US Airways 2004 Annual Report Download - page 60

Table of Contents
AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
As a result of the rent restructuring associated with the government guaranteed loan, one aircraft lease was amended to include a bargain purchase option.
As a result, this lease has been classified as a capital lease in accordance with SFAS No. 13, "Accounting for Leases," as amended, with an asset value of
$14.8 million which includes accumulated amortization of $2.1 million and corresponding lease obligation of $8.5 million at December 31, 2004.
In January 2004, one aircraft lessor exercised its put rights under the aircraft lease agreement to extend the lease for one Boeing 737-300 aircraft for an
additional 33 months.
The Company also leases certain terminal space, ground facilities and computer and other equipment under noncancelable operating leases.
At December 31, 2004, the scheduled future minimum cash rental payments under capital leases and noncancelable operating leases with initial terms of
more than one year are as follows:
Capital Operating
Years Ending December 31, Leases Leases
(in thousands)
2005 $ 4,659 $ 361,671
2006 4,988 335,412
2007 1,773 314,892
2008 — 264,017
2009 — 238,074
Thereafter — 1,719,934
Total minimum lease payments 11,420 $ 3,234,000
Less: Amounts of lease payments that represent interest (2,884)
Present value of future minimum capital lease payments 8,536
Less: Current obligations under capital leases (3,475)
Long-term capital lease obligations $ 5,061
Rent expense (excluding landing fees) was approximately $421.1 million, $406.8 million and $409.4 million for the years ended December 31, 2004, 2003
and 2002, respectively.
Collectively, the operating lease agreements require security deposits with lessors of $24.0 million, which have been classified as "Other Assets, Net" in
the accompanying consolidated balance sheets, and bank letters of credit of $13.8 million. The letters of credit are collateralized by $13.9 million of restricted
cash.
(b) Revenue Bonds
In June 1999, Series 1999 special facility revenue bonds ("new bonds") were issued by a municipality to fund the retirement of the Series 1994A bonds
("old bonds") and the construction of a new concourse with 14 gates at Terminal 4 in Phoenix Sky Harbor International Airport in support of AWA's strategic
growth plan. The new bonds are due June 2019 with interest accruing at 6.25% per annum payable semiannually on June 1 and December 1, commencing on
December 1, 1999. The new bonds are subject to optional redemption prior to the maturity date on or after June 1, 2009 in whole or in part, on any interest
payment date at the following redemption prices: 101% on June 1 or December 1, 2009; 100.5% on June 1 or December 1, 2010; and 100% on June 1, 2011
and thereafter. In accordance with EITF Issue No. 97-10, "The Effect of Lessee Involvement in Asset Construction," the Company accounts for this as an
operating lease.
In connection with these bonds, AWA entered into an Amended and Restated Airport Use Agreement, pursuant to which AWA agreed to make sufficient
payments to the Industrial Development Authority ("IDA") to cover the principal and interest of the bonds and to indemnify the IDA for any claims arising
out of the issuance and sale of the bonds and the use and occupancy of the concourses financed by these bonds and the old bonds. At December 31, 2004, the
outstanding principal amount of the bonds was $21.8 million. The Company estimates its remaining payments to cover the principal and interest of these
bonds will be approximately $43.6 million.
In addition, the Company is also the lessee under certain long-term leases at various airports. At certain of these airports, municipalities have issued
revenue bonds to improve airport facilities that are leased by the Company and accounted for as operating leases. The Company does not guarantee the
underlying debt related to these operating leases.
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