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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q/A
 (Amendment No. 1)
 (Mark One) þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period endedSeptember 30, 2004
 or o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission file number1-12649 AMERICA WEST HOLDINGS CORPORATION (Exact name of registrant as specified in its charter)
 DELAWARE
    
    86-0847214(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 111 WEST RIO SALADO PARKWAY, TEMPE, ARIZONA
    
    85281(Address of principal executive offices)
    
    (Zip Code)
 (480) 693-0800 
 (Registrants telephone number, including area code)
 N/A 
 (Former name, former address and former fiscal year, if changed since last report)
 Commission file number0-12337 AMERICA WEST AIRLINES, INC.
(Exact name of registrant as specified in its charter) DELAWARE
    
    86-0418245(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 4000 EAST SKY HARBOR BLVD, PHOENIX, ARIZONA
    
    85034(Address of principal executive offices)
    
    (Zip Code)
 (480) 693-0800 
 (Registrants telephone number, including area code)
 N/A 
 (Former name, former address and former fiscal year, if changed since last report)
 Indicate by check mark whether each registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ Noo Indicate by check mark whether the Registrants are accelerated filers (as defined in Exchange
Act Rule 12b-2). America West Holdings Corporation
    
    Yes þ  No oAmerica West Airlines, Inc.
    
    Yes o  No þ
 As of October 27, 2004, America West Holdings Corporation has 859,117 shares of Class A common
stock and 35,120,622 shares of Class B common stock outstanding. As of October 27, 2004, America
West Airlines, Inc. has 1,000 shares of Class B common stock outstanding, all of which are held by
America West Holdings Corporation.




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Explanatory Note In February 2005, management undertook a review of America West Airlines, Inc.s (AWA or the
Airline) accounting for its fuel hedging transactions. As a result of this review, management
concluded that AWAs fuel hedging transactions did not qualify for hedge accounting under U.S.
generally accepted accounting principles and that the financial statements of America West Holdings
Corporation (Holdings or the Company), AWAs parent corporation, and AWA for prior periods
required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and
statements of stockholders equity and comprehensive income of Holdings and AWA. In addition, the
accompanying unaudited Condensed Consolidated Statements of Operations of Holdings and the
unaudited Condensed Statements of Operations of AWA for the three and nine months ended September
30, 2004 and 2003 have also been restated to reflect the aforementioned accounting errors. The
Company has also reclassified all gains and losses from settled fuel hedges and the mark-to-market
adjustments on open fuel hedges from Aircraft Fuelto Realized and Unrealized Losses (Gains) on
Fuel Hedging Instruments, Neton the Consolidated Statements of Operations for both Holdings and
AWA. See Note 2, Restatement of Previously Reported Amountsin the accompanying condensed
consolidated financial statements of Holdings (including the notes thereto), Note 2, Restatement
of Previously Reported Amountsin the accompanying condensed financial statements of AWA
(including the notes thereto) and Managements Discussion and Analysis of Financial Condition and
Results of Operations for the impact of the restatements and reclassifications. This amended
Quarterly Report on Form 10-Q/A amends and restates those items of the previously filed Form 10-Q
for the three and nine months ended September 30, 2004 which have been affected by the revisions. This amended Quarterly Report on Form 10-Q/A has not been updated except as required to
reflect the effects of the foregoing restatement. In order to preserve the nature and character of
the disclosures set forth in such items as originally filed, no attempt has been made in this
amendment to modify or update the disclosures in the original Quarterly Report on Form 10-Q except
for the foregoing restatement. As a result, this amended Quarterly Report on Form 10-Q/A contains
forward-looking information which has not been updated for events subsequent to the date of the
original filing, and all information contained in this amended Quarterly Report on Form 10-Q/A and
the original Quarterly Report on Form 10-Q is subject to updating and supplementing as provided in
the periodic reports that we have filed and will file with the Securities and Exchange Commission
after the original filing date of the Quarterly Report on Form 10-Q. 2




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  AMERICA WEST HOLDINGS CORPORATIONITEM 1B. CONDENSED FINANCIAL STATEMENTS  AMERICA WEST AIRLINES, INC.ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 6. EXHIBITSSIGNATUREExhibit IndexEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 31.3EXHIBIT 31.4EXHIBIT 32.1EXHIBIT 32.2    Table of Contents  
 PART I  FINANCIAL INFORMATION The Company is the holding company that owns all of the stock of AWA. AWA, the eighth
largest passenger airline and the second largest low cost carrier in the United States,
accounted for most of Holdings revenues and expenses in 2003. The Leisure Company (TLC),
previously a wholly owned subsidiary of Holdings, was merged into AWA on January 1, 2004 and
continues to operate as the America West Vacations division of AWA. Through its America West
Vacations division, AWA also sells individual and group travel packages. This amended
Quarterly Report on Form 10-Q/A is filed by both Holdings and AWA and includes the financial
statements of each company in Item 1A and Item 1B, respectively. 
  ITEM 1A.
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  AMERICA WEST HOLDINGS CORPORATION. AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Balance Sheets
(in thousands except share data)
(unaudited) September 30,
    
    
    December 31,2004
    
    
    2003Assets
    
    (as restated)Current assets:Cash and cash equivalents
    
    $
    303,694
    
    
    $
    403,082Short-term investments
    
    
    68,141
    
    
    
    72,890Restricted cash
    
    
    
    
    
    
    42,900Accounts receivable, net
    
    
    92,407
    
    
    
    77,235Expendable spare parts and supplies, net
    
    
    63,030
    
    
    
    58,575Prepaid expenses
    
    
    170,863
    
    
    
    129,368Total current assets
    
    
    698,135
    
    
    
    784,050Property and equipment:Flight equipment
    
    
    898,747
    
    
    
    858,395Other property and equipment
    
    
    285,293
    
    
    
    273,284Equipment purchase deposits
    
    
    53,050
    
    
    
    46,0501,237,090
    
    
    
    1,177,729Less accumulated depreciation and amortization
    
    
    601,539
    
    
    
    570,017Net property and equipment
    
    
    635,551
    
    
    
    607,712Other assets:Investments in debt securities
    
    
    45,000
    
    
    
    40,740Restricted cash
    
    
    71,312
    
    
    
    69,876Other assets, net
    
    
    120,728
    
    
    
    112,007Total other assets
    
    
    237,040
    
    
    
    222,623$
    1,570,726
    
    
    $
    1,614,385
 See accompanying notes to condensed consolidated financial statements. 3




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AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Balance Sheets
(in thousands except share data)
(unaudited) September 30,
    
    
    December 31,2004
    
    
    2003Liabilities and Stockholders Equity
    
    (as restated)Current liabilities:Current maturities of long-term debt
    
    $
    146,653
    
    
    $
    103,899Current obligations under capital leases
    
    
    3,552
    
    
    
    3,442Accounts payable
    

    
    177,996
    
    
    
    210,288Air traffic liability
    
    
    229,534
    
    
    
    174,486Accrued compensation and vacation benefits
    
    
    41,666
    
    
    
    61,045Accrued taxes
    
    
    41,020
    
    
    
    36,846Other accrued liabilities
    
    
    74,252
    
    
    
    59,277Total current liabilities
    
    
    714,673
    
    
    
    649,283Long-term debt, less current maturities
    
    
    601,470
    
    
    
    688,965Capital leases, less current obligations
    
    
    5,061
    
    
    
    8,467Deferred credits and other liabilities
    
    
    143,642
    
    
    
    141,681Stockholders equity:Preferred stock, $.01 par value. Authorized 48,800,000
shares; no shares issued
    
    
    
    
    
    
    Class A common stock, $.01 par value. Authorized
1,200,000 shares; issued and outstanding 859,117 shares at
September 30, 2004 and December 31, 2003
    
    
    8
    
    
    
    8Class B common stock, $.01 par value. Authorized 100,000,000
shares; issued and outstanding 51,558,197 shares at September 30, 2004
and 51,239,200 shares at December 31, 2003
    
    
    516
    
    
    
    512Additional paid-in capital
    
    
    632,423
    
    
    
    631,269Accumulated deficit
    
    
    (219,161
    )
    
    
    (199,594
    )413,786
    
    
    
    432,195Less: Cost of Class B common stock in treasury, 16,437,575 shares at
September 30, 2004 and 16,283,895 shares at December 31, 2003
    
    
    (307,906
    )
    
    
    (306,206
    )Total stockholders equity
    
    
    105,880
    
    
    
    125,989$
    1,570,726
    
    
    $
    1,614,385
 See accompanying notes to condensed consolidated financial statements. 4




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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 EndedSeptember 30,
    
    
    September 30,2004
    
    
    2003
    
    
    2004
    
    
    2003(as restated)
    
    
    (as restated)Operating revenues:Passenger
    
    $
    542,167
    
    
    $
    552,564
    
    
    $
    1,648,666
    
    
    $
    1,591,496Cargo
    
    
    6,290
    
    
    
    6,201
    
    
    
    20,010
    
    
    
    21,101Other
    
    
    30,166
    
    
    
    33,537
    
    
    
    91,565
    
    
    
    78,709Total operating revenues
    
    
    578,623
    
    
    
    592,302
    
    
    
    1,760,241
    
    
    
    1,691,306Operating expenses:Salaries and related costs
    
    
    165,164
    
    
    
    158,167
    
    
    
    493,416
    
    
    
    477,884Aircraft rents
    
    
    76,400
    
    
    
    74,417
    
    
    
    226,931
    
    
    
    221,862Other rents and landing fees

    
    
    43,322
    
    
    
    38,210
    
    
    
    126,574
    
    
    
    115,475Aircraft fuel
    
    
    144,098
    
    
    
    91,462
    
    
    
    391,287
    
    
    
    281,442Realized and unrealized losses (gains) on
fuel hedging instruments, net
    
    
    (26,203
    )
    
    
    1,485
    
    
    
    (36,092
    )
    
    
    (6,394
    )Agency commissions
    
    
    6,302
    
    
    
    8,408
    
    
    
    19,305
    
    
    
    26,564Aircraft maintenance materials and repairs
    
    
    54,437
    
    
    
    50,854
    
    
    
    156,841
    
    
    
    173,572Depreciation and amortization
    
    
    13,296
    
    
    
    16,572
    
    
    
    39,674
    
    
    
    51,563Special charges
    
    
    1,629
    
    
    
    
    
    
    
    1,029
    
    
    
    14,370Other
    
    
    110,013
    
    
    
    103,944
    
    
    
    310,207
    
    
    
    318,235Total operating expenses
    
    
    588,458
    
    
    
    543,519
    
    
    
    1,729,172
    
    
    
    1,674,573Operating income (loss)
    
    
    (9,835
    )
    
    
    48,783
    
    
    
    31,069
    
    
    
    16,733Nonoperating income (expenses):Interest income
    
    
    2,053
    
    
    
    1,666
    
    
    
    5,350
    
    
    
    4,231Interest expense, net
    
    
    (19,931
    )
    
    
    (19,484
    )
    
    
    (58,920
    )
    
    
    (57,504
    )Federal government assistance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,255Other, net
    
    
    (952
    )
    
    
    625
    
    
    
    2,934
    
    
    
    2,326Total nonoperating income (expenses), net
    
    
    (18,830
    )
    
    
    (17,193
    )
    
    
    (50,636
    )
    
    
    30,308Income (loss) before income taxes
    
    
    (28,665
    )
    
    
    31,590
    
    
    
    (19,567
    )
    
    
    47,041Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (28,665
    )
    
    $
    31,590
    
    
    $
    (19,567
    )
    
    $
    47,041Earnings (loss) per share:Basic
    
    $
    (0.79
    )
    
    $
    0.90
    
    
    $
    (0.54
    )
    
    $
    1.38Diluted
    
    $
    (0.79
    )
    
    $
    0.58
    
    
    $
    (0.54
    )
    
    $
    1.11Shares used for computation:Basic
    
    
    36,111
    
    
    
    35,037
    
    
    
    35,989
    
    
    
    34,161Diluted
    
    
    36,111
    
    
    
    59,285
    
    
    
    35,989
    
    
    
    49,507
 See accompanying notes to condensed consolidated financial statements. 5




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AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited) Nine Months EndedSeptember 30,2004
    
    
    2003Net cash provided by operating activities
    
    $
    89,912
    
    
    $
    159,350Cash flows from investing activities:Purchases of property and equipment
    
    
    (125,938
    )
    
    
    (119,196
    )Purchases of short-term investments
    
    
    (58,165
    )
    
    
    (51,186
    )Sales of short-term investments
    
    
    77,409
    
    
    
    35,739Purchases of investments in debt securities
    
    
    (35,000
    )
    
    
    (46,189
    )Sales of investments in debt securities
    
    
    15,000
    
    
    
    1,501Increase in restricted cash
    
    
    (1,436
    )
    
    
    (23,465
    )Proceeds from disposition of assets
    
    
    2,544
    
    
    
    24,283Net cash used in investing activities
    
    
    (125,586
    )
    
    
    (178,513
    )Cash flows from financing activities:Repayment of debt
    
    
    (174,280
    )
    
    
    (14,719
    )Proceeds from issuance of debt
    
    
    110,564
    
    
    
    86,828Payments of debt issue costs
    
    
    (1,156
    )
    
    
    (3,105
    )Other
    
    
    1,158
    
    
    
    725Net cash provided by (used in) financing activities
    
    
    (63,714
    )
    
    
    69,729Net increase (decrease) in cash and cash equivalents
    
    
    (99,388
    )
    
    
    50,566Cash and cash equivalents at beginning of period
    
    
    403,082
    
    
    
    335,750Cash and cash equivalents at end of period
    
    $
    303,694
    
    
    $
    386,316Cash, cash equivalents, short-term investments and investments in debt
securities at end of period
    
    $
    416,835
    
    
    $
    471,189Cash paid for:Interest, net of amounts capitalized
    
    $
    18,001
    
    
    $
    14,304Income taxes paid (refunded)
    
    $
    1,441
    
    
    $
    (438
    )Non-cash investing and financing activities:Payment in kind notes issued
    
    $
    4,974
    
    
    $
    4,813Exercise of warrants
    
    $
    (2
    )
    
    $
    (17
    )Acquisition of shares due to loan default
    
    $
    1,700
    
    
    $
    Reclassification of investments in debt securities to
short-term investments
    
    $
    15,730
    
    
    $
    Notes payable issued (cancelled) under the aircraft purchase
agreement
    
    $
    7,000
    
    
    $
    (7,000
    )Cancellation of convertible notes
    
    $
    
    
    
    $
    (660
    )
 See accompanying notes to condensed consolidated financial statements. 6




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AMERICA WEST HOLDINGS CORPORATION
Notes To Condensed Consolidated Financial Statements
September 30, 2004 1. BASIS OF PRESENTATION The unaudited condensed consolidated financial statements include the accounts of Holdings and
its wholly owned subsidiary, AWA. TLC, previously a wholly owned subsidiary of Holdings, was
merged into AWA on January 1, 2004 and continues to operate as the America West Vacations division
of AWA. Accordingly, Holdings operates as one operating segment. 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, 2003. 2. RESTATEMENT OF PREVIOUSLY REPORTED AMOUNTS Fuel Hedging Instruments In February 2005, management undertook a review of the Companys accounting for its fuel
hedging transactions. As a result of this review, management concluded that the Companys fuel
hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting
principles. Accordingly, management concluded that the financial statements for prior periods
required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and
statements of stockholders equity and comprehensive income of Holdings and AWA. Specifically, (i)
Holdings has restated its balance sheet and statement of stockholders equity and comprehensive
income as of and for the year ended December 31, 2003, and (ii) AWA has restated its balance sheet
and statement of stockholders equity and comprehensive income as of and for the year ended
December 31, 2003. The Company restated its 2003 consolidated balance sheet to reduce the carrying
value of its fuel hedging instruments asset by $12.5 million, which served to record the asset at
fair value of open contracts as of December 31, 2003. The restatement also eliminated $12.5
million in accumulated other comprehensive income, $2.0 million of which was previously recorded in
the 2003 beginning balance of accumulated other comprehensive income. The restated amount of other
assets is $112.0 million in the consolidated balance sheet as of December 31, 2003. The
restatement eliminates the balance in accumulated other comprehensive income in the consolidated
balance sheet as of December 31, 2003 and the consolidated statement of stockholders equity and
comprehensive income for the year ended December 31, 2003. The unaudited Condensed Consolidated Statements of Operations for the three and nine months
ended September 30, 2004 and 2003 have also been restated to reflect the accounting for fuel
hedging instruments pursuant to managements determination that the Company did not qualify for
hedge accounting under Statement of Financial Accounting Standards No. 133 Accounting for
Derivative Instruments and Hedging Activities(SFAS No. 133). In addition, the restated amounts
also reflect corrections to properly reflect the fair value of open fuel hedging instruments at
each quarter end. The Company has also reclassified all gains and losses from settled fuel hedges
and the mark-to-market adjustments on open fuel hedges from Aircraft Fuelto Realized and
Unrealized Losses (Gains) on Fuel Hedging Instruments, Neton the Condensed Consolidated
Statements of Operations. The Company restated its September 30, 2004 condensed consolidated
balance sheet to reduce the carrying value of its fuel hedging instruments asset by $6.9 million
which served to record the asset at fair value of open contracts as of September 30, 2004. The
following summarizes the changes related to the restatement and reclassifications as referenced
above. 7




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AMERICA WEST HOLDINGS CORPORATION
Notes To Condensed Consolidated Financial Statements
September 30, 2004 Three Months Ended
    
    
    Three Months EndedSeptember 30, 2004
    
    
    September 30, 2003(as previously
    
    
    
    
    
    
    (as previouslyreported)
    
    
    (as restated)
    
    
    reported)
    
    
    (as restated)(in thousands except per share data)Aircraft fuel
    
    $
    136,297
    
    
    $
    144,098
    (1)
    
    $
    91,595
    
    
    $
    91,462
    (3)Realized and unrealized losses (gains) on
fuel
hedging instruments, net
    
    
    
    
    
    
    (26,203
    ) (1) (2)
    
    
    
    
    
    
    1,485
    (3) (4)Total operating expenses
    
    
    606,860
    
    
    
    588,458
    (2)
    
    
    542,167
    
    
    
    543,519
    (4)Operating income (loss)
    
    
    (28,237
    )
    
    
    (9,835
    ) (2)
    
    
    50,135
    
    
    
    48,783
    (4)Net income (loss)
    
    $
    (47,067
    )
    
    $
    (28,665
    ) (2)
    
    $
    32,942
    
    
    $
    31,590
    (4)Net income (loss) per share:Basic
    
    $
    (1.30
    )
    
    $
    (0.79
    )
    
    $
    0.94
    
    
    $
    0.90Diluted
    
    $
    (1.30
    )
    
    $
    (0.79
    )
    
    $
    0.60
    
    
    $
    0.58
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2004
    
    
    September 30, 2003(as previously
    
    
    
    
    
    
    (as previouslyreported)
    
    
    (as restated)
    
    
    reported)
    
    
    (as restated)(in thousands except per share data)Aircraft fuel
    
    $
    375,825
    
    
    $
    391,287
    (5)
    
    $
    271,481
    
    
    $
    281,442
    (7)Realized and unrealized gains on fuel
hedging instruments, net
    
    
    
    
    
    
    (36,092
    ) (5) (6)
    
    
    
    
    
    
    (6,394
    ) (7) (8)Total operating expenses
    
    
    1,749,802
    
    
    
    1,729,172
    (6)
    
    
    1,671,006
    
    
    
    1,674,573
    (8)Operating income
    
    
    10,439
    
    
    
    31,069
    (6)
    
    
    20,300
    
    
    
    16,733
    (8)Net income (loss)
    
    $
    (40,197
    )
    
    $
    (19,567
    ) (6)
    
    $
    50,608
    
    
    $
    47,041
    (8)Net income (loss) per share:Basic
    
    $
    (1.12
    )
    
    $
    (0.54
    )
    
    $
    1.48
    
    
    $
    1.38Diluted
    
    $
    (1.12
    )
    
    $
    (0.54
    )
    
    $
    1.18
    
    
    $
    1.11
   (1)
    
    Reflects reclassification of $7.8 million net credit from Aircraft Fuel
expense to Realized and Unrealized Losses (Gains) on Fuel Hedging Instruments, Net.(2)
    
    Reflects the restatement of $18.4 million net credit to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Losses (Gains) on Fuel Hedging Instruments, Net.(3)
    
    Reflects reclassification of $0.1 million net expense from Aircraft Fuel
expense to Realized and Unrealized Losses (Gains) on Fuel Hedging Instruments, Net.(4)
    
    Reflects the restatement of $1.4 million net expense to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Losses (Gains) on Fuel Hedging Instruments, Net.(5)
    
