##### 



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, 2003 or
|           |  |                                                                                                                                        
|o          |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from  to            

|                       |  |        
|---------------------- |  | -------
|Commission file number |  | 1-12649

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

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 86-0847214                          
|                                                               |  |                                     
|(State or other jurisdiction
of incorporation or organization) |  | (I.R.S. Employer Identification No.)

|                                         |  |                |  |           
|---------------------------------------- |  | -------------- |  | ----------
|111 WEST RIO SALADO PARKWAY,             |  | TEMPE, ARIZONA |  | 85281     
|                                        
|(Address of principal executive offices) |  |                |  | (Zip Code)

(480) 693-0800

(Registrants telephone number, including area code)


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

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

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 86-0418245                          
|                                                               |  |                                     
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

|                                         |  |                  |  |           
|---------------------------------------- |  | ---------------- |  | ----------
|4000 EAST SKY HARBOR BLVD,               |  | PHOENIX, ARIZONA |  | 85034     
|                                        
|(Address of principal executive offices) |  |                  |  | (Zip Code)

(480) 693-0800

(Registrants telephone number, including area code)


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

Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes þ        No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule
12b-2). Yes þ        No o

As of July 22, 2003, America West Holdings Corporation has 941,431 shares of
class A common stock and 32,821,588 shares of class B common stock outstanding.
As of July 22, 2003, America West Airlines, Inc. has 1,000 shares of class B
common stock outstanding, all of which are held by America West Holdings
Corporation.





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##### 



PART I  FINANCIAL INFORMATION

America West Holding Corporation (Holdings) is the holding company
that owns all of the stock of America West Airlines, Inc. (AWA). AWA,
the eighth largest passenger airline in the United States, accounted for
most of Holdings revenues and expenses in 2002. In addition, Holdings
owns all of the outstanding stock of The Leisure Company (TLC), which
sells individual and group travel packages. This combined Form 10-Q is
filed by both Holdings and AWA and includes the financial statements of
each company in Item 1A and Item 1B, respectively.

ITEM 1A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  AMERICA WEST HOLDINGS CORPORATION

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

|                        |                                                |                      |                            |         |         |             |           |              |         |         |  | 
|----------------------- | ---------------------------------------------- | -------------------- | -------------------------- | ------- | ------- | ----------- | --------- | ------------ | ------- | ------- |  | 
|                        |                                                |                      |                            |         |         | June 30,    |           | December 31,
|                        |                                                |                      |                            |         |         | 2003        |           | 2002        
|                        |                                                |                      |                            |         |         |             |           |             
|                        |                                                |                      |                            |         |         | (unaudited) |           |              |         |        
|                        |                                                |                      |                            | Assets  |         |             |           |              |         |         |  | 
|Current assets:         |                                                |                      |                            |         |         |             |           |             
|                        | Cash and cash equivalents                      |                      | $                          | 344,906 |         |             | $         | 335,750      |        
|                        | Short-term investments                         |                      |                            | 40,804  |         |             |           | 24,738       |        
|                        | Accounts receivable, net                       |                      |                            | 124,318 |         |             |           | 82,197       |        
|                        | Expendable spare parts and supplies, net       |                      |                            | 55,209  |         |             |           | 55,894       |        
|                        | Prepaid expenses                               |                      |                            | 155,707 |         |             |           | 110,337      |        
|                        |                                                |                      |                            |         |         |             |           |             
|                        |                                                | Total current assets |                            |         | 720,944 |             |           |              | 608,916 |        
|                        |                                                |                      |                            |         |         |             |           |             
|Property and equipment: |                                                |                      |                            |         |         |             |           |             
|                        | Flight equipment                               |                      |                            | 883,449 |         |             |           | 880,446      |        
|                        | Other property and equipment                   |                      |                            | 274,143 |         |             |           | 274,329      |        
|                        | Equipment purchase deposits                    |                      |                            | 42,550  |         |             |           | 46,050       |        
|                        |                                                |                      |                            |         |         |             |           |             
|                        |                                                |                      | 1,200,142                  |         |         |             | 1,200,825 |             
|                        | Less accumulated depreciation and amortization |                      |                            | 582,276 |         |             |           | 551,065      |        
|                        |                                                |                      |                            |         |         |             |           |             
|                        |                                                |                      | Net property and equipment |         |         | 617,866     |           |              |         | 649,760 | 
|                        |                                                |                      |                            |         |         |             |           |             
|Other assets:           |                                                |                      |                            |         |         |             |           |             
|                        | Restricted cash                                |                      |                            | 78,677  |         |             |           | 45,968       |        
|                        | Other assets, net                              |                      |                            | 136,075 |         |             |           | 134,309      |        
|                        |                                                |                      |                            |         |         |             |           |             
|                        |                                                | Total other assets   |                            |         | 214,752 |             |           |              | 180,277 |        
|                        |                                                |                      |                            |         |         |             |           |             
|                        |                                                | $                    | 1,553,562                  |         |         | $           | 1,438,953 |             
|                        |                                                |                      |                            |         |         |             |           |             

See accompanying notes to condensed consolidated financial statements.

2



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##### 



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

|                                         |                                                                                                                                                                           |                            |                                      |          |             |   |              |          |         |  | 
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------ | -------- | ----------- | - | ------------ | -------- | ------- |  | 
|                                         |                                                                                                                                                                           |                            |                                      |          | June 30,    |   | December 31,
|                                         |                                                                                                                                                                           |                            |                                      |          | 2003        |   | 2002        
|                                         |                                                                                                                                                                           |                            |                                      |          |             |   |             
|                                         |                                                                                                                                                                           |                            |                                      |          | (unaudited) |   |              |          |        
|                                         |                                                                                                                                                                           |                            | Liabilities and Stockholders Equity |          |             |   |              |          |         |  | 
|Current liabilities:                     |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                         | Current maturities of long-term debt                                                                                                                                      |                            | $                                    | 56,074   |             |   | $            | 19,116   |        
|                                         | Current obligations under capital leases                                                                                                                                  |                            |                                      | 3,212    |             |   |              | 3,122    |        
|                                         | Accounts payable                                                                                                                                                          |                            |                                      | 192,145  |             |   |              | 183,304  |        
|                                         | Air traffic liability                                                                                                                                                     |                            |                                      | 256,263  |             |   |              | 192,450  |        
|                                         | Accrued compensation and vacation benefits                                                                                                                                |                            |                                      | 47,862   |             |   |              | 39,076   |        
|                                         | Accrued taxes                                                                                                                                                             |                            |                                      | 50,163   |             |   |              | 35,159   |        
|                                         | Other accrued liabilities                                                                                                                                                 |                            |                                      | 38,290   |             |   |              | 38,607   |        
|                                         |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                         |                                                                                                                                                                           | Total current liabilities  |                                      |          | 644,009     |   |              |          | 510,834 | 
|                                         |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|Long-term debt, less current maturities  |                                                                                                                                                                           |                            | 659,302                              |          |             |   | 700,983      |         
|Capital leases, less current obligations |                                                                                                                                                                           |                            | 11,567                               |          |             |   | 11,999       |         
|Deferred credits and other liabilities   |                                                                                                                                                                           |                            | 143,928                              |          |             |   | 146,959      |         
|Commitments and contingencies            |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|Stockholders equity:                    |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                         | Preferred stock, $.01 par value. Authorized 48,800,000
shares; no shares issued                                                                                           |                            |                                      |         |             |   |              |         |        
|                                         | Class A common stock, $.01 par value. Authorized
1,200,000 shares; issued and outstanding 941,431 shares at
June 30, 2003 and December 31, 2002                           |                            |                                      | 9        |             |   |              | 9        |        
|                                         | Class B common stock, $.01 par value. Authorized 100,000,000
shares; issued and outstanding 49,105,483 shares at June 30, 2003
and 49,055,180 shares at December 31, 2002 |                            |                                      | 491      |             |   |              | 491      |        
|                                         | Additional paid-in capital                                                                                                                                                |                            |                                      | 629,100  |             |   |              | 628,868  |        
|                                         | Retained deficit                                                                                                                                                          |                            |                                      | (239,348 | )           |   |              | (257,014 | )      
|                                         | Accumulated other comprehensive income                                                                                                                                    |                            |                                      | 10,710   |             |   |              | 2,030    |        
|                                         |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                         |                                                                                                                                                                           |                            | 400,962                              |          |             |   | 374,384      |         
|                                         | Less: Cost of class B common stock in treasury, 16,283,895
shares at June 30, 2003 and December 31, 2002                                                                  |                            |                                      | (306,206 | )           |   |              | (306,206 | )      
|                                         |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                         |                                                                                                                                                                           | Total stockholders equity |                                      |          | 94,756      |   |              |          | 68,178  | 
|                                         |                                                                                                                                                                           |                            |                                      |          |             |   |              |         
|                                         |                                                                                                                                                                           | $                          | 1,553,562                            |          |             | $ | 1,438,953    |         
|                                         |                                                                                                                                                                           |                            |                                      |          |             |   |              |         

See accompanying notes to condensed consolidated financial statements.

3



---



##### 



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,        
|                                                                                                |                                                                          |                                           |        |                    |         |                 
|                                                                                                |                                                                          |                                           |        | 2003               |         | 2002             |         | 2003          |         | 2002
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |     
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         | (as restated) |         |      |         |           |           | (as restated)
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |              
|Operating revenues:                                                                             |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Passenger                                                                |                                           | $      | 538,358            |         |                  | $       | 507,309       |         |      | $       | 1,038,932 |           |               | $        | 944,284 |          
|                                                                                                | Cargo                                                                    |                                           |        | 7,844              |         |                  |         | 7,255         |         |      |         | 14,900    |           |               |          | 14,575  |          
|                                                                                                | Other                                                                    |                                           |        | 29,569             |         |                  |         | 29,582        |         |      |         | 45,172    |           |               |          | 45,578  |          
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                |                                                                          | Total operating revenues                  |        |                    | 575,771 |                  |         |               | 544,146 |      |         |           | 1,099,004 |               |          |         | 1,004,437 |  
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Operating expenses:                                                                             |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Salaries and related costs                                               |                                           |        | 155,009            |         |                  |         | 146,038       |         |      |         | 316,142   |           |               |          | 288,569 |          
|                                                                                                | Aircraft rents                                                           |                                           |        | 72,291             |         |                  |         | 70,618        |         |      |         | 147,445   |           |               |          | 143,509 |          
|                                                                                                | Other rents and landing fees                                             |                                           |        | 37,505             |         |                  |         | 38,382        |         |      |         | 77,265    |           |               |          | 79,812  |          
|                                                                                                | Aircraft fuel                                                            |                                           |        | 86,530             |         |                  |         | 73,448        |         |      |         | 179,886   |           |               |          | 131,536 |          
|                                                                                                | Agency commissions                                                       |                                           |        | 6,291              |         |                  |         | 10,508        |         |      |         | 12,483    |           |               |          | 24,757  |          
|                                                                                                | Aircraft maintenance materials and repairs                               |                                           |        | 58,510             |         |                  |         | 63,537        |         |      |         | 122,718   |           |               |          | 128,795 |          
|                                                                                                | Depreciation and amortization                                            |                                           |        | 17,155             |         |                  |         | 17,727        |         |      |         | 34,629    |           |               |          | 34,385  |          
|                                                                                                | Special charges, net                                                     |                                           |        | 14,472             |         |                  |         |              |         |      |         | 14,370    |           |               |          | 21,030  |          
|                                                                                                | Other                                                                    |                                           |        | 111,703            |         |                  |         | 122,467       |         |      |         | 223,901   |           |               |          | 234,089 |          
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                |                                                                          | Total operating expenses                  |        |                    | 559,466 |                  |         |               | 542,725 |      |         |           | 1,128,839 |               |          |         | 1,086,482 |  
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Operating income (loss)                                                                         |                                                                          |                                           | 16,305 |                    |         |                  | 1,421   |               |         |      | (29,835 | )         |           |               | (82,045  | )      
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Nonoperating income (expenses):                                                                 |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Interest income                                                          |                                           |        | 1,158              |         |                  |         | 3,252         |         |      |         | 2,565     |           |               |          | 6,041   |          
|                                                                                                | Interest expense, net                                                    |                                           |        | (19,515            | )       |                  |         | (19,958       | )       |      |         | (38,020   | )         |               |          | (37,131 | )        
|                                                                                                | Federal government assistance                                            |                                           |        | 81,255             |         |                  |         | 2,264         |         |      |         | 81,255    |           |               |          | 2,264   |          
|                                                                                                | Other, net                                                               |                                           |        | 481                |         |                  |         | 166           |         |      |         | 1,701     |           |               |          | (2,292  | )        
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                |                                                                          | Total nonoperating income (expenses), net |        |                    | 63,379  |                  |         |               | (14,276 | )    |         |           | 47,501    |               |          |         | (31,118   | )
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Income (loss) before income tax benefit and
cumulative effect
of change in accounting principle |                                                                          |                                           | 79,684 |                    |         |                  | (12,855 | )             |         |      | 17,666  |           |           |               | (113,163 | )      
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Income tax benefit                                                                              |                                                                          |                                           |       |                    |         |                  |        |               |         |      |        |           |           |               | (35,071  | )      
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Income (loss) before cumulative effect of change in
accounting principle                        |                                                                          |                                           | 79,684 |                    |         |                  | (12,855 | )             |         |      | 17,666  |           |           |               | (78,092  | )      
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Cumulative effect of change in accounting principle                                             |                                                                          |                                           |       |                    |         |                  |        |               |         |      |        |           |           |               | (208,223 | )      
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Net income (loss)                                                                               |                                                                          | $                                         | 79,684 |                    |         | $                | (12,855 | )             |         | $    | 17,666  |           |           | $             | (286,315 | )      
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Basic income (loss) per share:                                                                  |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Income (loss) before cumulative effect of change in
accounting principle |                                           | $      | 2.36               |         |                  | $       | (0.38         | )       |      | $       | 0.52      |           |               | $        | (2.32   | )        
|                                                                                                | Cumulative effect of change in accounting principle                      |                                           |        |                   |         |                  |         |              |         |      |         |          |           |               |          | (6.17   | )        
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Basic income (loss) per share                                            |                                           | $      | 2.36               |         |                  | $       | (0.38         | )       |      | $       | 0.52      |           |               | $        | (8.49   | )        
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Diluted income (loss) per share:                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Income (loss) before cumulative effect of change in
accounting principle |                                           | $      | 2.02               |         |                  | $       | (0.38         | )       |      | $       | 0.48      |           |               | $        | (2.32   | )        
|                                                                                                | Cumulative effect of change in accounting principle                      |                                           |        |                   |         |                  |         |              |         |      |         |          |           |               |          | (6.17   | )        
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Diluted income (loss) per share                                          |                                           | $      | 2.02               |         |                  | $       | (0.38         | )       |      | $       | 0.48      |           |               | $        | (8.49   | )        
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Shares used for computation:                                                                    |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Basic                                                                    |                                           |        | 33,719             |         |                  |         | 33,726        |         |      |         | 33,716    |           |               |          | 33,727  |          
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Diluted                                                                  |                                           |        | 39,497             |         |                  |         | 33,726        |         |      |         | 36,605    |           |               |          | 33,727  |          
|                                                                                                |                                                                          |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        

See accompanying notes to condensed consolidated financial statements.

4



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##### 



AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

|                                                                   |                                                              |                                                     |         |                  |          |      |         |               |         | 
|------------------------------------------------------------------ | ------------------------------------------------------------ | --------------------------------------------------- | ------- | ---------------- | -------- | ---- | ------- | ------------- | ------- | 
|                                                                   |                                                              |                                                     |         | Six Months Ended
|                                                                   |                                                              |                                                     |         | June 30,        
|                                                                   |                                                              |                                                     |         |                 
|                                                                   |                                                              |                                                     |         | 2003             |          | 2002
|                                                                   |                                                              |                                                     |         |                  |          |     
|                                                                   |                                                              |                                                     |         |                  |          |      |         | (as restated)
|Net cash provided by (used in) operating activities                |                                                              | $                                                   | 123,567 |                  |          | $    | (13,630 | )            
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Cash flows from investing activities:                              |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Purchases of property and equipment                          |                                                     |         | (82,219          | )        |      |         | (78,953       | )      
|                                                                   | Purchases of short-term investments                          |                                                     |         | (40,804          | )        |      |         | (60,129       | )      
|                                                                   | Sales of short-term investments                              |                                                     |         | 24,738           |          |      |         |              |        
|                                                                   | Increase in restricted cash                                  |                                                     |         | (32,709          | )        |      |         | (9,901        | )      
|                                                                   | Proceeds from disposition of assets                          |                                                     |         | 23,972           |          |      |         | 62            |        
|                                                                   | Proceeds from sale and leaseback of aircraft                 |                                                     |         |                 |          |      |         | 175,478       |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   |                                                              | Net cash provided by (used in) investing activities |         |                  | (107,022 | )    |         |               | 26,557  | 
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Cash flows from financing activities:                              |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Repayment of debt                                            |                                                     |         | (7,622           | )        |      |         | (165,999      | )      
|                                                                   | Proceeds from issuance of debt                               |                                                     |         |                 |          |      |         | 435,386       |        
|                                                                   | Payment of debt issue costs                                  |                                                     |         |                 |          |      |         | (12,667       | )      
|                                                                   | Other                                                        |                                                     |         | 233              |          |      |         | (139          | )      
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   |                                                              | Net cash provided by (used in) financing activities |         |                  | (7,389   | )    |         |               | 256,581 | 
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Net increase in cash and cash equivalents                          |                                                              |                                                     | 9,156   |                  |          |      | 269,508 |              
|Cash and cash equivalents at beginning of period                   |                                                              |                                                     | 335,750 |                  |          |      | 156,865 |              
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Cash and cash equivalents at end of period                         |                                                              | $                                                   | 344,906 |                  |          | $    | 426,373 |              
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Cash, cash equivalents and short-term investments at end of period |                                                              | $                                                   | 385,710 |                  |          | $    | 486,502 |              
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Cash paid (refunded) for:                                          |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Interest, net of amounts capitalized                         |                                                     | $       | 8,975            |          |      | $       | 12,879        |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Income taxes paid (refunded)                                 |                                                     | $       | 119              |          |      | $       | (63,226       | )      
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Non-cash investing and financing activities:                       |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Notes payable canceled under the aircraft purchase agreement |                                                     | $       | (3,500           | )        |      | $       | (10,500       | )      
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Notes payable issued under the aircraft purchase agreement   |                                                     | $       |                 |          |      | $       | 7,000         |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Payment in kind notes issued, net of returns                 |                                                     | $       | 4,426            |          |      | $       | 3,426         |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Issuance of convertible notes, net of cancellations          |                                                     | $       |                 |          |      | $       | 60,186        |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Issuance of warrants                                         |                                                     | $       |                 |          |      | $       | 35,383        |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Equipment acquired through capital lease                     |                                                     | $       |                 |          |      | $       | 16,878        |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Equipment acquired with issuance of notes payable            |                                                     | $       |                 |          |      | $       | 64,163        |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              

See accompanying notes to condensed consolidated financial statements.

5



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##### 



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2003

1. BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements include the
accounts of America West Holdings Corporation (Holdings or the Company) and
its wholly owned subsidiaries, America West Airlines, Inc. (AWA) and The
Leisure Company (TLC). These statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission and, in
accordance with those rules and regulations, certain information and footnotes
required by generally accepted accounting principles have been omitted. In the
opinion of management, the condensed consolidated financial statements reflect
all adjustments, which are of a normal recurring nature, necessary for a fair
presentation. Certain prior year amounts have been reclassified to conform
with current year presentation. The accompanying condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes thereto included in the Companys Annual
Report on Form 10-K (Form 10-K) for the year ended December 31, 2002.

2. RESTATEMENT OF PREVIOUSLY REPORTED AMOUNTS

As
disclosed in our Form 10-K for the year ended December 31, 2002, the Company has
restated its financial statements for the fiscal year ended December 31, 2001
and its unaudited financial statements for the first, second and third quarters
of fiscal year ended December 31, 2002. The changes include:



| |  |  a change in the timing from the first quarter of 2002 back to the
fourth quarter of 2001 of the non-cash impairment charge of
approximately $39.2 million recorded to adjust the carrying value of
owned aircraft to market value and the related non-cash impairment
charge of approximately $64.1 million recorded to write off
reorganization value in excess of amounts allocable to identifiable
assets (ERV) that arose in connection with the Companys plan of
reorganization from bankruptcy in 1994, both of which charges were
previously recorded in the first quarter of 2002; and
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  the recognition of a full valuation allowance relating to the
Companys net deferred tax assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Impairment Charges

Statement of Financial Accounting Standards (SFAS) No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of requires that an impairment analysis be performed whenever
circumstances indicate that the carrying amount of an asset that an entity
expects to hold and use may not be recoverable.

As a result of the adverse impacts on Holdings and AWA and the airline
industry as a whole resulting from the terrorist events of September 11, 2001
and their aftermath, AWA performed an assessment of impairment of its owned
aircraft during 2001 and again in connection with the preparation of the
interim financial statements for the first quarter of 2002.

As a result of AWAs assessments, no impairment adjustment was recorded in
the financial statements initially issued for 2001. The Company recorded an
impairment charge of approximately $39.2 million in the first quarter of 2002
to adjust the carrying value of AWAs owned aircraft to reflect market values
at that time. Such accounting treatment was considered appropriate at the time
of the issuance of the applicable financial statements. In connection with the
preparation of the financial statements and the related audit for the fiscal
year ended December 31, 2002, the Company determined that the more appropriate
recognition of the impairment charge of approximately $39.2 million was in the
fourth quarter of 2001 rather than in the first quarter of 2002.

