##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q (Mark One) þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934For the quarterly period ended March 31, 2004
 or o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from  to
 Commission file number 1-12649 AMERICA WEST HOLDINGS CORPORATION (Exact name of registrant as specified in its charter)
 DELAWARE
    
    86-0847214(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 111 WEST RIO SALADO PARKWAY, TEMPE, ARIZONA
    
    85281(Address of principal executive offices)
    
    (Zip Code)
 (480) 693-0800  (Registrants telephone number, including area code)
 N/A  (Former name, former address and former fiscal year, if changed since last report)
 Commission file number 0-12337 AMERICA WEST AIRLINES, INC. (Exact name of registrant as specified in its charter)
 DELAWARE
    
    86-0418245(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 4000 EAST SKY HARBOR BLVD, PHOENIX, ARIZONA
    
    85034(Address of principal executive offices)
    
    (Zip Code)
 (480) 693-0800  (Registrants telephone number, including area code)
 N/A  (Former name, former address and former fiscal year, if changed since last report)
 Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the Registrants are accelerated filers (as
defined in Exchange Act Rule 12b-2). America West Holdings Corporation
    
    Yes
    
    x
    
    No
    
    oAmerica West Airlines, Inc.
    
    Yes
    
    o
    
    No
    
    x
 As of April 20, 2004, America West Holdings Corporation has 859,117 shares of
Class A common stock and 35,121,045 shares of Class B common stock outstanding.
As of April 20, 2004, America West Airlines, Inc. has 1,000 shares of Class B
common stock outstanding, all of which are held by America West Holdings
Corporation.




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  AMERICA WEST HOLDINGS CORPORATION.ITEM 1B. CONDENSED FINANCIAL STATEMENTS  AMERICA WEST AIRLINES, INC.ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.ITEM 4. CONTROLS AND PROCEDURES.PART II  OTHER INFORMATIONITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.SIGNATUREEX-31.1EX-31.2EX-31.3EX-31.4EX-32.1EX-32.2    Table of Contents  
 PART I  FINANCIAL INFORMATION America West Holding Corporation (Holdings or the Company) is the
holding company that owns all of the stock of America West Airlines, Inc.
(AWA or the Airline). AWA, the eighth largest passenger airline and the
second largest low cost carrier in the United States, accounted for most of
Holdings revenues and expenses in 2003. The Leisure Company (TLC),
previously a wholly owned subsidiary of Holdings, was merged into AWA on
January 1, 2004 and continues to operate as the America West Vacations
division of AWA. Through its America West Vacations division, AWA also
sells individual and group travel packages. This combined Form 10-Q is
filed by both Holdings and AWA and includes the financial statements of each
company in Item 1A and Item 1B, respectively. 
 ITEM 1A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  AMERICA WEST HOLDINGS CORPORATION. AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Balance Sheets
(in thousands except share data)
(unaudited) March 31,
    
    December 31,2004
    
    2003AssetsCurrent assets:Cash and cash equivalents
    
    $
    321,222
    
    
    $
    403,076Short-term investments
    
    
    76,656
    
    
    
    72,890Restricted cash
    
    
    42,900
    
    
    
    42,900Accounts receivable, net
    
    
    94,777
    
    
    
    77,235Expendable spare parts and supplies, net
    
    
    57,495
    
    
    
    58,575Prepaid expenses
    
    
    189,552
    
    
    
    129,368Total current assets
    
    
    782,602
    
    
    
    784,044Property and equipment:Flight equipment
    
    
    856,718
    
    
    
    858,395Other property and equipment
    
    
    275,927
    
    
    
    273,284Equipment purchase deposits
    
    
    49,550
    
    
    
    46,0501,182,195
    
    
    
    1,177,729Less accumulated depreciation and amortization
    
    
    569,516
    
    
    
    570,017Net property and equipment
    
    
    612,679
    
    
    
    607,712Other assets:Investments in debt securities
    
    
    35,386
    
    
    
    40,740Restricted cash
    
    
    68,795
    
    
    
    69,876Other assets, net
    
    
    113,535
    
    
    
    124,534Total other assets
    
    
    217,716
    
    
    
    235,150$
    1,612,997
    
    
    $
    1,626,906
 See accompanying notes to condensed consolidated financial statements. 2




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AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Balance Sheets
(in thousands except share data)
(unaudited) March 31,
    
    December 31,2004
    
    2003Liabilities and Stockholders EquityCurrent liabilities:Current maturities of long-term debt
    
    $
    107,094
    
    
    $
    103,899Current obligations under capital leases
    
    
    6,602
    
    
    
    3,442Accounts payable
    
    
    178,452
    
    
    
    210,288Air traffic liability
    
    
    218,792
    
    
    
    174,486Accrued compensation and vacation benefits
    
    
    45,897
    
    
    
    61,045Accrued taxes
    
    
    43,719
    
    
    
    36,845Other accrued liabilities
    
    
    81,150
    
    
    
    59,278Total current liabilities
    
    
    681,706
    
    
    
    649,283Long-term debt, less current maturities
    
    
    643,351
    
    
    
    688,965Capital leases, less current obligations
    
    
    5,141
    
    
    
    8,467Deferred credits and other liabilities
    
    
    143,967
    
    
    
    141,675Stockholders equity:Preferred stock, $.01 par value. Authorized 48,800,000
shares; no shares issued
    
    
    
    
    
    
    Class A common stock, $.01 par value. Authorized
1,200,000 shares; issued and outstanding 859,117 shares at
March 31, 2004 and December 31, 2003
    
    
    8
    
    
    
    8Class B common stock, $.01 par value. Authorized 100,000,000
shares; issued and outstanding 51,393,606 shares at March 31, 2004
and 51,239,200 shares at December 31, 2003
    
    
    514
    
    
    
    512Additional paid-in capital
    
    
    631,648
    
    
    
    631,269Accumulated deficit
    
    
    (198,418
    )
    
    
    (199,594
    )Accumulated other comprehensive income
    
    
    12,086
    
    
    
    12,527445,838
    
    
    
    444,722Less: Cost of Class B common stock in treasury, 16,364,550
shares at March 31, 2004 and 16,283,895 shares at December 31, 2003
    
    
    (307,006
    )
    
    
    (306,206
    )Total stockholders equity
    
    
    138,832
    
    
    
    138,516$
    1,612,997
    
    
    $
    1,626,906
 See accompanying notes to condensed consolidated financial statements. 3




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Statements of Operations
(in thousands except per share data)
(unaudited) Three Months EndedMarch 31,2004
    
    2003Operating revenues:Passenger
    
    $
    537,333
    
    
    $
    500,574Cargo
    
    
    6,903
    
    
    
    7,056Other
    
    
    32,308
    
    
    
    15,603Total operating revenues
    
    
    576,544
    
    
    
    523,233Operating expenses:Salaries and related costs
    
    
    166,275
    
    
    
    163,094Aircraft rents
    
    
    75,185
    
    
    
    75,154Other rents and landing fees
    
    
    41,241
    
    
    
    39,760Aircraft fuel
    
    
    111,069
    
    
    
    93,356Agency commissions
    
    
    6,750
    
    
    
    8,824Aircraft maintenance materials and repairs
    
    
    50,054
    
    
    
    64,208Depreciation and amortization
    
    
    13,791
    
    
    
    17,663Other
    
    
    94,351
    
    
    
    107,314Total operating expenses
    
    
    558,716
    
    
    
    569,373Operating income (loss)
    
    
    17,828
    
    
    
    (46,140
    )Nonoperating income (expenses):Interest income
    
    
    1,518
    
    
    
    1,407Interest expense, net
    
    
    (19,752
    )
    
    
    (18,505
    )Other, net
    
    
    1,582
    
    
    
    1,220Total nonoperating expenses, net
    
    
    (16,652
    )
    
    
    (15,878
    )Income (loss) before income taxes
    
    
    1,176
    
    
    
    (62,018
    )Income taxes
    
    
    
    
    
    
    Net income (loss)
    
    $
    1,176
    
    
    $
    (62,018
    )Earnings (loss) per share:Basic
    
    $
    0.03
    
    
    $
    (1.84
    )Diluted
    
    $
    0.02
    
    
    $
    (1.84
    )Shares used for computation:Basic
    
    
    35,851
    
    
    
    33,713Diluted
    
    
    52,819
    
    
    
    33,713
 See accompanying notes to condensed consolidated financial statements. 4




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AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited) Three Months EndedMarch 31,2004
    
    2003Net cash used in operating activities
    
    $
    (1,425
    )
    
    $
    (21,767
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (36,979
    )
    
    
    (46,904
    )Purchases of short-term investments
    
    
    (26,166
    )
    
    
    Sales of short-term investments
    
    
    27,235
    
    
    
    24,738Purchases of investments in debt securities
    
    
    (15,000
    )
    
    
    Sales of investments in debt securities
    
    
    15,000
    
    
    
    Decrease in restricted cash
    
    
    1,081
    
    
    
    Proceeds from disposition of assets
    
    
    1,397
    
    
    
    23,643Net cash provided by (used in) investing activities
    
    
    (33,432
    )
    
    
    1,477Cash flows from financing activities:Repayment of debt
    
    
    (47,370
    )
    
    
    (5,791
    )Other
    
    
    373
    
    
    
    Net cash used in financing activities
    
    
    (46,997
    )
    
    
    (5,791
    )Net decrease in cash and cash equivalents
    
    
    (81,854
    )
    
    
    (26,081
    )Cash and cash equivalents at beginning of period
    
    
    403,076
    
    
    
    335,745Cash and cash equivalents at end of period
    
    $
    321,222
    
    
    $
    309,664Cash, cash equivalents, short-term investments and investments in debt
securities at end of period
    
    $
    433,264
    
    
    $
    309,664Cash paid for:Interest, net of amounts capitalized
    
    $
    7,700
    
    
    $
    5,766Income taxes paid
    
    $
    1,374
    
    
    $
    59Non-cash investing and financing activities:Payment in kind notes issued, net of returns
    
    $
    379
    
    
    $
    374Exercise of warrants
    
    $
    2
    
    
    $
    Acquisition of shares due to loan default
    
    $
    800
    
    
    $
    Reclassification of investments in debt securities to
short-term investments
    
    $
    5,344
    
    
    $
    Notes payable issued under the aircraft purchase agreement
    
    $
    3,500
    
    
    $
    
 See accompanying notes to condensed consolidated financial statements. 5




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AMERICA WEST HOLDINGS CORPORATION
Notes To Condensed Consolidated Financial Statements
March 31, 2004 1. BASIS OF PRESENTATION The unaudited condensed consolidated financial statements include the
accounts of Holdings and its wholly owned subsidiary, AWA. TLC, previously a
wholly owned subsidiary of Holdings, was merged into AWA on January 1, 2004 and
continues to operate as the America West Vacations division of AWA. 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 (Form 10-K) for
the year ended December 31, 2003. 2. STOCK OPTIONS The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees,and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. The Company
issues its stock options at a price equal to fair market value on the date of
grant. Accordingly, no compensation cost has been recognized for stock options
in the accompanying condensed consolidated financial statements. Had the
Company determined compensation cost based on the fair value at the grant date
for its stock options under Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation,the Companys net
income (loss) and income (loss) per share would have been reduced to the pro
forma amounts indicated below: Three Months EndedMarch 31,2004
    
    2003(in thousands except per share data)Net income (loss), as reported
    
    $
    1,176
    
    
    $
    (62,018
    )Stock-based compensation expense
    
    
    (1,270
    )
    
    
    (1,204
    )Pro forma net loss
    
    $
    (94
    )
    
    $
    (63,222
    )Income (loss) per share:Basic  as reported
    
    $
    0.03
    
    
    $
    (1.84
    )Basic  pro forma
    
    $
    0.00
    
    
    $
    (1.88
    )Diluted  as reported
    
    $
    0.02
    
    
    $
    (1.84
    )Diluted  pro forma
    
    $
    0.00
    
    
    $
    (1.88
    )
 3. FLIGHT EQUIPMENT In January 2004, the Company entered into three separate operating leases
for Airbus A320 aircraft, two with a lease term of five years and one with a
lease term of seven years. These aircraft are expected to be in service in
June 2004. In February 2004, the Company sold one Boeing 737-200 aircraft recognizing
a gain of approximately $0.3 million. The Company recorded this amount in
Nonoperating Income (Expenses)  Other, Netin the accompanying condensed
consolidated statements of operations. In the first quarter of 2004, the Company revised the estimated useful
life for certain aircraft and related spare parts inventory as a result of
changes in AWAs fleet plan and for capitalized maintenance on certain of its
engines as a result of changes in aircraft utilization. The net impact of this
change in estimate was an increase in net income for the three months ended
March 31, 2004 of $4.0 million. As a result, basic and diluted income per
share increased by $0.11 and $0.08, respectively, for the three months ended
March 31, 2004. 6




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AMERICA WEST HOLDINGS CORPORATION
Notes To Condensed Consolidated Financial Statements
March 31, 2004 4. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) includes changes in the fair value of
derivative financial instruments that qualify as cash flow hedges in accordance
with SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities.For the three months ended March 31, 2004, the Company recorded
total comprehensive income of $0.7 million. For the three months ended March
31, 2003, the Company recorded a total comprehensive loss of $49.3 million.
The difference between net income (loss) and comprehensive income (loss) for
the three months ended March 31, 2004 and 2003 is detailed in the following
table: Three Months EndedMarch 31,2004
    
    2003(in thousands)Net income (loss)
    
    $
    1,176
    
    
    $
    (62,018
    )Unrealized gains on derivative instruments
    
    
    2,459
    
    
    
    21,888Reclassification adjustment to net income (loss) of
previously reported unrealized gains (losses) on
derivative instruments
    
    
    (2,900
    )
    
    
    (9,210
    )Total other comprehensive income (loss)
    
    
    (441
    )
    
    
    12,678Comprehensive income (loss)
    
