US Airways 2008 Annual Report Download - page 147

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
AWA fully and unconditionally guaranteed the payment and performance of FTCHP's obligations under the notes and the loan
agreement. The notes require aggregate principal payments of $36 million with principal payments of $2 million due on each of the
first two anniversary dates and the remaining principal amount due on the fifth anniversary date. The notes may be prepaid in full at
any time (subject to customary LIBOR breakage costs) and in partial amounts of $2 million on the third and fourth anniversary dates.
The unpaid principal amount of the notes bears interest based on LIBOR plus a margin subject to adjustment based on a loan to
collateral value ratio.
The loan agreement contains customary covenants applicable to loans of this type, including obligations relating to the preservation
of the collateral and restrictions on the activities of FTCHP. In addition, the loan agreement contains events of default, including
payment defaults, cross-defaults to other debt of FTCHP, if any, breach of covenants, bankruptcy and insolvency defaults and
judgment defaults.
In connection with this financing, AWA sold all of its leasehold interests in the maintenance facility and flight training center to
FTCHP and entered into subleases for the facilities with FTCHP at lease rates expected to approximate the interest payments due
under the notes. In addition, AWA agreed to make future capital contributions to FTCHP in amounts sufficient to cover principal
payments and other amounts owing pursuant to the notes and the loan agreement. As part of the transfer of substantially all of AWA's
assets and liabilities to US Airways in connection with the combination of all mainline airline operations under one FAA operating
certificate on September 26, 2007, AWA assigned its subleases for the facilities with FTCHP to US Airways. In addition, US
Airways assumed all of the obligations of AWA in connection with the financing and joined the guarantee of the payment and
performance of FTCHP's obligations under the notes and the loan agreement.
(f) On October 20, 2008, US Airways and Airbus entered into amendments to the A320 Family Aircraft Purchase Agreement, the A330
Aircraft Purchase Agreement, and the A350 XWB Purchase Agreement. In exchange for US Airways' agreement to enter into these
amendments, Airbus advanced US Airways $200 million in consideration of aircraft deliveries under the various related purchase
agreements. Under the terms of each of the amendments, US Airways has agreed to maintain a level of unrestricted cash in the same
amount required by the US Airways Group Citicorp credit facility. This transaction was treated as a financing transaction for
accounting purposes with an effective interest rate commensurate with US Airways' credit rating. There are no stated interest
payments.
(g) In December 2004, deferred charges under US Airways' maintenance agreements with GE Engine Services, Inc. were converted into
an unsecured term note. Interest on the note accrues at LIBOR plus 4%, and became payable beginning in January 2008, with
principal and interest payments due in 48 monthly installments through 2011. The outstanding balance on the note at December 31,
2008 was $39 million at an interest rate of 6.6%.
In October 2008, US Airways entered into a promissory note with GE Engine Services, Inc. pursuant to which maintenance payments
up to $40 million due from October 2008 through March 2009 under US Airways' Engine Service Agreement are deferred. Interest
on the note accrues at 14%, and becomes payable beginning in April 2009, at which time principal and interest payments are due in
12 monthly installments. The deferred balance on the note at December 31, 2008 was $33 million.
(h) The industrial development revenue bonds are due April 2023. Interest at 6.3% is payable semiannually on April 1 and October 1.
The bonds are subject to optional redemption prior to the maturity date on or after April 1, 2008, in whole or in part, on any interest
payment date at the following redemption prices: 102% on April 1 or October 1, 2008; 101% on April 1 or October 1, 2009; and
100% on April 1, 2010 and thereafter.
(i) In connection with US Airways' emergence from bankruptcy in September 2005, it reached a settlement with the Pension Benefit
Guaranty Corporation ("PBGC") related to the termination of three of its defined benefit pension plans. The settlement included the
issuance of a $10 million note which matures in 2012 and bears interest at 6% payable annually in arrears.
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