##### 



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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|---------- |  | ----------------------------------------------------------------------------------------
|(Mark One)
|          
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|           |  |                                                                                         
|          
|          
|          
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|(CHECKBOX) |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|          
|          
|          
|          
|           |  | For the quarterly period ended September 30, 2001 or                                    
|          
|          
|          
|          
|           |  |                                                                                         
|          
|          
|          
|          
|(BOX)      |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|          
|          
|          
|          
|           |  | For the transition period from  to                                                      

Commission file number 1-12649

AMERICA WEST HOLDINGS CORPORATION(Exact name of registrant as specified in its charter)

|                                                                                    |  |                                               
|----------------------------------------------------------------------------------- |  | ----------------------------------------------
|DELAWARE(State or other jurisdiction of incorporation or organization)              |  | 86-0847214(I.R.S. Employer Identification No.)
|                                                                                   
|                                                                                   
|                                                                                   
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|                                                                                    |  |                                               
|                                                                                   
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|                                                                                   
|                                                                                   
|111 WEST RIO SALADO PARKWAY, TEMPE, ARIZONA(Address of principal executive offices) |  | 85281(Zip Code)                               

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

N/A

AMERICA WEST AIRLINES, INC.(Exact name of registrant as specified in its charter)

|                                                                                    |  |                                               
|----------------------------------------------------------------------------------- |  | ----------------------------------------------
|DELAWARE(State or other jurisdiction of incorporation or organization)              |  | 86-0418245(I.R.S. Employer Identification No.)
|                                                                                   
|                                                                                   
|                                                                                   
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|                                                                                    |  |                                               
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|4000 EAST SKY HARBOR BLVD, PHOENIX, ARIZONA(Address of principal executive offices) |  | 85034(Zip Code)                               

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

N/A

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 (CHECKBOX)          No (BOX)

As of October 29, 2001, America West Holdings Corporation has 941,431 shares of
Class A Common Stock and 32,780,695 shares of Class B Common Stock outstanding.
As of October 29, 2001, 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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##### 



PART I  FINANCIAL INFORMATION

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

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

|                        |                                                                                 |                      |                            |           |               |         |              |         |         |         | 
|----------------------- | ------------------------------------------------------------------------------- | -------------------- | -------------------------- | --------- | ------------- | ------- | ------------ | ------- | ------- | ------- | 
|                        |                                                                                 |                      |                            |           | September 30, |         | December 31,
|                        |                                                                                 |                      |                            |           | 2001          |         | 2000        
|                        |                                                                                 |                      |                            |           |               |         |             
|                        |                                                                                 |                      |                            |           | (Unaudited)   |         |              |         |        
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                       
|                       
|                       
|                       
|Assets                  |                                                                                 |                      |                            |           |               |         |              |        
|                       
|                       
|                       
|                       
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                       
|                       
|                       
|                       
|Current assets:         |                                                                                 |                      |                            |           |               |         |              |        
|                       
|                       
|                       
|                       
|                        | Cash and cash equivalents                                                       |                      | $                          | 133,368   |               |         | $            | 144,138 |        
|                       
|                       
|                       
|                       
|                        | Short-term investments                                                          |                      |                            | 11,120    |               |         |              | 50,686  |        
|                       
|                       
|                       
|                       
|                        | Accounts receivable, net                                                        |                      |                            | 118,346   |               |         |              | 152,649 |        
|                       
|                       
|                       
|                       
|                        | Expendable spare parts and supplies, net                                        |                      |                            | 51,465    |               |         |              | 41,843  |        
|                       
|                       
|                       
|                       
|                        | Prepaid expenses                                                                |                      |                            | 71,621    |               |         |              | 41,784  |        
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                        |                                                                                 | Total current assets |                            |           | 385,920       |         |              |         | 431,100 |        
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                       
|                       
|                       
|                       
|Property and equipment: |                                                                                 |                      |                            |           |               |         |              |        
|                       
|                       
|                       
|                       
|                        | Flight equipment                                                                |                      |                            | 1,207,681 |               |         |              | 903,336 |        
|                       
|                       
|                       
|                       
|                        | Other property and equipment                                                    |                      |                            | 244,213   |               |         |              | 220,085 |        
|                       
|                       
|                       
|                       
|                        | Equipment purchase deposits                                                     |                      |                            | 60,250    |               |         |              | 93,750  |        
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                        |                                                                                 |                      | 1,512,144                  |           |               |         | 1,217,171    |        
|                       
|                       
|                       
|                       
|                        | Less accumulated depreciation and amortization                                  |                      |                            | 547,417   |               |         |              | 462,844 |        
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                        |                                                                                 |                      | Net property and equipment |           |               | 964,727 |              |         |         | 754,327 | 
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                       
|                       
|                       
|                       
|Other assets:           |                                                                                 |                      |                            |           |               |         |              |        
|                       
|                       
|                       
|                       
|                        | Restricted cash                                                                 |                      |                            | 36,097    |               |         |              | 34,554  |        
|                       
|                       
|                       
|                       
|                        | Reorganization value in excess of amounts allocable to
identifiable assets, net |                      |                            | 277,658   |               |         |              | 293,780 |        
|                       
|                       
|                       
|                       
|                        | Other assets, net                                                               |                      |                            | 48,417    |               |         |              | 54,754  |        
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                        |                                                                                 | Total other assets   |                            |           | 362,172       |         |              |         | 383,088 |        
|                        |                                                                                 |                      |                            |           |               |         |              |        
|                        |                                                                                 | $                    | 1,712,819                  |           |               | $       | 1,568,515    |        
|                        |                                                                                 |                      |                            |           |               |         |              |        

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)

|                                        |                                                                                                                                                                |                            |           |               |         |              |           |          |         | 
|--------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | --------- | ------------- | ------- | ------------ | --------- | -------- | ------- | 
|                                        |                                                                                                                                                                |                            |           | September 30, |         | December 31,
|                                        |                                                                                                                                                                |                            |           | 2001          |         | 2000        
|                                        |                                                                                                                                                                |                            |           |               |         |             
|                                        |                                                                                                                                                                |                            |           | (Unaudited)   |         |              |           |         
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|Liabilities and Stockholders Equity    |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|Current liabilities:                    |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|                                        | Current maturities of long-term debt                                                                                                                           |                            | $         | 126,981       |         |              | $         | 159,667  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accounts payable                                                                                                                                               |                            |           | 205,712       |         |              |           | 156,449  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Air traffic liability                                                                                                                                          |                            |           | 221,887       |         |              |           | 208,868  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accrued compensation and vacation benefits                                                                                                                     |                            |           | 37,660        |         |              |           | 36,070   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accrued taxes                                                                                                                                                  |                            |           | 13,646        |         |              |           | 21,469   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Other accrued liabilities                                                                                                                                      |                            |           | 36,216        |         |              |           | 31,674   |        
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                        |                                                                                                                                                                | Total current liabilities  |           |               | 642,102 |              |           |          | 614,197 | 
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|Long-term debt, less current maturities |                                                                                                                                                                |                            | 352,273   |               |         |              | 145,578   |         
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|Deferred credits and other liabilities  |                                                                                                                                                                |                            | 96,129    |               |         |              | 101,122   |         
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|Deferred tax liability, net             |                                                                                                                                                                |                            | 40,267    |               |         |              | 40,545    |         
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|Commitments and contingencies           |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|Stockholders equity:                   |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|                                        | Preferred stock, $.01 par value. Authorized 48,800,000
shares; no shares issued                                                                                |                            |           |              |         |              |           |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Class A common stock, $.01 par value. Authorized
1,200,000 shares; issued and outstanding 941,431 shares at
September 30, 2001 and December 31, 2000           |                            |           | 9             |         |              |           | 9        |        
|                                       
|                                       
|                                       
|                                       
|                                        | Class B common stock, $.01 par value. Authorized 100,000,000
shares; issued 49,061,923 shares at September 30, 2001 and
48,991,256 shares at December 31, 2000 |                            |           | 491           |         |              |           | 490      |        
|                                       
|                                       
|                                       
|                                       
|                                        | Additional paid-in capital                                                                                                                                     |                            |           | 594,021       |         |              |           | 594,177  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Retained earnings                                                                                                                                              |                            |           | 293,747       |         |              |           | 380,746  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accumulated other comprehensive income (loss)                                                                                                                  |                            |           | 243           |         |              |           | (1,108   | )      
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                        |                                                                                                                                                                |                            | 888,511   |               |         |              | 974,314   |         
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|                                        | Less: Cost of Class B Common Stock in treasury, 16,296,395
shares at September 30, 2001 and 16,333,895 shares at
December 31, 2000                             |                            |           | (306,463      | )       |              |           | (307,241 | )      
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                                                                                                | Total stockholders equity |           |               | 582,048 |              |           |          | 667,073 | 
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         
|                                        |                                                                                                                                                                | $                          | 1,712,819 |               |         | $            | 1,568,515 |         
|                                        |                                                                                                                                                                |                            |           |               |         |              |           |         

See accompanying notes to condensed consolidated financial statements.

3



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##### 



AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Statements of Operations
(In thousands except per share data)
(Unaudited)

|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |           |           | 
|--------------------------------- | ------------------------------------------- | ----------------------------------------- | ------- | ------------------ | ------- | ----------------- | ------ | ------- | ------- | ---- | -------- | --------- | --------- | - | ------ | --------- | --------- | 
|                                  |                                             |                                           |         | Three Months Ended |         | Nine Months Ended
|                                  |                                             |                                           |         | September 30,      |         | September 30,    
|                                  |                                             |                                           |         |                    |         |                  
|                                  |                                             |                                           |         | 2001               |         | 2000              |        | 2001    |         | 2000
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Operating revenues:               |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Passenger                                   |                                           | $       | 463,345            |         |                   | $      | 549,320 |         |      | $        | 1,563,539 |           |   | $      | 1,639,853 |          
|                                 
|                                 
|                                 
|                                 
|                                  | Cargo                                       |                                           |         | 7,839              |         |                   |        | 8,357   |         |      |          | 27,599    |           |   |        | 27,784    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other                                       |                                           |         | 20,171             |         |                   |        | 32,862  |         |      |          | 74,889    |           |   |        | 103,721   |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             | Total operating revenues                  |         |                    | 491,355 |                   |        |         | 590,539 |      |          |           | 1,666,027 |   |        |           | 1,771,358 | 
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Operating expenses:               |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Salaries and related costs                  |                                           |         | 156,414            |         |                   |        | 142,702 |         |      |          | 452,731   |           |   |        | 410,484   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Aircraft rents                              |                                           |         | 88,529             |         |                   |        | 83,692  |         |      |          | 265,409   |           |   |        | 244,651   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other rents and landing fees                |                                           |         | 34,596             |         |                   |        | 34,689  |         |      |          | 104,785   |           |   |        | 96,738    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Aircraft fuel                               |                                           |         | 85,778             |         |                   |        | 98,591  |         |      |          | 278,677   |           |   |        | 257,450   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Agency commissions                          |                                           |         | 16,461             |         |                   |        | 22,471  |         |      |          | 62,017    |           |   |        | 67,694    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Aircraft maintenance materials and repairs  |                                           |         | 67,399             |         |                   |        | 63,754  |         |      |          | 197,867   |           |   |        | 185,474   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Depreciation and amortization               |                                           |         | 16,591             |         |                   |        | 12,742  |         |      |          | 46,662    |           |   |        | 39,188    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Amortization of excess reorganization value |                                           |         | 4,974              |         |                   |        | 4,974   |         |      |          | 14,922    |           |   |        | 14,922    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Special charges                             |                                           |         |                   |         |                   |        |        |         |      |          | 35,695    |           |   |        |          |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other                                       |                                           |         | 119,530            |         |                   |        | 126,684 |         |      |          | 384,198   |           |   |        | 395,180   |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  |                                             | Total operating expenses                  |         |                    | 590,272 |                   |        |         | 590,299 |      |          |           | 1,842,963 |   |        |           | 1,711,781 | 
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Operating income (loss)           |                                             |                                           | (98,917 | )                  |         |                   | 240    |         |         |      | (176,936 | )         |           |   | 59,577 |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Nonoperating income (expenses):   |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Interest income                             |                                           |         | 3,849              |         |                   |        | 5,172   |         |      |          | 11,370    |           |   |        | 11,374    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Interest expense, net                       |                                           |         | (9,093             | )       |                   |        | (3,693  | )       |      |          | (19,140   | )         |   |        | (11,401   | )        
|                                 
|                                 
|                                 
|                                 
|                                  | Federal government assistance               |                                           |         | 60,282             |         |                   |        |        |         |      |          | 60,282    |           |   |        |          |          
|                                 
|                                 
|                                 
|                                 
|                                  | Gains on sale of investments                |                                           |         | 1,089              |         |                   |        | 1,960   |         |      |          | 1,089     |           |   |        | 27,254    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other, net                                  |                                           |         | (3,971             | )       |                   |        | 8,583   |         |      |          | (4,219    | )         |   |        | 8,975     |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  |                                             | Total nonoperating income (expenses), net |         |                    | 52,156  |                   |        |         | 12,022  |      |          |           | 49,382    |   |        |           | 36,202    | 
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Income (loss) before income taxes |                                             |                                           | (46,761 | )                  |         |                   | 12,262 |         |         |      | (127,554 | )         |           |   | 95,779 |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Income taxes (benefit)            |                                             |                                           | (15,082 | )                  |         |                   | 10,960 |         |         |      | (40,555  | )         |           |   | 46,357 |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Net income (loss)                 |                                             | $                                         | (31,679 | )                  |         | $                 | 1,302  |         |         | $    | (86,999  | )         |           | $ | 49,422 |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Earnings (loss) per share:        |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Basic                                       |                                           | $       | (0.94              | )       |                   | $      | 0.04    |         |      | $        | (2.59     | )         |   | $      | 1.39      |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  | Diluted                                     |                                           | $       | (0.94              | )       |                   | $      | 0.04    |         |      | $        | (2.59     | )         |   | $      | 1.36      |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Shares used for computation:      |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Basic                                       |                                           |         | 33,691             |         |                   |        | 34,312  |         |      |          | 33,653    |           |   |        | 35,589    |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          
|                                  | Diluted                                     |                                           |         | 33,691             |         |                   |        | 34,764  |         |      |          | 33,653    |           |   |        | 36,296    |          
|                                  |                                             |                                           |         |                    |         |                   |        |         |         |      |          |           |           |   |        |          

See accompanying notes to condensed consolidated financial statements.