    $
    735
    
    
    $
    (49,340
    )
 5. SPECIAL CHARGES In the first quarter of 2004, the Company recorded a $0.6 million
reduction in special charges related to the revision of estimated costs
associated with the sale and leaseback of certain aircraft. This amount is
included in Other Expensesin the accompanying condensed consolidated
statements of operations. In February 2003, AWA announced the elimination of its hub operations in
Columbus, Ohio. As a result, 12 regional jets, all of which were operated by
Chautauqua Airlines under the America West Express banner, have been phased out
of the fleet. In addition, the hub has been downsized from 49 daily departures
to 15 destinations to four flights per day to Phoenix and Las Vegas. Service
to New York City La Guardia Airport was also eliminated because perimeter rules
at the airport prohibit flights beyond 1,500 miles, precluding service from
AWAs hubs in Phoenix and Las Vegas. In the first quarter of 2003, the Company
recorded special charges of $1.0 million related to the costs associated with
the termination of certain aircraft and facility contracts, employee transfer
and severance expenses and the write-off of leasehold improvements in Columbus,
Ohio. In the first quarter of 2003, the Company also recorded a $1.1 million
reduction in special charges related to the earlier-than-planned return of
certain leased aircraft in 2001 and 2002, as all payments related to these
aircraft returns have been made. The following table presents the payments and other settlements made
during the three months ended March 31, 2004 related to the special charge
accruals: ContractReductions-
    
    Termination/OtherSale-Leaseback
    
    Fleet Restructuring
    
    in-force
    
    Costs
    
    Total(in thousands)Balance at December 31, 2003
    
    $
    605
    
    
    $
    1,389
    
    
    $
    357
    
    
    $
    2,649
    
    
    $
    5,000Revision of estimate
    
    
    (600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (600
    )Payments
    
    
    (5
    )
    
    
    (180
    )
    
    
    (275
    )
    
    
    (515
    )
    
    
    (975
    )Balance at March 31, 2004
    
    $
    
    
    
    $
    1,209
    
    
    $
    82
    
    
    $
    2,134
    
    
    $
    3,425
 The Company expects to make payments related to these special charges
through the fourth quarter of 2005. 7




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes To Condensed Consolidated Financial Statements
March 31, 2004 6. EARNINGS (LOSS) PER SHARE (EPS) The following table presents the computation of basic and diluted EPS. Three Months EndedMarch 31,2004
    
    2003(in thousands except per share data)BASIC EARNINGS (LOSS) PER SHAREIncome (loss) applicable to common stock
    
    $
    1,176
    
    
    $
    (62,018
    )Weighted average common shares outstanding
    
    
    35,851
    
    
    
    33,713Basic earnings (loss) per share
    
    $
    0.03
    
    
    $
    (1.84
    )DILUTED EARNINGS (LOSS) PER SHAREIncome (loss) applicable to common stock
    
    $
    1,176
    
    
    $
    (62,018
    )Share computation:Weighted average common shares outstanding
    
    
    35,851
    
    
    
    33,713Assumed exercise of stock options and warrants
    
    
    16,968
    
    
    
    Weighted average common shares outstanding for purposes of computing
diluted net income (loss) per share
    
    
    52,819
    
    
    
    33,713Diluted income (loss) per share
    
    $
    0.02
    
    
    $
    (1.84
    )
 For the three months ended March 31, 2004, 2,711,887 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. In
addition, 8,694,000 incremental shares from assumed conversion of the 7.5%
convertible senior notes are not included in the computation of diluted EPS
because of the antidilutive effect on EPS. The shares issuable upon conversion
of the 7.25% Senior Exchangeable Notes due 2023 were not included in the
computation of diluted earnings per share since the conditions for conversion
have not been met. For the three months ended March 31, 2003, 22,537,000 warrants issued in
conjunction with the government guaranteed loan and related transactions and
7,768,466 stock options are not included in the computation of diluted EPS
because the option and warrant exercise prices were greater than the average
market price of common stock for the period. In addition, 159 incremental
shares from assumed exercise of stock options are not included in the
computation of diluted EPS because of the antidilutive effect on EPS. 7. 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. 8




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ITEM 1B. CONDENSED FINANCIAL STATEMENTS  AMERICA WEST AIRLINES, INC. The unaudited condensed balance sheets of AWA, a wholly-owned subsidiary
of Holdings, as of March 31, 2004 and December 31, 2003, the condensed
statements of operations for the three months ended March 31, 2004 and 2003 and
the condensed statements of cash flows for the three months ended March 31,
2004 and 2003, together with the related notes, are set forth on the following
pages. TLC, previously a wholly owned subsidiary of Holdings, was merged into
AWA on January 1, 2004 and continues to operate as the America West Vacations
division of AWA. See Note 1, Basis of Presentationand Note 7, Merger of
TLC into AWAin Notes to Condensed Financial Statements. AMERICA WEST AIRLINES, INC.
Condensed Balance Sheets
(in thousands except share data)
(unaudited) March 31,
    
    December 31,2004
    
    2003AssetsCurrent assets:Cash and cash equivalents
    
    $
    301,988
    
    
    $
    383,869Short-term investments
    
    
    76,656
    
    
    
    72,890Restricted cash
    
    
    42,900
    
    
    
    42,900Accounts receivable, net
    
    
    94,777
    
    
    
    77,235Advances to parent company and affiliate, net.
    
    
    385
    
    
    
    Expendable spare parts and supplies, net
    
    
    57,495
    
    
    
    58,575Prepaid expenses
    
    
    189,468
    
    
    
    129,294Total current assets
    
    
    763,669
    
    
    
    764,763Property and equipment:Flight equipment
    
    
    856,718
    
    
    
    858,395Other property and equipment
    
    
    274,235
    
    
    
    271,592Equipment purchase deposits
    
    
    49,550
    
    
    
    46,0501,180,503
    
    
    
    1,176,037Less accumulated depreciation and amortization
    
    
    568,967
    
    
    
    569,468Net property and equipment
    
    
    611,536
    
    
    
    606,569Other assets:Investments in debt securities
    
    
    35,386
    
    
    
    40,740Restricted cash
    
    
    68,795
    
    
    
    69,876Advances to parent company, net
    
    
    254,792
    
    
    
    254,792Other assets, net
    
    
    111,832
    
    
    
    122,725Total other assets
    
    
    470,805
    
    
    
    488,133$
    1,846,010
    
    
    $
    1,859,465
 See accompanying notes to condensed financial statements. 9




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AMERICA WEST AIRLINES, INC.
Condensed Balance Sheets
(in thousands except share data)
(unaudited) March 31,
    
    December 31,2004
    
    2003Liabilities and Stockholders EquityCurrent liabilities:Current maturities of long-term debt
    
    $
    107,094
    
    
    $
    103,899Current obligations under capital leases
    
    
    6,602
    
    
    
    3,442Accounts payable
    
    
    177,723
    
    
    
    209,372Payable to affiliate, net
    
    
    
    
    
    
    1,927Air traffic liability
    
    
    218,792
    
    
    
    174,486Accrued compensation and vacation benefits
    
    
    45,897
    
    
    
    61,045Accrued taxes
    
    
    31,998
    
    
    
    24,117Other accrued liabilities
    
    
    81,150
    
    
    
    59,278Total current liabilities
    
    
    669,256
    
    
    
    637,566Long-term debt, less current maturities
    
    
    643,351
    
    
    
    688,965Capital leases, less current maturities
    
    
    5,141
    
    
    
    8,467Deferred credits and other liabilities
    
    
    142,159
    
    
    
    139,867Stockholders equity:Common Stock $.01 par value. Authorized, issued and
outstanding; 1,000 shares
    
    
    
    
    
    
    Additional paid-in capital
    
    
    555,114
    
    
    
    555,115Accumulated deficit
    
    
    (181,097
    )
    
    
    (183,042
    )Accumulated other comprehensive income
    
    
    12,086
    
    
    
    12,527Total stockholders equity
    
    
    386,103
    
    
    
    384,600$
    1,846,010
    
    
    $
    1,859,465
 See accompanying notes to condensed financial statements. 10




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AMERICA WEST AIRLINES, INC.
Condensed Statements of Operations
(in thousands)
(unaudited) Three Months EndedMarch 31,2004
    
    2003Operating revenues:Passenger
    
    $
    537,333
    
    
    $
    500,574Cargo
    
    
    6,903
    
    
    
    7,056Other
    
    
    32,138
    
    
    
    15,433Total operating revenues
    
    
    576,374
    
    
    
    523,063Operating expenses:Salaries and related costs
    
    
    165,929
    
    
    
    162,457Aircraft rents
    
    
    75,185
    
    
    
    75,154Other rents and landing fees
    
    
    41,241
    
    
    
    39,760Aircraft fuel
    
    
    111,069
    
    
    
    93,356Agency commissions
    
    
    6,750
    
    
    
    8,824Aircraft maintenance materials and repairs
    
    
    50,054
    
    
    
    64,208Depreciation and amortization
    
    
    13,791
    
    
    
    17,663Other
    
    
    93,731
    
    
    
    106,761Total operating expenses
    
    
    557,750
    
    
    
    568,183Operating income (loss)
    
    
    18,624
    
    
    
    (45,120
    )Nonoperating income (expenses):Interest income
    
    
    3,201
    
    
    
    3,122Interest expense, net
    
    
    (21,462
    )
    
    
    (20,241
    )Other, net
    
    
    1,582
    
    
    
    1,220Total nonoperating expenses, net
    
    
    (16,679
    )
    
    
    (15,899
    )Income (loss) before income taxes
    
    
    1,945
    
    
    
    (61,019
    )Income taxes
    
    
    
    
    
    
    Net income (loss)
    
    $
    1,945
    
    
    $
    (61,019
    )
 See accompanying notes to condensed financial statements. 11




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Condensed Statements of Cash Flows
(in thousands)
(unaudited) Three Months EndedMarch 31,2004
    
    2003Net cash used in operating activities
    
    $
    (1,072
    )
    
    $
    (21,867
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (36,979
    )
    
    
    (46,904
    )Purchases of short-term investments
    
    
    (26,166
    )
    
    
    Sales of short-term investments
    
    
    27,235
    
    
    
    24,738Purchases of investments in debt securities
    
    
    (15,000
    )
    
    
    Sales of investments in debt securities
    
    
    15,000
    
    
    
    Decrease in restricted cash
    
    
    1,081
    
    
    
    Proceeds from disposition of assets
    
    
    1,397
    
    
    
    23,643Net cash provided by (used in) investing activities
    
    
    (33,432
    )
    
    
    1,477Cash flows from financing activities:Repayment of debt
    
    
    (47,370
    )
    
    
    (5,791
    )Other
    
    
    (7
    )
    
    
    Net cash used in financing activities
    
    
    (47,377
    )
    
    
    (5,791
    )Net decrease in cash and cash equivalents
    
    
    (81,881
    )
    
    
    (26,181
    )Cash and cash equivalents at beginning of period
    
    
    383,869
    
    
    
    334,674Cash and cash equivalents at end of period
    
    $
    301,988
    
    
    $
    308,493Cash, cash equivalents, short-term investments and investments in
debt securities at end of period
    
    $
    414,030
    
    
    $
    308,493Cash paid for:Interest, net of amounts capitalized
    
    $
    7,700
    
    
    $
    5,766Income taxes
    
    $
    325
    
    
    $
    29Non-cash investing and financing activities:Payment in kind notes issued, net of returns
    
    $
    379
    
    
    $
    374Reclassification of investments in debt securities to
short-term investments
    
    $
    5,344
    
    
    $
    Notes payable issued under the aircraft purchase agreement
    
    $
    3,500
    
    
    $
    
 See accompanying notes to condensed financial statements. 12




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
March 31, 2004 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. TLC, previously a
wholly owned subsidiary of Holdings, was merged into AWA on January 1, 2004 and
continues to operate as the America West Vacations division of AWA.
Accordingly, prior period amounts have been adjusted to give effect to the
merger as if it had occurred on January 1, 2003 and all intercompany
transactions between AWA and TLC have been eliminated. See Note 7, Merger of
TLC into AWA.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 AWAs Annual Report on Form
10-K for the year ended December 31, 2003. 2. ADVANCES TO PARENT COMPANY AND AFFILIATE As of March 31, 2004, AWA had net advances to Holdings of $254.8 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 government
guaranteed loan, of which $386.1 million remains outstanding, and the term
loan, of which $75.2 million remains outstanding. AWA settled all intercompany
amounts due to TLC upon the completion of the merger of TLC on January 1, 2004. 3. STOCK OPTIONS Certain of AWAs employees are eligible to participate in the stock option
plans of Holdings. Holdings accounts for its stock option plans in accordance
with the provisions of APB Opinion No. 25, Accounting for Stock Issued to
Employees,and related interpretations. As such, compensation expense would
be recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. Holdings issues its stock
options at a price equal to the fair market value on the date of grant.
Accordingly, no compensation cost has been recognized for stock options in
Holdings condensed consolidated financial statements. Had Holdings determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, Accounting for Stock-Based Compensation,and
allocated the compensation expense to AWA for its employees participating in
the stock option plans, AWAs net income (loss) would have been reduced to the
pro forma amounts indicated below: Three Months EndedMarch 31,2004
    
    2003(in thousands)Net income (loss), as reported
    
    $
    1,945
    
    
    $
    (61,019
    )Stock-based compensation expense
    
    
    (1,270
    )
    
    
    (1,204
    )Pro forma net income (loss)
    
    $
    675
    
    
    $
    (62,223
    )
 4. FLIGHT EQUIPMENT In January 2004, AWA entered into three separate operating leases for
Airbus A320 aircraft, two with a lease term of five years and one with a lease
term of seven years. These aircraft are expected to be in service in June
2004. In February 2004, AWA sold one Boeing 737-200 aircraft recognizing a gain
of approximately $0.3 million. AWA recorded this amount in Nonoperating
Income (Expenses)  Other, Netin the accompanying condensed statements of
operations. 13




