| Basis of Presentation and Summary of Significant Accounting Policies | 12 Months Ended |
| Dec. 31, 2013 |
| Basis of Presentation and Summary of Significant Accounting Policies | ' |
| 2. Basis of Presentation and Summary of Significant Accounting Policies |
| (a) Nature of Operations and Operating Environment |
| US Airways Group is a holding company whose primary business activity is the operation of a major network air carrier through its wholly owned subsidiaries US Airways, Inc. (“US Airways”), Piedmont Airlines, Inc. (“Piedmont”), PSA Airlines, Inc. (“PSA”), Material Services Company, Inc. (“MSC”) and Airways Assurance Limited (“AAL”). Effective December 9, 2013, US Airways Group became a wholly owned subsidiary of AAG as a result of the Merger described in Note 1. AAG owns all of US Airways Group’s outstanding common stock, par value of $0.01 per share. |
| Prior to the Merger, the Company operated the fifth largest airline in the United States as measured by domestic revenue passenger miles (“RPMs”) and available seat miles (“ASMs”). US Airways has hubs in Charlotte, Philadelphia, Phoenix and Washington, D.C. at Ronald Reagan Washington National Airport (“Washington National”). As of December 31, 2013, US Airways offered scheduled passenger service on more than 3,000 flights daily to 193 communities in the United States, Canada, Mexico, Europe, the Middle East, the Caribbean, and Central and South America. US Airways also has an established East Coast route network, including the US Airways Shuttle service. US Airways had approximately 57 million passengers boarding its mainline flights in 2013. During 2013, US Airways’ mainline operation provided regularly scheduled service or seasonal service at 133 airports, while the US Airways Express network served 150 airports in the United States, Canada, Mexico and the Caribbean, including 76 airports also served by the mainline operation. US Airways Express air carriers had approximately 28 million passengers boarding their planes in 2013. As of December 31, 2013, US Airways operated 343 mainline jets and is supported by the Company’s regional airline subsidiaries and third-party regional carriers operating as US Airways Express under capacity purchase agreements, which operated 238 regional jets and 40 turboprops. The Company’s prorate carriers operated four regional jets at December 31, 2013. |
| Following the Merger, AAG began moving toward operating under the single brand name of “American Airlines” through its mainline operations, American and US Airways. Until a single operating certificate is issued by the Federal Aviation Administration (“FAA”) and the operational integration is complete, American and US Airways will continue to operate as separate airlines. This process is expected to take 18-24 months. Through its operating subsidiaries, including the operating subsidiaries of US Airways Group, AAG is the largest airline in the world as measured by RPMs and ASMs. AAG has primary hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York City, Philadelphia, Phoenix and Washington, D.C. As of December 31, 2013, the combined airline, together with its third-party regional carriers, operated nearly 6,700 daily flights to 339 destinations in 54 countries. As of December 31, 2013, American and US Airways operated 965 mainline jets. US Airways continues to be provided with regional feed by Piedmont, PSA and third-party regional carriers. |
| As of December 31, 2013, US Airways employed approximately 32,100 active full-time equivalent employees. The Company’s regional subsidiaries, Piedmont and PSA, employed approximately 5,300 active full-time equivalent employees. Approximately 84% of employees are covered by collective bargaining agreements with various labor unions. See “Employees and Labor Relations” in Part I, Item 1 for further discussion. |
| (b) Basis of Presentation |
| The accompanying consolidated financial statements include the accounts of US Airways Group and its wholly owned subsidiaries. The Company has the ability to move funds freely between its operating subsidiaries to support operations. These transfers are recognized as intercompany transactions. All significant intercompany accounts and transactions have been eliminated. |
| The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The most significant areas of judgment relate to passenger revenue recognition, impairment of long-lived and intangible assets and goodwill, the frequent flyer program and the deferred tax asset valuation allowance. The Company’s accumulated other comprehensive income (loss) balances at December 31, 2013 and 2012 related to pension and other postretirement benefits. |
| (c) Statements of Cash Flows |
| Short-term investments, without regard to remaining maturity at acquisition, are not considered as cash equivalents for purposes of the statements of cash flows. |
|
| (d) Restricted Cash |
| Restricted cash primarily includes cash collateral to secure workers’ compensation claims and credit card processing holdback requirements for advance ticket sales for which US Airways has not yet provided air transportation. |
| (e) Aircraft Fuel, Spare Parts and Supplies, Net |
| Aircraft fuel, spare parts and supplies, net are recorded at net realizable value based on average costs. These items are expensed when used. An allowance for obsolescence is provided for aircraft spare parts and supplies. As discussed in Note 1, in connection with the Merger, the Company’s assets were recorded at fair value as of the Merger date. |
| (f) Operating Property and Equipment |
