e10vq

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KSdg4W/y5gaBarF4xFR8TwYt++A3WjC1+NonhAEE72jlUG8Aiah3DLnyPZ9ELHbT LlJY9p2JwWqqqa6nKAqNsw== 0000950153-05-001673.txt : 20050721 0000950153-05-001673.hdr.sgml : 20050721 20050721075745 ACCESSION NUMBER: 0000950153-05-001673 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050721 DATE AS OF CHANGE: 20050721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA WEST HOLDINGS CORP CENTRAL INDEX KEY: 0001029863 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 860847214 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12649 FILM NUMBER: 05964960 BUSINESS ADDRESS: STREET 1: 111 WEST RIO SALADO PARKWAY CITY: TEMPE STATE: AZ ZIP: 85281 BUSINESS PHONE: 4806930800 MAIL ADDRESS: STREET 1: 4000 E SKY HARBOR BLVD STREET 2: C/O AMERICA WEST AIRLINES CITY: PHOENIX STATE: AZ ZIP: 85034 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA WEST AIRLINES INC CENTRAL INDEX KEY: 0000706270 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 860418245 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12337 FILM NUMBER: 05964961 BUSINESS ADDRESS: STREET 1: 4000 E SKY HARBOR BLVD STREET 2: STE 2100 CITY: PHOENIX STATE: AZ ZIP: 85034 BUSINESS PHONE: 6026930800 MAIL ADDRESS: STREET 1: 4000 EAST SKY HARBOR BLVD STREET 2: STE 2100 CITY: PHOENIX STATE: AZ ZIP: 85034 10-Q 1 p70932e10vq.htm 10-Q e10vq

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended June 30, 2005

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission file number 1-12649

America West Holdings Corporation

(Exact name of registrant as specified in its charter)


Delaware		86-0847214
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

111 West Rio Salado Parkway, Tempe, Arizona (Address of principal executive offices)		85281 (Zip Code)

(480) 693-0800

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 incorporation or organization)		(I.R.S. Employer Identification No.)

4000 East Sky Harbor Blvd., Phoenix, Arizona (Address of principal executive offices)		85034 (Zip Code)

(480) 693-0800

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether each registrant (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 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 July 21, 2005, America West Holdings Corporation has 859,117 shares of Class A common stock and 35,238,357 shares of Class B common stock outstanding. As of July 21, 2005, America West Airlines, Inc. has 1,000 shares of Class B common stock outstanding, all of which are held by America West Holdings Corporation.

America West Airlines, Inc. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with reduced disclosure format pursuant to General Instruction H(2) of Form 10-Q.

TABLE OF CONTENTS


PART I -- FINANCIAL INFORMATION
	Item 1A. Condensed Consolidated Financial Statements -- America West Holdings Corporation.
	Item 1B. Condensed Consolidated Financial Statements -- America West Airlines, Inc.
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 3. Quantitative and Qualitative Disclosures about Market Risk.
	Item 4. Controls and Procedures.
PART II -- OTHER INFORMATION
	Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
	Item 4. Submission of Matters to a Vote of Security Holders.
	Item 6. Exhibits
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-31.3
EX-31.4
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

America West Holding Corporation (“Holdings” or the “Company”) is the holding company that owns all of the stock of America West Airlines, Inc. (“AWA” or the “Airline”). AWA, the eighth largest passenger airline and the second largest low cost carrier in the United States, accounted for most of Holdings’ revenues and expenses in 2004. Through its America West Vacations division, AWA also sells individual and group travel packages. This combined Form 10-Q is filed by both Holdings and AWA and includes the financial statements of each company in Item 1A and Item 1B, respectively.


Item 1A.	Condensed Consolidated Financial Statements — America West Holdings Corporation.

America West Holdings Corporation

Condensed Consolidated Balance Sheets

(in thousands except share data)

(unaudited)


			June 30,			December 31,
			2005			2004

ASSETS
Current assets:
	Cash and cash equivalents		$	116,061		$	149,091
	Short-term investments			206,217			126,651
	Restricted cash			—			41,264
	Accounts receivable, net			122,517			108,837
	Expendable spare parts and supplies, net			51,090			57,563
	Prepaid expenses			198,121			141,571

		Total current assets		694,006			624,977

Property and equipment:
	Flight equipment			931,264			926,930
	Other property and equipment			298,760			290,897
	Equipment purchase deposits			73,950			63,450

				1,303,974			1,281,277
	Less accumulated depreciation and amortization			619,771			624,742

		Net property and equipment		684,203			656,535

Other assets:
	Investments in debt securities			—			30,000
	Restricted cash			91,633			72,091
	Other assets, net			134,975			91,661

		Total other assets		226,608			193,752

			$	1,604,817		$	1,475,264


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current maturities of long-term debt		$	115,964		$	151,183
	Current obligations under capital leases			3,312			3,475
	Accounts payable			189,189			173,887
	Air traffic liability			265,727			194,718
	Accrued compensation and vacation benefits			47,035			42,699
	Accrued taxes			65,417			32,796
	Other accrued liabilities			85,910			65,958

		Total current liabilities		772,554			664,716

Long-term debt, less current maturities				588,060			635,129
Capital leases, less current obligations				5,124			5,061
Deferred credits and other liabilities				154,941			133,911
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 June 30, 2005 and December 31, 2004			8			8
	Class B common stock, $.01 par value. Authorized 100,000,000 shares; issued and outstanding 51,628,599 shares at June 30, 2005 and 51,564,865 shares at December 31, 2004			516			516
	Additional paid-in capital			632,652			632,446
	Accumulated deficit			(241,132	)		(288,617	)

				392,044			344,353
	Less: Cost of Class B common stock in treasury, 16,437,575 shares at June 30, 2005 and December 31, 2004			(307,906	)		(307,906	)

		Total stockholders’ equity		84,138			36,447

			$	1,604,817		$	1,475,264

See accompanying Notes to Condensed Consolidated Financial Statements.

America West Holdings Corporation

Condensed Consolidated Statements of Operations

(in thousands except per share data)

(unaudited)


			Three Months Ended						Six Months Ended
			June 30,						June 30,

			2005			2004			2005			2004

Operating revenues:
	Passenger		$	654,893		$	569,166		$	1,230,306		$	1,106,499
	Express			129,426			85,466			232,782			158,117
	Cargo			8,126			6,817			16,770			13,720
	Other			40,752			32,709			76,151			65,149

		Total operating revenues		833,197			694,158			1,556,009			1,343,485

Operating expenses:
	Salaries and related costs			173,752			161,977			348,900			328,252
	Aircraft rents			80,673			75,346			157,510			150,531
	Other rents and landing fees			45,727			42,011			87,266			83,252
	Aircraft fuel			191,006			132,977			342,869			247,189
	Realized and unrealized gains on fuel hedging instruments, net			(8,673	)		(9,485	)		(69,156	)		(9,889	)
	Agency commissions			6,710			6,253			12,264			13,003
	Aircraft maintenance materials and repairs			49,359			52,350			97,347			102,404
	Depreciation and amortization			11,587			12,587			23,447			26,378
	Special charges (credits), net			—			—			811			(600	)
	Express expenses			136,048			89,802			246,874			163,104
	Other			116,731			104,525			227,521			198,957

		Total operating expenses		802,920			668,343			1,475,653			1,302,581

Operating income				30,277			25,815			80,356			40,904

Nonoperating income (expenses):
	Interest income			2,476			1,779			4,375			3,297
	Interest expense, net			(19,736	)		(19,237	)		(38,715	)		(38,989	)
	Other, net			891			2,304			1,469			3,886

		Total nonoperating expenses, net		(16,369	)		(15,154	)		(32,871	)		(31,806	)

Income before income taxes				13,908			10,661			47,485			9,098

Income taxes				—			—			—			—

Net income			$	13,908		$	10,661		$	47,485		$	9,098

Earnings per share:
	Basic		$	0.39		$	0.30		$	1.32		$	0.25

	Diluted		$	0.29		$	0.20		$	0.92		$	0.17

Shares used for computation:
	Basic			36,032			36,005			36,015			35,928

	Diluted			53,553			52,020			62,551			52,070

See accompanying Notes to Condensed Consolidated Financial Statements.

America West Holdings Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


			Six Months Ended
			June 30,

			2005			2004

Net cash provided by operating activities			$	223,545		$	83,557

Cash flows from investing activities:
	Purchases of property and equipment			(97,210	)		(77,173	)
	Purchases of short-term investments			(283,750	)		(273,533	)
	Sales of short-term investments			233,961			289,610
	Purchases of investments in debt securities			—			(35,000	)
	Sales of investments in debt securities			—			15,000
	Decrease (increase) in restricted cash			(19,542	)		1,270
	Proceeds from disposition of other assets			1,227			1,848

		Net cash used in investing activities		(165,314	)		(77,978	)

Cash flows from financing activities:
	Repayment of debt			(86,717	)		(47,980	)
	Other			(4,544	)		843

		Net cash used in financing activities		(91,261	)		(47,137	)

Net decrease in cash and cash equivalents				(33,030	)		(41,558	)
Cash and cash equivalents at beginning of period				149,091			153,357

Cash and cash equivalents at end of period			$	116,061		$	111,799

Cash paid for:
	Interest, net of amounts capitalized		$	17,047		$	10,339

	Income taxes		$	112		$	1,440

Non-cash investing and financing activities:
	Reclassification of investments in debt securities to short-term investments		$	30,000		$	5,730

	Notes payable issued under the aircraft purchase agreement		$	8,750		$	7,000

	Notes payable cancelled under the aircraft purchase agreement		$	(7,000	)	$	—

	Acquisition of property and equipment under capital leases		$	17		$	—

	Payment in kind notes issued, net of returns		$	—		$	4,672

	Exercise of warrants		$	—		$	2

	Acquisition of shares due to loan default		$	—		$	1,700

See accompanying Notes to Condensed Consolidated Financial Statements.

America West Holdings Corporation

Notes to Condensed Consolidated Financial Statements

June 30, 2005


1.	Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of Holdings and its wholly owned subsidiary, AWA. These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and, in accordance with those rules and regulations, certain information and footnotes required by generally accepted accounting principles have been omitted. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

The Company has a regional airline alliance agreement with Mesa Airlines (“Mesa”). Mesa, operating as America West Express (“Express”), provides regional feeder service for AWA. To improve the visibility of Express operating results, effective with the first quarter of 2005, the Company has changed its method of reporting for this agreement to the gross basis of presentation. Previously, AWA used the net basis of presentation.

Using the gross basis of presentation, the passenger revenues and operating expenses associated with the Express agreement are reported gross (i.e., as “Operating Revenues — Express” and “Operating Expenses — Express Expenses”) in the Condensed Consolidated Statements of Operations. Under the net basis of presentation, Express passenger revenues and the associated operating expenses were netted and classified in “Operating Revenues — Other.” Prior period amounts have been reclassified to be consistent with the 2005 presentation. These reclassifications did not impact our operating income or net income for each period presented. See Note 7, “Change in Method of Reporting for America West Express Results” for additional information about this agreement and the reclassifications related to the change in presentation.

Certain other prior year amounts have been reclassified to conform with current year presentation.


2.	Stock Options

The Company accounts for its stock option plans in accordance with the provisions of Accounting Principles Board (“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. The Company issues its stock options at a price equal to fair market value on the date of grant. Accordingly, no compensation cost has been recognized for stock options in the accompanying condensed consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” the

Company’s net income and earnings per share would have been decreased to the pro forma amounts indicated below:


	Three Months Ended						Six Months Ended
	June 30,						June 30,

	2005			2004			2005			2004

	(in thousands except per share data)
Net income, as reported	$	13,908		$	10,661		$	47,485		$	9,098
Stock-based compensation expense		(1,055	)		(1,650	)		(2,345	)		(2,916	)

Pro forma net income	$	12,853		$	9,011		$	45,140		$	6,182

Income per share:
Basic — as reported	$	0.39		$	0.30		$	1.32		$	0.25

Basic — pro forma	$	0.36		$	0.25		$	1.25		$	0.17

Diluted — as reported	$	0.29		$	0.20		$	0.92		$	0.17

Diluted — pro forma	$	0.27		$	0.17		$	0.88		$	0.12


3.	Flight Equipment

In April 2005, the Company entered into an operating lease for one new Airbus A320 aircraft with a lease term of five years.

In May 2005, the Company entered into operating leases for one new Airbus A319 and one new Airbus A320 aircraft, each with a lease term of five years.

In June 2005, the Company completed sale-leaseback transactions on two new IAE V2500-A5 engines resulting in gains of $0.3 million and $2.6 million, respectively. These amounts have been deferred and will be amortized over the lease terms, each of which is seven years. The Company also completed a sale-leaseback transaction on one Airbus A320 aircraft resulting in a loss of $4.3 million. This amount was recorded in “Operating Expenses — Other.” The term of the leaseback is 12 years.


4.	Special Charges

The following table presents the payments and other settlements made during the six months ended June 30, 2005 related to the special charge accruals:


				Contract
	Fleet			Termination/
	Restructuring			Other Costs			Total

Balance at December 31, 2004	$	643		$	121		$	764

Special charges		690			—			690
Payments		(305	)		(111	)		(416	)
Revision of estimate		—			147			147

Balance at March 31, 2005		1,028			157			1,185

Special charges		—			—			—
Payments		—			—			—

Balance at June 30, 2005	$	1,028		$	157		$	1,185

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


5.	Earnings Per Share

The following table presents the computation of basic and diluted earnings per share (“EPS”).


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2005		2004		2005		2004

	(in thousands except per share data)
BASIC EARNINGS PER SHARE
Income applicable to common stock	$	13,908	$	10,661	$	47,485	$	9,098

Weighted average common shares outstanding		36,032		36,005		36,015		35,928

Basic earnings per share	$	0.39	$	0.30	$	1.32	$	0.25

DILUTED EARNINGS PER SHARE
Income as reported	$	13,908	$	10,661	$	47,485	$	9,098
Interest expense on 7.5% convertible senior notes		—		—		6,283		—
Interest expense on 7.25% senior exchangeable notes		1,735		—		3,470		—

Income for purposes of computing diluted earnings per share	$	15,643	$	10,661	$	57,238	$	9,098

SHARE COMPUTATION
Weighted average common shares outstanding		36,032		36,005		36,015		35,928
Assumed exercise of stock options and warrants		9,425		16,015		9,082		16,142
Assumed conversion of 7.5% convertible senior notes		—		—		9,358		—
Assumed conversion of 7.25% senior exchangeable notes		8,096		—		8,096		—

Weighted average common shares outstanding, as adjusted		53,553		52,020		62,551		52,070

Diluted earnings per share	$	0.29	$	0.20	$	0.92	$	0.17

For the three and six months ended June 30, 2005, 6,851,419 and 7,048,335 stock options, respectively, are not included in the computation of diluted EPS because the option exercise prices were greater than the average market price of the Company’s Class B common stock for the period. In addition, 9,358,276 incremental shares from assumed conversion of the 7.5% convertible senior notes are not included in the computation of diluted EPS for the second quarter because of the antidilutive effect on EPS.

For the three and six months ended June 30, 2004, 5,251,892 and 3,981,890 stock options, respectively, are not included in the computation of diluted EPS because the option exercise prices were greater than the average market price of the Company’s Class B common stock for the period. In addition, 8,694,000 incremental shares from assumed conversion of the 7.5% convertible senior notes are not included in the computation of diluted EPS for the second quarter and the six-month period because of the antidilutive effect on EPS. Similarly, the 8,095,842 shares issuable upon conversion of the 7.25% Senior Exchangeable Notes due 2023 were not included in the computation of diluted earnings per share for the three and six months ended June 30, 2004 because of the antidilutive effect on EPS.


6.	Segment Disclosures

Holdings is one reportable operating segment. Accordingly, the segment reporting financial data required by SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” is included in the accompanying condensed consolidated balance sheets and statements of operations.


7.	Change in Method of Reporting for America West Express Results

The Company has a regional airline alliance agreement (the “Agreement”) with Mesa that commenced in February 2001. Pursuant to the Agreement, Mesa, using aircraft owned and operated by Mesa under the name Express, provides feeder service to destinations in the western United States, Canada and northern

Mexico. As of June 30 2005, the Express fleet included 59 aircraft comprised of 35 86-seat CRJ 900s, 18 50-seat CRJ 200s and six 37-seat Dash 8 turbo prop aircraft.

Under the Agreement, Mesa is required to fly the routes and flights designated by AWA using Mesa’s aircraft, flight crews and other related services. Mesa maintains and operates the aircraft, employs, trains, manages and compensates personnel necessary to provide the flight services and provides related passenger handling services for and on the flights. AWA is responsible for establishing the routes, scheduling Express flights, pricing of the tickets, marketing and selling the tickets, collecting all sales amounts, paying all costs of sales and marketing and taking inventory risk on the inventory of seats for sale on Mesa. The ground handling of aircraft is performed by either AWA or Mesa, depending upon the airport.

AWA collects the revenue and income generated from the services provided by Mesa pursuant to the Agreement. In return, AWA: (i) reimburses Mesa for actual non-controllable costs incurred by Mesa such as fuel, insurance, taxes, fees and security; (ii) pays Mesa for actual controllable non-maintenance costs, subject to a cap, such as aircraft lease expense and crew expense; (iii) pays Mesa for controllable maintenance costs at fixed rates (subject to reimbursement of excess costs if actual costs during term are less than fixed amount paid by AWA); (iv) reimburses Mesa costs and expenses incurred at stations maintained and operated by Mesa; and (v) shares with Mesa a percentage of the revenue allocated to the flight segments flown by Mesa on a pro rata basis.

The agreement is anticipated to expire in June 2012.

