##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended June 30, 2005                                                
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission file number 1-12649


America West Holdings Corporation


(Exact name of registrant as specified in its charter)


|                                                                                        |  |                                         
|--------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                |  | 86-0847214                              
|(State or other jurisdiction of
    incorporation or organization)                      |  | (I.R.S. Employer
    Identification No.)
|                                                                                       
|111 West Rio Salado Parkway,
    Tempe, Arizona(Address of principal executive offices) |  | 85281(Zip Code)                         

(480) 693-0800


(Registrants telephone number, including area code)


N/A


(Former name, former address and former fiscal year, if
changed since last report)


Commission file number 0-12337


America West Airlines, Inc.


(Exact name of registrant as specified in its charter)


|                                                                                         |  |                                         
|---------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                 |  | 86-0418245                              
|(State or other jurisdiction of
    incorporation or organization)                       |  | (I.R.S. Employer
    Identification No.)
|                                                                                        
|4000 East Sky Harbor Blvd.,
    Phoenix, Arizona(Address of principal executive offices) |  | 85034(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)


þ o




|                                  |  |       |  |     
|--------------------------------- |  | ----- |  | ----
|America West Holdings Corporation |  | Yes þ |  | No o
|America West Airlines, Inc.       |  | Yes o |  | No þ













---

TABLE OF CONTENTS



|                                |                                                                                                |  |  |  |  |  |  | 
|------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION
|                                | Item 1A. Condensed Consolidated Financial Statements -- America West Holdings Corporation.    
|                                | Item 1B. Condensed Consolidated Financial Statements -- America West Airlines, Inc.           
|                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                                | Item 3. Quantitative and Qualitative Disclosures about Market Risk.                           
|                                | Item 4. Controls and Procedures.                                                              
|PART II -- OTHER INFORMATION   
|                                | Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities      
|                                | Item 4. Submission of Matters to a Vote of Security Holders.                                  
|                                | Item 6. Exhibits                                                                              
|EX-10.1                        
|EX-10.2                        
|EX-31.1                        
|EX-31.2                        
|EX-31.3                        
|EX-31.4                        
|EX-32.1                        
|EX-32.2                        



---



##### Table of Contents






PART I  FINANCIAL INFORMATION









|         |                                                                                     
|-------- | ------------------------------------------------------------------------------------
|Item 1A. | Condensed Consolidated Financial Statements 
    America West Holdings Corporation.

America West Holdings Corporation


Condensed Consolidated Balance Sheets


(in thousands except share data)


(unaudited)


|                                         |                                                                                                                                                                                       |                            |           |          |              |   |           |          |         | 
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | --------- | -------- | ------------ | - | --------- | -------- | ------- | 
|                                         |                                                                                                                                                                                       | June 30,                   |           |          | December 31, |  
|                                         |                                                                                                                                                                                       | 2005                       |           |          | 2004         |  
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|ASSETS                                   |                                                                                                                                                                                       |                            |           |          |              |   |           |         
|Current assets:                          |                                                                                                                                                                                       |                            |           |          |              |   |           |         
|                                         | Cash and cash equivalents                                                                                                                                                             |                            | $         | 116,061  |              |   | $         | 149,091  |        
|                                         | Short-term investments                                                                                                                                                                |                            |           | 206,217  |              |   |           | 126,651  |        
|                                         | Restricted cash                                                                                                                                                                       |                            |           |         |              |   |           | 41,264   |        
|                                         | Accounts receivable, net                                                                                                                                                              |                            |           | 122,517  |              |   |           | 108,837  |        
|                                         | Expendable spare parts and supplies, net                                                                                                                                              |                            |           | 51,090   |              |   |           | 57,563   |        
|                                         | Prepaid expenses                                                                                                                                                                      |                            |           | 198,121  |              |   |           | 141,571  |        
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|                                         |                                                                                                                                                                                       | Total current assets       |           |          | 694,006      |   |           |          | 624,977 | 
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|Property and equipment:                  |                                                                                                                                                                                       |                            |           |          |              |   |           |         
|                                         | Flight equipment                                                                                                                                                                      |                            |           | 931,264  |              |   |           | 926,930  |        
|                                         | Other property and equipment                                                                                                                                                          |                            |           | 298,760  |              |   |           | 290,897  |        
|                                         | Equipment purchase deposits                                                                                                                                                           |                            |           | 73,950   |              |   |           | 63,450   |        
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|                                         |                                                                                                                                                                                       |                            | 1,303,974 |          |              |   | 1,281,277 |         
|                                         | Less accumulated depreciation and amortization                                                                                                                                        |                            |           | 619,771  |              |   |           | 624,742  |        
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|                                         |                                                                                                                                                                                       | Net property and equipment |           |          | 684,203      |   |           |          | 656,535 | 
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|Other assets:                            |                                                                                                                                                                                       |                            |           |          |              |   |           |         
|                                         | Investments in debt securities                                                                                                                                                        |                            |           |         |              |   |           | 30,000   |        
|                                         | Restricted cash                                                                                                                                                                       |                            |           | 91,633   |              |   |           | 72,091   |        
|                                         | Other assets, net                                                                                                                                                                     |                            |           | 134,975  |              |   |           | 91,661   |        
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|                                         |                                                                                                                                                                                       | Total other assets         |           |          | 226,608      |   |           |          | 193,752 | 
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|                                         |                                                                                                                                                                                       | $                          | 1,604,817 |          |              | $ | 1,475,264 |         
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|                                        
|LIABILITIES AND STOCKHOLDERS EQUITY     |                                                                                                                                                                                       |                            |           |          |              |   |           |         
|Current liabilities:                     |                                                                                                                                                                                       |                            |           |          |              |   |           |         
|                                         | Current maturities of long-term debt                                                                                                                                                  |                            | $         | 115,964  |              |   | $         | 151,183  |        
|                                         | Current obligations under capital leases                                                                                                                                              |                            |           | 3,312    |              |   |           | 3,475    |        
|                                         | Accounts payable                                                                                                                                                                      |                            |           | 189,189  |              |   |           | 173,887  |        
|                                         | Air traffic liability                                                                                                                                                                 |                            |           | 265,727  |              |   |           | 194,718  |        
|                                         | Accrued compensation and vacation benefits                                                                                                                                            |                            |           | 47,035   |              |   |           | 42,699   |        
|                                         | Accrued taxes                                                                                                                                                                         |                            |           | 65,417   |              |   |           | 32,796   |        
|                                         | Other accrued liabilities                                                                                                                                                             |                            |           | 85,910   |              |   |           | 65,958   |        
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|                                         |                                                                                                                                                                                       | Total current liabilities  |           |          | 772,554      |   |           |          | 664,716 | 
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|Long-term debt, less current maturities  |                                                                                                                                                                                       |                            | 588,060   |          |              |   | 635,129   |         
|Capital leases, less current obligations |                                                                                                                                                                                       |                            | 5,124     |          |              |   | 5,061     |         
|Deferred credits and other liabilities   |                                                                                                                                                                                       |                            | 154,941   |          |              |   | 133,911   |         
|Stockholders equity:                    |                                                                                                                                                                                       |                            |           |          |              |   |           |         
|                                         | Preferred stock, $.01 par value. Authorized
    48,800,000 shares; no shares issued                                                                                                   |                            |           |         |              |   |           |         |        
|                                         | Class A common stock, $.01 par value. Authorized
    1,200,000 shares; issued and outstanding
    859,117 shares at June 30, 2005 and December 31,
    2004                           |                            |           | 8        |              |   |           | 8        |        
|                                         | Class B common stock, $.01 par value. Authorized
    100,000,000 shares; issued and outstanding
    51,628,599 shares at June 30, 2005 and
    51,564,865 shares at December 31, 2004 |                            |           | 516      |              |   |           | 516      |        
|                                         | Additional paid-in capital                                                                                                                                                            |                            |           | 632,652  |              |   |           | 632,446  |        
|                                         | Accumulated deficit                                                                                                                                                                   |                            |           | (241,132 | )            |   |           | (288,617 | )      
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|                                         |                                                                                                                                                                                       |                            | 392,044   |          |              |   | 344,353   |         
|                                         | Less: Cost of Class B common stock in treasury,
    16,437,575 shares at June 30, 2005 and
    December 31, 2004                                                                      |                            |           | (307,906 | )            |   |           | (307,906 | )      
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|                                         |                                                                                                                                                                                       | Total stockholders equity |           |          | 84,138       |   |           |          | 36,447  | 
|                                         |                                                                                                                                                                                       |                            |           |          |              |  
|                                         |                                                                                                                                                                                       | $                          | 1,604,817 |          |              | $ | 1,475,264 |         
|                                         |                                                                                                                                                                                       |                            |           |          |              |  



2



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##### Table of Contents



America West Holdings Corporation


Condensed Consolidated Statements of Operations


(in thousands except per share data)


(unaudited)


|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |           |           |   |        |           |           |  
|------------------------------- | -------------------------------------------------------------- | -------------------------------- | ------ | ------- | ---------------- | - | ------ | ------- | ------- | - | ------ | --------- | --------- | - | ------ | --------- | --------- | -
|                                |                                                                | Three Months Ended               |        |         | Six Months Ended |  
|                                |                                                                | June 30,                         |        |         | June 30,         |  
|                                |                                                                |                                  |        |         |                  |  
|                                |                                                                | 2005                             |        |         | 2004             |   |        | 2005    |         |   | 2004   |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Operating revenues:             |                                                                |                                  |        |         |                  |   |        |         |         |   |        |           |           |   |        |          
|                                | Passenger                                                      |                                  | $      | 654,893 |                  |   | $      | 569,166 |         |   | $      | 1,230,306 |           |   | $      | 1,106,499 |          
|                                | Express                                                        |                                  |        | 129,426 |                  |   |        | 85,466  |         |   |        | 232,782   |           |   |        | 158,117   |          
|                                | Cargo                                                          |                                  |        | 8,126   |                  |   |        | 6,817   |         |   |        | 16,770    |           |   |        | 13,720    |          
|                                | Other                                                          |                                  |        | 40,752  |                  |   |        | 32,709  |         |   |        | 76,151    |           |   |        | 65,149    |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|                                |                                                                | Total operating revenues         |        |         | 833,197          |   |        |         | 694,158 |   |        |           | 1,556,009 |   |        |           | 1,343,485 |  
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Operating expenses:             |                                                                |                                  |        |         |                  |   |        |         |         |   |        |           |           |   |        |          
|                                | Salaries and related costs                                     |                                  |        | 173,752 |                  |   |        | 161,977 |         |   |        | 348,900   |           |   |        | 328,252   |          
|                                | Aircraft rents                                                 |                                  |        | 80,673  |                  |   |        | 75,346  |         |   |        | 157,510   |           |   |        | 150,531   |          
|                                | Other rents and landing fees                                   |                                  |        | 45,727  |                  |   |        | 42,011  |         |   |        | 87,266    |           |   |        | 83,252    |          
|                                | Aircraft fuel                                                  |                                  |        | 191,006 |                  |   |        | 132,977 |         |   |        | 342,869   |           |   |        | 247,189   |          
|                                | Realized and unrealized gains on fuel hedging instruments, net |                                  |        | (8,673  | )                |   |        | (9,485  | )       |   |        | (69,156   | )         |   |        | (9,889    | )        
|                                | Agency commissions                                             |                                  |        | 6,710   |                  |   |        | 6,253   |         |   |        | 12,264    |           |   |        | 13,003    |          
|                                | Aircraft maintenance materials and repairs                     |                                  |        | 49,359  |                  |   |        | 52,350  |         |   |        | 97,347    |           |   |        | 102,404   |          
|                                | Depreciation and amortization                                  |                                  |        | 11,587  |                  |   |        | 12,587  |         |   |        | 23,447    |           |   |        | 26,378    |          
|                                | Special charges (credits), net                                 |                                  |        |        |                  |   |        |        |         |   |        | 811       |           |   |        | (600      | )        
|                                | Express expenses                                               |                                  |        | 136,048 |                  |   |        | 89,802  |         |   |        | 246,874   |           |   |        | 163,104   |          
|                                | Other                                                          |                                  |        | 116,731 |                  |   |        | 104,525 |         |   |        | 227,521   |           |   |        | 198,957   |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|                                |                                                                | Total operating expenses         |        |         | 802,920          |   |        |         | 668,343 |   |        |           | 1,475,653 |   |        |           | 1,302,581 |  
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Operating income                |                                                                |                                  | 30,277 |         |                  |   | 25,815 |         |         |   | 80,356 |           |           |   | 40,904 |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Nonoperating income (expenses): |                                                                |                                  |        |         |                  |   |        |         |         |   |        |           |           |   |        |          
|                                | Interest income                                                |                                  |        | 2,476   |                  |   |        | 1,779   |         |   |        | 4,375     |           |   |        | 3,297     |          
|                                | Interest expense, net                                          |                                  |        | (19,736 | )                |   |        | (19,237 | )       |   |        | (38,715   | )         |   |        | (38,989   | )        
|                                | Other, net                                                     |                                  |        | 891     |                  |   |        | 2,304   |         |   |        | 1,469     |           |   |        | 3,886     |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|                                |                                                                | Total nonoperating expenses, net |        |         | (16,369          | ) |        |         | (15,154 | ) |        |           | (32,871   | ) |        |           | (31,806   | )
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Income before income taxes      |                                                                |                                  | 13,908 |         |                  |   | 10,661 |         |         |   | 47,485 |           |           |   | 9,098  |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Income taxes                    |                                                                |                                  |       |         |                  |   |       |         |         |   |       |           |           |   |       |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Net income                      |                                                                | $                                | 13,908 |         |                  | $ | 10,661 |         |         | $ | 47,485 |           |           | $ | 9,098  |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Earnings per share:             |                                                                |                                  |        |         |                  |   |        |         |         |   |        |           |           |   |        |          
|                                | Basic                                                          |                                  | $      | 0.39    |                  |   | $      | 0.30    |         |   | $      | 1.32      |           |   | $      | 0.25      |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|                                | Diluted                                                        |                                  | $      | 0.29    |                  |   | $      | 0.20    |         |   | $      | 0.92      |           |   | $      | 0.17      |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Shares used for computation:    |                                                                |                                  |        |         |                  |   |        |         |         |   |        |           |           |   |        |          
|                                | Basic                                                          |                                  |        | 36,032  |                  |   |        | 36,005  |         |   |        | 36,015    |           |   |        | 35,928    |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|                                | Diluted                                                        |                                  |        | 53,553  |                  |   |        | 52,020  |         |   |        | 62,551    |           |   |        | 52,070    |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          



