##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark One)

|       |  |                                                                                                                                                     
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(xbox) |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2002 or             
|      
|      
|      
|      
|       |  |                                                                                                                                                     
|      
|      
|      
|      
|(box)  |  | 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 |  | 85281     
|                                        
|                                        
|                                        
|                                        
|                                        
|(Address of principal executive offices) |  |                |  | (Zip Code)

Registrants telephone number, including area code      (480) 693-0800

|                                                                                   | 
|---------------------------------------------------------------------------------- | 
|N/A                                                                               
|(Former name, former address and former fiscal year, if changed since last report)

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 |  | 85034     
|                                        
|                                        
|                                        
|                                        
|                                        
|(Address of principal executive offices) |  |                  |  | (Zip Code)

Registrants telephone number, including area code      (480) 693-0800

|                                                                                   | 
|---------------------------------------------------------------------------------- | 
|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.

YesXX                   No  ____

As of July 19, 2002, America West Holdings Corporation has 941,431 shares of
class A common stock and 32,781,951 shares of class B common stock outstanding.
As of July 19, 2002, America West Airlines, Inc. has 1,000 shares of class B
common stock outstanding, all of which are held by America West Holdings
Corporation.





---

TABLE OF CONTENTS



|                               |                                                                                               |  |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1A. CONSOLIDATED FINANCIAL STATEMENTS  AMERICA WEST HOLDINGS CORPORATION               
|                               | Notes to Condensed Consolidated Financial Statements                                         
|                               | ITEM 1B. 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                           
|PART II  OTHER INFORMATION   
|                               | ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDER                                     
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURE                     
|Index to Exhibits             
|ex-10.55                      



---



##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1A. CONSOLIDATED FINANCIAL STATEMENTS  AMERICA WEST HOLDINGS CORPORATION

AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Balance Sheets
(In thousands except share data)

|                        |                                                                                 |                      |                            |         |         |             |           |              |         |         |  | 
|----------------------- | ------------------------------------------------------------------------------- | -------------------- | -------------------------- | ------- | ------- | ----------- | --------- | ------------ | ------- | ------- |  | 
|                        |                                                                                 |                      |                            |         |         | June 30,    |           | December 31,
|                        |                                                                                 |                      |                            |         |         | 2002        |           | 2001        
|                        |                                                                                 |                      |                            |         |         |             |           |             
|                        |                                                                                 |                      |                            |         |         | (Unaudited) |           |              |         |        
|                        |                                                                                 |                      |                            | Assets  |         |             |           |              |         |         |  | 
|                       
|                       
|                       
|                       
|Current assets:         |                                                                                 |                      |                            |         |         |             |           |             
|                       
|                       
|                       
|                       
|                        | Cash and cash equivalents                                                       |                      | $                          | 426,373 |         |             | $         | 156,865      |        
|                       
|                       
|                       
|                       
|                        | Short-term investments                                                          |                      |                            | 60,129  |         |             |           |             |        
|                       
|                       
|                       
|                       
|                        | Accounts receivable, net                                                        |                      |                            | 123,900 |         |             |           | 109,012      |        
|                       
|                       
|                       
|                       
|                        | Expendable spare parts and supplies, net                                        |                      |                            | 50,455  |         |             |           | 51,833       |        
|                       
|                       
|                       
|                       
|                        | Prepaid expenses                                                                |                      |                            | 78,667  |         |             |           | 43,688       |        
|                        |                                                                                 |                      |                            |         |         |             |           |             
|                        |                                                                                 | Total current assets |                            |         | 739,524 |             |           |              | 361,398 |        
|                        |                                                                                 |                      |                            |         |         |             |           |             
|Property and equipment: |                                                                                 |                      |                            |         |         |             |           |             
|                       
|                       
|                       
|                       
|                        | Flight equipment                                                                |                      |                            | 976,119 |         |             |           | 1,082,649    |        
|                       
|                       
|                       
|                       
|                        | Other property and equipment                                                    |                      |                            | 268,415 |         |             |           | 258,400      |        
|                       
|                       
|                       
|                       
|                        | Equipment purchase deposits                                                     |                      |                            | 46,150  |         |             |           | 49,650       |        
|                        |                                                                                 |                      |                            |         |         |             |           |             
|                        |                                                                                 |                      | 1,290,684                  |         |         |             | 1,390,699 |             
|                       
|                       
|                       
|                       
|                        | Less accumulated depreciation and amortization                                  |                      |                            | 619,783 |         |             |           | 564,796      |        
|                        |                                                                                 |                      |                            |         |         |             |           |             
|                        |                                                                                 |                      | Net property and equipment |         |         | 670,901     |           |              |         | 825,903 | 
|                        |                                                                                 |                      |                            |         |         |             |           |             
|Other assets:           |                                                                                 |                      |                            |         |         |             |           |             
|                       
|                       
|                       
|                       
|                        | Restricted cash                                                                 |                      |                            | 64,448  |         |             |           | 54,546       |        
|                       
|                       
|                       
|                       
|                        | Reorganization value in excess of amounts allocable to
identifiable assets, net |                      |                            |        |         |             |           | 272,284      |        
|                       
|                       
|                       
|                       
|                        | Deferred tax asset, net                                                         |                      |                            | 84      |         |             |           |             |        
|                       
|                       
|                       
|                       
|                        | Other assets, net                                                               |                      |                            | 149,184 |         |             |           | 56,778       |        
|                        |                                                                                 |                      |                            |         |         |             |           |             
|                        |                                                                                 | Total other assets   |                            |         | 213,716 |             |           |              | 383,608 |        
|                        |                                                                                 |                      |                            |         |         |             |           |             
|                        |                                                                                 | $                    | 1,624,141                  |         |         | $           | 1,570,909 |             
|                        |                                                                                 |                      |                            |         |         |             |           |             

See accompanying notes to condensed consolidated financial statements.

2



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Balance Sheets
(In thousands except share data)

|                                        |                                                                                                                                                                           |                            |                                      |          |             |   |              |          |         |  | 
|--------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------ | -------- | ----------- | - | ------------ | -------- | ------- |  | 
|                                        |                                                                                                                                                                           |                            |                                      |          | June 30,    |   | December 31,
|                                        |                                                                                                                                                                           |                            |                                      |          | 2002        |   | 2001        
|                                        |                                                                                                                                                                           |                            |                                      |          |             |   |             
|                                        |                                                                                                                                                                           |                            |                                      |          | (Unaudited) |   |              |          |        
|                                        |                                                                                                                                                                           |                            | Liabilities and Stockholders Equity |          |             |   |              |          |         |  | 
|                                       
|                                       
|                                       
|                                       
|Current liabilities:                    |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                       
|                                       
|                                       
|                                       
|                                        | Current maturities of long-term debt                                                                                                                                      |                            | $                                    | 32,612   |             |   | $            | 119,141  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accounts payable                                                                                                                                                          |                            |                                      | 178,593  |             |   |              | 253,318  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Air traffic liability                                                                                                                                                     |                            |                                      | 249,407  |             |   |              | 187,714  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accrued compensation and vacation benefits                                                                                                                                |                            |                                      | 40,974   |             |   |              | 41,470   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accrued taxes                                                                                                                                                             |                            |                                      | 33,022   |             |   |              | 59,240   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Other accrued liabilities                                                                                                                                                 |                            |                                      | 34,562   |             |   |              | 29,643   |        
|                                        |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                        |                                                                                                                                                                           | Total current liabilities  |                                      |          | 569,170     |   |              |          | 690,526 | 
|                                        |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|Long-term debt, less current maturities |                                                                                                                                                                           |                            | 720,198                              |          |             |   | 222,955      |         
|                                       
|                                       
|                                       
|                                       
|Deferred credits and other liabilities  |                                                                                                                                                                           |                            | 145,816                              |          |             |   | 133,779      |         
|                                       
|                                       
|                                       
|                                       
|Deferred tax liability, net             |                                                                                                                                                                           |                            |                                     |          |             |   | 1,306        |         
|                                       
|                                       
|                                       
|                                       
|Commitments and contingencies           |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                       
|                                       
|                                       
|                                       
|Stockholders equity:                   |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                       
|                                       
|                                       
|                                       
|                                        | Preferred stock, $.01 par value. Authorized 48,800,000
shares; no shares issued                                                                                           |                            |                                      |         |             |   |              |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Class A common stock, $.01 par value. Authorized
1,200,000 shares; issued and outstanding 941,431 shares at
June 30, 2002 and December 31, 2001                           |                            |                                      | 9        |             |   |              | 9        |        
|                                       
|                                       
|                                       
|                                       
|                                        | Class B common stock, $.01 par value. Authorized 100,000,000
shares; issued and outstanding 49,065,846 shares at June 30, 2002
and 49,070,346 shares at December 31, 2001 |                            |                                      | 491      |             |   |              | 491      |        
|                                       
|                                       
|                                       
|                                       
|                                        | Additional paid-in capital                                                                                                                                                |                            |                                      | 629,028  |             |   |              | 593,784  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Retained earnings (deficit)                                                                                                                                               |                            |                                      | (133,884 | )           |   |              | 232,875  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accumulated other comprehensive income (loss)                                                                                                                             |                            |                                      | (481     | )           |   |              | 1,390    |        
|                                        |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                        |                                                                                                                                                                           |                            | 495,163                              |          |             |   | 828,549      |         
|                                       
|                                       
|                                       
|                                       
|                                        | Less: Cost of class B common stock in treasury, 16,283,895
shares at June 30, 2002 and December 31, 2001                                                                  |                            |                                      | (306,206 | )           |   |              | (306,206 | )      
|                                        |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                        |                                                                                                                                                                           | Total stockholders equity |                                      |          | 188,957     |   |              |          | 522,343 | 
|                                        |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                        |                                                                                                                                                                           | $                          | 1,624,141                            |          |             | $ | 1,570,909    |         
|                                        |                                                                                                                                                                           |                            |                                      |          |             |   |              |         

See accompanying notes to condensed consolidated financial statements.

3



---



##### Table of Contents



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,        
|                                                                                       |                                                                 |                                  |         | 2002               |         | 2001             |         | 2002    |         | 2001
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |     
|Operating revenues:                                                                    |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Passenger                                                       |                                  | $       | 507,309            |         |                  | $       | 547,428 |         |      | $        | 944,284 |           |   | $       | 1,100,194 |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Cargo                                                           |                                  |         | 7,255              |         |                  |         | 9,762   |         |      |          | 14,575  |           |   |         | 19,760    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Other                                                           |                                  |         | 29,582             |         |                  |         | 30,009  |         |      |          | 45,578  |           |   |         | 54,718    |          
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                       |                                                                 | Total operating revenues         |         |                    | 544,146 |                  |         |         | 587,199 |      |          |         | 1,004,437 |   |         |           | 1,174,672 |  
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Operating expenses:                                                                    |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Salaries and related costs                                      |                                  |         | 146,038            |         |                  |         | 147,322 |         |      |          | 288,569 |           |   |         | 296,317   |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Aircraft rents                                                  |                                  |         | 70,618             |         |                  |         | 89,002  |         |      |          | 143,509 |           |   |         | 176,880   |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Other rents and landing fees                                    |                                  |         | 38,382             |         |                  |         | 34,816  |         |      |          | 79,812  |           |   |         | 70,189    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Aircraft fuel                                                   |                                  |         | 73,448             |         |                  |         | 91,465  |         |      |          | 131,536 |           |   |         | 192,899   |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Agency commissions                                              |                                  |         | 10,508             |         |                  |         | 22,251  |         |      |          | 24,757  |           |   |         | 45,556    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Aircraft maintenance materials and repairs                      |                                  |         | 63,537             |         |                  |         | 65,304  |         |      |          | 128,795 |           |   |         | 130,468   |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Depreciation and amortization                                   |                                  |         | 17,727             |         |                  |         | 15,553  |         |      |          | 34,385  |           |   |         | 30,071    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Amortization of excess reorganization value                     |                                  |         |                   |         |                  |         | 4,974   |         |      |          |        |           |   |         | 9,948     |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Special charges                                                 |                                  |         |                   |         |                  |         | 35,695  |         |      |          | 60,255  |           |   |         | 35,695    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Other                                                           |                                  |         | 122,467            |         |                  |         | 134,330 |         |      |          | 234,089 |           |   |         | 264,668   |          
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                       |                                                                 | Total operating expenses         |         |                    | 542,725 |                  |         |         | 640,712 |      |          |         | 1,125,707 |   |         |           | 1,252,691 |  
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Operating income (loss)                                                                |                                                                 |                                  | 1,421   |                    |         |                  | (53,513 | )       |         |      | (121,270 | )       |           |   | (78,019 | )        
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Nonoperating income (expenses):                                                        |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Interest income                                                 |                                  |         | 3,252              |         |                  |         | 4,489   |         |      |          | 6,041   |           |   |         | 7,521     |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Interest expense, net                                           |                                  |         | (19,958            | )       |                  |         | (4,924  | )       |      |          | (37,131 | )         |   |         | (10,419   | )        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Federal government assistance                                   |                                  |         | 2,264              |         |                  |         |        |         |      |          | 2,264   |           |   |         |          |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Other, net                                                      |                                  |         | 166                |         |                  |         | 65      |         |      |          | (2,292  | )         |   |         | 124       |          
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                       |                                                                 | Total nonoperating expenses, net |         |                    | (14,276 | )                |         |         | (370    | )    |          |         | (31,118   | ) |         |           | (2,774    | )
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Loss before income tax benefit and cumulative effect of change
in accounting principle |                                                                 |                                  | (12,855 | )                  |         |                  | (53,883 | )       |         |      | (152,388 | )       |           |   | (80,793 | )        
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Income tax benefit                                                                     |                                                                 |                                  | (4,401  | )                  |         |                  | (11,399 | )       |         |      | (57,913  | )       |           |   | (25,473 | )        
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Loss before cumulative effect of change in accounting principle                        |                                                                 |                                  | (8,454  | )                  |         |                  | (42,484 | )       |         |      | (94,475  | )       |           |   | (55,320 | )        
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Cumulative effect of change in accounting principle                                    |                                                                 |                                  |        |                    |         |                  |        |         |         |      | (272,284 | )       |           |   |        |          
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Net loss                                                                               |                                                                 | $                                | (8,454  | )                  |         | $                | (42,484 | )       |         | $    | (366,759 | )       |           | $ | (55,320 | )        
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |           |          
|Basic loss per share:                                                                  |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Loss before cumulative effect of change in accounting principle |                                  | $       | (0.25              | )       |                  | $       | (1.26   | )       |      | $        | (2.80   | )         |   | $       | (1.64     | )        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Cumulative effect of change in accounting principle             |                                  |         |                   |         |                  |         |        |         |      |          | (8.07   | )         |   |         |          |          
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                       | Basic loss per share                                            |                                  | $       | (0.25              | )       |                  | $       | (1.26   | )       |      | $        | (10.87  | )         |   | $       | (1.64     | )        
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |           |          
|Diluted loss per share:                                                                |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Loss before cumulative effect of change in accounting principle |                                  | $       | (0.25              | )       |                  | $       | (1.26   | )       |      | $        | (2.80   | )         |   | $       | (1.64     | )        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Cumulative effect of change in accounting principle             |                                  |         |                   |         |                  |         |        |         |      |          | (8.07   | )         |   |         |          |          
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                       | Diluted loss per share                                          |                                  | $       | (0.25              | )       |                  | $       | (1.26   | )       |      | $        | (10.87  | )         |   | $       | (1.64     | )        
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |           |          
|Shares used for computation:                                                           |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Basic                                                           |                                  |         | 33,726             |         |                  |         | 33,646  |         |      |          | 33,727  |           |   |         | 33,633    |          
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                       | Diluted                                                         |                                  |         | 33,726             |         |                  |         | 33,646  |         |      |          | 33,727  |           |   |         | 33,633    |          
|                                                                                       |                                                                 |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          

See accompanying notes to condensed consolidated financial statements.

4



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

|                                                                   |                                                              |                                                     |         |                  |         |      |         |          |          |  
|------------------------------------------------------------------ | ------------------------------------------------------------ | --------------------------------------------------- | ------- | ---------------- | ------- | ---- | ------- | -------- | -------- | -
|                                                                   |                                                              |                                                     |         | Six Months Ended
|                                                                   |                                                              |                                                     |         | June 30,        
|                                                                   |                                                              |                                                     |         | 2002             |         | 2001
|                                                                   |                                                              |                                                     |         |                  |         |     
|Net cash provided by operating activities                          |                                                              | $                                                   | 789     |                  |         | $    | 100,671 |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|Cash flows from investing activities:                              |                                                              |                                                     |         |                  |         |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Purchases of property and equipment                          |                                                     |         | (78,953          | )       |      |         | (222,863 | )       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Sales (purchases) of short-term investments                  |                                                     |         | (60,129          | )       |      |         | 22,822   |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Proceeds from sale and leaseback of aircraft                 |                                                     |         | 175,478          |         |      |         | 64,000   |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Equipment purchase deposits and other                        |                                                     |         | 62               |         |      |         | 5,907    |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|                                                                   |                                                              | Net cash provided by (used in) investing activities |         |                  | 36,458  |      |         |          | (130,134 | )
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|Cash flows from financing activities:                              |                                                              |                                                     |         |                  |         |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Repayment of debt                                            |                                                     |         | (165,999         | )       |      |         | (120,829 | )       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Proceeds from issuance of debt                               |                                                     |         | 435,386          |         |      |         | 152,422  |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Payments of debt issue costs                                 |                                                     |         | (36,987          | )       |      |         |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Other                                                        |                                                     |         | (139             | )       |      |         | (132     | )       
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|                                                                   |                                                              | Net cash provided by financing activities           |         |                  | 232,261 |      |         |          | 31,461   |  
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|Net increase in cash and cash equivalents                          |                                                              |                                                     | 269,508 |                  |         |      | 1,998   |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cash and cash equivalents at beginning of period                   |                                                              |                                                     | 156,865 |                  |         |      | 144,138 |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|Cash and cash equivalents at end of period                         |                                                              | $                                                   | 426,373 |                  |         | $    | 146,136 |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|Cash, cash equivalents and short-term investments at end of period |                                                              | $                                                   | 486,502 |                  |         | $    | 174,000 |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|Cash paid (refunded) for:                                          |                                                              |                                                     |         |                  |         |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Interest, net of amounts capitalized                         |                                                     | $       | 12,879           |         |      | $       | 6,310    |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|                                                                   | Income taxes paid (refunded)                                 |                                                     | $       | (63,226          | )       |      | $       | 113      |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|Non-cash investing and financing activities:                       |                                                              |                                                     |         |                  |         |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Issuance of convertible notes, net of cancellations          |                                                     | $       | 60,186           |         |      | $       |         |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|                                                                   | Issuance of warrants                                         |                                                     | $       | 35,383           |         |      | $       |         |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|                                                                   | Equipment acquired through capital lease                     |                                                     | $       | 16,878           |         |      | $       |         |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|                                                                   | Equipment acquired with issuance of notes payable            |                                                     | $       | 64,163           |         |      | $       |         |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|                                                                   | Notes payable canceled under the aircraft purchase agreement |                                                     | $       | (10,500          | )       |      | $       | (17,500  | )       
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|                                                                   | Notes payable issued for equipment purchase deposits         |                                                     | $       | 7,000            |         |      | $       | 10,500   |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         
|                                                                   | Payment in kind notes issued, net of returns                 |                                                     | $       | 3,426            |         |      | $       |         |         
|                                                                   |                                                              |                                                     |         |                  |         |      |         |         

See accompanying notes to condensed consolidated financial statements.

