US Airways 2004 Annual Report Download - page 5

Table of Contents
PART I
ITEM 1. BUSINESS
Overview
Holdings, a Delaware corporation formed in 1996, is a holding company that owns all of the stock of AWA, a Delaware corporation formed in 1981. AWA
accounted for most of the Company's revenues and expenses in 2004. Based on 2004 operating revenues and available seat miles, or "ASMs", AWA is the
eighth largest passenger airline and the second largest low cost carrier in the United States. AWA is the largest low-cost carrier that operates a hub-and-spoke
network, with large hubs in both Phoenix, Arizona and Las Vegas, Nevada. Since 2003, AWA has also offered limited point-to-point service in certain major
transcontinental markets. At the end of 2004, AWA operated a fleet of 138 aircraft with an average age of 10.7 years and served 63 destinations in North
America, including eight in Mexico, three in Canada and one in Costa Rica. Through regional alliance and code share arrangements with other airlines, AWA
served an additional 51 destinations in North America and the Middle East. In 2004, AWA flew approximately 21.1 million passengers and generated
revenues of approximately $2.3 billion.
Through its America West Vacations division, AWA also sells individual and group travel packages, including air transportation on AWA and Hawaiian
Airlines, hotel accommodations, car rentals, cruise packages and other travel products, directly to consumers as well as through retail travel agencies in the
United States, Canada, Mexico and Costa Rica.
General information about us can be found at www.americawest.com/aboutawa under the investor relations link. Our annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments or exhibits to those reports, are available free of charge through
our website as soon as reasonably practicable after we file them with, or furnish them to, the Securities and Exchange Commission or "SEC."
Restatement of Previously Reported Amounts
Derivative Instruments
In February 2005, management undertook a review of AWA's accounting for its fuel hedging transactions. As a result of this review, management
concluded that AWA's fuel hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting principles and that the
Company's financial statements for prior periods required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and statements of
stockholders equity and comprehensive income of Holdings and AWA. See Note 2, "Restatement of Previously Reported Amounts" and Note 16, "Quarterly
Financial Data (Unaudited)" in Holdings' and Note 2, "Restatement of Previously Reported Amounts" and Note 15, "Quarterly Financial Data (Unaudited)"
in AWA's consolidated financial statements for the financial impact of the restatements. The Company concluded that these accounting errors were the result
of deficiencies in its internal control over financial reporting, from the lack of effective reviews of hedge transaction documentation and of quarterly mark-to-
market accounting entries on open fuel hedging contracts by personnel at an appropriate level.
Developments in 2004
During 2004, extremely high jet fuel prices and excess capacity throughout the domestic air system began to negatively impact the low cost segment of the
airline industry. As a result, several low cost carriers that had previously operated profitably, including AWA, experienced declining earnings. AWA reported
a net loss of $85.3 million for 2004.
In 2004, the Company reported a net loss of $89.0 million compared to net income of $57.4 million in 2003. See Item 7 – "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for further discussion of the 2004 financial performance.
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