In addition, SFAS No. 121 requires that goodwill that arose in a purchase
business combination be allocated, and included as part of the asset base, in
determining recoverability and measuring impairment. The Company did not have
goodwill at December 31, 2001, but did have a significant amount of unamortized
ERV. The Company has determined that a portion of the unamortized ERV balance
should have been allocated to AWAs owned aircraft in the impairment analysis
performed for the year ended December 31, 2001. The remaining unamortized
balance of ERV was written-off in the first quarter of 2002 as a cumulative
effect of a change in accounting principle, upon adoption of SFAS No. 142,
Goodwill and Other Intangible Assets.

The impact of the above described matters is to change the period of
recognition for these non-cash costs between late 2001 and early 2002.

6



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##### 



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2003

Deferred Income Taxes

SFAS No. 109, Accounting for Income Taxesrequires that a valuation
allowance be established when it is more likely than not that all or a
portion of deferred tax assets will not be realized. A review of all available
positive and negative evidence needs to be considered, including the companys
performance, the market environment in which the company operates, forecasts of
future profitability, the utilization of past tax credits, length of
carryforward periods and similar factors. SFAS No. 109 further states that it
is difficult to conclude that a valuation allowance is not needed when there is
negative evidence such as cumulative losses in recent years. Therefore,
cumulative losses weigh heavily in the overall assessment.

The Company had originally reported a net deferred tax liability at
December 31, 2001. After consideration of the restatement discussed above, the
Company had a net deferred tax asset and was in a cumulative loss position for
the three years ended December 31, 2001. A full valuation allowance has been
established relating to the Companys net deferred tax assets at December 31,
2001, and relating to net deferred tax assets generated by losses in 2002. We
expect to continue to record a full valuation allowance on future tax benefits
until we return to sustained profitability.

As a result of the adjustments discussed above, the Companys financial
statements for the second quarter and the six months ended June 30, 2002 have
been restated from amounts previously reported. The principal effects of these
adjustments on the accompanying financial statements are set forth below:

|                                                                                       |                                      |                                          |         |                                        |  |          |        |               |  |             |         |          |  |   |          |   |  |  |        |  |  |   |          |  
|-------------------------------------------------------------------------------------- | ------------------------------------ | ---------------------------------------- | ------- | -------------------------------------- |  | -------- | ------ | ------------- |  | ----------- | ------- | -------- |  | - | -------- | - |  |  | ------ |  |  | - | -------- | -
|                                                                                       |                                      | For the Three Months Ended June 30, 2002 |         | For the Six Months Ended June 30, 2002
|                                                                                       |                                      |                                          |         |                                       
|                                                                                       | (in thousands except per share data)
|                                                                                       |                                      | As Previously                            |         | Restatement                            |  | As       |        | As Previously |  | Restatement |         | As      
|                                                                                       |                                      | Reported                                 |         | Adjustments                            |  | Restated |        | Reported      |  | Adjustments |         | Restated
|                                                                                       |                                      |                                          |         |                                        |  |          |        |               |  |             |         |         
|Operating income (loss)                                                                |                                      | $                                        | 1,421   |                                        |  |          |       |               |  | $           | 1,421   |          |  | $ | (121,270 | ) |  |  | 39,225 |  |  | $ | (82,045  | )
|                                                                                       |                                      |                                          |         |                                        |  |          |        |               |  |             |         |          |  |   |          |   |  |  |        |  |  |   |          |  
|Loss before income tax benefit and
cumulative
effect of change in accounting principle |                                      |                                          | (12,855 | )                                      |  |          |       |               |  |             | (12,855 | )        |  |   | (152,388 | ) |  |  | 39,225 |  |  |   | (113,163 | )
|Income tax benefit                                                                     |                                      |                                          | (4,401  | )                                      |  |          | 4,401  |               |  |             |        |          |  |   | (57,913  | ) |  |  | 22,842 |  |  |   | (35,071  | )
|Loss before cumulative effect of change in
accounting principle                        |                                      |                                          | (8,454  | )                                      |  |          | (4,401 | )             |  |             | (12,855 | )        |  |   | (94,475  | ) |  |  | 16,383 |  |  |   | (78,092  | )
|Cumulative effect of change in accounting
principle                                    |                                      |                                          |        |                                        |  |          |       |               |  |             |        |          |  |   | (272,284 | ) |  |  | 64,061 |  |  |   | (208,223 | )
|Net loss                                                                               |                                      | $                                        | (8,454  | )                                      |  |          | (4,401 | )             |  | $           | (12,855 | )        |  | $ | (366,759 | ) |  |  | 80,444 |  |  | $ | (286,315 | )
|                                                                                       |                                      |                                          |         |                                        |  |          |        |               |  |             |         |          |  |   |          |   |  |  |        |  |  |   |          |  
|Basic and diluted loss per share:                                                      |                                      |                                          |         |                                        |  |          |        |               |  |             |         |          |  |   |          |   |  |  |        |  |  |   |          |  
|Loss before cumulative effect of change in
accounting principle                        |                                      | $                                        | (0.25   | )                                      |  |          | (0.13  | )             |  | $           | (0.38   | )        |  | $ | (2.80    | ) |  |  | 0.48   |  |  | $ | (2.32    | )
|Cumulative effect of change in accounting
principle                                    |                                      |                                          |        |                                        |  |          |       |               |  |             |        |          |  |   | (8.07    | ) |  |  | 1.90   |  |  |   | (6.17    | )
|                                                                                       |                                      |                                          |         |                                        |  |          |        |               |  |             |         |          |  |   |          |   |  |  |        |  |  |   |          |  
|Net loss per share                                                                     |                                      | $                                        | (0.25   | )                                      |  |          | (0.13  | )             |  | $           | (0.38   | )        |  | $ | (10.87   | ) |  |  | 2.38   |  |  | $ | (8.49    | )
|                                                                                       |                                      |                                          |         |                                        |  |          |        |               |  |             |         |          |  |   |          |   |  |  |        |  |  |   |          |  

3. STOCK OPTIONS

The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees,and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. Accordingly,
no compensation cost has been recognized for stock options in the accompanying
condensed consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, Accounting for Stock-Based Compensation,the
Companys net income (loss) and income (loss) per share would have been reduced
to the pro forma amounts indicated below:

7



---



##### 



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2003

|                                 |                                      |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  
|-------------------------------- | ------------------------------------ | ------------------ | ------ | ---------------- |  | ------------- | ------- | ---- |  | - | ------ | ------------- |  | - | -------- | -
|                                 |                                      | Three Months Ended |        | Six Months Ended
|                                 |                                      | June 30,           |        | June 30,        
|                                 |                                      |                    |        |                 
|                                 |                                      | 2003               |        | 2002             |  | 2003          |         | 2002
|                                 |                                      |                    |        |                  |  |               |         |     
|                                 |                                      |                    |        |                  |  | (as restated) |         |      |  |   |        | (as restated)
|                                 | (in thousands except per share data)
|Net income (loss), as reported   |                                      | $                  | 79,684 |                  |  | $             | (12,855 | )    |  | $ | 17,666 |               |  | $ | (286,315 | )
|Stock-based compensation expense |                                      |                    | (945   | )                |  |               | (1,684  | )    |  |   | (2,211 | )             |  |   | (2,995   | )
|                                 |                                      |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  
|Pro forma net income (loss)      |                                      | $                  | 78,739 |                  |  | $             | (14,539 | )    |  | $ | 15,455 |               |  | $ | (289,310 | )
|                                 |                                      |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  
|Income (loss) per share:         |                                      |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  
|Basic  as reported              |                                      | $                  | 2.36   |                  |  | $             | (0.38   | )    |  | $ | 0.52   |               |  | $ | (8.49    | )
|                                 |                                      |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  
|Basic  pro forma                |                                      | $                  | 2.34   |                  |  | $             | (0.43   | )    |  | $ | 0.46   |               |  | $ | (8.58    | )
|                                 |                                      |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  
|Diluted  as reported            |                                      | $                  | 2.02   |                  |  | $             | (0.38   | )    |  | $ | 0.48   |               |  | $ | (8.49    | )
|                                 |                                      |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  
|Diluted  pro forma              |                                      | $                  | 1.99   |                  |  | $             | (0.43   | )    |  | $ | 0.42   |               |  | $ | (8.58    | )
|                                 |                                      |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  

4. FLIGHT EQUIPMENT

In June 2003, the Company entered into an operating lease for one new
Airbus A320 aircraft with a lease term of 20 years.

During the second quarter of 2003, the Company returned two Boeing
737-300 aircraft and one Airbus A320 aircraft to the aircraft lessors upon expiration
of the lease terms.

In April 2003, one aircraft lessor exercised its put rights under the
aircraft lease agreement to extend the lease for one Boeing 737-300 aircraft
for an additional 18 months.

In April 2003, the Company revised the estimated useful life for
capitalized maintenance on certain of its engines driven by a new
maintenance agreement that guarantees minimum cycles on engine
overhauls. The net impact of this change in estimate increased net income for
the three months ended June 30, 2003 by $2.5 million. This change increased
basic and diluted income per share by $.07 and $.06, respectively,
for the three months ended June 30, 2003. The impact of this
change for the six months period ended June 30, 2003 was an
increase of $.07 for both basic and diluted income per share.

5. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes changes in the fair value of
derivative financial instruments that qualify for hedge accounting. For the
three and six months ended June 30, 2003, the Company recorded total
comprehensive income of $75.7 million and $26.3 million, respectively. For the
three and six months ended June 30, 2002, the Company recorded a total
comprehensive loss of $13.3 million and $288.2 million, respectively. The
difference between net income (loss) and comprehensive income (loss) for the
three and six months ended June 30, 2003 and 2002 is detailed in the following
table:

|                            |                                                                                                                     |                |                    |        |                  |   |               |      |      |   |        |        |               |   |          |        |  
|--------------------------- | ------------------------------------------------------------------------------------------------------------------- | -------------- | ------------------ | ------ | ---------------- | - | ------------- | ---- | ---- | - | ------ | ------ | ------------- | - | -------- | ------ | -
|                            |                                                                                                                     |                | Three Months Ended |        | Six Months Ended
|                            |                                                                                                                     |                | June 30,           |        | June 30,        
|                            |                                                                                                                     |                |                    |        |                 
|                            |                                                                                                                     |                | 2003               |        | 2002             |   | 2003          |      | 2002
|                            |                                                                                                                     |                |                    |        |                  |   |               |      |     
|                            |                                                                                                                     |                |                    |        |                  |   | (as restated) |      |      |   |        |        | (as restated)
|                            |                                                                                                                     | (in thousands)
|Net income (loss)           |                                                                                                                     | $              | 79,684             |        |                  | $ | (12,855       | )    |      | $ | 17,666 |        |               | $ | (286,315 | )     
|                            |                                                                                                                     |                |                    |        |                  |   |               |      |      |   |        |        |               |   |          |       
|                            | Unrealized gains (losses) on derivative
instruments                                                                 |                |                    | (3,998 | )                |   |               | (481 | )    |   |        | 17,890 |               |   |          | (481   | )
|                            | Reclassification adjustment to net income (loss)
of previously reported unrealized losses on
derivative instruments |                |                    |       |                  |   |               |     |      |   |        | (9,210 | )             |   |          | (1,390 | )
|                            |                                                                                                                     |                |                    |        |                  |   |               |      |      |   |        |        |               |   |          |       
|                            | Total other comprehensive income (loss)                                                                             |                |                    | (3,998 | )                |   |               | (481 | )    |   |        | 8,680  |               |   |          | (1,871 | )
|                            |                                                                                                                     |                |                    |        |                  |   |               |      |      |   |        |        |               |   |          |       
|Comprehensive income (loss) |                                                                                                                     | $              | 75,686             |        |                  | $ | (13,336       | )    |      | $ | 26,346 |        |               | $ | (288,186 | )     
|                            |                                                                                                                     |                |                    |        |                  |   |               |      |      |   |        |        |               |   |          |       

8



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##### 



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2003

6. SPECIAL CHARGES

In February 2003, AWA announced the elimination of its hub operations in
Columbus, Ohio. As a result, 12 regional jets, all of which were operated by
Chautauqua Airlines under the America West Express banner, have been phased out
of the fleet. In addition, the hub has been downsized from 49 daily departures
to 15 destinations to four flights per day to Phoenix and Las Vegas. Service
to New York City La Guardia Airport was also eliminated because perimeter rules
at the airport prohibit flights beyond 1,500 miles, precluding service from
AWAs hubs in Phoenix and Las Vegas. In the first and second quarters of 2003,
the Company recorded special charges of $1.0 million and $9.6 million,
respectively, related to the costs associated with the termination of certain
contracts, employee transfer and severance expenses and the write-off of
leasehold improvements in Columbus, Ohio.

In April 2003, as part of a cost reduction program, the Company
implemented a plan to reduce management, professional and administrative
payroll costs which resulted in fewer employees within these workgroups. As a
result, the Company recorded a special charge of $2.3 million related to this
reduction-in-force.

In June 2003, the Company recorded an impairment loss of $2.6 million
related to three owned Boeing 737-200 aircraft that have been or will be
grounded.

In the first quarter of 2003, the Company recorded a $1.1 million
reduction in special charges related to the earlier-than-planned return of
certain leased aircraft in 2001 and 2002, as all payments related to these
aircraft returns have been made.

The following table presents the payments and other settlements made
during the six months ended June 30, 2003 related to the special charge
accruals.

|                                                                |                |                |       |                     |  |          |        |       |  |             |        |             |  |          |        |   |  |   |        |  
|--------------------------------------------------------------- | -------------- | -------------- | ----- | ------------------- |  | -------- | ------ | ----- |  | ----------- | ------ | ----------- |  | -------- | ------ | - |  | - | ------ | -
|                                                                |                |                |       |                     |  |          |        |       |  |             |        |             |  | Contract |        |   |  |  
|                                                                |                |                |       |                     |  |          |        |       |  | Reductions- |        | Termination |  |          |        |  
|                                                                |                | Sale-Leaseback |       | Fleet Restructuring |  | in-force |        | Costs |  | Total      
|                                                                |                |                |       |                     |  |          |        |       |  |            
|                                                                | (in thousands)
|Balance at December 31, 2002                                    |                | $              | 2,476 |                     |  | $        | 3,357  |       |  | $           |       |             |  | $        |       |   |  | $ | 5,833  |  
|                                                                |                |                |       |                     |  |          |        |       |  |             |        |             |  |          |        |   |  |   |        |  
|Special charges                                                 |                |                |      |                     |  |          | (1,072 | )     |  |             | 470    |             |  |          | 500    |   |  |   | (102   | )
|Payments                                                        |                |                |      |                     |  |          | (271   | )     |  |             |       |             |  |          |       |   |  |   | (271   | )
|Loss on sale-leasebacks                                         |                |                | (6    | )                   |  |          |       |       |  |             |       |             |  |          |       |   |  |   | (6     | )
|                                                                |                |                |       |                     |  |          |        |       |  |             |        |             |  |          |        |   |  |   |        |  
|Balance at March 31, 2003                                       |                | $              | 2,470 |                     |  | $        | 2,014  |       |  | $           | 470    |             |  | $        | 500    |   |  | $ | 5,454  |  
|                                                                |                |                |       |                     |  |          |        |       |  |             |        |             |  |          |        |   |  |   |        |  
|Special charges                                                 |                |                |      |                     |  |          | 2,617  |       |  |             | 2,231  |             |  |          | 9,624  |   |  |   | 14,472 |  
|Payments                                                        |                |                |      |                     |  |          | (182   | )     |  |             | (1,159 | )           |  |          | (6,000 | ) |  |   | (7,341 | )
|Loss on sale-leasebacks                                         |                |                | (647  | )                   |  |          |       |       |  |             |       |             |  |          |       |   |  |   | (647   | )
|Write-off of leasehold improvements
due to Columbus hub closure |                |                |      |                     |  |          |       |       |  |             |       |             |  |          | (539   | ) |  |   | (539   | )
|Impairment loss                                                 |                |                |      |                     |  |          | (2,617 | )     |  |             |       |             |  |          |       |   |  |   | (2,617 | )
|                                                                |                |                |       |                     |  |          |        |       |  |             |        |             |  |          |        |   |  |   |        |  
|Balance at June 30, 2003                                        |                | $              | 1,823 |                     |  | $        | 1,832  |       |  | $           | 1,542  |             |  | $        | 3,585  |   |  | $ | 8,782  |  
|                                                                |                |                |       |                     |  |          |        |       |  |             |        |             |  |          |        |   |  |   |        |  

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

7. FEDERAL GOVERNMENT ASSISTANCE

In April 2003, the Senate and House of Representatives of the United
States of America passed, and the President signed, the Emergency Wartime
Supplemental Appropriations Act to provide certain aviation-related assistance.
The bill includes the following key provisions:



| |  |  | $2.3 billion of the appropriation is for grants by the
Transportation Security Administration (TSA) to U.S. air carriers
based on the proportional share each carrier has paid or collected as
of the date of enactment of the legislation for passenger security and
air carrier security fees. In May 2003, the Company received
approximately $81.3 million representing its proportional share of
passenger security and air carrier security fees paid or collected as
of April 2003. The Company recorded this amount in Nonoperating
Income (Expenses)  Other, Net in the accompanying Condensed
Consolidated Statements of Operations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The TSA will not impose passenger security fees during the period
beginning June 1, 2003 and ending September 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

9



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##### 



AMERICA WEST HOLDINGS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2003



| |  |  | $100 million of the appropriation will be available to compensate
air carriers for the direct costs associated with the strengthening of
flight deck doors and locks on aircraft. AWA expects to receive
approximately $3.0 million as reimbursement for the costs of
reinforcing flight deck doors and locks.                                                                                                                                                                                                                                                                                                               
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Aviation war risk insurance provided by the federal government is
extended until August 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | Certain airlines that received the aviation-related assistance,
principally those airlines with trans-Pacific or trans-Atlantic
flights, agreed to limit the total cash compensation for certain
executive officers during the 12-month period beginning April 1, 2003
to an amount equal to the annual salary paid to that officer during the
air carriers fiscal year 2002. Any violation of this agreement will
require the carrier to repay to the government the amount reimbursed
for airline security fees. Since AWA does not operate trans-Pacific or
trans-Atlantic flights, AWA is not subject to this provision.

8. EARNINGS PER SHARE (EPS)

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

|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |            | 
|------------------------------------------------------------------------ | ------------------------------------------------------ | ------------------------------------------- | ------------------ | ---------- | ---------------- | - | ------------- | ---------- | ---- | - | ---------- | ---------- | ------------- | - | ---------- | ---------- | 
|                                                                         |                                                        |                                             | Three Months Ended |            | Six Months Ended
|                                                                         |                                                        |                                             | June 30,           |            | June 30,        
|                                                                         |                                                        |                                             | 2003               |            | 2002             |   | 2003          |            | 2002
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |     
|                                                                         |                                                        |                                             |                    |            |                  |   | (as restated) |            |      |   |            |            | (as restated)
|                                                                         |                                                        | (in thousands of dollars except share data)
|BASIC INCOME (LOSS) PER SHARE                                            |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Income (loss) before cumulative effect of change in
accounting principle |                                                        | $                                           | 79,684             |            |                  | $ | (12,855       | )          |      | $ | 17,666     |            |               | $ | (78,092    | )         
|Cumulative effect of change in accounting principle                      |                                                        |                                             |                   |            |                  |   |              |            |      |   |           |            |               |   | (208,223   | )         
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Net income (loss)                                                        |                                                        | $                                           | 79,684             |            |                  | $ | (12,855       | )          |      | $ | 17,666     |            |               | $ | (286,315   | )         
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Weighted average common shares outstanding                               |                                                        |                                             | 33,719,192         |            |                  |   | 33,726,497    |            |      |   | 33,715,972 |            |               |   | 33,727,186 |           
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Basic income (loss) per share:                                           |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Income (loss) before cumulative effect of change in
accounting
principle |                                                        | $                                           | 2.36               |            |                  | $ | (0.38         | )          |      | $ | 0.52       |            |               | $ | (2.32      | )         
|Cumulative effect of change in accounting principle                      |                                                        |                                             |                   |            |                  |   |              |            |      |   |           |            |               |   | (6.17      | )         
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Net income (loss)                                                        |                                                        | $                                           | 2.36               |            |                  | $ | (0.38         | )          |      | $ | 0.52       |            |               | $ | (8.49      | )         
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|DILUTED INCOME (LOSS) PER SHARE                                          |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Income (loss) before cumulative effect of change in
accounting principle |                                                        | $                                           | 79,684             |            |                  | $ | (12,855       | )          |      | $ | 17,666     |            |               | $ | (78,092    | )         
|Cumulative effect of change in accounting principle                      |                                                        |                                             |                   |            |                  |   |              |            |      |   |           |            |               |   | (208,223   | )         
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Net income (loss)                                                        |                                                        | $                                           | 79,684             |            |                  | $ | (12,855       | )          |      | $ | 17,666     |            |               | $ | (286,315   | )         
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Share computation:                                                       |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|                                                                         | Weighted average common shares outstanding             |                                             |                    | 33,719,192 |                  |   |               | 33,726,497 |      |   |            | 33,715,972 |               |   |            | 33,727,186 | 
|                                                                         | Assumed exercise of stock options and warrants         |                                             |                    | 5,778,262  |                  |   |               |           |      |   |            | 2,889,211  |               |   |            |           | 
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|                                                                         | Weighted average common shares outstanding as adjusted |                                             |                    | 39,497,454 |                  |   |               | 33,726,497 |      |   |            | 36,605,183 |               |   |            | 33,727,186 | 
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Diluted income (loss) per share:                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Income (loss) before cumulative effect of change in
accounting principle |                                                        | $                                           | 2.02               |            |                  | $ | (0.38         | )          |      | $ | 0.48       |            |               | $ | (2.32      | )         
|Cumulative effect of change in accounting principle                      |                                                        |                                             |                   |            |                  |   |              |            |      |   |           |            |               |   | (6.17      | )         
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           
|Net income (loss)                                                        |                                                        | $                                           | 2.02               |            |                  | $ | (0.38         | )          |      | $ | 0.48       |            |               | $ | (8.49      | )         
|                                                                         |                                                        |                                             |                    |            |                  |   |               |            |      |   |            |            |               |   |            |           

For the three months ended June 30, 2003, 6,379,060 stock options and
17,321,941 warrants issued in conjunction with the government guaranteed loan
and related transactions are not included in the computation of diluted EPS
because the option and warrant exercise prices were greater than the average
market price of common stock for the period.