5



---



##### Table of Contents






AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2002



|1. |  | BASIS OF PRESENTATION
|-- |  | ---------------------

The unaudited condensed consolidated financial statements include the
accounts of America West Holdings Corporation (Holdings or the Company) and
its wholly owned subsidiaries, America West Airlines, Inc. (AWA) and The
Leisure Company (TLC). 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. Certain prior year amounts have been reclassified to conform
with current year 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, 2001.



|2. |  | REGISTRATION OF SECURITIES
|-- |  | --------------------------

On January 18, 2002, AWA closed a $429 million loan supported by a $380
million government loan guarantee (the ATSB Loan). This loan triggered
concessions and additional financing (primarily aircraft rent reductions and
future financing commitments), resulting in a restructuring of AWAs
indebtedness and lease commitments. As compensation for various elements of
the restructuring plan, Holdings issued a warrant to purchase up to 18,754,000
shares of class B common stock to the Air Transportation Stabilization Board,
or ATSB, and additional warrants to purchase up to 3,783,000 shares of class B
common stock to other loan participants, in each case at an exercise price of
$3 per share and with a term of 10 years. In addition, as compensation for
aircraft rent reductions and other lessor concessions, Holdings issued
$104,464,560 aggregate principal amount of 7.5% convertible senior notes due
2009, which are guaranteed by AWA, to certain of AWAs aircraft lessors.

In connection with the restructuring, Holdings and AWA granted to the
recipients of the notes and warrants certain registration rights. In May 2002,
Holdings and AWA filed a registration statement with the Securities and
Exchange Commission to satisfy their obligations to the recipients of the notes
and warrants. The registration statement covers:



| |  |  | The resale by the noteholders of $129,082,514 of 7.5% convertible
notes (including $24,617,954 of interest payable on the first six
interest payment dates, which are expected to be paid in the form of a
deemed loan added to the principal amount of the notes);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The resale by the noteholders of up to 10,756,876 shares of class B
common stock issuable upon conversion of the notes;                                                                                                                                            
|
| |  |  | The resale by the ATSB of the ATSB warrant;                                                                                                                                                                                                                        
|
| |  |  | The resale by the ATSB of up to 18,754,000 shares of class B common
stock issuable upon its exercise of the ATSB warrant;                                                                                                                                          
|
| |  |  | The issuance by the Company of shares of class B common stock upon
the exercise of the ATSB warrant by holders other than the ATSB; and                                                                                                                            
|
| |  |  | The resale by the holders of the other warrants of up to 3,783,000
shares of class B common stock issuable upon exercise of the other
warrants.                                                                                                                    

6



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2002



|3. |  | INCENTIVE EQUITY PLAN
|-- |  | ---------------------

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

For these reasons, on March 27, 2002, the Board adopted the Companys 2002
Incentive Equity Plan (the 2002 Incentive Plan), subject to stockholder
approval. A total of 8,000,000 shares of class B common stock, which the
Company believes will be adequate to fund the requirements under its long-term
compensation arrangements through 2005, have been reserved for issuance under
the 2002 Incentive Plan. At the same time, the Board determined that,
regardless of share availability, no new awards will be granted under the 1994
Incentive Plan following stockholder approval of the 2002 Incentive Plan. In
May 2002, the Companys stockholders approved the adoption of the 2002
Incentive Plan.



|4. |  | FLIGHT EQUIPMENT
|-- |  | ----------------

In the second quarter of 2002, AWA borrowed $64.2 million from the America
West Airlines 2001-1 Pass Through Trusts to mortgage finance the acquisition of
two new A320 Airbus aircraft. In the fourth quarter of 2001, AWA borrowed
$97.0 million from the America West Airlines 2001-1 Pass Through Trusts to
mortgage finance the acquisition of one new A319 and two new A320 Airbus
aircraft. As part of the restructuring completed on January 18, 2002, AWA
committed to the sale and leaseback of eight aircraft, including the three
aircraft acquired in the fourth quarter of 2001 and the two aircraft acquired
in the second quarter of 2002. The sale and leaseback of these five aircraft
was completed in June 2002 and resulted in pretax losses of approximately $2.3
million. The losses on the sale-leaseback transactions, which were subject to
a firm commitment in January 2002, were accrued in the accompanying condensed
consolidated statements of operations classified in Special Chargesin the
first quarter of 2002. See Note 6, Special Charges.

In June 2002, AWA restructured the leases for six of its Boeing 757-200
aircraft to improve lease rental rates and other terms. Prior to the
restructuring, AWA subleased the six aircraft from The Boeing Company
(Boeing), who in turn leased the aircraft from five different head lessors.
Under the restructuring, AWA terminated the subleases with Boeing and assumed,
amended and restated the existing head leases for each aircraft. Upon closing
of the transactions, AWA paid approximately $11.8 million in security deposits
and advance rental payments to the head lessors, net of a refund from Boeing
for prorated prepaid rent under the subleases, prorated accrued rent under the
head leases and cash deposits for the estimated cost of certain maintenance
work required to be performed on the aircraft prior to their return to Boeing.
As a result of these transactions, Boeing also relinquished its interest in
approximately $11.2 million face value of 7.5% convertible notes it received as
compensation for certain concessions granted under the restructuring completed
on January 18, 2002. Furthermore, AWA issued a $4.9 million note payable to
Boeing for the value of the concessions realized with respect to these six
aircraft prior to the termination of the subleases. The restructured leases
have a remaining term of approximately six years and are being accounted for as
operating leases.

7



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2002

In June 2002, one aircraft lessor exercised its put right under its
aircraft lease agreement to extend the lease for one Boeing 737-300 aircraft
for an additional 13 months. Upon exercising this right, the lessor agreed to
relinquish its interest in approximately $0.7 million face value of 7.5%
convertible senior notes it received as compensation for certain concessions
granted under the restructuring completed on January 18, 2002.



|5. |  | COMPREHENSIVE LOSS
|-- |  | ------------------

Comprehensive loss includes unrealized gains and losses on
available-for-sale securities and changes in the fair value of derivative
financial instruments that qualify for hedge accounting. For the three months
ended June 30, 2002 and 2001, the Company recorded a total comprehensive loss
of $8.9 million and $40.5 million, respectively. For the six months ended June
30, 2002 and 2001, the Company recorded a total comprehensive loss of $368.6
million and $55.2 million, respectively. The difference between net loss and
comprehensive loss for the three and six months ended June 30, 2002 and 2001 is
detailed in the following table:

|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |               |   |          |        |   |   |         |        |  
|------------------ | -------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | ---- | ---------------- | - | ------------- | ----- | ------------- | - | -------- | ------ | - | - | ------- | ------ | -
|                   |                                                                                                                                  |   | Three Months Ended |      | Six Months Ended
|                   |                                                                                                                                  |   | June 30, 2002      |      | June 30, 2001    |   | June 30, 2002 |       | June 30, 2001
|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |              
|                   |                                                                                                                                  |   | (In thousands)     |      | (In thousands)  
|Net loss           |                                                                                                                                  | $ | (8,454             | )    |                  | $ | (42,484       | )     |               | $ | (366,759 | )      |   | $ | (55,320 | )     
|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |               |   |          |        |   |   |         |       
|                   | Unrealized gains (losses) on derivative
instruments, net of deferred taxes                                                       |   |                    | (481 | )                |   |               | 2,014 |               |   |          | (481   | ) |   |         | 1,956  |  
|                  
|                  
|                  
|                  
|                   | Reclassification adjustment to net loss of
previously reported unrealized gains (losses)
on derivative instruments, net of taxes |   |                    |     |                  |   |               | 40    |               |   |          | (1,390 | ) |   |         | (1,622 | )
|                  
|                  
|                  
|                  
|                   | Unrealized losses on marketable equity
securities, net of deferred taxes                                                         |   |                    |     |                  |   |               | (88   | )             |   |          |       |   |   |         | (176   | )
|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |               |   |          |        |   |   |         |       
|                   | Total other comprehensive income (loss)                                                                                          |   |                    | (481 | )                |   |               | 1,966 |               |   |          | (1,871 | ) |   |         | 158    |  
|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |               |   |          |        |   |   |         |       
|Comprehensive loss |                                                                                                                                  | $ | (8,935             | )    |                  | $ | (40,518       | )     |               | $ | (368,630 | )      |   | $ | (55,162 | )     
|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |               |   |          |        |   |   |         |       



|6. |  | SPECIAL CHARGES
|-- |  | ---------------

In the first quarter of 2002, the Company recorded a pretax special charge
of $60.3 million, primarily related to the restructuring completed on January
18, 2002, resulting from the events of September 11, 2001. Components of the
special charge are as follows:

|                                                                    |       |   |                 |        | 
|------------------------------------------------------------------- | ----- | - | --------------- | ------ | 
|                                                                    |       |   | Special Charges
|                                                                    |       |   |                
|                                                                    |       |   | (In thousands) 
|Impairment of owned aircraft and engines (based on appraised value) |       | $ | 39,225          |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Fleet restructuring costs                                           |       |   | 9,915           |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Losses on sale-leaseback transactions                               |       |   | 6,328           |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Professional fees                                                   |       |   | 4,745           |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Write-off of computer system and security equipment                 |       |   | 3,411           |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Severance                                                           |       |   | 656             |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Revision of estimate for second quarter 2001 special charge         |       |   | (4,000          | )     
|                                                                    |       |   |                 |       
|                                                                    | Total |   | $               | 60,280 | 
|                                                                    |       |   |                 |       

8



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2002

Of this amount, approximately $10.0 million, principally related to losses
on sale-leaseback transactions, fleet restructuring costs, professional fees
and severance was accrued.

In April 2001, Holdings implemented a cost reduction plan to respond to a
softening economy. The plan included a slowing of the airlines growth through
the return of seven older 737-300 leased aircraft to the lessors in the second
half of 2001 and January 2002 and significant reductions in overhead due in
part to select reductions-in-force of management, administrative and clerical
personnel. The Company recorded a pretax charge of $35.7 million in the second
quarter of 2001 related to the earlier-than-planned aircraft returns and
reductions-in-force.

The following table presents the payments and other settlements made
during the second quarter of 2002 and the remaining special charge accruals as
of June 30, 2002.

|                          |  |           |        |               |  |              |        |            |  |       |     |  |  |   |      |   |  |   |        |  
|------------------------- |  | --------- | ------ | ------------- |  | ------------ | ------ | ---------- |  | ----- | --- |  |  | - | ---- | - |  | - | ------ | -
|                          |  | Sale-     |        | Fleet         |  | Professional |        | Reduction- |  |       |     | 
|                          |  | Leaseback |        | Restructuring |  | Fees         |        | in-force   |  | Total
|                          |  |           |        |               |  |              |        |            |  |      
|Balance at March 31, 2002 |  | $         | 6,328  |               |  | $            | 3,719  |            |  | $     | 500 |  |  | $ | 413  |   |  | $ | 10,960 |  
|                         
|                         
|                         
|                         
|Payments                  |  |           |       |               |  |              | (1,758 | )          |  |       |    |  |  |   | (393 | ) |  |   | (2,151 | )
|                         
|                         
|                         
|                         
|Loss on sale-leasebacks   |  |           | (2,319 | )             |  |              |       |            |  |       |    |  |  |   |     |   |  |   | (2,319 | )
|                          |  |           |        |               |  |              |        |            |  |       |     |  |  |   |      |   |  |   |        |  
|Balance at June 30, 2002  |  | $         | 4,009  |               |  | $            | 1,961  |            |  | $     | 500 |  |  | $ | 20   |   |  | $ | 6,490  |  
|                          |  |           |        |               |  |              |        |            |  |       |     |  |  |   |      |   |  |   |        |  

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

9



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2002



|7. |  | EARNINGS PER SHARE (EPS)
|-- |  | --------------------------

The following table presents the computation of basic and diluted EPS.

|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |            | 
|--------------------------------------------------------------- | ------------------------------------------------------ | - | ------------------------------------------- | ---------- | ---------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                                                |                                                        |   | Three Months Ended                          |            | Six Months Ended
|                                                                |                                                        |   | June 30,                                    |            | June 30,        
|                                                                |                                                        |   | 2002                                        |            | 2001             |   | 2002       |            | 2001
|                                                                |                                                        |   |                                             |            |                  |   |            |            |     
|                                                                |                                                        |   | (In thousands of dollars except share data)
|BASIC LOSS PER SHARE                                            |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|                                                               
|                                                               
|                                                               
|                                                               
|Loss before cumulative effect of change in accounting principle |                                                        | $ | (8,454                                      | )          |                  | $ | (42,484    | )          |      | $ | (94,475    | )          |  | $ | (55,320    | )         
|                                                               
|                                                               
|                                                               
|                                                               
|Cumulative effect of change in accounting principle             |                                                        |   |                                            |            |                  |   |           |            |      |   | (272,284   | )          |  |   |           |           
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|Net loss                                                        |                                                        | $ | (8,454                                      | )          |                  | $ | (42,484    | )          |      | $ | (366,759   | )          |  | $ | (55,320    | )         
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|Weighted average common shares outstanding                      |                                                        |   | 33,726,497                                  |            |                  |   | 33,645,881 |            |      |   | 33,727,186 |            |  |   | 33,633,398 |           
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|Basic loss per share:                                           |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|                                                               
|                                                               
|                                                               
|                                                               
|Loss before cumulative effect of change in accounting principle |                                                        | $ | (0.25                                       | )          |                  | $ | (1.26      | )          |      | $ | (2.80      | )          |  | $ | (1.64      | )         
|                                                               
|                                                               
|                                                               
|                                                               
|Cumulative effect of change in accounting principle             |                                                        |   |                                            |            |                  |   |           |            |      |   | (8.07      | )          |  |   |           |           
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|Net loss                                                        |                                                        | $ | (0.25                                       | )          |                  | $ | (1.26      | )          |      | $ | (10.87     | )          |  | $ | (1.64      | )         
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|DILUTED LOSS PER SHARE                                          |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|                                                               
|                                                               
|                                                               
|                                                               
|Loss before cumulative effect of change in accounting principle |                                                        | $ | (8,454                                      | )          |                  | $ | (42,484    | )          |      | $ | (94,475    | )          |  | $ | (55,320    | )         
|                                                               
|                                                               
|                                                               
|                                                               
|Cumulative effect of change in accounting principle             |                                                        |   |                                            |            |                  |   |           |            |      |   | (272,284   | )          |  |   |           |           
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|Net loss                                                        |                                                        | $ | (8,454                                      | )          |                  | $ | (42,484    | )          |      | $ | (366,759   | )          |  | $ | (55,320    | )         
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|Share computation:                                              |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Weighted average common shares outstanding             |   |                                             | 33,726,497 |                  |   |            | 33,645,881 |      |   |            | 33,727,186 |  |   |            | 33,633,398 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Assumed exercise of stock options and warrants         |   |                                             |           |                  |   |            |           |      |   |            |           |  |   |            |           | 
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|                                                                | Weighted average common shares outstanding as adjusted |   |                                             | 33,726,497 |                  |   |            | 33,645,881 |      |   |            | 33,727,186 |  |   |            | 33,633,398 | 
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|Diluted loss per share:                                         |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|                                                               
|                                                               
|                                                               
|                                                               
|Loss before cumulative effect of change in accounting principle |                                                        | $ | (0.25                                       | )          |                  | $ | (1.26      | )          |      | $ | (2.80      | )          |  | $ | (1.64      | )         
|                                                               
|                                                               
|                                                               
|                                                               
|Cumulative effect of change in accounting principle             |                                                        |   |                                            |            |                  |   |           |            |      |   | (8.07      | )          |  |   |           |           
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           
|Net loss                                                        |                                                        | $ | (0.25                                       | )          |                  | $ | (1.26      | )          |      | $ | (10.87     | )          |  | $ | (1.64      | )         
|                                                                |                                                        |   |                                             |            |                  |   |            |            |      |   |            |            |  |   |            |           

For the three months ended June 30, 2002, 14,657 incremental shares from
assumed exercise of stock options and 4,638,655 incremental shares from assumed
exercise of the warrants issued in conjunction with the government guaranteed
loan are not included in the computation of diluted EPS because of the
antidilutive effect on EPS. In addition, 7,827,608 stock options are not
included in the computation of diluted EPS because the option exercise prices
were greater than the average market price of common stock for the period.

For the three months ended June 30, 2001, 52,501 incremental shares from
assumed exercise of stock options are not included in the computation of
diluted EPS because of the antidilutive effect on EPS. In addition, 5,229,195
stock options are not included in the computation of diluted EPS because the
option exercise prices were greater than the average market price of common
stock for the period.