As discussed in Note 1, “Basis of Presentation,” the Company is reporting the passenger revenues and operating expenses associated with the Agreement on a gross basis to improve the visibility of Express operating results. Previously, these revenues and expenses were reported net in “Operating Revenues — Other” in our Condensed Consolidated Statements of Operations. The following table presents the effect of this reclassification for the three and six months ended June 30, 2004:


	Three Months Ended June 30, 2004

	As Reported		Adjustments			As Reclassified

Operating revenues:
Passenger	$	569,166	$	—		$	569,166
Express		—		85,466	(1)		85,466
Cargo and other		35,908		3,618			39,526

Total operating revenues	$	605,074	$	89,084		$	694,158

Operating expenses:
Operating expenses	$	579,259	$	(718	)	$	578,541
Express expenses		—		89,802	(2)		89,802

Total operating expenses	$	579,259	$	89,084		$	668,343


	Six Months Ended June 30, 2004

	As Reported		Adjustments			As Reclassified

Operating revenues:
Passenger	$	1,106,499	$	—		$	1,106,499
Express		—		158,117	(1)		158,117
Cargo and other		75,119		3,750			78,869

Total operating revenues	$	1,181,618	$	161,867		$	1,343,485

Operating expenses:
Operating expenses	$	1,140,714	$	(1,237	)	$	1,139,477
Express expenses		—		163,104	(3)		163,104

Total operating expenses	$	1,140,714	$	161,867		$	1,302,581


(1)	Reclassification of Express passenger revenues from “Operating Revenues — Other.”

(2)	Reclassification of $89.1 million and $0.7 million of Express operating expenses from “Operating Revenues — Other” and “Operating Expenses — Other,” respectively.

(3)	Reclassification of $161.9 million and $1.2 million of Express operating expenses from “Operating Revenues — Other” and “Operating Expenses — Other,” respectively

The operating margin that results from using the gross basis of presentation for Express revenues and expenses does not include any beyond contribution passenger revenue generated by feed into AWA’s mainline operations from Express flights. Overall, the Mesa alliance agreement adds to the total profitability of AWA.


8.	Agreement to Merge with Subsidiary of U.S. Airways Group

On May 19, 2005, US Airways Group, Inc. (“US Airways Group”), Holdings, and Barbell Acquisition Corp., a wholly owned subsidiary of US Airways Group (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Holdings, with Holdings continuing as the surviving corporation. The merger is expected to create the first full-service airline with the consumer-friendly pricing structure of a low-fare carrier.

In the merger, holders of Holdings Class A common stock will receive 0.5362 of a share of new US Airways Group common stock for each share of Holdings Class A common stock they own, and holders of Holdings Class B common stock will receive 0.4125 of a share of new US Airways Group common stock for each share of Holdings Class B common stock they own, on the terms specified in the Merger Agreement. The merger cannot be completed unless Holdings’ stockholders adopt the merger agreement and approve the merger. The obligations of Holdings and US Airways Group to complete the merger are also subject to the satisfaction or waiver of several other conditions, including clearance from regulatory agencies.


Item 1B.	Condensed Consolidated Financial Statements — America West Airlines, Inc.

The unaudited condensed consolidated balance sheets of AWA, a wholly-owned subsidiary of Holdings, as of June 30, 2005 and December 31, 2004, and the condensed consolidated statements of operations and cash flows for the three and six months ended June 30, 2005 and 2004, together with the related notes, are set forth on the following pages.

America West Airlines, Inc.

Condensed Consolidated Balance Sheets

(in thousands except share data)

(unaudited)


			June 30,			December 31,
			2005			2004

ASSETS
Current assets:
	Cash and cash equivalents		$	95,278		$	128,497
	Short-term investments			206,217			126,651
	Restricted cash			—			41,264
	Accounts receivable, net			122,517			108,837
	Expendable spare parts and supplies, net			51,090			57,563
	Prepaid expenses			198,096			141,571

		Total current assets		673,198			604,383

Property and equipment:
	Flight equipment			931,264			926,930
	Other property and equipment			297,142			289,279
	Equipment purchase deposits			73,950			63,450

				1,302,356			1,279,659
	Less accumulated depreciation and amortization			619,222			624,193

		Net property and equipment		683,134			655,466

Other assets:
	Investments in debt securities			—			30,000
	Restricted cash			91,633			72,091
	Advances to parent company, net			260,648			258,777
	Other assets, net			133,793			90,270

		Total other assets		486,074			451,138

			$	1,842,406		$	1,710,987


LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
	Current maturities of long-term debt		$	115,964		$	151,183
	Current obligations under capital leases			3,312			3,475
	Accounts payable			188,528			173,196
	Air traffic liability			265,727			194,718
	Accrued compensation and vacation benefits			47,035			42,699
	Accrued taxes			53,296			20,651
	Other accrued liabilities			85,910			65,958

		Total current liabilities		759,772			651,880

Long-term debt, less current maturities				588,060			635,129
Capital leases, less current maturities				5,124			5,061
Deferred credits and other liabilities				153,133			132,103
Stockholder’s equity:
	Common Stock $.01 par value. Authorized, issued and outstanding; 1,000 shares			—			—
	Additional paid-in capital			555,114			555,114
	Accumulated deficit			(218,797	)		(268,300	)

		Total stockholder’s equity		336,317			286,814

			$	1,842,406		$	1,710,987

See accompanying Notes to Condensed Consolidated Financial Statements.

America West Airlines, Inc.

Condensed Consolidated Statements of Operations

(in thousands)

(unaudited)


			Three Months Ended						Six Months Ended
			June 30,						June 30,

			2005			2004			2005			2004

Operating revenues:
	Passenger		$	654,893		$	569,166		$	1,230,306		$	1,106,499
	Express			129,426			85,466			232,782			158,117
	Cargo			8,126			6,817			16,770			13,720
	Other			40,582			32,539			75,811			64,809

		Total operating revenues		833,027			693,988			1,555,669			1,343,145

Operating expenses:
	Salaries and related costs			173,399			161,617			348,252			327,546
	Aircraft rents			80,673			75,346			157,510			150,531
	Other rents and landing fees			45,727			42,011			87,266			83,252
	Aircraft fuel			191,006			132,977			342,869			247,189
	Realized and unrealized gains on fuel hedging instruments, net			(8,673	)		(9,485	)		(69,156	)		(9,889	)
	Agency commissions			6,710			6,253			12,264			13,003
	Aircraft maintenance materials and repairs			49,359			52,350			97,347			102,404
	Depreciation and amortization			11,587			12,587			23,447			26,378
	Special charges (credits), net			—			—			811			(600	)
	Express expenses			136,048			89,802			246,874			163,104
	Other			115,469			103,779			225,518			197,591

		Total operating expenses		801,305			667,237			1,473,002			1,300,509

Operating income				31,722			26,751			82,667			42,636

Nonoperating income (expenses):
	Interest income			4,021			3,418			7,485			6,619
	Interest expense, net			(21,448	)		(20,948	)		(42,118	)		(42,410	)
	Other, net			891			2,304			1,469			3,886

		Total nonoperating expenses, net		(16,536	)		(15,226	)		(33,164	)		(31,905	)

Income before income taxes				15,186			11,525			49,503			10,731

Income taxes				—			—			—			—

Net income			$	15,186		$	11,525		$	49,503		$	10,731

See accompanying Notes to Condensed Consolidated Financial Statements.

America West Airlines, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


			Six Months Ended June 30,

			2005			2004

Net cash provided by operating activities			$	223,562		$	84,205

Cash flows from investing activities:
	Purchases of property and equipment			(97,210	)		(77,173	)
	Purchases of short-term investments			(283,750	)		(273,533	)
	Sales of short-term investments			233,961			289,610
	Purchases of investments in debt securities			—			(35,000	)
	Sales of investments in debt securities			—			15,000
	Decrease (increase) in restricted cash			(19,542	)		1,270
	Proceeds from disposition of assets			1,227			1,848

		Net cash used in investing activities		(165,314	)		(77,978	)

Cash flows from financing activities:
	Repayment of debt			(86,717	)		(47,980	)
	Other			(4,750	)		(8	)

		Net cash used in financing activities		(91,467	)		(47,988	)

Net decrease in cash and cash equivalents				(33,219	)		(41,761	)
Cash and cash equivalents at beginning of period				128,497			134,150

Cash and cash equivalents at end of period			$	95,278		$	92,389

Cash paid for:
	Interest, net of amounts capitalized		$	17,047		$	10,339

	Income taxes		$	6		$	325

Non-cash investing and financing activities:
	Reclassification of investments in debt securities to short-term investments		$	30,000		$	5,730

	Notes payable issued under the aircraft purchase agreement		$	8,750		$	7,000

	Notes payable cancelled under the aircraft purchase agreement		$	(7,000	)	$	—

	Acquisition of property and equipment under capital leases		$	17		$	—

	Payment in kind notes issued, net of returns		$	—		$	4,672

See accompanying Notes to Condensed Consolidated Financial Statements.

America West Airlines, Inc.

Notes to Condensed Consolidated Financial Statements

June 30, 2005


1.	Basis of Presentation

The unaudited condensed consolidated financial statements included herein have been prepared by AWA, a wholly owned subsidiary of Holdings, pursuant to the rules and regulations of the Securities and Exchange Commission and, in accordance with those rules and regulations, certain information and footnotes required by generally accepted accounting principles have been omitted. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in AWA’s Annual Report on Form 10-K for the year ended December 31, 2004.

AWA has a regional airline alliance agreement with Mesa Airlines (“Mesa”). Mesa, operating as America West Express (“Express”), provides regional feeder service for AWA. To improve the visibility of Express operating results, effective with the first quarter of 2005, AWA has changed its method of reporting for this agreement to the gross basis of presentation. Previously, AWA used the net basis of presentation.

Certain other prior year amounts have been reclassified to conform with current year presentation.


2.	Advances to Parent Company and Affiliate

As of June 30, 2005, AWA had net advances to Holdings of $260.6 million, which were classified in “Other Assets” on AWA’s condensed consolidated balance sheet due to certain restrictions related to the timing of repayment under the government guaranteed loan, of which $300.3 million remains outstanding.


3.	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. Holdings issues its stock options at a price equal to the fair market value on the date of grant. 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 Stock-Based Compensation,” and

allocated the compensation expense to AWA for its employees participating in the stock option plans, AWA’s net income would have been decreased to the pro forma amounts indicated below:


	Three Months Ended						Six Months Ended
	June 30,						June 30,

	2005			2004			2005			2004

	(in thousands)
Net income, as reported	$	15,186		$	11,525		$	49,503		$	10,731
Stock-based compensation expense		(1,055	)		(1,650	)		(2,345	)		(2,916	)

Pro forma net income	$	14,131		$	9,875		$	47,158		$	7,815


4.	Flight Equipment

In April 2005, the Company entered into an operating lease for one new Airbus A320 aircraft with a lease term of five years.

In May 2005, the Company entered into operating leases for one new Airbus A319 and one new Airbus A320 aircraft, each with a lease term of five years.

In June 2005, the Company completed sale-leaseback transactions on two new IAE V2500-A5 engines resulting in gains of $0.3 million and $2.6 million, respectively. These amounts have been deferred and will be amortized over the lease term, each of which is seven years. The Company also completed a sale-leaseback transaction on one Airbus A320 aircraft resulting in a loss of $4.3 million. This amount was recorded in “Operating Expenses — Other.” The term of the leaseback is 12 years.


5.	Special Charges

The following table presents the payments and other settlements made during the six months ended June 30, 2005 related to the special charge accruals:


	Fleet			Contract Termination/
	Restructuring			Other Costs			Total

Balance at December 31, 2004	$	643		$	121		$	764

Special charges		690			—			690
Payments		(305	)		(111	)		(416	)
Revision of estimate		—			147			147

Balance at March 31, 2005		1,028			157			1,185

Special charges		—			—			—
Payments		—			—			—

Balance at June 30, 2005	$	1,028		$	157		$	1,185

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


6.	Segment Disclosures

AWA is one reportable operating segment. Accordingly, the segment reporting financial data required by SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” is included in the accompanying condensed balance sheets and statements of operations.


7.	Change in Method of Reporting for America West Express Results

Mexico. As of June 30, 2005, the Express fleet included 59 aircraft comprised of 35 86-seat CRJ 900s, 18 50-seat CRJ 200s and six 37-seat Dash 8 turbo prop aircraft.

The Agreement is anticipated to expire in June 2012.

As discussed in Note 1, “Basis of Presentation,” AWA is reporting the passenger revenues and operating expenses associated with the Agreement on a gross basis to improve the visibility of Express operating results. Previously, these revenues and expenses were reported net in “Operating Revenues — Other” in our Condensed Consolidated Statements of Operations. The following table presents the effect of this reclassification for the three and six months ended June 30, 2004:


	Three Months Ended June 30, 2004

	As Reported		Adjustments			As Reclassified

Operating revenues:
Passenger	$	569,166	$	—		$	569,166
Express		—		85,466	(1)		85,466
Cargo and other		35,738		3,618			39,356

Total operating revenues	$	604,904	$	89,084		$	693,988

Operating expenses:
Operating expenses	$	578,153	$	(718	)	$	577,435
Express expenses		—		89,802	(2)		89,802

Total operating expenses	$	578,153	$	89,084		$	667,237


	Six Months Ended June 30, 2004

	As Reported		Adjustments			As Reclassified

Operating revenues:
Passenger	$	1,106,499	$	—		$	1,106,499
Express		—		158,117	(1)		158,117
Cargo and other		74,779		3,750			78,529

Total operating revenues	$	1,181,278	$	161,867		$	1,343,145

Operating expenses:
Operating expenses	$	1,138,642	$	(1,237	)	$	1,137,405
Express expenses		—		163,104	(3)		163,104

Total operating expenses	$	1,138,642	$	161,867		$	1,300,509


(1)	Reclassification of Express passenger revenues from “Operating Revenues — Other.”

(2)	Reclassification of $89.1 million and $0.7 million of Express operating expenses from “Operating Revenues — Other” and “Operating Expenses — Other,” respectively.

(3)	Reclassification of $161.9 million and $1.2 million of Express operating expenses from “Operating Revenues — Other” and “Operating Expenses — Other,” respectively.


8.	Agreement to Merge with Subsidiary of U.S. Airways Group

America West Holdings Corporation and

America West Airlines, Inc.

June 30, 2005


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Holdings is the parent company of AWA. AWA is the eighth largest passenger airline and the second largest low cost carrier in the United States operating through its hubs located in Phoenix, Arizona and Las Vegas, Nevada. As of June 30, 2005, AWA served 63 destinations in North America, including eight destinations in Mexico, three in Canada and one in Costa Rica. Through its America West Vacations (“AWV”) division, AWA also arranges and sells vacation packages primarily to Las Vegas, Nevada that may include airfare, hotel accommodations and ground transportation. Holdings’ primary business activity is ownership of all the capital stock of AWA.

Overview

During the second quarter of 2005, our improved revenue performance helped to mitigate the impact of record high jet fuel prices as follows:


	•	Passenger revenues were $654.9 million for the quarter, an increase of $85.7 million from the second quarter of 2004. Passenger revenue per available seat mile (“RASM”) was 8.44 cents for the second quarter of 2005, an increase of 11.9% versus the 2004 second quarter, driven by a 4.0 point increase in load factor as well as a 6.5% increase in yield. The Company’s strong unit revenue improvement was due to more aggressive peak day yield management in the 2005 second quarter, more balanced capacity in the markets served by AWA in the western United States and the positive impact of numerous legacy and low cost carrier fare increases in the winter and spring of 2005. Reductions in late 2004 of the Company’s transcontinental flying, which yields were negatively impacted by competitive responses, also contributed to improved period-over-period RASM and yield performance.

	•	The airline industry and AWA incurred and continue to face an increase in costs resulting from record high jet fuel prices. The average price per gallon of fuel increased 43.0% from 116.7 cents in the second quarter of 2004 to 166.9 cents per gallon in the second quarter of 2005. As a result, aircraft fuel expense for the quarter was $191.0 million, an increase of $58.0 million, or 43.6%, from the second quarter of 2004.

Holdings realized net income of $13.9 million, or $0.29 per diluted share, for the second quarter of 2005. Net income for the second quarter included an $8.7 million net gain associated with the Company’s fuel hedging transactions. Of this amount, $11.4 million resulted from realized gains on settled hedge transactions which was offset in part by $2.7 million of unrealized losses resulting from the application of mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments. The Company is required to use mark-to-market accounting as its fuel hedging instruments do not meet the requirements for hedge accounting as established by Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities.” If these instruments had qualified for hedge accounting treatment, any unrealized gains or losses, including the $2.7 million discussed above, would be deferred in other comprehensive income, a subset of stockholders’ equity until the jet fuel is purchased and the underlying fuel hedging instrument is settled. Given the market volatility of jet fuel, the fair value of these fuel hedging instruments is expected to change until settled.

As of June 30, 2005, Holdings unrestricted and restricted cash, cash equivalents and short-term investments totaled $413.9 million, of which $322.3 million was unrestricted. Although there can be no assurances, we believe that cash flows from operating activities, combined with these cash balances and our financing commitments, will be adequate to fund our operating and capital needs as well as enable us to maintain compliance with our various debt agreements through at least December 31, 2005.

Agreement to Merge with Subsidiary of U.S. Airways Group

On May 19, 2005, US Airways Group, Holdings and Merger Sub, a wholly owned subsidiary of US Airways Group, entered into the Merger Agreement. The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Holdings, with Holdings continuing as the surviving corporation. The merger is expected to create the first full-service airline with the consumer-friendly pricing structure of a low-fare carrier.

The merger is one of a series of transactions that require the approval of the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria Division, in the pending bankruptcy proceeding of US Airways Group and its domestic subsidiaries. The other transactions that must be approved by the bankruptcy court, as part of a comprehensive plan of reorganization of US Airways Group and its domestic subsidiaries, include receipt by US Airways Group of new equity financing concurrently with the merger. US Airways Group has entered into agreements with new equity investors which have agreed to contribute a total of $565 million in equity to the reorganized US Airways Group, subject to a variety of conditions, including confirmation of the plan of reorganization and completion of the merger. The merger is a key component of the plan of reorganization and is also conditioned upon, among other things, the receipt of at least $375 million from these equity investors. The plan of reorganization contemplates the cancellation of existing US Airways Group common stock and the issuance of new shares of reorganized US Airways Group upon emergence from the bankruptcy proceedings and in connection with the merger. On June 30, 2005, US Airways Group filed the plan of reorganization and its related disclosure statement with the Bankruptcy Court.