    Reflects reclassification of $15.5 million net credit from Aircraft Fuel
expense to Realized and Unrealized Gains on Fuel Hedging Instruments, Net.(6)
    
    Reflects the restatement of $20.6 million net credit to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Gains on Fuel Hedging Instruments, Net.(7)
    
    Reflects reclassification of $10.0 million net credit from Aircraft Fuel
expense to Realized and Unrealized Gains on Fuel Hedging Instruments, Net.(8)
    
    Reflects the restatement of $3.6 million net expense to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Gains on Fuel Hedging Instruments, Net. 8




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes To Condensed Consolidated Financial Statements
September 30, 2004 3. STOCK OPTIONS The Company accounts for its stock option plans in accordance with the provisions of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,and
related interpretations. As such, compensation expense would be recorded on the date of grant only
if the current market price of the underlying stock exceeded the exercise price. The Company
issues its stock options at a price equal to fair market value on the date of grant. Accordingly,
no compensation cost has been recognized for stock options in the accompanying condensed
consolidated financial statements. Had the Company determined compensation cost based on the fair
value at the grant date for its stock options under Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation,the Companys net income (loss) and
income (loss) per share would have been reduced (increased) to the pro forma amounts indicated
below: Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2003
    
    
    2004
    
    
    2003(as restated)
    
    
    (as restated)(in thousands except per share data)Net income (loss), as reported
    
    $
    (28,665
    )
    
    $
    31,590
    
    
    $
    (19,567
    )
    
    $
    47,041Stock-based compensation expense
    
    
    (1,824
    )
    
    
    (1,063
    )
    
    
    (4,740
    )
    
    
    (3,274
    )Pro forma net income (loss)
    
    $
    (30,489
    )
    
    $
    30,527
    
    
    $
    (24,307
    )
    
    $
    43,767Income (loss) per share:Basic  as reported
    
    $
    (0.79
    )
    
    $
    0.90
    
    
    $
    (0.54
    )
    
    $
    1.38Basic  pro forma
    
    $
    (0.84
    )
    
    $
    0.87
    
    
    $
    (0.68
    )
    
    $
    1.28Diluted  as reported
    
    $
    (0.79
    )
    
    $
    0.58
    
    
    $
    (0.54
    )
    
    $
    1.11Diluted  pro forma
    
    $
    (0.84
    )
    
    $
    0.56
    
    
    $
    (0.68
    )
    
    $
    1.04
 4. FLIGHT EQUIPMENT During the quarter, the Company entered into agreements with two aircraft lessors for the
return of six Boeing 737-200 aircraft. Three aircraft were returned during the quarter and three
are expected to be returned in the fourth quarter. Negotiations continue for the return of the
remaining two Boeing 737-200 aircraft. See Note 6 Special Charges. In August 2004, the Company amended its 1999 Airbus purchase contract. As amended, the new
agreement calls for the Company to acquire 22 Airbus A320 family aircraft (a mix of A320s and
A319s), all powered by V2500 engines from International Aero Engines. Of the 22 aircraft, it is
anticipated that 18 will be purchased directly from the manufacturer and four will be leased from
various lessors. The Company has negotiated lease agreements for the four leased aircraft. In
addition, the Company is exploring the possibility of leasing one additional aircraft in lieu of
purchasing such aircraft from the manufacturer. In the context of this incremental order, the
Company also secured extensive flexibility from Airbus with respect to its existing A318 order,
allowing the Company to better react to market conditions by enabling it to amend its 15 A318
delivery positions to A319s and A320s, if it so desires, or to no additional aircraft under certain
conditions. In the first quarter of 2004, the Company revised the estimated useful life for certain
aircraft and related spare parts inventory as a result of changes in AWAs fleet plan and for
capitalized maintenance on certain of its engines as a result of changes in aircraft utilization.
The net impact of this change in estimate was an increase in net income for the three and nine
months ended September 30, 2004 of $4.6 million and $13.8 million, respectively. As a result,
basic and diluted loss per share decreased by $0.13 and $0.13, respectively, for the three months
ended September 30, 2004, and increased by $0.38 and $0.38, respectively, for the nine months ended
September 30, 2004. 5. TERM LOAN REFINANCING On September 10, 2004, AWA entered into a term loan financing with GECC providing for loans in
an aggregate amount of $110.6 million. AWA used approximately $77.0 million of the proceeds from
this financing to repay in full its term loan with Mizuho Corporate Bank, Ltd. and certain other
lenders and to pay certain costs associated with this transaction. AWA intends to use the
remaining proceeds for general corporate purposes. The new term loan financing consists of two
secured term loan facilities: a $75.6 million term loan facility secured primarily by spare parts,
rotables 9




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes To Condensed Consolidated Financial Statements
September 30, 2004 and appliances (the Spare Parts Facility); and a $35.0 million term loan facility secured
primarily by aircraft engines and parts installed in such engines (the Engine Facility). The loans under the Spare Parts Facility are payable in full at maturity on September 10,
2010. The loans under the Engine Facility are payable in equal quarterly installments of $1.3
million beginning on March 10, 2006 through June 10, 2010 with the remaining loan amount of $11.8
million payable at maturity on September 10, 2010. The loans under each facility may be prepaid in
an amount not less than $5 million at any time after the 30th monthly anniversary of the funding
date under such facility. If AWA fails to maintain a certain ratio of rotables to loans under the
Spare Parts Facility, it may be required to pledge additional rotables or cash as collateral,
provide a letter of credit or prepay some or all of the loans under the Spare Parts Facility. In
addition, the loans under the Engine Facility are subject to mandatory prepayment upon the
occurrence of certain events of loss applicable to, or certain dispositions of, aircraft engines
securing the facility. Principal amounts outstanding under the loans bear interest at a rate per annum based on
three-month LIBOR plus margin. Both facilities contain customary events of default, including
payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and
judgment defaults. 6. SPECIAL CHARGES In the first quarter of 2004, the Company recorded a $0.6 million reduction in special charges
related to the revision of estimated costs associated with the sale and leaseback of certain
aircraft. In August 2004, the Company entered into definitive agreements with two lessors to return six
Boeing 737-200 aircraft. Three of these aircraft were returned to the lessors in the third
quarter, with the other aircraft expected to be returned in the fourth quarter. In addition, the
Company is also negotiating with one lessor on the return of its remaining two Boeing 737-200
aircraft, one of which was parked in March 2002. The other aircraft is expected to be removed from
service in January 2005. In connection with the return of the three aircraft in the third quarter,
the Company recorded $1.6 million of special charges which include lease termination payments of
$2.1 million, the write-down of leasehold improvements and aircraft rent balances of $1.7 million,
offset by the reversal of maintenance reserves of $2.2 million. The Company also expects to record
special charges of approximately $2.2 million for the remaining aircraft. The following table presents the payments and other settlements made during the nine months
ended September 30, 2004 related to the special charge accruals: Fleet
    
    
    
    
    
    
    ContractSale-
    
    
    Restructuring/
    
    
    Reductions-
    
    
    Termination/Leaseback
    
    
    Retirement
    
    
    in-force
    
    
    Other Costs
    
    
    Total(in thousands)Balance at December 31, 2003
    
    $
    605
    
    
    $
    1,389
    
    
    $
    357
    
    
    $
    2,649
    
    
    $
    5,000Revision of estimate
    
    
    (600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (600
    )Payments
    
    
    (5
    )
    
    
    (180
    )
    
    
    (275
    )
    
    
    (515
    )
    
    
    (975
    )Balance at March 31, 2004
    
    $
    
    
    
    $
    1,209
    
    
    $
    82
    
    
    $
    2,134
    
    
    $
    3,425Revision of estimate
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    
    
    
    
    (65
    )Payments
    
    
    
    
    
    
    (195
    )
    
    
    (17
    )
    
    
    (506
    )
    
    
    (718
    )Balance at June 30, 2004
    
    $
    
    
    
    $
    1,014
    
    
    $
    
    
    
    $
    1,628
    
    
    $
    2,642Special charges
    
    
    
    
    
    
    1,629
    
    
    
    
    
    
    
    
    
    
    
    1,629Payments
    
    
    
    
    
    
    (2,247
    )
    
    
    
    
    
    
    (506
    )
    
    
    (2,753
    )Reversal of maintenance reserves
    
    
    
    
    
    
    2,175
    
    
    
    
    
    
    
    
    
    
    
    2,175Write-down of leasehold improvements
and aircraft rent balances
    
    
    
    
    
    
    (1,739
    )
    
    
    
    
    
    
    
    
    
    
    (1,739
    )Balance at September 30, 2004
    
    $
    
    
    
    $
    832
    
    
    $
    
    
    
    $
    1,122
    
    
    $
    1,954
 The Company expects to make payments related to these special charges through the fourth
quarter of 2005. 10




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes To Condensed Consolidated Financial Statements
September 30, 2004 7. EARNINGS (LOSS) PER SHARE (EPS) The following table presents the computation of basic and diluted EPS. Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2003
    
    
    2004
    
    
    2003(as restated)
    
    
    (as restated)(in thousands of dollars except per share data)BASIC EARNINGS (LOSS) PER SHAREIncome (loss) applicable to common stock
    
    $
    (28,665
    )
    
    $
    31,590
    
    
    $
    (19,567
    )
    
    $
    47,041Weighted average common shares outstanding
    
    
    36,111,372
    
    
    
    35,036,616
    
    
    
    35,989,379
    
    
    
    34,161,024Basic earnings (loss) per share
    
    $
    (0.79
    )
    
    $
    0.90
    
    
    $
    (0.54
    )
    
    $
    1.38DILUTED EARNINGS (LOSS) PER SHAREIncome (loss) applicable to common stock
    
    $
    (28,665
    )
    
    $
    31,590
    
    
    $
    (19,567
    )
    
    $
    47,041Interest expense on 7.5% convertible notes
    
    
    
    
    
    
    2,680
    
    
    
    
    
    
    
    7,879Income (loss) for purposes of computing diluted net
income (loss) per share
    
    $
    (28,665
    )
    
    $
    34,270
    
    
    $
    (19,567
    )
    
    $
    54,920Share computation:Weighted average common shares outstanding
    
    
    36,111,372
    
    
    
    35,036,616
    
    
    
    35,989,379
    
    
    
    34,161,024Assumed exercise of stock options and warrants
    
    
    
    
    
    
    15,784,790
    
    
    
    
    
    
    
    7,187,737Assumed conversion of 7.5% convertible senior notes
    
    
    
    
    
    
    8,463,758
    
    
    
    
    
    
    
    8,157,839Weighted average common shares outstanding for purposes
of computing diluted net income (loss) per share
    
    
    36,111,372
    
    
    
    59,285,164
    
    
    
    35,989,379
    
    
    
    49,506,600Diluted income (loss) per share
    
    $
    (0.79
    )
    
    $
    0.58
    
    
    $
    (0.54
    )
    
    $
    1.11
 For the three months ended September 30, 2004, 7,318,166 incremental shares from assumed
exercise of stock options and 10,540,875 warrants issued in conjunction with the government
guaranteed loan and related transactions are not included in the computation of diluted EPS because
of the antidilutive effect on EPS. Incremental shares of 9,020,000 from the assumed conversion of
the 7.5% convertible senior notes are not included in the computation of diluted EPS because of the
antidilutive effect on EPS. The shares issuable upon conversion of the 7.25% senior exchangeable
notes due 2023 were not included in the computation of diluted earnings per share since the
conditions for conversion have not been met. For the nine months ended September 30, 2004, 6,721,430 incremental shares from the assumed
exercise of stock options and 12,880,721 warrants issued in conjunction with the government
guaranteed loan and related transactions are not included in the computation of diluted EPS because
of the antidilutive effect on EPS. Incremental shares of 8,694,000 from the assumed conversion of
the 7.5% convertibles notes are not included in the computation of diluted EPS because of the
antidilutive effect on EPS. For the three months ended September 30, 2003, 4,453,537 stock options are not included in the
computation of diluted EPS because the option exercise prices were greater than the average market
price of the Companys Class B common stock for the period. For the nine months ended September 30, 2003, 6,200,354 stock options are not included in the
computation of diluted EPS because the option exercise prices were greater than the average market
price of the Company's Class B common stock for the period. 11




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
Notes To Condensed Consolidated Financial Statements
September 30, 2004 8. 401(k) PLAN SHARES During the third quarter of 2004, Holdings became aware that an insufficient number of shares
of its Class B common stock were registered for offer and sale through its 401(k) plan. In
response to this registration shortfall, Holdings promptly filed a new registration statement on
Form S-8 on August 13, 2004, which registered an additional 4,500,000 shares of Holdings Class B
common stock to permit the continued offer and sale of such shares to participants through the
401(k) plan. Because the 401(k) plan in the past has purchased and in the future expects to
continue to purchase shares of Holdings Class B common stock needed for allocation to participant
accounts only in the open market and not directly from Holdings, the registration of these
additional shares and their purchase by the 401(k) plan will have no dilutive impact on the
outstanding equity of Holdings. As a result of the registration shortfall, however, participants
who acquired unregistered shares through their 401(k) plan accounts after June 30, 2003, and prior
to August 13, 2004, may be entitled to rescission rights or other remedies under the Securities Act
of 1933, as amended. Holdings is notifying affected existing and former plan participants of their
potential rescission rights, but cannot predict the extent to which any such rescission rights may
be exercised or the impact of any possible federal or state regulatory action pertaining to the
registration shortfall. Holdings does not believe, however, that any consequences arising from the
registration shortfall will have a material adverse effect on Holdings financial position or
results of operations. 12




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##### Table of Contents



ITEM 1B. CONDENSED FINANCIAL STATEMENTS  AMERICA WEST AIRLINES, INC. The unaudited condensed balance sheets of AWA, a wholly-owned subsidiary of Holdings, as of
September 30, 2004 and December 31, 2003, the condensed statements of operations for the three and
nine months ended September 30, 2004 and 2003 and the condensed statements of cash flows for the
nine months ended September 30, 2004 and 2003, together with the related notes, are set forth on
the following pages. TLC, previously a wholly owned subsidiary of Holdings, was merged into AWA on
January 1, 2004 and continues to operate as the America West Vacations division of AWA. See Note
1, Basis of Presentationand Note 8, Merger of TLC into AWAin Notes to Condensed Financial
Statements. AMERICA WEST AIRLINES, INC.
Condensed Balance Sheets
(in thousands except share data)
(unaudited) September 30,
    
    
    December 31,2004
    
    
    2003Assets
    
    (as restated)Current assets:Cash and cash equivalents
    
    $
    283,330
    
    
    $
    383,875Short-term investments
    
    
    68,141
    
    
    
    72,890Restricted cash
    
    
    
    
    
    
    42,900Accounts receivable, net
    
    
    92,333
    
    
    
    77,235Expendable spare parts and supplies, net
    
    
    63,030
    
    
    
    58,575Prepaid expenses
    
    
    170,848
    
    
    
    129,291Total current assets
    
    
    677,682
    
    
    
    764,766Property and equipment:Flight equipment
    
    
    898,747
    
    
    
    858,395Other property and equipment
    
    
    283,602
    
    
    
    271,593Equipment purchase deposits
    
    
    53,050
    
    
    
    46,0501,235,399
    
    
    
    1,176,038Less accumulated depreciation and amortization
    
    
    600,990
    
    
    
    569,468Net property and equipment
    
    
    634,409
    
    
    
    606,570Other assets:Investments in debt securities
    
    
    45,000
    
    
    
    40,740Restricted cash
    
    
    71,312
    
    
    
    69,876Advances to parent company, net
    
    
    257,945
    
    
    
    254,792Other assets, net
    
    
    119,233
    
    
    
    110,198Total other assets
    
    
    493,490
    
    
    
    475,606$
    1,805,581
    
    
    $
    1,846,942
 See accompanying notes to condensed financial statements. 13




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Condensed Balance Sheets
(in thousands except share data)
(unaudited) September 30,
    
    
    December 31,2004
    
    
    2003Liabilities and Stockholders Equity
    
    (as restated)Current liabilities:Current maturities of long-term debt
    
    $
    146,653
    
    
    $
    103,899Current obligations under capital leases
    
    
    3,552
    
    
    
    3,442Accounts payable
    
    
    177,278
    
    
    
    209,373Payable to affiliate, net
    
    
    
    
    
    
    1,926Air traffic liability
    
    
    229,534
    
    
    
    174,486Accrued compensation and vacation benefits
    
    
    41,666
    
    
    
    61,045Accrued taxes
    
    
    29,241
    
    
    
    24,117Other accrued liabilities
    
    
    74,252
    
    
    
    59,277Total current liabilities
    
    
    702,176
    
    
    
    637,565Long-term debt, less current maturities
    
    
    601,470
    
    
    
    688,965Capital leases, less current maturities
    
    
    5,061
    
    
    
    8,467Deferred credits and other liabilities
    
    
    141,834
    
    
    
    139,873Stockholders equity:Common Stock $.01 par value. Authorized, issued and
outstanding; 1,000 shares
    
    
    
    
    
    
    Additional paid-in capital
    
    
    555,114
    
    
    
    555,115Accumulated deficit
    
    
    (200,074
    )
    
    
    (183,043
    )Total stockholders equity
    
    
    355,040
    
    
    
    372,072$
    1,805,581
    
    
    $
    1,846,942
 See accompanying notes to condensed financial statements. 14




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Condensed Statements of Operations
(in thousands)
(unaudited) Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2003
    
    
    2004
    
    
    2003(as restated)
    
    
    (as restated)Operating revenues:Passenger
    
    $
    542,167
    
    
    $
    552,564
    
    
    $
    1,648,666
    
    
    $
    1,591,496Cargo
    
    
    6,290
    
    
    
    6,201
    
    
    
    20,010
    
    
    
    21,101Other
    
    
    29,996
    
    
    
    33,367
    
    
    
    91,055
    
    
    
    78,199Total operating revenues
    
    
    578,453
    
    
    
    592,132
    
    
    
    1,759,731
    
    
    
    1,690,796Operating expenses:Salaries and related costs
    
    
    164,861
    
    
    
    157,603
    
    
    
    492,407
    
    
    
    476,111Aircraft rents
    
    
    76,400
    
    
    
    74,417
    
    
    
    226,931
    
    
    
    221,862Other rents and landing fees
    
    
    43,322
    
    
    
    38,210
    
    
    
    126,574
    
    
    
    115,475Aircraft fuel
    
    
    144,098
    
    
    
    91,462
    
    
    
    391,287
    
    
    
    281,442Realized and unrealized losses (gains) on
fuel hedging instruments, net
    
    
    (26,203
    )
    
    
    1,485
    
    
    
    (36,092
    )
    
    
    (6,394
    )Agency commissions
    
    
    6,302
    
    
    
    8,408
    
    
    
    19,305
    
    
    
    26,564Aircraft maintenance materials and repairs
    
    
    54,437
    
    
    
    50,854
    
    
    
    156,841
    
    
    
    173,572Depreciation and amortization
    
    
    13,296
    
    
    
    16,572
    
    
    
    39,674
    
    
    
    51,563Special charges, net
    
    
    1,629
    
    
    
    
    
    
    
    1,029
    
    
    
    14,370Other
    
    
    109,177
    
    
    
    103,436
    
    
    
    308,005
    
    
    
    316,566Total operating expenses
    
    
    587,319
    
    
    
    542,447
    
    
    
    1,725,961
    
    
    
    1,671,131Operating income (loss)
    
    
    (8,866
    )
    
    
    49,685
    
    
    
    33,770
    
    
    
    19,665Nonoperating income (expenses):Interest income
    
    
    3,717
    
    
    
    3,434
    
    
    
    10,336
    
    
    
    9,465Interest expense, net
    
    
    (21,661
    )
    
    
    (21,276
    )
    
    
    (64,071
    )
    
    
    (62,805
    )Federal government assistance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,255Other, net
    
    
    (952
    )
    
    
    625
    
    
    
    2,934
    
    
    
    2,326Total nonoperating income (expenses), net
    
    
    (18,896
    )
    
    
    (17,217
    )
    
    
    (50,801
    )
    
    
    30,241Income (loss) before income taxes
    
    
    (27,762
    )
    
    
    32,468
    
    
    
    (17,031
    )
    
    
    49,906Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (27,762
    )
    
    $
    32,468
    
    
    $
    (17,031
    )
    
    $
    49,906
 See accompanying notes to condensed financial statements. 15




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Condensed Statements of Cash Flows
(in thousands)
(unaudited) Nine Months EndedSeptember 30,2004
    
    
    2003Net cash provided by operating activities
    
    $
    89,913
    
    
    $
    159,068Cash flows from investing activities:Purchases of property and equipment
    
    
    (125,938
    )
    