10



---



##### 



AMERICA WEST HOLDINGS
CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2003

For the three months ended June 30, 2002, 14,657 incremental shares from
assumed exercise of stock options and 4,638,655 incremental shares from assumed
exercise of warrants issued in conjunction with the government guaranteed loan
and related transactions are not included in the computation of diluted EPS
because of the antidilutive effect on EPS. In addition, 7,827,608 stock
options and 17,898,345 warrants are not included in the computation of diluted
EPS because the option and warrant exercise prices were greater than the
average market price of common stock for the period.

For the six months ended June 30, 2003, 7,073,763 stock options and
19,929,470 warrants issued in conjunction with the government guaranteed loan
and related transactions are not included in the computation of diluted EPS
because the option and warrant exercise prices were greater than the average
market price of common stock for the period.

For the six months ended June 30, 2002, 44,148 incremental shares from
assumed exercise of stock options and 5,588,797 incremental shares from assumed
exercise of warrants issued in conjunction with the government guaranteed loan
and related transactions are not included in the computation of diluted EPS
because of the antidilutive effect on EPS. In addition, 6,596,332 stock
options and 16,948,203 warrants are not included in the computation of diluted
EPS because the option and warrant exercise prices were greater than the
average market price of common stock for the period.

9. SEGMENT DISCLOSURES

Holdings is one reportable operating segment. Accordingly, the segment
reporting financial data required by SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Informationis included in the accompanying
condensed consolidated balance sheets and statements of operations.

10. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation Number (FIN) 46, Consolidation of Variable Interest
Entities.FIN 46 requires that companies that control another entity through
interests other than voting interests should consolidate the controlled entity.
FIN 46 is effective for variable interest entities created after January 31,
2003 and to any variable interest entities in which the Company obtains an
interest after that date. FIN 46 is effective for the quarter ending September
30, 2003 for variable interest entities in which the Company held a variable
interest that it acquired before February 1, 2003. The Company
is currently evaluating
the provisions of FIN 46 as it relates to certain airport lease
agreements and certain aircraft financings to determine its impact,
if any on the financial condition and results of operations of the
Company and does not believe it to be reasonably possible that
adoption would have a material effect on its financial condition or results of
operations.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. SFAS No. 149 is effective for certain
contracts entered into or modified by the Company after June 30, 2003. The
Company is currently evaluating SFAS No. 149 to determine its impact on the
financial condition and results of operations of the Company.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity.SFAS No. 150
specifies that freestanding financial instruments within its scope constitute
obligations of the issuer and that, therefore, the issuer must classify them as
liabilities. Such freestanding financial instruments include mandatorily
redeemable financial instruments, obligations to repurchase the issuers equity
shares by transferring assets, and certain obligations to issue a variable
number of shares. SFAS No. 150 is effective immediately for all financial
instruments entered into or modified after May 31, 2003. For all other
instruments, SFAS No. 150 is effective at the beginning of the third quarter of
2003. The Company is currently evaluating SFAS No. 150 to determine its impact
on the financial condition and results of operations of the Company.

11



---



##### 



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

The unaudited condensed balance sheets of AWA, a wholly-owned subsidiary
of Holdings, as of June 30, 2003 and December 31, 2002, the condensed
statements of operations for the three and six months ended June 30, 2003 and
2002 and the condensed statements of cash flows for the six months ended June
30, 2003 and 2002, together with the related notes, are set forth on the
following pages.

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

|                        |                                                |                            |           |         |             |   |              |         |         |  | 
|----------------------- | ---------------------------------------------- | -------------------------- | --------- | ------- | ----------- | - | ------------ | ------- | ------- |  | 
|                        |                                                |                            |           |         | June 30,    |   | December 31,
|                        |                                                |                            |           |         | 2003        |   | 2002        
|                        |                                                |                            |           |         |             |   |             
|                        |                                                |                            |           |         | (unaudited) |   |              |         |        
|                        |                                                |                            | Assets    |         |             |   |              |         |         |  | 
|Current assets:         |                                                |                            |           |         |             |   |              |        
|                        | Cash and cash equivalents                      |                            | $         | 337,519 |             |   | $            | 326,612 |        
|                        | Short-term investments                         |                            |           | 40,804  |             |   |              | 24,738  |        
|                        | Accounts receivable, net                       |                            |           | 110,975 |             |   |              | 72,667  |        
|                        | Expendable spare parts and supplies, net       |                            |           | 55,209  |             |   |              | 55,894  |        
|                        | Prepaid expenses                               |                            |           | 152,921 |             |   |              | 107,587 |        
|                        |                                                |                            |           |         |             |   |              |        
|                        |                                                | Total current assets       |           |         | 697,428     |   |              |         | 587,498 | 
|                        |                                                |                            |           |         |             |   |              |        
|Property and equipment: |                                                |                            |           |         |             |   |              |        
|                        | Flight equipment                               |                            |           | 883,449 |             |   |              | 880,446 |        
|                        | Other property and equipment                   |                            |           | 265,981 |             |   |              | 266,060 |        
|                        | Equipment purchase deposits                    |                            |           | 42,550  |             |   |              | 46,050  |        
|                        |                                                |                            |           |         |             |   |              |        
|                        |                                                |                            | 1,191,980 |         |             |   | 1,192,556    |        
|                        | Less accumulated depreciation and amortization |                            |           | 575,781 |             |   |              | 544,821 |        
|                        |                                                |                            |           |         |             |   |              |        
|                        |                                                | Net property and equipment |           |         | 616,199     |   |              |         | 647,735 | 
|                        |                                                |                            |           |         |             |   |              |        
|Other assets:           |                                                |                            |           |         |             |   |              |        
|                        | Restricted cash                                |                            |           | 78,677  |             |   |              | 45,968  |        
|                        | Advances to parent company, net                |                            |           | 223,695 |             |   |              | 223,695 |        
|                        | Other assets, net                              |                            |           | 142,439 |             |   |              | 140,119 |        
|                        |                                                |                            |           |         |             |   |              |        
|                        |                                                | Total other assets         |           |         | 444,811     |   |              |         | 409,782 | 
|                        |                                                |                            |           |         |             |   |              |        
|                        |                                                | $                          | 1,758,438 |         |             | $ | 1,645,015    |        
|                        |                                                |                            |           |         |             |   |              |        

See accompanying notes to condensed financial statements.

12



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##### 



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

|                                        |                                                                               |                            |                                      |          |             |   |              |          |         |  | 
|--------------------------------------- | ----------------------------------------------------------------------------- | -------------------------- | ------------------------------------ | -------- | ----------- | - | ------------ | -------- | ------- |  | 
|                                        |                                                                               |                            |                                      |          | June 30,    |   | December 31,
|                                        |                                                                               |                            |                                      |          | 2003        |   | 2002        
|                                        |                                                                               |                            |                                      |          |             |   |             
|                                        |                                                                               |                            |                                      |          | (unaudited) |   |              |          |        
|                                        |                                                                               |                            | Liabilities and Stockholders Equity |          |             |   |              |          |         |  | 
|Current liabilities:                    |                                                                               |                            |                                      |          |             |   |              |         
|                                        | Current maturities of long-term debt                                          |                            | $                                    | 56,074   |             |   | $            | 19,116   |        
|                                        | Current obligations of capital leases                                         |                            |                                      | 3,212    |             |   |              | 3,122    |        
|                                        | Accounts payable                                                              |                            |                                      | 183,128  |             |   |              | 176,903  |        
|                                        | Payable to affiliate, net                                                     |                            |                                      | 31,869   |             |   |              | 12,175   |        
|                                        | Air traffic liability                                                         |                            |                                      | 219,314  |             |   |              | 170,091  |        
|                                        | Accrued compensation and vacation benefits                                    |                            |                                      | 47,504   |             |   |              | 39,007   |        
|                                        | Accrued taxes                                                                 |                            |                                      | 43,830   |             |   |              | 28,809   |        
|                                        | Other accrued liabilities                                                     |                            |                                      | 38,032   |             |   |              | 38,450   |        
|                                        |                                                                               |                            |                                      |          |             |   |              |         
|                                        |                                                                               | Total current liabilities  |                                      |          | 622,963     |   |              |          | 487,673 | 
|                                        |                                                                               |                            |                                      |          |             |   |              |         
|Long-term debt, less current maturities |                                                                               |                            | 659,302                              |          |             |   | 700,983      |         
|Capital leases, less current maturities |                                                                               |                            | 11,567                               |          |             |   | 11,999       |         
|Deferred credits and other liabilities  |                                                                               |                            | 142,114                              |          |             |   | 145,145      |         
|Commitments and contingencies           |                                                                               |                            |                                      |          |             |   |              |         
|Stockholders equity:                   |                                                                               |                            |                                      |          |             |   |              |         
|                                        | Common Stock $.01 par value. Authorized, issued and
outstanding; 1,000 shares |                            |                                      |         |             |   |              |         |        
|                                        | Additional paid-in capital                                                    |                            |                                      | 555,132  |             |   |              | 555,132  |        
|                                        | Retained deficit                                                              |                            |                                      | (243,350 | )           |   |              | (257,947 | )      
|                                        | Accumulated other comprehensive income                                        |                            |                                      | 10,710   |             |   |              | 2,030    |        
|                                        |                                                                               |                            |                                      |          |             |   |              |         
|                                        |                                                                               | Total stockholders equity |                                      |          | 322,492     |   |              |          | 299,215 | 
|                                        |                                                                               |                            |                                      |          |             |   |              |         
|                                        |                                                                               | $                          | 1,758,438                            |          |             | $ | 1,645,015    |         
|                                        |                                                                               |                            |                                      |          |             |   |              |         

See accompanying notes to condensed financial statements.

13



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##### 



AMERICA WEST AIRLINES, INC.
Condensed Statements of Operations
(in thousands)
(unaudited)

|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |         |           |  
|----------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------------------------------------- | ------ | ------------------ | ------- | ---------------- | ------- | ------------- | ------- | ---- | ------- | --------- | --------- | ------------- | -------- | ------- | --------- | -
|                                                                                                |                                            |                                           |        | Three Months Ended |         | Six Months Ended
|                                                                                                |                                            |                                           |        | June 30,           |         | June 30,        
|                                                                                                |                                            |                                           |        |                    |         |                 
|                                                                                                |                                            |                                           |        | 2003               |         | 2002             |         | 2003          |         | 2002
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |     
|                                                                                                |                                            |                                           |        |                    |         |                  |         | (as restated) |         |      |         |           |           | (as restated)
|Operating revenues:                                                                             |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Passenger                                  |                                           | $      | 538,358            |         |                  | $       | 507,309       |         |      | $       | 1,038,932 |           |               | $        | 944,284 |          
|                                                                                                | Cargo                                      |                                           |        | 7,844              |         |                  |         | 7,255         |         |      |         | 14,900    |           |               |          | 14,575  |          
|                                                                                                | Other                                      |                                           |        | 18,854             |         |                  |         | 18,580        |         |      |         | 25,629    |           |               |          | 27,884  |          
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                |                                            | Total operating revenues                  |        |                    | 565,056 |                  |         |               | 533,144 |      |         |           | 1,079,461 |               |          |         | 986,743   |  
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Operating expenses:                                                                             |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Salaries and related costs                 |                                           |        | 154,437            |         |                  |         | 145,604       |         |      |         | 314,933   |           |               |          | 287,683 |          
|                                                                                                | Aircraft rents                             |                                           |        | 72,291             |         |                  |         | 70,618        |         |      |         | 147,445   |           |               |          | 143,509 |          
|                                                                                                | Other rents and landing fees               |                                           |        | 37,505             |         |                  |         | 38,382        |         |      |         | 77,265    |           |               |          | 79,812  |          
|                                                                                                | Aircraft fuel                              |                                           |        | 86,530             |         |                  |         | 73,448        |         |      |         | 179,886   |           |               |          | 131,536 |          
|                                                                                                | Agency commissions                         |                                           |        | 6,291              |         |                  |         | 10,508        |         |      |         | 12,483    |           |               |          | 24,757  |          
|                                                                                                | Aircraft maintenance materials and repairs |                                           |        | 58,510             |         |                  |         | 63,537        |         |      |         | 122,718   |           |               |          | 128,795 |          
|                                                                                                | Depreciation and amortization              |                                           |        | 17,155             |         |                  |         | 17,727        |         |      |         | 34,629    |           |               |          | 34,385  |          
|                                                                                                | Special charges, net                       |                                           |        | 14,081             |         |                  |         |              |         |      |         | 13,979    |           |               |          | 21,030  |          
|                                                                                                | Other                                      |                                           |        | 104,225            |         |                  |         | 114,375       |         |      |         | 208,839   |           |               |          | 218,619 |          
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                |                                            | Total operating expenses                  |        |                    | 551,025 |                  |         |               | 534,199 |      |         |           | 1,112,177 |               |          |         | 1,070,126 |  
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Operating income (loss)                                                                         |                                            |                                           | 14,031 |                    |         |                  | (1,055  | )             |         |      | (32,716 | )         |           |               | (83,383  | )      
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Nonoperating income (expenses):                                                                 |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                | Interest income                            |                                           |        | 2,829              |         |                  |         | 4,891         |         |      |         | 5,886     |           |               |          | 9,389   |          
|                                                                                                | Interest expense, net                      |                                           |        | (21,288            | )       |                  |         | (21,728       | )       |      |         | (41,529   | )         |               |          | (40,625 | )        
|                                                                                                | Federal government assistance              |                                           |        | 81,255             |         |                  |         | 2,264         |         |      |         | 81,255    |           |               |          | 2,264   |          
|                                                                                                | Other, net                                 |                                           |        | 481                |         |                  |         | 166           |         |      |         | 1,701     |           |               |          | (2,292  | )        
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|                                                                                                |                                            | Total nonoperating income (expenses), net |        |                    | 63,277  |                  |         |               | (14,407 | )    |         |           | 47,313    |               |          |         | (31,264   | )
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Income (loss) before income tax benefit and
cumulative effect of change in accounting principle |                                            |                                           | 77,308 |                    |         |                  | (15,462 | )             |         |      | 14,597  |           |           |               | (114,647 | )      
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Income tax benefit                                                                              |                                            |                                           |       |                    |         |                  |        |               |         |      |        |           |           |               | (30,484  | )      
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Income (loss) before cumulative effect of change in
accounting principle                        |                                            |                                           | 77,308 |                    |         |                  | (15,462 | )             |         |      | 14,597  |           |           |               | (84,163  | )      
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Cumulative effect of change in accounting principle                                             |                                            |                                           |       |                    |         |                  |        |               |         |      |        |           |           |               | (187,949 | )      
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        
|Net income (loss)                                                                               |                                            | $                                         | 77,308 |                    |         | $                | (15,462 | )             |         | $    | 14,597  |           |           | $             | (272,112 | )      
|                                                                                                |                                            |                                           |        |                    |         |                  |         |               |         |      |         |           |           |               |          |        

See accompanying notes to condensed financial statements.

14



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##### 



AMERICA WEST AIRLINES, INC.
Condensed Statements of Cash Flows
(in thousands)
(unaudited)

|                                                                   |                                                              |                                                     |         |                  |          |      |         |               |         | 
|------------------------------------------------------------------ | ------------------------------------------------------------ | --------------------------------------------------- | ------- | ---------------- | -------- | ---- | ------- | ------------- | ------- | 
|                                                                   |                                                              |                                                     |         | Six Months Ended
|                                                                   |                                                              |                                                     |         | June 30,        
|                                                                   |                                                              |                                                     |         |                 
|                                                                   |                                                              |                                                     |         | 2003             |          | 2002
|                                                                   |                                                              |                                                     |         |                  |          |     
|                                                                   |                                                              |                                                     |         |                  |          |      |         | (as restated)
|Net cash provided by (used in) operating activities                |                                                              | $                                                   | 125,548 |                  |          | $    | (8,956  | )            
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Cash flows from investing activities:                              |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Purchases of property and equipment                          |                                                     |         | (82,216          | )        |      |         | (78,709       | )      
|                                                                   | Purchases of short-term investments                          |                                                     |         | (40,804          | )        |      |         | (60,129       | )      
|                                                                   | Sales of short-term investments                              |                                                     |         | 24,738           |          |      |         |              |        
|                                                                   | Increase in restricted cash                                  |                                                     |         | (32,709          | )        |      |         | (13,589       | )      
|                                                                   | Proceeds from disposition of assets                          |                                                     |         | 23,972           |          |      |         | 62            |        
|                                                                   | Proceeds from sale and leaseback of aircraft                 |                                                     |         |                 |          |      |         | 175,478       |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   |                                                              | Net cash provided by (used in) investing activities |         |                  | (107,019 | )    |         |               | 23,113  | 
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Cash flows from financing activities:                              |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Repayment of debt                                            |                                                     |         | (7,622           | )        |      |         | (165,999      | )      
|                                                                   | Proceeds from issuance of debt                               |                                                     |         |                 |          |      |         | 435,386       |        
|                                                                   | Payment of debt issue costs                                  |                                                     |         |                 |          |      |         | (12,667       | )      
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   |                                                              | Net cash provided by (used in) financing activities |         |                  | (7,622   | )    |         |               | 256,720 | 
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Net increase in cash and cash equivalents                          |                                                              |                                                     | 10,907  |                  |          |      | 270,877 |              
|Cash and cash equivalents at beginning of period                   |                                                              |                                                     | 326,612 |                  |          |      | 148,520 |              
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Cash and cash equivalents at end of period                         |                                                              | $                                                   | 337,519 |                  |          | $    | 419,397 |              
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Cash, cash equivalents and short-term investments at end of period |                                                              | $                                                   | 378,323 |                  |          | $    | 479,526 |              
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Cash paid (refunded) for:                                          |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Interest, net of amounts capitalized                         |                                                     | $       | 8,975            |          |      | $       | 12,879        |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Income taxes paid (refunded)                                 |                                                     | $       | 26               |          |      | $       | (63,317       | )      
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|Non-cash investing and financing activities:                       |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Notes payable canceled under the aircraft purchase agreement |                                                     | $       | (3,500           | )        |      | $       | (10,500       | )      
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Notes payable issued under the aircraft purchase agreement   |                                                     | $       |                 |          |      | $       | 7,000         |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Payment in kind notes issued, net of returns                 |                                                     | $       | 4,426            |          |      | $       | 3,426         |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Reclassification of advances to parent company, net          |                                                     | $       |                 |          |      | $       | 257,771       |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Issuance of convertible notes, net of cancellations          |                                                     | $       |                 |          |      | $       | 60,186        |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Issuance of warrants                                         |                                                     | $       |                 |          |      | $       | 35,383        |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Equipment acquired through capital lease                     |                                                     | $       |                 |          |      | $       | 16,878        |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              
|                                                                   | Equipment acquired with issuance of notes payable            |                                                     | $       |                 |          |      | $       | 64,163        |        
|                                                                   |                                                              |                                                     |         |                  |          |      |         |              

See accompanying notes to condensed financial statements.

15



---



##### 



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
June 30, 2003

1. BASIS OF PRESENTATION

The unaudited condensed financial statements included herein have been
prepared by AWA, a wholly owned subsidiary of Holdings, pursuant to the rules
and regulations of the Securities and Exchange Commission and, in accordance
with those rules and regulations, certain information and footnotes required by
generally accepted accounting principles have been omitted. In the opinion of
management, the condensed financial statements reflect all adjustments, which
are of a normal recurring nature, necessary for a fair presentation. Certain
prior year amounts have been reclassified to conform with current year
presentation. The accompanying condensed financial statements should be read
in conjunction with the financial statements and related notes thereto included
in the Companys Annual Report on Form 10-K for the year ended December 31,
2002.

2. RESTATEMENT OF PREVIOUSLY REPORTED AMOUNTS

As
disclosed in our Form 10-K for the year ended December 31, 2002, AWA has restated its
financial statements for the fiscal year ended December 31, 2001 and its
unaudited financial statements for the first, second and third quarters of
fiscal year ended December 31, 2002. The changes include:



| |  |  | a change in the timing from the first quarter of 2002 back to the
fourth quarter of 2001 of the non-cash impairment charge of
approximately $39.2 million recorded to adjust the carrying value of
owned aircraft to market value and the related non-cash impairment
charge of approximately $64.1 million recorded to write off ERV that
arose in connection with the Companys plan of reorganization from
bankruptcy in 1994, both of which charges were previously recorded in
the first quarter of 2002; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the recognition of a full valuation allowance relating to AWAs net
deferred tax assets.                                                                                                                                                                                                                                                                                                                                                                                                                          

Impairment Charges

SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of requires that an impairment analysis be
performed whenever circumstances indicate that the carrying amount of an asset
that an entity expects to hold and use may not be recoverable.