10



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2002

For the six months ended June 30, 2002, 44,148 incremental shares from
assumed exercise of stock options and 5,588,797 incremental shares from assumed
exercise of warrants issued in conjunction with the government guaranteed loan
are not included in the computation of diluted EPS because of the antidilutive
effect on EPS. In addition, 6,596,332 stock options are not included in the
computation of diluted EPS because the option exercise prices were greater than
the average market price of common stock for the period.

For the six months ended June 30, 2001, 136,822 incremental shares from
assumed exercise of stock options are not included in the computation of
diluted EPS because of the antidilutive effect on EPS. In addition, 4,672,217
stock options are not included in the computation of diluted EPS because the
option exercise prices were greater than the average market price of common
stock for the period.



|8. |  | CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
|-- |  | -----------------------------------------------------

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and
Other Intangible Assets.SFAS No. 142 primarily addresses the accounting for
goodwill and intangible assets subsequent to their acquisition. SFAS No. 142
does not permit the amortization of goodwill as required by Accounting
Principles Board (APB) Opinion No. 17, Intangible Assets.Rather, goodwill
will be subject to a periodic impairment test, using a two-step process. The
first step is to identify a potential impairment. The second step of the
goodwill impairment test measures the amount of the impairment loss, using a
fair value-based approach. Under SFAS No. 142, reorganization value in excess
of amounts allocable to identifiable assets (ERV) shall be reported as
goodwill and accounted for in the same manner as goodwill. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. Upon adoption of
this statement on January 1, 2002, the Company recorded an impairment loss of
$272.3 million, which was determined by an independent valuation of the
Company. The impairment loss was recorded as the cumulative effect of a change
in accounting principle.

The following table presents reported net loss and loss per share
exclusive of ERV amortization expense for the three and six months ended June
30, 2002 and 2001.

|                                |  |                                         |        |                           |  |      |         |      |  |   |          |   |  |   |         |  
|------------------------------- |  | --------------------------------------- | ------ | ------------------------- |  | ---- | ------- | ---- |  | - | -------- | - |  | - | ------- | -
|                                |  | Three Months Ended June 30,             |        | Six Months Ended June 30,
|                                |  | 2002                                    |        | 2001                      |  | 2002 |         | 2001
|                                |  |                                         |        |                           |  |      |         |     
|                                |  | (In thousands except per share amounts)
|Reported net loss               |  | $                                       | (8,454 | )                         |  | $    | (42,484 | )    |  | $ | (366,759 | ) |  | $ | (55,320 | )
|                               
|                               
|                               
|                               
|ERV amortization, net of tax(1) |  |                                         |       |                           |  |      | 5,373   |      |  |   |         |   |  |   | 10,746  |  
|                                |  |                                         |        |                           |  |      |         |      |  |   |          |   |  |   |         |  
|Adjusted net loss               |  | $                                       | (8,454 | )                         |  | $    | (37,111 | )    |  | $ | (366,759 | ) |  | $ | (44,574 | )
|                                |  |                                         |        |                           |  |      |         |      |  |   |          |   |  |   |         |  
|Basic loss per share:           |  |                                         |        |                           |  |      |         |      |  |   |          |   |  |   |         |  
|                               
|                               
|                               
|                               
|Reported net loss               |  | $                                       | (0.25  | )                         |  | $    | (1.26   | )    |  | $ | (10.87   | ) |  | $ | (1.64   | )
|                               
|                               
|                               
|                               
|ERV amortization, net of tax(1) |  |                                         |       |                           |  |      | 0.16    |      |  |   |         |   |  |   | 0.32    |  
|                                |  |                                         |        |                           |  |      |         |      |  |   |          |   |  |   |         |  
|Adjusted net loss               |  | $                                       | (0.25  | )                         |  | $    | (1.10   | )    |  | $ | (10.87   | ) |  | $ | (1.32   | )
|                                |  |                                         |        |                           |  |      |         |      |  |   |          |   |  |   |         |  
|Diluted loss per share:         |  |                                         |        |                           |  |      |         |      |  |   |          |   |  |   |         |  
|                               
|                               
|                               
|                               
|Reported net loss               |  | $                                       | (0.25  | )                         |  | $    | (1.26   | )    |  | $ | (10.87   | ) |  | $ | (1.64   | )
|                               
|                               
|                               
|                               
|ERV amortization, net of tax(1) |  |                                         |       |                           |  |      | 0.16    |      |  |   |         |   |  |   | 0.32    |  
|                                |  |                                         |        |                           |  |      |         |      |  |   |          |   |  |   |         |  
|Adjusted net loss               |  | $                                       | (0.25  | )                         |  | $    | (1.10   | )    |  | $ | (10.87   | ) |  | $ | (1.32   | )
|                                |  |                                         |        |                           |  |      |         |      |  |   |          |   |  |   |         |  



---

|(1) |  | Amortization of ERV is not a tax-deductible expense.
|--- |  | ----------------------------------------------------

11



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2002

The following table presents reported net income (loss) and earnings
(loss) per share exclusive of ERV amortization expense for the years ended
December 31, 2001, 2000, 1999, 1998 and 1997.

|                                   |  |                                         |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 
|---------------------------------- |  | --------------------------------------- | -------- | ---- |  | ---- | ------ | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------ | 
|                                   |  | For the Year Ended December 31,        
|                                   |  |                                        
|                                   |  | 2001                                    |          | 2000 |  | 1999 |        | 1998 |  | 1997
|                                   |  |                                         |          |      |  |      |        |      |  |     
|                                   |  | (In thousands except per share amounts)
|Reported net income (loss)         |  | $                                       | (147,871 | )    |  | $    | 7,679  |      |  | $    | 119,389 |  |  | $ | 108,571 |  |  | $ | 74,970 | 
|                                  
|                                  
|                                  
|                                  
|ERV amortization, net of tax (1)   |  |                                         | 21,497   |      |  |      | 21,497 |      |  |      | 21,497  |  |  |   | 21,497  |  |  |   | 23,776 | 
|                                   |  |                                         |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 
|Adjusted net income (loss)         |  | $                                       | (126,374 | )    |  | $    | 29,176 |      |  | $    | 140,886 |  |  | $ | 130,068 |  |  | $ | 98,746 | 
|                                   |  |                                         |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 
|Basic earnings (loss) per share:   |  |                                         |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 
|                                  
|                                  
|                                  
|                                  
|Reported net income (loss)         |  | $                                       | (4.39    | )    |  | $    | 0.22   |      |  | $    | 3.17    |  |  | $ | 2.58    |  |  | $ | 1.68   | 
|                                  
|                                  
|                                  
|                                  
|ERV amortization, net of tax (1)   |  |                                         | 0.64     |      |  |      | 0.61   |      |  |      | 0.57    |  |  |   | 0.51    |  |  |   | 0.53   | 
|                                   |  |                                         |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 
|Adjusted net income (loss)         |  | $                                       | (3.75    | )    |  | $    | 0.83   |      |  | $    | 3.74    |  |  | $ | 3.09    |  |  | $ | 2.21   | 
|                                   |  |                                         |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 
|Diluted earnings (loss) per share: |  |                                         |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 
|                                  
|                                  
|                                  
|                                  
|Reported net income (loss)         |  | $                                       | (4.39    | )    |  | $    | 0.22   |      |  | $    | 3.03    |  |  | $ | 2.40    |  |  | $ | 1.63   | 
|                                  
|                                  
|                                  
|                                  
|ERV amortization, net of tax (1)   |  |                                         | 0.64     |      |  |      | 0.60   |      |  |      | 0.55    |  |  |   | 0.48    |  |  |   | 0.52   | 
|                                   |  |                                         |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 
|Adjusted net income (loss)         |  | $                                       | (3.75    | )    |  | $    | 0.82   |      |  | $    | 3.58    |  |  | $ | 2.88    |  |  | $ | 2.15   | 
|                                   |  |                                         |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 



---

|(1) |  | Amortization of ERV is not a tax-deductible expense.
|--- |  | ----------------------------------------------------



|9. |  | INCOME TAX REFUND
|-- |  | -----------------

In February 2002, Holdings filed its 2001 consolidated income tax return
with the IRS, which included a claim to carryback losses incurred in 2001 to
the tax years 1999 and 2000. This resulted in a refund of approximately $33.9
million, of which $33.8 million was received in the first quarter of 2002 and
$0.1 million was received in the second quarter of 2002. In March 2002,
Holdings filed a revised claim for carryback losses under the Job Creation and
Workers Assistance Act of 2002, resulting in an additional refund of
approximately $26.4 million which was received in the second quarter of 2002.



|10. |  | 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.



|11. |  | SUBSEQUENT EVENTS
|--- |  | -----------------

Federal Government Assistance

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

12



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2002

Term Loan Payment

In July 2002, AWA made a mandatory repayment of approximately $16.7
million on its $89.9 million term loan. The payment was made as a result of a
decrease in the fair market value of the assets securing the loan following the
terrorist attacks of September 11, 2001. Collateral for the loan consists of
aircraft, spare engines, rotable aircraft parts inventory and a maintenance
facility. AWA and the lenders have also agreed to amend certain provisions in
the loan agreement related to the collateral appraisal procedures.

Letter of Credit Facility

In
July 2002, AWA received approximately $17.6 million that had
been held as cash collateral to secure a $20 million letter of
credit facility. The letter of credit facility was terminated after
having been replaced with new letters of credit prior to
June 30, 2002. The $17.6 million will reduce the balance of
restricted cash with a corresponding increase in unrestricted cash
and cash equivalents in the third quarter of 2002.

13



---



##### Table of Contents






ITEM 1B. FINANCIAL STATEMENTS  AMERICA WEST AIRLINES, INC.

The unaudited condensed balance sheets of AWA, a wholly-owned subsidiary
of Holdings, as of June 30, 2002 and December 31, 2001, the condensed
statements of operations for the three and six months ended June 30, 2002 and
2001 and the condensed statements of cash flows for the six months ended June
30, 2002 and 2001, together with the related notes, are set forth on the
following pages.

AMERICA WEST AIRLINES, INC.
Condensed Balance Sheets
(In thousands except share data)

|                        |                                                                                 |                            |           |          |         |              |           |           |         | 
|----------------------- | ------------------------------------------------------------------------------- | -------------------------- | --------- | -------- | ------- | ------------ | --------- | --------- | ------- | 
|                        |                                                                                 |                            |           | June 30, |         | December 31,
|                        |                                                                                 |                            |           | 2002     |         | 2001        
|                        |                                                                                 |                            |           |          |         |             
|Assets                  |                                                                                 | (Unaudited)                |           |          |         |             
|Current assets:         |                                                                                 |                            |           |          |         |              |           |          
|                       
|                       
|                       
|                       
|                        | Cash and cash equivalents                                                       |                            | $         | 419,397  |         |              | $         | 148,520   |        
|                       
|                       
|                       
|                       
|                        | Short-term investments                                                          |                            |           | 60,129   |         |              |           |          |        
|                       
|                       
|                       
|                       
|                        | Accounts receivable, net                                                        |                            |           | 114,906  |         |              |           | 103,431   |        
|                       
|                       
|                       
|                       
|                        | Advances to parent and affiliate, net                                           |                            |           |         |         |              |           | 265,361   |        
|                       
|                       
|                       
|                       
|                        | Expendable spare parts and supplies, net                                        |                            |           | 50,455   |         |              |           | 51,833    |        
|                       
|                       
|                       
|                       
|                        | Prepaid expenses                                                                |                            |           | 74,796   |         |              |           | 40,589    |        
|                        |                                                                                 |                            |           |          |         |              |           |          
|                        |                                                                                 | Total current assets       |           |          | 719,683 |              |           |           | 609,734 | 
|                        |                                                                                 |                            |           |          |         |              |           |          
|Property and equipment: |                                                                                 |                            |           |          |         |              |           |          
|                       
|                       
|                       
|                       
|                        | Flight equipment                                                                |                            |           | 976,119  |         |              |           | 1,082,649 |        
|                       
|                       
|                       
|                       
|                        | Other property and equipment                                                    |                            |           | 259,509  |         |              |           | 249,739   |        
|                       
|                       
|                       
|                       
|                        | Equipment purchase deposits                                                     |                            |           | 46,150   |         |              |           | 49,650    |        
|                        |                                                                                 |                            |           |          |         |              |           |          
|                        |                                                                                 |                            | 1,281,778 |          |         |              | 1,382,038 |          
|                       
|                       
|                       
|                       
|                        | Less accumulated depreciation and amortization                                  |                            |           | 613,502  |         |              |           | 559,175   |        
|                        |                                                                                 |                            |           |          |         |              |           |          
|                        |                                                                                 | Net property and equipment |           |          | 668,276 |              |           |           | 822,863 | 
|                        |                                                                                 |                            |           |          |         |              |           |          
|Other assets:           |                                                                                 |                            |           |          |         |              |           |          
|                       
|                       
|                       
|                       
|                        | Restricted cash                                                                 |                            |           | 64,448   |         |              |           | 50,859    |        
|                       
|                       
|                       
|                       
|                        | Advances to parent company, net                                                 |                            |           | 257,771  |         |              |           |          |        
|                       
|                       
|                       
|                       
|                        | Reorganization value in excess of amounts allocable to
identifiable assets, net |                            |           |         |         |              |           | 252,010   |        
|                       
|                       
|                       
|                       
|                        | Other assets, net                                                               |                            |           | 153,862  |         |              |           | 61,768    |        
|                        |                                                                                 |                            |           |          |         |              |           |          
|                        |                                                                                 | Total other assets         |           |          | 476,081 |              |           |           | 364,637 | 
|                        |                                                                                 |                            |           |          |         |              |           |          
|                        |                                                                                 | $                          | 1,864,040 |          |         | $            | 1,797,234 |          
|                        |                                                                                 |                            |           |          |         |              |           |          

See accompanying notes to condensed financial statements.

14



---



##### Table of Contents



AMERICA WEST AIRLINES, INC.
Condensed Balance Sheets
(In thousands except share data)

|                                                    |                                                                               |                            |           |          |         |              |           |         |         | 
|--------------------------------------------------- | ----------------------------------------------------------------------------- | -------------------------- | --------- | -------- | ------- | ------------ | --------- | ------- | ------- | 
|                                                    |                                                                               |                            |           | June 30, |         | December 31,
|                                                    |                                                                               |                            |           | 2002     |         | 2001        
|                                                    |                                                                               |                            |           |          |         |             
|Liabilities and Stockholder's Equity                |                                                                               | (Unaudited)                |           |          |         |             
|Current liabilities:                                |                                                                               |                            |           |          |         |              |           |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Current maturities of long-term debt                                          |                            | $         | 32,612   |         |              | $         | 119,141 |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accounts payable                                                              |                            |           | 168,866  |         |              |           | 243,996 |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Payable to affiliate, net                                                     |                            |           | 15,492   |         |              |           |        |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Air traffic liability                                                         |                            |           | 218,069  |         |              |           | 176,985 |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accrued compensation and vacation benefits                                    |                            |           | 40,800   |         |              |           | 40,912  |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accrued taxes                                                                 |                            |           | 61,480   |         |              |           | 88,382  |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other accrued liabilities                                                     |                            |           | 34,288   |         |              |           | 29,397  |        
|                                                    |                                                                               |                            |           |          |         |              |           |        
|                                                    |                                                                               | Total current liabilities  |           |          | 571,607 |              |           |         | 698,813 | 
|                                                    |                                                                               |                            |           |          |         |              |           |        
|Long-term debt, less current maturities             |                                                                               |                            | 720,198   |          |         |              | 222,955   |        
|                                                   
|                                                   
|                                                   
|                                                   
|Deferred credits and other liabilities              |                                                                               |                            | 144,002   |          |         |              | 131,965   |        
|                                                   
|                                                   
|                                                   
|                                                   
|Deferred tax liability, net                         |                                                                               |                            | 7,179     |          |         |              | 8,569     |        
|                                                   
|                                                   
|                                                   
|                                                   
|Commitments and contingencies
Stockholders equity: |                                                                               |                            |           |          |         |              |           |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Common Stock $.01 par value. Authorized, issued and
outstanding; 1,000 shares |                            |           |         |         |              |           |        |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Additional paid-in capital                                                    |                            |           | 555,131  |         |              |           | 519,748 |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Retained earnings (deficit)                                                   |                            |           | (133,596 | )       |              |           | 213,794 |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accumulated other comprehensive income (loss)                                 |                            |           | (481     | )       |              |           | 1,390   |        
|                                                    |                                                                               |                            |           |          |         |              |           |        
|                                                    |                                                                               | Total stockholders equity |           |          | 421,054 |              |           |         | 734,932 | 
|                                                    |                                                                               |                            |           |          |         |              |           |        
|                                                    |                                                                               | $                          | 1,864,040 |          |         | $            | 1,797,234 |        
|                                                    |                                                                               |                            |           |          |         |              |           |        

See accompanying notes to condensed financial statements.