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
March 31, 2004 In the first quarter of 2004, AWA revised the estimated useful life for
certain aircraft and related spare parts inventory as a result of changes in
its fleet plan and for capitalized maintenance on certain of its engines as a
result of changes in aircraft utilization. The net impact of this change in
estimate was an increase in net income for the three months ended March 31,
2004 by $4.0 million. 5. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) includes changes in the fair value of
derivative financial instruments that qualify for hedge accounting. For the
three months ended March 31, 2004, AWA recorded total comprehensive income of
$1.5 million. For the three months ended March 31, 2003, AWA recorded a total
comprehensive loss of $48.3 million. The difference between net income (loss)
and comprehensive income (loss) for the three months ended March 31, 2004 and
2003 is detailed in the following table: Three Months EndedMarch 31,2004
    
    2003(in thousands)Net income (loss)
    
    $
    1,945
    
    
    $
    (61,019
    )Unrealized gains on derivative instruments
    
    
    2,459
    
    
    
    21,888Reclassification adjustment to net income
(loss) of previously
reported unrealized gains (losses) on
derivative instruments
    
    
    (2,900
    )
    
    
    (9,210
    )Total other comprehensive income (loss)
    
    
    (441
    )
    
    
    12,678Comprehensive income (loss)
    
    $
    1,504
    
    
    $
    (48,341
    )
 6. SPECIAL CHARGES In the first quarter of 2004, AWA recorded a $0.6 million reduction in
special charges related to the revision of estimated costs associated with the
sale and leaseback of certain aircraft. This amount is included in Other
Expensesin the accompanying condensed statements of operations. In February 2003, AWA announced the elimination of its hub operations in
Columbus, Ohio. As a result, 12 regional jets, all of which were operated by
Chautauqua Airlines under the America West Express banner, have been phased out
of the fleet. In addition, the hub has been downsized from 49 daily departures
to 15 destinations to four flights per day to Phoenix and Las Vegas. Service
to New York City La Guardia Airport was also eliminated because perimeter rules
at the airport prohibit flights beyond 1,500 miles, precluding service from
AWAs hubs in Phoenix and Las Vegas. In the first quarter of 2003, AWA recorded
special charges of $1.0 million related to the costs associated with the
termination of certain aircraft and facility contracts, employee transfer and
severance expenses and the write-off of leasehold improvements in Columbus,
Ohio. In the first quarter of 2003, AWA also recorded a $1.1 million reduction
in special charges related to the earlier-than-planned return of certain leased
aircraft in 2001 and 2002, as all payments related to these aircraft returns
have been made. The following table presents the payments and other settlements made
during the three months ended March 31, 2004 related to the special charge
accruals: ContractReductions-
    
    Termination/Sale-Leaseback
    
    Fleet Restructuring
    
    in-force
    
    Other Costs
    
    Total(in thousands)Balance at December 31, 2003
    
    $
    605
    
    
    $
    1,389
    
    
    $
    307
    
    
    $
    2,649
    
    
    $
    4,950Revision of estimate
    
    
    (600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (600
    )Increase due to TLC merger at 01/01/04
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    50Payments
    
    
    (5
    )
    
    
    (180
    )
    
    
    (275
    )
    
    
    (515
    )
    
    
    (975
    )Balance at March 31, 2004
    
    $
    
    
    
    $
    1,209
    
    
    $
    82
    
    
    $
    2,134
    
    
    $
    3,425
 AWA expects to make payments related to these special charges through the
fourth quarter of 2005. 14




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
March 31, 2004 7. MERGER OF TLC INTO AWA On January 1, 2004, TLC was merged into AWA. As a result of the merger,
TLC, which is one of the nations largest tour operators, ceased to exist as a
separate legal entity and instead became a division of AWA. This merger was
intended to save costs and streamline operations for the Company and did not
change any operating procedures. The assets and liabilities of TLC have been
recorded at historical cost. The condensed balance sheet of AWA as of December 31, 2003 and condensed
statement of operations for the three months ended March 31, 2003, after giving
effect to the merger, are set forth below. America West Airlines, Inc.
Condensed Balance Sheet
For the Year Ended December 31, 2003
(Unaudited) AWA
    
    
    
    
    
    Eliminations/As Reported
    
    TLC
    
    Adjustments
    
    Combined(in thousands)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    393,835
    
    
    $
    7,040
    
    
    $
    (17,006
    ) (a)
    
    $
    383,869Short-term investments
    
    
    72,890
    
    
    
    
    
    
    
    
    
    
    
    72,890Restricted cash
    
    
    42,900
    
    
    
    
    
    
    
    
    
    
    
    42,900Accounts receivable, net
    
    
    72,248
    
    
    
    4,987
    
    
    
    
    
    
    
    77,235Advances to parent company and affiliate, net.
    
    
    
    
    
    
    16,598
    
    
    
    (16,598
    ) (a)
    
    
    Expendable spare parts and supplies, net
    
    
    58,575
    
    
    
    
    
    
    
    
    
    
    
    58,575Prepaid expenses
    
    
    128,238
    
    
    
    3,546
    
    
    
    (2,490
    ) (b)
    
    
    129,294Total current assets
    
    
    768,686
    
    
    
    32,171
    
    
    
    (36,094
    )
    
    
    764,763Property and equipment:Flight equipment
    
    
    858,395
    
    
    
    
    
    
    
    
    
    
    
    858,395Other property and equipment
    
    
    263,907
    
    
    
    7,685
    
    
    
    
    
    
    
    271,592Equipment purchase deposits
    
    
    46,050
    
    
    
    
    
    
    
    
    
    
    
    46,0501,168,352
    
    
    
    7,685
    
    
    
    
    
    
    
    1,176,037Less accumulated depreciation and amortization
    
    
    563,213
    
    
    
    6,255
    
    
    
    
    
    
    
    569,468Net property and equipment
    
    
    605,139
    
    
    
    1,430
    
    
    
    
    
    
    
    606,569Other assets:Investments in debt securities
    
    
    40,740
    
    
    
    
    
    
    
    
    
    
    
    40,740Restricted cash
    
    
    69,876
    
    
    
    
    
    
    
    
    
    
    
    69,876Advances to parent company, net
    
    
    213,078
    
    
    
    52,732
    
    
    
    (11,018
    ) (a)
    
    
    254,792Other assets, net
    
    
    138,854
    
    
    
    21
    
    
    
    (16,150
    ) (c)
    
    
    122,725Total other assets
    
    
    462,548
    
    
    
    52,753
    
    
    
    (27,168
    )
    
    
    488,133$
    1,836,373
    
    
    $
    86,354
    
    
    $
    (63,262
    )
    
    $
    1,859,465
 15




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
March 31, 2004 America West Airlines, Inc.
Condensed Balance Sheet
For the Year Ended December 31, 2003
(Unaudited) AWA
    
    
    
    
    
    Eliminations/As Reported
    
    TLC
    
    Adjustments
    
    Combined(in thousands)Liabilities and stockholders equityCurrent liabilities:Current maturities of long-term debt
    
    $
    103,899
    
    
    $
    
    
    
    $
    
    
    
    $
    103,899Current obligations under capital leases
    
    
    3,442
    
    
    
    
    
    
    
    
    
    
    
    3,442Accounts payable
    
    
    203,146
    
    
    
    6,226
    
    
    
    
    
    
    
    209,372Payable to affiliate, net
    
    
    27,231
    
    
    
    
    
    
    
    (25,304
    )(a)
    
    
    1,927Air traffic liability
    
    
    174,486
    
    
    
    
    
    
    
    
    
    
    
    174,486Accrued compensation and vacation benefits
    
    
    60,847
    
    
    
    198
    
    
    
    
    
    
    
    61,045Accrued taxes
    
    
    30,516
    
    
    
    19,336
    
    
    
    (25,735
    )(a)(d)
    
    
    24,117Other accrued liabilities
    
    
    41,060
    
    
    
    20,707
    
    
    
    (2,489
    )(b)(e)
    
    
    59,278Total current liabilities
    
    
    644,627
    
    
    
    46,467
    
    
    
    (53,528
    )
    
    
    637,566Long-term debt, less current maturities
    
    
    688,965
    
    
    
    
    
    
    
    
    
    
    
    688,965Capital leases, less current obligations
    
    
    8,467
    
    
    
    
    
    
    
    
    
    
    
    8,467Deferred credits and other liabilities
    
    
    139,867
    
    
    
    6
    
    
    
    (6
    )
    
    
    139,867Stockholders equity:Preferred stock
    
    
    
    
    
    
    16,150
    
    
    
    (16,150
    )(c)
    
    
    Class B common stock, $.01 par value. Authorized
1,000 shares: issued and outstanding 1,000 shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    555,115
    
    
    
    1
    
    
    
    (1
    )
    
    
    555,115Retained earnings (deficit)
    
    
    (213,195
    )
    
    
    23,730
    
    
    
    6,423
    (d)
    
    
    (183,042
    )Accumulated other comprehensive income
    
    
    12,527
    
    
    
    
    
    
    
    
    
    
    
    12,527Total stockholders equity
    
    
    354,447
    
    
    
    39,881
    
    
    
    (9,728
    )
    
    
    384,600$
    1,836,373
    
    
    $
    86,354
    
    
    $
    (63,262
    )
    
    $
    1,859,465
   (a)
    
    Prior
to the effectiveness of the merger, AWA settled its inter-company
obligation to TLC for credit card receipts of approximately
$25 million. TLC settled its obligation to Holdings for inter-company taxes of
approximately $28 million, of which $8.7 million was
classified in advances to parent company and affiliate. The settlement of inter-company taxes was
accomplished using $17 million in cash (of which approximately $7
million was TLCs at December 31, 2003) and the remaining $11 million
was reflected as a reduction in advances to Holdings.(b)
    
    To eliminate approximately $2.5 million of
airline tickets sold by AWA to TLC.(c)
    
    To reflect the cancellation of approximately $16 million in TLC
preferred stock held by AWA.(d)
    
    TLC reported income tax expense of $6.4 million for the year ended
December 31, 2003 on a stand alone basis. On a pro forma basis,
AWAs tax benefits were utilized by TLC, which eliminated income
tax expense and resulted in a corresponding decrease in AWAs tax valuation
allowance. As a result, pro forma accrued taxes and retained deficit decreased by
this amount. 16




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
March 31, 2004 America West Airlines, Inc.
Condensed Statement of Operations
For the Three Months Ended March 31, 2003
(Unaudited) AWA
    
    
    
    
    
    Eliminations/As Reported
    
    TLC
    
    Adjustments
    
    Combined(In thousands)Operating revenues:Passenger
    
    $
    500,574
    
    
    $
    
    
    
    $
    
    
    
    $
    500,574Cargo
    
    
    7,056
    
    
    
    
    
    
    
    
    
    
    
    7,056Other
    
    
    6,775
    
    
    
    8,802
    
    
    
    (144
    )(a)
    
    
    15,433Total operating revenues
    
    
    514,405
    
    
    
    8,802
    
    
    
    (144
    )
    
    
    523,063Operating expenses:Salaries and related costs
    
    
    160,496
    
    
    
    1,961
    
    
    
    
    
    
    
    162,457Aircraft rents
    
    
    75,154
    
    
    
    
    
    
    
    
    
    
    
    75,154Other rents and landing fees
    
    
    39,760
    
    
    
    144
    
    
    
    (144
    )(a)
    
    
    39,760Aircraft fuel
    
    
    93,356
    
    
    
    
    
    
    
    
    
    
    
    93,356Agency commissions
    
    
    6,192
    
    
    
    2,632
    
    
    
    
    
    
    
    8,824Aircraft maintenance materials and repairs
    
    
    64,208
    
    
    
    
    
    
    
    
    
    
    
    64,208Depreciation and amortization
    
    
    17,474
    
    
    
    189
    
    
    
    
    
    
    
    17,663Other
    
    
    104,512
    
    
    
    2,249
    
    
    
    
    
    
    
    106,761Total operating expenses
    
    
    561,152
    
    
    
    7,175
    
    
    
    (144
    )
    
    
    568,183Operating income (loss)
    
    
    (46,747
    )
    
    
    1,627
    
    
    
    
    
    
    
    (45,120
    )Nonoperating income (expenses):Interest income
    
    
    3,057
    
    
    
    65
    
    
    
    
    
    
    
    3,122Interest expense, net
    
    
    (20,241
    )
    
    
    
    
    
    
    
    
    
    
    (20,241
    )Other, net
    
    
    1,220
    
    
    
    
    
    
    
    
    
    
    
    1,220Total nonoperating income (expenses), net
    
    
    (15,964
    )
    
    
    65
    
    
    
    
    
    
    
    (15,899
    )Income (loss) before income taxes
    
    
    (62,711
    )
    
    
    1,692
    
    
    
    
    
    
    
    (61,019
    )Income taxes
    
    
    
    
    
    
    658
    
    
    
    (658
    )(b)
    
    
    Net income (loss)
    
    $
    (62,711
    )
    
    $
    1,034
    
    
    $
    658
    
    
    $
    (61,019
    )
   (a)
    
    TLC paid rent in the amount
of $144,000 to AWA for space it occupied in certain AWA facilities. This
rent was reflected in other revenues by AWA and in operating expenses by
TLC. This adjustment eliminates those amounts.(b)
    
    TLC reported income tax expense of
$0.7 million on a stand alone basis. On a pro forma basis,
AWAs tax benefits were utilized by TLC, which
eliminated income tax expense and resulted in a corresponding
decrease in AWAs tax valuation allowance. 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. 17




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Holdings is the parent company of AWA. AWA is the eighth largest
passenger airline and the second largest low cost carrier in the United States
operating through its hubs located in Phoenix, Arizona and Las Vegas, Nevada.
As of March 31, 2004, AWA served 62 destinations in North America, including
eight destinations in Mexico, three in Canada and one in Costa Rica. TLC,
previously a wholly owned subsidiary of Holdings, was merged into AWA on
January 1, 2004 and continues to operate as the America West Vacations (AWV)
division of AWA. See Note 7, Merger of TLC into AWAin Notes to Condensed
Financial Statements of AWA. AWV arranges and sells vacation packages
primarily to Las Vegas, Nevada that may include airfare, hotel accommodations
and ground transportation. Holdings primary business activity is ownership
of all the capital stock of AWA. Overview In the first quarter of 2004, Holdings realized an operating profit of
$17.8 million and a pretax and net profit of $1.2 million, or $0.02 per diluted
share. During the first quarter, we benefited from the following:  
    
    Aggressive yield management and continued favorable consumer
response to our business-friendly fare structure, which was implemented
in March 2002. Passenger revenue per available seat mile (RASM) of
7.31 cents for the first quarter of 2004 was flat when compared to the
2003 first quarter, despite a 6.9% increase in average daily aircraft
utilization and a 5.2% increase in average stage length.
    
