US Airways 2005 Annual Report Download - page 117

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
Inc. ("Republic"), Mesa and Chautauqua Airlines, Inc. ("Chautauqua") in certain markets. Air Wisconsin, Mesa, Chautauqua and Republic operate regional jet
aircraft in these markets as part of US Airways Group Express and AWA Express. US Airways Group classifies revenues related to capacity purchase
arrangements as Express passenger revenues. Liabilities related to tickets sold for travel on these air carriers are also included in US Airways Group's air
traffic liability and are subsequently relieved in the same manner as described above.
AWA and US Airways also sell mileage credits to companies participating in the FlightFund and Dividend Miles programs, such as participating airlines,
hotels, car rental agencies and credit card companies. Transportation-related revenue from the sale of mileage credits is deferred and recognized as mainline
passenger revenue when transportation is provided. The remaining portion of sales proceeds is recognized immediately as a component of other operating
revenues.
(n) Stock-based compensation
At December 31, 2005, the Company had two stock-based employee compensation plans and one expired stock-based employee compensation plan,
which are described more fully in Note 19 "Stock Options and Awards." US Airways Group accounts for its stock option plans in accordance with the
provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and related interpretations. As such, compensation expense for
options granted would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Stock options are
issued at a price equal to fair market value on the date of grant. Accordingly, no compensation cost has been recognized for stock options in the consolidated
financial statements. Compensation expense, calculated using the provisions of APB 25, has been recorded for stock appreciation rights and restricted stock
units granted to US Airways Group employees.
Had US Airways Group determined compensation cost based on the fair value at the grant date for its stock options, stock appreciation rights and
restricted stock units under SFAS No. 123, "Accounting for Stock Based Compensation," the Company's net income (loss) and earnings (loss) per share
would have been adjusted as indicated below (in million, except per share data):
2005 2004 2003
Net income (loss), as reported $ (537) $ (89) $ 57
Add: Stock-based compensation included in reported net income (loss) 4 — —
Deduct: Stock-based compensation determined under the fair value based method (12) (6) (4)
Pro forma net income (loss) $ (545) $ (95) $ 53
Earnings (loss) per share:
Basic — as reported $ (17.06) $ (5.99) $ 4.03
Basic — pro forma $ (17.30) $ (6.39) $ 3.73
Diluted — as reported $ (17.06) $ (5.99) $ 3.07
Diluted — pro forma $ (17.30) $ (6.39) $ 2.88
(o) Maintenance and repair costs
Maintenance and repair costs for owned and leased flight equipment are charged to operating expense as incurred. AWA historically recorded the cost of
major scheduled airframe, engine and certain component overhauls as capitalized assets that were subsequently amortized over the periods benefited, referred
to as the deferral method. US Airways Group charges maintenance and repair costs for owned
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