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,
2010
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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
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(IRS Employer
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Incorporation or Organization)
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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
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(IRS Employer
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Incorporation or Organization)
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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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No
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US Airways, Inc.
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Yes
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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
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Accelerated
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Non-accelerated
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Smaller reporting company o
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US Airways, Inc.
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Large accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller reporting company o
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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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Yes
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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,
2010 was approximately $1.38 billion.
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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Yes þ
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US Airways, Inc.
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As of February 18, 2011, there were 161,894,329 shares
of US Airways Group, Inc. common stock outstanding.
As of February 18, 2011, 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 2011 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, 2010, 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, 2010
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 and
pricing environment, and our expected financial performance and
liquidity position. 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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the impact of the price and availability of fuel and significant
disruptions in the supply of aircraft fuel;
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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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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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interruptions or disruptions in service at one or more of our
hub airports;
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our reliance on third-party regional operators or third-party
service providers;
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our reliance on and costs of third-party distribution channels,
including those provided by global distribution systems and
online travel agents;
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changes in government legislation and regulation;
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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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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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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 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.
4
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
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 Securities Exchange Act of
1934, as amended (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 U.S. airline industry returned to profitability in 2010
after two difficult and challenging years. Profitability was
driven by increased revenues resulting from improved economic
conditions, new ancillary revenues and industry capacity
discipline, which enabled airlines to obtain higher yields. The
industry closed out 2010 experiencing continued strong passenger
demand. The Air Transport Association of America reported that
December 2010 marked the twelfth consecutive month of
year-over-year
revenue growth.
International markets outperformed domestic markets with respect
to
year-over-year
improvements in revenue. International markets had been more
severely impacted by the economic slowdown than domestic markets
in 2009 due to their greater reliance on business travel,
particularly premium and first class seating, to drive
profitability. Cargo demand, which contracted significantly in
2009 due to reduced business spending, also improved in 2010.
As general economic conditions improved during 2010, market
prices for crude oil and related products, including jet fuel,
increased significantly. The average daily spot price of crude
oil during 2010 was $79.48 per barrel as compared to $61.95 per
barrel in 2009. Crude oil prices were volatile, with daily spot
prices fluctuating between a low of $64.78 per barrel in May
2010 to a high of $91.48 per barrel in December 2010. Despite
these fuel price increases, the airline industry was generally
effective in maintaining profitability during 2010. As the
industry enters 2011, a significant uncertainty exists as to
whether the economic conditions and industry capacity discipline
that permitted the industry to increase revenues in 2010 and
thereby absorb large fuel price increases, will remain in place.
See Part 1, Item 1A, Risk Factors
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.
The return of most major domestic carriers to profitability in
2010 improved industry liquidity, which had been significantly
strained by the record fuel price spike in 2008 and recessionary
business conditions in late 2008 and 2009. A continuation of
these trends is dependent on, among other things, continued
improvement in economic conditions and the ability of the
industry to pass through increased costs, including increased
fuel costs.
5
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 in
Washington, D.C. at Ronald Reagan Washington National
Airport (Washington National). We offer scheduled
passenger service on more than 3,200 flights daily to more than
200 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. We had approximately 52 million
passengers boarding our mainline flights in 2010. During 2010,
our mainline operation provided regularly scheduled service or
seasonal service at 132 airports while the US Airways Express
network served 155 airports in the United States, Canada and
Mexico, including 75 airports also served by our mainline
operation. US Airways Express air carriers had approximately
28 million passengers boarding their planes in 2010. As of
December 31, 2010, we operated 339 mainline jets and were
supported by our regional airline subsidiaries and affiliates
operating as US Airways Express under capacity purchase
agreements, which operated 231 regional jets and 50 turboprops.
Our prorate carriers operated 10 turboprops and three regional
jets at December 31, 2010.
In 2010, we realigned 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. These four cities, as well as our hourly Shuttle
service between LaGuardia, Boston and Washington National
airports serve as the cornerstone of our network and represent
98% of our ASMs at December 31, 2010.
We continued our strong operational performance in 2010. We
received twelve first place rankings, the most among the hub and
spoke carriers, in three critical U.S. Department of
Transportation (DOT) monthly metrics including six
first place rankings in baggage handling, three first place
rankings in on-time performance and three first place rankings
for the lowest customer complaints ratio.
On a full year basis as measured by the DOT, we ranked first in
baggage handling and second in on-time performance. The
combination of continued strong on-time performance and fewer
mishandled bags contributed to an overall 2010 customer
complaints ratio that was 10% better than the average of our hub
and spoke peers.
In August 2009, US Airways Group and US Airways entered into a
mutual asset purchase and sale agreement with Delta Airlines,
Inc. (Delta). Pursuant to the agreement, US Airways
would transfer to Delta certain assets related to flight
operations at LaGuardia Airport in New York
(LaGuardia), 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, including 42 pairs of slots,
and the authority to serve Sao Paulo, Brazil and Tokyo, Japan.
The closing of the transactions under the agreement is subject
to certain closing conditions, including approvals from a number
of government agencies. In a final decision dated May 4,
2010, the Federal Aviation Administration (FAA)
rejected an alternative transaction proposed by Delta and us. On
July 2, 2010, we and Delta jointly filed with the United
States Circuit Court of Appeals for the District of Columbia
Circuit a notice of appeal of the regulatory action taken by the
FAA with respect to this transaction. We are presently in
discussions with Delta and the relevant government agencies
regarding a possible resolution that would allow a slot
transaction with Delta to proceed. However, we cannot predict
the outcome of these discussions or the related judicial
proceeding, or whether a slot transaction with Delta will be
completed.
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 consolidated financial
statements included in Items 8A and 8B of this Annual
Report on
Form 10-K.
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
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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 2010, the US Airways Express network served 155
airports in the continental United States, Canada and Mexico,
including 75 airports also served by our mainline operation.
During 2010, approximately 28 million passengers boarded US
Airways Express air carriers planes, approximately 44% of
whom connected to or from our mainline flights. Of these
28 million passengers, approximately 8 million were
enplaned by our wholly owned regional airlines Piedmont and PSA,
approximately 20 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. Our prorate carriers, Colgan Air, Inc. and Trans
States Airlines, Inc., operated 10 turboprops and three regional
jets, respectively, at December 31, 2010. All US Airways
Express carriers have logos, service marks, aircraft paint
schemes and uniforms similar to our mainline operation.
In January 2010, Mesa Air Group, Inc. and certain of its
subsidiaries, including Mesa Airlines, Inc. (Mesa),
filed voluntary petitions for relief under Chapter 11 of
the U.S. Bankruptcy Code. At December 31, 2010, Mesa
operated 51 aircraft for our Express passenger operations,
representing over $500 million in annual passenger revenues
to us in 2010. In November 2010, we signed an agreement for an
extension of 39 months on average from the current
scheduled expiration of June 30, 2012, for the operation of
38 CRJ900 aircraft by Mesa under the companies codeshare
and revenue sharing agreement, which agreement was approved by
the U.S. Bankruptcy Court. The remaining 13 aircraft
were not extended. On January 20, 2011, the
U.S. Bankruptcy Court approved the bankruptcy plan of Mesa
Air Group, Inc., who is expected to emerge from bankruptcy on or
about February 28, 2011. 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.
The following table sets forth our US Airways Express capacity
purchase agreements and the number and type of aircraft operated
under those agreements at December 31, 2010.
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Number and Type
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of Aircraft
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PSA (1)
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49 regional jets
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Piedmont (1)
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44 turboprops
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Air Wisconsin Airlines Corporation
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70 regional jets
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Republic Airline Inc.
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58 regional jets
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Mesa Airlines, Inc.
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45 regional jets and 6 turboprops
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Chautauqua Airlines, Inc.
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9 regional jets
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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
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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 27 member airlines
serving approximately 1,160 destinations in 181 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 Air
China, Air New Zealand, ANA, Asiana, bmi, Brussels Airlines,
Lufthansa, Singapore Airlines, Spanair, Swiss International, TAP
Portugal, Turkish Airlines and United. Other international code
sharing partners include EVA Airways, Qatar Airways, Royal
Jordanian Airlines, TACA 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, when
they begin service to new cities or when they 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 manage effectively 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 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.
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.
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Airlines are also regulated by the FAA, primarily in the areas
of flight operations, maintenance 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 on 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, increased airworthiness related inspections and
maintenance procedures to be conducted on certain aircraft, fuel
tank design control and flammability reductions, better fire
retardant insulation blankets, wide spread fatigue damage rules,
aircraft life limitations, aircraft dependent surveillance
broadcast out compliance and electrical wiring systems
maintenance. 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. 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. This decision was recently
upheld by the District of Columbia Circuit Court of Appeals. The
Obama Administration has not yet indicated how it intends to
move forward on the issue of congestion management in the New
York region, although we expect new proposed rules to be issued
later this year.
The DOT finalized rules, taking effect on April 29, 2010,
requiring new procedures for customer handling during long
onboard delays, as well as additional reporting requirements for
airlines that could increase the cost of airline operations or
reduce revenues. The DOT has been aggressively investigating
alleged violations of the new rules. In addition, the DOT
released a second set of proposed new rules addressing concerns
about how airlines handle interactions with passengers through
the reservations process, at the airport and on board the
aircraft. The comment period on the proposed rules ended in
September 2010. We anticipate that any new rules will take
effect in 2011. 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.
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
9
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 Agreement has been applications before the DOT for
antitrust immunity between various domestic and international
airlines. The DOT approved two such transatlantic immunities in
2010 involving other carriers. 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 2010, we incurred expenses of $50 million for the ASIF,
including amounts paid by our wholly owned regional
subsidiaries, PSA and Piedmont, and amounts attributable to our
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 have resulted 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.
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. Although no
federal legislation was passed in the last Congress on climate
change, several states have adopted or are in the process of
adopting greenhouse gas reporting or
cap-and-trade
programs.
10
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. While
some of our facilities may be covered by this rule in the
future, currently none of our facilities meet the threshold for
reporting. 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 U.S., 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.
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 business is labor intensive. In 2010, wages, salaries and
benefits were one of our largest expenses and represented
approximately 23% of our operating expenses. As of
December 31, 2010, US Airways employed approximately 30,900
active full-time equivalent employees, including approximately
4,000 pilots, 7,000 flight attendants, 5,700 passenger service
personnel, 5,900 fleet service personnel, 3,200 maintenance
personnel and 5,100 personnel in administrative and various
other job categories. Our Express subsidiaries, Piedmont and
PSA, employed approximately 4,900 active full-time equivalent
employees, including approximately 800 pilots, 500 flight
attendants, 2,800 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, 2010, approximately 86% 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 (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.
11
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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|
|
|
|
|
|
|
|
|
|
|
|
|
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Contract
|
|
Union
|
|
Class or Craft
|
|
Employees (1)
|
|
|
Amendable Date
|
|
|
Integrated labor agreements:
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|
|
|
|
|
|
|
|
|
|
International Association of Machinists & Aerospace
Workers (IAM)
|
|
Fleet Service
|
|
|
5,900
|
|
|
|
12/31/2011
|
|
Airline Customer Service Employee Association IBT
and CWA (the Association)
|
|
Passenger Service
|
|
|
5,700
|
|
|
|
12/31/2011
|
|
IAM
|
|
Mechanics, Stock Clerks and Related
|
|
|
3,200
|
|
|
|
12/31/2011
|
(2)
|
IAM
|
|
Maintenance Training Instructors
|
|
|
30
|
|
|
|
12/31/2011
|
|
Transport Workers Union (TWU)
|
|
Dispatch
|
|
|
200
|
|
|
|
12/31/2009
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(3)
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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
|
|
TWU
|
|
Flight Simulator Engineers
|
|
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50
|
|
|
|
12/31/2011
|
|
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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(4)
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Association of Flight Attendants-CWA (AFA)
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Flight Attendants
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4,800
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|
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12/31/2011
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(5)
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AWA:
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|
|
|
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|
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USAPA
|
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Pilots
|
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1,400
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12/30/2006
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(4)
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AFA
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Flight Attendants
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2,200
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05/04/2004
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(5)
|
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(1) |
|
Approximate number of active full-time equivalent employees
covered by the contract as of December 31, 2010. |
|
(2) |
|
In negotiations for an agreement to replace contract that will
become amendable. |
|
(3) |
|
In negotiations for an agreement to replace amendable contract. |
|
(4) |
|
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.
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. |
|
(5) |
|
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 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. |
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 increased 28.1% from 2009 to 2010, and
our total mainline and Express fuel expense increased
$700 million, or 28.3%, from 2009 to 2010. We estimate that
a one cent per gallon increase in aviation fuel prices would
result in a $14 million increase in annual expense based on
our 2011 forecasted mainline and Express fuel consumption.
Since the third quarter of 2008, we have not entered into any
new transactions to hedge our fuel consumption, and we have not
had any fuel hedging contracts outstanding since the third
quarter of 2009. During 2009 and 2008, we recognized net losses
of $7 million and $356 million, respectively, related
to our fuel hedging program.
12
The following table shows annual aircraft fuel consumption and
costs for our mainline operations for 2008 through 2010 (gallons
and aircraft fuel expense in millions):
|
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|
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|
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|
|
|
|
|
|
|
|
Average Price
|
|
Aircraft Fuel
|
|
Percentage of Total
|
Year
|
|
Gallons
|
|
per Gallon (1)
|
|
Expense (1)
|
|
Operating Expenses
|
|
2010
|
|
|
1,073
|
|
|
$
|
2.24
|
|
|
$
|
2,403
|
|
|
|
28.6
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%
|
2009
|
|
|
1,069
|
|
|
|
1.74
|
|
|
|
1,863
|
|
|
|
23.8
|
%
|
2008
|
|
|
1,142
|
|
|
|
3.17
|
|
|
|
3,618
|
|
|
|
33.3
|
%
|
|
|
|
(1) |
|
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, 2010, 2009 and
2008 were $769 million, $609 million and
$1.14 billion, respectively.
Fuel prices have fluctuated substantially over the past several
years and sharply in the last three years. 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.
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 September 30, 2011. 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 2010, we continued our trend of strong operational
performance. 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,
strengthens customer loyalty and attracts new customers.
The year ended December 31, 2010 marked a year of
outstanding operational performance for US Airways. We received
twelve first place rankings, the most among the hub and spoke
carriers, in three critical DOT monthly metrics including six
first place rankings in baggage handling, three first place
rankings in on-time performance and three first place rankings
for the lowest customer complaints ratio.
On a full year basis as measured by the DOT, we ranked first in
baggage handling and second in on-time performance. The
combination of continued strong on-time performance and fewer
mishandled bags contributed to an overall 2010 customer
complaints ratio that was 10% better than the average of our hub
and spoke peers.
13
We reported the following operating statistics to the DOT for
mainline operations for the years ended December 31, 2010
and 2009:
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|
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|
|
|
|
|
|
Percent
|
|
|
|
|
|
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Better
|
|
|
2010
|
|
2009
|
|
(Worse)
|
|
On-time performance (a)
|
|
|
83.0
|
|
|
|
80.9
|
|
|
|
2.6
|
|
Completion factor (b)
|
|
|
98.5
|
|
|
|
98.8
|
|
|
|
(0.3
|
)
|
Mishandled baggage (c)
|
|
|
2.56
|
|
|
|
3.03
|
|
|
|
15.5
|
|
Customer complaints (d)
|
|
|
1.53
|
|
|
|
1.31
|
|
|
|
(16.8
|
)
|
|
|
|
(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. |
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 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,
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 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.
Ticket
Distribution
Passengers can book tickets for travel on US Airways through
several distribution channels including our direct website
(www.usairways.com), our reservations centers and third party
distribution channels, including those provided by or through
global distribution systems (e.g., Amadeus, Sabre and
Travelport), conventional travel agents and online travel agents
(e.g., Expedia, Orbitz and Travelocity). In 2010, internal
channels of distribution accounted for 31% of our ticketed
passenger segments. Internet sites accounted for 63% of our
ticketed passenger segments, of which 26% originated from our
website, while 37% originated from online travel agent sites. To
remain competitive, we will need to manage successfully our
distribution costs and rights, increase our distribution
flexibility and improve the functionality of third party
distribution channels, while maintaining an industry-competitive
cost structure. For more discussion, see Part 1,
Item 1A, Risk Factors We rely on third
party distribution channels and must manage effectively the
costs, rights and functionality of these channels.
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.
14
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 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 result in the future, in
decreased passenger demand for air travel and changes in booking
practices, both of which in turn have had, and may have in the
future, 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 labor
agreements to which we are a party limit our ability to reduce
the number of aircraft in operation, and the utilization of such
aircraft, 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.
Global market and economic conditions were unprecedented and
challenging in 2008 and 2009, with tighter credit conditions
imposed on borrowers. 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 refinance debt maturities, raise capital or
fund other types of obligations. Any downgrades to our credit
rating may likewise increase the cost and reduce the
availability of financing.
In addition, we have substantial non-cancelable commitments for
capital expenditures, including the acquisition of new aircraft
and related spare engines. We have not yet secured financing
commitments for some of the 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, primarily based on the
London interbank offered rate for deposits of U.S. dollars
(LIBOR). LIBOR tends to fluctuate based on general
economic conditions, general interest rates, federal reserve
rates and the supply of and demand for credit in the London
interbank market. We have not hedged our interest rate exposure
and, accordingly, our interest expense for
15
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
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 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 three years.
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, we have from time to time entered into hedging
arrangements designed to protect against rising fuel costs.
Since the third quarter of 2008, we have not entered into any
new transactions to hedge our fuel consumption, and we have not
had any fuel hedging contracts outstanding since the third
quarter of 2009. 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 could adversely impact our
short-term liquidity as our hedge counterparties could 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.
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.
16
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.
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. We are currently
subject to certain holdback requirements. 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 Railway Labor Act (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, which could materially
adversely affect our ability to conduct our business and our
financial performance.
We are currently in negotiations with unions representing our
pilots and flight attendants, and both negotiations are being
overseen by the NMB. As a result, these unions presently 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 five
17
years of negotiations 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 materially adversely affect our
ability to conduct our business and our financial performance
and create material liability for back pay.
The
inability to maintain labor costs at competitive levels would
harm our financial performance.
Currently, our labor costs are very competitive relative to the
other
hub-and-spoke
carriers. However, we cannot provide assurance 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 86% of the employees within US
Airways Group are represented for collective bargaining purposes
by labor unions. Some of our unions have brought and may
continue to bring grievances to binding arbitration, including
related to wages. 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 material
additional costs that we did not anticipate.
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 Washington, D.C. is a focus city.
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 or at Washington, D.C.
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.
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. 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 January 2010, Mesa Air Group, Inc. and certain of its
subsidiaries, including Mesa Airlines, Inc., filed voluntary
petitions for relief under Chapter 11 of the
U.S. Bankruptcy Code. At December 31, 2010, Mesa
operated 51 aircraft for our Express passenger operations,
representing over $500 million in annual passenger revenues
to us in 2010. In November 2010, we signed an agreement for an
extension of 39 months on average from the current
scheduled expiration of June 30, 2012, for the operation of
38 CRJ900 aircraft by Mesa under the companies codeshare
and revenue sharing agreement, which agreement was approved by
the U.S. Bankruptcy Court. The remaining 13 aircraft
were not extended. On January 20, 2011, the
U.S. Bankruptcy Court approved the bankruptcy plan of Mesa
Air Group, Inc., who is expected to emerge from bankruptcy on or
about February 28, 2011. We cannot predict whether Mesa
will be successfully reorganized or any other aspect of the
pending bankruptcy case.
18
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.
We
rely on third party distribution channels and must manage
effectively the costs, rights and functionality of these
channels.
We rely on third party distribution channels, including those
provided by or through global distribution systems, or GDSs
(e.g., Amadeus, Sabre and Travelport), conventional travel
agents and online travel agents, or OTAs (e.g., Expedia, Orbitz
and Travelocity), to distribute a significant portion of our
airline tickets and we expect in the future to continue to rely
on these channels and hope eventually to use them to distribute
and collect revenues for ancillary products (e.g., fees for
selective seating). These distribution channels are more
expensive and at present have less functionality in respect of
ancillary product offerings than those we operate ourselves,
such as our call centers and our website. Certain of these
distribution channels also effectively restrict the manner in
which we distribute our products generally. To remain
competitive, we will need to manage successfully our
distribution costs and rights, increase our distribution
flexibility and improve the functionality of third party
distribution channels, while maintaining an industry-competitive
cost structure. A majority of our distribution agreements with
key GDSs and OTAs are due to expire this year and will therefore
require that we negotiate renewals or extensions. These
negotiations could be contentious, could result in diminished or
less favorable terms for the distribution of our tickets and
ancillary products, and may not provide the functionality we
require to maximize ancillary revenues. Any inability to manage
our third party distribution costs, rights and functionality at
a competitive level or any material diminishment or disruption
in the distribution of our tickets could have a material adverse
effect on our competitive position and our results of operations.
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. This decision was recently
upheld by the District of Columbia Circuit Court of Appeals. The
Obama Administration has not yet indicated how it intends to
move forward on the issue of congestion management in the New
York region, although we expect new proposed rules to be issued
later this year.
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, other environmental concerns, fuel tank inerting,
crew scheduling, aircraft operation and safety and increased
inspections and maintenance procedures to be conducted on older
aircraft. Our
19
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.
The DOT finalized rules, taking effect on April 29, 2010,
requiring new procedures for customer handling during long
onboard delays, as well as additional reporting requirements for
airlines that could increase the cost of airline operations or
reduce revenues. The DOT has been aggressively investigating
alleged violations of the new rules. In addition, the DOT
released a second set of proposed new rules addressing concerns
about how airlines handle interactions with passengers through
the reservations process, at the airport and on board the
aircraft. The comment period on the proposed rules ended in
September 2010. We anticipate that any new rules will take
effect in 2011.
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.
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 if weakened economic conditions continue
to make our customers more sensitive to increased travel costs
or provide a significant competitive advantage to other carriers
which determine not to institute similar charges.
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 the actions
of other carriers in many areas including pricing, scheduling,
capacity and promotions, which 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
20
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, potentially, further consolidation, and could
continue to have an impact on the overall performance of US
Airways Group.
Additionally, as mergers and 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 will grow and that growth will 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.
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. 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 and Transportation Security Act mandated 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.
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.
21
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
and 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. While we cannot yet determine what the
final regulatory programs will be in the U.S., 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
22
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 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 and could increase our costs.
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.
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 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 an optimum 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.
23
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 September 30, 2011. 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 claims
paying ability 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 a result of our international operations, we 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.
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
(Section 382), a limitation is imposed on the
corporations future ability to utilize any net operating
losses (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.
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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24
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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.
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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 7.25%
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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a requirement that holders of at least 80% of the voting power
of the shares entitled to vote in the election of directors
approve any amendment of our amended and restated bylaws
submitted to stockholders for approval; 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.
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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 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 DOT, its predecessors and
successors, from time to time), including any agent, trustee
25
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
At December 31, 2010, we operated a mainline fleet of 339
aircraft, down from a total of 349 mainline aircraft at
December 31, 2009. During 2010, we removed five leased
Boeing
757-200
aircraft, five leased Boeing
737-300
aircraft and four leased Embraer 190 aircraft from our mainline
operating fleet. During 2010, we took delivery of two
A320 aircraft and two A330-200 aircraft. We are also
supported by our regional airline subsidiaries and affiliates
operating as US Airways Express under capacity purchase
agreements, which operated 231 regional jets and
50 turboprops at December 31, 2010. Our prorate
carriers operated 10 turboprops and three regional jets at
December 31, 2010.
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). Since 2008, when
deliveries commenced under the purchase agreements, we have
taken delivery of 34 aircraft through December 31, 2010,
which includes four A320 aircraft, 23 A321 aircraft and seven
A330-200 aircraft.
US Airways plans to take delivery of 12 A320 family aircraft in
each of 2011 and 2012, with the remaining 46 A320 family
aircraft scheduled to be delivered between 2013 and 2015. In
addition, US Airways plans to take delivery of the eight
remaining A330-200 aircraft in 2013 and 2014. Deliveries of the
22 A350 XWB aircraft are scheduled to begin in 2017 and extend
through 2019. US Airways has financing commitments for all
Airbus aircraft scheduled for delivery in 2011 and 2012.
As of December 31, 2010, our mainline operating fleet
consisted of the following aircraft:
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Average Seat
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Owned/
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Average
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Aircraft Type
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Capacity
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Mortgaged (1)
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Leased (2)
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Total
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Age (years)
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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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10.3
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A330-200
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258
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4
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3
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7
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1.2
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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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6.0
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A320
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150
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11
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61
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72
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11.9
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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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10.2
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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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21.4
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B757-200
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181
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4
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19
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23
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17.9
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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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20.8
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B737-300
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131
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19
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19
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22.8
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ERJ 190
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99
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15
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15
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3.3
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Total
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154
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79
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260
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339
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12.3
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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 2011 and 2024. |
As of December 31, 2010, 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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6.3
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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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6.8
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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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19.3
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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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21.4
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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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13.4
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(1) |
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The terms of the leases expire between 2013 and 2022. |
We maintain inventories of spare engines, spare parts,
accessories and other maintenance supplies sufficient to support
our operating requirements.
27
The following table illustrates our committed orders and
scheduled lease expirations at December 31, 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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2015
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Thereafter
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Firm orders remaining
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12
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12
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21
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21
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12
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22
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Scheduled mainline lease expirations
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17
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39
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28
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21
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22
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133
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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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5
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30
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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, operations 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
associated with our hubs and focus city, which are located at
the following airports: Charlotte Douglas International,
Philadelphia International, Phoenix Sky Harbor International and
Washington National. At those locations and in other cities we
serve, we maintain administrative offices, terminal, catering,
cargo, 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
near 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
agreements with the government entities that own or control
these airports. From time to time, airports undertake projects
to improve or construct new facilities, which are typically
funded through proceeds from special or general purpose bond
offerings made by the respective airport governmental entity.
Our airport lease and operating agreements typically provide
that any costs for these new or improved airport facilities are
passed through to us in the form of higher occupancy costs based
on our relative percentage of occupancy at the airport. In
certain circumstances, we agree to manage these airport projects.
In 2010, the airlines and the City of Philadelphia approved a
project to make certain improvements to the Terminal F
facilities at the Philadelphia International Airport, which will
be funded with proceeds from the issuance of General Airport
Revenue Bonds issued by the City of Philadelphia. We have agreed
to manage this project, which is expected to commence during
2011 and cost approximately $120 million.
28
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Item 3.
|
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 allowed claims have been 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
consolidated 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 2011.
We are party to an arbitration proceeding relating to a
grievance brought by our pilots union to the effect that,
effective January 1, 2010, this work group was entitled to
a significant increase in wages by operation of the applicable
collective bargaining agreement. A hearing was conducted and the
parties are awaiting the ruling of the arbitrator. An adverse
ruling by the arbitrator could require a material increase in
the wages of our pilots and a material back payment to make the
wage increase retroactive to January 1, 2010. We believe
that the unions position is without merit and that the
possibility of an adverse outcome is remote.
We 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 we, having
consulted with outside counsel, believe that the ultimate
disposition of these contingencies will not materially affect
our consolidated financial position or results of operations.
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Item 4.
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[Removed
and Reserved]
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29
PART II
Stock
Exchange Listing
Our common stock trades on the NYSE under the symbol
LCC. As of February 18, 2011, the closing price
of our common stock on the NYSE was $9.72. As of
February 18, 2011, there were 1,758 holders of record of
our common stock.
Market
Prices of Common Stock
The following table sets forth, for the periods indicated, the
high and low sale prices of our common stock on the NYSE:
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Year Ended
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December 31
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Period
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High
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Low
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2010
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Fourth Quarter
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$
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12.26
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$
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8.94
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Third Quarter
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11.40
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8.02
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Second Quarter
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10.87
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5.70
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First Quarter
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8.17
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4.47
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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
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Third Quarter
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5.60
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2.00
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Second Quarter
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5.35
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2.11
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First Quarter
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9.70
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1.88
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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.
