US Airways 2008 Annual Report Download - page 92

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
purposes. As of December 31, 2008 and 2007, the Company had open fuel hedging instruments in place, which do not currently qualify
for hedge accounting under SFAS No. 133. Accordingly, the derivative hedging instruments are recorded as an asset or liability on the
consolidated balance sheets at fair value and any changes in fair value are recorded as gains or losses on fuel hedging instruments, net in
operating expenses in the accompanying consolidated statements of operations in the period of change. See Note 6(a) for additional
information on the Company's fuel hedging instruments.
(m) Deferred Gains and Credits, Net
In 2005, the Company's affinity credit card provider, Barclays Bank Delaware, formerly Juniper Bank, paid AWA $150 million in
bonuses, consisting of a $20 million bonus pursuant to AWA's original credit card agreement with Juniper and a $130 million bonus
following the effectiveness of the merger, subject to certain conditions.
In the event Barclays, at its option, terminates the amended agreement prior to April 1, 2009 due to the Company's breach of its
obligations under the amended credit card agreement, or upon the occurrence of certain other events, then the Company must repay all of
the bonus payments. If Barclays terminates the amended agreement any time thereafter through March 31, 2013 for the same reasons, the
Company must repay a reduced amount that declines monthly according to a formula. The Company will have no obligation to repay any
portion of the bonus payments after March 31, 2013.
At the time of payment, the entire $150 million was recorded as deferred revenue. The Company will begin recognizing revenue
from the bonus payments on April 1, 2009. The revenue from the bonus payments will be recognized on a straight-line basis through
March 31, 2017, the expiration date of the amended Barclays co-branded credit card agreement.
In connection with fresh-start reporting and purchase accounting for US Airways' in 2005 and fresh-start reporting for AWA upon
emergence from bankruptcy in 1994, aircraft operating leases were adjusted to fair value and deferred credits were established in the
accompanying consolidated balance sheets, which represented the net present value of the difference between the stated lease rates and
the fair market rates. These deferred credits will be amortized on a straight-line basis as a reduction in rent expense over the applicable
lease periods. At December 31, 2008 and 2007, the unamortized balance of the deferred credits was $93 million and $134 million,
respectively. The Company expects to amortize $21 million in 2009, $13 million in 2010, $9 million in 2011, $8 million in 2012,
$7 million in 2013 and $35 million thereafter to aircraft rent expense related to these leasehold interests.
(n) Revenue Recognition
Passenger Revenue
Passenger revenue is recognized when transportation is provided. Ticket sales for transportation that has not yet been provided are
initially recorded as air traffic liability on the consolidated balance sheets. The air traffic liability represents tickets sold for future travel
dates and estimated future refunds and exchanges of tickets sold for past travel dates. The majority of tickets sold are nonrefundable. A
small percentage of tickets, some of which are partially used tickets, expire unused. Due to complex pricing structures, refund and
exchange policies, and interline agreements with other airlines, certain amounts are recognized in revenue using estimates regarding both
the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based on the analysis of
the Company's historical data. The Company and members of the airline industry have consistently applied this accounting method to
estimate revenue from forfeited tickets at the date travel was to be provided. Estimated future refunds and exchanges included in the air
traffic liability are routinely evaluated based on subsequent activity to validate the accuracy of the Company's estimates. Any adjustments
resulting from periodic evaluations of the estimated air traffic liability are included in results of operations during the period in which the
evaluations are completed.
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