3



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##### Table of Contents



America West Holdings Corporation


Condensed Consolidated Statements of Cash Flows


(in thousands)


(unaudited)


|                                                 |                                                                                  |                                       |         |          |          |   |         |          |         |  
|------------------------------------------------ | -------------------------------------------------------------------------------- | ------------------------------------- | ------- | -------- | -------- | - | ------- | -------- | ------- | -
|                                                 |                                                                                  | Six Months Ended                      |        
|                                                 |                                                                                  | June 30,                              |        
|                                                 |                                                                                  |                                       |        
|                                                 |                                                                                  | 2005                                  |         |          | 2004     |  
|                                                 |                                                                                  |                                       |         |          |          |  
|Net cash provided by operating activities        |                                                                                  | $                                     | 223,545 |          |          | $ | 83,557  |         
|                                                 |                                                                                  |                                       |         |          |          |  
|Cash flows from investing activities:            |                                                                                  |                                       |         |          |          |   |         |         
|                                                 | Purchases of property and equipment                                              |                                       |         | (97,210  | )        |   |         | (77,173  | )      
|                                                 | Purchases of short-term investments                                              |                                       |         | (283,750 | )        |   |         | (273,533 | )      
|                                                 | Sales of short-term investments                                                  |                                       |         | 233,961  |          |   |         | 289,610  |        
|                                                 | Purchases of investments in debt securities                                      |                                       |         |         |          |   |         | (35,000  | )      
|                                                 | Sales of investments in debt securities                                          |                                       |         |         |          |   |         | 15,000   |        
|                                                 | Decrease (increase) in restricted cash                                           |                                       |         | (19,542  | )        |   |         | 1,270    |        
|                                                 | Proceeds from disposition of other assets                                        |                                       |         | 1,227    |          |   |         | 1,848    |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 |                                                                                  | Net cash used in investing activities |         |          | (165,314 | ) |         |          | (77,978 | )
|                                                 |                                                                                  |                                       |         |          |          |  
|Cash flows from financing activities:            |                                                                                  |                                       |         |          |          |   |         |         
|                                                 | Repayment of debt                                                                |                                       |         | (86,717  | )        |   |         | (47,980  | )      
|                                                 | Other                                                                            |                                       |         | (4,544   | )        |   |         | 843      |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 |                                                                                  | Net cash used in financing activities |         |          | (91,261  | ) |         |          | (47,137 | )
|                                                 |                                                                                  |                                       |         |          |          |  
|Net decrease in cash and cash equivalents        |                                                                                  |                                       | (33,030 | )        |          |   | (41,558 | )       
|Cash and cash equivalents at beginning of period |                                                                                  |                                       | 149,091 |          |          |   | 153,357 |         
|                                                 |                                                                                  |                                       |         |          |          |  
|Cash and cash equivalents at end of period       |                                                                                  | $                                     | 116,061 |          |          | $ | 111,799 |         
|                                                 |                                                                                  |                                       |         |          |          |  
|Cash paid for:                                   |                                                                                  |                                       |         |          |          |   |         |         
|                                                 | Interest, net of amounts capitalized                                             |                                       | $       | 17,047   |          |   | $       | 10,339   |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Income taxes                                                                     |                                       | $       | 112      |          |   | $       | 1,440    |        
|                                                 |                                                                                  |                                       |         |          |          |  
|Non-cash investing and financing activities:     |                                                                                  |                                       |         |          |          |   |         |         
|                                                 | Reclassification of investments in debt securities to short-term
    investments |                                       | $       | 30,000   |          |   | $       | 5,730    |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Notes payable issued under the aircraft purchase agreement                       |                                       | $       | 8,750    |          |   | $       | 7,000    |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Notes payable cancelled under the aircraft purchase agreement                    |                                       | $       | (7,000   | )        |   | $       |         |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Acquisition of property and equipment under capital leases                       |                                       | $       | 17       |          |   | $       |         |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Payment in kind notes issued, net of returns                                     |                                       | $       |         |          |   | $       | 4,672    |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Exercise of warrants                                                             |                                       | $       |         |          |   | $       | 2        |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Acquisition of shares due to loan default                                        |                                       | $       |         |          |   | $       | 1,700    |        
|                                                 |                                                                                  |                                       |         |          |          |  



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##### Table of Contents



America West Holdings Corporation


Notes to Condensed Consolidated Financial Statements


June 30, 2005




|   |                      
|-- | ---------------------
|1. | Basis of Presentation





Operating Revenues 
Express Operating Expenses 
Express Expenses Operating
Revenues  Other. Change in Method of Reporting for America West Express
Results






|   |              
|-- | -------------
|2. | Stock Options

Accounting for
Stock Issued to Employees, Accounting
for Stock-Based Compensation,


5



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##### Table of Contents





|                                 |  |                                      |        |   |                  |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------- |  | ------------------------------------ | ------ | - | ---------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                 |  | Three Months Ended                   |        |   | Six Months Ended |  
|                                 |  | June 30,                             |        |   | June 30,         |  
|                                 |  |                                      |        |   |                  |  
|                                 |  | 2005                                 |        |   | 2004             |   |        | 2005 |  |   | 2004   |  
|                                 |  |                                      |        |   |                  |   |        |      |  |   |        |  
|                                 |  | (in thousands except per share data) |       
|Net income, as reported          |  | $                                    | 13,908 |   |                  | $ | 10,661 |      |  | $ | 47,485 |   |  | $ | 9,098  |  
|Stock-based compensation expense |  |                                      | (1,055 | ) |                  |   | (1,650 | )    |  |   | (2,345 | ) |  |   | (2,916 | )
|                                 |  |                                      |        |   |                  |   |        |      |  |   |        |  
|Pro forma net income             |  | $                                    | 12,853 |   |                  | $ | 9,011  |      |  | $ | 45,140 |   |  | $ | 6,182  |  
|                                 |  |                                      |        |   |                  |   |        |      |  |   |        |  
|Income per share:                |  |                                      |        |   |                  |   |        |      |  |   |        |   |  |   |        |  
|Basic  as reported              |  | $                                    | 0.39   |   |                  | $ | 0.30   |      |  | $ | 1.32   |   |  | $ | 0.25   |  
|                                 |  |                                      |        |   |                  |   |        |      |  |   |        |  
|Basic  pro forma                |  | $                                    | 0.36   |   |                  | $ | 0.25   |      |  | $ | 1.25   |   |  | $ | 0.17   |  
|                                 |  |                                      |        |   |                  |   |        |      |  |   |        |  
|Diluted  as reported            |  | $                                    | 0.29   |   |                  | $ | 0.20   |      |  | $ | 0.92   |   |  | $ | 0.17   |  
|                                 |  |                                      |        |   |                  |   |        |      |  |   |        |  
|Diluted  pro forma              |  | $                                    | 0.27   |   |                  | $ | 0.17   |      |  | $ | 0.88   |   |  | $ | 0.12   |  
|                                 |  |                                      |        |   |                  |   |        |      |  |   |        |  



|   |                 
|-- | ----------------
|3. | Flight Equipment





Operating Expenses  Other.




|   |                
|-- | ---------------
|4. | Special Charges



|                             |  |               |       |          |              |   |      |       |  |   |       |  
|---------------------------- |  | ------------- | ----- | -------- | ------------ | - | ---- | ----- |  | - | ----- | -
|                             |  |               |       | Contract |              |   |     
|                             |  | Fleet         |       |          | Termination/ |   |      |      
|                             |  | Restructuring |       |          | Other Costs  |   |      | Total | 
|                             |  |               |       |          |              |   |      |       | 
|Balance at December 31, 2004 |  | $             | 643   |          |              | $ | 121  |       |  | $ | 764   |  
|                             |  |               |       |          |              |   |      |       | 
|Special charges              |  |               | 690   |          |              |   |     |       |  |   | 690   |  
|Payments                     |  |               | (305  | )        |              |   | (111 | )     |  |   | (416  | )
|Revision of estimate         |  |               |      |          |              |   | 147  |       |  |   | 147   |  
|                             |  |               |       |          |              |   |      |       | 
|Balance at March 31, 2005    |  |               | 1,028 |          |              |   | 157  |       |  |   | 1,185 |  
|                             |  |               |       |          |              |   |      |       | 
|Special charges              |  |               |      |          |              |   |     |       |  |   |      |  
|Payments                     |  |               |      |          |              |   |     |       |  |   |      |  
|                             |  |               |       |          |              |   |      |       | 
|Balance at June 30, 2005     |  | $             | 1,028 |          |              | $ | 157  |       |  | $ | 1,185 |  
|                             |  |               |       |          |              |   |      |       | 



6



---



##### Table of Contents





|   |                   
|-- | ------------------
|5. | Earnings Per Share



|                                                            |  |                                      |        |  |                  |   |        |      |  |   |        |  |  |   |        | 
|----------------------------------------------------------- |  | ------------------------------------ | ------ |  | ---------------- | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                                            |  | Three Months Ended                   |        |  | Six Months Ended |  
|                                                            |  | June 30,                             |        |  | June 30,         |  
|                                                            |  |                                      |        |  |                  |  
|                                                            |  | 2005                                 |        |  | 2004             |   |        | 2005 |  |   | 2004   | 
|                                                            |  |                                      |        |  |                  |   |        |      |  |   |        | 
|                                                            |  | (in thousands except per share data) |       
|BASIC EARNINGS PER SHARE                                    |  |                                      |        |  |                  |   |        |      |  |   |        |  |  |   |        | 
|Income applicable to common stock                           |  | $                                    | 13,908 |  |                  | $ | 10,661 |      |  | $ | 47,485 |  |  | $ | 9,098  | 
|                                                            |  |                                      |        |  |                  |   |        |      |  |   |        | 
|Weighted average common shares outstanding                  |  |                                      | 36,032 |  |                  |   | 36,005 |      |  |   | 36,015 |  |  |   | 35,928 | 
|                                                            |  |                                      |        |  |                  |   |        |      |  |   |        | 
|Basic earnings per share                                    |  | $                                    | 0.39   |  |                  | $ | 0.30   |      |  | $ | 1.32   |  |  | $ | 0.25   | 
|                                                            |  |                                      |        |  |                  |   |        |      |  |   |        | 
|DILUTED EARNINGS PER SHARE                                  |  |                                      |        |  |                  |   |        |      |  |   |        |  |  |   |        | 
|Income as reported                                          |  | $                                    | 13,908 |  |                  | $ | 10,661 |      |  | $ | 47,485 |  |  | $ | 9,098  | 
|Interest expense on 7.5% convertible senior notes           |  |                                      |       |  |                  |   |       |      |  |   | 6,283  |  |  |   |       | 
|Interest expense on 7.25% senior exchangeable notes         |  |                                      | 1,735  |  |                  |   |       |      |  |   | 3,470  |  |  |   |       | 
|                                                            |  |                                      |        |  |                  |   |        |      |  |   |        | 
|Income for purposes of computing diluted earnings per share |  | $                                    | 15,643 |  |                  | $ | 10,661 |      |  | $ | 57,238 |  |  | $ | 9,098  | 
|                                                            |  |                                      |        |  |                  |   |        |      |  |   |        | 
|SHARE COMPUTATION                                           |  |                                      |        |  |                  |   |        |      |  |   |        |  |  |   |        | 
|Weighted average common shares outstanding                  |  |                                      | 36,032 |  |                  |   | 36,005 |      |  |   | 36,015 |  |  |   | 35,928 | 
|Assumed exercise of stock options and warrants              |  |                                      | 9,425  |  |                  |   | 16,015 |      |  |   | 9,082  |  |  |   | 16,142 | 
|Assumed conversion of 7.5% convertible senior notes         |  |                                      |       |  |                  |   |       |      |  |   | 9,358  |  |  |   |       | 
|Assumed conversion of 7.25% senior exchangeable notes       |  |                                      | 8,096  |  |                  |   |       |      |  |   | 8,096  |  |  |   |       | 
|                                                            |  |                                      |        |  |                  |   |        |      |  |   |        | 
|Weighted average common shares outstanding, as adjusted     |  |                                      | 53,553 |  |                  |   | 52,020 |      |  |   | 62,551 |  |  |   | 52,070 | 
|                                                            |  |                                      |        |  |                  |   |        |      |  |   |        | 
|Diluted earnings per share                                  |  | $                                    | 0.29   |  |                  | $ | 0.20   |      |  | $ | 0.92   |  |  | $ | 0.17   | 
|                                                            |  |                                      |        |  |                  |   |        |      |  |   |        | 







|   |                    
|-- | -------------------
|6. | Segment Disclosures

Disclosures About Segments of
an Enterprise and Related Information




|   |                                                                   
|-- | ------------------------------------------------------------------
|7. | Change in Method of Reporting for America West Express
    Results