Assuming that US Airways Group receives $565 million in equity financing at the effective time of the merger, we expect that former America West Holdings stockholders will hold approximately 37% of new US Airways Group common stock outstanding immediately following the merger. Certain former US Airways Group creditors and new equity investors as a group will hold approximately 11% and 52%, respectively, of new US Airways Group common stock outstanding immediately following the merger. In each case, those percentages are subject to dilution as a result of any additional equity issuances, including as a result of the proposed rights offering discussed below, and are subject to certain assumptions concerning the likely exchange of certain convertible debt and securities that are dilutive at the per share purchase price paid by the equity investors for new US Airways Group common stock shortly after the merger.

The merger cannot be completed unless Holdings’ stockholders adopt the merger agreement and approve the merger. The obligations of Holdings and US Airways Group to complete the merger are also subject to the satisfaction or waiver of several other conditions, including clearance from regulatory agencies. On June 23, 2005, the U.S. Department of Justice notified Holdings and US Airways that the Department has completed its review of the proposed merger of the two airlines and that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 will expire without a formal request from the Department for additional information.

During the first six months of 2005, we incurred approximately $3.0 million in merger-related costs and we expect to incur significant additional merger-related costs in the remainder of 2005. If the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement, we may be required to pay a termination fee of $15.0 million to US Airways Group.

Airline Operations Update

AWA reported the following operating statistics to the U.S. Department of Transportation (“DOT”) for aircraft operated by AWA (“mainline”) for the second quarter of 2005 and 2004:


													Percent Change
	2005						2004						2005 - 2004

	Apr		May		Jun		Apr		May		Jun		Apr			May		Jun

On-time performance(a)		85.2		85.5		80.8		76.9		80.3		73.0		10.8			6.4		10.8
Completion factor(b)		99.4		99.0		99.0		98.2		98.7		98.4		1.2			0.3		0.6
Mishandled baggage(c)		3.39		3.27		3.58		3.07		2.94		4.24		10.5			11.3		(15.6	)
Customer complaints(d)		0.81		0.98		1.05		1.21		0.86		1.13		(32.9	)		13.8		(6.6	)


(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.

AWA had record load factors each month during the 2005 second quarter, which contributed to the Company’s improved revenue performance during the period. Record load factor does, however, put pressure on operations and AWA’s operating performance. Despite these load factors, the key reliability measures, on-time performance and completion factor, were much improved versus 2004.

Summary of Holdings’ Financial Results

Holdings recorded consolidated net income of $13.9 million in the second quarter of 2005, or $0.29 per diluted share. This compares to consolidated net income of $10.7 million, or $0.20 per diluted share, in the second quarter of 2004. The 2005 results include $8.7 million of net gains associated with the Company’s fuel hedging transactions. Of this amount, $11.4 million resulted from realized gains on settled hedge transactions which was offset in part by $2.7 million of unrealized losses resulting from the application of mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments. The 2005 quarter also includes a $4.3 million loss on the sale and leaseback of one new Airbus A320 aircraft acquired during the period.

The 2004 results include $9.5 million of net gains associated with the Company’s fuel hedging transactions. This amount includes $2.3 million of net realized gains on settled hedge transactions, and $7.2 million of gains resulting from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments.

Holdings recorded consolidated net income of $47.5 million in the first six months of 2005, or $0.92 per diluted share. This compares to consolidated net income of $9.1 million, or $0.17 per diluted share in the first six months of 2004. The 2005 results included $69.2 million of net gains associated with the Company’s fuel hedging transactions. Of this amount, $46.3 million resulted from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments and $22.9 million was net realized gains on settled hedge transactions. The 2005 six-month period also includes $0.8 million of special charges related to the write-down of deferred aircraft rent payments associated with the return of one Boeing 737-200 aircraft and an $8.0 million aggregate loss on the sale and leaseback of two new Airbus A320 aircraft acquired during the period.

The 2004 results include $9.9 million of net gains associated with the Company’s fuel hedging transactions. Of this amount $5.2 million was net realized gains on settled hedge transactions and $4.7 million was net gains resulting from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments. The 2004 six month period also included a $2.5 million credit to other operating revenues related to the reduction of certain obligations based upon a settlement with Mesa Airlines, a $2.0 million reduction in operating expenses resulting from the settlement of a lawsuit related to certain computer hardware and software that previously had been written off, a $1.7 million reduction in bad debt

expense due to a recovery of a previously reserved debt and a $0.6 million reduction in special charges due to a revision of the estimated costs related to certain aircraft sale-leaseback transactions.

The Company did not record income tax expense in the second quarter or for the first six months of 2005 as it currently expects to realize a loss for the full year 2005. Similarly, the Company did not record income tax expense in the second quarter or for the first six months of 2004 as it expected to realize a loss for the full year 2004.

AWA’s Results of Operations

The following discussion provides an analysis of AWA’s results of operations for the three and six months ended June 30, 2005 and material changes compared to the three and six months ended June 30, 2004.

The table below sets forth selected mainline operating data for AWA.


	Three Months							Six Months
	Ended June 30,				Percent			Ended June 30,				Percent
					Change							Change
	2005		2004		2005 - 2004			2005		2004		2005 - 2004

Revenue passenger miles (in millions)(a)		6,386		5,915		8.0			12,057		11,222		7.4
Available seat miles (in millions)(b)		7,755		7,552		2.7			15,057		14,904		1.0
Passenger load factor (percent)(c)		82.3		78.3		4.0 pts			80.1		75.3		4.8 pts
Yield per revenue passenger mile (cents)(d)		10.25		9.62		6.5			10.20		9.86		3.4
Passenger revenue per available seat mile (cents)(e)		8.44		7.54		11.9			8.17		7.42		10.1
Total revenue per available seat mile (cents)(f)		9.07		8.06		12.5			8.79		7.95		10.6
Passenger enplanements (in thousands)(g)		5,752		5,343		7.7			10,924		10,241		6.7
Aircraft (end of period)		143		140		2.1			143		140		2.1
Average daily aircraft utilization (hours)(h)		11.1		11.0		0.9			11.1		10.9		1.8
Block hours(i)		143,365		139,202		3.0			279,862		275,880		1.4
Average stage length (miles)(j)		1,037		1,058		(2.0	)		1,030		1,047		(1.6	)
Average passenger journey (miles)(k)		1,681		1,692		(0.7	)		1,653		1,644		0.5
Fuel consumption (gallons in millions)		114.5		113.9		0.5			221.7		222.4		(0.3	)
Average fuel price (cents per gallon)		166.9		116.7		43.0			154.7		111.2		39.1
Average number of full-time equivalent employees		12,200		11,936		2.2			12,177		11,881		2.5


(a)		Revenue passenger mile (“RPM”) — A basic measure of sales volume. It is one passenger flown one mile.

(b)		Available seat mile (“ASM”) — A basic measure of production. It is one seat flown one mile.

(c)		Load factor — The percentage of available seats that are filled with revenue passengers.

(d)		Yield — A measure of airline revenue derived by dividing passenger revenue by revenue passenger miles and expressed in cents per mile.

(e)		Passenger revenue per available seat mile (“RASM”) — Total passenger revenues divided by total available seat miles.

(f)		Total revenue per available seat mile — Total operating revenues divided by total available seat miles.

(g)		Passenger enplanements — The number of passengers on board an aircraft including local, connecting and through passengers.

(h)		Average daily aircraft utilization — The average number of block hours per day for all aircraft in service.

(i)		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.

(j)		Average stage length — The average of the distances flown on each segment of every route.

(k)		Average passenger journey — The average one-way trip measured in miles for one passenger origination.


	Three Months Ended June 30, 2005 and 2004

For the second quarter of 2005, AWA realized operating income of $31.7 million as compared to $26.8 million in last year’s quarter. Operating income in the 2005 period includes an $8.7 million net gain associated with the Company’s fuel hedging transactions. Of this amount, $11.4 million resulted from realized gains on settled hedge transactions which was offset in part by $2.7 million of unrealized losses resulting from the application of mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments. The 2004 period includes a $9.5 million net gain associated with the Company’s fuel hedging transactions. This amount includes $2.3 million of net realized gains on settled hedge transactions and $7.2 million of net gains resulting from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments. Income before income taxes for the second quarter of 2005 was $15.2 million as compared to $11.5 million for the comparable 2004 period.

Total operating revenues for the second quarter of 2005 were $833.0 million. Passenger revenues were $654.9 million for the second quarter of 2005, an increase of $85.7 million from the comparable 2004 quarter. RPMs increased 8.0% as ASMs increased 2.7%, resulting in a 4.0 point increase in load factor to 82.3%. This increase in load factor was achieved with higher passenger yield, which increased 6.5% in the 2005 second quarter. As a result, RASM increased 11.9% to 8.44 cents in the second quarter 2005 from 7.54 cents in the 2004 quarter. The Company’s strong unit revenue improvement was driven by more aggressive peak day yield management in the 2005 second quarter, more balanced capacity in the markets served by AWA in the western United States and the positive impact of numerous legacy and low cost carrier fare increases in the winter and spring of 2005. Reductions in late 2004 of the Company’s transcontinental flying, which yields were negatively impacted by competitive responses, also contributed to improved period-over-period RASM and yield performance.

Express revenues were $129.4 million for the second quarter of 2005, an increase of $44.0 million from the comparable 2004 quarter due to increased flying by Mesa Airlines under its alliance agreement with AWA.

Cargo revenues increased 19.2% in the second quarter of 2005 to $8.1 million due to increased mail volume. Other revenues increased 24.7% to $40.6 million in the second quarter of 2005 from $32.5 million in the second quarter of 2004 due principally to an increase in ticket change and service fees.

The table below sets forth mainline and Express operating expenses for AWA.


			Three Months Ended
			June 30,

			2005			2004

Operating expenses:
	Salaries and related costs		$	173,399		$	161,617
	Aircraft rents			80,673			75,346
	Other rents and landing fees			45,727			42,011
	Aircraft fuel			191,006			132,977
	Realized and unrealized gains on fuel hedging instruments, net			(8,673	)		(9,485	)
	Agency commissions			6,710			6,253
	Aircraft maintenance materials and repairs			49,359			52,350
	Depreciation and amortization			11,587			12,587
	Other			115,469			103,779

		Total mainline operating expenses		665,257			577,435
	Express expenses			136,048			89,802

		Total operating expenses	$	801,305		$	667,237

Total operating expenses in the second quarter of 2005 were $801.3 million, an increase of $134.1 million or 20.1%, compared to the 2004 quarter. Mainline operating expenses were $665.3 million in the second quarter of 2005, an increase of $87.8 million from the second quarter of 2004, while ASMs

increased 2.7%. Mainline CASM increased 12.2% to 8.58 cents in the second quarter of 2005 from 7.65 cents for the comparable 2004 period. The increase in CASM was driven by a 43.0% increase in the average fuel price per gallon from 116.7 cents in the 2004 second quarter to 166.9 cents per gallon in the second quarter of 2005. As a result, aircraft fuel expense for the quarter was $191.0 million, which accounted for $58.0 million of the period-over-period increase in operating expenses.

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


	Three
	Months
	Ended
	March 31,						Percent
							Change
	2005			2004			2005-2004

	(in cents)
Salaries and related costs		2.24			2.14			4.5
Aircraft rents		1.04			1.00			4.3
Other rents and landing fees		0.59			0.56			6.0
Aircraft fuel		2.46			1.76			39.9
Realized and unrealized gains on fuel hedging instruments, net		(0.11	)		(0.12	)		(11.0	)
Agency commissions		0.09			0.08			4.5
Aircraft maintenance materials and repairs		0.63			0.69			(8.2	)
Depreciation and amortization		0.15			0.17			(10.4	)
Other		1.49			1.37			8.4

		8.58			7.65			12.2

Significant changes in the components of mainline CASM are explained as follows:


	•	Salaries and related costs per ASM increased 4.5% primarily due to an increase in benefit related expenses ($9.2 million) including defined contribution plan payments which our pilots became eligible for on January 1, 2005 ($3.4 million), self-funded disability requirements ($1.1 million) and higher medical insurance costs ($3.8 million).

	•	Aircraft rent expense per ASM increased 4.3% due principally to mix as previously owned and leased Boeing 737-200 aircraft were retired or returned to aircraft lessors and replaced with leased Airbus A320 and A319 aircraft at higher monthly lease rates.

	•	Aircraft fuel expense per ASM increased 39.9% primarily due to a 43.0% increase in the average price per gallon of fuel to 166.9 cents in the second quarter of 2005 from 116.7 cents in the comparable 2004 quarter.

	•	Aircraft maintenance materials and repairs expense per ASM decreased 8.2% primarily due to decreases in aircraft C-Check ($3.9 million) which was offset in part by an increase in capitalized maintenance amortization ($1.3 million).

	•	Depreciation and amortization expense per ASM decreased 10.4% primarily due to lower amortization expense related to computer hardware and software ($1.0 million) as a result of AWA’s cash conservation program, which reduced capital expenditures.

	•	Other operating expenses per ASM increased 8.4% due primarily to a $4.3 million loss related to an aircraft sale-leaseback transaction in the second quarter of 2005 and increases in credit card fees ($2.9 million), and ground handling services ($1.5 million). The second quarter of 2004 included a $3.5 million gain resulting from the settlement of a claim in bankruptcy for amounts earned under an executory contract and a $1.0 million volume incentive earned due to certain Affinity Card sales levels meeting certain contract thresholds.

Express expenses increased 51.5% in the second quarter of 2005 to $136.0 million from $89.8 million in the second quarter of 2004. Aircraft operating expense for the quarter was $91.7 million which accounted for

$25.6 million of the period-over-period increase in Express operating expenses. In addition, aircraft fuel expense was $44.3 million which accounted for $20.6 million of the period-over-period increase.

AWA had net nonoperating expenses of $16.5 million in the second quarter of 2005 compared to $15.2 million in the second quarter of 2004 as interest income and interest expense remained relatively flat. The 2004 second quarter included a $1.4 million gain on the disposition of property and equipment, due principally to the sale of one Boeing 737-200 aircraft.

Six Months Ended June 30, 2005 and 2004

For the six months ended June 30, 2005, AWA realized operating income of $82.7 million as compared to $42.6 million in the first six months of 2004. Operating income in the 2005 period includes a $69.2 million net gain associated with the Company’s fuel hedging transactions. Of this amount $46.3 million resulted from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments and $22.9 million was net realized gains on settled hedge transactions. The 2004 period includes a $9.9 million net gain associated with the Company’s fuel hedging transactions. Of this amount $5.2 million was net realized gains on settled hedge transactions and $4.7 million was gains resulting from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments. Income before income taxes for the six months ended June 30, 2005 was $49.5 million as compared to $10.7 million for the comparable 2004 period.

Total operating revenues for the six months ended June 30, 2005 were $1.56 billion. Passenger revenues were $1.23 billion for the six-month period, an increase of $123.8 million from the comparable 2004 period. RPMs increased 7.4% as ASMs increased 1.0%, resulting in a 4.8 point increase in load factor to 80.1%. This increase in load factor was achieved with higher passenger yield, which increased 3.4% in the 2005 period. As a result, RASM increased 10.1% to 8.17 cents in the six months ended June 30, 2005 from 7.42 cents in the 2004 period. The Company’s strong unit revenue improvement was driven by more aggressive peak day yield management in the 2005 period, more balanced capacity in the markets served by AWA (principally in the western United States) and the positive impact of numerous legacy and low cost carrier fare increases in the winter and spring of 2005. Reductions in late 2004 of the Company’s transcontinental flying, which yields were negatively impacted by competitive responses, also contributed to improved period-over-period RASM and yield performance.

Express revenues were $232.8 million for the six months ended June 30, 2005, an increase of $74.7 million from the comparable 2004 quarter due to increased flying by Mesa Airlines under its alliance agreement with AWA.

Cargo revenues increased 22.2% for the six months ended June 30, 2005 to $16.8 million due to increased mail volume. Other revenues increased 17.0% to $75.8 million in the 2005 period from $64.8 million in the comparable period of 2004 due principally to an increase in ticket change and service fees.

The table below sets forth the mainline and Express operating expenses for AWA.


			Six Months Ended June 30,

			2005			2004

Operating expenses:
	Salaries and related costs		$	348,252		$	327,546
	Aircraft rents			157,510			150,531
	Other rents and landing fees			87,266			83,252
	Aircraft fuel			342,869			247,189
	Realized and unrealized gains on fuel hedging instruments, net			(69,156	)		(9,889	)
	Agency commissions			12,264			13,003
	Aircraft maintenance materials and repairs			97,347			102,404
	Depreciation and amortization			23,447			26,378
	Special charges (credits), net			811			(600	)
	Other			225,518			197,591

		Total mainline operating expenses		1,226,128			1,137,405
	Express expenses			246,874			163,104

		Total operating expenses	$	1,473,002		$	1,300,509

Total operating expenses for the six months ended June 30, 2005 were $1.47 billion, an increase of $172.5 million or 13.3%, compared to the 2004 six-month period. Mainline operating expenses were $1.23 billion in the six month period in 2005, an increase of $88.7 million from the same period in 2004, while ASMs increased 1.0%. Mainline CASM increased 6.7% to 8.14 cents in the first six months of 2005 from 7.63 cents for the comparable 2004 period. The increase in CASM was driven principally by a 39.2% increase in the average fuel price per gallon offset by the $69.2 million net gain associated with the fuel hedging transactions discussed above.