15



---



##### Table of Contents



AMERICA WEST AIRLINES, INC.
Condensed Statements of Operations
(In thousands)
(Unaudited)

|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |           |           |  
|-------------------------------------------------------------------------------------- | ------------------------------------------- | -------------------------------- | ------- | ------------------ | ------- | ---------------- | ------- | ------- | ------- | ---- | -------- | ------- | --------- | - | ------- | --------- | --------- | -
|                                                                                       |                                             |                                  |         | Three Months Ended |         | Six Months Ended
|                                                                                       |                                             |                                  |         | June 30,           |         | June 30,        
|                                                                                       |                                             |                                  |         |                    |         |                 
|                                                                                       |                                             |                                  |         | 2002               |         | 2001             |         | 2002    |         | 2001
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |     
|Operating revenues:                                                                    |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Passenger                                   |                                  | $       | 507,309            |         |                  | $       | 547,428 |         |      | $        | 944,284 |           |   | $       | 1,100,194 |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Cargo                                       |                                  |         | 7,255              |         |                  |         | 9,762   |         |      |          | 14,575  |           |   |         | 19,760    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Other                                       |                                  |         | 18,580             |         |                  |         | 16,719  |         |      |          | 27,884  |           |   |         | 30,962    |          
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                       |                                             | Total operating revenues         |         |                    | 533,144 |                  |         |         | 573,909 |      |          |         | 986,743   |   |         |           | 1,150,916 |  
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Operating expenses:                                                                    |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Salaries and related costs                  |                                  |         | 145,604            |         |                  |         | 146,832 |         |      |          | 287,683 |           |   |         | 295,312   |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Aircraft rents                              |                                  |         | 70,618             |         |                  |         | 89,002  |         |      |          | 143,509 |           |   |         | 176,880   |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Other rents and landing fees                |                                  |         | 38,382             |         |                  |         | 34,816  |         |      |          | 79,812  |           |   |         | 70,189    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Aircraft fuel                               |                                  |         | 73,448             |         |                  |         | 91,465  |         |      |          | 131,536 |           |   |         | 192,899   |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Agency commissions                          |                                  |         | 10,508             |         |                  |         | 22,251  |         |      |          | 24,757  |           |   |         | 45,556    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Aircraft maintenance materials and repairs  |                                  |         | 63,537             |         |                  |         | 65,304  |         |      |          | 128,795 |           |   |         | 130,468   |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Depreciation and amortization               |                                  |         | 17,727             |         |                  |         | 15,553  |         |      |          | 34,385  |           |   |         | 30,071    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Amortization of excess reorganization value |                                  |         |                   |         |                  |         | 4,974   |         |      |          |        |           |   |         | 9,948     |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Special charges                             |                                  |         |                   |         |                  |         | 35,695  |         |      |          | 60,255  |           |   |         | 35,695    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Other                                       |                                  |         | 114,375            |         |                  |         | 123,824 |         |      |          | 218,619 |           |   |         | 244,997   |          
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                       |                                             | Total operating expenses         |         |                    | 534,199 |                  |         |         | 629,716 |      |          |         | 1,109,351 |   |         |           | 1,232,015 |  
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Operating loss                                                                         |                                             |                                  | (1,055  | )                  |         |                  | (55,807 | )       |         |      | (122,608 | )       |           |   | (81,099 | )        
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Nonoperating income (expenses):                                                        |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Interest income                             |                                  |         | 4,891              |         |                  |         | 6,340   |         |      |          | 9,389   |           |   |         | 11,541    |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Interest expense, net                       |                                  |         | (21,728            | )       |                  |         | (6,791  | )       |      |          | (40,625 | )         |   |         | (14,157   | )        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Federal government assistance               |                                  |         | 2,264              |         |                  |         |        |         |      |          | 2,264   |           |   |         |          |          
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Other, net                                  |                                  |         | 166                |         |                  |         | 324     |         |      |          | (2,292  | )         |   |         | 763       |          
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|                                                                                       |                                             | Total nonoperating expenses, net |         |                    | (14,407 | )                |         |         | (127    | )    |          |         | (31,264   | ) |         |           | (1,853    | )
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Loss before income tax benefit and cumulative
effect
of change in accounting principle |                                             |                                  | (15,462 | )                  |         |                  | (55,934 | )       |         |      | (153,872 | )       |           |   | (82,952 | )        
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Income tax benefit                                                                     |                                             |                                  | (5,414  | )                  |         |                  | (12,636 | )       |         |      | (58,492  | )       |           |   | (26,600 | )        
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Loss before cumulative effect of change in
accounting principle                        |                                             |                                  | (10,048 | )                  |         |                  | (43,298 | )       |         |      | (95,380  | )       |           |   | (56,352 | )        
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Cumulative effect of change in accounting principle                                    |                                             |                                  |        |                    |         |                  |        |         |         |      | (252,010 | )       |           |   |        |          
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          
|Net loss                                                                               |                                             | $                                | (10,048 | )                  |         | $                | (43,298 | )       |         | $    | (347,390 | )       |           | $ | (56,352 | )        
|                                                                                       |                                             |                                  |         |                    |         |                  |         |         |         |      |          |         |           |   |         |          

See accompanying notes to condensed financial statements.

16



---



##### Table of Contents



AMERICA WEST AIRLINES, INC.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)

|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |          |        |          |  
|------------------------------------------------------------------- | ------------------------------------------------------------ | ----------------------------------------- | --------------------------------------------------- | -------- | ---------------- | ------ | ------- | -------- | ------ | -------- | -
|                                                                    |                                                              |                                           |                                                     |          | Six Months Ended
|                                                                    |                                                              |                                           |                                                     |          | June 30,        
|                                                                    |                                                              |                                           |                                                     |          |                 
|                                                                    |                                                              |                                           |                                                     |          | 2002             |        | 2001   
|                                                                    |                                                              |                                           |                                                     |          |                  |        |        
|Net cash provided by operating activities                           |                                                              | $                                         | 1,774                                               |          |                  | $      | 93,075  |         
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|Cash flows from investing activities:                               |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Purchases of property and equipment                          |                                           |                                                     | (78,708  | )                |        |         | (222,560 | )     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Sales (purchases) of short-term investments                  |                                           |                                                     | (60,129  | )                |        |         | 22,822   |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Proceeds from sale and leaseback of aircraft                 |                                           |                                                     | 175,478  |                  |        |         | 64,000   |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Equipment purchase deposits and other                        |                                           |                                                     | 62       |                  |        |         | 5,907    |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                    |                                                              |                                           | Net cash provided by (used in) investing activities |          |                  | 36,703 |         |          |        | (129,831 | )
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|Cash flows from financing activities:                               |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Repayment of debt                                            |                                           |                                                     | (165,999 | )                |        |         | (120,829 | )     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Proceeds from issuance of debt                               |                                           |                                                     | 435,386  |                  |        |         | 152,422  |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Payments of debt issue costs                                 |                                           |                                                     | (36,987  | )                |        |         |         |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                    |                                                              | Net cash provided by financing activities |                                                     |          | 232,400          |        |         |          | 31,593 |         
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|Net increase (decrease) in cash and cash equivalents                |                                                              |                                           | 270,877                                             |          |                  |        | (5,163  | )       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|Cash and cash equivalents at beginning of period                    |                                                              |                                           | 148,520                                             |          |                  |        | 139,150 |         
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|Cash and cash equivalents at end of period                          |                                                              | $                                         | 419,397                                             |          |                  | $      | 133,987 |         
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|Cash, cash equivalents, and short-term investments at end of period |                                                              | $                                         | 479,526                                             |          |                  | $      | 161,851 |         
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|Cash paid (refunded) for:                                           |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Interest, net of amounts capitalized                         |                                           | $                                                   | 12,879   |                  |        | $       | 6,310    |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                    | Income taxes paid (refunded)                                 |                                           | $                                                   | (63,316  | )                |        | $       | 22       |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|Non-cash investing and financing activities:                        |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Reclassification of advances to parent company, net          |                                           | $                                                   | 257,771  |                  |        | $       |         |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                    | Issuance of convertible notes, net of cancellations          |                                           | $                                                   | 60,186   |                  |        | $       |         |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                    | Issuance of warrants                                         |                                           | $                                                   | 35,383   |                  |        | $       |         |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                    | Equipment acquired through capital lease                     |                                           | $                                                   | 16,878   |                  |        | $       |         |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                    | Equipment acquired with issuance of notes payable            |                                           | $                                                   | 64,163   |                  |        | $       |         |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                    | Notes payable canceled under the aircraft purchase agreement |                                           | $                                                   | (10,500  | )                |        | $       | (17,500  | )     
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                    | Notes payable issued for equipment purchase deposits         |                                           | $                                                   | 7,000    |                  |        | $       | 10,500   |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         
|                                                                    | Payment in kind notes issued, net of returns                 |                                           | $                                                   | 3,426    |                  |        | $       |         |       
|                                                                    |                                                              |                                           |                                                     |          |                  |        |         |         

See accompanying notes to condensed financial statements.

17



---



##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
June 30, 2002



|1. |  | BASIS OF PRESENTATION
|-- |  | ---------------------

The unaudited condensed 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 financial statements reflect all adjustments, which
are of a normal recurring nature, necessary for a fair presentation. Certain
prior year amounts have been reclassified to conform with current year
presentation. The accompanying condensed financial statements should be read
in conjunction with the financial statements and related notes thereto included
in the Companys Annual Report on Form 10-K for the year ended December 31,
2001.



|2. |  | REGISTRATION OF SECURITIES
|-- |  | --------------------------

On January 18, 2002, AWA closed a $429 million loan supported by a $380
million government loan guarantee. This loan triggered concessions and
additional financing (primarily aircraft rent reductions and future financing
commitments), resulting in a restructuring of AWAs indebtedness and lease
commitments. As compensation for various elements of the restructuring plan,
Holdings issued a warrant to purchase up to 18,754,000 shares of class B common
stock to the Air Transportation Stabilization Board, or ATSB, and additional
warrants to purchase up to 3,783,000 shares of class B common stock to other
loan participants, in each case at an exercise price of $3 per share and with a
term of 10 years. In addition, as compensation for aircraft rent reductions
and other lessor concessions, Holdings issued $104,464,560 aggregate principal
amount of 7.5% convertible senior notes due 2009, which are guaranteed by AWA,
to certain of AWAs aircraft lessors.

In connection with the restructuring, Holdings and AWA granted to the
recipients of the notes and warrants certain registration rights. In May 2002,
Holdings and AWA filed a registration statement with the Securities and
Exchange Commission to satisfy their obligations to the recipients of the notes
and warrants. The registration statement covers:



| |  |  | The resale by the noteholders of $129,082,514 of 7.5% convertible
notes (including $24,617,954 of interest payable on the first interest
payment dates, which are expected to be paid in the form of a deemed
loan added to the principal amount of the notes);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The resale by the noteholders of up to 10,756,876 shares of class B
common stock issuable upon conversion of the notes;                                                                                                                                        
|
| |  |  | The resale by the ATSB of the ATSB warrant;                                                                                                                                                                                                                    
|
| |  |  | The resale by the ATSB of up to 18,754,000 shares of class B common
stock issuable upon its exercise of the ATSB warrant;                                                                                                                                      
|
| |  |  | The issuance by the Company of shares of class B common stock upon
the exercise of the ATSB warrant by holders other than the ATSB; and                                                                                                                        
|
| |  |  | The resale by the holders of the other warrants of up to 3,783,000
shares of class B common stock issuable upon exercise of the other
warrants.                                                                                                                



|3. |  | FLIGHT EQUIPMENT
|-- |  | ----------------

In the second quarter of 2002, AWA borrowed $64.2 million from the America
West Airlines 2001-1 Pass Through Trusts to mortgage finance the acquisition of
two new A320 Airbus aircraft. In the fourth quarter of 2001, AWA borrowed
$97.0 million from the America West Airlines 2001-1 Pass Through Trusts to
mortgage finance the acquisition of one new A319 and two new A320 Airbus
aircraft. As part of the restructuring completed on January 18, 2002, AWA
committed to the sale and leaseback of eight aircraft, including the three
aircraft acquired in the
18Table of Contents

AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
June 30, 2002

fourth quarter of 2001 and the two aircraft acquired
in the second quarter of 2002. The sale and leaseback of these five aircraft
was completed in June 2002 and resulted in pretax losses of approximately $2.3
million. The losses on the sale-leaseback transactions, which were subject to a firm commitment in January
2002, were accrued in the accompanying condensed statements of operations
classified in Special Chargesin the first quarter of 2002. See Note 6,
Special Charges.

In June 2002, AWA restructured the leases for six of its Boeing 757-200
aircraft to improve lease rental rates and other terms. Prior to the
restructuring, AWA subleased the six aircraft from The Boeing Company
(Boeing), who in turn leased the aircraft from five different head lessors.
Under the restructuring, AWA terminated the subleases with Boeing and assumed,
amended and restated the existing head leases for each aircraft. Upon closing
of the transactions, AWA paid approximately $11.8 million in security deposits
and advance rental payments to the head lessors, net of a refund from Boeing
for prorated prepaid rent under the subleases, prorated accrued rent under the
head leases and cash deposits for the estimated cost of certain maintenance
work required to be performed on the aircraft prior to their return to Boeing.
As a result of these transactions, Boeing also relinquished its interest in
approximately $11.2 million face value of 7.5% convertible notes it received as
compensation for certain concessions granted under the restructuring completed
on January 18, 2002. Furthermore, AWA issued a $4.9 million note payable to
Boeing for the value of the concessions realized with respect to these six
aircraft prior to the termination of the subleases. The restructured leases
have a remaining term of approximately six years and are being accounted for as
operating leases.

In June 2002, one aircraft lessor exercised its put right under its
aircraft lease agreement to extend the lease for one Boeing 737-300 aircraft
for an additional 13 months. Upon exercising the put option, the lessor agreed
to relinquish its interest in approximately $0.7 million face value of 7.5%
convertible senior notes it received as compensation for certain concessions
granted under the restructuring completed on January 18, 2002.



|4. |  | ADVANCES TO PARENT COMPANY AND AFFILIATE
|-- |  | ----------------------------------------

As of June 30, 2002, AWA had net advances to Holdings of $257.8 million,
which were classified in Other Assetson AWAs condensed balance sheet due to
certain restrictions related to the timing of repayment under the $429 million
government guaranteed loan and the $89.9 million term loan. In addition, AWA
had a net payable of $15.5 million due principally to TLC, a wholly owned
subsidiary of Holdings. This payable, which is primarily related to credit
card receipts collected by AWA for vacation packages sold by TLC, was
classified in AWAs condensed balance sheet as a current liability.



|5. |  | COMPREHENSIVE LOSS
|-- |  | ------------------

Comprehensive loss includes changes in the fair value of derivative
financial instruments that qualify for hedge accounting. For the three months
ended June 30, 2002 and 2001, AWA recorded a total comprehensive loss of $10.5
million and $41.2 million, respectively. For the six months ended June 30,
2002 and 2001, AWA recorded a total comprehensive loss of $349.3 million and
$56.0 million, respectively. The difference between net loss and comprehensive
loss for the three and six months ended June 30, 2002 and 2001 is detailed in
the following table:

|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |               |   |          |        |   |   |         |        |  
|------------------ | -------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | ---- | ---------------- | - | ------------- | ----- | ------------- | - | -------- | ------ | - | - | ------- | ------ | -
|                   |                                                                                                                                  |   | Three Months Ended |      | Six Months Ended
|                   |                                                                                                                                  |   |                    |      |                 
|                   |                                                                                                                                  |   | June 30, 2002      |      | June 30, 2001    |   | June 30, 2002 |       | June 30, 2001
|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |              
|                   |                                                                                                                                  |   | (In thousands)     |      | (In thousands)  
|                   |                                                                                                                                  |   |                    |      |                 
|Net loss           |                                                                                                                                  | $ | (10,048            | )    |                  | $ | (43,298       | )     |               | $ | (347,390 | )      |   | $ | (56,352 | )     
|                  
|                  
|                  
|                  
|                   | Unrealized gains (losses) on derivative
instruments, net of deferred taxes                                                       |   |                    | (481 | )                |   |               | 2,014 |               |   |          | (481   | ) |   |         | 1,956  |  
|                  
|                  
|                  
|                  
|                   | Reclassification adjustment to net loss of
previously reported unrealized gains (losses)
on derivative instruments, net of taxes |   |                    |     |                  |   |               | 40    |               |   |          | (1,390 | ) |   |         | (1,622 | )
|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |               |   |          |        |   |   |         |       
|                   | Total other comprehensive income (loss)                                                                                          |   |                    | (481 | )                |   |               | 2,054 |               |   |          | (1,871 | ) |   |         | 334    |  
|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |               |   |          |        |   |   |         |       
|Comprehensive loss |                                                                                                                                  | $ | (10,529            | )    |                  | $ | (41,244       | )     |               | $ | (349,260 | )      |   | $ | (56,018 | )     
|                   |                                                                                                                                  |   |                    |      |                  |   |               |       |               |   |          |        |   |   |         |       

19



---



##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
June 30, 2002



|6. |  | SPECIAL CHARGES
|-- |  | ---------------

In the first quarter of 2002, AWA recorded a pretax special charge of
$60.3 million, primarily related to the restructuring completed on January 18,
2002, resulting from the events of September 11, 2001. Components of the
special charge are as follows:

|                                                                    |       |   |                 |        | 
|------------------------------------------------------------------- | ----- | - | --------------- | ------ | 
|                                                                    |       |   | Special Charges
|                                                                    |       |   |                
|                                                                    |       |   | (In thousands) 
|Impairment of owned aircraft and engines (based on appraised value) |       | $ | 39,225          |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Fleet restructuring costs                                           |       |   | 9,915           |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Losses on sale-leaseback transactions                               |       |   | 6,328           |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Professional fees                                                   |       |   | 4,745           |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Write-off of computer system and security equipment                 |       |   | 3,411           |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Severance                                                           |       |   | 631             |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Revision of estimate for second quarter 2001 special charge         |       |   | (4,000          | )     
|                                                                    |       |   |                 |       
|                                                                    | Total |   | $               | 60,255 | 
|                                                                    |       |   |                 |       

Of this amount, approximately $10.0 million, principally related to losses
on sale-leaseback transactions, fleet restructuring costs, professional fees
and severance was accrued.

In April 2001, Holdings implemented a cost reduction plan to respond to a
softening economy. The plan included a slowing of the airlines growth through
the return of seven older 737-300 leased aircraft to the lessors in the second
half of 2001 and January 2002 and significant reductions in overhead due in
part to select reductions-in-force of management, administrative and clerical
personnel. The Company recorded a pretax charge of $35.7 million in the second
quarter of 2001 related to the earlier-than-planned aircraft returns and
reductions-in-force.