7



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##### Table of Contents











Basis of
Presentation, Operating Revenues  Other


|                         |  |                                  |         |  |             |   |        |                 |  |   |         | 
|------------------------ |  | -------------------------------- | ------- |  | ----------- | - | ------ | --------------- |  | - | ------- | 
|                         |  | Three Months Ended June 30, 2004 |        
|                         |  |                                  |        
|                         |  | As Reported                      |         |  | Adjustments |   |        | As Reclassified | 
|                         |  |                                  |         |  |             |   |        |                 | 
|Operating revenues:      |  |                                  |         |  |             |   |        |                 |  |   |         | 
|Passenger                |  | $                                | 569,166 |  |             | $ |       |                 |  | $ | 569,166 | 
|Express                  |  |                                  |        |  |             |   | 85,466 | (1)             |  |   | 85,466  | 
|Cargo and other          |  |                                  | 35,908  |  |             |   | 3,618  |                 |  |   | 39,526  | 
|                         |  |                                  |         |  |             |   |        |                 | 
|Total operating revenues |  | $                                | 605,074 |  |             | $ | 89,084 |                 |  | $ | 694,158 | 
|                         |  |                                  |         |  |             |   |        |                 | 
|Operating expenses:      |  |                                  |         |  |             |   |        |                 |  |   |         | 
|Operating expenses       |  | $                                | 579,259 |  |             | $ | (718   | )               |  | $ | 578,541 | 
|Express expenses         |  |                                  |        |  |             |   | 89,802 | (2)             |  |   | 89,802  | 
|                         |  |                                  |         |  |             |   |        |                 | 
|Total operating expenses |  | $                                | 579,259 |  |             | $ | 89,084 |                 |  | $ | 668,343 | 
|                         |  |                                  |         |  |             |   |        |                 | 

|                         |  |                                |           |  |             |   |         |                 |  |   |           | 
|------------------------ |  | ------------------------------ | --------- |  | ----------- | - | ------- | --------------- |  | - | --------- | 
|                         |  | Six Months Ended June 30, 2004 |          
|                         |  |                                |          
|                         |  | As Reported                    |           |  | Adjustments |   |         | As Reclassified | 
|                         |  |                                |           |  |             |   |         |                 | 
|Operating revenues:      |  |                                |           |  |             |   |         |                 |  |   |           | 
|Passenger                |  | $                              | 1,106,499 |  |             | $ |        |                 |  | $ | 1,106,499 | 
|Express                  |  |                                |          |  |             |   | 158,117 | (1)             |  |   | 158,117   | 
|Cargo and other          |  |                                | 75,119    |  |             |   | 3,750   |                 |  |   | 78,869    | 
|                         |  |                                |           |  |             |   |         |                 | 
|Total operating revenues |  | $                              | 1,181,618 |  |             | $ | 161,867 |                 |  | $ | 1,343,485 | 
|                         |  |                                |           |  |             |   |         |                 | 
|Operating expenses:      |  |                                |           |  |             |   |         |                 |  |   |           | 
|Operating expenses       |  | $                              | 1,140,714 |  |             | $ | (1,237  | )               |  | $ | 1,139,477 | 
|Express expenses         |  |                                |          |  |             |   | 163,104 | (3)             |  |   | 163,104   | 
|                         |  |                                |           |  |             |   |         |                 | 
|Total operating expenses |  | $                              | 1,140,714 |  |             | $ | 161,867 |                 |  | $ | 1,302,581 | 
|                         |  |                                |           |  |             |   |         |                 | 

8



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##### Table of Contents








|    |                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reclassification of Express passenger revenues from
    Operating Revenues  Other.                                                                                         
|   
|(2) | Reclassification of $89.1 million and $0.7 million of
    Express operating expenses from Operating
    Revenues  Otherand Operating
    Expenses  Other, respectively. 
|   
|(3) | Reclassification of $161.9 million and $1.2 million of
    Express operating expenses from Operating
    Revenues  Other and Operating
    Expenses  Other, respectively





|   |                                                             
|-- | ------------------------------------------------------------
|8. | Agreement to Merge with Subsidiary of U.S. Airways
    Group





9



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##### Table of Contents








|         |                                                                              
|-------- | -----------------------------------------------------------------------------
|Item 1B. | Condensed Consolidated Financial Statements 
    America West Airlines, Inc.



America West Airlines, Inc.


Condensed Consolidated Balance Sheets


(in thousands except share data)


(unaudited)


|                                        |                                                                                   |                            |           |          |              |   |           |          |         | 
|--------------------------------------- | --------------------------------------------------------------------------------- | -------------------------- | --------- | -------- | ------------ | - | --------- | -------- | ------- | 
|                                        |                                                                                   | June 30,                   |           |          | December 31, |  
|                                        |                                                                                   | 2005                       |           |          | 2004         |  
|                                        |                                                                                   |                            |           |          |              |  
|ASSETS                                  |                                                                                   |                            |           |          |              |   |           |         
|Current assets:                         |                                                                                   |                            |           |          |              |   |           |         
|                                        | Cash and cash equivalents                                                         |                            | $         | 95,278   |              |   | $         | 128,497  |        
|                                        | Short-term investments                                                            |                            |           | 206,217  |              |   |           | 126,651  |        
|                                        | Restricted cash                                                                   |                            |           |         |              |   |           | 41,264   |        
|                                        | Accounts receivable, net                                                          |                            |           | 122,517  |              |   |           | 108,837  |        
|                                        | Expendable spare parts and supplies, net                                          |                            |           | 51,090   |              |   |           | 57,563   |        
|                                        | Prepaid expenses                                                                  |                            |           | 198,096  |              |   |           | 141,571  |        
|                                        |                                                                                   |                            |           |          |              |  
|                                        |                                                                                   | Total current assets       |           |          | 673,198      |   |           |          | 604,383 | 
|                                        |                                                                                   |                            |           |          |              |  
|Property and equipment:                 |                                                                                   |                            |           |          |              |   |           |         
|                                        | Flight equipment                                                                  |                            |           | 931,264  |              |   |           | 926,930  |        
|                                        | Other property and equipment                                                      |                            |           | 297,142  |              |   |           | 289,279  |        
|                                        | Equipment purchase deposits                                                       |                            |           | 73,950   |              |   |           | 63,450   |        
|                                        |                                                                                   |                            |           |          |              |  
|                                        |                                                                                   |                            | 1,302,356 |          |              |   | 1,279,659 |         
|                                        | Less accumulated depreciation and amortization                                    |                            |           | 619,222  |              |   |           | 624,193  |        
|                                        |                                                                                   |                            |           |          |              |  
|                                        |                                                                                   | Net property and equipment |           |          | 683,134      |   |           |          | 655,466 | 
|                                        |                                                                                   |                            |           |          |              |  
|Other assets:                           |                                                                                   |                            |           |          |              |   |           |         
|                                        | Investments in debt securities                                                    |                            |           |         |              |   |           | 30,000   |        
|                                        | Restricted cash                                                                   |                            |           | 91,633   |              |   |           | 72,091   |        
|                                        | Advances to parent company, net                                                   |                            |           | 260,648  |              |   |           | 258,777  |        
|                                        | Other assets, net                                                                 |                            |           | 133,793  |              |   |           | 90,270   |        
|                                        |                                                                                   |                            |           |          |              |  
|                                        |                                                                                   | Total other assets         |           |          | 486,074      |   |           |          | 451,138 | 
|                                        |                                                                                   |                            |           |          |              |  
|                                        |                                                                                   | $                          | 1,842,406 |          |              | $ | 1,710,987 |         
|                                        |                                                                                   |                            |           |          |              |  
|                                       
|LIABILITIES AND STOCKHOLDERS EQUITY    |                                                                                   |                            |           |          |              |   |           |         
|Current liabilities:                    |                                                                                   |                            |           |          |              |   |           |         
|                                        | Current maturities of long-term debt                                              |                            | $         | 115,964  |              |   | $         | 151,183  |        
|                                        | Current obligations under capital leases                                          |                            |           | 3,312    |              |   |           | 3,475    |        
|                                        | Accounts payable                                                                  |                            |           | 188,528  |              |   |           | 173,196  |        
|                                        | Air traffic liability                                                             |                            |           | 265,727  |              |   |           | 194,718  |        
|                                        | Accrued compensation and vacation benefits                                        |                            |           | 47,035   |              |   |           | 42,699   |        
|                                        | Accrued taxes                                                                     |                            |           | 53,296   |              |   |           | 20,651   |        
|                                        | Other accrued liabilities                                                         |                            |           | 85,910   |              |   |           | 65,958   |        
|                                        |                                                                                   |                            |           |          |              |  
|                                        |                                                                                   | Total current liabilities  |           |          | 759,772      |   |           |          | 651,880 | 
|                                        |                                                                                   |                            |           |          |              |  
|Long-term debt, less current maturities |                                                                                   |                            | 588,060   |          |              |   | 635,129   |         
|Capital leases, less current maturities |                                                                                   |                            | 5,124     |          |              |   | 5,061     |         
|Deferred credits and other liabilities  |                                                                                   |                            | 153,133   |          |              |   | 132,103   |         
|Stockholders equity:                   |                                                                                   |                            |           |          |              |   |           |         
|                                        | Common Stock $.01 par value. Authorized, issued and
    outstanding; 1,000 shares |                            |           |         |              |   |           |         |        
|                                        | Additional paid-in capital                                                        |                            |           | 555,114  |              |   |           | 555,114  |        
|                                        | Accumulated deficit                                                               |                            |           | (218,797 | )            |   |           | (268,300 | )      
|                                        |                                                                                   |                            |           |          |              |  
|                                        |                                                                                   | Total stockholders equity |           |          | 336,317      |   |           |          | 286,814 | 
|                                        |                                                                                   |                            |           |          |              |  
|                                        |                                                                                   | $                          | 1,842,406 |          |              | $ | 1,710,987 |         
|                                        |                                                                                   |                            |           |          |              |  



10



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##### Table of Contents



America West Airlines, Inc.


