US Airways 2006 Annual Report Download - page 63

Table of Contents
Prior to October 5, 2010, the notes will not be redeemable at US Airways Group's option. US Airways Group may redeem all or a portion
of the notes at any time on or after October 5, 2010, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid
interest, if any, to the redemption date if the closing price of US Airways Group's common stock has exceeded 115% of the conversion
price for at least 20 trading days in the 30 consecutive trading day period ending on the trading day before the date on which US Airways
Group mails the redemption notice.
In July 2006, approximately $21 million of the $144 million outstanding principal amount of the 7% notes were converted into
883,523 shares of common stock. In connection with the conversion, we paid a premium of $5 million to the holders of the converted
notes, which was recorded in other non-operating expenses. In November 2006, approximately $49 million of the remaining $123 million
outstanding principal amount of the notes were converted into 2,026,113 shares of common stock. In connection with the conversion, we
paid a premium of $12 million to the holders of the converted notes, which was recorded in other non-operating expenses.
General Electric
Of the $139 million net proceeds from the 7% notes, $125 million was paid in September 2005 to General Electric ("GE"). Under
certain agreements among GE and US Airways Group, GE agreed, in consideration for the early return of 51 aircraft and six engines, the
assumption of certain modified leases and the payment of $125 million in cash by September 30, 2005, to: (1) retire an existing bridge
loan facility, (2) complete a purchase by GE of 21 aircraft and 28 engines with a simultaneous lease back of the equipment to
US Airways at market rates, (3) allow US Airways Group to draw additional amounts under an existing credit facility, which resulted in a
total principal outstanding balance under that facility of approximately $28 million, (4) restructure lease obligations of US Airways
relating to 59 aircraft at market rates, (5) provide financing for current and additional aircraft, (6) grant concessions regarding return
condition obligations with respect to the return of aircraft and engines, (7) waive penalties for the removal of engines currently under GE
engine maintenance agreements, and (8) reduce outstanding balances for deferred charges under its rate per hour engine agreements,
which resulted in a remaining balance due of $54 million. During 2006, the outstanding balance for deferred charges was further reduced
by $9 million resulting from credits received on engines removed from the agreements.
Restructuring of Affinity Credit Card Partner Agreement
In connection with the merger, AWA, pre-merger US Airways Group and Juniper Bank, a subsidiary of Barclays PLC, entered into
an amended credit card agreement on August 8, 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. The amended credit card agreement went into effect on January 1, 2006. Prior to that date, the AWA
credit card program was administered by Bank of America, N.A. (USA), under an agreement that terminated on December 31, 2005.
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, there is a dual branding period during which
both Juniper and Bank of America are running 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 Part I, Item 3,
"Legal Proceedings.")
The amended credit card agreement with Juniper took effect at the effective time of the merger. The credit card services provided by
Juniper under the amended credit card agreement commenced in early 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 pays US Airways Group fees for each mile awarded to each credit card account
administered by Juniper, subject to certain exceptions. Juniper also agreed to pay a one-time bonus payment of $130 million following
the effectiveness of the merger and an annual bonus of $5 million to
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