10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
	OR
o	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	(I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
111 WEST RIO SALADO PARKWAY	(480) 693-0800
TEMPE, ARIZONA 85281	(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

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 0-12337

AMERICA WEST AIRLINES, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(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 þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of each of the registrants’ 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. þ

     Indicate by check mark whether the registrants are accelerated filers (as defined in Exchange Act Rule 12b-2)

                         America West Holdings Corporation            Yes þ No o

                         America West Airlines, Inc.                            Yes o No þ

     As of June 30, 2004, there were 35,204,800 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 as quoted by the New York Stock Exchange, 35,029,271 shares of Class B common stock, having an aggregate market value of approximately $318,065,781 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 June 30, 2004, all outstanding equity securities of America West Airlines, Inc. were owned by America West Holdings Corporation.

     As of March 14, 2005, there were 859,117 shares of America West Holdings Corporation Class A common stock and 35,316,871 shares of America West Holdings Corporation Class B common stock outstanding. As of March 14, 2005, 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 2005 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, 2004, are incorporated by reference into Part III of this Annual Report on Form 10-K.

     America West Airlines, Inc. meets the conditions set forth in General Instruction I(1)(A) and (B) and is therefore filing this form with reduced disclosure format pursuant to General Instruction I(2).

TABLE OF CONTENTS

		PAGE
PART I
Item 1.	Business		2
Item 2.	Properties		18
Item 3.	Legal Proceedings		18
Item 4.	Submission of Matters to a Vote of Security Holders		18
PART II
Item 5.	Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		20
Item 6.	Selected Consolidated Financial Data		21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 8A.	Consolidated Financial Statements and Supplementary Data — America West Holdings Corporation		40
Item 8B.	Consolidated Financial Statements and Supplementary Data — America West Airlines, Inc		71
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		97
Item 9A.	Controls and Procedures		97
Item 9B.	Other Information		100
PART III
Item 10.	Directors and Executive Officers of the Registrants		101
Item 11.	Executive Compensation		101
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		101
Item 13.	Certain Relationships and Related Transactions		101
Item 14.	Principal Accountant Fees and Services		101
PART IV
Item 15.	Exhibits and Financial Statement Schedules		102
EX-3.2
EX-3.4
EX-10.41
EX-10.42
EX-10.43
EX-10.47
EX-10.48
EX-10.49
EX-10.50
EX-10.51
EX-10.53
EX-21.1
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-31.3
EX-31.4
EX-32.1
EX-32.2

     This combined Annual Report on Form 10-K is filed by both America West Holdings Corporation (“Holdings” or the “Company”) and its wholly owned subsidiary, America West Airlines, Inc. (“AWA” or the “Airline”).

Note Concerning Forward-Looking Information

     This report contains various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended (the “Exchange Act”). These statements 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,” “expect,” “project” 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 our results are:

•   general economic conditions;

•   the impact of global instability caused by military actions, terrorism, disease outbreaks and natural disasters;

•   limitations on our flexibility in responding to industry conditions due to high fixed costs and restrictions imposed by our debt instruments;

•   changes in federal and state laws and regulations;

•   changes in prevailing interest rates and the availability of and terms of financing to fund our business;

•   the ability to attract and retain qualified personnel;

•   the cyclical nature of the airline industry;

•   competitive practices in the airline industry;

•   the impact of changes in fuel prices; and

•   relations with unionized employees generally and the impact and outcome of labor negotiations.

     For additional discussion of these factors and other risks, see “Business – Risk Factors Relating to the Company and Industry Related Risks” included in Item 1 of this Annual Report. In light of these risks, uncertainties and assumptions, the forward-looking events described in this annual report on Form 10-K might not occur. Any forward-looking statements speak only as of the date of this Annual Report.

1

PART I

ITEM 1. BUSINESS

Overview

     Holdings, a Delaware corporation formed in 1996, is a holding company that owns all of the stock of AWA, a Delaware corporation formed in 1981. AWA accounted for most of the Company’s revenues and expenses in 2004. Based on 2004 operating revenues and available seat miles, or “ASMs”, AWA is the eighth largest passenger airline and the second largest low cost carrier in the United States. AWA is the largest low-cost carrier that operates a hub-and-spoke network, with large hubs in both Phoenix, Arizona and Las Vegas, Nevada. Since 2003, AWA has also offered limited point-to-point service in certain major transcontinental markets. At the end of 2004, AWA operated a fleet of 138 aircraft with an average age of 10.7 years and served 63 destinations in North America, including eight in Mexico, three in Canada and one in Costa Rica. Through regional alliance and code share arrangements with other airlines, AWA served an additional 51 destinations in North America and the Middle East. In 2004, AWA flew approximately 21.1 million passengers and generated revenues of approximately $2.3 billion.

     Through its America West Vacations division, AWA also sells individual and group travel packages, including air transportation on AWA and Hawaiian Airlines, hotel accommodations, car rentals, cruise packages and other travel products, directly to consumers as well as through retail travel agencies in the United States, Canada, Mexico and Costa Rica.

     General information about us can be found at www.americawest.com/aboutawa under the investor relations link. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments or exhibits to those reports, are available free of charge through our website as soon as reasonably practicable after we file them with, or furnish them to, the Securities and Exchange Commission or “SEC.”

Restatement of Previously Reported Amounts

     Derivative Instruments

     In February 2005, management undertook a review of AWA’s accounting for its fuel hedging transactions. As a result of this review, management concluded that AWA’s fuel hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting principles and that the Company's financial statements for prior periods required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and statements of stockholders equity and comprehensive income of Holdings and AWA. See Note 2, “Restatement of Previously Reported Amounts” and Note 16, “Quarterly Financial Data (Unaudited)” in Holdings’ and Note 2, “Restatement of Previously Reported Amounts” and Note 15, “Quarterly Financial Data (Unaudited)” in AWA’s consolidated financial statements for the financial impact of the restatements. The Company concluded that these accounting errors were the result of deficiencies in its internal control over financial reporting, from the lack of effective reviews of hedge transaction documentation and of quarterly mark-to-market accounting entries on open fuel hedging contracts by personnel at an appropriate level.

Developments in 2004

     During 2004, extremely high jet fuel prices and excess capacity throughout the domestic air system began to negatively impact the low cost segment of the airline industry. As a result, several low cost carriers that had previously operated profitably, including AWA, experienced declining earnings. AWA reported a net loss of $85.3 million for 2004.

     In 2004, the Company reported a net loss of $89.0 million compared to net income of $57.4 million in 2003. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the 2004 financial performance.

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Airline Operations

     Our operations and business strategy have traditionally been focused around our Phoenix and Las Vegas based route-network (supplemented by regional airline alliances and strategic relationships with other carriers), our low cost structure and our emphasis on customer service.

     Our Route Network

     We operate our route system through a hub-and-spoke network centered in our Phoenix and Las Vegas hubs. As of December 31, 2004, we were the leading airline serving Phoenix based on ASMs and takeoffs and landings and ranked second in Las Vegas based on the same measures. Our operations have focused on the Phoenix and Las Vegas markets and expanding our reach beyond those markets through strategic relationships with other carriers, including a regional alliance with Mesa Airlines or “Mesa,” and code-sharing arrangements with other carriers. See “Regional Airline Alliance” and “Alliances with Other Airlines” below. In addition to our operations through our hubs, we initiated point-to-point service in certain transcontinental markets in October 2003. With continued high jet fuel prices and substantial competitive reaction to our transcontinental service, which resulted in increased capacity and decreased fares, we scaled back our transcontinental flying in late 2004. Non-stop services from New York City’s John F. Kennedy International (JFK) and Logan International Airport (BOS) airports to San Francisco International Airport (SFO) were suspended in November 2004. We also suspended service between BOS and Los Angeles International Airport (LAX) and LAX and Washington Dulles International Airport in early 2005. Service between LAX and JFK remains in place with once daily scheduled service. We expect to increase our LAX to JFK service to twice-daily for the summer peak period from June through the Labor Day weekend, 2005.

     Separately, we commenced limited international point-to-point flying on the west coast. In June 2004, we commenced daily services from LAX to Vancouver and Edmonton, Canada as well as Mazatlan and Puerto Vallarta, Mexico. In October 2004, flights from San Diego to Cabo San Lucas and Puerto Vallarta were also added. All of the flights to Mexico are flown by Mesa on our behalf. In addition, we commenced non-stop flights from San Diego to Vancouver in March 2005.

     Cost Control

     We remain committed to maintaining a low cost structure, which we believe offers a significant competitive advantage over other major hub-and-spoke airlines in the United States. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the 2004 financial performance.

     Revised Pricing Structure

     In addition to the comprehensive changes made to our pricing structure in March 2002, we changed our pricing structure in February 2004 to make flying first class more affordable for both business and leisure travelers. This new first class fare structure features nonrefundable first class fares that are up to 70% lower than the industry’s traditional first class fares. Although some airlines also have initiated pricing changes, industry competitive reaction still is unclear at this time but there is potential for negative revenue impact on the industry and AWA. As other airlines continue to make changes to their pricing structures, we will continue to evaluate the best solution for AWA. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the revised pricing structure.

     Customer Service

     Continued emphasis on customer service is essential to growing our business and leisure traffic. Therefore, we are committed to building a successful airline by taking care of our customers. During 2004, we improved and expanded upon a series of customer service and reliability initiatives. These initiatives make it easier and more convenient for customers to travel on AWA.

•   Our “Buy on Board” meal program was expanded to all departure segments with a flight duration of 3 1/2 hours or greater.

•   Our day of departure first class upgrade program also was expanded in 2004 to allow for purchase up to 24 hours prior to departure on americawest.com and through our reservation centers. This program provides a simple and affordable way to upgrade to first class.

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•   Our Web Check-in product was modified in 2004 to allow customers to self check-in and obtain a boarding pass 36 hours prior to departure. This was later modified to 24 hours prior to departure to meet objectives set forth in a Transportation Security Administration or “TSA,” security directive to all carriers. In December 2004, Web check-in represented almost 7% of all passenger check-ins.

•   Throughout 2004, we significantly expanded the availability of self-service check-in kiosks across our system (218 units deployed in 43 of our airport facilities). In December 2004, self-service check-in represented nearly 50% of all boarding passes in stations with kiosks.

•   Over the year we expanded the number of interline e-ticket agreements with other carriers from three (Continental, United and American Airlines) to five (now including Delta and Hawaiian). In early 2005, we added Northwest Airlines to our interline e-ticket agreement list of carriers. These agreements make travel easier for customers who need to utilize multiple airlines in their itinerary.

•   We were the first airline to introduce an alternative payment method called “Bill Me Later®”, making it easier for customers to budget for their travel plans. Customers who make purchases online at americawest.com with Bill Me Later®, have at least 90 days to pay the balance in full with no interest.

•   Customers now can give the gift of travel with an America West Gift Card. Gift cards in $50, $100 or $250 denominations are available for purchase online at americawest.com or by calling our reservation center. Gift cards also can be purchased in $50 and $100 denominations at many grocery, convenience and drug stores.

•   In addition to the initiatives mentioned above, we emphasize improving our handling of customer re-accommodations during irregular operations (flight cancellations and delays). Although our goal is to operate every flight and depart on time, there are circumstances such as weather and Air Traffic Control or “ATC,” delays that cause disruption to planned flight activity. During 2004, we initiated several new programs and improved automation to speed the process of re-accommodating customers to alternative flight arrangements during these circumstances.

     Regional Airline Alliance

     We have a regional airline alliance agreement with Mesa. Mesa, operating as America West Express, provides regional feeder service to and from our Phoenix and Las Vegas hubs to destinations in the western United States, Canada and northern Mexico operating regional jets and large turboprop aircraft. Through this arrangement with Mesa, we offered America West Express service to an additional 33 destinations as of December 31, 2004.

     In 2004, we entered 16 86-seat CRJ-900 regional jets into America West Express service. Additionally, we completed a reconfiguration program that converted the CRJ-900 aircraft from a dual class 80-seat configuration to a single class, 86-seat configuration. At December 31, 2004, the America West Express fleet operated by Mesa included 49 aircraft comprised of 25 CRJ-900s, 18 50-seat CRJ-200s and six 37-seat Dash 8 turboprop aircraft.

     Alliances with Other Airlines

     AWA maintains alliance agreements with several leading domestic and international carriers to give customers a greater choice of destinations. Airline alliance agreements provide an array of benefits that vary by partner. By code sharing, each airline is able to offer additional destinations to its customers under its flight designator code without materially increasing operating expenses and capital expenditures. Frequent flyer arrangements provide members with extended networks for earning and redeeming credits on partner carriers. Lounge arrangements provide lounge members with access to partner carriers’ lounges.

     AWA’s alliance agreement with British Airways allows British Airways to code share on flights operated by AWA connecting to and from British Airways’ Phoenix, San Francisco, Los Angeles, Dallas, Boston and New York services. The agreement 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.

     Relationships with Northwest Airlines or “Northwest,” and EVA Airways or “EVA,” provide connecting service on AWA from those airlines’ Pacific routes to Las Vegas and Phoenix. The frequent flyer agreement with Northwest also provides for AWA FlightFund members to earn and redeem credit on Northwest’s transpacific flights. In addition, AWA lounge members have access to Northwest’s WorldClub lounges in the United States and EVA’s lounge in Taipei, Taiwan.

4

     AWA’s alliance agreement with Virgin Atlantic Airways or “Virgin,” allows Virgin to code share on flights operated by AWA connecting to and from Virgin’s Las Vegas, San Francisco and Los Angeles services. The agreement also allows AWA FlightFund members to earn credit for travel on Virgin and for frequent flyer benefits earned by AWA customers to be redeemed for travel on Virgin’s system.

     Relationships with ALIA/Royal Jordanian Airlines or “Royal Jordanian,” and Hawaiian Airlines or “Hawaiian,” allow each carrier to code share flights operated by the other carrier. AWA’s alliance with Royal Jordanian offers connecting service from Royal Jordanian’s Chicago, Detroit and New York services. The agreement also allows AWA FlightFund members to earn credit for travel on Royal Jordanian and for frequent flyer benefits earned by AWA customers to be redeemed for travel on Royal Jordanian’s system. In addition, AWA lounge members have access to Royal Jordanian’s VIP Clubs in Amman and Aqaba, Jordan. AWA’s agreement with Hawaiian offers connecting service to and from Hawaiian’s nonstop Phoenix to Honolulu service and beyond to the other islands of Hawaii. AWA FlightFund members can earn and redeem credit for travel on Hawaiian.

     AWA’s alliance agreement with Big Sky Airlines or “Big Sky,” allows AWA to code share on Big Sky’s services from Spokane, Washington, Boise, Idaho, and Billings, Montana to Big Sky’s destinations in Montana, North Dakota and Washington State. AWA FlightFund members can earn and redeem credit for travel on Big Sky.

     Airline Marketing

     In 2004, we launched the airline industry’s first gift card program. Gift cards have proven highly successful in the traditional retailer environment where they account for an increasing share of consumer purchases, particularly around the holiday season. We partnered with intermediary companies to launch gift cards at several large retailers, including Staples, Rite Aid, 7-Eleven and others, and cards are due to be available at approximately 10,000 stores nationwide by the first quarter of 2005. Gift cards also are available for purchase at americawest.com and currently may be redeemed by calling AWA reservations. It is anticipated that online redemption will be available during 2005.

     Airline Competition

     The airline industry and most of the markets we serve are highly competitive. We compete on the basis of pricing, scheduling (frequency and flight times), on-time performance, type of equipment, cabin configuration, amenities provided to passengers, frequent flyer programs, the automation of travel agent reservation systems, on-board products and other services. We compete with all of the major full service airlines on medium and long haul routes to, from and through our hubs and in our transcontinental markets and with a number of carriers for short haul flights at our Phoenix and Las Vegas hubs.

     In addition, we compete with a growing number of low cost carriers at our Phoenix and Las Vegas hubs and across our route system. The low cost carrier sector is growing and for the 12 months ended December 31, 2004, low cost carrier capacity (as measured by available seat miles) represented 23.6% of all domestic mainline service, an increase of 1.1 points from the 12 months ended December 31, 2003, when low cost carrier marketshare accounted for 22.5% of all domestic mainline service. We compete with other low cost carriers primarily on the basis of pricing. However, we believe our full service amenities (for example, first class seating, an award winning frequent flyer program and assigned seating) provide us with a competitive advantage against other low cost carriers without such amenities.

     Price competition occurs on a market-by-market basis through price discounts, changes in pricing structures, fare matching, target promotions and frequent flyer initiatives. Most airlines will quickly match price reductions in a particular market and certain airlines have in the past engaged in retaliatory activities, including steep pricing discounts in certain markets and termination of alliance agreements, in response to changes in our pricing structure. Our ability to compete on the basis of price is limited by our fixed costs and depends on our ability to maintain low operating costs. Our principal competitor, Southwest Airlines, and certain other low cost carriers have lower operating cost structures than we do. In addition, the consolidation of existing carriers, the entry of additional carriers including new low cost carriers, the creation of low fare airline divisions by several major airlines and the revision of traditional pricing structures by our competitors in many of our markets (as well as increased services by established carriers) has resulted in increased pressure on our pricing. For additional discussion of industry competition and related government regulation, see “Risk Factors Relating to America West and Industry Related Risks – 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 lower cost structures” and, generally, “Government Regulations.”

5

     Frequent Flyer Program

     All major United States airlines offer frequent flyer programs to encourage travel on their respective airlines and customer loyalty. AWA offers the FlightFund program, which allows members to earn mileage credit by flying AWA and America West Express, by flying on certain partner airlines and by using the services of a wide variety of other program participants such as hotels, rental car agencies and other specialty services. AWA also sells mileage credits to credit card companies, telephone companies, hotels, car rental agencies and others that participate in the FlightFund program.

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

     In 2004, the FlightFund program added new partnerships with Ameritrade, NetBank, Awards for Mortgage and Real Estate and Royal Jordanian Airlines.

     We account 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 fuel, liability insurance, food, beverages, supplies and ticketing costs that are accrued as FlightFund members accumulate mileage credits. No profit or overhead margin is included in the accrual for those incremental costs. Transportation-related revenue from the sale of mileage credits is deferred and recognized when transportation is provided. Non-revenue FlightFund travel accounted for 1.5%, 2.1% and 2.7% of total revenue passenger miles for the years ended December 31, 2004, 2003 and 2002, respectively. We do not believe that non-revenue FlightFund travel results in any significant displacement of revenue passengers.

     America West Vacations

     As of January 1, 2004, The Leisure Company merged into AWA and continued to operate as the America West Vacations or “AWV,” division of AWA. AWV sells individual and group travel packages including air transportation on AWA, America West Express and Hawaiian Airlines, hotel accommodations, car rentals and other travel products directly to consumers and through retail travel agencies in the United States, Canada, Mexico and Costa Rica. AWV is one of the largest tour packagers to Las Vegas in the United States, contracting for volume blocks of rooms with 31 Las Vegas hotels and resorts in 2004.

     AWV is focused on high-volume leisure travel products that have traditionally provided high profit margins. AWV negotiated several strategic partnerships with hotels, Internet travel sites and media companies to capitalize on the continued growth in online travel sales. AWV sells vacation packages and hotel rooms through its call center, via the Internet and its websites, AmericaWestVacations.com, AWVTravelAgents.com and AWVCruise.com, through global distribution systems Sabre TourGuide and WorldSpan Tour Source and through third-party websites on a co-branded or private-label basis. In 2004, approximately 55% of AWV’s total bookings were made electronically compared to 43% in 2003.

     AWV competes in a fragmented travel industry, which is highly competitive, price sensitive and has relatively low barriers to entry. AWV competes for customers with other wholesale travel companies, consolidators and E-travel companies through national mass media, preferred supplier agreements and Internet distribution agreements.

     During 2004, AWV operated co-branded websites for 15 partner companies, including Costco Travel, BestFares.com, Vegas.com, MandalayBay.com, and Aladdin.com. These co-branded sites allow AWV to gain a retail presence via distribution channels such as Costco wholesale warehouses and other company websites where AWA and AWV may not otherwise be a part of the consumers’ consideration set. AWV intends to continue to add new co-branded websites as opportunities present themselves.

     The Airline’s Fleet

     AWA began the year 2004 with 139 aircraft. In 2004, AWA retired seven 737-200 aircraft (returned five leased aircraft; parked one leased aircraft; sold one owned aircraft) and took delivery of one new A319 aircraft and five new A320 aircraft for a net total of 138 aircraft by the end of 2004 with an average age of 10.7 years. AWA’s fleet at the end of 2004 and as currently planned for the end of 2005 is described in the table below:

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Aircraft	Approx.		Qty as of 12/31				Average Age as of 12/31
Types	No. Seats		2004		2005		2004		2005
737-200		113		1		—		22.6		N/A	1
737-300		132		37		37		16.9		17.9
757-200		190		13		13		18.2		19.2
A319		124		33		37		4.2		4.7
A320		150		54		61		8.5		8.5
Totals				138		148		10.7		10.8

¹ The last 737-200 aircraft was retired in January 2005

     In August 2004, AWA amended its aircraft purchase contract with AVSA S.A.R.L., an affiliate of Airbus Industrie or “AVSA,” to acquire 22 Airbus A320 family aircraft (thirteen A320s and nine A319s), all powered by V2500 engines from International Aero Engines. Of the 22 aircraft, it is anticipated that 18 will be purchased directly from the manufacturer and four have been leased under noncancelable leases from various lessors for aircraft to be delivered in 2005. In the context of this incremental order, AWA also secured extensive flexibility from Airbus with respect to its existing A318 order, allowing AWA to better react to market conditions by enabling it to amend its 15 A318 delivery positions to A319s and A320s, if it so desires, or to take no additional aircraft under certain conditions.

     The following table illustrates AWA’s committed orders, scheduled lease expirations, and lessor call and put options as of December 31, 2004.

	2005		2006		2007		2008		2009
Firm orders remaining (EOY)		13		1		—		—		—
Lessor put options		2		4		—		—		—
Lease terminations:
Scheduled expirations		8		9		21		15		5
Lessor call options		9		7		7		1		—

     In January 2005, AWA retired its one remaining 737-200 aircraft. While this is the only forecasted 2005 retirement, AWA has the ability to return five additional leased Boeing 737-300 aircraft and one leased Airbus A320, and retire five owned Boeing 737-300 aircraft, if market conditions necessitate such a response. In February 2005, AWA renewed the lease on one Airbus A320 for an additional three years. These eleven aircraft exclude the exercise of two lessor put options on two aircraft that could require AWA to renew the leases for approximately 15 months beyond the current natural lease expiration date. In 2004, one put option on a Boeing 737-300 aircraft was exercised resulting in a lease extension of 33 months. No call options were exercised in 2004. Assuming the exercise of all put options, as of December 31, 2004, 52 aircraft have lease expirations prior to the end of 2008.

Aircraft Jet Fuel

     Jet fuel costs were our second-largest operating expense in 2004. Our average cost of jet fuel over the past five years was as follows:

					Percent of
	Cost		Average Cost		Operating
Year	(Millions)		per Gallon		Expenses
2000	$	373	$	0.88		15.8	%
2001	$	336	$	0.81		13.6	%
2002	$	299	$	0.73		13.6	%
2003	$	376	$	0.89		16.8	%
2004	$	557	$	1.24		23.4	%

     In addition, the Company incurs fuel expense for our regional airline alliance with Mesa. For the years ended December 31, 2004, 2003 and 2002, total fuel expense for the Mesa alliance was $102.1 million, $61.2 million and $46.3 million, respectively.

     The price and supply of jet fuel are unpredictable and fluctuate based on events outside our control including geopolitical developments, regional production patterns and environmental concerns. Price escalations or reductions in the supply of jet fuel will increase our operating expenses and cause our operating results and net income to decline. See “Risk Factors Relating to the Company and Industry Related Risks – Fluctuations in jet fuel costs could adversely affect our operating expenses and results.”

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Employees and Labor Relations

     The Company’s businesses are labor intensive with wages, salaries and benefits representing approximately 28% of the Company’s operating expenses during 2004.

     As of December 31, 2004, the Company employed 10,712 full-time and 2,576 part-time employees, for a full-time equivalent of 11,893 employees.

     A large majority of the employees of the major airlines in the United States are represented by labor unions. In addition, on August 18, 2004, the National Mediation Board certified the IBT as the collective bargaining representative for the Company’s passenger service employees, which includes the Company’s customer service agents, reservations agents and customer relations agents. Negotiations are expected to begin in April 2005. As illustrated in the table below, the majority of employees have selected union representation and/or negotiated collective bargaining agreements with AWA. Although there are few remaining employee groups who could engage in organization efforts, we cannot predict the outcome of any future efforts to organize those remaining 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 Relating to the Company and Industry Related Risks — Negotiations with labor unions could divert management attention and disrupt operations and new collective bargaining agreements or amendments to existing collective bargaining agreements could increase our labor costs and operating expenses.”

Employee	Approx. No.			Contract	Contract
Group	of Employees		Union	Effective	Amendable
Pilots		1,857	Air Line Pilots Association	December 2003	December 2006
Dispatchers		38	Transport Workers Union	September 2004	April 2008 (1)
Mechanics and related personnel*		844	International Brotherhood of Teamsters	October 1998	October 2003* (2)
Flight Attendants*		2,580	Association of Flight Attendants– Communications Workers of America	May 1999	May 2004* (3)
Fleet Service		2,221	Transport Workers Union	June 2000	June 2005
Stock Clerks		68	International Brotherhood of Teamsters	April 2003	April 2008

*	In contract negotiations.
(1)	On September 10, 2004, the Company’s dispatchers, represented by the Transport Workers Union, voted to ratify a second contract, becoming amendable in April 2008.
(2)	Negotiations with the International Brotherhood of Teamsters – Airline Division or “IBT,” on a second contract covering the Company’s mechanics and related employees commenced on October 9, 2003 and are ongoing.
(3)	Negotiations with the Association of Flight Attendants – Communications Workers of America or “AFA,” on a second contract covering the Company’s flight attendants commenced on February 4, 2004 and are ongoing.

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The Company’s Facilities

     The Company’s principal facilities include administrative office space located in Tempe and Phoenix, Arizona; reservations centers and other call centers located in Tempe, Arizona and Reno, Nevada; and airport and airport related facilities associated with the Airline’s hubs in Phoenix and Las Vegas. The following table describes the Company’s principal properties:

		Approximate
		Internal Floor
Principal Properties	Description	Area (sq. ft)		Nature of Ownership
Tempe, AZ Headquarters	Nine story complex housing headquarters for Holdings and AWA		225,000	Lease expires April 2014
Terminal 4, Phoenix Sky Harbor International Airport	42 gates, ticket counter space and administrative offices		330,000	Airport Use Agreement expires June 2016. Gate use governed by month-to-month rates and charges program
Las Vegas McCarran International Airport	17 gates, ticket counter space and concourse areas		115,000	Lease expires June 2007
Maintenance and technical support facility at Phoenix Sky Harbor International Airport	Four hangar bays, hangar shops, office space, warehouse and commissary facilities		375,000	Facilities and land leased from the City of Phoenix. Lease expires September 2019
Flight Training and Systems Operations Control Center, Phoenix, AZ	Complex accommodates training facilities, systems operation control and crew scheduling functions		164,000	Facilities and land leased from the City of Phoenix. Lease expires February 2031

     In addition, we have leased an aggregate of approximately 260,000 square feet of office and warehouse space in Tempe and Phoenix. Space for ticket counters, gates and back offices has been obtained at each of the other airports operated by AWA, 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 Mesa is provided by Mesa as part of AWA’s ground handling arrangement.

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 Department of Transportation or “DOT”. Although the Airline Deregulation Act of 1978 abolished regulation of domestic routes and fares, 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, 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.

     FAA Funding

     In 1997, new aviation taxes were imposed through September 30, 2007 to provide funding for the Federal Aviation Administration or “FAA”. Effective January 1, 2005, these taxes include a domestic excise tax of 7.5%, a domestic segment tax of $3.20 and an international departure and arrival tax of $14.10 (each way). 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.

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     Passenger Facility Charges

     During 1990, Congress enacted legislation to permit airport authorities, with prior approval from the DOT, to impose passenger facility charges or “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 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.

     Additional Security and Safety Measures

     On November 19, 2001, the President signed into law the Aviation and Transportation Security Act or “ATSA.” This law enhances aviation security measures and federalizes many aspects of civil aviation security. The ATSA established a new Transportation Security Administration, now within the Department of Homeland Security. Under the ATSA, substantially all security screeners at airports are federal employees and a significant number of other airport security functions are overseen and performed by federal employees, including federal security managers, federal law enforcement officers and federal air marshals. The ATSA mandated that beginning on January 18, 2002, all checked baggage at United States airports be screened using explosive detection systems or, where such systems are not yet available, using other screening techniques such as positively matching baggage to a passenger who has boarded an aircraft. The ATSA required all checked baggage to be screened by explosive detection systems by December 31, 2003. Other requirements in the ATSA that directly affect airline operations include the strengthening of cockpit doors, deploying federal air marshals on board certain flights, improving airline crew security training and expanding use of criminal background checks of employees. Implementation of these and other requirements of the ATSA resulted in increased costs for air carriers and may result in delays and disruptions to air travel. Under the ATSA, funding for the new federal security system is provided by a $2.50 per enplanement ticket tax, not to exceed $5.00 per one-way trip, and by imposing additional direct fees on air carriers. In 2004 and 2003, the Company’s cost of compliance with the security requirements of the ATSA was approximately $14.4 million and $13.2 million, respectively. The estimated cost to the Company of compliance with the security requirements of the ATSA for 2005 is approximately $17.0 million under current law. Under the proposed White House budget released February 7, 2005, this ticket tax for security fees would increase from $2.50 per leg to $5.50, with a cap of $8.00 per one-way trip with multiple legs and $16.00 for a round trip. This budget proposal is subject to approval of Congress. As a result of competitive pressure, AWA and other airlines may be unable to recover all of these additional security costs from passengers through increased fares. In addition, we cannot forecast what new security and safety requirements may be imposed in the future or the costs or financial impact of complying with any such requirements.

     The Company is subject to various other federal, state and local laws and regulations related to occupational health and safety, including Occupational Health and Safety Administration and Food and Drug Administration regulations.

     War Risk Insurance

     Since September 11, 2001, AWA and other airlines have been unable to obtain third party war risk (terrorism) insurance at reasonable rates from the commercial insurance market and have been obtaining this insurance through a special program administered by the FAA. Under the recently enacted Vision 100-Century of Aviation Reauthorization Act or “Vision 100,” the President may continue the insurance program until March 30, 2008. Currently the program has been extended through August 31, 2005. Should the federal insurance program terminate, competitive pressures could limit AWA and other airlines’ ability to pass these additional costs on to passengers and the increase in costs could be material to AWA’s financial condition and results of operations.

     Slot Restrictions

     At New York City’s John F. Kennedy International Airport and LaGuardia Airport, and at Washington D.C.’s Ronald Reagan National Airport, which are designated “High Density Airports” by the FAA, there are restrictions on the number of aircraft that may land and take-off during peak hours. At the New York airports, slot restrictions are abolished after January 1, 2007. In addition, the FAA may impose restrictions at any airport to manage excessive congestion and air safety. In 2004, certain air carriers, at the request of the FAA, voluntarily agreed to reduce flights at Chicago O’Hare International Airport and other operators, including AWA, agreed not to increase operations there during certain hours. In the future takeoff and landing time 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 High Density Airports contain provisions

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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 and reversion to the FAA for reassignment through a lottery arrangement.

     AWA currently utilizes five slots at Kennedy Airport and eight slots at National Airport during the restricted periods. AWA exceeds the requisite 80% use rate for these slots.

     Perimeter Rule at Washington D.C.’s Ronald Reagan National Airport

     There is a federal prohibition on flights exceeding 1,250 miles operating to or from National Airport. This “perimeter rule” generally prevents AWA from flying nonstop to and from National Airport and its principal hubs of Phoenix and Las Vegas. In 2000, Congress passed legislation that 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 to National Airport round trips and one daily Las Vegas to National Airport round trip. Vision 100, among other things, authorized the DOT to grant 12 additional slots exempted from the perimeter rule. AWA was authorized two additional slots to operate an additional daily round trip between Phoenix and National Airport which the Company began flying on June 1, 2004.

     Noise Abatement and Other Restrictions

     Numerous airports served by AWA, including those in 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 and to impose civil penalties for violations of the United States Transportation Code or FAA 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. In addition, a combination of FAA and Occupational Safety and Health Administration or “OSHA,” regulations on both federal and state levels apply to all of AWA’s ground-based operations and to in-flight cabin attendants.

     AWA also is 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 or “ADs,” in 1990 mandating changes to older aircraft maintenance programs. These ADs were issued to ensure that the oldest portion of the nation’s aircraft fleet remains airworthy and to 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. The FAA may in the future issue additional ADs requiring additional maintenance or modifications to various aircraft types operated by AWA.

     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 management and disposal activities. While the Company strives to comply with environmental laws and regulations, it has incurred and will continue to 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 will not have a material adverse effect on the Company’s financial condition or results of operations.

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     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 that has experienced a fuel leak into ground water at Phoenix Sky Harbor International Airport. AWA does not believe that its operations have been included within the scope 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 increasingly place more restrictions and limitations on activities that may affect the environment and we expect that the costs of compliance will continue to increase.

     Other

     We are also subject to the jurisdiction of the Federal Communications Commission with respect to the use of radio facilities and the United States Postal Service with respect to carriage of United States mail.

Risk Factors Relating to the Company and Industry Related Risks

     We caution the reader that these risk factors may not be exhaustive. We operate in a continually changing business environment and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or the extent to which any factor or combination of factors may impact our business.

     We have sustained, and may continue to sustain significant operating losses.

     For the year ended December 31, 2004, we incurred an operating loss of $43.8 million. In addition, we incurred operating losses for the years ended December 31, 2001 and 2002 resulting primarily from the decrease in revenue and passenger demand and the increase in operating costs after the terrorist attacks of September 11, 2001. Recently, the operating losses resulted primarily from a substantial increase in the cost of jet fuel and excess domestic industry capacity resulting in lower revenue per available seat mile. We expect the threat of further terrorist attacks and continued instability in oil producing regions to continue to negatively impact our revenues and costs in the near-term. We may not be able to effectively counteract increasing costs through our cost reduction initiatives, customer service initiatives and revised pricing structures. Moreover, our liquidity and borrowing options are limited and we may not be able to survive a prolonged economic downturn, decreases in demand for air travel or further increases in jet fuel costs. The inability to sustain profitability may impair our ability to satisfy our obligations as they become due, obtain future equity or debt financing, respond to competitive developments and otherwise sustain or expand our business.

     Global instability, caused by events such as terrorism, has had and may in the future have a material impact on the airline industry and, as a result, our financial condition, operations and prospects.

     Over the past several years, global instability, caused by military action, terrorism, disease outbreaks and natural disasters, has had a profound impact on the airline industry. The terrorist attacks of September 11, 2001 resulted in a severe strain on our and the other airlines’ liquidity as the government temporarily suspended all flights, passenger demand dropped precipitously and financial institutions tried to reduce their exposure by restricting the industry’s access to capital. In addition, the terrorist attacks led to a decrease in the value of aircraft and aircraft-related equipment and facilities and cost increases for enhanced security measures, aviation insurance, airport rents and landing fees. Subsequent to the terrorist attacks, other events, such as military action in Iraq and Afghanistan, general political and economic instability in oil producing regions, and the Severe Acute Respiratory Syndrome or “SARS,” outbreak in Asia, continued to adversely impact passenger demand and operating costs, especially jet fuel costs. These kinds of events (including natural disasters such as the recent tsunamis in the Indian Ocean) are likely to continue to impact the airline industry. Depending on the severity and geographical impact of such events, they may have a substantial adverse impact on our passenger demand, our costs, the value of our assets and our access to, and cost of capital. We cannot predict whether we will have sufficient liquidity or access to capital to withstand the adverse impact of a prolonged decrease in passenger demand or a substantial increase in costs caused by such global events.

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     Increases in insurance costs or reductions in insurance coverage may adversely impact our operations and financial results.

     The terrorist attacks of September 11, 2001 led to a significant increase in insurance premiums and a decrease in the insurance coverage available to commercial airline carriers. Accordingly, our insurance costs increased significantly and our ability to continue to obtain insurance even at current prices remains uncertain. In addition, AWA and other airlines have been unable to obtain third party war risk (terrorism) insurance at reasonable rates from the commercial insurance market and have been obtaining this insurance through a special program administered by the FAA. If the Federal insurance program terminates, we would likely face a material increase in the cost of war risk insurance. Because of competitive pressures in our industry, our ability to pass additional insurance costs to passengers is limited. As a result, further increases in insurance costs or reductions in available insurance coverage could harm our earnings.

     Our high level of fixed obligations limits our ability to fund general corporate requirements and obtain additional financing, limits our flexibility in responding to competitive developments and increases our vulnerability to adverse economic and industry conditions.

     We have a significant amount of fixed obligations, including debt, aircraft leases and financings, aircraft purchase commitments, leases of airport and other facilities and other cash obligations. As of December 31, 2004, we had approximately $786.3 million of outstanding debt, of which $186.0 million was secured. In addition, we had $8.5 million of payments to satisfy capital lease obligations and $3.2 billion of operating lease obligations through lease expiration dates incurred primarily in connection with off-balance sheet aircraft financings. We also have guaranteed costs associated with our regional alliance with Mesa and commitments to purchase aircraft from Airbus. As a result of the substantial fixed costs associated with these obligations:

•   A decrease in revenues results in a disproportionately greater percentage decrease in earnings.

•   We may not have sufficient liquidity to fund all of these fixed costs if our revenues decline or costs increase.

•   We may have to use our working capital to fund these fixed costs instead of funding general corporate requirements, including capital expenditures.

•   We may not have sufficient liquidity to respond to competitive developments and adverse economic conditions.

     Our obligations also impair our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business. Our existing indebtedness is secured by substantially all of our assets, leaving us with limited collateral for additional financing. Moreover, the terms of the government guaranteed loan restrict our ability to incur additional indebtedness or issue equity unless we use the proceeds of those transactions to repay the loan, require prepayment if our employee compensation costs exceed a certain threshold, require us to maintain a minimum cash balance of $100 million, and restrict our ability to take certain other actions, including mergers and acquisitions, investments and asset sales.

     Our ability to pay the fixed costs associated with our contractual obligations depends on our operating performance and cash flow, which in turn depend on general economic and political conditions. A failure to pay our fixed costs or breach of the contractual obligations could result in a variety of adverse consequences, including the acceleration of our indebtedness, the withholding of credit card proceeds by the credit card servicers and the exercise of remedies by our creditors and lessors. In such a situation, it is unlikely that we would be able to fulfill our obligations under or repay the accelerated indebtedness, make required lease payments or otherwise cover our fixed costs.

     Fluctuations in jet fuel costs could adversely affect our operating expenses and results.

     The price and supply of jet fuel are unpredictable and fluctuate based on events outside our control, including geopolitical developments, supply interruptions, regional production patterns and environmental concerns. Since jet fuel is the principal raw material consumed by our business, accounting for 23% of our total operating expenses in 2004, price escalations or reductions in the supply of jet fuel will increase our operating expenses and cause our operating results and net income to decline. For example, based on our current level of fuel consumption which includes our Mesa alliance, we estimate that a one-cent per gallon increase in jet fuel prices will cause our annual operating expense to increase by $5.7 million.

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     We have implemented a fuel-hedging program to manage the risk and effect of fluctuating jet fuel prices on our business. Our hedging program is intended to offset increases in jet fuel costs by using derivative instruments keyed to the future price of heating oil, which is highly correlated to the price of jet fuel delivered on the East Coast of the United States. Our hedging program does not fully protect us against increasing jet fuel costs because our hedging program does not cover all of our projected jet fuel volumes for 2005. Hedging transactions are in place with respect to approximately 45% and 2% of remaining projected 2005 and 2006 jet fuel requirements, respectively. Furthermore, our ability to effectively hedge jet fuel prices is limited because we purchase a substantially larger portion of our jet fuel requirements on the West Coast of the United States compared to our large competitors and West Coast fuel prices are less correlated to heating oil prices and other viable petroleum derivatives than East Coast fuel prices and, therefore, more difficult to hedge. The effectiveness of our fuel-hedging program may also be negatively impacted by continued instability in oil producing regions such as the Middle East, Nigeria, Russia and Venezuela.

     Because of our relatively low credit ratings, our borrowing costs may be high and our ability to incur additional debt may be impaired.

     Our credit ratings are relatively low, with Moody’s assessment of AWA’s senior implied rating and senior unsecured debt rating at B3 and Caa2, respectively, Standard & Poor’s assessment of AWA’s and Holdings’ corporate credit ratings at B- and AWA’s senior unsecured rating at CCC, and Fitch Ratings’ assessment of AWA’s long-term and senior unsecured debt rating at CCC. In addition, Standard & Poor’s recently placed AWA’s aircraft debt on CreditWatch with negative implications as part of a broader review of aircraft-backed debt. Low credit ratings could cause our future borrowing costs to increase, which would increase our interest expense and could affect our earnings and our credit ratings could adversely affect our ability to obtain additional financing. The rating agencies base their ratings on our financial performance and operations, our cash flow and liquidity, the level of our indebtedness and industry conditions in general. If our financial performance or industry conditions do not improve, we may face future downgrades, which could further negatively impact our borrowing costs and the prices of our equity or debt securities. In addition, any downgrade of our credit ratings may indicate a decline in our business and in our ability to satisfy our obligations under our indebtedness.

     Negotiations with labor unions could divert management attention and disrupt operations and new collective bargaining agreements or amendments to existing collective bargaining agreements could increase our labor costs and operating expenses.

     Some of our employees are represented by unions and other groups of our employees may seek union representation in the future. Negotiations with the IBT for a second collective bargaining agreement covering the Airline’s mechanics and related employees commenced on October 9, 2003 and are ongoing. Additionally, negotiations with the AFA on a second contract covering the Company’s flight attendants commenced on February 4, 2004 and are ongoing. On August 18, 2004, the National Mediation Board certified the IBT as the collective bargaining representative for the Company’s passenger service employees and reservations agents. Negotiations are expected to begin April 2005.

     We cannot predict the outcome of the negotiations with the IBT or AFA or any future negotiations relating to union representation or collective bargaining agreements. Agreements reached in collective bargaining may increase operating expenses and lower operating results and net income. This is particularly significant because our current employee costs contribute substantially to the low cost structure that we believe is one of our competitive strengths and because we are required to repay a portion of the government guaranteed loan if our labor costs exceed a certain threshold. In addition, negotiations with unions could divert management attention and disrupt operations, which may result in increased operating expenses and lower net income. If we are unable to negotiate acceptable collective bargaining agreements, we might have to address the threat of, or wait through, “cooling off” periods, which could be followed by union-initiated work actions, including strikes. Depending on the nature of the threat or the type and duration of any work action, these actions could disrupt our operations and, as a result, have a significant adverse affect on our operating results.

     Fluctuations in interest rates could adversely affect our liquidity, operating expenses and results.

     A substantial portion of our indebtedness bears interest at fluctuating interest rates based on the London interbank offered rate for deposits of U.S. dollars, or LIBOR. LIBOR tends to fluctuate based on general economic conditions, general interest rates, including the prime rate, and the supply of and demand for credit in the London interbank market. We have not hedged our interest rate exposure and, accordingly, our interest expense for any particular period may fluctuate based on LIBOR. To the extent LIBOR increases, our interest expense will increase, in which event, we may have difficulties making interest payments and funding our other fixed costs and our

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available cash flow for general corporate requirements may be adversely affected.

     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 new laws and regulations that impose additional requirements and restrictions on airline operations. Implementing these measures, such as aviation ticket taxes and passenger safety measures, has increased operating costs for us and the airline industry as a whole. In addition, new security measures imposed by the ATSA, or otherwise by Congress, the Department of Homeland Security or the FAA as a result of concern over continuing terrorist threats are expected to continue to increase costs for us and the airline industry as a whole. Furthermore, certain governmental agencies, such as the DOT and the FAA, have the authority to impose mandatory orders, such as Airworthiness Directives in connection with our aircraft and civil penalties for violations of applicable laws and regulations, each of which can result in material costs and adverse publicity. For example, the FAA from time to time may require us to retrofit our aircraft to meet enhanced safety standards. Depending on the implementation of these laws, regulations and other measures, our operating costs could increase significantly. We cannot predict which laws, regulations and other measures will be adopted or what other action regulators might take. Accordingly, we cannot guarantee that future legislative and regulatory acts will not have a material impact on our operating results.

     Interruptions or disruptions in service at one our hub airports could have a material adverse impact on our operations.

     We operate primarily through our hubs in Phoenix and Las Vegas. A majority of our flights either originate or fly into one of these hubs. A significant interruption or disruption in service at one of our hubs could result in the cancellation or delay of a significant portion of our flights and, as a result, could have a severe impact on our business, operations and financial performance.

     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 lower cost structures.

     The airline industry and most of the markets we serve are highly competitive. We compete with other airlines on the basis of pricing, scheduling (frequency and flight times), on-time performance, type of equipment, cabin configuration, amenities provided to passengers, frequent flyer programs, the automation of travel agent reservation systems, on-board products and other services. We compete with other low cost carriers primarily on the basis of pricing. Price competition occurs on a market-by-market basis through price discounts, changes in pricing structures, fare matching, target promotions and frequent flyer initiatives. Most airlines will quickly match price reductions in a particular market and certain airlines have in the past engaged in retaliatory activities, including steep pricing discounts in certain markets and termination of alliance agreements, in response to changes in our pricing structure. Our ability to compete on the basis of price is limited by our fixed costs and depends on our ability to maintain low operating costs. Our principal competitor, Southwest Airlines, and certain other low cost carriers have lower operating cost structures than we do. We also compete against the legacy carriers, many of which offer more extensive routes, frequencies and customer loyalty, marketing and advertising programs and have substantially greater resources than we do. We may be unable to compete effectively against carriers with substantially greater resources or lower cost structures.

     Recent airline restructurings and bankruptcies could alter the competitive environment of the airline industry to our detriment.

     The terrorist attacks of September 11, 2001, the continued military presence in Iraq and Afghanistan, increased competition from low cost carriers and soft economic conditions have led to the airline industry’s significant losses since 2001. Largely as a result of these losses, ATA Airlines, U.S. Airways, Aloha Airlines, Hawaiian Airlines and United Airlines filed for bankruptcy protection. Because bankruptcy protection may allow for greater flexibility in reducing costs by voiding contracts and renegotiating existing business obligations, current and future airline bankruptcies could have a substantial impact on industry competition. Continued weakness in the airline industry also may result in additional industry consolidation, greater reliance on industry alliances and increased price competition among the existing airlines, each of which could dramatically alter competitive environments in the markets we serve.

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     Our business is sensitive to general economic conditions, unforeseen events and seasonal fluctuations. As a result, our prior performance is not necessarily indicative of our future results.

     The air travel business historically fluctuates on a seasonal basis and in response to general economic conditions. Due to the greater demand for air and leisure travel during the summer months, revenues in the airline industry in the second and third quarters of the year tend to be greater than revenues in the first and fourth quarters of the year. In addition, the airline industry is highly susceptible to unforeseen events that result in declines in revenues or increased costs, such as political instability, regional hostilities, terrorist attacks, recession, fuel price escalation, inflation, infectious disease outbreaks, adverse weather conditions, consumer preferences, labor instability or regulatory oversight. Also, our results of operations for interim periods are not necessarily indicative of those for an entire year and our prior results are not necessarily indicative of our future results.

     We depend on the expertise of our management team. If key individuals leave unexpectedly, our business and operations could suffer.

     Many of our executive officers are key to the management of our business and operations. Our future success depends on our ability to retain these officers and other capable managers. Although we believe we could replace key personnel given adequate prior notice, the unexpected departure of key executive officers could cause substantial disruption to our business and operations. In addition, we may not be able to retain and recruit talented personnel without incurring substantial costs. Moreover, we must repay a portion of the government guaranteed loan if our labor costs exceed a certain threshold. As a result, our ability to spend additional amounts to retain and recruit talented personnel is limited.

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

     Currently, two stockholders collectively control more than 50% of the total voting power of Holdings. These stockholders, TPG Partners, L.P. and TPG Parallel I, L.P, or collectively, the TPG Stockholders, are 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 management. We cannot guarantee that the TPG Stockholders will not try to influence Holdings’ business in a way that would favor their own personal interests to the detriment of our interests and those of our other stockholders.

     We are at risk of losses and adverse publicity stemming from any accident involving any of our aircraft.

     If one of our aircraft were to crash or be involved in an accident, we could be exposed to significant tort liability. There can be no assurance that the insurance we carry to cover damages arising from any future accidents will be adequate. In the event that our insurance is not adequate, we may be forced to bear substantial losses from an accident. Claims resulting from an accident in excess of our insurance coverage would harm our business and results of operations. Accidents could also result in unforeseen mechanical and maintenance costs. In addition, any accident involving an aircraft that we operate could create a public perception that our aircraft are not safe or reliable, which could harm our reputation, result in air travelers being reluctant to fly on our aircraft and harm our business.

     Our operations are often affected by factors beyond our control, including traffic congestion at airports, weather conditions and increased security measures, any of which could harm our financial condition and results of operations.

     Like other airlines, our operations are subject to delays caused by factors beyond our control, including air traffic congestion at airports, adverse weather conditions and increased security measures, such as those required to be implemented under the ATSA. During periods of fog, snow, rain, storms or other adverse weather conditions, flights may be cancelled or significantly delayed. Cancellations and delays frustrate passengers, reduce aircraft utilization and increase costs, all of which in turn affect profitability. As a result, cancellations or delays could harm our financial condition and results of operations.

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     We rely heavily on automated systems to operate our business and any failure of these systems could harm our business.

     We depend on automated systems to operate our business, including our computerized airline reservation system, our telecommunication systems and our website. In 2004, approximately 96% of our tickets were issued electronically. Our website and reservation system must be able to accommodate a high volume of traffic and deliver important flight information. Substantial or repeated website, reservations system or telecommunication systems failures could reduce the attractiveness of our services and could cause our customers to purchase tickets from another airline. Any disruption in these systems could result in the loss of important data, increase our expenses and generally harm our business.

     Shares of our Class B common stock issuable upon exercise or conversion of outstanding securities could adversely affect our stock price and dilute the ownership interests of existing stockholders.

     Sales and potential sales of substantial amounts of our Class B common stock or securities exercisable for or into our Class B common stock in the public market, or the perception that these sales could occur, could adversely affect the market price of our Class B common stock. A substantial number of additional shares of our Class B common stock are issuable upon the conversion or exercise of outstanding securities. As of March 14, 2005, the outstanding shares of our Class B common stock were subject to dilution by:

•   19,692,000 shares of Class B common stock that are issuable upon the exercise, at a price of $3.00 per share, of certain warrants issued in connection with the government guaranteed loan, including 18,754,000 shares of Class B common stock issuable upon exercise of a warrant issued to the Air Transportation Stabilization Board, or ATSB; and

•   9,615,245 shares of our Class B common stock that are issuable upon the exercise of outstanding options.

     In addition, 859,117 shares of Class B common stock are issuable upon conversion of the outstanding shares of Holdings’ Class A common stock held by the TPG Stockholders (but subject to certain contractual restrictions on transfer), up to 8,095,842 shares of Holdings’ Class B common stock are issuable upon the exchange of AWA’s 7.25% senior exchangeable notes due 2023 (which exchange may not occur until the trading price of Holdings’ Class B common stock reaches certain thresholds, or other triggering events occur) and up to approximately 9,400,000 shares of Holdings’ Class B common stock are issuable upon conversion of Holdings’ 7.5% convertible senior notes due 2009. Holdings has registered either the issuance or resale of all of these shares, meaning that upon exercise, exchange or conversion, as applicable, such shares could be sold in the public market at any time.

     The conversion or exercise of some or all of these notes, warrants and options will dilute the ownership interests of existing stockholders and any sales in the public market of our Class B common stock issuable upon such conversion or exercise could adversely affect prevailing market prices of our Class B common stock. In addition, the existence of the notes, warrants and options may encourage short selling by market participants because conversion or exercise of the notes or warrants could depress the price of our Class B common stock.

     Provisions in our charter documents might deter acquisition bids for us.

     Holdings’ Certificate of Incorporation and Bylaws contain provisions that, among other things:

•   authorize Holdings’ board of directors to issue preferred stock ranking senior to our Class B common stock without any action on the part of the stockholders;

•   establish advance notice procedures for stockholder proposals, including nominations of directors, to be considered at stockholders’ meetings;

•   authorize Holdings’ board of directors to fill vacancies on the board resulting from an increase in the authorized number of directors or any other cause; and

•   restrict the ability of stockholders to call special meetings of stockholders.

     These provisions might make it more difficult for a third party to acquire us, even if doing so would benefit the stockholders.

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     Our stock price may continue to be volatile and could decline substantially.

     The stock market has, from time to time, experienced extreme price and volume fluctuations. Many factors may cause the market price for the Class B common stock to decline including, among others, the following:

•   our operating results failing to meet the expectations of securities analysts or investors in any quarter;

•   downward revisions in securities analysts’ estimates;

•   material announcements by us or our competitors;

•   public sales of a substantial number of shares of our Class B common stock;

•   governmental regulatory action; and

•   adverse changes in general market conditions or economic trends.

ITEM 2. PROPERTIES

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

ITEM 3. LEGAL PROCEEDINGS

     Holdings, AWA and certain of Holdings’ stockholders, executive officers and directors have been named as defendants in lawsuits filed in March and April of 1999 and subsequently consolidated in the Federal District Court of Arizona, alleging violations of the Exchange Act in connection with Holdings’ public disclosures regarding its business and prospects during 1997 and 1998. The defendants deny the claims set forth in these lawsuits. A settlement of the lawsuits was reached with the plaintiffs in November 2004 for $15 million. A fairness hearing was held on March 9, 2005 to allow class members to object to the settlement. No objections were filed and the Court entered a final judgment. The lawsuit was fully insured, but AWA contributed $5.1 million to the settlement due to the insolvency of one of its insurers.

     In addition, Holdings and its subsidiaries are parties to various legal proceedings, including some purporting to be class action suits and some that demand large monetary damages or other relief, which, if granted, would require significant expenditures. See Note 6, “Commitments and Contingencies — (e) Contingent Legal Obligations,” in Holdings’ Notes to Consolidated Financial Statements and Note 7, “Commitments and Contingencies — (e) Contingent Legal Obligations,” in AWA’s Notes to Consolidated Financial Statements.

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

     None.

Executive Officers of the Registrant

     Set forth below is information with respect to the names, ages, positions and offices with Holdings and AWA of the executive officers of Holdings and AWA as of March 14, 2005.

     W. Douglas Parker, Age 43. Chairman of the Board, President and Chief Executive Officer of Holdings and 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. He was elected to his current positions in September 2001.

     J. Scott Kirby, Age 37. Executive Vice President – Sales and Marketing of 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. In January 2000, he was elected to the positions of Senior Vice President — E-Business and Technology of AWA. He was elected to his current position in September 2001.

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     Jeffrey D. McClelland, Age 45. Executive Vice President and Chief Operating Officer of AWA. Mr. McClelland joined AWA as Senior Vice President – Operations in September 1999. He was elected Executive Vice President – Operations in September 2001 and was elected Chief Operating Officer in November 2002. From 1991 until 1999, Mr. McClelland worked at Northwest Airlines, most recently as Senior Vice President – Finance and Controller.

     Joseph C. Beery, Age 42. Senior Vice President and Chief Information Officer of AWA. Mr. Beery joined AWA in 1999 as Senior Director – Business Technology Delivery. In July 2000, Mr. Beery was elected to the position of Vice President – Business Technology Delivery. He was elected to his current position in December 2002. From 1989 until he joined AWA, Mr. Beery held a variety of positions in the computer integrated manufacturing group of Motorola Semiconductor.

     Hal M. Heule, Age 56. 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 61. 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 elected Vice President – Public Affairs of Holdings. He was elected to his current positions in February 1999.

     Derek J. Kerr, Age 40. Senior Vice President and Chief Financial Officer of AWA and Holdings. Mr. Kerr joined AWA as Senior Director — Financial Planning in April 1996. He was elected to the position of Vice President – Financial Planning and Analysis in May 1998. In February 2002, Mr. Kerr was elected Senior Vice President – Financial Planning and Analysis. He was elected to his current positions in September 2002.

     Anthony V. Mulé, Age 61. Senior Vice President – Customer Service of AWA. Mr. Mulé joined AWA as Vice President – In-Flight Services in 1996. He was elected to his current position in October 2000. Prior to joining AWA, Mr. Mulé held senior management positions at American Airlines, Pan American Airways and SuperShuttle, International.

     James E. Walsh III, Age 57. Senior Vice President and General Counsel of AWA. Mr. Walsh joined AWA as Senior Vice President and General Counsel in August 2004. Prior to joining AWA, Mr. Walsh was Senior Vice President & General Counsel of Fairchild Dornier Corporation. Prior to joining Fairchild in 1991, Mr. Walsh spent 12 years at American Airlines in various positions including Vice President of Purchasing & Inventory Control and later Vice President of Law.

     Michael R. Carreon, Age 51. Vice President and Controller of AWA. Mr. Carreon joined AWA as Senior Director – Corporate Audit in December 1994. He was elected to his current position in January 1996.

     Elise R. Eberwein, Age 39. Vice President – Corporate Communications of AWA. Ms. Eberwein joined AWA in September 2003. Prior to joining AWA, Ms. Eberwein held various communication positions for three other airlines, including Denver-based Frontier Airlines where she served as Vice President, Communications from 2000 until she joined AWA.

     Kara L. Gin, Age 34. Vice President – Financial Planning and Analysis of AWA. Mrs. Gin joined AWA as a Senior Analyst in Financial Planning & Analysis in June 1996. Prior positions held at AWA include Manager of Financial Planning, Manager of Flight Profitability, Director of Financial Planning and Senior Director of Distribution. She was elected to her current position in May 2004.

     Thomas T. Weir, Age 49. 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.

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PART II

ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

     Holdings’ Class A common stock, par value $0.01 per share, is not publicly traded. Holdings’ Class B common stock, par value $0.01 per share, has been traded on the New York Stock Exchange under the symbol “AWA” since August 26, 1994.

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

	Class B
	Common Stock
	High		Low
Year Ended December 31, 2004
First Quarter	$	13.6200	$	7.9200
Second Quarter		11.2400		8.8400
Third Quarter		9.1400		4.9300
Fourth Quarter		6.8600		3.9100
Year Ended December 31, 2003
First Quarter	$	2.3300	$	1.6700
Second Quarter		6.9800		1.9600
Third Quarter		11.0200		6.6300
Fourth Quarter		16.0000		9.5500

     As of December 31, 2004, there were two record holders of Class A common stock and approximately 2,949 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. The terms of the government guaranteed loan restrict the Company’s ability to pay cash dividends or repurchases shares of its stock prior to repayment of the loan in full.

     The following table set forth all purchases made by us or any “affiliated purchases” (as defined in Rule 10b-18(a)(3) of the Exchange Act), of Class B common stock during each month within the fourth quarter of 2004. No purchases were made pursuant to a publicly announced repurchase plan or program.

							(d) Maximum Number
							(or Approximate
					(c) Total Number of		Dollar Value) of
					Shares Purchased as		Shares that May Yet
					Part of Publicly		be Purchased Under
	(a) Total Number of		(b) Average Price		Announced Plans or		the Plans or
Period	Shares Purchased (1)		Paid per Share		Programs		Programs
October 1, 2004 – October 31, 2004		120,700		4.82		—		—
November 1, 2004 – November 30, 2004		51,400		4.91		—		—
December 1, 2004 – December 31, 2004		8,000		5.16		—		—

(1) Amounts consist of shares of Class B common stock purchased on the open market by the America West Holdings Corporation Future Care 401(k) Plan.

     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. Except for limited ability to fund operating expenses of Holdings, AWA’s ability to pay cash dividends on its common stock is restricted by the debt instruments and in the manner described above.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

Selected Consolidated Financial Data of Holdings

     The selected consolidated financial data presented below under the captions “Consolidated Statements of Operations Data” and “Consolidated Balance Sheet Data” as of and for the years ended December 31, 2004, 2003, 2002, 2001 and 2000 are derived from the audited consolidated financial statements of Holdings. The selected consolidated financial data should be read in conjunction with the consolidated financial statements for the respective periods, the related notes and the related reports of the Company’s independent registered public accounting firms.

	Year ended December 31,
	2004			2003		2002			2001			2000
	(in thousands except per share amounts)
Consolidated statements of operations data:
Operating revenues	$	2,338,957		$	2,254,497	$	2,047,116		$	2,065,913		$	2,344,354
Operating expenses (b)		2,382,728			2,232,362		2,206,540			2,476,594			2,356,991
Operating income (loss)		(43,771	)		22,135		(159,424	)		(410,681	)		(12,637	)
Income (loss) before income taxes (benefit) and cumulative effect of change in accounting principle (c)		(88,993	)		57,534		(214,757	)		(324,387	)		24,743
Income taxes (benefit)		30			114		(35,071	)		(74,536	)		17,064
Income (loss) before cumulative effect of change in accounting principle		(89,023	)		57,420		(179,686	)		(249,851	)		7,679
Net income (loss)		(89,023	)		57,420		(387,909	)		(249,851	)		7,679
Earnings (loss) per share before cumulative effect of change in accounting principle:
Basic		(2.47	)		1.66		(5.33	)		(7.42	)		0.22
Diluted		(2.47	)		1.26		(5.33	)		(7.42	)		0.22
Net income (loss) per share:
Basic		(2.47	)		1.66		(11.50	)		(7.42	)		0.22
Diluted (d)		(2.47	)		1.26		(11.50	)		(7.42	)		0.22
Shares used for computation:
Basic		36,026			34,551		33,723			33,670			35,139
Diluted (d)		36,026			56,113		33,723			33,670			35,688
Consolidated balance sheet data (at end of period):
Total assets (a)	$	1,475,264		$	1,614,385	$	1,438,953		$	1,469,218		$	1,568,515
Long-term debt, less current maturities		635,129			688,965		700,983			224,551			145,578
Total stockholders’ equity (a)		36,447			125,989		68,178			420,363			667,073

(a)

The Company has restated its consolidated balance sheet and consolidated statement of stockholders’ equity and comprehensive income as of and for the year ended December 31, 2003 to reflect the non-compliance with SFAS No. 133. See Note 2, “Restatement of Previously Reported Amounts” in Notes to Consolidated Financial Statements.

(b)

The 2004 results include a $16.3 million net credit associated with the termination of the rate per engine hour agreement with General Electric Engine Services for overhaul maintenance services on V2500-A1 engines, a $0.6 million credit related to the revision of the estimated costs associated with the sale and leaseback of certain aircraft recorded in the first quarter of 2002 and a $0.4 million credit related to the revision of estimated charges associated with the Columbus, Ohio hub (“CMH”) closure originally recorded in the second quarter of 2003. These credits were partially offset by $1.9 million of net charges related to the return of certain Boeing 737-200 aircraft which includes termination payments of $2.1 million, the write-down of leasehold improvements and deferred rent of $2.8 million, offset by the net reversal of maintenance reserves of $3.0 million. The 2003 period includes $16.0 million of charges resulting from the elimination of AWA’s hub operations in CMH ($11.1 million), the reduction-in-force of certain management, professional and administrative employees ($2.3 million), the impairment of certain owned Boeing 737-200 aircraft that have been grounded ($2.6 million) offset by a $1.1 million reduction of charges due to a revision of the estimated costs related to the early termination of certain aircraft leases and a $0.5 million reduction related to the revision of estimated costs associated with the sale and leaseback of certain aircraft. The 2002 period includes $19.0 million of charges primarily related to the restructuring completed on January 18, 2002, resulting from the events of September 11, 2001. The 2001 period includes $141.6 million of special charges related to the impairment of reorganization value in excess of amounts allocable to identifiable assets (“ERV”) and owned aircraft and engines, as well as the earlier-than-planned return of seven leased aircraft and severance expenses following a reduction-in-force in 2001. See Note 11, “Special Charges” in Holdings’ Notes to Consolidated Financial Statements. The Company reclassified amounts related to settled fuel hedge transactions and mark-to-market adjustments on open hedge instruments from fuel expense to gain (loss) on derivative instruments, net. The amounts for the years ended December 31, 2004 and 2003 were an addition to fuel expense of $30.5 million and $10.7 million, respectively. For the years ended December 31, 2002 and 2001, the amounts reduced fuel expense by $0.7 million and $7.2 million, respectively.

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(c)

Nonoperating income (expense) in the 2004 period includes a $30.5 million net gain on derivative instruments, which included mark-to-market changes and settled transactions, and $1.3 million for the write-off of debt issue costs in connection with the refinancing of the term loan. The 2003 period includes federal government assistance of $81.3 million recognized as nonoperating income under the Emergency Wartime Supplemental Appropriations Act and $8.5 million and $108.2 million recognized in 2002 and 2001, respectively, as nonoperating income under the Air Transportation Safety and System Stabilization Act. The 2003, 2002 and 2001 periods include a $10.7 million net gain, $0.7 million net loss and $7.2 million net loss on derivative instruments, respectively, including mark-to-market changes and settled transactions. See Note 12, “Nonoperating Income (Expenses) — Other, Net” in Holdings’ Notes to Consolidated Financial Statements.

(d)

The Company recalculated its diluted EPS for the year ended December 31, 2003 to include the 7.25% notes under the “if-converted” methodology. The impact reduced diluted EPS by $0.03 from $1.29 to $1.26.

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

     Holdings’ primary business activity is ownership of the capital stock of AWA and, prior to January 1, 2004, The Leisure Company. 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 and the consolidated financial statements for AWA presented in Item 8B.

Restatement of Previously Reported Amounts

     Derivative Instruments

     In February 2005, management undertook a review of AWA’s accounting for its fuel hedging transactions. As a result of this review, management concluded that AWA’s fuel hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting principles and that the Company's financial statements for prior periods required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and statements of stockholders equity and comprehensive income of Holdings and AWA. See Note 2, “Restatement of Previously Reported Amounts” and Note 16, “Quarterly Financial Data (Unaudited)” in Holdings’ and Note 2, “Restatement of Previously Reported Amounts” and Note 15, “Quarterly Financial Data (Unaudited)” in AWA’s consolidated financial statements for the financial impact of the restatements. The Company concluded that these accounting errors were the result of deficiencies in its internal control over financial reporting, from the lack of effective reviews of hedge transaction documentation and of quarterly mark-to-market accounting entries on open fuel hedging contracts by personnel at an appropriate level.

2004 in Review

     Overview

     Over the past several years, the U.S. domestic airline industry has experienced an unprecedented financial crisis caused by the combination of the terrorist attacks of September 11, 2001, soft economic conditions, increased competition and capacity and high fuel prices. In response to these conditions, AWA had repositioned itself as a low cost carrier and was able to operate profitably for 2003. During 2004, however, extremely high jet fuel prices and excessive capacity throughout the domestic air system began to negatively impact all airlines including the low cost segment of the airline industry as well and several low cost carriers that had previously operated profitably, including AWA, experienced declining earnings. Despite difficult industry conditions, AWA was able to complete two financial transactions in the third and fourth quarters of 2004 that brought additional capital into the company and extended debt maturities.

     During 2004, our constant commitment to lower costs remained a priority and we implemented the following revenue and cost reduction initiatives:

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•   We increased point-to-point flying and utilization flying, (using an aircraft that would ordinarily be parked at a gate for additional flights at minimal additional costs).

•   We continued to aggressively manage yield during peak travel periods.

•   We overhauled our first class fare structure much in the same way we did to our coach fares in 2002. This initiative reduced first class fares by up to 70 percent in some markets as compared to legacy carriers’ first class fares.

•   We launched two new websites designed to increase revenues from travel agents and corporate travel managers while lowering distribution costs.

     We also continued to position our airline as a low cost carrier with unique elements that differentiate our service from other low cost carriers. For example, in 2004 we continued, and intend to continue, to offer full service amenities that the major airlines offer, such as first class seating, an award winning frequent flyer program, FlightFund, and assigned seating. We believe that leisure and business customers will continue to value the service of low cost carriers and that our full service amenities give us a competitive advantage over other low cost carriers.

     In spite of these initiatives and others designed to increase revenue and productivity and reduce costs, we reported a net loss of $89.0 million in 2004 compared to net income of $57.4 million in 2003. The change in earnings was driven by a $181.1 million increase in fuel expense primarily due to a 39.1% increase in the average price per gallon of fuel. The 2003 results also included a nonoperating gain of $81.3 million related to federal government assistance recognized under the Emergency Wartime Supplemental Appropriations Act.

     Capacity, as measured by available seat miles (ASMs), was up 8.1% as compared to 2003. Passenger revenues were up 3.9% to $2.2 billion for 2004 over 2003. Passenger revenue per available seat mile (RASM) fell 3.8% during 2004 to 7.29 cents versus 2003 primarily due to a 5.2% decline in yield, a 7.9% increase in aircraft utilization and a 4.7% increase in average stage length.

     Total operating expenses were $2.4 billion, an increase of 6.7% from 2003. The average fuel price per gallon increased 39.1% to $1.24 during 2004. This, along with increased fuel burn due to increased flying during 2004, resulted in a 48.1% increase in fuel expenses in 2004 over 2003. In spite of the enormous increase in the cost of fuel, stringent cost controls enabled us to decrease unit costs by 1.3% during 2004 to 7.89 cents.

     In spite of our diligent work to contain our costs, we believe revenues will continue to reflect the excess capacity that exists across the domestic system and fuel prices will remain at, or exceed, record highs. Given these conditions, we anticipate significant losses for full year 2005.

     As of December 31, 2004, Holdings’ unrestricted and restricted cash, cash equivalents, short-term investments and investments in debt securities totaled $419.1 million. Although there can be no assurances, we believe that this cash balance, coupled with our financing commitments and cash flows from operating activities during 2005, will be adequate to fund our operating and capital needs as well as enable us to remain compliant with our various debt agreements through at least December 31, 2005.

     Cost Control

     We remain committed to maintaining a low cost structure, which we believe offers a significant competitive advantage over other major hub-and-spoke airlines in the United States. In 2004, our operating cost per available seat mile, or CASM, of 7.89 cents was the lowest of all the other major hub-and-spoke airlines in the United States and remained competitive with the major point-to-point airline, Southwest Airlines.

     In light of the current industry environment, we continue to focus on minimizing capital expenditures and prudent spending for discretionary expenses.

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     Revised Pricing Structure

     The revenue environment during 2004 remained challenging. As background, we restructured our coach fares in March 2002 in an effort to maximize revenue and increase business traffic. We eliminated our historic pricing structure and replaced it with a simplified structure, the primary components of which included reduced business fares (typically 40-75% below the walkup prices on major network carriers), elimination of Saturday night stay requirements and more fares available on a one-way basis. At the same time, we significantly reduced the number and level of highly discounted fares available through off-tariff channels. Immediately following the introduction of the new fare structure, higher-cost competitors placed extremely low prices in our nonstop markets and Continental Airlines cancelled its long-standing code share and frequent flyer agreements with us. As a result of these actions, our year-over-year domestic unit revenue performance during 2002 and 2003 was significantly better than the industry average, and the net effect on revenue of our revised pricing structure was positive.

     In February 2004, we revised our first class pricing structure similar to the coach fare restructuring initiated on our coach fares in early 2002 and as discussed above. The new first class fare structure featured nonrefundable first class fares that are up to 70% lower than the industry’s traditional first class fares. We believe that the revised first class fare structure will exploit our competitive advantages over both the major airlines, as their higher cost structures may prevent them from reducing their first class fares to match ours in a profitable manner, and the other low cost carriers, as many of them do not have first class cabins.

     In spite of these initiatives, during 2004, we experienced increased low cost carrier (LCC) competition and increased legacy carrier competition, and the results of these two factors can be seen in our unit revenue performance relative to the industry during 2004. Also, in January 2005, Delta Airlines made significant changes to its domestic pricing structure. Refundable business fares were reduced approximately 50 — 60% with none of the new fares exceeding a coach class cap of $499. First class fares were capped at $599. Delta also relaxed many of the rules with regard to leisure fares such as eliminating the Saturday night minimum stay requirement. While America West still has lower business fares in most markets than those of Delta’s, Delta’s new pricing scheme has resulted in a reduction in the number of markets and magnitude of pricing advantages previously held by America West. In addition, long-term industry competitive reaction is unclear at this time, and there is potential for negative revenue impact on the industry and America West. However, given the adverse impacts to our revenues in 2004 from increased LCC competition and increased legacy carrier response, we believe that the incremental effect of the Delta initiative will be smaller than it would have been had the Delta fare initiative occurred earlier.

     Customer Service

     Continued emphasis on customer service is essential to growing our business and leisure traffic. Therefore, we are committed to building a successful airline by taking care of our customers.

     AWA reported the following operating statistics to the DOT for 2004, 2003, and 2002:

							Percent Change			Percent Change
	2004		2003		2002		2004 – 2003			2004 – 2002
On-time performance (a)		75.7		82.0		82.9		(7.7	)		(8.7	)
Completion factor (b)		98.4		99.0		99.0		(0.6	)		(0.6	)
Mishandled baggage (c)		3.98		3.30		3.55		20.6			12.1
Customer complaints (d)		1.02		0.84		1.63		21.4			(37.4	)

(a)	Percentage of reported flight operations arriving on time.
(b)	Percentage of scheduled flight operations completed.
(c)	Rate of mishandled baggage reports per 1,000 passengers.
(d)	Rate of customer complaints filed with the DOT per 100,000 passengers.

     2004 proved to be a challenging year from an operations performance perspective. AWA made a business decision to increase aircraft utilization approximately 10%, in order to increase revenues and reduce unit costs. This increased utilization came through a combination of increased night flying through the Las Vegas hub and the creation of flight opportunities during the day when some aircraft previously sat on the ground for extended periods. Additionally, 2004 was a difficult year from an Air Traffic Control or “ATC” perspective. The growth in FAA

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reportable delays significantly outpaced the growth of domestic air traffic. For the year, FAA reportable delays grew 41.1% year-over-year compared to a 4.5% growth in domestic air traffic. AWA’s utilization growth, coupled with the increased ATC delays, offset somewhat by operating improvements, were the contributing factors resulting in the overall change in operating performance.

2005 Outlook

     We continue to face considerable challenges in 2005, including competing with legacy carriers that, through a variety of restructuring mechanisms, have reduced labor wages, extended debt maturities and lowered their overall cost per available seat mile. These actions could cause AWA’s cost advantage to diminish. In addition, recent fare initiatives by the major carriers may also cause a reduction in revenue per available seat mile. In 2004, we made loan repayments of approximately $85.8 million on the government guaranteed loan and payments of approximately $168.5 million in respect to our off-balance sheet aircraft financing arrangements. In 2005, we will need to make loan repayments of approximately $85.8 million on the government guaranteed loan, $41.3 million to redeem the 10 3/4 senior unsecured notes and payments of approximately $167.8 million in respect to our off-balance sheet aircraft financing arrangements. Although there can be no assurances, management believes that cash flow from operating activities, coupled with existing cash balances and financing commitments, will be adequate to fund the Company’s operating and capital needs as well as enable it to maintain compliance with its various debt agreements at least through December 31, 2005. See “Risk Factors Relating to the Company and Industry Related Risks” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Results of Operations

  Summary of Holdings’ Financial Results

     Holdings recorded a consolidated net loss of $89.0 million in 2004, or diluted earnings per share of $2.47. This compares to consolidated income of $57.4 million, or $1.26 per diluted share, in 2003 and a consolidated loss before the cumulative effect of a change in accounting principle of $179.7 million, or $5.33 per diluted share, in 2002. Including the cumulative effect of a change in accounting principle related to the Company’s adoption of Statement of Financial Accounting Standards (”SFAS”) No. 142, “Goodwill and Other Intangible Assets,” on January 1, 2002, Holdings’ net loss for 2002 was $387.9 million, or $11.50 per diluted share.

     The 2004 results include a $16.3 million net credit associated with the termination of the rate per engine hour agreement with General Electric Engine Services for overhaul maintenance services on V2500-A1 engines. This credit was partially offset by $1.9 million of net charges related to the return of certain Boeing 737-200 aircraft which includes termination payments of $2.1 million, the write-down of leasehold improvements and deferred rent of $2.8 million, offset by the net reversal of maintenance reserves of $3.0 million.

     The 2004 results also include a $30.5 million net gain on derivative instruments, including mark-to-market changes and settled transactions, a $6.1 million charge arising from the resolution of pending litigation, a $4.6 million loss on the sale and leaseback of two new Airbus aircraft and a $1.3 million charge for the write-off of debt issue costs in connection with the refinancing of the term loan.

     The 2003 results include a nonoperating gain of $81.3 million related to the federal government assistance received under the Emergency Wartime Supplemental Appropriations Act, a $10.8 million net gain on derivative instruments, including mark-to-market changes and settled transactions, a $9.8 million nonoperating gain on sale of the Company’s investment in Hotwire.com and a $3.3 million nonoperating gain on sale of the Company’s investment in National Leisure Group. See Note 12, “Nonoperating Income (Expenses) – Other, Net” in Holdings’ Notes to Consolidated Financial Statements. The 2003 results also include an operating gain of $4.4 million related to the purchase and subsequent exchange of an A320 airframe and a $2.8 million operating gain related to the settlement of disputed billings under the Company’s frequent flyer program. These gains were offset in part by $19.7 million of charges related to the execution of a new labor agreement with the Air Line Pilots Association (“ALPA”) net charges of $14.4 million resulted from the elimination of AWA’s hub operations in Columbus, Ohio ($11.1 million), the reduction-in-force of certain management, professional and administrative employees ($2.3 million) and the impairment of certain owned Boeing 737-200 aircraft that have been grounded ($2.6 million), offset by a $1.1 million reduction due to a revision of the estimated costs related to the early termination of certain aircraft leases and a $0.5 million reduction related to the revision of estimated costs associated with the sale and leaseback of certain aircraft. See Note 11, “Special Charges” in Holdings’ Notes to Consolidated Financial Statements.

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     The 2002 results include charges of $19.0 million primarily related to the restructuring completed on January 18, 2002 and an operating gain of $4.9 million related to a change in the Company’s vacation policy for certain administrative employees. The Company also recognized a nonoperating charge of $2.8 million related to the write-off of the Company’s investment in an e-commerce entity and a nonoperating gain of $8.5 million related to the federal government assistance received under the Air Transportation Safety and System Stabilization Act in 2002. AWA did not record an income tax benefit for the year ended December 31, 2004 as it currently expects to continue to record a full valuation allowance on any future tax benefits until it has achieved several quarters of consecutive profitable results coupled with an expectation of continued profitability. Consolidated income tax expense for financial reporting purposes was $0.1 million for 2003 on pretax income of $57.5 million. This compares to a consolidated income tax benefit for financial reporting purposes of $35.1 million for the 2002 period on a consolidated loss before income tax benefit and cumulative effect of a change in accounting principle of $214.8 million. The benefit in 2002 is primarily due to additional carryback losses made available as a result of the enactment of new tax legislation allowing an extended carryback period under the Job Creation and Workers Assistance Act of 2002.

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, 2004, 2003 and 2002.

AMERICA WEST AIRLINES, INC.
Statements of Operations
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)

	2004			2003			2002
Operating revenues:
Passenger	$	2,196,627		$	2,113,629		$	1,929,444
Cargo		28,233			26,914			27,574
Other		113,417			113,274			89,545
Total operating revenues		2,338,277			2,253,817			2,046,563
Operating expenses:
Salaries and related costs		655,185			658,042			601,870
Aircraft rents		304,343			297,518			295,016
Other rents and landing fees		167,772			154,598			158,290
Aircraft fuel		557,098			375,996			299,284
Agency commissions		25,191			34,457			49,953
Aircraft maintenance materials and repairs		205,580			223,266			252,691
Depreciation and amortization		54,354			66,865			75,201
Special charges (credits), net		(15,432	)		14,370			19,030
Other		423,890			402,613			451,444
Total operating expenses		2,377,981			2,227,725			2,202,779
Operating income (loss)		(39,704	)		26,092			(156,216	)
Nonoperating income (expenses):
Interest income		14,169			13,249			17,551
Interest expense, net		(86,488	)		(86,743	)		(79,529	)
Federal government assistance		—			81,255			8,466
Gain (loss) on disposition of property and equipment		1,460			151			(1,852	)
Gain on sale of investment		—			9,762			—
Gain (loss) on derivative instruments, net		23,782			10,746			(656	)
Other, net		1,547			6,888			215
Total nonoperating income (expenses), net		(45,530	)		35,308			(55,805	)
Income (loss) before income taxes (benefit) and cumulative effect of change in accounting principle	$	(85,234	)	$	61,400		$	(212,021	)

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     The table below sets forth selected operating data for AWA.

							Percent			Percent
	Year Ended December 31,						Change			Change
	2004		2003		2002		2004-2003			2003-2002
Aircraft (end of period)		138		139		143		(0.7	)		(2.8	)
Average daily aircraft utilization (hours) (a)		10.9		10.1		9.6		7.9			5.2
Available seat miles (in millions) (b)		30,153		27,888		27,008		8.1			3.3
Block hours (in thousands) (c)		557		519		505		7.3			2.8
Average stage length (miles) (d)		1,052		1,005		949		4.7			5.9
Average passenger journey (miles) (e)		1,686		1,564		1,434		7.8			9.1
Revenue passenger miles (in millions) (f)		23,333		21,295		19,878		9.6			7.1
Load factor (percent) (g)		77.4		76.4		73.6	1.0 pts			2.8 pts
Passenger enplanements (in thousands) (h)		21,132		20,050		19,454		5.4			3.1
Yield per revenue passenger mile (cents) (i)		9.41		9.93		9.71		(5.2	)		2.3
Revenue per available seat mile:
Passenger (cents) (j)		7.29		7.58		7.14		(3.8	)		6.2
Total (cents) (k)		7.75		8.08		7.58		(4.1	)		6.6
Fuel consumption (gallons in millions)		450		423		411		6.4			2.9
Average fuel price (cents per gallon)		123.7		88.9		73.0		39.1			21.8
Full-time equivalent employees (end of period)		11,893		11,475		12,111		3.6			(5.3	)

(a)	Average daily aircraft utilization – The average number of block hours per day for all aircraft in service.
(b)	Available seat mile (“ASM”) – A basic measure of production. It is one seat flown one statute mile.
(c)	Block hours – The hours measured from the moment an aircraft first moves under its own power, including taxi time, for the purposes of flight until the aircraft is docked at the next point of landing and its power is shut down.
(d)	Average stage length – The average of the distances flown on each segment of every route.
(e)	Average passenger journey – The average one-way trip measured in statute miles for one passenger origination.
(f)	Revenue passenger mile (“RPM”) – A basic measure of sales volume. It is one passenger flown one mile.
(g)	Load factor – The percentage of available seats that are filled with revenue passengers.
(h)	Passenger enplanements – The number of passengers on board an aircraft including local, connecting and through passengers.
(i)	Yield – A measure of airline revenue derived by dividing passenger revenue by revenue passenger miles and expressed in cents per mile.
(j)	Passenger revenue per available seat mile (“RASM”) – Total passenger revenues divided by total available seat miles.
(k)	Total revenue per available seat mile – Total operating revenues divided by total available seat miles.

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

								Percent			Percent
	Year Ended December 31,							Change			Change
	2004			2003		2002		2004-2003			2003-2002
				(in cents)
Salaries and related costs		2.17			2.36		2.23		(7.9	)		5.9
Aircraft rents		1.01			1.07		1.09		(5.4	)		(2.3	)
Other rents and landing fees		0.56			0.55		0.59		0.4			(5.4	)
Aircraft fuel		1.85			1.35		1.11		37.0			21.7
Agency commissions		0.08			0.12		0.18		(32.4	)		(33.2	)
Aircraft maintenance materials and repairs		0.68			0.80		0.94		(14.8	)		(14.4	)
Depreciation and amortization		0.18			0.24		0.28		(24.8	)		(13.9	)
Special charges (credits), net		(0.05	)		0.06		0.07		—			(26.9	)
Other		1.41			1.44		1.67		(2.6	)		(13.6	)
		7.89			7.99		8.16		(1.3	)		(2.1	)

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     2004 Compared with 2003

     AWA realized an operating loss of $39.7 million in 2004 compared to operating income of $26.1 million in 2003. Loss before income taxes was $85.3 million in 2004 compared to income before income taxes of $61.4 million for the comparable 2003 period.

     Total operating revenues for 2004 were $2.3 billion. Passenger revenues were $2.2 billion in 2004 compared to $2.1 billion in 2003. A 9.6% increase in RPMs exceeded an 8.1% increase in capacity, as measured by ASMs, resulting in a 1.0 point increase in load factor to 77.4%. RASM during 2004 decreased 3.8 percent to 7.29 cents, despite a 4.7 percent increase in average stage length, while yields decreased 5.2 percent to 9.41 cents. Cargo revenues for 2004 increased $1.3 million (4.9%) due to higher mail volumes. Other revenues remained flat year of year.