Condensed Consolidated Statements of Operations


(in thousands)


(unaudited)


|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |           |           |   |        |           |           |  
|------------------------------- | -------------------------------------------------------------- | -------------------------------- | ------ | ------- | ---------------- | - | ------ | ------- | ------- | - | ------ | --------- | --------- | - | ------ | --------- | --------- | -
|                                |                                                                | Three Months Ended               |        |         | Six Months Ended |  
|                                |                                                                | June 30,                         |        |         | June 30,         |  
|                                |                                                                |                                  |        |         |                  |  
|                                |                                                                | 2005                             |        |         | 2004             |   |        | 2005    |         |   | 2004   |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Operating revenues:             |                                                                |                                  |        |         |                  |   |        |         |         |   |        |           |           |   |        |          
|                                | Passenger                                                      |                                  | $      | 654,893 |                  |   | $      | 569,166 |         |   | $      | 1,230,306 |           |   | $      | 1,106,499 |          
|                                | Express                                                        |                                  |        | 129,426 |                  |   |        | 85,466  |         |   |        | 232,782   |           |   |        | 158,117   |          
|                                | Cargo                                                          |                                  |        | 8,126   |                  |   |        | 6,817   |         |   |        | 16,770    |           |   |        | 13,720    |          
|                                | Other                                                          |                                  |        | 40,582  |                  |   |        | 32,539  |         |   |        | 75,811    |           |   |        | 64,809    |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|                                |                                                                | Total operating revenues         |        |         | 833,027          |   |        |         | 693,988 |   |        |           | 1,555,669 |   |        |           | 1,343,145 |  
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Operating expenses:             |                                                                |                                  |        |         |                  |   |        |         |         |   |        |           |           |   |        |          
|                                | Salaries and related costs                                     |                                  |        | 173,399 |                  |   |        | 161,617 |         |   |        | 348,252   |           |   |        | 327,546   |          
|                                | Aircraft rents                                                 |                                  |        | 80,673  |                  |   |        | 75,346  |         |   |        | 157,510   |           |   |        | 150,531   |          
|                                | Other rents and landing fees                                   |                                  |        | 45,727  |                  |   |        | 42,011  |         |   |        | 87,266    |           |   |        | 83,252    |          
|                                | Aircraft fuel                                                  |                                  |        | 191,006 |                  |   |        | 132,977 |         |   |        | 342,869   |           |   |        | 247,189   |          
|                                | Realized and unrealized gains on fuel hedging instruments, net |                                  |        | (8,673  | )                |   |        | (9,485  | )       |   |        | (69,156   | )         |   |        | (9,889    | )        
|                                | Agency commissions                                             |                                  |        | 6,710   |                  |   |        | 6,253   |         |   |        | 12,264    |           |   |        | 13,003    |          
|                                | Aircraft maintenance materials and repairs                     |                                  |        | 49,359  |                  |   |        | 52,350  |         |   |        | 97,347    |           |   |        | 102,404   |          
|                                | Depreciation and amortization                                  |                                  |        | 11,587  |                  |   |        | 12,587  |         |   |        | 23,447    |           |   |        | 26,378    |          
|                                | Special charges (credits), net                                 |                                  |        |        |                  |   |        |        |         |   |        | 811       |           |   |        | (600      | )        
|                                | Express expenses                                               |                                  |        | 136,048 |                  |   |        | 89,802  |         |   |        | 246,874   |           |   |        | 163,104   |          
|                                | Other                                                          |                                  |        | 115,469 |                  |   |        | 103,779 |         |   |        | 225,518   |           |   |        | 197,591   |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|                                |                                                                | Total operating expenses         |        |         | 801,305          |   |        |         | 667,237 |   |        |           | 1,473,002 |   |        |           | 1,300,509 |  
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Operating income                |                                                                |                                  | 31,722 |         |                  |   | 26,751 |         |         |   | 82,667 |           |           |   | 42,636 |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Nonoperating income (expenses): |                                                                |                                  |        |         |                  |   |        |         |         |   |        |           |           |   |        |          
|                                | Interest income                                                |                                  |        | 4,021   |                  |   |        | 3,418   |         |   |        | 7,485     |           |   |        | 6,619     |          
|                                | Interest expense, net                                          |                                  |        | (21,448 | )                |   |        | (20,948 | )       |   |        | (42,118   | )         |   |        | (42,410   | )        
|                                | Other, net                                                     |                                  |        | 891     |                  |   |        | 2,304   |         |   |        | 1,469     |           |   |        | 3,886     |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|                                |                                                                | Total nonoperating expenses, net |        |         | (16,536          | ) |        |         | (15,226 | ) |        |           | (33,164   | ) |        |           | (31,905   | )
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Income before income taxes      |                                                                |                                  | 15,186 |         |                  |   | 11,525 |         |         |   | 49,503 |           |           |   | 10,731 |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Income taxes                    |                                                                |                                  |       |         |                  |   |       |         |         |   |       |           |           |   |       |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          
|Net income                      |                                                                | $                                | 15,186 |         |                  | $ | 11,525 |         |         | $ | 49,503 |           |           | $ | 10,731 |          
|                                |                                                                |                                  |        |         |                  |   |        |         |         |   |        |          



11



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##### Table of Contents



America West Airlines, Inc.


Condensed Consolidated Statements of Cash Flows


(in thousands)


(unaudited)


|                                                 |                                                                                  |                                       |         |          |          |   |         |          |         |  
|------------------------------------------------ | -------------------------------------------------------------------------------- | ------------------------------------- | ------- | -------- | -------- | - | ------- | -------- | ------- | -
|                                                 |                                                                                  | Six Months Ended June 30,             |        
|                                                 |                                                                                  |                                       |        
|                                                 |                                                                                  | 2005                                  |         |          | 2004     |  
|                                                 |                                                                                  |                                       |         |          |          |  
|Net cash provided by operating activities        |                                                                                  | $                                     | 223,562 |          |          | $ | 84,205  |         
|                                                 |                                                                                  |                                       |         |          |          |  
|Cash flows from investing activities:            |                                                                                  |                                       |         |          |          |   |         |         
|                                                 | Purchases of property and equipment                                              |                                       |         | (97,210  | )        |   |         | (77,173  | )      
|                                                 | Purchases of short-term investments                                              |                                       |         | (283,750 | )        |   |         | (273,533 | )      
|                                                 | Sales of short-term investments                                                  |                                       |         | 233,961  |          |   |         | 289,610  |        
|                                                 | Purchases of investments in debt securities                                      |                                       |         |         |          |   |         | (35,000  | )      
|                                                 | Sales of investments in debt securities                                          |                                       |         |         |          |   |         | 15,000   |        
|                                                 | Decrease (increase) in restricted cash                                           |                                       |         | (19,542  | )        |   |         | 1,270    |        
|                                                 | Proceeds from disposition of assets                                              |                                       |         | 1,227    |          |   |         | 1,848    |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 |                                                                                  | Net cash used in investing activities |         |          | (165,314 | ) |         |          | (77,978 | )
|                                                 |                                                                                  |                                       |         |          |          |  
|Cash flows from financing activities:            |                                                                                  |                                       |         |          |          |   |         |         
|                                                 | Repayment of debt                                                                |                                       |         | (86,717  | )        |   |         | (47,980  | )      
|                                                 | Other                                                                            |                                       |         | (4,750   | )        |   |         | (8       | )      
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 |                                                                                  | Net cash used in financing activities |         |          | (91,467  | ) |         |          | (47,988 | )
|                                                 |                                                                                  |                                       |         |          |          |  
|Net decrease in cash and cash equivalents        |                                                                                  |                                       | (33,219 | )        |          |   | (41,761 | )       
|Cash and cash equivalents at beginning of period |                                                                                  |                                       | 128,497 |          |          |   | 134,150 |         
|                                                 |                                                                                  |                                       |         |          |          |  
|Cash and cash equivalents at end of period       |                                                                                  | $                                     | 95,278  |          |          | $ | 92,389  |         
|                                                 |                                                                                  |                                       |         |          |          |  
|Cash paid for:                                   |                                                                                  |                                       |         |          |          |   |         |         
|                                                 | Interest, net of amounts capitalized                                             |                                       | $       | 17,047   |          |   | $       | 10,339   |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Income taxes                                                                     |                                       | $       | 6        |          |   | $       | 325      |        
|                                                 |                                                                                  |                                       |         |          |          |  
|Non-cash investing and financing activities:     |                                                                                  |                                       |         |          |          |   |         |         
|                                                 | Reclassification of investments in debt securities to short-term
    investments |                                       | $       | 30,000   |          |   | $       | 5,730    |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Notes payable issued under the aircraft purchase agreement                       |                                       | $       | 8,750    |          |   | $       | 7,000    |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Notes payable cancelled under the aircraft purchase agreement                    |                                       | $       | (7,000   | )        |   | $       |         |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Acquisition of property and equipment under capital leases                       |                                       | $       | 17       |          |   | $       |         |        
|                                                 |                                                                                  |                                       |         |          |          |  
|                                                 | Payment in kind notes issued, net of returns                                     |                                       | $       |         |          |   | $       | 4,672    |        
|                                                 |                                                                                  |                                       |         |          |          |  



12



---



##### Table of Contents



America West Airlines, Inc.


Notes to Condensed Consolidated Financial Statements


June 30, 2005




|   |                      
|-- | ---------------------
|1. | Basis of Presentation





Operating Revenues 
Express Operating Expenses 
Express Expenses Operating
Revenues  Other. Change in Method of Reporting for America West Express
Results






|   |                                         
|-- | ----------------------------------------
|2. | Advances to Parent Company and Affiliate

Other
Assets




|   |              
|-- | -------------
|3. | Stock Options

Accounting for Stock Issued to
Employees, Accounting for Stock-Based
Compensation,


13



---



##### Table of Contents





|                                 |  |                    |        |   |                  |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                 |  | Three Months Ended |        |   | Six Months Ended |  
|                                 |  | June 30,           |        |   | June 30,         |  
|                                 |  |                    |        |   |                  |  
|                                 |  | 2005               |        |   | 2004             |   |        | 2005 |  |   | 2004   |  
|                                 |  |                    |        |   |                  |   |        |      |  |   |        |  
|                                 |  | (in thousands)     |       
|Net income, as reported          |  | $                  | 15,186 |   |                  | $ | 11,525 |      |  | $ | 49,503 |   |  | $ | 10,731 |  
|Stock-based compensation expense |  |                    | (1,055 | ) |                  |   | (1,650 | )    |  |   | (2,345 | ) |  |   | (2,916 | )
|                                 |  |                    |        |   |                  |   |        |      |  |   |        |  
|Pro forma net income             |  | $                  | 14,131 |   |                  | $ | 9,875  |      |  | $ | 47,158 |   |  | $ | 7,815  |  
|                                 |  |                    |        |   |                  |   |        |      |  |   |        |  



|   |                 
|-- | ----------------
|4. | Flight Equipment





Operating Expenses  Other.




|   |                
|-- | ---------------
|5. | Special Charges



|                             |  |               |       |   |                       |   |      |       |  |   |       |  
|---------------------------- |  | ------------- | ----- | - | --------------------- | - | ---- | ----- |  | - | ----- | -
|                             |  | Fleet         |       |   | Contract Termination/ |   |      |      
|                             |  | Restructuring |       |   | Other Costs           |   |      | Total | 
|                             |  |               |       |   |                       |   |      |       | 
|Balance at December 31, 2004 |  | $             | 643   |   |                       | $ | 121  |       |  | $ | 764   |  
|                             |  |               |       |   |                       |   |      |       | 
|Special charges              |  |               | 690   |   |                       |   |     |       |  |   | 690   |  
|Payments                     |  |               | (305  | ) |                       |   | (111 | )     |  |   | (416  | )
|Revision of estimate         |  |               |      |   |                       |   | 147  |       |  |   | 147   |  
|                             |  |               |       |   |                       |   |      |       | 
|Balance at March 31, 2005    |  |               | 1,028 |   |                       |   | 157  |       |  |   | 1,185 |  
|                             |  |               |       |   |                       |   |      |       | 
|Special charges              |  |               |      |   |                       |   |     |       |  |   |      |  
|Payments                     |  |               |      |   |                       |   |     |       |  |   |      |  
|                             |  |               |       |   |                       |   |      |       | 
|Balance at June 30, 2005     |  | $             | 1,028 |   |                       | $ | 157  |       |  | $ | 1,185 |  
|                             |  |               |       |   |                       |   |      |       | 





|   |                    
|-- | -------------------
|6. | Segment Disclosures

Disclosures About Segments of
an Enterprise and Related Information




|   |                                                                   
|-- | ------------------------------------------------------------------
|7. | Change in Method of Reporting for America West Express
    Results