    Operating cost per available seat mile (CASM) decreased 8.5% to
7.59 cents, despite an increase in the average fuel price per gallon of
13.8% from 90.0 cents in the first quarter of 2003 to 102.4 cents per
gallon in the first quarter of 2004. The primary drivers of AWAs CASM
improvement during the first quarter of 2004 were the increases in
aircraft utilization and stage length discussed above, as well as the
Companys cost reduction plan implemented in early 2003.
    
    Continued solid operational performance, despite a record first
quarter load factor of 72.2%, which was an increase of 1.1 points from
the same period last year. As of March 31, 2004, Holdings unrestricted and restricted cash, cash
equivalents, short-term investments and investments in debt securities totaled
$545.0 million. Although there can be no assurances, we believe that cash flow
from operating activities, coupled with existing cash balances and financing
commitments, will be adequate to fund our operating and capital needs as well
as enable us to maintain compliance with our various debt agreements through at
least December 31, 2004. Airline Operations Update AWA reported the following operating statistics to the U.S. Department of
Transportation (DOT) for the first quarters of 2004 and 2003: Percent Change2004
    
    2003
    
    2004  2003Jan
    
    Feb
    
    Mar
    
    Jan
    
    Feb
    
    Mar
    
    Jan
    
    Feb
    
    MarOn-time performance(a)
    
    
    76.3
    
    
    
    71.7
    
    
    
    74.8
    
    
    
    77.8
    
    
    
    72.2
    
    
    
    79.5
    
    
    
    (1.9
    )
    
    
    (0.7
    )
    
    
    (5.9
    )Completion factor (b)
    
    
    98.1
    
    
    
    98.2
    
    
    
    98.6
    
    
    
    97.6
    
    
    
    97.4
    
    
    
    98.8
    
    
    
    0.5
    
    
    
    0.8
    
    
    
    (0.2
    )Mishandled baggage (c)
    
    
    3.96
    
    
    
    3.58
    
    
    
    3.50
    
    
    
    4.50
    
    
    
    4.31
    
    
    
    3.52
    
    
    
    (12.0
    )
    
    
    (16.9
    )
    
    
    (0.6
    )Customer complaints (d)
    
    
    1.23
    
    
    
    0.97
    
    
    
    1.28
    
    
    
    1.42
    
    
    
    1.25
    
    
    
    1.09
    
    
    
    (13.4
    )
    
    
    (22.4
    )
    
    
    17.4
   (a)
    
    Percentage of reported flight operations arriving on time.(b)
    
    Percentage of scheduled flight operations completed.(c)
    
    Rate of mishandled baggage reports per 1,000 passengers. 18




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004  (d)
    
    Rate of customer complaints filed with the DOT per 100,000
passengers. We continue to see positive trends in our key statistics with the
exception of our on-time performance. Runway construction in Phoenix and poor
weather in Phoenix and Las Vegas hurt our on-time performance in the first
quarter. Summary of Holdings Financial Results Holdings recorded consolidated net income of $1.2 million in the first
quarter of 2004, or $0.02 per diluted share. This compares to a consolidated
net loss of $62.0 million, or $1.84 per diluted share, in the first quarter of
2003. The 2004 results include a $4.0 million reduction in operating expenses
related to a change in the estimated useful life for certain aircraft and
related spare parts inventory as a result of changes in AWAs fleet plan and
for capitalized maintenance on certain of its engines as a result of changes in
aircraft utilization. See Note 3, Flight Equipmentin Notes to Condensed
Consolidated Financial Statements. The 2004 results also include a $2.5
million credit to operating revenues related to the reduction of certain
obligations based upon a settlement with Mesa Airlines, a $2.0 million
reduction in operating expenses resulting from the settlement of a lawsuit
related to certain computer hardware and software that had previously been
written off, a $1.7 million reduction in bad debt expense due to recovery of a
previously reserved debt and a $0.6 million reduction in special charges due to
a revision of the estimated costs related to certain aircraft sale-leaseback
transactions. The 2003 results include an operating gain of $4.4 million related to the
purchase and subsequent exchange of an A320 airframe and an operating gain of
$1.1 million due to a revision of the estimated costs related to the early
termination of certain aircraft leases. These gains were offset in part by a
special charge of $1.0 million resulting from the elimination of AWAs hub
operations in Columbus, Ohio. The Company did not record income tax expense in the first quarter of 2004
as it currently expects to use net operating losses generated in prior years to
offset any profits expected to be realized for the full year 2004. RESULTS OF OPERATIONS The following discussion provides an analysis of AWAs results of
operations for the first quarter of 2004 and material changes compared to the
first quarter of 2003. The table below sets forth selected operating data for AWA. Three Months EndedMarch 31,
    
    Percent Change2004
    
    2003
    
    2004-2003Aircraft (end of period)
    
    
    138
    
    
    
    142
    
    
    
    (2.8
    )Average daily aircraft utilization (hours)(a)
    
    
    10.8
    
    
    
    10.1
    
    
    
    6.9Available seat miles (in millions) (b)
    
    
    7,352
    
    
    
    6,852
    
    
    
    7.3Block hours (c)
    
    
    136,678
    
    
    
    130,104
    
    
    
    5.1Average stage length (miles) (d)
    
    
    1,037
    
    
    
    986
    
    
    
    5.2Average passenger journey (miles) (e)
    
    
    1,594
    
    
    
    1,434
    
    
    
    11.2Revenue passenger miles (in millions) (f)
    
    
    5,306
    
    
    
    4,872
    
    
    
    8.9Load factor (percent) (g)
    
    
    72.2
    
    
    
    71.1
    
    
    
    1.1


    ptsPassenger enplanements (in thousands) (h)
    
    
    4,897
    
    
    
    4,655
    
    
    
    5.2Yield per revenue passenger mile (cents) (i)
    
    
    10.13
    
    
    
    10.27
    
    
    
    (1.4
    )Revenue per available seat mile:Passenger (cents) (j)
    
    
    7.31
    
    
    
    7.31
    
    
    
    Total (cents) (k)
    
    
    7.84
    
    
    
    7.63
    
    
    
    2.8Fuel consumption (gallons in millions)
    
    
    108.5
    
    
    
    103.8
    
    
    
    4.5Average fuel price (cents per gallon)
    
    
    102.4
    
    
    
    90.0
    
    
    
    13.8Average number of full-time equivalent employees
    
    
    11,827
    
    
    
    12,309
    
    
    
    (3.9
    )
   (a)
    
    Average daily aircraft utilization  The average number of
block hours per day for all aircraft in service.(b)
    
    Available seat mile (ASM)  A basic measure of production.
It is one seat flown one mile. 19




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004  (c)
    
    Block hours  The hours measured from the moment an aircraft
first moves under its own power, including taxi time, for the
purposes of flight until the aircraft is docked at the next point of
landing and its power is shut down.(d)
    
    Average stage length  The average of the distances flown on
each segment of every route.(e)
    
    Average passenger journey  The average one-way trip measured
in miles for one passenger origination.(f)
    
    Revenue passenger mile (RPM)  A basic measure of sales
volume. It is one passenger flown one mile.(g)
    
    Load factor  The percentage of available seats that are filled
with revenue passengers.(h)
    
    Passenger enplanements  The number of passengers on board an
aircraft including local, connecting and through passengers.(i)
    
    Yield  A measure of airline revenue derived by dividing
passenger revenue by revenue passenger miles and expressed in cents
per mile.(j)
    
    Passenger revenue per available seat mile (RASM)  Total
passenger revenues divided by total available seat miles.(k)
    
    Total revenue per available seat mile  Total operating
revenues divided by total available seat miles. The table below sets forth the major components of operating cost per
available seat mile (CASM) for AWA. Three Months Ended
    
    PercentMarch 31,
    
    Change2004
    
    2003
    
    2004-2003(in cents)Salaries and related costs
    
    
    2.27
    
    
    
    2.36
    
    
    
    (4.8
    )Aircraft rents
    
    
    1.02
    
    
    
    1.10
    
    
    
    (6.8
    )Other rents and landing fees
    
    
    0.56
    
    
    
    0.58
    
    
    
    (3.3
    )Aircraft fuel
    
    
    1.51
    
    
    
    1.36
    
    
    
    10.9Agency commissions
    
    
    0.09
    
    
    
    0.13
    
    
    
    (28.7
    )Aircraft maintenance materials and repairs
    
    
    0.68
    
    
    
    0.94
    
    
    
    (27.4
    )Depreciation and amortization
    
    
    0.19
    
    
    
    0.26
    
    
    
    (27.2
    )Other
    
    
    1.27
    
    
    
    1.56
    
    
    
    (18.3
    )7.59
    
    
    
    8.29
    
    
    
    (8.5
    )
 Three Months Ended March 31, 2004 and 2003 For the first quarter of 2004, AWA realized operating income of $18.6
million compared to an operating loss of $45.1 million in last years quarter.
Income before income taxes for the first quarter of 2004 was $1.9 million
compared to a loss before income taxes of $61.0 million for the comparable 2003
period. Total operating revenues for the first quarter of 2004 were $576.4
million. Passenger revenues were $537.3 million for the first quarter of 2004,
an increase of $36.8 million or 7.3% from the comparable 2003 quarter. An 8.9%
increase in RPMs was offset in part by a 7.3% increase in ASMs, resulting in a
1.1 point increase in load factor, while yield decreased 1.4%. As a result,
RASM of 7.31 cents for the first quarter of 2004 was flat when compared to the
first quarter of 2003, despite a 6.9% increase in average daily aircraft
utilization and a 5.1% increase in average stage length. Cargo revenues were
relatively flat quarter-over-quarter while other revenues increased 108.2% to
$32.1 million due primarily to increased flying for AWA by its codeshare
partner Mesa Airlines (Mesa) and a $2.5 million credit related to the
reduction of certain obligations based upon a settlement with Mesa. These
increases were offset in part by lower net revenues from the sale of America
West Vacations packages due primarily to a decrease in volume. Operating expenses in the first quarter of 2004 decreased $10.4 million or
1.8% as compared to the first quarter of 2003. ASMs increased 7.3% primarily
due to a 5.1% increase in average stage length and a 6.9% increase in aircraft
utilization offset in part by a reduction in aircraft from 142 at the end of
March 2003 to 138 on March 31, 2004. As a result, CASM decreased 8.5% to 7.59
cents in the first quarter of 2004 from 8.29 cents for the first quarter of
2003. Significant changes in the components of CASM are explained as follows: 20




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004  
    
    Salaries and related costs per ASM decreased 4.8% primarily due to
the 7.3% increase in ASMs and a 3.9% decrease in average full-time
equivalent employees (FTEs) which was offset in part by a $5.0 million
increase in pilot payroll expense as a result of the new labor agreement
with the Air Line Pilots Association (ALPA) effective December 30,
2003. The decline in FTEs was due primarily to the reduction-in-force
of certain management, professional and administrative employees and the
elimination of AWAs hub operations in Columbus, Ohio in the second
quarter of 2003.
    
    Aircraft rent expense per ASM decreased 6.8% due to the 7.3% increase
in ASMs, which was accomplished through higher utilization rather than
additional aircraft.
    
    Other rents and landing fees expense per ASM decreased 3.3% mainly
driven by the 7.3% increase in ASMs in the first quarter of 2004 offset
in part by increases in landing fees ($0.9 million) and airport rents
($0.7 million).
    
    Aircraft fuel expense per ASM increased 10.9% primarily due to a
13.8% increase in the average price per gallon of fuel to 102.4 cents in
the first quarter of 2004 from 90.0 cents in the comparable 2003
quarter. Fuel expense in the first quarter of 2004 was reduced by $3.1
million as a result of fuel hedging transactions in the quarter.
    
    Agency commissions expense per ASM decreased 28.7% due to reductions
in various travel agency incentive programs and lower override
commissions.
    
    Aircraft maintenance materials and repairs expense per ASM decreased
27.4% primarily due to decreases in aircraft C-Check ($5.0 million) and
capitalized maintenance amortization ($10.1 million) expenses. The
decrease in capitalized maintenance amortization expense was driven
primarily by changes in the estimated useful life of certain aircraft
engine overhaul costs ($3.1 million), effective April 1, 2003, driven by
a new maintenance agreement that guarantees minimum cycles on engine
overhauls and capitalized maintenance on certain engines ($2.7 million),
effective January 1, 2004, as a result of changes in aircraft
utilization. The retirement of assets related to lease return aircraft
and engines ($3.4 million) also contributed to the decrease.
    
    Depreciation and amortization expense per ASM decreased 27.2%
primarily due to the 7.3% increase in ASMs, lower amortization expense
related to aircraft leasehold improvements ($1.5 million) and computer
hardware and software ($0.9 million) and reduced capital expenditures in
2003 and 2002 as a result of the Companys cash conservation program. A
change in the estimated useful life for rotable and repairable spare
parts as a result of changes in AWAs fleet plan also contributed to the
decrease ($0.9 million).
    
