US Airways 2007 Annual Report Download - page 106

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
mortgage financings, the equipment notes issued to the trusts are direct obligations of US Airways. As of December 31, 2007,
$576 million associated with these mortgage financings is reflected as debt in the accompanying balance sheet.
Neither the Company nor US Airways guarantee or participate in any way in the residual value of the leased aircraft. All leased
aircraft financed by these trusts are structured as leveraged leased financings, which are not reflected as debt on the balance sheet of
either the Company or US Airways. US Airways does not provide residual value guarantees under these lease arrangements. Each lease
contains a purchase option that allows US Airways to purchase the aircraft at a fixed price, which at the inception of the lease
approximated the aircraft's expected fair market value at the option date, near the end of the lease term.
These leasing entities meet the criteria for variable interest entities. However, they do not meet the consolidation criteria under
FIN 46(R) "Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51" because the Company is not the primary
beneficiary under these arrangements.
(d) Regional Jet Capacity Purchase Agreements
The Company has entered into capacity purchase agreements with certain regional jet operators. The capacity purchase agreements
provide that all revenues (passenger, mail and freight) go to the Company. In return, the Company agrees to pay predetermined fees to the
regional airlines for operating an agreed upon number of aircraft, without regard to the number of passengers onboard. In addition, these
agreements provide that certain variable costs, such as airport landing fees, will be reimbursed 100% by the Company. The Company
controls marketing, scheduling, ticketing, pricing and seat inventories. The regional jet capacity purchase agreements have expirations
from 2012 to 2020 and provide for optional extensions at the Company's discretion. The future minimum noncancellable commitments
under the regional jet capacity purchase agreements are $1.06 billion in 2008, $1.11 billion in 2009, $1.13 billion in 2010, $1.16 billion in
2011, $1.02 billion in 2012 and $4.68 billion thereafter.
Certain entities with which the Company has capacity purchase agreements are considered variable interest entities under
FIN 46(R). In connection with its restructuring and emergence from bankruptcy, US Airways contracted with Air Wisconsin, a related
party, and Republic to purchase a significant portion of these companies' regional jet capacity for a period of ten years. The Company has
determined that it is not the primary beneficiary of these variable interest entities, based on cash flow analyses. Additionally, the
Company has analyzed the arrangements with other carriers with which the Company has long-term capacity purchase agreements and
has concluded it is not required to consolidate any of the entities.
(e) Legal Proceedings
On September 12, 2004, US Airways Group and its domestic subsidiaries (collectively, the "Reorganized Debtors") filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia,
Alexandria Division (Case Nos. 04-13819-SSM through 03-13823-SSM) (the "2004 Bankruptcy"). On September 16, 2005, the
Bankruptcy Court issued an order confirming the plan of reorganization submitted by the Reorganized Debtors and on September 27,
2005, the Reorganized Debtors emerged from the 2004 Bankruptcy. The Bankruptcy Court's order confirming the plan included a
provision called the plan injunction, which forever bars other parties from pursuing most claims against the Reorganized Debtors that
arose prior to September 27, 2005 in any forum other than the Bankruptcy Court. The great majority of these claims are pre-petition
claims that, if paid out at all, will be paid out in common stock of the post-bankruptcy US Airways Group at a fraction of the actual claim
amount.
On February 9, 2007, passengers Daphne Renard and Todd Robins filed a class action suit against US Airways in San Francisco
Superior Court. The complaint, which was later amended to include only Robins as a lead plaintiff, alleges that US Airways breached its
contract of carriage by charging additional fares and fees, after the purchase of tickets on the usairways.com website, for passengers
under two years of age who travel as "lap children," meaning
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