| Operating property and equipment are recorded at cost. Interest expense related to the acquisition of certain property and equipment, including aircraft purchase deposits, is capitalized as an additional cost of the asset. Interest capitalized for the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011 was $1 million, $13 million, $12 million and $8 million, respectively. Property and equipment is depreciated and amortized to residual values over the estimated useful lives or the lease term, whichever is less, using the straight-line method. Costs of major improvements that enhance the usefulness of the asset are capitalized and depreciated over the estimated useful life of the asset or the modifications, whichever is less. As discussed in Note 1, in connection with the Merger, the Company’s assets were recorded at fair value as of the Merger date. The depreciable lives used for the principal depreciable asset classifications are as follows: |
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| | | | | | | | | | | | | | | | |
| Principal Depreciable Asset Classification | | Depreciable Life | | | | | | | | | | | | | | |
| Jet aircraft and engines | | 30 years | | | | | | | | | | | | | | |
| Other regional aircraft and engines | | 25 years | | | | | | | | | | | | | | |
| Major rotable parts, avionics and assemblies | | Fleet end date | | | | | | | | | | | | | | |
| Improvements to leased flight equipment | | Shorter of asset/leasehold improvement or lease end date | | | | | | | | | | | | | | |
| Buildings and improvements | | Lesser of 5 - 30 years or lease term | | | | | | | | | | | | | | |
| Furniture, fixtures and other equipment | | 3-10 years: Ranges from computer hardware to furniture | | | | | | | | | | | | | | |
| Capitalized software | | Lesser of 5 years or lease term | | | | | | | | | | | | | | |
| The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. |
| (g) Income Taxes |
| Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. The Company provides a valuation allowance for deferred tax assets when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. In making this determination, the Company considers all available positive and negative evidence in accordance with ASC 740, “Income Taxes.” At December 31, 2013, the Company had a full valuation allowance against its net deferred tax assets. |
| (h) Goodwill |
| Goodwill represents the excess of the purchase price over the net fair value of the assets acquired and liabilities assumed by AAG on December 9, 2013 in connection with the Merger. Goodwill is not amortized but is tested for impairment annually on October 1 or more frequently if events or circumstances indicate. |
|
| (i) Intangibles, Net |
| Intangible assets consist primarily of domestic and international airport take-off and landing slots, customer relationships, marketing agreements and tradenames. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. |
| In connection with the application of acquisition accounting as of December 9, 2013, the intangible assets were measured at fair value using the market and income approaches. The Company utilized the market approach to value airport take-off and landing slots, when sufficient market information was available, and included prices and other relevant information generated by market transactions involving comparable assets. The Company utilized the income approach to value the customer relationships, marketing partners, certain international take-off and landing slots and the US Airways tradename. The income approach indicates value for a subject asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required market rate of return that reflects the relative risk of achieving the cash flows and the time value of money. |
| The following table provides information relating to the Company’s intangible assets subject to amortization as of December 31, 2013 and 2012 (in millions): |
|
| | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
| Airport take-off and landing slots | | $ | 55 | | | $ | 581 | | | | | | | | | |
| Dividend Miles customer relationships | | | 300 | | | | — | | | | | | | | | |
| Dividend Miles marketing partners | | | 105 | | | | — | | | | | | | | | |
| Tradenames | | | 35 | | | | — | | | | | | | | | |
| Airport gate leasehold rights | | | — | | | | 47 | | | | | | | | | |
| Accumulated amortization | | | (5 | ) | | | (158 | ) | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total | | $ | 490 | | | $ | 470 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| The intangible assets subject to amortization generally are amortized on a straight-line basis and included in depreciation and amortization on the consolidated statements of operations. In connection with the application of acquisition accounting as of December 9, 2013, certain airport take-off and landing slots, customer relationships, marketing partners and tradenames are amortized over 25 years, 9 years, 30 years and 15 months, respectively. For the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011, the Company recorded amortization expense of $4 million, $23 million, $24 million and $23 million, respectively, related to its intangible assets. The Company expects to record annual amortization expense of $67 million in 2014, $44 million in 2015, $39 million in 2016, $39 million in 2017, $39 million in 2018 and $262 million thereafter related to these intangible assets. |
| The Company’s indefinite-lived assets include certain domestic and international airport take-off and landing slots. Indefinite-lived assets are not amortized but instead are reviewed for impairment annually and more frequently if events or circumstances indicate that the asset may be impaired. As discussed above, the Company’s domestic and international airport take-off and landing slots were measured at fair value in connection with the application of acquisition accounting as of December 9, 2013 and therefore an impairment test was not performed. As of December 31, 2013 and 2012, the Company had $1.01 billion and $39 million of indefinite-lived intangible assets, respectively, on its consolidated balance sheets. |
