US Airways 2004 Annual Report Download - page 95

Table of Contents
AMERICA WEST AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
11. Special Charges
In the first quarter of 2004, AWA recorded a $0.6 million reduction in special charges related to the revision of estimated costs associated with the sale and
leaseback of certain aircraft.
In August 2004, AWA entered into definitive agreements with two lessors to return six Boeing 737-200 aircraft. Three of these aircraft were returned to
the lessors in the third quarter, two were returned in the fourth quarter and one was returned in January 2005. In addition, AWA continues negotiating with
one lessor on the return of its remaining two Boeing 737-200 aircraft, one of which was parked in March 2002. The other aircraft was removed from service
in January 2005. In connection with the return of the aircraft, AWA recorded $1.9 million of special charges which include lease termination payments of
$2.1 million, the write-down of leasehold improvements and aircraft rent balances of $2.8 million, offset by the net reversal of maintenance reserves of
$3.0 million.
In December 2004, AWA and General Electric ("GE") mutually agreed to terminate the V2500 A-1 power by hour (PBH) agreement effective January 1,
2005. This agreement was entered into March 1998 with an original term of ten years. For terminating the agreement early, AWA received a $20.0 million
credit to be applied to amounts due for other engines under the 1998 agreement that is expected to be fully applied by December 31, 2005. AWA had
capitalized PBH payments for V2500 A-1 engines in excess of the unamortized cost of the overhauls performed by GE of approximately $3.7 million. With
the termination of this agreement, these payments were not realizable and as a result, AWA wrote off this amount against the $20.0 million credit referred to
above resulting in a $16.3 million net gain.
In February 2003, AWA announced the elimination of its hub operations in Columbus, Ohio. As a result, 12 regional jets, all of which were operated by
Chautauqua Airlines under the America West Express banner, have been phased out of the fleet. In addition, the hub has been downsized from 49 daily
departures to 15 destinations to four flights per day to Phoenix and Las Vegas. Service to New York City La Guardia Airport was also eliminated because
perimeter rules at the airport prohibit flights beyond 1,500 miles, precluding service from AWA's hubs in Phoenix and Las Vegas. In the first and second
quarters of 2003, AWA recorded special charges of $1.0 million and $9.6 million, respectively, related to the costs associated with the termination of certain
aircraft and facility contracts, employee transfer and severance expenses and the write-off of leasehold improvements in Columbus, Ohio.
In the first quarter of 2003, AWA recorded a $1.1 million reduction in special charges related to the earlier-than-planned return of certain leased aircraft in
2001 and 2002, as all payments related to these aircraft returns have been made.
In April 2003, as part of a cost reduction program, AWA implemented a plan to reduce management, professional and administrative payroll costs which
resulted in 161 fewer employees within these workgroups. As a result, AWA recorded a special charge of $1.8 million related to this reduction-in-force.
In June 2003, AWA recorded an impairment loss of $2.6 million related to three owned Boeing 737-200 aircraft that were grounded and subsequently sold.
In the third quarter of 2003, AWA recorded an additional $0.5 million of special charges associated with the elimination of our hub operations in
Columbus, Ohio. These special charges were offset by a $0.5 million reduction in special charges related to the revision of estimated costs associated with the
sale and leaseback of certain aircraft.
In the first quarter of 2002, AWA recorded a special charge of $21.0 million, primarily related to the restructuring completed on January 18, 2002,
resulting from the events of September 11, 2001. Components of the special charge are as follows:
Special Charges
(in thousands)
Fleet restructuring costs $ 9,915
Losses on sale-leaseback transactions 6,328
Professional fees 4,745
Write-off of computer system and security equipment 3,411
Severance 631
Revision of estimate for second quarter 2001 special charge (4,000)
Total $ 21,030
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