30
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 the Exchange
Act, 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
December 31, 2005 through December 31, 2010. The
comparison assumes $100 was invested on December 31, 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.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2005
|
|
12/31/2006
|
|
12/31/2007
|
|
12/31/2008
|
|
12/31/2009
|
|
12/31/2010
|
|
US Airways Group, Inc.
|
|
$
|
100
|
|
|
$
|
145
|
|
|
$
|
40
|
|
|
$
|
21
|
|
|
$
|
13
|
|
|
$
|
27
|
|
Amex Airline Index
|
|
|
100
|
|
|
|
107
|
|
|
|
63
|
|
|
|
45
|
|
|
|
62
|
|
|
|
86
|
|
S&P 500
|
|
|
100
|
|
|
|
114
|
|
|
|
118
|
|
|
|
72
|
|
|
|
89
|
|
|
|
101
|
|
31
|
|
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 for
the years ended December 31, 2010, 2009 and 2008 and as of
December 31, 2010 and 2009 are derived from US Airways
Groups audited consolidated financial statements included
elsewhere in this report. The selected consolidated financial
data for the years ended December 31, 2007 and 2006 and as
of December 31, 2008, 2007 and 2006 are derived from US
Airways Groups audited consolidated financial statements
not included in this report. The selected consolidated financial
data should be read in conjunction with US Airways Groups
consolidated financial statements for the respective periods,
the related notes and the related reports of KPMG LLP, an
independent registered public accounting firm.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions, except share and per share data)
|
|
|
Consolidated statements of operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
11,908
|
|
|
$
|
10,458
|
|
|
$
|
12,118
|
|
|
$
|
11,700
|
|
|
$
|
11,557
|
|
Operating expenses (a)
|
|
|
11,127
|
|
|
|
10,340
|
|
|
|
13,918
|
|
|
|
11,167
|
|
|
|
10,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) (a)
|
|
|
781
|
|
|
|
118
|
|
|
|
(1,800
|
)
|
|
|
533
|
|
|
|
558
|
|
Income (loss) before cumulative effect of change in accounting
principle (b)
|
|
|
502
|
|
|
|
(205
|
)
|
|
|
(2,215
|
)
|
|
|
423
|
|
|
|
285
|
|
Cumulative effect of change in accounting principle, net (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
502
|
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
|
$
|
423
|
|
|
$
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share before cumulative effect of
change in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
3.11
|
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
|
$
|
4.62
|
|
|
$
|
3.30
|
|
Diluted
|
|
|
2.61
|
|
|
|
(1.54
|
)
|
|
|
(22.11
|
)
|
|
|
4.52
|
|
|
|
3.20
|
|
Cumulative effect of change in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.01
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
Earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
3.11
|
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
|
$
|
4.62
|
|
|
$
|
3.31
|
|
Diluted
|
|
|
2.61
|
|
|
|
(1.54
|
)
|
|
|
(22.11
|
)
|
|
|
4.52
|
|
|
|
3.21
|
|
Shares used for computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
161,412
|
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
91,536
|
|
|
|
86,447
|
|
Diluted
|
|
|
201,131
|
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
95,603
|
|
|
|
93,821
|
|
Consolidated balance sheet data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,819
|
|
|
$
|
7,454
|
|
|
$
|
7,214
|
|
|
$
|
8,040
|
|
|
$
|
7,576
|
|
Long-term obligations, less current maturities (d)
|
|
|
4,559
|
|
|
|
4,643
|
|
|
|
4,281
|
|
|
|
3,654
|
|
|
|
3,454
|
|
Total stockholders equity (deficit)
|
|
|
84
|
|
|
|
(355
|
)
|
|
|
(494
|
)
|
|
|
1,455
|
|
|
|
990
|
|
|
|
|
(a) |
|
The 2010 period included a $6 million non-cash charge
related to the decline in market value of certain spare parts,
$5 million in aircraft costs related to previously
announced capacity reductions and other net special charges of
$10 million, which included a settlement and corporate
transaction costs. These costs were offset by a $16 million
refund of ASIF and a $1 million refund of ASIF for our
Express subsidiaries previously paid to the TSA during the years
2005 to 2009. |
|
|
|
The 2009 period included $375 million of net unrealized
gains on fuel hedging instruments, $22 million in aircraft
costs as a result of capacity reductions, $16 million in
non-cash impairment charges due to the decline in fair value of
certain indefinite lived intangible assets associated with
international routes, $11 million in severance and other
charges, $6 million in costs incurred related to the 2009
liquidity improvement program and $3 million in non-cash
charges related to the decline in market value of certain
Express spare parts. |
32
|
|
|
|
|
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 our Boeing 737
aircraft fleet and, as a result of 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. |
|
(b) |
|
The 2010 period included $53 million of net realized gains
related to the sale of certain investments in auction rate
securities as well as an $11 million settlement gain,
offset by $5 million in non-cash charges related to the
write off of debt issuance costs. |
|
|
|
The 2009 period 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,
$10 million in
other-than-temporary
non-cash impairment charges for 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 during 2009. 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 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 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 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 write
off of debt discount and issuance costs associated with those
converted notes, offset by $8 million of interest income
earned on certain prior year federal income tax refunds. |
33
|
|
|
(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. |
|
(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 for
the years ended December 31, 2010, 2009 and 2008 and as of
December 31, 2010 and 2009 are derived from US
Airways audited consolidated financial statements included
elsewhere in this report. The selected consolidated financial
data for the years ended December 31, 2007 and 2006 and as
of December 31, 2008, 2007 and 2006 are derived from US
Airways audited consolidated financial statements not
included in this report. The selected consolidated financial
data should be read in conjunction with US Airways
consolidated financial statements for the respective periods,
the related notes and the related reports of KPMG LLP, an
independent registered public accounting firm.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions)
|
|
|
Consolidated statements of operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
12,055
|
|
|
$
|
10,609
|
|
|
$
|
12,244
|
|
|
$
|
11,813
|
|
|
$
|
11,692
|
|
Operating expenses (a)
|
|
|
11,274
|
|
|
|
10,487
|
|
|
|
14,017
|
|
|
|
11,289
|
|
|
|
11,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) (a)
|
|
|
781
|
|
|
|
122
|
|
|
|
(1,773
|
)
|
|
|
524
|
|
|
|
557
|
|
Income (loss) before cumulative effect of change in accounting
principle (b)
|
|
|
599
|
|
|
|
(140
|
)
|
|
|
(2,148
|
)
|
|
|
478
|
|
|
|
348
|
|
Cumulative effect of change in accounting principle, net (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
599
|
|
|
$
|
(140
|
)
|
|
$
|
(2,148
|
)
|
|
$
|
478
|
|
|
$
|
349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated balance sheet data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,565
|
|
|
$
|
7,123
|
|
|
$
|
6,954
|
|
|
$
|
7,787
|
|
|
$
|
7,351
|
|
Long-term obligations, less current maturities (d)
|
|
|
3,130
|
|
|
|
3,266
|
|
|
|
2,867
|
|
|
|
2,013
|
|
|
|
2,131
|
|
Total stockholders equity (deficit)
|
|
|
780
|
|
|
|
255
|
|
|
|
(221
|
)
|
|
|
1,850
|
|
|
|
(461
|
)
|
|
|
|
(a) |
|
The 2010 period included a $6 million non-cash charge
related to the decline in market value of certain spare parts,
$5 million in aircraft costs related to previously
announced capacity reductions and other net special charges of
$10 million, which included a settlement and corporate
transaction costs. These costs were offset by a $16 million
refund of ASIF previously paid to the TSA during the years 2005
to 2009. |
|
|
|
The 2009 period included $375 million of net unrealized
gains on fuel hedging instruments, $22 million in aircraft
costs as a result of capacity reductions, $16 million in
non-cash impairment charges due to the decline in fair value of
certain indefinite lived intangible assets associated with
international routes, $11 million in severance and other
charges and $6 million in costs incurred related to the
2009 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
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- |
34
|
|
|
|
|
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. |
|
(b) |
|
The 2010 period included $53 million of net realized gains
related to the sale of certain investments in auction rate
securities as well as an $11 million settlement gain,
offset by $5 million in non-cash charges related to the
write off of debt issuance costs. |
|
|
|
The 2009 period 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,
$10 million in
other-than-temporary
non-cash impairment charges for 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 during 2009. 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 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. |
|
|
|
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 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 on certain prior year
federal income tax refunds. |
|
(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. |
|
(d) |
|
Includes debt, capital leases, postretirement benefits other
than pensions and employee benefit liabilities and other. |
35
|
|
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 in
Washington, D.C. at Ronald Reagan Washington National
Airport. We offer scheduled passenger service on more than 3,200
flights daily to more than 200 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. We had
approximately 52 million passengers boarding our mainline
flights in 2010. As of December 31, 2010, we operated 339
mainline jets and are supported by our regional airline
subsidiaries and affiliates operating as US Airways Express
under capacity purchase agreements, which operated 231 regional
jets and 50 turboprops. Our prorate carriers operated 10
turboprops and three regional jets at December 31, 2010.
2010 Year
in Review
The U.S.
Airline Industry
The U.S. airline industry returned to profitability in 2010
after two difficult and challenging years. Profitability was
driven by increased revenues resulting from improved economic
conditions, new ancillary revenues and industry capacity
discipline, which enabled airlines to obtain higher yields. The
industry closed out 2010 experiencing continued strong passenger
demand. The Air Transport Association of America reported that
December 2010 marked the twelfth consecutive month of
year-over-year
revenue growth.
International markets outperformed domestic markets with respect
to
year-over-year
improvements in revenue. International markets had been more
severely impacted by the economic slowdown than domestic markets
in 2009 due to their greater reliance on business travel,
particularly premium and first class seating, to drive
profitability. Cargo demand, which contracted significantly in
2009 due to reduced business spending, also improved in 2010.
As general economic conditions improved during 2010, market
prices for crude oil and related products, including jet fuel,
increased significantly. The average daily spot price of crude
oil during 2010 was $79.48 per barrel as compared to $61.95 per
barrel in 2009. Crude oil prices were volatile, with daily spot
prices fluctuating between a low of $64.78 per barrel in May
2010 to a high of $91.48 per barrel in December 2010. Despite
these fuel price increases, the airline industry was generally
effective in maintaining profitability during 2010. As the
industry enters 2011, a significant uncertainty exists as to
whether the economic conditions and industry capacity discipline
that permitted the industry to increase revenues in 2010 and
thereby absorb large fuel price increases, will remain in place.
See Part 1, Item 1A, Risk Factors
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.
The return of most major domestic carriers to profitability in
2010 improved industry liquidity, which had been significantly
strained by the record fuel price spike in 2008 and recessionary
business conditions in late 2008 and 2009. A continuation of
these trends is dependent on, among other things, continued
improvement in economic conditions and the ability of the
industry to pass through increased costs, including increased
fuel costs.
US
Airways Group
US Airways Groups net income for the year ended
December 31, 2010 was $502 million, or $2.61 per
diluted share, which represented our highest annual profit since
our merger in 2005. Additionally, we ran one of the
industrys most reliable operations as measured by the DOT
rankings in on-time performance, baggage handling and customer
complaints ratio.
36
Revenue
We experienced
year-over-year
growth in revenues driven by higher yields as a result of the
improved economy and industry capacity discipline. Mainline and
Express passenger revenues increased $1.21 billion, or
13.1%, as compared to the 2009 period. The increase in passenger
revenues was driven by an 11.2% increase in yields as compared
to 2009. Our mainline and Express passenger revenue per
available seat mile (PRASM) was 12.20 cents in
2010, a 12.1% increase as compared to 10.88 cents in 2009. Total
revenue per available seat mile (RASM) increased by
a greater amount. RASM was 13.88 cents in 2010, as compared to
12.29 cents in 2009, representing a 12.9% improvement. Total
revenues benefited from our ancillary revenue initiatives, which
generated $514 million in revenues in 2010, an increase of
$90 million over 2009.
Fuel
The average mainline and Express price per gallon of fuel was
$2.25 in 2010 as compared to an average cost per gallon of $1.76
in 2009, an increase of 28.1%. Accordingly, our mainline and
Express fuel expense for 2010 was $700 million, or 28.3%
higher than the 2009 period on a 0.9% increase in total system
capacity.
Since the third quarter of 2008, we have not entered into any
new transactions to hedge our fuel consumption, and we have not
had any fuel hedging contracts outstanding since the third
quarter of 2009.
Cost
Control
We remained committed to maintaining a 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. Our mainline CASM
excluding special items, fuel and profit sharing, decreased 0.04
cents, or 0.4%, from 8.34 cents in 2009 to 8.30 cents in 2010.
The decrease in the 2010 period was primarily due to our strong
operational performance and continued cost diligence, which
enabled us to increase mainline capacity by 1.2% while keeping
costs relatively flat.
The following table details our mainline costs per available
seat mile (CASM) for the year ended
December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
|
(In cents)
|
|
|
|
|
|
Mainline CASM excluding special items, fuel and profit sharing:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline CASM
|
|
|
11.73
|
|
|
|
11.06
|
|
|
|
6.1
|
|
Special items, net
|
|
|
(0.01
|
)
|
|
|
(0.08
|
)
|
|
|
(91.7
|
)
|
Aircraft fuel and related taxes
|
|
|
(3.36
|
)
|
|
|
(2.63
|
)
|
|
|
27.4
|
|
Loss on fuel hedging instruments, net
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
nm
|
|
Profit sharing
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline CASM excluding special items, fuel and profit
sharing (1)
|
|
|
8.30
|
|
|
|
8.34
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We believe that the presentation of mainline CASM excluding fuel
is useful to investors as both the cost and availability of fuel
are subject to many economic and political factors beyond our
control, and excluding special items and profit sharing provides
investors the ability to measure financial performance in a way
that is more indicative of our ongoing performance and is more
comparable to measures reported by other major airlines.
Management uses mainline CASM excluding special items, fuel and
profit sharing to evaluate our operating performance. Amounts
may not recalculate due to rounding. |
Customer
Service
In 2010, we continued our trend of strong operational
performance. 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,
strengthens customer loyalty and attracts new customers.
37
The year ended December 31, 2010 marked a year of
outstanding operational performance for US Airways. We received
twelve first place rankings, the most among the hub and spoke
carriers, in three critical DOT monthly metrics including six
first place rankings in baggage handling, three first place
rankings in on-time performance and three first place rankings
for the lowest customer complaints ratio.
On a full year basis as measured by the DOT, we ranked first in
baggage handling and second in on-time performance. The
combination of continued strong on-time performance and fewer
mishandled bags contributed to an overall 2010 customer
complaints ratio that was 10% better than the average of our hub
and spoke peers.
We reported the following operating statistics to the DOT for
mainline operations for the years ended December 31, 2010
and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
Better
|
|
|
2010
|
|
2009
|
|
(Worse)
|
|
On-time performance (a)
|
|
|
83.0
|
|
|
|
80.9
|
|
|
|
2.6
|
|
Completion factor (b)
|
|
|
98.5
|
|
|
|
98.8
|
|
|
|
(0.3
|
)
|
Mishandled baggage (c)
|
|
|
2.56
|
|
|
|
3.03
|
|
|
|
15.5
|
|
Customer complaints (d)
|
|
|
1.53
|
|
|
|
1.31
|
|
|
|
(16.8
|
)
|
|
|
|
(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. |
Liquidity
Position
As of December 31, 2010, our cash, cash equivalents,
investments in marketable securities and restricted cash were
$2.28 billion, of which $364 million was restricted.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
Cash and cash equivalents
|
|
$
|
1,859
|
|
|
$
|
1,299
|
|
Long-term restricted cash
|
|
|
364
|
|
|
|
480
|
|
Long-term investments in marketable securities
|
|
|
57
|
|
|
|
203
|
|
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents, investments in marketable
securities and restricted cash
|
|
$
|
2,280
|
|
|
$
|
1,982
|
|
|
|
|
|
|
|
|
|
|
During 2010, our profitability drove a $298 million
improvement in our liquidity position. This improvement is net
of a repurchase of $69 million of our 7% Senior
Convertible Notes (the 7% notes) in 2010.
As of December 31, 2010, our investments in marketable
securities included $57 million ($84 million par
value) of auction rate securities that are classified as
noncurrent assets on our consolidated balance sheets. The
reduction in long-term investments during 2010 was due
principally to sales of $145 million of auction rate
securities. Proceeds from our auction rate security sale
transactions approximated the carrying amount of those
investments.
Long-term restricted cash primarily includes cash collateral to
secure workers compensation claims and credit card
processing holdback requirements for advance ticket sales for
which US Airways has not yet provided air transportation. The
decrease in restricted cash during 2010 was primarily due to a
reduction in the amount of credit card holdback.
2011
Outlook
Looking forward it is difficult to predict the price of oil, the
pace at which the economy will continue to recover or the
capacity actions of other airlines, which may impact the ability
to obtain higher yields. Over the past few years we have taken
significant and decisive actions to maintain capacity that is in
line with demand, realign our network to focus on key markets,
introduce new revenue streams, control costs and continue our
commitment to exceptional operating reliability. We believe
these actions have positioned us well as we enter 2011.
38
US
Airways Groups Results of Operations
In 2010, we realized operating income of $781 million and
income before income taxes of $502 million. We experienced
year-over-year
growth in revenues driven by higher yields as a result of the
improved economy and industry capacity discipline. Our 2010
results were also impacted by recognition of the following
special items:
|
|
|
|
|
$5 million of net special charges, consisting of a
$6 million non-cash charge related to the decline in market
value of certain spare parts, $5 million in aircraft costs
related to previously announced capacity reductions and other
net special charges of $10 million, which included a
settlement and corporate transaction costs. These costs were
offset by a $16 million refund of ASIF previously paid to
the TSA during the years 2005 to 2009;
|
|
|
|
$1 million refund for our Express subsidiaries of ASIF
previously paid to the TSA during the years 2005 to
2009; and
|
|
|
|
$53 million of net realized gains related to the sale of
certain investments in auction rate securities as well as an
$11 million settlement gain, offset by $5 million in
non-cash charges related to the write off of debt issuance
costs, all included in nonoperating expense, net.
|
In 2009, we realized operating income of $118 million and a
loss before income taxes of $243 million. We experienced
significant declines in revenues in 2009 as a result of the
global economic recession. Our 2009 results were also impacted
by recognition of the following special items:
|
|
|
|
|
$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;
|
|
|
|
$55 million of net special charges, consisting of
$22 million in aircraft costs as a result of capacity
reductions, $16 million in non-cash impairment charges due
to the decline in fair value of certain indefinite lived
intangible assets associated with international routes,
$11 million in severance and other charges and
$6 million in costs incurred related to the 2009 liquidity
improvement program;
|
|
|
|
$3 million in non-cash charges related to the decline in
market 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 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-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
special 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;
|
|
|
|
$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 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 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.
|
At December 31, 2010, we had approximately
$1.92 billion of gross NOLs to reduce future federal
taxable income. All of our NOLs are expected to be available to
reduce federal taxable income in the calendar year 2011. The
NOLs expire during the years 2024 through 2029. Our net deferred
tax assets, which include $1.85 billion of the NOLs, are
subject to a full valuation allowance. We also had approximately
$82 million of tax-effected state NOLs
39
at December 31, 2010. At December 31, 2010, the
federal and state valuation allowances were $368 million
and $62 million, respectively.
For the year ended December 31, 2010, we utilized NOLs to
reduce our income tax obligation. Utilization of these NOLs
results 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.
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 during 2009. 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
The table below sets forth our selected mainline and Express
operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
Year Ended December 31,
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010-2009
|
|
|
2009-2008
|
|
|
Mainline
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
58,977
|
|
|
|
57,889
|
|
|
|
60,570
|
|
|
|
1.9
|
|
|
|
(4.4
|
)
|
Available seat miles (millions) (b)
|
|
|
71,588
|
|
|
|
70,725
|
|
|
|
74,151
|
|
|
|
1.2
|
|
|
|
(4.6
|
)
|
Passenger load factor (percent) (c)
|
|
|
82.4
|
|
|
|
81.9
|
|
|
|
81.7
|
|
|
|
0.5
|
pts
|
|
|
0.2
|
pts
|
Yield (cents) (d)
|
|
|
12.96
|
|
|
|
11.66
|
|
|
|
13.51
|
|
|
|
11.1
|
|
|
|
(13.7
|
)
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
10.68
|
|
|
|
9.55
|
|
|
|
11.04
|
|
|
|
11.9
|
|
|
|
(13.5
|
)
|
Operating cost per available seat mile (cents) (f)
|
|
|
11.73
|
|
|
|
11.06
|
|
|
|
14.66
|
|
|
|
6.1
|
|
|
|
(24.6
|
)
|
Passenger enplanements (thousands) (g)
|
|
|
51,853
|
|
|
|
51,016
|
|
|
|
54,820
|
|
|
|
1.6
|
|
|
|
(6.9
|
)
|
Departures (thousands)
|
|
|
451
|
|
|
|
461
|
|
|
|
496
|
|
|
|
(2.2
|
)
|
|
|
(7.1
|
)
|
Aircraft at end of period
|
|
|
339
|
|
|
|
349
|
|
|
|
354
|
|
|
|
(2.9
|
)
|
|
|
(1.4
|
)
|
Block hours (thousands) (h)
|
|
|
1,199
|
|
|
|
1,224
|
|
|
|
1,300
|
|
|
|
(2.1
|
)
|
|
|
(5.8
|
)
|
Average stage length (miles) (i)
|
|
|
981
|
|
|
|
972
|
|
|
|
955
|
|
|
|
0.9
|
|
|
|
1.8
|
|
Average passenger journey (miles) (j)
|
|
|
1,674
|
|
|
|
1,637
|
|
|
|
1,554
|
|
|
|
2.3
|
|
|
|
5.4
|
|
Fuel consumption (gallons in millions)
|
|
|
1,073
|
|
|
|
1,069
|
|
|
|
1,142
|
|
|
|
0.4
|
|
|
|
(6.4
|
)
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
2.24
|
|
|
|
1.74
|
|
|
|
3.17
|
|
|
|
28.5
|
|
|
|
(45.0
|
)
|
Full time equivalent employees at end of period
|
|
|
30,871
|
|
|
|
31,333
|
|
|
|
32,671
|
|
|
|
(1.5
|
)
|
|
|
(4.1
|
)
|
Express (k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
10,616
|
|
|
|
10,570
|
|
|
|
10,855
|
|
|
|
0.4
|
|
|
|
(2.6
|
)
|
Available seat miles (millions) (b)
|
|
|
14,230
|
|
|
|
14,367
|
|
|
|
14,953
|
|
|
|
(1.0
|
)
|
|
|
(3.9
|
)
|
Passenger load factor (percent) (c)
|
|
|
74.6
|
|
|
|
73.6
|
|
|
|
72.6
|
|
|
|
1.0
|
pts
|
|
|
1.0
|
pts
|
Yield (cents) (d)
|
|
|
26.57
|
|
|
|
23.68
|
|
|
|
26.52
|
|
|
|
12.2
|
|
|
|
(10.7
|
)
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
19.83
|
|
|
|
17.42
|
|
|
|
19.26
|
|
|
|
13.8
|
|
|
|
(9.5
|
)
|
Operating cost per available seat mile (cents) (f)
|
|
|
19.18
|
|
|
|
17.53
|
|
|
|
20.39
|
|
|
|
9.4
|
|
|
|
(14.0
|
)
|
Passenger enplanements (thousands) (g)
|
|
|
27,707
|
|
|
|
26,949
|
|
|
|
26,732
|
|
|
|
2.8
|
|
|
|
0.8
|
|
Aircraft at end of period
|
|
|
281
|
|
|
|
283
|
|
|
|
296
|
|
|
|
(0.7
|
)
|
|
|
(4.4
|
)
|
Fuel consumption (gallons in millions)
|
|
|
336
|
|
|
|
338
|
|
|
|
352
|
|
|
|
(0.6
|
)
|
|
|
(3.8
|
)
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
2.29
|
|
|
|
1.80
|
|
|
|
3.23
|
|
|
|
27.0
|
|
|
|
(44.3
|
)
|
Total Mainline and Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
69,593
|
|
|
|
68,459
|
|
|
|
71,425
|
|
|
|
1.7
|
|
|
|
(4.2
|
)
|
Available seat miles (millions) (b)
|
|
|
85,818
|
|
|
|
85,092
|
|
|
|
89,104
|
|
|
|
0.9
|
|
|
|
(4.5
|
)
|
Passenger load factor (percent) (c)
|
|
|
81.1
|
|
|
|
80.5
|
|
|
|
80.2
|
|
|
|
0.6
|
pts
|
|
|
0.3
|
pts
|
Yield (cents) (d)
|
|
|
15.04
|
|
|
|
13.52
|
|
|
|
15.49
|
|
|
|
11.2
|
|
|
|
(12.7
|
)
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
12.20
|
|
|
|
10.88
|
|
|
|
12.42
|
|
|
|
12.1
|
|
|
|
(12.4
|
)
|
Total revenue per available seat mile (cents) (l)
|
|
|
13.88
|
|
|
|
12.29
|
|
|
|
13.60
|
|
|
|
12.9
|
|
|
|
(9.6
|
)
|
Passenger enplanements (thousands) (g)
|
|
|
79,560
|
|
|
|
77,965
|
|
|
|
81,552
|
|
|
|
2.0
|
|
|
|
(4.4
|
)
|
Aircraft at end of period
|
|
|
620
|
|
|
|
632
|
|
|
|
650
|
|
|
|
(1.9
|
)
|
|
|
(2.8
|
)
|
Fuel consumption (gallons in millions)
|
|
|
1,409
|
|
|
|
1,407
|
|
|
|
1,494
|
|
|
|
0.1
|
|
|
|
(5.8
|
)
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
2.25
|
|
|
|
1.76
|
|
|
|
3.18
|
|
|
|
28.1
|
|
|
|
(44.8
|
)
|
|
|
|
(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. |
41
|
|
|
(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
Airline Inc., Mesa Airlines, Inc. and Chautauqua Airlines, Inc. |
|
(l) |
|
Total revenue per available seat mile
(RASM) Total revenues divided by total
mainline and Express ASMs. |
2010
Compared With 2009
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline passenger
|
|
$
|
7,645
|
|
|
$
|
6,752
|
|
|
|
13.2
|
|
Express passenger
|
|
|
2,821
|
|
|
|
2,503
|
|
|
|
12.7
|
|
Cargo
|
|
|
149
|
|
|
|
100
|
|
|
|
48.8
|
|
Other
|
|
|
1,293
|
|
|
|
1,103
|
|
|
|
17.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
11,908
|
|
|
$
|
10,458
|
|
|
|
13.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues in 2010 were $11.91 billion as
compared to $10.46 billion in 2009, an increase of
$1.45 billion or 13.9%. Significant changes in the
components of operating revenues are as follows:
|
|
|
|
|
Mainline passenger revenues were $7.65 billion in 2010, an
increase of $893 million from 2009. Mainline RPMs increased
1.9% as mainline capacity, as measured by ASMs, increased 1.2%,
resulting in a 0.5 point increase in load factor to 82.4%.
Mainline passenger yield increased 11.1% to 12.96 cents in 2010
from 11.66 cents in 2009. Mainline PRASM increased 11.9% to
10.68 cents in 2010 from 9.55 cents in 2009. These increases in
mainline yield and PRASM were due principally to the
strengthened pricing environment driven by the improved economy
and continued industry capacity discipline.
|
|
|
|
Express passenger revenues were $2.82 billion in 2010, an
increase of $318 million from 2009. Express RPMs increased
0.4% as Express capacity, as measured by ASMs, decreased 1%,
resulting in a one point increase in load factor to 74.6%.
Express passenger yield increased 12.2% to 26.57 cents in 2010
from 23.68 cents in 2009. Express PRASM increased 13.8% to 19.83
cents in 2010 from 17.42 cents in 2009. The increases in Express
yield and PRASM were the result of the same strengthened pricing
environment discussed in mainline passenger revenues above.
|
|
|
|
Cargo revenues were $149 million in 2010, an increase of
$49 million, or 48.8%, from 2009. The increase in cargo
revenues was driven primarily by an increase in international
freight volume as a result of the improved economic environment.
|
|
|
|
Other revenues were $1.29 billion in 2010, an increase of
$190 million, or 17.2%, from 2009. Ancillary revenues,
principally checked bag fees, comprised approximately half of
the increase. The remaining increase is primarily related to
higher revenues associated with our frequent flyer program,
including increased marketing revenues related to miles sold to
business partners and increased revenues from partner airline
frequent flyer award redemptions on US Airways.
|
42
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
$
|
2,403
|
|
|
$
|
1,863
|
|
|
|
29.0
|
|
Loss (gain) on fuel hedging instruments, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
|
|
|
|
|
|
|
382
|
|
|
|
nm
|
|
Unrealized
|
|
|
|
|
|
|
(375
|
)
|
|
|
nm
|
|
Salaries and related costs
|
|
|
2,244
|
|
|
|
2,165
|
|
|
|
3.6
|
|
Aircraft rent
|
|
|
670
|
|
|
|
695
|
|
|
|
(3.7
|
)
|
Aircraft maintenance
|
|
|
661
|
|
|
|
700
|
|
|
|
(5.5
|
)
|
Other rent and landing fees
|
|
|
549
|
|
|
|
560
|
|
|
|
(1.9
|
)
|
Selling expenses
|
|
|
421
|
|
|
|
382
|
|
|
|
10.3
|
|
Special items, net
|
|
|
5
|
|
|
|
55
|
|
|
|
(91.6
|
)
|
Depreciation and amortization
|
|
|
248
|
|
|
|
242
|
|
|
|
2.7
|
|
Other
|
|
|
1,197
|
|
|
|
1,152
|
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline operating expenses
|
|
|
8,398
|
|
|
|
7,821
|
|
|
|
7.4
|
|
Express expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
|
769
|
|
|
|
609
|
|
|
|
26.2
|
|
Other
|
|
|
1,960
|
|
|
|
1,910
|
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Express expenses
|
|
|
2,729
|
|
|
|
2,519
|
|
|
|
8.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
11,127
|
|
|
$
|
10,340
|
|
|
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses were $11.13 billion in 2010, an
increase of $787 million, or 7.6%, compared to 2009.
