the calendar year 2010. The
NOLs expire during the years 2022 through 2029.
The Companys net deferred tax assets, which include
$2.06 billion of the NOLs, have been subject to a full
valuation allowance. The Company also has approximately
$90 million of tax-effected state NOLs at December 31,
2009. At December 31, 2009, the federal and state valuation
allowance is $546 million and $77 million,
respectively, all of which will reduce future tax expense when
recognized.
For the year ended December 31, 2009, the Company recorded
a tax benefit of $38 million. Of this amount,
$21 million was due to a non-cash income tax benefit
related to gains recorded within other comprehensive income
during 2009. Generally accepted accounting principles
(GAAP) require all items be considered (including
items recorded in other comprehensive income) in determining the
amount of tax benefit that results from a loss from continuing
operations that should be allocated to continuing operations. In
accordance with GAAP, the Company recorded a tax benefit on the
loss from continuing operations, which was exactly offset by
income tax expense on other comprehensive income as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
Net Loss Income
|
|
|
Other Comprehensive
|
|
|
|
Statement
|
|
|
Income
|
|
|
Pre-allocation
|
|
$
|
(226
|
)
|
|
$
|
46
|
|
Tax allocation
|
|
|
21
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
As presented
|
|
$
|
(205
|
)
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
As the income tax expense on other comprehensive income is equal
to the income tax benefit recognized in continuing operations,
the Companys total comprehensive loss is unchanged. In
addition, the Companys net deferred tax position at
December 31, 2009 is not impacted by this tax allocation.
In addition, the Company recorded a $14 million benefit
related to a legislation change allowing the Company to carry
back 100% of 2008 Alternative Minimum Tax liability
(AMT) net operating losses, resulting in the
recovery of AMT amounts paid in prior years. The Company also
recognized a $3 million tax benefit related to the reversal
of the deferred tax liability associated with the indefinite
lived intangible assets that were impaired during 2009.
For the year ended December 31, 2008, the Company reported
a loss, which increased its NOLs, and it did not record a tax
provision.
For the year ended December 31, 2007, the Company utilized
NOLs to reduce its income tax obligation. Utilization of these
NOLs resulted in a corresponding decrease in the valuation
allowance. As this valuation allowance was established through
the recognition of tax expense, the decrease in valuation
allowance offset the Companys tax provision dollar for
dollar. The Company recognized $7 million of non-cash state
income tax expense for the year ended December 31, 2007, as
the Company utilized NOLs that were generated by US Airways
prior to the merger. As these were acquired NOLs, the accounting
rules in place at that time required that the decrease in the
valuation allowance associated with these NOLs reduce goodwill
instead of the provision for income taxes.
The Company is subject to AMT. In most cases, the recognition of
AMT does not result in tax expense. However, since the
Companys net deferred tax asset is subject to a full
valuation allowance, any liability for AMT is recorded as tax
expense. The Company recorded AMT expense of $1 million for
the year ended December 31, 2007. The Company also recorded
$1 million of state income tax related to certain states
where NOLs were not available or limited for the year ended
December 31, 2007.
92
The components of the provision (benefit) for income taxes are
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
|
$
|
1
|
|
|
$
|
1
|
|
State
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
Deferred provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(38
|
)
|
|
|
|
|
|
|
(1
|
)
|
State
|
|
|
|
|
|
|
(1
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(38
|
)
|
|
|
(1
|
)
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
$
|
(38
|
)
|
|
$
|
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) differs from amounts computed at
the federal statutory income tax rate as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income tax expense (benefit) at the federal statutory income tax
rate
|
|
$
|
(85
|
)
|
|
$
|
(775
|
)
|
|
$
|
151
|
|
Book expenses not deductible for tax purposes
|
|
|
17
|
|
|
|
229
|
|
|
|
13
|
|
State income tax expense, net of federal income tax expense
(benefit)
|
|
|
(6
|
)
|
|
|
(30
|
)
|
|
|
30
|
|
Change in valuation allowance
|
|
|
74
|
|
|
|
575
|
|
|
|
(185
|
)
|
AMT provision (benefit)
|
|
|
(14
|
)
|
|
|
1
|
|
|
|
1
|
|
Allocation to other comprehensive income
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
Long-lived intangibles
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(38
|
)
|
|
$
|
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
(15.7
|
)%
|
|
|
|
%
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
as of December 31, 2009 and 2008 are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
779
|
|
|
$
|
546
|
|
Property, plant and equipment
|
|
|
30
|
|
|
|
22
|
|
Investments
|
|
|
63
|
|
|
|
95
|
|
Financing transactions
|
|
|
41
|
|
|
|
25
|
|
Employee benefits
|
|
|
346
|
|
|
|
352
|
|
Dividend Miles awards
|
|
|
126
|
|
|
|
144
|
|
AMT credit carryforward
|
|
|
25
|
|
|
|
38
|
|
Other deferred tax assets
|
|
|
26
|
|
|
|
199
|
|
Valuation allowance
|
|
|
(623
|
)
|
|
|
(646
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
813
|
|
|
|
775
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
582
|
|
|
|
563
|
|
Sale and leaseback transactions and deferred rent
|
|
|
137
|
|
|
|
144
|
|
Leasing transactions
|
|
|
45
|
|
|
|
47
|
|
Long-lived intangibles
|
|
|
25
|
|
|
|
31
|
|
Other deferred tax liabilities
|
|
|
40
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
829
|
|
|
|
794
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
|
16
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Less: current deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax liabilities
|
|
$
|
16
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
93
The reason for significant differences between taxable and
pre-tax book income primarily relates to depreciation on fixed
assets, employee pension and postretirement benefit costs,
employee-related accruals and leasing transactions.
The Company files tax returns in the U.S. federal
jurisdiction, and in various states and foreign jurisdictions.
All federal and state tax filings for US Airways Group and its
subsidiaries for fiscal years through December 31, 2008
have been timely filed. There are currently no federal audits
and one state audit in process. The Companys federal
income tax year 2005 was closed by operation of the statute of
limitations expiring, and there were no extensions filed. The
Company files tax returns in 44 states, and its major state
tax jurisdictions are Arizona, California, Pennsylvania and
North Carolina. Tax years up to 2004 for these state tax
jurisdictions are closed by operation of the statute of
limitations expiring. Extensions for two states have been filed.
The Company believes that its income tax filing positions and
deductions related to tax periods subject to examination will be
sustained upon audit and does not anticipate any adjustments
that will result in a material adverse effect on the
Companys financial condition, results of operations, or
cash flow. Therefore, no reserves for uncertain income tax
positions have been recorded.
|
|
6.
|
Risk
Management and Financial Instruments
|
The Companys economic prospects are heavily dependent upon
two variables it cannot control: the health of the economy and
the price of fuel. Due to the discretionary nature of business
and leisure travel spending, airline industry revenues are
heavily influenced by the condition of the U.S. economy and
the economies in other regions of the world. Unfavorable
economic conditions may result in decreased passenger demand for
air travel, which in turn could have a negative effect on the
Companys revenues. Similarly, the airline industry may not
be able to sufficiently raise ticket prices to offset increases
in aviation jet fuel prices. These factors could impact the
Companys results of operations, financial performance and
liquidity.
The Company periodically enters into derivative contracts
comprised of heating oil-based derivative instruments to hedge a
portion of its projected jet fuel requirements. Since the third
quarter of 2008, the Company has not entered into any new fuel
hedging transactions and, as of December 31, 2009, the
Company had no remaining outstanding fuel hedging contracts.
The Companys fuel hedging instruments did not qualify for
hedge accounting. Accordingly, the derivative hedging
instruments were recorded as an asset or liability on the
balance sheet at fair value and any changes in fair value were
recorded in the period of change as gains or losses on fuel
hedging instruments, net in operating expenses in the
accompanying consolidated statements of operations. The
following table details the Companys loss (gain) on fuel
hedging instruments, net (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Realized loss (gain)
|
|
$
|
382
|
|
|
$
|
(140
|
)
|
|
$
|
(58
|
)
|
Unrealized loss (gain)
|
|
|
(375
|
)
|
|
|
496
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on fuel hedging instruments, net
|
|
$
|
7
|
|
|
$
|
356
|
|
|
$
|
(245
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized gains in 2009 were related to the reversal of
prior period unrealized losses due to contracts settling in 2009.
Cash,
Cash Equivalents and Investments in Marketable
Securities
The Company invests available cash in money market securities
and highly liquid debt instruments.
As of December 31, 2009, the Company held auction rate
securities totaling $347 million at par value, which are
classified as
available-for-sale
securities and noncurrent assets on the Companys
consolidated balance sheets.
94
Contractual maturities for these auction rate securities range
from seven to 43 years, with 73% of the Companys
portfolio maturing within the next 10 years
(2016 2017), 19% maturing within the next
30 years (2033 2036) and 8% maturing
thereafter (2049 2052). With the liquidity issues
experienced in the global credit and capital markets, all of the
Companys auction rate securities have experienced failed
auctions since August 2007. The estimated fair value of these
auction rate securities no longer approximates par value. At
December 31, 2009, the fair value of the Companys
auction rate securities was $203 million. Refer to
Note 7 for discussion on how the Company determines the
fair value of its investments in auction rate securities.
During 2009, the Company sold certain investments in auction
rate securities for net proceeds of $32 million.
Additionally, the Company recorded net unrealized gains of
$58 million in other comprehensive income related to the
increase in fair value of certain investments in auction rate
securities, as well as $10 million in
other-than-temporary
impairment charges recorded in other nonoperating expense, net
related to the decline in fair value of certain investments in
auction rate securities.
In 2008, the Company recorded $214 million of
other-than-temporary
impairment charges in other nonoperating expense, net. These
charges included $48 million of previously recorded
unrealized losses in other comprehensive income. The
Companys conclusion for the $214 million
other-than-temporary
impairment was due to the length of time and extent to which the
fair value was less than cost for certain securities. In 2007,
the Company recorded a $58 million decline in fair value.
Of this decline in fair value, $48 million was deemed
temporary and recorded to other comprehensive income and
$10 million of the decline was deemed
other-than-temporary
and recorded to other nonoperating expense, net.
The Company continues to monitor the market for auction rate
securities and consider its impact (if any) on the fair value of
its investments. If the current market conditions deteriorate,
the Company may be required to record additional impairment
charges in other nonoperating expense, net in future periods.
Accounts
Receivable
As of December 31, 2009, most of the Companys
receivables related to tickets sold to individual passengers
through the use of major credit cards or to tickets sold by
other airlines and used by passengers on US Airways or its
regional airline affiliates. These receivables are short-term,
mostly being settled within seven days after sale. Bad debt
losses, which have been minimal in the past, have been
considered in establishing allowances for doubtful accounts. The
Company does not believe it is subject to any significant
concentration of credit risk.
The Company has exposure to market risk associated with changes
in interest rates related primarily to its variable rate debt
obligations. Interest rates on $3.33 billion principal
amount of long-term debt as of December 31, 2009 are
subject to adjustment to reflect changes in floating interest
rates. The weighted average effective interest rate on the
Companys variable rate debt was 3.98% at December 31,
2009.
The fair value of the Companys long-term debt was
approximately $3.95 billion and $3.31 billion at
December 31, 2009 and 2008, respectively. The fair values
were estimated using quoted market prices where available. For
long-term debt not actively traded, fair values were estimated
using a discounted cash flow analysis, based on the
Companys current incremental borrowing rates for similar
types of borrowing arrangements.
|
|
7.
|
Fair
Value Measurements
|
On January 1, 2008, the Company adopted the provisions of
SFAS No. 157, Fair Value Measurements
(included in FASB ASC Topic 320, Investments Debt
and Equity Securities), which defines fair value, establishes a
consistent framework for measuring fair value and expands
disclosure for each major asset and liability category measured
at fair value on either a recurring or nonrecurring basis. This
accounting guidance clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset
or paid to transfer a liability in an orderly transaction
between market participants. As such, fair value is a
market-based measurement that should be determined based on
assumptions that market participants would use in pricing an
asset or liability. As a basis for
95
considering such assumptions, this accounting guidance
establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value as follows:
|
|
|
|
Level 1.
|
Observable inputs such as quoted prices in active markets;
|
|
Level 2.
|
Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and
|
|
Level 3.
|
Unobservable inputs in which there is little or no market data,
which require the reporting entity to develop its own
assumptions.
|
Assets measured at fair value on a recurring basis are as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
Significant Other
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
Observable
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
Inputs
|
|
Inputs
|
|
Valuation
|
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Technique
|
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities (noncurrent)
|
|
$
|
203
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
203
|
|
|
|
(1
|
)
|
At December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities (noncurrent)
|
|
$
|
187
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
187
|
|
|
|
(1
|
)
|
Fuel hedging derivatives
|
|
|
(375
|
)
|
|
|
|
|
|
|
(375
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
(1) |
|
The Company estimated the fair value of its auction rate
securities based on the following: (i) the underlying
structure of each security; (ii) the present value of
future principal and interest payments discounted at rates
considered to reflect current market conditions;
(iii) consideration of the probabilities of default,
passing a future auction, or repurchase at par for each period;
and (iv) estimates of the recovery rates in the event of
default for each security. These estimated fair values could
change significantly based on future market conditions. Refer to
Note 6(b) for further discussion of the Companys
investments in marketable securities. |
|
(2) |
|
As the Companys fuel hedging derivative instruments were
not traded on a market exchange, the fair values were determined
using valuation models which included assumptions about
commodity prices based on those observed in the underlying
markets. The fair value of fuel hedging derivatives is recorded
in accounts payable on the consolidated balance sheets. Refer to
Note 6(a) for further discussion of the Companys fuel
hedging derivatives. |
Assets measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) are as
follows (in millions):
|
|
|
|
|
|
|
Investments in
|
|
|
|
Marketable
|
|
|
|
Securities
|
|
|
|
(Noncurrent)
|
|
|
Balance at December 31, 2007
|
|
$
|
353
|
|
Losses deemed to be other than temporary reclassified from other
comprehensive income to other nonoperating expense, net
|
|
|
48
|
|
Impairment losses included in other nonoperating expense, net
|
|
|
(214
|
)
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
187
|
|
Net unrealized gains recorded to other comprehensive income
|
|
|
58
|
|
Impairment losses included in other nonoperating expense, net
|
|
|
(10
|
)
|
Sales of marketable securities
|
|
|
(32
|
)
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
203
|
|
|
|
|
|
|
Assets measured at fair value on a nonrecurring basis are as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
Significant Other
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
Observable
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
Inputs
|
|
Inputs
|
|
Total
|
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Losses
|
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International route authorities
|
|
$
|
39
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
39
|
|
|
$
|
(16
|
)
|
96
The Company performed the annual impairment test on its
international route authorities during the fourth quarter of
2009. The fair values of international route authorities were
assessed using the market approach. The market approach took
into consideration relevant supply and demand factors at the
related airport locations as well as available market sale and
lease data. As a result of the Companys annual impairment
test on its international route authorities, the Company
recorded a $16 million impairment charge related to the
decline in fair value of certain international routes.
|
|
8.
|
Employee
Pension and Benefit Plans
|
Substantially all of the Companys employees meeting
certain service and other requirements are eligible to
participate in various pension, medical, dental, life insurance,
disability and survivorship plans.
|
|
(a)
|
Defined
Benefit and Other Postretirement Benefit Plans
|
The following table sets forth changes in the fair value of plan
assets, benefit obligations and the funded status of the plans
and the amounts recognized in the Companys consolidated
balance sheets as of December 31, 2009 and 2008 (in
millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Pension Plans
|
|
|
Other Postretirement Benefits
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Fair value of plan assets at beginning of period
|
|
$
|
33
|
|
|
$
|
46
|
|
|
$
|
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
7
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
|
|
|
|
2
|
|
|
|
19
|
|
|
|
15
|
|
Plan participants contributions
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
23
|
|
Gross benefits paid
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(36
|
)
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
|
38
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
|
|
59
|
|
|
|
50
|
|
|
|
122
|
|
|
|
163
|
|
Service cost
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
Interest cost
|
|
|
3
|
|
|
|
3
|
|
|
|
9
|
|
|
|
9
|
|
Plan participants contributions
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
23
|
|
Actuarial (gain) loss
|
|
|
(4
|
)
|
|
|
8
|
|
|
|
11
|
|
|
|
(33
|
)
|
Gross benefits paid
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
(36
|
)
|
|
|
(38
|
)
|
Plan amendments
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
Effect of adopting the measurement date provisions of
employers accounting for other postretirement benefit plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
|
57
|
|
|
|
59
|
|
|
|
143
|
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status of the plan
|
|
$
|
(19
|
)
|
|
$
|
(26
|
)
|
|
$
|
(143
|
)
|
|
$
|
(122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability recognized in the consolidated balance sheet
|
|
$
|
(19
|
)
|
|
$
|
(26
|
)
|
|
$
|
(143
|
)
|
|
$
|
(122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain) recognized in accumulated other
comprehensive income
|
|
$
|
5
|
|
|
$
|
15
|
|
|
$
|
(60
|
)
|
|
$
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plans are measured as of December 31, 2009
and 2008. On January 1, 2008, the Company adopted the
measurement date provisions of SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans (included in FASB ASC Topic
960, Plan Accounting Defined Benefit Pension Plans).
The change in the Companys other postretirement benefit
obligation reflects a $4 million reduction in 2008, which
includes $6 million of benefit payments, offset by
$2 million of net periodic benefit costs for the period
between the measurement date utilized in 2007,
September 30, and the beginning of 2008. The
$2 million of net periodic benefit costs was recorded as an
adjustment to accumulated deficit.
The Company maintains two defined benefit pension plans
sponsored by Piedmont. Piedmont closed one plan to new
participants in 2002 and froze the accrued benefits for the
other plan for all participants in 2003. The aggregate
accumulated benefit obligations, projected benefit obligations
and plan assets were $52 million, $57 million and
97
$38 million, as of December 31, 2009 and
$54 million, $59 million and $33 million, as of
December 31, 2008, respectively.
In connection with the ratification of new unified agreements
that moved all of US Airways fleet services and
maintenance and related employees to one labor contract, the
Companys postretirement benefit plans were amended
effective as of January 1, 2009 to include all pre-merger
AWA fleet service and maintenance and related employees.
The following table presents the weighted average assumptions
used to determine benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Pension Plans
|
|
Other Postretirement Benefits
|
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Discount rate
|
|
|
5.5
|
%
|
|
|
5.5
|
%
|
|
|
5.51
|
%
|
|
|
5.98
|
%
|
Rate of compensation increase
|
|
|
4
|
%
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
As of December 31, 2009 and 2008, the Company discounted
its pension obligations based on the current rates earned on
high quality Aa rated long-term bonds.
The Company assumed discount rates for measuring its other
postretirement benefit obligations, based on a hypothetical
portfolio of high quality publicly traded U.S. bonds (Aa
rated, non-callable or callable with make-whole provisions), for
which the timing and cash outflows approximate the estimated
benefit payments of the other postretirement benefit plans.
As of December 31, 2009, the assumed health care cost trend
rates are 8% in 2010 and 7.5% in 2011, decreasing to 5.5% in
2015 and thereafter. As of December 31, 2008, the assumed
health care cost trend rates are 9% in 2009 and 8% in 2010,
decreasing to 5.5% in 2015 and thereafter. The assumed health
care cost trend rates could have a significant effect on amounts
reported for retiree health care plans. A one-percentage point
change in the health care cost trend rates would have the
following effects on other postretirement benefits as of
December 31, 2009 (in millions):
|
|
|
|
|
|
|
|
|
|
|
1% Increase
|
|
1% Decrease
|
|
Effect on total service and interest costs
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
Effect on postretirement benefit obligation
|
|
|
9
|
|
|
|
(8
|
)
|
Weighted average assumptions used to determine net periodic
benefit cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Pension Plans
|
|
Other Postretirement Benefits
|
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
Discount rate
|
|
|
5.5
|
%
|
|
|
6
|
%
|
|
|
5.75
|
%
|
|
|
5.98
|
%
|
|
|
5.94
|
%
|
|
|
5.67
|
%
|
Expected return on plan assets
|
|
|
8
|
%
|
|
|
8
|
%
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate of compensation increase
|
|
|
4
|
%
|
|
|
4
|
%
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of the net and total periodic cost for pension and
other postretirement benefits are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Pension Plans
|
|
|
Other Postretirement Benefits
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Service cost
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
3
|
|
Interest cost
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
|
9
|
|
|
|
9
|
|
|
|
12
|
|
Expected return on plan assets
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss (gain) (1)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total periodic costs
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
9
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The estimated actuarial gain for other postretirement benefit
plans that will be amortized from accumulated other
comprehensive income into net periodic benefit cost in 2010 is
$4 million. |
98
In 2010, the Company expects to contribute $13 million to
its other postretirement plans. No contributions are expected in
2010 for the Companys defined benefit plans. The following
benefits, which reflect expected future service, as appropriate,
are expected to be paid from the defined benefit and other
postretirement plans (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Postretirement
|
|
|
|
|
Defined Benefit
|
|
Benefits before
|
|
|
|
|
Pension Plans
|
|
Medicare Subsidy
|
|
Medicare Subsidy
|
|
2010
|
|
$
|
2
|
|
|
$
|
13
|
|
|
$
|
|
|
2011
|
|
|
2
|
|
|
|
13
|
|
|
|
|
|
2012
|
|
|
2
|
|
|
|
12
|
|
|
|
|
|
2013
|
|
|
2
|
|
|
|
12
|
|
|
|
|
|
2014
|
|
|
2
|
|
|
|
13
|
|
|
|
|
|
2015 to 2019
|
|
|
14
|
|
|
|
66
|
|
|
|
(2
|
)
|
The Company assumed that its pension plans assets would
generate a long-term rate of return of 8% at December 31,
2009. The expected long-term rate of return assumption was
developed by evaluating input from the plans investment
consultants, including their review of asset class return
expectations and long-term inflation assumptions.
The Companys overall investment strategy is to achieve
long-term investment growth. The Companys targeted asset
allocation as of December 31, 2009 is approximately 65%
equity securities and 35% fixed-income securities. Equity
securities primarily include mutual funds invested in large-cap
and mid-cap U.S. and international companies. Fixed-income
securities primarily include mutual funds invested in
U.S. treasuries and corporate bonds. The Company believes
that its long-term asset allocation on average will approximate
the targeted allocation. The Company regularly reviews its
actual asset allocation and periodically rebalances its
investments to its targeted allocation when considered
appropriate.
The fair value of pension plan assets by asset category is as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
Significant Other
|
|
Significant
|
|
|
|
|
Active Markets for
|
|
Observable
|
|
Unobservable
|
|
|
|
|
Identical Assets
|
|
Inputs
|
|
Inputs
|
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
38
|
|
|
$
|
38
|
|
|
$
|
|
|
|
$
|
|
|
As of December 31, 2009, the plans mutual funds were
invested 53% in equity securities of large-cap and mid-cap
U.S. companies, 33% in U.S. treasuries and corporate
bonds, 11% in equity securities of large-cap international
companies and 3% in equity securities of emerging market
companies. The mutual fund shares are classified as Level 1
instruments and valued at quoted prices in an active market
exchange, which represents the net asset value of shares held by
the pension plan.
|
|
(b)
|
Defined
Contribution Plans
|
The Company sponsors several defined contribution plans which
cover a majority of its employee groups. The Company makes
contributions to these plans based on the individual plan
provisions, including an employer non-discretionary contribution
and an employer match. These contributions are generally made
based upon eligibility, eligible earnings and employee group.
Expenses related to these plans were $98 million,
$96 million and $81 million for the years ended
December 31, 2009, 2008, and 2007, respectively.
|
|
(c)
|
Postemployment
Benefits
|
The Company provides certain postemployment benefits to its
employees. These benefits include disability-related and
workers compensation benefits for certain employees. The
Company accrues for the cost of such benefit expenses once an
appropriate triggering event has occurred. In 2007, the Company
recorded a $99 million charge to increase long-term
disability obligations for US Airways pilots as a result
of a change in the FAA-mandated retirement age for pilots from
60 to 65.
99
Most non-executive employees of US Airways are eligible to
participate in the 2005 Profit Sharing Plan, an annual bonus
program. Annual bonus awards are paid from a profit-sharing pool
equal to (i) 10% of the annual profits of US Airways Group
(excluding unusual items) for pre-tax profit margins up to 10%,
plus (ii) 15% of the annual profits of US Airways Group
(excluding unusual items) for pre-tax profit margins greater
than 10%. Awards are paid as a lump sum no later than March 15
after the end of each fiscal year. The Company recorded no
amounts in 2009 and 2008 for profit sharing as the Company had a
net loss in these years excluding special items and recorded
$49 million for profit sharing in 2007, which is recorded
in salaries and related costs.
|
|
9.
|
Commitments
and Contingencies
|
|
|
(a)
|
Commitments
to Purchase Flight Equipment and Maintenance
Services
|
Aircraft
and Engine Purchase Commitments
US Airways has definitive purchase agreements with Airbus for
the acquisition of 134 aircraft, including 97 single-aisle
A320 family aircraft and 37 widebody aircraft (comprised of 22
A350 XWB aircraft and 15 A330-200 aircraft), of which 30
aircraft have been delivered through December 31, 2009.
Deliveries of the A320 family aircraft commenced during 2008
with the delivery of five A321 aircraft. During 2009, US Airways
took delivery of 18 Airbus A321 aircraft, five A330-200 aircraft
and two Airbus A320 aircraft. Of the 20 A320 family aircraft, 11
were financed using manufacturer backstop financing, eight were
financed through existing financing facilities and one was
financed through a leasing transaction. Of the five A330-200
aircraft, three were financed through leasing transactions and
two were financed through new loan agreements.
In November 2009, US Airways amended its purchase agreements
with Airbus to defer 54 Airbus aircraft originally scheduled for
delivery between 2010 and 2012 to 2013 and beyond. These
deferral arrangements will reduce the Companys aircraft
capital expenditures over the next three years by approximately
$2.5 billion and reduce near- and medium-term obligations
to Airbus and others by approximately $132 million. US
Airways now plans to take delivery of 28 Airbus aircraft between
2010 and 2012, consisting of four aircraft in 2010 (two A320
aircraft and two A330 aircraft) and 24 A320 family aircraft in
2011-2012.
In addition, commencement of US Airways Airbus A350 XWB
operations, with aircraft deliveries originally scheduled to
start in 2015, will now be postponed to 2017.
US Airways has agreements for the purchase of eight new IAE
V2500-A5 spare engines scheduled for delivery through 2014 for
use on the Airbus A320 family fleet, three new Trent 700 spare
engines scheduled for delivery through 2013 for use on the
Airbus A330-200 fleet and three new Trent XWB spare engines
scheduled for delivery in 2017 through 2019 for use on the
Airbus A350 XWB aircraft. US Airways has taken delivery of two
of the Trent 700 spare engines and one of the V2500-A5 spare
engines, which were financed through leasing transactions.
Under all of the Companys aircraft and engine purchase
agreements, the Companys total future commitments as of
December 31, 2009 are expected to be approximately
$6.09 billion through 2019 as follows: $296 million in
2010, $504 million in 2011, $579 million in 2012,
$1.15 billion in 2013, $932 million in 2014 and
$2.63 billion thereafter, which includes predelivery
deposits and payments. The Company has financing commitments for
all Airbus aircraft scheduled for delivery during 2010 to 2012.
The Company leases certain aircraft, engines, and ground
equipment, in addition to the majority of its ground facilities
and terminal space. As of December 31, 2009, the Company
had 316 aircraft under operating leases, with remaining terms
ranging from one month to approximately 14 years. Ground
facilities include maintenance facilities and ticket, corporate
and administrative offices. Public airports are utilized for
flight operations under lease arrangements with the
municipalities or agencies owning or controlling such airports.
Substantially all leases provide that the lessee must pay taxes,
maintenance, insurance and certain other operating expenses
applicable to the leased property. Some leases also include
renewal and purchase options.
