US Airways 2006 Annual Report Download - page 121

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
(e) Guarantees and Indemnifications
The Company 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 and AWA. Under such leases, US Airways
and AWA are required to make rental payments sufficient to pay maturing principal and interest payments on the related bonds. As of
December 31, 2006, the principal amount outstanding of these bonds was $96 million. Remaining lease payments guaranteeing the
principal and interest on these bonds will be $163 million.
The Company enters into real estate leases in substantially all cities that it serves. It is common in such commercial lease
transactions for the Company 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. With
respect to certain special facility bonds, the Company agreed to indemnify the municipalities for any claims arising out of the issuance
and sale of the bonds and the use or occupancy of the concourses financed by these bonds. Additionally, the Company typically
indemnifies such parties for any environmental liability that arises out of or relates to its use of the leased premises.
The Company is the lessee under many aircraft financing agreements (including leveraged lease financings of aircraft under pass
through trusts) and real estate leases. It is common in such transactions for the Company as the lessee to agree to indemnify the lessor and
other related third parties for the manufacture, design, ownership, financing, use, operation and maintenance of the aircraft, and for tort
liabilities that arise out of or relate to the Company's use or occupancy of the leased asset. 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.
The Company reviewed its long-term operating leases at a number of airports, including leases where the Company 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).
(f) Concentration of Credit Risks
The Company 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.
As of December 31, 2006, most of the Company's receivables related to tickets sold to individual passengers through the use of
major credit cards or to tickets sold by other airlines and used by passengers on US Airways and AWA or its regional airline affiliates.
These receivables are short-term, mostly being settled within seven days after sale. Bad debt losses, which have been minimal in the past,
have been considered in establishing allowances for doubtful accounts. The Company does not believe it is subject to any significant
concentration of credit risk.
11. Nonoperating Income (Expense) — Other, Net
During 2006, in connection with the conversion of $70 million of the 7% Senior Convertible Notes, the Company paid an
inducement of $17 million to the holders of the converted notes, which was recorded in other nonoperating expense. In addition, the
write-off of $2 million in debt issuance costs associated with the notes was recorded in other nonoperating expense.
In 2006 and 2005, the Company recorded $11 million and $4 million, respectively, of derivative gains attributable to stock options
in Sabre and warrants in a number of companies. On an ongoing basis, the Company
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