The following table presents the payments and other settlements made
during the second quarter of 2002 and the remaining special charge accruals as
of June 30, 2002.

|                          |  |                |        |                     |  |                   |        |          |  |       |     |  |  |            |      |   |  |   |        |  
|------------------------- |  | -------------- | ------ | ------------------- |  | ----------------- | ------ | -------- |  | ----- | --- |  |  | ---------- | ---- | - |  | - | ------ | -
|                          |  |                |        |                     |  |                   |        |          |  |       |     |  |  | Reduction- |      |   |  |  
|                          |  | Sale-Leaseback |        | Fleet Restructuring |  | Professional Fees |        | in-force |  | Total
|                          |  |                |        |                     |  |                   |        |          |  |      
|Balance at March 31, 2002 |  | $              | 6,328  |                     |  | $                 | 3,719  |          |  | $     | 500 |  |  | $          | 408  |   |  | $ | 10,955 |  
|                         
|                         
|                         
|                         
|Payments                  |  |                |       |                     |  |                   | (1,758 | )        |  |       |    |  |  |            | (388 | ) |  |   | (2,146 | )
|                         
|                         
|                         
|                         
|Loss on sale-leasebacks   |  |                | (2,319 | )                   |  |                   |       |          |  |       |    |  |  |            |     |   |  |   | (2,319 | )
|                          |  |                |        |                     |  |                   |        |          |  |       |     |  |  |            |      |   |  |   |        |  
|Balance at June 30, 2002  |  | $              | 4,009  |                     |  | $                 | 1,961  |          |  | $     | 500 |  |  | $          | 20   |   |  | $ | 6,490  |  
|                          |  |                |        |                     |  |                   |        |          |  |       |     |  |  |            |      |   |  |   |        |  

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



|7. |  | CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
|-- |  | -----------------------------------------------------

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets.SFAS No. 142 primarily addresses the accounting for goodwill and
intangible assets subsequent to their acquisition. SFAS No. 142 does not
permit the amortization of goodwill as required by APB Opinion No. 17,
Intangible Assets.Rather, goodwill will be subject to a periodic impairment
test, using a two-step process. The first step is to identify a potential
impairment. The second step of the goodwill impairment test measures the
amount of the impairment loss, using a fair value-based approach. Under SFAS
No. 142, ERV shall be reported as goodwill and accounted for in the same manner
as goodwill. SFAS No. 142 is effective for fiscal years beginning after
December 15, 2001. Upon adoption of this statement on January 1, 2002, AWA
recorded an impairment loss of $252.0 million, which was determined by an
independent valuation of the Company. The impairment loss was recorded as the
cumulative effect of a change in accounting principle.

20



---



##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
June 30, 2002

The following table presents reported net loss exclusive of ERV
amortization expense for the three and six months ended June 30, 2002 and 2001.

|                                 |  |                             |         |                           |  |      |         |      |  |   |          |   |  |   |         |  
|-------------------------------- |  | --------------------------- | ------- | ------------------------- |  | ---- | ------- | ---- |  | - | -------- | - |  | - | ------- | -
|                                 |  | Three Months Ended June 30, |         | Six Months Ended June 30,
|                                 |  |                             |         |                          
|                                 |  | 2002                        |         | 2001                      |  | 2002 |         | 2001
|                                 |  |                             |         |                           |  |      |         |     
|                                 |  | (In thousands)             
|Reported net loss                |  | $                           | (10,048 | )                         |  | $    | (43,298 | )    |  | $ | (347,390 | ) |  | $ | (56,352 | )
|                                
|                                
|                                
|                                
|ERV amortization, net of tax (1) |  |                             |        |                           |  |      | 4,974   |      |  |   |         |   |  |   | 9,948   |  
|                                 |  |                             |         |                           |  |      |         |      |  |   |          |   |  |   |         |  
|Adjusted net loss                |  | $                           | (10,048 | )                         |  | $    | (38,324 | )    |  | $ | (347,390 | ) |  | $ | (46,404 | )
|                                 |  |                             |         |                           |  |      |         |      |  |   |          |   |  |   |         |  



---

|(1) |  | Amortization of ERV is not a tax-deductible expense.
|--- |  | ----------------------------------------------------

The following table presents reported net income (loss) exclusive of ERV
amortization expense for the years ended December 31, 2001, 2000, 1999, 1998
and 1997.

|                                 |  |                                 |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 
|-------------------------------- |  | ------------------------------- | -------- | ---- |  | ---- | ------ | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------ | 
|                                 |  | For the Year Ended December 31,
|                                 |  |                                
|                                 |  | 2001                            |          | 2000 |  | 1999 |        | 1998 |  | 1997
|                                 |  |                                 |          |      |  |      |        |      |  |     
|                                 |  | (In thousands)                 
|Reported net income (loss)       |  | $                               | (148,398 | )    |  | $    | (529   | )    |  | $    | 116,622 |  |  | $ | 103,016 |  |  | $ | 75,330 | 
|                                
|                                
|                                
|                                
|ERV amortization, net of tax (1) |  |                                 | 19,896   |      |  |      | 19,896 |      |  |      | 19,896  |  |  |   | 19,896  |  |  |   | 23,776 | 
|                                 |  |                                 |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 
|Adjusted net income (loss)       |  | $                               | (128,502 | )    |  | $    | 19,367 |      |  | $    | 136,518 |  |  | $ | 122,912 |  |  | $ | 99,106 | 
|                                 |  |                                 |          |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |        | 



---

|(1) |  | Amortization of ERV is not a tax-deductible expense.
|--- |  | ----------------------------------------------------



|8. |  | 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.



|9. |  | SUBSEQUENT EVENTS
|-- |  | -----------------

Federal Government Assistance

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

Term Loan Payment

In July 2002, AWA made a mandatory repayment of approximately $16.7
million on its $89.9 million term loan. The payment was made as a result of a
decrease in the fair market value of the assets securing the loan following the
terrorist attacks of September 11, 2001. Collateral for the loan consists of
aircraft, spare engines, rotable aircraft parts inventory and a maintenance
facility. AWA and the lenders have also agreed to amend certain provisions in
the loan agreement related to the collateral appraisal procedures.

21



---



##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
June 30, 2002

Letter of Credit Facility

In July 2002, AWA received approximately $17.6 million that had been held
as cash collateral to secure a $20 million letter of credit facility. The
letter of credit facility was terminated after having been replaced with new
letters of credit prior to June 30, 2002. The $17.6 million will reduce the
balance of restricted cash with a corresponding increase in unrestricted cash
and cash equivalents in the third quarter of 2002.

22



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Holdings is the parent company of AWA and TLC. AWA is the eighth largest
commercial airline carrier in the United States operating through its principal
hubs located in Phoenix, Arizona and Las Vegas, Nevada, and a mini-hub located
in Columbus, Ohio. As of June 30, 2002, AWA served 58 destinations in North
America, including seven destinations in Mexico and two in Canada. TLC
arranges and sells vacation packages primarily to Las Vegas that may include
airfare, hotel accommodations and ground transportation. Holdings primary
business activity is ownership of all the capital stock of AWA and TLC.

Overview

During the second quarter of 2002, the airline industry and AWA continued
to feel the negative effects of the September 11, 2001 terrorist attacks and
the soft economic conditions. Passenger revenues have been adversely affected
by a decline in high-yield business traffic and a general decline in the demand
for air travel after the terrorist attacks. The airline industry also
incurred, and continues to face, an increase in costs resulting from enhanced
security measures and aviation-related insurance.

During the first quarter of 2002, we improved our liquidity as a result of
the closing of a $429 million loan supported by a $380 million government
guarantee in January 2002. In addition, we eliminated base commissions for
travel agency tickets issued in the United States effective March 21, 2002 and
we introduced a new pricing structure offering lower and more flexible fares on
March 24, 2002. The new pricing structure has succeeded in increasing America
Wests share in key business markets. Immediately following the introduction
of the new fare structure, higher-cost competitors placed extremely low prices
in non-stop America West markets and Continental Airlines cancelled its long
standing code share and frequent flyer agreements with America West. Despite
these actions, America Wests year-over-year domestic unit revenue performance
was better than that for the industry in April and May.

We believe near-term revenues will continue to be negatively impacted by
the soft economic conditions and decline in business traffic. In addition, we
expect AWAs revenues and costs to be negatively impacted by the threat of
future terrorist attacks in the near and long-term, as well as the real and
perceived hassle factor associated with increased security at airports.

Airline Operations Update

A key element of AWAs strategy to improve unit revenues remains the
customer service initiatives launched in July 2000, which were designed to
improve operational reliability and restore customer confidence by reducing the
number of flight cancellations and improving on-time performance. In the
second quarter of 2002, AWA continued to make improvements in a number of key
service areas based on the most recent statistics published by the Department
of Transportation, or DOT:



| |  |  | On-time performance improved to 84.9% in April 2002 from 73.5% in
April 2001 and 87.7% in May 2002 from 77.0% in May 2001.           
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The percentage of flights cancelled dropped to 0.7% in April 2002 from 2.0% in April 2001 and 0.4% in
May 2002 from 2.0% in May 2001.
|
| |  |  | AWA posted year-over-year improvements in mishandled baggage of 20%
in April 2002 and 10% in May 2002.                               
|
| |  |  | Customer complaints to the DOT declined by 57% in April 2002 and 47%
in May 2002 compared to the comparable periods in 2001.         

23



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

Through the first five months of 2002, AWA was the industry leader in
on-time performance. AWA also ranked among the top five in the industry in
terms of the lowest percentage of cancelled flights and fewest mishandled
baggage during the period.

Summary of Holdings Financial Results

Holdings recorded a consolidated net loss of $8.5 million in the second
quarter of 2002, a diluted loss per share of $0.25. This compares to a
consolidated net loss of $42.5 million, or $1.26 per diluted share, in the
second quarter of 2001. The decline in net loss during the period was due
primarily to lower aircraft rental rates negotiated with AWAs aircraft lessors
as part of the government guaranteed loan transaction, aircraft fuel expense
due to a 16.6% reduction in AWAs fuel price per gallon in the second quarter
of 2002 compared to the second quarter of 2001, and agency commissions expense
as a result of the elimination of base commission for travel agency tickets
issued in the United States, effective March 21, 2002. The 2002 results include
a nonoperating pretax gain of $2.3 million ($1.4 million after tax) related to
the federal government assistance received under the Air Transportation Safety
and System Stabilization Act. See Note 11, Subsequent Events  Federal
Government Assistancein Notes to Condensed Consolidated Financial Statements.
The 2001 results include a pretax special charge of $35.7 million ($22.2
million after tax) resulting from the Companys cost reduction initiatives.
See Note 6, Special Chargesin Notes to Condensed Consolidated Financial
Statements. The Company recorded a consolidated income tax benefit for
financial reporting purposes of $4.4 million for the 2002 second quarter on a
loss before income tax benefit of $12.9 million. This compares to an income
tax benefit of $11.4 million in the second quarter of 2001 on a pretax loss of
$53.9 million.

Holdings recorded a consolidated loss before the cumulative effect of a
change in accounting principle of $94.5 million for the six months ended June
30, 2002, a diluted loss per share of $2.80. This compares to a consolidated
net loss of $55.3 million, or $1.64 per diluted share, for the six month period
in 2001. Including the cumulative effect of a change in accounting principle
related to the Companys adoption of SFAS No. 142, Goodwill and Other
Intangible Assetson January 1, 2002, Holdings net loss for the six months
ended June 30, 2002 was $366.8 million, or $10.87 per diluted share. See Note
8, Cumulative Effect of a Change in Accounting Principlein Notes to
Condensed Consolidated Financial Statements. The decline in earnings during
the period was due primarily to depressed passenger traffic and revenues
following the terrorist attacks on September 11, 2001 and a reduction in
business travel driven by the continuing soft economic conditions. The
decrease in revenues was offset in part by lower aircraft rent, fuel and agency
commissions expenses. The 2002 results include pretax special charges of $60.3
million ($36.8 million after tax) primarily related to the restructuring
completed on January 18, 2002, including the reduction in value of owned
aircraft, losses on sales of assets, fleet restructuring costs and professional
fees. See Note 6, Special Chargesin Notes to Condensed Consolidated
Financial Statements. The Company also recognized a nonoperating pretax charge
of $2.8 million ($1.7 million after tax) related to the write-off of the
Companys investment in an e-commerce entity and a nonoperating pretax gain of
$2.3 million ($1.4 million after tax) related to the federal government
assistance discussed above. The 2001 results included an $11.0 million pretax
gain ($6.8 million after tax) resulting from the settlement in March 2001 of a
lawsuit related to an air-to-ground telecommunication system that was
previously written off and the pretax special charges of $35.7 million ($22.2
million after tax) discussed above. The Company recorded a consolidated income
tax benefit for financial reporting purposes of $57.9 million for the first six
months of 2002 on a loss before income tax benefit and cumulative effect of a
change in accounting principle of $152.4 million. This compares to an income
tax benefit of $25.5 million in the comparable 2001 period on a pretax loss of
$80.8 million.

24



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

RESULTS OF OPERATIONS

The following discussion provides an analysis of AWAs results of
operations for the three and six months ended June 30, 2002 and material
changes compared to the three and six months ended June 30, 2001.

The table below sets forth selected operating data for AWA.

|                                                 |                   |  |                    |      |         |  |                  |      |         |  |       |      |           |  |         |      |  |  |         |      |  |  |       |      |  
|------------------------------------------------ | ----------------- |  | ------------------ | ---- | ------- |  | ---------------- | ---- | ------- |  | ----- | ---- | --------- |  | ------- | ---- |  |  | ------- | ---- |  |  | ----- | ---- | -
|                                                 |                   |  | Three Months Ended |      | Percent |  | Six Months Ended |      | Percent
|                                                 |                   |  | June 30,           |      | Change  |  | June 30,         |      | Change 
|                                                 |                   |  | 2002               |      | 2001    |  | 2002-2001        |      | 2002    |  | 2001  |      | 2002-2001
|                                                 |                   |  |                    |      |         |  |                  |      |         |  |       |      |          
|Aircraft (end of period)                         |                   |  | 144                |      |         |  | 142              |      |         |  | 1.4   |      |           |  | 144     |      |  |  | 142     |      |  |  | 1.4   |     
|                                                
|                                                
|                                                
|                                                
|Average daily aircraft utilization (hours)       |                   |  | 9.8                |      |         |  | 10.2             |      |         |  | (3.9  | )    |           |  | 9.3     |      |  |  | 10.5    |      |  |  | (11.4 | )   
|                                                
|                                                
|                                                
|                                                
|Available seat miles (in millions)               |                   |  | 6,850              |      |         |  | 6,896            |      |         |  | (0.7  | )    |           |  | 12,928  |      |  |  | 13,952  |      |  |  | (7.3  | )   
|                                                
|                                                
|                                                
|                                                
|Block hours                                      |                   |  | 127,628            |      |         |  | 132,576          |      |         |  | (3.7  | )    |           |  | 241,577 |      |  |  | 269,256 |      |  |  | (10.3 | )   
|                                                
|                                                
|                                                
|                                                
|Average stage length (miles)                     |                   |  | 947                |      |         |  | 895              |      |         |  | 5.8   |      |           |  | 935     |      |  |  | 890     |      |  |  | 5.1   |     
|                                                
|                                                
|                                                
|                                                
|Average passenger journey (miles)                |                   |  | 1,446              |      |         |  | 1,307            |      |         |  | 10.6  |      |           |  | 1,405   |      |  |  | 1,281   |      |  |  | 9.7   |     
|                                                
|                                                
|                                                
|                                                
|Revenue passenger miles (in millions)            |                   |  | 5,189              |      |         |  | 5,205            |      |         |  | (0.3  | )    |           |  | 9,451   |      |  |  | 10,087  |      |  |  | (6.3  | )   
|                                                
|                                                
|                                                
|                                                
|Load factor (percent)                            |                   |  | 75.8               |      |         |  | 75.5             |      |         |  | 0.3   | pts  |           |  | 73.1    |      |  |  | 72.3    |      |  |  | 0.8   | pts 
|                                                
|                                                
|                                                
|                                                
|Passenger enplanements (in thousands)            |                   |  | 5,080              |      |         |  | 5,294            |      |         |  | (4.0  | )    |           |  | 9,383   |      |  |  | 10,398  |      |  |  | (9.8  | )   
|                                                
|                                                
|                                                
|                                                
|Yield per revenue passenger mile (cents)         |                   |  | 9.78               |      |         |  | 10.52            |      |         |  | (7.0  | )    |           |  | 9.99    |      |  |  | 10.91   |      |  |  | (8.4  | )   
|                                                
|                                                
|                                                
|                                                
|Revenue per available seat mile:                 |                   |  |                    |      |         |  |                  |      |         |  |       |      |           |  |         |      |  |  |         |      |  |  |       |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Passenger (cents) |  |                    | 7.41 |         |  |                  | 7.94 |         |  |       | (6.7 | )         |  |         | 7.30 |  |  |         | 7.89 |  |  |       | (7.5 | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Total (cents)     |  |                    | 7.78 |         |  |                  | 8.32 |         |  |       | (6.5 | )         |  |         | 7.63 |  |  |         | 8.25 |  |  |       | (7.5 | )
|                                                
|                                                
|                                                
|                                                
|Fuel consumption (gallons in millions)           |                   |  | 104.2              |      |         |  | 108.2            |      |         |  | (3.7  | )    |           |  | 196.1   |      |  |  | 218.1   |      |  |  | (10.1 | )   
|                                                
|                                                
|                                                
|                                                
|Average fuel price (cents per gallon)            |                   |  | 70.5               |      |         |  | 84.5             |      |         |  | (16.6 | )    |           |  | 67.1    |      |  |  | 88.5    |      |  |  | (24.2 | )   
|                                                
|                                                
|                                                
|                                                
|Average number of full-time equivalent
employees |                   |  | 11,973             |      |         |  | 12,848           |      |         |  | (6.8  | )    |           |  | 11,773  |      |  |  | 12,950  |      |  |  | (9.1  | )   

The table below sets forth the major components of operating cost per
available seat mile (CASM) for AWA.

