US Airways 2005 Annual Report Download - page 122

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
amounts, paying all costs of sales and marketing and taking inventory risk on the inventory of seats for sale on Mesa. The ground handling of aircraft is
performed by either AWA or Mesa, depending upon the airport.
AWA collects the revenue and income generated from the services provided by Mesa pursuant to the Mesa Agreement. In return, AWA: (i) reimburses
Mesa for actual non-controllable costs incurred by Mesa such as fuel, insurance, taxes, fees and security; (ii) pays Mesa for actual controllable non-
maintenance costs, subject to a cap, such as aircraft lease expense and crew expense; (iii) pays Mesa for controllable maintenance costs at fixed rates (subject
to reimbursement of excess costs if actual costs during the term are less than fixed amounts paid by AWA); (iv) reimburses Mesa costs and expenses incurred
at stations maintained and operated by Mesa; and (v) shares with Mesa a percentage of the revenue allocated to the flight segments flown by Mesa on a pro
rata basis.
To improve the visibility of mainline and America West Express operating results, effective in the first quarter of 2005, America West Holdings changed
its method of accounting for the Mesa Agreement from the net basis to the gross basis of presentation. Under the gross basis of presentation, passenger
revenues and operating expenses associated with the Mesa agreement are reported gross (i.e., in operating revenues as Express passenger and within operating
expenses as Express expenses) in the condensed consolidated statement of operations. Under the net basis of presentation, America West Express passenger
revenues and the associated operating expenses were netted and classified in operating revenues in other. Prior period amounts have been reclassified to be
consistent with the 2005 presentation. The America West Express reclassifications did not impact operating income or net income (loss) for the periods
presented.
The following table presents the effect of this reclassification for the years ended December 31, 2004 and 2003 (in millions):
Year Ended December 31, 2004
As Previously Reported Reclassifications As Reclassified
Operating revenues:
Mainline passenger $ 2,197 $ 6(1) $ 2,203
Express revenue — 353(2) 353
Cargo and other 142 50(2)(3) 192
Total operating revenues 2,339 409 2,748
Operating expenses:
Operating expenses 2,383 11(4)(5) 2,394
Express expenses — 374(5) 374
Total operating expenses $ 2,383 $ 385 $ 2,768
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