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


	Three
	Months
	Ended
	March 31,						Percent
							Change
	2005			2004			2005-2004

	(in cents)
Salaries and related costs		2.31			2.20			5.2
Aircraft rents		1.04			1.00			3.6
Other rents and landing fees		0.58			0.56			3.8
Aircraft fuel		2.28			1.67			37.3
Realized and unrealized gains on fuel hedging instruments, net		(0.46	)		(0.07	)		—
Agency commissions		0.08			0.09			(6.6	)
Aircraft maintenance materials and repairs		0.65			0.69			(5.9	)
Depreciation and amortization		0.15			0.17			(12.0	)
Special charges		0.01			—			—
Other		1.50			1.32			13.0

		8.14			7.63			6.7

Significant changes in the components of mainline CASM are explained as follows:


	•	Salaries and related costs per ASM increased 5.2% primarily due to an increase in benefit related expenses ($17.0 million) including defined contribution plan payments which our pilots became eligible for on January 1, 2005 ($6.6 million), self-funded disability requirements ($3.2 million), higher medical insurance costs ($3.5 million) and workers compensation claim coverage ($1.1 million).


	•	Aircraft rent expense per ASM increased 3.6% due principally to mix as previously owned and leased Boeing 737-200 aircraft were retired or returned to aircraft lessors and replaced with leased Airbus A320 and A319 aircraft at higher monthly lease rates.

	•	Aircraft fuel expense per ASM increased 37.3% primarily due to a 39.2% increase in the average price per gallon of fuel to 154.7 cents in the first six months of 2005 from 111.2 cents in the comparable 2004 quarter.

	•	Aircraft maintenance materials and repairs expense per ASM decreased 5.9% primarily due to decreases in aircraft C-Check ($5.2 million), airframe maintenance ($1.4 million), and other maintenance related expenses ($1.1 million), which was offset in part by an increase in capitalized maintenance amortization ($2.9 million). The decrease in other maintenance related expenses resulted from a reduction in the rates charged for the repair of certain rotable equipment under a power-by-the-hour agreement.

	•	Depreciation and amortization expense per ASM decreased 12.0% due principally to lower amortization expense related to computer hardware and software ($2.1 million) as a result of AWA’s cash conservation program, which reduced capital expenditures.

	•	Other operating expenses per ASM increased 13.0% due primarily to a $8.0 million aggregate loss associated with two aircraft sale-leaseback transactions in the first six months of 2005 and increases in credit card fees ($3.9 million), ground handling services ($3.0 million), airport guard services ($2.3 million), property taxes ($1.9 million) and crew per diem ($1.8 million). The first six months of 2004 included 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 and a $1.7 million reduction in bad debt expense due to a recovery of a previously reserved debt. A $3.5 million gain resulting from the settlement of a claim in bankruptcy for amounts earned under an executory contract and a $1.0 million volume incentive earned due to certain Affinity Card sales levels meeting certain contract thresholds in the 2004 period also contributed to the increase.

Express expenses increased 51.4% in the first six months of 2005 to $246.9 million from $163.1 million in the second quarter of 2004. Aircraft operating expense for the quarter was $170.2 million which accounted for $48.2 million of the period-over-period increase in Express operating expenses. In addition, aircraft fuel expense was $76.7 million which accounted for $35.6 million of the period-over-period increase.

AWA had net nonoperating expenses of $33.2 million in the first six months of 2005 compared to $31.9 million in the 2004 period. Interest income increased $0.9 million or 13.1% due to higher average rates of return on investments, while interest expense remained relatively flat. The 2004 period benefited from a $2.1 million gain on the disposition of property and equipment due principally to the sale of one Boeing 737-200 aircraft.


	*Liquidity and Capital Resources*


	Sources and Uses of Cash

As of June 30, 2005, Holdings and AWA’s total cash, cash equivalents, short-term investments and restricted cash were $413.9 million and $393.1 million, respectively. Net cash provided by operating activities for Holdings and AWA was $223.5 million and $223.6 million, respectively, for the first six months of 2005. This compares to net cash provided by operating activities for Holdings and AWA of $83.6 million and $84.2 million, respectively, for the first six months of 2004. The year-over-year increase in net cash provided by operating activities of $139.9 million and $139.4 million for Holdings and AWA, respectively, was due to higher net earnings in the 2005 period and a $20.4 million year-over-year increase in air traffic liability and the associated taxes due to higher passenger demand and improved pricing during 2005. The 2004 period included a decrease in accounts payable ($42.8 million), due to the timing of vendor payments and the payment in February 2004 of $19.9 million related to the execution of a new pilot agreement, which was accrued at December 31, 2003. In addition, the 2004 period was impacted by a decrease in accrued

compensation and vacation benefits primarily due to the payment in March 2004 of the Company’s obligation for employee performance bonuses and AWArd pay ($20.1 million), which was accrued at December 31, 2003.

In the first six months of 2005, net cash used in investing activities was $165.3 million for Holdings and AWA. This compares to net cash used in investing activities of $78.0 million for Holdings and AWA in the first six months of 2004. Principal investing activities during the first six months of 2005 included purchases of property and equipment totaling $97.2 million, and net purchases of short-term investments totaling $49.8 million. Restricted cash increased by $19.5 million during the 2005 period due to an increase in reserves required under an agreement for processing the Company’s Visa and MasterCard credit card transactions. The 2004 period included purchases of property and equipment totaling $77.2 million, and net purchases of short-term investments and investments in debt securities totaling $3.9 million.

In the first six months of 2005, net cash used in financing activities by Holdings and AWA was $91.3 million and $91.5 million, respectively. Principal financing activities in 2005 included a $42.9 million payment for the government guaranteed loan and redemption of $39.5 million of the Company’s remaining outstanding 10.75% Senior Secured Notes, which was included in current restricted cash at December 31, 2004. This compares to $48.0 million of debt repayments during the comparable 2004 period, including the first principal payment of $42.9 million for the government guaranteed loan.

Capital expenditures for the first six months of 2005 were approximately $97.2 million for both Holdings and AWA as compared to capital expenditures of approximately $77.2 million for both Holdings and AWA for the first six months of 2004. Included in these amounts are capital expenditures for capitalized maintenance of approximately $75.8 million and $58.4 million for both Holdings and AWA for the first six months of 2005 and 2004, 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 also are 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 the second quarter of 2005, AWA made $28.4 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 83 aircraft, as well as leases for certain terminal space, ground facilities and computer and other equipment. In the second quarter of 2005, AWA made $50.0 million in lease payments related to these operating leases.


	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 June 30, 2005, 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 June 30, 2005, we had $704.0 million of long-term debt (including current maturities). This amount consisted primarily of the $300.3 million government guaranteed loan, a secured term loan financing with General Electric Capital Corporation (“GECC”), of which $110.6 million remains outstanding, $36.0 million principal amount of senior secured discount 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 Air Transportation Stabilization Board (“ATSB”). Certain third-party counter-guarantors have fully and unconditionally guaranteed the payment of an aggregate of $45 million of the original 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, which began on March 31, 2004 and end on September 30, 2008. The Company has made the first three of these payments as scheduled. Principal amounts outstanding under the government guaranteed loan bear interest at a rate per annum equal to LIBOR plus 40 basis points. We also pay guarantees fees of approximately 8% of the outstanding guaranteed principal balance in 2005 through 2008 to the U.S. Treasury Department and other loan participants.

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.


	GECC Term Loan Financing

In September 2004, AWA entered into a term loan financing with GECC providing for loans in an aggregate amount of $110.6 million. The 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.


	Senior Secured Discount Notes Due 2009

In December 2004, AWA raised additional capital by financing its Phoenix maintenance facility and flight training center. 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 December 27, 2005 and 2006 and the remaining principal amount due on December 27, 2009. 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 December 27, 2007 and 2008. 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 10³/4% senior unsecured notes due 2005 and 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 June 30, 2005 (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.

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.

In addition, completion of the proposed merger with a subsidiary of US Airways Group will constitute a “change of control” under AWA’s 7.25% senior exchangeable notes due 2023 and will require AWA to make an offer to purchase those notes within 30 days after the effective time of the merger at a purchase price of $343.61 per $1,000 principal amount at maturity. Under the terms of the notes and the related guarantee and exchange agreement, Holdings may satisfy AWA’s obligation to purchase those notes by delivery of shares of new US Airways Group common stock having a “fair market value” of not less than $343.61 per $1,000 principal amount at maturity for a total of $86.8 million plus accrued but unpaid interest. For this purpose “fair market value” means 95% of the average market price of the new US Airways Group common stock calculated over the 5 business days ending on the third business day before the purchase date.


	Other Indebtedness and Obligations

In addition to the above described indebtedness, we had $35.3 million of secured equipment notes and $47.6 million of other unsecured indebtedness, including $29.3 million of industrial revenue bonds.

The following table sets forth our cash obligations as of June 30, 2005.


		2005		2006		2007		2008		2009		Beyond 2009		Total

		(in thousands)
Long-term debt:
	Equipment notes — non-EETC(1)	$	4,153	$	8,305	$	7,772	$	15,082	$	—	$	—	$	35,312
	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)		42,900		85,800		85,800		85,800		—		—		300,300
	State loan(6)		250		250		250		—		—		—		750
	Industrial development bonds(7)		—		—		—		—		—		29,300		29,300
	AVSA promissory notes(8)		8,750		8,750		—		—		—		—		17,500
	Senior Secured Discount Notes(9)		1,530		1,529		1,529		1,530		29,870		—		35,988

			57,583		109,792		100,509		107,570		147,327		371,927		894,708
Cash aircraft rental payments(10)			149,933		331,798		307,568		259,409		230,610		1,666,132		2,945,450
Lease payments on equipment and facility operating leases(11)			10,924		20,687		18,183		17,866		16,299		55,708		139,667
Capital lease obligations			4,472		4,991		1,773		—		—		—		11,236
Special facility revenue bonds(12)			1,363		1,363		1,362		1,362		2,044		36,106		43,600
Aircraft purchase commitments(13)			173,042		468,136		48,142		—		—		—		689,320
Engine maintenance commitments(14)			6,000		6,000		3,000		1,000		—		—		16,000

Total		$	403,317	$	942,767	$	480,537	$	387,207	$	396,280	$	2,129,873	$	4,739,981


	(1)	Includes approximately $35.3 million of equipment notes with variable interest rates of 3.94% to 4.72%, averaging 4.07% at June 30, 2005, installments due 2005 through 2008.

	(2)	The amount consists of the Spare Parts Facility and the Engine Facility with a variable interest rate of 7.33% at June 30, 2005. 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 June 30, 2005, the accreted balance of the convertible senior notes in the accompanying consolidated balance sheet is approximately $70.6 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 $300.3 million with a variable interest rate of 3.49% at June 30, 2005 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 7.87% at June 30, 2005.

(7) Includes $29.3 million of 6.3% industrial development bonds due April 2023.

(8) Includes AVSA promissory notes of $17.5 million due 2005 with variable interest rates averaging 4.47% at June 30, 2005.

(9) Includes $36.0 million of senior secured discount notes due 2009 with a variable interest rate of 6.98% at June 30, 2005.


(10)	Includes non-cancelable operating leases for 137 aircraft with remaining terms ranging from three 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 18 Airbus aircraft and five 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.

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 June 30, 2005, Holdings and AWA were in compliance with the covenants in their long-term debt agreements.

Our credit ratings, like most airlines, 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. Both S&P and Fitch placed AWA on “Watch Negative” and Moody’s revised its outlook to “Negative” following the merger announcement. 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 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.

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 have negotiated or are in the process of negotiating 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 — Union disputes, employee strikes and other labor-related disruptions may adversely affect our operations.”


	*Regulatory Matters*

Certain aspects of the proposed merger of America West Holdings and US Airways Group are subject to regulatory review by the DOT. Specifically, the change in ownership resulting from the merger requires that the restructured US Airways Group and its various operating subsidiaries, including America West Airlines, undergo a continuing fitness review of their managements, operations, finances and citizenship. In addition, the DOT must approve the consolidation under common ownership of the various international route authorities, now independently held by AWA, US Airways and PSA. While we anticipate that the DOT review will be concluded favorably, any complications in the review process that hinder or delay the closing of the transaction could have a severe impact on our operations and financial results.

AWA currently holds eight exemption slots at Ronald Reagan National Airport in Washington, DC (DCA) awarded to it by the DOT. These exemption slots were awarded to AWA specifically to operate three daily roundtrips between DCA and Phoenix and one daily round trip between DCA and Las Vegas. The federal law creating these exemption slots prohibits the sale or transfer of these exemptions. AWA believes that the proposed merger does not constitute a prohibited transfer of these exemptions. Should the DOT conclude that the proposed merger, if consummated, would constitute a transfer, it may withdraw some or all of these exemptions from AWA, forcing the Company to reduce or terminate this service to our hubs.


	*Related Party Transactions*

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 $2.5 million in such reimbursement.


	*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 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 June 30, 2005, the Company had recorded a valuation allowance of $109.3 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 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 its 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. As issued, this revision was effective for interim periods beginning after June 15, 2005. On April 14, 2005, the Securities and Exchange Commission amended the compliance date for SFAS No. 123R to the beginning of the next fiscal year that begins after June 15, 2005. Accordingly, the Company will adopt this revised SFAS effective January 1, 2006. 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.


	*Change in Accounting Policy*

America West records the cost of major scheduled airframe, engine and certain component overhauls as capitalized assets that are subsequently amortized over the periods benefited (deferral method). US Airways Group charges maintenance and repair costs for owned and leased flight equipment to operating expense as incurred. Upon the earlier of the completion of the merger (See Note 8, “Proposed Merger of America West Holdings and US Airways Group” in Notes to Condensed Consolidated Financial Statements) or December 31, 2005, America West Holdings will change its accounting policy from the deferral method to the expense as incurred method. While the deferral method is permitted under accounting principles generally accepted in the United States of America, America West Holdings believes that the expense as incurred method is preferable and the predominant method used in the airline industry. The effect of this change in accounting for aircraft maintenance and repairs will be treated as a cumulative effect of a change in accounting principle.

Forward-Looking Information

Certain of the statements contained in this quarterly report on Form 10-Q should be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” and “continue” and similar terms used in connection with statements regarding our outlook, expected fuel costs, the revenue environment, and our expected 2005 financial performance. These statements are based upon the current beliefs and expectations of management and are subject to significant risks and uncertainties that could cause our actual results and financial position to differ materially from these statements. These risks and uncertainties include,

but are not limited to, those described below under the heading “Risk Factors Relating to America West and Industry Related Risks” and the following:


	•	the ability of Holdings to consummate the proposed merger with a subsidiary of US Airways Group, Inc.

	•	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;

	•	the ability to attract and retain qualified personnel;

	•	the ability of AWA to attract and retain customers;

	•	the cyclical nature of the airline industry;

	•	competitive practices in the airline industry, including significant fare restructuring by major airlines;

	•	the impact of historically high fuel prices;

	•	economic conditions;

	•	reliance on automated systems and the impact of any failure of these systems;

	•	labor costs;

	•	security-related and insurance costs;

	•	weather conditions;

	•	government legislation and regulation; and

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

There may be other factors not identified above of which the companies are not currently aware that may affect matters discussed in the forward-looking statements, and may also cause actual results to differ materially from those discussed. The companies assume no obligation to publicly update any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these estimates other than as required by law.

Risk Factors Relating to America West 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.


	Our business is dependent on the price and availability of aircraft fuel. Continued periods of historically high fuel costs, significant disruptions in the supply of aircraft fuel or significant further increases in fuel costs could have a significant negative impact on our operating results.

Our operating results are significantly impacted by changes in the availability or price of aircraft fuel. Fuel prices increased substantially in 2004 compared with 2003 and have continued to increase in 2005. Since jet fuel is the principal raw material consumed by our business, accounting for 23.3% of our total operating expenses in the first six months of 2005 and 19% 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 $5.5 million. Due to the competitive nature of the airline industry, we generally have not been able to increase our fares when fuel prices have risen in the past and we may not be able to do so in the future. Although we are currently able to obtain adequate supplies of aircraft fuel, it is impossible to predict the future availability or price of aircraft fuel.

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 fuel hedging 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 53% and 12% 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 fuel hedging instruments than East Coast fuel prices and, therefore, more difficult to hedge. The effectiveness of our fuel hedging program also may be negatively impacted by continued instability in oil producing regions such as the Middle East, Nigeria, Russia and Venezuela.


	*Failure to complete the proposed merger with a subsidiary of US Airways Group could negatively impact the stock price and our future business and financial results.*

Completion of the proposed merger is subject to the satisfaction or waiver of various conditions, including the receipt of approvals from our stockholders, receipt of various regulatory approvals and authorizations, including approval of US Airways Group’s plan of reorganization, and the absence of any order, injunction or decree preventing the completion of the proposed merger. There is no assurance that all of the various conditions will be satisfied or waived. If the proposed merger is not completed for any reason, we may be subject to several risks, including the following:


	•	having incurred certain costs relating to the proposed merger that are payable whether or not the merger is completed, including legal, accounting, financial advisor and printing fees; and

	•	having had the focus of management directed toward the proposed merger and integration planning instead of our business and other opportunities that could have been beneficial to us.

In addition, we would not realize any of the expected benefits of having completed the proposed merger. If the proposed merger is not completed, we cannot assure you that these risks will not materialize or materially adversely affect its business, financial results, financial condition and stock price.


	*The combined company created by our merger into a subsidiary of US Airways Group may not perform as well financially as we expect following the merger.*

In deciding to enter into the merger agreement, Holdings and US Airways Group considered the benefits of operating as a combined company, including, among others: an enhanced ability to compete in the airline industry and the fact that the proprietary brands of the combined company would permit the combined entity to further differentiate itself from other airline companies. The success of the merger will depend, in part, on our ability to realize the anticipated revenue opportunities and cost savings from combining the businesses of Holdings and US Airways Group. We cannot assure you, however, that any expected operating cost and revenue synergies will be realized. To realize the anticipated benefits from the merger, we must successfully combine the businesses of Holdings and US Airways Group in a manner that permits those costs savings and other synergies to be realized in a timely fashion. In addition, we must achieve these savings without adversely affecting revenues or suffering a business interruption. If we are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. We cannot assure you that the merger, even if achieved in an efficient, effective and timely manner, will result in combined results of operations and financial condition consistent with our expectations or superior to what Holdings and US Airways Group could have achieved independently.