4



---



##### 



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

|                                                                   |                                                              |                                                     |         |                   |          |      |         |          |          |  
|------------------------------------------------------------------ | ------------------------------------------------------------ | --------------------------------------------------- | ------- | ----------------- | -------- | ---- | ------- | -------- | -------- | -
|                                                                   |                                                              |                                                     |         | Nine Months Ended
|                                                                   |                                                              |                                                     |         | September 30,    
|                                                                   |                                                              |                                                     |         |                  
|                                                                   |                                                              |                                                     |         | 2001              |          | 2000
|                                                                   |                                                              |                                                     |         |                   |          |     
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net cash provided by operating activities                          |                                                              | $                                                   | 117,804 |                   |          | $    | 198,691 |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cash flows from investing activities:                              |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Purchases of property and equipment                          |                                                     |         | (450,257          | )        |      |         | (209,042 | )       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Sales (purchases) of short-term investments                  |                                                     |         | 39,566            |          |      |         | (26,215  | )       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Proceeds from sale and leaseback of aircraft and engines     |                                                     |         | 74,000            |          |      |         | 38,700   |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Net proceeds from sale of subsidiaries                       |                                                     |         |                  |          |      |         | 44,530   |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Equipment purchase deposits and other                        |                                                     |         | 14,723            |          |      |         | (7,972   | )       
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   |                                                              | Net cash used in investing activities               |         |                   | (321,968 | )    |         |          | (159,999 | )
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cash flows from financing activities:                              |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Repayment of debt                                            |                                                     |         | (125,190          | )        |      |         | (41,568  | )       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Proceeds from issuance of debt                               |                                                     |         | 326,422           |          |      |         | 32,000   |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Repurchase of common stock and AWA warrants                  |                                                     |         |                  |          |      |         | (49,305  | )       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Other                                                        |                                                     |         | (7,838            | )        |      |         | 5,487    |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   |                                                              | Net cash provided by (used in) financing activities |         |                   | 193,394  |      |         |          | (53,386  | )
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net decrease in cash and cash equivalents                          |                                                              |                                                     | (10,770 | )                 |          |      | (14,694 | )       
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cash and cash equivalents at beginning of period                   |                                                              |                                                     | 144,138 |                   |          |      | 112,174 |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cash and cash equivalents at end of period                         |                                                              | $                                                   | 133,368 |                   |          | $    | 97,480  |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cash, cash equivalents and short-term investments at end of period |                                                              | $                                                   | 144,488 |                   |          | $    | 139,312 |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cash paid for:                                                     |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Interest, net of amounts capitalized                         |                                                     | $       | 12,365            |          |      | $       | 12,200   |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   | Income taxes                                                 |                                                     | $       | 145               |          |      | $       | 9,708    |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Non-cash financing activities:                                     |                                                              |                                                     |         |                   |          |      |         |         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Notes payable issued for equipment purchase deposits         |                                                     | $       | 10,500            |          |      | $       | 31,500   |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         
|                                                                   | Notes payable canceled under the aircraft purchase agreement |                                                     | $       | 29,750            |          |      | $       | 21,000   |         
|                                                                   |                                                              |                                                     |         |                   |          |      |         |         

See accompanying notes to condensed consolidated financial statements.

5



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##### 



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2001

1. BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements include the
accounts of America West Holdings Corporation (Holdings or the Company) and
its wholly owned subsidiaries, America West Airlines, Inc. (AWA) and The
Leisure Company (TLC). These statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission and, in
accordance with those rules and regulations, certain information and footnotes
required by generally accepted accounting principles have been omitted. In the
opinion of management, the condensed consolidated financial statements reflect
all adjustments, which are of a normal recurring nature, necessary for a fair
presentation. Certain prior year amounts have been reclassified to conform
with current year presentation. The accompanying condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes thereto included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2000.

2. AIR TRANSPORTATION SAFETY AND SYSTEM STABILIZATION ACT

In the wake of large financial losses attributed to the terrorist attacks
on the United States that occurred on September 11, 2001, the Senate and House
of Representatives of the United States of America passed, and the President
signed into law H.R. 2926, the Air Transportation Safety and System
Stabilization Act (the Act). The intent of the Act is to preserve the
continued viability of the United States air transportation system. The Act
includes the following key provisions:



| |  |  | Airlines will receive immediate cash compensation up to an industry
total of $5 billion, including up to $500 million in the aggregate for
cargo carriers and up to $4.5 billion in the aggregate for commercial
carriers based upon each carriers share of available seat miles during
the month of August 2001. Airlines must demonstrate that their losses
equal or exceed the amount granted. AWA anticipates receiving
approximately $120 million from this program, of which $60.3 million was
received in September 2001. AWA recognized all $60.3 million of the
federal government assistance as nonoperating income in the third
quarter of 2001 to offset incurred direct and incremental losses
resulting from the terrorist attacks (see Note 8, Nonoperating Income
(Expense)  Other, Net").
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The federal government will guarantee credit instruments issued to
air carriers of up to $10 billion. A newly created Air Transportation
Stabilization Board will have authority to set all terms and conditions,
including determining the amounts and recipients of the loans. The Act
also allows the government to take an equity stake in the airlines
receiving federal loan guarantees as collateral. AWA expects to apply
for a loan guarantee in the near future.                                                                                                                                                                                                                                                                                                                                   
|
| |  |  | The Act establishes potential protection for air service to small
communities. Carriers that receive direct financial assistance may be
required by the Secretary of the Department of Transportation (DOT) to
maintain scheduled service to any point served by the carrier prior to
September 11, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | The Act establishes forgiveness of Internal Revenue Service (IRS)
penalties for late payment of certain taxes, provided they are paid by
November 15, 2001, or, at the discretion of the Secretary of the DOT, as
late as January 15, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | The Act provides for reimbursement to air carriers and their vendors
or subcontractors for increases in the cost of war risk insurance for
the period up to October 1, 2002. The Act also limits the amount of
liability for claims against an air carrier attributed to the terrorist
attacks to a total not to exceed the limits of the liability coverage
maintained by the carrier.                                                                                                                                                                                                                                                                                                                                                                                                                      

6



---



##### 



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2001

3. FLIGHT EQUIPMENT

In the third quarter of 2001, AWA borrowed $174.0 million from the America
West Airlines 2001-1 Pass Through Trusts to fund the acquisition of six new
A319 aircraft. In September 2001, AWA completed a sale of two owned aircraft
engines, with a combined net book value of $10.9 million, for approximately
$10.0 million as part of a sale leaseback transaction. The resulting $0.9
million pretax loss on this transaction was recognized in the accompanying
Condensed Consolidated Statement of Operations, classified in Nonoperating
Income (Expense)  Other, Net.

4. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes unrealized gains and losses on
available-for-sale securities and changes in the fair value of derivative
financial instruments that qualify for hedge accounting. For the three and
nine months ended September 30, 2001, the Company recorded a total
comprehensive loss of $30.5 million and $85.6 million, respectively. The
difference between net loss and comprehensive loss for the three and nine
months ended September 30, 2001 is detailed in the following table:

|                   |                                                                                                                          |   |                    |        |                    |   |         |        |  
|------------------ | ------------------------------------------------------------------------------------------------------------------------ | - | ------------------ | ------ | ------------------ | - | ------- | ------ | -
|                   |                                                                                                                          |   | Three Months       |        | Nine Months       
|                   |                                                                                                                          |   | Ended              |        | Ended             
|                   |                                                                                                                          |   | September 30, 2001 |        | September 30, 2001
|                   |                                                                                                                          |   |                    |        |                   
|                   |                                                                                                                          |   | (In thousands)    
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                  
|                  
|                  
|                  
|Net loss           |                                                                                                                          | $ | (31,679            | )      |                    | $ | (86,999 | )     
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                  
|                  
|                  
|                  
|                   | Unrealized losses on derivative instruments,
net of deferred taxes                                                       |   |                    | (3,683 | )                  |   |         | (1,727 | )
|                  
|                  
|                  
|                  
|                   | Reclassification adjustment to net loss of previously
reported unrealized losses on derivative
instruments, net of taxes |   |                    | 3,592  |                    |   |         | 1,970  |  
|                  
|                  
|                  
|                  
|                   | Unrealized losses on marketable equity securities,
net of deferred taxes                                                 |   |                    | (23    | )                  |   |         | (199   | )
|                  
|                  
|                  
|                  
|                   | Realized losses on marketable equity securities,
net of taxes                                                            |   |                    | 1,307  |                    |   |         | 1,307  |  
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                   | Total other comprehensive income (loss)                                                                                  |   |                    | 1,193  |                    |   |         | 1,351  |  
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                  
|                  
|                  
|                  
|Comprehensive loss |                                                                                                                          | $ | (30,486            | )      |                    | $ | (85,648 | )     
|                   |                                                                                                                          |   |                    |        |                    |   |         |       

In July 2000, Holdings completed the sale of America West Golf Vacations,
a division of TLC, to Book4golf.com, a provider of Internet-based, real-time,
golf tee time reservation systems. TLC received 900,000 common shares, with a
fair market value of $2.1 million, and warrants to purchase up to 700,000
common shares of Book4golf.com. The transaction also provides for the right to
earn an additional 300,000 common shares, which, along with the exercise of the
warrants, is subject to certain performance criteria. The Company recorded a
non-operating pretax gain on sale of $2.0 million in the third quarter of 2000.

In accordance with Statement of Financial Accounting Standards (SFAS)
No. 115, Accounting for Certain Investments in Debt and Equity Securities,
the Company had classified TLCs investment in Book4golf.com as
available-for-sale securities in the Companys consolidated balance sheet.
SFAS No. 130, Reporting Comprehensive Incomerequires unrealized gains or
losses on the Companys available-for-sale securities to be included in
accumulated other comprehensive income, a component of stockholders equity.
In the third quarter of 2001, management determined the decline in market value
of the Companys investment in Book4Golf.com, approximately $2.1 million since
July 2000, was other than temporary. In accordance with FASB No. 12,
Accounting for Certain Marketable Securities,the investment was written down
to realizable value, recognizing a non-operating pretax loss of $2.1 million.
The tax benefit associated with the loss was $0.8 million.

7



---



##### 



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2001

5. EARNINGS PER SHARE (EPS)

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

|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |            | 
|------------------------------------------ | ------------------------------------------------------ | - | ------------------------------------------- | ---------- | ----------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                           |                                                        |   | Three Months Ended                          |            | Nine Months Ended
|                                           |                                                        |   | September 30,                               |            | September 30,    
|                                           |                                                        |   |                                             |            |                  
|                                           |                                                        |   | 2001                                        |            | 2000              |   | 2001       |            | 2000
|                                           |                                                        |   |                                             |            |                   |   |            |            |     
|                                           |                                                        |   | (In thousands of dollars except share data)
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                          
|                                          
|                                          
|                                          
|BASIC EARNINGS (LOSS) PER SHARE            |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                          
|                                          
|                                          
|                                          
|Income (loss) applicable to common stock   |                                                        | $ | (31,679                                     | )          |                   | $ | 1,302      |            |      | $ | (86,999    | )          |  | $ | 49,422     |           
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|Weighted average common shares outstanding |                                                        |   | 33,691,379                                  |            |                   |   | 34,312,124 |            |      |   | 33,652,938 |            |  |   | 35,589,220 |           
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|Basic earnings (loss) per share            |                                                        | $ | (0.94                                       | )          |                   | $ | 0.04       |            |      | $ | (2.59      | )          |  | $ | 1.39       |           
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                          
|                                          
|                                          
|                                          
|DILUTED EARNINGS (LOSS) PER SHARE          |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                          
|                                          
|                                          
|                                          
|Income (loss) applicable to common stock   |                                                        | $ | (31,679                                     | )          |                   | $ | 1,302      |            |      | $ | (86,999    | )          |  | $ | 49,422     |           
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                          
|                                          
|                                          
|                                          
|Share computation:                         |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                          
|                                          
|                                          
|                                          
|                                           | Weighted average common shares outstanding             |   |                                             | 33,691,379 |                   |   |            | 34,312,124 |      |   |            | 33,652,938 |  |   |            | 35,589,220 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Assumed exercise of stock options and warrants         |   |                                             |           |                   |   |            | 451,627    |      |   |            |           |  |   |            | 706,403    | 
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                           | Weighted average common shares
outstanding as adjusted |   |                                             | 33,691,379 |                   |   |            | 34,763,751 |      |   |            | 33,652,938 |  |   |            | 36,295,623 | 
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           
|                                          
|                                          
|                                          
|                                          
|Diluted earnings (loss) per share          |                                                        | $ | (0.94                                       | )          |                   | $ | 0.04       |            |      | $ | (2.59      | )          |  | $ | 1.36       |           
|                                           |                                                        |   |                                             |            |                   |   |            |            |      |   |            |            |  |   |            |           

For the three and nine months ended September 30, 2001, the incremental
shares from assumed exercise of stock options are not included in the
computation of diluted EPS because of the antidilutive effect on EPS.

For the three and nine months ended September 30, 2000, options for
3,366,409 and 3,240,797, respectively, 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 respective periods, resulting in an
antidilutive effect.

6. SPECIAL CHARGES

In April 2001, Holdings announced a cost reduction plan to respond to a
softening economy. The plan included a slowing of the airlines growth through
the return of seven older 737-300 leased aircraft to the lessors in the second
half of 2001 and January 2002 and significant reductions in overhead due in
part to select reductions-in-force of management, administrative and clerical
personnel.

The Company recorded a pretax charge of $35.7 million in the second
quarter of 2001 related to the earlier-than-planned aircraft returns and
reductions-in-force. The following table presents the payments made during the
third quarter of 2001 and remaining accrual as of September 30, 2001.

|                              |  |                  |        |                    |  |       |     |  |  |   |        | 
|----------------------------- |  | ---------------- | ------ | ------------------ |  | ----- | --- |  |  | - | ------ | 
|                              |  | Aircraft Returns |        | Reduction-in-force |  | Total
|                              |  |                  |        |                    |  |      
|                              |  |                  |        |                    |  |       |     |  |  |   |        | 
|                             
|                             
|                             
|                             
|Balance at June 30, 2001      |  | $                | 22,569 |                    |  | $     | 468 |  |  | $ | 23,037 | 
|                             
|                             
|                             
|                             
|Payments                      |  |                  | 2,193  |                    |  |       | 296 |  |  |   | 2,489  | 
|                              |  |                  |        |                    |  |       |     |  |  |   |        | 
|Balance at September 30, 2001 |  | $                | 20,376 |                    |  | $     | 172 |  |  | $ | 20,548 | 
|                              |  |                  |        |                    |  |       |     |  |  |   |        | 

8



---



##### 



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2001

7. SALE OF EQUITY INVESTMENTS

In July 2001, AWA sold 62,240 warrants to purchase common stock of
Expedia.com, resulting in a pretax gain of approximately $1.1 million (see Note
8, Nonoperating Income (Expense)  Other, Net").

In July 2001, AWA sold 73,413 Equant N.V. depository certificates, which
were held by the SITA Foundation, resulting in a pretax gain of approximately
$1.5 million.

8. NONOPERATING INCOME (EXPENSE)  OTHER, NET

For accounting purposes, AWA recognizes federal government assistance
income to offset direct and incremental losses resulting from the terrorist
attacks to the extent payment has been received from the United States
Government. In September 2001, AWA received a $60.3 million advance payment
under the Act from the United States Government (see Note 2, Air
Transportation Safety and System Stabilization Act"). In accordance with
Emerging Issues Task Force Issue No. 01-10, Accounting for the Impact of the
Terrorist Attacks of September 11, 2001,AWA recognized the entire amount as
nonoperating income because direct and incremental losses incurred during the
third quarter exceeded that amount. When the next payment of federal
government assistance is received, AWA will recognize additional income to
offset losses incurred in the third quarter in excess of the $60.3 million
already recognized, as well as additional losses expected to be incurred in the
fourth quarter of 2001.

In July 2001, AWA recognized a pretax gain of approximately $1.1 million
from the sale of warrants to purchase common stock of Expedia.com (see Note 7,
Sale of Equity Investments").

In the third quarter of 2001, management determined the decline in market
value of the Companys investment in Book4Golf.com, approximately $2.1 million
since July 2000, was other than temporary. In accordance with SFAS No. 12,
Accounting for Certain Marketable Securities,the investment was written down
to realizable value, recognizing a pretax loss of $2.1 million (see Note 4,
"Comprehensive Income (Loss)).

In September 2000, AWA recorded an $8.8 million pretax unrealized gain on
the Companys investment in one million shares of GetThere.com common stock.
AWA sold all one million shares of GetThere.com for approximately $17.8 million
in October 2000.

9. 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
consolidated balance sheets and statements of operations.

