US Airways 2006 Annual Report Download - page 155

Table of Contents
America West Airlines, Inc.
Notes to Consolidated Financial Statements — (Continued)
converted or redeemed. The payment of principal, premium and interest on the 7.5% convertible senior notes was fully and
unconditionally guaranteed by AWA and US Airways Group.
On March 24, 2006, America West Holdings gave notice to the holders of the 7.5% convertible senior notes that it was redeeming
the notes in full, at a redemption price of 102.50% of the principal amount of the notes, as required under the terms of the
indenture, plus accrued and unpaid interest up to, but not including, the date of redemption. The redemption price, plus the
relevant interest, was $1,052.50 per $1,000 principal amount of the notes, and the redemption date was April 13, 2006. Holders
had the right, at any time at or prior to the close of business on April 11, 2006, to convert the notes into shares of common stock of
US Airways Group at a price of $29.09 per share, or 34.376 shares per $1,000 principal amount. Holders who converted also
received interest up to the date of conversion. A total of $112 million in principal amount of the notes was converted into shares of
common stock prior to the redemption date, resulting in the issuance of 3,860,358 shares of common stock.
(d) The industrial development revenue bonds are due April 2023. Interest at 6.3% is payable semiannually on April 1 and October 1.
The bonds are subject to optional redemption prior to the maturity date on or after April 1, 2008, in whole or in part, on any
interest payment date at the following redemption prices: 102% on April 1 or October 1, 2008; 101% on April 1 or October 1,
2009; and 100% on April 1, 2010 and thereafter.
(e) In connection with the merger, AWA, US Airways Group and Juniper Bank, a subsidiary of Barclays PLC ("Juniper"), entered
into an agreement on August 8, 2005 amending AWA's co-branded credit card agreement with Juniper, dated January 25, 2005.
Pursuant to the amended credit card agreement, Juniper agreed to offer and market an airline mileage award credit card program to
the general public to participate in US Airways Group's Dividend Miles program through the use of a co-branded credit card.
US Airways Group's credit card program was also administered by Bank of America, N.A. (USA) prior to the merger. On
December 28, 2005, US Airways issued a notice of termination under its agreement with Bank of America and that notice will
become effective on December 28, 2007. Pending termination of the Bank of America agreement, both Juniper and Bank of
America will run separate credit card programs for US Airways Group. The amended credit card agreement is the subject of
pending litigation filed by Bank of America against US Airways Group, US Airways and AWA (See Note 7(d)).
The amended credit card agreement took effect at the effective time of the merger. The credit card services provided by Juniper
under the amended credit card agreement began in January 2006, and will continue until the expiration date, which is the later of
December 31, 2012 or seven years from the date on which Juniper commences marketing to the general public.
Under the amended credit card agreement, Juniper will pay to US Airways Group fees for each mile awarded to each credit card
account administered by Juniper, subject to certain exceptions. Pursuant to the original credit card agreement, Juniper paid to
AWA a bonus of $20 million. Juniper also agreed to pay a one-time bonus payment of $130 million, following the effectiveness of
the merger, subject to certain conditions. The $130 million bonus payment was made to AWA on October 3, 2005. The entire
$150 million balance for bonus payments are included in "Deferred gains and other liabilities" in the accompanying consolidated
balance sheet as of December 31, 2005. US Airways Group will not recognize any revenue from the bonus payments until the dual
branding period has expired in approximately February 2008. At that time AWA expects to begin recognizing revenue from the
bonus payments on a straight-line basis through December 2012, the expiration date of the Juniper agreement. Further, if Juniper is
not granted exclusivity to offer a co-branded credit card after the dual branding period, US Airways Group must repay the bonus
payments and repurchase unused pre-paid miles with interest, plus a $50 million penalty. Juniper will pay an annual bonus of
$5 million to US Airways Group, subject to certain exceptions, for each year after Juniper becomes the exclusive issuer of the co-
branded credit card.
On October 3, 2005, Juniper pre-paid for miles from US Airways Group totaling $325 million, subject to the same conditions that
apply to the $130 million bonus payment. To the extent that these miles are not used by Juniper as allowed under the co-branded
credit card program in certain circumstances, US Airways Group will repurchase these miles in 12 equal quarterly installments
beginning on the fifth year prior to the expiration date
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