     Operating expenses increased $150.3 million or 6.7% compared to the comparable 2003 period, while ASMs increased 8.1% due to increases in average stage length of 4.7% and aircraft utilization of 7.9%. CASM decreased 1.3% to 7.89 cents in 2004 from 7.99 cents in 2003 despite a 39.1% increase in average fuel price per gallon. The 2004 period includes a $15.4 million reduction in special charges versus a $14.4 million charge in 2003. Significant changes in the components of operating expense per ASM are explained as follows:

•   Salaries and related costs per ASM decreased 7.9% due to increased productivity and lower benefit costs. ASMs increased 8.1% and average full-time equivalent employees (“FTEs”) decreased 2.2%. This increase in productivity was offset in part by a $26.5 million increase in pilot payroll expense principally as a result of the new labor agreement with the Air Line Pilots Association (“ALPA”) effective December 30, 2003.

•   Aircraft rent expense per ASM decreased 5.4% due to the 7.9% increase in aircraft utilization.

•   Other rents and landing fees expense per ASM remained flat year over year as increases in airport rents ($6.6 million) and landing fees ($5.7 million) were offset by the 8.1% increase in ASMs.

•   Aircraft jet fuel expense per ASM increased 37.0% due primarily to a 39.1% increase in the average price per gallon of fuel to 123.7 cents in 2004 from 88.9 cents in 2003.

•   Agency commissions expense per ASM decreased 32.4% due to the reductions in various travel agency incentive programs and lower override commissions.

•   Aircraft maintenance materials and repair expense per ASM decreased 14.8% due to decreases in capitalized maintenance amortization expense ($23.4 million), and aircraft C-Check expense ($4.0 million). The decrease in capitalized maintenance amortization expense is driven by changes in the estimated useful life on certain engines, effective January 1, 2004, as a result of changes in aircraft utilization ($9.2 million), and on certain aircraft engine overhaul costs, effective April 1, 2003, driven by a new maintenance agreement that guarantees minimum cycles on engine overhauls ($2.3 million). During 2004, the net decrease of fully amortized assets versus new asset amortization totaled $6.6 million. These decreases were partially offset by increases in airframe maintenance ($6.1 million) and engine overhaul ($3.7 million) expenses.

•   Depreciation and amortization expense per ASM decreased 24.8% due to lower computer hardware and software amortization ($6.1 million) as a result of AWA’s cash conservation program, which reduced capital expenditures and lower amortization expenses related to aircraft leasehold improvements ($1.7 million). The change in the estimated useful life as a result of changes in AWA’s fleet plan discussed above contributed to the decrease in depreciation for improvements on AWA’s owned aircraft ($3.1 million), and for rotable and repairable spare parts ($2.1 million).

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•   Other operating expenses per ASM decreased 2.6% to $1.41 from $1.44 primarily due to decreases in catering costs ($6.3 million), bad debt expense ($2.6 million) and traffic liability insurance ($1.8 million). These decreases were partially offset by increases in aircraft jet fuel tax ($4.7 million), passenger traffic related expenses ($4.2 million), reservation system booking fees ($4.1 million), legal fees ($3.6 million), computer credit card discount fees ($3.5 million), airport guard services ($1.9 million) and ground handling expenses ($1.6 million). As a result, other operating expenses increased by $21.4 million. In addition, the 2004 period also included a $5.1 million charge resulting from the settlement of the shareholder lawsuit, a $4.6 million charge related to the sale and leaseback transactions of two new aircraft, a $3.5 million gain resulting from the settlement of a claim in bankruptcy for amounts earned under an executory contract, a $2.0 million gain resulting from the settlement of a lawsuit related to certain computer hardware and software that had previously been written off, a $1.0 million charge related to an arbitration settlement with Aeroxchange and a $1.0 million volume incentive earned due to certain Affinity Card sales levels meeting certain contract thresholds. The comparable 2003 period includes a $4.4 million gain related to the purchase and subsequent exchange of an A320 airframe.

     AWA had net nonoperating expense of $45.5 million in 2004 compared to net nonoperating income of $35.3 million in 2003. The 2003 period benefited from $81.3 million of federal government assistance received under the Emergency Wartime Supplemental Appropriations Act. See Note 16, “Emergency Wartime Supplemental Appropriations Act” in AWA’s Notes to Consolidated Financial Statements. In 2004, debt issue costs totaling $1.3 million were written off in connection with the refinancing of the term loan. This was more than offset by a gain on the disposition of property and equipment ($1.1 million) primarily due to the sale of two Boeing 737-200 aircraft. Interest income increased $0.9 million or 6.9% due to higher average cash balances in the 2004 period. The changes in the fair value of the Company’s derivative instruments and the net realized gains for the settled hedge transactions was a $23.8 million credit in 2004 compared to a $10.7 million credit in the 2003 period. Interest expense remained flat year-over-year. The 2003 period also includes a $9.8 million gain related to the sale of an investment in Hotwire.com. See Note 12, “Nonoperating Income (Expenses) – Other, Net” in AWA’s Notes to Consolidated Financial Statements.

     2003 Compared with 2002

     AWA recorded operating income of $26.1 million in 2003 compared to an operating loss of $156.2 million in 2002. Income before income taxes was $61.4 million in 2003 compared to a loss before income taxes and the cumulative effect of a change in accounting principle of $212.0 million in 2002.

     Total operating revenues for 2003 were $2.3 billion. Passenger revenues were $2.1 billion in 2003 compared to $1.9 billion in 2002. A 7.1% increase in RPMs exceeded a 3.3% increase in capacity, as measured by ASMs, resulting in a 2.8 point increase in load factor to 76.4%. RASM during 2003 increased 6.2 percent to 7.58 cents, despite a 5.9 percent increase in average stage length, while yields improved 2.3 percent to 9.93 cents. Cargo revenues for 2003 decreased $0.7 million (2.4%) due to lower freight and mail volumes. Other revenues, which consist primarily of alcoholic beverage sales, contract service sales, service charges, America West Vacations net revenues and Mesa codeshare agreement revenues, increased $23.7 million (26.5%) due to increased net revenues from AWA’s code sharing agreement with Mesa Airlines, higher excess baggage revenue and higher ticket refund and reissue penalty fees for ticketing changes.

     Operating expenses, including special charges of $14.4 million and $19.0 million recognized in 2003 and 2002, respectively, (see Note 11, “Special Charges” in AWA’s Notes to Consolidated Financial Statements) increased $24.9 million or 1.1%, while ASMs increased 3.3% in 2003 as compared to 2002. As a result, CASM decreased 2.1% to 7.99 cents in 2003 from 8.16 cents in 2002. Significant changes in the components of operating expense per ASM are explained as follows:

•   Salaries and related costs per ASM increased 5.9% primarily due to an increase in the accrual for employee performance bonuses and AWArd Pay ($20.1 million), charges related to the execution of a new labor agreement between AWA and ALPA ($19.7 million), higher medical, disability and workers’ compensation insurance costs ($6.7 million), vacation expense due to a change in the Company’s vacation policy for certain administrative employees in 2002 ($6.4 million) and DOT on-time performance bonuses ($2.3 million). These increases were offset in part by a 4.5% decrease FTEs in 2003 as compared to 2002, driven by the Company’s decision to eliminate its Columbus hub operations and the reduction-in-force of management, administrative and professional employees.

•   Aircraft rent expense per ASM decreased 2.3% due to a reduction of rental rates as a result of lease extensions that occurred in 2003.

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•   Other rents and landing fees expense per ASM decreased 5.4% primarily due to lower costs for borrowed parts ($5.6 million) and other space rental ($1.3 million). This decrease was offset in part by higher airport rent ($1.5 million) and landing fees ($1.4 million).

•   Aircraft jet fuel expense per ASM increased 21.7% primarily due to a 21.8% increase in the average price per gallon of fuel to 88.9 cents in 2003 from 73.0 cents in 2002.

•   Agency commissions expense per ASM decreased 33.2% primarily due to the elimination of base commissions for travel agency tickets issued in the United States, effective March 21, 2002, subsequent reductions in various travel agency incentive programs and lower override commissions.

•   Aircraft maintenance materials and repair expense per ASM decreased 14.4% primarily due to lower aircraft C-Check ($10.1 million), airframe maintenance ($3.1 million), and engine overhaul ($2.9 million) expenses and the 3.3% increase in ASMs. In addition, a change in the estimated useful life of certain aircraft engine overhaul costs, effective April 1, 2003 and driven by a new maintenance agreement that guarantees minimum cycles on engine overhauls, resulted in a $12.7 million reduction in capitalized maintenance amortization expense (see Note 1, “Summary of Significant Accounting Policies – (e) Aircraft Maintenance and Repairs” in AWA’s Notes to Consolidated Financial Statements) offset by a $0.9 million penalty for the return of two spare engines in 2003.

•   Depreciation and amortization expense per ASM decreased 13.9% due primarily to reduced capital expenditures as a result of the Company’s cash conservation program and the 3.3% increase in ASMs. Decreases in computer hardware, software and facility improvements ($4.5 million), aircraft leasehold improvement amortization ($2.9 million) and depreciation expense for owned aircraft ($2.0 million) were offset in part by an increase in depreciation expense for rotable aircraft parts ($0.9 million).

•   Other operating expenses per ASM decreased 13.6% from 1.67 cents to 1.44 cents primarily due to decreases in traffic liability insurance ($11.6 million), computer reservations system booking fees ($7.7 million), security services ($6.0 million), FlightFund expense ($5.2 million), bad debt expense ($5.2 million) and the 3.3% increase in ASMs. These decreases were offset in part by increased credit card fees ($6.2 million). In addition, the 2003 period includes a $4.4 million gain related to the purchase and subsequent exchange of an A320 airframe and a $2.8 million credit related to the settlement of disputed billings under the Company’s frequent flyer program.

     AWA had net nonoperating income of $35.3 million in 2003 compared to $55.8 million of net nonoperating expenses in 2002. The 2003 period benefited from $81.3 million of federal government assistance received under the Emergency Wartime Supplemental Appropriations Act. See Note 16, “Emergency Wartime Supplemental Appropriations Act” in AWA’s Notes to Consolidated Financial Statements. Interest expense increased $7.2 million in 2003 due to higher average outstanding debt while interest income decreased $4.3 million primarily due to lower interest rates in 2003 compared to 2002. The 2003 period also includes a $9.8 million gain related to the sale of an investment in Hotwire.com. See Note 12, “Nonoperating Income (Expenses) – Other, Net” in AWA’s Notes to Consolidated Financial Statements. The 2002 period included $8.5 million of federal government assistance received under the Air Transportation Safety and System Stabilization Act and a $2.8 million charge related to the write-off of AWA’s investment in an e-commerce entity. The changes in the fair value of the Company’s derivative instruments and the net realized gains and losses for the settled hedge transactions was a $10.7 million credit in 2003 compared to $0.7 million expense in the 2002 period.

Liquidity and Capital Resources

Sources and Uses of Cash

     At December 31, 2004, Holdings’ and AWA’s total cash, cash equivalents, short-term investments, investments in debt securities and restricted cash balances were $419.1 million and $398.5 million, respectively. Net cash provided by operating activities for Holdings and AWA was $20.8 million and $20.6 million, respectively, in 2004. This compares to net cash provided by operating activities of $241.8 million and $226.1 million for Holdings and AWA, respectively, in 2003. The year-over-year decrease in net cash provided by operating activities of $221.0 million and $205.4 million for Holdings and AWA, respectively, was primarily due to the loss in the 2004 period and the receipt of $81.3 million of refunded security fees from the Federal government in 2003.

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     In 2004, net cash used in investing activities was $16.1 million for Holdings and $16.0 for AWA, respectively. This compares to net cash used in investing activities of $491.6 million for both Holdings and AWA in 2003. Principal investing activities during 2004 included purchases of property and equipment totaling $219.4 million for both Holdings and AWA and net sales of short-term investments and investments in debt securities totaling $205.3 million for both Holdings and AWA. The 2003 period included purchases of property and equipment totaling $154.4 million for both Holdings and AWA and net purchases of short-term investments totaling $269.4 million for both Holdings and AWA. Restricted cash increased by $2.2 million during 2004 compared to an increase of $23.9 million during 2003 primarily due to an increase in cash reserves required under an agreement for processing the Company’s Visa and MasterCard credit card transactions. The 2003 period also included proceeds from the disposition of assets totaling $25.8 million.

     In 2004, net cash used in financing activities was $41.2 million and $42.3 million for Holdings and AWA, respectively, consisting principally of $175.6 debt repayments including principal repayments of $85.8 million for the government guaranteed loan. In addition, AWA entered into a term loan financing with GECC resulting in proceeds of $110.6 million, approximately $77.0 million of which was used to pay off the balance of the term loan with Muzuho Corporate Bank, Ltd. and certain other lenders. The 2004 period also includes $30.8 million of proceeds from the issuance of senior secured discount notes, secured by the Company’s leasehold interest in its Phoenix maintenance facility and flight training center. This compares to net cash provided by financing activities of $67.4 million and $65.0 million for Holdings and AWA, respectively, in 2003. The 2003 period included proceeds from the issuance of senior exchangeable notes totaling $86.8 million and debt repayments of $16.8 million.

     Capital expenditures for 2004 were $219.4 million for Holdings and AWA. Capital expenditures for 2003 were $154.4 million for Holdings and AWA. Included in these amounts are capital expenditures for capitalized maintenance of approximately $139.2 million and $119.3 million for both Holdings and AWA for 2004 and 2003, respectively.

Off-Balance Sheet Arrangements

The Pass Through Trusts

     Since AWA’s restructuring in 1994, AWA has set up 19 pass through trusts, which have issued over $1.4 billion of pass through trust certificates (also known as “Enhanced Equipment Trust Certificates” or “EETC”) covering the financing of 54 aircraft. These trusts are off-balance sheet entities, the primary purpose of which is to finance the acquisition of aircraft. Rather than finance each aircraft separately when such aircraft is purchased or delivered, these trusts allow the Company to raise the financing for several aircraft at one time and place such funds in escrow pending the purchase or delivery of the relevant aircraft. The trusts are also structured to provide for certain credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust certificates and, as a result, reduce the cost of aircraft financing to AWA.

     Each trust covered a set amount of aircraft scheduled to be delivered within a specific period of time. At the time of each covered aircraft financing, the relevant trust used the funds in escrow to purchase equipment notes relating to the financed aircraft. The equipment notes were issued, at AWA’s election, either by AWA in connection with a mortgage financing of the aircraft or by a separate owner trust in connection with a leveraged lease financing of the aircraft. In the case of a leveraged lease financing, the owner trust then leased the aircraft to AWA. In both cases, the equipment notes are secured by a security interest in the aircraft. The pass through trust certificates are not direct obligations of, nor guaranteed by, Holdings or AWA. However, in the case of mortgage financings, the equipment notes issued to the trusts are direct obligations of AWA and in the case of leveraged lease financings, the leases are direct obligations of AWA. In addition, neither Holdings nor AWA guarantee or participate in any way in the residual value of the leased aircraft. All aircraft financed by these trusts are currently structured as leveraged lease financings, which are not reflected as debt on the balance sheets of either AWA or Holdings. In 2004, AWA made $168.5 million in lease payments in respect of the leveraged lease financings under the pass through trusts.

Other Operating Leases

     In addition to the aircraft financed by the pass through trust certificates, AWA has noncancelable operating leases covering 82 aircraft, of which four aircraft will be delivered in 2005, as well as leases for certain terminal space, ground facilities and computer and other equipment. In 2004, AWA made $197.2 million in lease payments related to these operating leases. See the Airline’s fleet section in Item 1 for further discussion.

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Special Facility 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. In accordance with Emerging Issues Task Force (“EITF”) Issue No. 97-10, “The Effect of Lessee Involvement in Asset Construction,” the Company accounts for this as an operating lease.

     In connection with these bonds, AWA entered into an Amended and Restated Airport Use Agreement, pursuant to which AWA agreed to make sufficient payments to the Industrial Development Authority (“IDA”) to cover the principal and interest of the bonds and to indemnify the IDA for any claims arising out of the issuance and sale of the bonds and the use and occupancy of the concourses financed by these bonds and the old bonds. At December 31, 2004, the outstanding principal amount of the bonds was $21.8 million. The Company estimates its remaining payments to cover the principal and interest of these bonds will be approximately $43.6 million.

Commitments

     As of December 31, 2004, we had $786.3 million of long-term debt (including current maturities). This amount consisted primarily of the $343.2 million government guaranteed loan, a secured term loan financing with General Electric Capital Corporation (“GECC”), of which $110.6 million remains outstanding, $39.5 million principal amount of 10 3/4% senior unsecured notes, $112.3 million principal amount of 7.5% convertible senior notes (including interest through December 31, 2004 as a deemed loan added to the principal thereof) and $252.7 million issue price of 7.25% senior exchangeable notes, of which $86.8 million was received at issuance.

Government Guaranteed Loan

     In January 2002, AWA closed a $429 million loan supported by a $380 million guarantee provided by the ATSB. Certain third-party counter-guarantors have fully and unconditionally guaranteed the payment of an aggregate of $45 million of the outstanding principal amount under the government guaranteed loan plus accrued and unpaid interest thereon. In addition, Holdings has fully and unconditionally guaranteed the payment of all principal, premium, interest and other obligations outstanding under the government guaranteed loan and has pledged the stock of AWA to secure its obligations under such guarantee. Principal amounts under this loan become due in ten installments of $42.9 million on each March 31 and September 30, commencing on March 31, 2004 and ending on September 30, 2008. Principal amounts outstanding under the government guaranteed loan bear interest at a rate per annum equal to LIBOR plus 40 basis points.

     Subject to certain exceptions, we are required to prepay the government guaranteed loan with:

•   the net proceeds of all issuances of debt or equity by either Holdings or AWA after January 2002;

•   proceeds from asset sales in excess of $20 million in any fiscal year; and

•   insurance proceeds in excess of $2 million to the extent such proceeds are not used to restore or replace the assets from which such proceeds are derived.

     In addition, we are required to prepay the government guaranteed loan upon a change in control and we may be required to prepay portions of the loan if our employee compensation costs exceed a certain threshold. We may, at our option, prepay the government guaranteed loan without premium or penalty, subject to reimbursement of the lenders’ breakage costs in the case of prepayment of LIBOR loans.

     The government guaranteed loan requires that AWA maintain a minimum cash balance of $100 million. In addition, the government loan contains customary affirmative covenants and the following negative covenants: restrictions on liens, investments, restricted payments, fundamental changes, asset sales and acquisitions, the creation of new subsidiaries, sale and leasebacks, transactions with affiliates, the conduct of business, mergers or consolidations, issuances and dispositions of capital stock of subsidiaries, and amendments to other indebtedness. The government guaranteed loan contains customary events of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.

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GECC Term Loan Financing

     On September 10, 2004, AWA entered into a term loan financing with GECC providing for loans in an aggregate amount of $110.6 million. AWA used approximately $77.0 million of the proceeds from this financing to repay in full its term loan with Mizuho Corporate Bank, Ltd. and certain other lenders and to pay certain costs associated with this transaction. AWA used the remaining proceeds for general corporate purposes. The new term loan financing consists of two secured term loan facilities: a $75.6 million term loan facility secured primarily by spare parts, rotables and appliances (the “Spare Parts Facility”); and a $35.0 million term loan facility secured primarily by aircraft engines and parts installed in such engines (the “Engine Facility”).

     The facilities are cross-collateralized on a subordinated basis and the collateral securing the facilities also secures on a subordinated basis certain of AWA’s other existing debt and lease obligations to GECC and its affiliates.

     The loans under the Spare Parts Facility are payable in full at maturity on September 10, 2010. The loans under the Engine Facility are payable in equal quarterly installments of $1.3 million beginning on March 10, 2006 through June 10, 2010 with the remaining loan amount of $11.8 million payable at maturity on September 10, 2010. The loans under each facility may be prepaid in an amount not less than $5 million at any time after the 30^th monthly anniversary of the funding date under such facility. If AWA fails to maintain a certain ratio of rotables to loans under the Spare Parts Facility, it may be required to pledge additional rotables or cash as collateral, provide a letter of credit or prepay some or all of the loans under the Spare Parts Facility. In addition, the loans under the Engine Facility are subject to mandatory prepayment upon the occurrence of certain events of loss applicable to, or certain dispositions of, aircraft engines securing the facility.

     Principal amounts outstanding under the loans bear interest at a rate per annum based on three-month LIBOR plus a margin. Both facilities contain customary events of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.

Senior Secured Discount Notes Due 2009

     On December 27, 2004, AWA raised additional capital by financing its Phoenix maintenance facility and flight training center. The flight training center was previously unencumbered, and the maintenance facility became unencumbered earlier this year when AWA refinanced its term loan. Using its leasehold interests in these two facilities as collateral, AWA, through a wholly owned subsidiary named FTCHP LLC, raised $30.8 million through the issuance of senior secured discount notes. The notes were issued by FTCHP at a discount pursuant to the terms of a senior secured term loan agreement among the Company, FTCHP, Heritage Bank, SSB, as administrative agent, Citibank, N.A., as the initial lender, and the other lenders from time to time party thereto. Citibank, N.A. subsequently assigned all of its interests in the notes to third party lenders.

     AWA has fully and unconditionally guaranteed the payment and performance of FTCHP’s obligations under the notes and the loan agreement. The notes require aggregate principal payments of $36.0 million with principal payments of $1.5 million due on each of the first two anniversary dates and the remaining principal amount due on the fifth anniversary date. The notes may be prepaid in full at any time (subject to customary LIBOR breakage costs) and in partial amounts of $1.5 million on the third and fourth anniversary dates. The unpaid principal amount of the notes bears interest based on LIBOR plus a margin subject to adjustment based on a loan to collateral value ratio.

     The loan agreement contains customary covenants applicable to loans of this type, including obligations relating to the preservation of the collateral and restrictions on the activities of FTCHP. In addition, the loan agreement contains events of default, including payment defaults, cross-defaults to other debt of FTCHP, if any, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.

     In connection with this financing, AWA sold all of its leasehold interests in the maintenance facility and flight training center to FTCHP and entered into subleases for the facilities with FTCHP at lease rates expected to approximate the interest payments due under the notes. In addition, AWA agreed to make future capital contributions to FTCHP in amounts sufficient to cover principal payments and other amounts owing pursuant to the notes and the loan agreement.

     The proceeds from this financing, together with $10.5 million from operating cash flow, were irrevocably deposited with the trustee for AWA’s 10-3/4% senior unsecured notes due 2005 and subsequently redeemed on January 26, 2005.

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10 3/4% Senior Notes due 2005

     In August 1995, AWA issued $75.0 million principal amount of 10³/4% senior unsecured notes due 2005 of which $39.5 million remained outstanding at December 31, 2004. Interest on the 10³/4% senior unsecured notes is payable semiannually in arrears on March 1 and September 1 of each year. The senior notes were subsequently redeemed on January 26, 2005.

7.5% Convertible Senior Notes due 2009

     In connection with the closing of the government guaranteed loan and the related transactions, Holdings issued $104.5 million of 7.5% convertible senior notes due 2009, of which approximately $112.3 million remained outstanding at December 31, 2004 (including interest paid through December 31, 2004 as a deemed loan added to the principal thereof). These notes are convertible into shares of class B common stock, at the option of the holders, at an initial conversion price of $12.00 per share or a conversion ratio of approximately 83.333 shares per $1,000 principal amount of such notes, subject to standard anti-dilution adjustments. Interest on the 7.5% convertible senior notes is payable semiannually in arrears on June 1 and December 1 of each year. At Holdings’ option, the first six interest payments were payable in the form of a deemed loan added to the principal amount of these notes. The 7.5% convertible senior notes will mature on January 18, 2009 unless earlier converted or redeemed. The payment of principal, premium and interest on the 7.5% convertible senior notes is fully and unconditionally guaranteed by AWA.

     Holdings may redeem 7.5% convertible senior notes, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount thereof), if redeemed during the twelve-month period commencing on January 18 of the years set forth below, plus, in each case, accrued and unpaid interest, if any, to the date of redemption:

Year	Redemption Price
2005		103.75	%
2006		102.50	%
2007		101.25	%
2008 and thereafter		100.00	%

7.25% Senior Exchangeable Notes due 2023

     In July and August of 2003, AWA completed a private placement of approximately $86.8 million issue price of 7.25% Senior Exchangeable Notes due 2023. The notes bear cash interest until July 30, 2008. Thereafter, the notes will cease bearing cash interest and begin accruing original issue discount daily at a rate of 7.25% per year until maturity. Each note was issued at a price of $343.61 and is exchangeable for class B common stock of Holdings at an exchange ratio of 32.038 shares per $1,000 principal amount at maturity of the notes (subject to adjustment in certain circumstances). This represents an equivalent conversion price of approximately $10.73 per share. The aggregate amount due at maturity, including accrued original issue discount from July 31, 2008, will be $252,695,000. The notes are unconditionally guaranteed on a senior unsecured basis by Holdings.

     Holders may exchange their notes for the shares of class B common stock of Holdings in any fiscal quarter commencing after September 30, 2003, if, as of the last day of the preceding fiscal quarter, the closing sale price of the class B common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such preceding fiscal quarter is more than 110% of the accreted exchange price per share of Class B common stock on the last day of such preceding fiscal quarter. If the foregoing condition is satisfied, then the notes will be exchangeable at any time at the option of the holder through maturity. The accreted exchange price per share as of any day will equal the issue price of a note plus accrued original issue discount to that day divided by 32.038, subject to any adjustments to the exchange rate through that day.

     On or before July 30, 2018, a holder also may exchange its notes for shares of the Class B common stock at any time after a 10 consecutive trading-day period in which the average of the trading prices for the notes for that 10 trading-day period was less than 103% of the average exchange value for the notes during that period. Exchange value is equal to the product of the closing sale price for the shares of Class B common stock on a given day multiplied by the then current exchange rate, which is the number of shares of Class B common stock for which each note is then exchangeable.

     In addition, the holders may exchange the notes if the notes have been called for redemption or if certain specified corporate transactions have occurred.

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     Holders of the notes may require AWA to repurchase the notes at a price equal to the original issue price plus accrued cash interest and original issue discount, if any, on July 30, 2008, 2013 and 2018. The purchase price of such notes may be paid in cash or class B common stock of Holdings, subject to certain restrictions. In addition, each holder may require AWA to purchase all or a portion of such holder’s notes upon the occurrence of certain change of control events concerning AWA or Holdings. AWA may redeem the notes, in whole or in part, on or after July 30, 2008 at a price equal to the original issue price plus accrued cash interest and original issue discount, if any.

Other Indebtedness and Obligations

     In addition to the above described indebtedness, we had $39.5 million of secured equipment notes and $45.8 million of other unsecured indebtedness, including $29.3 million of industrial revenue bonds.

     The following table sets forth our cash obligations as of December 31, 2004.

											Beyond
	2005		2006		2007		2008		2009		2009		Total
	(in thousands)
Long-term debt:
Equipment notes – non-EETC (1)	$	8,305	$	8,305	$	7,772	$	15,082	$	—	$	—		$	39,464
GECC term loan (2)		—		5,158		5,158		5,158		5,158		89,932			110,564
7.5% convertible senior notes due 2009(3)		—		—		—		—		112,299		—			112,299
7.25% senior exchangeable notes due 2023 (4)		—		—		—		—		—		252,695			252,695
Government guaranteed loan (5)		85,800		85,800		85,800		85,800		—		—			343,200
State loan (6)		250		250		250		—		—		—			750
10 3/4% senior unsecured notes due 2005		39,548		—		—		—		—		—			39,548
Industrial development bonds (7)		—		—		—		—		—		29,300			29,300
AVSA promissory notes (8)		15,750		—		—		—		—		—			15,750
Senior Secured Discount Notes (9)		1,530		1,529		1,529		1,530		29,870		—			35,988
		151,183		101,042		100,509		107,570		147,327		371,927			979,558
Cash aircraft rental payments (10)		343,554		318,668		300,247		249,000		223,894		1,668,015			3,103,378
Lease payments on equipment and facility operating leases (11)		18,117		16,744		14,645		15,017		14,180		51,919			130,622
Capital lease obligations		4,659		4,988		1,773		—		—		—			11,420
Special facility revenue bonds (12)		1,363		1,363		1,362		1,362		2,044		36,106			43,600
Aircraft purchase commitments (13)		272,820		456,891		47,697		—		—		—			777,408
Engine maintenance commitments (14)		12,000		6,000		3,000		1,000		—		—			22,000
Total	$	803,696	$	905,696	$	469,233	$	373,949	$	387,445	$	2,127,967		$	5,067,986

(1)	Includes approximately $39.5 million of equipment notes with variable interest rates of 2.88% to 3.37%, averaging 2.96% at December 31, 2004, installments due 2005 through 2008.
(2)	The amount consists of two the Spare Parts Facility and the Engine Facility with a variable interest rate of 6.41% at December 31, 2004. See “—GECC Term Loan Financing” above.
(3)	Includes $90.7 million principal amount of 7.5% convertible senior notes, due 2009, and $21.6 million of interest paid in kind of issuance through December 31, 2004. For financial reporting purposes, we initially recorded the convertible senior notes at their fair market value on the date of issuance. As of December 31, 2004, the accreted balance of the convertible senior notes in the accompanying consolidated balance sheet is approximately $68.5 million.
(4)	Includes $252.7 million principal amount of 7.25% senior exchangeable notes due July 2023 with cash interest payable through July 2008 at a rate of 2.49% on the principal amount at maturity. Thereafter, the notes will cease bearing cash interest and begin accruing original issue discount at a rate of 7.25% until maturity. The aggregate amount due at maturity, including accrued original issue discount from July 31, 2008, will be $252.7 million.
(5)	Government guaranteed loan includes $343.2 million with a variable interest rate of 2.38% at December 31, 2004 and ratable principal payments due 2005 through 2008. Guarantee fees of approximately 8.0% of the outstanding guaranteed principal balance in 2005 through 2008 are payable to the U.S. Treasury Department and other loan participants.
(6)	Includes Arizona State loan of $0.8 million due December 2007 with a variable interest rate of 5.97% at December 31, 2004.

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(7)	Includes $29.3 million of 6.3% industrial development bonds due April 2023.
(8)	Includes AVSA promissory notes of $15.8 million due 2005 with a variable interest rate of 3.61% at December 31, 2004.
(9)	Includes $36.0 million of senior secured discount notes due 2009 with a variable interest rate of 6.42% at December 31, 2004.
(10)	Includes non-cancelable operating leases for 136 aircraft with remaining terms ranging from five months to approximately 19 years. Management estimates the debt equivalent value of these operating leases approximates $1.9 billion using an interest rate of 10%.
(11)	Includes leases for terminal space, ground facilities, the flight training center and computer and other equipment under non-cancelable operating leases.
(12)	Includes Series 1999 Terminal 4 Improvements Bonds, due 2019.
(13)	Includes commitments to purchase a total of 20 Airbus aircraft and seven spare engines for delivery in 2005 through 2007.
(14)	Includes minimum commitments under AWA’s rate per engine hour agreement with General Electric Engine Services for overhaul maintenance services on CFM56-3B engines through April 2008. Minimum monthly commitment amounts: for the period through and including April 2006 — $1.0 million, for the period May 2006 through and including April 2008 — $250,000. These amounts reflect the termination agreement signed by AWA in late December 2004 which eliminates the V2500-A1 engines from the program.

     We expect to fund these cash obligations from funds provided by operations and future financings, if necessary. The cash available to us from these sources, however, may not be sufficient to cover these cash obligations because economic factors outside our control may reduce the amount of cash generated by operations or increase our costs. For instance, an economic downturn or general global instability caused by military actions, terrorism, disease outbreaks and natural disasters could reduce the demand for air travel, which would reduce the amount of cash generated by operations. An increase in our costs, either due to an increase in borrowing costs caused by a reduction in our credit rating or a general increase in interest rates or due to an increase in the cost of fuel, maintenance, aircraft and aircraft engines and parts, could decrease the amount of cash available to cover the cash obligations. In addition, we may be required to prepay portions of the government guaranteed loan if our employee compensation costs exceed a certain threshold and we may be required to prepay portions of the term loan to the extent the value of the collateral securing the term loan decreases. In any of these cases, our liquidity may be adversely affected and we may not have sufficient cash to prepay the government loan and meet our other obligations. Moreover, the government guaranteed loan contains a $100 million minimum cash balance requirement. As a result, we cannot use all of our available cash to fund operations, capital expenditures and cash obligations without violating this requirement.

     Although there can be no assurances, management believes that cash flow from operating activities, coupled with existing cash balances and financing commitments, will be adequate to fund the Company’s operating and capital needs as well as enable it to maintain compliance with its various debt agreements at least through December 31, 2005.

Financial Covenants and Credit Rating

     In addition to the minimum cash balance requirements, our long-term debt agreements contain various negative covenants that restrict our actions, including our ability to pay dividends, or make other restricted payments. Finally, our long-term debt agreements contain cross-default provisions, which may be triggered by defaults by us under other agreements relating to indebtedness. See “Risk Factors Relating to the Company and Industry Related Risks — Our high level of fixed obligations limits our ability to fund general corporate requirements and obtain additional financing, limits our flexibility in responding to competitive developments and increases our vulnerability to adverse economic and industry conditions.” As of December 31, 2004, Holdings and AWA were in compliance with the covenants in their long-term debt agreements.

     Our credit ratings are relatively low, with Moody’s assessment of AWA’s senior implied rating and senior unsecured debt rating at B3 and Caa2, respectively, Standard & Poor’s assessment of AWA’s and Holdings’ corporate credit ratings at B- and AWA’s senior unsecured rating at CCC and Fitch Ratings’ assessment of AWA’s long-term and unsecured debt rating at CCC. In addition, Standard & Poor’s recently placed AWA’s aircraft debt on CreditWatch with negative implications as part of a broader review of aircraft-backed debt. Low credit ratings could cause our borrowing costs to increase, which would increase our interest expense and could affect our net income and our credit ratings could adversely affect our ability to obtain additional financing. The rating agencies

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base their ratings on our financial performance and operations, our cash flow and liquidity, the level of our indebtedness and industry conditions in general. If our financial performance or industry conditions do not improve, we may face future downgrades, which could further negatively impact our borrowing costs and the prices of our equity or debt securities. In addition, any downgrade of our credit ratings may indicate a decline in our business and in our ability to satisfy our obligations under our indebtedness. See “Risk Factors Relating to the Company and Industry Related Risks — Because of our relatively low credit ratings, our borrowing costs may be high and our ability to incur additional debt may be impaired.”

Other Information

Labor Relations

     A large majority of the employees of the major airlines in the United States are represented by labor unions. The majority of AWA employees have selected union representation and/or negotiated collective bargaining agreements with AWA. Although there are few remaining employee groups who could engage in organization efforts, we cannot predict the outcome of any future efforts to organize those remaining 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 Relating to the Company and Industry Related Risks — Negotiations with labor unions could divert management attention and disrupt operations and new collective bargaining agreements or amendments to existing collective bargaining agreements could increase our labor costs and operating expenses.”

Income Taxes

     At December 31, 2004, the Company had net operating loss carryforwards (“NOLs”) and tax credit carryforwards for federal income tax purposes of approximately $451.4 million and $1.1 million, respectively. The NOLs expire during the years 2007 through 2024 while approximately $0.2 million of the tax credit carryforwards will expire in 2005 and 2006. The Company also had capital loss carryforwards for federal income tax purposes of approximately $1.4 million which expire in 2009. However, such carryforwards are not 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 NOLs and business tax credit carryforwards may be restricted.

     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 expense (benefit) rate for financial reporting purposes that differs from the current federal statutory income tax rate of 35%.

Government Regulations

     On November 19, 2001, the President signed into law the ATSA. This law enhances aviation security measures and federalizes many aspects of civil aviation security. The ATSA established a new Transportation Security Administration, now within the Department of Homeland Security. Under the ATSA, substantially all security screeners at airports are federal employees and a significant number of other airport security functions are overseen and performed by federal employees, including federal security managers, federal law enforcement officers and federal air marshals. The ATSA mandated that beginning on January 18, 2002, all checked baggage at United States airports be screened using explosive detection systems or, where such systems are not yet available, using other screening techniques such as positively matching baggage to a passenger who has boarded an aircraft. The ATSA required all checked baggage to be screened by explosive detection systems by December 31, 2003. Other requirements in the ATSA that directly affect airline operations include the strengthening of cockpit doors, deploying federal air marshals on board certain flights, improving airline crew security training and expanding use of criminal background checks of employees. Implementation of these and other requirements of the ATSA resulted in increased costs for air carriers and may result in delays and disruptions to air travel. Under the ATSA, funding for the new federal security system is provided by a $2.50 per enplanement ticket tax, not to exceed $5.00 per one-way trip, and by imposing additional direct fees on air carriers. In 2004 and 2003, the Company’s cost of compliance with the security requirements of the ATSA was approximately $14.4 million and $13.2 million, respectively. The estimated cost to the Company of compliance with the security requirements of the ATSA for 2005 is approximately $17.0 million under current law. Under the proposed White House budget released February 7, 2005, this ticket tax for security fees would increase from $2.50 per leg to $5.50 with a cap of $8.00 one-way trip with multiple legs and $16.00 for a round trip. This budget proposal is subject to approval of Congress. As a result of competitive pressure, AWA and other airlines may be unable to recover all of these additional security costs from

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passengers through increased fares. In addition, we cannot forecast what new security and safety requirements may be imposed in the future or the costs or financial impact of complying with any such requirements.

     In 1997, new aviation taxes were imposed through September 30, 2007 to provide funding for the FAA. Included in the 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 increased to $3.00 in 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.

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

Related Party Transactions

     As part of our reorganization in 1994, Continental Airlines and AWA entered into an alliance agreement that included code sharing arrangements, reciprocal frequent flyer programs and ground handling operations. In March 2002, AWA received notice from Continental of its intention to terminate the code sharing and frequent flyer agreements between the two airlines, effective April 26, 2002. Two of Continental’s directors are managing partners of Texas Pacific Group, which, through TPG Advisors, Inc., effectively controls the voting power of Holdings. See “Risk Factors Relating to the Company and Industry Related Risks — The stockholders who effectively control the voting power of Holdings could take actions that would favor their own personal interests to the detriment of our interests.” AWA paid Continental approximately $13.4 million, $17.3 million and $25.5 million and also received approximately $4.1 million, $5.0 million and $15.9 million in 2004 and 2003 and 2002, respectively, from Continental pursuant to these agreements.

     Texas Pacific Group agreed to reimburse the Company approximately $2.5 million for expenses incurred by the Company on its behalf. As a result, the Company recorded this as a receivable as of December 31, 2004. Subsequent to December 31, 2004, the Company received $1.3 million in such reimbursement and expects to receive an additional $1.2 million in 2005.

Application of Critical Accounting Policies

     The preparation of our consolidated financial statements in accordance with generally accepted accounting principles requires that we make certain estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of our financial statements. We believe our estimates and assumptions are reasonable; however, actual results could differ from those estimates. We have identified the following critical accounting policies that require the use of significant judgments and estimates relating to matters that are inherently uncertain and may result in materially different results under different assumptions and conditions.

•   Passenger Revenue – Passenger revenue is recognized when transportation is provided. Ticket sales for transportation that 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. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based on the statistical analysis of our historical data. Any adjustments resulting from periodic evaluations of the estimated air traffic liability are included in results of operations during the period in which the evaluations are completed.

•   Accounting For Long-Lived Assets – Owned property and equipment are recorded at cost and depreciated to residual values over the estimated useful lives using the straight-line method. 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. Interest on advance payments for aircraft acquisitions and on expenditures for aircraft improvements is capitalized and added to the cost of the asset. The estimated useful lives of our owned aircraft, jet engines, flight equipment and rotable parts range from five to 25 years. The estimated useful lives of our technical support facility and flight training center in Phoenix, Arizona are

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	22 years and 30 years, respectively. The estimated useful lives of our ground property and equipment range from three to 12 years. We test for impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired as defined by SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” An impairment loss is recognized if the carrying amount of the asset is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and fair value of the asset.
•	Frequent Flyer Accounting – We maintain 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 is recognized as a liability and charged to operations as program members accumulate mileage. Travel awards are valued at the incremental cost of carrying one passenger, based on expected redemptions. Incremental costs are based on expectations of expenses to be incurred on a per passenger basis and include fuel, liability insurance, food, beverages, supplies and ticketing costs. We also sell mileage credits to companies participating in our FlightFund program, such as hotels, car rental agencies and credit card companies. Transportation-related revenue from the sale of mileage credits is deferred and recognized when transportation is provided. A change to the estimated cost per mile, minimum award level, percentage of revenue to be deferred or deferred recognition period could have a significant impact on our revenues or mileage liability accrual in the year of the change as well as future years.
•	Long-Term Maintenance Reserve – We record an accrual for the estimated cost of scheduled airframe and engine overhauls required to be performed on leased aircraft upon their return to the lessors. These estimates are based on historical costs and our assumptions regarding the renewal of aircraft leases. A significant change to AWA’s fleet plan could have a material impact on our reserve requirements.
•	Deferred Tax Asset Valuation Allowance – The Company initially recorded a full valuation allowance relating to its net deferred tax assets at December 31, 2001 and to tax benefits generated in 2002. In recording that valuation allowance, we considered whether it was more likely than not that all or a portion of the deferred tax assets will not be realized, in accordance with SFAS No. 109, “Accounting for Income Taxes.” The Company was in a cumulative loss position three out of four years between December 31, 2001 through December 31, 2004, which weighed heavily in the overall determination that a valuation allowance was needed. As of December 31, 2004, the Company had recorded a valuation allowance of $129.0 million against its net deferred tax assets. The Company expects to continue to record a full valuation allowance on any future tax benefits until we have achieved several quarters of consecutive profitable results coupled with an expectation of continued profitability.

Recently Issued Accounting Pronouncements

     In November 2004, the Emerging Issues Task Force (“EITF”) of the FASB reached a consensus on EITF 04-08, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share,” which requires that issuers of convertible securities with contingent conversion features use the “if-converted” method to calculate reported earnings per share (“EPS”) irrespective of the contingent conversion trigger being met. As approved by the FASB, this change is effective for years ending after December 15, 2004. The Company applied this methodology in the accompanying consolidated statement of operations. The impact of using the “if-converted” method for the Company’s 7.25% Notes is antidilutive for the years ended December 31, 2004 and 2002. For the year ended December 31, 2003, the inclusion of the 7.25% Notes reduced diluted EPS by $0.03 from $1.29 to $1.26.

     In November 2004, the FASB issued Revised Statement No. 123, “Accounting for Share-Based Payment” (“SFAS No. 123R”). This statement requires the Company to recognize the grant-date fair value of stock options in the Statement of Operations. In addition, the Company will be required to calculate this compensation using the fair-value based method, versus the intrinsic value method previously allowed under SFAS No. 123. This revision is effective for periods beginning after June 15, 2005. Accordingly, the Company will adopt this revised SFAS effective July 1, 2005. The Company is currently evaluating how it will adopt SFAS No. 123R and has not determined the method it will use to value granted stock options. The adoption of SFAS No. 123R is expected to have a material effect on the Company’s results of operations. See Note 1, “Summary of Significant Accounting Policies” (m) “Stock Options” for the Company’s disclosure of the impact of the compensation cost associated with stock options under SFAS No. 123.

39

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Sensitive Instruments

(a) Commodity Price Risk

     Aircraft jet fuel costs accounted for approximately 23% of the Company’s total operating expenses during 2004. 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 2005 by approximately $5.7 million which includes Mesa. Accordingly, a substantial change in the price of jet fuel would have a significant impact on the Company’s results of operations.

     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, 2004, the Company had entered into costless collar transactions that establish an upper and lower limit on heating oil futures prices and basis swap transactions that establish the spread between heating oil and jet fuel. These transactions are in place with respect to approximately 42% of projected 2005 fuel requirements, including 67% related to the first quarter of 2005, 46% related to the second quarter, 36% related to the third quarter and 20% for the fourth quarter. See “Risk Factors Relating to the Company and Industry Related Risks - Fluctuations in jet fuel costs could adversely affect our operating expenses and results.”

     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. At December 31, 2004, the Company estimates that a 10% increase in heating oil futures prices would increase the fair value of the costless collar transactions by approximately $7.5 million. The Company estimates that a 10% decrease in heating oil futures prices would decrease the fair value of the costless collar transactions by approximately $9.6 million.

     As of March 14, 2005, approximately 45% and 2% of AWA’s remaining 2005 and 2006, respectively, projected fuel requirements are hedged.

(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, 2004, the Company’s variable-rate long-term debt obligations of approximately $545.7 million represented approximately 69.4% of its total long-term debt. If interest rates increased 10% in 2004, 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, 2004 and 2003, and the related consolidated statements of operations, cash flows and stockholders’ equity and comprehensive income for each of the years in the three-year period ended December 31, 2004, together with the related notes and the reports of KPMG LLP, and PricewaterhouseCoopers LLP, independent registered public accounting firms, are set forth on the following pages.

40

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
America West Holdings Corporation:

We have audited the accompanying consolidated balance sheets of America West Holdings Corporation and subsidiary as of December 31, 2004 and 2003, and the related consolidated statements of operations, cash flows and stockholders’ equity and comprehensive income for the years then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 subsidiary as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of America West Holdings Corporation’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 11, 2005, expressed an unqualified opinion on management’s assessment of, and an adverse opinion on the effective operation of, internal control over financial reporting.

As discussed in Note 2 to the accompanying consolidated financial statements, the Company has restated the consolidated balance sheet as of December 31, 2003 and the consolidated statement of changes in stockholders’ equity and comprehensive income for the year then ended. As discussed in Note 13 to the accompanying consolidated financial statements, the Company restated its dilutive earnings per share for the year ended December 31, 2003 in connection with the adoption of Emerging Issue Task Force 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share”.

/s/ KPMG LLP

Phoenix, Arizona
March 11, 2005

41

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
of America West Holdings Corporation:

In our opinion, the accompanying consolidated statements of operations, of cash flows and of stockholders’ equity and comprehensive income for the year ended December 31, 2002 present fairly, in all material respects, the results of operations and cash flows of America West Holdings Corporation and its subsidiaries for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. 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 audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 1(k) to the consolidated financial statements, the Company changed its method of accounting for reorganization value in excess of amounts allocable to identifiable assets in connection with the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” effective January 1, 2002.

PricewaterhouseCoopers LLP
Phoenix, Arizona
March 24, 2003

42

AMERICA WEST HOLDINGS CORPORATION
Consolidated Balance Sheets
December 31, 2004 and 2003
(in thousands except share data)

	2004			2003
				(as restated-See
				Note 2)
Assets
Current assets:
Cash and cash equivalents	$	149,091		$	153,357
Short-term investments		126,651			322,615
Restricted cash		41,264			42,900
Accounts receivable, less allowance for doubtful accounts of $1,487 in 2004 and $5,807 in 2003		108,837			77,235
Expendable spare parts and supplies, less allowance for obsolescence of $14,759 in 2004 and $12,254 in 2003		57,563			58,575
Prepaid expenses		141,571			129,368
Total current assets		624,977			784,050
Property and equipment:
Flight equipment		926,930			858,395
Other property and equipment		290,897			273,284
Equipment purchase deposits		63,450			46,050
		1,281,277			1,177,729
Less accumulated depreciation and amortization		624,742			570,017
		656,535			607,712
Other assets:
Investments in debt securities		30,000			40,740
Restricted cash		72,091			69,876
Other assets, net		91,661			112,007
		193,752			222,623
	$	1,475,264		$	1,614,385
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	151,183		$	103,899
Current obligations under capital leases		3,475			3,442
Accounts payable		173,887			210,288
Air traffic liability		194,718			174,486
Accrued compensation and vacation benefits		42,699			61,045
Accrued taxes		32,796			36,846
Other accrued liabilities		65,958			59,277
Total current liabilities		664,716			649,283
Long-term debt, less current maturities		635,129			688,965
Capital leases, less current obligations		5,061			8,467
Deferred credits and other liabilities		133,911			141,681
Commitments and contingencies (see Note 6)
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 859,117 shares at December 31, 2004 and 2003		8			8
Class B common stock, $.01 par value. Authorized 100,000,000 shares; issued and outstanding 51,564,865 shares in 2004 and 51,239,200 shares in 2003		516			512
Additional paid-in capital		632,446			631,269
Accumulated deficit		(288,617	)		(199,594	)
Less: Cost of Class B common stock in treasury, 16,437,575 shares in 2004 and 16,283,895 shares in 2003		(307,906	)		(306,206	)
Total stockholders’ equity		36,447			125,989
	$	1,475,264		$	1,614,385

See accompanying notes to consolidated financial statements.

43

AMERICA WEST HOLDINGS CORPORATION
Consolidated Statements of Operations
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands except per share data)

	2004			2003			2002
Operating revenues:
Passenger	$	2,196,627		$	2,113,629		$	1,929,444
Cargo		28,233			26,914			27,574
Other		114,097			113,954			90,098
Total operating revenues		2,338,957			2,254,497			2,047,116
Operating expenses:
Salaries and related costs		656,462			660,299			603,657
Aircraft rents		304,343			297,518			295,016
Other rents and landing fees		167,772			154,598			158,290
Aircraft fuel		557,098			375,996			299,284
Agency commissions		25,191			34,457			49,953
Aircraft maintenance materials and repairs		205,580			223,266			252,691
Depreciation and amortization		54,354			66,865			75,201
Special charges (credits), net		(15,432	)		14,370			19,030
Other		427,360			404,993			453,418
Total operating expenses		2,382,728			2,232,362			2,206,540
Operating income (loss)		(43,771	)		22,135			(159,424	)
Nonoperating income (expenses):
Interest income		7,597			6,262			10,549
Interest expense, net		(79,608	)		(79,665	)		(72,442	)
Federal government assistance		—			81,255			8,466
Gain (loss) on disposition of property and equipment		1,460			151			(1,852	)
Gain on sale of investments		—			10,110			—
Gain (loss) on derivative instruments, net		23,782			10,746			(656	)
Other, net		1,547			6,540			602
Total nonoperating income (expenses), net		(45,222	)		35,399			(55,333	)
Income (loss) before income taxes (benefit) and cumulative effect of change in accounting principle		(88,993	)		57,534			(214,757	)
Income tax expense (benefit)		30			114			(35,071	)
Income (loss) before cumulative effect of change in accounting principle		(89,023	)		57,420			(179,686	)
Cumulative effect of change in accounting principle		—			—			(208,223	)
Net income (loss)	$	(89,023	)	$	57,420		$	(387,909	)
Basic earnings (loss) per share:
Earnings (loss) before cumulative effect of change in accounting principle	$	(2.47	)	$	1.66		$	(5.33	)
Cumulative effect of change in accounting principle		—			—			(6.17	)
Basic earnings (loss) per share	$	(2.47	)	$	1.66		$	(11.50	)
Diluted earnings (loss) per share:
Earnings (loss) before cumulative effect of change in accounting principle	$	(2.47	)	$	1.26		$	(5.33	)
Cumulative effect of change in accounting principle		—			—			(6.17	)
Diluted earnings (loss) per share	$	(2.47	)	$	1.26		$	(11.50	)
Shares used for computation:
Basic		36,026			34,551			33,723
Diluted		36,026			56,113			33,723

See accompanying notes to consolidated financial statements.

44

AMERICA WEST HOLDINGS CORPORATION
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)

	2004			2003			2002
Cash flows from operating activities:
Net income (loss)	$	(89,023	)	$	57,420			(387,909	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		54,354			66,865			75,894
Amortization of capitalized maintenance		85,590			105,076			111,576
Amortization of deferred credits		(8,208	)		(10,970	)		(10,077	)
Amortization of deferred rent		6,189			9,514			11,452
Amortization of warrants		7,155			8,100			7,708
Amortization of debt issue costs and guarantee fees		35,752			35,977			24,978
Amortization of bond discount		3,826			3,366			2,894
Amortization of investment discount and premium, net		1,435			899			—
Special charges, net		(15,432	)		14,370			19,055
Gain on sale of investment		—			(3,287	)		—
Cumulative effect of change in accounting principle		—			—			208,223
Other		28,374			7,770			16,746
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash		1,636			(42,900	)		—
Decrease (increase) in accounts receivable, net		(13,337	)		(5,408	)		21,445
Decrease (increase) in expendable spare parts and supplies, net		1,012			(2,681	)		(4,061	)
Increase in prepaid expenses		(49,286	)		(45,932	)		(64,726	)
Decrease (increase) in other assets, net		82			183			5,634
Increase (decrease) in accounts payable		(35,417	)		17,945			(71,488	)
Increase (decrease) in air traffic liability		20,232			4,395			(6,894	)
Increase (decrease) in accrued compensation and vacation benefits		(18,347	)		19,796			(3,050	)
Increase (decrease) in accrued taxes		(4,050	)		1,687			(24,647	)
Increase (decrease) in other accrued liabilities		6,938			(1,689	)		28,348
Increase in other liabilities		1,299			1,294			16,022
Net cash provided by (used in) operating activities		20,774			241,790			(22,877	)
Cash flows from investing activities:
Purchases of property and equipment		(219,383	)		(154,365	)		(157,202	)
Sale of property and equipment		74			—			—
Purchases of short-term investments		(487,505	)		(633,711	)		(69,987	)
Sales of short-term investments		707,774			364,332			45,249
Purchases of investments in debt securities		(35,000	)		(80,436	)		—
Sales of investments in debt securities		20,000			10,300			—
Decrease (increase) in restricted cash		(2,215	)		(23,908	)		—
Proceeds from sales of aircraft		—			—			175,478
Proceeds from sales of other property and equipment		32,372			25,826			122
Proceeds from sale of NLG investment		—			348			—
Net cash provided by (used in) investing activities		16,117			(491,614	)		(6,340	)
Cash flows from financing activities:
Proceeds from issuance of debt		141,354			86,828			435,386
Repayment of debt		(175,640	)		(16,832	)		(192,596	)
Payment of debt issue costs		(1,152	)		(3,236	)		(36,987	)
Other		(5,719	)		671			2,299
Net cash provided by (used in) financing activities		(41,157	)		67,431			208,102
Net increase (decrease) in cash and cash equivalents		(4,266	)		(182,393	)		178,885
Cash and cash equivalents at beginning of year		153,357			335,750			156,865
Cash and cash equivalents at end of year	$	149,091		$	153,357		$	335,750

See accompanying notes to consolidated financial statements.

45

AMERICA WEST HOLDINGS CORPORATION
Consolidated Statements of Stockholders’ Equity and Comprehensive Income
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands except share data)

												ACCUMULATED
	CLASS A			CLASS B		ADDITIONAL			RETAINED			OTHER			CLASS B
	COMMON			COMMON		PAID-IN			EARNINGS/			COMPREHENSIVE			TREASURY
	STOCK			STOCK		CAPITAL			(DEFICIT)			INCOME			STOCK			TOTAL
Balance at December 31, 2001	$	9		$	491	$	593,784		$	130,895		$	1,390		$	(306,206	)	$	420,363
Net loss		—			—		—			(387,909	)		—			—			(387,909	)
Other comprehensive income (loss):
Changes in the fair value of derivative financial instruments, net of tax		—			—		—			—			640			—			640
Total comprehensive income (loss)		—			—		—			(387,909	)		640			—			(387,269	)
Issuance of warrants to purchase Class B common stock		—			—		35,384			—			—			—			35,384
Cancellation of 15,166 shares of Class B common stock issued as restricted stock		—			—		(300	)		—			—			—			(300	)
Balance at December 31, 2002		9			491		628,868			(257,014	)		2,030			(306,206	)		68,178
Net income		—			—		—			57,420			—			—			57,420
Correction of other comprehensive income (a)		—			—		—			—			(2,030	)		—			(2,030	)
Conversion of 82,314 shares of Class A common stock to Class B common stock		(1	)		1		—			—			—			—			—
Issuance of 1,653,908 shares of Class B common stock pursuant to the exercise of stock warrants		—			17		(17	)		—			—			—			—
Issuance of 451,525 shares of Class B common stock pursuant to the exercise of stock options		—			3		2,462			—			—			—			2,465
Cancellation of 3,727 shares of Class B common stock issued as restricted stock		—			—		(44	)		—			—			—			(44	)
Balance at December 31, 2003, as restated		8			512		631,269			(199,594	)		—			(306,206	)		125,989
Net loss		—			—		—			(89,023	)		—			—			(89,023	)
Other comprehensive loss:
Acquisition of 153,680 shares of Class B treasury stock due to default on loan		—			—		—			—			—			(1,700	)		(1,700	)
Issuance of 151,321 shares of Class B common stock pursuant to the exercise of stock warrants		—			2		—			—			—			—			2
Issuance of 174,344 shares of Class B common stock pursuant to the exercise of stock options		—			2		633			—			—			—			635
Accelerated vesting		—			—		544			—			—			—			544
Balance at December 31, 2004	$	8		$	516	$	632,446		$	(288,617	)	$	—		$	(307,906	)	$	36,447

(a) Correction of Other Comprehensive Income – See Note 2, “Restatement of Previously Reported Amounts”

See accompanying notes to consolidated financial statements.

46

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004, 2003 AND 2002

     America West Holdings Corporation (“Holdings” or the “Company”) is a holding company that owns all of the stock of America West Airlines, Inc. (“AWA” or the “Airline”). AWA accounted for most of the Company’s revenues and expenses in 2004. Based on 2004 operating revenues and available seat miles (“ASMs”), AWA is the eighth largest passenger airline in the United States with the lowest cost structure of the eight major hub-and-spoke airlines. At the end of 2004, AWA operated a fleet of 138 aircraft with an average fleet age of 10.7 years and served 63 destinations in North America, including eight in Mexico, three in Canada and one in Costa Rica. Through regional alliance and code share arrangements with other airlines, AWA served an additional 51 destinations in North America and the Middle East as of December 31, 2004. In 2004, AWA flew approximately 21.1 million passengers and generated revenues of approximately $2.3 billion. Prior to 2004, Holdings owned the outstanding stock of The Leisure Company (“TLC”), which sells individual and group travel packages, including air transportation of AWA and Hawaiian Airlines, hotel accommodations, car rentals, cruise packages and other travel products, directly to consumers as well as through retail travel agencies in the United States, Canada, Mexico and Costa Rica. As of January 1, 2004, TLC has been merged into AWA and continues to operate as the America West Vacations division of AWA.

1. Summary of Significant Accounting Policies

     (a) Basis of Presentation

     The consolidated financial statements include the accounts of Holdings and its wholly owned subsidiary AWA, which includes its wholly owned subsidiary Flight Training Center Hangar Plan. All significant intercompany 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 that approximates fair value.

     The Company reclassified investments in auction rate securities previously classified as cash equivalents to short-term investments on the accompanying consolidated balance sheets. Investments reclassified in 2004 and 2003 were $58.4 million and $249.7 million, respectively.

     (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.

     (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, 2004, 2003 and 2002, was $2.2 million, $1.6 million and $3.0 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 30 years for the flight training facility. The estimated useful lives of the Company’s owned aircraft, jet engines, flight equipment and rotable parts range from five to 25 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.

47

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     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. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.

     (e) Restricted Cash

     Restricted cash includes cash deposits securing certain letters of credit and surety bonds and cash deposits held by institutions that process credit card sales transactions. Current restricted cash includes amounts set aside in an irrevocable trust for the redemption of the 10 ³/4% senior unsecured notes that was subsequently paid on January 26, 2005.

     (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.

     In the first quarter of 2004, the Company revised the estimated useful life for certain aircraft and related spare parts inventory as a result of changes in AWA’s fleet plan and for capitalized maintenance on certain of its engines as a result of changes in aircraft utilization. The net impact of this change in estimate decreased the net loss for 2004 by approximately $18.4 million or $0.51 per basic and diluted share.

     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 also been recorded. These estimates are based on historical costs and our assumptions regarding the renewal of aircraft leases.

     (g) Derivative Instruments

     AWA’s fuel hedging contracts do not qualify as cash flow hedges under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). See Note 2, “Restatement of Previously Reported Amounts.” Accordingly, the derivative hedging instruments are recorded as an asset or liability on the balance sheet at fair value and the changes in the fair values are recorded in “Gain (Loss) on Derivative Instruments, Net” in the accompanying consolidated statements of operations. See Note 12, “Nonoperating Income (Expenses) — Other, Net.”

     (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. Transportation-related revenue from the sale of mileage credits is deferred and recognized when transportation is provided.

     (i) Deferred Credits-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, 2004 and 2003, the unamortized balance of the deferred credit was $38.3 million and $44.6 million, respectively.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     In January 2002, AWA closed a $429 million loan supported by a $380 million government loan guarantee. This loan triggered aircraft rent concessions negotiated with approximately 20 aircraft lessors. Approximately $18.1 million of aircraft rent, which was accrued as of December 31, 2001, was waived by the aircraft lessors. This amount has been recorded as a deferred credit in the accompanying consolidated balance sheet and will be amortized over the remaining lives of the applicable leases as a reduction in rent expense. At December 31, 2004 and 2003, the unamortized balance of the deferred credit was approximately $4.2 million and $7.8 million, respectively.

     (j) Passenger Revenue

     Passenger revenue is recognized when transportation is provided. Ticket sales for transportation that 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. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based on the statistical analysis of the Company’s historical data. Any adjustments resulting from periodic evaluations of the estimated air traffic liability are included in results of operations during the period in which the evaluations are completed.

     (k) Reorganization Value in Excess of Amounts Applicable to Identifiable Assets (“ERV”)

     In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 412, “Goodwill and Other Intangible Assets.” SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. SFAS No. 142 does not permit the amortization of goodwill as required by Accounting Principles Board (“APB”) Opinion No. 17, “Intangible Assets.” Rather, goodwill is subject to a periodic impairment test, using a two-step process. The first step is to identify a potential impairment. The second step of the goodwill impairment test measures the amount of the Impairment loss, using a fair value-based approach. Under SFAS No. 142, ERV is reported as goodwill and accounted for in the same manner as goodwill. SFAS No. 142 was affective for fiscal years beginning after December 15, 2001. Upon adoption of this statement on January 1, 2002, the Company recorded an impairment loss of $208.2 million, which was supported by an independent valuation of the Company. The impairment loss was recorded as the cumulative effect of a change in accounting principle.

     (l) Advertising Costs

     The Company expenses the costs of advertising as incurred. Advertising expense for the years ended December 31, 2004, 2003 and 2002 was $8.3 million, $9.0 million and $10.6 million, respectively.

     (m) 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. A valuation allowance is established, if necessary, for the amount of any tax benefits that, based on available evidence, are not expected to be realized.

     (n) Stock Options

     At December 31, 2004, the Company had two stock-based employee compensation plans, which are described more fully in Note 9, “Stock Options and Awards.” The Company accounts for its stock option plans 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. Accordingly, no compensation cost has been recognized for 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, “Accounting for Share-Based Payment,” the Company’s net income (loss) and earnings (loss) per share would have been reduced to the pro forma amounts indicated below:

	2004			2003			2002
	(in thousands except per share data)
Net income (loss), as reported	$	(89,023	)	$	57,420		$	(387,909	)
Stock-based compensation expense, net of income taxes		(5,874	)		(4,320	)		(3,709	)
Pro forma net income (loss)	$	(94,897	)	$	53,100		$	(391,618	)
Earnings (loss) per share:
Basic - as reported	$	(2.47	)	$	1.66		$	(11.50	)
Basic - pro forma	$	(2.63	)	$	1.54		$	(11.61	)
Diluted - as reported	$	(2.47	)	$	1.26		$	(11.50	)
Diluted – pro forma	$	(2.63	)	$	1.19		$	(11.61	)

49

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     (o) New Accounting Standards

     In November 2004, the Emerging Issues Task Force (“EITF”) of the FASB reached a consensus on EITF 04-08, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share,” which requires that issuers of convertible securities with contingent conversion features use the “if-converted” method to calculate reported earnings per share (“EPS”) irrespective of the contingent conversion trigger being met. As approved by the FASB, this change is effective for years ending after December 15, 2004. The Company applied this methodology in the accompanying consolidated statement of operations. The impact of using the “if-converted” method for the Company’s 7.25% Notes is antidilutive for the years ended December 31, 2004 and 2002. For the year ended December 31, 2003, the inclusion of the 7.25% Notes reduced diluted EPS by $0.03 from $1.29 to $1.26.

     In November 2004, the FASB issued Revised Statement No. 123, “Accounting for Share-Based Payment” (“SFAS No. 123R”). This statement requires the Company to recognize the grant-date fair value of stock options in the Statement of Operations. In addition, the Company will be required to calculate this compensation using the fair-value based method, versus the intrinsic value method previously allowed under SFAS No. 123. This revision is effective for periods beginning after June 15, 2005. Accordingly, the Company will adopt this revised SFAS effective July 1, 2005. The Company is currently evaluating how it will adopt SFAS No. 123R and has not determined the method it will use to value granted stock options. The adoption of SFAS No. 123R is expected to have a material effect on the Company’s results of operations. See Note 1, “Summary of Significant Accounting Policies” (m) “Stock Options” for the Company’s disclosure of the impact of the compensation cost associated with stock options under SFAS No. 123.

     (p) 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 accounting principles generally accepted in the United States. Actual results could differ from those estimates.

     (q) Reclassifications

     The Company reclassified amounts related to settled fuel hedge transactions and mark-to-market adjustments on open hedge instruments from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net” in the accompanying consolidated statement of operations. In fiscal years 2004 and 2003, such amounts reduced fuel expense while in fiscal years 2002 and 2001, such amounts increased fuel expense, as originally classified. The amounts reclassified are as follows:

Fiscal Year	Amounts Reclassified
	(in thousands)
2004	$	30,529
2003		10,746
2002		(656	)

2. Restatement of Previously Reported Amounts

     Derivative Instruments

     In February 2005, management undertook a review of the Company’s accounting for its fuel hedging transactions. As a result of this review, management concluded that the Company’s fuel hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting principles. Accordingly, management concluded that the financial statements for prior periods required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and statements of stockholders equity and comprehensive income of Holdings and AWA. Specifically, (i) Holdings has restated its balance sheet and statement of stockholders’ equity and comprehensive income as of and for the year ended December 31, 2003, and (ii) AWA has restated its balance sheet and statement of stockholder’s equity and comprehensive income as of and for the year ended December 31, 2003, and (iii) Holdings and AWA have restated their 2004 and 2003 interim financial results to correct the aforementioned accounting errors. The unaudited interim results as originally reported and as restated are presented in Note 16, “Quarterly Financial Data (Unaudited).” The Company restated its 2003 consolidated balance sheet to reduce the carrying value of its derivative instruments asset by $12.5 million, which served to record the asset at fair value of open contracts as of December 31, 2003. The restatement also eliminated $12.5 million in accumulated other comprehensive income, $2.0 million of which was previously recorded in the 2003 beginning balance of accumulated other comprehensive income. The restated amount of other assets is $112 million in the accompanying 2003 consolidated balance sheet. The restatement eliminates the balance in accumulated other comprehensive income in the accompanying 2003 consolidated balance sheet and consolidated statement of stockholders’ equity and comprehensive income.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

3. Investments in Debt Securities

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

	2004		2003
	(in thousands)
Cash and cash equivalents:
Corporate notes	$	—	$	4,206
Cash and money market funds		147,586		147,647
U.S. government securities		1,505		1,504
Total cash and cash equivalents	$	149,091	$	153,357
Short-term investments:
Corporate notes	$	126,651	$	318,845
U.S. government securities		—		3,770
Total short-term investments		126,651		322,615
Total cash equivalents and short-term investments	$	275,742	$	475,972

     In addition, the Company had long-term investments in debt securities of $30.0 million and $40.7 million as of December 31, 2004 and 2003, respectively. Long-term investments consist of cash invested in certain debt securities with maturities greater than one year. The debt securities are classified as held to maturity and are carried at amortized cost that approximates fair value.

4. 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.

     Investments in Equity Securities

     In May 2000, Holdings completed the sale of a majority interest in The Leisure Company, (“TLC”), currently operating as a division in AWA as America West Vacations, 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. In response to additional capital calls, TLC invested an additional $1.2 million in National Leisure Group during 2001. The investment was carried on the Company’s consolidated balance sheet at cost, which approximated $7.7 million at December 31, 2002. In the fourth quarter of 2003, Holdings completed the sale of its 12% interest in National Leisure Group to PAR Capital. PAR Capital owned $10.45 million face value of the Company’s 10 3/4% senior unsecured notes. PAR Capital purchased the Company’s investment in National Leisure Group in exchange for the $10.45 million face value of the 10 3/4% notes plus $0.3 million in cash. This resulted in a $3.3 million nonoperating gain. See Note 12, “Nonoperating Income (Expenses) – Other, Net.”

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     Long-term Debt

     At December 31, 2004 and 2003, the fair value of long-term debt was approximately $721.5 million and $845.6 million, respectively. The Company’s variable rate long-term debt with a carrying value of $545.7 million and $555.9 million at December 31, 2004 and 2003, respectively, approximates fair value because these borrowings have variable interest rate terms that approximate market interest rates for similar debt instruments. The fair values of the Company’s other long-term debt are determined based on quoted market prices if available or market prices for comparable debt instruments.

     (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. As of December 31, 2004, the Company had entered into costless collar and basis swap transactions hedging approximately 42% of its projected 2005 fuel requirements. The fair value of the Company’s financial derivative instruments was a net asset of approximately $0.2 million and $2.7 million at December 31, 2004 and 2003, respectively. See Note 2, “Restatement of Previously Reported Amounts.”

     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 from tickets sold by other airlines and used by passengers on AWA. These receivables are short-term, generally being settled shortly after the sale.

     5. Long-Term Debt

     Long-term debt at December 31, 2004 and 2003 consists of the following:

	2004			2003
	(in thousands)
Secured
Equipment notes payable, variable interest rates of 2.88% to 3.37%, averaging 2.96%, installments due 2005 through 2008	$	39,464		$	48,454
GECC term loan, variable interest rate of 6.41%, quarterly installments beginning 2006 through 2010 (a)		110,564			—
Term loan, variable interest rate, paid off September 2004 (a)		—			74,775
Senior secured discount notes, variable interest rate of 6.42%, installments due 2005 through 2009 (b)		35,988			—
		186,016			123,229
Unsecured
Government guaranteed loan, variable interest rate of 2.38%, installments due 2005 through 2008 (c)		343,200			429,000
10 3/4% senior unsecured notes, interest only payments until due in 2005 (d)		39,548			39,548
7.5% convertible senior notes, interest only payments until due in 2009 (e)		112,299			104,328
7.25% senior exchangeable notes, due 2023 with cash interest at 2.49% payable through 2008 and original issue discount of 7.25% thereafter (f)		252,695			252,695
Equipment notes payable, interest rates of 90-day LIBOR +1.25%, averaging 3.61%, installments due through 2005		15,750			5,250
Industrial development bonds, fixed interest rate of 6.3% due 2023 (g)		29,300			29,300
State loan, variable interest rate of 5.97%, installments due 2005 through 2007		750			1,500
		793,542			861,621
Total long-term debt		979,558			984,850
Less: Unamortized discount on debt		(193,246	)		(191,986	)
Current maturities		(151,183	)		(103,899	)
	$	635,129		$	688,965

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(a)	On September 10, 2004, AWA entered into a term loan financing with GECC providing for loans in an aggregate amount of $110.6 million. AWA used approximately $77.0 million of the proceeds from this financing to repay in full its term loan with Mizuho Corporate Bank, Ltd. and certain other lenders and to pay certain costs associated with this transaction. AWA used the remaining proceeds for general corporate purposes. The new term loan financing consists of two secured term loan facilities: a $75.6 million term loan facility secured primarily by spare parts, rotables and appliances (the “Spare Parts Facility”); and a $35.0 million term loan facility secured primarily by aircraft engines and parts installed in such engines (the “Engine Facility”).
	The facilities are cross-collateralized on a subordinated basis and the collateral securing the facilities also secures on a subordinated basis certain of AWA’s other existing debt and lease obligations to GECC and its affiliates.
	The loans under the Spare Parts Facility are payable in full at maturity on September 10, 2010. The loans under the Engine Facility are payable in equal quarterly installments of $1.3 million beginning on March 10, 2006 through June 10, 2010 with the remaining loan amount of $11.8 million payable at maturity on September 10, 2010. The loans under each facility may be prepaid in an amount not less than $5 million at any time after the 30th monthly anniversary of the funding date under such facility. If AWA fails to maintain a certain ratio of rotables to loans under the Spare Parts Facility, it may be required to pledge additional rotables or cash as collateral, provide a letter of credit or prepay some or all of the loans under the Spare Parts Facility. In addition, the loans under the Engine Facility are subject to mandatory prepayment upon the occurrence of certain events of loss applicable to, or certain dispositions of, aircraft engines securing the facility.
	Principal amounts outstanding under the loans bear interest at a rate per annum based on three-month LIBOR plus a margin. Both facilities contain customary events of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.
(b)	On December 27, 2004, AWA raised additional capital by financing its Phoenix maintenance facility and flight training center. The flight training center was previously unencumbered, and the maintenance facility became unencumbered earlier this year when AWA refinanced its term loan. Using its leasehold interest these two facilities as collateral, AWA, through a wholly owned subsidiary named FTCHP LLC, raised $30.8 million through the issuance of a senior secured discount notes. The notes were issued by FTCHP at a discount pursuant to the terms of a senior secured term loan agreement among the Company, FTCHP, Heritage Bank, SSB, as administrative agent, Citibank, N.A., as the initial lender, and the other lenders from time to time party thereto. Citibank, N.A. subsequently assigned all of its interests in the notes to third party lenders.
	AWA has fully and unconditionally guaranteed the payment and performance of FTCHP’s obligations under the notes and the loan agreement. The notes require aggregate principal payments of $36 million with principal payments of $1.5 million due on each of the first two anniversary dates and the remaining principal amount due on the fifth anniversary date. The notes may be prepaid in full at any time (subject to customary LIBOR breakage costs) and in partial amounts of $1.5 million on the third and fourth anniversary dates. The unpaid principal amount of the notes bears interest based on LIBOR plus a margin subject to adjustment based on a loan to collateral value ratio.
	The loan agreement contains customary covenants applicable to loans of this type, including obligations relating to the preservation of the collateral and restrictions on the activities of FTCHP. In addition, the loan agreement contains events of default, including payment defaults, cross-defaults to other debt of FTCHP, if any, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.
	In connection with this financing, AWA sold all of its leasehold interests in the maintenance facility and flight training center to FTCHP and entered into subleases for the facilities with FTCHP at lease rates expected to approximate the interest payments due under the notes. In addition, AWA agreed to make future capital contributions to FTCHP in amounts sufficient to cover principal payments and other amounts owing pursuant to the notes and the loan agreement.
	The proceeds from this financing, together with $10.5 million from operating cash flow, were irrevocably deposited with the trustee for AWA’s 10 3/4% senior unsecured notes due 2005 and subsequently redeemed on January 26, 2005.
(c)	In January 2002, AWA closed a $429 million loan backed by a $380 million federal loan guarantee provided by the Air Transportation Stabilization Board (the “ATSB”). Certain third-party counter-guarantors have fully and unconditionally guaranteed the payment of an aggregate of $45 million of the outstanding principal amount under the government guaranteed loan plus accrued and unpaid interest thereon. In addition, Holdings has fully and unconditionally guaranteed the payment of all principal, premium, interest and other

53

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

obligations outstanding under the government guaranteed loan and has pledged the stock of AWA to secure its obligations under such guarantee. Principal amounts under this loan become due in ten installments of $42.9 million on each March 31 and September 30, commencing on March 31, 2004 and ending on September 30, 2008. Principal amounts outstanding under the government guaranteed loan bear interest at a rate per annum equal to LIBOR plus 40 basis points.

Subject to certain exceptions, AWA is required to prepay the government guaranteed loan with:

•   the net proceeds of all issuances of debt or equity by either Holdings or AWA after January 2002;

•   proceeds from asset sales in excess of $20 million in any fiscal year; and

•   insurance proceeds in excess of $2 million to the extent such proceeds are not used to restore or replace the assets from which such proceeds are derived.

	In addition, AWA is required to prepay the government guaranteed loan upon a change in control and we may be required to prepay portions of the loan if our employee compensation costs exceed a certain threshold. AWA may, at its option, prepay the government guaranteed loan without premium or penalty, subject to reimbursement of the lenders’ breakage costs in the case of prepayment of LIBOR loans.
	The government guaranteed loan requires that AWA maintain a minimum cash balance of $100 million. In addition, the government loan contains customary affirmative covenants and the following negative covenants: restrictions on liens, investments, restricted payments, fundamental changes, asset sales and acquisitions, the creation of new subsidiaries, sale and leasebacks, transactions with affiliates, the conduct of business, mergers or consolidations, issuances and dispositions of capital stock of subsidiaries, and amendments to other indebtedness. The government guaranteed loan contains customary events of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.
(d)	In August 1995, AWA issued $75.0 million principal amount of 10 3/4% senior unsecured notes due 2005 of which $39.5 million remained outstanding at December 31, 2004. Interest on the 10 3/4% senior unsecured notes is payable semiannually in arrears on March 1 and September 1 of each year. On December 27, 2004, AWA called for the redemption on January 26, 2005 of all of the senior unsecured notes at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest through the redemption date. In addition, AWA irrevocably deposited the $30.8 million raised through the maintenance facility and flight training center financing, together with an additional $10.5 million from its operating cash flow, with the trustee for the senior unsecured notes. The senior notes were subsequently redeemed on January 26, 2005.
(e)	In connection with the closing of the government guaranteed loan and the related transactions, Holdings issued $104.5 million of 7.5% convertible senior notes due 2009, of which approximately $112.3 million remained outstanding at December 31, 2004 (including $21.6 million of interest paid through December 31, 2004 as a deemed loan added to the initial principal thereof). Beginning January 18, 2005, these notes are convertible into shares of class B common stock, at the option of the holders, at an initial conversion price of $12.00 per share or a conversion ratio of approximately 83.333 shares per $1,000 principal amount of such notes, subject to standard anti-dilution adjustments. Interest on the 7.5% convertible senior notes is payable semiannually in arrears on June 1 and December 1 of each year. At Holdings’ option, the first six interest payments were payable in the form of a deemed loan added to the principal amount of these notes. The 7.5% convertible senior notes will mature on January 18, 2009 unless earlier converted or redeemed. The payment of principal, premium and interest on the 7.5% convertible senior notes is fully and unconditionally guaranteed by AWA.
	Holdings may redeem some or all of the 7.5% convertible senior notes at any time before January 18, 2005, at a redemption price equal to $1,000 per note to be redeemed if (A) the closing price of the class B common stock has exceeded 120% of the conversion price then in effect for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date of the mailing of the redemption notice, and (B) a shelf registration statement covering resales of the notes and the class B common stock issuable upon conversion thereof is effective and available for use and is expected to remain effective and available for use for the 30 days following the redemption date, unless registration is no longer required. Holdings may redeem the 7.5% convertible senior notes, in whole or in part, on or after January 18, 2005 at the following redemption prices (expressed as percentages of the principal amount thereof), if redeemed during the twelve-month period commencing on January 18 of the years set forth below, plus, in each case, accrued and unpaid interest, if any, to the date of redemption:

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Year	Redemption Price
2005		103.75	%
2006		102.50	%
2007		101.25	%
2008 and thereafter		100.00	%

	For financial reporting purposes, the Company recorded the convertible senior notes at their fair market value on the date of issuance. The balance at December 31, 2004 is net of an unamortized discount of $22.2 million.
(f)	In July and August of 2003, AWA completed a private placement of approximately $86.8 million issue price of 7.25% Senior Exchangeable Notes due 2023. The notes bear cash interest at 2.49% per year until July 30, 2008. Thereafter, the notes will cease bearing cash interest and begin accruing original issue discount daily at a rate of 7.25% per year until maturity. Each note was issued at a price of $343.61 and is exchangeable for class B common stock of Holdings at an exchange ratio of 32.038 shares per $1,000 principal amount at maturity of the notes (subject to adjustment in certain circumstances). This represents an equivalent conversion price of approximately $10.73 per share. The aggregate amount due at maturity, including accrued original issue discount from July 31, 2008, will be $252,695,000. The notes are unconditionally guaranteed on a senior unsecured basis by Holdings.
	Holders may exchange their notes for the shares of class B common stock of Holdings in any fiscal quarter commencing after September 30, 2003, if, as of the last day of the preceding fiscal quarter, the closing sale price of the class B common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such preceding fiscal quarter is more than 110% of the accreted exchange price per share of Class B common stock on the last day of such preceding fiscal quarter. If the foregoing condition is satisfied, then the notes will be exchangeable at any time at the option of the holder through maturity. The accreted exchange price per share as of any day will equal the issue price of a note plus accrued original issue discount to that day divided by 32.038, subject to any adjustments to the exchange rate through that day.
	On or before July 30, 2018, a holder also may exchange its notes for shares of the Class B common stock at any time after a 10 consecutive trading-day period in which the average of the trading prices for the notes for that 10 trading-day period was less than 103% of the average exchange value for the notes during that period. Exchange value is equal to the product of the closing sale price for the shares of Class B common stock on a given day multiplied by the then current exchange rate, which is the number of shares of Class B common stock for which each note is then exchangeable.
	In addition, the holders may exchange the notes if the notes have been called for redemption or if certain specified corporate transactions have occurred.
	Holders of the notes may require AWA to repurchase the notes at a price equal to the original issue price plus accrued cash interest and original issue discount, if any, on July 30, 2008, 2013 and 2018. The purchase price of such notes may be paid in cash or class B common stock of Holdings, subject to certain restrictions. In addition, each holder may require AWA to purchase all or a portion of such holder’s notes upon the occurrence of certain change of control events concerning AWA or Holdings. AWA may redeem the notes, in whole or in part, on or after July 30, 2008 at a price equal to the original issue price plus accrued cash interest and original issue discount, if any.
(g)	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% on April 1 or October 1, 2008; 101% on April 1 or October 1, 2009; and 100% on April 1, 2010 and thereafter.

     Secured financings totaling $186.0 million are collateralized by assets, primarily aircraft, engines, simulators, rotable aircraft parts and AWA’s hangar facility, with a net book value of $268.4 million at December 31, 2004.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     At December 31, 2004, the estimated maturities of long-term debt are as follows:

	(in thousands)
2005		151,183
2006		101,042
2007		100,509
2008		107,570
2009		147,327
Thereafter		371,927
	$	979,558

     Certain of the Company’s long-term debt agreements contain minimum cash balance requirements and other covenants with which Holdings and AWA are in compliance. Certain of these covenants restrict the Company’s ability to pay cash dividends on its common stock and make certain other restricted payments (as specified therein). Finally, AWA’s long-term debt agreements contain cross-default provisions, which may be triggered by defaults by AWA under other agreements relating to indebtedness.

6. Commitments and Contingencies

     (a) Leases

     As of December 31, 2004, the Company had 136 aircraft under operating leases, including four aircraft that will be delivered in 2005, with remaining terms ranging from five months to approximately 19 years. In January 2002, in connection with the government guaranteed loan, AWA restructured its aircraft lease commitments. Under the restructured lease agreements, annual rent payments have been reduced for each of the next five years. Certain of these leases contain put options pursuant to which the lessors could require AWA to renew the leases for periods ranging from eight months to approximately nine years or call options pursuant to which the lessors could require AWA to return the aircraft to the lessors upon receipt of six to nine months written notice. The Company also 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 supplemental rent payments.

     Since AWA’s restructuring in 1994, AWA has set up 19 pass through trusts, which have issued over $1.4 billion of pass through trust certificates (also known as “Enhanced Equipment Trust Certificates” or “EETC”) covering the financing of 54 aircraft. These trusts are off-balance sheet entities, the primary purpose of which is to finance the acquisition of aircraft. Rather than finance each aircraft separately when such aircraft is purchased or delivered, these trusts allow the Company to raise the financing for several aircraft at one time and place such funds in escrow pending the purchase or delivery of the relevant aircraft. The trusts are also structured to provide for certain credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust certificates and, as a result, reduce the cost of aircraft financings to AWA.

     Each trust covered a set amount of aircraft scheduled to be delivered within a specific period of time. At the time of each covered aircraft financing, the relevant trust used the funds in escrow to purchase equipment notes relating to the financed aircraft. The equipment notes were issued, at AWA’s election, either by AWA in connection with a mortgage financing of the aircraft or by a separate owner trust in connection with a leveraged lease financing of the aircraft. In the case of a leveraged lease financing, the owner trust then leased the aircraft to AWA. In both cases, the equipment notes are secured by a security interest in the aircraft. The pass through trust certificates are not direct obligations of, nor guaranteed by, Holdings or AWA. However, in the case of mortgage financings, the equipment notes issued to the trusts are direct obligations of AWA and in the case of leveraged lease financings, the leases are direct obligations of AWA. In addition, neither Holdings nor AWA guarantee or participate in any way in the residual value of the leased aircraft. All aircraft financed by these trusts are currently structured as leveraged lease financings, which are not reflected as debt on the balance sheets of either AWA or Holdings. The Company does not provide residual value guarantees under these lease arrangements. Each lease contains a purchase option that allows the Company to purchase the aircraft at a fixed price, which at the inception of the lease approximated the aircraft’s expected fair market value at the option date, near the end of the lease term. These leasing entities meet the criteria for variable interest entities. However, they do not meet the consolidation criteria under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” because the Company is not the primary beneficiary under these arrangements.

