US Airways 2007 Annual Report Download - page 142

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
exchanges included in the air traffic liability are routinely evaluated based on subsequent activity to validate the accuracy of US Airways'
estimates. Any adjustments resulting from periodic evaluations of the estimated air traffic liability are included in results of operations
during the period in which the evaluations are completed.
Passenger traffic commissions and related fees are expensed when the related revenue is recognized. Passenger traffic commissions
and related fees not yet recognized are included as a prepaid expense.
US Airways purchases capacity, or ASMs, generated by US Airways Group's wholly owned regional air carriers and the capacity of
Air Wisconsin Airlines Corp. ("Air Wisconsin"), Republic Airways Holdings ("Republic"), Mesa Airlines, Inc. ("Mesa") and Chautauqua
Airlines, Inc. ("Chautauqua") in certain markets. Air Wisconsin, Republic, Mesa and Chautauqua operate regional jet aircraft in these
markets as part of US Airways Express. US Airways classifies revenues related to capacity purchase arrangements as Express passenger
revenues. Liabilities related to tickets sold for travel on these air carriers are also included in US Airways' air traffic liability and are
subsequently relieved in the same manner as described above.
Most of US Airways' receivables relate 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 US Airways 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.
US Airways collects various excise taxes on its ticket sales, which are accounted for on a net basis.
Cargo Revenue
Cargo revenue is recognized when shipping services for mail and other cargo are provided.
Other Revenue
Other revenue includes excess baggage charges, ticket change and service fees, commissions earned on tickets sold for flights on
other airlines, sales of tour packages by the US Airways Vacations division and the marketing component earned from selling mileage
credits to partners, as discussed in Note 1(k), "Frequent Traveler Program."
(o) Stock-based Compensation
Upon emergence from the first bankruptcy in March 2003, the Predecessor Company adopted the fair value method of recording
stock-based employee compensation contained in SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123") and
accounted for this change in accounting principle using the "prospective method" as described by SFAS No. 148, "Accounting for Stock-
Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123" ("SFAS 148"). Accordingly, the fair
values of all Predecessor Company stock option and warrant grants, as determined on the date of the grant, were amortized as
compensation expense in the statements of operations over the vesting period. All stock options and warrants were canceled upon
emergence from the second bankruptcy.
Effective with the emergence from bankruptcy and merger with America West Holdings, US Airways applied the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations.
Effective January 1, 2006, US Airways adopted SFAS No. 123R, "Share-Based Payment" ("SFAS 123R"), using the modified
prospective transition method. Under the modified prospective transition method, compensation cost is recognized in the financial
statements beginning with the effective date based on the requirements of SFAS 123R for all share-based payments granted after that
date, and based on the requirements of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), for all unvested
awards granted prior to the effective date of SFAS 123R. Results for prior periods are not restated using the modified prospective
transition method.
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