Mainline operating expenses were $8.4 billion in 2010, an
increase of $577 million, or 7.4%, from 2009, while
mainline capacity increased 1.2%.
The 2010 period included $5 million of net special charges,
consisting of a $6 million non-cash charge related to the
decline in market value of certain spare parts, $5 million
in aircraft costs related to previously announced capacity
reductions and other net special charges of $10 million,
which included a settlement and corporate transaction costs.
These costs were offset by a $16 million refund of ASIF
previously paid to the TSA during the years 2005 to 2009. This
compares to net special charges of $55 million in 2009,
consisting of $22 million in aircraft costs as a result of
capacity reductions, $16 million in non-cash impairment
charges due to the decline in fair value of certain indefinite
lived intangible assets associated with international routes,
$11 million in severance and other charges and
$6 million in costs incurred related to the 2009 liquidity
improvement program.
Our mainline CASM excluding special items, fuel and profit
sharing, decreased 0.04 cents, or 0.4%, from 8.34 cents in 2009
to 8.30 cents in 2010. The decrease in 2010 was primarily due to
our strong operational performance and continued cost diligence,
which enabled us to increase mainline capacity by 1.2%, while
keeping costs relatively flat.
43
The table below sets forth the major components of our total
mainline CASM and our mainline CASM excluding special items,
fuel and profit sharing for the years ended December 31,
2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
|
(In cents)
|
|
|
|
|
|
Mainline CASM:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
|
3.36
|
|
|
|
2.63
|
|
|
|
27.4
|
|
Loss on fuel hedging instruments, net
|
|
|
|
|
|
|
0.01
|
|
|
|
nm
|
|
Salaries and related costs
|
|
|
3.13
|
|
|
|
3.06
|
|
|
|
2.4
|
|
Aircraft rent
|
|
|
0.93
|
|
|
|
0.98
|
|
|
|
(4.9
|
)
|
Aircraft maintenance
|
|
|
0.92
|
|
|
|
0.99
|
|
|
|
(6.6
|
)
|
Other rent and landing fees
|
|
|
0.77
|
|
|
|
0.79
|
|
|
|
(3.1
|
)
|
Selling expenses
|
|
|
0.59
|
|
|
|
0.54
|
|
|
|
9.0
|
|
Special items, net
|
|
|
0.01
|
|
|
|
0.08
|
|
|
|
(91.7
|
)
|
Depreciation and amortization
|
|
|
0.35
|
|
|
|
0.34
|
|
|
|
1.5
|
|
Other
|
|
|
1.67
|
|
|
|
1.63
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline CASM
|
|
|
11.73
|
|
|
|
11.06
|
|
|
|
6.1
|
|
Special items, net
|
|
|
(0.01
|
)
|
|
|
(0.08
|
)
|
|
|
|
|
Aircraft fuel and related taxes
|
|
|
(3.36
|
)
|
|
|
(2.63
|
)
|
|
|
|
|
Loss on fuel hedging instruments, net
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
Profit sharing
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline CASM excluding special items, fuel and profit
sharing (1)
|
|
|
8.30
|
|
|
|
8.34
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We believe that the presentation of mainline CASM excluding fuel
is useful to investors as both the cost and availability of fuel
are subject to many economic and political factors beyond our
control, and excluding special items and profit sharing provides
investors the ability to measure financial performance in a way
that is more indicative of our ongoing performance and is more
comparable to measures reported by other major airlines.
Management uses mainline CASM excluding special items, fuel and
profit sharing to evaluate our operating performance. Amounts
may not recalculate due to rounding. |
Significant changes in the components of mainline operating
expense per ASM are as follows:
|
|
|
|
|
Aircraft fuel and related taxes per ASM increased 27.4%
primarily due to a 28.5% increase in the average price per
gallon of fuel to $2.24 in 2010 from $1.74 in 2009. A 0.4%
increase in gallons of fuel consumed in 2010 also contributed to
the increase.
|
|
|
|
Salaries and related costs per ASM increased 2.4% primarily due
to the accrual of $47 million for profit sharing.
|
|
|
|
Aircraft maintenance expense per ASM decreased 6.6% in 2010 as
compared to 2009 due to a shift in the mix of aircraft engines
undergoing maintenance, which carried lower overhaul costs as
well as a decrease in the number of engine overhauls performed.
|
|
|
|
Selling expenses per ASM increased 9% due to higher credit card
fees and commissions paid as a result of the 13.1% increase in
passenger revenues in 2010.
|
Total Express expenses increased $210 million, or 8.4%, in
2010 to $2.73 billion from $2.52 billion in 2009. The
year-over-year
increase was primarily driven by a $160 million increase in
fuel costs. The average fuel price per gallon was $2.29 in 2010,
which was 27% higher than the average fuel price per gallon of
$1.80 in 2009. Other Express expenses increased
$50 million, or 2.7%, despite a 1% decrease in Express ASMs
due primarily to an increase in selling expenses as a result of
the 12.7% increase in passenger revenues as well as an increase
in maintenance expenses due principally to increases in the
number of engine overhauls performed in 2010 as compared to 2009.
44
Nonoperating
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
|
(In millions)
|
|
|
|
|
|
Nonoperating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
13
|
|
|
$
|
24
|
|
|
|
(46.3
|
)
|
Interest expense, net
|
|
|
(329
|
)
|
|
|
(304
|
)
|
|
|
8.2
|
|
Other, net
|
|
|
37
|
|
|
|
(81
|
)
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating expense, net
|
|
$
|
(279
|
)
|
|
$
|
(361
|
)
|
|
|
(22.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net nonoperating expense was $279 million in 2010 as
compared to $361 million in 2009. Interest expense, net
increased $25 million due to an increase in the average
debt balance outstanding in 2010 primarily as a result of
liquidity raising initiatives completed throughout 2009.
Other nonoperating expense, net in 2010 included
$53 million of net realized gains related to the sale of
certain investments in auction rate securities as well as an
$11 million settlement gain. These gains were offset by
$17 million in net foreign currency losses as a result of
the overall strengthening of the U.S. dollar during 2010
and $5 million in non-cash charges related to the write off
of debt issuance costs. 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 investments in auction rate
securities, $3 million in foreign currency losses and a
$2 million non-cash asset impairment charge. The sales of
auction rate securities are discussed in more detail under
Liquidity and Capital Resources.
2009
Compared With 2008
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
|
(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, a
decrease of 17.5% from 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.
|
45
|
|
|
|
|
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 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
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
|
(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 mainline
capacity decreased 4.6%.
The 2009 period included $55 million of net special charges
consisting of $22 million in aircraft costs as a result of
capacity reductions, $16 million in non-cash impairment
charges due to the decline in fair value of certain indefinite
lived intangible assets associated with international routes,
$11 million in severance and other charges and
$6 million in costs incurred related to the 2009 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 capacity reductions, $14 million in aircraft
costs and $9 million in severance charges.
Our mainline CASM excluding special items, fuel and the 2008
goodwill impairment charge was relatively constant
year-over-year.
46
The table below sets forth the major components of our total
mainline CASM and our mainline CASM excluding special items,
fuel and the 2008 goodwill impairment charge for the years ended
December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
|
(In cents)
|
|
|
|
|
|
Mainline CASM:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
|
2.63
|
|
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special items, net
|
|
|
(0.08
|
)
|
|
|
(0.10
|
)
|
|
|
|
|
Aircraft fuel and related taxes
|
|
|
(2.63
|
)
|
|
|
(4.88
|
)
|
|
|
|
|
Loss on fuel hedging instruments, net
|
|
|
(0.01
|
)
|
|
|
(0.48
|
)
|
|
|
|
|
Goodwill impairment
|
|
|
|
|
|
|
(0.84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline CASM excluding special items and fuel (1)
|
|
|
8.34
|
|
|
|
8.36
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We believe that the presentation of mainline CASM excluding fuel
is useful to investors as both the cost and availability of fuel
are subject to many economic and political factors beyond our
control, and excluding special items provides investors the
ability to measure financial performance in a way that is more
indicative of our ongoing performance and is more comparable to
measures reported by other major airlines. Management uses
mainline CASM excluding special items and fuel to evaluate our
operating performance. Amounts may not recalculate due to
rounding. |
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 2008. 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
transactions to hedge our fuel consumption, and we have not had
any fuel hedging contracts outstanding since the third quarter
of 2009. 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% in 2009 as
compared to 2008 due principally to decreases in the number of
engine overhauls performed in 2009 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.
|
47
|
|
|
|
|
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 a $528 million decrease in
fuel costs. The average fuel price per gallon was $1.80 in 2009,
which was 44.3% lower than the average price per gallon of $3.23
in 2008. 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.
Nonoperating
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
|
(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 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 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.
US
Airways Results of Operations
In 2010, US Airways realized operating income of
$781 million and income before income taxes of
$600 million. US Airways experienced
year-over-year
growth in revenues driven by higher yields as a result of the
improved economy and industry capacity discipline. US
Airways 2010 results were also impacted by recognition of
the following special items:
|
|
|
|
|
$5 million of net special charges, consisting of a
$6 million non-cash charge related to the decline in market
value of certain spare parts, $5 million in aircraft costs
related to previously announced capacity reductions and other
net special charges of $10 million, which included a
settlement and corporate transaction costs. These costs were
offset by a $16 million refund of ASIF previously paid to
the TSA during the years 2005 to 2009; and
|
|
|
|
$53 million of net realized gains related to the sale of
certain investments in auction rate securities as well as an
$11 million settlement gain, offset by $5 million in
non-cash charges related to the write off of debt issuance
costs, all included in nonoperating expense, net.
|
48
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 in 2009 as a result of the global economic
recession. US Airways 2009 results were also impacted
by recognition of the following special items:
|
|
|
|
|
$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;
|
|
|
|
$55 million of net special charges, consisting of
$22 million in aircraft costs as a result of capacity
reductions, $16 million in non-cash impairment charges due
to the decline in fair value of certain indefinite lived
intangible assets associated with international routes,
$11 million in severance and other charges and
$6 million in costs incurred related to the 2009 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 investments in auction rate
securities and a $2 million non-cash asset impairment
charge, all included in nonoperating expense, net.
|
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 special 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;
|
|
|
|
$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
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 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.
|
At December 31, 2010, US Airways had approximately
$1.84 billion of gross NOLs to reduce future federal
taxable income. All of US Airways NOLs are expected to be
available to reduce federal taxable income in the calendar year
2011. The NOLs expire during the years 2024 through 2029. US
Airways net deferred tax assets, which include
$1.77 billion of the NOLs, are subject to a full valuation
allowance. US Airways also had approximately $78 million of
tax-effected state NOLs at December 31, 2010. At
December 31, 2010, the federal and state valuation
allowances were $388 million and $62 million,
respectively.
For the year ended December 31, 2010, US Airways utilized
NOLs to reduce its income tax obligation. Utilization of these
NOLs results 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. For the
year ended December 31, 2010, US Airways recorded
$1 million of state income tax expense related to certain
states where NOLs were either limited or not available to be
used.
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. 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.
For the year ended December 31, 2008, US Airways reported a
loss, which increased its NOLs, and it did not record a tax
provision.
49
The table below sets forth US Airways selected mainline
and Express operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
Year Ended December 31,
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010-2009
|
|
|
2009-2008
|
|
|
Mainline
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
58,977
|
|
|
|
57,889
|
|
|
|
60,570
|
|
|
|
1.9
|
|
|
|
(4.4
|
)
|
Available seat miles (millions) (b)
|
|
|
71,588
|
|
|
|
70,725
|
|
|
|
74,151
|
|
|
|
1.2
|
|
|
|
(4.6
|
)
|
Passenger load factor (percent) (c)
|
|
|
82.4
|
|
|
|
81.9
|
|
|
|
81.7
|
|
|
|
0.5
|
pts
|
|
|
0.2
|
pts
|
Yield (cents) (d)
|
|
|
12.96
|
|
|
|
11.66
|
|
|
|
13.51
|
|
|
|
11.1
|
|
|
|
(13.7
|
)
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
10.68
|
|
|
|
9.55
|
|
|
|
11.04
|
|
|
|
11.9
|
|
|
|
(13.5
|
)
|
Aircraft at end of period
|
|
|
339
|
|
|
|
349
|
|
|
|
354
|
|
|
|
(2.9
|
)
|
|
|
(1.4
|
)
|
Fuel consumption (gallons in millions)
|
|
|
1,073
|
|
|
|
1,069
|
|
|
|
1,142
|
|
|
|
0.4
|
|
|
|
(6.4
|
)
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
2.24
|
|
|
|
1.74
|
|
|
|
3.17
|
|
|
|
28.5
|
|
|
|
(45.0
|
)
|
Express (f)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
10,616
|
|
|
|
10,570
|
|
|
|
10,855
|
|
|
|
0.4
|
|
|
|
(2.6
|
)
|
Available seat miles (millions) (b)
|
|
|
14,230
|
|
|
|
14,367
|
|
|
|
14,953
|
|
|
|
(1.0
|
)
|
|
|
(3.9
|
)
|
Passenger load factor (percent) (c)
|
|
|
74.6
|
|
|
|
73.6
|
|
|
|
72.6
|
|
|
|
1.0
|
pts
|
|
|
1.0
|
pts
|
Yield (cents) (d)
|
|
|
26.57
|
|
|
|
23.68
|
|
|
|
26.52
|
|
|
|
12.2
|
|
|
|
(10.7
|
)
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
19.83
|
|
|
|
17.42
|
|
|
|
19.26
|
|
|
|
13.8
|
|
|
|
(9.5
|
)
|
Aircraft at end of period
|
|
|
281
|
|
|
|
283
|
|
|
|
296
|
|
|
|
(0.7
|
)
|
|
|
(4.4
|
)
|
Fuel consumption (gallons in millions)
|
|
|
336
|
|
|
|
338
|
|
|
|
352
|
|
|
|
(0.6
|
)
|
|
|
(3.8
|
)
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
2.29
|
|
|
|
1.80
|
|
|
|
3.23
|
|
|
|
27.3
|
|
|
|
(44.3
|
)
|
Total Mainline and Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) (a)
|
|
|
69,593
|
|
|
|
68,459
|
|
|
|
71,425
|
|
|
|
1.7
|
|
|
|
(4.2
|
)
|
Available seat miles (millions) (b)
|
|
|
85,818
|
|
|
|
85,092
|
|
|
|
89,104
|
|
|
|
0.9
|
|
|
|
(4.5
|
)
|
Passenger load factor (percent) (c)
|
|
|
81.1
|
|
|
|
80.5
|
|
|
|
80.2
|
|
|
|
0.6
|
pts
|
|
|
0.3
|
pts
|
Yield (cents) (d)
|
|
|
15.04
|
|
|
|
13.52
|
|
|
|
15.49
|
|
|
|
11.2
|
|
|
|
(12.7
|
)
|
Passenger revenue per available seat mile (cents) (e)
|
|
|
12.20
|
|
|
|
10.88
|
|
|
|
12.42
|
|
|
|
12.1
|
|
|
|
(12.4
|
)
|
Total revenue per available seat mile (cents) (g)
|
|
|
14.05
|
|
|
|
12.47
|
|
|
|
13.74
|
|
|
|
12.7
|
|
|
|
(9.3
|
)
|
Aircraft at end of period
|
|
|
620
|
|
|
|
632
|
|
|
|
650
|
|
|
|
(1.9
|
)
|
|
|
(2.8
|
)
|
Fuel consumption (gallons in millions)
|
|
|
1,409
|
|
|
|
1,407
|
|
|
|
1,494
|
|
|
|
0.1
|
|
|
|
(5.8
|
)
|
Average aircraft fuel price including related taxes (dollars per
gallon)
|
|
|
2.25
|
|
|
|
1.76
|
|
|
|
3.18
|
|
|
|
28.2
|
|
|
|
(44.8
|
)
|
|
|
|
(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) |
|
Express statistics include Piedmont and PSA, as well as
operating and financial results from capacity purchase
agreements with Air Wisconsin Airlines Corporation, Republic
Airline Inc., Mesa Airlines, Inc. and Chautauqua Airlines, Inc. |
|
(g) |
|
Total revenue per available seat mile
(RASM) Total revenues divided by total
mainline and Express ASMs. |
50
2010
Compared With 2009
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline passenger
|
|
$
|
7,645
|
|
|
$
|
6,752
|
|
|
|
13.2
|
|
Express passenger
|
|
|
2,821
|
|
|
|
2,503
|
|
|
|
12.7
|
|
Cargo
|
|
|
149
|
|
|
|
100
|
|
|
|
48.8
|
|
Other
|
|
|
1,440
|
|
|
|
1,254
|
|
|
|
14.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
12,055
|
|
|
$
|
10,609
|
|
|
|
13.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues in 2010 were $12.06 billion as
compared to $10.61 billion in 2009, an increase of
$1.45 billion or 13.6%. Significant changes in the
components of operating revenues are as follows:
|
|
|
|
|
Mainline passenger revenues were $7.65 billion in 2010, an
increase of $893 million from 2009. Mainline RPMs increased
1.9% as mainline capacity, as measured by ASMs, increased 1.2%,
resulting in a 0.5 point increase in load factor to 82.4%.
Mainline passenger yield increased 11.1% to 12.96 cents in 2010
from 11.66 cents in 2009. Mainline PRASM increased 11.9% to
10.68 cents in 2010 from 9.55 cents in 2009. These increases in
mainline yield and PRASM were due principally to the
strengthened pricing environment driven by the improved economy
and continued industry capacity discipline.
|
|
|
|
Express passenger revenues were $2.82 billion in 2010, an
increase of $318 million from 2009. Express RPMs increased
0.4% as Express capacity, as measured by ASMs, decreased 1%,
resulting in a one point increase in load factor to 74.6%.
Express passenger yield increased 12.2% to 26.57 cents in 2010
from 23.68 cents in 2009. Express PRASM increased 13.8% to 19.83
cents in 2010 from 17.42 cents in 2009. The increases in Express
yield and PRASM were the result of the same strengthened pricing
environment discussed in mainline passenger revenues above.
|
|
|
|
Cargo revenues were $149 million in 2010, an increase of
$49 million, or 48.8%, from 2009. The increase in cargo
revenues was driven primarily by an increase in international
freight volume as a result of the improved economic environment.
|
|
|
|
Other revenues were $1.44 billion in 2010, an increase of
$186 million, or 14.8%, from 2009. Ancillary revenues,
principally checked bag fees, comprised approximately half of
the increase. The remaining increase is primarily related to
higher revenues associated with US Airways frequent flyer
program, including increased marketing revenues related to miles
sold to business partners and increased revenues from partner
airline frequent flyer award redemptions on US Airways.
|
51
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
$
|
2,403
|
|
|
$
|
1,863
|
|
|
|
29.0
|
|
Loss (gain) on fuel hedging instruments, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
|
|
|
|
|
|
|
382
|
|
|
|
nm
|
|
Unrealized
|
|
|
|
|
|
|
(375
|
)
|
|
|
nm
|
|
Salaries and related costs
|
|
|
2,244
|
|
|
|
2,165
|
|
|
|
3.6
|
|
Aircraft rent
|
|
|
670
|
|
|
|
695
|
|
|
|
(3.7
|
)
|
Aircraft maintenance
|
|
|
661
|
|
|
|
700
|
|
|
|
(5.5
|
)
|
Other rent and landing fees
|
|
|
549
|
|
|
|
560
|
|
|
|
(1.9
|
)
|
Selling expenses
|
|
|
421
|
|
|
|
382
|
|
|
|
10.3
|
|
Special items, net
|
|
|
5
|
|
|
|
55
|
|
|
|
(91.6
|
)
|
Depreciation and amortization
|
|
|
258
|
|
|
|
251
|
|
|
|
2.6
|
|
Other
|
|
|
1,223
|
|
|
|
1,181
|
|
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mainline operating expenses
|
|
|
8,434
|
|
|
|
7,859
|
|
|
|
7.3
|
|
Express expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
|
|
770
|
|
|
|
609
|
|
|
|
26.5
|
|
Other
|
|
|
2,070
|
|
|
|
2,019
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Express expenses
|
|
|
2,840
|
|
|
|
2,628
|
|
|
|
8.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
11,274
|
|
|
$
|
10,487
|
|
|
|
7.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses were $11.27 billion in 2010, an
increase of $787 million, or 7.5%, compared to 2009.
Mainline operating expenses were $8.43 billion in 2010, an
increase of $575 million, or 7.3%, from 2009, while
mainline capacity increased 1.2%.
The 2010 period included $5 million of net special charges,
consisting of a $6 million non-cash charge related to the
decline in market value of certain spare parts, $5 million
in aircraft costs related to previously announced capacity
reductions and other net special charges of $10 million,
which included a settlement and corporate transaction costs.
These costs were offset by a $16 million refund of ASIF
previously paid to the TSA during the years 2005 to 2009. This
compares to net special charges of $55 million in 2009,
consisting of $22 million in aircraft costs as a result of
capacity reductions, $16 million in non-cash impairment
charges due to the decline in fair value of certain indefinite
lived intangible assets associated with international routes,
$11 million in severance and other charges and
$6 million in costs incurred related to the 2009 liquidity
improvement program.
Significant changes in the components of mainline operating
expense are as follows:
|
|
|
|
|
Aircraft fuel and related taxes increased 29% primarily due to a
28.5% increase in the average price per gallon of fuel to $2.24
in 2010 from $1.74 in 2009. A 0.4% increase in gallons of fuel
consumed in 2010 also contributed to the increase.
|
|
|
|
Salaries and related costs increased 3.6% primarily due to the
accrual of $47 million for profit sharing.
|
|
|
|
Aircraft maintenance expense decreased 5.5% in 2010 as compared
to 2009 due to a shift in the mix of aircraft engines undergoing
maintenance, which carried lower overhaul costs as well as a
decrease in the number of engine overhauls performed.
|
|
|
|
Selling expenses increased 10.3% due to higher credit card fees
and commissions paid as a result of the 13.1% increase in
passenger revenues in 2010.
|
Total Express expenses increased $212 million, or 8.1%, in
2010 to $2.84 billion from $2.63 billion in 2009. The
year-over-year
increase was primarily driven by a $161 million increase in
fuel costs. The average fuel price per gallon was $2.29 in 2010,
which was 27.3% higher than the average fuel price per gallon of
$1.80 in 2009. Other Express expenses increased
$51 million, or 2.5%, despite a 1% decrease in Express ASMs
due primarily to an
52
increase in selling expenses as a result of the 12.7% increase
in passenger revenues and certain contractual rate increases
associated with capacity purchase agreements.
Nonoperating
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
|
(In millions)
|
|
|
|
|
|
Nonoperating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
13
|
|
|
$
|
24
|
|
|
|
(46.3
|
)
|
Interest expense, net
|
|
|
(233
|
)
|
|
|
(241
|
)
|
|
|
(3.1
|
)
|
Other, net
|
|
|
39
|
|
|
|
(83
|
)
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating expense, net
|
|
$
|
(181
|
)
|
|
$
|
(300
|
)
|
|
|
(39.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net nonoperating expense was $181 million in 2010 as
compared to $300 million in 2009. Interest expense, net
decreased $8 million due to a reduction in interest-bearing
intercompany payable balances, offset by an increase in the
average debt balance outstanding in 2010 primarily as a result
of liquidity raising initiatives completed throughout 2009.
Other nonoperating expense, net in 2010 included
$53 million of net realized gains related to the sale of
certain investments in auction rate securities as well as an
$11 million settlement gain. These gains were offset by
$17 million in net foreign currency losses as a result of
the overall strengthening of the U.S. dollar during 2010
and $5 million in non-cash charges related to the write off
of debt issuance costs. 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 investments in auction rate
securities, $3 million in foreign currency losses and a
$2 million non-cash asset impairment charge. The sales of
auction rate securities are discussed in more detail under
Liquidity and Capital Resources.
2009
Compared With 2008
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
|
(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, a
decrease of 17.5% from 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
|
53
|
|
|
|
|
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 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.
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
|
(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, while
mainline capacity decreased 4.6%.
The 2009 period included $55 million of net special charges
consisting of $22 million in aircraft costs as a result of
capacity reductions, $16 million in non-cash impairment
charges due to the decline in fair value of certain indefinite
lived intangible assets associated with international routes,
$11 million in severance and other charges and
$6 million in costs incurred related to the 2009 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 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 2008. A 6.4% decrease in gallons of fuel
consumed in 2009 on 4.6% lower capacity also contributed to the
decrease.
|
54
|
|
|
|
|
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 transactions to hedge its
fuel consumption, and US Airways has not had any fuel hedging
contracts outstanding since the third quarter of 2009. 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.
|
|
|
|
Aircraft maintenance expense decreased 10.6% in 2009 as compared
to 2008 due principally to decreases in the number of engine
overhauls performed in 2009 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 a $528 million decrease in
fuel costs. The average fuel price per gallon was $1.80 in 2009,
which was 44.3% lower than the average price per gallon of $3.23
in 2008. 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 capacity
purchase agreements as well as certain contractual rate
increases with these carriers.
Nonoperating
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
|
(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 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 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.
55
Liquidity
and Capital Resources
As of December 31, 2010, our cash, cash equivalents,
investments in marketable securities and restricted cash were
$2.28 billion, of which $364 million was restricted.
Our investments in marketable securities included
$57 million of auction rate securities at fair value
($84 million par value) that are classified as noncurrent
assets on our consolidated balance sheets.
Investments
in Marketable Securities
As of December 31, 2010, we held auction rate securities
with a fair value of $57 million ($84 million 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 23 to 42 years, with 78% of our portfolio
maturing within the next 30 years (2033
2036) and 22% maturing thereafter (2052). As a result of
the liquidity issues experienced in the global credit and
capital markets, all of our auction rate securities have
experienced failed auctions since August 2007.
During 2010, we sold certain investments in auction rate
securities for proceeds of $145 million, resulting in
$53 million of net realized gains recorded in nonoperating
expense, net, of which $52 million represents the
reclassification of prior period net unrealized gains from other
comprehensive income as determined on a specific-identification
basis. Proceeds for all of these sale transactions approximated
the carrying value of our investments. We have now sold more
than 75% of our investments in auction rate securities, which
have experienced failed auctions since August 2007.
We continue to monitor the market for auction rate securities
and consider its impact (if any) on the fair value of our
remaining investments in these securities. 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, 2010, the current lack
of liquidity in our remaining 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
2010
Compared to 2009
Net cash provided by operating activities was $804 million
and $59 million in 2010 and 2009, respectively, a
year-over-year
improvement of $745 million. Growth in operating cash flows
resulted from a $1.45 billion increase in total operating
revenues driven primarily by higher yields as a result of the
improved economy and industry capacity discipline. The increase
in revenues was offset in part by increases in mainline and
Express fuel expense, which was $700 million, or 28.3%
higher than the 2009 period on a 0.9% increase in total system
capacity.
Net cash provided by investing activities was $63 million
in 2010 as compared to net cash used in investing activities of
$495 million in 2009. Principal investing activities in
2010 included proceeds from sales of marketable securities of
$325 million, including sales of auction rate securities of
$145 million, and a $116 million decrease in
restricted cash. These cash inflows were offset in part by
purchases of marketable securities of $180 million and
expenditures for property and equipment totaling
$201 million. Expenditures for property and equipment
related primarily to the purchase of Airbus aircraft and
payments of equipment purchase deposits for certain aircraft on
order. Restricted cash decreased primarily due to a change in
the amount of holdback held by certain credit card processors
for advance ticket sales for which US Airways has not yet
provided air transportation. Principal investing activities in
2009 included expenditures for property and equipment totaling
$683 million primarily related to the purchase of Airbus
aircraft. These cash outflows were offset in part by
$76 million in proceeds from dispositions of property and
equipment, a $60 million decrease in restricted cash and
proceeds from sales of investments in marketable securities of
$52 million. The $76 million in proceeds from
dispositions of property and equipment was the result of 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
56
during 2009 due to a change in the amount of holdback held by
certain credit card processors for advance ticket sales for
which US Airways has not yet provided air transportation.
Net cash used in financing activities was $307 million in
2010 as compared to net cash provided by financing activities of
$701 million in 2009. Principal financing activities in
2010 included debt repayments of $764 million, including
the repayment of existing debt associated with eight Airbus
aircraft refinanced by a December 2010 enhanced equipment trust
certificate (2010 EETC) issuance and the repurchase
of $69 million aggregate principal amount of our
7% notes. These cash outflows were offset in part by
proceeds from the issuance of debt of $467 million, which
included $340 million of proceeds from the issuance of
equipment notes associated with the 2010 EETC issuance as well
as the financing associated with the purchase of Airbus
aircraft. 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 in a May 2009 public offering, 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. These cash inflows were
offset in part by debt repayments that 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 offering of 17.5 million shares and
$137 million from a September 2009 public offering of
29 million shares.
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
year-over-year
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 transactions
to hedge our fuel consumption, and we have not had any fuel
hedging contracts outstanding since the third quarter of 2009.
