<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration Number 333-14691
PROSPECTUS
$218,557,000
[AMERICA WEST LOGO]
America West Airlines
1996-1 Pass Through Trusts
PASS THROUGH CERTIFICATES, SERIES 1996-1
------------------------
Each Pass Through Certificate (collectively, the "Certificates") will
represent a fractional undivided interest in one of the five America West
Airlines 1996-1 Pass Through Trusts (the "Class A Trust", the "Class B Trust",
the "Class C Trust", the "Class D Trust" and the "Class E Trust" and,
collectively, the "Trusts") to be formed pursuant to a pass through trust
agreement (the "Basic Agreement") and five separate supplements thereto (each, a
"Trust Supplement" and together with the Basic Agreement, collectively, the
"Pass Through Trust Agreements") between America West Airlines, Inc. ("America
West" or the "Company") and Fleet National Bank, as trustee under each Trust
(the "Trustee"). The Certificates to be issued by the Class A Trust, the Class B
Trust, the Class C Trust, the Class D Trust and the Class E Trust are referred
to herein as "Class A Certificates", "Class B Certificates", "Class C
Certificates", "Class D Certificates" and "Class E Certificates", respectively.
No Certificate issued by a Trust will have any rights, benefits or interests in
respect of any other Trust. Pursuant to the Intercreditor Agreement (as defined
herein), (i) the Class B Certificates will be subordinated in right of payment
to the Class A Certificates, (ii) the Class C Certificates will be subordinated
in right of payment to the Class B Certificates, (iii) the Class D Certificates
will be subordinated in right of payment to the Class C Certificates and (iv)
the Class E Certificates will be subordinated in right of payment to the Class D
Certificates. Payments of interest on the Class A, Class B, and Class C
Certificates (but not the Class D and Class E Certificates) will be supported by
a separate liquidity facility for the benefit of the holders of such
Certificates, each such facility to be provided by Kredietbank N.V., acting
through its New York branch (the "Liquidity Provider"), in an amount sufficient
to pay interest thereon at the applicable interest rate for such Certificates on
three successive distribution dates. (continued on the following page)
------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 25 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
FINAL EXPECTED PRICE TO
PASS THROUGH CERTIFICATES PRINCIPAL AMOUNT INTEREST RATE DISTRIBUTION DATE PUBLIC(1)(2)
- ---------------------------- ------------------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Class A $99,522,000 6.85% July 2, 2009 100%
Class B 37,129,000 6.93 January 2, 2008 100
Class C 37,747,000 6.86 July 2, 2004 100
Class D 29,618,000 8.16 July 2, 2002 100
Class E 14,541,000 10.50 January 2, 2004 100
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from November 26, 1996.
(2) The aggregate commission payable to the Underwriters varies by Trust and
aggregates to $2,668,246, which constitutes 1.22% of the principal amount of
the Certificates offered hereby. The aggregate commission and certain other
expenses, estimated at approximately $1,947,000, will be paid by
U.S.-domiciled subsidiaries of GPA Group plc. All proceeds of the
Certificates will be used by the Trusts to purchase the Equipment Notes from
the Owner Trustees (as defined herein).
------------------------
The Certificates offered hereby are offered by the Underwriters, subject to
prior sale, when, as and if accepted by the Underwriters and subject to approval
of certain legal matters by Milbank, Tweed, Hadley & McCloy, counsel for the
Underwriters. It is expected that delivery of the Certificates in book-entry
form will be made on or about November 26, 1996 through the facilities of The
Depository Trust Company, against payment therefor in immediately available
funds.
------------------------
MORGAN STANLEY & CO.
Incorporated
CITICORP SECURITIES, INC.
LEHMAN BROTHERS
SALOMON BROTHERS INC
November 22, 1996
<PAGE> 2
(continued from cover page)
The property of the Trusts will include, among other things, equipment
notes (the "Equipment Notes") to be issued on a nonrecourse basis by the
trustees (each, an "Owner Trustee") of separate owner trusts (each, an "Owner
Trust") in connection with 11 separate leveraged lease transactions to refinance
the current indebtedness of such Owner Trustees previously incurred to finance
the purchase of eight Airbus Industrie model A320-231 aircraft (collectively,
the "Aircraft") and three International Aero Engines model IAE V2500-A1 engines
(collectively, the "Spare Engines" and, together with the Aircraft, the
"Equipment") which will be leased to America West. The Equipment Notes in
respect of each Aircraft and Spare Engine will be issued in up to five series
(the "Series A Equipment Notes", the "Series B Equipment Notes", the "Series C
Equipment Notes", the "Series D Equipment Notes" and the "Series E Equipment
Notes"). Each Trust will purchase one series of Equipment Notes issued with
respect to some or all of the Equipment such that all of the Equipment Notes
held in each Trust will have an interest rate corresponding to the interest rate
applicable to the Certificates to be issued by such Trust. The maturity dates of
the Equipment Notes acquired by each Trust will occur on or before the final
expected distribution date applicable to the Certificates to be issued by such
Trust. The Equipment Notes issued with respect to each Aircraft and Spare Engine
will be secured by a security interest in such Aircraft or Spare Engine and an
assignment of certain of the related Owner Trustee's rights under the lease
relating thereto (each, a "Lease"), including the right to receive rentals
payable with respect to such Aircraft or Spare Engine by America West. Although
neither the Certificates nor the Equipment Notes are obligations of, or
guaranteed by, America West, the aggregate amounts unconditionally payable by
America West for lease of the Equipment will be at least sufficient to pay in
full when due all scheduled amounts required to be paid on the Equipment Notes
held in the Trusts.
All of the Equipment Notes held by each Trust will accrue interest at the
applicable rate per annum for such Trust, payable on January 2 and July 2 of
each year, commencing January 2, 1997. Interest paid on the Equipment Notes held
in each Trust will be passed through to Certificateholders (as defined herein)
of such Trust on each such date, in each case subject to the Intercreditor
Agreement. See "Description of the Certificates -- General" and "-- Payments and
Distributions".
Scheduled principal payments made on the Equipment Notes held in each Trust
will be passed through to the Certificateholders of each such Trust on January 2
or July 2 or both in certain years, commencing January 2 , 1997, in accordance
with the principal repayment schedule set forth herein under "Description of the
Certificates -- Pool Factors", in each case subject to the Intercreditor
Agreement.
Under each Pass Through Trust Agreement, a PTC Event of Default (as defined
herein) will occur if the Trustee fails to pay within ten business days of the
due date thereof: (i) the outstanding Pool Balance (as defined herein) of the
applicable Class of Certificates on the Final Legal Distribution Date (as
defined herein) for such Class or (ii) interest due on such Certificates on any
Distribution Date (as defined herein) (unless, in the case of the Class A, B or
C Certificates, the Subordination Agent (as defined herein) shall have made an
Interest Drawing (as defined herein) in an amount sufficient to pay such
interest and shall have distributed such amount to the Certificateholders
entitled thereto).
---------------------
Delivery of the Certificates is scheduled to be made against payment
therefor on November 26, 1996 (the "Closing Date"), without regard to the date
on which the Underwriters enter into a firm agreement to purchase the
Certificates. Accordingly, the Certificates will be subject to a settlement
cycle that exceeds three business days (such settlement cycle being referred to
herein as "Long Settlement"). Purchasers of Certificates should note that
initial trading of Certificates may be affected by the Long Settlement. See
"Underwriting".
Prior to their issuance there will have been no public market for the
Certificates offered hereby nor can there be any assurance that one will
develop. See "Risk Factors -- Factors Relating to the Certificates and the
Offering -- Absence of a Public Market for the Certificates".
2
<PAGE> 3
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AMERICA
WEST, THE UNDERWRITERS OR THE LIQUIDITY PROVIDER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AMERICA
WEST SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THE OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE CERTIFICATES PURSUANT TO EXEMPTIONS FROM RULES 10B-6,
10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE
"EXCHANGE ACT").
------------------------
AVAILABLE INFORMATION AND REPORTS TO CERTIFICATEHOLDERS
America West has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all amendments
and exhibits, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Certificates offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission, and to which reference is hereby
made. Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports and other information with the
Commission. Reports and other information concerning America West can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549; The Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the Public Reference Room of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov. The Company's
Class B Common Stock and Warrants to purchase Class B Common Stock are listed on
the New York Stock Exchange and the Company's registration statements, reports,
proxy and information statements and other information may also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. On behalf of each Trust, the applicable Trustee will prepare and send
certain periodic reports concerning the Certificates and distributions made by
such Trust to the Certificateholders of such Trust. See "Description of the
Certificates -- Reports to Certificateholders".
The Company is a Delaware corporation. Its executive offices are located at
4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034, and its telephone number
is (602) 693-0800.
3
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of America West, which have been filed with the
Commission, are hereby incorporated by reference in this Prospectus:
Annual Report on Form 10-K for the year ended December 31, 1995.
Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and
September 30, 1996.
All documents filed by America West pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Certificates offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. The Company's file number is 1-0140.
America West will provide without charge to any person to whom a copy of
this Prospectus has been delivered, upon written or oral request, a copy of any
or all of the foregoing documents incorporated herein by reference (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Patricia Penwell,
Corporate Secretary, America West Airlines, Inc., 4000 East Sky Harbor
Boulevard, Phoenix, Arizona 85034, telephone number (602) 693-0800.
FORWARD LOOKING INFORMATION
This Prospectus 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. 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 or
projected. See "Risk Factors -- Company Related Risks -- Forward Looking
Information May Prove Inaccurate".
4
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Available Information and Reports to Certificateholders................................ 3
Incorporation of Certain Documents by Reference........................................ 4
Forward Looking Information............................................................ 4
Prospectus Summary..................................................................... 6
Risk Factors........................................................................... 25
Use of Proceeds........................................................................ 34
Ratio of Earnings to Fixed Charges..................................................... 34
Capitalization......................................................................... 35
Selected Financial and Operating Data.................................................. 36
Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... 38
Business............................................................................... 50
Management............................................................................. 63
Certain Transactions................................................................... 67
Description of the Certificates........................................................ 69
Description of the Liquidity Facilities................................................ 81
Description of the Intercreditor Agreement............................................. 85
Description of the Equipment and the Appraisals........................................ 89
Description of the Equipment Notes..................................................... 90
Certain U.S. Federal Income Tax Consequences........................................... 110
State Tax Considerations............................................................... 112
ERISA Considerations................................................................... 113
Underwriting........................................................................... 115
Legal Matters.......................................................................... 116
Experts................................................................................ 117
Index to Financial Statements.......................................................... F-1
Index of Certain Defined Terms......................................................... I-1
Aircraft Appraisals.................................................................... II-1
Equipment Notes Principal Payment Schedule............................................. III-1
</TABLE>
5
<PAGE> 6
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by reference to the detailed information appearing elsewhere in
this Prospectus.
Certain capitalized terms used herein are defined elsewhere in this
Prospectus on the pages indicated in the "Index of Certain Defined Terms"
appearing as Appendix I hereto, and all cross references herein refer to
sections of this Prospectus.
THE COMPANY
America West Airlines, Inc. is the ninth largest commercial airline carrier
in the United States, operating through its principal hubs located in Phoenix,
Arizona and Las Vegas, Nevada and a mini-hub located in Columbus, Ohio. The
Company believes that it is the lowest cost full service carrier in the United
States. At September 30, 1996, the Company served 53 destinations, including
five destinations in Mexico and one in Canada, with a fleet of 99 aircraft. The
Company offers service to an additional 21 destinations through an alliance
agreement with Continental Airlines, Inc. ("Continental ") and 17 commuter
service and regional destinations through an alliance agreement with Mesa Air
Group, Inc. ("Mesa ").
America West is the leading airline serving Phoenix and Las Vegas, based on
revenue passenger miles, with approximately 35% and 25% of total revenue
passenger miles, respectively, for the 12 months ended March 31, 1996. The
Phoenix and Las Vegas airports are the seventh and thirteenth largest airports
in the United States as measured by passenger enplanements. In addition, these
cities are among the fastest growing in the nation. The Company believes these
hubs are well positioned for continued growth due to their geographically
favorable locations with strategic access to key Southwestern and West Coast
markets, relatively low operating costs, year-round fair weather and modern,
uncongested facilities. Substantially all of the Company's passenger traffic is
channeled into or through its hubs, which serve as gateways for the Company's
route network. Through its hub and spoke system, the Company serves more markets
with greater frequency than would be possible with the same number of aircraft
in a point-to-point route system.
America West operates with one of the lowest cost structures among the
major U.S. airlines. The Company's operating cost per available seat mile
("ASM ") for the first nine months of 1996 was 7.92 cents, which was
approximately 13.1% less than the average operating cost per ASM of the eight
largest other domestic full service airlines. Management believes that the
Company's low cost structure is a significant competitive advantage relative to
other full service carriers and also enables the Company to compete effectively
against low cost carriers in its short-haul local markets. As a full service
airline, the Company believes that it distinguishes itself from other low cost
carriers by offering passenger services which include assigned seating,
participation in computerized reservation systems, interline ticketing, first
class cabins, baggage transfer and various other services.
STRATEGY
America West's strategy seeks to achieve additional revenue growth and
profitability by capitalizing on the Company's key competitive strengths while
maximizing financial flexibility. This strategy focuses on (i) strengthening the
Company's position in its existing hubs through strategic expansion, (ii)
maintaining its position as a leading low cost full service carrier, (iii)
operating a modern and efficient fleet and (iv) continuing to develop its
passenger base through key alliances. Principal elements of the Company's
strategy are as follows:
Strengthen Position in Existing Hubs through Strategic Expansion. America
West's strategic plan is designed to capitalize on its strong positions in its
Phoenix and Las Vegas hubs. In September 1995, the Company announced a two-year
plan to expand its principal hub operations and increase connecting traffic and
service to longer-haul nonstop markets. The growth plan is expected to increase
ASMs by 24% and add at least eight new cities to the Company's route network.
As the Company adds aircraft required to support the expansion of the
Phoenix hub, the Company intends to continue to optimize asset utilization
through the expansion of its night flight service to Las Vegas. By utilizing
aircraft for this service that would otherwise be idle overnight, the Company is
able to compete in a low cost market segment without diminishing asset
availability for use in its Phoenix operations.
Maintain its Position as a Leading Low Cost Full Service Airline. America
West is committed to maintaining its low cost structure, which the Company has
achieved primarily through its favorable labor costs per ASM and asset
utilization enhancements. The Company has focused on increasing productivity at
all
6
<PAGE> 7
levels. From December 31, 1994 to September 30, 1996, the Company's workforce
decreased by 14% despite an increase in aircraft of 14%. Aircraft utilization
has been enhanced through a restructuring of the Company's route network
including expansion of its Las Vegas night flight program. The Company's fleet
configuration, consisting of three aircraft types, permits the Company to
minimize spare parts inventories and simplify maintenance and training
operations.
Operate a Modern and Efficient Fleet. The Company enjoys operational
efficiencies due to its modern, fuel efficient fleet. At September 30, 1996, the
Company's fleet consisted of 61 Boeing 737s, 24 Airbus A320s and 14 Boeing 757s,
with an average age of approximately ten years. Most of the Company's existing
aircraft are held under leases, including leases on 20 aircraft expiring prior
to December 1998. As a result, in the event general economic conditions change
adversely, the Company may reduce its fleet size by not renewing expiring
aircraft leases.
Continue to Develop Passenger Base through Alliances. The Company plans to
continue to capitalize on its alliance agreement with Continental to further
expand the Company's passenger base while achieving cost savings through the
reduction of redundant labor and facilities. This agreement provides for
codesharing arrangements, coordination of flight schedules, linking of frequent
flyer programs, sharing of ticket counter space, coordination of ground handling
operations and joint purchasing and marketing efforts. Through codesharing, each
airline is able to offer additional destinations to the Company's customers
without materially increasing operating and capital expenses. Management
believes that its codesharing activities result in increased demand for travel
on America West and intends to pursue additional alliances as opportunities
warrant.
As a part of America West's ongoing strategy, the Company from time to time
evaluates opportunities for additional alliances and codesharing arrangements as
well as investment opportunities pursuant to which the Company may capitalize on
its key strengths and market position.
SUMMARY OF TERMS OF CERTIFICATES
Set forth below is certain information about each Class of Certificates:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D CLASS E
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Aggregate face amount.... $99,522,000 $37,129,000 $37,747,000 $29,618,000 $14,541,000
Rating:
Moody's................ A2 Baa2 Ba1 Ba3 B1
Standard & Poor's...... AA- A- BBB- BB B+
Initial LTV Ratio
(cumulative)(1)........ 39.4% 54.1% 69.1% 80.8% 93.4%
Expected principal
distribution window (in
years)................. 0.6-12.6 0.6-11.1 0.6-7.6 0.1-5.6 0.1-7.1
Initial average life (in
years)................. 8.6 5.7 4.0 1.8 2.5
Regular Distribution
Dates.................. January 2 January 2 January 2 January 2 January 2
and July 2 and July 2 and July 2 and July 2 and July 2
Final Expected
Distribution Date...... July 2, 2009 January 2, 2008 July 2, 2004 July 2, 2002 January 2, 2004
Final Legal Distribution
Date................... January 2, 2011 July 2, 2009 January 2, 2006 July 2, 2002 January 2, 2004
sec. 1110
protection(2).......... Yes Yes Yes Yes Yes
Liquidity Facility
coverage............... 3 semi-annual 3 semi-annual 3 semi-annual None None
interest interest interest
payments payments payments
Initial Liquidity
Facility amount(3)..... $10,225,886 $3,859,560 $3,884,166 None None
</TABLE>
- ---------------
(1) Assumes an aggregate appraised Equipment Value of $252,415,833. The initial
LTV Ratio for the Class E Certificates is computed using the four Aircraft
and the three Spare Engines securing the Series E Equipment Notes.
(2) The benefits of Section 1110 of the Bankruptcy Code (as defined herein)
would be available by assignment to the Indenture Trustees (as and to the
extent described in further detail herein).
(3) For each Class of Certificates (other than the Class D and Class E
Certificates), the initial amount of the related Liquidity Facility will
cover the first three successive interest payments (without regard to any
future payments of principal on such Certificates).
7
<PAGE> 8
EQUIPMENT NOTES AND THE EQUIPMENT
Set forth below is certain information about the Equipment Notes held in
the Trusts and the Equipment securing such Equipment Notes:
<TABLE>
<CAPTION>
EQUIPMENT EQUIPMENT NOTES
- --------------------------------------------------------------- ----------------------------------------------
MANUFACTURER'S EQUIPMENT DELIVERY APPRAISED PRINCIPAL MATURITY
SERIAL NUMBER TYPE DATE(1) VALUE SERIES AMOUNT DATE
- -------------- --------------- -------- ------------ ---------- ------------ ----------------
<C> <S> <C> <C> <C> <C> <C>
55 Airbus A320-231 9/25/89 $29,841,667 A,B,C,D $23,177,987 July 2, 2005
65 Airbus A320-231 12/22/89 29,900,000 A,B,C,D 24,464,986 January 2, 2006
77 Airbus A320-231 12/22/89 30,162,500 A,B,C,D 24,464,986 January 2, 2006
82 Airbus A320-231 12/28/89 30,225,000 A,B,C,D 22,866,991 January 2, 2009
091 Airbus A320-231 9/28/90 30,350,833 A,B,C,D,E 27,654,623 January 2, 2009
092 Airbus A320-231 9/28/90 30,350,833 A,B,C,D,E 27,654,623 January 2, 2009
098 Airbus A320-231 9/28/90 30,605,000 A,B,C,D,E 27,654,623 January 2, 2009
099 Airbus A320-231 9/28/90 30,480,000 A,B,C,D,E 27,654,623 January 2, 2009
V0019 IAE V2500-A1 3/27/91 3,500,000 A,B,C,D,E 4,321,186 July 2, 2009
V0025 IAE V2500-A1 3/27/91 3,500,000 A,B,C,D,E 4,321,186 July 2, 2009
V0049 IAE V2500-A1 3/27/91 3,500,000 A,B,C,D,E 4,321,186 July 2, 2009
------------ ------------
$252,415,833 $218,557,000
============ ============
</TABLE>
- ---------------
(1) The delivery date indicated is for the purpose of the Leases. The original
delivery dates of the Aircraft and Spare Engines from the manufacturer were
in 1989 and 1990. See "Description of the Equipment and the Appraisals".
The appraised value of each Aircraft and Spare Engine set forth above is
based upon the lesser of the average and median value of such Aircraft or Spare
Engine as appraised by the following three independent appraisal and consulting
firms as of the dates indicated: BK Associates, Inc. ("BK") as of July 2, 1996,
Aircraft Information Services, Inc. ("AISI") as of July 11, 1996 and Morten
Beyer and Associates ("MBA") as of July 12, 1996 (BK, AISI and MBA are
collectively referred to herein as the "Appraisers"). See "Description of the
Equipment and the Appraisals".