100
As of December 31, 2009, obligations under noncancellable
operating leases for future minimum lease payments were as
follows (in millions):
|
|
|
|
|
2010
|
|
$
|
1,075
|
|
2011
|
|
|
948
|
|
2012
|
|
|
871
|
|
2013
|
|
|
724
|
|
2014
|
|
|
645
|
|
Thereafter
|
|
|
3,184
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
7,447
|
|
|
|
|
|
|
For the years ended December 31, 2009, 2008 and 2007,
rental expense under operating leases was $1.29 billion,
$1.33 billion and $1.29 billion, respectively.
|
|
(c)
|
Off-balance
Sheet Arrangements
|
US Airways has obligations with respect to pass through trust
certificates, or EETCs, issued by pass through trusts to cover
the financing of 19 owned aircraft, 114 leased aircraft and
three leased engines. These trusts are off-balance sheet
entities, the primary purpose of which is to finance the
acquisition of flight equipment. Rather than finance each
aircraft separately when such aircraft is purchased or
delivered, these trusts allowed US Airways to raise the
financing for several aircraft at one time and place such funds
in escrow pending the purchase or delivery of the relevant
aircraft. The trusts were also structured to provide for certain
credit enhancements, such as liquidity facilities to cover
certain interest payments, that reduce the risks to the
purchasers of the trust certificates and, as a result, reduce
the cost of aircraft financing to US Airways.
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at US Airways
election in connection with a mortgage financing of the aircraft
or by a separate owner trust in connection with a leveraged
lease financing of the aircraft. In the case of a leveraged
lease financing, the owner trust then leased the aircraft to US
Airways. In both cases, the equipment notes are secured by a
security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor are they
guaranteed by, the Company or US Airways. However, in the case
of mortgage financings, the equipment notes issued to the trusts
are direct obligations of US Airways. As of December 31,
2009, $505 million associated with these mortgage
financings is reflected as debt in the accompanying consolidated
balance sheet.
With respect to leveraged leases, US Airways evaluated whether
the leases had characteristics of a variable interest entity. US
Airways concluded the leasing entities met the criteria for
variable interest entities. US Airways then evaluated whether or
not it was the primary beneficiary by evaluating whether or not
it was exposed to the majority of the risks (expected losses) or
whether it receives the majority of the economic benefits
(expected residual returns) from the trusts activities. US
Airways does not provide residual value guarantees to the
bondholders or equity participants in the trusts. Each lease
does have a fixed price purchase option that allows US Airways
to purchase the aircraft near the end of the lease term.
However, the option price approximates an estimate of the
aircrafts fair value at the option date. Under this
feature, US Airways does not participate in any increases in the
value of the aircraft. US Airways concluded it was not the
primary beneficiary under these arrangements. Therefore, US
Airways accounts for its EETC leveraged lease financings as
operating leases. US Airways total future obligations
under these leveraged lease financings are $3.25 billion as
of December 31, 2009, which are included in the future
minimum lease payments table in (b) above.
|
|
(d)
|
Regional
Jet Capacity Purchase Agreements
|
US Airways has entered into capacity purchase agreements with
certain regional jet operators. The capacity purchase agreements
provide that all revenues, including passenger, mail and freight
revenues, go to US Airways. In return, US Airways agrees to pay
predetermined fees to these airlines for operating an
agreed-upon
number of aircraft, without regard to the number of passengers
onboard. In addition, these agreements provide that certain
variable costs, such as airport landing fees and passenger
liability insurance, will be reimbursed 100% by US
101
Airways. US Airways controls marketing, scheduling, ticketing,
pricing and seat inventories. The regional jet capacity purchase
agreements have expirations from 2012 to 2020. The future
minimum noncancellable commitments under the regional jet
capacity purchase agreements are $1.01 billion in 2010,
$1.03 billion in 2011, $900 million in 2012,
$772 million in 2013, $771 million in 2014 and
$2.35 billion thereafter.
Certain entities with which US Airways has capacity purchase
agreements are considered variable interest entities. In
connection with its restructuring and emergence from bankruptcy,
US Airways contracted with Air Wisconsin and Republic to
purchase a significant portion of these companies regional
jet capacity for a period of 10 years. US Airways has
determined that it is not the primary beneficiary of these
variable interest entities, based on cash flow analyses.
Additionally, US Airways has analyzed the arrangements with
other carriers with which US Airways has long-term capacity
purchase agreements and has concluded it is not required to
consolidate any of the entities.
On September 12, 2004, US Airways Group and its domestic
subsidiaries (collectively, the Reorganized Debtors)
filed voluntary petitions for relief under Chapter 11 of
the Bankruptcy Code in the United States Bankruptcy Court for
the Eastern District of Virginia, Alexandria Division (Case
Nos. 04-13819-SSM
through
03-13823-SSM)
(the 2004 Bankruptcy). On September 16, 2005,
the Bankruptcy Court issued an order confirming the plan of
reorganization submitted by the Reorganized Debtors and on
September 27, 2005, the Reorganized Debtors emerged from
the 2004 Bankruptcy. The Bankruptcy Courts order
confirming the plan included a provision called the plan
injunction, which forever bars other parties from pursuing most
claims against the Reorganized Debtors that arose prior to
September 27, 2005 in any forum other than the Bankruptcy
Court. Substantially all of the claims in the 2004 Bankruptcy
have been settled and the remaining claims, if paid at all, will
be paid out in common stock of the post-bankruptcy
US Airways Group at a small fraction of the actual claim
amount. However, the effects of these common stock distributions
were already reflected in the Companys financial
statements upon emergence from bankruptcy and will not have any
further impact on its financial position or results of
operations. The Company presently expects the bankruptcy case to
be closed during 2010.
The Company
and/or its
subsidiaries are defendants in various pending lawsuits and
proceedings, and from time to time are subject to other claims
arising in the normal course of its business, many of which are
covered in whole or in part by insurance. The outcome of those
matters cannot be predicted with certainty at this time, but the
Company, having consulted with outside counsel, believes that
the ultimate disposition of these contingencies will not
materially affect its consolidated financial position or results
of operations.
|
|
(f)
|
Guarantees
and Indemnifications
|
US Airways guarantees the payment of principal and interest on
certain special facility revenue bonds issued by municipalities
to build or improve certain airport and maintenance facilities
which are leased to US Airways. Under such leases, US Airways is
required to make rental payments through 2023, sufficient to pay
maturing principal and interest payments on the related bonds.
As of December 31, 2009, the remaining lease payments
guaranteeing the principal and interest on these bonds are
$137 million, of which $34 million of these
obligations is accounted for as a capital lease and reflected as
debt in the accompanying consolidated balance sheet.
The Company enters into real estate leases in substantially all
cities that it serves. It is common in such commercial lease
transactions for the Company as the lessee to agree to indemnify
the lessor and other related third parties for tort liabilities
that arise out of or relate to the use or occupancy of the
leased premises. In some cases, this indemnity extends to
related liabilities arising from the negligence of the
indemnified parties, but usually excludes any liabilities caused
by their gross negligence or willful misconduct. With respect to
certain special facility bonds, the Company agreed to indemnify
the municipalities for any claims arising out of the issuance
and sale of the bonds and use or occupancy of the concourses
financed by these bonds. Additionally, the Company typically
indemnifies such parties for any environmental liability that
arises out of or relates to its use or occupancy of the leased
premises.
The Company is the lessee under many aircraft financing
agreements (including leveraged lease financings of aircraft
under pass through trusts). It is common in such transactions
for the Company as the lessee to agree to indemnify the lessor
and other related third parties for the manufacture, design,
ownership, financing, use,
102
operation and maintenance of the aircraft, and for tort
liabilities that arise out of or relate to the Companys
use or occupancy of the leased asset. In some cases, this
indemnity extends to related liabilities arising from the
negligence of the indemnified parties, but usually excludes any
liabilities caused by their gross negligence or willful
misconduct. In aircraft financing agreements structured as
leveraged leases, the Company typically indemnifies the lessor
with respect to adverse changes in U.S. tax laws.
|
|
10.
|
Other
Comprehensive Income (Loss)
|
The Companys other comprehensive income (loss) consisted
of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net income (loss)
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
|
$
|
423
|
|
Net unrealized gains (losses) on
available-for-sale
securities, net of tax expense of $21 million in 2009
|
|
|
35
|
|
|
|
|
|
|
|
(48
|
)
|
Recognition of previous unrealized losses now deemed
other-than-temporary
|
|
|
|
|
|
|
48
|
|
|
|
|
|
Pension and other postretirement benefits
|
|
|
(10
|
)
|
|
|
7
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
(180
|
)
|
|
$
|
(2,160
|
)
|
|
$
|
430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive income were as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Pension and other postretirement benefits
|
|
$
|
55
|
|
|
$
|
65
|
|
Accumulated net unrealized gains on
available-for-sale
securities, net of tax
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
$
|
90
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
Supplemental
Cash Flow Information
|
Supplemental disclosure of cash flow information and non-cash
investing and financing activities are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payables issued for aircraft purchases
|
|
$
|
333
|
|
|
$
|
|
|
|
$
|
|
|
Debt extinguished from sale of aircraft
|
|
|
(251
|
)
|
|
|
|
|
|
|
|
|
Unrealized loss (gain) on
available-for-sale
securities, net
|
|
|
(58
|
)
|
|
|
|
|
|
|
48
|
|
Interest payable converted to debt
|
|
|
40
|
|
|
|
7
|
|
|
|
|
|
Maintenance payable converted to debt
|
|
|
8
|
|
|
|
33
|
|
|
|
|
|
Cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid, net of amounts capitalized
|
|
|
195
|
|
|
|
216
|
|
|
|
248
|
|
Income taxes paid
|
|
|
|
|
|
|
1
|
|
|
|
4
|
|
|
|
12.
|
Related
Party Transactions
|
Richard A. Bartlett, a member of the Companys board of
directors until June 2008, is a greater than 10% owner of Air
Wisconsin. US Airways and Air Wisconsin also entered into a
regional jet services agreement under which Air Wisconsin may,
but is not required to, provide regional jet service under a US
Airways Express code share arrangement. On April 8, 2005,
Air Wisconsin notified the Company of its intention to deploy 70
regional jets, the maximum number provided for in the agreement,
into the US Airways Express network. Mr. Bartlett became a
member of the board of directors pursuant to certain stockholder
agreements, which by their terms expired in June 2008.
Edward L. Shapiro, a member of the Companys board of
directors until June 2008, is a Vice President and partner of
PAR Capital Management, the general partner of PAR. PAR received
10,768,485 shares of US Airways Group
103
common stock, including shares received pursuant to
Participation Agreements with America West Holdings, for a total
investment of $160 million at the time of the merger. As of
December 31, 2007, PAR has sold substantially all of its
investment in the Company. Mr. Shapiro became a member of
the board of directors pursuant to certain stockholder
agreements, which by their terms expired in June 2008.
|
|
13.
|
Operating
Segments and Related Disclosures
|
The Company is managed as a single business unit that provides
air transportation for passengers and cargo. This allows it to
benefit from an integrated revenue pricing and route network
that includes US Airways, Piedmont, PSA and third-party carriers
that fly under capacity purchase or prorate agreements as part
of the Companys Express operations. The flight equipment
of all these carriers is combined to form one fleet that is
deployed through a single route scheduling system. When making
resource allocation decisions, the chief operating decision
maker evaluates flight profitability data, which considers
aircraft type and route economics, but gives no weight to the
financial impact of the resource allocation decision on an
individual carrier basis. The objective in making resource
allocation decisions is to maximize consolidated financial
results, not the individual results of US Airways, Piedmont and
PSA.
Information concerning operating revenues in principal
geographic areas is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
United States
|
|
$
|
8,285
|
|
|
$
|
9,659
|
|
|
$
|
9,582
|
|
Foreign
|
|
|
2,173
|
|
|
|
2,459
|
|
|
|
2,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,458
|
|
|
$
|
12,118
|
|
|
$
|
11,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company attributes operating revenues by geographic region
based upon the origin and destination of each flight segment.
The Companys tangible assets consist primarily of flight
equipment, which are mobile across geographic markets and,
therefore, have not been allocated.
Holders of common stock are entitled to one vote per share on
all matters submitted to a vote of common shareholders, except
that voting rights of
non-U.S. citizens
are limited to the extent that the shares of common stock held
by such
non-U.S. persons
would otherwise be entitled to more than 24.9% of the aggregate
votes of all outstanding equity securities of US Airways Group.
Holders of common stock have no right to cumulate their votes.
Holders of common stock participate equally as to any dividends
or distributions on the common stock.
In May 2009, the Company completed a public offering of
17.5 million shares of common stock at an offering price of
$3.97 per share. Net proceeds from the offering, after
underwriting discounts and commissions, were $66 million.
In September 2009, the Company completed a public offering of
29 million shares of common stock at a price of $4.75 per
share. Net proceeds from the offering, after offering costs,
were $137 million.
In August 2008, the Company completed a public offering of
21.85 million shares of common stock at an offering price
of $8.50 per share. Net proceeds from the offering, after
underwriting discounts and commissions, were $179 million.
|
|
15.
|
Stock-based
Compensation
|
In June 2008, the stockholders of the Company approved the 2008
Equity Incentive Plan (the 2008 Plan). The 2008 Plan
replaces and supersedes the 2005 Equity Incentive Plan (the
2005 Plan). No additional awards will be made under
the 2005 Plan, although outstanding awards previously made under
the 2005 Plan will continue to be governed by the terms and
conditions of the 2005 Plan. Any shares subject to an award
under the 2005 Plan outstanding as of the date on which the 2008
Plan was approved by the Board that expire, are forfeited or
otherwise terminate unexercised will increase the shares
reserved for issuance under the 2008 Plan by (i) one share
for each share of stock issued pursuant to a stock option or
stock appreciation right and (ii) three shares for each
share of
104
stock issued pursuant to a restricted stock unit, which
corresponds to the reduction originally made with respect to
each award in the 2005 Plan.
The 2008 Plan authorizes the grant of awards for the issuance of
up to a maximum of 6,700,000 shares of the Companys
common stock. Awards may be in the form of performance grants,
bonus awards, performance shares, restricted stock awards,
vested shares, restricted stock units, vested units, incentive
stock options, nonstatutory stock options and stock appreciation
rights. The number of shares of the Companys common stock
available for issuance under the 2008 Plan is reduced by
(i) one share for each share of stock issued pursuant to a
stock option or a stock appreciation right, and (ii) one
and one-half (1.5) shares for each share of stock issued
pursuant to all other stock awards. Cash settled awards do not
reduce the number of shares available for issuance under the
2008 Plan. Stock awards that are terminated, forfeited or
repurchased result in an increase in the share reserve of the
2008 Plan corresponding to the reduction originally made in
respect of the award. Any shares of the Companys stock
tendered or exchanged by a participant as full or partial
payment to the Company of the exercise price under an option and
any shares retained or withheld by the Company in satisfaction
of an employees obligations to pay applicable withholding
taxes with respect to any award will not be available for
reissuance, subjected to new awards or otherwise used to
increase the share reserve under the 2008 Plan. The cash
proceeds from option exercises will not be used to repurchase
shares on the open market for reuse under the 2008 Plan.
The Companys net income (loss) for the years ended
December 31, 2009, 2008 and 2007 included $23 million,
$34 million and $32 million, respectively, of
stock-based compensation costs. During 2009, stock-based
compensation costs consisted of $20 million related to
stock settled awards and $3 million related to cash settled
awards.
Restricted Stock Unit Awards As of
December 31, 2009, the Company has outstanding restricted
stock unit awards (RSUs) with service conditions,
which are classified as equity awards. The grant-date fair value
of RSUs is equal to the market price of the underlying shares of
common stock on the date of grant and is expensed over the
vesting period. The vesting period for RSU awards is three years.
RSU award activity for the years ending December 31, 2009,
2008 and 2007 is as follows (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average Grant-
|
|
|
|
Shares
|
|
|
Date Fair Value
|
|
|
2005 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
Nonvested balances at December 31, 2006
|
|
|
814
|
|
|
$
|
28.63
|
|
Granted
|
|
|
242
|
|
|
|
41.51
|
|
Vested and released
|
|
|
(446
|
)
|
|
|
29.85
|
|
Forfeited
|
|
|
(18
|
)
|
|
|
31.26
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2007
|
|
|
592
|
|
|
$
|
32.91
|
|
Granted
|
|
|
535
|
|
|
|
9.02
|
|
Vested and released
|
|
|
(390
|
)
|
|
|
29.07
|
|
Forfeited
|
|
|
(32
|
)
|
|
|
23.15
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2008
|
|
|
705
|
|
|
$
|
17.36
|
|
Granted
|
|
|
|
|
|
|
|
|
Vested and released
|
|
|
(323
|
)
|
|
|
22.16
|
|
Forfeited
|
|
|
(29
|
)
|
|
|
15.76
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2009
|
|
|
353
|
|
|
$
|
13.10
|
|
|
|
|
|
|
|
|
|
|
2008 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2007
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
19
|
|
|
|
7.52
|
|
Vested and released
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2008
|
|
|
19
|
|
|
$
|
7.52
|
|
Granted
|
|
|
280
|
|
|
|
3.44
|
|
Vested and released
|
|
|
(189
|
)
|
|
|
2.84
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2009
|
|
|
110
|
|
|
$
|
5.19
|
|
|
|
|
|
|
|
|
|
|
105
As of December 31, 2009, there were $3 million of
total unrecognized compensation costs related to RSUs. These
costs are expected to be recognized over a weighted average
period of 0.9 years. The total fair value of RSUs vested
during 2009, 2008 and 2007 was $2 million, $3 million
and $14 million, respectively.
Stock Options and Stock Appreciation Rights
Stock options and stock appreciation rights are granted with an
exercise price equal to the underlying common stocks fair
market value at the date of each grant. Stock options and stock
appreciation rights have service conditions, become exercisable
over a three-year vesting period and expire if unexercised at
the end of their term, which ranges from seven to 10 years.
Stock options and stock-settled stock appreciation rights
(SARs) are classified as equity awards as the
exercise results in the issuance of shares of the Companys
common stock. Cash-settled stock appreciation rights
(CSARs) are classified as liability awards as the
exercise results in payment of cash by the Company.
Stock option and SARs activity for the years ending
December 31, 2009, 2008 and 2007 is as follows (stock
options and SARs in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Stock
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
Options
|
|
|
Average
|
|
|
Contractual Term
|
|
|
Aggregate
|
|
|
|
and SARs
|
|
|
Exercise Price
|
|
|
(years)
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
1994 Incentive Equity Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
750
|
|
|
$
|
46.10
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(30
|
)
|
|
|
40.93
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(75
|
)
|
|
|
46.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
645
|
|
|
$
|
46.30
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2
|
)
|
|
|
9.21
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(244
|
)
|
|
|
55.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
399
|
|
|
$
|
40.96
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(200
|
)
|
|
|
45.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
199
|
|
|
$
|
36.57
|
|
|
|
.62
|
|
|
$
|
|
|
Vested or expected to vest at December 31, 2009
|
|
|
199
|
|
|
$
|
36.57
|
|
|
|
.62
|
|
|
$
|
|
|
Exercisable at December 31, 2009
|
|
|
199
|
|
|
$
|
36.57
|
|
|
|
.62
|
|
|
$
|
|
|
2002 Incentive Equity Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
798
|
|
|
$
|
18.33
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(36
|
)
|
|
|
14.36
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
762
|
|
|
$
|
18.52
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2
|
)
|
|
|
6.42
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(23
|
)
|
|
|
25.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
737
|
|
|
$
|
18.34
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(17
|
)
|
|
|
19.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Stock
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
Options
|
|
|
Average
|
|
|
Contractual Term
|
|
|
Aggregate
|
|
|
|
and SARs
|
|
|
Exercise Price
|
|
|
(years)
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
Balance at December 31, 2009
|
|
|
720
|
|
|
$
|
18.32
|
|
|
|
3.95
|
|
|
$
|
|
|
Vested or expected to vest at December 31, 2009
|
|
|
720
|
|
|
$
|
18.32
|
|
|
|
3.95
|
|
|
$
|
|
|
Exercisable at December 31, 2009
|
|
|
720
|
|
|
$
|
18.32
|
|
|
|
3.95
|
|
|
$
|
|
|
2005 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
2,495
|
|
|
$
|
31.53
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,123
|
|
|
|
42.23
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(92
|
)
|
|
|
29.74
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(93
|
)
|
|
|
35.00
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(63
|
)
|
|
|
37.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
3,370
|
|
|
$
|
34.96
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,959
|
|
|
|
9.11
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(5
|
)
|
|
|
8.84
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(200
|
)
|
|
|
30.18
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(218
|
)
|
|
|
32.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
4,906
|
|
|
$
|
24.93
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(119
|
)
|
|
|
20.43
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(266
|
)
|
|
|
30.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
4,521
|
|
|
$
|
24.67
|
|
|
|
7.00
|
|
|
$
|
|
|
Vested or expected to vest at December 31, 2009
|
|
|
4,429
|
|
|
$
|
24.87
|
|
|
|
6.98
|
|
|
$
|
|
|
Exercisable at December 31, 2009
|
|
|
3,184
|
|
|
$
|
28.69
|
|
|
|
6.54
|
|
|
$
|
|
|
2008 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,389
|
|
|
|
6.64
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(56
|
)
|
|
|
6.70
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
2,333
|
|
|
$
|
6.64
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,286
|
|
|
|
3.23
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(193
|
)
|
|
|
6.67
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(8
|
)
|
|
|
6.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
5,418
|
|
|
$
|
4.57
|
|
|
|
6.03
|
|
|
$
|
5.6
|
|
Vested or expected to vest at December 31, 2009
|
|
|
5,095
|
|
|
$
|
4.59
|
|
|
|
6.02
|
|
|
$
|
5.2
|
|
Exercisable at December 31, 2009
|
|
|
717
|
|
|
$
|
6.65
|
|
|
|
5.63
|
|
|
$
|
|
|
107
CSARs activity for the year ending December 31, 2009 is as
follows (CSARs in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Contractual Term
|
|
|
Aggregate
|
|
|
|
CSARs
|
|
|
Exercise Price
|
|
|
(years)
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
2008 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
4,645
|
|
|
|
3.10
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(232
|
)
|
|
|
3.10
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
4,413
|
|
|
$
|
3.10
|
|
|
|
6.27
|
|
|
$
|
7.7
|
|
Vested or expected to vest at December 31, 2009
|
|
|
4,110
|
|
|
$
|
3.10
|
|
|
|
6.27
|
|
|
$
|
7.2
|
|
Exercisable at December 31, 2009
|
|
|
3
|
|
|
$
|
5.23
|
|
|
|
5.87
|
|
|
$
|
|
|
The fair value of stock options and stock appreciation rights is
determined at the grant date using a Black-Scholes option
pricing model, which requires several assumptions. The risk-free
interest rate is based on the U.S. Treasury yield curve in
effect for the expected term of the award at the time of grant.
The dividend yield is assumed to be zero as the Company does not
pay dividends and has no current plans to do so in the future.
The volatility is based on the historical volatility of the
Companys common stock over a time period equal to the
expected term of the award. The expected life of the award is
based on the historical experience of the Company.
The per share weighted-average grant-date fair value of stock
appreciation rights granted and the weighted-average assumptions
used for the years ended December 31, 2009, 2008 and 2007
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Weighted average fair value
|
|
$
|
1.84
|
|
|
$
|
3.28
|
|
|
$
|
16.57
|
|
Risk free interest rate
|
|
|
1.3
|
%
|
|
|
2.5
|
%
|
|
|
4.5
|
%
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected life
|
|
|
3.0 years
|
|
|
|
3.0 years
|
|
|
|
3.0 years
|
|
Volatility
|
|
|
92
|
%
|
|
|
62
|
%
|
|
|
52
|
%
|
As of December 31, 2009, there was $12 million of
total unrecognized compensation costs related to stock options
and SARs. These costs are expected to be recognized over a
weighted average period of 1.1 years. There were no stock
options or SARs exercised during 2009. The total intrinsic value
of stock options and SARs exercised during the years ended
December 31, 2008 and 2007 was $0.1 million and
$4 million, respectively. Cash received from stock option
and SAR exercises during the years ended December 31, 2008
and 2007 was $0.1 million and $2 million, respectively.
As of December 31, 2009, the average fair market value of
outstanding CSARs was $3.52 per share and the related liability
was $3 million. These CSARs will continue to be remeasured
at fair value at each reporting date until all awards are
settled. As of December 31, 2009, the total unrecognized
compensation expense for CSARs was $10 million and is
expected to be recognized over a weighted average period of
1.3 years.
Agreements with the Pilot Union US Airways
Group and US Airways have a letter of agreement with the US
Airways pilot union through April 18, 2008, that
provides that US Airways pilots designated by the union
receive stock options to purchase 1.1 million shares of the
Companys common stock. The first tranche of
0.5 million stock options was granted on January 31,
2006 with an exercise price of $33.65. The second tranche of
0.3 million stock options was granted on January 31,
2007 with an exercise price of $56.90. The third and final
tranche of 0.3 million stock options was granted on
January 31, 2008 with an exercise price of $12.50. The
stock options granted to pilots do not reduce the shares
available for grant under any equity incentive plan. Any of
these pilot stock options that are forfeited or that expire
without being exercised will not become available for grant
under any of the Companys plans.
108
The per share fair value of the pilot stock options and
assumptions used for the January 31, 2008 and 2007 grants
were as follows:
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Per share fair value
|
|
$
|
3.02
|
|
|
$
|
18.02
|
|
Risk free interest rate
|
|
|
2.2
|
%
|
|
|
4.9
|
%
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
Expected life
|
|
|
2.0 years
|
|
|
|
2.0 years
|
|
Volatility
|
|
|
55
|
%
|
|
|
53
|
%
|
As of December 31, 2009, there were no unrecognized
compensation costs related to stock options granted to pilots as
the stock options were fully vested on the grant date. As of
December 31, 2009, there were 0.8 million pilot stock
options outstanding at a weighted average exercise price of
$34.40 and a weighted average remaining contractual term of
7.28 years. No pilot stock options were exercised in 2009
or 2008. There were 25,029 pilot stock options exercised during
2007 pursuant to this agreement. The total intrinsic value of
pilot stock options exercised during 2007 was $1 million.
Cash received from pilot stock options exercised during 2007
totaled $1 million.
|
|
16.
|
Valuation
and Qualifying Accounts (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
End
|
|
Description
|
|
of Period
|
|
|
Additions
|
|
|
Deductions
|
|
|
of Period
|
|
|
Allowance for doubtful receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
4
|
|
|
$
|
10
|
|
|
$
|
8
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
$
|
8
|
|
|
$
|
9
|
|
|
$
|
13
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for inventory obsolescence:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
51
|
|
|
$
|
19
|
|
|
$
|
7
|
|
|
$
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
40
|
|
|
$
|
21
|
|
|
$
|
10
|
|
|
$
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
$
|
30
|
|
|
$
|
12
|
|
|
$
|
2
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance on deferred tax asset, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
646
|
|
|
$
|
|
|
|
$
|
23
|
|
|
$
|
623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
71
|
|
|
$
|
575
|
|
|
$
|
|
|
|
$
|
646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
$
|
256
|
|
|
$
|
|
|
|
$
|
185
|
|
|
$
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On January 15, 2009, US Airways flight 1549 was involved in
an accident in New York that resulted in the aircraft ditching
in the Hudson River. The Airbus A320 aircraft was en route to
Charlotte from LaGuardia with 150 passengers and a crew of
five onboard. All aboard survived and there were no serious
injuries. US Airways had insurance coverage for both the
aircraft (which was a total loss) as well as costs resulting
from the accident, and there were no applicable deductibles.
The aircraft involved in the flight 1549 accident was leased by
US Airways. In the first quarter of 2009, US Airways exercised
its aircraft substitution right under the lease agreement and
transferred title of an owned Airbus A320 to the lessor in
substitution for the Airbus A320 aircraft that was involved in
the accident. This transferred aircraft will continue to be
leased to US Airways under the same terms and conditions of the
lease agreement. In connection with this transaction, US Airways
extinguished $22 million of debt associated with the
previously owned aircraft that was transferred to the lessor.