10. SUBSEQUENT EVENTS

Sale Leaseback Transactions

In October 2001, AWA completed sales of eight owned A319 aircraft, two
owned A320 flight simulators and one owned 737-300 flight simulator as part of
sale leaseback transactions. AWA received gross proceeds of $268.8 million
from the aircraft sale leaseback transaction, of which $227.5 million was used
to pay down mortgages existing on these aircraft. The $34.1 million gain
resulting from this transaction will be deferred and amortized over the term of
the operating leases, which approximates 20 years, as a reduction in rent
expense. The flight simulators, with a combined book value of $14.6 million,
were sold for approximately $17.4 million. The gain resulting from this
transaction will be deferred and amortized over the term of the operating
lease, which approximates nine years, as a reduction in rent expense.

9



---



##### 



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2001

Federal Aviation Administration (FAA) Proposed Civil Penalties

In October 2001, the FAA announced that it proposed civil penalties be
assessed against AWA in the amount of approximately $668,000 for alleged
maintenance violations occurring in May and June 1999 and alleged operation of
aircraft in violation of FAA regulations between November 1997 and September
2000. AWA believes it is currently in full compliance with FAA regulations and
intends to contest the proposed penalties.

Default under Aircraft Leases

In October 2001, AWA suspended payment under certain aircraft leases and,
as a result, has received notices of default from certain aircraft lessors.
AWA is currently negotiating with these lessors and others to reduce aircraft
rent and restructure its costs and obligations under these agreements and for
the potential return of certain aircraft prior to the expiration of the leases.

Sale of Equity Investment

In July 2001, Softbank Capital Partners and General Catalyst LLC, TLC and
the remaining shareholders of National Leisure Group, Inc. (NLG) entered into
a Merger Agreement with USA Networks in connection with the proposed sale of
NLG to USA Networks. TLC holds approximately a 12% ownership interest in NLG.
The transaction was subject to, among other things, the completion of due
diligence by USA Networks and certain regulatory and other third party
approvals and consents. On October 3, 2001, USA Networks exercised its right
to terminate the Merger Agreement based on a material adverse change to the
business and financial condition of NLG following the events of September 11
and termination by a material customer of its business with NLG. On October 3,
2001, USA Networks filed a lawsuit in Delaware state court against NLG and its
shareholders seeking a declaration that USA Networks termination of the Merger
Agreement is valid. On October 29, 2001, USA Networks and NLG announced that
the parties had settled the litigation and that, in lieu of the transaction
contemplated by the Merger Agreement, USA Networks would acquire a minority
interest in NLG for $20 million and certain additional rights regarding
possible future transactions.

10



---



##### 



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

The unaudited condensed balance sheets of AWA as of September 30, 2001 and
December 31, 2000, statements of operations for the three and nine months ended
September 30, 2001 and 2000 and statements of cash flows for the nine months
ended September 30, 2001 and 2000, together with the related notes, are set
forth on the following pages.

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

|                           |                                                                                 |   |               |           |              |   |           |         | 
|-------------------------- | ------------------------------------------------------------------------------- | - | ------------- | --------- | ------------ | - | --------- | ------- | 
|                           |                                                                                 |   | September 30, |           | December 31,
|                           |                                                                                 |   | 2001          |           | 2000        
|                           |                                                                                 |   |               |           |             
|                           |                                                                                 |   | (Unaudited)   |           |              |   |          
|                           |                                                                                 |   |               |           |              |   |           |        
|                          
|                          
|                          
|                          
|Assets                     |                                                                                 |   |               |           |              |   |           |        
|                          
|                          
|                          
|                          
|                          
|                          
|                          
|                          
|Current assets:            |                                                                                 |   |               |           |              |   |           |        
|                          
|                          
|                          
|                          
|                           | Cash and cash equivalents                                                       |   | $             | 127,386   |              |   | $         | 139,150 | 
|                          
|                          
|                          
|                          
|                           | Short-term investments                                                          |   |               | 11,120    |              |   |           | 50,686  | 
|                          
|                          
|                          
|                          
|                           | Accounts receivable, net                                                        |   |               | 109,912   |              |   |           | 130,219 | 
|                          
|                          
|                          
|                          
|                           | Advances to parent company and affiliate, net                                   |   |               | 252,729   |              |   |           | 273,272 | 
|                          
|                          
|                          
|                          
|                           | Expendable spare parts and supplies, net                                        |   |               | 51,465    |              |   |           | 41,843  | 
|                          
|                          
|                          
|                          
|                           | Prepaid expenses                                                                |   |               | 66,612    |              |   |           | 35,998  | 
|                           |                                                                                 |   |               |           |              |   |           |        
|Total
current assets       |                                                                                 |   | 619,224       |           |              |   | 671,168   |        
|                           |                                                                                 |   |               |           |              |   |           |        
|Property
and equipment:    |                                                                                 |   |               |           |              |   |           |        
|                          
|                          
|                          
|                          
|                           | Flight equipment                                                                |   |               | 1,207,681 |              |   |           | 903,336 | 
|                          
|                          
|                          
|                          
|                           | Other property and equipment                                                    |   |               | 235,604   |              |   |           | 211,922 | 
|                          
|                          
|                          
|                          
|                           | Equipment purchase deposits                                                     |   |               | 60,250    |              |   |           | 93,750  | 
|                           |                                                                                 |   |               |           |              |   |           |        
|                           |                                                                                 |   | 1,503,535     |           |              |   | 1,209,008 |        
|                          
|                          
|                          
|                          
|                           | Less accumulated depreciation and amortization                                  |   |               | 542,103   |              |   |           | 458,616 | 
|                           |                                                                                 |   |               |           |              |   |           |        
|Net
property and equipment |                                                                                 |   | 961,432       |           |              |   | 750,392   |        
|                           |                                                                                 |   |               |           |              |   |           |        
|Other
assets:              |                                                                                 |   |               |           |              |   |           |        
|                          
|                          
|                          
|                          
|                           | Restricted cash                                                                 |   |               | 32,409    |              |   |           | 31,120  | 
|                          
|                          
|                          
|                          
|                           | Reorganization value in excess of amounts allocable to
identifiable assets, net |   |               | 256,984   |              |   |           | 271,906 | 
|                          
|                          
|                          
|                          
|                           | Other assets, net                                                               |   |               | 54,609    |              |   |           | 60,887  | 
|                           |                                                                                 |   |               |           |              |   |           |        
|Total
other assets         |                                                                                 |   | 344,002       |           |              |   | 363,913   |        
|                           |                                                                                 |   |               |           |              |   |           |        
|                           |                                                                                 | $ | 1,924,658     |           |              | $ | 1,785,473 |        
|                           |                                                                                 |   |               |           |              |   |           |        

See accompanying notes to condensed financial statements.

11



---



##### 



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

|                                        |                                                                               |                            |           |               |         |              |           |         |         | 
|--------------------------------------- | ----------------------------------------------------------------------------- | -------------------------- | --------- | ------------- | ------- | ------------ | --------- | ------- | ------- | 
|                                        |                                                                               |                            |           | September 30, |         | December 31,
|                                        |                                                                               |                            |           | 2001          |         | 2000        
|                                        |                                                                               |                            |           |               |         |             
|                                        |                                                                               |                            |           | (Unaudited)   |         |              |           |        
|                                        |                                                                               |                            |           |               |         |              |           |         |        
|                                       
|                                       
|                                       
|                                       
|Liabilities and Stockholders Equity    |                                                                               |                            |           |               |         |              |           |         |        
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|Current liabilities:                    |                                                                               |                            |           |               |         |              |           |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Current maturities of long-term debt                                          |                            | $         | 126,981       |         |              | $         | 159,667 |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accounts payable                                                              |                            |           | 194,041       |         |              |           | 147,661 |        
|                                       
|                                       
|                                       
|                                       
|                                        | Air traffic liability                                                         |                            |           | 198,763       |         |              |           | 183,531 |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accrued compensation and vacation benefits                                    |                            |           | 37,204        |         |              |           | 35,850  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accrued taxes                                                                 |                            |           | 48,418        |         |              |           | 57,540  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Other accrued liabilities                                                     |                            |           | 35,987        |         |              |           | 31,542  |        
|                                        |                                                                               |                            |           |               |         |              |           |         |        
|                                        |                                                                               | Total
current liabilities  |           |               | 641,394 |              |           |         | 615,791 | 
|                                        |                                                                               |                            |           |               |         |              |           |        
|Long-term
debt, less current maturities |                                                                               |                            | 352,274   |               |         |              | 145,578   |        
|                                       
|                                       
|                                       
|                                       
|Deferred
credits and other liabilities  |                                                                               |                            | 94,315    |               |         |              | 99,308    |        
|                                       
|                                       
|                                       
|                                       
|Deferred
tax liability, net             |                                                                               |                            | 41,904    |               |         |              | 42,856    |        
|                                       
|                                       
|                                       
|                                       
|Commitments
and contingencies           |                                                                               |                            |           |               |         |              |           |        
|                                       
|                                       
|                                       
|                                       
|Stockholders
equity:                   |                                                                               |                            |           |               |         |              |           |        
|                                       
|                                       
|                                       
|                                       
|                                        | Common Stock $.01 par value. Authorized, issued and
outstanding; 1,000 shares |                            |           |              |         |              |           |        |        
|                                       
|                                       
|                                       
|                                       
|                                        | Additional paid-in capital                                                    |                            |           | 519,748       |         |              |           | 519,748 |        
|                                       
|                                       
|                                       
|                                       
|                                        | Retained earnings                                                             |                            |           | 274,780       |         |              |           | 362,192 |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accumulated other comprehensive income                                        |                            |           | 243           |         |              |           |        |        
|                                        |                                                                               |                            |           |               |         |              |           |        
|                                        |                                                                               | Total
stockholders equity |           |               | 794,771 |              |           |         | 881,940 | 
|                                        |                                                                               |                            |           |               |         |              |           |        
|                                        |                                                                               | $                          | 1,924,658 |               |         | $            | 1,785,473 |        
|                                        |                                                                               |                            |           |               |         |              |           |        

See accompanying notes to condensed financial statements.

12



---



##### 



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

|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |           |           | 
|--------------------------------- | ------------------------------------------- | ----------------------------------------- | -------- | ------------------ | ------- | ----------------- | ----- | ------- | ------- | ---- | -------- | --------- | --------- | - | ------ | --------- | --------- | 
|                                  |                                             |                                           |          | Three Months Ended |         | Nine Months Ended
|                                  |                                             |                                           |          | September 30,      |         | September 30,    
|                                  |                                             |                                           |          |                    |         |                  
|                                  |                                             |                                           |          | 2001               |         | 2000              |       | 2001    |         | 2000
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |     
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Operating revenues:               |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Passenger                                   |                                           | $        | 463,345            |         |                   | $     | 549,320 |         |      | $        | 1,563,539 |           |   | $      | 1,639,853 |          
|                                 
|                                 
|                                 
|                                 
|                                  | Cargo                                       |                                           |          | 7,839              |         |                   |       | 8,357   |         |      |          | 27,599    |           |   |        | 27,784    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other                                       |                                           |          | 7,545              |         |                   |       | 20,780  |         |      |          | 38,507    |           |   |        | 60,518    |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                  |                                             | Total operating revenues                  |          |                    | 478,729 |                   |       |         | 578,457 |      |          |           | 1,629,645 |   |        |           | 1,728,155 | 
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|Operating
expenses:               |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Salaries and related costs                  |                                           |          | 155,934            |         |                   |       | 142,001 |         |      |          | 451,246   |           |   |        | 408,382   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Aircraft rents                              |                                           |          | 88,529             |         |                   |       | 83,692  |         |      |          | 265,409   |           |   |        | 244,651   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other rents and landing fees                |                                           |          | 34,596             |         |                   |       | 34,689  |         |      |          | 104,785   |           |   |        | 96,738    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Aircraft fuel                               |                                           |          | 85,778             |         |                   |       | 98,591  |         |      |          | 278,677   |           |   |        | 257,450   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Agency commissions                          |                                           |          | 16,461             |         |                   |       | 22,471  |         |      |          | 62,017    |           |   |        | 67,694    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Aircraft maintenance materials and repairs  |                                           |          | 67,399             |         |                   |       | 63,754  |         |      |          | 197,867   |           |   |        | 185,474   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Depreciation and amortization               |                                           |          | 16,591             |         |                   |       | 12,742  |         |      |          | 46,662    |           |   |        | 39,188    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Amortization of excess reorganization value |                                           |          | 4,974              |         |                   |       | 4,974   |         |      |          | 14,922    |           |   |        | 14,922    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Special charges                             |                                           |          |                   |         |                   |       |        |         |      |          | 35,695    |           |   |        |          |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other                                       |                                           |          | 109,393            |         |                   |       | 116,463 |         |      |          | 354,390   |           |   |        | 353,446   |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                  |                                             | Total operating expenses                  |          |                    | 579,655 |                   |       |         | 579,377 |      |          |           | 1,811,670 |   |        |           | 1,667,945 | 
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|Operating
income (loss)           |                                             |                                           | (100,926 | )                  |         |                   | (920  | )       |         |      | (182,025 | )         |           |   | 60,210 |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|Nonoperating
income (expenses):   |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Interest income                             |                                           |          | 6,238              |         |                   |       | 6,850   |         |      |          | 17,779    |           |   |        | 16,910    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Interest expense, net                       |                                           |          | (11,423            | )       |                   |       | (5,621  | )       |      |          | (25,208   | )         |   |        | (17,003   | )        
|                                 
|                                 
|                                 
|                                 
|                                  | Federal government assistance               |                                           |          | 60,282             |         |                   |       |        |         |      |          | 60,282    |           |   |        |          |          
|                                 
|                                 
|                                 
|                                 
|                                  | Gain on sale of investment                  |                                           |          | 1,089              |         |                   |       |        |         |      |          | 1,089     |           |   |        | 15,515    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other, net                                  |                                           |          | (1,578             | )       |                   |       | 8,868   |         |      |          | (1,187    | )         |   |        | 9,829     |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                  |                                             | Total nonoperating income (expenses), net |          |                    | 54,608  |                   |       |         | 10,097  |      |          |           | 52,755    |   |        |           | 25,251    | 
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|Income
(loss) before income taxes |                                             |                                           | (46,318  | )                  |         |                   | 9,177 |         |         |      | (129,270 | )         |           |   | 85,461 |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|Income
taxes (benefit)            |                                             |                                           | (15,258  | )                  |         |                   | 9,926 |         |         |      | (41,858  | )         |           |   | 42,425 |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|Net
income (loss)                 |                                             | $                                         | (31,060  | )                  |         | $                 | (749  | )       |         | $    | (87,412  | )         |           | $ | 43,036 |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          

See accompanying notes to condensed financial statements.

