US Airways 2005 Annual Report Download - page 264

Table of Contents
US Airways, Inc.
Notes to the Financial Statements — (Continued)
US Airways is party to various legal proceedings, including some purporting to be class action suits, and some that demand large monetary damages or
other relief, which, if granted, would require significant expenditures. In certain cases where it is probable that the outcome will result in monetary damages,
US Airways will consider all available information and record an accrual. For those cases where a range of loss is probable but no amount within the range is
a better estimate than any other amount, US Airways will record an accrual at the low end of the range.
(e) Guarantees
US Airways guarantees the payment of principal and interest on certain special facility revenue bonds issued by municipalities to build or improve certain
airport and maintenance facilities which are leased to US Airways. Under such leases, US Airways is required to make rental payments through 2023,
sufficient to pay maturing principal and interest payments on the related bonds. As of December 31, 2005, the principal amount outstanding of these bonds
was $77 million. Remaining lease payments guaranteeing the principal and interest on these bonds will be $131 million.
US Airways enters into real estate leases in substantially all cities that it serves. It is common in such commercial lease transactions for US Airways as the
lessee to agree to indemnify the lessor and other related third parties for tort liabilities that arise out of or relate to the use or occupancy of the leased premises.
In some cases, this indemnity extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by
their gross negligence or willful misconduct. Additionally, US Airways typically indemnifies such parties for any environmental liability that arises out of or
relates to its use of the leased premises.
In aircraft financing agreements, US Airways typically indemnifies the financing parties, trustees acting on their behalf and other related parties against
liabilities that arise from the manufacture, design, ownership, financing, use, operation and maintenance of the aircraft and for tort liability, whether or not
these liabilities arise out of or relate to the negligence of these indemnified parties, except for their gross negligence or willful misconduct. In aircraft
financing transactions structured as leveraged leases, US Airways typically indemnifies the lessor with respect to adverse changes in U.S. tax laws.
US Airways expects that it would be covered by insurance (subject to deductibles) for most tort liabilities and related indemnities described above with
respect to real estate leases and aircraft it operates. US Airways cannot estimate the potential amount of future payments under the foregoing indemnities and
guarantees.
US Airways reviewed its long-term operating leases at a number of airports, including leases where US Airways is also the guarantor of the underlying
debt. Such leases are typically with municipalities or other governmental entities. The arrangements are not required to be consolidated based on the
provisions of FIN 46(R).
As discussed in Note 1, the 7% Senior Convertible Notes are fully and unconditionally guaranteed, jointly and severally and on a senior unsecured basis,
by US Airways Group's two major operating subsidiaries, US Airways and AWA. The guarantees are the guarantors' unsecured obligations and rank equally
in right of payment to the other senior unsecured and unsubordinated indebtedness of the guarantors and are effectively subordinated to the guarantors'
secured indebtedness to the extent of the value of assets securing such indebtedness.
(f) Concentration of credit risk
US Airways invests available cash in money market securities of various banks, commercial paper and asset-backed securities of various financial
institutions, other companies with high credit ratings and securities backed by the U.S. government.
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