109
In August 2009, the Company and US Airways entered into a mutual
asset purchase and sale agreement with Delta Air Lines, Inc.
(Delta). Pursuant to the agreement, US Airways would
transfer to Delta certain assets related to flight operations at
LaGuardia Airport in New York, including 125 pairs of slots
currently used to provide US Airways Express service at
LaGuardia. Delta would transfer to US Airways certain assets
related to flight operations at Washington National Airport,
including 42 pairs of slots, and the authority to serve Sao
Paulo, Brazil and Tokyo, Japan. One slot equals one take-off or
landing, and each pair of slots equals one roundtrip flight. The
agreement is structured as two simultaneous asset sales and is
expected to be cash neutral to US Airways. The closing of the
transactions under the agreement is subject to certain closing
conditions, including approvals from a number of government
agencies, including the U.S. Department of Justice, the
U.S. Department of Transportation (DOT), the
FAA and The Port Authority of New York and New Jersey.
On February 9, 2010, the DOT issued a proposed order
conditionally approving the transaction. The proposed order,
which is subject to a 30-day comment period, would require the
airlines to divest 20 of the 125 slot pairs involved at
LaGuardia and 14 of the 42 slot pairs at Washington National.
Delta and the Company are currently reviewing the DOTs
proposed order to determine next steps. However, the Company
expects that if this order is implemented as proposed the
transaction will not go forward.
US Airways sold 10 of its Embraer 190 aircraft to Republic
during the fourth quarter of 2009. US Airways is currently
leasing back four of the 10 aircraft from Republic for periods
ranging from one to five months. Debt outstanding on the 10
Embraer aircraft was $216 million prior to the sale. In
connection with this transaction, Republic agreed to assume the
full amount of this debt and US Airways was released from its
obligations under the assumed debt. Additionally, at the time of
sale, US Airways had $35 million outstanding under a loan
from Republic (the Republic loan). The Republic loan
was scheduled to be repaid starting in January 2010 and fully
repaid in October 2011. The full amount outstanding under the
Republic loan was applied to the purchase price of the 10
aircraft. US Airways incurred non-cash charges of
$49 million from the loss on sale of the 10 aircraft and
write off of related debt discount and issuance costs in the
fourth quarter of 2009.
110
|
|
20.
|
Selected
Quarterly Financial Information (unaudited)
|
Summarized quarterly financial information for 2009 and 2008 is
as follows (in millions, except share and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Quarter
|
|
|
2nd Quarter
|
|
|
3rd Quarter
|
|
|
4th Quarter
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
2,455
|
|
|
$
|
2,658
|
|
|
$
|
2,719
|
|
|
$
|
2,626
|
|
Operating expenses
|
|
|
2,480
|
|
|
|
2,536
|
|
|
|
2,713
|
|
|
|
2,612
|
|
Operating income (loss)
|
|
|
(25
|
)
|
|
|
122
|
|
|
|
6
|
|
|
|
14
|
|
Nonoperating expenses, net
|
|
|
(78
|
)
|
|
|
(64
|
)
|
|
|
(86
|
)
|
|
|
(131
|
)
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38
|
)
|
Net income (loss)
|
|
|
(103
|
)
|
|
|
58
|
|
|
|
(80
|
)
|
|
|
(79
|
)
|
Earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
(0.90
|
)
|
|
$
|
0.47
|
|
|
$
|
(0.60
|
)
|
|
$
|
(0.49
|
)
|
Diluted:
|
|
$
|
(0.90
|
)
|
|
$
|
0.42
|
|
|
$
|
(0.60
|
)
|
|
$
|
(0.49
|
)
|
Shares used for computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
114,121
|
|
|
|
123,790
|
|
|
|
132,985
|
|
|
|
161,103
|
|
Diluted
|
|
|
114,121
|
|
|
|
144,125
|
|
|
|
132,985
|
|
|
|
161,103
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
2,840
|
|
|
$
|
3,257
|
|
|
$
|
3,261
|
|
|
$
|
2,761
|
|
Operating expenses
|
|
|
3,036
|
|
|
|
3,793
|
|
|
|
3,950
|
|
|
|
3,139
|
|
Operating loss
|
|
|
(196
|
)
|
|
|
(536
|
)
|
|
|
(689
|
)
|
|
|
(378
|
)
|
Nonoperating expenses, net
|
|
|
(41
|
)
|
|
|
(32
|
)
|
|
|
(174
|
)
|
|
|
(168
|
)
|
Income tax provision (benefit)
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
(3
|
)
|
Net loss
|
|
|
(237
|
)
|
|
|
(568
|
)
|
|
|
(866
|
)
|
|
|
(543
|
)
|
Loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
(2.58
|
)
|
|
$
|
(6.17
|
)
|
|
$
|
(8.46
|
)
|
|
$
|
(4.76
|
)
|
Diluted:
|
|
$
|
(2.58
|
)
|
|
$
|
(6.17
|
)
|
|
$
|
(8.46
|
)
|
|
$
|
(4.76
|
)
|
Shares used for computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
92,023
|
|
|
|
92,137
|
|
|
|
102,406
|
|
|
|
114,106
|
|
Diluted
|
|
|
92,023
|
|
|
|
92,137
|
|
|
|
102,406
|
|
|
|
114,106
|
|
The Companys 2009 and 2008 fourth quarter results were
impacted by recognition of the following items:
Fourth quarter 2009 operating expenses included $33 million
of net special charges consisting of $16 million in
non-cash impairment charges due to the decline in fair value of
certain indefinite lived intangible assets associated with
international routes, $5 million in aircraft costs as a
result of the Companys previously announced capacity
reductions, $6 million in severance charges and
$6 million in costs related to the Companys liquidity
improvement program. Operating expenses also included
$3 million in non-cash charges related to the decline in
fair value of certain Express spare parts. Nonoperating
expenses, net included $49 million in non-cash charges
associated with the sale of 10 Embraer 190 aircraft and write
off of related debt discount and issuance costs. Income tax
benefit includes $21 million of a non-cash income tax
benefit related to gains recorded within other comprehensive
income, a $14 million tax benefit related to a legislation
change allowing the Company to carry back 100% of 2008 AMT
net operating losses, resulting in the recovery of AMT amounts
paid in prior years and a $3 million tax benefit related to
the reversal of the deferred tax liability associated with the
indefinite lived intangible assets that were impaired during
2009.
Fourth quarter 2008 operating expenses included
$234 million of net unrealized losses on fuel hedging
instruments and $8 million of net special charges
consisting of $7 million in aircraft costs and
$1 million in severance charges, both as a result of the
Companys capacity reductions. Non-operating expenses, net
included $74 million in
other-than-temporary
non-cash impairment charges for the Companys investments
in auction rate securities as well as $5 million in write
offs of debt issuance costs resulting from certain loan
prepayments.
111
|
|
Item 8B.
|
Consolidated
Financial Statements and Supplementary Data of US Airways,
Inc.
|
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholder
US Airways, Inc.:
We have audited the accompanying consolidated balance sheets of
US Airways, Inc. and subsidiaries (US Airways) as of
December 31, 2009 and 2008, and the related consolidated
statements of operations, stockholders equity (deficit),
and cash flows for each of the years in the three-year period
ended December 31, 2009. These consolidated financial
statements are the responsibility of US Airways
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of US Airways, Inc. and subsidiaries as of
December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2009, in conformity
with U.S. generally accepted accounting principles.
As discussed in Note 6 to the consolidated financial
statements, US Airways adopted the provisions of
SFAS No. 157, Fair Value Measurements (included
in FASB ASC Topic 320, Investments-Debt and Equity
Securities), as of January 1, 2008.
As discussed in Note 7 to the consolidated financial
statements, US Airways adopted the measurement date provisions
of SFAS No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans
(included in FASB ASC Topic 960, Plan
Accounting Defined Benefit Pension Plans), as of
January 1, 2008.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), US
Airways internal control over financial reporting as of
December 31, 2009, based on criteria established in
Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 16, 2010
expressed an unqualified opinion on the effectiveness of US
Airways internal control over financial reporting.
/s/ KPMG LLP
Phoenix, Arizona
February 16, 2010
112
US
Airways, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2009, 2008 and
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline passenger
|
|
$
|
6,752
|
|
|
$
|
8,183
|
|
|
$
|
8,135
|
|
Express passenger
|
|
|
2,503
|
|
|
|
2,879
|
|
|
|
2,698
|
|
Cargo
|
|
|
100
|
|
|
|
144
|
|
|
|
138
|
|
Other
|
|
|
1,254
|
|
|
|
1,038
|
|
|
|
842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
10,609
|
|
|
|
12,244
|
|
|
|
11,813
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
|
1,863
|
|
|
|
3,618
|
|
|
|
2,630
|
|
Loss (gain) on fuel hedging instruments, net
|
|
|
7
|
|
|
|
356
|
|
|
|
(245
|
)
|
Salaries and related costs
|
|
|
2,165
|
|
|
|
2,231
|
|
|
|
2,302
|
|
Express expenses
|
|
|
2,628
|
|
|
|
3,139
|
|
|
|
2,727
|
|
Aircraft rent
|
|
|
695
|
|
|
|
724
|
|
|
|
727
|
|
Aircraft maintenance
|
|
|
700
|
|
|
|
783
|
|
|
|
635
|
|
Other rent and landing fees
|
|
|
560
|
|
|
|
562
|
|
|
|
536
|
|
Selling expenses
|
|
|
382
|
|
|
|
439
|
|
|
|
453
|
|
Special items, net
|
|
|
55
|
|
|
|
76
|
|
|
|
99
|
|
Depreciation and amortization
|
|
|
251
|
|
|
|
224
|
|
|
|
198
|
|
Goodwill impairment
|
|
|
|
|
|
|
622
|
|
|
|
|
|
Other
|
|
|
1,181
|
|
|
|
1,243
|
|
|
|
1,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
10,487
|
|
|
|
14,017
|
|
|
|
11,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
122
|
|
|
|
(1,773
|
)
|
|
|
524
|
|
Nonoperating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
24
|
|
|
|
83
|
|
|
|
172
|
|
Interest expense, net
|
|
|
(241
|
)
|
|
|
(218
|
)
|
|
|
(229
|
)
|
Other, net
|
|
|
(83
|
)
|
|
|
(240
|
)
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating expense, net
|
|
|
(300
|
)
|
|
|
(375
|
)
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(178
|
)
|
|
|
(2,148
|
)
|
|
|
485
|
|
Income tax provision (benefit)
|
|
|
(38
|
)
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(140
|
)
|
|
$
|
(2,148
|
)
|
|
$
|
478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
113
US
Airways, Inc.
Consolidated Balance Sheets
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions, except share and per share amounts)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,209
|
|
|
$
|
1,026
|
|
Investments in marketable securities
|
|
|
|
|
|
|
20
|
|
Restricted cash
|
|
|
|
|
|
|
186
|
|
Accounts receivable, net
|
|
|
282
|
|
|
|
291
|
|
Materials and supplies, net
|
|
|
188
|
|
|
|
163
|
|
Prepaid expenses and other
|
|
|
507
|
|
|
|
673
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,186
|
|
|
|
2,359
|
|
Property and equipment
|
|
|
|
|
|
|
|
|
Flight equipment
|
|
|
3,710
|
|
|
|
3,017
|
|
Ground property and equipment
|
|
|
856
|
|
|
|
791
|
|
Less accumulated depreciation and amortization
|
|
|
(1,098
|
)
|
|
|
(914
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
3,468
|
|
|
|
2,894
|
|
Equipment purchase deposits
|
|
|
112
|
|
|
|
267
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
3,580
|
|
|
|
3,161
|
|
Other assets
|
|
|
|
|
|
|
|
|
Other intangibles, net of accumulated amortization of
$106 million and $81 million, respectively
|
|
|
467
|
|
|
|
508
|
|
Restricted cash
|
|
|
480
|
|
|
|
540
|
|
Investments in marketable securities
|
|
|
203
|
|
|
|
187
|
|
Other assets
|
|
|
207
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
1,357
|
|
|
|
1,434
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,123
|
|
|
$
|
6,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Current maturities of debt and capital leases
|
|
$
|
418
|
|
|
$
|
346
|
|
Accounts payable
|
|
|
319
|
|
|
|
781
|
|
Payables to related parties, net
|
|
|
642
|
|
|
|
985
|
|
Air traffic liability
|
|
|
778
|
|
|
|
698
|
|
Accrued compensation and vacation
|
|
|
171
|
|
|
|
147
|
|
Accrued taxes
|
|
|
142
|
|
|
|
142
|
|
Other accrued expenses
|
|
|
815
|
|
|
|
867
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,285
|
|
|
|
3,966
|
|
Noncurrent liabilities and deferred credits
|
|
|
|
|
|
|
|
|
Long-term debt and capital leases, net of current maturities
|
|
|
2,667
|
|
|
|
2,236
|
|
Deferred gains and credits, net
|
|
|
317
|
|
|
|
342
|
|
Postretirement benefits other than pensions
|
|
|
129
|
|
|
|
107
|
|
Employee benefit liabilities and other
|
|
|
470
|
|
|
|
524
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent liabilities and deferred credits
|
|
|
3,583
|
|
|
|
3,209
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit)
|
|
|
|
|
|
|
|
|
Common stock, $1 par value, 1,000 shares issued and
outstanding
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
2,445
|
|
|
|
1,845
|
|
Accumulated other comprehensive income
|
|
|
94
|
|
|
|
78
|
|
Accumulated deficit
|
|
|
(2,284
|
)
|
|
|
(2,144
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
255
|
|
|
|
(221
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit)
|
|
$
|
7,123
|
|
|
$
|
6,954
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
114
US
Airways, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2009, 2008 and
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(140
|
)
|
|
$
|
(2,148
|
)
|
|
$
|
478
|
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
251
|
|
|
|
224
|
|
|
|
198
|
|
Loss on dispositions of property and equipment
|
|
|
60
|
|
|
|
7
|
|
|
|
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
Gain on sale of investments
|
|
|
|
|
|
|
(1
|
)
|
|
|
(17
|
)
|
Goodwill impairment
|
|
|
|
|
|
|
622
|
|
|
|
|
|
Auction rate security impairment
|
|
|
10
|
|
|
|
214
|
|
|
|
10
|
|
Asset impairment
|
|
|
18
|
|
|
|
13
|
|
|
|
|
|
Non-cash tax benefits
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
Utilization of acquired net operating loss carryforwards
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Change in fair value of fuel hedging instruments, net
|
|
|
(375
|
)
|
|
|
496
|
|
|
|
(187
|
)
|
Amortization of deferred credits and rent
|
|
|
(49
|
)
|
|
|
(40
|
)
|
|
|
(40
|
)
|
Amortization of debt discount and issuance costs
|
|
|
23
|
|
|
|
15
|
|
|
|
13
|
|
Amortization of actuarial gains
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
|
|
Debt extinguishment costs
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
Other
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
186
|
|
|
|
(184
|
)
|
|
|
(1
|
)
|
Decrease in accounts receivable, net
|
|
|
9
|
|
|
|
68
|
|
|
|
17
|
|
Decrease (increase) in materials and supplies, net
|
|
|
(25
|
)
|
|
|
35
|
|
|
|
(2
|
)
|
Decrease (increase) in prepaid expenses and other
|
|
|
164
|
|
|
|
(270
|
)
|
|
|
(55
|
)
|
Decrease (increase) in other assets, net
|
|
|
(13
|
)
|
|
|
3
|
|
|
|
(5
|
)
|
Increase (decrease) in accounts payable
|
|
|
(79
|
)
|
|
|
114
|
|
|
|
(26
|
)
|
Increase (decrease) in payables to related parties, net
|
|
|
257
|
|
|
|
(31
|
)
|
|
|
(28
|
)
|
Increase (decrease) in air traffic liability
|
|
|
80
|
|
|
|
(134
|
)
|
|
|
(22
|
)
|
Increase (decrease) in accrued compensation and vacation
|
|
|
24
|
|
|
|
(67
|
)
|
|
|
(36
|
)
|
Decrease in accrued taxes
|
|
|
|
|
|
|
(16
|
)
|
|
|
(22
|
)
|
Increase (decrease) in other liabilities
|
|
|
(43
|
)
|
|
|
59
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
326
|
|
|
|
(1,025
|
)
|
|
|
433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(677
|
)
|
|
|
(1,041
|
)
|
|
|
(566
|
)
|
Purchases of marketable securities
|
|
|
|
|
|
|
(299
|
)
|
|
|
(2,591
|
)
|
Sales of marketable securities
|
|
|
52
|
|
|
|
505
|
|
|
|
3,203
|
|
Proceeds from sale of other investments
|
|
|
|
|
|
|
4
|
|
|
|
56
|
|
Decrease (increase) in long-term restricted cash
|
|
|
60
|
|
|
|
(74
|
)
|
|
|
200
|
|
Proceeds from sale-leaseback transactions and dispositions of
property and equipment
|
|
|
76
|
|
|
|
16
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(489
|
)
|
|
|
(889
|
)
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of debt and capital lease obligations
|
|
|
(391
|
)
|
|
|
(318
|
)
|
|
|
(105
|
)
|
Proceeds from issuance of debt
|
|
|
747
|
|
|
|
1,386
|
|
|
|
198
|
|
Deferred financing costs
|
|
|
(10
|
)
|
|
|
(17
|
)
|
|
|
(3
|
)
|
Decrease in payables to related parties, net
|
|
|
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
346
|
|
|
|
1,000
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
183
|
|
|
|
(914
|
)
|
|
|
829
|
|
Cash and cash equivalents at beginning of year
|
|
|
1,026
|
|
|
|
1,940
|
|
|
|
1,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
1,209
|
|
|
$
|
1,026
|
|
|
$
|
1,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
115
US
Airways, Inc.
Consolidated Statements of Stockholders Equity
(Deficit)
For the Years Ended December 31, 2009, 2008 and
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Retained
|
|
|
Accumulated Other
|
|
|
|
|
|
|
Common
|
|
|
Paid-In
|
|
|
Earnings
|
|
|
Comprehensive
|
|
|
|
|
|
|
Stock
|
|
|
Capital
|
|
|
(Deficit)
|
|
|
Income (Loss)
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Balance at December 31, 2006
|
|
$
|
|
|
|
$
|
11
|
|
|
$
|
(472
|
)
|
|
$
|
|
|
|
$
|
(461
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
478
|
|
|
|
|
|
|
|
478
|
|
Forgiveness of intercompany payable to US Airways Group
|
|
|
|
|
|
|
1,834
|
|
|
|
|
|
|
|
|
|
|
|
1,834
|
|
Unrealized loss on
available-for-sale
securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48
|
)
|
|
|
(48
|
)
|
Other postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
|
|
|
|
1,845
|
|
|
|
6
|
|
|
|
(1
|
)
|
|
|
1,850
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(2,148
|
)
|
|
|
|
|
|
|
(2,148
|
)
|
Recognition of previous unrealized loss on
available-for-sale
securities, net now deemed
other-than-temporary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
48
|
|
Effect of adopting the measurement date provisions of
employers accounting for other postretirement benefit plans
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
Other postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
|
|
|
|
1,845
|
|
|
|
(2,144
|
)
|
|
|
78
|
|
|
|
(221
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(140
|
)
|
|
|
|
|
|
|
(140
|
)
|
Forgiveness of intercompany payable to US Airways Group
|
|
|
|
|
|
|
600
|
|
|
|
|
|
|
|
|
|
|
|
600
|
|
Net unrealized gain on
available-for-sale
securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
35
|
|
Other postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
|
|
|
$
|
2,445
|
|
|
$
|
(2,284
|
)
|
|
$
|
94
|
|
|
$
|
255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
116
US
Airways, Inc.
Notes to Consolidated Financial Statements
|
|
1.
|
Basis of
Presentation and Summary of Significant Accounting
Policies
|
|
|
(a)
|
Nature
of Operations and Operating Environment
|
US Airways, Inc. (US Airways) is a Delaware
corporation whose primary business activity is the operation of
a major network air carrier. US Airways is a wholly owned
subsidiary of US Airways Group, Inc. (US Airways
Group), which owns all of US Airways outstanding
common stock, par value $1 per share.
On September 26, 2007, as part of the integration efforts
following the merger, America West Airlines, Inc.
(AWA) surrendered its Federal Aviation
Administration (FAA) operating certificate. As a
result, all mainline airline operations are now being conducted
under US Airways FAA operating certificate. In connection
with the combination of all mainline airline operations under
one FAA operating certificate, US Airways Group contributed 100%
of its equity interest in America West Holdings Corporation
(America West Holdings), the parent company of AWA,
to US Airways. As a result, America West Holdings and AWA became
wholly owned subsidiaries of US Airways. In addition, AWA
transferred substantially all of its assets and liabilities to
US Airways. All off-balance sheet commitments of AWA were also
transferred to US Airways.
US Airways operates the fifth largest airline in the United
States as measured by domestic revenue passenger miles
(RPMs) and available seat miles (ASMs).
US Airways has hubs in Charlotte, Philadelphia and Phoenix and a
focus city at Ronald Reagan Washington National Airport. US
Airways offers scheduled passenger service on more than 3,000
flights daily to more than 190 communities in the United States,
Canada, Mexico, Europe, the Middle East, the Caribbean, Central
and South America. US Airways also has an established East Coast
route network, including the US Airways Shuttle service, with a
substantial presence at Washington National Airport. US Airways
had approximately 51 million passengers boarding its
mainline flights in 2009. During 2009, US Airways mainline
operation provided regularly scheduled service or seasonal
service at 138 airports, while the US Airways Express network
served 152 airports in the United States, Canada and Mexico,
including 75 airports also served by the mainline operation.
During 2009, US Airways Express air carriers had approximately
27 million passengers boarding their planes. As of
December 31, 2009, US Airways operated 349 mainline jets
and is supported by US Airways Groups regional airline
subsidiaries and affiliates operating as US Airways Express
either under capacity purchase or prorate agreements, which
operated approximately 236 regional jets and 60 turboprops.
As of December 31, 2009, US Airways employed approximately
31,300 active full-time equivalent employees. Approximately 86%
of US Airways employees are covered by collective
bargaining agreements with various labor unions. US
Airways pilots and flight attendants are currently working
under the terms of their respective US Airways or AWA collective
bargaining agreements, as modified by transition agreements
reached in connection with the merger.
|
|
(b)
|
Basis
of Presentation
|
The transfer of assets between US Airways and AWA described
above constitutes a transfer of assets between entities under
common control and was accounted for in a manner similar to the
pooling of interests method of accounting. Under this method,
the carrying amount of net assets recognized in the balance
sheets of each combining entity are carried forward to the
balance sheet of the combined entity, and no other assets or
liabilities are recognized as a result of the contribution of
shares. The accompanying consolidated financial statements in
this annual report on
Form 10-K
are presented as though the transfer had occurred at the time of
US Airways emergence from bankruptcy in September 2005.
The accompanying consolidated financial statements include the
accounts of US Airways and its wholly owned subsidiaries. US
Airways Group has the ability to move funds freely between its
operating subsidiaries to support operations. These transfers
are recognized as intercompany transactions. In the accompanying
consolidated statements of cash flows, these intercompany
transactions are designated as payables to related parties, net
and are classified as operating or financing activities
depending upon the nature of the transaction. All significant
117
intercompany accounts and transactions between US Airways and
its wholly owned subsidiaries have been eliminated.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. The principal areas of judgment
relate to passenger revenue recognition, impairment of
long-lived and intangible assets, valuation of investments in
marketable securities, the frequent traveler program and the
deferred tax asset valuation allowance.
US Airways evaluated subsequent events through the date the
accompanying financial statements were issued, which was
February 16, 2010.
|
|
(c)
|
Cash
and Cash Equivalents
|
Cash equivalents consist primarily of cash in money market
securities and highly liquid debt instruments. All highly liquid
investments purchased within three months of maturity are
classified as cash equivalents. Cash equivalents are stated at
cost, which approximates fair value due to the highly liquid
nature and short-term maturities of the underlying securities.
As of December 31, 2009 and 2008, US Airways cash and
cash equivalents are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash and money market funds
|
|
$
|
1,209
|
|
|
$
|
1,016
|
|
Corporate bonds
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
$
|
1,209
|
|
|
$
|
1,026
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
Investments
in Marketable Securities
|
All highly liquid investments with maturities greater than three
months but less than one year are classified as current
investments in marketable securities. Investments in marketable
securities classified as noncurrent assets on US Airways
balance sheet represent investments expected to be converted to
cash after 12 months. Debt securities, other than auction
rate securities, are classified as held to maturity.
Held-to-maturity
investments are carried at amortized cost, which approximates
fair value. Investments in auction rate securities are
classified as available for sale and recorded at fair value.
As of December 31, 2009 and 2008, US Airways
investments in marketable securities are classified as follows
(in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Held-to-maturity
securities:
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
|
|
|
$
|
20
|
|
|
|
|
|
|
|
|
|
|
Total investments in marketable securities-current
|
|
|
|
|
|
$
|
20
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
Auction rate securities
|
|
|
203
|
|
|
|
187
|
|
|
|
|
|
|
|
|
|
|
Total investments in marketable securities-noncurrent
|
|
$
|
203
|
|
|
$
|
187
|
|
|
|
|
|
|
|
|
|
|
See Note 5(b) for more information on US Airways
investments in marketable securities.
Restricted cash includes deposits in trust accounts primarily to
fund certain taxes and fees and workers compensation
claims, deposits securing certain letters of credit and surety
bonds and deposits held by institutions that process credit card
sales transactions. Restricted cash is stated at cost, which
approximates fair value.
118
|
|
(f)
|
Materials
and Supplies, Net
|
Inventories of materials and supplies are valued at the lower of
cost or fair value. Costs are determined using average costing
methods. An allowance for obsolescence is provided for flight
equipment expendable and repairable parts. These items are
generally charged to expense when issued for use. During 2008,
US Airways recorded a $5 million write down related to its
Boeing 737 spare parts inventory to reflect lower of cost or
fair value.
|
|
(g)
|
Property
and Equipment
|
Property and equipment are recorded at cost. Interest expense
related to the acquisition of certain property and equipment,
including aircraft purchase deposits, is capitalized as an
additional cost of the asset or as a leasehold improvement if
the asset is leased. Interest capitalized for the years ended
December 31, 2009, 2008 and 2007 was $10 million,
$6 million and $4 million, respectively. Property and
equipment is depreciated and amortized to residual values over
the estimated useful lives or the lease term, whichever is less,
using the straight-line method. Costs of major improvements that
enhance the usefulness of the asset are capitalized and
depreciated over the estimated useful life of the asset or the
modifications, whichever is less.
The estimated useful lives of owned aircraft, jet engines, other
flight equipment and rotable parts range from five to
30 years. Leasehold improvements relating to flight
equipment and other property on operating leases are amortized
over the life of the lease or the life of the asset, whichever
is shorter, on a straight-line basis. The estimated useful lives
for other owned property and equipment range from three to
12 years and range from 18 to 30 years for training
equipment and buildings.
US Airways records impairment losses on long-lived assets used
in operations when events and circumstances indicate that the
assets might be impaired. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of
an asset to undiscounted future net cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less cost to
sell.
US Airways recorded a $13 million impairment charge in 2008
related to the decline in the fair value of Boeing 737 rotable
parts included in flight equipment on its consolidated balance
sheet. US Airways recorded no impairment charges in the years
ended December 31, 2009 and 2007.
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. A valuation allowance is
established, if necessary, for the amount of any tax benefits
that, based on available evidence, are not expected to be
realized.
|
|
(i)
|
Goodwill
and Other Intangibles, Net
|
Goodwill
In 2008, US Airways recorded a $622 million impairment
charge to write off all the goodwill created by the merger of US
Airways Group and America West Holdings in September 2005. US
Airways performed an interim goodwill impairment test during
2008 as a result of a significant increase in fuel prices,
declines in US Airways Groups stock price and mainline
capacity reductions, which led to no implied fair value of
goodwill.
