US Airways 2005 Annual Report Download - page 74

Table of Contents
introduction of MidAtlantic service in April 2004 and higher fuel prices that are paid by US Airways for US Airways Express operations.
US Airways had a net nonoperating loss of $237 million in 2004 compared to nonoperating income of $1.70 billion in 2003. The change in nonoperating
income (expense) is primarily a result of the reorganization items representing amounts incurred as a direct result of the Chapter 11 proceedings related to the
first bankruptcy. See the description below for additional information on the components of reorganizations items. Interest income decreased $5 million in
2004 as compared to 2003 as a result of the reclassification of $4 million of interest income to reorganization item following the second bankruptcy filing in
September 2004. Interest expenses decreased $1 million as a result of the conversion of mortgaged aircraft to leased aircraft and the abandonment of certain
aircraft in the first bankruptcy, offset by interest on the US Airways loan formerly guaranteed by the ATSB and penalty interest incurred as a result of the
second bankruptcy filing. Other, net in 2004 includes $13 million related to a business interruption insurance recovery and a $2 million gain on the sale of
four aircraft, while the 2004 results reflect a $30 million gain recognized in connection with the sale of US Airways' investment in Hotwire, Inc.
Description of Reorganization items
Reorganization items, net represent amounts incurred as a direct result of US Airways' Chapter 11 filings and are presented separately in the statements of
operations. Such items consist of the following (in millions):
Predecessor Company
Nine Months Three Months
Ended Year Ended Ended
September 30, December 31, March 31,
2005 2004 2003
Curtailment of postretirement benefits(a) $ 1,420 $ — $ —
Termination of pension plans(b) 801 — 386
Discharge of liabilities(c) 75 — 3,655
Aircraft order cancellation penalties & reversals(d) 30 (7) —
Interest income on accumulated cash 7 4 2
Damage and deficiency claims(e) 2 (2) (1,892)
Revaluation of assets and liabilities(f) (1,498) — (1,106)
Severance including benefits(g) (96) — —
Professional fees (57) (27) (51)
Airbus equipment deposits and credits, net(h) (35) — —
Restructured aircraft financings(i) (5) — 946
Write-off of deferred compensation (4) — —
Loss on aircraft abandonment(j) — — (9)
Other (4) — (43)
$ 636 $ (32) $ 1,888
(a) In January 2005, the Bankruptcy Court approved settlement agreements between US Airways and its unions and the court-appointed Section 1114
Committee, representing retirees other than those represented by the IAM and TWU, to begin the significant curtailment of postretirement medical
benefits. US Airways recognized a gain of $183 million in connection with this curtailment in the first quarter of 2005. Upon the emergence from
bankruptcy and effectiveness of the plan of reorganization, an additional gain of $1.24 billion was recognized as the liability associated with the
postretirement medical benefits was reduced to fair market value. See also Note 7 to US Airways' financial statements included in Item 8C of this
report. 68