    Other operating expenses per ASM decreased 18.3% due primarily to
decreases in bad debt expense ($2.8 million), property taxes ($2.7
million), catering costs ($2.2 million), airport guard services ($1.9
million), ground handling services ($1.3 million) and the 7.3% increase
in ASMs. A gain of $2.0 million resulting from the settlement of a
lawsuit related to certain computer hardware and software that had
previously been written off also contributed to the decrease. AWA had net nonoperating expenses of $16.7 million in the first quarter of
2004 compared to $15.9 million of net nonoperating expenses in the first
quarter of 2003. Interest income remained relatively flat while interest
expense increased $1.2 million due to higher average outstanding debt. LIQUIDITY AND CAPITAL RESOURCES Sources and Uses of Cash At March 31, 2004, Holdings and AWAs total cash, cash equivalents,
short-term investments, investments in debt securities and restricted cash was
$545.0 million and $525.7 million, respectively. Net cash used in operating
activities for Holdings and AWA was $1.4 million and $1.1 million,
respectively, in the first three months of 2004 compared to $21.8 million and
$21.9 million for Holdings and AWA, respectively, in the first three months of
2003. The year-over-year decrease in net cash used in operating activities of
$20.3 million and $20.8 million for Holdings and AWA, respectively, was due to
the improvement in earnings for the first quarter of 2004. 21




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 In the first quarter of 2004, net cash used in investing activities was
$33.4 million for Holdings and AWA. This compares to net cash provided by
investing activities of $1.5 million for Holdings and AWA in the first quarter
of 2003. Principal investing activities during the first three months of 2004
included purchases of property and equipment totaling $37.0 million and net
sales of short-term investments and investments in debt securities totaling
$1.1 million. The first quarter of 2003 included purchases of property and
equipment totaling $46.9 million, including $12.0 million related to the
purchase of an A320 airframe that was used to replace an airframe that was
damaged in an accident in August 2002, and sales of short-term investments
totaling $24.7 million. The 2003 period also included proceeds from the
disposition of assets totaling $23.6 million, including $12.6 million of
insurance proceeds and $3.6 million of scrap proceeds both associated with the
replaced A320 airframe discussed above, and $6.9 million related to the sale
and leaseback of 29 jet bridges at Phoenix Sky Harbor International Airport. In the first quarter of 2004, net cash used in financing activities by
both Holdings and AWA was $47.0 million, primarily debt repayments, including
the first principal payment of $42.9 million for the government guaranteed
loan. This compares to $5.8 million of debt repayments during the comparable
2003 period. Capital expenditures for the first quarter of 2004 were approximately
$37.0 million for both Holdings and AWA as compared to capital expenditures of
approximately $46.9 million for both Holdings and AWA for the first quarter of
2003. Included in these amounts are capital expenditures for capitalized
maintenance of approximately $29.8 million and $25.4 million for both Holdings
and AWA for the first quarter of 2004 and 2003, respectively. Off-Balance Sheet Arrangements The Pass Through Trusts Since AWAs restructuring in 1994, AWA has set up 19 pass through trusts,
which have issued over $1.4 billion of pass through trust certificates (also
known as Enhanced Equipment Trust Certificates or EETC) covering the
financing of 54 aircraft. These trusts are off-balance sheet entities, the
primary purpose of which is to finance the acquisition of aircraft. Rather
than finance each aircraft separately when such aircraft is purchased or
delivered, these trusts allow the Company to raise the financing for several
aircraft at one time and place such funds in escrow pending the purchase or
delivery of the relevant aircraft. The trusts are also structured to provide
for certain credit enhancements, such as liquidity facilities to cover certain
interest payments, that reduce the risks to the purchasers of the trust
certificates and, as a result, reduce the cost of aircraft financing to AWA. Each trust covered a set amount of aircraft scheduled to be delivered
within a specific period of time. At the time of each covered aircraft
financing, the relevant trust used the funds in escrow to purchase equipment
notes relating to the financed aircraft. The equipment notes were issued, at
AWAs election, either by AWA in connection with a mortgage financing of the
aircraft or by a separate owner trust in connection with a leveraged lease
financing of the aircraft. In the case of a leveraged lease financing, the
owner trust then leased the aircraft to AWA. In both cases, the equipment
notes are secured by a security interest in the aircraft. The pass through
trust certificates are not direct obligations of, nor guaranteed by, Holdings
or AWA. However, in the case of mortgage financings, the equipment notes
issued to the trusts are direct obligations of AWA and in the case of leveraged
lease financings, the leases are direct obligations of AWA. In addition,
neither Holdings nor AWA guarantee or participate in any way in the residual
value of the leased aircraft. All aircraft financed by these trusts are
currently structured as leveraged lease financings, which are not reflected as
debt on the balance sheets of either AWA or Holdings in accordance with
Financial Accounting Standards Board (FASB) Interpretation No. 46,
Consolidation of Variable Interest Entities(Fin 46). In the first quarter
of 2004, AWA made $76.1 million in lease payments in respect of the leveraged
lease financings under the pass through trusts. Other Operating Leases In addition to the aircraft financed by the pass through trust
certificates, AWA has noncancelable operating leases covering 80 aircraft, as
well as leases for certain terminal space, ground facilities and computer and
other equipment. In the first quarter of 2004, AWA made $52.5 million in lease
payments related to these operating leases. 22




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 Special Facility Revenue Bonds In June 1999, Series 1999 special facility revenue bonds (new bonds)
were issued by the Industrial Development Authority (IDA) of the City of
Phoenix to fund the retirement of the Series 1994A bonds (old bonds) and the
construction of a new concourse with 14 gates at Terminal 4 in Phoenix Sky
Harbor International Airport in support of AWAs strategic growth plan. The
new bonds are due June 2019 with interest accruing at 6.25% per annum payable
semiannually on June 1 and December 1, commencing on December 1, 1999. The new
bonds are subject to optional redemption prior to the maturity date on or after
June 1, 2009 in whole or in part, on any interest payment date at the following
redemption prices: 101% on June 1 or December 1, 2009; 100.5% on June 1 or
December 1, 2010; and 100% on June 1, 2011 and thereafter. In connection with these bonds, AWA entered into an Amended and Restated
Airport Use Agreement, pursuant to which AWA agreed to make sufficient payments
to the IDA to cover the principal and interest of the bonds and to indemnify
the IDA for any claims arising out of the issuance and sale of the bonds and
the use and occupancy of the concourses financed by these bonds and the old
bonds. At March 31, 2004, the outstanding principal amount of the bonds was
$21.8 million. The Company estimates its remaining payments to cover the
principal and interest of these bonds will be approximately $42.9 million. In
accordance with Emerging Issues Task Force (EITF) Issue No. 97-10, The
Effect of Lessee Involvement in Asset Construction,the Company accounts for
this as an operating lease. Commitments As of March 31, 2004, we had $750.4 million of long-term debt (including
current maturities). This amount consisted primarily of the government
guaranteed loan, of which $386.1 million remains outstanding, a secured term
loan with a group of financial institutions, of which $75.2 million remains
outstanding (including interest through March 31, 2004 as a deemed loan added
to the principal thereof), $39.5 million principal amount of 10 3/4% senior
unsecured notes, $104.3 million principal amount of 7.5% convertible senior
notes (including interest through March 31, 2004 as a deemed loan added to the
principal thereof) and $86.8 million issue price of 7.25% senior exchangeable
notes. Government Guaranteed Loan In January 2002, AWA closed a $429 million loan supported by a $380
million guarantee provided by the Air Transportation Stabilization Board (the
ATSB). Certain third-party counter-guarantors have fully and unconditionally
guaranteed the payment of an aggregate of $45 million of the outstanding
principal amount under the government guaranteed loan plus accrued and unpaid
interest thereon. In addition, Holdings has fully and unconditionally
guaranteed the payment of all principal, premium, interest and other
obligations outstanding under the government guaranteed loan and has pledged
the stock of AWA to secure its obligations under such guarantee. Principal
amounts under this loan become due in ten installments of $42.9 million on each
March 31 and September 30, commencing on March 31, 2004 and ending on September
30, 2008. AWA made the first principal payment of $42.9 million on March 31,
2004. In connection with the issuance of the 7.25% Senior Exchangeable Notes
in the third quarter of 2003, AWA placed $42.9 million of the net proceeds in a
cash collateral account to secure the second principal payment due on September
30, 2004. This amount has been recorded as restricted cash in the accompanying
condensed consolidated balance sheet. See 7.25% Senior Exchangeable Notes Due
2023below. Principal amounts outstanding under the government guaranteed
loan bear interest at a rate per annum equal to LIBOR plus 40 basis points. Subject to certain exceptions, we are required to prepay the government
guaranteed loan with:  
    
    the net proceeds of all issuances of debt or equity by either
Holdings or AWA after January 2002;
    
    proceeds from asset sales in excess of $20 million in any fiscal
year to the extent such proceeds are not applied to redeem AWAs
103/4% senior notes due 2005; and
    
    insurance proceeds in excess of $2 million to the extent such
proceeds are not used to restore or replace the assets from which such
proceeds are derived. 23




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 In addition, we are required to prepay the government guaranteed loan upon
a change in control and we may be required to prepay portions of the loan if
our employee compensation costs exceed a certain threshold. We may, at our
option, prepay the government guaranteed loan without premium or penalty,
subject to reimbursement of the lenders breakage costs in the case of
prepayment of LIBOR loans. The government guaranteed loan requires that AWA maintain a minimum cash
balance of $100 million. In addition, the government loan contains customary
affirmative covenants and the following negative covenants: restrictions on
liens, investments, restricted payments, changes in our fundamental business,
asset sales and acquisitions, the creation of new subsidiaries, sale-leaseback
transactions, transactions with affiliates, continued existence, mergers or
consolidations, issuances and dispositions of capital stock of subsidiaries,
and amendments to other indebtedness. The government guaranteed loan contains
customary events of default, including payment defaults, cross-defaults, breach
of covenants, bankruptcy and insolvency defaults and judgment defaults. Term Loan In connection with the closing of the government guaranteed loan and the
related transactions, AWA converted its existing revolving credit facility into
a term loan with the Mizuho Corporate Bank, Ltd., as successor by merger to the
Industrial Bank of Japan, Limited, and certain other lenders. As of March 31,
2004, $75.2 million remains outstanding under the term loan (including interest
paid through March 31, 2004 as a deemed loan added to the initial principal
thereof.) Principal amounts under the term loan become due in two installments
of $30 million on December 31, 2005 and December 31, 2006 with the remaining
amounts becoming due and payable in full on December 31, 2007. Principal
amounts outstanding under the term loan bear interest at a rate per annum equal
to, at our option,
either the Base Rate or the Eurodollar Rate (which is based on LIBOR), in
each case plus an applicable margin. The applicable margin adjusts based on
the length of time the term loan has been outstanding. The term Base Rate
has a meaning customary and appropriate for financings of this type. In
addition, principal amounts outstanding under the term loan bear interest in
kind at a rate of 2% through December 31, 2004. The prepayment requirements and covenants of the term loan are
substantially similar to those of the government guaranteed loan. We may, at
our option, prepay the term loan without premium or penalty, subject to
reimbursement of the lenders breakage costs in the case of prepayment of loans
bearing the Eurodollar Rate. The term loan is secured by a first priority
perfected security interest in certain of our spare engines, rotable aircraft
parts inventory and a maintenance facility. We may be required to prepay
portions of the loan if the fair market value of the collateral, as determined
by independent appraisers, decreases. The term loan contains customary events
of default, including payment defaults, cross-defaults, breach of covenants,
bankruptcy and insolvency defaults and judgment defaults. 10 3/4% Senior Notes due 2005 In
August 1995, AWA issued $75.0 million principal amount of
10 3/4%
senior notes due 2005 of which $39.5 million remained outstanding at March 31,
2004. Interest on the 10 3/4% senior notes is payable semiannually in arrears
on March 1 and September 1 of each year. We
may redeem the 10 3/4% senior notes, in whole or in part, at a
redemption price of 100%. If AWA undergoes a change of control, it may be
required to repurchase the 10 3/4% senior notes at a price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of repurchase. If AWA sells certain assets, it may be required to use the
net cash proceeds to repurchase the 10 3/4% senior notes at 100% of the
principal amount, plus accrued and unpaid interest, to the date of purchase. The
indenture governing the 10 3/4% senior notes contains certain
covenants that, among other things, limit our ability to pay dividends or make
distributions to our stockholders, repurchase or redeem capital stock, make
investments or other restricted payments, enter into transactions with our
stockholders and affiliates, sell assets (including the stock of our
subsidiaries) and merge or consolidate with other companies. The indenture
governing the 10 3/4% senior notes also contains customary events of default,
including payment defaults, cross-defaults, breach of covenants, bankruptcy and
insolvency defaults and judgment defaults. 24




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 7.5% Convertible Senior Notes due 2009 In connection with the closing of the government guaranteed loan and the
related transactions, Holdings issued $104.5 million of 7.5% convertible senior
notes due 2009, of which approximately $104.3 million remained outstanding at
March 31, 2004 (including interest paid through March 31, 2004 as a deemed loan
added to the principal thereof). Beginning January 18, 2005, these notes are
convertible into shares of Class B common stock, at the option of the holders,
at an initial conversion price of $12.00 per share or a conversion ratio of
approximately 83.333 shares per $1,000 principal amount of such notes, subject
to standard anti-dilution adjustments. Interest on the 7.5% convertible senior
notes is payable semiannually in arrears on June 1 and December 1 of each year.
At Holdings option, the first six interest payments may be paid in the form
of a deemed loan added to the principal amount of these notes. The 7.5%
convertible senior notes will mature on January 18, 2009 unless earlier
converted or redeemed. The payment of principal, premium and interest on the
7.5% convertible senior notes is fully and unconditionally guaranteed by AWA. Holdings may redeem some or all of the 7.5% convertible senior notes at
any time before January 18, 2005, at a redemption price equal to $1,000 per
note to be redeemed if (A) the closing price of the Class B common stock has
exceeded 120% of the conversion price then in effect for at least 20 trading
days within a period of 30 consecutive trading days ending on the trading day
before the date of the mailing of the redemption notice, and (B) a shelf
registration statement covering resales of the notes and the Class B common
stock issuable upon conversion thereof is effective and available for use and
is expected to remain effective and available for use for the 30 days following
the redemption date, unless registration is no longer required. Holdings may
redeem the 7.5% convertible senior notes, in whole or in part, on or after
January 18, 2005 at the following redemption prices (expressed as percentages
of the principal amount thereof), if redeemed during the twelve-month period
commencing on January 18 of the years set forth below, plus, in each case,
accrued and unpaid interest, if any, to the date of redemption: Year
    