As a result of the adverse impacts on AWA and the airline industry as a
whole resulting from the terrorist events of September 11, 2001 and their
aftermath, AWA performed an assessment of impairment of its owned aircraft
during 2001 and again in connection with the preparation of the interim
financial statements for the first quarter of 2002.

As a result of AWAs assessments, no impairment adjustment was recorded in
the financial statements initially issued for 2001. AWA recorded an impairment
charge of approximately $39.2 million in the first quarter of 2002 to adjust
the carrying value of AWAs owned aircraft to reflect market values at that
time. Such accounting treatment was considered appropriate at the time of the
issuance of the applicable financial statements. In connection with the
preparation of the financial statements and the related audit for the fiscal
year ended December 31, 2002, AWA determined that the more appropriate
recognition of the impairment charge of approximately $39.2 million was in the
fourth quarter of 2001 rather than in the first quarter of 2002.

In addition, SFAS No. 121 requires that goodwill that arose in a purchase
business combination be allocated, and included as part of the asset base, in
determining recoverability and measuring impairment. AWA did not have goodwill
at December 31, 2001, but did have a significant amount of unamortized ERV.
AWA has determined that a portion of the unamortized ERV balance should have
been allocated to AWAs owned aircraft in the impairment analysis performed for
the year ended December 31, 2001. The remaining unamortized balance of ERV was
written-off in the first quarter of 2002 as a cumulative effect of a change in
accounting principle, upon adoption of SFAS No. 142, Goodwill and Other
Intangible Assets.

The impact of the above described matters is to change the period of
recognition for these non-cash costs between late 2001 and early 2002.

16



---



##### 



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
June 30, 2003

Deferred Income Taxes

SFAS No. 109, Accounting for Income Taxesrequires that a valuation
allowance be established when it is more likely than not that all or a
portion of deferred tax assets will not be realized. A review of all available
positive and negative evidence needs to be considered, including the companys
performance, the market environment in which the company operates, forecasts of
future profitability, the utilization of past tax credits, length of
carryforward periods and similar factors. SFAS No. 109 further states that it
is difficult to conclude that a valuation allowance is not needed when there is
negative evidence such as cumulative losses in recent years. Therefore,
cumulative losses weigh heavily in the overall assessment.

AWA had originally reported a net deferred tax liability at December 31,
2001. After consideration of the restatement discussed above, AWA had a net
deferred tax asset and was in a cumulative loss position for the three years
ended December 31, 2001. A full valuation allowance has been established
relating to AWAs net deferred tax assets at December 31, 2001, and relating to
net deferred tax assets generated by losses in 2002. We expect to continue to
record a full valuation allowance on future tax benefits until we return to
sustained profitability.

As a result of the adjustments discussed above, AWAs financial statements
for the second quarter and the six months ended June 30, 2002 have been
restated from amounts previously reported. The principal effects of these
adjustments on the accompanying financial statements are set forth below:

|                                                                                       |  |                                          |         |                                        |  |          |        |               |  |                |         |          |  |   |          |   |  |   |        |  |  |   |          |  
|-------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------- | -------------------------------------- |  | -------- | ------ | ------------- |  | -------------- | ------- | -------- |  | - | -------- | - |  | - | ------ |  |  | - | -------- | -
|                                                                                       |  | For the Three Months Ended June 30, 2002 |         | For the Six Months Ended June 30, 2002
|                                                                                       |  |                                          |         |                                       
|                                                                                       |  |                                          |         |                                        |  |          |        |               |  | (in thousands) |         |          |  |   |          |   |  |  
|                                                                                       |  | As Previously                            |         | Restatement                            |  | As       |        | As Previously |  | Restatement    |         | As      
|                                                                                       |  | Reported                                 |         | Adjustments                            |  | Restated |        | Reported      |  | Adjustments    |         | Restated
|                                                                                       |  |                                          |         |                                        |  |          |        |               |  |                |         |         
|Operating loss                                                                         |  | $                                        | (1,055  | )                                      |  |          |       |               |  | $              | (1,055  | )        |  | $ | (122,608 | ) |  | $ | 39,225 |  |  | $ | (83,383  | )
|                                                                                       |  |                                          |         |                                        |  |          |        |               |  |                |         |          |  |   |          |   |  |   |        |  |  |   |          |  
|Loss before income tax benefit and
cumulative effect of change in
accounting principle |  |                                          | (15,462 | )                                      |  |          |       |               |  |                | (15,462 | )        |  |   | (153,872 | ) |  |   | 39,225 |  |  |   | (114,647 | )
|Income tax benefit                                                                     |  |                                          | (5,414  | )                                      |  |          | 5,414  |               |  |                |        |          |  |   | (58,492  | ) |  |   | 28,008 |  |  |   | (30,484  | )
|Loss before cumulative effect of change in
accounting principle                        |  |                                          | (10,048 | )                                      |  |          | (5,414 | )             |  |                | (15,462 | )        |  |   | (95,380  | ) |  |   | 11,217 |  |  |   | (84,163  | )
|Cumulative effect of change in accounting
Principle                                    |  |                                          |        |                                        |  |          |       |               |  |                |        |          |  |   | (252,010 | ) |  |   | 64,061 |  |  |   | (187,949 | )
|Net loss                                                                               |  | $                                        | (10,048 | )                                      |  |          | (5,414 | )             |  | $              | (15,462 | )        |  | $ | (347,390 | ) |  |   | 75,278 |  |  | $ | (272,112 | )
|                                                                                       |  |                                          |         |                                        |  |          |        |               |  |                |         |          |  |   |          |   |  |   |        |  |  |   |          |  

3. ADVANCES TO PARENT COMPANY AND AFFILIATE

As of June 30, 2003, AWA had net advances to Holdings of $223.7 million,
which were classified in Other Assetson AWAs condensed balance sheet due to
certain restrictions related to the timing of repayment under the $429 million
government guaranteed loan and the $73.2 million term loan. In addition, AWA
had a net payable of $31.9 million due principally to TLC, a wholly owned
subsidiary of Holdings. This payable, which is primarily related to credit
card receipts collected by AWA for vacation packages sold by TLC, was
classified in AWAs condensed balance sheet as a current liability.

4. STOCK OPTIONS

Certain of AWAs employees are eligible to participate in the stock option
plans of Holdings. Holdings accounts for its stock option plans in accordance
with the provisions of APB Opinion No. 25, Accounting for Stock Issued to
Employees,and related interpretations. As such, compensation expense would
be recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. Accordingly, no compensation
cost has been recognized for stock options in Holdings condensed consolidated
financial statements. Had Holdings determined compensation cost based on the
fair value at the grant date for its stock options under SFAS No. 123,
Accounting for Stock-Based Compensation,and allocated the compensation
expense to AWA for its employees participating in the stock option plans, AWAs
net income (loss) would have been reduced to the pro forma amounts indicated
below:

17



---



##### 



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
June 30, 2003

|                                 |  |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  
|-------------------------------- |  | ------------------ | ------ | ---------------- |  | ------------- | ------- | ---- |  | - | ------ | ------------- |  | - | -------- | -
|                                 |  | Three Months Ended |        | Six Months Ended
|                                 |  | June 30,           |        | June 30,        
|                                 |  |                    |        |                 
|                                 |  | 2003               |        | 2002             |  | 2003          |         | 2002
|                                 |  |                    |        |                  |  |               |         |     
|                                 |  |                    |        |                  |  | (as restated) |         |      |  |   |        | (as restated)
|                                 |  | (in thousands)    
|Net income (loss), as reported   |  | $                  | 77,308 |                  |  | $             | (15,462 | )    |  | $ | 14,597 |               |  | $ | (272,112 | )
|Stock-based compensation expense |  |                    | (934   | )                |  |               | (1,656  | )    |  |   | (2,185 | )             |  |   | (2,888   | )
|                                 |  |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  
|Pro forma net income (loss)      |  | $                  | 76,374 |                  |  | $             | (17,118 | )    |  | $ | 12,412 |               |  | $ | (275,000 | )
|                                 |  |                    |        |                  |  |               |         |      |  |   |        |               |  |   |          |  

5. FLIGHT EQUIPMENT

In June
2003, AWA entered into an operating lease for one new
Airbus A320 aircraft with a lease term of 20 years, which is being accounted
for as an operating lease.

During
the second quarter of 2003, AWA returned two Boeing 737-300
aircraft and one Airbus A320 aircraft to the aircraft lessors upon expiration
of the lease terms.

In April 2003, one aircraft lessor exercised its put rights under the
aircraft lease agreement to extend the lease for one Boeing 737-300 aircraft
for an additional 18 months.

In April 2003, AWA revised the estimated useful life for capitalized
maintenance on certain of its engines driven by a new maintenance
agreement that guarantees minimum cycles on engine overhauls.
The net impact of this change in estimate increased net income for the three
months ended June 30, 2003 by $2.5 million.

6. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes changes in the fair value of
derivative financial instruments that qualify for hedge accounting. For the
three and six months ended June 30, 2003, AWA recorded total comprehensive
income of $73.3 million and $23.8 million, respectively. For the three and six
months ended June 30, 2002, AWA recorded a total comprehensive loss of $15.9
million and $274.0 million, respectively. The difference between net income
(loss) and comprehensive income (loss) for the three and six months ended June
30, 2003 and 2002 is detailed in the following table:

|                            |                                                                                                                     |   |                    |        |                  |   |               |      |      |   |        |        |               |   |          |        |  
|--------------------------- | ------------------------------------------------------------------------------------------------------------------- | - | ------------------ | ------ | ---------------- | - | ------------- | ---- | ---- | - | ------ | ------ | ------------- | - | -------- | ------ | -
|                            |                                                                                                                     |   | Three Months Ended |        | Six Months Ended
|                            |                                                                                                                     |   | June 30,           |        | June 30,        
|                            |                                                                                                                     |   |                    |        |                 
|                            |                                                                                                                     |   | 2003               |        | 2002             |   | 2003          |      | 2002
|                            |                                                                                                                     |   |                    |        |                  |   |               |      |     
|                            |                                                                                                                     |   |                    |        |                  |   | (as restated) |      |      |   |        |        | (as restated)
|                            |                                                                                                                     |   | (in thousands)    
|Net income (loss)           |                                                                                                                     | $ | 77,308             |        |                  | $ | (15,462       | )    |      | $ | 14,597 |        |               | $ | (272,112 | )     
|                            |                                                                                                                     |   |                    |        |                  |   |               |      |      |   |        |        |               |   |          |       
|                            | Unrealized gains (losses) on derivative instruments                                                                 |   |                    | (3,998 | )                |   |               | (481 | )    |   |        | 17,890 |               |   |          | (481   | )
|                            | Reclassification adjustment to net income (loss)
of previously reported unrealized losses on
derivative instruments |   |                    |       |                  |   |               |     |      |   |        | (9,210 | )             |   |          | (1,390 | )
|                            |                                                                                                                     |   |                    |        |                  |   |               |      |      |   |        |        |               |   |          |       
|                            | Total other comprehensive income (loss)                                                                             |   |                    | (3,998 | )                |   |               | (481 | )    |   |        | 8,680  |               |   |          | (1,871 | )
|                            |                                                                                                                     |   |                    |        |                  |   |               |      |      |   |        |        |               |   |          |       
|Comprehensive income (loss) |                                                                                                                     | $ | 73,310             |        |                  | $ | (15,943       | )    |      | $ | 23,777 |        |               | $ | (273,983 | )     
|                            |                                                                                                                     |   |                    |        |                  |   |               |      |      |   |        |        |               |   |          |       

7. SPECIAL CHARGES

In February 2003, AWA announced the elimination of its hub operations in
Columbus, Ohio. As a result, 12 regional jets, all of which were operated by
Chautauqua Airlines under the America West Express banner, have been phased out
of the fleet. In addition, the hub has been downsized from 49 daily departures
to 15 destinations to four flights per day to Phoenix and Las Vegas. Service
to New York City La Guardia Airport was also eliminated because perimeter rules
at the airport prohibit flights beyond 1,500 miles, precluding service from
AWAs hubs in Phoenix and

18



---



##### 



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
June 30, 2003

Las Vegas. In the first and second quarters of 2003, the Company recorded
special charges of $1.0 million and $9.6 million, respectively, related to the
costs associated with the termination of certain contracts, employee transfer
and severance expenses and the write-off of leasehold improvements in Columbus,
Ohio.

In April 2003, as part of a cost reduction program, the Company
implemented a plan to reduce management, professional and administrative
payroll costs which resulted in fewer employees within these workgroups. As a
result, AWA recorded a special charge of $1.8 million related to this
reduction-in-force.

In June 2003, AWA recorded an impairment loss of $2.6 million related to
three owned Boeing 737-200 aircraft that have been or will be grounded.

In the first quarter of 2003, AWA recorded a $1.1 million reduction in
special charges related to the earlier-than-planned return of certain leased
aircraft in 2001 and 2002, as all payments related to these aircraft returns
have been made.

The following table presents the payments and other settlements made
during the six months ended June 30, 2003 related to the special charge
accruals.

|                                                                |  |                |       |                     |  |          |        |       |  |             |       |             |  |          |        |   |  |   |        |  
|--------------------------------------------------------------- |  | -------------- | ----- | ------------------- |  | -------- | ------ | ----- |  | ----------- | ----- | ----------- |  | -------- | ------ | - |  | - | ------ | -
|                                                                |  |                |       |                     |  |          |        |       |  |             |       |             |  | Contract |        |   |  |  
|                                                                |  |                |       |                     |  |          |        |       |  | Reductions- |       | Termination |  |          |        |  
|                                                                |  | Sale-Leaseback |       | Fleet Restructuring |  | in-force |        | Costs |  | Total      
|                                                                |  |                |       |                     |  |          |        |       |  |            
|                                                                |  | (in thousands)
|Balance at December 31, 2002                                    |  | $              | 2,476 |                     |  | $        | 3,357  |       |  | $           |      |             |  | $        |       |   |  | $ | 5,833  |  
|                                                                |  |                |       |                     |  |          |        |       |  |             |       |             |  |          |        |   |  |   |        |  
|Special charges                                                 |  |                |      |                     |  |          | (1,072 | )     |  |             | 470   |             |  |          | 500    |   |  |   | (102   | )
|Payments                                                        |  |                |      |                     |  |          | (271   | )     |  |             |      |             |  |          |       |   |  |   | (271   | )
|Loss on sale-leasebacks                                         |  |                | (6    | )                   |  |          |       |       |  |             |      |             |  |          |       |   |  |   | (6     | )
|                                                                |  |                |       |                     |  |          |        |       |  |             |       |             |  |          |        |   |  |   |        |  
|Balance at March 31, 2003                                       |  | $              | 2,470 |                     |  | $        | 2,014  |       |  | $           | 470   |             |  | $        | 500    |   |  | $ | 5,454  |  
|                                                                |  |                |       |                     |  |          |        |       |  |             |       |             |  |          |        |   |  |   |        |  
|Special charges                                                 |  |                |      |                     |  |          | 2,617  |       |  |             | 1,840 |             |  |          | 9,624  |   |  |   | 14,081 |  
|Payments                                                        |  |                |      |                     |  |          | (182   | )     |  |             | (894  | )           |  |          | (6,000 | ) |  |   | (7,076 | )
|Loss on sale-leasebacks                                         |  |                | (647  | )                   |  |          |       |       |  |             |      |             |  |          |       |   |  |   | (647   | )
|Write-off of leasehold improvements
due to Columbus hub closure |  |                |      |                     |  |          |       |       |  |             |      |             |  |          | (539   | ) |  |   | (539   | )
|Impairment loss                                                 |  |                |      |                     |  |          | (2,617 | )     |  |             |      |             |  |          |       |   |  |   | (2,617 | )
|                                                                |  |                |       |                     |  |          |        |       |  |             |       |             |  |          |        |   |  |   |        |  
|Balance at June 30, 2003                                        |  | $              | 1,823 |                     |  | $        | 1,832  |       |  | $           | 1,416 |             |  | $        | 3,585  |   |  | $ | 8,656  |  
|                                                                |  |                |       |                     |  |          |        |       |  |             |       |             |  |          |        |   |  |   |        |  

AWA expects to make payments related to these special charges through the
fourth quarter of 2005.

8. FEDERAL GOVERNMENT ASSISTANCE

In April 2003, the Senate and House of Representatives of the United
States of America passed, and the President signed, the Emergency Wartime
Supplemental Appropriations Act to provide certain aviation-related assistance.
The bill includes the following key provisions:



| |  |  | $2.3 billion of the appropriation is for grants by the
Transportation Security Administration (TSA) to U.S. air carriers
based on the proportional share each carrier has paid or collected as
of the date of enactment of the legislation for passenger security and
air carrier security fees. In May 2003, AWA received approximately
$81.3 million representing its proportional share of passenger security
and air carrier security fees paid or collected as of April 2003. AWA
recorded this amount in Nonoperating Income (Expenses)
 Other, Net
in the accompanying Condensed Statements of Operations.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The TSA will not impose passenger security fees during the period
beginning June 1, 2003 and ending September 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | $100 million of the appropriation will be available to compensate
air carriers for the direct costs associated with the strengthening of
flight deck doors and locks on aircraft. AWA expects to receive
approximately $3.0 million as reimbursement for the costs of
reinforcing flight deck doors and locks.                                                                                                                                                                                                                                                                                                        

19



---



##### 



AMERICA WEST AIRLINES, INC.
Notes to Condensed Financial Statements
June 30, 2003



| |  |  | Aviation war risk insurance provided by the federal government is
extended until August 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Certain airlines that received the aviation-related assistance,
principally those airlines with trans-Pacific or trans-Atlantic
flights, agreed to limit the total cash compensation for certain
executive officers during the 12-month period beginning April 1, 2003
to an amount equal to the annual salary paid to that officer during the
air carriers fiscal year 2002. Any violation of this agreement will
require the carrier to repay to the government the amount reimbursed
for airline security fees. Since AWA does not operate trans-Pacific or
trans-Atlantic flights, AWA is not subject to this provision.

9. SEGMENT DISCLOSURES

AWA is one reportable operating segment. Accordingly, the segment
reporting financial data required by SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Informationis included in the accompanying
condensed balance sheets and statements of operations.

10. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FIN 46, Consolidation of Variable
Interest Entities.FIN 46 requires that companies that control another entity
through interests other than voting interests should consolidate the controlled
entity. FIN 46 is effective for variable interest entities created after
January 31, 2003 and to any variable interest entities in which
AWA
obtains an interest after that date. FIN 46 is effective for the quarter
ending September 30, 2003 for variable interest entities in
which AWA
held a variable interest that it acquired before February 1,
2003. AWA is currently evaluating the provisions of FIN 46 as it
relates to certain airport lease agreements and certain aircraft
financings to determine its impact, if any, on the financial condition
and results of operations of AWA.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. SFAS No. 149 is effective for certain
contracts entered into or modified by AWA after June 30, 2003.
AWA is currently evaluating SFAS No. 149 to determine the impact
on its
financial condition and results of operations.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity.
SFAS No. 150 specifies that freestanding financial instruments within its scope
constitute obligations of the issuer and that, therefore, the issuer must
classify them as liabilities. Such freestanding financial instruments include
mandatorily redeemable financial instruments, obligations to repurchase the
issuers equity shares by transferring assets, and certain obligations to issue
a variable number of shares. SFAS No. 150 is effective immediately for all
financial instruments entered into or modified after May 31, 2003. For all
other instruments, SFAS No. 150 is effective at the beginning of the third
quarter of 2003. AWA is currently evaluating SFAS No. 150 to determine
the impact on its financial condition and results of operations.

20



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

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

Holdings is the parent company of AWA and TLC. AWA is the eighth largest
commercial airline carrier in the United States operating through its principal
hubs located in Phoenix, Arizona and Las Vegas, Nevada. As of June 30, 2003,
AWA served 63 destinations in North America, including eight destinations in
Mexico and three in Canada. TLC arranges and sells vacation packages primarily
to Las Vegas that may include airfare, hotel accommodations and ground
transportation. Holdings primary business activity is ownership of all the
capital stock of AWA and TLC.

Restatement Of Previously Reported Amounts

As
disclosed in our Form 10-K for the year ended December 31, 2002, Holdings and AWA have
restated their financial statements for the fiscal year ended December 31, 2001
and their unaudited financial statements for the first, second and third
quarters of fiscal year ended December 31, 2002. The changes include:



| |  |  | a change in the timing from the first quarter of 2002 back to the
fourth quarter of 2001 of the non-cash impairment charge of
approximately $39.2 million recorded to adjust the carrying value of
owned aircraft to market value and the related non-cash impairment
charge of approximately $64.1 million recorded to write off ERV that
arose in connection with the Companys plan of reorganization from
bankruptcy in 1994, both of which charges were previously recorded in
the first quarter of 2002; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the recognition of full valuation allowances relating to Holdings
and AWAs net deferred tax assets.                                                                                                                                                                                                                                                                                                                                                                                                             

See Note 2, Restatement of Previously Reported Amountsin both Notes to
Condensed Consolidated Financial Statements of Holdings and Notes to Condensed
Financial Statements of AWA.

