US Airways 2005 Annual Report Download - page 85

Table of Contents
During the third quarter of 2005, AWA incurred a $57 million special charge related to the amended Airbus purchase agreement. US Airways also
incurred a restructuring fee of $39 million, which was recorded as a reorganization item in the third quarter of 2005. The restructuring fees were paid by
means of set-off against existing equipment purchase deposits held by Airbus.
Embraer Purchase Commitments
On February 16, 2006, the Bankruptcy Court approved a settlement and assumption term sheet between the Company and Embraer, executed by the
Company on February 9, 2006, which amends the purchase agreement dated as of May 9, 2003, as amended, between the Company and Embraer and
contemplates an amended and restated financing letter with Embraer. The Bankruptcy Court also authorized the assumption of the purchase agreement, as
amended by the term sheet, and a related maintenance agreement, and disallowed certain proofs of claim filed by Embraer in the bankruptcy proceedings
related to these agreements. The purchase agreement, as amended by the term sheet, provides that Embraer will retain and apply approximately $18 million in
non-refundable progress and deposit payments ("PDPs") previously paid by the Company. The Company has agreed to place an initial firm order for 25
Embraer 190 aircraft and an additional firm order for 32 Embraer 190 aircraft. The outstanding PDPs will be applied to these orders in accordance with the
terms of the amended purchase agreement. In addition, upon assumption of the amended purchase agreement, Embraer granted the Company the right to
purchase up to 50 additional Embraer 190 aircraft in accordance with the term sheet. The term sheet also provides that the Company will be allowed to
convert certain of the Embraer 190 aircraft to Embraer 170, Embraer 175 or Embraer 195 aircraft, subject to availability and upon agreed notice. Embraer has
agreed to provide financing for certain of the aircraft scheduled for delivery under the amended purchase agreement, under the terms of the amended and
restated financing letter.
Bombardier Purchase Commitments
Under its agreement with Bombardier, US Airways Group acquired three new CRJ-700 aircraft in January 2005. The purchase was financed through the
application of $28 million of existing purchase deposits held by Bombardier, $2 million in cash and a financed lease facility with DVB Bank AG.
Additionally, $7 million of purchase deposits held by Bombardier were used to satisfy existing defaults, cure payments and liquidated damages. While
US Airways Group continued to operate under the protection of Chapter 11 in compliance with the Bankruptcy Code and until a decision is reached to assume
or reject the Bombardier regional jet purchase agreement, no obligations arise on the part of US Airways Group or Bombardier with respect to the purchase
and delivery of any aircraft.
Covenants and Credit Rating
In addition to the minimum cash balance requirements, our long-term debt agreements contain various negative covenants that restrict our actions,
including our ability to pay dividends, or make other restricted payments. Finally, our long-term debt agreements contain cross-default provisions, which may
be triggered by defaults by us under other agreements relating to indebtedness. See "Risk Factors Relating to the Company and Industry Related Risks — Our
high level of fixed obligations limits our ability to fund general corporate requirements and obtain additional financing, limits our flexibility in responding to
competitive developments and increases our vulnerability to adverse economic and industry conditions." As of December 31, 2005, US Airways Group and
its subsidiaries were in compliance with the covenants in their long-term debt agreements.
US Airways Group's credit ratings, like those of most airlines, are relatively low, with Standard & Poor's ("S&P") assessment of the corporate credit rating
for US Airways Group, AWA and US Airways at B- and senior unsecured debt rating at CCC for US Airways Group and AWA. Fitch's ratings for both
US Airways Group and AWA for long-term debt and senior unsecured debt is CCC and CC, respectively. Moody's assessment of AWA's long-term corporate
family rating and senior unsecured debt rating is B3 and Caa2, respectively. S&P and Fitch have placed a "negative" outlook designation for US Airways
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