-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U8WUXFou08YFl6qSJxhFZ+JkwuQuS4ZyFrxgAUsrXqKRd4LAhk2Lrd7CRZzhqTIN Avp3SLyzGfNT7Jj0OXpqPw== 0000950153-01-500200.txt : 20010409 0000950153-01-500200.hdr.sgml : 20010409 ACCESSION NUMBER: 0000950153-01-500200 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA WEST HOLDINGS CORP CENTRAL INDEX KEY: 0001029863 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 860847214 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-12649 FILM NUMBER: 1591491 BUSINESS ADDRESS: STREET 1: 111 WEST RIO SALADO PARKWAY CITY: TEMPE STATE: AZ ZIP: 85281 BUSINESS PHONE: 6026930800 MAIL ADDRESS: STREET 1: 4000 E SKY HARBOR BLVD STREET 2: C/O AMERICA WEST AIRLINES CITY: PHOENIX STATE: AZ ZIP: 85034 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA WEST AIRLINES INC CENTRAL INDEX KEY: 0000706270 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 860418245 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-12337 FILM NUMBER: 1591492 BUSINESS ADDRESS: STREET 1: 4000 E SKY HARBOR BLVD STREET 2: STE 2100 CITY: PHOENIX STATE: AZ ZIP: 85034 BUSINESS PHONE: 6026930800 MAIL ADDRESS: STREET 1: 4000 EAST SKY HARBOR BLVD STREET 2: STE 2100 CITY: PHOENIX STATE: AZ ZIP: 85034 10-K405 1 p64739e10-k405.htm 10-K405 e10-k405
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

     
[X]
   ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

OR

     
[   ]
   TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-12649
AMERICA WEST HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

     
DELAWARE
86-0847214
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
(I.R.S. EMPLOYER IDENTIFICATION NO.)
 
111 WEST RIO SALADO PARKWAY
(480) 693-0800
TEMPE, ARIZONA 85281
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

     
TITLE OF EACH CLASS
NAME OF EACH EXCHANGE ON WHICH REGISTERED:
CLASS B COMMON STOCK, $.01 PAR VALUE
NEW YORK STOCK EXCHANGE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
 
COMMISSION FILE NUMBER 1-10140
AMERICA WEST AIRLINES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

     
DELAWARE
86-0418245
(STATE OR OTHER JURISDICTION OF INCORPORATION
(I.R.S. EMPLOYER IDENTIFICATION NO.)
OR ORGANIZATION)
 
4000 E. SKY HARBOR BOULEVARD
(480) 693-0800
PHOENIX, ARIZONA 85034-3899
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
SENIOR UNSECURED NOTES DUE 2005
(TITLE OF CLASS)

      Indicate by check mark whether each of the registrants (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No


PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrants' Common Equity and Related Stockholder Matters
Item 6. Selected Consolidated Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8A. Consolidated Financial Statements and Supplementary Data -- America West Holdings Corporation
Item 8B. Financial Statements and Supplementary Data -- America West Airlines, Inc.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrants
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
EX-3.2
EX-3.4
EX-10.40
EX-10.42
EX-10.43
EX-21.1
EX-23.1


      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 under the Securities Exchange Act of 1934) is not contained herein, and will not be contained, to the best of each of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X

      As of March 30, 2001, there were 32,698,461 shares of America West Holdings Corporation Class B Common Stock, $.01 par value issued and outstanding. As of such date, based on the closing sales price, 32,111,512 shares of Class B Common Stock, having an aggregate market value of approximately $308,270,515 were held by non-affiliates. For purposes of the above statement only, all directors and executive officers of the registrants are assumed to be affiliates. As of March 30, 2001, all outstanding equity securities of America West Airlines, Inc. were owned by America West Holdings Corporation.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the proxy statement related to America West Holdings Corporation’s 2001 annual meeting of stockholders, which proxy statement will be filed under the Securities Exchange Act of 1934 within 120 days of the end of America West Holdings Corporation’s fiscal year ended December 31, 2000, are incorporated by reference into Part III of this Form 10-K.

      AMERICA WEST AIRLINES, INC., A WHOLLY OWNED SUBSIDIARY OF AMERICA WEST HOLDINGS CORPORATION, MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(A) AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION J(2).


Table of Contents

TABLE OF CONTENTS

             
    PAGE
PART I
 
Item 1.
Business
  1
Item 2.
Properties
15
Item 3.
Legal Proceedings
16
Item 4.
Submission of Matters to a Vote of Security Holders
16
 
PART II
 
Item 5.
Market for Registrants’ Common Equity and Related Stockholder Matters
18
Item 6.
Selected Consolidated Financial Data
19
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
29
Item 8A
Consolidated Financial Statements and Supplementary Data —America West Holdings Corporation
30
Item 8B
Financial Statements and Supplementary Data —America West Airlines, Inc.
52
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
70
 
PART III
 
Item 10.
Directors and Executive Officers of the Registrants
70
Item 11.
Executive Compensation
70
Item 12.
Security Ownership of Certain Beneficial Owners and Management
70
Item 13.
Certain Relationships and Related Transactions
70
 
PART IV
 
Item 14.
Exhibits, Financial Statement Schedules and Reports on Form 8-K
71


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Note Concerning Forward-Looking Information

      This Report contains various forward-looking statements and information that are based on management’s beliefs as well as assumptions made by and information currently available to management. When used in this document, the words “anticipate,” “estimate,” “project,” “expect” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or expected. Among the key factors that may have a direct bearing on the Company’s results are competitive practices in the airline and travel industries generally and particularly in the Company’s principal markets, the ability of the Company to meet existing financial obligations in the event of adverse industry or economic conditions or to obtain additional capital to fund future commitments and expansion, the Company’s relations with unionized employees generally and the impact of the process of negotiation of labor contracts on the Company’s operations, the outcome of negotiations of collective bargaining agreements and the impact of those agreements on labor costs, and the impact of current and future laws and governmental regulations affecting the airline and travel industries and the Company’s operations. For additional discussion of such risks see “Business —Risk Factors,” included in Item 1 of this Report on Form 10-K. Any forward-looking statements speak only as of the date such statements are made.

PART I

      This combined Form 10-K is filed by each of America West Holdings Corporation and its wholly owned subsidiary, America West Airlines, Inc. America West Holdings Corporation is referred to as “Holdings” or “the Company” or “our Company”, and America West Airlines is sometimes referred to as “AWA” or “the Airline”. The Leisure Company, the other wholly owned subsidiary of Holdings, is sometimes referred to as “TLC”. The term “we” is used to refer to management of the Company, the Airline or TLC, as the context requires.

ITEM 1. BUSINESS

Overview of our Company’s Businesses

      Holdings is the parent company of AWA and TLC. We believe that the holding company structure improves the Company’s ability to manage separate business segments effectively and that Holdings provides a platform for further expansion of the Company’s travel-related businesses. The Company intends to continue to evaluate investment and expansion opportunities that would allow it to capitalize on the key strengths and market positions of AWA, TLC and Holdings’ e-commerce businesses.

      AWA is the ninth largest commercial airline carrier in the United States, operating through its principal hubs located in Phoenix, Arizona and Las Vegas, Nevada, and a mini-hub located in Columbus, Ohio. AWA has the lowest cost structure of all major full-service domestic airlines in the United States. At December 31, 2000, the Airline served 63 destinations, including seven destinations in Mexico and two in Canada, with a fleet of 138 aircraft and offered service to an additional 44 destinations through alliance arrangements with other airlines.

      TLC arranges and sells leisure travel products that may include airfare, hotel accommodations, ground transportation, and a variety of other travel options. TLC’s largest brand, America West Vacations, has significant strength in the Las Vegas destination market and also has presence in other vacation destinations such as Arizona, California, Florida, Mexico and Canada.

      Together, Holdings and its subsidiaries employed 14,146 people on December 31, 2000.

Strategy

      The Company seeks to maximize stockholder value by capitalizing on the Company’s key competitive strengths while maintaining financial flexibility. The principal elements of our strategy are to improve customer service, to grow America West Airlines, to improve the Airline’s unit revenues, to maintain the Airline’s strategic cost advantage, to ensure financial flexibility for the future and to pursue strategic technology and e-commerce opportunities in the travel and travel-related industries.

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      Improve Customer Service

      The Company is committed to building a winning airline by taking care of our customers. During 2000, we implemented a number of initiatives designed to improve the airline’s reliability, including a temporary reduction in AWA’s flight schedule to reduce cancellations and improve on-time performance, a restructured approach to AWA’s existing line maintenance operation, increased capacity to perform preventive and reliability-related maintenance, the use of automation to optimize the provisioning of spare parts and components, an increase in ramp personnel in Phoenix and Las Vegas and a comprehensive program to increase the efficiency of AWA’s hub operation at Phoenix Sky Harbor International Airport.

      In addition to the operational reliability improvements, we implemented a number of other initiatives designed to improve customer satisfaction. A new team was deployed with exclusive responsibilities to develop innovative approaches to Customers First initiatives and ensure that the airline is exceeding its twelve commitments under this industry-wide program. A new officer position, Vice President —Customers, was created to oversee AWA’s Customers First program and function as the advocate on behalf of the airline’s customers on AWA’s senior management team and for all strategic decisions made by the Company. In addition, we implemented enhancements in automation of the passenger re-accommodation process and added personnel and ticket counter space at Phoenix Sky Harbor International Airport and Las Vegas McCarran International Airport to reduce the time spent processing changes to passenger itineraries in the event of cancellations or delays.

      AWA also implemented several technology initiatives to improve the customer experience including: 1) a project to maintain up-to-date, accurate arrival and departure information on the Flight Information Display monitors at certain airports, including Phoenix Sky Harbor International Airport, 2) a project to allow customers to check-in and receive boarding passes at the curb at Phoenix Sky Harbor International Airport, and 3) a project that allows customers the ability to check system-wide schedules and flight arrival and departure information through wireless devices.

      Grow the Airline

      The Company intends to continue growing the Airline primarily by increasing service to and from Phoenix and Las Vegas. The Phoenix and Las Vegas markets are among the fastest growing in the United States, and the Company believes that its Phoenix hub remains undersized relative to its potential. In execution of this strategy, AWA has increased available seat miles (“ASMs”) 15% over the past three years with the majority of this growth focused on strengthening AWA’s position at Phoenix. Compared with 2000, ASMs are expected to increase approximately 6% in 2001 and approximately 5% annually through 2003. The growth will be focused on adding frequencies from Phoenix to existing business markets and, to a lesser degree, to markets not previously served by AWA.

      The Airline has expanded its reach outside of its core markets through alliances. AWA has codesharing arrangements with Continental Airlines, Mesa Airlines, British Airways, Northwest Airlines, Chautauqua Airlines, Big Sky Airlines and EVA Airways of Taiwan, and has received United States government approval for a codesharing agreement with Air China. These alliances allow the Airline to expand its passenger base without significant increases in capital or operating expense and in some cases, achieve cost savings through economies of scale and joint purchasing agreements. The Company believes that alliances are an efficient means of developing new markets and increasing travel opportunities for its customers. We anticipate continuing to pursue such relationships with existing alliance partners and other domestic and international carriers.

      Improve the Airline’s Unit Revenues

      Due to AWA’s leisure oriented hub markets in Phoenix and Las Vegas, the competitive nature of many of the western U.S. markets where the Airline flies, and the Airline’s size relative to its competition, AWA’s passenger revenue per available seat mile (“RASM”) is well below the average RASM for the ten largest airlines in the United States. One of the Company’s primary opportunities to improve profitability is to close that RASM gap through three main efforts: growing in key business markets; investing in scheduling and revenue management automation and technology; and improving the quality of the Airline’s products.

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      Maintain Strategic Cost Advantage

      The Company is committed to maintaining AWA’s low cost structure, which we believe offers a significant competitive advantage over other major full-service airlines. In 2000 the Company’s cost per available seat mile (“CASM”) was 8.50 cents, approximately 17% less than the average CASM of the other major domestic hub-and-spoke airlines. AWA has achieved this low cost structure primarily through employee productivity, favorable labor costs per ASM and high aircraft utilization.

      Ensure Financial Flexibility

      The airline and travel industries are cyclical in nature. Because of this, an important element of the Company’s strategy is to maintain financial flexibility as protection against a downturn in the business cycle. A key component of this strategy is AWA’s aircraft leasing plan. As of December 31, 2000, and through the end of 2004, leases for 54 aircraft will expire. As a result, if economic conditions change adversely during that period, the Airline can delay the growth of its fleet and its aircraft-related financial obligations by electing to not renew these aircraft leases. Another component of this strategy is the Company’s compensation system for its non-union employees, which includes a variable pay element based largely on the Company’s operating income level. The Company further enhances its financial flexibility by maintaining a $125 million senior secured revolving credit facility with certain financial institutions.

      Pursue Strategic Technology and E-Commerce Opportunities

      In January 2000 we established an e-business division to manage our electronic business, Internet initiatives and on-line investments. The objectives of this division include improving customer service, generating additional revenue, reducing our distribution, procurement and other costs through business-to-business Internet applications and related automation and creating shareholder value through equity holdings in e-business partners. The e-business division will provide additional opportunities for customers to purchase airline seats or vacation packages conveniently over the Internet and will complement, support and expand our existing successful commercial relationships and equity partnerships with other companies that offer discount airfares, travel packages and other services direct to consumers via the Internet.

      We have already made significant progress in our efforts to create value through equity positions in our partners. During 2000, we recognized pretax gains of approximately $25 million, primarily through disposition of equity interests in Priceline.com and GetThere.com. In addition, we currently hold equity stakes in nine on-line ventures, eight of which are not yet public. In May 2000 we completed the sale of a majority interest in TLC’s retail operations for $52 million in cash and a 12% passive ownership interest in the restructured venture. In July 2000, we completed the sale of America West Golf Vacations, receiving 900,000 common shares of Book4golf.com.

      During 2000, the Company undertook a number of technology initiatives in support of the improvement of the airline’s operations, upgrading the Company’s technology infrastructure and the deployment of new systems in support of key business objectives. We have upgraded the Company’s network and telecommunications infrastructure at the Phoenix Sky Harbor International Airport and the Phoenix maintenance facility and implemented a new cargo tracking system and a new flight attendant scheduling system required by the flight attendant collective bargaining agreement. Implementation of a company-wide area network (“WAN”) and development of a disaster recovery plan are expected to be complete in 2001.

America West Airlines

      The Airline’s Operations

      As of December 31, 2000, AWA is the ninth largest commercial airline and our unit cost is the lowest of all full-service airlines in the United States. The Airline reported approximately $2.3 billion in revenues in 2000, an increase in annual revenues of 6.7% over revenues reported in 1999 and almost 48% over those reported in 1995. The Airline operates through its hubs in Phoenix, Arizona and Las Vegas, Nevada and a mini-hub in Columbus, Ohio. At the end of 2000 the Airline operated a fleet of 138 aircraft flying approximately 640 flights each day and served 63 destinations directly and offered service to another 44 destinations through AWA’s alliance agreements

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with other carriers.

      We seek to maximize AWA’s market share and profitability by operating the Airline through a hub and spoke network, the strategy employed by all but one of the ten largest airlines in the United States. As of December 31, 2000, AWA is the leading airline serving Phoenix based on ASMs and takeoffs and landings and ranks second in Las Vegas based on the same measures.

      We believe that the success of the Airline’s operations in Phoenix and Las Vegas is due to a number of factors including:

    Phoenix is the seventh largest city in the United States and its metropolitan area is the 14th largest in the country.
 
    The attractiveness of Phoenix and Las Vegas as business and leisure destinations.
 
    The size of those cities’ airports. Phoenix Sky Harbor International Airport is the 5th largest airport in the United States based on takeoffs and landings and Las Vegas McCarran International Airport is the 7th largest airport in the country by that measure.
 
    The geographically favorable location of those cities with convenient access to and connecting opportunities for passengers travelling to or from key southwest and west coast markets and vacation destinations in Mexico.
 
    The relatively low operating costs incurred in those cities’ metropolitan areas and at those airports.

      The Phoenix and Las Vegas metropolitan areas are among the fastest growing in the country. Moreover, we believe that our Phoenix hub remains undersized compared to other airlines’ hubs of similar or smaller populations and airport size. Therefore, we believe that the Airline’s hubs are well positioned for the continued growth that is one of the key elements of our strategy.

      Toward that end, the Company has increased service in Phoenix from 174 daily jet departures at year-end 1995 to 268 at December 31, 2000. America West’s goal is to increase daily jet departures to 300 by year-end 2002 primarily by adding flight frequencies in existing markets with demonstrated profitability. America West has a 25 —30% market share of Phoenix-originating passengers and is working aggressively to capture a greater share of this traffic.

      As a key element of America West’s strategy to improve unit revenues we have placed a greater emphasis on the business traveler over the past three years. Tailoring its schedule to attract a greater percentage of high-yield business flyers, America West has added nonstop destinations and increased flight frequencies to major business destinations. Inventory-management systems, much improved over the last three years, assure that good seats are available to the Company’s most-frequent and most-lucrative travelers.

      At the same time, the sales and marketing focus on the business traveler has been increased. The Flight Fund frequent-flyer program was improved in early 1999 and then again in early 2001. The changes included more domestic and international destinations for free award travel, non-expiring miles and lower redemption levels throughout the year. The America West fleet also is undergoing an upgrade, with new Airbus A319s and A320s being added. Airbus A318 aircraft will be added to the fleet in 2003. The Airbus aircraft offer wider, more comfortable cabins and more first class seats than the Boeing 737s that traditionally have been the mainstay of America West’s fleet. The improved in-flight services include enhanced meal service and in-flight entertainment in first class and in coach on long-haul flights.

      The Company is also committed to providing quality customer service and reliability. In this regard, we were less successful in 2000. In July 2000 AWA announced a series of actions designed to improve operational reliability and restore customer confidence by reducing the number of flight cancellations and improving on-time performance. The specific initiatives announced include:

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    A 3.5% reduction in the number of scheduled aircraft to provide four additional spare aircraft to substitute for other scheduled aircraft that may not be available because of maintenance requirements, weather or air traffic control, and to increase access to aircraft for performing reliability-related maintenance.
 
    A restructured approach to AWA’s existing line-maintenance operations including increasing staffing, parts provisioning, automation and support.
 
    An increase in AWA’s capacity to perform preventive and reliability-related maintenance by adding two additional aircraft maintenance lines.
 
    The use of automation to optimize the provisioning of spare parts and components to ensure more efficient and effective deployment of AWA’s spare part inventory throughout the system.
 
    An increase in ramp personnel at AWA’s Phoenix and Las Vegas hubs to reduce ground delays and improve baggage handling.
 
    Implementation of a program designed to increase the efficiency of AWA’s Phoenix hub operation.

      During the fourth quarter of 2000, AWA’s operating reliability improved as the service initiatives implemented in late summer reduced the number of aircraft out of service. Maintenance-related cancellations fell 24% versus the third quarter 2000. A key focus for America West going forward will be improving the Company’s operational reliability.

      Alliances with Other Airlines

      AWA has alliance agreements with Continental Airlines, Mesa Airlines, British Airways, Northwest Airlines, Chautauqua Airlines, Big Sky Airlines and EVA Airways of Taiwan, and has received United States government approval for an alliance arrangement with Air China.

      AWA’s alliance agreement with Continental Airlines provides for codesharing arrangements, coordinating flight schedules, sharing ticket counter space and coordinating ground handling operations. The arrangement also allows AWA FlightFund (the Airline’s frequent flyer program) members to earn credits for travel on Continental and for frequent flyer benefits earned by AWA customers to be redeemed for travel on Continental’s system.

      By codesharing, each airline is able to offer additional destinations to its customers under its flight designator code without materially increasing operating expenses and capital expenditures. The arrangement also provides that AWA personnel handle Continental’s ticket counter and ground operations at certain airports in the western and southwestern United States and that Continental’s personnel handle those operations for AWA at certain airports in the east, midwest and south. Through its alliance arrangement with Continental, AWA offered service to an additional 15 destinations as of December 31, 2000 and achieves cost savings primarily through the consolidation of airport facilities and resources and elimination of duplicative costs for labor and equipment.

      Mesa Airlines (“Mesa”), operating as America West Express, provides regional feeder service to and from the Airline’s Phoenix hub to destinations in the western United States and northern Mexico flying, principally, regional jets and large turboprop aircraft. In addition, Mesa operates America West Express regional jet service to and from the Airline’s mini-hub in Columbus, Ohio to midwest and eastern business markets. As of December 31, 2000, 21 regional jets were committed to America West Express service. Through its alliance arrangement with Mesa, AWA offered America West Express service to an additional 29 destinations as of December 31, 2000. The alliance arrangement with Mesa provides for the Airline’s management of coordinated flight schedules and all America West Express marketing and sales. All reservations are booked under AWA’s flight designator code. America West Express passengers connecting to or from an AWA flight can purchase one airfare for their entire trip.

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      In the first quarter of 2001 AWA restructured its codeshare agreement with Mesa Airlines to expand regional flying in the western United States under the America West Express banner. AWA also entered into a new partnership with Chautauqua Airlines for regional codesharing as America West Express in the eastern United States. Under these agreements, the America West Express regional fleet will increase to 77 jet aircraft by 2005 with options for further expansion to as many as 129 aircraft. The new regional jets will be used to grow AWA’s service from its three primary hubs in Phoenix, Las Vegas and Columbus, Ohio. AWA also entered into a codeshare agreement with Big Sky Airlines, expanding AWA’s route structure with service to 20 new markets in Montana, Texas, Oklahoma and Arkansas.

      AWA’s alliance agreement with British Airways allows British Airways to offer connecting service to and from British Airways’ flights to Phoenix, San Francisco and Los Angeles onward to certain destinations served by the Airline. The arrangement also allows AWA FlightFund members to earn credit for travel on British Airways and for frequent flyer benefits earned by AWA customers to be redeemed for travel on British Airways’ system.

      Through AWA’s alliance agreements with Northwest Airlines and EVA Airways, AWA provides connecting service from those airlines’ Pacific routes to Las Vegas and Phoenix. Upon implementation of the alliance agreement with Air China, AWA will provide connecting service to Las Vegas and Phoenix from Air China’s Pacific routes.

      Airline Competition and Marketing

      The airline industry is highly competitive. Airlines compete on the basis of pricing, scheduling (frequency and flight times), on-time performance, frequent flyer programs, on-board products and other services. AWA competes with a number of major airlines on medium and long haul routes to and from and through its hubs and with a number of carriers for short haul flights at its Phoenix and Las Vegas hubs and its Columbus mini-hub. AWA competes with other major full service airlines based on price and, due to its low cost structure, is able to compete with other low cost carriers in both short and long haul markets. The consolidation of existing carriers and the entry of additional carriers in many of AWA’s markets (as well as increased services by established carriers) could negatively impact AWA’s results of operations. For additional discussion of industry competition and related government regulation, see “Risk Factors —The airline industry and the markets we serve are highly competitive and we may be unable to compete effectively against carriers with substantially greater resources or low-cost structures” and, generally, “Government Regulations.”

      Most tickets for travel on AWA are sold by travel agents. Travel agents generally receive commissions based on the price of tickets sold. AWA and other airlines often pay additional commissions in connection with special revenue programs, competing not only with respect to the price of tickets sold but also with respect to the amount of commissions paid. AWA pays a travel agency base commission rate of 5% with a maximum payment of $50 for each round trip flight. We believe that our commission structure, together with AWA’s program of additional commissions in connection with special programs, is competitive with the commission programs of the other major United States airlines.

      Most tickets sold by travel agents are sold through computer reservation systems that are controlled by other airlines. Travel agents’ reliance on those computer reservation systems have, from time to time, significantly increased the cost of making reservations, which costs are born by airlines which subscribe to the computer reservation systems, including AWA.

      AWA has sought to address these issues through several initiatives. First, AWA’s electronic or paperless ticketing program responds to customer needs and reduces distribution costs for tickets booked directly through the Airline’s reservation system and through travel agencies. During 2000 approximately 71.5% of the Airline’s tickets were processed electronically, up from 60% during 1999. Second, AWA provides the ability for its customers to book tickets directly through the Internet using the Airline’s web site located at www.americawest.com, thus avoiding the more expensive computer reservation systems. Bookings through americawest.com and other travel-related Internet sites were approximately 13.3% of total 2000 bookings, up from 7% in 1999.

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      Federal regulations have been promulgated that are intended to diminish preferential scheduling displays and other practices with respect to computer reservation systems that place AWA and other similarly situated users at a competitive disadvantage to airlines controlling the systems. Those regulations are presently under review by the Department of Transportation (“DOT”). The Airline is participating aggressively in the federal rule making process related to computer reservations systems.

      Frequent Flyer Program

      All major United States airlines offer frequent flyer programs to encourage travel on that airline and customer loyalty. AWA offers the FlightFund program which allows members to earn mileage credits by flying AWA and America West Express, by flying on certain partner airlines including Continental Airlines and British Airways and by using the services of a wide variety of other program participants such as hotels, rental car agencies and other specialty services.

      Through the FlightFund Program, accumulated mileage credits can be redeemed for free travel on AWA and America West Express and certain partner airlines including Continental and British Airways and for first class upgrades on AWA. Use of mileage credits is subject to industry standard restrictions including blackout dates. The Airline must purchase space on other airlines to accommodate FlightFund redemption travel on those airlines.

      The Company accounts for the FlightFund program under the incremental cost method whereby travel awards are valued at the incremental cost of carrying one passenger based on expected redemptions. Those incremental costs are based on expectations of expenses to be incurred on a per passenger basis and include food, beverages, supplies, fuel, liability insurance and ticketing costs which are accrued as FlightFund members accumulate mileage credits. No profit or overhead margin is included in the accrual for those incremental costs. Non-revenue FlightFund travel accounted for 2.6%, 3.2% and 3.5% of total revenue passenger miles for the years ended December 31, 2000, 1999 and 1998, respectively. We do not believe that non-revenue FlightFund travel results in any significant displacement of revenue passengers.

      The Airline’s Fleet

      At December 31, 2000, the Airline operated a fleet of 138 aircraft having an average age of 10.0 years. The Airline’s aircraft acquisition program will provide the aircraft necessary to allow the Airline to continue its strategic growth. Terminations of aircraft operating leases scheduled to occur over the next several years will allow the Airline flexibility to manage the growth of its fleet size and related financial obligations in response to unfavorable economic conditions.

      In 2001 the Airline intends to take delivery of 15 new aircraft, retire three aircraft and expects to operate a fleet of 150 aircraft at the end of 2001 having an average age of 9.9 years.

      The Airline’s fleet at the end of 2000 and as expected at the end of 2001 are described in the table below:

                                           
Number 12/31 Average Age (Yrs.) 12/31
Aircraft Approx.

Types No. Seats 2000 2001 2000 2001






B737-200 113 14 14 19.2 20.2
B737-300 132 47 45 13.2 14.2
B757-200 190 13 13 14.2 15.2
A319-100 124 19 31 1.0 1.4
A320-200 150 45 47 6.4 6.9




Totals 138 150 10.0 9.9




      As of March 30, 2001, AWA had firm commitments to purchase or acquire by operating lease a total of 15 Airbus A318-100, 11 Airbus A319-100 and 10 Airbus A320-200 aircraft for delivery in 2001 through 2004. The Airline also has 17 options and 25 purchase rights to acquire aircraft in the “A320 family” of aircraft (A318s, A319s, A320s and A321s) for delivery in 2005 through 2008. As of March 30, 2001, leases for 54 of the Airline’s aircraft were scheduled to terminate through the end of 2004.

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      The following table illustrates the Airline’s committed orders and scheduled lease terminations over 2002-2004:

                         
2002 2003 2004



Firm Orders (A318-100/319-100/A320-200)
4 11 10
Scheduled Lease Terminations
14 25 5

      For further details on the Airline’s commitments to acquire aircraft and financing strategies and capital requirements for aircraft, see “Risk Factors —Our high level of debt may limit our ability to fund general corporate requirements, limit our flexibility in responding to competitive developments and increase our vulnerability to adverse economic and industry conditions.” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources.”

The Leisure Company

      TLC’s Operations, Products, Marketing and Competition

      TLC sells individual and group travel packages including air transportation on AWA, hotel accommodations, car rentals and other travel products directly to consumers and through retail travel agencies in the United States, Canada and Mexico. TLC focuses on simple, high-volume, value-oriented travel packages marketed on a national and international basis.

      TLC is one of the largest providers of Las Vegas vacation packages and hotel rooms in the United States sold under the company’s largest brand, America West Vacations. The majority of sales are from vacation packages for destinations in Nevada, Arizona, California, Mexico and western ski resorts in Colorado, Utah and Canada. TLC sells vacation packages and discounted hotel rooms through its Tempe, Arizona call center and through its Internet site at www.americawestvacations.com.

      On May 2, 2000, TLC refocused its strategy on its core wholesale vacation package business and sold a majority interest in The Vacation Store (“TVS”), acquired in November 1998, and National Leisure Group (“NLG”), acquired in May 1999, to Softbank Capital Partners and General Catalyst, LLC. TLC realized a $9.2 million non-operating pretax gain on the sale while maintaining a 12% passive ownership interest in the restructured venture.

      In July 2000 TLC sold the property and assets of the America West Golf Vacations business to Book4golf.com, a provider of Internet-based, real-time golf tee time reservations systems. TLC received as consideration 900,000 common shares and up to 700,000 share purchase warrants in Book4golf.com Corporation. Exercise of the warrants and right to earn an additional 300,000 common shares is subject to certain performance criteria. TLC and Book4golf.com also entered into a services agreement whereby TLC provides product fulfillment support for America West Golf Vacations and other Book4golf Travel Services brands.

      The Leisure Company competes in a fragmented, consolidating travel industry that is highly competitive with relatively low barriers to entry. TLC competes for customers through national mass media, preferred supplier agreements and on-line with E-travel companies with exclusive relationships with major Internet portals. Fewer large competitors with stronger off-line and on-line market positions and brand recognition are continuing to emerge. The industry also faces disintermediation as suppliers adopt new Internet and E-commerce strategies.

      TLC remains focused on simple, high-volume products which have traditionally provided high margins. TLC is developing viable business strategies for the future including new leisure travel products and an expanded Internet presence. TLC’s strong position in Las Vegas, affiliation with AWA’s growing route network and E-commerce strategy will strengthen TLC’s positioning. TLC continues to evaluate investment and strategic alliance opportunities in the leisure travel industry.

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Employees and Labor Relations

      The Company’s businesses are labor intensive with wages, salaries and benefits representing approximately 24% of the Company’s operating expenses during 2000.

      As of December 31, 2000, the Company employed 11,337 full-time and 2,809 part-time employees, for a full-time equivalent of 13,145 employees (“FTEs”). We believe that the Company’s workforce is very productive, compared to workforces employed at other major United States airlines. As AWA pursues its growth strategy, we believe that this productivity will be improved as economies of scale will allow the Company to increase the size of its workforce proportionately less than the growth in number of aircraft or ASMs.

      The Company’s non-union employees are compensated on a pay-for-performance basis under which salaries and wages are determined in part by performance evaluations by an employee’s superiors and peers. To encourage increased productivity, the Airline awards performance bonuses, referred to as AWArd Pay, to eligible, non-executive, non-union employees provided certain annually established targets are achieved. AWArd Pay bonuses could range from 5% of base pay if those targets are met to 25% of base pay if those targets are significantly exceeded. The 345 non-union employees of TLC participate in a similar performance bonus plan based on TLC’s performance. No performance bonuses were paid in 2000 as neither the Airline nor TLC met the minimum operating income thresholds for payout.

      A large majority of the employees of the major airlines in the United States are represented by labor unions. There have been numerous attempts by unions to organize AWA’s employees and we expect those organization efforts to continue in the future. As illustrated by the table below, several groups of AWA’s employees have selected union representation and negotiated collective bargaining agreements with the Airline. We cannot predict the outcome of any continuing or future efforts to organize the Airline’s employees or the terms of any future labor agreements or the effect, if any, on the Company’s or AWA’s operations or financial performance. For more discussion, see “Risk Factors —Efforts by labor unions to organize AWA’s employees have occurred in the past and we expect will occur in the future, which could divert management attention and increase our operating expenses.”

                     
Employee Approx. No. of Contract Contract
Group Employees Union Effective Amendable





Pilots
1,700
Airline Pilots Association
May 1995*
May 2000*
Dispatchers
40
Transportation Workers Union
March 1998
March 2003
Maintenance technicians and related personnel
800
International Brotherhood of Teamsters
October 1998
October 2003
Flight Attendants
2,400
Association of Flight Attendants
May 1999
May 2004
Fleet Service
2,500
Transportation Workers Union
June 2000
June 2005
Stock Clerks
60
International Brotherhood of Teamsters
*
*

*   In contract negotiations.

      On June 2, 2000 AWA and the Transportation Workers Union (“TWU”) entered into a five-year collective bargaining agreement covering the Airline’s 2,500 fleet service employees. All of the collective bargaining agreements are consistent with our productivity objectives and cost advantage, include flexible work rules, and prohibit sympathy strikes. None of those contracts restrict management’s ability to make key strategic decisions, including entering into or expanding alliances or considering acquisitions.

      The Company is in the process of negotiating with the Air Line Pilots Association (“ALPA”) on a new contract for AWA’s pilots. The existing contract with ALPA became amendable in May 2000. In addition, the Company is in negotiations with the International Brotherhood of Teamsters (“IBT”) on a first contract covering the Company’s stock clerks, a work group of approximately 60 employees. The Company cannot predict the form of these future collective bargaining agreements and therefore the effect, if any, on AWA’s operations or financial performance.

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      On January 22, 2001, the TWU filed an Application for Investigation of Representation Dispute with the National Mediation Board (“NMB”), seeking to represent approximately 4,000 passenger service representatives and reservations agents. On March 20, 2001, that application was dismissed by the NMB due to an insufficient showing of interest. See “Risk Factors —Efforts by labor unions to organize AWA’s employees have occurred in the past and we expect will occur in the future, which could divert management attention, disrupt operations and increase our operating expenses.”

The Company’s Facilities

      Our Company’s principal facilities include administrative office space located in Tempe and Phoenix, Arizona; reservations centers and other call centers located in Tempe and Reno, Nevada; and airport and airport related facilities associated with the Airline’s hubs in Phoenix and Las Vegas and mini-hub in Columbus.

      The Company leases approximately 361,000 square feet of general office and administrative space in Tempe for Holdings’, the Airline’s and TLC’s headquarters and administrative offices. The Company’s headquarters and principal administrative functions are located in a nine story, 225,000 sq. ft. complex in Tempe.

      AWA operates from Terminal 4 at Sky Harbor Airport and leases 42 gates, ticket counter space and administrative offices comprising an aggregate of approximately 330,000 sq. ft. of space.

      The Airline leases approximately 200,000 sq. ft. of space at Las Vegas McCarran International Airport, which includes 23 gates, ticket counter space and concourse areas. AWA leases approximately 30,000 sq. ft. and seven gates at Port Columbus International Airport.

      Space for ticket counters, gates and back offices has been obtained at each of the other airports operated by AWA personnel, either by lease from the airport operator or by sublease from another airline. Space and facilities at certain airports where AWA’s operation is managed by Continental Airlines or Mesa Airlines is provided by those airlines as part of AWA’s alliance arrangements.

      The Airline also owns a 375,000 sq. ft. maintenance and technical support facility at Phoenix Sky Harbor International Airport on land leased from the City of Phoenix, which includes four hangar bays, hangar shops, two flight simulator bays and pilot training facilities and warehouse and commissary facilities.

      In November 2000, AWA broke ground on an approximately 164,000 sq. ft. new flight training and systems operations control center to accommodate AWA’s pilot and flight attendant training, systems operational control and crew scheduling functions to be located in Phoenix next to Phoenix Sky Harbor International Airport. We expect construction to be completed during the first quarter of 2002.

Government Regulations

      The airline industry is highly regulated as more fully described below.

      DOT Oversight

      AWA operates under a certificate of public convenience and necessity issued by the DOT. Although regulation of domestic routes and fares was abolished by the Airline Deregulation Act of 1978, the DOT retains the authority to alter or amend AWA’s certificate or to revoke that certificate for intentional failure to comply with the terms and conditions of the certificate. In addition, the DOT has jurisdiction over international tariffs and pricing, international routes, computer reservation systems, domestic code share agreements, and economic and consumer protection matters such as advertising, denied boarding compensation and smoking and has the authority to impose civil penalties for violation of the United States Transportation Code or DOT regulations.

      As a member of the Air Transport Association, AWA voluntarily established a customer service plan to provide additional information to passengers on flight delays, cancellations or overbookings, to offer the lowest fare available, allow reservations to be held or cancelled, provide prompt ticket refunds and be more responsive to customer complaints. Congress is currently considering legislation that could impose new consumer protection

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requirements on airlines including payments to passengers for excessive flight delays and prohibition of the issuance of non-refundable tickets. As a result of competitive pressures AWA and other airlines would be limited in their ability to pass costs associated with compliance with such laws to passengers. We cannot forecast the cost impact of such measures if enacted.

      FAA Funding

      In 1997 new aviation taxes were imposed through September 30, 2007 to provide funding for the Federal Aviation Administration (“FAA”). Included in the new law is a phase-in of a modified federal air transportation excise tax structure with a system that includes: a domestic excise tax which started at 9% and declined to 7.5% in 1999; a domestic segment tax that started at $1.00 and increases to $3.00 by 2003; and an increase in taxes imposed on international travel from $6.00 per international departure to an arrival and departure tax of $12.00 (each way). Both the domestic segment tax and the international arrival and departure tax are indexed for inflation. The legislation also included a 7.5% excise tax on certain amounts paid to an air carrier for the right to provide mileage and similar awards (e.g., purchase of frequent flyer miles by a credit card company). As a result of competitive pressures, AWA and other airlines have been limited in their ability to pass on the cost of these taxes to passengers through fare increases.

      In December 1997 the National Civil Aviation Review Commission (the “NCARC”) completed its Report to Congress on FAA funding and recommended implementation of a cost based user fee system for air carriers. Congress is presently considering the recommendations of the NCARC, which may result in enactment of a new funding mechanism. The Company cannot currently estimate the effect the new combination of ticket and segment taxes, or any change in those taxes as recommended by the NCARC, will have on its operating results. There can be no assurance that the new taxes or such changes will not have a material adverse effect on the Company’s financial condition and results of operations.

      Fuel Tax

      In August 1993 the federal government increased taxes on fuel, including aircraft fuel, by 4.3 cents per gallon. The Company’s annual operating expenses increased by approximately $18.2 million for 2000 because of such fuel tax increases. Total fuel taxes paid by the Company in 2000 were $28.8 million.

      Passenger Facility Charges

      During 1990 Congress enacted legislation to permit airport authorities, with prior approval from the DOT, to impose passenger facility charges (“PFCs”) as a means of funding local airport projects. These charges, which are intended to be collected by the airlines from their passengers, are limited to $4.50 per enplanement, and to no more than $18.00 per round trip. As a result of competitive pressure, AWA and other airlines have been limited in their ability to pass on the cost of the PFCs to passengers through fare increases.

      Slot Restrictions

      At New York City’s John F. Kennedy International Airport and LaGuardia Airport, Chicago’s O’Hare International Airport and Ronald Reagan Washington National Airport, which have been designated “High Density Airports” by the FAA, there are restrictions on the number of aircraft that may land and take off during peak hours. In the future, these take-off and landing time slot restrictions and other restrictions on the use of various airports and their facilities may result in further curtailment of services by, and increased operating costs for, individual airlines, including AWA, particularly in light of the increase in the number of airlines operating at such airports. In general, the FAA rules relating to allocated slots at the High Density Airports contain provisions requiring the relinquishment of slots for non-use and permit carriers, under certain circumstances, to sell, lease or trade their slots to other carriers. All slots must be used on 80% of the dates during each two-month reporting period. Failure to satisfy the 80% use rate will result in loss of the slot which would revert to the FAA and be reassigned through a lottery arrangement.

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      Slot restrictions at O’Hare Airport will be limited to the hours between 2:45 p.m. and 8:14 p.m. after July 1, 2001 and all slot restrictions are abolished after July 1, 2002. At the New York airports, slot restrictions are abolished after January 1, 2007.

      AWA currently utilizes five slots at Kennedy Airport, eight slots at LaGuardia Airport, 21 slots at O’Hare Airport and 12 slots at National Airport during the restricted periods. AWA utilizes these slots more than the requisite 80% use rate. Three of the slots at National Airport are subject to expiration in December 2001, and AWA intends to file a timely application for renewal. Approval of such application is discretionary by the FAA. Effective January 2001 the FAA imposed a cap on new slot exemptions authorized by Congress in 2000 at LaGuardia and announced plans to initiate a pricing or other form of allocation program for exemption slots at the airport. The effect of the cap or new allocation program could affect AWA’s ability to maintain some or all of its current service at LaGuardia.

      Perimeter Rule at Washington’s Ronald Reagan National Airport

      There is a federal prohibition on flights exceeding 1,250 miles operating from or to National Airport. This “perimeter rule” generally prevents AWA from flying non-stop to and from National Airport and its principal hubs of Phoenix and Las Vegas. In 2000 Congress passed legislation which authorized the DOT to grant exceptions to the 1,250 mile perimeter rule for up to 12 slots per day. AWA was authorized six of these slots to operate two daily Phoenix —National Airport round trips and one daily Las Vegas —National Airport round trip. AWA will seek additional slots should they become available.

      Noise Abatement and Other Restrictions

      Numerous airports served by AWA, including those at Boston, Burbank, Denver, Long Beach, Los Angeles, Minneapolis-St. Paul, New York City, Orange County, San Diego, San Francisco, San Jose and Washington, D.C., have imposed restrictions such as curfews, limits on aircraft noise levels, mandatory flight paths, runway restrictions and limits on the number of average daily departures, which limit the ability of air carriers to provide service to or increase service at such airports. AWA’s Boeing 757-200s, Boeing 737-300s and Airbus A319s and A320s all comply with the current noise abatement requirements of the airports listed above.

