US Airways 2006 Annual Report Download - page 117

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
Engine Maintenance Commitments
In connection with the merger, US Airways and AWA restructured their rate per engine hour agreements with General Electric
Engine Services for overhaul maintenance services. Under the restructured agreements, the minimum monthly payment on account of
accrued engine flight hours for both the US Airways and AWA agreements together will equal $3 million as long as both agreements
remain in effect through October 2009.
(b) Leases
The Company leases certain aircraft, engines, and ground equipment, in addition to the majority of its ground facilities and terminal
space. As of December 31, 2006, the Company had 376 aircraft under operating leases, with remaining terms ranging from one month to
approximately 18 years. Ground facilities include executive offices, maintenance facilities and ticket and administrative offices. Public
airports are utilized for flight operations under lease arrangements with the municipalities or agencies owning or controlling such airports.
Substantially all leases provide that the lessee must pay taxes, maintenance, insurance and certain other operating expenses applicable to
the leased property. Some leases also include renewal and purchase options.
As of December 31, 2006, obligations under noncancelable operating leases for future minimum lease payments were as follows (in
millions):
2007 $ 1,077
2008 995
2009 874
2010 787
2011 722
Thereafter 4,706
Total minimum lease payments $ 9,161
For the years ended December 31, 2006, 2005 and 2004, rental expense under operating leases, excluding landing fees, was
$1.24 billion, $632 million and $421 million, respectively.
In January 2002, AWA closed a $429 million loan supported by a $380 million government loan guarantee from the ATSB that
resulted in a restructuring of its aircraft lease commitments. Under the restructured lease agreements, annual rent payments have been
reduced through January 2007. Certain of these leases contain put options pursuant to which the lessors could require AWA to renew the
leases for periods up to approximately nine years or call options pursuant to which the lessors could require AWA to return the aircraft to
the lessors upon receipt of six to nine months written notice. The Company also has options to purchase certain of the aircraft at fair
market values at the end of the lease terms. Certain of the agreements require security deposits, minimum return provisions and
supplemental rent payments.
AWA and US Airways have set up pass through trusts, which have issued pass through trust certificates (also known as "Enhanced
Equipment Trust Certificates" or "EETCs") covering the financing of 19 owned aircraft and 116 leased aircraft. These trusts are off-
balance sheet entities, the primary purpose of which is to finance the acquisition of aircraft. Rather than finance each aircraft separately
when such aircraft is purchased or delivered, these trusts allow the Company to raise the financing for several aircraft at one time and
place such funds in escrow pending the purchase or delivery of the relevant aircraft. The trusts are also structured to provide for certain
credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust
certificates and, as a result, reduce the cost of aircraft financing to the Company.
Each trust covered a set amount of aircraft scheduled to be delivered within a specific period of time. At the time of each covered
aircraft financing, the relevant trust used the funds in escrow to purchase equipment notes
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