    Redemption Price2005
    
    
    103.75
    %2006
    
    
    102.50
    %2007
    
    
    101.25
    %2008 and thereafter
    
    
    100.00
    %
 7.25% Senior Exchangeable Notes due 2023 In July and August of 2003, AWA completed a private placement of
approximately $86.8 million issue price of 7.25% Senior Exchangeable Notes due
2023. The notes bear cash interest until July 30, 2008. Thereafter, the notes
will cease bearing cash interest and begin accruing original issue discount
daily at a rate of 7.25% per year until maturity. Each note was issued at a
price of $343.61 and is exchangeable for Class B common stock of Holdings at an
exchange ratio of 32.038 shares per $1,000 principal amount at maturity of the
notes (subject to adjustment in certain circumstances). This represents an
equivalent conversion price of approximately $10.73 per share. The aggregate
amount due at maturity, including accrued original issue discount from July 31,
2008, will be $252,695,000. The notes are unconditionally guaranteed on a
senior unsecured basis by Holdings. Holders may exchange their notes for the shares of Class B common stock of
Holdings at any time, if, as of the last day of the preceding fiscal quarter,
the closing sale price of the Class B common stock for at least 20 trading days
in a period of 30 consecutive trading days ending on the last trading day of
such preceding fiscal quarter is more than 110% of the accreted exchange price
per share of Class B common stock on the last day of such preceding fiscal
quarter. If the foregoing condition is satisfied, then the notes will be
exchangeable at any time at the option of the holder through maturity. The
accreted exchange price per share as of any day will equal the issue price of a
note plus accrued original issue discount to that day divided by 32.038,
subject to any adjustments to the exchange rate through that day. On or before July 30, 2018, a holder also may exchange its notes for
shares of the Class B common stock at any time after a 10 consecutive
trading-day period in which the average of the trading prices for the notes for
that 10 trading-day period was less than 103% of the average exchange value for
the notes during that period. Exchange value is equal to the product of the
closing sale price for the shares of Class B common stock on a given day
multiplied by the then current exchange rate, which is the number of shares of
Class B common stock for which each note is then 25




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 exchangeable. In addition, the holders may exchange the notes if the notes have been
called for redemption or if certain specified corporate transactions have
occurred. Holders of the notes may require AWA to repurchase the notes at a price
equal to the original issue price plus accrued cash interest and original issue
discount, if any, on July 30, 2008, 2013 and 2018. The purchase price of such
notes may be paid in cash or Class B common stock of Holdings, subject to
certain restrictions. In addition, each holder may require AWA to purchase all
or a portion of such holders notes upon the occurrence of certain change of
control events concerning AWA or Holdings. AWA may redeem the notes, in whole
or in part, on or after July 30, 2008 at a price equal to the original issue
price plus accrued cash interest and original issue discount, if any. In connection with the offering AWA placed $42.9 million of the net
proceeds in a cash collateral account to secure the scheduled principal and
interest payments on certain of its indebtedness through September 30, 2004.
This amount has been recorded as restricted cash in the accompanying condensed
consolidated balance sheet. Other Indebtedness and Obligations In addition to the above described indebtedness, we had $44.2 million of
secured equipment notes and $39.6 million of other unsecured indebtedness,
including $29.3 million of industrial revenue bonds. The following table sets forth our cash obligations as of March 31, 2004. Beyond2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    2008
    
    Total(In thousands)Long-term debt:Equipment notes  non-EETC (1)
    
    $
    4,685
    
    
    $
    8,305
    
    
    $
    8,305
    
    
    $
    7,772
    
    
    $
    15,083
    
    
    $
    
    
    
    $
    44,150Term loan (2)
    
    
    3,489
    
    
    
    30,000
    
    
    
    30,000
    
    
    
    11,665
    
    
    
    
    
    
    
    
    
    
    
    75,1547.5% convertible senior notes due
2009(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,328
    
    
    
    104,3287.25% senior exchangeable notes
due 2023 (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    252,695
    
    
    
    252,695Government guaranteed loan (5)
    
    
    42,900
    
    
    
    85,800
    
    
    
    85,800
    
    
    
    85,800
    
    
    
    85,800
    
    
    
    
    
    
    
    386,100State loan (6)
    
    
    750
    
    
    
    250
    
    
    
    250
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    1,500103/4% senior unsecured notes due 2005
    
    
    
    
    
    
    39,548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,548Industrial development bonds (7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,300
    
    
    
    29,300AVSA promissory notes (8)
    
    
    5,250
    
    
    
    3,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,75057,074
    
    
    
    167,403
    
    
    
    124,355
    
    
    
    105,487
    
    
    
    100,883
    
    
    
    386,323
    
    
    
    941,525Cash aircraft rental payments (9)
    
    
    209,397
    
    
    
    317,457
    
    
    
    291,890
    
    
    
    274,312
    
    
    
    227,895
    
    
    
    1,834,322
    
    
    
    3,155,273Lease payments on equipment and
facility operating leases (10)
    
    
    15,455
    
    
    
    19,498
    
    
    
    17,614
    
    
    
    15,540
    
    
    
    15,754
    
    
    
    62,864
    
    
    
    146,725Capital lease obligations
    
    
    4,425
    
    
    
    4,744
    
    
    
    4,988
    
    
    
    1,773
    
    
    
    
    
    
    
    
    
    
    
    15,930Special facility revenue bonds (11)
    
    
    1,363
    
    
    
    1,363
    
    
    
    1,363
    
    
    
    1,362
    
    
    
    1,362
    
    
    
    36,106
    
    
    
    42,919Aircraft purchase commitments (12)
    
    
    91,281
    
    
    
    84,780
    
    
    
    223,362
    
    
    
    263,941
    
    
    
    
    
    
    
    
    
    
    
    663,364Engine maintenance commitments (13)
    
    
    18,500
    
    
    
    24,000
    
    
    
    12,000
    
    
    
    6,000
    
    
    
    2,000
    
    
    
    
    
    
    
    62,500Total
    
    $
    397,495
    
    
    $
    619,245
    
    
    $
    675,572
    
    
    $
    668,415
    
    
    $
    347,894
    
    
    $
    2,319,615
    
    
    $
    5,028,236
   (1)
    
    Includes approximately $44.2 million of equipment notes with variable interest rates of 2.13% to 2.63%, averaging
2.24%, installments due 2004 through 2008.(2)
    
    Includes a $71.7 million secured term loan maturing at year-end 2007 with a variable interest rate of 3.37% and
$3.5 million of interest paid in kind through March 31, 2004 at a fixed rate of 2%. Excludes $1.1 million of interest
payable in kind through December 2004.(3)
    
    Includes $90.7 million principal amount of 7.5% convertible senior notes, due 2009, and $13.6 million of interest
paid in kind through March 31, 2004. For financial reporting purposes, we recorded the convertible senior notes at
their fair market value on the date of issuance. As of March 31, 2004, the balance of the convertible senior notes in
the accompanying condensed consolidated balance sheet is approximately $65.7 million. 26




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004  (4)
    
    Includes $252.7 million principal amount of 7.25% senior exchangeable notes due July 2023 with cash interest
payable through July 2008 at a rate of 2.49% on the principal amount at maturity. Thereafter, the notes will cease
bearing cash interest and begin accruing original issue discount at a rate of 7.25% until maturity. The aggregate
amount due at maturity, including accrued original issue discount from July 31, 2008, will be $252.7 million.(5)
    
    Government guaranteed loan includes $386.1 million with a variable interest rate of 1.6% at March 31, 2004 and
ratable principal payments due 2004 through 2008. Guarantee fees of approximately 8.0% of the outstanding guaranteed
principal balance in 2004 through 2008 are payable to the U.S. Treasury Department and other loan participants.(6)
    
    Includes Arizona State loan of $1.5 million due December 2007 with a variable interest rate of 4.65% at March 31,
2004.(7)
    
    Includes $29.3 million of 6.3% industrial development bonds due April 2023.(8)
    
    Includes AVSA promissory notes of $8.8 million due 2004 with a variable interest rate of 2.38% at March 31, 2004.(9)
    
    Includes non-cancelable operating leases for 135 aircraft with remaining terms ranging from four months to
approximately 21 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 19 Airbus aircraft and four spare engines for delivery in 2004 through
2007.(13)
    
    Includes minimum commitments under AWAs rate per engine hour agreement with General Electric Engine Services for
overhaul maintenance services on V2500-A1 and CFM56-3B engines through April 2008. Minimum monthly commitment
amounts: for the period through and including April 2004  $2.5 million, for the period from May 2004 through and
including April 2006  $2.0 million, for the period May 2006 through and including April 2008  $500,000. We expect to fund these cash obligations from funds provided by operations
and future financings, if necessary. The cash available to us from these
sources, however, may not be sufficient to cover these cash obligations because
economic factors outside our control may reduce the amount of cash generated by
operations or increase our costs. For instance, a further economic downturn or
other events, including future hostilities and terrorist attacks or infectious
disease outbreaks, such as Severe Acute Respiratory Syndrome, could reduce the
demand for air travel, which would reduce the amount of cash generated by
operations. An increase in our costs, either due to an increase in
borrowing costs caused by a reduction in our credit rating or a general
increase in interest rates or due to an increase in the cost of fuel,
maintenance, aircraft and aircraft engines and parts, could decrease the amount
of cash available to cover the cash obligations. In addition, we may be
required to prepay portions of the government guaranteed loan if our employee
compensation costs exceed a certain threshold and we may be required to prepay
portions of the term loan to the extent the value of the collateral securing
the term loan decreases. In any of these cases, our liquidity may be adversely
affected and we may not have sufficient cash to prepay the government loan and
meet our other obligations. Moreover, certain of our long-term debt agreements
contain a $100 million minimum cash balance requirement. As a result, we
cannot use all of our available cash to fund operations, capital expenditures
and cash obligations without violating this requirement. Although there can be no assurances, we believe that cash flow from
operating activities coupled with existing cash balances, will be adequate to
fund our operating and capital needs as well as enable us to maintain
compliance with our various debt agreements through at least December 31, 2004. Financial Covenants and Credit Rating In addition to the minimum cash balance requirements, our long-term debt
agreements contain various negative covenants that restrict our actions,
including our ability to pay dividends, together with any other restricted
payments. Moreover, under the terms of the government guaranteed loan, we are
prohibited from paying cash dividends prior to repayment of the loan in full.
Finally, our long-term debt agreements contain cross-default provisions, which
may be triggered by defaults by us under other agreements relating to
indebtedness. See Risk 27




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 Factors Relating to America West and Industry Related
Risks  Our high level of indebtedness and fixed costs limits our ability to
fund general corporate requirements and obtain additional financing, limits our
flexibility in responding to competitive developments and increases our
vulnerability to adverse economic and industry conditions.As of March 31,
2004, Holdings and AWA were in compliance with the covenants in their long-term
debt agreements. In March 2004, Moodys raised its credit ratings on AWA to B3 from Caa1
for its senior implied rating and to Caa2 from Caa3 for its senior unsecured
debt rating. Standard & Poors currently rates AWAs and Holdings corporate
credit ratings at B- and AWAs senior unsecured rating at CCC and Fitch
Ratings rates AWAs long-term and senior unsecured debt rating at CCC. Our
relatively low credit ratings may impair our ability to incur additional
indebtedness. 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. Any downgrade of our credit ratings may
indicate a decline in our business and in our ability to satisfy our
obligations under our indebtedness. See Risk Factors Relating to America
West and Industry Related Risks  Because of our relatively low credit ratings,
our borrowing costs may be high and our ability to incur additional debt may be
impaired. Other Information Labor Relations On January 13, 2003, negotiations commenced with the Transportation
Workers Union (TWU) on a second contract covering the Companys dispatchers.
On September 17, 2003, TWU filed a petition for mediation with the National
Mediation Board (NMB). Mediated discussions began on October 15, 2003 and a
tentative agreement for a new four-year contract was announced on February 20,
2004. On March 26, 2004, TWU informed the Company that a majority of
dispatchers voted against ratification of the tentative agreement. The Company
expects to resume negotiations with TWU under the guidance of the NMB. Negotiations with the International Brotherhood of Teamsters  Airline
Division (IBT) on a second contract covering the Companys mechanics and
related employees commenced on October 9, 2003 and will continue in 2004. Negotiations with the Association of Flight Attendants  Communications
Workers of America (AFA) on a second contract covering the Companys flight
attendants commenced on February 4, 2004 and will continue in 2004. Related Party Transactions As part of our 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. Continental
terminated the code sharing and frequent flyer agreements between the two
airlines, effective April 26, 2002. Until March 12, 2004, two managing
partners of Texas Pacific Group, which, through TPG Advisors, Inc. effectively
controls the voting power of Holdings, were members of Continentals board of
directors. In the first quarter of 2004,
AWA paid Continental approximately $2.4 million and also received
approximately $1.4 million from Continental pursuant to these agreements. In
the first quarter of 2003, the amount paid to and received from Continental
pursuant to these agreements was $5.1 million and $1.7 million, respectively. Application of Critical Accounting Policies The preparation of our consolidated financial statements in accordance
with generally accepted accounting principles requires that we make certain
estimates and assumptions that affect the reported amount of assets and
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities at the date of our financial statements. We believe our estimates
and assumptions are reasonable; however, actual results could differ from those
estimates. We have identified the following critical accounting policies that
require the use of significant judgments and estimates relating to matters that
are inherently uncertain and may result in materially different 28




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 results under
different assumptions and conditions.  
    