Impairment Charges

SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of requires that an impairment analysis be
performed whenever circumstances indicate that the carrying amount of an asset
that an entity expects to hold and use may not be recoverable.

As a result of the adverse impacts on Holdings and AWA and the airline
industry as a whole resulting from the terrorist events of September 11, 2001
and their aftermath, AWA performed an assessment of impairment of its owned
aircraft during 2001 and again in connection with the preparation of the
interim financial statements for the first quarter of 2002.

As a result of AWAs assessments, no impairment adjustment was recorded in
the financial statements initially issued for 2001. The Company recorded an
impairment charge of approximately $39.2 million in the first quarter of 2002
to adjust the carrying value of AWAs owned aircraft to reflect market values
at that time. Such accounting treatment was considered appropriate at the time
of the issuance of the applicable financial statements. In connection with the
preparation of the financial statements and the related audit for the fiscal
year ended December 31, 2002, the Company determined that the more appropriate
recognition of the impairment charge of approximately $39.2 million was in the
fourth quarter of 2001 rather than in the first quarter of 2002.

In addition, SFAS No. 121 requires that goodwill that arose in a purchase
business combination be allocated, and included as part of the asset base, in
determining recoverability and measuring impairment. The Company did not have
goodwill at December 31, 2001, but did have a significant amount of unamortized
ERV. The Company has determined that a portion of the unamortized ERV balance
should have been allocated to AWAs owned aircraft in the impairment analysis
performed for the year ended December 31, 2001. The remaining unamortized
balance of ERV was written-off in the first quarter of 2002 as a cumulative
effect of a change in accounting principle, upon adoption of SFAS No. 142,
Goodwill and Other Intangible Assets.

The impact of the above described matters is to change the period of
recognition for these non-cash costs between late 2001 and early 2002.

21



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

Deferred Income Taxes

SFAS No. 109, Accounting for Income Taxesrequires that a valuation
allowance be established when it is more likely than not that all or a
portion of deferred tax assets will not be realized. A review of all available
positive and negative evidence needs to be considered, including the companys
performance, the market environment in which the company operates, forecasts of
future profitability, the utilization of past tax credits, length of
carryforward periods and similar factors. SFAS No. 109 further states that it
is difficult to conclude that a valuation allowance is not needed when there is
negative evidence such as cumulative losses in recent years. Therefore,
cumulative losses weigh heavily in the overall assessment.

Holdings and AWA had originally reported net deferred tax liabilities at
December 31, 2001. After consideration of the restatement discussed above,
Holdings and AWA each had net deferred tax assets and were in a cumulative loss
position for the three years ended December 31, 2001. Full valuation
allowances have been established relating to Holdings and AWAs net deferred
tax assets at December 31, 2001, and relating to net deferred tax assets
generated by losses in 2002. We expect to continue to record a full valuation
allowance on future tax benefits until we return to sustained profitability.

Overview

In the second quarter of 2003, Holdings realized an operating profit of
$16.3 million and a pretax and net profit of $79.7 million, or $2.02 per
diluted share. The quarters results include federal government assistance of $81.3
million, or $2.06 per diluted share, and special charges of $14.5 million, or
$0.37 per diluted share. During the second quarter, AWA benefited from the
following:



| |  |  | More rational capacity in markets served by AWA as a result of
industry capacity declines over the past year.                                                                                                                                                                                                                                                                                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Aggressive yield management during the peak summer travel period
and continued favorable consumer response to our business-friendly fare
structure, which was implemented in March 2002. Passenger revenue per
available seat mile (RASM) improved 4.2% from 7.41 cents in the second
quarter of 2002 to 7.72 cents in the second quarter of 2003, due to
improvement in both load factor and yield.
|
| |  |  | Operating cost per available seat mile (CASM) increased only 1.3%
to 7.90 cents, while the average fuel price per gallon excluding tax
increased 15.9% from 70.5 cents in the second quarter of 2002 to 81.7 cents per gallon
in the second quarter of 2003. The CASM related to special charges
was 0.20 cents in the quarter.                                                                     
|
| |  |  | Continued strong operational performance, despite record load
factors in the quarter.                                                                                                                                                                                                                                                                                                               

Despite these results, we still expect to incur a loss for the full year
2003. In addition, our results of operations may continue to be negatively
impacted by the soft economic conditions, decline in business traffic, rising
fuel prices and increasing competitive capacity in the markets we serve.

As the low cost leader among the major hub and spoke airlines, we continue
to focus on maintaining our low cost structure. During the second quarter of
2003, we completed the downsizing of our operations in Columbus, Ohio, which
is expected to result in annual savings of approximately $25 million. See
Note 6, Special Chargesin Notes to Condensed Consolidated Financial
Statements. Furthermore, we implemented a reduction-in-force of management,
professional and administrative employees, and asked our business partners and
vendors to reduce their fees, which are expected to result in additional
savings of approximately $47 million annually.

In May 2003, the Company received approximately $81.3 million under the
Emergency Wartime Supplemental Appropriations Act. See Note 7, Federal
Government Assistancein Notes to Condensed Consolidated Financial Statements.
As a result, our cash and cash equivalents and short-term investments at June
30, 2003 increased to $385.7 million. In addition, restricted cash increased
approximately $32.4 million during the quarter, primarily due to the
implementation of a new agreement with a third party vendor for the processing
of our Visa and MasterCard credit card transactions, which required net
additional cash reserves of $25.0 million as collateral for the transactions
processed. See Liquidity and Capital Resources  Sources and Uses of Cash.

22



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

Although there can be no assurances, we believe that cash flow from
operating activities coupled with existing cash balances and financing
commitments will be adequate to fund our operating and capital needs as well as
enable us to maintain compliance with our various debt agreements through at
least December 31, 2003.

Airline Operations Update

AWA has made significant strides in improving its operating performance
over the last three years since initiating comprehensive customer service
initiatives in July 2000. Overall, in the second quarter of 2003, we continued
to see positive trends in our key statistics.

AWA reported the following operating statistics to the U.S. Department of
Transportation (DOT) for the second quarters of 2003, 2002 and 2001:

|                        |  |      |      |      |  |      |      |             |  |             |      |     |  |     |      |     |  |     |      |     |  |  |      |  |  |                |       |                |  |  |       |   |  |  |       |   |  |  |       |  
|----------------------- |  | ---- | ---- | ---- |  | ---- | ---- | ----------- |  | ----------- | ---- | --- |  | --- | ---- | --- |  | --- | ---- | --- |  |  | ---- |  |  | -------------- | ----- | -------------- |  |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|                        |  |      |      |      |  |      |      |             |  |             |      |     |  |     |      |     |  |     |      |     |  |  |      |  |  | Percent Change |       | Percent Change
|                        |  | 2003 |      | 2002 |  | 2001 |      | 2003 - 2002 |  | 2003 - 2001
|                        |  |      |      |      |  |      |      |             |  |            
|                        |  | Apr  |      | May  |  | Apr  |      | May         |  | Apr         |      | May |  | Apr |      | May |  | Apr |      | May
|                        |  |      |      |      |  |      |      |             |  |             |      |     |  |     |      |     |  |     |      |    
|On-time performance (a) |  |      | 88.2 |      |  |      | 85.9 |             |  |             | 84.9 |     |  |     | 87.7 |     |  |     | 73.5 |     |  |  | 77.0 |  |  |                | 3.9   |                |  |  | (2.1  | ) |  |  | 20.0  |   |  |  | 11.6  |  
|Completion factor (b)   |  |      | 99.7 |      |  |      | 99.6 |             |  |             | 99.3 |     |  |     | 99.6 |     |  |     | 98.0 |     |  |  | 98.0 |  |  |                | 0.3   |                |  |  |      |   |  |  | 1.7   |   |  |  | 1.6   |  
|Mishandled baggage (c)  |  |      | 2.53 |      |  |      | 2.68 |             |  |             | 3.05 |     |  |     | 2.95 |     |  |     | 3.82 |     |  |  | 3.28 |  |  |                | (16.9 | )              |  |  | (9.3  | ) |  |  | (33.7 | ) |  |  | (18.4 | )
|Customer complaints (d) |  |      | 0.84 |      |  |      | 1.04 |             |  |             | 1.80 |     |  |     | 1.42 |     |  |     | 4.28 |     |  |  | 2.69 |  |  |                | (53.4 | )              |  |  | (26.6 | ) |  |  | (80.4 | ) |  |  | (61.4 | )



---

|(a) |  | Percentage of reported flight operations arriving on time.            
|--- |  | ----------------------------------------------------------------------
|   
|(b) |  | Percentage of scheduled flight operations completed.                  
|   
|(c) |  | Rate of mishandled baggage reports per 1,000 passengers.              
|   
|(d) |  | Rate of customer complaints filed with the DOT per 100,000
passengers.

Summary of Holdings Financial Results

Holdings recorded consolidated net income of $79.7 million in the second
quarter of 2003, or $2.02 per diluted share. This compares to a consolidated
net loss of $12.9 million, or $0.38 per diluted share, in the second quarter of
2002. The 2003 results include a nonoperating gain of $81.3 million related to
the federal government assistance received under the Emergency Wartime
Supplemental Appropriations Act (see Note 7, Federal Government Assistancein
Notes to Condensed Consolidated Financial Statements) and special charges of
$14.5 million resulting from the elimination of AWAs hub operations in
Columbus, Ohio ($9.6 million), the reduction-in-force of certain management,
professional and administrative employees ($2.3 million) and the impairment of
certain owned Boeing 737-200 aircraft that have been or will be grounded in
2003 ($2.6 million). See Note 6, Special Chargesin Notes to Condensed
Consolidated Financial Statements. The 2002 results included a nonoperating
gain of $2.3 million related to the federal government assistance received
under the Air Transportation Safety and System Stabilization Act. The Company
did not record income tax expense in the second quarter of 2003 as it currently
expects to realize a loss for the full year 2003. As discussed above under
Restatement of Previously Reported Amounts  Deferred Income Taxes,the
Company recorded a full valuation allowance relating to net deferred tax assets
generated by losses in 2002 and expects to continue to record a full valuation
allowance on future tax benefits until it returns to sustained profitability.

Holdings recorded consolidated net income of $17.7 million in the first
six months of 2003, or $0.48 per diluted share. This compares to a
consolidated loss before the cumulative effect of a change in accounting
principle of $78.1 million, or $2.32 per diluted share, in the first six months
of 2002. Including the cumulative effect of a change in accounting principle
related to the Companys adoption of SFAS No. 142, Goodwill and Other
Intangible Assetson January 1, 2002, Holdings net loss for the first six
months of 2002 was $286.3 million, or $8.49 per diluted share. The 2003
results include the $81.3 million of federal government assistance discussed
above, an operating gain of

23



---



##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

$4.4 million related to the purchase and subsequent exchange of an A320
airframe in the first quarter of 2003 and an operating gain of $1.1 million due
to a revision of the estimated costs related to the early termination of
certain aircraft leases. These gains were offset in part by special charges of
$15.5 million resulting from the elimination of AWAs hub operations in
Columbus, Ohio ($10.6), the reduction-in-force of certain management,
professional and administrative employees ($2.3 million) and the impairment of
certain owned Boeing 737-200 aircraft that have been or will be grounded in
2003 ($2.6 million). See Note 6, Special Chargesin Notes to Condensed
Consolidated Financial Statements. The 2002 results included special charges
of $21.0 million primarily related to the restructuring completed on January
18, 2002, a nonoperating charge of $2.8 million related to the write-off of the
Companys investment in an e-commerce entity and a nonoperating gain of $2.3
million related to the federal government assistance received under the Air
Transportation Safety and System Stabilization Act. The Company did not record
income tax expense in the first six months of 2003 as it currently expects to
realize a loss for the full year 2003. The Company recorded an income tax
benefit of $35.1 million in the first six months of 2002 on a pretax loss of
$113.2 million. The 2002 income tax benefit resulted from Holdings 2001
consolidated income tax return, which included a claim to carryback losses
incurred in 2001 to the tax years 1996 through 2000 due to a change in United
States income tax law. As discussed above under Restatement of Previously
Reported Amounts  Deferred Income Taxes,the Company recorded a full
valuation allowance relating to net deferred tax assets generated by losses in
2002 and expects to continue to record a full valuation allowance on future tax
benefits until it returns to sustained profitability.

RESULTS OF OPERATIONS

The following discussion provides an analysis of AWAs results of
operations for the three and six months ended June 30, 2003 and material
changes compared to the three and six months ended June 30, 2002.

The table below sets forth selected operating data for AWA.

|                                                 |                       |  |                    |      |         |  |                  |      |         |        |      |     |           |  |         |      |               |  |         |        |  |  |      |     | 
|------------------------------------------------ | --------------------- |  | ------------------ | ---- | ------- |  | ---------------- | ---- | ------- | ------ | ---- | --- | --------- |  | ------- | ---- | ------------- |  | ------- | ------ |  |  | ---- | --- | 
|                                                 |                       |  | Three Months Ended |      | Percent |  | Six Months Ended |      | Percent
|                                                 |                       |  | June 30,           |      | Change  |  | June 30,         |      | Change 
|                                                 |                       |  | 2003               |      | 2002    |  | 2003-2002        |      | 2003    |        | 2002 |     | 2003-2002
|                                                 |                       |  |                    |      |         |  |                  |      |         |        |      |     |          
|                                                 |                       |  |                    |      |         |  | (as restated)    |      |         |        |      |     |           |  |         |      | (as restated) |  |         |        | 
|Aircraft (end of period)                         |                       |  | 140                |      |         |  | 142              |      |         |        | (1.4 | )   |           |  | 140     |      |               |  | 142     |        |  |  | (1.4 | )  
|Average daily aircraft utilization (hours) (a)   |                       |  | 10.1               |      |         |  | 9.9              |      |         |        | 2.0  |     |           |  | 10.1    |      |               |  | 9.4     |        |  |  | 7.4  |    
|Available seat miles (in millions) (b)           |                       |  | 6,974              |      |         |  | 6,850            |      |         |        | 1.8  |     |           |  | 13,826  |      |               |  | 12,928  |        |  |  | 6.9  |    
|Block hours (c)                                  |                       |  | 129,576            |      |         |  | 127,628          |      |         |        | 1.5  |     |           |  | 259,680 |      |               |  | 241,577 |        |  |  | 7.5  |    
|Average stage length (miles) (d)                 |                       |  | 992                |      |         |  | 947              |      |         |        | 4.8  |     |           |  | 989     |      |               |  | 935     |        |  |  | 5.8  |    
|Average passenger journey (miles) (e)            |                       |  | 1,586              |      |         |  | 1,446            |      |         |        | 9.7  |     |           |  | 1,510   |      |               |  | 1,405   |        |  |  | 7.5  |    
|Revenue passenger miles (in millions) (f)        |                       |  | 5,502              |      |         |  | 5,189            |      |         |        | 6.0  |     |           |  | 10,374  |      |               |  | 9,451   |        |  |  | 9.8  |    
|Load factor (percent) (g)                        |                       |  | 78.9               |      |         |  | 75.8             |      |         | 3.1pts |      |     | 75.0      |  |         |      | 73.1          |  |         | 1.9pts
|Passenger enplanements (in thousands) (h)        |                       |  | 5,185              |      |         |  | 5,080            |      |         |        | 2.1  |     |           |  | 9,840   |      |               |  | 9,383   |        |  |  | 4.9  |    
|Yield per revenue passenger mile (cents) (i)     |                       |  | 9.79               |      |         |  | 9.78             |      |         |        | 0.1  |     |           |  | 10.01   |      |               |  | 9.99    |        |  |  | 0.2  |    
|Revenue per available seat mile:                 |                       |  |                    |      |         |  |                  |      |         |        |      |     |           |  |         |      |               |  |         |        |  |  |      |    
|                                                 | Passenger (cents) (j) |  |                    | 7.72 |         |  |                  | 7.41 |         |        |      | 4.2 |           |  |         | 7.51 |               |  |         | 7.30   |  |  |      | 2.9 | 
|                                                 | Total (cents) (k)     |  |                    | 8.10 |         |  |                  | 7.78 |         |        |      | 4.1 |           |  |         | 7.81 |               |  |         | 7.63   |  |  |      | 2.4 | 
|Fuel consumption (gallons in millions)           |                       |  | 105.9              |      |         |  | 104.2            |      |         |        | 1.6  |     |           |  | 209.7   |      |               |  | 196.1   |        |  |  | 6.9  |    
|Average fuel price (cents per gallon)            |                       |  | 81.7               |      |         |  | 70.5             |      |         |        | 15.9 |     |           |  | 85.8    |      |               |  | 67.1    |        |  |  | 27.9 |    
|Average number of full-time equivalent
employees |                       |  | 11,309             |      |         |  | 11,973           |      |         |        | (5.5 | )   |           |  | 11,692  |      |               |  | 11,773  |        |  |  | (0.7 | )  



---

|(a) |  | Average daily aircraft utilization  The average number of block
hours per day for all aircraft in service.                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Available seat mile (ASM)  A basic measure of production. It is
one seat flown one statute mile.                                                                                                                                
|   
|(c) |  | Block hours  The hours measured from the moment an aircraft first
moves under its own power, including taxi time, for the purposes of
flight until the aircraft is docked at the next point of landing and its
power is shut down.
|   
|(d) |  | Average stage length  The average of the distances flown on each
segment of every route.                                                                                                                                          
|   
|(e) |  | Average passenger journey  The average one-way trip measured in
statute miles for one passenger origination.                                                                                                                      

24



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

|(f) |  | Revenue passenger mile (RPM)  A basic measure of sales volume.
It is one passenger flown one mile.                                 
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------
|   
|(g) |  | Load factor  The percentage of available seats that are filled with
revenue passengers.                                              
|   
|(h) |  | Passenger enplanements  The number of passengers on board an
aircraft including local, connecting and through passengers.            
|   
|(i) |  | Yield  A measure of airline revenue derived by dividing passenger
revenue by revenue passenger miles and expressed in cents per mile.
|   
|(j) |  | Passenger revenue per available seat mile (RASM)  Total passenger
revenues divided by total available seat miles.                  
|   
|(k) |  | Total revenue per available seat mile  Total operating revenues
divided by total available seat miles.                               

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

|                                           |  |                    |      |         |  |                  |      |         |  |      |       |           |  |  |      |               |  |  |      |  |  |  |       |  
|------------------------------------------ |  | ------------------ | ---- | ------- |  | ---------------- | ---- | ------- |  | ---- | ----- | --------- |  |  | ---- | ------------- |  |  | ---- |  |  |  | ----- | -
|                                           |  | Three Months Ended |      | Percent |  | Six Months Ended |      | Percent
|                                           |  | June 30,           |      | Change  |  | June 30,         |      | Change 
|                                           |  | 2003               |      | 2002    |  | 2003-2002        |      | 2003    |  | 2002 |       | 2003-2002
|                                           |  |                    |      |         |  |                  |      |         |  |      |       |          
|(in cents)                                 |  |                    |      |         |  | (as restated)    |      |         |  |      |       |           |  |  |      | (as restated) |  |  |      | 
|Salaries and related costs                 |  |                    | 2.21 |         |  |                  | 2.13 |         |  |      | 4.2   |           |  |  | 2.28 |               |  |  | 2.22 |  |  |  | 2.4   |  
|Aircraft rents                             |  |                    | 1.04 |         |  |                  | 1.03 |         |  |      | 0.6   |           |  |  | 1.06 |               |  |  | 1.11 |  |  |  | (3.9  | )
|Other rents and landing fees               |  |                    | 0.54 |         |  |                  | 0.56 |         |  |      | (4.0  | )         |  |  | 0.56 |               |  |  | 0.62 |  |  |  | (9.5  | )
|Aircraft fuel                              |  |                    | 1.24 |         |  |                  | 1.07 |         |  |      | 15.7  |           |  |  | 1.30 |               |  |  | 1.02 |  |  |  | 27.9  |  
|Agency commissions                         |  |                    | 0.09 |         |  |                  | 0.15 |         |  |      | (41.2 | )         |  |  | 0.09 |               |  |  | 0.19 |  |  |  | (52.9 | )
|Aircraft maintenance materials and repairs |  |                    | 0.84 |         |  |                  | 0.93 |         |  |      | (9.6  | )         |  |  | 0.89 |               |  |  | 1.00 |  |  |  | (10.9 | )
|Depreciation and amortization              |  |                    | 0.25 |         |  |                  | 0.26 |         |  |      | (5.0  | )         |  |  | 0.25 |               |  |  | 0.27 |  |  |  | (5.8  | )
|Special charges                            |  |                    | 0.20 |         |  |                  |     |         |  |      |      |           |  |  | 0.10 |               |  |  | 0.16 |  |  |  | (37.9 | )
|Other                                      |  |                    | 1.49 |         |  |                  | 1.67 |         |  |      | (10.5 | )         |  |  | 1.51 |               |  |  | 1.69 |  |  |  | (10.7 | )
|                                           |  |                    |      |         |  |                  |      |         |  |      |       |           |  |  |      |               |  |  |      |  |  |  |       |  
|                                           |  |                    | 7.90 |         |  |                  | 7.80 |         |  |      | 1.3   |           |  |  | 8.04 |               |  |  | 8.28 |  |  |  | (2.8  | )
|                                           |  |                    |      |         |  |                  |      |         |  |      |       |           |  |  |      |               |  |  |      |  |  |  |       |  

Three Months Ended June 30, 2003 and 2002

For the three months ended June 30, 2003, AWA realized operating income of
$14.0 million compared to an operating loss of $1.1 million in last years
second quarter. Income before income tax benefit for the three month period in
2003 was $77.3 million compared to a loss before income tax benefit of $15.5
million in 2002.