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     As a result of the rent restructuring associated with the government guaranteed loan, one aircraft lease was amended to include a bargain purchase option. As a result, this lease has been classified as a capital lease in accordance with SFAS No. 13, “Accounting for Leases,” as amended, with an asset value of $14.8 million which includes accumulated amortization of $2.1 million and corresponding lease obligation of $8.5 million at December 31, 2004.

     In January 2004, one aircraft lessor exercised its put rights under the aircraft lease agreement to extend the lease for one Boeing 737-300 aircraft for an additional 33 months.

     The Company also leases certain terminal space, ground facilities and computer and other equipment under noncancelable operating leases.

     At December 31, 2004, the scheduled future minimum cash rental payments under capital leases and noncancelable operating leases with initial terms of more than one year are as follows:

	Capital			Operating
Years Ending December 31,	Leases			Leases
	(in thousands)
2005	$	4,659		$	361,671
2006		4,988			335,412
2007		1,773			314,892
2008		—			264,017
2009		—			238,074
Thereafter		—			1,719,934
Total minimum lease payments		11,420		$	3,234,000
Less: Amounts of lease payments that represent interest		(2,884	)
Present value of future minimum capital lease payments		8,536
Less: Current obligations under capital leases		(3,475	)
Long-term capital lease obligations	$	5,061

     Rent expense (excluding landing fees) was approximately $421.1 million, $406.8 million and $409.4 million for the years ended December 31, 2004, 2003 and 2002, respectively.

     Collectively, the operating lease agreements require security deposits with lessors of $24.0 million, which have been classified as “Other Assets, Net” in the accompanying consolidated balance sheets, and bank letters of credit of $13.8 million. The letters of credit are collateralized by $13.9 million of restricted cash.

     (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. In accordance with EITF Issue No. 97-10, “The Effect of Lessee Involvement in Asset Construction,” the Company accounts for this as an operating lease.

     In connection with these bonds, AWA entered into an Amended and Restated Airport Use Agreement, pursuant to which AWA agreed to make sufficient payments to the Industrial Development Authority (“IDA”) to cover the principal and interest of the bonds and to indemnify the IDA for any claims arising out of the issuance and sale of the bonds and the use and occupancy of the concourses financed by these bonds and the old bonds. At December 31, 2004, the outstanding principal amount of the bonds was $21.8 million. The Company estimates its remaining payments to cover the principal and interest of these bonds will be approximately $43.6 million.

     In addition, the Company is also the lessee under certain long-term leases at various airports. At certain of these airports, municipalities have issued revenue bonds to improve airport facilities that are leased by the Company and accounted for as operating leases. The Company does not guarantee the underlying debt related to these operating leases.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     (c) Aircraft Acquisitions

     In August 2004, AWA amended its aircraft purchase contract with AVSA S.A.R.L., an affiliate of Airbus Industrie or “AVSA,” to acquire 22 Airbus A320 family aircraft (thirteen A320s and nine A319s), all powered by V2500 engines from International Aero Engines. Of the 22 aircraft, it is anticipated that 18 will be purchased directly from the manufacturer and four have been leased under noncancelable leases from various lessors for aircraft to be delivered in 2005. In the context of this incremental order, AWA also secured extensive flexibility from Airbus with respect to its existing A318 order, allowing AWA to better react to market conditions by enabling it to amend its 15 A318 delivery positions to A319s and A320s, if it so desires, or to take no additional aircraft under certain conditions.

     The Company has an agreement with International Aero Engines or “IAE,” which provides for the purchase by the Company of seven new V2500-A5 spare engines scheduled for delivery through 2007 for use on certain of the Airbus A320 fleet. At December 31, 2004, the seven engines have an estimated gross cost of $39 million.

     The following table reflects estimated net cash payments under the restructured aircraft purchase agreement with AVSA and the IAE engine contract. Actual payments may vary due to inflation factor adjustments and changes in the delivery schedule of the equipment.

	(in thousands)
2005	$	272,820
2006		456,891
2007		47,697
	$	777,408

     (d) Sale-Leaseback Transactions

     In the fourth quarter of 2004, the Company completed two separate aircraft sale-leaseback transactions on one Airbus A320 aircraft and one Airbus A319 aircraft resulting in a combined loss of $4.6 million. This amount was recorded in “Other Operating Expenses.”

     In May 2004, the Company completed a sale-leaseback transaction on one V2500-A5 engine resulting in a gain of $2.9 million which has been deferred and will be amortized over the lease term of seven years.

     In July 2004, the Company completed a sale-leaseback transaction on one V2500-A5 engine resulting in a gain of $0.8 million which has been deferred and will be amortized over the lease term of seven years.

     As part of the restructuring completed on January 18, 2002, AWA committed to the sale and leaseback of eight aircraft. The sales and leaseback of six of these aircraft were completed in 2002 and resulted in losses of approximately $3.8 million. The sale and leaseback of one aircraft was completed in June 2003 and resulted in a loss of approximately $0.6 million. The sale and leaseback of the final aircraft was completed in September 2003 and resulted in a loss of approximately $0.7 million. The losses on the sale-leaseback transactions, which were subject to a firm commitment in January 2002, were accrued in the accompanying consolidated statements of operations classified in “Special Charges” in the first quarter of 2002. See Note 11, “Special Charges.”

     (e) Contingent Legal Obligations

     Holdings and its subsidiaries are parties to various legal proceedings, including some purporting to be class action suits, and some that demand large monetary damages or other relief, which, if granted, would require significant expenditures. In certain cases where it is probable that the outcome will result in monetary damages, the Company has reviewed available information and determined that the best estimate of losses to be incurred related to these cases is $2 million, which has been accrued. For those cases where a loss is possible, or cases where a range of loss is probable but no amount within the range is a better estimate than any other amount, the estimated amount of additional exposure ranges from $0 to $25 million. In these instances, no accrual has been recorded.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     (f) General Guarantees and Indemnifications

     The Company is the lessee under many aircraft financing agreements (including leveraged lease financings of aircraft under the pass through trusts) and real estate leases. It is common in such transactions for the Company as the lessee to agree to indemnify the lessor and other related third parties for the manufacture, design, ownership, financing, use, operation and maintenance of the aircraft, and for tort liabilities that arise out of or relate to the Company’s use or occupancy of the leased asset. In some cases, this indemnity extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by their gross negligence or willful misconduct. Additionally, in the case of real estate leases, the Company typically indemnifies such parties for any environmental liability that arises out of or relates to the Company’s use of the leased premises. The Company expects that it would be covered by insurance (subject to deductibles) for most tort liabilities and related indemnities described above with respect to leased real estate and operated aircraft.

7. Income Taxes

     The Company recorded income tax expense (benefit) as follows:

	Year Ended December 31,
	2004		2003		2002
	(in thousands)
Federal	$	—	$	114	$	(35,071	)
State		30		—		—
Total current taxes		30		114		(35,071	)
Deferred taxes		—		—		—
Total income tax expense (benefit)	$	30	$	114	$	(35,071	)

     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 that result in an effective tax expense (benefit) rate for financial reporting purposes that differs from the current federal statutory income tax rate of 35%.

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

	Year Ended December 31,
	2004			2003			2002
	(in thousands)
Income tax expense (benefit) at the federal statutory income tax rate	$	(31,148	)	$	20,137		$	(75,165	)
State income tax expense (benefit), net of federal income tax expense (benefit)		(3,196	)		2,383			(8,024	)
State rate change		—			(3,229	)		—
Change in valuation allowance		32,492			(17,334	)		38,137
Expired tax credits		—			—			7,987
Other, net		1,882			(1,843	)		1,994
Total	$	30		$	114		$	(35,071	)

     As of December 31, 2004, the Company has available net operating loss carryforwards (“NOLs”) and tax credit carryforwards for federal income tax purposes of approximately $451.4 million and $1.1 million, respectively. The NOLs expire during the years 2007 through 2024 while approximately $0.2 million of the tax credit carryforwards will expire in 2005 and 2006. The Company also had capital loss carryforwards for federal income tax purposes of approximately $1.4 million which expire in 2009. However, such carryforwards are not 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 NOLs and tax credit carryforwards may be restricted.

     In September 2003, Holdings filed its 2002 consolidated income tax return with the IRS, which included a claim to carryback losses incurred in 2002 to the tax years 1999 and 2000. This resulted in a refund of approximately $3.1 million, of which substantially all was received in the fourth quarter of 2003.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     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:

	2004			2003
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	184,515		$	126,219
Aircraft leases		13,585			17,347
Vacation accrual		13,407			11,948
Frequent flyer accrual		6,592			5,958
Restructuring and other reserves		3,626			3,858
Tax credit carryforwards		1,112			1,112
Other		3,144			2,767
Gross deferred tax assets		225,981			169,209
Deferred tax liabilities:
Accelerated depreciation and amortization		(95,365	)		(70,534	)
Partnership losses		(1,421	)		(1,420	)
Other		(229	)		(781	)
Gross deferred tax liabilities		(97,015	)		(72,735	)
Net deferred tax assets before valuation allowance		128,966			96,474
Less valuation allowance		(128,966	)		(96,474	)
Net deferred liability		—			—

     SFAS No. 109, “Accounting for Income Taxes,” requires that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the company’s performance, the market environment in which the company operates, forecasts of future profitability, the utilization of past tax credits, length of carryforward periods and similar factors. SFAS No. 109 further states that it is difficult to conclude that a valuation allowance is not needed when there is negative evidence such as cumulative losses in recent years. Therefore, cumulative losses weigh heavily in the overall assessment.

     The Company was in a cumulative loss position three out of four years between December 31, 2001 through December 31, 2004, which weighed heavily in the overall determination that a valuation allowance was needed. As of December 31, 2004, the Company had recorded a valuation allowance of $129.0 million against its net deferred tax assets. The Company expects to continue to record a full valuation allowance on any future tax benefits until we have achieved several quarters of consecutive profitable results coupled with an expectation of continued profitability. As of December 2004 and 2003, the valuation allowance totaled $129.0 million and $96.5 million, respectively.

8. Capital Stock

     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.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     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, Holdings 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, Holdings repurchased approximately 16.5 million shares of Class B common stock and 7.4 million warrants to purchase Class B common stock. Holdings has not repurchased any Class B common stock during the last four fiscal years. Holdings’ stock repurchase program expired on December 31, 2002. The terms of the government guaranteed loan restricted the Company’s ability to repurchase shares of its stock prior to repayment of the loan in full.

     In March and April 2004, Holdings reacquired 153,680 shares of Class B common stock from a former executive in payment for approximately $1.7 million of nonrecourse loans made by Holdings between 1994 and 1997.

     Warrants

     As compensation for various elements of the Company’s financial restructuring completed in January 2002, Holdings issued a warrant to purchase 18.8 million shares of its Class B common stock to the federal government and additional warrants to purchase 3.8 million shares of its Class B common stock to other loan participants, in each case at an exercise price of $3 per share and a term of ten years. For accounting purposes, the warrants were valued at $35.4 million, or $1.57 per share, using the Black-Scholes pricing model with the following assumptions: expected dividend yield of 0.0%, risk-free interest rate of 4.8%, volatility of 44.9% and an expected life of ten years. This amount has been recorded in the accompanying consolidated balance sheets, classified as “Other Assets, Net,” and will be amortized over the life of the government guaranteed loan as an increase to interest expense. In the first quarter of 2004, approximately 220,000 warrant were exercised at $3 per share. In the third quarter of 2003, approximately 2.6 million warrants were exercised at $3 per share. These warrant exercises were cashless transactions resulting in the issuance of approximately 1.6 million shares of Holdings’ Class B common stock.

9. Stock Options and Awards

     Under the 1994 Incentive Equity Plan, as amended (the “1994 Incentive Plan”), the Company’s Board of Directors (the “Board”) was authorized to grant stock options to officers and key employees. The maximum number of shares of Class B common stock authorized for issuance under the Plan was 9.0 million shares.

     As of March 27, 2002, only 205,831 shares of the Company’s Class B common stock remained available for future grants under the 1994 Incentive Plan. As of that date, although awards covering an aggregate of 6,799,570 shares of Class B common stock remained outstanding under the 1994 Incentive Plan, all options granted prior to December 31, 2001 were significantly out-of-the-money (based on the $5.55 per share closing price of the Company’s Class B common stock as reported on the New York Stock Exchange on March 27, 2002) due to the significant drop in the price of the Company’s stock during 2001 (largely as a result of the events of September 11, 2001 and its aftermath). Consequently, these options had lost substantially all value as retention and incentive tools. The Board is strongly opposed to repricing outstanding stock options and, in connection with the government guaranteed loan, the Company agreed not to reprice any outstanding stock options so long as the loan remains outstanding.

     For these reasons, on March 27, 2002, the Board adopted the Company’s 2002 Incentive Equity Plan (the “2002 Incentive Plan”). A total of 8.0 million shares of Class B common stock, which the Company believes will be adequate to fund the requirements under its long-term compensation arrangements through 2005, have been reserved for issuance under the 2002 Incentive Plan. At the same time, the Board determined that, regardless of share availability, no new awards will be granted under the 1994 Incentive Plan following stockholder approval of the 2002 Incentive Plan. In May 2002, the Company’s stockholders approved the adoption of the 2002 Incentive Plan.

     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. At December 31, 2004, approximately 2.5 million shares are available for grant under the 2002 Incentive Plan.

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     Stock option activity during the years indicated is as follows:

				Weighted
	Number of			Average
1994 Plan	Shares			Exercise Price
Balance at December 31, 2001:		5,288,886		$	15.74
Granted		986,987		$	3.79
Exercised		—			—
Canceled		(362,267	)	$	11.38
Balance at December 31, 2002:		5,913,606		$	14.01
Granted		—			—
Exercised		(235,737	)	$	6.09
Canceled		(1,088,089	)	$	15.33
Balance at December 31, 2003:		4,589,780		$	14.10
Granted		—			—
Exercised		(23,672	)	$	3.80
Canceled		(506,046	)	$	9.90
Balance at December 31, 2004:		4,060,062		$	14.69

	Number of			Average
2002 Plan	Shares			Exercise Price
Balance at December 31, 2002:		2,021,963		$	5.00
Granted		1,780,600		$	3.68
Exercised		(215,788	)	$	4.78
Canceled		(182,661	)	$	4.77
Balance at December 31, 2003:		3,404,114		$	4.34
Granted		1,973,100		$	10.10
Exercised		(150,672	)	$	3.63
Canceled		(138,513	)	$	7.09
Balance at December 31, 2004:		5,088,029		$	6.52

     At December 31, 2004, options outstanding and exercisable by price range for both plans 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
$1.93 to $3.80		2,192,083		7.82	$	2.98		1,067,382	$	3.12
$4.88 to $9.92		1,846,703		6.17	$	6.28		1,049,239	$	6.02
$10.13 to $10.75		1,831,766		8.90	$	10.54		516,266	$	10.48
$10.82 to $17.94		1,845,964		3.96	$	13.26		1,831,298	$	13.26
$18.06 to $29.19		1,431,575		3.80	$	21.58		1,431,575	$	21.58
		9,148,091		6.30	$	10.14		5,895,760	$	11.91

     There were 4,959,604 and 4,669,601 stock options exercisable as of December 31, 2003 and December 31, 2002, respectively. The per share weighted-average fair value of stock options granted during 2004, 2003 and 2002 was $4.50, $2.03 and $2.87, respectively, on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: 2004 - - expected dividend yield of 0.0%, risk-free interest rate of 3.4%, volatility of 54.0% and an expected life of five years; 2003 — expected dividend yield of 0.0%, risk-free interest rate of 2.8%, volatility of 70.4% and an expected life of five years; 2002 — expected dividend yield of 0.0%, risk-free interest rate of 3.9%, volatility of 87.9% and an expected life of four years.

     There were no restricted stock grants in the last three fiscal years. The Company recognized compensation expense of $0.1 million, $1.1 million and $0.7 million related to restricted stock grants under the 1994 Incentive Plan in 2004, 2003 and 2002, respectively. At December 31, 2004, 135,342 shares of restricted stock were vested.

     The stock option plans also provide for the issuance of stock and grant of stock options to non-employee directors. The Company has granted options to purchase 563,000 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, 2004, 409,000 options were outstanding and exercisable at prices ranging from $1.93 to $29.19 per share. There were no grants of Class B common stock to non-employee directors in 2004 or 2003.

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10. 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 50% of their pretax earnings to a maximum of $13,000 in 2004. The Company’s matching contribution is determined annually by the Board of Directors. The Company’s contribution expense to the plan totaled $11.4 million, $8.7 million and $8.7 million in 2004, 2003 and 2002, respectively.

     During the third quarter of 2004, the Company became aware that an insufficient number of shares of its Class B common stock were registered for offer and sale through its 401(k) plan. In response to this registration shortfall, the Company promptly filed a new registration statement on Form S-8 on August 13, 2004, which registered an additional 4,500,000 shares of Class B common stock to permit the continued offer and sale of such shares to participants through the 401(k) plan. Because the 401(k) plan in the past has purchased and in the future expects to continue to purchase shares of Class B common stock needed for allocation to participant accounts only in the open market and not directly from the Company, the registration of these additional shares and their purchase by the 401(k) plan will have no dilutive impact on the outstanding equity of the Company. As a result of the registration shortfall, however, participants who acquired unregistered shares through their 401(k) plan accounts after June 30, 2003, and prior to August 13, 2004, may be entitled to rescission rights or other remedies under the Securities Act of 1933, as amended. The Company has notified affected existing and former plan participants of their potential rescission rights, but cannot predict the extent to which any such rescission rights may be exercised or the impact of any possible federal or state regulatory action pertaining to the registration shortfall. The Company does not believe, however, that any consequences arising from the registration shortfall will have a material adverse effect on its financial position or results of operations.

11. Special Charges

     In the first quarter of 2004, the Company recorded a $0.6 million reduction in special charges related to the revision of estimated costs associated with the sale and leaseback of certain aircraft.

     In August 2004, the Company entered into definitive agreements with two lessors to return six Boeing 737-200 aircraft. Three of these aircraft were returned to the lessors in the third quarter, two were returned in the fourth quarter and one was returned in January 2005. In addition, the Company continues negotiating with one lessor on the return of its remaining two Boeing 737-200 aircraft, one of which was parked in March 2002. The other aircraft was removed from service in January 2005. In connection with the return of the aircraft, the Company recorded $1.9 million of special charges which include lease termination payment of $2.1 million, the write-down of leasehold improvements and aircraft rent balance of $2.8 million, offset by the net reversal of maintenance reserves of $3.0 million.

     In December 2004, the Company and General Electric (“GE”) mutually agreed to terminate the V2500 A-1 power by hour (PBH) agreement effective January 1, 2005. This agreement was entered into March 1998 with an original term of ten years. For terminating the agreement early, the Company received a $20.0 million credit to be applied to amounts due for other engines under the 1998 agreement that is expected to be fully applied by December 31, 2005. The Company had capitalized PBH payments for V2500 A-1 engines in excess of the unamortized cost of the overhauls performed by GE of approximately $3.7 million. With the termination of this agreement, these payments were not realizable and as a result, the Company wrote off this amount against the $20.0 million credit referred to above resulting in a $16.3 million net gain.

     In February 2003, AWA announced the elimination of its hub operations in Columbus, Ohio. As a result, 12 regional jets, all of which were operated by Chautauqua Airlines under the America West Express banner, have been phased out of the fleet. In addition, the hub has been downsized from 49 daily departures to 15 destinations to four flights per day to Phoenix and Las Vegas. Service to New York City La Guardia Airport was also eliminated because perimeter rules at the airport prohibit flights beyond 1,500 miles, precluding service from AWA’s hubs in Phoenix and Las Vegas. In the first and second quarters of 2003, the Company recorded special charges of $1.0 million and $9.6 million, respectively, related to the costs associated with the termination of certain aircraft and facility contracts, employee transfer and severance expenses and the write-off of leasehold improvements in Columbus, Ohio.

     In the first quarter of 2003, the Company recorded a $1.1 million reduction in special charges related to the earlier-than-planned return of certain leased aircraft in 2001 and 2002, as all payments related to these aircraft returns have been made.

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     In April 2003, as part of a cost reduction program, the Company implemented a plan to reduce management, professional and administrative payroll costs which resulted in 179 fewer employees within these workgroups. As a result, the Company recorded a special charge of $2.3 million related to this reduction-in-force.

     In June 2003, the Company recorded an impairment loss of $2.6 million related to three owned Boeing 737-200 aircraft that were grounded and subsequently sold.

     In the third quarter of 2003, the Company recorded an additional $0.5 million of special charges associated with the elimination of our hub operations in Columbus, Ohio. These special charges were offset by a $0.5 million reduction in special charges related to the revision of estimated costs associated with the sale and leaseback of certain aircraft.

     In the first quarter of 2002, the Company recorded a special charge of $21.1 million, primarily related to the restructuring completed on January 18, 2002, resulting from the events of September 11, 2001. Components of the special charge are as follows:

	Special Charges
	(in thousands)
Fleet restructuring costs	$	9,915
Losses on sale-leaseback transactions		6,328
Professional fees		4,745
Write-off of computer system and security equipment		3,411
Severance		656
Revision of estimate for second quarter 2001 special charge		(4,000	)
Total	$	21,055

     Of this amount, approximately $10.3 million, principally related to losses on sale-leaseback transactions, fleet restructuring costs, professional fees and severance was accrued.

     In the third quarter of 2002, the Company recorded a $2.0 million reduction in special charges due to a revision of the estimated costs related to the early termination of certain aircraft leases.

     The following table presents the payments and other settlements made during 2002, 2003 and 2004 and the remaining special charge accruals as of December 31, 2004.

													Contract
	Sale-			Fleet			Professional			Reductions-			Termination/
	Leaseback			Restructuring			Fees			in-force			Other Costs			Total
	(in thousands)
Balance at December 31, 2001	$	—		$	16,786		$	—		$	83		$	—		$	16,869
Special charges		6,328			10,582			1,489			631			—			19,030
Reclassification of aircraft rent due to restructuring		—			4,696			—			—			—			4,696
Payments		—			(14,516	)		(1,489	)		(714	)		—			(16,719	)
Issuance of convertible notes		—			(5,000	)		—			—			—			(5,000	)
Forfeiture of security deposits		—			(2,289	)		—			—			—			(2,289	)
Loss on sale-leasebacks		(3,852	)		—			—			—			—			(3,852	)
Reclassification of capitalized maintenance for parked aircraft		—			(902	)		—			—			—			(902	)
Revision of estimate		—			(6,000	)		—			—			—			(6,000	)
Balance at December 31, 2002		2,476			3,357			—			—			—			5,833
Special charges		(510	)		1,545			—			2,701			10,634			14,370
Payments		—			(896	)		—			(2,344	)		(7,446	)		(10,686	)
Loss on sale-leasebacks		(1,361	)		—			—			—			—			(1,361	)
Write-off of leasehold improvements due to Columbus hub closure		—			—			—			—			(539	)		(539	)
Impairment loss		—			(2,617	)		—			—			—			(2,617	)
Balance at December 31, 2003		605			1,389			—			357			2,649			5,000
Special charges		(600	)		1,913			—			—			—			1,313
Payments		(5	)		(2,908	)		—			(292	)		(2,528	)		(5,733	)
Revision of estimate		—			—			—			(65	)		—			(65	)
Reversal of maintenance reserves		—			3,000			—			—			—			3,000
Write-off of leasehold improvements, engine overhauls and deferred rent		—			(2,751	)		—			—			—			(2,751	)
Balance at December 31, 2004	$	—		$	643		$	—		$	—		$	121		$	764

64

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     The Company expects to make payments related to these special charges through the fourth quarter of 2005.

12. Nonoperating Income (Expenses) — Other, Net

     In connection with the term loan refinancing with GECC, the Company wrote off $1.3 million of debt issue costs associated to the term loan with Mizuho in 2004. This amount was recorded in nonoperating expenses.

     The changes in the fair value of the Company’s derivative instruments and the net realized gains and losses for the settled hedge transactions was a $30.5 million credit in 2004, $10.7 million credit in 2003 and $0.6 million expense in 2002.

     In April 2003, the Senate and House of Representatives of the United States of America passed, and the President signed, the Emergency Wartime Supplemental Appropriations Act to provide certain aviation-related assistance. $2.3 billion of the appropriation was for grants by the TSA to U.S. air carriers based on the proportional share each carrier had paid or collected as of the date of enactment of the legislation for passenger security and air carrier security fees. In May 2003, AWA received approximately $81.3 million representing its proportional share of passenger security and air carrier security fees paid or collected as of April 2003, which has been classified as “Federal Government Assistance” in the accompanying consolidated statements of operations. See Note 17, “Emergency Wartime Supplemental Appropriations Act.”

     In the fourth quarter of 2003, IAC/InterActiveCorp completed its acquisition of Hotwire.com, a discount travel website. Hotwire was founded by the Texas Pacific Group, American Airlines, Continental Airlines, Northwest Airlines, United Airlines, US Airways and AWA in October 2000. AWA had an ownership interest of approximately 1.5% in Hotwire.com with a carrying value of approximately $0.03 million. Upon closing of the transaction, AWA received cash of $9.8 million. Accordingly, AWA recognized a nonoperating gain of $9.8 million in the fourth quarter of 2003.

     In the fourth quarter of 2003, Holdings completed the sale of its 12% interest in National Leisure Group to PAR Capital. The investment in National Leisure Group was carried on the Company’s consolidated balance sheet at cost, which approximated $7.7 million. PAR Capital owned $10.45 million face value of the Company’s 10 3/4% senior unsecured notes. PAR Capital purchased the Company’s investment in National Leisure Group in exchange for the $10.45 million face value of the 10 3/4% notes plus $0.3 million in cash. This resulted in a $3.3 million nonoperating gain. See Note 4, “Financial Instruments and Risk Management – (a) Fair Value of Financial Instruments – Investments in Equity Securities.”

     Under the airline compensation provisions of the Air Transportation Safety and System Stabilization Act (the “Act”), each air carrier was entitled to receive the lesser of: (i) its direct and incremental losses for the period September 11, 2001 to December 31, 2001 or (ii) its proportional available seat mile allocation (based on available seat miles for August 2001) of the $4.5 billion compensation available under the Act. In 2001, AWA received $98.2 million under the Act from the United States government and expected to receive, based on its losses and its share of available seat miles, at least an additional $10.0 million. In accordance with EITF Issue No. 01-10, “Accounting for the Impact of the Terrorist Attacks of September 11, 2001,” AWA recognized $108.2 million of federal government assistance in 2001 as nonoperating income because direct and incremental losses incurred during 2001 exceeded that amount. In July 2002, AWA received an additional $12.3 million under the Act. Accordingly, $10.0 million was credited against the receivable established in 2001 and $2.3 million was recognized as nonoperating income in the second quarter of 2002. In August 2002, AWA received an additional payment of $6.2 million under the Act, which was recognized as nonoperating income in the third quarter of 2002.

     In March 2002, the Company wrote down its investment in Aeroxchange, an e-commerce entity, which was carried at cost, to net realizable value recognizing a loss of $2.8 million.

65

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

13. Earnings (Loss) Per Share

	Year Ended December 31,
	2004			2003		2002
	(in thousands of dollars except per share data)
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) before cumulative effect of change in accounting principle	$	(89,023	)	$	57,420	$	(179,686	)
Cumulative effect of change in accounting principle		—			—		(208,223	)
Net income (loss)	$	(89,023	)	$	57,420	$	(387,909	)
Weighted average common shares outstanding		36,026,478			34,550,979		33,723,252
Basic earnings (loss) per share:
Earnings (loss) before cumulative effect of change in accounting principle	$	(2.47	)	$	1.66	$	(5.33	)
Cumulative effect of change in accounting principle		—			—		(6.17	)
Net earnings (loss)	$	(2.47	)	$	1.66	$	(11.50	)
DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) before cumulative effect of change in accounting principle	$	(89,023	)	$	57,420	$	(179,686	)
Cumulative effect of change in accounting principle		—			—		(208,223	)
Net income (loss)		(89,023	)		57,420		(387,909	)
Interest expense on 7.5% convertible senior notes		—			10,664		—
Interest expense on 7.25% senior exchangeable notes		—			2,881		—
Income (loss) for purposes of computing diluted net income (loss) per share	$	(89,023	)	$	70,965	$	(387,909	)
Share computation:
Weighted average common shares outstanding		36,026,478			34,550,979		33,723,252
Assumed exercise of stock options and warrants		—			9,966,128		—
Assumed conversion of 7.5% convertible senior notes		—			8,157,839		—
Assumed conversion of 7.25% senior exchangeable notes		—			3,437,960		—
Weighted average common shares outstanding as adjusted		36,026,478			56,112,906		33,723,252
Diluted earnings (loss) per share:
Earnings (loss) before cumulative effect of change in accounting principle	$	(2.47	)	$	1.26	$	(5.33	)
Cumulative effect of change in accounting principle		—			—		(6.17	)
Net earnings (loss)	$	(2.47	)	$	1.26	$	(11.50	)

     For the year ended December 31, 2004, 5,248,891 stock options and 7,352,988 warrants issued in conjunction with the government guaranteed loan and related transactions are not included in the computation of diluted EPS because the option and warrant exercise prices were greater than the average market price of common stock for the period. In addition, 8,095,842 shares issuable upon conversion of the 7.25% senior exchangeable notes due 2023 and 8,694,000 issuable upon conversion of the 7.5% convertible senior notes are not included in the computation of diluted EPS because of the antidilutive effect on EPS.

     For the year ended December 31, 2003, 5,256,111 stock options and 11,410,318 warrants issued in conjunction with the government guaranteed loan and related transactions are not included in the computation of diluted EPS because the option and warrant exercise prices were greater than the average market price of common stock for the period. In November 2004, the Emerging Issues Task Force (“EITF”) of the FASB reached a consensus on EITF 04-08, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share,” which requires that issuers of convertible securities with contingent conversion features use the “if-converted” method to calculate reported earnings per share (“EPS”) irrespective of the contingent conversion trigger being met. As approved by the FASB, this change is effective for years ending after December 15, 2004. The Company applied this methodology in the accompanying consolidated statement of operations. The impact of using the “if-converted” method for the Company’s 7.25% Notes is antidilutive for the years ended December 31, 2004 and 2002. For the year ended December 31, 2003, the inclusion of the 7.25% Notes reduced diluted EPS by $0.03 from $1.29 to $1.26.

66

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     For the year ended December 31, 2002, 22,074 stock options and 2,794,399 warrants issued in conjunction with the government guaranteed loan and related transactions are not included in the computation of diluted EPS because of the antidilutive effect on EPS. In addition, 7,292,706 stock options and 19,742,601 warrants are not included in the computation of diluted EPS because the option and warrant exercise prices were greater than the average market price of common stock for the period. The shares issuable upon conversion of the 7.5% convertible senior notes are not included in the computation of diluted EPS because of the antidilutive effect on EPS.

14. 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,
	2004			2003			2002
	(in thousands)
Non-cash transactions:
Reclassification of investments in debt securities to short-term	$	25,730		$	29,058		$	—
Issuance of convertible notes		—			—			67,902
Cancellation of convertible notes		—			(660	)		(8,279	)
Cancellation of 10.75% senior unsecured notes related to sale of NLG investment		—			(10,370	)		—
Issuance of warrants		—			—			35,383
Exercise of warrants		(2	)		(17	)		—
Equipment acquired through capital leases		—			—			17,753
Equipment acquired with issuance of notes payable		—			—			64,163
Notes payable issued for equipment purchase deposits		17,500			5,250			10,500
Notes payable canceled under the aircraft purchase agreement		(7,000	)		(7,000	)		(10,500	)
Payment in kind notes issued, net of returns		9,033			8,972			7,756
Acquisition of shares due to loan default		1,700			—			—
Cash transactions:
Interest paid, net of amounts capitalized		23,841			17,201			25,942
Income taxes paid (refunded)		1,118			(3,605	)		(63,353	)

15. Related Party Transactions

     As part of AWA’s reorganization in 1994, Continental Airlines and AWA entered into an alliance agreement that included code sharing arrangements, reciprocal frequent flyer programs and ground handling operations. In March 2002, AWA received notice from Continental of its intention to terminate the code sharing and frequent flyer agreements between the two airlines, effective April 26, 2002. Two of Continental’s directors are managing partners of Texas Pacific Group, which, through TPG Advisors, Inc., effectively controls the voting power of Holdings. AWA paid Continental approximately $13.4 million, $17.3 million and $25.5 million and also received approximately $4.1 million, $5.0 million and $15.9 million in 2004, 2003 and 2002, respectively, from Continental pursuant to these agreements.

     Texas Pacific Group agreed to reimburse the Company approximately $2.5 million for expenses incurred by the Company on its behalf. As a result, the Company recorded this as a receivable as of December 31, 2004. Subsequent to December 31, 2004, the Company received $1.3 million in such reimbursement and expects to receive an additional $1.2 million in 2005.

16. Quarterly Financial Data (Unaudited)

     The 2004 and 2003 unaudited quarterly financial data has been restated to reflect the accounting for fuel hedging derivative instruments pursuant to management’s determination that the Company did not qualify for hedge accounting under SFAS No. 133. In addition, the restated amounts also reflect corrections to properly reflect the fair value of open derivative instruments at each quarter end. See Note 2, “Restatement of Previously Reported Amounts.”

67

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

     Summarized quarterly financial data for 2004 and 2003 follows (in thousands of dollars except per share amounts):

	1st Quarter						2nd Quarter
				(as previously						(as previously
	(as restated)			reported)			(as restated)			reported)
2004
Operating revenues	$	576,544		$	576,544		$	605,074		$	605,074
Operating income		14,685	(1)		17,828			16,330	(3)		20,848
Nonoperating expenses, net		(16,248	)(1) (2)		(16,652	)		(5,669	)(3) (4)		(15,154	)
Income tax expense		—			—			—			—
Net income (loss)		(1,563	)(2)		1,176			10,661	(4)		5,694
Net income (loss) per share:
Basic		(0.04	)		0.03			0.30			0.16
Diluted		(0.03	)		0.02			0.20			0.11

	3rd Quarter						4th Quarter
				(as previously						(as previously
	(as restated)			reported)			(as restated)			reported)
2004
Operating revenues	$	578,623		$	578,623		$	578,716		$	578,716
Operating loss		(36,038	)(5)		(28,237	)		(38,748	)(7)		(23,681	)
Nonoperating income (expenses), net		7,373	(5) (6)		(18,830	)		(30,678	)(7) (8)		(26,001	)
Income tax expense		—			—			30			30
Net loss		(28,665	)(6)		(47,067	)		(69,456	)(8)		(49,712	)
Net loss per share:
Basic		(0.79	)		(1.30	)		(1.92	)		(1.38	)
Diluted		(0.79	)		(1.30	)		(1.92	)		(1.38	)

	1st Quarter						2nd Quarter
				(as previously						(as previously
	(as restated)			reported)			(as restated)			reported)
2003
Operating revenues	$	523,233		$	523,233		$	575,771		$	575,771
Operating income (loss)		(56,376	)(9)		(46,140	)		16,447	(11)		16,305
Nonoperating income (expenses), net		(7,045	)(9) (10)		(15,878	)		62,425	(11) (12)		63,379
Income tax expense		—			—			—			—
Net income (loss)		(63,421	)(10)		(62,018	)		78,872	(12)		79,684
Net income (loss) per share:
Basic		(1.88	)		(1.84	)		2.34			2.36
Diluted		(1.88	)		(1.84	)		2.00			2.02

	3rd Quarter						4th Quarter
				(as previously						(as previously
	(as restated)			reported)			(as restated)			reported)
2003
Operating revenues	$	592,302		$	592,302		$	563,191		$	563,191
Operating income		50,268	(13)		50,135			11,796	(15)		12,581
Nonoperating expenses, net		(18,678	)(13) (14)		(17,193	)		(1,303	)(15) (16)		(5,655	)
Income tax expense		—			—			(114	)		(114	)
Net income		31,590	(14)		32,942			10,379	(16)		6,812
Net income per share:
Basic		0.90			0.94			0.29			0.19
Diluted		0.53			0.60			0.19			0.13

(1)	Reflects reclassification of $3.1 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”
(2)	Reflects the restatement of $2.7 million net expense to eliminate hedge accounting for the period presented.
(3)	Reflects reclassification of $4.5 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”
(4)	Reflects the restatement of $5.0 million net credit to eliminate hedge accounting for the period presented.
(5)	Reflects reclassification of $7.8 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”

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AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(6)	Reflects the restatement of $18.4 million net credit to eliminate hedge accounting for the period presented.
(7)	Reflects reclassification of $15.0 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.” Note, an additional $7.6 million of losses on derivative instruments was recorded directly to “Gain (Loss) on Derivative Instruments, Net.”
(8)	Reflects the restatement of $19.7 million net expense to eliminate hedge accounting for the period presented.
(9)	Reflects reclassification of $10.2 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”
(10)	Reflects the restatement of $1.4 million net expense to eliminate hedge accounting for the period presented.
(11)	Reflects reclassification of $0.2 million net expense from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”
(12)	Reflects the restatement of $0.8 million net expense to eliminate hedge accounting for the period presented.
(13)	Reflects reclassification of $0.1 million net expense from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”
(14)	Reflects the restatement of $1.4 million net expense to eliminate hedge accounting for the period presented.
(15)	Reflects reclassification of $0.8 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”
(16)	Reflects the restatement of $3.6 million net credit to eliminate hedge accounting for the period presented.

     Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share in 2004 and 2003 does not equal the total computed for the year.

17. Emergency Wartime Supplemental Appropriations Act

     In April 2003, the Senate and House of Representatives of the United States of America passed, and the President signed, the Emergency Wartime Supplemental Appropriations Act to provide certain aviation-related assistance. The bill included the following key provisions:

•   $2.3 billion of the appropriation was for grants by the Transportation Security Administration (“TSA”) to U.S. air carriers based on the proportional share each carrier had paid or collected as of the date of enactment of the legislation for passenger security and air carrier security fees. In May 2003, the Company received approximately $81.3 million representing its proportional share of passenger security and air carrier security fees paid or collected as of April 2003. The Company recorded this amount as nonoperating income in the accompanying consolidated statements of operations. See Note 12, “Nonoperating Income (Expenses) – Other, Net.”

•   The TSA would not impose passenger security fees during the period beginning June 1, 2003 and ending September 30, 2003.

•   $100 million of the appropriation would be available to compensate air carriers for the direct costs associated with the strengthening of flight deck doors and locks on aircraft. AWA received approximately $4.6 million in 2003 as reimbursement for the costs of reinforcing flight deck doors and locks.

•   Aviation war risk insurance provided by the federal government is extended until August 2005.

69

AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

•   Certain airlines that received the aviation-related assistance, principally those airlines with trans-Pacific or trans-Atlantic flights, agreed to limit the total cash compensation for certain executive officers during the 12-month period beginning April 1, 2003 to an amount equal to the annual salary paid to that officer during the air carrier’s fiscal year 2002. Any violation of this agreement would have required the carrier to repay to the government the amount reimbursed for airline security fees. Since AWA does not operate trans-Pacific or trans-Atlantic flights, AWA was not subject to this provision.

18. Segment Disclosures

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

70

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

     Consolidated balance sheets of AWA as of December 31, 2004 and 2003, and the related consolidated statements of operations, cash flows and stockholder’s equity and comprehensive income for each of the years in the three-year period ended December 31, 2004, together with the related notes and the reports of KPMG LLP, and PricewaterhouseCoopers LLP, independent registered public accounting firms, are set forth on the following pages.

71

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of America West Airlines, Inc. and subsidiary as of December 31, 2004 and 2003, and the related consolidated statements of operations, cash flows and stockholder’s equity and comprehensive income for the years then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 Airlines, Inc. and subsidiary as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the accompanying consolidated financial statements, the Company has restated the consolidated balance sheet as of December 31, 2003 and the consolidated statement of changes in stockholder’s equity and comprehensive income for the year then ended.

/s/ KPMG LLP

Phoenix, Arizona
March 11, 2005

72

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

In our opinion, the accompanying consolidated statements of operations, of cash flows and of stockholder’s equity and comprehensive income for the year ended December 31, 2002 present fairly, in all material respects, the results of operations and cash flows of America West Airlines, Inc. (a wholly-owned subsidiary of America West Holdings Corporation) for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. 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 audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 1(k) to the consolidated financial statements, the Company changed its method of accounting for reorganization value in excess of amounts allocable to identifiable assets in connection with the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” effective January 1, 2002.

PricewaterhouseCoopers LLP
Phoenix, Arizona
March 24, 2003, except for the effects of the
reorganization transaction described in Note 1(a)
as to which the date is August 2, 2004

73

AMERICA WEST AIRLINES, INC.
Consolidated Balance Sheets
December 31, 2004 and 2003
(in thousands except share data)

	2004			2003
				(as restated -
				See Note 2)
Assets
Current assets:
Cash and cash equivalents	$	128,497		$	134,150
Short-term investments		126,651			322,615
Restricted cash		41,264			42,900
Accounts receivable, less allowance for doubtful accounts of $1,487 in 2004 and $5,806 in 2003		108,837			77,235
Expendable spare parts and supplies, less allowance for obsolescence of $14,759 in 2004 and $12,254 in 2003		57,563			58,575
Prepaid expenses		141,571			129,291
Total current assets		604,383			764,766
Property and equipment:
Flight equipment		926,930			858,395
Other property and equipment		289,279			271,593
Equipment purchase deposits		63,450			46,050
		1,279,659			1,176,038
Less accumulated depreciation and amortization		624,193			569,468
		655,466			606,570
Other assets:
Investments in debt securities		30,000			40,740
Restricted cash		72,091			69,876
Advances to parent company, net (see Note 5)		258,777			254,792
Other assets, net		90,270			110,198
		451,138			475,606
	$	1,710,987		$	1,846,942
Liabilities and Stockholder’s Equity
Current liabilities:
Current maturities of long-term debt	$	151,183		$	103,899
Current obligations under capital leases		3,475			3,442
Accounts payable		173,196			209,373
Payable to affiliate, net		—			1,926
Air traffic liability		194,718			174,486
Accrued compensation and vacation benefits		42,699			61,045
Accrued taxes		20,651			24,117
Other accrued liabilities		65,958			59,277
Total current liabilities		651,880			637,565
Long-term debt, less current maturities		635,129			688,965
Capital leases, less current obligations		5,061			8,467
Deferred credits and other liabilities		132,103			139,873
Commitments and contingencies (see Note 7)
Stockholder’s equity:
Class B common stock, $.01 par value. Authorized 1,000 shares; issued and outstanding 1,000 shares		—			—
Additional paid-in capital		555,114			555,115
Accumulated deficit		(268,300	)		(183,043	)
Total stockholder’s equity		286,814			372,072
	$	1,710,987		$	1,846,942

See accompanying notes to consolidated financial statements.

74

AMERICA WEST AIRLINES, INC.
Consolidated Statements of Operations
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)

	2004			2003			2002
Operating revenues:
Passenger	$	2,196,627		$	2,113,629		$	1,929,444
Cargo		28,233			26,914			27,574
Other		113,417			113,274			89,545
Total operating revenues		2,338,277			2,253,817			2,046,563
Operating expenses:
Salaries and related costs		655,185			658,042			601,870
Aircraft rents		304,343			297,518			295,016
Other rents and landing fees		167,772			154,598			158,290
Aircraft fuel		557,098			375,996			299,284
Agency commissions		25,191			34,457			49,953
Aircraft maintenance materials and repairs		205,580			223,266			252,691
Depreciation and amortization		54,354			66,865			75,201
Special charges (credits), net		(15,432	)		14,370			19,030
Other		423,890			402,613			451,444
Total operating expenses		2,377,981			2,227,725			2,202,779
Operating income (loss)		(39,704	)		26,092			(156,216	)
Nonoperating income (expenses):
Interest income		14,169			13,249			17,551
Interest expense, net		(86,488	)		(86,743	)		(79,529	)
Federal government assistance		—			81,255			8,466
Gain (loss) on disposition of property and equipment		1,460			151			(1,852	)
Gain on sale of investments		—			9,762			—
Gain (loss) on derivative instruments, net		23,782			10,746			(656	)
Other, net		1,547			6,888			215
Total nonoperating income (expenses), net		(45,530	)		35,308			(55,805	)
Income (loss) before income taxes (benefit) and cumulative effect of change in accounting principle		(85,234	)		61,400			(212,021	)
Income tax expense (benefit)		23			114			(30,544	)
Income (loss) before cumulative effect of change in accounting principle		(85,257	)		61,286			(181,477	)
Cumulative effect of change in accounting principle		—			—			(208,223	)
Net income (loss)	$	(85,257	)	$	61,286		$	(389,700	)

See accompanying notes to consolidated financial statements.

75

AMERICA WEST AIRLINES, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)

	2004			2003			2002
Cash flows from operating activities:
Net income (loss)	$	(85,257	)	$	61,286		$	(389,700	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Cumulative effect of change in accounting principle		—			—			208,223
Depreciation and amortization		54,354			66,865			75,894
Amortization of capitalized maintenance		85,590			105,076			111,576
Amortization of deferred credits		(8,208	)		(10,970	)		(10,077	)
Amortization of deferred rent		6,189			9,514			11,452
Amortization of warrants		7,155			8,100			7,708
Amortization of debt issue costs and guarantee fees		35,752			35,977			24,978
Amortization of bond discount		3,826			3,366			2,894
Amortization of investment discount and premium, net		1,435			899			—
Gain on sale of investments		—			(3,287	)		—
Special charges, net		(15,432	)		14,370			19,055
Other		28,311			6,714			15,801
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash		1,636			(42,900	)		—
Decrease (increase) in accounts receivable, net		(13,337	)		4,365			60,009
Decrease (increase) in expendable spare parts and supplies, net		1,012			(2,681	)		(4,061	)
Increase in prepaid expenses		(49,286	)		(45,932	)		(64,350	)
Decrease (increase) in other assets, net		(2,635	)		(254	)		5,319
Increase (decrease) in accounts payable		(37,120	)		9,385			(61,525	)
Increase (decrease) in air traffic liability		20,232			4,395			(6,894	)
Increase (decrease) in accrued compensation and vacation benefits		(18,347	)		19,796			(3,050	)
Decrease in accrued taxes		(3,465	)		(17,614	)		(68,909	)
Increase (decrease) in other accrued liabilities		6,938			(1,689	)		28,348
Increase in other liabilities		1,299			1,294			16,022
Net cash provided by (used in) operating activities		20,642			226,075			(21,287	)
Cash flows from investing activities:
Purchases of property and equipment		(219,383	)		(154,365	)		(157,202	)
Purchases of short-term investments		(487,505	)		(633,711	)		(69,987	)
Sales of short-term investments		707,774			364,332			45,249
Purchases of investments in debt securities		(35,000	)		(80,436	)		—
Sales of investments in debt securities		20,000			10,300			—
Increase in restricted cash		(2,215	)		(23,908	)		—
Proceeds from sales of aircraft		—			—			175,478
Proceeds from sales of other property and equipment		32,372			25,826			122
Proceeds from sale of NLG investment		—			348			—
Net cash provided by (used in) investing activities		16,043			(491,614	)		(6,340	)
Cash flows from financing activities
Proceeds from issuance of debt		141,354			86,828			435,386
Repayment of debt		(175,640	)		(16,832	)		(192,596	)
Payment of debt issue costs		(1,152	)		(3,236	)		(36,987	)
Other		(6,900	)		(1,750	)		2,600
Net cash provided by (used in) financing activities		(42,338	)		65,010			208,403
Net increase (decrease) in cash and cash equivalents		(5,653	)		(200,529	)		180,776
Cash and cash equivalents at beginning of year		134,150		$	334,679			153,903
Cash and cash equivalents at end of year	$	128,497		$	134,150		$	334,679

See accompanying notes to consolidated financial statements.

76

AMERICA WEST AIRLINES, INC.
Consolidated Statements of Stockholder’s Equity and Comprehensive Income
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands except share data)

							ACCUMULATED
	ADDITIONAL			RETAINED			OTHER
	PAID-IN			EARNINGS/			COMPREHENSIVE
	CAPITAL			(DEFICIT)			INCOME			TOTAL
Balance at December 31, 2001	$	519,748		$	145,371		$	1,390		$	666,509
Net loss		—			(389,700	)		—			(389,700	)
Other comprehensive income:
Changes in the fair value of derivative financial instruments, net of tax		—			—			640			640
Total comprehensive income (loss)		—			(389,700	)		640			(389,060	)
Non-cash capital contribution		35,384			—			—			35,384
Balance at December 31, 2002		555,132			(244,329	)		2,030			312,833
Net income		—			61,286			—			61,286
Correction of other comprehensive income (a)		—			—			(2,030	)		(2,030	)
Exercise of warrants		(17	)		—			—			(17	)
Balance at December 31, 2003, as restated	$	555,115		$	(183,043	)	$	—		$	372,072
Net loss		—			(85,257	)					(85,257	)
Exercise of warrants		(1	)		—			—			(1	)
Balance at December 31, 2004	$	555,114		$	(268,300	)	$	—		$	286,814

(a) Correction of Other Comprehensive Income – See Note 2, “Restatement of Previously Reported Amounts.”

See accompanying notes to consolidated financial statements.

77

AMERICA WEST AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004, 2003 AND 2002

     America West Airlines, Inc. (“AWA” or the “Airline”) is a wholly owned subsidiary of America West Holdings Corporation (“Holdings” or the “Company”). AWA accounted for most of the Company’s revenues and expenses in 2004. Based on 2004 operating revenues and available seat miles (“ASMs”), AWA is the eighth largest passenger airline in the United States with the lowest cost structure of the eight major hub-and-spoke airlines. At the end of 2004, AWA operated a fleet of 138 aircraft with an average fleet age of 10.7 years and served 63 destinations in North America, including eight in Mexico, three in Canada and one in Costa Rica. Through regional alliance and code share arrangements with other airlines, AWA served an additional 51 destinations in North America and the Middle East. In 2004, AWA flew approximately 21.1 million passengers and generated revenues of approximately $2.3 billion.

1. Summary of Significant Accounting Policies

     (a) Basis of Presentation

     The consolidated financial statements include the accounts of America West Airlines and its wholly owned subsidiary Flight Training Center Hangar Plan (“FTCHP”). All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current year’s presentation.

     The Leisure Company (“TLC”), previously a wholly owned subsidiary of Holdings, was merged into AWA on January 1, 2004 and continues to operate as the America West Vacations division of AWA. This transaction was accounted for as a reorganization of entities under common control. The 2003 and 2002 consolidated financial statements are presented on a comparable basis with the 2004 consolidated financial statements, as if the reorganization had occurred January 1, 2002. All intercompany transactions between AWA and TLC have been eliminated.

     (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 that approximates fair value.

     AWA reclassified investments in auction rate securities previously classified as cash equivalents to short-term investments on the accompanying consolidated balance sheets. Investments reclassified in 2004 and 2003 were $58.4 million and $249.7 million, respectively.

     (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.

     (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, 2004, 2003 and 2002 was $2.2 million, $1.6 million and $3.0 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 30 years for the flight training facility. The estimated useful lives of AWA’s owned aircraft, jet engines, flight equipment and rotable parts range from five to 25 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.

78

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

     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 SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.

     (e) Restricted Cash

     Restricted cash includes cash deposits securing certain letters of credit and surety bonds and cash deposits held by institutions that process credit card sales transactions. Current restricted cash includes amounts set aside in an irrevocable trust for the redemption of the 10 ³/4% senior unsecured notes which was subsequently paid on January 26, 2005.

     (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.

     In the first quarter of 2004, the Company revised the estimated useful life for certain aircraft and related spare parts inventory as a result of changes in AWA’s fleet plan and for capitalized maintenance on certain of its engines as a result of changes in aircraft utilization. The net impact of this change in estimate decreased the net loss for 2004 by approximately $18.4 million.

     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 also been recorded. These estimates are based on historical costs and our assumptions regarding the renewal of aircraft leases.

     (g) Derivative Instruments

     AWA’s fuel hedging contracts do not qualify as cash flow hedges under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). See Note 2, “Restatement of Previously Reported Amounts.” Accordingly, the derivative hedging instruments are recorded as an asset or liability on the balance sheet at fair value and the changes in the fair values are recorded in “Gain (Loss) on Derivative Instruments, Net” in the accompanying consolidated statements of operations. See Note 12, “Nonoperating Income (Expenses) — Other, Net.”

     (h) 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. Transportation-related 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 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, 2004 and 2003, the unamortized balance of the deferred credit was $38.3 million and $44.6 million, respectively.

79

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

     In January 2002, AWA closed a $429 million loan supported by a $380 million government loan guarantee. This loan triggered aircraft rent concessions negotiated with approximately 20 aircraft lessors. Approximately $18.1 million of aircraft rent, which was accrued as of December 31, 2001, was waived by the aircraft lessors. This amount has been recorded as a deferred credit in the accompanying consolidated balance sheet and will be amortized over the remaining lives of the applicable leases as a reduction in rent expense. At December 31, 2004 and 2003, the unamortized balance of the deferred credit was approximately $4.2 million and $7.8 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. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based on the statistical analysis of AWA’s historical data. Any adjustments resulting from periodic evaluations of the estimated air traffic liability are included in results of operations during the period in which the evaluations are completed.

     (k) Reorganization Value in Excess of Amounts Allocable to Identifiable Assets (“ERV”)

     In June 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. SFAS No. 142 does not permit the amortization of goodwill as required by APB Opinion No. 17, “Intangible Assets.” Rather, goodwill is subject to a periodic impairment test, using a two-step process. The first step is to identify a potential impairment. The second step of the goodwill impairment test measures the amount of the impairment loss, using a fair value-based approach. Under SFAS No. 142, ERV is reported as goodwill and accounted for in the same manner as goodwill. SFAS No. 142 was effective for fiscal years beginning after December 15, 2001. Upon adoption of this statement on January 1, 2002, AWA recorded an impairment loss of $208.2 million, which was supported by an independent valuation of the Company. The impairment loss was recorded as the cumulative effect of a change in accounting principle.

     (l) Advertising Costs

     AWA expenses the costs of advertising as incurred. Advertising expense for the years ended December 31, 2004, 2003 and 2002 was $8.3 million, $5.8 million and $6.5 million, respectively.

     (m) 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. A valuation allowance is established, if necessary, for the amount of any tax benefits that, based on available evidence, are not expected to be realized.

     (n) Stock Options

     Certain of AWA’s employees are eligible to participate in the stock option plans of Holdings. Holdings accounts for its stock option plans 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. Accordingly, no compensation cost has been recognized for stock options in Holdings’ condensed consolidated financial statements. Had Holdings determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, “Accounting for Share-Based Payments,” and allocated the compensation expense to AWA for its employees participating in the stock option plans, AWA’s net income (loss) would have been reduced to the pro forma amounts indicated below:

	2004			2003			2002
	(in thousands)
Net income (loss), as reported	$	(85,257	)	$	61,286		$	(389,700	)
Stock-based compensation expense		(5,874	)		(4,320	)		(3,709	)
Pro forma net income (loss)	$	(91,131	)	$	56,966		$	(393,409	)

80

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

     (o) New Accounting Standards

     In November 2004, the FASB issued Revised Statement No. 123, “Accounting for Share-Based Payment” (“SFAS No. 123R”). This statement requires AWA to recognize the grant-date fair value of stock options in the Statement of Operations. In addition, AWA will be required to calculate this compensation using the fair-value based method, versus the intrinsic value method previously allowed under SFAS No. 123. This revision is effective for periods beginning after June 15, 2005. Accordingly, AWA will adopt this revised SFAS effective July 1, 2005. AWA is currently evaluating how it will adopt SFAS No. 123R and has not determined the method it will use to value granted stock options. The adoption of SFAS No. 123R is expected to have a material effect on AWA’s results of operations. See Note 1, “Summary of Significant Accounting Policies” (m) “Stock Options” for AWA’s disclosure of the impact of the compensation cost associated with stock options under SFAS No. 123.

     (p) 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 consolidated financial statements in conformity with accounting principles generally accepted in the United States. Actual results could differ from those estimates.

     (q) Reclassifications

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

     AWA reclassified amounts related to settled fuel hedge transactions and mark-to-market adjustments on open hedge instruments from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net” in the accompanying consolidated statement of operations. In fiscal years 2004 and 2003, such amounts reduced fuel expense while in fiscal years 2002 and 2001, such amounts increased fuel expense, as originally classified. The amounts reclassified are as follows:

Fiscal Year	Amounts Reclassified
	(in thousands)
2004	$	30,529
2003		10,746
2002		(656	)

2. Restatement of Previously Reported Amounts

     Derivative Instruments

In February 2005, management undertook a review of AWA’s accounting for its fuel hedging transactions. As a result of this review, management concluded that AWA’s hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting principles. Accordingly, management concluded that the financial statements for prior periods required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and statements of stockholders equity and comprehensive income of Holdings and AWA. Specifically, (i) AWA has restated its balance sheet and statement of stockholder’s equity and comprehensive income as of and for the year ended December 31, 2003, and (ii) AWA has restated its 2004 and 2003 interim financial results to correct the aforementioned accounting errors. The unaudited interim results as originally reported and as restated are presented in Note 15, “Quarterly Financial Data (Unaudited).” AWA restated its 2003 consolidated balance sheet to reduce the carrying value of its derivative instruments asset by $12.5 million, which served to record the asset at fair value of open contracts as of December 31, 2003. The restatement also eliminated $12.5 million in accumulated other comprehensive income, $2.0 million of which was previously recorded in the 2003 beginning balance of accumulated other comprehensive income. The restated amount of other assets is $110.2 million in the accompanying 2003 consolidated balance sheet. The restatement eliminates the balance in accumulated other comprehensive income in the accompanying 2003 consolidated balance sheet and consolidated statement of stockholder’s equity and comprehensive income.

81

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

3. Investments in Debt Securities

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

	2004		2003
	(in thousands)
Cash and cash equivalents:
Corporate notes	$	—	$	4,205
Cash and money market funds		126,992		128,441
U.S. government securities		1,505		1,504
Total cash and cash equivalents	$	128,497	$	134,150
Short-term investments:
Corporate notes	$	126,651	$	318,845
U.S. government securities		—		3,770
Total short-term investments		126,651		322,615
Total cash equivalents and short-term investments	$	255,148	$	456,765

     In addition, AWA had long-term investments in debt securities of $30.0 million and $40.7 million as of December 31, 2004 and 2003, respectively. Long-term investments consist of cash invested in certain debt securities with maturities greater than one year. The debt securities are classified as held to maturity and are carried at amortized cost that approximates fair value.

4. 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.

     Long-term Debt

     At December 31, 2004 and 2003, the fair value of long-term debt was approximately $721.5 million and $845.6 million, respectively. AWA’s variable rate long-term debt with a carrying value of $545.7 million and $555.9 million at December 31, 2004 and 2003, respectively, approximates fair value because these borrowings have variable interest rate terms that approximate market interest rates for similar debt instruments. The fair values of AWA’s other long-term debt are determined based on quoted market prices if available or market prices for comparable debt instruments.

     (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. As of December 31, 2004, AWA had entered into costless collar and basis swap transactions hedging approximately 42% of its projected 2005 fuel requirements. The fair value of AWA’s financial derivative instruments was a net asset of approximately $0.2 million and $2.7 million at December 31, 2004 and 2003, respectively. See Note 2, “Restatement of Previously Reported Amounts.”

     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 from tickets sold by other airlines and used by passengers on AWA. These receivables are short-term, generally being settled shortly after the sale.

82

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

5. Advances to Parent Company and Affiliate

     In January 2002, AWA closed a $429 million loan supported by a $380 million government loan guarantee. The terms of this loan and AWA’s secured term loan restrict Holdings’ and AWA’s ability to incur additional indebtedness or issue equity unless the proceeds of those transactions are used to prepay the government guaranteed loan and the term loan. Accordingly, as a result of this transaction, AWA’s net advances to Holdings have been classified in “Other Assets” on AWA’s balance sheet.

     AWA’s net advances to Holdings were approximately $258.8 million and $213.1 million at December 31, 2004 and 2003, respectively.

6. Long-Term Debt

     Long-term debt at December 31, 2004 and 2003 consists of the following:

	2004			2003
	(in thousands)
Secured
Equipment notes payable, variable interest rates of 2.88% to 3.37%, averaging 2.96%, installments due 2005 through 2008	$	39,464		$	48,454
GECC term loan, variable interest rate of 6.41%, quarterly installments beginning 2006 through 2010 (a)		110,564			—
Term loan, variable interest rate, paid off September 2004 (a)		—			74,775
Senior secured discount notes, variable interest rate of 6.42%, installments due 2005 through 2009 (b)		35,988			—
		186,016			123,229
Unsecured
Government guaranteed loan, variable interest rate of 2.38%, installments due 2005 through 2008 (c)		343,200			429,000
10 3/4% senior unsecured notes, interest only payments until due in 2005 (d)		39,548			39,548
7.5% convertible senior notes, interest only payments until due in 2009 (e)		112,299			104,328
7.25% senior exchangeable notes, due 2023 with cash interest at 2.49% payable through 2008 and original issue discount of 7.25% thereafter (f)		252,695			252,695
Equipment notes payable, interest rates of 90-day LIBOR +1.25%, averaging 3.61%, installments due through 2005		15,750			5,250
Industrial development bonds, fixed interest rate of 6.3% due 2023 (g)		29,300			29,300
State loan, variable interest rate of 5.97%, installments due 2005 through 2007		750			1,500
		793,542			861,621
Total long-term debt		979,558			984,850
Less: Unamortized discount on debt		(193,246	)		(191,986	)
Current maturities		(151,183	)		(103,899	)
	$	635,129		$	688,965

(a)	On September 10, 2004, AWA entered into a term loan financing with GECC providing for loans in an aggregate amount of $110.6 million. AWA used approximately $77.0 million of the proceeds from this financing to repay in full its term loan with Mizuho Corporate Bank, Ltd. and certain other lenders and to pay certain costs associated with this transaction. AWA used the remaining proceeds for general corporate purposes. The new term loan financing consists of two secured term loan facilities: a $75.6 million term loan facility secured primarily by spare parts, rotables and appliances (the “Spare Parts Facility”); and a $35.0 million term loan facility secured primarily by aircraft engines and parts installed in such engines (the “Engine Facility”).
	The facilities are cross-collateralized on a subordinated basis and the collateral securing the facilities also secures on a subordinated basis certain of AWA’s other existing debt and lease obligations to GECC and its affiliates.
	The loans under the Spare Parts Facility are payable in full at maturity on September 10, 2010. The loans under the Engine Facility are payable in equal quarterly installments of $1.3 million beginning on March 10, 2006 through June 10, 2010 with the remaining loan amount of $11.8 million payable at maturity on September 10, 2010. The loans under each facility may be prepaid in an amount not less than $5 million at any time after the 30th monthly anniversary of the funding date under such facility. If AWA fails to maintain a certain ratio of rotables to loans under the Spare Parts Facility, it may be required to pledge additional rotables or cash as collateral, provide a letter of credit or prepay some or all of the loans under the Spare Parts Facility. In addition, the loans under the Engine Facility are subject to mandatory prepayment upon the occurrence of certain events of loss applicable to, or certain dispositions of, aircraft engines securing the facility.

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	Principal amounts outstanding under the loans bear interest at a rate per annum based on three-month LIBOR plus a margin. Both facilities contain customary events of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.
(b)	On December 27, 2004, AWA raised additional capital by financing its Phoenix maintenance facility and flight training center. The flight training center was previously unencumbered, and the maintenance facility became unencumbered earlier this year when AWA refinanced its term loan. Using its leasehold interest in these two facilities as collateral, AWA, through a wholly owned subsidiary named FTCHP LLC, raised $30.8 million through the issuance of senior secured discount notes. The notes were issued by FTCHP at a discount pursuant to the terms of a senior secured term loan agreement among AWA, FTCHP, Heritage Bank, SSB, as administrative agent, Citibank, N.A., as the initial lender, and the other lenders from time to time party thereto. Citibank, N.A. subsequently assigned all of its interests in the notes to third party lenders.
	AWA has fully and unconditionally guaranteed the payment and performance of FTCHP’s obligations under the notes and the loan agreement. The notes require aggregate principal payments of $36 million with principal payments of $1.5 million due on each of the first two anniversary dates and the remaining principal amount due on the fifth anniversary date. The notes may be prepaid in full at any time (subject to customary LIBOR breakage costs) and in partial amounts of $1.5 million on the third and fourth anniversary dates. The unpaid principal amount of the notes bears interest based on LIBOR plus a margin subject to adjustment based on a loan to collateral value ratio.
	The loan agreement contains customary covenants applicable to loans of this type, including obligations relating to the preservation of the collateral and restrictions on the activities of FTCHP. In addition, the loan agreement contains events of default, including payment defaults, cross-defaults to other debt of FTCHP, if any, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.
	In connection with this financing, AWA sold all of its leasehold interests in the maintenance facility and flight training center to FTCHP and entered into subleases for the facilities with FTCHP at lease rates expected to approximate the interest payments due under the notes. In addition, AWA agreed to make future capital contributions to FTCHP in amounts sufficient to cover principal payments and other amounts owing pursuant to the notes and the loan agreement.
	The proceeds from this financing, together with $10.5 million from operating cash flow, were irrevocably deposited with the trustee for AWA’s 10 3/4% senior unsecured notes due 2005 and subsequently redeemed on January 26, 2005.
(c)	In January 2002, AWA closed a $429 million loan backed by a $380 million federal loan guarantee provided by the Air Transportation Stabilization Board (the “ATSB”). Certain third-party counter-guarantors have fully and unconditionally guaranteed the payment of an aggregate of $45 million of the outstanding principal amount under the government guaranteed loan plus accrued and unpaid interest thereon. In addition, Holdings has fully and unconditionally guaranteed the payment of all principal, premium, interest and other obligations outstanding under the government guaranteed loan and has pledged the stock of AWA to secure its obligations under such guarantee. Principal amounts under this loan become due in ten installments of $42.9 million on each March 31 and September 30, commencing on March 31, 2004 and ending on September 30, 2008. Principal amounts outstanding under the government guaranteed loan bear interest at a rate per annum equal to LIBOR plus 40 basis points.
	Subject to certain exceptions, AWA is required to prepay the government guaranteed loan with:

•   the net proceeds of all issuances of debt or equity by either Holdings or AWA after January 2002;

•   proceeds from asset sales in excess of $20 million in any fiscal year; and

•   insurance proceeds in excess of $2 million to the extent such proceeds are not used to restore or replace the assets from which such proceeds are derived.

In addition, AWA is required to prepay the government guaranteed loan upon a change in control and we may be required to prepay portions of the loan if our employee compensation costs exceed a certain threshold. AWA may, at its option, prepay the government guaranteed loan without premium or penalty, subject to reimbursement of the lenders’ breakage costs in the case of prepayment of LIBOR loans.

The government guaranteed loan requires that AWA maintain a minimum cash balance of $100 million. In addition, the government loan contains customary affirmative covenants and the following negative covenants: restrictions on liens, investments, restricted payments, fundamental changes, asset sales and acquisitions, the creation of new subsidiaries, sale and leasebacks, transactions with affiliates, the conduct of business, mergers or consolidations, issuances and dispositions of capital stock of subsidiaries, and

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	amendments to other indebtedness. The government guaranteed loan contains customary events of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.
(d)	In August 1995, AWA issued $75.0 million principal amount of 10 3/4% senior unsecured notes due 2005 of which $39.5 million remained outstanding at December 31, 2004. Interest on the 10 3/4% senior unsecured notes is payable semiannually in arrears on March 1 and September 1 of each year. On December 27, 2004, AWA called for the redemption on January 26, 2005 of all of the senior unsecured notes at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest through the redemption date. In addition, AWA irrevocably deposited the $30.8 million raised through the maintenance facility and flight training center financing, together with an additional $10.5 million from its operating cash flow, with the trustee for the senior unsecured notes. The senior notes were subsequently redeemed on January 26, 2005.
(e)	In connection with the closing of the government guaranteed loan and the related transactions, Holdings issued $104.5 million of 7.5% convertible senior notes due 2009, of which approximately $112.3 million remained outstanding at December 31, 2004 (including $21.6 million of interest paid through December 31, 2004 as a deemed loan added to the initial principal thereof). Beginning January 18, 2005, these notes are convertible into shares of class B common stock, at the option of the holders, at an initial conversion price of $12.00 per share or a conversion ratio of approximately 83.333 shares per $1,000 principal amount of such notes, subject to standard anti-dilution adjustments. Interest on the 7.5% convertible senior notes is payable semiannually in arrears on June 1 and December 1 of each year. At Holdings’ option, the first six interest payments were payable in the form of a deemed loan added to the principal amount of these notes. The 7.5% convertible senior notes will mature on January 18, 2009 unless earlier converted or redeemed. The payment of principal, premium and interest on the 7.5% convertible senior notes is fully and unconditionally guaranteed by AWA.
	Holdings may redeem some or all of the 7.5% convertible senior notes at any time before January 18, 2005, at a redemption price equal to $1,000 per note to be redeemed if (A) the closing price of the class B common stock has exceeded 120% of the conversion price then in effect for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date of the mailing of the redemption notice, and (B) a shelf registration statement covering resales of the notes and the class B common stock issuable upon conversion thereof is effective and available for use and is expected to remain effective and available for use for the 30 days following the redemption date, unless registration is no longer required. Holdings may redeem the 7.5% convertible senior notes, in whole or in part, on or after January 18, 2005 at the following redemption prices (expressed as percentages of the principal amount thereof), if redeemed during the twelve-month period commencing on January 18 of the years set forth below, plus, in each case, accrued and unpaid interest, if any, to the date of redemption:

Year	Redemption Price
2005		103.75	%
2006		102.50	%
2007		101.25	%
2008 and thereafter		100.00	%

	For financial reporting purposes, AWA recorded the convertible senior notes at their fair market value on the date of issuance. The balance at December 31, 2004 is net of an unamortized discount of $22.2 million.
(f)	In July and August of 2003, AWA completed a private placement of approximately $86.8 million issue price of 7.25% Senior Exchangeable Notes due 2023. The notes bear cash interest at 2.49% per year until July 30, 2008. Thereafter, the notes will cease bearing cash interest and begin accruing original issue discount daily at a rate of 7.25% per year until maturity. Each note was issued at a price of $343.61 and is exchangeable for class B common stock of Holdings at an exchange ratio of 32.038 shares per $1,000 principal amount at maturity of the notes (subject to adjustment in certain circumstances). This represents an equivalent conversion price of approximately $10.73 per share. The aggregate amount due at maturity, including accrued original issue discount from July 31, 2008, will be $252,695,000. The notes are unconditionally guaranteed on a senior unsecured basis by Holdings.
	Holders may exchange their notes for the shares of class B common stock of Holdings in any fiscal quarter commencing after September 30, 2003, if, as of the last day of the preceding fiscal quarter, the closing sale price of the class B common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such preceding fiscal quarter is more than 110% of the accreted exchange price per share of Class B common stock on the last day of such preceding fiscal quarter. If the foregoing condition is satisfied, then the notes will be exchangeable at any time at the option of the holder through maturity. The accreted exchange price per share as of any day will equal the issue price of a note plus accrued original issue discount to that day divided by 32.038, subject to any adjustments to the exchange rate through that day.

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	On or before July 30, 2018, a holder also may exchange its notes for shares of the Class B common stock at any time after a 10 consecutive trading-day period in which the average of the trading prices for the notes for that 10 trading-day period was less than 103% of the average exchange value for the notes during that period. Exchange value is equal to the product of the closing sale price for the shares of Class B common stock on a given day multiplied by the then current exchange rate, which is the number of shares of Class B common stock for which each note is then exchangeable.
	In addition, the holders may exchange the notes if the notes have been called for redemption or if certain specified corporate transactions have occurred.
	Holders of the notes may require AWA to repurchase the notes at a price equal to the original issue price plus accrued cash interest and original issue discount, if any, on July 30, 2008, 2013 and 2018. The purchase price of such notes may be paid in cash or class B common stock of Holdings, subject to certain restrictions. In addition, each holder may require AWA to purchase all or a portion of such holder’s notes upon the occurrence of certain change of control events concerning AWA or Holdings. AWA may redeem the notes, in whole or in part, on or after July 30, 2008 at a price equal to the original issue price plus accrued cash interest and original issue discount, if any.
(g)	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% on April 1 or October 1, 2008; 101% on April 1 or October 1, 2009; and 100% on April 1, 2010 and thereafter.

     Secured financings totaling $186.0 million are collateralized by assets, primarily aircraft, engines, simulators, rotable aircraft parts and AWA’s hangar facility, with a net book value of $268.4 million at December 31, 2004.

     At December 31, 2004, the estimated maturities of long-term debt are as follows:

	(in thousands)
2005		151,183
2006		101,042
2007		100,509
2008		107,570
2009		147,327
Thereafter		371,927
	$	979,558

     Certain of AWA’s long-term debt agreements contain minimum cash balance requirements and other covenants with which Holdings and AWA are in compliance. Certain of these covenants restrict AWA’s ability to pay cash dividends on its common stock and make certain other restricted payments (as specified therein). Finally, AWA’s long-term debt agreements contain cross-default provisions, which may be triggered by defaults by AWA under other agreements relating to indebtedness.

7. Commitments and Contingencies

     (a) Leases

     As of December 31, 2004, AWA had 136 aircraft under operating leases, including four aircraft that will be delivered in 2005, with remaining terms ranging from five months to approximately 19 years. In January 2002, AWA closed a $429 million loan supported by a $380 million government loan guarantee that resulted in a restructuring of its aircraft lease commitments. Under the restructured lease agreements, annual rent payments have been reduced for each of the next five years. Certain of these leases contain put options pursuant to which the lessors could require AWA to renew the leases for periods ranging from eight months to approximately nine years or call options pursuant to which the lessors could require AWA to return the aircraft to the lessors upon receipt of six to nine months written notice. AWA also 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 supplemental rent payments.

     Since AWA’s restructuring in 1994, AWA has set up 19 pass through trusts, which have issued over $1.4 billion of pass through trust certificates (also known as “Enhanced Equipment Trust Certificates” or “EETC”) covering the financing of 54 aircraft. These trusts are off-balance sheet entities, the primary purpose of which is to finance the acquisition of aircraft. Rather than finance each aircraft separately when such aircraft is purchased or delivered,

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these trusts allow AWA to raise the financing for several aircraft at one time and place such funds in escrow pending the purchase or delivery of the relevant aircraft. The trusts are also structured to provide for certain credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust certificates and, as a result, reduce the cost of aircraft financings to AWA.

Each trust covered a set amount of aircraft scheduled to be delivered within a specific period of time. At the time of each covered aircraft financing, the relevant trust used the funds in escrow to purchase equipment notes relating to the financed aircraft. The equipment notes were issued, at AWA’s election, either by AWA in connection with a mortgage financing of the aircraft or by a separate owner trust in connection with a leveraged lease financing of the aircraft. In the case of a leveraged lease financing, the owner trust then leased the aircraft to AWA. In both cases, the equipment notes are secured by a security interest in the aircraft. The pass through trust certificates are not direct obligations of, nor guaranteed by, Holdings or AWA. However, in the case of mortgage financings, the equipment notes issued to the trusts are direct obligations of AWA and in the case of leveraged lease financings, the leases are direct obligations of AWA. In addition, neither Holdings nor AWA guarantee or participate in any way in the residual value of the leased aircraft. All aircraft financed by these trusts are currently structured as leveraged lease financings, which are not reflected as debt on the balance sheets of either AWA or Holdings. AWA does not provide residual value guarantees under these lease arrangements. Each lease contains a purchase option that allows AWA to purchase the aircraft at a fixed price, which at the inception of the lease approximated the aircraft’s expected fair market value at the option date, near the end of the lease term. These leasing entities meet the criteria for variable interest entities. However, they do not meet the consolidation criteria under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” because AWA is not the primary beneficiary under these arrangements.

     As a result of the rent restructuring associated with the government guaranteed loan, one aircraft lease was amended to include a bargain purchase option. As a result, this lease has been classified as a capital lease in accordance with SFAS No. 13, “Accounting for Leases,” as amended, with an asset value of $14.8 million which includes accumulated amortization of $2.1 million and corresponding lease obligation of $8.5 million at December 31, 2004.

     In January 2004, one aircraft lessor exercised its put rights under the aircraft lease agreement to extend the lease for one Boeing 737-300 aircraft for an additional 33 months.

     AWA also leases certain terminal space, ground facilities and computer and other equipment under noncancelable operating leases.

     At December 31, 2004, the scheduled future minimum cash rental payments under capital leases and noncancelable operating leases with initial terms of more than one year are as follows:

	Capital			Operating
Years Ending December 31,	Leases			Leases
	(in thousands)
2005		4,659			361,671
2006		4,988			335,412
2007		1,773			314,892
2008		—			264,017
2009		—			238,074
Thereafter		—			1,719,934
Total minimum lease payments		11,420		$	3,234,000
Less: Amounts of lease payments that represent interest		(2,884	)
Present value of future minimum capital lease payments		8,536
Less: Current obligations under capital leases		(3,475	)
Long-term capital lease obligations	$	5,061

     Rent expense (excluding landing fees) was approximately $421.1 million, $406.8 million and $409.4 million for the years ended December 31, 2004, 2003 and 200, respectively.

     Collectively, the operating lease agreements require security deposits with lessors of $24.0 million, which have been classified as “Other Assets, Net” in the accompanying balance sheets, and bank letters of credit of $13.8 million. The letters of credit are collateralized by $13.9 million of restricted cash.

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     (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. In accordance with EITF Issue No. 97-10, “The Effect of Lessee Involvement in Asset Construction,” AWA accounts for this as an operating lease.

     In connection with these bonds, AWA entered into an Amended and Restated Airport Use Agreement, pursuant to which AWA agreed to make sufficient payments to the Industrial Development Authority (“IDA”) to cover the principal and interest of the bonds and to indemnify the IDA for any claims arising out of the issuance and sale of the bonds and the use and occupancy of the concourses financed by these bonds and the old bonds. At December 31, 2004, the outstanding principal amount of the bonds was $21.8 million. AWA estimates its remaining payments to cover the principal and interest of these bonds will be approximately $43.6 million.

     In addition, AWA is also the lessee under certain long-term leases at various airports. At certain of these airports, municipalities have issued revenue bonds to improve airport facilities that are leased by AWA and accounted for as operating leases. AWA does not guarantee the underlying debt related to these operating leases.

     (c) Aircraft Acquisitions

     In August 2004, AWA amended its aircraft purchase contract with AVSA S.A.R.L., an affiliate of Airbus Industrie or “AVSA,” to acquire 22 Airbus A320 family aircraft (thirteen A320s and nine A319s), all powered by V2500 engines from International Aero Engines. Of the 22 aircraft, it is anticipated that 18 will be purchased directly from the manufacturer and four have been leased under noncancelable leases from various lessors for aircraft to be delivered in 2005. AWA has negotiated lease agreements for the four leased aircraft. In the context of this incremental order, AWA also secured extensive flexibility from Airbus with respect to its existing A318 order, allowing AWA to better react to market conditions by enabling it to amend its 15 A318 delivery positions to A319s and A320s, if it so desires, or to take no additional aircraft under certain conditions.

     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 2007 for use on certain of the Airbus A320 fleet. At December 31, 2004, the seven engines have an estimated gross cost of $39 million.

     The following table reflects estimated net cash payments under the restructured aircraft purchase agreement with AVSA and the IAE engine contract. Actual payments may vary due to inflation factor adjustments and changes in the delivery schedule of the equipment.

	(in thousands)
2005	$	272,820
2006		456,891
2007		47,697
	$	777,408

     (d) Sale-Leaseback Transactions

     In the fourth quarter of 2004, AWA completed two separate aircraft sale-leaseback transactions on one Airbus A320 aircraft and one Airbus A319 aircraft resulting in a combined loss of $4.6 million. This amount was recorded in “Other Operating Expenses.”

     In May 2004, AWA completed a sale-leaseback transaction on one V2500-A5 engine resulting in a gain of $2.9 million which has been deferred and will be amortized over the lease term of seven years.

     In July 2004, AWA completed a sale-leaseback transaction on one V2500-A5 engine resulting in a gain of $0.8 million which has been deferred and will be amortized over the lease term of seven years.

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     As part of the restructuring completed on January 18, 2002, AWA committed to the sale and leaseback of eight aircraft. The sales and leaseback of six of these aircraft were completed in 2002 and resulted in losses of approximately $3.8 million. The sale and leaseback of one aircraft was completed in June 2003 and resulted in a loss of approximately $0.6 million. The sale and leaseback of the final aircraft was completed in September 2003 and resulted in a loss of approximately $0.7 million. The losses on the sale-leaseback transactions, which were subject to a firm commitment in January 2002, were accrued in the accompanying statements of operations classified in “Special Charges” in the first quarter of 2002. See Note 11, “Special Charges.”

     (e) Contingent Legal Obligations

     Holdings and its subsidiaries are parties to various legal proceedings, including some purporting to be class action suits, and some that demand large monetary damages or other relief, which, if granted, would require significant expenditures. In certain cases where it is probable that the outcome will result in monetary damages, AWA has reviewed available information and determined that the best estimate of losses to be incurred related to these cases is $2 million, which has been accrued. For those cases where a loss is possible, or cases where a range of loss is probable but no amount within the range is a better estimate than any other amount, the estimated amount of additional exposure ranges from $0 to $25 million. In these instances, no accrual has been recorded.

     (f) General Guarantees and Indemnifications

     AWA is the lessee under many aircraft financing agreements (including leveraged lease financings of aircraft under the pass through trusts) and real estate leases. It is common in such transactions for AWA as the lessee to agree to indemnify the lessor and other related third parties for the manufacture, design, ownership, financing, use, operation and maintenance of the aircraft, and for tort liabilities that arise out of or relate to AWA’s use or occupancy of the leased asset. In some cases, this indemnity extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by their gross negligence or willful misconduct. Additionally, in the case of real estate leases, AWA typically indemnifies such parties for any environmental liability that arises out of or relates to AWA’s use of the leased premises. AWA expects that it would be covered by insurance (subject to deductibles) for most tort liabilities and related indemnities described above with respect to leased real estate and operated aircraft.

8. Income Taxes

     AWA is included in Holdings’ consolidated income tax return. Income tax expense in the accompanying statements of operations has been determined on a separate company basis.

     AWA recorded income tax expense (benefit) as follows:

	Year Ended December 31,
	2004		2003		2002
	(in thousands)
Current taxes:
Federal	$	—	$	114	$	(30,544	)
State		23		—		—
Total current taxes		23		114		(30,544	)
Deferred taxes		—		—		—
Total income tax expense (benefit)	$	23	$	114	$	(30,544	)

     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 that result in an effective tax expense (benefit) rate for financial reporting purposes that differs from the current federal statutory income tax rate of 35%.

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

	Year Ended December 31,
	2004			2003			2002
	(in thousands)
Income tax expense (benefit) at the federal statutory income tax rate	$	(29,832	)	$	21,490		$	(74,207	)
State income tax expense (benefit), net of federal income tax expense (benefit)		(3,057	)		2,532			(7,920	)
State rate change		—			(3,229	)		—
Change in valuation allowance		31,036			(17,532	)		44,461
Expired tax credits		—			—			7,988
Other, net		1,876			(3,147	)		(866	)
Total	$	23		$	114		$	(30,544	)

     As of December 31, 2004, AWA has available net operating loss carryforwards (“NOLs”) and tax credit carryforwards for federal income tax purposes of approximately $447.6 million and $1.1 million, respectively. The NOLs expire during the years 2007 through 2024 while approximately $0.2 million of the tax credit carryforwards will expire in 2005 and 2006. AWA also had capital loss carryforwards for federal income tax purposes of approximately $1.4 million which expire in 2009. However, such carryforwards are not 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 NOLs and tax credit carryforwards may be restricted.

     In September 2003, Holdings filed its 2002 consolidated income tax return with the IRS, which included a claim to carryback losses incurred in 2002 to the tax years 1999 and 2000. This resulted in a refund of approximately $3.1 million, of which substantially all was received in the fourth quarter of 2003.