14



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##### Table of Contents











Basis of
Presentation, Operating Revenues  Other


|                         |  |                                  |         |  |             |   |        |                 |  |   |         | 
|------------------------ |  | -------------------------------- | ------- |  | ----------- | - | ------ | --------------- |  | - | ------- | 
|                         |  | Three Months Ended June 30, 2004 |        
|                         |  |                                  |        
|                         |  | As Reported                      |         |  | Adjustments |   |        | As Reclassified | 
|                         |  |                                  |         |  |             |   |        |                 | 
|Operating revenues:      |  |                                  |         |  |             |   |        |                 |  |   |         | 
|Passenger                |  | $                                | 569,166 |  |             | $ |       |                 |  | $ | 569,166 | 
|Express                  |  |                                  |        |  |             |   | 85,466 | (1)             |  |   | 85,466  | 
|Cargo and other          |  |                                  | 35,738  |  |             |   | 3,618  |                 |  |   | 39,356  | 
|                         |  |                                  |         |  |             |   |        |                 | 
|Total operating revenues |  | $                                | 604,904 |  |             | $ | 89,084 |                 |  | $ | 693,988 | 
|                         |  |                                  |         |  |             |   |        |                 | 
|Operating expenses:      |  |                                  |         |  |             |   |        |                 |  |   |         | 
|Operating expenses       |  | $                                | 578,153 |  |             | $ | (718   | )               |  | $ | 577,435 | 
|Express expenses         |  |                                  |        |  |             |   | 89,802 | (2)             |  |   | 89,802  | 
|                         |  |                                  |         |  |             |   |        |                 | 
|Total operating expenses |  | $                                | 578,153 |  |             | $ | 89,084 |                 |  | $ | 667,237 | 
|                         |  |                                  |         |  |             |   |        |                 | 

|                         |  |                                |           |  |             |   |         |                 |  |   |           | 
|------------------------ |  | ------------------------------ | --------- |  | ----------- | - | ------- | --------------- |  | - | --------- | 
|                         |  | Six Months Ended June 30, 2004 |          
|                         |  |                                |          
|                         |  | As Reported                    |           |  | Adjustments |   |         | As Reclassified | 
|                         |  |                                |           |  |             |   |         |                 | 
|Operating revenues:      |  |                                |           |  |             |   |         |                 |  |   |           | 
|Passenger                |  | $                              | 1,106,499 |  |             | $ |        |                 |  | $ | 1,106,499 | 
|Express                  |  |                                |          |  |             |   | 158,117 | (1)             |  |   | 158,117   | 
|Cargo and other          |  |                                | 74,779    |  |             |   | 3,750   |                 |  |   | 78,529    | 
|                         |  |                                |           |  |             |   |         |                 | 
|Total operating revenues |  | $                              | 1,181,278 |  |             | $ | 161,867 |                 |  | $ | 1,343,145 | 
|                         |  |                                |           |  |             |   |         |                 | 
|Operating expenses:      |  |                                |           |  |             |   |         |                 |  |   |           | 
|Operating expenses       |  | $                              | 1,138,642 |  |             | $ | (1,237  | )               |  | $ | 1,137,405 | 
|Express expenses         |  |                                |          |  |             |   | 163,104 | (3)             |  |   | 163,104   | 
|                         |  |                                |           |  |             |   |         |                 | 
|Total operating expenses |  | $                              | 1,138,642 |  |             | $ | 161,867 |                 |  | $ | 1,300,509 | 
|                         |  |                                |           |  |             |   |         |                 | 

15



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##### Table of Contents








|    |                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reclassification of Express passenger revenues from
    Operating Revenues  Other.                                                                                        
|   
|(2) | Reclassification of $89.1 million and $0.7 million of
    Express operating expenses from Operating
    Revenues  Otherand Operating
    Expenses  Other,respectively. 
|   
|(3) | Reclassification of $161.9 million and $1.2 million of
    Express operating expenses from Operating
    Revenues  Otherand Operating
    Expenses  Other,respectively.





|   |                                                             
|-- | ------------------------------------------------------------
|8. | Agreement to Merge with Subsidiary of U.S. Airways
    Group





16



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##### Table of Contents



America West Holdings Corporation and


America West Airlines, Inc.


June 30, 2005







|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.



Overview






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Passenger revenues were $654.9 million for the quarter, an
    increase of $85.7 million from the second quarter of 2004.
    Passenger revenue per available seat mile (RASM) was
    8.44 cents for the second quarter of 2005, an increase of 11.9%
    versus the 2004 second quarter, driven by a 4.0 point increase
    in load factor as well as a 6.5% increase in yield. The
    Companys strong unit revenue improvement was due to more
    aggressive peak day yield management in the 2005 second quarter,
    more balanced capacity in the markets served by AWA in the
    western United States and the positive impact of numerous legacy
    and low cost carrier fare increases in the winter and spring of
    2005. Reductions in late 2004 of the Companys
    transcontinental flying, which yields were negatively impacted
    by competitive responses, also contributed to improved
    period-over-period RASM and yield performance.
|
| |  | The airline industry and AWA incurred and continue to face an
    increase in costs resulting from record high jet fuel prices.
    The average price per gallon of fuel increased 43.0% from 116.7
    cents in the second quarter of 2004 to 166.9 cents per gallon in
    the second quarter of 2005. As a result, aircraft fuel expense
    for the quarter was $191.0 million, an increase of
    $58.0 million, or 43.6%, from the second quarter of 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Accounting for Derivative
Instruments and Hedging Activities.




17



---



##### Table of Contents



Agreement to Merge with Subsidiary of U.S. Airways
Group














18



---



##### Table of Contents



Airline Operations Update




|                       |  |      |      |  |      |                |      |             |  |  |      |  |  |     |      |  |     |  |      |     |  |  |      |  |  |     |       |   |  |  |      |  |  |  |       |  
|---------------------- |  | ---- | ---- |  | ---- | -------------- | ---- | ----------- |  |  | ---- |  |  | --- | ---- |  | --- |  | ---- | --- |  |  | ---- |  |  | --- | ----- | - |  |  | ---- |  |  |  | ----- | -
|                       |  |      |      |  |      | Percent Change |     
|                       |  | 2005 |      |  | 2004 |                |      | 2005 - 2004 | 
|                       |  |      |      |  |      |                |      |             | 
|                       |  | Apr  |      |  | May  |                |      | Jun         |  |  | Apr  |  |  | May |      |  | Jun |  |      | Apr |  |  | May  |  |  | Jun |      
|                       |  |      |      |  |      |                |      |             |  |  |      |  |  |     |      |  |     |  |      |     |  |  |      |  |  |     |      
|On-time performance(a) |  |      | 85.2 |  |      |                | 85.5 |             |  |  | 80.8 |  |  |     | 76.9 |  |     |  | 80.3 |     |  |  | 73.0 |  |  |     | 10.8  |   |  |  | 6.4  |  |  |  | 10.8  |  
|Completion factor(b)   |  |      | 99.4 |  |      |                | 99.0 |             |  |  | 99.0 |  |  |     | 98.2 |  |     |  | 98.7 |     |  |  | 98.4 |  |  |     | 1.2   |   |  |  | 0.3  |  |  |  | 0.6   |  
|Mishandled baggage(c)  |  |      | 3.39 |  |      |                | 3.27 |             |  |  | 3.58 |  |  |     | 3.07 |  |     |  | 2.94 |     |  |  | 4.24 |  |  |     | 10.5  |   |  |  | 11.3 |  |  |  | (15.6 | )
|Customer complaints(d) |  |      | 0.81 |  |      |                | 0.98 |             |  |  | 1.05 |  |  |     | 1.21 |  |     |  | 0.86 |     |  |  | 1.13 |  |  |     | (32.9 | ) |  |  | 13.8 |  |  |  | (6.6  | )






|    |  |                                                                           
|--- |  | --------------------------------------------------------------------------
|(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.



Summary of Holdings Financial Results










19



---



##### Table of Contents







AWAs Results of
Operations






|                                                     |  |                |         |  |         |  |            |                |  |  |         |   |  |      |         |  |             |  |         |  |  |  |         |  
|---------------------------------------------------- |  | -------------- | ------- |  | ------- |  | ---------- | -------------- |  |  | ------- | - |  | ---- | ------- |  | ----------- |  | ------- |  |  |  | ------- | -
|                                                     |  | Three Months   |         |  |         |  | Six Months |                |  | 
|                                                     |  | Ended June 30, |         |  | Percent |  |            | Ended June 30, |  |  | Percent |  
|                                                     |  |                |         |  | Change  |  |            |                |  |  | Change  |  
|                                                     |  | 2005           |         |  | 2004    |  |            | 2005 - 2004    |  |  | 2005    |   |  | 2004 |         |  | 2005 - 2004 | 
|                                                     |  |                |         |  |         |  |            |                |  |  |         |   |  |      |         |  |             | 
|Revenue passenger miles (in millions)(a)             |  |                | 6,386   |  |         |  | 5,915      |                |  |  | 8.0     |   |  |      | 12,057  |  |             |  | 11,222  |  |  |  | 7.4     |  
|Available seat miles (in millions)(b)                |  |                | 7,755   |  |         |  | 7,552      |                |  |  | 2.7     |   |  |      | 15,057  |  |             |  | 14,904  |  |  |  | 1.0     |  
|Passenger load factor (percent)(c)                   |  |                | 82.3    |  |         |  | 78.3       |                |  |  | 4.0 pts |   |  |      | 80.1    |  |             |  | 75.3    |  |  |  | 4.8 pts |  
|Yield per revenue passenger mile (cents)(d)          |  |                | 10.25   |  |         |  | 9.62       |                |  |  | 6.5     |   |  |      | 10.20   |  |             |  | 9.86    |  |  |  | 3.4     |  
|Passenger revenue per available seat mile (cents)(e) |  |                | 8.44    |  |         |  | 7.54       |                |  |  | 11.9    |   |  |      | 8.17    |  |             |  | 7.42    |  |  |  | 10.1    |  
|Total revenue per available seat mile (cents)(f)     |  |                | 9.07    |  |         |  | 8.06       |                |  |  | 12.5    |   |  |      | 8.79    |  |             |  | 7.95    |  |  |  | 10.6    |  
|Passenger enplanements (in thousands)(g)             |  |                | 5,752   |  |         |  | 5,343      |                |  |  | 7.7     |   |  |      | 10,924  |  |             |  | 10,241  |  |  |  | 6.7     |  
|Aircraft (end of period)                             |  |                | 143     |  |         |  | 140        |                |  |  | 2.1     |   |  |      | 143     |  |             |  | 140     |  |  |  | 2.1     |  
|Average daily aircraft utilization (hours)(h)        |  |                | 11.1    |  |         |  | 11.0       |                |  |  | 0.9     |   |  |      | 11.1    |  |             |  | 10.9    |  |  |  | 1.8     |  
|Block hours(i)                                       |  |                | 143,365 |  |         |  | 139,202    |                |  |  | 3.0     |   |  |      | 279,862 |  |             |  | 275,880 |  |  |  | 1.4     |  
|Average stage length (miles)(j)                      |  |                | 1,037   |  |         |  | 1,058      |                |  |  | (2.0    | ) |  |      | 1,030   |  |             |  | 1,047   |  |  |  | (1.6    | )
|Average passenger journey (miles)(k)                 |  |                | 1,681   |  |         |  | 1,692      |                |  |  | (0.7    | ) |  |      | 1,653   |  |             |  | 1,644   |  |  |  | 0.5     |  
|Fuel consumption (gallons in millions)               |  |                | 114.5   |  |         |  | 113.9      |                |  |  | 0.5     |   |  |      | 221.7   |  |             |  | 222.4   |  |  |  | (0.3    | )
|Average fuel price (cents per gallon)                |  |                | 166.9   |  |         |  | 116.7      |                |  |  | 43.0    |   |  |      | 154.7   |  |             |  | 111.2   |  |  |  | 39.1    |  
|Average number of full-time equivalent employees     |  |                | 12,200  |  |         |  | 11,936     |                |  |  | 2.2     |   |  |      | 12,177  |  |             |  | 11,881  |  |  |  | 2.5     |  






|    |  |                                                                                                                                                                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Revenue passenger mile (RPM)  A basic
    measure of sales volume. It is one passenger flown one mile.                                                                                                                                      
|   
|(b) |  | Available seat mile (ASM)  A basic
    measure of production. It is one seat flown one mile.                                                                                                                                                
|   
|(c) |  | Load factor  The percentage of available seats that
    are filled with revenue passengers.                                                                                                                                                   
|   
|(d) |  | Yield  A measure of airline revenue derived by
    dividing passenger revenue by revenue passenger miles and
    expressed in cents per mile.                                                                                                 
|   
|(e) |  | Passenger revenue per available seat mile
    (RASM)  Total passenger revenues divided
    by total available seat miles.                                                                                                                   
|   
|(f) |  | Total revenue per available seat mile  Total
    operating revenues divided by total available seat miles.                                                                                                                                    
|   
|(g) |  | Passenger enplanements  The number of passengers on
    board an aircraft including local, connecting and through
    passengers.                                                                                                             
|   
|(h) |  | Average daily aircraft utilization  The average
    number of block hours per day for all aircraft in service.                                                                                                                                
|   
|(i) |  | 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.
|   
|(j) |  | Average stage length  The average of the distances
    flown on each segment of every route.                                                                                                                                                  
|   
|(k) |  | Average passenger journey  The average one-way trip
    measured in miles for one passenger origination.                                                                                                                                      