|
| (j) Frequent Flyer Liability |
| The Dividend Miles frequent flyer program awards mileage credits to passengers who fly on US Airways, American, Star Alliance carriers and certain other partner airlines that participate in the program. Mileage credits can be redeemed for travel on American, US Airways or other participating partner airlines, in which case US Airways pays a fee. Effective March 31, 2014, US Airways will join the oneworld alliance and exit the Star Alliance. At that point, frequent flyer program reciprocity will begin with oneworld partner airlines and will be discontinued for many Star Alliance airlines. Mileage credits can also be earned through purchases from other non-airline partners that participate in the respective loyalty programs. |
| The Company uses the incremental cost method to account for the portion of its frequent flyer liability incurred when Dividend Miles members earn mileage credits by flying on US Airways, American or their third-party regional carriers. The Company has an obligation to provide future travel when these mileage credits are redeemed and therefore have recorded a liability for mileage credits outstanding. |
| The incremental cost liability includes all mileage credits that are expected to be redeemed, including mileage credits earned by members whose mileage account balances have not yet reached the minimum mileage credit level required to redeem an award. Additionally, outstanding mileage credits are subject to expiration if unused. In calculating the liability, the Company estimates how many mileage credits will never be redeemed for travel and excludes those mileage credits from the estimate of the liability. Estimates are also made for the number of miles that will be used per award redemption and the number of travel awards that will be redeemed on partner airlines. These estimates are based on historical program experience as well as consideration of enacted program changes, as applicable. Changes in the liability resulting from members earning additional mileage credits or changes in estimates are recorded in the statements of operations as a part of passenger revenue. |
| The liability for outstanding mileage credits is valued based on the estimated incremental cost of carrying one additional passenger. Incremental cost primarily includes unit costs incurred for fuel, food and insurance as well as fees incurred when travel awards are redeemed on partner airlines. In addition, the Company also includes in the determination of incremental cost the amount of certain fees related to redemptions expected to be collected from Dividend Miles members. These redemption fees reduce incremental cost. No profit or overhead margin is included in the accrual of incremental cost. These estimates are generally updated based upon the Company’s 12-month historical average of such costs. |
| The Company applied the acquisition method of accounting in connection with the Merger and therefore recorded the liability for outstanding mileage credits at fair value. As of December 31, 2013, the liability for outstanding mileage credits expected to be redeemed for future travel awards under the Dividend Miles program was $932 million and is included on the consolidated balance sheets within frequent flyer liability. This liability will be reduced as miles are redeemed and new miles earned will be recorded as a liability based on the incremental cost method discussed above. |
| As of December 31, 2012, the liability for outstanding mileage credits expected to be redeemed for future travel awards under the Dividend Miles program was $177 million. |
| The Company also sells frequent flyer program mileage credits to participating airline partners and non-airline business partners. Sales of mileage credits to business partners is comprised of two components, transportation and marketing. Historically, the Company has used the residual method of accounting to determine the values of each component as there had not been a material modification to any significant agreements since the adoption of Accounting Standards Update (“ASU”) No. 2009-13, “Revenue Recognition (Topic 605) – Multiple-Deliverable Revenue Arrangements” on January 1, 2011. |
| In connection with the Merger on December 9, 2013, a material modification occurred on all of the Company’s agreements. Therefore, the Company applied the relative selling price method to determine the values of each deliverable. Under the relative selling price method, the Company identified five revenue elements for the co-branded credit card agreement with Barclays: the transportation component; use of the US Airways brand including access to frequent flyer member lists; advertising; lounge access; and baggage services (together excluding “the transportation component,” the “marketing component”). |
| The transportation component represents the fair value of future travel awards and is determined using historical transaction information, including information related to customer redemption patterns. The transportation component is deferred based on its relative selling price and amortized into passenger revenue on a straight-line basis over the period in which the mileage credits are expected to be redeemed for travel. |
|
| The marketing component represents services provided to the Company’s business partners and relates primarily to the use of the US Airways logo and tradenames along with access to customer lists of Dividend Miles members. The marketing services are provided periodically, but no less than monthly. Accordingly, the marketing component is considered earned and recognized in other revenues in the period of the mileage sale. |
