US Airways 2005 Annual Report Download - page 183

Table of Contents
America West Airlines, Inc.
Notes to Consolidated Financial Statements — (Continued)
classified as mainline passenger revenue and the marketing portion of the affinity partner revenue is classified as other revenue.
AWA has a regional airline alliance agreement with Mesa (the Mesa Agreement) that commenced in February 2001. Mesa, operating as America West
Express, provides feeder service for AWA. As of December 31, 2005, the America West Express fleet included 62 aircraft comprised of 38 86-seat CRJ 900
aircraft, 18 50-seat CRJ 200 aircraft and six 37-seat Dash 8 turbo prop aircraft. The Mesa Agreement is anticipated to expire in June 2012.
Under the Mesa Agreement, Mesa is required to fly the routes and flights designated by AWA using Mesa's aircraft, flight crews and other related
services. Mesa maintains and operates the aircraft; employs, trains, manages and compensates personnel necessary to provide the flight services; and provides
related passenger handling services for and on the flights. AWA is responsible for establishing the routes, scheduling Express flights, pricing of the tickets,
marketing and selling the tickets, collecting all sales 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 revenue" 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 for the periods
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