13



---



##### 



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

|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |          |        |          |  
|------------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------------------------------- | ------------------------------------- | -------- | ----------------- | -------- | ------- | -------- | ------ | -------- | -
|                                                                    |                                                              |                                                     |                                       |          | Nine Months Ended
|                                                                    |                                                              |                                                     |                                       |          | September 30,    
|                                                                    |                                                              |                                                     |                                       |          |                  
|                                                                    |                                                              |                                                     |                                       |          | 2001              |          | 2000   
|                                                                    |                                                              |                                                     |                                       |          |                   |          |        
|Net cash provided by operating activities                           |                                                              | $                                                   | 116,532                               |          |                   | $        | 193,440 |         
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Cash
flows from investing activities:                               |                                                              |                                                     |                                       |          |                   |          |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Purchases of property and equipment                          |                                                     |                                       | (449,812 | )                 |          |         | (206,808 | )     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Sales (purchases) of short-term investments                  |                                                     |                                       | 39,566   |                   |          |         | (26,215  | )     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Proceeds from sale and leaseback of aircraft                 |                                                     |                                       | 74,000   |                   |          |         | 38,700   |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Equipment purchase deposits and other                        |                                                     |                                       | 15,023   |                   |          |         | (6,770   | )     
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|                                                                    |                                                              |                                                     | Net cash used in investing activities |          |                   | (321,223 | )       |          |        | (201,093 | )
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|Cash
flows from financing activities:                               |                                                              |                                                     |                                       |          |                   |          |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Repayment of debt                                            |                                                     |                                       | (125,190 | )                 |          |         | (41,568  | )     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Proceeds from issuance of debt                               |                                                     |                                       | 326,422  |                   |          |         | 32,000   |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Other                                                        |                                                     |                                       | (8,305   | )                 |          |         | (205     | )     
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|                                                                    |                                                              | Net cash provided by (used in) financing activities |                                       |          | 192,927           |          |         |          | (9,773 | )       
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|Net
decrease in cash and cash equivalents                           |                                                              |                                                     | (11,764                               | )        |                   |          | (17,426 | )       
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|Cash
and cash equivalents at beginning of period                    |                                                              |                                                     | 139,150                               |          |                   |          | 105,545 |         
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|Cash
and cash equivalents at end of period                          |                                                              | $                                                   | 127,386                               |          |                   | $        | 88,119  |         
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|Cash,
cash equivalents, and short-term investments at
end of period |                                                              | $                                                   | 138,506                               |          |                   | $        | 129,951 |         
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|Cash
paid for:                                                      |                                                              |                                                     |                                       |          |                   |          |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Interest, net of amounts capitalized                         |                                                     | $                                     | 12,365   |                   |          | $       | 12,200   |       
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|                                                                    | Income taxes paid                                            |                                                     | $                                     | 25       |                   |          | $       | 2,735    |       
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|Non-cash
financing activities:                                      |                                                              |                                                     |                                       |          |                   |          |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Notes payable issued for equipment purchase deposits         |                                                     | $                                     | 10,500   |                   |          | $       | 31,500   |       
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         
|                                                                    | Notes payable canceled under the aircraft
purchase agreement |                                                     | $                                     | 29,750   |                   |          | $       | 21,000   |       
|                                                                    |                                                              |                                                     |                                       |          |                   |          |         |         

See accompanying notes to condensed financial statements.

14



---



##### 



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
September 30, 2001

1. BASIS OF PRESENTATION

The unaudited condensed financial statements included herein have been
prepared by America West Airlines, Inc., (AWA), a wholly owned subsidiary of
America West Holdings Corporation (Holdings or the Company), pursuant to
the rules and regulations of the Securities and Exchange Commission and, in
accordance with those rules and regulations, certain information and footnotes
required by generally accepted accounting principles have been omitted. In the
opinion of management, the condensed financial statements reflect all
adjustments, which are of a normal recurring nature, necessary for a fair
presentation. Certain prior year amounts have been reclassified to conform
with current year presentation. The accompanying condensed financial
statements should be read in conjunction with the financial statements and
related notes thereto included in the Companys Annual Report on Form 10-K for
the year ended December 31, 2000.

2. ADVANCES TO PARENT COMPANY AND AFFILIATE

As
of September 30, 2001, AWA had net advances to Holdings of $257.8
million. In addition, AWA had net advances of $5.1 million due to The Leisure
Company (TLC), a wholly owned subsidiary of Holdings.

3. AIR TRANSPORTATION SAFETY AND SYSTEM STABILIZATION ACT

In the wake of large financial losses attributed to the terrorist attacks
on the United States that occurred on September 11, 2001, the Senate and House
of Representatives of the United States of America passed, and the President
signed into law H.R. 2926, the Act. The intent of the Act is to preserve the
continued viability of the United States air transportation system. The Act
includes the following key provisions:



| |  |  | Airlines will receive immediate cash compensation up to an industry
total of $5 billion, including up to $500 million in the aggregate for
cargo carriers and up to $4.5 billion in the aggregate for commercial
carriers based upon each carriers share of available seat miles during
the month of August 2001. Airlines must demonstrate that their losses
equal or exceed the amount granted. AWA anticipates receiving
approximately $120 million from this program, of which $60.3 million
was received in September 2001. AWA recognized all $60.3 million of
the federal government assistance as nonoperating income in the third
quarter of 2001 to offset incurred direct and incremental losses
resulting from the terrorist attacks (see Note 8, Nonoperating Income
(Expense)  Other, Net").
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The federal government will guarantee credit instruments issued to
air carriers of up to $10 billion. A newly created Air Transportation
Stabilization Board will have authority to set all terms and
conditions, including determining the amounts and recipients of the
loans. The Act also allows the government to take an equity stake in
the airlines receiving federal loan guarantees as collateral. AWA
expects to apply for a loan guarantee in the near future.                                                                                                                                                                                                                                                                                                                                   
|
| |  |  | The Act establishes potential protection for air service to small
communities. Carriers that receive direct financial assistance may be
required by the Secretary of the Department of Transportation (DOT)
to maintain scheduled service to any point served by the carrier prior
to September 11, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | The Act establishes forgiveness of Internal Revenue Service (IRS)
penalties for late payment of certain taxes, provided they are paid by
November 15, 2001, or, at the discretion of the Secretary of the DOT,
as late as January 15, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | The Act provides for reimbursement to air carriers and their
vendors or subcontractors for increases in the cost of war risk
insurance for the period up to October 1, 2002. The Act also limits
the amount of liability for claims against an air carrier attributed to
the terrorist attacks to a total not to exceed the limits of the
liability coverage maintained by the carrier.                                                                                                                                                                                                                                                                                                                                                                                                                      

15



---



##### 



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
September 30, 2001

4. FLIGHT EQUIPMENT

In the third quarter of 2001, AWA borrowed $174.0 million from the America
West Airlines 2001-1 Pass Through Trusts to fund the acquisition of six new
A319 aircraft. In September 2001, AWA completed a sale of two owned aircraft
engines, with a combined net book value of $10.9 million, for approximately
$10.0 million as part of a sale leaseback transaction. The resulting $0.9
million pretax loss on this transaction was recognized in the accompanying
Condensed Consolidated Statement of Operations, classified in Nonoperating
Income (Expense)  Other, Net.

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 and nine months ended September 30, 2001, AWA recorded a total
comprehensive loss of $31.2 million and $87.2 million, respectively. The
difference between net loss and comprehensive loss for the three and nine
months ended September 30, 2001 is detailed in the following table:

|                   |                                                                                                                          |   |                    |        |                    |   |         |        |  
|------------------ | ------------------------------------------------------------------------------------------------------------------------ | - | ------------------ | ------ | ------------------ | - | ------- | ------ | -
|                   |                                                                                                                          |   | Three Months       |        | Nine Months       
|                   |                                                                                                                          |   | Ended              |        | Ended             
|                   |                                                                                                                          |   | September 30, 2001 |        | September 30, 2001
|                   |                                                                                                                          |   |                    |        |                   
|                   |                                                                                                                          |   | (In thousands)    
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                  
|                  
|                  
|                  
|Net loss           |                                                                                                                          | $ | (31,060            | )      |                    | $ | (87,412 | )     
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                  
|                  
|                  
|                  
|                   | Unrealized losses on derivative instruments,
net of deferred taxes                                                       |   |                    | (3,683 | )                  |   |         | (1,727 | )
|                  
|                  
|                  
|                  
|                   | Reclassification adjustment to net loss of previously
reported unrealized losses on derivative
instruments, net of taxes |   |                    | 3,592  |                    |   |         | 1,970  |  
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                   | Total other comprehensive income (loss)                                                                                  |   |                    | (91    | )                  |   |         | 243    |  
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                   |                                                                                                                          |   |                    |        |                    |   |         |       
|                  
|                  
|                  
|                  
|Comprehensive loss |                                                                                                                          | $ | (31,151            | )      |                    | $ | (87,169 | )     
|                   |                                                                                                                          |   |                    |        |                    |   |         |       

6. SPECIAL CHARGES

In April 2001, AWA announced a cost reduction plan to respond to a
softening economy. The plan included a slowing of the airlines growth through
the return of seven older 737-300 leased aircraft to the lessors in the second
half of 2001 and January 2002 and significant reductions in overhead due in
part to select reductions-in-force of management, administrative and clerical
personnel.

AWA recorded a pretax charge of $35.7 million in the second quarter of
2001 related to the earlier-than-planned aircraft returns and
reductions-in-force. The following table presents the payments made during the
third quarter of 2001 and remaining accrual as of September 30, 2001.

|                              |  |                  |        |                    |  |       |     |  |  |   |        | 
|----------------------------- |  | ---------------- | ------ | ------------------ |  | ----- | --- |  |  | - | ------ | 
|                              |  | Aircraft Returns |        | Reduction-in-force |  | Total
|                              |  |                  |        |                    |  |      
|                              |  |                  |        |                    |  |       |     |  |  |   |        | 
|                             
|                             
|                             
|                             
|Balance at June 30, 2001      |  | $                | 22,569 |                    |  | $     | 468 |  |  | $ | 23,037 | 
|                             
|                             
|                             
|                             
|                              |  |                  |        |                    |  |       |     |  |  |   |        | 
|                             
|                             
|                             
|                             
|Payments                      |  |                  | 2,193  |                    |  |       | 296 |  |  |   | 2,489  | 
|                              |  |                  |        |                    |  |       |     |  |  |   |        | 
|                              |  |                  |        |                    |  |       |     |  |  |   |        | 
|                             
|                             
|                             
|                             
|Balance at September 30, 2001 |  | $                | 20,376 |                    |  | $     | 172 |  |  | $ | 20,548 | 
|                              |  |                  |        |                    |  |       |     |  |  |   |        | 

16



---



##### 



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
September 30, 2001

7. SALE OF EQUITY INVESTMENTS

In July 2001, AWA sold 62,240 warrants to purchase common stock of
Expedia.com, resulting in a pretax gain of approximately $1.1 million (see Note
8, Nonoperating Income (Expense)  Other, Net).

In July 2001, AWA sold 73,413 Equant N.V. depository certificates, which
were held by the SITA Foundation, resulting in a pretax gain of approximately
$1.5 million.

8. NONOPERATING INCOME (EXPENSE)  OTHER, NET

For accounting purposes, AWA recognizes federal government assistance
income to offset direct and incremental losses resulting from the
terrorist attacks to the extent payment has been received from the United
States government. In September 2001, AWA received a $60.3 million advance
payment under the Act from the United States government (see Note 3, Air
Transportation Safety and System Stabilization Act). In accordance with
Emerging Issues Task Force Issue No. 01-10, Accounting for the Impact of the
Terrorist Attacks of September 11, 2001,AWA recognized the entire amount as
nonoperating income because direct and incremental losses incurred during the
third quarter exceeded that amount. When the next payment of federal
government assistance is received, AWA will recognize additional income to
offset losses incurred in the third quarter in excess of the $60.3 million
already recognized, as well as additional losses expected to be incurred in the
fourth quarter of 2001.

In July 2001, AWA recognized a pretax gain of approximately $1.1 million
from the sale of warrants to purchase common stock of Expedia.com (see Note 7,
Sale of Equity Investments).

In September 2000, AWA recorded an $8.8 million pretax unrealized gain on
AWAs investment in one million shares of GetThere.com common stock. AWA sold
all one million shares of GetThere.com for approximately $17.8 million in
October 2000.

9. 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
balance sheets and statements of operations.

10. SUBSEQUENT EVENTS

Sale Leaseback Transactions

In October 2001, AWA completed sales of eight owned A319 aircraft, two
owned A320 flight simulators and one owned 737-300 flight simulator as part of
sale leaseback transactions. AWA received gross proceeds of $268.8 million
from the aircraft sale leaseback transaction, of which $227.5 million was used
to pay down mortgages existing on these aircraft. The $34.1 million gain
resulting from this transaction will be deferred and amortized over the term of
the operating leases, which approximates 20 years, as a reduction in rent
expense. The flight simulators, with a combined book value of $14.6 million,
were sold for approximately $17.4 million. The gain resulting from this
transaction will be deferred and amortized over the term of the operating
lease, which approximates nine years, as a reduction in rent expense.

Federal Aviation Administration (FAA) Proposed Civil Penalties

In October 2001, the FAA announced that it proposed civil penalties be
assessed against AWA in the amount of approximately $668,000 for alleged
maintenance violations occurring in May and June 1999 and alleged operation of
aircraft in violation of FAA regulations between November 1997 and September
2000. AWA believes it is currently in full compliance with FAA regulations and
intends to contest the proposed penalties.

17



---



##### 



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
September 30, 2001

Default under Aircraft Leases

In October 2001, AWA suspended payment under certain aircraft leases and,
as a result, has received notices of default from certain aircraft lessors.
AWA is currently negotiating with these lessors and others to reduce aircraft
rent and restructure its costs and obligations, and for the potential return of
certain aircraft prior to the expiration of the leases.

18



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

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

Holdings is the parent company of AWA and TLC. AWA is the eighth largest
commercial airline carrier in the United States operating through its principal
hubs located in Phoenix, Arizona and Las Vegas, Nevada, and a mini-hub located
in Columbus, Ohio. As of September 30, 2001, AWA served 57 destinations in
North America, including seven destinations in Mexico and two in Canada. TLC
arranges and sells leisure travel products that may include airfare, hotel
accommodations, ground transportation and a variety of other travel options.
Holdings primary business activity is ownership of all the capital stock of
AWA and TLC.

Overview

The airline industry is cyclical in nature and highly sensitive to general
economic conditions. In 2001, prior to September 11, softening economic
conditions had a severe adverse effect on airline industry revenues,
principally due to a decline in higher yielding business traffic. In addition,
historically high fuel costs led to increased costs and reduced operating
margins. Accordingly, prior to September 11, 2001, AWA focused on maintaining
its low cost structure and on continuing to improve its unit revenues with the
expectation that economic conditions would improve by 2002.

The September 11, 2001 terrorist attacks on the World Trade Center and the
Pentagon dramatically worsened the economic conditions for AWA and the airline
industry in general. After the attacks, the FAA suspended all commercial
airline flights for two days leading to substantial losses for AWA and the
other airlines. AWA cancelled more than 2,000 flights from September 11 until
the airline resumed normal operations on September 16, 2001. During this five
day period, the Company continued to incur substantially all of its normal
operating expenses and therefore recognized operating losses of approximately
$20 million. As a result of these acts of terrorism, demand for air travel, as
shown by advance bookings and load factors, has declined significantly. Ticket
prices and, in turn, yields (revenue per passenger mile) have also fallen
dramatically as airlines attempt to stimulate incremental passenger travel. The
airline industry has also incurred, and will continue to face, an increase in
costs resulting from enhanced security measures and aviation-related insurance.
In addition, the general increase in hostilities relating to reprisals
against terrorist organizations and the threat of further terrorist attacks
could continue to negatively impact airline revenues and costs for the near
term. Thus, for the period September 16 through September 30, 2001, despite
resuming normal operations, AWA incurred further operating losses of
approximately $37 million.

AWAs Response to the September 11, 2001 Terrorist Attacks

The September 11, 2001 terrorist attacks and the resulting losses had a
substantial and immediate adverse effect on the Companys liquidity. In the
absence of additional financing and cost reductions, the Company believed its
liquidity position was not adequate to weather the post-September 11 downturn
in the short term.

Additional Financing

AWA has actively sought additional financing from the federal government,
in the form of direct cash assistance and guaranteed loans, and the private
sector, primarily through the sale and leaseback of owned assets. In
September 2001, AWA received federal assistance of $60.3 million under the Act
(see Note 2, Air Transportation Safety and System Stabilization Actand Note
8, Nonoperating Income (Expense)  Other, Netin Notes to Condensed
Consolidated Financial Statements) and expects to receive an additional $60
million in the fourth quarter of 2001. In October 2001, AWA completed the sale
and leaseback of eight Airbus aircraft, three flight simulators and two spare
aircraft engines, resulting in proceeds of approximately $70 million to the
airline (see Note 3, Flight Equipmentand Note 10, Subsequent Events  Sale
Leaseback Transactionsin Notes to Condensed Consolidated Financial
Statements).

