US Airways 2008 Annual Report Download - page 91

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
(j) Other Assets, Net
Other assets, net consists of the following as of December 31, 2008 and 2007 (in millions):
2008 2007
Deposits $ 40 $ 46
Debt issuance costs, net 57 14
Long term investments 11 12
Deferred rent 46 48
Aircraft leasehold interest, net 83 89
Other 1 2
Total other assets, net $ 238 $ 211
In connection with fresh-start reporting for US Airways following its emergence from bankruptcy in September 2005, aircraft
operating leases were adjusted to fair value and $101 million of assets were established for leasehold interests in aircraft for aircraft
leases with rental rates deemed to be below market rates. These leasehold interests are amortized on a straight-line basis as an increase to
aircraft rent expense over the applicable remaining lease periods. The Company expects to amortize $6 million per year in 2009-2013 and
$53 million thereafter to aircraft rent expense related to these leasehold interests.
The Company capitalized $50 million in debt issuance costs in 2008 as a result of its current year financing transactions.
(k) Frequent Traveler Program
Members of the Dividend Miles program, the US Airways frequent traveler program, can redeem miles on US Airways or other
members of the Star Alliance. The estimated cost of providing the travel award, using the incremental cost method as adjusted for
estimated redemption rates, is recognized as a liability and charged to operations as program members accumulate mileage. For travel
awards on partner airlines, the liability is based on the average contractual amount to be paid to the other airline per redemption. As of
December 31, 2008, Dividend Miles members had accumulated mileage credits for approximately 2.6 million awards. The liability for
the future travel awards accrued on the Company's consolidated balance sheets within other accrued expenses was $151 million and
$161 million as of December 31, 2008 and 2007, respectively.
The Company sells mileage credits to participating airline and non-airline business partners. Revenue earned from selling mileage
credits to other companies is recognized in two components. A portion of the revenue from these sales is deferred, representing the
estimated fair value of the transportation component of the sold mileage credits. The deferred revenue for the transportation component is
amortized on a straight-line basis over the period in which the credits are expected to be redeemed for travel as passenger revenue, which
is currently estimated to be 28 months. The marketing component, which is earned at the time the miles are sold, is recognized in other
revenues at the time of the sale. As of December 31, 2008 and 2007, the Company had $240 million and $241 million, respectively, in
deferred revenue from the sale of mileage credits included in other accrued expenses on its consolidated balance sheets.
(l) Derivative Instruments
The Company currently utilizes heating oil-based derivative instruments to hedge a portion of its exposure to jet fuel price
increases. These instruments consist of no premium collars. SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," requires that all derivatives be marked to fair value and recorded on the balance sheet. Derivatives that do not qualify for
hedge accounting must be adjusted to fair value through the income statement. The Company does not purchase or hold any derivative
financial instruments for trading
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