US Airways 2006 Annual Report Download - page 143

Table of Contents
America West Airlines, Inc.
Notes to Consolidated Financial Statements — (Continued)
amount of revenue to be recognized. These estimates are generally based on the analysis of our historical data. AWA and members of the
airline industry have consistently applied this accounting method to estimate revenue from forfeited tickets at the date travel was to be
provided. Estimated future refunds and exchanges included in the air traffic liability are routinely evaluated based on subsequent activity
to validate the accuracy of AWA's estimates. Any adjustments resulting from periodic evaluations of the estimated air traffic liability are
included in results of operations during the period in which the evaluations are completed.
Passenger traffic commissions and related fees are expensed when the related revenue is recognized. Passenger traffic commissions
and related fees not yet recognized are included as a prepaid expense.
AWA purchases the capacity, or ASMs, of Mesa in certain markets. Mesa operates regional jet aircraft in these markets as part of
AWA Express. AWA classifies revenues related to capacity purchase arrangements as Express passenger revenues. Liabilities related to
tickets sold for travel on Mesa are also included in AWA's air traffic liability and are subsequently relieved in the same manner as
described above.
See Note 1(i) above for information on the revenue recognition for the sale of Dividend Miles.
Cargo Revenue
Cargo revenue is recognized when shipping services for mail and other cargo are provided.
Other Revenue
Other revenue includes excess baggage charges, ticket change and service fees, commissions earned on tickets sold for flights on
other airlines, sales of tour packages by the US Airways Vacations division and the marketing component earned from selling mileage
credits to partners, as discussed in Note 1(i) "Frequent Traveler Program".
(m) Stock-based Compensation
Prior to January 1, 2006, AWA accounted for stock-based compensation plans in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations. Effective January 1, 2006, AWA
adopted SFAS No. 123R, "Share-Based Payment" ("SFAS 123R"), using the modified prospective transition method. Under the modified
prospective transition method, compensation cost is recognized in the financial statements beginning with the effective date based on the
requirements of SFAS 123R for all share-based payments granted after that date, and based on the requirements of SFAS No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123") for all unvested awards granted prior to the effective date of SFAS 123R.
Results for prior periods are not restated using the modified prospective transition method.
Had US Airways Group determined compensation cost based on the fair value at the grant date for its stock options, stock
appreciation rights and restricted stock units under SFAS 123 for the years ended December 31, 2005 and 2004 and allocated the
compensation expense to AWA for its employees participating in the stock option plans, AWA's net loss would have been adjusted to the
pro forma amounts indicated below (in millions):
2005 2004
Net loss, as reported $ (397) $ (85)
Add: Stock-based compensation included in reported net loss 3 —
Deduct: Stock-based compensation determined under the fair value based method (11) (6)
Pro forma net loss $ (405) $ (91)
(n) Maintenance and Repair Costs
Maintenance and repair costs for owned and leased flight equipment are charged to operating expense as incurred. AWA
historically recorded the cost of major scheduled airframe, engine and certain component overhauls
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