Total operating revenues for the second quarter of 2003 were $565.1
million. Passenger revenues were $538.4 million for the three months ended
June 30, 2003, an increase of $31.0 million or 6.1% from the 2002 quarter. A
6.0% increase in RPMs exceeded a 1.8% increase in ASMs, resulting in a 3.1
point increase in load factor, while yield increased 0.1%. As a result, RASM
increased 4.2% to 7.72 cents in 2003 from 7.41 cents in 2002. The increase in
passenger revenues and traffic statistics for the second quarter of 2003 as
compared to the second quarter of 2002 is primarily due to a decrease in
industry capacity in the second quarter of 2002 and aggressive yield management
by AWA during the peak summer travel period. The implementation of a revised
fare structure in March 2002, which has increased AWAs share in key business
markets, also contributed to the increases. Cargo revenues increased 8.1% to
$7.8 million in the second quarter of 2003 due to increased freight and mail
volumes while other revenues were relatively flat quarter-over-quarter.

Operating expenses in the second quarter of 2003, including special
charges of $14.1 million, increased $16.8 million or 3.1% as compared to the
2002 second quarter. ASMs increased 1.8% primarily due to a 2.0% increase in
average daily aircraft utilization, which increased from 9.9 hours in the 2002
quarter to 10.1 hours in the 2003 quarter. As a result, CASM increased 1.3%
to 7.90 cents in the second quarter of 2003 from 7.80 cents for the comparable
2002 period. Significant changes in the components of CASM are explained as
follows:



| |  |  | Salaries and related costs per ASM increased 4.2% due to a 12.3%
increase in average salaries and related costs per full-time equivalent
employee (FTE) primarily as a result of higher medical insurance costs
($3.5 million), pilot payroll expense due to the recall of pilots
furloughed following the terrorist attacks of September
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25



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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003



| |   |  | 11, 2001 ($0.8 million), flight attendant payroll expense due to salary
increases in accordance with the labor agreement with the Association of
Flight Attendants (AFA) ($0.8 million) and an accrual for vacation
expense for certain administrative employees resulting from a change in
vacation policy effective January 1, 2003 ($2.3 million).
This vacation accrual for administrative employees is an intra-period accrual, which will reverse by December 31, 2003. These increases
were offset in part by a 5.5% decrease in average FTEs in the second
quarter of 2003 as compared to the second quarter of 2002, driven by the
Companys decision to eliminate its Columbus hub operations and the
reduction-in-force of management, administrative and professional
employees.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Other rents and landing fees expense per ASM decreased 4.0% in the
second quarter of 2003 primarily due to decreases in borrowed parts
($0.4 million) and landing fees ($0.4 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | Aircraft fuel expense per ASM increased 15.7% primarily due to a
15.9% increase in the average price per gallon of fuel to 81.7 cents in
the 2003 quarter from 70.5 cents in 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Agency commissions expense per ASM decreased 41.2% primarily due to
the elimination of base commission for travel agency tickets issued in
the United States, effective March 21, 2002 ($2.6 million) and lower
override commissions ($1.5 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | Aircraft maintenance materials and repairs expense per ASM decreased
9.6% primarily due to decreases in aircraft C-Check ($1.9 million),
engine overhaul ($0.6 million) and airframe maintenance ($0.5 million)
expenses. In addition, a change in the estimated useful life of certain
aircraft engine overhaul costs, effective April 1, 2003, driven by a new
maintenance agreement that guarantees minimum cycles on engine
overhauls, resulted in a $2.5 million reduction in capitalized
maintenance amortization expense in the second quarter of 2003. See
Note 5, Flight Equipmentin Notes to Condensed Financial Statements.                                                                                                                                                      
|
| |  |  | Depreciation and amortization expense per ASM decreased 5.0% due
primarily to lower amortization expense related to aircraft leasehold
improvements ($1.4 million), airframe depreciation expense ($0.5
million) and reduced capital expenditures as a result of the Companys
cash conservation program. These decreases were offset in part by
higher amortization expense related to computer hardware and software
($0.8 million) and depreciation of rotable aircraft parts ($0.3
million).                                                                                                                                                                                                                                                                                              
|
| |  |  | Other operating expenses per ASM decreased 10.5% due primarily to
decreases in traffic liability insurance ($2.6 million), bad debt
expense ($2.6 million), computer reservations system booking fees ($1.8
million) and security services ($1.1 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

AWA had net nonoperating income of $63.3 million in the second quarter of
2003 compared to $14.4 million of net nonoperating expenses in the second
quarter of 2002. The 2003 period benefited from $81.3 million of federal
government assistance received under the Emergency Wartime Supplemental
Appropriations Act. See Note 8, Federal Government Assistancein Notes to
Condensed Financial Statements. Interest income decreased $2.1 million due to
lower average cash and short-term investment balances and lower interest rates
in the 2003 period. The 2002 period included $2.3 million of federal
government assistance received under the Air Transportation Safety and System
Stabilization Act.

Six Months Ended June 30, 2003 and 2002

For the six months ended June 30, 2003, AWA realized an operating loss of
$32.7 million compared to an operating loss of $83.4 million in the first six
months of 2002. Income before income tax benefit and the cumulative effect of
a change in accounting principle for the six month period in 2003 was $14.6
million compared to a loss before income tax benefit and the cumulative effect
of a change in accounting principle of $114.6 million in 2002.

Total operating revenues for the six months ended June 30, 2003 were $1.1
billion. Passenger revenues were $1.0 billion, an increase of $94.6 million or
10.0% from the 2002 six-month period. A 9.8% increase in RPMs exceeded a 6.9%
increase in ASMs, resulting in a 1.9 point increase in load factor, while yield
increased 0.2%. As a result, RASM increased 2.9% to 7.51 cents in 2003 from
7.30 cents in 2002. The increase in passenger revenues and traffic statistics
for the first six months of 2003 as compared to the comparable 2002 period is
primarily due to a decrease in

26



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

industry capacity in the second quarter of 2002 and aggressive yield
management by AWA during the peak summer travel period. The implementation of
a revised fare structure in March 2002, which has increased AWAs share in key
business markets, also contributed to the increases. Cargo revenues were
relatively flat period-over-period while other revenues decreased 8.1% to $25.6
million for the six months ended June 30, 2003 due primarily to lower net
revenues from AWAs code sharing agreement with Mesa Airlines.

Operating expenses in the first six months of 2003 increased $42.1
million or 3.9% as compared to the 2002 six-month period, while ASMs increased
6.9%. As a result, CASM decreased 2.8% to 8.04 cents in 2003 from 8.28 cents
for the six-month period in 2002 despite a 27.9% increase in average fuel price
per gallon. Operating expenses in the first six months of 2003 and 2002
included special charges of $14.1 million and $21.0 million, respectively.
Significant changes in the components of CASM are explained as follows:



| |  |  | Salaries and related costs per ASM increased 2.4% primarily due to a
10.2% increase in average salaries and related costs per FTE, primarily
as a result of higher medical insurance costs ($8.3 million), pilot
payroll expense due to the recall of pilots furloughed following the
terrorist attacks of September 11, 2001 ($3.9 million), flight attendant
payroll expense due to salary increases in accordance with the labor
agreement with the AFA ($2.9 million) and an accrual for vacation
expense for certain administrative employees, resulting from a change
in vacation policy effective January 1, 2003 ($4.3 million). This vacation accrual for administrative employees is an
intra-period accrual, which will reverse by December 31, 2003. These
increases were offset in part by a 0.7% decline in FTEs driven by the
Companys decision to eliminate its Columbus hub operations and the
reduction-in-force of management, administrative and professional
employees and the 6.9% increase in ASMs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Aircraft rent expense per ASM decreased 3.9% primarily due to the
6.9% increase in ASMs. This decrease was offset in part by an increase
in aircraft rent expense primarily due to the sale and leaseback of five
previously owned aircraft in June 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | Other rents and landing fees expense per ASM decreased 9.5% in the
first six months of 2003 primarily due to lower costs for borrowed
parts ($4.4 million). This decrease was offset in part by higher
landing fees ($1.3 million) and airport rents ($1.2 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | Aircraft fuel expense per ASM increased 27.9% due to a 27.9% increase
in the average price per gallon of fuel to 85.8 cents in the first six
months of 2003 from 67.1 cents in 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | Agency commissions expense per ASM decreased 52.9% primarily due to
the elimination of base commission for travel agency tickets issued in
the United States, effective March 21, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Aircraft maintenance materials and repairs expense per ASM decreased
10.9% primarily due to lower engine overhaul ($1.7 million), aircraft
C-Check ($1.0 million) and airframe maintenance ($0.4 million) expenses
and the 6.9% increase in ASMs. In addition, a change in the estimated
useful life of certain aircraft engine overhaul costs, effective April 1,
2003, driven by a new maintenance agreement that guarantees minimum
cycles on engine overhauls, resulted in a $2.5 million reduction in
capitalized maintenance amortization expense in the first six months of
2003. See Note 5, Flight Equipmentin Notes to Condensed Financial
Statements.                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | Depreciation and amortization expense per ASM decreased 5.8% due
primarily to the 6.9% increase in ASMs and reduced capital expenditures
as a result of the Companys cash conservation program. Decreases in
depreciation expense for owned aircraft ($1.7 million) and aircraft
leasehold improvement amortization expense ($0.6 million) were
substantially offset by an increase in depreciation expense for computer
hardware and software ($1.5 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Other operating expenses per ASM decreased 10.7% due primarily to
decreases in traffic liability insurance ($4.9 million), bad debt
expense ($2.6 million) and the 6.9% increase in ASMs. In addition, the
2003 period includes a $4.4 million gain related to the purchase and
subsequent exchange of an A320 airframe.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

AWA had net nonoperating income of $47.3 million in the first six months
of 2003 compared to $31.3 million of net nonoperating expenses in the first six
months of 2002. The 2003 period benefited from $81.3 million of federal

27



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

government assistance received under the Emergency Wartime Supplemental
Appropriations Act. See Note 8, Federal Government Assistancein Notes to
Condensed Financial Statements. Interest income decreased $3.5 million due to
lower average cash and short-term investment balances and lower interest rates
in the 2003 period. The 2002 period included $2.3 million of federal
government assistance received under the Air Transportation Safety and System
Stabilization Act and a $2.8 million charge related to the write-off of AWAs
investment in an e-commerce entity.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

At
June 30, 2003, Holdings and AWAs total cash, cash
equivalents, short-term investments and restricted cash was $464.4 million and
$457.0 million, respectively.
Net cash provided by operating activities for Holdings and AWA was $123.6
million and $125.5 million, respectively, in the first six months of 2003.
This compares to net cash used in operating activities of $13.6 million and
$9.0 million for Holdings and AWA, respectively, in the first six months of
2002. The year-over-year increase in net cash provided by operating activities
of $137.2 million and $134.5 million for Holdings and AWA, respectively, was
due primarily to the receipt of $81.3 million in connection with the Emergency
Wartime Supplemental Appropriations Act in the 2003 period (see Note 7,
Federal Government Assistancein Notes to Condensed Consolidated Financial
Statements), the payment in 2002 of amounts due vendors and aircraft lessors
that had been subject to the Companys cash conservation program prior to the
closing of the government guaranteed loan in January 2002 and the payment in
2002 of $58.1 million of transportation taxes to the IRS that had been deferred
from 2001, as allowed under the Air Transportation Safety and System
Stabilization Act.

In the first six months of 2003, net cash used in investing activities was
$107.0 million for both Holdings and AWA. This compares to net cash provided
by investing activities of $26.6 million and $23.1 million for Holdings and
AWA, respectively, in the first six months of 2002. Principal investing
activities during the first six months of 2003 included purchases of property
and equipment totaling $82.2 million, including $12.0 million related to the
purchase of an A320 airframe that was used to replace an airframe that was
damaged in an accident in August 2002, net purchases of short-term investments
totaling $16.1 million and an increase in restricted cash of $32.7 million,
primarily due to an increase in cash reserves required under an agreement
executed in May 2003 for the processing of our Visa and MasterCard credit card
transactions. The 2003 period also included proceeds from the disposition of
assets totaling $24.0 million, including $12.6 million of insurance proceeds
and $3.6 million of scrap proceeds, both associated with the replaced A320
airframe discussed above, and $6.9 million related to the sale and leaseback of
29 jet bridges at Phoenix Sky Harbor International Airport. The 2002 period
included purchases of property and equipment totaling $79.0 million for
Holdings and $78.7 million for AWA, including $64.2 million related to the
purchase of two new A320 aircraft, purchases of short-term investments
totaling $60.1 million for both Holdings and AWA and an increase in restricted
cash of $9.9 million for Holdings and $13.6 million for AWA. In addition, the Company received $175.5 million of
proceeds from the sale and leaseback of the two A320 aircraft discussed above
and one A319 aircraft and two additional A320 aircraft that had been purchased
in the fourth quarter of 2001.

In the first six months of 2003, net cash used in financing activities was
$7.4 million and $7.6 million for Holdings and AWA, respectively, due to
repayments of debt. This compares to net cash provided by financing activities
of $256.6 million and $256.7 million for Holdings and AWA, respectively, in the
first six months of 2002. The 2002 period included proceeds from the issuance
of debt totaling $435.4 million, primarily related to the government guaranteed
loan, payments of debt issue costs totaling $12.7 million and debt repayments
of $166.0 million, primarily related to the sale and leaseback of the five
aircraft discussed above.

Capital expenditures for the six months ended June 30, 2003 were
approximately $82.2 million for both Holdings and AWA. Capital expenditures
for the six months ended June 30, 2002 were approximately $79.0 million for
Holdings and $78.7 million for AWA. Included in these amounts are capital
expenditures for capitalized maintenance of approximately $57.1 million and
$56.2 million for both Holdings and AWA for the six months ended June 30, 2003
and 2002, respectively.

28



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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

In April 2003, we implemented a plan to reduce management, professional
and administrative payroll costs which resulted in fewer employees within these
workgroups. See Note 6, Special Chargesin Notes to Condensed
Consolidated Financial Statements. In addition, our business partners and
vendors have been asked to reduce their fees in order to further reduce costs
and maintain sufficient liquidity in this uncertain environment. We expect these actions to result in additional cost savings of
approximately $47 million annually.

In April 2003, we executed an agreement with a third party vendor for the
processing of our Visa and MasterCard credit card transactions. Upon
implementation of the agreement in May 2003, we were required to establish net
additional cash reserves of $25.0 million as collateral for the transactions
processed. This amount was funded from credit card receipts over a 30-day
period and recorded as restricted cash. Under certain circumstances, including
a change in our financial position, the amount of the cash reserve requirement
could increase or decrease.
Pass Through Trusts

Since AWAs restructuring in 1994, AWA has set up 19 pass through trusts,
which have issued over $1.4 billion of pass through trust certificates (also
known as Enhanced Equipment Trust Certificates or EETC). These trusts are
off-balance sheet entities, the primary purpose of which is to finance the
acquisition of aircraft. Rather than finance each aircraft separately when
such aircraft is purchased or delivered, these trusts allow the Company to
raise the financing for several aircraft at one time and place such funds in
escrow pending the purchase or delivery of the relevant aircraft.

Each trust covered a set amount of aircraft scheduled to be delivered
within a specific period of time. At the time of each covered aircraft
financing, the relevant trust used the funds in escrow to purchase equipment
notes relating to the financed aircraft. The equipment notes were issued, at
AWAs election, either by AWA in connection with a mortgage financing of the
aircraft or by a separate owner trust in connection with a leveraged lease
financing of the aircraft. In the case of a leveraged lease financing, the
owner trust then leased the aircraft to AWA. In both cases, the equipment
notes are secured by a security interest in the aircraft. The pass through
trust certificates are not direct obligations of, nor guaranteed by, Holdings
or AWA. However, in the case of mortgage financings, the equipment notes
issued to the trusts are direct obligations of AWA and in the case of leveraged
lease financings, the leases are direct obligations of AWA. In addition,
neither Holdings nor AWA guarantee or participate in any way in the residual
value of the leased aircraft. All aircraft financed by these trusts are
currently structured as leveraged lease financings, which are not reflected as
debt on the balance sheets of either AWA or Holdings.

AWAs 2001-1 Pass Through Trusts provided for the financing of nine Airbus
A319 aircraft and five Airbus A320 aircraft, all of which were delivered in
2001 and 2002. No additional EETC financing is anticipated in 2003.

Commitments

As of June 30, 2003, we had $715.4 million of long-term debt (including
current maturities). This amount consisted primarily of the $429 million
government guaranteed loan, a $73.2 million secured term loan with a group of
financial institutions, $91.7 million face value of 7.5% convertible senior
notes, and $50.0 million of 10 3/4% senior notes.

Government Guaranteed Loan

In January 2002, AWA closed a $429 million loan supported by a $380
million guarantee provided by the Air Transportation Stabilization Board (the
ATSB). Certain third-party counter-guarantors have fully and unconditionally
guaranteed the payment of an aggregate of $45 million of the outstanding
principal amount under the government guaranteed loan plus accrued and unpaid
interest thereon. In addition, Holdings has fully and unconditionally
guaranteed the payment of all principal, premium, interest and other
obligations outstanding under the government guaranteed loan and has pledged
the stock of AWA to secure its obligations under such guarantee. Principal
amounts under this loan become due in ten installments of $42.9 million on each
March 31 and September 30, commencing on March 31, 2004 and ending on September
30, 2008. Principal amounts outstanding under the government guaranteed loan
bear interest at a rate per annum equal to LIBOR plus 40 basis points.
Subject to certain exceptions, we are required to prepay the government
guaranteed loan with:

29



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003



| |  |  | the net proceeds of all issuances of debt or equity by either
Holdings or AWA after January 2002;                                                                   
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | proceeds from asset sales in excess of $20 million in any
fiscal year to the extent such proceeds are not applied to redeem
AWAs 10 3/4% senior notes due 2005; and
|
| |  |  | insurance proceeds in excess of $2 million to the extent such
proceeds are not used to restore or replace the assets from which
such proceeds are derived.          

In addition, we are required to prepay the government guaranteed loan upon
a change in control. We may, at our option, prepay the government guaranteed
loans without premium or penalty, subject to reimbursement of the lenders
breakage costs in the case of prepayment of LIBOR loans.

The government guaranteed loan requires that AWA maintain a minimum cash
balance of $100 million. In addition, the government loan contains customary
affirmative covenants and the following negative covenants: restrictions on
liens, investments, restricted payments, fundamental changes, asset sales and
acquisitions, the creation of new subsidiaries, sale and leasebacks,
transactions with affiliates, the conduct of business, mergers or
consolidations, issuances and dispositions of capital stock of subsidiaries,
and amendments to other indebtedness. The government guaranteed loan contains
customary events of default, including payment defaults, cross-defaults, breach
of covenants, bankruptcy and insolvency defaults and judgment defaults.

Term Loan

In connection with the closing of the government guaranteed loan and the
related transactions, AWA converted its existing revolving credit facility into
a term loan with the Mizuho Corporate Bank, Ltd., as successor by merger to the
Industrial Bank of Japan, Limited, and certain other lenders. As of June 30,
2003, $73.2 million remains outstanding under the term loan. Principal amounts
under the term loan become due in two installments of $30 million on December
31, 2005 and December 31, 2006 with the remaining amounts becoming due and
payable in full on December 31, 2007. Principal amounts outstanding under the
term loan bear interest at a rate per annum equal to, at the our option, either
the Base Rate or the Eurodollar Rate (which is based on LIBOR), in each case
plus an applicable margin. The applicable margin adjusts based on the length
of time the term loan has been outstanding. The term Base Rate has a meaning
customary and appropriate for financings of this type. In addition, principal
amounts outstanding under the term loan bear interest in kind at a rate of 2%
through December 31, 2004.

The prepayment requirements and covenants of the term loan are
substantially similar to those of the government guaranteed loan. We may, at
our option, prepay the term loan without premium or penalty, subject to
reimbursement of the lenders breakage costs in the case of prepayment of loans
bearing the Eurodollar Rate.
The term loan is secured by a first priority perfected security interest in
certain of our aircraft, spare engines, rotable aircraft parts inventory and a
maintenance facility. The term loan contains customary events of default,
including payment defaults, cross-defaults, breach of covenants, bankruptcy and
insolvency defaults and judgment defaults.

10 3/4% Senior Notes due 2005

In August 1995, AWA issued $75 million principal amount of 10 3/4% senior
notes due 2005, of which $50.0 million remained outstanding at June 30, 2003.
Interest on the 10 3/4% senior notes is payable semi annually in arrears on
March 1 and September 1 of each year.

We may redeem the 10 3/4% senior notes, in whole or in part, at any time
prior to September 1, 2003 at a redemption price of 101.792% and at any time
thereafter at a redemption price of 100%.

If AWA undergoes a change of control, it may be required to repurchase the
10 3/4% senior notes at a price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of repurchase. If AWA
sells certain assets, it may be required to use the net cash proceeds to
repurchase the 10 3/4% senior notes at 100% of the principal amount, plus
accrued and unpaid interest, to the date of purchase.