    
    (119,196
    )Purchases of short-term investments
    
    
    (58,165
    )
    
    
    (51,186
    )Sales of short-term investments
    
    
    77,409
    
    
    
    35,739Purchases of investments in debt securities
    
    
    (35,000
    )
    
    
    (46,189
    )Sales of investments in debt securities
    
    
    15,000
    
    
    
    1,501Increase in restricted cash
    
    
    (1,436
    )
    
    
    (23,465
    )Proceeds from disposition of assets
    
    
    2,544
    
    
    
    24,283Net cash used in investing activities
    
    
    (125,586
    )
    
    
    (178,513
    )Cash flows from financing activities:Repayment of debt
    
    
    (174,280
    )
    
    
    (14,719
    )Proceeds from issuance of debt
    
    
    110,564
    
    
    
    86,828Payments of debt issue costs
    
    
    (1,156
    )
    
    
    (3,105
    )Net cash provided by (used in) financing activities
    
    
    (64,872
    )
    
    
    69,004Net increase (decrease) in cash and cash equivalents
    
    
    (100,545
    )
    
    
    49,559Cash and cash equivalents at beginning of period
    
    
    383,875
    
    
    
    334,679Cash and cash equivalents at end of period
    
    $
    283,330
    
    
    $
    384,238Cash, cash equivalents, short-term investments and investments in
debt securities at end of period
    
    $
    396,471
    
    
    $
    469,111Cash paid for:Interest, net of amounts capitalized
    
    $
    18,001
    
    
    $
    14,304Income taxes paid (refunded)
    
    $
    326
    
    
    $
    (558
    )Non-cash investing and financing activities:Payment in kind notes issued
    
    $
    4,974
    
    
    $
    4,813Reclassification of investments in debt securities to
short-term investments
    
    $
    15,730
    
    
    $
    Notes payable issued (cancelled) under the aircraft purchase
agreement
    
    $
    7,000
    
    
    $
    (7,000
    )Exercise of warrants
    
    $
    (2
    )
    
    $
    (17
    )Cancellation of convertible notes
    
    $
    
    
    
    $
    (660
    )
 See accompanying notes to condensed financial statements. 16




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes To Condensed Financial Statements
September 30, 2004 1. BASIS OF PRESENTATION The unaudited condensed financial statements included herein have been prepared by AWA, a
wholly owned subsidiary of Holdings, pursuant to the rules and regulations of the Securities and
Exchange Commission and, in accordance with those rules and regulations, certain information and
footnotes required by generally accepted accounting principles have been omitted. TLC, previously
a wholly owned subsidiary of Holdings, was merged into AWA on January 1, 2004 and continues to
operate as the America West Vacations division of AWA. Accordingly, prior period amounts have been
adjusted to give effect to the merger as if it had occurred on January 1, 2003 and all intercompany
transactions between AWA and TLC have been eliminated. See Note 8, Merger of TLC into AWA.In
the opinion of management, the condensed financial statements reflect all adjustments, which are of
a normal recurring nature, necessary for a fair presentation. Certain prior year amounts have been
reclassified to conform with current year presentation. The accompanying condensed financial
statements should be read in conjunction with the financial statements and related notes thereto
included in AWAs current report on Form 8-K dated August 12, 2004. 2. RESTATEMENT OF PREVIOUSLY REPORTED AMOUNTS Fuel Hedging Instruments In February 2005, management undertook a review of AWAs accounting for its fuel hedging
transactions. As a result of this review, management concluded that AWAs hedging transactions did
not qualify for hedge accounting under U.S. generally accepted accounting principles. Accordingly,
management concluded that the financial statements for prior periods required restatement to
reflect the fair value of fuel hedging contracts in the balance sheets and statements of
stockholders equity and comprehensive income of Holdings and AWA. Specifically, AWA has restated
its balance sheet and statement of stockholders equity and comprehensive income as of and for the
year ended December 31, 2003, and AWA restated its 2003 balance sheet to reduce the carrying value
of its fuel hedging instruments asset by $12.5 million, which served to record the asset at fair
value of open contracts as of December 31, 2003. The restatement also eliminated $12.5 million in
accumulated other comprehensive income, $2.0 million of which was previously recorded in the 2003
beginning balance of accumulated other comprehensive income. The restated amount of other assets
is $110.2 million in the balance sheet as of December 31, 2003. The restatement eliminates the
balance in accumulated other comprehensive income in the balance sheet as of December 31, 2003 and
the statement of stockholders equity and comprehensive income for the year ended December 31,
2003. The unaudited Condensed Statements of Operations for the three and nine months ended September
30, 2004 and 2003 have also been restated to reflect the accounting for fuel hedging instruments
pursuant to managements determination that AWA did not qualify for hedge accounting under
Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and
Hedging Activities(SFAS No. 133). In addition, the restated amounts also reflect corrections
to properly reflect the fair value of open fuel hedging instruments at each quarter end. AWA has
also reclassified all gains and losses from settled fuel hedges and the mark-to-market adjustments
on open fuel hedges from Aircraft Fuelto Realized and Unrealized Losses (Gains) on Fuel Hedging
Instruments, Neton the Condensed Statements of Operations. AWA restated its September 30, 2004
condensed balance sheet to reduce the carrying value of its fuel hedging instruments asset by $6.9
million which served to record the asset at fair value of open contracts as of September 30, 2004.
The following summarizes the changes related to the restatement and reclassifications as referenced
above. 17




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes To Condensed Financial Statements
September 30, 2004 Three Months Ended
    
    
    Three Months EndedSeptember 30, 2004
    
    
    September 30, 2003(as previously
    
    
    
    
    
    
    (as previouslyreported)
    
    
    (as restated)
    
    
    reported)
    
    
    (as restated)(in thousands)Aircraft fuel
    
    $
    136,297
    
    
    $
    144,098
    (1)
    
    $
    91,595
    
    
    $
    91,462
    (3)Realized and unrealized losses (gains) on
fuel
hedging instruments, net
    
    
    
    
    
    
    (26,203
    ) (1) (2)
    
    
    
    
    
    
    1,485
    (3) (4)Total operating expenses
    
    
    605,721
    
    
    
    587,319
    (2)
    
    
    541,095
    
    
    
    542,447
    (4)Operating income (loss)
    
    
    (27,268
    )
    
    
    (8,866
    ) (2)
    
    
    51,037
    
    
    
    49,685
    (4)Net income (loss)
    
    $
    (46,164
    )
    
    $
    (27,762
    ) (2)
    
    $
    33,820
    
    
    $
    32,468
    (4)
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2004
    
    
    September 30, 2003(as previously
    
    
    
    
    
    
    (as previouslyreported)
    
    
    (as restated)
    
    
    reported)
    
    
    (as restated)(in thousands)Aircraft fuel
    
    $
    375,825
    
    
    $
    391,287
    (5)
    
    $
    271,481
    
    
    $
    281,442
    (7)Realized and unrealized gains on fuel
hedging instruments, net
    
    
    
    
    
    
    (36,092
    ) (5) (6)
    
    
    
    
    
    
    (6,394
    ) (7) (8)Total operating expenses
    
    
    1,746,591
    
    
    
    1,725,961
    (6)
    
    
    1,667,564
    
    
    
    1,671,131
    (8)Operating income (loss)
    
    
    13,140
    
    
    
    33,770
    (6)
    
    
    23,232
    
    
    
    19,665
    (8)Net income (loss)
    
    $
    (37,661
    )
    
    $
    (17,031
    ) (6)
    
    $
    53,473
    
    
    $
    49,906
    (8)
   (1)
    
    Reflects reclassification of $7.8 million net credit from Aircraft Fuel
expense to Realized and Unrealized Losses (Gains) on Fuel Hedging Instruments,
Net.(2)
    
    Reflects the restatement of $18.4 million net credit to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Losses (Gains) on Fuel Hedging Instruments, Net.(3)
    
    Reflects reclassification of $0.1 million net expense from Aircraft Fuel
expense to Realized and Unrealized Losses (Gains) on Fuel Hedging Instruments,
Net.(4)
    
    Reflects the restatement of $1.4 million net expense to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Losses (Gains) on Fuel Hedging Instruments, Net.(5)
    
    Reflects reclassification of $15.5 million net credit from Aircraft Fuel
expense to Realized and Unrealized Gains on Fuel Hedging Instruments, Net.(6)
    
    Reflects the restatement of $20.6 million net credit to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Gains on Fuel Hedging Instruments, Net.(7)
    
    Reflects reclassification of $10.0 million net credit from Aircraft Fuel
expense to Realized and Unrealized Gains on Fuel Hedging Instruments, Net.(8)
    
    Reflects the restatement of $3.6 million net expense to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Gains on Fuel Hedging Instruments, Net. 3. ADVANCES TO PARENT COMPANY AND AFFILIATE As of September 30, 2004, AWA had net advances to Holdings of $257.9 million, which were
classified in Other Assetson AWAs condensed balance sheet due to certain restrictions related
to the timing of repayment under the government guaranteed loan, of which $343.2 million remains
outstanding. AWA settled all intercompany amounts due to TLC upon the completion of the merger of
TLC on January 1, 2004. 18




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes To Condensed Financial Statements
September 30, 2004 4. STOCK OPTIONS Certain of AWAs employees are eligible to participate in the stock option plans of Holdings.
Holdings accounts for its stock option plans in accordance with the provisions of APB Opinion No.
25, Accounting for Stock Issued to Employees,and related interpretations. As such, compensation
expense would be recorded on the date of grant only if the current market price of the underlying
stock exceeded the exercise price. Holdings issues its stock options at a price equal to the fair
market value on the date of grant. Accordingly, no compensation cost has been recognized for stock
options in Holdings condensed consolidated financial statements. Had Holdings determined
compensation cost based on the fair value at the grant date for its stock options under SFAS No.
123, Accounting for Stock-Based Compensation,and allocated compensation expense to AWA for its
employees participating in the stock option plans, AWAs net income (loss) would have been reduced
(increased) to the pro forma amounts indicated below: Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2003
    
    
    2004
    
    
    2003(as restated)
    
    
    (as restated)(in thousands)Net income (loss), as reported
    
    $
    (27,762
    )
    
    $
    32,468
    
    
    $
    (17,031
    )
    
    $
    49,906Stock-based compensation expense
    
    
    (1,824
    )
    
    
    (1,051
    )
    
    
    (4,740
    )
    
    
    (3,214
    )Pro forma net income (loss)
    
    $
    (29,586
    )
    
    $
    31,417
    
    
    $
    (21,771
    )
    
    $
    46,692
 5. FLIGHT EQUIPMENT During the quarter, AWA entered into agreements with two aircraft lessors for the return of
six Boeing 737-200 aircraft. Three aircraft were returned during the quarter and three are
expected to be returned in the fourth quarter. Negotiations continue for the return of the
remaining two Boeing 737-200 aircraft. See Note 7 Special Charges. In August 2004, AWA amended its 1999 Airbus purchase contract. As amended, the new agreement
calls for AWA to acquire 22 Airbus A320 family aircraft (a mix of A320s and A319s), all powered by
V2500 engines from International Aero Engines. Of the 22 aircraft, it is anticipated that 18 will
be purchased directly from the manufacturer and four will be leased from various lessors. AWA has
negotiated lease agreements for the four leased aircraft. In addition, AWA is exploring the
possibility of leasing one additional aircraft in lieu of purchasing such aircraft from the
manufacturer. In the context of this incremental order, AWA also secured extensive flexibility
from Airbus with respect to its existing A318 order, allowing AWA to better react to market
conditions by enabling it to amend its 15 A318 delivery positions to A319s and A320s, if it so
desires, or to no additional aircraft under certain conditions. In the first quarter of 2004, AWA revised the estimated useful life for certain aircraft and
related spare parts inventory as a result of changes in its fleet plan and for capitalized
maintenance on certain of its engines as a result of changes in aircraft utilization. The net
impact of this change in estimate was an increase in net income for the three and nine months ended
September 30, 2004 by $4.6 million and $13.8 million, respectively. 6. TERM LOAN REFINANCING On September 10, 2004, AWA entered into a term loan financing with GECC providing for loans in
an aggregate amount of $110.6 million. AWA used approximately $77.0 million of the proceeds from
this financing to repay in full its term loan with Mizuho Corporate Bank, Ltd. and certain other
lenders and to pay certain costs associated with this transaction. AWA intends to use the
remaining proceeds for general corporate purposes. The new term loan financing consists of two
secured term loan facilities: a $75.6 million term loan facility secured primarily by spare parts,
rotables and appliances (the Spare Parts Facility); and a $35.0 million term loan facility
secured primarily by aircraft engines and parts installed in such engines (the Engine Facility). The loans under the Spare Parts Facility are payable in full at maturity on September 10,
2010. The loans under the Engine Facility are payable in equal quarterly installments of $1.3
million beginning on March 10, 2006 through June 10, 2010 with the remaining loan amount of $11.8
million payable at maturity on September 10, 2010. The loans under 19




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes To Condensed Financial Statements
September 30, 2004 each facility may be prepaid in an amount not less than $5 million at any time after the
30th monthly anniversary of the funding date under such facility. If AWA fails to
maintain a certain ratio of rotables to loans under the Spare Parts Facility, it may be required to
pledge additional rotables or cash as collateral, provide a letter of credit or prepay some or all
of the loans under the Spare Parts Facility. In addition, the loans under the Engine Facility are
subject to mandatory prepayment upon the occurrence of certain events of loss applicable to, or
certain dispositions of, an aircraft engine securing the facility. Principal amounts outstanding under the loans bear interest at a rate per annum based on
three-month LIBOR plus margin. Both facilities contain customary events of default, including
payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and
judgment defaults. 7. SPECIAL CHARGES In the first quarter of 2004, AWA recorded a $0.6 million reduction in special charges related
to the revision of estimated costs associated with the sale and leaseback of certain aircraft. In August 2004, AWA entered into definitive agreements with two lessors to return six Boeing
737-200 aircraft. Three of these aircraft were returned to the lessors in the third quarter, with
the other aircraft expected to be returned in the fourth quarter. In addition, AWA is also
negotiating with one lessor on the return of its remaining two Boeing 737-200 aircraft, one of
which was parked in March 2002. The other aircraft is expected to be removed from service in
January 2005. In connection with the return of the three aircraft in the third quarter, AWA
recorded $1.6 million of special charges which include lease termination payments of $2.1 million,
the write-down of leasehold improvements and aircraft rent balances of $1.7 million, offset by the
reversal of maintenance reserves of $2.2 million. AWA also expects to record special charges of
approximately $2.2 million for the remaining aircraft. The following table presents the payments and other settlements made during the nine months
ended September 30, 2004 related to the special charge accruals: Fleet
    
    
    
    
    
    
    ContractSale-
    
    
    Restructuring/
    
    
    Reductions-
    
    
    Termination/Leaseback
    
    
    Retirement
    
    
    in-force
    
    
    Other Costs
    
    
    Total(in thousands)Balance at December 31, 2003
    
    $
    605
    
    
    $
    1,389
    
    
    $
    307
    
    
    $
    2,649
    
    
    $
    4,950Revision of estimate
    
    
    (600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (600
    )Increase due to TLC merger at 01/01/04
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    50Payments
    
    
    (5
    )
    
    
    (180
    )
    
    
    (275
    )
    
    
    (515
    )
    
    
    (975
    )Balance at March 31, 2004
    
    $
    
    
    
    $
    1,209
    
    
    $
    82
    
    
    $
    2,134
    
    
    $
    3,425Revision of estimate
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    
    
    
    
    (65
    )Payments
    
    
    
    
    
    
    (195
    )
    
    
    (17
    )
    
    
    (506
    )
    
    
    (718
    )Balance at June 30, 2004
    
    $
    
    
    
    $
    1,014
    
    
    $
    
    
    
    $
    1,628
    
    
    $
    2,642Special charges
    
    
    
    
    
    
    1,629
    
    
    
    
    
    
    
    
    
    
    
    1,629Payments
    
    
    
    
    
    
    (2,247
    )
    
    
    
    
    
    
    (506
    )
    
    
    (2,753
    )Reversal of maintenance reserves
    
    
    
    
    
    
    2,175
    
    
    
    
    
    
    
    
    
    
    
    2,175Write-down of leasehold improvements
and aircraft rent balances
    
    
    
    
    
    
    (1,739
    )
    
    
    
    
    
    
    
    
    
    
    (1,739
    )Balance at September 30, 2004
    
    $
    
    
    
    $
    832
    
    
    $
    
    
    
    $
    1,122
    
    
    $
    1,954
 AWA expects to make payments related to these special charges through the fourth quarter
of 2005. 8. MERGER OF TLC INTO AWA On January 1, 2004, TLC was merged into AWA. As a result of the merger, TLC, which is one of
the nations largest tour operators, ceased to exist as a separate legal entity and instead became
a division of AWA. This merger was intended to save costs and streamline operations for AWA and
did not change any operating procedures. The assets and liabilities of TLC have been recorded at
historical cost. 20




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes To Condensed Financial Statements
September 30, 2004 The Condensed Statement of Operations for the three and nine months ended September 30, 2003,
after giving effect to the merger, are set forth below. America West Airlines, Inc.
Condensed Statement of Operations
For the Three Months Ended September 30, 2003
(unaudited)
(as restated) AWA
    
    
    
    
    
    
    Eliminations/As Reported
    
    
    TLC
    
    
    Adjustments
    
    
    Combined(in thousands)Operating revenues:Passenger
    
    $
    552,564
    
    
    $
    
    
    
    $
    
    
    
    $
    552,564Cargo
    
    
    6,201
    
    
    
    
    
    
    
    
    
    
    
    6,201Other
    
    
    22,847
    
    
    
    10,663
    
    
    
    (143
    )(a)
    
    
    33,367Total operating revenues
    
    
    581,612
    
    
    
    10,663
    
    
    
    (143
    )
    
    
    592,132Operating expenses:Salaries and related costs
    
    
    156,059
    
    
    
    1,544
    
    
    
    
    
    
    
    157,603Aircraft rents
    
    
    74,417
    
    
    
    
    
    
    
    
    
    
    
    74,417Other rents and landing fees
    
    
    38,210
    
    
    
    143
    
    
    
    (143
    )(a)
    
    
    38,210Aircraft fuel
    
    
    91,462
    
    
    
    
    
    
    
    
    
    
    
    91,462Realized and unrealized losses on fuel hedging
instruments, net
    
    
    1,485
    
    
    
    
    
    
    
    
    
    
    
    1,485Agency commissions
    
    
    5,589
    
    
    
    2,819
    
    
    
    
    
    
    
    8,408Aircraft maintenance materials and repairs
    
    
    50,854
    
    
    
    
    
    
    
    
    
    
    
    50,854Depreciation and amortization
    
    
    16,407
    
    
    
    165
    
    
    
    
    
    
    
    16,572Other
    
    
    101,541
    
    
    
    1,895
    
    
    
    
    
    
    
    103,436Total operating expenses
    
    
    536,024
    
    
    
    6,566
    
    
    
    (143
    )
    
    
    542,447Operating income
    
    
    45,588
    
    
    
    4,097
    
    
    
    
    
    
    
    49,685Nonoperating income (expenses):Interest income
    
    
    3,361
    
    
    
    73
    
    
    
    
    
    
    
    3,434Interest expense, net
    
    
    (21,276
    )
    
    
    
    
    
    
    
    
    
    
    (21,276
    )Other, net
    
    
    625
    
    
    
    
    
    
    
    
    
    
    
    625Total nonoperating income (expenses), net
    
    
    (17,290
    )
    
    
    73
    
    
    
    
    
    
    
    (17,217
    )Income before income taxes
    
    
    28,298
    
    
    
    4,170
    
    
    
    
    
    
    
    32,468Income taxes
    
    
    
    
    
    
    1,620
    
    
    
    (1,620
    )(b)
    
    
    Net income
    
    $
    28,298
    
    
    $
    2,550
    
    
    $
    1,620
    
    
    $
    32,468
   (a)
    
    TLC paid rent in the amount of $143,000 to AWA for space it occupied in certain AWA
facilities. This rent was reflected in other revenues by AWA and in operating expenses by
TLC. This adjustment eliminates those amounts.(b)
    
    TLC reported income tax expense of $1.6 million on a stand-alone basis. On a pro forma
basis, AWAs tax benefits were utilized by TLC, which eliminated income tax expense and
resulted in a corresponding decrease in AWAs tax valuation allowance. 21




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes To Condensed Financial Statements
September 30, 2004 America West Airlines, Inc.
Condensed Statement of Operations
For the Nine Months Ended September 30, 2003
(unaudited)
(as restated) AWA
    
    
    
    
    
