US Airways 2005 Annual Report Download - page 225

Table of Contents
US Airways, Inc.
Notes to the Financial Statements — (Continued)
SFAS 142 requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual
values, and reviewed for impairments in accordance with SFAS 144. The following table provides information relating to US Airways' intangible assets
subject to amortization as of December 31, 2005 and 2004 (in millions):
December 31, December 31,
2005 2004
Cost A/A Cost A/A
Airport take-off and landing slots $ 411 $ 4 $ 425 $ 30
Airport gate leasehold rights 52 4 32 10
Capitalized software costs — — 50 38
Total $ 463 $ 8 $ 507 $ 78
A/A = Accumulated Amortization
The intangible assets subject to amortization generally are amortized over 25 years for airport take-off and landing slots, over the term of the lease for
airport gate leasehold rights and over five years for capitalized software costs on a straight-line basis and are included in depreciation and amortization on the
statements of operations. For the three months ended December 31, 2005, the nine months ended September 30, 2005, the year ended December 31, 2004, the
nine months ended December 31, 2003, and the three months ended March 31, 2003, US Airways recorded amortization expense of $8 million, $19 million,
$35 million, $43 million, and $11 million, respectively, related to its intangible assets. US Airways expects to record annual amortization expense of
$27 million in 2006, $23 million in years 2007 through 2009 and $22 million in 2010 related to these intangible assets.
(h) Other assets, net
Other assets, net consist primarily of deposits held by vendors, long-term investments and leasehold interests in aircraft. In connection with fresh-start
reporting, aircraft operating leases were adjusted to fair value and $101 million of assets were established for leasehold interests in aircraft for aircraft leases
with rental rates deemed to be below market rates. These leasehold interests are amortized on a straight-line basis as an increase to aircraft rent expense over
the applicable remaining lease periods, generally 17 years.
(i) Frequent traveler program
US Airways accrues the estimated incremental cost of travel awards earned by participants in its Dividend Miles frequent traveler program when the
requisite mileage award levels are achieved. For travel awards on partner airlines, the liability is based on the average contractual amount to be paid to the
other airline per redemption. US Airways also sells mileage credits to certain participating airlines and marketing partners. US Airways defers the portion of
revenue attributable to future transportation and recognizes it as mainline passenger revenue when the service is provided. The remaining portion of sales
proceeds is recognized immediately as a component of other operating revenues.
(j) Derivative financial instruments
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") requires all derivatives to be recognized on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of derivatives are either offset against the change in fair value of assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a hedging derivative's change in fair
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