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 cash outflows were offset
in part by $76 million in proceeds from dispositions of
property and equipment, a $60 million decrease in
restricted cash and proceeds from sales of investments in
marketable securities of $52 million. The $76 million
in proceeds from dispositions of property and equipment was the
result of 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 a
change in the amount of holdback held by certain credit card
processors for advance ticket sales for which US Airways has 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 in 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
in a May 2009 public offering, 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. These cash
57
inflows were offset in part by debt repayments that 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 offering of
17.5 million shares and $137 million from a September
2009 public 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, 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. These cash
inflows were offset in part by debt repayments that totaled
$734 million in 2008, 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 offering of 21.85 million
shares during the third quarter of 2008.
US
Airways
2010
Compared to 2009
Net cash provided by operating activities was $821 million
and $326 million in 2010 and 2009, respectively, a
year-over-year
improvement of $495 million. Growth in operating cash flows
resulted from a $1.45 billion increase in total operating
revenues driven primarily by higher yields as a result of the
improved economy and industry capacity discipline. The increase
in revenues was offset in part by increases in mainline and
Express fuel expense, which was $701 million, or 28.4%
higher than the 2009 period on a 0.9% increase in total system
capacity. In addition, US Airways 2009 operating cash
flows also benefited from $257 million of net intercompany
cash transfers received from US Airways Group. US Airways
2010 operating cash flows were not materially impacted by net
intercompany cash transfers.
Net cash provided by investing activities was $77 million
in 2010 as compared to net cash used in investing activities of
$489 million in 2009. Principal investing activities in
2010 included proceeds from sales of marketable securities of
$325 million, including sales of auction rate securities of
$145 million, and a $116 million decrease in
restricted cash. These cash inflows were offset in part by
purchases of marketable securities of $180 million and
expenditures for property and equipment totaling
$187 million. Expenditures for property and equipment
related primarily to the purchase of Airbus aircraft and
payments of equipment purchase deposits for certain aircraft on
order. Restricted cash decreased primarily due to a change in
the amount of holdback held by certain credit card processors
for advance ticket sales for which US Airways has not yet
provided air transportation. Principal investing activities in
2009 included expenditures for property and equipment totaling
$677 million primarily related to the purchase of Airbus
aircraft. These cash outflows were offset in part by
$76 million in proceeds from dispositions of property and
equipment, a $60 million decrease in restricted cash and
proceeds from sales of investments in marketable securities of
$52 million. The $76 million in proceeds from
dispositions of property and equipment was the result of 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 a change
in the amount of holdback held by certain credit card processors
for advance ticket sales for which US Airways has not yet
provided air transportation.
Net cash used in financing activities was $251 million in
2010 as compared to net cash provided by financing activities of
$346 million in 2009. Principal financing activities in
2010 included debt repayments of $679 million, including
the repayment of existing debt associated with eight Airbus
aircraft refinanced by a December 2010 EETC issuance. These cash
outflows were offset in part by proceeds from the issuance of
debt of $437 million, which included $340 million of
proceeds from the issuance of equipment notes associated with
the 2010 EETC issuance as well as the financing associated with
the purchase of Airbus aircraft. 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. These cash inflows were offset in part by debt
repayments that totaled $391 million in 2009.
58
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
year-over-year
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 US Airways
counterparties. Since the third quarter of 2008, US Airways has
not entered into any new transactions to hedge its fuel
consumption, and US Airways has not had any fuel hedging
contracts outstanding since the third quarter of 2009.
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. In addition, US
Airways 2009 operating cash flows also benefited from
$257 million of net intercompany cash transfers received
from US Airways Group.
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 cash outflows were offset
in part by $76 million in proceeds from dispositions of
property and equipment, a $60 million decrease in
restricted cash and proceeds from sales of investments in
marketable securities of $52 million. The $76 million
in proceeds from dispositions of property and equipment was the
result of 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 a
change in the amount of holdback held by certain credit card
processors for advance ticket sales for which US Airways has 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 in 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. These cash inflows were offset in part by debt
repayments that 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. These cash inflows were offset
in part by debt repayments that totaled $318 million in
2008, 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.
Commitments
As of December 31, 2010, we had $4.62 billion of
long-term debt and capital leases (including current maturities
and before discount on debt).
59
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 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 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,
2010, the interest rate on the Citicorp credit facility was
2.79% 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 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 $1.15 billion as of December 31, 2010. As of
December 31, 2010, we were in compliance with all debt
covenants under the Citicorp credit facility.
7% Senior
Convertible Notes
Prior to September 30, 2010, we had outstanding
$74 million principal amount of 7% notes. Holders had
the right to require us to purchase for cash or shares or a
combination thereof, at our election, all or a portion of their
7% notes on September 30, 2010 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. As of September 30, 2010, $69 million
of the 7% notes outstanding were validly surrendered for
purchase and we paid $69 million in cash to satisfy the
aggregate repurchase price. The principal amount of the
remaining 7% notes outstanding as of December 31, 2010
was $5 million.
2010
Financing Transactions
In 2010, US Airways borrowed $181 million to finance Airbus
aircraft deliveries. 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.
60
In 2010, US Airways Group borrowed $30 million to finance
airport construction activities in Philadelphia. These notes
bear interest at fixed rates and are secured by certain US
Airways leasehold interests. The notes payable mature from
2020 to 2029.
In December 2010, US Airways created two pass-through trusts
which issued approximately $340 million aggregate face
amount of
Series 2010-1A
and
Series 2010-1B
Enhanced Equipment Trust Certificates (the 2010
EETCs) in connection with the refinancing of eight Airbus
aircraft owned by US Airways. The 2010 EETCs represent
fractional undivided interests in the respective pass-through
trusts and are not obligations of US Airways. The net proceeds
from the issuance of the 2010 EETCs were used to purchase
equipment notes issued by US Airways in two series:
Series A equipment notes in an aggregate principal amount
of $263 million bearing interest at 6.25% per annum and
Series B equipment notes in an aggregate principal amount
of $77 million bearing interest at 8.5% per annum. Interest
on the equipment notes is payable semiannually in April and
October of each year, beginning in April 2011. Principal
payments on the equipment notes are scheduled to begin in
October 2011. The final payments on the Series A equipment
notes and Series B equipment notes will be due in April
2023 and April 2017, respectively. US Airways payment
obligations under the equipment notes are fully and
unconditionally guaranteed by US Airways Group. Substantially
all of the proceeds from the issuance of the equipment notes
were used to repay the existing debt associated with eight
Airbus aircraft, with the balance used for general corporate
purposes. The equipment notes are secured by liens on aircraft.
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. These holdback
amounts are reflected on our consolidated balance sheet as
restricted cash.
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). Since 2008, when deliveries commenced under the
purchase agreements, we have taken delivery of 34 aircraft
through December 31, 2010, which includes four A320
aircraft, 23 A321 aircraft and seven A330-200 aircraft. During
2010, US Airways took delivery of two A320 aircraft and two
A330-200 aircraft, which were financed as discussed above. US
Airways plans to take delivery of 12 A320 family aircraft in
each of 2011 and 2012, with the remaining 46 A320 family
aircraft scheduled to be delivered between 2013 and 2015. In
addition, US Airways plans to take delivery of the eight
remaining A330-200 aircraft in 2013 and 2014. Deliveries of the
22 A350 XWB aircraft are scheduled to begin in 2017 and
extend through 2019.
US Airways has agreements for the purchase of eight new IAE
V2500-A5 spare engines scheduled for delivery through 2014 for
use on the A320 family fleet, three new Trent 700 spare engines
scheduled for delivery through 2013 for use on the A330-200
fleet and three new Trent XWB spare engines scheduled for
delivery in 2017 through 2019 for use on the A350 XWB aircraft.
US Airways has taken delivery of two of the Trent 700 spare
engines and one of the V2500-A5 spare engines through
December 31, 2010.
Under all of our aircraft and engine purchase agreements, our
total future commitments as of December 31, 2010 are
expected to be approximately $5.9 billion through 2019 as
follows: $570 million in 2011, $618 million in 2012,
61
$1.15 billion in 2013, $935 million in 2014,
$445 million in 2015 and $2.18 billion thereafter,
which includes predelivery deposits and payments. We have
financing commitments for all Airbus aircraft scheduled for
delivery in 2011 and 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, 2010, we and our subsidiaries were in
compliance with the covenants in our long-term debt agreements.
The following table details our credit ratings as of
December 31, 2010:
|
|
|
|
|
|
|
|
|
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 worsen, we may face
future downgrades, which could 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 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 our
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 27 owned aircraft, 114 leased aircraft and three
leased engines, which were financed with pass through trust
certificates, or EETCs, issued by pass through trusts. These
trusts are off-balance sheet entities, the
62
primary purpose of which is to finance the acquisition of flight
equipment. Rather than finance each aircraft separately when
such aircraft is purchased, delivered or refinanced, these
trusts allowed US Airways to raise the financing for several
aircraft at one time and place such funds in escrow pending the
purchase, delivery or refinancing 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 or refinanced 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, 2010, $809 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 generally is not the
primary beneficiary of the leasing entities if the lease terms
are consistent with market terms at the inception of the lease
and do not include a residual value guarantee, fixed-price
purchase option or similar feature that obligates US Airways to
absorb decreases in value or entitles US Airways to participate
in increases in the value of the aircraft. 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 $2.96 billion as of December 31, 2010.
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, 2010, the remaining lease payments
guaranteeing the principal and interest on these bonds are
$121 million, of which $30 million of these
obligations is accounted for as a capital lease and reflected as
debt in the accompanying consolidated balance sheet.
63
Contractual
Obligations
The following table provides details of our future cash
contractual obligations as of December 31, 2010 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Thereafter
|
|
|
Total
|
|
|
US Airways Group (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt (2)
|
|
$
|
16
|
|
|
$
|
116
|
|
|
$
|
116
|
|
|
$
|
1,276
|
|
|
$
|
|
|
|
$
|
35
|
|
|
$
|
1,559
|
|
Interest obligations (3)
|
|
|
57
|
|
|
|
54
|
|
|
|
49
|
|
|
|
24
|
|
|
|
3
|
|
|
|
23
|
|
|
|
210
|
|
US Airways (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt and capital lease obligations (5) (6)
|
|
|
381
|
|
|
|
339
|
|
|
|
301
|
|
|
|
279
|
|
|
|
279
|
|
|
|
1,479
|
|
|
|
3,058
|
|
Interest obligations (3) (6)
|
|
|
151
|
|
|
|
147
|
|
|
|
116
|
|
|
|
99
|
|
|
|
101
|
|
|
|
309
|
|
|
|
923
|
|
Aircraft purchase and operating lease commitments (7)
|
|
|
1,547
|
|
|
|
1,520
|
|
|
|
1,891
|
|
|
|
1,598
|
|
|
|
1,016
|
|
|
|
4,737
|
|
|
|
12,309
|
|
Regional capacity purchase agreements (8)
|
|
|
1,005
|
|
|
|
1,009
|
|
|
|
1,011
|
|
|
|
1,016
|
|
|
|
898
|
|
|
|
1,385
|
|
|
|
6,324
|
|
Other US Airways Group subsidiaries (9)
|
|
|
11
|
|
|
|
9
|
|
|
|
8
|
|
|
|
6
|
|
|
|
1
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,168
|
|
|
$
|
3,194
|
|
|
$
|
3,492
|
|
|
$
|
4,298
|
|
|
$
|
2,298
|
|
|
$
|
7,968
|
|
|
$
|
24,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These commitments represent those entered into by US Airways
Group. |
|
(2) |
|
Excludes $136 million of unamortized debt discount as of
December 31, 2010. |
|
(3) |
|
For variable-rate debt, future interest obligations are shown
above using interest rates in effect as of December 31,
2010. |
|
(4) |
|
These commitments represent those entered into by US Airways. |
|
(5) |
|
Excludes $81 million of unamortized debt discount as of
December 31, 2010. |
|
(6) |
|
Includes $809 million of future principal payments and
$339 million of future interest payments as of
December 31, 2010, respectively, related to pass through
trust certificates or EETCs associated with mortgage financings
for the purchase of certain aircraft as described 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 $2.96 billion of future minimum lease payments
related to EETC leveraged leased financings of certain aircraft
as of December 31, 2010, as described 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. |
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.
64
Critical
Accounting Policies and Estimates
The preparation of financial statements in accordance with
accounting principles generally accepted in the United States
requires management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities,
revenues and expenses, and the disclosure of contingent assets
and liabilities at the date of the 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 consolidated
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 Recognition
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 $861 million
and $778 million as of December 31, 2010 and 2009,
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. We 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 our 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. Holding other factors constant, a 10%
change in our estimate of the amount refunded, exchanged or
forfeited for 2010 would result in a $35 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 Long-Lived and Intangible 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. With respect to long-lived
assets, 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
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
2010. 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
65
relief-from-royalty method. As a result of our annual impairment
test on international route authorities and trademarks, no
impairment was indicated. We will perform our next annual
impairment test on October 1, 2011.
Valuation
of Investments in Marketable Securities
As of December 31, 2010, 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.
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
the 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 the frequent traveler program liability related
to mileage credits earned by Dividend Miles members through
purchased flights. We have an obligation to provide future
travel
66
when these mileage credits are redeemed and therefore have
recognized an expense and recorded a liability for mileage
credits outstanding.
The liability for outstanding mileage credits earned by Dividend
Miles members through the purchase of travel includes all
mileage credits that are expected to be redeemed, including
mileage credits earned by members whose mileage account balances
have not yet reached the minimum mileage credit level required
to redeem an award. Additionally, outstanding mileage credits
are subject to expiration if unused. 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.
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 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 incremental cost the amount of certain
fees related to redemptions 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, 2010 and 2009, 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 $149 million,
representing 132.4 billion mileage credits, and
$130 million, representing 129.1 billion mileage
credits, respectively.
A change to certain estimates in the calculation of incremental
cost could have a material impact on the liability. At
December 31, 2010, we have assumed 10% of 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 a $9 million impact on the liability as
of December 31, 2010.
We also sell frequent flyer program mileage credits to
participating airline partners and non-airline business
partners. Sales of mileage credits to business partners is
comprised of two components, transportation and marketing. We
use the residual method of accounting to determine the values of
each component. The transportation component represents the fair
value of future travel awards and is determined based on the
equivalent value of purchased tickets that have similar
restrictions as frequent traveler awards. The determination of
the transportation component requires estimates and assumptions
that require management judgment. Significant estimates and
assumptions include:
|
|
|
|
|
the number of awards expected to be redeemed on US Airways;
|
|
|
the number of awards expected to be redeemed on partner airlines;
|
|
|
the class of service for which the award is expected to be
redeemed; and
|
|
|
the geographic region of travel for which the award is expected
to be redeemed.
|
These estimates and assumptions are based on historical program
experience. The transportation component is deferred and
amortized into passenger revenue on a straight-line basis over
the period in which the mileage credits are expected to be
redeemed for travel, which is currently estimated to be
33 months.
Under the residual method, the total mileage sale proceeds less
the transportation component is the marketing component. The
marketing component represents services provided by us to our
business partners and relates primarily to the use of our logo
and trademarks along with access to our list of Dividend Miles
members. The marketing services are provided periodically, but
no less than monthly. Accordingly, the marketing component is
considered earned and recognized in other revenues in the period
of the mileage sale.
As of December 31, 2010 and 2009, we had $178 million
and $212 million, respectively, in deferred revenue from
the sale of mileage credits included in other accrued expenses
on the consolidated balance sheets. For the years ended
December 31, 2010, 2009 and 2008, the marketing component
of mileage sales recognized at the time of sale in other
revenues was approximately $144 million, $112 million
and $126 million, respectively.
67
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 $11 million impact on
revenue recognized in 2010.
The number of travel award redemptions during the year ended
December 31, 2010 was approximately 0.8 million,
representing approximately 4% of US Airways total mainline
and Express RPMs during that period. The use of inventory
management techniques minimizes the displacement of revenue
passengers by passengers traveling on award tickets.
We are required to adopt and apply Accounting Standards Update
(ASU)
No. 2009-13,
Revenue Recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements, to any new or
materially modified business partner agreements entered into on
or after January 1, 2011. Refer to the Recent
Accounting Pronouncements section below for more
information.
Deferred
Tax Asset Valuation Allowance
At December 31, 2010, 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. The ultimate realization
of deferred tax assets is dependent upon the generation of
future taxable income (including reversals of deferred tax
liabilities) during the periods in which those temporary
differences will become deductible.
Recent
Accounting Pronouncements
In December 2009, the Financial Accounting Standards Board
(FASB) issued 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
requires 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 is 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 adopted
ASU
No. 2009-17
as of January 1, 2010, and its application had no 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:
(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. Our multiple-deliverable
revenue arrangements consist principally of sales of frequent
flyer program mileage credits to business partners, which are
comprised of two components, transportation and marketing. Refer
to the Critical Accounting Policies and Estimates
section above for more information on our frequent traveler
program. We are required to adopt and apply ASU
No. 2009-13
to any new or materially modified multiple-deliverable revenue
arrangements entered into on or after January 1, 2011. It
is not practical to estimate the impact of the new guidance on
our consolidated financial statements because we will apply the
guidance prospectively to agreements entered into or materially
modified subsequent to January 1, 2011.
68
|
|
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
Fuel prices have fluctuated substantially over the past several
years and sharply in the last three years. 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.
Our 2011 forecasted mainline and Express fuel consumption is
approximately 1.43 billion gallons, and based on this
forecast, a one cent per gallon increase in aviation fuel price
results in a $14 million increase in annual expense. Since
the third quarter of 2008, we have not entered into any new
transactions to hedge our fuel consumption, and we have not had
any fuel hedging contracts outstanding since the third quarter
of 2009.
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, 2010, our variable-rate
long-term debt obligations of approximately $2.97 billion
represented approximately 64% of our total long-term debt. If
interest rates increased 10% in 2010, the impact on our results
of operations would have been approximately $11 million of
additional interest expense. Additional information regarding
our debt obligations as of December 31, 2010 is as follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected Maturity Date
|
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
Thereafter
|
|
Total
|
|
Fixed-rate debt
|
|
$
|
195
|
|
|
$
|
181
|
|
|
$
|
104
|
|
|
$
|
278
|
|
|
$
|
158
|
|
|
$
|
732
|
|
|
$
|
1,648
|
|
Weighted avg. interest rate
|
|
|
8.5
|
%
|
|
|
8.0
|
%
|
|
|
7.8
|
%
|
|
|
7.9
|
%
|
|
|
7.9
|
%
|
|
|
7.4
|
%
|
|
|
|
|
Variable-rate debt
|
|
$
|
202
|
|
|
$
|
274
|
|
|
$
|
313
|
|
|
$
|
1,277
|
|
|
$
|
121
|
|
|
$
|
782
|
|
|
$
|
2,969
|
|
Weighted avg. interest rate
|
|
|
3.7
|
%
|
|
|
3.5
|
%
|
|
|
3.4
|
%
|
|
|
3.3
|
%
|
|
|
3.4
|
%
|
|
|
3.1
|
%
|
|
|
|
|
US Airways Group and US Airways have total future aircraft and
spare engine purchase commitments of approximately
$5.9 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, 2010, included within our investment
portfolio are investments in auction rate securities with a fair
value of $57 million ($84 million par value). As a
result of the liquidity issues experienced in the global credit
and capital markets, all of our auction rate securities have
experienced failed auctions since August 2007. 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, 2010, the current lack
of liquidity in our remaining 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.
69
|
|
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, 2010 and 2009, 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, 2010. 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, 2010 and 2009, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2010, in
conformity with U.S. generally accepted accounting
principles.
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, 2010, 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 22, 2011
expressed an unqualified opinion on the effectiveness of the
Companys internal control over financial reporting.
Phoenix, Arizona
February 22, 2011
70
US
Airways Group, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2010, 2009 and
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions, except share and per share amounts)
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline passenger
|
|
$
|
7,645
|
|
|
$
|
6,752
|
|
|
$
|
8,183
|
|
Express passenger
|
|
|
2,821
|
|
|
|
2,503
|
|
|
|
2,879
|
|
Cargo
|
|
|
149
|
|
|
|
100
|
|
|
|
144
|
|
Other
|
|
|
1,293
|
|
|
|
1,103
|
|
|
|
912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
11,908
|
|
|
|
10,458
|
|
|
|
12,118
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
|
2,403
|
|
|
|
1,863
|
|
|
|
3,618
|
|
Loss on fuel hedging instruments, net
|
|
|
|
|
|
|
7
|
|
|
|
356
|
|
Salaries and related costs
|
|
|
2,244
|
|
|
|
2,165
|
|
|
|
2,231
|
|
Express expenses
|
|
|
2,729
|
|
|
|
2,519
|
|
|
|
3,049
|
|
Aircraft rent
|
|
|
670
|
|
|
|
695
|
|
|
|
724
|
|
Aircraft maintenance
|
|
|
661
|
|
|
|
700
|
|
|
|
783
|
|
Other rent and landing fees
|
|
|
549
|
|
|
|
560
|
|
|
|
562
|
|
Selling expenses
|
|
|
421
|
|
|
|
382
|
|
|
|
439
|
|
Special items, net
|
|
|
5
|
|
|
|
55
|
|
|
|
76
|
|
Depreciation and amortization
|
|
|
248
|
|
|
|
242
|
|
|
|
215
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
622
|
|
Other
|
|
|
1,197
|
|
|
|
1,152
|
|
|
|
1,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
11,127
|
|
|
|
10,340
|
|
|
|
13,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
781
|
|
|
|
118
|
|
|
|
(1,800
|
)
|
Nonoperating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
13
|
|
|
|
24
|
|
|
|
83
|
|
Interest expense, net
|
|
|
(329
|
)
|
|
|
(304
|
)
|
|
|
(258
|
)
|
Other, net
|
|
|
37
|
|
|
|
(81
|
)
|
|
|
(240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating expense, net
|
|
|
(279
|
)
|
|
|
(361
|
)
|
|
|
(415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
502
|
|
|
|
(243
|
)
|
|
|
(2,215
|
)
|
Income tax benefit
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
502
|
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
3.11
|
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
Diluted earnings (loss) per share
|
|
$
|
2.61
|
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
Shares used for computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
161,412
|
|
|
|
133,000
|
|
|
|
100,168
|
|
Diluted
|
|
|
201,131
|
|
|
|
133,000
|
|
|
|
100,168
|
|
See accompanying notes to consolidated financial statements.
71
US
Airways Group, Inc.
Consolidated Balance Sheets
December 31, 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In millions, except share
|
|
|
|
and per share amounts)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,859
|
|
|
$
|
1,299
|
|
Accounts receivable, net
|
|
|
311
|
|
|
|
285
|
|
Materials and supplies, net
|
|
|
231
|
|
|
|
227
|
|
Prepaid expenses and other
|
|
|
508
|
|
|
|
520
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,909
|
|
|
|
2,331
|
|
Property and equipment
|
|
|
|
|
|
|
|
|
Flight equipment
|
|
|
4,134
|
|
|
|
3,852
|
|
Ground property and equipment
|
|
|
843
|
|
|
|
883
|
|
Less accumulated depreciation and amortization
|
|
|
(1,304
|
)
|
|
|
(1,151
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
3,673
|
|
|
|
3,584
|
|
Equipment purchase deposits
|
|
|
123
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
3,796
|
|
|
|
3,696
|
|
Other assets
|
|
|
|
|
|
|
|
|
Other intangibles, net of accumulated amortization of
$139 million and $113 million, respectively
|
|
|
477
|
|
|
|
503
|
|
Restricted cash
|
|
|
364
|
|
|
|
480
|
|
Investments in marketable securities
|
|
|
57
|
|
|
|
203
|
|
Other assets
|
|
|
216
|
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
1,114
|
|
|
|
1,427
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,819
|
|
|
$
|
7,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Current maturities of debt and capital leases
|
|
$
|
397
|
|
|
$
|
502
|
|
Accounts payable
|
|
|
386
|
|
|
|
337
|
|
Air traffic liability
|
|
|
861
|
|
|
|
778
|
|
Accrued compensation and vacation
|
|
|
245
|
|
|
|
178
|
|
Accrued taxes
|
|
|
149
|
|
|
|
141
|
|
Other accrued expenses
|
|
|
802
|
|
|
|
853
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,840
|
|
|
|
2,789
|
|
Noncurrent liabilities and deferred credits
|
|
|
|
|
|
|
|
|
Long-term debt and capital leases, net of current maturities
|
|
|
4,003
|
|
|
|
4,024
|
|
Deferred gains and credits, net
|
|
|
336
|
|
|
|
377
|
|
Postretirement benefits other than pensions
|
|
|
141
|
|
|
|
130
|
|
Employee benefit liabilities and other
|
|
|
415
|
|
|
|
489
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent liabilities and deferred credits
|
|
|
4,895
|
|
|
|
5,020
|
|
Commitments and contingencies (Note 9)
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit)
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 400,000,000 shares
authorized, 161,874,756 shares issued and outstanding at
December 31, 2010; 161,520,457 and 161,102,833 shares
issued and outstanding at December 31, 2009
|
|
|
2
|
|
|
|
2
|
|
Additional paid-in capital
|
|
|
2,115
|
|
|
|
2,107
|
|
Accumulated other comprehensive income
|
|
|
14
|
|
|
|
90
|
|
Accumulated deficit
|
|
|
(2,047
|
)
|
|
|
(2,541
|
)
|
Treasury stock, common stock, 417,624 shares at
December 31, 2009
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
84
|
|
|
|
(355
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit)
|
|
$
|
7,819
|
|
|
$
|
7,454
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
72
US
Airways Group, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2010, 2009 and
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
502
|
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
273
|
|
|
|
267
|
|
|
|
240
|
|
Loss on dispositions of property and equipment
|
|
|
8
|
|
|
|
61
|
|
|
|
7
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Gain on sale of investments
|
|
|
(53
|
)
|
|
|
|
|
|
|
(1
|
)
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
622
|
|
Auction rate security impairment
|
|
|
|
|
|
|
10
|
|
|
|
214
|
|
Asset impairment
|
|
|
6
|
|
|
|
21
|
|
|
|
13
|
|
Non-cash tax benefits
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
Change in fair value of fuel hedging instruments, net
|
|
|
|
|
|
|
(375
|
)
|
|
|
496
|
|
Amortization of deferred credits and rent
|
|
|
(63
|
)
|
|
|
(62
|
)
|
|
|
(41
|
)
|
Amortization of debt discount and issuance costs
|
|
|
61
|
|
|
|
56
|
|
|
|
25
|
|
Amortization of actuarial gains
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
(2
|
)
|
Stock-based compensation
|
|
|
13
|
|
|
|
20
|
|
|
|
34
|
|
Debt extinguishment costs
|
|
|
5
|
|
|
|
6
|
|
|
|
7
|
|
Other
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
|
|
|
|
186
|
|
|
|
(184
|
)
|
Decrease (increase) in accounts receivable, net
|
|
|
(34
|
)
|
|
|
8
|
|
|
|
74
|
|
Decrease (increase) in materials and supplies, net
|
|
|
(10
|
)
|
|
|
(29
|
)
|
|
|
49
|
|
Decrease (increase) in prepaid expenses and other
|
|
|
(57
|
)
|
|
|
162
|
|
|
|
(259
|
)
|
Decrease (increase) in other assets, net
|
|
|
18
|
|
|
|
(14
|
)
|
|
|
4
|
|
Increase (decrease) in accounts payable
|
|
|
55
|
|
|
|
(78
|
)
|
|
|
96
|
|
Increase (decrease) in air traffic liability
|
|
|
83
|
|
|
|
80
|
|
|
|
(134
|
)
|
Increase (decrease) in accrued compensation and vacation
|
|
|
67
|
|
|
|
20
|
|
|
|
(67
|
)
|
Increase (decrease) in accrued taxes
|
|
|
8
|
|
|
|
(1
|
)
|
|
|
(10
|
)
|
Increase (decrease) in other liabilities
|
|
|
(74
|
)
|
|
|
(36
|
)
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
804
|
|
|
|
59
|
|
|
|
(980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(201
|
)
|
|
|
(683
|
)
|
|
|
(1,068
|
)
|
Purchases of marketable securities
|
|
|
(180
|
)
|
|
|
|
|
|
|
(299
|
)
|
Sales of marketable securities
|
|
|
325
|
|
|
|
52
|
|
|
|
505
|
|
Proceeds from sale of other investments
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Decrease (increase) in long-term restricted cash
|
|
|
116
|
|
|
|
60
|
|
|
|
(74
|
)
|
Proceeds from sale-leaseback transactions and dispositions of
property and equipment
|
|
|
3
|
|
|
|
76
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
63
|
|
|
|
(495
|
)
|
|
|
(915
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of debt and capital lease obligations
|
|
|
(764
|
)
|
|
|
(407
|
)
|
|
|
(734
|
)
|
Proceeds from issuance of debt
|
|
|
467
|
|
|
|
919
|
|
|
|
1,586
|
|
Deferred financing costs
|
|
|
(10
|
)
|
|
|
(14
|
)
|
|
|
(50
|
)
|
Proceeds from issuance of common stock, net
|
|
|
|
|
|
|
203
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used in) financing activities
|
|
|
(307
|
)
|
|
|
701
|
|
|
|
981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
560
|
|
|
|
265
|
|
|
|
(914
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
1,299
|
|
|
|
1,034
|
|
|
|
1,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
1,859
|
|
|
$
|
1,299
|
|
|
$
|
1,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
73
US
Airways Group, Inc.