An appraisal is only an estimate of value and should not be relied upon as
a measure of realizable value. The proceeds realized upon a sale of any
Equipment may be less than the appraised value thereof. In addition, the value
of the Equipment in the event of the exercise of remedies under the applicable
Indenture will depend on market and economic conditions, the availability of
buyers, the condition of the Equipment, whether the Equipment is sold separately
or as a block and other factors. Accordingly, there can be no assurance that the
proceeds realized upon any such exercise with respect to the Equipment Notes and
the Equipment pursuant to the applicable Indenture would be as appraised or
sufficient to satisfy in full payments due on the Equipment Notes issued
thereunder or the Certificates.
For a discussion of the assumptions and methodologies used in preparing the
appraisals, see "Risk Factors -- Factors Relating to the Certificates and the
Offering -- Appraisals and Realizable Value of the Equipment" and "Description
of the Equipment and the Appraisals".
LOAN TO EQUIPMENT VALUE RATIOS
The following table sets forth the loan to Equipment value ratio ("LTV
Ratio") for each Class of Certificates as of the date of the consummation of the
offering of the Certificates and the Regular Distribution Dates specified
therein. The LTV Ratios for each Class of Certificates were obtained for each
such Regular Distribution Date by dividing (i) the expected Pool Balance of such
Class of Certificates together in each case with the expected Pool Balance of
all other Classes of Certificates senior in right of payment to such Class of
Certificates under the Intercreditor Agreement determined immediately after
giving effect to the distributions expected to be made on such Regular
Distribution Date, by (ii) the assumed value of all of the Equipment (the
"Assumed Aggregate Equipment Value") on such Regular Distribution Date based on
the assumptions set forth below.
8
<PAGE> 9
The table contains forward-looking information that is based on the
assumption that the value of each Aircraft and Spare Engine included in the
Assumed Aggregate Equipment Value as of November 26, 1996 depreciates by 2% per
year until the fifteenth year after the year of delivery of such Aircraft or
Spare Engine by the manufacturer, by 4% per year thereafter until the twentieth
year after the year of such delivery and by 6% per year thereafter. Other rates
or methods of depreciation would result in materially different LTV Ratios and
no assurance can be given (i) that the depreciation rates and methods assumed
for the purpose of the table are the ones most likely to occur or are
appropriate for evaluating the actual future value of any Aircraft or Spare
Engine or (ii) as to such actual future value. Many of the factors affecting the
value of the Equipment are discussed herein under "Risk Factors -- Factors
Relating to the Certificates and the Offering -- Appraisals and Realizable Value
of Equipment". Although the table is compiled on an aggregate basis, it should
be noted that, because the Equipment Notes are not cross-collateralized, the
excess proceeds realized from the disposition of any particular Aircraft or
Spare Engine would not be available to offset shortfalls on the Equipment Notes
relating to any other Aircraft or Spare Engine. Therefore, upon the occurrence
of an Indenture Event of Default, even if the Equipment as a group could be sold
for more than the total amounts payable in respect of all of the outstanding
Equipment Notes, if certain Equipment were sold for less than the total amount
payable in respect of the related Equipment Notes, there would not be sufficient
proceeds to pay all Classes of Certificates in full. See "Description of the
Equipment Notes -- Loan to Value Ratios of Equipment Notes" for additional
information regarding LTV Ratios for the Equipment Notes issued in respect of
each Aircraft or Spare Engine which may be more relevant in a default situation
than the aggregate values shown in the following table. Thus, the table should
not be considered a forecast or prediction of expected or likely LTV Ratios but
simply a mathematical calculation based on one set of assumptions.
<TABLE>
<CAPTION>
ASSUMED
AGGREGATE CLASS A CLASS A CLASS B CLASS B
EQUIPMENT CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
DATE VALUE(1) POOL BALANCE LTV RATIO POOL BALANCE LTV RATIO
- ------------------------------ ------------ ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
November 26, 1996............. $252,415,833 $ 99,522,000 39.4% $ 37,129,000 54.1
July 2, 1997.................. 247,367,517 98,564,002 39.8 36,769,751 54.7
July 2, 1998.................. 242,319,200 96,634,779 39.9 33,879,803 53.9
July 2, 1999.................. 237,270,883 94,132,616 39.7 27,451,387 51.2
July 2, 2000.................. 232,222,567 92,361,193 39.8 24,847,492 50.5
July 2, 2001.................. 227,174,250 90,111,515 39.7 24,451,784 50.4
July 2, 2002.................. 222,125,933 86,231,267 38.8 16,800,123 51.5
July 2, 2003.................. 217,077,617 76,605,927 35.3 16,768,626 51.9
July 2, 2004.................. 212,029,300 66,141,681 31.2 13,321,826 49.7
July 2, 2005.................. 180,705,067 55,087,741 30.5 2,040,376 44.2
July 2, 2006.................. 126,154,600 37,626,977 29.8 1,471,870 34.6
July 2, 2007.................. 119,654,133 19,290,222 16.1 1,471,870 22.6
July 2, 2008.................. 113,153,667 5,265,932 4.7 0 0.0
July 2, 2009.................. NA 0 0.0 0 0.0
</TABLE>
- ---------------
(1) The Assumed Aggregate Equipment Value as of November 26, 1996 (but not the
Assumed Aggregate Equipment Values for subsequent dates) was determined
based upon the lesser of the average and median value of all Equipment as
appraised by the Appraisers as of the respective dates of their appraisals
(see "Description of the Equipment and the Appraisals"). No assurance can be
given that such value represents the realizable value of the Equipment. See
"Risk Factors -- Factors Relating to the Certificates and the
Offering -- Appraisals and Realizable Value of the Equipment" and
"Description of the Equipment and the Appraisals".
9
<PAGE> 10
<TABLE>
<CAPTION>
CLASS C CLASS C CLASS D CLASS D CLASS E CLASS E
CERTIFICATE CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
DATE POOL BALANCE LTV RATIO POOL BALANCE LTV RATIO POOL BALANCE LTV RATIO(2)
- ------------------------- ------------ --------- ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
November 26, 1996........ $ 37,747,000 69.1% $ 29,618,000 80.8% $ 14,541,000 93.4%
July 2, 1997............. 36,992,046 69.7 22,192,690 78.6 9,941,082 91.2
July 2, 1998............. 36,237,089 68.8 13,140,927 80.1 6,802,715 85.5
July 2, 1999............. 34,586,544 65.8 5,367,747 74.1 5,957,339 78.9
July 2, 2000............. 22,349,212 60.1 2,261,570 67.2 5,008,043 71.3
July 2, 2001............. 5,758,610 53.0 2,119,985 59.3 4,055,813 62.7
July 2, 2002............. 2,204,764 58.4 0 0.0 245,889 72.7
July 2, 2003............. 917,068 55.7 0 0.0 183,651 58.1
July 2, 2004............. 0 0.0 0 0.0 0 0.0
July 2, 2005............. 0 0.0 0 0.0 0 0.0
July 2, 2006............. 0 0.0 0 0.0 0 0.0
July 2, 2007............. 0 0.0 0 0.0 0 0.0
July 2, 2008............. 0 0.0 0 0.0 0 0.0
July 2, 2009............. 0 0.0 0 0.0 0 0.0
</TABLE>
- ---------------
(2) The LTV Ratio for the Class E Certificates is computed using the four
Aircraft and the three Spare Engines securing the Series E Equipment Notes.
10
<PAGE> 11
CASH FLOW STRUCTURE
Set forth below is a diagram illustrating the structure for the offering of
the Certificates and certain cash flows.
[ORGANIZATIONAL CHART]
- ---------------
* Each Aircraft and Spare Engine is subject to a separate Lease and a related
Indenture.
** The Series E Equipment Notes will only be secured by four of the Aircraft
and the three Spare Engines.
*** Liquidity Facilities are only available with respect to the Class A, B and C
Certificates.
11
<PAGE> 12
THE OFFERING
Trusts:.................... Each of the Class A Trust, the Class B Trust, the
Class C Trust, the Class D Trust and the Class E
Trust is to be formed pursuant to one of the five
separate Pass Through Trust Agreements to be
entered into between America West and Fleet
National Bank, as trustee under each Trust. Each
Trust will be a separate entity.
Certificates Offered:...... The Certificates are pass through certificates to
be issued by each Trust, representing fractional
undivided interests in such Trust. The
Certificates to be issued by the Class A Trust,
the Class B Trust, the Class C Trust, the Class D
Trust and the Class E Trust are the Class A
Certificates, Class B Certificates, Class C
Certificates, Class D Certificates and Class E
Certificates, respectively.
Subordination Agent:....... Fleet National Bank, as subordination agent under
the Intercreditor Agreement (in such capacity,
the "Subordination Agent").
Initial Liquidity
Provider:.................. Kredietbank N.V., acting through its New York
branch, initially will provide three separate
liquidity facilities for the benefit of the
holders of the Class A Certificates, Class B
Certificates and Class C Certificates,
respectively.
Trust Property:............ The property of the Trusts (the "Trust Property")
will include (i) Equipment Notes to be issued on
a nonrecourse basis by the Owner Trustees in
connection with 11 separate leveraged lease
transactions to refinance the current
indebtedness of such Owner Trustees originally
incurred to finance the Aircraft and the Spare
Engines which will be leased by such Owner
Trustees to America West, together with all
monies at any time paid thereon and all monies
due and to become due thereunder, (ii) the rights
of such Trust under the Intercreditor Agreement
(including all monies receivable in respect of
such rights), (iii) except for the Class D and
Class E Trusts, all monies receivable under the
Liquidity Facility for such Trust and (iv) funds
from time to time deposited with the Trustee in
accounts relating to such Trust. The Equipment
Notes with respect to each Aircraft and Spare
Engine will be issued in up to five series under
separate Indentures (each, an "Indenture")
between the related Owner Trustee and the
indenture trustee thereunder (the "Indenture
Trustee"). Each Trust will purchase, pursuant to
certain Refunding Agreements (each, a "Refunding
Agreement"), one series of Equipment Notes issued
with respect to some or all of the Equipment such
that all of the Equipment Notes held in each
Trust will have an interest rate corresponding to
the interest rate applicable to the Certificates
to be issued by such Trust. The maturity dates of
the Equipment Notes acquired by each Trust will
occur on or before the final expected
distribution date (the "Final Expected
Distribution Date") applicable to the
Certificates to be issued by such Trust as set
forth on the cover page of this Prospectus. The
aggregate original principal amount of the
Equipment Notes to be held in each Trust will be
the same as the aggregate original face amount of
the Certificates to be issued by such Trust.
Certificates and
Denominations:........... The Certificates of each Trust will be issued in
denominations of $1,000 and integral multiples
thereof. See "Description of the Certificates --
General".
12
<PAGE> 13
Regular Distribution
Dates:..................... January 2 and July 2, commencing January 2, 1997.
Special Distribution
Date:...................... Any business day on which a Special Payment is to
be distributed. See "Description of the
Certificates -- Payments and Distributions".
Record Date:............... The fifteenth day preceding a Regular Distribution
Date or a Special Distribution Date.
Distributions:............. All payments of principal and interest received by
the Trustee on the Equipment Notes held in each
Trust will be distributed by the Trustee to the
holders of the Certificates (the
"Certificateholders ") of such Trust, on the
Regular Distribution Dates, subject to the
provisions of the Intercreditor Agreement.
Assuming payments on the Equipment Notes are made
when due, the Final Expected Distribution Date
for each Class of Certificates will be as set
forth on the cover page of this Prospectus.
Payments on the Equipment Notes held in each
Trust are scheduled to be received in specified
amounts by the Trustee of such Trust on January 2
and July 2 of each year, commencing January 2,
1997. Payments of principal, Make-Whole Amount
(if any) and interest resulting from the purchase
(if any) of the Equipment Notes held in any Trust
will be distributed on a Special Distribution
Date after not less than ten days' notice from
the Trustee to the Certificateholders of such
Trust, subject to the provisions of the
Intercreditor Agreement. For a discussion of
distributions upon an Indenture Event of Default,
see "Description of the Certificates -- Indenture
Events of Default and Certain Rights Upon an
Indenture Event of Default".
Events of Default:......... Events of Default under each Pass Through Trust
Agreement (each, a "PTC Event of Default ") are
the failure to pay within ten business days of
the due date thereof: (i) the outstanding Pool
Balance of the applicable Class of Certificates
on the Final Legal Distribution Date (as defined
below) for such Class or (ii) interest due on
such Class of Certificates on any Regular
Distribution Date or Special Distribution Date
(each, a "Distribution Date") (unless, in the
case of the Class A, B or C Certificates, the
Subordination Agent shall have made an Interest
Drawing with respect thereto in an amount
sufficient to pay such interest and shall have
distributed such amount to the Certificateholders
entitled thereto). The "Final Legal Distribution
Date" for each of the Class A, B, C, D and E
Certificates is January 2, 2011, July 2, 2009,
January 2, 2006, July 2, 2002 and January 2,
2004, respectively. Any failure to make expected
principal distributions on any Class of
Certificates on any Regular Distribution Date
(other than the Final Legal Distribution Date)
will not constitute a PTC Event of Default with
respect to such Certificates.
Purchase Rights of
Certificateholders:...... Upon the occurrence and during the continuation of
a Triggering Event (as defined below), (i) the
Class B Certificateholders shall have the right
to purchase all, but not less than all, of the
Class A Certificates, (ii) the Class C
Certificateholders shall have the right to
purchase all, but not less than all, of the Class
A and B Certificates, (iii) the Class D
Certificateholders shall have the right to
purchase all, but not less than all, of the Class
A, B and C Certificates and (iv) the Class E
13
<PAGE> 14
Certificateholders shall have the right to
purchase all, but not less than all, of the Class
A, B, C and D Certificates, in each case at a
purchase price equal to the Pool Balance of the
relevant Class or Classes of Certificates plus
accrued and unpaid interest thereon to the date
of purchase, without any Make-Whole Amount, but
including any other amounts due to the
Certificateholders of such Class or Classes.
"Triggering Event" means (x) the occurrence of an
Indenture Event of Default under all Indentures
resulting in a PTC Event of Default with respect
to the most senior Class of Certificates then
outstanding, (y) the acceleration of, or a
failure to pay at final maturity, all of the
outstanding Equipment Notes or (z) certain
bankruptcy or insolvency events involving America
West.
Equipment Notes
(a) Interest:............ The Equipment Notes held in each Trust will accrue
interest at the applicable rate per annum for the
Certificates issued by such Trust as set forth on
the cover page of this Prospectus, payable on
January 2 and July 2 of each year, commencing
January 2, 1997, and such interest will be passed
through to Certificateholders of such Trust on
each such date until the Final Expected
Distribution Date for the Certificates issued by
such Trust, in each case subject to the
Intercreditor Agreement. Interest is calculated
on the basis of a 360-day year consisting of
twelve 30-day months. See "Description of the
Certificates -- Payments and Distributions",
"Description of the Equipment Notes -- General"
and "-- Principal and Interest Payments".
(b) Principal:........... Scheduled principal payments made on the Equipment
Notes held in each Trust will be passed through
to the Certificateholders of each such Trust on
January 2 or July 2 or both in certain years
commencing January 2, 1997, in accordance with
the principal repayment schedule set forth herein
under "Description of the Certificates -- Pool
Factors", in each case subject to the
Intercreditor Agreement.
(c) Redemption and
Purchase:........... (i) All of the Equipment Notes issued with
respect to an Aircraft or a Spare Engine will
be redeemed in whole upon the occurrence of
an Event of Loss with respect to such
Equipment if such Equipment is not replaced
by America West under the related Lease, in
each case at a price equal to the aggregate
unpaid principal amount thereof, together
with accrued interest thereon to, but not
including, the date of redemption, and all
other amounts payable under the related
Indenture or under the related Refunding
Agreement to the holders of such Equipment
Notes, but without any Make-Whole Amount.
(ii) If, with respect to an Aircraft or a Spare
Engine, (x) the Indenture Trustee with
respect to the related Equipment Notes has
taken action or notified the applicable Owner
Trustee that it intends to take action to
foreclose the lien of the related Indenture
or otherwise commence the exercise of any
significant remedy under such Indenture or
the related Lease, (y) the Equipment Notes
with respect to such Aircraft or Spare Engine
shall have been accelerated or (z) there
shall have occurred and be continuing a Lease
Event of Default, then in each case all of
the Equipment
14
<PAGE> 15
Notes issued with respect to such Aircraft or
Spare Engine may be purchased by the related
Owner Trustee or the beneficial owner of such
Equipment (the "Owner Participant"), at a price
equal to the aggregate unpaid principal amount
thereof, together with accrued and unpaid
interest thereon to, but not including, the
purchase date, and all other amounts then
payable under the related Indenture or under
the related Refunding Agreement to the holders
of such Equipment Notes, but without any
Make-Whole Amount (provided that if such option
is exercised at a time when a Lease Event of
Default shall have occurred and be continuing
for less than 120 days and the events described
in clauses (x) and (y) of this sentence do not
apply, such price shall include the Make-Whole
Amount).
(d) Security:............ The Equipment Notes issued with respect to each
Aircraft and Spare Engine will be secured by a
perfected security interest in the related Owner
Trustee's rights in and to such Aircraft or Spare
Engine and an assignment to the related Indenture
Trustee of certain of the related Owner Trustee's
rights under the related Lease, including the
right to receive payments of rent thereunder. The
Equipment Notes are not cross-collateralized and,
consequently, the Equipment Notes issued in
respect of any one Aircraft or Spare Engine are
not secured by any of the other Equipment or the
Leases related thereto. There are no cross-
default provisions in the Indentures or Leases
and, consequently, events resulting in an event
of default under any particular Indenture or
Lease may or may not result in an event of
default occurring under any other Indenture or
Lease. If the Equipment Notes issued in respect
of one or more Aircraft or Spare Engine are in
default and the Equipment Notes issued in respect
of the remaining Equipment are not in default, no
remedies will be exercisable under the Indentures
with respect to such remaining Equipment. See
"Description of the Equipment Notes -- Security",
"-- Indenture Events of Default; Notice and
Waiver" and "-- Remedies".
Although the Equipment Notes are not obligations
of, or guaranteed by, America West, the aggregate
amounts unconditionally payable by America West
for lease of the Equipment will be at least
sufficient to pay in full when due all scheduled
amounts required to be paid on the Equipment
Notes issued with respect to the Equipment. See
"Description of the Equipment Notes -- General".
(e) Section 1110
Protection:......... Milbank, Tweed, Hadley & McCloy, counsel to the
Underwriters, has advised the Indenture Trustees
that if America West were to become a debtor
under Chapter 11 of the Bankruptcy Code, the
applicable Owner Trustee, as a lessor under each
Lease, and the related Indenture Trustee, as
assignee of such Owner Trustee's rights under
such Lease pursuant to such related Indenture,
would be entitled to the benefits of Section 1110
of Title 11 of the United States Code (the
"Bankruptcy Code") with respect to the airframe
and engines comprising the related Aircraft or
with respect to the related Spare Engine. See
"Description of the Equipment Notes -- Remedies"
for a description of that opinion and certain
assumptions and qualifications contained therein.
(f) Ranking:............. Series B Equipment Notes issued in respect of the
Equipment will be subordinated in right of
payment to Series A Equipment Notes issued
15
<PAGE> 16
in respect of such Equipment; Series C Equipment
Notes issued in respect of such Equipment will be
subordinated in right of payment to Series A and
B Equipment Notes issued in respect of such
Equipment; Series D Equipment Notes issued in
respect of such Equipment will be subordinated in
right of payment to Series A, B and C Equipment
Notes issued in respect of such Equipment; and
Series E Equipment Notes issued in respect of
such Equipment will be subordinated in right of
payment to Series A, B, C and D Equipment Notes
issued in respect of such Equipment. On each
Distribution Date, (i) payments of interest and
principal due on Series A Equipment Notes issued
in respect of any Equipment will be made prior to
payments of interest and principal due on any
Series B, C, D and E Equipment Notes issued in
respect of such Equipment, (ii) payments of
interest and principal due on Series B Equipment
Notes will be made prior to payments of interest
and principal due on any Series C, D and E
Equipment Notes issued in respect of such
Equipment, (iii) payments of interest and
principal due on Series C Equipment Notes will be
made prior to payments of interest and principal
due on any Series D and E Equipment Notes issued
in respect of such Equipment and (iv) payments of
interest and principal due on Series D Equipment
Notes will be made prior to payments of interest
and principal due on any Series E Equipment Notes
issued in respect of such Equipment.