    
    Eliminations/As Reported
    
    
    TLC
    
    
    Adjustments
    
    
    Combined(in thousands)Operating revenues:Passenger
    
    $
    1,591,496
    
    
    $
    
    
    
    $
    
    
    
    $
    1,591,496Cargo
    
    
    21,101
    
    
    
    
    
    
    
    
    
    
    
    21,101Other
    
    
    48,476
    
    
    
    30,152
    
    
    
    (429
    )(a)
    
    
    78,199Total operating revenues
    
    
    1,661,073
    
    
    
    30,152
    
    
    
    (429
    )
    
    
    1,690,796Operating expenses:Salaries and related costs
    
    
    470,992
    
    
    
    5,119
    
    
    
    
    
    
    
    476,111Aircraft rents
    
    
    221,862
    
    
    
    
    
    
    
    
    
    
    
    221,862Other rents and landing fees
    
    
    115,475
    
    
    
    429
    
    
    
    (429
    )(a)
    
    
    115,475Aircraft fuel
    
    
    281,442
    
    
    
    
    
    
    
    
    
    
    
    281,442Realized and unrealized gains on fuel hedging
instruments, net
    
    
    (6,394
    )
    
    
    
    
    
    
    
    
    
    
    (6,394
    )Agency commissions
    
    
    18,072
    
    
    
    8,492
    
    
    
    
    
    
    
    26,564Aircraft maintenance materials and repairs
    
    
    173,572
    
    
    
    
    
    
    
    
    
    
    

    173,572Depreciation and amortization
    
    
    51,036
    
    
    
    527
    
    
    
    
    
    
    
    51,563Special charges, net
    
    
    13,979
    
    
    
    391
    
    
    
    
    
    
    
    14,370Other
    
    
    310,380
    
    
    
    6,186
    
    
    
    
    
    
    
    316,566Total operating expenses
    
    
    1,650,416
    
    
    
    21,144
    
    
    
    (429
    )
    
    
    1,671,131Operating income
    
    
    10,657
    
    
    
    9,008
    
    
    
    
    
    
    
    19,665Nonoperating income (expenses):Interest income
    
    
    9,247
    
    
    
    218
    
    
    
    
    
    
    
    9,465Interest expense, net
    
    
    (62,805
    )
    
    
    
    
    
    
    
    
    
    
    (62,805
    )Federal government assistance
    
    
    81,255
    
    
    
    
    
    
    
    
    
    
    
    81,255Other, net
    
    
    2,326
    
    
    
    
    
    
    
    
    
    
    
    2,326Total nonoperating income, net
    
    
    30,023
    
    
    
    218
    
    
    
    
    
    
    
    30,241Income before income taxes
    
    
    40,680
    
    
    
    9,226
    
    
    
    
    
    
    
    49,906Income taxes
    
    
    
    
    
    
    3,585
    
    
    
    (3,585
    )(b)
    
    
    Net income
    
    $
    40,680
    
    
    $
    5,641
    
    
    $
    3,585
    
    
    $
    49,906
   (a)
    
    TLC paid rent in the amount of $429,000 to AWA for space it occupied in certain AWA
facilities. This rent was reflected in other revenues by AWA and in operating expenses by
TLC. This adjustment eliminates those amounts.(b)
    
    TLC reported income tax expense of $3.6 million on a stand-alone basis. On a pro forma
basis, AWAs tax benefits were utilized by TLC, which eliminated income tax expense and
resulted in a corresponding decrease in AWAs tax valuation allowance. 22




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##### Table of Contents



AMERICA WEST AIRLINES, INC.
Notes To Condensed Financial Statements
September 30, 2004 9. 401(k) PLAN SHARES During the third quarter of 2004, Holdings became aware that an insufficient number of shares
of its Class B common stock were registered for offer and sale through its 401(k) plan. In
response to this registration shortfall, Holdings promptly filed a new registration statement on
Form S-8 on August 13, 2004, which registered an additional 4,500,000 shares of Holdings Class B
common stock to permit the continued offer and sale of such shares to participants through the
401(k) plan. Because the 401(k) plan in the past has purchased and in the future expects to
continue to purchase shares of Holdings Class B common stock needed for allocation to participant
accounts only in the open market and not directly from Holdings, the registration of these
additional shares and their purchase by the 401(k) plan will have no dilutive impact on the
outstanding equity of Holdings. As a result of the registration shortfall, however, participants
who acquired unregistered shares through their 401(k) plan accounts after June 30, 2003, and prior
to August 13, 2004, may be entitled to rescission rights or other remedies under the Securities Act
of 1933, as amended. Holdings is notifying affected existing and former plan participants of their
potential rescission rights, but cannot predict the extent to which any such rescission rights may
be exercised or the impact of any possible federal or state regulatory action pertaining to the
registration shortfall. Holdings does not believe, however, that any consequences arising from the
registration shortfall will have a material adverse effect on Holdings financial position or
results of operations. 23




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 
  ITEM 2.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Holdings is the parent company of AWA. AWA is the eighth largest passenger airline and the
second largest low cost carrier in the United States operating through its hubs located in Phoenix,
Arizona and Las Vegas, Nevada. As of September 30, 2004, AWA served 62 destinations in North
America, including eight destinations in Mexico, two in Canada and one in Costa Rica. TLC,
previously a wholly owned subsidiary of Holdings, was merged into AWA on January 1, 2004 and
continues to operate as the America West Vacations (AWV) division of AWA. See Note 8, Merger of
TLC into AWAin Notes to Condensed Financial Statements of AWA. AWV arranges and sells vacation
packages primarily to Las Vegas, Nevada that may include airfare, hotel accommodations and ground
transportation. Holdings primary business activity is ownership of all the capital stock of AWA. Restatement of Previously Reported Amounts In February 2005, management undertook a review of the Companys accounting for its fuel
hedging transactions. As a result of this review, management concluded that the Companys fuel
hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting
principles. Accordingly, management concluded that the financial statements for prior periods
required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and
statements of stockholders equity and comprehensive income of Holdings and AWA. The 2004 and 2003 unaudited quarterly financial data has been restated to reflect the
accounting for fuel hedging instruments pursuant to managements determination that the Company did
not qualify for hedge accounting under Statement of Financial Accounting Standards (SFAS) No.
133. In addition, the restated amounts also reflect corrections to properly reflect the fair value
of open fuel hedging instruments at each quarter end. The Company has also reclassified all gains
and losses from settled fuel hedges and the mark-to-market adjustments on open fuel hedges from
Aircraft Fuelto Realized and Unrealized Losses (Gains) on Fuel Hedging Instruments, Neton
the Condensed Consolidated Statements of Operations. See Note 2, Restatement of Previously
Reported Amounts.The Company restated its September 30, 2004 consolidated balance sheet to
reduce the carrying value of its fuel hedging instruments asset by $6.9 million which served to
record the asset at fair value of open contracts as of September 30, 2004. The following
summarizes the changes related to the restatement as referenced above. Three Months Ended
    
    
    Three Months EndedSeptember 30, 2004
    
    
    September 30, 2003(as previously
    
    
    
    
    
    
    (as previouslyreported)
    
    
    (as restated)
    
    
    reported)
    
    
    (as restated)America West Holdings Corporation
    
    (in thousands except per share data)Aircraft fuel
    
    $
    136,297
    
    
    $
    144,098
    (1)
    
    $
    91,595
    
    
    $
    91,462
    (3)Realized and unrealized losses (gains) on
fuel
hedging instruments, net
    
    
    
    
    
    
    (26,203
    ) (1) (2)
    
    
    
    
    
    
    1,485
    (3) (4)Total operating expenses
    
    
    606,860
    
    
    
    588,458
    (2)
    
    
    542,167
    
    
    
    543,519
    (4)Operating income (loss)
    
    
    (28,237
    )
    
    
    (9,835
    ) (2)
    
    
    50,135
    
    
    
    48,783
    (4)Net income (loss)
    
    $
    (47,067
    )
    
    $
    (28,665
    ) (2)
    
    $
    32,942
    
    
    $
    31,590
    (4)Net income (loss) per share:Basic
    
    $
    (1.30
    )
    
    $
    (0.79
    )
    
    $
    0.94
    
    
    $
    0.90Diluted
    
    $
    (1.30
    )
    
    $
    (0.79
    )
    
    $
    0.60
    
    
    $
    0.58
 24




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2004
    
    
    September 30, 2003(as previously
    
    
    
    
    
    
    (as previouslyreported)
    
    
    (as restated)
    
    
    reported)
    
    
    (as restated)America West Holdings Corporation
    
    (in thousands except per share data)Aircraft fuel
    
    $
    375,825
    
    
    $
    391,287
    (5)
    
    $
    271,481
    
    
    $
    281,442
    (7)Realized and unrealized gains on fuel
hedging instruments, net
    
    
    
    
    
    
    (36,092
    ) (5) (6)
    
    
    
    
    
    
    (6,394
    ) (7) (8)Total operating expenses
    
    
    1,749,802
    
    
    
    1,729,172
    (6)
    
    
    1,671,006
    
    
    
    1,674,573
    (8)Operating income
    
    
    10,439
    
    
    
    31,069
    (6)
    
    
    20,300
    
    
    
    16,733
    (8)Net income (loss)
    
    $
    (40,197
    )
    
    $
    (19,567
    ) (6)
    
    $
    50,608
    
    
    $
    47,041
    (8)Net income (loss) per share:Basic
    
    $
    (1.12
    )
    
    $
    (0.54
    )
    
    $
    1.48
    
    
    $
    1.38Diluted
    
    $
    (1.12
    )
    
    $
    (0.54
    )
    
    $
    1.18
    
    
    $
    1.11
   (1)
    
    Reflects reclassification of $7.8 million net credit from Aircraft Fuel
expense to Realized and Unrealized Losses (Gains) on Fuel Hedging Instruments,
Net.(2)
    
    Reflects the restatement of $18.4 million net credit to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Losses (Gains) on Fuel Hedging Instruments, Net.(3)
    
    Reflects reclassification of $0.1 million net expense from Aircraft Fuel
expense to Realized and Unrealized Losses (Gains) on Fuel Hedging Instruments,
Net.(4)
    
    Reflects the restatement of $1.4 million net expense to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Losses (Gains) on Fuel Hedging Instruments, Net.(5)
    
    Reflects reclassification of $15.5 million net credit from Aircraft Fuel
expense to Realized and Unrealized Gains on Fuel Hedging Instruments, Net.(6)
    
    Reflects the restatement of $20.6 million net credit to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Gains on Fuel Hedging Instruments, Net.(7)
    
    Reflects reclassification of $10.0 million net credit from Aircraft Fuel
expense to Realized and Unrealized Gains on Fuel Hedging Instruments, Net.(8)
    
    Reflects the restatement of $3.6 million net expense to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Gains on Fuel Hedging Instruments, Net. Three Months Ended
    
    
    Three Months EndedSeptember 30, 2004
    
    
    September 30, 2003(as previously
    
    
    
    
    
    
    (as previouslyreported)
    
    
    (as restated)
    
    
    reported)
    
    
    (as restated)America West Airlines, Inc.
    
    (in thousands except CASM and fuel price)Aircraft fuel
    
    $
    136,297
    
    
    $
    144,098
    (1)
    
    $
    91,595
    
    
    $
    91,462
    (3)Realized and unrealized losses (gains) on
fuel
hedging instruments, net
    
    
    
    
    
    
    (26,203
    ) (1) (2)
    
    
    
    
    
    
    1,485
    (3) (4)Total operating expenses
    
    
    605,721
    
    
    
    587,319
    (2)
    
    
    541,095
    
    
    
    542,447
    (4)Operating income (loss)
    
    
    (27,268
    )
    
    
    (8,866
    ) (2)
    
    
    51,037
    
    
    
    49,685
    (4)Net income (loss)
    
    $
    (46,164
    )
    
    $
    (27,762
    ) (2)
    
    $
    33,820
    
    
    $
    32,468
    (4)Operating CASM (cents)
    
    
    7.92
    
    
    
    7.68
    
    
    
    7.66
    
    
    
    7.68Average fuel price (cents per gallon)
    
    
    118.0
    
    
    
    124.8
    
    
    
    84.6
    
    
    
    84.5
 25




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2004
    
    
    September 30, 2003(as previously
    
    
    
    
    
    
    (as previouslyreported)
    
    
    (as restated)
    
    
    reported)
    
    
    (as restated)America West Airlines, Inc.
    
    
    
    
    
    (in thousands except CASM and fuel price)Aircraft fuel
    
    $
    375,825
    
    
    $
    391,287
    (5)
    
    $
    271,481
    
    
    $
    281,442
    (7)Realized and unrealized gains on fuel
hedging instruments, net
    
    
    
    
    
    
    (36,092
    ) (5) (6)
    
    
    
    
    
    
    (6,394
    ) (7) (8)Total operating expenses
    
    
    1,746,591
    
    
    
    1,725,961
    (6)
    
    
    1,667,564
    
    
    
    1,671,131
    (8)Operating income
    
    
    13,140
    
    
    
    33,770
    (6)
    
    
    23,232
    
    
    
    19,665
    (8)Net income (loss)
    
    $
    (37,661
    )
    
    $
    (17,031
    ) (6)
    
    $
    53,473
    
    
    $
    49,906
    (8)Operating CASM (cents)
    
    
    7.75
    
    
    
    7.65
    
    
    
    7.98
    
    
    
    8.00Average fuel price (cents per gallon)
    
    
    111.2
    
    
    
    115.8
    
    
    
    85.4
    
    
    
    88.5
   (1)
    
    Reflects reclassification of $7.8 million net credit from Aircraft Fuel
expense to Realized and Unrealized Losses (Gains) on Fuel Hedging Instruments,
Net.(2)
    
    Reflects the restatement of $18.4 million net credit to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Losses (Gains) on Fuel Hedging Instruments, Net.(3)
    
    Reflects reclassification of $0.1 million net expense from Aircraft Fuel
expense to Realized and Unrealized Losses (Gains) on Fuel Hedging Instruments,
Net.(4)
    
    Reflects the restatement of $1.4 million net expense to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Losses (Gains) on Fuel Hedging Instruments, Net.(5)
    
    Reflects reclassification of $15.5 million net credit from Aircraft Fuel
expense to Realized and Unrealized Gains on Fuel Hedging Instruments, Net.(6)
    
    Reflects the restatement of $20.6 million net credit to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Gains on Fuel Hedging Instruments, Net.(7)
    
    Reflects reclassification of $10.0 million net credit from Aircraft Fuel
expense to Realized and Unrealized Gains on Fuel Hedging Instruments, Net.(8)
    
    Reflects the restatement of $3.6 million net expense to eliminate hedge
accounting for the period presented which is reflected in Realized and Unrealized
Gains on Fuel Hedging Instruments, Net. Overview During the third quarter of 2004, the airline industry and AWA incurred and continues to face
an increase in costs resulting from record high jet fuel prices. At the same time, AWAs passenger
revenues were negatively impacted by a weak revenue environment. Weak domestic yields are an
industry wide problem due to excess domestic capacity, limited pricing power and continued growth
of low cost carriers. For the third quarter, Holdings recorded an operating loss of $9.8 million and pretax and net
loss of $28.7 million, or $0.79 per diluted share. During the quarter:  
    Capacity as measured by available seat miles (ASMs), was up 8.3% as compared to the 2003
third quarter, while passenger revenues were down $10.4 million or 1.9% to $542.2 million.
Passenger revenue per available seat mile (RASM) decreased 9.3% to 7.09 cents versus the
2003 third quarter primarily due to an 11.2% decline in yield, a 7.9% increase in aircraft
utilization and a 6.1% increase in average stage length.
    Total operating expenses were $588.5 million, an increase of $44.9 million from the
third quarter of 2003. The 2004 results include $26.2 million of net
gains associated with the Companys fuel hedging transactions. The average fuel price per gallon increased 47.7% from 84.5 cents
in the third quarter of 2003 to 124.8 cents per gallon in the third quarter of 2004. As a
result, aircraft fuel expense for the quarter was $144.1 million, which accounted for $52.6
million of the period-over-period increase in operating expenses. Other operating expenses
increased by only 4.4%, while the airline grew by 8.3%, driven by the Companys stringent
cost controls. 26




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 We believe near term revenues will continue to be negatively impacted by this weak yield
environment and fuel prices will remain at record levels. Given these conditions, Holdings
anticipates it will report significant losses for the fourth quarter and full year 2004. As of September 30, 2004, Holdings unrestricted and restricted cash, cash equivalents,
short-term investments and investments in debt securities totaled $488.1 million. Although there
can be no assurances, we believe that these high cash balances, coupled with our financing
commitments and cash flows from operating activities will be adequate to fund our operating and
capital needs as well as enable us to maintain compliance with our various debt agreements through
at least December 31, 2005. Airline Operations Update During the third quarter of 2004, average daily aircraft utilization increased by 7.9% to 10.9
hours as the Company continued to grow the airline, principally through lower cost utilization
flying. This increase occurred during the time when domestic air traffic volume increased 6.6%
year-over-year and the national air traffic system was already constrained. In addition, AWA had
three consecutive months of record passenger load factors, averaging 81.3% during the same period.
The increase in aircraft utilization, constrained air space and carrying record load factors put
pressure on our operations. As a result, AWAs operating performance and completion factor were
worse than the third quarter of 2003. The Companys recent action to improve operating performance, which included a modest
reduction in planned growth and an increase in maintenance stations, has had a positive impact on
third quarter operating results. Operating performance for the third quarter improved over the
2004 second quarter as average on-time performance increased to 77.8% from 76.7% and average
completion factor increased to 98.7% from 98.4%. The Company expects its fourth quarter 2004
operating results will continue to improve versus the third quarter. AWA reported the following operating statistics to the U.S. Department of Transportation
(DOT) for the third quarters of 2004 and 2003: Percent Change2004
    
    
    2003
    
    
    2004  2003Jul
    
    
    Aug
    
    
    Sep
    
    
    Jul
    
    
    Aug
    
    
    Sep
    
    
    Jul
    
    
    Aug
    
    
    SepOn-time performance
(a)
    
    
    76.4
    
    
    
    74.9
    
    
    
    82.2
    
    
    
    82.0
    
    
    
    80.8
    
    
    
    86.4
    
    
    
    (5.6
    )
    
    
    (5.9
    )
    
    
    (4.2
    )Completion factor (b)
    
    
    98.5
    
    
    
    98.8
    
    
    
    97.9
    (e)
    
    
    99.2
    
    
    
    99.3
    
    
    
    99.4
    
    
    
    (0.7
    )
    
    
    (0.5
    )
    
    
    (1.5
    )Mishandled baggage (c)
    
    
    4.46
    
    
    
    4.76
    
    
    
    3.24
    
    
    
    3.44
    
    
    
    3.59
    
    
    
    2.40
    
    
    
    29.7
    
    
    
    32.6
    
    
    
    35.0Customer complaints
(d)
    
    
    0.82
    
    
    
    1.41
    
    
    
    1.30
    
    
    
    0.63
    
    
    
    0.75
    
    
    
    0.71
    
    
    
    30.2
    
    
    
    88.0
    
    
    
    83.1
   (a)
    
    Percentage of reported flight operations arriving on time.(b)
    
    Percentage of scheduled flight operations completed.(c)
    
    Rate of mishandled baggage reports per 1,000 passengers.(d)
    
    Rate of customer complaints filed with the DOT per 100,000 passengers.(e)
    
    Excluding the effects of the Los Angeles-area Federal Aviation Administration radio
outage that impacted operations on September 14 and 15 and the effects of hurricanes that
affected operations for several days during the month, completion factor would have been
98.8%. 27




