US Airways 2005 Annual Report Download - page 232

Table of Contents
US Airways, Inc.
Notes to the Financial Statements — (Continued)
applied to all pilots as a result of a lump sum payment due to pilots recalled from furlough and further agreed to pay $500,000 to resolve an outstanding
grievance over pay credits for pilots assigned by US Airways to travel to and from certain duty assignments.
While a significant amount of the Debtors' liabilities were extinguished as a result of the discharge granted upon confirmation of the Plan of
Reorganization, not all of the Debtors' liabilities were subject to discharge. The types of obligations that the Debtors remain responsible for include those
relating to their secured financings, aircraft financings, certain environmental liabilities, the continuing obligations arising under contracts and leases assumed
by the Debtors and certain grievances with our labor unions, as well as allowed administrative claims. Allowed administrative claims consist primarily of the
costs and expenses of administration of the Chapter 11 cases, including the costs of operating the Debtors' businesses since filing for bankruptcy. The
Bankruptcy Court set August 22, 2005 and November 14, 2005 as the bar dates by which creditors asserting administrative claims, other than administrative
claims arising in the ordinary course of business, were required to be filed. The Debtors received a large number of timely filed administrative claims, as well
as additional claims that were filed late without permission of the Bankruptcy Court. Included in these claims, however, are claims for amounts arising in the
ordinary course that have either already been paid, or that are included in the Debtors' business plan and are expected to be paid in the ordinary course. Also
included are claims that are duplicative, claims for which the Debtors believe there is no legal merit for a claim of any status, and claims that the Debtors
believe may be valid as unsecured claims but are not entitled to administrative claims status. Accordingly, the Debtors believe that only a very small portion
of the claims filed in response to the bar dates for non-ordinary course administrative expense claims will actually be allowed in amounts exceeding the
ordinary course expenditures already contained in the Debtors' business plan. However, there can be no assurances that the aggregate amount of the claims
ultimately allowed will not be material. To the extent any of these claims are allowed, they will generally be satisfied in full.
(b) Fresh-start reporting and purchase accounting
In connection with its emergence from bankruptcy on September 27, 2005, US Airways adopted fresh-start reporting in accordance with SOP 90-7.
Accordingly, US Airways valued its assets and liabilities at fair value. In addition, as a result of the merger which is accounted for as a reverse acquisition
under SFAS No. 141 "Business Combinations," ("SFAS 141") with America West Holdings as the accounting acquirer, US Airways Group applied the
provisions of SFAS 141 and allocated the purchase price to the assets and liabilities of US Airways Group and to its wholly owned subsidiaries including
US Airways. The purchase price or value of the merger consideration was determined based upon America West Holdings' traded market price per share due
to the fact that US Airways Group was operating under bankruptcy protection. The $4.82 per share value was based on the five-day average share price of
America West Holdings common stock, with May 19, 2005, the merger announcement date, as the midpoint. Certain unsecured creditors of US Airways
Group have been or will be issued an aggregate of approximately 8.2 million shares of US Airways Group common stock in settlement of their claims,
including stock issued to the PBGC and ALPA. The fair value of that common stock valued at an equivalent price based on the $4.82 value of the America
West Holdings stock is $96 million, which was determined to be the reorganization value of US Airways Group. America West Holdings incurred $21 million
of direct acquisition costs in connection with the merger. The following table summarizes the purchase price (in millions):
Fair value of common shares issued to US Airways Group's unsecured creditors $ 96
Estimated merger costs 21
Total purchase price $ 117
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