      Aircraft Maintenance and Operations

      AWA is subject to the jurisdiction of the FAA with respect to aircraft maintenance and operations, including equipment, dispatch, communications, training, flight personnel and other matters affecting air safety. The FAA has the authority to issue new or additional regulations. To ensure compliance with its regulations, the FAA conducts regular safety audits and requires AWA to obtain operating, airworthiness and other certificates, which are subject to suspension or revocation for cause. At the request and with the approval of the FAA, AWA is currently implementing a maintenance action plan, which should be fully implemented by the Fall 2001. In addition, a combination of FAA and Occupational Safety and Health Administration (“OSHA”) regulations on both federal and state levels apply to all of AWA’s ground-based operations and to in-flight cabin attendants.

      AWA is also subject to the jurisdiction of the Department of Defense with respect to its voluntary participation in their Commercial Passenger Airlift program administered by the Air Force’s Air Mobility Command.

      Aging Aircraft Maintenance

      The FAA issued several Airworthiness Directives (“ADs”) in 1990 mandating changes to the older aircraft maintenance programs. These ADs were issued to ensure that the oldest portion of the nation’s aircraft fleet remains airworthy and require structural modifications to or inspections of those aircraft. All of AWA’s currently affected aircraft are in compliance with the aging aircraft mandates. AWA constantly monitors its fleet of aircraft to ensure safety levels that meet or exceed those mandated by the FAA and the DOT.

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      Additional Security and Safety Measures

      In 1996 and 1997 the President’s Commission on Aviation Safety and Security issued recommendations and the U.S. Congress and the FAA adopted increased safety and security measures designed to increase airline passenger safety and security and protect against terrorist acts. Such measures have resulted in additional operating costs to the airline industry. Examples of increased safety and security measures include the introduction of a domestic passenger manifest requirement, increased passenger profiling, enhanced pre-board screening of passengers and carry-on baggage, positive bag match for profile selections, continuous physical bag search at checkpoints, additional airport security personnel, expanded criminal background checks for selected airport employees, significantly expanded use of bomb-sniffing dogs, certification of screening companies, aggressive testing of existing security systems, expansion of aging aircraft inspections to include non-structural components, development of objective methods for carriers to monitor and improve their own level of safety and installation of new ground proximity warning systems on all commercial aircraft. We cannot forecast what additional security and safety requirements may be imposed in the future or the costs or revenue impact that would be associated with complying with such requirements.

      Environmental Matters

      The Company is subject to regulation under major environmental laws administered by federal, state and local agencies, including laws governing air, water and waste discharge activities. While the Company strives to comply with environmental laws and regulations, the Company has incurred and may incur costs to comply with applicable environmental laws, including soil and groundwater cleanup and other related response costs. We believe, however, that under current environmental laws and regulations these costs would not have a material adverse effect on the Company’s financial condition and results of operations.

      The Comprehensive Environmental Response Compensation and Liability Act of 1980, also known as Superfund, and comparable state laws impose liability without regard to fault on certain classes of persons that may have contributed to the release or threatened release of a “hazardous substance” into the environment. These persons include the owner or operator of a facility and persons that disposed or arranged for the disposal of hazardous substances. Many airports in the United States, including Phoenix Sky Harbor International Airport, are the subject of Superfund investigations or state implemented groundwater investigations. AWA occupies facilities at some of these affected airports and is a member of a fuel handling consortium which has experienced a fuel leak into ground water at Phoenix Sky Harbor International Airport. The Company does not believe that its operations have been included within the ambit of any of these investigations and does not believe that its expenses associated with the fuel leak at Phoenix Sky Harbor International Airport will be material.

      The trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment, and we expect that the costs of compliance will continue to increase.

Risk Factors

      The airline industry and the markets we serve are highly competitive and we may be unable to compete effectively against carriers with substantially greater resources or low-cost structures.

      The airline industry is highly competitive and industry earnings are typically volatile. We compete with other airlines on the basis of pricing, scheduling (frequency and flight times), on-time performance, frequent flyer programs and other services. We compete against both larger carriers with substantially greater resources than we have available as well as smaller carriers with low-cost structures. Many of our larger competitors have proprietary reservation systems and more expansive marketing and advertising programs than we do and smaller carriers may be able to offer prices at discounts lower than we are able to offer. We may be unable to compete effectively against carriers with substantially greater resources or lower cost structures.

      Most of the markets we serve are highly competitive. The markets we serve are frequently high volume vacation destinations, most of which are likely to experience discounted fares because ticket prices are a leading consideration among leisure travel consumers. At our Phoenix and Las Vegas hubs, our principal competitor is Southwest Airlines. However, we also compete against new carriers that enter the airline industry, many of which

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have low-cost structures and initiate price discounting. Price discounting occurs when a carrier offers discounts or promotional fares to passengers. The entry of additional new carriers in many of our markets, the consolidation of existing carriers, as well as increased competition from or the introduction of new services by existing carriers, could reduce the numbers of tickets we sell and therefore affect our operating results.

      If the rates of travel on the routes that we serve decrease or if competition increases between carriers, we may not be able to compete effectively and our operating results could decline both in absolute terms and in relation to the operating results of our competitors.

      TLC’s business is also highly competitive. TLC competes with wholesalers and tour operators, some of which have substantially greater financial and other resources than TLC.

      The Company’s results of operations for interim periods are not necessarily indicative of those for an entire year, because the travel business is subject to seasonal fluctuations. Due to the greater demand for air and leisure travel during the summer months, revenues in the airline and leisure travel industries in the second and third quarters of the year tend to be greater than revenues in the first and fourth quarters of the year.

      Our high level of debt may limit our ability to fund general corporate requirements, limit our flexibility in responding to competitive developments and increase our vulnerability to adverse economic and industry conditions.

      As of December 31, 2000, we owed approximately $145.6 million of long-term debt (less current maturities). Much of this debt is secured by a large portion of our assets, leaving us with a limited number of assets to use to obtain additional financing which we may need if we encounter adverse industry conditions or a prolonged economic recession in the future. Our high level of debt and the financial and other covenants in our debt instruments may also limit our ability to fund general corporate requirements, including working capital and capital expenditures, limit our flexibility in responding to competitive developments and increase our vulnerability to adverse economic and industry conditions.

      The Airline has outstanding orders to purchase aircraft as well as option rights to purchase additional aircraft. AWA has arranged for financing for a portion of the outstanding orders to purchase the aircraft, but will have to look to outside sources to finance the remaining aircraft. We cannot guarantee that the Airline will be able to obtain enough capital to finance the remainder of the aircraft, and if the Airline defaults on commitments to purchase aircraft, our ability to execute our business strategy could be materially impaired.

      Efforts by labor unions to organize AWA’s employees have occurred in the past and we expect will occur in the future, which could divert management attention, disrupt operations and increase our operating expenses.

      In the recent past, labor unions have made several attempts to organize AWA’s employees, and we expect that these efforts will continue. Certain groups of AWA’s employees have chosen to be represented by unions and we are currently negotiating collective bargaining agreements with some of these groups. We cannot predict which, if any, other groups of employees may seek union representation or the outcome of collective bargaining agreements that we may be forced to negotiate in the future. These negotiations could divert management attention and disrupt AWA’s operations, which may result in increased operating expenses and lower net revenues. In addition, agreements reached in collective bargaining may also increase operating expenses and lower net revenues. If we are unable to negotiate acceptable collective bargaining agreements, we might have to wait through “cooling off” periods, which are often followed by union-initiated work actions, including strikes. Depending on the type and duration of work action we endure, our operating expense could increase significantly.

      The stockholders who effectively control the voting power of our Company could take actions that would favor their own personal interests to the detriment of our interests.

      Currently, three stockholders collectively control approximately 50% of the total voting power of Holdings. These stockholders, TPG Partners, L.P., TPG Parallel I, L.P. and Air Partners II, L.P. are all controlled by the same company, TPG Advisors, Inc. Since TPG Advisors, Inc. is an investment firm, its strategic objectives may be different than both the short-term or long-term objectives of our board of directors and/or management. We cannot

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guarantee that the controlling stockholders identified above will not try to influence our business in a way that would favor their own personal interests to the detriment of our interests.

      Any fluctuations in fuel costs could affect our operating expenses and results.

      The price and supply of jet fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, regional production patterns and environmental concerns. Since fuel is the principal raw material used in our business, accounting for approximately 16% of our total operating expenses in 2000, price escalations or reductions in the supply of jet fuel will increase our operating expenses and cause our operating results to decline. For example, with our current level of fuel consumption, a one cent per gallon increase in jet fuel prices will cause our annual operating results to decline by $4.7 million. We have implemented a “fuel hedging” program to manage the risk and effect of fluctuating jet fuel prices on our business. Our hedging program tries to offset increases in jet fuel costs by acquiring derivative instruments keyed to the future price of heating oil, effectively resulting in a lower net cost of jet fuel. Despite this program, we may not be adequately protected against jet fuel costs. As of March 30, 2001, our hedging program covers only approximately 51% of projected fuel volumes in the first quarter of 2001, 60% of projected fuel volumes in the second quarter of 2001, 30% of projected fuel volumes in the third quarter of 2001 and 20% of projected fuel volumes in the fourth quarter of 2001. In addition, our program primarily addresses our exposure to fuel requirements on the East Coast as opposed to the more volatile West Coast jet fuel prices, even though we primarily serve the Western United States and purchase a substantially larger portion of our jet fuel requirements on the West Coast compared to our larger competitors. For these reasons, the protective measures we have adopted to protect against increases in jet fuel costs may be inadequate and our operating results are susceptible to decline.

      Our operating costs could increase as a result of past, current or new regulations that impose additional requirements and restrictions on airline operations.

      The airline industry is heavily regulated. Both federal and state governments from time to time propose laws and regulations that impose additional requirements and restrictions on airline operations. Implementing these measures, such as recently enacted aviation ticket taxes and passenger safety measures, has increased operating costs for AWA and the airline industry as a whole. Depending on the implementation of these and other laws, our operating costs could increase significantly. We cannot predict which laws and regulations will be adopted or the changes and increased expense that they could cause. Accordingly, we cannot guarantee that future legislative and regulatory acts will not have a material impact on our operating results.

      Broad stock market fluctuations, quarterly variations in operating results and other events or factors may adversely affect the market price of our Class B Common Stock.

      The stock market has experienced significant price and volume fluctuations that have affected the market prices of equity securities of companies in the airline industry and that often have been unrelated to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of the Class B Common Stock of Holdings (the “Class B Common Stock”). In addition, the market price of the Company’s Class B Common Stock is volatile and subject to fluctuations in response to quarterly variations in operating results, announcements of new services by the Company or its competitors, changes in financial estimates by securities analysts or other events or factors, many of which are beyond the Company’s control. See “Item 5. Market for Registrants’ Common Equity and Related Stockholder Matters.”

ITEM 2. PROPERTIES

      For a description of the Company’s properties, see Item 1 of Part I of this Report on Form 10-K.

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ITEM 3. LEGAL PROCEEDINGS

      Holdings and its subsidiaries are parties to various legal proceedings, including some purporting to be class actions, and some which demand large monetary damages or other relief which, if granted, would require significant expenditures.

      The Company, Holdings and certain of Holdings’ stockholders, executive officers and directors have been named as defendants in lawsuits alleging violations of the Securities Exchange Act of 1934, as amended, in connection with Holdings’ public disclosures regarding its business and prospects during 1997 and 1998. The defendants deny and are vigorously defending the claims set forth in these lawsuits. While the outcome of these lawsuits cannot be predicted with certainty, we currently expect that any liability arising from such matters, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on the Company’s business, financial condition and results of operation.

      Holdings and AWA are named defendants in a number of additional lawsuits and proceedings arising in the ordinary course of business. While the outcome of the contingencies, lawsuits or other proceedings cannot be predicted with certainty, we currently expect that any liability arising from such matters, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on the financial condition and results of operations of the Company.

      AWA leases six aircraft which may be subject to a claim in an unspecified amount as a result of the Internal Revenue Service potentially disallowing investment tax credits and accelerated depreciation claimed by the lessor of such aircraft. Under the terms of indemnity agreements, if such tax benefits were fully or partially disallowed, AWA’s monthly payment obligation under the agreements could be increased by up to approximately $15,000 per aircraft (approximately $1,080,000 per year for all six aircraft) for the period from 1991 to 2013. The payment increase applicable to periods prior to the determination of an indemnity obligation would be payable monthly over a 24-month period, with interest calculated at a specified prime rate. We are unable to predict whether the Internal Revenue Service will prevail in matters asserted against the lessor and, consequently, whether AWA will incur any liability in connection with such claims or the amount of any such liability, if incurred. Based on information and relevant documents available to the Company, however, we currently believe that it is unlikely that the disposition of these matters will have a material adverse effect on the Company’s financial condition and results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.

Executive Officers of the Registrant

      Set forth below is information respecting the names, ages, positions and offices with the Company of the executive officers of the Company as of March 23, 2001.

      William A. Franke, Age 63. Chairman of the Board, President and Chief Executive Officer of Holdings and Chairman of the Board and Chief Executive Officer of AWA. Mr. Franke has served as Chairman of the Board of Directors of AWA since September 1992, and as Chairman of the Board and Chief Executive Officer of Holdings since its formation in December 1996. In addition to his responsibilities at the Company, Mr. Franke serves as president of Franke & Company, Inc., a financial services company he has owned since May 1987, and as a managing partner of Newbridge Latin America Fund, L.P., a private equity fund. Mr. Franke serves as a director of Phelps Dodge Corp., ON Semiconductor, Inc. and the Air Transport Association of America.

      W. Douglas Parker, Age 39. Executive Vice President of Holdings and President and Chief Operating Officer of AWA. Mr. Parker joined the Company as Senior Vice President and Chief Financial Officer in June 1995. He was elected Executive Vice President of the Company and Executive Vice President - Corporate Group of AWA in April 1999. He was elected President of AWA in May 2000 and Chief Operating Officer of AWA in December 2000.

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      Gilbert D. Mook, Age 58. Executive Vice President – Operations Group and Chief Operating Officer of AWA. Mr. Mook joined the Company in April 1999. From 1983 through 1998, Mr. Mook was employed with Federal Express Corporation, most recently as Senior Vice President – Air Operations Division from 1996 to 1998. Mr. Mook resigned from the Company effective December 31, 2000.

      Lonnie D. Bane, Age 42. Senior Vice President – Human Resources of AWA. Mr. Bane joined the Company in August 2000. From 1998 until 2000, Mr. Bane worked for Corporate Express Delivery Systems, Inc., most recently as Senior Vice President of Business Development and E-Commerce. From 1996 until 1998, Mr. Bane served as Senior Vice President of Human Resources for CEMEX USA. From 1994 until 1996, Mr. Bane served as Vice President of Human Resources for the Braking Systems Division of AlliedSignal.

      Bernard L. Han, Age 36. Senior Vice President – Marketing and Planning of AWA and President and Chief Executive Officer of TLC. Mr. Han joined AWA as Vice President – Financial Planning and Analysis in January 1996. He was elected to the position of Senior Vice President – Planning in May 1998. He was elected to his current position in January 2001.

      Hal M. Heule, Age 52. Senior Vice President – Technical Operations of AWA. Mr. Heule joined AWA in January 2001. From 1994 until the time he joined AWA, Mr. Heule served as Executive Vice President for Strand Associates, Inc., an aviation consulting firm.

      C.A. Howlett, Age 57. Senior Vice President – Public Affairs of AWA and Holdings. Mr. Howlett joined AWA as Vice President – Public Affairs in January 1995. On January 1, 1997, he was appointed Vice President – Public Affairs of Holdings. He was elected to his current positions in February 1999.

      Stephen L. Johnson, Age 44. Senior Vice President of Holdings and Senior Vice President and Chief Administrative Officer of AWA. Mr. Johnson joined the Company as Vice President – Legal Affairs in February 1995. In December 1995, Mr. Johnson was elected to the position of Senior Vice President – Legal Affairs and in December 1997, he was elected to the position of Senior Vice President – Corporate Affairs of AWA and Holdings. He was elected to his current positions in April 1999.

      Evon L. Jones, Age 36. Senior Vice President and Chief Information Officer of Holdings and AWA. Mr. Jones joined the Company in November 1998. From 1995 until 1998, Mr. Jones served as Vice President – Global Financial Technologies of American Express Company.

      J. Scott Kirby, Age 33. Senior Vice President – E-Business and Technology of Holdings and AWA. Mr. Kirby joined AWA as Senior Director – Schedules and Planning in October 1995. In October 1997, Mr. Kirby was elected to the position of Vice President – Planning and in May 1998, he was elected to the position of Vice President – Revenue Management. He was elected to his current positions in January 2000.

      Thomas K. MacGillivray, Age 40. Senior Vice President and Chief Financial Officer of Holdings and AWA. From 1994 until 2000, Mr. MacGillivray was employed by Central Newspapers, Inc., most recently as Senior Vice President and Chief Financial Officer.

      Jeffrey D. McClelland, Age 41. Senior Vice President – Operations of AWA. Mr. McClelland joined the Company in August 1999. From 1991 until 1999, Mr. McClelland worked at Northwest Airlines, most recently as Senior Vice President – Finance and Controller.

      Anthony Mule, Age 57. Senior Vice President – Customer Service of AWA. Mr. Mule joined the Company as Vice President – In-Flight Services in 1996. Prior to joining the Company, Mr. Mule served as President and Chief Operating Officer of SuperShuttle, a Phoenix-based national transportation company.

      Jack Richards, Age 47. Chief Operating Officer of The Leisure Company. Mr. Richards joined the Company in March 1999. From 1992 until 1999, Mr. Richards served as President and Chief Operating Officer of Adventure Tours USA.

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      Michael A. Smith, Age 47. Senior Vice President – Marketing and Sales of AWA. Mr. Smith joined AWA in November 1997. From 1977 until 1997, Mr. Smith served in various management positions with American Airlines, most recently as Managing Director – European Sales and Marketing.

      Michael R. Carreon, Age 47. Vice President and Controller of AWA. Mr. Carreon joined AWA as Senior Director – Corporate Audit in December 1994. He was elected to his current positions in January 1996.

      Linda M. Mitchell, Age 42. Vice President and General Counsel of AWA. Ms. Mitchell joined AWA as Senior Director – Legal Affairs in January 1996. She was elected to her current positions in February 2000. From 1992 until 1995, Ms. Mitchell was in private practice with the law firm of Squire Sanders & Dempsey LLP in Phoenix.

      Thomas T. Weir, Age 45. Vice President and Treasurer of AWA. Mr. Weir joined AWA in February 2000. From 1988 until 2000, Mr. Weir held various sales finance positions at Airbus Industrie of North America, Inc., most recently as Sales Finance Director.

PART II

ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The Class A Common Stock of Holdings, par value $.01 per share (the “Class A Common Stock”), is not publicly traded. The Class B Common Stock, par value $.01 per share, and Warrants have been traded on the New York Stock Exchange under the symbol “AWA” and “AWAws,” respectively, since August 26, 1994. Unexercised Warrants expired and trading ceased on August 25, 1999.

      The following table sets forth, for the periods indicated, the high and low sales prices of the Class B Common Stock and the Warrants as reported on the New York Stock Exchange.

                                 
Class B
Common Stock Warrants


High Low High Low




Year Ended December 31, 2000
First Quarter
$ 20.9375 $ 12.5000
Second Quarter
19.9375 13.8750
Third Quarter
18.4375 12.1250
Fourth Quarter
13.0625 8.9375
 
Year Ended December 31, 1999
First Quarter
$ 24.1250 $ 16.0000 $ 19.1875 $ 6.5000
Second Quarter
22.7500 16.5000 10.7500 5.2500
Third Quarter
21.8750 16.9375 9.0000 4.5000
Fourth Quarter
21.7500 17.4375

      As of December 31, 2000, there were three record holders of Class A Common Stock and approximately 7,844 record holders of Class B Common Stock.

      Holdings has not paid cash dividends in any of the last three fiscal years and does not anticipate paying cash dividends in the foreseeable future. We expect that the Company will retain all available earnings generated by its operations for the development and growth of its business. Any future determination as to the payment of dividends will be made at the discretion of the Board of Directors and will depend upon the Company’s operating results, financial condition, capital requirements, general business conditions and such other factors as the Board of Directors deems relevant. Certain debt instruments of the Company restrict the Company’s ability to pay cash dividends on its Common Stock and make certain other restricted payments (as defined therein). Under these restrictions, as of December 31, 2000, the Company’s ability to pay dividends, together with any other restricted payments, would be limited. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources.”

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      In September 1995 the Company adopted a stock repurchase program. The program was amended in December 1995, August 1997, August 1998, May 1999 and February 2000. During 1995 through 2000 the Company purchased approximately 16.5 million shares of Class B Common Stock and 7.4 million Warrants. As of December 31, 2000, the remaining balance available to be purchased under the program was 900 shares of issued and outstanding Class B Common Stock.

      AWA has 1,000 shares of Common Stock outstanding, all of which are owned by Holdings. There is no established public trading market for AWA’s Common Stock. AWA’s ability to pay cash dividends on its Common Stock is restricted by the debt instruments and in the manner described above.

      TLC has 1,000 shares of Preferred Stock outstanding, which are owned by AWA, and 1,000 shares of Common Stock outstanding, which are owned by Holdings. There is no established public trading market for TLC’s Preferred or Common Stock.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

Selected Consolidated Financial Data

      The selected consolidated data presented below under the captions “Consolidated Statements of Income Data” and “Consolidated Balance Sheet Data” as of and for the years ended December 31, 2000, 1999, 1998, 1997 and 1996 are derived from the audited consolidated financial statements of the Company. The selected consolidated data should be read in conjunction with the consolidated financial statements for the respective periods, the related notes and the independent auditors’ report.

                                             
Year ended December 31,

2000 1999 1998 1997 1996





(in thousands except per share amounts)
Consolidated statements of income data:
Operating revenues
$ 2,344,354 $ 2,210,884 $ 2,023,284 $ 1,874,956 $ 1,739,526
Operating expenses
2,356,991 2,006,333 1,814,221 1,713,130 1,670,860
Operating income (loss)
(12,637 ) 204,551 209,063 161,826 68,666
Income before income taxes and extraordinary items
24,743 206,150 194,346 140,001 34,493
Income taxes
17,064 86,761 85,775 65,031 24,883
Income before extraordinary items
7,679 119,389 108,571 74,970 9,610
Extraordinary loss (a)
(1,105 )
Net income
7,679 119,389 108,571 74,970 8,505
Earnings per share:
Basic:
Before extraordinary items
0.22 3.17 2.58 1.68 .21
Extraordinary items (a)
(.02 )
Net income
0.22 3.17 2.58 1.68 .19
Diluted:
Before extraordinary items
0.22 3.03 2.40 1.63 .20
Extraordinary items (a)
(.02 )
Net income
0.22 3.03 2.40 1.63 .18
Shares used for computation
Basic:
35,139 37,679 42,102 44,529 44,932
Diluted
35,688 39,432 45,208 46,071 47,733
Consolidated balance sheet data (at end of period):
Total assets
$ 1,568,515 $ 1,507,154 $ 1,525,030 $ 1,546,791 $ 1,597,650
Long-term debt, less current maturities
145,578 155,168 207,906 272,760 330,148
Total stockholders’ equity
667,073 714,169 669,458 683,570 622,753


(a)   Includes an extraordinary loss of $1.1 million in 1996 resulting from the partial prepayment of its 10 3/4% Senior Unsecured Notes.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      Holdings’ primary business activity is ownership of all the capital stock of AWA and TLC. Management’s Discussion and Analysis of Financial Condition and Results of Operations presented below relates to the consolidated financial statements of Holdings presented in Item 8A. Financial statements for AWA, Holdings’ wholly owned subsidiary, are presented in Item 8B.

2000 in Review

Financial Results

      In 2000 Holdings earned $7.7 million in consolidated net income, or $0.22 per share, fully diluted. AWA recorded a net loss of $0.5 million in 2000 as compared to net income of $116.6 million in 1999. The decline in earnings resulted from a number of factors, including high jet fuel prices and operational difficulties. AWA’s average fuel cost per gallon increased to 88.1 cents in 2000, as compared to 53.4 cents in 1999. This resulted in a year-over-year increase in fuel costs of approximately $152.9 million. Operating difficulties had an adverse impact on earnings, as AWA flew fewer available seat miles than planned without a corresponding reduction in operating expenses, negatively impacting high yield business traffic.

      The Company recorded non-recurring operating expenses of $16.0 million ($10.0 million after tax) in the fourth quarter of 2000. This differs from the $25.0 million of non-recurring operating expenses previously described in the Company’s preliminary unaudited earnings release dated January 17, 2001, which included an $8.5 million pretax charge ($5.3 million after tax) related to the early termination of leases on certain aircraft. The lease terminations were not completed as anticipated. Those aircraft leases are now anticipated to terminate in 2001 and the Company expects to record a similar pretax charge of $8.5 million at that time.

      To improve operational reliability and restore customer confidence by reducing the number of flight cancellations and improving on-time performance, AWA announced a series of actions in July 2000. The specific service initiatives include:

    A 3.5% reduction in the number of scheduled aircraft to provide four additional spare aircraft to substitute for other scheduled aircraft that may not be available because of maintenance requirements, weather or air traffic control, and to increase access to aircraft for performing reliability-related maintenance.
 
    A restructured approach to AWA’s existing line-maintenance operations including increasing staffing, parts provisioning, automation and support.
 
    An increase in AWA’s capacity to perform preventive and reliability-related maintenance by adding two additional aircraft maintenance lines.
 
    The use of automation to optimize the provisioning of spare parts and components to ensure more efficient and effective deployment of AWA’s spare part inventory throughout the system.
 
    An increase in ramp personnel at AWA’s Phoenix and Las Vegas hubs to reduce ground delays and improve baggage handling.
 
    Implementation of a program designed to increase the efficiency of AWA’s Phoenix hub operation.

      During the fourth quarter of 2000, AWA’s operating reliability improved as the service initiatives implemented in late summer reduced the number of aircraft out of service. Maintenance-related cancellations fell 24% versus the third quarter 2000.

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      Completion factors in January and February 2001 were 96.3% and 97.2%, respectively, which were in line with industry results. Maintenance related cancellations fell 9.7% in January 2001 and 18.9% in February 2001 due to the Company’s operational improvement plan. Looking forward into 2001, management believes the comprehensive plan to address AWA’s operating problems has had a positive impact on operations and that the Company will continue to see gradual improvement in operations during the year as that plan is implemented.

      Despite the challenges in 2000, AWA maintained its position as having the lowest operating cost per available seat mile (“CASM”) of all the other major domestic hub-and-spoke airlines and competitive with the major point-to-point airline, Southwest Airlines. In 2000 the Company’s CASM was 8.50 cents, approximately 17% less than the average CASM of the other major domestic hub-and-spoke airlines.

      In addition, the Company’s EBITDAR (operating income before depreciation, amortization and rent) margin for 2000 was 23.0%, which ranks fourth among all major domestic airlines. The Company believes that EBITDAR margin, which is a non-GAAP measurement, is the best measure of relative airline financial performance. EBITDAR measures operating profits before depreciation and aircraft rentals. By excluding both rentals and depreciation, differences in the method of financing aircraft acquisitions are eliminated. Cash earnings are distorted by differences in financing aircraft as depreciation attributable to owned aircraft (including those acquired through finance leases) is added back to cash earnings while operating lease rentals are deducted. Operating profit is also less valuable as a basis of comparison because both the depreciation and interest element of aircraft acquisitions are included in operating profit for aircraft acquired through operating leases. While excluded from EBITDAR margin, depreciation, amortization and rent are components of operating expense which are significant in understanding and assessing the Company’s financial performance. In addition, the Company’s use of EBITDAR margin may not be comparable to similarly titled measures presented by other companies.

First Quarter 2001 Outlook

      The first quarter of 2001 will be a challenging one for the airline industry. A softening economy makes realizing increases in yields difficult, while fuel prices remain high by historical standards. In addition there is industry-wide instability in labor relations. Several of the Company’s competitor airlines have announced that they intend to post significant losses for the March 2001 quarter. In this environment, the Company expects to post an operating loss for the quarter.

Results of Operations

      In January 1998 TLC began operations as a new travel subsidiary of Holdings to develop and grow the America West Vacations division (“AWV”) vacation package tour business. With commencement of TLC, Holdings’ operations consisted of two distinct lines of business for financial reporting purposes. While not required by the rules and regulations of the Securities and Exchange Commission, management believed a discussion of AWA and TLC on a stand alone basis in the “Results of Operations” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) would provide relevant information that enhanced a reader’s understanding of the Company’s operating results. Accordingly, starting with Holdings’ Form 10-Q for the quarter ended March 31, 1998, a discussion of “Results of Operations” was presented for both AWA and TLC in MD&A.

      TLC initiated its growth strategy by acquiring The Vacation Store (“TVS”) in November 1998 and National Leisure Group (“NLG”) in May 1999. The acquisitions of TVS and NLG added established retail networks to TLC’s largely wholesale travel product line. In May 2000, TLC refocused its strategy on its wholesale business and sold a majority interest in TVS and NLG to a third party, realizing a $9.2 million pretax gain while maintaining a 12% passive ownership interest in the restructured venture. With this sale TLC’s stand alone financial statements again primarily reflect the operations of AWV in its role as a package wholesaler generating traffic volume on AWA. Functioning in this manner, management believes reporting TLC’s results of operations on a stand alone basis is no longer meaningful and that profitability of AWA and TLC is best measured on a combined basis. Accordingly, the Company discontinued providing separate company disclosures for AWA and TLC starting with this Annual Report on Form 10-K.

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Summary

      Holdings earned consolidated net income of $7.7 million in 2000, as compared to 1999’s record consolidated net income of $119.4 million. Diluted earnings per share for the year ended December 31, 2000 were $0.22 compared to a record $3.03 for the year ended December 31, 1999. The decline in earnings was due primarily to a 65% increase in year-over-year fuel price, an increase in effective income tax rates and the airline’s unsatisfactory operating performance during 2000. The 2000 results include non-operating pretax gains of $15.5 million ($9.6 million after tax) from AWA’s sale of Priceline.com equity in March 2000, $9.2 million ($5.7 million after tax) from TLC’s sale of a majority interest in National Leisure Group and The Vacation Store in May 2000, $2.0 million ($1.2 million after tax) from TLC’s sale of America West Golf Vacations in July 2000 and $8.6 million ($5.3 million after tax) from AWA’s sale of GetThere.com equity in October 2000. (See Note 11, “Non-Operating Income (Expense) —Other, Net” in Notes to Consolidated Financial Statements.) The 2000 period also includes $16.0 million of non-recurring operating expenses. The non-recurring expenses include charges related to the write-down to net realizable value of certain excess expendable parts inventory that will be sold. Consolidated income tax expense for financial reporting purposes was $17.1 million for 2000 on pretax income of $24.7 million. This compares to $86.8 million of tax expense in 1999 on $206.2 million of pretax income. Holdings’ effective tax rate increases sharply as pretax earnings decrease primarily as the result of AWA’s amortization of excess reorganization value expense, which is not deductible for tax purposes. Accordingly, the Company’s book tax rate increased to 69.0% in 2000 from 42.1% in 1999.

      In 1998 the Company recognized net income of $108.6 million and income tax expense for financial reporting purposes of $85.8 million. Diluted earnings per share for 1998 were $2.40.

AWA

      The following discussion provides an analysis of AWA’s results of operations and reasons for material changes therein for the years ended December 31, 2000, 1999 and 1998.

AMERICA WEST AIRLINES, INC.
Statements of Operations
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands)

                             
2000 1999 1998



Operating revenues:
Passenger
$ 2,179,811 $ 2,028,223 $ 1,858,551
Cargo
37,377 41,936 45,551
Other
73,683 76,796 64,612



Total operating revenues
2,290,871 2,146,955 1,968,714



Operating expenses:
Salaries and related costs
556,906 498,490 448,049
Aircraft rents
331,005 277,326 244,088
Other rents and landing fees
130,679 122,034 119,089
Aircraft fuel
373,313 220,380 194,360
Agency commissions
86,469 114,742 117,483
Aircraft maintenance materials and repairs
258,432 218,319 182,844
Depreciation and amortization
54,313 48,442 49,026
Amortization of reorganization value in excess of amounts allocable to identifiable assets
19,896 19,896 19,896
Other
492,596 429,425 396,033



Total operating expenses
2,303,609 1,949,054 1,770,868



Operating income (loss)
(12,738 ) 197,901 197,846



Nonoperating income (expenses):
Interest income
23,706 19,593 20,682
Interest expense, net
(22,939 ) (29,352 ) (33,807 )
Gain (loss) on disposition of property and equipment
(2,332 ) 1,095 (638 )
Other, net
29,444 11,737 474



Total nonoperating income (expenses), net
27,879 3,073 (13,289 )



Income before income taxes
$ 15,141 $ 200,974 $ 184,557



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      The table below sets forth selected operating data for AWA.

                                           
Year Ended December 31, Percent Percent

Change Change
2000 1999 1998 2000-1999 1999-1998





Aircraft (end of period)
138 123 111 12.2 10.8
Average daily aircraft utilization (hours)
10.9 11.6 12.0 (6.0 ) (3.3 )
Available seat miles (in millions)
27,112 25,912 24,307 4.6 6.6
Block hours (in thousands)
517 493 461 4.9 6.9
Average stage length (miles)
878 862 822 1.9 4.9
Average passenger journey (miles)
1,303 1,303 1,218 7.0
Revenue passenger miles (in millions)
19,113 17,711 16,374 7.9 8.2
Load factor (percent)
70.5 68.4 67.4 2.1 pts 1.0 pts
Passenger enplanements (in thousands)
19,954 18,704 17,792 6.7 5.1
Yield per revenue passenger mile (cents)
11.40 11.45 11.35 (0.4 ) 0.9
Revenue per available seat mile:
Passenger (cents)
8.04 7.83 7.65 2.7 2.4
Total (cents)
8.45 8.29 8.10 1.9 2.3
Fuel consumption (gallons in millions)
424 412 387 2.9 6.5
Average fuel price (cents per gallon)
88.1 53.4 50.3 65.0 6.2
Full-time equivalent employees (end of period)
12,850 11,536 10,759 11.4 7.2

      The table below sets forth the major components of CASM for AWA for the applicable years.

                                         
Year Ended December 31, Percent Percent

Change Change
2000 1999 1998 2000-1999 1999-1998





(in cents)
Salaries and related costs
2.06 1.92 1.84 6.8 4.3
Aircraft rents
1.22 1.07 1.01 14.1 5.9
Other rents and landing fees
.48 .47 .49 2.3 (4.1 )
Aircraft fuel
1.38 .85 .80 61.9 6.2
Agency commissions
.32 .44 .48 (28.0 ) (8.3 )
Aircraft maintenance materials and repairs
.95 .84 .75 13.1 12.0
Depreciation and amortization
.20 .19 .20 7.2 (5.0 )
Amortization of reorganization values in excess of amounts applicable to identifiable assets
.07 .08 .08 (4.4 )
Other
1.82 1.66 1.64 9.6 1.2



8.50 7.52 7.29 13.0 3.2



2000 Compared with 1999

      AWA recorded an operating loss of $12.7 million in 2000, a decrease of $210.6 million from 1999’s operating income of $197.9 million. Income before income taxes for 2000 was $15.1 million compared to $201.0 million in 1999.

      Total operating revenues for 2000 were a record $2.3 billion. Passenger revenues were a record $2.2 billion in 2000, an increase of $151.6 million or 7.5% from 1999. RASM in 2000 increased 2.7% to 8.04 cents from 7.83 cents despite a 1.9% increase in average stage length due to increased flying to long-haul business markets. Revenue per passenger mile (“yield”) decreased 0.4% to 11.40 cents in 2000 from 11.45 cents in 1999. Capacity, as measured by available seat miles (“ASMs”) increased 4.6% in 2000 as compared to 1999 while load factor (the percentage of available seats that are filled with revenue passengers) increased by 2.1 points to 70.5%. Cargo revenues for 2000 decreased $4.6 million (10.9%) due to lower freight and mail volumes. Other revenues, which consist primarily of alcoholic beverage sales, contract service sales, service charges and Mesa Airlines net revenues, decreased $3.1 million (4.1%) due primarily to the effect of higher fuel prices, which reduced net revenues from AWA’s codesharing agreement with Mesa Airlines.

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      Operating expenses in 2000 increased $354.6 million, or 18.2% year-over-year while ASMs increased 4.6% in 2000 as compared to 1999. As a result, CASM increased 13.0% to 8.50 cents in 2000 from 7.52 cents in 1999 largely due to higher fuel prices, the airline’s operating reliability issues which led to a reduction in ASMs without a corresponding reduction in total expenses and $16.0 million of non-recurring operating expenses which were recorded in “other expenses.” Excluding the non-recurring operating expenses, CASM for 2000 was 8.44 cents, an increase of 12.2% from 1999. Significant changes in the components of operating expense per ASM are explained as follows:

    Salaries and related costs per ASM increased 6.8% primarily due to a higher number of employees in 2000 to support anticipated growth. The number of full-time equivalent employees increased 11.4% year-over-year. Also, contracts with the Transportation Workers Union (“TWU”) (signed June 2000) and the Association of Flight Attendants (“AFA”) (signed May 1999), covering the airline’s fleet service workers and flight attendants, respectively, included higher wage rates. Payroll expense for fleet service personnel increased by $13.9 million (17.3%) and flight attendant salaries increased $6.6 million (12.4%) in 2000. In addition, the contract with Airline Pilots Association (“ALPA”) (signed May 1995) required longevity-related salary level increases. Payroll expense for pilots increased by $16.6 million (12.0%) in 2000.
 
    Aircraft rent expense per ASM increased 14.1% due primarily to the net addition of 15 leased aircraft to the fleet during 2000 as compared to 1999. The effect of a sale/leaseback transaction involving six previously owned aircraft, which was completed in August 1999, increased aircraft rent expense by approximately $8.8 million in 2000.
 
    Aircraft fuel expense per ASM increased 61.9% due to a 65.0% increase in the average price per gallon of fuel to 88.1 cents in 2000 from 53.4 cents in 1999.
 
    Agency commissions expense per ASM decreased 28.0% due to an increase in the mix of non-commissionable revenue in 2000 primarily due to increased usage of the Company’s website and other lower cost distribution channels and a decrease in the base commission rate from 8% to 5% effective October 18, 1999.
 
    Aircraft maintenance materials and repairs expense per ASM increased 13.1% primarily due to higher aircraft C-check ($27.2 million), engine overhaul ($2.4 million) and wheel and brake maintenance ($1.1 million) expenses.
 
    Depreciation and amortization expense per ASM increased 7.2% due primarily to an increase in amortization expense related to computer software and hardware additions and facility improvements to support growth ($4.1 million) and aircraft leasehold improvements ($2.6 million). Rotable inventory ($1.5 million) and engine ($0.8 million) depreciation expenses also increased in 2000. These increases were offset in part by a decrease in airframe depreciation ($3.6 million) resulting from the sale/leaseback transaction involving six previously owned aircraft, which was completed in August 1999.
 
    Amortization of excess reorganization value expense per ASM decreased 4.4% due to the 4.6% increase in ASMs.
 
    Other operating expenses per ASM increased 9.6% to 1.82 cents from 1.66 cents primarily due to the non-recurring charges of $16.0 million, higher interrupted trip and baggage claim expenses driven by the airline’s operational challenges ($12.1 million), higher professional, technical and legal fees ($7.6 million) and increased costs resulting from growth. Growth-related costs include aircraft refueling charges and fuel taxes ($7.6 million), catering expense ($6.7 million), frequent traveler program expense ($5.3 million), advertising ($5.0 million), furnished accommodations and per diem ($4.3 million), ground handling ($3.8 million), guard services ($2.2 million), aircraft cleaning ($1.6 million) and traffic liability insurance ($1.4 million). These increases were offset in part by a $19.6 million year-over-year decrease in Year 2000 remediation costs and the recovery in September 2000 of $4.1 million from the settlement of a lawsuit related to certain software applications that were previously written off.

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      Net non-operating expenses benefited from a $15.5 million gain on sale of 500,000 warrants to purchase common stock of Priceline.com (“Priceline”) in March 2000 and an $8.6 million gain on sale of one million shares of GetThere.com common stock in October 2000. The 1999 period included a $2.7 million gain on sale of AWA’s investment in 30,000 shares of Priceline common stock in June 1999 and an $11.9 million mark-to-market gain on 294,109 shares of Priceline common stock that were sold in January 2000. Net interest expense decreased $6.4 million in 2000 primarily due to lower average outstanding debt resulting in part from the sale/leaseback of six aircraft in August 1999. Interest income increased $4.1 million due to higher interest rates and cash and cash equivalent balances in 2000.

1999 Compared with 1998

      For 1999 AWA realized operating income of $197.9 million, which was relatively flat when compared to the $197.8 million of operating income recognized in 1998. Income before income taxes for 1999 was a record $201.0 million compared to $184.6 million in 1998.

      Total operating revenues for 1999 were $2.1 billion. Passenger revenues were $2.0 billion in 1999, an increase of $169.7 million or 9.1% from 1998. RASM in 1999 increased 2.4% to 7.83 cents from 7.65 cents driven by a 0.9% increase in yield. The increase in RASM and yield occurred despite a 4.9% increase in average stage length due to increased flying to long-haul business markets. ASMs increased 6.6% in 1999 as compared to 1998 while load factor increased by 1.0 points to 68.4%. Cargo revenues for 1999 decreased $3.6 million (7.9%) due to lower freight and mail volumes. Other revenues increased $12.2 million (18.9%) due primarily to expansion and increased profitability of AWA’s codesharing agreement with Mesa Airlines.