Consolidated Statements of Stockholders
Equity (Deficit)
For the Years Ended December 31, 2010, 2009 and
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Treasury
|
|
|
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Income
|
|
|
Deficit
|
|
|
Stock
|
|
|
Total
|
|
|
|
(In millions, except share amounts)
|
|
|
Balance at December 31, 2007
|
|
$
|
1
|
|
|
$
|
1,576
|
|
|
$
|
10
|
|
|
$
|
(119
|
)
|
|
$
|
(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
|
|
|
|
65
|
|
|
|
(2,336
|
)
|
|
|
(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
|
|
|
|
90
|
|
|
|
(2,541
|
)
|
|
|
(13
|
)
|
|
|
(355
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
502
|
|
|
|
|
|
|
|
502
|
|
Issuance of 771,923 shares of common stock pursuant to
employee stock plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of 417,624 shares of treasury stock
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
13
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
Recognition of net realized gains on sale of
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
|
(52
|
)
|
Net unrealized loss on
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Pension and other postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
2
|
|
|
$
|
2,115
|
|
|
$
|
14
|
|
|
$
|
(2,047
|
)
|
|
$
|
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
74
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 in Washington, D.C. at Ronald Reagan Washington
National Airport (Washington National).
US Airways offers scheduled passenger service on more than
3,200 flights daily to more than 200 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. US Airways had approximately 52 million
passengers boarding its mainline flights in 2010. During 2010,
US Airways mainline operation provided regularly scheduled
service or seasonal service at 132 airports, while the US
Airways Express network served 155 airports in the United
States, Canada and Mexico, including 75 airports also served by
the mainline operation. US Airways Express air carriers had
approximately 28 million passengers boarding their planes
in 2010. As of December 31, 2010, US Airways operated 339
mainline jets and is supported by the Companys regional
airline subsidiaries and affiliates operating as US Airways
Express under capacity purchase agreements, which operated 231
regional jets and 50 turboprops. The Companys prorate
carriers operated 10 turboprops and three regional jets at
December 31, 2010.
As of December 31, 2010, US Airways employed approximately
30,900 active full-time equivalent employees. The Companys
Express subsidiaries, Piedmont and PSA, employed approximately
4,900 active full-time equivalent employees. Approximately 86%
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 accordance with
accounting principles generally accepted in the United States
requires management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities,
revenues and expenses, and the disclosure of contingent assets
and liabilities at the date of the financial statements. 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.
|
|
(c)
|
Cash
and Cash Equivalents
|
Cash equivalents consist of cash in money market securities and
certificates of deposit. 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.
75
|
|
(d)
|
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. The
Companys investments in marketable securities consist of
auction rate securities, which are classified as available for
sale and recorded at fair value. See Note 6(b) for more
information on the Companys investments in marketable
securities.
Restricted cash primarily includes cash collateral to secure
workers compensation claims and credit card processing
holdback requirements for advance ticket sales for which US
Airways has not yet provided air transportation. 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 market 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 2010,
the Company recorded a $6 million write down related to
certain spare parts inventory to reflect lower of cost or market
value. During 2009, the Company recorded a $3 million write
down related to certain Express spare parts inventory to reflect
lower of cost or market 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 market 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, 2010, 2009 and 2008 was $4 million,
$10 million and $6 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 or
improvement, 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 no impairment charges in the years ended
December 31, 2010 and 2009. 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.
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.
76
|
|
(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, 2010 and
2009 (in millions):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Airport take-off and landing slots
|
|
$
|
495
|
|
|
$
|
495
|
|
Airport gate leasehold rights
|
|
|
52
|
|
|
|
52
|
|
Accumulated amortization
|
|
|
(139
|
)
|
|
|
(113
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
408
|
|
|
$
|
434
|
|
|
|
|
|
|
|
|
|
|
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, 2010, 2009 and 2008, the
Company recorded amortization expense of $26 million,
$26 million and $25 million, respectively, related to
its intangible assets. The Company expects to record annual
amortization expense of $23 million in year 2011,
$22 million in year 2012, $22 million in year 2013,
$22 million in year 2014, $22 million in year 2015 and
$297 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. As of
December 31, 2010 and 2009, the Company had
$39 million of international route authorities and
$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 2010. 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 international route authorities and trademarks, no impairment
was indicated. In 2009, the Company recorded $16 million in
non-cash impairment charges related to the decline in fair value
of certain international routes. The Company will perform its
next annual impairment test on October 1, 2011.
Other assets consist of the following as of December 31,
2010 and 2009 (in millions):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Aircraft leasehold interest, net
|
|
$
|
71
|
|
|
$
|
77
|
|
Deferred rent
|
|
|
47
|
|
|
|
59
|
|
Debt issuance costs, net
|
|
|
48
|
|
|
|
58
|
|
Deposits
|
|
|
38
|
|
|
|
36
|
|
Long-term investments
|
|
|
10
|
|
|
|
9
|
|
Other
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
216
|
|
|
$
|
241
|
|
|
|
|
|
|
|
|
|
|
77
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 purchase accounting for US Airways in
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 2011 to 2015 and
$41 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 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 Company has an
obligation to provide future travel when these mileage credits
are redeemed and therefore has recognized an expense and
recorded a liability for mileage credits outstanding.
The liability for outstanding mileage credits earned by Dividend
Miles members through the purchase of travel includes all
mileage credits that are expected to be redeemed, including
mileage credits earned by members whose mileage account balances
have not yet reached the minimum mileage credit level required
to redeem an award. Additionally, outstanding mileage credits
are subject to expiration if unused. In calculating the
liability, the Company estimates how many mileage credits will
never be redeemed for travel and excludes 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.
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 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 incremental cost the amount of
certain fees related to redemptions 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, 2010 and 2009, 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 $149 million and
$130 million, respectively.
The Company also sells frequent flyer program mileage credits to
participating airline partners and non-airline business
partners. Sales of mileage credits to business partners is
comprised of two components, transportation and marketing. The
Company uses the residual method of accounting to determine the
values of each component. The transportation component
represents the fair value of future travel awards and is
determined based on the equivalent value of purchased tickets
that have similar restrictions as frequent traveler awards. The
determination of the transportation component requires estimates
and assumptions that require management judgment. Significant
estimates and assumptions include:
|
|
|
|
|
the number of awards expected to be redeemed on US Airways;
|
|
|
the number of awards expected to be redeemed on partner airlines;
|
|
|
the class of service for which the award is expected to be
redeemed; and
|
|
|
the geographic region of travel for which the award is expected
to be redeemed.
|
These estimates and assumptions are based on historical program
experience. The transportation component is deferred and
amortized into passenger revenue on a straight-line basis over
the period in which the mileage credits are expected to be
redeemed for travel, which is currently estimated to be
33 months.
Under the residual method, the total mileage sale proceeds less
the transportation component is the marketing component. The
marketing component represents services provided by the Company
to its business partners and
78
relates primarily to the use of the Companys logo and
trademarks along with access to the Companys list of
Dividend Miles members. The marketing services are provided
periodically, but no less than monthly. Accordingly, the
marketing component is considered earned and recognized in other
revenues in the period of the mileage sale.
As of December 31, 2010 and 2009, the Company had
$178 million and $212 million, respectively, in
deferred revenue from the sale of mileage credits included in
other accrued expenses on the consolidated balance sheets. For
the years ended December 31, 2010, 2009 and 2008, the
marketing component of mileage sales recognized at the time of
sale in other revenues was approximately $144 million,
$112 million and $126 million, respectively.
The Company is required to adopt and apply Accounting Standards
Update (ASU)
No. 2009-13,
Revenue Recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements, to any new or
materially modified business partner agreements entered into on
or after January 1, 2011. See Note 1(t) for more
information on recent accounting pronouncements.
|
|
(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. Since the third quarter of 2008, the Company
has not entered into any new transactions to hedge its fuel
consumption, and the Company has not had any fuel hedging
contracts outstanding since the third quarter of 2009. 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.
Also included within deferred gains and credits, net are amounts
deferred and amortized into future periods associated with the
sale and leaseback of property and equipment, the adjustment of
leases to fair value in connection with prior period fresh-start
and purchase accounting and certain vendor incentives.
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 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
79
based on 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 Corporation (Air
Wisconsin), Republic Airline Inc. (Republic),
Mesa Airlines, Inc. (Mesa) and Chautauqua Airlines,
Inc. (Chautauqua) in certain markets. The
Companys wholly owned regional air carriers, Air
Wisconsin, Republic, Mesa and Chautauqua operate regional jet
aircraft in these markets as part of US Airways Express. The
Company classifies revenues generated from transportation on
these carriers as Express passenger revenues. Liabilities
related to tickets sold by the Company 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 taxes and fees on its ticket sales.
These taxes and fees are remitted to governmental authorities
and 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, 2010, 2009 and 2008 were
$10 million, $11 million and $10 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.
|
|
(r)
|
Foreign
Currency Gains and Losses
|
Foreign currency gains and losses are recorded as part of other
nonoperating expense, net in the Companys consolidated
statements of operations. Foreign currency losses for the years
ended December 31, 2010, 2009 and 2008 were
$17 million, $3 million and $25 million,
respectively.
80
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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Aircraft fuel and related taxes
|
|
$
|
769
|
|
|
$
|
609
|
|
|
$
|
1,137
|
|
Salaries and related costs
|
|
|
257
|
|
|
|
246
|
|
|
|
244
|
|
Capacity purchases
|
|
|
1,065
|
|
|
|
1,059
|
|
|
|
1,049
|
|
Aircraft rent
|
|
|
51
|
|
|
|
51
|
|
|
|
51
|
|
Aircraft maintenance
|
|
|
89
|
|
|
|
81
|
|
|
|
74
|
|
Other rent and landing fees
|
|
|
129
|
|
|
|
121
|
|
|
|
115
|
|
Selling expenses
|
|
|
173
|
|
|
|
154
|
|
|
|
163
|
|
Special items, net (a)
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
|
|
Depreciation and amortization
|
|
|
25
|
|
|
|
25
|
|
|
|
25
|
|
Other expenses
|
|
|
172
|
|
|
|
170
|
|
|
|
191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express expenses
|
|
$
|
2,729
|
|
|
$
|
2,519
|
|
|
$
|
3,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
In 2010, the Company recorded a $1 million refund for its
Express subsidiaries of ASIF previously paid to the
Transportation Security Administration (TSA) during
the years 2005 to 2009. |
In 2009, the Company recorded a $3 million write down
related to certain Express spare parts inventory to reflect
lower of cost or market value.
|
|
(t)
|
Recent
Accounting Pronouncements
|
In December 2009, the Financial Accounting Standards Board
(FASB) issued 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
requires 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 is 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
adopted ASU
No. 2009-17
as of January 1, 2010, and its application had no impact on
the Companys 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 Companys
multiple-deliverable revenue arrangements consist principally of
sales of frequent flyer program mileage credits to business
partners, which are comprised of two components, transportation
and marketing. See Note 1(k) for more information on the
Companys
81
frequent traveler program. The Company is required to adopt and
apply ASU
No. 2009-13
to any new or materially modified multiple-deliverable revenue
arrangements entered into on or after January 1, 2011. It
is not practical to estimate the impact of the new guidance on
the Companys consolidated financial statements because the
Company will apply the guidance prospectively to agreements
entered into or materially modified subsequent to
January 1, 2011.
Special items, net as shown on the consolidated statements of
operations include the following charges (credits) (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Aviation Security Infrastructure Fee (ASIF) refund
(a)
|
|
$
|
(16
|
)
|
|
$
|
|
|
|
$
|
|
|
Other costs(b)
|
|
|
10
|
|
|
|
6
|
|
|
|
|
|
Asset impairment charges (c)
|
|
|
6
|
|
|
|
16
|
|
|
|
18
|
|
Aircraft costs (d)
|
|
|
5
|
|
|
|
22
|
|
|
|
14
|
|
Severance and other charges (e)
|
|
|
|
|
|
|
11
|
|
|
|
9
|
|
Merger-related transition expenses (f)
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5
|
|
|
$
|
55
|
|
|
$
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
In 2010, the Company recorded a $16 million refund of ASIF
previously paid to the TSA during the years 2005 to 2009. |
|
(b) |
|
In 2010, the Company recorded other net special charges of
$10 million, which included a settlement and corporate
transaction costs. In 2009, the Company incurred $6 million
in costs related to the 2009 liquidity improvement program,
which primarily consisted of professional and legal fees. |
|
(c) |
|
In 2010, the Company recorded a $6 million non-cash charge
related to the decline in market value of certain spare parts.
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 international
routes. 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), 1(g) and 1(i) for further discussion of each of
these charges. |
|
(d) |
|
In 2010, 2009 and 2008, the Company recorded $5 million,
$22 million and $14 million, respectively, in aircraft
costs as a result of previously announced capacity reductions. |
|
(e) |
|
In 2009 and 2008, the Company recorded $11 million and
$9 million, respectively, in severance and other charges. |
|
(f) |
|
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 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. |
82
|
|
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
(SARs), employee restricted stock units
(RSUs) 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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
502
|
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (in thousands)
|
|
|
161,412
|
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
3.11
|
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
502
|
|
|
|
(205
|
)
|
|
|
(2,215
|
)
|
Interest expense on 7.25% convertible senior notes
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) for purposes of computing diluted earnings (loss)
per share
|
|
$
|
525
|
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
161,412
|
|
|
|
133,000
|
|
|
|
100,168
|
|
Dilutive effect of stock awards
|
|
|
1,973
|
|
|
|
|
|
|
|
|
|
Assumed conversion of 7.25% convertible senior notes
|
|
|
37,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding as adjusted
|
|
|
201,131
|
|
|
|
133,000
|
|
|
|
100,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
2.61
|
|
|
$
|
(1.54
|
)
|
|
$
|
(22.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2010, 1,803,093 shares
underlying stock options, SARs and RSUs were not included in the
computation of diluted EPS because inclusion of such shares
would be antidilutive and 4,127,992 SARs were not included in
the computation of diluted EPS because their exercise prices
were greater than the average market price of common stock for
the period. In addition, 2,328,787 incremental shares from the
assumed conversion of the 7% Senior Convertible Notes (the
7% notes) were excluded from the computation of
diluted EPS due to their antidilutive effect.
For the year ended December 31, 2009, 4,806,237 shares
underlying stock options, SARs and RSUs were not included in the
computation of diluted EPS because inclusion of such shares
would be antidilutive and 6,673,505 SARs were not included in
the computation of diluted EPS because their 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% notes and 23,954,303
incremental shares from the assumed conversion of the
7.25% Convertible Senior Notes (the
7.25% notes) were excluded from the computation
of diluted EPS due to their antidilutive effect.
For the year ended December 31, 2008, 3,246,159 shares
underlying stock options, SARs and RSUs were not included in the
computation of diluted EPS because inclusion of such shares
would be antidilutive and 4,935,181 SARs were not included in
the computation of diluted EPS because their exercise prices
were greater than the average market price of common stock for
the 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.
83
The following table details the Companys debt (in
millions). Variable interest rates listed are the rates as of
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Secured
|
|
|
|
|
|
|
|
|
Citicorp North America loan, variable interest rate of 2.79%,
installments due through 2014 (a)
|
|
$
|
1,152
|
|
|
$
|
1,168
|
|
Equipment loans and other notes payable, fixed and variable
interest rates ranging from 1.66% to 10.29%, maturing from 2011
to 2029 (b)
|
|
|
1,920
|
|
|
|
2,201
|
|
Aircraft enhanced equipment trust certificates
(EETCs), fixed interest rates ranging from 6.25% to
9.01%, maturing from 2015 to 2023 (c)
|
|
|
809
|
|
|
|
505
|
|
Other secured obligations, fixed interest rate of 8%, maturing
from 2015 to 2021
|
|
|
85
|
|
|
|
84
|
|
Senior secured discount notes
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,966
|
|
|
|
3,990
|
|
Unsecured
|
|
|
|
|
|
|
|
|
Barclays prepaid miles, variable interest rate of 5.01%,
interest only payments (d)
|
|
|
200
|
|
|
|
200
|
|
Airbus advance, repayments through 2018 (e)
|
|
|
222
|
|
|
|
247
|
|
7.25% convertible senior notes, interest only payments until due
in 2014 (f)
|
|
|
172
|
|
|
|
172
|
|
7% senior convertible notes, interest only payments until
due in 2020 (g)
|
|
|
5
|
|
|
|
74
|
|
Industrial development bonds, fixed interest rate of 6.3%,
interest only payments until due in 2023 (h)
|
|
|
29
|
|
|
|
29
|
|
Other unsecured obligations, maturing from 2011 to 2012
|
|
|
23
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
651
|
|
|
|
803
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and capital lease obligations
|
|
|
4,617
|
|
|
|
4,793
|
|
Less: Total unamortized discount on debt
|
|
|
(217
|
)
|
|
|
(267
|
)
|
Current maturities, less $9 million of unamortized discount
on debt at December 31, 2009
|
|
|
(397
|
)
|
|
|
(502
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital lease obligations, net of current
maturities
|
|
$
|
4,003
|
|
|
$
|
4,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 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 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,
2010, the interest rate on the Citicorp credit facility was
2.79% based on a 2.50% LIBOR margin.
84
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
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 equipment financing agreements
entered into in 2010: |
In 2010, US Airways borrowed $181 million to finance Airbus
aircraft deliveries. 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.
In 2010, US Airways Group borrowed $30 million to finance
airport construction activities in Philadelphia. These notes
bear interest at fixed rates and are secured by certain US
Airways leasehold interests. The notes payable mature from
2020 to 2029.
|
|
|
(c) |
|
The equipment notes underlying these EETCs are the direct
obligations of US Airways and cover the financing of 27
aircraft. See Note 9(c) for further discussion. |
In December 2010, US Airways created two pass-through trusts
which issued approximately $340 million aggregate face
amount of
Series 2010-1A
and
Series 2010-1B
Enhanced Equipment Trust Certificates (the 2010
EETCs) in connection with the refinancing of eight Airbus
aircraft owned by US Airways. The 2010 EETCs represent
fractional undivided interests in the respective pass-through
trusts and are not obligations of US Airways. The net
proceeds from the issuance of the 2010 EETCs were used to
purchase equipment notes issued by US Airways in two
series: Series A equipment notes in an aggregate principal
amount of $263 million bearing interest at 6.25% per annum
and Series B equipment notes in an aggregate principal
amount of $77 million bearing interest at 8.5% per annum.
Interest on the equipment notes is payable semiannually in April
and October of each year, beginning in April 2011. Principal
payments on the equipment notes are scheduled to begin in
October 2011. The final payments on the Series A equipment
notes and Series B equipment notes will be due in April
2023 and April 2017, respectively. US Airways payment
obligations under the equipment notes are fully and
unconditionally guaranteed by US Airways Group. Substantially
all of the proceeds from the issuance of the equipment notes
were used to repay the existing debt associated with eight
Airbus aircraft, with the balance used for general corporate
purposes. The equipment notes are secured by liens on aircraft.
|
|
|
(d) |
|
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
85
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.
|
|
|
(e) |
|
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 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. |
|
(f) |
|
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,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
Principal amount of 7.25% convertible senior notes
|
|
$
|
172
|
|
|
$
|
172
|
|
Unamortized discount on debt
|
|
|
(80
|
)
|
|
|
(92
|
)
|
Net carrying amount of 7.25% convertible senior notes
|
|
|
92
|
|
|
|
80
|
|
Additional paid-in capital
|
|
|
96
|
|
|
|
96
|
|
At December 31, 2010, the remaining period over which the
unamortized discount will be recognized is 3.4 years.
The following table details interest expense recognized related
to the 7.25% notes (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Contractual coupon interest
|
|
$
|
13
|
|
|
$
|
8
|
|
Amortization of discount
|
|
|
12
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
25
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
86
|
|
|
|
|
At December 31, 2010, the if-converted value of the
7.25% notes exceeded the principal amount by
$205 million. |
|
(g) |
|
Prior to September 30, 2010, the Company had outstanding
$74 million principal amount of 7% notes. Holders had
the right to 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 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. As of September 30,
2010, $69 million of the 7% notes outstanding were
validly surrendered for purchase and the Company paid
$69 million in cash to satisfy the aggregate repurchase
price. The principal amount of the remaining 7% notes
outstanding as of December 31, 2010 was $5 million. |
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, 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. 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.
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,
|
|
|
2010
|
|
2009
|
|
Principal amount of 7% senior convertible notes
|
|
$
|
5
|
|
|
$
|
74
|
|
Unamortized discount on debt
|
|
|
|
|
|
|
(5
|
)
|
Net carrying amount of 7% senior convertible notes
|
|
|
5
|
|
|
|
69
|
|
Additional paid-in capital
|
|
|
40
|
|
|
|
40
|
|
The following table details interest expense recognized related
to the 7% notes (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Contractual coupon interest
|
|
$
|
4
|
|
|
$
|
5
|
|
|
$
|
5
|
|
Amortization of discount
|
|
|
5
|
|
|
|
6
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
9
|
|
|
$
|
11
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010, the if-converted value of the
7% notes did not exceed the principal amount.
|
|
|
(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, in whole or in part, on any interest
payment date at a redemption price of 100%. |
87
Secured financings are collateralized by assets, primarily
aircraft, engines, simulators, rotable aircraft parts, hangar
and maintenance facilities and airport take-off and landing
slots. At December 31, 2010, the maturities of long-term
debt and capital leases are as follows (in millions):
|
|
|
|
|
2011
|
|
$
|
397
|
|
2012
|
|
|
455
|
|
2013
|
|
|
417
|
|
2014
|
|
|
1,555
|
|
2015
|
|
|
279
|
|
Thereafter
|
|
|
1,514
|
|
|
|
|
|
|
|
|
$
|
4,617
|
|
|
|
|
|
|
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, 2010. 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.
As of December 31, 2010, the Company had approximately
$1.92 billion of gross NOLs to reduce future federal
taxable income. All of the Companys NOLs are expected to
be available to reduce federal taxable income in the calendar
year 2011. The NOLs expire during the years 2024 through 2029.
The Companys net deferred tax assets, which include
$1.85 billion of the NOLs, are subject to a full valuation
allowance. The Company also had approximately $82 million
of tax-effected state NOLs at December 31, 2010. At
December 31, 2010, the federal and state valuation
allowances were $368 million and $62 million,
respectively.
For the year ended December 31, 2010, the Company utilized
NOLs to reduce its income tax obligation. Utilization of these
NOLs results 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.
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 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
Net Loss Income
|
|
|
Other Comprehensive
|
|
|
|
Statement
|
|
|
Income
|
|
|
Pre-allocation
|
|
$
|
(226
|
)
|
|
$
|
46
|
|
Tax allocation
|
|
|
21
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
As presented
|
|
$
|
(205
|
)
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
In addition, for the year ended December 31, 2009, 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.
88
For the year ended December 31, 2008, the Company reported
a loss, which increased its NOLs, and it did not record a tax
provision.
The components of the provision (benefit) for income taxes are
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Deferred benefit:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
|
|
|
|
(38
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit for income taxes
|
|
$
|
|
|
|
$
|
(38
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) differs from amounts computed at
the federal statutory income tax rate as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Income tax expense (benefit) at the federal statutory income tax
rate
|
|
$
|
176
|
|
|
$
|
(85
|
)
|
|
$
|
(775
|
)
|
Book expenses not deductible for tax purposes
|
|
|
14
|
|
|
|
17
|
|
|
|
229
|
|
State income tax expense, net of federal income tax expense
(benefit)
|
|
|
12
|
|
|
|
(6
|
)
|
|
|
(30
|
)
|
Change in valuation allowance
|
|
|
(202
|
)
|
|
|
74
|
|
|
|
575
|
|
AMT provision (benefit)
|
|
|
|
|
|
|
(14
|
)
|
|
|
1
|
|
Allocation to other comprehensive income
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
Long-lived intangibles
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
(38
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
|
%
|
|
|
(15.7
|
)%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
as of December 31, 2010 and 2009 are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
701
|
|
|
$
|
779
|
|
Property, plant and equipment
|
|
|
38
|
|
|
|
30
|
|
Investments
|
|
|
(3
|
)
|
|
|
63
|
|
Financing transactions
|
|
|
27
|
|
|
|
41
|
|
Employee benefits
|
|
|
322
|
|
|
|
346
|
|
Dividend Miles awards
|
|
|
120
|
|
|
|
126
|
|
AMT credit carryforward
|
|
|
25
|
|
|
|
25
|
|
Other deferred tax assets
|
|
|
71
|
|
|
|
26
|
|
Valuation allowance
|
|
|
(430
|
)
|
|
|
(623
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
871
|
|
|
|
813
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
642
|
|
|
|
582
|
|
Sale and leaseback transactions and deferred rent
|
|
|
127
|
|
|
|
137
|
|
Leasing transactions
|
|
|
59
|
|
|
|
45
|
|
Long-lived intangibles
|
|
|
25
|
|
|
|
25
|
|
Other deferred tax liabilities
|
|
|
33
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
886
|
|
|
|
829
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
|
15
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Less: current deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax liabilities
|
|
$
|
15
|
|
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
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, 2009
have been timely filed. There are currently no federal audits
and three state audits in process. The Companys federal
income tax year 2006 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 2005 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 accruals 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.
90
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
transactions to hedge its fuel consumption, and the Company has
not had any fuel hedging contracts outstanding since the third
quarter of 2009.
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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Realized loss (gain)
|
|
$
|
|
|
|
$
|
382
|
|
|
$
|
(140
|
)
|
Unrealized loss (gain)
|
|
|
|
|
|
|
(375
|
)
|
|
|
496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on fuel hedging instruments, net
|
|
$
|
|
|
|
$
|
7
|
|
|
$
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
certificates of deposit and highly liquid debt instruments.
As of December 31, 2010, the Company held auction rate
securities with a fair value of $57 million
($84 million par value), which are classified as
available-for-sale
securities and noncurrent assets on the Companys
consolidated balance sheets. Contractual maturities for these
auction rate securities range from 23 to 42 years, with 78%
of the Companys portfolio maturing within the next
30 years (2033 2036) and 22% maturing
thereafter (2052). As a result of 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. Refer to Note 7 for discussion
on how the Company determines the fair value of its investments
in auction rate securities.
During 2010, the Company sold certain investments in auction
rate securities for proceeds of $145 million, resulting in
$53 million of net realized gains recorded in nonoperating
expense, net, of which $52 million represents the
reclassification of prior period net unrealized gains from other
comprehensive income as determined on a specific-identification
basis. Proceeds for all of these sale transactions approximated
the carrying value of the Companys investments.
Additionally, the Company recorded net unrealized losses of
$1 million in other comprehensive income related to the
decline in fair value of certain investments in auction rate
securities, which offset previously recognized unrealized gains.
During 2009, the Company sold certain investments in auction
rate securities for 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.
91
The Company continues to monitor the market for auction rate
securities and consider its impact (if any) on the fair value of
its remaining investments in these securities. 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
Most of the Companys receivables relate 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 $2.97 billion principal
amount of long-term debt as of December 31, 2010 are
subject to adjustment to reflect changes in floating interest
rates. The weighted average effective interest rate on the
Companys variable rate debt was 3.75% at December 31,
2010.
The fair value of the Companys long-term debt was
approximately $4.37 billion and $3.95 billion at
December 31, 2010 and 2009, 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
|
The accounting guidance for fair value measurements, included in
FASB ASC Topic 320, Investments Debt and Equity
Securities, 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.
|
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, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities (noncurrent)
|
|
$
|
57
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
57
|
|
|
|
(1
|
)
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities (noncurrent)
|
|
$
|
203
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
203
|
|
|
|
(1
|
)
|
|
|
|
(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 |
92
|
|
|
|
|
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. |
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, 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
|
|
Sales of marketable securities
|
|
|
(145
|
)
|
Net unrealized losses recorded to other comprehensive income
|
|
|
(1
|
)
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
57
|
|
|
|
|
|
|
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, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International route authorities
|
|
$
|
39
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
39
|
|
|
$
|
|
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International route authorities
|
|
$
|
39
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
39
|
|
|
$
|
(16
|
)
|
The Company performed the annual impairment test on its
international route authorities during the fourth quarter of
2010. 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 international route authorities, no impairment was
indicated. In 2009, the Company recorded $16 million in
non-cash impairment charges related to the decline in fair value
of certain international routes.