19



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

Despite AWAs qualification for $120 million in federal assistance, the
completion of $70 million in sale leaseback financing, and careful management
of its business and costs, it will be necessary for AWA to participate in the
Federal Guarantee Loan Program established under the Act (see Note 2, Air
Transportation Safety and System Stabilization Actin Notes to Condensed
Consolidated Financial Statements) in order to restore AWA to a manageable
liquidity position and allow it to weather the post-September 11 economic
downturn. AWA expects to apply for a loan guarantee in the near future. To
qualify for assistance under the Federal Guarantee Loan Program, AWA must
demonstrate that it will be able to continue operations and be able to repay
the loans in accordance with their terms. In addition, the regulations under
the Act strongly suggest that an applicant obtain assistance from its key
constituents in order to restructure its costs. Accordingly, AWA has initiated
a comprehensive effort to obtain concessions from its key constituents that
will allow it to right size its business, reduce its costs consistent with
reduced revenue generating capability, create financial flexibility, and
restore its long-term sustainability and profitability.

AWAs key constituents, and the nature of the concessions required from
them, are as follows:



| |  |  | Employees  AWA implemented a 2,000 employee reduction-in-force in
October 2001. The workforce reduction was accomplished through a
combination of attrition, deferred hiring and select
reductions-in-force. In addition, a compensation cap for 20 of AWAs
most senior executives has been instituted through 2003. AWA will
remain focused on maintaining other labor costs at affordable levels.                                                                                                                                                    
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Creditors  AWA has $90 million outstanding under a senior secured
revolving credit agreement, which includes restrictive financial
covenants and collateral requirements and, by its terms, is repayable
in full at the end of 2002 (see Liquidity and Capital Resources
below). AWA is in discussions with the lenders under the credit
agreement to waive any collateral shortfalls resulting from the
potential devaluation of aircraft and rotable parts, extend repayment
terms, reduce interest rates and eliminate certain financial covenants.
|
| |  |  | Alliance Partners  AWA is in discussions with its regional airline
partners to restructure the existing cost reimbursement and revenue
sharing arrangements to reduce the costs reimbursed by AWA.                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | Aircraft Manufacturers  AWA is in discussions with certain
aircraft and engine manufacturers to defer firm aircraft orders
scheduled for delivery and to provide financing for aircraft to be
delivered under the aircraft purchase agreement.                                                                                                                                                                                                                                                                                                          
|
| |  |  | Aircraft Lessors  In October 2001, AWA suspended payment under
certain aircraft leases and, as a result, has received notices of
default from certain aircraft lessors. AWA is currently negotiating
with those lessors and others to reduce aircraft rent and restructure
its costs and obligations, and for the potential return of certain
aircraft prior to the expiration of the leases.                                                                                                                                                           
|
| |  |  | Major Vendors  AWA is negotiating with virtually all vendors to
further reduce its cost structure and improve its operating
flexibility.                                                                                                                                                                                                                                                                                                                                                                                                                

AWA expects to complete the application for assistance under the Federal
Guarantee Loan Program, including the business plan, in the fourth quarter of
2001. There can be no assurance, however, that AWAs effort to obtain
concessions from its key constituents or its application under the Federal
Guarantee Loan Program will be successful. If AWA is unsuccessful with its
efforts to obtain additional financing and restructure its existing
obligations, AWAs liquidity position will be inadequate in the short term and
the Company may be forced to file for bankruptcy protection.

20



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

Cost Reductions

After September 11, 2001, the Company took immediate steps to reduce
costs, including a reduction in its flight schedule by approximately 20% based
on available seat miles effective September 18, 2001, the discontinuation of
meal service on all flights and the elimination of approximately 2,000
positions. In addition, AWA implemented a plan to conserve cash by deferring
non-essential capital expenditures and slowing or suspending payments to
vendors and business partners. As discussed above, AWA continues to work
closely with its vendors and business partners to identify and implement cash
conservation and cost reduction opportunities.

Win Back Customers Campaign

AWA has launched a vigorous campaign to win back customers and get America
flying again. Key components of the campaign include:



| |  |  | New security measures, including additional law enforcement officers
and enhanced security screening procedures, have been implemented at
AWAs airport locations. AWA has also begun the process of
reinforcing cockpit doors on all its aircraft.                                                                                                                                                                                
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | A communication plan, including direct marketing and media efforts,
has been developed to reinforce the convenience of air travel. These
efforts include letters to community organizations, business leaders,
tourism offices and government agencies. In Phoenix, Arizona, AWAs
principal hub location, local media has also donated print,
television, radio, outdoor and online advertising to promote the
hometown airline.
|
| |  |  | Marketing initiatives, including internet fare sales, travel agent
promotions and enhanced frequent flyer program benefits, have been
launched.                                                                                                                                                                                                                                                                                    

As a result of these initiatives, AWAs passenger load factors and booking
levels are steadily improving. However, revenues remain well below last
years level.

Airline Operations Update

Despite the September 11, 2001 terrorist attacks, a key element of AWAs
strategy to improve unit revenues remains the customer service initiatives
launched in July 2000, which were designed to improve operational reliability
and restore customer confidence by reducing the number of flight cancellations
and improving on-time performance. In July and August 2001, AWA continued to
make significant improvements in a number of key service areas as reported to
the DOT:



| |  |  | On-time performance improved to 74.3% in July 2001 from 64.4% in
July 2000 and 70.6% in August 2001 from 59.5% in August 2000.           
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The percentage of flights cancelled dropped to 1.9% in July 2001
from 6.3% in July 2000 and 2.1% in August 2001 from 3.6% in August
2000.
|
| |  |  | AWA posted year-over-year improvements in mishandled baggage of 51%
in July 2001 and 49% in August 2001.                                 
|
| |  |  | Customer complaints to the DOT declined by 55% in July 2001 and 60%
in August 2001 compared to the comparable periods in 2000.           

21



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

The improvement in operational reliability, combined with pricing
incentives, resulted in AWA load factors in July and August 2001 (79.4% and
79.6%, respectively) that were among the highest in the industry. Management
believed these improvements produced a solid foundation for profitability as
economic and industry conditions
improved. After September 11, 2001, AWA continued to outperform the
industry as measured by key operating statistics. AWAs month-to-date
completion factor for October 2001 is 99% compared to 95% in October 2000 and
month-to-date on-time performance is 84% compared to 60% in October 2000.

Summary of Holdings Financial Results

Holdings recorded a consolidated net loss of $31.7 million in the third
quarter of 2001, a diluted loss per share of $0.94. This compares to $1.3
million of consolidated net income, or $0.04 per diluted share, in the third
quarter of 2000. The decline in earnings was due primarily to depressed
passenger traffic and revenues resulting from the terrorist attacks on
September 11, 2001, a softening economy and much smaller book income tax
credits. The third quarter 2001 results include a nonoperating pretax gain of
$60.3 million ($37.5 million after tax) related to the federal government
assistance (see Note 2, Air Transportation Safety and System Stabilization
Actand Note 8, Nonoperating Income (Expenses)  Other, Netin Notes to
Condensed Consolidated Financial Statements) and a $2.1 million pretax loss
($1.3 million after tax) related to the write down to realizable value of the
Companys investment in Book4golf.com (see Note 4, Comprehensive Income
(Loss)in Notes to Condensed Consolidated Financial Statements). The third
quarter 2000 results included a non-operating pretax gain of $8.8 million ($5.5
million after tax) related to an investment in one million shares of
GetThere.com common stock and a $2.0 million non-operating pretax gain ($1.2
million after tax) from TLCs sale of America West Golf Vacations. The Company
recorded a consolidated income tax benefit for financial reporting purposes of
$15.1 million for the 2001 third quarter on a pretax loss of $46.8 million.
This compares to $11.0 million of income tax expense in the third quarter of
2000 on $12.3 million of pretax income. Primarily as a result of AWAs
amortization of excess reorganization value (ERV), which is not deductible
for tax purposes, AWAs book tax rate can fluctuate significantly with changes
in earnings. The loss in the third quarter 2001 resulted in much smaller book
income tax credits than would be anticipated had the Company used effective tax
rates as in the 2000 period.

Holdings recorded a consolidated net loss of $87.0 million for the nine
months ended September 30, 2001, a diluted loss per share of $2.59. This
compares to $49.4 million of consolidated net income, or $1.36 per diluted
share, in the 2000 period. Results for the nine month period in 2001 include a
pretax gain of $60.3 million related to the federal government assistance and
an $11.0 million pretax gain ($6.8 million after tax) resulting from the
settlement in March 2001 of a lawsuit related to an air-to-ground
telecommunication system that was previously written off. These gains were
offset by a $35.7 million pre-tax special charge ($22.2 million after tax)
resulting from the Companys cost reduction initiatives in the second quarter
of 2001 and a $2.1 million pretax loss on the Companys investment in
Book4golf.com. Results for the nine month period in 2000 include a pretax gain
of $15.5 million ($9.6 million after tax) from AWAs sale of 500,000 warrants
to purchase common stock of Priceline.com in the first quarter of 2000, a
pretax gain of $9.7 million ($6.1 million after tax) from TLCs sales of a
majority interest in National Leisure Group and The Vacation Store in the
second quarter of 2000 and the gains related to AWAs investment in
GetThere.com common stock and TLCs sale of America West Golf Vacations
discussed above. The Company recorded a consolidated income tax benefit for
financial reporting purposes of $40.6 million for the nine months ended
September 30, 2001. This compares to $46.4 million of income tax expense for
the 2000 nine month period.

22



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

RESULTS OF OPERATIONS

The following discussion provides an analysis of AWAs results of
operations for the third quarter and nine months ended September 30, 2001 and
material changes compared to the third quarter and nine months ended September
30, 2000.

America West Airlines, Inc.
Statements of Operations
(In thousands)
(Unaudited)

|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |           |           | 
|--------------------------------- | ------------------------------------------- | ----------------------------------------- | -------- | ------------------ | ------- | ----------------- | ----- | ------- | ------- | ---- | -------- | --------- | --------- | - | ------ | --------- | --------- | 
|                                  |                                             |                                           |          | Three Months Ended |         | Nine Months Ended
|                                  |                                             |                                           |          | September 30,      |         | September 30,    
|                                  |                                             |                                           |          |                    |         |                  
|                                  |                                             |                                           |          | 2001               |         | 2000              |       | 2001    |         | 2000
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |     
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Operating revenues:               |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Passenger                                   |                                           | $        | 463,345            |         |                   | $     | 549,320 |         |      | $        | 1,563,539 |           |   | $      | 1,639,853 |          
|                                 
|                                 
|                                 
|                                 
|                                  | Cargo                                       |                                           |          | 7,839              |         |                   |       | 8,357   |         |      |          | 27,599    |           |   |        | 27,784    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other                                       |                                           |          | 7,545              |         |                   |       | 20,780  |         |      |          | 38,507    |           |   |        | 60,518    |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                  |                                             | Total operating revenues                  |          |                    | 478,729 |                   |       |         | 578,457 |      |          |           | 1,629,645 |   |        |           | 1,728,155 | 
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Operating expenses:               |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Salaries and related costs                  |                                           |          | 155,934            |         |                   |       | 142,001 |         |      |          | 451,246   |           |   |        | 408,382   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Aircraft rents                              |                                           |          | 88,529             |         |                   |       | 83,692  |         |      |          | 265,409   |           |   |        | 244,651   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other rents and landing fees                |                                           |          | 34,596             |         |                   |       | 34,689  |         |      |          | 104,785   |           |   |        | 96,738    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Aircraft fuel                               |                                           |          | 85,778             |         |                   |       | 98,591  |         |      |          | 278,677   |           |   |        | 257,450   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Agency commissions                          |                                           |          | 16,461             |         |                   |       | 22,471  |         |      |          | 62,017    |           |   |        | 67,694    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Aircraft maintenance materials and repairs  |                                           |          | 67,399             |         |                   |       | 63,754  |         |      |          | 197,867   |           |   |        | 185,474   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Depreciation and amortization               |                                           |          | 16,591             |         |                   |       | 12,742  |         |      |          | 46,662    |           |   |        | 39,188    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Amortization of excess reorganization value |                                           |          | 4,974              |         |                   |       | 4,974   |         |      |          | 14,922    |           |   |        | 14,922    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Special charges                             |                                           |          |                   |         |                   |       |        |         |      |          | 35,695    |           |   |        |          |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other                                       |                                           |          | 109,393            |         |                   |       | 116,463 |         |      |          | 354,390   |           |   |        | 353,446   |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                  |                                             | Total operating expenses                  |          |                    | 579,655 |                   |       |         | 579,377 |      |          |           | 1,811,670 |   |        |           | 1,667,945 | 
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Operating income (loss)           |                                             |                                           | (100,926 | )                  |         |                   | (920  | )       |         |      | (182,025 | )         |           |   | 60,210 |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Nonoperating income (expenses):   |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|                                  | Interest income                             |                                           |          | 6,238              |         |                   |       | 6,850   |         |      |          | 17,779    |           |   |        | 16,910    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Interest expense, net                       |                                           |          | (11,423            | )       |                   |       | (5,621  | )       |      |          | (25,208   | )         |   |        | (17,003   | )        
|                                 
|                                 
|                                 
|                                 
|                                  | Federal government assistance               |                                           |          | 60,282             |         |                   |       |        |         |      |          | 60,282    |           |   |        |          |          
|                                 
|                                 
|                                 
|                                 
|                                  | Gains on sales of investments               |                                           |          | 1,089              |         |                   |       |        |         |      |          | 1,089     |           |   |        | 15,515    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other, net                                  |                                           |          | (1,578             | )       |                   |       | 8,868   |         |      |          | (1,187    | )         |   |        | 9,829     |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                  |                                             | Total nonoperating income (expenses), net |          |                    | 54,608  |                   |       |         | 10,097  |      |          |           | 52,755    |   |        |           | 25,251    | 
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          
|                                 
|                                 
|                                 
|                                 
|Income (loss) before income taxes |                                             | $                                         | (46,318  | )                  |         | $                 | 9,177 |         |         | $    | (129,270 | )         |           | $ | 85,461 |          
|                                  |                                             |                                           |          |                    |         |                   |       |         |         |      |          |           |           |   |        |          

23



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

The table below sets forth selected operating data for AWA.