Liquidity Facilities:...... The Subordination Agent and the Liquidity Provider
will enter into a revolving credit agreement
(each, a "Liquidity Facility") with respect to
each Trust (other than the Class D and Class E
Trusts). Under each of the Liquidity Facilities,
the Liquidity Provider will, if necessary, make
advances ("Interest Drawings") in an aggregate
amount (the "Required Amount") sufficient to pay
interest on the Class A, B or C Certificates, as
the case may be, on up to three successive
Regular Distribution Dates (without regard to any
future payments of principal on such
Certificates) at the respective interest rates
(without any penalty or default margin) on such
Certificates (the "Stated Interest Rates"). The
initial amount available under the Liquidity
Facilities for the Class A Certificates, the
Class B Certificates and the Class C Certificates
will be $10,225,886, $3,859,560 and $3,884,166,
respectively. An Interest Drawing under the
relevant Liquidity Facility will be made promptly
after any Regular Distribution Date if, after
giving effect to the subordination provisions of
the Intercreditor Agreement, there are
insufficient funds available to the Subordination
Agent to pay interest on any Class A, B or C
Certificates; provided, however, that on any date
the maximum amount available under such Liquidity
Facility to fund any shortfall in interest due on
such Certificates will not exceed the Required
Amount. The Liquidity Facility for any Trust does
not provide for drawings thereunder to pay for
principal of, or Make-Whole Amount on, the
Certificates of such Trust, any interest on the
Certificates of such Trust in excess of the
Stated Interest Rates, or principal of, or
interest or Make-Whole Amount on, the
Certificates of any other Trust.
Upon each Interest Drawing under any Liquidity
Facility, the Subordination Agent will be
obligated to reimburse (to the extent that the
Subordination Agent has available funds therefor)
the Liquidity Provider for the amount of such
drawing. Such reimbursement
16
<PAGE> 17
obligation and any other amounts, including
interest thereon, owing to the Liquidity Provider
under each Liquidity Facility or certain other
agreements (the "Liquidity Obligations") will
rank pari passu with the Liquidity Obligations
relating to all other Liquidity Facilities and
will rank senior to the Certificates in right of
payment. Upon reimbursement in full of the
Interest Drawings (but not other Drawings),
together with any accrued interest thereon, under
any Liquidity Facility, the amount available
under such Liquidity Facility will be reinstated
to the then Required Amount of such Liquidity
Facility; provided that the amount will not be
reinstated at any time if (i) a Liquidity Event
of Default (as defined herein) shall have
occurred and be continuing or (ii) both(A) a
Triggering Event shall have occurred and be
continuing and (B) a Performing Note Deficiency
(as defined below) exist.
"Non-Performing Equipment Notes" are Equipment
Notes other than Performing Equipment Notes.
"Performing Equipment Notes" are Equipment Notes
with respect to which no payment default has
occurred and is continuing (without giving effect
to any acceleration thereof); provided that in
the event of a bankruptcy proceeding involving
America West as a debtor under Chapter 11 of the
Bankruptcy Code (i) any payment default existing
during the 60-day period under Section
1110(a)(1)(A) of the Bankruptcy Code (or such
longer period as may apply under Section 1110(b)
of the Bankruptcy Code) (the "Section 1110
Period ") shall not be taken into consideration,
unless during the Section 1110 Period the trustee
in such proceeding or America West refuses to
assume or agree to perform its obligations under
the Lease related to such Equipment Notes and
(ii) any payment default occurring after the date
of the order of relief in such proceeding shall
not be taken into consideration if such payment
default is cured under Section 1110(a)(1)(B) of
the Bankruptcy Code before the later of (A) 30
days after the date of such default or (B) the
expiration of the Section 1110 Period.
"Performing Note Deficiency" means any time that
less than 65% of the then aggregate outstanding
principal amount of all Equipment Notes are
Performing Equipment Notes.
If at any time the short-term unsecured debt rating
of the Liquidity Provider issued by Moody's
Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Group ("Standard & Poor's" and,
together with Moody's, the "Rating Agencies") is
lower than the Threshold Rating (as defined
herein) or, in the event the Liquidity Provider's
short-term unsecured debt is not rated by Moody's
or Standard & Poor's, the long-term unsecured
debt rating of any Liquidity Provider issued by
either Moody's or Standard & Poor's is lower than
the Threshold Rating, then the Liquidity Provider
for the related Trust or the Subordination Agent
may arrange for another similar facility to be
provided by a financial institution having
unsecured short-term debt ratings or, in the
event a selected financial institution's
short-term unsecured debt is not rated by Moody's
or Standard & Poor's, long-term unsecured debt
ratings, issued by the applicable Rating Agencies
which are equal to or higher than the Threshold
Rating. If such Liquidity Facility is not
replaced within the period specified in the
17
<PAGE> 18
Intercreditor Agreement after notice of the
downgrading, such Liquidity Facility will be
drawn in full (the "Downgrade Drawing") and the
proceeds will be deposited into an account (a
"Cash Collateral Account") for such Trust and
used for the same purposes and under the same
circumstances and subject to the same conditions
as cash payments of Interest Drawings under such
Liquidity Facility would be used.
The Intercreditor Agreement provides that the
Subordination Agent shall hold the proceeds of a
Final Drawing made in accordance with the
provisions set forth under "Description of
Liquidity Facilities -- Liquidity Events of
Default" in the Cash Collateral Account for the
related Trust as cash collateral to be used for
the same purposes and under the same
circumstances, and subject to the same
conditions, as cash payments of Interest Drawings
under such Liquidity Facility would be used.
The Subordination Agent, in consultation with
America West (whose recommendations the
Subordination Agent will accept), may, subject to
certain limitations, arrange for a replacement
facility at any time to replace the Liquidity
Facility for any Trust. If such replacement
facility is provided at any time after a
Downgrade Drawing under such Liquidity Facility,
the funds on deposit in the Cash Collateral
Account for such Trust will be returned to the
Liquidity Provider being replaced.
Notwithstanding the subordination provisions of the
Intercreditor Agreement, the Liquidity Facility
for any Class of Certificates does not provide
for drawings thereunder to pay principal of or
interest or Make-Whole Amount on the Certificates
of any other Class. Therefore, only the holders
of the Certificates to be issued by a particular
Trust will be entitled to receive and retain the
proceeds of drawings under the Liquidity Facility
for such Trust. There is no Liquidity Facility
for the Class D and Class E Trusts. See
"Description of the Liquidity Facilities".
Intercreditor Agreement:
(a) Subordination:....... The Trusts, the Liquidity Provider and the
Subordination Agent will enter into an agreement
(the "Intercreditor Agreement") which will
provide as follows:
(i) All payments made in respect of the Equipment
Notes and certain other payments will be made
to the Subordination Agent which will
distribute such payments as described in
paragraphs (ii) and (iii) below.
(ii) On each Distribution Date, so long as no
Triggering Event shall have occurred (whether
or not continuing), all payments received by
the Subordination Agent in respect of the
Equipment Notes and certain other payments
will be distributed in the following order:
(a) payment of the Liquidity Obligations to
the Liquidity Provider and, if applicable, to
replenish Cash Collateral Accounts up to
their respective Required Amounts; (b)
payment of Expected Distributions (as defined
below) to the holders of Class A
Certificates; (c) payment of Expected
Distributions to the holders of Class B
Certificates; (d) payment of Expected
Distributions to the holders of Class C
Certificates; (e) payment of
18
<PAGE> 19
Expected Distributions to the holders of Class
D Certificates; (f) payment of Expected
Distributions to the holders of the Class E
Certificates; and (g) payment of certain fees
and expenses of the Subordination Agent and
each Trustee.
"Expected Distributions" means, with respect to the
Certificates of any Trust on any Distribution
Date (the "Current Distribution Date"), the sum
of (x) accrued and unpaid interest on such
Certificates and (y) the difference between (A)
the Pool Balance of such Certificates as of the
immediately preceding Distribution Date and (B)
the Pool Balance of such Certificates as of the
Current Distribution Date, calculated on the
basis that the principal of the Equipment Notes
held in such Trust has been paid when due
(whether at stated maturity, upon redemption,
prepayment, purchase or acceleration or
otherwise) and such payments have been
distributed to the holders of such Certificates.
(iii) Upon the occurrence of a Triggering Event and
at all times thereafter, all payments
received by the Subordination Agent in
respect of the Equipment Notes and certain
other payments will be distributed in the
following order: (a) to reimburse the
Subordination Agent, each Trustee, the
Liquidity Provider and any Certificateholder,
as the case may be, for the payment of
Administration Expenses (as defined herein);
(b) to the Liquidity Provider in payment of
Liquidity Obligations and, so long as no
Performing Note Deficiency exists and no
Liquidity Event of Default has occurred and
is continuing, to replenish Cash Collateral
Accounts up to their respective Required
Amounts; (c) to reimburse the Subordination
Agent, each Trustee and each
Certificateholder, as the case may be, for
the payment of Certain Taxes and Fees (as
defined herein); (d) to pay Adjusted Expected
Distributions to the holders of Class A
Certificates; (e) to pay Adjusted Expected
Distributions to the holders of Class B
Certificates; (f) to pay Adjusted Expected
Distributions to the holders of Class C
Certificates; (g) to pay Adjusted Expected
Distributions to the holders of Class D
Certificates; and (h) to pay Adjusted
Expected Distributions to the holders of
Class E Certificates.
"Adjusted Expected Distributions" means with
respect to the Certificates of any Class on any
Current Distribution Date the sum of (x) the
amount of accrued and unpaid interest on such
Certificates plus (y) the greater of:
(A) the difference between (x) the Pool Balance of
such Certificates as of the immediately preceding
Distribution Date and (y) the Pool Balance of
such Certificates as of the Current Distribution
Date, calculated on the basis that (i) the
principal of the Non-Performing Equipment Notes
held in such Trust has been paid in full and such
payments have been distributed to the holders of
such Certificates and (ii) the principal of the
Performing Equipment Notes has been paid when due
(but without giving effect to any acceleration of
Performing Equipment Notes) and has been
distributed to the holders of such Certificates;
and
(B) the amount, if any, by which (i) the Pool
Balance of such Class of Certificates as of the
immediately preceding Distribution Date exceeds
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<PAGE> 20
(ii) the Aggregate LTV Collateral Amount for such
Class of Certificates for the Current
Distribution Date;
provided that, until the date of the initial LTV
Appraisals (as defined below), clause (B) above
shall not be applicable.
"Aggregate LTV Collateral Amount" means, for any
Class of Certificates for any Distribution Date,
the sum of the applicable LTV Collateral Amounts
(as defined below) for each Aircraft and Spare
Engine minus the Pool Balance for each Class of
Certificates, if any, senior to such Class after
giving effect to any distribution of principal on
such Distribution Date on such senior Class or
Classes, but in no event an amount less than
zero.
"Appraised Current Market Value" of any Aircraft or
Spare Engine means the lower of the average or
the median of the most recent three LTV
Appraisals (as defined below) of such Aircraft or
Spare Engine. After a Triggering Event occurs and
any Equipment Note becomes a Non-Performing
Equipment Note, the Subordination Agent will be
required to obtain LTV Appraisals to determine
the Appraised Current Market Value and additional
LTV Appraisals on or prior to each anniversary of
the date of such initial LTV Appraisals; provided
that, if the Controlling Party reasonably objects
to the appraised value of the Aircraft or Spare
Engine shown in any such LTV Appraisals, the
Controlling Party shall have the right to obtain
or cause to be obtained substitute LTV Appraisals
(including any LTV Appraisals based upon physical
inspection of the Equipment).
"LTV Appraisal" means a current fair market value
appraisal (which may be a "desktop" appraisal)
performed by any Appraiser or any other
nationally recognized appraiser on the basis of
an arm's-length transaction between an informed
and willing purchaser under no compulsion to buy
and an informed and willing seller under no
compulsion to sell, both parties having knowledge
of all relevant facts.
"LTV Collateral Amount" of any Aircraft or Spare
Engine for any Class of Certificates for any
Distribution Date means the lesser of (i) the
initial LTV Ratio for such Class of Certificates
multiplied by the Appraised Current Market Value
of such Aircraft or Spare Engine and (ii) the
outstanding principal amount of the Equipment
Notes secured by such Aircraft or Spare Engine
after giving effect to any principal payments of
such Equipment Notes on or before such
Distribution Date.
"LTV Ratio" initially means for the Class A
Certificates 39.4%, for the Class B Certificates
54.1%, for the Class C Certificates 69.1%, for
the Class D Certificates 80.8% and for the Class
E Certificates 93.4%.
(b) Intercreditor
Rights:.................... Pursuant to the Intercreditor Agreement, the
Trustees and the Liquidity Provider shall agree
that, with respect to any Indenture at any given
time, the relevant Indenture Trustee will be
directed (a) in taking, or refraining from
taking, any action thereunder, so long as no
Indenture Event of Default shall have occurred
and be continuing thereunder, by the holders of
at least a majority of the outstanding principal
amount of the Equipment Notes issued thereunder
(provided that, for so long as the Subordination
Agent is the registered holder of the Equipment
Notes, the Subordination Agent shall act with
respect to this clause (a) in accordance with the
directions of the Trustees representing holders
of Certificates representing an undivided
interest in such
20
<PAGE> 21
principal amount of Equipment Notes) and (b)
after the occurrence and during the continuance
of an Indenture Event of Default thereunder,
subject to certain conditions in exercising
remedies thereunder (including acceleration of
such Equipment Notes or foreclosing the lien on
the Equipment securing such Equipment Notes), by
the Controlling Party.
"Controlling Party" with respect to any Indenture
means: (v) the Class A Trustee; (w) upon payment
of Final Distributions to the holders of Class A
Certificates, the Class B Trustee; (x) upon
payment of Final Distributions to the holders of
Class B Certificates, the Class C Trustee; (y)
upon payment of Final Distributions to the
holders of Class C Certificates, the Class D
Trustee; and (z) upon payment of Final
Distributions to the holders of Class D
Certificates, the Class E Trustee. See
"Description of the Certificates -- Indenture
Events of Default and Certain Rights Upon an
Indenture Event of Default" for a description of
the rights of the Certificateholders of each
Trust to direct the respective Trustee.
Notwithstanding the foregoing, subject to certain
limitations, the Liquidity Provider shall have
the right to elect to become the Controlling
Party with respect to an Indenture at any time
from and including the date which is 18 months
after the earlier of (i) the acceleration of the
Equipment Notes issued thereunder and (ii) a
Final Drawing (as defined herein) under the
Liquidity Facilities, if at the time of such
election the Liquidity Obligations have not been
paid in full; provided that if there is more than
one Liquidity Provider, the Liquidity Provider
with the greatest amount of unreimbursed
Liquidity Obligations shall have such right.
"Final Distributions" means, with respect to the
Certificates of any Trust on any Distribution
Date, the sum of (x) the aggregate amount of all
accrued and unpaid interest on such Certificates
and (y) the Pool Balance of such Certificates as
of the immediately preceding Distribution Date.
(i) Upon the occurrence and during the
continuation of any Indenture Event of
Default under any Indenture, the Controlling
Party may accelerate and sell all (but not
less than all) of the Equipment Notes issued
under such Indenture to any person, subject
to the provisions of paragraph (ii) below.
The proceeds of such sale will be distributed
pursuant to the provisions of the
Intercreditor Agreement.
(ii) So long as any Certificates are outstanding,
during nine months after the earlier of (x)
the acceleration of the Equipment Notes under
any Indenture or (y) the bankruptcy or
insolvency of America West, without the
consent of each Trustee, (a) no Equipment
subject to the lien of such Indenture or such
Equipment Notes may be sold, if the net
proceeds from such sale would be less than
the Minimum Sale Price for such Equipment or
such Equipment Notes, and (b) the amount and
payment dates of rentals payable by America
West under the Lease for such Equipment may
not be adjusted, if, as a result of such
adjustment, the discounted present value of
all such rentals would be less than 75% of
the discounted present value of the rentals
payable by America West under such Lease
before giving effect to such
21
<PAGE> 22
adjustment, in each case, using the weighted
average interest rate of the Equipment Notes
then outstanding under such Indenture as the
discount rate.
"Minimum Sale Price" means, with respect to the
Equipment or the Equipment Notes issued in
respect of such Equipment, at any time, the
lesser of (a) 75% of the Appraised Current Market
Value of such Equipment based on the most recent
LTV Appraisal and (b) the aggregate outstanding
principal amount of such Equipment Notes, plus
accrued and unpaid interest thereon.
Use of Proceeds:........... The proceeds from the sale of the Certificates
offered hereby will be used to purchase the
Equipment Notes issued by the related Owner
Trustees in connection with the refinancing of
the indebtedness previously incurred by the Owner
Trustees to finance the purchase of the
Equipment. The proceeds from the sale of
Equipment Notes will be used to repay all of the
current indebtedness of the Owner Trustees with
respect to the Equipment, and any proceeds
remaining after such repayment may be used to pay
certain costs and expenses, such as break-funding
costs and redemption premiums, incurred in the
refinancing. Such Equipment Notes will represent
in the aggregate the entire debt portion of the
leveraged lease transactions relating to all of
the Equipment. America West will not receive any
of the proceeds from the sale of the
Certificates. See "Use of Proceeds".
Trustee:................... Fleet National Bank will act as Trustee and as
paying agent and registrar for the Certificates
of each Trust. Fleet National Bank will also act
as Subordination Agent under the Intercreditor
Agreement. The Chase Manhattan Bank will act as
Indenture Trustee with respect to the issue of
Equipment Notes relating to four of the Aircraft,
and Fleet National Bank will act as Indenture
Trustee with respect to the issue of Equipment
Notes relating to four of the Aircraft and the
three Spare Engines.
Federal Income Tax
Consequences:............ Each Trust will be classified as a grantor trust
for federal income tax purposes, and therefore
each Certificate Owner will be treated as the
owner of a pro rata undivided interest in each of
the Equipment Notes and any other property held
by such Trust. Each Certificate Owner should
report on its federal income tax return its pro
rata share of income from such Equipment Notes
and other property held by such Trust in
accordance with such Certificate Owner's method
of accounting. The Equipment Notes will not be
issued with original issue discount for U.S.
federal income tax purposes. See "Certain U.S.
Federal Income Tax Consequences".
ERISA Considerations:...... In general, employee benefit plans subject to Title
I of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or Section 4975 of
the Internal Revenue Code of 1986, as amended
(the "Code"), or entities which may be deemed to
hold the assets of any such plan (collectively,
"Plans"), will be eligible to purchase the Class
A Certificates. Plans will not be eligible to
purchase the Class B, C, D or E Certificates;
provided, however, that such Certificates may be
acquired with the assets of an insurance company
general account that may be deemed to contain
Plan assets if the conditions of Prohibited
Transaction Class Exemption ("PTCE") 95-60, 60
Fed. Reg. 35,925, are satisfied. By the
acceptance of a Class B, C, D or E Certificate,
each Certificateholder will be deemed to have
represented
22
<PAGE> 23
that either (i) no Plan assets have been used to
purchase such Certificate or (ii) the purchase
and holding of such Certificate is exempt from
the prohibited transaction restrictions of ERISA
and the Code pursuant to PTCE 95-60. Each Plan
fiduciary (and each fiduciary for a governmental
or church plan subject to rules similar to those
imposed on Plans under ERISA) should consult with
its legal advisor concerning an investment in any
of the Certificates. See "ERISA Considerations".
Rating of the
Certificates:.............. It is a condition to the issuance of the
Certificates that the Certificates be rated by
Moody's and Standard & Poor's as set forth below:
<TABLE>
<CAPTION>
STANDARD &
CERTIFICATES MOODY'S POOR'S
------------ ------- ----------
<S> <C> <C>
Class A A2 AA-
Class B Baa2 A-
Class C Ba1 BBB-
Class D Ba3 BB
Class E B1 B+
</TABLE>
A rating is not a recommendation to purchase, hold
or sell Certificates, inasmuch as such rating
does not address market price or suitability for
a particular investor. There can be no assurance
that such ratings will not be lowered or
withdrawn by a Rating Agency if, in the opinion
of such Rating Agency, circumstances (including
the downgrading of America West or the Liquidity
Provider) so warrant. See "Risk Factors --
Factors Relating to the Certificates and the
Offering -- Ratings of the Certificates".
Rating of the Initial
Liquidity Provider:........ Kredietbank N.V., acting through its New York
branch, as the Initial Liquidity Provider, has a
short-term unsecured debt rating of P-1 and A1+
from Moody's and Standard & Poor's, respectively,
and a long-term unsecured debt rating of Aa2 and
AA- from Moody's and Standard & Poor's,
respectively.