| As a result of the change in the marketing component value when the relative selling price method is applied, the Company now defers less revenue per mile sold. As of December 31, 2013 and 2012, the Company had $313 million and $258 million, respectively, in deferred revenue from the sale of mileage credits which is included on the consolidated balance sheets within frequent flyer liability. The marketing component of mileage sales recognized at the time of sale and included in other revenues on the consolidated statements of operations for the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011 was approximately $18 million, $151 million, $141 million and $133 million, respectively. |
| (k) Revenue Recognition |
| Passenger Revenue |
| Passenger revenue is recognized when transportation is provided. Ticket sales for transportation that has not yet been provided are initially deferred and recorded as air traffic liability on the consolidated balance sheets. The air traffic liability represents tickets sold for future travel dates and estimated future refunds and exchanges of tickets sold for past travel dates. The balance in the air traffic liability fluctuates throughout the year based on seasonal travel patterns and fare sale activity. The Company’s air traffic liability was $1.24 billion and $1.09 billion as of December 31, 2013 and 2012, respectively. |
| The majority of tickets sold are nonrefundable. A small percentage of tickets, some of which are partially used tickets, expire unused. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based on the analysis of the Company’s historical data. The Company and members of the airline industry have consistently applied this accounting method to estimate revenue from forfeited tickets at the date travel was to be provided. Estimated future refunds and exchanges included in the air traffic liability are routinely evaluated based on subsequent activity to validate the accuracy of the Company’s estimates. 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. |
| (l) Maintenance, materials and repairs |
| Maintenance, materials and repair costs for owned and leased flight equipment are charged to operating expense as incurred. |
| (m) Selling Expenses |
| Selling expenses include commissions, credit card fees, computerized reservations systems fees and advertising expenses. Advertising expenses are expensed on a straight-line basis as incurred throughout the year. Advertising expenses for the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011 were $1 million, $10 million, $11 million and $11 million, respectively. |
| (n) Share-based Compensation |
| The Company accounts for its share-based compensation expense based on the fair value of the stock award at the time of grant, which is recognized ratably over the vesting period of the stock award. The fair value of stock options and stock appreciation rights is estimated using a Black-Scholes option pricing model. The fair value of restricted stock units is based on the market price of the underlying shares of common stock on the date of grant. See Note 13 for further discussion of share-based compensation. |
| (o) Deferred Gains and Credits, Net |
| Included within deferred gains and credits, net are amounts deferred and amortized into future periods associated with the adjustment of leases to fair value in connection with the application of acquisition accounting and certain vendor incentives. |
|
| (p) Foreign Currency Gains and Losses |
| Foreign currency gains and losses are recorded as part of other nonoperating expense, net in the Company’s consolidated statements of operations. Foreign currency losses for the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011 were $1 million, $13 million, $10 million and $17 million, respectively. |
| (q) Other Operating Expenses |
| Other operating expenses includes expenses associated with ground and cargo handling, crew travel, aircraft food and catering, US Airways’ frequent flyer program, passenger accommodation, airport security, international navigation fees and certain general and administrative expenses. |
| (r) Regional Expenses |
| Expenses associated with the Company’s wholly owned regional airlines and third-party regional carriers operating as US Airways Express are classified as regional expenses on the consolidated statements of operations. Regional expenses consist of the following and as discussed in Note 1, prior period amounts have been reclassified to conform to the new AAG presentation of regional airline expenses (in millions): |
|
| | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor | |
| | Period From | | | Period From | | | Year Ended | | | Year Ended | |
| December 9 to | January 1 to | December 31, | December 31, |
| December 31, | December 8, | | |
| | 2013 | | | 2013 | | | 2012 | | | 2011 | |
| Aircraft fuel and related taxes | | $ | 64 | | | $ | 988 | | | $ | 1,098 | | | $ | 1,056 | |
| Salaries, wages and benefits | | | 27 | | | | 364 | | | | 380 | | | | 359 | |
| Capacity purchases (a) | | | 69 | | | | 1,033 | | | | 1,102 | | | | 1,056 | |
| Maintenance, materials and repairs | | | 11 | | | | 123 | | | | 115 | | | | 191 | |
| Other rent and landing fees | | | 11 | | | | 161 | | | | 168 | | | | 171 | |
| Aircraft rent | | | 3 | | | | 47 | | | | 51 | | | | 51 | |
| Selling expenses | | | 11 | | | | 163 | | | | 177 | | | | 177 | |
| Depreciation and amortization | | | 3 | | | | 29 | | | | 30 | | | | 25 | |
| Special items, net (b) | | | — | | | | (12 | ) | | | 3 | | | | 2 | |
| Other | | | 16 | | | | 194 | | | | 193 | | | | 201 | |
| | | | | | | | | | | | | | | | |
| Regional expenses | | $ | 215 | | | $ | 3,090 | | | $ | 3,317 | | | $ | 3,289 | |
| | | | | | | | | | | | | | | | |
|
