US Airways 2004 Annual Report Download - page 97

Table of Contents
AMERICA WEST AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
In the fourth quarter of 2003, IAC/InterActiveCorp completed its acquisition of Hotwire.com, a discount travel website. Hotwire was founded by the Texas
Pacific Group, American Airlines, Continental Airlines, Northwest Airlines, United Airlines, US Airways and AWA in October 2000. AWA had an
ownership interest of approximately 1.5% in Hotwire.com with a carrying value of approximately $0.03 million. Upon closing of the transaction, AWA
received cash of $9.8 million. Accordingly, AWA recognized a nonoperating gain of $9.8 million in the fourth quarter of 2003.
Under the airline compensation provisions of the Air Transportation Safety and System Stabilization Act (the "Act"), each air carrier was entitled to
receive the lesser of: (i) its direct and incremental losses for the period September 11, 2001 to December 31, 2001 or (ii) its proportional available seat mile
allocation (based on available seat miles for August 2001) of the $4.5 billion compensation available under the Act. In 2001, AWA received $98.2 million
under the Act from the United States government and expected to receive, based on its losses and its share of available seat miles, at least an additional
$10.0 million. In accordance with EITF Issue No. 01-10, "Accounting for the Impact of the Terrorist Attacks of September 11, 2001," AWA recognized
$108.2 million of federal government assistance in 2001 as nonoperating income because direct and incremental losses incurred during 2001 exceeded that
amount. In July 2002, AWA received an additional $12.3 million under the Act. Accordingly, $10.0 million was credited against the receivable established in
2001 and $2.3 million was recognized as nonoperating income in the second quarter of 2002. In August 2002, AWA received an additional payment of
$6.2 million under the Act, which was recognized as nonoperating income in the third quarter of 2002.
In March 2002, AWA wrote down its investment in Aeroxchange, an e-commerce entity, which was carried at cost, to net realizable value recognizing a
loss of $2.8 million.
13. Supplemental Information to Statements of Cash Flows
Supplemental disclosure of cash flow information and non-cash investing and financing activities were as follows:
Year Ended December 31,
2004 2003 2002
(in thousands)
Non-cash transactions:
Reclassification of investments in debt securities to short-term investments $ 25,730 $ 29,058 $ —
Reclassification of advances to parent company, net — — 265,810
Issuance of convertible notes — — 67,902
Cancellation of convertible notes — (660) (8,280)
Cancellation of 10.75% senior unsecured notes related to sale of NLG investment — (10,370) —
Issuance of warrants — — 35,383
Exercise of warrants (2) (17) —
Equipment acquired through capital leases — — 17,753
Equipment acquired with issuance of notes payable — — 64,163
Notes payable issued for equipment purchase deposits 17,500 5,250 10,500
Notes payable canceled under the aircraft purchase agreement (7,000) (7,000) (10,500)
Payment in kind notes issued, net of returns 9,033 8,972 7,756
Cash transactions:
Interest paid, net of amounts capitalized 23,841 17,201 25,942
Income taxes paid (refunded) 367 (2,493) (63,503)
14. Related Party Transactions
As part of our reorganization in 1994, Continental Airlines and AWA entered into an alliance agreement that included code sharing arrangements,
reciprocal frequent flyer programs and ground handling operations. In March 2002, AWA received notice from Continental of its intention to terminate the
code sharing and frequent flyer agreements between the two airlines, effective April 26, 2002. Two of Continental's directors are managing partners of Texas
Pacific Group, which, through TPG Advisors, Inc., effectively controls the voting power of Holdings. AWA paid Continental approximately $13.4 million,
$17.3 million and $25.5 million and also received approximately $4.1 million, $5.0 million and $15.9 million in 2004, 2003 and 2002, respectively, from
Continental pursuant to these agreements.
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