Threshold Rating:.......... "Threshold Rating" means the short-term unsecured
debt rating of P-1 by Moody's and A-1 by Standard
& Poor's or, in the event a person's short-term
unsecured debt is not rated by either Moody's or
Standard & Poor's, the long-term unsecured debt
rating of A2 by Moody's and AA- by Standard &
Poor's.
23
<PAGE> 24
SUMMARY FINANCIAL AND OPERATING DATA
The following table summarizes certain financial and operating data with
respect to the Company contained elsewhere in this Prospectus and should be read
in conjunction therewith. Statements of operations data subsequent to August 25,
1994 and balance sheet data as of December 31, 1994 and 1995 and September 30,
1995 and 1996 reflect the adoption by the Company of fresh start reporting upon
consummation of the Company's reorganization and are not prepared on a basis of
accounting consistent with prior data. References to "Predecessor Company" refer
to the Company's operations prior to its emergence from bankruptcy and
references to "Reorganized Company" refer to the Company's operations after its
emergence from bankruptcy. See the financial statements and related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
<TABLE>
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY(1)
----------------------------------------------------------- ---------------------------
NINE MONTHS NINE MONTHS PERIOD FROM PERIOD FROM
ENDED ENDED YEAR ENDED AUGUST 26 TO JANUARY 1 TO YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, AUGUST 25, DECEMBER 31,
1996 1995 1995(2) 1994 1994 1993
------------- ------------- ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Operating revenues............... $1,299,617 $1,154,333 $1,550,642 $ 469,766 $ 939,028 $1,325,364
Operating income................. 43,258(3) 132,012 154,732 38,871 107,506 121,054
Income (loss) before income taxes
and extraordinary items........ 17,690 95,278 108,378 19,736 (201,209) 37,924
Income (loss) before
extraordinary items............ (2,458) 48,782 54,770 7,846 (203,268) 37,165
Extraordinary items(4)........... (1,105) (984) (984) -- 257,660 --
Net income (loss)................ (3,563) 47,798 53,786 7,846 54,392 37,165
Earnings (loss) per share(5):
Primary........................ (0.08) 1.04 1.16 .17 1.99 1.50
Fully diluted.................. (0.08) 1.03 1.15 .17 1.41 1.04
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital deficiency....... $(136,467) $ (77,306) $ (70,416) $ (47,927) $ (163,572) $ (124,375)
Total assets..................... 1,539,389 1,642,831 1,588,709 1,545,092 1,053,780 1,016,743
Long-term debt, less current
maturities(6).................. 336,235 376,655 373,964 465,598 597,839 620,992
Total stockholders' equity
(deficiency)................... 609,495 643,488 649,472 595,446 (286,395) (254,262)
OPERATING DATA:
Available seat miles (in
millions)...................... 15,863 14,503 19,421 6,424 11,636 17,190
Revenue passenger miles (in
millions)...................... 11,341 10,035 13,313 3,972 8,261 11,221
Passenger load factor (%)........ 71.5 69.2 68.5 61.8 71.0 65.3
Yield per revenue passenger mile
(cents)........................ 10.81 10.79 10.91 11.02 10.68 11.11
Passenger revenue per available
seat mile (cents).............. 7.73 7.47 7.48 6.81 7.58 7.25
Operating cost per available seat
mile (cents)................... 7.92(3) 7.05 7.19(7) 6.71 7.15 7.01
Full time equivalent employees
(at end of period)............. 9,208 9,786 8,712 10,715 10,849 10,544
</TABLE>
- ---------------
(1) Includes net expenses incurred by the Predecessor Company in connection with
its reorganization of $273.7 million for the period January 1 to August 25,
1994 and $25.0 million for the year ended December 31, 1993.
(2) Costs associated with the Company's outsourcing of its heavy aircraft
maintenance resulted in a pretax restructuring charge of approximately $10.5
million.
(3) Reflects a $65.1 million nonrecurring special charge related to the
Company's renegotiation of its AVSA aircraft purchase agreement and
writedown of certain aircraft related inventory and equipment and
underutilized facilities as well as certain other adjustments.
(4) Includes (i) an extraordinary loss of $1.1 million in the nine months ended
September 30, 1996 relating to prepayment of indebtedness, (ii) an
extraordinary loss of $984,000 in the nine months ended September 30, 1995
and the year ended December 31, 1995 resulting from the exchange of debt by
the Company and (iii) an extraordinary gain of $257.7 million in the period
from January 1 to August 25, 1994 resulting from the discharge of
indebtedness pursuant to the consummation of the Company's plan of
reorganization.
(5) Historical per share data for the Predecessor Company are not meaningful
since the Company has been recapitalized and has adopted fresh start
reporting as of August 25, 1994.
(6) Includes certain balances reported as "Estimated Liabilities Subject to
Chapter 11 Proceedings" for the Predecessor Company.
(7) Restructuring costs associated with the Company's outsourcing of its heavy
aircraft maintenance resulted in an increase in cost per available seat mile
of .05 cents for the year ended December 31, 1995.
24
<PAGE> 25
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE CERTIFICATES SHOULD CAREFULLY REVIEW THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY
CONSIDER THE FOLLOWING MATTERS:
COMPANY RELATED RISKS
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This Prospectus 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 or
projected. Among the key factors that may have a direct bearing on America
West's results are competitive practices in the airline industry generally and
particularly in the Company's principal markets, the ability of the Company to
meet existing financial obligations in the event of adverse industry or economic
conditions or to obtain additional capital to fund future commitments and
expansion, the Company's relationship with employees and the terms of future
collective bargaining agreements and the impact of current and future laws and
governmental regulations affecting the airline industry and the Company's
operations.
LEVERAGE; FUTURE CAPITAL REQUIREMENTS
At September 30, 1996, the Company had $382.5 million of long-term
indebtedness (including current maturities). America West does not have
available lines of credit or significant unencumbered assets. The Company may be
less able than certain of its competitors to withstand adverse industry
conditions or a prolonged economic recession. In addition, at September 30,
1996, the Company had commitments for a total of 22 Airbus A320-200 aircraft for
delivery beginning in 1999. The aggregate net cost of such aircraft is based on
formulae that include certain price indices (including indices for various
aircraft components such as metal products) for periods preceding the various
delivery dates. Based on an assumed 5% annual price escalation, the Company
estimates such aggregate net cost to be approximately $1.1 billion. The Company
has arranged for financing for up to one-half of the commitment relating to such
aircraft and will require substantial capital from external sources to meet its
remaining financial commitment. There can be no assurance that the Company will
be able to obtain such capital in sufficient amounts or on acceptable terms. If
the Company restructures the Company's arrangements with AVSA, the AVSA Term
Sheet provides among other things, that the number of aircraft ordered by the
Company would be increased from 22 to 34 and the orders subject to cancellation
would be increased from five to 12. Also, the AVSA Term Sheet provides for an
improvement from the Company's perspective in the financing terms and conditions
under which aircraft would be purchased, and that AVSA and the manufacturers of
the engines for the aircraft would agree to provide back-stop financing for 16
of the 22 firm orders. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recent Developments" and "-- Liquidity
and Capital Resources". In addition, pursuant to the Company's growth plan, the
Company is expanding its fleet, increasing frequencies to existing cities and
adding destinations to its route system. See "Business -- Operations". This
expansion will require the lease of additional aircraft. There can be no
assurance that the Company will be able to negotiate such leasing arrangements
in sufficient amounts or on acceptable terms.
PRIOR REORGANIZATION
The Company experienced significant operating losses in each year of the
three-year period ended December 31, 1992. During this period, notwithstanding a
series of actions taken by the Company to improve its cash position and reduce
costs, the Company faced a severe liquidity crisis and filed for protection
under Chapter 11 of the Bankruptcy Code in June 1991. In connection with its
reorganization in bankruptcy and related operational restructuring (the
"Reorganization"), the Company took significant steps to improve its operations,
leading to profitability during 1993 and subsequent periods. The Company's
long-term viability, however, will depend upon its ability to sustain profitable
results of operations. There can be no assurance that
25
<PAGE> 26
such results can or will be sustained. In connection with the Reorganization,
the Company adopted fresh start reporting. Certain fresh start adjustments have
had a significant effect on the Company's statements of operations subsequent to
the Reorganization, which statements are not prepared on a basis consistent with
the prior periods. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations". At September 30, 1996, approximately
398,000 shares of the Company's Class B Common Stock (the "Class B Common
Stock") remained with an escrow agent pending final resolution of claims in
connection with the bankruptcy. All other securities issued pursuant to the
bankruptcy have been distributed.
LABOR NEGOTIATIONS
In October 1993, the Air Line Pilots Association ("ALPA") was certified by
the National Mediation Board (the "NMB") as the bargaining representative of the
Company's pilots. In May 1995, a five-year collective bargaining agreement with
the Company's pilots became effective. In September 1994, the Company's flight
attendants voted in favor of AFA representation and contract negotiations are
ongoing. In January 1996, the International Brotherhood of Teamsters ("IBT")
filed an application with the NMB seeking to be certified as the bargaining
representative for the Company's mechanics, including related personnel. After a
representation election, the NMB confirmed the IBT as the bargaining
representative of the mechanics. The Company is presently contesting that
confirmation. In April 1996, the IBT filed an application with the NMB seeking
to become the collective bargaining representative of the Company's 40 stock
clerks, which was rejected at an election in July 1996. Following the
announcement of those election results, the IBT filed with the NMB a claim of
election interference against the Company. If the NMB rules in favor of IBT, a
rerun election will be ordered.
In September 1996, the Transportation Workers Union filed an application
with the NMB seeking to become the collective bargaining representative of the
Company's approximately 40 dispatchers. The NMB has scheduled a representation
election to occur during late October and November 1996.
There have been numerous attempts by unions to organize the employees of
the Company, and the Company expects such organization efforts to continue in
the future. The Company cannot predict the terms of any future collective
bargaining agreement and therefore the effect, if any, on the Company's
operations or financial condition. See "Business -- Labor Relations".
CONCENTRATION OF VOTING POWER, INFLUENCE OF CERTAIN PRINCIPAL STOCKHOLDERS
At October 31, 1996, TPG Partners, L.P. ("TPG ") (together with its
affiliates TPG Parallel I, L.P. ("TPG Parallel ") and Air Partners II, L.P.
("Air Partners II ")), Continental and Mesa owned in the aggregate 4,373,395
shares of the outstanding Class B Common Stock (assuming the exercise of all
warrants to purchase Class B Common Stock (the "Warrants") held by such persons)
and 100% of the Company's Class A Common Stock (the "Class A Common Stock" and
together with the Class B Common Stock, the "Common Stock"), and thereby
controlled approximately 60.4% of the total voting power of America West. As a
result, TPG, TPG Parallel, Air Partners II, Continental and Mesa, whose shares
are subject to the terms of a Stockholders' Agreement (defined herein), are able
to elect a majority of their designees to the Board of Directors and otherwise
to control the Company by, among other things, taking or approving actions to
(i) amend the America West charter or effect a merger, sale of assets or other
major corporate transaction; (ii) defeat any takeover attempt; (iii) determine
the amount of dividends, if any, paid to themselves and the other holders of
Common Stock, and (iv) control the outcome of virtually all matters submitted
for a vote of the stockholders of the Company, subject to certain restrictions.
Mesa and Continental are engaged in the airline industry and, are parties to
alliance agreements with the Company. The general partner of each of TPG, TPG
Parallel and Air Partners II is a limited partnership whose general partner is
TPG Advisors, Inc., a Delaware corporation. The executive officers and directors
of TPG Advisors, Inc. are David Bonderman, James G. Coulter, William Price,
James O'Brien, Richard P. Schifter and Richard Ekleberry. Mr. Bonderman, Mr.
Coulter and Mr. Price, through their positions in Air Partners, L.P., a
partnership formed to participate in the funding of the reorganization of
Continental and a significant shareholder of Continental, may be deemed to own
beneficially a significant percentage of Continental's common stock. Mr.
Bonderman and Mr. Price are directors of Continental. Larry L. Risley, a
director of the Company, is the chairman and chief executive officer of Mesa. As
a result, there can be no assurance that the interests of
26
<PAGE> 27
Continental, Mesa, TPG, TPG Parallel and Air Partners II will not differ from
the interests of the Company or that any such party will not seek to influence
the Company in a manner that serves its interests.
Pursuant to the terms of an agreement among the Company, AmWest Partners,
L.P., GPA and certain designated stockholder representatives (the "Stockholders'
Agreement"), AmWest Partners, L.P. ("AmWest "), a limited partnership in which
TPG, TPG Parallel, Air Partners II, Continental and Mesa participated, agreed to
certain limitations on its ability to control the Company, including, that for a
three-year period beginning on August 25, 1994 (the "Effective Date"), the
Company shall have a Board of Directors of up to 15 members, six members of
which may be designated by parties other than AmWest or its partners (including
three Creditors' Committee Directors, one Equity Committee Director, one
Independent Company Director and one GPA Director, as such terms are defined in
the Stockholders' Agreement). As of May 1996, GPA Group plc ("GPA") is no longer
entitled to designate a director. In addition, the Stockholders' Agreement
provides that until the first annual meeting after August 25, 1997, the approval
of certain transactions in which AmWest or its affiliates may participate will
require the affirmative vote of the holders of a majority of the voting power of
the outstanding shares of each class of common stock of the Company entitled to
vote, voting as a single class and excluding any shares owned by AmWest or any
of its affiliates (other than Mesa). Transactions to which such restriction
applies include any merger or consolidation of the Company with or into AmWest
or any of its affiliates, any sale or other disposition of all or a substantial
part of the assets of the Company to AmWest or any of its affiliates and certain
other transactions with or involving the Company in which AmWest or any of its
affiliates would acquire an increased percentage ownership of voting equity
securities in the Company. The shareholder voting requirements specified above
will not apply to a proposed action approved or recommended by (i) the Board of
Directors and (ii) at least three Independent Directors (as such term is defined
in the Stockholders' Agreement), unless otherwise required by applicable law.
Upon the dissolution of AmWest on the Effective Date, the provisions of the
Stockholders' Agreement with respect to AmWest became binding upon TPG, TPG
Parallel, Air Partners II, Continental and Mesa.
Since 1990, America West, GPA and certain of its subsidiaries have engaged
in a variety of transactions in addition to its leasing of the Aircraft as
described herein. See "Certain Transactions".
INDUSTRY RELATED RISKS
COMPETITIVE INDUSTRY CONDITIONS
The airline industry is highly competitive and industry earnings are
volatile. From 1990 to 1992, the airline industry experienced unprecedented
losses due to high fuel costs, general economic conditions, intense price
competition and other factors. Airlines compete on the basis of pricing,
scheduling (frequency and flight times), on-time performance, frequent flyer
programs and other services. The airline industry is susceptible to price
discounting, which involves the offering of discount or promotional fares to
passengers. Any such fares offered by one airline are normally matched by
competing airlines, which may result in lower industry yields without a
corresponding increase in traffic levels.
Most of the Company's markets are highly competitive and are served by
larger carriers with substantially greater financial resources than the Company.
Also, in recent years several new carriers have entered the industry, typically
with low cost structures. In some cases, new entrants have initiated or
triggered further price discounting. The entry of additional new carriers on
many of the Company's routes, as well as increased competition from or the
introduction of new services by established carriers, could negatively impact
America West's results of operations.
In addition, the introduction of broadly available, deeply discounted fares
by a U.S. airline would result in lower yields for the entire industry and could
have a material adverse effect on America West's operating results.
AIRCRAFT FUEL
Fuel costs constituted approximately 13.2% of America West's total
operating expenses during the nine months ended September 30, 1996. A one cent
per gallon change in fuel price would affect the Company's
27
<PAGE> 28
annual operating results by approximately $3.4 million at consumption levels of
the first three quarters of 1996. Accordingly, either a substantial increase in
fuel prices or the lack of adequate fuel supplies in the future would be likely
to have a material adverse effect on the operating results of the Company. Fuel
price increases or supply shortages can occur at any time as a result of, among
other things, geopolitical developments. The Company purchases fuel on standard
trade terms under master agreements. The Company does not currently hedge its
fuel costs but the Company's board of directors has recently approved a fuel
hedging plan and the Company may elect to implement it in the future.
FAA FUNDING
The National Aviation Civilian Review Commission, with the assistance of
the Department of Transportation (the "DOT"), will conduct an independent study
of funding requirements for the Federal Aviation Administration (the "FAA") and
develop a cost allocation model for distribution of the cost of using the United
States aviation system to each segment of the system. The Review Commission will
also analyze funding alternatives to the existing federal air transportation
excise taxes (the 10% domestic ticket tax, the 6.25% air cargo tax and the $6.00
international departure tax) which currently fund the FAA and which are
scheduled to expire December 31, 1996. The Company cannot forecast the results
of the Review Commission's activities or what proposals the Review Commission
will make. Implementation of these proposals could significantly increase the
cost of airline operations and could have a material adverse effect on the
Company's operating results. See "Business -- Government Regulations -- FAA
Funding".
SECURITY AND SAFETY MEASURES
The President's Commission on Aviation Safety and Security recommended and
the U.S. Congress recently adopted increased safety and security measures
designed to increase airline passenger security and protect against terrorist
acts which have resulted in additional operating costs to the airline industry.
Future decisions which place increased security and safety requirements on the
airline industry could be significant. The Company cannot forecast what
additional security and safety requirements may be imposed in the future or the
costs or revenue impact that would be associated with complying with such
requirements. See "Business -- Government Regulations -- Security and Safety
Measures".
OTHER REGULATORY MATTERS
In the last several years, the FAA has issued a number of maintenance
directives and other regulations relating to, among other things, retirement of
older aircraft, collision avoidance systems, airborne windshear avoidance
systems, noise abatement and increased inspections and maintenance procedures to
be conducted on older aircraft. At September 30, 1996, the Company's fleet
consisted of 99 aircraft of which 21 aircraft meet the FAA's Stage II (but not
Stage III) noise reduction requirements and must be retired or significantly
modified prior to the year 2000. These modifications may require substantial
capital expenditures. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources".
Management is currently considering its options regarding such aircraft.
The FAA is currently revising procedures for airline surveillance of
outsourced maintenance and training. Additional laws and regulations have been
proposed from time to time that could significantly increase the cost of airline
operations by imposing additional requirements or restrictions on operations.
Laws and regulations have also been considered from time to time that would
prohibit, restrict or tax the ownership of airline routes or takeoff and landing
slots. Also, the award of international route authority to U.S. carriers (and
the retention of such authority) is regulated by the DOT and such authority may
be affected by treaties and related agreements between the United States and
foreign governments which are amended from time to time. America West cannot
predict what laws and regulations will be adopted or what changes to
international air transportation agreements will be effected, if any, or how
they will affect America West. See "Business -- Government Regulations."
28
<PAGE> 29
FACTORS RELATING TO THE CERTIFICATES AND THE OFFERING
APPRAISALS AND REALIZABLE VALUE OF THE EQUIPMENT
The appraised value of each Aircraft and Spare Engine is based upon the
lesser of the average and median value of such Aircraft or Spare Engine as
appraised by the Appraisers (the "Appraisals"). The Appraisals are based on
differing assumptions and methodologies, which vary among the Appraisers. For a
discussion of the assumptions and methodologies used in preparing each of the
Appraisals, reference is hereby made to the Appraiser's reports with respect to
the Appraisals, copies of which are annexed to this Prospectus as Appendix II.
Appraisals that are prepared based on different assumptions or methodologies may
result in valuations that are significantly different from those contained in
the Appraisals. The appraised value presented in this Prospectus for each of the
Spare Engines (which is based upon the lesser of the average and median
appraisal values provided by the Appraisers) indicates a value for each such
Spare Engine that is less than the aggregate principal amount of the Equipment
Notes to be issued (the "Notes Amount") in respect of such Spare Engine. Two of
the Appraisers appraised each of the Spare Engines at a value lower than the
corresponding Notes Amount, while one Appraiser appraised each of the Spare
Engines at a value greater than the corresponding Notes Amount.
An appraisal is only an estimate of value and should not be relied upon as
a measure of realizable value. The proceeds realized upon the sale of any
Equipment may be less than the appraised value thereof. In addition, the value
of the Equipment in the event of the exercise of remedies under the applicable
Indenture will depend on market and economic conditions at the time, the
availability of buyers, the condition of the Equipment, whether the Equipment is
sold separately or as a block and other factors. Accordingly, there can be no
assurance that the proceeds realized upon any such exercise with respect to the
Equipment Notes and the Equipment pursuant to the applicable Indenture would be
as appraised or sufficient to satisfy in full remaining payments due on the
Equipment Notes issued thereunder or the Certificates. See "Description of the
Equipment and the Appraisals -- Appraised Value".