      Operating expenses in 1999 increased $178.2 million, or 10.1% year-over-year while ASMs increased 6.6% in 1999 as compared to 1998. As a result, CASM increased 3.2% to 7.52 cents in 1999 from 7.29 cents in 1998. Significant changes in the components of operating expense per ASM are explained as follows:

    Salaries and related costs per ASM increased 4.3% primarily due to a higher number of employees in 1999 to support anticipated growth. Also, contracts with the International Brotherhood of Teamsters (“IBT”) (signed October 1998) and AFA (signed May 1999), covering the airline’s mechanics and flight attendants, respectively, included higher wage rates. Payroll expense for maintenance-related personnel increased by $3.7 million (21.3%) and flight attendant salaries increased $8.4 million (18.6%) in 1999. In addition, the contract with ALPA (signed May 1995), covering the airline’s pilots, required longevity-related salary level increases. Payroll expense for pilots increased by $11.2 million (8.8%) in 1999.
 
    Aircraft rent expense per ASM increased 5.9% due primarily to the net addition of 12 leased aircraft to the fleet during 1999 as compared to 1998. The effect of a sale/leaseback transaction involving six previously owned aircraft, which was completed in August 1999, increased aircraft rent expense by approximately $5.5 million in 1999.
 
    Other rents and landing fees expense per ASM decreased 4.1% in 1999 due to the 6.6% increase in ASMs. A decrease in aircraft part borrow costs of $2.4 million was substantially offset by higher landing fees ($1.4 million) and airport rents ($1.0 million).
 
    Aircraft fuel expense per ASM increased 6.2% due to a 6.2% increase in the average price per gallon of fuel to 53.4 cents in 1999 from 50.3 cents in 1998.
 
    Agency commissions expense per ASM decreased 8.3% due to an increase in the mix of non-commissionable revenue in 1999 as compared to 1998. A decrease in the base commission rate from 8% to 5% effective October 18, 1999 and the institution of a $50 commission cap implemented on May 1, 1998 also contributed to the decrease.
 
    Aircraft maintenance materials and repairs expense per ASM increased 12.0% primarily due to a $21.9 million increase in capitalized maintenance amortization expense for 1999 when compared to 1998 and higher airframe maintenance costs ($5.7 million).

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    Depreciation and amortization expense per ASM decreased 5.0% due primarily to the airline extending the estimated depreciable service lives of certain Boeing 737-200 aircraft that have been modified to meet the FAA’s Stage III noise requirements. This change increased the average depreciable life by approximately four years. The sale/leaseback transaction involving six previously owned aircraft, which was completed in August 1999, also decreased depreciation and amortization expense by approximately $4.0 million.
 
    Other operating expenses per ASM increased 1.2% to 1.66 cents from 1.64 cents primarily due to the effect in 1999 of non-salary related Year 2000 costs ($6.9 million), higher interrupted trip expense ($4.3 million) and higher costs resulting from growth. Growth-related costs include catering costs ($3.6 million), refueling and service checks ($3.3 million), EDS reservation systems fees ($2.8 million) and property taxes ($2.1 million). These increases were offset in part by a $3.7 million gain on sale of AWA’s investment in Equant, a $2.6 million decrease in traffic liability insurance expense primarily due to a rate decrease in 1999 and a $5.3 million decrease in expense associated with AWA’s frequent flyer program resulting from a reduction in the estimated liability for travel awards.

      Net non-operating expenses benefited from a $2.7 million gain on sale of AWA’s investment in 30,000 shares of Priceline common stock in June 1999. AWA also recognized an $11.9 million unrealized gain related to an investment in 294,109 shares of Priceline common stock. Net interest expense decreased $4.5 million in 1999 primarily due to lower average outstanding debt and interest income decreased $1.1 million due to lower cash and cash equivalent balances.

Liquidity and Capital Resources

      Holdings’ unrestricted cash and cash equivalents and short-term investments increased to $194.8 million at December 31, 2000 from $127.8 million at December 31, 1999. Net cash provided by operating activities decreased to $190.1 million in 2000 from $269.3 million in 1999, a decrease of $79.2 million, due to lower net income in the 2000 period. Net cash used in investing activities increased to $204.2 million in 2000 from $106.8 million in 1999. This increase was primarily due to the sale in August 1999 of six aircraft as part of a sale/leaseback transaction which provided $114.1 million of cash flows from investing activities. In addition, the 2000 period included purchases of short-term investments totaling $35.1 million, as compared to sales of $11.9 million of short-term investments in 1999, and the sale of TVS and NLG which generated net proceeds of $44.5 million. Net cash provided by financing activities was $46.0 million for the year ended December 31, 2000 compared to $158.7 million used in financing activities in 1999. The 2000 period included $32.0 million of borrowing to fund the acquisition of a new A320 aircraft in June 2000, which was repaid in full upon completion of a sale/leaseback transaction in July 2000, and $111.3 million of borrowing under AWA’s revolving credit facility in December 2000. AWA repaid $50 million of credit facility debt in February 2001 and $15 million in March 2001. The 2000 period also included $10.2 million of long-term debt repayments and purchases of common stock under the stock repurchase program totaling $60.7 million. The 1999 period included $162.1 million of revolving credit facility debt, $94.3 million in February 1999 and $67.8 million in August 1999. These borrowings were repaid in 1999 in accordance with the terms of the credit facility. The 1999 period also included proceeds of $32.8 million from the exercise of 2.6 million AWA Warrants to purchase Holdings’ Class B Common Stock and purchases of Holdings Class B Common Stock and AWA Warrants totaling $121.7 million.

      Operating with a working capital deficiency is common in the airline industry as tickets sold for transportation which has not yet been provided are classified as a current liability while the related income producing assets, the aircraft, are classified as non-current. The Company’s working capital deficiency at December 31, 2000 is $183.1 million.

      As of December 31, 2000, the Company had $305.2 million of long-term debt (including current maturities) which consists primarily of principal amortization of notes payable secured by certain of the Company’s aircraft and $111.3 million of revolving credit facility debt. AWA repaid $50 million of credit facility debt in February 2001 and $15 million in March 2001. Management expects to fund the remaining requirements with cash from operations or refinance these obligations, subject to availability and market conditions at such time.

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      At December 31, 2000, AWA had firm commitments to AVSA S.A.R.L., an affiliate of Airbus Industrie (“AVSA”), to purchase a total of 39 Airbus aircraft. AWA also had 17 options and 25 purchase rights to purchase aircraft in the “A320 family” of aircraft (A318s, A319s, A320s and A321s) for delivery in 2005 through 2008. The aggregate cost of firm commitments remaining under the aircraft order is approximately $1.5 billion.

      In July 2000 America West Airlines 2000-1 Pass Through Trusts issued $253.3 million of Pass Through Trust Certificates in connection with the financing of eight Airbus A319 aircraft and two Airbus A320 aircraft to be purchased from AVSA. The Pass Through Trust Certificates are not direct obligations of, nor guaranteed by, Holdings and AWA. The combined effective interest rate on the financing is 8.49%. Six A319 and one A320 aircraft that are the subject of this financing were delivered in 2000. The remaining three aircraft were delivered in the first quarter of 2001.

      AWA intends to seek additional financing (which may include public debt financing or private financing) in the future when and as appropriate to support these aircraft orders. There can be no assurance that sufficient funding will be obtained for all aircraft. A default by AWA under the AVSA purchase commitment could have a material adverse effect on AWA.

      AWA has in place a $125 million senior secured revolving credit facility with a group of financial institutions that will expire in 2002. The credit agreement is secured by certain assets of AWA. As of December 31, 2000, AWA had drawn $111.3 million to provide additional working capital during the first quarter of 2001 when revenues tend to be lower due to seasonal fluctuations in the demand for air travel. AWA subsequently repaid $50 million in February 2001 and $15 million in March 2001.

      In May 2000 Holdings completed the sale of a majority interest in TLC’s retail operations, NLG and TVS, to Softbank Capital Partners and General Catalyst LLC. TLC received $52 million in cash and retained a 12% passive ownership interest in the restructured venture.

      In July 2000 Holdings completed the sale of America West Golf Vacations, a division of TLC, to Book4golf.com, a provider of Internet-based, real-time golf tee time reservations systems. TLC received 900,000 common shares, with a fair market value at December 31, 2000 of approximately $0.3 million, and up to 700,000 share purchase warrants of Book4golf.com. Exercise of the warrants and right to earn an additional 300,000 common shares is subject to certain performance criteria. Book4golf.com and TLC have formed a post-acquisition strategic alliance to create and market golf vacation packages that can be designed and purchased on-line, including tee times, green fees, golf lessons, air travel, car rental and hotel accommodations.

      In January 2001 AWA entered into a development agreement and ground lease with the City of Phoenix pursuant to which AWA will construct, lease and operate a flight operations and training facility on land located on the northwest corner of Interstate 10 and Buckeye Road and adjacent to Phoenix Sky Harbor International Airport. The initial lease term is 20 years with two five-year extension options. The facility will contain 164,000 square feet and be comprised of pilot and in-flight training facilities, systems and maintenance operations control, and crew scheduling. The estimated cost to design and construct the facility is $35 million.

      Capital expenditures for the years ended December 31, 2000, 1999 and 1998 were approximately $255.4 million, $299.6 million and $177.0 million, respectively. Capital expenditures for capitalized maintenance were $125.6 million, $112.8 million and $112.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. Capital expenditures in 2000 include $32.0 million to purchase one Airbus A320 aircraft that was subsequently refinanced through the sale of America West Airlines 2000-1 Pass Through Trust Certificates. Excluding this aircraft, 2000 capital expenditures were approximately $223.4 million. Capital expenditures in 1999 include $67.8 million to purchase one Airbus A319 and one Airbus A320 aircraft that were subsequently refinanced through the sale of America West Airlines 1999-1 Pass Through Trust Certificates. Excluding these aircraft, 1999 capital expenditures were approximately $231.8 million. Capital expenditures for 2001 are expected to increase to approximately $279.9 million due primarily to increased expenditures for rotable aircraft parts, the new flight training center and automation projects. The Company currently intends to fund such expenditures with cash from operations.

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Other Information

Labor Relations

      On June 2, 2000 AWA and the TWU entered into a five-year collective bargaining agreement covering the airline’s 2,500 fleet service employees.

      The Company is in the process of negotiating with ALPA on a new contract for AWA’s pilots. The existing contract with ALPA became amendable in May 2000. In addition, the Company is in negotiations with the IBT on a first contract covering the Company’s stock clerks, a work group of approximately 60 employees. The Company cannot predict the form of these future collective bargaining agreements and therefore the effect, if any, on AWA’s operations or financial performance.

      On January 22, 2001, the TWU filed an Application for Investigation of Representation Dispute with the National Mediation Board (“NMB”), seeking to represent approximately 4,000 passenger service representatives and reservations agents. On March 20, 2001, that application was dismissed by the NMB due to an insufficient showing of interest. See “Risk Factors —Efforts by labor unions to organize AWA’s employees have occurred in the past and we expect will occur in the future, which could divert management attention, disrupt operations and increase our operating expenses.”

Income Taxes

      At December 31, 2000, the Company had net operating loss (“NOL”), general business tax credit carryforwards and alternative minimum tax credit carryforwards of approximately $147.1 million, $10.3 million and $1.3 million, respectively. Under Section 382 of the Internal Revenue Code of 1986, as amended, if a loss corporation has an “ownership change” within a designated testing period, its ability to use its NOL and tax credit carryforwards is subject to certain limitations. The Company is a loss corporation within the meaning of Section 382. The issuance of certain common stock by the Company pursuant to the plan of reorganization resulted in an ownership change within the meaning of Section 382. This ownership change has resulted in an annual limitation (the “Section 382 Limitation”) upon the Company’s ability to offset any post-change taxable income with pre-change NOL. The Company’s Section 382 Limitation is $36.2 million per year. Should the Company generate insufficient taxable income in any post-change taxable year to utilize fully the Section 382 Limitation of that year, any excess limitation will be carried forward to use in subsequent tax years, provided the pre-change NOL has not been exhausted and the carryforward period has not expired. The amount of the limitation may under certain circumstances be increased by the built-in gains in assets held by the Company at the time of the ownership change that are recognized in the five year period after the change. During 1999, the Company generated a $105 million built-in gain resulting from a sale/leaseback transaction involving six previously owned aircraft, thereby increasing the limitation under Section 382. See "(d) Sale/Leaseback Transaction” in Note 13, “Commitments and Contingencies” in Notes to Consolidated Financial Statements. The alternative minimum tax credit may be carried forward indefinitely and is available to reduce future income tax payable.

      The Company’s reorganization and the associated implementation of fresh start reporting in 1994 gave rise to significant items of expense for financial reporting purposes that are not deductible for income tax purposes. In large measure, it is these nondeductible expenses that result in an effective tax rate (for financial reporting purposes) significantly greater than the current U.S. corporate statutory rate of 35%. Nevertheless, the Company’s actual cash income tax liability (i.e., current income taxes payable) of $7.1 million in 2000 is considerably lower than income tax expense shown for financial reporting purposes of $17.1 million. This difference in financial expense compared to actual income tax liability is in part attributable to the utilization of certain tax attributes of the predecessor company that serve to reduce AWA’s actual income tax liability.

Government Regulations

      As a member of the Air Transport Association, AWA voluntarily established a customer service plan to provide additional information to passengers on flight delays, cancellations or overbookings, to offer the lowest fare available, allow reservations to be held or cancelled, provide prompt ticket refunds and be more responsive to customer complaints. Congress is currently considering legislation that could impose new consumer protection

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requirements on airlines including payments to passengers for excessive flight delays and prohibition of the issuance of non-refundable tickets. As a result of competitive pressures AWA and other airlines would be limited in their ability to pass costs associated with compliance with such laws to passengers. We cannot forecast the cost impact of such measures if enacted.

      In 1997 new aviation taxes were imposed through September 30, 2007 to provide funding for the FAA. Included in the new law is a phase-in of a modified federal air transportation excise tax structure with a system that includes: a domestic excise tax which started at 9% and declined to 7.5% in 1999; a domestic segment tax that started at $1.00 and increases to $3.00 by 2003; and an increase in taxes imposed on international travel from $6.00 per international departure to an arrival and departure tax of $12.00 (each way). Both the domestic segment tax and the international arrival and departure tax are indexed for inflation. The legislation also included a 7.5% excise tax on certain amounts paid to an air carrier for the right to provide mileage and similar awards (e.g., purchase of frequent flyer miles by a credit card company). As a result of competitive pressures, AWA and other airlines have been limited in their ability to pass on the cost of these taxes to passengers through fare increases.

      In December 1997 the National Civil Aviation Review Commission (the “NCARC”) completed its Report to Congress on FAA funding and recommended implementation of a cost based user fee system for air carriers. Congress is presently considering the recommendations of the NCARC, which may result in enactment of a new funding mechanism. The Company cannot currently estimate the effect the new combination of ticket and segment taxes, or any change in those taxes as recommended by the NCARC, will have on its operating results. There can be no assurance that the new taxes or such changes will not have a material adverse effect on the Company’s financial condition and results of operations.

      For additional information on government regulation and its effect on the Company see “Government Regulations” in Item 1, Business.

Forward Looking Information

      This discussion contains various forward-looking statements and information that are based on management’s beliefs as well as assumptions made by and information currently available to management. When used in this document, the words “anticipate”, “estimate”, “project”, “expect” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or expected. Among the key factors that may have a direct bearing on the Company’s results are competitive practices in the airline and travel industries generally and particularly in the Company’s principal markets, the ability of the Company to meet existing financial obligations in the event of adverse industry or economic conditions or to obtain additional capital to fund future commitments and expansion, the Company’s relations with unionized employees generally and the impact of the process of negotiation of labor contracts on the Company’s operations, the outcome of negotiations of collective bargaining agreements and the impact of those agreements on labor costs, and the impact of current and future laws and governmental regulations affecting the airline and travel industries and the Company’s operations. For additional discussion of such risks see “Business —Risk Factors,” included in Item 1 of this Report on Form 10-K. Any forward-looking statements speak only as of the date such statements are made.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Sensitive Instruments

(a) Commodity Price Risk

      Aircraft fuel costs accounted for approximately 16% of the Company’s total operating expenses during 2000. At current consumption levels, a one cent per gallon change in the price of jet fuel would affect the Company’s annual operating results in 2000 by approximately $4.7 million. Accordingly, a substantial change in the price of jet fuel would have a significant impact on the Company’s results of operations.

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      In 1996 AWA implemented a fuel hedging program to manage the risk from fluctuating jet fuel prices. The program’s objectives are to provide some protection against extreme, upward movements in the price of jet fuel and to protect AWA’s ability to meet its annual fuel expense budget. Under the program, AWA may enter into certain hedging transactions with approved counterparties for future periods generally not exceeding 12 months.

      As of December 31, 2000, the Company had entered into price basis swap transactions which fix the spread between West Coast jet fuel prices and heating oil futures and Gulf Coast jet fuel prices and heating oil futures. Further, the Company had entered into costless collar transactions which establish an upper and lower limit on heating oil futures prices. These transactions are in place with respect to approximately 12% of projected 2001 fuel requirements, including 51% related to the first quarter, as of December 31, 2000.

      The use of such hedging transactions in the Company’s fuel hedging program could result in the Company not fully benefiting from certain declines in heating oil futures prices or certain declines in the spread between jet fuel prices and heating oil futures. At December 31, 2000 the Company estimates that a 10% change in the price of West Coast jet fuel relative to heating oil futures would have changed the fair value of existing West Coast jet fuel basis swap contracts by approximately $37,800. Similarly, a 10% change in the price of Gulf Coast jet fuel relative to heating oil futures would have changed the fair value of existing Gulf Coast jet fuel basis swap contracts by approximately $10,080. In addition, a 10% increase in heating oil futures prices would have changed the fair value of the costless collar by approximately $1.7 million while a 10% decrease in heating oil futures prices would have changed the fair value by approximately $2.8 million.

      As of March 30, 2001, approximately 40% of AWA’s 2001 fuel requirements are hedged.

      See “(n) New Accounting Standards” in Note 1, “Summary of Significant Accounting Policies” in Notes to Consolidated Financial Statements.

(b) Interest Rate Risk

      The Company’s exposure to interest rate risk relates primarily to its variable rate long-term debt obligations. At December 31, 2000, the Company’s variable-rate long-term debt obligations of approximately $15.7 million represented approximately 11% of its total long-term debt. If interest rates increased 10% in 2001, the impact on the Company’s results of operations would not be material.

ITEM 8A. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA —AMERICA WEST HOLDINGS CORPORATION

      Consolidated balance sheets of Holdings as of December 31, 2000 and 1999, and the related consolidated statements of income, cash flows and stockholders’ equity for each of the years in the three-year period ended December 31, 2000, together with the related notes and the report of KPMG LLP, independent certified public accountants, are set forth on the following pages.

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders
America West Holdings Corporation:

      We have audited the accompanying consolidated balance sheets of America West Holdings Corporation and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, cash flows and stockholders’ equity for each of the years in the three-year period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of America West Holdings Corporation and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.

KPMG LLP
Phoenix, Arizona
March 28, 2001

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AMERICA WEST HOLDINGS CORPORATION
Consolidated Balance Sheets
December 31, 2000 and 1999
(in thousands except share data)

                       
2000 1999


Assets
Current assets:
Cash and cash equivalents
$ 144,138 $ 112,174
Short-term investments
50,686 15,617
Accounts receivable, less allowance for doubtful accounts of $1,794 in 2000 and $2,453 in 1999
152,649 118,076
Expendable spare parts and supplies, less allowance for obsolescence of $5,439 in 2000 and $5,612 in 1999
41,843 49,327
Prepaid expenses
41,784 42,809


Total current assets
431,100 338,003


Property and equipment:
Flight equipment
903,336 801,541
Other property and equipment
220,085 208,961
Equipment purchase deposits
93,750 79,399


1,217,171 1,089,901
Less accumulated depreciation and amortization
462,844 382,187


754,327 707,714


Other assets:
Restricted cash
34,554 35,579
Reorganization value in excess of amounts allocable to identifiable assets, net
293,780 315,275
Other assets, net
54,754 110,583


383,088 461,437


$ 1,568,515 $ 1,507,154


Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt
$ 159,667 $ 45,171
Accounts payable
156,449 149,816
Air traffic liability
208,868 192,799
Accrued compensation and vacation benefits
36,070 49,865
Accrued taxes
17,155 23,158
Other accrued liabilities
35,988 38,030


Total current liabilities
614,197 498,839


Long-term debt, less current maturities
145,578 155,168
Deferred credits and other liabilities
101,122 106,989
Deferred tax liability, net
40,545 31,989
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 48,800,000 shares; no shares issued
Class A common stock, $.01 par value. Authorized 1,200,000 shares; issued and outstanding 941,431 shares at December 31, 2000 and 1,100,000 shares at December 31, 1999
9 11
Class B common stock, $.01 par value. Authorized 100,000,000 shares; issued and outstanding 48,991,256 shares in 2000 and 48,561,916 shares in 1999
490 486
Additional paid-in capital
594,177 599,078
Retained earnings
380,746 373,067
Accumulated other comprehensive income (loss)
(1,108 )


974,314 972,642
Less: Cost of Class B common stock in treasury, 16,333,895 shares in 2000 and 13,384,795 shares in 1999
(307,241 ) (258,473 )


Total stockholders’ equity
667,073 714,169


$ 1,568,515 $ 1,507,154


See accompanying notes to consolidated financial statements.

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AMERICA WEST HOLDINGS CORPORATION
Consolidated Statements of Income
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands except per share data)

                             
2000 1999 1998



Operating revenues:
Passenger
$ 2,179,811 $ 2,028,223 $ 1,858,551
Cargo
37,377 41,936 45,551
Other
127,166 140,725 119,182



Total operating revenues
2,344,354 2,210,884 2,023,284



Operating expenses:
Salaries and related costs
559,578 500,351 450,220
Aircraft rents
331,005 277,326 244,088
Other rents and landing fees
130,680 122,035 119,091
Aircraft fuel
373,313 220,380 194,360
Agency commissions
86,469 114,742 117,483
Aircraft maintenance materials and repairs
258,432 218,319 182,844
Depreciation and amortization
54,313 48,442 49,026
Amortization of reorganization value in excess of amounts allocable to identifiable assets
19,896 19,896 19,896
Other
543,305 484,842 437,213



Total operating expenses
2,356,991 2,006,333 1,814,221



Operating income (loss)
(12,637 ) 204,551 209,063



Nonoperating income (expenses):
Interest income
15,980 12,417 13,105
Interest expense, net
(15,449 ) (22,253 ) (26,050 )
Gain (loss) on disposition of property and equipment
(2,332 ) 1,095 (638 )
Other, net
39,181 10,340 (1,134 )



Total nonoperating income (expenses), net
37,380 1,599 (14,717 )



Income before income taxes
24,743 206,150 194,346



Income taxes
17,064 86,761 85,775



Net income
$ 7,679 $ 119,389 $ 108,571



Earnings per share:
Basic
$ 0.22 $ 3.17 $ 2.58



Diluted
$ 0.22 $ 3.03 $ 2.40



Shares used for computation:
Basic
35,139 37,679 42,102



Diluted
35,688 39,432 45,208



See accompanying notes to consolidated financial statements.

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AMERICA WEST HOLDINGS CORPORATION
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands)

                               
2000 1999 1998



Cash flows from operating activities:
Net income
$ 7,679 $ 119,389 $ 108,571
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
56,881 51,385 49,545
Amortization of capitalized maintenance
121,031 113,679 89,347
Amortization of reorganization value
21,496 21,496 21,496
Amortization of deferred credits
(9,272 ) (7,521 ) (6,798 )
Gain on sale of subsidiaries
(11,125 )
Other
5,713 3,258 14,316
Changes in operating assets and liabilities:
Increase in accounts receivable, net
(36,622 ) (21,693 ) (8,091 )
Decrease (increase) in expendable spare parts and supplies, net
7,484 (18,180 ) (4,012 )
Decrease (increase) in prepaid expenses
(2,596 ) (366 ) 93
Decrease (increase) in other assets, net
8,879 (51,984 ) 22,473
Increase (decrease) in accounts payable
9,926 37,252 (31,136 )
Increase (decrease) in air traffic liability
16,216 (16,727 ) 35,141
Increase (decrease) in accrued compensation and vacation benefits
(13,795 ) 1,526 11,072
Increase in accrued taxes
4,974 39,603 55,913
Decrease in other accrued liabilities
(152 ) (2,774 ) (1,554 )
Increase (decrease) in other liabilities
3,425 955 (7,435 )



Net cash provided by operating activities
190,142 269,298 348,941



Cash flows from investing activities:
Purchases of property and equipment
(255,417 ) (299,571 ) (176,996 )
Sale (purchases) of short-term investments
(35,069 ) 11,868 (27,485 )
Proceeds from sales of property and equipment
38,611 187,197 6,147
Net proceeds from sale of subsidiaries
44,530
Equipment purchase deposits and other
3,182 (6,250 ) (14,415 )



Net cash used in investing activities
(204,163 ) (106,756 ) (212,749 )



Cash flows from financing activities:
Proceeds from issuance of debt
143,310 162,074
Repayment of debt
(42,159 ) (239,876 ) (72,245 )
Acquisition of treasury stock
(60,653 ) (118,278 ) (116,148 )
Acquisition of warrants
(3,378 ) (16,175 )
Proceeds from exercise of AWA warrants
32,781 325
Other
5,487 7,949 4,108



Net cash provided by (used in) financing activities
45,985 (158,728 ) (200,135 )



Net increase (decrease) in cash and cash equivalents
31,964 3,814 (63,943 )



Cash and cash equivalents at beginning of year
112,174 108,360 172,303



Cash and cash equivalents at end of year
$ 144,138 $ 112,174 $ 108,360



Cash, cash equivalents and short-term investments at end of year
$ 194,824 $ 127,791 $ 135,845



See accompanying notes to consolidated financial statements.

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AMERICA WEST HOLDINGS CORPORATION
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss)
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands except share data)

                                 
CLASS A ADDITIONAL
COMMON COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS




Balance at December 31, 1997
$ 12 $ 448 $ 565,546 $ 145,107




Net income
108,571
Issuance of 25,560 shares and 353,000 shares of Class B common stock pursuant to the exercise of stock warrants and stock options including tax benefit from the exercise of stock options of $1,873
4 6,702
Issuance of 119,235 shares of Class B common stock
1 1,683
Acquisition of 100,000 shares of Class A treasury stock
(1 ) (1,811 )
Acquisition of 5,951,927 shares of Class B treasury stock
Issuance of 50,000 shares of Class B treasury stock
563
Repurchase of 2,906,867 warrants at $5.56 per warrant
(16,175 )




Balance at December 31, 1998
11 453 556,508 253,678




Net income
119,389
Issuance of 2,573,060 shares and 481,420 shares of Class B common stock pursuant to the exercise of stock warrants and stock options including tax benefit from the exercise of stock options of $647
31 41,346
Issuance of 227,237 shares of Class B common stock
2 4,567
Acquisition of 6,046,700 shares of Class B treasury stock
Issuance of 50,000 shares of Class B treasury stock
35
Repurchase of 377,400 warrants at $8.95 per warrant
(3,378 )




Balance at December 31, 1999
11 486 599,078 373,067




Net income
7,679
Other comprehensive income:
Adjustment to unrealized gain (loss) on available-for-sale securities, net of tax




Total comprehensive income
7,679




Cancellation of 1,930 shares and issuance of 442,010 shares of Class B common stock pursuant to the exercise of stock warrants and stock options including tax benefit from the exercise of stock options of $593
4 6,281
Cancellation of 10,740 shares of Class B common stock issued as restricted stock
(331 )
Acquisition of 2,999,100 shares of Class B treasury stock
Issuance of 50,000 shares of Class B treasury stock
(26 )
Acquisition and retirement of 158,569 shares of Class A common stock
(2 ) (10,825 )




Balance at December 31, 2000
$ 9 $ 490 $ 594,177 $ 380,746





[Additional columns below]

 

[Continued from above table, first column(s) repeated]
                         
ACCUMULATED OTHER CLASS B
COMPREHENSIVE TREASURY
INCOME (LOSS) STOCK TOTAL



Balance at December 31, 1997
$ $ (27,543 ) $ 683,570



Net income
108,571
Issuance of 25,560 shares and 353,000 shares of Class B common stock pursuant to the exercise of stock warrants and stock options including tax benefit from the exercise of stock options of $1,873
6,706
Issuance of 119,235 shares of Class B common stock
1,684
Acquisition of 100,000 shares of Class A treasury stock
(1,812 )
Acquisition of 5,951,927 shares of Class B treasury stock
(114,336 ) (114,336 )
Issuance of 50,000 shares of Class B treasury stock
687 1,250
Repurchase of 2,906,867 warrants at $5.56 per warrant
(16,175 )



Balance at December 31, 1998
(141,192 ) 669,458



Net income
119,389
Issuance of 2,573,060 shares and 481,420 shares of Class B common stock pursuant to the exercise of stock warrants and stock options including tax benefit from the exercise of stock options of $647
41,377
Issuance of 227,237 shares of Class B common stock
4,569
Acquisition of 6,046,700 shares of Class B treasury stock
(118,278 ) (118,278 )
Issuance of 50,000 shares of Class B treasury stock
997 1,032
Repurchase of 377,400 warrants at $8.95 per warrant
(3,378 )



Balance at December 31, 1999
(258,473 ) 714,169



Net income
7,679
Other comprehensive income:
Adjustment to unrealized gain (loss) on available-for-sale securities, net of tax
(1,108 ) (1,108 )




Total comprehensive income
(1,108 ) 6,571




Cancellation of 1,930 shares and issuance of 442,010 shares of Class B common stock pursuant to the exercise of stock warrants and stock options including tax benefit from the exercise of stock options of $593
6,285
Cancellation of 10,740 shares of Class B common stock issued as restricted stock
(331 )
Acquisition of 2,999,100 shares of Class B treasury stock
(49,825 ) (49,825 )
Issuance of 50,000 shares of Class B treasury stock
1,057 1,031
Acquisition and retirement of 158,569 shares of Class A common stock
(10,827 )



Balance at December 31, 2000
$ (1,108 ) $ (307,241 ) $ 667,073




See accompanying notes to consolidated financial statements

35


Table of Contents

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998

1. Summary of Significant Accounting Policies

      Holdings is the parent company for America West Airlines (“AWA”) and The Leisure Company (“TLC”). AWA is the ninth largest commercial airline carrier in the United States serving 63 destinations in the U.S., Canada and Mexico. TLC is a leisure travel subsidiary that arranges and sells vacation packages that include hotel accommodations, airfare, ground transportation and a variety of entertainment options. Holdings’ primary business activity is ownership of all the capital stock of AWA and TLC.

  (a)   Basis of Presentation

      The consolidated financial statements include the accounts of Holdings and its wholly owned subsidiaries AWA and TLC (collectively, the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the current year’s presentation.

  (b)   Cash, Cash Equivalents and Short-term Investments

      Cash equivalents consist of all highly liquid debt instruments purchased with original maturities of three months or less. Short-term investments consist of cash invested in certain debt securities with original maturities greater than 90 days and less than one year. The debt securities are classified as held to maturity and are carried at amortized cost which approximates fair value.

  (c)   Expendable Spare Parts and Supplies

      Flight equipment expendable spare parts and supplies are valued at average cost. An allowance for obsolescence is provided, over the estimated useful life of the related aircraft and engines, for spare parts expected to be on hand at the date the aircraft are retired from service. In the fourth quarter of 2000, the Company committed to the disposal of certain excess expendable spare parts inventory with a net book value of approximately $11.0 million. As a result, the Company recorded a non-recurring operating expense of $9.0 million to write down excess inventory to net realizable value.

  (d)   Property and Equipment

      Property and equipment are recorded at cost. Interest capitalized on advance payments for aircraft acquisitions and on expenditures for aircraft improvements are part of these costs. Interest capitalized for the years ended December 31, 2000, 1999 and 1998 was $9.0 million, $6.1 million and $4.9 million, respectively. Property and equipment is depreciated and amortized to residual values over the estimated useful lives or the lease term, whichever is less, using the straight-line method.

      The estimated useful lives for the Company’s ground property and equipment range from three to 12 years for owned property and equipment and up to 22 years for the technical support facility. The estimated useful lives of the Company’s owned aircraft, jet engines, flight equipment and rotable parts range from five to 22 years. Leasehold improvements relating to flight equipment and other property on operating leases are amortized over the life of the lease or the life of the asset, whichever is shorter.

      Effective October 1, 1998, AWA extended the estimated depreciable service lives of certain owned Boeing 737-200 aircraft which have been modified to meet the Federal Aviation Administration’s (“FAA”) Stage III noise reduction requirements. This change increased the average depreciable life by approximately four years and reduced depreciation expense in 2000, 1999 and 1998 by approximately $8.0 million, $8.0 million and $2.0 million, respectively.

      The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired as defined by Statement of Financial Accounting Standards (“SFAS”) No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.”

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

  (e)   Restricted Cash

      Restricted cash includes cash deposits securing certain letters of credit.

  (f)   Aircraft Maintenance and Repairs

      Routine maintenance and repairs are charged to expense as incurred. The cost of major scheduled airframe, engine and certain component overhauls are capitalized and amortized over the periods benefited and are included in aircraft maintenance materials and repairs expense. Additionally, an accrual for the estimated cost of scheduled airframe and engine overhauls required to be performed on leased aircraft prior to their return to the lessors has been recorded.

  (g)   Reorganization Value in Excess of Amounts Allocable to Identifiable Assets

      Reorganization value in excess of amounts allocable to identifiable assets is amortized on a straight line basis over 20 years. Accumulated amortization at December 31, 2000, 1999 and 1998 was $156.6 million, $135.1 million and $113.6 million, respectively. In accordance with SFAS No. 121 and Accounting Principles Board (“APB”) Opinion No. 17, the Company assesses the recoverability of this asset based upon expected future undiscounted cash flows and other relevant information.

  (h)   Frequent Flyer Awards

      The Company maintains a frequent travel award program known as “FlightFund” that provides a variety of awards to program members based on accumulated mileage. The estimated cost of providing the free travel, using the incremental cost method as adjusted for estimated redemption rates, is recognized as a liability and charged to operations as program members accumulate mileage.

      The Company also sells mileage credits to companies participating in its FlightFund program, such as hotels, car rental agencies and credit card companies. Revenue from the sale of mileage credits is deferred and recognized when transportation is provided.

  (i)   Deferred Credit-Operating Leases

      Rents for operating leases were adjusted to fair market value when the Company emerged from bankruptcy in 1994. The net present value of the difference between the stated lease rates and the fair market rates has been recorded as a deferred credit in the accompanying consolidated balance sheets. The deferred credit will be increased through charges to interest expense and decreased on a straight-line basis as a reduction in rent expense over the applicable lease periods. At December 31, 2000 and 1999, the unamortized balance of the deferred credit was $65.6 million and $72.2 million, respectively.

  (j)   Passenger Revenue

      Passenger revenue is recognized when transportation is provided. Ticket sales for transportation which has not yet been provided are recorded as air traffic liability. Passenger traffic commissions and related fees are expensed when the related revenue is recognized. Passenger traffic commissions and related fees not yet recognized are included as a prepaid expense.

  (k)   Advertising Costs

      The Company expenses the costs of advertising as incurred. Advertising expense for the years ended December 31, 2000, 1999 and 1998 was $26.3 million, $23.7 million and $20.6 million, respectively.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

  (l)   Income Taxes

      Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

  (m)   Stock Options

      The Company accounts for its stock option plan in accordance with the provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. In accordance with SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company provides pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and subsequent years as if the fair-value-based method defined in SFAS No. 123 had been applied. (See Note 4, “Stock Options and Awards.”)

  (n)   New Accounting Standards

      In June 1998 the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,” which established accounting and reporting standards for all derivative instruments and hedging activities. SFAS No. 133 requires recognition of all derivatives as either assets or liabilities in the balance sheet at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment (“fair value hedge”), a hedge of the exposure to variable cash flows of a forecasted transaction (“cash flow hedge”), or a hedge of the foreign currency exposure (“foreign currency hedge”) of a net investment in a foreign operation or a foreign currency-denominated forecasted transaction. The accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. In accounting for a fair value hedge, the derivative hedging instrument will be measured at fair value with the mark to fair value being recorded in earnings. In a cash flow hedge, the derivative hedging instrument will be measured at fair value with the effective portion of the gains or losses on the derivative hedging instrument initially being reported in other comprehensive income. In June 1999 the Financial Accounting Standards Board issued SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133”, which defers the effective date of SFAS No. 133 to be effective for all fiscal years beginning after June 15, 2000. The Company will adopt SFAS No. 133 in 2001. As of December 31, 2000, the estimated fair value of the Company’s fuel hedging contracts was a net obligation of $2.4 million. See “(b) Fuel Price Risk Management” in Note 6, “Financial Instruments and Risk Management” in Notes to Consolidated Financial Statements. SFAS No. 133 is not expected to have a material effect on the Company’s results of operations or financial position.

  (o)   Use of Estimates

      Management of the Company has made certain estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

2. Long-Term Debt

      Long-term debt at December 31 consists of the following:

                 
2000 1999


(in thousands)
Secured
Notes payable, primarily fixed interest rates of 10.75% to 10.79%, averaging 10.78%, installments due 2001 through 2008
$ 77,376 $ 87,245
Revolving credit facility, floating interest rates of three month LIBOR + 2.50%, averaging 9.125%, interest only due through 2003 (a)
111,310


188,686 87,245
Unsecured
10 3/4% Senior Unsecured Notes, face amount of $50 million, interest only payment until due in 2005 (b)
49,028 48,820
Notes payable, interest rates of 90-day LIBOR + 1.25%, averaging 7.97%, installments due through 2001
38,500 35,000
Industrial development bonds, face amount of $29.3 million, fixed interest rate of 6.3% due 2023 (c)
29,020 29,008
Other
11 266


116,559 113,094


Total long-term debt
305,245 200,339
Less: current maturities
159,667 45,171


$ 145,578 $ 155,168


(a)   In December 1999 AWA entered into a $125 million senior secured revolving credit facility with a group of financial institutions that has a three-year term. Borrowings under this credit facility will accrue interest at either the “base rate” (prime rate or the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate) or the “adjusted eurodollar rate” (LIBOR rate adjusted for certain reserve requirements in respect to “Eurodollar liabilities”) plus the applicable margin based on Moody’s rating of AWA’s senior unsecured notes. The credit agreement is secured by certain assets of AWA. As of December 31, 2000, AWA had drawn $111.3 million against its available line of credit. AWA subsequently repaid $50 million in February 2001 and $15 million in March 2001.
 
(b)   The 10 3/4% Senior Unsecured Notes mature on September 1, 2005 and interest is payable in arrears semi-annually. The 10 3/4% Senior Unsecured Notes may be redeemed at the option of the Company on or after September 1, 2000 at any time in whole or from time to time in part, at a redemption price equal to the following percentage of principal redeemed, plus accrued and unpaid interest to the date of redemption, if redeemed during the 12-month period beginning:

         
September 1, Percentage
2000
105.375 %
2001
103.583 %
2002
101.792 %
2003 and thereafter
100.000 %

(c)   The industrial development revenue bonds are due April 2023. Interest at 6.3% is payable semiannually (April 1 and October 1). The bonds are subject to optional redemption prior to the maturity date on or after April 1, 2008, in whole or in part, on any interest payment date at the following redemption prices: 102 percent on April 1 or October 1, 2008; 101 percent on April 1 or October 1, 2009; and 100 percent on April 1, 2010 and thereafter.

      Secured financings totaling $188.7 million are collateralized by assets, primarily aircraft, engines, simulators and rotable aircraft parts, with a net book value of $286.3 million at December 31, 2000.

      At December 31, 2000, the estimated maturities of long-term debt are as follows:

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Table of Contents

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

           
(in thousands)
2001
159,667
2002
9,674
2003
9,674
2004
8,989
2005
58,303
Thereafter
58,938

$ 305,245

      Certain of the Company’s long-term debt agreements contain minimum cash balance requirements, leverage ratios, coverage ratios, limitations on investments and restricted payments including cash dividends, and other financial covenants with which the Company was in compliance at December 31, 2000.

3. Capital Stock

      On August 25, 1994, AWA issued approximately 10.4 million warrants to purchase Class B Common Stock with an exercise price of $12.74 per share. The warrants were exercisable by the holders any time before August 25, 1999 and 10.4 million shares of Class B Common Stock were reserved for the exercise of these warrants. As part of the holding company formation transaction that was effective December 31, 1996, the AWA warrants became rights to acquire shares of Holdings Class B Common Stock. AWA made arrangements for the issuance of Holdings Class B Common Stock upon the exercise of such warrants by purchasing an option from Holdings to acquire such stock. AWA issued a $62.4 million note payable to Holdings due December 31, 2005 with an interest rate of 11%. Subsequently, Holdings made a capital contribution to AWA by issuing a note payable to AWA for $62.4 million due December 31, 2045 with an interest rate of 10 7/8%. Approximately 7.4 million warrants were repurchased by AWA for approximately $51.0 million and approximately 2.6 million warrants were exercised at $12.74 per share. The balance of unexercised warrants expired and were cancelled on August 25, 1999.

      Preferred Stock

      The Company’s Board of Directors by resolution may authorize the issuance of the Preferred Stock as a class, in one or more series, having the number of shares, designations, relative voting rights, dividend rights, liquidation and other preferences and limitations that the Board of Directors fixes, without any stockholder approval. No shares of Preferred Stock have been issued.

      Common Stock

      The holders of Class A Common Stock are entitled to fifty votes per share, and the holders of Class B Common Stock are entitled to one vote per share, on all matters submitted to a vote of common stockholders except that voting rights of non-U.S. citizens are limited. The Class A Common Stock is convertible into an equal number of Class B shares at any time at the election of the holders of the Class A Common Stock. Holdings’ Class B Common Stock is listed on the New York Stock Exchange.

