US Airways 2009 Annual Report Download - page 51

Table of Contents
In 2008, US Airways realized an operating loss of $1.77 billion and a loss before income taxes of $2.15 billion. The 2008 loss was
driven by an average mainline and Express price per gallon of fuel of $3.18 as well as a $622 million non-cash charge to write off all of
the goodwill created by the merger of US Airways Group and America West Holdings in September 2005. US Airways' 2008 results
were also impacted by recognition of the following items:
• $496 million of net unrealized losses resulting from the application of mark-to-market accounting for changes in the fair value of
fuel hedging instruments, offset by $140 million of net realized gains on settled fuel hedge transactions;
• $76 million of net special charges consisting of $35 million of merger-related transition expenses, $18 million in non-cash charges
related to the decline in fair value of certain spare parts associated with US Airways' Boeing 737 aircraft fleet and, as a result of
US Airways' capacity reductions, $14 million in aircraft costs and $9 million in severance charges; and
• $214 million in other-than-temporary non-cash impairment charges for US Airways' investments in auction rate securities as well
as $6 million in write offs of debt discount and debt issuance costs in connection with the refinancing of certain aircraft equipment
notes and a loan prepayment, offset by $8 million in gains on forgiveness of debt, all included in nonoperating expense, net.
In 2007, US Airways realized operating income of $524 million and income before income taxes of $485 million. US Airways' 2007
results were impacted by recognition of the following items:
• $187 million of net unrealized gains resulting from the application of mark-to-market accounting for changes in the fair value of
fuel hedging instruments as well as $58 million of net realized gains on settled fuel hedge transactions;
• $99 million of net special charges due to merger-related transition expenses;
• 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;
• $7 million in tax credits due to an IRS rule change allowing US Airways to recover certain fuel usage tax amounts for years
2003-2006 and $9 million of insurance settlement proceeds related to business interruption and property damages incurred as a
result of Hurricane Katrina in 2005. These gains were offset in part by $4 million in charges related to reduced flying from
Pittsburgh; and
• a $17 million gain recognized on the sale of stock in ARINC Incorporated, offset by $10 million in other-than-temporary non-cash
impairment charges for US Airways' investments in auction rate securities, all included in nonoperating expense, net.
US Airways reported a loss in 2009, which increased its NOLs. As of December 31, 2009, US Airways has approximately
$2.05 billion of gross NOLs to reduce future federal taxable income. All of US Airways' NOLs are available to reduce federal taxable
income in the calendar year 2010. The NOLs expire during the years 2022 through 2029.
US Airways' net deferred tax assets, which include $1.98 billion of the NOLs, have been subject to a full valuation allowance. US
Airways also has approximately $86 million of tax-effected state NOLs at December 31, 2009. At December 31, 2009, the federal and
state valuation allowance is $575 million and $78 million, respectively, all of which will reduce future tax expense when recognized.
For the year ended December 31, 2009, US Airways recorded a tax benefit of $38 million. Of this amount, $21 million was due to a
non-cash income tax benefit related to gains recorded within other comprehensive income. In addition, US Airways recorded a
$14 million tax benefit related to a legislation change allowing it to carry back 100% of 2008 AMT net operating losses, resulting in the
recovery of AMT amounts paid in prior years. US Airways also recognized a $3 million tax benefit related to the reversal of the deferred
tax liability associated with the indefinite lived intangible assets that were impaired during 2009.
49