US Airways 2005 Annual Report Download - page 202

Table of Contents
America West Airlines, Inc.
Notes to Consolidated Financial Statements — (Continued)
contribution expense to the plan totaled $10 million, $11 million and $9 million in 2005, 2004 and 2003, respectively.
Effective January 1, 2005 America West Holdings initiated a new defined contribution plan covering pilots under the collective bargaining agreement with
the Airline Pilots Association. Under this plan, AWA is required to make a non-elective discretionary employer contribution equal to 7% of each pilot's
compensation (as defined in the plan and subject to statutory annual maximums). Such contributions are in addition to the existing AWA company match
under the 401(k) defined contribution plan covering all employees discussed above. AWA's contribution expense to this plan totaled $13 million for 2005.
12. Stockholder's Equity
(a) Common Stock
The holder of common stock is entitled to one vote per share on all matters submitted to a vote of the common shareholder. All common stock of AWA is
held by America West Holdings.
(b) Warrants
As compensation for various elements of AWA's financial restructuring completed in January 2002, America West Holdings issued a warrant to
purchase 18.8 million shares of its Class B common stock to the ATSB and additional warrants to purchase 3.8 million shares of its Class B common stock to
other loan participants, in each case at an exercise price of $3 per share and a term of ten years. For accounting purposes, the warrants were valued at
$35 million, or $1.57 per share, using the Black-Scholes pricing model with the following assumptions: expected dividend yield of 0.0%, risk-free interest rate
of 4.8%, volatility of 44.9% and an expected life of ten years. The warrants were recorded by AWA as a non-cash capital contribution in the consolidated
statements of stockholder's equity and comprehensive income and classified as "Other Assets, Net" in the consolidated balance sheet. The warrants were being
amortized over the life of the government guaranteed loan as an increase to interest expense. In the first quarter of 2004, approximately 220,000 warrants were
exercised at $3 per share. In the third quarter of 2003, approximately 2.6 million warrants were exercised at $3 per share. These warrant exercises were
cashless transactions resulting in the issuance of approximately 1.6 million shares of America West Holdings' Class B common stock.
In the fourth quarter of 2005, US Airways Group announced an agreement to repurchase all of the replacement warrants issued to the ATSB in connection
with the merger with America West Holdings. US Airways Group repurchased approximately 7.7 million warrants to purchase shares of common stock that
had an exercise price of $7.27 per share. The total purchase price for the warrants was $116 million, the estimated fair value of such warrants on the purchase
date. In connection with this repurchase, AWA recorded $8 million of non operating expense. This amount represented the unamortized balance recorded as
an other asset, which was being amortized over the life of the government guaranteed loan as an increase to interest expense.
13. Advances to Parent Company and Affiliate
In January 2002, AWA closed a $429 million loan supported by a $380 million government loan guarantee, of which $250 million remains outstanding as
of December 31, 2005. The terms of this loan and AWA's secured term loan restrict America West Holdings' and AWA's ability to incur additional
indebtedness or issue equity unless the proceeds of those transactions are used to prepay the government guaranteed loan and the term loan. Accordingly, as a
result of this transaction, AWA's net advances to America West Holdings have been classified in "Other Assets" on AWA's balance sheet. As of
December 31, 2005, AWA had net advances to parent company of $261 million.
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