      Holders of Common Stock of all classes participate equally as to any dividends or distributions on the Common Stock, except that dividends payable in shares of Common Stock, or securities to acquire Common Stock, will be made in the same class of Common Stock as that held by the recipient of the dividend. Holders of Common Stock have no right to cumulate their votes in the election of directors. The Common Stock votes together as a single class, subject to the right to a separate class vote in certain instances required by law.

      Treasury Stock

      In September 1995 the Company adopted a stock repurchase program. The program was amended in December 1995, August 1997, August 1998, May 1999 and February 2000. During 1995 through 2000 the Company purchased approximately 16.5 million shares of Class B Common Stock and 7.4 million Warrants. As of December 31, 2000, the remaining balance available to be purchased under the program was 900 shares of issued and outstanding Class B Common Stock.

40


Table of Contents

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

4. Stock Options and Awards

      Under the 1994 Incentive Equity Plan, as amended (the “Plan”), the Company’s Board of Directors may grant stock options to officers and key employees. The maximum number of shares of Class B Common Stock authorized for issuance under the Plan is 9.0 million shares of which 0.6 million shares are available for grant at December 31, 2000. Stock options are granted with an exercise price equal to the stock’s fair market value at the date of grant, generally become exercisable over a three-year period and expire if unexercised at the end of 10 years.

      Stock option activity during the years indicated is as follows:

                   
Weighted-
Number of Average
Shares Exercise Price


Balance at December 31, 1997:
3,451,500 $ 14.09


Granted
1,867,000 $ 19.60
Exercised
(353,000 ) $ 12.77
Canceled
(180,500 ) $ 16.02


Balance at December 31, 1998:
4,785,000 $ 16.26


Granted
1,525,650 $ 19.53
Exercised
(481,420 ) $ 16.51
Canceled
(591,993 ) $ 18.74


Balance at December 31, 1999:
5,237,237 $ 16.91


Granted
1,782,300 $ 13.49
Exercised
(442,010 ) $ 12.93
Canceled
(676,222 ) $ 19.28


Balance at December 31, 2000:
5,901,305 $ 15.90


      At December 31, 2000, options outstanding and exercisable by price range are as follows:

                                         
Weighted Weighted
Average Weighted Options Average
Range of Options Remaining Average Currently Exercise
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Price






$8.00 - $12.00
2,195,884 7.57 $ 10.51 1,065,593 $ 10.23
$12.01 - $16.50
880,834 6.97 $ 14.36 652,178 $ 14.16
$16.51 - $20.00
1,247,001 8.22 $ 18.10 615,013 $ 18.24
$20.01 - $24.88
1,459,586 7.70 $ 22.07 785,125 $ 22.60
$24.89 - $29.19
118,000 7.38 $ 28.48 87,667 $ 28.47


5,901,305 7.64 $ 15.90 3,205,576 $ 16.09


      The per share weighted-average fair value of stock options granted during 2000, 1999 and 1998 was $5.38, $8.83 and $7.88, respectively, on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: 2000 —expected dividend yield of 0.0%, risk-free interest rate of 6.1%, volatility of 52.2% and an expected life of four years; 1999 —expected dividend yield of 0.0%, risk-free interest rate of 5.5%, volatility of 60.0% and an expected life of four years; 1998 —expected dividend yield of 0.0%, risk-free interest rate of 4.5%, volatility of 52.6% and an expected life of four years.

      The Company applies APB Opinion No. 25 in accounting for its Plan and, accordingly, no compensation cost has been recognized for its stock options in the consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company’s net income and earnings per share would have been reduced to the pro forma (unaudited) amounts indicated below:

41


Table of Contents

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

                             
2000 1999 1998



(in thousands except per share data)
Net income (loss):
As reported
$ 7,679 $ 119,389 $ 108,571



Pro forma
$ (1,709) $ 114,323 $ 103,583



Earnings (loss) per share:
Basic
As reported
$ 0.22 $ 3.17 $ 2.58



Pro forma
$ (0.05) $ 3.03 $ 2.46



Diluted
As reported
$ 0.22 $ 3.03 $ 2.40



Pro forma
$ (0.05) $ 2.90 $ 2.29



      Pro forma net income (loss) reflects only options granted during the years 1995 through 2000. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net income (loss) amounts presented above because compensation cost is reflected over the options’ vesting period and compensation cost for options granted prior to January 1, 1995 is not considered.

      Under the Plan, the Company granted 20,000 shares, 221,500 shares and 113,000 shares of Class B Common Stock as restricted stock to certain officers and key employees in 2000, 1999 and 1998, respectively. The Company recognized compensation expense of $1.6 million, $0.9 million and $1.1 million related to restricted stock in 2000, 1999 and 1998, respectively. At December 31, 2000, 302,734 shares of restricted stock were vested.

      The Plan also provides for the issuance of stock and grant of stock options to non-employee directors. The Company has granted options to purchase 240,000 shares of Class B Common Stock to members of the Board of Directors who are not employees of the Company. The options have a ten-year term and are exercisable six months after the date of grant. As of December 31, 2000, 183,000 options were outstanding and exercisable at prices ranging from $8.00 to $29.19 per share. On December 31, 2000, 1999 and 1998, non-employee directors were also granted Class B Common Stock pursuant to the Plan totaling 9,000 shares, 5,737 shares, and 6,235 shares, respectively.

5. Employee Benefit Plan

      The Company has a 401(k) defined contribution plan, covering essentially all employees of the Company. Participants may contribute from 1 to 15% of their pretax earnings to a maximum of $10,500 in 2000. The Company’s matching contribution is determined annually by the Board of Directors. The Company’s contribution expense to the plan totaled $9.0 million, $7.6 million and $6.9 million in 2000, 1999 and 1998, respectively.

6. Financial Instruments and Risk Management

  (a)   Fair Value of Financial Instruments

      Cash Equivalents, Short-term Investments and Receivables

      The carrying amount approximates fair value because of the short-term nature of these instruments.

      Investment in Equity Securities

      The Company owns approximately 77,000 depository certificates which are convertible, subject to certain restrictions, into the common stock of Equant N.V. (“Equant”). The estimated fair value of these depository certificates as of December 31, 2000 and 1999 was approximately $2.0 million and $8.6 million, respectively, based upon the publicly traded market value of Equant common stock. The fair value of the Company’s investment in the depository certificates is not readily determinable (i.e., the depository certificates are not traded on a securities exchange). Accordingly, the investment is carried at cost, which was not material as of December 31, 2000 or 1999.

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Table of Contents

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

      In May 2000 Holdings completed the sale of a majority interest in TLC’s retail operations, National Leisure Group and The Vacation Store, to Softbank Capital Partners and General Catalyst LLC. TLC received $52 million in cash and retained a 12% passive ownership interest in the restructured venture. The investment is carried on the Company’s consolidated balance sheet at historical cost, which approximates $6.5 million at December 31, 2000.

      In July 2000 Holdings completed the sale of America West Golf Vacations, a division of TLC, to Book4golf.com, a provider of Internet-based, real-time golf tee time reservation systems. TLC received 900,000 common shares, with a fair market value of $2.1 million, representing approximately 2% ownership interest. The estimated fair value of the Company’s investment in Book4golf.com was approximately $0.3 million at December 31, 2000. (See Note 10, “Accumulated Other Comprehensive Income (Loss).”)

      Warrants

      The Company is the holder of warrants in a number of on-line ventures that are not yet public. The fair value of these warrants is not readily determinable. Accordingly, the investment is carried at cost, which was not material at December 31, 2000 or 1999.

      Long-term Debt

      At December 31, 2000 and 1999, the fair value of long-term debt was approximately $305 million and $200 million, respectively, based on quoted market prices for the same or similar debt including debt of comparable remaining maturities.

  (b)   Fuel Price Risk Management

      Under its fuel hedging program, the Company may enter into certain hedging transactions with approved counterparties for a period generally not exceeding 12 months. Gains and losses on such transactions are recorded as adjustments to fuel expense when the underlying fuel being hedged is used. As of December 31, 2000, the Company had entered into fixed price swap and costless collar transactions hedging approximately 12% of its projected 2001 fuel requirements. The fair value of the Company’s financial derivative instruments at December 31, 2000 was a net obligation of approximately $2.4 million. For further details of the Company’s fuel hedge positions at December 31, 2000 see “Quantitative and Qualitative Disclosures about Market Risk” and “New Accounting Standards” in Note 1.

      The Company is exposed to credit risks in the event any counterparty fails to meet its obligations. The Company does not anticipate such non-performance as counterparties are selected based on credit ratings, exposure to any one counterparty is limited based on formal guidelines and the relative market positions with such counterparties are closely monitored.

  (c)   Concentration of Credit Risk

      The Company does not believe it is subject to any significant concentration of credit risk. Most of the Company’s receivables result from tickets sold to individual passengers through the use of major credit cards or to tickets sold by other airlines and used by passengers on AWA. These receivables are short-term, generally being settled shortly after the sale.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

7. Income Taxes

      The Company recorded income tax expense as follows:

                             
Year Ended December 31,

2000 1999 1998



(in thousands)
Current Taxes:
Federal
$ 6,352 $ 23,503 $ 33,915
State
786 3,215 5,214



Total current taxes
7,138 26,718 39,129



Deferred taxes
9,926 60,043 46,646



Total income tax expense
$ 17,064 $ 86,761 $ 85,775



      The Company’s emergence from bankruptcy reorganization in 1994 and the associated implementation of fresh start reporting gave rise to significant items of expense for financial reporting purposes that are not deductible for income tax purposes. In large measure, it is these nondeductible (for income tax purposes) expenses and state income taxes that result in an effective tax rate (for financial reporting purposes) significantly greater than the current U.S. corporate statutory rate of 35%. Nevertheless, the Company’s actual cash income tax liability (i.e., current income taxes payable) is considerably lower than income tax expense shown for financial reporting purposes. This difference in financial expense compared to actual income tax liability is in part attributable to the utilization of certain tax attributes of the predecessor company that serve to reduce the Company’s current income tax liability.

      Income tax expense differs from amounts computed at the federal statutory income tax rate as follows:

                           
Year Ended December 31,

2000 1999 1998



(in thousands)
Income tax expense at U.S. statutory rate
$ 8,660 $ 72,153 $ 68,021
State income taxes, net of federal income tax benefit
1,329 6,620 7,803
Nondeductible amortization of reorganization value in excess of amounts allocable to identifiable assets
7,524 7,524 7,524
Change in valuation allowance
(1,419 )
Expired tax credits
1,419
Other, net
(449 ) 464 2,427



Total
$ 17,064 $ 86,761 $ 85,775



      As of December 31, 2000, the Company has available net operating loss carryforwards (“NOL”), business tax credit carryforwards and alternative minimum tax credit carryforwards for federal income tax purposes of approximately $147.1 million, $10.3 million and $1.3 million, respectively. The NOL expire during the years 2005 through 2009 while the business credit carryforwards expire during the years 2001 through 2006. However, such carryforwards are not fully available to offset federal (and in certain circumstances, state) alternative minimum taxable income. Further, as a result of a statutory “ownership change” (as defined for purposes of Section 382 of the Internal Revenue Code) that occurred as a result of the Company’s reorganization in 1994, the Company’s ability to utilize its NOL and business tax credit carryforwards may be restricted. The alternative minimum tax credit may be carried forward without expiration and is available to offset future income tax payable.

      Composition of Deferred Tax Items:

      Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, the significant components of the Company’s deferred tax assets and liabilities are a result of the temporary differences related to the items described as follows:

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

                         
2000 1999


(in thousands)
Deferred income tax liabilities
Property and equipment, principally depreciation and “fresh start” differences
$ (107,482 ) $ (101,480 )
Other
(6,738 )


Total deferred tax liability
(107,482 ) (108,218 )


Deferred tax assets
Aircraft leases
17,267 18,718
Frequent flyer accrual
5,469 4,790
Net operating loss carryforwards
55,150 68,301
Tax credit carryforwards
12,145 12,968
Other
4,034


Total deferred tax assets
94,065 104,777
Valuation allowance
(27,128 ) (28,548 )


 
66,937 76,229


Net deferred tax liability
$ (40,545 ) $ (31,989 )


      The change in net deferred tax liability differs from current year deferred income tax expense due to the Alternative Minimum Tax credit carryforward and SFAS No. 115 deferred tax item of approximately $1.4 million.

      SFAS No. 109, “Accounting for Income Taxes”, requires a “more likely than not” criterion be applied when evaluating the realizability of a deferred tax asset. The valuation allowance of $27.1 million is necessary because at this time the Company has not determined it is more likely than not that the balance of the deferred tax assets will be fully realized. The Company continues to monitor the valuation allowance and will make adjustments as appropriate. If in future tax periods, the Company were to recognize additional tax benefits related to items attributable to the predecessor company such as net operating loss and other carryforwards, such benefits would be applied to reduce further reorganization value in excess of amounts allocable to identifiable assets.

8. Supplemental Information to Consolidated Statements of Cash Flows

      Supplemental disclosure of cash flow information and non-cash investing and financing activities were as follows:

                           
Year Ended December 31,

2000 1999 1998



(in thousands)
Non-cash transactions:
Notes payable issued for equipment purchase deposits
$ 42,000 $ 35,000 $ 45,500
Notes payable canceled under the aircraft purchase agreement
38,500 45,500 12,596
Cash transactions:
Interest paid, net of amounts capitalized
11,536 19,920 22,184
Income taxes paid
9,859 56,062 20,963

9. Investments in Debt Securities

      Cash equivalents and short-term investments as of December 31 are classified as follows:

                   
2000 1999


(in thousands)
Corporate notes
163,942 61,135
Money market funds
30,882 55,507
Other debt securities
11,149


Total cash, cash equivalents and short-term investments
$ 194,824 $ 127,791


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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

10. Accumulated Other Comprehensive Income (Loss)

      In July 2000 Holdings completed the sale of America West Golf Vacations, a division of TLC, to Book4golf.com, a provider of Internet-based, real-time, golf tee time reservation systems. TLC received 900,000 common shares, with a fair market value of $2.1 million, and up to 700,000 share purchase warrants of Book4golf.com. Exercise of the warrants and right to earn an additional 300,000 common shares is subject to certain performance criteria. The Company recorded a non-operating pretax gain on sale of $2.0 million in the third quarter of 2000. Book4golf.com and TLC have formed a post-acquisition alliance to create and market golf vacation packages that can be designed and purchased on-line, including tee times, green fees, golf lessons, air travel, car rental and hotel accommodations. In accordance with SFAS No. 115, the Company has classified TLC’s investment in Book4golf.com as available-for-sale securities in the Company’s consolidated balance sheet.

      SFAS No. 130, “Reporting Comprehensive Income” requires unrealized gains or losses on the Company’s available-for-sale securities to be included in accumulated other comprehensive income, a component of stockholders’ equity. The fair market value of the 900,000 Book4golf.com common shares was $0.3 million at December 31, 2000. Accordingly, the Company has recorded a $1.1 million net loss to reflect a decrease in the fair market value of this investment. The tax benefit associated with the loss was $0.7 million.

11. Non-Operating Income (Expense) —Other, Net

      In March 2000 AWA sold 500,000 warrants to purchase common stock of Priceline.com, Inc. for approximately $18.0 million, resulting in a pretax gain of approximately $15.5 million.

      In May 2000 Holdings completed the sale of a majority interest in TLC’s retail operations, National Leisure Group and The Vacation Store, to Softbank Capital Partners and General Catalyst LLC. TLC received $52 million in cash and retained a 12% passive ownership interest in the restructured venture. The Company recorded a $9.2 million pretax gain on this sale transaction.

      In July 2000 Holdings completed the sale of America West Golf Vacations, a division of TLC, to Book4golf.com, a provider of Internet-based, real-time, golf tee time reservation systems. TLC received 900,000 common shares, with a fair market value of $2.1 million, and up to 700,000 share purchase warrants of Book4golf.com. Exercise of the warrants and right to earn an additional 300,000 common shares is subject to certain performance criteria. The Company recorded a non-operating pretax gain on sale of $2.0 million in the third quarter of 2000.

      In September 2000 AWA recorded an $8.8 million pretax unrealized gain on the Company’s investment in one million shares of GetThere.com common stock. AWA sold all one million shares of GetThere.com for approximately $17.8 million in October 2000.

      In December 1999 AWA recorded an $11.9 million pretax unrealized gain on the Company’s investment in Priceline.com common stock. AWA sold all 294,109 shares of Priceline.com for approximately $15.1 million in January 2000.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

12. Earnings Per Share

                           
Year Ended December 31,

2000 1999 1998



(in thousands of dollars except share data)
BASIC EARNINGS PER SHARE
Income applicable to common stock
$ 7,679 $ 119,389 $ 108,571



Weighted average common shares outstanding
35,139,084 37,678,947 42,102,211



Basic earnings per share
$ 0.22 $ 3.17 $ 2.58



DILUTED EARNINGS PER SHARE
 
Income applicable to common stock
$ 7,679 $ 119,389 $ 108,571



Share computation:
Weighted average common shares outstanding
35,139,084 37,678,947 42,102,211
Assumed exercise of stock options and warrants
549,093 1,753,324 3,105,982



Weighted average common shares outstanding as adjusted
35,688,177 39,432,271 45,208,193



Diluted earnings per share
$ 0.22 $ 3.03 $ 2.40



      For the years ended December 31, 2000, 1999 and 1998, options of 3,592,311, 1,632,041 and 1,843,391, respectively, are not included in the computation of diluted EPS because the option exercise prices were greater than the average market price of common stock.

13. Commitments and Contingencies

  (a)   Leases

      As of December 31, 2000, the Company had 127 aircraft under operating leases with remaining terms ranging from one year to approximately 22 years. The Company has options to purchase certain of the aircraft at fair market values at the end of the lease terms. Certain of the agreements require security deposits, minimum return provisions and maintenance reserve payments. The Company also leases certain terminal space, ground facilities and computer and other equipment under noncancelable operating leases.

      At December 31, 2000, the scheduled future minimum cash rental payments under noncancelable operating leases with initial terms of more than one year are as follows:

         
(in thousands)
2001
$ 369,670
2002
336,141
2003
283,386
2004
235,472
2005
220,327
Thereafter
1,820,343

$ 3,265,339

      Rent expense (excluding landing fees) was approximately $427 million, $365 million and $330 million for the years ended December 31, 2000, 1999 and 1998, respectively.

      Collectively, the operating lease agreements require security deposits with lessors of $27.9 million and bank letters of credit of $18.5 million. The letters of credit are collateralized by $18.5 million of restricted cash as of December 31, 2000.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

  (b)   Revenue Bonds

      In June 1999 Series 1999 special facility revenue bonds (“new bonds”) were issued by a municipality to fund the retirement of the Series 1994A bonds (“old bonds”) and the construction of a new concourse with 14 gates at Terminal 4 in Phoenix Sky Harbor International Airport in support of AWA’s strategic growth plan. The new bonds are due June 2019 with interest accruing at 6.25% per annum payable semiannually on June 1 and December 1, commencing on December 1, 1999. The new bonds are subject to optional redemption prior to the maturity date on or after June 1, 2009 in whole or in part, on any interest payment date at the following redemption prices: 101% on June 1 or December 1, 2009; 100.5% on June 1 or December 1, 2010; and 100% on June 1, 2011 and thereafter.

  (c)   Aircraft Acquisitions

      At December 31, 2000, AWA had firm commitments to AVSA for a total of 15 Airbus A318-100, 13 Airbus A319-100 and 11 Airbus A320-200 aircraft with delivery through 2004 at a cost of approximately $1.5 billion. The agreement with AVSA also includes options to purchase an additional 17 A320 family aircraft during 2005 through 2006 and purchase rights for an additional 25 A320 series aircraft for delivery in 2007 to 2008.

      The Company has an agreement with International Aero Engines (“IAE”) which provides for the purchase by the Company of seven new V2500-A5 spare engines scheduled for delivery through 2003 for use on certain of the A320 fleet. At December 31, 2000, the seven engines have an estimated aggregate cost of $31 million.

      The following table reflects estimated cash payments under the aircraft and engine purchase contracts. Actual payments may vary due to inflation factor adjustments and changes in the delivery schedule of the equipment. The estimated cash payments include progress payments that will be made in cash, as opposed to being financed under an existing progress payment financing facility.

         
(in thousands)
2001
$ 446,080
2002
153,747
2003
387,116

$ 986,943

      In July 2000 America West Airlines 2000-1 Pass Through Trusts issued $253.3 million of Pass Through Trust Certificates in connection with the financing of eight Airbus A319 aircraft and two Airbus A320 aircraft to be purchased from AVSA. The Pass Through Trust Certificates are not direct obligations of, nor guaranteed by, Holdings and AWA. The combined effective interest rate on the financing is 8.49%. Six A319 and one A320 aircraft that are the subject of this financing were delivered in 2000. The remaining three aircraft were delivered in the first quarter of 2001.

  (d)   Sale/Leaseback Transactions

      In June 2000 AWA borrowed $32.0 million from a foreign bank to fund the acquisition of one new A320 aircraft. In July 2000 AWA entered into a sale/leaseback transaction whereby the Company sold this aircraft for approximately the acquisition cost. The aircraft is being leased back from the purchaser for approximately 22 years and is being accounted for as an operating lease.

      In August 1999, AWA entered into a sale/leaseback transaction whereby the Company sold five Boeing 737-300 aircraft and one Boeing 757-200 aircraft for approximately $114 million. To complete this transaction, the Company paid approximately $49.3 million to retire mortgage debt outstanding on the aircraft. The aircraft are being leased back from the purchaser for approximately six years. The sale resulted in a $9.2 million gain for AWA, which was deferred and is being amortized over the lease term as a reduction in rent expense. The related lease is being accounted for as an operating lease. The average annual lease payments, over the life of the leases, are $15.5 million.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

  (e)   Contingent Legal Obligations

      Holdings and AWA are named defendants in a number of additional lawsuits and proceedings arising in the ordinary course of business. While the outcome of the contingencies, lawsuits or other proceedings cannot be predicted with certainty, management currently expects that any liability arising from such matters, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on the financial condition and results of operations of the Company.

14. Related Party Transactions

      AWA has entered into various aircraft leasing arrangements with AerFi Group plc (“AerFi”), formerly GPA Group plc, at terms comparable to those obtained from third parties for similar transactions. William A. Franke, the Company’s Chairman and CEO, was a director and, indirectly, a minor shareholder of AerFi. In addition, an affiliate of TPG purchased a large minority stake in AerFi in November 1998 and had three representatives serving on AerFi’s five-member Board of Directors. AerFi was acquired by AirFinance B.V. in November 2000 and Mr. Franke and the TPG affiliate disposed of all share interests in AerFi at that time. Mr. Franke and the representatives of the TPG affiliate also resigned from their board positions at that time. AWA currently leases four aircraft from AerFi and the rental payments for such leases amounted to $14.8 million, $14.8 million and $19.2 million for the years ended December 31, 2000, 1999 and 1998, respectively. As of December 31, 2000, the Company was obligated to pay approximately $177.1 million under the AerFi leases which expire at various dates through the year 2013.

      AerFi and AWA also entered into a Put Termination Agreement which terminated arrangements with AerFi pursuant to which AerFi could cause AWA to lease up to four additional aircraft prior to June 30, 1999. Pursuant to the Put Termination Agreement, AWA is obligated to make certain payments to the U.S. subsidiaries of AerFi (“AerFi Subs”). The payments due to the AerFi Subs under the Put Termination Agreement were approximately $1.9 million for each of the years 2000, 1999 and 1998.

      As part of the Company’s reorganization in 1994, Continental Airlines made an investment in the Company, and the Company entered into an alliance agreement related to codesharing arrangements and ground handling operations. The Company paid Continental approximately $32.4 million, $31.7 million and $27.8 million and also received approximately $25.5 million, $24.5 million and $20.5 million in 2000, 1999 and 1998, respectively, from Continental pursuant to these agreements.

      In December 2000 Continental Airlines sold to the Company all 158,569 shares of Class A common stock of the Company held by Continental. Continental also assigned to the Company its rights of first refusal held by Continental with respect to shares of Class A Common Stock owned by TPG Partners, L.P., TPG Parallel I, L.P. and Air Partners II, L.P. (collectively, the “TPG Parties”) under a Priority Distribution Agreement originally entered into between Continental and the TPG Parties in 1994. As consideration, America West paid Continental $10.8 million with respect to these transactions. As an inducement for the TPG Parties to consent to the transfer of the rights of first refusal, the Company has agreed not to exercise its rights of first refusal with respect to any of the Class A common stock held by the TPG Parties but retains its rights of first refusal with respect to any subsequent transfer proposed by any third party who acquires such shares. Additionally, the Company's rights of first refusal will terminate in the event William A. Franke ceases to be the Chairman of the Company. The payment was accounted for in 2000 as a reduction in shareholders’ equity.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

15. Quarterly Financial Data (Unaudited)

      Summarized quarterly financial data for 2000 and 1999 follows (in thousands of dollars except per share amounts):

                                   
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter




2000
Operating revenues
$ 562,892 $ 617,927 $ 590,539 $ 572,996
Operating income (loss)
11,030 48,307 240 (72,214 )
Nonoperating income, net
15,001 9,179 12,022 1,178
Income tax benefit (expense)
(11,402 ) (23,995 ) (10,960 ) 29,293
Net income (loss)
14,629 (1) 33,491 (2) 1,302 (3) (41,743 )(4)
Earnings (loss) per share:
Basic
.40 .93 .04 (1.24 )
Diluted
.40 .91 .04 (1.23 )
                                   
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter




1999
Operating revenues
$ 519,626 $ 569,480 $ 552,839 $ 568,939
Operating income
50,715 75,591 41,198 37,047
Nonoperating income (expense), net
(3,978 ) (273 ) (3,326 ) 9,176
Income tax expense
(20,798 ) (33,064 ) (15,659 ) (17,240 )
Net income
25,939 42,254 22,213 28,983 (5)
Earnings per share:
Basic
.67 1.12 .60 .79
Diluted
.63 1.06 .57 .76


(1)   Includes a $15.5 million pretax gain on sale of 500,000 warrants to purchase common stock of Priceline.com.
(2)   Includes a $9.2 million pretax gain from TLC’s sale of a majority interest in National Leisure Group and The Vacation Store.
(3)   Includes an $8.8 million pretax unrealized gain on the Company’s investment in GetThere.com common stock.
(4)   Includes $16.0 million of non-recurring operating expenses primarily related to the write-down to net realizable value of certain excess expendable parts inventory that will be sold.
(5)   Includes an $11.9 million pretax unrealized gain on the Company’s investment in Priceline common stock and $2.5 million of revenue related to additional Priceline warrants granted to AWA in November 1999.

      Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share in 2000 and 1999 does not equal the total computed for the year.

16. Segment Disclosures

      Holdings is one reportable operating segment. Accordingly, the segment reporting financial data required by SFAS No. 131 is included in the accompanying balance sheets and statements of income.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED

17. Subsequent Event

      Codeshare Agreements

      In March 2001 AWA restructured its codeshare agreement with Mesa Airlines to expand regional flying in the western United States under the America West Express banner. AWA also entered into a new partnership with Chautauqua Airlines for regional codesharing as America West Express in the eastern United States. Under these agreements, the America West Express regional fleet will increase to 77 jet aircraft by 2005 with options for further expansion to as many as 129 aircraft. The new regional jets will be used to grow AWA’s service from its three primary hubs in Phoenix, Las Vegas and Columbus, Ohio. In February 2001 AWA also entered into a codeshare agreement with Big Sky Airlines, expanding AWA’s route structure with service to 20 new markets in Montana, Texas, Oklahoma and Arkansas.

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ITEM 8B. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA —AMERICA WEST AIRLINES, INC. (“AWA”)

      Balance sheets of AWA as of December 31, 2000 and 1999, and the related statements of operations, cash flows and stockholder’s equity for each of the years in the three-year period ended December 31, 2000, together with the related notes and the report of KPMG LLP, independent certified public accountants, are set forth on the following pages.

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholder
America West Airlines, Inc.:

      We have audited the accompanying balance sheets of America West Airlines, Inc. as of December 31, 2000 and 1999, and the related statements of operations, cash flows and stockholder’s equity for each of the years in the three-year period ended December 31, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of America West Airlines, Inc. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.

KPMG LLP
Phoenix, Arizona
March 28, 2001

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AMERICA WEST AIRLINES, INC.
Balance Sheets
December 31, 2000 and 1999
(in thousands except share data)

                       
2000 1999


Assets
Current assets:
Cash and cash equivalents
$ 139,150 $ 105,545
Short-term investments
50,686 15,617
Accounts receivable, less allowance for doubtful accounts of $1,401 in 2000 and $2,005 in 1999
130,219 102,014
Advances to parent company and affiliate, net
273,272 248,335
Expendable spare parts and supplies, less allowance for obsolescence of $5,439 in 2000 and $5,612 in 1999
41,843 49,327
Prepaid expenses
35,998 33,903


Total current assets
671,168 554,741


Property and equipment:
Flight equipment
903,336 801,541
Other property and equipment
211,922 197,394
Equipment purchase deposits
93,750 79,399


1,209,008 1,078,334
Less accumulated depreciation and amortization
458,616 378,185


750,392 700,149


Other assets:
Restricted cash
31,120 31,624
Reorganization value in excess of amounts allocable to identifiable assets, net
271,906 291,801
Other assets, net
60,887 85,180


363,913 408,605


$ 1,785,473 $ 1,663,495


 
Liabilities and Stockholder’s Equity
 
Current liabilities:
Current maturities of long-term debt
$ 159,667 $ 45,171
Accounts payable
147,661 130,752
Air traffic liability
183,531 175,528
Accrued compensation and vacation benefits
35,850 48,227
Accrued taxes
53,226 54,775
Other accrued liabilities
35,856 35,462


Total current liabilities
615,791 489,915


 
Long-term debt, less current maturities
145,578 155,168
 
Deferred credits and other liabilities
99,308 105,175
 
Deferred tax liability, net
42,856 30,768
 
Commitments and contingencies  
Stockholder’s equity:
Class B common stock, $.01 par value. Authorized 1,000 shares; issued and outstanding 1,000 shares
Additional paid-in capital
519,748 519,748
Retained earnings
362,192 362,721


Total stockholder’s equity
881,940 882,469


$ 1,785,473 $ 1,663,495


See accompanying notes to financial statements.

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AMERICA WEST AIRLINES, INC.
Statements of Operations
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands)

                               
2000 1999 1998



Operating revenues:
Passenger
$ 2,179,811 $ 2,028,223 $ 1,858,551
Cargo
37,377 41,936 45,551
Other
73,683 76,796 64,612



Total operating revenues
2,290,871 2,146,955 1,968,714



 
Operating expenses:
Salaries and related costs
556,906 498,490 448,049
Aircraft rents
331,005 277,326 244,088
Other rents and landing fees
130,679 122,034 119,089
Aircraft fuel
373,313 220,380 194,360
Agency commissions
86,469 114,742 117,483
Aircraft maintenance materials and repairs
258,432 218,319 182,844
Depreciation and amortization
54,313 48,442 49,026
Amortization of reorganization value in excess of amounts allocable to identifiable assets
19,896 19,896 19,896
Other
492,596 429,425 396,033



Total operating expenses
2,303,609 1,949,054 1,770,868



 
Operating income (loss)
(12,738 ) 197,901 197,846



 
Nonoperating income (expenses):
Interest income
23,706 19,593 20,682
Interest expense, net
(22,939 ) (29,352 ) (33,807 )
Gain (loss) on disposition of property and equipment
(2,332 ) 1,095 (638 )
Other, net
29,444 11,737 474



Total nonoperating income (expenses), net
27,879 3,073 (13,289 )



Income before income taxes
15,141 200,974 184,557



 
Income taxes
15,670 84,352 81,541



Net income (loss)
$ (529 ) $ 116,622 $ 103,016



See accompanying notes to financial statements.

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AMERICA WEST AIRLINES, INC.
Statements of Cash Flows
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands)

                               
2000 1999 1998



Cash flows from operating activities:
Net income (loss)
$ (529 ) $ 116,622 $ 103,016
 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
54,313 48,442 49,026
Amortization of capitalized maintenance
121,031 113,679 89,347
Amortization of reorganization value
19,896 19,896 19,896
Amortization of deferred credits
(9,272 ) (7,521 ) (6,798 )
Other
4,133 2,402 14,009
Changes in operating assets and liabilities:
Increase in accounts receivable, net
(53,143 ) (147,173 ) (115,471 )
Decrease (increase) in expendable spare parts and supplies, net
7,484 (18,180 ) (4,012 )
Decrease (increase) in prepaid expenses
(2,771 ) (387 ) 904
Decrease (increase) in other assets, net
7,891 (24,172 ) 43,267
Increase (decrease) in accounts payable
16,908 28,646 (38,803 )
Increase (decrease) in air traffic liability
8,004 (20,485 ) 22,864
Increase (decrease) in accrued compensation and vacation benefits
(12,377 ) 1,145 10,530
Increase in accrued taxes
10,539 72,174 51,706
Increase (decrease) in other accrued liabilities
180 (5,938 ) (705 )
Increase (decrease) in other liabilities
3,425 950 (7,435 )



Net cash provided by operating activities
175,712 180,100 231,341



 
Cash flows from investing activities:
Purchases of property and equipment
(252,177 ) (293,424 ) (176,337 )
Sale (purchases) of short-term investments
(35,069 ) 11,868 (27,485 )
Proceeds from sales of property and equipment
38,611 187,197 1,647
Equipment purchase deposits and other
5,582 (6,250 ) (5,500 )



Net cash used in investing activities
(243,053 ) (100,609 ) (207,675 )



 
Cash flows from financing activities
Proceeds from issuance of debt
143,310 162,074
Repayment of debt
(42,159 ) (239,876 ) (71,495 )
Acquisition of warrants
(3,378 ) (16,175 )
Other
(205 ) (400 )



Net cash provided by (used in) financing activities
100,946 (81,180 ) (88,070 )



 
Net increase (decrease) in cash and cash equivalents
33,605 (1,689 ) (64,404 )



 
Cash and cash equivalents at beginning of year
105,545 107,234 171,638



 
Cash and cash equivalents at end of year
$ 139,150 $ 105,545 $ 107,234



 
Cash, cash equivalents and short-term investments at end of year
$ 189,836 $ 121,162 $ 134,719



See accompanying notes to financial statements.

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AMERICA WEST AIRLINES, INC.
Statements of Stockholder’s Equity
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands except share data)

                         
ADDITIONAL
PAID-IN RETAINED
CAPITAL EARNINGS TOTAL



Balance at December 31, 1997
$ 539,301 $ 145,467 $ 684,768
Repurchase of 2,906,867 warrants at $5.56 per warrant
(16,175 ) (16,175 )
Dividend to Holdings
(2,384 ) (2,384 )
Net income
103,016 103,016



Balance at December 31, 1998
523,126 246,099 769,225



Repurchase of 377,400 warrants at $8.95 per warrant
(3,378 ) (3,378 )
Net income
116,622 116,622



Balance at December 31, 1999
519,748 362,721 882,469



Net loss
(529 ) (529 )



Balance at December 31, 2000
$ 519,748 $ 362,192 $ 881,940



See accompanying notes to financial statements.

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998

1. Summary of Significant Accounting Policies

      America West Airlines, Inc. (“AWA”), is a wholly owned subsidiary of America West Holdings Corporation (“Holdings”), a Delaware corporation. Holdings’ primary business activity is ownership of all the capital stock of AWA, the ninth largest commercial airline carrier in the United States serving 63 destinations in the U.S., Canada and Mexico.

  (a)   Cash, Cash Equivalents and Short-term Investments

      Cash equivalents consist of all highly liquid debt instruments purchased with original maturities of three months or less. Short-term investments consist of cash invested in certain debt securities with original maturities greater than 90 days and less than one year. The debt securities are classified as held to maturity and are carried at amortized cost which approximates fair value.

  (b)   Expendable Spare Parts and Supplies

      Flight equipment expendable spare parts and supplies are valued at average cost. An allowance for obsolescence is provided, over the estimated useful life of the related aircraft and engines, for spare parts expected to be on hand at the date the aircraft are retired from service. In the fourth quarter of 2000, the Company committed to the disposal of certain excess expendable spare parts inventory with a net book value of approximately $11.0 million. As a result, the Company recorded a non-recurring operating expense of $9.0 million to write down excess inventory to net realizable value.

  (c)   Property and Equipment

      Property and equipment are recorded at cost. Interest capitalized on advance payments for aircraft acquisitions and on expenditures for aircraft improvements are part of these costs. Interest capitalized for the years ended December 31, 2000, 1999 and 1998 was $9.0 million, $6.1 million and $4.9 million, respectively. Property and equipment is depreciated and amortized to residual values over the estimated useful lives or the lease term, whichever is less, using the straight-line method.

      The estimated useful lives for AWA’s ground property and equipment range from three to 12 years for owned property and equipment and up to 22 years for the technical support facility. The estimated useful lives of AWA’s owned aircraft, jet engines, flight equipment and rotable parts range from five to 22 years. Leasehold improvements relating to flight equipment and other property on operating leases are amortized over the life of the lease or the life of the asset, whichever is shorter.

      Effective October 1, 1998, AWA extended the estimated depreciable service lives of certain owned Boeing 737-200 aircraft which have been modified to meet the Federal Aviation Administration’s (“FAA”) Stage III noise reduction requirements. This change increased the average depreciable life by approximately four years and reduced depreciation expense in 2000, 1999 and 1998 by approximately $8.0 million, $8.0 million and $2.0 million, respectively.

      AWA records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired as defined by Statement of Financial Accounting Standards (“SFAS”) No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.”

  (d)   Restricted Cash

      Restricted cash includes cash deposits securing certain letters of credit.

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

  (e)   Aircraft Maintenance and Repairs

      Routine maintenance and repairs are charged to expense as incurred. The cost of major scheduled airframe, engine and certain component overhauls are capitalized and amortized over the periods benefited and are included in aircraft maintenance materials and repairs expense. Additionally, an accrual for the estimated cost of scheduled airframe and engine overhauls required to be performed on leased aircraft prior to their return to the lessors has been recorded.

  (f)   Reorganization Value in Excess of Amounts Allocable to Identifiable Assets

      Reorganization value in excess of amounts allocable to identifiable assets is amortized on a straight-line basis over 20 years. Accumulated amortization at December 31, 2000, 1999 and 1998 was $151.8 million, $131.9 million and $112.0 million, respectively. In accordance with SFAS No. 121 and APB Opinion No. 17, AWA assesses the recoverability of this asset based upon expected future undiscounted cash flows and other relevant information.

  (g)   Frequent Flyer Awards

      AWA maintains a frequent travel award program known as “FlightFund” that provides a variety of awards to program members based on accumulated mileage. The estimated cost of providing the free travel, using the incremental cost method as adjusted for estimated redemption rates, is recognized as a liability and charged to operations as program members accumulate mileage.

      AWA also sells mileage credits to companies participating in its FlightFund program, such as hotels, car rental agencies and credit card companies. Revenue from the sale of mileage credits is deferred and recognized when transportation is provided.

  (h)   Deferred Credit-Operating Leases

      Rents for operating leases were adjusted to fair market value when AWA emerged from bankruptcy in 1994. The net present value of the difference between the stated lease rates and the fair market rates has been recorded as a deferred credit in the accompanying balance sheets. The deferred credit will be increased through charges to interest expense and decreased on a straight-line basis as a reduction in rent expense over the applicable lease periods. At December 31, 2000 and 1999, the unamortized balance of the deferred credit was $65.6 million and $72.2 million, respectively.

  (i)   Passenger Revenue

      Passenger revenue is recognized when transportation is provided. Ticket sales for transportation which has not yet been provided are recorded as air traffic liability. Passenger traffic commissions and related fees are expensed when the related revenue is recognized. Passenger traffic commissions and related fees not yet recognized are included as a prepaid expense.

  (j)   Advertising Costs

      AWA expenses the costs of advertising as incurred. Advertising expense for the years ended December 31, 2000, 1999 and 1998 was $18.7 million, $14.4 million and $16.2 million, respectively.

  (k)   Income Taxes

      Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

  (l)   New Accounting Standards

      In June 1998 the Financial Accounting Standards Board issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which established accounting and reporting standards for all derivative instruments and hedging activities. SFAS No. 133 requires recognition of all derivatives as either assets or liabilities in the balance sheet at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment (“fair value hedge”), a hedge of the exposure to variable cash flows of a forecasted transaction (“cash flow hedge”), or a hedge of the foreign currency exposure (“foreign currency hedge”) of a net investment in a foreign operation or a foreign currency-denominated forecasted transaction. The accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. In accounting for a fair value hedge, the derivative hedging instrument will be measured at fair value with the mark to fair value being recorded in earnings. In a cash flow hedge, the derivative hedging instrument will be measured at fair value with the effective portion of the gains or losses on the derivative hedging instrument initially being reported in other comprehensive income. In June 1999 the Financial Accounting Standards Board issued SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities —Deferral of the Effective Date of FASB Statement No. 133”, which defers the effective date of SFAS No. 133 to be effective for all fiscal years beginning after June 15, 2000. AWA will adopt SFAS No. 133 in 2001. As of December 31, 2000, the estimated fair value of AWA’s fuel hedging contracts was a net obligation of $2.4 million. See “(b) Fuel Price Risk Management” in Note 5, “Financial Instruments and Risk Management” in Notes to Financial Statements. SFAS No. 133 is not expected to have a material effect on AWA’s results of operations or financial position.

  (m)   Use of Estimates

      Management of AWA has made certain estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

  (n)   Reclassification

      Certain reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation.

