US Airways 2004 Annual Report Download - page 81

Table of Contents
AMERICA WEST AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004, 2003 AND 2002
America West Airlines, Inc. ("AWA" or the "Airline") is a wholly owned subsidiary of America West Holdings Corporation ("Holdings" or the
"Company"). AWA accounted for most of the Company's revenues and expenses in 2004. Based on 2004 operating revenues and available seat miles
("ASMs"), AWA is the eighth largest passenger airline in the United States with the lowest cost structure of the eight major hub-and-spoke airlines. At the end
of 2004, AWA operated a fleet of 138 aircraft with an average fleet 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.
1. Summary of Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements include the accounts of America West Airlines and its wholly owned subsidiary Flight Training Center Hangar Plan
("FTCHP"). All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior
years' consolidated financial statements to conform to the current year's presentation.
The Leisure Company ("TLC"), previously a wholly owned subsidiary of Holdings, was merged into AWA on January 1, 2004 and continues to operate as
the America West Vacations division of AWA. This transaction was accounted for as a reorganization of entities under common control. The 2003 and 2002
consolidated financial statements are presented on a comparable basis with the 2004 consolidated financial statements, as if the reorganization had occurred
January 1, 2002. All intercompany transactions between AWA and TLC have been eliminated.
(b) Cash, Cash Equivalents and Short-term Investments
Cash equivalents consist of all highly liquid debt instruments purchased with original maturities of three months or less. Short-term investments consist of
cash invested in certain debt securities with original maturities greater than 90 days and less than one year. The debt securities are classified as held to
maturity and are carried at amortized cost that approximates fair value.
AWA reclassified investments in auction rate securities previously classified as cash equivalents to short-term investments on the accompanying
consolidated balance sheets. Investments reclassified in 2004 and 2003 were $58.4 million and $249.7 million, respectively.
(c) Expendable Spare Parts and Supplies
Flight equipment expendable spare parts and supplies are valued at average cost. An allowance for obsolescence is provided, over the estimated useful life
of the related aircraft and engines, for spare parts expected to be on hand at the date the aircraft are retired from service.
(d) Property and Equipment
Property and equipment are recorded at cost. Interest capitalized on advance payments for aircraft acquisitions and on expenditures for aircraft
improvements are part of these costs. Interest capitalized for the years ended December 31, 2004, 2003 and 2002 was $2.2 million, $1.6 million and
$3.0 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.
The estimated useful lives for AWA's ground property and equipment range from three to 12 years for owned property and equipment and up to 30 years
for the flight training facility. The estimated useful lives of AWA's owned aircraft, jet engines, flight equipment and rotable parts range from five to 25 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,
whichever is shorter.
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