| (a) | For the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011, the component of capacity purchase expenses related to aircraft deemed to be leased was approximately $20 million, $280 million, $300 million and $300 million, respectively. | | | | | | | | | | | | | | | |
|
| (b) | The 2013 Predecessor Period consisted primarily of a credit due to a favorable arbitration ruling related to a vendor contract. | | | | | | | | | | | | | | | |
| US Airways, Inc. [Member] | ' |
| Basis of Presentation and Summary of Significant Accounting Policies | ' |
| 2. Basis of Presentation and Summary of Significant Accounting Policies |
| (a) Nature of Operations and Operating Environment |
| Prior to the Merger, US Airways operated the fifth largest airline in the United States as measured by domestic revenue passenger miles (“RPMs”) and available seat miles (“ASMs”). US Airways has hubs in Charlotte, Philadelphia, Phoenix and Washington, D.C. at Ronald Reagan Washington National Airport (“Washington National”). As of December 31, 2013, US Airways offered scheduled passenger service on more than 3,000 flights daily to 193 communities in the United States, Canada, Mexico, Europe, the Middle East, the Caribbean, and Central and South America. US Airways also has an established East Coast route network, including the US Airways Shuttle service. US Airways had approximately 57 million passengers boarding its mainline flights in 2013. During 2013, US Airways’ mainline operation provided regularly scheduled service or seasonal service at 133 airports, while the US Airways Express network served 150 airports in the United States, Canada, Mexico and the Caribbean, including 76 airports also served by the mainline operation. US Airways Express air carriers had approximately 28 million passengers boarding their planes in 2013. As of December 31, 2013, US Airways operated 343 mainline jets and is supported by US Airways’ regional airline subsidiaries and third-party regional carriers operating as US Airways Express under capacity purchase agreements, which operated 238 regional jets and 40 turboprops. US Airways’ prorate carriers operated four regional jets at December 31, 2013. |
| Following the Merger, AAG began moving toward operating under the single brand name of “American Airlines” through its mainline operations, American and US Airways. Until a single operating certificate is issued by the Federal Aviation Administration (“FAA”) and the operational integration is complete, American and US Airways will continue to operate as separate airlines. This process is expected to take 18-24 months. Through its operating subsidiaries, including the operating subsidiaries of US Airways Group, AAG is the largest airline in the world as measured by RPMs and ASMs. AAG has primary hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York City, Philadelphia, Phoenix and Washington, D.C. As of December 31, 2013, the combined airline, together with its third-party regional carriers, operated nearly 6,700 daily flights to 339 destinations in 54 countries. As of December 31, 2013, American and US Airways operated 965 mainline jets. US Airways continues to be provided with regional feed by Piedmont, PSA and third-party regional carriers. |
| As of December 31, 2013, US Airways employed approximately 32,100 active full-time equivalent employees. Approximately 84% of employees are covered by collective bargaining agreements with various labor unions. See “Employees and Labor Relations” in Part I, Item 1 for further discussion. |
| (b) Basis of Presentation |
| US Airways Group has the ability to move funds freely between its operating subsidiaries to support operations. These transfers are recognized as intercompany transactions. In the accompanying consolidated statements of cash flows, these intercompany transactions are designated as receivables from, or payables to, related parties, net and are classified as operating or financing activities depending upon the nature of the transaction. |
| The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The most significant areas of judgment relate to passenger revenue recognition, impairment of long-lived and intangible assets and goodwill, the frequent flyer program and the deferred tax asset valuation allowance. US Airways’ accumulated other comprehensive income balances at December 31, 2013 and 2012 related to other postretirement benefits. |
| (c) Statements of Cash Flows |
| Short-term investments, without regard to remaining maturity at acquisition, are not considered as cash equivalents for purposes of the statements of cash flows. |
| (d) Restricted Cash |
| Restricted cash primarily includes cash collateral to secure workers’ compensation claims and credit card processing holdback requirements for advance ticket sales for which US Airways has not yet provided air transportation. |
|
| (e) Aircraft Fuel, Spare Parts and Supplies, Net |
| Aircraft fuel, spare parts and supplies, net are recorded at net realizable value based on average costs. These items are expensed when used. An allowance for obsolescence is provided for aircraft spare parts and supplies. As discussed in Note 1, in connection with the Merger, US Airways’ assets were recorded at fair value as of the Merger date. |
| (f) Operating Property and Equipment |
| Operating property and equipment are recorded at cost. Interest expense related to the acquisition of certain property and equipment, including aircraft purchase deposits, is capitalized as an additional cost of the asset. Interest capitalized for the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011 was $1 million, $13 million, $12 million and $8 million, respectively. Property and equipment is depreciated and amortized to residual values over the estimated useful lives or the lease term, whichever is less, using the straight-line method. Costs of major improvements that enhance the usefulness of the asset are capitalized and depreciated over the estimated useful life of the asset or the modifications, whichever is less. As discussed in Note 1, in connection with the Merger, US Airways’ assets were recorded at fair value as of the Merger date. The depreciable lives used for the principal depreciable asset classifications are as follows: |
