US Airways 2008 Annual Report Download - page 52

Table of Contents
• $214 million in other than temporary non-cash impairment charges included in nonoperating expense for its investments in
auction rate securities primarily driven by the length of time and extent to which the fair value has been less than cost for these
securities.
• $496 million of net unrealized losses resulting from the application of mark-to-market accounting for changes in the fair value of
fuel hedging instruments, offset by $140 million of net realized gains on settled fuel hedge transactions. The net unrealized losses
were primarily driven by the significant decrease in the price of oil in the latter part of 2008. US Airways is required to use mark-
to-market accounting as its existing fuel hedging instruments do not meet the requirements for hedge accounting established by
SFAS No. 133. If these instruments had qualified for hedge accounting treatment, any unrealized gains or losses, including the
$496 million discussed above, would have been deferred in other comprehensive income, a component of stockholder's equity,
until the jet fuel is purchased and the underlying fuel hedging instrument is settled. Given the market volatility of jet fuel, the fair
value of these fuel hedging instruments is expected to change until settled.
• $76 million of net special charges, consisting of $35 million of merger related transition expenses, $18 million in non-cash
charges related to the decline in fair value of certain spare parts associated with US Airways' Boeing 737 aircraft fleet and as a
result of US Airways' capacity reductions, $14 million in lease return costs and penalties related to certain Airbus aircraft and
$9 million in severance charges.
• $8 million in gains on forgiveness of debt, offset by $6 million in write offs of debt discount and debt issuance costs due to the
refinancing of certain aircraft equipment notes and a loan prepayment in connection with US Airways' 2008 financing
transactions, all included in nonoperating expense.
In 2007, US Airways realized operating income of $524 million and income before income taxes of $485 million. US Airways'
results were impacted by recognition of the following items:
• $187 million of net unrealized gains resulting from the application of mark-to-market accounting for changes in the fair value of
fuel hedging instruments as well as $58 million of net realized gains on settled fuel hedge transactions.
• $99 million of net special charges due to merger related transition expenses.
• a $99 million charge for an increase to long-term disability obligations for US Airways' pilots as a result of a change in the FAA
mandated retirement age for pilots from 60 to 65.
• $7 million in tax credits due to an IRS rule change allowing US Airways to recover certain fuel usage tax amounts for years
2003-2006 and $9 million of insurance settlement proceeds related to business interruption and property damages incurred as a
result of Hurricane Katrina in 2005. These gains were offset in part by $4 million in charges related to reduced flying from
Pittsburgh.
• a $17 million gain recognized on the sale of stock in ARINC Incorporated, offset by $10 million in other than temporary
impairment charges for US Airways' investments in auction rate securities, all included in nonoperating expense.
In 2006, US Airways realized operating income of $557 million and income before income taxes and cumulative effect of change in
accounting principle of $446 million. US Airways' results were impacted by recognition of the following items:
• $70 million of net unrealized losses resulting from the application of mark-to-market accounting for changes in the fair value of
fuel hedging instruments as well as $9 million of net realized losses on settled fuel hedge transactions.
• $38 million of net special charges, consisting of $131 million of merger related transition expenses, offset by a $90 million credit
related to the restructuring of the then existing Airbus aircraft order and $3 million of credits related to the settlement of certain
bankruptcy-related claims.
• $6 million of expense related to prepayment penalties and $5 million in accelerated amortization of debt issuance costs in
connection with the refinancing of the loan previously guaranteed by the ATSB and two
50