Other
intangible assets
Other intangible assets consist primarily of trademarks,
international route authorities, airport take-off and landing
slots and airport gates. Intangible assets with estimable useful
lives are amortized over their respective estimated useful lives
to their estimated residual values and reviewed for impairment
whenever events or changes in
119
circumstances indicate that the carrying value may not be
recoverable. The following table provides information relating
to US Airways intangible assets subject to amortization as
of December 31, 2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Airport take-off and landing slots
|
|
$
|
452
|
|
|
$
|
452
|
|
Airport gate leasehold rights
|
|
|
52
|
|
|
|
52
|
|
Accumulated amortization
|
|
|
(106
|
)
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
398
|
|
|
$
|
423
|
|
|
|
|
|
|
|
|
|
|
The intangible assets subject to amortization generally are
amortized over 25 years for airport take-off and landing
slots and over the term of the lease for airport gate leasehold
rights on a straight-line basis and are included in depreciation
and amortization on the consolidated statements of operations.
For the years ended December 31, 2009, 2008 and 2007, US
Airways recorded amortization expense of $25 million,
$23 million and $23 million, respectively, related to
its intangible assets. US Airways expects to record annual
amortization expense of $24 million in 2010,
$21 million in year 2011, $20 million in year 2012,
$20 million in year 2013, $20 million in year 2014 and
$293 million thereafter related to these intangible assets.
Indefinite lived assets are not amortized but instead are
reviewed for impairment annually and more frequently if events
or circumstances indicate that the asset may be impaired. US
Airways had $39 million and $55 million of
international route authorities as of December 31, 2009 and
2008, respectively. As of December 31, 2009 and 2008, US
Airways had $30 million of trademarks on its balance sheets.
US Airways performed the annual impairment test on its
international route authorities and trademarks during the fourth
quarter of 2009. The fair values of international route
authorities were assessed using the market approach. The market
approach took into consideration relevant supply and demand
factors at the related airport locations as well as available
market sale and lease data. For trademarks, US Airways utilized
a form of the income approach known as the relief-from-royalty
method. As a result of US Airways annual impairment test
on its international route authorities, US Airways recorded a
$16 million impairment charge related to the decline in
fair value of certain international routes. US Airways will
perform its next annual impairment test on October 1, 2010.
Other assets consist of the following as of December 31,
2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Aircraft leasehold interest, net
|
|
$
|
77
|
|
|
$
|
83
|
|
Deferred rent
|
|
|
59
|
|
|
|
46
|
|
Deposits
|
|
|
36
|
|
|
|
40
|
|
Debt issuance costs, net
|
|
|
26
|
|
|
|
19
|
|
Long-term investments
|
|
|
9
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
207
|
|
|
$
|
199
|
|
|
|
|
|
|
|
|
|
|
Aircraft leasehold interest, net represents assets established
for leasehold interests in aircraft subject to operating leases
with rental rates deemed to be below-market rates in connection
with the application of fresh-start reporting for US Airways
following its emergence from bankruptcy in September 2005. These
leasehold interests are amortized on a straight-line basis as an
increase to aircraft rent expense over the applicable remaining
lease periods. US Airways expects to amortize $6 million
per year in 2010 to 2014 and $47 million thereafter to
aircraft rent expense related to these leasehold interests.
|
|
(k)
|
Frequent
Traveler Program
|
The Dividend Miles frequent traveler program awards mileage
credits to passengers who fly on US Airways and Star Alliance
carriers and certain other partner airlines that participate in
US Airways program. Mileage credits can be redeemed for
travel on US Airways or other participating partner airlines, in
which case US Airways pays a fee. US Airways uses the
incremental cost method to account for the portion of the
frequent traveler program liability related to mileage credits
earned by Dividend Miles members through purchased flights. The
liability for
120
outstanding mileage credits is valued based on the estimated
incremental cost of carrying one additional passenger.
Incremental cost includes unit costs incurred by US Airways for
fuel, credit card fees, insurance, denied boarding compensation,
food and beverages as well as fees incurred when travel awards
are redeemed on partner airlines. In addition, US Airways also
includes in the determination of its incremental cost the amount
of redemption fees expected to be collected from Dividend Miles
members. These redemption fees reduce incremental cost. No
profit or overhead margin is included in the accrual of
incremental cost. As of December 31, 2009 and 2008, the
incremental cost liability for outstanding mileage credits
expected to be redeemed for future travel awards accrued on the
balance sheets within other accrued expenses was
$130 million and $151 million, respectively.
US Airways also sells frequent flyer program mileage credits to
participating airline partners and non-airline business
partners. Revenue earned from selling mileage credits to other
companies is recognized in two components. A portion of the
revenue from these sales is deferred, representing the estimated
fair value of the transportation component of the sold mileage
credits. The deferred revenue for the transportation component
is amortized on a straight-line basis over the period in which
the credits are expected to be redeemed for travel as passenger
revenue, which is currently estimated to be 28 months. The
marketing component, which is earned at the time the miles are
sold, is recognized in other revenues at the time of the sale.
As of December 31, 2009 and 2008, US Airways had
$212 million and $240 million, respectively, in
deferred revenue from the sale of mileage credits included in
other accrued expenses on its consolidated balance sheets.
|
|
(l)
|
Derivative
Instruments
|
US Airways has from time to time utilized heating oil-based
derivative instruments to hedge a portion of its exposure to jet
fuel price increases. These instruments consisted of no premium
collars. All derivatives were marked to fair value on the
balance sheet with adjustments to fair value recorded in the
income statement. US Airways does not purchase or hold any
derivative financial instruments for trading purposes. Since the
third quarter of 2008, US Airways has not entered into any new
fuel hedging transactions and, as of December 31, 2009, US
Airways had no remaining outstanding fuel hedging contracts. As
of December 31, 2008, US Airways had open fuel hedging
instruments in place, which did not qualify for hedge
accounting. Accordingly, the derivative hedging instruments were
recorded as an asset or liability on the consolidated balance
sheets at fair value and any changes in fair value were recorded
as gains or losses on fuel hedging instruments, net in operating
expenses in the accompanying consolidated statements of
operations in the period of change. See Note 5(a) for
additional information on US Airways fuel hedging
instruments.
|
|
(m)
|
Deferred
Gains and Credits, Net
|
In 2005, US Airways co-branded credit card provider,
Barclays Bank Delaware, formerly Juniper Bank, paid AWA
$150 million in bonuses, consisting of a $20 million
bonus pursuant to AWAs original credit card agreement with
Juniper and a $130 million bonus following the
effectiveness of the merger, subject to certain conditions.
In the event Barclays, at its option, terminates the amended
agreement prior to March 31, 2013 due to US Airways
breach of its obligations under the amended credit card
agreement, or upon the occurrence of certain other events, then
US Airways must repay a portion of the bonus, which declines
monthly according to a formula. US Airways will have no
obligation to repay any portion of the bonus payments after
March 31, 2013.
At the time of payment, the entire $150 million was
recorded as deferred revenue. US Airways began recognizing
revenue from the bonus payments on April 1, 2009. The
revenue from the bonus payments will be recognized on a
straight-line basis through March 31, 2017, the expiration
date of the amended Barclays co-branded credit card agreement.
In connection with fresh-start reporting and purchase accounting
for US Airways in 2005 and fresh-start reporting for AWA upon
emergence from bankruptcy in 1994, aircraft operating leases
were adjusted to fair value and deferred credits were
established in the accompanying consolidated balance sheets,
which represented the net present value of the difference
between the stated lease rates and the fair market rates. These
deferred credits are amortized on a straight-line basis as a
reduction in rent expense over the applicable lease periods. At
December 31, 2009 and 2008, the unamortized balance of the
deferred credits was $74 million and $93 million,
respectively. US
121
Airways expects to amortize $13 million in 2010,
$9 million in 2011, $9 million in 2012,
$7 million in 2013, $6 million in 2014 and
$30 million thereafter to aircraft rent expense related to
these leasehold interests.
Passenger
Revenue
Passenger revenue is recognized when transportation is provided.
Ticket sales for transportation that has not yet been provided
are initially recorded as air traffic liability on the
consolidated balance sheets. The air traffic liability
represents tickets sold for future travel dates and estimated
future refunds and exchanges of tickets sold for past travel
dates. The majority of tickets sold are nonrefundable. A small
percentage of tickets, some of which are partially used tickets,
expire unused. Due to complex pricing structures, refund and
exchange policies, and interline agreements with other airlines,
certain amounts are recognized in revenue using estimates
regarding both the timing of the revenue recognition and the
amount of revenue to be recognized. These estimates are
generally based on the analysis of US Airways historical
data. US Airways and members of the airline industry have
consistently applied this accounting method to estimate revenue
from forfeited tickets at the date travel was to be provided.
Estimated future refunds and exchanges included in the air
traffic liability are routinely evaluated based on subsequent
activity to validate the accuracy of US Airways estimates.
Any adjustments resulting from periodic evaluations of the
estimated air traffic liability are included in results of
operations during the period in which the evaluations are
completed.
Passenger traffic commissions and related fees are expensed when
the related revenue is recognized. Passenger traffic commissions
and related fees not yet recognized are included as a prepaid
expense.
US Airways purchases capacity, or ASMs, generated by US Airways
Groups wholly owned regional air carriers and the capacity
of Air Wisconsin Airlines Corp. (Air Wisconsin),
Republic Airways Holdings (Republic), Mesa Airlines,
Inc. (Mesa) and Chautauqua Airlines, Inc.
(Chautauqua) in certain markets. Air Wisconsin,
Republic, Mesa and Chautauqua operate regional jet aircraft in
these markets as part of US Airways Express. US Airways
classifies revenues related to capacity purchase arrangements as
Express passenger revenues. Liabilities related to tickets sold
for travel on these air carriers are also included in US
Airways air traffic liability and are subsequently
relieved in the same manner as described above.
US Airways collects various excise taxes on its ticket sales,
which are accounted for on a net basis.
Cargo
Revenue
Cargo revenue is recognized when shipping services for mail and
other cargo are provided.
Other
Revenue
Other revenue includes checked and excess baggage charges,
beverage sales, ticket change and service fees, commissions
earned on tickets sold for flights on other airlines and sales
of tour packages by the US Airways Vacations division, which are
recognized when the services are provided. Other revenues also
include processing fees for travel awards issued through the
Dividend Miles frequent traveler program and the marketing
component earned from selling mileage credits to partners, as
discussed in Note 1(k).
|
|
(o)
|
Maintenance
and Repair Costs
|
Maintenance and repair costs for owned and leased flight
equipment are charged to operating expense as incurred.
Selling expenses include commissions, credit card fees,
computerized reservations systems fees, advertising and
promotional expenses. Advertising and promotional expenses are
expensed when incurred. Advertising and promotional expenses for
the years ended December 31, 2009, 2008 and 2007 were
$11 million, $10 million and $16 million,
respectively.
122
|
|
(q)
|
Stock-based
Compensation
|
US Airways accounts for its stock-based compensation expense
based on the fair value of the stock award at the time of grant,
which is recognized ratably over the vesting period of the stock
award. The fair value of stock options and stock appreciation
rights is estimated using a Black-Scholes option pricing model.
The fair value of restricted stock units is based on the market
price of the underlying shares of common stock on the date of
grant. See Note 13 for further discussion of stock-based
compensation.
Expenses associated with affiliate regional airlines operating
as US Airways Express are classified as Express expenses on the
consolidated statements of operations. Express expenses consist
of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Aircraft fuel and related taxes
|
|
$
|
609
|
|
|
$
|
1,137
|
|
|
$
|
765
|
|
Salaries and related costs
|
|
|
23
|
|
|
|
21
|
|
|
|
20
|
|
Capacity purchases
|
|
|
1,652
|
|
|
|
1,621
|
|
|
|
1,599
|
|
Other rent and landing fees
|
|
|
99
|
|
|
|
96
|
|
|
|
93
|
|
Selling expenses
|
|
|
154
|
|
|
|
163
|
|
|
|
157
|
|
Other expenses
|
|
|
91
|
|
|
|
101
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express expenses
|
|
$
|
2,628
|
|
|
$
|
3,139
|
|
|
$
|
2,727
|
|
|
|
|
|
|
|
|
|
|
|
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(s)
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Recent
Accounting Pronouncements
|
In June 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 168, The FASB
Accounting Standards
Codificationtm
and the Hierarchy of Generally Accepted Accounting
Principles A Replacement of FASB Statement
No. 162. SFAS No. 168 establishes the FASB
Accounting Standards
Codificationtm
(the Codification or ASC) as the single
source of authoritative U.S. GAAP recognized by the FASB to
be applied by nongovernmental entities. Rules and interpretive
releases of the SEC under authority of federal securities laws
are also sources of authoritative U.S. GAAP for SEC
registrants. Effective July 1, 2009, the Codification
superseded all existing non-SEC accounting and reporting
standards.
In April 2009, the FASB issued FASB Staff Position
(FSP) Financial Accounting Standards
(FAS)
115-2 and
FAS 124-2,
Recognition and Presentation of
Other-Than-Temporary
Impairments, as adopted by the Codification on
July 1, 2009. This FSP changes existing guidance for
determining whether an impairment of debt securities is
other-than-temporary.
The FSP requires
other-than-temporary
impairments to be separated into the amount representing the
decrease in cash flows expected to be collected from a security
(referred to as credit losses) which is recognized in earnings
and the amount related to other factors (referred to as
noncredit losses) which is recognized in other comprehensive
income. This noncredit loss component of the impairment may only
be classified in other comprehensive income if both of the
following conditions are met (a) the holder of the security
concludes that it does not intend to sell the security and
(b) the holder concludes that it is more likely than not
that the holder will not be required to sell the security before
the security recovers its value. If these conditions are not
met, the noncredit loss must also be recognized in earnings.
When adopting the FSP, an entity is required to record a
cumulative effect adjustment as of the beginning of the period
of adoption to reclassify the noncredit component of a
previously recognized
other-than-temporary
impairment from retained earnings to accumulated other
comprehensive income. FSP
FAS 115-2
and
FAS 124-2
is effective for interim and annual periods ending after
June 15, 2009. US Airways adopted FSP
FAS 115-2
and
FAS 124-2
as of April 1, 2009. US Airways does not meet the
conditions necessary to recognize the noncredit loss component
of its auction rate securities in other comprehensive income.
Accordingly, US Airways did not reclassify any previously
recognized
other-than-temporary
impairment losses from retained earnings to accumulated other
comprehensive income and the adoption of FSP
FAS 115-2
and
FAS 124-2
had no material impact on US Airways consolidated
financial statements.
In June 2009, the FASB issued SFAS No. 167,
Amendments to FASB Interpretation (FIN)
No. 46(R), which was codified in December 2009 with
the issuance of Accounting Standards Update (ASU)
No. 2009-17,
123
Consolidations (Topic 810) Improvements to
Financial Reporting by Enterprises Involved with Variable
Interest Entities. ASU
No. 2009-17
changes how a reporting entity determines when an entity that is
insufficiently capitalized or is not controlled through voting
(or similar rights) should be consolidated. The determination of
whether a reporting entity is required to consolidate another
entity is based on, among other things, the other entitys
purpose and design and the reporting entitys ability to
direct the activities of the other entity that most
significantly impact the other entitys economic
performance. ASU
No. 2009-17
will require a reporting entity to provide additional
disclosures about its involvement with variable interest
entities and any significant changes in risk exposure due to
that involvement. A reporting entity will be required to
disclose how its involvement with a variable interest entity
affects the reporting entitys financial statements. ASU
No. 2009-17
is effective for fiscal years beginning after November 15,
2009, and interim periods within those fiscal years. US Airways
is currently evaluating the requirements of ASU
No. 2009-17
and has not yet determined the impact on its consolidated
financial statements.
In October 2009, the FASB issued ASU
No. 2009-13,
Revenue Recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements. ASU
No. 2009-13
addresses the accounting for multiple-deliverable arrangements
to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit. This
guidance establishes a selling price hierarchy for determining
the selling price of a deliverable, which is based on:
(a) vendor-specific objective evidence;
(b) third-party evidence; or (c) estimates. This
guidance also eliminates the residual method of allocation and
requires that arrangement consideration be allocated at the
inception of the arrangement to all deliverables using the
relative selling price method. In addition, this guidance
significantly expands required disclosures related to a
vendors multiple-deliverable revenue arrangements. ASU
No. 2009-13
is effective prospectively for revenue arrangements entered into
or materially modified in fiscal years beginning on or after
June 15, 2010 and early adoption is permitted. A company
may elect, but will not be required, to adopt the amendments in
ASU
No. 2009-13
retrospectively for all prior periods. US Airways is currently
evaluating the requirements of ASU
No. 2009-13
and has not yet determined the impact on its consolidated
financial statements.
Special items, net as shown on the consolidated statements of
operations include the following charges (in millions):
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Year Ended December 31,
|
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|
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2009
|
|
|
2008
|
|
|
2007
|
|
|
Aircraft costs (a)
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$
|
22
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|
|
$
|
14
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|
|
$
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|
|
Asset impairment charges (b)
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16
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|
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18
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|
|
|
Severance and other charges (c)
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11
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|
|
|
9
|
|
|
|
|
|
Liquidity improvement costs (d)
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6
|
|
|
|
|
|
|
|
|
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Merger-related transition expenses (e)
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35
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|
|
|
99
|
|
|
|
|
|
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|
|
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|
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Total
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$
|
55
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|
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$
|
76
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|
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$
|
99
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(a) |
|
In 2009 and 2008, US Airways recorded $22 million and
$14 million, respectively, in aircraft costs as a result of
its previously announced capacity reductions. |
|
(b) |
|
In 2009, US Airways recorded $16 million in non-cash
impairment charges due to the decline in fair value of certain
indefinite lived intangible assets associated with its
international routes. See Note 1(i) for further discussion
of these charges. In 2008, US Airways recorded $18 million
in non-cash charges related to the decline in fair value of
certain spare parts associated with its Boeing 737 aircraft
fleet. See Notes 1(f) and 1(g) for further discussion of
these charges. |
|
(c) |
|
In 2009, US Airways recorded $11 million in severance and
other charges. US Airways expects $4 million will be
substantially paid by the end of the first quarter of 2010, with
the remaining balance scheduled for payment later in 2010. In
2008, US Airways recorded $9 million in severance charges
as a result of its capacity reductions. |
|
(d) |
|
In 2009, US Airways incurred $6 million in costs related to
its liquidity improvement program, which primarily consisted of
professional and legal fees. |
124
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|
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(e) |
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In 2008, in connection with the effort to consolidate functions
and integrate organizations, procedures and operations with AWA,
US Airways incurred $35 million of merger-related
transition expenses. These expenses included $12 million in
uniform costs to transition employees to the new US Airways
uniforms; $5 million in applicable employment tax expenses
related to contractual benefits granted to certain current and
former employees as a result of the merger; $6 million in
compensation expenses for equity awards granted in connection
with the merger to retain key employees through the integration
period; $5 million of aircraft livery costs;
$4 million in professional and technical fees related to
the integration of airline operations systems and
$3 million in other expenses. |
In 2007, US Airways incurred $99 million of merger-related
transition expenses. These expenses included $13 million in
training and related expenses; $19 million in compensation
expenses for equity awards granted in connection with the merger
to retain key employees through the integration period;
$20 million of aircraft livery costs; $37 million in
professional and technical fees related to the integration of
airline operations systems; $1 million in employee moving
expenses; $4 million related to reservation system
migration expenses and $5 million of other expenses.
The following table details US Airways debt (in millions).
Variable interest rates listed are the rates as of
December 31, 2009.
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December 31,
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December 31,
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2009
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2008
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Secured
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|
|
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Equipment loans, aircraft pre-delivery payment financings and
other notes payable, fixed and variable interest rates ranging
from 1.63% to 10.28%, averaging 4.94%, maturing from 2010 to
2021 (a)
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|
$
|
2,201
|
|
|
$
|
1,674
|
|
Aircraft enhanced equipment trust certificates
(EETCs), fixed interest rates ranging from 7.08% to
9.01%, averaging 7.79%, maturing from 2015 to 2022 (b)
|
|
|
505
|
|
|
|
540
|
|
Slot financing, fixed interest rate of 8.08%, interest only
payments until due in 2015 (c)
|
|
|
47
|
|
|
|
47
|
|
Capital lease obligations, interest rate of 8%, installments due
through 2021(d)
|
|
|
37
|
|
|
|
39
|
|
Senior secured discount notes, variable interest rate of 8.39%,
due in 2010(e)
|
|
|
32
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,822
|
|
|
|
2,332
|
|
Unsecured
|
|
|
|
|
|
|
|
|
Airbus advance, repayments beginning in 2010 through 2018(f)
|
|
|
247
|
|
|
|
207
|
|
Engine maintenance notes (g)
|
|
|
36
|
|
|
|
72
|
|
Industrial development bonds, fixed interest rate of 6.3%,
interest only payments until due in 2023 (h)
|
|
|
29
|
|
|
|
29
|
|
Note payable to Pension Benefit Guaranty Corporation, fixed
interest rate of 6%, interest only payments until due in 2012 (i)
|
|
|
10
|
|
|
|
10
|
|
Other notes payable, due in 2010
|
|
|
35
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
357
|
|
|
|
363
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and capital lease obligations
|
|
|
3,179
|
|
|
|
2,695
|
|
Less: Total unamortized discount on debt
|
|
|
(94
|
)
|
|
|
(113
|
)
|
Current maturities, less $4 million and $10 million of
unamortized discount on debt at December 31, 2009 and
December 31, 2008, respectively
|
|
|
(418
|
)
|
|
|
(346
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital lease obligations, net of current
maturities
|
|
$
|
2,667
|
|
|
$
|
2,236
|
|
|
|
|
|
|
|
|
|
|
|
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|
(a) |
|
The following are the significant secured financing agreements
entered into in 2009: |
|
|
|
US Airways borrowed $825 million in 2009 to finance Airbus
aircraft deliveries through a combination of facility agreements
and manufacturer backstop financing. These financings bear
interest at a rate of LIBOR plus an applicable margin and
contain default provisions and other covenants that are typical
in the industry. |
125
|
|
|
|
|
US Airways borrowed an additional $120 million in 2009
under its spare parts loan agreement. The spare parts loan
agreement bears interest at a rate of LIBOR plus a margin per
annum and is secured by a first priority security interest in
substantially all of US Airways rotable, repairable and
expendable aircraft spare parts. The spare parts loan agreement
matures on October 20, 2014. |
|
|
|
In 2009, US Airways sold 10 of its Embraer 190 aircraft to
Republic. In connection with this transaction, Republic assumed
$216 million of debt outstanding on the 10 Embraer 190
aircraft and US Airways was released from its obligations
associated with the debt assumed. |
|
(b) |
|
The equipment notes underlying these EETCs are the direct
obligations of US Airways and cover the financing of 19
aircraft. See Note 8(c) for further discussion. |
|
(c) |
|
In September 2005, US Airways entered into an agreement with
Republic to sell and leaseback certain of its commuter slots at
Ronald Reagan Washington National Airport and New York LaGuardia
Airport. US Airways continues to hold the right to repurchase
the slots anytime after the second anniversary of the slot
sale-leaseback transaction. These transactions were accounted
for as secured financings. Installments are due monthly through
2015. In December 2006, Republic and US Airways modified terms
of the agreement to conform to subsequent regulatory changes at
LaGuardia, and the LaGuardia slots were returned to
US Airways. The need for a subsequent modification was
fully contemplated in the original agreement. |
|
(d) |
|
Capital lease obligations consist principally of certain airport
maintenance and facility leases which expire in 2018 and 2021. |
|
(e) |
|
On December 27, 2004, AWA raised additional capital by
financing its Phoenix maintenance facility and flight training
center. The flight training center was previously unencumbered,
and the maintenance facility became unencumbered earlier in 2004
when AWA refinanced its term loan. Using its leasehold interest
in these two facilities as collateral, AWA, through a wholly
owned subsidiary named FTCHP LLC, raised $31 million
through the issuance of senior secured discount notes. The notes
were issued by FTCHP at a discount pursuant to the terms of a
senior secured term loan agreement among AWA, FTCHP, Heritage
Bank SSB, as administrative agent, Citibank, N.A., as the
initial lender, and the other lenders from time to time party
thereto. Citibank, N.A. subsequently assigned all of its
interests in the notes to third-party lenders. |
|
|
|
AWA fully and unconditionally guaranteed the payment and
performance of FTCHPs obligations under the notes and the
loan agreement. The notes require aggregate principal payments
of $36 million with principal payments of $2 million
due on each of the first two anniversary dates and the remaining
principal amount due on the fifth anniversary date. The notes
may be prepaid in full at any time (subject to customary LIBOR
breakage costs) and in partial amounts of $2 million on the
third and fourth anniversary dates. The unpaid principal amount
of the notes bears interest based on LIBOR plus a margin subject
to adjustment based on a loan to collateral value ratio. |
|
|
|
The loan agreement contains customary covenants applicable to
loans of this type, including obligations relating to the
preservation of the collateral and restrictions on the
activities of FTCHP. In addition, the loan agreement contains
events of default, including payment defaults, cross-defaults to
other debt of FTCHP, if any, breach of covenants, bankruptcy and
insolvency defaults and judgment defaults. |
|
|
|
In connection with this financing, AWA sold all of its leasehold
interests in the maintenance facility and flight training center
to FTCHP and entered into subleases for the facilities with
FTCHP at lease rates expected to approximate the interest
payments due under the notes. In addition, AWA agreed to make
future capital contributions to FTCHP in amounts sufficient to
cover principal payments and other amounts owing pursuant to the
notes and the loan agreement. As part of the transfer of
substantially all of AWAs assets and liabilities to US
Airways in connection with the combination of all mainline
airline operations under one FAA operating certificate on
September 26, 2007, AWA assigned its subleases for the
facilities with FTCHP to US Airways. In addition, US Airways
assumed all of the obligations of AWA in connection with the
financing and joined the guarantee of the payment and
performance of FTCHPs obligations under the notes and the
loan agreement. In 2009, the maturity date of the loan agreement
was extended to March 31, 2010. |
|
(f) |
|
On October 20, 2008, US Airways and Airbus entered into
amendments to the A320 Family Aircraft Purchase Agreement, the
A330 Aircraft Purchase Agreement, and the A350 XWB Purchase
Agreement. In exchange for US Airways agreement to enter
into these amendments, Airbus advanced US Airways
$200 million in consideration of aircraft deliveries under
the various related purchase agreements. Under the terms of each
of |
126
|
|
|
|
|
the amendments, US Airways has agreed to maintain a level of
unrestricted cash in the same amount required by the US Airways
Group Citicorp credit facility. This transaction was treated as
a financing transaction for accounting purposes using an
effective interest rate commensurate with US Airways
credit rating. There are no stated interest payments. |
|
(g) |
|
In December 2004, deferred charges under US Airways
maintenance agreements with GE Engine Services, Inc. were
converted into an unsecured term note. Interest on the note
accrues at LIBOR plus 4%, and became payable beginning in
January 2008, with principal and interest payments due in
48 monthly installments through 2011. The outstanding
balance on the note at December 31, 2009 was
$26 million at an interest rate of 4.5%. |
|
|
|
In October 2008, US Airways entered into a promissory note with
GE Engine Services, Inc. pursuant to which maintenance payments
of up to $40 million due from October 2008 through March
2009 under US Airways Engine Service Agreement were
deferred. Interest on the note accrues at 14%, and the first of
12 monthly principal and interest payments commenced in
April 2009. The outstanding balance on the note at
December 31, 2009 was $10 million. |
|
(h) |
|
The industrial development revenue bonds are due April 2023.