	*The integration of Holdings and US Airways Group following the merger will present significant challenges.*

Holdings and US Airways Group have operated and, until the completion of the merger, will continue to operate, independently. Holdings and US Airways Group will face significant challenges in consolidating functions, integrating their organizations, procedures and operations in a timely and efficient manner and retaining key Holdings and US Airways Group personnel. The integration of Holdings and US Airways Group will be costly, complex and time consuming, and the managements of Holdings and US Airways Group will have to devote substantial effort to such integration that could otherwise be spent on operational matters or other strategic opportunities.


	*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. Our 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. In addition, 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.


	*Union disputes, employee strikes and other labor-related disruptions may adversely affect our operations.*

Approximately 81% of our employees are represented for collective bargaining purposes by labor unions. These employees are organized into seven labor groups represented by four different unions at AWA. Relations between air carriers and labor unions in the United States are governed by the Railway Labor Act, or the RLA. Under the RLA, collective bargaining agreements generally contain “amendable dates” rather than expiration dates, and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the National Mediation Board. This process continues until either the parties have

reached agreement on a new collective bargaining agreement, or the parties have been released to “self-help” by the National Mediation Board. Although in most circumstances the RLA prohibits strikes, after release by the National Mediation Board carriers and unions are free to engage in self-help measures such as strikes and lock-outs. Of our labor agreements, three are currently amendable, a fourth becomes amendable soon and negotiations are proceeding with a fifth group for an initial collective bargaining agreement. See “Other Information — Labor Relations.”

We cannot predict the outcome of current negotiations 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.


	*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. These are primarily 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, federal reserve rates 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 and other variable interest rates. To the extent these interest rates increase, our interest expense will increase, in which event, we may have difficulties making interest payments and funding our other fixed costs and our available cash flow for general corporate requirements may be adversely affected.


	*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 systems, our flight operations systems, our telecommunication systems and our websites. In 2004, approximately 96% of our tickets were issued electronically. Our website and reservation systems must be able to accommodate a high volume of traffic and deliver important flight information. Substantial or repeated website, reservations systems or telecommunication systems failures could reduce the attractiveness of our services and could cause our customers to purchase tickets from another airline.


	If we incur problems with any of our third party service providers, our operations could be adversely affected by a resulting decline in revenue or negative public perception about our services.

Our reliance upon others to provide essential services on behalf of our operations may result in the relative inability to control the efficiency and timeliness of contract services. We have entered into agreements with contractors to provide various facilities and services required for our operations, including aircraft maintenance, ground facilities and baggage handling. It is likely that similar agreements will be entered into in any new markets we decide to serve. All of these agreements are subject to termination after notice. Any material problems with the efficiency and timeliness of contract services could have a material adverse effect on our business, financial condition and results of operations.


	*The travel industry, materially adversely affected by the September 11, 2001 terrorist attacks, continues to face on-going security concerns and cost burdens associated with security.*

The attacks of September 11, 2001 materially impacted and continue to impact air travel. In November 2001, the President signed into law the Aviation and Transportation Security Act, or the Aviation Security Act. This law federalized substantially all aspects of civil aviation security, creating a new Transportation Security Administration, or TSA. Under the Aviation Security Act, substantially all security screeners at airports are now federal employees and significant other elements of airline and airport security are now

overseen and performed by federal employees, including federal security managers, federal law enforcement officers, federal air marshals and federal security screeners. Among other matters, the law mandates improved flight deck security, deployment of federal air marshals onboard flights, improved airport perimeter access security, airline crew security training, enhanced security screening of passengers, baggage, cargo, mail, employees and vendors, enhanced training and qualifications of security screening personnel, additional provision of passenger data to U.S. Customs and enhanced background checks. These increased security procedures introduced at airports since the attacks have increased costs to airlines. We would also be materially impacted in the event of further terrorist attacks or perceived terrorist threats.


	*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, we have obtained third party war risk (terrorism) insurance through a special program administered by the FAA resulting in lower premiums than if we had obtained this insurance in the commercial insurance market. 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.


	*Changes in government regulation could increase our operating costs and limit our ability to conduct our business.*

Airlines are subject to extensive regulatory requirements. In the last several years, Congress has passed laws and the U.S. Federal Aviation Administration has issued a number of maintenance directives and other regulations. These requirements impose substantial costs on airlines. Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce revenues. The ability of U.S. carriers to operate international routes is subject to change because the applicable arrangements between the U.S. and foreign governments may be amended from time to time, or because appropriate slots or facilities may not be available. We cannot assure you that laws or regulations enacted in the future will not adversely affect our operating costs.


	*The airline industry is intensely competitive.*

Our competitors include other major domestic airlines as well as foreign, regional and new entrant airlines, some of which have more financial resources or lower cost structures than ours, and other forms of transportation, including rail and private automobiles. In most of our markets we compete with at least one low-cost air carrier. Our revenues are sensitive to numerous factors, and the actions of other carriers in the areas of pricing, scheduling and promotions can have a substantial adverse impact on overall industry revenues. These factors may become even more significant in periods when the industry experiences large losses, as airlines under financial stress, or in bankruptcy, may institute pricing structures intended to achieve near-term survival rather than long-term viability.


	*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.


	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 June 30, 2005, we had approximately $704.0 million of outstanding debt, of which $181.9 million was secured. In addition, we had $11.2 million of payments to satisfy capital lease obligations and $3.1 billion of operating lease obligations through lease expiration dates incurred primarily in connection with off-balance sheet aircraft financings. See “Liquidity and Capital Resources — Off Balance Sheet Arrangements.” 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.


	*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.


	*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. The insurance we carry to cover damages arising from any future accidents may be inadequate. In the event that our insurance is inadequate, we may be forced to bear substantial losses from an accident. 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 adversely impact our financial condition and operations.


	*Our business is subject to weather factors and seasonal variations in airline travel, which cause our results to fluctuate.*

Our operations are vulnerable to severe weather conditions in parts of our network that could disrupt service, create air traffic control problems, decrease revenue, and increase costs. In addition, the air travel business historically fluctuates on a seasonal basis. 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.


	*Employee benefit plans represent significant continuing costs to us.*

We sponsor employee benefit plans and arrangements that provide retirement, medical, disability, and other benefits to our employees and participating retirees. Many of the benefits provided under these plans are mandated under various collective bargaining agreements, while others are provided on a voluntary basis as a means to recruit and retain valuable employees. The benefit obligations associated with our employee benefit plans represent a substantial continuing cost to us. In addition, many of these employee benefit plans are subject to federal laws such as the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code, and must be maintained accordingly. Continued compliance with these rules is necessary, as even unintentional failures to comply can result in significant fines and penalties. Employee benefit plans in general also are increasingly the subject of protracted litigation, especially following significant plan design changes.


	*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. Our ability to retain key executive officers may be adversely impacted by the proposed merger with US Airways Group. 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.


	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 July 21, 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;

	•	10,287,644 shares of our Class B common stock that are issuable upon the exercise of outstanding options;

	•	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. The existence of the notes, warrants and options may also 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.

In addition, completion of the merger with a subsidiary of US Airways Group may result in the issuance of additional shares of new US Airways Group common stock in satisfaction of certain put rights granted to the holders of the 7.25% senior exchangeable notes upon the occurrence of a “change of control.” See “Liquidity and Capital Resources — Commitments — 7.25% Senior Exchangeable Notes due 2023.”


	*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.


	*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:


	•	the failure to complete the proposed merger with a subsidiary of US Airways Group;

	•	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 3. Quantitative and Qualitative Disclosures about Market Risk.

Market Risk Sensitive Instruments


(a)	Commodity Price Risk

As of June 30, 2005, the Company had entered into costless collar transactions, which establish an upper and lower limit on heating oil futures prices. These transactions are in place with respect to approximately 53% and 12% of remaining projected 2005 and 2006 fuel requirements, respectively, including 55% related to the third quarter of 2005 and 50% related to the fourth quarter of 2005. See “Risk Factors Relating to America West and Industry Related Risks — Fluctuations in 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 or certain declines in the differential between jet fuel and heating oil futures prices. At June 30, 2005, the Company estimates that a 10% increase in heating oil futures prices would increase the fair value of the costless collar transactions by approximately $29.5 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 $25.6 million.

As of July 21, 2005, approximately 53% and 12% of AWA’s remaining 2005 and 2006 projected fuel requirements, respectively, 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 June 30, 2005, the Company’s variable-rate long-term debt obligations of approximately $500.4 million represented approximately 71% of its total long-term debt. If interest rates increased 10% in 2005, the impact on the Company’s results of operations would not be material.


Item 4.	Controls and Procedures.


(a)	Evaluation of disclosure controls and procedures.

An evaluation was performed under the supervision and with the participation of Holdings’ and AWA’s management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the rules promulgated under the Exchange Act) as of June 30, 2005. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of June 30, 2005.


(b)	Changes in internal control over financial reporting.

There has been no change to the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


(c)	Limitation on the effectiveness of controls.

We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and, following the changes in our internal controls implemented prior to the filing of this report, the CEO and CFO believe that our disclosure controls and procedures were effective at the “reasonable assurance” level as of June 30, 2005.

PART II — OTHER INFORMATION


Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

The following table sets forth all purchases made by us or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, as amended, of our Class B common stock during each month within the second quarter of 2005. No purchases were made pursuant to a publicly announced repurchase plan or program.

(d)

Maximum Number

(c)

(or Approximate

Total Number of

Dollar Value) of

(a)

Shares Purchased as

Shares that May Yet

Total Number

(b)

Part of Publicly

be Purchased Under

of Shares

Average Price

Announced Plans or

the Plans or

Period

Purchased(1)

Paid per Share

Programs

April 1, 2005 - April 30, 2005

64,200

4.54

—

May 1, 2005 - May 31, 2005

112,500

4.68

—

June 1, 2005 - June 30, 2005

33,700

6.11

—


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


Item 4.	Submission of Matters to a Vote of Security Holders.

At our annual meeting of stockholders held on May 17, 2005 (the “Annual Meeting”), the stockholders approved the election of the following directors to hold office until the Company’s annual meeting in 2006 and until their successors are elected and qualified, or until their earlier death or resignations.


	Number of Shares

	For		Withheld

Matthew J. Hart		30,733,838		329,390
Robert J. Miller		30,677,130		386,098
W. Douglas Parker		30,794,012		269,216
John F. Tierney		30,711,960		351,268

The following directors’ term of office as a director continued after the Annual Meeting: Herbert M. Baum, John L. Goolsby, Walter T. Klenz, Richard C. Kraemer, Denise M. O’Leary, Richard P. Schifter and J. Steven Whisler.

II-1


Item 6.	Exhibits


Exhibit
number			Description and Method of Filing
	2	.1	Agreement and Plan of Merger, dated May 19, 2005, among US Airways Group, Inc., Holdings and Barbell Acquisition Corp. — Incorporated by reference to Exhibit 2.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.1+	Summary of Officer Benefits.
	10	.2*	Master Memorandum of Understanding, dated as of June 13, 2005, among US Airways, Inc., US Airways Group, Inc., Holdings, AWA, General Electric Capital Corporation acting through its agent, GE Commercial Aviation Services LLC, and General Electric Company/ GE Transport Component.
	10	.3	Advisory Agreement, dated May 19, 2005, between America West Holdings Corporation and TPG Advisory, Inc. — Incorporated by reference to Exhibit 10.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.4	Investment Agreement, dated May 19, 2005, among Eastshore Aviation, LLC, Holdings and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 2.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.5	Investment Agreement, dated May 19, 2005, among Par Investment Partners, L.P., Holdings and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 10.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.6	Investment Agreement, dated May 19, 2005, among Peninsula Investment Partners, L.P., Holdings and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 10.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.7	Investment Agreement, dated May 19, 2005, among ACE Aviation Holdings, Holdings and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 10.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.8	Investment Agreement, dated May 27, 2005, among Wellington Management Company, LLP, Holdings and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 10.1 to Holdings’ Form 8-K filed on June 2, 2005 (File no. 001-12649).
	99	.1	Voting Agreement, dated May 19, 2005, among TPG Partners, L.P., TPG Parallel I, L.P., Air Partners II, L.P. and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 2.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	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.


(+)	Represents a management contract or compensatory plan or arrangement.


(*)	The Company has sought confidential treatment for portions of the referenced exhibit.

II-2

AMERICA WEST HOLDINGS CORPORATION

June 30, 2005

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AMERICA WEST HOLDINGS CORPORATION


	By	/s/ Derek J. Kerr



	Derek J. Kerr
	Senior Vice President and Chief Financial Officer

DATED: July 21, 2005

II-3

AMERICA WEST AIRLINES, INC.

June 30, 2005

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AMERICA WEST AIRLINES, INC.


	By	/s/ Derek J. Kerr



	Derek J. Kerr
	Senior Vice President and Chief Financial Officer

DATED: July 21, 2005

II-4 EX-10.1 2 p70932exv10w1.htm EX-10.1 exv10w1

Exhibit 10.1

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 AWHC 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. An officer’s position at the time the policies were activated determined his or her level of coverage. 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. In lieu of these individual level term life insurance policies, eligible officers were allowed to elect to receive annual cash payments equal to the average insurance premium cost that AWHC would have incurred or continue their participation in split-dollar life insurance policies and assume those policies from AWHC as of December 31, 2003. Four officers elected to continue to participate in split-dollar life insurance policies and subsequently assumed them from AWHC.