The Equipment Notes are not cross-collateralized and, consequently,
liquidation proceeds from the sale of the Equipment in excess of the amounts due
on Equipment Notes related to such Equipment will not be available to cover
losses, if any, on any other Equipment Notes.
PRIORITY OF DISTRIBUTIONS; SUBORDINATION
Pursuant to the Intercreditor Agreement to which the Trusts, the
Subordination Agent and the Liquidity Provider will be parties, on each
Distribution Date, so long as no Triggering Event shall have occurred (whether
or not continuing), all payments received by the Subordination Agent will be
distributed in the following order: (a) payment of the Liquidity Obligations to
the Liquidity Provider and, if applicable, to replenish the Cash Collateral
Accounts up to their respective Required Amounts; (b) payment of Expected
Distributions to the holders of Class A Certificates; (c) payment of Expected
Distributions to the holders of Class B Certificates; (d) payment of Expected
Distributions to the holders of Class C Certificates; (e) payment of Expected
Distributions to the holders of Class D Certificates; (f) payment of Expected
Distributions to the holders of Class E Certificates; and (g) payment of certain
fees and expenses of the Subordination Agent and each Trustee.
In addition, upon the occurrence of a Triggering Event and at all times
thereafter, all payments received by the Subordination Agent in respect of the
Equipment Notes and certain other payments will be distributed under the
Intercreditor Agreement in the following order: (a) to reimburse the
Subordination Agent, each Trustee, the Liquidity Provider and any
Certificateholder, as the case may be, for the payment of Administration
Expenses; (b) to the Liquidity Provider in payment of Liquidity Obligations and,
so long as no Performing Note Deficiency Exists and no Liquidity Event of
Default has occurred and is continuing to replenish Cash Collateral Accounts up
to their respective Required Amounts; (c) to reimburse the Subordination Agent,
each Trustee and each Certificateholder, as the case may be, for payment of
Certain Taxes and Fees; (d) to pay Adjusted Expected Distributions to the
holders of Class A Certificates; (e) to pay Adjusted Expected Distributions to
the holders of Class B Certificates; (f) to pay Adjusted Expected
29
<PAGE> 30
Distributions to the holders of Class C Certificates; (g) to pay Adjusted
Expected Distributions to the holders of Class D Certificates; and (h) to pay
Adjusted Expected Distributions to the holders of Class E Certificates.
The priority of distributions after a Triggering Event will have the effect
in certain circumstances of distributing payments received in respect of one or
more junior series of Equipment Notes to more senior Classes of Certificates. If
this should occur, the interest accruing on the remaining Equipment Notes would
be less than the interest accruing on the remaining Certificates because the
Certificates would have a greater proportion of high interest rate junior
classes. As a result of this possible interest shortfall, the holders of one or
more junior Classes of Certificates may not receive the full amount due them
after a Triggering Event even if all the Equipment Notes are eventually paid in
full. See "Description of the Intercreditor Agreement".
CONTROL OVER COLLATERAL; SALE OF COLLATERAL
Pursuant to the Intercreditor Agreement, the Trustee and the Liquidity
Provider will agree that, with respect to any Indenture at any given time, the
Indenture Trustee will be directed (a) in taking, or refraining from taking, any
action with respect to such Indenture or the Equipment Notes issued thereunder,
so long as no Indenture Event of Default has occurred and is continuing
thereunder, by the holders of at least a majority of the outstanding principal
amount of the Equipment Notes issued thereunder (provided that, for so long as
the Subordination Agent is the registered holder of the Equipment Notes, the
Subordination Agent shall act with respect to this clause (a) in accordance with
the directions of the Trustees representing holders of Certificates representing
an undivided interest in such principal amount of Equipment Notes) and (b)
subject to certain conditions in exercising remedies thereunder (including
acceleration of such Equipment Notes or foreclosing the lien on the Equipment
securing such Equipment Notes) after the occurrence and during the continuance
of an Indenture Event of Default thereunder, by the Controlling Party. See
"Description of the Certificates -- Indenture Events of Default and Certain
Rights Upon an Indenture Event of Default" for a description of the rights of
the Certificateholders of each Trust to direct the respective Trustee.
Notwithstanding the foregoing, subject to certain limitations, the Liquidity
Provider shall have the right to elect to become the Controlling Party at any
time after 18 months from the acceleration of the Equipment Notes, if at the
time of such election the Liquidity Obligations have not been paid in full. For
purposes of giving effect to the foregoing, the Trustee (other than the
Controlling Party) shall irrevocably agree (and the Certificateholders (other
than the Certificateholders represented by the Controlling Party) shall be
deemed to agree by virtue of their purchase of Certificates) to exercise their
voting rights as directed by the Controlling Party.
Upon the occurrence and during the continuation of any Indenture Event of
Default under any Indenture, the Controlling Party may accelerate and, subject
to the provisions of the following paragraph, sell all (but not less than all)
of the Equipment Notes issued under such Indenture to any person. The market for
Equipment Notes at the time of the existence of any Indenture Event of Default
may be very limited, and there can be no assurance as to the price at which they
could be sold. If the Controlling Party sells any such Equipment Notes for less
than their outstanding principal amount, certain Certificateholders will receive
a smaller amount of principal distributions than anticipated and will not have
any claim for the shortfall against America West, any Owner Trustee, any Owner
Participant or any Trustee.
Subject to the right of the Owner Trustee or Owner Participant to purchase
the Equipment Notes as described under "Description of Equipment Notes --
Redemption", so long as any Certificates are outstanding, during nine months
after the earlier of (x) the acceleration of the Equipment Notes under any
Indenture or (y) the bankruptcy or insolvency of America West, without the
consent of each Trustee, (a) no Equipment subject to the lien of such Indenture
or such Equipment Notes may be sold, if the net proceeds from such sale would be
less than the Minimum Sale Price for such Equipment or such Equipment Notes, and
(b) the amount and payment dates of rentals payable by America West under the
Lease for such Equipment may not be adjusted, if, as a result of such
adjustment, the discounted present value of all such rentals would be less than
75% of the discounted present value of the rentals payable by America West under
such Lease before giving effect to such adjustment, in each case, using the
weighted average interest rate of the Equipment Notes outstanding under such
Indenture as the discount rate.
30
<PAGE> 31
RATINGS OF THE CERTIFICATES
It is a condition to the issuance of the Certificates that the Class A
Certificates be rated A2 by Moody's and AA- by Standard & Poor's, the Class B
Certificates be rated Baa2 by Moody's and A- by Standard & Poor's, the Class C
Certificates be rated Ba1 by Moody's and BBB- by Standard & Poor's, the Class D
Certificates be rated Ba3 by Moody's and BB by Standard & Poor's and the Class E
Certificates be rated B1 by Moody's and B+ by Standard & Poor's. A rating is not
a recommendation to purchase, hold or sell Certificates, inasmuch as such rating
does not address market price or suitability for a particular investor. There is
no assurance that a rating will remain for any given period of time or that a
rating will not be lowered or withdrawn entirely by a Rating Agency if, in its
judgment, circumstances in the future (including the downgrading of America West
or the Liquidity Provider) so warrant. The rating of the Certificates is based
primarily on the default risk of the Equipment Notes, the availability of the
Liquidity Facility for the holders of the Certificates (other than the Class D
and the Class E Certificates), the collateral value provided by the Equipment
and the subordination in right of payment under the Intercreditor Agreement of
the Class B Certificates to the Class A Certificates, of the Class C
Certificates to the Class B Certificates, of the Class D Certificates to the
Class C Certificates and of the Class E Certificates to the Class D
Certificates. The foregoing ratings address the likelihood of timely payment of
interest (at the non-default rate) when due on the Certificates and the ultimate
payment of principal of the Certificates by the Final Legal Distribution Date.
Such ratings do not address the possibility of a PTC Event of Default, an
Indenture Event of Default, including a Lease Event of Default, or other
circumstances (such as an Event of Loss (as defined herein)) which could result
in the payment of the outstanding principal amount of the Certificates prior to
the Final Expected Distribution Date.
The reduction, suspension or withdrawal of the ratings of the Certificates
will not, in and of itself, constitute a PTC Event of Default or an Indenture
Event of Default, including a Lease Event of Default.
REPOSSESSION
Except for the Aircraft subject to the Japanese Cross-Border Lease
financings, in which case America West may not permit such Aircraft to be used,
operated or maintained in the country in which foreign financing was obtained,
the Leases do not contain general geographic restrictions on America West's (or
any Permitted Sublessee's) ability to operate the Equipment. Although America
West has no current intention to do so, America West is permitted, upon
compliance with the Leases and the Refunding Agreements, to sublease the
Equipment and to register the Aircraft in foreign jurisdictions. While the
Indenture Trustee's rights and remedies in the event of a default under the
related Lease include the right to terminate such Lease (and any sublease) and
repossess the related Equipment, it may be difficult, expensive and
time-consuming to obtain possession of such Equipment, particularly when such
Equipment has been registered in a foreign jurisdiction or is located outside
the United States or is subleased to a foreign operator. Any such exercise of
the right to repossess Equipment will be subject to the limitations and
requirements of applicable law, including the need to obtain consents or
approvals for deregistration or re-export of the Aircraft, which may be subject
to delays and to political risk. When a defaulting Permitted Sublessee or other
permitted transferee is the subject of a bankruptcy, insolvency or similar
event, such as protective administration, additional limitations on the exercise
of remedies may apply. Furthermore, certain jurisdictions may accord higher
priority to certain other liens or other third-party rights over the Equipment
than the lien of the related Indenture. These factors could limit the benefits
of the security interest in the Equipment.
As permitted under the Leases, an Airframe subject to a Lease may be
equipped with Engines which are not subject to the same Lease, and Engines
subject to a Lease may not be on an Airframe subject to that or another Lease.
As a result, notwithstanding America West's agreement in the Leases to return
the related Engines owned by the applicable Owner Trustee on the return of the
related repossessed Airframe, at the time of obtaining repossession of an
Airframe it could be difficult, expensive and time-consuming to assemble an
Aircraft consisting of an Airframe and related Engines subject to such Lease.
31
<PAGE> 32
CROSS-BORDER LEASES
Two Aircraft securing the obligations under the two related Indentures are
subject to Japanese Cross-Border Lease financings with terms expiring in 1999.
The rights of the Cross-Border Lessee (as defined herein) under each of these
financings have been assigned to the relevant Owner Trustees.
Under the terms of each of the Cross-Border Lease financings, title to the
relevant Aircraft is held by a special purpose Japanese entity. In summary, the
Japanese lease financing documentation provides that, subject to various terms
and conditions, the relevant Cross-Border Lessee is entitled to acquire title to
the relevant Aircraft on termination thereof, upon not less than 90 days' notice
and upon payment of an agreed sum upon a voluntary termination, and otherwise
whether or not an agreed sum is paid. To the extent, if any, that passage of
title is conditioned upon payment of an agreed sum, the obligation to pay such
sum has been assumed (against receipt of cash) by a foreign financial
institution or, to the extent not so assumed, cash collateralized by or on
behalf of the relevant Cross-Border Lessee. In addition, each Cross-Border
Lessor (as defined herein) has expressly agreed that its interest in the
Aircraft is subject and subordinate to the security interest of the relevant
Indenture Trustee.
The ability of an Indenture Trustee to realize upon its security interest
in an Aircraft that is subject to a Cross-Border Lease financing could be
adversely affected if the relevant Cross-Border Lessor or any investor in such
lessor were to become a debtor in a bankruptcy or similar proceeding in its home
jurisdiction and a creditor, trustee in bankruptcy, liquidator, receiver or
similar official were to take the position that the related Aircraft should be
treated as part of the estate of such lessor or investor, as the case may be
(particularly, if at the same time the Indenture Trustee is seeking to exercise
remedies under the related Indenture). If such a position were to be taken in
such a proceeding, a delay in the transfer or re-acquisition of title to such
Aircraft to or by the relevant Owner Trustee following the occurrence and
continuance of a Lease Event of Default (as defined herein) under the related
Lease could occur. Such a delay might impede the ability of an Indenture Trustee
to realize upon the Aircraft collateral securing the related Equipment Notes.
Legal opinions from Japanese counsel (based on certain assumptions and
qualifications) will be given to the effect that the interests of the relevant
Cross-Border Lessor have been validly subordinated to the lien of the relevant
Indenture Trustee, and that any liquidator, receiver, trustee or any other
similar officer of the Cross-Border Lessor should not be entitled to deny or
contest such subordination in a bankruptcy or similar proceeding in Japan. There
can be no assurance, however, that the circumstances or the law upon which such
counsel based their opinions will not change, that a court of competent
jurisdiction in Japan would not find differently, that such opinions would prove
to be correct or that the law of another jurisdiction would not apply.
The information set forth above regarding Cross-Border Lease financings was
provided by GPA and America West takes no responsibility for the accuracy
thereof.
MAINTENANCE
America West is responsible for the maintenance, service, repair and
overhaul of the Equipment to the extent described in the Leases. The failure of
America West (or any Permitted Sublessee (as defined herein)) to maintain,
service, repair or overhaul adequately an Aircraft or a Spare Engine may
adversely affect the value of such Aircraft or Spare Engine and thus, upon a
liquidation of the Equipment, may affect the proceeds available to repay the
holders of the related Equipment Notes. Under the Leases, the applicable
maintenance standards may vary depending upon the jurisdiction in which an
Aircraft is registered and whether an Aircraft is subleased, but America West is
obligated to cause such Aircraft to be maintained in accordance with maintenance
standards required by, or substantially equivalent to those required by, the
central civil aviation authority of the country of registry and, to the extent
not inconsistent therewith, the FAA. Notwithstanding compliance by America West
(or any Permitted Sublessee) with its obligations under the Lease to maintain,
service, repair or overhaul adequately the Equipment, the value of the Equipment
may deteriorate. Such a deterioration in the value of the Equipment would not,
in and of itself, constitute a breach by America West of its obligations under
the Leases. See "Description of the Equipment Notes -- The Leases".
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<PAGE> 33
INSURANCE
America West is responsible for the maintenance of public liability,
property damage and all-risk aircraft hull insurance on the Equipment to the
extent described in the Leases. The failure of America West to adequately insure
the Equipment will affect the proceeds which could be obtained upon an Event of
Loss and, thus, may affect the proceeds available to repay the holders of the
related Equipment Notes.
With respect to any hull insurance required, America West may maintain
deductibles of up to $1.0 million per Aircraft. See "Description of the
Equipment Notes -- The Leases -- Insurance".
ABSENCE OF A PUBLIC MARKET FOR THE CERTIFICATES
There has been no market for the Certificates prior to the sale of the
Certificates. The Underwriters have advised the Company that they currently
intend to make a market in the Certificates as permitted by applicable law. No
Underwriter, however, is obligated to make a market in the Certificates and any
such market-making may be discontinued at any time at the sole discretion of
such Underwriter. Accordingly, no assurance can be given as to the development
or liquidity of any market for the Certificates.
33
<PAGE> 34
USE OF PROCEEDS
The Certificates are being issued in connection with 11 separate leveraged
lease transactions with respect to the refinancing of the current indebtedness
of the Owner Trustees previously incurred to finance the purchase of the
Aircraft and the Spare Engines. Such indebtedness bore interest at a weighted
average rate per annum of approximately 7.97% as of November 7, 1996 and matures
at various dates between 1996 and 2009. America West will not receive any of the
proceeds from the sale of the Certificates.
The proceeds from the sale of the Certificates are to be used by the
Trustee on behalf of the Trusts to purchase $218,560,054 aggregate principal
amount of Equipment Notes to be issued by the related Owner Trustees. Such
Equipment Notes will be issued under the Indentures on a non-recourse basis by
the Owner Trustees and will represent in the aggregate the entire debt portion
of the leveraged lease transactions relating to all of the Equipment. The
proceeds from the sale of the Equipment Notes will be used to repay all of the
current indebtedness of the Owner Trustees with respect to the Aircraft and the
Spare Engines, including the Equipment Trust Certificate (as defined below), and
any proceeds remaining after such repayment may be used to pay certain costs and
expenses of the Original Lessees, such as break-funding costs and redemption
premiums, incurred in the refinancing and which would otherwise be borne
directly by the Original Lessees (as defined below). Morgan Stanley & Co.
Incorporated purchased on September 3, 1996 a $23,178,000 9.125% equipment trust
certificate (the "Equipment Trust Certificate") evidencing indebtedness of an
Owner Trustee with respect to an Aircraft, which proceeds were used by the Owner
Trustee to repay an equipment trust certificate maturing in September 1996
issued by such Owner Trustee under an indenture related to such Aircraft.
When originally acquired, the Aircraft and the Spare Engines were delivered
to an operator-sublessee other than America West, from which they were, shortly
after delivery, returned to, or were originally delivered directly to, certain
U.S.-domiciled subsidiaries of GPA. The Aircraft were leased from the Owner
Trustees to such subsidiaries, as original lessees (each, an "Original Lessee")
and sublessors. After a period of storage the Aircraft and the Spare Engines
were, in September 1990, subleased by the Original Lessees to America West. See
"Certain Transactions". In addition, certain of these Aircraft at the time of
lease to the Original Lessees were, and continue to be, subject to certain
cross-border transactions with foreign lessors. See "Description of the
Equipment Notes -- Cross-Border Leases". In connection with the refinancing of
the Aircraft and the Spare Engines, each Original Lessee's interests under
leases between the Owner Trustees and such Original Lessee, as lessee, are being
assigned to America West and the leases will be amended and restated as leases
between the Owner Trustees and America West, with each Original Lessee being
released from future obligations thereunder.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
America West for the periods indicated. The ratio of earnings to fixed charges
represents the number of times that fixed charges were covered by earnings. In
computing the ratio, earnings consist of income (loss) before income taxes and
extraordinary items plus fixed charges, less capitalized interest. Fixed charges
consist of interest expense including amortization of debt expense, one-third of
rental expense, which is considered representative of an interest factor, and
capitalized interest.
<TABLE>
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY
- ----------------------------------------------------------- --------------------------------
NINE MONTHS NINE MONTHS PERIOD FROM PERIOD FROM YEAR ENDED
ENDED ENDED YEAR ENDED AUGUST 26 TO JANUARY 1 TO DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, AUGUST 25, ------------------
1996 1995 1995 1994 1994 1993 1992 1991
- ------------- ------------- ------------ ------------ ----------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1.14 1.84 1.73 1.38 * 1.28 * *
</TABLE>
- ---------------
* For the period ended August 25, 1994, earnings were insufficient to cover
fixed charges by $201.2 million. For the years ended December 31, 1992 and 1991,
earnings were insufficient to cover fixed charges by $131.8 million and $228.7
million, respectively.
34
<PAGE> 35
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1996. The table should be read in conjunction with the Company's
financial statements and the related notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
--------------
(IN THOUSANDS)
<S> <C>
Long-term debt, including current maturities................................. $382,477
Stockholders' equity:
Preferred Stock (48,800,000 shares authorized and no shares issued and
outstanding)............................................................ --
Class A Common Stock (1,200,000 shares authorized and 1,200,000 shares
issued and outstanding)................................................. 12
Class B Common Stock (100,000,000 shares authorized and 44,613,981 shares
issued and outstanding)................................................. 446
Additional paid-in capital................................................... 576,471
Retained earnings............................................................ 58,070
-----------
634,999
Less Treasury Stock (1,382,000 shares of Class B Common Stock at cost)....... (25,504)
Total stockholders' equity................................................. 609,495
-----------
Total capitalization......................................................... $991,972
===========
</TABLE>
35
<PAGE> 36
SELECTED FINANCIAL AND OPERATING DATA
The selected data presented below under the captions "Statements of
Operations Data" and "Balance Sheet Data" for, and as of, (i) the year ended
December 31, 1995, the period August 26, 1994 to December 31, 1994, the period
January 1, 1994 to August 25, 1994, and each of the years in the three-year
period ended December 31, 1993, are derived from the financial statements of the
Company, which financial statements have been audited by KPMG Peat Marwick LLP,
independent certified public accountants and (ii) the periods ended September
30, 1996 and 1995 are derived from the unaudited condensed financial statements
of the Company. In the opinion of management, the unaudited condensed financial
statements reflect all adjustments, which are of a normal recurring nature,
necessary for a fair presentation. The selected data should be read in
conjunction with the financial statements, the related notes and the independent
auditors' report included elsewhere herein. The independent auditors' report for
the period August 26, 1994 to December 31, 1994, the period January 1, 1994 to
August 25, 1994, and for the year ended December 31, 1995 contains an
explanatory paragraph that states the financial statements of the Reorganized
Company reflect the impact of adjustments to reflect the fair value of assets
and liabilities under fresh start reporting. As a result, the financial
statements of the Reorganized Company are presented on a different basis than
those of the Predecessor Company and, therefore, are not comparable in all
respects.