    Passenger Revenue  Passenger revenue is recognized when
transportation is provided. Ticket sales for transportation that has
not yet been provided are recorded as air traffic liability. Passenger
traffic commissions and related fees are expensed when the related
revenue is recognized. Passenger traffic commissions and related fees
not yet recognized are included as a prepaid expense. Due to complex
pricing structures, refund and exchange policies, and interline
agreements with other airlines, certain amounts are recognized in
revenue using estimates regarding both the timing of the revenue
recognition and the amount of revenue to be recognized. These estimates
are generally based on the statistical analysis of our historical data.
Any adjustments resulting from periodic evaluations of the estimated air
traffic liability are included in results of operations during the
period in which the evaluations are completed.
    
    Accounting For Long-Lived Assets  Owned property and equipment are
recorded at cost and depreciated to residual values over the estimated
useful lives using the straight-line method. Leasehold improvements
relating to flight equipment and other property on operating leases are
amortized over the life of the lease, or the life of the asset,
whichever is shorter. Interest on advance payments for aircraft
acquisitions and on expenditures for aircraft improvements is
capitalized and added to the cost of the asset. The estimated useful
lives of our owned aircraft, jet engines, flight equipment and rotable
parts range from five to 25 years. The estimated useful lives of our
technical support facility and flight training center in Phoenix,
Arizona are 22 years and 30 years, respectively. The estimated useful
lives of our ground property and equipment range from three to 12
years. We test for impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might
be impaired as defined by SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets.An impairment loss is recognized if
the carrying amount of the asset is not recoverable from its
undiscounted cash flows and is measured as the difference between the
carrying amount and fair value of the asset.
    
    Frequent Flyer Accounting  We maintain a frequent travel award
program known as FlightFund that provides a variety of awards to
program members based on accumulated mileage. The estimated cost of
providing the free travel is recognized as a liability and charged to
operations as program members accumulate mileage. Travel awards are
valued at the incremental cost of carrying one passenger, based on
expected redemptions. Incremental costs are based on expectations of
expenses to be incurred on a per passenger basis and include fuel,
liability insurance, food, beverages, supplies and ticketing costs. We
also sell mileage credits to companies participating in our FlightFund
program, such as hotels, car rental agencies and credit card companies.
Transportation-related revenue from the sale of mileage credits is
deferred and recognized when transportation is provided. A change to
the estimated cost per mile, minimum award level, percentage of revenue
to be deferred or deferred recognition period could have a significant
impact on our revenues or mileage liability accrual in the year of the
change as well as future years.
    
    Long-Term Maintenance Reserve  We record an accrual for the
estimated cost of scheduled airframe and engine overhauls required to be
performed on leased aircraft upon their return to the lessors. These
estimates are based on historical costs and our assumptions regarding
the renewal of aircraft leases. A significant change to AWAs fleet
plan could have a material impact on our reserve requirements.
    
    Deferred Tax Asset Valuation Allowance  The Company initially
recorded a full valuation allowance relating to its net deferred tax
assets at December 31, 2001 and to tax benefits generated in 2002. In
recording that valuation allowance, we considered whether it was more
likely than not that all or a portion of the deferred tax assets will
not be realized, in accordance with SFAS No. 109, Accounting for Income
Taxes.The Company was in a cumulative loss position for the three
years ended December 31, 2002, which weighed heavily in the
overall determination that a valuation allowance was needed. As of March
31, 2004, the Company had recorded a valuation allowance of $61.5 million
against its net deferred tax assets. The Company expects to continue to
record a full valuation allowance on any future tax benefits until we have
achieved several quarters of consecutive profitable results coupled with
an expectation of continued profitability. 29




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 Forward-Looking Information This quarterly report on Form 10-Q contains various forward-looking
statements within the meaning of Section 21E of the Exchange Act. These
statements are based on managements beliefs as well as assumptions made by and
information currently available to management. When used in this document, the
words anticipate, estimate, 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 AWAs or the Holdings results are:  
    
    economic conditions;
    
    the impact of global instability, including the continuing impact of
the continued military presence in Iraq and Afghanistan and the
terrorist attacks of September 11, 2001, and the potential impact of any
future hostilities, terrorist attacks, infectious disease outbreaks,
such as severe acute respiratory syndrome, and government responses
thereto, or other global events;
    
    limitations on the Companys or AWAs ability to obtain additional
financing due to high levels of debt and the financial and other
covenants in its debt instruments;
    
    changes in federal and state laws and regulations;
    
    changes in prevailing interest rates and the availability of and terms of financing to fund our business;
    
    the ability to attract and retain qualified personnel;
    
    the cyclical nature of the airline industry;
    
    competitive practices in the airline industry;
    
    the impact of changes in fuel prices; and
    
    relations with unionized employees generally and the impact and outcome of labor negotiations. For additional discussion of such risks see Business  Risk Factors
Relating to America West and Industry Related Risksdiscussed below. Any
forward-looking statements speak only as of the date of this report. Risk Factors Relating to America West and Industry Related Risks We caution the reader that these risk factors may not be exhaustive. We
operate in a continually changing business environment and new risk factors
emerge from time to time. Management cannot predict such new risk factors, nor
can it assess the impact, if any, of such new risk factors on our business or
the extent to which any factor or combination of factors may cause actual
results to differ materially from those projected in any forward-looking
statement. In light of these risks, uncertainties and assumptions, the
forward-looking events described in this quarterly report on Form 10-Q might
not occur. In the recent past, we sustained significant operating losses and we may
sustain significant losses in the future. For the years ended December 31, 2002 and 2001, we incurred operating
losses of $160.1 million and $417.9 million, respectively. Although we
reported net income of $57.4 million for the year ended December 31, 2003,
there can be no assurance that we will be able to maintain or grow this level
of net income. Since the terrorist attacks of September 11, 2001, we have
experienced an increase in costs related to enhanced security measures,
aviation
insurance and airport rents and landing fees. We expect the threat of
further terrorist attacks and continued instability 30




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 in the Middle East to
continue to negatively impact our revenues and costs in the near-term. In
addition, we have recently experienced a substantial increase in the cost of
fuel. We may not be able to effectively counteract increasing costs through
our cost reduction initiatives, customer service initiatives and revised
pricing structures. Moreover, our liquidity and borrowing options are limited
and we may not be able to survive a prolonged economic downturn, further
decreases in demand for air travel or further increases in fuel costs. The
inability to sustain profitability may hinder our ability to satisfy our
obligations as they become due, obtain future equity or debt financing or to do
so on economical terms and to sustain or expand our business. The terrorist attacks of September 11, 2001 and government responses have
had, and continue to have, a material adverse effect on our financial
condition, operations and prospects. The terrorist attacks of September 11, 2001 have had, and continue to
have, a wide-ranging impact on our financial condition, operations and
prospects. The immediate impact of the terrorist attacks included a severe
strain on our liquidity as the government temporarily suspended all flights, as
passenger demand dropped precipitously after the attacks and as our credit
ratings were downgraded by both Moodys and Standard & Poors. Since then,
although passenger demand has recovered, we continue to experience reduced
demand compared to prior years, especially in discretionary business travel,
and our costs relating to enhanced security measures, aviation insurance,
airport rents and landing fees have increased, in some cases significantly.
The continued impact of the terrorist attacks on our operations, and the
sufficiency of our financial resources to absorb this impact, will depend on
the following:  
    
    our ability to maintain our low cost structure and adequate cash balances;
    
    general economic conditions and the extent to which the current soft economic conditions improve;
    
    competition in the airline industry;
    
    our ability to manage fuel and labor costs; and
    
    the other risks discussed in this report. Moreover, continued global instability (including fuel price
fluctuations), soft economic conditions, future terrorist attacks and
infectious disease outbreaks, such as severe acute respiratory syndrome, could
further reduce demand for air travel, increase our fuel, insurance and other
costs and generally impact our liquidity or financial condition. Our ability
to obtain additional financing to absorb the impact of these type of events is
limited by the constraints imposed by our existing indebtedness, reductions in
the value of our aircraft (as a result of the terrorist attacks) and our
relatively low credit ratings. Increased insurance costs due to the terrorist attacks of September 11,
2001 may adversely impact our operations and financial results. The terrorist attacks of September 11, 2001 resulted in staggering losses
to the insurance industry. These losses led to a significant increase in our
insurance premiums and could lead to future increases in our insurance
premiums. These increases have and could continue to negatively impact our
financial results. In addition, the resulting general instability in the
insurance industry could adversely affect some of our existing insurance
carriers or our ability to obtain future insurance coverage. To the extent
that our existing insurance carriers are unable or unwilling to provide us with
insurance coverage, our insurance costs could further increase. Moreover, since September 11, 2001, AWA and other airlines have been
unable to obtain third party war risk (terrorism) insurance at reasonable rates
from the commercial insurance market and have been obtaining this insurance
through a special program administered by the Federal Aviation Administration,
or FAA. This program has been extended by Vision 100 to a new termination date
of March 30, 2008. If the Federal insurance program terminates, we would
likely face a material increase in the cost of terrorism insurance, but because
of competitive pressures in our industry, our ability to pass this additional
cost to passengers would be limited. 31




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 Our high level of indebtedness and fixed costs limits our ability to fund
general corporate requirements and obtain additional financing, limits our
flexibility in responding to competitive developments and increases our
vulnerability to adverse economic and industry conditions. We have a significant amount of indebtedness. 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.
As of March 31, 2004, we had approximately $750.4 million of indebtedness
outstanding, of which $119.3 million was secured by certain aircraft,
substantially all of our spare engines and rotable aircraft parts inventory,
and a maintenance facility. In addition, we had $15.9 million of capital lease
obligations and $3.3 billion of operating lease obligations through the lease
expiration dates incurred primarily in connection with off-balance sheet
aircraft financings. See Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and Capital Resources 
Off-Balance Sheet Arrangements.We also have guaranteed costs associated with
our regional alliance with Mesa Airlines. Due to our high fixed costs,
including aircraft lease obligations and debt service, a decrease in revenues
results in a disproportionately greater percentage decrease in earnings. In
addition, as a result of our significant indebtedness and fixed costs:  
    
    our ability to satisfy our debt and lease obligations may be
impaired;
    
    we have only a limited ability to obtain additional financing, if
needed. Our existing indebtedness 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 term loan restrict our and AWAs ability to
incur additional indebtedness or issue equity unless we use the
proceeds of those transactions to prepay or redeem certain of our
existing indebtedness;
    
    our ability to fund general corporate requirements, including
capital expenditures, may be impaired. We have substantial obligations
to pay principal and interest on our indebtedness 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 it 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; and
    
    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, including the indenture governing the 10 3/4%
senior notes due 2005 and the agreements governing the government guaranteed
loan and the term loan, contain negative covenants that restrict our ability to
take certain actions. As a result of these restrictive covenants and the
minimum cash balance requirement discussed above, we may be limited in how we
conduct our business and may be unable to raise additional debt or equity
financing to operate during general economic or business downturns, to compete
effectively or to take advantage of new business opportunities. This may affect
our ability to generate revenues and make profits. Without sufficient revenues,
we may not be able to pay interest and principal on outstanding indebtedness.
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 a
breach of these covenants, a failure to make required payments or 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 fulfill our obligations
under or otherwise repay the accelerated indebtedness or make required lease
payments. 32




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 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 consumed by our business, accounting for 20% of our total
operating expenses in the first quarter of 2004 and 16% of our total operating
expenses in 2003, price escalations or reductions in the supply of jet fuel
will increase our operating expenses and cause our operating results and net
income to decline. For example, based on our current level of fuel
consumption, we estimate that a one-cent per gallon increase in jet fuel prices
will cause our annual operating expense to increase by $4.4 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 of the United States. Our
hedging program does not fully protect us against increasing jet fuel costs
because our hedging program does not cover all of our projected fuel volumes
for 2004. Hedging transactions are in place with respect to approximately 24%
of projected 2004 fuel requirements. 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 of the United States 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 continued instability in the Middle
East and terrorist activity. Because of our relatively low credit ratings, our borrowing costs may be
high and our ability to incur additional debt may be impaired. Our credit ratings are relatively low, with Moodys assessment of AWAs
senior implied rating and senior unsecured debt rating at B3 and Caa2,
respectively, Standard & Poors assessment of AWAs and Holdings corporate
credit ratings at B- and AWAs senior unsecured rating at CCC, and Fitch
Ratings assessment of AWAs long-term and senior unsecured debt rating at CCC.
Low credit ratings could cause our future 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. The rating agencies base their ratings on our financial
performance and operations, our cash flow and liquidity, the level of our
indebtedness and industry conditions in general. If our financial performance
or industry conditions do not improve, we may face future downgrades, which
could further negatively impact our borrowing costs and the prices of our
equity or debt securities. In addition, any downgrade of our credit ratings
may indicate a decline in our business and in our ability to satisfy our
obligations under our indebtedness. Negotiations with labor unions could divert management attention and
disrupt operations and new collective bargaining agreements or amendments to
existing collective bargaining agreements could increase our labor costs and
operating expenses. Some of our employees are represented by unions and other groups of our
employees may seek union representation in the future. On January 13, 2003,
negotiations commenced with TWU on a second contract covering the Companys
dispatchers. On September 17, 2003, TWU filed a petition for mediation with
the NMB. Mediated discussions began on October 15, 2003 and a tentative
agreement for a new four-year contract was announced on February 20, 2004. On
March 26, 2004, TWU informed the Company that a majority of dispatchers voted
against ratification of the tentative agreement. The Company expects to resume
negotiations with TWU under the guidance of the NMB. Negotiations with IBT for
a second collective bargaining agreement covering the Airlines mechanics and
related employees commenced on October 9, 2003 and will continue during 2004.
Additionally, negotiations with AFA on a second contract covering the Companys
flight attendants commenced on February 4, 2004 and will continue during 2004. 33