20



---



##### Table of Contents





| |                                          
| | -----------------------------------------
| | Three Months Ended June 30, 2005 and 2004











|                    |                                                                |                                   |   |         |         |  |   |         |         | 
|------------------- | -------------------------------------------------------------- | --------------------------------- | - | ------- | ------- |  | - | ------- | ------- | 
|                    |                                                                | Three Months Ended                |  
|                    |                                                                | June 30,                          |  
|                    |                                                                |                                   |  
|                    |                                                                | 2005                              |   |         | 2004    | 
|                    |                                                                |                                   |   |         |         | 
|Operating expenses: |                                                                |                                   |   |         |         |  |   |        
|                    | Salaries and related costs                                     |                                   | $ | 173,399 |         |  | $ | 161,617 |        
|                    | Aircraft rents                                                 |                                   |   | 80,673  |         |  |   | 75,346  |        
|                    | Other rents and landing fees                                   |                                   |   | 45,727  |         |  |   | 42,011  |        
|                    | Aircraft fuel                                                  |                                   |   | 191,006 |         |  |   | 132,977 |        
|                    | Realized and unrealized gains on fuel hedging instruments, net |                                   |   | (8,673  | )       |  |   | (9,485  | )      
|                    | Agency commissions                                             |                                   |   | 6,710   |         |  |   | 6,253   |        
|                    | Aircraft maintenance materials and repairs                     |                                   |   | 49,359  |         |  |   | 52,350  |        
|                    | Depreciation and amortization                                  |                                   |   | 11,587  |         |  |   | 12,587  |        
|                    | Other                                                          |                                   |   | 115,469 |         |  |   | 103,779 |        
|                    |                                                                |                                   |   |         |         | 
|                    |                                                                | Total mainline operating expenses |   |         | 665,257 |  |   |         | 577,435 | 
|                    | Express expenses                                               |                                   |   | 136,048 |         |  |   | 89,802  |        
|                    |                                                                |                                   |   |         |         | 
|                    |                                                                | Total operating expenses          |   | $       | 801,305 |  |   | $       | 667,237 | 
|                    |                                                                |                                   |   |         |         | 



21



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##### Table of Contents







|                                                               |  |            |       |   |         |  |       |           |  |  |       |  
|-------------------------------------------------------------- |  | ---------- | ----- | - | ------- |  | ----- | --------- |  |  | ----- | -
|                                                               |  | Three      |       |   |        
|                                                               |  | Months     |       |   |        
|                                                               |  | Ended      |       |   |        
|                                                               |  | March 31,  |       |   | Percent | 
|                                                               |  |            |       |   | Change  | 
|                                                               |  | 2005       |       |   | 2004    |  |       | 2005-2004 | 
|                                                               |  |            |       |   |         |  |       |           | 
|                                                               |  | (in cents) |       |   |        
|Salaries and related costs                                     |  |            | 2.24  |   |         |  | 2.14  |           |  |  | 4.5   |  
|Aircraft rents                                                 |  |            | 1.04  |   |         |  | 1.00  |           |  |  | 4.3   |  
|Other rents and landing fees                                   |  |            | 0.59  |   |         |  | 0.56  |           |  |  | 6.0   |  
|Aircraft fuel                                                  |  |            | 2.46  |   |         |  | 1.76  |           |  |  | 39.9  |  
|Realized and unrealized gains on fuel hedging instruments, net |  |            | (0.11 | ) |         |  | (0.12 | )         |  |  | (11.0 | )
|Agency commissions                                             |  |            | 0.09  |   |         |  | 0.08  |           |  |  | 4.5   |  
|Aircraft maintenance materials and repairs                     |  |            | 0.63  |   |         |  | 0.69  |           |  |  | (8.2  | )
|Depreciation and amortization                                  |  |            | 0.15  |   |         |  | 0.17  |           |  |  | (10.4 | )
|Other                                                          |  |            | 1.49  |   |         |  | 1.37  |           |  |  | 8.4   |  
|                                                               |  |            |       |   |         |  |       |           | 
|                                                               |  |            | 8.58  |   |         |  | 7.65  |           |  |  | 12.2  |  
|                                                               |  |            |       |   |         |  |       |           | 





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Salaries and related costs per ASM increased 4.5% primarily due
    to an increase in benefit related expenses ($9.2 million)
    including defined contribution plan payments which our pilots
    became eligible for on January 1, 2005 ($3.4 million),
    self-funded disability requirements ($1.1 million) and
    higher medical insurance costs ($3.8 million).                                                                                                                                                                                                                       
|
| |  | Aircraft rent expense per ASM increased 4.3% due principally to
    mix as previously owned and leased Boeing 737-200 aircraft were
    retired or returned to aircraft lessors and replaced with leased
    Airbus A320 and A319 aircraft at higher monthly lease rates.                                                                                                                                                                                                                                                                                                                      
|
| |  | Aircraft fuel expense per ASM increased 39.9% primarily due to a
    43.0% increase in the average price per gallon of fuel to 166.9
    cents in the second quarter of 2005 from 116.7 cents in the
    comparable 2004 quarter.                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Aircraft maintenance materials and repairs expense per ASM
    decreased 8.2% primarily due to decreases in aircraft C-Check
    ($3.9 million) which was offset in part by an increase in
    capitalized maintenance amortization ($1.3 million).                                                                                                                                                                                                                                                                                                                                            
|
| |  | Depreciation and amortization expense per ASM decreased 10.4%
    primarily due to lower amortization expense related to computer
    hardware and software ($1.0 million) as a result of
    AWAs cash conservation program, which reduced capital
    expenditures.                                                                                                                                                                                                                                                                                                                         
|
| |  | Other operating expenses per ASM increased 8.4% due primarily to
    a $4.3 million loss related to an aircraft sale-leaseback
    transaction in the second quarter of 2005 and increases in
    credit card fees ($2.9 million), and ground handling
    services ($1.5 million). The second quarter of 2004
    included a $3.5 million gain resulting from the settlement
    of a claim in bankruptcy for amounts earned under an executory
    contract and a $1.0 million volume incentive earned due to
    certain Affinity Card sales levels meeting certain contract
    thresholds.



22



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##### Table of Contents







Six Months Ended June 30, 2005 and 2004










23



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##### Table of Contents





|                    |                                                                |                                   |   |         |           |  |   |         |           | 
|------------------- | -------------------------------------------------------------- | --------------------------------- | - | ------- | --------- |  | - | ------- | --------- | 
|                    |                                                                | Six Months Ended June 30,         |  
|                    |                                                                |                                   |  
|                    |                                                                | 2005                              |   |         | 2004      | 
|                    |                                                                |                                   |   |         |           | 
|Operating expenses: |                                                                |                                   |   |         |           |  |   |        
|                    | Salaries and related costs                                     |                                   | $ | 348,252 |           |  | $ | 327,546 |          
|                    | Aircraft rents                                                 |                                   |   | 157,510 |           |  |   | 150,531 |          
|                    | Other rents and landing fees                                   |                                   |   | 87,266  |           |  |   | 83,252  |          
|                    | Aircraft fuel                                                  |                                   |   | 342,869 |           |  |   | 247,189 |          
|                    | Realized and unrealized gains on fuel hedging instruments, net |                                   |   | (69,156 | )         |  |   | (9,889  | )        
|                    | Agency commissions                                             |                                   |   | 12,264  |           |  |   | 13,003  |          
|                    | Aircraft maintenance materials and repairs                     |                                   |   | 97,347  |           |  |   | 102,404 |          
|                    | Depreciation and amortization                                  |                                   |   | 23,447  |           |  |   | 26,378  |          
|                    | Special charges (credits), net                                 |                                   |   | 811     |           |  |   | (600    | )        
|                    | Other                                                          |                                   |   | 225,518 |           |  |   | 197,591 |          
|                    |                                                                |                                   |   |         |           | 
|                    |                                                                | Total mainline operating expenses |   |         | 1,226,128 |  |   |         | 1,137,405 | 
|                    | Express expenses                                               |                                   |   | 246,874 |           |  |   | 163,104 |          
|                    |                                                                |                                   |   |         |           | 
|                    |                                                                | Total operating expenses          |   | $       | 1,473,002 |  |   | $       | 1,300,509 | 
|                    |                                                                |                                   |   |         |           | 





|                                                               |  |            |       |   |         |  |       |           |  |  |       |  
|-------------------------------------------------------------- |  | ---------- | ----- | - | ------- |  | ----- | --------- |  |  | ----- | -
|                                                               |  | Three      |       |   |        
|                                                               |  | Months     |       |   |        
|                                                               |  | Ended      |       |   |        
|                                                               |  | March 31,  |       |   | Percent | 
|                                                               |  |            |       |   | Change  | 
|                                                               |  | 2005       |       |   | 2004    |  |       | 2005-2004 | 
|                                                               |  |            |       |   |         |  |       |           | 
|                                                               |  | (in cents) |       |   |        
|Salaries and related costs                                     |  |            | 2.31  |   |         |  | 2.20  |           |  |  | 5.2   |  
|Aircraft rents                                                 |  |            | 1.04  |   |         |  | 1.00  |           |  |  | 3.6   |  
|Other rents and landing fees                                   |  |            | 0.58  |   |         |  | 0.56  |           |  |  | 3.8   |  
|Aircraft fuel                                                  |  |            | 2.28  |   |         |  | 1.67  |           |  |  | 37.3  |  
|Realized and unrealized gains on fuel hedging instruments, net |  |            | (0.46 | ) |         |  | (0.07 | )         |  |  |      |  
|Agency commissions                                             |  |            | 0.08  |   |         |  | 0.09  |           |  |  | (6.6  | )
|Aircraft maintenance materials and repairs                     |  |            | 0.65  |   |         |  | 0.69  |           |  |  | (5.9  | )
|Depreciation and amortization                                  |  |            | 0.15  |   |         |  | 0.17  |           |  |  | (12.0 | )
|Special charges                                                |  |            | 0.01  |   |         |  |      |           |  |  |      |  
|Other                                                          |  |            | 1.50  |   |         |  | 1.32  |           |  |  | 13.0  |  
|                                                               |  |            |       |   |         |  |       |           | 
|                                                               |  |            | 8.14  |   |         |  | 7.63  |           |  |  | 6.7   |  
|                                                               |  |            |       |   |         |  |       |           | 





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Salaries and related costs per ASM increased 5.2% primarily due
    to an increase in benefit related expenses ($17.0 million)
    including defined contribution plan payments which our pilots
    became eligible for on January 1, 2005 ($6.6 million),
    self-funded disability requirements ($3.2 million), higher
    medical insurance costs ($3.5 million) and workers
    compensation claim coverage ($1.1 million).

24



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Aircraft rent expense per ASM increased 3.6% due principally to
    mix as previously owned and leased Boeing 737-200 aircraft were
    retired or returned to aircraft lessors and replaced with leased
    Airbus A320 and A319 aircraft at higher monthly lease rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Aircraft fuel expense per ASM increased 37.3% primarily due to a
    39.2% increase in the average price per gallon of fuel to 154.7
    cents in the first six months of 2005 from 111.2 cents in the
    comparable 2004 quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Aircraft maintenance materials and repairs expense per ASM
    decreased 5.9% primarily due to decreases in aircraft C-Check
    ($5.2 million), airframe maintenance ($1.4 million),
    and other maintenance related expenses ($1.1 million),
    which was offset in part by an increase in capitalized
    maintenance amortization ($2.9 million). The decrease in
    other maintenance related expenses resulted from a reduction in
    the rates charged for the repair of certain rotable equipment
    under a power-by-the-hour agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Depreciation and amortization expense per ASM decreased 12.0%
    due principally to lower amortization expense related to
    computer hardware and software ($2.1 million) as a result
    of AWAs cash conservation program, which reduced capital
    expenditures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Other operating expenses per ASM increased 13.0% due primarily
    to a $8.0 million aggregate loss associated with two
    aircraft sale-leaseback transactions in the first six months of
    2005 and increases in credit card fees ($3.9 million),
    ground handling services ($3.0 million), airport guard
    services ($2.3 million), property taxes ($1.9 million)
    and crew per diem ($1.8 million). The first six months of
    2004 included 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
    $1.7 million reduction in bad debt expense due to a
    recovery of a previously reserved debt. A $3.5 million gain
    resulting from the settlement of a claim in bankruptcy for
    amounts earned under an executory contract and a
    $1.0 million volume incentive earned due to certain
    Affinity Card sales levels meeting certain contract thresholds
    in the 2004 period also contributed to the increase.







| |                                
| | -------------------------------
| | Liquidity and Capital Resources



| |                         
| | ------------------------
| | Sources and Uses of Cash



25



---



##### Table of Contents













| |                               
| | ------------------------------
| | Off-Balance Sheet Arrangements



| |                        
| | -----------------------
| | The Pass Through Trusts





26



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##### Table of Contents





| |                       
| | ----------------------
| | Other Operating Leases





| |                               
| | ------------------------------
| | Special Facility Revenue Bonds

The Effect of
Lessee Involvement in Asset Construction,






| |            
| | -----------
| | Commitments





| |                           
| | --------------------------
| | Government Guaranteed Loan



27



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##### Table of Contents







| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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; 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.







| |                         
| | ------------------------
| | GECC Term Loan Financing











| |                                       
| | --------------------------------------
| | Senior Secured Discount Notes Due 2009



28



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##### Table of Contents











3 4




| |                                       
| | --------------------------------------
| | 7.5% Convertible Senior Notes due 2009





|                    |  |                  |        |  
|------------------- |  | ---------------- | ------ | -
|Year                |  | Redemption Price |       
|                    |  |                  |       
|2005                |  |                  | 103.75 | %
|2006                |  |                  | 102.50 | %
|2007                |  |                  | 101.25 | %
|2008 and thereafter |  |                  | 100.00 | %



| |                                         
| | ----------------------------------------
| | 7.25% Senior Exchangeable Notes due 2023