30



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

The indenture governing the 10 3/4% senior notes contains certain
covenants that, among other things, limit our ability to pay dividends or make
distributions to our stockholders, repurchase or redeem capital stock, make
investments or other restricted payments, enter into transactions with our
stockholders and affiliates, sell assets (including the stock of our
subsidiaries) and merge or consolidate with other companies. The indenture
governing the 10 3/4% senior notes also contains customary events of default,
including payment defaults, cross-defaults, breach of covenants, bankruptcy and
insolvency defaults and judgment defaults.

7.5% Convertible Senior Notes due 2009

In connection with the closing of the government guaranteed loan and the
related transactions, Holdings issued $104.5 million of 7.5% convertible senior
notes due 2009, of which approximately $101.6 million remained outstanding at
June 30, 2003 (including interest paid through June 1, 2003 as a deemed loan
added to the initial principal thereof). Beginning January 18, 2005, these
notes are convertible into shares of class B common stock, at the option of the
holders, at an initial conversion price of $12.00 per share or a conversion
ratio of approximately 83.333 shares per $1,000 principal amount of such notes,
subject to standard anti-dilution adjustments. Interest on the 7.5%
convertible senior notes is payable semi annually in arrears on June 1 and
December 1 of each year. At Holdings option, the first six interest payments
may be paid in the form of a deemed loan added to the principal amount of these
notes. The 7.5% convertible senior notes will mature on January 18, 2009
unless earlier converted or redeemed. The payment of principal, premium and
interest on the 7.5% convertible senior notes is fully and unconditionally
guaranteed by us.

Holdings may redeem some or all of the 7.5% convertible senior notes at
any time before January 18, 2005, at a redemption price equal to $1,000 per
note to be redeemed if (A) the closing price of the class B common stock has
exceeded 120% of the conversion price then in effect for at least 20 trading
days within a period of 30 consecutive trading days ending on the trading day
before the date of the mailing of the redemption notice, and (B) a shelf
registration statement covering resales of the notes and the class B common
stock issuable upon conversion thereof is effective and available for use and
is expected to remain effective and available for use for the 30 days following
the redemption date, unless registration is no longer required. Holdings may
redeem the 7.5% convertible senior notes, in whole or in part, on or after
January 18, 2005 at the following redemption prices (expressed as percentages
of the principal amount thereof), if redeemed during the twelve-month period
commencing on January 18 of the years set forth below, plus, in each case,
accrued and unpaid interest, if any, to the date of redemption:

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

Other Indebtedness and Obligations

In addition to the above described indebtedness, we had $53.3 million of
secured equipment notes and $34.3 million of other unsecured indebtedness,
including $29.3 million of industrial revenue bonds.

31



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

The following table sets forth our cash obligations as of June 30, 2003.

|                                                             |                                           |   |         |       |      |   |         |        |      |   |                |        |             |   |         |        |  |   |         |        |  |   |           |         |  |   |           |         | 
|------------------------------------------------------------ | ----------------------------------------- | - | ------- | ----- | ---- | - | ------- | ------ | ---- | - | -------------- | ------ | ----------- | - | ------- | ------ |  | - | ------- | ------ |  | - | --------- | ------- |  | - | --------- | ------- | 
|                                                             |                                           |   | 2003    |       | 2004 |   | 2005    |        | 2006 |   | 2007           |        | Beyond 2007 |   | Total  
|                                                             |                                           |   |         |       |      |   |         |        |      |   |                |        |             |   |        
|                                                             |                                           |   |         |       |      |   |         |        |      |   | (in thousands) |        |             |   |         |        |  |   |         |        |  |   |          
|Long-term debt:                                              |                                           |   |         |       |      |   |         |        |      |   |                |        |             |   |         |        |  |   |         |        |  |   |           |         |  |   |           |        
|                                                             | Equipment notes  Non EETC (1)            |   | $       | 4,837 |      |   | $       | 8,989  |      |   | $              | 8,305  |             |   | $       | 8,305  |  |   | $       | 7,771  |  |   | $         | 15,083  |  |   | $         | 53,290  | 
|                                                             | Term loan(2)                              |   |         |      |      |   |         | 2,343  |      |   |                | 30,000 |             |   |         | 30,000 |  |   |         | 13,170 |  |   |           |        |  |   |           | 75,513  | 
|                                                             | 7.5% convertible senior notes due
2009(3) |   |         |      |      |   |         |       |      |   |                |       |             |   |         |       |  |   |         |       |  |   |           | 101,565 |  |   |           | 101,565 | 
|                                                             | Government guaranteed loan(4)             |   |         |      |      |   |         | 85,800 |      |   |                | 85,800 |             |   |         | 85,800 |  |   |         | 85,800 |  |   |           | 85,800  |  |   |           | 429,000 | 
|                                                             | State loan(5)                             |   |         |      |      |   |         | 750    |      |   |                | 250    |             |   |         | 250    |  |   |         | 250    |  |   |           |        |  |   |           | 1,500   | 
|                                                             | 10 3/4% senior unsecured notes due
2005   |   |         |      |      |   |         |       |      |   |                | 49,998 |             |   |         |       |  |   |         |       |  |   |           |        |  |   |           | 49,998  | 
|                                                             | Industrial development bonds(6)           |   |         |      |      |   |         |       |      |   |                |       |             |   |         |       |  |   |         |       |  |   |           | 29,300  |  |   |           | 29,300  | 
|                                                             | AVSA promissory notes(7)                  |   |         | 3,500 |      |   |         |       |      |   |                |       |             |   |         |       |  |   |         |       |  |   |           |        |  |   |           | 3,500   | 
|                                                             |                                           |   |         |       |      |   |         |        |      |   |                |        |             |   |         |        |  |   |         |        |  |   |           |         |  |   |           |        
|                                                             |                                           |   | 8,337   |       |      |   | 97,882  |        |      |   | 174,353        |        |             |   | 124,355 |        |  |   | 106,991 |        |  |   | 231,748   |         |  |   | 743,666   |        
|Cash aircraft rental payments(8)                             |                                           |   | 138,702 |       |      |   | 310,978 |        |      |   | 292,418        |        |             |   | 268,955 |        |  |   | 255,632 |        |  |   | 2,007,853 |         |  |   | 3,274,538 |        
|Lease payments on equipment and
facility operating leases(9) |                                           |   | 9,436   |       |      |   | 17,782  |        |      |   | 17,251         |        |             |   | 15,485  |        |  |   | 14,125  |        |  |   | 74,730    |         |  |   | 148,809   |        
|Capital lease obligations                                    |                                           |   | 3,707   |       |      |   | 4,278   |        |      |   | 4,298          |        |             |   | 4,655   |        |  |   | 1,685   |        |  |   |          |         |  |   | 18,623    |        
|Special facility revenue bonds(10)                           |                                           |   | 681     |       |      |   | 1,362   |        |      |   | 1,362          |        |             |   | 1,362   |        |  |   | 1,362   |        |  |   | 37,469    |         |  |   | 43,598    |        
|Aircraft purchase commitments(11)                            |                                           |   | 39,861  |       |      |   | 86,710  |        |      |   | 85,330         |        |             |   | 224,917 |        |  |   | 265,811 |        |  |   |          |         |  |   | 702,629   |        
|                                                             |                                           |   |         |       |      |   |         |        |      |   |                |        |             |   |         |        |  |   |         |        |  |   |           |         |  |   |           |        
|Total                                                        |                                           | $ | 200,724 |       |      | $ | 518,992 |        |      | $ | 575,012        |        |             | $ | 639,729 |        |  | $ | 645,606 |        |  | $ | 2,351,800 |         |  | $ | 4,931,863 |        
|                                                             |                                           |   |         |       |      |   |         |        |      |   |                |        |             |   |         |        |  |   |         |        |  |   |           |         |  |   |           |        



---

|(1)  |  | Includes approximately $53.3 million of equipment notes with variable
interest rates of 2.25% to 2.63%, averaging 2.47%, installments due 2003
through 2008.                                                                                                                                                                                                                                                                                                                                                        
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(2)  |  | Includes a $73.2 million secured term loan maturing at year-end 2007 with
a variable interest rate of 3.37% and $2.3 million of interest payable in
kind through June 30, 2003 at a fixed rate of 2%. Excludes $2.4 million
of interest payable in kind through December 2004.                                                                                                                                                                                                                                      
|    
|(3)  |  | Includes $91.7 million face value of 7.5% convertible senior notes, due
2009, and $9.9 million of interest payable in kind through June 30, 2003.
Excludes $11.9 million of interest payable in kind through December 2004.
For financial reporting purposes, we recorded the convertible senior notes
at their fair market value on the date of issuance. As of June 30, 2003,
the balance of the convertible senior notes in the accompanying condensed
consolidated balance sheet is approximately $63.9 million.
|    
|(4)  |  | Government guaranteed loan includes $429.0 million due September 2008
with a variable interest rate of 1.7%. Guarantee fees of approximately
8.0% of the outstanding guaranteed principal balance in 2003 through 2008
are payable to the U.S. Treasury Department and other loan participants.                                                                                                                                                                                                                     
|    
|(5)  |  | Includes Arizona State loan of $1.5 million due December 2007 with a
variable interest rate of 4.82%.                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(6)  |  | Includes $29.3 million of 6.3% industrial development bonds due April
2023.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    
|(7)  |  | Includes AVSA promissory notes of $3.5 million due 2003 with a variable
interest rate of 2.51%.                                                                                                                                                                                                                                                                                                                                                                                                                     
|    
|(8)  |  | Includes non-cancelable operating leases for 130 aircraft with remaining
terms ranging from seven months to approximately 21 years. Management
estimates the debt equivalent value of these operating leases approximates
$2 billion using an interest rate of 10%.                                                                                                                                                                                                                                                 
|    
|(9)  |  | Includes leases for terminal space, ground facilities, the flight
training center and computer and other equipment under non-cancelable
operating leases.                                                                                                                                                                                                                                                                                                                                                           
|    
|(10) |  | Includes Series 1999 Terminal 4 Improvements Bonds, due 2019.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    
|(11) |  | Includes commitments to purchase a total of 20 Airbus aircraft and spare
engines for delivery in 2003 through 2007.                                                                                                                                                                                                                                                                                                                                                                                                 

32



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

We expect to fund these cash obligations from funds provided by
operations, the $200 million of financing commitments for Airbus aircraft
obtained in connection with the government loan, and future financings, if
necessary. The cash available to us from these sources, however, may not be
sufficient to cover these cash obligations because economic factors outside our
control may reduce the amount of cash generated by operations or increase our
costs. For instance, a further economic downturn or other events, including
continued military action in Iraq or the spread of severe acute respiratory
syndrome (SARS) in the United States, could reduce the demand for air travel,
which would reduce the amount of cash generated by operations. An increase in
borrowing costs, either due to a reduction in our credit rating or due to a
general increase in interest rates, or in the cost of fuel, maintenance,
aircraft and aircraft engines and parts, could increase our costs, which could
decrease the amount of cash available to cover the cash obligations. In
addition, we may be required to prepay portions of the government guaranteed
loan if our employee compensation costs exceed a certain threshold; we may be
required to prepay portions of the term loan to the extent the value of the
collateral securing the term loan decreases; and we may fail to meet the
minimum liquidity threshold required to obtain the entire amount of financing
commitment for two of the Airbus aircraft. In any of these cases, our
liquidity may be adversely affected and we may not have sufficient cash to
prepay the government loan and meet our other obligations. Moreover, certain
of our long-term debt agreements contain a $100 million minimum cash balance
requirement. As a result, we cannot use all of our available cash to fund
operations, capital expenditures and cash obligations without violating this
requirement.

Although there can be no assurances, we believe that cash flow from
operating activities coupled with existing cash balances and financing
commitments will be adequate to fund our operating and capital needs as well as
enable us to maintain compliance with our various debt agreements through at
least December 31, 2003.

Financial Covenants and Credit Rating

In addition to the minimum cash balance requirements, our long-term debt
agreements contain various negative covenants that restrict our actions,
including our ability to pay dividends, together with any other restricted
payments. Moreover, under the terms of the government guaranteed loan, we are
prohibited from paying cash dividends prior to repayment of the loan in full.
Finally, our long-term debt agreements contain cross-default provisions, which
may be triggered by defaults by us under other agreements relating to
indebtedness. See Risk Factors Relating to America West and Industry Related
Risks  Our high level of indebtedness and fixed costs limits our ability to
fund general corporate requirements and obtain additional financing, limits our
flexibility in responding to competitive developments and increases our
vulnerability to adverse economic and industry conditions.As of June 30,
2003, Holdings and AWA were in compliance with the covenants in their long-term
debt agreements.

In June 2002, Standard & Poors raised its credit ratings on Holdings to
B- from CCC- and AWA for its senior unsecured debt to CCC from C and removed
them from Credit Watch, where they were placed on September 13, 2001. Ratings
on the various pass-through certificates were also raised. However, Standard &
Poors again placed AWA on Credit Watch on March 18, 2003 and the outlook on
the industry and AWA continues to be negative. Moodys currently rates AWAs
senior unsecured debt at Ca. Our relatively low credit ratings may impair our
ability to incur additional indebtedness. The rating agencies base their
ratings on our financial performance and operations, our cash flow and
liquidity, the level of our debt and industry conditions in general. If our
financial performance or industry conditions do not improve, we may face future
downgrades, which could further negatively impact our borrowing costs and the
prices of our equity or debt securities. See Risk Factors Relating to America
West and Industry Related Risks  Because of our relatively low credit ratings,
our borrowing costs may be high and our ability to incur additional debt may be
impaired.

OTHER INFORMATION

Labor Relations

On April 7, 2003, the Company announced that a five-year collective
bargaining agreement had been ratified by AWAs stock clerks, represented by
the International Brotherhood of Teamsters (IBT). The stock clerks workgroup
includes approximately 55 employees.

33



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

On April 2, 2003, the Company commenced negotiations with the Transport
Workers Union (TWU) for a second collective bargaining agreement covering
AWAs dispatchers. The Company cannot predict the outcome of those
negotiations.

On December 23, 2002, the Company announced that it had reached a
tentative agreement with the Air Line Pilots Association (ALPA) on a new
contract for AWAs pilots. The tentative agreement was subject to a membership
ratification vote in March 2003. On March 18, 2003, ALPA informed the Company
that a majority of AWAs pilots voted against ratification of the tentative
agreement. The Company will resume mediated discussions with ALPA at a date to
be determined by the National Mediation Board (NMB). The Company cannot
predict the outcome of those discussions.

On August 19, 2002, the IBT filed an Application for Investigation of
Representation Dispute with the NMB, seeking to represent approximately 4,000
passenger service representatives and reservations agents. An election was
conducted and on November 12, 2002, the NMB dismissed the case, finding that
the majority of employees (2,051 of 3,619) chose not to be represented by a
union. Thereafter, the IBT appealed the election results claiming the Company
improperly interfered with the employees voting rights. On May 19, 2003, the
NMB ruled that the Company did not interfere with the laboratory conditions
required for a fair election and closed its file in this matter.

Application of Critical Accounting Policies

The preparation of our consolidated financial statements in accordance
with generally accepted accounting principles requires that we make certain
estimates and assumptions that affect the reported amount of assets and
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities at the date of our financial statements. We believe our estimates
and assumptions are reasonable; however, actual results could differ from those
estimates. We have identified the following critical accounting policies that
require the use of significant judgments and estimates relating to matters that
are inherently uncertain and may result in materially different results under
different assumptions and conditions.



| |  |  | Passenger Revenue  Passenger revenue is recognized when
transportation is provided. Ticket sales for transportation that has
not yet been provided are recorded as air traffic liability. Passenger
traffic commissions and related fees are expensed when the related
revenue is recognized. Passenger traffic commissions and related fees
not yet recognized are included as a prepaid expense. Due to complex
pricing structures, refund and exchange policies, and interline
agreements with other airlines, certain amounts are recognized in
revenue using estimates regarding both the timing of the revenue
recognition and the amount of revenue to be recognized. These estimates
are generally based on the statistical analysis of our historical data.
Any adjustments resulting from periodic evaluations of the estimated air
traffic liability are included in results of operations during the
period in which the evaluations are completed.                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Accounting For Long-Lived Assets  Owned property and equipment are
recorded at cost and depreciated to residual values over the estimated
useful lives using the straight-line method. Leasehold improvements
relating to flight equipment and other property on operating leases are
amortized over the life of the lease, or the life of the asset,
whichever is shorter. Interest on advance payments for aircraft
acquisitions and on expenditures for aircraft improvements is
capitalized and added to the cost of the asset. The estimated useful
lives of our owned aircraft, jet engines, flight equipment and rotable
parts range from five to 30 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.

34



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003



| |  |  | Frequent Flyer Accounting  We maintain a frequent travel award
program known as FlightFund that provides a variety of awards to
program members based on accumulated mileage. The estimated cost of
providing the free travel is recognized as a liability and charged to
operations as program members accumulate mileage. Travel awards are
valued at the incremental cost of carrying one passenger, based on
expected redemptions. Incremental costs are based on expectations of
expenses to be incurred on a per passenger basis and include fuel,
liability insurance, food, beverages, supplies and ticketing costs. We
also sell mileage credits to companies participating in our FlightFund
program, such as hotels, car rental agencies and credit card companies.
Transportation-related revenue from the sale of mileage credits is
deferred and recognized when transportation is provided. A change to
the estimated cost per mile, minimum award level, percentage of revenue
to be deferred or deferred recognition period could have a significant
impact on our revenues or mileage liability accrual in the year of the
change as well as future years.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Long-Term Maintenance Reserve  We record an accrual for the
estimated cost of scheduled airframe and engine overhauls required to be
performed on leased aircraft upon their return to the lessors. These
estimates are based on historical costs and our assumptions regarding
the renewal of aircraft leases. A significant change to AWAs fleet
plan could have a material impact on our reserve requirements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

Related Party Transactions

As part of our reorganization in 1994, Continental Airlines and AWA
entered into an alliance agreement which included code sharing arrangements,
reciprocal frequent flyer programs and ground handling operations. In March
2002, AWA received notice from Continental of its intention to terminate the
code sharing and frequent flyer agreements between the two airlines, effective
April 26, 2002. Two of Continentals directors are managing partners of Texas
Pacific Group, which, through TPG Advisors, Inc., effectively controls the
voting power of Holdings. See Risk Factors Relating to America West and
Industry Related Risks  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.In the second quarter of 2003,
AWA paid Continental approximately $4.5 million and also received approximately
$1.2 million from Continental pursuant to these agreements. In the second
quarter of 2002, the amount paid to and received from Continental pursuant to
these agreements was $6.9 million and $5.6 million, respectively.

Recently Issued Accounting Pronouncements

In January 2003, the FASB issued FIN 46, Consolidation of Variable
Interest Entities.FIN 46 requires that companies that control another
entity through interests other than voting interests should consolidate the
controlled entity. FIN 46 is effective for variable interest entities created
after January 31, 2003 and to any variable interest entities in which the
Company obtains an interest after that date. FIN 46 is effective for the
quarter ending September 30, 2003 for variable interest entities in which the
Company held a variable interest that it acquired before February 1, 2003.
The Company is currently evaluating the provisions of FIN 46 as it
relates to certain airport lease agreements and certain aircraft
financings to determine its impact, if any, on the financial condition
and results of operations of the Company.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. SFAS No. 149 is effective for certain
contracts entered into or modified by the Company after June 30, 2003. The
Company is currently evaluating SFAS No. 149 to determine its impact on the
financial condition and results of operations of the Company.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity.
SFAS No. 150 specifies that freestanding financial instruments within its scope
constitute obligations of the issuer and that, therefore, the issuer must
classify them as liabilities. Such freestanding financial instruments include
mandatorily redeemable financial instruments, obligations to repurchase the
issuers equity shares by transferring assets, and certain obligations to issue
a variable number of shares. SFAS No. 150 is effective immediately for all
financial instruments entered into or modified after May 31, 2003. For all
other instruments, SFAS No. 150 is effective at the beginning of the third
quarter of 2003. The Company is currently evaluating SFAS No. 150 to determine
its impact on the financial condition and results of operations of the Company.

35



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

Forward-Looking Information

This quarterly report on Form 10-Q contains various forward-looking
statements and information that are based on managements beliefs as well as
assumptions made by and information currently available to management. When
used in this document, the words anticipate, estimate, project, expect
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated, projected or expected. Among the key factors
that may have a direct bearing on AWAs or the Holdings results are:



| |  |  | the duration and extent of the current soft economic
conditions;                                                                                                                                                                                                                                    
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the impact of global instability, including the continuing
impact of the continued military presence in Iraq and Afghanistan
and the terrorist attacks of September 11, 2001 and the potential
impact of future hostilities, terrorist attacks, infectious disease
outbreaks or other global events;
|
| |  |  | limitations on Holdings or AWAs ability to obtain
additional financing due to high levels of debt and the financial
and other covenants in its debt instruments;                                                                                                                                  
|
| |  |  | changes in federal and state laws and regulations;                                                                                                                                                                                                                                                  
|
| |  |  | changes in prevailing interest rates and the availability of
and terms of financing to fund our business;                                                                                                                                                                                           
|
| |  |  | the ability to attract and retain qualified personnel;                                                                                                                                                                                                                                              
|
| |  |  | the cyclical nature of the airline industry;                                                                                                                                                                                                                                                        
|
| |  |  | competitive practices in the airline industry;                                                                                                                                                                                                                                                      
|
| |  |  | the impact of changes in fuel prices;                                                                                                                                                                                                                                                               
|
| |  |  | relations with unionized employees generally and the impact
and outcome of labor negotiations; and                                                                                                                                                                                                  
|
| |  |  | other factors referenced in this quarterly report on Form
10-Q, including those set forth under the caption Risk
Factors Relating to America West and Industry Related Risks.                                                                                                                     

All of the forward-looking statements are qualified in their entirety by
reference to the factors discussed under the caption Risk
Factors Relating to America West and Industry Related Risks.

