US Airways 2006 Annual Report Download - page 146

Table of Contents
America West Airlines, Inc.
Notes to Consolidated Financial Statements — (Continued)
principle is not presented net of tax as any tax effects resulting from the change have been immediately offset by the recording of a
valuation allowance through the same financial statement caption.
3. Special Charges
Special charges included within the statements of operations include the following components (in millions):
Year Ended December 31,
2006 2005 2004
Airbus restructuring $ (51)(a) $ 57(a) $ —
Sale leaseback transactions — 27(b) (1)(g)
Merger related transition expenses 68(c) 13(c) —
Power by the hour program penalties — 7(d) —
Severance due to change in control — 2(e) —
Aircraft returns — 1(f) 2(f)
Termination of V2500 power by the hour agreement — — (16)(h)
Other — (1) (1)
Total $ 17 $ 106 $ (16)
(a) In the third quarter of 2005, in connection with the merger and a memorandum of understanding (the "Airbus MOU") executed
between AVSA S.A.R.L., an affiliate of Airbus S.A.S. ("Airbus"), US Airways Group, US Airways and AWA, certain aircraft
firm orders were restructured. In connection with that restructuring, US Airways Group and America West Holdings were required
to pay non-refundable restructuring fees totaling $89 million by means of set-off against existing equipment deposits of
US Airways and AWA held by Airbus of $39 million and $50 million respectively. AWA's restructuring fee of $50 million has
been classified as a special charge, along with $7 million in associated capitalized interest. Also in connection with the Airbus
MOU, US Airways and AWA entered into two loan agreements with aggregate commitments of up to $161 million and
$89 million. As described in further detail in Note 6, on March 31, 2006, the outstanding principal and accrued interest on the
$89 million loan was forgiven upon repayment in full of the $161 million loan in accordance with terms of the Airbus loans. As a
result, AWA recognized a gain associated with the return of these equipment deposits upon forgiveness of the loan totaling
$51 million, consisting of the $50 million in equipment deposits and accrued interest of $1 million.
(b) In the third quarter of 2005, a $27 million loss was incurred related to the sale-leaseback of six 737-300 aircraft and two 757
aircraft.
(c) In 2006, AWA incurred $68 million of transition and merger integration costs. These items included $16 million in personnel costs
for severance, retention payments and stock awards; $12 of costs associated with the integration of the AWA FlightFund and
US Airways Dividend Miles frequent traveler programs; $1 million in merger related aircraft lease return expenses; $15 million of
aircraft livery costs; $15 million in professional and technical fees; $3 million of training related expenses; and $6 million of other
expenses.
In the fourth quarter of 2005, AWA recorded $13 million of merger related expenses related to transitioning the employees,
systems and facilities of AWA and US Airways into one consolidated company. The $13 million includes insurance premiums of
$4 million related to policies for former officers and directors, compensation expense of $3 million for special stock awards,
granted under a program designed to retain key employees through the integration period, professional and technical fees of
$3 million and sales and marketing program expenses of $2 million related to notifying frequent traveler program members about
the merger.
(d) In the fourth quarter of 2005, in connection with the return of certain leased aircraft, AWA incurred expenses of $7 million related
to penalties incurred under the outsourced maintenance arrangement.
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