US Airways 2004 Annual Report Download - page 31

Table of Contents
2004 Compared with 2003
AWA realized an operating loss of $39.7 million in 2004 compared to operating income of $26.1 million in 2003. Loss before income taxes was
$85.3 million in 2004 compared to income before income taxes of $61.4 million for the comparable 2003 period.
Total operating revenues for 2004 were $2.3 billion. Passenger revenues were $2.2 billion in 2004 compared to $2.1 billion in 2003. A 9.6% increase in
RPMs exceeded an 8.1% increase in capacity, as measured by ASMs, resulting in a 1.0 point increase in load factor to 77.4%. RASM during 2004 decreased
3.8 percent to 7.29 cents, despite a 4.7 percent increase in average stage length, while yields decreased 5.2 percent to 9.41 cents. Cargo revenues for 2004
increased $1.3 million (4.9%) due to higher mail volumes. Other revenues remained flat year of year.
Operating expenses increased $150.3 million or 6.7% compared to the comparable 2003 period, while ASMs increased 8.1% due to increases in average
stage length of 4.7% and aircraft utilization of 7.9%. CASM decreased 1.3% to 7.89 cents in 2004 from 7.99 cents in 2003 despite a 39.1% increase in
average fuel price per gallon. The 2004 period includes a $15.4 million reduction in special charges versus a $14.4 million charge in 2003. Significant
changes in the components of operating expense per ASM are explained as follows:
• Salaries and related costs per ASM decreased 7.9% due to increased productivity and lower benefit costs. ASMs increased 8.1% and average full-
time equivalent employees ("FTEs") decreased 2.2%. This increase in productivity was offset in part by a $26.5 million increase in pilot payroll
expense principally as a result of the new labor agreement with the Air Line Pilots Association ("ALPA") effective December 30, 2003.
• Aircraft rent expense per ASM decreased 5.4% due to the 7.9% increase in aircraft utilization.
• Other rents and landing fees expense per ASM remained flat year over year as increases in airport rents ($6.6 million) and landing fees
($5.7 million) were offset by the 8.1% increase in ASMs.
• Aircraft jet fuel expense per ASM increased 37.0% due primarily to a 39.1% increase in the average price per gallon of fuel to 123.7 cents in 2004
from 88.9 cents in 2003.
• Agency commissions expense per ASM decreased 32.4% due to the reductions in various travel agency incentive programs and lower override
commissions.
• Aircraft maintenance materials and repair expense per ASM decreased 14.8% due to decreases in capitalized maintenance amortization expense
($23.4 million), and aircraft C-Check expense ($4.0 million). The decrease in capitalized maintenance amortization expense is driven by changes in
the estimated useful life on certain engines, effective January 1, 2004, as a result of changes in aircraft utilization ($9.2 million), and on certain
aircraft engine overhaul costs, effective April 1, 2003, driven by a new maintenance agreement that guarantees minimum cycles on engine overhauls
($2.3 million). During 2004, the net decrease of fully amortized assets versus new asset amortization totaled $6.6 million. These decreases were
partially offset by increases in airframe maintenance ($6.1 million) and engine overhaul ($3.7 million) expenses.
• Depreciation and amortization expense per ASM decreased 24.8% due to lower computer hardware and software amortization ($6.1 million) as a
result of AWA's cash conservation program, which reduced capital expenditures and lower amortization expenses related to aircraft leasehold
improvements ($1.7 million). The change in the estimated useful life as a result of changes in AWA's fleet plan discussed above contributed to the
decrease in depreciation for improvements on AWA's owned aircraft ($3.1 million), and for rotable and repairable spare parts ($2.1 million).
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