We caution the reader that these risk factors may not be exhaustive. We
operate in a continually changing business environment, and new risk factors
emerge from time to time. Management cannot predict such new risk factors, nor
can it assess the impact, if any, of such new risk factors on our businesses or
the extent to which any factor or combination of factors, may cause actual
results to differ materially from those projected in any forward-looking
statements. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this quarterly report on Form 10-Q might
not occur.

For these statements, we claim the protection of the safe harbor for
forward-looking statements contained in Section 21E of the Exchange Act.

36



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

Risk Factors Relating to America West and Industry Related Risks

In the recent past, we sustained significant operating losses and may sustain
significant losses in the future.

The soft economic conditions, coupled with the impact of the terrorist
attacks of September 11, 2001 and the continued military presence in Iraq and
Afghanistan, have had a substantial negative impact on our revenues and costs.
For the years ended December 31, 2002 and 2001, we incurred operating losses
of $160.1 million and $417.9 million, respectively. Our total operating
revenues for 2002 have declined 1% as compared to 2001 and 13% compared to
2000. In addition, we have experienced an increase in costs related to
enhanced security measures, aviation insurance and airport rents and landing
fees. We do not expect our revenues to increase significantly until general
economic conditions improve and we expect the threat of further terrorist
attacks and continued instability in the Middle East to continue to negatively
impact our revenues and costs in the near-term. We may not be able to
effectively counteract decreasing revenues and increasing costs through our
cost reduction initiatives, customer service initiatives and revised pricing
structures. Moreover, our liquidity and borrowing options are limited and we
may not be able to survive a prolonged economic downturn, further decreases in
demand for air travel or substantial increases in fuel costs. The inability to
sustain profitability may hinder our ability to satisfy our obligations as they
become due, obtain future equity or debt financing or to do so on economical
terms and to sustain or expand our business.

The terrorist attacks of September 11, 2001 and government responses have had,
and continue to have, a material adverse effect on our financial condition,
operations and prospects.

The terrorist attacks of September 11, 2001 have had, and continue to
have, a wide-ranging impact on our financial condition, operations and
prospects. The immediate impact of the terrorist attacks included a severe
strain on our liquidity as the government temporarily suspended all flights, as
passenger demand dropped precipitously after the attacks and as our credit
ratings were downgraded by both Moodys and Standard and Poors. Since then,
although passenger demand has recovered, we continue to experience reduced
demand compared to prior years, especially in discretionary business travel,
and our costs relating to enhanced security measures, aviation insurance,
airport rents and landing fees have increased, in some cases significantly.
The continued impact of the terrorist attacks on our operations, and the
sufficiency of our financial resources to absorb this impact, will depend on:



| |  |  | our ability to reduce our operating costs, to conserve
financial resources and to continue implementing our restructuring
plan;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | general economic conditions and the extent to which the current soft economic conditions improve;                              
|
| |  |  | competition in the airline industry;                                                                                           
|
| |  |  | our ability to manage fuel and labor costs; and                                                                                
|
| |  |  | the other risks discussed in this quarterly report on Form 10-Q.                                                               

Moreover, continued global instability (including fuel price
fluctuations), soft economic conditions and future terrorist attacks could
further reduce demand for air travel, increase our fuel, insurance and other
costs and generally impact our liquidity or financial condition. Our ability
to obtain additional financing to absorb the impact of these type of events is
limited by the constraints imposed by our existing debt, reductions in the
value of our aircraft (as a result of the terrorist attacks) and our relatively
low credit ratings.

Increased insurance costs due to the terrorist attacks of September 11, 2001
may adversely impact our operations and financial results.

The terrorist attacks of September 11, 2001 resulted in staggering losses
to the insurance industry. These losses led to a significant increase in our
insurance premiums and could lead to future increases in our insurance
premiums. These increases have and could continue to negatively impact our
financial results. In addition, the resulting

37



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

general instability in the insurance industry could affect some of our existing
insurance carriers or our ability to obtain future insurance coverage. To the
extent that our existing insurance carriers are unable or unwilling to provide
us with insurance coverage, our insurance costs could further increase.

Moreover, since September 11, 2001, AWA and other airlines have been
unable to obtain third party war risk (terrorism) insurance at reasonable rates
from the commercial insurance market and have been obtaining this insurance
through a special program administered by the Federal Aviation Administration,
or FAA. The Emergency Wartime Supplemental Appropriations Act extended this
insurance protection until August 2004. If the Federal insurance program
terminates, we would likely face a material increase in the cost of terrorism
insurance, but because of competitive pressures in our industry, our ability to
pass this additional cost to passengers would be limited.

Our high level of indebtedness and fixed costs limits our ability to fund
general corporate requirements and obtain additional financing, limits our
flexibility in responding to competitive developments and increases our
vulnerability to adverse economic and industry conditions.

We have a significant amount of indebtedness. In addition, we have
incurred significant capitalized and operating lease obligations in connection
with the financing of aircraft and the lease of airport and other facilities.
We also have fixed costs associated with our regional alliance with Mesa
Airlines. Due to our high fixed costs, including aircraft lease obligations
and debt service, a decrease in revenues results in a disproportionately
greater percentage decrease in earnings. In addition, as a result of our
significant indebtedness and fixed costs:



| |  |  | We have only a limited ability to obtain additional
financing, if needed. Our existing debt is secured by a substantial
portion of our assets, leaving us with limited assets to use to
obtain additional financing. In addition, the terms of both the
$429 million government-guaranteed loan and the $73.2 million term
loan restrict our and AWAs ability to incur additional
indebtedness or issue equity unless we use proceeds of those
transactions to prepay the government guaranteed loan and the term
loan.                                                                                                                                                                                                                                                                                    
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Our ability to fund general corporate requirements, including
capital expenditures, may be impaired. We have substantial
obligations to pay principal and interest on our indebtedness and
other recurring fixed costs. Further, we may be required to prepay
portions of the government guaranteed loan if our employee
compensation costs exceed a certain threshold. Accordingly, we may
have to use our working capital to fund such payments and costs
instead of funding general corporate requirements. In addition,
because under the terms of certain of AWAs indebtedness it must
maintain a minimum cash balance of $100 million, we cannot use all
of our available cash to fund operations, capital expenditures and
cash obligations without violating this minimum cash balance
requirement.
|
| |  |  | Our ability to respond to competitive developments and
adverse economic conditions may be limited. Without the ability to
obtain additional financing and with substantial fixed costs, we may
not be able to fund the capital expenditures, including the purchase
of new aircraft, required to keep us competitive or to withstand
prolonged adverse economic conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                 

Moreover, our flexibility is limited because many of the agreements
governing our indebtedness, including the indenture governing the
10 3/4%
senior notes due 2005, the government guaranteed loan and the term loan contain
negative covenants that restrict our ability to take certain actions as well as
the minimum cash balance requirement discussed above. As a result of these
restrictive covenants, we may be limited in how we conduct our business, and
may be unable to raise additional debt or equity financing to operate during
general economic or business downturns, to compete effectively, or to take
advantage of new business opportunities. This may affect our ability to
generate revenues and make profits. Without sufficient revenues, we may not be
able to pay interest and principal on outstanding debt. A breach of these
covenants or a failure to make any required payments under our indebtedness or
certain of our aircraft leases could result in the acceleration of a
substantial portion of our indebtedness. In the event of a breach of these
covenants, a failure to make required payments or an acceleration of our
indebtedness, it is likely that credit card companies would begin to withhold
proceeds due to us from the sale of our tickets and our lessors may attempt to
exercise remedies under their respective leases. In such a situation, it is
unlikely we would be able to fulfill our obligations under the accelerated
indebtedness or make required lease payments.

38



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AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

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

The price and supply of jet fuel are unpredictable and fluctuate based on
events outside our control, including geopolitical developments, regional
production patterns and environmental concerns. Since fuel is the principal
raw material used in our business, accounting for 14% of our total operating
expenses in 2002, price escalations or reductions in the supply of jet fuel
will increase our operating expenses and cause our operating results and net
income to decline. For example, with our current level of fuel consumption, a
one-cent per gallon increase in jet fuel prices will cause our annual operating
expense to increase by $4.4 million.

We have implemented a fuel-hedging program to manage the risk and effect
of fluctuating jet fuel prices on our business. Our hedging program is
intended to offset increases in jet fuel costs by using derivative instruments
keyed to the future price of heating oil, which is highly correlated to the
price of jet fuel delivered on the East Coast. Our hedging program does not
fully protect us against increasing jet fuel costs because our hedging program
does not cover all of our projected fuel volumes for 2003. Hedging
transactions are in place with respect to approximately 28% of remaining
projected 2003 fuel requirements, including 35% related to the third quarter of
2003 and 21% related to the fourth quarter of 2003. In order to execute
additional hedging transactions, we anticipate that we will have to provide
cash collateral or other credit support, which we may not be able to provide in
a cost-effective manner. Furthermore, our ability to effectively hedge fuel
prices is limited because we purchase a substantially larger portion of our jet
fuel requirements on the West Coast than our large competitors and West Coast
fuel prices are less correlated to heating oil prices and other viable
petroleum derivatives than East Coast fuel prices and, therefore, more
difficult to hedge. The effectiveness of our fuel-hedging program may also be
negatively impacted by continued instability in the Middle East and Venezuela
and terrorist activity, including the aftermath of the terrorist attacks of
September 11, 2001 and the resulting government responses.

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

Our credit ratings are relatively low, with Moodys assessment of AWAs
senior implied rating and senior unsecured debt rating at Caa2 and Ca,
respectively, and Standard & Poors ratings at B- for Holdings and CCC for
AWAs senior unsecured debt. On March 18, 2003, Standard
& Poors placed AWA on credit watch. Low credit ratings could cause our borrowing
costs to increase, which would increase our interest expense and could affect
our net income. In addition, our credit ratings could adversely affect our
ability to obtain additional financing. The rating agencies base their ratings
on our financial performance and operations, our cash flow and liquidity, the
level of our debt and industry conditions in general. If our financial
performance or industry conditions do not improve, we may face future
downgrades, which could further negatively impact our borrowing costs and the
prices of our equity or debt securities. In addition, any downgrade of our
credit ratings may indicate a decline in our business and in our ability to
satisfy our obligations under our indebtedness.

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

Some of our employees are represented by unions and other groups of our
employees may seek union representation in the future. Since May 2000, we have
been negotiating a collective bargaining agreement with the Air Line Pilots
Association, or ALPA, which represents all of our approximately 1,600 pilots.
We had reached a tentative agreement with ALPA in December 2002 on a new
contract for AWAs pilots. However, in March 2003, ALPA informed us that a
majority of AWAs pilots had voted against ratification of the tentative
agreement. We will resume mediated discussions with ALPA at a date to be
determined by the National Mediation Board, or NMB. In addition, we have
commenced negotiations with the Transport Workers Union, or TWU, for a second
collective bargaining agreement covering AWAs dispatchers.

We cannot predict the outcome of the current negotiations with ALPA or TWU
or any future negotiations relating to union representation or collective
bargaining agreements. Agreements reached in collective bargaining may
increase operating expenses and lower operating results and net income. This
is particularly significant because our current employee costs contribute
substantially to the low cost structure that we believe is one of our
competitive strengths and because the terms of the government guaranteed loan
restricts the amount we can spend on employee compensation. In addition,
negotiations with unions could divert management attention and disrupt
operations, which

39



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

may result in increased operating expenses and lower net income. If we are
unable to negotiate acceptable collective bargaining agreements, we might have
to address the threat of, or wait through cooling off periods, which could be
followed by union-initiated work actions, including strikes. Depending on the
nature of the threat or the type and duration of any work action, these actions
could disrupt our operations and, as a result, have a significant adverse
affect on our operating results.

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

Our indebtedness under both the government-guaranteed loan and our
existing $73.2 million term loan bears interest at fluctuating interest rates
based on the London interbank offered rate for deposits of U.S. dollars, or
LIBOR. LIBOR tends to fluctuate based on general economic conditions, general
interest rates, including the prime rate, and the supply of and demand for
credit in the London interbank market. We have not hedged our interest rate
exposure and, accordingly, our interest expense for any particular period may
fluctuate based on LIBOR. To the extent LIBOR increases, our interest expense
will increase, in which event, we may have difficulties making interest
payments and funding our other fixed costs and our available cash flow for
general corporate requirements may be adversely affected.

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

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

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

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

The terrorist attacks of September 11, 2001 and the current soft economic
conditions have led to the airline industrys significant losses since 2001.
Largely as a result of these losses, both U.S. Airways and United Airlines
filed for bankruptcy protection in 2001. Because bankruptcy protection may
allow for greater flexibility in reducing costs by voiding contracts and
renegotiating existing business obligations, current and future airline
bankruptcies could have a substantial impact on industry competition.
Continued weakness in the airline industry may also resulting in additional
industry consolidation, greater reliance on industry alliances and increase
price competition among the existing airlines, each of which could dramatically
alter competitive environments in the markets we serve. These circumstances
could also make it more difficult and costly to obtain additional financing on
reasonable terms, if at all.

40



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

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

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

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

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

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

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

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

If one of our aircraft were to crash or be involved in an accident, we
could be exposed to significant tort liability. There can be no assurance that
the insurance we carry to cover damages arising from any future accidents will
be adequate. In the event that our insurance is not adequate, we may be forced
to bear substantial losses from an accident. Claims resulting from an accident
in excess of our insurance coverage would harm our business and results of
operations. Accidents could also result in unforeseen mechanical and
maintenance costs. In addition, any accident involving an aircraft that we
operate could create a public perception that our aircraft are not safe or
reliable, which could harm our reputation, result in air travelers being
reluctant to fly on our aircraft and harm our business.

Our operations are often affected by factors beyond our control, including
traffic congestion at airports, weather conditions and increased security
measures, any of which could harm our financial condition and results of
operations.

Like other airlines, our operations are subject to delays caused by
factors beyond our control, including air traffic congestion at airports,
adverse weather conditions and increased security measures such as those
required to be implemented under the Aviation and Transportation Security Act.
During periods of fog, snow, rain, storms or other adverse weather conditions,
flights may be cancelled or significantly delayed. Cancellations and delays
frustrate passengers, reduce aircraft utilization and increase costs, all of
which in turn affect profitability. As a result, cancellations or delays could
harm our financial condition and results of operations.

41



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

Shares of class B common stock issuable upon exercise or conversion of
outstanding securities could adversely affect our stock price and dilute the
ownership interests of existing stockholders.

Sales and potential sales of substantial amounts of our
class B common stock in the public market, or the perception that these
sales could occur, could adversely affect the market price of the class B
common stock. A substantial number of additional shares of class B common
stock are issuable upon the conversion or exercise of outstanding
securities.  As of June 30, 2002, the 32,821,588 outstanding shares of class
B common stock were subject to dilution by:



| |  |  | 22,537,000 shares of class B common stock that are issuable
upon the exercise, at an exercise price of $3.00 per share, of certain
warrants issued in connection with the government guaranteed loan; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 8,878,962 shares of class B common stock that are issuable
upon the exercise of outstanding options.                                                                                                     

Certain of the warrant holders have indicated to us their
intention to exercise and sell their warrants in the near future and one of
the warrant holders has tendered an exercise notice covering 1,141,000
shares of class B common stock.  In addition, 941,431 shares of class B
common stock are issuable upon conversion of the outstanding shares of our
class A common stock (but subject to certain contractual restrictions on
transfer) and up to 9,453,000 shares of class B common stock will be
issuable after January 18, 2005 upon conversion of our 7.5% convertible
senior notes.   We have registered either the issuance or resale of all of
these shares meaning that upon exercise or conversion, such shares could be
sold in the public market at any time.

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

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

Holdings Certificate of Incorporation and Restated Bylaws contain
provisions that, among other things:



| |  |  | authorize our board of directors to issue preferred stock
ranking senior to the class B common stock without any action on the
part of the stockholders;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | establish advance notice procedures for stockholder
proposals, including nominations of directors, to be considered at
stockholders meetings;          
|
| |  |  | authorize our 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.                                                                          

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

The stock market has, from time to time, experienced extreme price and
volume fluctuations. Many factors may cause the market price for the class B
common stock to decline including:



| |  |  | 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;                                                          

42



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003



| |  |  | public sales of a substantial number of shares of the class B common stock;
| | - |  | ---------------------------------------------------------------------------
|
| |  |  | governmental regulatory action; and                                        
|
| |  |  | adverse changes in general market conditions or economic trends.           

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Sensitive Instruments

(a)  Commodity Price Risk

As of June 30, 2003, the Company had entered into costless collar
transactions which establish an upper and lower limit on heating oil futures
prices. These transactions are in place with respect to approximately 28% of
remaining projected 2003 fuel requirements, including 35% related to the third
quarter of 2003 and 21% related to the fourth quarter of 2003.

The use of such transactions in the Companys fuel hedging program could
result in the Company not benefiting from certain declines in heating oil
futures prices. At June 30, 2003, the Company estimates that a 10% increase in
heating oil futures prices would increase the fair value of the costless collar
transactions by approximately $1.4 million. The Company estimates that a 10%
decrease in heating oil futures prices would decrease the fair value of the
costless collar transactions by approximately $1.7 million.

As of July 22, 2003, approximately 28% of AWAs remaining 2003 fuel
requirements are hedged.



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

The Companys exposure to interest rate risk relates primarily to its
variable-rate long-term debt obligations. At June 30, 2003, the Companys
variable-rate long-term debt obligations of approximately $560.5 million
represented approximately 78% of its total long-term debt. If interest rates
increased 10% in 2003, the impact on the Companys results of operations would
not be material.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the
participation of the Companys management, including the Chief
Executive Officer (the CEO) and Chief Financial Officer (the CFO), of
the effectiveness of the design and operation of the Companys disclosure
controls and procedures (as defined in Rule 13a-15(e) promulgated under the
Securities and Exchange Act of 1934, as amended) as of June 30, 2003. Based on
that evaluation, the Companys management, including the CEO and CFO,
concluded that the Companys disclosure controls and procedures were
effective. There have been no significant changes in the Companys internal
controls or in other factors that could significantly affect internal
controls.

43



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##### 



AMERICA WEST HOLDINGS CORPORATION
June 30, 2003

PART II  OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The 2003 Annual Meeting of Stockholders of the Company was held on May 19,
2003. The four persons named below were elected as proposed in the proxy
statement pursuant to Regulation 14A of the Securities Exchange Act of 1934, as
amended, to serve as directors until the Companys Annual Meeting in 2004 and
until their successors are elected and qualified. There were 77,643,658 votes
cast in the election of directors. The voting regarding each nominee was as
follows: Herbert M. Baum (for: 76,885,579 / withheld: 758,079); John L Goolsby
(for: 76,030,271 / withheld: 1,613,387); Richard P. Shifter (for: 75,136,656 /
withheld 2,507,002); and J. Steven Whisler (for: 76,346,800 / withheld:
1,296,858). The following directors term of office as a director continued
after the meeting: Robert J. Miller, W. Douglas Parker, John F. Tierney,
Walter T. Klenz, Richard C. Kraemer and Denise M. OLeary.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | a. |  | Exhibits
| | -- |  | --------

|        |  |                                                                                                                                          
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                          
|NUMBER  |  | DESCRIPTION AND METHOD OF FILING                                                                                                         
|        |  |                                                                                                                                          
|10.57   |  | America West Airlines Performance-Based Award Plan, effective
January 1, 2003.                                                           
|        |  |                                                                                                                                          
|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.    
|        |  |                                                                                                                                          



| | b. |  | Reports on Form 8-K
| | -- |  | -------------------



| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Holdings and AWA filed a report on Form 8-K, dated April 23, 2003,
furnishing under Item 9 a press release, dated April 23, 2003,
announcing the Companys results for its first quarter ended March 31,
2003.



| |                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Holdings and AWA filed a report of Form 8-K, dated July 2, 2003,
furnishing under Item 9 a press release, dated July 2, 2003,
announcing certain traffic statistics for June 2003.

44



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

SIGNATURE

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

| |  |                                                                
| |  | ---------------------------------------------------------------
| |  | AMERICA WEST HOLDINGS CORPORATION                              
| |  |                                                                
| |  | By /s/ Derek J. Kerr                                           
| |  |                                                                
| |  | Derek J. Kerr
Senior Vice President and Chief Financial Officer

DATED: July 22, 2003

45



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##### 



AMERICA WEST HOLDINGS CORPORATION AND
AMERICA WEST AIRLINES, INC.
June 30, 2003

SIGNATURE

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

| |  |                                                                
| |  | ---------------------------------------------------------------
| |  | AMERICA WEST AIRLINES, INC.                                    
| |  |                                                                
| |  | By /s/ Derek J. Kerr                                           
| |  |                                                                
| |  | Derek J. Kerr
Senior Vice President and Chief Financial Officer

DATED: July 22, 2003

46



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##### 



EXHIBIT INDEX

|        |  |                                                                                                                                          
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                          
|NUMBER  |  | DESCRIPTION AND METHOD OF FILING                                                                                                         
|        |  |                                                                                                                                          
|10.57   |  | America West Airlines Performance-Based Award Plan, effective
January 1, 2003.                                                           
|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.    

47