US Airways 2007 Annual Report Download - page 50

Table of Contents
Operating Expenses:
Percent
2007 2006 Change
(In millions)
Operating expenses:
Aircraft fuel and related taxes $ 2,630 $ 2,518 4.4
Loss (gain) on fuel hedging instruments, net
Realized (58) 9 nm
Unrealized (187) 70 nm
Salaries and related costs 2,302 2,090 10.2
Aircraft rent 727 732 (0.6)
Aircraft maintenance 635 582 9.1
Other rent and landing fees 536 568 (5.7)
Selling expenses 453 446 1.6
Special items, net 99 38 nm
Depreciation and amortization 198 184 8.1
Other 1,227 1,228 (0.1)
Total mainline operating expenses 8,562 8,465 1.1
Express expenses:
Fuel 765 764 0.1
Other 1,962 1,906 2.9
Total operating expenses $ 11,289 $ 11,135 1.4
Total operating expenses were $11.29 billion in 2007, an increase of $154 million or 1.4% compared to the 2006 period. Mainline
operating expenses were $8.56 billion in 2007, an increase of $97 million from the 2006 period, while ASMs decreased 1.5%. The 2007
period included net charges from special items of $99 million, primarily due to merger related transition expenses. This compares to net
charges from special items of $38 million in 2006, which included $131 million of merger related transition expenses, offset by a
$90 million credit related to the restructuring of the then existing Airbus aircraft order and $3 million of credits related to the settlement
of certain bankruptcy-related claims. The period over period increase in mainline operating expenses was driven principally by increases
in salaries and related costs ($212 million), aircraft fuel ($112 million) and aircraft maintenance ($53 million). These increases were
offset in part by gains on fuel hedging instruments ($245 million) in the 2007 period as compared to losses in the 2006 period
($79 million).
Significant changes in the components of mainline operating expenses are as follows:
• Aircraft fuel and related taxes increased 4.4% due primarily to a 5.8% increase in the average price per gallon of fuel to $2.20 in
2007 from $2.08 in 2006.
• Loss (gain) on fuel hedging instruments, net fluctuated from a loss of $79 million in 2006 to a gain of $245 million in 2007 as a
result of a period over period increase in the volume of barrels hedged during a period in which the fair market value of the
costless collar transactions increased.
• Salaries and related costs increased 10.2% due a $99 million charge for an increase to long-term disability obligations for US
Airways' pilots as a result of a change in the FAA mandated retirement age for pilots from 60 to 65 as well as a period over
period increase in headcount, principally in fleet and passenger service employees as part of our initiative to improve operational
performance, and increases in employee benefits as a result of higher medical claims due to general inflationary cost increases.
• Aircraft maintenance expense increased 9.1% due principally to an increase in the number of overhauls performed on engines not
subject to power by the hour maintenance agreements as well as an increase in the volume of seat overhauls and thrust reverser
repairs in the 2007 period compared to the 2006 period.
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