|                                            |  |                    |      |         |  |                  |      |         |  |      |        |           |  |  |      |  |  |  |      |  |  |  |        |  
|------------------------------------------- |  | ------------------ | ---- | ------- |  | ---------------- | ---- | ------- |  | ---- | ------ | --------- |  |  | ---- |  |  |  | ---- |  |  |  | ------ | -
|                                            |  | Three Months Ended |      | Percent |  | Six Months Ended |      | Percent
|                                            |  | June 30,           |      | Change  |  | June 30,         |      | Change 
|                                            |  | 2002               |      | 2001    |  | 2002-2001        |      | 2002    |  | 2001 |        | 2002-2001
|                                            |  |                    |      |         |  |                  |      |         |  |      |        |          
|(in cents)                                  |  |                    |      |         |  |                  |      |         |  |      |        |           |  |  |      |  |  |  |      |  |  |  |        |  
|                                           
|                                           
|                                           
|                                           
|Salaries and related costs                  |  |                    | 2.13 |         |  |                  | 2.13 |         |  |      |       |           |  |  | 2.22 |  |  |  | 2.12 |  |  |  | 5.1    |  
|                                           
|                                           
|                                           
|                                           
|Aircraft rents                              |  |                    | 1.03 |         |  |                  | 1.29 |         |  |      | (20.1  | )         |  |  | 1.11 |  |  |  | 1.27 |  |  |  | (12.4  | )
|                                           
|                                           
|                                           
|                                           
|Other rents and landing fees                |  |                    | 0.56 |         |  |                  | 0.50 |         |  |      | 11.0   |           |  |  | 0.62 |  |  |  | 0.50 |  |  |  | 22.7   |  
|                                           
|                                           
|                                           
|                                           
|Aircraft fuel                               |  |                    | 1.07 |         |  |                  | 1.33 |         |  |      | (19.2  | )         |  |  | 1.02 |  |  |  | 1.38 |  |  |  | (26.4  | )
|                                           
|                                           
|                                           
|                                           
|Agency commissions                          |  |                    | 0.15 |         |  |                  | 0.32 |         |  |      | (52.5  | )         |  |  | 0.19 |  |  |  | 0.33 |  |  |  | (41.4  | )
|                                           
|                                           
|                                           
|                                           
|Aircraft maintenance materials and
repairs  |  |                    | 0.93 |         |  |                  | 0.95 |         |  |      | (2.1   | )         |  |  | 1.00 |  |  |  | 0.93 |  |  |  | 6.6    |  
|                                           
|                                           
|                                           
|                                           
|Depreciation and amortization               |  |                    | 0.26 |         |  |                  | 0.23 |         |  |      | 14.7   |           |  |  | 0.26 |  |  |  | 0.22 |  |  |  | 23.4   |  
|                                           
|                                           
|                                           
|                                           
|Amortization of excess reorganization
value |  |                    |     |         |  |                  | 0.07 |         |  |      | (100.0 | )         |  |  |     |  |  |  | 0.07 |  |  |  | (100.0 | )
|                                           
|                                           
|                                           
|                                           
|Special charges                             |  |                    |     |         |  |                  | 0.52 |         |  |      | (100.0 | )         |  |  | 0.47 |  |  |  | 0.26 |  |  |  | 82.2   |  
|                                           
|                                           
|                                           
|                                           
|Other                                       |  |                    | 1.67 |         |  |                  | 1.79 |         |  |      | (7.0   | )         |  |  | 1.69 |  |  |  | 1.75 |  |  |  | (3.7   | )
|                                            |  |                    |      |         |  |                  |      |         |  |      |        |           |  |  |      |  |  |  |      |  |  |  |        |  
|                                            |  |                    | 7.80 |         |  |                  | 9.13 |         |  |      | (14.6  | )         |  |  | 8.58 |  |  |  | 8.83 |  |  |  | (2.8   | )
|                                            |  |                    |      |         |  |                  |      |         |  |      |        |           |  |  |      |  |  |  |      |  |  |  |        |  

25



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

Three Months Ended June 30, 2002 and 2001

For the three months ended June 30, 2002, AWA realized an operating loss
of $1.1 million compared to an operating loss of $55.8 million in last years
second quarter. Loss before income tax benefit for the three month period in
2002 was $15.5 million compared to $55.9 million in 2001. Excluding special
charges of $35.7 million, AWAs operating loss and loss before income tax
benefit for the second quarter of 2001 was $20.1 million and $20.2 million,
respectively.

Total operating revenues for the second quarter of 2002 were $533.1
million. Passenger revenues were $507.3 million for the three months ended
June 30, 2002, a decrease of $40.1 million or 7.3% from the 2001 quarter. A
0.3% decrease in revenue passenger miles (RPM) was exceeded by a 0.7%
decrease in capacity as measured by available seat miles (ASM), resulting in
a 0.3 point increase in load factor (the percentage of available seats that are
filled with revenue passengers). The increase in load factor was more than
offset by a 7.0% decrease in revenue per passenger mile (yield) resulting in
a 6.7% decrease in passenger revenue per available seat mile (RASM) to 7.41
cents in 2002 from 7.94 cents in 2001. The decrease in yield was driven by a
significant decline in business travel and the introduction of security fees
paid by passengers. Cargo revenues decreased 25.7% to $7.3 million due to
lower freight and mail volumes following the terrorist attacks. Other revenues
increased 11.1% to $18.6 million for the second quarter of 2002 due primarily
to higher ticket refund and reissue penalty fees for ticketing changes. Net
revenues from AWAs code sharing agreement with Mesa Airlines were relatively
flat quarter-over-quarter.

Excluding the $35.7 million of special charges in the 2001 period,
operating expenses in the second quarter of 2002 decreased $59.8 million or
10.1% as compared to the 2001 second quarter, while ASMs decreased 0.7%. As a
result, CASM decreased 9.4% to 7.80 cents in the second quarter of 2002 from
8.61 cents for the comparable 2001 period. Significant changes in the
components of CASM are explained as follows:



| |  |  | Aircraft rent expense per ASM decreased 20.1% primarily due to the
reduction of rental rates negotiated with AWAs aircraft lessors as part
of the government guaranteed loan transaction.                                                                                                                                                                                                                                                                                      
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Other rents and landing fees expense per ASM increased 11.0% in the
second quarter of 2002 primarily due to higher airport rents ($1.3
million) and landing fees ($1.1 million). The sale and leaseback of
three previously owned flight simulators in the second quarter of 2002,
also contributed to the increase ($0.8 million).                                                                                                                                             
|
| |  |  | Aircraft fuel expense per ASM decreased 19.2% primarily due to a
16.6% decrease in the average price per gallon of fuel to 70.5 cents in
the 2002 quarter from 84.5 cents in 2001. A 3.7% decrease in fuel
consumption due to lower block hours in the 2002 quarter also
contributed to the decrease.                                                                                                                                                                           
|
| |  |  | Agency commissions expense per ASM decreased 52.5% primarily due to
the elimination of base commission for travel agency tickets issued in
the United States, effective March 21, 2002.                                                                                                                                                                                                                                                                                         
|
| |  |  | Aircraft maintenance materials and repairs expense per ASM decreased
2.1% primarily due to lower aircraft C-Check ($2.6 million), airframe
maintenance ($2.6 million) and engine overhaul ($0.7 million) expenses.
These decreases were offset in part by a $2.7 million increase in the
accrual for the estimated costs of maintenance required to be performed
upon the return of leased aircraft and a $1.8 million increase in
capitalized maintenance amortization expense.
|
| |  |  | Depreciation and amortization expense per ASM increased 14.7% due
primarily to higher amortization expense related to aircraft leasehold
improvements ($1.3 million) and computer hardware and facility
improvements ($0.9 million) and an increase in depreciation expense
related to rotable aircraft parts ($0.4 million).                                                                                                                                                   
|
| |  |  | Upon adoption of SFAS No. 142, Goodwill and Other Intangible Assets
on January 1, 2002, the Companys ERV balance is no longer subject to
amortization, resulting in a $5.0 million decrease in amortization
expense in the second quarter of 2002 when compared to the first quarter
of 2001. See Note 7, Cumulative Effect of a Change in Accounting
Principlein Notes to Condensed Financial Statements.                                                                 

26



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002



| |  |  | Other operating expenses per ASM decreased 7.0% due primarily to
decreases in passenger traffic related expenses including catering costs
($5.1 million), refueling and service checks ($2.0 million) and
advertising expenses ($1.8 million), as well as lower professional,
technical and legal fees ($1.6 million) and interrupted trip expenses
($3.3 million) due to improved airline operating performance. These
decreases were offset in part by increases in traffic liability and
other insurance ($8.8 million), ground handling costs ($1.7 million),
and bad debt expense ($1.0 million).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Excluding the $2.3 million of federal government assistance discussed
above, net nonoperating expenses increased $16.5 million to $16.7 million in
the second quarter of 2002 from $0.1 million in the second quarter of 2001.
Net interest expense increased $14.9 million in the second quarter of 2002 due
to higher average outstanding debt while interest income decreased $1.4 million
due to lower escrow balances from the 2001-1 Pass Through Trust Certificates in
the second quarter of 2002 compared to the second quarter of 2001. See
Liquidity and Capital Resources  Pass Through Trustsbelow.

Six Months Ended June 30, 2002 and 2001

For the six months ended June 30, 2002, AWA realized an operating loss of
$122.6 million. Excluding special charges recognized in 2002 and 2001, AWAs
operating loss was $62.4 million in 2002 compared to an operating loss of $45.4
million in the first six months of 2001. Loss before income tax benefit and
the cumulative effect of a change in accounting principle for the six month
period in 2002 was $95.4 million compared to $56.4 million in 2001.

Total operating revenues for the six months ended June 30, 2002 were
$986.7 million. Passenger revenues were $944.3 million, a decrease of $155.9
million or 14.2% from the 2001 six-month period. A 6.3% decrease in RPMs was
exceeded by a 7.3% decrease in ASMs, resulting in a 0.8 point increase in load
factor. The increase in load factor was more than offset by an 8.4% decrease
in yield resulting in a 7.5% decrease in RASM to 7.30 cents in 2002 from 7.89
cents in 2001. The decrease in yield was driven by a significant decline in
business travel and the introduction of security fees paid by passengers.
Cargo revenues decreased 26.2% to $14.6 million due to lower freight and mail
volumes following the terrorist attacks. Other revenues decreased 9.9% to
$27.9 million for the six months ended June 30, 2002 due primarily to lower net
revenues from AWAs code sharing agreement with Mesa Airlines.

Excluding special charges, operating expenses in the first six months of
2002 decreased $147.2 million or 12.3% as compared to the 2001 six-month
period, while ASMs decreased 7.3%. As a result, CASM excluding special charges
decreased 5.3% to 8.12 cents in 2002 from 8.57 cents for the six-month period
in 2001. Significant changes in the components of CASM are explained as
follows:



| |  |  | Salaries and related costs per ASM increased 5.1% primarily due to a
7.2% increase in average salaries and related costs per full time
equivalent employee (FTE) as a result of higher medical and workers
compensation insurance costs ($12.7 million) and the 7.3% decrease in
ASMs. These increases were offset in part by a 9.1% decline in FTEs,
resulting in a $14.0 million decrease in payroll costs in the first six
months of 2002 when compared to the comparable 2001 period.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Aircraft rent expense per ASM decreased 12.4% primarily due to the
reduction of rental rates negotiated with AWAs aircraft lessors as part
of the government guaranteed loan transaction.                                                                                                                                                                                                                                                                                                  
|
| |  |  | Other rents and landing fees expense per ASM increased 22.7% in the
first six months of 2002 primarily due to higher costs for borrowed
parts ($4.0 million), airport rents ($3.3 million) and landing fees
($0.8 million). A $0.8 million increase in flight simulator rents,
primarily as a result of the sale and leaseback of three previously
owned flight simulators in the second quarter of 2002, and the 7.3%
decrease in ASMs also contributed to the increase.                   

27



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002



| |  |  | Aircraft fuel expense per ASM decreased 26.4% primarily due to a
24.2% decrease in the average price per gallon of fuel to 67.1 cents in
the first six months of 2002 from 88.5 cents in 2001 and a 10.1%
decrease in fuel consumption due to lower block hours in the 2002
six-month period. These decreases were offset in part by the 7.3%
decrease in ASMs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Agency commissions expense per ASM decreased 41.4% primarily due to
the elimination of base commission for travel agency tickets issued in
the United States, effective March 21, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Aircraft maintenance materials and repairs expense per ASM increased
6.6% primarily due to the 7.3% decrease in ASMs. Lower aircraft C-Check
($7.8 million), airframe maintenance ($2.3 million) and engine overhaul
($0.9 million) expenses were substantially offset by a $10.4 million
increase in the accrual for the estimated costs of maintenance required
to be performed upon the return of leased aircraft.                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | Depreciation and amortization expense per ASM increased 23.4% due
primarily to higher amortization expense related to aircraft leasehold
improvements ($1.6 million) and computer hardware and facility
improvements ($1.5 million). An increase in depreciation expense
related to rotable aircraft parts ($1.1 million) and the 7.3% decrease
in ASMs also contributed to the increase.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | Upon adoption of SFAS No. 142, Goodwill and Other Intangible Assets
on January 1, 2002, the Companys ERV balance is no longer subject to
amortization, resulting in a $9.9 million decrease in amortization
expense in the second quarter of 2002 when compared to the first quarter
of 2001. See Note 8, Cumulative Effect of a Change in Accounting
Principlein Notes to Condensed Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Other operating expenses per ASM decreased 3.7% due primarily to
decreases in passenger traffic related expenses including catering costs
($11.1 million), computer reservation systems booking fees ($5.2
million), advertising expenses ($4.3 million) and refueling and service
checks ($4.0 million), as well as lower professional, technical and
legal fees ($5.1 million) and interrupted trip expenses ($8.5 million)
due to improved airline operating performance. These decreases were
offset in part by increases in traffic liability and other insurance
($17.8 million), security costs ($3.2 million) and the 7.3% decrease in
ASMs. In addition, the 2001 period included an $11.0 million recovery
from the settlement of a lawsuit related to an air to ground
telecommunication system that was previously written off.

Excluding the $2.3 million of federal government assistance discussed
above, net nonoperating expenses increased $31.7 million to $33.5 million in
the first six months of 2002 from $1.9 million in the first six months of 2001.
Net interest expense increased $26.5 million due to higher average outstanding
debt while interest income decreased $2.2 million due to lower escrow balances
from the 2001-1 Pass Through Trust Certificates in the first six months of 2002
compared to the first six months of 2001. See Liquidity and Capital Resources
- Pass Through Trustsbelow.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

In January 2002, AWA closed a $429 million loan supported by a $380
million government loan guarantee. Completion of the government loan and
related restructuring increased the Companys liquidity by approximately $390
million ($429 million loan, less 550 basis point first year guarantee fee to
the U.S. Treasury Department and other loan participants, and less other
transaction fees.)

At June 30, 2002, Holdings consolidated and AWAs unrestricted cash and
cash equivalents and short-term investments were $486.5 million and $479.5
million, respectively. Net cash provided by operating activities for Holdings
and AWA was $0.8 million and $1.8 million, respectively, in the first six
months of 2002. The year-over-year decrease was due primarily to a higher loss
in the 2002 period and payment in the 2002 period of amounts due vendors and
aircraft lessors that had been subject to the Companys cash conservation
program prior to the closing of the government loan in January 2002. During
the first six months of 2002, the Company paid $58.1 million of
28Table of Contents

AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

transportation
taxes to the IRS that had been deferred from 2001, as allowed under the Air
Transportation Safety and System Stabilization Act. The Company also made a
$30.7 million payment to the AWA 2001-1 Pass Through Trusts in April 2002 (see
Pass Through Trustsbelow) and benefited from a $60.3 million federal income
tax refund. (See Note 9, Income Tax Refundin Notes to Condensed
Consolidated Financial Statements.)

In the first six months of 2002, net cash provided by investing activities
by Holdings and AWA was $36.5 million and $36.7 million, respectively.
Principal investing activities during the first six months of 2002 included the
purchase of two new A320 aircraft, which were subsequently refinanced as part
of a sale-leaseback transaction. The Company also received $175.5 million of
proceeds from the sale and leaseback of one new A319 aircraft and four new A320
aircraft (see Note 4, Flight Equipmentin Notes to Condensed Consolidated
Financial Statements) and purchased short-term investments totaling $60.1
million. The 2001 period included the purchase of four new A319 aircraft, two
of which were subsequently refinanced in the second quarter of 2001 and two
that were refinanced in the fourth quarter of 2001 as the result of sale-leaseback
transactions. The 2001 period also included $64.0 million of proceeds from the
sale and leaseback of the two new A319 aircraft and sales of short-term
investments totaling $22.8 million.

In the first six months of 2002, net cash provided by financing activities
to Holdings and AWA was $232.3 million and $232.4 million, respectively,
primarily due to the government guaranteed loan. The Company also repaid
$161.2 million of debt as a result of the sale and leaseback of the five
aircraft discussed above and paid $37.0 million in loan-related fees during the
period. The first six months of 2001 included $107.4 million of borrowing to
fund the acquisition of four new A319 aircraft and the repayment of $49.4
million of debt as a result of the sale and leaseback of two A319 aircraft.
The 2001 period also included the repayment of $66.5 million in the first
quarter of 2001 and $45.0 million of borrowing in June 2001 under the Companys
revolving credit facility.

Capital expenditures for the six months ended June 30, 2002 were
approximately $79.0 million for Holdings and $78.7 million for AWA. Included
in these amounts are capital expenditures for capitalized maintenance of
approximately $56.2 million.

In July 2002, AWA made a mandatory repayment of approximately $16.7
million on its $89.9 million term loan. The payment was made as a result of a
decrease in the fair market value of the assets securing the loan following the
terrorist attacks of September 11, 2001. Collateral for the loan consists of
aircraft, spare engines, rotable aircraft parts inventory and a maintenance
facility. AWA and the lenders have also agreed to amend certain provisions in
the loan agreement related to the collateral appraisal procedures.

In July 2002, AWA received approximately $17.6 million that had been held
as cash collateral to secure a $20 million letter of credit facility. The
letter of credit facility was terminated after having been replaced with new
letters of credit prior to June 30, 2002. The $17.6 million will reduce the
balance of restricted cash with a corresponding increase in unrestricted cash
and cash equivalents in the third quarter of 2002.

