US Airways 2005 Annual Report Download - page 186

Table of Contents
America West Airlines, Inc.
Notes to Consolidated Financial Statements — (Continued)
(c) In the fourth quarter of 2005, AWA recorded $13 million of merger related expenses related to transitioning the employees, systems and facilities of
AWA and US Airways into one consolidated company. The $13 million includes insurance premiums of $4 million related to policies for former
officers and directors, compensation expense of $3 million for special stock awards, granted under a program designed to retain key employees through
the integration period, professional and technical fees of $3 million and sales and marketing program expenses of $2 million related to notifying
frequent traveler program members about the merger.
(d) In the fourth quarter of 2005, in connection with the return of certain leased aircraft, AWA incurred expenses of $7 million related to penalties incurred
under the outsourced maintenance arrangement.
(e) In the third and fourth quarter of 2005, AWA recorded severance expense totaling approximately $2 million for terminated employees resulting from
the merger. The majority of the $2 million will be paid in the first quarter of 2006.
(f) In August 2004, AWA entered into definitive agreements with two lessors to return six Boeing 737-200 aircraft. Three of these aircraft were returned to
the lessors in the third quarter of 2004, two were returned in the fourth quarter of 2004 and one was returned in January 2005. In addition, AWA
continues negotiating with one lessor on the return of its remaining two Boeing 737-200 aircraft, one of which was parked in March 2002. The other
aircraft was removed from service in January 2005. In connection with the return of the aircraft, AWA recorded $2 million of special charges in 2004,
which include lease termination payments of $2 million and the write-down of leasehold improvements and aircraft rent balances of $3 million, offset
by the net reversal of lease return provisions of $3 million. In the first quarter of 2005, AWA recorded $1 million in special charges related to the final
Boeing 737-200 aircraft which was removed from service in January 2005.
(g) In the first quarter of 2004, AWA recorded a $1 million reduction in special charges related to the revision of estimated costs associated with the sale
and leaseback of certain aircraft.
(h) In December 2004, AWA and GE mutually agreed to terminate the V2500 A-1 power by hour ("PBH") agreement effective January 1, 2005. This
agreement was entered into March 1998 with an original term of ten years. For terminating the agreement early, AWA received a $20 million credit to
be applied to amounts due for other engines under the 1998 agreement. AWA had capitalized PBH payments for V2500 A-1 engines in excess of the
unamortized cost of the overhauls performed by GE of approximately $4 million. With the termination of this agreement, these payments were not
realizable and as a result, AWA wrote off this amount against the $20 million credit referred to above, resulting in a $16 million net gain.
(i) In the first quarter of 2003, AWA recorded a $1 million reduction in special charges related to the earlier-than-planned return of certain leased aircraft
in 2001 and 2002, as all payments related to these aircraft returns had been made.
(j) In February 2003, AWA announced the elimination of its hub operations in Columbus, Ohio. As a result, 12 regional jets, all of which were operated by
Chautauqua Airlines under the America West Express banner, were phased out of the fleet. In addition, the hub was downsized from 49 daily departures
to 15 destinations to four flights per day to Phoenix and Las Vegas. Service to New York City La Guardia Airport was also eliminated because
perimeter rules at the airport prohibit flights beyond 1,500 miles, precluding service from AWA's hubs in Phoenix and Las Vegas. In the first, second
and third quarters of 2003, AWA recorded special charges totaling $11 million related to the costs associated with the termination of certain aircraft and
facility contracts, employee transfer and severance expenses and the write-off of leasehold improvements in Columbus, Ohio. All payments were
completed as of December 31, 2005.
(k) In April 2003, as part of a cost reduction program, AWA implemented a plan to reduce management, professional and administrative payroll costs that
resulted in 161 fewer employees within these 180