     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:

	2004			2003
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	183,058		$	126,220
Aircraft leases		13,585			17,347
Vacation accrual		13,407			11,948
Frequent flyer accrual		6,592			5,958
Restructuring and other reserves		3,626			3,858
Tax credit carryforwards		1,112			1,112
Other		3,144			2,740
Gross deferred tax assets		224,524			169,183
Deferred tax liabilities:
Accelerated depreciation and amortization		(95,365	)		(70,534	)
Partnership losses		(1,421	)		(1,420	)
Other		(254	)		(781	)
Gross deferred tax liabilities		(97,040	)		(72,735	)
Net deferred tax assets before valuation allowance		127,484			96,448
Less valuation allowance		(127,484	)		(96,448	)
Net deferred liability		—			—

     SFAS No. 109, “Accounting for Income Taxes,” requires that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including AWA’s performance, the market environment in which AWA operates, forecasts of future profitability, the utilization of past tax credits, length of carryforward periods and similar factors. SFAS No. 109 further states that it is difficult to conclude that a valuation allowance is

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not needed when there is negative evidence such as cumulative losses in recent years. Therefore, cumulative losses weigh heavily in the overall assessment.

     AWA was in a cumulative loss position three out of four years between December 31, 2001 through December 31, 2004, which weighed heavily in the overall determination that a valuation allowance was needed. As of December 31, 2004, AWA had recorded a valuation allowance of $127.5 million against its net deferred tax assets. AWA expects to continue to record a full valuation allowance on any future tax benefits until we have achieved several quarters of consecutive profitable results coupled with an expectation of continued profitability. As of December 2004 and 2003, the valuation allowance totaled $127.5 million and $96.4 million, respectively.

9. Capital Stock

     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.

     Warrants

     As compensation for various elements of AWA’s financial restructuring completed in January 2002, Holdings issued a warrant to purchase 18.8 million shares of its Class B common stock to the federal government and additional warrants to purchase 3.8 million shares of its Class B common stock to other loan participants, in each case at an exercise price of $3 per share and a term of ten years. For accounting purposes, the warrants were valued at $35.4 million, or $1.57 per share, using the Black-Scholes pricing model with the following assumptions: expected dividend yield of 0.0%, risk-free interest rate of 4.8%, volatility of 44.9% and an expected life of ten years. The warrants were recorded by AWA as a non-cash capital contribution in the accompanying consolidated statements of stockholder’s equity and comprehensive income and classified as “Other Assets, Net” in the accompanying consolidate balance sheets. The warrants will be amortized over the life of the government guaranteed loan as an increase to interest expense. In the first quarter of 2004, approximately 220,000 warrants were exercised at $3 per share. In the third quarter of 2003, approximately 2.6 million warrants were exercised at $3 per share. These warrant exercises were cashless transactions resulting in the issuance of approximately 1.6 million shares of Holdings’ Class B common stock.

10. Employee Benefit Plan

     Holdings has a 401(k) defined contribution plan, covering essentially all employees of AWA. Participants may contribute from 1 to 50% of their pretax earnings to a maximum of $13,000 in 2004. AWA’s matching contribution is determined annually by the Board of Directors. AWA’s contribution expense to the plan totaled $11.4 million, $8.6 million and $8.6 million in 2004, 2003 and 2002, respectively.

     During the third quarter of 2004, Holdings became aware that an insufficient number of shares of its Class B common stock were registered for offer and sale through its 401(k) plan. In response to this registration shortfall, Holdings promptly filed a new registration statement on Form S-8 on August 13, 2004, which registered an additional 4,500,000 shares of Class B common stock to permit the continued offer and sale of such shares to participants through the 401(k) plan. Because the 401(k) plan in the past has purchased and in the future expects to continue to purchase shares of Class B common stock needed for allocation to participant accounts only in the open market and not directly from Holdings, the registration of these additional shares and their purchase by the 401(k) plan will have no dilutive impact on the outstanding equity of Holdings. As a result of the registration shortfall, however, participants who acquired unregistered shares through their 401(k) plan accounts after June 30, 2003, and prior to August 13, 2004, may be entitled to rescission rights or other remedies under the Securities Act of 1933, as amended. Holdings has notified affected existing and former plan participants of their potential rescission rights, but cannot predict the extent to which any such rescission rights may be exercised or the impact of any possible federal or state regulatory action pertaining to the registration shortfall. Holdings does not believe, however, that any consequences arising from the registration shortfall will have a material adverse effect on its financial position or results of operations.

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11. Special Charges

     In the first quarter of 2004, AWA recorded a $0.6 million reduction in special charges related to the revision of estimated costs associated with the sale and leaseback of certain aircraft.

     In August 2004, AWA entered into definitive agreements with two lessors to return six Boeing 737-200 aircraft. Three of these aircraft were returned to the lessors in the third quarter, two were returned in the fourth quarter and one was returned in January 2005. In addition, AWA continues negotiating with one lessor on the return of its remaining two Boeing 737-200 aircraft, one of which was parked in March 2002. The other aircraft was removed from service in January 2005. In connection with the return of the aircraft, AWA recorded $1.9 million of special charges which include lease termination payments of $2.1 million, the write-down of leasehold improvements and aircraft rent balances of $2.8 million, offset by the net reversal of maintenance reserves of $3.0 million.

     In December 2004, AWA and General Electric (“GE”) mutually agreed to terminate the V2500 A-1 power by hour (PBH) agreement effective January 1, 2005. This agreement was entered into March 1998 with an original term of ten years. For terminating the agreement early, AWA received a $20.0 million credit to be applied to amounts due for other engines under the 1998 agreement that is expected to be fully applied by December 31, 2005. AWA had capitalized PBH payments for V2500 A-1 engines in excess of the unamortized cost of the overhauls performed by GE of approximately $3.7 million. With the termination of this agreement, these payments were not realizable and as a result, AWA wrote off this amount against the $20.0 million credit referred to above resulting in a $16.3 million net gain.

     In February 2003, AWA announced the elimination of its hub operations in Columbus, Ohio. As a result, 12 regional jets, all of which were operated by Chautauqua Airlines under the America West Express banner, have been phased out of the fleet. In addition, the hub has been downsized from 49 daily departures to 15 destinations to four flights per day to Phoenix and Las Vegas. Service to New York City La Guardia Airport was also eliminated because perimeter rules at the airport prohibit flights beyond 1,500 miles, precluding service from AWA’s hubs in Phoenix and Las Vegas. In the first and second quarters of 2003, AWA recorded special charges of $1.0 million and $9.6 million, respectively, related to the costs associated with the termination of certain aircraft and facility contracts, employee transfer and severance expenses and the write-off of leasehold improvements in Columbus, Ohio.

     In the first quarter of 2003, AWA recorded a $1.1 million reduction in special charges related to the earlier-than-planned return of certain leased aircraft in 2001 and 2002, as all payments related to these aircraft returns have been made.

     In April 2003, as part of a cost reduction program, AWA implemented a plan to reduce management, professional and administrative payroll costs which resulted in 161 fewer employees within these workgroups. As a result, AWA recorded a special charge of $1.8 million related to this reduction-in-force.

     In June 2003, AWA recorded an impairment loss of $2.6 million related to three owned Boeing 737-200 aircraft that were grounded and subsequently sold.

     In the third quarter of 2003, AWA recorded an additional $0.5 million of special charges associated with the elimination of our hub operations in Columbus, Ohio. These special charges were offset by a $0.5 million reduction in special charges related to the revision of estimated costs associated with the sale and leaseback of certain aircraft.

     In the first quarter of 2002, AWA recorded a special charge of $21.0 million, primarily related to the restructuring completed on January 18, 2002, resulting from the events of September 11, 2001. Components of the special charge are as follows:

	Special Charges
	(in thousands)
Fleet restructuring costs	$	9,915
Losses on sale-leaseback transactions		6,328
Professional fees		4,745
Write-off of computer system and security equipment		3,411
Severance		631
Revision of estimate for second quarter 2001 special charge		(4,000	)
Total	$	21,030

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     Of this amount, approximately $10.3 million, principally related to losses on sale-leaseback transactions, fleet restructuring costs, professional fees and severance was accrued.

     In the third quarter of 2002, AWA recorded a $2.0 million reduction in special charges due to a revision of the estimated costs related to the early termination of certain aircraft leases.

     The following table presents the payments and other settlements made during 2002, 2003 and 2004 and the remaining special charge accruals as of December 31, 2004.

													Contract
	Sale-			Fleet			Professional			Reductions-			Termination/
	Leaseback			Restructuring			Fees			in-force			Other Costs			Total
	(in thousands)
Balance at December 31, 2001	$	—		$	16,786		$	—		$	83		$	—		$	16,869
Special charges		6,328			10,582			1,489			631			—			19,030
Reclassification of aircraft rent due to restructuring		—			4,696			—			—			—			4,696
Payments		—			(14,516	)		(1,489	)		(714	)		—			(16,719	)
Issuance of convertible notes		—			(5,000	)		—			—			—			(5,000	)
Forfeiture of security deposits		—			(2,289	)		—			—			—			(2,289	)
Loss on sale-leasebacks		(3,852	)		—			—			—			—			(3,852	)
Reclassification of capitalized maintenance for parked aircraft		—			(902	)		—			—			—			(902	)
Revision of estimate		—			(6,000	)		—			—			—			(6,000	)
Balance at December 31, 2002		2,476			3,357			—			—			—			5,833
Special charges		(510	)		1,545			—			2,310			10,634			13,979
Payments		—			(896	)		—			(2,003	)		(7,446	)		(10,345	)
Loss on sale-leasebacks		(1,361	)		—			—			—			—			(1,361	)
Write-off of leasehold improvements due to Columbus hub closure		—			—			—			—			(539	)		(539	)
Impairment loss		—			(2,617	)		—			—			—			(2,617	)
Balance at December 31, 2003		605			1,389			—			307			2,649			4,950
Special charges		(600	)		1,913			—			—			—			1,313
Payments		(5	)		(2,908	)		—			(242	)		(2,528	)		(5,683	)
Revision of estimate		—			—			—			(65	)		—			(65	)
Reversal of maintenance reserves		—			3,000			—			—			—			3,000
Write-off of leasehold improvements, engine overhauls and deferred rent		—			(2,751	)		—			—			—			(2,751	)
Balance at December 31, 2003	$	—		$	643		$	—		$	—		$	121		$	764

     AWA expects to make payments related to these special charges through the fourth quarter of 2005.

12. Nonoperating Income (Expenses) — Other, Net

     In connection with the term loan refinancing with GECC, AWA wrote off $1.3 million of debt issue costs associated to the term loan with Mizuho in 2004. This amount was recorded in nonoperating expenses.

     The changes in the fair value of AWA’s derivative instruments and the net realized gains and losses for the settled hedge transactions was a $30.5 million credit in 2004, $10.7 million credit in 2003 and $0.6 million expense in 2002.

     In April 2003, the Senate and House of Representatives of the United States of America passed, and the President signed, the Emergency Wartime Supplemental Appropriations Act to provide certain aviation-related assistance. $2.3 billion of the appropriation was for grants by the TSA to U.S. air carriers based on the proportional share each carrier had paid or collected as of the date of enactment of the legislation for passenger security and air carrier security fees. In May 2003, AWA received approximately $81.3 million representing its proportional share of passenger security and air carrier security fees paid or collected as of April 2003, which has been classified as “Federal Government Assistance” in the accompanying statements of operations. See Note 16, “Emergency Wartime Supplemental Appropriations Act.”

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In the fourth quarter of 2003, IAC/InterActiveCorp completed its acquisition of Hotwire.com, a discount travel website. Hotwire was founded by the Texas Pacific Group, American Airlines, Continental Airlines, Northwest Airlines, United Airlines, US Airways and AWA in October 2000. AWA had an ownership interest of approximately 1.5% in Hotwire.com with a carrying value of approximately $0.03 million. Upon closing of the transaction, AWA received cash of $9.8 million. Accordingly, AWA recognized a nonoperating gain of $9.8 million in the fourth quarter of 2003.

     Under the airline compensation provisions of the Air Transportation Safety and System Stabilization Act (the “Act”), each air carrier was entitled to receive the lesser of: (i) its direct and incremental losses for the period September 11, 2001 to December 31, 2001 or (ii) its proportional available seat mile allocation (based on available seat miles for August 2001) of the $4.5 billion compensation available under the Act. In 2001, AWA received $98.2 million under the Act from the United States government and expected to receive, based on its losses and its share of available seat miles, at least an additional $10.0 million. In accordance with EITF Issue No. 01-10, “Accounting for the Impact of the Terrorist Attacks of September 11, 2001,” AWA recognized $108.2 million of federal government assistance in 2001 as nonoperating income because direct and incremental losses incurred during 2001 exceeded that amount. In July 2002, AWA received an additional $12.3 million under the Act. Accordingly, $10.0 million was credited against the receivable established in 2001 and $2.3 million was recognized as nonoperating income in the second quarter of 2002. In August 2002, AWA received an additional payment of $6.2 million under the Act, which was recognized as nonoperating income in the third quarter of 2002.

     In March 2002, AWA wrote down its investment in Aeroxchange, an e-commerce entity, which was carried at cost, to net realizable value recognizing a loss of $2.8 million.

13. 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,
	2004			2003			2002
	(in thousands)
Non-cash transactions:
Reclassification of investments in debt securities to short-term investments	$	25,730		$	29,058		$	—
Reclassification of advances to parent company, net		—			—			265,810
Issuance of convertible notes		—			—			67,902
Cancellation of convertible notes		—			(660	)		(8,280	)
Cancellation of 10.75% senior unsecured notes related to sale of NLG investment		—			(10,370	)		—
Issuance of warrants		—			—			35,383
Exercise of warrants		(2	)		(17	)		—
Equipment acquired through capital leases		—			—			17,753
Equipment acquired with issuance of notes payable		—			—			64,163
Notes payable issued for equipment purchase deposits		17,500			5,250			10,500
Notes payable canceled under the aircraft purchase agreement		(7,000	)		(7,000	)		(10,500	)
Payment in kind notes issued, net of returns		9,033			8,972			7,756
Cash transactions:
Interest paid, net of amounts capitalized		23,841			17,201			25,942
Income taxes paid (refunded)		367			(2,493	)		(63,503	)

14. Related Party Transactions

     As part of our reorganization in 1994, Continental Airlines and AWA entered into an alliance agreement that included code sharing arrangements, reciprocal frequent flyer programs and ground handling operations. In March 2002, AWA received notice from Continental of its intention to terminate the code sharing and frequent flyer agreements between the two airlines, effective April 26, 2002. Two of Continental’s directors are managing partners of Texas Pacific Group, which, through TPG Advisors, Inc., effectively controls the voting power of Holdings. AWA paid Continental approximately $13.4 million, $17.3 million and $25.5 million and also received approximately $4.1 million, $5.0 million and $15.9 million in 2004, 2003 and 2002, respectively, from Continental pursuant to these agreements.

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     Texas Pacific Group agreed to reimburse AWA approximately $2.5 million for expenses incurred by AWA on its behalf. As a result, AWA recorded this as a receivable as of December 31, 2004. Subsequent to December 31, 2004, AWA received $1.3 million in such reimbursement and expects to receive an additional $1.2 million in 2005.

15. Quarterly Financial Data (Unaudited)

     The 2004 and 2003 unaudited quarterly financial data has been restated to reflect the accounting for fuel hedging derivative instruments pursuant to management’s determination that AWA did not qualify for hedge accounting under SFAS No. 133. In addition, the restated amounts also reflect corrections to properly reflect the fair value of open derivative instruments at each quarter end. See Note 2, “Restatement of Previously Reported Amounts.”

     Summarized quarterly financial data for 2004 and 2003 follows (in thousands of dollars):

	1st Quarter						2nd Quarter
				(as previously						(as previously
	(as restated)			reported)			(as restated)			reported)
2004
Operating revenues	$	576,374		$	576,374		$	604,904		$	604,904
Operating income		15,481	(1)		18,624			17,266	(3)		21,784
Nonoperating expenses, net		(16,275	)(1)(2)		(16,679	)		(5,741	)(3)(4)		(15,226	)
Income tax expense		—			—			—			—
Net income		(794	)(2)		1,945			11,525	(4)		6,558

	3rd Quarter						4th Quarter
				(as previously						(as previously
	(as restated)			reported)			(as restated)			reported)
2004
Operating revenues	$	578,453		$	578,453		$	578,546		$	578,546
Operating loss		(35,069	)(5)		(27,268	)		(37,382	)(7)		(22,315	)
Nonoperating income (expenses), net		7,307	(5)(6)		(18,896	)		(30,821	)(7)(8)		(26,144	)
Income tax expense		—			—			(23	)		(23	)
Net loss		(27,762	)(6)		(46,164	)		(68,226	)(8)		(48,482	)

	1st Quarter						2nd Quarter
				(as previously						(as previously
	(as restated)			reported)			(as restated)			reported)
2003
Operating revenues	$	523,063		$	523,063		$	575,601		$	575,601
Operating income (loss)		(55,356	)(9)		(45,120	)		17,457	(11)		17,315
Nonoperating income (expenses), net		(7,066	)(9)(10)		(15,899	)		62,403	(11)(12)		63,357
Income tax expense		—			—			—			—
Net income (loss)		(62,422	)(10)		(61,019	)		79,860	(12)		80,672

	3rd Quarter						4th Quarter
				(as previously						(as previously
	(as restated)			reported)			(as restated)			reported)
2003
Operating revenues	$	592,132		$	592,132		$	563,021		$	563,021
Operating income		51,170	(13)		51,037			12,821	(15)		13,606
Nonoperating expenses, net		(18,702	)(13)(14)		(17,217	)		(1,327	)(15)(16)		(5,679	)
Income tax expense		—			—			(114	)		(114	)
Net income		32,468	(14)		33,820			11,380	(16)		7,813

⁽¹⁾ Reflects reclassification of $3.1 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”

⁽²⁾ Reflects the restatement of $2.7 million net expense to eliminate hedge accounting for the period presented.

⁽³⁾ Reflects reclassification of $4.5 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”

⁽⁴⁾ Reflects the restatement of $5.0 million net credit to eliminate hedge accounting for the period presented.

⁽⁵⁾ Reflects reclassification of $7.8 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”

⁽⁶⁾ Reflects the restatement of $18.4 million net credit to eliminate hedge accounting for the period presented.

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⁽⁷⁾ Reflects reclassification of $15.0 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.” Note, an additional $7.6 million of losses on derivative instruments was recorded directly to “Gain (Loss) on Derivative Instruments, Net.”

⁽⁸⁾ Reflects the restatement of $19.7 million net expense to eliminate hedge accounting for the period presented.

⁽⁹⁾ Reflects reclassification of $10.2 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”

⁽¹⁰⁾ Reflects the restatement of $1.4 million net expense to eliminate hedge accounting for the period presented.

⁽¹¹⁾ Reflects reclassification of $0.2 million net expense from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”

⁽¹²⁾ Reflects the restatement of $0.8 million net expense to eliminate hedge accounting for the period presented.

⁽¹³⁾ Reflects reclassification of $0.1 million net expense from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”

⁽¹⁴⁾ Reflects the restatement of $1.4 million net expense to eliminate hedge accounting for the period presented.

⁽¹⁵⁾ Reflects reclassification of $0.8 million net credit from “Aircraft Fuel” expense to “Gain (Loss) on Derivative Instruments, Net.”

⁽¹⁶⁾ Reflects the restatement of $3.6 million net credit to eliminate hedge accounting for the period presented.

16. Emergency Wartime Supplemental Appropriations Act

     In April 2003, the Senate and House of Representatives of the United States of America passed, and the President signed, the Emergency Wartime Supplemental Appropriations Act to provide certain aviation-related assistance. The bill included the following key provisions:

•   $2.3 billion of the appropriation was for grants by the TSA to U.S. air carriers based on the proportional share each carrier had paid or collected as of the date of enactment of the legislation for passenger security and air carrier security fees. In May 2003, AWA received approximately $81.3 million representing its proportional share of passenger security and air carrier security fees paid or collected as of April 2003. AWA recorded this amount as nonoperating income in the accompanying statements of operations. See Note 12, “Nonoperating Income (Expenses) – Other, Net.”

•   The TSA would not impose passenger security fees during the period beginning June 1, 2003 and ending September 30, 2003.

•   $100 million of the appropriation would be available to compensate air carriers for the direct costs associated with the strengthening of flight deck doors and locks on aircraft. AWA received approximately $4.6 million in 2003 as reimbursement for the costs of reinforcing flight deck doors and locks.

•   Aviation war risk insurance provided by the federal government is extended until August 2005.

•   Certain airlines that received the aviation-related assistance, principally those airlines with trans-Pacific or trans-Atlantic flights, agreed to limit the total cash compensation for certain executive officers during the 12-month period beginning April 1, 2003 to an amount equal to the annual salary paid to that officer during the air carrier’s fiscal year 2002. Any violation of this agreement would have required the carrier to repay to the government the amount reimbursed for airline security fees. Since AWA does not operate trans-Pacific or trans-Atlantic flights, AWA was not subject to this provision.

17. 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 operations.

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

     The Holdings’ Audit Committee has selected and retained KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2004.

     PricewaterhouseCoopers LLP served as the Company’s and AWA’s independent registered public accounting firm for the fiscal years ended December 31, 2002 and 2001. On August 21, 2003, the Company dismissed PricewaterhouseCoopers LLP as the Company’s and AWA’s independent registered public accounting firm. The Company appointed KPMG as independent registered public accounting firm for the Company and AWA on August 21, 2003. The decision to change independent auditors was approved by the Company’s Audit Committee.

     The audit reports of PricewaterhouseCoopers LLP on Holdings’ and AWA’s consolidated balance sheets as of December 31, 2001 and 2002 and the related statements of operations, cash flows and stockholders’ equity for each of such years 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, 2001 and 2002 and through August 21, 2003, there were no disagreements between Holdings or AWA and PricewaterhouseCoopers LLP as to any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused it to make reference to the subject matter of the disagreement in 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, 2001 and 2002 and through August 21, 2003, there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K).

     Holdings and AWA did not consult with KPMG LLP 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 a disagreement or a reportable event within the meaning of Item 304(a)(1) of Regulation S-K.

ITEM 9A. CONTROLS AND PROCEDURES

     (a) Evaluation of Disclosure Controls and Procedures.

     The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Our Chief Executive Officer and Chief Financial Officer believe that our disclosure controls and procedures were not effective at the “reasonable assurance” level as of the end of the period covered by this report since they resulted in a need to restate our financial statements as described below.

     (b) Management’s Report on Internal Control over Financial Reporting.

     Management’s Report on Internal Control over Financial Reporting

     Management is responsible for establishing and maintaining effective internal control over Holdings’ financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Management assessed the effectiveness of Holdings’ internal control over financial reporting as of December 31, 2004. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework. Based on this assessment, management has concluded that as of December 31, 2004, the Company did not maintain effective internal control over financial reporting, due to a material weakness associated with the accounting for AWA’s fuel hedging program, as described below.

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     In February 2005, management undertook a review of AWA’s accounting for its fuel hedging transactions. As a result of this review, management concluded that AWA’s fuel hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting principles and that the Company’s financial statements for prior periods required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and statements of stockholders equity and comprehensive income of Holdings and AWA. See Note 2, “Restatement of Previously Reported Amounts” and Note 16, “Quarterly Financial Data (Unaudited)” in Holdings’ and Note 2, “Restatement of Previously Reported Amounts” and Note 15, “Quarterly Financial Data (Unaudited)” in AWA’s consolidated financial statements for the financial impact of the restatements. The Company concluded that these accounting errors were the result of deficiencies in its internal control over financial reporting, from the lack of effective reviews of hedge transaction documentation and of quarterly mark-to-market accounting entries on open fuel hedging contracts by personnel at an appropriate level.

     The Company’s independent registered public accounting firm, KPMG LLP, have audited and issued their report on management’s assessment of Holdings’ effectiveness of internal control over financial reporting as of December 31, 2004. The report of KPMG LLP appears in (d) below.

     (c) Changes in Internal Controls.

     There were no changes, in our internal controls over financial reporting during the period covered by this report that materially affected, or were reasonably likely to materially affect, our internal controls over financial reporting. However, prior to the filing of this report, we have implemented changes to our internal controls to correct the material weakness identified, as described above. Specifically, we have corrected this material weakness by implementing a review process that verifies the quarterly mark-to-market adjustment on open derivative positions. In addition, the Company will utilize the mark-to-market method of accounting for its derivative instruments going forward until such time it is able to implement processes and controls necessary to ensure that appropriate hedge documentation is obtained at hedge inception. At that time, the Company will evaluate whether it will re-apply hedge accounting.

     (d) Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
America West Holdings Corporation:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting (Item 9A(b)), that America West Holdings Corporation (“Holdings” or the “Company”) and its subsidiary America West Airlines, Inc. (AWA) did not maintain effective internal control over financial reporting as of December 31, 2004, because of the effect of the material weakness identified in management’s assessment associated with the Company’s accounting for fuel hedging transactions, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

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accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weakness has been identified and included in management’s assessment: As of December 31, 2004, the Company did not maintain effective internal control over financial reporting due to a material weakness associated with its accounting for AWA’s fuel hedging transactions. Management concluded that AWA’s fuel hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting principles and that the Company’s financial statements for prior periods required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and statements of stockholders equity and comprehensive income of Holdings and AWA. These accounting errors resulted from the lack of effective reviews of hedge transaction documentation and of quarterly mark-to-market accounting entries on open fuel hedging contracts by personnel at an appropriate level.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2004 and 2003, and the related consolidated statements of operations, cash flows and stockholders’ equity and comprehensive income, for the years then ended. The aforementioned material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the Company’s 2004 consolidated financial statements, and this report does not affect our report dated March 11, 2005, which expressed an unqualified opinion on the Company’s consolidated financial statements.

In our opinion, management’s assessment that the Company did not maintain effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control – Integrated Framework issued by COSO. Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control – Integrated Framework issued by COSO.

/s/ KPMG LLP

Phoenix, Arizona
March 11, 2005

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ITEM 9B. OTHER INFORMATION

     On March 10, 2005, the Compensation Committee of Holdings’ Board of Directors approved grants of stock options to executive officers of Holdings and AWA as set forth in the table below. All of the options have an exercise price equal to $5.13, the fair market value of Holdings’ common stock on the date of grant, and will vest in equal thirds on each of March 10, 2006, 2007 and 2008.

		Number of Shares
Name	Position	Underlying Stock Options
W. Douglas Parker	Chairman, President and Chief Executive Officer of Holdings and AWA		250,000
J. Scott Kirby	Executive Vice President – Sales and Marketing of AWA		100,000
Jeffrey D. McClelland	Executive Vice President and Chief Operating Officer of AWA		100,000
Joseph C. Beery	Senior Vice President and Chief Information Officer of AWA		30,000
Hal M. Heule	Senior Vice President – Technical Operations of AWA		30,000
C.A. Howlett	Senior Vice President – Public Affairs of Holdings and AWA		30,000
Derek J. Kerr	Senior Vice President and Chief Financial Officer of Holdings and AWA		35,000
Anthony Mule	Senior Vice President – Customer Service of AWA		30,000
James E. Walsh III	Senior Vice President and General Counsel of AWA		30,000
Michael R. Carreon	Vice President and Controller of AWA		22,000
Elise R. Eberwein	Vice President – Corporate Communications of AWA		23,000
Kara L. Gin	Vice President – Financial Planning and Analysis of AWA		22,000
Thomas T. Weir	Vice President and Treasurer of AWA		22,000

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PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS

     Information respecting continuing directors and nominees of the Company will be set forth under the caption “Proposal I: Election of Directors” in Holdings’ Proxy Statement relating to its 2005 Annual Meeting of Stockholders (the “Proxy Statement”) and is incorporated by reference into this Annual Report on Form 10-K.

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

     We have adopted a Code of Business Conduct and Ethics, or the “Code,” within the meaning of Item 406(b) of Regulation S-K. The Code applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The Code, our Corporate Governance Guidelines and the charters of our Board committees are publicly available on our website at www.americawest.com. Printed copies of the Code, our Corporate Governance Guidelines and the charters of our Board committees are available at no charge to any stockholder upon request to the Company’s Corporate Secretary at America West Holdings Corporation, 111 West Rio Salado Parkway, Tempe, Arizona 85281. If we make substantive amendments to the Code or grant any waiver, including any implicit waiver, to our principal executive officer, principal financial offer, principal accounting officer or controller, and persons performing similar functions, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K in accordance with applicable rules and regulations.

     Other information required by Item 10 will be set forth under an appropriate caption in the Proxy Statement and incorporated by reference into this Annual Report on Form 10-K.

     The Proxy Statement will be filed with the SEC in accordance with Rule 14a-6(c) promulgated under 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 the Company is set forth at Part I of this Annual Report on Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION

     Information concerning executive compensation will be set forth under the captions “Report of the Compensation and Human Resources Committee of the Board of Directors on Executive Compensation,” “Executive Compensation” and “Employment Agreements” in the Proxy Statement and is incorporated by reference into this Annual Report on Form 10-K.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     Information concerning security ownership of certain beneficial owners and management will be set forth under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement and is incorporated by reference into this Annual Report on Form 10-K.

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 Annual Report on Form 10-K.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Information concerning principal accountant fees and services will be set forth under the captions “Independent Registered Public Accounting Firm’s Fees,” “Audit Committee Disclosure” and “Policy on Audit Committee Pre-Approval” in the Proxy Statement and is incorporated by reference into this Annual Report on Form 10-K.

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PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

     The following financial statements and the Reports of Independent Registered Public Accounting Firms are filed in Part II, Items 8A and 8B of this report on the pages indicated:

America West Holdings Corporation

Report of Independent Registered Public Accounting Firm – page 41.

Report of Independent Registered Public Accounting Firm – page 42.

Consolidated Balance Sheets – December 31, 2004 and 2003 – page 43.

Consolidated Statements of Operations –Years ended December 31, 2004, 2003 and 2002 – page 44.

Consolidated Statements of Cash Flows–Years ended December 31, 2004, 2003 and 2002 – page 45.

Consolidated Statements of Stockholders’ Equity and Comprehensive Income – Years ended December 31, 2003, 2002 and 2001 – page 46.

Notes to Consolidated Financial Statements – page 47.

America West Airlines, Inc.

Report of Independent Registered Public Accounting Firm – page 72.

Report of Independent Registered Public Accounting Firm – page 73.

Consolidated Balance Sheets – December 31, 2004 and 2003 — page 74.

Consolidated Statements of Operations – Years ended December 31, 2004, 2003 and 2002 – page 75.

Consolidated Statements of Cash Flows – Years ended December 31, 2003, 2002 and 2001 – page 76.

Consolidated Statements of Stockholder’s Equity and Comprehensive Income – Years ended December 31, 2003, 2002 and 2001 – page 77.

Notes to Consolidated Financial Statements – page 78.

(a)(2) Financial Statement Schedules

America West Holdings Corporation

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule – page 112.

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule – page 113.

Schedule II: Valuation and Qualifying Accounts – page 114.

America West Airlines, Inc.

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule – page 115.

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule – page 116.

Schedule II: Valuation and Qualifying Accounts – page 117.

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     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.

     (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).
3.2*	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 and incorporated by reference to Exhibit 3.1 of Holdings’ Registration Statement on Form 8-B dated January 13, 1997. Holdings’ Certificate of Incorporation was subsequently amended by a Certificate of Amendment, filed with the Delaware Secretary of State on May 24, 2004 and incorporated herein by reference to Exhibit 3.1 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 001-12649).
3.4*	Bylaws of Holdings.
4.1	Indenture, dated as of July 30, 2003, between America West Airlines, Inc. and U.S. Bank National Association, as trustee and not in its individual capacity, for America West Airlines, Inc. Senior Exchangeable Notes due 2023 – Incorporated by reference to Exhibit 4.1 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
4.2	Form of America West Airlines, Inc. Senior Exchangeable Note due 2023 – Incorporated by reference to Exhibit 4.2 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
4.3	Registration Rights Agreement, dated as of July 30, 2003, with respect to shares of Class B Common Stock underlying the America West Airlines, Inc. Senior Exchangeable Notes due 2023 – Incorporated by reference to Exhibit 4.3 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
4.4	Guarantee and Exchange Agreement, dated as of July 30, 2003, between America West Holdings Corporation and U.S. Bank, National Association, as exchange agent and trustee and not in its individual capacity, for America West Airlines Inc. Senior Exchangeable Notes due 2023 – Incorporated by reference to Exhibit 4.4 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
4.5	Stock Option Agreement, dated 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.
4.6	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 (File No. 000-12337).
4.7	Assumption of Certain Obligations Under Registration Rights Agreement executed by Holdings for the benefit of TPG Partners, L.P., TPG Parallel I, 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.

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Exhibit
Number	Title
4.8	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 Current Report on Form 8-K dated November 26, 1996 (File No. 000-12337).
4.9	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 dated June 4, 1997 (File No. 333-27351).
4.10	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 dated March 25, 1999 (File No. 333-71615).
4.11	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, the issuance of 8.54% Initial Pass Through Certificates, Series 1999-1C-S and 1999-1C-O, the issuance of 7.93% Exchange Pass Through Certificates, Series 1999-1G-S and 1999-1G-O, and the issuance of 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 (File No. 000-12337).
4.12	Insurance and Indemnity Agreement, dated as of September 21, 1999, among AWA, Ambac Assurance Corporation as Policy Provider and Wilmington Trust Company as Subordination Agent and Trustee under the Pass Through Trust 1999-1G-O – Incorporated by reference to Exhibits 4.15 to AWA’s Registration Statement on Form S-4 dated March 16, 2000 (File No. 333-93393).
4.13	Pass Through Trust Agreement, dated as of July 7, 2000, between AWA, and Wilmington Trust Company, as Trustee, made with respect to the formation of America West Airlines Pass Through Trust, Series 2000-1G-0, 2000-1G-S, 2000-1C-O and 2000-1C-S, the issuance of 8.057% Initial Pass Through Certificates, Series 2000-1G-O and 2000-1G-S, the issuance of 9.244% Initial Pass Through Certificates, Series 2000-1C-O and 2000-1C-S, the issuance of 8.057% Exchange Pass Through Certificates, Series 2000-1G-O and 2000-1G-S and the issuance of 9.244% Exchange Pass Through Certificates, Series 2000-1C-O and 2000-1C-S – Incorporated by reference to Exhibits 4.3, 4.4, 4.5 and 4.6 to AWA’s Registration Statement on Form S-4 dated September 12, 2002 (File No. 333-44930).
4.14	Insurance and Indemnity Agreement, dated as of July 7, 2000, among AWA, Ambac Assurance Corporation as Policy Provider and Wilmington Trust company as Subordination Agent and Trustee under the Pass Through Trust 2000-1G – Incorporated by reference to Exhibits 4.15 to AWA’s Registration Statement on Form S-4 dated September 12, 2002 (File No. 333-44930).
4.16	Insurance and Indemnity Agreement (Series G), dated as of May 17, 2001, among AWA, Ambac Assurance Corporation as Policy Provider and Wilmington Trust company as Subordination Agent – Incorporated by reference to Exhibit 4.20 to AWA’s Registration Statement on Form S-4 dated February 14, 2002 (File No. 333-69356).
4.17	Indenture, dated as of January 18, 2002, between America West Holdings Corporation and Wilmington Trust Company, as Trustee and not in its individual capacity, for America West Holdings Corporation 7.5% Convertible Senior Notes due 2009 – Incorporated by reference to Exhibit 4.15 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4.18	Form of America West Holdings Corporation 7.5% Convertible Senior Notes due 2009 – Incorporated by reference to Exhibit 4.16 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4.19	Registration Rights Agreement, dated January 18, 2002, with respect to shares of Class B Common Stock underlying the America West Holdings Corporation 7.5% Convertible Senior Notes due 2009 – Incorporated by reference to Exhibit 4.17 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).

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Exhibit
Number	Title
4.20	Guaranty, dated as of January 18, 2002, by America West Airlines, Inc., in favor of the Holders and the Trustee under the Indenture dated January 18, 2002 – Incorporated by reference to Exhibit 4.18 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4.21	Form of Warrant to Purchase Class B Common Stock, dated January 18, 2002, issued to the Air Transportation Stabilization Board and certain warrant recipients – Incorporated by reference to Exhibit 4.19 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4.22	Registration Rights Agreement, dated January 18, 2002, between America West Holdings Corporation and the Air Transportation Stabilization Board with respect to shares of Class B Common Stock underlying the Warrant to Purchase Class B Common Stock – Incorporated by reference to Exhibit 4.20 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4.23	Warrant Registration Rights Agreement between America West Holdings Corporation and certain warrant recipients – Incorporated by reference to Exhibit 4.21 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
10.1	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 (File No. 000-12337).
10.2	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 quarter ended September 30, 1990 (File No. 000-12337).
10.3	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 dated August 23, 1994, as amended (File No. 33-54243).
10.4	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 (File No. 001-12649).
10.5	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 (File No. 001-12649).
10.6	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 (File No. 000-12337).
10.7	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 quarter ended June 30, 1999 (File No. 000-12337).
10.8(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 (File No. 001-12649).
10.9(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 (File No. 001-12649).

105

Exhibit
Number	Title
10.10(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 (File No. 000-12337).
10.11(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 AWA, including Letter Agreement Nos. 1 — 8 thereto – Incorporated by reference to Exhibit 10.36 to Holdings’ and AWA’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-12337).
10.12(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 AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 000-12337).
10.13(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 AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 000-12337).
10.14(1)	Amendment No. 7, dated July 30, 2004, to the A319/A320 Purchase Agreement dated September 12, 1997, between AVSA, S.A.R.L. and AWA and Letter Agreement Nos. 2 – 8 – Incorporated by reference to Exhibit 10.15 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.15(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 Holdings’ and AWA’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 000-12337).
10.16(1)	Side Letter No. 15, dated May 26, 2004, to the Amended and Restated V2500 Support Contract, dated October 7, 1998, between AWA and IAE International Aero Engines AG – Incorporated by reference to Exhibit 10.16 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.18	Priority Distribution Agreement, dated as of August 25, 1994, between TPG Partners, L.P., TPG Parallel I, L.P., 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.
10.19	Disposition and Redevelopment Agreement, dated as of February 5, 2001, between AWA and the City of Phoenix, AZ – Incorporated by reference to Exhibit 10.44 to AWA’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 000-12337).
10.20(1)	Unsubordinated Ground Lease, dated as of February 5, 2001, between AWA and the City of Phoenix, AZ – Incorporated by reference to Exhibit 10.45 to AWA’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 000-12337).
10.21(1)	Code Share and Revenue Sharing Agreement, dated as of March 20, 2001, between AWA and Mesa Airlines, Inc. – Incorporated by reference to Exhibit 10.46 to AWA’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 000-12337).
10.22(1)	$429,000,000 Loan Agreement, dated as of January 18, 2002, among America West Airlines, Inc., Citibank, N.A., as Agent, KPMG Consulting, Inc., as Loan Administrator, Citibank, N.A., as Initial Lender and the Air Transportation Stabilization Board – Incorporated by reference to Exhibit 10.51 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).

106

Exhibit
Number	Title
10.23	Undertaking (regarding restrictions on transfer of Class A Common Stock), dated as of January 18, 2002, among America West Holdings Corporation, TPG Partners, L.P., TPG Parallel I, L.P. and Air Partners II, L.P. for the benefit of the Air Transportation Stabilization Board – Incorporated by reference to Exhibit 10.53 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
10.24	Second Amendment to Code Share and Revenue Sharing Agreement, as amended, dated as of October 24, 2002, by and among AWA, Mesa Airlines, Inc., Freedom Airlines, Inc. and Air Midwest, Inc. – Incorporated by reference to Exhibit 10.56 of Holdings’ and AWA’s Annual Report on Form 10-K for the year ended December 31, 2002.
10.25	Third Amendment to Code Share and Revenue Sharing Agreement dated as of January 29, 2003 among AWA, Mesa Airlines, Inc. and Freedom Airlines, Inc. – Incorporated by reference to Exhibit 10.1 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.26(1)	Fourth Amendment to Code Share and Revenue Sharing Agreement and Release dated as of September 5, 2003 among AWA, Mesa Airlines, Inc., Air Midwest, Inc. and Freedom Airlines, Inc. – Incorporated by reference to Exhibit 10.2 to Holdings’ and AWA’s Amendment No. 1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.27	Loan Agreement [Engines], dated as of September 3, 2004, among AWA, GECC, as administrative agent, original Series A lender and original Series B lender, Wells Fargo Bank Northwest, National Association (“Wells Fargo”), as security trustee and the lenders from time to time party thereto – Incorporated by reference to Exhibit 10.1 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.28	Engine Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and Wells Fargo – Incorporated by reference to Exhibit 10.2 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.29	Mortgage and Security Agreement Supplement No. 1, dated September 10, 2004, of AWA – Incorporated by reference to Exhibit 10.3 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.30	Subordinated Engine Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and Wells Fargo – Incorporated by reference to Exhibit 10.4 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.31	Subordinated Mortgage and Security Agreement Supplement No. 1, dated September 10, 2004, of AWA – Incorporated by reference to Exhibit 10.5 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.32	Security Trustee Agreement [Engines], dated as of September 3, 2004, among Wells Fargo, as security trustee and the beneficiaries named therein – Incorporated by reference to Exhibit 10.6 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.33	Payment and Indemnity Agreement [Engines], dated as of September 3, 2004, among AWA, certain beneficiaries listed on Schedule 1 and Wells Fargo – Incorporated by reference to Exhibit 10.7 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.34	Restructure Letter Agreement [Engines], dated as of September 3, 2004, among AWA and GECC – Incorporated by reference to Exhibit 10.8 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).

107

Exhibit
Number	Title
10.35	Loan Agreement [Spare Parts], dated as of September 3, 2004, among AWA, GECC, as administrative agent, original Series A lender and original Series B lender, Wells Fargo, as security trustee and the lenders from time to time party thereto – Incorporated by reference to Exhibit 10.9 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.36	Spare Parts Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and Wells Fargo – Incorporated by reference to Exhibit 10.10 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.37	Subordinated Spare Parts Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and Wells Fargo – Incorporated by reference to Exhibit 10.11 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.38	Security Trustee Agreement [Spare Parts], dated as of September 3, 2004, among Wells Fargo, as security trustee and the beneficiaries named therein – Incorporated by reference to Exhibit 10.12 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.39	Payment and Indemnity Agreement [Spare Parts], dated as of September 3, 2004, among AWA, certain beneficiaries listed on Schedule 1 and Wells Fargo – Incorporated by reference to Exhibit 10.13 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.40	Restructure Letter Agreement [Spare Parts], dated as of September 3, 2004, among AWA and GECC – Incorporated by reference to Exhibit 10.14 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.41*	$30,790,000 Senior Secured Term Loan Agreement, dated December 23, 2004, among FTCHP LLC, as Borrower, America West Airlines, Inc., as Guarantor, Heritage Bank, SSB, as Administrative Agent and Citibank, N.A. (and other lenders named therein) as Lenders.
10.42*	Senior Secured Discount Note, dated December 23, 2004, issued by FTCHP LLC.
10.43*	Unconditional Guaranty Agreement, dated December 23, 2004, by America West Airlines, Inc. in favor of Citibank, N.A.
10.44+	Amended and Restated America West 1994 Incentive Equity Plan – Incorporated by reference to Exhibit 10.21 to AWA’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 000-12337).
10.45+	2002 Incentive Equity Plan – Incorporated by reference to Appendix A to Holdings’ Proxy Statement on Schedule 14A filed on April 17, 2002 (File No. 001-12649).
10.46+	Performance-based Award Plan – Incorporated by reference to Exhibit 10.57 to Holdings’ and AWA’s quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 001-12649).
10.47*+	Form of Offer Letter for officers.
10.48*+	Form of Change of Control and Severance Benefit Agreement for Vice Presidents.
10.49*+	Form of Change of Control and Severance Benefit Agreement for Senior Vice Presidents.
10.50*+	Summary of Officer Benefits.
10.51*+	Summary of Director Compensation and Benefits.
10.52+	Form of Letter Agreement for Directors’ Travel – Incorporated by reference to Exhibit 10.32 to Holdings’ and AWA’s Annual Report on Form 10-K for the period ended December 31, 2003.

108

Exhibit
Number	Title
10.53*+	Employment Agreement, dated February 24, 2004, by and among America West Holdings Corporation, America West Airlines, Inc. and W. Douglas Parker.
21.1*	Subsidiaries of Holdings.
23.1*	Consent of KPMG LLP.
23.2*	Consent of PricewaterhouseCoopers 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.
31.1*	Certification of Holdings’ Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.2*	Certification of Holdings’ Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.3*	Certification of AWA’s Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.4*	Certification of AWA’s Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
32.1*	Certification of Holdings’ Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of AWA’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

109

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: March 14, 2005	By:	/s/ W. Douglas Parker
		W. Douglas Parker,
		Chairman, President and Chief Executive Officer

POWER OF ATTORNEY

     We, the undersigned, directors and officers of America West Holdings Corporation, do hereby severally constitute and appoint W. Douglas Parker and Derek J. Kerr 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, 2004, 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 March 14, 2005.

SIGNATURE	TITLE
/s/ W. Douglas Parker	Chairman, President and Chief Executive Officer
W. Douglas Parker	(Principal Executive Officer)
/s/ Derek J. Kerr	Senior Vice President
Derek J. Kerr	(Principal Financial and Accounting Officer)
/s/ Herbert M. Baum	Director
Herbert M. Baum
/s/ John L. Goolsby	Director
John L. Goolsby
/s/ Matthew J. Hart	Director
Mathew J. Hart
/s/ Walter T. Klenz	Director
Walter T. Klenz
/s/ Richard C. Kraemer	Director
Richard C. Kraemer
/s/ Robert J. Miller	Director
Robert J. Miller
/s/ Denise M. O’Leary	Director
Denise M. O’Leary
/s/ Richard P. Schifter	Director
Richard P. Schifter
/s/ John F. Tierney	Director
John F. Tierney
/s/ J. Steven Whisler	Director
J. Steven Whisler

110

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 AIRLINES, INC.
Date: March 14, 2005	By:	/s/ W. Douglas Parker
		W. Douglas Parker,
		Chairman, President and Chief Executive Officer

POWER OF ATTORNEY

     We, the undersigned, directors and officers of America West Airlines, Inc., do hereby severally constitute and appoint W. Douglas Parker and Derek J. Kerr 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, 2004, 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 March 14, 2005.

SIGNATURE	TITLE
/s/ W. Douglas Parker	Chairman, President and Chief Executive Officer
W. Douglas Parker	(Principal Executive Officer)
/s/ Derek J. Kerr	Senior Vice President
Derek J. Kerr	(Principal Financial and Accounting Officer)
/s/ Herbert M. Baum	Director
Herbert M. Baum
/s/ John L. Goolsby	Director
John L. Goolsby
/s/ Matthew J. Hart	Director
Mathew J. Hart
/s/ Walter T. Klenz	Director
Walter T. Klenz
/s/ Richard C. Kraemer	Director
Richard C. Kraemer
/s/ Robert J. Miller	Director
Robert J. Miller
/s/ Denise M. O’Leary	Director
Denise M. O’Leary
/s/ Richard P. Schifter	Director
Richard P. Schifter
/s/ John F. Tierney	Director
John F. Tierney
/s/ J. Steven Whisler	Director
J. Steven Whisler

111

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULE

The Board of Directors and Stockholders
America West Holdings Corporation:

The audits referred to in our report dated March 11, 2005 included the related consolidated financial statement schedule for the years ended December 31, 2004 and 2003, 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.

As discussed in Note 2 to the accompanying consolidated financial statements, the Company has restated the consolidated balance sheet as of December 31, 2003 and the consolidated statement of changes in stockholders’ equity and comprehensive income for the year then ended. As discussed in Note 13 to the accompanying consolidated financial statements, the Company restated its dilutive earnings per share for the year ended December 31, 2003 in connection with the adoption of Emerging Issue Task Force 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share”.

/s/ KPMG LLP

Phoenix, Arizona
March 11, 2005

112

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
of America West Holdings Corporation:

Our audit of the consolidated financial statements of America West Holdings Corporation referred to in our report dated March 24, 2003 appearing in this Annual Report on Form 10-K also included an audit of the 2002 financial statement schedule information included in the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, the 2002 financial statement schedule information presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP
Phoenix, Arizona
March 24, 2003

113

AMERICA WEST HOLDINGS CORPORATION
Schedule II-Valuation and Qualifying Accounts
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)

	Balance at						Balance
	Beginning						at End
Description	of Period		Additions		Deductions		of Period
Allowance for doubtful receivables:
Year ended December 31, 2004	$	5,807	$	1,110	$	5,430	$	1,487
Year ended December 31, 2003	$	6,767	$	1,450	$	2,410	$	5,807
Year ended December 31, 2002	$	3,216	$	6,755	$	3,204	$	6,767
Allowance for obsolescence:
Year ended December 31, 2004	$	12,254	$	2,882	$	377	$	14,759
Year ended December 31, 2003	$	9,261	$	3,450	$	457	$	12,254
Year ended December 31, 2002	$	7,249	$	3,029	$	1,017	$	9,261
Valuation allowance on deferred tax asset, net:
Year ended December 31, 2004	$	96,474	$	56,772	$	24,280	$	128,966
Year ended December 31, 2003	$	78,787	$	38,379	$	20,692	$	96,474
Year ended December 31, 2002	$	40,650	$	46,124	$	7,987	$	78,787
Leased aircraft return provision:
Year ended December 31, 2004	$	26,872	$	6,645	$	1,558	$	31,959
Year ended December 31, 2003	$	22,441	$	9,000	$	4,569	$	26,872
Year ended December 31, 2002	$	11,277	$	17,636	$	6,472	$	22,441

114

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

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

The audits referred to in our report dated March 11, 2005 included the related consolidated financial statement schedule for the years ended December 31, 2004 and 2003, 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.

As discussed in Note 2 to the accompanying consolidated financial statements, the Company has restated the consolidated balance sheet as of December 31, 2003 and the consolidated statement of changes in stockholder’s equity and comprehensive income for the year then ended.

/s/ KPMG LLP

Phoenix, Arizona
March 11, 2005

115

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
of America West Airlines, Inc.:

Our audit of the consolidated financial statements of America West Airlines, Inc. referred to in our report dated March 24, 2003, except for the effects of the reorganization transaction described in Note 1(a) as to which the date is August 2, 2004, appearing in this Annual Report on Form 10-K also included an audit of the 2002 financial statement schedule information included in the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, the 2002 financial statement schedule information presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP
Phoenix, Arizona
March 24, 2003, except for the effects of the
reorganization transaction described in Note 1(a)
as to which the date is August 2, 2004

116

AMERICA WEST AIRLINES, INC.
Schedule II-Valuation and Qualifying Accounts
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)

	Balance at						Balance
	Beginning						at End
Description	Of Period		Additions		Deductions		of Period
Allowance for doubtful receivables:
Year ended December 31, 2004	$	5,807	$	1,110	$	5,430	$	1,487
Year ended December 31, 2003	$	6,767	$	1,450	$	2,410	$	5,807
Year ended December 31, 2002	$	3,216	$	6,755	$	3,204	$	6,767
Allowance for obsolescence:
Year ended December 31, 2004	$	12,254	$	2,882	$	377	$	14,759
Year ended December 31, 2003	$	9,261	$	3,450	$	457	$	12,254
Year ended December 31, 2002	$	7,249	$	3,029	$	1,017	$	9,261
Valuation allowance on deferred tax asset, net:
Year ended December 31, 2004	$	96,448	$	55,343	$	24,305	$	127,484
Year ended December 31, 2003	$	78,602	$	39,481	$	21,635	$	96,448
Year ended December 31, 2002	$	34,140	$	52,587	$	8,125	$	78,602
Leased aircraft return provision:
Year ended December 31, 2004	$	26,872	$	6,645	$	1,558	$	31,959
Year ended December 31, 2003	$	22,441	$	9,000	$	4,569	$	26,872
Year ended December 31, 2002	$	11,277	$	17,636	$	6,472	$	22,441

117

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*	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 and incorporated by reference to Exhibit 3.1 of Holdings’ Registration Statement on Form 8-B dated January 13, 1997. Holdings’ Certificate of Incorporation was subsequently amended by a Certificate of Amendment, filed with the Delaware Secretary of State on May 24, 2004 and incorporated herein by reference to Exhibit 3.1 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 001-12649).
3.4*	Bylaws of Holdings.
4.1	Indenture, dated as of July 30, 2003, between America West Airlines, Inc. and U.S. Bank National Association, as trustee and not in its individual capacity, for America West Airlines, Inc. Senior Exchangeable Notes due 2023 – Incorporated by reference to Exhibit 4.1 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
4.2	Form of America West Airlines, Inc. Senior Exchangeable Note due 2023 – Incorporated by reference to Exhibit 4.2 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
4.3	Registration Rights Agreement, dated as of July 30, 2003, with respect to shares of Class B Common Stock underlying the America West Airlines, Inc. Senior Exchangeable Notes due 2023 – Incorporated by reference to Exhibit 4.3 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
4.4	Guarantee and Exchange Agreement, dated as of July 30, 2003, between America West Holdings Corporation and U.S. Bank, National Association, as exchange agent and trustee and not in its individual capacity, for America West Airlines Inc. Senior Exchangeable Notes due 2023 – Incorporated by reference to Exhibit 4.4 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
4.5	Stock Option Agreement, dated 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.
4.6	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 (File No. 000-12337).
4.7	Assumption of Certain Obligations Under Registration Rights Agreement executed by Holdings for the benefit of TPG Partners, L.P., TPG Parallel I, 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.
4.8	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 Current Report on Form 8-K dated November 26, 1996 (File No. 000-12337).

118

Exhibit
Number	Title
4.9	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 dated June 4, 1997 (File No. 333-27351).
4.10	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 dated March 25, 1999 (File No. 333-71615).
4.11	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, the issuance of 8.54% Initial Pass Through Certificates, Series 1999-1C-S and 1999-1C-O, the issuance of 7.93% Exchange Pass Through Certificates, Series 1999-1G-S and 1999-1G-O, and the issuance of 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 (File No. 000-12337).
4.12	Insurance and Indemnity Agreement, dated as of September 21, 1999, among AWA, Ambac Assurance Corporation as Policy Provider and Wilmington Trust Company as Subordination Agent and Trustee under the Pass Through Trust 1999-1G-O – Incorporated by reference to Exhibits 4.15 to AWA’s Registration Statement on Form S-4 dated March 16, 2000 (File No. 333-93393).
4.13	Pass Through Trust Agreement, dated as of July 7, 2000, between AWA, and Wilmington Trust Company, as Trustee, made with respect to the formation of America West Airlines Pass Through Trust, Series 2000-1G-0, 2000-1G-S, 2000-1C-O and 2000-1C-S, the issuance of 8.057% Initial Pass Through Certificates, Series 2000-1G-O and 2000-1G-S, the issuance of 9.244% Initial Pass Through Certificates, Series 2000-1C-O and 2000-1C-S, the issuance of 8.057% Exchange Pass Through Certificates, Series 2000-1G-O and 2000-1G-S and the issuance of 9.244% Exchange Pass Through Certificates, Series 2000-1C-O and 2000-1C-S – Incorporated by reference to Exhibits 4.3, 4.4, 4.5 and 4.6 to AWA’s Registration Statement on Form S-4 dated September 12, 2002 (File No. 333-44930).
4.14	Insurance and Indemnity Agreement, dated as of July 7, 2000, among AWA, Ambac Assurance Corporation as Policy Provider and Wilmington Trust company as Subordination Agent and Trustee under the Pass Through Trust 2000-1G – Incorporated by reference to Exhibits 4.15 to AWA’s Registration Statement on Form S-4 dated September 12, 2002 (File No. 333-44930).
4.15	Pass Through Trust Agreement, dated as of May 17, 2001, between AWA and Wilmington Trust Company, as Trustee, made with respect to the formation of America West Airlines Pass Through Trust, Series 2001-1G-O, 2001-1G-S, 2001-1C-O, 2001-1C-S, 2001-1D-O and 2001-1D-S, the issuance of 7.10% Initial Pass Through Certificates, Series 2001-1G-O and 2001-1G-S, the issuance of 8.37% Initial Pass Through Certificates, Series 2001-1C-O and 2001-1G-S, the issuance of Six-Month LIBOR plus 3.20% Initial Pass Through Certificates, Series 2001-1D-O and Series 2001-1D-S, the issuance of 7.10% Exchange Pass Through Certificates, Series 2001-1G-O and 2001-1G-S, the issuance of 8.37% Exchange Pass Through Certificates, Series 2001-1C-O and 2001-1G-S, and the issuance of Six-Month LIBOR plus 3.20% Exchange Pass Through Certificates, Series 2001-1D-O and Series 2001-1D-S – 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 dated February 14, 2002 (File No. 333-69356).
4.16	Insurance and Indemnity Agreement (Series G), dated as of May 17, 2001, among AWA, Ambac Assurance Corporation as Policy Provider and Wilmington Trust company as Subordination Agent – Incorporated by reference to Exhibit 4.20 to AWA’s Registration Statement on Form S-4 dated February 14, 2002 (File No. 333-69356).
4.17	Indenture, dated as of January 18, 2002, between America West Holdings Corporation and Wilmington Trust Company, as Trustee and not in its individual capacity, for America West Holdings Corporation 7.5% Convertible Senior Notes due 2009 – Incorporated by reference to Exhibit 4.15 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).

119

Exhibit
Number	Title
4.18	Form of America West Holdings Corporation 7.5% Convertible Senior Notes due 2009 – Incorporated by reference to Exhibit 4.16 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4.19	Registration Rights Agreement, dated January 18, 2002, with respect to shares of Class B Common Stock underlying the America West Holdings Corporation 7.5% Convertible Senior Notes due 2009 – Incorporated by reference to Exhibit 4.17 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4.20	Guaranty, dated as of January 18, 2002, by America West Airlines, Inc., in favor of the Holders and the Trustee under the Indenture dated January 18, 2002 – Incorporated by reference to Exhibit 4.18 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4.21	Form of Warrant to Purchase Class B Common Stock, dated January 18, 2002, issued to the Air Transportation Stabilization Board and certain warrant recipients – Incorporated by reference to Exhibit 4.19 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4.22	Registration Rights Agreement, dated January 18, 2002, between America West Holdings Corporation and the Air Transportation Stabilization Board with respect to shares of Class B Common Stock underlying the Warrant to Purchase Class B Common Stock – Incorporated by reference to Exhibit 4.20 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4.23	Warrant Registration Rights Agreement between America West Holdings Corporation and certain warrant recipients – Incorporated by reference to Exhibit 4.21 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
10.1	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 (File No. 000-12337).
10.2	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 quarter ended September 30, 1990 (File No. 000-12337).
10.3	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 dated August 23, 1994, as amended (File No. 33-54243).
10.4	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 (File No. 001-12649).
10.5	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 (File No. 001-12649).
10.6	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 (File No. 000-12337).
10.7	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 quarter ended June 30, 1999 (File No. 000-12337).

120

Exhibit
Number	Title
10.8(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 (File No. 001-12649).
10.9(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 (File No. 001-12649).
10.10(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 (File No. 000-12337).
10.11(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 AWA, including Letter Agreement Nos. 1 — 8 thereto – Incorporated by reference to Exhibit 10.36 to Holdings’ and AWA’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-12337).
10.12(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 AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 000-12337).
10.13(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 AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 000-12337).
10.14(1)	Amendment No. 7, dated July 30, 2004, to the A319/A320 Purchase Agreement dated September 12, 1997, between AVSA, S.A.R.L. and AWA and Letter Agreement Nos. 2 – 8 – Incorporated by reference to Exhibit 10.15 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.15(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 Holdings’ and AWA’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 000-12337).
10.16(1)	Side Letter No. 15, dated May 26, 2004, to the Amended and Restated V2500 Support Contract, dated October 7, 1998, between AWA and IAE International Aero Engines AG – Incorporated by reference to Exhibit 10.16 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.17	Purchase Agreement, dated as of December 27, 2000, between Holdings, AWA and Continental Airlines, Inc., including Letter Agreement – Incorporated by reference to Exhibit 10.40 to Holdings’ and AWA’s Annual Report on Form 10-K for the year ended December 31, 2000 (File Nos. 001-12649 and 000-12337).
10.18	Priority Distribution Agreement, dated as of August 25, 1994, between TPG Partners, L.P., TPG Parallel I, L.P., 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.
10.19	Disposition and Redevelopment Agreement, dated as of February 5, 2001, between AWA and the City of Phoenix, AZ – Incorporated by reference to Exhibit 10.44 to AWA’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 000-12337).
10.20(1)	Unsubordinated Ground Lease, dated as of February 5, 2001, between AWA and the City of Phoenix, AZ – Incorporated by reference to Exhibit 10.45 to AWA’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 000-12337).

121

Exhibit
Number	Title
10.21(1)	Code Share and Revenue Sharing Agreement, dated as of March 20, 2001, between AWA and Mesa Airlines, Inc. – Incorporated by reference to Exhibit 10.46 to AWA’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 000-12337).
10.22(1)	$429,000,000 Loan Agreement, dated as of January 18, 2002, among America West Airlines, Inc., Citibank, N.A., as Agent, KPMG Consulting, Inc., as Loan Administrator, Citibank, N.A., as Initial Lender and the Air Transportation Stabilization Board – Incorporated by reference to Exhibit 10.51 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
10.23	Undertaking (regarding restrictions on transfer of Class A Common Stock), dated as of January 18, 2002, among America West Holdings Corporation, TPG Partners, L.P., TPG Parallel I, L.P. and Air Partners II, L.P. for the benefit of the Air Transportation Stabilization Board – Incorporated by reference to Exhibit 10.53 to Holdings’ and AWA’s Current Report on Form 8-K dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
10.24	Second Amendment to Code Share and Revenue Sharing Agreement, as amended, dated as of October 24, 2002, by and among AWA, Mesa Airlines, Inc., Freedom Airlines, Inc. and Air Midwest, Inc. – Incorporated by reference to Exhibit 10.56 of Holdings’ and AWA’s Annual Report on Form 10-K for the year ended December 31, 2002.
10.25	Third Amendment to Code Share and Revenue Sharing Agreement dated as of January 29, 2003 among AWA, Mesa Airlines, Inc. and Freedom Airlines, Inc. – Incorporated by reference to Exhibit 10.1 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.26(1)	Fourth Amendment to Code Share and Revenue Sharing Agreement and Release dated as of September 5, 2003 among AWA, Mesa Airlines, Inc., Air Midwest, Inc. and Freedom Airlines, Inc. – Incorporated by reference to Exhibit 10.2 to Holdings’ and AWA’s Amendment No. 1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.27	Loan Agreement [Engines], dated as of September 3, 2004, among AWA, GECC, as administrative agent, original Series A lender and original Series B lender, Wells Fargo Bank Northwest, National Association (“Wells Fargo”), as security trustee and the lenders from time to time party thereto –Incorporated by reference to Exhibit 10.1 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.28	Engine Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and Wells Fargo — Incorporated by reference to Exhibit 10.2 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.29	Mortgage and Security Agreement Supplement No. 1, dated September 10, 2004, of AWA - Incorporated by reference to Exhibit 10.3 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.30	Subordinated Engine Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and Wells Fargo – Incorporated by reference to Exhibit 10.4 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.31	Subordinated Mortgage and Security Agreement Supplement No. 1, dated September 10, 2004, of AWA – Incorporated by reference to Exhibit 10.5 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.32	Security Trustee Agreement [Engines], dated as of September 3, 2004, among Wells Fargo, as security trustee and the beneficiaries named therein – Incorporated by reference to Exhibit 10.6 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).

122

Exhibit
Number	Title
10.33	Payment and Indemnity Agreement [Engines], dated as of September 3, 2004, among AWA, certain beneficiaries listed on Schedule 1 and Wells Fargo – Incorporated by reference to Exhibit 10.7 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.34	Restructure Letter Agreement [Engines], dated as of September 3, 2004, among AWA and GECC – Incorporated by reference to Exhibit 10.8 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.35	Loan Agreement [Spare Parts], dated as of September 3, 2004, among AWA, GECC, as administrative agent, original Series A lender and original Series B lender, Wells Fargo, as security trustee and the lenders from time to time party thereto – Incorporated by reference to Exhibit 10.9 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.36	Spare Parts Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and Wells Fargo – Incorporated by reference to Exhibit 10.10 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.37	Subordinated Spare Parts Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and Wells Fargo – Incorporated by reference to Exhibit 10.11 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.38	Security Trustee Agreement [Spare Parts], dated as of September 3, 2004, among Wells Fargo, as security trustee and the beneficiaries named therein – Incorporated by reference to Exhibit 10.12 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.39	Payment and Indemnity Agreement [Spare Parts], dated as of September 3, 2004, among AWA, certain beneficiaries listed on Schedule 1 and Wells Fargo – Incorporated by reference to Exhibit 10.13 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.40	Restructure Letter Agreement [Spare Parts], dated as of September 3, 2004, among AWA and GECC – Incorporated by reference to Exhibit 10.14 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 001-12649).
10.41*	$30,790,000 Senior Secured Term Loan Agreement, dated December 23, 2004, among FTCHP LLC, as Borrower, America West Airlines, Inc., as Guarantor, Heritage Bank, SSB, as Administrative Agent and Citibank, N.A. (and other lenders named therein) as Lenders.
10.42*	Senior Secured Discount Note, dated December 23, 2004, issued by FTCHP LLC.
10.43*	Unconditional Guaranty Agreement, dated December 23, 2004, by America West Airlines, Inc. in favor of Citibank, N.A.
10.44+	Amended and Restated America West 1994 Incentive Equity Plan – Incorporated by reference to Exhibit 10.21 to AWA’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 000-12337).
10.45+	2002 Incentive Equity Plan – Incorporated by reference to Appendix A to Holdings’ Proxy Statement on Schedule 14A filed on April 17, 2002 (File No. 001-12649).
10.46+	Performance-based Award Plan – Incorporated by reference to Exhibit 10.57 to Holdings’ and AWA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 001-12649).
10.47*+	Form of Offer Letter for officers.
10.48*+	Form of Change of Control and Severance Benefit Agreement for Vice Presidents.

123

Exhibit
Number	Title
10.49*+	Form of Change of Control and Severance Benefit Agreement for Senior Vice Presidents.
10.50*+	Summary of Officer Benefits.
10.51*+	Summary of Director Compensation and Benefits.
10.52+	Form of Letter Agreement for Directors’ Travel – Incorporated by reference to Exhibit 10.32 to Holdings’ and AWA’s Annual Report on Form 10-K for the period ended December 31, 2003.
10.53*+	Employment Agreement, dated February 24, 2004, by and among America West Holdings Corporation, America West Airlines, Inc. and W. Douglas Parker.
21.1*	Subsidiaries of Holdings.
23.1*	Consent of KPMG LLP.
23.2*	Consent of PricewaterhouseCoopers 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.
31.1*	Certification of Holdings’ Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.2*	Certification of Holdings’ Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.3*	Certification of AWA’s Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.4*	Certification of AWA’s Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
32.1*	Certification of Holdings’ Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of AWA’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

124

EX-3.2

                                                                     EXHIBIT 3.2

                                     BYLAWS

                                       OF

                           AMERICA WEST AIRLINES, INC.

AS AMENDED THROUGH  JANUARY 20, 2005




                                TABLE OF CONTENTS



                                                                                             PAGE
                                                                                          
ARTICLE I    OFFICES.......................................................................   1

      Section  1.01 Offices................................................................   1

ARTICLE II   SEAL..........................................................................   1

      Section 2.01  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  Adjourned Meetings.....................................................   2
      Section 3.07  Quorum and Adjournment.................................................   2
      Section 3.08  Majority Vote Required.................................................   3
      Section 3.09  Manner of Voting.......................................................   3
      Section 3.10  Proxies................................................................   3
      Section 3.11  Presiding Officer and Secretary........................................   3

ARTICLE IV   DIRECTORS.....................................................................   3

      Section 4.01  Powers.................................................................   3
      Section 4.02  Number and Classification..............................................   4
      Section 4.03  Nominations............................................................   4
      Section 4.04  Resignations...........................................................   4
      Section 4.05  Removal................................................................   4
      Section 4.06  Vacancies..............................................................   4
      Section 4.07  Presiding Officer and Secretary........................................   5
      Section 4.08  Annual Meetings........................................................   5
      Section 4.09  Regular Meetings.......................................................   5
      Section 4.10  Special Meetings.......................................................   5
      Section 4.11  Quorum and Powers of a Majority........................................   5
      Section 4.12  Waiver of Notice.......................................................   5
      Section 4.13  Manner of Acting.......................................................   6


                                       i.


                                TABLE OF CONTENTS
                                   (CONTINUED)



                                                                                             PAGE
                                                                                          
      Section 4.14  Compensation...........................................................   6

      Section 4.15  Committees.............................................................   6

      Section 4.16  Committee Procedure....................................................   6

      Section 4.17  Executive Committee....................................................   7

      Section 4.18  Joint Meetings.........................................................   7

ARTICLE V    OFFICERS......................................................................   8

      Section 5.01  Number.................................................................   8

      Section 5.02  Election of Officers, Qualification and Term...........................   8

      Section 5.03  Removal................................................................   9

      Section 5.04  Resignations...........................................................   9

      Section 5.05  Vacancies..............................................................   9

      Section 5.06  Salaries...............................................................   9

      Section 5.07  The Chairman of the Board..............................................   9

      Section 5.08  The President..........................................................   9

      Section 5.09  The Vice Presidents....................................................  10

      Section 5.10  The Secretary and the Assistant Secretary..............................  10

      Section 5.11  The Treasurer and the Assistant Treasurer..............................  10

      Section 5.12  Treasurer's Bond.......................................................  11

      Section 5.13  Chief Executive Officer................................................  11

      Section 5.14  Chief Operating Officer................................................  11

ARTICLE VI   STOCK.........................................................................  11

      Section 6.01  Certificates...........................................................  11

      Section 6.02  Transfers..............................................................  11

      Section 6.03  Lost, Stolen or Destroyed Certificates.................................  12

      Section 6.04  Record Date............................................................  12

      Section 6.05  Registered Stockholders................................................  12

      Section 6.06  Additional Powers of the Board.........................................  12

ARTICLE VII  LIMITATIONS OF OWNERSHIP BY NON-CITIZENS......................................  13

      Section 7.01  Definitions............................................................  13

      Section 7.02  Policy.................................................................  14


                                       ii.


                                TABLE OF CONTENTS
                                   (CONTINUED)



                                                                                           PAGE
                                                                                        
      Section 7.03  Foreign Stock Record.................................................   14

      Section 7.04  Suspension of Voting Rights..........................................   14

      Section 7.05  Beneficial Ownership Inquiry.........................................   14

ARTICLE VIII MISCELLANEOUS...............................................................   15

      Section 8.01  Place and Inspection of Books........................................   15

      Section 8.02  Indemnification of Directors, Officers, Employees and Agents.........   15

      Section 8.03  Dividends............................................................   17

      Section 8.04  Execution of Deeds, Contracts and Other Agreements and Instruments...   18

      Section 8.05  Checks...............................................................   18

      Section 8.06  Voting Shares in Other Corporations..................................   18

      Section 8.07  Fiscal Year..........................................................   18

      Section 8.08  Gender/Number........................................................   18

      Section 8.09  Paragraph Titles.....................................................   18

      Section 8.10  Amendment............................................................   18

      Section 8.11  Restated Certificate of Incorporation................................   18


                                      iii.


                                     BYLAWS
                                       OF
                           AMERICA WEST AIRLINES, INC.

                                   ARTICLE I

                                     OFFICES

      SECTION 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.

                                   ARTICLE II

                                      SEAL

      SECTION 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.

                                   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) 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.

                                       1.


            (b) At each annual meeting the stockholders shall, by plurality of
the votes cast, elect Directors.

      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 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.

      SECTION 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.

      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.

            (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.

            (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 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.

      SECTION 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

                                       2.


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.

      SECTION 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.

      SECTION 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.

      SECTION 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.

      SECTION 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.

                                   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 Restated
Certificate of Incorporation of this Corporation or by these Restated Bylaws
conferred upon or reserved to the stockholders of any class or classes.

                                       3.


      SECTION 4.02 NUMBER AND CLASSIFICATION.

            (a) The authorized number of Directors of the Corporation shall be
not less than nine (9) nor more than fifteen (15), with the exact number of
authorized Directors to be fixed from time to time, within the foregoing limits,
by resolution of the Board of Directors or by proper action of the stockholders.

            (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 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.

      SECTION 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.

      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. 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.

      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.

            (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

                                       4.


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. 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.

      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 (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.

      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, 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.

      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,

                                       5.


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 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.

      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; 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.

      SECTION 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

                                       6.


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.

      SECTION 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.

      SECTION 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,

                                       7.


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.

                                   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 (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

                                       8.


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).

      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 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 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.

      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 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.

                                       9.


      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 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 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 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,

                                       10.


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
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 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.

                                      11.


      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 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.

      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 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 and such transfer agent and/or any such registrar of transfers.

                                      12.


            (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 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.

                                      13.


      SECTION 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.

      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 a Non-Citizen, or (ii)
registration of such shares on the Foreign Stock Record, subject to the final
sentence 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.

                                      14.


            (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.

                                  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)   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.

      SECTION 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

                                      15.


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.

            (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

                                      16.


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.

      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.

                                      17.


      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 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.

      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 Restated 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 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.

      SECTION 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.

                                       18.

EX-3.4

                                                                     EXHIBIT 3.4

                                     BYLAWS

                                       OF

                        AMERICA WEST HOLDINGS CORPORATION

AS AMENDED THROUGH JANUARY 20, 2005



                                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..........................................................................     3

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...................................................................................     4

SECTION 4.01 POWERS....................................................................................     4

SECTION 4.02  NUMBER AND CLASSIFICATION................................................................     5

SECTION 4.03 NOMINATIONS...............................................................................     5

SECTION 4.04 RESIGNATIONS..............................................................................     5

SECTION 4.05 REMOVAL...................................................................................     5

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..........................................................................     6

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................................................................................     7

SECTION 4.16 COMMITTEE PROCEDURE.......................................................................     8


                                       i.


                                TABLE OF CONTENTS
                                   (CONTINUED)



                                                                                                          PAGE
                                                                                                       
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

SECTION 5.04 RESIGNATIONS.............................................................................     10

SECTION 5.05 VACANCIES................................................................................     10

SECTION 5.06 SALARIES.................................................................................     10

SECTION 5.07 THE CHAIRMAN OF THE BOARD................................................................     10

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................................................     11

SECTION 5.12 TREASURER'S BOND.........................................................................     12

SECTION 5.13 CHIEF EXECUTIVE OFFICER..................................................................     12

SECTION 5.14 CHIEF OPERATING OFFICER..................................................................     12

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.....................................................................     15

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................................................................................     19


                                      ii.


                                TABLE OF CONTENTS
                                   (CONTINUED)



                                                                                                          PAGE
                                                                                                       
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................................................................................     20

SECTION 8.11 CERTIFICATE OF INCORPORATION.............................................................     21


                                      iii.


                                     BYLAWS
                                       OF
                        AMERICA WEST HOLDINGS CORPORATION

                                    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 and transact such other business as may properly
be brought before them.

                                       1.


            (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 only in
the removal of directors in accordance with the Certificate of Incorporation of
the Corporation.

            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

                                       2.


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, 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, 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

                                       3.


power registered in his or her name on the books of the Corporation on the
record date 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.


            SECTION 4.02 NUMBER AND CLASSIFICATION. (a) The authorized number of
Directors of the Corporation shall be not less than nine (9) nor more than
fifteen (15), with the exact number of authorized Directors to be fixed from
time to time, within the foregoing limits, by resolution of the Board of
Directors or by proper action of the stockholders.

            (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. Except as otherwise provided in the
Stockholders' Agreement, 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. Except as otherwise provided in the
Stockholders' Agreement, 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. Stockholders shall have the right to act by written consent only
in the removal of directors in accordance with the Stockholders' Agreement or
any other voting agreement by and between GPA Group plc and AmWest Partners,
L.P. and their successors and assigns, for so long as any such agreement remains
in force and effect. In the absence of such an election, any vacancy may be
filled as provided in Section 4.06.

                                        5.


            SECTION 4.06 VACANCIES. (a) Except as otherwise provided in the
Stockholders' Agreement, 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.

            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

                                        6.


facsimile transmission, bymail, 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, 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
precludeany 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

                                        7.


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.

            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
andreport the same to the Board of Directors when required.

            (c)   Any member of any committee, other than a member thereof
servingex-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;

                                        8.


                  (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 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

                                        9.


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. 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 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.

                                       10.


            (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 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.

                                       11.


            (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.

            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.

                                       12.


                                   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
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

                                       13.


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 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.

                                       14.


                                   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.

            (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

                                       15.


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 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.

                                       16.


                                  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 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

                                       17.


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.

            (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

                                    18.


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,
orgranted 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," 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

                                       19.


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 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.

                                       20.


            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.

                                       21.

EX-10.41

                                                                   EXHIBIT 10.41

                       SENIOR SECURED TERM LOAN AGREEMENT
                                      among

                                   FTCHP LLC,
                                    Borrower

                                       and

                          AMERICA WEST AIRLINES, INC.,
                                    Guarantor

                                       and

                               HERITAGE BANK, SSB,
                              Administrative Agent

                                       and

                  CITIBANK, N.A. AND THE LENDERS NAMED HEREIN,
                                     Lenders

                              $30,790,000 TERM LOAN
      $35,988,000 STATED PRINCIPAL AMOUNT OF SENIOR SECURED DISCOUNT NOTES

                          DATED AS OF DECEMBER 23, 2004



                                TABLE OF CONTENTS



                                                                                    Page
                                                                                    ----
                                                                                 
SECTION 1 DEFINITIONS AND TERMS.................................................      1
   1.1    Definitions...........................................................      1
   1.2    Number and Gender of Words; Other References..........................     12
   1.3    Accounting Principles.................................................     13
SECTION 2 LOAN PROCEEDS/ISSUANCE OF SENIOR SECURED DISCOUNT NOTES...............     13
   2.1    Loan Proceeds.........................................................     13
   2.2    Issuance of Senior Secured Discount Notes.............................     13
   2.3    Legend................................................................     13
SECTION 3 TERMS OF PAYMENT......................................................     13
   3.1    Senior Secured Discount Notes and Payments............................     13
   3.2    Payments of Interest and Principal Prior to Termination Date..........     14
   3.3    Prepayments...........................................................     14
   3.4    Interest Options......................................................     15
   3.5    Default Rate..........................................................     15
   3.6    Interest Recapture....................................................     15
   3.7    Interest Calculations.................................................     15
   3.8    Maximum Rate..........................................................     15
   3.9    Interest Periods......................................................     16
   3.10   Conversion to Base Rate Borrowing.....................................     16
   3.11   Order of Application..................................................     16
   3.12   Sharing of Payments, Etc..............................................     17
   3.14   Booking Borrowings....................................................     17
SECTION 4 CHANGE IN CIRCUMSTANCES...............................................     17
   4.1    Increased Cost and Reduced Return.....................................     17
   4.2    Limitation on Types of Loans..........................................     18
   4.3    Illegality............................................................     18
   4.4    Treatment of Affected Loans...........................................     18
   4.5    Compensation..........................................................     19
   4.6    Taxes.................................................................     19
SECTION 5 FEES..................................................................     21
   5.1    Treatment of Fees.....................................................     21
   5.2    Fees of Administrative Agent..........................................     21
SECTION 6 SECURITY; GUARANTIES..................................................     21
   6.1    Collateral............................................................     21
   6.2    Future Liens..........................................................     21
   6.3    Release of Collateral.................................................     21
SECTION 7 CONDITIONS PRECEDENT..................................................     22
   7.1    Conditions Precedent to Closing.......................................     22
SECTION 8 REPRESENTATIONS, WARRANTIES, AND CERTAIN COVENANTS....................     22
   8.1    Organization, Powers, Capitalization..................................     22
   8.2    Authorization of Borrowing, No Conflict...............................     23
   8.3    Financial Condition...................................................     23
   8.4    No Adverse Material Change............................................     23
   8.5    Indebtedness and Liabilities..........................................     23
   8.6    Title to Properties; Liens............................................     23
   8.7    Litigation; Adverse Facts.............................................     23
   8.8    Broker's Fees.........................................................     24


                                                        Senior Secured Term Loan

                                        i



                                                                                  
   8.9     Solevency.............................................................     24
   8.10    Disclosure............................................................     24
   8.11    Compliance with Laws; Authorizations; Consents........................     24
   8.12    Governmental Regulation...............................................     24
   8.13    Access to Accountants and Management..................................     24
   8.14    Inspection............................................................     25
   8.15    Borrower's Receipt of Payments........................................     25
   8.16    Reports...............................................................     25
   8.17    Supplemental Schedules................................................     25
   8.18    Single Purpose Entity.................................................     26
   8.19    Licenses, Permits, etc................................................     26
   8.20    Deposit Accounts......................................................     26
   8.21    Additional Environmental Representations..............................     26
SECTION 9  REPORTING AND OTHER AFFIRMATIVE COVENANTS.............................     27
   9.1     Financial Statements and Other Reports................................     27
   9.2     Endorsement; Insurance Claims.........................................     27
   9.3     Maintenance of Properties.............................................     27
   9.4     Further Assurances....................................................     27
   9.5     Mortgages; Title Reports..............................................     27
   9.6     Use of Proceeds and Margin Security...................................     28
   9.7     Termination/Default of Contracts......................................     28
   9.8     Notice of Event of Default and Other Matters..........................     28
   9.9     Payment of the Obligation.............................................     28
   9.10    Compliance with Laws, and Certain Environmental Covenants.............     28
   9.11    Notice of Claims......................................................     29
   9.12    Corrective Action.....................................................     29
   9.13    Borrower's Remedial Action............................................     30
   9.14    Periodic Site Assessments.............................................     31
   9.15    Deposit and Cash Collateral Accounts..................................     31
   9.16    Post-Closing Matters..................................................     32
SECTION 10 NEGATIVE COVENANTS....................................................     32
   10.1    Debt..................................................................     32
   10.2    Guaranties............................................................     33
   10.3    Transfers, Liens, and Related Matters.................................     33
   10.4    Investments and Loans.................................................     33
   10.5    Restricted Junior Payments............................................     33
   10.6    Restriction on Fundamental Changes....................................     33
   10.7    Transactions with Affiliates..........................................     34
   10.8    Conduct of Business...................................................     34
   10.9    Tax Consolidations....................................................     34
   10.10   Subsidiaries..........................................................     34
   10.11   Fiscal Year...........................................................     34
   10.12   Use of Lenders' Name..................................................     34
   10.13   IRS Form 8821.........................................................     34
   10.14   Sale Lease-back Transactions..........................................     34
   10.15   Transfers, Liens, and Related Matters.................................     34
   10.16   Liquidation...........................................................     35
   10.17   Restriction on Fundamental Changes....................................     35
   10.18   Transaction with Affiliates...........................................     35
   10.19   Conduct of Business...................................................     35
   10.20   Fiscal Year; Tax Designation..........................................     35



                                                        Senior Secured Term Loan

                                       ii




                                                                                          
   10.21  Use of Lenders' Name.........................................................      35
   10.22  IRS Form 8821................................................................      35
SECTION 11DEFAULT, RIGHTS, AND REMEDIES................................................      35
   11.1   Event of Default.............................................................      35
   11.2   Remedies Upon Default........................................................      37
   11.3   Borrower Waivers.............................................................      38
   11.4   Performance by Administrative Agent..........................................      38
   11.5   Delegation of Duties; Reliance...............................................      38
   11.6   Not in Control...............................................................      39
   11.7   Course of Dealing............................................................      39
   11.8   Cumulative Rights............................................................      39
   11.9   Application of Proceeds......................................................      39
   11.10  Certain Proceedings..........................................................      39
   11.11  Expenditures by Lenders......................................................      40
   11.12  INDEMNIFICATION..............................................................      40
SECTION 12AGREEMENT AMONG LENDERS......................................................      42
   12.1   Administrative Agent.........................................................      42
   12.2   Expenses.....................................................................      43
   12.3   Proportionate Absorption of Losses...........................................      44
   12.4   [Intentionally Omitted]......................................................      44
   12.5   Limitation of Liability......................................................      44
   12.6   Default; Collateral..........................................................      45
   12.7   Limitation of Liability......................................................      46
   12.8   Relationship of Lenders......................................................      46
   12.9   Benefits of Agreement........................................................      46
   12.10  Obligations Several..........................................................      46
SECTION 13MISCELLANEOUS................................................................      46
   13.1   Headings.....................................................................      47
   13.2   Nonbusiness Days.............................................................      47
   13.3   Communications...............................................................      47
   13.4   Form and Number of Documents.................................................      48
   13.5   Survival.....................................................................      48
   13.6   GOVERNING LAW................................................................      48
   13.7   Invalid Provisions...........................................................      48
   13.8   Entirety.....................................................................      48
   13.9   Jurisdiction; Venue; Service of Process; Jury Trial..........................      49
   13.10  Amendments, Consents, Conflicts, and Waivers.................................      49
   13.11  Multiple Counterparts........................................................      50
   13.12  Successors and Assigns; Assignments and Participations.......................      50
   13.13  Decisions by Borrower........................................................      52
   13.14  Confidentiality..............................................................      52
   13.15  Publication..................................................................      53
   13.16  Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances..      53



                                                        Senior Secured Term Loan

                                       iii



                                    SCHEDULES

Schedule 1A           -   Mortgaged Property
Schedule 1B           -   Other Liens
Schedule 2.1          -   Lenders Pro Rata Loan Proceeds Amounts
Schedule 2.2          -   Principal Amount of Senior Secured Discount Notes
Schedule 7.1          -   Conditions Precedent to Closing
Schedule 8.1          -   Capitalization of Borrower
Schedule 8.5          -   Debt and Liabilities
Schedule 8.11         -   Compliance with Laws
Schedule 8.20         -   Deposit Account
Schedule 9.16         -   Post-Closing Matters
Schedule 10.1(c)      -   Existing Debt
Schedule 10.1(d)      -   Debt Incurred with Refinancing of Existing Mortgages
Schedule 10.4         -   Existing Investments and Loans

                                                        Senior Secured Term Loan

                                       iv



                            SENIOR SECURED TERM LOAN

      THIS SENIOR SECURED TERM LOAN AGREEMENT (this "AGREEMENT"), is entered
into as of December 23, 2004, among FTCHP LLC, a Delaware limited liability
company (the "BORROWER"), America West Airlines, Inc. (the "GUARANTOR"),
Citibank, N.A. (the "INITIAL LENDER"), the Lenders (as defined herein), and
Heritage Bank, SSB, as Administrative Agent for itself and the Lenders.