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 Summary of Holdings Financial Results Holdings recorded a consolidated net loss of $28.7 million, or $0.79 per diluted share, in the
third quarter of 2004. This compares to consolidated net income of $31.6 million, or $0.58 per
diluted share, in the third quarter of 2003. The 2004 period also includes $1.6 million of special
charges related to the return of three Boeing 737-200 aircraft. This
amount includes termination payments of $2.1 million, the write-down of leasehold improvements
and aircraft rent balances of $1.7 million, offset by the reversal of maintenance reserves of $2.2
million. See Note 6, Special Chargesin Notes to Condensed Financial Statements. Holdings recorded a consolidated net loss of $19.6 million in the first nine months of 2004,
or $0.54 per diluted share. This compares to consolidated net income of $47.0 million, or $1.11
per diluted share, in the first nine months of 2003. The 2004 period includes $1.0 million of
special charges as discussed above. The nine months ended 2004 also
includes net gains associated with the Companys fuel hedging instruments, of $36.1 million. The 2003 period included the
$81.3 million of federal government assistance received under the Emergency Wartime Supplemental
Appropriations Act, an operating gain of $4.4 million related to the purchase and subsequent
exchange of an A320 airframe in the first quarter of 2003 and an operating gain of $1.1 million due
to a revision of the estimated costs related to the early termination of certain aircraft leases.
The 2003 period also includes a realized and unrealized gain on fuel hedging instruments, net of
$6.4 million. These gains were offset in part by special charges of $15.5 million resulting from
the elimination of AWAs hub operations in Columbus, Ohio ($11.1 million), the reduction-in-force
of certain management, professional and administrative employees ($2.3 million) the impairment of
certain owned Boeing 737-200 aircraft grounded in 2003 ($2.6 million) and a $0.5 million reduction
related to the revision of estimated costs associated with the sale and leaseback of certain
aircraft. The
2004 results include $26.2 million of net gains associated with
the Companys fuel hedging transactions. This amount includes
$20.3 million of gains resulting from mark-to-market accounting
for changes in the fair value of the Companys fuel hedging
instruments and $5.9 million of net realized gains on settled
hedge transactions. The Company did not record an income tax benefit in the third quarter or income tax expense
for the first six months of 2004 as it currently expects to continue to record a full valuation
allowance on any future tax benefits until it has achieved several quarters of consecutive
profitable results coupled with an expectation of continued profitability. 28




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 RESULTS OF OPERATIONS The following discussion provides an analysis of AWAs results of operations for the three and
nine months ended September 30, 2004 and material changes compared to the three and nine months
ended September 30, 2003. The table below sets forth selected operating data for AWA. Three Months Ended
    
    
    Percent
    
    
    Nine Months Ended
    
    
    PercentSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2004
    
    
    2003
    
    
    2004-2003
    
    
    2004
    
    
    2003
    
    
    2004-2003Aircraft (end of period)
    
    
    139
    
    
    
    140
    
    
    
    (0.7
    )
    
    
    139
    
    
    
    140
    
    
    
    (0.7
    )Average daily aircraft utilization (hours) (a)
    
    
    10.9
    
    
    
    10.1
    
    
    
    7.9
    
    
    
    10.9
    
    
    
    10.1
    
    
    
    7.9Available seat miles (in millions) (b)
    
    
    7,646
    
    
    
    7,062
    
    
    
    8.3
    
    
    
    22,550
    
    
    
    20,887
    
    
    
    8.0Block hours (c)
    
    
    140,076
    
    
    
    129,830
    
    
    
    7.9
    
    
    
    415,956
    
    
    
    389,509
    
    
    
    6.8Average stage length (miles) (d)
    
    
    1,067
    
    
    
    1,006
    
    
    
    6.1
    
    
    
    1,054
    
    
    
    995
    
    
    
    5.9Average passenger journey (miles) (e)
    
    
    1,771
    
    
    
    1,593
    
    
    
    11.2
    
    
    
    1,688
    
    
    
    1,539
    
    
    
    9.7Revenue passenger miles (in millions) (f)
    
    
    6,227
    
    
    
    5,635
    
    
    
    10.5
    
    
    
    17,448
    
    
    
    16,009
    
    
    
    9.0Load factor (percent) (g)
    
    
    81.4
    
    
    
    79.8
    
    
    1.6
    pts
    
    
    77.4
    
    
    
    76.6
    
    
    0.8
    ptsPassenger enplanements (in thousands) (h)
    
    
    5,556
    
    
    
    5,322
    
    
    
    4.4
    
    
    
    15,796
    
    
    
    15,162
    
    
    
    4.2Yield per revenue passenger mile (cents) (i)
    
    
    8.71
    
    
    
    9.81
    
    
    
    (11.2
    )
    
    
    9.45
    
    
    
    9.94
    
    
    
    (4.9
    )Revenue per available seat mile:Passenger (cents) (j)
    
    
    7.09
    
    
    
    7.82
    
    
    
    (9.3
    )
    
    
    7.31
    
    
    
    7.62
    
    
    
    (4.1
    )Total (cents) (k)
    
    
    7.57
    
    
    
    8.39
    
    
    
    (9.8
    )
    
    
    7.80
    
    
    
    8.09
    
    
    
    (3.6
    )Fuel consumption (gallons in millions)
    
    
    115.5
    
    
    
    108.3
    
    
    
    6.7
    
    
    
    337.9
    
    
    
    317.9
    
    
    
    6.3Average fuel price (cents per gallon) *
    
    
    124.8
    
    
    
    84.5
    
    
    
    47.7
    
    
    
    115.8
    
    
    
    88.5
    
    
    
    30.8Average number of full-time equivalent employees
    
    
    11,936
    
    
    
    11,347
    
    
    
    5.2
    
    
    
    11,924
    
    
    
    11,712
    
    
    
    1.8
   *
    
    As restated  (a)
    Average daily aircraft utilization  The average number of block hours per day
for all aircraft in service.(b)
    Available seat mile (ASM)  A basic measure of production. It is one seat
flown one mile.(c)
    Block hours  The hours measured from the moment an aircraft first moves under
its own power, including taxi time, for the purposes of flight until the aircraft is
docked at the next point of landing and its power is shut down.(d)
    Average stage length  The average of the distances flown on each segment of
every route.(e)
    Average passenger journey  The average one-way trip measured in miles for one
passenger origination.(f)
    Revenue passenger mile (RPM)  A basic measure of sales volume. It is one
passenger flown one mile.(g)
    Load factor  The percentage of available seats that are filled with revenue
passengers.(h)
    Passenger enplanements  The number of passengers on board an aircraft including
local, connecting and through passengers.(i)
    Yield  A measure of airline revenue derived by dividing passenger revenue by
revenue passenger miles and expressed in cents per mile.(j)
    Passenger revenue per available seat mile (RASM)  Total passenger revenues
divided by total available seat miles.(k)
    Total revenue per available seat mile  Total operating revenues divided by total
available seat miles. 29




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 The table below sets forth the major components of CASM for AWA. Three Months Ended
    
    
    Percent
    
    
    Nine Months Ended
    
    
    PercentSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2004
    
    
    2003
    
    
    2004-2003
    
    
    2004
    
    
    2003
    
    
    2004-2003(in cents)
    
    (as restated)
    
    
    
    
    
    
    (as restated)Salaries and related costs
    
    
    2.16
    
    
    
    2.23
    
    
    
    (3.4
    )
    
    
    2.18
    
    
    
    2.28
    
    
    
    (4.2
    )Aircraft rents
    
    
    1.00
    
    
    
    1.05
    
    
    
    (5.2
    )
    
    
    1.01
    
    
    
    1.06
    
    
    
    (5.3
    )Other rents and landing fees
    
    
    0.57
    
    
    
    0.54
    
    
    
    4.7
    
    
    
    0.56
    
    
    
    0.55
    
    
    
    1.5Aircraft fuel
    
    
    1.88
    
    
    
    1.30
    
    
    
    45.5
    
    
    
    1.73
    
    
    
    1.35
    
    
    
    28.9Realized and unrealized losses (gains) on
fuel
hedging instruments, net
    
    
    (0.34
    )
    
    
    0.02
    
    
    
    
    
    
    
    (0.16
    )
    
    
    (0.03
    )
    
    
    Agency commissions
    
    
    0.08
    
    
    
    0.12
    
    
    
    (30.8
    )
    
    
    0.09
    
    
    
    0.13
    
    
    
    (32.7
    )Aircraft maintenance materials and repairs
    
    
    0.71
    
    
    
    0.72
    
    
    
    (1.1
    )
    
    
    0.69
    
    
    
    0.83
    
    
    
    (16.3
    )Depreciation and amortization
    
    
    0.17
    
    
    
    0.24
    
    
    
    (25.9
    )
    
    
    0.17
    
    
    
    0.25
    
    
    
    (28.7
    )Special charges, net
    
    
    0.02
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    0.06
    
    
    
    (93.4
    )Other
    
    
    1.43
    
    
    
    1.46
    
    
    
    (2.5
    )
    
    
    1.37
    
    
    
    1.52
    
    
    
    (9.9
    )7.68
    
    
    
    7.68
    
    
    
    
    
    
    
    7.65
    
    
    
    8.00
    
    
    
    (4.4
    )
 Three months ended September 30, 2004 and 2003 For the third quarter of 2004, AWA realized an operating loss of $8.9 million compared to
operating income of $49.7 million for the comparable 2003
quarter. The 2004 period includes $26.2 million of net
gains associated with the Companys fuel hedging transactions.
This amount includes $20.3 million
of gains resulting from mark-to-market accounting for changes in the fair value of the Companys fuel hedging
instruments and $5.9 million of net realized gains on settled hedge transactions. Loss before
income taxes for the third quarter of 2004 was $27.8 million compared to income before income taxes
of $32.5 million for the comparable 2003 period. Total operating revenues for the third quarter of 2004 were $578.5 million. Passenger
revenues were $542.2 million, a decrease of $10.4 million or 1.9% from the comparable 2003 quarter.
A 10.5% increase in RPMs exceeded an 8.3% increase in ASMs, resulting in a 1.6 point increase in
load factor, while yield decreased 11.2%. As a result, RASM decreased 9.3% to 7.09 cents in the
third quarter 2004 compared to 7.82 cents in the 2003 quarter due to a weak revenue environment.
Weak domestic yields are an industry wide problem due to excess domestic capacity, limited pricing
power and continued growth of low cost carriers. Cargo revenues ($6.3 million) were relatively
flat period-over-period. Other revenues decreased 10.1% from $33.4 million in the third quarter of
2003 to $30.0 million in the third quarter of 2004 due principally to lower net revenues from the
sale of America West Vacations packages as a result of lower volume. Net revenues from AWAs code
sharing arrangement with Mesa Airlines were flat when compared to the 2003 third quarter as the
increase in revenues associated with Mesas capacity growth was substantially offset by higher fuel
and aircraft operating costs. Operating expenses in the third quarter of 2004 increased $44.9 million or 8.3% compared to
the 2003 quarter while ASMs increased 8.3% primarily due to increases in average stage length of
6.1% and aircraft utilization of 7.9%. CASM remained flat at 7.68 cents in the third quarter of
2004 and 2003 despite a 47.7% increase in average fuel price per gallon. Operating expenses in the
third quarter of 2004 include special charges of $1.6 million related to the return of three Boeing
737-200 aircraft. Significant changes in the components of CASM are explained as follows:  
    Salaries and related costs per ASM decreased 3.4 % due to increased productivity. ASMs
increased 8.3% and average full-time equivalent employees (FTEs) increased 5.2%. This
increase in productivity was offset in part by an $8.1 million increase in pilot payroll
expense, principally as a result of the new labor agreement with the Air Line Pilots
Association (ALPA) effective December 30, 2003.
    Aircraft rent expense per ASM decreased 5.2% due to the increase in aircraft utilization.
    Other rents and landing fees expense per ASM increased 4.7% primarily due to increases in
airport rents ($2.9 million), landing fees ($1.2 million) and other space rentals ($0.6
million), which more than offset the 8.3% increase in ASMs. 30




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004  
    Aircraft fuel expense per ASM increased 45.5% primarily due to a 47.7% increase in the
average price per gallon of fuel to 124.8 cents in the third quarter of 2004 from 84.5 cents
in the comparable 2003 quarter.
    Agency commissions expense per ASM decreased 30.8% due to reductions in various travel
agency incentive programs and lower override commissions.
    Aircraft maintenance materials and repairs expense per ASM decreased 1.1% primarily due
to a decrease in capitalized maintenance amortization expense ($4.0 million), driven
primarily by a change in the estimated useful life on certain engines, effective January 1,
2004, as a result of changes in aircraft utilization, and the 8.3% increase in ASMs. This
was partially offset by increases in aircraft C-check ($3.5 million) and airframe
maintenance ($3.3 million) expenses.
    Depreciation and amortization expense per ASM decreased 25.9% primarily due to lower
computer hardware and software amortization ($2.5 million) as a result of the AWAs cash
conservation program, which reduced capital expenditures. The change in the estimated
useful life as a result of changes in AWAs fleet plan, effective January 1, 2004, driven by
changes in aircraft utilization contributed to the decrease in depreciation expense for
improvements on AWAs owned aircraft ($0.8 million) and for rotable and repairable spare
parts ($0.5 million).
    Other operating expenses per ASM decreased 2.5% primarily due to the 8.3% increase in
ASMs, as a decrease in property taxes ($2.8 million) was more than offset by increases in
guard services ($2.6 million), litigation fees ($1.9 million), aircraft fuel tax ($1.3
million), ground handling ($1.2 million) and computer reservation system booking fees ($0.6
million). AWA had net nonoperating expense of $18.9 million in the third quarter of 2004 compared to
$17.2 million of net nonoperating expense in the 2003 period. Debt issue costs totaling $1.3
million were written off in connection with the refinancing of the term loan in September 2004.
See Note 5, Term Loan Refinancing. Nine months ended September 30, 2004 and 2003 For the nine months ended September 30, 2004, AWA realized operating income of $33.8 million
compared to $19.7 million for the 2003 period. The 2004 period includes $36.1
million of net gains associated with the Companys fuel hedging
transactions. This amount includes $25.0
million resulting from mark-to-market accounting for changes in the fair value of the Companys fuel
hedging instruments and $11.1 million of net realized gains on settled hedge transactions. The
2003 period includes a $6.4 million net gain associated with the Companys fuel hedging
transactions. This amount includes $9.1 million of net realized
gains on settled hedge transactions off set by a $2.7 million
loss resulting from mark-to-market accounting for changes in the fair
value of the Companys fuel hedging instruments. Loss before income taxes for the nine-month period in 2004 was $17.0
million compared to income before income taxes of $49.9 million in 2003. Total operating revenues for the first nine months of 2004 were $1.8 billion. Passenger
revenues were $1.6 billion, an increase of $57.2 million or 3.6% from the comparable 2003 period.
A 9.0% increase in RPMs exceeded an 8.0% increase in ASMs, resulting in a 0.8 point increase in
load factor, while yield decreased 4.9%. As a result, RASM decreased 4.1% to 7.31 cents in the
first nine months of 2004 from 7.62 cents in the comparable 2003 period due to the overall increase
in industry domestic capacity and competition. Cargo revenues decreased 5.2% to $20.0 million due
to lower mail rates and volumes. Other revenues increased 16.4% to $91.1 million primarily due to
increased flying for AWA by its codeshare partner Mesa Airlines (Mesa) and a $2.5 million credit
related to the reduction of certain obligations based upon a settlement with Mesa. These increases

were offset in part by lower net revenues from the sale of America West Vacations packages due
primarily to a decrease in volume. Operating expenses for the first nine months of 2004 increased $54.8 million or 3.3% compared
to the comparable 2003 period, while ASMs increased 8.0% due to increases in average stage length
of 5.9% and aircraft utilization of 7.9%. CASM decreased 4.4% to 7.65 cents for the first nine
months of 2004 from 8.00 cents for the comparable 2003 period despite a 30.8% increase in average
fuel price per gallon. Operating expenses in the first nine months of 2004 included a $0.6 million
reduction in special charges related to the revision of estimated costs associated with the sale
and leaseback of certain aircraft and a $1.6 million charge related to the return of three
Boeing 737-200 aircraft. The 31




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 comparable 2003 period included special charges of $14.4 million.
Significant changes in the components of CASM are explained as follows:  
    Salaries and related costs per ASM decreased 4.2% due to increased productivity. ASMs
increased 8.0% and average FTEs increased 1.8%. This increase in productivity was offset in
part by a $20.6 million increase in pilot payroll expense principally as a result of the new
labor agreement with ALPA effective December 30, 2003.
    Aircraft rent expense per ASM decreased 5.3% due to the increase in aircraft utilization.
    Other rents and landing fees expense per ASM increased 1.5% primarily due to increases in
airport rents ($6.6 million) and landing fees ($3.9 million), which more than offset the
8.0% increase in ASMs.
    Aircraft fuel expense per ASM increased 28.9% due to a 30.8% increase in the average
price per gallon of fuel to 115.8 cents in the first nine months of 2004 from 88.5 cents in
the comparable 2003 period.
    Agency commissions expense per ASM decreased 32.7% primarily due to the reductions in
various travel agency incentive programs and lower override commissions.
    Aircraft maintenance materials and repairs expense per ASM decreased 16.3% primarily due
to decreases in capitalized maintenance amortization expense ($21.8 million) and aircraft
C-Check expense ($1.4 million). The decrease in capitalized maintenance amortization
expense is driven by changes in the estimated useful life on certain engines, effective
January 1, 2004, as a result of changes in aircraft utilization ($6.3 million), and on
certain aircraft engine overhaul costs, effective April 1, 2003, driven by a new maintenance
agreement that guarantees minimum cycles on engine overhauls ($2.3 million). During 2004,
AWA also retired fully depreciated assets related to the return of certain leased aircraft
and engines which reduced period-over-period capitalized maintenance amortization expense
($3.3 million). These decreases were partially offset by increases in airframe maintenance
($4.4 million) and engine overhaul ($1.8 million) expenses.
    Depreciation and amortization expense per ASM decreased 28.7% primarily due to lower
computer hardware and software amortization ($5.3 million) as a result of AWAs cash
conservation program, which reduced capital expenditures and lower amortization expense
related to aircraft leasehold improvements ($1.8 million). The change in the estimated
useful life as a result of changes in AWAs fleet plan discussed above contributed to the
decrease in depreciation for improvements on AWAs owned aircraft ($2.7 million), and for
rotable and repairable spare parts ($2.4 million).
    Other operating expenses per ASM decreased 9.9% primarily due to decreases in FlightFund
expenses ($6.7 million), property taxes ($5.7 million), catering costs ($5.1 million), bad
debt expense ($2.8 million), offset by increases in aircraft fuel tax ($2.9 million), credit
card discount fees ($2.7 million), computer reservation system booking fees ($2.5 million),
litigation fees ($1.9 million), and airport guard services ($1.4 million). Contributing to
the decrease in the 2004 period were a $3.5 million gain resulting from the settlement of a
claim in bankruptcy for amounts earned under an executory contract, a $2.0 million gain
resulting from the settlement of a lawsuit related to certain computer hardware and software
that had previously been written off and a $1.0 million volume incentive earned due to
certain Affinity Card sales levels meeting certain contract thresholds. The comparable 2003
period includes a $4.4 million gain related to the purchase and subsequent exchange of an
A320 airframe. AWA had net nonoperating expenses of $50.8 million in the first nine months of 2004 compared
to $30.2 million of net nonoperating income in the 2003 period, which benefited from $81.3 million
of federal government assistance received under the Emergency Wartime Supplemental Appropriations
Act.In the first nine months of 2004, debt issue costs totaling $1.3 million were written off in
connection with the refinancing of the term loan. The 2003 period included a gain on the
disposition of property and equipment ($2.1 million) primarily due to the sale of one Boeing
737-200 aircraft. Interest income increased $0.9 million or 9.2% due to higher average cash
balances in the 2004 period. Interest expense increased $1.3 million or 2.0% due to higher average
interest rates on outstanding debt. 32




