US Airways 2004 Annual Report Download - page 61

Table of Contents
AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(c) Aircraft Acquisitions
In August 2004, AWA amended its aircraft purchase contract with AVSA S.A.R.L., an affiliate of Airbus Industrie or "AVSA," to acquire 22 Airbus A320
family aircraft (thirteen A320s and nine A319s), all powered by V2500 engines from International Aero Engines. Of the 22 aircraft, it is anticipated that 18
will be purchased directly from the manufacturer and four have been leased under noncancelable leases from various lessors for aircraft to be delivered in
2005. In the context of this incremental order, AWA also secured extensive flexibility from Airbus with respect to its existing A318 order, allowing AWA to
better react to market conditions by enabling it to amend its 15 A318 delivery positions to A319s and A320s, if it so desires, or to take no additional aircraft
under certain conditions.
The Company has an agreement with International Aero Engines or "IAE," which provides for the purchase by the Company of seven new V2500-A5
spare engines scheduled for delivery through 2007 for use on certain of the Airbus A320 fleet. At December 31, 2004, the seven engines have an estimated
gross cost of $39 million.
The following table reflects estimated net cash payments under the restructured aircraft purchase agreement with AVSA and the IAE engine contract.
Actual payments may vary due to inflation factor adjustments and changes in the delivery schedule of the equipment.
(in thousands)
2005 $ 272,820
2006 456,891
2007 47,697
$ 777,408
(d) Sale-Leaseback Transactions
In the fourth quarter of 2004, the Company completed two separate aircraft sale-leaseback transactions on one Airbus A320 aircraft and one Airbus A319
aircraft resulting in a combined loss of $4.6 million. This amount was recorded in "Other Operating Expenses."
In May 2004, the Company completed a sale-leaseback transaction on one V2500-A5 engine resulting in a gain of $2.9 million which has been deferred
and will be amortized over the lease term of seven years.
In July 2004, the Company completed a sale-leaseback transaction on one V2500-A5 engine resulting in a gain of $0.8 million which has been deferred
and will be amortized over the lease term of seven years.
As part of the restructuring completed on January 18, 2002, AWA committed to the sale and leaseback of eight aircraft. The sales and leaseback of six of
these aircraft were completed in 2002 and resulted in losses of approximately $3.8 million. The sale and leaseback of one aircraft was completed in June 2003
and resulted in a loss of approximately $0.6 million. The sale and leaseback of the final aircraft was completed in September 2003 and resulted in a loss of
approximately $0.7 million. The losses on the sale-leaseback transactions, which were subject to a firm commitment in January 2002, were accrued in the
accompanying consolidated statements of operations classified in "Special Charges" in the first quarter of 2002. See Note 11, "Special Charges."
(e) Contingent Legal Obligations
Holdings and its subsidiaries are parties to various legal proceedings, including some purporting to be class action suits, and some that demand large
monetary damages or other relief, which, if granted, would require significant expenditures. In certain cases where it is probable that the outcome will result
in monetary damages, the Company has reviewed available information and determined that the best estimate of losses to be incurred related to these cases is
$2 million, which has been accrued. For those cases where a loss is possible, or cases where a range of loss is probable but no amount within the range is a
better estimate than any other amount, the estimated amount of additional exposure ranges from $0 to $25 million. In these instances, no accrual has been
recorded.
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