|                                                 |                   |  |                    |      |         |  |                   |      |         |         |       |       |           |  |         |      |      |  |         |      |     |  |      |      |  
|------------------------------------------------ | ----------------- |  | ------------------ | ---- | ------- |  | ----------------- | ---- | ------- | ------- | ----- | ----- | --------- |  | ------- | ---- | ---- |  | ------- | ---- | --- |  | ---- | ---- | -
|                                                 |                   |  | Three Months Ended |      | Percent |  | Nine Months Ended |      | Percent
|                                                 |                   |  | September 30,      |      | Change  |  | September 30,     |      | Change 
|                                                 |                   |  | 2001               |      | 2000    |  | 2001-2000         |      | 2001    |         | 2000  |       | 2001-2000
|                                                 |                   |  |                    |      |         |  |                   |      |         |         |       |       |          
|                                                 |                   |  |                    |      |         |  |                   |      |         |         |       |       |           |  |         |      |      |  |         |      |     |  |      |     
|                                                
|                                                
|                                                
|                                                
|Aircraft (end of period)                         |                   |  | 149                |      |         |  | 133               |      |         |         | 12.0  |       |           |  | 149     |      |      |  | 133     |      |     |  | 12.0 |     
|                                                
|                                                
|                                                
|                                                
|Average daily aircraft utilization (hours)       |                   |  | 8.1                |      |         |  | 10.8              |      |         |         | (25.0 | )     |           |  | 10.1    |      |      |  | 11.0    |      |     |  | (8.2 | )   
|                                                
|                                                
|                                                
|                                                
|Available seat miles (in millions)               |                   |  | 6,695              |      |         |  | 6,881             |      |         |         | (2.7  | )     |           |  | 20,647  |      |      |  | 20,194  |      |     |  | 2.2  |     
|                                                
|                                                
|                                                
|                                                
|Block hours                                      |                   |  | 128,066            |      |         |  | 130,047           |      |         |         | (1.5  | )     |           |  | 397,322 |      |      |  | 384,495 |      |     |  | 3.3  |     
|                                                
|                                                
|                                                
|                                                
|Average stage length (miles)                     |                   |  | 895                |      |         |  | 884               |      |         |         | 1.2   |       |           |  | 891     |      |      |  | 875     |      |     |  | 1.8  |     
|                                                
|                                                
|                                                
|                                                
|Average passenger journey (miles)                |                   |  | 1,369              |      |         |  | 1,309             |      |         |         | 4.6   |       |           |  | 1,309   |      |      |  | 1,267   |      |     |  | 3.3  |     
|                                                
|                                                
|                                                
|                                                
|Revenue passenger miles (in millions)            |                   |  | 4,953              |      |         |  | 5,026             |      |         |         | (1.5  | )     |           |  | 15,039  |      |      |  | 14,381  |      |     |  | 4.6  |     
|                                                
|                                                
|                                                
|                                                
|Load factor (percent)                            |                   |  | 74.0               |      |         |  | 73.0              |      |         | 1.0 pts |       |       | 72.8      |  |         |      | 71.2 |  |         | 1.6  | pts
|                                                
|                                                
|                                                
|                                                
|Passenger enplanements (in thousands)            |                   |  | 5,034              |      |         |  | 5,178             |      |         |         | (2.8  | )     |           |  | 15,432  |      |      |  | 14,996  |      |     |  | 2.9  |     
|                                                
|                                                
|                                                
|                                                
|Yield per revenue passenger mile (cents)         |                   |  | 9.36               |      |         |  | 10.93             |      |         |         | (14.4 | )     |           |  | 10.40   |      |      |  | 11.40   |      |     |  | (8.8 | )   
|                                                
|                                                
|                                                
|                                                
|Revenue per available seat mile:                 |                   |  |                    |      |         |  |                   |      |         |         |       |       |           |  |         |      |      |  |         |      |     |  |      |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Passenger (cents) |  |                    | 6.92 |         |  |                   | 7.98 |         |         |       | (13.3 | )         |  |         | 7.57 |      |  |         | 8.12 |     |  |      | (6.8 | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Total (cents)     |  |                    | 7.15 |         |  |                   | 8.41 |         |         |       | (15.0 | )         |  |         | 7.89 |      |  |         | 8.56 |     |  |      | (7.8 | )
|                                                
|                                                
|                                                
|                                                
|Fuel consumption (gallons in millions)           |                   |  | 105.6              |      |         |  | 108.4             |      |         |         | (2.6  | )     |           |  | 323.6   |      |      |  | 316.4   |      |     |  | 2.3  |     
|                                                
|                                                
|                                                
|                                                
|Average fuel price (cents per gallon)            |                   |  | 81.3               |      |         |  | 91.0              |      |         |         | (10.7 | )     |           |  | 86.1    |      |      |  | 81.4    |      |     |  | 5.8  |     
|                                                
|                                                
|                                                
|                                                
|Average number of full-time equivalent
employees |                   |  | 12,667             |      |         |  | 12,461            |      |         |         | 1.6   |       |           |  | 12,854  |      |      |  | 12,117  |      |     |  | 6.1  |     

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

|                                            |  |                    |      |         |  |                   |      |         |  |      |       |           |  |  |      |  |  |  |      |  |  |  |       |  
|------------------------------------------- |  | ------------------ | ---- | ------- |  | ----------------- | ---- | ------- |  | ---- | ----- | --------- |  |  | ---- |  |  |  | ---- |  |  |  | ----- | -
|                                            |  | Three Months Ended |      | Percent |  | Nine Months Ended |      | Percent
|                                            |  | September 30,      |      | Change  |  | September 30,     |      | Change 
|                                            |  | 2001               |      | 2000    |  | 2001-2000         |      | 2001    |  | 2000 |       | 2001-2000
|                                            |  |                    |      |         |  |                   |      |         |  |      |       |          
|(in cents)                                  |  |                    |      |         |  |                   |      |         |  |      |       |           |  |  |      |  |  |  |      |  |  |  |       |  
|                                           
|                                           
|                                           
|                                           
|Salaries and related costs                  |  |                    | 2.33 |         |  |                   | 2.06 |         |  |      | 13.1  |           |  |  | 2.18 |  |  |  | 2.02 |  |  |  | 7.9   |  
|                                           
|                                           
|                                           
|                                           
|Aircraft rents                              |  |                    | 1.32 |         |  |                   | 1.22 |         |  |      | 8.2   |           |  |  | 1.28 |  |  |  | 1.21 |  |  |  | 5.8   |  
|                                           
|                                           
|                                           
|                                           
|Other rents and landing fees                |  |                    | .52  |         |  |                   | .50  |         |  |      | 4.0   |           |  |  | .51  |  |  |  | .48  |  |  |  | 6.3   |  
|                                           
|                                           
|                                           
|                                           
|Aircraft fuel                               |  |                    | 1.28 |         |  |                   | 1.43 |         |  |      | (10.5 | )         |  |  | 1.35 |  |  |  | 1.28 |  |  |  | 5.5   |  
|                                           
|                                           
|                                           
|                                           
|Agency commissions                          |  |                    | .25  |         |  |                   | .33  |         |  |      | (24.2 | )         |  |  | .30  |  |  |  | .34  |  |  |  | (11.8 | )
|                                           
|                                           
|                                           
|                                           
|Aircraft maintenance materials and repairs  |  |                    | 1.01 |         |  |                   | .93  |         |  |      | 8.6   |           |  |  | .96  |  |  |  | .92  |  |  |  | 4.3   |  
|                                           
|                                           
|                                           
|                                           
|Depreciation and amortization               |  |                    | .25  |         |  |                   | .19  |         |  |      | 31.6  |           |  |  | .23  |  |  |  | .19  |  |  |  | 21.1  |  
|                                           
|                                           
|                                           
|                                           
|Amortization of excess reorganization value |  |                    | .07  |         |  |                   | .07  |         |  |      |      |           |  |  | .07  |  |  |  | .07  |  |  |  |      |  
|                                           
|                                           
|                                           
|                                           
|Special charges                             |  |                    |     |         |  |                   |     |         |  |      |      |           |  |  | .17  |  |  |  |     |  |  |  | 100.0 |  
|                                           
|                                           
|                                           
|                                           
|Other                                       |  |                    | 1.63 |         |  |                   | 1.69 |         |  |      | (3.6  | )         |  |  | 1.72 |  |  |  | 1.75 |  |  |  | (1.7  | )
|                                            |  |                    |      |         |  |                   |      |         |  |      |       |           |  |  |      |  |  |  |      |  |  |  |       |  
|                                            |  |                    | 8.66 |         |  |                   | 8.42 |         |  |      | 2.9   |           |  |  | 8.77 |  |  |  | 8.26 |  |  |  | 6.2   |  
|                                            |  |                    |      |         |  |                   |      |         |  |      |       |           |  |  |      |  |  |  |      |  |  |  |       |  

Three Months Ended September 30, 2001 and 2000

For the three months ended September 30, 2001, AWA realized an operating
loss of $100.9 million compared to an operating loss of $0.9 million in last
years third quarter. Loss before income taxes for the three month period in
2001 was $46.3 million compared to $9.2 million of pretax income in 2000.

Total operating revenues for the 2001 third quarter were $478.7 million.
Passenger revenues were $463.3 million for the three months ended September 30,
2001, a decrease of $86.0 million or 15.7% from the 2000 quarter. A 1.5%
decrease in revenue passenger miles (RPM) was more than offset by a 2.7%
decrease in

24



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

capacity as measured by available seat miles (ASM), resulting in
a 1.0 point increase in load factor (the percentage of available seats that are
filled with revenue passengers). The decline in traffic statistics for the
third quarter of 2001 is a direct result of the terrorist attacks of September
11 and the ensuing decline in demand for air travel. Passenger revenue per
available seat mile (RASM) for the quarter decreased 13.3% to 6.92 cents
driven by a 14.4% decrease in revenue per passenger mile (yield) to 9.36
cents from 10.93 cents. The decline in yield is due primarily to the softening
economy, resulting in a significant decline in business travel, and decreased
demand for air travel in the wake of the terrorist attacks. Cargo revenues
decreased 6.2% to $7.8 million due to lower freight and mail volumes.
Other revenues decreased 63.7% to $7.5 million for the third quarter of 2001
due primarily to lower net revenues from AWAs code sharing agreement with Mesa
Airlines.

CASM increased 2.9% to 8.66 cents in the third quarter of 2001 from 8.42
cents for the comparable 2000 period primarily due to the reduction in ASMs.
Operating expenses in the third quarter of 2001 were relatively flat when
compared to the 2000 third quarter, while ASMs decreased 2.7%. A significant
contributor to the increase in CASM was the post-September 11 suspension of air
service which reduced ASMs without a commensurate reduction in expenses.
Significant changes in the components of CASM are explained as follows:



| |  |  | Salaries and related costs per ASM increased 13.1% primarily due to
an increase in salaries and related costs per employee, lower ASMs due
to the post-September 11 suspension of air service and a higher number
of employees in the 2001 period to support anticipated growth. Average
salaries and related costs per FTE increased 8.0% primarily due to
higher medical and disability insurance costs. The average number of
full time equivalent employees (FTE) increased 1.6% in the quarter
while ASMs decreased 2.7%.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Aircraft rent expense per ASM increased 8.2% primarily due to the
net addition of seven leased aircraft to the fleet during the 2001
quarter as compared to 2000.                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | Other rents and landing fees expense per ASM increased 4.0% in the
third quarter of 2001 primarily due to lower ASMs.                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | Aircraft fuel expense per ASM decreased 10.5% primarily due to a
10.7% decrease in the average price per gallon of fuel to 81.3 cents in
the 2001 quarter from 91.0 cents in 2000.                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | Agency commissions expense per ASM decreased 24.2% due to an
increase in the percentage of non-commissionable revenue in the third
quarter of 2001, primarily as a result of increased usage of the
Companys website and other lower cost distribution channels, and a
decrease in the travel agent commission cap from $50 to $20, effective
August 28, 2001.                                                                                                                                                                 
|
| |  |  | Aircraft maintenance materials and repairs expense per ASM
increased 8.6% principally due to higher airframe maintenance ($2.3
million), aircraft C-check ($1.9 million) and engine overhaul ($1.1
million) expenses in the third quarter of 2001 when compared to the
2000 third quarter. These increases were offset in part by lower
capitalized maintenance amortization expense ($1.4 million).                                                                                                                            
|
| |  |  | Depreciation and amortization expense per ASM increased 31.6% due
primarily to an increase in amortization expense related to aircraft
leasehold improvements ($1.5 million) and computer hardware and
facility improvements to support growth ($0.4 million). Higher
depreciation expense related to owned aircraft ($1.0 million) and
rotable aircraft parts ($0.7 million) also contributed to the increase.                                                                                                                 
|
| |  |  | Other operating expenses per ASM decreased 3.6% due primarily to
lower interrupted trip and baggage claim expenses as a result of AWAs
improved operating performance.                                                                                                                                                                                                                                                                                                                                                         

Excluding the $60.3 million of federal government assistance discussed
above, AWA had nonoperating pretax expenses of $5.7 million in the third
quarter of 2001 as compared to $10.1 million of nonoperating pretax income in
the 2000 third quarter. The period-over-period change was primarily due to an
$8.8 million unrealized

25



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

gain in the 2000 period related to an investment in one
million shares of GetThere.com common stock. Net interest expense increased
$5.8 million in the third quarter of 2001 due to higher average outstanding
debt. The 2001 period also included a $1.1 million gain on sale of 62,240
warrants to purchase common stock of Expedia.com (see Note 8, Nonoperating
Income (Expense)  Other, Netin Notes to Condensed Consolidated Financial
Statements).

Nine Months Ended September 30, 2001 and 2000

For the nine months ended September 30, 2001, AWA realized an operating
loss of $182.0 million as compared to $60.2 million of operating income in the
nine months ended September 30, 2000. Loss before income taxes for the nine
month period in 2001 was $129.3 million compared to $85.5 million of pretax
income in 2000.

Total operating revenues for the nine months ended September 30, 2001 were
$1.6 billion. Passenger revenues were $1.6 billion for the nine months ended
September 30, 2001, which was relatively flat when compared with the 2000
period. RPMs increased 4.6% while capacity as measured by ASMs increased 2.2%,
resulting in a 1.6 point increase in load factor. RASM decreased 6.8% to 7.57
cents for the nine months ended September 30, 2001 driven by an 8.8% decrease
in yield to 10.40 cents from 11.40 cents. Cargo revenues were relatively flat
year-over-year while other revenues decreased 36.4% to $38.5 million for the
nine months ended September 30, 2001 due primarily to lower net revenues from
AWAs code sharing agreement with Mesa Airlines.

Excluding special charges, CASM increased 4.1% to 8.60 cents in the nine
months ended September 30, 2001 from 8.26 cents for the comparable 2000 period
largely due to higher fuel prices and increases in capacity that were more
modest than planned. As a result, operating expenses excluding special charges
increased $108.0 million for the nine months ended September 30, 2001 or 6.5%
as compared to the 2000 period, while ASMs increased only 2.2%. Significant
changes in the components of CASM are explained as follows:



| |  |  | Salaries and related costs per ASM increased 7.9% primarily due to
a higher number of employees in the 2001 period to support anticipated
growth and an increase in salaries and related costs per employee. The
average number of FTEs increased 6.1% in the period while ASMs
increased only 2.2%. Average salaries and related costs per FTE
increased 4.2% primarily due to a new collective bargaining agreement
with the Companys fleet service workers, which was entered into in
June 2000, contractual wage increases required by the Companys
agreement with the Air Line Pilots Association (ALPA) and higher
medical and disability insurance costs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Aircraft rent expense per ASM increased 5.8% due primarily to the
net addition of seven leased aircraft to the fleet during the 2001
period as compared to 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Other rents and landing fees expense per ASM increased 6.3% due
primarily to higher airport rentals ($5.8 million) and landing fees
($4.4 million), which were offset in part by lower costs for borrowed
parts ($2.4 million).                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Aircraft fuel expense per ASM increased 5.5% due to a 5.8% increase
in the average price per gallon of fuel to 86.1 cents in the 2001
period from 81.4 cents in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | Agency commissions expense per ASM decreased 11.8% due to an
increase in the percentage of non-commissionable revenue in the 2001
nine month period, primarily as a result of increased usage of the
Companys website and other lower cost distribution channels. A
decrease in the travel agent commission cap from $50 to $20, effective
August 28, 2001, also contributed to the decrease.                                                                                                                                                                                                                                                                      

26



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001



| |  |  | Aircraft maintenance materials and repairs expense per ASM
increased 4.3% primarily due to higher airframe maintenance ($6.8
million), aircraft C-check ($6.2 million) and engine overhaul ($2.0
million) expenses in the 2001 period. These increases were offset in
part by a $2.6 million decrease in capitalized maintenance amortization
expense for the 2001 period when compared to the 2000 nine month
period.                
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Depreciation and amortization expense per ASM increased 21.1% due
primarily to an increase in amortization expense related to aircraft
leasehold improvements ($2.2 million) and computer software and
hardware additions and facility improvements to support growth ($1.2
million). Higher depreciation expense related to rotable aircraft
parts ($1.8 million) and owned aircraft ($1.5 million) also contributed
to the increase.
|
| |  |  | Other operating expenses per ASM decreased 1.7% to 1.72 cents from
1.75 cents primarily due to lower interrupted trip and baggage claim
expenses as a result of AWAs improved operating performance.                                                                                                                                                                                                                                 

Excluding the $60.3 million of federal government assistance, AWA had
nonoperating pretax expenses of $7.5 million for the nine months ended
September 30, 2001 as compared to $25.3 million of nonoperating pretax income
in the 2000 period. The period-over-period change was primarily due to a $15.5
million gain on sale of 500,000 warrants to purchase common stock of
Priceline.com, Inc. in the first quarter of 2000 and an $8.8 million unrealized
gain related to an investment in one million shares of GetThere.com common
stock in the third quarter of 2000. Net interest expense increased $8.2
million in the first nine months of 2001 primarily due to higher average
outstanding debt. The 2001 period also included a $1.1 million gain on sale of
62,240 warrants to purchase common stock of Expedia.com (see Note 8,
Nonoperating Income (Expenses)  Other, Netin Notes to Condensed
Consolidated Financial Statements).