Interest at 6.3% is payable semiannually on April 1 and
October 1. The bonds are subject to optional redemption
prior to the maturity date on or after April 1, 2008, in
whole or in part, on any interest payment date at the following
redemption prices: 102% on April 1 or October 1, 2008; 101%
on April 1 or October 1, 2009; and 100% on April 1,
2010 and thereafter. |
|
(i) |
|
In connection with US Airways emergence from bankruptcy in
September 2005, it reached a settlement with the Pension Benefit
Guaranty Corporation (PBGC) related to the
termination of three of its defined benefit pension plans. The
settlement included the issuance of a $10 million note
which matures in 2012 and bears interest at 6% payable annually
in arrears. |
Secured financings are collateralized by assets, primarily
aircraft, engines, simulators, rotable aircraft parts and hangar
and maintenance facilities. At December 31, 2009, the
estimated maturities of long-term debt and capital leases are as
follows (in millions):
|
|
|
|
|
2010
|
|
$
|
421
|
|
2011
|
|
|
334
|
|
2012
|
|
|
305
|
|
2013
|
|
|
255
|
|
2014
|
|
|
265
|
|
Thereafter
|
|
|
1,599
|
|
|
|
|
|
|
|
|
$
|
3,179
|
|
|
|
|
|
|
Certain of US Airways long-term debt agreements contain
significant minimum cash balance requirements and other
covenants with which US Airways was in compliance at
December 31, 2009. Certain of US Airways long-term
debt agreements contain cross-default provisions, which may be
triggered by defaults by US Airways under other agreements
relating to indebtedness.
US Airways accounts for income taxes using the asset and
liability method. US Airways and its wholly owned subsidiaries
are part of the US Airways Group consolidated income tax return.
US Airways Group allocates tax and tax items, such as net
operating losses (NOLs) and net tax credits, between
members of the group based on their proportion of taxable income
and other items. Accordingly, US Airways tax expense is
based on taxable income, taking into consideration allocated tax
loss carryforwards/carrybacks and tax credit carryforwards.
US Airways reported a loss in 2009, which increased its NOLs. As
of December 31, 2009, US Airways has approximately
$2.05 billion of gross NOLs to reduce future federal
taxable income. All of US Airways NOLs are available to
reduce federal taxable income in the calendar year 2010. The
NOLs expire during the years 2022 through 2029.
US Airways net deferred tax assets, which include
$1.98 billion of the NOLs, have been subject to a full
valuation allowance. US Airways also has approximately
$86 million of tax-effected state NOLs at December 31,
127
2009. At December 31, 2009, the federal and state valuation
allowance is $575 million and $78 million,
respectively, all of which will reduce future tax expense when
recognized.
For the year ended December 31, 2009, US Airways recorded a
tax benefit of $38 million. Of this amount,
$21 million was due to a non-cash income tax benefit
related to gains recorded within other comprehensive income
during 2009. Generally accepted accounting principles
(GAAP) require all items be considered (including
items recorded in other comprehensive income) in determining the
amount of tax benefit that results from a loss from continuing
operations that should be allocated to continuing operations. In
accordance with GAAP, US Airways recorded a tax benefit on the
loss from continuing operations, which was exactly offset by
income tax expense on other comprehensive income as follows:
|
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|
|
|
|
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|
|
|
|
|
|
Change in
|
|
|
|
Net Loss Income
|
|
|
Other Comprehensive
|
|
|
|
Statement
|
|
|
Income
|
|
|
Pre-allocation
|
|
$
|
(161
|
)
|
|
$
|
37
|
|
Tax allocation
|
|
|
21
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
As presented
|
|
$
|
(140
|
)
|
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
As the income tax expense on other comprehensive income is equal
to the income tax benefit recognized in continuing operations,
US Airways total comprehensive loss is unchanged. In
addition, US Airways net deferred tax position at
December 31, 2009 is not impacted by this tax allocation.
In addition, US Airways recorded a $14 million benefit
related to a legislation change allowing it to carry back 100%
of 2008 Alternative Minimum Tax liability (AMT) net
operating losses, resulting in the recovery of AMT amounts paid
in prior years. US Airways also recognized a $3 million tax
benefit related to the reversal of the deferred tax liability
associated with the indefinite lived intangible assets that were
impaired during 2009.
For the year ended December 31, 2008, US Airways reported a
loss, which increased its NOLs, and it did not record a tax
provision.
For the year ended December 31, 2007, US Airways utilized
NOLs to reduce its income tax obligation. Utilization of these
NOLs resulted in a corresponding decrease in the valuation
allowance. As this valuation allowance was established through
the recognition of tax expense, the decrease in valuation
allowance offset US Airways tax provision dollar for
dollar. US Airways recognized $7 million of non-cash state
income tax expense for the year ended December 31, 2007, as
US Airways utilized NOLs that were generated prior to the
merger. As these were acquired NOLs, the accounting rules in
place at that time required that the decrease in the valuation
allowance associated with these NOLs reduce goodwill instead of
the provision for income taxes.
US Airways is subject to AMT. In most cases, the recognition of
AMT does not result in tax expense. However, since US
Airways net deferred tax asset is subject to a full
valuation allowance, any liability for AMT is recorded as tax
expense. US Airways recorded AMT expense of $1 million for
the year ended December 31, 2007. US Airways also recorded
$1 million of state income tax related to certain states
where NOLs were not available or limited for the year ended
December 31, 2007.
The components of the provision (benefit) for income taxes are
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
|
$
|
1
|
|
|
$
|
1
|
|
State
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
Deferred provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(38
|
)
|
|
|
|
|
|
|
(1
|
)
|
State
|
|
|
|
|
|
|
(1
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(38
|
)
|
|
|
(1
|
)
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
$
|
(38
|
)
|
|
$
|
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128
Income tax expense (benefit) differs from amounts computed at
the federal statutory income tax rate as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income tax expense (benefit) at the federal statutory income tax
rate
|
|
$
|
(62
|
)
|
|
$
|
(752
|
)
|
|
$
|
170
|
|
Book expenses not deductible for tax purposes
|
|
|
17
|
|
|
|
229
|
|
|
|
12
|
|
State income tax expense, net of federal income tax expense
(benefit)
|
|
|
(4
|
)
|
|
|
(38
|
)
|
|
|
7
|
|
Change in valuation allowance
|
|
|
49
|
|
|
|
560
|
|
|
|
(180
|
)
|
AMT provision (benefit)
|
|
|
(14
|
)
|
|
|
1
|
|
|
|
1
|
|
Allocation to other comprehensive income
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
Long-lived intangibles
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(38
|
)
|
|
$
|
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
(21.5
|
)%
|
|
|
|
%
|
|
|
1.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
as of December 31, 2009 and 2008 are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
748
|
|
|
$
|
515
|
|
Property, plant and equipment
|
|
|
28
|
|
|
|
21
|
|
Investments
|
|
|
63
|
|
|
|
95
|
|
Financing transactions
|
|
|
41
|
|
|
|
25
|
|
Employee benefits
|
|
|
335
|
|
|
|
338
|
|
Dividend Miles awards
|
|
|
126
|
|
|
|
144
|
|
AMT credit carryforward
|
|
|
25
|
|
|
|
38
|
|
Other deferred tax assets
|
|
|
24
|
|
|
|
197
|
|
Valuation allowance
|
|
|
(653
|
)
|
|
|
(643
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
737
|
|
|
|
730
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
541
|
|
|
|
522
|
|
Sale and leaseback transactions and deferred rent
|
|
|
137
|
|
|
|
144
|
|
Leasing transactions
|
|
|
45
|
|
|
|
47
|
|
Long-lived intangibles
|
|
|
25
|
|
|
|
31
|
|
Other deferred tax liabilities
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
752
|
|
|
|
748
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
|
15
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
Less: current deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax liabilities
|
|
$
|
15
|
|
|
$
|
18
|
|
|
|
|
|
|
|
|
|
|
The reason for significant differences between taxable and
pre-tax book income primarily relates to depreciation on fixed
assets, employee pension and postretirement benefit costs,
employee-related accruals and leasing transactions.
US Airways files tax returns in the U.S. federal
jurisdiction, and in various states and foreign jurisdictions.
All federal and state tax filings for US Airways and AWA for
fiscal years through December 31, 2008 have been timely
filed. US Airways federal income tax year 2005 was closed
by operation of the statute of limitations expiring, and there
were no extensions filed. US Airways is not currently under IRS
examination. US Airways files tax returns in 44 states, and
its major state tax jurisdictions are Arizona, California,
Pennsylvania and North Carolina. Tax years up to 2004 for these
state tax jurisdictions are closed by operation of the statute
of limitations expiring. Extensions for two states have been
filed.
129
US Airways believes that its income tax filing positions and
deductions related to tax periods subject to examination will be
sustained upon audit and does not anticipate any adjustments
that will result in a material adverse effect on US
Airways financial condition, results of operations, or
cash flow. Therefore, no reserves for uncertain income tax
positions have been recorded.
|
|
5.
|
Risk
Management and Financial Instruments
|
US Airways economic prospects are heavily dependent upon
two variables it cannot control: the health of the economy and
the price of fuel. Due to the discretionary nature of business
and leisure travel spending, airline industry revenues are
heavily influenced by the condition of the U.S. economy and
the economies in other regions of the world. Unfavorable
economic conditions may result in decreased passenger demand for
air travel, which in turn could have a negative effect on US
Airways revenues. Similarly, the airline industry may not
be able to sufficiently raise ticket prices to offset increases
in aviation jet fuel prices. These factors could impact US
Airways results of operations, financial performance and
liquidity.
US Airways periodically enters into derivative contracts
comprised of heating oil-based derivative instruments to hedge a
portion of its projected jet fuel requirements. Since the third
quarter of 2008, US Airways has not entered into any new fuel
hedging transactions and, as of December 31, 2009, US
Airways had no remaining outstanding fuel hedging contracts.
US Airways fuel hedging instruments did not qualify for
hedge accounting. Accordingly, the derivative hedging
instruments were recorded as an asset or liability on the
balance sheet at fair value and any changes in fair value were
recorded in the period of change as gains or losses on fuel
hedging instruments, net in operating expenses in the
accompanying consolidated statements of operations. The
following table details US Airways loss (gain) on fuel
hedging instruments, net (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Realized loss (gain)
|
|
$
|
382
|
|
|
$
|
(140
|
)
|
|
$
|
(58
|
)
|
Unrealized loss (gain)
|
|
|
(375
|
)
|
|
|
496
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on fuel hedging instruments, net
|
|
$
|
7
|
|
|
$
|
356
|
|
|
$
|
(245
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized gains in 2009 were related to the reversal of
prior period unrealized losses due to contracts settling in 2009.
Cash,
Cash Equivalents and Investments in Marketable
Securities
US Airways invests available cash in money market securities and
highly liquid debt instruments.
As of December 31, 2009, US Airways held auction rate
securities totaling $347 million at par value, which are
classified as
available-for-sale
securities and noncurrent assets on US Airways
consolidated balance sheets. Contractual maturities for these
auction rate securities range from seven to 43 years, with
73% of US Airways portfolio maturing within the next
10 years (2016 2017), 19% maturing within the
next 30 years (2033 2036) and 8% maturing
thereafter (2049 2052). With the liquidity issues
experienced in the global credit and capital markets, all of US
Airways auction rate securities have experienced failed
auctions since August 2007. The estimated fair value of these
auction rate securities no longer approximates par value. At
December 31, 2009, the fair value of US Airways
auction rate securities was $203 million. Refer to
Note 6 for discussion on how US Airways determines the fair
value of its investments in auction rate securities.
During 2009, US Airways sold certain investments in auction rate
securities for net proceeds of $32 million. Additionally,
US Airways recorded net unrealized gains of $58 million in
other comprehensive income related to the increase in fair value
of certain investments in auction rate securities, as well as
$10 million in
other-than-temporary
130
impairment charges recorded in other nonoperating expense, net
related to the decline in fair value of certain investments in
auction rate securities.
In 2008, US Airways recorded $214 million of
other-than-temporary
impairment charges in other nonoperating expense, net. These
charges included $48 million of previously recorded
unrealized losses in other comprehensive income. US
Airways conclusion for the $214 million
other-than-temporary
impairment was due to the length of time and extent to which the
fair value was less than cost for certain securities. In 2007,
US Airways recorded a $58 million decline in fair value. Of
this decline in fair value, $48 million was deemed
temporary and recorded to other comprehensive income and
$10 million of the decline was deemed
other-than-temporary
and recorded to other nonoperating expense, net.
US Airways continues to monitor the market for auction rate
securities and consider its impact (if any) on the fair value of
its investments. If the current market conditions deteriorate,
US Airways may be required to record additional impairment
charges in other nonoperating expense, net in future periods.
Accounts
Receivable
As of December 31, 2009, most of US Airways
receivables related to tickets sold to individual passengers
through the use of major credit cards or to tickets sold by
other airlines and used by passengers on US Airways or its
regional airline affiliates. These receivables are short-term,
mostly being settled within seven days after sale. Bad debt
losses, which have been minimal in the past, have been
considered in establishing allowances for doubtful accounts. US
Airways does not believe it is subject to any significant
concentration of credit risk.
US Airways has exposure to market risk associated with changes
in interest rates related primarily to its variable rate debt
obligations. Interest rates on $1.96 billion principal
amount of long-term debt as of December 31, 2009 are
subject to adjustment to reflect changes in floating interest
rates. The weighted average effective interest rate on US
Airways variable rate debt was 4.59% at December 31,
2009.
The fair value of US Airways long-term debt was
approximately $2.83 billion and $2.28 billion at
December 31, 2009 and 2008, respectively. The fair values
were estimated using quoted market prices where available. For
long-term debt not actively traded, fair values were estimated
using a discounted cash flow analysis, based on US Airways
current incremental borrowing rates for similar types of
borrowing arrangements.
|
|
6.
|
Fair
Value Measurements
|
On January 1, 2008, US Airways adopted the provisions of
SFAS No. 157, Fair Value Measurements
(included in FASB ASC Topic 320, Investments-Debt and Equity
Securities), which defines fair value, establishes a consistent
framework for measuring fair value and expands disclosure for
each major asset and liability category measured at fair value
on either a recurring or nonrecurring basis. This accounting
guidance clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset
or paid to transfer a liability in an orderly transaction
between market participants. As such, fair value is a
market-based measurement that should be determined based on
assumptions that market participants would use in pricing an
asset or liability. As a basis for considering such assumptions,
this accounting guidance establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair
value as follows:
|
|
|
|
Level 1.
|
Observable inputs such as quoted prices in active markets;
|
|
Level 2.
|
Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and
|
|
Level 3.
|
Unobservable inputs in which there is little or no market data,
which require the reporting entity to develop its own
assumptions.
|
131
Assets measured at fair value on a recurring basis are as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Valuation
|
|
|
|
Fair Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Technique
|
|
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities (noncurrent)
|
|
$
|
203
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
203
|
|
|
|
(1
|
)
|
At December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities (noncurrent)
|
|
$
|
187
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
187
|
|
|
|
(1
|
)
|
Fuel hedging derivatives
|
|
|
(375
|
)
|
|
|
|
|
|
|
(375
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
(1) |
|
US Airways estimated the fair value of its auction rate
securities based on the following: (i) the underlying
structure of each security; (ii) the present value of
future principal and interest payments discounted at rates
considered to reflect current market conditions;
(iii) consideration of the probabilities of default,
passing a future auction, or repurchase at par for each period;
and (iv) estimates of the recovery rates in the event of
default for each security. These estimated fair values could
change significantly based on future market conditions. Refer to
Note 5(b) for further discussion of US Airways
investments in marketable securities. |
|
(2) |
|
As US Airways fuel hedging derivative instruments were not
traded on a market exchange, the fair values were determined
using valuation models which included assumptions about
commodity prices based on those observed in the underlying
markets. The fair value of fuel hedging derivatives is recorded
in accounts payable on the consolidated balance sheets. Refer to
Note 5(a) for further discussion of US Airways fuel
hedging derivatives. |
Assets measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) are as
follows (in millions):
|
|
|
|
|
|
|
Investments in
|
|
|
|
Marketable
|
|
|
|
Securities
|
|
|
|
(Noncurrent)
|
|
|
Balance at December 31, 2007
|
|
$
|
353
|
|
Losses deemed to be other than temporary reclassified from other
comprehensive income to other nonoperating expense, net
|
|
|
48
|
|
Impairment losses included in other nonoperating expense, net
|
|
|
(214
|
)
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
187
|
|
Net unrealized gains recorded to other comprehensive income
|
|
|
58
|
|
Impairment losses included in other nonoperating expense, net
|
|
|
(10
|
)
|
Sales of marketable securities
|
|
|
(32
|
)
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
203
|
|
|
|
|
|
|
Assets measured at fair value on a nonrecurring basis are as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
Significant Other
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
Observable
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
Inputs
|
|
Inputs
|
|
Total
|
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Losses
|
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International route authorities
|
|
$
|
39
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
39
|
|
|
$
|
(16
|
)
|
US Airways performed the annual impairment test on its
international route authorities during the fourth quarter of
2009. The fair values of international route authorities were
assessed using the market approach. The market approach took
into consideration relevant supply and demand factors at the
related airport locations as well as available market sale and
lease data. As a result of US Airways annual impairment
test on its international route authorities, US Airways recorded
a $16 million impairment charge related to the decline in
fair value of certain international routes.
132
|
|
7.
|
Employee
Pension and Benefit Plans
|
Substantially all of US Airways employees meeting certain
service and other requirements are eligible to participate in
various pension, medical, dental, life insurance, disability and
survivorship plans.
|
|
(a)
|
Other
Postretirement Benefits Plan
|
The following table sets forth changes in the fair value of plan
assets, benefit obligations and the funded status of the plans
and the amounts recognized in US Airways consolidated
balance sheets as of December 31, 2009 and 2008 (in
millions).
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Fair value of plan assets at beginning of period
|
|
$
|
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
19
|
|
|
|
15
|
|
Plan participants contributions
|
|
|
17
|
|
|
|
22
|
|
Gross benefits paid
|
|
|
(36
|
)
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
|
|
121
|
|
|
|
162
|
|
Service cost
|
|
|
2
|
|
|
|
2
|
|
Interest cost
|
|
|
9
|
|
|
|
9
|
|
Plan participants contributions
|
|
|
17
|
|
|
|
22
|
|
Actuarial (gain) loss
|
|
|
11
|
|
|
|
(33
|
)
|
Gross benefits paid
|
|
|
(36
|
)
|
|
|
(37
|
)
|
Plan amendments
|
|
|
18
|
|
|
|
|
|
Effect of adopting the measurement date provisions of
employers accounting for other postretirement benefit plans
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
|
142
|
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
Funded status of the plan
|
|
|
(142
|
)
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
Liability recognized in the consolidated balance sheet
|
|
$
|
(142
|
)
|
|
$
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
Net actuarial gain recognized in accumulated other comprehensive
income
|
|
$
|
59
|
|
|
$
|
78
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plans are measured as of December 31, 2009
and 2008. On January 1, 2008, US Airways adopted the
measurement date provisions of SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans (included in FASB ASC Topic
960, Plan Accounting Defined Benefit Pension Plans).
The change in US Airways other postretirement benefit
obligation reflects a $4 million reduction in 2008, which
includes $6 million of benefit payments, offset by
$2 million of net periodic benefit costs for the period
between the measurement date utilized in 2007,
September 30, and the beginning of 2008. The
$2 million of net periodic benefit costs was recorded as an
adjustment to accumulated deficit.
In connection with the ratification of new unified agreements
that moved all of US Airways fleet services and
maintenance and related employees to one labor contract, US
Airways postretirement benefit plans were amended
effective as of January 1, 2009 to include all pre-merger
AWA fleet service and maintenance and related employees.
The following table presents the weighted average assumptions
used to determine benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Year Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
Discount rate
|
|
|
5.51
|
%
|
|
|
5.98
|
%
|
US Airways assumed discount rates for measuring its other
postretirement benefit obligations, based on a hypothetical
portfolio of high quality publicly traded U.S. bonds (Aa
rated, non-callable or callable with make-whole provisions), for
which the timing and cash outflows approximate the estimated
benefit payments of the other postretirement benefit plans.
133
As of December 31, 2009, the assumed health care cost trend
rates are 8% in 2010 and 7.5% in 2011, decreasing to 5.5% in
2015 and thereafter. As of December 31, 2008, the assumed
health care cost trend rates are 9% in 2009 and 8% in 2010,
decreasing to 5.5% in 2015 and thereafter. The assumed health
care cost trend rates could have a significant effect on amounts
reported for retiree health care plans. A one-percentage point
change in the health care cost trend rates would have the
following effects on other postretirement benefits as of
December 31, 2009 (in millions):
|
|
|
|
|
|
|
|
|
|
|
1% Increase
|
|
1% Decrease
|
|
Effect on total service and interest costs
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
Effect on postretirement benefit obligation
|
|
|
9
|
|
|
|
(8
|
)
|
Weighted average assumptions used to determine net periodic
benefit cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
Discount rate
|
|
|
5.98
|
%
|
|
|
5.94
|
%
|
|
|
5.67
|
%
|
Components of the net and total periodic cost for other
postretirement benefits are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Service cost
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
3
|
|
Interest cost
|
|
|
9
|
|
|
|
9
|
|
|
|
12
|
|
Amortization of actuarial gain (1)
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total periodic cost
|
|
$
|
5
|
|
|
$
|
9
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The estimated actuarial gain for other postretirement benefit
plans that will be amortized from accumulated other
comprehensive income into net periodic benefit cost in 2010 is
$4 million. |
In 2010, US Airways expects to contribute $13 million to
its other postretirement plans. The following benefits, which
reflect expected future service, as appropriate, are expected to
be paid from the other postretirement plans (in millions):
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
Postretirement
|
|
|
|
|
Benefits before
|
|
|
|
|
Medicare Subsidy
|
|
Medicare Subsidy
|
|
2010
|
|
$
|
13
|
|
|
$
|
|
|
2011
|
|
|
13
|
|
|
|
|
|
2012
|
|
|
12
|
|
|
|
|
|
2013
|
|
|
12
|
|
|
|
|
|
2014
|
|
|
13
|
|
|
|
|
|
2015 to 2019
|
|
|
66
|
|
|
|
(2
|
)
|
|
|
(b)
|
Defined
Contribution Plans
|
US Airways sponsors several defined contribution plans which
cover a majority of its employee groups. US Airways makes
contributions to these plans based on the individual plan
provisions, including an employer non-discretionary contribution
and an employer match. These contributions are generally made
based upon eligibility, eligible earnings and employee group.
Expenses related to these plans were $94 million,
$92 million and $78 million for the years ended
December 31, 2009, 2008, and 2007, respectively.
|
|
(c)
|
Postemployment
Benefits
|
US Airways provides certain postemployment benefits to its
employees. These benefits include disability-related and
workers compensation benefits for certain employees. US
Airways accrues for the cost of such benefit expenses once an
appropriate triggering event has occurred. In 2007, US Airways
recorded a $99 million charge to
134
increase long-term disability obligations for US Airways
pilots as a result of a change in the FAA-mandated retirement
age for pilots from 60 to 65.
Most non-executive employees of US Airways are eligible to
participate in the 2005 Profit Sharing Plan, an annual bonus
program. Annual bonus awards are paid from a profit-sharing pool
equal to (i) 10% of the annual profits of US Airways Group
(excluding unusual items) for pre-tax profit margins up to 10%,
plus (ii) 15% of the annual profits of US Airways Group
(excluding unusual items) for pre-tax profit margins greater
than 10%. Awards are paid as a lump sum no later than March 15
after the end of each fiscal year. US Airways recorded no
amounts in 2009 and 2008 for profit sharing as US Airways had a
net loss in these years excluding special items and recorded
$49 million for profit sharing in 2007, which is recorded
in salaries and related costs.
|
|
8.
|
Commitments
and Contingencies
|
|
|
(a)
|
Commitments
to Purchase Flight Equipment and Maintenance
Services
|
Aircraft
and Engine Purchase Commitments
US Airways has definitive purchase agreements with Airbus for
the acquisition of 134 aircraft, including 97 single-aisle A320
family aircraft and 37 widebody aircraft (comprised of 22 A350
XWB aircraft and 15 A330-200 aircraft), of which 30 aircraft
have been delivered through December 31, 2009. Deliveries
of the A320 family aircraft commenced during 2008 with the
delivery of five A321 aircraft. During 2009, US Airways took
delivery of 18 Airbus A321 aircraft, five A330-200 aircraft and
two Airbus A320 aircraft. Of the 20 A320 family aircraft, 11
were financed using manufacturer backstop financing, eight were
financed through existing financing facilities and one was
financed through a leasing transaction. Of the five A330-200
aircraft, three were financed through leasing transactions and
two were financed through new loan agreements.
In November 2009, US Airways amended its purchase agreements
with Airbus to defer 54 Airbus aircraft originally scheduled for
delivery between 2010 and 2012 to 2013 and beyond. These
deferral arrangements will reduce US Airways aircraft
capital expenditures over the next three years by approximately
$2.5 billion and reduce near- and medium-term obligations
to Airbus and others by approximately $132 million. US
Airways now plans to take delivery of 28 Airbus aircraft between
2010 and 2012, consisting of four aircraft in 2010 (two A320
aircraft and two A330 aircraft) and 24 A320 family aircraft in
2011-2012.
In addition, commencement of US Airways Airbus A350 XWB
operations, with aircraft deliveries originally scheduled to
start in 2015, will now be postponed to 2017.
US Airways has agreements for the purchase of eight new IAE
V2500-A5 spare engines scheduled for delivery through 2014 for
use on the Airbus A320 family fleet, three new Trent 700 spare
engines scheduled for delivery through 2013 for use on the
Airbus A330-200 fleet and three new Trent XWB spare engines
scheduled for delivery in 2017 through 2019 for use on the
Airbus A350 XWB aircraft. US Airways has taken delivery of two
of the Trent 700 spare engines and one of the V2500-A5 spare
engines, which were financed through leasing transactions.
Under all of US Airways aircraft and engine purchase
agreements, US Airways total future commitments as of
December 31, 2009 are expected to be approximately
$6.09 billion through 2019 as follows: $296 million in
2010, $504 million in 2011, $579 million in 2012,
$1.15 billion in 2013, $932 million in 2014 and
$2.63 billion thereafter, which includes predelivery
deposits and payments. US Airways has financing commitments for
all Airbus aircraft scheduled for delivery during 2010 to 2012.
US Airways leases certain aircraft, engines, and ground
equipment, in addition to the majority of its ground facilities
and terminal space. As of December 31, 2009, US Airways had
305 aircraft under operating leases, with remaining terms
ranging from one month to approximately 14 years. Ground
facilities include maintenance facilities and ticket, corporate
and administrative offices. Public airports are utilized for
flight operations under lease arrangements with the
municipalities or agencies owning or controlling such airports.
Substantially all leases provide that the lessee must pay taxes,
maintenance, insurance and certain other operating expenses
applicable to the leased property. Some leases also include
renewal and purchase options.
135
As of December 31, 2009, obligations under noncancellable
operating leases for future minimum lease payments were as
follows (in millions):
|
|
|
|
|
2010
|
|
$
|
1,064
|
|
2011
|
|
|
939
|
|
2012
|
|
|
862
|
|
2013
|
|
|
717
|
|
2014
|
|
|
639
|
|
Thereafter
|
|
|
3,183
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
7,404
|
|
Less sublease rental receipts
|
|
|
(782
|
)
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
6,622
|
|
|
|
|
|
|
For the years ended December 31, 2009, 2008 and 2007,
rental expense under operating leases was $1.28 billion,
$1.32 billion and $1.28 billion, respectively.
