US Airways 2008 Annual Report Download - page 56

Table of Contents
oil as it is a commodity with prices that are generally highly correlated with jet fuel prices. US Airways recognized net gains
from its fuel hedging program in the first half of 2008 as the price of heating oil exceeded the upper limit on certain of its collar
transactions. However, the significant decline in the price of oil in the latter part of 2008 generated unrealized losses on certain
open fuel hedge transactions as the price of heating oil fell below the lower limit of those collar transactions.
• Aircraft maintenance expense increased 23.2% due principally to increases in the number of engine and landing gear overhauls
performed in 2008 as compared to 2007.
• Other rent and landing fees increased 4.9% due primarily to increases in rental rates at certain airports in the 2008 period as
compared to the 2007 period.
• Depreciation and amortization increased 13.1% due to the acquisition of 14 Embraer aircraft and five Airbus aircraft in 2008,
which increased depreciation expense on owned aircraft.
Total Express expenses increased 15.1% in 2008 to $3.14 billion from $2.73 billion in 2007. Express fuel costs increased
$372 million as the average fuel price per gallon increased 44.8% from $2.23 in 2007 to a record high $3.23 in 2008. Other Express
operating expenses increased $40 million year-over year as a result of the 5.6% increase in Express capacity in 2008, partially offset by a
decrease in amounts paid under capacity purchases with US Airways Group's wholly owned Express carriers.
Nonoperating Income (Expense):
Percent
2008 2007 Change
(In millions)
Nonoperating income (expense):
Interest income $ 83 $ 172 (51.6)
Interest expense, net (218) (229) (5.1)
Other, net (240) 18 nm
Total nonoperating expense, net $ (375) $ (39) nm
Net nonoperating expense was $375 million in 2008 as compared to $39 million in 2007. Interest income decreased $89 million in
2008 due to lower average investment balances and lower rates of return. Interest expense, net decreased $11 million due primarily to
reductions in average interest rates associated with variable rate debt, partially offset by an increase in the average debt balance
outstanding as compared to the 2007 period.
Other nonoperating expense, net in 2008 included $214 million in other than temporary impairment charges for US Airways'
investments in auction rate securities primarily due to the length of time and extent to which the fair value has been less than cost for
these securities. US Airways also recognized $25 million in foreign currency losses related to transactions denominated in foreign
currencies and $6 million in write offs of debt discount and debt issuance costs in connection with the refinancing of certain aircraft
equipment notes and a loan prepayment in connection with US Airways' 2008 financing transactions, offset in part by $8 million in gains
on forgiveness of debt. Other nonoperating expense, net in 2007 included a $17 million gain on the sale of stock in ARINC Incorporated
as well as $7 million in foreign currency gains related to transactions denominated in foreign currencies, offset by a $10 million other
than temporary impairment charge for US Airways' investments in auction rate securities. The impairment charges on auction rate
securities are discussed in more detail under "Liquidity and Capital Resources."
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