US Airways 2005 Annual Report Download - page 67

Table of Contents
during 2004 decreased 3.8% to 7.31 cents from 7.60 cents in 2003, despite a 4.7% increase in average stage length, while yields decreased 5.1% to 9.44 cents.
Express passenger revenues were $353 million for 2004, an increase of $85 million from 2003 due to increased flying by Mesa under its alliance
agreement with AWA.
Total operating expenses were $2.76 billion in 2004, an increase of $229 million or 9.0% compared to 2003. Mainline operating expenses were
$2.39 billion in 2004, an increase of $142 million from 2003, while ASMs increased 8.1%. Mainline CASM decreased 1.7% to 7.92 cents in 2004 from 8.07
cents in 2003, despite a 36.5% increase in the average fuel price per gallon. The 2004 period includes $16 million of net special credits, which reduced 2004
mainline CASM by 0.05 cents, as compared to $14 million of net special charges in 2003, which increased mainline CASM by 0.06 cents. Significant changes
in the components of operating expense per ASM are explained as follows:
• Aircraft fuel and related tax expense per ASM increased 35.0% due primarily to a 36.5% increase in the average price per gallon of fuel to $1.31 in
2004 from $0.96 in 2003.
• Salaries and related costs per ASM decreased 7.9% due to increased productivity. ASMs increased 8.1% in 2004, while average full-time equivalent
employees decreased 2.2% year-over year. This increase in productivity was offset in part by a $27 million increase in pilot payroll expense, principally
as a result of the new labor agreement with ALPA that was effective December 30, 2003.
• Aircraft rent expense per ASM decreased 5.4% due to the 7.9% increase in aircraft utilization.
• Aircraft maintenance materials and repair expense per ASM decreased 14.8% due to decreases in capitalized maintenance amortization expense
($23 million) and aircraft maintenance expense ($4 million). The decrease in capitalized maintenance amortization expense was driven by changes in
the estimated useful life of certain engines, effective January 1, 2004, as a result of changes in aircraft utilization ($9 million) and certain aircraft engine
overhaul costs, effective April 1, 2003, driven by a new maintenance agreement that guarantees minimum cycles on engine overhauls ($2 million).
These decreases were partially offset by increases in airframe maintenance ($6 million) and engine overhaul ($4 million) expenses.
• Other rents and landing fees expense per ASM remained flat year over year as increases in airport rents ($7 million) and landing fees ($6 million) were
offset by the 8.1% increase in ASMs.
• Selling expenses per ASM decreased 9.2% due to reductions in various travel agency incentive programs and override commissions ($9 million) and
decreases in advertising expenses ($1 million), which were offset in part by higher credit card expenses ($4 million), and reservation system booking
fees ($4 million).
• Depreciation and amortization expense per ASM decreased 24.8% due to lower computer hardware and software amortization ($6 million) as a result of
AWA's cash conservation program, which reduced capital expenditures, and lower amortization on aircraft leasehold improvements ($2 million). The
change in the estimated useful life resulting from changes in aircraft utilization discussed above contributed to the decrease in depreciation for
improvements on AWA's owned aircraft ($3 million) and rotable and repairable spare parts ($2 million).
• Other operating expenses per ASM decreased 2.5% in 2004. Decreases in catering costs ($6 million), bad debt expense ($3 million) and traffic liability
insurance ($2 million) were offset by increases in passenger traffic related expenses ($4 million), legal fees ($4 million), airport guard services
($2 million) and ground handling expenses ($2 million). The 2004 period included a $6 million charge resulting from the settlement of pending
litigation and a $5 million loss on the sale and leaseback of two new aircraft. A $4 million gain resulting from the settlement of a claim in bankruptcy
for amounts earned under an executory contract, a $2 million gain resulting from the settlement of a lawsuit related to certain computer hardware and
software that had previously been written off, a $2 million reduction in bad debt expense due to a recovery of a previously reserved
61