US Airways leases certain flight equipment to related parties
(see Note 11(b)) under noncancellable operating leases
expiring in various years through year 2022. The future minimum
rental receipts associated with these leases are
$78 million in each year 2010 through 2014 and
$392 million thereafter. The following amounts relate to
owned aircraft leased under such agreements as reflected in
flight equipment as of December 31, 2009 and 2008 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Flight equipment
|
|
$
|
286
|
|
|
$
|
286
|
|
Less accumulated amortization
|
|
|
(43
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
243
|
|
|
$
|
253
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
Off-balance
Sheet Arrangements
|
US Airways has obligations with respect to pass through trust
certificates, or EETCs, issued by pass through trusts to cover
the financing of 19 owned aircraft, 114 leased aircraft and
three leased engines. These trusts are off-balance sheet
entities, the primary purpose of which is to finance the
acquisition of flight equipment. Rather than finance each
aircraft separately when such aircraft is purchased or
delivered, these trusts allowed US Airways to raise the
financing for several aircraft at one time and place such funds
in escrow pending the purchase or delivery of the relevant
aircraft. The trusts were also structured to provide for certain
credit enhancements, such as liquidity facilities to cover
certain interest payments, that reduce the risks to the
purchasers of the trust certificates and, as a result, reduce
the cost of aircraft financing to US Airways.
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at US Airways
election in connection with a mortgage financing of the aircraft
or by a separate owner trust in connection with a leveraged
lease financing of the aircraft. In the case of a leveraged
lease financing, the owner trust then leased the aircraft to US
Airways. In both cases, the equipment notes are secured by a
security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor are they
guaranteed by, US Airways Group or US Airways. However, in the
case of mortgage financings, the equipment notes issued to the
trusts are direct obligations of US Airways. As of
December 31, 2009, $505 million associated with these
mortgage financings is reflected as debt in the accompanying
consolidated balance sheet.
With respect to leveraged leases, US Airways evaluated whether
the leases had characteristics of a variable interest entity. US
Airways concluded the leasing entities met the criteria for
variable interest entities. US Airways then evaluated whether or
not it was the primary beneficiary by evaluating whether or not
it was exposed to the majority of the risks (expected losses) or
whether it receives the majority of the economic benefits
(expected residual returns) from the trusts activities. US
Airways does not provide residual value guarantees to the
bondholders or equity participants in the trusts. Each lease
does have a fixed price purchase option that allows US Airways
to purchase the aircraft near the end of the lease term.
However, the option price approximates an
136
estimate of the aircrafts fair value at the option date.
Under this feature, US Airways does not participate in any
increases in the value of the aircraft. US Airways concluded it
was not the primary beneficiary under these arrangements.
Therefore, US Airways accounts for its EETC leveraged lease
financings as operating leases. US Airways total future
obligations under these leveraged lease financings are
$3.25 billion as of December 31, 2009, which are
included in the future minimum lease payments table in
(b) above.
|
|
(d)
|
Regional
Jet Capacity Purchase Agreements
|
US Airways has entered into capacity purchase agreements with
certain regional jet operators. The capacity purchase agreements
provide that all revenues, including passenger, mail and freight
revenues, go to US Airways. In return, US Airways agrees to pay
predetermined fees to these airlines for operating an
agreed-upon
number of aircraft, without regard to the number of passengers
onboard. In addition, these agreements provide that certain
variable costs, such as airport landing fees and passenger
liability insurance, will be reimbursed 100% by US Airways. US
Airways controls marketing, scheduling, ticketing, pricing and
seat inventories. The regional jet capacity purchase agreements
have expirations from 2012 to 2020. The future minimum
noncancellable commitments under the regional jet capacity
purchase agreements are $1.01 billion in 2010,
$1.03 billion in 2011, $900 million in 2012,
$772 million in 2013, $771 million in 2014 and
$2.35 billion thereafter.
Certain entities with which US Airways has capacity purchase
agreements are considered variable interest entities. In
connection with its restructuring and emergence from bankruptcy,
US Airways contracted with Air Wisconsin and Republic to
purchase a significant portion of these companies regional
jet capacity for a period of 10 years. US Airways has
determined that it is not the primary beneficiary of these
variable interest entities, based on cash flow analyses.
Additionally, US Airways has analyzed the arrangements with
other carriers with which US Airways has long-term capacity
purchase agreements and has concluded it is not required to
consolidate any of the entities.
On September 12, 2004, US Airways Group and its domestic
subsidiaries (collectively, the Reorganized Debtors)
filed voluntary petitions for relief under Chapter 11 of
the Bankruptcy Code in the United States Bankruptcy Court for
the Eastern District of Virginia, Alexandria Division (Case Nos.
04-13819-SSM
through
03-13823-SSM)
(the 2004 Bankruptcy). On September 16, 2005,
the Bankruptcy Court issued an order confirming the plan of
reorganization submitted by the Reorganized Debtors and on
September 27, 2005, the Reorganized Debtors emerged from
the 2004 Bankruptcy. The Bankruptcy Courts order
confirming the plan included a provision called the plan
injunction, which forever bars other parties from pursuing most
claims against the Reorganized Debtors that arose prior to
September 27, 2005 in any forum other than the Bankruptcy
Court. Substantially all of the claims in the 2004 Bankruptcy
have been settled and the remaining claims, if paid at all, will
be paid out in common stock of the post-bankruptcy US Airways
Group at a small fraction of the actual claim amount. However,
the effects of these common stock distributions were already
reflected in US Airways financial statements upon
emergence from bankruptcy and will not have any further impact
on its financial position or results of operations. US Airways
presently expects the bankruptcy case to be closed during 2010.
US Airways
and/or its
subsidiaries are defendants in various pending lawsuits and
proceedings, and from time to time are subject to other claims
arising in the normal course of its business, many of which are
covered in whole or in part by insurance. The outcome of those
matters cannot be predicted with certainty at this time, but US
Airways, having consulted with outside counsel, believes that
the ultimate disposition of these contingencies will not
materially affect its consolidated financial position or results
of operations.
|
|
(f)
|
Guarantees
and Indemnifications
|
US Airways guarantees the payment of principal and interest on
certain special facility revenue bonds issued by municipalities
to build or improve certain airport and maintenance facilities
which are leased to US Airways. Under such leases, US Airways is
required to make rental payments through 2023, sufficient to pay
maturing principal and interest payments on the related bonds.
As of December 31, 2009, the remaining lease payments
guaranteeing the
137
principal and interest on these bonds are $137 million, of
which $34 million of these obligations is accounted for as
a capital lease and reflected as debt in the accompanying
consolidated balance sheet.
US Airways enters into real estate leases in substantially all
cities that it serves. It is common in such commercial lease
transactions for US Airways as the lessee to agree to indemnify
the lessor and other related third parties for tort liabilities
that arise out of or relate to the use or occupancy of the
leased premises. In some cases, this indemnity extends to
related liabilities arising from the negligence of the
indemnified parties, but usually excludes any liabilities caused
by their gross negligence or willful misconduct. With respect to
certain special facility bonds, US Airways agreed to indemnify
the municipalities for any claims arising out of the issuance
and sale of the bonds and use or occupancy of the concourses
financed by these bonds. Additionally, US Airways typically
indemnifies such parties for any environmental liability that
arises out of or relates to its use or occupancy of the leased
premises.
US Airways is the lessee under many aircraft financing
agreements (including leveraged lease financings of aircraft
under pass through trusts). It is common in such transactions
for US Airways as the lessee to agree to indemnify the lessor
and other related third parties for the manufacture, design,
ownership, financing, use, operation and maintenance of the
aircraft, and for tort liabilities that arise out of or relate
to US Airways use or occupancy of the leased asset. In
some cases, this indemnity extends to related liabilities
arising from the negligence of the indemnified parties, but
usually excludes any liabilities caused by their gross
negligence or willful misconduct. In aircraft financing
agreements structured as leveraged leases, US Airways typically
indemnifies the lessor with respect to adverse changes in
U.S. tax laws.
US Airways Groups 7% notes are fully and
unconditionally guaranteed, jointly and severally and on a
senior unsecured basis, by US Airways and AWA. In addition, US
Airways is a guarantor of US Airways Groups Citicorp
credit facility.
|
|
9.
|
Other
Comprehensive Income (Loss)
|
US Airways other comprehensive income (loss) consisted of
the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net income (loss)
|
|
$
|
(140
|
)
|
|
$
|
(2,148
|
)
|
|
$
|
478
|
|
Net unrealized gains (losses) on
available-for-sale
securities, net of tax expense of $21 million in 2009
|
|
|
35
|
|
|
|
|
|
|
|
(48
|
)
|
Recognition of previous unrealized losses now deemed
other-than-temporary
|
|
|
|
|
|
|
48
|
|
|
|
|
|
Other postretirement benefits
|
|
|
(19
|
)
|
|
|
31
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
(124
|
)
|
|
$
|
(2,069
|
)
|
|
$
|
477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive income were as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Other postretirement benefits
|
|
$
|
59
|
|
|
$
|
78
|
|
Accumulated net unrealized gains on
available-for-sale
securities, net of tax
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
$
|
94
|
|
|
$
|
78
|
|
|
|
|
|
|
|
|
|
|
138
|
|
10.
|
Supplemental
Cash Flow Information
|
Supplemental disclosure of cash flow information and non-cash
investing and financing activities are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of intercompany payable to US Airways Group
|
|
$
|
600
|
|
|
$
|
|
|
|
$
|
1,834
|
|
Note payables issued for aircraft purchases
|
|
|
333
|
|
|
|
|
|
|
|
|
|
Debt extinguished from sale of aircraft
|
|
|
(251
|
)
|
|
|
|
|
|
|
|
|
Unrealized loss (gain) on
available-for-sale
securities, net
|
|
|
(58
|
)
|
|
|
|
|
|
|
48
|
|
Interest payable converted to debt
|
|
|
40
|
|
|
|
7
|
|
|
|
|
|
Maintenance payable converted to debt
|
|
|
8
|
|
|
|
33
|
|
|
|
|
|
Repayment of Barclays prepaid miles loan by US Airways Group
|
|
|
|
|
|
|
|
|
|
|
325
|
|
Cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid, net of amounts capitalized
|
|
|
145
|
|
|
|
124
|
|
|
|
122
|
|
Income taxes paid
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
11.
|
Related
Party Transactions
|
The following represents net payable balances to related parties
(in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
US Airways Group
|
|
$
|
607
|
|
|
$
|
949
|
|
US Airways Groups wholly owned subsidiaries
|
|
|
35
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
642
|
|
|
$
|
985
|
|
|
|
|
|
|
|
|
|
|
US Airways Group has the ability to move funds freely between
its operating subsidiaries to support operations. These
transfers are recognized as intercompany transactions. In
September 2009, US Airways Group contributed $600 million
in net intercompany receivables due from US Airways to the
capital of US Airways.
US Airways recorded interest expense for the years ended
December 31, 2009, 2008 and 2007 of $27 million,
$61 million and $86 million, respectively, related to
the above transactions and other transactions with wholly owned
subsidiaries of US Airways Group as described below. Interest is
calculated at market rates, which are reset quarterly.
|
|
(b)
|
Subsidiaries
of US Airways Group
|
The net payable to US Airways Groups wholly owned
subsidiaries consists of amounts due under regional capacity
agreements with the other airline subsidiaries and fuel purchase
arrangements with a non-airline subsidiary.
US Airways purchases all of the capacity generated by US Airways
Groups wholly owned regional airline subsidiaries at a
rate per ASM that is periodically determined by US Airways and,
concurrently, recognizes revenues that result primarily from
passengers being carried by these affiliated companies. The rate
per ASM that US Airways pays is based on estimates of the costs
incurred to supply the capacity. US Airways recognized US
Airways Express capacity purchase expense for the years ended
December 31, 2009, 2008 and 2007 of $451 million,
$417 million and $455 million, respectively, related
to this program.
US Airways provides various services to these regional airlines,
including passenger handling, maintenance and catering. US
Airways recognized other operating revenues for the years ended
December 31, 2009, 2008 and 2007 of $87 million,
$89 million and $95 million, respectively, related to
these services. These regional airlines also perform passenger
and ground handling services for US Airways at certain airports,
for which US Airways recognized other operating expenses for the
years ended December 31, 2009, 2008 and 2007 of
$142 million,
139
$154 million and $156 million, respectively. US
Airways also leases or subleases certain aircraft to these
regional airline subsidiaries. US Airways recognized other
operating revenues of $78 million related to these
arrangements for each of the years ended December 31, 2009,
2008 and 2007, respectively.
US Airways purchases a portion of its aviation fuel from US
Airways Groups wholly owned subsidiary, MSC, which acts as
a fuel wholesaler to US Airways in certain circumstances. For
the years ended December 31, 2009, 2008 and 2007, MSC sold
fuel totaling $677 million, $1.33 billion and
$1.02 billion, respectively, used by US Airways
mainline and Express flights.
|
|
12.
|
Operating
Segments and Related Disclosures
|
US Airways is managed as a single business unit that provides
air transportation for passengers and cargo. This allows it to
benefit from an integrated revenue pricing and route network
that includes US Airways, Piedmont, PSA and third-party carriers
that fly under capacity purchase or prorate agreements as part
of US Airways Express operations. The flight equipment of
all these carriers is combined to form one fleet that is
deployed through a single route scheduling system. When making
resource allocation decisions, the chief operating decision
maker evaluates flight profitability data, which considers
aircraft type and route economics, but gives no weight to the
financial impact of the resource allocation decision on an
individual carrier basis. The objective in making resource
allocation decisions is to maximize consolidated financial
results, not the individual results of US Airways and US Airways
Express.
Information concerning operating revenues in principal
geographic areas is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
United States
|
|
$
|
8,405
|
|
|
$
|
9,760
|
|
|
$
|
9,675
|
|
Foreign
|
|
|
2,204
|
|
|
|
2,484
|
|
|
|
2,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,609
|
|
|
$
|
12,244
|
|
|
$
|
11,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Airways attributes operating revenues by geographic region
based upon the origin and destination of each flight segment. US
Airways tangible assets consist primarily of flight
equipment, which are mobile across geographic markets and,
therefore, have not been allocated.
|
|
13.
|
Stock-based
Compensation
|
In June 2008, the stockholders of US Airways Group approved the
2008 Equity Incentive Plan (the 2008 Plan). The 2008
Plan replaces and supersedes the 2005 Equity Incentive Plan (the
2005 Plan). No additional awards will be made under
the 2005 Plan, although outstanding awards previously made under
the 2005 Plan will continue to be governed by the terms and
conditions of the 2005 Plan. Any shares subject to an award
under the 2005 Plan outstanding as of the date on which the 2008
Plan was approved by the Board that expire, are forfeited or
otherwise terminate unexercised will increase the shares
reserved for issuance under the 2008 Plan by (i) one share
for each share of stock issued pursuant to a stock option or
stock appreciation right and (ii) three shares for each
share of stock issued pursuant to a restricted stock unit, which
corresponds to the reduction originally made with respect to
each award in the 2005 Plan.
The 2008 Plan authorizes the grant of awards for the issuance of
up to a maximum of 6,700,000 shares of US Airways
Groups common stock. Awards may be in the form of
performance grants, bonus awards, performance shares, restricted
stock awards, vested shares, restricted stock units, vested
units, incentive stock options, nonstatutory stock options and
stock appreciation rights. The number of shares of US Airways
Groups common stock available for issuance under the 2008
Plan is reduced by (i) one share for each share of stock
issued pursuant to a stock option or a stock appreciation right,
and (ii) one and one-half (1.5) shares for each share of
stock issued pursuant to all other stock awards. Cash settled
awards do not reduce the number of shares available for issuance
under the 2008 Plan. Stock awards that are terminated, forfeited
or repurchased result in an increase in the share reserve of the
2008 Plan corresponding to the reduction originally made in
respect of the award. Any shares of the US Airways Groups
stock tendered or exchanged by a participant as full or partial
payment to US Airways Group of the exercise price under an
option and any shares retained or withheld by US Airways Group
in satisfaction of an
140
employees obligations to pay applicable withholding taxes
with respect to any award will not be available for reissuance,
subjected to new awards or otherwise used to increase the share
reserve under the 2008 Plan. The cash proceeds from option
exercises will not be used to repurchase shares on the open
market for reuse under the 2008 Plan.
US Airways net income (loss) for the years ended
December 31, 2009, 2008 and 2007 included $23 million,
$34 million and $32 million, respectively, of
stock-based compensation costs. During 2009, stock-based
compensation costs consisted of $20 million related to
stock settled awards and $3 million related to cash settled
awards.
Restricted Stock Unit Awards As of
December 31, 2009, US Airways Group has outstanding
restricted stock unit awards (RSUs) with service
conditions, which are classified as equity awards. The
grant-date fair value of RSUs is equal to the market price of
the underlying shares of US Airways Groups common stock on
the date of grant and is expensed over the vesting period. The
vesting period for RSU awards is three years.
RSU award activity for the years ending December 31, 2009,
2008 and 2007 is as follows (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average Grant-
|
|
|
|
Shares
|
|
|
Date Fair Value
|
|
|
2005 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
Nonvested balances at December 31, 2006
|
|
|
814
|
|
|
$
|
28.63
|
|
Granted
|
|
|
242
|
|
|
|
41.51
|
|
Vested and released
|
|
|
(446
|
)
|
|
|
29.85
|
|
Forfeited
|
|
|
(18
|
)
|
|
|
31.26
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2007
|
|
|
592
|
|
|
$
|
32.91
|
|
Granted
|
|
|
535
|
|
|
|
9.02
|
|
Vested and released
|
|
|
(390
|
)
|
|
|
29.07
|
|
Forfeited
|
|
|
(32
|
)
|
|
|
23.15
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2008
|
|
|
705
|
|
|
$
|
17.36
|
|
Granted
|
|
|
|
|
|
|
|
|
Vested and released
|
|
|
(323
|
)
|
|
|
22.16
|
|
Forfeited
|
|
|
(29
|
)
|
|
|
15.76
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2009
|
|
|
353
|
|
|
$
|
13.10
|
|
|
|
|
|
|
|
|
|
|
2008 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2007
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
19
|
|
|
|
7.52
|
|
Vested and released
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2008
|
|
|
19
|
|
|
$
|
7.52
|
|
Granted
|
|
|
280
|
|
|
|
3.44
|
|
Vested and released
|
|
|
(189
|
)
|
|
|
2.84
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2009
|
|
|
110
|
|
|
$
|
5.19
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there were $3 million of
total unrecognized compensation costs related to RSUs. These
costs are expected to be recognized over a weighted average
period of 0.9 years. The total fair value of RSUs vested
during 2009, 2008 and 2007 was $2 million, $3 million
and $14 million, respectively.
Stock Options and Stock Appreciation Rights
Stock options and stock appreciation rights are granted with an
exercise price equal to the underlying common stocks fair
market value at the date of each grant. Stock options and stock
appreciation rights have service conditions, become exercisable
over a three-year vesting period and expire if unexercised at
the end of their term, which ranges from seven to 10 years.
Stock options and stock-settled stock appreciation rights
(SARs) are classified as equity awards as the
exercise results in the issuance of shares of US Airways
Groups common stock. Cash-settled stock appreciation
rights (CSARs) are classified as liability awards as
the exercise results in payment of cash by US Airways.
141
Stock option and SARs activity for the years ending
December 31, 2009, 2008 and 2007 is as follows (stock
options and SARs in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Stock
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
Options
|
|
|
Average
|
|
|
Contractual Term
|
|
|
Aggregate
|
|
|
|
and SARs
|
|
|
Exercise Price
|
|
|
(years)
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
1994 Incentive Equity Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
750
|
|
|
$
|
46.10
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(30
|
)
|
|
|
40.93
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(75
|
)
|
|
|
46.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
645
|
|
|
$
|
46.30
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2
|
)
|
|
|
9.21
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(244
|
)
|
|
|
55.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
399
|
|
|
$
|
40.96
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(200
|
)
|
|
|
45.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
199
|
|
|
$
|
36.57
|
|
|
|
.62
|
|
|
$
|
|
|
Vested or expected to vest at December 31, 2009
|
|
|
199
|
|
|
$
|
36.57
|
|
|
|
.62
|
|
|
$
|
|
|
Exercisable at December 31, 2009
|
|
|
199
|
|
|
$
|
36.57
|
|
|
|
.62
|
|
|
$
|
|
|
2002 Incentive Equity Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
798
|
|
|
$
|
18.33
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(36
|
)
|
|
|
14.36
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
762
|
|
|
$
|
18.52
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2
|
)
|
|
|
6.42
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(23
|
)
|
|
|
25.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
737
|
|
|
$
|
18.34
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(17
|
)
|
|
|
19.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
720
|
|
|
$
|
18.32
|
|
|
|
3.95
|
|
|
$
|
|
|
Vested or expected to vest at December 31, 2009
|
|
|
720
|
|
|
$
|
18.32
|
|
|
|
3.95
|
|
|
$
|
|
|
Exercisable at December 31, 2009
|
|
|
720
|
|
|
$
|
18.32
|
|
|
|
3.95
|
|
|
$
|
|
|
2005 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
2,495
|
|
|
$
|
31.53
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,123
|
|
|
|
42.23
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(92
|
)
|
|
|
29.74
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(93
|
)
|
|
|
35.00
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(63
|
)
|
|
|
37.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Stock
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
Options
|
|
|
Average
|
|
|
Contractual Term
|
|
|
Aggregate
|
|
|
|
and SARs
|
|
|
Exercise Price
|
|
|
(years)
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
Balance at December 31, 2007
|
|
|
3,370
|
|
|
$
|
34.96
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,959
|
|
|
|
9.11
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(5
|
)
|
|
|
8.84
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(200
|
)
|
|
|
30.18
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(218
|
)
|
|
|
32.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
4,906
|
|
|
$
|
24.93
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(119
|
)
|
|
|
20.43
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(266
|
)
|
|
|
30.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
4,521
|
|
|
$
|
24.67
|
|
|
|
7.00
|
|
|
$
|
|
|
Vested or expected to vest at December 31, 2009
|
|
|
4,429
|
|
|
$
|
24.87
|
|
|
|
6.98
|
|
|
$
|
|
|
Exercisable at December 31, 2009
|
|
|
3,184
|
|
|
$
|
28.69
|
|
|
|
6.54
|
|
|
$
|
|
|
2008 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,389
|
|
|
|
6.64
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(56
|
)
|
|
|
6.70
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
2,333
|
|
|
$
|
6.64
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,286
|
|
|
|
3.23
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(193
|
)
|
|
|
6.67
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(8
|
)
|
|
|
6.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
5,418
|
|
|
$
|
4.57
|
|
|
|
6.03
|
|
|
$
|
5.6
|
|
Vested or expected to vest at December 31, 2009
|
|
|
5,095
|
|
|
$
|
4.59
|
|
|
|
6.02
|
|
|
$
|
5.2
|
|
Exercisable at December 31, 2009
|
|
|
717
|
|
|
$
|
6.65
|
|
|
|
5.63
|
|
|
$
|
|
|
CSARs activity for the year ending December 31, 2009 is as
follows (CSARs in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Contractual Term
|
|
|
Aggregate
|
|
|
|
CSARs
|
|
|
Exercise Price
|
|
|
(years)
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
2008 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
4,645
|
|
|
|
3.10
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(232
|
)
|
|
|
3.10
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
4,413
|
|
|
$
|
3.10
|
|
|
|
6.27
|
|
|
$
|
7.7
|
|
Vested or expected to vest at December 31, 2009
|
|
|
4,110
|
|
|
$
|
3.10
|
|
|
|
6.27
|
|
|
$
|
7.2
|
|
Exercisable at December 31, 2009
|
|
|
3
|
|
|
$
|
5.23
|
|
|
|
5.87
|
|
|
$
|
|
|
The fair value of stock options and stock appreciation rights is
determined at the grant date using a Black-Scholes option
pricing model, which requires several assumptions. The risk-free
interest rate is based on the U.S. Treasury yield curve in
effect for the expected term of the award at the time of grant.
The dividend yield is assumed to be zero as US Airways Group
does not pay dividends and has no current plans to do so in the
future. The volatility is based
143
on the historical volatility of US Airways Groups common
stock over a time period equal to the expected term of the
award. The expected life of the award is based on the historical
experience of US Airways.
The per share weighted-average grant-date fair value of stock
appreciation rights granted and the weighted-average assumptions
used for the years ended December 31, 2009, 2008 and 2007
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Weighted average fair value
|
|
$
|
1.84
|
|
|
$
|
3.28
|
|
|
$
|
16.57
|
|
Risk free interest rate
|
|
|
1.3
|
%
|
|
|
2.5
|
%
|
|
|
4.5
|
%
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected life
|
|
|
3.0 years
|
|
|
|
3.0 years
|
|
|
|
3.0 years
|
|
Volatility
|
|
|
92
|
%
|
|
|
62
|
%
|
|
|
52
|
%
|
As of December 31, 2009, there was $12 million of
total unrecognized compensation costs related to stock options
and SARs. These costs are expected to be recognized over a
weighted average period of 1.1 years. There were no stock
options or SARs exercised during 2009. The total intrinsic value
of stock options and SARs exercised during the years ended
December 31, 2008 and 2007 was $0.1 million and
$4 million, respectively. Cash received from stock option
and SAR exercises during the years ended December 31, 2008
and 2007 was $0.1 million and $2 million, respectively.
As of December 31, 2009, the average fair market value of
outstanding CSARs was $3.52 per share and the related liability
was $3 million. These CSARs will continue to be remeasured
at fair value at each reporting date until all awards are
settled. As of December 31, 2009, the total unrecognized
compensation expense for CSARs was $10 million and is
expected to be recognized over a weighted average period of
1.3 years.
Agreements with the Pilot Union US Airways
Group and US Airways have a letter of agreement with the US
Airways pilot union through April 18, 2008, that
provides that US Airways pilots designated by the union
receive stock options to purchase 1.1 million shares of US
Airways Groups common stock. The first tranche of
0.5 million stock options was granted on January 31,
2006 with an exercise price of $33.65. The second tranche of
0.3 million stock options was granted on January 31,
2007 with an exercise price of $56.90. The third and final
tranche of 0.3 million stock options was granted on
January 31, 2008 with an exercise price of $12.50. The
stock options granted to pilots do not reduce the shares
available for grant under any equity incentive plan. Any of
these pilot stock options that are forfeited or that expire
without being exercised will not become available for grant
under any of US Airways plans.
The per share fair value of the pilot stock options and
assumptions used for the January 31, 2008 and 2007 grants
were as follows:
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
January 31,
|
|
|
2008
|
|
2007
|
|
Per share fair value
|
|
$
|
3.02
|
|
|
$
|
18.02
|
|
Risk free interest rate
|
|
|
2.2
|
%
|
|
|
4.9
|
%
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
Expected life
|
|
|
2.0 years
|
|
|
|
2.0 years
|
|
Volatility
|
|
|
55
|
%
|
|
|
53
|
%
|
As of December 31, 2009, there were no unrecognized
compensation costs related to stock options granted to pilots as
the stock options were fully vested on the grant date. As of
December 31, 2009, there were 0.8 million pilot stock
options outstanding at a weighted average exercise price of
$34.40 and a weighted average remaining contractual term of
7.28 years. No pilot stock options were exercised in 2009
or 2008. There were 25,029 pilot stock options exercised during
2007 pursuant to this agreement. The total intrinsic value of
pilot stock options exercised during 2007 was $1 million.
Cash received from pilot stock options exercised during 2007
totaled $1 million.
144
|
|
14.
|
Valuation
and Qualifying Accounts (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
at End
|
|
Description
|
|
of Period
|
|
|
Additions
|
|
|
Deductions
|
|
|
of Period
|
|
|
Allowance for doubtful receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
4
|
|
|
$
|
10
|
|
|
$
|
8
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
$
|
8
|
|
|
$
|
9
|
|
|
$
|
13
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for inventory obsolescence:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
48
|
|
|
$
|
12
|
|
|
$
|
2
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
38
|
|
|
$
|
18
|
|
|
$
|
8
|
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
$
|
29
|
|
|
$
|
10
|
|
|
$
|
1
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance on deferred tax asset, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
643
|
|
|
$
|
29
|
|
|
$
|
19
|
|
|
$
|
653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
83
|
|
|
$
|
560
|
|
|
$
|
|
|
|
$
|
643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
$
|
263
|
|
|
$
|
|
|
|
$
|
180
|
|
|
$
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On January 15, 2009, US Airways flight 1549 was involved in
an accident in New York that resulted in the aircraft ditching
in the Hudson River. The Airbus A320 aircraft was en route to
Charlotte from LaGuardia with 150 passengers and a crew of
five onboard. All aboard survived and there were no serious
injuries. US Airways had insurance coverage for both the
aircraft (which was a total loss) as well as costs resulting
from the accident, and there were no applicable deductibles.
