US Airways 2004 Annual Report Download - page 91

Table of Contents
AMERICA WEST AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(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," AWA 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. AWA estimates its remaining payments to cover the principal and interest of these bonds will be
approximately $43.6 million.
In addition, AWA 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 AWA and accounted for as operating leases. AWA does not guarantee the underlying debt related to these
operating leases.
(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. AWA has negotiated lease agreements for the four leased aircraft. 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.
AWA has an agreement with International Aero Engines ("IAE") which provides for the purchase by AWA 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, AWA 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, AWA 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, AWA 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.
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