US Airways 2007 Annual Report Download - page 88

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
(a) In connection with the merger and the Airbus Memorandum of Understanding (the "Airbus MOU") executed between AVSA
S.A.R.L., an affiliate of Airbus S.A.S. ("Airbus"), US Airways Group, US Airways and AWA, certain aircraft firm orders were
restructured. In connection with that restructuring, US Airways Group and America West Holdings were required to pay non-
refundable restructuring fees totaling $89 million by means of set-off against existing equipment deposits of US Airways and
AWA held by Airbus of $39 million and $50 million respectively. In 2005, AWA's restructuring fee of $50 million has been
classified as a special charge, along with $7 million in associated capitalized interest. Also in connection with the Airbus MOU,
US Airways and AWA entered into two loan agreements with aggregate commitments of up to $161 million and $89 million. On
March 31, 2006, the outstanding principal and accrued interest on the $89 million loan was forgiven upon repayment in full of the
$161 million loan in accordance with terms of the Airbus loans. As a result, in 2006, the Company recognized a gain associated
with the return of these equipment deposits upon forgiveness of the loan totaling $90 million, consisting of the $89 million in
equipment deposits and accrued interest of $1 million.
(b) In 2007, in connection with the continuing effort to consolidate functions and integrate the Company's organizations, procedures,
and operations, the Company incurred $99 million of transition and merger integration costs. These items included $13 million in
training and related expenses; $19 million in compensation expenses for equity awards granted in connection with the merger to
retain key employees through the integration period; $20 million of aircraft livery costs; $37 million in professional and technical
fees related to the integration of the Company's airline operations systems; $1 million in employee moving expenses; $4 million
related to reservation system migration expenses and $5 million of other expenses.
In 2006, the Company incurred $131 million of transition and merger integration costs. These items included $6 million in training
and related expenses; $41 million in compensation expenses primarily for severance, retention payments and equity awards
granted in connection with the merger to retain key employees through the integration period; $17 million of aircraft livery costs;
$38 million in professional and technical fees, including continuing professional fees associated with US Airways' bankruptcy
proceedings and fees related to the integration of the Company's airline operations systems; $7 million of employee moving
expenses; $11 million of net costs associated with the integration of the AWA FlightFund and US Airways Dividend Miles
frequent traveler programs; $2 million in merger related aircraft lease return expenses and $9 million of other expenses.
In 2005, the Company incurred $28 million of transition and merger integration costs in the fourth quarter of 2005. These items
included $8 million in compensation expenses primarily for severance and special stock awards granted under a program designed
to retain key employees through the integration period; $1 million of aircraft livery costs; $3 million in professional and technical
fees; $11 million in insurance premiums related to policies for former officers and directors; $2 million of sales and marketing
program expenses related to notifying frequent traveler program members about the merger; $1 million of programming service
expense and $2 million in other expenses.
Severance charges and payment activity related to the merger are as follows (in millions):
Year Ended December 31,
2006 2005
Balance beginning of year $ 9 $ —
Amount recorded by US Airways in purchase accounting — 24
Severance expense 14 2
Payments (23) (17)
Balance end of year $ — $ 9
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