US Airways 2008 Annual Report Download - page 159

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
With respect to leveraged leases, US Airways evaluated whether the leases had characteristics of a variable interest entity as defined
by FIN No. 46(R). US Airways concluded the leasing entities met the criteria for variable interest entities. US Airways then evaluated
whether or not it was the primary beneficiary by evaluating whether or not it was exposed to the majority of the risks (expected losses) or
whether it receives the majority of the economic benefits (expected residual returns) from the trusts' activities. US Airways does not
provide residual value guarantees to the bondholders or equity participants in the trusts. Each lease does have a fixed price purchase
option that allows US Airways to purchase the aircraft near the end of the lease term. However, the option price approximates an estimate
of the aircraft's fair value at the option date. Under this feature, US Airways does not participate in any increases in the value of the
aircraft. US Airways concluded it was not the primary beneficiary under these arrangements. Therefore, US Airways accounts for its
EETC leverage lease financings as operating leases under the criteria of SFAS No. 13, "Accounting for Leases." US Airways' total
obligations under these leveraged lease financings are $3.57 billion as of December 31, 2008, which are included in the future minimum
lease payments table in (b) above.
(d) Regional Jet Capacity Purchase Agreements
US Airways has entered into capacity purchase agreements with certain regional jet operators. The capacity purchase agreements
provide that all revenues (passenger, mail and freight) go to US Airways. In return, US Airways agrees to pay predetermined fees to the
regional airlines for operating an agreed upon number of aircraft, without regard to the number of passengers onboard. In addition, these
agreements provide that certain variable costs, such as airport landing fees and passenger liability insurance, will be reimbursed 100% by
US Airways. US Airways controls marketing, scheduling, ticketing, pricing and seat inventories. The regional jet capacity purchase
agreements have expirations from 2012 to 2020 and provide for optional extensions at US Airways' discretion. The future minimum
noncancellable commitments under the regional jet capacity purchase agreements are $1.01 billion in 2009, $1.01 billion in 2010,
$1.03 billion in 2011, $902 million in 2012, $731 million in 2013 and $2.71 billion thereafter.
Certain entities with which US Airways has capacity purchase agreements are considered variable interest entities under
FIN No. 46(R). In connection with its restructuring and emergence from bankruptcy, US Airways contracted with Air Wisconsin and
Republic Airways to purchase a significant portion of these companies' regional jet capacity for a period of ten years. US Airways has
determined that it is not the primary beneficiary of these variable interest entities, based on cash flow analyses. Additionally, US Airways
has analyzed the arrangements with other carriers with which US Airways has long-term capacity purchase agreements and has
concluded it is not required to consolidate any of these entities.
(e) Legal Proceedings
On September 12, 2004, US Airways Group and its domestic subsidiaries (collectively, the "Reorganized Debtors") filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia,
Alexandria Division (Case Nos. 04-13819-SSM through 03-13823-SSM) (the "2004 Bankruptcy"). On September 16, 2005, the
Bankruptcy Court issued an order confirming the plan of reorganization submitted by the Reorganized Debtors and on September 27,
2005, the Reorganized Debtors emerged from the 2004 Bankruptcy. The Bankruptcy Court's order confirming the plan included a
provision called the plan injunction, which forever bars other parties from pursuing most claims against the Reorganized Debtors that
arose prior to September 27, 2005 in any forum other than the Bankruptcy Court. The great majority of these claims are pre-petition
claims that, if paid out at all, will be paid out in common stock of the post-bankruptcy US Airways Group at a fraction of the actual claim
amount.
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