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

Holdings unrestricted consolidated cash and cash equivalents and
short-term investments was $144.5 million at September 30, 2001 as compared to
$194.8 million at December 31, 2000. Net cash provided by operating activities
decreased to $117.8 million for the nine months ended September 30, 2001 from
$198.7 million for the nine months ended September 30, 2000 due primarily to
the loss in the 2001 period. Net cash provided by operating activities
benefited by $19.8 million in the 2001 period as AWA deferred payment of
certain transportation taxes to the IRS until November 15, 2001 as allowed by
the Act (see Note 2, Air Transportation Safety and System Stabilization Act
in Notes to Condensed Consolidated Financial Statements). In addition, the
Company has slowed or suspended payments to certain of its vendors and business
partners as a result of the cash conservation program implemented in response
to the September 11 terrorist attacks (see Overview  AWAs Response to the
September 11, 2001 Terrorist Attacks  Cost Reductions). As of September 30,
2001, AWAs cash balance increased by $39.9 million as a result of this
program. Net cash used in investing activities increased to $322.0 million for
the 2001 period from $160.0 million for the 2000 period due principally to
sales of short-term investments totaling $39.6 million in the 2001 period as
compared to purchases of $26.2 million of short-term investments in the 2000
period and the purchase of ten new A319 aircraft in the 2001 period, of which
two were purchased in the first quarter, two were purchased in the second
quarter and six were purchased in the third quarter of 2001 (see Note 3,
Flight Equipmentin Notes to Condensed Consolidated Financial Statements).
The two aircraft purchased in the first quarter of 2001 were subsequently
refinanced as the result of a sale leaseback transaction in March 2001 and the
remaining eight aircraft were refinanced as part of a sale leaseback
transaction in October 2001 (see Note 10, Subsequent Events  Sale-Leaseback
Transactionsin Notes to Condensed Consolidated Financial Statements). The
2001 period also included $10 million of proceeds from the sale and leaseback
of two owned aircraft engines in September 2001 (see Note 3, Flight Equipment
in Notes to Condensed Consolidated Financial Statements). The 2000 period
included the purchase of one new A320 aircraft and the sale of TLCs retail
operations, which generated net proceeds of $44.5 million. Net cash provided
by financing activities was $193.4 million for the nine months ended September
30, 2001 compared to $53.4 million used in financing activities for the nine
months ended September 30, 2000. The 2001 period

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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

included $281.4 million of
borrowing to fund the acquisition of the ten new A319 aircraft discussed above
and $45.0 million of borrowing under the Companys revolving credit facility.
The 2001 period also included the repayment of $49.4 million of debt as a
result of the sale/leaseback of two A319 aircraft discussed above and $66.5
million of revolving credit facility debt repayments. The 2000 period included
$32.0 million of borrowing to fund the acquisition of one new A320 aircraft and
purchases of common stock totaling $49.3 million.

Operating with a working capital deficiency is common in the airline
industry as tickets sold for transportation which has not yet been provided are
classified as a current liability while the related income-producing assets,
the aircraft, are classified as non-current. The Companys working capital
deficiency at September 30, 2001 was $256.2 million.

Capital expenditures for the nine months ended September 30, 2001 and 2000
were approximately $450.3 million and $209.0 million, respectively. Included
in these amounts are capital expenditures for capitalized maintenance of
approximately $75.6 million for the nine months ended September 30, 2001 and
$93.1 million for the nine months ended September 30, 2000. The Companys 2001
capital plan included approximately $280 million of capital expenditures. As a
result of the cost reduction plan implemented in May 2001, and the September 11
terrorist attacks, the Company has deferred 2001 capital expenditures of
approximately $36 million in order to reduce costs and conserve cash.

In July 2001, AWA sold 62,240 warrants to purchase common stock of
Expedia.com for approximately $1.1 million and 73,413 Equant N.V. depository
certificates, which were held by the SITA Foundation, for approximately $1.5
million.

In May 2000, TLC sold a majority interest in NLG to Softbank Capital
Partners and General Catalyst LLC. In July 2001, Softbank Capital Partners and
General Catalyst LLC, TLC and the remaining shareholders of NLG entered into a
Merger Agreement with USA Networks in connection with the proposed sale of NLG
to USA Networks. TLC holds approximately a 12% ownership interest in NLG. The
transaction was subject to, among other things, the completion of due diligence
by USA Networks and certain regulatory and other third party approvals and
consents. On October 3, 2001, USA Networks exercised its right to terminate
the Merger Agreement based on a material adverse change to the business and
financial condition of NLG following the events of September 11 and termination
by a material customer of its business with NLG. On October 3, 2001, USA
Networks filed a lawsuit in Delaware state court against NLG and its
shareholders seeking a declaration that USA Networks termination of the Merger
Agreement is valid. On October 29, 2001, USA Networks and NLG announced that
the parties had settled the litigation and that, in lieu of the transaction
contemplated by the Merger Agreement, USA Networks would acquire a minority
interest in NLG for $20 million and certain additional rights regarding
possible future transactions.

In September 2001, AWA received a $60.3 million advance payment under the
Act from the United States government (see Note 2, Air Transportation Safety
and System Stabilization Actin Notes to Condensed Consolidated Financial
Statements). Despite the receipt of such advance payment, AWAs qualification
for additional $60 million in government assistance, the completion of $70
million in sale leaseback financing described below, and careful management of
its business and costs, it will be necessary for AWA to seek additional
financing, including participation in the Federal Guarantee Loan Program
established under the Act (see Note 2, Air Transportation Safety and System
Stabilization Actin Notes to Condensed Consolidated Financial Statements and
OverviewAWAs Response to the September 11, 2001 Terrorist Attacks
Additional Financingabove) in order to restore AWA to a manageable liquidity
position and allow it to weather the post-September 11 economic downturn.
There can be no assurances that AWA will obtain such additional financing. If
AWA is unsuccessful with its efforts to obtain additional financing and
restructure its existing obligations, AWAs liquidity position will be
inadequate in the short term and the Company may be forced to file for
bankruptcy protection (see Risk Factors  We may not be successful in
obtaining sufficient financing to survive the post-September 11, 2001 downturn
below).

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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

Senior Secured Revolving Credit Facility and Other Senior Indebtedness

AWA has in place a $125 million senior secured revolving credit facility
with a group of financial institutions that has a three-year term expiring in
December 2002. As of September 30, 2001, AWA had drawn $89.9 million under
this facility.

The credit facility is secured by certain assets of AWA, contains
restriction on AWAs ability to take certain actions, and requires AWA to meet
and maintain certain financial tests and minimum ratios. In order to give AWA
added flexibility, effective June 29, 2001, two of these financial tests were
temporarily amended: the fixed charge coverage ratio requirement, which is
tested on a quarter-end basis, was reduced for the second and third quarters of
2001, and the minimum liquidity covenant was waived through October 31, 2001.
In connection with these amendments, AWA agreed, among other things, to a
reduction of the borrowing base to a maximum of $90 million
and an increase in the applicable margin and standby commitment fee. The
amendments provide that if AWA satisfies certain additional criteria by
October 31, 2001, including obtaining additional equity or debt financing in a
threshold aggregate amount, the maximum borrowing base will be restored to the
original $125 million and the reduction of the required fixed charge coverage
ratio will become permanent through the term of the credit facility (see Risk
Factors  Our high leverage, fixed costs and the financial and other covenants
in our debt instruments and possible cross-defaults may limit our ability to
fund general corporate requirements, limit our flexibility in responding to
competitive developments and increase our vulnerability to adverse economic and
industry conditionsbelow). However, due primarily to impact of the September
11, 2001 terrorist attacks, AWA does not expect to obtain additional equity or
debt financing prior to October 31, 2001. As a result, and in connection with
AWAs response to the terrorist attacks, AWA is in discussions with the lenders
party to the credit agreement regarding amending or waiving certain terms of
the credit facility (see OverviewAWAs Response to the September 11, 2001
Terrorist AttacksAdditional Financingabove).

Certain of AWAs long-term debt agreements contain minimum cash balance
requirements, leverage ratios, coverage ratios and other financial covenants
with which Holdings and AWA were in compliance as of September 30, 2001.
Certain of these financial covenants restrict the Companys ability to pay cash
dividends on its common stock and make certain other restricted payments (as
specified therein). Under these restrictions, as of September 30, 2001, the
Companys ability to pay dividends, together with any other restricted
payments, was limited. In addition, AWAs long-term debt agreements contain
cross-default provisions, which may be triggered by defaults by AWA under other
agreements relating to indebtedness. As discussed above under OverviewAWAs
Response to the September 11, 2001 Terrorist AttacksAdditional Financing,AWA
has suspended payment under certain aircraft leases and, as a result, has
received notices of default from certain aircraft lessors. If these defaults
continue, they could lead to cross defaults under agreements with other
vendors, lessors and creditors, including the lenders under AWAs senior
secured revolving credit agreement. Cross-defaults could lead to a foreclosure
by secured creditors on the assets securing the obligations to such creditors
or could otherwise further impair the Companys liquidity and access to
financing. In the event of any such foreclosure or if AWA cannot obtain
sufficient financing, the Company may be forced to file for bankruptcy
protection (see Risk Factors  We may not be successful in obtaining
sufficient financing to survive the post-September 11, 2001 downturnbelow).

Commitments

Long-term debt maturities through 2003 consist primarily of principal
amortization of notes payable secured by certain of AWAs aircraft and $89.9
million of borrowing under the revolving credit facility. Such maturities are
$24.2 million, $116.0 million and $19.5 million, respectively, for the
remainder of 2001, 2002 and 2003. As discussed in Overview  AWAs Response
to the September 11, 2001 Terrorist Attacks  Additional Financing,AWA is in
discussions with the lenders under the revolving credit facility to extend
repayment terms. In October 2001, AWA completed the sale of eight owned A319
aircraft, which were subject to mortgage financing, as part of a sale leaseback
transaction (see Note 10, Subsequent Events  Sale Leaseback Transactionsin
Notes to Condensed Consolidated Financial Statements). As a result, the
maturities of long-term debt have

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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

decreased to $19.8 million, $99.5 million and
$9.7 million, respectively, for the remainder of 2001, 2002 and 2003.

At September 30, 2001, AWA had a commitment to AVSA S.A.R.L., an affiliate
of Airbus Industrie (AVSA), to purchase a total of 28 Airbus aircraft, with
three remaining to be delivered in 2001. The remaining 25 aircraft will be
delivered in 2002 through 2004. AWA also has 17 options and 25 purchase rights
to purchase aircraft in the A320 family of aircraft (A318s, A319s, A320s and
A321s) for delivery in 2005 through 2008. The aggregate cost of firm
commitments remaining under the aircraft order is approximately $1.1 billion,
of which approximately $195.2 million is financed under the 2001-1 Pass Through
Trusts (see Financing Transactionsbelow). As discussed in Overview  AWAs
Response to the September 11, 2001 Terrorist Attacks  Additional Financing,
AWA is in discussions with Airbus Industrie to defer firm aircraft orders
scheduled for delivery and to
provide financing for aircraft to be delivered under the aircraft
purchase agreement.

AWA intends to seek additional financing (which may include public debt
financing or private financing) in the future when and as appropriate to
support these aircraft orders. There can be no assurance that sufficient
funding
will be obtained for all aircraft. A default by AWA under the AVSA purchase
commitment could have a material adverse effect on AWA.

In January 2001, AWA entered into a development agreement and ground lease
with the City of Phoenix pursuant to which AWA will construct, lease and
operate a flight operations and training facility on land located adjacent to
Phoenix Sky Harbor International Airport. The initial lease term is 20 years
with two five-year extension options. The facility will contain 164,000 square
feet and be comprised of pilot and in-flight training facilities, systems and
maintenance operations control, and crew scheduling. The estimated cost to
design and construct the facility is $35 million, of which the Company has paid
approximately $10 million as of September 30, 2001. The Company currently
intends to fund the remaining construction costs with operating cash flow, or
if conditions warrant, the issuance of debt.

Financing Transactions

In May 2001, America West Airlines 2001-1 Pass Through Trusts issued
$427.2 million of Pass Through Trust Certificates in connection with the
financing of nine Airbus A319 aircraft and five Airbus A320 aircraft. The
combined effective interest rate on this financing is 7.66% on a fixed rate
equivalent basis at the time of closing. The Pass Through Trust Certificates
were issued by separate trusts that hold equipment notes issued upon delivery
of each financed aircraft. Proceeds from the certificates are deposited in an
escrow account pending their application to purchase the equipment notes. The
equipment notes are secured by a security interest in the aircraft and are
issued in connection with either a leveraged lease financing or a mortgage
financing of the relevant aircraft, at AWAs election. The Pass Through Trust
Certificates are not direct obligations of, nor guaranteed by, Holdings or AWA.
However, AWA has certain indemnity obligations in respect of the trusts and
interest on the escrowed proceeds pending their application to finance
aircraft. The acquisition of each aircraft subject to this financing and
delivered to date has been structured as a mortgage financing.

Two of the aircraft that are the subject of this financing were delivered
in the second quarter of 2001 and six were delivered in the third quarter of
2001. In connection with the delivery of the aircraft, AWA issued equipment
notes in an aggregate amount of $58 million during the second quarter of 2001
and $174 million in the third quarter of 2001. In October 2001, AWA completed
the sale of these eight aircraft as part of a sale leaseback transaction (see
Note 10, Subsequent Events  Sale Leaseback Transactionsin Notes to
Condensed Consolidated Financial Statements). The remaining aircraft are
expected to be delivered between December 2001 and May 2002. With the issuance
of these trust certificates, management believes that it has addressed all of
AWAs anticipated aircraft financing requirements through November 2002.

In September 2001, AWA completed a sale of two owned aircraft engines for
approximately $10 million as part of a sale leaseback transaction.

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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

In October 2001, AWA completed the sale of two owned A320 flight
simulators and one owned 737-300 flight simulator for approximately $17.4
million as part of a sale leaseback transaction.