93
|
|
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, 2010 and 2009 (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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Fair value of plan assets at beginning of period
|
|
$
|
38
|
|
|
$
|
33
|
|
|
$
|
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
5
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
19
|
|
Plan participants contributions
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
17
|
|
Gross benefits paid
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(30
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
|
40
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
|
|
57
|
|
|
|
59
|
|
|
|
143
|
|
|
|
122
|
|
Service cost
|
|
|
1
|
|
|
|
1
|
|
|
|
3
|
|
|
|
2
|
|
Interest cost
|
|
|
3
|
|
|
|
3
|
|
|
|
8
|
|
|
|
9
|
|
Plan participants contributions
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
17
|
|
Actuarial (gain) loss
|
|
|
3
|
|
|
|
(4
|
)
|
|
|
16
|
|
|
|
11
|
|
Gross benefits paid
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(30
|
)
|
|
|
(36
|
)
|
Plan amendments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
|
61
|
|
|
|
57
|
|
|
|
156
|
|
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status of the plan
|
|
$
|
(21
|
)
|
|
$
|
(19
|
)
|
|
$
|
(156
|
)
|
|
$
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability recognized in the consolidated balance sheet
|
|
$
|
(21
|
)
|
|
$
|
(19
|
)
|
|
$
|
(156
|
)
|
|
$
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain) recognized in accumulated other
comprehensive income
|
|
$
|
8
|
|
|
$
|
5
|
|
|
$
|
(40
|
)
|
|
$
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $56 million, $61 million and
$40 million, as of December 31, 2010 and
$52 million, $57 million and $38 million, as of
December 31, 2009, respectively.
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,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Discount rate
|
|
5.25%
|
|
5.5%
|
|
4.93%
|
|
5.51%
|
Rate of compensation increase
|
|
4%
|
|
4%
|
|
|
|
|
As of December 31, 2010 and 2009, 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 corporate bonds denominated in
U.S. currency (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.
94
As of December 31, 2010, the assumed health care cost trend
rates are 9% in 2011 and 8.5% in 2012, decreasing to 5.0% in
2019 and thereafter. 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. 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, 2010 (in millions):
|
|
|
|
|
|
|
|
|
|
|
1% Increase
|
|
1% Decrease
|
|
Effect on total service and interest costs
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
Effect on postretirement benefit obligation
|
|
|
14
|
|
|
|
(11
|
)
|
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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Discount rate
|
|
|
5.5
|
%
|
|
|
5.5
|
%
|
|
|
6
|
%
|
|
|
5.51
|
%
|
|
|
5.98
|
%
|
|
|
5.94
|
%
|
Expected return on plan assets
|
|
|
7.5
|
%
|
|
|
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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Service cost
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
|
8
|
|
|
|
9
|
|
|
|
9
|
|
Expected return on plan assets
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss (gain) (1)
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total periodic costs
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 2011 is
$3 million. |
In 2011, the Company expects to contribute $16 million to
its other postretirement plans. No contributions are expected in
2011 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
|
|
2011
|
|
$
|
2
|
|
|
$
|
16
|
|
|
$
|
|
|
2012
|
|
|
2
|
|
|
|
13
|
|
|
|
|
|
2013
|
|
|
2
|
|
|
|
13
|
|
|
|
|
|
2014
|
|
|
2
|
|
|
|
12
|
|
|
|
|
|
2015
|
|
|
2
|
|
|
|
12
|
|
|
|
|
|
2016 to 2020
|
|
|
16
|
|
|
|
65
|
|
|
|
(2
|
)
|
The Company assumed that its pension plans assets would
generate a long-term rate of return of 7.5% at December 31,
2010. The expected long-term rate of return assumption was
developed by evaluating input from the
95
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, 2010 is approximately 65%
equity securities and 35% fixed-income securities. Equity
securities primarily include mutual funds invested in large-cap,
mid-cap and small-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, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
40
|
|
|
$
|
40
|
|
|
$
|
|
|
|
$
|
|
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
38
|
|
|
$
|
38
|
|
|
$
|
|
|
|
$
|
|
|
As of December 31, 2010, the plans mutual funds were
invested 54% in equity securities of large-cap, mid-cap and
small-cap. U.S. companies, 33% in U.S. treasuries and
corporate bonds, 13% in equity securities of international
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.
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.
|
|
(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 $102 million,
$98 million and $96 million for the years ended
December 31, 2010, 2009, and 2008, 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.
Most non-executive employees of US Airways are eligible to
participate in a profit sharing plan. Awards are paid as a lump
sum after the end of each fiscal year. The Company recorded
$47 million for profit sharing in 2010, which is recorded
in salaries and related costs on the consolidated statement of
operations and included in accrued compensation and vacation on
the consolidated balance sheet. In 2009 and 2008, no amounts
were recorded for profit sharing.
96
|
|
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). Since 2008, when
deliveries commenced under the purchase agreements, we have
taken delivery of 34 aircraft through December 31, 2010,
which includes four A320 aircraft, 23 A321 aircraft and seven
A330-200 aircraft. During 2010, US Airways took delivery of two
A320 aircraft and two A330-200 aircraft, which were financed
through new loan agreements. US Airways plans to take delivery
of 12 A320 family aircraft in each of 2011 and 2012, with the
remaining 46 A320 family aircraft scheduled to be delivered
between 2013 and 2015. In addition, US Airways plans to take
delivery of the eight remaining A330-200 aircraft in 2013 and
2014. Deliveries of the 22 A350 XWB aircraft are scheduled to
begin in 2017 and extend through 2019.
US Airways has agreements for the purchase of eight new IAE
V2500-A5 spare engines scheduled for delivery through 2014 for
use on the A320 family fleet, three new Trent 700 spare engines
scheduled for delivery through 2013 for use on the A330-200
fleet and three new Trent XWB spare engines scheduled for
delivery in 2017 through 2019 for use on the A350 XWB aircraft.
US Airways has taken delivery of two of the Trent 700 spare
engines and one of the V2500-A5 spare engines through
December 31, 2010.
Under all of the Companys aircraft and engine purchase
agreements, the Companys total future commitments as of
December 31, 2010 are expected to be approximately
$5.9 billion through 2019 as follows: $570 million in
2011, $618 million in 2012, $1.15 billion in 2013,
$935 million in 2014, $445 million in 2015 and
$2.18 billion thereafter, which includes predelivery
deposits and payments. The Company has financing commitments for
all Airbus aircraft scheduled for delivery in 2011 and 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, 2010, the Company
had 301 aircraft under operating leases, with remaining terms
ranging from four months to approximately 13 years.
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.
As of December 31, 2010, obligations under noncancellable
operating leases for future minimum lease payments were as
follows (in millions):
|
|
|
|
|
2011
|
|
$
|
988
|
|
2012
|
|
|
911
|
|
2013
|
|
|
751
|
|
2014
|
|
|
669
|
|
2015
|
|
|
572
|
|
Thereafter
|
|
|
2,550
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
6,441
|
|
|
|
|
|
|
For the years ended December 31, 2010, 2009 and 2008,
rental expense under operating leases was $1.26 billion,
$1.29 billion and $1.33 billion, respectively.
|
|
(c)
|
Off-balance
Sheet Arrangements
|
US Airways has 27 owned aircraft, 114 leased aircraft and three
leased engines, which were financed with pass through trust
certificates, or EETCs, issued by pass through trusts. 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, delivered or refinanced, these trusts allowed US
Airways to raise the financing for several aircraft at one time
and place such funds in escrow pending the purchase, delivery or
97
refinancing 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 or refinanced 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,
2010, $809 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 generally is not the
primary beneficiary of the leasing entities if the lease terms
are consistent with market terms at the inception of the lease
and do not include a residual value guarantee, fixed-price
purchase option or similar feature that obligates US Airways to
absorb decreases in value or entitles US Airways to participate
in increases in the value of the aircraft. 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 $2.96 billion as of December 31, 2010, 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
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 Airways.
US Airways controls marketing, scheduling, ticketing, pricing
and seat inventories. The regional jet capacity purchase
agreements have expirations from 2014 to 2020. The future
minimum noncancellable commitments under the regional jet
capacity purchase agreements are $1 billion in 2011,
$1.01 billion in 2012, $1.01 billion in 2013,
$1.02 billion in 2014, $898 million in 2015 and
$1.38 billion thereafter.
In January 2010, Mesa Air Group, Inc. and certain of its
subsidiaries, including Mesa Airlines, Inc., filed voluntary
petitions for relief under Chapter 11 of the
U.S. Bankruptcy Code. At December 31, 2010, Mesa
operated 51 aircraft for the Companys Express passenger
operations, representing over $500 million in annual
passenger revenues in 2010. In November 2010, the Company signed
an agreement for an extension of 39 months on average from
the current scheduled expiration of June 30, 2012, for the
operation of 38 CRJ900 aircraft by Mesa under the
companies codeshare and revenue sharing agreement, which
agreement was approved by the U.S. Bankruptcy Court. The
remaining 13 aircraft were not extended. On
January 20, 2011, the U.S. Bankruptcy Court approved
the bankruptcy plan of Mesa Air Group, Inc., who is expected to
emerge from bankruptcy on or about February 28, 2011.
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
98
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 allowed claims have been 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 consolidated 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 2011.
The Company is party to an arbitration proceeding relating to a
grievance brought by its pilots union to the effect that,
effective January 1, 2010, this work group was entitled to
a significant increase in wages by operation of the applicable
collective bargaining agreement. A hearing was conducted and the
parties are awaiting the ruling of the arbitrator. An adverse
ruling by the arbitrator could require a material increase in
the wages of the Companys pilots and a material back
payment to make the wage increase retroactive to January 1,
2010. The Company believes that the unions position is
without merit and that the possibility of an adverse outcome is
remote.
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, 2010, the remaining lease payments
guaranteeing the principal and interest on these bonds are
$121 million, of which $30 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, 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.
99
|
|
10.
|
Other
Comprehensive Income (Loss)
|
The Companys other comprehensive income (loss) consisted
of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net income (loss)
|
|
$
|
502
|
|
|
$
|
(205
|
)
|
|
$
|
(2,215
|
)
|
Recognition of net realized gains on sale of
available-for-sale
securities
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on
available-for-sale
securities, net of tax expense of $21 million in 2009
|
|
|
(1
|
)
|
|
|
35
|
|
|
|
|
|
Recognition of previous unrealized losses now deemed
other-than-temporary
|
|
|
|
|
|
|
|
|
|
|
48
|
|
Pension and other postretirement benefits
|
|
|
(23
|
)
|
|
|
(10
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
426
|
|
|
$
|
(180
|
)
|
|
$
|
(2,160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive income were as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Pension and other postretirement benefits
|
|
$
|
32
|
|
|
$
|
55
|
|
Available-for-sale
securities
|
|
|
(18
|
)
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
$
|
14
|
|
|
$
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payables issued for aircraft purchases
|
|
$
|
118
|
|
|
$
|
333
|
|
|
$
|
|
|
Interest payable converted to debt
|
|
|
40
|
|
|
|
40
|
|
|
|
7
|
|
Net unrealized loss (gain) on
available-for-sale
securities
|
|
|
1
|
|
|
|
(58
|
)
|
|
|
|
|
Prepayment applied to equipment purchase deposits
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
Deposit applied to principal repayment on debt
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
Debt extinguished from sale of aircraft
|
|
|
|
|
|
|
(251
|
)
|
|
|
|
|
Maintenance payable converted to debt
|
|
|
|
|
|
|
8
|
|
|
|
33
|
|
Cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid, net of amounts capitalized
|
|
|
225
|
|
|
|
195
|
|
|
|
216
|
|
Income taxes paid
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
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 have a regional jet
services agreement. Mr. Bartlett 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
100
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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
$
|
9,158
|
|
|
$
|
8,285
|
|
|
$
|
9,659
|
|
Foreign
|
|
|
2,750
|
|
|
|
2,173
|
|
|
|
2,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,908
|
|
|
$
|
10,458
|
|
|
$
|
12,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 an offering price of
$4.75 per share. Net proceeds from the offering, after
underwriting discounts and commissions, 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 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
101
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, 2010, 2009 and 2008 included $31 million,
$23 million and $34 million, respectively, of
stock-based compensation costs. During 2010, stock-based
compensation costs consisted of $13 million related to
stock settled awards and $18 million related to cash
settled awards. During 2009, stock-based compensation costs
consisted of $20 million related to stock settled awards
and $3 million related to cash settled awards. There was no
expense related to cash settled awards in 2008.
Restricted Stock Unit Awards As of
December 31, 2010, 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 on a
straight-line basis over the vesting period for the entire
award. The vesting period for RSU awards is three years.
RSU award activity for the years ending December 31, 2010,
2009 and 2008 is as follows (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average Grant-
|
|
|
|
Shares
|
|
|
Date Fair Value
|
|
|
2005 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
Nonvested balances 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
|
|
Granted
|
|
|
|
|
|
|
|
|
Vested and released
|
|
|
(212
|
)
|
|
|
18.71
|
|
Forfeited
|
|
|
(1
|
)
|
|
|
11.37
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2010
|
|
|
140
|
|
|
$
|
9.21
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Granted
|
|
|
84
|
|
|
|
9.14
|
|
Vested and released
|
|
|
(91
|
)
|
|
|
7.52
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2010
|
|
|
103
|
|
|
$
|
6.36
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, there were $1 million of
total unrecognized compensation costs related to RSUs. These
costs are expected to be recognized over a weighted average
period of 0.6 years. The total fair value of RSUs vested
during 2010, 2009 and 2008 was $2 million, $2 million
and $3 million, respectively.
102
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, 2010, 2009 and 2008 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, 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
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(176
|
)
|
|
|
39.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
23
|
|
|
$
|
15.60
|
|
|
|
0.7
|
|
|
$
|
|
|
Vested or expected to vest at December 31, 2010
|
|
|
23
|
|
|
$
|
15.60
|
|
|
|
0.7
|
|
|
$
|
|
|
Exercisable at December 31, 2010
|
|
|
23
|
|
|
$
|
15.60
|
|
|
|
0.7
|
|
|
$
|
|
|
2002 Incentive Equity Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(18
|
)
|
|
|
5.57
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(1
|
)
|
|
|
25.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
701
|
|
|
$
|
18.64
|
|
|
|
2.9
|
|
|
$
|
0.1
|
|
Vested or expected to vest at December 31, 2010
|
|
|
701
|
|
|
$
|
18.64
|
|
|
|
2.9
|
|
|
$
|
0.1
|
|
Exercisable at December 31, 2010
|
|
|
701
|
|
|
$
|
18.64
|
|
|
|
2.9
|
|
|
$
|
0.1
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Stock
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
Options
|
|
|
Average
|
|
|
Contractual Term
|
|
|
Aggregate
|
|
|
|
and SARs
|
|
|
Exercise Price
|
|
|
(years)
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
2005 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(242
|
)
|
|
|
8.61
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(9
|
)
|
|
|
13.20
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(201
|
)
|
|
|
34.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
4,069
|
|
|
$
|
24.98
|
|
|
|
5.9
|
|
|
$
|
1.7
|
|
Vested or expected to vest at December 31, 2010
|
|
|
4,068
|
|
|
$
|
24.98
|
|
|
|
5.9
|
|
|
$
|
1.7
|
|
Exercisable at December 31, 2010
|
|
|
3,538
|
|
|
$
|
27.37
|
|
|
|
5.7
|
|
|
$
|
1.0
|
|
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
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
562
|
|
|
|
7.77
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(742
|
)
|
|
|
4.79
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(42
|
)
|
|
|
5.82
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(32
|
)
|
|
|
6.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
5,164
|
|
|
$
|
4.88
|
|
|
|
5.2
|
|
|
$
|
26.5
|
|
Vested or expected to vest at December 31, 2010
|
|
|
5,112
|
|
|
$
|
4.87
|
|
|
|
5.2
|
|
|
$
|
26.3
|
|
Exercisable at December 31, 2010
|
|
|
1,744
|
|
|
$
|
5.32
|
|
|
|
4.8
|
|
|
$
|
8.2
|
|
104
CSARs activity for the years ending December 31, 2010 and
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
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,865
|
|
|
|
7.42
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,028
|
)
|
|
|
3.10
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(196
|
)
|
|
|
4.15
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
5,054
|
|
|
$
|
4.65
|
|
|
|
5.6
|
|
|
$
|
27.1
|
|
Vested or expected to vest at December 31, 2010
|
|
|
4,959
|
|
|
$
|
4.63
|
|
|
|
5.6
|
|
|
$
|
26.7
|
|
Exercisable at December 31, 2010
|
|
|
438
|
|
|
$
|
3.11
|
|
|
|
5.3
|
|
|
$
|
3.0
|
|
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. Stock options
and stock appreciation rights are expensed on a straight-line
basis over the vesting period for the entire award.
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, 2010, 2009 and 2008
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Weighted average fair value
|
|
$
|
4.93
|
|
|
$
|
1.84
|
|
|
$
|
3.28
|
|
Risk free interest rate
|
|
|
2.4
|
%
|
|
|
1.3
|
%
|
|
|
2.5
|
%
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected life
|
|
|
5.0 years
|
|
|
|
3.0 years
|
|
|
|
3.0 years
|
|
Volatility
|
|
|
81
|
%
|
|
|
92
|
%
|
|
|
62
|
%
|
As of December 31, 2010, there were $7 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 0.8 years. The total intrinsic
value of stock options and SARs exercised during the years ended
December 31, 2010 and 2008 was $5 million and
$0.1 million, respectively. Cash received from stock option
exercises during each of the years ended December 31, 2010
and 2008 was $0.1 million. There were no stock options or
SARs exercised during 2009.
As of December 31, 2010, the average fair market value of
outstanding CSARs was $7.99 per share and the related liability
was $15 million. These CSARs will continue to be remeasured
at fair value at each reporting date until all awards are
settled. As of December 31, 2010, the total unrecognized
compensation expense for CSARs was $24 million and is
expected to be recognized over a weighted average period of one
year. Total cash paid for CSARs exercised during the year ended
December 31, 2010 was $6 million. There were no CSARs
exercised during 2009 and 2008.
Agreements with the Pilot Union US Airways
Group and US Airways have a letter of agreement with
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
105
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.
The per share fair value of the pilot stock options and
assumptions used for the January 31, 2008 grant was as
follows:
|
|
|
|
|
|
|
January 31,
|
|
|
2008
|
|
Per share fair value
|
|
$
|
3.02
|
|
Risk free interest rate
|
|
|
2.2
|
%
|
Expected dividend yield
|
|
|
|
|
Expected life
|
|
|
2.0 years
|
|
Volatility
|
|
|
55
|
%
|
As of December 31, 2010, 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, 2010, there were 0.8 million pilot stock
options outstanding at a weighted average exercise price of
$34.48 and a weighted average remaining contractual term of
1.27 years. No pilot stock options were exercised in 2010,
2009 or 2008.
|
|
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, 2010
|
|
$
|
8
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
4
|
|
|
$
|
10
|
|
|
$
|
8
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for inventory obsolescence:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2010
|
|
$
|
63
|
|
|
$
|
21
|
|
|
$
|
4
|
|
|
$
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
51
|
|
|
$
|
19
|
|
|
$
|
7
|
|
|
$
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
40
|
|
|
$
|
21
|
|
|
$
|
10
|
|
|
$
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance on deferred tax asset, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2010
|
|
$
|
623
|
|
|
$
|
|
|
|
$
|
193
|
|
|
$
|
430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
646
|
|
|
$
|
|
|
|
$
|
23
|
|
|
$
|
623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
71
|
|
|
$
|
575
|
|
|
$
|
|
|
|
$
|
646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In August 2009, US Airways Group and US Airways entered into a
mutual asset purchase and sale agreement with Delta Airlines,
Inc. (Delta). Pursuant to the agreement, US Airways
would transfer to Delta certain assets related to flight
operations at LaGuardia Airport in New York
(LaGuardia), 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, including 42 pairs of slots,
and the authority to serve Sao Paulo, Brazil and Tokyo, Japan.
The closing of the transactions under the agreement is subject
to certain closing conditions, including approvals from a number
of government agencies. In a final decision dated May 4,
2010, the Federal Aviation Administration (FAA)
rejected an alternative transaction proposed by Delta and US
Airways. On July 2, 2010, US Airways and Delta jointly
filed with the United States Circuit Court of Appeals for the
District of Columbia Circuit a notice of appeal of the
regulatory action taken by the FAA with respect to this
transaction. The Company is presently in discussions with Delta
and the relevant government agencies regarding a possible
106
resolution that would allow a slot transaction with Delta to
proceed. However, the Company cannot predict the outcome of
these discussions or the related judicial proceeding, or whether
a slot transaction with Delta will be completed.
|
|
18.
|
Selected
Quarterly Financial Information (unaudited)
|
Summarized quarterly financial information for 2010 and 2009 is
as follows (in millions, except share and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
2,651
|
|
|
$
|
3,171
|
|
|
$
|
3,179
|
|
|
$
|
2,907
|
|
Operating expenses
|
|
|
2,661
|
|
|
|
2,800
|
|
|
|
2,864
|
|
|
|
2,802
|
|
Operating income (loss)
|
|
|
(10
|
)
|
|
|
371
|
|
|
|
315
|
|
|
|
105
|
|
Nonoperating expenses, net
|
|
|
(35
|
)
|
|
|
(92
|
)
|
|
|
(74
|
)
|
|
|
(78
|
)
|
Income tax provision (benefit)
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
(1
|
)
|
Net income (loss)
|
|
|
(45
|
)
|
|
|
279
|
|
|
|
240
|
|
|
|
28
|
|
Earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
(0.28
|
)
|
|
$
|
1.73
|
|
|
$
|
1.49
|
|
|
$
|
0.17
|
|
Diluted:
|
|
$
|
(0.28
|
)
|
|
$
|
1.41
|
|
|
$
|
1.22
|
|
|
$
|
0.17
|
|
Shares used for computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
161,115
|
|
|
|
161,292
|
|
|
|
161,464
|
|
|
|
161,776
|
|
Diluted
|
|
|
161,115
|
|
|
|
203,809
|
|
|
|
204,535
|
|
|
|
202,200
|
|
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
|
|
The Companys 2010 and 2009 fourth quarter results were
impacted by recognition of the following items:
Fourth quarter 2010 operating expenses included a
$6 million non-cash charge related to the decline in market
value of certain spare parts. Nonoperating expenses, net
included an $11 million settlement gain, offset by
$5 million in non-cash charges related to the write off of
debt issuance costs.
Fourth quarter 2009 operating expenses included $36 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 capacity reductions, $6 million in severance
charges, $6 million in costs related to the 2009 liquidity
improvement program and $3 million in non-cash charges
related to the decline in market 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.
107
|
|
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, 2010 and 2009, 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, 2010. 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, 2010 and 2009, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2010, in conformity
with U.S. generally accepted accounting principles.
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, 2010, 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 22, 2011
expressed an unqualified opinion on the effectiveness of US
Airways internal control over financial reporting.
Phoenix, Arizona
February 22, 2011
108
US
Airways, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2010, 2009 and
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline passenger
|
|
$
|
7,645
|
|
|
$
|
6,752
|
|
|
$
|
8,183
|
|
Express passenger
|
|
|
2,821
|
|
|
|
2,503
|
|
|
|
2,879
|
|
Cargo
|
|
|
149
|
|
|
|
100
|
|
|
|
144
|
|
Other
|
|
|
1,440
|
|
|
|
1,254
|
|
|
|
1,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
12,055
|
|
|
|
10,609
|
|
|
|
12,244
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related taxes
|
|
|
2,403
|
|
|
|
1,863
|
|
|
|
3,618
|
|
Loss on fuel hedging instruments, net
|
|
|
|
|
|
|
7
|
|
|
|
356
|
|
Salaries and related costs
|
|
|
2,244
|
|
|
|
2,165
|
|
|
|
2,231
|
|
Express expenses
|
|
|
2,840
|
|
|
|
2,628
|
|
|
|
3,139
|
|
Aircraft rent
|
|
|
670
|
|
|
|
695
|
|
|
|
724
|
|
Aircraft maintenance
|
|
|
661
|
|
|
|
700
|
|
|
|
783
|
|
Other rent and landing fees
|
|
|
549
|
|
|
|
560
|
|
|
|
562
|
|
Selling expenses
|
|
|
421
|
|
|
|
382
|
|
|
|
439
|
|
Special items, net
|
|
|
5
|
|
|
|
55
|
|
|
|
76
|
|
Depreciation and amortization
|
|
|
258
|
|
|
|
251
|
|
|
|
224
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
622
|
|
Other
|
|
|
1,223
|
|
|
|
1,181
|
|
|
|
1,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
11,274
|
|
|
|
10,487
|
|
|
|
14,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
781
|
|
|
|
122
|
|
|
|
(1,773
|
)
|
Nonoperating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
13
|
|
|
|
24
|
|
|
|
83
|
|
Interest expense, net
|
|
|
(233
|
)
|
|
|
(241
|
)
|
|
|
(218
|
)
|
Other, net
|
|
|
39
|
|
|
|
(83
|
)
|
|
|
(240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating expense, net
|
|
|
(181
|
)
|
|
|
(300
|
)
|
|
|
(375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
600
|
|
|
|
(178
|
)
|
|
|
(2,148
|
)
|
Income tax provision (benefit)
|
|
|
1
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
599
|
|
|
$
|
(140
|
)
|
|
$
|
(2,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
109
US
Airways, Inc.
Consolidated Balance Sheets
December 31, 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In millions, except share
|
|
|
|
and per share amounts)
|
|
|
ASSETS
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,856
|
|
|
$
|
1,209
|
|
Accounts receivable, net
|
|
|
309
|
|
|
|
282
|
|
Materials and supplies, net
|
|
|
184
|
|
|
|
188
|
|
Prepaid expenses and other
|
|
|
480
|
|
|
|
507
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,829
|
|
|
|
2,186
|
|
Property and equipment
|
|
|
|
|
|
|
|
|
Flight equipment
|
|
|
3,985
|
|
|
|
3,710
|
|
Ground property and equipment
|
|
|
812
|
|
|
|
856
|
|
Less accumulated depreciation and amortization
|
|
|
(1,238
|
)
|
|
|
(1,098
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
3,559
|
|
|
|
3,468
|
|
Equipment purchase deposits
|
|
|
123
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
3,682
|
|
|
|
3,580
|
|
Other assets
|
|
|
|
|
|
|
|
|
Other intangibles, net of accumulated amortization of
$130 million and $106 million, respectively
|
|
|
443
|
|
|
|
467
|
|
Restricted cash
|
|
|
364
|
|
|
|
480
|
|
Investments in marketable securities
|
|
|
57
|
|
|
|
203
|
|
Other assets
|
|
|
190
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
1,054
|
|
|
|
1,357
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,565
|
|
|
$
|
7,123
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS EQUITY
|
Current liabilities
|
|
|
|
|
|
|
|
|
Current maturities of debt and capital leases
|
|
$
|
381
|
|
|
$
|
418
|
|
Accounts payable
|
|
|
343
|
|
|
|
319
|
|
Payables to related parties, net
|
|
|
626
|
|
|
|
642
|
|
Air traffic liability
|
|
|
861
|
|
|
|
778
|
|
Accrued compensation and vacation
|
|
|
236
|
|
|
|
171
|
|
Accrued taxes
|
|
|
149
|
|
|
|
142
|
|
Other accrued expenses
|
|
|
766
|
|
|
|
815
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,362
|
|
|
|
3,285
|
|
Noncurrent liabilities and deferred credits
|
|
|
|
|
|
|
|
|
Long-term debt and capital leases, net of current maturities
|
|
|
2,596
|
|
|
|
2,667
|
|
Deferred gains and credits, net
|
|
|
293
|
|
|
|
317
|
|
Postretirement benefits other than pensions
|
|
|
140
|
|
|
|
129
|
|
Employee benefit liabilities and other
|
|
|
394
|
|
|
|
470
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent liabilities and deferred credits
|
|
|
3,423
|
|
|
|
3,583
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
Common stock, $1 par value, 1,000 shares issued and
outstanding
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
2,445
|
|
|
|
2,445
|
|
Accumulated other comprehensive income
|
|
|
20
|
|
|
|
94
|
|
Accumulated deficit
|
|
|
(1,685
|
)
|
|
|
(2,284
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
780
|
|
|
|
255
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
7,565
|
|
|
$
|
7,123
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
110
US
Airways, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2010,
2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
599
|
|
|
$
|
(140
|
)
|
|
$
|
(2,148
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
258
|
|
|
|
251
|
|
|
|
224
|
|
Loss on dispositions of property and equipment
|
|
|
7
|
|
|
|
60
|
|
|
|
7
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Gain on sale of investments
|
|
|
(53
|
)
|
|
|
|
|
|
|
(1
|
)
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
622
|
|
Auction rate security impairment
|
|
|
|
|
|
|
10
|
|
|
|
214
|
|
Asset impairment
|
|
|
6
|
|
|
|
18
|
|
|
|
13
|
|
Non-cash tax benefits
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
Change in fair value of fuel hedging instruments, net
|
|
|
|
|
|
|
(375
|
)
|
|
|
496
|
|
Amortization of deferred credits and rent
|
|
|
(46
|
)
|
|
|
(49
|
)
|
|
|
(40
|
)
|
Amortization of debt discount and issuance costs
|
|
|
17
|
|
|
|
23
|
|
|
|
15
|
|
Amortization of actuarial gains
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
(2
|
)
|
Debt extinguishment costs
|
|
|
5
|
|
|
|
6
|
|
|
|
6
|
|
Other
|
|
|
(2
|
)
|
|
|
(8
|
)
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
|
|
|
|
186
|
|
|
|
(184
|
)
|
Decrease (increase) in accounts receivable, net
|
|
|
(34
|
)
|
|
|
9
|
|
|
|
68
|
|
Decrease (increase) in materials and supplies, net
|
|
|
(2
|
)
|
|
|
(25
|
)
|
|
|
35
|
|
Decrease (increase) in prepaid expenses and other
|
|
|
(41
|
)
|
|
|
164
|
|
|
|
(270
|
)
|
Decrease (increase) in other assets, net
|
|
|
17
|
|
|
|
(13
|
)
|
|
|
3
|
|
Increase (decrease) in accounts payable
|
|
|
29
|
|
|
|
(79
|
)
|
|
|
114
|
|
Increase (decrease) in payables to related parties, net
|
|
|
(16
|
)
|
|
|
257
|
|
|
|
(31
|
)
|
Increase (decrease) in air traffic liability
|
|
|
83
|
|
|
|
80
|
|
|
|
(134
|
)
|
Increase (decrease) in accrued compensation and vacation
|
|
|
65
|
|
|
|
24
|
|
|
|
(67
|
)
|
Increase (decrease) in accrued taxes
|
|
|
7
|
|
|
|
|
|
|
|
(16
|
)
|
Increase (decrease) in other liabilities
|
|
|
(74
|
)
|
|
|
(43
|
)
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
821
|
|
|
|
326
|
|
|
|
(1,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(187
|
)
|
|
|
(677
|
)
|
|
|
(1,041
|
)
|
Purchases of marketable securities
|
|
|
(180
|
)
|
|
|
|
|
|
|
(299
|
)
|
Sales of marketable securities
|
|
|
325
|
|
|
|
52
|
|
|
|
505
|
|
Proceeds from sale of other investments
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Decrease (increase) in long-term restricted cash
|
|
|
116
|
|
|
|
60
|
|
|
|
(74
|
)
|
Proceeds from sale-leaseback transactions and dispositions of
property and equipment
|
|
|
3
|
|
|
|
76
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
77
|
|
|
|
(489
|
)
|
|
|
(889
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of debt and capital lease obligations
|
|
|
(679
|
)
|
|
|
(391
|
)
|
|
|
(318
|
)
|
Proceeds from issuance of debt
|
|
|
437
|
|
|
|
747
|
|
|
|
1,386
|
|
Deferred financing costs
|
|
|
(9
|
)
|
|
|
(10
|
)
|
|
|
(17
|
)
|
Decrease in payables to related parties, net
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(251
|
)
|
|
|
346
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
647
|
|
|
|
183
|
|
|
|
(914
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
1,209
|
|
|
|
1,026
|
|
|
|
1,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
1,856
|
|
|
$
|
1,209
|
|
|
$
|
1,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
111
US
Airways, Inc.