The aircraft involved in the flight 1549 accident was leased by
US Airways. In the first quarter of 2009, US Airways exercised
its aircraft substitution right under the lease agreement and
transferred title of an owned Airbus A320 to the lessor in
substitution for the Airbus A320 aircraft that was involved in
the accident. This transferred aircraft will continue to be
leased to US Airways under the same terms and conditions of the
lease agreement. In connection with this transaction, US Airways
extinguished $22 million of debt associated with the
previously owned aircraft that was transferred to the lessor.
In August 2009, US Airways Group and US Airways entered into a
mutual asset purchase and sale agreement with Delta Air Lines,
Inc. (Delta). Pursuant to the agreement, US Airways
would transfer to Delta certain assets related to flight
operations at LaGuardia Airport in New York, including 125 pairs
of slots currently used to provide US Airways Express service at
LaGuardia. Delta would transfer to US Airways certain assets
related to flight operations at Washington National Airport,
including 42 pairs of slots, and the authority to serve Sao
Paulo, Brazil and Tokyo, Japan. One slot equals one take-off or
landing, and each pair of slots equals one roundtrip flight. The
agreement is structured as two simultaneous asset sales and is
expected to be cash neutral to US Airways. The closing of the
transactions under the agreement is subject to certain closing
conditions, including approvals from a number of government
agencies, including the U.S. Department of Justice, the
U.S. Department of Transportation (DOT), the
FAA and The Port Authority of New York and New Jersey.
On February 9, 2010, the DOT issued a proposed order
conditionally approving the transaction. The proposed order,
which is subject to a 30-day comment period, would require the
airlines to divest 20 of the 125 slot pairs involved at
LaGuardia and 14 of the 42 slot pairs at Washington National.
Delta and US Airways are currently reviewing the DOTs
proposed order to determine next steps. However, US Airways
expects that if this order is implemented as proposed the
transaction will not go forward.
145
US Airways sold 10 of its Embraer 190 aircraft to Republic
during the fourth quarter of 2009. US Airways is currently
leasing back four of the 10 aircraft from Republic for periods
ranging from one to five months. Debt outstanding on the 10
Embraer aircraft was $216 million prior to the sale. In
connection with this transaction, Republic agreed to assume the
full amount of this debt and US Airways was released from its
obligations under the assumed debt. Additionally, at the time of
sale, US Airways had $35 million outstanding under a loan
from Republic (the Republic loan). The Republic loan
was scheduled to be repaid starting in January 2010 and fully
repaid in October 2011. The full amount outstanding under the
Republic loan was applied to the purchase price of the
10 aircraft. US Airways incurred non-cash charges of
$49 million from the loss on sale of the 10 aircraft and
write off of related debt discount and issuance costs in the
fourth quarter of 2009.
|
|
18.
|
Selected
Quarterly Financial Information (unaudited)
|
Summarized quarterly financial information for 2009 and 2008 is
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
|
Operating revenues
|
|
$
|
2,491
|
|
|
$
|
2,696
|
|
|
$
|
2,758
|
|
|
$
|
2,664
|
|
Operating expenses
|
|
|
2,517
|
|
|
|
2,575
|
|
|
|
2,757
|
|
|
|
2,638
|
|
Operating income (loss)
|
|
|
(26
|
)
|
|
|
121
|
|
|
|
1
|
|
|
|
26
|
|
Nonoperating expenses, net
|
|
|
(69
|
)
|
|
|
(52
|
)
|
|
|
(69
|
)
|
|
|
(110
|
)
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38
|
)
|
Net income (loss)
|
|
|
(95
|
)
|
|
|
69
|
|
|
|
(68
|
)
|
|
|
(46
|
)
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
2,867
|
|
|
$
|
3,287
|
|
|
$
|
3,293
|
|
|
$
|
2,797
|
|
Operating expenses
|
|
|
3,060
|
|
|
|
3,825
|
|
|
|
3,981
|
|
|
|
3,151
|
|
Operating loss
|
|
|
(193
|
)
|
|
|
(538
|
)
|
|
|
(688
|
)
|
|
|
(354
|
)
|
Nonoperating expenses, net
|
|
|
(31
|
)
|
|
|
(21
|
)
|
|
|
(164
|
)
|
|
|
(159
|
)
|
Income tax provision (benefit)
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
(3
|
)
|
Net loss
|
|
|
(224
|
)
|
|
|
(559
|
)
|
|
|
(855
|
)
|
|
|
(510
|
)
|
US Airways 2009 and 2008 fourth quarter financial results
were impacted by recognition of the following items:
Fourth quarter 2009 operating expenses included $33 million
of net special charges consisting of $16 million in
non-cash impairment charges due to the decline in fair value of
certain indefinite lived intangible assets associated with
international routes, $5 million in aircraft costs as a
result of US Airways previously announced capacity
reductions, $6 million in severance charges and
$6 million in costs related to US Airways liquidity
improvement program. Operating expenses also included
$3 million in non-cash charges related to the decline in
fair value of certain Express spare parts. Nonoperating
expenses, net included $49 million in non-cash charges
associated with the sale of 10 Embraer 190 aircraft and write
off of related debt discount and issuance costs. Income tax
benefit includes $21 million of a non-cash income tax
benefit related to gains recorded within other comprehensive
income, a $14 million tax benefit related to a legislation
change allowing US Airways to carry back 100% of 2008 AMT
net operating losses, resulting in the recovery of AMT amounts
paid in prior years and a $3 million tax benefit related to
the reversal of the deferred tax liability associated with the
indefinite lived intangible assets that were impaired during
2009.
Fourth quarter 2008 operating expenses included
$234 million of net unrealized losses on fuel hedging
instruments and $8 million of net special charges
consisting of $7 million in aircraft costs and
$1 million in severance charges, both as a result of US
Airways capacity reductions. Non-operating expenses, net
included $74 million in
other-than-temporary
non-cash impairment charges for US Airways investments in
auction rate securities as well as $4 million in write offs
of debt issuance costs resulting from certain loan prepayments.
146
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|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Section 404 of the Sarbanes-Oxley Act of 2002 requires
management to include in this Annual Report on
Form 10-K
a report on managements assessment of the effectiveness of
US Airways Groups and US Airways internal control
over financial reporting, as well as an attestation report from
US Airways Groups and US Airways independent
registered public accounting firm on the effectiveness of US
Airways Groups and US Airways internal control over
financial reporting. Managements annual report on internal
control over financial reporting and the related attestation
report from US Airways Groups and US Airways
independent registered public accounting firm are included
herein.
Disclosure
Controls and Procedures
An evaluation was performed under the supervision and with the
participation of US Airways Groups and US Airways
management, including the Chief Executive Officer (the
CEO) and Chief Financial Officer (the
CFO), of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined
in the rules promulgated under the Exchange Act) as of
December 31, 2009. Based on that evaluation, our
management, including the CEO and CFO, concluded that our
disclosure controls and procedures were effective as of
December 31, 2009.
Changes
in Internal Control over Financial Reporting
There has been no change to US Airways Groups or US
Airways internal control over financial reporting that
occurred during the quarter ended December 31, 2009 that
has materially affected, or is reasonably likely to materially
affect, US Airways Groups or US Airways internal
control over financial reporting.
Limitation
on the Effectiveness of Controls
We believe that a controls system, no matter how well designed
and operated, cannot provide absolute assurance that the
objectives of the controls system are met and no evaluation of
controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been
detected. Our disclosure controls and procedures are designed to
provide reasonable assurance of achieving their objectives, and
the CEO and CFO believe that our disclosure controls and
procedures were effective at the reasonable
assurance level as of December 31, 2009.
147
Managements
Annual Report on Internal Control over Financial
Reporting
Management of US Airways Group, Inc. is responsible for
establishing and maintaining adequate internal control over
financial reporting as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Securities Exchange Act of 1934, as amended. US
Airways Groups internal control over financial reporting
is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. US Airways
Groups internal control over financial reporting includes
those policies and procedures that:
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|
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|
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of US Airways Group;
|
|
|
|
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of US Airways Group are being
made only in accordance with authorizations of management and
directors of US Airways Group; and
|
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|
provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of US
Airways Groups assets that could have a material effect on
the financial statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of US Airways Groups
internal control over financial reporting as of
December 31, 2009. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal
Control-Integrated Framework.
Based on our assessment and those criteria, management concludes
that US Airways Group maintained effective internal control over
financial reporting as of December 31, 2009.
US Airways Groups independent registered public accounting
firm has issued an audit report on the effectiveness of US
Airways Groups internal control over financial reporting.
That report has been included herein.
148
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
US Airways Group, Inc.:
We have audited US Airways Group, Inc. and subsidiaries
(the Company) internal control over financial
reporting as of December 31, 2009 based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in the accompanying
managements annual report on internal control over
financial reporting. Our responsibility is to express an opinion
on the effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control over
financial reporting based on the assessed risk. Our audit also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
U.S. generally accepted accounting principles. A
companys internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with
U.S. generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use,
or disposition of the companys assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, US Airways Group, Inc. and subsidiaries
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2009, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of US Airways Group and subsidiaries
as of December 31, 2009 and 2008, and the related
consolidated statements of operations, stockholders equity
(deficit), and cash flows for each of the years in the
three-year period ended December 31, 2009, and our report
dated February 16, 2010 expressed an unqualified opinion on
those consolidated financial statements.
Phoenix, Arizona
February 16, 2010
149
Managements
Annual Report on Internal Control over Financial
Reporting
Management of US Airways, Inc. is responsible for establishing
and maintaining adequate internal control over financial
reporting as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Securities Exchange Act of 1934, as amended. US
Airways internal control over financial reporting is
designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. US Airways
internal control over financial reporting includes those
policies and procedures that:
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|
|
|
|
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of US Airways;
|
|
|
|
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of US Airways are being made only
in accordance with authorizations of management and directors of
US Airways; and
|
|
|
|
provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of US
Airways assets that could have a material effect on the
financial statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of US Airways
internal control over financial reporting as of
December 31, 2009. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal
Control-Integrated Framework.
Based on our assessment and those criteria, management concludes
that US Airways maintained effective internal control over
financial reporting as of December 31, 2009.
US Airways independent registered public accounting firm
has issued an audit report on the effectiveness of US
Airways internal control over financial reporting. That
report has been included herein.
150
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholder
US Airways, Inc.:
We have audited US Airways, Inc. and subsidiaries
(US Airways) internal control over financial
reporting as of December 31, 2009 based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). US
Airways management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in the accompanying
managements annual report on internal control over
financial reporting. Our responsibility is to express an opinion
on the effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control over
financial reporting based on the assessed risk. Our audit also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
U.S. generally accepted accounting principles. A
companys internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with
U.S. generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use,
or disposition of the companys assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, US Airways, Inc. and subsidiaries maintained, in
all material respects, effective internal control over financial
reporting as of December 31, 2009, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of US Airways, Inc. and subsidiaries
as of December 31, 2009 and 2008, and the related
consolidated statements of operations, stockholders equity
(deficit) and cash flows for each of the years in the three-year
period ended December 31, 2009, and our report dated
February 16, 2010 expressed an unqualified opinion on those
consolidated financial statements.
Phoenix, Arizona
February 16, 2010
151
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Item 9B.
|
Other
Information
|
None.
152
PART III
The information required by Part III of this Annual Report
on
Form 10-K,
pursuant to General Instruction G(3) of
Form 10-K,
will, except as otherwise set forth below in Item 10, be
set forth in US Airways Groups definitive Proxy Statement
to be filed pursuant to Regulation 14A relating to US
Airways Groups Annual Meeting of Stockholders on
June 10, 2010 and is incorporated herein by reference. US
Airways Group will, within 120 days of the end of its
fiscal year, file with the SEC a definitive proxy statement
pursuant to Regulation 14A.
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Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
Except as stated below, information regarding US Airways
Groups and US Airways directors and executive
officers required by this Item will be set forth under the
captions Proposal 1 Election of
Directors, Executive Officers,
Section 16(a) Beneficial Ownership Reporting
Compliance and Information About Our Board of
Directors and Corporate Governance in US Airways
Groups definitive Proxy Statement and is incorporated by
reference into this Annual Report on
Form 10-K.
US Airways Group has adopted a Code of Business Conduct and
Ethics (Code) within the meaning of Item 406(b)
of
Regulation S-K.
The Code applies to the officers, directors and employees of US
Airways Group and its subsidiaries. The Code, US Airways
Groups Corporate Governance Guidelines and the charters of
our Board committees are publicly available on US Airways
Groups website at www.usairways.com. Printed copies
of the Code, the Corporate Governance Guidelines and the
charters of the Board committees are available at no charge to
any stockholder upon request to our Corporate Secretary at US
Airways, 111 West Rio Salado Parkway, Tempe, Arizona 85281.
If US Airways Group makes substantive amendments to the Code or
grants any waiver, including any implicit waiver, to its
principal executive officer, principal financial officer,
principal accounting officer or controller, and persons
performing similar functions, US Airways Group will disclose the
nature of such amendment or waiver on its website or in a
Current Report on
Form 8-K
in accordance with applicable rules and regulations. The
information contained on or connected to US Airways Groups
website is not incorporated by reference into this Annual Report
on
Form 10-K
and should not be considered part of this or any other report
that US Airways Group files or furnishes with the SEC.
|
|
Item 11.
|
Executive
Compensation
|
Information required by this Item will be set forth in US
Airways Groups definitive Proxy Statement under the
captions Information About Our Board of Directors and
Corporate Governance, Executive Compensation
and Director Compensation in the definitive Proxy
Statement and is incorporated by reference into this Annual
Report on
Form 10-K.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
Information required by this Item will be set forth in US
Airways Groups definitive Proxy Statement under the
captions Security Ownership of Certain Beneficial Owners
and Management and Equity Compensation Plan
Information in the Proxy Statement and is incorporated by
reference into this Annual Report on
Form 10-K.
|
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Item 13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
Information required by this Item will be set forth in US
Airways Groups definitive Proxy Statement under the
captions Certain Relationships and Related Party
Transactions and Information About Our Board of
Directors and Corporate Governance in the Proxy Statement
and is incorporated by reference into this Annual Report on
Form 10-K.
|
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Item 14.
|
Principal
Accountant Fees and Services
|
Information required by this Item will be set forth in US
Airways Groups definitive Proxy Statement under the
caption Proposal 2 Ratification of
Appointment of Independent Registered Public Accounting
Firm in the Proxy Statement and is incorporated by
reference into this Annual Report on
Form 10-K.
153
PART IV
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Item 15.
|
Exhibits
and Financial Statement Schedules
|
Consolidated
Financial Statements
The following consolidated financial statements of US Airways
Group, Inc. are included in Part II, Item 8A of this
report:
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|
Consolidated Statements of Operations for the years ended
December 31, 2009, 2008 and 2007
|
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|
Consolidated Balance Sheets as of December 31, 2009 and 2008
|
|
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|
Consolidated Statements of Cash Flows for the years ended
December 31, 2009, 2008 and 2007
|
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|
Consolidated Statements of Stockholders Equity (Deficit)
for the years ended December 31, 2009, 2008 and 2007
|
|
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|
Notes to Consolidated Financial Statements
|
The following consolidated financial statements of US Airways,
Inc. are included in Part II, Item 8B of this report:
|
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|
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|
Consolidated Statements of Operations for the years ended
December 31, 2009, 2008 and 2007
|
|
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|
Consolidated Balance Sheets as of December 31, 2009 and 2008
|
|
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|
Consolidated Statements of Cash Flows for the years ended
December 31, 2009, 2008 and 2007
|
|
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|
Consolidated Statements of Stockholders Equity (Deficit)
for the years ended December 31, 2009, 2008 and 2007
|
|
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|
Notes to Consolidated Financial Statements
|
Consolidated
Financial Statement Schedules
All financial statement schedules have been omitted because they
are not applicable or not required, or because the required
information is either incorporated herein by reference or
included in the consolidated financial statements or notes
thereto included in this report.
Exhibits
Exhibits required to be filed by Item 601 of
Regulation S-K.
Where the amount of securities authorized to be issued under any
of the Companys long-term debt agreements does not exceed
10 percent of the Companys assets, pursuant to
paragraph (b)(4)(iii) of Item 601 of
Regulation S-K,
in lieu of filing such as an exhibit, the Company hereby agrees
to furnish to the Commission upon request a copy of any
agreement with respect to such long-term debt.
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Exhibit
|
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Number
|
|
Description
|
|
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2
|
.1
|
|
Agreement and Plan of Merger, dated May 19, 2005, by and
among US Airways Group and America West Holdings Corporation
(incorporated by reference to Exhibit 2.1 to US Airways
Groups Registration Statement on
Form S-4
filed on June 28, 2005) (Pursuant to item 601(b)(2) of
Regulation S-K
promulgated by the SEC, the exhibits and schedules to the
Agreement and Plan of Merger have been omitted. Such exhibits
and schedules are described in the Agreement and Plan of Merger.
US Airways Group hereby agrees to furnish to the SEC, upon its
request, any or all of such omitted exhibits or schedules)
(Registration
No. 333-126162).
|
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2
|
.2
|
|
Letter Agreement, dated July 7, 2005 by and among US
Airways Group, America West Holdings Corporation, Barbell
Acquisition Corp., ACE Aviation America West Holdings, Inc.,
Eastshore Aviation, LLC, Par Investment Partners, L.P.,
Peninsula Investment Partners, L.P. and Wellington Management
Company, LLP (incorporated by reference to Exhibit 2.2 to
Amendment No. 1 to US Airways Groups Registration
Statement on
Form S-4
filed on August 8, 2005) (Registration
No. 333-126162).
|
154
|
|
|
|
|
|
2
|
.3
|
|
Joint Plan of Reorganization of US Airways, Inc. and Its
Affiliated Debtors and
Debtors-in-Possession
(incorporated by reference to Exhibit 2.1 to US Airways
Groups Current Report on
Form 8-K
filed on September 22, 2005).
|
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2
|
.4
|
|
Findings of Fact, Conclusions of Law and Order Under 11 USC
Sections 1129(a) and(b) of Fed. R. Bankr. P. 3020
Confirming the Joint Plan of Reorganization of US Airways, Inc.
and Its Affiliated Debtors and
Debtors-in-Possession
(incorporated by reference to Exhibit 2.2 to US Airways
Groups Current Report on
Form 8-K
filed on September 22, 2005).
|
|
2
|
.5
|
|
Mutual Asset Purchase and Sale Agreement dated as of
August 11, 2009 among Delta Air Lines, Inc., US Airways,
Inc. and US Airways Group, Inc. (incorporated by reference to
Exhibit 2.1 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2009).*
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of US Airways
Group, effective as of September 27, 2005 (incorporated by
reference to Exhibit 3.1 to US Airways Groups Current
Report on
Form 8-K
filed on October 3, 2005).
|
|
3
|
.2
|
|
Amended and Restated Bylaws of US Airways Group, effective as of
September 27, 2005 (incorporated by reference to
Exhibit 3.1 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007).
|
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3
|
.3
|
|
Amended and Restated Certificate of Incorporation of US Airways,
Inc., effective as of March 31, 2003 (incorporated by
reference to Exhibit 4.4 to US Airways Groups
Automatic Shelf Registration Statement on
Form S-3
filed December 3, 2009).
|
|
3
|
.4
|
|
Amended and Restated Bylaws of US Airways, Inc., effective as of
March 31, 2003 (incorporated by reference to
Exhibit 4.5 to US Airways Groups Automatic Shelf
Registration Statement on
Form S-3
filed December 3, 2009).
|
|
3
|
.5
|
|
Certificate of Amendment to Amended and Restated Certificate of
Incorporation of US Airways Group, Inc., effective as of
July 24, 2009 (incorporated by reference to
Exhibit 3.1 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2009).
|
|
4
|
.1
|
|
Indenture, dated as of September 30, 2005, between US
Airways Group, the guarantors listed therein and U.S. Bank
National Association, as trustee (incorporated by reference to
Exhibit 4.1 to US Airways Groups Current Report on
Form 8-K
filed on October 3, 2005).
|
|
4
|
.2
|
|
Registration Rights Agreement, dated as of September 30,
2005, between US Airways Group, AWA and US Airways, as
guarantors, and the initial purchaser named therein
(incorporated by reference to Exhibit 4.2 to US Airways
Groups Current Report on
Form 8-K
filed on October 3, 2005).
|
|
4
|
.3
|
|
Indenture, dated May 13, 2009, between US Airways Group,
Inc. and The Bank of New York Mellon Trust Company, N.A.,
as trustee (incorporated by reference to Exhibit 4.1 to US
Airways Groups Current Report on
Form 8-K
filed May 14, 2009).
|
|
4
|
.4
|
|
First Supplemental Indenture, dated May 13, 2009, between
US Airways Group, Inc. and The Bank of New York Mellon
Trust Company, N.A., as trustee., including a form of
7.25% Convertible Senior Note due 2014 (incorporated by
reference to Exhibit 4.2 to US Airways Groups Current
Report on
Form 8-K
filed May 14, 2009).
|
|
4
|
.5
|
|
Specimen of Common Stock Certificate (incorporated by reference
to Exhibit 4.6 to US Airways Groups Automatic Shelf
Registration Statement on
Form S-3
filed December 3, 2009).
|
|
4
|
.6
|
|
Form of US Airways Group, Inc. Indenture for Debt Securities
(incorporated by reference to Exhibit 4.7 to US Airways
Groups Automatic Shelf Registration Statement on
Form S-3
filed December 3, 2009).
|
|
4
|
.7
|
|
Form of US Airways, Inc. Indenture for Debt Securities
(incorporated by reference to Exhibit 4.8 to US Airways
Groups Automatic Shelf Registration Statement on
Form S-3
filed December 3, 2009).
|
|
10
|
.1
|
|
Master Memorandum of Understanding, dated as of
November 24, 2004, among US Airways Group, US Airways, and
General Electric Capital Corporation acting through its agent GE
Capital Aviation Services, Inc. and General Electric Company, GE
Transportation Component (incorporated by reference to
Exhibit 10.9 to US Airways Groups Annual Report on
Form 10-K/A
for the year ended December 31, 2004).*
|
155
|
|
|
|
|
|
10
|
.2
|
|
Master Merger Memorandum of Understanding, dated as of
June 13, 2005, among US Airways, US Airways Group, America
West Holdings, Inc., AWA, General Electric Capital Corporation,
acting through its agent GE Commercial Aviation Services LLC, GE
Engine Services, Inc., GE Engine Services Dallas, LP
and General Electric Company, GE Transportation Component
(incorporated by reference to Exhibit 10.9 to US Airways
Groups Quarterly Report on
Form 10-Q/A
for the quarter ended June 30, 2005).*
|
|
10
|
.3
|
|
Amended and Restated Airbus A320 Agreement dated as of
October 2, 2007 between US Airways, Inc. and Airbus S.A.S.
(incorporated by reference to Exhibit 10.3 to US Airways
Groups Annual Report on
Form 10-K
for the year ended December 31, 2007).*
|
|
10
|
.4
|
|
Amendment No. 1 dated as of January 11, 2008 to the
Amended and Restated Airbus A320 Family Aircraft Purchase
Agreement dated as of October 2, 2007 between US Airways,
Inc. and Airbus S.A.S. (incorporated by reference to
Exhibit 10.1 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008).*
|
|
10
|
.5
|
|
Amendment No. 2 dated as of October 20, 2008 to the
Amended and Restated Airbus A320 Family Aircraft Purchase
Agreement dated as of October 2, 2007 between US Airways,
Inc. and Airbus S.A.S., including Amended and Restated Letter
Agreement No. 3, Amended and Restated Letter Agreement
No. 5, and Amended and Restated Letter Agreement No. 9
to the Purchase Agreement (incorporated by reference to
Exhibit 10.5 to US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2008).*
|
|
10
|
.6
|
|
A330 Purchase Agreement dated as of October 2, 2007 between
US Airways, Inc. and Airbus S.A.S. (incorporated by reference to
Exhibit 10.4 to US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2007).*
|
|
10
|
.7
|
|
Amendment No. 1 dated as of November 15, 2007 to A330
Purchase Agreement dated as of October 2, 2007 between US
Airways, Inc. and Airbus S.A.S. (incorporated by reference to
Exhibit 10.5 to US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2007).*
|
|
10
|
.8
|
|
Amendment No. 2 dated as of October 20, 2008 to A330
Purchase Agreement dated as of October 2, 2007 between US
Airways, Inc. and Airbus S.A.S., including Amended and Restated
Letter Agreement No. 5 and Amended and Restated Letter
Agreement No. 9 to the Purchase Agreement (incorporated by
reference to Exhibit 10.8 to US Airways Groups Annual
Report on
Form 10-K
for the year ended December 31, 2008).*
|
|
10
|
.9
|
|
A330/A340 Purchase Agreement dated as of November 24, 1998
between US Airways Group and AVSA, S.A.R.L. (incorporated by
reference to Exhibit 10.5 to US Airways Groups Annual
Report on
Form 10-K
for the year ended December 31, 1998).*
|
|
10
|
.10
|
|
Amendment No. 1 dated as of March 23, 2000 to
A330/A340 Purchase Agreement dated November 24, 1998
between US Airways Group and AVSA, S.A.R.L. (incorporated by
reference to Exhibit 10.2 to US Airways Groups
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2000).*
|
|
10
|
.11
|
|
Amendment No. 2 dated as of June 29, 2000 to A330/A340
Purchase Agreement dated November 24, 1998 between US
Airways Group and AVSA, S.A.R.L. (incorporated by reference to
Exhibit 10.2 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2000).*
|
|
10
|
.12
|
|
Amendment No. 3 dated as of November 27, 2000 to
A330/A340 Purchase Agreement dated November 24, 1998
between US Airways Group and AVSA, S.A.R.L. (incorporated by
reference to Exhibit 10.14 to US Airways Groups
Annual Report on
Form 10-K
for the year ended December 31, 2000).*
|
|
10
|
.13
|
|
Amendment No. 4 dated as of September 20, 2001 to
A330/A340 Purchase Agreement dated November 24, 1998
between US Airways Group and AVSA, S.A.R.L. (incorporated by
reference to Exhibit 10.16 to US Airways Groups
Annual Report on
Form 10-K
for the year ended December 31, 2001).*
|
|
10
|
.14
|
|
Amendment No. 5 dated as of July 17, 2002 to A330/A340
Purchase Agreement dated November 24, 1998 between US
Airways Group and AVSA, S.A.R.L. (incorporated by reference to
Exhibit 10.2 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2002).*
|
|
10
|
.15
|
|
Amendment No. 6 dated as of March 29, 2003 to
A330/A340 Purchase Agreement dated November 24, 1998
between US Airways Group and AVSA, S.A.R.L. (incorporated by
reference to Exhibit 10.2 to US Airways Groups
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2003).*
|
156
|
|
|
|
|
|
10
|
.16
|
|
Amendment No. 7 dated August 30, 2004 to the Airbus
A330/A340 Purchase Agreement dated November 24, 1998
between US Airways Group and AVSA, S.A.R.L. (incorporated by
reference to Exhibit 10.3 to US Airways Groups
Quarterly Report on
Form 10-Q/A
for the quarter ended September 30, 2004).*
|
|
10
|
.17
|
|
Amendment No. 8 dated December 22, 2004 to the Airbus
A330/A340 Purchase Agreement dated as of November 24, 1998
between US Airways Group and AVSA, S.A.R.L. (incorporated by
reference to Exhibit 10.6 to US Airways Groups
Quarterly Report on
Form 10-Q/A
for the quarter ended March 31, 2005).*
|
|
10
|
.18
|
|
Amendment No. 9 dated January 2005 to the Airbus A330/A340
Purchase Agreement dated November 24, 1998 between US
Airways Group and AVSA, S.A.R.L. (incorporated by reference to
Exhibit 10.7 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2005).*
|
|
10
|
.19
|
|
Letter Agreement dated December 17, 2004 between US Airways
Group and US Airways and Airbus North America Sales Inc.
