US Airways 2004 Annual Report Download - page 90

Table of Contents
AMERICA WEST AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
these trusts allow AWA to raise the financing for several aircraft at one time and place such funds in escrow pending the purchase or delivery of the relevant
aircraft. The trusts are also structured to provide for certain credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the
risks to the purchasers of the trust certificates and, as a result, reduce the cost of aircraft financings to AWA.
Each trust covered a set amount of aircraft scheduled to be delivered within a specific period of time. At the time of each covered aircraft financing, the
relevant trust used the funds in escrow to purchase equipment notes relating to the financed aircraft. The equipment notes were issued, at AWA's election,
either by AWA in connection with a mortgage financing of the aircraft or by a separate owner trust in connection with a leveraged lease financing of the
aircraft. In the case of a leveraged lease financing, the owner trust then leased the aircraft to AWA. In both cases, the equipment notes are secured by a
security interest in the aircraft. The pass through trust certificates are not direct obligations of, nor guaranteed by, Holdings or AWA. However, in the case of
mortgage financings, the equipment notes issued to the trusts are direct obligations of AWA and in the case of leveraged lease financings, the leases are direct
obligations of AWA. In addition, neither Holdings nor AWA guarantee or participate in any way in the residual value of the leased aircraft. All aircraft
financed by these trusts are currently structured as leveraged lease financings, which are not reflected as debt on the balance sheets of either AWA or
Holdings. AWA does not provide residual value guarantees under these lease arrangements. Each lease contains a purchase option that allows AWA to
purchase the aircraft at a fixed price, which at the inception of the lease approximated the aircraft's expected fair market value at the option date, near the end
of the lease term. These leasing entities meet the criteria for variable interest entities. However, they do not meet the consolidation criteria under FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities," because AWA is not the primary beneficiary under these arrangements.
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.
AWA 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 200, 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 balance sheets, and bank letters of credit of $13.8 million. The letters of credit are collateralized by $13.9 million of restricted cash.
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