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 LIQUIDITY AND CAPITAL RESOURCES Sources and Uses of Cash At September 30, 2004, Holdings and AWAs total cash, cash equivalents, short-term
investments, investments in debt securities and restricted cash were $488.1 million and $467.8
million, respectively. Net cash provided by operating activities for Holdings and AWA was $89.9
million in the first nine months of 2004 compared to $159.3 million and $159.1 million for Holdings
and AWA, respectively, in the first nine months of 2003. The year-over-year decrease in net cash
provided by operating activities of $69.4 million and $69.2 million for Holdings and AWA,
respectively, was primarily due to receiving $81.3 million of refunded security fees from the
federal government in the third quarter of 2003. In the first nine months of 2004, net cash used in investing activities was $125.6 million for
Holdings and AWA. This compares to net cash used in investing activities of $178.5 million for
Holdings and AWA in the first nine months of 2003. Principal investing activities during the first
nine months of 2004 included purchases of property and equipment totaling $125.9 million and net
purchases of short-term investments and investments in debt securities totaling $0.8 million. The
first nine months of 2003 included purchases of property and equipment totaling $119.2 million,
including $12.0 million related to the purchase of an A320 airframe that was used to replace an
airframe that was damaged in an accident in August 2002, and net purchases of short-term
investments totaling $60.1 million. The 2003 period also included proceeds from the disposition of
assets totaling $24.0 million, including $12.6 million of insurance proceeds and $3.6 million of
scrap proceeds both associated with the replaced A320 airframe discussed above, and $6.9 million
related to the sale and leaseback of 29 jet bridges at Phoenix Sky Harbor International Airport. In the first nine months of 2004, net cash used in financing activities by Holdings and AWA
was $63.7 million and $64.9 million, respectively, consisting primarily of debt repayments,
including principal payments of $85.8 million for the government guaranteed loan. In addition, AWA
refinanced the term loan resulting in proceeds of $110.6 million, a portion of which was used to
pay off the balance of the term loan for approximately $77.0 million and to pay for debt issue
costs of $1.2 million. See Note 5, Term Loan Refinancingin Notes to Condensed Consolidated
Financial Statements and Commitments  GECC Term Loan Financingbelow. The comparable 2003
period includes $86.8 million of proceeds from the issuance of the Senior Exchangeable Notes, debt
repayments of $14.7 million and payments of debt issue costs totaling $3.1 million for both
Holdings and AWA. Capital expenditures for the first nine months of 2004 were approximately $125.9 million for
both Holdings and AWA as compared to capital expenditures of approximately $119.2 million for both
Holdings and AWA for the first nine months of 2003. Included in these amounts are expenditures for
capitalized maintenance of approximately $96.0 million and $91.8 million for both Holdings and AWA
for the first nine months of 2004 and 2003, respectively. Off-Balance Sheet Arrangements The Pass Through Trusts Since AWAs restructuring in 1994, AWA has set up 19 pass through trusts, which have issued
over $1.4 billion of pass through trust certificates (also known as Enhanced Equipment Trust
Certificates or EETC) covering the financing of 54 aircraft, all of which have been delivered.
These trusts are off-balance sheet entities, the primary purpose of which is to finance the
acquisition of aircraft. Rather than finance each aircraft separately when such aircraft is
purchased or delivered, these trusts allowed AWA to raise the financing for several aircraft at one
time and place such funds in escrow pending the purchase or delivery of the relevant aircraft. The
trusts also are structured to provide for certain credit enhancements, such as liquidity facilities
to cover certain interest payments, that reduce the risks to the purchasers of the trust
certificates and, as a result, reduce the cost of aircraft financing to AWA. Each trust covered a set amount of aircraft scheduled to be delivered within a specific period
of time. At the time of each covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed aircraft. The equipment notes were
issued, at AWAs election, either by AWA in connection with a mortgage financing of the aircraft or
by a separate owner trust in connection with a leveraged lease financing of the aircraft. In the
case of a leveraged lease financing, the owner trust then leased the aircraft to AWA. In both
cases, the equipment notes are secured by a security interest in the aircraft. The pass through
trust certificates are not direct 33




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 obligations of, nor guaranteed by, Holdings or AWA. However, in the case of mortgage
financings, the equipment notes issued to the trusts are direct obligations of AWA and in the case
of leveraged lease financings, the leases are direct obligations of AWA. In addition, neither
Holdings nor AWA guarantee or participate in any way in the residual value of the leased aircraft.
All aircraft financed by these trusts are currently structured as leveraged lease financings, which
are not reflected as debt on the balance sheets of either AWA or Holdings in accordance with
Financial Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable
Interest Entities (Fin 46). In the third quarter and the first nine months of 2004, AWA made
$52.8 million and $154.2 million, respectively, in lease payments in respect of the leveraged lease
financings under the pass through trusts. Other Operating Leases In addition to the aircraft financed by the pass through trust certificates, AWA has
noncancelable operating leases covering 82 aircraft, as well as leases for certain terminal space,
ground facilities and computer and other equipment. In the third quarter and first nine months of
2004, AWA made $47.4 million and $146.1 million, respectively, in lease payments related to these
operating leases. During the quarter, the Company entered into agreements with two aircraft
lessors for the return of three Boeing 737-200 aircraft. Three aircraft were returned during the
quarter and three are committed to being returned in the fourth quarter. Negotiations continue for
the return of the remaining two Boeing 737-200 aircraft. Special Facility Revenue Bonds In June 1999, Series 1999 special facility revenue bonds (new bonds) were issued by the
Industrial Development Authority (IDA) of the City of Phoenix to fund the retirement of the
Series 1994A bonds (old bonds) and the construction of a new concourse with 14 gates at Terminal
4 in Phoenix Sky Harbor International Airport in support of AWAs strategic growth plan. The new
bonds are due June 2019 with interest accruing at 6.25% per annum payable semiannually on June 1
and December 1, commencing on December 1, 1999. The new bonds are subject to optional redemption
prior to the maturity date on or after June 1, 2009 in whole or in part, on any interest payment
date at the following redemption prices: 101% on June 1 or December 1, 2009; 100.5% on June 1 or
December 1, 2010; and 100% on June 1, 2011 and thereafter. In connection with these bonds, AWA entered into an Amended and Restated Airport Use
Agreement, pursuant to which AWA agreed to make sufficient payments to the IDA to cover the
principal and interest of the bonds and to indemnify the IDA for any claims arising out of the
issuance and sale of the bonds and the use and occupancy of the concourses financed by these bonds
and the old bonds. At September 30, 2004, the outstanding principal amount of the bonds was $21.8
million. The Company estimates its remaining payments to cover the principal and interest of these
bonds will be approximately $42.2 million. In accordance with Emerging Issues Task Force (EITF)
Issue No. 97-10, The Effect of Lessee Involvement in Asset Construction, the Company accounts for
this as an operating lease. Commitments As of September 30, 2004, AWA had $748.1 million of long-term debt (including current
maturities). This amount consisted primarily of the government guaranteed loan, of which $343.2
million remains outstanding, a secured term loan financing with General Electric Capital
Corporation (GECC), of which $110.6 million remains outstanding, $39.5 million principal amount
of 103/4% senior unsecured notes, $108.2 million principal amount of 7.5% convertible senior notes
(including interest through September 30, 2004 as a deemed loan added to the principal thereof) and
$86.8 million issue price of 7.25% senior exchangeable notes. Government Guaranteed Loan In January 2002, AWA closed a $429 million loan supported by a $380 million guarantee provided
by the Air Transportation Stabilization Board (the ATSB). Certain third-party counter-guarantors
have fully and unconditionally guaranteed the payment of an aggregate of $45 million of the
outstanding principal amount under the government guaranteed loan plus accrued and unpaid interest
thereon. In addition, Holdings has fully and unconditionally guaranteed the payment of all
principal, premium, interest and other obligations outstanding under the government guaranteed loan
and has pledged the stock of AWA to secure its obligations under such guarantee. 34




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 Principal amounts
under this loan become due in ten installments of $42.9 million on each March 31 and September
30, commencing on March 31, 2004 and ending on September 30, 2008. AWA made the first two
principal payments of $42.9 million each on March 31, 2004 and September 30, 2004. In connection
with the issuance of the 7.25% Senior Exchangeable Notes in the third quarter of 2003, AWA placed
$42.9 million of the net proceeds in a cash collateral account to secure the second principal
payment due on September 30, 2004. This amount was previously recorded as restricted cash in AWAs
and Holdings consolidated balance sheets. Principal amounts outstanding under the government
guaranteed loan bear interest at a rate per annum equal to LIBOR plus 40 basis points. Subject to certain exceptions, we are required to prepay the government guaranteed loan with:  
    the net proceeds of all issuances of debt or equity by either Holdings or AWA
after January 2002;
    proceeds from asset sales in excess of $20 million in any fiscal year to the
extent such proceeds are not applied to redeem AWAs 10 3/4% senior notes due 2005; and
    insurance proceeds in excess of $2 million to the extent such proceeds are not
used to restore or replace the assets from which such proceeds are derived. In addition, we are required to prepay the government guaranteed loan upon a change in control
and we may be required to prepay portions of the loan if our employee compensation costs exceed a
certain threshold. We may, at our option, prepay the government guaranteed loan without premium or
penalty, subject to reimbursement of the lenders breakage costs in the case of prepayment of LIBOR
loans. The government guaranteed loan requires that AWA maintain a minimum cash balance of $100
million. In addition, the government loan contains customary affirmative covenants and the
following negative covenants: restrictions on liens, investments, restricted payments, changes in
our fundamental business, asset sales and acquisitions, the creation of new subsidiaries,
sale-leaseback transactions, transactions with affiliates, continued existence, mergers or
consolidations, issuances and dispositions of capital stock of subsidiaries, and amendments to
other indebtedness. The government guaranteed loan contains customary events of default, including
payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and
judgment defaults. GECC Term Loan Financing On September 10, 2004, AWA entered into a term loan financing with GECC providing for loans in
an aggregate amount of $110.6 million. AWA used approximately $77.0 million of the proceeds from
this financing to repay in full its term loan with Mizuho Corporate Bank, Ltd. and certain other
lenders and to pay certain costs associated with this transaction. AWA intends to use the
remaining proceeds for general corporate purposes. The new term loan financing consists of two
secured term loan facilities: a $75.6 million term loan facility secured primarily by spare parts,
rotables and appliances (the Spare Parts Facility); and a $35.0 million term loan facility
secured primarily by aircraft engines and parts installed in such engines (the Engine Facility). The collateral securing the facilities is substantially the same collateral that secured the
Mizuho term loan, except that AWAs maintenance hanger in Phoenix does not secure the facilities.
The facilities are cross-collateralized on a subordinated basis and the collateral securing the
facilities also secures on a subordinated basis certain of AWAs other existing debt and lease
obligations to GECC and its affiliates. The loans under the Spare Parts Facility are payable in full at maturity on September 10,
2010. The loans under the Engine Facility are payable in equal quarterly installments of $1.3
million beginning on March 10, 2006 through June 10, 2010 with the remaining loan amount of $11.8
million payable at maturity on September 10, 2010. The loans under each facility may be prepaid in
an amount not less than $5 million at any time after the 30th monthly anniversary of the
funding date under such facility. If AWA fails to maintain a certain ratio of rotables to loans
under the Spare Parts Facility, it may be required to pledge additional rotables or cash as
collateral, provide a letter of credit or prepay some or all of the loans under the Spare Parts
Facility. In addition, the loans under the Engine Facility are subject to mandatory prepayment
upon the occurrence of certain events of loss applicable to, or certain dispositions of, aircraft
engines securing the facility. 35




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 Principal amounts outstanding under the loans bear interest at a rate per annum based on
three-month LIBOR plus a margin. Both facilities contain customary events of default, including
payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and
judgment defaults. 10 3/4% Senior Notes due 2005 In August 1995, AWA issued $75.0 million principal amount of 10 3/4% senior notes due 2005 of
which $39.5 million remained outstanding at September 30, 2004. Interest on the 10 3/4% senior notes
is payable semiannually in arrears on March 1 and September 1 of each year. We may redeem the 10 3/4% senior notes, in whole or in part, at a redemption price of 100%. If
AWA undergoes a change of control, it may be required to repurchase the 10 3/4% senior notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of repurchase. If AWA sells certain assets, it may be required to use the net cash
proceeds to repurchase the 10 3/4% senior notes at 100% of the principal amount, plus accrued and
unpaid interest, to the date of purchase. The indenture governing the 10 3/4% senior notes contains certain covenants that, among other
things, limit our ability to pay dividends or make distributions to our stockholders, repurchase or
redeem capital stock, make investments or other restricted payments, enter into transactions with
our stockholders and affiliates, sell assets (including the stock of our subsidiaries) and merge or
consolidate with other companies. The indenture governing the 10 3/4% senior notes also contains
customary events of default, including payment defaults, cross-defaults, breach of covenants,
bankruptcy and insolvency defaults and judgment defaults. 7.5% Convertible Senior Notes due 2009 In connection with the closing of the government guaranteed loan and the related transactions,
Holdings issued $104.5 million of 7.5% convertible senior notes due 2009, of which approximately
$108.2 remained outstanding at September 30, 2004 (including interest paid through September 30,
2004 as a deemed loan added to the principal thereof). Beginning January 18, 2005, these notes are
convertible into shares of Class B common stock, at the option of the holders, at an initial
conversion price of $12.00 per share or a conversion ratio of approximately 83.333 shares per
$1,000 principal amount of such notes, subject to standard anti-dilution adjustments. Interest on
the 7.5% convertible senior notes is payable semiannually in arrears on June 1 and December 1 of
each year. At Holdings option, the first six interest payments may be paid in the form of a
deemed loan added to the principal amount of these notes. The 7.5% convertible senior notes will
mature on January 18, 2009 unless earlier converted or redeemed. The payment of principal, premium
and interest on the 7.5% convertible senior notes is fully and unconditionally guaranteed by AWA. Holdings may redeem some or all of the 7.5% convertible senior notes at any time before
January 18, 2005, at a redemption price equal to $1,000 per note to be redeemed if (A) the closing
price of the Class B common stock has exceeded 120% of the conversion price then in effect for at
least 20 trading days within a period of 30 consecutive trading days ending on the trading day
before the date of the mailing of the redemption notice, and (B) a shelf registration statement
covering resales of the notes and the Class B common stock issuable upon conversion thereof is
effective and available for use and is expected to remain effective and available for use for the
30 days following the redemption date, unless registration is no longer required. Holdings may
redeem the 7.5% convertible senior notes, in whole or in part, on or after January 18, 2005 at the
following redemption prices (expressed as percentages of the principal amount thereof), if redeemed
during the twelve-month period commencing on January 18 of the years set forth below, plus, in each
case, accrued and unpaid interest, if any, to the date of redemption: Year
    
    Redemption Price2005
    
    
    103.75
    %2006
    
    
    102.50
    %2007
    
    
    101.25
    %2008 and thereafter
    
    
    100.00
    %
 36




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 7.25% Senior Exchangeable Notes due 2023 In July and August of 2003, AWA completed a private placement of approximately $86.8 million
issue price of 7.25% Senior Exchangeable Notes due 2023. The notes bear cash interest until July
30, 2008. Thereafter, the notes will cease bearing cash interest and begin accruing original issue
discount daily at a rate of 7.25% per year until maturity. Each note was issued at a price of
$343.61 and is exchangeable for Class B common stock of Holdings at an exchange ratio of 32.038
shares per $1,000 principal amount at maturity of the notes (subject to adjustment in certain
circumstances). This represents an equivalent conversion price of approximately $10.73 per share.
The aggregate amount due at maturity, including accrued original issue discount from July 31, 2008,
will be $252,695,000. The notes are unconditionally guaranteed on a senior unsecured basis by
Holdings. Holders may exchange their notes for the shares of Class B common stock of Holdings at any
time, if, as of the last day of the preceding fiscal quarter, the closing sale price of the Class B
common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the
last trading day of such preceding fiscal quarter is more than 110% of the accreted exchange price
per share of Class B common stock on the last day of such preceding fiscal quarter. If the
foregoing condition is satisfied, then the notes will be exchangeable at any time at the option of
the holder through maturity. The accreted exchange price per share as of any day will equal the
issue price of a note plus accrued original issue discount to that day divided by 32.038, subject
to any adjustments to the exchange rate through that day. On or before July 30, 2018, a holder also may exchange its notes for shares of the Class B
common stock at any time after a 10 consecutive trading-day period in which the average of the
trading prices for the notes for that 10 trading-day period was less than 103% of the average
exchange value for the notes during that period. Exchange value is equal to the product of the
closing sale price for the shares of Class B common stock on a given day multiplied by the then
current exchange rate, which is the number of shares of Class B common stock for which each note is
then exchangeable. In addition, the holders may exchange the notes if the notes have been called for redemption
or if certain specified corporate transactions have occurred. Holders of the notes may require AWA to repurchase the notes at a price equal to the original
issue price plus accrued cash interest and original issue discount, if any, on July 30, 2008, 2013
and 2018. The purchase price of such notes may be paid in cash or Class B common stock of
Holdings, subject to certain restrictions. In addition, each holder may require AWA to purchase
all or a portion of such holders notes upon the occurrence of certain change of control events
concerning AWA or Holdings. AWA may redeem the notes, in whole or in part, on or after July 30,
2008 at a price equal to the original issue price plus accrued cash interest and original issue
discount, if any. 37




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 Other Indebtedness and Obligations In addition to the above described indebtedness, we had $40.0 million of secured equipment
notes and $43.0 million of other unsecured indebtedness, including $29.3 million of industrial
revenue bonds. The following table sets forth our cash obligations as of September 30, 2004. Beyond2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2008
    
    
    Total(in thousands)Long-term debt:Equipment notes  non-EETC (1)
    
    $
    533
    
    
    $
    8,305
    
    
    $
    8,305
    
    
    $
    7,772
    
    
    $
    15,083
    
    
    $
    
    
    
    $
    39,998GECC Term loan (2)
    
    
    
    
    
    
    
    
    
    
    5,158
    
    
    
    5,158
    
    
    
    5,158
    
    
    
    95,090
    
    
    
    110,5647.5% convertible senior notes due
2009(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,240
    
    
    
    108,2407.25% senior exchangeable notes
due 2023 (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    252,695
    
    
    
    252,695Government guaranteed loan (5)
    
    
    
    
    
    
    85,800
    
    
    
    85,800
    
    
    
    85,800
    
    
    
    85,800
    
    
    
    
    
    
    
    343,200State loan (6)
    
    
    750
    
    
    
    250
    
    
    
    250
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    1,50010 3/4% senior unsecured notes due 2005
    
    
    
    
    
    
    39,548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,548Industrial development bonds (7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,300
    
    
    
    29,300AVSA promissory notes (8)
    
    
    5,250
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,2506,533
    
    
    
    140,903
    
    
    
    99,513
    
    
    
    98,980
    
    
    
    106,041
    
    
    
    485,325
    
    
    
    937,295Cash aircraft rental payments (9)
    
    
    51,217
    
    
    
    331,599
    
    
    
    310,448
    
    
    
    292,312
    
    
    
    243,645
    
    
    
    1,858,444
    
    
    
    3,087,665Lease payments on equipment and
facility operating leases (10)
    
    
    4,859
    
    
    
    20,023
    
    
    
    18,166
    
    
    
    16,083
    
    
    
    16,279
    
    
    
    64,609
    
    
    
    140,019Capital lease obligations
    
    
    110
    
    
    
    4,659
    
    
    
    4,988
    
    
    
    1,773
    
    
    
    
    
    
    
    
    
    
    
    11,530Special facility revenue bonds (11)
    
    
    681
    
    
    
    1,363
    
    
    
    1,363
    
    
    
    1,362
    
    
    
    1,362
    
    
    
    36,106
    
    
    
    42,237Aircraft purchase commitments (12)
    
    
    74,983
    
    
    
    274,203
    
    
    
    461,191
    
    
    
    13,636
    
    
    
    
    
    
    
    
    
    
    
    824,013Engine maintenance commitments (13)
    
    
    6,000
    
    
    
    24,000
    
    
    
    12,000
    
    
    
    6,000
    
    
    
    2,000
    
    
    
    
    
    
    
    50,000Total
    
    $
    144,383
    
    
    $
    796,750
    
    
    $
    907,669
    
    
    $
    430,146
    
    
    $
    369,327
    
    
    $
    2,444,484
    
    
    $
    5,092,759
   (1)
    
    Includes approximately $40.0 million of equipment notes with variable interest rates
of 2.88% to 2.40%, averaging 2.80%, installments due 2004 through 2008.(2)
    
    The amount consists of two secured loan facilities with an interest rate of 5.81% at
September 30, 2004. A $75.6 million term loan facility secured primarily by spare parts,
rotables and appliances payable in full at maturity on September 10, 2010. A $35.0 million
term loan facility secured primarily by aircraft engines and parts installed on such engines
payable in quarterly installments of $1.3 million beginning March 10, 2006 through June 10,
2010 with the remaining loan amount of $11.8 million payable at maturity on September 10,
2010.(3)
    
    Includes $90.7 million principal amount of 7.5% convertible senior notes, due 2009,
and $17.5 million of interest paid in kind through September 30, 2004. For financial
reporting purposes, we recorded the convertible senior notes at their fair market value on the
date of issuance. As of September 30, 2004, the balance of the convertible senior notes in
the accompanying condensed consolidated balance sheet is approximately $67.6 million.(4)
    
    Includes $252.7 million principal amount of 7.25% senior exchangeable notes due July
2023 with cash interest payable through July 2008 at a rate of 2.49% on the principal amount
at maturity. Thereafter, the notes will cease bearing cash interest and begin accruing
original issue discount at a rate of 7.25% until maturity. The aggregate amount due at
maturity, including accrued original issue discount from July 31, 2008, will be $252.7
million.(5)
    
    Government guaranteed loan includes $343.2 million with a variable interest rate of
2.38% at September 30, 2004 and ratable principal payments due 2004 through 2008. Guarantee
fees of approximately 8.0% of the outstanding guaranteed principal balance in 2004 through
2008 are payable to the U.S. Treasury Department and other loan participants.(6)
    
    Includes Arizona State loan of $1.5 million due December 2007 with a variable
interest rate of 5.38% at September 30, 2004.(7)
    
    Includes $29.3 million of 6.3% industrial development bonds due April 2023.(8)
    