As a result of the filing by the Company of a voluntary petition to
reorganize under Chapter 11 of the Bankruptcy Code on June 27, 1991 and
operating as a debtor-in-possession until August 25, 1994, the selected
financial data for periods prior to June 27, 1991 are not comparable to periods
subsequent to periods subsequent to such date.
<TABLE>
<CAPTION>
PREDECESSOR
REORGANIZED COMPANY COMPANY(1)
--------------------------------------------------------- ------------
NINE MONTHS NINE MONTHS PERIOD FROM PERIOD FROM
ENDED ENDED YEAR ENDED AUGUST 26 TO JANUARY 1 TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, AUGUST 25,
1996 1995 1995(2) 1994 1994
------------- ------------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Operating Revenues........................ $ 1,299,617 $ 1,154,333 $1,550,642 $ 469,766 $ 939,028
Operating income (loss)................... 43,258(3) 132,012 154,732 38,871 107,506
Income (loss) before income taxes and
extraordinary items...................... 17,690 95,278 108,378 19,736 (201,209)
Income (loss) before extraordinary
items.................................... (2,458) 48,782 54,770 7,846 (203,268)
Extraordinary items(4).................... (1,105) (984) (984) -- 257,660
Net income (loss)......................... (3,563) 47,798 53,786 7,846 54,392
Earnings (loss) per share(5):
Primary.................................. (0.08) 1.04 1.16 .17 1.99
Fully diluted............................ (0.08) 1.03 1.15 .17 1.41
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital deficiency................ $ (136,467) $ (77,306) $ (70,416) $ (47,927) $ (163,572)
Total assets.............................. 1,539,389 1,642,831 1,588,709 1,545,092 1,053,780
Long-term debt, less current
maturities(6)............................ 336,235 376,655 373,964 465,598 597,839
Total stockholders' equity (deficiency)... 609,495 643,488 649,472 595,446 (286,395)
OPERATING DATA:
Available seat miles (in millions)........ 15,863 14,503 19,421 6,424 11,636
Revenue passenger miles (in millions)..... 11,341 10,035 13,313 3,972 8,261
Passenger load factor (%)................. 71.5 69.2 68.5 61.8 71.0
Yield per revenue passenger mile
(cents).................................. 10.81 10.79 10.91 11.02 10.68
Passenger revenue per available seat mile
(cents).................................. 7.73 7.47 7.48 6.81 7.58
Operating cost per available seat mile
(cents).................................. 7.92(3) 7.05 7.19(7) 6.71 7.15
Full time equivalent employees (at end of
period).................................. 9,208 9,786 8,712 10,715 10,849
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Operating Revenues........................ $ 1,325,364 $ 1,294,140 $ 1,413,925
Operating income (loss)................... 121,054 (74,812) (104,657)
Income (loss) before income taxes and
extraordinary items...................... 37,924 (131,761) (222,016)
Income (loss) before extraordinary
items.................................... 37,165 (131,761) (222,016)
Extraordinary items(4).................... -- -- --
Net income (loss)......................... 37,165 (131,761) (222,016)
Earnings (loss) per share(5):
Primary.................................. 1.50 (5.58) (10.39)
Fully diluted............................ 1.04 (5.58) (10.39)
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital deficiency................ $ (124,375) $ (201,567) $ (51,158)
Total assets.............................. 1,016,743 1,036,441 1,111,144
Long-term debt, less current
maturities(6)............................ 620,992 647,015 726,514
Total stockholders' equity (deficiency)... (254,262) (294,613) (166,510)
OPERATING DATA:
Available seat miles (in millions)........ 17,190 19,271 20,627
Revenue passenger miles (in millions)..... 11,221 11,781 13,030
Passenger load factor (%)................. 65.3 61.1 63.2
Yield per revenue passenger mile
(cents).................................. 11.11 10.31 10.22
Passenger revenue per available seat mile
(cents).................................. 7.25 6.30 6.46
Operating cost per available seat mile
(cents).................................. 7.01 7.10 7.36
Full time equivalent employees (at end of
period).................................. 10,544 10,233 11,561
</TABLE>
- ---------------
(1) Includes net expenses incurred by the Predecessor Company in connection with
its reorganization of $273.7 million for the period January 1 to August 25,
1994 and $25.0 million, $16.2 million and $58.4 million for the years ended
December 31, 1993, 1992 and 1991, respectively.
(footnotes continue on following page)
36
<PAGE> 37
(2) Costs associated with the Company's outsourcing of its heavy aircraft
maintenance resulted in a pretax restructuring charge of approximately $10.5
million.
(3) Reflects a $65.1 million nonrecurring special charge related to the
Company's renegotiation of its AVSA aircraft purchase agreement and
writedown of certain aircraft related inventory and equipment and
underutilized facilities as well as certain other adjustments.
(4) Includes (i) an extraordinary loss of $1.1 million in the nine months ended
September 30, 1996 relating to prepayment of indebtedness, (ii) an
extraordinary loss of $984,000 in the nine months ended September 30, 1995
and the year ended December 31, 1995 resulting from the exchange of debt by
the Company and (iii) an extraordinary gain of $257.7 million in the period
from January 1 to August 25, 1994 resulting from the discharge of
indebtedness pursuant to the consummation of the plan of reorganization.
(5) Historical per share data for the Predecessor Company are not meaningful
since the Company has been recapitalized and has adopted fresh start
reporting as of August 25, 1994.
(6) Includes certain balances reported as "Estimated Liabilities Subject to
Chapter 11 Proceedings" for the Predecessor Company.
(7) Restructuring costs associated with the Company's outsourcing of its heavy
aircraft maintenance resulted in an increase in cost per available seat mile
of .05 cents for the year ended December 31, 1995.
37
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL FACTORS AFFECTING COMPANY RESULTS
The Company's operating results are significantly affected by general
economic conditions as well as competitive factors, jet fuel price levels,
government regulations, taxes on jet fuel and taxes specific to the air
transport industry and other conditions affecting the airline industry. From
1990 to 1992, the airline industry experienced significant operating losses.
These losses were attributable in large part to high fuel prices, depressed
traffic levels and intense fare competition among airlines brought about by the
Persian Gulf conflict, a fear of terrorism in the United States and the
deepening national recession. America West was acutely affected by these
conditions, as it had incurred high levels of indebtedness to finance fleet
expansions beyond its core base of operations. As a result of the effects of
these conditions, the Company filed for bankruptcy protection in 1991. The
Company completed its reorganization under Chapter 11 of the Bankruptcy Code in
August 1994. In recent periods, airlines have achieved generally improved
operating results as a result of more favorable economic conditions and as
carriers have focused on their areas of relative strength, eliminating service
to under-performing markets and rationalizing operations, route systems and
pricing strategies.
In addition, the Company, under new leadership that has been in place since
the Reorganization, developed and implemented a restructuring plan focusing on
the Company's competitive strengths, which included its hub positions in Phoenix
and Las Vegas and its low cost structure. The Company reduced its fleet from
five aircraft types to three, eliminated routes that did not adequately support
strategic objectives and implemented cost reduction programs.
America West began to achieve positive results beginning in 1993 due to an
operational restructuring, combined with a gradually improving economic climate
and a more rational pricing environment. As a result, the Company achieved 14
consecutive quarters of profitability beginning with the first quarter of 1993
through June 1996.
The Company operates with one of the lowest cost structures among the major
U.S. airlines. To the extent that other carriers are successful in reducing
their operating costs, the advantage which the Company enjoys as a result of its
low cost structure would be reduced. For this reason, maintaining a low cost
structure is one of the Company's strategic imperatives. In May 1995, a
five-year collective bargaining agreement with the Company's pilots became
effective. The terms of this contract are consistent with the Company's goal of
maintaining its low unit cost structure. Specifically, the agreement provides
for a salary level increase at a compound annual rate of approximately 5.7
percent and includes provisions relating to pilot productivity which management
estimates will result in productivity increases of approximately 2 percent per
year. A significant portion of such salary level increase was effected in May
1995 in order to provide the pilots with a pay and benefits package competitive
with other low cost carriers. Salary level increases after the May 1995 increase
will occur through April 2000 at a compound annual rate of approximately 2.5
percent.
Also consistent with its goal of maintaining a low cost structure, in
December 1995, the Company outsourced its heavy aircraft maintenance, which
reduced the Company's workforce by approximately 500. Costs associated with the
outsourcing resulted in a restructuring charge against fourth quarter 1995
operating income of approximately $10.5 million.
Commencing October 1, 1995, operating costs of the Company were affected by
the expiration of a 4.3 cents per gallon federal tax exemption for commercial
aviation fuel. The expiration of such exemption increased the Company's annual
operating expenses, which increase is expected to be approximately $14.6 million
for 1996 based upon the Company's expected 1996 fuel consumption levels. Debate
continues in the Congress as to whether the exemption from the federal fuel tax
previously granted to the commercial airlines should be reinstated, but there
can be no assurance that the jet fuel tax will be repealed, either temporarily
or permanently. See "Risk Factors -- Industry Related Risks -- Aircraft Fuel".
On August 20, 1996, the Small Business Job Protection Act of 1996
reinstated the federal air transportation excise taxes (the 10 percent domestic
ticket tax, the 6.25 percent air cargo tax and the $6.00 international departure
tax) effective August 27, 1996. Management believes that the Company benefitted
from the expiration of the federal aviation excise tax on December 31, 1995 and
that the reimposition of such excise tax on August 27, 1996 has a negative
impact on the Company, although the amount of such benefit or
38
<PAGE> 39
negative impact directly resulting from the excise tax cannot be precisely
determined. The reinstated federal air transportation excise taxes expire on
December 31, 1996 and it is unclear at this time whether the taxes will be
extended beyond the expiration date.
The Company's operating costs have been and will continue to be affected by
various safety, security and other regulations and requirements applicable to
its operations. See "Risk Factors -- Industry Related Risks -- FAA Funding",
"-- Security and Safety Measures" and "-- Other Regulatory Matters".
The Company's actual income tax liability (i.e., income taxes payable) is
considerably lower than income tax expense for financial reporting purposes due
principally to the utilization of net operating loss and certain tax credit
carryforwards and the effects of fresh start reporting. The amortization of the
excess reorganization value is not deductible for income tax purposes, giving
rise to an effective tax rate for financial reporting purposes that is
significantly greater than the current U.S. corporate statutory rate of 35%. See
"-- Liquidity and Capital Resources".
IMPACT OF FRESH START REPORTING
In connection with its emergence from bankruptcy in August 1994, the
Company adopted fresh start reporting in accordance with Statement of Position
90-7 "Financial Reporting by Entities in Reorganization under the Bankruptcy
Code" ("SOP 90-7") of the American Institute of Certified Public Accountants.
Fresh start reporting significantly affects the Company's statements of
operations including the financial statement accounting for income taxes.
However, actual cash flows, including cash taxes payable, do not materially
change as a result of fresh start reporting.
Under fresh start reporting, the reorganization value of the Company has
been allocated to its assets and liabilities on a basis substantially consistent
with purchase accounting. The portion of reorganization value not attributable
to specific tangible assets has been recorded as "Reorganization Value in Excess
of Amounts Allocable to Identifiable Assets". Certain fresh start reporting
adjustments, primarily related to the adjustment of the Company's assets and
liabilities to fair market values, have had and will have a significant effect
on the Company's statements of operations. The more significant adjustments
relate to (i) reduced rent expense due to the re-valuation of aircraft leases to
market rates, (ii) reduced maintenance expense due to the write off of
previously capitalized overhauls, (iii) reduced depreciation expense on property
and equipment due to the re-valuation of such assets to fair value, (iv) the
addition of amortization expense relating to reorganization value in excess of
amounts allocable to identifiable assets, (v) increased interest expense due to
the re-valuation of aircraft leases to market rates, and (vi) increased income
tax expense principally because the amortization of excess reorganization value
is not deductible for income tax purposes, giving rise to an effective tax rate
for financial reporting purposes that is significantly greater than the current
U.S. corporate statutory rate of 35 percent.
The Company's actual income tax liability (i.e., income taxes payable) is
considerably lower than income tax expense for financial reporting purposes due
in part to the utilization of net operating loss and certain tax credit
carryforwards.
SEASONALITY
Due to the greater demand for air 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. Other
factors that are not necessarily seasonal also significantly affect results,
including the extent and nature of price and other competition from other
airlines, changing levels of operations, domestic and international events, fuel
prices and general economic conditions.
39
<PAGE> 40
SELECTED OPERATING DATA
The table below sets forth selected operating data for America West. The
data for the year ended December 31, 1994 is on a combined basis for the
Reorganized and Predecessor Company.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------------- ------------------------------------------------------
PERCENT COMBINED PERCENT PERCENT
CHANGE BASIS CHANGE CHANGE
1996 1995 1996-1995 1995 1994 1993 1995-1994 1994-1993
------ ------ --------- ------ -------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available seat miles (in
millions).................. 15,863 14,503 9.4 19,421 18,060 17,190 7.5 5.1
Revenue passenger miles (in
millions).................. 11,341 10,035 13.0 13,313 12,233 11,221 8.8 9.0
Load factor (percent)........ 71.5 69.2 3.3 68.5 67.7 65.3 1.2 3.7
Yield per revenue passenger
mile (cents)............... 10.81 10.79 0.2 10.91 10.79 11.11 1.1 (2.9)
Revenue per available seat
mile
Passenger (cents).......... 7.73 7.47 3.5 7.48 7.31 7.25 2.3 0.8
Total (cents).............. 8.19 7.96 2.9 7.98 7.80 7.71 2.3 1.2
Passenger enplanements (in
thousands)................. 13,558 12,653 7.2 16,848 15,669 14,740 7.5 6.3
Average stage length
(miles).................... 723 687 5.2 686 676 645 1.5 4.8
Average passenger journey
(miles).................... 1,028 996 3.2 986 979 970 0.7 0.9
Average daily aircraft
utilization (hours)........ 11.7 11.4 2.6 11.4 11.2 10.7 1.8 4.7
Aircraft (end of period)..... 99 91 8.8 93 87 85 6.9 2.4
Full time equivalent
employees (end of
period).................... 9,208 9,786 (5.9) 8,712 10,715 10,544 (18.7) 0.2
</TABLE>
The table below sets forth the major components of operating expense per
ASM for America West for the applicable periods. The data for the year ended
December 31, 1994 is shown on a combined basis for the Reorganized and
Predecessor Company.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- --------------------------------------------------
PERCENT COMBINED PERCENT PERCENT
CHANGE BASIS CHANGE CHANGE
1996 1995 1996-1995 1995 1994 1993 1995-1994 1994-1993
---- ---- --------- ---- -------- ---- --------- ---------
(IN CENTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and related costs............. 1.83 1.96 (6.6) 1.97 1.83 1.78 7.7 2.8
Aircraft rents......................... .94 .89 5.6 .89 .89 .96 -- (7.3)
Other rents and landing fees........... .52 .56 (7.1) .56 .58 .64 (3.4) (9.4)
Aircraft fuel.......................... 1.05 .87 20.7 .90 .88 .97 2.3 (9.3)
Agency commissions..................... .63 .64 (1.6) .64 .64 .62 -- 3.2
Aircraft maintenance materials and
repairs.............................. .57 .31 83.9 .34 .25 .18 36.0 38.9
Depreciation and amortization.......... .25 .25 -- .25 .40 .48 (37.5) (16.7)
Amortization of reorganization value in
excess of amounts allocable to
identifiable assets.................. .12 .17 (29.4) .17 .07 -- 142.9 --
Restructuring charges.................. -- -- -- .05 -- -- -- --
Nonrecurring special charge............ .41 -- -- -- -- -- -- --
Other.................................. 1.60 1.40 14.3 1.42 1.45 1.38 (2.1) 5.1
---- ---- ------- ---- --- ---- ------- -------
7.92 7.05 12.3 7.19 6.99 7.01 2.9 (.3)
==== ==== ======= ==== ====== ==== ======= =======
</TABLE>
40
<PAGE> 41
RESULTS OF OPERATIONS
The following discussion provides an analysis of the Company's results of
operations and reasons for material changes therein for the (i) three month
periods ended September 30, 1996 and 1995, (ii) nine-month periods ended
September 30, 1996 and 1995 and (iii) year ended December 31, 1995 and the
combined period from August 26 to December 31, 1994 and January 1 to August 25,
1994 and the year ended December 31, 1993. The Company's results of operations
for the periods subsequent to August 25, 1994 have not been prepared on a basis
of accounting consistent with its results of operations for periods prior to
August 26, 1994 due to the implementation of fresh start reporting upon the
Company's emergence from bankruptcy.
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
For the three months ended September 30, 1996, the Company realized a net
loss of $45.7 million. That net loss included a pretax, nonrecurring special
charge of $65.1 million and a tax benefit for financial reporting purposes of
$15.8 million. Approximately $49.7 million of the nonrecurring special charge
was associated with the Company's restructuring of its aircraft purchase
agreement with AVSA S.A.R.L., an affiliate of Airbus Industrie ("AVSA"), the
reevaluation of the Company's facilities, and the completion of its plan for the
disposition of certain aircraft related inventories and equipment. The charge
includes $18.8 million for cancellation penalty payments; write-off of
capitalized interest on advance payments; a provision for maintenance costs on
certain leased aircraft currently scheduled to be returned due to accelerated
deliveries under the new agreement; $7.5 million to reduce the carrying value to
estimated fair value of certain under-utilized facilities and $23.4 million to
write-down certain aircraft related inventories and equipment to estimated fair
value. The remaining $15.4 million of the charge represents loss contingencies
based on estimated settlements of pending and threatened litigation. Excluding
the nonrecurring special charge, the Company recorded pretax earnings of $3.6
million. Comparative figures for the third quarter of 1995 were net income of
$21.7 million, pretax income of $43.1 million and income tax expense for
financial reporting purposes of $20.4 million before extraordinary item.
The decline in pretax income (excluding the nonrecurring special charge and
before the extraordinary item) for the 1996 period resulted from lower yields
caused by untimely revenue decisions made in June and July of 1996, high jet
fuel prices and operating dependability difficulties encountered during the
summer of 1996. Industry capacity increases and aggressive fare sale activity
also impacted the 1996 third quarter. Revenue per available seat mile ("RASM")
decreased by 6.6 percent in the 1996 period from the 1995 period, revenue per
passenger mile (yield) decreased 7.2 percent, and the average price of jet fuel
increased 22.5 percent.
Total operating revenues were $422.5 million for the three months ended
September 30, 1996 compared to $408.6 million in the 1995 period. Passenger
revenues were $397.9 million, an increase of 3.5 percent over the prior period.
Cargo and other revenues increased 1.7 percent to $24.6 million for the third
quarter of 1996. Other revenues consist primarily of alcoholic beverage sales,
contract service sales and service charges.
Capacity, as measured by ASMs, increased 10.9 percent for the three months
ended September 30, 1996 compared to the 1995 period, primarily due to an
increase in the fleet size to 99 aircraft from 91 aircraft. Revenue passenger
miles increased 11.5 percent for the three months ended September 30, 1996
compared with the 1995 period. Load factor for the 1996 period remained
constant, on 10.9 percent higher available capacity.
Operating expense per ASM increased to 7.39 cents (excluding the 1.17 cent
cost attributable to the nonrecurring special charge) for the three months ended
September 30, 1996 from 7.08 cents for the 1995 period. The changes in the
components of operating expense per ASM are explained as follows:
- Salaries and related costs per ASM decreased 9.6 percent for the three
month period ended September 30, 1996 primarily due to a 10.9 percent
increase in ASMs. Pilot salaries increased $3.8 million due in part to
the effects of the pilot pay contract implemented in May 1995. In
addition,
41
<PAGE> 42
salaries decreased $2.9 million due to the Company's outsourcing of its
heavy aircraft maintenance in December 1995.
- Aircraft rents per ASM increased 5.7 percent for the three months ended
September 30, 1996 due principally to the addition of eight leased
aircraft to the fleet since September 30, 1995.
- Other rents and landing fees per ASM decreased primarily due to the 10.9
percent increase in ASMs for the three months ended September 30, 1996.
- As noted above, the average price per gallon of aircraft fuel increased
22.5 percent to 66.97 cents for the 1996 quarter from 54.67 cents for
the 1995 quarter. This increase in fuel price increased operating
expenses by approximately $11 million in the 1996 third quarter.