                                    RECITALS

      A.    Borrower has requested that Lenders extend credit to Borrower, and
Lender requires and Borrower has agreed to issue to Lender Senior Secured
Discount Notes, all as set forth in this Agreement.

      B.    In order to secure Borrower's obligations under the Loan Documents
(hereinafter defined), Borrower shall grant to Administrative Agent, for the
benefit of Lenders, a security interest in and lien upon, all of the Borrower's
personal property and real property.

      C.    As additional security for Borrower's obligations under the Loan
Documents, Guarantor shall guaranty the obligations of Borrower.

      Accordingly, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:

SECTION 1 DEFINITIONS AND TERMS.

      1.1   DEFINITIONS. As used herein:

      ADJUSTED EURODOLLAR RATE means, for any Eurodollar Rate Borrowing for any
Interest Period, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by Administrative Agent to be equal to the
quotient obtained by dividing (a) the Eurodollar Rate for such Eurodollar Rate
Borrowing for such Interest Period by (b) 1 minus the Reserve Requirement for
such Eurodollar Rate Borrowing for such Interest Period; provided however, that
in no event shall the Adjusted Eurodollar Rate be less than 1.5%.

      ADMINISTRATIVE AGENT means Heritage Bank, SSB, and its permitted
successors and assigns as "ADMINISTRATIVE AGENT" for Lenders under the Loan
Documents.

      AFFILIATE of any Person means any other individual or entity (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person, provided, however,
that no individual shall be an Affiliate of any Person solely by reason of his
or her being a director, officer, or employee of such Person, or (ii) 10% or
more of the voting stock (or in the case of an entity which is not a
corporation, 10% or more of the voting equity interest) of which is beneficially
owned or held by such Person; and, for purposes of this definition only,
"control," "controlled by," and "under common control with" means possession,
directly or indirectly, of the power to direct or cause the direction of
management or policies (whether through ownership of voting securities, by
contract, or otherwise); provided that, for purposes of this Agreement neither
Administrative Agent nor any Lender shall be deemed to be an Affiliate of
Borrower.

                                                        Senior Secured Term Loan



      AGGREGATE SENIOR SECURED DISCOUNT NOTE STATED AMOUNT means, on any date of
determination, the sum of the Stated Principal Amount of all outstanding Senior
Secured Discount Notes.

      AGREEMENT means this Senior Secured Term Loan Agreement (as the same may
hereafter be amended, modified, supplemented, or restated from time to time).

      ANNIVERSARY DATE means the annually recurring date that is twelve (12)
months from the Closing Date.

      APPLICABLE BASE RATE means, from day to day, the Base Rate plus the
Applicable Base Rate Margin.

      APPLICABLE BASE RATE MARGIN means (a) from the Closing Date until the
first Anniversary Date, 1.00%, and (b) thereafter, as calculated on each of the
first, second, third, and fourth Anniversary Dates, an amount equal to 1.00%,
plus or minus 4.25 basis points for each whole 1.00% increase or decrease in the
prior year's LTV Ratio, provided however, that in no event shall the Applicable
Base Rate Margin be less than 0%.

      APPLICABLE EURODOLLAR RATE means, for any Interest Period, the Adjusted
Eurodollar Rate for such Interest Period plus the Applicable Eurodollar Rate
Margin.

      APPLICABLE EURODOLLAR RATE MARGIN means (a) from the Closing Date until
the first Anniversary Date, 3.89%, and (b) thereafter, as calculated on each of
the first, second, third, and fourth Anniversary Dates, an amount equal to
3.89%, plus or minus 17 basis points for each whole 1.00% increase or decrease
in the prior year's LTV Ratio, provided however, that in no event shall the
Applicable Eurodollar Rate Margin be less than 0%.

      APPRAISAL means valuation of the Collateral as performed by the Approved
Appraisers, completed at least fifteen (15) days and no more than forty-five
(45) days prior to the date that is thirty (30) months from the Closing Date. As
used herein "Approved Appraisers" for the Collateral shall mean Simat Hellieson
& Eichner Inc. for the that portion of the Collateral consisting of the
maintenance hangar and Crosson Dannis, Inc. for that portion of the Collateral
consisting of the Flight Training Center or any other appraiser for such
Collateral approved in writing by the Administrative Agent and consented to by
the Guarantor, such consent not to be unreasonably withheld or delayed.

      APPRAISED VALUE means, from time to time, the declared value of the
Collateral as determined by an Appraisal. In order to calculate the Appraised
Value on any given date, the parties will rely on the results of the previous
completed Appraisal that is closest in time to such date. As of the Closing Date
the Appraised Value is $43,700,000.

      ASSET DISPOSITION means the disposition, whether by sale, lease, transfer,
loss, damage, destruction, condemnation, or otherwise, of any or all of the
assets of Borrower or any of its Subsidiaries other than (a) sales of inventory
in the ordinary course of business, (b) disposition of worn out or obsolete
equipment, (c) transfer of aircraft in the ordinary course of business, and (d)
transfers of assets which are replaced with assets of equal value and utility.

      ASSIGNMENT AND ASSUMPTION means an assignment and assumption entered into
by a Lender and an Eligible Assignee (with the consent of any party whose
consent is required by SECTION 13.12), and accepted by Administrative Agent.

                                                        Senior Secured Term Loan

                                       2



      AUTHORIZATIONS means all material filings, recordings, and registrations
with, and all material validations or exemptions, approvals, orders,
authorizations, consents, franchises, licenses, certificates, certificates of
compliance, grants of authority, and permits from, any Governmental Authority.

      AWA'S ACCOUNTANTS means the independent certified public accountants
selected by the Borrower and Guarantor and reasonably acceptable to
Administrative Agent, which selection shall not be modified during the terms of
this Agreement (except if the Borrower and Guarantor retain another of the
so-called "Big Four" accounting firms) without the Collateral Agent's prior
written consent, which consent shall not be withheld, delayed or conditioned
unreasonably.

      BASE RATE means the interest rate printed in The Wall Street Journal, from
time to time, as the base rate and not necessarily the best or lowest rate of
interest offered by banks on such date.

      BASE RATE BORROWING means the Outstanding Note Balance during such time as
the Senior Secured Discount Note bears interest at the per annum rate equal to
the sum of the Base Rate, plus the Applicable Base Rate Margin.

      BORROWER is defined in the preamble to this Agreement.

      BORROWING means any amount disbursed (not the Stated Principal Amount),
less the fees payable to the Administrative Agent pursuant to SECTION 5.2
herein, (a) by one or more Lenders pursuant to the terms of this Agreement or
any other Loan Document, whether such amount constitutes an original
disbursement of funds or the continuation of an amount outstanding, or (b) by
any Lender in accordance with, and to satisfy the obligations of Borrower under,
any Loan Document.

      BUSINESS DAY means (a) for all purposes, any day other than Saturday,
Sunday, and any other day on which commercial banking institutions are required
or authorized by Law to be closed in Dallas, Texas, Phoenix, Arizona, or New
York, New York, and (b) in addition to the foregoing, in respect of any
Eurodollar Rate Borrowing, a day on which dealings in United States dollars are
conducted in the London interbank market and commercial banks are open for
international business in London.

      CAPITAL LEASE means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.

      CASH COLLATERAL ACCOUNT means the Deposit Account set forth on SCHEDULE
8.20, styled the Reserve Account subject to the exclusive direction, domain, and
control of Administrative Agent.

      CASH EQUIVALENTS means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency or
instrumentality of the United States the obligations of which are backed by the
full faith and credit of the United States, in each case maturing within one
year after such date; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper not issued by the
Borrower or Guarantor maturing no more than one year after such date and having,
at the time of the acquisition thereof, a rating of at least A-2 from S&P or at
least P-2 from Moody's; (iv) certificates of deposit or bankers' acceptances
maturing within one year after such date and issued or accepted by any Lender or
by any commercial bank organized under the laws of the United States of America
or any state thereof or the District of Columbia that (a) is at least
"adequately capitalized" (as defined in the regulations of its primary Federal
banking regulator) and (b) has Tier 1 capital (as defined in such regulations)
of not less than $100,000,000; and (v) shares of any

                                                        Senior Secured Term Loan

                                       3



money market mutual fund that (a) has at least 95% of its assets invested
continuously in the types of investments referred to in clauses (i) and (ii)
above, (b) has net assets of not less than $500,000,000, and (c) has the highest
rating obtainable from either S&P or Moody's.

      CERCLA means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. Sections  9601 et seq.

      CLOSING DATE means the date upon which this Agreement has been executed by
Borrower, Lenders, and Administrative Agent and all conditions precedent
specified in SECTION 7 have been satisfied or waived.

      CODE means the Internal Revenue Code of 1986, as amended, together with
the rules and regulations promulgated thereunder.

      COLLATERAL means all of the items and types of property described as
"Collateral" in SECTION 6 of this Agreement and in now existing or hereafter
created Collateral Documents.

      COLLATERAL DOCUMENTS means all pledge agreements, financing statements,
assignments of partnership interests, guaranties, Mortgages, assignments of
rents, and any other collateral documents at any time delivered to
Administrative Agent to create or evidence Liens securing the Obligation,
together with all reaffirmations, amendments, and modifications thereof or
supplements thereto.

      COMMITMENT PERCENTAGE means, for any Lender, at any date of determination
occurring prior to the funding of the Loan Proceeds, the proportion (stated as a
percentage) that its Committed Sum bears to the aggregate Committed Sums of all
Lenders.

      COMMITTED SUM means, at any date of determination occurring prior to the
funding of the Loan Proceeds, the amount stated beside such Lender's name on the
most-recently amended SCHEDULE 2.1 to this Agreement (which amount is subject to
increase, reduction, or cancellation in accordance with the Loan Documents).

      CONSEQUENTIAL LOSS means any loss or expense which any Lender may
reasonably incur in respect of a Eurodollar Rate Borrowing as a consequence of
any event described in SECTION 4.5.

      CONTROL AGREEMENT means, with respect to any Collateral consisting of
investment property, Deposit Accounts, electronic chattel paper, and
letter-of-credit Rights, an agreement evidencing that Administrative Agent has
"control" (as defined in the UCC) of such Collateral.

      DEBT means (without duplication), for any Person (a) all indebtedness for
borrowed money; (b) obligations under leases which in accordance with GAAP
constitute Capital Leases; (c) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money;
(d) any obligation owed for all or any part of the deferred purchase price of
property or services if the purchase price is due more than six months from the
date the obligation is incurred or is evidenced by a note or similar written
instrument; (e) all indebtedness secured by any Lien on any property or asset
owned or held by that Person regardless of whether the indebtedness secured
thereby shall have been assumed by that Person or is non-recourse to the credit
of that Person; and (f) any advances under any factoring arrangement.

      DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of
America, as amended from time to time, and all other applicable liquidation,
conservatorship, bankruptcy, moratorium,

                                                        Senior Secured Term Loan

                                       4



rearrangement, receivership, insolvency, reorganization, or similar debtor
relief laws from time to time in effect affecting the rights of creditors
generally.

      DEFAULT is defined in SECTION 11.

      DEFAULT RATE means, (i) with respect to the Outstanding Note Balance, on
any date, a per annum rate of interest equal from day to day to the non-Default
interest rate applicable to the Outstanding Note Balance, plus 5%, and (ii) with
respect to any other Obligation under the Loan Documents, the lesser of (a) the
Base Rate plus the then-effective Applicable Base Rate Margin plus 5% and (b)
the Maximum Rate.

      DEPOSIT ACCOUNTS means any and all deposit accounts, bank accounts,
investment accounts, or securities accounts, now owned or hereafter acquired or
opened by Borrower, including, without limitation, any such accounts set forth
on SCHEDULE 8.20, and any account which is a replacement or substitute for any
of such accounts, together with all monies, instruments, certificates, checks,
drafts, wire transfer receipts, and other property deposited therein and all
balances therein.

      DOLLARS and the symbol $ means lawful money of the United States of
America.

      ELIGIBLE ASSIGNEE means (a) a commercial bank organized under the Laws of
the United States, or any state thereof, and having a combined capital and
surplus of at least $100,000,000; (b) a commercial bank organized under the Laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
country in which it is organized or another country which is also a member of
the OECD; (c) any other entity which is an "ACCREDITED INVESTOR" (as defined in
Regulation D under the Securities Act) or (d) any other entity which is
"qualified institutional buyer" (as defined in Rule 144A of the Securities Act);
provided, however, that no Affiliate of Borrower shall be an Eligible Assignee.

      ENVIRONMENTAL CLAIM means any actual or threatened claim, complaint,
accusation, citation, demand, notice, obligation, cause of action, or any order,
relating to or alleging any violation, damage (including, without limitation, to
any Person, property or natural resources), injury, judgment, penalty or fine,
cost of enforcement or compliance, cost of remedial action, cleanup,
restoration, contribution or indemnity, direct, indirect, consequential or
punitive damages, or any other cost or expense whatsoever, including reasonable
attorneys' fees and disbursements, relating to or resulting from (a) the
violation or alleged violation of any Environmental Law or Environmental
Requirements, (b) the Release or threatened Release of Hazardous Substances, (c)
the imposition of any Environmental Lien or (d) otherwise arising under any
Environmental Law or under any common law cause of action that could result in
Environmental Damages asserted by any Person against Borrower, Guarantor,
Administrative Agent or Lender.

      ENVIRONMENTAL DAMAGES means all damages (including for strict liability
and under CERCLA), (including direct, indirect, consequential or punitive
damages), penalties, fines, costs, including response, compliance and oversight
costs and expenses (including reasonable fees, costs and expenses of attorneys,
consultants, contractors, experts and laboratories), of any and every kind or
character, contingent or otherwise, matured or unmatured, known or unknown,
direct or indirect, foreseeable or unforeseeable, made, incurred, suffered or
brought at any time and from time to time and arising in whole or in part from:

            (a) The presence of any Hazardous Substance at the Mortgaged
      Property, the Release or threatened Release of any Hazardous Substance on,
      to or from the Mortgaged Property

                                                        Senior Secured Term Loan

                                       5



      or other Collateral, or the migration or threatened migration of any
      Hazardous Substance to, from or through the Mortgaged Property; or

            (b) The handling, treatment, containment, removal, storage,
      decontamination, remediation, clean-up, transport or disposal of any
      Hazardous Substance by Borrower or Guarantor, or any party for whose
      actions Borrower or Guarantor is liable under this Agreement, the Loan
      Documents, Environmental Requirements, or in connection with the Mortgaged
      Property or other Collateral; or

            (c) The breach of any representation, warranty, covenant or
      agreement to the extent such breach relates to the environmental
      representations, warranties, covenants or agreements in this Agreement; or

            (d) Any violation of any Environmental Law or Environmental
      Requirement, regardless of whether any act, omission, event or
      circumstance giving rise to the violation constituted a violation at the
      time of the occurrence or inception of such act, omission, event or
      circumstance, by Borrower or Guarantor or any party for whose actions
      either is liable, or in connection with the Mortgaged Property or other
      Collateral; or

            (e) Any Environmental Claim against Borrower or Guarantor in
      connection with the Mortgaged Property or other Collateral, or the filing
      or imposition of any Environmental Lien against the Mortgaged Property,
      because of, resulting from, in connection with, or arising out of any of
      the matters referred to in clauses (a) through (d) preceding.

      ENVIRONMENTAL LAW means any applicable Law relating to protection of the
public health, welfare, and the environment, or occupational health and safety,
including without limitation, those relating to the storage, handling, shipment
and use of chemicals and other hazardous materials, those relating to the
generation, processing, treatment, storage, transport, disposal, investigation,
remediation, or other management of Hazardous Substances or waste materials of
any kind, and those relating to the protection of environmentally sensitive
areas, as any may have been and may be amended or supplemented from time to
time, and any analogous future enacted or adopted Law.

      ENVIRONMENTAL LIEN means a Lien in favor of any Governmental Authority:
(a) under any Environmental Law; or (b) for any liability or damages arising
from, or costs incurred by, any Governmental Authority in response to, the
Release or threatened Release of any Hazardous Substance at the Mortgaged
Property.

      ENVIRONMENTAL REQUIREMENT means any Environmental Law, agreement, permit,
authorization, approval, identification number, license, notification,
registration, order or restriction, applicable to the Borrower or Guarantor, in
connection with the Mortgaged Property or other Collateral as the same now
exists or may be changed, amended, or come into effect in the future, which
pertains to the environment, including, but not limited to ground, air, water,
or underground or aboveground tanks storing or used for Hazardous Substances.

      EURODOLLAR RATE means, for any Eurodollar Rate Borrowing for any Interest
Period therefore, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the term "Eurodollar Rate" shall mean,
for any Eurodollar Rate Borrowing for any Interest Period therefore, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing
on Reuters Screen

                                                        Senior Secured Term Loan

                                       6



LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates (rounded upwards,
if necessary, to the nearest 1/100 of 1%).

      EURODOLLAR RATE BORROWING means the Outstanding Note Balance during such
period of time as the Note bears interest at the per annum rate equal to the sum
of the Adjusted Eurodollar Rate plus the Applicable Eurodollar Rate Margin.

      FACILITIES means any building or other facility owned or used by Borrower
in its business.

      FEDERAL FUNDS RATE means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined (which
determination shall be conclusive and binding, absent manifest error) by
Administrative Agent to be equal to the weighted average of the rates on
overnight Federal funds transactions with member banks of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such day;
provided that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day, and (b) if no such rate
is so published on such next succeeding Business Day, the Federal Funds Rate for
such day shall be the average rate charged to Administrative Agent (in its
individual capacity) on such day on such transactions as determined by
Administrative Agent (which determination shall be conclusive and binding,
absent manifest error).

      FINANCIAL STATEMENTS means balance sheets, statements of operations,
statements of shareholders' equity, and statements of cash flows prepared in
accordance with GAAP, which statements of operations and statements of cash
flows shall be in comparative form to the corresponding period of the preceding
fiscal year, and which balance sheets and statements of shareholders' equity
shall be in comparative form to the prior fiscal year-end figures.

      FISCAL YEAR means each twelve (12) month period ending on the last day of
December in each year.

      GAAP means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board which are applicable from time to time.

      GUARANTOR is defined in the preamble to this Agreement.

      GOVERNMENTAL AUTHORITY means any (a) state, county, city, town, village,
or other local, state, or federal judicial, executive, regulatory, or
legislative instrumentality, (b) private arbitration board or panel, or (c)
central bank.

      HAZARDOUS SUBSTANCE means all or any of the following: (a) substances that
are regulated, defined or listed in, or otherwise classified pursuant to, any
Environmental Laws or regulations as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances," "pollutant or contaminant,"
or any other formulation intended to define, list, or classify substances by
reason of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, or toxicity; (b) oil, petroleum, or petroleum derived
substances, natural gas, natural gas liquids, or synthetic gas, and drilling
fluids, produced waters, and other products, substances, or wastes associated
with the exploration, development, production or use of crude oil, natural gas,
or geothermal resources or any product thereof;

                                                        Senior Secured Term Loan

                                       7



(c) any flammable substances, explosives, or any radioactive materials; (d)
asbestos in any form or electrical equipment which contains any oil or
dielectric fluid containing polychlorinated biphenyls; and (e) any other
materials whose use, handling, management, transport or disposal is regulated
because of its effect or potential effect on the environment.

      INITIAL LENDER is defined in the preamble to this Agreement.

      INTEREST PERIOD is determined in accordance with SECTION 3.9.

      LAWS means all applicable statutes, laws, treaties, ordinances, tariff
requirements, rules, regulations, orders, permits or licenses, writs,
injunctions, decrees, judgments, opinions, guidance documents or interpretations
of any Governmental Authority.

      LENDERS means, on any date of determination, the Initial Lender or subject
to the terms and conditions of this Agreement, any respective successor or
assign of the Initial Lender.

      LIABILITIES has the meaning given that term in accordance with GAAP and
includes Debt.

      LIEN means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind, and any other
Right of or arrangement with any creditor (other than under or relating to
subordination or other intercreditor arrangements) to have its claim satisfied
out of any property or assets, or the proceeds therefrom, prior to the general
creditors of the owner thereof.

      LITIGATION means any action by or before any Governmental Authority.

      LOAN DOCUMENTS means (a) this Agreement, the Senior Secured Discount
Notes, and the Collateral Documents, (b) all agreements, documents, or
instruments in favor of Administrative Agent or Lenders delivered concurrently
herewith or at any time hereafter pursuant to this Agreement or otherwise in
connection with all or any part of the Obligation, and (c) any and all future
renewals, extensions, restatements, reaffirmations, or amendments of, or
supplements to, all or any part of the foregoing.

      LOAN PROCEEDS means the aggregate principal sum of all credit extended by
all Lenders on the Closing Date, which amount shall not exceed $30,790,000.

      LTV RATIO means on each Anniversary Date, the ratio of (i) the Loan
Proceeds less any principal payments made on the Senior Secured Discount Notes
(including the payments of principal to be made pursuant to SECTION 3.2(b)) less
the fees payable to the Administrative Agent pursuant to SECTION 5.2 herein, to
(ii) the Appraised Value as of such Anniversary Date; provided however, that for
purposes of computing the LTV Ratio, the Appraised Value, at no time, shall be
deemed to exceed $45,000,000.

      MATERIAL ADVERSE EVENT means any set of one or more circumstances or
events which, individually or collectively, results in any (a) material adverse
effect on the ability of Borrower or Guarantor, as applicable, to perform any
obligations under any Loan Document or the ability of Administrative Agent or
any Lender to enforce any such obligations or any of their respective Rights
under the Loan Documents, or (b) material and adverse effect on the business,
operations, prospects, properties, assets, or condition (financial or otherwise)
of Borrower or Guarantor, as applicable.

      MATERIAL CONTRACT means a contract or agreement (including, without
limitation, a provider agreement) the default (or event of default) under,
termination of, or expiration of which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Event.

                                                        Senior Secured Term Loan

                                       8



      MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for each Lender, the
maximum non-usurious amount and the maximum non-usurious rate of interest which,
under applicable Law, such Lender is permitted to contract for, charge, take,
reserve, or receive on the Obligation.

      MORTGAGE means each of the mortgages, deeds of trust, leasehold mortgages,
leasehold deeds of trust, collateral assignments of leases, or other real estate
security documents delivered by Borrower to Administrative Agent, on behalf of
Lenders, with respect to the Mortgaged Property, all in form and substance
satisfactory to Administrative Agent.

      MORTGAGED PROPERTY means that certain real property leased by Borrower,
along with certain fixtures, all as described on SCHEDULE 1A.

      OBLIGATION means all present and future indebtedness, liabilities, and
obligations, and all renewals and extensions thereof, or any part thereof, now
or hereafter owing, due, or payable to Administrative Agent, any Lender, or any
Affiliate of any Lender by Borrower arising from, by virtue of, or pursuant to
any Loan Document, including, without limitation, all interest accruing thereon,
fees, costs, and expenses (including, without limitation, all reasonable
attorneys' fees and expenses incurred in the enforcement or collection thereof)
payable under the Loan Documents.

      OUTSTANDING NOTE BALANCE means, as of any date of calculation, the Stated
Principal Amount less all principal payments made on the Senior Secured Discount
Notes through such date.

      PARTICIPANT is defined in SECTION 13.12(d).

      PERMITTED DEBT is defined in SECTION 10.1.

      PERMITTED LIENS means the following types of Liens: (a) Liens (other than
Liens relating to Environmental Claims or ERISA) for Taxes not yet due and
payable; (b) statutory Liens of landlords, carriers, warehousemen, mechanics,
materialmen, and other similar Liens imposed by Law, which are incurred in the
ordinary course of business for sums not more than 30 days delinquent; (c) Liens
(other than any Lien imposed by ERISA) incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance, and other types of social security, statutory obligations, surety,
and appeal bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds, and other similar obligations (exclusive
of obligations for the payment of borrowed money); (d) easements, rights-of-way,
restrictions, and other similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of Borrower; (e)
Liens for purchase money obligations, provided that (i) the purchase of the
asset subject to any such Lien is permitted under SECTION 10.1(c), (ii) the Debt
secured by any such Lien is permitted under SECTION 10.1, and (iii) such Lien
encumbers only the asset so purchased; (f) Liens in respect of Debt permitted
under SECTION 10.1(c); provided that such Liens encumber only the asset which is
subject to a Capital Lease; (g) Liens in favor of Administrative Agent, on
behalf of itself and the other Lenders securing the Obligation; and, (h) Liens
existing on the Closing Date to the extent set forth on SCHEDULE 1B.

      PERSON means any individual, entity, or Governmental Authority.

      POTENTIAL DEFAULT means the occurrence of any event or existence of any
circumstance which, after the giving of notice or lapse of time or both, would
become a Default.

      PRO FORMA means the unaudited consolidated balance sheet of the Borrower
and its Subsidiaries as of the Closing Date after giving effect to the
transactions contemplated by this Agreement.

                                                        Senior Secured Term Loan

                                       9



      PRO RATA or PRO RATA PART, for each Lender, means on any date of
determination, the proportion which the portion of the Aggregate Senior Secured
Discount Note Stated Amount owed to such Lender (as applicable) bears to the
Aggregate Senior Secured Discount Note Stated Amount owed to all Lenders at the
time in question.

      REGISTER is defined in SECTION 13.12(c).

      REGULATION D means Regulation D of the Board of Governors of the Federal
Reserve System, as amended.

      REGULATION U means Regulation U of the Board of Governors of the Federal
Reserve System, as amended.

      RELATED FUND means, with respect to any Lender, a fund or other investment
vehicle that invests in commercial loans and is managed by such Lender or by the
same investment advisor that manages such Lender or by an Affiliate of such
Lender or investment advisor.

      RELEASE means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, disposing, depositing,
dispersing, migrating, or other movement into the air, ground, ground or surface
water, or soil.

      REPRESENTATIVES means representatives, officers, directors, employees,
attorneys, and agents.

      REQUIRED LENDERS means, on any date of determination, those Lenders
holding 50.1% or more of the Aggregate Senior Secured Discount Note Stated
Amount .

      RESERVE REQUIREMENT means, at any time, the maximum rate at which reserves
(including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against, in the case of
Eurodollar Rate Borrowings, "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks with respect to (a) any category of liabilities which includes
deposits by reference to which the Adjusted Eurodollar Rate is to be determined,
or (b) any category of extensions of credit or other assets which include
Eurodollar Rate Borrowings. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement.

      RESTRICTED JUNIOR PAYMENT means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of the
Borrower, except a dividend payable solely with shares of the class of stock on
which such dividend is declared; (b) any redemption, conversion, exchange,
retirement, defeasance, sinking fund, or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
of the Borrower, or the issuance of a notice of an intention to do any of the
foregoing; (c) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any class of
stock of Borrower; and (d) any payment by Borrower of any management,
consulting, or similar fees to any Affiliate, whether pursuant to a management
agreement or otherwise.

      RIGHTS means rights, remedies, powers, privileges, and benefits.

                                                        Senior Secured Term Loan

                                       10



      SCHEDULE means, unless specified otherwise, a schedule attached to this
Agreement, as the same may be supplemented and modified from time to time in
accordance with the terms of the Loan Documents.

      SECURITIES ACT means the Securities Act of 1933, as the same may be
amended, modified or supplemented from time to time, and any successor statute
thereto, and any and all rules or regulations promulgated from time to time
thereunder.

      SENIOR SECURED DISCOUNT NOTES means the senior secured discount notes
issued by Borrower to Lenders on the Closing Date, and any replacement notes
issued pursuant to this Agreement.

      SINGLE PURPOSE ENTITY means a Person which: (a) was formed under the laws
of the State of Delaware solely for the purpose of acquiring and holding an
leasehold interest in the Mortgaged Property, (b) does not engage in any
business unrelated to the Mortgaged Property, (c) does not have any assets other
than those related to its interest in the Mortgaged Property, (d) does not have
any Debt other than, in the case of Borrower, Permitted Debt, (e) maintains
books, accounts, records, financial statements, stationery, invoices and checks
which are separate and apart from those of any other Person (except that such
Person's financial position, assets, results of operations and cash flows may be
included in the consolidated financial statements of an affiliate of such Person
in accordance with GAAP, provided that any such consolidated financial
statements shall contain a note indicating that such Person and its affiliates
are separate legal entities and maintain records, books of account separate and
apart from any other Person), (f) is subject to and complies with all of the
limitations on powers and separateness requirements set forth in the
organizational documentation of such Person as of the Closing Date, (g) holds
itself out as being a Person separate and apart from each other Person and not
as a division or part of another Person, (h) conducts its business in its own
name, (i) exercises reasonable efforts to correct any misunderstanding actually
known to it regarding its separate identity, maintains an arm's-length
relationship with its Affiliates, and does not permit any of its Affiliates or
constituent party independent access to its bank accounts, (j) pays its own
liabilities out of its own funds (including the salaries of its own employees)
and reasonably allocates any overhead that is shared with an affiliate,
including, but not limited to, paying for shared office space and services
performed by any officer or employee of an affiliate, (k) maintains a sufficient
number of employees in light of its contemplated business operations, (l)
conducts its business so that the assumptions made with respect to it which are
contained in the that certain non-consolidation opinion issued by Lewis and
Roca, LLP, of even date herewith, shall at all times be true and correct in all
material respects, (m) in the case of (i) a corporation, observes all applicable
corporate formalities in all material respects, (ii) a limited liability
company, observes all applicable limited liability company formalities in all
material respects, and (iii) a limited partnership, observes all applicable
limited partnership formalities in all material respects, (n) does not commingle
its assets with those of any other Person and holds such assets in its own name,
(o) does not assume, guarantee or become obligated for the debts of any other
Person, and does not hold out its credit as being available to satisfy the
obligations or securities of others, (p) does not acquire obligations or
securities of its shareholders, members or partners, (q) does not pledge its
assets for the benefit of any other Person and does not make any loans or
advances to any Person, (r) maintains adequate capital in light of its
contemplated business operations, and (s) has by-laws or an operating agreement,
which provides that, for so long as the Loan is outstanding, such Person shall
not take or consent to any of the following actions, except to the extent
expressly permitted in this Agreement and the other Loan Documents:

      (i) the dissolution, liquidation, consolidation, merger or sale of all or
substantially all of its assets;

                                                        Senior Secured Term Loan

                                       11



      (ii) the engagement by such Person in any business other than the
acquisition, development, management, leasing, ownership, maintenance and
operation of the Mortgaged Property, and activities incidental thereto;

      (iii) the filing, or consent to the filing, of a bankruptcy or insolvency
petition, any general assignment for the benefit of creditors or the institution
of any other insolvency proceeding, or the seeking or consenting to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official in respect of such Person without the
affirmative vote of its Special Manager; and

      (iv) any amendment or modification of any provision of its organizational
documents relating to qualification as a "SINGLE PURPOSE ENTITY".

      SOLVENT means, as to a Person, that (a) the aggregate fair saleable value
of such Person's assets exceeds its liabilities (whether contingent,
subordinated, unmatured, unliquidated, or otherwise), (b) such Person does not
intend to incur and does not believe that it will incur Debt beyond its ability
to pay such Debt as it becomes due, and (c) such Person does not have
unreasonably small capital to conduct such Person's businesses as presently
conducted or contemplated.

      STATED PRINCIPAL AMOUNT means, as to each Senior Secured Discount Note,
the "Stated Principal Amount at Maturity" of such Senior Secured Discount Note,
as set forth on SCHEDULE 2.2.

      SUBSIDIARY of any Person means (a) any entity of which an aggregate of
more than 50% (in number of votes) of the stock, membership interests, or other
equity interests is owned of record or beneficially, directly or indirectly, by
such Person, or (b) any partnership (limited or general) of which such Person
shall at any time be the controlling general partner determined in accordance
with GAAP or own more than 50% of the issued and outstanding partnership
interests.

      TAXES means, for any Person, taxes, assessments, or other governmental
charges or levies imposed upon such Person, its income, or any of its
properties, franchises, or assets.

      TERMINATION DATE means the earlier of (a) December 31, 2009, and (b) the
effective date of any other termination, cancellation, redemption, or
acceleration of the Loan.

      UCC means the Uniform Commercial Code as adopted in Arizona, or any
relevant jurisdiction which relates to the Liens in question.

      1.2 NUMBER AND GENDER OF WORDS; OTHER REFERENCES. Unless otherwise
specified in the Loan Documents, (a) where appropriate, the singular includes
the plural and vice versa, and words of any gender include each other gender,
(b) heading and caption references may not be construed in interpreting
provisions, (c) monetary references are to currency of the United States of
America, (d) section, paragraph, annex, schedule, exhibit, and similar
references are to the particular Loan Document in which they are used, (e)
references to "telecopy," "facsimile," "fax," or similar terms are to facsimile
or telecopy transmissions, (f) references to "including" mean including without
limiting the generality of any description preceding that word, (g) the rule of
construction that references to general items that follow references to specific
items are limited to the same type or character of those specific items is not
applicable in the Loan Documents, (h) references to any Person include that
Person's heirs, personal representatives, successors, trustees, receivers, and
permitted assigns, (i) references to any Law include every amendment or
supplement to it, rule and regulation adopted under it, and successor or
replacement for it, and (j) references to any Loan Document or other document
include every renewal and extension of it, amendment and supplement to it, and
replacement or substitution for it.

                                                        Senior Secured Term Loan

                                       12



      1.3 ACCOUNTING PRINCIPLES. Except as otherwise expressly provided herein,
all accounting and financial terms used in the Loan Documents and the compliance
with each financial covenant therein shall be determined in accordance with
GAAP, and, all accounting principles shall be applied on a consistent basis so
that the accounting principles in a current period are comparable in all
material respects to those applied during the preceding comparable period. If
Borrower or Required Lenders determine that a change in GAAP from that in effect
on the date hereof has altered the treatment of certain financial data to its
detriment under this Agreement, such party may, by written notice to the others
and Administrative Agent not later than thirty (30) days after the effective
date of such change in GAAP, request renegotiation, in good faith, of the
financial covenants affected by such change. If Borrower and Required Lenders,
despite good faith efforts, have not agreed on revised covenants within 30 days
after delivery of such notice, then, for purposes of this Agreement, GAAP will
mean generally accepted accounting principles on the date just prior to the date
on which the change that gave rise to the renegotiation occurred.

SECTION 2 LOAN PROCEEDS/ISSUANCE OF SENIOR SECURED DISCOUNT NOTES.

      2.1 LOAN PROCEEDS. Each Lender severally, but not jointly, agrees to lend
to Borrower in a single advance on the Closing Date such Lender's Commitment
Percentage of the Loan Proceeds as set forth on Schedule 2.1A.

      2.2 ISSUANCE OF SENIOR SECURED DISCOUNT NOTES. Borrower agrees to issue to
each Lender, on the Closing Date, the Stated Principal Amount of Senior Secured
Discount Notes set forth opposite the name of such Lender on SCHEDULE 2.2.
Borrower and each Lender agree that for purposes of Sections 1271 through 1275
of the Code, the aggregate original purchase price of the Senior Secured
Discount Notes is as set forth under the heading "Purchase Price" on SCHEDULE
2.2, and such price will be appropriately used by Borrower and such Lender for
financial reporting and income Tax purposes.

      2.3 LEGEND. Each Senior Secured Discount Note shall bear the following
original issue discount legend:

      FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS
      AMENDED (THE "CODE"), THIS SECURITY HAS ORIGINAL ISSUE DISCOUNT. FOR
      PURPOSES OF SECTION 1273 OF THE CODE, THE ISSUE PRICE IS $35,988,000, THE
      AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $5,198,000, AND THE YIELD TO MATURITY
      COMPOUNDED QUARTERLY IS LIBOR PLUS 7.14% ASSUMING NO OPTIONAL PRINCIPAL
      PREPAYMENTS AND ASSUMING THE APPRAISED VALUE REMAINS CONSTANT FOR THE LIFE
      OF THIS SENIOR SECURED DISCOUNT NOTE.

SECTION 3 TERMS OF PAYMENT.

      3.1 SENIOR SECURED DISCOUNT NOTES AND PAYMENTS.

            (a) Senior Secured Discount Notes. The amount owed by Borrower to
      each Lender shall be evidenced by a Senior Secured Discount Note, payable
      to the order of such Lender. On the Closing Date, Borrower will deliver to
      each Lender a Senior Secured Discount Note in the name of such Lender and
      in the Stated Principal Amount as set forth on SCHEDULE 2.2. Upon any
      assignment of any portion of any Lender's Senior Secured Discount Notes,
      Borrower shall issue new Senior Secured Discount Notes to both the
      assigning Lender and the assignee to reflect such assignment.

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                                       13



            (b) Payment. All payments of principal, interest, and other amounts
      to be made by Borrower under this Agreement and the other Loan Documents
      shall be made to Administrative Agent at its principal office in Dallas,
      Texas in Dollars and in funds which are or will be available for immediate
      use by Administrative Agent by 2:00 p.m. central time on the day due,
      without setoff, deduction, or counterclaim. Payments made after 2:00 p.m.
      central time shall be deemed made on the Business Day next following.
      Administrative Agent shall pay to each Lender any payment of principal,
      interest, or other amount to which such Lender is entitled hereunder on
      the same day Administrative Agent shall have received the same from
      Borrower; provided such payment is received by Administrative Agent prior
      to 2:00 p.m. central time, and otherwise before 2:00 p.m. central time on
      the Business Day next following.

            (c) Payment Assumed. Unless Administrative Agent has received notice
      from Borrower prior to the date on which any payment is due under this
      Agreement that Borrower will not make that payment in full, Administrative
      Agent may assume that Borrower has made the full payment due and
      Administrative Agent may, in reliance upon that assumption, cause to be
      distributed to the appropriate Lender on that date the amount then due to
      such Lenders. If and to the extent Borrower does not make the full payment
      due to Administrative Agent, each Lender shall repay to Administrative
      Agent on demand the amount distributed to that Lender by Administrative
      Agent together with interest for each day from the date that Lender
      received payment from Administrative Agent until the date that Lender
      repays Administrative Agent (unless such repayment is made on the same day
      as such distribution), at an annual interest rate equal to the Federal
      Funds Rate.

      3.2 PAYMENTS OF INTEREST AND PRINCIPAL PRIOR TO TERMINATION DATE.

            (a) Interest Payments. Interest shall accrue on the Outstanding Note
      Balance at the applicable rate set forth in SECTION 3.4, below. Accrued
      interest on each Eurodollar Rate Borrowing and each Base Rate Borrowing is
      due and payable quarterly in arrears on March 31, June 30, September 30
      and December 31 of each year, commencing March 31, 2005, and ending on the
      Termination Date.

            (b) Principal Payments. Borrower shall make the following payments
      to Administrative Agent: (i) on each of the first and second Anniversary
      Dates, an amount equal to $1,529,500 and (ii) on the Termination Date, the
      Outstanding Note Balance.

      3.3 PREPAYMENTS.

            (a) Optional Prepayments.

                  (i) After giving Administrative Agent advance written notice
            of its intent to prepay, Borrower may voluntarily prepay the Loan
            only as follows: (i) on each of the third and fourth Anniversary
            Dates, the amount that is equal to $1,529,500 and (ii) from time to
            time and at any time, the Outstanding Note Balance on all
            outstanding Senior Secured Discount Notes; provided that: (A) such
            notice must be received by Administrative Agent by 12:00 p.m.
            central time, three Business Days preceding the date of prepayment,
            and (B) concurrently with the delivery of such notice, Borrower
            shall deliver to Administrative Agent evidence satisfactory to
            Administrative Agent that such prepayment is permitted by the terms
            of this Agreement. Conversions under SECTION 3.11 are not
            prepayments. Each notice of prepayment shall specify the prepayment
            date and the amount to be prepaid and shall constitute a binding
            obligation of Borrower to make a prepayment on the date stated
            therein, together with (unless such prepayment is made

                                                        Senior Secured Term Loan

                                       14



            with respect to a Base Rate Borrowing) accrued and unpaid interest
            to the date of such payment on the aggregate principal amount
            prepaid.

                  (ii) Application of Voluntary Prepayment. If no Default or
            Potential Default then exists or arises as a result therefrom, any
            voluntary prepayments of the Obligation shall be allocated Pro Rata
            to each Lender.

            (b) Prepayments; Interest/Consequential Loss. All prepayments under
      this SECTION 3.3 shall be made, together with accrued interest to the date
      of such prepayment on the principal amount prepaid, together with any
      Consequential Loss arising as a result thereof.

      3.4 INTEREST OPTIONS. Except as set forth in SECTIONS 4.2(A) and 4.3
herein, the Outstanding Note Balance shall bear interest at the Applicable
Eurodollar Rate, as adjusted every ninety (90) days, provided however, that the
Applicable Base Rate shall apply when a Default exists. Each change in the Base
Rate, subject to the terms of this Agreement, will become effective, without
notice to Borrower or any other person, upon the effective date of such change.

      3.5 DEFAULT RATE. At the option of Required Lenders and to the extent
permitted by Law, all past-due principal payments and past due interest accruing
on any of the Obligation shall bear interest from maturity (stated or by
acceleration) or the date due, as applicable, at the Default Rate until paid;
provided that, the Default Rate shall automatically apply in the case of SECTION
11.4 where the Default Rate is specified.

      3.6 INTEREST RECAPTURE. If the designated rate applicable to the
Outstanding Note Balance exceeds the Maximum Rate, the rate of interest on such
Outstanding Note Balance shall be limited to the Maximum Rate, but any
subsequent reductions in such designated rate shall not reduce the rate of
interest thereon below the Maximum Rate until the total amount of interest
accrued thereon equals the amount of interest which would have accrued thereon
if such designated rate had at all times been in effect. In the event that at
maturity (stated or by acceleration), or at final payment of the Aggregate
Senior Secured Discount Note Stated Amount , the total amount of interest paid
or accrued is less than the amount of interest which would have accrued if such
designated rates had at all times been in effect, then, at such time and to the
extent permitted by Law, Borrower shall pay an amount equal to the difference
between (a) the lesser of the amount of interest which would have accrued if
such designated rates had at all times been in effect and the amount of interest
which would have accrued if the Maximum Rate had at all times been in effect,
and (b) the amount of interest actually paid or accrued on the Aggregate Senior
Secured Discount Note Stated Amount .

      3.7 INTEREST CALCULATIONS. Interest will be calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed but computed as if each calendar year consisted of 360 days (unless the
calculation would result in an interest rate greater than the Maximum Rate, in
which event interest will be calculated on the basis of a year of 365 or 366
days, as the case may be). All interest rate determinations and calculations by
Administrative Agent are conclusive and binding absent manifest error.

      3.8 MAXIMUM RATE. Regardless of any provision contained in any Loan
Document, neither Administrative Agent nor any Lender shall ever be entitled to
contract for, charge, take, reserve, receive, or apply, as interest on all or
any part of the Obligation, any amount in excess of the Maximum Rate, and, if
Lenders ever do so, then such excess shall be deemed a partial prepayment of
principal and treated hereunder as such and any remaining excess shall be
refunded to Borrower. In determining if the interest paid or payable exceeds the
Maximum Rate, Borrower and Lenders shall, to the maximum extent permitted under
applicable Law, (a) treat all Borrowings as but a single extension of credit
(and Lenders

                                                        Senior Secured Term Loan

                                       15



and Borrower agree that such is the case), (b) characterize any nonprincipal
payment as an expense, fee, or premium rather than as interest, (c) exclude
voluntary prepayments and the effects thereof and any Termination Fee payable as
a result thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligation.
However, if the Obligation is paid and performed in full prior to the end of the
full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any Laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount.

      3.9 INTEREST PERIODS. The interest period applicable to Eurodollar Rate
Borrowings shall be ninety (90) days (each an "INTEREST PERIOD"); provided,
however, that: (a) the initial Interest Period shall commence on the date hereof
and each Interest Period occurring thereafter in respect of the Outstanding Note
Balance shall commence on the day on which the next preceding Interest Period
applicable thereto expires; and (b) if any Interest Period for a Eurodollar Rate
Borrowing begins on a day for which there is no numerically corresponding
Business Day in the calendar month at the end of such Interest Period, then such
Interest Period shall end on the last Business Day in the calendar month at the
end of such Interest Period.

      3.10 CONVERSION TO BASE RATE BORROWING. No Eurodollar Rate Borrowing may
be made or continued as a Eurodollar Rate Borrowing, and no Base Rate Borrowing
may be converted to a Eurodollar Rate Borrowing, if the interest rate for such
Eurodollar Rate Borrowing would exceed the Maximum Rate. The right to continue
as a Eurodollar Rate Borrowing shall not be available during the occurrence of a
Default.

      3.11 ORDER OF APPLICATION. Any payment or prepayment (including proceeds
from the exercise of any Rights) shall be applied to the Obligation in the
following order: (i) to the ratable payment of all fees, expenses, and
indemnities for which Administrative Agent or Lenders have not been paid or
reimbursed in accordance with the Loan Documents (as used in this SECTION 3.11,
a "ratable payment" for any Lender or Administrative Agent shall be, on any date
of determination, that proportion which the portion of the total fees, expenses,
and indemnities owed to such Lender or Administrative Agent bears to the total
aggregate fees and indemnities owed to all Lenders and Administrative Agent on
such date of determination); (ii) to the ratable payment of accrued and unpaid
interest on the Aggregate Senior Secured Discount Note Stated Amount (as used in
this SECTION 3.11), "ratable payment" means, for any Lender, on any date of
determination, that proportion which the accrued and unpaid interest on the
Senior Secured Discount Note owed to such Lender bears to the total accrued and
unpaid interest on the Aggregate Senior Secured Discount Note Stated Amount owed
to all Lenders); (iii) to the ratable payment of the Aggregate Senior Secured
Discount Note Stated Amount (as used in this SECTION 3.11, "ratable payment"
means, for any Lender, on any date of determination, that proportion which the
Senior Secured Discount Note Amount owed to such Lender bears to the Aggregate
Senior Secured Discount Note Stated Amount owed to all Lenders); and (iv) to the
payment of the remaining Obligation in the order and manner Required Lenders
deem appropriate.

Subject to the provisions of SECTION 12 and provided that Administrative Agent
shall not in any event be bound to inquire into or to determine the validity,
scope, or priority of any interest or entitlement of any Lender and may suspend
all payments or seek appropriate relief (including, without limitation,
instructions from Required Lenders or an action in the nature of interpleader)
in the event of any doubt or dispute as to any apportionment or distribution
contemplated hereby, Administrative Agent shall promptly distribute such amounts
to each Lender in accordance with the Agreement and the related Loan Documents.

                                                        Senior Secured Term Loan

                                       16



      3.12 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment or
prepayment with respect to the Obligation (whether voluntary, involuntary, or
otherwise, including, without limitation, as a result of exercising its Rights
under Section 3.13) which is in excess of its share of any such payment in
accordance with the relevant Rights of the Lenders under the Loan Documents,
then such Lender shall purchase from the other Lenders such participations as
shall be necessary to cause such purchasing Lender to share the excess payment
with each other Lender in accordance with the relevant Rights under the Loan
Documents. If all or any portion of such excess payment is subsequently
recovered from such purchasing Lender, then the purchase shall be rescinded and
the purchase price restored to the extent of such recovery. Borrower agrees that
any Lender purchasing a participation from another Lender pursuant to this
SECTION 3.12 may, to the fullest extent permitted by Law, exercise all of its
Rights of payment (including the Right of offset) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation.

      3.13 BOOKING BORROWINGS. To the extent permitted by Law, any Lender may
make, carry, or transfer its Pro Rata Part of the Outstanding Note Balance at,
to, or for the account of any of its Affiliates; provided that, no Affiliate of
any Lender shall be entitled to receive any greater payment under SECTION 4 than
the transferor Lender would have been entitled to receive with respect to such
Pro Rata Part.

SECTION 4 CHANGE IN CIRCUMSTANCES.

      4.1 INCREASED COST AND REDUCED RETURN.

            (a) Changes in Law. If, after the date hereof, the adoption of any
      applicable Law or any change in any applicable Law or any change in the
      interpretation or administration thereof by any Governmental Authority
      having jurisdiction over the Loan Documents, or compliance by any Lender
      with any request or directive (having the force of Law) of any such
      Governmental Authority:

                  (i) shall subject such Lender to any Tax or other charge with
            respect to any Eurodollar Rate Borrowing or its obligation to loan
            Eurodollar Rate Borrowings, or change the basis of taxation of any
            amounts payable to such Lender under the Loan Documents in respect
            of any Eurodollar Rate Borrowings (other than Taxes imposed on the
            overall net income of such Lender by the jurisdiction in which such
            Lender has its principal office);

                  (ii) shall impose, modify, or deem applicable any reserve,
            special deposit, assessment, or similar requirement (other than the
            Reserve Requirement utilized in the determination of the Adjusted
            Eurodollar Rate) relating to any extensions of credit or other
            assets of, or any deposits with or other liabilities or commitments
            of, such Lender, including the commitment of such Lender hereunder;
            or

                  (iii) shall impose on such Lender or the London interbank
            market any other condition affecting the Loan Documents or any of
            such extensions of credit or liabilities or commitments;

      and the result of any of the foregoing is to increase the cost to such
      Lender of making, converting into, continuing, or maintaining any
      Eurodollar Rate Borrowings or to reduce any sum received or receivable by
      such Lender under the Loan Documents with respect to any Eurodollar Rate
      Borrowing, then Borrower shall pay to such Lender on demand such amount or
      amounts as will compensate such Lender for such increased cost or
      reduction.

                                                        Senior Secured Term Loan

                                       17


            (b)   Capital Adequacy. If, after the date hereof, any
      Lender shall have determined that the adoption of any applicable Law
      regarding capital adequacy or any change therein or in the interpretation
      or administration thereof by any Governmental Authority charged with the
      interpretation or administration thereof and having jurisdiction over the
      Loan Documents, or any request or directive regarding capital adequacy
      (having the force of Law) of any such Governmental Authority has or would
      have the effect of reducing the rate of return on the capital of such
      Lender or any corporation controlling such Lender as a consequence of such
      Lender's obligations hereunder to a level below that which such Lender or
      such corporation could have achieved but for such adoption, change,
      request, or directive (taking into consideration, in good faith, its
      policies with respect to capital adequacy), then from time to time upon
      demand Borrower shall pay to such Lender such additional amount or amounts
      as will compensate such Lender for such reduction.

            (c)   Compensation Statement. Each Lender shall promptly
      notify Borrower and Administrative Agent of any event of which it has
      knowledge, occurring after the date hereof, which will entitle such Lender
      to compensation pursuant to this Section. Any Lender claiming compensation
      under this Section shall furnish to Borrower and Administrative Agent a
      statement setting forth the additional amount or amounts to be paid to it
      hereunder which shall be conclusive in the absence of manifest error. In
      determining such amount, such Lender may use any reasonable averaging and
      attribution methods.

      4.2   LIMITATION ON TYPES OF LOANS. If on or prior to the first day of
any Interest Period for any Eurodollar Rate Borrowing, Administrative Agent
determines (which determination shall be conclusive absent manifest error) that
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, then Administrative Agent shall give Borrower prompt notice
thereof specifying the relevant amounts or periods, and so long as such
condition remains in effect, the Lenders shall be under no obligation to
continue Eurodollar Rate Borrowings, or to convert Base Rate Borrowings into
Eurodollar Rate Borrowings, and Borrower shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Eurodollar Rate Borrowings,
either prepay such Eurodollar Rate Borrowings or convert such Eurodollar Rate
Borrowings into Base Rate Borrowings in accordance with the terms of this
Agreement.

      4.3   ILLEGALITY. Notwithstanding any other provision of the Loan
Documents, in the event that it becomes unlawful for any Lender to make,
maintain, or fund Eurodollar Rate Borrowings hereunder, then such Lender shall
promptly notify Borrower thereof and such Lender's obligation to make or
continue Eurodollar Rate Borrowings and to convert other Base Rate Borrowings
into Eurodollar Rate Borrowings shall be suspended until such time as such
Lender may again make, maintain, and fund Eurodollar Rate Borrowings (in which
case the provisions of SECTION 4.4 shall be applicable).

      4.4   TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to
fund Eurodollar Rate Borrowings or to continue Eurodollar Rate Borrowings shall
be suspended pursuant to SECTIONS 4.1, 4.2, or 4.3 hereof, such Lender's
Eurodollar Rate Borrowings shall be automatically converted into Base Rate
Borrowings on the last day(s) of the then current Interest Period(s) for
Eurodollar Rate Borrowings (or, in the case of a conversion required by SECTION
4.3 hereof, on such earlier date as such Lender may specify to Borrower with a
copy to Administrative Agent) and, unless and until such Lender gives notice as
provided below that the circumstances specified in SECTIONS 4.1, 4.2, or 4.3
hereof that gave rise to such conversion no longer exist:

            (a)   to the extent that such Lender's Eurodollar Rate
      Borrowings have been so converted, all payments and prepayments of
      principal that would otherwise be applied to such Lender's Eurodollar Rate
      Borrowings shall be applied instead to its Base Rate Borrowings; and

                                                        Senior Secured Term Loan

                                       18



            (b)   all Eurodollar Rate Borrowings that would otherwise be
      made or continued by such Lender as Eurodollar Rate Borrowings shall be
      made or continued instead as Base Rate Borrowings, and all Base Rate
      Borrowings of such Lender that would otherwise be converted into
      Eurodollar Rate Borrowings shall be converted instead into (or shall
      remain as) Base Rate Borrowings.

If such Lender gives notice to Borrower (with a copy to Administrative Agent)
that the circumstances specified in SECTIONS 4.1, 4.2, or 4.3 hereof that gave
rise to the conversion of such Lender's Eurodollar Rate Borrowings pursuant to
this SECTION 4.4 no longer exist, such Lender's Base Rate Borrowings shall be
automatically converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Rate Borrowings, to the extent
necessary so that, after giving effect thereto, all Eurodollar Rate Borrowings
held by the Lenders and by such Lender are held pro rata (as to principal
amounts and Interest Periods) in accordance with their ratable shares of the
Aggregate Senior Secured Discount Note Stated Amount .

      4.5   COMPENSATION. Upon the request of any Lender, Borrower shall pay
to such Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender) to compensate it for any actual out-of-pocket loss,
cost, or expense (including loss of anticipated profits) incurred by it as a
result of:

            (a)   any payment, prepayment, or conversion of a Eurodollar
      Rate Borrowing for any reason (including, without limitation, the
      acceleration of the loan pursuant to SECTION 11.2) on a date other than
      the last day of the Interest Period; or

            (b)   any failure by Borrower for any reason to borrow,
      continue, or prepay a Eurodollar Rate Borrowing on the date for such
      borrowing, continuation, or prepayment specified in the relevant notice of
      prepayment or continuation under this Agreement.

      4.6   TAXES.

            (a)   General. Any and all payments by Borrower to or for
      the account of any Lender or Administrative Agent hereunder or under any
      other Loan Document shall be made free and clear of and without deduction
      for any and all present or future Taxes, excluding, in the case of each
      Lender and Administrative Agent, Taxes imposed on its income and franchise
      Taxes imposed on it by the jurisdiction under the Laws of which such
      Lender or Administrative Agent (as the case may be) is organized, or any
      political subdivision thereof. If Borrower shall be required by Law to
      deduct any Taxes from or in respect of any sum payable under any Loan
      Document to any Lender or Administrative Agent, (i) the sum payable shall
      be increased as necessary so that after making all required deductions
      (including deductions applicable to additional sums payable under this
      SECTION 4.6) such Lender or Administrative Agent receives an amount equal
      to the sum it would have received had no such deductions been made, (ii)
      Borrower shall make such deductions, (iii) Borrower shall pay the full
      amount deducted to the relevant taxation authority or other authority in
      accordance with applicable Law, and (iv) Borrower shall furnish to
      Administrative Agent, the original or a certified copy of a receipt
      evidencing payment thereof.

            (b)   Stamp and Documentary Taxes. In addition, Borrower
      agrees to pay any and all present or future stamp or documentary taxes and
      any other excise or property taxes or charges or similar levies which
      arise from any payment made under any Loan Document or from the

                                                        Senior Secured Term Loan

                                       19



      execution or delivery of, or otherwise with respect to, any Loan Document
      (hereinafter referred to as "OTHER TAXES").

            (c)   Indemnification for Taxes. Borrower agree to
      indemnify each Lender and Administrative Agent for the full amount of
      Taxes and Other Taxes (including, without limitation, any Taxes or Other
      Taxes imposed or asserted by any jurisdiction on amounts payable under
      this SECTION 4.6) paid by such Lender or Administrative Agent (as the case
      may be) and any liability (including penalties, interest, and expenses)
      arising therefrom or with respect thereto.

            (d)   Withholding Tax Forms. Each Lender organized under
      the Laws of a jurisdiction outside the United States, on or prior to the
      date of its execution and delivery of this Agreement in the case of each
      Lender listed on the signature pages hereof and on or prior to the date on
      which it becomes a Lender in the case of each other Lender, and from time
      to time thereafter, including, without limitation, upon the expiration or
      obsolescence of any previously delivered form or upon the written request
      of Borrower or Administrative Agent (but only so long as such Lender
      remains lawfully able to do so) shall provide Borrower and Administrative
      Agent with (i) two duly completed copies of Internal Revenue Service Form
      W-BEN, W-8ECI, W-8IMY, W-9, or other applicable form, as the case may be,
      certifying in each case that such Lender is entitled to benefits under an
      income tax treaty to which the United States is a party which reduces the
      rate of withholding tax on payments of interest or certifying that the
      income receivable pursuant to this Agreement is effectively connected with
      the conduct of a trade or business in the United States, or certifying
      that such Lender is entitled to an exemption from or a reduced rate of tax
      on payment pursuant to the "portfolio interest" exception under section
      871(h) or 881(c) of the Code, (ii) if applicable, a statement indicating
      that such Lender is entitled to the "portfolio interest" exception under
      Section 871(h) or 881(c)(3) of the Code, and (iii) any other governmental
      forms or certificates which are necessary or required under an applicable
      tax treaty or otherwise by law to reduce or eliminate withholding tax,
      which has been reasonably requested by Borrower or Administrative Agent.
      If an event (including without limitation any change in treaty, law, or
      regulation) has occurred prior to the date on which any delivery required
      by the preceding sentence would otherwise be required which renders all
      such forms inapplicable or which would prevent any Lender from duly
      completing and delivering any such form with respect to it and such Lender
      advises Borrower and Administrative Agent that it is not capable of
      receiving payments without any deduction or withholding of United States
      federal income tax, such Lender shall not be required to deliver such
      forms. If the form provided by a Lender at the time such Lender first
      becomes a party to this Agreement indicates a United States interest
      withholding tax rate in excess of zero, withholding at such rate shall be
      considered excluded from "Taxes".

            (e)   Failure to Provide Withholding Forms; Changes in Tax
      Laws. For any period with respect to which a Lender has failed to provide
      Borrower and Administrative Agent with the appropriate form pursuant to
      SECTION 4.6(d) (unless such failure is due to a change in Law occurring
      subsequent to the date on which a form originally was required to be
      provided), such Lender shall not be entitled to indemnification under
      SECTION 4.6(a) or 4.6(b) with respect to Taxes imposed by the United
      States; provided, however, that should a Lender, which is otherwise exempt
      from or subject to a reduced rate of withholding tax, become subject to
      Taxes because of its failure to deliver a form required hereunder,
      Borrower shall take such steps as such Lender shall reasonably request to
      assist such Lender to recover such Taxes.

            (f)   Tax Payment Receipt. Within 30 days after the date of
      any payment of Taxes, Borrower shall furnish to Administrative Agent the
      original or a certified copy of a receipt evidencing such payment.

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                                       20



            (g)   Survival. Without prejudice to the survival of any
      other agreement of Borrower hereunder, the agreements and obligations of
      Borrower contained in this SECTION 4.6 shall survive the payment in full
      of the Obligation.

SECTION 5 FEES.

      5.1   TREATMENT OF FEES. Except as otherwise provided by Law, the fees
described in this SECTION 5: (a) do not constitute compensation for the use,
detention, or forbearance of money, (b) are in addition to, and not in lieu of,
interest and expenses otherwise described in the Loan Documents, (c) shall be
payable in accordance with SECTION 3.1(b), (d) shall be non-refundable, (e)
shall, to the fullest extent permitted by Law, bear interest, if not paid when
due, at the Default Rate, and (f) shall be calculated on the basis of actual
number of days (including the first day but excluding the last day) elapsed, but
computed as if each calendar year consisted of 365 or 366 days, as the case may
be.

      5.2   FEES OF ADMINISTRATIVE AGENT. Borrower shall pay to
Administrative Agent (for its own account) the fees described in that certain
fee letter with Administrative Agent.

SECTION 6 SECURITY.

      6.1   COLLATERAL. To secure the full and complete payment and
performance of the Obligation on the Closing Date, each of Guarantor and
Borrower shall enter into Collateral Documents (in form and substance acceptable
to Administrative Agent) pursuant to which, among other things, each such entity
shall, to the extent permitted by applicable Law, grant, pledge, assign, and
create first priority Liens (except to the extent Permitted Liens affect such
priority) in favor of Administrative Agent for the ratable benefit of Lenders in
and to: (a) all Rights, titles, and interests in all personal property of
Borrower; (b) all Rights, titles, and interests in all real property of
Borrower, including but not limited to the Mortgaged Property; (c) Guarantor's
equity interests in the Borrower and all Rights, titles, and interests attendant
thereto; and (d) all cash and non-cash proceeds of any of the foregoing (the
"COLLATERAL").

      6.2   FUTURE LIENS. Promptly after (a) the acquisition of any material
assets (real, personal, tangible, or intangible) by Borrower, (b) the removal,
termination, or expiration of any prohibitions upon the granting of a Lien in
any asset (real, personal, tangible, or intangible) of Borrower, or (c) upon the
designation, formation, or acquisition of any new Subsidiary of Borrower (the
assets described in CLAUSES (a) through (c) hereof are referred to herein as the
"ADDITIONAL ASSETS"), Borrower shall (or shall cause the appropriate new
Subsidiary to) execute and deliver to Administrative Agent all further
instruments and documents (including, without limitation, Collateral Documents,
and all certificates and instruments representing shares of stock or evidencing
Debt and any realty appraisals as Administrative Agent may require with respect
to any such Additional Assets), and shall take all further action that may be
necessary or desirable, or that Administrative Agent may reasonably request, to
grant, perfect, and protect Liens in favor of Administrative Agent for the
benefit of Lenders in such Additional Assets; it being expressly understood that
the granting of such additional security for the Obligation is a material
inducement to the execution and delivery of this Agreement by each Lender. Upon
satisfying the terms and conditions hereof, such Additional Assets shall be
included in the "COLLATERAL" for all purposes under the Loan Documents, and all
references to the "COLLATERAL" in the Loan Documents shall include the
Additional Assets.

      6.3   RELEASE OF COLLATERAL.

            (a)   Upon Sale or Disposition of Collateral. Upon any

      sale, transfer, or disposition of Collateral which is expressly permitted
      pursuant to the Loan Documents (or is otherwise authorized by Required
      Lenders), and promptly upon written request by Borrower or Guarantor

                                                        Senior Secured Term Loan

                                       21



      (which request must be accompanied by true and correct copies of (i) all
      documents of transfer or disposition, including any contract of sale, and
      (ii) all requested release instruments), Administrative Agent shall (and
      is hereby irrevocably authorized by Lenders to) execute such documents as
      may be necessary to evidence the release of Liens granted to
      Administrative Agent for the benefit of Lenders pursuant hereto in such
      Collateral.

            (b)   General Provisions. The actions of Administrative
      Agent under this SECTION 6.3 are subject to the following: (i) no such
      release of Liens shall be granted if any Default or Potential Default has
      occurred and is continuing, including, without limitation, the failure to
      make certain mandatory prepayments in accordance with SECTIONS 3.2(b) and
      3.3(b) in conjunction with the sale or transfer of such Collateral; (ii)
      Administrative Agent shall not be required to execute any such document on
      terms which, in Administrative Agent's opinion, would expose
      Administrative Agent to liability or create any obligation or entail any
      consequence other than the release of such Liens without recourse or
      warranty; and (iii) such release shall not in any manner discharge,
      affect, or impair the Obligation or Liens upon all interests retained by
      Borrower or Guarantor.

SECTION 7 CONDITIONS PRECEDENT TO CLOSING.

      7.1   CONDITIONS PRECEDENT TO CLOSING. This Agreement shall not become
effective, and Lenders shall not be obligated to advance any Loan Proceeds,
unless all conditions precedent listed on SCHEDULE 7.1 have been completed to
the satisfaction of each Lender. Each condition precedent in this Agreement is
material to the transactions contemplated in this Agreement, and time is of the
essence in respect of each thereof.

SECTION 8 REPRESENTATIONS, WARRANTIES, AND CERTAIN COVENANTS.

      To induce Administrative Agent and each Lender to enter into the Loan
Documents and to advance the Loan Proceeds, the Borrower and/or Guarantor, as
applicable, represents, warrants, and covenants to Administrative Agent and
Lenders that the following statements are and will be true, correct, and
complete and, unless specifically limited, shall remain so until indefeasible
payment in full, in cash, of the Obligation:

      8.1   ORGANIZATION, POWERS, CAPITALIZATION.

            (a)   Organization and Powers. Each of Borrower and
      Guarantor is an entity duly organized, validly existing, and in good
      standing under the laws of its jurisdiction of organization and qualified
      to do business in each jurisdiction where such qualification is required
      except where failure to be so qualified could not reasonably be expected
      to be a Material Adverse Event. Each of Borrower and Guarantor has all
      requisite power and authority to own and operate its respective
      properties, to carry on its business as now conducted, and proposed to be
      conducted and to enter into each Loan Document to which it is a party.

            (b)   Capitalization. The authorized and the issued equity
      interests in Borrower are as set forth on SCHEDULE 8.1, including all
      preemptive or other outstanding rights, options, warrants, conversion
      rights, or similar agreements or understandings for the purchase or
      acquisition from Borrower of any equity interests or other securities. All
      issued and outstanding equity interests of Borrower are duly authorized
      and validly issued, fully paid, nonassessable, free and clear of all Liens
      other than (1) Liens securing the Obligation and such equity interest were
      issued in compliance with all applicable state and federal laws. Guarantor
      will promptly notify Lenders of any change in Borrower's ownership or
      structure.

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                                       22



      8.2   AUTHORIZATION OF BORROWING, NO CONFLICT. Each of Borrower and
Guarantor has the power and authority to incur the Obligation and to grant
security interests in and liens on the Collateral. On the Closing Date, the
execution, delivery, and performance of the Loan Documents by Borrower and
Guarantor will have been duly authorized by all necessary corporate and
shareholder action. The execution, delivery, and performance by Borrower and
Guarantor of each Loan Document to which it is a party and the consummation of
the transactions contemplated thereby do not contravene any applicable Law, the
corporate charter or bylaws, or other organizational documents of Borrower or
Guarantor any material agreement or order by which Borrower, Guarantor or their
respective property, is bound. This Agreement and the other Loan Documents are
the legal, valid, and binding obligations of each of the Borrower and Guarantor,
enforceable against Borrower and Guarantor in accordance with their respective
terms.

      8.3   FINANCIAL CONDITION. All Financial Statements concerning the
Borrower or Guarantor, respectively, (a) furnished on or before the Closing Date
to Administrative Agent or any Lender by the Borrower or Guarantor, as the case
may be, in connection with this Agreement and (b) furnished subsequent to the
Closing Date to Administrative Agent or any Lender pursuant to this Agreement
have been prepared in accordance with GAAP consistently applied throughout the
periods involved (except as disclosed therein) and present fairly the financial
condition of Persons covered thereby as at the dates thereof and the results of
their operations for the periods then ended.

      8.4   NO ADVERSE MATERIAL CHANGE. Since September 30, 2004, there has
been no change in the business, assets, operations, or condition (financial or
otherwise) of Guarantor or the Collateral, or in the facts and information
regarding such entities or collateral as represented, which change may
reasonably be expected to result in a Material Adverse Event.

      8.5   DEBT AND LIABILITIES. As of the Closing Date, except as set forth
on SCHEDULE 8.5 and the Obligations, Borrower has no (a) Debt or other
obligations for borrowed money; or (b) Liabilities. Each of Borrower and
Guarantor promptly shall deliver copies of all notices given or received by
Borrower or Guarantor with respect to noncompliance with any term or condition
of any Debt which noncompliance may result in a Material Adverse Event and shall
promptly notify Administrative Agent of any default or event of default with
respect to any Debt.

      8.6   TITLE TO PROPERTIES; LIENS. Each of Borrower and Guarantor has
good, sufficient, and legal title to all of the Collateral (and any other
material properties and assets, if any) and will have good, sufficient, and
legal title of all after-acquired Collateral (and any other after-acquired
material properties and assets, if any), in each case, free and clear of all
Liens except for Permitted Liens. Administrative Agent for the benefit of
Lenders has a valid, perfected, and first priority Lien and/or security interest
in the Collateral (subject only to Permitted Liens), securing the payment of the
Obligation, and such Liens are entitled to all of the Rights, priorities, and
benefits afforded by the UCC or other applicable Law as enacted in any relevant
jurisdiction which relates to perfected Liens.

      8.7   LITIGATION; ADVERSE FACTS. There are no judgments outstanding
against either Borrower or Guarantor affecting their respective property nor are
there any actions, suits, proceedings, governmental investigations, or
arbitrations now pending or, to the best knowledge of Borrower or Guarantor
after due inquiry, threatened against or affecting Borrower or Guarantor or any
of their respective property which, if adversely determined, could reasonably be
expected to result in a Material Adverse Event. Promptly upon Borrower or
Guarantor obtaining knowledge of (a) the institution of any action, suit,
proceeding, governmental investigation, or arbitration against or affecting
Borrower or Guarantor or any of their respective property, not previously
disclosed by Borrower or Guarantor to Administrative Agent, which if adversely
determined could reasonably be expected to be a Material

                                                        Senior Secured Term Loan

                                       23



Adverse Event or (b) any development in any action, suit, proceeding,
governmental investigation, or arbitration at any time pending or affecting
Borrower or Guarantor any of their respective property which could reasonably be
expected to be a Material Adverse Event, Borrower or Guarantor, as the case may
be, will promptly give notice thereof to Administrative Agent and provide such
other information as may be reasonably available to enable Administrative Agent
and its counsel to evaluate such matter.

      8.8   BROKER'S FEES. No broker's or finder's fee or commission will be
payable with respect to this Agreement, other then those fees disclosed to
Lender prior to the Closing Date.

      8.9   SOLVENCY. As of the date of this Agreement, each of Borrower and
Guarantor is Solvent.

      8.10  DISCLOSURE. No representation or warranty of Borrower or
Guarantor contained in this Agreement, the other Loan Documents, or any other
document, certificate, or written statement furnished to Administrative Agent or
any Lender contains any untrue statement of a material fact or omitted, omits,
or will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which the same were made. There is no material fact known to Borrower or
Guarantor that is or could reasonably be expected to be a Material Adverse Event
and that has not been disclosed herein or in such other documents, certificates,
and statements furnished to Administrative Agent or any Lender for use in
connection with the transactions contemplated hereby.

      8.11  COMPLIANCE WITH LAWS; AUTHORIZATIONS; CONSENTS. Except as set
forth on SCHEDULE 8.11, neither Borrower nor Guarantor is in violation of any
Law (including all Environmental Laws and Environmental Requirements) under (a)
any Governmental Authority in all jurisdictions in which Borrower or Guarantor,
as the case may be, is now doing business, and (b) any Governmental Authority
otherwise having jurisdiction over the conduct of Borrower or Guarantor or any
of their respective businesses, or the ownership of any of its properties, which
violation would subject Borrower or Guarantor, or any of their respective
officers to criminal liability or, in each case, could reasonably be expected to
result in a Material Adverse Event and, to Borrower's and Guarantor's knowledge,
no such violation has been alleged. Each of Borrower and Guarantor will comply
with the requirements of all applicable Laws (including all Environmental Laws
and Environmental Requirements) of (i) any Governmental Authority as now in
effect and which may be imposed in the future in all jurisdictions in which
Borrower or Guarantor is now doing business or may hereafter be doing business,
and (ii) any Governmental Authority otherwise having jurisdiction over the
conduct of Borrower or Guarantor or any of their respective businesses, or the
ownership of any of its properties, except to the extent that such noncompliance
could not reasonably be expected to be a Material Adverse Event. No
Authorization, approval or other action by, and no notice to or filing with, any
domestic or foreign Governmental Authority or regulatory body or consent of any
other Person is required for (x) the grant by each of Borrower and Guarantor of
the Liens granted hereby or for the execution, delivery, or performance of this
Agreement or the other Loan Documents by Borrower and Guarantor, respectively;
(y) the perfection of the Liens granted hereby and pursuant to any other Loan
Documents (except for filing UCC financing statements with the appropriate
jurisdiction, any filings with the U.S. Patent and Trademark Office or the U.S.
Copyright Office, and recording of Mortgages, if any); or (z) the exercise by
Administrative Agent or any Lender of its Rights and remedies hereunder (except
as may have been taken by or at the direction of Borrower, Guarantor or
Administrative Agent).

      8.12  GOVERNMENTAL REGULATION. Neither Borrower nor Guarantor is
subject to regulation under the Public Utility Holding Borrower Act of 1935, the
Federal Power Act or the Investment Borrower Act of 1940, or to any other Law
limiting its ability to incur Debt.

      8.13  ACCESS TO ACCOUNTANTS AND MANAGEMENT. Each of Borrower and
Guarantor authorizes Administrative Agent and Lenders to discuss the financial
condition and Financial Statements of

                                                        Senior Secured Term Loan

                                       24



Borrower and Guarantor with AWA's Accountants upon reasonable notice to the
Borrower (and if no Default has occurred and is continuing, in the Borrower's
presence, either in person, or if Administrative Agent or Lenders elect, by
telephone), authorizes the AWA's Accountants to respond to all of Administrative
Agent's and Lenders' inquiries. Administrative Agent and each Lender may confer
with Borrower's management directly regarding Borrower's business, operations,
and financial condition.

      8.14  INSPECTION. Subject to SECTION 13.16 AND PURSUANT TO SECTION9.14,
each of Borrower and Guarantor shall permit Administrative Agent, any Lender,
and any authorized Representatives designated by Administrative Agent or any
Lender to visit and inspect any of the properties of Borrower or Guarantor,
including its financial and accounting records and insurance coverage, and, in
conjunction with such inspection, to make copies and take extracts therefrom,
and to discuss their affairs, finances, business and insurance coverage with its
officers and the AWA's Accountants, at such reasonable times during normal
business hours and as often as may be reasonably requested but no more than six
times per year; provided, however, that upon the occurrence and during the
continuance of a Default, the number of visits and inspections per year shall
not be limited. Such inspections may include, upon reasonable prior notice,
inspection and investigation of the Mortgaged Property and other Collateral and
each of their compliance with Environmental Laws and Environmental Requirements,
and may include subsurface environmental site investigations, provided such are
conducted in material accordance with the requirements of the applicable
Governmental Authority, as set forth in Section 9.14, provided that neither any
Lender nor Administrative Agent shall be obligated or required to make such
inspections or investigations. Lender and/or Administrative Agent shall repair
any material damage caused by any such inspection. Each Lender may accompany
Administrative Agent on any such visit or inspection. All actual out-of-pocket
expenses of Administrative Agent in connection with such visits and inspections
shall be paid by Borrower or Guarantor.

      8.15  BORROWER'S RECEIPT OF PAYMENTS. If Borrower, or any of its
Affiliates, employees, agents, or any other Persons acting for or in concert
with Borrower, shall receive any monies, checks, notes, drafts, or any other
payments relating to and/or proceeds of any Collateral, Borrower or such Person
shall hold such instrument or funds in trust for Administrative Agent, and,
immediately upon receipt thereof, shall remit the same or cause the same to be
remitted, in kind, to Administrative Agent.

      8.16  REPORTS. Each of Borrower and Guarantor has timely filed or
caused to be timely filed all cost reports and other reports of every kind
whatsoever required by Law or by written or oral contracts or otherwise to have
been filed or made with respect to the Facilities, except for such reports of
which the failure to file individually or in the aggregate, could not reasonably
be expected to be a Material Adverse Event. There are no claims, actions, or
appeals pending (and neither Borrower nor Guarantor has filed any claims or
reports which should result in any such claims, actions, or appeals) before any
commission, board, or agency, or any disallowance by any commission, board, or
agency in connection with any audit of such cost reports, which, individually or
in the aggregate, could reasonably be expected to be a Material Adverse Event.
As of the Closing Date, and thereafter, no validation review or program
integrity review related to Borrower or Guarantor, or the consummation of the
transactions contemplated herein, or related to the Facilities or the
Collateral, and to the knowledge of each of Borrower and Guarantor, no such
reviews are scheduled, pending, or threatened against or affecting any of the
providers, or any of the Facilities or the Collateral, or the consummation of
the transactions contemplated hereby, except those reviews that could not
reasonably be expected to result in a Material Adverse Event.

      8.17  SUPPLEMENTAL SCHEDULES. Borrower may amend any one of more of the
Schedules referred in this SECTION 8 by notice to Administrative Agent. Any
representation, warranty, or covenant contained herein which refers to any such
Schedule shall from and after the date of any such amendment refer to such
Schedule as so amended; provided, however, that in no event shall the amendment
of any such Schedule constitute a waiver by Administrative Agent or Lenders of
any Default that has occurred

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                                       25



and is continuing at the time of such amendment unless such Default has been
cured by the amendment of such Schedule and has been expressly waived by
Required Lenders.

      8.18  SINGLE PURPOSE ENTITY Borrower is a Single Purpose Entity. Each
of the assumptions contained in that certain non-consolidation opinion of even
date herewith, issued by Lewis and Roca, LLP delivered on the Closing Date,
including those assumptions relating to the past behavior of Borrower is true
and correct in all material respects. Without limiting the generality of the
foregoing, Borrower has maintained and accounted for its individual assets in
such a manner that it would be neither costly nor difficult to segregate,
ascertain or distinguish such individual assets from those of any other Person.

      8.19  LICENSES, PERMITS, ETC. Borrower has the legal right to use such
operating and property rights, licenses, permits, consents, authorizations,
exemptions and orders of tribunals or otherwise as are necessary or appropriate
to carry on its business as now being or currently proposed to be conducted and
is in compliance with the requirements of the same, except where the failure to
have such right would not result in a Material Adverse Event.

      8.20  DEPOSIT ACCOUNTS. SCHEDULE 8.20 accurately lists all Deposit
Accounts in which Borrower has any rights, titles, or interest (but such failure
of such description to be accurate or complete shall not impair the security
interest in such Collateral). With respect to the Deposit Accounts Borrower
maintains each Deposit Account with the bank listed on SCHEDULE 8.20 hereto and
has the legal right to pledge and assign to Administrative Agent the funds
deposited and to be deposited in each such Deposit Account.

      8.21  ADDITIONAL ENVIRONMENTAL REPRESENTATIONS.

            (a)   NOTICES. Except for such instances as would not
      result in a Material Adverse Event, neither Borrower nor Guarantor has
      received or has been required to give any notice, letter, citation, order,
      warning, complaint, inquiry, demand or other communication or otherwise
      learned of any Environmental Claim that would individually or in the
      aggregate reasonably be expected result in a Material Adverse Event or
      cause Environmental Damages that would result in a Material Adverse Event.
      In the event of such notice or communication, Borrower and/or Guarantor,
      as applicable, shall immediately provide a copy to the Administrative
      Agent.

            (b)   COMPLIANCE AND RELEASES. Except as in compliance with
      Environmental Law and Environmental Requirements and any non-compliance
      that would not result in a Material Adverse Event, the Mortgaged Property
      has not been used at any time to generate, manufacture, refine, transport,
      treat, store, handle, dispose of, transfer, produce, process or in any
      manner deal with Hazardous Substances, and no Hazardous Substances are now
      located on the Mortgaged Property or have been Released nor has there been
      a threatened Release to, from, under, at or onto the Mortgaged Property or
      other Collateral, nor has any Hazardous Substance been deposited,
      discharged, placed or disposed of at, on, under, onto, or near any of such
      properties.

            (c)   ENVIRONMENTAL REPORTS. No environmental investigation or
      other similar analysis of environmental matters has been conducted in
      relation to the Mortgaged Property or other Collateral that has not been
      delivered or otherwise made available to Administrative Agent, other than
      prior environmental reports relating to the Mortgaged Property; all such
      reports have been delivered.

            (d)   UNDERGROUND STORAGE TANKS. There are no, and except as
      disclosed by Borrower or Guarantor, have been, no aboveground or
      underground storage tanks at the Mortgaged Property.

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                                       26



            (e)   CONDITIONS. No conditions currently exist or are reasonably
      foreseeable at the Mortgaged Property or other Collateral that would
      subject the Borrower or Guarantor, or Administrative Agent or Lender to
      any Environmental Claim or Environmental Damages that could result in a
      Material Adverse Event. In the event of notice of such conditions,
      Borrower and/or Guarantor, as applicable, shall immediately provide a copy
      to the Administrative Agent.

SECTION 9 REPORTING AND OTHER AFFIRMATIVE COVENANTS.

      Each of Borrower and Guarantor covenants and agrees that, until
indefeasible payment in full, in cash, of the Obligation, each of Borrower and
Guarantor shall perform and Guarantor shall cause each of its Subsidiaries to
perform, all covenants in this SECTION 9.

      9.1   FINANCIAL STATEMENTS AND OTHER REPORTS. Each of Borrower and
Guarantor will deliver to Administrative Agent the Financial Statements and
other reports as required in this Agreement.

      9.2   ENDORSEMENT; INSURANCE CLAIMS. Each of Borrower and Guarantor
hereby constitutes and appoints Administrative Agent and all Persons designated
by Administrative Agent for that purpose as Borrower's and Guarantor's true and
lawful attorney-in-fact, with power in the place and stead of Borrower or
Guarantor, as the case may be, and in the name of Borrower or Guarantor, as the
case may be, (a) upon the occurrence and during the continuance of a Default, to
endorse Borrower's or Guarantor's name to any of the items of payment or
proceeds described in SECTION 8.15 and all proceeds of Collateral that come into
Administrative Agent's possession or under Administrative Agent's control, and
(b) during the continuance of a Default, to obtain, adjust, and settle insurance
claims, which are required to be paid to Administrative Agent or Lenders. Each
of Borrower and Guarantor hereby ratifies and approves all acts of
Administrative Agent or Lenders made or taken in accordance with this SECTION
9.2. Both the appointment of Administrative Agent as Borrower's and Guarantor's
attorney and Administrative Agent's Rights and powers hereunder are coupled with
an interest and are irrevocable.

      9.3   MAINTENANCE OF PROPERTIES. Each of Borrower and Guarantor will
maintain or cause to be maintained in good repair, working order, and condition
the Mortgaged Properties and other Collateral and will make or cause to be made
all appropriate repairs, renewals, and replacements with respect thereto.

      9.4   FURTHER ASSURANCES. Each of Borrower and Guarantor, from time to
time, shall execute such financing or continuation statements, documents,
security agreements, reports, and other documents or deliver to Administrative
Agent such instruments, certificates of title, mortgages, deeds of trust, or
other documents as Administrative Agent at any time may reasonably request to
evidence, perfect or otherwise implement the security for repayment of the
Obligation provided for in the Loan Documents.

