US Airways 2007 Annual Report Download - page 82

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
recognition and the amount of revenue to be recognized. These estimates are generally based on the analysis of the Company's historical
data. The Company and members of the airline industry have consistently applied this accounting method to estimate revenue from
forfeited tickets at the date travel was to be provided. Estimated future refunds and exchanges included in the air traffic liability are
routinely evaluated based on subsequent activity to validate the accuracy of the Company's 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.
The Company purchases capacity, or ASMs, generated by the Company'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. The Company 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 the Company's air traffic liability
and are subsequently relieved in the same manner as described above.
Most of the Company's 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.
The Company 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
Prior to January 1, 2006, the Company accounted for stock-based compensation plans in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations. Effective January 1, 2006,
the Company 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.
80