2. Long-Term Debt

      Long-term debt at December 31 consists of the following:

                 
2000 1999


(in thousands)
Secured
Notes payable, primarily fixed interest rates of 10.75% to 10.79%, averaging 10.78%, installments due 2001 through 2008
$ 77,376 $ 87,245
Revolving credit facility, floating interest rates of three month LIBOR + 2.50%, averaging 9.125%, interest only due through 2003 (a)
111,310


188,686 87,245
Unsecured
10 3/4% Senior Unsecured Notes, face amount of $50 million, interest only payment until due in 2005 (b)
49,028 48,820
Notes payable, interest rates of 90-day LIBOR +1.25%, averaging 7.97%, installments due through 2001
38,500 35,000
Industrial development bonds, face amount of $29.3 million, fixed interest rate of 6.3% due 2023 (c)
29,020 29,008
Other
11 266


116,559 113,094


Total long-term debt
305,245 200,339
Less: current maturities
159,667 45,171


$ 145,578 $ 155,168


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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

 
(a)   In December 1999 AWA entered into a $125 million senior secured revolving credit facility with a group of financial institutions that has a three-year term. Borrowings under this credit facility will accrue interest at either the “base rate” (prime rate or the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate) or the “adjusted eurodollar rate” (LIBOR rate adjusted for certain reserve requirements in respect to “Eurodollar liabilities”) plus the applicable margin based on Moody’s rating of AWA’s senior unsecured notes. The credit agreement is secured by certain assets of AWA. As of December 31, 2000, AWA had drawn $111.3 million against its available line of credit. AWA subsequently repaid $50 million in February 2001 and $15 million in March 2001.
 
(b)   The 10 3/4% Senior Unsecured Notes mature on September 1, 2005 and interest is payable in arrears semi-annually. The 10 3/4% Senior Unsecured Notes may be redeemed at the option of the Company on or after September 1, 2000 at any time in whole or from time to time in part, at a redemption price equal to the following percentage of principal redeemed, plus accrued and unpaid interest to the date of redemption, if redeemed during the 12-month period beginning:

         
September 1, Percentage
2000
105.375 %
2001
103.583 %
2002
101.792 %
2003 and thereafter
100.000 %

(c)   The industrial development revenue bonds are due April 2023. Interest at 6.3% is payable semiannually (April 1 and October 1). The bonds are subject to optional redemption prior to the maturity date on or after April 1, 2008, in whole or in part, on any interest payment date at the following redemption prices: 102 percent on April 1 or October 1, 2008; 101 percent on April 1 or October 1, 2009; and 100 percent on April 1, 2010 and thereafter.

      Secured financings totaling $188.7 million are collateralized by assets, primarily aircraft, engines, simulators and rotable aircraft parts, with a net book value of $286.3 million at December 31, 2000.

      At December 31, 2000, the estimated maturities of long-term debt are as follows:

           
(in thousands)
2001
159,667
2002
9,674
2003
9,674
2004
8,989
2005
58,303
Thereafter
58,938

$ 305,245

      Certain of AWA’s long-term debt agreements contain minimum cash balance requirements, leverage ratios, coverage ratios, limitations on investments and restricted payments including cash dividends, and other financial covenants with which AWA was in compliance at December 31, 2000.

3. Capital Stock

      Warrants

      On August 25, 1994, AWA issued approximately 10.4 million warrants to purchase Class B Common Stock with an exercise price of $12.74 per share. The warrants were exercisable by the holders any time before August 25, 1999 and 10.4 million shares of Class B Common Stock were reserved for the exercise of these warrants. As part of the holding company formation transaction that was effective December 31, 1996, the AWA warrants became rights to acquire shares of Holdings Class B Common Stock. AWA made arrangements for the issuance of Holdings Class B Common Stock upon the exercise of such warrants by purchasing an option from Holdings to acquire such stock. AWA issued a $62.4 million note payable to Holdings due December 31, 2005 with an interest rate of 11%. Subsequently, Holdings made a capital contribution to AWA by issuing a note payable to AWA for $62.4 million due December 31, 2045 with an interest rate of 10 7/8%. AWA has the right on December 31, 2005 to repay all or a

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

portion of the then outstanding principal balance of its note payable by offsetting by an equal amount the then outstanding principal balance of its note receivable and thus, these notes have been offset in the accompanying financial statements in accordance with applicable accounting standards.

      Approximately 7.4 million warrants were repurchased by AWA for approximately $51.0 million and approximately 2.6 million warrants were exercised at $12.74 per share. The balance of unexercised warrants expired and were cancelled on August 25, 1999.

      Common Stock

      The holders of common stock are entitled to one vote for each share of stock held by the holder. Holders of common stock have no right to cumulate their votes in the election of directors. The holders of common stock are entitled to receive, when and if declared by the Board of Directors, out of the assets of AWA which are by law available, dividends payable either in cash, in stock or otherwise. Holdings’ Class B Common Stock is listed on the New York Stock Exchange.

4. Employee Benefit Plan

      AWA has a 401(k) defined contribution plan, covering essentially all employees of AWA. Participants may contribute from 1 to 15% of their pretax earnings to a maximum of $10,500 in 2000. AWA’s matching contribution is determined annually by the Board of Directors. AWA’s contribution expense to the plan totaled $8.9 million, $7.4 million and $6.8 million in 2000, 1999 and 1998, respectively.

5. Financial Instruments and Risk Management

(a)   Fair Value of Financial Instruments

      Cash Equivalents, Short-term Investments and Receivables

      The carrying amount approximates fair value because of the short-term nature of these instruments.

      Investment in Equity Securities

      AWA owns approximately 77,000 depository certificates which are convertible, subject to certain restrictions, into the common stock of Equant N.V. (“Equant”). The estimated fair value of these depository certificates as of December 31, 2000 and 1999 was approximately $2.0 million and $8.6 million, respectively, based upon the publicly traded market value of Equant common stock. The fair value of AWA’s investment in the depository certificates is not readily determinable (i.e., the depository certificates are not traded on a securities exchange). Accordingly, the investment is carried at cost, which was not material as of December 31, 2000 or 1999.

      Warrants

      AWA is the holder of warrants in a number of on-line ventures that are not yet public. The fair value of these warrants is not readily determinable. Accordingly, the investment is carried at cost, which was not material at December 31, 2000 or 1999.

      Long-term Debt

      At December 31, 2000 and 1999, the fair value of long-term debt was approximately $305 million and $200 million, respectively, based on quoted market prices for the same or similar debt including debt of comparable remaining maturities.

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

(b)   Fuel Price Risk Management

      Under its fuel hedging program, AWA may enter into certain hedging transactions with approved counterparties for a period generally not exceeding 12 months. Gains and losses on such transactions are recorded as adjustments to fuel expense when the underlying fuel being hedged is used. As of December 31, 2000, AWA had entered into fixed price swap and costless collar transactions hedging approximately 12% of its projected 2001 fuel requirements. The fair value of the Company’s financial derivative instruments at December 31, 2000 was a net obligation of approximately $2.4 million. For further details of AWA’s fuel hedge positions at December 31, 2000 see “Quantitative and Qualitative Disclosures about Market Risk” and “New Accounting Standards” in Note 1.

      AWA is exposed to credit risks in the event any counterparty fails to meet its obligations. AWA does not anticipate such non-performance as counterparties are selected based on credit ratings, exposure to any one counterparty is limited based on formal guidelines and the relative market positions with such counterparties are closely monitored.

(c)   Concentration of Credit Risk

      AWA does not believe it is subject to any significant concentration of credit risk. Most of AWA’s receivables result from tickets sold to individual passengers through the use of major credit cards or to tickets sold by other airlines and used by passengers on AWA. These receivables are short-term, generally being settled shortly after the sale.

6. Income Taxes

      AWA recorded income tax expense (benefit) as follows:

                             
Year Ended December 31,

2000 1999 1998



(in thousands)
Current:
Federal
$ 2,296 $ 22,983 $ 29,322
State
284 3,161 4,959



Total current
2,580 26,144 34,281
Deferred:
13,090 58,208 47,260



Total income tax expense
$ 15,670 $ 84,352 $ 81,541



      AWA’s emergence from bankruptcy reorganization in 1994 and the associated implementation of fresh start reporting gave rise to significant items of expense for financial reporting purposes that are not deductible for income tax purposes. In large measure, it is these nondeductible (for income tax purposes) expenses and state income taxes that result in an effective tax rate (for financial reporting purposes) significantly greater than the current U.S. corporate statutory rate of 35%. Nevertheless, AWA’s actual cash income tax liability (i.e., current income taxes payable) is considerably lower than income tax expense shown for financial reporting purposes. This difference in financial expense compared to actual income tax liability is in part attributable to the utilization of certain tax attributes of the predecessor company that serve to reduce AWA’s actual income tax liability.

      Income tax expense differs from amounts computed at the federal statutory income tax rate as follows:

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

                           
Year Ended December 31,

2000 1999 1998



(in thousands)
Income tax expense at U.S. statutory rate
$ 5,299 $ 70,341 $ 64,595
State income taxes, net of federal income tax benefit
1,045 6,418 7,431
Nondeductible amortization of reorganization value in excess of amounts allocable to identifiable assets
6,963 6,964 6,964
Change in valuation allowance
(1,419 )
Expired tax credits
1,419
Other, net
2,363 629 2,551



Total
$ 15,670 $ 84,352 $ 81,541



      As of December 31, 2000, AWA has available net operating loss carryforwards (“NOL”), business tax credit carryforwards and alternative minimum tax credit carryforwards for federal income tax purposes of approximately $147.1 million, $10.3 million and $1.3 million, respectively. The NOL expire during the years 2005 through 2009 while the business credit carryforwards expire during the years 2001 through 2006. However, such carryforwards are not fully available to offset federal (and in certain circumstances, state) alternative minimum taxable income. Further, as a result of a statutory “ownership change” (as defined for purposes of Section 382 of the Internal Revenue Code) that occurred as a result of AWA’s reorganization in 1994, AWA’s ability to utilize its NOL and business tax credit carryforwards may be restricted. The alternative minimum tax credit may be carried forward without expiration and is available to offset future income tax payable.

      Composition of Deferred Tax Items:

      Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, the significant components of AWA’s deferred tax assets and liabilities are a result of the temporary differences related to the items described as follows:

                         
2000 1999


(in thousands)
Deferred income tax liabilities
Property and equipment, principally depreciation and “fresh start” differences
$ (107,816 ) $ (101,666 )
Other
(5,331 )


Total deferred tax liabilities
$ (107,816 ) $ (106,997 )


Deferred tax assets
Aircraft leases
17,267 18,718
Frequent flyer accrual
5,469 4,790
Net operating loss carryforwards
55,150 68,301
Tax credit carryforwards
11,271 12,968
Other
2,931


Total deferred tax assets
92,088 104,777
Valuation allowance
(27,128 ) (28,548 )


64,960 76,229


Net deferred tax liability
$ (42,856 ) $ (30,768 )


      The change in net deferred tax liability differs from current year deferred income tax expense due to the Alternative Minimum Tax credit carryforward of approximately $1.0 million.

      Statement of Financial Accounting Standards (“SFAS”), No. 109, Accounting for Income Taxes requires a “more likely than not” criterion be applied when evaluating the realizability of a deferred tax asset. The valuation allowance of $27.1 million is necessary because at this time AWA has not determined it is more likely than not that the balance of the deferred tax assets will be fully realized. AWA continues to monitor the valuation allowance and will make adjustments as appropriate. If in future tax periods, AWA were to recognize additional tax benefits related to items attributable to the predecessor company such as net operating loss and other carryforwards, such benefits would be applied to reduce further reorganization value in excess of amounts allocable to identifiable assets.

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

7. Supplemental Information to Statements of Cash Flows

      Supplemental disclosure of cash flow information and non-cash investing and financing activities were as follows:

                           
Year Ended December 31,

2000 1999 1998



(in thousands)
Non-cash transactions:
Notes payable issued for equipment purchase deposits
$ 42,000 $ 35,000 $ 45,500
Notes payable canceled under the aircraft purchase agreement
38,500 45,500 12,596
Cash transactions:
Interest paid, net of amounts capitalized
11,536 19,920 22,184
Income taxes paid
2,852 3,677 20,963

8. Investments in Debt Securities

      Cash equivalents and short-term investments as of December 31 are classified as follows:

                   
2000 1999


(in thousands)
Corporate notes
163,941 65,169
Money market funds
25,895 47,507
Other debt securities
8,486


Total cash equivalents and short-term investments
$ 189,836 $ 121,162


9. Non-Operating Income (Expense) —Other, Net

      In March 2000 AWA sold 500,000 warrants to purchase common stock of Priceline.com, Inc. for approximately $18.0 million, resulting in a pretax gain of approximately $15.5 million.

      In September 2000 AWA recorded an $8.8 million pretax unrealized gain on the Company’s investment in one million shares of GetThere.com common stock. AWA sold all one million shares of GetThere.com for approximately $17.8 million in October 2000.

      In December 1999 AWA recorded an $11.9 million pretax unrealized gain on the Company’s investment in Priceline.com common stock. AWA sold all 294,109 shares of Priceline.com for approximately $15.1 million in January 2000.

10. Commitments and Contingencies

  (a)   Leases

      As of December 31, 2000, AWA had 127 aircraft under operating leases with remaining terms ranging from one year to approximately 22 years. AWA has options to purchase certain of the aircraft at fair market values at the end of the lease terms. Certain of the agreements require security deposits, minimum return provisions and maintenance reserve payments. AWA also leases certain terminal space, ground facilities and computer and other equipment under noncancelable operating leases.

      At December 31, 2000, the scheduled future minimum cash rental payments under noncancelable operating leases with initial terms of more than one year are as follows:

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

         
(in thousands)
2001
$ 369,136
2002
335,749
2003
283,278
2004
235,365
2005
220,219
Thereafter
1,819,443

$ 3,263,190

      Rent expense (excluding landing fees) was approximately $427 million, $365 million and $330 million for the years ended December 31, 2000, 1999 and 1998, respectively.

      Collectively, the operating lease agreements require security deposits with lessors of $27.9 million and bank letters of credit of $18.5 million. The letters of credit are collateralized by $18.5 million of restricted cash as of December 31, 2000.

  (b)   Revenue Bonds

      In June 1999 Series 1999 special facility revenue bonds (“new bonds”) were issued by a municipality to fund the retirement of the Series 1994A bonds (“old bonds”) and the construction of a new concourse with 14 gates at Terminal 4 in Phoenix Sky Harbor International Airport in support of AWA’s strategic growth plan. The new bonds are due June 2019 with interest accruing at 6.25% per annum payable semiannually on June 1 and December 1, commencing on December 1, 1999. The new bonds are subject to optional redemption prior to the maturity date on or after June 1, 2009 in whole or in part, on any interest payment date at the following redemption prices: 101% on June 1 or December 1, 2009; 100.5% on June 1 or December 1, 2010; and 100% on June 1, 2011 and thereafter.

  (c)   Aircraft Acquisitions

      At December 31, 2000, AWA had firm commitments to AVSA for a total of 15 Airbus A318-100, 13 Airbus A319-100 and 11 Airbus A320-200 aircraft with delivery through 2004 at a cost of approximately $1.5 billion. The agreement also includes options to purchase an additional 17 A320 family aircraft during 2005 through 2006 and purchase rights for an additional 25 A320 series aircraft for delivery in 2007 to 2008.

      AWA has an agreement with International Aero Engines (“IAE”) which provides for the purchase by AWA of seven new V2500-A5 spare engines scheduled for delivery through 2003 for use on certain of the A320 fleet. At December 31, 2000, the seven engines have an estimated aggregate cost of $31 million.

      The following table reflects estimated cash payments under the aircraft and engine purchase contracts. Actual payments may vary due to inflation factor adjustments and changes in the delivery schedule of the equipment. The estimated cash payments include progress payments that will be made in cash, as opposed to being financed under an existing progress payment financing facility.

         
(in thousands)
2001
$ 446,080
2002
153,747
2003
387,116

$ 986,943

      In July 2000 America West Airlines 2000-1 Pass Through Trusts issued $253.3 million of Pass Through Trust Certificates in connection with the financing of eight Airbus A319 aircraft and two Airbus A320 aircraft to be purchased from AVSA. The Pass Through Trust Certificates are not direct obligations of, nor guaranteed by, AWA. The combined effective interest rate on the financing is 8.49%. Six A319 and one A320 aircraft that are the subject of this financing were delivered in 2000. The remaining three aircraft were delivered in the first quarter of 2001.

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

  (d)   Sale/Leaseback Transaction

      In June 2000 AWA borrowed $32.0 million from a foreign bank to fund the acquisition of one new A320 aircraft. In July 2000 AWA entered into a sale/leaseback transaction whereby the Company sold this aircraft for approximately the acquisition cost. The aircraft is being leased back from the purchaser for approximately 22 years and is being accounted for as an operating lease.

      In August 1999, AWA entered into a sale/leaseback transaction whereby the Company sold five Boeing 737-300 aircraft and one Boeing 757-200 aircraft for approximately $114 million. To complete this transaction, the Company paid approximately $49.3 million to retire mortgage debt outstanding on the aircraft. The aircraft are being leased back from the purchaser for approximately six years. The sale resulted in a $9.2 million gain for AWA, which was deferred and is being amortized over the lease term as a reduction in rent expense. The related lease is being accounted for as an operating lease. The average annual lease payments, over the life of the leases, are $15.5 million.

  (e)   Contingent Legal Obligations

      Holdings and AWA are named defendants in a number of additional lawsuits and proceedings arising in the ordinary course of business. While the outcome of the contingencies, lawsuits or other proceedings cannot be predicted with certainty, management currently expects that any liability arising from such matters, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on the financial condition and results of operations of AWA.

11. Advances to Parent Company and Affiliate

      As of December 31, 2000, AWA had net advances to Holdings of $253.2 million. In addition, AWA had net advances of $20.1 million to TLC, a wholly owned subsidiary of Holdings.

12. Related Party Transactions

      AWA has entered into various aircraft leasing arrangements with AerFi Group plc (“AerFi”), formerly GPA Group plc, at terms comparable to those obtained from third parties for similar transactions. William A. Franke, the Company’s Chairman and CEO, was a director and, indirectly, a minor shareholder of AerFi. In addition, an affiliate of TPG purchased a large minority stake in AerFi in November 1998 and had three representatives serving on AerFi’s five-member Board of Directors. AerFi was acquired by AirFinance B.V. in November 2000 and Mr. Franke and the TPG affiliate disposed of all share interests in AerFi at that time. Mr. Franke and the representatives of the TPG affiliate also resigned from their board positions at that time. AWA currently leases four aircraft from AerFi and the rental payments for such leases amounted to $14.8 million, $14.8 million and $19.2 million for the years ended December 31, 2000, 1999 and 1998, respectively. As of December 31, 2000, AWA was obligated to pay approximately $177.1 million under the AerFi leases which expire at various dates through the year 2013.

      AerFi and AWA also entered into a Put Termination Agreement which terminated arrangements with AerFi pursuant to which AerFi could cause AWA to lease up to four additional aircraft prior to June 30, 1999. Pursuant to the Put Termination Agreement, AWA is obligated to make certain payments to the U.S. subsidiaries of AerFi (“AerFi Subs”). The payments due to the AerFi Subs under the Put Termination Agreement were approximately $1.9 million for each of the years 2000, 1999 and 1998.

      As part of AWA’s reorganization in 1994, Continental Airlines made an investment in AWA, and AWA entered into an alliance agreement related to codesharing arrangements and ground handling operations. AWA paid Continental approximately $32.4 million, $31.7 million and $27.8 million and also received approximately $25.5 million, $24.5 million and $20.5 million in 2000, 1999 and 1998, respectively, from Continental pursuant to these agreements.

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

      In December 2000 Continental Airlines sold to the Company all 158,569 shares of Class A common stock of the Company held by Continental. Continental also assigned to the Company its rights of first refusal held by Continental with respect to shares of Class A common stock owned by TPG Partners, L.P., TPG Parallel I, L.P. and Air Partners II, L.P. (collectively, the “TPG Parties”) under a Priority Distribution Agreement originally entered into between Continental and the TPG Parties in 1994. As consideration, America West paid Continental $10.8 million with respect to these transactions. As an inducement for the TPG Parties to consent to the transfer of the rights of first refusal, the Company has agreed not to exercise its rights of first refusal with respect to any of the Class A common stock held by the TPG Parties but retains its rights of first refusal with respect to any subsequent transfer proposed by any third party who acquires such shares. Additionally, the Company's rights of first refusal will terminate in the event William A. Franke ceases to be the Chairman of the Company. The payment was accounted for in 2000 as a reduction in shareholders’ equity.

      AWA provides air transportation and certain administrative services to The Leisure Company, a wholly owned subsidiary of Holdings that was formed on January 1, 1998. The cost of air transportation and administrative services are negotiated on an arms length basis. AWA had net air transportation sales to TLC of $55.3 million, $54.8 million and $61.6 million, and also received $1.3 million, $1.6 million and $1.9 million in 2000, 1999 and 1998, respectively, under the services agreement.

13. Quarterly Financial Data (Unaudited)

      Summarized quarterly financial data for 2000 and 1999 follows (in thousands of dollars):

                                 
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter




2000
Operating revenues
$ 544,888 $ 604,810 $ 578,457 $ 562,716
Operating income (loss)
11,853 49,277 (920 ) (72,948 )
Nonoperating income (expense), net
15,476 (322 ) 10,097 2,628
Income tax benefit (expense)
(11,821 ) (20,678 ) (9,926 ) 26,755
Net income (loss)
15,508 (1) 28,277 (749 )(2) (43,565 )(3)
                                 
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter




1999
Operating revenues
$ 506,462 $ 554,193 $ 533,894 $ 552,406
Operating income
48,889 74,059 38,848 36,105
Nonoperating income (expense), net
(4,098 ) (164 ) (2,702 ) 10,037
Income tax expense
(19,885 ) (32,351 ) (14,831 ) (17,285 )
Net income
24,906 41,544 21,315 28,857 (4)


(1)   Includes a $15.5 million pretax gain on sale of 500,000 warrants to purchase common stock of Priceline.com.
(2)   Includes an $8.8 million pretax unrealized gain on the Company’s investment in GetThere.com common stock.
(3)   Includes $16.0 million of non-recurring operating expenses primarily related to the write-down to net realizable value of certain excess expendable parts inventory that will be sold.
(4)   Includes an $11.9 million pretax unrealized gain on the Company’s investment in Priceline common stock and $2.5 million of revenue related to additional Priceline warrants granted to AWA in November 1999.

14. Segment Disclosures

      AWA is one reportable operating segment. Accordingly, the segment reporting financial data required by SFAS No. 131 is included in the accompanying balance sheets and statements of income.

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AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS — CONTINUED

15. Subsequent Event

      Codeshare Agreements

      In March 2001 AWA restructured its codeshare agreement with Mesa Airlines to expand regional flying in the western United States under the America West Express banner. AWA also entered into a new partnership with Chautauqua Airlines for regional codesharing as America West Express in the eastern United States. Under these agreements, the America West Express regional fleet will increase to 77 jet aircraft by 2005 with options for further expansion to as many as 129 aircraft. The new regional jets will be used to grow AWA’s service from its three primary hubs in Phoenix, Las Vegas and Columbus, Ohio. In February 2001 AWA also entered into a codeshare agreement with Big Sky Airlines, expanding AWA’s route structure with service to 20 new markets in Montana, Texas, Oklahoma and Arkansas.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

KPMG LLP served as the Company’s and AWA's independent auditors for the fiscal years ended December 31, 2000, 1999, and 1998. The Company’s contract for services with KPMG LLP expired upon completion of the 2000 audit, and on March 29, 2001, the Company notified KPMG LLP that it had approved the engagement of PricewaterhouseCoopers as its independent auditors for the Company and AWA for the fiscal year ended December 31, 2001. The decision to change independent auditors was not made as the result of a disagreement of any kind. The change was recommended by the Holdings Audit Committee and approved by the Board of Directors of Holdings and AWA.

The audit reports of KPMG LLP on Holdings’ consolidated balance sheets and on AWA’s balance sheets as of December 31, 2000 and 1999 and the related statements of income, cash flows and stockholders’ equity for Holdings and statements of operations, cash flows and stockholders’ equity for AWA for each of the years in the three year period ended December 31, 2000 did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles.

In connection with the audits of the fiscal years ended December 31, 2000, 1999, and 1998 and the interim periods subsequent to December 31, 2000 through March 29, 2001, there were no disagreements between Holdings or AWA and KPMG LLP as to any matter of accounting principles or practices, financial statement disclosure, or audit scope or procedure, which such disagreements, if not resolved to the satisfaction of KPMG LLP, would have caused it to make reference to the subject matter of the disagreement in connection with its reports on the financial statements for such periods within the meaning of Item 304(a)(1)(iv) of Regulation S-K. During the fiscal years ended December 31, 2000, 1999 and 1998 and the interim periods subsequent to December 31, 2000 through March 29, 2001, there have been no reportable events (as defined in Item 304(a)(1)(iv) of Regulation S-K).

Holdings and AWA have not consulted with PricewaterhouseCoopers prior to its engagement regarding the application of accounting principles to a specified transaction, either completed or proposed, the type of audit opinion that might be rendered on the financial statements of Holdings or AWA or any matter that was either the subject of disagreement or a reportable event within the meaning of Item 304(a)(1) of Regulation S-K.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Information respecting continuing directors and nominees of the Company is set forth under the caption “Election of Directors” in Holdings’ Proxy Statement relating to its 2001 Annual Meeting of Stockholders and is incorporated by reference into this Form 10-K Report. The Proxy Statement will be filed with the Securities and Exchange Commission in accordance with Rule 14a-6(c) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). With the exception of the foregoing information and other information specifically incorporated by reference into this Form 10-K Report, the Proxy Statement is not being filed as a part hereof. Information respecting executive officers of Holdings is set forth at Part I of this Report.

      Information respecting compliance with Section 16(a) of the Exchange Act is set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement and is incorporated by references into this Form 10-K Report.

ITEM 11. EXECUTIVE COMPENSATION

      Information concerning executive compensation required by Item 11 is set forth under the captions “Executive Compensation”, “Stock Option Grants and Exercises”, “Employment Agreements” and “Compensation Committee Interlocks” in the Proxy Statement and is incorporated by reference into this Form 10-K Report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      Information concerning security ownership of certain beneficial owners and management required by Item 12 is set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement and is incorporated by reference into this Form 10-K Report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Information concerning certain relationships and related transactions required by Item 13 is set forth under the captions “Employment Agreements” and “Certain Transactions” in the Proxy Statement and is incorporated by reference into this Form 10-K Report.

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

  (a)   Financial Statements

      The following financial statements and the Independent Auditors’ Reports are filed in Part II, Item 8A and 8B of this report on the pages indicated:

      America West Holdings Corporation

        Independent Auditors’ Report —page 31.
 
        Consolidated Balance Sheets —December 31, 2000 and 1999 —page 32.
 
        Consolidated Statements of Income-Years ended December 31, 2000, 1999 and 1998 —page 33.
 
        Consolidated Statements of Cash Flows-Years ended December 31, 2000, 1999 and 1998 —page 34.
 
        Consolidated Statements of Stockholders’ Equity-Years ended December 31, 2000, 1999 and 1998 —page       35.
 
        Notes to Consolidated Financial Statements —page 36.

      America West Airlines, Inc.

        Independent Auditors’ Report —page 53.
 
        Balance Sheets —December 31, 2000 and 1999 —page 54.
 
        Statements of Operations —Years ended December 31, 2000, 1999 and 1998 —page 55.
 
        Statements of Cash Flows —Years ended December 31, 2000, 1999 and 1998 —page 56.
 
        Statements of Stockholder’s Equity —Years ended December 31, 2000, 1999 and 1998 —page 57.
 
        Notes to Financial Statements —page 58.

  (b)   Reports on Form 8-K

  Holdings filed a Report on Form 8-K dated December 6, 2000 furnishing under Item 9 a press release, dated December 6, 2000, setting forth certain data regarding AWA’s fleet plan, unit costs, operating statistics, fuel and performance statistics.

  (c)   Exhibits

     
Exhibit
Number Title
 
2.2 Agreement and Plan of Merger, dated as of December 19, 1996, by and among America West Holdings Corporation (“Holdings”), America West Airlines, Inc. (“AWA”) and AWA Merger, Inc., with an effective date and time as of midnight on December 31, 1996 —Incorporated by reference to Exhibit 2.1 to Holdings’ Registration Statement on Form 8-B dated January 13, 1997.
3.1 Restated Certificate of Incorporation of AWA (included in Exhibit 2.2 above).

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Exhibit
Number Title
 
*3.2 Restated Bylaws of AWA.
  3.3 Certificate of Incorporation of Holdings (filed with the Secretary of State of the State of Delaware on December 13, 1996) —Incorporated by reference to Exhibit 3.1 of Holdings’ Registration Statement on Form 8-B dated January 13, 1997.
*3.4 Restated bylaws of Holdings.
  4.1 Indenture for 10 3/4% Senior Unsecured Notes due 2005 —Incorporated by reference to Exhibit 4.1 to AWA’s Form S-4 (No. 33-61099).
  4.2 Form of Senior Note (included as Exhibit A to Exhibit 4.1 above).
  4.7 Stock Option Agreement, dated effective as of December 31, 1996, between Holdings and AWA —Incorporated by reference to Exhibit 4.5 to Holdings’ Registration Statement on Form 8-B dated January 13, 1997.
  4.8 Registration Rights Agreement, dated as of August 25, 1994, among AWA, AmWest Partners, L.P. and other holders —Incorporated by reference to Exhibit 4.6 to the AWA’s Current Report on Form 8-K dated August 25, 1994.
  4.9 Assumption of Certain Obligations Under Registration Rights Agreement executed by Holdings for the benefit of TPG Partners, L.P., TPG Parallel 1, L.P., Air Partners II, L.P., Continental Airlines, Inc., Mesa Airlines, Inc., Lehman Brothers, Inc., Belmont Capital Partners II, L.P. and Belmont Fund, L.P. —Incorporated by reference to Exhibit 4.7 to Holdings’ Registration Statement on Form 8-B dated January 13, 1997.
  4.10 Form of Pass Through Trust Agreement, dated as of November 26, 1996, between AWA and Fleet National Bank, as Trustee —Incorporated by reference to Exhibit 4.1 to AWA’s Report on Form 8-K dated November 26, 1996.
  4.12 Form of Pass Through Trust Agreement, dated as of June 17, 1997, between AWA and Fleet National Bank, as Trustee —Incorporated by reference to Exhibit 4.5 to AWA’s Registration Statement on Form S-3 (No. 33-327351).
  4.13 Forms of Pass Through Trust Agreements, dated as of October 6, 1998, between AWA and Wilmington Trust Company, as Trustee —Incorporated by reference to Exhibits 4.4, 4.5, 4.6, 4.7, 4.8 and 4.9 to AWA’s Registration Statement on Form S-4 (No. 333-71615).
  4.14 Pass Through Trust Agreements, dated as of September 21, 1999, between AWA and Wilmington Trust Company, as Trustee, made with respect to the formation of America West Airlines Pass Through Trusts, Series 1999-1G-S, 1999-1G-O, 1999-1C-S and 1999-1C-O and the issuance of 7.93% Initial Pass Through Certificates Series 1999-1G-S and 1999-1G-O, and 8.54% Initial Pass Through Certificates, Series 1999-1C-S and 1999-1C-O, and 7.93% Exchange Pass Through Certificates, Series 1999-1G-S and 1999-1G-O, and 8.54% Exchange Pass Through Certificates, Series 1999-1C-S and 1999-1C-O —Incorporated by reference to AWA’s Quarterly Report on Form 10-Q for the period ended September 30, 1999.
  10.1 Alliance Agreements, dated as of August 25, 1994, between AWA and Continental Airlines, Inc. including the Master Ground Handling Agreement, the Reciprocal Frequent Flyer Participation Agreement, the Code Sharing Agreement, the Cargo Special Pro-Rate Agreement, the Reciprocal Club Usage Agreement and the Memorandum of Understanding Concerning Technology Transfers-Incorporated by reference to Exhibit 10.12 to AWA’s Current Report on Form 8-K dated August 25, 1994.

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Exhibit
Number Title
 
10.11 Airport Use Agreement, dated as of July 1, 1989, among the City of Phoenix, The Industrial Development Authority of the City of Phoenix, Arizona and AWA (“Airport Use Agreement”) —Incorporated by reference to Exhibit 10-D(9) to AWA’s Annual Report on Form 10-K for the year ended December 31, 1989.
10.12 First Amendment to Airport Use Agreement, dated as of August 1, 1990 - - Incorporated by reference to Exhibit 10-(D)(9) to AWA’s Quarterly Report on Form 10-Q for the period ended September 30, 1990.
10.19 Management Rights Agreement, dated as of August 25, 1994, between TPG Partners L.P., TPG Genpar, L.P. and AWA —Incorporated by reference to Exhibit 10.47 to AWA’s Registration Statement on Form S-1 (No. 33-54243), as amended.
10.20(1) Amended and Restated V2500 Support Contract, dated as of October 7, 1998, between AWA and IAE International Aero Engines AG and Side Letters Nos. 1 and 2 thereto —Incorporated by reference to Exhibit 10.20 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
+10.21 Amended and Restated America West 1994 Incentive Equity Plan - Incorporated by reference to Exhibit 10.21 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
+10.23 Employment Agreement, dated as of February 17, 1998, among Holdings, AWA, The Leisure Company and William A. Franke —Incorporated by reference to Exhibit 10.23 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
10.25(1) Airbus A320/A319 Purchase Agreement, dated as of September 12, 1997, between AVSA S.A.R.L and AWA including Letter Agreements Nos. 1-10 - Incorporated by reference to Exhibit 10.26 to Holdings’ Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
10.26 Revolving Credit Agreement, dated as of December 10, 1999, among AWA and The Industrial Bank of Japan, Limited, Citicorp USA, Inc., Salomon Smith Barney, Inc. and Bankers Trust Company —Incorporated by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
10.28(1) Amendment No. 1, dated as of March 31, 1998, to the Airbus A320/A319 Purchase Agreement, dated as of September 12, 1997, between AVSA S.A.R.L. and AWA —Incorporated by reference to Exhibit 10.28 to Holdings’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
10.29 Financing Agreement, dated as of April 1, 1998, between the Industrial Development Authority of the City of Phoenix, Arizona and AWA - - Incorporated by reference to Exhibit 10.29 to Holdings’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
10.30 Indenture of Trust, dated as of April 1, 1998, from the Industrial Development Authority of the City of Phoenix, Arizona to Norwest Bank, Arizona N.A. —Incorporated by reference to Exhibit 10.30 to Holdings’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
10.31 Amendment No. 1 to Code Sharing Agreement, dated as of June 29, 1994, between AWA and Continental Airlines, Inc. —Incorporated by reference to Exhibit 10.31 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
10.32(1) Amendment No. 2, dated as of December 9, 1998, to the Airbus A320/A319 Purchase Agreement, dated as of September 12, 1997, between AVSA S.A.R.L. and AWA —Incorporated by reference to Exhibit 10.32 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.

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Exhibit
Number Title
 
+10.33 Amendment to Employment Agreement, dated as of January 15, 1999, among Holdings, AWA, The Leisure Company and William A. Franke —Incorporated by reference to Exhibit 10.33 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
10.34 Second Amendment to Airport Use Agreement, dated as of August 25, 1995 —Incorporated by reference to Exhibit 10.34 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
10.35 Indenture of Trust, dated as of June 1, 1999, from The Industrial Development Authority of the City of Phoenix, Arizona to Bank One Arizona, N.A. —Incorporated by reference to Exhibit 10.35 to AWA’s Quarterly Report on Form 10-Q for the period ended June 30, 1999.
10.36(1) Amendment No. 3, dated as of October 14, 1999, to the Airbus A320/319 Purchase Agreement, dated as of September 12, 1997, between AVSA, S.A.R.L. and America West and Letter Agreement Nos. 1 —8 thereto - - Incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.
+10.37 Second Amendment to Employment Agreement, dated as of January 1, 2000, by and among Holdings, AWA, TLC and William A. Franke —Incorporated by reference to Exhibit 10.37 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
10.38(1) Amendment No. 4, dated as of July 1, 2000, to the Airbus A320/319 Purchase Agreement, dated as of September 12, 1997, between AVSA S.A.R.L. and AWA —Incorporated by reference to Exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
10.39(1) Amendment No. 5, dated as of October 12, 2000, to the Airbus A320/319 Purchase Agreement, dated as of September 12, 1997, between AVSA S.A.R.L. and AWA —Incorporated by reference to Exhibit 10.39 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
*10.40 Purchase Agreement, dated as of December 27, 2000, between Holdings, AWA and Continental Airlines, Inc., including Letter Agreement.
10.41 Priority Distribution Agreement, dated as of August 25, 1994, between TPG Partners, L.P., TPG Parallel I, L.P. and Air Partners II, L.P., and Continental Airlines, Inc. —Incorporated by reference to Exhibit 3 to Schedule 13D filed by TPG Partners, L.P. on September 6, 1994.
*10.42 Amendment No. 2 to Code Sharing Agreement, dated as of June 29, 1994, between AWA and Continental Airlines, Inc.
*10.43 Amendment No. 3 to Code Sharing Agreement, dated as of June 29, 1994, between AWA and Continental Airlines, Inc.
*21.1 Subsidiaries of Holdings.
*23.1 Consent of KPMG LLP.
24.1 Power of Attorney, pursuant to which amendments to this Annual Report on Form 10-K may be filed, is included on the signature pages of this Annual Report on Form 10-K.

*   Filed herewith.
+   Represents a management contract or compensatory plan or arrangement.
(1)   The Company has sought confidential treatment for portions of the referenced exhibit.

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        (d) Financial Statement Schedules

        America West Holdings Corporation

        Independent Auditors’ Report on Schedule and Consent - page 78.
 
        Schedule II: Valuation and Qualifying Accounts —page 79.

        America West Airlines, Inc.

        Independent Auditors’ Report on Schedule —page 80.
 
        Schedule II: Valuation and Qualifying Accounts —page 81.

      All other information and schedules have been omitted as not applicable or because the required information is included in the financial statements or notes thereto.

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, America West Holdings Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     
AMERICA WEST HOLDINGS CORPORATION
 
Date: April 2, 2001
By: /s/ William A. Franke                                                        
       William A. Franke,
    Chairman of the Board and Chief Executive Officer

POWER OF ATTORNEY

      We, the undersigned, directors and officers of America West Holdings Corporation, do hereby severally constitute and appoint William A. Franke, W. Douglas Parker and Stephen L. Johnson and each or any of them, our true and lawful attorneys and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, and to file the same with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each or any of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys and agents, and each of them, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on April 2, 2001.

     
SIGNATURE TITLE


/s/ William A. Franke

William A. Franke
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
 
 
 
/s/ W. Douglas Parker

W. Douglas Parker
Executive Vice President and Director
 
 
 
 
/s/ Thomas K. MacGillivray

Thomas K. MacGillivray
Senior Vice President
(Principal Financial and Accounting Officer)
 
 
 
/s/ John L. Goolsby

John L. Goolsby
Director
 
 
 
 
/s/ Walter T. Klenz

Walter T. Klenz
Director
 
 
 
 
/s/ Marie L. Knowles

Marie L. Knowles
Director
 
 
 
 
/s/ Richard C. Kraemer

Richard C. Kraemer
Director
 
 
 
 
/s/ Robert J. Miller

Robert J. Miller
Director
 
 
 
 
/s/ Denise M. O’Leary

Denise M. O’Leary
Director
 
 
 
 
/s/ Richard P. Schifter

Richard P. Schifter
Director
 
 
 
 
/s/ Jeffrey A. Shaw

Jeffrey A. Shaw
Director
 
 
 
 
/s/ John F. Tierney

John F. Tierney
Director
 
 
 
 
/s/ J. Steven Whisler

J. Steven Whisler
Director
 

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, America West Airlines, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     
AMERICA WEST HOLDINGS CORPORATION
 
Date: April 2, 2001
By: /s/ William A. Franke                                                        
       William A. Franke,
    Chairman of the Board and Chief Executive Officer

POWER OF ATTORNEY

      We, the undersigned, directors and officers of America West Airlines, Inc., do hereby severally constitute and appoint William A. Franke, W. Douglas Parker and Stephen L. Johnson and each or any of them, our true and lawful attorneys and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, and to file the same with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each or any of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys and agents, and each of them, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on April 2, 2001.

     
SIGNATURE TITLE


/s/ William A. Franke

William A. Franke
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
 
 
 
/s/ W. Douglas Parker

W. Douglas Parker
President, Chief Operating Officer and Director
 
 
 
 
/s/ Thomas K. MacGillivray

Thomas K. MacGillivray
Senior Vice President
(Principal Financial Officer)
 
 
 
/s/ Michael R. Carreon

Michael R. Carreon
Vice President and Controller
(Principal Accounting Officer)
 
 
 
/s/ John L. Goolsby

John L. Goolsby
Director
 
 
 
 
/s/ Walter T. Klenz

Walter T. Klenz
Director
 
 
 
 
/s/ Marie L. Knowles

Marie L. Knowles
Director
 
 
 
 
/s/ Richard C. Kraemer

Richard C. Kraemer
Director
 
 
 
 
/s/ Robert J. Miller

Robert J. Miller
Director
 
 
 
 
/s/ Denise M. O’Leary

Denise M. O’Leary
Director
 
 
 
 
/s/ Richard P. Schifter

Richard P. Schifter
Director
 
 
 
 
/s/ Jeffrey A. Shaw

Jeffrey A. Shaw
Director
 
 
 
 
/s/ John F. Tierney

John F. Tierney
Director
 
 
 
 
/s/ J. Steven Whisler

J. Steven Whisler
Director
 

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INDEPENDENT AUDITORS’ REPORT ON SCHEDULE AND CONSENT

The Board of Directors and Stockholders
America West Holdings Corporation:

      The audits referred to in our report dated March 28, 2001, included the related consolidated financial statement schedule as listed in Item 14(d) for the years ended December 31, 2000, 1999 and 1998, included herein. The consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statement schedule based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

      We consent to incorporation by reference in the Registration Statements (Form S-8 No. 33-60555), (Form S-8 No. 333-26935), (Form S-8 No. 333-70486), (Form S-8 No. 333-94361), (Form S-3 No. 333-51107) and (Form S-3 No. 333-02129) of America West Holdings Corporation of our report dated March 28, 2001, relating to the consolidated balance sheets of America West Holdings Corporation and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, cash flows and stockholders’ equity for each of the years in the three-year period ended December 31, 2000, and the related consolidated financial statement schedule, which report appears in the December 31, 2000, annual report on Form 10-K of America West Holdings Corporation.