      9.5   MORTGAGES; TITLE REPORTS.

            (a)   Title Reports. Within 60 days following the Closing
      Date, Borrower shall deliver or cause to be delivered to Administrative
      Agent copies of such title reports or title commitments so that
      Administrative Agent can determine that the Mortgages shall create first
      priority mortgage liens on the respective Mortgaged Property, free and
      clear of all mortgages, deeds of trust, and other Liens arising from Debt.

            (b)   Mortgages. Borrower shall, within 60 days after the
      Closing Date, deliver to Administrative Agent fully executed Mortgages, in
      form and substance satisfactory to Administrative Agent.

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            (c)   Other Real Property. If Borrower intends to acquire
      any real property after the Closing Date, Borrower shall comply with all
      provisions of this Agreement. Borrower shall grant to Administrative Agent
      a first priority mortgage or deed of trust lien upon any real property
      acquired by Borrower after the Closing Date, and obtain such lender's
      title insurance, ALTA surveys, environmental reports, structural and
      engineering inspection reports and other documents in form and substance
      reasonably satisfactory to Administrative Agent.

      9.6   USE OF PROCEEDS AND MARGIN SECURITY. Borrower shall use the Loan
Proceeds for proper business purposes consistent with all applicable Laws. No
portion of the Loan Proceeds shall be used for the purpose of purchasing or
carrying margin stock within the meaning of Regulation U, or in any manner that
might cause the Loan Proceeds or the application of such proceeds to violate
Regulations T, U, or X, or any other regulation of the Board of Governors of the
Federal Reserve System or to violate the Securities Act.

      9.7   TERMINATION/DEFAULT OF CONTRACTS. Each of Borrower and Guarantor
agrees to notify Administrative Agent of any (a) default or event of default
under, (b) termination of, (c) modification or amendment of, or (d) failure of
any party to renew, any Material Contract as soon as reasonably possible (other
than with respect to any notice of default, termination, or failure to renew
that originates with Borrower or Guarantor, which notice shall be sent
concurrently to Administrative Agent). Notwithstanding anything in this SECTION
9.7 to the contrary, no provision in this SECTION 9.7 shall modify, reduce, or
otherwise affect Administrative Agent's or any Lender's Rights hereunder or
under any other Loan Document.

      9.8   NOTICE OF DEFAULT AND OTHER MATTERS. Promptly after any of the
following, Borrower shall give notice to Lender of:

            (a)   any Default;

            (b)   any change in the business, assets, liabilities,
      financial condition, results of operations, or business prospects of
      Borrower or Guarantor, which has had or could reasonably, individually, or
      in the aggregate, be expected to result in a Material Adverse Event; and

            (c)   any material amendment of the articles of
      incorporation or by-laws of Borrower or Guarantor or any of Guarantor's
      Subsidiaries which could reasonably be expected to result in a Material
      Adverse Event.

      9.9   PAYMENT OF THE OBLIGATION. Borrower shall pay the Obligation in
accordance with the terms and provisions of the Loan Documents.

      9.10  COMPLIANCE WITH LAWS, AND CERTAIN ENVIRONMENTAL COVENANTS.

            (a)   COMPLIANCE. Each of Borrower and Guarantor shall
      comply in all material respects and require (i) all tenants, under any
      leases or occupancy agreements affecting any portion of any Mortgaged
      Property and (ii) all other Persons on or occupying such property, to
      comply in all material respects with the requirements of all applicable
      Laws, including Environmental Laws and Environmental Requirements
      applicable to the Mortgaged Property and other Collateral. Each of
      Borrower and Guarantor shall maintain and keep in force all permits,
      licenses or other authorizations necessary for the conduct of Borrower's
      operations except where the failure to comply would not result in a
      Material Adverse Event.

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                                       28



            (b)   HAZARDOUS SUBSTANCES. Except for such conditions as are in or
      will promptly be brought into compliance with Environmental Laws or
      Environmental Requirements, or otherwise would not reasonably be expected
      to result in a Material Adverse Event or any Environmental Claims, each of
      Borrower and Guarantor (i) shall not cause any Hazardous Substance to be
      generated, placed, held, managed, located or disposed of on, under, at or
      transported to or from any Mortgaged Property or other Collateral in
      violation of Environmental Laws or Environmental Requirements or in a
      manner that could result in Environmental Claims or Environmental Damages
      which could result in a Material Adverse Event; and (ii) shall not permit
      any such Mortgaged Property to ever be used as a dump site or storage site
      (whether permanent or temporary) for any Hazardous Substance.

      9.11  NOTICE OF CLAIMS. Each of Borrower and Guarantor, as applicable,
shall provide written notice to the Administrative Agent within 48 hours when
either receives information in connection with the Mortgaged Property or other
Collateral that could result in a Material Adverse Event arising from or related
to: (i) the non-compliance with or violation of any Environmental Law or any
Environmental Requirements or any Environmental Claims; (ii) the presence or the
Release or threatened Release of any Hazardous Substance into the environment;
(iii) the existence of any Environmental Lien; (iv) any material remedial action
taken by Borrower in response to any Environmental Claim or Environmental
Damages; or (v) the listing of any of the Mortgaged Property on any
environmental listing of any Governmental Authority to the extent that Borrower
or Guarantor obtains knowledge of such listing, whether or not such listing
would reasonably be expected to result in a Material Adverse Event.

      9.12  CORRECTIVE ACTION. In the event of the breach of any
representation, warranty or covenant in this Agreement regarding or relating to
environmental matters, or any Environmental Claim or Environmental Damages,
Borrower and Guarantor shall promptly provide all timely and appropriate
required regulatory notices, copying Administrative Agent and Lenders, and take
all appropriate steps to (i) remedy any non-compliance or violation of any
Environmental Law or Environmental Requirements; (ii) pay or cause to be paid
all costs and expenses incurred to ensure compliance with Environmental Law and
Environmental Requirements; (iii) investigate, remediate, cleanup and restore
any areas of the Mortgaged Property affected by a Release or threatened Release
of any Hazardous Substance in such manner as to obtain the maximum protection
for Borrower, Guarantor, the Administrative Agent, and the Lenders; and (iv)
discharge and eliminate any Environmental Lien, provided that such Environmental
Liens may be contested in the manner permitted for the contest of liens in the
Mortgage. Administrative Agent shall have the right, but not the obligation, to
advise any Governmental Agency of any environmental condition on or affecting
the Mortgaged Property or other Collateral to the extent required by
Environmental Law or Environmental Requirements, that constitutes or may
constitute a breach of Borrower's and Guarantor's obligations in this Agreement.
If neither Borrower nor Guarantor shall perform its obligations in this Section
within thirty (30) days after notice, Administrative Agent or Lender may elect,
in either of their sole discretion, and with no obligation to do so, to
undertake appropriate action. Any monies expended in such action, including the
costs of hiring consultants, investigation, removal, remediation, or
restoration, or the costs of curing any non-compliance, and reasonable
attorney's fees and disbursements, shall be reimbursed by Borrower and Guarantor
on demand, will constitute a portion of the Debt, will bear interest from the
date incurred until paid at the Default Rate, and will be secured by the
Collateral.

      Borrower and Guarantor agree that Borrower and Guarantor shall be
unconditionally liable for the obligations under this SECTION 9.12 and such
liability shall not be limited to the original or amortized principal amount of
the Loan. Indemnitees may enforce the obligations under this SECTION 9.12
without first having recourse to any Collateral, any other Loan Document or any
other party liable thereunder or hereunder.

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                                       29



      Borrower shall provide Administrative Agent, within thirty (30) days after
demand by Administrative Agent, with a bond, letter of credit or similar
financial assurance evidencing to Administrative Agent's satisfaction that
necessary funds are available to pay the any costs pursuant to this SECTION 9.12
and of discharging any assessments which may be established on the Mortgaged
Property as a result thereof.

      9.13  BORROWER'S REMEDIAL ACTION.

            (a)   VOLUNTARY REMEDIATION. In the event of any Release or
      threatened Release of Hazardous Substances at, on, from or to the
      Mortgaged Property or related to any other Collateral, Borrower shall
      promptly make appropriate inquiry to determine whether any Hazardous
      Substances Released at, on, from or to the Mortgaged Property are above or
      below the Arizona Department of Environmental Quality ("ADEQ") action
      levels, and, if above such levels, shall use commercially reasonable
      efforts to obtain a "no further action" letter ("NFA") or similar approval
      from the ADEQ. The application to obtain the NFA or other approval shall
      provide maximum protection for the Administrative Agent, the Lenders, and
      any other party designated by the Administrative Agent, and shall propose
      the most time effective remedy. In all events of any Release or threatened
      Release of a Hazardous Substance, Borrower and Guarantor shall take all
      appropriate actions necessary to prevent or mitigate damage to and protect
      the Mortgaged Property and other Collateral, and shall provide copies of
      all correspondence, studies, reports, or other documentation to
      Administrative Agent and the Lender. Administrative Agent and Lender shall
      have the right to review and approve any action under this Section 9.13
      (a).

            (b)   In the event Borrower or Guarantor undertakes any
      remedial action with respect to any Hazardous Substances on, in, or under
      the Mortgaged Property, Borrower or Guarantor shall conduct and complete
      such remedial action in material compliance with all applicable
      Environmental Laws, and in accordance with the policies, orders, and
      directives of all federal, state, and local Governmental Authorities
      except when, and only to the extent that, Borrower's or Guarantor's
      liability for such presence, storage, use, disposal, transportation, or
      discharge of any Hazardous Substances is being contested in good faith by
      Borrower or Guarantor, and shall, where required by this provision, obtain
      a NFA or other similar approval under the Arizona VRP. Any such remedial
      action shall be performed in a manner that places no unreasonable
      restriction or limitation on the use of the Mortgaged Property for its
      intended purpose and is approved by the Administrative Agent, such
      approval not to be unreasonably withheld.

            (c)   FAILURE TO PERFORM. If neither Borrower nor Guarantor
      shall perform the obligations in this Section within thirty (30) days
      after receipt of notice, Administrative Agent or Lender may elect, in
      either of their sole discretion, and with no obligation to do so, to
      undertake appropriate action. Any monies expended in such action,
      including the costs of hiring consultants, investigation, removal,
      remediation, or restoration, or the costs of curing any non-compliance,
      and reasonable attorney's fees and disbursements, shall be reimbursed by
      Borrower and Guarantor on demand, will constitute a portion of the Debt,
      will bear interest from the date incurred until paid at the Default Rate,
      and will be secured by the Collateral.

      Borrower and Guarantor agree that Borrower and Guarantor shall be
unconditionally liable for the obligations under this SECTION 9.13 and such
liability shall not be limited to the original or amortized principal amount of
the Loan. Indemnitees may enforce the obligations under this SECTION 9.13
without first having recourse to any Collateral, any other Loan Document or any
other party liable thereunder or hereunder.

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                                       30



      Borrower shall provide Administrative Agent, within thirty (30) days after
demand by Administrative Agent, with a bond, letter of credit or similar
financial assurance evidencing to Administrative Agent's reasonable satisfaction
that necessary funds are available to pay the any costs pursuant to this SECTION
9.13 and of discharging any Environmental Lien which may be established on the
Mortgaged Property as a result thereof.

      9.14  PERIODIC SITE ASSESSMENTS.

            (a)   Administrative Agent at any time and from time to time
      that Administrative Agent has any reason to believe that any condition or
      occurrence in violation of Environmental Law or Environmental
      Requirements, any Release or threatened Release or the basis for any
      Environmental Claim may exist with respect to the Mortgaged Property or
      other Collateral may require Borrower by written notice to contract for
      the services of environmental consultants reasonably acceptable to
      Administrative Agent (the "Site Reviewers") to perform environmental site
      assessments on the Mortgaged Property or to provide environmental
      consulting services (collectively, "Site Assessments") for the purpose of
      determining whether there exists on or at the Mortgaged Property any basis
      for any Environmental Claim or Environmental Damages.

            (b)   Administrative Agent may, but shall not be required
      to, contract directly with Site Reviewers to perform a Site Assessment (i)
      at any time after the occurrence and during the continuance of an Event of
      Default, without prior notice to Borrower or Guarantor, or (ii) if for any
      reason Borrower or Guarantor fails to contract with Site Reviewers or any
      such Site Reviewers fail to commence work within thirty (30) days of
      Administrative Agent's written notice to Borrower or Guarantor. The Site
      Assessments may be performed at any time or times during normal business
      hours, upon reasonable notice. Borrower hereby authorizes and grants to
      the Site Reviewers a license to enter upon the Mortgaged Property for such
      purposes, provided that such entry shall be performed in material
      accordance with all applicable requirements of Governmental Authorities.
      The Site Reviewers are further authorized and granted a license to perform
      both above and below the ground testing for the presence of Hazardous
      Substances on the Mortgaged Property and to perform such other invasive
      tests as may be appropriate to conduct the Site Assessments in the
      reasonable opinion of the Site Reviewers, provided such is conducted in
      accordance with the requirement of Governmental Authorities. Borrower or
      Guarantor agree to supply to the Site Reviewers such historical and
      operational information regarding the Mortgaged Property and other
      Collateral as may be reasonably requested by the Site Reviewers and will
      make available for meetings with the Site Reviewers appropriate personnel
      having knowledge of such matters.

            (c)   Borrower or Guarantor shall pay the cost of performing
      any Site Assessment and, if such costs are incurred by Administrative
      Agent or Lender, shall be payable by Borrower or Guarantor upon demand of
      Administrative Agent or Lender and shall bear interest from the date
      demanded until paid at the Default Rate. Any unpaid obligations shall be
      added to and become a part of the Loan.

      9.15  DEPOSIT AND CASH COLLATERAL ACCOUNTS. Until the Obligations are
paid and performed in full, Borrower covenants and agrees that Borrower will:

            (a)   execute all documents and take any action required by
      Administrative Agent in order for Administrative Agent to obtain "control"
      (as defined in the UCC) with respect to Collateral consisting of Deposit
      Accounts, and

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                                       31



            (b)   with respect to any Deposit Accounts, (i) maintain the
      Deposit Accounts at the bank (a "DEPOSITORY BANK") described on SCHEDULE
      8.20 or such additional depository banks as have complied with ITEM (iii)
      hereof; (ii) on or prior to the Closing Date, deliver to each depository
      bank a Control Agreement with respect to Administrative Agent's rights in
      such Deposit Account and obtain the execution of Control Agreement by each
      depository bank acknowledging that the pledge of such Deposit Account has
      been recorded in the books and records of such bank and that
      Administrative Agent shall have dominion and "control" (as defined in the
      UCC) over such Deposit Account; and (iii) notify Administrative Agent
      prior to establishing any additional Deposit Accounts and, at the request
      of Administrative Agent, obtain from such depository bank an executed
      Control Agreement reasonably acceptable to Administrative Agent and
      deliver the same to Administrative Agent.

            (c)   on the Closing Date, deposit Loan Proceeds in the
      amount of $380,000 into the Cash Collateral Account. If an Event of
      Default exists and is continuing, Administrative Agent shall have, and
      Borrower hereby grant to Administrative Agent, the Right and authority to
      transfer all funds on deposit in the Deposit Accounts to the CASH
      COLLATERAL ACCOUNT. No disbursements or withdrawals shall be permitted to
      be made by Borrower from such Cash Collateral Account. Such Cash
      Collateral Account shall be subject to a first priority perfected security
      interest in favor of Administrative Agent created by the Mortgage, and
      Borrower hereby grants a security interest to Administrative Agent, for
      the benefit of Lenders in and to, such Cash Collateral Account and all
      checks, drafts, and other items ever received by Borrower for deposit
      therein. Furthermore, if an Event of Default exists and is continuing,
      Administrative Agent shall have the right, at any time in its discretion
      without notice to Borrower, (i) to transfer to or to register in the name
      of Administrative Agent, for the benefit of Lenders, any certificates of
      deposit or deposit instruments constituting Deposit Accounts and shall
      have the right to exchange such certificates or instruments representing
      Deposit Accounts for certificates or instruments of smaller or larger
      denominations and (ii) to take and apply against the Obligations any and
      all funds then or thereafter on deposit in the Cash Collateral Account or
      otherwise constituting Deposit Accounts subject to the exclusive
      direction, domain, and control of Administrative Agent. Borrower hereby
      irrevocably constitutes and appoints Administrative Agent and any officer
      or agent thereof, with full power of substitution, as its true and lawful
      attorney-in-fact with full irrevocable power and authority in the name of
      Borrower or in its own name, to take after the occurrence and during the
      continuance of an Event of Default and from time to time thereafter, any
      and all action and to execute any and all documents and instruments which
      Administrative Agent at any time and from time to time deems necessary or
      desirable to accomplish the foregoing including, without limitation, the
      power and Right on behalf of Borrower and in its own name to transfer any
      and all funds on deposit in the Deposit Accounts to the Cash Collateral
      Account as set forth herein.

      9.16  POST-CLOSING MATTERS. Without limiting in any manner any other
provisions of this Agreement, execute and deliver, or cause to be executed and
delivered, to the Administrative Agent such agreements and other documents
described on SCHEDULE 9.16 and take or cause to be taken such actions, and
otherwise comply with such obligations, as are specified on SCHEDULE 9.16.

SECTION 10  NEGATIVE COVENANTS.

      Borrower covenants and agrees that until indefeasible payment in full, in
cash, of the Obligation, it shall not:

      10.1  DEBT. Directly or indirectly create, incur, assume, guaranty, or
otherwise become or remain directly or indirectly liable, on a fixed or
contingent basis, with respect to any Debt except: (a) the

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                                       32



Obligation; (b) intercompany Debt, incurred in the ordinary course of business;
(c) Debt existing on the Closing Date and identified on SCHEDULE 10.1(c); and,
(d) Debt incurred in connection with refinancing of those certain mortgages
existing on the date hereof that encumber any real property owned by the
Borrower on the date hereof, as set forth in SCHEDULE 10.1(d), which Debt shall
not exceed the principal balance secured by such mortgages on the Closing Date.
Borrower will not incur any Liabilities except Debt permitted herein and trade
payables and normal accruals in the ordinary course of business not yet due and
payable or with respect to which Borrower is contesting in good faith the amount
or validity thereof by appropriate proceedings and then only to the extent that
Borrower has established adequate reserves therefore under GAAP (collectively,
"PERMITTED DEBT").

      10.2  GUARANTIES. Except for endorsements of instruments or items of
payment for collection in the ordinary course of business, guaranty, endorse, or
otherwise in any way become or be responsible for any obligations of any other
Person (unless such obligation constitutes Debt permitted by SECTION 10.1),
whether directly or indirectly by agreement to purchase the Debt of any other
Person or through the purchase of goods, supplies, or services, or maintenance
of working capital or other balance sheet covenants or conditions, or by way of
stock purchase, capital contribution, advance, or loan for the purpose of paying
or discharging any Debt or obligation of such other Person or otherwise.

      10.3  TRANSFERS, LIENS, AND RELATED MATTERS.

            (a)   Transfers. Sell, assign (by operation of Law or
      otherwise), or otherwise dispose of, or grant any option with respect to
      any of the Collateral.

            (b)   Liens. Except for Permitted Liens and Liens incurred
      in connection with Debt permitted under SECTION 10.1(a) (provided that
      such Liens shall not encumber accounts or inventory unless the grantee in
      respect of such Liens have entered into a subordination agreement in form
      and substance satisfactory to Administrative Agent), directly or
      indirectly create, incur, assume, or permit to exist any Lien on or with
      respect to any of the Collateral or any proceeds, income, or profits
      therefrom.

            (c)   No Negative Pledges. Except for agreements in
      connection with Debt permitted under SECTION 10.1(a) (provided that such
      agreements shall not restrict encumbrances on accounts or inventory unless
      the parties benefiting from such agreements have entered into
      subordination agreements or other agreements in form and substance
      satisfactory to Administrative Agent), enter into or assume any agreement
      (other than the Loan Documents) prohibiting the creation or assumption of
      any Lien upon its properties or assets, whether now owned or hereafter
      acquired except if such agreement is entered into or assumed in connection
      with Capital Leases, or purchases secured by purchase money Liens, in
      either case permitted by SECTION 10.1.

      10.4  INVESTMENTS AND LOANS. Make or permit to exist investments in, loans
to, or distributions to any other Person, except: (a) Cash Equivalents held by
Borrower; (b) loans in respect of intercompany Debt permitted in SECTION 10.1;
and, (c) the investments disclosed on SCHEDULE 10.4 existing on the Closing
Date.

      10.5  RESTRICTED JUNIOR PAYMENTS. Directly or indirectly declare, order,
pay, make or set apart any sum for any Restricted Junior Payment.

      10.6  RESTRICTION ON FUNDAMENTAL CHANGES. (a) Enter into any transaction
of merger or consolidation; (b) liquidate, wind-up, or dissolve itself (or
suffer any liquidation or dissolution); (c) convey, sell, lease, sublease,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business or assets, whether now
owned or hereafter acquired;

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                                       33



or (d) acquire by purchase or otherwise all or any substantial part of the
business or assets of, or stock or other beneficial ownership of, any Person.

      10.7  TRANSACTIONS WITH AFFILIATES. Directly or indirectly, enter into
or permit to exist any transaction (including the purchase, sale, or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director, or employee of Borrower, except for transactions in the
ordinary course of business and upon fair and reasonable terms which are fully
disclosed to Administrative Agent and which are no less favorable to Borrower
than they would obtain in a comparable arm's length transaction with an
unaffiliated Person.

      10.8  CONDUCT OF BUSINESS. From and after the Closing Date, engage in
any business other than businesses of the type engaged in by Borrower on the
Closing Date.

      10.9  TAX CONSOLIDATIONS. File or consent to the filing of any
consolidated income tax return with any Person.

      10.10 SUBSIDIARIES. Establish, create, or acquire, subject to SECTION
10.4, any new Subsidiaries without the written consent of Required Lenders.

      10.11 FISCAL YEAR . Change its Fiscal Year.

      10.12 USE OF LENDERS' NAME. Borrower will not, nor will it permit its
Affiliates to, in the future, issue any press release or other public disclosure
using the name of any Lender or any of their respective Affiliates or referring
to this Agreement or the other Loan Documents without at least two Business Days
prior written notice to Lenders and without the prior written consent of Lenders
unless required to so disclose under Law and then, in any event, Borrower will
consult with Lender before any such press release or other public disclosure is
issued.

      10.13 IRS FORM 8821. Revoke IRS Form 8821 designating Administrative
Agent as Borrower's appointee to receive directly from the IRS, on an on-going
basis, certain tax information, notices, and other written communication or fail
to take actions necessary to renew such Form 8821 prior to its expiration for
all time periods prior to the Termination Date.

      10.14 SALE LEASE-BACK TRANSACTIONS. Directly or indirectly, enter into
any arrangement whereby Borrower sells or transfers all or any of its respective
assets and, within one (1) year thereafter, rents or leases such assets so sold
or transferred.

      Guarantor covenants and agrees that until indefeasible payment in full, in
cash, of the Obligation, it shall not:

      10.15 TRANSFERS, LIENS, AND RELATED MATTERS.

            (a)   TRANSFERS. Sell, assign (by operation of Law or otherwise), or
      otherwise dispose of, or grant any option with respect to any of the
      Collateral owned by Guarantor, except in connection with the sale,
      transfer or disposition, subject to the Liens and security interests in
      favor of the Administrative Agent, of substantially all of its assets not
      prohibited by Section 10.17.

            (b)   LIENS. Directly or indirectly create, incur, assume, or permit
      to exist any Lien on or with respect to any of the Collateral owned by
      Guarantor or any proceeds, income, or profits therefrom.

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                                       34



      10.16 LIQUIDATION Liquidate, wind-up, or dissolve itself (or suffer any
liquidation or dissolution).

      10.17 RESTRICTION ON FUNDAMENTAL CHANGES Become a party to any merger
or consolidation, acquire by purchase, lease or otherwise all or substantially
all of the assets of any Person, or sell, transfer, lease or otherwise dispose
of all or substantially all of the assets of Guarantor; provided, however, that
the foregoing shall not operate to prevent a merger or consolidation or
transfer, sale, purchase, disposition, acquisition or lease of all or
substantially all of the assets of Guarantor or any other Person by Guarantor if
such merger, consolidation or transfer, sale, purchase, disposition, acquisition
or lease will not result in a Material Adverse Event and no Default then exists,
and provided further that in the event of a merger or consolidation where the
Guarantor is not the survivor or continuing corporation, the surviving
corporation expressly assumes all obligations of Guarantor under this Agreement.
The term "substantially all" as used herein shall mean twenty five percent (25%)
or more of such property or assets of Guarantor or a Person, as applicable..

      10.18 TRANSACTIONS WITH AFFILIATES Directly or indirectly, enter into
or permit to exist any transaction (including the purchase, sale, or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director, or employee of Guarantor, except for transactions in the
ordinary course of business and upon fair and reasonable terms which are fully
disclosed to Administrative Agent and which are no less favorable to Guarantor,
as the case may be, than they would obtain in a comparable arm's length
transaction with an unaffiliated Person.

      10.19 CONDUCT OF BUSINESS From and after the Closing Date, cease to
engage in business of the type engaged in by Guarantor on the Closing Date.

      10.20 FISCAL YEAR; TAX DESIGNATION Change its Fiscal Year.

      10.21 USE OF LENDERS' NAME Permit its Affiliates to, in the future, issue
any press release or other public disclosure using the name of any Lender or any
of their respective Affiliates or referring to this Agreement or the other Loan
Documents without at least two Business Days prior written notice to Lenders and
without the prior written consent of Lenders unless required to so disclose
under Law and then, in any event, Guarantor will consult with Lender before any
such press release or other public disclosure is issued.

      10.22 IRS FORM 8821 Revoke IRS Form 8821 designating Administrative
Agent as Guarantor's appointee to receive directly from the IRS, on an on-going
basis, certain tax information, notices, and other written communication or fail
to take actions necessary to renew such Form 8821 prior to its expiration for
all time periods prior to the Termination Date.

SECTION 11  DEFAULT, RIGHTS, AND REMEDIES.

      11.1  DEFAULT. "DEFAULT" shall mean the occurrence or existence of any
one or more of the following (for each section a different grace or cure period
may be specified, if no grace or cure period is specified, such occurrence or
existence constitutes an immediate Default):

            (a)   Payment. Failure of Borrower or Guarantor to comply
      with SECTION 9.9 or any other failure to make payment of any of the
      Obligation when due and in the case of interest, such failure shall not be
      cured within five days of the applicable due date; or

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                                       35



            (b)   Default in Other Agreements. (i) Failure of Borrower
      to pay when due any principal or interest on any Debt (other than the
      Obligation) or (ii) breach or default of Borrower with respect to any Debt
      (other than the Obligation); or

            (c)   Breach of Certain Provisions. Failure of Borrower or
      Guarantor to perform or comply with any term or condition contained in
      SECTIONS 9.10, 9.11, 9.12, 9.13, 9.14, or 10 unless cured within 15 days;
      or

            (d)   Breach of Warranty. Any representation, warranty,
      certification, or other statement made by Borrower or Guarantor in any
      Loan Document or in any statement or certificate at any time given by such
      Person in writing pursuant to or in connection with any Loan Document is
      false in any material respect on the date made; or

            (e)   Other Defaults Under Loan Documents. Any Borrower or
      Guarantor defaults in the performance of or compliance with any term
      contained in this Agreement other than those otherwise set forth in this
      SECTION 11.1 (or defaults in the performance of or compliance with any
      term contained in the other Loan Documents) and such default is not
      remedied or waived within 30 days after notice from Administrative Agent
      to Borrower or Guarantor of such default; provided that if such default is
      not capable of being cured within such 30 day period and Borrower or
      Guarantor, as applicable, has and continues to diligently, continuously
      and in good faith pursue a cure, Borrower or Guarantor, as applicable,
      shall have an additional period of 15 days to cure such default; or

            (f)   Involuntary Bankruptcy; Appointment of Receiver, etc.
      (i) A court enters a decree or order for relief with respect to the
      Borrower or Guarantor in an involuntary case under any Debtor Relief Laws
      now or hereafter in effect, which decree or order is not stayed or other
      similar relief is not granted under any applicable Law; or (ii) the
      continuance of any of the following events for 90 days unless dismissed,
      bonded or discharged: (A) an involuntary case is commenced against the
      Borrower or Guarantor under any Debtor Relief Law now or hereafter in
      effect; or (B) a receiver, liquidator, sequestrator, trustee, custodian,
      or other fiduciary having similar powers over the Borrower or Guarantor or
      over all or a substantial part of their respective property, is appointed;
      or

            (g)   Voluntary Bankruptcy; Appointment of Receiver, etc.
      (i) The Borrower or Guarantor commences a voluntary case under any Debtor
      Relief Law now or hereafter in effect, or consents to the entry of an
      order for relief in an involuntary case or to the conversion of an
      involuntary case to a voluntary case under any such Law or consents to the
      appointment of or taking possession by a receiver, trustee, or other
      custodian for all or a substantial part of its property; or (ii) the
      Borrower or Guarantor makes any assignment for the benefit of creditors;
      or (iii) the members of the Borrower or board of directors of Guarantor
      adopts any resolution or otherwise authorizes action to approve any of the
      actions referred to in this SECTION 11.1(g); or

            (h)   Liens. Any Lien, levy, or assessment is filed or
      recorded with respect to or otherwise imposed upon all or any part of the
      Collateral or the assets of the Borrower or Guarantor by the United States
      or any department or instrumentality thereof or by any other Governmental
      Authority (other than Permitted Liens) and such Lien, levy, or assessment
      is not stayed, vacated, paid, or discharged within ten days after
      Borrower's receipt of notice thereof; or

            (i)   Judgment and Attachments. Any money judgment, writ or
      warrant of attachment, or similar process involving (i) an amount in any
      individual case in excess of $500,000 or (ii) an amount in the aggregate
      at any time in excess of $1,000,000 (in either case not

                                                        Senior Secured Term Loan

                                       36



      adequately covered by insurance as to which the insurance company has
      acknowledged coverage) is entered or filed against the Borrower or
      Guarantor or any of its assets and remains undischarged, unvacated,
      unbonded, uninsured, or unstayed for a period of 90 consecutive days; or

            (j)   Dissolution. Any order, judgment, or decree is
      entered against Borrower or Guarantor decreeing the dissolution or split
      up of Borrower or Guarantor, as the case may be, and such order remains
      undischarged or unstayed for a period in excess of ninety (90) consecutive
      days, but in any event not later than five (5) days prior to the date of
      any proposed dissolution or split up; or

            (k)   Invalidity of Loan Documents. Any of the Loan
      Documents for any reason, other than a partial or full release in
      accordance with the terms thereof, ceases to be in full force and effect
      or is declared to be null and void, or Borrower or Guarantor denies that
      it has any further liability under any Loan Documents to which it is
      party, or gives notice to such effect (in each case prior to such
      respective partial or full release); or

            (l)   Failure of Security. Administrative Agent, on behalf
      of itself and Lenders, does not have or ceases to have a valid and
      perfected security interest in the Collateral (subject only to Permitted
      Liens), in each case, for any reason other than the failure of
      Administrative Agent or any Lender to take any action within its control;
      or

            (m)   Damage, Strike, Casualty. Any damage to, or loss,
      theft, or destruction of, any Collateral not insured, or any strike,
      lockout, labor dispute, embargo, condemnation, act of God or public enemy,
      or other casualty which causes, for more than ten (10) consecutive days,
      the cessation or substantial curtailment of revenue producing activities
      at any Facility of Borrower or Guarantor, if any such event or
      circumstance could reasonably be expected to result in a Material Adverse
      Event; or

            (n)   Licenses and Permits. The loss, suspension or
      revocation of, or failure to renew, any license, permit or other
      governmental Authorization now held or hereafter acquired by the Borrower
      or Guarantor that is required for either the Borrower or Guarantor to
      conduct their business as presently conducted, which loss, suspension,
      revocation, or failure to renew could reasonably be expected to result in
      a Material Adverse Event; or

            (o)   Material Adverse Event. Any change in Guarantor's
      business operations or Guarantor's use of the Mortgaged Properties which
      change may reasonably be expected to result in a Material Adverse Event;
      or

            (p)   Termination of Lease. Termination or condemnation of
      any lease or that certain sublease between Guarantor and Borrower covering
      the Mortgaged Property.

      11.2  REMEDIES UPON DEFAULT.

            (a)   Debtor Relief. If a Default exists under SECTION
      11.1(f) or 11.1(g), the commitment to extend credit hereunder shall
      automatically terminate and the entire unpaid balance of the Obligation
      shall automatically become due and payable without any action or notice of
      any kind whatsoever.

            (b)   Other Defaults. If any Default exists, Administrative
      Agent may (and, subject to the terms of SECTION 12, shall upon the request
      of Required Lenders) or Required Lenders may,

                                                        Senior Secured Term Loan

                                       37



      do any one or more of the following: (i) if the maturity of the Obligation
      has not already been accelerated under SECTION 11.2(a), declare the entire
      unpaid balance of the Obligation, or any part thereof, immediately due and
      payable, whereupon it shall be due and payable; (ii) terminate the
      commitments of Lenders to extend credit hereunder; (iii) reduce any claim
      to judgment; (iv) to the extent permitted by Law, exercise (or request
      each Lender to, and each Lender shall be entitled to, exercise) the Rights
      of offset or banker's Lien against the interest of Borrower or Guarantor
      in and to every account and other property of Borrower which are in the
      possession of Administrative Agent or any Lender to the extent of the full
      amount of the Obligation (to the extent permitted by Law, Borrower being
      deemed directly obligated to each Lender in the full amount of the
      Obligation for such purposes); and (v) exercise any and all other legal or
      equitable Rights afforded by the Loan Documents, the Laws of the State of
      New York, or any other applicable jurisdiction as Administrative Agent or
      Required Lenders (as the case may be) shall deem appropriate, or
      otherwise, including, but not limited to, the Right to bring suit or other
      proceedings before any Governmental Authority either for specific
      performance of any covenant or condition contained in any of the Loan
      Documents or in aid of the exercise of any Right granted to Administrative
      Agent or any Lender in any of the Loan Documents.

      11.3 BORROWER WAIVERS. To the extent permitted by Law, each of the
Borrower and Guarantor hereby waives presentment and demand for payment,
protest, notice of intention to accelerate, notice of acceleration, and notice
of protest and nonpayment, and agree that their respective liability with
respect to the Obligation (or any part thereof) shall not be affected by any
renewal or extension in the time of payment of the Obligation (or any part
thereof), by any indulgence, or by any release or change in any security for the
payment of the Obligation (or any part thereof).

      11.4 PERFORMANCE BY ADMINISTRATIVE AGENT. If any covenant, duty, or
agreement of Borrower or Guarantor is not performed in accordance with the terms
of the Loan Documents, after the occurrence and during the continuance of a
Default, Administrative Agent may, at its option (but subject to the approval of
Required Lenders), perform or attempt to perform such covenant, duty, or
agreement on behalf of Borrower or Guarantor, as the case may be. In such event,
any amount expended by Administrative Agent in such performance or attempted
performance shall be payable by the Borrower to Administrative Agent on demand,
shall become part of the Obligation, and shall bear interest at the Default Rate
from the date of such expenditure by Administrative Agent until paid.
Notwithstanding the foregoing, it is expressly understood that Administrative
Agent does not assume, and shall never have, except by its express written
consent, any liability or responsibility for the performance of any covenant,
duty, or agreement of Borrower.

      11.5 DELEGATION OF DUTIES; RELIANCE. Administrative Agent may perform any
of its duties or exercise any of its Rights under the Loan Documents by or
through its Representatives. Administrative Agent and its Representatives shall
(a) be entitled to rely upon (and shall be protected in relying upon) any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telecopy, telegram, telex or teletype message, statement, order, or other
documents or conversation believed by it or them to be genuine and correct and
to have been signed or made by the proper Person and, with respect to legal
matters, upon opinion of counsel selected by Administrative Agent, (b) be
entitled to deem and treat each Lender as the owner and holder of the Obligation
owed to such Lender for all purposes until, subject to SECTION 13.12, written
notice of the assignment or transfer thereof shall have been given to and
received by Administrative Agent (and any request, authorization, consent, or
approval of any Lender shall be conclusive and binding on each subsequent
holder, assignee, or transferee of the Obligation owed to such Lender or portion
thereof until such notice is given and received), (c) not be deemed to have
notice of the occurrence of a Default unless a responsible officer of
Administrative Agent, who handles matters associated with the Loan Documents and
transactions thereunder, has received written notice from a Lender or Borrower
and stating that such notice is a "Notice of Default," and (d) be entitled to
consult

                                                        Senior Secured Term Loan

                                       38



with legal counsel (including counsel for Borrower), independent accountants,
and other experts selected by Administrative Agent and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants, or experts.

      11.6 NOT IN CONTROL. Nothing in any Loan Document shall, or shall be
deemed to (a) give Administrative Agent or any Lender the Right to exercise
control over the assets (including real property), affairs, or management of
Borrower or Guarantor, (b) preclude or interfere with compliance by Borrower or
Guarantor thereof with any Law (including Environmental Law or Environmental
Requirements), or (c) require any act or omission by Borrower or Guarantor
thereof that may be harmful to Persons or property. Any "Material Adverse Event"
or other materiality qualifier in any representation, warranty, covenant, or
other provision of any Loan Document is included for credit documentation
purposes only and shall not, and shall not be deemed to, mean that
Administrative Agent or any Lender acquiesces in any non-compliance by Borrower
or Guarantor with any Law or document, or that Administrative Agent or any
Lender does not expect the Borrower or Guarantor to promptly, diligently, and
continuously carry out all appropriate removal, remediation, restoration and
termination activities required or appropriate in accordance with all
Environmental Laws and Environmental Requirements. The Administrative Agent and
the Lenders have no fiduciary relationship with or fiduciary duty to Borrower or
Guarantor arising out of or in connection with the Loan Documents, and the
relationship between the Administrative Agent and the Lenders, on the one hand,
and Borrower or Guarantor, on the other hand, in connection with the Loan
Documents is solely that of debtor and creditor. The power of the Administrative
Agent and Lenders under the Loan Documents is limited to the Rights provided in
the Loan Documents, which Rights exist solely to assure payment and performance
of the Obligation and may be exercised in a manner calculated by the
Administrative Agent and Lenders in their respective good faith business
judgment.

      11.7 COURSE OF DEALING. The acceptance by Administrative Agent or Lenders
at any time and from time to time of partial payment on the Obligation shall not
be deemed to be a waiver of any Default then existing. No waiver by
Administrative Agent, Required Lenders, or Lenders of any Default shall be
deemed to be a waiver of any other then-existing or subsequent Default. No delay
or omission by Administrative Agent, Required Lenders, or Lenders in exercising
any Right under the Loan Documents shall impair such Right or be construed as a
waiver thereof or any acquiescence therein, nor shall any single or partial
exercise of any such Right preclude other or further exercise thereof, or the
exercise of any other Right under the Loan Documents or otherwise.

      11.8 CUMULATIVE RIGHTS. All Rights available to Administrative Agent and
Lenders under the Loan Documents are cumulative of and in addition to all other
Rights granted to Administrative Agent and Lenders at law or in equity, whether
or not the Obligation is due and payable and whether or not Administrative Agent
or Lenders have instituted any suit for collection, foreclosure, or other action
in connection with the Loan Documents.

      11.9 APPLICATION OF PROCEEDS. Any and all proceeds ever received by
Administrative Agent or Lenders from the exercise of any Rights pertaining to
the Obligation shall be applied to the Obligation in the order and manner set
forth in SECTION 3.11.

      11.10 CERTAIN PROCEEDINGS. Each of Borrower and Guarantor agrees that it
will promptly execute and deliver, or cause the execution and delivery of, all
applications, certificates, instruments, registration statements, and all other
documents and papers Administrative Agent or Lenders may reasonably request in
connection with the obtaining of any consent, approval, registration,
qualification, permit, license, or Authorization of any Governmental Authority
or other Person necessary or appropriate for the effective exercise of any
Rights under the Loan Documents. Because each of the Borrower and Guarantor
agrees that Administrative Agent's and Lenders' remedies at Law for failure of
the Borrower

                                                        Senior Secured Term Loan

                                       39



or Guarantor to comply with the provisions of this Section would be inadequate
and that such failure would not be adequately compensable in damages, each of
the Borrower and Guarantor agrees that the covenants of this Section may be
specifically enforced.

      11.11 EXPENDITURES BY LENDERS. Borrower shall promptly pay within fifteen
(15) Business Days after request therefore (a) all reasonable out-of-pocket
costs, fees, and expenses paid or incurred by Administrative Agent and Highland
Capital Management, L.P., incident to any Loan Document (including, but not
limited to, the reasonable fees and expenses of counsel to Administrative Agent
and Highland Capital Management, L.P. in connection with the negotiation,
preparation, delivery, execution, coordination, and administration of the Loan
Documents and any related amendment, waiver, or consent) and (b) all reasonable
out-of-pocket costs and expenses of Lenders and Administrative Agent incurred by
Administrative Agent or any Lender in connection with the enforcement of the
obligations of Borrower and Guarantor arising under the Loan Documents
(including, without limitation, costs and expenses incurred in connection with
any workout or bankruptcy) or the exercise of any Rights arising under the Loan
Documents (including, but not limited to, reasonable attorneys' fees including
allocated cost of internal counsel, court costs, and other costs of collection),
all of which shall be a part of the Obligation and shall bear interest at the
Default Rate from the date due until the date repaid.

      11.12 INDEMNIFICATION. EACH OF BORROWER AND GUARANTOR AGREES TO INDEMNIFY
DEFEND, RELEASE, SAVE AND HOLD HARMLESS ADMINISTRATIVE AGENT, AND EACH LENDER,
AND EACH OF THEIR RESPECTIVE AFFILIATES AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS, AND ADVISORS (EACH, AN "INDEMNIFIED
PARTY") FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES
(INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL CLAIMS OR ENVIRONMENTAL
DAMAGES), COSTS, AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEYS' FEES) THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY
INDEMNIFIED PARTY, IN EACH CASE ARISING OUT OF OR IN CONNECTION WITH OR BY
REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY INVESTIGATION,
LITIGATION, OR PROCEEDING OR PREPARATION OF DEFENSE IN CONNECTION THEREWITH) THE
LOAN DOCUMENTS, THE BREACH OF ANY WARRANTY, REPRESENTATION, OR COVENANT
CONTAINED IN THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR
THE ACTUAL OR PROPOSED USE OF THE LOAN PROCEEDS (INCLUDING ANY OF THE FOREGOING
ARISING FROM THE NEGLIGENCE OF THE INDEMNIFIED PARTY), EXCEPT TO THE EXTENT SUCH
CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE IS FOUND IN A FINAL,
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
FROM SUCH INDEMNIFIED PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE
CASE OF AN INVESTIGATION, LITIGATION, OR OTHER PROCEEDING TO WHICH THE INDEMNITY
IN THIS SECTION 11.12 APPLIES, SUCH INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT
SUCH INVESTIGATION, LITIGATION, OR PROCEEDING IS BROUGHT BY BORROWER, GUARANTOR,
THEIR RESPECTIVE DIRECTORS, SHAREHOLDERS, OR CREDITORS OR AN INDEMNIFIED PARTY
OR ANY OTHER PERSON OR ANY INDEMNIFIED PARTY IS OTHERWISE A PARTY THERETO AND
WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED. EACH OF
BORROWER AND GUARANTOR RELEASES AND AGREES NOT TO ASSERT ANY CLAIM AGAINST ANY
INDEMNIFIED PARTY ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT,
CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING OUT OF OR OTHERWISE RELATING TO THE
LOAN DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR
PROPOSED USE OF THE LOAN PROCEEDS. WITHOUT PREJUDICE TO THE SURVIVAL OF ANY
OTHER AGREEMENT OF THE BORROWER OR GUARANTOR HEREUNDER, THE AGREEMENTS AND
OBLIGATIONS OF THE BORROWER AND GUARANTOR CONTAINED IN THIS SECTION 11.12 SHALL
SURVIVE THE PAYMENT IN FULL OF THE OBLIGATIONS AND ALL OTHER AMOUNTS PAYABLE
UNDER THE LOAN DOCUMENTS.

                                                        Senior Secured Term Loan

                                       40



      THIS INDEMNITY OBLIGATION SHALL INCLUDE, WITHOUT LIMITATION, (I) ANY
CLAIMS RESULTING FROM THE NEGLIGENCE OR ALLEGED NEGLIGENCE OF ANY INDEMNITEE,
(II) STATUTORY AND COMMON LAW NEGLIGENCE AND STRICT LIABILITY CLAIMS AS WELL AS
NEGLIGENCE, STRICT LIABILITY AND ALL OTHER CLAIMS ARISING UNDER ENVIRONMENTAL
LAWS, INCLUDING CERCLA OR OTHER ANALOGOUS FEDERAL OR STATE STATUTES, AND (III)
ANY LOSS OR DAMAGE ARISING FROM DIMINUTION IN THE VALUE OF THE MORTGAGED
PROPERTY OR OTHER COLLATERAL RESULTING FROM ANY ENVIRONMENTAL CLAIM OR
ENVIRONMENTAL DAMAGES.

      (a)   To the extent the Indemnified Parties are entitled to the
indemnity pursuant to this SECTION 11.12, this Indemnity obligation shall
include, but shall not be limited to:

                  (i)   the burden of defending all claims, suits,
            and administrative proceedings (with counsel reasonably approved by
            Indemnitees), even if such claims, suits, or proceedings are
            groundless, false, fraudulent, or frivolous, and of conducting all
            negotiations of any description with respect thereto;

                  (ii)  paying and discharging, when and as the
            same shall become due, any and all judgments, penalties, or other
            sums due against any Indemnitee;

                  (iii) all costs of investigation, removal,
            remediation, and disposal of all Hazardous Substances, (whether or
            not such Hazardous Substance may be legally allowed to remain upon,
            about or beneath the Mortgaged Property or other Collateral if
            removal or remediation is prudent; provided, however, that any
            removal or remediation shall be conducted in such a manner as to
            place no restriction on the future use of the Mortgaged Property, to
            place no deed restriction upon the Mortgaged Property and to require
            no post-response action care or monitoring);

                  (iv)  all reasonable costs of determining
            whether the Mortgaged Property or other Collateral is in compliance,
            and causing the Mortgaged Property or other Collateral to be in
            compliance, with all applicable Environmental Laws as permitted by
            Section 9.14;

                  (v)   all reasonable costs associated with
            claims for damages to persons, property or natural resources; and

                  (vi)  Indemnitees' reasonable attorneys' fees and
            consultants' fees and any court costs.

            Any Indemnitee, at its expense, may employ additional counsel of its
      choice to associate with counsel approved by Indemnitees and employed by
      Borrower or Guarantor.

            Borrower, Guarantor, and their successors and assigns hereby
      waive, release and agree not to make any claim or bring any action under
      any Environmental Law now existing or hereafter enacted against any
      Indemnitee with respect to the Mortgaged Property or other Collateral, or
      any matter that arises or might arise under this Agreement except to the
      extent such arises as a result of the negligent or intentional act or
      omissions of Indemnitees. It is expressly understood and agreed that to
      the extent that any Indemnitee is strictly liable under any Environmental
      Law with respect to any Environmental Claim or any matter that arises or
      might arise under this

                                                        Senior Secured Term Loan

                                       41



      Agreement, Borrower and Guarantor's obligations to Indemnitees under this
      Agreement shall likewise be without regard to fault on the part of
      Borrower or Guarantor with respect to the violation or condition which
      results in liability to any Indemnitee.

            (b)   If the undertaking in the preceding paragraph, or in
      any portion thereof, is at any time determined to be unenforceable because
      it violates any law or public policy, Borrower or Guarantor will
      contribute the maximum portion that either is permitted to pay and satisfy
      under applicable law to the payment and satisfaction of all obligations.

            (c)   Notwithstanding the foregoing, the obligations and
      liabilities of Borrower and/or Guarantor under this Agreement shall not
      include (a) any Environmental Claim arising or resulting from the activity
      of an Indemnitee (without contribution by Borrower and/or Guarantor or any
      affiliate, officer, director, employee, contractor or agent of Borrower
      and/or Guarantor) after possession of and full title to the Mortgaged
      Property has been accepted by the Indemnitee, or (b) any Environmental
      Claim occurring or arising with respect to any Hazardous Substance first
      placed on or Released to the Mortgaged Property after possession of and
      full title to the Mortgaged Property has been accepted by an Indemnitee.
      The burden of proof with regard to establishing the date upon which any
      event or condition occurred or upon which a Hazardous Substance was
      placed, disposed or Released on, to or from the Mortgaged Property, or the
      cause of such event or condition shall be upon Borrower and/or Guarantor.

SECTION 12  AGREEMENT AMONG LENDERS.

      12.1  ADMINISTRATIVE AGENT.

            (a)   Appointment of Administrative Agent. Each Lender hereby
      appoints Heritage Bank, SSB (and Heritage Bank, SSB accepts such
      appointment) as its nominee and agent, in its name and on its behalf: (i)
      to act as nominee for and on behalf of such Lender in and under all Loan
      Documents; (ii) to arrange the means whereby the funds of Lenders are to
      be made available to Borrower under the Loan Documents; (iii) to take such
      action as may be requested by any Lender under the Loan Documents (when
      such Lender is entitled to make such request under the Loan Documents and
      after such requesting Lender has obtained the concurrence of such other
      Lenders as may be required under the Loan Documents); (iv) to receive all
      documents and items to be furnished to Lenders under the Loan Documents;
      (v) to timely distribute, and Administrative Agent agrees to so
      distribute, to each Lender all material information, requests, documents,
      and items received from Borrower and Guarantor under the Loan Documents;
      (vi) to promptly distribute to each Lender its ratable part of each
      payment or prepayment (whether voluntary, as proceeds of collateral upon
      or after foreclosure, as proceeds of insurance thereon, or otherwise) in
      accordance with the terms of the Loan Documents; and (vii) to deliver to
      the appropriate Persons requests, demands, approvals, and consents
      received from Lenders; provided, however, Administrative Agent shall not
      be required to take any action which exposes Administrative Agent to
      personal liability or which is contrary to the Loan Documents or
      applicable Law.

            (b)   Resignation or Removal of Administrative Agent. Successor
      Administrative Agent. Administrative Agent may resign at any time with or
      without cause as Administrative Agent under the Loan Documents by giving
      written notice thereof to Lenders and may be removed as Administrative
      Agent under the Loan Documents at any time with cause by Required Lenders.
      Should the initial or any successor Administrative Agent ever cease to be
      a party hereto or should the initial or any successor Administrative Agent
      ever resign or be removed as Administrative Agent, then Required Lenders
      shall elect the successor Administrative Agent from among the Lenders
      (other than the resigning Administrative Agent). If no successor

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                                       42



      Administrative Agent shall have been so appointed by Required Lenders,
      within 30 days after the retiring Administrative Agent's giving of notice
      of resignation or Required Lenders' removal of the retiring Administrative
      Agent, then the retiring Administrative Agent may, on behalf of Lenders,
      appoint a successor Administrative Agent. Upon the acceptance of any
      appointment as Administrative Agent under the Loan Documents by a
      successor Administrative Agent, such successor Administrative Agent shall
      thereupon succeed to and become vested with all the Rights of the retiring
      Administrative Agent, and the retiring Administrative Agent shall be
      discharged from its duties and obligations of Administrative Agent under
      the Loan Documents, and each Lender shall execute such documents as any
      Lender may reasonably request to reflect such change in and under the Loan
      Documents. After any retiring Administrative Agent's resignation or
      removal as Administrative Agent under the Loan Documents, the provisions
      of this SECTION 12 shall inure to its benefit as to any actions taken or
      omitted to be taken by it while it was Administrative Agent under the Loan
      Documents.

            (c)   Administrative Agent as a Lender. Non-Fiduciary.
      Administrative Agent if also a Lender, in such capacity as a Lender, shall
      have the same Rights under the Loan Documents as any other Lender and may
      exercise the same as though it were not acting as Administrative Agent;
      the term "Lender" shall, unless the context otherwise indicates, include
      Administrative Agent; and any resignation, or removal of Administrative
      Agent hereunder shall not impair or otherwise affect any Rights which it
      has or may have in its capacity as an individual Lender. Each Lender, the
      Borrower and Guarantor agree that Administrative Agent is not a fiduciary
      for Lenders, Borrower, or Guarantor but simply is acting in the capacity
      described herein to alleviate administrative burdens for Borrower,
      Guarantor and Lenders, that Administrative Agent has no duties or
      responsibilities to Lenders, Borrower or Guarantor except those expressly
      set forth herein, and that Administrative Agent in its capacity as a
      Lender has all Rights of any other Lender.

            (d)   Other Activities of Administrative Agent. Administrative Agent
      and its Affiliates may now or hereafter be engaged in one or more loan,
      letter of credit, leasing, or other financing transactions with Borrower
      or Guarantor, act as trustee or depositary for Borrower or Guarantor, or
      otherwise be engaged in other transactions with Borrower or Guarantor
      (collectively, the "OTHER ACTIVITIES") not the subject of the Loan
      Documents. Without limiting the Rights of Lenders specifically set forth
      in the Loan Documents, Administrative Agent and its Affiliates shall not
      be responsible to account to Lenders for such other activities, and no
      Lender shall have any interest in any other activities, any present or
      future guaranties by or for the account of Borrower or Guarantor which are
      not contemplated or included in the Loan Documents, any present or future
      offset exercised by Administrative Agent and its Affiliates in respect of
      such other activities, any present or future property taken as security
      for any such other activities, or any property now or hereafter in the
      possession or control of Administrative Agent or its Affiliates which may
      be or become security for the obligations of Borrower or Guarantor arising
      under the Loan Documents by reason of the general description of
      indebtedness secured or of property contained in any other agreements,
      documents, or instruments related to any such other activities; provided
      that, if any payments in respect of such guaranties or such property or
      the proceeds thereof shall be applied to reduction of the Obligation, then
      each Lender shall be entitled to share in such application ratably.

      12.2  EXPENSES. Upon demand by Administrative Agent, each Lender shall
pay its ratable portion (determined as of the date reimbursement is sought
hereunder) of any reasonable expenses (including, without limitation, court
costs, reasonable attorneys' fees, and other costs of collection) incurred by
Administrative Agent in connection with any of the Loan Documents if and to the
extent such Administrative Agent does not receive reimbursement therefore from
other sources within 60 days after

                                                        Senior Secured Term Loan

                                       43



incurred; provided that, each Lender shall be entitled to receive its ratable
portion of any reimbursement for such expenses, or part thereof, which
Administrative Agent subsequently receives from such other sources.

      12.3  PROPORTIONATE ABSORPTION OF LOSSES. Except as otherwise provided
in the Loan Documents, nothing in the Loan Documents shall be deemed to give any
Lender any advantage over any other Lender insofar as the Obligation is
concerned, or to relieve any Lender from absorbing its ratable portion of any
losses sustained with respect to the Obligation (except to the extent such
losses result from unilateral actions or inactions of any Lender that are not
made in accordance with the terms and provisions of the Loan Documents).

      12.4  [INTENTIONALLY OMITTED].

      12.5  LIMITATION OF LIABILITY.

            (a)   General. Neither Administrative Agent nor any of its
      Representatives shall be liable for any action taken or omitted to be
      taken by it or them under the Loan Documents in good faith and reasonably
      believed by it or them to be within the discretion or power conferred upon
      it or them by the Loan Documents or be responsible for the consequences of
      any error of judgment, except for fraud, gross negligence, or willful
      misconduct; and neither Administrative Agent nor any of its
      Representatives has a fiduciary relationship with any Lender by virtue of
      the Loan Documents (provided that, nothing herein shall negate the
      obligation of Administrative Agent to account for funds received by it for
      the account of any Lender).

            (b)   Non-Discretionary Actions. Indemnification. Unless
      indemnified to its satisfaction against loss, cost, liability, and
      expense, neither Administrative Agent nor any other Agent shall be
      compelled to do any act under the Loan Documents or to take any action
      toward the execution or enforcement of the powers thereby created or to
      prosecute or defend any suit in respect of the Loan Documents. If
      Administrative Agent requests instructions from Lenders or Required
      Lenders, as the case may be, with respect to any act or action (including,
      but not limited to, any failure to act) in connection with any Loan
      Document, Administrative Agent shall be entitled (but shall not be
      required) to refrain (without incurring any liability to any Person by so
      refraining) from such act or action unless and until it has received such
      instructions. Except where action of Required Lenders or all Lenders is
      required in the Loan Documents, Administrative Agent may act hereunder in
      its own discretion without requesting instructions. In no event, however,
      shall Administrative Agent or any of its Representatives be required to
      take any action which it or they determine could incur for it or them
      criminal or onerous civil liability. Without limiting the generality of
      the foregoing, no Lender shall have any right of action against
      Administrative Agent as a result of Administrative Agent's acting or
      refraining from acting hereunder in accordance with the instructions of
      Required Lenders (or all Lenders if required in the Loan Documents).

            (c)   Independent Credit Decision. Neither Administrative
      Agent nor any other Agent shall be responsible in any manner to any Lender
      or any Participant for, and each Lender represents and warrants that it
      has not relied upon Administrative Agent or any other Agent in respect of,
      (i) the creditworthiness of Borrower or Guarantor and the risks involved
      to such Lender, (ii) the effectiveness, enforceability, genuineness,
      validity, or the due execution of any Loan Document, (iii) any
      representation, warranty, document, certificate, report, or statement made
      therein or furnished thereunder or in connection therewith, (iv) the
      existence, priority, or perfection of any Lien hereafter granted or
      purported to be granted under any Loan Document, or (v) observation of or
      compliance with any of the terms, covenants, or conditions of any Loan

                                                        Senior Secured Term Loan

                                       44



      Document on the part of either Borrower or Guarantor. Each Lender agrees
      to indemnify Administrative Agent and its Representatives and hold them
      harmless from and against (but limited to such Lender's Pro Rata Part of)
      any and all liabilities, obligations, losses, damages, penalties, actions,
      judgments, suits, costs, reasonable expenses, and reasonable disbursements
      of any kind or nature whatsoever which may be imposed on, asserted
      against, or incurred by them in any way relating to or arising out of the
      Loan Documents or any action taken or omitted by them under the Loan
      Documents (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF
      ADMINISTRATIVE AGENT OR ITS REPRESENTATIVES), to the extent Administrative
      Agent and its Representatives are not reimbursed for such amounts by
      Borrower (provided that, Administrative Agent and its Representatives
      shall not have the Right to be indemnified hereunder for its or their own
      fraud, gross negligence, or willful misconduct).

      12.6  DEFAULT; COLLATERAL.

            (a)   Upon the occurrence and continuance of a Default,
      Lenders agree to promptly confer in order that Required Lenders or
      Lenders, as the case may be, may agree upon a course of action for the
      enforcement of the Rights of Lenders; and Administrative Agent shall be
      entitled to refrain from taking any action (without incurring any
      liability to any Person for so refraining) unless and until Administrative
      Agent shall have received instructions from Required Lenders. All Rights
      of action under the Loan Documents and all Rights to the Collateral, if
      any, hereunder may be enforced by Administrative Agent and any suit or
      proceeding instituted by Administrative Agent in furtherance of such
      enforcement shall be brought in its name as Administrative Agent without
      the necessity of joining as plaintiffs or defendants any other Agent or
      Lender, and the recovery of any judgment shall be for the benefit of
      Lenders subject to the expenses of Administrative Agent. In actions with
      respect to any property of Borrower or Guarantor, Administrative Agent is
      acting for the ratable benefit of each Lender. Any and all agreements to
      subordinate (whether made heretofore or hereafter) other indebtedness or
      obligations of Borrower or Guarantor to the Obligation shall be construed
      as being for the ratable benefit of each Lender.

            (b)   Each Lender authorizes and directs Administrative
      Agent to enter into the Collateral Documents for the benefit of the
      Lenders. Except to the extent unanimity or a supermajority is required
      hereunder, each Lender agrees that any action taken by the Required
      Lenders in accordance with the provisions of the Loan Documents, and the
      exercise by the Required Lenders of the powers set forth herein or
      therein, together with such other powers as are reasonably incidental
      thereto, shall be authorized and binding upon all of the Lenders.

            (c)   Administrative Agent is hereby authorized on behalf of
      all of the Lenders, without the necessity of any notice to or further
      consent from any Lender, from time to time to take any action with respect
      to any Collateral or Collateral Documents which may be necessary to
      perfect and maintain perfected the Liens upon the Collateral granted
      pursuant to the Collateral Documents.

            (d)   Administrative Agent shall have no obligation whatsoever to
      any Lender or to any other Person to assure that the Collateral exists or
      is owned by Borrower or Guarantor or is cared for, protected, or insured
      or has been encumbered or that the Liens granted to Administrative Agent
      herein or pursuant hereto have been properly or sufficiently or lawfully
      created, perfected, protected, or enforced, or are entitled to any
      particular priority, or to exercise at all or in any particular manner or
      under any duty of care, disclosure, or fidelity, or to continue
      exercising, any of the Rights granted or available to Administrative Agent
      in this SECTION 12.6 or in any of the Collateral Documents; it being
      understood that Administrative Agent shall have no

                                                        Senior Secured Term Loan

                                       45



      duty or liability whatsoever to any Lender, other than to act without
      gross negligence or willful misconduct.

            (e)   Lenders hereby irrevocably authorize Administrative
      Agent, at its option and in its discretion, to release any Lien granted to
      or held by Administrative Agent upon any Collateral: (i) upon payment and
      satisfaction of the Obligation; (ii) constituting property in which
      Borrower did not own an interest at the time the Lien was granted or at
      any time thereafter;(iii) upon the sale, transfer, or disposition of
      Collateral which is expressly permitted pursuant to the Loan Documents;
      (iv) as contemplated in SECTION 6.3; or (v) if approved, authorized, or
      ratified in writing by all necessary Lenders. Upon request by
      Administrative Agent at any time, Lenders will confirm in writing
      Administrative Agent's authority to release particular types or items of
      Collateral pursuant to this SECTION 12.6.

            (f)   In furtherance of the authorizations set forth in this
      SECTION 12.6, each Lender hereby irrevocably appoints Administrative Agent
      its attorney-in-fact, with full power of substitution, for and on behalf
      of and in the name of each such Lender, (i) to enter into Collateral
      Documents (including, without limitation, any appointments of substitute
      trustees under any Collateral Document), (ii) to take action with respect
      to the Collateral and Collateral Documents to perfect, maintain, and
      preserve Lender's Liens, and (iii) to execute instruments of release or to
      take other action necessary to release Liens upon any Collateral to the
      extent authorized in PARAGRAPH (e) hereof. This power of attorney shall be
      liberally, not restrictively, construed so as to give the greatest
      latitude to Administrative Agent's power, as attorney, relative to the
      Collateral matters described in this SECTION 12.6. The powers and
      authorities herein conferred on Administrative Agent may be exercised by
      Administrative Agent through any Person who, at the time of the execution
      of a particular instrument, is an officer of Administrative Agent. The
      power of attorney conferred by this SECTION 12.6(f) is granted for
      valuable consideration and is coupled with an interest and is irrevocable
      so long as the Obligation, or any part thereof, shall remain unpaid.

      12.7 LIMITATION OF LIABILITY. To the extent permitted by Law, (a)
Administrative Agent (acting in its agent capacity) shall not incur any
liability to any Lender or Participant except for acts or omissions resulting
from its own fraud, gross negligence or willful misconduct, and (b) neither
Administrative Agent nor any Lender or Participant shall incur any liability to
any other Person for any act or omission of any other Lender or Participant.

      12.8 RELATIONSHIP OF LENDERS. Nothing herein shall be construed as
creating a partnership or joint venture among Administrative Agent and Lenders.

      12.9 BENEFITS OF AGREEMENT. None of the provisions of this SECTION 12
shall inure to the benefit of or obligate Borrower or any other Person other
than Lenders and Administrative Agent; consequently, neither Borrower or any
other Person shall be entitled to rely upon, or to raise as a defense, in any
manner whatsoever, the failure of Administrative Agent or any Lender to comply
with such provisions.

      12.10 OBLIGATIONS SEVERAL. The obligations of Lenders hereunder are
several, and each Lender hereunder shall not be responsible for the obligations
of the other Lenders hereunder, nor will the failure of one Lender to perform
any of its obligations hereunder relieve the other Lenders from the performance
of their respective obligations hereunder.

SECTION 13  MISCELLANEOUS.

                                                        Senior Secured Term Loan

                                       46



      13.1 HEADINGS. The headings, captions, and arrangements used in any of the
Loan Documents are, unless specified otherwise, for convenience only and shall
not be deemed to limit, amplify, or modify the terms of the Loan Documents, nor
affect the meaning thereof.

      13.2 NONBUSINESS DAYS. In any case where any payment or action is due
under any Loan Document on a day which is not a Business Day, such payment or
action may be delayed until the next-succeeding Business Day, but interest and
fees shall continue to accrue in respect of any payment to which it is
applicable until such payment is in fact made; provided that, if, in the case of
any such payment in respect of a Eurodollar Rate Borrowing, the next-succeeding
Business Day is in the next calendar month, then such payment shall be made on
the next-preceding Business Day.

      13.3 COMMUNICATIONS. Unless otherwise specifically provided herein or any
other Loan Document, all notices shall be in writing addressed to the respective
party as set forth below and may be personally served, faxed, telecopied, or
sent by overnight courier service or United States mail and shall be deemed to
have been given: (a) if delivered in person, when delivered; (b) if delivered by
fax or telecopy, on the date of transmission if transmitted on a Business Day
before 4:00 p.m. Central time or, if not, on the next succeeding Business Day;
(c) if delivered by overnight courier, the next succeeding Business Day after
delivery to such courier properly addressed; or (d) if by U.S. Mail, four (4)
Business Days after depositing in the United States mail, with postage prepaid
and properly addressed.

               If to Borrower/Guarantor       America West Airlines, Inc.
                                              111 W.Rio Salado Parkway
                                              Tempe, Arizona 85281
                                              Attn: Paul Lambert
                                              Fax/Telecopy: 480/693-5932

               With a copy to:                America West Airlines
                                              111 W.Rio Salado Parkway
                                              Tempe,Arizona 85281
                                              Attn: James Walsh, General Counsel
                                              Fax/Telecopy:

               If to Administrative Agent:    Heritage Bank, SSB
                                              Two Galleria Tower, Suite 2220
                                              13455 Noel Road
                                              Dallas, Texas 75240
                                              Attn: Davis Deadman
                                              Fax/Telecopy No.:972/628-4147

               With a copy to:                Haynes and Boone, LLP
                                              901 Main Street
                                              Suite 3100
                                              Dallas, Texas 75202
                                              Attn: Paul H. Amiel
                                              Fax/Telecopy No.:(214)200-0555

               If to Initial Lender:          Citibank, N.A.
                                              390 Greenwich St.1st Fl
                                              New York, NY 10013
                                              Attn: Walt Larsen
                                              Fax/Telecopy No.:(213) 623-3592

                                                        Senior Secured Term Loan

                                       47



              With a copy to:                 Citibank, N.A.
                                              390 Greenwich St. 1st Fl
                                              New York, NY 10013
                                              Attn: Joe Shanahan
                                              Fax/Telecopy No.:(212)816-5705

      If to any Lender: Its address indicated on the signature page hereto, in
an Assignment and Acceptance Agreement or in a notice to Administrative Agent
and Borrower or to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this SECTION 13.3.

      13.4 FORM AND NUMBER OF DOCUMENTS. Each agreement, document, instrument,
or other writing to be furnished under any provision of the Loan Documents must
be in form and substance and in such number of counterparts as may be reasonably
satisfactory to Administrative Agent and its counsel.

      13.5 SURVIVAL. All covenants, agreements, undertakings, representations,
and warranties made in any of the Loan Documents shall survive all closings
under the Loan Documents and, except as otherwise indicated, shall not be
affected by any investigation made by any party. All Rights of, and provisions
relating to, reimbursement and indemnification of Administrative Agent or any
Lender (and any other provision of the Loan Documents that expressly provides
for such survival) shall survive termination of this Agreement, payment in full
of the Obligation, and any assignment by any Lender.

      13.6 GOVERNING LAW. THE LOAN DOCUMENTS HAVE BEEN ENTERED INTO PURSUANT TO
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND THE SUBSTANTIVE LAWS
OF THE STATE OF NEW YORK (EXCEPT TO THE EXTENT THE LAWS OF ANOTHER JURISDICTION
GOVERN THE CREATION, PERFECTION, VALIDITY, OR ENFORCEMENT OF LIENS UNDER THE
COLLATERAL DOCUMENTS OR TO THE EXTENT THAT ENVIRONMENTAL LAWS OR ENVIRONMENTAL
REQUIREMENTS OF ANOTHER JURISDICTION APPLY TO OBLIGATIONS OF BORROWER AND
GUARANTOR UNDER THAT JURISDICTION'S LAWS), AND THE APPLICABLE FEDERAL LAWS OF
THE UNITED STATES OF AMERICA SHALL GOVERN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT AND INTERPRETATION OF THE LOAN DOCUMENTS.

      13.7 INVALID PROVISIONS. In the event that any provision of this Agreement
is deemed to be invalid, illegal, or unenforceable by reason of the operation of
any Law or by reason of the interpretation placed thereon by any Governmental
Authority, the validity, legality, and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby, and the affected provision shall be modified to the minimum extent
permitted by Law so as most fully to achieve the intention of this Agreement.

      13.8 ENTIRETY. THE RIGHTS AND OBLIGATIONS OF BORROWER, GUARANTOR, LENDERS,
AND ADMINISTRATIVE AGENT SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS,
DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN SUCH PARTIES
ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS AGREEMENT (AS AMENDED IN
WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY
BORROWER, GUARANTOR, ANY LENDER, AND/OR ADMINISTRATIVE AGENT (TOGETHER WITH ALL
COMMITMENT LETTERS AND FEE LETTERS AS THEY RELATE TO THE PAYMENT OF FEES AFTER
THE CLOSING DATE) REPRESENT THE FINAL AGREEMENT BETWEEN THE BORROWER, GUARANTOR,
LENDERS, AND ADMINISTRATIVE AGENT, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY SUCH PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

                                                        Senior Secured Term Loan

                                       48



      13.9 JURISDICTION; VENUE; SERVICE OF PROCESS; JURY TRIAL. EACH PARTY
HERETO, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY (A)
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE (PURSUANT TO
SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND FEDERAL COURTS
LOCATED IN THE BOROUGH OF MANHATTAN IN THE STATE OF NEW YORK, AND AGREES AND
CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING
ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS AND THE OBLIGATION BY
SERVICE OF PROCESS AS PROVIDED BY NEW YORK LAW, (B) IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION
WITH THE LOAN DOCUMENTS AND THE OBLIGATION BROUGHT IN ANY SUCH COURT, (C)
IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM, (D) IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE
MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE
PREPAID, AT ITS ADDRESS SET FORTH HEREIN, (E) IRREVOCABLY AGREES THAT ANY LEGAL
PROCEEDING AGAINST ANY PARTY HERETO ARISING OUT OF OR IN CONNECTION WITH THE
LOAN DOCUMENTS OR THE OBLIGATION SHALL BE BROUGHT IN ONE OF THE AFOREMENTIONED
COURTS, AND (F) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY. The
scope of each of the foregoing waivers is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including, without limitation, contract claims, tort
claims, breach of duty claims, and all other common law and statutory claims.
The Borrower and each other party to the Loan Documents acknowledge that this
waiver is a material inducement to the agreement of each party hereto to enter
into a business relationship, that each has already relied on this waiver in
entering into the Loan Documents, and each will continue to rely on each of such
waivers in related future dealings. The Borrower and each other party to the
Loan Documents warrant and represent that they have reviewed these waivers with
their legal counsel, and that they knowingly and voluntarily agree to each such
waiver following consultation with legal counsel. THE WAIVERS IN THIS SECTION
13.9 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
SUPPLEMENTS, AND REPLACEMENTS TO OR OF THIS OR ANY OTHER LOAN DOCUMENT. In the
event of Litigation, this Agreement may be filed as a written consent to a trial
by the court.

      13.10 AMENDMENTS, CONSENTS, CONFLICTS, AND WAIVERS.

            (a)   Except as otherwise specifically provided in this
      SECTION 13.10 or otherwise in the Loan Documents, (i) this Agreement may
      only be amended, modified, or waived by an instrument in writing executed
      jointly by Borrower and Required Lenders, and, in the case of any matter
      affecting Administrative Agent (except removal of Administrative Agent as
      provided in SECTION 12) by Administrative Agent, and may only be
      supplemented by documents delivered or to be delivered in accordance with
      the express terms hereof, and (ii) the other Loan Documents may only be
      the subject of an amendment, modification, or waiver if Borrower and
      Required Lenders, and, in the case of any matter affecting Administrative
      Agent (except as set forth above), such Administrative Agent, have
      approved same.

            (b)   Any amendment to or consent or waiver under any Loan
      Document which purports to accomplish any of the following must be
      approved by Borrower and by each Lender adversely affected thereby, and,
      in the case of any matter affecting Administrative Agent, by
      Administrative Agent: (i) postpones or delays any date fixed by the Loan
      Documents for any

                                                        Senior Secured Term Loan

                                       49



      payment of all or any part of the Obligation payable to such Lender or
      Administrative Agent; (ii) reduces the interest rate or decreases the
      amount of any payment of principal, interest, fees, or other sums payable
      to Administrative Agent or any such Lender hereunder (except such
      reductions as are contemplated by this Agreement); (iii) changes the
      definition of "REQUIRED LENDERS" or this SECTION 13.10(b) or any other
      provisions of the Loan Documents that require the unanimous consent of the
      Lenders; (iv) changes the order of application of any payment or
      prepayment set forth in SECTIONS 3.3 and 3.11 in any manner that adversely
      affects such Lender or Administrative Agent; or (v) except as otherwise
      permitted by any Loan Document (including, without limitation, SECTION
      6.3), releases all or any substantial portion of the Collateral or any
      material Borrower. Without the consent of such Lender, no Lender's
      "COMMITMENT PERCENTAGE" may be increased.

            (c)   Any conflict or ambiguity between the terms and
      provisions of this Agreement and terms and provisions in any other Loan
      Document shall be controlled by the terms and provisions herein.

            (d)   No course of dealing nor any failure or delay by
      Administrative Agent, any Lender, or any of their respective
      Representatives with respect to exercising any Right of Administrative
      Agent or any Lender hereunder shall operate as a waiver thereof. A waiver
      must be in writing and signed by Administrative Agent and requisite
      Lenders to be effective, and such waiver will be effective only in the
      specific instance and for the specific purpose for which it is given.

      13.11 MULTIPLE COUNTERPARTS. The Loan Documents may be executed in a
number of counterparts, each of which shall be deemed an original for all
purposes and all of which constitute, collectively, one agreement; but, in
making proof of any Loan Document, it shall not be necessary to produce or
account for more than one such counterpart. This Agreement shall become
effective when counterparts hereof shall have been executed and delivered to
Administrative Agent by each Lender, Administrative Agent, Borrower, and
Guarantor, or, when Administrative Agent shall have received telecopied,
telexed, or other evidence satisfactory to it that such party has executed and
is delivering to Administrative Agent a counterpart hereof.

      13.12 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS.

            (a)   The provisions of this Agreement shall be binding upon
      and inure to the benefit of the parties hereto and their respective
      successors and assigns permitted hereby, except that neither Borrower nor
      Guarantor may not, except as otherwise permitted under the Loan Documents,
      assign or otherwise transfer any of its Rights or obligations hereunder
      without the prior written consent of each Lender and no Lender may assign
      or otherwise transfer any of its rights or obligations hereunder except
      (i) to an Eligible Assignee in accordance with the provisions of SECTION
      13.12(b), (ii) by way of participation in accordance with the provisions
      of SECTION 13.12(d), or (iii) by way of pledge or assignment of a security
      interest subject to the restrictions of SECTION 13.12(f) (and any other
      attempted assignment or transfer by any party hereto shall be null and
      void). Nothing in this Agreement, expressed or implied, shall be construed
      to confer upon any Person (other than the parties hereto, their respective
      successors and assigns permitted hereby, Participants to the extent
      provided in SECTION 13.12(d) and, to the extent expressly contemplated
      hereby, the Affiliates of each of the Administrative Agent and the
      Lenders) any legal or equitable Right, remedy, or claim under or by reason
      of this Agreement.

            (b)   Any Lender may at any time assign to one or more
      Eligible Assignees all or a portion of its Rights and obligations under
      this Agreement (including all or a portion of the

                                                        Senior Secured Term Loan

                                       50



      Aggregate Senior Secured Discount Note Stated Amount owing to it);
      provided that (i) except in the case of an assignment of the entire
      remaining amount of the assigning Lender's Senior Secured Discount Note at
      the time owing to it or in the case of an assignment to a Lender or an
      Affiliate of a Lender or a Related Fund with respect to a Lender, the
      aggregate amount of the Aggregate Senior Secured Discount Note Stated
      Amount of the assigning Lender subject to each such assignment (determined
      as of the date the Assignment and Assumption with respect to such
      assignment is delivered to the Administrative Agent or, if "Trade Date" is
      specified in the Assignment and Assumption, as of the Trade Date) shall
      not be less than $1,000,000, unless each of Administrative Agent and, so
      long as no Default or Potential Default has occurred and is continuing,
      the Borrower otherwise consents (such consent not to be unreasonably
      withheld or delayed); (ii) each partial assignment shall be made as an
      assignment of a proportionate part of all the assigning Lender's Rights
      and obligations under this Agreement with respect to the Senior Secured
      Discount Notes assigned, except that this CLAUSE (II) shall not prohibit
      any Lender from assigning all or a portion of its Rights and obligations
      on a non-pro rata basis; and (iii) the parties to each assignment shall
      execute and deliver to Administrative Agent an Assignment and Assumption.
      Subject to acceptance and recording thereof by Administrative Agent
      pursuant to SECTION 13.12(c), from and after the effective date specified
      in each Assignment and Assumption, the Eligible Assignee thereunder shall
      be a party to this Agreement and, to the extent of the interest assigned
      by such Assignment and Assumption, have the rights and obligations of a
      Lender under this Agreement, and the assigning Lender thereunder shall, to
      the extent of the interest assigned by such Assignment and Assumption, be
      released from its obligations under this Agreement (and, in the case of an
      Assignment and Assumption covering all of the assigning Lender's Rights
      and obligations under this Agreement, such Lender shall cease to be a
      party hereto) but shall continue to be entitled to the benefits of
      SECTIONS 4, 11, and 13 with respect to facts and circumstances occurring
      prior to the effective date of such assignment. Any assignment or transfer
      by a Lender of rights or obligations under this Agreement that does not
      comply with this paragraph shall be treated for purposes of this Agreement
      as a sale by such Lender of a participation in such rights and obligations
      in accordance with SECTION 13.12(d).

            (c)   Administrative Agent, acting solely for this purpose
      as an agent of the Borrower, shall maintain at its office in Dallas, Texas
      a copy of each Assignment and Assumption delivered to it and a register
      for the recordation of the names and addresses of the Lenders, Aggregate
      Senior Secured Note Amount owing to, each Lender pursuant to the terms
      hereof from time to time (the "REGISTER"). The entries in the Register
      shall be conclusive as to all Lenders (absent manifest error), and the
      Borrower, Administrative Agent, and the Lenders may treat each Person
      whose name is recorded in the Register pursuant to the terms hereof as a
      Lender hereunder for all purposes of this Agreement, notwithstanding
      notice to the contrary. The Register shall be available for inspection by
      the Borrower and any Lender, at any reasonable time and from time to time
      upon reasonable prior notice.

            (d)   Any Lender may at any time, without the consent of, or
      notice to, Borrower or Administrative Agent, sell participations to any
      Person (other than a natural person or Borrower or any of Borrower's
      Affiliates or Subsidiaries) (each, a "PARTICIPANT") in all or a portion of
      such Lender's Rights and/or obligations under this Agreement (including
      all or a portion of the Aggregate Senior Secured Discount Note Stated
      Amount owing to it); provided that (i) such Lender's obligations under
      this Agreement shall remain unchanged, (ii) such Lender shall remain
      solely responsible to the other parties hereto for the performance of such
      obligations, and (iii) Borrower, Administrative Agent, and the other
      Lenders shall continue to deal solely and directly with such Lender in
      connection with such Lender's Rights and obligations under this Agreement.
      Any agreement or instrument pursuant to which a Lender sells such a
      participation shall provide that such Lender shall retain the sole right
      to enforce this Agreement and to approve any

                                                        Senior Secured Term Loan

                                       51



      amendment, modification, or waiver of any provision of this Agreement;
      provided that such agreement or instrument may provide that such Lender
      will not, without the consent of the Participant, agree to any amendment,
      modification, or waiver with respect to the following: extending the due
      date for payment of any amount in respect of principal (other than
      mandatory prepayments), interest, or fees due under the Loan Documents,
      reducing the interest rate or the amount of principal or fees applicable
      to the Obligation (except such reductions as are contemplated by the Loan
      Documents), or releasing all or any substantial portion of the Collateral
      for the Obligation under the Loan Documents (except such releases of
      Collateral as are contemplated in SECTION 6.3) that affects such
      Participant. SUBJECT TO SECTION 13.12(e), Borrower agree that each
      Participant shall be entitled to the benefits of SECTION 4 to the same
      extent as if it were a Lender and had acquired its interest by assignment
      pursuant to SECTION 13.12(b). To the extent permitted by Law, each
      Participant also shall be entitled to the benefits of SECTION 3.13 as
      though it were a Lender, provided such Participant agrees to be subject to
      SECTION 3.12 as though it were a Lender.

            (e)   A Participant shall not be entitled to receive any
      greater payment under SECTION 4 than the applicable Lender would have been
      entitled to receive with respect to the participation sold to such
      Participant, unless the sale of the participation to such Participant is
      made with Borrower's prior written consent. A Participant that is not
      incorporated under the Laws of the United States of America or a state
      thereof shall not be entitled to the benefits of SECTION 4.6 unless
      Borrower is notified of the participation sold to such Participant and
      such Participant agrees, for the benefit of Borrower, to comply with
      SECTION 4.6(d) as though it were a Lender.

            (f)   Any Lender may at any time pledge or assign a security
      interest in all or any portion of its Rights under this Agreement to
      secure obligations of such Lender, including without limitation any pledge
      or assignment to secure obligations to a Federal Reserve Bank; provided
      that no such pledge or assignment shall release such Lender from any of
      its obligations hereunder or substitute any such pledgee or assignee for
      such Lender as a party hereto.

      13.13 DECISIONS BY BORROWER. To the extent any action under the Loan
Documents requires the consent or direction of Borrower and Borrower does not
agree on the action to be taken, Administrative Agent shall (a) take the
alternative action (if any) provided under the Loan Documents for circumstances
under which no consent or direction is given by Borrower, or (b) if no such
action is provided, take no action unless otherwise directed by Required
Lenders.

      13.14 CONFIDENTIALITY. Administrative Agent and each Lender agree to
exercise its best efforts to keep confidential any non-public information
delivered pursuant to the Loan Documents and identified as such by Borrower and
not to disclose such information to Persons other than to: its respective
Affiliates, officers, directors, and employees and in each case, on a
need-to-know basis and provided that such recipient complies with the
confidentiality provisions hereof; or its potential assignees or Participants;
or Persons employed by or engaged by Administrative Agent, any Lender, or any
Lender's assignees or Participants including, without limitation, attorneys,
auditors, professional consultants, rating agencies, and portfolio management
services and in each case, on a need-to-know basis and provided that such
recipient complies with the confidentiality provisions hereof. The
confidentiality provisions contained in this subsection shall not apply to
disclosures (a) required to be made by Administrative Agent or any Lender to any
Governmental Authority or pursuant to legal process or (b) consisting of general
portfolio information that does not identify Borrower. The obligations of
Administrative Agent and Lenders under this SECTION 13.14 shall supersede and
replace the obligations of Administrative Agent and Lenders under any
confidentiality agreement in respect of this financing executed and delivered by
Administrative Agent or any Lender prior to the date hereof. In no event shall
Administrative Agent or any Lender be obligated or required to return any
materials furnished by Borrower; provided, however,

                                       52


each potential assignee or Participant shall be required to agree that if it
does not become an assignee (or Participant) it shall return all materials
furnished to it by Borrower in connection herewith.

      13.15 PUBLICATION. Borrower consents to the publication by Administrative
Agent or Lenders of a tombstone or similar advertising material relating to the
financing transactions contemplated by this Agreement; provided, however,
Administrative Agent or Lenders (as applicable) shall provide a draft of any
such tombstone or similar advertising material to Borrower for review prior to
the publication thereof. Administrative Agent and Lenders reserve the right to
provide industry trade organizations information necessary and customary for
inclusion in league table measurements.

