US Airways 2009 Annual Report Download - page 103

Table of Contents
As of December 31, 2009, obligations under noncancellable operating leases for future minimum lease payments were as follows (in
millions):
2010 $ 1,075
2011 948
2012 871
2013 724
2014 645
Thereafter 3,184
Total minimum lease payments $ 7,447
For the years ended December 31, 2009, 2008 and 2007, rental expense under operating leases was $1.29 billion, $1.33 billion and
$1.29 billion, respectively.
(c) Off-balance Sheet Arrangements
US Airways has obligations with respect to pass through trust certificates, or EETCs, issued by pass through trusts to cover the
financing of 19 owned aircraft, 114 leased aircraft and three leased engines. These trusts are off-balance sheet entities, the primary
purpose of which is to finance the acquisition of flight equipment. Rather than finance each aircraft separately when such aircraft is
purchased or delivered, these trusts allowed US Airways to raise the financing for several aircraft at one time and place such funds in
escrow pending the purchase or delivery of the relevant aircraft. The trusts were also structured to provide for certain credit
enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust certificates
and, as a result, reduce the cost of aircraft financing to US Airways.
Each trust covered a set amount of aircraft scheduled to be delivered within a specific period of time. At the time of each covered
aircraft financing, the relevant trust used the funds in escrow to purchase equipment notes relating to the financed aircraft. The equipment
notes were issued, at US Airways' election in connection with a mortgage financing of the aircraft or by a separate owner trust in
connection with a leveraged lease financing of the aircraft. In the case of a leveraged lease financing, the owner trust then leased the
aircraft to US Airways. In both cases, the equipment notes are secured by a security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor are they guaranteed by, the Company or US Airways. However, in the case of mortgage
financings, the equipment notes issued to the trusts are direct obligations of US Airways. As of December 31, 2009, $505 million
associated with these mortgage financings is reflected as debt in the accompanying consolidated balance sheet.
With respect to leveraged leases, US Airways evaluated whether the leases had characteristics of a variable interest entity. US Airways
concluded the leasing entities met the criteria for variable interest entities. US Airways then evaluated whether or not it was the primary
beneficiary by evaluating whether or not it was exposed to the majority of the risks (expected losses) or whether it receives the majority
of the economic benefits (expected residual returns) from the trusts' activities. US Airways does not provide residual value guarantees to
the bondholders or equity participants in the trusts. Each lease does have a fixed price purchase option that allows US Airways to
purchase the aircraft near the end of the lease term. However, the option price approximates an estimate of the aircraft's fair value at the
option date. Under this feature, US Airways does not participate in any increases in the value of the aircraft. US Airways concluded it
was not the primary beneficiary under these arrangements. Therefore, US Airways accounts for its EETC leveraged lease financings as
operating leases. US Airways' total future obligations under these leveraged lease financings are $3.25 billion as of December 31, 2009,
which are included in the future minimum lease payments table in (b) above.
(d) Regional Jet Capacity Purchase Agreements
US Airways has entered into capacity purchase agreements with certain regional jet operators. The capacity purchase agreements
provide that all revenues, including passenger, mail and freight revenues, go to US Airways. In return, US Airways agrees to pay
predetermined fees to these airlines for operating an agreed-upon number of aircraft, without regard to the number of passengers onboard.
In addition, these agreements provide that certain variable costs, such as airport landing fees and passenger liability insurance, will be
reimbursed 100% by US
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