US Airways 2010 Annual Report Download - page 123

Table of Contents
(c) On October 20, 2008, US Airways and Airbus entered into amendments to the A320 Family Aircraft Purchase Agreement, the A330
Aircraft Purchase Agreement, and the A350 XWB Purchase Agreement. In exchange for US Airways' agreement to enter into these
amendments, Airbus advanced US Airways $200 million in consideration of aircraft deliveries under the various related purchase
agreements. Under the terms of each of the amendments, US Airways has agreed to maintain a level of unrestricted cash in the same
amount required by US Airways Group's Citicorp credit facility. This transaction was treated as a financing transaction for
accounting purposes using an effective interest rate commensurate with US Airways' credit rating. There are no stated interest
payments.
(d) The industrial development revenue bonds are due April 2023. Interest at 6.3% is payable semiannually on April 1 and October 1.
The bonds are subject to optional redemption prior to the maturity date, in whole or in part, on any interest payment date at a
redemption price of 100%.
Secured financings are collateralized by assets, primarily aircraft, engines, simulators, rotable aircraft parts, hangar and maintenance
facilities and airport take-off and landing slots. At December 31, 2010, the maturities of long-term debt and capital leases are as follows
(in millions):
2011 $ 381
2012 339
2013 301
2014 279
2015 279
Thereafter 1,479
$ 3,058
Certain of US Airways' long-term debt agreements contain significant minimum cash balance requirements and other covenants with
which US Airways was in compliance at December 31, 2010. Certain of US Airways' long-term debt agreements contain cross-default
provisions, which may be triggered by defaults by US Airways under other agreements relating to indebtedness.
4. Income Taxes
US Airways accounts for income taxes using the asset and liability method. US Airways is part of the US Airways Group consolidated
income tax return. US Airways Group allocates tax and tax items, such as net operating losses ("NOLs") and net tax credits, between
members of the group based on their proportion of taxable income and other items. Accordingly, US Airways' tax expense is based on
taxable income, taking into consideration allocated tax loss carryforwards/carrybacks and tax credit carryforwards.
As of December 31, 2010, US Airways had approximately $1.84 billion of gross NOLs to reduce future federal taxable income. All of
US Airways' NOLs are expected to be available to reduce federal taxable income in the calendar year 2011. The NOLs expire during the
years 2024 through 2029. US Airways' net deferred tax assets, which include $1.77 billion of the NOLs, are subject to a full valuation
allowance. US Airways also had approximately $78 million of tax-effected state NOLs at December 31, 2010. At December 31, 2010, the
federal and state valuation allowances were $388 million and $62 million, respectively.
For the year ended December 31, 2010, US Airways utilized NOLs to reduce its income tax obligation. Utilization of these NOLs
results in a corresponding decrease in the valuation allowance. As this valuation allowance was established through the recognition of tax
expense, the decrease in valuation allowance offsets the tax provision dollar for dollar. For the year ended December 31, 2010,
US Airways recorded $1 million of state income tax expense related to certain states where NOLs were either limited or not available to
be used.
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 during 2009. Generally accepted accounting
principles ("GAAP") require all items be considered (including items recorded in other comprehensive income) in determining the
amount of tax benefit that results from a loss from continuing operations that should be allocated to continuing operations. In accordance
with GAAP, US Airways
122