US Airways 2007 Annual Report Download - page 58

Table of Contents
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.
Affinity Credit Card Partner Agreement
In connection with the merger, AWA, pre-merger US Airways Group and Barclays Bank of Delaware entered into an amended
credit card agreement on August 8, 2005. Pursuant to the amended credit card agreement, Barclays 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. Under the amended credit card agreement, Barclays pays us fees for each mile awarded to each credit card
account administered by Barclays, subject to certain exceptions. The credit card services provided by Barclays commenced in early
January 2006.
Pre-merger US Airways' credit card program was administered by Bank of America, N.A. (USA). Pending termination of the Bank
of America agreement, there is a dual branding period during which both Barclays and Bank of America are running separate credit card
programs for us. As a result of a May 11, 2007 settlement of litigation filed by Bank of America against US Airways Group, US Airways
and AWA, the agreement with Bank of America has been extended to March 31, 2009, among other changes, and the dual branding
period has been extended through the same date. The term of the amended credit card agreement with Barclays also was extended to
March 31, 2015, among other changes, as a result of the litigation settlement.
Under the amended credit card agreement, Barclays 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 us, subject to certain exceptions, for each year after Barclays becomes
the exclusive issuer of the co-branded credit card. If Barclays is not granted exclusivity to offer a co-branded credit card after the dual
branding period with Bank of America, we must repay this bonus payment plus repay a $20 million bonus payment AWA previously
received under the original credit card agreement with Barclays. Barclays may, at its option, terminate the amended credit card agreement
in the event that we breach our obligations under the amended credit card agreement, or upon the occurrence of certain other events,
which also would require us to repay some or all of the bonus payments as discussed above. As of December 31, 2007, we have not
recorded income from the bonus payments and have a deferred liability of $150 million recorded in other long-term liabilities.
Aircraft and Engine Purchase Commitments
On June 13, 2006, we and Embraer executed an Amended and Restated Purchase Agreement and an Amended and Restated Letter
Agreement. In accordance with the terms of these agreements, we placed an initial firm order for 25 Embraer 190 aircraft and an
additional order for 32 Embraer 190 aircraft. The progress and deposit payments totaling approximately $18 million previously paid by
us to Embraer in accordance with the terms of the Purchase Agreement dated as of May 9, 2003, are being applied to these orders in
accordance with the terms of the amended and restated agreements. In addition, we had the option to purchase up to 50 additional
Embraer 190 aircraft and to convert certain of the Embraer 190 aircraft to Embraer 170, Embraer 175 or Embraer 195 aircraft, subject to
availability and upon agreed notice. Embraer has agreed to provide financing for certain of the aircraft. On July 21, 2006, we assigned 30
of the purchase options to Republic Airlines Inc. On January 12, 2007, we assigned eight additional purchase options to Republic
Airlines. We purchased and took delivery of two Embraer 190 aircraft in the fourth quarter of 2006 and nine Embraer 190 aircraft
throughout 2007. We expect to take delivery of 14 Embraer 190 aircraft in 2008. In June and August 2007, we amended the Amended
and Restated Purchase Agreement to revise the delivery schedule for the additional 32 Embraer 190 aircraft. On June 6, 2007, we entered
into another amendment to the Amended and Restated Purchase Agreement whereby Embraer granted us an additional
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