KPMG LLP
Phoenix, Arizona
March 28, 2001

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AMERICA WEST HOLDINGS CORPORATION
Schedule II-Valuation and Qualifying Accounts
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands)

                                   
Balance at Balance
Beginning at End
Description of Period Additions Deductions of Period





Allowance for doubtful receivables:
Year ended December 31, 2000
$ 2,453 $ 3,223 $ 3,882 $ 1,794




Year ended December 31, 1999
$ 3,545 $ 3,188 $ 4,280 $ 2,453




Year ended December 31, 1998
$ 3,850 $ 3,412 $ 3,717 $ 3,545




 
 
Allowance for obsolescence:
Year ended December 31, 2000
$ 5,612 $ 11,413 $ 11,586 $ 5,439




Year ended December 31, 1999
$ 4,112 $ 1,642 $ 142 $ 5,612




Year ended December 31, 1998
$ 2,495 $ 1,699 $ 82 $ 4,112




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INDEPENDENT AUDITORS’ REPORT ON SCHEDULE

The Board of Directors and Stockholder
America West Airlines, Inc.:

      The audits referred to in our report dated March 28, 2001, included the related financial statement schedule as listed in Item 14(d) for the years ended December 31, 2000, 1999 and 1998, included herein. The financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

KPMG LLP
Phoenix, Arizona
March 28, 2001

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AMERICA WEST AIRLINES, INC.
Schedule II-Valuation and Qualifying Accounts
For the Years Ended December 31, 2000, 1999 and 1998

(in thousands)

                                   
Balance at Balance
Beginning at End
Description of Period Additions Deductions of Period





Allowance for doubtful receivables:
Year ended December 31, 2000
$ 2,005 $ 3,000 $ 3,604 $ 1,401




Year ended December 31, 1999
$ 3,268 $ 3,000 $ 4,263 $ 2,005




Year ended December 31, 1998
$ 3,850 $ 3,000 $ 3,582 $ 3,268




 
 
Allowance for obsolescence:
Year ended December 31, 2000
$ 5,612 $ 11,413 $ 11,586 $ 5,439




Year ended December 31, 1999
$ 4,112 $ 1,642 $ 142 $ 5,612




Year ended December 31, 1998
$ 2,495 $ 1,699 $ 82 $ 4,112




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INDEX TO EXHIBITS

     
Exhibit
Number Title
 
  2.2 Agreement and Plan of Merger, dated as of December 19, 1996, by and among America West Holdings Corporation (“Holdings”), America West Airlines, Inc. (“AWA”) and AWA Merger, Inc., with an effective date and time as of midnight on December 31, 1996 —Incorporated by reference to Exhibit 2.1 to Holdings’ Registration Statement on Form 8-B dated January 13, 1997.
  3.1 Restated Certificate of Incorporation of AWA (included in Exhibit 2.2 above).
*3.2 Restated Bylaws of AWA.
  3.3 Certificate of Incorporation of Holdings (filed with the Secretary of State of the State of Delaware on December 13, 1996) —Incorporated by reference to Exhibit 3.1 of Holdings’ Registration Statement on Form 8-B dated January 13, 1997.
*3.4 Restated bylaws of Holdings.
  4.1 Indenture for 10 3/4% Senior Unsecured Notes due 2005 —Incorporated by reference to Exhibit 4.1 to AWA’s Form S-4 (No. 33-61099).
  4.2 Form of Senior Note (included as Exhibit A to Exhibit 4.1 above).
  4.7 Stock Option Agreement, dated effective as of December 31, 1996, between Holdings and AWA —Incorporated by reference to Exhibit 4.5 to Holdings’ Registration Statement on Form 8-B dated January 13, 1997.
  4.8 Registration Rights Agreement, dated as of August 25, 1994, among AWA, AmWest Partners, L.P. and other holders —Incorporated by reference to Exhibit 4.6 to the AWA’s Current Report on Form 8-K dated August 25, 1994.
  4.9 Assumption of Certain Obligations Under Registration Rights Agreement executed by Holdings for the benefit of TPG Partners, L.P., TPG Parallel 1, L.P., Air Partners II, L.P., Continental Airlines, Inc., Mesa Airlines, Inc., Lehman Brothers, Inc., Belmont Capital Partners II, L.P. and Belmont Fund, L.P. —Incorporated by reference to Exhibit 4.7 to Holdings’ Registration Statement on Form 8-B dated January 13, 1997.
  4.10 Form of Pass Through Trust Agreement, dated as of November 26, 1996, between AWA and Fleet National Bank, as Trustee —Incorporated by reference to Exhibit 4.1 to AWA’s Report on Form 8-K dated November 26, 1996.
  4.12 Form of Pass Through Trust Agreement, dated as of June 17, 1997, between AWA and Fleet National Bank, as Trustee —Incorporated by reference to Exhibit 4.5 to AWA’s Registration Statement on Form S-3 (No. 33-327351).
  4.13 Forms of Pass Through Trust Agreements, dated as of October 6, 1998, between AWA and Wilmington Trust Company, as Trustee —Incorporated by reference to Exhibits 4.4, 4.5, 4.6, 4.7, 4.8 and 4.9 to AWA’s Registration Statement on Form S-4 (No. 333-71615).

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Exhibit
Number Title
 
4.14 Pass Through Trust Agreements, dated as of September 21, 1999, between AWA and Wilmington Trust Company, as Trustee, made with respect to the formation of America West Airlines Pass Through Trusts, Series 1999-1G-S, 1999-1G-O, 1999-1C-S and 1999-1C-O and the issuance of 7.93% Initial Pass Through Certificates Series 1999-1G-S and 1999-1G-O, and 8.54% Initial Pass Through Certificates, Series 1999-1C-S and 1999-1C-O, and 7.93% Exchange Pass Through Certificates, Series 1999-1G-S and 1999-1G-O, and 8.54% Exchange Pass Through Certificates, Series 1999-1C-S and 1999-1C-O —Incorporated by reference to AWA’s Quarterly Report on Form 10-Q for the period ended September 30, 1999.
10.1 Alliance Agreements, dated as of August 25, 1994, between AWA and Continental Airlines, Inc. including the Master Ground Handling Agreement, the Reciprocal Frequent Flyer Participation Agreement, the Code Sharing Agreement, the Cargo Special Pro-Rate Agreement, the Reciprocal Club Usage Agreement and the Memorandum of Understanding Concerning Technology Transfers-Incorporated by reference to Exhibit 10.12 to AWA’s Current Report on Form 8-K dated August 25, 1994.
10.11 Airport Use Agreement, dated as of July 1, 1989, among the City of Phoenix, The Industrial Development Authority of the City of Phoenix, Arizona and AWA (“Airport Use Agreement”) —Incorporated by reference to Exhibit 10-D(9) to AWA’s Annual Report on Form 10-K for the year ended December 31, 1989.
10.12 First Amendment to Airport Use Agreement, dated as of August 1, 1990 - - Incorporated by reference to Exhibit 10-(D)(9) to AWA’s Quarterly Report on Form 10-Q for the period ended September 30, 1990.
10.19 Management Rights Agreement, dated as of August 25, 1994, between TPG Partners L.P., TPG Genpar, L.P. and AWA —Incorporated by reference to Exhibit 10.47 to AWA’s Registration Statement on Form S-1 (No. 33-54243), as amended.
10.20(1) Amended and Restated V2500 Support Contract, dated as of October 7, 1998, between AWA and IAE International Aero Engines AG and Side Letters Nos. 1 and 2 thereto —Incorporated by reference to Exhibit 10.20 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
+10.21 Amended and Restated America West 1994 Incentive Equity Plan - Incorporated by reference to Exhibit 10.21 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
+10.23 Employment Agreement, dated as of February 17, 1998, among Holdings, AWA, The Leisure Company and William A. Franke —Incorporated by reference to Exhibit 10.23 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
10.25(1) Airbus A320/A319 Purchase Agreement, dated as of September 12, 1997, between AVSA S.A.R.L and AWA including Letter Agreements Nos. 1-10 - Incorporated by reference to Exhibit 10.26 to Holdings’ Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
10.26 Revolving Credit Agreement, dated as of December 10, 1999, among AWA and The Industrial Bank of Japan, Limited, Citicorp USA, Inc., Salomon Smith Barney, Inc. and Bankers Trust Company —Incorporated by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
10.28(1) Amendment No. 1, dated as of March 31, 1998, to the Airbus A320/A319 Purchase Agreement, dated as of September 12, 1997, between AVSA S.A.R.L. and AWA —Incorporated by reference to Exhibit 10.28 to Holdings’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
10.29 Financing Agreement, dated as of April 1, 1998, between the Industrial Development Authority of the City of Phoenix, Arizona and AWA - - Incorporated by reference to Exhibit 10.29 to Holdings’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.

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Exhibit
Number Title
 
10.30 Indenture of Trust, dated as of April 1, 1998, from the Industrial Development Authority of the City of Phoenix, Arizona to Norwest Bank, Arizona N.A. —Incorporated by reference to Exhibit 10.30 to Holdings’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
10.31 Amendment No. 1 to Code Sharing Agreement, dated as of June 29, 1994, between AWA and Continental Airlines, Inc. —Incorporated by reference to Exhibit 10.31 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
10.32(1) Amendment No. 2, dated as of December 9, 1998, to the Airbus A320/A319 Purchase Agreement, dated as of September 12, 1997, between AVSA S.A.R.L. and AWA —Incorporated by reference to Exhibit 10.32 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
+10.33 Amendment to Employment Agreement, dated as of January 15, 1999, among Holdings, AWA, The Leisure Company and William A. Franke —Incorporated by reference to Exhibit 10.33 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
10.34 Second Amendment to Airport Use Agreement, dated as of August 25, 1995 —Incorporated by reference to Exhibit 10.34 to AWA’s Annual Report on Form 10-K for the year ended December 31, 1998.
10.35 Indenture of Trust, dated as of June 1, 1999, from The Industrial Development Authority of the City of Phoenix, Arizona to Bank One Arizona, N.A. —Incorporated by reference to Exhibit 10.35 to AWA’s Quarterly Report on Form 10-Q for the period ended June 30, 1999.
10.36(1) Amendment No. 3, dated as of October 14, 1999, to the Airbus A320/319 Purchase Agreement, dated as of September 12, 1997, between AVSA, S.A.R.L. and America West and Letter Agreement Nos. 1 —8 thereto - - Incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.
+10.37 Second Amendment to Employment Agreement, dated as of January 1, 2000, by and among Holdings, AWA, TLC and William A. Franke —Incorporated by reference to Exhibit 10.37 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
10.38(1) Amendment No. 4, dated as of July 1, 2000, to the Airbus A320/319 Purchase Agreement, dated as of September 12, 1997, between AVSA S.A.R.L. and AWA —Incorporated by reference to Exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
10.39(1) Amendment No. 5, dated as of October 12, 2000, to the Airbus A320/319 Purchase Agreement, dated as of September 12, 1997, between AVSA S.A.R.L. and AWA —Incorporated by reference to Exhibit 10.39 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
*10.40 Purchase Agreement, dated as of December 27, 2000, between Holdings, AWA and Continental Airlines, Inc., including Letter Agreement.
10.41 Priority Distribution Agreement, dated as of August 25, 1994, between TPG Partners, L.P., TPG Parallel I, L.P. and Air Partners II, L.P., and Continental Airlines, Inc. —Incorporated by reference to Exhibit 3 to Schedule 13D filed by TPG Partners, L.P. on September 6, 1994.
*10.42 Amendment No. 2 to Code Sharing Agreement, dated as of June 29, 1994, between AWA and Continental Airlines, Inc.
*10.43 Amendment No. 3 to Code Sharing Agreement, dated as of June 29, 1994, between AWA and Continental Airlines, Inc.
*21.1 Subsidiaries of Holdings.

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Exhibit
Number Title
 
*23.1 Consent of KPMG LLP.
24.1 Power of Attorney, pursuant to which amendments to this Annual Report on Form 10-K may be filed, is included on the signature pages of this Annual Report on Form 10-K.


*   Filed herewith.
+   Represents a management contract or compensatory plan or arrangement.
(1)   The Company has sought confidential treatment for portions of the referenced exhibit.