|
| | | | | | | | | | | | | | | | |
| Principal Depreciable Asset Classification | | Depreciable Life | | | | | | | | | | | | | | |
| Jet aircraft and engines | | 30 years | | | | | | | | | | | | | | |
| Other regional aircraft and engines | | 25 years | | | | | | | | | | | | | | |
| Major rotable parts, avionics and assemblies | | Fleet end date | | | | | | | | | | | | | | |
| Improvements to leased flight equipment | | Shorter of asset/leasehold improvement or lease end date | | | | | | | | | | | | | | |
| Buildings and improvements | | Lesser of 5 - 30 years or lease term | | | | | | | | | | | | | | |
| Furniture, fixtures and other equipment | | 3-10 years: Ranges from computer hardware to furniture | | | | | | | | | | | | | | |
| Capitalized software | | Lesser of 5 years or lease term | | | | | | | | | | | | | | |
| US Airways records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. |
| (g) Income Taxes |
| Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. US Airways provides a valuation allowance for deferred tax assets when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. In making this determination, US Airways considers all available positive and negative evidence in accordance with ASC 740, “Income Taxes.” At December 31, 2013, US Airways had a full valuation allowance against its net deferred tax assets. |
| (h) Goodwill |
| Goodwill represents the excess of the purchase price over the net fair value of the assets acquired and liabilities assumed by AAG on December 9, 2013 in connection with the Merger. Goodwill is not amortized but is tested for impairment annually on October 1 or more frequently if events or circumstances indicate. |
|
| (i) Intangibles, Net |
| Intangible assets consist primarily of domestic and international airport take-off and landing slots, customer relationships, marketing agreements and tradenames. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. |
| In connection with the application of acquisition accounting as of December 9, 2013, the intangible assets were measured at fair value using the market and income approaches. US Airways utilized the market approach to value airport take-off and landing slots, when sufficient market information was available, and included prices and other relevant information generated by market transactions involving comparable assets. US Airways utilized the income approach to value the customer relationships, marketing partners, certain international take-off and landing slots and the US Airways tradename. The income approach indicates value for a subject asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required market rate of return that reflects the relative risk of achieving the cash flows and the time value of money. |
| The following table provides information relating to US Airways’ intangible assets subject to amortization as of December 31, 2013 and 2012 (in millions): |
|
| | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
| Airport take-off and landing slots | | $ | 55 | | | $ | 540 | | | | | | | | | |
| Dividend Miles customer relationships | | | 300 | | | | — | | | | | | | | | |
| Dividend Miles marketing partners | | | 105 | | | | — | | | | | | | | | |
| Tradenames | | | 35 | | | | — | | | | | | | | | |
| Airport gate leasehold rights | | | — | | | | 47 | | | | | | | | | |
| Accumulated amortization | | | (5 | ) | | | (146 | ) | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total | | $ | 490 | | | $ | 441 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| The intangible assets subject to amortization generally are amortized on a straight-line basis and included in depreciation and amortization on the consolidated statements of operations. In connection with the application of acquisition accounting as of December 9, 2013, certain airport take-off and landing slots, customer relationships, marketing partners and tradenames are amortized over 25 years, 9 years, 30 years and 15 months, respectively. For the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011, US Airways recorded amortization expense of $4 million, $23 million, $22 million and $21 million, respectively, related to its intangible assets. US Airways expects to record annual amortization expense of $67 million in 2014, $44 million in 2015, $39 million in 2016, $39 million in 2017, $39 million in 2018 and $262 million thereafter related to these intangible assets. |
| US Airways’ indefinite-lived assets include certain domestic and international airport take-off and landing slots. Indefinite-lived assets are not amortized but instead are reviewed for impairment annually and more frequently if events or circumstances indicate that the asset may be impaired. As discussed above, US Airways’ domestic and international airport take-off and landing slots were measured at fair value in connection with the application of acquisition accounting as of December 9, 2013 and therefore an impairment test was not performed. As of December 31, 2013 and 2012, US Airways had $1.01 billion and $39 million of indefinite-lived intangible assets, respectively, on its consolidated balance sheets. |
| (j) Frequent Flyer Liability |
