US Airways 2008 Annual Report Download - page 148

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
Secured financings are collateralized by assets, primarily aircraft, engines, simulators, rotable aircraft parts and hangar and
maintenance facilities. At December 31, 2008, the estimated maturities of long-term debt and capital leases are as follows (in millions):
2009 $ 356
2010 221
2011 257
2012 246
2013 192
Thereafter 1,423
$ 2,695
Certain of US Airways' long-term debt agreements contain minimum cash balance requirements and other covenants with which US
Airways was in compliance at December 31, 2008. Certain of US Airways' long-term debt agreements contain cross-default provisions,
which may be triggered by defaults by US Airways under other agreements relating to indebtedness.
4. Income taxes
US Airways accounts for income taxes using the asset and liability method. US Airways and its wholly owned subsidiaries are part
of the US Airways Group consolidated income tax return. US Airways Group allocates tax and tax items, such as net operating losses
("NOL") and net tax credits, between members of the group based on their proportion of taxable income and other items. Accordingly,
US Airways' tax expense is based on taxable income, taking into consideration allocated tax loss carryforwards/carrybacks and tax credit
carryforwards.
US Airways reported a loss for 2008, which increased its NOL, and has not recorded a tax provision for 2008. As of December 31,
2008, US Airways has approximately $1.41 billion of gross NOL to reduce future federal taxable income. Of this amount, approximately
$1.37 billion is available to reduce federal taxable income in the calendar year 2009. The NOL expires during the years 2022 through
2028. US Airways' deferred tax asset, which includes $1.33 billion of the NOL discussed above, has been subject to a full valuation
allowance. US Airways also has approximately $72 million of tax-effected state NOL as of December 31, 2008.
In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or
all of the deferred tax assets will be realized. US Airways has recorded a valuation allowance against its net deferred tax asset. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income (including reversals of deferred tax
liabilities) during the periods in which those temporary differences will become deductible.
At December 31, 2008, the federal valuation allowance is $563 million, all of which will reduce future tax expense when
recognized. The state valuation allowance is $80 million, of which $56 million was established through the recognition of tax expense.
The remaining $24 million was established in purchase accounting. Effective January 1, 2009, US Airways adopted SFAS No. 141R. In
accordance with SFAS No. 141R, all future decreases in the valuation allowance established in purchase accounting will be recognized as
a reduction of tax expense. In addition, US Airways has $28 million and $2 million, respectively, of unrealized federal and state tax
benefit related to amounts recorded in other comprehensive income.
Throughout 2006 and 2007, US Airways utilized NOL that was generated prior to the merger. Utilization of the NOL results in a
corresponding decrease in the valuation allowance. As this valuation allowance was established through the recognition of tax expense,
the decrease in valuation allowance offsets US Airways' tax provision dollar for dollar. US Airways recognized $7 million and
$85 million of non-cash income tax expense for the years ended December 31, 2007 and 2006, respectively, as US Airways utilized NOL
that was generated prior to the merger. As
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