(incorporated by reference to Exhibit 99.1 to US Airways
Groups Current Report on
Form 8-K
filed on February 9, 2005).
|
|
10
|
.20
|
|
Amendment No. 10 dated September 2005 to the Airbus
A330/A340 Purchase Agreement dated November 24, 1998
between US Airways Group and AVSA, S.A.R.L. (incorporated by
reference to Exhibit 10.7 to US Airways Groups
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2005).*
|
|
10
|
.21
|
|
Amendment No. 11 dated as of October 2, 2007 to the
Airbus A330/A340 Purchase Agreement dated November 24, 1998
between US Airways Group and AVSA, S.A.R.L. (incorporated by
reference to Exhibit 10.18 to US Airways Groups
Annual Report on
Form 10-K
for the year ended December 31, 2007).*
|
|
10
|
.22
|
|
Amended and Restated Airbus A350 XWB Purchase Agreement, dated
as of October 2, 2007, among AVSA, S.A.R.L. and US Airways,
Inc., AWA and US Airways Group (incorporated by reference to
Exhibit 10.19 to US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2007).*
|
|
10
|
.23
|
|
Amendment No. 1 dated as of October 20, 2008 to the
Amended and Restated Airbus A350 XWB Purchase Agreement, dated
as of October 2, 2007, between US Airways, Inc. and Airbus
S.A.S., including Amended and Restated Letter Agreement
No. 3, Amended and Restated Letter Agreement No. 5,
and Amended and Restated Letter Agreement No. 9 to the
Purchase Agreement (incorporated by reference to
Exhibit 10.23 to US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2008).*
|
|
10
|
.24
|
|
Amended and Restated Embraer Aircraft Purchase Agreement dated
as of June 13, 2006 between US Airways Group and
Embraer Empresa Brasileira de Aeronautica S.A.
(incorporated by reference to Exhibit 10.3 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2006).*
|
|
10
|
.25
|
|
Amendment No. 1 dated as of June 1, 2007 to Amended
and Restated Embraer Aircraft Purchase Agreement dated
June 13, 2006 between US Airways Group and
Embraer Empresa Brasileira de Aeronautica S.A.
(incorporated by reference to Exhibit 10.1 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2007).*
|
|
10
|
.26
|
|
Amendment No. 2 dated as of June 6, 2007 to Amended
and Restated Embraer Aircraft Purchase Agreement dated
June 13, 2006 between US Airways Group and
Embraer Empresa Brasileira de Aeronautica S.A.
(incorporated by reference to Exhibit 10.2 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2007).*
|
|
10
|
.27
|
|
Amendment No. 3 dated as of August 15, 2007 to Amended
and Restated Embraer Aircraft Purchase Agreement dated as of
June 13, 2006 between US Airways Group and
Embraer Empresa Brasileira de Aeronautica S.A.
(incorporated by reference to Exhibit 10.2 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007).*
|
|
10
|
.28
|
|
Amendment No. 4 dated as of March 14, 2008 to Amended
and Restated Embraer Aircraft Purchase Agreement dated as of
June 13, 2006 between US Airways Group and
Embraer Empresa Brasileira de Aeronautica S.A.
(incorporated by reference to Exhibit 10.2 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008).*
|
157
|
|
|
|
|
|
10
|
.29
|
|
Amendment No. 5 dated as of June 30, 2008 to Amended
and Restated Embraer Aircraft Purchase Agreement dated as of
June 13, 2006 between US Airways Group and
Embraer Empresa Brasileira de Aeronautica S.A.
(incorporated by reference to Exhibit 10.3 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2008).*
|
|
10
|
.30
|
|
Amendment No. 6 dated as of October 22, 2008 to
Amended and Restated Embraer Aircraft Purchase Agreement dated
as of June 13, 2006 between US Airways Group and
Embraer Empresa Brasileira de Aeronautica S.A.
(incorporated by reference to Exhibit 10.30 to US Airways
Groups Annual Report on Form 10-K for the year ended
December 31, 2008).*
|
|
10
|
.31
|
|
Amendment No. 1 dated as of August 15, 2007 to Amended
and Restated Letter Agreement DCT-022/33 dated as of
June 13, 2006 between US Airways Group and
Embraer Empresa Brasileira de Aeronautica S.A.
(incorporated by reference to Exhibit 10.3 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007).*
|
|
10
|
.32
|
|
Amendment No. 2 dated as of March 14, 2008 to Amended
and Restated Letter Agreement DCT-022/33 dated as of
June 13, 2006 between US Airways Group and
Embraer Empresa Brasileira de Aeronautica S.A.
(incorporated by reference to Exhibit 10.3 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008).*
|
|
10
|
.33
|
|
Bombardier CRJ Aircraft Master Purchase Agreement dated as of
May 9, 2003 between US Airways Group and Bombardier, Inc.
(incorporated by reference to Exhibit 10.2 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003).*
|
|
10
|
.34
|
|
Contract Change Order 1 dated January 27, 2004 to
Bombardier CRJ Aircraft Master Purchase Agreement dated as of
May 9, 2003 between US Airways Group and Bombardier, Inc.
(incorporated by reference to Exhibit 10.6 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004).*
|
|
10
|
.35
|
|
Contract Change Order 2 dated February 9, 2004 to
Bombardier CRJ Aircraft Master Purchase Agreement dated as of
May 9, 2003 between US Airways Group and Bombardier, Inc.
(incorporated by reference to Exhibit 10.7 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004).*
|
|
10
|
.36
|
|
Contract Change Order 3 dated February 26, 2004 to
Bombardier CRJ Aircraft Master Purchase Agreement dated as of
May 9, 2003 between US Airways Group and Bombardier, Inc.
(incorporated by reference to Exhibit 10.8 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004).*
|
|
10
|
.37
|
|
Global Settlement Letter, dated November 10, 2006, among US
Airways Group and Bombardier Inc. (incorporated by reference to
Exhibit 10.46 to US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2006).*
|
|
10
|
.38
|
|
Letter Agreement dated September 16, 2005 by and among US
Airways Group, America West Holdings Corporation, Barbell
Acquisition Corp., ACE Aviation America West Holdings, Inc.,
Eastshore Aviation, LLC, Par Investment Partners, L.P.,
Peninsula Investment Partners, L.P. and Wellington Management
Company, LLP (incorporated by reference to Exhibit 10.11 to
US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2005).
|
|
10
|
.39
|
|
Merchant Services Bankcard Agreement, dated as of April 16,
2003, between AWA, The Leisure Company, JPMorgan Chase Bank, and
Chase Merchant Services L.L.C. (incorporated by reference to
Exhibit 10.113 to Amendment No. 2 to the Registration
Statement on
Form S-4
filed by US Airways Group on August 11, 2005) (Registration
No. 333-126162).*
|
|
10
|
.40
|
|
First Amendment to Merchant Services Bankcard Agreement, dated
as of August 8, 2005, among AWA, JPMorgan Chase Bank, N.A.,
and Chase Merchant Services, L.L.C. (incorporated by reference
to Exhibit 10.111 to Amendment No. 2 to the
Registration Statement on
Form S-4
filed by US Airways Group on August 11, 2005) (Registration
No. 333-126162).*
|
|
10
|
.41
|
|
Second Amendment to Merchant Services Bankcard Agreement, dated
as of April 11, 2008, between US Airways Group, US Airways,
Chase Alliance Partners, LLC, as successor to Chase Merchant
Services, LLC, and JPMorgan Chase Bank, N.A. (incorporated by
reference to Exhibit 10.2 to US Airways Groups Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2008).*
|
158
|
|
|
|
|
|
10
|
.42
|
|
Loan Agreement [Spare Parts], dated as of October 20, 2008,
among US Airways, Inc., GECC, as administrative agent,
collateral agent and original lender, and the lenders from time
to time party thereto (incorporated by reference to
Exhibit 10.49 to US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2008).*
|
|
10
|
.43
|
|
Amendment No. 1 to Loan Agreement [Spare Parts], dated as
of December 5, 2008, among US Airways, Inc., GECC, as
administrative agent, collateral agent and original lender, and
the lenders from time to time party thereto (incorporated by
reference to Exhibit 10.50 to US Airways Groups
Annual Report on
Form 10-K
for the year ended December 31, 2008).*
|
|
10
|
.44
|
|
Loan Agreement, dated March 23, 2007, among US Airways
Group as Borrower, certain subsidiaries of US Airways Group
party to the agreement from time to time, Citicorp North
America, Inc., as Administrative Agent, the lenders party to the
agreement from time to time, Citigroup Global Markets Inc., as
Joint Lead Arranger and Bookrunner, Morgan Stanley Senior
Funding, Inc., as Joint Lead Arranger and Bookrunner and
Syndication Agent, and General Electric Capital Corporation, as
Documentation Agent (incorporated by reference to
Exhibit 4.1 to US Airways Groups Current Report on
Form 8-K
filed on March 26, 2007).
|
|
10
|
.45
|
|
Amendment No. 2 to Loan Agreement, dated as of
January 14, 2008, between US Airways Group, Inc., as
Borrower, and Citicorp North America, Inc., as Administrative
Agent and Collateral Agent (incorporated by reference to
Exhibit 10.3 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2008).
|
|
10
|
.46
|
|
Amendment No. 3 to Loan Agreement, dated as of
October 20, 2008, between US Airways Group, Inc., as
Borrower, and Citigroup North America, Inc. as Administrative
Agent and Collateral Agent (incorporated by reference to
Exhibit 10.53 to US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.47
|
|
Amended and Restated Loan Agreement, dated as of April 7,
2006, among US Airways Group, General Electric Capital
Corporation, as Administrative Agent, the lenders party to the
agreement from time to time, and certain subsidiaries of US
Airways Group party to the agreement from time to time
(incorporated by reference to Exhibit 4.1 to US Airways
Groups Current Report on
Form 8-K
dated April 7, 2006, filed on April 10, 2006).
|
|
10
|
.48
|
|
Stockholders Agreement, dated as of September 27,
2005, among US Airways Group and the group of investors named
therein under the management of Wellington Management Company,
LLP (incorporated by reference to Exhibit 10.5 to US
Airways Groups Current Report on
Form 8-K
filed on October 3, 2005).
|
|
10
|
.49
|
|
Stockholders Agreement, dated as of September 27,
2005, among US Airways Group, Tudor Proprietary Trading L.L.C.
and the group of investors named therein for which Tudor
Investment Corp. acts as investment advisor (incorporated by
reference to Exhibit 10.6 to US Airways Groups
Current Report on
Form 8-K
filed on October 3, 2005).
|
|
10
|
.50
|
|
US Airways Funded Executive Defined Contribution Plan
(incorporated by reference to Exhibit 10.1 to US
Airways Annual Report on
Form 10-K
for the year ended December 31, 2003).
|
|
10
|
.51
|
|
First Amendment to the US Airways Funded Executive Defined
Contribution Plan dated January 26, 2004 (incorporated by
reference to Exhibit 10.4 to US Airways Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
|
10
|
.52
|
|
Second Amendment to the US Airways Funded Executive Defined
Contribution Plan dated May 20, 2004 (incorporated by
reference to Exhibit 10.5 to US Airways Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
|
10
|
.53
|
|
Third Amendment to the US Airways Funded Executive Defined
Contribution Plan dated June 24, 2004 (incorporated by
reference to Exhibit 10.6 to US Airways Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
|
10
|
.54
|
|
US Airways Unfunded Executive Defined Contribution Plan
(incorporated by reference to Exhibit 10.2 to US
Airways Annual Report on
Form 10-K
for the year ended December 31, 2003).
|
|
10
|
.55
|
|
First Amendment to the US Airways Unfunded Executive Defined
Contribution Plan dated January 26, 2004 (incorporated by
reference to Exhibit 10.7 to US Airways Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
159
|
|
|
|
|
|
10
|
.56
|
|
Second Amendment to the US Airways Unfunded Executive Defined
Contribution Plan dated May 20, 2004 (incorporated by
reference to Exhibit 10.8 to US Airways Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
|
10
|
.57
|
|
Third Amendment to the US Airways Unfunded Executive Defined
Contribution Plan dated June 24, 2004 (incorporated by
reference to Exhibit 10.9 to US Airways Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
|
10
|
.58
|
|
US Airways Group 2005 Equity Incentive Plan (incorporated by
reference to Exhibit 10.1 to US Airways Groups
Current Report on
Form 8-K
filed on October 3, 2005).
|
|
10
|
.59
|
|
Stock Unit Award Agreement, dated as of September 27, 2005,
between US Airways Group and W. Douglas Parker (incorporated by
reference to Exhibit 10.6 to US Airways Groups
Current Report on
Form 8-K
filed on October 3, 2005).
|
|
10
|
.60
|
|
Form of Stock Unit Agreement under US Airways Groups 2005
Equity Incentive Plan (incorporated by reference to
Exhibit 10.2 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007).
|
|
10
|
.61
|
|
Form of Stock Appreciation Rights Award Agreement under US
Airways Groups 2005 Equity Incentive Plan (incorporated by
reference to Exhibit 10.75 to US Airways Groups
Annual Report on
Form 10-K
for the year ended December 31, 2005).
|
|
10
|
.62
|
|
Form of Nonstatutory Stock Option Award Agreement under US
Airways Groups 2005 Equity Incentive Plan (incorporated by
reference to Exhibit 10.5 to US Airways Groups
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2006).
|
|
10
|
.63
|
|
Form of Stock Bonus Award Agreement for Non-Employee Directors
under US Airways Groups 2005 Equity Incentive Plan
(incorporated by reference to Exhibit 10.96 to US Airways
Groups Annual Report on
Form 10-K
for the year ended December 31, 2007).
|
|
10
|
.64
|
|
US Airways Group, Inc. 2008 Equity Incentive Plan (incorporated
by reference to Exhibit 4.1 to US Airways Groups
Registration Statement on
Form S-8
filed on June 30, 2008 (Registration
No. 333-152033)).
|
|
10
|
.65
|
|
Form of Restricted Stock Unit Award Agreement under the US
Airways Group, Inc. 2008 Equity Incentive Plan (incorporated by
reference to Exhibit 10.1 to US Airways Groups
Current Report on
Form 8-K
filed August 7, 2008).
|
|
10
|
.66
|
|
Form of Stock Appreciation Right Award Agreement under the US
Airways Group, Inc. 2008 Equity Incentive Plan (incorporated by
reference to Exhibit 10.2 to US Airways Groups
Current Report on
Form 8-K
filed August 7, 2008).
|
|
10
|
.67
|
|
Form of Director Vested Share Award Agreement under the US
Airways Group 2008 Equity Incentive Plan (incorporated by
reference to Exhibit 10.78 to US Airways Groups
Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.68
|
|
Form of Indemnity Agreement (incorporated by reference to
Exhibit 10.1 to US Airways Groups Current Report on
Form 8-K
filed on October 6, 2005).
|
|
10
|
.69
|
|
Performance-Based Award Plan (as Amended and Restated effective
November 2, 2005) (incorporated by reference to
Exhibit 10.79 to US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2005).
|
|
10
|
.70
|
|
Amended and Restated America West 1994 Incentive Equity Plan
(incorporated by reference to Exhibit 10.21 to AWAs
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2001).
|
|
10
|
.71
|
|
America West Holdings 2002 Incentive Equity Plan as amended
through May 23, 2002 (incorporated by reference to
Exhibit 10.1 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2006).
|
|
10
|
.72
|
|
2007 Performance-Based Award Program under the US Airways Group
2005 Equity Incentive Plan (incorporated by reference to
Exhibit 10.2 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007).
|
|
10
|
.73
|
|
2008 Long Term Incentive Program under the US Airways Group 2005
Equity Incentive Plan (incorporated by reference to
Exhibit 10.84 to US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
160
|
|
|
|
|
|
10
|
.74
|
|
Form of Executive Change in Control Agreement for Presidents
(incorporated by reference to Exhibit 10.2 to US Airways
Groups Current Report on
Form 8-K
filed on November 29, 2007).
|
|
10
|
.75
|
|
Form of Executive Change in Control Agreement for Executive Vice
Presidents (incorporated by reference to Exhibit 10.3 to US
Airways Groups Current Report on
Form 8-K
filed on November 29, 2007).
|
|
10
|
.76
|
|
Form of Executive Change in Control Agreement for Senior Vice
Presidents (incorporated by reference to Exhibit 10.4 to US
Airways Groups Current Report on
Form 8-K
filed on November 29, 2007).
|
|
10
|
.77
|
|
Summary of Director Compensation and Benefits (incorporated by
reference to Exhibit 10.88 to US Airways Groups
Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.78
|
|
Form of Letter Agreement for Directors Travel Program
(incorporated by reference to Exhibit 10.106 to US Airways
Groups Annual Report on
Form 10-K
for the year ended December 31, 2007).
|
|
10
|
.79
|
|
Amended and Restated Employment Agreement dated as of
November 28, 2007 by and among US Airways Group, US
Airways, Inc. and W. Douglas Parker (incorporated by reference
to Exhibit 10.1 to US Airways Groups Current Report
on
Form 8-K
filed on November 29, 2007).
|
|
10
|
.80
|
|
US Airways Group Incentive Compensation Plan (incorporated by
reference to Exhibit 10.1 to US Airways Groups
Current Report on
Form 8-K
filed on January 23, 2006).
|
|
10
|
.81
|
|
2009 Long Term Incentive Program under the US Airways Group 2008
Equity Incentive Plan.
|
|
10
|
.82
|
|
Amendment No. 4 dated as of August 11, 2009 to the
Amended and Restated Airbus A320 Family Aircraft Purchase
Agreement dated as of October 2, 2007 between Airbus S.A.S.
and US Airways, Inc. (incorporated by reference to
Exhibit 10.1 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2009).*
|
|
10
|
.83
|
|
Amendment No. 4 dated as of July 23, 2009 to the A330
Purchase Agreement dated as of October 2, 2007 between
Airbus S.A.S. and US Airways, Inc. (incorporated by reference to
Exhibit 10.2 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2009).*
|
|
10
|
.84
|
|
Amendment No. 3 dated as of July 23, 2009 to the
Amended and Restated Airbus A350 XWB Purchase Agreement dated as
of October 2, 2007 between Airbus S.A.S. and US Airways,
Inc. (incorporated by reference to Exhibit 10.3 to US
Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2009).*
|
|
10
|
.85
|
|
Amendment No. 3 dated as of January 16, 2009 to the
Amended and Restated Airbus A320 Family Aircraft Purchase
Agreement dated as of October 2, 2007 between US Airways,
Inc. and Airbus S.A.S. (incorporated by reference to
Exhibit 10.1 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009).*
|
|
10
|
.86
|
|
Amendment No. 3 dated as of January 16, 2009 to the
Airbus A330 Purchase Agreement dated as of October 2, 2007
between US Airways, Inc. and Airbus S.A.S. (incorporated by
reference to Exhibit 10.2 to US Airways Groups
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009).*
|
|
10
|
.87
|
|
Amendment No. 2 dated as of January 16, 2009 to the
Amended and Restated Airbus A350 XWB Purchase Agreement, dated
as of October 2, 2007, among AVSA, S.A.R.L. and US Airways,
Inc., AWA and US Airways Group (incorporated by reference to
Exhibit 10.3 to US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009).*
|
|
10
|
.88
|
|
Amendment No. 7 dated as of January 14, 2009 to
Amended and Restated Embraer Aircraft Purchase Agreement dated
as of June 13, 2006 between US Airways Group and
Embraer Empresa Brasileira de Aeronautica S.A.
(incorporated by reference to Exhibit 10.4 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009).*
|
|
10
|
.89
|
|
Amendment No. 2 to Loan Agreement [Spare Parts], dated as
of January 15, 2009, among US Airways, Inc., GECC, as
administrative agent, collateral agent and original lender, and
the lenders from time to time party thereto (incorporated by
reference to Exhibit 10.6 to US Airways Groups
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009).*
|
|
10
|
.90
|
|
Amendment No. 3 to Loan Agreement [Spare Parts], dated as
of March 31, 2009, among US Airways, Inc., GECC, as
administrative agent, collateral agent and original lender, and
the lenders from time to time party thereto (incorporated by
reference to Exhibit 10.7 to US Airways Groups
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009).*
|
161
|
|
|
|
|
|
10
|
.91
|
|
Form of Stock Appreciation Right (Cash-Settled) Award Agreement
under the US Airways Group, Inc. 2008 Equity Incentive Plan
(incorporated by reference to Exhibit 10.8 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009).
|
|
10
|
.92
|
|
Form of Stock Appreciation Right (Stock-Settled) Award Agreement
under the US Airways Group, Inc. 2008 Equity Incentive Plan
(incorporated by reference to Exhibit 10.9 to US Airways
Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009).
|
|
10
|
.93
|
|
Amendment No. 5 dated as of October 2, 2009 to the
Amended and Restated Airbus A320 Family Aircraft Purchase
Agreement dated as of October 2, 2007 between Airbus S.A.S.
and US Airways, Inc.*
|
|
10
|
.94
|
|
Amendment No. 6 dated as of November 20, 2009 to the
Amended and Restated Airbus A320 Family Aircraft Purchase
Agreement dated as of October 2, 2007 between Airbus S.A.S.
and US Airways, Inc.*
|
|
10
|
.95
|
|
Amendment No. 5 dated as of November 20, 2009 to the
A330 Purchase Agreement dated as of October 2, 2007 between
Airbus S.A.S. and US Airways, Inc.*
|
|
10
|
.96
|
|
Amendment No. 4 dated as of November 20, 2009 to the
Amended and Restated Airbus A350 XWB Purchase Agreement dated as
of October 2, 2007 between Airbus S.A.S. and US Airways,
Inc.*
|
|
10
|
.97
|
|
Second Amended and Restated Letter Agreement No. 5 dated as
of November 20, 2009 to the Amended and Restated Airbus
A350 XWB Purchase Agreement dated as of October 2, 2007
between Airbus S.A.S. and US Airways, Inc.*
|
|
21
|
.1
|
|
Subsidiaries of US Airways Group and US Airways.
|
|
23
|
.1
|
|
Consents of KPMG LLP, Independent Registered Public Accounting
Firm of US Airways Group.
|
|
24
|
.1
|
|
Powers of Attorney (included in signature page of this Annual
Report on
Form 10-K).
|
|
31
|
.1
|
|
Certification of US Airways Groups Chief Executive Officer
pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2
|
|
Certification of US Airways Groups Chief Financial Officer
pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.3
|
|
Certification of US Airways Chief Executive Officer
pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.4
|
|
Certification of US Airways Chief Financial Officer
pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1
|
|
Certification of US Airways Groups Chief Executive Officer
and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
|
|
Certification of US Airways Chief Executive Officer and
Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Portions of this exhibit have been omitted under a request for
confidential treatment and filed separately with the United
States Securities and Exchange Commission. |
|
|
|
Management contract or compensatory plan or arrangement. |
162
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the registrants
have duly caused this report to be signed on their behalf by the
undersigned, hereunto duly authorized.
US Airways Group, Inc.
|
|
|
|
By:
|
/s/ W.
Douglas Parker
|
W. Douglas Parker
Chairman and Chief Executive Officer
Date: February 16, 2010
US Airways, Inc.
|
|
|
|
By:
|
/s/ W.
Douglas Parker
|
W. Douglas Parker
Chairman and Chief Executive Officer
Date: February 16, 2010
KNOW ALL MEN BY THESE PRESENTS, that each individual whose
signature appears below constitutes and appoints W. Douglas
Parker and Derek J. Kerr and each or any of them, his or her
true and lawful attorneys and agents, with full power of
substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign
any and all amendments to the Registrants Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, and to file
the same with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each or
any of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully
to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys
and agents, and each of them, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the
following persons on behalf of the registrants and in the
capacities and on the dates indicated.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ W.
Douglas Parker
W.
Douglas Parker
|
|
Chairman and Chief Executive Officer (Principal Executive
Officer)
|
|
February 16, 2010
|
|
|
|
|
|
/s/ Derek
J. Kerr
Derek
J. Kerr
|
|
Executive Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer)
|
|
February 16, 2010
|
|
|
|
|
|
/s/ Bruce
R. Lakefield
Bruce
R. Lakefield
|
|
Director
|
|
February 16, 2010
|
|
|
|
|
|
/s/ Herbert
M. Baum
Herbert
M. Baum
|
|
Director
|
|
February 16, 2010
|
|
|
|
|
|
/s/ Matthew
J. Hart
Matthew
J. Hart
|
|
Director
|
|
February 16, 2010
|
163
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Richard
C. Kraemer
Richard
C. Kraemer
|
|
Director
|
|
February 16, 2010
|
|
|
|
|
|
/s/ Cheryl
G. Krongard
Cheryl
G. Krongard
|
|
Director
|
|
February 16, 2010
|
|
|
|
|
|
/s/ Denise
M. OLeary
Denise
M. OLeary
|
|
Director
|
|
February 16, 2010
|
|
|
|
|
|
/s/ George
M. Philip
George
M. Philip
|
|
Director
|
|
February 16, 2010
|
|
|
|
|
|
/s/ J.
Steven Whisler
J.
Steven Whisler
|
|
Director
|
|
February 16, 2010
|
164
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.81
|
|
2009 Long Term Incentive Program under the US Airways Group 2008
Equity Incentive Plan.
|
|
10
|
.93
|
|
Amendment No. 5 dated as of October 2, 2009 to the
Amended and Restated Airbus A320 Family Aircraft Purchase
Agreement dated as of October 2, 2007 between Airbus S.A.S.
and US Airways, Inc.*
|
|
|
|
|
|
|
10
|
.94
|
|
Amendment No. 6 dated as of November 20, 2009 to the
Amended and Restated Airbus A320 Family Aircraft Purchase
Agreement dated as of October 2, 2007 between Airbus S.A.S.
and US Airways, Inc.*
|
|
|
|
|
|
|
10
|
.95
|
|
Amendment No. 5 dated as of November 20, 2009 to the
A330 Purchase Agreement dated as of October 2, 2007 between
Airbus S.A.S. and US Airways, Inc.*
|
|
|
|
|
|
|
10
|
.96
|
|
Amendment No. 4 dated as of November 20, 2009 to the
Amended and Restated Airbus A350 XWB Purchase Agreement dated as
of October 2, 2007 between Airbus S.A.S. and US Airways,
Inc.*
|
|
|
|
|
|
|
10
|
.97
|
|
Second Amended and Restated Letter Agreement No. 5 dated as
of November 20, 2009 to the Amended and Restated Airbus
A350 XWB Purchase Agreement dated as of October 2, 2007
between Airbus S.A.S. and US Airways, Inc.*
|
|
|
|
|
|
|
21
|
.1
|
|
Subsidiaries of US Airways Group and US Airways.
|
|
|
|
|
|
|
23
|
.1
|
|
Consents of KPMG LLP, Independent Registered Public Accounting
Firm of US Airways Group.
|
|
|
|
|
|
|
24
|
.1
|
|
Powers of Attorney (included in signature page of this Annual
Report on
Form 10-K).
|
|
|
|
|
|
|
31
|
.1
|
|
Certification of US Airways Groups Chief Executive Officer
pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
|
|
|
|
|
31
|
.2
|
|
Certification of US Airways Groups Chief Financial Officer
pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
|
|
|
|
|
31
|
.3
|
|
Certification of US Airways Chief Executive Officer
pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
|
|
|
|
|
31
|
.4
|
|
Certification of US Airways Chief Financial Officer
pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
|
|
|
|
|
32
|
.1
|
|
Certification of US Airways Groups Chief Executive Officer
and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
32
|
.2
|
|
Certification of US Airways Chief Executive Officer and
Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Portions of this exhibit have been omitted under a request for
confidential treatment and filed separately with the United
States Securities and Exchange Commission. |
|
|
Management contract or compensatory plan or arrangement. |
165