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-10.2 3 p70932exv10w2.txt EX-10.2 EXHIBIT 10.2 [Redacted] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS AND THE WORK "REDACTED", HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. CONFIDENTIAL As of June 13, 2005 US Airways Group, Inc. 2345 Crystal Drive Arlington, VA 22227 US Airways, Inc. 2345 Crystal Drive Arlington, VA 22227 America West Holdings Corporation 111 West Rio Salado Pkwy. Tempe, Arizona 85281 America West Airlines, Inc. 111 West Rio Salado Pkwy. Tempe, Arizona 85281 General Electric Capital Corporation c/o GE Commercial Aviation Services LLC 201 High Ridge Road Stamford, CT 06927-4900 Re: Master Merger Memorandum of Understanding ("Merger MOU") among US Airways, Inc. (including, as the context may require, as reorganized pursuant to the Bankruptcy Code, "US Airways"), US Airways Group, Inc. (including, as the context may require, as reorganized pursuant to the Bankruptcy Code, "Group"), America West Holdings Corporation ("Holdings"), America West Airlines, Inc. ("AWA"), General Electric Capital Corporation, acting through its agent GE Commercial Aviation Services LLC ("GECC"; and together with GE Commercial Aviation Services LLC ("GECAS"), GE Engine Services, Inc. and GE Engine Services - Dallas, LP (collectively, "GE Engine Services"), and General Electric Company, GE Transportation Component ("GEAE") and their respective affiliates, the "GE Entities")/Amendment to Original MOU (as hereinafter defined) Ladies and Gentlemen: This Merger MOU, when countersigned by the respective parties, shall set forth our understanding with respect to the restructuring of certain of the indebtedness and obligations of CONFIDENTIAL US Airways and Group to the GE Entities, and the restructuring of certain of the indebtedness and obligations of Holdings and AWA to the GE Entities, both in connection with that certain merger transaction described in the Agreement and Plan of Merger filed on May 20, 2005 with the Bankruptcy Court as defined below (the "Merger"), which understanding was reached in separate negotiations with each of such respective parties in connection with the related matters contained herein. I. Relationship to Original MOU Reference is made to the Amended and Restated Master Memorandum of Understanding, dated as of November 24, 2004 (as amended prior to the date hereof, the "Original MOU"), among US Airways, Group and the GE Entities. Terms used herein and in the Supplemental Merger Term Sheets (as defined below) and not otherwise defined have the meanings given to them in the Original MOU. The parties hereto agree that the Original MOU remains in effect and operative in connection with the Merger and that this Merger MOU shall be interpreted as being supplemental to the Original MOU, with the result that the Phase II Transactions and the Exit Transactions as described in the Original MOU, as supplemented hereby, shall continue to be implemented in the manner provided by the Original MOU except as otherwise expressly provided to the contrary herein. In accordance with the foregoing statement of intent concerning the supplementary nature of this Merger MOU to the Original MOU, the parties hereto agree that the Original MOU and this Merger MOU shall be interpreted to the maximum extent possible in a manner that reconciles any inconsistencies between them; provided, however, that, in the event of a direct irreconcilable conflict between the Original MOU and this Merger MOU, the terms of this Merger MOU shall control. In furtherance of the foregoing, the Global Events of Default stated in the Original MOU are hereby deleted in their entirety and replaced with each of the Merger Events of Default hereunder and, accordingly, each Merger Event of Default hereunder shall constitute a Global Event of Default under the Original MOU and in each document referencing the Original MOU. II. Supplemental Terms regarding the Original MOU to provide for Certain Additional Restructuring Transactions. A. US Airways and AWA Lease and Finance Arrangements In conjunction with the bankruptcy proceedings of Group and certain of its subsidiaries (including US Airways) under Chapter 11, Title 11 of the United States Code (the "Chapter 11 Case") commenced on September 12, 2004 (the "Petition Date") in the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria Division (the "Bankruptcy Court"), and in conjunction with the Merger, US Airways and AWA wish to obtain and GECAS is willing to provide (both during the Chapter 11 Case and upon the effective date of a plan of reorganization ("Plan of Reorganization") confirmed by the Bankruptcy Court (the "Emergence" and "Emergence Date", as the case may be) that provides for the Merger and other transactions contemplated hereby in accordance with this Merger MOU, and both prior to the closing of the Merger and upon closing of the Merger as provided herein) the following transactions to 2 CONFIDENTIAL supplement the Phase II Transactions and Exit Transactions contemplated by the Original MOU: (i) certain lease modifications to shorten the terms of various leases with respect to certain GECC aircraft leased to US Airways, and with respect to certain GE Entities' aircraft leased to AWA, and certain related lease amendments, as described in Exhibit A; (ii) certain acknowledgments regarding the existing bridge facility to US Airways from a GE Entity and certain lease modifications related to the rent under various leases, as described in Exhibit B; (iii) certain arrangements in respect of regional jet leases and financings with US Airways, as described in Exhibit C; (iv) certain modifications to the financing provided by GE Entities to AWA in respect of Spare Parts, as described in Exhibit D; (v) certain amendments to the Phase II Transactions between GECAS and US Airways, as described in Exhibit E; and (vi) certain modifications with respect to certain of the contracts between US Airways and GE Engine Services and GEAE, as described in Exhibit F. B. General Conditions Each of the transactions and modifications described herein is to occur, together with the Phase II Transactions and Exit Transactions described in the Original MOU, as supplemented hereby, pursuant to the terms and conditions set forth in the following applicable term sheets attached as Exhibits A through F (each, a "Supplemental Merger Term Sheet" and, collectively, the "Supplemental Merger Term Sheets"). Certain of the transactions and modifications described in the Supplemental Merger Term Sheets are scheduled to take effect as described therein prior to the Emergence Date and the closing of the Merger (the "Pre-Merger Transactions"); and others are scheduled to take effect upon or after the Emergence Date and the closing of the Merger as described in the attached Supplemental Merger Term Sheets (the "Merger Transactions" and, together with the Pre-Merger Transactions, the Phase II Transactions and the Exit Transactions, the "Restructuring Transactions"). The parties further acknowledge and agree that (i) the Restructuring Transactions contemplated in this Merger MOU and the Original MOU are comprised of several separate interrelated transactions (each of which is individually described in its respective Term Sheet), and (ii) each Pre-Merger Transaction, Merger Transaction, Phase II Transaction and Exit Transaction is expressly conditioned upon the consummation of every other Pre-Merger Transaction, Merger Transaction, Phase II Transaction and Exit Transaction, as applicable. In no event shall any Supplemental Merger Term Sheet be viewed as a stand-alone transaction. Accordingly, each of the transactions and modifications contemplated by the Supplemental Merger Term Sheets must be evidenced by executed definitive agreements in order to effectuate the Restructuring Transactions. Each of the Pre-Merger Transactions, the Merger Transactions, the Phase II Transactions and the Exit Transactions shall only take effect on the effective dates and, in each case subject to the satisfaction of applicable conditions, for such transactions (whether such conditions are provided for in the schedules to this Merger MOU or in the schedules to the Original MOU or in the applicable Supplemental Merger Term Sheet or Term Sheet); provided, however, that to the extent an individual transaction under any of the Supplemental Merger Term Sheets to this Merger MOU or the Term Sheets to the Original MOU is consummated prior to the Merger and/or the Emergence Date, and without waiving or otherwise affecting any of the other terms 3 CONFIDENTIAL and conditions of the Original MOU or the Term Sheets, this Merger MOU or the Supplemental Merger Term Sheets, such transaction shall be effective nevertheless and shall not be reversed or rescinded even if the Merger and/or such emergence does not occur. Each and every obligation of US Airways or Group to a GE Entity, or of Holdings or AWA to a GE Entity, or to another party where nonperformance of such obligation could impose an obligation on a GE Entity, which may be created under this Merger MOU, the Original MOU and the Supplemental Merger Term Sheets hereunder and the Term Sheets thereunder (such obligations, the "Restructuring Obligations") will be, subject to the last sentence of this paragraph, (i) cross-defaulted to each and every Restructuring Obligation unless such cross-default has specifically been waived by the affected GE Entity or in this Merger MOU or in the Original MOU or in the Supplemental Merger Term Sheets or Term Sheets, as applicable, and (ii) cross-defaulted with the cash collateral order in respect of the existing loan guaranteed by the Air Transportation Stabilization Board (the "ATSB") in accordance with the Air Carrier Guarantee Loan Program (the "ATSB Loan"). Upon Emergence, any agreement between US Airways and/or Group and a GE Entity, or Holdings and/or AWA and a GE Entity, which contains a cross-default to other obligations owing a GE Entity shall be amended to include any obligations of US Airways or AWA, and their affiliates, to a GE Entity, subject to any qualifications and conditions in such cross-default provision. After the Emergence Date and consummation of the Merger, (x) US Airways and Group shall guarantee each and every obligation of Holdings and/or AWA to a GE Entity, or to another party where nonperformance of such obligation could impose an obligation on a GE Entity, existing under any transaction between any GE Entity and Holdings and/or AWA or their respective affiliates (the "AWA Obligations"), (y) Holdings and AWA shall guarantee each and every obligation of Group and/or US Airways to a GE Entity, or to another party where nonperformance of such obligation could impose an obligation on a GE Entity, existing under any transaction between any GE Entity and Group and/or US Airways or their respective affiliates (the "US Airways Obligations," together with the AWA Obligations, the "Obligations"), and (z) to the extent a new holding company is formed in connection with the Merger and survives the Merger ("Newco") it shall guarantee all Obligations. Notwithstanding anything herein to the contrary but without limiting the conditions for any Restructuring Transaction or the effect of a Merger Event of Default or Global Event of Default, prior to the Emergence Date and consummation of the Merger, (i) no default under, or failure to perform, any US Airways Obligation or Restructuring Obligation by US Airways or Group shall give rise to any obligation or liability of Holdings or AWA on account of any such default under or failure to perform such US Airways Obligation or Restructuring Obligation and (ii) no default under, or failure to perform, any AWA Obligation or Restructuring Obligation by Holdings or AWA shall give rise to any obligation or liability of US Airways or Group on account of any such default under or failure to perform such AWA Obligation or Restructuring Obligation. III. Confidentiality Each of the parties hereto acknowledges that this Merger MOU and the related Supplemental Merger Term Sheets contain commercially sensitive and proprietary information. Each of the parties agrees to keep this information strictly confidential and agrees to disclose it to no person other than: (A) their respective board(s) of directors; (B) employees working on the subject 4 CONFIDENTIAL matter of this Merger MOU; (C) professional advisors advising them concerning the subject matter of this Merger MOU provided that US Airways, Group, Holdings, AWA shall cause such outside professional advisors to keep such information confidential; (D) the ATSB, provided that US Airways and AWA shall use commercially reasonable efforts to prevent disclosure of such information under the Freedom of Information Act; (E) the Bankruptcy Court during the course of the Chapter 11 Case, provided, however, that no document shall be filed with the Bankruptcy Court unless either there has been obtained prior to the filing thereof an order of the Bankruptcy Court enabling US Airways to file those portions of the documents under seal or portions of such filed documents designated by GECC are redacted, in each case, as GECC shall request in its sole discretion; (F) the professional advisors of the Official Committee of Unsecured Creditors (the "Creditors' Committee"), but only to the extent that designated portions of such material to be disclosed are redacted, in each case, as GECC shall request in its sole discretion, members of the Creditors' Committee, and (G) any potential debtor-in-possession ("DIP") lender and equity investor that is acceptable to GECC and GEAE in terms of permitting disclosure of this Merger MOU and attached Supplemental Merger Term Sheets or information contained herein or therein, provided that such entities shall, in each case prior to disclosure, execute a confidentiality agreement in form and substance acceptable to GECC and GEAE. A written summary of the Restructuring Transaction, approved by GECC in advance of disclosing such summary, may be provided to (i) US Airways', Group's, Holdings' and AWA's labor unions, (ii) any lender, potential lender, or participant that is acceptable to GECC and GEAE in terms of permitting disclosure of this Merger MOU and attached Supplemental Merger Term Sheets or information contained herein or therein, (iii) any material stakeholder in US Airways' and Group's proposed restructuring that is acceptable to GECC and GEAE in terms of permitting disclosure of this Merger MOU and attached Supplemental Merger Term Sheets or information contained herein or therein, (iv) the Creditors' Committee (but only if such summary has been redacted in a manner satisfactory to GECC as provided above) or (v) such other third parties as the parties hereto may mutually agree; provided that such parties described in (i) - (v) above have executed a confidentiality agreement in form and substance acceptable to GECC and GE Engine Services. The parties agree that the terms of this Paragraph will survive any termination, through expiration or otherwise, of the Supplemental Merger Term Sheets that are the subject hereof. IV. Binding Obligations and Miscellaneous Subject to the conditions set forth in Schedule A and Schedule B hereto with respect to the Pre-Merger Transactions and the Merger Transactions, and the conditions in the Original MOU and the Term Sheets thereunder, this Merger MOU and the Supplemental Merger Term Sheets are intended to create binding legal obligations among the parties. Reference is made to the milestones, provisions and events described in Schedule C hereto, with each of which Group and US Airways agree to comply or cause compliance (as the same may be amended, and failure to comply or cause compliance with any of which for any reason whatsoever shall constitute a "Merger Event of Default"). This Merger MOU may not be modified or amended in any manner other than in writing duly executed by or on behalf of all of the parties hereto. 5 CONFIDENTIAL Once this Merger MOU has been countersigned, the parties will proceed to finalize appropriate definitive agreements and to commence the other steps that will be necessary or appropriate to complete the transactions contemplated by the Supplemental Merger Term Sheets herein and in the Original MOU. This Merger MOU shall be governed by and construed in accordance with the laws of the State of New York, and may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. [Signature pages follow.] 6 IN WITNESS WHEREOF, this Merger MOU was entered into the day and year first above written. For and on behalf of US AIRWAYS GROUP, INC. Name: /s/ Stephen Morrell ---------------------------------------------- Title: Treasurer ---------------------------------------------- US AIRWAYS, INC. By: /s/ Stephen Morrell ---------------------------------------------- Name: Vice President - Finance and Treasurer ---------------------------------------------- Title: -------------------------------------------- AMERICA WEST HOLDINGS CORPORATION By: /s/ Derek J. Kerr ----------------------------------- Name: Derek J. Kerr ----------------------------------- Title: Chief Financial Officer ----------------------------------- AMERICA WEST AIRLINES, INC. By: /s/ Derek J. Kerr ----------------------------------- Name: Derek J. Kerr ----------------------------------- Title: Chief Financial Officer ----------------------------------- GENERAL ELECTRIC CAPITAL CORPORATION Name: /s/ Keith Helming ----------------------------------- Title: Vice President ----------------------------------- GENERAL ELECTRIC COMPANY, GE TRANSPORTATION COMPONENT Name: /s/ Scott Hankins -------------------------------------------- Title: Financing Counsel -------------------------------------------- SCHEDULE A Pre-Merger Transaction Conditions In addition to the conditions precedent set forth in the Supplemental Merger Term Sheets attached to this Merger MOU, the obligations of each of the parties hereto to consummate each Pre-Merger Transaction shall be subject to the satisfaction (or waiver) of the following conditions precedent on or before the closing date of the applicable Pre-Merger Transaction: 1. Consummation of each Phase II Transaction. 2. Satisfactory negotiation, review and agreement of definitive documentation, including legal review, for the Phase II Transactions and Pre-Merger Transactions in form and substance acceptable to US Airways and Group, or Holdings and AWA, as applicable, on the one hand and to GECAS, GECC, GE Engine Services, or GEAE, as applicable on the other hand. 3. Bring-down due diligence (including, but not limited to, credit analysis, business review, legal review and review of capital, operating structure (including mainline and regional operations)) respecting Holdings, AWA, US Airways and Group satisfactory to GECAS, GECC, GE Engine Services, or GEAE, as applicable, in their sole discretion. 4. Assumption of all leases and executory contracts as modified in accordance with the Restructuring Transactions with GE Entities on or prior to the earlier of the date provided for assumption of such lease or executory contract in the Supplemental Merger Term Sheets or Emergence. 5. Judicial Order of the Bankruptcy Court approving all transactions related to this Merger MOU, on or before June 30, 2005, which order (a) shall be in form and substance acceptable to GECC in its sole discretion and (b) shall not be subject to an appeal, motion for rehearing or reconsideration or petition for writ of certiorari and the time to file such appeal, motion or petition shall have expired. 6. Payment or reimbursement of all reasonable costs and expenses, including without limitation, reasonable legal fees (including legal fees accruing prior to the Petition Date) of the GE Entities for which invoices have been provided on the earlier of 15 days after being submitted or one business day prior to the closing of the applicable Pre-Merger Transaction. The GE Entities will endeavor to submit invoices on a monthly basis. Except for costs directly related to the removal of AWA Aircraft prior to consummation of the Merger (for which AWA shall be responsible), US Airways/Group shall be responsible for all such costs and expenses. 7. No Merger Event of Default has occurred and is continuing. 7. No event of default or material breach beyond any applicable notice and cure period under any agreement between Holdings, AWA or any of their affiliates, on the one hand, and any GE Entity, on the other hand (including without limitation, any default arising on account of any cross-default of any lease ) shall have occurred and be continuing other than those expressly waived in writing by a GE Entity. SCHEDULE B Merger Transaction Conditions In addition to the conditions precedent set forth in the Supplemental Merger Term Sheets attached to this Merger MOU, the obligations of each of the parties hereto to consummate each Merger Transaction shall be subject to the satisfaction (or waiver) of the following conditions precedent on or before the closing date of the applicable Merger Transaction: 1. Consummation of the Phase II Transactions and each other Pre-Merger Transaction, and concurrent consummation of the Exit Transactions. 2. Satisfactory negotiation, review and agreement of definitive documentation, including legal review, for the Merger Transactions and Exit Transactions in form and substance acceptable to US Airways and Group on the one hand, or Holdings and AWA on the one hand, as applicable, and to GECAS, GECC, GE Engine Services, or GEAE, as applicable on the other hand. 3. Bring-down due diligence (including, but not limited to, credit analysis, business review, legal review and review of capital structure, business plan, regional carrier arrangements, ownership structure, equity ownership, listing and public securities arrangements, exit financing arrangements) respecting Holding, AWA, US Airways and Group satisfactory to GECAS, GECC, GE Engine Services, or GEAE, as applicable, in their sole discretion up to and including the date of confirmation of the Plan of Reorganization and the approved Disclosure Statement (each as approved by GECAS as herein provided). 4. Assumption of all leases and executory contracts as modified in accordance with the Restructuring Transactions with GE Entities on or prior to the earlier of the date provided for assumption of such lease or executory contract in the Supplemental Merger Term Sheets or Emergence. 5. Payment or reimbursement of all reasonable costs and expenses, including without limitation, reasonable legal fees (including legal fees accruing prior to the Petition Date) of the GE Entities for which invoices have been provided on the earlier of 15 days after being submitted or one business day prior to the closing of the applicable Merger Transaction. The GE Entities will endeavor to submit invoices on a monthly basis. Except for costs directly related to the removal of AWA Aircraft prior to consummation of the Merger (for which AWA shall be responsible), US Airways/Group shall be responsible for all such costs and expenses. 6. No Merger Event of Default has occurred and is continuing. 7. GECAS approval, in its sole discretion, of the merger business plan (including both mainline and regional operations), ownership, capital and governance structures for Holdings, AWA, Group, US Airways and Newco up to and including the date of confirmation of the Plan of Reorganization and the approved Disclosure Statement (each as approved by GECAS as herein provided). 8. Airbus contribution of at least $100,000,000 in additional liquidity. 9. Final resolution of all ATSB issues, acceptable to GECAS in its sole discretion. 10. At least $500,000,000 of equity commitments for the Merger (which commitments may include a fully committed and underwritten shareholder or creditor equity rights offering). 11. Cross-Guaranties by Group, US Airways, Holdings, AWA and Newco of all Obligations. 13. No event of default or material breach beyond any applicable notice and cure period under any agreement between Holdings, AWA or any of their affiliates, on the one hand, and any GE Entity, on the other hand (including without limitation, any default arising on account of any cross-default of any lease) shall have occurred and be continuing other than those expressly waived in writing by a GE Entity. 14. No material adverse change in the reasonable discretion of GECAS in the business, operations, financial conditions, or prospects of Newco as the merged business of Group, US Airways, Holdings and AWA from that contemplated in the Plan of Reorganization and the Disclosure Statement (each as approved by GECAS as herein provided) since the date of confirmation of the Plan of Reorganization, and Emergence and consummation of the Merger in accordance with such Plan of Reorganization and Disclosure Statement. SCHEDULE C Merger Events of Default 1. Continued compliance with each of the following milestones during the Chapter 11 Case:

