US Airways 2009 Annual Report Download - page 66

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transferred assets, (3) an obligation under derivative instruments classified as equity or (4) any obligation arising out of a material
variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in
leasing, hedging or research and development arrangements with us.
We have no off-balance sheet arrangements of the types described in the first three categories above that we believe may have a
material current or future effect on financial condition, liquidity or results of operations. Certain guarantees that we do not expect to have
a material current or future effect on financial condition, liquidity or results of operations are disclosed in Note 9(f) to the consolidated
financial statements of US Airways Group included in Item 8A of this report and Note 8(f) to the consolidated financial statements of US
Airways included in Item 8B of this report.
Pass Through Trusts
US Airways has obligations with respect to pass through trust certificates, also known as Enhanced Equipment 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, US Airways Group 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.
Special Facility Revenue Bonds
US Airways guarantees the payment of principal and interest on certain special facility revenue bonds issued by municipalities to build
or improve certain airport and maintenance facilities which are leased to US Airways. Under such leases, US Airways is required to make
rental payments through 2023, sufficient to pay maturing principal and interest payments on the related bonds. As of December 31, 2009,
the remaining lease payments guaranteeing the principal and interest on these bonds are $137 million, of which $34 million of these
obligations is accounted for as a capital lease and reflected as debt in the accompanying consolidated balance sheet.
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