85 EX-3.2 2 p64739ex3-2.txt EX-3.2 1 Exhibit 3.2 RESTATED BYLAWS OF AMERICA WEST AIRLINES, INC. AUGUST 25, 1994 UPDATED THROUGH MARCH 19, 2001 2 TABLE OF CONTENTS 1. OFFICES............................................................1 1.01 Offices.....................................................1 2. SEAL...............................................................1 2.01 Seal........................................................1 3. MEETINGS OF STOCKHOLDERS...........................................1 3.01 Place of Meetings...........................................1 3.02 Annual Meetings.............................................1 3.03 Special Meetings............................................1 3.04 Action by Consent in Lieu of a Meeting......................1 3.05 Notice of Meetings..........................................1 3.06 Adjourned Meetings..........................................2 3.07 Quorum and Adjournment......................................2 3.08 Majority Vote Required......................................2 3.09 Manner of Voting............................................2 3.10 Proxies.....................................................2 3.11 Presiding Officer and Secretary.............................2 4. DIRECTORS..........................................................2 4.01 Powers......................................................2 4.02 Number and Classification...................................2 4.03 Nominations.................................................3 4.04 Resignations................................................3 4.05 Removal.....................................................3 4.06 Vacancies...................................................3 4.07 Presiding Officer and Secretary.............................3 4.08 Annual Meetings.............................................3 4.09 Regular Meetings............................................3 4.10 Special Meetings............................................3 4.11 Quorum and Powers of a Majority.............................4 4.12 Waiver of Notice............................................4 4.13 Manner of Acting............................................4 4.14 Compensation................................................4 4.15 Committees..................................................4 4.16 Committee Procedure.........................................4 4.17 Executive Committee.........................................5 4.18 Joint Meetings..............................................5 5. OFFICERS...........................................................5 5.01 Number......................................................5 5.02 Election of Officers, Qualification and Term................6 5.03 Removal.....................................................6 5.04 Resignations................................................6 5.05 Vacancies...................................................6 5.06 Salaries....................................................6 5.07 The Chairman of the Board...................................6 5.08 The President...............................................6 5.09 The Vice Presidents.........................................6 5.10 The Secretary and the Assistant Secretary...................6 5.11 The Treasurer and the Assistant Treasurer...................7 5.12 Treasurer's Bond............................................7 5.13 Chief Executive Officer.....................................7 5.14 Chief Operating Officer.....................................7 6. STOCK..............................................................7 6.01 Certificates................................................7 6.02 Transfers...................................................8 6.03 Lost. Stolen or Destroyed Certificates......................8 6.04 Record Date.................................................8 3 6.05 Registered Stockholders..................................................8 6.06 Additional Powers of the Board...........................................8 7. LIMITATIONS OF OWNERSHIP BY NON-CITIZENS........................................9 7.01 Definitions..............................................................9 7.02. Policy...................................................................9 7.03 Foreign Stock Record.....................................................9 7.04 Suspension of Voting Rights..............................................9 7.05 Beneficial Ownership Inquiry.............................................9 8. MISCELLANEOUS................................................................. 10 8.01 Place and Inspection of Books...........................................10 8.02 Indemnification of Directors, Officers, Employees and Agents............10 8.03 Dividends...............................................................11 8.04 Execution of Deeds, Contracts and Other Agreements and Instruments......12 8.05 Checks..................................................................12 8.06 Voting Shares in Other Corporations.....................................12 8.07 Fiscal Year.............................................................12 8.08 Gender/Number...........................................................12 8.09 Paragraph Titles........................................................12 8.10 Amendment...............................................................12 8.11 Restated Certificate of Incorporation...................................12
4 RESTATED BYLAWS OF AMERICA WEST AIRLINES, INC. (as effective on August 25, 1994) 1. OFFICES. 1.01 OFFICES. In addition to its registered office in the state of Delaware, the Corporation shall have a general office at Maricopa County, Arizona, and such other offices, either within or without the State of Delaware, at such locations as the Board of Directors may from time to time determine or the business of the Corporation may require. 2. SEAL. 2.01 SEAL. (a) The Corporation shall have a seal, which shall have inscribed thereon its name and year of incorporation and the words, "Corporate Seal Delaware." (b) The seal shall be kept in safe custody by the Secretary of the Corporation. It shall be affixed by the Chairman of the Board, the President or any Vice President, the Secretary or any Assistant Secretary, or the Treasurer to any corporate instrument or document requiring it, by practice or by law, and when so affixed, it may be attested by the signature of the officer so affixing it. 3. MEETINGS OF STOCKHOLDERS. 3.01 PLACE OF MEETINGS. All meetings of stockholders of the Corporation shall be held at the general office of the Corporation in Maricopa County, State of Arizona, unless otherwise specified in the notice calling any such meeting. 3.02 ANNUAL MEETINGS. (a) Pursuant to Section 211(b) of the Delaware General Corporation Law, stockholders may, unless the certificate of incorporation provides otherwise, act by written consent to elect directors in lieu of an annual meeting. The annual meeting of stockholders shall be held on the first Tuesday of May, if not a legal holiday, and if a legal holiday, then on the next business day following, or at such other time, date and place as shall be determined by the Board of Directors from time to time. (b) At each annual meeting the stockholders shall, by plurality of the votes cast, elect Directors. 3.03 SPECIAL MEETINGS. Special meetings of the stockholders of the Corporation, for any purpose or purposes, unless otherwise prescribed herein or by statute, may be called by the Chairman of the Board and shall be called by the Secretary at the written request, or by resolution adopted by the affirmative vote of a majority of the Board of Directors or the holders of a majority of the voting power of the stockholders. Such request shall state the purpose or purposes of the proposed meeting. 3.04 ACTION BY CONSENT IN LIEU OF A MEETING. Unless otherwise provided in the Certificate of Incorporation, any action required by statute to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. 3.05 NOTICE OF MEETINGS. (a) Notices of meetings of stockholders shall be in writing and shall state the place (which may be within or without the state of Delaware), date and hour of the meeting and in the case of a special meeting, the purpose or purposes for which a meeting is called. (b) Such notice shall either be delivered personally or mailed, postage prepaid, to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. If mailed, the notice shall be directed to the stockholder at his or her address as it appears on the records of the Corporation. Personal delivery of any such notice to any officer of a corporation or association or to any member of a partnership shall constitute delivery of such notice to such corporation, association or partnership. 1 5 (c) Notice of any meeting of stockholders need not be given to any stockholder if waived by such stockholder in writing, whether before or after such meeting is held, or if such stockholder shall sign the minutes or attend the meeting. 3.06 ADJOURNED MEETINGS. When a meeting is adjourned to another time or place, unless otherwise provided by these Restated Bylaws, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the stockholders may transact any business which might have been transacted at the original meeting. If an adjournment is for more than thirty (30) days or if after an adjournment a new record date is fixed for the adjourned meeting a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. 3.07 QUORUM AND ADJOURNMENT. Except as otherwise provided by law, by the Restated Certificate of Incorporation of the Corporation or by these Restated Bylaws, the presence, in person or by proxy, of the holders of a majority of the aggregate voting power of the stock issued and outstanding, entitled to vote thereat, and the voting rights of which are not suspended, shall be requisite and shall constitute a quorum for the transaction of business at all meetings of stockholders. 3.08 MAJORITY VOTE REQUIRED. When a quorum is present at any meeting of stockholders, the affirmative vote of the majority of the aggregate voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall constitute the act of the stockholders, unless by express provision of law, the Restated Certificate of Incorporation or these Restated Bylaws a different vote is required, in which case such express provision shall govern and control. 3.09 MANNER OF VOTING. At each meeting of stockholders, each stockholder having the right to vote, and whose voting rights have not been suspended shall be entitled to vote in person or by proxy. Each stockholder shall be entitled to vote each share of stock having voting power registered in his name on the books of the Corporation on the record date fixed, as provided in Section 6.04 of these Restated Bylaws, for the determination of stockholders entitled to vote at such meeting. All elections of directors shall be by written ballot. The Secretary shall maintain and, if necessary, prepare at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting. 3.10 PROXIES. (a) At any meeting of stockholders, any stockholder may be represented and vote by proxy or proxies appointed by a written form of proxy. In the event that any form of proxy shall designate two or more persons to act as proxies, a majority of such persons present at the meeting or, if only one shall be present, then that one shall have and may exercise all of the powers conferred by the form of proxy upon all of the persons so designated unless the form of proxy shall otherwise provide. (b) The Board of Directors may, in advance of any annual or special meeting of the stockholders, prescribe additional regulations concerning the manner of execution and filing of proxies and the validation of the same, which are intended to be voted at any such meeting. 3.11 PRESIDING OFFICER AND SECRETARY. At each meeting of stockholders, the Chairman of the Board shall preside and the Secretary shall act as Secretary of the meeting. 4. DIRECTORS. 4.01 POWERS. The Board of Directors shall exercise all of the power of the Corporation except such as are by law, or by the Restated Certificate of Incorporation of this Corporation or by these Restated Bylaws conferred upon or reserved to the stockholders of any class or classes. 4.02 NUMBER AND CLASSIFICATION. (a) The authorized number of directors of the corporation shall be twelve (12), until such number is changed by an amendment to this Bylaw duly adopted by the Board of Directors or by proper action of the Stockholders. Directors need not be stockholders unless so required by the Restated Certificate of Incorporation. Each director shall hold office until the election and qualification of his or her successor or until his or her resignation, disqualification, removal or death. (b) Subject to and at such time as provided in the Restated Certificate of Incorporation, the number of Directors shall be divided into three (3) classes, as nearly equal in number as may be, to serve 2. 6 staggered three-year terms on the Board of Directors. In the case of any increase in the number of Directors of the Corporation, the additional Directors shall be so classified that all classes of Directors shall be increased equally as nearly as may be, and the additional Directors shall be elected as provided herein by the Directors or by the stockholders at an annual meeting. In case of any decrease in the number of Directors of the Corporation, all classes of Directors shall be decreased equally, as nearly as may be. Election of Directors shall be conducted as provided in the Restated Certificate of Incorporation, in these Bylaws, or by applicable law. (c) At all times the composition of the Board of Directors shall comply in all respects with the U.S. citizenship requirements of the Federal Aviation Act of 1958, as amended. 4.03 NOMINATIONS. No person shall be elected to the Board of Directors of this Corporation at an annual meeting or special meeting or by written consent, unless a written nomination of such person is made by or at the direction of the Board of Directors or the holders of a majority of the voting power of the stockholders. 4.04 RESIGNATIONS. Any Director may resign at any time by giving written notice to the Board of Directors or the Secretary. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein. Acceptance of such resignation shall not be necessary to make it effective. 4.05 REMOVAL. Any Director may, by a vote of the holders of stock representing a majority of the voting power of all the shares of stock issued and outstanding and entitled to vote thereat, be removed from office with or without cause, and the successor of the Director so removed may be elected at such meeting. 4.06 VACANCIES. (a) In case any vacancy shall occur on the Board of Directors because of death, resignation, retirement, disqualification, removal, an increase in the authorized number of Directors or any other cause, the Board of Directors may, at any meeting, by resolution adopted by the affirmative vote of a majority of the Directors then in office, though less than a quorum, elect a Director to fill such vacancy. (b) If, as a result of a disaster or emergency (as determined in good faith by the then remaining Directors), it becomes impossible to ascertain whether or not vacancies exist on the Board of Directors, and a person is or persons are elected by Directors, who in good faith believe themselves to be a majority of the remaining Directors, to fill a vacancy or vacancies that said remaining Directors in good faith believe exists, then the acts of such person or persons who are so elected as Directors shall be valid and binding upon the corporation and the stockholders, although it may subsequently develop that at the time of the election (i) there was in fact no vacancy or vacancies existing on the Board of Directors or (ii) the Directors who so elected such person or persons did not in fact constitute a majority of the remaining Directors. 4.07 PRESIDING OFFICER AND SECRETARY. At each meeting of the Board of Directors, the Chairman of the Board shall preside, and the Secretary shall act as secretary of the meeting. 4.08 ANNUAL MEETINGS. The Board of Directors shall meet each year immediately following the annual meeting of stockholders, at the place where such meeting of stockholders has been held, or at such other place as shall be fixed by the person presiding over the meeting of the stockholders at which such Directors are elected, for the purpose of organization, election of officers, and consideration of such other business as the Board considers relevant to the management of the Corporation. 4.09 REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held on such dates and at such times and places, within or without the state of Delaware, as shall from time to time be determined by the Board of Directors. In the absence of any such determination, such meetings shall be held at such times and places, within or without the State of Delaware, as shall be designated by the Chairman of the Board on not less than three (3) calendar days' notice (specifying the time and place of the meeting and the agenda therefor) to each Director, given verbally or in writing either personally, by telephone, by facsimile transmission, by mail, by telegram or by telex. 4.10 SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held at the call of the Chairman of the Board at such times and places, within or without the State of Delaware, as he or she shall designate, on not less than three (3) calendar days' notice (specifying the time and place of the meeting and the agenda therefor) to each Director, given verbally or in writing either personally, by telephone, by facsimile transmission, by mail, by telegram or by telex. Special meetings shall be called by the Secretary on like notice at the written request of a majority of the Directors. 3. 7 4.11 QUORUM AND POWERS OF A MAJORITY. At all meetings of the Board of Directors and of each committee thereof, a majority of the members shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of the Board of Directors or such committee, unless by express provision of law, of the Restated Certificate of Incorporation or these Restated Bylaws, a different vote is required, in which case such express provision shall govern and control. In the absence of a quorum, a majority of the members present at any meeting may, without notice other than announcement at the meeting, adjourn such meeting from time to time until a quorum is present. 4.12 WAIVER OF NOTICE. Notice of any meeting of the Board of Directors, or any committee thereof, need not be given to any member if waived by him or her in writing, whether before or after such meeting is held, or if he or she shall sign the minutes or attend the meeting. 4.13 MANNER OF ACTING. (a) Members of the Board of Directors, or any committee thereof, may participate in any meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating therein can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. (b) Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee. 4.14 COMPENSATION. (a) The Board of Directors, by a resolution or resolutions may fix, and from time to time change, the compensation of Directors. (b) Each Director shall be entitled to reimbursement from the Corporation for his or her reasonable expenses incurred in attending meetings of the Board of Directors or any committee thereof. (c) Nothing contained in these Restated Bylaws shall be construed to preclude any Director from sending the Corporation in any other capacity and from receiving compensation from the Corporation for services rendered to it in such other capacity. 4.15 COMMITTEES. The Board of Directors may, by resolution or resolutions adopted by the affirmative vote of a majority of the Board of Directors, designate one or more committees, each committee to consist of two or more Directors, which to the extent provided in said resolution or resolutions shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation; that no such committee shall have the power to (i) elect Directors, (ii) alter, amend, or repeal these Bylaws or any resolution of the Board relating to such committee, (iii) appoint any member of such committee, (iv) declare any dividend or make any other distribution to the stockholders of the Corporation or (v) take any other actions which may lawfully be taken only by the full Board of Directors. Such committee or committees shall have such name or names as may be determined from time to time by resolutions adopted by the Board of Directors. 4.16 COMMITTEE PROCEDURE. (a) Except as otherwise provided by these Restated Bylaws, each committee shall adopt its own rules governing the time, place and method of holding its meetings and the conduct of its proceedings and shall meet as provided by such rules or by resolution of the Board of Directors. Unless otherwise provided by these Restated Bylaws or any such rules or resolutions, notice of the time and place of each meeting of a committee shall be given to each member of such committee as provided in Section 4.10 of these Restated Bylaws with respect to notices of special meetings of the Board of Directors. (b) Each committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. (c) Any member of any committee, other than a member thereof serving ex-officio, may be removed from such committee either with or without cause, at any time, by resolution adopted by the affirmative vote of a majority of the Board of Directors at any meeting thereof. Any vacancy in any committee shall be filled by the Board of Directors in the manner prescribed by these Restated Bylaws for the original appointment of the members of such committee. 4. 8 4.17 EXECUTIVE COMMITTEE. The Board of Directors may establish an Executive Committee. If established, the Executive Committee shall, to the full extent of the DGCL, have and may exercise in the intervals between meetings of the Board of Directors, all the powers of the whole Board of Directors in its management of the affairs and business of the Corporation, except the power or authority to: (a) amend the Restated Certificate of Incorporation; (b) adopt any agreement of merger or consolidation; (c) recommend to stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets; (d) recommend to stockholders a dissolution of the Corporation or a revocation of a dissolution; (e) amend these Bylaws; (f) appoint or remove a member of any committee established by the Board of Directors, fill vacancies on the Board of Directors, remove an officer elected by the Board of Directors, or raise or lower any officer's salary; or (g) declare dividends or authorize the issuance of stock. Meetings of the Executive Committee may be called at any time by the Chairman of the Board and shall be held at the general office of the Corporation or at such other place, within or without the State of Delaware, as the Chairman of the Board may designate, on not less than one (1) day's notice to each member of the Executive Committee, given verbally or in writing either personally, by telephone, by facsimile transmission, by mail, by telegram or telex. 4.18 JOINT MEETINGS. Notwithstanding any provision of these Bylaws to the contrary, so long as all of the outstanding voting capital stock of the Corporation is owned, directly or indirectly, by Parent (as defined below), and so long as each member of the Board of Directors of the Corporation is also a member of the Board of Directors of Parent, (i) each meeting of the Board of Directors of Parent (a "Parent Board Meeting") shall constitute a Joint Meeting (as defined below) unless otherwise specified in the notice given with respect to such Parent Board Meeting in accordance with the bylaws of Parent and (ii) no notice of any Joint Meeting shall be required to be given to any person in his or her capacity as a director of the corporation. As used in this Section 4.18, (a) "Parent" means America West Holdings Corporation, a Delaware corporation, and any entity into which America West Holdings Corporation or any successor may be merged or converted or with which it may be considered or any entity resulting from any merger, conversion or consolidation to which America West Holdings Corporation or any successor shall be a party and (B) a "Joint Meeting" means a joint meeting of the respective Boards of Directors of Parent and the Corporation. 5. OFFICERS. 5.01 NUMBER. (a) The officers of the corporation shall include a Chief Executive Officer, a President, one or more Vice Presidents (including one or more Executive Vice Presidents and one or more Senior Vice Presidents if deemed appropriate by the Board of Directors), a Secretary and a Treasurer. The Board of Directors shall also elect a Chairman of the Board pursuant to Section 5.02. The Board of Directors may also elect such other officers as the Board of Directors may from time to time deem appropriate or necessary. Except for the Chairman of the Board, none of the officers of the Corporation need be a Director of the Corporation. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity. (b) The Chairman of the Board shall be the Chief Executive Officer unless the Board of Directors, by resolution adopted by the affirmative vote of not less than a majority of the Directors then in office, designates the President or some other person as Chief Executive Officer. The President shall be the Chief Operating Officer. If at any time the offices of the Chairman of the Board and Chief Executive Officer shall not be filled, the President shall also be the Chief Executive Officer. 5. 9 (c) The Board of Directors may delegate to the Chief Executive Officer the power to appoint one or more employees of the corporation as divisional or departmental vice presidents and fix the duties of such appointees. However, no such divisional or departmental vice president shall be considered as an officer of the Corporation, the officers of the Corporation being limited to those officers elected by the Board of Directors. 5.02 ELECTION OF OFFICERS, QUALIFICATION AND TERM. The officers of the Corporation to be elected by the Board of Directors shall be elected annually at the first meeting of the Board of Directors held after each annual meeting of the stockholders. Each such officer shall hold office for one (1) year and until a successor shall have been duly elected and shall qualify in his or her stead unless the Board of Directors shall have provided by contract or otherwise in any particular case, or until such officer shall have resigned and his or her resignation shall have become effective, or until such officer shall have been removed in the manner hereinafter provided. Notwithstanding anything in this Section 5.02 to the contrary, the Chairman of the Board may be elected only by the vote of a majority of the Directors then in office (who may include the Director who is or is to be the Chairman of the Board). 5.03 REMOVAL. Except as otherwise expressly provided in a contract duly authorized by the Board of Directors, any officer elected by the Board of Directors may be removed, either with or without cause, at any time by resolution adopted by the affirmative vote of a majority of the Board of Directors at any meeting thereof; provided that the Chairman of the Board may be removed by the vote of a majority of the Directors then in office (excluding the Director who is the Chairman of the Board). 5.04 RESIGNATIONS. Any officer of the Corporation may resign at any time by giving written notice to the Board of Directors or the Chairman of the Board. Such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 5.05 VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause may be filled for the unexpired portion of the term by election by the Board of Directors at any meeting thereof. 5.06 SALARIES. The salaries of all officers of the Corporation shall be fixed by the Board of Directors from time to time, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the Corporation. 5.07 THE CHAIRMAN OF THE BOARD. (a) The Chairman of the Board shall have the powers and duties customarily and usually associated with the office of the Chairman of the Board. The Chairman of the Board shall preside at meetings of the stockholders and of the Board of Directors. In the event the Chairman of Board's temporary absence or disability and the absence or disability of the President, the Chairman of the Board shall have the power to designate any Director to preside at any or all meetings of the stockholders and of the Board of Directors. (b) If at any time the office of President shall not be filled, or in the event of the disability of the President, the Chairman of the Board (if one shall be elected) shall have the duties and powers of the President. The Chairman of the Board shall have such other powers and perform such greater or lesser duties as may be delegated to him from time to time by the Board of Directors. 5.08 THE PRESIDENT. In the event of the disability of the Chairman of the Board, the President shall have the powers and duties of the Chairman of the Board. The President shall serve as chief operating officer and shall have such other powers and perform such other duties as may be delegated to him or her from time to time by the Board of Directors or the Chairman of the Board. 5.09 THE VICE PRESIDENTS. Each Vice President shall have such powers and perform such duties as may from time to time be assigned to him or her by the Board of Directors, the Chairman of the Board or the President. 5.10 THE SECRETARY AND THE ASSISTANT SECRETARY. (a) The Secretary shall attend meetings of the Board of Directors and meetings of the stockholders and record all votes and minutes of all such proceedings in a book kept for such purpose and shall perform like duties for the committees of Directors as provided for in these Restated Bylaws when required. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and of the Board of Directors (except in case of meetings called by the Chairman of the Board in accordance with Sections 4.09 or 4.10). He or she shall have charge of the stock ledger (unless responsibility for maintaining the stock ledger is delegated to a transfer agent by the Board of Directors pursuant to Section 6.06) and such other books and papers 6. 10 as the Board of Directors may direct. He or she shall have all such further powers and duties as generally are incident to the position of Secretary or as may from time to time be assigned to him or her by the Board of Directors or the Chairman of the Board. (b) Each Assistant Secretary shall have such powers and perform such duties as may from time to time be assigned to him or her by the Board of Directors, the Chairman of the Board or the Secretary. In case of the absence or disability of the Secretary, the Assistant Secretary designated by the Secretary (or, in the absence of such designation, the senior Assistant Secretary) shall perform the duties and exercise the powers of the Secretary. 5.11 THE TREASURER AND THE ASSISTANT TREASURER. (a) The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He or she may endorse all commercial documents requiring endorsements for or on behalf of the Corporation and may sign all receipts and vouchers for payments made to the Corporation. (b) The Treasurer shall disburse funds of the Corporation as may from time to time be ordered by the Board of Directors, taking proper vouchers for such disbursements, and render to the Board of Directors, the Chairman of the Board and President, whenever they may require it, an account of all transactions undertaken by him or her as Treasurer and of the financial condition of the Corporation. (c) The Treasurer shall also maintain adequate records of all assets, liabilities and transactions of the corporation and shall see that adequate audits thereof are currently and regularly made. The Treasurer shall have such other powers and perform such other duties that generally are incident to the position of Treasurer or as may from time to time be assigned to him or her by the Board of Directors, the Chairman of the Board or the President. (d) Each Assistant Treasurer shall have such powers and perform such duties as may from time to time be assigned to him or her by the Board of Directors, the Chairman of the Board, the President or the Treasurer. In case of the absence or disability of the Treasurer, the Assistant Treasurer designated by the Treasurer (or, in the absence of such designation, the senior Assistant Treasurer) shall perform the duties and exercise the powers of the Treasurer. 5.12 TREASURER'S BOND. If required by the Board of Directors, the Treasurer or any Assistant Treasurer shall give the Corporation a bond in such form and with such surety or sureties as are satisfactory to the Board of Directors for the faithful performance of the duties of office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation. 5.13 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have, subject to the supervision, direction and control of the Board of Directors, the general powers and duties of supervision, direction and management of the affairs and business of the Corporation usually vested in the chief executive officer of a Corporation, including, without limitation, all powers necessary to direct and control the organizational and reporting relationships within the Corporation. If at any time the office of Chairman of the Board shall not be filled, the Chief Executive Officer shall have the powers and duties of the Chairman of the Board. 5.14 CHIEF OPERATING OFFICER. The Chief Operating Officer shall, subject to the supervision, direction and control of the Chief Executive Officer and the Board of Directors, manage the day-to-day operations of the Corporation and, in general, shall assist the Chief Executive Officer. 6. STOCK 6.01 CERTIFICATES. Certificates or shares of the stock of the Corporation shall be issued under the seal of the Corporation, or facsimile thereof, and shall be numbered and shall be entered in the books of the Corporation as they are issued. Each certificate shall bear a serial number, shall exhibit the holder's name and the number of shares evidenced thereby and shall be signed by the Chairman of the Board or a Vice Chairman, if any, or the Chief Executive Officer or the President or any Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. Any or all of the signatures on the certificate may be a facsimile. In case any officer, 7. 11 transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person or entity were such officer, transfer agent or registrar at the date of issue. 6.02 TRANSFERS. Transfers of stock of the Corporation shall be made on the books of the Corporation only upon surrender to the Corporation of a certificate for the shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, provided such succession, assignment, or transfer is not prohibited by the Restated Certificate of Incorporation, the Bylaws, applicable law, or contract. Thereupon, the Corporation shall issue a net certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. 6.03 LOST. STOLEN OR DESTROYED CERTIFICATES. Any person claiming a certificate of stock to be lost, stolen or destroyed shall make an affidavit or an affirmation of that fact, and shall give the Corporation a bond of indemnity in satisfactory form and with one or more satisfactory sureties, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed. 6.04 RECORD DATE. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors shall fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. (b) If no record date is fixed by the Board of Directors, (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the date on which notice is given, or, if notice is waived by all stockholders entitled to vote at the meeting, at the close of business on the day next preceding the day on which the meeting was held and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided that the Board of Directors may fix a new record date for the adjourned meeting. 6.05 REGISTERED STOCKHOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares as the person entitled to exercise the rights referred to in Section 6.04 and shall not be bound to recognize any equitable or other claim to or interest in any such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Delaware. 6.06 ADDITIONAL POWERS OF THE BOARD. (a) In addition to those powers set forth in Section 4.01, the Board of Directors shall have power and authority to make all such rules and regulations as it shall deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. (b) The Board of Directors may appoint and remove transfer agents and registrars of transfers, and may require all stock certificates to bear the signature of and such transfer agent and/or any such registrar of transfers. (c) The Board of Directors shall have power and authority to create and issue (whether or not in connection with the issue and sale of any stock or other securities of the Corporation) warrants, rights or options entitling the holders thereof to purchase from the Corporation any shares of any class or classes or any other securities of the Corporation for such consideration and to such persons, firms or corporations as the Board of Directors, in its sole discretion, may determine, setting aside from the authorized but unissued stock of the Corporation the requisite number of shares for issuance upon the exercise of such warrants, rights or options. Such warrants, rights or options shall be evidenced by such instrument or instruments as shall be approved by the Board of Directors. The terms upon which, the time or times (which may be limited or unlimited in duration) at or within which, and the price or prices at which any such shares or 8. 12 other securities may be purchased from the Corporation upon the exercise of any such warrant, right or option shall be such as shall be fixed and stated in a resolution or resolutions of the Board of Directors providing for the creation and issue of such warrants, rights or options. 7. LIMITATIONS OF OWNERSHIP BY NON-CITIZENS. 7.01 DEFINITIONS. (a) "Act" shall mean the Federal Aviation Act of 1958, as amended (Title 49 United States Code) or as the same may be from time to time amended. (b) "Beneficial Ownership," "Beneficially Owned" or "Owned Beneficially" refers to beneficial ownership as defined in Rule 13d-3 (without regard to the 60-day provision in paragraph (d)(l)(i) thereof under the Securities Exchange Act of 1934, as amended. (c) "Foreign Stock Record" shall have the meaning set forth Section 7.03. (d) "Non-Citizen" shall mean any person or entity who is not a "Citizen of the United States" as defined in Section 101 of the Act, including any agent, trustee or representative of a Non-Citizen. (e) "Own or Control" or "Owned or Controlled" shall mean (i) ownership of record, (ii) beneficial ownership or (iii) the power to direct, by agreement, agency or in any other manner, the voting of Stock. Any determination by the Board of Directors as to whether Stock is Owned or Controlled by a Non-Citizen shall be final. (f) "Permitted Percentage" shall mean twenty five percent (25%) of the voting power of the Stock. (g) "Stock" shall mean the outstanding capital stock of the corporation entitled to vote; provided, however, that for the purpose of determining the voting power of Stock that shall at any time constitute the Permitted Percentage, the voting Power of Stock outstanding shall not be adjusted downward solely because shares of Stock may not be entitled to vote by reason of any provision of this Article 7. 7.02. POLICY. It is the policy of the Corporation that, consistent with the requirements of Section 101 of the Act, Non-Citizens shall not Own or Control more than the Permitted Percentage and, if Non-Citizens nonetheless at any time Own or Control more than the Permitted Percentage, the voting rights of the Stock in excess of the Permitted Percentage shall be automatically suspended in accordance with Sections 7.03 and 7.04 below. 7.03 FOREIGN STOCK RECORD. The Corporation or any transfer agent designated by it shall maintain a separate stock record (the "Foreign Stock Record") in which shall be registered Stock known to the corporation to be Owned or Controlled by Non-Citizens. The Foreign Stock Record shall include (i) the name and nationality of each such Non-Citizen, (ii) the number of shares of Stock Owned or controlled by such Non-Citizen and (iii) the date of registration of such shares in the Foreign Stock Record. In no event shall shares in excess of the Permitted Percentage be entered on the Foreign Stock Record. In the event that the Corporation shall determine that stock registered on the Foreign Stock Record exceeds the Permitted Percentage, sufficient shares shall be removed from the Foreign Stock Record so that the number of shares entered therein does not exceed the Permitted Percentage. Stock shall be removed from the Foreign Stock Record in reverse chronological order based upon the date of registration therein. 7.04 SUSPENSION OF VOTING RIGHTS. If at any time the number of shares of Stock known to the Corporation to be Owned or Controlled by Non-Citizens exceeds the Permitted Percentage, the voting rights of Stock Owned or Controlled by Non-Citizens and not registered on the Foreign Stock Record at the time of any vote or action of the stockholders of the Corporation shall, without further action by the Corporation, be suspended. Such suspension of voting rights shall automatically terminate upon the earlier of the (i) transfer of such shares to a person or entity who is not a Non-Citizen, or (ii) registration of such shares on the Foreign Stock Record, subject to the final sentence of Section 7.03. 7.05 BENEFICIAL OWNERSHIP INQUIRY. (a) The Corporation may by notice in writing (which may be included in the form of proxy or ballot distributed to stockholders in connection with the annual meeting or any special meeting of the stockholders of the Corporation, or otherwise) require a person that is a holder of record of Stock or that the Corporation knows to have, or has reasonable cause to believe has, Beneficial Ownership of Stock to certify in such 9. 13 manner as the Corporation shall deem appropriate (including by way of execution of any form of proxy or ballot of such person) that, to the knowledge of such person: (i) all Stock as to which such person has record ownership or Beneficial Ownership is owned and controlled only by Citizens of the United States; or (ii) the number and class or series of Stock owned of record or Beneficially Owned by such person that is owned or controlled by Non-Citizens is as set forth in such certificate. (b) With respect to any Stock identified in response to clause (a)(ii) above, the Corporation may require such person to provide such further information as the Corporation may reasonably require in order to implement the provisions of this Article 7. (c) For purposes of applying the provisions of this Article 7 with respect to any Stock, in the event of the failure of any person to provide the certificate or other information to which the Corporation is entitled pursuant to this Section 7.05, the Corporation shall presume that the Stock in question in owned or controlled by Non-Citizens. 8.0 MISCELLANEOUS. 8.01 PLACE AND INSPECTION OF BOOKS. (a) The books of the Corporation other than such books as are required by law to be kept within the State of Delaware shall be kept in the State of Arizona or at such place or places either within or without the State of Delaware as the Board of Directors may from time to time determine. (c) The Board of Directors shall determine from time to time whether and when and under what conditions and regulations the accounts and books of the Corporation (except such as may be by law specifically open to inspection or as otherwise provided by these Restated Bylaws) or any of them shall be open to the inspection of the stockholders and the stockholders' rights in respect thereof. 8.02 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. (a) The Corporation shall indemnify any person who was or is a company or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a Director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid or owed in settlement actually and reasonably paid or incurred by him or her or rendered or levied against him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner lie or she reasonably believed to be in or not opposed to the best interests of the Corporation; and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, in itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. (b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a Director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses, including attorneys' fees, actually and reasonably paid or incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation; provided however, that no indemnification shall be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. 10. 14 (c) The Corporation shall, at the discretion of the Board of Directors, indemnify all employees and agents of the Corporation (other than Directors and officers) to the extent that Directors and officers shall be indemnified pursuant to subsections (a) and (b). (d) To the extent that a person who may be entitled to indemnification by the Corporation under this section is or has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b), or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses, including attorney's fees, actually and reasonably paid or incurred by him or her in connection therewith. (e) Any indemnification under subsections (a), (b), or (c) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in subsection (a) or (b). Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, (ii) if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, (iii) by the stockholders, or (iv) in any case in which applicable law makes court approval a prerequisite to indemnification, by the court in which such action, suit or proceeding was brought or another court of competent jurisdiction. (f) Expenses, including attorneys' fees, incurred by an officer or Director in defending a civil, criminal, administrative, or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this section. Such expenses, including attorneys' fees, incurred by other employees and agents shall be so paid upon terms and conditions, if any, as the Board of Directors deems appropriate. (g) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of the stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. (h) The provisions of this section shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the estate, executors, administrators, spouse, heirs, legatees or devisees of a person entitled to indemnification hereunder and the term "person," there used in the section shall include the estate, executors, administrators, spouse, heirs, legatees or devisees of such person. (i) For the purposes of this Section 8.02, (i) "employee benefit plan" and "fiduciary" shall be deemed to include, but not be limited to, the meanings set forth, respectively, in Sections 3(3) and 21(A) of the Employee Retirement Income Security Act of 1974, as amended, and references to the judgments, fines and amounts paid or owed in settlement or rendered or levied shall be deemed to encompass and include excise taxes required to be paid pursuant to a applicable law in respect of any transaction involving an employee benefit plan, (ii) references to the Corporation shall be deemed to include any predecessor corporation and any constituent corporation absorbed in a merger, consolidation or other reorganization of or by the Corporation which, if its separate existence had continued, would have had power and authority to Indemnify its directors, officers, employees, agents or fiduciaries so that any person who was a director, officer, employee, agent or fiduciary of such predecessor or constituent corporation, or served at the request of such predecessor or constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Section 8.02 with respect to the Corporation as such person would have with respect to such predecessor or constituent corporation if its separate existence had continued, and (iii) all other terms shall be deemed to have the meanings for such terms as set forth in Section 145 of the DGCL. 8.03 DIVIDENDS. (a) Dividends may be declared at the discretion of the Board of Directors at any meeting thereof. 11. 15 (b) Dividends may be paid to stockholders in cash or, when the Directors shall so determine, in stock. A Director shall be fully protected in relying in good faith upon the books of account of the Corporation or statements prepared by any of its officers as to the value and amount of the assets, liabilities or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared. (c) Before payment of any dividend or any distribution of profits, there may be set aside out of the said surplus of the Corporation such sum or sums as the Board of Directors from time to time, in its discretion thinks proper as a reserve fund to meet contingencies, or for equalizing dividends, or for such other purpose as the Board of Directors shall think conducive to the interests of the Corporation and the Board of Directors may abolish any such reserve in the manner in which it was created. 8.04 EXECUTION OF DEEDS, CONTRACTS AND OTHER AGREEMENTS AND INSTRUMENTS. Subject to the specific directions of the Board of Directors, all deeds, mortgages and bonds entered into by the Corporation all other written contracts and agreements to which the Corporation shall be a party shall be executed in its name by the Chairman of the Board, the President, or a Vice President, or such other person or persons as may be authorized by any such officer. 8.05 CHECKS. All checks, drafts, acceptances, notes and other orders, demands or instruments in respect to the payment of money may be signed or endorsed on behalf of the Corporation by such officer or officers or by such agent or agents as the Board of Directors may from time to time designate. 8.06 VOTING SHARES IN OTHER CORPORATIONS. The Chairman of the Board of the Corporation (or any other Director designated by a majority of the Board of Directors) may vote any and all shares held by the Corporation in any other corporation. 8.07 FISCAL YEAR. The fiscal year of the Corporation shall correspond with the calendar year. 8.08 GENDER/NUMBER. As used in these Restated Bylaws, the masculine, feminine or neuter gender, and the singular or plural number, shall each include the others whenever the context so indicates. 8.09 PARAGRAPH TITLES. The titles of the paragraphs have been inserted as a matter of reference only and shall not control or affect the meaning or construction of any of the terms and provisions hereof. 8.10 AMENDMENT. These Restated Bylaws may be altered, amended or repealed by the affirmative vote of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote at any meeting of stockholders or by resolution adopted by the affirmative vote of not less than a majority of the Directors in office at any annual or regular meeting of the Board of Directors or at any special meeting of the Board of Directors if notice of the proposed alteration, amendment or repeal be contained in the notice of such special meeting. 8.11 RESTATED CERTIFICATE OF INCORPORATION. Notwithstanding anything to the contrary contained herein, if any provision contained in these Restated Bylaws is inconsistent with or conflicts with a provision of the Restated Certificate of the Corporation, such provision of these Restated Bylaws shall be superseded by the inconsistent provision in the Restated Certificate of Incorporation to the extent necessary to give effect to such provision in the Restated Certificate of Incorporation. 12.
EX-3.4 3 p64739ex3-4.txt EX-3.4 1 EXHIBIT 3.4 BYLAWS OF AMERICA WEST HOLDINGS CORPORATION DECEMBER 19, 1996 UPDATED THROUGH MARCH 19, 2001 2 TABLE OF CONTENTS
PAGE ARTICLE I - OFFICES............................................................. 1 ARTICLE II - SEAL............................................................... 1 ARTICLE III - MEETINGS OF STOCKHOLDERS.......................................... 1 Section 3.01 Place of Meetings........................................... 1 Section 3.02 Annual Meetings............................................. 1 Section 3.03 Special Meetings............................................ 2 Section 3.04 Action by Consent in Lieu of a Meeting...................... 2 Section 3.05 Notice of Meetings.......................................... 2 Section 3.06 Stockholder Notices......................................... 2 Section 3.07 Adjourned Meetings.......................................... 3 Section 3.08 Quorum and Adjournment...................................... 3 Section 3.09 Majority Vote Required...................................... 3 Section 3.10 Manner of Voting............................................ 4 Section 3.11 Proxies..................................................... 4 Section 3.12 Presiding Officer and Secretary............................. 4 Section 3.13 Disregard of Nomination or Proposal......................... 4 Section 3.14 Inspections of Elections.................................... 4 ARTICLE IV - DIRECTORS.......................................................... 5 Section 4.01 Powers...................................................... 5 Section 4.02 Number and Classification................................... 5 Section 4.03 Nominations................................................. 5 Section 4.04 Resignations................................................ 5 Section 4.05 Removal..................................................... 6 Section 4.06 Vacancies................................................... 6 Section 4.07 Presiding Officer and Secretary............................. 6 Section 4.08 Annual Meetings............................................. 6 Section 4.09 Regular Meetings............................................ 6 Section 4.10 Special Meetings............................................ 7 Section 4.11 Quorum and Powers of a Majority............................. 7 Section 4.12 Waiver of Notice............................................ 7 Section 4.13 Manner of Acting............................................ 7 Section 4.14 Compensation................................................ 7 Section 4.15 Committees.................................................. 8 Section 4.16 Committee Procedure......................................... 8 Section 4.17 Executive Committee......................................... 8 ARTICLE V - OFFICERS............................................................ 9 Section 5.01 Number...................................................... 9 Section 5.02 Election of Officers, Qualification and Term................ 10 Section 5.03 Removal..................................................... 10
i. 3 TABLE OF CONTENTS (CONTINUED)
PAGE Section 5.04 Resignations................................................ 10 Section 5.05 Vacancies................................................... 10 Section 5.06 Salaries.................................................... 10 Section 5.07 The Chairman of the Board................................... 11 Section 5.08 The President............................................... 11 Section 5.09 The Vice Presidents......................................... 11 Section 5.10 The Secretary and the Assistant Secretary................... 11 Section 5.11 The Treasurer and the Assistant Treasurer................... 12 Section 5.12 Treasurer's Bond............................................ 12 Section 5.13 Chief Executive Officer..................................... 12 Section 5.14 Chief Operating Officer..................................... 13 ARTICLE VI - STOCK.............................................................. 13 Section 6.01 Certificates................................................ 13 Section 6.02 Transfers................................................... 13 Section 6.03 Lost, Stolen or Destroyed Certificates...................... 13 Section 6.04 Record Date................................................. 13 Section 6.05 Registered Stockholders..................................... 14 Section 6.06 Additional Powers of the Board.............................. 14 ARTICLE VII - LIMITATIONS OF OWNERSHIP BY NON-CITIZENS.......................... 15 Section 7.01 Definitions................................................. 15 Section 7.02 Policy...................................................... 15 Section 7.03 Foreign Stock Record........................................ 16 Section 7.04 Suspension of Voting Rights................................. 16 Section 7.05 Beneficial Ownership Inquiry................................ 16 ARTICLE VIII - MISCELLANEOUS.................................................... 17 Section 8.01 Place and Inspection of Books............................... 17 Section 8.02 Indemnification of Directors, Officers, Employees and Agents 17 Section 8.03 Dividends................................................... 20 Section 8.04 Execution of Deeds, Contracts, and Other Agreements and Instruments ................................................ 20 Section 8.05 Checks...................................................... 20 Section 8.06 Voting Shares in Other Corporations......................... 20 Section 8.07 Fiscal Year................................................. 20 Section 8.08 Gender/Number............................................... 20 Section 8.09 Paragraph Titles............................................ 20 Section 8.10 Amendment................................................... 21 Section 8.11 Certificate of Incorporation................................ 21
ii. 4 BYLAWS OF AMERICA WEST HOLDINGS CORPORATION (as effective on December 19, 1996) ARTICLE I OFFICES In addition to its registered office in the state of Delaware, the Corporation shall have a general office at Maricopa County, Arizona, and such other offices, either within or without the State of Delaware, at such locations as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II SEAL The Corporation shall have a seal, which shall have inscribed thereon its name and year of incorporation and the words, "Corporate Seal Delaware." The seal shall be kept in safe custody by the Secretary of the Corporation. It shall be affixed by the Chairman of the Board, the President or any Vice President, the Secretary or any Assistant Secretary, or the Treasurer to any corporate instrument or document requiring it, by practice or by law, and when so affixed, it may be attested by the signature of the officer so affixing it. ARTICLE III MEETINGS OF STOCKHOLDERS SECTION 3.01 PLACE OF MEETINGS. All meetings of stockholders of the Corporation shall be held at the general office of the Corporation in Maricopa County, State of Arizona, unless otherwise specified in the notice calling any such meeting. SECTION 3.02 ANNUAL MEETINGS. (a) All annual meetings of stockholders shall be held on the first Tuesday of May, if not a legal holiday, and if a legal holiday, then on the next business day following, or at such other time, date and place as shall be determined by the Board of Directors from time to time. (b) At each annual meeting the stockholders shall, by plurality of the votes cast, elect Directors. 1. 5 (c) The Board of Directors may, in advance of any annual or special meeting of the stockholders, adopt an agenda for such meeting, adherence to which the Chairman of the Board may enforce. SECTION 3.03 SPECIAL MEETINGS. Special meetings of the stockholders of the Corporation, for any purpose or purposes, unless otherwise prescribed herein or by statute, may be called by the Chairman of the Board and shall be called by the Secretary at the written request, or by resolution adopted by the affirmative vote, of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting. Stockholders of the Corporation shall not be entitled to request a special meeting of the stockholders. SECTION 3.04 ACTION BY CONSENT IN LIEU OF A MEETING. Stockholders may act by consent in lieu of a meeting in accordance with Delaware Law. SECTION 3.05 NOTICE OF MEETINGS. (a) Notices of meetings of stockholders shall be in writing and shall state the place (which may be within or without the state of Delaware), date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which a meeting is called. No business other than that specified in the notice thereof shall be transacted at any special meeting. (b) Such notice shall either be delivered personally or mailed, postage prepaid, to each stockholder entitled to vote at such meeting not less than ten nor more than 60 days before the date of the meeting. If mailed, the notice shall be directed to the stockholder at his or her address as it appears on the records of the Corporation. Personal delivery of any such notice to any officer of a corporation or association or to any member of a partnership shall constitute delivery of such notice to such corporation, association or partnership. (c) Notice of any meeting of stockholders need not be given to any stockholder if waived by such stockholder in writing, whether before or after such meeting is held, or if such stockholder shall sign the minutes or attend the meeting. SECTION 3.06 STOCKHOLDER NOTICES. (a) At any meeting of the stockholders, only such business shall be conducted, and only such proposals shall be acted upon as shall have been brought before the meeting (i) by, or at the direction of the Board of Directors or (ii) by any stockholder who complies with the notice procedures set forth in this Section 3.06 (or for election of directors, with the notice provisions set forth in Section 4.03). (b) For a proposal to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary. To be timely, a stockholder's notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the scheduled annual meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, 2. 6 however, that if less than 70 days notice or prior public disclosure of the date of the scheduled annual meeting is given or made, notice by the stockholder to be timely must be so delivered or received no later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled annual meeting was mailed or the day on which such public disclosure was made. (c) A stockholder's notice to the Secretary shall in addition set forth as to each matter the stockholder proposes to bring before the meeting (i) a brief description of the proposal desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (iii) the class and number of shares which are beneficially owned by the stockholder on the date of such stockholder notice and (iv) any material interest of the stockholder in such proposal. SECTION 3.07 ADJOURNED MEETINGS. When a meeting is adjourned to another time or place, unless otherwise provided by these Bylaws, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the stockholders may transact any business which might have been transacted at the original meeting. If an adjournment is for more than 30 days or if after an adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. SECTION 3.08 QUORUM AND ADJOURNMENT. Except as otherwise provided by law, by the Certificate of Incorporation of the Corporation or by these Bylaws, the presence, in person or by proxy, of the holders of a majority of the aggregate voting power of the stock issued and outstanding, entitled to vote thereat, and the voting rights of which are not suspended, shall be requisite and shall constitute a quorum for the transaction of business at all meetings of stockholders. If, however, such majority shall not be present or represented at any meeting of stockholders, the stockholders present, although less than a quorum, shall have the power to adjourn the meeting. SECTION 3.09 MAJORITY VOTE REQUIRED. When a quorum is present at any meeting of stockholders, the affirmative vote of the majority of the aggregate voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall constitute the act of the stockholders, unless by express provision of law, the Certificate of Incorporation or these Bylaws a different vote is required or allowed, in which case such express provision shall govern and control. SECTION 3.10 MANNER OF VOTING. At each meeting of stockholders, each stockholder having the right to vote, and whose voting rights have not been suspended shall be entitled to vote in person or by proxy. Proxies need not be filed with the Secretary of the Corporation until the meeting is called to order, but shall be filed before being voted. Each stockholder shall be entitled to vote each share of stock having voting power registered in his or her name on the books of the Corporation on the record date 3. 7 fixed, as provided in Section 6.04 of these Bylaws, for the determination of stockholders entitled to vote at such meeting. All elections of directors shall be by written ballot. SECTION 3.11 PROXIES. (a) At any meeting of stockholders, any stockholder may be represented and vote by proxy or proxies appointed by a written form of proxy. In the event that any form of proxy shall designate two or more persons to act as proxies, a majority of such persons present at the meeting or, if only one shall be present, then that one shall have and may exercise all of the powers conferred by the form of proxy upon all of the persons so designated unless the form of proxy shall otherwise provide. (b) The Board of Directors may, in advance of any annual or special meeting of the stockholders, prescribe additional regulations concerning the manner of execution and filing of proxies and the validation of the same, which are intended to be voted at any such meeting. SECTION 3.12 PRESIDING OFFICER AND SECRETARY. At each meeting of stockholders, the Chairman of the Board shall preside and the Secretary shall act as Secretary of the meeting. SECTION 3.13 DISREGARD OF NOMINATION OR PROPOSAL. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the person presiding over any meeting of the stockholders shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Article III or Section 4.03 and, if any proposed nomination or business is not in compliance with such provisions, to declare that such defective proposal or nomination shall be disregarded. SECTION 3.14 INSPECTIONS OF ELECTIONS. The Board of Directors by resolution shall appoint one or more inspectors of election (which may include individuals who serve the Corporation in other capacities including, without limitation, as officers, employees, agents or representatives of the Corporation) to act at any meeting of the stockholders and make a written report thereof. Such appointments shall be made in accordance with, and each inspector shall have the duties prescribed by, Section 231 of the General Corporation Law of the State of Delaware (the "DGCL"). ARTICLE IV DIRECTORS SECTION 4.01 POWERS. The Board of Directors shall exercise all of the power of the Corporation except such as are by law, or by the Certificate of Incorporation of this Corporation or by these Bylaws conferred upon or reserved to the stockholders of any class or classes. 4. 8 SECTION 4.02 NUMBER AND CLASSIFICATION. (a) The authorized number of directors of the corporation shall be twelve (12), until such number is changed by an amendment to this Bylaw duly adopted by the Board of Directors or by proper action of the Stockholders. Directors need not be stockholders unless so required by the Certificate of Incorporation. Each director shall hold office until the election and qualification of his or her successor or until his or her resignation, disqualification, removal or death. (b) Subject to and at such time as provided in the Certificate of Incorporation, the number of Directors shall be divided into three classes, as nearly equal in number as may be, to serve staggered three-year terms on the Board of Directors. In the case of any increase in the number of Directors of the Corporation, the additional Directors shall be classified so that all classes of Directors shall be increased equally as nearly as may be, and the additional Directors shall be elected as provided herein by the Directors or by the stockholders at an annual meeting. In case of any decrease in the number of Directors of the Corporation, all classes of Directors shall be decreased equally, as nearly as may be. Election of Directors shall be conducted as provided in the Certificate of Incorporation, in these Bylaws, or by applicable law. (c) At all times the composition of the Board of Directors shall comply in all respects with the U.S. citizenship requirements of the Act (as hereinafter defined). SECTION 4.03 NOMINATIONS. No person shall be elected to the Board of Directors of this Corporation at an annual meeting of the stockholders, or at a special meeting called for that purpose, unless a written nomination of such person to the Board of Directors (i) by a stockholder of the Corporation who is entitled to vote at such meeting shall be received by the Secretary of the Corporation at least 90 days prior to such meeting or (ii) is made by or at the direction of the Board of Directors. SECTION 4.04 RESIGNATIONS. Any Director may resign at any time by giving written notice to the Board of Directors or the Secretary. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein. Acceptance of such resignation shall not be necessary to make it effective. SECTION 4.05 REMOVAL. At any special meeting of the stockholders duly called as provided herein, any Director may, by a vote of the holders of stock representing a majority of the voting power of all the shares of stock issued and outstanding and entitled to vote thereat, be removed from office with or without cause, and the successor of the Director so removed may be elected at such meeting. In the absence of such an election, any vacancy may be filled as provided in Section 4.06. SECTION 4.06 VACANCIES. (a) In case any vacancy shall occur on the Board of Directors because of death, resignation, retirement, disqualification, removal, an increase in the authorized number of Directors or any other cause, the Board of Directors may, at any meeting, by resolution adopted by the affirmative vote of a majority of the Directors then in office, though less than a quorum, elect a Director to fill such vacancy. 5. 