Consolidated Statements of Stockholders
Equity (Deficit)
For the Years Ended December 31, 2010, 2009 and
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Accumulated Other
|
|
|
Retained
|
|
|
|
|
|
|
Common
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Earnings
|
|
|
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Income (Loss)
|
|
|
(Deficit)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
|
|
|
$
|
1,845
|
|
|
$
|
(1
|
)
|
|
$
|
6
|
|
|
$
|
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
|
|
|
|
78
|
|
|
|
(2,144
|
)
|
|
|
(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
|
|
|
|
94
|
|
|
|
(2,284
|
)
|
|
|
255
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
599
|
|
|
|
599
|
|
Recognition of net realized gains on sale of
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
(52
|
)
|
|
|
|
|
|
|
(52
|
)
|
Net unrealized loss on
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
Other postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
|
|
|
$
|
2,445
|
|
|
$
|
20
|
|
|
$
|
(1,685
|
)
|
|
$
|
780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
112
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. The accompanying
consolidated financial statements include the accounts of US
Airways and its wholly owned subsidiary, FTCHP LLC.
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 in Washington, D.C. at Ronald Reagan Washington
National Airport (Washington National).
US Airways offers scheduled passenger service on more than
3,200 flights daily to more than 200 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. US Airways had approximately 52 million
passengers boarding its mainline flights in 2010. During 2010,
US Airways mainline operation provided regularly scheduled
service or seasonal service at 132 airports, while the US
Airways Express network served 155 airports in the United
States, Canada and Mexico, including 75 airports also served by
the mainline operation. US Airways Express air carriers had
approximately 28 million passengers boarding their planes
in 2010. As of December 31, 2010, US Airways operated 339
mainline jets and is supported by US Airways Groups
regional airline subsidiaries and affiliates operating as US
Airways Express under capacity purchase agreements, which
operated 231 regional jets and 50 turboprops. US
Airways prorate carriers operated 10 turboprops and three
regional jets at December 31, 2010.
As of December 31, 2010, US Airways employed approximately
30,900 active full-time equivalent employees. Approximately 85%
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 and its wholly owned subsidiary. 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
intercompany accounts and transactions between US Airways and
its wholly owned subsidiary have been eliminated.
The preparation of financial statements in accordance with
accounting principles generally accepted in the United States
requires management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities,
revenues and expenses, and the disclosure of contingent assets
and liabilities at the date of the financial statements. 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.
|
|
(c)
|
Cash
and Cash Equivalents
|
Cash equivalents consist of cash in money market securities and
certificates of deposit. All highly liquid investments purchased
within three months of maturity are classified as cash
equivalents. Cash equivalents are
113
stated at cost, which approximates fair value due to the highly
liquid nature and short-term maturities of the underlying
securities.
|
|
(d)
|
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. US
Airways investments in marketable securities consist of
auction rate securities, which are classified as available for
sale and recorded at fair value. See Note 5(b) for more
information on US Airways investments in marketable
securities.
Restricted cash primarily includes cash collateral to secure
workers compensation claims and credit card processing
holdback requirements for advance ticket sales for which US
Airways has not yet provided air transportation. 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 market 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 2010,
US Airways recorded a $6 million write down related to
certain spare parts inventory to reflect lower of cost or market
value. During 2008, US Airways recorded a $5 million write
down related to its Boeing 737 spare parts inventory to reflect
lower of cost or market 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, 2010, 2009 and 2008 was $4 million,
$10 million and $6 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 or
improvement, 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 no impairment charges in the years ended
December 31, 2010 and 2009. 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.
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
114
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 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, 2010 and
2009 (in millions):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Airport take-off and landing slots
|
|
$
|
452
|
|
|
$
|
452
|
|
Airport gate leasehold rights
|
|
|
52
|
|
|
|
52
|
|
Accumulated amortization
|
|
|
(130
|
)
|
|
|
(106
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
374
|
|
|
$
|
398
|
|
|
|
|
|
|
|
|
|
|
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, 2010, 2009 and 2008, US
Airways recorded amortization expense of $24 million,
$25 million and $23 million, respectively, related to
its intangible assets. US Airways expects to record annual
amortization expense of $21 million in year 2011,
$20 million in year 2012, $20 million in year 2013,
$20 million in year 2014, $20 million in year 2015 and
$273 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. As of
December 31, 2010 and 2009, US Airways had $39 million
of international route authorities and $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 2010. 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 the US Airways annual impairment
test on international route authorities and trademarks, no
impairment was indicated. In 2009, US Airways recorded
$16 million in non-cash impairment charges related to the
decline in fair value of certain international routes. US
Airways will perform its next annual impairment test on
October 1, 2011.
115
Other assets consist of the following as of December 31,
2010 and 2009 (in millions):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Aircraft leasehold interest, net
|
|
$
|
71
|
|
|
$
|
77
|
|
Deferred rent
|
|
|
47
|
|
|
|
59
|
|
Deposits
|
|
|
38
|
|
|
|
36
|
|
Debt issuance costs, net
|
|
|
24
|
|
|
|
26
|
|
Long-term investments
|
|
|
10
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
190
|
|
|
$
|
207
|
|
|
|
|
|
|
|
|
|
|
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 purchase accounting for US Airways in
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 2011 to 2015 and
$41 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 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. US Airways has an
obligation to provide future travel when these mileage credits
are redeemed and therefore has recognized an expense and
recorded a liability for mileage credits outstanding.
The liability for outstanding mileage credits earned by Dividend
Miles members through the purchase of travel includes all
mileage credits that are expected to be redeemed, including
mileage credits earned by members whose mileage account balances
have not yet reached the minimum mileage credit level required
to redeem an award. Additionally, outstanding mileage credits
are subject to expiration if unused. In calculating the
liability, US Airways estimates how many mileage credits will
never be redeemed for travel and excludes 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.
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 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 incremental cost the amount of
certain fees related to redemptions 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, 2010 and 2009, 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 $149 million and
$130 million, respectively.
US Airways also sells frequent flyer program mileage credits to
participating airline partners and non-airline business
partners. Sales of mileage credits to business partners is
comprised of two components, transportation and marketing. US
Airways uses the residual method of accounting to determine the
values of each component. The transportation component
represents the fair value of future travel awards and is
determined based on the equivalent value of purchased tickets
that have similar restrictions as frequent traveler awards. The
determination of the
116
transportation component requires estimates and assumptions that
require management judgment. Significant estimates and
assumptions include:
|
|
|
|
|
the number of awards expected to be redeemed on US Airways;
|
|
|
the number of awards expected to be redeemed on partner airlines;
|
|
|
the class of service for which the award is expected to be
redeemed; and
|
|
|
the geographic region of travel for which the award is expected
to be redeemed.
|
These estimates and assumptions are based on historical program
experience. The transportation component is deferred and
amortized into passenger revenue on a straight-line basis over
the period in which the mileage credits are expected to be
redeemed for travel, which is currently estimated to be
33 months.
Under the residual method, the total mileage sale proceeds less
the transportation component is the marketing component. The
marketing component represents services provided by US Airways
to its business partners and relates primarily to the use of US
Airways logo and trademarks along with access to US
Airways list of Dividend Miles members. The marketing
services are provided periodically, but no less than monthly.
Accordingly, the marketing component is considered earned and
recognized in other revenues in the period of the mileage sale.
As of December 31, 2010 and 2009, US Airways had
$178 million and $212 million, respectively, in
deferred revenue from the sale of mileage credits included in
other accrued expenses on the consolidated balance sheets. For
the years ended December 31, 2010, 2009 and 2008, the
marketing component of mileage sales recognized at the time of
sale in other revenues was approximately $144 million,
$112 million and $126 million, respectively.
US Airways is required to adopt and apply Accounting Standards
Update (ASU)
No. 2009-13,
Revenue Recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements, to any new or
materially modified business partner agreements entered into on
or after January 1, 2011. See Note 1(t) for more
information on recent accounting pronouncements.
|
|
(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. Since the third quarter of 2008, US Airways
has not entered into any new transactions to hedge its fuel
consumption, and US Airways has not had any fuel hedging
contracts outstanding since the third quarter of 2009. 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.
Also included within deferred gains and credits, net are amounts
deferred and amortized into future periods associated with the
sale and leaseback of property and equipment, the adjustment of
leases to fair value in connection with prior period fresh-start
and purchase accounting and certain vendor incentives.
117
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 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 Corporation
(Air Wisconsin), Republic Airline Inc.
(Republic), Mesa Airlines, Inc. (Mesa)
and Chautauqua Airlines, Inc. (Chautauqua) in
certain markets. US Airways Groups wholly owned
regional air carriers, Air Wisconsin, Republic, Mesa and
Chautauqua operate regional jet aircraft in these markets as
part of US Airways Express. US Airways classifies
revenues generated from transportation on these carriers as
Express passenger revenues. Liabilities related to tickets sold
by US Airways 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 taxes and fees on its ticket
sales. These taxes and fees are remitted to governmental
authorities and 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, 2010, 2009 and 2008 were
$10 million, $11 million and $10 million,
respectively.
118
|
|
(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.
|
|
(r)
|
Foreign
Currency Gains and Losses
|
Foreign currency gains and losses are recorded as part of other
nonoperating expense, net in US Airways consolidated
statements of operations. Foreign currency losses for the years
ended December 31, 2010, 2009 and 2008 were
$17 million, $3 million and $25 million,
respectively.
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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Aircraft fuel and related taxes
|
|
$
|
770
|
|
|
$
|
609
|
|
|
$
|
1,137
|
|
Salaries and related costs
|
|
|
23
|
|
|
|
23
|
|
|
|
21
|
|
Capacity purchases
|
|
|
1,681
|
|
|
|
1,652
|
|
|
|
1,621
|
|
Other rent and landing fees
|
|
|
107
|
|
|
|
99
|
|
|
|
96
|
|
Selling expenses
|
|
|
173
|
|
|
|
154
|
|
|
|
163
|
|
Other expenses
|
|
|
86
|
|
|
|
91
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express expenses
|
|
$
|
2,840
|
|
|
$
|
2,628
|
|
|
$
|
3,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(t)
|
Recent
Accounting Pronouncements
|
In December 2009, the Financial Accounting Standards Board
(FASB) issued 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
requires 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 is 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 adopted
ASU No. 2009-17
as of January 1, 2010, and its application had no impact on
US Airways 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
119
amendments in ASU
No. 2009-13
retrospectively for all prior periods. US Airways
multiple-deliverable revenue arrangements consist principally of
sales of frequent flyer program mileage credits to business
partners, which are comprised of two components, transportation
and marketing. See Note 1(k) for more information on
US Airways frequent traveler program. US Airways
is required to adopt and apply ASU
No. 2009-13
to any new or materially modified multiple-deliverable revenue
arrangements entered into on or after January 1, 2011. It
is not practical to estimate the impact of the new guidance on
US Airways consolidated financial statements because
US Airways will apply the guidance prospectively to
agreements entered into or materially modified subsequent to
January 1, 2011.
Special items, net as shown on the consolidated statements of
operations include the following charges (credits) (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Aviation Security Infrastructure Fee (ASIF) refund
(a)
|
|
$
|
(16
|
)
|
|
$
|
|
|
|
$
|
|
|
Other costs(b)
|
|
|
10
|
|
|
|
6
|
|
|
|
|
|
Asset impairment charges (c)
|
|
|
6
|
|
|
|
16
|
|
|
|
18
|
|
Aircraft costs (d)
|
|
|
5
|
|
|
|
22
|
|
|
|
14
|
|
Severance and other charges (e)
|
|
|
|
|
|
|
11
|
|
|
|
9
|
|
Merger-related transition expenses (f)
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5
|
|
|
$
|
55
|
|
|
$
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
In 2010, US Airways recorded a $16 million refund of
ASIF previously paid to the Transportation Security
Administration (TSA) during the years 2005 to 2009. |
|
(b) |
|
In 2010, US Airways recorded other net special charges of
$10 million, which included a settlement and corporate
transaction costs. In 2009, US Airways incurred
$6 million in costs related to the 2009 liquidity
improvement program, which primarily consisted of professional
and legal fees. |
|
(c) |
|
In 2010, US Airways recorded a $6 million non-cash
charge related to the decline in market value of certain spare
parts. 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
international routes. 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), 1(g) and 1(i) for further
discussion of each of these charges. |
|
(d) |
|
In 2010, 2009 and 2008, US Airways recorded
$5 million, $22 million and $14 million,
respectively, in aircraft costs as a result of previously
announced capacity reductions. |
|
(e) |
|
In 2009 and 2008, US Airways recorded $11 million and
$9 million, respectively, in severance and other charges. |
|
(f) |
|
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. |
120
The following table details US Airways debt (in
millions). Variable interest rates listed are the rates as of
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Secured
|
|
|
|
|
|
|
|
|
Equipment loans and other notes payable, fixed and variable
interest rates ranging from 1.66% to 10.29%, maturing from 2011
to 2021 (a)
|
|
$
|
1,890
|
|
|
$
|
2,201
|
|
Aircraft enhanced equipment trust certificates
(EETCs), fixed interest rates ranging from 6.25% to
9.01%, maturing from 2015 to 2023 (b)
|
|
|
809
|
|
|
|
505
|
|
Other secured obligations, fixed interest rate of 8%, maturing
from 2015 to 2021
|
|
|
85
|
|
|
|
84
|
|
Senior secured discount notes
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,784
|
|
|
|
2,822
|
|
Unsecured
|
|
|
|
|
|
|
|
|
Airbus advance, repayments through 2018 (c)
|
|
|
222
|
|
|
|
247
|
|
Industrial development bonds, fixed interest rate of 6.3%,
interest only payments until due in 2023 (d)
|
|
|
29
|
|
|
|
29
|
|
Other unsecured obligations, maturing from 2011 to 2012
|
|
|
23
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
274
|
|
|
|
357
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and capital lease obligations
|
|
|
3,058
|
|
|
|
3,179
|
|
Less: Total unamortized discount on debt
|
|
|
(81
|
)
|
|
|
(94
|
)
|
Current maturities, less $4 million of unamortized discount
on debt at December 31, 2009
|
|
|
(381
|
)
|
|
|
(418
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital lease obligations, net of current
maturities
|
|
$
|
2,596
|
|
|
$
|
2,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The following are the significant equipment financing agreements
entered into in 2010: |
|
|
|
In 2010, US Airways borrowed $181 million to finance
Airbus aircraft deliveries. 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. |
|
(b) |
|
The equipment notes underlying these EETCs are the direct
obligations of US Airways and cover the financing of 27
aircraft. See Note 8(c) for further discussion. |
|
|
|
In December 2010, US Airways created two pass-through
trusts which issued approximately $340 million aggregate
face amount of
Series 2010-1A
and
Series 2010-1B
Enhanced Equipment Trust Certificates (the 2010
EETCs) in connection with the refinancing of eight Airbus
aircraft owned by US Airways. The 2010 EETCs represent
fractional undivided interests in the respective pass-through
trusts and are not obligations of US Airways. The net
proceeds from the issuance of the 2010 EETCs were used to
purchase equipment notes issued by US Airways in two
series: Series A equipment notes in an aggregate principal
amount of $263 million bearing interest at 6.25% per annum
and Series B equipment notes in an aggregate principal
amount of $77 million bearing interest at 8.5% per annum.
Interest on the equipment notes is payable semiannually in April
and October of each year, beginning in April 2011. Principal
payments on the equipment notes are scheduled to begin in
October 2011. The final payments on the Series A equipment
notes and Series B equipment notes will be due in April
2023 and April 2017, respectively. US Airways payment
obligations under the equipment notes are fully and
unconditionally guaranteed by US Airways Group.
Substantially all of the proceeds from the issuance of the
equipment notes were used to repay the existing debt associated
with eight Airbus aircraft, with the balance used for general
corporate purposes. The equipment notes are secured by liens on
aircraft. |
121
|
|
|
(c) |
|
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 the amendments, US Airways has agreed to maintain a
level of unrestricted cash in the same amount required by
US Airways Groups 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. |
|
(d) |
|
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, in whole or in part, on any interest
payment date at a redemption price of 100%. |
Secured financings are collateralized by assets, primarily
aircraft, engines, simulators, rotable aircraft parts, hangar
and maintenance facilities and airport take-off and landing
slots. At December 31, 2010, the maturities of long-term
debt and capital leases are as follows (in millions):
|
|
|
|
|
2011
|
|
$
|
381
|
|
2012
|
|
|
339
|
|
2013
|
|
|
301
|
|
2014
|
|
|
279
|
|
2015
|
|
|
279
|
|
Thereafter
|
|
|
1,479
|
|
|
|
|
|
|
|
|
$
|
3,058
|
|
|
|
|
|
|
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, 2010. 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 is 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.
As of December 31, 2010, US Airways had approximately
$1.84 billion of gross NOLs to reduce future federal
taxable income. All of US Airways NOLs are expected
to be available to reduce federal taxable income in the calendar
year 2011. The NOLs expire during the years 2024 through 2029.
US Airways net deferred tax assets, which include
$1.77 billion of the NOLs, are subject to a full valuation
allowance. US Airways also had approximately
$78 million of tax-effected state NOLs at December 31,
2010. At December 31, 2010, the federal and state valuation
allowances were $388 million and $62 million,
respectively.
For the year ended December 31, 2010, US Airways
utilized NOLs to reduce its income tax obligation. Utilization
of these NOLs results 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.
For the year ended December 31, 2010, US Airways
recorded $1 million of state income tax expense related to
certain states where NOLs were either limited or not available
to be used.
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
122
recorded a tax benefit on the loss from continuing operations,
which was exactly offset by income tax expense on other
comprehensive income as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
Net Loss Income
|
|
|
Other Comprehensive
|
|
|
|
Statement
|
|
|
Income
|
|
|
Pre-allocation
|
|
$
|
(161
|
)
|
|
$
|
37
|
|
Tax allocation
|
|
|
21
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
As presented
|
|
$
|
(140
|
)
|
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
In addition, for the year ended December 31, 2009,
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.
The components of the provision (benefit) for income taxes are
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1
|
|
State
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Deferred benefit:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
|
|
|
|
(38
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
$
|
1
|
|
|
$
|
(38
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) differs from amounts computed at
the federal statutory income tax rate as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Income tax expense (benefit) at the federal statutory income tax
rate
|
|
$
|
210
|
|
|
$
|
(62
|
)
|
|
$
|
(752
|
)
|
Book expenses not deductible for tax purposes
|
|
|
13
|
|
|
|
17
|
|
|
|
229
|
|
State income tax expense, net of federal income tax expense
(benefit)
|
|
|
16
|
|
|
|
(4
|
)
|
|
|
(38
|
)
|
Change in valuation allowance
|
|
|
(238
|
)
|
|
|
49
|
|
|
|
560
|
|
AMT provision (benefit)
|
|
|
|
|
|
|
(14
|
)
|
|
|
1
|
|
Allocation to other comprehensive income
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
Long-lived intangibles
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1
|
|
|
$
|
(38
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
0.11
|
%
|
|
|
(21.5
|
)%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
as of December 31, 2010 and 2009 are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
670
|
|
|
$
|
748
|
|
Property, plant and equipment
|
|
|
35
|
|
|
|
28
|
|
Investments
|
|
|
(3
|
)
|
|
|
63
|
|
Financing transactions
|
|
|
27
|
|
|
|
41
|
|
Employee benefits
|
|
|
311
|
|
|
|
335
|
|
Dividend Miles awards
|
|
|
120
|
|
|
|
126
|
|
AMT credit carryforward
|
|
|
25
|
|
|
|
25
|
|
Other deferred tax assets
|
|
|
69
|
|
|
|
24
|
|
Valuation allowance
|
|
|
(450
|
)
|
|
|
(653
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
804
|
|
|
|
737
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
603
|
|
|
|
541
|
|
Sale and leaseback transactions and deferred rent
|
|
|
127
|
|
|
|
137
|
|
Leasing transactions
|
|
|
59
|
|
|
|
45
|
|
Long-lived intangibles
|
|
|
25
|
|
|
|
25
|
|
Other deferred tax liabilities
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
818
|
|
|
|
752
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
|
14
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Less: current deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax liabilities
|
|
$
|
14
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
The reason for significant differences between taxable and
pre-tax book income primarily relates to depreciation on fixed
assets, employee 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 for fiscal
years through December 31, 2009 have been timely filed.
US Airways federal income tax year 2006 was closed by
operation of the statute of limitations expiring, and there were
no extensions filed. There are currently no federal audits and
three state audits in process. 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 2005 for these state tax jurisdictions are closed by
operation of the statute of limitations expiring. Extensions for
two states have been filed.
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 accruals 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.
124
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
transactions to hedge its fuel consumption, and US Airways
has not had any fuel hedging contracts outstanding since the
third quarter of 2009.
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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Realized loss (gain)
|
|
$
|
|
|
|
$
|
382
|
|
|
$
|
(140
|
)
|
Unrealized loss (gain)
|
|
|
|
|
|
|
(375
|
)
|
|
|
496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on fuel hedging instruments, net
|
|
$
|
|
|
|
$
|
7
|
|
|
$
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, certificates of deposit and highly liquid debt
instruments.
As of December 31, 2010, US Airways held auction rate
securities with a fair value of $57 million
($84 million 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 23 to 42 years, with 78%
of US Airways portfolio maturing within the next
30 years (2033 - 2036) and 22% maturing
thereafter (2052). As a result of 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. Refer to Note 6 for
discussion on how US Airways determines the fair value of
its investments in auction rate securities.
During 2010, US Airways sold certain investments in auction
rate securities for proceeds of $145 million, resulting in
$53 million of net realized gains recorded in nonoperating
expense, net, of which $52 million represents the
reclassification of prior period net unrealized gains from other
comprehensive income as determined on a specific-identification
basis. Proceeds for all of these sale transactions approximated
the carrying value of US Airways investments.
Additionally, US Airways recorded net unrealized losses of
$1 million in other comprehensive income related to the
decline in fair value of certain investments in auction rate
securities, which offset previously recognized unrealized gains.
During 2009, US Airways sold certain investments in auction
rate securities for 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
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.
125
US Airways continues to monitor the market for auction rate
securities and consider its impact (if any) on the fair value of
its remaining investments in these securities. 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
Most of US Airways receivables relate 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 $1.62 billion principal
amount of long-term debt as of December 31, 2010 are
subject to adjustment to reflect changes in floating interest
rates. The weighted average effective interest rate on
US Airways variable rate debt was 4.28% at
December 31, 2010.
The fair value of US Airways long-term debt was
approximately $2.85 billion and $2.83 billion at
December 31, 2010 and 2009, 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
|
The accounting guidance for fair value measurements, included in
FASB ASC Topic 320, Investments Debt and Equity
Securities, 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.
|
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, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities (noncurrent)
|
|
$
|
57
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
57
|
|
|
|
(1
|
)
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities (noncurrent)
|
|
$
|
203
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
203
|
|
|
|
(1
|
)
|
|
|
|
(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 |
126
|
|
|
|
|
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. |
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, 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
|
|
Sales of marketable securities
|
|
|
(145
|
)
|
Net unrealized losses recorded to other comprehensive income
|
|
|
(1
|
)
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
57
|
|
|
|
|
|
|
Assets measured at fair value on a nonrecurring basis are as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
Significant Other
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
Observable Inputs
|
|
Inputs
|
|
Total
|
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Losses
|
|
At December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International route authorities
|
|
$
|
39
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
39
|
|
|
$
|
|
|
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
2010. 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 international route authorities, no impairment was
indicated. In 2009, US Airways recorded $16 million in
non-cash impairment charges related to the decline in fair value
of certain international routes.
|
|
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.
127
|
|
(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, 2010 and 2009 (in
millions).
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Fair value of plan assets at beginning of period
|
|
$
|
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
14
|
|
|
|
19
|
|
Plan participants contributions
|
|
|
16
|
|
|
|
17
|
|
Gross benefits paid
|
|
|
(30
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
|
|
142
|
|
|
|
121
|
|
Service cost
|
|
|
3
|
|
|
|
2
|
|
Interest cost
|
|
|
8
|
|
|
|
9
|
|
Plan participants contributions
|
|
|
16
|
|
|
|
17
|
|
Actuarial loss
|
|
|
16
|
|
|
|
11
|
|
Gross benefits paid
|
|
|
(30
|
)
|
|
|
(36
|
)
|
Plan amendments
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
|
155
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
Funded status of the plan
|
|
|
(155
|
)
|
|
|
(142
|
)
|
|
|
|
|
|
|
|
|
|
Liability recognized in the consolidated balance sheet
|
|
$
|
(155
|
)
|
|
$
|
(142
|
)
|
|
|
|
|
|
|
|
|
|
Net actuarial gain recognized in accumulated other comprehensive
income
|
|
$
|
38
|
|
|
$
|
59
|
|
|
|
|
|
|
|
|
|
|
The following table presents the weighted average assumptions
used to determine benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Year Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
Discount rate
|
|
|
4.93
|
%
|
|
|
5.51
|
%
|
US Airways assumed discount rates for measuring its other
postretirement benefit obligations, based on a hypothetical
portfolio of high quality corporate bonds denominated in
U.S. currency (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, 2010, the assumed health care cost trend
rates are 9% in 2011 and 8.5% in 2012, decreasing to 5.0% in
2019 and thereafter. 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. 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, 2010 (in millions):
|
|
|
|
|
|
|
|
|
|
|
1% Increase
|
|
1% Decrease
|
|
Effect on total service and interest costs
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
Effect on postretirement benefit obligation
|
|
|
14
|
|
|
|
(11
|
)
|
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,
|
|
|
2010
|
|
2009
|
|
2008
|
Discount rate
|
|
|
5.51
|
%
|
|
|
5.98
|
%
|
|
|
5.94
|
%
|
128
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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Service cost
|
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost
|
|
|
8
|
|
|
|
9
|
|
|
|
9
|
|
Amortization of actuarial gain (1)
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total periodic cost
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 2011 is
$3 million. |
In 2011, US Airways expects to contribute $16 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
|
|
2011
|
|
$
|
16
|
|
|
$
|
|
|
2012
|
|
|
13
|
|
|
|
|
|
2013
|
|
|
13
|
|
|
|
|
|
2014
|
|
|
12
|
|
|
|
|
|
2015
|
|
|
12
|
|
|
|
|
|
2016 to 2020
|
|
|
65
|
|
|
|
(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 $98 million,
$94 million and $92 million for the years ended
December 31, 2010, 2009, and 2008, 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.