      13.16 DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. The obligations of Borrower under the Loan Documents shall remain
in full force and effect until the payment in full of the Aggregate Senior
Secured Discount Note Stated Amount and of all interest, fees, and other amounts
of the Obligation then due and owing, except that SECTIONS 4, 11, and 13, and
any other provisions under the Loan Documents expressly intended to survive by
the terms hereof or by the terms of the applicable Loan Documents, shall survive
such termination. If at any time any payment of the principal of or interest on
any Note or any other amount payable by Borrower under any Loan Document is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy, or reorganization of Borrower or otherwise, the obligations of
Borrower under the Loan Documents with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK.
                            SIGNATURE PAGES FOLLOW.]

                                       53



IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

                                    BORROWER:

                                    FTCHP LLC,
                                    a Delaware limited liability company

                                    By: /s/ Derek J. Kerr
                                        ---------------------------------
                                        Derek J. Kerr
                                        President

                                    Address for Borrower:

                                    America West Airlines, Inc.
                                    111 W. Rio Salado Parkway
                                    Tempe, Arizona  85281

                                    Attn: Paul Lambert

                                    Telecopier: (480) 693-5932
                                    Telephone:___________________________

                                    With a copy to:

                                    America West Airlnies
                                    111 W. Rio Salado Parkway
                                    Tempe, Arizona  85281

                                    Attn: James Walsh, General Counsel

                                    Telecopier:__________________________
                                    Telephone:___________________________

                   SIGNATURE PAGE TO SENIOR SECURED TERM LOAN



                                   GUARANTOR:

                                   AMERICA WEST AIRLINES, INC.,
                                   a Delaware corporation

                                   By: /s/ Derek J. Kerr
                                       ----------------------------------
                                       Derek J. Kerr
                                       Senior Vice President and Chief
                                       Financial Officer

                                   Address for Borrower:

                                   America West Airlines, Inc.
                                   111 W. Rio Salado Parkway
                                   Tempe, Arizona 85281

                                   Attn: Paul Lambert

                                   Telecopier: (480) 693-5932
                                   Telephone:____________________________

                                   With a copy to:

                                   America West Airlnies
                                   111 W. Rio Salado Parkway
                                   Tempe, Arizona  85281

                                   Attn: James Walsh, General Counsel

                                   Telecopier:___________________________
                                   Telephone:____________________________

                   SIGNATURE PAGE TO SENIOR SECURED TERM LOAN



                              ADMINISTRATIVE AGENT:

                              HERITAGE BANK, SSB,
                              as Administrative Agent

                              By: /s/ Davis Deadman, CFA
                                  ---------------------------------------
                                  Name:  Davis Deadman, CFA
                                  Title: Chief Executive Officer

                              Address for Administrative Agent:

                              Heritage Bank, SSB
                              Two Galleria Tower, Suite 2220
                              13455 Noel Road
                              Dallas, Texas 75240

                              Attn: Davis Deadman

                              Telecopier: (972) 628-4147
                              Telephone:  (972) 628-4100

                              With a copy to:

                              Haynes and Boone, LLP
                              901 Main St., Suite 3100
                              Dallas, Texas  75202

                              Attn: Paul H. Amiel

                              Telecopier: (214) 200-0555
                              Telephone:  (214) 651-5605

                   SIGNATURE PAGE TO SENIOR SECURED TERM LOAN



                                 INITIAL LENDER:

                                 CITIBANK, N.A.,
                                 as Initial Lender

                                 By: /s/ Rosemary M. Bell
                                     ------------------------------------
                                     Name: Rosemary M. Bell
                                     Title: Director & Vice President

                                 Address for Lender:

                                 Citibank, N.A.
                                 390 Greenwich St. 1st Fl
                                 New York, NY 10013

                                 Attn:___________________________________

                                 Telecopier:_____________________________
                                 Telephone:______________________________

                   SIGNATURE PAGE TO SENIOR SECURED TERM LOAN



                                   SCHEDULE 1A

(Hangar - 43217-1 and 43217-2)

PARCEL NO. 1:

A portion of the Southwest quarter of Section 7 and the Northwest quarter of
Section 18, Township 1 North, Range 4 East of the Gila and Salt River Base and
Meridian, Maricopa County, Arizona, more fully described as follows:

COMMENCING at the South quarter corner of said Section 7;

THENCE North 89 degrees 05 minutes 45 seconds West along the Southerly line of
said Section 7, 428.83 feet to the TRUE POINT OF BEGINNING;

THENCE South 50 degrees 38 minutes 15 seconds West, 7.74 feet;

THENCE South 58 degrees 04 minutes 46 seconds West, 269.71 feet;

THENCE North 90 degrees 00 minutes 00 seconds West, 751.73 feet;

THENCE North 00 degrees 00 minutes 00 seconds East, 1040.00 feet;

THENCE North 90 degrees 00 minutes 00 seconds East, 1062.15 feet;

THENCE South 00 degrees 00 minutes 00 seconds West, 641.57 feet;

THENCE South 53 degrees 54 minutes 22 seconds West, 15.92 feet;

THENCE South 04 degrees 11 minutes 51 seconds West, 202.87 feet;

THENCE South 50 degrees 38 minutes 15 seconds West, 61.83 feet to the TRUE POINT
OF BEGINNING.

(FTC - 91518)

PARCEL NO. 2:

That portion of Lot 9, PHOENIX SKY HARBOR CENTER PHASE I, according to Book 341
of Maps, page 37, records of Maricopa County, Arizona, located in a portion of
the South half of Section 10, Township 1 North, Range 3 East of the Gila and
Salt River Base and Meridian, Maricopa County, Arizona, being more particularly
described by metes and bounds as follows:

COMMENCING at the Southeast corner of said Section 10;

THENCE a called bearing and distance of North 89 degrees 40 minutes 53 seconds
West along the South line of said Section 10, a distance of 2413.62 feet;

THENCE a called bearing and distance of North 00 degrees 14 minutes 07 seconds
West, a distance of 60.05 feet to an ADOT aluminum cap found for the Southeast
corner of said Lot 9 and the point of beginning;

THENCE North 00 degrees 12 minutes 37 seconds East along the Westerly
right-of-way line of the I-10 Freeway, a measured distance of 115.06 feet (North
00 degrees 12 minutes 37 seconds East, a distance of 114.98 feet of record) to
an ADOT aluminum cap found for the beginning of a non-tangent curve concave
Easterly;

THENCE Northerly along the arc of said curve to the right, having a central
angle of 31 degrees 44 minutes 50 seconds and a radius of 730.26 feet, whose
chord bears North 27 degrees 50 minutes 26 seconds West, a measured distance of
399.44 feet, for a measured arc distance of 404.60 feet (along the arc of said
curve to the right, having a central angle of 31 degrees 45 minutes 02 seconds,
a radius of 730.26 feet and an arc of 404.67 feet of record) to an ADOT aluminum
cap found for the beginning of a curve concave Easterly;

THENCE Northerly along the arc of said curve to the right, having a central
angle of 37 degrees 00 minutes 41 seconds and a radius of 740.76 feet, whose
chord bears North 06 degrees 32 minutes 13 Seconds East, a distance of 470.23
feet, for an arc distance of 478.51 feet to a 5/8 inch rebar with cap set for
the corner;



THENCE departing said Westerly right-of-way line along the South line of the
property leased to WYLE LABORATORIES in the document recorded in Instrument No.
94-0735726 of Official Records, North 89 degrees 44 minutes 47 seconds West, a
measured distance of 800.08 feet (North 89 degrees 44 minutes 07 seconds West, a
distance of 800.24 feet of record) to a 5/8 inch rebar with cap set for the
corner;

THENCE South 00 degrees 00 minutes 13 seconds West, a measured distance of
916.96 feet (South 00 degrees 00 minutes 02 seconds West, a distance of 916.37
feet of record) to a spike found in the South line of said Lot 9 and the
Northerly right-of-way line of Buckeye Road;

THENCE South 87 degrees 37 minutes 32 seconds East along the South line of said
Lot 9 and the North right-of-way line of Buckeye Road, a measured distance of
128.26 feet (South 87 degrees 26 minutes 29 seconds West, a distance of 128.26
feet of record) to a 1/2 inch rebar found for the corner;

THENCE South 89 degrees 57 minutes 57 seconds East along the South line of said
Lot 9 and the North right-of-way line of Buckeye Road, a measured distance of
595.06 feet (South 89 degrees 59 minutes 03 seconds East, a distance of 594.94
feet of record) to a 1/2 inch rebar found for the corner;

THENCE South 04 degrees 00 minutes 11 seconds west along the South line of said
Lot 9 and the North right-of-way line of Buckeye Road, a measured distance of
15.26 feet (South 03 degrees 40 minutes 58 seconds West, a distance of 15.26
feet of record) to an aluminum cap found for the corner;

THENCE South 89 degrees 41 minutes 28 seconds East along the South line of said
Lot 9 and the North right-of-way line of Buckeye Road, a measured distance of
210.58 feet (South 89 degrees 42 minutes 12 seconds East, a distance of 210.46.
feet of record) to the point of beginning.

ACCESS PARCEL:

That portion of Lot 9, PHOENIX SKY HARBOR CENTER PHASE I, according to Book 341
of Maps, page 37, records of Maricopa County, Arizona, located in a portion of
the South half of Section 10, Township 1 North, Range 3 East of the Gila and
Salt River Base and Meridian, Maricopa County, Arizona, being more particularly
described by metes and bounds as follows:

COMMENCING at the Southeast corner of said Section 10;

THENCE a called bearing and distance of North 89 degrees 40 minutes 53 seconds
West along the South line of said Section 10, a distance of 2413.62 feet;

THENCE a called bearing and distance of North 00 degrees 14 minutes 07 seconds
West, a distance of 60.05 feet to an ADOT aluminum cap found for the Southeast
corner of said Lot 9;

THENCE North 00 degrees 12 minutes 37 seconds East along the Westerly
right-of-way line of the I-10 Freeway, a measured distance of 115.06 feet (North
00 degrees 12 minutes 37 seconds East, a distance of 114.98 feet of record) to
an ADOT aluminum cap found for the beginning of a non-tangent curve concave
Easterly;

THENCE Northerly along the arc of said curve to the right, having a central
angle of 31 degrees 44 minutes 50 seconds and a radius of 730.26 feet, whose
chord bears North 27 degrees 50 minutes 26 seconds West, a measured distance of
399.44 feet, for a measured arc distance of 404.60 feet (along the arc of said
curve to the right, having a central angle of 31 degrees 45 minutes 02 second, a
radius of 730.26 feet and an arc of 404.67 feet of record) to an ADOT aluminum
cap found for the beginning of a curve concave Easterly;

THENCE Northerly along the arc of said curve to the right, having a central
angle of 37 degrees 00 minutes 41 seconds, a radius of 740.76 feet, whose chord
bears North 06 degrees 32 minutes



13 seconds East, a distance of 470.23 feet, for an arc distance of 478.51 feet
to a 5/8 inch rebar with cap set for the corner;

THENCE departing said Westerly right-of-way line along the South line of the
property leased to WYLE LABORATORIES in the document recorded in Instrument No.
94-0735726 of Official Records, North 89 degrees 44 minutes 47 seconds West, a
measured distance of 800.08 feet (North 89 degrees 44 minutes 07 seconds West, a
distance of 800.24 feet of record) to a 5/8 inch rebar with cap set for the
point of beginning;

THENCE North 89 degrees 44 minutes 07 seconds West, a measured distance of
586.04 feet (North 89 degrees 44 minutes 07 seconds West, a distance of 585.78
fee to a 5/8 inch rebar with cap set for the corner in the Easterly right-of-way
line of Sky Harbor Circle North, said point is the beginning of a non-tangent
curve to the right;

THENCE Northeasterly along the Easterly right-of-way line of Sky Harbor Circle
North and along the arc of said curve to the right, having a central angle of 04
degrees 00 minutes 03 seconds, a radius of 581.62 feet, whose chord bears North
10 degrees 10 minutes 51 seconds East, a distance of 40.61 feet, for an arc
distance of 40.61 feet to a 1/2 inch rebar found for the corner;

THENCE South 89 degrees 44 minutes 07 seconds East, a distance of 578.86 feet to
the point of beginning.



FTC - Option Parcel (91518)

That portion of Lot 9, PHOENIX SKY HARBOR CENTER PHASE I, according to Book 341
of Maps, Page 37, records of Maricopa County, Arizona, located in a portion of
the South half of Section 10, Township 1 North, Range 3 East of the Gila and
Salt River Base and Meridian, Maricopa County, Arizona, being more particularly
described by metes and bounds as follows:

COMMENCING at the Southeast corner of said Section 10; THENCE a called bearing
and distance of North 89 degrees 40'53" West along the South line of said
Section 10, a distance of 2413.62 feet; THENCE a called bearing and distance of
North 00 degrees 14'07" West a distance of 60.05 feet to an ADOT Aluminum Cap
found for the Southeast corner of said Lot 9; THENCE North 00 degrees 12'37"
East, along the Westerly right-of-way line of the I-10 Freeway, a measured
distance of 115.06 feet (North 00 degrees 12'37" East a distance of 114.98 feet
of record) to an ADOT Aluminum Cap found for the beginning of a non-tangent
curve concave Easterly; THENCE Northerly along the arc of said curve to the
right, having a central angle of 31 degrees 44'50" and a radius of 730.26 feet,
whose chord bears North 27 degrees 50'26" West a measured distance of 399.44
feet for a measured arc distance of 404.60 feet (along the arc of said curve to
the right, having a central angle of 31 degrees 45'02", a radius of 730.26 feet
and an arc of 404.67 feet of record) to an ADOT Aluminum Cap found for the
beginning of a curve concave Easterly; THENCE Northerly along the arc of said
curve to the right, having a central angle of 37 degrees 00'41", a radius of
740.76 feet, whose chord bears North 06 degrees 32'13" East a distance of 470.23
feet for an arc distance of 478.51 feet to a 5/8" Rebar with cap set for corner;
THENCE departing said Westerly right-of-way line, along the South line of the
property leased to Wyle Laboratories in document recorded in instrument No.
94-0735726 of Official Records, North 89 degrees 44'47" West a measured distance
of 800.08 feet (North 89 degrees 44'07") West a distance of 800.24 feet of
record) to a SET 5/8" Rebar with cap; THENCE South 00 degrees 00'13" West a
distance of 40.00 feet to a 5/8" Rebar with set for THE POINT OF BEGINNING;

THENCE South 00 degrees 00'13" West a distance of 876.96 feet to a Spike found
for corner in the Northerly right-of-way line of Buckeye Road and the South line
of said Lot 9;

THENCE North 87 degrees 19'48" West, along the South line of said Lot 9 and the
Northerly right-of-way line of Buckeye Road, a measured distance of 322.47 feet
(North 87 degrees 26'29" West a distance of 322.47 feet of record) to an
Aluminum Cap set for corner;

THENCE North 89 degrees 59'03" West, along the South line of said Lot 9 and the
Northerly right-of-way line of Buckeye Road, a measured distance of 78.06 feet
(North 89 degrees 59'03" West a distance of 78.00 feet of record) to an Aluminum
Cap set for corner;

THENCE North 00 degrees 00'57" East, along the South line of said Lot 9 and the
Northerly right-of-way line of Buckeye Road, a distance of 10.00 feet to an
Aluminum Cap set for corner;

THENCE North 89 degrees 59'03" West, along the South line of said Lot 9 and the
Northerly right-of-way line of Buckeye Road, a distance of 95.00 feet to an
Aluminum Cap set for corner;

THENCE North 45 degrees 04'49" West, along the South line of said Lot 9 and the
Northerly right-of-way line of Buckeye Road, a measured distance of 124.18 feet
(North 44 degrees 58'59" West a distance of 124.64 feet of record) to a 5/8"
Rebar with cap set for corner in the Easterly right-of-way line of Sky Harbor
Circle North and the West line of said Lot 9;

THENCE North 00 degrees 00'22" West, along the West line of said Lot 9 and the
Easterly right-of-way line of Sky Harbor Circle North, a measured distance of
199.71 feet (North 00 degrees 01'05" East a distance of 199.12 feet of record)
to a 1/2" Rebar found for corner;

THENCE North 01 degrees 22'36" West, along the West line of said Lot 9 and the
Easterly right-of-way line of Sky Harbor Circle North, a distance of 359.92 feet
to a 1/2" Rebar found for corner;



THENCE North 00 degrees 03'09" West, along the West line of said Lot 9 and the
Easterly Northerly right-of-way line of Sky Harbor Circle North, a measured
distance of 124.78 feet (North 00 degrees 01'05" East a distance of 125.19 feet
of record) to a 5/8" Rebar with cap set for corner, said point is the beginning
of a non-tangent curve to the right;

THENCE Northeasterly along the West line of said Lot 9 and along the Easterly
right-of-way line of Sky Harbor Circle North and along the arc of said curve to
the right, having a central angle of 08 degrees 09'45", a radius of 581.62 feet,
whose chord bears North 04 degrees 05'57" East a distance of 82.79 feet, for an
arc distance of 82.86 feet to a 5/8" Rebar with cap set for corner;

THENCE South 89 degrees 44'07" East a measured distance of 586.04 feet (South
89 degrees 44'07" East a distance of 585.78 feet of record) to the POINT OF
BEGINNING and countering 11.555 Acres (503,355 sq. ft.) of land, more or less.



                                   SCHEDULE 1B
                                   OTHER LIENS

None.



                                  SCHEDULE 2.1
                     LENDERS PRO RATA LOAN PROCEEDS AMOUNTS

                                 
Citibank, N.A.                      $30,790,000





                                  SCHEDULE 2.2
                PRINCIPAL AMOUNT OF SENIOR SECURED DISCOUNT NOTES

                                     
Stated Principal Amount at Maturity:
Citibank, NA.                           $35,988,000

Purchase Price:
Citibank, NA.                           $30,790,000





                                  SCHEDULE 7.1
                         CONDITIONS PRECEDENT TO CLOSING

The Agreement and related Loan Documents shall not become effective unless
Administrative Agent has received all of the following (unless otherwise
indicated, all documents shall be dated as of December __, 2004, and all terms
used with their initial letters capitalized are used herein with their meanings
as defined in the Agreement):

1.    Agreement. Agreement (together with all Schedules and Exhibits thereto)
      executed by Borrower, Guarantor, Administrative Agent, and each Lender.

2.    Senior Secured Discount Notes. Senior Secured Discount Notes issued by
      Borrower and payable to the order of Lender.

3.    Organizational Documents. Copies of the articles of incorporation,
      certificate of incorporation, or articles of organization and all
      amendments thereto of Borrower and Guarantor (each a "CREDIT PARTY" and
      collectively the "CREDIT PARTIES"), each accompanied by a certificate that
      such copy is correct and complete, (a) one dated a Current Date (as used
      herein, the term "CURRENT DATE" means any date not more than 30 days prior
      to the Closing Date), issued by the appropriate governmental authority of
      the jurisdiction of organization of each Credit Party, and (b) one dated
      the Closing Date, executed by the President, Vice President, Treasurer,
      Chief Executive Officer, Chief Financial Officer, or Secretary (each a
      "RESPONSIBLE OFFICER") of each such Credit Party, and the Secretary,
      Assistant Secretary, or other similar officer of each such Credit Party.

4.    Bylaws/Operating Agreements. A copy of the bylaws or operating agreement,
      and all amendments thereto, of each Credit Party, accompanied by a
      certificate that such copy is correct and complete, dated the Closing
      Date, and executed by a Responsible Officer, and the Secretary, Assistant
      Secretary, or other similar officer of each such entity.

5.    Good Standing and Authority. Certificates of the appropriate governmental
      authorities of such jurisdictions as Administrative Agent may designate,
      each dated a Current Date, to the effect that each Credit Party is in good
      standing with respect to the payment of franchise and similar Taxes (to
      the extent such information is available) and is duly qualified to
      transact business in such jurisdiction.

6.    Incumbency/Secretary's Certificate. Certificates of incumbency dated as of
      the Closing Date with respect to all managers, officers, or partners of
      each Credit Party who will be authorized to execute or attest to any of
      the Loan Documents on behalf of such Credit Party, executed by a
      Responsible Officer, and the Secretary, Assistant Secretary, or other
      similar officer of each such Credit Party.

7.    Resolutions. Copies of resolutions duly adopted by the Board of Directors
      or sole member, as applicable, of each Credit Party, approving this Loan
      Agreement and the other Loan Documents and authorizing the transactions
      contemplated in such Loan Documents, accompanied by a certificate of the
      Secretary or an Assistant Secretary of each such Credit Party, dated as of
      the Closing Date, certifying that such copy is a true and correct copy of
      resolutions duly adopted at a meeting of (which may be held by conference
      telephone or similar communications equipment by means of which all
      Persons participating in a meeting can hear each other if permitted by
      applicable law and, if required by such law, by such entity's bylaws or
      operating agreement), or by the unanimous written consent of (if permitted
      by applicable Law and, if required by such Law, by such entity's bylaws or
      operating agreement), the Board of Directors or sole



      member, as applicable, of each such Credit Party, and that such
      resolutions constitute all the resolutions adopted with respect to such
      transactions, have not been amended, modified, or revoked in any respect,
      and are in full force and effect as of the Closing Date.

8.    Opinion of Counsel to the Credit Parties. The opinion of counsel to each
      of the Credit Parties, addressed to Administrative Agent and Lenders, in
      form and substance acceptable to Administrative Agent. (Corporate
      Borrowing Opinion).

9.    Non Consolidation Opinion of Counsel to the Credit Parties. The non
      consolidation opinion of counsel to each of the Credit Parties, addressed
      to Administrative Agent and Lenders, in form and substance acceptable to
      Administrative Agent.

10.   Opinion of New York Counsel. The opinion of New York counsel to the Credit
      Parties addressed to Administrative Agent and Lenders, in form and
      substance acceptable to Administrative Agent.

11.   Opinion of Delaware Counsel. The opinion of Delaware counsel to the Credit
      Parties addressed to Administrative Agent and Lenders, in form and
      substance acceptable to Administrative Agent.

12.   Security and Pledge Agreements. A Pledge Agreement executed by Borrower,
      as debtor, and Guarantor, as pledgor, and delivered to Administrative
      Agent, as secured party on behalf of Lenders, granting and creating Liens
      in favor of Lenders in and to 100% of the issued and outstanding stock or
      other equity or investment securities of Borrower, and all real and
      personal property of Borrower, owned by such pledgor, together with (i)
      one or more UCC financing statements, executed and delivered by Pledgor,
      as debtor, in favor of Administrative Agent, as secured party on behalf of
      Lenders, covering all such Collateral (as such term is defined in the
      Pledge Agreement), and (ii) delivery to Administrative Agent of all Equity
      Securities (as such term is defined in the Pledge Agreement), together
      with executed blank stock powers for each Equity Security certificate
      delivered, all in form acceptable to Administrative Agent.

13.   Guaranty. Guaranty (as such term is defined in the Unconditional Guaranty
      Agreement) executed by Guarantor in favor of Lender.

14.   Deposit Account Control Agreements. An executed Deposit Account Control
      Agreement in favor of Administrative Agent.

15.   Leasehold Deed of Trust, Security Agreement and Financing Statement.
      Leasehold Deed of Trust, Security Agreement and Financing Statement
      executed by Borrower, as Grantor, for the benefit of Administrative Agent
      on behalf of the Lenders, together with (i) one or more UCC financing
      statements, executed and delivered by Grantor, as debtor, in favor of
      Administrative Agent, as secured party on behalf of Lenders, covering all
      Collateral (as such term is defined in the Leasehold Deed of Trust,
      Security Agreement and Financing Statement).

16.   Absolute Assignment of Leases and Rents. Absolute Assignment of Leases and
      Rents executed by Borrower, as Assignor, for the benefit of Administrative
      Agent on behalf of the Lenders.

17.   Survey. Certified survey on the Mortgaged Property of Borrower.

18.   Mortgagee Policy of Title Insurance. Mortgagee policy of title insurance
      insuring each parcel of Mortgaged Property for the benefit of
      Administrative Agent on behalf of the Lenders, in form and substance
      reasonably satisfactory to Administrative Agent.



19.   Lien Searches. To the extent requested by Administrative Agent, Lien
      searches in the name of each Credit Party in Delaware and Arizona, showing
      no financing statements or other Lien instruments of record except for
      Permitted Liens or Liens being released on the Closing Date.

20.   Consents, filings, etc. Evidence satisfactory to Administrative Agent and
      its counsel that each Credit Party has received all approvals,
      authorizations, consents, and waivers of any governmental authority or
      other Person necessary or appropriate for the execution, delivery, and
      performance by each Credit Party of the Loan Documents to which it is a
      party, including, without limitation, (a) all such approvals,
      authorizations, consents, and waivers disclosed in the Loan Documents
      (including those required in connection with the assignment of any
      material agreements), and (b) all filings, consents, or approvals with or
      of Governmental Authorities necessary to enter into the Loan Documents or
      consummate any other transactions contemplated by the a Loan Documents.

21.   Insurance. Evidence that each Credit Party maintains with financially
      sound, responsible, and reputable insurance companies or associations
      insurance covering its properties and business against such risks, in such
      amounts, and with no greater risk retention as are customarily maintained,
      insured, or retained by companies of established repute engaged in the
      same or similar business as such Credit Party.

22.   Current Financials. True and correct copies of the Financial Statements of
      Borrower and Guarantor.

23.   Payment of Fees and Closing Fees. Evidence of payment of all fees payable
      on or prior to the Closing Date to Administrative Agent, or any Lender as
      provided for in the Agreement, together with reimbursements to
      Administrative Agent and Highland for all fees and expenses incurred in
      connection with the negotiation, preparation, and closing of the
      transactions evidenced by the Loan Documents (including, without
      limitation, attorneys' fees and expenses).

24.   Real Property Conveyance Documents. Consents, approvals and authorizations
      from the City of Phoenix, documents evidencing amendment and assignment of
      leases, sublease agreements, licenses and permits, zoning letters,
      inspection reports, endorsements, and documents related thereto in form
      and substance acceptable to Administrative Agent.

25.   Environmental Documents. All prior environmental site investigations or
      assessments relating to Mortgaged Property, all current environmental site
      investigations or assessments relating to Mortgaged Property addressed to
      Lender, and documents related thereto in form and substance acceptable to
      Administrative Agent.

      Other Documents. Such other agreements, documents, instruments, opinions,
      certificates, and evidences as Administrative Agent may reasonably
      request.



                                  SCHEDULE 8.1
                           CAPITALIZATION OF BORROWER

                                         
America West Airlines, Inc.                 100%





                                  SCHEDULE 8.5
                              DEBT AND LIABILITIES

None.



                                  SCHEDULE 8.11
                              COMPLIANCE WITH LAWS

None.



                                  SCHEDULE 8.20
                                 DEPOSIT ACCOUNT

Operating Account:
America West Airlines, FTCHP LLC
634912794

Restricted Account:
America West Airlines, FTCHP LLC (Restricted)
1831160161



                                  SCHEDULE 9.16
                              POST-CLOSING MATTERS

1.    Borrower shall provide to Lender an ALTA survey of they Hangar Land and
      Parking Land (as described in Schedule 1A), in a form reasonably
      satisfactory to Administrative Agent, on or before January 15, 2004.

2.    Subordination, Non-Disturbance and Attornment Agreement executed by
      General Electric Capital Corporation in form previously executed by
      Heritage Bank, SSB, America West Airlines, Inc. and FTCHP LLC, on or
      before January 4, 2004.

3.    Tenant Estoppel Certificate executed by General Electric Capital
      Corporation and America West Airlines, Inc., relating to that Sublease
      Agreement by and among General Electric Capital Corporation and America
      West Airlines, Inc., in a form reasonably satisfactory to Administrative
      Agent, on or before January 4, 2004.

4.    Waiver and Agreement by Heritage Bank, SSB, and Fidelity National Title
      Insurance Company, as trustee, in favor of Aviation Financial Services
      Inc., relating to flight simulator bearing manufacturer's works order
      number, T3878, in a form reasonably satisfactory to Administrative Agent,
      on or before January 4, 2004.

5.    Waiver and Agreement by Heritage Bank, SSB, and Fidelity National Title
      Insurance Company, as trustee, in favor of Aviation Financial Services
      Inc., relating to flight simulator bearing Federal Aviation Administrative
      ID numbers 332,351,417 and 795, in a form reasonably satisfactory to
      Administrative Agent, on or before January 4, 2004.



                                SCHEDULE 10.1(c)
                                  EXISTING DEBT

None.



                                SCHEDULE 10.1(d)
              DEBT INCURRED WITH REFINANCING OF EXISTING MORTGAGES

None.



                                  SCHEDULE 10.4
                         EXISTING INVESTMENTS AND LOANS

None.

EX-10.42

                                                                   EXHIBIT 10.42

FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"), THIS SECURITY HAS ORIGINAL ISSUE DISCOUNT. FOR PURPOSES OF SECTION
1273 OF THE CODE, THE ISSUE PRICE IS $35,988,000, THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT IS $5,198,000, AND THE YIELD TO MATURITY COMPOUNDED QUARTERLY IS LIBOR
PLUS 7.14% ASSUMING NO OPTIONAL PRINCIPAL PREPAYMENTS AND ASSUMING THE APPRAISED
VALUE REMAINS CONSTANT FOR THE LIFE OF THIS SENIOR SECURED DISCOUNT NOTE.

                          SENIOR SECURED DISCOUNT NOTE

$35,988,000                                                    DECEMBER 23, 2004

FOR VALUE RECEIVED, FTCHP LLC, a Delaware limited liability company ("MAKER"),
hereby unconditionally promises to pay to the order of Citibank, N.A. ("PAYEE"),
at the principal office of Heritage Bank, SSB, as Administrative Agent
("ADMINISTRATIVE AGENT") under the Loan Agreement (defined below), at Two
Galleria Tower, Suite 2220, 13455 Noel Road, Dallas, Texas 75240, or such other
office as Administrative Agent designates, the principal sum of THIRTY-FIVE
MILLION NINE HUNDRED AND EIGHTY-EIGHT THOUSAND AND NO/100 DOLLARS ($35,988,000)
together with accrued interest thereon at the rate set forth in the Loan
Agreement, in lawful money of the United States of America. Capitalized terms
not defined herein shall have the meanings assigned to such terms in the Loan
Agreement.

The unpaid principal amount of this promissory note (this "NOTE") shall and may
be payable in accordance with the terms of SECTIONS 3.1(b), 3.2(b) and 3.3 (a)
of the Loan Agreement.

The unpaid principal amount of this Note shall bear interest from the date of
advance until maturity in accordance with SECTIONS 3.4 AND 3.7 of the Loan
Agreement. Interest on this Note shall be payable in accordance with SECTIONS
3.1(b) and 3.2(a) of the Loan Agreement.

This Note has been executed and delivered pursuant to that certain Senior
Secured Term Loan Agreement (as amended, modified, supplemented, restated or
amended and restated from time to time, the "LOAN AGREEMENT"), dated as of even
date herewith, by and among the Maker, Administrative Agent, and Lenders and is
one of the "SENIOR SECURED DISCOUNT NOTES" referred to therein. This Note
evidences loans made under the Loan Agreement, and the holder of this Note shall
be entitled to the benefits provided in the Loan Agreement. Reference is hereby
made to the Loan Agreement for a statement of: (a) the prepayment rights and
obligations of the Maker; (b) the collateral for the repayment of this Note; and
(c) the events upon which the maturity of this Note may be accelerated.

If this Note, or any installment or payment due hereunder, is not paid when due,
whether at maturity or by acceleration, or if it is collected through a
bankruptcy, probate or other court, whether before or after maturity, the Maker
agrees to pay all out-of-pocket costs of collection, including, but not limited
to, reasonable attorneys' fees incurred by the holder hereof and costs of appeal
as provided in the Loan Agreement. All past-due principal of, and, to the extent
permitted by applicable law, past-due interest on this Note shall bear interest
until paid at the Default Rate as provided in the Loan Agreement.

The Maker and all sureties, endorsers, guarantors and other parties ever liable
for payment of any sums payable pursuant to the terms of this Note, jointly and
severally waive demand, presentment for payment, protest, notice of protest,
notice of acceleration, notice of intent to accelerate, diligence in collection,
the bringing of any suit against any party, and any notice of or defense on
account of any extensions,

                SENIOR SECURED DISCOUNT NOTE FOR CITIBANK, N.A.


renewals, partial payment, or any releases or substitutions of any security,
or any delay, indulgence, or other act of any trustee or any holder hereof,
whether before or after maturity.

Pursuant to Section 5-1401 of the New York General Obligations Law, the
substantive laws of the State of New York, without regard to the choice of law
principals that might otherwise apply, and the applicable federal laws of the
United States of America, shall govern the validity, construction, enforcement
and interpretation of this Note.

                                 FTCHP LLC, a Delaware limited liability company

                                 By: /s/ Derek J. Kerr
                                     -----------------------
                                     Derek J. Kerr
                                     President

                SENIOR SECURED DISCOUNT NOTE FOR CITIBANK, N.A.

EX-10.43

                                                                  EXHIBIT 10.43

                        UNCONDITIONAL GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT ("GUARANTY") is executed as of December 23, 2004, by
America West Airlines, Inc., a Delaware corporation ("GUARANTOR"), in favor of
Citibank, N.A. ("LENDER").

A.    FTCHP LLC ("BORROWER") may from time to time be indebted to Lender
pursuant to that certain Senior Secured Term Loan Agreement ("LOAN AGREEMENT")
dated of even date herewith by and between Lender and Borrower;

B.    Lender is not willing to extend credit to Borrower unless Guarantor
unconditionally guarantees payment of all present and future indebtedness and
obligations of Borrower to Lender; and

C.    Guarantor will benefit from Lender's extension of credit to Borrower.

ACCORDINGLY, as an inducement to Lender to enter into the Loan Agreement and to
extend credit to Borrower under this Guaranty, Guarantor guarantees payment of
the Guaranteed Obligation (as defined below) and agrees as follows:

1.    DEFINITIONS.

      "BORROWER" means that party described in the recitals above. "Borrower"
includes any successor to Borrower, including, without limitation, any new
entity formed as a result of the dissolution of Borrower, or the admission of
new members to, or withdrawal of members from, Borrower, and, any successor
entity, any entity formed as a result of any reorganization of Borrower or the
entity that survives in the event of any merger including Borrower.

      "GUARANTEED OBLIGATION" means:

            (a) All principal, interest, attorneys' fees, commitment fees,
liabilities for costs and expenses and other indebtedness, obligations and
liabilities of Borrower to Lender at any time created or arising in connection
with the Loan Agreement, or any amendment thereto or substitution therefor,
including but not limited to all indebtedness, obligations and liabilities of
Borrower to Lender arising under that certain promissory note dated of even date
herewith in the original principal amount of Thirty Five Million Nine Hundred
and Eighty Eight Thousand and No/100 Dollars ($35,988,000.00), executed by
Borrower and payable to Lender (the "NOTE") and under any renewals,
modifications, increases and extensions of the Note (collectively, the
"GUARANTEED NOTES");

            (b) All liabilities of Borrower for future advances, extensions of
credit, sales on account or other value at any time given or made by Lender to
Borrower in connection with the Loan Agreement and Guaranteed Notes, whether or
not the advances, credit or value are given pursuant to a commitment;

            (c) Any and all other indebtedness, liabilities, obligations and
duties of every kind and character of Borrower to Lender arising in connection
with the Loan Agreement and Guaranteed Notes, whether now or hereafter existing
or arising, whether arising prior to or subsequent to any filing of any
bankruptcy or similar proceeding filed by or against Borrower, (and including
any "debtor-in-possession" and post-petition financing under any bankruptcy
proceeding), regardless of whether such present or future indebtedness,
liabilities, obligations or duties be direct or indirect, primary or secondary,
joint, several, or joint and several, fixed or contingent, and regardless of
whether such present or future indebtedness, liabilities, obligations or duties
may, prior to their acquisition by Lender, be or have been payable to, or be or
have been in favor of, some other person or have been acquired by Lender in any



transaction with one other than Borrower and regardless of whether Borrower
shall ever cease to be liable to Lender for any such present or future
indebtedness, liabilities, obligations, and duties (except by reason of the
indefeasible payment in full thereof by Borrower); together with any and all
renewals, extensions, modifications and increases of such indebtedness,
liabilities, obligations and duties, or any part thereof; and

            (d) All reasonable costs, expenses and fees, including but not
limited to court costs and reasonable attorneys' fees, arising in connection
with the collection of any or all amounts, indebtedness, obligations and
liabilities of Borrower to Lender described in items (a) through (c) above.

      "GUARANTOR CLAIMS" shall mean all debts and liabilities of Borrower to
Guarantor whether such debts and liabilities now exist or are hereafter incurred
or arise, or whether the obligations of Borrower thereon be direct, contingent,
primary, secondary, several, joint and several, or otherwise, and irrespective
of whether such debts or liabilities be evidenced by note, contract, open
account, or otherwise, and irrespective of the person or persons in whose favor
such debts or liabilities may, at their inception, have been, or may hereafter
be created, or the manner in which they have been or may hereafter be acquired
by Guarantor.

2.    GUARANTEED OBLIGATION NOT REDUCED BY OFFSET. The Guaranteed Notes,
indebtedness, liabilities, obligations and any Guaranteed Obligation guaranteed
in this Guaranty, and the liabilities and obligations of Guarantor to Lender
under this Guaranty, shall not be reduced, discharged or released because or by
reason of any existing or future offset, claim or defense of Borrower, or any
other party, against Lender or against payment of the Guaranteed Obligation,
whether such offset, claim or defense arises in connection with the Guaranteed
Obligation (or the transactions creating the Guaranteed Obligation) or
otherwise. Without limiting the foregoing or Guarantor's liability, to the
extent that Lender provides loans or advances or extends credit to Borrower
pursuant to the Guaranteed Notes or Loan Agreement and does not receive payments
or benefits thereon in the amounts and at the times required or provided by
applicable agreements or laws, including any applicable notice and cure periods
afforded to Borrower, Guarantor is absolutely liable to make such payments to
and confer such benefits on Lender on a timely basis pursuant to SECTION 5
herein.

3.    GUARANTY OF OBLIGATION. Guarantor irrevocably and unconditionally
guarantees to Lender and its successors and assigns (i) the due and punctual
payment of the Guaranteed Obligation, and (ii) the timely performance of all
other obligations now or in the future owed by Borrower to Lender, including
without limitation those under the Loan Agreement.

4.    NATURE OF GUARANTY. This Guaranty is intended to be an irrevocable,
absolute, continuing guaranty of payment and is not a guaranty of collection.
This Guaranty may not be revoked or limited by Guarantor and shall continue to
be effective with respect to any Guaranteed Obligation arising or created after
any attempted revocation by Guarantor. The fact that at any time or from time to
time the Guaranteed Obligation may be increased or reduced, pursuant to the
terms hereof, shall not release the obligation of Guarantor with respect to the
Guaranteed Obligation. This Guaranty may be enforced by Lender and any
subsequent holder of the Guaranteed Obligation and shall not be discharged by
the assignment or negotiation of all or part of the Guaranteed Obligation.

5.    PAYMENT BY GUARANTOR. If all or any part of the Guaranteed Obligation
is not punctually paid when due, whether at maturity or earlier by acceleration
or otherwise, Guarantor shall, immediately upon demand by Lender, and without
presentment, protest, notice of protest, notice of nonpayment, notice of
intention to accelerate or acceleration or any other notice whatsoever, pay in
lawful money of the United States of America, the amount due on the Guaranteed
Obligation to Lender at Lender's principal office at:

                                        2



Citibank, N.A.
390 Greenwich St. 1st Fl
New York, NY 10013
Attn: Walt Larsen
Fax/Telecopy No.: (213) 623-3592

Such demand(s) may be made at any time coincident with or after the time for
payment of all or part of the Guaranteed Obligation, and may be made from time
to time with respect to the same or different items of Guaranteed Obligation.
Such demand shall be deemed made, given and received in accordance with SECTION
14.2.

6.    PAYMENT OF EXPENSES. In the event that Guarantor should breach or fail
to timely perform any provisions of this Guaranty, Guarantor shall, immediately
upon demand by Lender, pay Lender all costs and expenses (including court costs
and reasonable attorneys' fees) incurred by Lender in the enforcement or the
preservation of Lender's rights under this Guaranty. The covenant contained in
this SECTION 6 shall survive the payment of the Guaranteed Obligation.

7.    NO DUTY TO PURSUE OTHERS. It is not necessary for Lender (and Guarantor
waives any rights which Guarantor may have to require Lender), in order to
enforce such payment by Guarantor, first to (i) institute suit or exhaust its
remedies against Borrower or others liable on the Guaranteed Obligation or any
other person, (ii) enforce Lender's rights against any security which shall ever
have been given to secure the Guaranteed Obligation, (iii) enforce Lender's
rights against any other guarantors of the Guaranteed Obligation, (iv) join
Borrower or any others liable on the Guaranteed Obligation in any action seeking
to enforce this Guaranty, (v) exhaust any remedies available to Lender against
any security which shall ever have been given to secure the Guaranteed
Obligation, or (vi) resort to any other means of obtaining payment of the
Guaranteed Obligation. Lender shall not be required to mitigate damages or take
any other action to reduce, collect or enforce the Guaranteed Obligation.
Further, Guarantor expressly waives each and every right to which it may be
entitled by virtue of the suretyship law of the state of New York.

8.    WAIVER OF NOTICES, ETC. Guarantor agrees to the provisions of the
Guaranteed Notes and the Loan Agreement, and waives notice of (i) any loans or
advances made by Lender to Borrower, (ii) acceptance of this Guaranty, (iii) any
amendment, increase or extension of the Guaranteed Notes or the Loan Agreement
or of any other instrument or document pertaining to all or any part of the
Guaranteed Obligation, (iv) the execution and delivery by Borrower and Lender of
any other loan or credit agreement or of Borrower's execution and delivery of
any promissory notes or other documents in connection therewith, (v) the
occurrence of any breach by Borrower or default in connection with the
Guaranteed Obligation, the Guaranteed Notes and any instruments, agreements or
security documents with respect to this Guaranty, (vi) Lender's transfer or
disposition of the Guaranteed Obligation, or any part thereof, (vii) sale or
foreclosure (or posting or advertising for sale or foreclosure) of any
collateral for the Guaranteed Obligation, (viii) protest, proof of nonpayment or
default by Borrower, or (ix) any other action at any time taken or omitted by
Lender, and, generally, all demands and notices of every kind in connection with
this Guaranty, the Loan Agreement, and any documents or agreements evidencing,
securing or relating to any of the Guaranteed Obligation.

9.    EFFECT OF BANKRUPTCY, OTHER MATTERS. In the event that, pursuant to any
insolvency, bankruptcy, reorganization, receivership or other debtor relief law,
or any judgment, order or decision thereunder, or for any other reason, (i)
Lender must rescind or restore any payment, or any part thereof, received by
Lender in satisfaction of the Guaranteed Obligation, as set forth in this
Guaranty, any prior

                                       3



release or discharge from the terms of this Guaranty given to Guarantor by
Lender shall be without effect, and this Guaranty shall remain in full force and
effect or, (ii) Borrower shall cease to be liable to Lender for any of the
Guaranteed Obligation (other than by reason of the indefeasible payment in full
thereof by Borrower), the obligations of Guarantor under this Guaranty shall
remain in full force and effect. It is the intention of Lender and Guarantor
that Guarantor's obligations under this Guaranty shall not be discharged except
by Guarantor's performance of such obligations and then only to the extent of
such performance. Without limiting the generality of the foregoing, it is the
intention of Lender and Guarantor that the filing of any bankruptcy or similar
proceeding by or against Borrower or any other person or party obligated on any
portion of the Guaranteed Obligation shall not affect the obligations of
Guarantor under this Guaranty or the rights of Lender under this Guaranty,
including, without limitation, the right or ability of Lender to pursue or
institute suit against Guarantor for the entire Guaranteed Obligation.

10.   FINANCIAL INFORMATION. Guarantor agrees to deliver to Lender current
balance sheets and other financial information of Guarantor as shall be required
by Lender, not later than forty-five (45) days after the end of each calendar
quarter.

11.   ADDITIONAL TERMS. Guarantor consents and agrees to each of the
following, and agrees that Guarantor's obligations under this Guaranty shall not
be released, diminished, impaired, reduced or adversely affected by any of the
following, and waives any common law, equitable, statutory or other rights
(including without limitation rights to notice) which Guarantor might otherwise
have as a result of or in connection with any of the following:

            11.1 MODIFICATIONS, ETC. Any renewal, extension, increase,
modification, alteration or rearrangement of all or any part of the Guaranteed
Obligation, or of the Guaranteed Notes, or any Loan Agreement, security
agreement, collateral document or other document, instrument, contract or
understanding between Borrower and Lender, or any other parties, pertaining to
the Guaranteed Obligation;

            11.2 ADJUSTMENT, ETC. Any adjustment, indulgence, forbearance or
compromise that might be granted or given by Lender to Borrower or Guarantor;

            11.3 CONDITION, COMPOSITION OR STRUCTURE OF BORROWER OR GUARANTOR.
The insolvency, bankruptcy, arrangement, adjustment, composition, structure,
liquidation, disability, dissolution or lack of power of Borrower or any other
party at any time liable for the payment of all or part of the Guaranteed
Obligation; or any dissolution of Borrower or Guarantor, or any sale, lease or
transfer of any or all of the assets of Borrower or Guarantor, or any changes in
name, business, location, composition, structure or changes in the shareholders,
partners or members (whether by accession, secession, cessation, death,
dissolution, transfer of assets or other matter) of Borrower; or any
reorganization of Borrower;

            11.4 INVALIDITY OF GUARANTEED OBLIGATION. The invalidity, illegality
or unenforceability of all or any part of the Guaranteed Obligation, or any
document or agreement executed in connection with the Guaranteed Obligation, for
any reason whatsoever, including without limitation the fact that (i) the
Guaranteed Obligation, or any part thereof, exceeds the amount permitted by law,
(ii) the act of creating the Guaranteed Obligation or any part thereof is ultra
vires, (iii) the officers or representatives executing the Guaranteed Notes or
other documents or otherwise creating the Guaranteed Obligation acted in excess
of their authority, (iv) the Guaranteed Obligation violates applicable usury
laws, (v) the Borrower has valid defenses, claims or offsets (whether at law, in
equity or by agreement) which render the Guaranteed Obligation wholly or
partially uncollectible from Borrower, (vi) the creation, performance or
repayment of the Guaranteed Obligation (or the execution, delivery and

                                       4



performance of any document or instrument representing part of the Guaranteed
Obligation or executed in connection with the Guaranteed Obligation, or given to
secure the repayment of the Guaranteed Obligation) is illegal, uncollectible or
unenforceable, or (vii) the Guaranteed Notes, Loan Agreement or other documents
or instruments pertaining to the Guaranteed Obligation have been forged or
otherwise are irregular or not genuine or authentic.

            11.5 RELEASE OF OBLIGORS. Any full or partial release of the
liability of Borrower on the Guaranteed Obligation or any part thereof, or any
other person or entity now or hereafter liable, whether directly or indirectly,
jointly, severally, or jointly and severally, to pay, perform, guarantee or
assure the payment of the Guaranteed Obligation or any part thereof, it being
recognized, acknowledged and agreed by Guarantor that Guarantor may be required
to pay the Guaranteed Obligation in full without assistance or support of any
other party, and Guarantor has not been induced to enter into this Guaranty on
the basis of a contemplation, belief, understanding or agreement that other
parties (other than Borrower pursuant to the Loan Agreement) will be liable to
perform the Guaranteed Obligation, or that Lender will look to other parties to
perform the Guaranteed Obligation; notwithstanding the foregoing, Guarantor does
not waive or release (expressly or impliedly) any rights of subrogation,
reimbursement or contribution which it may have, after payment in full of the
Guaranteed Obligation, against others liable on the Guaranteed Obligation;
Guarantor's rights of subrogation and reimbursement are, however, subordinate to
the rights and claims of Lender until such time as the Guaranteed Obligation is
paid in full;

            11.6 OTHER SECURITY. The taking or accepting of any other security,
collateral or guaranty, or other assurance of payment, for all or any part of
the Guaranteed Obligation;

            11.7 RELEASE OF COLLATERAL, ETC. Any release, surrender, exchange,
subordination, deterioration, waste, loss or impairment (including without
limitation negligent, willful, unreasonable or unjustifiable impairment) of any
collateral, property or security, at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Obligation;

            11.8 CARE AND DILIGENCE. The failure of Lender or any other party to
exercise diligence or reasonable care or act, fail to act or comply with any
duty in the administration, preservation, protection, enforcement, sale
application, disposal or other handling or treatment of all or any part of
Guaranteed Obligation or any collateral, property or security at any time
securing any portion thereof, including, without limiting the generality of the
foregoing, the failure to conduct any foreclosure or other remedy fairly or in
such a way so as to obtain the best possible price or a favorable price or
otherwise act or fail to act;

            11.9 STATUS OF LIENS. The fact that any collateral, security,
security interest or lien contemplated or intended to be given, created or
granted as security for the repayment of the Guaranteed Obligation shall not be
properly perfected or created, or shall prove to be unenforceable or subordinate
to any other security interest or lien, it being recognized and agreed by
Guarantor that Guarantor is not entering into this Guaranty in reliance on, or
in contemplation of the benefits of, the validity, enforceability,
collectibility or value of any of the collateral for the Guaranteed Obligation;
notwithstanding the foregoing, Guarantor does not waive or release (expressly or
impliedly) any right to be subrogated to the rights of Lender in any collateral
or security for the Guaranteed Obligation after payment in full of the
Guaranteed Obligation; Guarantor's rights of subrogation are, however,
subordinate to the rights, claims, liens and security interests of Lender until
such time as the Guaranteed Obligation is paid in full;

            11.10 OFFSET. The Guaranteed Notes and any part or all of the
Guaranteed Obligation guaranteed, and the liabilities and obligations of
Guarantor to Lender under this Guaranty, shall not be

                                       5



reduced, discharged or released because of or by reason of any existing or
future right of offset, claim or defense of Borrower against Lender, or any
other party, or against payment of the Guaranteed Obligation, whether such right
of offset, claim or defense arises in connection with the Guaranteed Obligation
(or the transactions creating the Guaranteed Obligation) or otherwise;

            11.11 MERGER. The reorganization, merger or consolidation of
Borrower into or with any other corporation or entity;

            11.12 PREFERENCE. Any payment by Borrower to Lender is held to
constitute a preference under bankruptcy laws, or for any reason Lender is
required to refund such payment or pay such amount to Borrower or someone else;
or

            11.13 OTHER ACTIONS TAKEN OR OMITTED. Any other action taken or
omitted to be taken with respect to the Loan Agreement, the Guaranteed
Obligation, or the security and collateral therefor, whether or not such action
or omission prejudices Guarantor or increases the likelihood or risk that
Guarantor will be required to pay the Guaranteed Obligation; it is the
unambiguous and unequivocal intention of Guarantor that Guarantor shall be
obligated to pay the Guaranteed Obligation when due pursuant to SECTION 5
hereof, notwithstanding any occurrence, circumstance, event, action, or omission
whatsoever, whether contemplated or uncontemplated, and whether or not otherwise
or particularly described in this Guaranty, except for the full and final
payment and satisfaction of the Guaranteed Obligation.

12.   REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into the
Loan Agreement and extend credit to Borrower, Guarantor represents and warrants
to Lender that:

            12.1 FAMILIARITY AND RELIANCE. Guarantor is familiar with, and has
independently reviewed books and records regarding, the financial condition of
the Borrower and is familiar with the value of any and all collateral intended
to be created as security for the payment of the Guaranteed Obligation; however,
Guarantor is not relying on such financial condition or the collateral as an
inducement to enter into this Guaranty;

            12.2 NO REPRESENTATION BY LENDER. Neither Lender nor any other party
has made any representation, warranty or statement to Guarantor in order to
induce the Guarantor to execute this Guaranty;

            12.3 LEGALITY. The execution, delivery and performance by Guarantor
of this Guaranty and the consummation of the transactions contemplated hereunder
(i) have been duly authorized by all necessary corporate and stockholder action
of Guarantor, and (ii) do not, and will not, contravene or conflict with any
law, statute or regulation whatsoever to which Guarantor is subject or
constitute a default (or an event which with notice or lapse of time or both
would constitute a default) under, or result in the breach of, any indenture,
mortgage, deed of trust, charge, lien, or any contract, agreement or other
instrument to which Guarantor is a party or which may be applicable to Guarantor
or any of its assets, or violate any provisions of its Certificate of
Incorporation, Bylaws or any other organizational document of Guarantor.

            12.4 ORGANIZATION AND GOOD STANDING. Guarantor (i) is, and will
continue to be, a corporation duly organized and validly existing in good
standing under the laws of the State of Delaware, and (ii) possesses all
requisite authority, power, licenses, permits and franchises necessary to own
its assets, to conduct its business and to execute and deliver and comply with
the terms of this Guaranty.

                                       6



            12.5 SURVIVAL. All representations and warranties made by Guarantor
in this Guaranty shall survive the execution of this Guaranty.

13.   WAIVER, SUBORDINATION OF CERTAIN INDEBTEDNESS.

            13.1 WAIVER, SUBORDINATION OF GUARANTOR CLAIMS. Until the Guaranteed
Obligation shall be paid and satisfied in full and Guarantor shall have
performed all of its obligations under this Guaranty, Guarantor shall not
receive or collect, directly or indirectly, from Borrower or any other party any
amount upon the Guarantor Claims.

            13.2 CLAIMS IN BANKRUPTCY. In the event of receivership, bankruptcy,
reorganization, arrangement, debtor's relief, or other insolvency proceedings
involving Borrower as debtor, Lender shall have the right to prove its claim in
any such proceeding so as to establish its rights under this Guaranty and
receive directly from the receiver, trustee or other court custodian dividends
and payments which would otherwise be payable upon Guarantor Claims. Guarantor
assigns such dividends and payments to Lender. Should Lender receive, for
application upon the Guaranteed Obligation, any such dividend or payment which
is otherwise payable to Guarantor, and which, as between Borrower and Guarantor,
shall constitute a credit upon the Guarantor Claims, then upon payment to Lender
in full of the Guaranteed Obligation, Guarantor shall become subrogated to the
rights of Lender to the extent that such payments to Lender on the Guarantor
Claims have contributed toward the liquidation of the Guaranteed Obligation, and
such subrogation shall be with respect to that proportion of the Guaranteed
Obligation which would have been unpaid if Lender had not received dividends or
payments upon the Guarantor Claims.

            13.3 PAYMENTS HELD IN TRUST. In the event that, notwithstanding
SECTIONS 13.1 and 13.2 above, Guarantor should receive any funds, payment, claim
or distribution which is prohibited by such Sections, Guarantor agrees to hold
in trust for Lenders, in kind, all funds, payments, claims or distributions so
received, and agrees that it shall have absolutely no dominion over such funds,
payments, claims or distributions so received except to pay them promptly to
Lenders, and Guarantor covenants promptly to pay the same to Lenders until such
time as the Guaranteed Obligation is paid and satisfied in full.

            13.4 LIENS SUBORDINATE. Until such time as the Guaranteed Obligation
is paid and satisfied in full, Guarantor agrees that any liens, security
interests, judgment liens, charges or other encumbrances upon Borrower's assets
securing payment of the Guarantor Claims shall be and remain inferior and
subordinate to any liens, security interests, judgment liens, charges or other
encumbrances upon Borrower's assets securing payment of the Guaranteed
Obligation, regardless of whether such encumbrances in favor of Guarantor or
Lender presently exist or are subsequently created or attach. Without the prior
written consent of Lender, Guarantor shall not, for so long as the Guaranteed
Obligation is outstanding, (i) exercise or enforce any creditor's right it may
have against Borrower, or (ii) foreclose, repossess, sequester or otherwise take
steps or institute any action or proceedings (judicial or otherwise, including
without limitation the commencement of, or joinder in, any liquidation,
bankruptcy, rearrangement, debtor's relief or insolvency proceeding) to enforce
any liens, mortgages, deeds of trust, security interest, collateral rights,
judgments or other encumbrances on assets of Borrower held by Guarantor.

            13.5 NOTATION OF RECORDS. Guarantor shall use reasonable efforts to
ensure that all promissory notes, accounts receivable ledgers or other evidences
of the Guarantor Claims accepted by or held by Guarantor shall contain a
specific written notice thereon that the indebtedness evidenced thereby is
subordinated under the terms of this Guaranty; provided, however, if such
written notice is not indicated on the indebtedness, the same shall nonetheless
be subordinated under the terms of this


                                       7



Guaranty until such time as the Guaranteed Obligation is paid and satisfied in
full.

            13.6 WAIVER OF INCIDENTAL CLAIMS. Notwithstanding anything to the
contrary contained in this Guaranty, Guarantor waives all rights of subrogation,
reimbursement, indemnification, contribution and all other claims against
Borrower and every other party which is or shall ever be in any way obligated on
the Guaranteed Obligation which Guarantor may ever have as a result of payment
of any of the Guaranteed Obligation, as well as all incidental rights and
benefits in favor of Guarantor in connection with payment of any of the
Guaranteed Obligation until such time as the Guaranteed Obligation is paid and
satisfied in full.

            13.7 SET OFF AGAINST GUARANTOR. Lender shall have the right to
setoff and apply against this Guaranty or the Guaranteed Obligation or both,
without notice to Guarantor, any and all deposits (general or special, time or
demand, provisional or final) or other sums at any time credited by or owing
from Lender to Guarantor, or either of them, to the extent that the Guaranteed
Obligation is then due and Lender has made demand under this Guaranty.

14.   MISCELLANEOUS.

            14.1 WAIVER. No failure to exercise, and no delay in exercising, on
the part of Lender, any right under this Guaranty shall operate as a waiver, nor
shall any single or partial exercise preclude any other or further exercise
thereof or the exercise of any other right. The rights of Lender under this
Guaranty shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Guaranty, nor consent to
departure therefrom, shall be effective unless in writing and no such consent or
waiver shall extend beyond the particular case and purpose involved. No notice
or demand given in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such notice or demand.

            14.2 NOTICES. Any notices or other communications required or
permitted to be given by this Guaranty must be (i) given in writing and
personally delivered, or (ii) mailed by express carrier, or (ii) made by
facsimile with telephone confirmation of receipt, to the party to whom such
notice or communication is directed, to the address of such party as follows:

Guarantor: America West Airlines, Inc.
           111 W. Rio Salado Parkway
           Tempe, Arizona  85281
           Attn:  Paul Lambert
           Facsimile: 480-693-5932
           Telephone: 480-693-5773

           With copy to:        America West Airlines, Inc.
                                111 W. Rio Salado Parkway
                                Tempe, Arizona  85281
                                Attn:  James Walsh,  General Counsel
                                Facsimile:
                                Telephone:

Lender:    Citibank, N.A.
           390 Greenwich St. 1st Fl

                                       8



           New York, NY 10013
           Attn: Walt Larsen
           Fax/Telecopy No.: (213) 623-3592

           With a copy to:
                                    Citibank, N.A.
                                    390 Greenwich St. 1st Fl
                                    New York, NY 10013
                                    Attn:  Joe Shanahan
                                    Fax/Telecopy No.: (212) 816-5705

Any such notice or other communication shall be deemed to have been given
(whether actually received or not) on the day it is personally delivered as
aforesaid or, if mailed by express carrier, on the day it is received, or, if
transmitted by facsimile, on the day that it is confirmed by telephone as having
been received. Any party may change its address for purposes of this Guaranty by
giving notice of such change to the other party pursuant to this SECTION 14.2.

            14.3 GOVERNING LAW. The substantive laws of the State of New York
shall govern the validity, construction, enforcement and interpretation of this
Guaranty.

            14.4 INVALID PROVISIONS. If any provision of this Guaranty is held
to be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Guaranty, such provision shall be fully severable, and
this Guaranty shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Guaranty, and the
remaining provisions of this Guaranty shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Guaranty, unless such continued effectiveness of this
Guaranty, as modified, would be contrary to the basic understandings and
intentions of the parties as expressed in this Guaranty.

            14.5 ENTIRETY AND AMENDMENTS. This Guaranty embodies the entire
agreement between the parties and supersedes all prior agreements and
understandings, if any, relating to the subject matter of this Guaranty, and
this Guaranty may be amended only by an instrument in writing executed by an
authorized officer of the party against whom such amendment is sought to be
enforced.

            14.6 PARTIES BOUND; ASSIGNMENT. This Guaranty shall be binding upon
and inure to the benefit of the parties hereto and their respective successors,
assigns and legal representatives; provided, however, that Guarantor may not,
without the prior written consent of Lender, assign any of its rights, powers,
duties or obligations under this Guaranty.

            14.7 HEADINGS. Section headings are for convenience of reference
only and shall in no way affect the interpretation of this Guaranty.

            14.8 RIGHTS AND REMEDIES. If Guarantor becomes liable for any
indebtedness owing by Borrower to Lender, by endorsement or otherwise, other
than under this Guaranty, such liability shall not be in any manner impaired or
affected and the rights of Lender under this Guaranty shall be cumulative of any
and all other rights that Lender may ever have against Guarantor. The exercise
by Lender of any right or remedy under this Guaranty or under any other
instrument, or at law or in equity, shall not preclude the concurrent or
subsequent exercise of any other right or remedy; provided, however, Guarantor
shall not be liable for any sums in excess of the Guaranteed Obligations and the
amounts

                                       9



provided under SECTION 6 hereof.

            14.9 TIME OF THE ESSENCE. Time is of the essence of this Guaranty.

                                       10



EXECUTED as of the day and year first above written.

                                    GUARANTOR:

                                    America West Airlines, Inc.

                                    By: /s/ Derek J. Kerr
                                        -----------------------------
                                        Derek J. Kerr
                                        Senior Vice President and Chief
                                        Financial Officer

                 UNCONDITIONAL GUARANTY AGREEMENT SIGNATURE PAGE

EX-10.47

                                                                   EXHIBIT 10.47

                 [America West Holdings Corporation Letterhead]

Date

Name
Address
City, State, Zip Code

Dear Name:

On behalf of America West Airlines and subject to ratification by our Board of
Directors, I am pleased to offer you the position of Title on the following
principal terms:

     Base Salary - $_______ on an annual basis, in semi-monthly payments of
     $_______.

     Annual Incentive Compensation - In addition to base salary, you will
     participate in our executive incentive compensation program, pursuant to
     which participants in the program receive a bonus in any year the Company
     meets pre-established financial targets and the individual achieves his or
     her objectives. The target bonus for your position is ___ of your annual
     base salary, but could be as low as zero or as high as ____ of base salary
     depending on the Company's financial performance and your performance
     measured against objectives. All incentive bonuses are at the discretion of
     the Board of Directors.

     [Long Term Incentive Plan - You also are eligible to participate in our
     long term performance-based award plan. Payments under this plan are
     determined by America West's Total Stockholder Return (TSR) relative to the
     TSRs of a pre-defined competitive peer group. You will be eligible for the
     three-year performance cycle beginning _______ and ending on _______.]

     Stock Options - Under the corporation's stock option program, you will
     receive an initial grant of __________ stock options to purchase shares of
     the corporation's Class B Common Stock at the stock's NYSE closing price on
     the date of the grant. You will be eligible for additional grants of stock
     options during your tenure with America West, however, all stock option
     awards are at the discretion of the Board of Directors. Stock options
     currently vest over a three-year schedule and expire ten years after
     issuance.



Name
Date

Page 2


     Benefits & Perquisites - You will be eligible for the benefits, allowances
     and perquisites generally extended to other Sr. Vice Presidents of the
     corporation as outlined in the enclosed package.

     Location - You will be based at Corporate Headquarters, currently located
     in Tempe, Arizona.

     Relocation - You will be offered a relocation package commensurate with a
     Sr. Vice President level as outlined in the enclosed package

Please understand that all employment with America West is on an "at will" basis
unless expressly agreed otherwise. For this reason, this letter is not intended
to and should not be construed as an employment contract or as a basis for
establishing any guaranteed duration of employment. If the terms set forth above
are agreeable to you, please sign a copy of this letter in the space provided
below and return it to Bonnie Thompson, Director, Recruitment.

Members of the executive management at America West are unanimously impressed
with your background and qualifications, and believe this to be a natural fit.
We look forward to having you join our team as soon as possible.

Very truly yours,


/s/ W. Douglas Parker
- -------------------------------------
W. Douglas Parker
Chairman, President & CEO

                                        Accepted and agreed to:

                                        ----------------------------------------
                                        Name

                                        ----------------------------------------
                                        Date

c: Shirley Kaufman
   Bonnie Thompson

EX-10.48

                                                                   EXHIBIT 10.48

                         EXECUTIVE CHANGE IN CONTROL AND
                          SEVERANCE BENEFITS AGREEMENT

                  (VICE PRESIDENTS AND OFFICERS OF EQUAL RANK)

     This EXECUTIVE CHANGE IN CONTROL AND SEVERANCE BENEFITS AGREEMENT (the
"Agreement") is entered into as of the _____ day of _____, 2004 (the "Effective
Date"), by and among ______________ ("Executive"), AMERICA WEST HOLDINGS
CORPORATION, a Delaware corporation ("Holdings"), and AMERICA WEST AIRLINES,
INC., a Delaware corporation and a wholly-owned subsidiary of Holdings ("AWA"
and, together with Holdings, the "Company").

     WHEREAS, Executive is currently employed by the Company and has made and is
expected to continue to make major contributions to the short- and long-term
profitability, growth and financial strength of the Company;

     WHEREAS, the Company wishes to provide additional inducement for the
Executive to remain in the ongoing employ of the Company; and

     WHEREAS, this Agreement is intended to supersede any other policy, plan,
program or arrangement relating to severance benefits payable by the Company to
Executive, including without limitation, any prior Executive Change in Control
and Severance Benefits Agreementsby and among Executive, Holdings, AWA and The
Leisure Company (collectively, the "Prior Agreement") and the America West
Holdings Corporation Executive Perquisites and Benefits policy as it relates to
such severance benefits.

                                    ARTICLE 1

                                  DEFINED TERMS

     For purposes of the Agreement, the following terms are defined as follows:

     1.1 "BASE SALARY" means Executive's annual base salary as in effect during
the last regularly scheduled payroll period immediately preceding the effective
date of Executive's termination (i) by the Company for any reason other than
Misconduct or Disability, or (ii) by Executive for Good Reason.

     1.2 "BOARD" means the Board of Directors of Holdings.

     1.3 "CHANGE IN CONTROL" means one or more of the following events:

          (A)  the individuals who, as of the Effective Date, constitute the
               Board (the "Incumbent Board"), cease for any reason to constitute
               at least a majority of the Board; provided, however, that any
               individual becoming a director subsequent to the Effective Date
               whose election, or


                                       1.



               nomination for election by Holdings' stockholders, was approved
               by a vote of at least two-thirds of the directors then comprising
               the Incumbent Board shall be considered as though such an
               individual were a member of the Incumbent Board; or

          (B)  any individual, entity or group (within the meaning of Section
               13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
               amended (the "Exchange Act")), other than the Company, acquires
               (directly or indirectly) the beneficial ownership (within the
               meaning of Rule 13d-3 promulgated under the Exchange Act) of more
               than 50% of the combined voting power of the then outstanding
               voting securities of AWA or Holdings entitled to vote generally
               in the election of directors ("Voting Power"); or

          (C)  any individual, entity or group (within the meaning of Section
               13(d)(3) or 14(d)(2) of the Exchange Act), that is controlled
               (directly or indirectly, through ownership share or voting power)
               by any former executive officer(s) of Holdings either (a)
               acquires (directly or indirectly) the beneficial ownership
               (within the meaning of Rule 13d-3 promulgated under the Exchange
               Act) of more than 50% of the outstanding shares of Holdings Class
               A Common Stock, or (b) elects or appoints one or more
               representatives to the Board; or

          (D)  Holdings or AWA shall consummate a merger, consolidation or
               reorganization of Holdings or AWA or any other similar
               transaction or series of related transactions (collectively, a
               "Transaction") other than (A) a Transaction in which the voting
               securities of Holdings or AWA outstanding immediately prior
               thereto become (by operation of law), or are to be converted into
               or exchanged for, voting securities of the surviving corporation
               or its parent corporation immediately after such Transaction that
               are owned by the same person or entity or persons or entities as
               immediately prior thereto and possess at least 75% of the Voting
               Power held by the voting securities of the surviving corporation
               or its parent corporation, or (B) a Transaction effected to
               implement a recapitalization of Holdings or AWA (or similar
               transaction) in which no person (excluding Holdings or AWA or any
               person who held more than 50% of the Voting Power immediately
               prior to such Transaction) acquires more than 50% of the Voting
               Power; or


                                       2.



          (E)  Holdings or AWA shall consummate a Transaction as a result of
               which neither Holdings nor AWA survives as a publicly-owned
               corporation whose common stock is registered under the Exchange
               Act; or

          (F)  Holdings or AWA shall sell or otherwise dispose of, or consummate
               a transaction or series of related transactions providing for the
               sale or other disposition of, all or substantially all of the
               stock or assets of AWA or shall enter into a plan for the
               complete liquidation of either Holdings or AWA; or

          (G)  any individual, entity or group (within the meaning of Section
               13(d)(3) or 14(d)(2) of the Exchange Act), other than the
               Company, acquires (directly or indirectly) the beneficial
               ownership (within the meaning of Rule 13d-3 promulgated under the
               Exchange Act) of more than 25% but not more than 50% of the
               Voting Power; or

          (H)  Holdings or AWA shall consummate a Transaction in which a person
               (excluding Holdings or AWA or any person who held more than 25%
               of the Voting Power immediately prior to such Transaction)
               acquires more than 25% but not more than 50% of the Voting Power.

     1.4 "DISABILITY" means a physical or mental condition of Executive that, in
the good faith judgment of the Company, based upon certification by a licensed
physician reasonably acceptable to Executive and the Company, (i) prevents
Executive from being able to perform the services required by his or her
position with the Company, (ii) has continued for a period of at least six (6)
months during any period of twelve (12) consecutive months and (iii) is expected
to continue.

     1.5 "GOOD REASON" means any of the following acts or failures to act, but
in each case only if it occurs during the period Executive is employed by the
Company and only if it is not consented to by Executive: (i) a material adverse
alteration by the Company in the nature or status of Executive's pay, position,
function, duties or responsibilities; provided, however, that such alteration
shall cease to be a Good Reason ninety (90) days after the occurrence of such
alteration unless prior to such date Executive has given written notice of
termination to the Company on account of such alteration; (ii) the relocation of
Executive outside the metropolitan area in which Executive is based; provided,
however, that such relocation shall cease to be a Good Reason ninety (90) days
after the occurrence of such relocation unless prior to such date Executive has
given written notice of termination to the Company on account of such
relocation; or (iii) the failure of the Company to perform any material
obligation owed to Executive, but only if such failure shall continue unremedied
for more than fifteen (15) days after written notice of such failure is given to
the Company by Executive.


                                       3.



     1.6 "MISCONDUCT" means one or more of the following:

          (a)  the willful and continued failure by Executive to perform his or
               her duties (other than any such failure resulting from
               Executive's incapacity due to physical or mental illness) after
               written notice of such failure has been given to Executive by the
               Company and Executive has had a reasonable period (but no more
               than sixty (60) days) after receipt of such notice to correct
               such failure;

          (b)  the willful commission by Executive of any act that is both
               dishonest and demonstrably injurious to Holdings, AWA or any
               direct or indirect subsidiary of Holdings (monetarily or
               otherwise) in any material respect;

          (c)  the conviction of Executive for a felony offense involving moral
               turpitude;

          (d)  a material breach by Executive of any of the covenants set forth
               in any employment agreement between the Company and Executive,
               but only if such breach shall continue unremedied for more than
               fifteen (15) days after written notice thereof is given to the
               Executive by the Company.

                                    ARTICLE 2

                                    BENEFITS

     2.1 BENEFITS UPON CERTAIN TERMINATIONS FOLLOWING A CHANGE IN CONTROL. If,
within twenty-four (24) months following the effective date of a Change in
Control, Executive (i) is terminated by the Company for any reason other than
Misconduct or Disability or (ii) terminates employment with the Company for Good
Reason, Executive shall receive the following benefits:

          (A) BASE SALARY. Executive shall receive an amount equal to 200% of
Executive's Base Salary.

          (B) ANNUAL BONUS. Executive shall receive an amount equal to either
(i) 200% of Executive's target bonus under the Company's annual bonus program,
if then in effect, for the year of such termination, or (ii) if such program is
not then in effect and its suspension or termination constituted a Good Reason
basis for Executive's termination of employment, 200% of Executive's target
bonus under such program immediately prior to its suspension or termination.

          (C) EXTENDED EXERCISABILITY OF OPTIONS. Executive shall be entitled to
exercise his or her outstanding stock options, to the extent such options are
vested, until the earlier of (i) the expiration of the term of such options as
provided in the agreement under which such options were granted, and (ii)
eighteen (18) months after Executive's termination of employment.

          (D) CONTINUED HEALTH INSURANCE BENEFITS. Provided that Executive
elects continued coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1985


                                       4.



("COBRA"), the Company shall pay the portion of premiums of Executive's group
medical, dental and vision coverage, including coverage for Executive's eligible
dependents, that the Company paid prior to Executive's termination of
employment, through the earlier of (i) the date on which Executive obtains
alternative group medical, dental or vision insurance coverage, (ii) twenty-four
(24) months following the effective date of such termination, or (iii) the end
of the period during which COBRA coverage will be made available to Executive.
Executive shall be required to notify the Company immediately if Executive
obtains alternative group medical, dental or vision insurance.

     No provision of this Agreement shall affect the continuation coverage rules
under COBRA, except that the Company's payment of any applicable insurance
premiums shall be credited as a payment by Executive for purposes of Executive's
payment required under COBRA. Therefore, the period during which Executive may
elect to continue the Company's group medical coverage at Executive's own
expense under COBRA, the length of time during which COBRA coverage will be made
available to Executive, and all other rights and obligations of Executive under
COBRA (except the obligation to pay insurance premiums that the Company pays
during the period set forth above) shall be applied in the same manner that such
rules would apply in the absence of this Agreement. At the conclusion of the
period during which the Company will pay a portion of the premiums for
Executive's group medical, dental and vision coverage, Executive shall be
responsible for the entire payment of premiums required under COBRA for the
duration of the COBRA period. For purposes of this Section 2.1 (d), applicable
premiums that will be paid by the Company shall not include any amounts payable
by Executive under an Internal Revenue Code Section 125 health care
reimbursement plan, which amounts, if any, are the sole responsibility of
Executive.

     2.2 ACCELERATION OF OPTION VESTING.

          (I) In the event of a Change in Control described in any of clauses
(a) through (f) of section 1.3 of this Agreement, all outstanding stock options
held by Executive shall become immediately vested and exercisable effective upon
such Change in Control.

          (II) If, within twenty-four (24) months following the effective date
of a Change in Control described in clause (g) or (h) of section 1.3 of this
Agreement, Executive is (i) terminated by the Company for any reason other than
Misconduct or (ii) terminates employment with the Company for Good Reason, all
outstanding stock options held by Executive shall become immediately vested and
exercisable effective upon such termination.

     2.3 FLIGHT PRIVILEGES. Executive shall be entitled to top priority, first
class, positive space travel privileges, to be provided by AWA or, if AWA did
not survive the Change in Control, by the airline which survived the Change in
Control. The travel privileges would cover Executive and his/her dependents for
as long as Executive lives.

     2.4 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
received by Executive or by any retirement benefits received


                                       5.



by Executive after the date of Executive's termination (i) by the Company for
any reason other than Misconduct or Disability, or (ii) by Executive for Good
Reason.

                                    ARTICLE 3

                     LIMITATIONS AND CONDITIONS ON BENEFITS

     3.1 RELEASE PRIOR TO PAYMENT OF BENEFITS. In order to be eligible to
receive benefits under this Agreement, Executive must execute a general waiver
and release in substantially the form attached hereto, as Exhibit A, Exhibit B
or Exhibit C, as appropriate, and such release must become effective in
accordance with its terms. The Company, in its sole discretion, shall determine
the form of the required release, which may be incorporated into a termination
agreement or other agreement with Executive, and may modify the form of the
required release to comply with applicable federal or state law.

     3.2 PARACHUTE PAYMENTS. If any payment, distribution or benefit Executive
would receive from the Company or otherwise, but determined without regard to
any additional payment required under this Section 3.2, pursuant to the terms of
this Agreement ("Payment"), would (i) constitute a "parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), and (ii) be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties payable with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then Executive shall be entitled
to receive from the Company an additional payment (the "Gross-Up Payment") in an
amount that shall fund the payment by Executive of any Excise Tax on the Payment
as well as all income and employment taxes imposed on the Gross-Up Payment, any
Excise Tax imposed on the Gross-Up Payment and any interest or penalties imposed
with respect to income and employment taxes imposed on the Gross-Up Payment.

     The accounting firm engaged by the Company for general audit purposes as of
the day prior to the effective date of the Change in Control shall perform the
foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall
bear all expenses with respect to the determinations by such accounting firm
required to be made hereunder.

     The accounting firm engaged to make the determinations hereunder shall
provide its calculations, together with detailed supporting documentation, to
the Company and Executive within fifteen (15) calendar days after the date on
which Executive's right to a Payment is triggered (if requested at that time by
the Company or Executive) or such other time as requested by the Company or
Executive. If the accounting firm determines that no Excise Tax is payable with
respect to a Payment, either before or after the application of the Reduced
Amount, it shall furnish the Company and Executive with an opinion reasonably
acceptable to Executive that no Excise Tax will be imposed with respect to such
Payment. Any good faith determinations of the


                                       6.



accounting firm made hereunder shall be final, binding and conclusive upon the
Company and Executive.

     3.3 CERTAIN REDUCTIONS AND OFFSETS. The Company, in its sole discretion,
shall have the authority to reduce Executive's severance benefits, in whole or
in part, by any other severance benefits, pay in lieu of notice, or other
similar benefits payable to Executive by the Company that become payable in
connection with Executive's termination of employment pursuant to (i) any
applicable legal requirement, including, without limitation, the Worker
Adjustment and Retraining Notification Act (the "WARN Act"), (ii) a written
employment or severance agreement with the Company, or (iii) any Company policy
or practice providing for Executive to remain on the payroll for a limited
period of time after being give notice of the termination of Executive's
employment. The benefits provided under this Agreement are intended to satisfy,
in whole or in part, any and all statutory obligations that may arise out of
Executive's termination of employment, and the Company shall so construe and
enforce the terms of this Agreement. The Company's decision to apply such
reductions to the severance benefits of one Executive and the amount of such
reductions shall in no way obligate the Company to apply the same reductions in
the same amounts to the severance benefits of any other Executive, even if
similarly situated. In the Company's sole discretion, such reductions may be
applied on a retroactive basis, with severance benefits previously paid being
recharacterized as payments pursuant to the Company's statutory obligation.

     3.4 TERMINATION ON ACCOUNT OF DEATH. In no event shall a termination on
account of Executive's death entitle Executive or any of his or her heirs or
beneficiaries to any benefits under this Agreement.

     3.5 TERMINATION OF BENEFITS. Benefits under this Agreement shall terminate
immediately if Executive, at any time, violates any proprietary information or
confidentiality obligation to the Company.

     3.6 TERMINATION OF CERTAIN OTHER BENEFITS. All other benefits (such as
401(k) plan coverage) shall terminate as of Executive's termination date.

     3.7 NON-DUPLICATION OF BENEFITS. Executive is not eligible to receive
benefits under this Agreement more than one time.

                                    ARTICLE 4

                       TIME OF PAYMENT AND FORM OF BENEFIT

     4.1 The Company reserves the right to determine in what form the severance
benefits under this Agreement shall be paid and to determine the timing of such
payments. All such payments under this Agreement shall be subject to applicable
withholding for federal, state, and local taxes. In no event shall payment of
any severance benefit under Section 2.1 of this Agreement be made prior to
Executive's termination date or prior to the effective date of the release
described in Section 3.1 of this Agreement.


                                       7.



                                    ARTICLE 5

                               GENERAL PROVISIONS

     5.1 EMPLOYMENT STATUS. Nothing in this Agreement alters the at-will nature
of Executive's employment. Either the Company or the Executive can terminate the
employment relationship at any time, with or without cause and with or without
advance notice. This at-will employment relationship can only be modified in a
writing signed by Executive and a duly authorized Company representative.

     5.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third (3rd) day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.

     5.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.

     5.4 WAIVER. If any party should waive any breach of any provisions of this
Agreement, the party shall not thereby be deemed to have waived any preceding or
succeeding breach of the same or any other provision of this Agreement.

     5.5 COMPLETE AGREEMENT. This Agreement, including Exhibit A, Exhibit B and
Exhibit C, constitutes the entire agreement between Executive and the Company
and is the complete, final, and exclusive embodiment of their agreement with
regard to this subject matter, and it supersedes any other agreements or
promises made to Executive by the Company, whether oral, written or implied,
regarding payments and benefits to Executive in the event of employment
termination, including, without limitation, the Prior Agreement. The Agreement
is entered into without reliance on any promise or representation other than
those expressly contained herein.

     5.6 AMENDMENT OR TERMINATION. This Agreement may be changed or terminated
only upon the mutual written consent of the Company and Executive. Unless so
terminated, this Agreement shall continue in effect for as long as Executive
continues to be employed by the Company or by any surviving or successor entity
following any Change in Control.

     5.7 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.


                                       8.



     5.8 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.

     5.9 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and any
surviving entity resulting from a Change in Control and upon any other person
who is a successor by merger, acquisition, consolidation or otherwise to the
business formerly carried on by the Company, and their respective successors,
assigns, heirs, executors and administrators, without regard to whether or not
such person expressly assumes any rights or duties hereunder; provided, however,
that Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.

     5.10 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
Arizona, without regard to such state's conflict of laws rules.

     5.11 NON-PUBLICATION. The parties mutually agree not to disclose the terms
of this Agreement except to the extent that disclosure is mandated by applicable
law, standard or required corporate reporting, or disclosure is made to the
parties' respective advisors and agents (e.g., attorneys, accountants) or
immediate family members.

     5.12 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.


                                       9.



     IN WITNESS WHEREOF, the parties have executed this Agreement on the
Effective Date written above.

AMERICA WEST HOLDINGS CORPORATION          AMERICA WEST AIRLINES, INC.


By:                                        By:
    ------------------------------------       ---------------------------------
Name:                                      Name:
Title:                                     Title:

[EXECUTIVE]

- ----------------------------------------
[NAME]

Exhibit A: Release (Individual Termination - Age 40 or Older)
Exhibit B: Release (Individual and Group Termination - Under Age 40)
Exhibit C: Release (Group Termination - Age 40 or Older)


                                      10.



                                    EXHIBIT A

                                     RELEASE
                   (INDIVIDUAL TERMINATION - AGE 40 OR OLDER)

     In consideration of the benefits I will receive under the Executive Change
in Control and Severance Benefits Agreement (the "Agreement") dated
____________, 2004, to which I would not otherwise be entitled, I hereby agree
as follows:

     I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.

     Except as otherwise set forth in this Release, I hereby release, acquit and
forever discharge the Company, its parents, subsidiaries and affiliates, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys' fees, damages,
indemnities and obligations of every kind and nature, in law, equity, or
otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed (other than any claim for indemnification I may have as a result of
any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to and including the date I execute this Release, including, but
not limited to: all such claims and demands directly or indirectly arising out
of or in any way connected with my employment with the Company or the
termination of that employment, including but not limited to, claims of
intentional and negligent infliction of emotional distress, any and all tort
claims for personal injury, claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other equity or ownership interests in
the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, or any other form of equity or compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the Arizona Civil Rights Act, as amended; tort law; contract law;
wrongful discharge; discrimination; fraud; defamation; emotional distress; and
breach of the implied covenant of good faith and fair dealing.

     I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA and that the consideration given under the
Agreement for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (A) my waiver and release do not apply to any rights or claims that may
arise on or after the date I execute this Release; (B) I have the right to
consult with an attorney prior to executing this Release; (C) I have twenty-one
(21) days to consider this Release (although I may


                                       1.



choose to voluntarily execute this Release earlier); (D) I have seven (7) days
following my execution of this Release to revoke the Release; and (E) this
Release shall not be effective until the date upon which the revocation period
has expired, which shall be the eighth (8th) day after I execute this Release.

                                           [EXECUTIVE]

                                           -------------------------------------
                                           Date:
                                                 -------------------------------


                                       2.



                                    EXHIBIT B

                                     RELEASE
                (INDIVIDUAL AND GROUP TERMINATION - UNDER AGE 40)

     In consideration of the benefits I will receive under the Executive Change
in Control and Severance Benefits Agreement (the "Agreement") dated
____________, 2004, to which I would not otherwise be entitled, I hereby agree
as follows:

     I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.