9 (b) If, as a result of a disaster or emergency (as determined in good faith by the then remaining Directors), it becomes impossible to ascertain whether or not vacancies exist on the Board of Directors, and a person is or persons are elected by Directors, who in good faith believe themselves to be a majority of the remaining Directors, to fill a vacancy or vacancies that said remaining Directors in good faith believe exists, then the acts of such person or persons who are so elected as Directors shall be valid and binding upon the Corporation and the stockholders, although it may subsequently develop that at the time of the election (i) there was in fact no vacancy or vacancies existing on the Board of Directors, or (ii) the Directors who so elected such person or persons did not in fact constitute a majority of the remaining Directors. SECTION 4.07 PRESIDING OFFICER AND SECRETARY. At each meeting of the Board of Directors, the Chairman of the Board shall preside, and the Secretary shall act as secretary of the meeting. SECTION 4.08 ANNUAL MEETINGS. The Board of Directors shall meet each year immediately following the annual meeting of stockholders, at the place where such meeting of stockholders has been held, or at such other place as shall be fixed by the person presiding over the meeting of the stockholders at which such Directors are elected, for the purpose of organization, election of officers, and consideration of such other business as the Board considers relevant to the management of the Corporation. SECTION 4.09 REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held on such dates and at such times and places, within or without the state of Delaware, as shall from time to time be determined by the Board of Directors; provided, however, that the Board of Directors shall hold at least four regular meetings in each year. In the absence of any such determination, such meetings shall be held at such times and places, within or without the State of Delaware, as shall be designated by the Chairman of the Board on not less than three calendar days' notice (specifying the time and place of the meeting and the agenda therefor) to each Director, given verbally or in writing either personally, by telephone, by facsimile transmission, by mail, by telegram or by telex. SECTION 4.10 SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held at the call of the Chairman of the Board at such times and places, within or without the State of Delaware, as he or she shall designate, on not less than three calendar days' notice (specifying the time and place of the meeting and the agenda therefor) to each Director, given verbally or in writing either personally, by telephone, by facsimile transmission, by mail, by telegram or by telex. Special meetings shall be called by the Secretary on like notice at the written request of a majority of the Directors. SECTION 4.11 QUORUM AND POWERS OF A MAJORITY. At all meetings of the Board of Directors and of each committee thereof, a majority of the members shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of the Board of Directors or such committee, unless by express provision of law, 6. 10 of the Certificate of Incorporation or these Bylaws, a different vote is required, in which case such express provision shall govern and control. In the absence of a quorum, a majority of the members present at any meeting may, without notice other than announcement at the meeting, adjourn such meeting from time to time until a quorum is present. SECTION 4.12 WAIVER OF NOTICE. Notice of any meeting of the Board of Directors, or any committee thereof, need not be given to any member if waived by him or her in writing, whether before or after such meeting is held, or if he or she shall sign the minutes or attend the meeting. SECTION 4.13 MANNER OF ACTING. (a) Members of the Board of Directors, or any committee thereof, may participate in any meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating therein can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. (b) Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee. SECTION 4.14 COMPENSATION. (a) The Board of Directors, by a resolution or resolutions may fix, and from time to time change, the compensation of Directors. (b) Each Director shall be entitled to reimbursement from the Corporation for his or her reasonable expenses incurred in attending meetings of the Board of Directors or any committee thereof. (c) Nothing contained in these Bylaws shall be construed to preclude any Director from serving the Corporation in any other capacity and from receiving compensation from the Corporation for service rendered to it in such other capacity. SECTION 4.15 COMMITTEES. The Board of Directors may, by resolution or resolutions adopted by the affirmative vote of a majority of the Board of Directors, designate one or more committees, each committee to consist of two or more Directors, which to the extent provided in said resolution or resolutions shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation; provided, however, that no such committee shall have the power to (i) elect Directors, (ii) alter, amend, or repeal these Bylaws or any resolution of the Board relating to such committee, (iii) appoint any member of such committee, (iv) declare any dividend or make any other distribution to the stockholders of the Corporation or (v) take any other actions which may lawfully be taken only by the full Board of Directors. Such committee or committees shall have such name or names as may be determined from time to time by resolutions adopted by the Board of Directors. 7. 11 SECTION 4.16 COMMITTEE PROCEDURE. (a) Except as otherwise provided by these Bylaws, each committee shall adopt its own rules governing the time, place and method of holding its meetings and the conduct of its proceedings and shall meet as provided by such rules or by resolution of the Board of Directors. Unless otherwise provided by these Bylaws or any such rules or resolutions, notice of the time and place of each meeting of a committee shall be given to each member of such committee as provided in Section 4.10 of the Bylaws with respect to notices of special meetings of the Board of Directors. (b) Each committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. (c) Any member of any committee, other than a member thereof serving ex-officio, may be removed from such committee either with or without cause, at any time, by resolution adopted by the affirmative vote of a majority of the Board of Directors at any meeting thereof. Any vacancy in any committee shall be filled by the Board of Directors in the manner prescribed by these Bylaws for the original appointment of the members of such committee. SECTION 4.17 EXECUTIVE COMMITTEE. There shall be established an Executive Committee consisting of three (3) members. The Chairman of the Board shall be a member and shall act as Chairman of the Executive Committee. In addition, the Board of Directors shall elect from its members the remaining members of the Executive Committee. The Executive Committee shall, to the full extent of the DGCL, have and may exercise in the intervals between meetings of the Board of Directors, all the powers of the whole Board of Directors in its management of the affairs and business of the Corporation, except the power or authority to: (a) amend the Certificate of Incorporation; (b) adopt any agreement of merger or consolidation; (c) recommend to stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets; (d) recommend to stockholders a dissolution of the Corporation or a revocation of a dissolution; (e) amend these Bylaws; (f) appoint or remove a member of any committee established by the Board of Directors, fill vacancies on the Board of Directors, remove an officer elected by the Board of Directors, or raise or lower any officer's salary; or 8. 12 (g) declare dividends or authorize the issuance of stock. Meetings of the Executive Committee may be called at any time by the Chairman of the Board and shall be held at the general office of the Corporation or at such other place, within or without the State of Delaware, as the Chairman of the Board may designate, on not less than one day's notice to each member of the Executive Committee, given verbally or in writing either personally, by telephone, by facsimile transmission, by mail, by telegram or telex. ARTICLE V OFFICERS SECTION 5.01 NUMBER. (a) The officers of the corporation shall include a Chief Executive Officer, a President, one or more Vice Presidents (including one or more Executive Vice Presidents and one or more Senior Vice Presidents if deemed appropriate by the Board of Directors), a Secretary and a Treasurer. The Board of Directors shall also elect a Chairman of the Board pursuant to Section 5.02. The Board of Directors may also elect such other officers as the Board of Directors may from time to time deem appropriate or necessary. Except for the Chairman of the Board, none of the officers of the Corporation need be a Director of the Corporation. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity. (b) The Chairman of the Board shall be the Chief Executive Officer unless the Board of Directors, by resolution adopted by the affirmative vote of not less than a majority of the Directors then in office, designates the President or some other person as Chief Executive Officer. The President shall be the Chief Operating Officer. If at any time the offices of the Chairman of the Board and Chief Executive Officer shall not be filled, the President shall also be the Chief Executive Officer. (c) The Board of Directors may delegate to the Chief Executive Officer the power to appoint one or more employees of the corporation as divisional or departmental vice presidents and fix the duties of such appointees. However, no such divisional or departmental vice president shall be considered as an officer of the Corporation, the officers of the Corporation being limited to those officers elected by the Board of Directors. SECTION 5.02 ELECTION OF OFFICERS, QUALIFICATION AND TERM. The officers of the Corporation to be elected by the Board of Directors shall be elected annually at the first meeting of the Board of Directors held after each annual meeting of the stockholders. Each such officer shall hold office for one year and until a successor shall have been duly elected and shall qualify in his or her stead unless the Board of Directors shall have provided by contract or otherwise in any particular case, or until such officer shall have resigned and his or her resignation shall have become effective, or until such officer shall have been removed in the manner hereinafter provided. 9. 13 Notwithstanding anything in this Section 5.02 to the contrary, the Chairman of the Board may be elected only by the vote of a majority of the Directors then in office (who may include the Director who is or is to be the Chairman of the Board). SECTION 5.03 REMOVAL. Except as otherwise expressly provided in a contract duly authorized by the Board of Directors, any officer elected by the Board of Directors may be removed, either with or without cause, at any time by resolution adopted by the affirmative vote of a majority of the Board of Directors at any meeting thereof; provided, however, that the Chairman of the Board may be removed by the vote of a majority of the Directors then in office (excluding the Director who is the Chairman of the Board). SECTION 5.04 RESIGNATIONS. Any officer of the Corporation may resign at any time by giving written notice to the Board of Directors or the Chairman of the Board. Such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 5.05 VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause may be filled for the unexpired portion of the term by election by the Board of Directors at any meeting thereof. SECTION 5.06 SALARIES. The salaries of all officers of the Corporation shall be fixed by the Board of Directors from time to time, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the Corporation. SECTION 5.07 THE CHAIRMAN OF THE BOARD. (a) The Chairman of the Board shall have the powers and duties customarily and usually associated with the office of the Chairman of the Board. The Chairman of the Board shall preside at meetings of the stockholders and of the Board of Directors. In the event of the Chairman of the Board's temporary absence or disability and the absence or disability of the President, the Chairman of the Board shall have the power to designate any Director to preside at any or all meetings of the Board of Directors, and the power to designate any Director or any Vice President to preside at any or all meetings of the stockholders. (b) If at any time the office of President shall not be filled, or in the event of the disability of the President, the Chairman of the Board (if one shall be elected) shall have the duties and powers of the President. The Chairman of the Board shall have such other powers and perform such greater or lesser duties as may be delegated to him or her from time to time by the Board of Directors. SECTION 5.08 THE PRESIDENT. In the event of the disability of the Chairman of the Board, the President shall have the powers and duties of the Chairman of the Board. The President shall serve as chief operating officer and shall have such other 10. 14 powers and perform such other duties as may be delegated to him or her from time to time by the Board of Directors or the Chairman of the Board. SECTION 5.09 THE VICE PRESIDENTS. Each Vice President shall have such powers and perform such duties as may from time to time be assigned to him or her by the Board of Directors, the Chairman of the Board or the President. SECTION 5.10 THE SECRETARY AND THE ASSISTANT SECRETARY. (a) The Secretary shall attend meetings of the Board of Directors and meetings of the stockholders and record all votes and minutes of all such proceedings in a book kept for such purpose and shall perform like duties for the committees of Directors as provided for in these Bylaws when required. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and of the Board of Directors (except in case of meetings called by the Chairman of the Board in accordance with Sections 4.09 or 4.10). He or she shall have charge of the stock ledger (unless responsibility for maintaining the stock ledger is delegated to a transfer agent by the Board of Directors pursuant to Section 6.06) and such other books and papers as the Board of Directors may direct. He or she shall have all such further powers and duties as generally are incident to the position of Secretary or as may from time to time be assigned to him or her by the Board of Directors or the Chairman of the Board. (b) Each Assistant Secretary shall have such powers and perform such duties as may from time to time be assigned to him or her by the Board of Directors, the Chairman of the Board or the Secretary. In case of the absence or disability of the Secretary, the Assistant Secretary designated by the Secretary (or, in the absence of such designation, the senior Assistant Secretary) shall perform the duties and exercise the powers of the Secretary. SECTION 5.11 THE TREASURER AND THE ASSISTANT TREASURER. (a) The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He or she may endorse all commercial documents requiring endorsements for or on behalf of the Corporation and may sign all receipts and vouchers for payments made to the Corporation. (b) The Treasurer shall disburse funds of the Corporation as may from time to time be ordered by the Board of Directors, taking proper vouchers for such disbursements, and render to the Board of Directors, the Chairman of the Board and President, whenever they may require it, an account of all transactions undertaken by him or her as Treasurer and of the financial condition of the Corporation. (c) The Treasurer shall also maintain adequate records of all assets, liabilities and transactions of the corporation and shall see that adequate audits thereof are currently and regularly made. The Treasurer shall have such other powers and perform 11. 15 such other duties that generally are incident to the position of Treasurer or as may from time to time be assigned to him or her by the Board of Directors, the Chairman of the Board or the President. (d) Each Assistant Treasurer shall have such powers and perform such duties as may from time to time be assigned to him or her by the Board of Directors, the Chairman of the Board, the President or the Treasurer. In case of the absence or disability of the Treasurer, the Assistant Treasurer designated by the Treasurer (or, in the absence of such designation, the senior Assistant Treasurer) shall perform the duties and exercise the powers of the Treasurer. SECTION 5.12 TREASURER'S BOND. If required by the Board of Directors, the Treasurer or any Assistant Treasurer shall give the Corporation a bond in such form and with such surety or sureties as are satisfactory to the Board of Directors for the faithful performance of the duties of office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation. SECTION 5.13 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have, subject to the supervision, direction and control of the Board of Directors, the general powers and duties of supervision, direction and management of the affairs and business of the Corporation usually vested in the chief executive officer of a Corporation, including, without limitation, all powers necessary to direct and control the organizational and reporting relationships within the Corporation. If at any time the office of Chairman of the Board shall not be filled, the Chief Executive Officer shall have the powers and duties of the Chairman of the Board. SECTION 5.14 CHIEF OPERATING OFFICER. The Chief Operating Officer shall, subject to the supervision, direction and control of the Chief Executive Officer and the Board of Directors, manage the day-to-day operations of the Corporation and, in general, shall assist the Chief Executive Officer. ARTICLE VI STOCK SECTION 6.01 CERTIFICATES. Certificates or shares of the stock of the Corporation shall be issued under the seal of the Corporation, or facsimile thereof, and shall be numbered and shall be entered in the books of the Corporation as they are issued. Each certificate shall bear a serial number, shall exhibit the holder's name and the number of shares evidenced thereby, and shall be signed by the Chairman of the Board or a Vice Chairman, if any, or the Chief Executive Officer or the President or any Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been 12. 16 placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person or entity were such officer, transfer agent or registrar at the date of issue. SECTION 6.02 TRANSFERS. Transfers of stock of the Corporation shall be made on the books of the Corporation only upon surrender to the Corporation of a certificate for the shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer; provided, however, such succession, assignment, or transfer is not prohibited by the Certificate of Incorporation, the Bylaws, applicable law, or contract. Thereupon, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 6.03 LOST, STOLEN OR DESTROYED CERTIFICATES. Any person claiming a certificate of stock to be lost, stolen or destroyed shall make an affidavit or an affirmation of that fact, and shall give the Corporation a bond of indemnity in satisfactory form and with one or more satisfactory sureties, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed. SECTION 6.04 RECORD DATE. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors shall fix, in advance, a record date, which shall not be more than 60 nor less than ten days before the date of such meeting, nor more than 60 days prior to any other action. (b) If no record date is fixed by the Board of Directors, (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the date on which notice is given, or, if notice is waived by all stockholders entitled to vote at the meeting, at the close of business on the day next preceding the day on which the meeting was held and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 6.05 REGISTERED STOCKHOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares as the person entitled to exercise the rights referred to in Section 6.04 and shall 13. 17 not be bound to recognize any equitable or other claim to or interest in any such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Delaware. SECTION 6.06 ADDITIONAL POWERS OF THE BOARD. (a) In addition to those powers set forth in Section 4.01, the Board of Directors shall have power and authority to make all such rules and regulations as it shall deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. (b) The Board of Directors may appoint and remove transfer agents and registrars of transfers, and may require all stock certificates to bear the signature of any such transfer agent and/or any such registrar of transfers. (c) The Board of Directors shall have power and authority to create and issue (whether or not in connection with the issue and sale of any stock or other securities of the Corporation) warrants, rights or options entitling the holders thereof to purchase from the Corporation any shares of any class or classes or any other securities of the Corporation for such consideration and to such persons, firms or corporations as the Board of Directors, in its sole discretion, may determine, setting aside from the authorized but unissued stock of the Corporation the requisite number of shares for issuance upon the exercise of such warrants, rights or options. Such warrants, rights or options shall be evidenced by such instrument or instruments as shall be approved by the Board of Directors. The terms upon which, the time or times (which may be limited or unlimited in duration) at or within which, and the price or prices at which any such shares or other securities may be purchased from the Corporation upon the exercise of any such warrant, right or option shall be such as shall be fixed and stated in a resolution or resolutions of the Board of Directors providing for the creation and issue of such warrants, rights or options. ARTICLE VII LIMITATIONS OF OWNERSHIP BY NON-CITIZENS SECTION 7.01 DEFINITIONS. (a) "Act" shall mean Subtitle VII of Title 49 of the United States Code, as amended, or as the same may be from time to time amended. (b) "Beneficial Ownership," "Beneficially Owned" or "Owned Beneficially" refers to beneficial membership as defined in Rule 13d-3 (without regard to the 60-day provision in paragraph (d)(1)(i) thereof) under the Securities Exchange Act of 1934, as amended. (c) "Foreign Stock Record" shall have the meaning set forth Section 7.03. 14. 18 (d) "Non-Citizen" shall mean any person or entity who is not a "citizen of the United States" (as defined in Section 40102 of the Act), including any agent, trustee or representative of a Non-Citizen. (e) "Own or Control" or "Owned or Controlled" shall mean (i) ownership of record, (ii) beneficial ownership or (iii) the power to direct, by agreement, agency or in any other manner, the voting of Stock. Any determination by the Board of Directors as to whether Stock is Owned or Controlled by a Non-Citizen shall be final. (f) "Permitted Percentage" shall mean 25% of the voting power of the Stock. (g) "Stock" shall mean the outstanding capital stock of the Corporation entitled to vote; provided, however, that for the purpose of determining the voting power of Stock that shall at any time constitute the Permitted Percentage, the voting power of Stock outstanding shall not be adjusted downward solely because shares of Stock may not be entitled to vote by reason of any provision of this Article VII. SECTION 7.02 POLICY. It is the policy of the Corporation that, consistent with the requirements of the Act, Non-Citizens shall not Own or Control more than the Permitted Percentage and, if Non-Citizens nonetheless at any time Own or Control more than the Permitted Percentage, the voting rights of the Stock in excess of the Permitted Percentage shall be automatically suspended in accordance with Sections 7.03 and 7.04 below. SECTION 7.03 FOREIGN STOCK RECORD. The Corporation or any transfer agent designated by it shall maintain a separate stock record (the "Foreign Stock Record") in which shall be registered Stock known to the corporation to be Owned or Controlled by Non-Citizens. The Foreign Stock Record shall include (i) the name and nationality of each such Non-Citizen, (ii) the number of shares of Stock Owned or Controlled by such Non-Citizen and (iii) the date of registration of such shares in the Foreign Stock Record. In no event shall shares in excess of the Permitted Percentage be entered on the Foreign Stock Record. In the event that the Corporation shall determine that Stock registered on the Foreign Stock Record exceeds the Permitted Percentage, sufficient shares shall be removed from the Foreign Stock Record so that the number of shares entered therein does not exceed the Permitted Percentage. Stock shall be removed from the Foreign Stock Record in reverse chronological order based upon the date of registration therein. SECTION 7.04 SUSPENSION OF VOTING RIGHTS. If at any time the number of shares of Stock known to the Corporation to be Owned or Controlled by Non-Citizens exceeds the Permitted Percentage, the voting rights of Stock Owned or Controlled by Non-Citizens and not registered on the Foreign Stock Record at the time of any vote or action of the stockholders of the Corporation shall, without further action by the Corporation, be suspended. Such suspension of voting rights shall automatically terminate upon the earlier of the (i) transfer of such shares to a person or entity who is not 15. 19 a Non-Citizen, or (ii) registration of such shares on the Foreign Stock Record, subject to the last two sentences of Section 7.03. SECTION 7.05 BENEFICIAL OWNERSHIP INQUIRY. (a) The Corporation may by notice in writing (which may be included in the form of proxy or ballot distributed to stockholders in connection with the annual meeting or any special meeting of the stockholders of the Corporation, or otherwise) require a person that is a holder of record of Stock or that the Corporation knows to have, or has reasonable cause to believe has, Beneficial Ownership of Stock to certify in such manner as the Corporation shall deem appropriate (including by way of execution of any form of proxy or ballot of such person) that, to the knowledge of such person: (i) all Stock as to which such person has record ownership or Beneficial Ownership is Owned and Controlled only by Citizens of the United States; or (ii) the number and class or series of Stock owned of record or Beneficially Owned by such person that is Owned or Controlled by Non-Citizens is as set forth in such certificate. (b) With respect to any Stock identified in response to clause (a)(ii) above, the Corporation may require such person to provide such further information as the Corporation may reasonably require in order to implement the provisions of this Article VII. (c) For purposes of applying the provisions of this Article VII with respect to any Stock, in the event of the failure of any person to provide the certificate or other information to which the Corporation is entitled pursuant to this Section 7.05, the Corporation shall presume that the Stock in question is Owned or Controlled by Non-Citizens. ARTICLE VIII MISCELLANEOUS SECTION 8.01 PLACE AND INSPECTION OF BOOKS. (a) The books of the Corporation other than such books as are required by law to be kept within the State of Delaware shall be kept in the State of Arizona or at such place or places either within or without the State of Delaware as the Board of Directors may from time to time determine. (b) At least ten days before each meeting of stockholders, the officer in charge of the stock ledger of the Corporation shall prepare a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 16. 20 ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. (c) The Board of Directors shall determine from time to time whether and, if allowed, when and under what conditions and regulations the accounts and books of the Corporation (except such as may be by law specifically open to inspection or as otherwise provided by these Bylaws) or any of them shall be open to the inspection of the stockholders and the stockholders' rights in respect thereof. SECTION 8.02 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. (a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a Director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid or owed in settlement actually and reasonably paid or incurred by him or her or rendered or levied against him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation; and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, in itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. (b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a Director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses, including attorneys' fees, actually and reasonably paid or incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, that no indemnification shall be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought 17. 21 shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. (c) The Corporation shall, at the discretion of the Board of Directors, indemnify all employees and agents of the Corporation (other than Directors and officers) to the extent that Directors and officers shall be indemnified pursuant to subsections (a) and (b). (d) To the extent that a person who may be entitled to indemnification by the Corporation under this section is or has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b), or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses, including attorney's fees, actually and reasonably paid or incurred by him or her in connection therewith. (e) Any indemnification under subsections (a), (b), or (c) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in subsection (a) or (b). Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, (iii) by the stockholders, or (iv) in any case in which applicable law makes court approval a prerequisite to indemnification, by the court in which such action, suit or proceeding was brought or another court of competent jurisdiction. (f) Expenses, including attorneys' fees, incurred by an officer or Director in defending a civil, criminal, administrative, or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this section. Such expenses, including attorneys' fees, incurred by other employees and agents shall be so paid upon terms and conditions, if any, as the Board of Directors deems appropriate. (g) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of the stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. (h) The provisions of this section shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the 18. 22 estate, executors, administrators, spouse, heirs, legatees or devisees of a person entitled to indemnification hereunder and the term "person," where used in the section shall include the estate, executors, administrators, spouse, heirs, legatees or devisees of such person. (i) For the purposes of this Section 8.02, (i) "employee benefit plan" and "fiduciary" shall be deemed to include, but not be limited to, the meanings set forth, respectively, in Section 3(3) and 21(A) of the Employee Retirement Income Security Act of 1974, as amended, and references to the judgments, fines and amounts paid or owed in settlement or rendered or levied shall be deemed to encompass and include excise taxes required to be paid pursuant to applicable law in respect of any transaction involving an employee benefit plan, (ii) references to the Corporation shall be deemed to include any predecessor corporation and any constituent corporation absorbed in a merger, consolidation or other reorganization of or by the Corporation which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries so that any person who was a director, officer, employee, agent or fiduciary of such predecessor or constituent corporation, or served at the request of such predecessor or constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Section 8.02 with respect to the Corporation as such person would have with respect to such predecessor or constituent corporation if its separate existence had continued, and (iii) all other terms shall be deemed to have the meanings for such terms as set forth in Section 145 of the DGCL. SECTION 8.03 DIVIDENDS. (a) Dividends may be declared at the discretion of the Board of Directors at any meeting thereof. (b) Dividends may be paid to stockholders in cash or, when the Directors shall so determine, in stock. A Director shall be fully protected in relying in good faith upon the books of account of the Corporation or statements prepared by any of its officers as to the value and amount of the assets, liabilities or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared. (c) Before payment of any dividend or any distribution of profits, there may be set aside out of the said surplus of the Corporation such sum or sums as the Board of Directors from time to time, in its discretion thinks proper as a reserve fund to meet contingencies, or for equalizing dividends, or for such other purpose as the Board of Directors shall think conducive to the interests of the Corporation and the Board of Directors may abolish any such reserve in the manner in which it was created. SECTION 8.04 EXECUTION OF DEEDS, CONTRACTS, AND OTHER AGREEMENTS AND INSTRUMENTS. Subject to the specific directions of the Board of Directors, all deeds, mortgages and bonds entered into by the Corporation and all other written contracts and agreements to which the Corporation shall be a party shall be executed in its name by the 19. 23 Chairman of the Board, the President, or a Vice President, or such other person or persons as may be authorized by any such officer. SECTION 8.05 CHECKS. All checks, drafts, acceptances, notes and other orders, demands or instruments in respect to the payment of money may be signed or endorsed on behalf of the Corporation by such officer or officers or by such agent or agents as the Board of Directors may from time to time designate. SECTION 8.06 VOTING SHARES IN OTHER CORPORATIONS. The Chairman of the Board of the Corporation (or any other Director designated by a majority of the Board of Directors) may vote any and all shares held by the Corporation in any other corporation. SECTION 8.07 FISCAL YEAR. The fiscal year of the Corporation shall correspond with the calendar year. SECTION 8.08 GENDER/NUMBER. As used in these Bylaws, the masculine, feminine or neuter gender, and the singular or plural number, shall each include the others whenever the context so indicates. SECTION 8.09 PARAGRAPH TITLES. The titles of the paragraphs have been inserted as a matter of reference only and shall not control or affect the meaning or construction of any of the terms and provisions hereof. SECTION 8.10 AMENDMENT. These Bylaws may be altered, amended or repealed by the affirmative vote of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote at any meeting of stockholders or by resolution adopted by the affirmative vote of not less than a majority of the Directors in office at any annual or regular meeting of the Board of Directors or at any special meeting of the Board of Directors if notice of the proposed alteration, amendment or repeal be contained in the notice of such special meeting. SECTION 8.11 CERTIFICATE OF INCORPORATION. Notwithstanding anything to the contrary contained herein, if any provision contained in these Bylaws is inconsistent with or conflicts with a provision of the Certificate of Incorporation, such provision of these Bylaws shall be superseded by the inconsistent provision in the Certificate of Incorporation to the extent necessary to give effect to such provision in the Certificate of Incorporation. 20.
EX-10.40 4 p64739ex10-40.txt EX-10.40 1 EXHIBIT 10.40 PURCHASE AGREEMENT This Purchase Agreement ("Agreement") is entered into as of this 27th day of December 2000 by and among America West Holdings Corporation ("Holdings"), a Delaware corporation, America West Airlines, Inc. ("America West"), a Delaware corporation, and Continental Airlines, Inc. ("Continental"), a Delaware corporation. RECITALS Continental owns 158,569 shares of Class A Common Stock, $.01 par value, of Holdings (the "Shares"). Holdings desires to purchase from Continental and Continental desires to sell to Holdings the Shares. TPG Partners, L.P., TPG Parallel I, L.P. and Air Partners II, L.P. (collectively, "TPG"), together with Continental, are parties to that certain Priority Distribution Agreement, dated as of August 25, 1994 (the "Priority Distribution Agreement"), a copy of which has been delivered to and reviewed by Holdings, pursuant to which, among other matters, Continental was granted certain rights of first refusal with respect to certain securities of Holdings owned by TPG, as set forth in Section 3 of the Priority Distribution Agreement (the "Right of First Refusal"). Holdings desires to assume the rights and obligations of Continental under the Priority Distribution Agreement, and Continental desires to assign to Holdings its rights and delegate to Holdings its obligations under the Priority Distribution Agreement. NOW, THEREFORE, the parties hereto, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree as follows: 1. SALE AND PURCHASE. (a) Acquisition. In reliance upon the representations, warranties, covenants and agreements contained herein and upon the terms and subject to the conditions hereinafter set forth, Continental hereby sells, assigns, transfers, conveys and delivers to Holdings, and Holdings hereby purchases, acquires and accepts from Continental, the Priority Distribution Agreement and the Shares (the "Acquisition"). As part of the Acquisition, from and after the date hereof, Holdings agrees to assume Continental's rights and perform its obligations under the Priority Distribution Agreement, and to hold Continental harmless from any failure to so perform such obligations. Holdings acknowledges that no amounts previously paid or payable to Continental under the Priority Distribution Agreement are being assigned to Holdings hereunder. 2 (b) Purchasing Price. The consideration for the Acquisition is $10,827,532 (the "Purchase Price"), payable by Holdings to Continental as provided in paragraph (c) below. (c) Payment of Purchase Price and Delivery of Shares. On the date hereof, Holdings shall pay the Purchase Price to Continental in cash in United States Dollars by wire transfer of immediately available funds to the account of Continental previously designated by Continental to Holdings. Upon receipt by it of confirmation that the Purchase Price has been so paid, Continental will on the date thereof deliver to Holdings a certificate or certificates representing the Shares, duly endorsed for transfer or accompanied by stock powers executed in blank. The closing of the Acquisition and related transactions shall occur at the offices of Continental at 1600 Smith Street, Houston, Texas. 2. REPRESENTATIONS AND WARRANTIES OF AMERICA WEST AND HOLDINGS. Each of America West and Holdings hereby jointly and severally represents and warrants to Continental that: (a) its execution, delivery and performance of this Agreement do not violate applicable law, its certificate of incorporation or by-laws or any material agreement to which it is a party; (b) this Agreement has been duly authorized, executed and delivered by it and constitutes a valid and binding obligation of it, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights generally and legal principles of general applicability governing the availability of equitable remedies (whether considered in a proceeding in equity or at law or under applicable legal codes); and (c) except for applicable laws, if any, noncompliance with which could not reasonably be expected to prevent America West or Holdings from performing their respective obligations under this Agreement in all material respects, no filing or registration with, no waiting period imposed by and no authorization of, any governmental authority is required under any laws applicable to America West or Holdings to permit America West and Holdings to execute, deliver or perform its obligations under this Agreement or to consummate the transactions contemplated hereby. 3. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL. Continental hereby represents and warrants to America West and Holdings that: 2 3 (a) its execution, delivery and performance of this Agreement do not violate applicable law, its certificate of incorporation or by-laws or any material agreement to which it is a party; (b) this Agreement has been duly authorized, executed and delivered by it and constitutes a valid and binding obligation of it, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights generally and legal principles of general applicability governing the availability of equitable remedies (whether considered in a proceeding in equity or at law or under applicable legal codes); (c) except for applicable laws, if any, noncompliance with which could not reasonably be expected to prevent Continental from performing its obligations under this Agreement in all material respects, no filing or registration with, no waiting period imposed by and no authorization of, any governmental authority is required under any laws applicable to Continental to permit it to excuse, deliver or perform its obligations under this Agreement or to consummate the transactions contemplated hereby; (d) Continental has not assigned, transferred, waived, impaired or otherwise encumbered the Priority Distribution Agreement or the Right of First Refusal; and (c) Continental owns the Shares of record and beneficially, free and clear of liens, attachments, pledges, claims, restrictions, charges, encumbrances or security interests of any nature whatsoever ("Liens"), other than any Lien arising pursuant to this Agreement or under applicable securities laws. Continental has full power and legal right to sell, assign, transfer and deliver the Shares, and the delivery to Holdings of the Shares pursuant to the provisions of this Agreement will transfer to Holdings good and valid title thereto, free and clear of all Liens (other than restrictions on transfer pursuant to applicable securities laws). 4. NON-EXERCISE. In the event for any reason that the Priority Distribution Agreement shall be determined by a court of competent jurisdiction to be non-assignable or if for any other reason the assignment thereof by Continental to Holdings shall be determined by any court of competent jurisdiction to be ineffective, in each case without depriving Continental of the Purchase Price or imposing any additional obligations upon Continental, then from and after any such determination Continental will not exercise the Right of First Refusal. 5. INDEMNIFICATION. (a) To the fullest extent permitted by applicable law, subject to the terms of Section 5(c) hereof, each of Holdings and America West, jointly and severally, will indemnify, defend and hold harmless Continental and its directors, officers, stockholders, partners, employees, agents, representatives, successors, transferees and assigns, from 3 4 and against all out-of-pocket costs and expenses (including, without limitation, reasonable legal fees and expenses incurred in connection with AW Claims (as defined below)), including amounts paid to third parties (which shall be deemed to include Holdings and its affiliates and America West and its affiliates) in respect of settlements or judgments resulting from or arising in connection with claims made by holders, former holders, beneficial owners or former beneficial owners of securities of Holdings or America West (other than Continental) in their capacity as holders of such securities, or by, on behalf of or in the name of Holdings or America West (each, a "AW Claim", and collectively, "AW Claims") based upon or in connection with this Agreement or the transactions contemplated hereby, provided, however, that Holdings and America West still have no obligation hereunder to indemnify Continental or any other Indemnified Party (as defined below) to the extent, but only to the extent, the AW Claim relates to a breach by Continental of this Agreement or any other agreement to which Continental is a party. (b) To the fullest extent permitted by applicable law, subject to the terms of Section 5(c) hereof, Continental will indemnify, defend and hold harmless Holdings and America West and their respective directors, officers, stockholders, partners, employees, agents, representatives, successors, transferees and assigns, from and against all out-of-pocket costs and expenses (including, without limitation, reasonable legal fees and expenses incurred in connection with Continental Claims (as defined below)), including amounts paid to third parties (which shall be deemed to include Continental and its affiliates) in respect of settlements or judgments resulting from or arising in connection with claims made by holders, former holders, beneficial owners or former beneficial owners of securities of Continental (other than Holdings and America West) in their capacity as holders of such securities, or by, on behalf of or in the name of Continental (each, a "Continental Claim", and collectively, "Continental Claims") based upon or in connection with this Agreement or the transactions contemplated hereby; provided, however, that Continental shall have no obligation hereunder to indemnify Holdings, America West or any other Indemnified Party (as defined below) to the extent, but only to the extent, the Continental Claim relates to a breach by Holdings or America West of this Agreement or any other agreement to which Holdings or America West is a party. (c) For purposes of this Section 5, the term "Indemnifying Party" when used in connection with a particular AW Claim means Holdings and America West and when used in connection with a particular Continental Claim means Continental, which are the persons having an obligation to indemnify with respect to such Claim pursuant to this Section 5, and the term "Indemnified Party" when used in connection with a particular Claim means the person (whether one or more) having the right to be indemnified with respect to such Claim pursuant to this Section 5. As used herein, a "Claim" shall mean an AW Claim or a Continental Claim, as the case may be. The following procedures will apply to the indemnification obligations set forth in this Agreement: (i) Promptly after receipt of written notice of a Claim involving a third party, the Indemnified Party against whom such Claim is asserted will give the 4 5 Indemnifying Party written notice of any such Claim; provided, however, that any failure or delay in providing such notice to the Indemnifying Party will not relieve the Indemnifying Party of any obligations under this Section 5 except to the extent and only to the extent the Indemnifying Party was actually and materially prejudiced by such delay or failure. The Indemnifying Party will promptly designate counsel chosen by it and reasonably acceptable to the Indemnified Party to represent the Indemnified Party in connection with such Claim and the Indemnifying Party will pay all costs of investigation, litigation or arbitration incurred in connection with such Claim including, without limitation, fees and expenses of such counsel. The Indemnifying Party will have the right to undertake the defense, compromise or settlement of such Claim (subject to paragraph (ii) below), and the Indemnifying Party will not be liable for the fees or expenses of separate counsel for the Indemnified Party, unless the employment of such counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of such action or the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to have charge of the defense of such action or, based upon the written advice of counsel, the Indemnified Party shall have reasonably concluded that there may be defenses available to it that are different from those available to the Indemnifying Party or that a material conflict of interest or material potential conflict of interest exists (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), in any of which cases the reasonable fees and expenses of counsel for the Indemnified Party shall be borne by the Indemnifying Party and paid as incurred (it being understood, however, that the Indemnifying Party shall not be liable for the expenses of more than one separate counsel (other than local counsel) in any one action or series of related actions in the same jurisdiction representing the Indemnified Parties who are parties to such action). The Indemnified Party will use its reasonable efforts to cooperate fully with respect to the defense of any Claim. If after the passage of a reasonable period of time after notice of any Claim, the Indemnifying Party has not initiated a defense against such Claim, the Indemnified Party will have the right, upon written notice to the Indemnifying Party, to undertake the defense, compromise or settlement of such Claim at any time prior to settlement, compromise or final determination thereof and any action so taken by the Indemnified Party with regard to such defense, compromise or settlement will be deemed to be within the protection afforded by this Agreement unless a court of competent jurisdiction makes a final determination that the Indemnified Party is not entitled to indemnification hereunder with respect to such Claim; provided, however, that any settlement of any such Claim shall require the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. (ii) Anything in this Section 5(c) to the contrary notwithstanding, the Indemnifying Party will not settle or compromise any Claim or consent to the entry of any judgment that does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Indemnified Party a full, irrevocable and unconditional release from all liability in respect of such Claim; provided that if 5 6 the terms of such settlement, compromise or judgment adversely affects any of the rights granted to such Indemnified Party herein, the Indemnifying Party will not settle or compromise such Claim or consent to the entry of judgment without the written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed. In the event that there is more than one Indemnified Party with respect to any Claim, any notice contemplated by this Section 5(c) to be given to the Indemnified Party will be deemed to be given for purposes hereof if it is given to the respective parties hereto. No Indemnifying Party shall be liable for any settlement of any Claim effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent, the Indemnifying Party agrees to indemnify and hold harmless any Indemnified Party from and against any loss or liability by reason of such settlement. 6. MISCELLANEOUS. (a) Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of law). (b) Jurisdiction. Any judicial proceeding brought against any of the parties hereto with respect to this Agreement shall be brought in the United States District Court for the District of Delaware irrespective of where such party may be located at the time of such proceeding, and by execution and delivery of this Agreement, each of the parties hereto hereby consents to the exclusive jurisdiction of such court and waives any defense or opposition to such jurisdiction. (c) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to constitute an original, but all of which together shall constitute one and the same document. (d) Assignment; No Third-Party Beneficiaries; Amendment. Neither this Agreement, nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties hereto. This Agreement is binding upon and for the sole benefit of the parties hereto and their respective successors and assigns and nothing herein, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. (e) Waiver. Failure by any party to take action against another in case of the other's noncompliance with obligations or conditions set forth in this Agreement shall not be interpreted as a waiver for a subsequent noncompliance of the same or other obligations or conditions. No waiver shall be deemed to have been made by any party of any of its rights under this Agreement unless the same is in writing and is signed on its 6 7 behalf by its authorized representative. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party granting such waiver in any other respect or at any other time. (f) INTERPRETATION. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". Any reference to "herein" or "hereof" or similar terms shall refer to the agreement as a whole rather than to the individual paragraph or section. (g) SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as it is enforceable. (h) SPECIFIC PERFORMANCE. The parties hereby acknowledge and agree that the failure of any party to this Agreement timely to perform its agreements and covenants hereunder will cause substantial and irreparable injury to the other parties to this Agreement for which damages, even if available, will not be an adequate remedy. Accordingly, each of the parties hereto hereby consents to the granting of equitable relief (including specific performance and injunctive relief) by any court having jurisdiction over the matter to enforce any party's obligations hereunder. The parties further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such equitable relief, and that this Section 6(h) is without prejudice to any other rights that the parties hereto may have for any failure to perform this Agreement. The parties further agree not to assert in any proceeding that grounds for any equitable relief are not satisfied. The parties acknowledge that because the obligations imposed on them in this Agreement are special, unique and of an extraordinary character, the making available of equitable remedies (including specific performance and injunctive relief) in this Agreement was a condition to each party's entering into this Agreement. (i) NOTICES. Notices, requests and other communications hereunder to a party shall be in writing and shall be deemed given (x) upon delivery if personally delivered or (y) three Business Days after being mailed by registered or certified mail (return receipt requested) or (z) one Business Day after being delivered by overnight courier or by facsimile (with confirmation) to such party at its address or facsimile set forth below or such other address or facsimile as such party may specify by notice to the parties hereto. 7 8 If to Continental: Continental Airlines Inc. 1600 Smith Street Dept. HQSEO Houston, Texas 77002 Attention: General Counsel and Chief Financial Officer Telephone: (713) 324-2948 Facsimile: (713) 324-2687 If to Holdings or America West: America West Holdings Corporation 111 West Rio Salado Parkway Tempe, Arizona 85281 Attention: General Counsel Telephone: (480) 693-5785 Telecopier: (480) 693-5702 As used herein, a "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday unless such day shall be a day when financial institutions in Houston or Phoenix are authorized by applicable law to close. (j) Entire Agreement. This Agreement constitutes the entire agreement of the parties, and supersedes all prior agreements and undertakings, both written and oral, among the parties, with respect to the subject matter hereof. (k) Further Assurances. Each of the parties to this Agreement will cooperate and use its reasonable efforts to take or cause to be taken all reasonable actions, to cooperate reasonably with the other parties hereto with respect to such actions, and to do or cause to be done all things reasonably necessary or advisable to consummate and make effective the transactions contemplated by this Agreement. ******* 8 9 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. CONTINENTAL AIRLINES, INC. By: /s/ Jeffery A. Smisek ------------------------------- Name: Jeffery A. Smisek Title: Executive Vice President AMERICA WEST HOLDINGS CORPORATION By: /s/ Stephen L. Johnson ------------------------------- Name: Stephen L. Johnson Title: Senior Vice President AMERICA WEST AIRLINES, INC. By: /s/ Stephen L. Johnson ------------------------------- Name: Stephen L. Johnson Title: Senior Vice President 9 10 CONSENT Each of TPG Partners, L.P., a Delaware limited partnership ("TPG Partners"), TPG Parallel I, L.P., a Delaware limited partnership ("Parallel"), and Air Partners II, L.P., a Texas limited partnership ("APII", and collectively with TPG Partners and Parallel, "TPG") hereby irrevocably consents to the sale and assignment by Continental Airlines, Inc. to America West Holdings Corporation of the Priority Distribution Agreement, and the assumption by America West Holdings Corporation of Continental's rights and obligations thereunder, all as contemplated by that certain Purchase Agreement dated as of December 27, 2000 among Continental Airlines, Inc., America West Holdings Corporation and America West Airlines, Inc., a copy of which Purchase Agreement has been provided to and reviewed by TPG. Executed as of December 27, 2000. TPG PARTNERS, L.P. By: TPG Genpar, L.P. By: TPG Advisors, Inc. By /s/ Richard P. Schifter ----------------------- Name: Title: TPG PARALLEL I, L.P. By: TPG Genpar, L.P. By: TPG Advisors, Inc. By /s/ Richard P. Schifter ----------------------- Name: Title: AIR PARTNERS, II, L.P. By: TPG Genpar, L.P. By: TPG Advisors, Inc. By /s/ Richard P. Schifter ----------------------- Name: Title: 11 [AMERICA WEST HOLDINGS CORPORATION LETTERHEAD] December 27, 2000 TPG Partners, L.P. TPG Parallel I, L.P. Air Partners II, L.P. 301 Commerce Street, Suite 3300 Fort Worth, Texas 76102 Attention: James J. O'Brien RE: PRIORITY DISTRIBUTION AGREEMENT Gentlemen: America West Holdings Corporation ("Holdings"), America West Airlines, Inc. and Continental Airlines, Inc. ("Continental") are today entering into a Purchase Agreement pursuant to which, among other things, Continental is assigning to Holdings, and Holdings is assuming, the rights and obligations of Continental under the Priority Distribution Agreement (the "Priority Distribution Agreement") dated as of August 25, 1994 between the Addressees (each a "TPG Entity") and Continental. The TPG Entities have consented to that assignment and assumption. In connection with such assignment and assumption, and in consideration for the TPG Entities' consent, this letter will confirm the acknowledgement and agreement of Holdings that: 1. No payments currently are due to Holdings, and at no time in the future will any payments become due to Holdings, under Section 2 of the Priority Distribution Agreement. 2. Holdings will not exercise the rights of first refusal arising under Section 3 of the Priority Distribution Agreement (the "Rights of First Refusal") in respect of any sale, transfer or other disposition of shares of Class A Common Stock, par value $.01 per share, of Holdings by any TPG Entity (or any affiliate of any TPG Entity) but, subject to the termination provision in Clause 3 below, Holdings shall be entitled to exercise the Rights of First Refusal in respect of a sale, transfer or other disposition of any of those shares by any other person. 3. The Priority Distribution Agreement and the Rights of First Refusal shall be terminated and no longer be of any force and effect if William A. Franke ceases to be Chairman of the Board of Directors of Holdings. 12 TPG Partners, L.P. December 27, 2000 Page 2 Subject to these clarifications and modifications, the Priority Distribution Agreement, as assigned by Continental and assumed by Holdings, remains in full force and effect between the TPG Entities and Holdings. To confirm your acknowledgement and agreement to the foregoing, please sign a counterpart of this letter where indicated below and return to the undersigned. Very truly yours, AMERICA WEST HOLDINGS CORPORATION By: /s/ Stephen L. Johnson ---------------------- Name: Stephen L. Johnson Title: Senior Vice President ACKNOWLEDGED AND AGREED: TGP PARTNERS, L.P. By: TPG Genpar, L.P. By: TPG Advisors, Inc. By: /s/ Richard P. Schifter ----------------------- Name: Title: 13 TPG Partners, L.P. December 27, 2000 Page 3 TPG PARALLEL I, L.P. By: TPG Genpar, L.P. By: TPG Advisors, Inc. By: /s/ Richard P. Schifter ----------------------- Name: Title: AIR PARTNERS II, L.P. By: TPG Genpar, L.P. By: TPG Advisors, Inc. By: /s/ Richard P. Schifter ----------------------- Name: Title: EX-10.42 5 p64739ex10-42.txt EX-10.42 1 EXHIBIT 10.42 AMENDMENT No. 2 TO CODE SHARING AGREEMENT Continental Airlines, Inc. ("Continental") and America West Airlines, Inc. ("America West") are each party to the Code Sharing Agreement dated June 29, 1994 (the "Agreement"). America West and Continental each desire to amend the Agreement as provided below. This amendment is made this 18th day of November 1999. NOW, THEREFORE, IT IS AGREED: 1. Capitalized terms used herein that are not defined shall have the same meaning set forth for them in the Agreement. Except as specifically amended and modified hereby, the Agreement shall remain in effect as written. 2. The Agreement shall be amended as follows: (a) Schedule 1-A and 1-B of the Agreement are hereby replaced in their entirety by the Schedule 2-A and Schedule 2-B attached hereto to designate the Shared Code Segments now operated pursuant to the Agreement and to add a list of new Shared Code Segments to be added to the Agreement effective November 1, 1999 pursuant to Section 1 of the Agreement or, with respect to International Shared Code Segments, as soon as reasonably practicable after all applicable regulatory approvals are obtained for the applicable Shared Code Segment and both parties have satisfactorily implemented mutually acceptable procedures with respect to codesharing on such international Shared Code Segments. (b) The last sentence of Clause 1 of the Agreement is hereby replaced in its entirety by the following: "Either party may, at its own discretion, by thirty (30) days prior written notice to the other party, remove a Shared Code Segment designated with an asterisk (*) as "New" on Schedules 2-A and 2-B from Schedule 2-A or Schedule 2-B, for all purposes of this Agreement. (c) Clause 20 of the Agreement shall be amended by substituting the words "and Amendment Nos. 1 and 2" after the word "Agreement" in the first and second sentences. 2 3. Clauses 3, 20, 21, 22, 25, and 26 of the Agreement are herein incorporated by reference, mutatis mutandis. CONTINENTAL AIRLINES, INC. AMERICA WEST AIRLINES, INC. By: /s/ Bob King By: /s/ Bernard Han --------------------- ---------------- Title: Staff Vice President Title: SVP, Planning Corporate Development 3 SCHEDULE 2-A - ------------------------------------------------------------------------------- HP* FLIGHTS - ------------------------------------------------------------------------------- CURRENT SEGMENTS NEW SEGMENTS - ------------------------------------------------------------------------------- SEGMENT SEGMENT SEGMENT SEGMENT - ------------------------------------------------------------------------------- ABE-CLE* CLE-PIT* GSO-IAH AMS-EWR* ABQ-IAH CLE-RIC* HNL-LAX ANC-SEA* ACT-IAH* CLE-ROC* HOU-IAH* BRU-EWR* ALB-EWR* CLE-SBN* HRL-IAH EWR-ZRH* ATL-IAH* CLE-SYR* IAD-IAH* AUS-IAH CLE-YYZ* IAH-ILE* BDL-CLE* CLL-IAH* IAH-IND BDL-EQR* CLT-IAH* IAH-JAN* BDL-IAH* CMH-EWR IAH-JAX BGR-EWR* CMH-IAH IAH-LAS BHM-IAH* CRP-IAH IAH-LGA* BHX-EWR* CVG-IAH* IAH-LIT BNA-IAH* DCA-IAH* IAH-MCO BRO-IAH DTW-IAH IAH-MEM* BTR-IAH* DUB-EWR* IAH-MFE BTV-EWR* DUS-EWR* IAH-MIA BUF-CLE* ELP-IAH IAH-MLU* BUF-EWR* EWR-FRA* IAH-MOB* BWI-CLE* EWR-GLA* IAH-MSY CAK-CLE* EWR-LAS IAH-PBI CDG-EWR* EWR-MAN* IAH-PHL CDG-IAH* EWR-MDT* IAH-PHX CLE-CMH* EWR-MHT* IAH-PIT CLE-CVG* EWR-ORF IAH-PNS CLE-DCA* EWR-PHL* IAH-RDU* CLE-DEN EWR-PHX IAH-RSW CLE-DTW* EWR-PVD IAH-SDF CLE-FNT* EWR-PWM IAH-SHV* CLE-IAD* EWR-RIC* IAH-SJO* CLE-IAH EWR-ROC* IAH-SJU* CLE-LAN* EWR-SNN* IAH-TPA CLE-LEX* EWR-SYR* IAH-TUS CLE-LGA* EWR-YOW* IAH-TYR* CLE-MBS* EWR-YUL* IAH-YYZ* CLE-MDT* EWR-YYZ* CLE-PHL* FLL-IAH 4 SCHEDULE 2-B CO* FLIGHTS - ---------------------------------------- CURRENT SEGMENTS - ---------------------------------------- SEGMENT SEGMENT SEGMENT - ---------------------------------------- BUR-LAS LAS-ONT OAK-PHX BUR-PHX LAS-PDX ONT-PHX CMH-LAS LAS-RNO PDX-PHX CMH-EWR LAS-SAN PHX-PSP DEN-PHX LAS-SEA PHX-RNO EWR-LAS LAS-SFO PHX-SAN EWR-PHX LAS-SLC PHX-SEA IAH-LAS LAS-SMF PHX-SFO IAH-PHX LAS-TUS PHX-SJC LAS-LAX LAX-PHX PHX-SLC LAS-MDW LGB-PHX PHX-SMF LAS-OAK MCO-PHX PHX-TUS EX-10.43 6 p64739ex10-43.txt EX-10.43 1 Exhibit 10.43 AMENDMENT NO. 3 TO CODE SHARING AGREEMENT This Amendment No. 3 to Code Sharing Agreement (this "Amendment No. 3") is dated as of December 27, 2000 and is between Continental Airlines, Inc., a Delaware corporation ("Continental"), and America West Airlines, Inc., a Delaware corporation ("America West"). RECITALS: Continental and America West are each party to that certain Code Sharing Agreement dated June 29, 1994, as amended by Amendment No. 1 to Code Sharing Agreement dated October 19, 1998 and Amendment No. 2 to Code Sharing Agreement dated November 18, 1999 (collectively, the "Agreement"). Continental and America West each desire to amend the Agreement as provided in this Amendment No. 3. NOW, THEREFORE, the parties hereto, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree as follows: 1. Capitalized terms used herein that are not defined shall have the same meaning set forth for them in the Agreement. Except as specifically amended and modified hereby, the Agreement shall remain in effect as written. 2. Effective on the date hereof, the Agreement is hereby amended as follows: (a) The current last sentence of Section 1 of the Agreement is hereby deleted and replaced by the following: "Either carrier may, at its own discretion, by providing the other carrier thirty (30) days' prior written notice, remove any Shared Code Segment or Segments from Schedule 2-A or 2-B for all purposes of this Agreement." (b) The following new sentences are hereby added as the last sentences of Section 1 of the Agreement: "Neither carrier is obligated to place its code on the other carrier's flights, or to permit the other carrier to place the other carrier's code on its own flights, operating between the two carriers' hubs (Newark, Houston and Cleveland in the case of CAL and Phoenix, Las Vegas and Columbus in the case of AWA), without the prior express written consent of the carrier, which consent may be withheld or conditioned in the sole discretion of the carrier granting (or refusing to grant) such 2 consent: provided that AWA may place its code on flights operated by CAL between two carriers' hubs to the extent, and only to the extent, that such CAL operated flight is in time channels in which AWA does not itself operate a flight which has commercially appropriate connection times for itineraries that connect beyond the applicable CAL hub, as determined in the sole discretion of CAL. To the extent that either carrier, as of the date hereof, is displaying its designator code on flights operated by the other carrier in a manner that is inconsistent with the immediately preceding sentence, it will discontinue such display as soon as reasonably possible, but in no event later than 30 days from the date hereof. Notwithstanding the foregoing, either carrier, subject to the prior consent of the other carrier, may add any origin and destination segment to Schedule 2-A or 2-B of the Agreement as a Shared Code Segment that creates a unique market as compared to the markets then currently served by AWA and CAL upon 90 days' prior written notice to the other carrier." (c) Section 9(c) of the Agreement is hereby deleted in it entirety. (d) Section 20 of the Agreement shall be amended by substituting the words "and Amendment Nos. 1, 2 and 3" after the word "Agreement" in the first and second sentences. (e) Schedule 2-A and 2-B of the Agreement are hereby replaced in their entirety by Schedule 2-A and Schedule 2-B, respectively, attached hereto. (f) References in the Agreement and in this Amendment No. 3 to "Sections" and "Clauses" shall be used interchangeably and shall have the identical meanings. 3. Clauses 3, 20, 21, 22, 25, and 26 of the Agreement are herein incorporated by reference, mutatis mutandis. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement No. 3 to be executed as of the date first written above by their respective officers thereunto duly authorized. CONTINENTAL AIRLINES, INC. AMERICA WEST AIRLINES, INC. By: /s/ Mike Bonds By: /s/ Stephen L. Johnson ------------- ---------------------- Vice President Stephen L. Johnson Title: Corporate Development Title: Senior Vice President 2 3 SCHEDULE 2-A
HP* FLIGHTS SEGMENT SEGMENT SEGMENT SEGMENT ABE-CLE CLE-PIT GSO-IAH AMS-EWR ACT-IAH CLE-RIC HNL-LAX ANC-SEA ALB-EWR CLE-ROC HOU-IAH BRU-EWR ATL-IAH CLE-SBN HRL-IAH EWR-ZRH AUS-IAH CLE-SYR IAD-IAH EWR-STN BDL-CLE CLE-YYZ IAH-ILE ABI-IAH BDL-EWR CLL-IAH IAH-IND AEX-IAH BDL-IAH CLT-IAH IAH-JAN ALB-CLE BGR-EWR CMH-EWR+ IAH-JAX AVP-CLE BHM-IAH CMH-IAH+ IAH-LAS+ AZO-CLE BHX-EWR CRP-IAH IAH-LGA BPT-IAH BNA-IAH CVG-IAH IAH-LIT BTV-CLE BRO-IAH DCA-IAH IAH-MCO CAE-EWR BTR-IAH DTW-IAH IAH-MEM CAE-IAH BTV-EWR DUB-EWR IAH-MFE CHS-CLE BUF-CLE DUS-EWR IAH-MIA CHS-IAH BUF-EWR EWR-FRA IAH-MLU CLE-CLT BWI-CLE EWR-GLA IAH-MOB CLE-CRW CAK-CLE EWR-LAS+ IAH-MSY CLE-DAY CDG-EWR EWR-MAN IAH-PBI CLE-ERI CDG-IAH EWR-MDT IAH-PHL CLE-FWA CLE-CMH+ EWR-MHT IAH-PHX+ CLE-GRR CLE-CVG EWR-ORF IAH-PIT CLE-GSO CLE-DCA EWR-PHL IAH-PNS CLE-HPN CLE-DTW EWR-PHX+ IAH-RDU CLE-ISP CLE-FNT EWR-PVD IAH-RSW CLE-MHT CLE-IAD EWR-PWM IAH-SDF CLE-ORF CLE-LAN EWR-RIC IAH-SHV CLE-PVD CLE-LEX EWR-ROC IAH-TPA CLE-PWM CLE-LGA EWR-SNN IAH-TYR CLE-RDU CLE-MBS EWR-SYR IAH-YYZ CLE-SDF CLE-MDT EWR-YOW HSV-IAH CLE-TOL CLE-PHL EWR-YUL IAH-LBB CLE-YUL EWR-IAD EWR-YYZ IAH-LCH DAL-IAH EWR-YHZ FLL-IAH IAH-LFT EWR-YQB IAH-PVD IAH-LRD GPT-IAH IAH-RIC IAH-MAF GSP-IAH IAH-SAV IAH-ORF IAH-VCT IAH-SJT EFD-IAH IAH-TYS IAH-SJU DAY-IAH
4 SCHEDULE 2-A + Indicates that segment may only operate as an HP* Flight in time channels in which AWA does not itself operate a flight which has commercially appropriate connection times for itineraries that connect beyond the applicable CAL hub (IAH, EWR and CLE), as determined in the sole discretion of CAL. ii 5 SCHEDULE 2-B CO* FLIGHTS - ---------------------------------------- SEGMENT SEGMENT SEGMENT - ---------------------------------------- BUR-LAS LAS-SFO PHX-SAN BUR-PHX LAS-SLC PHX-SEA CMH-LAS LAS-SMF PHX-SFO DEN-PHX LAS-TUS PHX-SJC LAS-LAX LAX-PHX PHX-SLC LAS-OAK LGB-PHX PHX-SMF LAS-ONT OAK-PHX PHX-TUS LAS-PDX ONT-PHX LAS-RNO PDX-PHX LAS-SAN PHX-PSP LAS-SEA PHX-RNO
EX-21.1 7 p64739ex21-1.txt EX-21.1 1 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT
JURISDICTION OF NAME ORGANIZATION PARENT LINE OF BUSINESS - --------------------------------------------------------------------------------------------------------------- America West Airlines, Inc. Delaware America West Holdings Corporation Airline The Leisure Company Delaware America West Holdings Corporation Travel AWHQ LLC Arizona America West Holdings Corporation Administrative
EX-23.1 8 p64739ex23-1.txt EX-23.1 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' REPORT ON SCHEDULE AND CONSENT THE BOARD OF DIRECTORS AND STOCKHOLDERS AMERICA WEST HOLDINGS CORPORATION: The audits referred to in our report dated March 28, 2001, included the related consolidated financial statement schedule as listed in Item 14(d) for the years ended December 31, 2000, 1999 and 1998, included herein. The consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statement schedule based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We consent to incorporation by reference in the Registration Statements (Form S-8 No. 33-60555), (Form S-8 No. 333-26935), (Form S-8 No. 333-70486), (Form S-8 No. 333-94361), (Form S-3 No. 333-51107) and (Form S-3 No. 333-02129) of America West Holdings Corporation of our report dated March 28, 2001, relating to the consolidated balance sheets of America West Holdings Corporation and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, cash flows and stockholders' equity for each of the years in the three-year period ended December 31, 2000, and the related consolidated financial statement schedule, which report appears in the December 31, 2000, annual report on Form 10-K of America West Holdings Corporation. KPMG LLP Phoenix, Arizona March 28, 2001 -----END PRIVACY-ENHANCED MESSAGE-----