US Airways 2011 Annual Report Download - page 92

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(b) The following are the significant equipment financing agreements entered into in 2011:
In 2011, US Airways borrowed $168 million to finance new Airbus aircraft deliveries. These financings bear interest at a rate of LIBOR plus an
applicable margin and contain default provisions and other covenants that are typical in the industry.
(c) The equipment notes underlying these EETCs are the direct obligations of US Airways and cover the financing of 36 aircraft. See Note 9(c) for further
discussion.
In June 2011, US Airways created three pass-through trusts which issued approximately $471 million aggregate face amount of Series 2011-1 Class A,
Class B and Class C Enhanced Equipment Trust Certificates in connection with the refinancing of five Airbus aircraft owned by US Airways and the
financing of four new Airbus aircraft delivered in 2011 (the "2011 EETCs"). The 2011 EETCs represent fractional undivided interests in the respective
pass-through trusts and are not obligations of US Airways. The net proceeds from the issuance of the 2011 EETCs were used to purchase equipment
notes issued by US Airways in three series: Series A equipment notes in an aggregate principal amount of $294 million bearing interest at 7.125% per
annum, Series B equipment notes in an aggregate principal amount of $94 million bearing interest at 9.75% per annum and Series C equipment notes in
an aggregate principal amount of $83 million bearing interest at 10.875% per annum. Interest on the equipment notes is payable semiannually in April
and October of each year and began in October 2011. Principal payments on the equipment notes are scheduled to begin in April 2012. The final
payments on the Series A equipment notes, Series B equipment notes and Series C equipment notes will be due in October 2023, October 2018 and
October 2014, respectively. US Airways' payment obligations under the equipment notes are fully and unconditionally guaranteed by US Airways
Group. The net proceeds from the issuance of these equipment notes were used to repay the existing debt associated with five Airbus aircraft and to
finance four new Airbus aircraft delivered in 2011, with the balance used for general corporate purposes. The equipment notes are secured by liens on
aircraft.
In July 2011, US Airways completed an offering of Class C certificates in the aggregate principal amount of $53 million under its Series 2010-1
EETCs. The 2010-1 Class A and B certificates originally closed in December 2010 in connection with the refinancing of owned Airbus aircraft. In
connection with this offering, US Airways issued $53 million in additional equipment notes bearing interest at 11% per annum. The net proceeds from
the offering will be used for general corporate purposes.
(d) US Airways Group is a party to a co-branded credit card agreement with Barclays Bank Delaware. The co-branded credit card agreement provides for,
among other things, the pre-purchase of frequent flyer miles in the aggregate amount of $200 million, which amount was paid by Barclays in
October 2008. The Company pays interest to Barclays on the outstanding dollar amount of the pre-purchased miles at the rate of LIBOR plus a margin.
This transaction was treated as a financing transaction for accounting purposes using an effective interest rate commensurate with the Company's credit
rating.
Barclays has agreed that for each month that specified conditions are met it will pre-purchase additional miles on a monthly basis in an amount equal to
the difference between $200 million and the amount of unused miles then outstanding. Among the conditions to this monthly purchase of miles is a
requirement that US Airways Group maintain an unrestricted cash balance, as defined in the agreement, of at least $1.35 billion for the months of
March through November and $1.25 billion for the months of January, February and December. The Company may repurchase any or all of the pre-
purchased miles at any time, from time to time, without penalty. The agreement expires in 2017. In February 2012, US Airways Group amended its co-
branded credit card agreement with Barclays. This amendment provides that the $200 million previously scheduled to reduce commencing in
January 2012 will now be reduced commencing in January 2014 over a period of up to approximately two years.
(e) 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 the 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.
(f) In May 2009, US Airways Group issued $172 million aggregate principal amount of the 7.25% notes for net proceeds of approximately $168 million.
The 7.25% notes bear interest at a rate of 7.25% per annum, which shall be payable semi-annually in arrears on each May 15 and November 15. The
7.25% notes mature on May 15, 2014.
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