29



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##### Table of Contents

















| |                                   
| | ----------------------------------
| | Other Indebtedness and Obligations



30



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##### Table of Contents





|                                                              |                                             |                |         |        |      |   |         |        |  |   |         |        |  |      |         |        |             |   |         |         |  |   |           |         |  |   |           |         | 
|------------------------------------------------------------- | ------------------------------------------- | -------------- | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ |  | ---- | ------- | ------ | ----------- | - | ------- | ------- |  | - | --------- | ------- |  | - | --------- | ------- | 
|                                                              |                                             | 2005           |         |        | 2006 |   |         | 2007   |  |   | 2008    |        |  | 2009 |         |        | Beyond 2009 |   |         | Total   | 
|                                                              |                                             |                |         |        |      |   |         |        |  |   |         |        |  |      |         |        |             |   |         |         | 
|                                                              |                                             | (in thousands) |        
|Long-term debt:                                               |                                             |                |         |        |      |   |         |        |  |   |         |        |  |      |         |        |             |   |         |         |  |   |           |         |  |   |           |        
|                                                              | Equipment notes 
    non-EETC(1)           |                | $       | 4,153  |      |   | $       | 8,305  |  |   | $       | 7,772  |  |      | $       | 15,082 |             |   | $       |        |  |   | $         |        |  |   | $         | 35,312  | 
|                                                              | GECC term loan(2)                           |                |         |       |      |   |         | 5,158  |  |   |         | 5,158  |  |      |         | 5,158  |             |   |         | 5,158   |  |   |           | 89,932  |  |   |           | 110,564 | 
|                                                              | 7.5% convertible senior notes due 2009(3)   |                |         |       |      |   |         |       |  |   |         |       |  |      |         |       |             |   |         | 112,299 |  |   |           |        |  |   |           | 112,299 | 
|                                                              | 7.25% senior exchangeable notes due 2023(4) |                |         |       |      |   |         |       |  |   |         |       |  |      |         |       |             |   |         |        |  |   |           | 252,695 |  |   |           | 252,695 | 
|                                                              | Government guaranteed loan(5)               |                |         | 42,900 |      |   |         | 85,800 |  |   |         | 85,800 |  |      |         | 85,800 |             |   |         |        |  |   |           |        |  |   |           | 300,300 | 
|                                                              | State loan(6)                               |                |         | 250    |      |   |         | 250    |  |   |         | 250    |  |      |         |       |             |   |         |        |  |   |           |        |  |   |           | 750     | 
|                                                              | Industrial development bonds(7)             |                |         |       |      |   |         |       |  |   |         |       |  |      |         |       |             |   |         |        |  |   |           | 29,300  |  |   |           | 29,300  | 
|                                                              | AVSA promissory notes(8)                    |                |         | 8,750  |      |   |         | 8,750  |  |   |         |       |  |      |         |       |             |   |         |        |  |   |           |        |  |   |           | 17,500  | 
|                                                              | Senior Secured Discount Notes(9)            |                |         | 1,530  |      |   |         | 1,529  |  |   |         | 1,529  |  |      |         | 1,530  |             |   |         | 29,870  |  |   |           |        |  |   |           | 35,988  | 
|                                                              |                                             |                |         |        |      |   |         |        |  |   |         |        |  |      |         |        |             |   |         |         | 
|                                                              |                                             |                | 57,583  |        |      |   | 109,792 |        |  |   | 100,509 |        |  |      | 107,570 |        |             |   | 147,327 |         |  |   | 371,927   |         |  |   | 894,708   |        
|Cash aircraft rental payments(10)                             |                                             |                | 149,933 |        |      |   | 331,798 |        |  |   | 307,568 |        |  |      | 259,409 |        |             |   | 230,610 |         |  |   | 1,666,132 |         |  |   | 2,945,450 |        
|Lease payments on equipment and facility operating leases(11) |                                             |                | 10,924  |        |      |   | 20,687  |        |  |   | 18,183  |        |  |      | 17,866  |        |             |   | 16,299  |         |  |   | 55,708    |         |  |   | 139,667   |        
|Capital lease obligations                                     |                                             |                | 4,472   |        |      |   | 4,991   |        |  |   | 1,773   |        |  |      |        |        |             |   |        |         |  |   |          |         |  |   | 11,236    |        
|Special facility revenue bonds(12)                            |                                             |                | 1,363   |        |      |   | 1,363   |        |  |   | 1,362   |        |  |      | 1,362   |        |             |   | 2,044   |         |  |   | 36,106    |         |  |   | 43,600    |        
|Aircraft purchase commitments(13)                             |                                             |                | 173,042 |        |      |   | 468,136 |        |  |   | 48,142  |        |  |      |        |        |             |   |        |         |  |   |          |         |  |   | 689,320   |        
|Engine maintenance commitments(14)                            |                                             |                | 6,000   |        |      |   | 6,000   |        |  |   | 3,000   |        |  |      | 1,000   |        |             |   |        |         |  |   |          |         |  |   | 16,000    |        
|                                                              |                                             |                |         |        |      |   |         |        |  |   |         |        |  |      |         |        |             |   |         |         | 
|Total                                                         |                                             | $              | 403,317 |        |      | $ | 942,767 |        |  | $ | 480,537 |        |  | $    | 387,207 |        |             | $ | 396,280 |         |  | $ | 2,129,873 |         |  | $ | 4,739,981 |        
|                                                              |                                             |                |         |        |      |   |         |        |  |   |         |        |  |      |         |        |             |   |         |         | 






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Includes approximately $35.3 million of equipment notes
    with variable interest rates of 3.94% to 4.72%, averaging 4.07%
    at June 30, 2005, installments due 2005 through 2008.                                                                                                                                                                                                                                                                                                                  
|
| | (2) | The amount consists of the Spare Parts Facility and the Engine
    Facility with a variable interest rate of 7.33% at June 30,
    2005. See  GECC Term
    Loan Financingabove.                                                                                                                                                                                                                                                                                                                    
|
| | (3) | Includes $90.7 million principal amount of
    7.5% convertible senior notes, due 2009, and
    $21.6 million of interest paid in kind of issuance through
    December 31, 2004. For financial reporting purposes, we
    initially recorded the convertible senior notes at their fair
    market value on the date of issuance. As of June 30, 2005,
    the accreted balance of the convertible senior notes in the
    accompanying consolidated balance sheet is approximately
    $70.6 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 $300.3 million with a
    variable interest rate of 3.49% at June 30, 2005 and
    ratable principal payments due 2005 through 2008. Guarantee fees
    of approximately 8.0% of                                                                                                                                                                                                                                                                                   

31



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| |     |                                                                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------
| |     | the outstanding guaranteed principal balance in 2005 through
    2008 are payable to the U.S. Treasury Department and other
    loan participants.
|
| | (6) | Includes Arizona State loan of $0.8 million due December
    2007 with a variable interest rate of 7.87% at June 30,
    2005.                    
|
| | (7) | Includes $29.3 million of 6.3% industrial development bonds
    due April 2023.                                                                   
|
| | (8) | Includes AVSA promissory notes of $17.5 million due 2005
    with variable interest rates averaging 4.47% at June 30,
    2005.                   
|
| | (9) | Includes $36.0 million of senior secured discount notes due
    2009 with a variable interest rate of 6.98% at June 30,
    2005.                 



|     |                                                                                                                                                                                                                                                                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes non-cancelable operating leases for 137 aircraft with
    remaining terms ranging from three months to approximately
    19 years. Management estimates the debt equivalent value of
    these operating leases approximates $1.9 billion using an
    interest rate of 10%.                                                                                                   
|    
|(11) | Includes leases for terminal space, ground facilities, the
    flight training center and computer and other equipment under
    non-cancelable operating leases.                                                                                                                                                                                                                       
|    
|(12) | Includes Series 1999 Terminal 4 Improvements Bonds,
    due 2019.                                                                                                                                                                                                                                                                                                                       
|    
|(13) | Includes commitments to purchase a total of 18 Airbus
    aircraft and five spare engines for delivery in 2005 through
    2007.                                                                                                                                                                                                                                                        
|    
|(14) | Includes minimum commitments under AWAs rate per engine
    hour agreement with General Electric Engine Services for
    overhaul maintenance services on CFM56-3B engines through April
    2008. Minimum monthly commitment amounts: for the period through
    and including April 2006  $1.0 million, for the
    period May 2006 through and including April 2008 
    $250,000.







| |                                      
| | -------------------------------------
| | Financial Covenants and Credit Rating

Risk Factors Relating to
the Company and Industry Related Risks  Our high
level of fixed obligations limits our ability to fund general
corporate requirements and obtain additional financing, limits
our flexibility in responding to competitive developments


32



---



##### Table of Contents



and increases our vulnerability to adverse economic and
industry conditions.




Other Information




| |                
| | ---------------
| | Labor Relations

Risk Factors Relating to the Company
and Industry Related Risks  Union disputes, employee
strikes and other labor-related disruptions may adversely affect
our operations.




| |                   
| | ------------------
| | Regulatory Matters







| |                           
| | --------------------------
| | Related Party Transactions



33



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##### Table of Contents





| |                                            
| | -------------------------------------------
| | Application of Critical Accounting Policies





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Passenger Revenue  Passenger revenue is
    recognized when transportation is provided. Ticket sales for
    transportation that has not yet been provided are recorded as
    air traffic liability. Passenger traffic commissions and related
    fees are expensed when the related revenue is recognized.
    Passenger traffic commissions and related fees not yet
    recognized are included as a prepaid expense. Due to complex
    pricing structures, refund and exchange policies, and interline
    agreements with other airlines, certain amounts are recognized
    in revenue using estimates regarding both the timing of the
    revenue recognition and the amount of revenue to be recognized.
    These estimates are generally based on the statistical analysis
    of our historical data. Any adjustments resulting from periodic
    evaluations of the estimated air traffic liability are included
    in results of operations during the period in which the
    evaluations are completed.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Accounting For Long-Lived Assets  Owned
    property and equipment are recorded at cost and depreciated to
    residual values over the estimated useful lives using the
    straight-line method. Leasehold improvements relating to flight
    equipment and other property on operating leases are amortized
    over the life of the lease, or the life of the asset, whichever
    is shorter. Interest on advance payments for aircraft
    acquisitions and on expenditures for aircraft improvements is
    capitalized and added to the cost of the asset. The estimated
    useful lives of our owned aircraft, jet engines, flight
    equipment and rotable parts range from five to 25 years.
    The estimated useful lives of our technical support facility and
    flight training center in Phoenix, Arizona are 22 years and
    30 years, respectively. The estimated useful lives of our
    ground property and equipment range from three to 12 years.
    We test for impairment losses on long-lived assets used in
    operations when events and circumstances indicate that the
    assets might be impaired as defined by SFAS No. 144,
    Accounting for the Impairment or Disposal of Long-Lived
    Assets.An impairment loss is recognized if the
    carrying amount of the asset is not recoverable from its
    undiscounted cash flows and is measured as the difference
    between the carrying amount and fair value of the asset.
|
| |  | Frequent Flyer Accounting  We maintain a
    frequent travel award program known as FlightFund
    that provides a variety of awards to program members based on
    accumulated mileage. The estimated cost of providing the free
    travel is recognized as a liability and charged to operations as
    program members accumulate mileage. Travel awards are valued at
    the incremental cost of carrying one passenger, based on
    expected redemptions. Incremental costs are based on
    expectations of expenses to be incurred on a per passenger basis
    and include fuel, liability insurance, food, beverages, supplies
    and ticketing costs. We also sell mileage credits to companies
    participating in our FlightFund program, such as hotels, car
    rental agencies and credit card companies.
    Transportation-related revenue from the sale of mileage credits
    is deferred and recognized when transportation is provided. A
    change to the estimated cost per mile, minimum award level,
    percentage of revenue to be deferred or deferred recognition
    period could have a significant impact on our revenues or
    mileage liability accrual in the year of the change as well as
    future years.                                                                                                                                                                                                                   
|
| |  | Long-Term Maintenance Reserve  We record an
    accrual for the estimated cost of scheduled airframe and engine
    overhauls required to be performed on leased aircraft upon their
    return to the lessors. These estimates are based on historical
    costs and our assumptions regarding the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | 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 three out of four years between
    December 31, 2001 through December 31, 2004, which
    weighed heavily in the overall determination that a valuation
    allowance was needed. As of June 30, 2005, the Company had
    recorded a valuation allowance of $109.3 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.



| |                                          
| | -----------------------------------------
| | Recently Issued Accounting Pronouncements

Accounting for Share-Based Payment




| |                            
| | ---------------------------
| | Change in Accounting Policy