2. Continued compliance by US Airways with the following financial covenants (expressed in millions of US dollars):

3. No event of default or material breach beyond any applicable notice and cure period under any agreement between US Airways, Group or any of their affiliates, on the one hand, and any GE Entity, on the other hand (including without limitation, any default arising on account of any cross-default or upon the rejection of any lease) shall occur other than those expressly waived in this Merger MOU or in the Original MOU or the Supplemental Merger Term Sheets or Term Sheets or otherwise in writing by a GE Entity, and Excepted Obligations as currently defined in the 2001 Facility (collectively, the "Excepted Obligations"). 4. No continuing default or material breach or the occurrence of any termination event beyond any applicable notice and cure period under the Cash Collateral Order relating to the ATSB Loan, and no material breach or event of default beyond any applicable notice and cure period under any Debtor-in-Possession Facility (in each case, irrespective of whether the ATSB has agreed to waive or forebear exercising rights with respect to such default, breach or termination event), shall occur. 5. No failure to substantially complete the Sale-Leaseback Phase II Transactions by July 1, 2005. - ---------- * Measured starting April 2004. CONFIDENTIAL EXHIBIT A AIRCRAFT EARLY REMOVAL TERM SHEET EXCEPT AS EXPRESSLY SET FORTH IN THE MERGER MOU OR IN THE ORIGINAL MOU, OR IN THE RESPECTIVE SUPPLEMENTAL MERGER TERM SHEETS OR TERM SHEETS ATTACHED THERETO, US AIRWAYS SHALL PERFORM ALL OF ITS OBLIGATIONS UNDER ANY EXISTING AIRCRAFT LEASE CONTRACT OR OTHER AGREEMENT WITH ANY GE ENTITY BOTH DURING THE CHAPTER 11 CASE AND UPON EMERGENCE FROM CHAPTER 11 PURSUANT TO CONSENSUAL 1110 AGREEMENTS EFFECTIVE DURING THE PENDENCY OF DEBTORS' CHAPTER 11 CASES, OR AMENDMENTS TO PRE-PETITION AGREEMENTS; IT BEING AGREED THAT, EXCEPT AS OTHERWISE SET FORTH IN THIS MERGER MOU OR IN THE ORIGINAL MOU, OR IN THE RESPECTIVE SUPPLEMENTAL MERGER TERM SHEETS OR TERM SHEETS ATTACHED THERETO OR ANY ORDERS OF THE BANKRUPTCY COURT APPROVING THE SAME, THE SAME SHALL NOT CONSTITUTE AN ASSUMPTION OF ANY SUCH AGREEMENT OR A POST-PETITION CONTRACT FOR PURPOSES OF, AMONG OTHER THINGS, SECTIONS 365, 503 AND 507 OF THE BANKRUPTCY CODE, BUT SHALL BE SUBJECT TO US AIRWAYS' OBLIGATIONS UNDER THE BANKRUPTCY CODE, INCLUDING, WITHOUT LIMITATION SECTION 1110 OF THE BANKRUPTCY CODE. PART I - US AIRWAYS REMOVALS: Subject to consummation of the Merger or, as applicable, Part III below, the leases between US Airways and the applicable GE Entities in respect of the aircraft described below shall be amended to change the expiry dates of such leases to remove such aircraft from service prior to the current lease expiry date and redeliver such aircraft to the applicable GE Entity without any liability in the nature of rejection claim damages arising therefrom. For any aircraft having a revised expiry date prior to the Milestone Date for Emergence and consummation of the Merger, such aircraft shall nevertheless be redelivered on the revised date, provided that, except as otherwise provided in Part III below, on such date (i) no Merger Event of Default shall have occurred and be continuing and (ii) no public announcement or SEC filing by any of Group, US Airways, Holdings, or AWA, and no applicable government authority announcement, shall have been made to the effect or which has the effect that any significant term or condition of the Merger will not be complied with or met by the applicable Milestone or that a Milestone will not otherwise be met. 11X B734: 11x B734 aircraft single investor leases will be amended to have expiry dates in 2009 on the dates described in Part A-I.1 of Schedule A to this Exhibit A. Any purchase or renewal options shall be deleted. In addition, the leases will be amended to provide the applicable GE Entity an early termination option to remove all or a portion of 5x B734's starting in July 2007 and 6x B734's in 2008, exercisable on or before October 31, 2006 (such early termination dates are set forth in Part A-I.1 of Schedule A to this Exhibit A) unless as of September 30, 2006, US Airways has either (i) achieved a corporate credit rating of at least [Redacted] (not on negative credit watch) or (ii) holds consolidated unrestricted cash of at least [Redacted] and achieved at least [Redacted] of the cumulative consolidated EBITDAR for the period from Emergence through September 30, 2006, as set forth in the final disclosure statement, as approved by the Bankruptcy Court in respect of the Plan of Reorganization. 7X B733: 7x B733 aircraft leases will be amended to have lease expiry dates between December 2005 and February 2006, as described in Part A-I.2 of Schedule A to this Exhibit A. GECAS and US Airways hereby agree on the schedule for engine swaps among such 7x B733 aircraft as described in Part A-I.2(a) of Schedule A to this Exhibit A. 6X A319/320 In connection with the closing of the Phase II Transactions, 6x A319/320 leases will be amended to have lease expiry dates between September 2005 and November 2005, as described in Part A-I.3 of Schedule A to this Exhibit A. 1X B733 1x B733 (msn [Redacted]) aircraft on operating lease will be amended to have a lease expiry date of September 1, 2005, as described in Part A-I.4 of Schedule A to this Exhibit A. 1X B733 1x B733 (msn [Redacted]) aircraft on operating lease has been or will be rejected with the consent of the applicable GE Entity and will be redelivered on or about June 14, 2005, as described in Part A-I.4 of Schedule A to this Exhibit A. 15X B733/SILS 15x B733 aircraft single investor leases as described in Part A-I.5 of Schedule A to this Exhibit A shall be removed from service and redelivered to the applicable GE Entity between July 2005 and February 2006. The existing lessee extension options on 2x of these GE Entity-owned B733 aircraft (msn [Redacted] and [Redacted]) will be amended to be one (1) month; all other lessee extension options with respect to the remaining 13x of these GE Entity-owned B733 aircraft will

2 be terminated. Each such expiry date is described in Part II of Schedule A to this Exhibit A. GECAS and US Airways hereby agree on the schedule for engine swaps among such 15x 733 aircraft as described in Part A-I.5(a) of Schedule A to this Exhibit A.

PART II [Redacted] PART III - REDELIVERIES NOT DEPENDANT ON MERGER: Regardless of whether or not the Merger is consummated or a Merger Event of Default has occurred prior to the date of redelivery, the parties agree that the lease expiry dates for aircraft identified with a "*" on Schedule A or B to this Exhibit A will be amended as described in Part I and II above. [Redacted] PART IV - RELATED SPARE ENGINE LEASE EARLY TERMINATIONS: As a result of the fleet reductions noted above, and so long as US Airways remains in compliance with the sparing ratio set forth in the CFM56-3 Agreement and CFM56-5 Agreement, as applicable, the expiry dates for certain US Airways spare engine leases (contemplated in the Phase II Transaction) shall be amended to terminate early as follows: CFM56-5B 1 of the CFM56-5B spare engine leased pursuant to the Phase II Transaction, as selected by US Airways on 60 days' prior notice, will expire on or about November 2005. CFM56-3B: Up to 5x CFM56-3B spare engines leased pursuant to the Phase II Transaction, as selected by US Airways on 60 days' prior notice, will be redelivered early by US Airways at the rate of one spare engine for every fifth Boeing 737-300 returned to the applicable GE Entity.

PART V - RELATED REDELIVERY CONDITION LEASE AMENDMENTS. The applicable GE Entity and US Airways, or AWA and the applicable GE Entity, will amend the leases for certain aircraft to provide for revised redelivery conditions for the following aircraft that are to be removed pursuant to this Exhibit A. The redelivery concession amendments in respect of US Airways aircraft scheduled for redelivery prior to the Milestone Date for Emergence and consummation of the Merger will be effective upon Emergence and consummation of the Merger; it being understood that the relevant GE Entity will permit US Airways to defer compliance with the applicable redelivery conditions to the extent of such concession, and permit US Airways to calculate amounts owed to the applicable lessor utilizing the concession (the obligation of US Airways to pay such concession amount being deferred), until the Milestone Date for Emergence and consummation of the Merger for aircraft scheduled for redelivery prior thereto whereupon if Emergence and consummation of the Merger have not occurred the deferred amounts shall be due and payable and if Emergence and consummation of 3 the Merger shall have occurred they shall be discharged. Except as expressly provided below, all redelivery condition obligations detailed in the respective leases shall otherwise remain in effect. [Redacted] [Redacted] US AIRWAYS AIRCRAFT: For the US Airways Airbus aircraft to be returned between September 2005 and November 2005, pursuant to this Exhibit A, GECAS agrees to limit any payment owed under the maintenance payment formulas at redelivery with respect to engines under the respective leases to an average of [Redacted] per engine ([Redacted] in the aggregate).

US Airways and AWA agree that the maximum amount of the redelivery concession to be realized by them, collectively, as a result of the amended redelivery conditions provided herein in respect of the subject aircraft shall be [Redacted] in the aggregate.1 Once such aggregate amount has been reached, then US Airways and/or AWA shall pay and otherwise perform all redelivery requirements in full when due. [Redacted] The redelivery concession amount is to be confirmed upon redelivery of each applicable aircraft and a running total of the aggregate amount of the redelivery concessions shall be maintained. Prior to Emergence, any redelivery payments payable by any applicable GE Entity to US Airways will first be netted against any redelivery payments payable to any applicable GE Entity from US Airways, and, subject to the provisions of the first paragraph of this Part V, any net balance remaining after such netting will be refunded to US Airways upon Emergence and consummation of the Merger, provided that there is no Merger Event of Default. - ---------- (1) Anything herein to the contrary notwithstanding, AWA, but not US Airways, shall be entitled to realize any redelivery concessions, subject to the collective maximum aggregate amount of [Redacted] thereof, associated with any AWA aircraft redelivered pursuant to Part III above. 4 CONFIDENTIAL SCHEDULE A TO EXHIBIT A US Airways Early Removal Dates Part A-I.1
Early Termination Return Date Tail# MSN A/C Type Expiry Date* [Redacted] [Redacted] 737-400 7/15/07 6/2/09 [Redacted] [Redacted] 737-400 10/15/07 12/2/09 [Redacted] [Redacted] 737-400 11/15/07 9/2/09 [Redacted] [Redacted] 737-400 11/15/07 6/2/09 [Redacted] [Redacted] 737-400 12/15/07 7/2/09 [Redacted] [Redacted] 737-400 1/15/08 9/2/09 [Redacted] [Redacted] 737-400 2/15/08 8/2/09 [Redacted] [Redacted] 737-400 3/15/08 9/17/09 [Redacted] [Redacted] 737-400 4/15/08 10/21/09 [Redacted] [Redacted] 737-400 5/15/08 10/29/09 [Redacted] [Redacted] 737-400 6/15/08 10/6/09
* US Airways shall have the right to swap aircraft and early termination dates within 90 days after the applicable GE Entity's exercise of the early termination option, and advise GECAS of any swaps of engines on such aircraft within such 90 day period so long as such engines meet the redelivery requirements. Part A-I.2
Tail# MSN A/C Type Return Date [Redacted] [Redacted] B737-300 12/1/05 [Redacted] [Redacted] B737-300 2/1/06 [Redacted] [Redacted] B737-300 2/1/06 [Redacted] [Redacted] B737-300 1/15/06 [Redacted] [Redacted] B737-300 1/15/06 [Redacted] [Redacted] B737-300 1/15/06 [Redacted] [Redacted] B737-300 1/15/06
Part A-I.2(a)
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Part A-I.3
Tail# MSN A/C Type Return Date [Redacted] [Redacted] A319-200 9/30/05 [Redacted] [Redacted] A319-200 11/1/05 [Redacted] [Redacted] A320-200 10/1/05 [Redacted] [Redacted] A320-200 10/1/05 [Redacted] [Redacted] A320-200 11/1/05 [Redacted] [Redacted] A320-200 11/1/05
Part A-I.4
Tail# MSN A/C Type Return Date ~~[Redacted] [Redacted] B737-300 6/14/05 [Redacted] [Redacted] B737-300 9/1/05~~
Part A-I.5
Tail# MSN A/C Type Return Date [Redacted] [Redacted] B737-300 1/7/06 [Redacted] [Redacted] B737-300 2/10/06 [Redacted] [Redacted] B737-300 2/7/06 [Redacted] [Redacted] B737-300 1/30/06 [Redacted] [Redacted] B737-300 1/31/06 [Redacted] [Redacted] B737-300 7/5/05 [Redacted] [Redacted] B737-300 12/10/05 [Redacted] [Redacted] B737-300 10/28/05

Tail# MSN A/C Type Return Date [Redacted] [Redacted] B737-300 10/15/05 [Redacted] [Redacted] B737-300 11/14/05 [Redacted] [Redacted] B737-300 12/10/05 [Redacted] [Redacted] B737-300 10/17/05 [Redacted] [Redacted] B737-300 12/9/05 [Redacted] [Redacted] B737-300 11/14/05 [Redacted] [Redacted] B737-300 12/10/05
Part A-I.5(a)
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[Redacted] [Redacted] [Redacted] [Redacted] [Redacted] ~~[Redacted] [Redacted] [Redacted] [Redacted] [Redacted]~~
SCHEDULE B TO EXHIBIT A AWA Early Removal Dates [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

EXHIBIT B US AIRWAYS AIRCRAFT RENTAL AMENDMENTS TERM SHEET BRIDGE FACILITY No change to the Bridge Facility described in Exhibit E to the Original MOU. BOEING AIRCRAFT US Airways and GECC shall implement the "true-up" payment as provided in Part 2 of Exhibit A to the Original MOU, determined as of June 30, 2005, in satisfaction of all then remaining rental payment obligations on account of the 15 x B733 and 10 x B752 SIL Aircraft through said date, and shall thereupon amend the leases relative to such Boeing SIL Aircraft and the 11 x B734 SIL Aircraft (collectively, the "Boeing SIL Aircraft Leases") to provide for payment of rentals from and after July 1, 2005 at the post-Emergence Date levels referenced in the Original MOU, and specifically in respect of the 11x B734 SILs, at the rate of [Redacted] per month. The lease amendments will further provide that the difference between the current rental payment under the Boeing SIL Aircraft Leases and such reduced rental payment (the "Deferred Rent") will be treated as hereinafter provided. Except as provided below, US Airways will not be required to provide any lump sum cash or Convertible Notes in respect of the B734 SIL rent reduction as previously provided for in the B737-400 SIL Restructure Option pursuant to the Original MOU. The assumption of the Boeing SIL Aircraft Leases, as

modified and amended by, and subject to, the provisions of this Exhibit B to the Merger MOU, shall be approved by the Bankruptcy Court no later than June 30, 2005, and only return conditions, rents through the later of the Emergence Milestone Date (as it may be extended by mutual agreement) or return of the Aircraft, and Deferred Rents shall be entitled to administrative priority pursuant to Section 503(b)(1)(A) and 507(a)(i) of the Bankruptcy Code; if the Merger is not consummated by the Milestone Date for Emergence and consummation of the Merger, the terms of such Boeing SIL Aircraft Leases, including rents (including amounts and payment dates, with US Airways being given credit for any payments previously made), return conditions and expiry dates shall be the original terms set forth in such Boeing SIL Aircraft Leases, subject to the limitation on administrative claims described above, and US Airways shall have the benefit of the provisions of the Original MOU in respect of the Boeing SIL Aircraft, subject to the terms and conditions therein. CRJ AIRCRAFT Rents on 23x CRJ200 aircraft on lease from the applicable GE Entities to US Airways will be restructured so that the quarterly rents of each aircraft will be reduced to [Redacted] per quarter (for existing 14x CRJ-200 SILs as described in Part I of Schedule A to this Exhibit B) and [Redacted] per quarter (for 9x CRJ-200 aircraft subject to the Phase II Transaction as described in Part II of Schedule A to this Exhibit B) for a period of 30 months post Emergence and consummation of the Merger. The deferred amount will be added to the rents payable over the 24 month period immediately following the 30 month deferral period such that applicable GE Entities' lease economics are maintained. The 14x existing CRJ-200 SILs will be extended by 3 months each. This lease restructuring is subject to manufacturer's consent and continuation of manufacturer support. Permanent long term leases for 16x CRJ aircraft (9x CRJ-200s, and 7x CRJ-700s post-petition leases as described in Part III of Schedule A to this Exhibit B) shall be entered into on or before July 29, 2005 ("Permanent RJ Leases"). Each Permanent RJ Lease will be a post-petition agreement, but only rent payable through the later of the Emergence Milestone Date (as the parties may agree to extend it) or the return of the Aircraft and return condition obligations shall be afforded administrative expense status, and all other claims under such lease, including any rejection damage claims, shall be unsecured pre-petition claims.

SCHEDULE A TO EXHIBIT B PART I [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

PART II [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

PART III [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

EXHIBIT C REGIONAL JET LEASE TRANSACTIONS TERM SHEET EXISTING RJ Any future RJ lease commitments directly to US Airways, as described LEASE COMMITMENT in Exhibit B to the Original MOU are eliminated, whether or not the Merger is consummated. THIRD PARTY EMB LEASE The applicable GE Entities will provide single investor or operating COMMITMENT leases to third party carriers acceptable to GECAS for 10x EMB-170/190/195 aircraft delivering between 2007 and 2008 on a schedule and on terms to be agreed and acceptable to GECAS, conditional on manufacturer support and order stream relief to be acceptable to GECAS and agreed with the manufacturer and on the third party carrier meeting certain financial tests to be agreed and acceptable to GECAS. [Redacted] 3X EMB-170 LEASES The applicable GE Entities will provide single investor or operating leases to Republic Airways for 3x already produced EMB-170 aircraft on terms to be agreed, conditional on manufacturer support and order stream relief to be acceptable to GECAS and separately agreed with the manufacturer, [Redacted] 15X EMB CONSENT TO The applicable GE Entities to consent to assignment of up to 15x LEASE ASSIGNMENT EMB-170 leases to Republic with acceptable US Airways backstop from Republic-US Airways Jet Service Agreement,and subject to manufacturer consent and continuation of manufacturer support, [Redacted]

EXHIBIT D AWA SPARE ENGINE AND PARTS LOAN [Redacted] EXHIBIT E PHASE II SALE-LEASEBACK TRANSACTIONS SPARE ENGINE As per the Exhibit C of the Original MOU and SALE-LEASEBACKS irrespective of whether or not the Merger is consummated, purchase prices for each of the fourteen (14) CFM56-3B2 engines to be purchased by the applicable GE Entity and leased-back to US Airways will be reduced by [Redacted] ([Redacted] in the aggregate) to reflect GECAS's estimate of the current condition of each engine. For all of the CFM56-3B2 Spare Engines pursuant to the Phase II Transaction, US Airways shall receive a [Redacted] per engine ([Redacted] in the aggregate) maintenance adjustment payment from the applicable GE Entity at redelivery of each CFM56-3B Spare Engine payable under the terms of the lease. 2001 CREDIT AGREEMENT GECC agrees to defer the May 16, 2005 2001 Loan amortization payment (but not the interest then due, which has been paid) of [Redacted] to June 17, 2005. RESTATED 2001 CREDIT The 2001 Credit Agreement shall be amended and AGREEMENT restated (the "Restated 2001 Credit Agreement"), as described in Part I of Exhibit D to the Original MOU. If the Merger is consummated, scheduled amortization on the Restated 2001 Credit Agreement will be amended to provide that amortization will begin in September 2006 (rather than September 2005) with quarterly principal payments of: - [Redacted] - [Redacted] - [Redacted] If the Merger is not consummated, then the amortization of Restated 2001 Credit Agreement shall be as set forth in Part I of Exhibit D to the Original MOU. US Airways may sell all of the 4x CRJ700 aircraft (to be collateral for the Restated 2001 Credit Agreement) and GECC will release the liens on such aircraft with an early principal repayment on the Loan outstanding under the Restated 2001 Credit Agreement of [Redacted] (reduced ratably to reflect any principal repayments).