- Aircraft maintenance materials and repairs expense per ASM increased
69.4 percent or $16.3 million due primarily to an increase in
capitalized maintenance which increased capitalized maintenance
amortization expense for the 1996 period by $7.0 million compared with
the third quarter of 1995. The unamortized balance of capitalized
maintenance grew from $60 million at September 30, 1995 to $116.1
million at September 30, 1996. In addition, maintenance expense per ASM
increased further in the 1996 period due to the classification for
accounting purposes of costs associated with the outsourcing of the
Company's heavy aircraft maintenance work. This increase in maintenance
expense was substantially offset by a reduction in maintenance payroll
expense as discussed above.
- Amortization of reorganization value in excess of amounts allocable to
identifiable assets per ASM decreased due to a reduction in the
unamortized balance of excess reorganization value due to (i)
utilization of tax attributes of the pre-reorganization Company,
including net operating loss carryforwards, such reduction amounting to
$50 million in 1995 and (ii) recognition of a deferred income tax asset
of $74.7 million in 1995.
- Other operating costs per ASM increased 14 percent to 1.55 cents for the
1996 quarter from 1.36 cents for the 1995 quarter. This was due to a 4.3
cents per gallon federal fuel tax for which the Company became liable
commencing October 1, 1995, an increase in passenger traffic-related
cost such as Computer Reservation System ("CRS") fees, catering costs,
credit card discount fees, and advertising expense and an increase in
interrupted trip expense due to the operating dependability difficulties
discussed above.
- The first class installation program completed in December 1995 reduced
ASMs by 2.6 percent which had the effect of increasing operating cost
per ASM for the 1996 third quarter.
Net nonoperating expenses decreased $2.7 million to $8.4 million for the
three months ended September 30, 1996 due principally to a net decrease in
interest expense resulting from reduced levels of debt and lower interest rates.
Income tax benefit for financial reporting purposes for the three month
period ended September 30, 1996 amounted to $15.8 million compared to the $20.4
million income tax expense for the 1995 period.
In the third quarter of 1995, the Company incurred an extraordinary charge
of $984,000 net of income tax benefit of $984,000 for the prepayment of $48
million in principal of its 10 3/4% Notes.
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
For the nine months ended September 30, 1996, the Company realized a net
loss before extraordinary item of $2.5 million including the $65.1 million
nonrecurring special charge described above. This compares to net income before
extraordinary item of $48.8 million in the 1995 nine month period. Excluding the
nonrecurring special charge, the Company had pretax earnings before
extraordinary item of $82.8 million. Pre-tax income before extraordinary item
for the similar period in 1995 was $95.3 million. The Company reported record
operating, pretax and net income for the first six months of 1996, but the third
quarter of 1996 was adversely affected by the factors described above (see
"-- Three Months Ended September 30, 1996 and
42
<PAGE> 43
1995"). Income taxes for the nine month periods in 1996 and 1995 were $20.1
million and $46.5 million, respectively.
Total operating revenue was $1.3 billion for the nine months ended
September 30, 1996, up 12.6 percent from the comparable period in 1995.
Passenger revenues were $1.2 billion, an increase of 13.2 percent over the prior
period. Cargo and other revenues increased 3.7 percent to $74.1 million. Other
revenues consisted primarily of alcoholic beverage sales, contract service sales
and service charges.
Capacity, as measured by ASMs, increased 9.4 percent for the nine months
ended September 30, 1996 compared with the 1995 period primarily due to the
addition of eight aircraft to the fleet since September 30, 1995 and increased
utilization of the fleet. Revenue passenger miles increased 13.0 percent for the
nine months ended September 30, 1996 compared with the 1995 period. Load factor
for the nine month period increased 3.3 percent on 9.4 percent higher capacity
while yield remained flat when compared with the same period in 1995.
Operating expense per ASM increased to 7.51 cents (excluding the .41 cents
attributable to the nonrecurring special charge) for the nine months ended
September 30, 1996 from 7.05 cents for the same period in 1995. The changes in
components of operating expense per ASM are explained as follows:
- Salaries and related costs per ASM decreased 6.6 percent for the nine
months ended September 30, 1996 compared to 1995 primarily due to the
9.4 percent increase in ASMs. Salaries and related costs increased $7.0
million due in part to the $15.0 million increase in pilot salaries
which was partially offset by a $10.7 million reduction in salaries
related to the Company's outsourcing of its heavy aircraft maintenance
in December 1995.
- Aircraft rent per ASM increased 5.6 percent for the nine months ended
September 30, 1996 as compared to 1995, principally due to the addition
of eight aircraft to the fleet since September 30, 1995.
- Other rents and landing fees per ASM decreased 7.1 percent primarily due
to the 9.4 percent increase in ASMs for the nine months ended September
30, 1996 compared with 1995.
- The average price per gallon of aircraft fuel increased 17.4 percent to
64.12 cents for the nine months ended September 30, 1996 compared with
1995. This increase in fuel price increased operating expenses for the
nine months ended September 30, 1996 by approximately $25 million.
- Aircraft maintenance materials and repairs expense per ASM increased
83.9 percent or $45.6 million due primarily to an increase in
capitalized maintenance expense which has increased capitalized
maintenance amortization expense by $19.4 million for the nine months
ended September 30, 1996 compared with 1995. In addition, maintenance
expense per ASM increased further in the 1996 period with the
outsourcing of the Company's heavy aircraft maintenance work. That
increase was essentially a reclassification of expense and was
substantially offset by a reduction in maintenance salary expense as
discussed above.
- Amortization of reorganization in excess of amounts allocable to
identifiable assets per ASM decreased 29.4 percent due to a reduction in
the unamortized balance of excess reorganization value due to, (i)
utilization of tax attributes of the pre-reorganization Company,
including net operating loss carryforwards, such reduction amounting to
$50 million in 1995 and (ii) recognition of a deferred income tax asset
of $74.7 million in 1995.
- Other operating cost per ASM increased 14.3 percent to 1.60 cents for
the nine months ended September 30, 1996 compared with 1995. The
increase in cost for the 1996 period is primarily attributed to a 4.3
cents per gallon federal fuel tax for which the Company became liable
commencing October 1, 1995, an increase in passenger traffic-related
costs such as CRS fees, catering costs, credit card discount fees and
advertising expense and an increase in interrupted trip expense
resulting from the 1996 third quarter operating dependability
difficulties.
- The first class installation program completed in December 1995 reduced
ASMs by 2.6 percent which had the effect of increasing operating cost
per ASM for the nine month period.
43
<PAGE> 44
Net nonoperating expenses decreased $11.2 million to $25.6 million for the
nine month period ended September 30, 1996 compared with 1995. The 30.4 percent
decrease in cost resulted primarily from a net decrease in interest expense of
$10.6 million due to reduced levels of debt and lower interest rates for the
nine months ended September 30, 1996 as compared with 1995.
Income tax expense for financial reporting purposes for the nine months
ended September 30, 1996 and 1995 decreased to $20.1 million from $46.5 million
primarily due to lower pretax income.
For the nine months ended September 30, 1996 and 1995, the Company incurred
extraordinary charges of $1.1 million and $984,000, respectively, for the
partial prepayment of its 10 3/4% Senior Unsecured Notes. These amounts were net
of income tax benefit of $918,000 and $984,000, respectively.
YEAR ENDED DECEMBER 31, 1995 AND THE COMBINED PERIOD FROM AUGUST 26 TO
DECEMBER 31, 1994, AND JANUARY 1 TO AUGUST 25, 1994
For the periods ended December 31, 1995 and 1994, the Company realized net
income of $53.8 million and a combined $62.2 million, respectively. Net income
for 1995 included income tax expense for financial reporting purposes of $53.6
million compared to a combined $13.9 million in 1994. The increase in income tax
expense for financial reporting purposes resulted principally from the adoption
of fresh start reporting. Net income for the combined periods of 1994 included
reorganization expense of $273.7 million and an extraordinary gain of $257.7
million.
Total operating revenues were $1.6 billion for the year ended December 31,
1995 compared to a combined $1.4 billion for 1994. Passenger revenues increased
10% to $1.5 billion during the year ended December 31, 1995. Cargo and other
revenues increased 10.7 percent to $98.4 million for 1995. The balance of other
revenues includes revenues generated primarily from alcoholic beverage sales,
headset rentals and service charges.
Capacity, as measured by ASM's, increased 7.5 percent for the year ended
December 31, 1995 compared to the combined 1994 period, primarily due to an
increase in the average stage length of 1.5 percent and the addition of six
aircraft to the fleet. Revenue passenger miles increased 8.8 percent for the
year ended December 31, 1995 compared to the combined 1994 period. Load factor
increased by 0.8 points and yield increased 1.1 percent for the year ended
December 31, 1995 compared to the combined 1994 period.
Operating expense per ASM increased to 7.19 cents for the year ended
December 31, 1995 from 6.99 cents for the combined 1994 period. The changes in
the components of operating expense per available seat mile are explained as
follows:
- The increase in salaries and related costs per ASM is primarily the
result of accruals totaling $17.7 million for the year ended December
31, 1995 to provide for performance awards related to the Company's
profitability. In addition, such costs were affected in May 1995 by a
significant initial increase in pilot salaries under their collective
bargaining agreement and the adoption of the Company's Total Pay program
in January 1995. These pay increases were effected in order to make
employees' compensation levels more competitive with that of other low
cost carriers and local employers. These pay increases were largely
offset by improvements in productivity and through a reduction in the
size of the work force.
- Aircraft rent per ASM was flat primarily due to the decrease related to
the amortization of deferred credits recorded in the Company's
adjustment of operating leases to fair market value under fresh start
reporting; offset by the addition of six aircraft to the fleet.
- Rentals and landing fees per ASM decreased primarily due to the 7.5
percent increase in ASM's.
- The average price per gallon of aircraft fuel increased slightly to 55.8
cents for the 1995 period from 54.9 cents for the combined 1994 period.
- Aircraft maintenance materials and repairs expense per ASM increased
largely as the result of the change in classification of the
amortization expense associated with heavy engine and airframe overhauls
from depreciation and amortization expense to aircraft maintenance
materials and repairs
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<PAGE> 45
expense in August 1994. For the year ended December 31, 1995 and the
period August 26 to December 31, 1994, amortization of capitalized
maintenance totaling $11.9 million and $356,000, respectively, is
included in aircraft maintenance materials and repairs expense.
Amortization of capitalized maintenance totaling $24 million for the
period January 1 to August 25, 1994 is included in depreciation and
amortization. In addition, costs associated with a new auxiliary power
unit repair agreement which commenced in April 1994 increased in 1995 as
compared to 1994.
- Depreciation and amortization expense per ASM decreased due to the $24
million change in the classification of the amortization expense
associated with capitalized aircraft maintenance materials and repairs
expense. In addition, the revaluation of property and equipment under
fresh start reporting reduced expense by $835,000. These decreases were
partially offset by an increase of $20.8 million arising from the
amortization of the reorganization value in excess of amounts allocable
to identifiable assets under fresh start reporting.
- A restructuring charge incurred in 1995 associated with the Company's
outsourcing of its heavy aircraft maintenance consisted of a provision
for employee severance and related cost of $10.5 million.
- Other operating expenses per ASM decreased primarily due to the
reduction in property taxes and the fixed nature of certain other costs.
- Operating cost per ASM also increased overall due to the first class
installation program that was completed in 1995 which caused ASM's to be
reduced by approximately 69 million.
Net nonoperating expenses decreased $281.5 million to $46.4 million for the
year ended December 31, 1995 from a combined $327.9 million for 1994. This net
decrease resulted from: a decrease in reorganization expense of $273.7 million
since the Company emerged from bankruptcy; an increase in interest income of
$10.7 million due to higher cash and cash equivalent balances in 1995; partially
offset by a net increase in interest expense of $2.0 million because the Company
did not accrue and pay interest on unsecured prepetition long-term debt during
its bankruptcy proceedings in conformity with SOP 90-7, and an increase in
interest expense due to the re-valuation of aircraft leases to market rates as
part of fresh start reporting.
Income tax expense for financial reporting purposes for the year ended
December 31, 1995 increased to $53.6 million from a combined $13.9 million in
1994 due principally to the increase in the amortization of the excess
reorganization value which is not deductible for income tax purposes.
COMBINED PERIODS FROM AUGUST 26, 1994 TO DECEMBER 31, 1994 AND JANUARY 1,
1994 TO AUGUST 25, 1994 AND THE YEAR ENDED DECEMBER 31, 1993
The Company realized net income of $62.2 million on a combined basis for
1994 compared to net income of $37.2 million for 1993. The 1994 combined results
include an extraordinary gain of $257.7 million from the discharge of certain
prepetition indebtedness and $273.7 million of reorganization expenses. The
results for 1993 include reorganization expenses of $25 million, and losses
aggregating $4.6 million primarily resulting from the disposition of surplus
spare aircraft parts and equipment.
Total operating revenues were $1.4 billion on a combined basis for 1994, an
increase of 6.3 percent compared to the prior year. Passenger revenues for 1994
and 1993 were $1.3 billion on a combined basis and $1.2 billion, respectively.
Passenger revenue per ASM increased slightly on a combined basis in 1994
compared to 1993 as the increase in load factor period over period was largely
offset by a decline in average passenger yields. The passenger revenue increases
realized in 1994 reflect a continuation of trends which commenced in 1993. These
trends reflected a gradually improving economic climate and a more stable
environment within the airline industry.
With the exception of the two aircraft deliveries late in 1994, the Company
operated an 85 aircraft fleet and realized increases in capacity over 1993 as
measured by ASMs by increasing the average stage length flown by 4.8 percent and
by increasing the average daily utilization of the aircraft by 4.7 percent.
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<PAGE> 46
In the fourth quarter of 1994, certain competitive pricing initiatives were
commenced by other carriers which exerted pressure on both the Company's yield
and the load factor. The result of these initiatives, which carried over to the
first quarter of 1995, was softer traffic and generally lower yield levels. To
address these conditions, the Company announced certain fare initiatives of its
own, and selectively matched fare decreases initiated by other carriers.
Revenues from sources other than passenger fares increased to $88.9 million
on a combined basis for 1994 compared to $78.8 million for 1993. Cargo revenues
comprised 49.8 percent, or $44.3 million of other revenues on a combined basis
for 1994. The Company carried 129.6 million and 110.7 million pounds of freight
and mail, for the combined 1994 and 1993 years, respectively.
Operating expense per ASM declined to 6.99 cents on a combined basis for
1994 from 7.01 cents for 1993. The changes in the components of operating
expense per ASM are explained as follows:
- The increase in 1994 salaries and related costs on a combined basis
compared to 1993 is a result of the implementation of a pay plan in the
second quarter of 1994. Effective April 1, 1994, the Company implemented
a pay plan that increased wages by between 2 percent and 8 percent,
depending on the employee's length of service with the Company, and the
Company increased its matching contribution under the Company's 401(k)
plan. The pay program replaced a transition program that the Company had
in place from mid-1993 through the first quarter of 1994. Under the
transition program, pay increases totaling $6.5 million, including
applicable payroll taxes, were made in 1993. Such pay plans were put in
place to improve compensation to employees following a period of reduced
compensation during the bankruptcy. In addition, commencing in the third
quarter of 1993, employee award distributions based on the greater of
0.5 percent of an employee's annual base wage or $125 were made on a
quarterly basis. Such payments for 1993 totaled $2.6 million, including
applicable payroll taxes. In 1994, approximately $4.5 million in
distributions were made prior to the termination of the transition and
award pay program.
- Rentals and landing fees decreased on a combined basis in 1994 compared
to 1993 for the following reasons:
- The Company generated more ASMs in 1994 with essentially the same
sized aircraft fleet as in 1993 which, in turn, caused the rate per
ASM to decrease;
- Rent reductions were obtained at New York's John F. Kennedy Airport
and Phoenix Sky Harbor International Airport;
- Rent expense for aircraft leases were reduced to fair market rates in
August 1994 under fresh start reporting; and
- The Company vacated certain administrative office space as part of
its facilities consolidation program.
- Aircraft fuel expense decreased year over year due to the decline in the
average price per gallon to 54.9 cents from 61.1 cents for 1993.
- Agency commission expense increased on a combined basis in 1994 in
comparison to 1993 as a result of the increase in passenger revenue per
ASM. In addition, the 1994 commission expense increased because a higher
percentage of passenger revenues was generated by America West
Vacations, which pays a higher average commission rate on its sales.
- Aircraft maintenance materials and repair expense increased in 1994 as
the result of an increase in average daily utilization of the fleet to
11.2 hours per day in 1994 from 10.7 hours for 1993. This higher level
of utilization resulted in increases in line maintenance materials
usage, engine repairs and component repairs.
- Depreciation and amortization expense decreased slightly on a combined
basis in 1994 compared to 1993 as the result of a decrease in
depreciation expense arising from the re-valuation of property and
equipment under fresh start reporting, which was partially offset by an
increase in amortization
46
<PAGE> 47
expense arising from the amortization of the reorganization value in
excess of amounts allocable to identifiable assets under fresh start
reporting.
- The increase in other operating expense on a combined basis for 1994
compared to 1993 is due to increased expenses related to increased
passenger traffic, such as credit card discount fees, booking fees,
catering expenses and supplies.
Nonoperating expenses (net of nonoperating income) were $327.9 million on a
combined basis for 1994 and $83.1 million for 1993. Interest expense increased
to $56.6 million on a combined basis for 1994 compared to $54.2 million in 1993.
The increase in interest expense is primarily the result of the issuance of $123
million of senior unsecured notes in connection with the Company's emergence
from bankruptcy. In conformity with SOP 90-7, the Company ceased accruing and
paying interest on certain prepetition long-term debt while the Company remained
a debtor-in-possession. Had the Company continued to accrue interest on such
debt, interest expense for 1994 and 1993 would have been $67.3 million and $73.0
million, respectively. The Company incurred expenses of $273.7 million on a
combined basis in 1994 and $25 million in 1993 in connection with its efforts to
reorganize under Chapter 11. See Note 1 of Notes to Financial Statements as of
December 31, 1995 for further discussion with respect to reorganization.
Income tax expense increased significantly after August 26, 1994 due to the
amortization of the excess reorganization value which is not deductible for
income tax purposes. Income tax expense for 1993 and January 1 through August
25, 1994 reflects the benefit of the Company's net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
Unrestricted cash and cash equivalents and short-term investments decreased
to $200.5 million at September 30, 1996 from $224.4 million at December 31, 1995
primarily due to the prepayment of debt and the repurchase of Class B Common
Stock and Warrants. Net cash provided from operating activities decreased to
$200.6 million for the nine months ended September 30, 1996 from $245.2 million
for the nine months ended September 30, 1995, a decrease of $44.6 million. This
decrease was principally due to the period over period change in air traffic
liability, which grew 8.9 percent in the 1996 period as compared to 78.6 percent
in the 1995 period. Net cash used in investing activities increased to $169.9
million for the nine months ended September 30, 1996 from $81.3 million for the
1995 period, an increase of $88.6 million primarily related to the reinvestment
of certain cash equivalents into certain income producing short-term investments
with maturities greater than 90 days and increased expenditures for capitalized
maintenance and automation initiatives. Net cash used in financing activities
increased to $105.3 million for the nine months ended September 30, 1996 from
the 1995 period. The increase was principally due to the repurchase of Class B
Common Stock and Warrants in 1996 which was partially offset by lower repayment
on the Company's senior unsecured notes in 1996 as compared to 1995. See
"Certain Transactions".
The Company has a working capital deficiency which was $136.5 million at
September 30, 1996 and $70.4 million at December 31, 1995. Operating with a
working capital deficiency is typical in the airline industry as tickets sold
for transportation which has not yet been provided are classified as a current
liability while the related income producing assets, the aircraft, are
classified as non-current assets. Despite the working capital deficiency, the
Company expects to meet all of its obligations as they become due.
The Company's long-term debt maturities through 1998 consist primarily of
principal amortization of notes payable secured by certain of the Company's
aircraft. At September 30, 1996, such maturities were $12.9 million, $45.7
million and $42.8 million, respectively, for the remainder of 1996, 1997 and
1998. Management expects to fund these requirements with cash from operations.
At September 30, 1996, the Company had net operating loss ("NOL")
carryforwards and general business tax credit carryforwards of approximately
$525.9 million and $12.7 million, respectively. Under Section 382 of the Code,
if a loss corporation has an "ownership change" within a designated testing
period, its ability to use its NOL and business tax credit carryforwards is
subject to certain limitations. The Company is a loss corporation within the
meaning of Section 382. The issuance of certain common stock by the Company
pursuant to the plan of reorganization resulted in an ownership change within
the meaning of Section 382.
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<PAGE> 48
This ownership change has resulted in an annual limitation (the "Section 382
Limitation") upon the Company's ability to offset any post-change taxable income
with pre-change NOL. Should the Company generate insufficient taxable income in
any post-change taxable year to fully utilize the Section 382 Limitation of that
year, any excess limitation will be carried forward for use in subsequent tax
years, provided the pre-change NOL has not been exhausted nor has the
carryforward period expired. The alternative minimum tax credit may be carried
forward indefinitely and is available to reduce future income tax payable.