| The Dividend Miles frequent flyer program awards mileage credits to passengers who fly on US Airways, American, Star Alliance carriers and certain other partner airlines that participate in the program. Mileage credits can be redeemed for travel on American, US Airways or other participating partner airlines, in which case US Airways pays a fee. Effective March 31, 2014, US Airways will join the oneworld alliance and exit the Star Alliance. At that point frequent flyer program reciprocity will begin with oneworld partner airlines and will be discontinued for many Star Alliance airlines. Mileage credits can also be earned through purchases from other non-airline partners that participate in the respective loyalty programs. |
|
| US Airways uses the incremental cost method to account for the portion of its frequent flyer liability incurred when Dividend Miles members earn mileage credits by flying on US Airways, American or their third-party regional carriers. US Airways has an obligation to provide future travel when these mileage credits are redeemed and therefore have recorded a liability for mileage credits outstanding. |
| The incremental cost liability includes all mileage credits that are expected to be redeemed, including mileage credits earned by members whose mileage account balances have not yet reached the minimum mileage credit level required to redeem an award. Additionally, outstanding mileage credits are subject to expiration if unused. In calculating the liability, US Airways estimates how many mileage credits will never be redeemed for travel and excludes those mileage credits from the estimate of the liability. Estimates are also made for the number of miles that will be used per award redemption and the number of travel awards that will be redeemed on partner airlines. These estimates are based on historical program experience as well as consideration of enacted program changes, as applicable. Changes in the liability resulting from members earning additional mileage credits or changes in estimates are recorded in the statements of operations as a part of passenger revenue. |
| The liability for outstanding mileage credits is valued based on the estimated incremental cost of carrying one additional passenger. Incremental cost primarily includes unit costs incurred for fuel, food and insurance as well as fees incurred when travel awards are redeemed on partner airlines. In addition, US Airways also includes in the determination of incremental cost the amount of certain fees related to redemptions expected to be collected from Dividend Miles members. These redemption fees reduce incremental cost. No profit or overhead margin is included in the accrual of incremental cost. These estimates are generally updated based upon US Airways’ 12-month historical average of such costs. |
| US Airways applied the acquisition method of accounting in connection with the Merger and therefore recorded the liability for outstanding mileage credits at fair value. As of December 31, 2013, the liability for outstanding mileage credits expected to be redeemed for future travel awards under the Dividend Miles program was $932 million and is included on the consolidated balance sheets within frequent flyer liability. This liability will be reduced as miles are redeemed and new miles earned will be recorded as a liability based on the incremental cost method discussed above. |
| As of December 31, 2012, the liability for outstanding mileage credits expected to be redeemed for future travel awards under the Dividend Miles program was $177 million. |
| US Airways also sells frequent flyer program mileage credits to participating airline partners and non-airline business partners. Sales of mileage credits to business partners is comprised of two components, transportation and marketing. Historically, US Airways has used the residual method of accounting to determine the values of each component as there had not been a material modification to any significant agreements since the adoption of Accounting Standards Update (“ASU”) No. 2009-13, “Revenue Recognition (Topic 605) – Multiple-Deliverable Revenue Arrangements” on January 1, 2011. |
| In connection with the Merger on December 9, 2013, a material modification occurred on all of US Airways’ agreements. Therefore, US Airways applied the relative selling price method to determine the values of each deliverable. Under the relative selling price method, US Airways identified five revenue elements for the co-branded credit card agreement with Barclays: the transportation component; use of the US Airways brand including access to frequent flyer member lists; advertising; lounge access; and baggage services (together excluding “the transportation component,” the “marketing component”). |
| The transportation component represents the fair value of future travel awards and is determined using historical transaction information, including information related to customer redemption patterns. The transportation component is deferred based on its relative selling price and amortized into passenger revenue on a straight-line basis over the period in which the mileage credits are expected to be redeemed for travel. |
| The marketing component represents services provided to US Airways’ business partners and relates primarily to the use of the US Airways logo and tradenames along with access to customer lists of Dividend Miles members. The marketing services are provided periodically, but no less than monthly. Accordingly, the marketing component is considered earned and recognized in other revenues in the period of the mileage sale. |
| As a result of the change in the marketing component value when the relative selling price method is applied, US Airways now defers less revenue per mile sold. As of December 31, 2013 and 2012, US Airways had $313 million and $258 million, respectively, in deferred revenue from the sale of mileage credits which is included on the consolidated balance sheets within frequent flyer liability. The marketing component of mileage sales recognized at the time of sale and included in other revenues on the consolidated statements of operations for the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011 was approximately $18 million, $151 million, $141 million and $133 million, respectively. |
