US Airways 2009 Annual Report Download - page 133

Table of Contents
impairment charges recorded in other nonoperating expense, net related to the decline in fair value of certain investments in auction rate
securities.
In 2008, US Airways recorded $214 million of other-than-temporary impairment charges in other nonoperating expense, net. These
charges included $48 million of previously recorded unrealized losses in other comprehensive income. US Airways' conclusion for the
$214 million other-than-temporary impairment was due to the length of time and extent to which the fair value was less than cost for
certain securities. In 2007, US Airways recorded a $58 million decline in fair value. Of this decline in fair value, $48 million was deemed
temporary and recorded to other comprehensive income and $10 million of the decline was deemed other-than-temporary and recorded to
other nonoperating expense, net.
US Airways continues to monitor the market for auction rate securities and consider its impact (if any) on the fair value of its
investments. If the current market conditions deteriorate, US Airways may be required to record additional impairment charges in other
nonoperating expense, net in future periods.
Accounts Receivable
As of December 31, 2009, most of US Airways' receivables related to tickets sold to individual passengers through the use of major
credit cards or to tickets sold by other airlines and used by passengers on US Airways or its regional airline affiliates. These receivables
are short-term, mostly being settled within seven days after sale. Bad debt losses, which have been minimal in the past, have been
considered in establishing allowances for doubtful accounts. US Airways does not believe it is subject to any significant concentration of
credit risk.
(c) Interest Rate Risk
US Airways has exposure to market risk associated with changes in interest rates related primarily to its variable rate debt obligations.
Interest rates on $1.96 billion principal amount of long-term debt as of December 31, 2009 are subject to adjustment to reflect changes in
floating interest rates. The weighted average effective interest rate on US Airways' variable rate debt was 4.59% at December 31, 2009.
The fair value of US Airways' long-term debt was approximately $2.83 billion and $2.28 billion at December 31, 2009 and 2008,
respectively. The fair values were estimated using quoted market prices where available. For long-term debt not actively traded, fair
values were estimated using a discounted cash flow analysis, based on US Airways' current incremental borrowing rates for similar types
of borrowing arrangements.
6. Fair Value Measurements
On January 1, 2008, US Airways adopted the provisions of SFAS No. 157, "Fair Value Measurements" (included in FASB ASC Topic
320, Investments-Debt and Equity Securities), which defines fair value, establishes a consistent framework for measuring fair value and
expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. This
accounting guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should
be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such
assumptions, this accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair
value as follows:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own
assumptions.
131