US Airways 2007 Annual Report Download - page 80

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
(j) Other Assets, Net
Other assets, net consists of the following as of December 31, 2007 and 2006 (in millions):
2007 2006
Deposits $ 46 $ 49
Debt issuance costs, net 14 24
Long term investments 12 38
Deferred rent 48 49
Aircraft leasehold interest, net 89 95
Other 2 4
Total other assets, net $ 211 $ 259
In connection with fresh-start reporting for US Airways, aircraft operating leases were adjusted to fair value and $101 million of
assets were established for leasehold interests in aircraft for aircraft leases with rental rates deemed to be below market rates. These
leasehold interests are amortized on a straight-line basis as an increase to aircraft rent expense over the applicable remaining lease
periods, which range from one month to 17 years.
(k) Frequent Traveler Program
Members of the Dividend Miles program, the US Airways frequent traveler program, can redeem miles on US Airways or other
members of the Star Alliance. The estimated cost of providing the free travel, using the incremental cost method as adjusted for estimated
redemption rates, is recognized as a liability and charged to operations as program members accumulate mileage and requisite mileage
award levels are achieved. For travel awards on partner airlines, the liability is based on the average contractual amount to be paid to the
other airline per redemption. As of December 31, 2007, Dividend Miles members had accumulated mileage credits for approximately
3.1 million awards. The liability for the future travel awards accrued on the Company's balance sheets within other accrued liabilities was
$161 million and $201 million as of December 31, 2007 and 2006, respectively.
The Company sells mileage credits to participating airline and non-airline business partners. Revenue earned from selling mileage
credits to other companies is recognized in two components. A portion of the revenue from these sales is deferred, representing the
estimated fair value of the transportation component of the sold mileage credits. The deferred revenue for the transportation component is
amortized on a straight-line basis over the period in which the credits are expected to be redeemed for travel as passenger revenue, which
is currently estimated to be 28 months. The marketing component, which is earned at the time the miles are sold, is recognized in other
revenues at the time of the sale. As of December 31, 2007 and 2006, the Company had $241 million and $220 million, respectively, in
deferred revenue from the sale of mileage credits included in other accrued liabilities on its balance sheets.
(l) Derivative Instruments
The Company utilizes financial derivative instruments primarily to manage its risk associated with changing jet fuel prices. The
Company currently utilizes heating oil-based derivative instruments to hedge a portion of its exposure to jet fuel price increases. These
instruments consist of costless collars. As of December 31, 2007, the Company has entered into costless collars to hedge approximately
22% of its 2008 projected mainline and Express jet fuel requirements. The Company does not purchase or hold any derivative financial
instruments for trading purposes.
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