|
| (k) Revenue Recognition |
| Passenger Revenue |
| Passenger revenue is recognized when transportation is provided. Ticket sales for transportation that has not yet been provided are initially deferred and recorded as air traffic liability on the consolidated balance sheets. The air traffic liability represents tickets sold for future travel dates and estimated future refunds and exchanges of tickets sold for past travel dates. The balance in the air traffic liability fluctuates throughout the year based on seasonal travel patterns and fare sale activity. US Airways’ air traffic liability was $1.24 billion and $1.09 billion as of December 31, 2013 and 2012, respectively. |
| The majority of tickets sold are nonrefundable. A small percentage of tickets, some of which are partially used tickets, expire unused. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based on the analysis of US Airways’ historical data. US Airways and members of the airline industry have consistently applied this accounting method to estimate revenue from forfeited tickets at the date travel was to be provided. Estimated future refunds and exchanges included in the air traffic liability are routinely evaluated based on subsequent activity to validate the accuracy of US Airways’ estimates. 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. |
| (l) Maintenance, materials and repairs |
| Maintenance, materials and repair costs for owned and leased flight equipment are charged to operating expense as incurred. |
| (m) Selling Expenses |
| Selling expenses include commissions, credit card fees, computerized reservations systems fees and advertising expenses. Advertising expenses are expensed on a straight-line basis as incurred throughout the year. Advertising expenses for the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011 were $1 million, $10 million, $11 million and $11 million, respectively. |
| (n) Share-based Compensation |
| US Airways accounts for its share-based compensation expense based on the fair value of the stock award at the time of grant, which is recognized ratably over the vesting period of the stock award. The fair value of stock options and stock appreciation rights is estimated using a Black-Scholes option pricing model. The fair value of restricted stock units is based on the market price of the underlying shares of common stock on the date of grant. See Note 13 for further discussion of share-based compensation. |
| (o) Deferred Gains and Credits, Net |
| Included within deferred gains and credits, net are amounts deferred and amortized into future periods associated with the adjustment of leases to fair value in connection with the application of acquisition accounting and certain vendor incentives. |
| (p) Foreign Currency Gains and Losses |
| Foreign currency gains and losses are recorded as part of other nonoperating expense, net in US Airways’ consolidated statements of operations. Foreign currency losses for the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011 were $1 million, $13 million, $10 million and $17 million, respectively. |
| (q) Other Operating Expenses |
| Other operating expenses includes expenses associated with ground and cargo handling, crew travel, aircraft food and catering, US Airways’ frequent flyer program, passenger accommodation, airport security, international navigation fees and certain general and administrative expenses. |
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| (r) Regional Expenses |
| Expenses associated with affiliate regional airlines operating as US Airways Express are classified as regional expenses on the consolidated statements of operations. Regional expenses consist of the following and as discussed in Note 1, prior period amounts have been reclassified to conform to the new AAG presentation of regional airline expenses (in millions): |
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| | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor | |
| | Period From | | | Period From | | | Year Ended | | | Year Ended | |
| December 9 to | January 1 to | December 31, | December 31, |
| December 31, | December 8, | | |
| | 2013 | | | 2013 | | | 2012 | | | 2011 | |
| Aircraft fuel and related taxes | | $ | 64 | | | $ | 989 | | | $ | 1,099 | | | $ | 1,058 | |
| Salaries, wages and benefits | | | 9 | | | | 106 | | | | 107 | | | | 108 | |
| Capacity purchases (a) | | | 117 | | | | 1,713 | | | | 1,828 | | | | 1,797 | |
| Maintenance, materials and repairs | | | — | | | | 3 | | | | 3 | | | | 3 | |
| Other rent and landing fees | | | 10 | | | | 140 | | | | 146 | | | | 147 | |
| Selling expenses | | | 11 | | | | 163 | | | | 177 | | | | 178 | |
| Depreciation and amortization | | | 1 | | | | 6 | | | | 7 | | | | 1 | |
| Special items, net (b) | | | — | | | | (14 | ) | | | — | | | | — | |
| Other | | | 7 | | | | 92 | | | | 96 | | | | 99 | |
| | | | | | | | | | | | | | | | |
| Regional expenses | | $ | 219 | | | $ | 3,198 | | | $ | 3,463 | | | $ | 3,391 | |
| | | | | | | | | | | | | | | | |
|
| (a) | For the 2013 Successor Period, the 2013 Predecessor Period and the years ended December 31, 2012 and 2011, the component of capacity purchase expenses related to aircraft deemed to be leased was approximately $20 million, $280 million, $300 million and $300 million, respectively. | | | | | | | | | | | | | | | |
|
| (b) | The 2013 Predecessor Period consisted of a credit due to a favorable arbitration ruling related to a vendor contract. | | | | | | | | | | | | | | | |
