US Airways 2006 Annual Report Download - page 160

Table of Contents
America West Airlines, Inc.
Notes to Consolidated Financial Statements — (Continued)
In addition, AWA is also the lessee under certain long-term leases at various airports. At certain of these airports, municipalities
have issued revenue bonds to improve airport facilities that are leased by AWA and accounted for as operating leases. AWA does not
guarantee the underlying debt related to these operating leases.
AWA 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 AWA 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 AWA'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.
Additionally, in the case of real estate leases, AWA typically indemnifies such parties for any environmental liability that arises out of or
relates to AWA's use of the leased premises.
US Airways, America West Holdings, AWA, and other subsidiaries of US Airways Group are all guarantors of the $1.25 billion GE
Loan.
US Airways Group's 7% Senior Convertible Notes are fully and unconditionally guaranteed, jointly and severally and on a senior
unsecured basis, by US Airways and AWA.
(f) Concentration of Credit Risk
AWA 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 AWA'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 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. AWA does not believe it is subject to any significant concentration of credit risk.
8. Income Taxes
AWA accounts for income taxes according to the provisions in SFAS No. 109, "Accounting for Income Taxes." AWA files a
consolidated federal income tax return with its parent company, US Airways Group. US Airways Group and its wholly owned
subsidiaries allocate tax and tax items, such as net operating losses ("NOL") and net tax credits, between members of the group based on
their proportion of taxable income and other items. Accordingly, AWA's tax expense is based on its taxable income, taking into
consideration its allocated tax loss carryforwards/carrybacks and tax credit carryforwards.
In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or
all of the deferred tax assets will be realized. AWA has recorded a valuation allowance against its net deferred tax asset. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income (including reversals of deferred tax liabilities)
during the periods in which those temporary differences will become deductible.
As of December 31, 2006, AWA has available NOL carryforwards and tax credit carry forwards for federal income tax purposes of
approximately $400 million and $7 million, respectively. The NOL expires during the years 2022 through 2025. As a result of a statutory
"ownership change" (as defined for purposes of Section 382 of the Internal Revenue Code) that occurred as a result of America West
Holding's merger with US Airways Group on September 27, 2005, AWA's ability to utilize its regular and AMT NOL and tax credit
carryforwards may be restricted.
157