US Airways 2006 Annual Report Download - page 58

Table of Contents
As the result of US Airways' bankruptcy filing in September 2004, it failed to meet the conditions precedent for continued
financing of regional jets and was not able to take delivery of scheduled aircraft and therefore incurred penalties of $7 million in
the fourth quarter of 2004.
(e) Damage and deficiency claims are largely a result of US Airways' election to either restructure, abandon or reject aircraft debt and
leases during the bankruptcy proceedings. As a result of the confirmation of the plan of reorganization and the effectiveness of the
merger, these claims were withdrawn and the accruals reversed.
(f) As of September 30, 2005, US Airways recorded $1.5 billion of adjustments to reflect assets and liabilities at fair value, including
an initial net write-down of goodwill of $1.82 billion. Goodwill of $584 million was recorded to reflect the excess of the estimated
fair value of liabilities and equity over identifiable assets. Subsequent to September 30, 2005, US Airways recorded an additional
$148 million of goodwill to reflect adjustments to the estimated fair values of certain assets and liabilities.
(g) In connection with filing for bankruptcy on September 12, 2004, US Airways achieved cost-savings agreements with its principal
collective bargaining groups. In connection with the new labor agreements, approximately 5,000 employees across several of
US Airways' labor groups were involuntarily terminated or participated in voluntary furlough and termination programs.
(h) In connection with the Airbus MOU, US Airways was required to pay a restructuring fee of $39 million, which was paid by means
of offset against existing equipment deposits held by Airbus. US Airways also received credits from Airbus totaling $4 million in
2005, primarily related to equipment deposits. See also Note 3 to US Airways' financial statements included in Item 8C of this
report.
(i) The GE Merger MOU provided for the continued use of certain leased Airbus, Boeing and regional jet aircraft, the modification of
monthly lease rates and the return of certain other leased Airbus and Boeing aircraft. The GE Merger MOU also provided for the
sale-leaseback of assets securing various GE obligations. In connection with these transactions, US Airways recorded a net loss of
$5 million.
Liquidity and Capital Resources
Sources and Uses of Cash
US Airways Group
As of December 31, 2006, US Airways Group's cash, cash equivalents, short-term investments and restricted cash were $3.0 billion,
of which $2.4 billion was unrestricted. US Airways Group has the ability to move funds freely between operating subsidiaries to support
operations. These transfers are recognized as intercompany transactions. We believe that cash flows from operating activities, combined
with cash balances and financing commitments, will be adequate to fund operating and capital needs as well as to maintain compliance
with our various debt arrangements through the end of 2007.
Net cash provided by operating activities was $618 million and $46 million in 2006 and 2005, respectively. Cash flows for 2005
include the results of America West Holdings for the 269 days through September 27, 2005, the effective date of the merger, and the
consolidated results of US Airways Group for the 96 days from September 27, 2005 to December 31, 2005. The year-over-year increase
in cash flows from operations is primarily the result of the 2006 net income of $304 million compared to a net loss of $537 million in
2005, which included the non-cash $202 million cumulative effect of change in accounting principle in 2005.
Net cash used in investing activities in 2006 was $903 million compared to net cash provided by investing activities of $399 million
in 2005. Principal investing activities in 2006 included purchases of property and equipment totaling $232 million, including the purchase
of three Boeing 757-200 and two Embraer 190 aircraft, net purchases of short-term investments of $798 million and a decrease in
restricted cash of $128 million primarily due to a decrease in cash reserves required under an agreement for processing credit card
transactions. The 2005 period included the merger transaction, which included $258 million of net cash acquired. Other investing
activities in 2005 included net purchases of short-term investments totaling $295 million and purchases of property and equipment
totaling $44 million. In 2005 we also received proceeds of $592 million from flight equipment asset sales; the sale and leaseback of
aircraft including six Boeing 737-300, two Boeing 757-200, nine Airbus A319 and
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