    Includes AVSA promissory notes of $12.2 million due through 2005 with a variable
interest rate of 2.97% at September 30, 2004. 38




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004  (9)
    
    Includes non-cancelable operating leases for 136 aircraft with remaining terms
ranging from five months to approximately 20
years. Management estimates the debt equivalent value of these operating leases approximates
$1.9 billion using an interest rate of 10%.(10)
    
    Includes leases for terminal space, ground facilities, the flight training center
and computer and other equipment under non-cancelable operating leases.(11)
    
    Includes Series 1999 Terminal 4 Improvements Bonds, due 2019.(12)
    
    Includes commitments to purchase a total of 21 Airbus aircraft and seven spare
engines for delivery in 2004 through 2007.(13)
    
    Includes minimum commitments under AWAs rate per engine hour agreement with
General Electric Engine Services for overhaul maintenance services on V2500-A1 and CFM56-3B
engines through April 2008. Minimum monthly commitment amounts: for the period through and
including October 2004 through and including April 2006  $2.0 million, for the period May
2006 through and including April 2008  $500,000. We expect to fund these cash obligations from funds provided by operations and future
financings, if necessary. The cash available to us from these sources, however, may not be
sufficient to cover these cash obligations because economic factors outside our control may reduce
the amount of cash generated by operations or increase our costs. For instance, a further economic
downturn or other events, including future hostilities and terrorist attacks or infectious disease
outbreaks could reduce the demand for air travel, which would reduce the amount of cash generated
by operations. An increase in our costs, either due to an increase in borrowing costs caused by a
reduction in our credit rating or a general increase in interest rates or due to an increase in the
cost of fuel, maintenance, aircraft and aircraft engines and parts, could decrease the amount of
cash available to cover the cash obligations. In addition, we may be required to prepay portions
of the government guaranteed loan if our employee compensation costs exceed a certain threshold and
we may be required to prepay portions of the term loan to the extent the value of the collateral
securing the term loan decreases. In any of these cases, our liquidity may be adversely affected
and we may not have sufficient cash to prepay the government loan and meet our other obligations.
Moreover, certain of our long-term debt agreements contain a $100 million minimum cash balance
requirement. As a result, we cannot use all of our available cash to fund operations, capital
expenditures and cash obligations without violating this requirement. Although there can be no assurances, we believe that cash flow from operating activities
coupled with existing cash balances, will be adequate to fund our operating and capital needs as
well as enable us to maintain compliance with our various debt agreements through at least December
31, 2005. Financial Covenants and Credit Rating In addition to the minimum cash balance requirements, our long-term debt agreements contain
various negative covenants that restrict our actions, including our ability to pay dividends,
together with any other restricted payments. Moreover, under the terms of the government
guaranteed loan, we are prohibited from paying cash dividends prior to repayment of the loan in
full. Finally, our long-term debt agreements contain cross-default provisions, which may be
triggered by defaults by us under other agreements relating to indebtedness. See Risk Factors
Relating to America West and Industry Related Risks  Our high level of indebtedness and fixed
costs limits our ability to fund general corporate requirements and obtain additional financing,
limits our flexibility in responding to competitive developments and increases our vulnerability to
adverse economic and industry conditions.As of September 30, 2004, Holdings and AWA were in
compliance with the covenants in their long-term debt agreements. In March 2004, Moodys raised its credit ratings on AWA to B3 from Caa1 for its senior implied
rating and to Caa2 from Caa3 for its senior unsecured debt rating. Standard & Poors currently
rates AWAs and Holdings corporate credit ratings at B- and AWAs senior unsecured rating at CCC
and Fitch Ratings rates AWAs long-term and senior unsecured debt rating at CCC. Our relatively
low credit ratings may impair our ability to incur additional indebtedness. The rating agencies
base their ratings on our financial performance and operations, our cash flow and liquidity, the
level of our debt and industry conditions in general. Any downgrade of our credit ratings may
indicate a decline in our business and in our ability to satisfy our obligations under our
indebtedness. See Risk Factors Relating to America West and Industry Related Risks  Because of
our relatively low credit ratings, our borrowing costs may be high and our ability to incur
additional debt may be impaired. 39




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 Other Information Labor Relations On September 10, 2004, the Companys dispatchers, represented by the Transport Workers Union
(TWU), voted to ratify a second contract ending April 1, 2008. Negotiations with the International Brotherhood of Teamsters  Airline Division (IBT) on a
second contract covering the Companys mechanics and related employees commenced on October 9, 2003
and are ongoing. Negotiations with the Association of Flight Attendants  Communications Workers of America
(AFA) on a second contract covering the Companys flight attendants commenced on February 4, 2004
and are ongoing. On August 18, 2004, the National Mediation Board (NMB) certified the IBT as the collective
bargaining representative for the Companys passenger service employees. Related Party Transactions As part of our reorganization in 1994, Continental Airlines and AWA entered into an alliance
agreement which included code sharing arrangements, reciprocal frequent flyer programs and ground
handling operations. Continental terminated the code sharing and frequent flyer agreements between
the two airlines, effective April 26, 2002. Until March 12, 2004, two managing partners of Texas
Pacific Group, which, through TPG Advisors, Inc., effectively controls the voting power of
Holdings, were members of Continentals board of directors. In the third quarter of 2004, AWA paid
Continental approximately $3.8 million and received approximately $1.1 million from Continental
pursuant to these agreements. In the third quarter of 2003, the amount paid to and received from
Continental pursuant to these agreements was $4.2 million and $1.1 million, respectively. Application of Critical Accounting Policies The preparation of our consolidated financial statements in accordance with generally accepted
accounting principles requires that we make certain estimates and assumptions that affect the
reported amount of assets and liabilities, revenues and expenses, and the disclosure of contingent
assets and liabilities at the date of our financial statements. We believe our estimates and
assumptions are reasonable; however, actual results could differ from those estimates. We have
identified the following critical accounting policies that require the use of significant judgments
and estimates relating to matters that are inherently uncertain and may result in materially
different results under different assumptions and conditions.  
    Passenger Revenue  Passenger revenue is recognized when transportation is
provided. Ticket sales for transportation that has not yet been provided are recorded as
air traffic liability. Passenger traffic commissions and related fees are expensed when the
related revenue is recognized. Passenger traffic commissions and related fees not yet
recognized are included as a prepaid expense. Due to complex pricing structures, refund and
exchange policies, and interline agreements with other airlines, certain amounts are
recognized in revenue using estimates regarding both the timing of the revenue recognition
and the amount of revenue to be recognized. These estimates are generally based on the
statistical analysis of our historical data. Any adjustments resulting from periodic
evaluations of the estimated air traffic liability are included in results of operations
during the period in which the evaluations are completed.
    Accounting For Long-Lived Assets  Owned property and equipment are recorded at
cost and depreciated to residual values over the estimated useful lives using the
straight-line method. Leasehold improvements relating to flight equipment and other
property on operating leases are amortized over the life of the lease, or the life of the
asset, whichever is shorter. Interest on advance payments for aircraft acquisitions and on
expenditures for aircraft improvements is capitalized and added to the cost of the asset.
The estimated useful lives of our owned aircraft, jet engines, flight equipment and rotable
parts range from five to 25 years. The estimated useful lives of our technical support
facility and flight training center in Phoenix, Arizona are 22 years and 30 years,
respectively. The estimated useful lives of our ground property and equipment range from
three to 12 years. We test for impairment losses on long-lived assets used in operations
when events and 40




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004  circumstances indicate that the assets might be impaired as defined by SFAS
No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets.An impairment loss is recognized if the
carrying amount of the asset is not recoverable from its undiscounted cash flows and is
measured as the difference between the carrying amount and fair value of the asset.
    Frequent Flyer Accounting  We maintain a frequent travel award program known as
FlightFund that provides a variety of awards to program members based on accumulated
mileage. The estimated cost of providing the free travel is recognized as a liability and
charged to operations as program members accumulate mileage. Travel awards are valued at
the incremental cost of carrying one passenger, based on expected redemptions. Incremental
costs are based on expectations of expenses to be incurred on a per passenger basis and
include fuel, liability insurance, food, beverages, supplies and ticketing costs. We also
sell mileage credits to companies participating in our FlightFund program, such as hotels,
car rental agencies and credit card companies. Transportation-related revenue from the sale
of mileage credits is deferred and recognized when transportation is provided. A change to
the estimated cost per mile, minimum award level, percentage of revenue to be deferred or
deferred recognition period could have a significant impact on our revenues or mileage
liability accrual in the year of the change as well as future years.
    Long-Term Maintenance Reserve  We record an accrual for the estimated cost of
scheduled airframe and engine overhauls required to be performed on leased aircraft upon
their return to the lessors. These estimates are based on historical costs and our
assumptions regarding the renewal of aircraft leases. A significant change to AWAs fleet
plan could have a material impact on our reserve requirements.
    Deferred Tax Asset Valuation Allowance  The Company initially recorded a full
valuation allowance relating to its net deferred tax assets at December 31, 2001 and to tax
benefits generated in 2002. In recording that valuation allowance, we considered whether it
was more likely than not that all or a portion of the deferred tax assets will not be
realized, in accordance with SFAS No. 109, Accounting for Income Taxes.The Company was
in a cumulative loss position for the three years ended December 31, 2002, which weighed
heavily in the overall determination that a valuation allowance was needed. As of September
30, 2004, the Company had recorded a valuation allowance of $61.5 million against its net
deferred tax assets. The Company expects to continue to record a full valuation allowance
on any future tax benefits until we have achieved several quarters of consecutive profitable
results coupled with an expectation of continued profitability. Forward-Looking Information This
quarterly report on Form 10-Q/A contains various forward-looking statements within the
meaning of Section 21E of the Exchange Act. These statements are based on managements beliefs as
well as assumptions made by and information currently available to management. When used in this
document, the words anticipate, estimate, expect, project 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, expected or projected. Among the key factors that may have a direct
bearing on AWAs or Holdings results are:  
    economic conditions;
    the impact of global instability, including the continuing threat of terrorism,
the continued military presence in Iraq and Afghanistan and the current instability in
Nigeria, Russia, Venezuela and other oil producing countries or regions, and the potential
impact of any future hostilities, terrorist attacks, infectious disease outbreaks, and
government responses thereto, or other global events;
    limitations on the Companys or AWAs ability to obtain additional financing
due to high levels of debt and the financial and other covenants in its debt instruments;
    changes in federal and state laws and regulations; 41




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004  
    changes in prevailing interest rates and the availability and terms of financing to fund our business;
    the ability to attract and retain qualified personnel;
    the cyclical nature of the airline industry;
    competitive practices in the airline industry;
    the impact of changes in fuel prices; and
    relations with unionized employees generally and the impact and outcome of labor negotiations. For additional discussion of such risks see Business  Risk Factors Relating to America West
and Industry Related Risksdiscussed below. Any forward-looking statements speak only as of the
date of this report. Risk Factors Relating to America West and Industry Related Risks We caution the reader that these risk factors may not be exhaustive. We operate in a
continually changing business environment and new risk factors emerge from time to time.
Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new
risk factors on our business or the extent to which any factor or combination of factors may cause
actual results to differ materially from those projected in any forward-looking statement. In
light of these risks, uncertainties and assumptions, the forward-looking events described in this
quarterly report on Form 10-Q/A might not occur. In the recent past, we sustained significant operating losses and we may sustain significant
losses in the future. For the years ended December 31, 2002 and 2001, we incurred operating losses of $160.1 million
and $417.9 million, respectively. Although we reported net income of $57.4 million for the year
ended December 31, 2003, there can be no assurance that we will be able to maintain or grow this
level of net income. Since the terrorist attacks of September 11, 2001, we have experienced an
increase in costs related to enhanced security measures, aviation insurance and airport rents and
landing fees. In addition, we recently have experienced a substantial increase in the cost of
fuel. We expect the threat of further terrorist attacks and continued instability in the Middle
East, Nigeria, Russia, Venezuela and in other oil producing countries or regions, including Russia
and Nigeria, to continue to negatively impact our revenues and costs in the near-term. We may not
be able to effectively counteract increasing costs through our cost reduction initiatives, customer
service initiatives and revised pricing structures. Moreover, our liquidity and borrowing options
are limited and we may not be able to survive a prolonged economic downturn, decreases in demand
for air travel or further increases in fuel costs. The inability to sustain profitability may
hinder our ability to satisfy our obligations as they become due, obtain future equity or debt
financing or to do so on economical terms or to sustain or expand our business. The terrorist attacks of September 11, 2001 and government responses have had, and continue to
have, a material adverse effect on our financial condition, operations and prospects. The terrorist attacks of September 11, 2001 have had, and continue to have, a wide-ranging
impact on our financial condition, operations and prospects. The immediate impact of the terrorist
attacks included a severe strain on our liquidity as the government temporarily suspended all
flights, passenger demand dropped precipitously after the attacks and our credit ratings were
downgraded by both Moodys and Standard & Poors. Since then, although passenger demand has
recovered, we continue to experience reduced demand compared to prior years, especially in
discretionary business travel, and our costs relating to enhanced security measures, aviation
insurance, airport rents and landing fees have increased, in some cases significantly. The
continued impact of the terrorist attacks on our operations, and the sufficiency of our financial
resources to absorb this impact, will depend on certain factors, including, among others, the
following: 42




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004  
    our ability to maintain our low cost structure and adequate cash balances;
    general economic conditions and the extent to which the current soft economic conditions improve;
    competition in the airline industry;
    our ability to manage fuel and labor costs; and
    the other risks discussed in this report. Moreover, continued global instability (including fuel price fluctuations), soft economic
conditions, future terrorist attacks and infectious disease outbreaks could further reduce demand
for air travel, increase our fuel, insurance and other costs and generally impact our liquidity or
financial condition. Our ability to obtain additional financing to absorb the impact of these type
of events is limited by the constraints imposed by our existing indebtedness, reductions in the
value of our aircraft (as a result of the terrorist attacks) and our relatively low credit ratings. Increased insurance costs due to the terrorist attacks of September 11, 2001 may adversely
impact our operations and financial results. The terrorist attacks of September 11, 2001 resulted in staggering losses to the insurance
industry. These losses led to a significant increase in our insurance premiums and could lead to
future increases in our insurance premiums. These increases have and could continue to negatively
impact our financial results. In addition, the resulting general instability in the insurance
industry could adversely affect some of our existing insurance carriers or our ability to obtain
future insurance coverage. To the extent that our existing insurance carriers are unable or
unwilling to provide us with insurance coverage, our insurance costs could further increase. Moreover, since September 11, 2001, AWA and other airlines have been unable to obtain third
party war risk (terrorism) insurance at reasonable rates from the commercial insurance market and
have been obtaining this insurance through a special program administered by the Federal Aviation
Administration, or FAA. This program has been extended to a new termination date of March 30,
2008. If the Federal insurance program terminates, we would likely face a material increase in the
cost of terrorism insurance, but because of competitive pressures in our industry, our ability to
pass this additional cost to passengers would be limited. Our high level of indebtedness and fixed costs limits our ability to fund general corporate
requirements and obtain additional financing, limits our flexibility in responding to competitive
developments and increases our vulnerability to adverse economic and industry conditions. We have a significant amount of indebtedness. In addition, we have incurred significant
capitalized and operating lease obligations in connection with the financing of aircraft and the
lease of airport and other facilities. As of September 30, 2004, we had approximately $748.1
million of indebtedness outstanding, of which $150.6 million was secured by certain aircraft and
substantially all of our spare engines and rotable aircraft parts inventory. In addition, we had
$11.5 million of capital lease obligations and $3.2 billion of operating lease obligations through
the lease expiration dates incurred primarily in connection with off-balance sheet aircraft
financings. See Managements Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources  Off-Balance Sheet Arrangements.We also have
guaranteed costs associated with our regional alliance with Mesa Airlines. Due to our high fixed
costs, including aircraft lease obligations and debt service, a decrease in revenues results in a
disproportionately greater percentage decrease in earnings. In addition, as a result of our
significant indebtedness and fixed costs: 43




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004  
    our ability to satisfy our debt and lease obligations may be impaired;
    we have only a limited ability to obtain additional financing, if needed. Our
existing indebtedness is secured by a substantial portion of our assets, leaving us with
limited assets to use to obtain additional financing. In addition, the terms of the
government guaranteed loan restricts our and AWAs ability to incur additional indebtedness
or issue equity unless we use the proceeds of those transactions to prepay or redeem
certain of our existing indebtedness;
    our ability to fund general corporate requirements, including capital
expenditures, may be impaired. We have substantial obligations to pay principal and
interest on our indebtedness and other recurring fixed costs. Further, we may be required
to prepay portions of the government guaranteed loan if our employee compensation costs
exceed a certain threshold. Accordingly, we may have to use our working capital to fund
such payments and costs instead of funding general corporate requirements. In addition,
because the terms of certain of AWAs indebtedness require it to maintain a minimum cash
balance of $100 million, we cannot use all of our available cash to fund operations,
capital expenditures and cash obligations without violating this minimum cash balance
requirement; and
    our ability to respond to competitive developments and adverse economic
conditions may be limited. Without the ability to obtain additional financing and with
substantial fixed costs, we may not be able to fund the capital expenditures, including the
purchase of new aircraft, required to keep us competitive or to withstand prolonged adverse
economic conditions. Moreover, our flexibility is limited because many of the agreements governing our
indebtedness, including the indenture governing the 10 3/4% senior notes due 2005 and the agreements
governing the government guaranteed loan, contain negative covenants that restrict our ability to
take certain actions. As a result of these restrictive covenants and the minimum cash balance
requirement discussed above, we may be limited in how we conduct our business and may be unable to
raise additional capital through debt or equity financings to operate during general economic or
business downturns, to compete effectively or to take advantage of new business opportunities.
This may affect our ability to generate revenues and make profits. Without sufficient revenues, we
may not be able to pay interest and principal on outstanding indebtedness. A breach of these
covenants or a failure to make any required payments under our indebtedness or certain of our
aircraft leases could result in the acceleration of a substantial portion of our indebtedness. In
the event of a breach of these covenants, a failure to make required payments or an acceleration of
our indebtedness, it is likely that credit card companies would begin to withhold proceeds due to
us from the sale of our tickets and our lessors may attempt to exercise remedies under their
respective leases. In such a situation, it is unlikely we would be able to fulfill our obligations
under or otherwise repay the accelerated indebtedness or make required lease payments. Fluctuations in fuel costs could adversely affect our operating expenses and results. The price and supply of jet fuel are unpredictable and fluctuate based on events outside our
control, including geopolitical developments, regional production patterns and environmental
concerns. Since fuel is the principal raw material consumed by our business, accounting for 22.7%
of our total operating expenses in the first nine months of 2004 and 16.8% of our total operating
expenses for the same period of 2003, price escalations or reductions in the supply of jet fuel
will increase our operating expenses and cause our operating results and net income to decline.
For example, based on our current level of fuel consumption, we estimate that a one-cent per gallon
increase in jet fuel prices will cause our annual operating expense to increase by $4.4 million. We have implemented a fuel-hedging program to manage the risk and effect of fluctuating jet
fuel prices on our business. Our hedging program is intended to offset increases in jet fuel costs
by using fuel hedging instruments keyed to the future price of heating oil, which is highly
correlated to the price of jet fuel delivered on the East Coast of the United States. Our hedging
program does not fully protect us against increasing jet fuel costs because our hedging program
does not cover all of our projected fuel volumes for 2004. Hedging transactions are in place with
respect to
approximately 65% and 26% of remaining projected 2004 and 2005 fuel requirements,
respectively. Furthermore, our ability to effectively hedge fuel prices is limited because we
purchase a substantially larger portion of our jet fuel requirements on the West Coast of the
United States compared to 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, 44




