US Airways 2010 Annual Report Download - page 80

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Table of Contents
relates primarily to the use of the Company's logo and trademarks along with access to the Company's list of Dividend Miles members.
The marketing services are provided periodically, but no less than monthly. Accordingly, the marketing component is considered earned
and recognized in other revenues in the period of the mileage sale.
As of December 31, 2010 and 2009, the Company had $178 million and $212 million, respectively, in deferred revenue from the sale
of mileage credits included in other accrued expenses on the consolidated balance sheets. For the years ended December 31, 2010, 2009
and 2008, the marketing component of mileage sales recognized at the time of sale in other revenues was approximately $144 million,
$112 million and $126 million, respectively.
The Company is required to adopt and apply Accounting Standards Update ("ASU") No. 2009-13, "Revenue Recognition (Topic
605) – Multiple-Deliverable Revenue Arrangements," to any new or materially modified business partner agreements entered into on or
after January 1, 2011. See Note 1(t) for more information on recent accounting pronouncements.
(l) Derivative Instruments
The Company has from time to time utilized heating oil-based derivative instruments to hedge a portion of its exposure to jet fuel price
increases. These instruments consisted of no premium collars. All derivatives were marked to fair value on the balance sheet with
adjustments to fair value recorded in the income statement. Since the third quarter of 2008, the Company has not entered into any new
transactions to hedge its fuel consumption, and the Company has not had any fuel hedging contracts outstanding since the third quarter of
2009. See Note 6(a) for additional information on the Company's fuel hedging instruments.
(m) Deferred Gains and Credits, Net
In 2005, the Company's co-branded credit card provider, Barclays Bank Delaware, formerly Juniper Bank, paid AWA $150 million in
bonuses, consisting of a $20 million bonus pursuant to AWA's original credit card agreement with Juniper and a $130 million bonus
following the effectiveness of the merger, subject to certain conditions.
In the event Barclays, at its option, terminates the amended agreement prior to March 31, 2013 due to the Company's breach of its
obligations under the amended credit card agreement, or upon the occurrence of certain other events, then the Company must repay a
portion of the bonus, which declines monthly according to a formula. The Company will have no obligation to repay any portion of the
bonus payments after March 31, 2013.
At the time of payment, the entire $150 million was recorded as deferred revenue. The Company began recognizing revenue from the
bonus payments on April 1, 2009. The revenue from the bonus payments will be recognized on a straight-line basis through March 31,
2017, the expiration date of the amended Barclays co-branded credit card agreement.
Also included within deferred gains and credits, net are amounts deferred and amortized into future periods associated with the sale
and leaseback of property and equipment, the adjustment of leases to fair value in connection with prior period fresh-start and purchase
accounting and certain vendor incentives.
(n) Revenue Recognition
Passenger Revenue
Passenger revenue is recognized when transportation is provided. Ticket sales for transportation that has not yet been provided are
initially deferred and recorded as air traffic liability on the consolidated balance sheets. The air traffic liability represents tickets sold for
future travel dates and estimated future refunds and exchanges of tickets sold for past travel dates. The majority of tickets sold are
nonrefundable. A small percentage of tickets, some of which are partially used tickets, expire unused. Due to complex pricing structures,
refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized in revenue using estimates
regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based on
the analysis of the Company's historical data. The Company and members of the airline industry have consistently applied this accounting
method to estimate revenue from forfeited tickets at the date travel was to be provided. Estimated future refunds and exchanges included
in the air traffic liability are routinely evaluated
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