In April 2001, Moodys downgraded its credit rating of AWA and revised its
outlook to negative. In June 2001, Standard & Poors revised its outlook from
stable to negative. In response to the September 11, 2001 terrorist attacks,
Moodys further downgraded its credit rating of AWA and reaffirmed its outlook
as negative. In addition, Standard & Poors downgraded its credit ratings of
AWA and revised its outlook from negative to developing, which means that a
rating may be raised or lowered in the future (See Risk Factors  Because our
credit rating was recently downgraded, our borrowing costs may increase and our
ability to incur additional debt may be impaired below.)

OTHER INFORMATION

Labor Relations

The Company is in the process of negotiating with ALPA on a new contract
for AWAs pilots. The existing contract with ALPA became amendable in May
2000. In addition, the Company is in negotiations with the International Brotherhood of Teamsters (IBT) on a first contract covering the
Companys stock clerks, a work group of approximately 60 employees. The
Company cannot predict the form of these future collective bargaining
agreements and therefore the effect, if any, on AWAs operations or financial
performance.

FAA Proposed Civil Penalties

In October 2001, the FAA announced that it proposed civil penalties be
assessed against AWA in the amount of approximately $668,000 for alleged
maintenance violations occurring in May and June 1999 and alleged operation of
aircraft in violation of FAA regulations between November 1997 and September
2000. AWA believes it is currently in full compliance with FAA regulations and
intends to contest the proposed penalties.

Forward-Looking Statements

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

RISK FACTORS

Risk Factors Relating to America West and Industry Related Risks

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

The terrorist attacks of September 11, 2001 on the World Trade Center in
New York City and the Pentagon in Washington, D.C. using four hijacked
commercial aircraft have been highly publicized. The impacts that these events
may have on the airline industry in general, and AWA in particular, are not
known at this time, but are expected to include a substantial negative impact
on revenues due to:

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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001



| |  |  | The imposed grounding of the U.S. airline industry by the FAA and resulting airport closures in the short term (including
losses of approximately $20 million directly attributable to the imposed grounding and airport closures from September 11,
2001 until the Company resumed normal operations on September 16, 2001);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Increased demand for ticket refunds, with a corresponding reduction in the demand for travel in the near and mid terms
until public confidence in the air transportation system is restored;                                                                                                                                 
|
| |  |  | An increase in costs due to enhanced security measures and related government directives; and                                                                                                                                                                                                                                
|
| |  |  | An increase in the cost of aviation insurance in general, and the cost and availability of coverage for acts of war,
terrorism, hijacking, sabotage and similar acts of peril in particular, for us and our vendors.                                                                                                         

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



| |  |  | The adverse impact of the terrorist attacks on the travel industry and economy in general;                                                                                                                                                                             
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The potential increase in fuel costs and decrease in availability of fuel if oil-producing countries are impacted by the
aftermath of the terrorist attacks and the ability of our fuel-hedge program to manage this risk;                                             
|
| |  |  | Our ability to reduce our operating costs, conserve financial resources and implement our restructuring plan, taking into
account any resultant increase in costs (including significant increases in the cost of aviation insurance) as a
consequence of these events;
|
| |  |  | Any resulting decline in the value of the aircraft in our fleet;                                                                                                                                                                                                       
|
| |  |  | The extent of the benefits we receive under the Act, taking into account any challenges to, and interpretation or
amendments of, the Act or regulations issued pursuant thereto;                                                                                       
|
| |  |  | Our overall ability to raise financing taking into account our current leverage and the limitations imposed by the
government in recently promulgated regulations relating to the application for loan guarantees under the Act;                                       
|
| |  |  | The number of crew members who may be called for duty in the reserve forces of the armed services and the resulting impact
on our ability to operate as planned; and                                                                                                   
|
| |  |  | The scope and nature of any future terrorist attacks.                                                                                                                                                                                                                  

Partly as a result of the terrorist attacks, both Moodys and Standard and
Poors have recently downgraded our credit rating, which could negatively
impact our ability to obtain further financing (see Because our credit rating
was recently downgraded, our borrowing costs may increase and our ability to
incur additional debt may be impaired).

We may not be successful in obtaining sufficient financing to survive the
post-September 11, 2001 downturn.

As discussed above, the September 11, 2001 terrorist attacks have had, and
will most likely continue to have, a dramatic impact on the airline industry
and the economy in general. Despite the government assistance provided
pursuant to the Act, we may not be able to obtain sufficient financing to
survive the adverse economic conditions resulting from the September 11, 2001
attacks. We intend to apply for government guarantees under the Federal
Guarantee Loan Program established under the Act, but in order to qualify for
such guarantees we believe we will need to obtain significant concessions from
our employees, suppliers and lenders. We may not be able to obtain such
concessions. Even if we obtain such concessions or otherwise qualify for the
Federal Guarantee Loan Program, we may not be able to obtain additional
financing from third parties on commercially acceptable terms or at all.

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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

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

As of September 30, 2001, we owed approximately $479.3 million of debt.
Much of our debt is secured by a substantial portion of our assets, leaving us
with limited assets to use to obtain additional financing. In addition, we
have significant capitalized and operating lease obligations incurred in
connection with the financing of aircraft and the lease of airport and other
facilities and we have fixed costs in connection with our regional alliances
with Mesa airlines and Chautauqua Airlines. Our high leverage, lease
obligations and other fixed costs, and the financial and other covenants in our
debt instruments may limit our ability to borrow additional amounts and to fund
general corporate requirements, including working capital and capital
expenditures, may limit our flexibility in responding to competitive
developments and adverse market conditions and may increase our vulnerability
to adverse economic and industry conditions.

We also have outstanding orders to purchase aircraft. While we have
arranged for financing for all aircraft deliveries scheduled through November
2002, we have firm orders to purchase an additional 20 aircraft between
December 2002 and December 2004 that will require additional financing. We
cannot guarantee that we will be able to obtain enough capital to finance the
remainder of the aircraft, and if we default on our commitments to purchase
aircraft, our ability to execute our business strategy could be materially
impaired.

We depend to a significant extent on our senior secured revolving credit
facility to maintain our liquidity. As of September 30, 2001, we had $89.9
million drawn under this credit facility and a borrowing base of $90
million. The credit facility expires in December 2002, and we cannot assure
you that we will be able to extend or refinance this facility on satisfactory
terms, if at all.

The credit facility contains customary covenants that restrict our ability
to take certain actions as well as financial covenants that require us to meet
and maintain certain financial tests and minimum ratios. During the second
quarter of 2001, our lenders agreed to amend certain terms of our credit
facility, including providing additional flexibility under the financial
covenants. However, unless we satisfy certain additional criteria, including
obtaining additional equity or debt financing in a threshold aggregate amount,
certain of the amendments to our financial covenants are temporary. Due
primarily to the impact of the September 11, 2001 terrorist attacks, we do not
expect to satisfy such additional criteria. As a result, we are in discussions
with the lenders under the credit facility to amend or waive certain financial
covenants of the credit facility. A breach of the covenants in our credit
facility or the covenants in our other debt instruments could result in the
acceleration of the indebtedness under our credit facility or under our other
debt instruments. Any such breach could have a material adverse effect on our
liquidity and financial condition. We cannot assure you that the lenders will
agree to amend or waive such covenants or that we can comply with the covenants
and meet the financial tests of our credit facility, even if and as amended.

In addition, to conserve cash, we have slowed payment to certain vendors
and suspended payment to certain aircraft lessors, some of which have sent us
notices of default. If these defaults continue, they could lead to
cross-defaults under agreements with other vendors, lessors and creditors,
including the lenders under our senior secured revolving credit agreement.
Such cross-defaults could lead to acceleration of underlying debt and
foreclosure by our secured creditors against the assets securing our
obligations to such creditors or could otherwise further impair our liquidity
and access to financing. In the event of any such acceleration or foreclosure
or if we cannot obtain sufficient financing, we may be forced to file for
bankruptcy protection.

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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

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

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

Negotiations with labor unions could divert management attention, disrupt
operations and increase our labor costs and operating expenses.

Some of our employees are represented by unions. We currently are
negotiating collective bargaining agreements with ALPA, which represents all of
our approximately 1,700 pilots, and the IBT, which represents all of our
approximately 60 stock clerks. On May 2, 2001, we filed for federal mediation
with the National Mediation Board (the NMB) to facilitate contract
negotiation with ALPA and on August 8, 2001, the IBT filed for mediation with
the NMB in connection with the stock clerk negotiations. We cannot predict the
outcome of federal mediation or negotiations with ALPA or IBT. In addition,
other groups of employees may seek union representation. We cannot predict the
outcome of any future negotiations relating to union representation or
collective bargaining agreements. Agreements reached in collective bargaining
may increase operating expenses and lower operating results and net income.
This is particularly significant because our current employee costs contribute
substantially to the low cost structure that we believe is one of our
competitive strengths. In addition, negotiations with unions could
divert management attention and disrupt operations, which may result in
increased operating expenses and lower net income. If we are unable to
negotiate acceptable collective bargaining agreements, we might have to wait
through cooling off periods, which could be followed by union-initiated work
actions, including strikes. Depending on their type and duration, work actions
could disrupt our operations and, as a result, significantly adversely affect
our operating results.

Our business is sensitive to general economic conditions 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,
recession, fuel price escalation, inflation, adverse weather conditions,
consumer preferences, labor instability or regulatory oversight. Also, our
results of operations for interim periods are not necessarily indicative of
those for an entire year and our prior results are not necessarily indicative
of our future results.

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

The price and supply of jet fuel are unpredictable and fluctuate based on
events outside our control, including geopolitical developments, regional
production patterns and environmental concerns. Since fuel is the principal
raw material used in our business, accounting for 16.2% of our total operating
expenses in 2000, price escalations or reductions in the supply of jet fuel
will increase our operating expenses and cause our operating results and net
income to decline. For example, with our current level of fuel consumption, a
one-cent per gallon increase in jet fuel prices will cause our annual operating
expense to increase by $4.7 million.

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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

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 similar
to hedging programs employed by other major airlines and 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. Despite this program, we are not fully protected
against increasing jet fuel costs because our hedging program does not cover
all of our projected fuel volumes for 2001 and we have not executed hedging
transactions beyond March 31, 2002. Furthermore, our ability to effectively
hedge fuel prices is limited because we purchase a substantially larger portion
of our jet fuel requirements on the West Coast than our large competitors and
West Coast fuel prices are less correlated to heating oil prices and other
viable petroleum derivatives than East Coast fuel prices and, therefore, more
difficult to hedge. The effectiveness of our fuel hedging program may also be
impacted by the events of September 11 if fuel producing countries are affected
by the aftermath of the terrorist attacks (see The negative impact of September
11, 2001 terrorist attacks could be material to our financial condition,
results of operations and prospects").

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

The airline industry is heavily regulated. Both federal and state
governments from time to time propose laws and regulations that impose
additional requirements and restrictions on airline operations. Implementing
these measures, such as aviation ticket taxes and passenger safety measures,
has increased operating costs for us and the airline industry as a whole. In
addition, new security measures imposed by the FAA as a result of the recent
terrorist attacks are expected to increase costs for us and the airline
industry as a whole. Depending on the implementation of these and other laws,
our operating costs could increase significantly. In addition, certain
governmental agencies, such as the 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 might be taken by regulators. Accordingly, we cannot guarantee that
future legislative and regulatory acts will not have a material impact on our
operating results.

Because our credit rating was recently downgraded, our borrowing costs may
increase and our ability to incur additional debt may be impaired.

On April 19, 2001, Moodys downgraded our senior implied rating to B2 from
B1 and our senior unsecured debt rating to B3 from B1. On April 19, 2001,
Moodys also revised its ratings outlook from stable to negative. In addition,
on June 18, 2001, Standard & Poors revised its ratings outlook from stable to
negative. On September 14, 2001, Moodys further downgraded our senior implied
rating to Caa1 from B2 and our senior unsecured debt rating to Caa2 from B3 and
reaffirmed its ratings outlook as negative. A negative outlook suggests a
further downgrade may occur in the future. In addition, on September 19,
2001, Standard and Poors downgraded our credit rating to CCC- from B+ and
revised its ratings outlook from negative to developing. A developing outlook
means that a rating may be raised or lowered in the future.

According to Moodys, the recent rating downgrades reflect our highly
leveraged financial structure, weak cash flows and earnings for the previous
three quarters and our increasing dependence on leisure travel as the airline
industry experiences a loss in business class passengers. Moodys anticipates
that the recent terrorist attacks will further dampen demand for leisure travel
(see Terrorist attacks may negatively impact our revenues and costs).

As a result of these downgrades, our borrowing costs may increase, which
would increase our interest expense and could affect our net income. In
addition, these downgrades could affect our ability to obtain additional
financing. A future downgrade could further negatively impact our borrowing
costs and the prices of any securities we have outstanding (see Our high
leverage, fixed costs and the financial and other covenants in our debt
instruments and possible cross-defaults may limit our ability to fund general
corporate requirements, limit

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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

our flexibility in responding to competitive
developments and increase our vulnerability to adverse economic and industry
conditions).

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 have developed a management
succession plan and 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, although
we believe that we can retain and recruit talented personnel, we may incur
substantial costs to do so, and if we are unable to do so our business and
operations may suffer.

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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Sensitive Instruments

(a)  Commodity Price Risk

As of September 30, 2001, the Company had entered into heating oil
costless collar transactions, which establish upper and lower limits on heating
oil futures prices. These transactions are in place with respect to
approximately 37% of remaining projected fuel requirements for 2001. In
addition, as of September 30, 2001, the Company has hedged approximately 12% of
its anticipated fuel requirements for the first quarter of 2002.

The use of such transactions in the Companys fuel hedging program could
result in the Company not fully benefiting from certain declines in heating oil
futures prices. At September 30, 2001, the Company estimates that a 10%
increase in heating oil futures prices would have changed the fair value of the
costless collar transactions by approximately $1.1 million while a 10% decrease
in heating oil futures prices would have changed the fair value by
approximately $3.0 million.

As of October 19, 2001, approximately 37% of AWAs remaining 2001 fuel
requirements are hedged and approximately 12% of AWAs projected fuel
requirements for the first quarter of 2002 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 September 30, 2001 the Companys
variable-rate long-term debt obligations of approximately $82.2 million
represented approximately 23.3% of its total long-term debt. If interest rates
increased 10% in 2000, the impact on the Companys results of operations would
not be material.

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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2001

PART II  OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDER



| |  |  | None.
| |  |  | -----

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | a. |  | Exhibits                                                                                                                                                                                                                                                                                                                                                        
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | None.                                                                                                                                                                                                                                                                                                                                                           
|
| | b. |  | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                             
|
| |    |  | Holdings filed a report on Form 8-K, dated August 24, 2001,
furnishing under Item 5 a press release, dated August 22, 2001,
announcing the election of W. Douglas Parker as Chairman, President
and Chief Executive Officer of Holdings and AWA and the retirement
of William A. Franke as an officer and director.                                             
|
| |    |  | Holdings filed a report on Form 8-K, dated September 12, 2001,
furnishing under Item 5 a press release, dated September 10, 2001,
announcing a restructuring of the senior management of Holdings and
AWA and the election of certain officers to new offices, including
the election of Bernard L. Han as Executive Vice President and
Chief Financial Officer.
|
| |    |  | AWA did not filed any reports on Form 8-K during the quarter ended
September 30, 2001.                                                                                                                                                                                                                                                                          

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AMERICA WEST HOLDINGS CORPORATION
September 30, 2001



SIGNATURE

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



| | AMERICA WEST HOLDINGS CORPORATION
| | ---------------------------------



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

DATED: October 31, 2001

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AMERICA WEST AIRLINES, INC.
September 30, 2001



SIGNATURE

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



| | AMERICA WEST AIRLINES, INC.
| | ---------------------------



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

DATED: October 31, 2001

39