Pass Through Trusts

Since AWAs restructuring in 1994, AWA has set up 13 pass through trusts,
which have issued over $1.4 billion of pass through trust certificates (also
known as Enhanced Equipment Trust Certificatesor EETC). With respect to
each of these trusts, proceeds from the certificates are deposited in an escrow
account pending their application to purchase the equipment notes. The
equipment notes are secured by a security interest in the aircraft and are
issued, at AWAs election, either by AWA in connection with a mortgage
financing of the relevant aircraft or by a separate owner trust in connection
with a leveraged lease financing of the relevant aircraft. The Pass Through
Trust Certificates are not direct obligations of, nor guaranteed by, Holdings
or AWA. However, AWA has certain indemnity obligations in respect of the
trusts and obligations to cover certain interest shortfalls on the escrowed
proceeds pending their application to finance aircraft. All aircraft financed
by these trusts are currently structured as leverage lease financings.

29



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

AWAs 2001-1 Pass Through Trusts provided for the financing of nine Airbus
A319 aircraft and five Airbus A320 aircraft. Of the 14 aircraft, 11 were
delivered in 2001, including three in the fourth quarter of 2001. One aircraft
was delivered in the first quarter of 2002 and two were delivered in the second
quarter of 2002. Except for the aircraft delivered in the first quarter of
2002, which was already financed as a leverage lease upon delivery, the
acquisition of each aircraft was initially structured as a mortgage financing
and subsequently converted into a leverage lease financing in sale-leaseback
transactions. In connection with the purchase of the two aircraft delivered in
the second quarter of 2002, AWA issued $64.2 million of equipment notes. In
June 2002, AWA converted the mortgage financing of the three aircraft delivered
in the fourth quarter of 2001 and the two aircraft delivered in the second
quarter of 2002 into a leverage lease financing by entering into sale-leaseback
transactions. See Note 4, Flight Equipmentin Notes to Condensed
Consolidated Financial Statements. As a result, approximately $161.2 million
of the equipment notes were assumed, on a non-recourse basis, by the owner
trustees that purchased the aircraft from AWA.

Commitments

As of June 30, 2002, the Company had $752.8 million of long-term debt
(including current maturities). This amount consisted primarily of the $429
million government guaranteed loan, an $89.9 million secured term loan with a
group of
financial institutions, $92.5 million face value of convertible senior
notes and principal amortization of notes payable secured by certain of AWAs
aircraft.

The following table sets forth the Companys cash obligations as of June
30, 2002.

|                                                              |                                            |   |                |        |      |   |         |       |      |   |         |        |             |   |         |        |  |   |         |        |  |   |           |         |  |   |           |         | 
|------------------------------------------------------------- | ------------------------------------------ | - | -------------- | ------ | ---- | - | ------- | ----- | ---- | - | ------- | ------ | ----------- | - | ------- | ------ |  | - | ------- | ------ |  | - | --------- | ------- |  | - | --------- | ------- | 
|                                                              |                                            |   | 2002           |        | 2003 |   | 2004    |       | 2005 |   | 2006    |        | Beyond 2006 |   | Total  
|                                                              |                                            |   |                |        |      |   |         |       |      |   |         |        |             |   |        
|                                                              |                                            |   | (In thousands)
|Long-term debt:                                               |                                            |   |                |        |      |   |         |       |      |   |         |        |             |   |         |        |  |   |         |        |  |   |           |         |  |   |           |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Equipment notes  Non EETC (1)             |   | $              | 4,837  |      |   | $       | 9,674 |      |   | $       | 8,989  |             |   | $       | 8,305  |  |   | $       | 8,305  |  |   | $         | 22,854  |  |   | $         | 62,964  | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Promissory Note (2)                        |   |                | 2,443  |      |   |         | 2,443 |      |   |         |       |             |   |         |       |  |   |         |       |  |   |           |        |  |   |           | 4,886   | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Term loan(3)                               |   |                | 16,686 |      |   |         |      |      |   |         | 822    |             |   |         | 30,000 |  |   |         | 30,000 |  |   |           | 13,169  |  |   |           | 90,677  | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | 7.5% Convertible Senior Notes due
2009 (4) |   |                |       |      |   |         |      |      |   |         |       |             |   |         |       |  |   |         |       |  |   |           | 95,087  |  |   |           | 95,087  | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Government guaranteed loan (5)             |   |                |       |      |   |         |      |      |   |         | 85,800 |             |   |         | 85,800 |  |   |         | 85,800 |  |   |           | 171,600 |  |   |           | 429,000 | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | State loan (6)                             |   |                |       |      |   |         |      |      |   |         | 750    |             |   |         | 250    |  |   |         | 250    |  |   |           | 250     |  |   |           | 1,500   | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | 10-3/4% Senior Unsecured Notes due
2005    |   |                |       |      |   |         |      |      |   |         |       |             |   |         | 49,998 |  |   |         |       |  |   |           |        |  |   |           | 49,998  | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Industrial development bonds(7)            |   |                |       |      |   |         |      |      |   |         |       |             |   |         |       |  |   |         |       |  |   |           | 29,300  |  |   |           | 29,300  | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | AVSA promissory notes(8)                   |   |                |       |      |   |         | 3,500 |      |   |         |       |             |   |         |       |  |   |         |       |  |   |           |        |  |   |           | 3,500   | 
|                                                              |                                            |   |                |        |      |   |         |       |      |   |         |        |             |   |         |        |  |   |         |        |  |   |           |         |  |   |           |        
|                                                              |                                            |   | 23,966         |        |      |   | 15,617  |       |      |   | 96,361  |        |             |   | 174,353 |        |  |   | 124,355 |        |  |   | 332,260   |         |  |   | 766,912   |        
|                                                             
|                                                             
|                                                             
|                                                             
|Cash aircraft rental payments (9)                             |                                            |   | 154,832        |        |      |   | 316,064 |       |      |   | 295,919 |        |             |   | 287,739 |        |  |   | 264,341 |        |  |   | 2,181,424 |         |  |   | 3,500,319 |        
|                                                             
|                                                             
|                                                             
|                                                             
|Lease payments on equipment and
Facility operating leases(10) |                                            |   | 9,700          |        |      |   | 17,971  |       |      |   | 16,293  |        |             |   | 16,488  |        |  |   | 14,636  |        |  |   | 82,608    |         |  |   | 157,696   |        
|                                                             
|                                                             
|                                                             
|                                                             
|Capital lease obligation                                      |                                            |   | 3,174          |        |      |   | 3,492   |       |      |   | 3,841   |        |             |   | 4,225   |        |  |   | 4,655   |        |  |   | 1,684     |         |  |   | 21,071    |        
|                                                             
|                                                             
|                                                             
|                                                             
|Special facility revenue bonds (11)                           |                                            |   | 1,644          |        |      |   | 1,644   |       |      |   | 1,644   |        |             |   | 1,644   |        |  |   | 1,644   |        |  |   | 20,546    |         |  |   | 28,766    |        
|                                                             
|                                                             
|                                                             
|                                                             
|Aircraft purchase commitments (12)                            |                                            |   | 42,724         |        |      |   | 168,266 |       |      |   | 75,219  |        |             |   |        |        |  |   | 225,781 |        |  |   | 266,829   |         |  |   | 778,819   |        
|                                                              |                                            |   |                |        |      |   |         |       |      |   |         |        |             |   |         |        |  |   |         |        |  |   |           |         |  |   |           |        
|Total                                                         |                                            | $ | 236,040        |        |      | $ | 523,054 |       |      | $ | 489,277 |        |             | $ | 484,449 |        |  | $ | 635,412 |        |  | $ | 2,885,351 |         |  | $ | 5,253,583 |        
|                                                              |                                            |   |                |        |      |   |         |       |      |   |         |        |             |   |         |        |  |   |         |        |  |   |           |         |  |   |           |        



---

|(1) |  | Includes approximately $63.0 million of equipment notes with variable
interest rates of 2.94% to 3.29%, averaging 3.01%, installments due 2002
through 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes an unsecured promissory note maturing at June 2003 with a fixed
rate of 10%. In June 2002, AWA restructured the leases for six of its
Boeing 757-200 aircraft to improve lease rental rates and other terms.
Prior to the restructuring, AWA subleased the six aircraft from The Boeing
Company (Boeing), who in turn leased the aircraft from five different
head lessors. Under the restructuring, AWA terminated the subleases with
Boeing and assumed, amended and restated the existing head leases for each
aircraft. Upon closing of the transactions, AWA paid approximately $11.8
million in security deposits and advance rental payments to the

30



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002



|     |  | head
lessors, net of a refund from Boeing for prorated prepaid rent under the
subleases, prorated accrued rent under the head leases and cash deposits
for the estimated cost of certain maintenance work required to be
performed on the aircraft prior to their return to Boeing. As a result of
these transactions, Boeing also relinquished its interest in approximately
$11.2 million face value of 7.5% convertible notes it received as
compensation for certain concessions granted under the restructuring
completed on January 18, 2002. Furthermore, AWA issued a $4.9 million
note payable to Boeing for the value of the concessions realized with
respect to these six aircraft prior to the termination of the subleases.
The restructured leases have a remaining term of approximately six years.
While the restructuring of the Boeing leases resulted in initial negative
cash flows, the restructured leases result in positive cash flows by March
2003. See Note 4, Flight Equipmentin Notes to Condensed Consolidated
Financial Statements.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(3)  |  | Includes an $89.9 million secured term loan maturing at year-end 2007
with a variable interest rate of 4.13% and $0.8 million of interest paid
in kind through June 30, 2002 at a fixed rate of 2%. Excludes $3.9
million of interest paid in kind through December 2004. See Note 11,
Subsequent Events  Term Loan Paymentin Notes to Condensed Consolidated
Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|    
|    
|    
|(4)  |  | Includes $92.5 million face value of 7.5% convertible senior notes, due
2009, and $2.6 million of interest paid in kind through June 30, 2002.
Excludes $19.7 million of interest paid in kind through December 2004.
For financial reporting purposes, the Company recorded the convertible
senior notes at their fair market value on the
date of issuance. As of June 30, 2002, the balance of the senior
convertible notes in the accompanying condensed consolidated balance sheet
is $61.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|    
|    
|    
|(5)  |  | Government guaranteed loan includes $429.0 million due September 2008
with a variable interest rate of 2.44%. Guarantee fees of 5.5% of the
outstanding guaranteed principal balance in 2002 and approximately 8.0% of
the outstanding guaranteed principal balance in 2003 through 2008 are
payable to the U.S. Treasury Department and other loan participants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    
|    
|    
|    
|(6)  |  | Arizona State loan includes $1.5 million due December 2007 with a
variable interest rate of 5.50%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|    
|    
|    
|(7)  |  | Includes $29.3 million of 6.3% industrial development bonds due April
2023.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|    
|    
|    
|(8)  |  | Includes AVSA promissory notes of $3.5 million due 2003 with a variable
interest rate of 3.15%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    
|    
|    
|    
|(9)  |  | Includes non-cancelable operating leases for 133 aircraft with remaining
terms ranging from one year to approximately 22 years. Management
estimates the debt equivalent value of these operating leases approximates
$2 billion using an interest rate of 10%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    
|    
|    
|    
|(10) |  | Includes leases for terminal space, ground facilities, the flight
training center and computer and other equipment under non-cancelable
operating leases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|    
|    
|    
|(11) |  | Includes Series 1999 Terminal 4 Improvements Bonds, due 2019.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    
|    
|    
|    
|(12) |  | Includes commitments to purchase a total of 22 Airbus aircraft and spare
engines for delivery in 2002 through 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

AWA expects to fund these cash obligations from funds provided by
operations, the proceeds of the government guaranteed loan, the $200 million of
financing commitments for Airbus aircraft obtained in connection with the
government loan, and future financings, if necessary. The cash available to
AWA from these sources, however, may not be sufficient to cover these cash
obligations because economic factors outside its control may reduce the amount
of cash generated by operations or increase its costs. For instance, a further
economic downturn or other unforeseen events could reduce the demand for air
travel, which would reduce the amount of cash generated by operations. An
increase in borrowing costs, either due to a reduction in our credit rating or
due to a general increase in interest rates, or in the cost of maintenance,
aircraft and aircraft engines and parts, could increase AWAs costs, which
could

31



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

decrease the amount of cash available to cover the cash obligations. In
addition, AWA may be required to prepay portions of the government guaranteed
loan if its employee compensation costs exceed a certain threshold and AWA may
fail to meet the minimum liquidity threshold or the financial performance goals
required to obtain financing for certain Airbus aircraft. In any of these
cases, its liquidity may be adversely affected and it may not have sufficient
cash to prepay the government loan and meet its other obligations. Moreover,
certain of its long-term debt agreements contain a $100 million minimum cash
balance requirement. As a result, AWA cannot use all of its available cash to
fund operations, capital expenditures and cash obligations without violating
this requirement.

Financial Covenants and Credit Rating

Certain of AWAs long-term debt agreements contain minimum cash balance
requirements and other covenants with which Holdings and AWA are in compliance.
Thus the Company cannot use all of its available cash to fund its operations
and commitments without potentially violating these minimum cash balance
requirements. In addition, certain of these covenants restrict AWAs ability
to pay cash dividends on its common stock and make certain other restricted
payments (as specified therein). Under these restrictions, as of June 30,
2002, the Companys ability to pay dividends, together with any other
restricted payments, was limited. Moreover, under the terms of the government
guaranteed loan, the Company is prohibited from paying cash dividends prior to
repayment of the loan in full. Finally, AWAs long-term debt agreements
contain cross-default provisions, which may be triggered by defaults by AWA
under other agreements relating to indebtedness. As of December 31, 2001, AWA
had suspended payment under certain aircraft leases and, as a result, had
received notices of default from certain aircraft lessors. In January 2002, AWA
paid in full approximately $81 million in deferred aircraft lease payments
simultaneously with the funding of the $429 million government guaranteed loan,
thereby curing the defaults. See Risk Factors Relating to America West and
Industry Related Risks  Our high leverage, fixed costs and the financial and
other covenants in our debt instruments may limit our ability to fund general
corporate requirements, limit our flexibility in responding to competitive
developments and increase our vulnerability to adverse economic and industry
conditions.

The government guaranteed loan contains a $100 million minimum cash
balance requirement and other covenants with which Holdings and AWA are in
compliance. These covenants are consistent with those in AWAs other long-term
debt agreements in that AWAs ability to pay dividends, together with any other
restricted payments (as defined therein), is limited and defaults by AWA under
other agreements relating to indebtedness may trigger a default under the
government guaranteed loan.

In June 2002, Standard & Poors raised its credit ratings on Holdings to
B- from CCC- and AWA for its senior unsecured debt to CCC from C and removed
them from Credit Watch, where they were placed on September 13, 2001. Ratings
on the various pass-through certificates were also raised. However, the
outlook continues to be negative. Moodys currently rates AWAs senior
unsecured debt at Ca. Our relatively low credit ratings may impair our ability
to incur additional indebtedness. The rating agencies base their ratings on
the Companys financial performance and operations, its cash flow and
liquidity, the level of its debt and industry conditions in general. If the
Companys financial performance or industry conditions do not improve, it may
face future downgrades, which could further negatively impact its borrowing
costs and the prices of its equity or debt securities. See Risk Factors
Relating to America West and Industry Related Risks  Because of our
relatively low credit ratings, our borrowing costs may increase and our ability
to incur additional debt may be impaired.

OTHER INFORMATION

Labor Relations

The Company is in the process of negotiating with the Air Line Pilots
Association (ALPA) on a new contract for AWAs pilots. The parties are
currently in mediation under the auspices of the National Mediation Board
(NMB). The existing contract with ALPA became amendable in May 2000. In
addition, the Company is in negotiations with the International Brotherhood of
Teamsters (IBT) on a first contract covering the Companys stock clerks, a
work group of approximately 60 employees. The parties are currently in
mediation under the auspices of the NMB. The Company cannot predict the form
of these future collective bargaining agreements and therefore

32



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

the effect, if
any, on AWAs operations or financial performance.

Application of Critical Accounting Policies

The preparation of the Companys consolidated financial statements in
accordance with generally accepted accounting principles requires that
management 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 the Companys
historical data. Any adjustments resulting from periodic evaluations of
the estimated air traffic liability are included in results of
operations during the period in which the evaluations are completed.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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 the Companys owned aircraft, jet engines, flight equipment and
rotable parts range from five to 30 years. The estimated useful lives
of the Companys technical support facility and flight training center
in Phoenix, Arizona are 22 years and 30 years, respectively. The
estimated useful lives of the Companys ground property and equipment
range from three to 12 years. The Company records impairment losses on
long-lived assets used in operations when events and circumstances
indicate that the assets might be impaired as defined by 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  The Company maintains a frequent travel
award program known as FlightFund that provides a variety of awards to
program members based on accumulated mileage. The estimated cost of
providing the free travel 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. The
Company also sells mileage credits to companies participating in its
FlightFund program, such as hotels, car rental agencies and credit card
companies. Transportation-related revenue from the sale of mileage
credits is deferred and recognized when transportation is provided. 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 the Companys revenues or mileage liability
accrual in the year of the change as well as future years.                                                                                                                                                                                                               
|
| |  |  | Long-Term Maintenance Reserve  The Company records 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 managements
assumptions regarding the renewal of aircraft leases. A significant
change to the Airlines fleet plan could have a material impact on the
Companys                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

33



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002



| |  |  | maintenance reserve requirements.
| |  |  | ---------------------------------

Related Party Transactions

As part of the Companys reorganization in 1994, Continental Airlines and
AWA entered into an alliance agreement which included code sharing
arrangements, reciprocal frequent flyer programs and ground handling
operations. AWA paid Continental approximately $6.9 million and also received
approximately $5.6 million in the second quarter of 2002 from Continental
pursuant to these agreements. In the second quarter of 2001, the amount paid
to and received from Continental pursuant to these agreements was $6.9 million
and $5.6 million, respectively. In March 2002, AWA received notice from
Continental of its intention to terminate the code sharing and frequent flyer
agreements between the two airlines, effective April 26, 2002. Two of
Continentals directors are managing partners of Texas Pacific Group, which,
through TPG Advisors, Inc., effectively controls the voting power of Holdings.
See Risk Factors  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.