EXHIBIT F May 19, 2005 US Airways, Inc. US Airways Group, Inc. America West Airlines, Inc. Re: (i) CFM56-3 Engine Maintenance Agreement (ESI-96-222G) between US Airways, Inc. ("US Airways") and GE Engine Services, Inc. ("GEES") (as amended, the "CFM56-3 Agreement"); (ii) CFM56-5 Engine Maintenance Agreement (ESI-97-0084W) between US Airways and GEES (as amended, the "CFM56-5 Agreement"); (iii) CF6-80C2 Engine Maintenance Agreement (ESI-96-610I) between US Airways and GEES (as amended, the "CF6-80C2 Agreement," and together with the CFM56-3 Agreement and the CFM56-5 Agreement, the "US Airways Agreements"); (iv) Rate Per Engine Hour Management Agreement (Contract No. S-970611) between America West Airlines, Inc. ("America West") and GE Engine Services -- Dallas, LP ("GEES -- Dallas") (as same has been or may be amended, the "AWA Agreement," and together with the US Airways Agreements, the "Agreements") Gentlemen/Ladies: This term sheet is being entered into in connection with the proposed merger of US Airways and America West (such merger being referred to as the "Merger"), and in connection with the pending cases of US Airways, US Airways Group, Inc. ("Group") and certain of their affiliates (the "Chapter 11 Case") under Chapter 11, Title 11 of the United States Code (the "Bankruptcy Code") that were commenced on September 12, 2004 (the "Petition Date") in the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria Division (the "Bankruptcy Court"), and with reference to the MOU (as defined below) to which this term sheet will be attached. The following sets forth the understandings that have been reached among US Airways, Group, America West, GEES and GEES -- Dallas in relation to the Agreements. Capitalized terms not defined herein have the meanings given those terms in the US Airways Agreements and/or the AWA Agreements, as applicable. Each of US Airways and America West seek forgiveness of certain obligations arising under their respective Agreements, deferral of other obligations arising thereunder, and certain amendments thereto. GEES and GEES -- Dallas are willing to grant such forgiveness, to accept such deferrals and to make such amendments, subject to the terms and conditions contained in this term sheet. US Airways, acting as debtor-in-possession in the Chapter 11 Case, acknowledges that the US Airways Agreements have been assumed with approval of the Bankruptcy Court under Section 365 of the Bankruptcy Code, subject to the limitations on claims set forth in Exhibit H of the Initial MOU (as defined below), all as provided for in Orders of the Bankruptcy Court entered on December 17, 2004 (Docket No. 1431) and February 4, 2005 (Docket No. 1763), and as set forth in the Omnibus Agreement, effective December 30, 2004, entered into pursuant thereto. The parties agree as follows: 1. The provisions of this term sheet, the transactions contemplated herein and the obligations of the parties hereto shall be of no force and effect until satisfaction of each of the following conditions: A. No default shall have occurred and be continuing by US Airways or America West under their respective Agreements, or with respect to any other obligation between US Airways, Group or America West and/or any of their respective affiliates, on the one hand, and General Electric Company and/or any of its affiliates (each a "GE Party"), on the other hand, including, but not limited to, the obligations of US Airways, Group, America West and/or the merged airline under this term sheet (the "GE Obligations"), except (a) any payment default that relates solely to a good faith dispute regarding the performance of GEES or GEES -- Dallas or any other GE Party under any engine maintenance agreement (including, without limitation, the Agreements) between US Airways, Group or America West or any of their respective affiliates, on the one hand, and GEES or GEES -- Dallas or any other GE Party, on the other, (b) any lease payment default that relates solely to a good faith dispute regarding the return of an aircraft past the scheduled or mutually agreed-upon termination of the lease of such aircraft, provided that none of US Airways, America West or any of their respective affiliates is operating such aircraft, and (c) any obligations or defaults that have been forgiven, deferred or waived pursuant to this term sheet, the MOU, the Initial MOU (as defined below), any letter agreement or otherwise, so long as, with respect to any deferral, such payments are made at the time specified in this term sheet, the MOU, the Initial MOU, any such letter agreement or as otherwise agreed by the parties (a "Cross-Default"); B. US Airways and America West have reached agreements with General Electric Capital Corporation ("GECC") and its affiliates in contemplation of the Merger, which will be evidenced by a Master Memorandum of Understanding to be entered into among America West, US Airways, Group and GECC (acting on behalf of itself and its affiliates) (the "MOU"), reflecting the transactions described in that certain GECC Restructuring Outline of even date herewith; C. US Airways, Group and America West, and their respective affiliates shall be in compliance with all of their obligations under the MOU and any other term sheets attached thereto, and all applicable conditions precedent contained in the MOU and any other term sheets attached thereto shall be satisfied; D. On or before October 31, 2005, the effective date shall have occurred under US Airways' Chapter 11 plan of reorganization (the "Chapter 11 Plan") under which it (or its successor under the Chapter 11 Plan) continues to operate as an airline; and E. The Merger is completed in connection with the Chapter 11 Plan by October 31, 2005. 2. US Airways, Group and America West shall be jointly and severally responsible for reimbursement of reasonable legal fees paid by GEES and GEES -- Dallas to their outside counsel in connection with the negotiation, documentation and implementation of this term sheet, including, but not limited to, drafting of definitive documents. GEES and GEES -- Dallas agree to share the same law firms. 3. The parties intend that this term sheet will be attached to the MOU, which will be submitted for approval by the Bankruptcy Court in the Chapter 11 Case no later than June 30, 2005. This term sheet and each of the transactions contemplated herein shall become effective only upon approval by the Bankruptcy Court pursuant to an order which (a) shall be in form and substance acceptable to GEES and GEES -- Dallas, in their sole discretion, and (b) shall not be subject to an appeal, motion for re-hearing or reconsideration, or petition for writ of certiorari, and the time to file such appeal, motion or petition shall have expired. If the MOU and this term sheet are not submitted and approved by the Bankruptcy Court on or before such date, then each of the parties hereto may, at its option, elect not to consummate the transactions described in this term sheet. The parties will undertake to agree upon definitive documents prior to the hearing date, and to execute same promptly upon approval of the MOU and this term sheet, and in no event later than thirty days following such approval. The parties agree that this term sheet and any final agreements resulting from this term sheet will be subject to the confidentiality provisions contained in paragraph 14, below. 4. In addition to the agreement of GEES to waive removal charges with respect to the Engines identified by serial numbers on Exhibit A hereto, as provided for pursuant to the Initial MOU, defined below, US Airways and America West shall, in accordance with the removal schedule contained in Exhibit B hereto, have the right to remove from their respective Agreements the Engines (including spare Engines, subject to compliance with the spare engine ratio requirements of the Agreements), identified by serial number on Exhibit B hereto (the "Removed Engines") and, subject to the absence of any Cross-Default, GEES and GEES -- Dallas shall waive all removal charges owing by US Airways and America West in connection with the removal of the Removed Engines from such Agreements, up to an amount not to exceed [Redacted] in the aggregate. 5. US Airways shall, in accordance with the removal schedule contained in Exhibit C hereto, have the right to remove from the CFM56-5 Agreement up to [Redacted] Engines (comprised of [Redacted] installed and, subject to compliance with the spare engine ratio requirements of the Agreement, [Redacted] spare), identified by serial number in such Exhibit C. Reconciliation for Engines removed shall be determined as provided in the CFM56-5 Agreement. The parties agree that all removal credits owed by GEES to US Airways in connection with the Engines removed (in the approximate amount of [Redacted]) shall be applied to reduce the outstanding balance of the Deferred Charges, in the amount of approximately [Redacted], owing by US Airways to GEES under the CFM56-5 Agreement, which balance is further evidenced by US Airways' Term Note effective November 24, 2004. 6. GEES agrees that the Deferred Obligations (as defined in the initial Memorandum of Understanding among the parties thereto dated November 24, 2004, as amended (the "Initial MOU")) in the amount of [Redacted], owing to GEES by US Airways on the Petition Date, shall be reduced by [Redacted], which represents the difference between (i) the payment received by GEES from the owner of ESN 722240 following US Airways' lease rejection and abandonment of the Engine in the Chapter 11 Case, and (ii) the not yet invoiced removal charge associated with such Engine (which shall be considered paid). The remaining balance of the Deferred Obligations, in the amount of [Redacted], shall be paid in installments of [Redacted] (and interest accrued thereon), due on June 30, 2005, and [Redacted] (and interest accrued thereon), due on the earlier of the effective date of the Chapter 11 Plan and September 30, 2005. 7. Following expiration or earlier termination of the CF6-80C2 Agreement, GEES shall have the last right of offer with respect to any engine maintenance agreement for US Airways' CF6-80C2 fleet (whether operated by US Airways or in any combination with America West). In the event that GEES' proposal is competitive with proposals received by US Airways (or the merged airline) from vendors of comparable recognized reputation, then US Airways (or the merged airline) shall enter into an engine maintenance agreement with GEES for this fleet. 8. The CFM56-5 Agreement shall be extended to a term of [Redacted] years, terminating [Redacted], and US Airways shall waive its rights granted in Section 2.6 of Amendment No. 2 to the CFM56-5 Agreement, effective December 30, 2004, to convert to exclusive T&M or terminate the CFM56-5 Agreement on [Redacted]. 9. In lieu of the existing provisions contained in the CFM56-3 Agreement and the AWA Agreement governing minimum monthly payments, each of the Agreements shall be amended to provide that, for so long as both Agreements remain in effect, the minimum monthly payment on account of accrued Engine flight hours for the two Agreements together shall equal [Redacted]. 10. [Redacted] 11. [Redacted] 12. Without prejudice to the respective obligations of GEES and GEES -- Dallas under the Agreements, which shall at all times remain in full force and effect subject to their terms, the parties acknowledge that GEES and GEES -- Dallas shall not be liable for compliance with engine return conditions provided for in any lease or other agreements of US Airways or America West with respect to Engines maintained under the Agreements. 13. The terms and conditions contained in this term sheet comprise a non-severable package of concessions and incentives, made and given in the context of the continuing agreements between the GE Parties and US Airways, Group or America West and/or their respective affiliates. Therefore, any default under any GE Obligation which is not excepted under paragraph 1(A) hereof, owed to, or affecting any guaranty of, those certain GE Parties comprised of General Electric Company, GE Transportation Component, and all affiliates of General Electric Company reporting to its GE Transportation Component ("GE Transportation Obligations") shall constitute a default under all other GE Transportation Obligations. Without limiting the rights and remedies of the GE Parties at law or in equity, upon the occurrence of any default with respect to the GE Transportation Obligations, all charges waived by GEES and GEES -- Dallas under this term sheet, the outstanding balance of the Deferred Obligations, and the outstanding balance of the Deferred Charges under the CFM56-5 Agreement, as may be adjusted as provided herein, shall become immediately due and payable. 14. The parties hereto acknowledge that this term sheet and the exhibits annexed hereto and the Agreements contain commercially sensitive and proprietary information. Each of the parties agrees to keep this information strictly confidential and agrees to disclose it to no person other than: (A) their respective boards(s) of directors; (B) employees working on the subject matter of this term sheet; (C) professional advisors advising them concerning the subject matter of this term sheet provided that US Airways, Group, America West and such outside professional advisors execute, or have executed, a confidentiality agreement in form and substance acceptable to GEES and GEES -- Dallas; (D) the ATSB, provided that US Airways and America West shall use commercially reasonable efforts to prevent disclosure of such information under the Freedom of Information Act; (E) the Bankruptcy Court during the course of the Chapter 11 Case, provided, however, that no document shall be filed with the Bankruptcy Court unless either there has been obtained prior to the filing thereof an order of the Bankruptcy Court enabling US Airways to file those portions of the documents under seal or portions of such filed documents designated by GEES and GEES -- Dallas are redacted, in each case, as they shall request in their sole discretion; (F) the professional advisors of the Official Committee of Unsecured Creditors (the "Creditors Committee"), but only to the extent that designated portions of such material to be disclosed are redacted, in each case, as GEES and GEES -- Dallas shall request in their sole discretion, and (G) any potential debtor-in-possession ("DIP") lender and equity investors provided that such entities shall, in each case prior to disclosure, execute a confidentiality agreement in form and substance acceptable to GEES and GEES -- Dallas. A written summary of the transactions approved by GEES and GEES -- Dallas in advance of disclosing such summary, may be provided to (i) US Airways' labor unions, (ii) any lender, potential lender, or participant, (iii) any material stakeholder in US Airways' proposed restructuring, (iv) the Creditors' Committee (but only if such summary has been redacted in a manner satisfactory to GEES and GEES -- Dallas as provided above) or (v) such other third parties as the parties hereto may mutually agree; provided that such parties described in (i)-(v) above have executed a confidentiality agreement in form and substance acceptable to GEES and GEES -- Dallas. The parties agree that the terms of this paragraph will survive any termination, through expiration or otherwise, of this term sheet. 15. Notwithstanding anything herein to the contrary, the agreement of each of US Airways, Group and America West to the modifications and amendments to the Agreements as set forth herein is subject to the satisfactory review of the US Airways Agreements by America West, and the AWA Agreements by US Airways, as applicable, prior to the approval of the MOU by the Bankruptcy Court, and, subject to paragraph 14 hereof, GEES and GEES -- Dallas shall reasonably cooperate with such parties in connection with such review process. 16. Anything herein to the contrary notwithstanding, the obligations of the applicable parties under each of paragraphs 2 and 6 hereof shall be immediately effective upon the approval of the MOU by the Bankruptcy Court as set forth herein, without regard to the other conditions precedent, as set forth in paragraph 1 hereof. 17. This term sheet may not be modified or amended in any manner other than in writing duly executed by or on behalf of all of the parties hereto. 18. This term sheet may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument. This term sheet has been executed as of the date first above written. US AIRWAYS, INC. By: /s/ Stephen Morrell --------------------------------- Title: Vice President and Treasurer --------------------------------- US AIRWAYS GROUP, INC. By: /s/ Stephen Morrell --------------------------------- Title: Treasurer -------------------------------- AMERICA WEST AIRLINES, INC. By: /s/ W. Douglas Parker ------------------------- Title: Chief Executive Officer GE ENGINE SERVICES, INC. By: /s/ illegible --------------------------------- Title: Vice President -------------------------------- GE ENGINE SERVICES -- DALLAS, LP By: GE Engine Services - Dallas, Inc. ---------------------------------------- General Partner By: /s/ illegible ----------------------------------- Title: Vice President -------------------------------- With respect to paragraph 11, agreement confirmed: CFM INTERNATIONAL, INC. By: /s/ illegible ------------------------------------------ Title: Finance Director, CFM International --------------------------------------- [EXHIBITS A-C REDACTED] EX-31.1 4 p70932exv31w1.htm EX-31.1 exv31w1

Exhibit 31.1

CEO CERTIFICATION

I, W. Douglas Parker, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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 reporting, 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 principle;

      (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: July 21, 2005

/s/ W. Douglas Parker

W. Douglas Parker

Chief Executive Officer

EX-31.2 5 p70932exv31w2.htm EX-31.2 exv31w2

Exhibit 31.2

CFO CERTIFICATION

I, Derek J. Kerr, certify that:

      1. I have reviewed this quarterly report on Form 10-Q 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 reporting, 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 principle;

      (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: July 21, 2005

/s/ Derek J. Kerr

Derek J. Kerr

Chief Financial Officer

EX-31.3 6 p70932exv31w3.htm EX-31.3 exv31w3

Exhibit 31.3

CEO CERTIFICATION

I, W. Douglas Parker, certify that:

      1. I have reviewed this quarterly report on Form 10-Q 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 reporting, 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 principle;

      (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: July 21, 2005

/s/ W. Douglas Parker

W. Douglas Parker

Chief Executive Officer

EX-31.4 7 p70932exv31w4.htm EX-31.4 exv31w4

Exhibit 31.4

CFO CERTIFICATION

I, Derek J. Kerr, certify that:

      1. I have reviewed this quarterly report on Form 10-Q 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 reporting, 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 principle;

      (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: July 21, 2005

/s/ Derek J. Kerr

Derek J. Kerr

Chief Financial Officer

EX-32.1 8 p70932exv32w1.htm EX-32.1 exv32w1

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 Quarterly Report on Form 10-Q for the period ended June 30, 2005, to which this certification is attached as Exhibit 32.1 (the “Periodic 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 Periodic 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 21st day of July 2005.

/s/ W. Douglas Parker

W. Douglas Parker

Chief Executive Officer

/s/ Derek J. Kerr

Derek J. Kerr

Chief Financial Officer

EX-32.2 9 p70932exv32w2.htm EX-32.2 exv32w2

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 Quarterly Report on Form 10-Q for the period ended June 30, 2005, to which this Certification is attached as Exhibit 32.2 (the “Periodic 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 Periodic 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 21st day of July 2005.

/s/ W. Douglas Parker

W. Douglas Parker

Chief Executive Officer

/s/ Derek J. Kerr

Derek J. Kerr

Chief Financial Officer

~~-----END PRIVACY-ENHANCED MESSAGE-----~~


		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 7.87% at June 30, 2005.

	(7)	Includes $29.3 million of 6.3% industrial development bonds due April 2023.

	(8)	Includes AVSA promissory notes of $17.5 million due 2005 with variable interest rates averaging 4.47% at June 30, 2005.

	(9)	Includes $36.0 million of senior secured discount notes due 2009 with a variable interest rate of 6.98% at June 30, 2005.


		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 June 30, 2005, the Company had recorded a valuation allowance of $109.3 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.


	1.	I have reviewed this quarterly report on Form 10-Q of America West Holdings Corporation;


	(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 reporting, 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 principle;

	(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


	(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.


	/s/ W. Douglas Parker

	W. Douglas Parker
	Chief Executive Officer


	1. The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2005, to which this certification is attached as Exhibit 32.1 (the “Periodic 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 Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.