Most non-executive employees of US Airways are eligible to
participate in a profit sharing plan. Awards are paid as a lump
sum after the end of each fiscal year. US Airways recorded
$47 million for profit sharing in 2010, which is recorded
in salaries and related costs on the consolidated statement of
operations and included in accrued compensation and vacation on
the consolidated balance sheet. In 2009 and 2008, no amounts
were recorded for profit sharing.
|
|
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). Since 2008, when deliveries commenced under the
purchase agreements, we have taken
129
delivery of 34 aircraft through December 31, 2010, which
includes four A320 aircraft, 23 A321 aircraft and seven A330-200
aircraft. During 2010, US Airways took delivery of two A320
aircraft and two A330-200 aircraft, which were financed through
new loan agreements. US Airways plans to take delivery of 12
A320 family aircraft in each of 2011 and 2012, with the
remaining 46 A320 family aircraft scheduled to be delivered
between 2013 and 2015. In addition, US Airways plans to take
delivery of the eight remaining A330-200 aircraft in 2013 and
2014. Deliveries of the 22 A350 XWB aircraft are scheduled to
begin in 2017 and extend through 2019.
US Airways has agreements for the purchase of eight new IAE
V2500-A5 spare engines scheduled for delivery through 2014 for
use on the A320 family fleet, three new Trent 700 spare engines
scheduled for delivery through 2013 for use on the A330-200
fleet and three new Trent XWB spare engines scheduled for
delivery in 2017 through 2019 for use on the A350 XWB aircraft.
US Airways has taken delivery of two of the Trent 700 spare
engines and one of the V2500-A5 spare engines through
December 31, 2010.
Under all of US Airways aircraft and engine purchase
agreements, US Airways total future commitments as of
December 31, 2010 are expected to be approximately
$5.9 billion through 2019 as follows: $570 million in
2011, $618 million in 2012, $1.15 billion in 2013,
$935 million in 2014, $445 million in 2015 and
$2.18 billion thereafter, which includes predelivery
deposits and payments. US Airways has financing commitments for
all Airbus aircraft scheduled for delivery in 2011 and 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, 2010, US Airways had
290 aircraft under operating leases, with remaining terms
ranging from four months to approximately 13 years.
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.
As of December 31, 2010, obligations under noncancellable
operating leases for future minimum lease payments were as
follows (in millions):
|
|
|
|
|
2011
|
|
$
|
977
|
|
2012
|
|
|
902
|
|
2013
|
|
|
743
|
|
2014
|
|
|
663
|
|
2015
|
|
|
571
|
|
Thereafter
|
|
|
2,550
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
6,406
|
|
Less sublease rental receipts
|
|
|
(470
|
)
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
5,936
|
|
|
|
|
|
|
For the years ended December 31, 2010, 2009 and 2008,
rental expense under operating leases was $1.25 billion,
$1.28 billion and $1.32 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 2011 through 2014,
$74 million in 2015 and $312 million thereafter. The
following amounts relate to owned aircraft leased under such
agreements as reflected in flight equipment as of
December 31, 2010 and 2009 (in millions):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Flight equipment
|
|
$
|
286
|
|
|
$
|
286
|
|
Less accumulated amortization
|
|
|
(53
|
)
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
233
|
|
|
$
|
243
|
|
|
|
|
|
|
|
|
|
|
130
|
|
(c)
|
Off-balance
Sheet Arrangements
|
US Airways has 27 owned aircraft, 114 leased aircraft and three
leased engines, which were financed with pass through trust
certificates, or EETCs, issued by pass through trusts. 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, delivered or refinanced, these trusts allowed US
Airways to raise the financing for several aircraft at one time
and place such funds in escrow pending the purchase, delivery or
refinancing 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 or refinanced 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, 2010, $809 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 generally is not the
primary beneficiary of the leasing entities if the lease terms
are consistent with market terms at the inception of the lease
and do not include a residual value guarantee, fixed-price
purchase option or similar feature that obligates US Airways to
absorb decreases in value or entitles US Airways to participate
in increases in the value of the aircraft. 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 $2.96 billion as of December 31, 2010, 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
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 Airways.
US Airways controls marketing, scheduling, ticketing, pricing
and seat inventories. The regional jet capacity purchase
agreements have expirations from 2014 to 2020. The future
minimum noncancellable commitments under the regional jet
capacity purchase agreements are $1 billion in 2011,
$1.01 billion in 2012, $1.01 billion in 2013,
$1.02 billion in 2014, $898 million in 2015 and
$1.38 billion thereafter.
In January 2010, Mesa Air Group, Inc. and certain of its
subsidiaries, including Mesa Airlines, Inc., filed voluntary
petitions for relief under Chapter 11 of the
U.S. Bankruptcy Code. At December 31, 2010, Mesa
operated 51 aircraft for US Airways Express passenger
operations, representing over $500 million in annual
passenger revenues in 2010. In November 2010, US Airways signed
an agreement for an extension of 39 months on average from
the current scheduled expiration of June 30, 2012, for the
operation of 38 CRJ900 aircraft by Mesa under the
companies codeshare and revenue sharing agreement, which
agreement was approved by the U.S. Bankruptcy
131
Court. The remaining 13 aircraft were not extended. On
January 20, 2011, the U.S. Bankruptcy Court approved
the bankruptcy plan of Mesa Air Group, Inc., who is expected to
emerge from bankruptcy on or about February 28, 2011.
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 allowed claims have been 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 consolidated 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 2011.
US Airways is party to an arbitration proceeding relating to a
grievance brought by their pilots union to the effect that,
effective January 1, 2010, this work group was entitled to
a significant increase in wages by operation of the applicable
collective bargaining agreement. A hearing was conducted and the
parties are awaiting the ruling of the arbitrator. An adverse
ruling by the arbitrator could require a material increase in
the wages of US Airways pilots and a material back payment
to make the wage increase retroactive to January 1, 2010.
US Airways believes that the unions position is without
merit and that the possibility of an adverse outcome is remote.
US Airways is a defendant in various pending lawsuits and
proceedings, and from time to time is 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, 2010, the remaining lease payments
guaranteeing the principal and interest on these bonds are
$121 million, of which $30 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
132
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 is a guarantor of US Airways Groups Citicorp
credit facility, 7% senior convertible notes and
$30 million loan to finance airport construction activities
in Philadelphia.
|
|
9.
|
Other
Comprehensive Income (Loss)
|
US Airways other comprehensive income (loss) consisted of
the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net income (loss)
|
|
$
|
599
|
|
|
$
|
(140
|
)
|
|
$
|
(2,148
|
)
|
Recognition of net realized gains on sale of
available-for-sale
securities
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on
available-for-sale
securities, net of tax expense of $21 million in 2009
|
|
|
(1
|
)
|
|
|
35
|
|
|
|
|
|
Recognition of previous unrealized losses now deemed
other-than-temporary
|
|
|
|
|
|
|
|
|
|
|
48
|
|
Other postretirement benefits
|
|
|
(21
|
)
|
|
|
(19
|
)
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
525
|
|
|
$
|
(124
|
)
|
|
$
|
(2,069
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive income were as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Other postretirement benefits
|
|
$
|
38
|
|
|
$
|
59
|
|
Available-for-sale
securities
|
|
|
(18
|
)
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
$
|
20
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payables issued for aircraft purchases
|
|
$
|
118
|
|
|
$
|
333
|
|
|
$
|
|
|
Interest payable converted to debt
|
|
|
40
|
|
|
|
40
|
|
|
|
7
|
|
Net unrealized loss (gain) on
available-for-sale
securities
|
|
|
1
|
|
|
|
(58
|
)
|
|
|
|
|
Prepayment applied to equipment purchase deposits
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
Deposit applied to principal repayment on debt
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
Forgiveness of intercompany payable to US Airways Group
|
|
|
|
|
|
|
600
|
|
|
|
|
|
Debt extinguished from sale of aircraft
|
|
|
|
|
|
|
(251
|
)
|
|
|
|
|
Maintenance payable converted to debt
|
|
|
|
|
|
|
8
|
|
|
|
33
|
|
Cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid, net of amounts capitalized
|
|
|
164
|
|
|
|
145
|
|
|
|
124
|
|
Income taxes paid
|
|
|
1
|
|
|
|
|
|
|
|
|
|
133
|
|
11.
|
Related
Party Transactions
|
The following represents net payable balances to related parties
(in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
US Airways Group
|
|
$
|
571
|
|
|
$
|
607
|
|
US Airways Groups wholly owned subsidiaries
|
|
|
55
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
626
|
|
|
$
|
642
|
|
|
|
|
|
|
|
|
|
|
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, 2010, 2009 and 2008 of $9 million,
$27 million and $61 million, respectively, related to
its intercompany payable balance to US Airways Group. 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
Express capacity purchase expense for the years ended
December 31, 2010, 2009 and 2008 of $460 million,
$451 million and $417 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, 2010, 2009 and 2008 of $89 million,
$87 million and $89 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, 2010, 2009 and 2008 of
$158 million, $142 million and $154 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, 2010, 2009 and 2008, 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, 2010, 2009 and 2008, MSC sold
fuel totaling $879 million, $677 million and
$1.33 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, US Airways Groups wholly owned
regional air carriers 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
134
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,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
$
|
9,305
|
|
|
$
|
8,405
|
|
|
$
|
9,760
|
|
Foreign
|
|
|
2,750
|
|
|
|
2,204
|
|
|
|
2,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,055
|
|
|
$
|
10,609
|
|
|
$
|
12,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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 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, 2010, 2009 and 2008 included $31 million,
$23 million and $34 million, respectively, of
stock-based compensation costs. During 2010, stock-based
compensation costs consisted of $13 million related to
stock settled awards and $18 million related to cash
settled awards. During 2009, stock-based compensation costs
consisted of $20 million related to stock settled awards
and $3 million related to cash settled awards. There was no
expense related to cash settled awards in 2008.
Restricted Stock Unit Awards As of
December 31, 2010, 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 on a straight-line basis over
the vesting period for the entire award. The vesting period for
RSU awards is three years.
135
RSU award activity for the years ending December 31, 2010,
2009 and 2008 is as follows (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average Grant-
|
|
|
|
Shares
|
|
|
Date Fair Value
|
|
|
2005 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
Nonvested balances 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
|
|
Granted
|
|
|
|
|
|
|
|
|
Vested and released
|
|
|
(212
|
)
|
|
|
18.71
|
|
Forfeited
|
|
|
(1
|
)
|
|
|
11.37
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2010
|
|
|
140
|
|
|
$
|
9.21
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Granted
|
|
|
84
|
|
|
|
9.14
|
|
Vested and released
|
|
|
(91
|
)
|
|
|
7.52
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at December 31, 2010
|
|
|
103
|
|
|
$
|
6.36
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, there were $1 million of
total unrecognized compensation costs related to RSUs. These
costs are expected to be recognized over a weighted average
period of 0.6 years. The total fair value of RSUs vested
during 2010, 2009 and 2008 was $2 million, $2 million
and $3 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.
136
Stock option and SARs activity for the years ending
December 31, 2010, 2009 and 2008 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, 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
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(176
|
)
|
|
|
39.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
23
|
|
|
$
|
15.60
|
|
|
|
0.7
|
|
|
$
|
|
|
Vested or expected to vest at December 31, 2010
|
|
|
23
|
|
|
$
|
15.60
|
|
|
|
0.7
|
|
|
$
|
|
|
Exercisable at December 31, 2010
|
|
|
23
|
|
|
$
|
15.60
|
|
|
|
0.7
|
|
|
$
|
|
|
2002 Incentive Equity Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(18
|
)
|
|
|
5.57
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(1
|
)
|
|
|
25.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
701
|
|
|
$
|
18.64
|
|
|
|
2.9
|
|
|
$
|
0.1
|
|
Vested or expected to vest at December 31, 2010
|
|
|
701
|
|
|
$
|
18.64
|
|
|
|
2.9
|
|
|
$
|
0.1
|
|
Exercisable at December 31, 2010
|
|
|
701
|
|
|
$
|
18.64
|
|
|
|
2.9
|
|
|
$
|
0.1
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Stock
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
Options
|
|
|
Average
|
|
|
Contractual Term
|
|
|
Aggregate
|
|
|
|
and SARs
|
|
|
Exercise Price
|
|
|
(years)
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
2005 Equity Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(242
|
)
|
|
|
8.61
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(9
|
)
|
|
|
13.20
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(201
|
)
|
|
|
34.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
4,069
|
|
|
$
|
24.98
|
|
|
|
5.9
|
|
|
$
|
1.7
|
|
Vested or expected to vest at December 31, 2010
|
|
|
4,068
|
|
|
$
|
24.98
|
|
|
|
5.9
|
|
|
$
|
1.7
|
|
Exercisable at December 31, 2010
|
|
|
3,538
|
|
|
$
|
27.37
|
|
|
|
5.7
|
|
|
$
|
1.0
|
|
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
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
562
|
|
|
|
7.77
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(742
|
)
|
|
|
4.79
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(42
|
)
|
|
|
5.82
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(32
|
)
|
|
|
6.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
5,164
|
|
|
$
|
4.88
|
|
|
|
5.2
|
|
|
$
|
26.5
|
|
Vested or expected to vest at December 31, 2010
|
|
|
5,112
|
|
|
$
|
4.87
|
|
|
|
5.2
|
|
|
$
|
26.3
|
|
Exercisable at December 31, 2010
|
|
|
1,744
|
|
|
$
|
5.32
|
|
|
|
4.8
|
|
|
$
|
8.2
|
|
138
CSARs activity for the years ending December 31, 2010 and
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
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,865
|
|
|
|
7.42
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,028
|
)
|
|
|
3.10
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(196
|
)
|
|
|
4.15
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
5,054
|
|
|
$
|
4.65
|
|
|
|
5.6
|
|
|
$
|
27.1
|
|
Vested or expected to vest at December 31, 2010
|
|
|
4,959
|
|
|
$
|
4.63
|
|
|
|
5.6
|
|
|
$
|
26.7
|
|
Exercisable at December 31, 2010
|
|
|
438
|
|
|
$
|
3.11
|
|
|
|
5.3
|
|
|
$
|
3.0
|
|
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 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. Stock
options and stock appreciation rights are expensed on a
straight-line basis over the vesting period for the entire award.
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, 2010, 2009 and 2008
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Weighted average fair value
|
|
$
|
4.93
|
|
|
$
|
1.84
|
|
|
$
|
3.28
|
|
Risk free interest rate
|
|
|
2.4
|
%
|
|
|
1.3
|
%
|
|
|
2.5
|
%
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected life
|
|
|
5.0 years
|
|
|
|
3.0 years
|
|
|
|
3.0 years
|
|
Volatility
|
|
|
81
|
%
|
|
|
92
|
%
|
|
|
62
|
%
|
As of December 31, 2010, there were $7 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 0.8 years. The total intrinsic
value of stock options and SARs exercised during the years ended
December 31, 2010 and 2008 was $5 million and
$0.1 million, respectively. Cash received from stock option
exercises during each of the years ended December 31, 2010
and 2008 was $0.1 million. There were no stock options or
SARs exercised during 2009.
As of December 31, 2010, the average fair market value of
outstanding CSARs was $7.99 per share and the related liability
was $15 million. These CSARs will continue to be remeasured
at fair value at each reporting date until all awards are
settled. As of December 31, 2010, the total unrecognized
compensation expense for CSARs was $24 million and is
expected to be recognized over a weighted average period of one
year. Total cash paid for CSARs exercised during the year ended
December 31, 2010 was $6 million. There were no CSARs
exercised during 2009 and 2008.
Agreements with the Pilot Union US Airways
Group and US Airways have a letter of agreement with 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
139
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 grant was as
follows:
|
|
|
|
|
|
|
January 31,
|
|
|
2008
|
|
Per share fair value
|
|
$
|
3.02
|
|
Risk free interest rate
|
|
|
2.2
|
%
|
Expected dividend yield
|
|
|
|
|
Expected life
|
|
|
2.0 years
|
|
Volatility
|
|
|
55
|
%
|
As of December 31, 2010, 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, 2010, there were 0.8 million pilot stock
options outstanding at a weighted average exercise price of
$34.48 and a weighted average remaining contractual term of
1.27 years. No pilot stock options were exercised in 2010,
2009 or 2008.
|
|
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, 2010
|
|
$
|
8
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
4
|
|
|
$
|
10
|
|
|
$
|
8
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for inventory obsolescence:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2010
|
|
$
|
58
|
|
|
$
|
18
|
|
|
$
|
2
|
|
|
$
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
48
|
|
|
$
|
12
|
|
|
$
|
2
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
38
|
|
|
$
|
18
|
|
|
$
|
8
|
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance on deferred tax asset, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2010
|
|
$
|
653
|
|
|
$
|
|
|
|
$
|
203
|
|
|
$
|
450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
643
|
|
|
$
|
29
|
|
|
$
|
19
|
|
|
$
|
653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
83
|
|
|
$
|
560
|
|
|
$
|
|
|
|
$
|
643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In August 2009, US Airways Group and US Airways entered into a
mutual asset purchase and sale agreement with Delta Airlines,
Inc. (Delta). Pursuant to the agreement, US Airways
would transfer to Delta certain assets related to flight
operations at LaGuardia Airport in New York
(LaGuardia), 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, including 42 pairs of slots,
and the authority to serve Sao Paulo, Brazil and Tokyo, Japan.
The closing of the transactions under the agreement is subject
to certain closing conditions, including approvals from a number
of government agencies. In a final decision dated May 4,
2010, the Federal Aviation Administration (FAA)
rejected an alternative transaction proposed by Delta and US
Airways. On July 2, 2010, US Airways and Delta jointly
filed with the United States Circuit Court of Appeals for the
District of Columbia Circuit a notice of appeal of the
regulatory action taken by the FAA with respect to this
transaction. US Airways is presently in discussions with
Delta and the relevant government agencies regarding a possible
140
resolution that would allow a slot transaction with Delta to
proceed. However, US Airways cannot predict the outcome of these
discussions or the related judicial proceeding, or whether a
slot transaction with Delta will be completed.
|
|
16.
|
Selected
Quarterly Financial Information (unaudited)
|
Summarized quarterly financial information for 2010 and 2009 is
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
2,685
|
|
|
$
|
3,209
|
|
|
$
|
3,217
|
|
|
$
|
2,944
|
|
Operating expenses
|
|
|
2,695
|
|
|
|
2,847
|
|
|
|
2,906
|
|
|
|
2,826
|
|
Operating income (loss)
|
|
|
(10
|
)
|
|
|
362
|
|
|
|
311
|
|
|
|
118
|
|
Nonoperating expenses, net
|
|
|
(13
|
)
|
|
|
(67
|
)
|
|
|
(47
|
)
|
|
|
(54
|
)
|
Income tax provision
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Net income (loss)
|
|
|
(23
|
)
|
|
|
295
|
|
|
|
263
|
|
|
|
64
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
US Airways 2010 and 2009 fourth quarter results were
impacted by recognition of the following items:
Fourth quarter 2010 operating expenses included a
$6 million non-cash charge related to the decline in market
value of certain spare parts. Nonoperating expenses, net
included an $11 million settlement gain, offset by
$5 million in non-cash charges related to the write off of
debt issuance costs.
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 capacity reductions, $6 million in severance
charges and $6 million in costs related to the 2009
liquidity improvement program. 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.
141
|
|
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, 2010. Based on that evaluation, our
management, including the CEO and CFO, concluded that our
disclosure controls and procedures were effective as of
December 31, 2010.
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, 2010 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, 2010.
142
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:
|
|
|
|
|
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
|
|
|
|
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, 2010. 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, 2010.
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.
143
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, 2010 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 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, 2010, 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, 2010 and 2009, 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, 2010, and our report
dated February 22, 2011 expressed an unqualified opinion on
those consolidated financial statements.
Phoenix, Arizona
February 22, 2011
144
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;
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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
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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.
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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, 2010. 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, 2010.
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.
145
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, 2010 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 US Airways 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, 2010, 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, 2010 and 2009, 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, 2010, and our report dated
February 22, 2011 expressed an unqualified opinion on those
consolidated financial statements.
Phoenix, Arizona
February 22, 2011
146
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Item 9B.
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Other
Information
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None.
147
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 9, 2011 and is incorporated herein by reference. US
Airways Group will file with the SEC a definitive proxy
statement within 120 days of the end of its fiscal year.
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Item 10.
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Directors,
Executive Officers and Corporate Governance
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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. 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.
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Item 11.
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Executive
Compensation
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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.
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Item 12.
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Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
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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.
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Certain
Relationships and Related Transactions and Director
Independence
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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.
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Principal
Accountant Fees and Services
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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.
148
PART IV
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Item 15.
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Exhibits
and Financial Statement Schedules
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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, 2010, 2009 and 2008
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Consolidated Balance Sheets as of December 31, 2010 and 2009
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Consolidated Statements of Cash Flows for the years ended
December 31, 2010, 2009 and 2008
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Consolidated Statements of Stockholders Equity (Deficit)
for the years ended December 31, 2010, 2009 and 2008
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Notes to Consolidated Financial Statements
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The following consolidated financial statements of US Airways,
Inc. are included in Part II, Item 8B of this report:
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Consolidated Statements of Operations for the years ended
December 31, 2010, 2009 and 2008
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Consolidated Balance Sheets as of December 31, 2010 and 2009
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Consolidated Statements of Cash Flows for the years ended
December 31, 2010, 2009 and 2008
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Consolidated Statements of Stockholders Equity (Deficit)
for the years ended December 31, 2010, 2009 and 2008
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Notes to Consolidated Financial Statements
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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
The exhibits listed in the Exhibit Index following the
signature pages to this report are filed as part of, or
incorporated by reference into, this report.
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.
149
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, 2010, 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.
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Signatures
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Title
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Date
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/s/ W.
Douglas Parker
W.
Douglas Parker
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Chairman and Chief Executive Officer (Principal Executive
Officer)
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February 22, 2011
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/s/ Derek
J. Kerr
Derek
J. Kerr
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Executive Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer)
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February 22, 2011
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/s/ Bruce
R. Lakefield
Bruce
R. Lakefield
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Director
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February 22, 2011
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/s/ Herbert
M. Baum
Herbert
M. Baum
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Director
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February 22, 2011
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/s/ Matthew
J. Hart
Matthew
J. Hart
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Director
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February 22, 2011
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/s/ Richard
C. Kraemer
Richard
C. Kraemer
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Director
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February 22, 2011
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/s/ Cheryl
G. Krongard
Cheryl
G. Krongard
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Director
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February 22, 2011
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/s/ Denise
M. OLeary
Denise
M. OLeary
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Director
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February 22, 2011
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/s/ George
M. Philip
George
M. Philip
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Director
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February 22, 2011
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/s/ J.
Steven Whisler
J.
Steven Whisler
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Director
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February 22, 2011
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151
EXHIBIT INDEX
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Exhibit
|
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Number
|
|
Description
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2
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.1
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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) (Registration
No. 333-126162)
(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).
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2
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.2
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|
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).
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2
|
.3
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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 (Commission File
No. 1-8444)).
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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 (Commission File
No. 1-8444)).
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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 (Commission File
No. 1-8444)).*
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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 (Commission File
No. 1-8444)).
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3
|
.2
|
|
Amended and Restated Bylaws of US Airways Group, effective as of
February 4, 2011 (incorporated by reference to
Exhibit 3.1 to US Airways Groups Current Report on
Form 8-K
filed on February 4, 2011 (Commission File
No. 1-8444)).
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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) (Registration
No. 333-163463).
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3
|
.4
|
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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) (Registration
No. 333-163463).
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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 (Commission File
No. 1-8444)).
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4
|
.1
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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 (Commission File
No. 1-8444)).
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4
|
.2
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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 (Commission File
No. 1-8444)).
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4
|
.3
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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 (Commission File
No. 1-8444)).
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152
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Exhibit
|
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Number
|
|
Description
|
|
|
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 (Commission File
No. 1-8444)).
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4
|
.5
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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) (Registration
No. 333-163463).
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4
|
.6
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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) (Registration
No. 333-163463).
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4
|
.7
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|
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) (Registration
No. 333-163463).
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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 (Commission File
No. 1-8444)).*
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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 (Commission File
No. 1-8444)).*
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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 (Commission File
No. 1-8444)).*
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|
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 (Commission File
No. 1-8444)).*
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|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
153
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
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|
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 (Commission File
No. 1-8444)).*
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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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
|
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 (Commission File
No. 1-8444)).*
|
154
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
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 (Commission File
No. 1-8444)).*
|
|
10
|
.24
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.25
|
|
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 (Commission File
No. 1-8444)).*
|
|
10
|
.26
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.27
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.28
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.29
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.30
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.31
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.32
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.33
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.34
|
|
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 (Commission File
No. 1-8444)).
|
155
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.35
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.36
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.37
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.38
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.39
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.40
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.41
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.42
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.43
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.44
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.45
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.46
|
|
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
|
.47
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.48
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.49
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.50
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.51
|
|
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 (Commission File
No. 1-8444)).
|
156
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.52
|
|
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 (Commission File
No. 0-12337).
|
|
10
|
.53
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.54
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.55
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.56
|
|
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 (Commission
File No. 1-8444)).
|
|
10
|
.57
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.58
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.59
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.60
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.61
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.62
|
|
2009 Long Term Incentive Program under the US Airways Group
2008 Equity Incentive Plan (incorporated by reference to
Exhibit 10.81 to US Airways Groups Annual Report
on
Form 10-K
for the year ended December 31, 2009 (Commission File
No. 1-8444)).
|
|
10
|
.63
|
|
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 (Commission File
No. 1-8444)).*
|
|
10
|
.64
|
|
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 (Commission File
No. 1-8444)).*
|
|
10
|
.65
|
|
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 (Commission File
No. 1-8444)).*
|
|
10
|
.66
|
|
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 (Commission File
No. 1-8444)).*
|
157
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.67
|
|
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 (Commission File
No. 1-8444)).*
|
|
10
|
.68
|
|
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 (Commission File
No. 1-8444)).*
|
|
10
|
.69
|
|
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 (Commission File
No. 1-8444)).*
|
|
10
|
.70
|
|
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 (Commission File
No. 1-8444)).*
|
|
10
|
.71
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.72
|
|
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 (Commission File
No. 1-8444)).
|
|
10
|
.73
|
|
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. (incorporated by reference to
Exhibit 10.93 to US Airways Groups Annual Report
on
Form 10-K
for the year ended December 31, 2009 (Commission File
No. 1-8444)).*
|
|
10
|
.74
|
|
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. (incorporated by reference to
Exhibit 10.94 to US Airways Groups Annual Report
on
Form 10-K
for the year ended December 31, 2009 (Commission File
No. 1-8444)).*
|
|
10
|
.75
|
|
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. (incorporated by
reference to Exhibit 10.95 to US Airways Groups
Annual Report on
Form 10-K
for the year ended December 31, 2009 (Commission File
No. 1-8444)).*
|
|
10
|
.76
|
|
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. (incorporated by reference to Exhibit 10.96 to
US Airways Groups Annual Report on
Form 10-K
for the year ended December 31, 2009 (Commission File
No. 1-8444)).*
|
|
10
|
.77
|
|
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. (incorporated by
reference to Exhibit 10.97 to US Airways Groups
Annual Report on
Form 10-K
for the year ended December 31, 2009 (Commission File
No. 1-8444)).*
|
|
10
|
.78
|
|
2010 Annual Incentive Program Under 2008 Equity Incentive Plan
(incorporated by reference to Exhibit 10.1 to
US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2010 (Commission File
No. 1-8444)).
|
|
10
|
.79
|
|
2010 Long Term Incentive Performance Program Under 2008 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, 2010 (Commission File
No. 1-8444)).
|
|
10
|
.80
|
|
Amendment No. 7, dated as of April 1, 2010, 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 June 30, 2010 (Commission File
No. 1-8444)).*
|
158
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.81
|
|
Letter Agreement by and among US Airways Group, Inc.,
US Airways, Inc. and C.A. Howlett dated September 13,
2010 (incorporated by reference to Exhibit 10.1 to
US Airways Groups Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2010 (Commission File
No. 1-8444)).
|
|
10
|
.82
|
|
Form of Participation Agreement (Participation Agreement between
US Airways, Inc., as Owner, and Wilmington
Trust Company, as Indenture Trustee and Subordination
Agent) (incorporated by reference to Exhibit 4.14 to US
Airways Groups Current Report on
Form 8-K
filed on December 23, 2010 (Commission File
No. 1-8444)).
|
|
10
|
.83
|
|
Form of Indenture (Trust Indenture and Security Agreement
between US Airways, Inc., as Owner, and Wilmington
Trust Company, as Indenture Trustee) (incorporated by
reference to Exhibit 4.15 to US Airways Groups
Current Report on
Form 8-K
filed on December 23, 2010 (Commission File
No. 1-8444)).
|
|
10
|
.84
|
|
Guarantee, dated as of December 21, 2010, from
US Airways Group, Inc. (incorporated by reference to
Exhibit 4.18 to US Airways Groups Current Report
on
Form 8-K
filed on December 23, 2010 (Commission File
No. 1-8444)).
|
|
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. |
159