     Except as otherwise set forth in this Release, I hereby release, acquit and
forever discharge the Company, its parents, subsidiaries and affiliates, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys' fees, damages,
indemnities and obligations of every kind and nature, in law, equity, or
otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed (other than any claim for indemnification I may have as a result of
any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to and including the date I execute this Release, including, but
not limited to: all such claims and demands directly or indirectly arising out
of or in any way connected with my employment with the Company or the
termination of that employment, including but not limited to, claims of
intentional and negligent infliction of emotional distress, any and all tort
claims for personal injury, claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other equity or ownership interests in
the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, or any other form of equity or compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Employee
Retirement Income Security Act of 1974, as amended; the federal Americans with
Disabilities Act of 1990; the Arizona Civil Rights Act, as amended; tort law;
contract law; wrongful discharge; discrimination; fraud; defamation; emotional
distress; and breach of the implied covenant of good faith and fair dealing.

     I acknowledge that I have fourteen (14) days to consider this Release
(although I may choose to voluntarily execute this Release earlier).

                                           [EXECUTIVE]

                                           -------------------------------------
                                           Date:
                                                 -------------------------------


                                       1.



                                    EXHIBIT C

                                     RELEASE
                      (GROUP TERMINATION - AGE 40 OR OLDER)

     In consideration of the benefits I will receive under the Executive Change
in Control and Severance Benefits Agreement (the "Agreement") dated
____________, 2004, to which I would not otherwise be entitled, I hereby agree
as follows:

     I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.

     Except as otherwise set forth in this Release, I hereby release, acquit and
forever discharge the Company, its parents, subsidiaries and affiliates, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys' fees, damages,
indemnities and obligations of every kind and nature, in law, equity, or
otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed (other than any claim for indemnification I may have as a result of
any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to and including the date I execute this Release, including, but
not limited to: all such claims and demands directly or indirectly arising out
of or in any way connected with my employment with the Company or the
termination of that employment, including but not limited to, claims of
intentional and negligent infliction of emotional distress, any and all tort
claims for personal injury, claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other equity or ownership interests in
the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, or any other form of equity or compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the Arizona Civil Rights Act, as amended; tort law; contract law;
wrongful discharge; discrimination; fraud; defamation; emotional distress; and
breach of the implied covenant of good faith and fair dealing.

     I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA and that the consideration given under the
Agreement for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (A) my waiver and release do not apply to any rights or claims that may
arise on or after the date I execute this Release; (B) I have the right to
consult with an attorney prior to executing this Release; (C) I have forty-five
(45) days to consider this Release (although I may


                                       2.



choose to voluntarily execute this Release earlier); (D) I have seven (7) days
following my execution of this Release to revoke the Release; (E) this Release
shall not be effective until the date upon which the revocation period has
expired, which shall be the eighth day (8th) after I execute this Release; and
(F) I have received with this Release a detailed list of the job titles and ages
of all employees who were terminated in this group termination and the ages of
all employees of the Company in the same job classification or organizational
unit who were not terminated.

                                           [EXECUTIVE]

                                           -------------------------------------
                                           Date:
                                                 -------------------------------


                                       3.

EX-10.49

                                                                   EXHIBIT 10.49

                         EXECUTIVE CHANGE IN CONTROL AND
                          SEVERANCE BENEFITS AGREEMENT

          (SENIOR VICE PRESIDENTS AND OFFICERS OF EQUAL OR HIGHER RANK)

     This EXECUTIVE CHANGE IN CONTROL AND SEVERANCE BENEFITS AGREEMENT (the
"Agreement") is entered into as of the _____ day of _____________ , 200_ (the
"Effective Date"), by and among ___________________________ ("Executive"),
AMERICA WEST HOLDINGS CORPORATION, a Delaware corporation ("Holdings"), and
AMERICA WEST AIRLINES, INC., a Delaware corporation and a wholly-owned
subsidiary of Holdings ("AWA" and, together with Holdings, the "Company").

     WHEREAS, Executive is currently employed by the Company and has made and is
expected to continue to make major contributions to the short- and long-term
profitability, growth and financial strength of the Company;

     WHEREAS, the Company wishes to provide additional inducement for Executive
to remain in the ongoing employ of the Company; and

     WHEREAS, this Agreement is intended to supersede any other policy, plan,
program or arrangement relating to severance benefits payable by the Company to
Executive, including, without limitation, any prior Executive Change in Control
and Severance Benefits Agreements entered by and among Executive, Holdings, AWA
and The Leisure Company (collectively, the "Prior Agreement") and the America
West Holdings Corporation Executive Perquisites and Benefits policy as said
policy relates to such severance benefits.

                                    ARTICLE 1

                                  DEFINED TERMS

     For purposes of the Agreement, the following terms are defined as follows:

     1.1 "BASE SALARY" means Executive's annual base salary as in effect during
the last regularly scheduled payroll period immediately preceding the effective
date of Executive's termination (i) by the Company for any reason other than
Misconduct or Disability, or (ii) by Executive for Good Reason.

     1.2 "BOARD" means the Board of Directors of Holdings.

     1.3 "CHANGE IN CONTROL" shall occur on the first date after the Effective
Date that any of the following occurs:

          (I) the individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the Effective Date whose election, or nomination for
election by Holdings' stockholders, was approved by a vote of at


                                       1.



least two-thirds of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board; or

          (II) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than the Company, acquires (directly or indirectly) the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 25% of the combined voting power of the then
outstanding voting securities of Holdings or AWA entitled to vote generally in
the election of directors ("Voting Power"); or

          (III) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act), that is controlled (directly or
indirectly, through ownership share or voting power) by any former executive
officer(s) of Holdings either (a) acquires (directly or indirectly) the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 50% of the outstanding shares of Holdings Class A
Common Stock, or (b) elects or appoints one or more representatives to the
Board; or

          (IV) Holdings or AWA shall consummate a merger, consolidation or
reorganization of Holdings or AWA or any other similar transaction or series of
related transactions (collectively, a "Transaction") other than (A) a
Transaction in which the voting securities of Holdings or AWA outstanding
immediately prior thereto become (by operation of law), or are converted into or
exchanged for, voting securities of the surviving corporation or its parent
corporation immediately after such Transaction that are owned by the same person
or entity or persons or entities as immediately prior thereto and possess at
least 75% of the Voting Power held by the voting securities of the surviving
corporation or its parent corporation, or (B) a Transaction effected to
implement a recapitalization of Holdings or AWA (or similar transaction) in
which no person (excluding Holdings or AWA or any person who held more than 25%
of the Voting Power immediately prior to such Transaction) acquires more than
25% of the Voting Power; or

          (V) Holdings or AWA shall consummate a Transaction as a result of
which neither Holdings nor AWA survives as a publicly-owned corporation whose
common stock is registered under the Exchange Act; or

          (VI) Holdings or AWA shall sell or otherwise dispose of, or consummate
a transaction or series of related transactions providing for the sale or other
disposition of, all or substantially all of the stock or assets of AWA, or shall
enter into a plan for the complete liquidation of either Holdings or AWA.

     1.4 "DISABILITY" means a physical or mental condition of Executive that, in
the good faith judgment of the Company, based upon certification by a licensed
physician reasonably acceptable to Executive and the Company, (i) prevents
Executive from being able to perform the services required by his or her
position with the Company, (ii) has continued for a period of at least six (6)
months during any period of twelve (12) consecutive months and (iii) is expected
to continue.


                                       2.



     1.5 "GOOD REASON" means any of the following acts or failures to act, but
in each case only if it occurs during the period Executive is employed by the
Company and only if it is not consented to by Executive: (i) a material adverse
alteration by the Company in the nature or status of Executive's pay, position,
function, duties or responsibilities; provided, however, that such alteration
shall cease to be a Good Reason ninety (90) days after the occurrence of such
alteration unless prior to such date Executive has given written notice of
termination to the Company on account of such alteration; (ii) the relocation of
Executive outside the metropolitan area in which Executive is based; provided,
however, that such relocation shall cease to be a Good Reason ninety (90) days
after the occurrence of such relocation unless prior to such date Executive has
given written notice of termination to the Company on account of such
relocation; or (iii) the failure of the Company to perform any material
obligation owed to Executive, but only if such failure shall continue unremedied
for more than fifteen (15) days after written notice of such failure is given to
the Company by Executive.

     1.6 "MISCONDUCT" means one or more of the following:

          (I) the willful and continued failure by Executive to perform his or
her duties (other than any such failure resulting from Executive's incapacity
due to physical or mental illness) after written notice of such failure has been
given to Executive by the Company and Executive has had a reasonable period (but
not more than sixty (60) days) after receipt of such notice to correct such
failure;

          (II) the willful commission by Executive of any act that is both
dishonest and demonstrably injurious to Holdings, AWA or any direct or indirect
subsidiary of Holdings (monetarily or otherwise) in any material respect;

          (III) the conviction of Executive for a felony offense involving moral
turpitude; or

          (IV) a material breach by Executive of any of the covenants set forth
in any employment agreement between the Company and Executive, but only if such
breach shall continue unremedied for more than fifteen (15) days after written
notice thereof is given to Executive by the Company.

                                    ARTICLE 2

                                    BENEFITS

     2.1 BENEFITS UPON CERTAIN TERMINATIONS FOLLOWING A CHANGE IN CONTROL. If,
within twenty-four (24) months following the date of a Change in Control,
Executive (i) is terminated by the Company for any reason other than Misconduct
or Disability or (ii) terminates employment with the Company for Good Reason,
Executive shall receive the following benefits:

          (I) BASE SALARY. Executive shall receive an amount equal to 200% of
Executive's Base Salary.

          (II) ANNUAL BONUS. Executive shall receive an amount equal to either
(i) 200% of Executive's target bonus under the Company's annual bonus program,
if then in effect,


                                       3.



for the year of such termination, or (ii) if such program is not then in effect
and its suspension or termination constituted a Good Reason basis for
Executive's termination of employment, 200% of Executive's target bonus under
such program immediately prior to its suspension or termination.

          (III) LONG TERM INCENTIVE PLAN. Executive shall receive in respect of
the America West Airlines Performance-Based Award Plan, which became effective
as of January 1, 2003 (the "LTIP"), either (i) if the LTIP is in effect on
Executive's employment termination date, an amount equal to 200% of the greater
of (x) Executive's target award under the LTIP and (y) the award under the LTIP
that would have been paid to Executive had AWA's Total Stockholder Return for
the Performance Cycle ending on the December 31 of the year in which employment
termination occurs (or the next December 31 if no such Performance Cycle ends in
such year) been measured as of Executive's employment termination date, or (ii)
if the LTIP is not in effect on Executive's employment termination date and its
suspension or termination constituted a Good Reason basis for Executive's
termination of employment, an amount equal to 200% of the greater of (x) and (y)
above, determined on the basis of the target award most recently established for
Executive under the LTIP and AWA's Total Stockholder Return, measured as of
Executive's employment termination date, for the Performance Cycle that, absent
such suspension or termination of the LTIP, would have ended on the December 31
of the year in which employment termination occurs (or the next December 31 if
no such Performance Cycle would have ended in such year). Capitalized terms in
the preceding sentence that are not defined in this Agreement shall have the
definition assigned to such terms in the LTIP.

          (IV) EXTENDED EXERCISABILITY OF OPTIONS. Executive shall be entitled
to exercise his or her outstanding stock options, to the extent such options are
vested, until the earlier of (i) the expiration of the term of such options as
provided in the agreement under which such options were granted, and (ii)
eighteen (18) months after Executive's termination of employment.

          (V) CONTINUED HEALTH INSURANCE BENEFITS. Provided that Executive
elects continued coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA"), the Company shall pay the portion of premiums of
Executive's group medical, dental and vision coverage, including coverage for
Executive's eligible dependents, that the Company paid prior to Executive's
termination of employment, through the earlier of (i) the date on which
Executive obtains alternative group medical, dental or vision insurance
coverage, (ii) twenty-four (24) months following the effective date of such
termination, or (iii) the end of the period during which COBRA coverage will be
made available to Executive. Executive shall be required to notify the Company
immediately if Executive obtains alternative group medical, dental or vision
insurance.

     No provision of this Agreement shall affect the continuation coverage rules
under COBRA, except that the Company's payment of any applicable insurance
premiums shall be credited as a payment by Executive for purposes of Executive's
payment required under COBRA. Therefore, the period during which Executive may
elect to continue the Company's group medical coverage at Executive's own
expense under COBRA, the length of time during which COBRA coverage will be made
available to Executive, and all other rights and obligations of Executive under
COBRA (except the obligation to pay insurance premiums that the Company


                                       4.



pays during the period set forth above) shall be applied in the same manner that
such rules would apply in the absence of this Agreement. At the conclusion of
the period during which the Company will pay a portion of the premiums for
Executive's group medical, dental and vision coverage, Executive shall be
responsible for the entire payment of premiums required under COBRA for the
duration of the COBRA period. For purposes of this Section 2.1(e), applicable
premiums that will be paid by the Company shall not include any amounts payable
by Executive under an Internal Revenue Code Section 125 health care
reimbursement plan, which amounts, if any, are the sole responsibility of
Executive.

     2.2 BENEFITS UPON A CHANGE IN CONTROL. In the event of a Change in Control,
Executive shall receive the following benefits:

          (I) ACCELERATION OF OPTION VESTING. All outstanding stock options held
by Executive shall become immediately vested and exercisable effective upon such
Change in Control.

          (II) FLIGHT PRIVILEGES. Executive shall be entitled to top priority,
first class, positive space travel privileges, to be provided by AWA or, if AWA
did not survive the Change in Control, by the airline which survived the Change
in Control. The travel privileges would cover Executive and his/her dependents
for as long as Executive lives.

     2.3 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
received by Executive or by any retirement benefits received by Executive after
the date of Executive's termination (i) by the Company for any reason other than
Misconduct or Disability, or (ii) by Executive for Good Reason.

                                    ARTICLE 3

                     LIMITATIONS AND CONDITIONS ON BENEFITS

     3.1 RELEASE PRIOR TO PAYMENT OF BENEFITS. In order to be eligible to
receive benefits under this Agreement, Executive must execute a general waiver
and release in substantially the form attached hereto as Exhibit A, Exhibit B or
Exhibit C, as appropriate, and such release must become effective in accordance
with its terms. The Company, in its sole discretion, shall determine the form of
the required release, which may be incorporated into a termination agreement or
other agreement with Executive, and may modify the form of the required release
to comply with applicable federal or state law.

     3.2 PARACHUTE PAYMENTS. If any payment, distribution or benefit Executive
would receive from the Company or otherwise, but determined without regard to
any additional payment required under this Section 3.2, pursuant to the terms of
this Agreement ("Payment"), would (i) constitute a "parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), and (ii) be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties payable with respect to such excise tax


                                       5.



(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then Executive shall be entitled
to receive from the Company an additional payment (the "Gross-Up Payment") in an
amount that shall fund the payment by Executive of any Excise Tax on the Payment
as well as all income and employment taxes imposed on the Gross-Up Payment, any
Excise Tax imposed on the Gross-Up Payment and any interest or penalties imposed
with respect to income and employment taxes imposed on the Gross-Up Payment.

     The accounting firm engaged by the Company for general audit purposes as of
the day prior to the effective date of the Change in Control shall perform the
foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall
bear all expenses with respect to the determinations by such accounting firm
required to be made hereunder.

     The accounting firm engaged to make the determinations hereunder shall
provide its calculations, together with detailed supporting documentation, to
the Company and Executive within fifteen (15) calendar days after the date on
which Executive's right to a Payment is triggered (if requested at that time by
the Company or Executive) or such other time as requested by the Company or
Executive. If the accounting firm determines that no Excise Tax is payable with
respect to a Payment, either before or after the application of the Reduced
Amount, it shall furnish the Company and Executive with an opinion reasonably
acceptable to Executive that no Excise Tax will be imposed with respect to such
Payment. Any good faith determinations of the accounting firm made hereunder
shall be final, binding and conclusive upon the Company and Executive.

     3.3 CERTAIN REDUCTIONS AND OFFSETS. The Company, in its sole discretion,
shall have the authority to reduce Executive's severance benefits, in whole or
in part, by any other severance benefits, pay in lieu of notice, or other
similar benefits payable to Executive by the Company that become payable in
connection with Executive's termination of employment pursuant to (i) any
applicable legal requirement, including, without limitation, the Worker
Adjustment and Retraining Notification Act (the "WARN Act"), (ii) a written
employment or severance agreement with the Company, or (iii) any Company policy
or practice providing for Executive to remain on the payroll for a limited
period of time after being given notice of the termination of Executive's
employment. The benefits provided under this Agreement are intended to satisfy,
in whole or in part, any and all statutory obligations that may arise out of
Executive's termination of employment, and the Company shall so construe and
enforce the terms of this Agreement. The Company's decision to apply such
reductions to the severance benefits of one Executive and the amount of such
reductions shall in no way obligate the Company to apply the same reductions in
the same amounts to the severance benefits of any other Executive, even if
similarly situated. In the Company's sole discretion, such reductions may be
applied on a retroactive basis, with severance benefits previously paid being
recharacterized as payments pursuant to the Company's statutory obligation.


                                       6.



     3.4 TERMINATION ON ACCOUNT OF DEATH. In no event shall a termination on
account of Executive's death entitle Executive or any of his or her heirs or
beneficiaries to any benefits under this Agreement.

     3.5 TERMINATION OF BENEFITS. Benefits under this Agreement shall terminate
immediately if Executive, at any time, violates any proprietary information or
confidentiality obligation to the Company.

     3.6 TERMINATION OF CERTAIN OTHER BENEFITS. All other benefits (such as
401(k) plan coverage) shall terminate as of Executive's termination date.

     3.7 NON-DUPLICATION OF BENEFITS. Executive is not eligible to receive
benefits under this Agreement more than one time.

                                    ARTICLE 4

                       TIME OF PAYMENT AND FORM OF BENEFIT

     The Company reserves the right to determine in what form the severance
benefits under this Agreement shall be paid and to determine the timing of such
payments. All such payments under this Agreement shall be subject to applicable
withholding for federal, state, and local taxes. In no event shall payment of
any severance benefit under Section 2.1 of this Agreement be made prior to
Executive's termination date or prior to the effective date of the release
described in Section 3.1.

                                    ARTICLE 5

                               GENERAL PROVISIONS

     5.1 EMPLOYMENT STATUS. Nothing in this Agreement alters the at-will nature
of Executive's employment. Either the Company or Executive can terminate the
employment relationship at any time, with or without cause and with or without
advance notice. This at-will employment relationship can only be modified in a
writing signed by Executive and a duly authorized Company representative.

     5.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third (3rd) day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.

     5.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed,


                                       7.



construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provisions had never been contained herein.

     5.4 WAIVER. If any party should waive any breach of any provisions of this
Agreement, the party shall not thereby be deemed to have waived any preceding or
succeeding breach of the same or any other provision of this Agreement.

     5.5 COMPLETE AGREEMENT. This Agreement, including Exhibit A, Exhibit B and
Exhibit C, constitutes the entire agreement between Executive and the Company
and is the complete, final, and exclusive embodiment of their agreement with
regard to this subject matter, and it supersedes any other agreements or
promises made to Executive by the Company, whether oral, written or implied,
regarding payments and benefits to Executive in the event of employment
termination, including, without limitation, the Prior Agreement. The Agreement
is entered into without reliance on any promise or representation other than
those expressly contained herein.

     5.6 AMENDMENT OR TERMINATION. This Agreement may be changed or terminated
only upon the mutual written consent of the Company and Executive. Unless so
terminated, this Agreement shall continue in effect for as long as Executive
continues to be employed by the Company or by any surviving or successor entity
following any Change in Control.

     5.7 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.

     5.8 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.

     5.9 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and any
surviving entity resulting from a Change in Control and upon any other person
who is a successor by merger, acquisition, consolidation or otherwise to the
business formerly carried on by the Company, and their respective successors,
assigns, heirs, executors and administrators, without regard to whether or not
such person expressly assumes any rights or duties hereunder; provided, however,
that Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.

     5.10 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
Arizona, without regard to such state's conflict of laws rules.

     5.11 NON-PUBLICATION. The parties mutually agree not to disclose the terms
of this Agreement except to the extent that disclosure is mandated by applicable
law, standard or required corporate reporting, or disclosure is made to the
parties' respective advisors and agents (e.g., attorneys, accountants) or
immediate family members.


                                       8.



     5.12 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.


                                       9.



     IN WITNESS WHEREOF, the parties have executed this Agreement on the
Effective Date written above.

AMERICA WEST HOLDINGS CORPORATION          AMERICA WEST AIRLINES, INC.


By:                                        By:
    ------------------------------------       ---------------------------------
Name:                                      Name:
Title:                                     Title:

[EXECUTIVE]

- ----------------------------------------
[NAME]

Exhibit A: Release (Individual Termination - Age 40 or Older)
Exhibit B: Release (Individual and Group Termination - Under Age 40)
Exhibit C: Release (Group Termination - Age 40 or Older)


                                      10.



                                    EXHIBIT A

                                     RELEASE
                   (INDIVIDUAL TERMINATION - AGE 40 OR OLDER)

     In consideration of the benefits I will receive under the Executive Change
in Control and Severance Benefits Agreement (the "Agreement") dated February __,
2004, to which I would not otherwise be entitled, I hereby agree as follow:

     I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.

     Except as otherwise set forth in this Release, I hereby release, acquit and
forever discharge the Company, its parents, subsidiaries and affiliates, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys' fees, damages,
indemnities and obligations of every kind and nature, in law, equity, or
otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed (other than any claim for indemnification I may have as a result of
any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to and including the date I execute this Release, including, but
not limited to: all such claims and demands directly or indirectly arising out
of or in any way connected with my employment with the Company or the
termination of that employment, including but not limited to, claims of
intentional and negligent infliction of emotional distress, any and all tort
claims for personal injury, claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other equity or ownership interests in
the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, or any other form of equity or compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the Arizona Civil Rights Act, as amended; tort law; contract law;
wrongful discharge; discrimination; fraud; defamation; emotional distress; and
breach of the implied covenant of good faith and fair dealing.

     I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA and that the consideration given under the
Agreement for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (A) my waiver and release do not apply to any rights or claims that may
arise on or after the date I execute this Release; (B) I have the right to
consult with an attorney prior to executing this Release; (C) I have twenty-one
(21) days to consider this Release (although I may


                                       1.



choose to voluntarily execute this Release earlier); (D) I have seven (7) days
following my execution of this Release to revoke the Release; and (E) this
Release shall not be effective until the date upon which the revocation period
has expired, which shall be the eighth (8th) day after I execute this Release.

                                        [EXECUTIVE]

                                        ----------------------------------------
                                        Date:
                                              ----------------------------------


                                       2.



                                    EXHIBIT B

                                     RELEASE
                (INDIVIDUAL AND GROUP TERMINATION - UNDER AGE 40)

     In consideration of the benefits I will receive under the Executive Change
in Control and Severance Benefits Agreement (the "Agreement") dated February __,
2004, to which I would not otherwise be entitled, I hereby agree s follows:

     I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.

     Except as otherwise set forth in this Release, I hereby release, acquit and
forever discharge the Company, its parents, subsidiaries and affiliates, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys' fees, damages,
indemnities and obligations of every kind and nature, in law, equity, or
otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed (other than any claim for indemnification I may have as a result of
any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to and including the date I execute this Release, including, but
not limited to: all such claims and demands directly or indirectly arising out
of or in any way connected with my employment with the Company or the
termination of that employment, including but not limited to, claims of
intentional and negligent infliction of emotional distress, any and all tort
claims for personal injury, claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other equity or ownership interests in
the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, or any other form of equity or compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Employee
Retirement Income Security Act of 1974, as amended; the federal Americans with
Disabilities Act of 1990; the Arizona Civil Rights Act, as amended; tort law;
contract law; wrongful discharge; discrimination; fraud; defamation; emotional
distress; and breach of the implied covenant of good faith and fair dealing.

     I acknowledge that I have fourteen (14) days to consider this Release
(although I may choose to voluntarily execute this Release earlier).

                                        [EXECUTIVE]

                                        ----------------------------------------
                                        Date:
                                              ----------------------------------



                                    EXHIBIT C

                                     RELEASE
                      (GROUP TERMINATION - AGE 40 OR OLDER)

     In consideration of the benefits I will receive under the Executive Change
in Control and Severance Benefits Agreement (the "Agreement") dated February __,
2004, to which I would not otherwise be entitled, I hereby agree as follow:

     I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.

     Except as otherwise set forth in this Release, I hereby release, acquit and
forever discharge the Company, its parents, subsidiaries and affiliates, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys' fees, damages,
indemnities and obligations of every kind and nature, in law, equity, or
otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed (other than any claim for indemnification I may have as a result of
any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to and including the date I execute this Release, including, but
not limited to: all such claims and demands directly or indirectly arising out
of or in any way connected with my employment with the Company or the
termination of that employment, including but not limited to, claims of
intentional and negligent infliction of emotional distress, any and all tort
claims for personal injury, claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other equity or ownership interests in
the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, or any other form of equity or compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the Arizona Civil Rights Act, as amended; tort law; contract law;
wrongful discharge; discrimination; fraud; defamation; emotional distress; and
breach of the implied covenant of good faith and fair dealing.

     I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA and that the consideration given under the
Agreement for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (A) my waiver and release do not apply to any rights or claims that may
arise on or after the date I execute this Release; (B) I have the right to
consult with an attorney prior to executing this Release; (C) I have forty-five
(45) days to consider this Release (although I may


                                       2.



choose to voluntarily execute this Release earlier); (D) I have seven (7) days
following my execution of this Release to revoke the Release; (E) this Release
shall not be effective until the date upon which the revocation period has
expired, which shall be the eighth day (8th) after I execute this Release; and
(F) I have received with this Release a detailed list of the job titles and ages
of all employees who were terminated in this group termination and the ages of
all employees of the Company in the same job classification or organizational
unit who were not terminated.

                                        [EXECUTIVE]

                                        ----------------------------------------
                                        Date:
                                              ----------------------------------


                                       3.

EX-10.50

                                                                   EXHIBIT 10.50

                                OFFICER BENEFITS

 AMERICA WEST HOLDINGS CORPORATION (AWHC) AND AMERICA WEST AIRLINES, INC. (AWA)

1. TRAVEL BENEFITS. Positive-space travel on America West Airlines and America
West Express is provided to officers of AWHC and AWA and their eligible
dependents, and cash payments are made to federal and state tax authorities on
behalf of each officer to cover tax liability on the value of travel benefits.

2. FINANCIAL ADVISORY AND TAX PREPARATION SERVICES. Financial advisory and tax
preparation services are provided to officers of AWHC and AWA. Vice Presidents
are eligible for reimbursement up to $3,500 annually and Senior Vice Presidents
and above are eligible for reimbursement up to $4,500 annually. Applicable
payroll taxes are withheld on the gross amount of reimbursement made to each
officer.

3. EXECUTIVE PHYSICALS. Payment of expenses associated with an annual physical
exam performed under the Mayo Clinic, Scottsdale Executive Health Program are
provided to officers.

4. RETIREE HEALTH BENEFITS. Retiree Health Benefits (medical, prescription drug,
behavioral health, vision and dental) are available to officers age 55 and at
least five (5) years of service with AWHC or AWA. Eligible dependents may also
be covered as long as the retired officer is eligible for coverage and until the
first day of the month in which the officer turns age 65. AWHC pays 80% of the
cost of retiree health benefits for officers and their eligible dependents.

5. WELFARE BENEFITS. Officers hired or promoted before June 2002 are eligible
for Company paid, individual level term life insurance policies of $1,000,000
coverage for Vice Presidents, $1,500,000 for Senior Vice Presidents, $1,750,000
for Executive Vice Presidents and $2,000,000 coverage for
Chairman/CEO/President. Cash payments are made to federal and state tax
authorities on behalf of each eligible officer to cover tax liability on the
premiums paid for these policies.

Officers are provided self-insured, taxable, supplemental long-term disability
(LTD) coverage for their own occupation. This coverage provides a supplement to
the Company's group disability benefit program. The LTD supplement covers up to
80% of the officer's monthly pre-disability base salary to a maximum monthly
benefit of $15,000, offset by any benefit received under the group LTD Plan
(that has a benefit at 66-2/3% of pre-disability base salary to a maximum of
$6,667 per month) for up to two (2) years of LTD. Thereafter, the supplemental
LTD plan pays at 66-2/3% of pre-disability base salary to a maximum of $15,000
per month to age 65, offset by any benefit received under the group LTD plan.

6. AUTOMOBILE ALLOWANCE. A taxable automobile allowance up to 6% of monthly base
salary to a maximum of $800 per month is provided to officers.

7. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE AND INDEMNIFICATION. AWHC has a
policy that provides liability insurance for directors and officers of AWHC or
AWA.

EX-10.51

                                                                   EXHIBIT 10.51

                       DIRECTOR BENEFITS AND COMPENSATION

 AMERICA WEST HOLDINGS CORPORATION (AWHC) AND AMERICA WEST AIRLINES, INC. (AWA)

1. CASH COMPENSATION OF NON-EMPLOYEE DIRECTORS. Non-employee directors receive
an annual $20,000 retainer, $1,000 per meeting attended, $10,000 per year for
chairing the Audit Committee and $4,000 per year for chairing all other Board
committees.

2. FLIGHT BENEFITS FOR DIRECTORS. Positive-space travel on America West Airlines
and America West Express is provided to directors of AWHC and AWA and their
eligible dependents, and cash payments are made to federal and state tax
authorities on behalf of each director to cover tax liability on the value of
travel benefits.

3. STOCK BASED COMPENSATION FOR NON-EMPLOYEE DIRECTORS. Under AWHC's 2002
Incentive Equity Plan, non-employee directors receive an annual grant of options
to purchase 10,000 shares of the AWHC's Class B Common Stock. In addition, each
non-employee director automatically receives upon the date of initial election
or appointment options to purchase 10,000 shares of the AWHC's Class B Common
Stock.

4. CHARITABLE AWARD PROGRAM. All directors are invited to participate in a
charitable award program. Under this program, upon the death of a participant,
AWHC will donate $1 million to one or more qualifying charitable organizations
chosen by the participant. The donations will be substantially funded by life
insurance proceeds from policies maintained by the AWHC on the lives of each
participant. Individual directors will derive no direct financial benefit from
this program because all insurance proceeds are paid and all tax deductions for
the charitable contributions accrue solely to AWHC.

5. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE AND INDEMNIFICATION. AWHC has a
policy which provides liability insurance for directors and officers of AWHC and
AWA.

EX-10.53

                                                                  EXHIBIT 10.53

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT ("AGREEMENT"), dated as of February 24, 2004
(the "EFFECTIVE DATE"), by and among AMERICA WEST HOLDINGS CORPORATION, a
Delaware corporation ("HOLDINGS"), AMERICA WEST AIRLINES, INC., a Delaware
corporation and a wholly-owned subsidiary of Holdings ("AWA", and, together with
Holdings, "EMPLOYERS" and individually, an "EMPLOYER"), and W. DOUGLAS PARKER
("PARKER").

      WHEREAS, Employers desire to employ Parker in an executive capacity and
Parker desires to serve in such capacity, all on the terms and conditions, and
for the consideration, set forth in this Agreement.

      NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:

                                   ARTICLE 1

                         DEFINITIONS AND INTERPRETATIONS

      1.1   DEFINITIONS

            For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the following terms shall
have the following respective meanings:

      "ACCOUNTING FIRM" shall have the meaning specified in Section 4.6(a).

      "ADMINISTRATOR" shall have the meaning specified in Section 6.1.

      "ANNUAL AWARD" shall have the meaning specified in Section 3.2.

      "ARBITRATORS" shall have the meaning specified in Section 6.1.

      "BASE SALARY" shall have the meaning specified in Section 3.1.

      "BOARD" shall mean the Board of Directors of Holdings.

      "CEO" shall mean, when used with reference to any Constituent Company, the
chief executive officer of such Constituent Company.

      "CHAIRMAN" shall mean, when used with reference to any Constituent
Company, the Chairman of the board of directors of such Constituent Company.

      Subject to the terms of Section 7.8(a) below, "CHANGE IN CONTROL" shall
occur on the first date after the Effective Date that any of the following
occur:

            (i) the individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided,

                                       1.


however, that any individual becoming a director subsequent to the Effective
Date whose election, or nomination for election by Holdings' stockholders, was
approved by a vote of at least two-thirds of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board; or

            (ii) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act), other than the Employers, acquires
(directly or indirectly) the beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of more than 25% of the combined
voting power of the then outstanding voting securities of Holdings or AWA
entitled to vote generally in the election of directors ("Voting Power"); or

            (iii) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act), that is controlled (directly or
indirectly, through ownership share or voting power) by any former executive
officer(s) of Holdings either (a) acquires (directly or indirectly) the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 50% of the outstanding shares of Holdings Class A
Common Stock, or (b) elects or appoints one or more representatives to the
Board; or

            (iv) Holdings or AWA shall consummate a merger, consolidation or
reorganization of Holdings or AWA or any other similar transaction or series of
related transactions (collectively, a "Transaction") other than (A) a
Transaction in which the voting securities of Holdings or AWA outstanding
immediately prior thereto become (by operation of law), or are converted into or
exchanged for, voting securities of the surviving corporation or its parent
corporation immediately after such Transaction that are owned by the same person
or entity or persons or entities as immediately prior thereto and possess at
least 75% of the Voting Power held by the voting securities of the surviving
corporation or its parent corporation, or (B) a Transaction effected to
implement a recapitalization of Holdings or AWA (or similar transaction) in
which no person (excluding Holdings or AWA or any person who held more than 25%
of the Voting Power immediately prior to such Transaction) acquires more than
25% of the Voting Power;

            (v) Holdings or AWA shall consummate a Transaction as a result of
which neither Holdings nor AWA survives as a publicly-owned corporation whose
common stock is registered under the Exchange Act; or

            (vi) Holdings or AWA shall sell or otherwise dispose of, or
consummate a transaction or series of related transactions providing for the
sale or other disposition of, all or substantially all of the stock or assets of
AWA, or shall enter into a plan for the complete liquidation of either Holdings
or AWA.

      "COBRA" shall have the meaning specified in Section 4.4( c).

      "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder as in effect from time to time.

      "CONFIDENTIAL INFORMATION" shall have the meaning specified in Section
5.1(a).

                                       2.


      "CONSTITUENT COMPANIES" shall mean, collectively, Holdings and AWA and all
other direct or indirect subsidiaries of Holdings.

      "DISABILITY" shall mean a physical or mental condition of Parker that, in
the good faith judgment of not less than a majority of the entire membership of
the Board, based upon certification by a licensed physician reasonably
acceptable to Parker and the Board, (i) prevents Parker from being able to
perform the essential functions of the services required under this Agreement,
(ii) has continued for a period of at least six months during any period of
twelve consecutive months and (iii) is expected to continue.

      "DISPUTE" shall have the meaning specified in Section 6.1.

      "EMPLOYMENT PERIOD" shall mean the period commencing on the Effective Date
and ending on the Expiration Date; provided, however, that if either Holdings or
Parker gives a Notice of Termination pursuant to Section 4.1 or 4.2, then the
Employment Period shall not extend beyond the relevant Termination Date.

      "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.

      "EXCISE TAX" shall have the meaning specified in Section 4.6.

      "EXPIRATION DATE" shall mean December 31, 2007; provided, however, that
commencing on January 1, 2007 and on each January 1 thereafter, the Expiration
Date shall automatically be extended one additional year unless, not later than
the September 30 prior to such January 1, either party shall give written notice
to the other party that the Expiration Date shall cease to be so extended.

      "GROSS-UP PAYMENT" shall have the meaning specified in Section 4.6.

      "GOOD REASON" shall mean any of the following actions or failures to act,
but in each case only if it occurs during the Employment Period and then only if
it is not consented to by Parker in writing:

            (i) a material diminution by an Employer in the nature or scope of
Parker's applicable titles, positions, functions, duties or responsibilities
described in Section 2.2, including any change which would alter Parker's
reporting responsibilities described in Section 2.2; provided, however, that
each such alteration shall cease to be a Good Reason on the date that is 180
days after the occurrence of such alteration unless, prior to such date, Parker
gives a Notice of Termination pursuant to Section 4.1 on account of such
alteration;

            (ii) the failure of an Employer to perform any of its obligations
under this Agreement in any material regard, including without limitation
Section 3 hereof, but only if such failure shall continue unremedied for more
than 30 days after written notice detailing such failure is given by Parker to
Holdings;

            (iii) the relocation of the principal executive offices of an
Employer outside the greater Phoenix, Arizona metropolitan area or an Employer's
requiring Parker to be based other than at such principal executive offices;
provided, however, that such relocation shall cease to be

                                       3.


a Good Reason on the date that is 180 days after the occurrence of such
relocation unless, prior to such date, Parker gives a Notice of Termination
pursuant to Section 4.1 on account of such relocation;

            (iv) the failure of an Employer to obtain any assumption agreement
required by Section 7.5(a), but only if such failure shall continue unremedied
for more than 30 days after written notice detailing such failure is given by
Parker to Holdings;

            (v) the failure of an Employer to elect or re-elect, or to appoint
or re-appoint, Parker to the applicable offices described in paragraphs (a) or
(b) of Section 2.2, but only if such failure shall continue unremedied for more
than 30 days after written notice detailing such failure is given by Parker to
Holdings; or

            (vi) the failure of Parker to be elected or appointed, or to be
re-elected or re-appointed, as Chairman of either Employer as contemplated by
Section 2.2, but only if such failure shall continue unremedied for more than 30
days after written notice detailing such failure is given by Parker to Holdings.

      "INCENTIVE EQUITY PLANS" shall mean the America West 1994 Incentive Equity
Plan and the America West 2002 Incentive Equity Plan, as amended from time to
time, or any successor and future equity-based plans.

      "LTIP" shall mean the America West Airlines Performance-Based Award Plan,
which became effective as of January 1, 2003.

      Subject to the terms of Section 7.8(a) below, "MISCONDUCT" shall mean one
or more of the following:

            (i) the willful and continued failure by Parker to perform his
duties described in Section 2.2 (other than any such failure resulting from
Parker's incapacity due to physical or mental illness) after written notice of
such failure has been given to Parker by Holdings and Parker has had a
reasonable period (but not more than 60 days) after receipt of such notice to
correct such failure;

            (ii) the willful commission by Parker of any act that is both
dishonest and demonstrably injurious to any Constituent Company (monetarily or
otherwise) in any material respect;

            (iii) the conviction of Parker for a felony offense involving moral
turpitude; or

            (iv) a material breach by Parker of any of the covenants set forth
in this Agreement (other than Section 2.2), but only if such breach shall
continue unremedied for more than 15 days after written notice thereof is given
to Parker by Holdings.

      "NOTICE OF TERMINATION" shall mean a notice terminating Parker's
employment in accordance with Section 4.1 or 4.2.

      "PAYMENT" shall have the meaning specified in Section 4.6.

                                       4.


      "PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust and an unincorporated organization.

      "PRESIDENT" shall mean, when used with reference to any Constituent
Company, the president of such Constituent Company.

      "RESTRICTED PERIOD" shall have the meaning specified in Section 5.2(a).

      "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

      "TERMINATION DATE" shall mean either the termination date specified in a
Notice of Termination delivered in accordance with Section 4.1 or 4.2 or the
Expiration Date, as applicable.

      "UNDERPAYMENT" shall have the meaning specified in Section 4.6(a).

      1.2   INTERPRETATIONS

            (a) In this Agreement, unless a clear contrary intention appears,
(i) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision, (ii) reference to any Article or Section means
such Article or Section hereof, (iii) the words "including" (and with
correlative meaning "include") means including, without limiting the generality
of any description preceding such term, and (iv) where any provision of this
Agreement refers to action to be taken by any party, or which such party is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such party.

            (b) The Article and Section headings herein are for convenience only
and shall not affect the construction hereof.

            (c) No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.

                                   ARTICLE 2

                     EMPLOYMENT; TERM; POSITIONS AND DUTIES

      2.1   EMPLOYMENT; TERM

            Each Employer hereby employs Parker in the executive capacities set
forth herein and Parker hereby accepts employment by each Employer, in each case
on the terms and conditions, and for the consideration, set forth in this
Agreement. Parker's employment hereunder shall commence on the Effective Date
and shall terminate on the Expiration Date, unless earlier terminated as
provided in Article 4.

                                       5.


      2.2   POSITIONS AND DUTIES

            (a) While employed hereunder, Parker shall serve as Chairman,
President and CEO of Holdings and shall have and may exercise all of the powers,
functions, duties and responsibilities normally attributable to such positions,
including such powers, duties and responsibilities as are set forth with respect
to such positions in the certificate of incorporation and bylaws (as from time
to time in effect) of Holdings.

            (b) While employed hereunder, Parker shall serve as Chairman,
President and CEO of AWA and shall have and may exercise all of the powers,
functions, duties and responsibilities normally attributable to such position,
including such powers, duties and responsibilities as are set forth with respect
to such position in the certificate of incorporation and bylaws (as from time to
time in effect) of AWA.

            (c) Parker shall have such additional duties and responsibilities
commensurate with the positions referred to above as from time to time may be
reasonably assigned to him by the Board.

            (d) While employed hereunder, Parker shall report directly and
exclusively to the Board and shall observe and comply with all lawful policies,
directions and instructions of the Board that are consistent with paragraphs
(a), (b) and (c) above. Parker acknowledges and agrees that the obligation to
respond to inquiries and requests made by duly appointed committees of the Board
is within the scope of his responsibilities as Chairman, President and CEO.

            (e) During the Employment Period, the chief operating officer, the
chief financial officer, the chief legal officer, the chief marketing officer
and the chief public affairs officer of each of AWA and Holdings, respectively,
and such other officers as the Board and Parker shall mutually agree, shall
report directly to Parker or to such other executive officer as Parker may
designate.

            (f) The Employers agree to use their best efforts to cause Parker to
be elected or appointed, or re-elected or re-appointed, as Chairman of each
Employer at all times during the Employment Period.

            (g) While employed hereunder, Parker agrees to devote substantially
all of his business time, attention, skill and efforts to the faithful and
efficient performance of his duties hereunder as Chairman, President and CEO of
Holdings and as Chairman, President and CEO of AWA; provided, however, that
Parker may engage in the following activities so long as they do not interfere
in any material respect with the performance of Parker's duties and
responsibilities hereunder: (i) serve on corporate boards or committees with
respect to which the Board shall have given its prior approval, which approval
shall not be unreasonably withheld, (ii) serve on civic or charitable boards or
committees, (iii) engage in community affairs or charitable endeavors, (iv)
manage his personal finances, investments and other matters, and (v) deliver
lectures, fulfill speaking engagements or teach on a part-time basis at
educational institutions.

                                       6.


      2.3   PLACE OF EMPLOYMENT

            Parker's place of employment hereunder shall be at Holdings'
principal executive offices.

                                   ARTICLE 3

                            COMPENSATION AND BENEFITS

      3.1   BASE SALARY

            (a) For services rendered by Parker under this Agreement, Employers
shall pay to Parker an annual cash base salary ("BASE Salary") in the amount
(subject to adjustment as provided in paragraph (b) below) of $550,000 effective
from and after the date of execution of this Agreement and for the remainder of
his employment hereunder. The Base Salary shall be payable as earned during the
Employment Period at such time and in such manner consistent with the Employer's
payroll practices for other senior executives.

            (b) The Base Salary shall be reviewed at least annually at such time
or times as the salaries of other senior executives of the Employers as a group
are reviewed commencing in February 2004, and may be increased, but not
decreased, by the Compensation and Human Resources Committee of the Board (or
such other committee as may be appointed by the Board with such authority) at
any time or from time to time as such committee may deem appropriate.

      3.2   INCENTIVE COMPENSATION AWARDS

            (a) With respect to each full or partial fiscal year occurring
during the Employment Period, beginning with the fiscal year ending December 31,
2003, Parker shall be eligible to receive in addition to the Base Salary an
annual incentive compensation award (the "ANNUAL AWARD") for services rendered
during such full or partial fiscal year, subject to the terms and conditions of
the Employers' annual incentive compensation plan as in effect from time to
time. The amount of the Annual Award, if any, with respect to any fiscal year
shall be based upon performance targets and award levels determined, in
consultation with Parker, by and in the sole discretion of the Board, the
Compensation and Human Resources Committee or such other committee as may be
appointed by the Board with such authority, in accordance with the Employers'
annual incentive compensation plan as in effect from time to time; provided,
however, that for each fiscal year the target award levels with respect to
Parker shall be established in such a manner as to provide Parker with the
opportunity to earn an Annual Award of at least 80% of his Base Salary, assuming
performance at the target level, and a maximum Annual Award opportunity of 160%
of his Base Salary, assuming performance at an extraordinary level in excess of
the target level, for such fiscal year (pro rated for any partial fiscal year).

            (b) With respect to the LTIP, the parties acknowledge and agree that
during the Employment Period, Parker will participate in each "Performance
Cycle" and "Transition Performance Cycle," as such terms are defined in the
LTIP, that commences under the LTIP at the award level applicable to the Chief
Executive Officer of AWA. Except as otherwise

                                       7.


expressly set forth in this Agreement, the terms of Parker's awards under the
LTIP will be governed in accordance with the terms of the LTIP, as in effect
from time to time.

      3.3   STOCK INCENTIVE AWARDS

            Parker shall be granted equity-based incentive awards, including
stock options and restricted stock awards, commensurate with his status as the
most senior executive officer of the Employers pursuant to the Incentive Equity
Plans, at such time or times as equity-based incentive grants are made to other
senior executives of the Employers as a group (but excluding special grants
associated with or attributable to new hires, promotions and other individual
retention decisions). Parker acknowledges that the decision to make such awards
to senior executives of the Employers generally shall be made by and in the sole
discretion of the Compensation and Human Resources Committee, or such other
committee as may be appointed by the Board with such authority.

      3.4   OTHER INCENTIVE COMPENSATION AND BENEFITS

            In addition to the incentive and equity compensation that Parker
becomes entitled to receive under Sections 3.2 and 3.3 above, Parker shall be
granted additional grants of equity compensation and other annual and long-term
incentive compensation, commensurate with his status as the most senior
executive officer of the Employers at such time or times as such awards are made
to other senior executives of the Employers as a group (but excluding special
grants associated with or attributable to new hires, promotions and other
individual retention decisions). Parker acknowledges that the decision to make
such grants or awards to senior executives of the Employers shall be made by and
in the sole discretion of the Compensation and Human Resources Committee, or
such other committee as may be appointed by the Board with such authority.

      3.5   LIFE INSURANCE

            During the Employment Period, Employers agree to maintain, at all
times and without premium cost to Parker, a term life insurance policy on the
life of Parker in the amount of $2 million, the proceeds of which, in the event
of Parker's death, shall be payable to one or more beneficiaries designated by
Parker or, in the absence of any such designation, to his estate. Such policy
shall be issued by a solvent insurance company reasonably acceptable to Parker.

      3.6   OFFICE SPACE; STAFFING; SERVICES

            During the Employment Period, Employers shall provide Parker with
office space, secretarial and other support staff and administrative services
necessary to enable Parker to perform his duties and responsibilities under this
Agreement and as appropriate for a senior executive of Parker's status.

      3.7   BUSINESS EXPENSES

            Each Employer shall, in accordance with the rules and policies that
it may establish from time to time for senior executives, reimburse Parker
(without duplication) for business expenses reasonably incurred in the
performance of Parker's duties hereunder. It is

                                       8.


understood that Parker is authorized to incur reasonable business expenses for
promoting the businesses and reputations of the Constituent Companies, including
reasonable expenditures for travel, lodging, meals and client and/or business
associate entertainment. Requests for reimbursement for such expenses must be
accompanied by appropriate documentation.

      3.8   OTHER BENEFITS

            Parker shall be entitled to receive all benefits and other
perquisites that may be offered by the Employers to their senior executives as a
group, including, (i) participation in the various employee benefit plans or
programs provided to senior executives of Employers in general (including life
insurance and disability insurance programs), subject to meeting the eligibility
requirements with respect to each of such benefit plans or programs, (ii)
tax/financial planning assistance, (iii) automobile allowances, (iv) on-line and
interline, positive space travel privileges, (v) participation in Employers'
severance payment policies or plans for executives in general and (vi)
participation in Employers' retiree medical insurance programs, subject to
meeting the eligibility requirements of such programs. In addition, the
Employers shall reimburse Parker for membership fees and dues for up to two (2)
clubs that Parker may choose to join, in his sole discretion. However, nothing
in this Section 3.7 shall be deemed to prohibit Employers from making any
changes in any of the plans, programs or benefits described herein, provided the
change similarly affects all senior executives of Employers.

      3.9   ATTORNEYS' FEES

            Holdings shall pay, or reimburse Parker for, reasonable attorneys'
fees and associated costs incurred by Parker in connection with the negotiation
and execution of this Agreement and in connection with any amendment to this
Agreement.

      3.10  NO DIRECTOR FEES

            In no event shall Parker be entitled to receive any additional
compensation for serving as a director of any Constituent Company during the
Employment Period.

                                   ARTICLE 4

                 CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT

      4.1   TERMINATION BY PARKER

            Parker may, at any time prior to the Expiration Date, terminate his
employment hereunder for any reason by delivering a Notice of Termination to the
Board. Any such Notice of Termination shall specify a Termination Date not less
than 30 or more than 60 days after the date such notice is given; provided,
however, that if the Notice of Termination purports to terminate Parker's
employment for Good Reason, it shall set forth in reasonable detail the reason
for such termination and the facts and circumstances claimed to provide a basis
for such termination, and shall specify a Termination Date not less than 5 or
more than 30 days after the date such notice is given.

                                       9.


      4.2   TERMINATION BY HOLDINGS

            Holdings may, at any time prior to the Expiration Date, terminate
Parker's employment hereunder for any reason by delivering a Notice of
Termination to Parker; provided, however, that in no event shall Holdings be
entitled to terminate Parker's employment hereunder prior to the Expiration Date
unless (i) the Board shall duly adopt, by the affirmative vote of at least a
majority of the entire membership of the Board at a duly convened meeting at
which a quorum is present, a resolution authorizing such termination, and (ii)
Parker shall have been offered an opportunity to address the Board at such
meeting (or at a prior meeting at which his proposed termination is discussed)
before any such resolution is finally adopted. Any such Notice of Termination
delivered under this Section 4.2 shall specify a Termination Date not less than
30 or more than 60 days after the date such notice is given; provided, however,
that if the Notice of Termination purports to terminate Parker's employment for
Misconduct, it shall set forth in reasonable detail the reason for such
termination and the facts and circumstances claimed to provide a basis for such
termination, and shall specify as the Termination Date the date such notice is
given (subject to any applicable periods during which Parker may cure the
circumstances of the alleged Misconduct) or any subsequent date up to the date
30 days after the date such notice is given.

      4.3   PAYMENT OF ACCRUED BASE SALARY, VACATION PAY, ETC.

            Promptly upon the termination of Parker's employment hereunder for
any reason, including Parker's death, Misconduct or Disability, Employers shall
pay to Parker a lump sum amount for (i) any unpaid Base Salary earned hereunder
prior to the Termination Date, (ii) all unused vacation time accrued by Parker
as of the Termination Date in accordance with Employers' vacation policies for
senior executives, (iii) all unpaid benefits earned by Parker as of the
Termination Date under any and all incentive compensation plans or programs of
Employers, (iv) all amounts owing to Parker under Section 3.6 and (v) any
additional amounts or benefits which may be required to be paid in a lump sum by
applicable law or under the terms of the applicable plans.

      4.4   OTHER TERMINATION BENEFITS AND PRIVILEGES

            The following provisions shall apply to (i) any termination by
Parker of his employment hereunder for any reason within 24 months following the
date of a Change in Control, (ii) any termination by Parker of his employment
hereunder for Good Reason, (iii) any termination by Holdings of Parker's
employment hereunder for any reason other than Parker's Misconduct, (iv) any
termination of Parker's employment hereunder upon the Expiration Date following
the delivery to Parker by an Employer of written notice that the Expiration Date
will not be extended, or (v) any termination of Parker's employment hereunder on
account of his death or Disability:

            (a) SEVERANCE PAYMENT. In the event the termination is described in
clause (i), (ii) or (iii) above, Employers promptly shall pay to Parker a
severance payment (in cash or other immediately available funds) in an amount
equal to two times the sum of (A) Parker's current Base Salary plus (B) the
greater of (I) the average Annual Award paid or payable to Parker with respect
to the three calendar years ending immediately prior to the year in which the

                                      10.


Termination Date occurs and (II) the target level Annual Award for the year in
which the Termination Date occurs. In the event the termination is described in
clause (iv) above or any termination of Parker's employment hereunder on account
of his Disability, Employers promptly shall pay to Parker a severance payment
(in cash or other immediately available funds) in an amount equal to the sum of
(A) Parker's current Base Salary plus (B) the greater of (I) the average Annual
Award paid or payable to Parker with respect to the three calendar years ending
immediately prior to the year in which the Termination Date occurs and (II) the
target level Annual Award for the year in which the Termination Date occurs.

            (b) STOCK OPTIONS, STOCK APPRECIATION RIGHTS ETC. In the event the
termination is described in clause (i), (ii), (iii) or (v) above, all
outstanding stock options, stock appreciation rights, restricted stock and other
awards, including, without limitation, any long term incentive awards, held by
Parker pursuant to the provisions of the Incentive Equity Plans and any other
plan in which Parker participates pursuant to Section 3.4 shall become
immediately vested and exercisable as of the Termination Date (except, in
connection with awards made after the Effective Date, as otherwise expressly
accepted or agreed by Parker with respect to any specific award after
consultation between Parker and Employers regarding any such terms, which
consultation shall be acknowledged in writing on the signature page of the
applicable award agreement). Where applicable, all such awards shall remain
exercisable for a period of 36 months from the Termination Date, or such longer
period as may apply under the terms of any specific grant, plan or any other
agreement with Parker. In the event the termination is described in clause (iv)
above or is due to Parker's Misconduct, Parker shall retain all vested stock
options, stock appreciation rights, restricted stock and other awards held by
him as of the Termination Date pursuant to the provisions of the Incentive
Equity Plans and any other plan to which an award is subject, in accordance with
the terms of each specific grant, but without any accelerated vesting, extension
of the period of exercisability or other modification.

            (c) LONG TERM INCENTIVE PLAN. In the event the termination is
described in clause (i), (ii) or (iii) above, in settlement of the Employers'
obligations under the LTIP, the Employers shall pay Parker a cash amount equal
to two times the greater of (i) 125% of his Base Salary and (ii) the amount that
would have been paid to Parker had the Total Stockholder Return (as defined in
the LTIP) for the Performance Cycle (as defined in the LTIP) ending on the
December 31 of the year in which the termination occurs (or the next December
31, if no such Performance Cycle ends in such year) been measured as of the
Termination Date. In the event the termination is described in clause (iv) or
(v), then such termination shall be considered termination of an LTIP
participant's employment with the Employers on account of retirement, total
disability or death (regardless of Parker's age at the time), and Parker's
rights under the LTIP will be governed by the terms of the plan accordingly.

            (d) MEDICAL INSURANCE. In the event the termination is described in
any clause of the first paragraph of this Section 4.4, during the 24-month
period following the Termination Date, each Employer, at its cost, shall
maintain in full force and effect for the continued benefit of Parker and
Parker's dependents all benefits available to Parker and Parker's dependents
under all medical plans and programs of such Employer, provided that (i)
Parker's continued participation is possible under the terms and provisions of
such plans and programs and (ii) Parker elects to receive such coverage pursuant
to the Consolidated Omnibus Reconciliation Act of 1985, as amended ("COBRA"),
and pays the regular employee premium, if

                                      11.


any, required by such plans and programs. In the event that participation by
Parker (or his dependents) in any such plan or program after the Termination
Date is barred pursuant to the terms thereof, or in the event an Employer shall
terminate any such plan or program, such Employer shall obtain for Parker
(and/or his dependents) comparable coverage under individual policies. The
foregoing medical plan coverage for Parker and Parker's dependents shall be in
complete discharge of each Employer's obligation under COBRA.

            (e) LIFE INSURANCE. In the event the termination is described in any
clause of the first paragraph of this Section 4.4 (other than a termination on
account of Parker's death), during the 24-month period following the Termination
Date, each Employer, at its cost, shall continue to provide Parker all life
insurance coverages (and in the same amounts) provided to him by an Employer
immediately prior to the date on which the relevant Notice of Termination is
given in accordance with this Article 4.

            (f) TRAVEL PRIVILEGES. In the event the termination is described in
any clause of the first paragraph of this Section 4.4, each Employer shall
provide Parker (and his wife and dependents) lifetime on-line and interline,
positive space travel privileges in accordance with the terms of its non-revenue
travel policy for senior executives as in effect on the Effective Date;
provided, however, that the travel privileges to be provided to Parker (and his
wife and dependents) by each Employer under this paragraph (e) shall be at least
as favorable to Parker (and his wife and dependents) as the travel privileges
generally provided to the senior executives of such Employer from time to time.

      4.5   RESIGNATION AS A DIRECTOR

            If Parker's employment under this Agreement is terminated for any
reason, Parker agrees, if requested by the Board, to resign as a director of all
Constituent Companies of which he is a director, such resignation to be
effective immediately or at such later time as the Board shall request.

      4.6   CERTAIN TAX MATTERS

            Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by an Employer to or for the benefit of Parker (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this Section 4.6) (a "PAYMENT") would be subject to the excise tax imposed
by Section 4999 of the Code, or any interest or penalties are incurred by Parker
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "EXCISE
TAX"), then Parker shall be entitled to receive an additional payment (a
"GROSS-UP PAYMENT") in an amount such that after payment by Parker of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any income taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, Parker retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

                                      12.


            (a) CALCULATION. Subject to the provisions of Section 4.6(b) below,
all determinations required to be made under this Section 4.6, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the independent auditors most recently engaged by Holdings to conduct an
independent audit of Holdings' financial statements or such other certified
public accounting firm reasonably acceptable to Parker as may be designated by
Holdings (the "ACCOUNTING FIRM") which shall provide detailed supporting
calculations both to Parker and Holdings within 15 business days of the receipt
of notice from Parker that there has been a Payment, or such earlier time as is
requested by Holdings. All fees and expenses of the Accounting Firm shall be
borne solely by Holdings. Any Gross-Up Payment, as determined pursuant to this
Section 4.6, shall be paid by Holdings to or for the benefit of Parker within 5
days of the later of (i) the due date for the payment of any Excise Tax and (ii)
the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon Parker and Holdings unless substantial
authority under the Code exists to the contrary or a ruling is obtained from the
Internal Revenue Service supporting a contrary view. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which shall not have been made by Holdings should have been
made ("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. In the event that Holdings exhausts its remedies pursuant to Section
4.6(b) and Parker or Holdings thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by Holdings
to Parker or for Parker's benefit. The previous sentence shall apply mutatis
mutandis to any overpayment of a Gross-Up Payment.

            (b) COOPERATION. Parker shall notify Holdings in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by Holdings of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than 30 business days after Parker is informed
in writing of such claim, and shall apprise Holdings of the nature of such claim
and the date on which such claim is required to be paid. Parker shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to Holdings (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If Holdings
notifies Parker in writing prior to the expiration of such period that it
desires to contest such claim, Parker will:

                  (i) give Holdings any information reasonably requested by
Holdings relating to such claim,

                  (ii) take such action in connection with contesting such claim
as Holdings shall reasonably request in writing from time to time, including
accepting legal representation with respect to such claim by an attorney
reasonably selected by Holdings,

                  (iii) cooperate with Holdings in good faith in order
effectively to contest such claim, and

                  (iv) permit Holdings to participate in any proceeding relating
to such claim.

                                      13.


Holdings shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold Parker harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 4.6(b), Holdings
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Parker to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
Parker agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as Holdings shall determine; provided, however, that if
Holdings directs Parker to pay such claim and sue for a refund, Holdings shall
advance the amount of such payment to Parker, on an interest-free basis, and
shall indemnify and hold Parker harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and provided further, however, that any extension of the
statute of limitations relating to payment of taxes for Parker's taxable year
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, Holdings' control of the contest
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder, and Parker shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.

            (c) ADJUSTMENTS. If, after the receipt by Parker of an amount
advanced by Holdings pursuant to this Section 4.6, Parker becomes entitled to
receive any refund with respect to such claim, Parker shall (subject to
Holdings' complying with the requirements of Section 4.6(b)) promptly pay to
Holdings the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Parker of an
amount advanced by Holdings pursuant to this Section 4.6, a determination is
made that Parker shall not be entitled to any refund with respect to such claim
and Holdings does not notify Parker in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

                                   ARTICLE 5

                   CONFIDENTIAL INFORMATION, NON-INTERFERENCE

      5.1   CONFIDENTIAL INFORMATION

            (a) Parker recognizes that the services to be performed by him
hereunder are special, unique and extraordinary and that, by reason of his
employment with Employers and the positions described in paragraphs (a) and (b)
of Section 2.2, he may acquire Confidential Information (defined below)
concerning one or more of the Constituent Companies, the use or disclosure of
which would cause the Constituent Companies substantial loss and damages which
could not be readily calculated and for which no remedy at law would be
adequate. Accordingly,

                                      14.


Parker agrees that he will not (directly or indirectly) at any time, whether
during or after his employment hereunder, disclose any such Confidential
Information to any Person except (i) in the performance of his obligations to
the Constituent Companies hereunder, (ii) as required by applicable law, (iii)
in order to enforce his rights under this Agreement, (iv) in connection with any
litigation (pending or threatened) that is the subject of Section 6 hereof or
(v) with the prior written consent of the Board. As used herein, "CONFIDENTIAL
INFORMATION" includes information with respect to the services, strategies,
facilities and methods, research and development, trade secrets and other
intellectual property, pricing and revenue management systems, patents and
patent applications, procedures, manuals, confidential reports, financial
information, business plans, prospects or opportunities of any Constituent
Company; provided, however, that such term shall not include any information
that (x) is or becomes generally known or available other than as a result of a
disclosure by Parker or (y) is or becomes known or available to Parker on a
nonconfidential basis from a source (other than Employers) which, to Parker's
knowledge, is not prohibited from disclosing such information to Parker by a
legal, contractual, fiduciary or other obligation to any Constituent Company.

            (b) Parker confirms that all Confidential Information is the
exclusive property of the relevant Constituent Company. All business records,
papers and documents kept or made by Parker (whether electronically or
otherwise) while employed by any Constituent Company relating to the business of
any Constituent Company shall be and remain the property of such Constituent
Company at all times. Upon the request of Holdings at any time, Parker shall
promptly deliver to Holdings, and shall retain no copies of, any electronic
media or written materials, records and documents made by Parker or coming into
his possession while employed by any Constituent Company concerning the business
or affairs of any Constituent Company other than personal materials, records and
documents (including notes and correspondence) of Parker not containing
information relating to such business or affairs. Notwithstanding the foregoing,
Parker shall be permitted to retain copies of, or have access to, all such
materials, records and documents as may be necessary in order to enforce his
rights under this Agreement or in connection with any litigation (pending or
threatened) that is the subject of Section 6 hereof.

      5.2   NON-INTERFERENCE

            (a) During the period beginning on the Effective Date and continuing
for six months following the Termination Date (the "RESTRICTED PERIOD"), Parker
shall not, whether for his own account or for the account of any other Person
(excluding Holdings), intentionally solicit, endeavor to entice or induce any
employee of any Constituent Company to terminate his employment with such
Constituent Company or accept employment with anyone else; provided, however,
that this Section 5.2 shall not apply to Parker's personal secretary.

            (b) If any provision of this Section 5.2 relating to the Restricted
Period and/or the areas of restriction shall be declared by an arbitrator
pursuant to Article 6 or a court of competent jurisdiction to exceed the maximum
time period or areas such arbitrator or court deems reasonable and enforceable,
the Restricted Period and/or areas of restriction deemed reasonable and
enforceable by such arbitrator or court shall become and thereafter be the
maximum time period and/or areas.

                                      15.


      5.3   INJUNCTIVE RELIEF

            Parker acknowledges that a breach of any of the covenants contained
in this Article 5 may result in material irreparable injury to the Constituent
Companies for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach and the Constituent Companies (or any of them) shall be
entitled to obtain a temporary restraining order and/or a preliminary or
permanent injunction restraining Parker from engaging in activities prohibited
by this Article 5 or such other relief as may required to specifically enforce
any of the covenants contained in this Article 5. Parker agrees to and hereby
does submit to in personam jurisdiction before each and every such court for
that purpose.

                                   ARTICLE 6

                               DISPUTE RESOLUTION

      6.1   GENERAL

            Any claim, dispute, or controversy of whatever nature arising out of
or relating to this Agreement (including any other agreement(s) contemplated
hereunder), including any action or claim based on tort, contract, or statute
(including any claims of breach or violation of statutory or common law
protections from discrimination, harassment and hostile working environment), or
concerning the interpretation, effect, termination, validity, performance and/or
breach of this Agreement (a "DISPUTE"), shall to the fullest extent permitted by
law be resolved by final and binding arbitration before a panel of three
arbitrators ("ARBITRATORS") selected from and administered by JAMS (the
"ADMINISTRATOR") in accordance with its then existing Comprehensive Arbitration
Rules & Procedures, except with respect to the selection of such Arbitrators
which shall be made in accordance with Section 6.3 below. The arbitration
hearing shall be held in Maricopa County, Arizona.

      6.2   PRELIMINARY REQUIREMENTS

            Before commencing the above-referenced JAMS arbitration, the parties
shall first make a good faith attempt to resolve a Dispute through their
management. In the event such good faith negotiation fails to settle a Dispute
within 30 days from notice of such Dispute, the parties shall endeavor to
resolve the Dispute by mediation through JAMS. If the Dispute has not been
resolved pursuant to the JAMS mediation within 30 days of the request for
mediation, the Dispute shall be submitted to the JAMS arbitration process
described herein.

      6.3   CHOICE OF ARBITRATORS

            The choice of Arbitrators shall be made as follows. Parker shall
choose one independent Arbitrator and Holdings shall choose one independent
Arbitrator. The two Arbitrators so chosen will choose the third Arbitrator, who
must be independent with excellent academic and professional credentials, with
experience in the subject matter of the Dispute and who has had both training
and at least five years experience as an arbitrator.

                                      16.


      6.4   ARBITRATION; RULES

            (a) Any issue as to whether or the extent to which the Dispute is
subject to the arbitration, including, but not limited to, issues relating to
the validity or enforceability of this Article 6, the applicability of any
statute of limitations or other defense relating to the timeliness of the
assertion of any claim or any other matter relating to the arbitrability of such
claim, shall be decided by the Arbitrators.

            (b) The Arbitrators shall be authorized to award compensatory
damages, but shall not be authorized (i) to award non-economic damages, such as
for emotional distress, pain and suffering, or loss of consortium, (ii) to award
punitive damages, or (iii) to reform, modify or materially change this Agreement
or any other agreements contemplated hereunder; provided, however<184> that the
damage limitations described in parts (i) and (ii) of this sentence will not
apply if such damages are statutorily imposed. The Arbitrators also shall be
authorized to grant any temporary, preliminary or permanent equitable remedy or
relief he or she deems just and equitable and within the scope of this
Agreement, including, without limitation, an injunction or order for specific
performance.

            (c) Each party shall bear its own attorney's fees, costs, and
disbursements arising out of the arbitration; however, the Arbitrators shall be
authorized to determine whether a party is the prevailing party, and if so, to
award to that prevailing party reimbursement for its reasonable attorneys' fees,
costs and disbursements (including, for example, expert witness fees and
expenses, photocopy charges, travel expenses, etc.). Holdings shall pay the
costs of the arbitration, including the cost of the Arbitrators themselves.

            (d) The Arbitrators shall render their decision in writing and,
unless both parties agree otherwise, shall include an explanation of the reasons
for the award, which explanation shall be limited to the extent necessary to
support the award and need not attempt to cover all issues raised by the
parties.

            (e) The arbitration shall be governed by the substantive laws of the
State of Arizona applicable to contracts made and to be performed therein,
without regard to conflicts of law rules. The Arbitrators shall have no power or
authority to order or grant any remedy or relief that a court could not order or
grant under applicable law.

      6.5   ENFORCEMENT

            Judgment upon the award rendered by the Arbitrators may be entered
in any court having jurisdiction thereof. These arbitration provisions may be
enforced by any court of competent jurisdiction, and the party seeking
enforcement shall be entitled to all costs and expenses, including reasonable
attorneys' fees, to be paid by the party against whom enforcement is ordered.

      6.6   CERTAIN COURT ACTIONS PERMITTED

            Notwithstanding the foregoing, this Article 6 will not preclude
either party from pursuing a court action for the sole purpose of obtaining a
temporary restraining order or a preliminary injunction in circumstances in
which such relief is appropriate (including as

                                      17.


contemplated by Section 5.4), provided that any other relief will be pursued
through an arbitration proceeding pursuant to this Article 6. For purposes of
this Section 6.6, each party hereto irrevocably and unconditionally:

            (a) agrees that any suit, action or other legal proceeding arising
out of this Agreement (other than as contemplated by Section 5.4) shall only be
brought in the United States District Court for the District of the State of
Arizona or, if such court does not have jurisdiction or will not accept
jurisdiction, then only in the Superior Court of the State of Arizona,

            (b) consents to the jurisdiction of any such court in any such suit,
action or proceeding, and

            (c) waives any objection which such party may have to the laying of
venue of any such suit, action or proceeding in any such court.

      6.7   WAIVER OF CERTAIN RIGHTS AND PROTECTIONS

            BY AGREEING TO THIS BINDING ARTICLE 6, THE PARTIES UNDERSTAND THAT
THEY ARE WAIVING CERTAIN RIGHTS AND PROTECTIONS WHICH MAY OTHERWISE BE AVAILABLE
IF A DISPUTE WERE DETERMINED BY LITIGATION IN COURT, INCLUDING, WITHOUT
LIMITATION, THE RIGHT SEEK OR OBTAIN CERTAIN TYPES OF DAMAGES PRECLUDED BY THIS
ARTICLE 6, THE RIGHT TO A JURY TRIAL, CERTAIN RIGHTS OF DISCOVERY AND APPEAL,
AND A RIGHT TO INVOKE FORMAL RULES OF PROCEDURE AND EVIDENCE.

                                   ARTICLE 7

                                  MISCELLANEOUS

      7.1   NO MITIGATION OR SET OFF

            The provisions of this Agreement are not intended to, nor shall they
be construed to, require that Parker mitigate the amount of any payment provided
for in this Agreement by seeking or accepting other employment, nor shall the
amount of any payment provided for in this Agreement be reduced by any
compensation earned by Parker as the result of employment by another employer or
otherwise. Without limitation of the foregoing, Employers' obligations to make
the payments to Parker required under this Agreement and otherwise to perform
their obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, right or action that either an may have
against Parker.

      7.2   ASSIGNABILITY

            The obligations of Parker hereunder are personal and may not be
assigned or delegated by Parker or transferred in any manner whatsoever, nor are
such obligations subject to involuntary alienation, assignment or transfer. Each
Employer shall have the right to assign this Agreement and to delegate all its
rights, duties and obligations hereunder as provided in Section 7.5.

                                      18.


      7.3   NOTICES

            All notices and all other communications provided for in the
Agreement shall be in writing and shall be sent, delivered or mailed, addressed
as follows: (i) if to Employers (or any of them), at Holdings principal office
address or such other address as Holdings may have designated by written notice
to Parker for purposes hereof, directed to the attention of the Board with a
copy to the Secretary of Holdings and (ii) if to Parker, at his residence
address on the records of Holdings or to such other address as he may have
designated to Holdings in writing for purposes hereof. Each such notice or other
communication shall be deemed to have been duly given when delivered in person,
by facsimile or by United States registered mail, return receipt requested,
postage prepaid, except that any notice of change of address shall be effective
only upon receipt.

      7.4   SEVERABILITY

            The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

      7.5   SUCCESSORS; BINDING AGREEMENT

            (a) Each Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of such Employer, by agreement
in form and substance reasonably acceptable to Parker, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
such Employer would be required to perform it if no such succession had taken
place. Failure of such Employer to obtain such agreement prior to the
effectiveness of any such succession shall be a material breach of this
Agreement. As used herein, (i) the term "Holdings" shall include any successor
to its business and/or assets as aforesaid which executes and delivers the
Agreement provided for in this Section 7.5 or which otherwise becomes bound by
all terms and provisions of this Agreement by operation of law and (ii) the term
"AWA" shall include any successor to its business and/or assets as aforesaid
which executes and delivers the Agreement provided for in this Section 7.5 or
which otherwise becomes bound by all terms and provisions of this Agreement by
operation of law.

            (b) This Agreement and all rights of Parker hereunder shall inure to
the benefit of and be enforceable by Parker's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Parker should die while any amounts would be payable to him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Parker's devisee, legatee, or other designee or, if there be no such designee,
to Parker's estate.

            (c) This Agreement and all rights of the Constituent Companies
hereunder shall inure to the benefit of and be enforceable by the Constituent
Companies and their respective successors and assigns.

                                      19.


      7.6   TAX WITHHOLDINGS

            Each Employer shall withhold from all payments hereunder all
applicable taxes (federal, state or other) that it is required to withhold
therefrom unless Parker has otherwise paid to such Employer the amount of such
taxes.

      7.7   AMENDMENTS AND WAIVERS

            No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by Parker and the Employer or Employers that shall be bound by such
modification, waiver or discharge. No waiver by any party hereto at any time of
any breach by any other party hereto of, or in compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.

      7.8   NO DUPLICATE SEVERANCE; ENTIRE AGREEMENT

            (a) Notwithstanding any term to the contrary in this Agreement, in
the event Parker shall become entitled to receive a severance payment pursuant
to Section 4.4(a) above under circumstances which also entitle him to receive
another severance payment under any severance policy or plan of an Employer,
then the other severance payment due to Parker pursuant to such policy or plan
automatically shall be reduced by the amount of the severance payment paid or
payable under Section 4.4(a) (but shall not be reduced by the amount of any
Gross-Up Payment paid or payable under Section 4.6).

            (b) The parties acknowledge, confirm and agree that, except as
expressly provided herein, this Agreement represents the entire agreement of the
parties, and no agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by any party
which are not set forth expressly in this Agreement.

      7.9   GOVERNING LAW

            The validity, interpretation, construction and performance of this
agreement shall be governed by the laws of the state of Arizona without regard
to its conflict of laws provision.

      7.10  COUNTERPARTS

            This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

      7.11  INDEMNIFICATION; LIABILITY INSURANCE

            Parker shall be indemnified by the Employers to the full extent
permitted by law and in accordance with the Employers' policies applicable to
other senior executives and directors. In the event Holdings maintains directors
and officers liability insurance, Parker will be insured under such policies
during the Employment Period at a level commensurate with

                                      20.


those applicable to other senior executives and directors of Holdings. Without
Parker's prior written consent, no Employer shall amend, modify or repeal any
provision of its certificate of incorporation or bylaws if such amendment,
modification or repeal would materially adversely affect Parker's rights to
indemnification by such Employer.

      7.12  REMEDIES CUMULATIVE

            No right, power or remedy granted under this Agreement is intended
to be exclusive, but each shall be cumulative and in addition to any other
rights, powers or remedies referred to in this Agreement or otherwise available
at law or in equity.

      7.13  JOINT AND SEVERAL LIABILITY

            The obligations of Employers hereunder shall be joint and several.

                                      21.


            IN WITNESS WHEREOF, the parties have executed this Agreement on
February ____, 2004 but effective for all purposes (except as herein otherwise
expressly provided) as of the date first above written.

                                         AMERICA WEST HOLDINGS CORPORATION

/S/ W. DOUGLAS PARKER                    By: /S/ WALTER T. KLENZ
- ------------------------------------     --------------------------------------
W. DOUGLAS PARKER                        Name:  Walter T. Klenz
                                         Title: Director and Member of the
                                                Compensation and Human Resources
                                                Committee

                                         AMERICA WEST AIRLINES, INC.

                                         By: /S/ WALTER T. KLENZ
                                         --------------------------------------
                                         Name:  Walter T. Klenz
                                         Title: Director and Member of the
                                                Compensation and Human Resources
                                                Committee

                                      22.


                                                                 
ARTICLE 1        DEFINITIONS AND INTERPRETATIONS................     1

      1.1    Definitions........................................     1

      1.2    Interpretations....................................     5

ARTICLE 2        EMPLOYMENT; TERM; POSITIONS AND DUTIES.........     5

      2.1    Employment; Term...................................     5

      2.2    Positions and Duties...............................     6

      2.3    Place of Employment................................     7

ARTICLE 3        COMPENSATION AND BENEFITS......................     7

      3.1    Base Salary........................................     7

      3.2    Incentive Compensation Awards......................     7

      3.3    Stock Incentive Awards.............................     8

      3.4    Other Incentive Compensation and Benefits..........     8

      3.5    Life Insurance.....................................     8

      3.6    Office Space; Staffing; Services...................     8

      3.7    Business Expenses..................................     8

      3.8    Other Benefits.....................................     9

      3.9    Attorneys' Fees....................................     9

      3.10   No Director Fees...................................     9

ARTICLE 4        CHANGE IN CONTROL AND TERMINATION OF
                 EMPLOYMENT ....................................     9

      4.1    Termination by Parker..............................     9

      4.2    Termination by Holdings............................    10

      4.3    Payment of Accrued Base Salary, Vacation Pay, etc..    10

      4.4    Other Termination Benefits and Privileges..........    10

      4.5    Resignation as a Director..........................    12

      4.6    Certain Tax Matters................................    12

ARTICLE 5        CONFIDENTIAL INFORMATION, NON-INTERFERENCE.....    14

      5.1    Confidential Information...........................    14

      5.2    Non-Interference...................................    15

      5.3    Injunctive Relief..................................    16

ARTICLE 6        DISPUTE RESOLUTION.............................    16

      6.1    General............................................    16

      6.2    Preliminary Requirements...........................    16




                                                                 
      6.3    Choice of Arbitrators..............................    16

      6.4    Arbitration; Rules.................................    17

      6.5    Enforcement........................................    17

      6.6    Certain Court Actions Permitted....................    17

      6.7    Waiver of Certain Rights and Protections...........    18

ARTICLE 7        MISCELLANEOUS..................................    18

      7.1    No Mitigation or Set Off...........................    18

      7.2    Assignability......................................    18

      7.3    Notices............................................    19

      7.4    Severability.......................................    19

      7.5    Successors; Binding Agreement......................    19

      7.6    Tax Withholdings...................................    20

      7.7    Amendments and Waivers.............................    20

      7.8    No Duplicate Severance; Entire Agreement...........    20

      7.9    Governing Law......................................    20

      7.10   Counterparts.......................................    20

      7.11   Indemnification; Liability Insurance...............    20

      7.12   Remedies Cumulative................................    21

      7.13   Joint and Several Liability........................    21

EX-21.1

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
AWHQ LLC	Arizona	America West Holdings Corporation	Real estate holding company
FTCHP LLC	Delaware	America West Airlines, Inc.	Real estate holding company

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
America West Holdings Corporation:

We consent to the incorporation by reference in the registration statements on Form S-3 (No. 333-113471, No. 333-110031 and No. 333-88588) of America West Holdings Corporation (the “Company”) and America West Airlines, Inc., (“AWA”) the registration statement on Form S-3 (No. 333-02129) of AWA and the registration statements on Form S-8 (No. 333-118188, No. 333-94361, No. 333-40486 and No. 333-89288) of the Company of our reports dated March 11, 2005, with respect to the consolidated balance sheets of the Company and subsidiary as of December 31, 2004 and 2003, and the related consolidated statements of operations, cash flows and stockholders’ equity and comprehensive income for the years then ended, the related consolidated financial statement schedule, and our report on management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting as of December 31, 2004, which reports appear in the December 31, 2004 annual report on Form 10-K of the Company. Our report on management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting as of December 31, 2004 expresses our opinion that the Company did not maintain effective internal control over financial reporting as of December 31, 2004 because of the effect of a material weakness on the achievement of the objectives of the control criteria and contains an explanatory paragraph that states the Company did not maintain effective internal control over financial reporting due to a material weakness associated with its accounting for AWA’s fuel hedging transactions. Management concluded that AWA’s fuel hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting principles and that the Company’s financial statements for prior periods required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and statements of stockholders equity and comprehensive income for Holdings and AWA. These accounting errors were the result of deficiencies in its internal control over financial reporting from the lack of effective reviews of hedge transaction documentation and of quarterly mark-to-market accounting entries on open fuel hedging contracts by personnel at an appropriate level.

We also consent to the incorporation by reference of our reports dated March 11, 2005, relating to the consolidated balance sheets of AWA and subsidiary as of December 31, 2004 and 2003, and the related consolidated statements of operations, cash flows and stockholder’s equity and comprehensive income for the years then ended, and the related financial statement schedule, which reports appear in the December 31, 2004 annual report on Form 10-K of AWA.

Our report dated March 11, 2005, related to the consolidated financial statements of the Company refers to the restatement of the Company’s consolidated balance sheet and consolidated statement of stockholders’ equity as of and for the year ended December 31, 2003 and the restatement of the Company’s dilutive earnings per share for the year ended December 31, 2003 in connection with the adoption of Emerging Issues Task Force 04-8 “The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share”. Our report dated March 11, 2005, related to the consolidated financial statements of AWA refers to the restatement of AWA’s consolidated balance sheet and consolidated statement of stockholder’s equity as of and for the year ended December 31, 2003.

/s/ KPMG LLP

Phoenix, Arizona
March 11, 2005

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-113471, No. 333-110031 and No. 333-88588) of America West Holdings Corporation and America West Airlines, Inc., the Registration Statement on Form S-3 (No. 333-02129) of America West Airlines, Inc. and the Registration Statements on Form S-8 (No. 333-118188, No. 333-94361, No. 333-40486 and No. 333-89288) of America West Holdings Corporation of our reports dated March 24, 2003 relating to the consolidated financial statements and financial statement schedule of America West Holdings Corporation, which appear in this Form 10-K. We also hereby consent to the incorporation by reference in such registration statements of our reports dated March 24, 2003, except for the effects of the reorganization transaction described in Note 1(a) as to which the date is August 2, 2004, relating to the consolidated financial statements and financial statement schedule of America West Airlines, Inc., which appear in this Form 10-K.

PricewaterhouseCoopers LLP
Phoenix, Arizona
March 14, 2005

EX-31.1

Exhibit 31.1

CEO CERTIFICATION

I, W. Douglas Parker, certify that:

1.	I have reviewed this annual report on Form 10-K of America West Holdings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial report, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2005	/s/ W. Douglas Parker
	W. Douglas Parker
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CFO CERTIFICATION

I, Derek J. Kerr, certify that:

1.	I have reviewed this annual report on Form 10-K of America West Holdings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.	Designed such internal control over financial report, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2005	/s/ Derek J. Kerr
	Derek J. Kerr
	Chief Financial Officer

EX-31.3

Exhibit 31.3

CEO CERTIFICATION

I, W. Douglas Parker, certify that:

1.   I have reviewed this annual report on Form 10-K of America West Airlines, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial report, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2005	/s/ W. Douglas Parker
	W. Douglas Parker
	Chief Executive Officer

EX-31.4

Exhibit 31.4

CFO CERTIFICATION

I, Derek J. Kerr, certify that:

1.   I have reviewed this annual report on Form 10-K of America West Airlines, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial report, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2005	/s/ Derek J. Kerr
	Derek J. Kerr
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, W. Douglas Parker, the Chief Executive Officer of America West Holdings Corporation (the “Company”) and Derek J. Kerr, the Chief Financial Officer of the Company, hereby certify that, to the best of their knowledge:

1.   The Company’s Annual Report on Form 10-K for the period ended December 31, 2004, to which this certification is attached as Exhibit 32.1 (the “Annual Report”), fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934, and

2.   The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 14th day of March 2005.

/s/ W. Douglas Parker  

W. Douglas Parker 

Chief Executive Officer 

/s/ Derek J. Kerr  

Derek J. Kerr 

Chief Financial Officer 

A signed original of this written statement required by Section 906 has been provided to America West Holdings Corporation and will be retained by America West Holdings Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

This certification “accompanies” the Form 10-K to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K, irrespective of any general incorporation language contained in such filing).

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, W. Douglas Parker, the Chief Executive Officer of America West Airlines, Inc. (the “Company”) and Derek J. Kerr, the Chief Financial Officer of the Company, hereby certify that, to the best of their knowledge:

1.   The Company’s Annual report on Form 10-K for the period ended December 31, 2004, to which this Certification is attached as Exhibit 32.2 (the “Annual Report”), fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934, and

2.   The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 14th day of March 2005.

/s/ W. Douglas Parker  

W. Douglas Parker 

Chief Executive Officer 

/s/ Derek J. Kerr  

Derek J. Kerr 

Chief Financial Officer 

A signed original of this written statement required by Section 906 has been provided to America West Airlines, Inc. and will be retained by America West Airlines, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

This certification “accompanies” the Form 10-K to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K, irrespective of any general incorporation language contained in such filing).