US Airways 2005 Annual Report Download - page 176

Table of Contents
America West Airlines, Inc.
Notes to Consolidated Financial Statements — (Continued)
Services, L.L.C. (collectively, "Chase"), entered into the First Amendment to the Merchant Services Bankcard Agreement on August 8, 2005. Pursuant to the
amended card processing agreement, Chase will perform authorization, processing and settlement services for sales on Visa and Mastercard for AWA and
US Airways following the merger. The original card processing agreement is guaranteed by America West Holdings, and US Airways Group executed a
guaranty of the amended card processing agreement on the effective date of the merger.
The amended card processing agreement took effect at the effective time of the merger and continues until the expiration of the initial term, which is three
years from the effective date. Upon expiration of the initial term, the amended card processing agreement will automatically renew for successive one-year
periods pursuant to the terms of the agreement.
Under the amended card processing agreement, AWA will pay to Chase fees in connection with card processing services such as sales authorization,
settlement services and customer service. AWA and US Airways are also required to maintain a reserve account to secure Chase's exposure to outstanding air
traffic liability.
Asset Based Financings — For 2005, AWA also executed flight equipment asset sale and leaseback transactions resulting in net proceeds of $23 million
and a reduction in aircraft related debt of $38 million.
2. Basis of Presentation and Summary of Significant Accounting Policies
(a) Nature of operations and operating environment
AWA is a certificated air carrier engaged primarily in the business of transporting passengers, property and mail. AWA enplaned approximately
22.1 million passengers in 2005 and was the eighth largest U.S. air carrier, as ranked by revenue passenger miles ("RPMs") and available seat miles
("ASMs"). As of December 31, 2005, AWA operated 141 jet aircraft and 62 regional jet aircraft and provided regularly scheduled service at 93 airports in
North America, including eight in Mexico, four in Canada and one in Costa Rica.
Most of AWA's operations are in competitive markets. Competitors include other air carriers along with other modes of transportation. Although a
competitive strength in some regards, the concentration of significant operations in the western U.S. results in AWA being susceptible to changes in certain
regional conditions that may have an adverse effect on AWA's financial condition and results of operations.
As of December 31, 2005, AWA employed approximately 12,100 active full-time equivalent employees. Approximately 80% of AWA's employees are
covered by collective bargaining agreements with various labor unions.
(b) Basis of Presentation
The accompanying consolidated financial statements include the accounts of AWA and its wholly owned subsidiary Flight Training Center Hangar Plan,
LLC ("FTCHP"). AWA is a wholly owned subsidiary of America West Holdings, which is a wholly owned subsidiary of US Airways Group, Inc, as
discussed in Note 1. US Airways Group has the ability to move funds freely between its operating subsidiaries, to support operations. These transfers are
recognized as intercompany transactions. In the accompanying consolidated statement of cash flows, these intercompany transactions are designated as
payable to affiliate and are classified as operating activities as it is US Airways Group's intent to settle these transactions in the near term. All significant
intercompany balances and transactions have been eliminated in consolidation. As discussed further in Note 16, AWA's consolidated financial statements
include certain related party transactions. 170