US Airways 2010 Annual Report Download - page 50

Table of Contents
In 2009, US Airways realized operating income of $122 million and a loss before income taxes of $178 million. US Airways
experienced significant declines in revenues in 2009 as a result of the global economic recession. US Airways' 2009 results were also
impacted by recognition of the following special items:
• $375 million of net unrealized gains resulting from the application of mark-to-market accounting for changes in the fair value of
fuel hedging instruments;
• $55 million of net special charges, consisting of $22 million in aircraft costs as a result of capacity reductions, $16 million in non-
cash impairment charges due to the decline in fair value of certain indefinite lived intangible assets associated with international
routes, $11 million in severance and other charges and $6 million in costs incurred related to the 2009 liquidity improvement
program; and
• $49 million in non-cash charges associated with the sale of 10 Embraer 190 aircraft and write off of related debt discount and
issuance costs, $10 million in other-than-temporary non-cash impairment charges for investments in auction rate securities and a
$2 million non-cash asset impairment charge, all included in nonoperating expense, net.
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 special 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;
• $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
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 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.
At 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. 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.
For the year ended December 31, 2008, US Airways reported a loss, which increased its NOLs, and it did not record a tax provision.
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