US Airways 2005 Annual Report Download - page 118

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
and leased flight equipment to operating expense as incurred. In 2005, AWA changed its accounting policy from the deferral method to the direct expense
method. While the deferral method is permitted under accounting principles generally accepted in the United States of America, US Airway Group and AWA
believe that the direct expense method is preferable and the predominant method used in the airline industry. The effect of this change in accounting for
aircraft maintenance and repairs is recorded as a cumulative effect of a change in accounting principle (see also Note 4).
(p) Selling expenses
Selling expenses include commissions, credit card fees, computerized reservations systems fees and advertising and promotional expenses. Advertising
and promotional expenses are expensed when incurred. Advertising and promotional expenses for the years ended December 31, 2005, 2004 and 2003 were
$13 million, $10 million and $11 million, respectively.
(q) Express expenses
Expenses associated with US Airways' MidAtlantic division, US Airways Group's wholly owned regional airlines and affiliate regional airlines operating
as US Airways Express and expenses associated with AWA's regional alliance agreement with Mesa are classified as Express expenses on the statements of
operations. Expenses associated with prior periods have been reclassified as discussed in Note 5. Express expenses on the statements of operations consists of
the following (in millions):
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2005 2004 2003
Aircraft fuel and related taxes $ 256 $ 102 $ 61
Salaries and related costs 61 — —
Capacity purchases 567 238 198
Other rent and landing fees 19 8 7
Aircraft rent 23 — —
Selling expenses 45 23 19
Aircraft maintenance 17 — —
Depreciation and amortization 7 — —
Other expenses 78 3 2
Express expenses $ 1,073 $ 374 $ 287
(r) Variable interest entities
US Airways Group has adopted Financial Accounting Standards Board ("FASB") Interpretation No. 46 "Consolidation of Variable Interest Entities," as
revised ("FIN 46(R)"). As described below, the adoption of FIN 46 did not materially affect US Airways Group's, AWA's or US Airways' financial
statements. In the fourth quarter of 2005, as a result of entering into new jet service agreements, US Airways determined that certain entities with which the
Company has capacity purchase agreements are considered variable interest entities under FIN 46(R). The Company has determined that it is not the primary
beneficiary of any of these variable interest entities, and accordingly, does not consolidate any of the entities with which it has jet service agreements. (See
also Notes 12(b), 12(c) and 12(e)). 112