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 more difficult to hedge. The effectiveness of our fuel-hedging program may also be
negatively impacted by continued instability in the Middle East, Nigeria, Russia, Venezuela and
other oil producing countries or regions and terrorist activity. Because of our relatively low credit ratings, our borrowing costs may be high and our ability
to incur additional debt may be impaired. Our credit ratings are relatively low, with Moodys assessment of AWAs senior implied rating
and senior unsecured debt rating at B3 and Caa2, respectively, Standard & Poors assessment of
AWAs and Holdings corporate credit ratings at B- and AWAs senior unsecured rating at CCC, and
Fitch Ratings assessment of AWAs long-term and senior unsecured debt rating at CCC. Low credit
ratings could cause our future borrowing costs to increase, which would increase our interest
expense and could affect our net income. In addition, our credit ratings could adversely affect
our ability to obtain additional financing. The rating agencies base their ratings on our
financial performance and operations, our cash flow and liquidity, the level of our indebtedness
and industry conditions in general. If our financial performance or industry conditions do not
improve, we may face future downgrades, which could further negatively impact our borrowing costs
and the prices of our equity or debt securities. In addition, any downgrade of our credit ratings
may indicate a decline in our business and in our ability to satisfy our obligations under our
indebtedness. Negotiations with labor unions could divert management attention and disrupt operations and
new collective bargaining agreements or amendments to existing collective bargaining agreements
could increase our labor costs and operating expenses. Some of our employees are represented by unions and other groups of our employees may seek
union representation in the future. Negotiations with the IBT for a second collective bargaining
agreement covering the Airlines mechanics and related employees commenced on October 9, 2003 and
are ongoing. Additionally, negotiations with the AFA on a second contract covering the Companys
flight attendants commenced on February 4, 2004 and are ongoing. On August 18, 2004, the National
Mediation Board certified the IBT as the collective bargaining representative for the Companys
passenger service employees. We cannot predict the outcome of the negotiations with the IBT or AFA or any future
negotiations relating to union representation or collective bargaining agreements. Agreements
reached in collective bargaining may increase operating expenses and lower operating results and
net income. This is particularly significant because our current employee costs contribute
substantially to the low cost structure that we believe is one of our competitive strengths and
because we are required to repay a portion of the government guaranteed loan if our labor costs
exceed a certain threshold. In addition, negotiations with unions could divert management
attention and disrupt operations, which may result in increased operating expenses and lower net
income. If we are unable to negotiate acceptable collective bargaining agreements, we might have
to address the threat of, or wait through cooling off periods, which could be followed by
union-initiated work actions, including strikes. Depending on the nature of the threat or the type
and duration of any work action, these actions could disrupt our operations and, as a result, have
a significant adverse affect on our operating results. Fluctuations in interest rates could adversely affect our liquidity, operating expenses and
results. Our indebtedness under the government guaranteed loan and the GECC term loans bears interest
at fluctuating interest rates based on the London interbank offered rate for deposits of U.S.
dollars, or LIBOR. LIBOR tends to fluctuate based on general economic conditions, general interest
rates, including the prime rate, and the supply of and demand for credit in the London interbank
market. We have not hedged our interest rate exposure and, accordingly, our interest expense for
any particular period may fluctuate based on LIBOR. To the extent LIBOR increases, our interest
expense will increase, in which event, we may have difficulties making interest payments and
funding our other fixed costs and our available cash flow for general corporate requirements may be
adversely affected. 45




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 Our operating costs could increase as a result of past, current or new regulations that impose
additional requirements and restrictions on airline operations. The airline industry is heavily regulated. Both federal and state governments
from time to time propose new laws and regulations that impose additional requirements and
restrictions on airline operations. Implementing these measures, such as aviation ticket taxes and
passenger safety measures, has increased operating costs for us and the airline industry as a
whole. In addition, new security measures imposed by the Aviation and Transportation Security Act,
or ATSA, or otherwise by Congress, the Department of Homeland Security or the FAA as a result of
concern over continuing terrorist threats are expected to continue to increase costs for us and the
airline industry as a whole. Furthermore, 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. For example, the FAA from time to time
may require us to retrofit our aircraft to meet enhanced safety standards. Depending on the
implementation of these laws, regulations and other measures, our operating costs could increase
significantly. We cannot predict which laws, regulations and other measures will be adopted or
what other action regulators might take. Accordingly, we cannot guarantee that future legislative
and regulatory acts will not have a material impact on our operating results. The airline industry and the markets we serve are highly competitive and we may be unable to
compete effectively against carriers with substantially greater resources or lower cost structures. The airline industry and most of the markets we serve are highly competitive. We compete with
other airlines on the basis of pricing, scheduling (frequency and flight times), on-time
performance, type of equipment, cabin configuration, amenities provided to passengers, frequent
flyer programs, the automation of travel agent reservation systems, on-board products and other
services. Certain airlines have in the past engaged in retaliatory activities, including steep
pricing discounts in certain markets and termination of alliance agreements, in response to changes
in our pricing structure. In addition, the elimination of federal regulations that are intended to
diminish the use of preferential scheduling displays and other computer reservation systems (CRS)
practices may place us at a competitive disadvantage to airlines controlling the CRS systems. Our
principal competitor is Southwest Airlines, which has a lower operating cost structure than we do.
We also compete against other existing carriers, many of which offer more extensive routes,
frequencies and customer loyalty, marketing and advertising programs than we do and with new
carriers which typically have low operating cost structures. We may be unable to compete
effectively against carriers with substantially greater resources or lower cost structures. The
entry of additional new carriers in our markets, the consolidation of existing carriers or
increased competition from existing carriers, could adversely affect our operating results. The terrorist attacks of September 11, 2001, the continued military presence in Iraq and
Afghanistan, increased competition from low cost carriers and soft economic conditions have led to
the airline industrys significant losses since 2001. Largely as a result of these losses, both
U.S. Airways and United Airlines filed for bankruptcy protection. Because bankruptcy protection
may allow for greater flexibility in reducing costs by voiding contracts and renegotiating existing
business obligations, current and future airline bankruptcies could have a substantial impact on
industry competition. Continued weakness in the airline industry may also result in additional
industry consolidation, greater reliance on industry alliances and increased price competition
among the existing airlines, each of which could dramatically alter competitive environments in the
markets we serve. Our business is sensitive to general economic conditions, unforeseen events and seasonal
fluctuations. As a result, our prior performance is not necessarily indicative of our future
results. The air travel business historically fluctuates on a seasonal basis and in response to general
economic conditions. Due to the greater demand for air and leisure travel during the summer
months, revenues in the airline industry in the second and third quarters of the year tend to be
greater than revenues in the first and fourth quarters of the year. In addition, the airline
industry is highly susceptible to unforeseen events that result in declines in revenues or
increased costs, such as political instability, regional hostilities, terrorist attacks, recession,
fuel price escalation, inflation,
infectious disease outbreaks, adverse weather conditions, consumer preferences, labor
instability or regulatory oversight. Also, our results of operations for interim periods are not
necessarily indicative of those for an entire year 46




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 and our prior results are not necessarily
indicative of our future results. We depend on the expertise of our management team. If key individuals leave unexpectedly, our
business and operations could suffer. Many of our executive officers are key to the management of our business and operations. Our
future success depends on our ability to retain these officers and other capable managers.
Although we believe we could replace key personnel given adequate prior notice, the unexpected
departure of key executive officers could cause substantial disruption to our business and
operations. In addition, we may not be able to retain and recruit talented personnel without
incurring substantial costs. Moreover, we must repay a portion of the government guaranteed loan
if our labor costs exceed a certain threshold. As a result, our ability to spend additional
amounts to retain and recruit talented personnel is limited. The stockholders who effectively control the voting power of Holdings could take actions that
would favor their own personal interests to the detriment of our interests. Currently, two stockholders collectively control more than 50% of the total voting power of
Holdings. These stockholders, TPG Partners, L.P. and TPG Parallel I, L.P (collectively, the TPG
Stockholders) are controlled by the same company, TPG Advisors, Inc. Since TPG Advisors, Inc. is
an investment firm, its strategic objectives may be different than both the short-term or long-term
objectives of our board of directors and management. We cannot guarantee that the TPG Stockholders
will not try to influence Holdings business in a way that would favor their own personal interests
to the detriment of our interests and those of our other stockholders. We are at risk of losses and adverse publicity stemming from any accident involving any of our
aircraft. If one of our aircraft were to crash or be involved in an accident, we could be exposed to
significant tort liability. There can be no assurance that the insurance we carry to cover damages
arising from any future accidents will be adequate. In the event that our insurance is not
adequate, we may be forced to bear substantial losses from an accident. Claims resulting from an
accident in excess of our insurance coverage would harm our business and results of operations.
Accidents could also result in unforeseen mechanical and maintenance costs. In addition, any
accident involving an aircraft that we operate could create a public perception that our aircraft
are not safe or reliable, which could harm our reputation, result in air travelers being reluctant
to fly on our aircraft and harm our business. Our operations are often affected by factors beyond our control, including traffic congestion
at airports, weather conditions and increased security measures, any of which could harm our
financial condition and results of operations. Like other airlines, our operations are subject to delays caused by factors beyond our
control, including air traffic congestion at airports, adverse weather conditions and increased
security measures, such as those required to be implemented under the ATSA. During periods of fog,
snow, rain, storms or other adverse weather conditions, flights may be cancelled or significantly
delayed. Cancellations and delays frustrate passengers, reduce aircraft utilization and increase
costs, all of which in turn affect profitability. As a result, cancellations or delays could harm
our financial condition and results of operations. We rely heavily on automated systems to operate our business and any failure of these systems
could harm our business. We depend on automated systems to operate our business, including our computerized airline
reservation system, our telecommunication systems and our website. For the first nine months of
2004, approximately 96% of our tickets were issued electronically. Our website and reservation
system must be able to accommodate a high volume of traffic and deliver important flight
information. Substantial or repeated website, reservations system or telecommunication systems
failures could reduce the attractiveness of our services and could cause our customers to purchase
tickets from
another airline. Any disruption in these systems could result in the loss of important data,
increase our expenses and generally harm our business. 47




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 Shares of our Class B common stock issuable upon exercise or conversion of outstanding
securities could adversely affect our stock price and dilute the ownership interests of existing
stockholders. Sales and potential sales of substantial amounts of our Class B common stock or securities
exercisable for or into our Class B common stock in the public market, or the perception that these
sales could occur, could adversely affect the market price of our Class B common stock. A
substantial number of additional shares of our Class B common stock are issuable upon the
conversion or exercise of outstanding securities. As of October 27, 2004, the outstanding shares
of our Class B common stock were subject to dilution by:  
    19,692,000 shares of Class B common stock that are issuable upon the exercise,
at a price of $3.00 per share, of certain warrants issued in connection with the government
guaranteed loan, including 18,754,000 shares of Class B common stock issuable upon exercise
of a warrant issued to the ATSB; and
    8,662,293 shares of our Class B common stock that are issuable upon the
exercise of outstanding options. In addition, 859,117 shares of Class B common stock are issuable upon conversion of the
outstanding shares of Holdings Class A common stock held by the TPG Stockholders (but subject to
certain contractual restrictions on transfer), up to 8,095,842 shares of Holdings Class B common
stock will be issuable upon the exchange of AWAs 7.25% senior exchangeable notes due 2023 (which
exchange may not occur until the trading price of Holdings Class B common stock reaches certain
thresholds, or other triggering events occur) and up to approximately 9,400,000 shares of Holdings
Class B common stock will be issuable after January 18, 2005 upon conversion of Holdings 7.5%
convertible senior notes due 2009. Holdings has registered either the issuance or resale of all of
these shares, meaning that upon exercise, exchange or conversion, as applicable, such shares could
be sold in the public market at any time. The conversion or exercise of some or all of these notes, warrants and options will dilute the
ownership interests of existing stockholders and any sales in the public market of our Class B
common stock issuable upon such conversion or exercise could adversely affect prevailing market
prices of our Class B common stock. In addition, the existence of the notes, warrants and options
may encourage short selling by market participants because conversion or exercise of the notes or
warrants could depress the price of our Class B common stock. Provisions in our charter documents might deter acquisition bids for us. Holdings Certificate of Incorporation and Restated Bylaws contain provisions that, among
other things:  
    authorize Holdings board of directors to issue preferred stock ranking senior
to our Class B common stock without any action on the part of the stockholders;
    establish advance notice procedures for stockholder proposals, including
nominations of directors, to be considered at stockholders meetings;
    authorize Holdings board of directors to fill vacancies on the board resulting
from an increase in the authorized number of directors or any other cause; and
    restrict the ability of stockholders to call special meetings of stockholders. These provisions might make it more difficult for a third party to acquire us, even if doing
so would benefit the stockholders. 48




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 Our stock price may continue to be volatile and could decline substantially. The stock market has, from time to time, experienced extreme price and volume fluctuations.
Many factors may cause the market price for the Class B common stock to decline including, among
others, the following:  
    our operating results failing to meet the expectations of securities analysts or investors in any quarter;
    downward revisions in securities analysts estimates;
    material announcements by us or our competitors;
    public sales of a substantial number of shares of our Class B common stock;
    governmental regulatory action; and
    adverse changes in general market conditions or economic trends. 
 ITEM 4. CONTROLS AND PROCEDURES. The following has been amended to reflect the restatement of our financial statements for
current and prior periods as discussed further in the Explanatory Note, Note 2, Restatement of
Previously Reported Amountsof Holdings Notes to Condensed Consolidated Financial Statements
appearing in Item 1A and Note 2, Restatement of Previously Reported Amountsof AWAs Notes to
Condensed Financial Statements appearing in Item 1B. (a) Evaluation of disclosure controls and procedures. In connection with the preparation of the previously filed Quarterly Report on Form 10-Q for
the three and nine months ended September 30, 2004, an evaluation was performed under the
supervision and with the participation of Holdings and AWAs management, including the Chief
Executive Officer (the CEO) and Chief Financial Officer (the CFO), of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in the rules promulgated
under the Exchange Act) as of September 30, 2004. Based on that evaluation at that time, our
management, including the CEO and CFO, concluded that our disclosure controls and procedures were
effective as of September 30, 2004. However, in connection with the preparation of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2004, our management, in consultation with the Audit Committee of Holdings
Board of Directors, identified a material weakness in our disclosure controls and procedures
associated with the accounting for AWAs fuel hedging program that resulted in a need to restate
our financial statements for interim and prior periods, as described below. In February 2005, management undertook a review of AWAs accounting for its fuel hedging
transactions. As a result of this review, management concluded that AWAs fuel hedging
transactions did not qualify for hedge accounting under U.S. generally accepted accounting
principles and that the Companys financial statements for prior periods required restatement to
reflect the fair value of fuel hedging contracts in the balance sheets and statements of
stockholders equity and comprehensive income of Holdings and AWA. The Company concluded that these
accounting errors were the result of deficiencies in its internal control over financial reporting,
from the lack of
effective reviews of hedge transaction documentation and of quarterly mark-to-market
accounting entries on open fuel hedging contracts by personnel at an appropriate level. In light of the material weakness described above, our management, including the CEO and CFO,
now believe that our disclosure controls and procedures were not effective as of September 30, 2004
since they resulted in a need to restate our financial statements, as described above. 49




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 (b) Changes in internal control over financial reporting. There were no significant changes in our internal control over financial reporting during the
three month period ended September 30, 2004 that materially affected, or were reasonably likely to
materially affect, our internal control over financial reporting. However, prior to the filing of
this report, we have implemented changes to our internal controls to correct the material weakness
identified, as described above. Specifically, we have corrected this material weakness by
implementing a review process that verifies the quarterly mark-to-market adjustment on open fuel
hedging positions. In addition, the Company will utilize the mark-to-market method of accounting
for its fuel hedging instruments going forward until such time it is able to implement processes
and controls necessary to ensure that appropriate hedge documentation is obtained at hedge
inception. At that time, the Company will evaluate whether it will re-apply hedge accounting. (c) Limitation on the effectiveness of controls. We believe that a controls system, no matter how well designed and operated, cannot provide
absolute assurance that the objectives of the controls system are met and no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud, if any, within a
company have been detected. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving their objectives, and the CEO and CFO now believe that our
disclosure controls and procedures were not effective at the reasonable assurance level as of
September 30, 2004 since they resulted in a need to restate our financial statements for prior
periods, as described above. However, with the changes in our internal controls implemented prior
to the filing of this report, the CEO and CFO now believe that these controls and procedures are
effective at the reasonable assurance level. 50




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 
 PART II  OTHER INFORMATION 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The following table sets forth all purchases made by us or any affiliated purchaser as
defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, as amended (the Exchange
Act), of Holdings Class B common stock during each month within the third quarter of 2004. No
purchases were made pursuant to a publicly announced repurchase plan or program. (d) Maximum Number(or Approximate(c) Total Number of
    
    
    Dollar Value) ofShares Purchased as
    
    
    Shares that May YetPart of Publicly
    
    
    be Purchased Under(a) Total Number of
    
    
    (b) Average Price
    
    
    Announced Plans or
    
    
    the Plans orPeriod
    
    Shares Purchased (1)
    
    
    Paid per Share
    
    
    Programs
    
    
    ProgramsJuly 1, 2004  July 31, 2004
    
    
    49,000
    
    
    
    5.99
    
    
    
    
    
    
    
    August 1, 2004  August 31, 2004
    
    
    119,900
    
    
    
    6.30
    
    
    
    
    
    
    
    September 1, 2004  September 30, 2004
    
    
    102,100
    
    
    
    5.91
    
    
    
    
    
    
    
    
   (1)
    
    Amounts consist of shares of Holdings Class B common stock purchased on the open market by
the America West Holdings Corporation Future Care 401(k) Plan. 
 ITEM 6. EXHIBITS. a. Exhibits EXHIBITNUMBER
    
    DESCRIPTION AND METHOD OF FILING10.1*
    
    Loan Agreement [Engines], dated as of September 3, 2004, among AWA, GECC, as administrative agent,
original Series A lender and original Series B lender, Wells Fargo Bank Northwest, National
Association (Wells Fargo), as security trustee and the lenders from time to time party thereto.10.2*
    
    Engine Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and Wells Fargo.10.3*
    
    Mortgage and Security Agreement Supplement No. 1, dated September 10, 2004, of AWA.10.4*
    
    Subordinated Engine Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and
Wells Fargo.10.5*
    
    Subordinated Mortgage and Security Agreement Supplement No. 1, dated September 10, 2004, of AWA.10.6*
    
    Security Trustee Agreement [Engines], dated as of September 3, 2004, among Wells Fargo, as security
trustee and the beneficiaries named therein.10.7*
    
    Payment and Indemnity Agreement [Engines], dated as of September 3, 2004, among AWA, certain
beneficiaries listed on Schedule 1 and Wells Fargo.10.8*
    
    Restructure Letter Agreement [Engines], dated as of September 3, 2004, among AWA and GECC.10.9*
    
    Loan Agreement [Spare Parts], dated as of September 3, 2004, among AWA, GECC, as administrative
agent, original Series A lender and original Series B lender, Wells Fargo, as security trustee and
the lenders from time to time party thereto.10.10*
    
    Spare Parts Mortgage and Security Agreement, dated as of September 3, 2004, between AWA and Wells
Fargo.
 51




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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
September 30, 2004 EXHIBITNUMBER
    
    DESCRIPTION AND METHOD OF FILING10.11*
    
    Subordinated Spare Parts Mortgage and Security Agreement, dated as of September 3, 2004, between AWA
and Wells Fargo.10.12*
    
    Security Trustee Agreement [Spare Parts], dated as of September 3, 2004, among Wells Fargo, as
security trustee and the beneficiaries named therein.10.13*
    
    Payment and Indemnity Agreement [Spare Parts], dated as of September 3, 2004, among AWA, certain
beneficiaries listed on Schedule 1 and Wells Fargo.10.14*
    
    Restructure Letter Agreement [Spare Parts], dated as of September 3, 2004, among AWA and GECC.10.15(1)*
    
    Amendment No. 7, dated July 30, 2004, to the A319/A320 Purchase Agreement dated September 12, 1997,
between AVSA, S.A.R.L. and AWA and Letter Agreement Nos. 2  8.10.16(1)*
    
    Side Letter No. 15, dated May 26, 2004, to the Amended and Restated V2500 Support Contract, dated
October 7, 1998, between AWA and IAE International Aero Engines AG.31.1
    
    Certification of Holdings Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934, as amended.31.2
    
    Certification of Holdings Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934, as amended.31.3
    
    Certification of AWAs Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934, as amended.31.4
    
    Certification of AWAs Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934, as amended.32.1
    
    Certification of Holdings Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of AWAs Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
   (1)
    
    The Company has sought confidential treatment for portions of the referenced exhibit.*
    
    Previously filed. 52




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AMERICA WEST HOLDINGS CORPORATION
September 30, 2004 
 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICA WEST HOLDINGS CORPORATIONBy
    
    /s/ Derek J. KerrDerek J. KerrSenior Vice President and Chief Financial Officer
 DATED: April 26, 2005 53




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##### Table of Contents



AMERICA WEST HOLDINGS CORPORATION
September 30, 2004 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICA WEST AIRLINES, INC.By
    
    /s/ Derek J. KerrDerek J. KerrSenior Vice President and Chief Financial Officer
 DATED: April 26, 2005 54




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##### Table of Contents



Exhibit Index EXHIBITNUMBER
    
    DESCRIPTION AND METHOD OF FILING31.1
    
    Certification of Holdings Chief Executive Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.31.2
    
    Certification of Holdings Chief Financial Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.31.3
    
    Certification of AWAs Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended.31.4
    
    Certification of AWAs Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of Holdings Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2
    
    Certification of AWAs Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.