Forward Looking Information

This report contains various forward-looking statements and information
that are based on managements beliefs as well as assumptions made by and
information currently available to management. When used in this document, the
words anticipate, estimate, project, expect and similar expressions are
intended to identify forward-looking statements. Such statements are subject
to certain risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated,
estimated, projected or expected. Among the key factors that may have a direct
bearing on the
Companys results are:



| |  |  | the aftermath of the September 11 terrorist attacks;                                                                                                                                                                                                                                  
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the resulting negative impacts on revenues due to airport closures and reduced demand for air travel;                                                                                                                                                                                 
|
| |  |  | increased costs due to enhanced security measures and related government directives;                                                                                                                                                                                                  
|
| |  |  | the ability of the Company to obtain sufficient additional financing
if necessary to survive the adverse economic effects following the
September 11 attacks;                                                                                                                         
|
| |  |  | limitations on financing flexibility due to high levels of debt,
financial and other covenants in debt instruments, cross default
provisions and the potential dilutive impact of the warrants and
convertible notes issued in connection with the term loan and related
transactions;
|
| |  |  | the cyclical nature of the airline industry;                                                                                                                                                                                                                                          
|
| |  |  | competitive practices in the industry;                                                                                                                                                                                                                                                
|
| |  |  | the impact of changes in fuel prices;                                                                                                                                                                                                                                                 
|
| |  |  | relations with unionized employees generally and the impact of the
process of negotiation of labor contracts on our operations; and                                                                                                                                                   
|
| |  |  | the outcome of negotiations of collective bargaining.                                                                                                                                                                                                                                 

For additional discussion of such risks see Risk Factors Related to
America West and Industry Related Risksbelow. Any forward-looking statements
speak only as of the date of this report.

34



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

Risk Factors Relating to America West and Industry Related Risks

The negative impact of the September 11, 2001 terrorist attacks and the
resulting government responses could be material to our financial condition,
results of operations and prospects.

The terrorist attacks of September 11, 2001 were highly publicized. The
impacts that these events will continue to have on the airline industry in
general, and AWA in particular, are not known at this time, but are expected to
include a substantial negative impact on the Companys ability to return to
profitable operations due to:



| |  |  | A reduction in the demand for travel in the near and mid-term until
public confidence in the air transportation system is restored;                                                             
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | An increase in costs due to enhanced security measures and government
directives in response to the terrorist attacks;                                                                          
|
| |  |  | An increase in the cost of aviation insurance in general, and the
cost and availability of coverage for acts of war, terrorism, hijacking,
sabotage and similar acts of peril in particular; and
|
| |  |  | An increase in airport rents and landing fees.                                                                                                                                                  

In addition, we expect that the general increase in hostilities relating
to reprisals against terrorist organizations and the continued threat of
further terrorist attacks will continue to negatively impact our revenues and
costs in the near and mid-term. The extent of the impact that the terrorist
attacks and their aftermath will have on our operations, and the sufficiency of
our financial resources to absorb this impact, will depend on a number of
factors, including:



| |  |  | The adverse impact that terrorist attacks, and the resulting
government responses, will have on the travel industry and the economy
in general;                                                                                                                                                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The potential increase in fuel costs and decrease in availability of
fuel if oil-producing countries are affected by the aftermath of the
terrorist attacks, including the governments responses, and the ability
of our fuel-hedging program to manage this risk;                                                                   
|
| |  |  | Our ability to reduce our operating costs, conserve financial
resources and to continue implementing our restructuring plan, taking
into account the cost increases (including significant increases in the
cost of aviation insurance) expected to result from the aftermath of the
terrorist attacks and the governments responses;
|
| |  |  | Any resulting decline in the value of the aircraft in our fleet;                                                                                                                                                                                                                                                                      
|
| |  |  | Our ability to raise additional financing, if necessary, taking into
account our current leverage and the limitations imposed by the terms of
our existing indebtedness;                                                                                                                                                              
|
| |  |  | The number of crew members who may be called for duty in the reserve
forces of the armed services and the resulting impact on our ability to
operate as planned; and                                                                                                                                                                  
|
| |  |  | The scope and nature of any future terrorist attacks.                                                                                                                                                                                                                                                                                 

Partly as a result of the terrorist attacks, both Moodys and Standard &
Poors downgraded our credit rating last fall. Further terrorist activity
could similarly result in downgrades of our credit rating, which could
negatively impact our ability to obtain further financing. See Because of our
relatively low credit rating, our borrowing costs may be high and our ability
to incur additional debt may be impaired.

Our high leverage, fixed costs and the financial and other covenants in
our debt instruments may limit our ability to fund general corporate
requirements, limit our flexibility in responding to competitive developments
and increase our vulnerability to adverse economic and industry conditions.

As of June 30, 2002, we owed approximately $752.8 million of debt. On
January 18, 2002, AWA closed a $429 million loan supported by a $380 million
government loan guarantee and converted its existing credit facility into an
$89.9 million term loan maturing in 2007 and Holdings issued approximately
$104.5 million aggregate principal amount of its 7.5% convertible senior notes
due 2009. In addition, we have incurred significant capitalized and operating
lease obligations in connection with the financing of aircraft and the lease of
airport and other facilities. We also have fixed costs associated with our
regional alliances with Mesa Airlines and Chautauqua Airlines. As a result of
our high leverage:
35Table of Contents

AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002



| |  |  | We have only a limited ability to obtain additional financing, if
needed. Our existing debt is secured by a substantial portion of our
assets, leaving us with limited assets to use to obtain additional
financing. In addition, the terms of both the government-guaranteed loan
and the credit facility restrict our or AWAs ability to incur
additional indebtedness or issue equity unless we use the proceeds of
those transactions to prepay the government guaranteed loan and the
credit facility.                                                                                                                                                                                                                                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Our ability to fund general corporate requirements, including capital
expenditures, may be impaired. We have substantial obligations to pay
principal and interest on our debt and other recurring fixed costs.
Further, we may be required to prepay portions of the government
guaranteed loan if our employee compensation costs exceed a certain
threshold. Accordingly, we may have to use our working capital to fund
such payments and costs instead of funding general corporate
requirements. In addition, because under the terms of certain of AWAs
indebtedness, AWA must maintain a minimum cash balance of $100 million,
we cannot use all of our available cash to fund operations, capital
expenditures and cash obligations without violating this minimum cash
balance requirement.
|
| |  |  | Our ability to respond to competitive developments and adverse
economic conditions may be limited. Without the ability to obtain
additional financing and with substantial fixed costs, we may not be
able to fund the capital expenditures, including the purchase of new
aircraft, required to keep us competitive or to withstand prolonged
adverse economic conditions.                                                                                                                                                                                                                                                                                                                                                                                                                           

Moreover, our flexibility is limited because many of the agreements
governing our indebtedness contain negative covenants that restrict our ability
to take certain actions as well as financial covenants that require us to meet
certain financial tests, including the minimum cash balance requirements
discussed above. A breach of these covenants or a failure to make any required
payments under our indebtedness or certain of our aircraft leases could result
in the acceleration of a substantial portion of our indebtedness. In the event
of an acceleration of our indebtedness, it is likely that credit card companies
would begin to withhold proceeds due to us from the sale of our tickets and our
lessors may
attempt to exercise remedies under their respective leases. In such a
situation, it is unlikely we would be able to repay the accelerated
indebtedness or make required lease payments.

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

The price and supply of jet fuel are unpredictable and fluctuate based on
events outside our control, including geopolitical developments, regional
production patterns and environmental concerns. Since fuel is the principal
raw material used in our business, accounting for 14.4% of our total operating
expenses in 2001, 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, with our current level of fuel consumption, a
one-cent per gallon increase in jet fuel prices will cause our annual operating
expense to increase by $4.2 million.

We have implemented a fuel-hedging program to manage the risk and effect
of fluctuating jet fuel prices on our business. Our hedging program is
intended to offset increases in jet fuel costs by using derivative instruments
keyed to the future price of heating oil, which is highly correlated to the
price of jet fuel delivered on the East Coast. Our hedging program does not
fully protect us against increasing jet fuel costs because our hedging program
does not cover all of our projected fuel volumes for 2002. Furthermore, our
ability to effectively hedge fuel prices is limited because we purchase a
substantially larger portion of our jet fuel requirements on the West Coast
than our large competitors and West Coast fuel prices are less correlated to
heating oil prices and other viable petroleum derivatives than East Coast fuel
prices and, therefore, more difficult to hedge. The effectiveness of our
fuel-hedging program may also be negatively impacted by the events of September
11 if fuel-producing countries are affected by the aftermath of the terrorist
attacks, including the resulting government responses. See The negative
impact of the September 11, 2001 terrorist attacks and the resulting government
responses could be material to our financial condition, results of operation
and prospects.
36Table of Contents

AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

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

Our credit ratings are relatively low with Moodys assessment of AWAs
senior implied rating and senior unsecured debt rating at Caa3 and Ca,
respectively, and Standard & Poors ratings at B- for Holdings and CCC for
AWAs senior unsecured debt. Low credit ratings could cause our borrowing
costs to increase, which would increase our interest expense and could affect
our net income. In addition, our credit ratings could adversely affect our
ability to obtain additional financing. See Our high leverage, fixed costs
and the financial and other covenants in our debt instruments may limit our
ability to fund general corporate requirements, limit our flexibility in
responding to competitive developments and increase our vulnerability to
adverse economic and industry conditions.The rating agencies base their
ratings on our financial performance and operations, our cash flow and
liquidity, the level of our debt 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.

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

Some of our employees are represented by unions. We currently are
negotiating collective bargaining agreements with the Air Line Pilots
Association, or ALPA, which represents all of our approximately 1,600 pilots,
and the International Brotherhood of Teamsters, or IBT, which represents all of
our approximately 60 stock clerks. On May 2, 2001, we filed for federal
mediation with the National Mediation Board, or NMB, to facilitate contract
negotiation with ALPA and on August 8, 2001, the IBT filed for mediation with
the NMB in connection with the stock clerk negotiations. We cannot predict the
outcome of the federal mediation or negotiations with ALPA or IBT. In
addition, other groups of employees may seek union representation. We cannot
predict the outcome of 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 the terms of
the government guaranteed loan restricts the amount we can spend on employee
compensation. In addition, negotiations with unions could divert management
attention and disrupt operations, which may result in increased operating
expenses and lower net income. If we are unable to negotiate acceptable
collective bargaining agreements, we might have to wait through cooling off
periods, which could be followed by union-initiated work actions, including
strikes. Depending on their type and duration, work actions could disrupt our
operations and, as a result, have a significant adverse affect on our operating
results.

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

Our indebtedness under both the government-guaranteed loan and our
existing $89.9 million term loan bears interest at fluctuating interest rates
based on the London interbank offered rate for deposits of U.S. dollars, or
LIBOR. LIBOR tends to fluctuate based on general economic conditions, general
interest rates, including the prime rate, and the supply of and demand for
credit in the London interbank market. We have not hedged our interest rate
exposure and, accordingly, our interest expense for any particular period may
fluctuate based on LIBOR. To the extent LIBOR increases, our interest expense
will increase, in which event, we may have difficulties making interest
payments and funding our other fixed costs and our available cash flow for
general corporate requirements may be adversely affected.

37



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

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

The airline industry is heavily regulated. Both federal and state
governments from time to time propose laws and regulations that impose
additional requirements and restrictions on airline operations. Implementing
these measures, such as aviation ticket taxes and passenger safety measures,
has increased operating costs for us and the airline industry as a whole. In
addition, new security measures imposed by the U.S. Federal Aviation
Administration, or FAA, as a result of the recent terrorist attacks are
expected to continue to increase costs for us and the airline industry as a
whole. Depending on the implementation of these and other laws, our operating
costs could increase significantly. In addition, certain governmental agencies,
such as the Department of Transportation, or DOT, and the FAA have the
authority to impose mandatory orders, such as Airworthiness Directives in
connection with our aircraft, and civil penalties for violations of applicable
laws and regulations, each of which can result in material costs and adverse
publicity. We cannot predict which laws and regulations will be adopted or
what other action regulators might take. Accordingly, we cannot guarantee that
future legislative and regulatory acts will not have a material impact on our
operating results.

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

The airline industry and most of the markets we serve are highly
competitive. We compete with other airlines on the basis of pricing,
scheduling (frequency and flight times), on-time performance, frequent flyer
programs and other services. Our principal competitor is Southwest Airlines,
which has a lower operating cost structure than we do. We also compete against
other existing carriers, many of which offer more extensive routes, frequencies
and customer loyalty, marketing and advertising programs than we do. From time
to time, we also compete with new carriers that enter the airline industry,
which typically have low operating cost structures. We may be unable to
compete effectively against carriers with substantially greater resources or
lower cost structures. The entry of additional new carriers in our markets,
the consolidation of existing carriers or increased competition from existing
carriers, could adversely affect our operating results.

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

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

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

Many of our executive officers are key to the management of our business
and operations. Our future success depends on our ability to retain these
officers and other capable managers. Although we believe we could replace key
personnel given adequate prior notice, the unexpected departure of key
executive officers could cause substantial disruption to our business and
operations. In addition, we may not be able to retain and recruit talented
personnel without incurring substantial costs. Moreover, in connection with
the government guaranteed loan, we agreed to limit the amount of compensation
we provide to our executives. As a result, our ability to spend additional
amounts to retain and recruit talented personnel is limited.

38



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

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, three stockholders collectively control more than 50% of the
total voting power of Holdings. These stockholders, TPG Partners, L.P., TPG
Parallel I, L.P. and Air Partners II, L.P. are all controlled by the same
company, TPG Advisors, Inc. Since TPG Advisors, Inc. is an investment firm, its
strategic objectives may be different than both the short-term or long-term
objectives of our board of directors and management. We cannot guarantee that
the controlling stockholders identified above will not try to influence
Holdings business in a way that would favor their own personal interests to
the detriment of our interests.

Conversion of the notes or exercise of the warrants issued in connection
with the government-guaranteed loan and related transactions will dilute the
ownership interests of existing stockholders.

The conversion or exercise of some or all of the notes or warrants issued
in connection with the government-guaranteed loan and related transactions will
dilute the ownership interests of existing stockholders and any sales in the
public market of the class B common stock issuable upon such conversion or
exercise could adversely affect prevailing market prices of our class B common
stock. In addition, the existence of the notes or warrants may encourage short
selling by market participants because conversion or exercise of the notes or
warrants could depress the price of our class B common stock.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Sensitive Instruments

(a) Commodity Price Risk

As of June 30, 2002, 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 37% of
remaining projected 2002 fuel requirements, including 49% related to the third
quarter of 2002 and 25% related to the fourth quarter of 2002.

The use of such transactions in the Companys fuel hedging program could
result in the Company not fully benefiting from certain declines in heating oil
futures prices. At July 19, 2002, the Company estimates that a 10% change in
heating oil futures prices would not change the fair value of the costless
collar transactions.

As of July 19, 2002, approximately 35% of AWAs remaining 2002 fuel
requirements are hedged.

(b) Interest Rate Risk

The Companys exposure to interest rate risk relates primarily to its
variable rate long-term debt obligations. At June 30, 2002 the Companys
variable-rate long-term debt obligations of approximately $586.8 million
represented approximately 79.7% of its total long-term debt. If interest rates
increased 10% in 2002, the impact on the Companys results of operations would
not be material.

39



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2002

PART II  OTHER INFORMATION







ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDER

The 2002 Annual Meeting of Stockholders of the Company was held on May 20,
2002. The three persons named below were elected as proposed in the proxy
statement pursuant to Regulation 14A of the Securities Exchange Act of 1934, as
amended, to serve as directors until the Companys Annual Meeting in 2005 and
until their successors are elected and qualified. There were 77,776,693 votes
cast in the election of directors and there were no abstentions and broker
non-votes. The voting regarding each nominee was as follows: W. Douglas Parker
(for: 74,769,801 / withheld: 3,006,892); John F. Tierney; (for: 74,483,720 /
withheld: 3,292,973); and Robert J. Miller (for: 74,782,972 / withheld:
2,993,721). The following directors term of office as a director continued
after the meeting: John L. Goolsby, Richard P. Schifter, Marie L. Knowles, J.
Steven Whisler, Richard C. Kraemer, Walter T. Klenz and Denise M. OLeary.

The stockholders approved the adoption of our 2002 Incentive Equity Plan.
There were 53,848,943 votes cast for the plan, 11,276,542 votes against, 98,569
abstentions and there were 12,552,639 broker non-votes.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a.     Exhibits

|        |  |                                                                                                                                                                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                                                                                                                                      
|NUMBER  |  | DESCRIPTION AND METHOD OF FILING                                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                      
|10.55   |  | Amendment No. 1 to Amended and Restated Term Loan
Agreement, dated as of May 28, 2002, among AWA, the lenders from
time to time party thereto, Mizuho Corporate Bank, Ltd., Citicorp
USA, Inc., Salomon Smith Barney, Inc., and Deutsche Bank Trust
Company Americas.

b.     Reports on Form 8-K

None.

40



---



##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
June 30, 2002




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/ Bernard L. Han                                                  |  | 
| |  |                                   |  |                                                                     |  | 
| |  |                                   |  | Bernard L. Han
Executive Vice President and Chief Financial Officer |  | 

DATED: July 19, 2002

41



---



##### Table of Contents



AMERICA WEST AIRLINES, INC.
June 30, 2002

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/ Bernard L. Han                                                  |  | 
| |  |                             |  |                                                                     |  | 
| |  |                             |  | Bernard L. Han
Executive Vice President and Chief Financial Officer |  | 

DATED: July 19, 2002

42



---



##### Table of Contents






Index to Exhibits

|        |  |                                                                                                                                                                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                                                                                                                                      
|NUMBER  |  |                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                      
|10.55   |  | Amendment No. 1 to Amended and Restated Term Loan
Agreement, dated as of May 28, 2002, among AWA, the lenders from
time to time party thereto, Mizuho Corporate Bank, Ltd., Citicorp
USA, Inc., Salomon Smith Barney, Inc., and Deutsche Bank Trust
Company Americas.