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 We cannot predict the outcome of the negotiations with TWU, IBT or AFA or
any future negotiations relating to union representation or collective
bargaining agreements. Agreements reached in collective bargaining may
increase operating expenses and lower operating results and net income. This
is particularly significant because our current
employee costs contribute substantially to the low cost structure that we
believe is one of our competitive strengths and because we are required to
repay a portion of the government guaranteed loan if our labor costs exceed a
certain threshold. In addition, negotiations with unions could divert
management attention and disrupt operations, which may result in increased
operating expenses and lower net income. If we are unable to negotiate
acceptable collective bargaining agreements, we might have to address the
threat of, or wait through cooling off periods, which could be followed by
union-initiated work actions, including strikes. Depending on the nature of
the threat or the type and duration of any work action, these actions could
disrupt our operations and, as a result, have a significant adverse affect on
our operating results. Fluctuations in interest rates could adversely affect our liquidity,
operating expenses and results. Our indebtedness under both the government guaranteed loan and the 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. Our operating costs could increase as a result of past, current or new
regulations that impose additional requirements and restrictions on airline
operations. The airline industry is heavily regulated. Both federal and state
governments from time to time propose new laws and regulations that impose
additional requirements and restrictions on airline operations. Implementing
these measures, such as aviation ticket taxes and passenger safety measures,
has increased operating costs for us and the airline industry as a whole. In
addition, new security measures imposed by the Aviation and Transportation
Security Act or otherwise by Congress, the Department of Homeland Security or
the FAA as a result of concern over continuing terrorist threats are expected
to continue to increase costs for us and the airline industry as a whole.
Depending on the implementation of these laws and other measures, our operating
costs could increase significantly. Certain governmental agencies, such as the
DOT and the FAA, have the authority to impose mandatory orders, such as
Airworthiness Directives in connection with our aircraft and civil penalties
for violations of applicable laws and regulations, each of which can result in
material costs and adverse publicity. 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, type of
equipment, cabin configuration, amenities provided to passengers, frequent
flyer programs, the automation of travel agent reservation systems, on-board
products and other services. Certain airlines have in the past engaged in
retaliatory activities, including steep pricing discounts in certain markets
and termination of alliance agreements, in response to changes in our pricing
structure. In addition, the elimination of federal regulations that are
intended to diminish the use of preferential scheduling displays and other CRS
practices may place us at a competitive disadvantage to airlines controlling
the CRS systems. 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 and with new
carriers 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. 34




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 The terrorist attacks of September 11, 2001, the continued military
presence in Iraq and Afghanistan, and the current soft economic conditions have
led to the airline industrys significant losses since 2001. Largely as a
result of these losses, both U.S. Airways and United Airlines filed for
bankruptcy protection. Because bankruptcy protection may allow for greater
flexibility in reducing costs by voiding contracts and renegotiating existing
business obligations,
current and future airline bankruptcies could have a substantial impact on
industry competition. Continued weakness in the airline industry may also
result in additional industry consolidation, greater reliance on industry
alliances and increased price competition among the existing airlines, each of
which could dramatically alter competitive environments in the markets we
serve. Our business is sensitive to general economic conditions, unforeseen
events and seasonal fluctuations. As a result, our prior performance is not
necessarily indicative of our future results. The air travel business historically fluctuates on a seasonal basis and in
response to general economic conditions. Due to the greater demand for air and
leisure travel during the summer months, revenues in the airline industry in
the second and third quarters of the year tend to be greater than revenues in
the first and fourth quarters of the year. In addition, the airline industry
is highly susceptible to unforeseen events that result in declines in revenues
or increased costs, such as political instability, regional hostilities,
terrorist attacks, recession, fuel price escalation, inflation, infectious
disease outbreaks, adverse weather conditions, consumer preferences, labor
instability or regulatory oversight. Also, our results of operations for
interim periods are not necessarily indicative of those for an entire year and
our prior results are not necessarily indicative of our future results. We depend on the expertise of our management team. If key individuals
leave unexpectedly, our business and operations could suffer. Many of our executive officers are key to the management of our business
and operations. Our future success depends on our ability to retain these
officers and other capable managers. Although we believe we could replace key
personnel given adequate prior notice, the unexpected departure of key
executive officers could cause substantial disruption to our business and
operations. In addition, we may not be able to retain and recruit talented
personnel without incurring substantial costs. Moreover, we must repay a
portion of the government guaranteed loan if our labor costs exceed a certain
threshold. As a result, our ability to spend additional amounts to retain and
recruit talented personnel is limited. The stockholders who effectively control the voting power of Holdings
could take actions that would favor their own personal interests to the
detriment of our interests. Currently, two stockholders collectively control more than 50% of the
total voting power of Holdings. These stockholders, TPG Partners, L.P. and TPG
Parallel I, L.P (collectively, the TPG Stockholders) are controlled by the
same company, TPG Advisors, Inc. Since TPG Advisors, Inc. is an investment
firm, its strategic objectives may be different than both the short-term or
long-term objectives of our board of directors and management. We cannot
guarantee that the TPG Stockholders will not try to influence Holdings
business in a way that would favor their own personal interests to the
detriment of our interests. We are at risk of losses and adverse publicity stemming from any accident
involving any of our aircraft. If one of our aircraft were to crash or be involved in an accident, we
could be exposed to significant tort liability. There can be no assurance that
the insurance we carry to cover damages arising from any future accidents will
be adequate. In the event that our insurance is not adequate, we may be forced
to bear substantial losses from an accident. Claims resulting from an accident
in excess of our insurance coverage would harm our business and results of
operations. Accidents could also result in unforeseen mechanical and
maintenance costs. In addition, any accident involving an aircraft that we
operate could create a public perception that our aircraft are not safe or
reliable, which could harm our reputation, result in air travelers being
reluctant to fly on our aircraft and harm our business. 35




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 Our operations are often affected by factors beyond our control, including
traffic congestion at airports, weather conditions and increased security
measures, any of which could harm our financial condition and results of
operations. Like other airlines, our operations are subject to delays caused by
factors beyond our control, including air traffic congestion at airports,
adverse weather conditions and increased security measures, such as those
required to be implemented under the ATSA. During periods of fog, snow, rain,
storms or other adverse weather conditions, flights
may be cancelled or significantly delayed. Cancellations and delays
frustrate passengers, reduce aircraft utilization and increase costs, all of
which in turn affect profitability. As a result, cancellations or delays could
harm our financial condition and results of operations. We rely heavily on automated systems to operate our business and any
failure of these systems could harm our business. We depend on automated systems to operate our business, including our
computerized airline reservation system, our telecommunication systems and our
website. In 2003, approximately 94% of our tickets were issued electronically.
Our website and reservation system must be able to accommodate a high volume
of traffic and deliver important flight information. Substantial or repeated
website, reservations system or telecommunication systems failures could reduce
the attractiveness of our services and could cause our customers to purchase
tickets from another airline. Any disruption in these systems could result in
the loss of important data, increase our expenses and generally harm our
business. Shares of Class B common stock issuable upon exercise or conversion of
outstanding securities could adversely affect our stock price and dilute the
ownership interests of existing stockholders. Sales and potential sales of substantial amounts of our Class B common
stock or securities exercisable for or into our Class B common stock in the
public market, or the perception that these sales could occur, could adversely
affect the market price of the Class B common stock. A substantial number of
additional shares of Class B common stock are issuable upon the conversion or
exercise of outstanding securities. As of April 20, 2004, the outstanding
shares of Class B common stock were subject to dilution by:  
    
    19,692,000 shares of Class B common stock that are issuable upon
the exercise, at a price of $3.00 per share, of certain warrants issued
in connection with the government guaranteed loan, including 18,754,000 shares of Class B common stock issuable upon exercise of a warrant
issued to the ATSB; and
    
    10,173,946 shares of Class B common stock that are issuable upon
the exercise of outstanding options. In addition, 859,117 shares of Class B common stock are issuable upon
conversion of the outstanding shares of Holdings Class A common stock held by
the TPG Stockholders (but subject to certain contractual restrictions on
transfer), up to 8,095,842 shares of Holdings Class B common stock will be
issuable upon the exchange of AWAs 7.25% senior exchangeable notes due 2023
(which exchange may not occur until the trading price of Holdings Class B
common stock reaches certain thresholds, or other triggering events occur) and
up to approximately 9,400,000 shares of Holdings Class B common stock will be
issuable after January 18, 2005 upon conversion of Holdings 7.5% convertible
senior notes due 2009. Holdings has registered either the issuance or resale
of all of these shares, meaning that upon exercise, exchange or conversion, as
applicable, such shares could be sold in the public market at any time. The conversion or exercise of some or all of these notes, warrants and
options will dilute the ownership interests of existing stockholders and any
sales in the public market of the Class B common stock issuable upon such
conversion or exercise could adversely affect prevailing market prices of the
Class B common stock. In addition, the existence of the notes, warrants and
options may encourage short selling by market participants because conversion
or exercise of the notes or warrants could depress the price of the Class B
common stock. 36




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 Provisions in our charter documents might deter acquisition bids for us. Holdings Certificate of Incorporation and Restated Bylaws contain
provisions that, among other things:  
    
    authorize Holdings board of directors to issue preferred stock
ranking senior to the Class B common stock without any action on the
part of the stockholders;
    
    establish advance notice procedures for stockholder proposals,
including nominations of directors, to be
considered at stockholders meetings;
    
    authorize Holdings board of directors to fill vacancies on the
board resulting from an increase in the authorized number of directors
or any other cause; and
    
    restrict the ability of stockholders to call special meetings of
stockholders. These provisions might make it more difficult for a third party to acquire
us, even if doing so would benefit the stockholders. Our stock price may continue to be volatile and could decline
substantially. The stock market has, from time to time, experienced extreme price and
volume fluctuations. Many factors may cause the market price for the Class B
common stock to decline including the following:  
    
    our operating results failing to meet the expectations of securities analysts or investors in any quarter;
    
    downward revisions in securities analysts estimates;
    
    material announcements by us or our competitors;
    
    public sales of a substantial number of shares of the Class B common stock;
    
    governmental regulatory action; and
    
    adverse changes in general market conditions or economic trends. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Market Risk Sensitive Instruments (a) Commodity Price Risk As of March 31, 2004, the Company had entered into basis swaps, the price
spread between Los Angeles spot jet fuel prices and NYMEX heating oil futures,
and costless collar transactions, which establish an upper and lower limit on
heating oil futures prices. These transactions are in place with respect to
approximately 21% of remaining projected 2004 fuel requirements, including 28%
related to the second quarter of 2004, 20% related to the third quarter of 2004
and 16% related to the fourth quarter of 2004. See Risk Factors Relating to
America West and Industry Related Risks  Fluctuations in fuel costs could
adversely affect our operating expenses and results. The use of such hedging transactions in the Companys fuel hedging program
could result in the Company not fully benefiting from certain declines in
heating oil futures prices or certain declines in the differential between jet
fuel and heating oil futures prices. At March 31, 2004, the Company estimates
that a 10% increase in heating oil futures prices would increase the fair value
of the costless collar transactions by approximately $0.5 million. The Company
estimates that a 10% decrease in heating oil futures prices would decrease the
fair value of the costless collar transactions by approximately $0.3 million. 37




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 As of April 20, 2004, approximately 24% of AWAs 2004 projected fuel
requirements are hedged. (b) Interest Rate Risk The Companys exposure to interest rate risk relates primarily to its
variable rate long-term debt obligations. At March 31, 2004, the Companys
variable-rate long-term debt obligations of approximately $512.2 million
represented approximately 68% of its total long-term debt. If interest rates
increased 10% in 2004, the impact on the Companys results of operations would
not be material. 
 ITEM 4. CONTROLS AND PROCEDURES. An evaluation was performed under the supervision and with the
participation of Holdings and AWAs management, including the Chief Executive
Officer (the CEO) and Chief Financial Officer (the CFO), of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in the rules promulgated under the Securities and
Exchange Act of 1934, as amended) as of March 31, 2004. Based on that
evaluation, our management, including the CEO and CFO, concluded that our
disclosure controls and procedures were effective as of March 31, 2004. There
were no significant changes in our internal control over financial reporting
during the period covered by this report reasonably likely to materially affect
our internal control over financial reporting. We believe that a controls system, no matter how well designed and
operated, cannot provide absolute assurance that the objectives of the controls
system are met and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving their objectives, and the CEO and CFO have
concluded that these controls and procedures are effective at the reasonable
assurance level. 38




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
March 31, 2004 
 PART II  OTHER INFORMATION 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. a. Exhibits EXHIBITNUMBER
    
    DESCRIPTION AND METHOD OF FILING31.1
    
    Certification of Holdings Chief Executive Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.31.2
    
    Certification of Holdings Chief Financial Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.31.3
    
    Certification of AWAs Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended.31.4
    
    Certification of AWAs Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of Holdings Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2
    
    Certification of AWAs Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
 (1) The Company has sought confidential treatment for portions of the
referenced exhibit. b. Reports on Form 8-K Holdings and AWA filed a report on Form 8-K dated January 5, 2004,
furnishing under Item 12 a press release dated January 5, 2004 announcing
certain traffic statistics for December 2003. Holdings and AWA filed a report on Form 8-K dated January 9, 2004, filing
under Item 5 a press release dated January 9, 2004 announcing that TLC
had been merged into AWA. Holdings and AWA filed a report on Form 8-K dated January 22, 2004,
filing under Item 5 a press release dated January 22, 2004 announcing the
Companys results for the fourth quarter and full year ended December 31,
2003. Holdings and AWA filed a report on Form 8-K dated February 4, 2004,
furnishing under Item 12 a press release dated February 4, 2004
announcing certain traffic statistics for January 2004. Holdings and AWA filed a report on Form 8-K dated March 3, 2004,
furnishing under Item 12 a press release dated March 3, 2004 announcing
certain traffic statistics for February 2004. 39




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AMERICA WEST HOLDINGS CORPORATION
March 31, 2004 
 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 CORPORATIONBy
    
    /s/ Derek J. KerrDerek J. KerrSenior Vice President and Chief Financial OfficerDATED: April 20, 2004
 40




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AMERICA WEST AIRLINES, INC.
March 31, 2004 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. AMERICA WEST AIRLINES, INC.By
    
    /s/ Derek J. KerrDerek J. KerrSenior Vice President and Chief Financial OfficerDATED: April 20, 2004
 41