US Airways 2008 Annual Report Download - page 58

Table of Contents
Operating Expenses:
Percent
2007 2006 Change
(In millions)
Operating expenses:
Aircraft fuel and related taxes $ 2,630 $ 2,518 4.4
Loss (gain) on fuel hedging instruments, net
Realized (58) 9 nm
Unrealized (187) 70 nm
Salaries and related costs 2,302 2,090 10.1
Aircraft rent 727 732 (0.6)
Aircraft maintenance 635 582 9.1
Other rent and landing fees 536 568 (5.7)
Selling expenses 453 446 1.6
Special items, net 99 38 nm
Depreciation and amortization 198 184 8.1
Other 1,227 1,228 (0.1)
Total mainline operating expenses 8,562 8,465 1.1
Express expenses:
Fuel 765 764 0.1
Other 1,962 1,906 2.9
Total Express operating expenses 2,727 2,670 2.1
Total operating expenses $ 11,289 $ 11,135 1.4
Total operating expenses were $11.29 billion in 2007, an increase of $154 million or 1.4% compared to 2006. Mainline operating
expenses were $8.56 billion in 2007, an increase of $97 million or 1.1% from 2006. The period over period increase in mainline operating
expenses was driven principally by higher salaries and related costs ($212 million), aircraft fuel costs ($112 million) and aircraft
maintenance ($53 million). These increases were offset in part by gains on fuel hedging instruments ($245 million) in the 2007 period as
compared to losses in the 2006 period ($79 million).
The 2007 period included net charges from special items of $99 million, primarily due to merger related transition expenses. This
compares to net charges from special items of $38 million in 2006, which included $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.
Significant changes in the components of mainline operating expenses are as follows:
• Aircraft fuel and related taxes increased 4.4% due primarily to a 5.8% increase in the average price per gallon of fuel to $2.20 in
2007 from $2.08 in 2006.
• Loss (gain) on fuel hedging instruments, net fluctuated from a loss of $79 million in 2006 to a gain of $245 million in 2007. The
net gain in the 2007 period is the result of net unrealized gains of $187 million on open fuel hedge transactions as well as
$58 million of net realized gains on settled fuel hedge transactions. US Airways recognized net gains from its fuel hedging
program in 2007 as the price of heating oil exceeded the upper limit on certain of its collar transactions.
• Salaries and related costs increased 10.1% due to 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 as well as a period over
period increase in headcount, principally in fleet and passenger service
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