Proposed Merger of America
West Holdings and US Airways Group


Forward-Looking Information




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Risk Factors Relating to America West and Industry
Related Risks




| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the ability of Holdings to consummate the proposed merger with a
    subsidiary of US Airways Group, Inc.                                            
|
| |  | the impact of global instability caused by military actions,
    terrorism, disease outbreaks and natural disasters;                                 
|
| |  | limitations on our flexibility in responding to industry
    conditions due to high fixed costs and restrictions imposed by
    our debt instruments;
|
| |  | changes in federal and state laws and regulations;                                                                                                   
|
| |  | changes in prevailing interest rates;                                                                                                                
|
| |  | the ability to attract and retain qualified personnel;                                                                                               
|
| |  | the ability of AWA to attract and retain customers;                                                                                                  
|
| |  | the cyclical nature of the airline industry;                                                                                                         
|
| |  | competitive practices in the airline industry, including
    significant fare restructuring by major airlines;                                       
|
| |  | the impact of historically high fuel prices;                                                                                                         
|
| |  | economic conditions;                                                                                                                                 
|
| |  | reliance on automated systems and the impact of any failure of
    these systems;                                                                    
|
| |  | labor costs;                                                                                                                                         
|
| |  | security-related and insurance costs;                                                                                                                
|
| |  | weather conditions;                                                                                                                                  
|
| |  | government legislation and regulation; and                                                                                                           
|
| |  | relations with unionized employees generally and the impact and
    outcome of labor negotiations.                                                   



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Risk Factors Relating to America West and Industry Related
Risks






| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business is dependent on the price and availability of
    aircraft fuel. Continued periods of historically high fuel
    costs, significant disruptions in the supply of aircraft fuel or
    significant further increases in fuel costs could have a
    significant negative impact on our operating results.







| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Failure to complete the proposed merger with a subsidiary
    of US Airways Group could negatively impact the stock price
    and our future business and financial results.





| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | having incurred certain costs relating to the proposed merger
    that are payable whether or not the merger is completed,
    including legal, accounting, financial advisor and printing
    fees; and
|
| |  | having had the focus of management directed toward the proposed
    merger and integration planning instead of our business and
    other opportunities that could have been beneficial to us.          



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| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The combined company created by our merger into a
    subsidiary of US Airways Group may not perform as well
    financially as we expect following the merger.





| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | The integration of Holdings and US Airways Group
    following the merger will present significant challenges.





| |                                                                                 
| | --------------------------------------------------------------------------------
| | We have sustained, and may continue to sustain significant
    operating losses.





| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | Union disputes, employee strikes and other labor-related
    disruptions may adversely affect our operations.






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Other
Information  Labor Relations.






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





| |                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------
| | We rely heavily on automated systems to operate our
    business and any failure of these systems could harm our
    business.





| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we incur problems with any of our third party service
    providers, our operations could be adversely affected by a
    resulting decline in revenue or negative public perception about
    our services.





| |                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The travel industry, materially adversely affected by the
    September 11, 2001 terrorist attacks, continues to face
    on-going security concerns and cost burdens associated with
    security.



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| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | Increases in insurance costs or reductions in insurance
    coverage may adversely impact our operations and financial
    results.





| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | Changes in government regulation could increase our
    operating costs and limit our ability to conduct our
    business.





| |                                               
| | ----------------------------------------------
| | The airline industry is intensely competitive.





| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Recent airline restructurings and bankruptcies could alter
    the competitive environment of the airline industry to our
    detriment.



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| |                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our high level of fixed obligations 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.

Liquidity and Capital Resources  Off Balance
Sheet Arrangements.




| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A decrease in revenues results in a disproportionately greater
    percentage decrease in earnings.                                                        
|
| |  | We may not have sufficient liquidity to fund all of these fixed
    costs if our revenues decline or costs increase.                                       
|
| |  | We may have to use our working capital to fund these fixed costs
    instead of funding general corporate requirements, including
    capital expenditures.
|
| |  | We may not have sufficient liquidity to respond to competitive
    developments and adverse economic conditions.                                           







| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | Interruptions or disruptions in service at one our hub
    airports could have a material adverse impact on our
    operations.





| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | We are at risk of losses and adverse publicity stemming
    from any accident involving any of our aircraft.



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| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | Our business is subject to weather factors and seasonal
    variations in airline travel, which cause our results to
    fluctuate.





| |                                                                         
| | ------------------------------------------------------------------------
| | Employee benefit plans represent significant continuing
    costs to us.





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





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





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



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| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 Air Transportation Stabilization Board, or ATSB;
|
| |  | 10,287,644 shares of our Class B common stock that are
    issuable upon the exercise of outstanding options;                                                                                                                                                                                                                                                         
|
| |  | 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 are 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 are issuable upon conversion of
    Holdings 7.5% convertible senior notes due 2009.                                                                                                                                                                                                      



Liquidity and Capital
Resources  Commitments  7.25% Senior
Exchangeable Notes due 2023.




| |                                                                             
| | ----------------------------------------------------------------------------
| | Provisions in our charter documents might deter
    acquisition bids for us.





| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                                                                                    



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| |                                                                                 
| | --------------------------------------------------------------------------------
| | Our stock price may continue to be volatile and could
    decline substantially.





| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | the failure to complete the proposed merger with a subsidiary of
    US Airways Group;                        
|
| |  | 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 3. Quantitative and Qualitative Disclosures
about Market Risk.


Market Risk Sensitive Instruments




|    |                     
|--- | --------------------
|(a) | Commodity Price Risk

Risk Factors Relating to America
West and Industry Related Risks  Fluctuations in fuel
costs could adversely affect our operating expenses and
results.








|    |                   
|--- | ------------------
|(b) | Interest Rate Risk








|        |                         
|------- | ------------------------
|Item 4. | Controls and Procedures.



|    |                                                  
|--- | -------------------------------------------------
|(a) | Evaluation of disclosure controls and procedures.



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|    |                                                      
|--- | -----------------------------------------------------
|(b) | Changes in internal control over financial reporting.





|    |                                             
|--- | --------------------------------------------
|(c) | Limitation on the effectiveness of controls.



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PART II  OTHER INFORMATION







|        |                                                                                     
|------- | ------------------------------------------------------------------------------------
|Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases
    of Equity Securities



|                               |  |              |         |  |                |                 |                     |                    |                  |                     |                    |  |  |  |   | 
|------------------------------ |  | ------------ | ------- |  | -------------- | --------------- | ------------------- | ------------------ | ---------------- | ------------------- | ------------------ |  |  |  | - | 
|                               |  |              |         |  |                |                 |                     | (d)                |                 
|                               |  |              |         |  |                |                 |                     | Maximum Number     |                 
|                               |  |              |         |  |                | (c)             |                     |                    | (or Approximate  |                    
|                               |  |              |         |  |                | Total Number of |                     |                    | Dollar Value) of |                    
|                               |  | (a)          |         |  |                |                 | Shares Purchased as |                    |                  | Shares that May Yet |                   
|                               |  | Total Number |         |  | (b)            |                 |                     | Part of Publicly   |                  |                     | be Purchased Under | 
|                               |  | of Shares    |         |  | Average Price  |                 |                     | Announced Plans or |                  |                     | the Plans or       | 
|Period                         |  | Purchased(1) |         |  | Paid per Share |                 |                     | Programs           |                  |                     | Programs           | 
|                               |  |              |         |  |                |                 |                     |                    |                  |                     |                    | 
|April 1, 2005 - April 30, 2005 |  |              | 64,200  |  |                |                 | 4.54                |                    |                  |                     |                   |  |  |  |  | 
|May 1, 2005 - May 31, 2005     |  |              | 112,500 |  |                |                 | 4.68                |                    |                  |                     |                   |  |  |  |  | 
|June 1, 2005 - June 30, 2005   |  |              | 33,700  |  |                |                 | 6.11                |                    |                  |                     |                   |  |  |  |  | 






|    |                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amounts consist of shares of our Class B common stock
    purchased on the open market by the America West Holdings
    Corporation Future Care 401(k) Plan.






|        |                                                     
|------- | ----------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders.



|                  |  |                  |            |  |          |  |         | 
|----------------- |  | ---------------- | ---------- |  | -------- |  | ------- | 
|                  |  | Number of Shares |           
|                  |  |                  |           
|                  |  | For              |            |  | Withheld | 
|                  |  |                  |            |  |          | 
|Matthew J. Hart   |  |                  | 30,733,838 |  |          |  | 329,390 | 
|Robert J. Miller  |  |                  | 30,677,130 |  |          |  | 386,098 | 
|W. Douglas Parker |  |                  | 30,794,012 |  |          |  | 269,216 | 
|John F. Tierney   |  |                  | 30,711,960 |  |          |  | 351,268 | 



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|        |         
|------- | --------
|Item 6. | Exhibits

|        |    |                                  |  |                                                                                                                                                                                                                                                                                                        
|------- | -- | -------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                                 
|number  |    | Description and Method of Filing
|        | 2  | .1                               |  | Agreement and Plan of Merger, dated May 19, 2005, among
    US Airways Group, Inc., Holdings and Barbell Acquisition
    Corp.  Incorporated by reference to Exhibit 2.1
    to Holdings Form 8-K filed on May 25, 2005
    (File no. 001-12649).                                                    
|        | 10 | .1+                              |  | Summary of Officer Benefits.                                                                                                                                                                                                                                                                           
|        | 10 | .2*                              |  | Master Memorandum of Understanding, dated as of June 13,
    2005, among US Airways, Inc., US Airways Group, Inc., Holdings,
    AWA, General Electric Capital Corporation acting through its
    agent, GE Commercial Aviation Services LLC, and General Electric
    Company/ GE Transport Component.
|        | 10 | .3                               |  | Advisory Agreement, dated May 19, 2005, between America
    West Holdings Corporation and TPG Advisory, Inc. 
    Incorporated by reference to Exhibit 10.1 to Holdings
    Form 8-K filed on May 25, 2005
    (File no. 001-12649).                                                                 
|        | 10 | .4                               |  | Investment Agreement, dated May 19, 2005, among Eastshore
    Aviation, LLC, Holdings and U.S. Airways Group, Inc. 
    Incorporated by reference to Exhibit 2.1 to Holdings
    Form 8-K filed on May 25, 2005
    (File no. 001-12649).                                                            
|        | 10 | .5                               |  | Investment Agreement, dated May 19, 2005, among Par
    Investment Partners, L.P., Holdings and U.S. Airways Group,
    Inc.  Incorporated by reference to Exhibit 10.1
    to Holdings Form 8-K filed on May 25, 2005
    (File no. 001-12649).                                                     
|        | 10 | .6                               |  | Investment Agreement, dated May 19, 2005, among Peninsula
    Investment Partners, L.P., Holdings and U.S. Airways Group,
    Inc.  Incorporated by reference to Exhibit 10.1
    to Holdings Form 8-K filed on May 25, 2005
    (File no. 001-12649).                                               
|        | 10 | .7                               |  | Investment Agreement, dated May 19, 2005, among ACE
    Aviation Holdings, Holdings and U.S. Airways Group,
    Inc.  Incorporated by reference to Exhibit 10.1
    to Holdings Form 8-K filed on May 25, 2005
    (File no. 001-12649).                                                             
|        | 10 | .8                               |  | Investment Agreement, dated May 27, 2005, among Wellington
    Management Company, LLP, Holdings and U.S. Airways Group,
    Inc.  Incorporated by reference to Exhibit
    10.1 to Holdings Form 8-K filed on June 2,
    2005 (File no. 001-12649).                                                
|        | 99 | .1                               |  | Voting Agreement, dated May 19, 2005, among
    TPG Partners, L.P., TPG Parallel I, L.P., Air
    Partners II, L.P. and U.S. Airways Group, Inc. 
    Incorporated by reference to Exhibit 2.1 to Holdings
    Form 8-K filed on May 25, 2005
    (File no. 001-12649).                              
|        | 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.                                                                                                                                                          






|    |                                                                          
|--- | -------------------------------------------------------------------------
|(+) | Represents a management contract or compensatory plan or
    arrangement.



|    |                                                                                          
|--- | -----------------------------------------------------------------------------------------
|(*) | The Company has sought confidential treatment for portions of
    the referenced exhibit.

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AMERICA WEST HOLDINGS CORPORATION


June 30, 2005


SIGNATURE






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



| |    |                  
| | -- | -----------------
| | By | /s/ Derek J. Kerr

| |                                                  
| | -------------------------------------------------
| |                                                  
| | Derek J. Kerr                                    
| | Senior Vice President and Chief Financial Officer



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AMERICA WEST AIRLINES, INC.


June 30, 2005


SIGNATURE






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



| |    |                  
| | -- | -----------------
| | By | /s/ Derek J. Kerr

| |                                                  
| | -------------------------------------------------
| |                                                  
| | Derek J. Kerr                                    
| | Senior Vice President and Chief Financial Officer



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