The Company's reorganization and the associated implementation of fresh
start reporting gave rise to significant items of expense for financial
reporting purposes that are not deductible for income tax purposes. In large
measure, it is these nondeductible expenses that result in an effective tax rate
(for financial reporting purposes) significantly greater than the current U.S.
corporate statutory rate of 35 percent. Nevertheless, the Company's actual
income tax liability (i.e., income taxes payable) is considerably lower than
income tax expense shown for financial reporting purposes. This difference in
financial expense compared to actual income tax liability is in part
attributable to tax attributes (including NOLs, subject to certain limitations)
of the predecessor to the Company that serve to reduce the Company's actual
income tax liability. To the extent the tax attributes of the predecessor to the
Company reduce the Company's actual income tax liability below the amount of
expense reflected in the financial statements, that difference is applied to
reduce the carrying balance of the Company's Reorganization Value in Excess of
Amounts Allocable to Identifiable Assets.
At September 30, 1996, the Company had leased one B737-300 aircraft and
three A320-200 aircraft, and was obligated to lease four additional aircraft
prior to June 30, 1999 under a put agreement with GPA (the "GPA Put
Agreement "). Under the GPA Put Agreement, new or used B737-300, B757-200, or
new or "like new" A320-200 aircraft may be put to the Company at a rate of no
more than one aircraft in 1996 and three aircraft per year thereafter. In
addition, for every new A320 aircraft put to the Company, the Company has the
right to reduce deliveries under the AVSA A320 purchase contract (discussed
below) on a one-for-one basis. In connection with the transactions described in
this Prospectus, the GPA Put Agreement will be terminated pursuant to a Put
Termination Agreement among GPA, the Original Lessees and the Company (the "GPA
Put Termination Agreement") and, as a result, GPA's right under the GPA Put
Agreement to put aircraft to the Company and the Company's obligation to accept
and lease such aircraft under the GPA Put Agreement will be terminated. See
"Certain Transactions".
At September 30, 1996, the Company had commitments to AVSA, for a total of
22 Airbus A320-200 aircraft with delivery dates that fall in the years 1999
through 2001. The aggregate net cost of such aircraft is based on formulae that
include certain price indices (including indices for various aircraft components
such as metal products) for periods preceding the various delivery dates. Based
on an assumed 5 percent annual price escalation, the Company estimates such
aggregate net cost to be approximately $1.1 billion. The Company has the option
to cancel without cause up to five of these aircraft. If the Company exercised
its existing rights to cancel five aircraft under the AVSA agreement, the
aggregate net cost (based upon the assumptions described above) of commitments
under such agreement would be reduced to approximately $850 million.
The Company has arranged for financing from AVSA for up to one-half of the
deliveries under the AVSA agreement, although the Company intends to seek
financing on more favorable terms from other sources. Additionally, the Company
will require capital from external sources to meet the balance of its financial
commitments for aircraft and other equipment orders. The Company intends to seek
such financing in the future when and as appropriate. There can be no assurance
that the Company will be able to obtain such capital in sufficient amounts or on
terms acceptable to the Company. A default by the Company under the AVSA
agreement or any such commitment could have a material adverse effect on the
Company.
In September 1996, the Company and AVSA signed a term sheet (the "AVSA Term
Sheet"), which, subject to the satisfaction of a number of conditions by
November 30, 1996, provides for the restructuring of the Company's arrangements
with AVSA, and specifically that (i) the number of aircraft ordered by the
Company would be increased from 22 to 34 (including 24 A320 aircraft and 10 A319
aircraft), (ii) the orders subject to cancellation would be increased from five
to 12 (resulting in the Company being committed to purchase 12 A320s and ten
A319s), (iii) AVSA and the manufacturer of the engines for the aircraft would
agree to provide back-stop financing for 16 of the 22 firm orders, and (iv) the
financing terms and conditions
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<PAGE> 49
under which aircraft would be purchased would be improved from the Company's
perspective. There can be no assurance that the conditions to the restructuring
of the Company's arrangements with AVSA will be satisfied or that a final
agreement will be reached or finalized in the form described above.
In addition, pursuant to the Company's growth plan, the Company expects to
expand its fleet, increase frequencies to existing cities and add destinations
to its route system. This expansion will require the lease or purchase of
additional aircraft. There can be no assurance that the Company will be able to
negotiate such leasing or purchase arrangements in sufficient quantities or on
terms acceptable to the Company.
As of September 30, 1996, the Company's fleet consisted of 99 aircraft, 21
of which meet the FAA's Stage II (but not Stage III) noise reduction
requirements and must be retired or significantly modified prior to the year
2000. Management is currently considering its options regarding such aircraft.
If the Company determines to modify such aircraft to comply with Stage III, the
required capital expenditures for such modifications are currently estimated to
be approximately $2 million per aircraft. There can be no assurance that the
Company will be able to obtain such capital in sufficient amounts or on
favorable terms or that the Company will be able to lease or purchase substitute
aircraft in sufficient quantities or on favorable terms if the Company elected
not to carry out such modifications.
Capital expenditures for the nine months ended September 30, 1996 and 1995
were approximately $117.4 million and $81.1 million, respectively. Included in
these amounts are capitalized maintenance of approximately $73.8 million for the
nine months of 1996 and $56.7 million for the nine months of 1995.
As of September 30, 1996, the Company under the authorization granted by
the Board of Directors in 1995, repurchased in 1996, 1,270,000 shares of Class B
Common Stock on the open market at per share prices ranging from $14.50 to
$21.88 and 2.2 million Warrants for approximately $18 million.
Certain of the Company's long-term debt agreements contain minimum cash
balance requirements, leverage ratios, coverage ratios and other financial
covenants with which the Company was in compliance at September 30, 1996.
NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 123 -- "Accounting for
Stock-Based Compensation" ("SFAS 123") requires that companies can elect to
account for stock-based compensation plans using a method based upon fair value
or continue measuring compensation expense for those plans using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25 --
"Accounting for Stock Issued to Employees" ("APB 25"). Companies electing to
continue using the intrinsic value method must make proforma disclosures in 1996
of net income and earnings per share as if the fair value based method had been
applied. The Company will continue using APB 25; therefore, SFAS 123 is not
expected to have an impact on the Company's results of operations or financial
position.
49
<PAGE> 50
BUSINESS
America West is the ninth largest commercial airline carrier in the United
States, operating through its principal hubs located in Phoenix, Arizona and Las
Vegas, Nevada, and a mini-hub located in Columbus, Ohio. The Company believes it
is the lowest cost full service carrier in the United States. At September 30,
1996 the Company served 53 destinations, including five destinations in Mexico
and one in Canada, with a fleet of 99 aircraft. The Company offers service to an
additional 21 destinations through an alliance agreement with Continental and 17
commuter service and regional destinations through an alliance agreement with
Mesa.
STRATEGY
America West's strategy seeks to achieve additional revenue growth and
profitability by capitalizing on the Company's key competitive strengths while
maximizing financial flexibility. This strategy focuses on (i) strengthening the
Company's position in its existing hubs through strategic expansion, (ii)
maintaining its position as a leading low cost full service carrier, (iii)
operating a modern and efficient fleet and (iv) continuing to develop its
passenger base through key alliances. Principal elements of the Company's
strategy are as follows:
STRENGTHEN POSITION IN EXISTING HUBS THROUGH STRATEGIC EXPANSION
America West's strategic plan is designed to capitalize on its strong
positions in its Phoenix and Las Vegas hubs. In connection with the Company's
restructuring, the Company's operations in Phoenix contracted somewhat during a
period when airlines generally were expanding their strategic hub operations. In
September 1995, the Company announced a two-year plan to expand its principal
hub operations and increase connecting traffic and service to longer-haul
nonstop markets. The growth plan is expected to increase ASMs by 24% and add at
least eight new cities to the Company's route network.
As the Company adds aircraft required to support the expansion of the
Phoenix hub, the Company intends to continue to optimize asset utilization
through the expansion of its night flight service to Las Vegas. By utilizing
aircraft for this service that would otherwise be idle overnight, the Company is
able to compete in a low cost market segment without diminishing asset
availability for use in its Phoenix operations. The Company believes that its
existing service at its Columbus mini-hub is adequate based on current demand.
MAINTAIN ITS POSITION AS A LEADING LOW COST FULL SERVICE AIRLINE
America West is committed to maintaining its low cost structure, which the
Company has achieved primarily through its favorable labor costs per ASM and
asset utilization enhancements. The Company has focused on increasing
productivity at all levels. From December 31, 1994 to September 30, 1996, the
Company's workforce decreased by 14% despite an increase in aircraft of 14%. In
December 1995, the Company outsourced its heavy aircraft maintenance, which
reduced the Company's workforce by approximately 500. Aircraft utilization has
been enhanced through a restructuring of the Company's route network including
expansion of its Las Vegas night flight program. The Company's fleet
configuration, consisting of three aircraft types, permits the Company to
minimize spare parts inventories and simplify maintenance and training
operations.
OPERATE A MODERN AND EFFICIENT FLEET
The Company enjoys operational efficiencies due to its modern, fuel
efficient fleet. At September 30, 1996, the Company's fleet consisted of 61
Boeing 737s, 24 Airbus A320s and 14 Boeing 757s, with an average age of
approximately ten years. Most of the Company's existing aircraft are held under
leases, including leases on 20 aircraft expiring prior to December 1998. As a
result, in the event general economic conditions change adversely, the Company
may reduce its fleet size by not renewing expiring aircraft leases.
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<PAGE> 51
CONTINUE TO DEVELOP PASSENGER BASE THROUGH ALLIANCES
The Company plans to continue to capitalize on its alliance agreement with
Continental to continue to expand the Company's passenger base while achieving
cost savings through the reduction of redundant labor and facilities. This
agreement provides for codesharing arrangements, coordination of flight
schedules, linking of frequent flyer programs, sharing of ticket counter space,
coordination of ground handling operations and joint purchasing and marketing
efforts. Through codesharing, each airline is able to offer additional
destinations to its customers without materially increasing operating and
capital expenses. Management believes that its codesharing activities result in
increased demand for travel on America West and intends to pursue additional
alliances as opportunities warrant.
As a part of America West's ongoing strategy, the Company from time to time
evaluates opportunities for additional alliances and codesharing arrangements as
well as investment opportunities pursuant to which the Company may capitalize on
its key strengths and market position.
OPERATIONS
HUB OPERATIONS
The Company operates primarily through hub airports in Phoenix and Las
Vegas and, to a lesser extent, through its mini-hub in Columbus. The Company
schedules banks of flights timed to arrive at the hub from one direction at
approximately the same time and to depart toward the opposite direction a short
time later. The hub system allows the Company to transport passengers between a
large number of destinations with substantially more frequent service than if
each market were served directly.
The Company is the leading airline serving Phoenix Sky Harbor International
Airport and McCarran International Airport in Las Vegas, based upon revenue
passenger miles, with approximately 35% and 25% of total revenue passenger
miles, respectively, for the twelve months ended March 31, 1996. In both markets
the Company's principal competitor is Southwest Airlines, with approximately 22%
and 16% of total revenue passenger miles in Phoenix and Las Vegas, respectively,
in the year ended December 31, 1995. At September 30, 1996, the Company served
47 destinations from its Phoenix hub and 42 destinations from its Las Vegas hub.
At September 30, 1996, the Company provided non-stop jet service to 12
destinations from Columbus. For the twelve months ended March 31, 1996, the
Company had approximately 51% of Columbus revenue passenger miles compared to
approximately 11% for USAir, the Company's principal competitor at Columbus. The
Company offers service to an additional 21 destinations through its alliance
with Continental and 17 commuter service and regional destinations through its
alliance with Mesa.
The success of the Company's hub system depends on its ability to attract
passengers traveling to and from its hubs, as well as passengers traveling
through the hubs to the Company's other destinations. The Company believes the
success of its operations in Phoenix and Las Vegas is in part due to such
airports being among the world's largest 25 in passenger traffic and such cities
being among the fastest growing in the nation. In addition, the Company believes
these hubs are well positioned for continued growth due to their geographically
favorable locations with strategic access to key Southwestern and West Coast
markets, relatively low operating costs, year-round fair weather, and modern,
uncongested facilities.
GROWTH PLAN
The Company began a two-year growth plan in February 1996 to expand its
principal hub operations and increase connecting traffic and service to
longer-haul nonstop markets. The growth plan is expected to increase ASMs by 24%
and add at least eight new cities to the Company's route network. As part of its
growth plan, the Company has initiated service to Detroit and San Antonio and
non-stop service from Phoenix to Boston, Philadelphia, Newark and Atlanta. The
Company intends to begin service to additional major business destinations such
as Cleveland and Miami and non-stop service from Phoenix to Orlando. In
addition, flight frequencies have been increased to better serve existing West
Coast destinations and to expand connecting opportunities through Phoenix to
long-haul flights to the East and Midwest.
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<PAGE> 52
The Company's growth at Phoenix will support concurrent expansion of the
Las Vegas night flight service. The growth plan provides for Las Vegas night
flight departures to increase to 50 by September 1997. The Company believes that
service at its Columbus mini-hub reflects current demand.
CONTINENTAL ALLIANCE
The Company's alliance agreement with Continental provides for codesharing
arrangements, coordinating flight schedules, sharing ticket counter space,
linking frequent flyer programs and membership clubs, and coordinating ground
handling operations. Through the alliance, the Company's Phoenix hub is able to
attract a share of the connecting traffic previously served at Continental's
Denver hub which has been downsized during the past few years. Through
codesharing, each airline is able to offer additional destinations to its
customers without materially increasing operating and capital expenses. By
placing its designation code on certain of Continental's flights, America West
is able to offer single carrier connecting service to cities that it does not
independently serve. These single carrier code shared flights generally are
afforded superior ranking over multi-carrier connecting flights in the displays
of computer reservation systems used by U.S. travel agents when booking
reservations. Management believes that its codesharing activities result in
increased demand for travel on America West. The Company has also realized
significant cost savings through this alliance primarily through the
consolidation of airport facilities and resources and the elimination of
duplicative costs for labor and equipment at key locations. In addition, through
joint purchasing, both carriers may receive greater volume discounts on certain
cost items.
MESA ALLIANCE
America West has entered into a codesharing agreement with Mesa designed to
establish Mesa as a feeder carrier for the Company at its Phoenix hub. The
codesharing agreement provides for coordinated flight schedules, passenger
handling and computer reservations under the America West flight designator
code, thereby allowing passengers to purchase one air fare for their entire
trip. Through this alliance, the Company has added 17 destinations to its route
network. Mesa operates under the name "America West Express" and has
incorporated the color scheme and commercial logo of America West on certain
aircraft utilized on these routes.
OTHER CODESHARING AGREEMENTS
The Company also has codesharing agreements with Northwest Airlines,
Aeromexico and British Airways.
AMERICA WEST VACATIONS
In 1987, the Company developed America West Vacations, which is a tour
packaging division that arranges vacation packages that include hotel
accommodations, air fare and ground transportation in certain markets. During
1995, this division sold approximately 795,000 room nights and approximately
90,000 rental car days, handled approximately 516,000 passengers and generated
approximately $180 million in gross package sales.
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AIRCRAFT
At September 30, 1996, the Company operated a fleet of 61 Boeing 737s, 24
Airbus A320s and 14 Boeing 757s as follows:
<TABLE>
<CAPTION>
AVERAGE
REMAINING
NUMBER AVERAGE LEASE
AIRCRAFT TYPE STATUS(1) AIRCRAFT AGE (YRS.) TERM (YRS.)
- --------------------------------------------------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C>
B737-100........................................... Owned 1 26.98 --
B737-200........................................... Leased 15 16.28 4.48
B737-200........................................... Owned 5 17.56 --
B737-300........................................... Leased 29 9.54 4.10
B737-300........................................... Owned 11 7.91 --
B757-200........................................... Leased 12 10.16 8.56
B757-200........................................... Owned 2 7.01 --
A320-200........................................... Leased 24 5.73 12.06
--
99 10.00 7.23
==
</TABLE>
- ---------------
(1) Each of the aircraft that is designated as owned serves as collateral for a
loan pursuant to which the aircraft was acquired by the Company or serves
as collateral for a non-purchase money loan.
Beginning in September 1996 through December 1998, leases for 20 of the
Company's aircraft are scheduled to terminate (such aircraft are 12 Boeing
B737-300s, three Boeing B737-200s, three Airbus A320-231s, and two Boeing
B757-200s). At the option of the lessor, the lease for one of the B737-300
aircraft may be extended for up to 48 months, and the leases for six of the
B737-300 aircraft may each be extended for up to 60 months, at set rates, which
are currently less than market rates. There are no contractual options to extend
any other of such leases. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
EMPLOYEES
At September 30, 1996, the Company employed 8,127 full-time and 2,453
part-time employees, for an equivalent of 9,208 full-time employees.
LABOR RELATIONS
During the Reorganization, the Company reduced its employee compensation.
Subsequently, the Company began certain initiatives to increase compensation,
including adoption of the Total Pay Program, to provide employees with a pay and
benefits package which is competitive with other low-cost airlines and local
employers. To offset such increases in compensation and to maintain its
competitive advantage as a low cost operator, the Company began to focus on
increasing productivity.
In January 1995, the Company announced its new compensation program, the
Total Pay Program. This program increased non-executive pay by approximately $25
million in fiscal 1995. This increase in compensation was more than offset by a
strategic overhaul of the Company's work processes which reduced its workforce
by approximately 1,100 employees. In addition, in December 1995, the Company
further reduced its workforce by approximately 500 in connection with the
outsourcing of its heavy aircraft maintenance. In addition, performance bonuses
("AWArd Pay") of up to 25% of base pay will be made to employees provided
certain annually established operating income targets are attained. In February
1996, the Company paid performance awards under the AWArd Pay program amounting
to 10.25% of each employee's 1995 base pay to the employees covered under this
program.
In October 1993, ALPA was certified by the NMB as the bargaining
representative of the Company's pilots. In May 1995, a five-year collective
bargaining agreement with the Company's pilots became effective. The terms of
this contract are consistent with the Company's goal of maintaining its low unit
cost structure. Specifically, the agreement provides for a salary level increase
at a compound annual rate of approximately 5.7% and includes provisions relating
to pilot productivity which management estimates will result in productivity
increases of approximately 2% per year. A significant portion of such salary
level increase was
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effected in May 1995 in order to provide the pilots with a pay and benefits
package competitive with other low cost carriers and local employers. Salary
level increases after the May 1995 increase will occur through April 2000 and
will increase at a compound annual rate of approximately 2.5%. Other terms of
the agreement include a single pay scale for all aircraft types, flexible work
rules, management's right to staff the airline and to enter into strategic
alliances and the preclusion of sympathy work stoppages.
In June 1994, the NMB accepted the AFA petition to represent the Company's
flight attendants. In September 1994, the Company's flight attendants voted in
favor of AFA representation and contract negotiations are ongoing.
In January 1996, the Company's ground operations workers petitioned the NMB
for a union representation election requesting that the Transportation Workers
Union ("TWU ") represent them. That application was later withdrawn and under
NMB rules no union will be allowed to seek to represent that work group until
early 1997.
In January 1996, the IBT filed an application with the NMB seeking to be
certified as the bargaining representative for the Company's mechanics,
including related personnel. Following a representation election in April 1996,
the NMB certified the IBT as the collective bargaining representative for that
work group. Immediately after notification of the election results, the Company
filed a lawsuit in Federal District Court in Phoenix, Arizona seeking to have
that certification declared invalid. The Company is challenging the results of
the election because of the decision of the NMB that the 378 former mechanics
and related personnel who were terminated in connection with the Company's
outsourcing of its heavy maintenance were eligible to vote in the election. In
that litigation, the Company sought a preliminary injunction declaring that it
has no obligation to negotiate with the IBT and IBT sought a preliminary
injunction ordering the Company to begin negotiations. The NMB requested that
the case against it be dismissed on the basis that the federal courts do not
have jurisdiction over NMB's conduct and management of representation elections.
In September 1996, the Court granted the NMB's motion to dismiss and the IBT's
motion for preliminary injunction. The Company intends to appeal those rulings
to the Ninth Circuit Court of Appeals. See "-- Legal Proceedings."
In April 1996, the IBT filed an application with the NMB seeking to become
the collective bargaining representative of the Company's 40 stock clerks, which
was rejected at an election in July 1996. Following the announcement of those
election results, the IBT filed a claim of election interference against the
Company. Both the Company and the IBT filed submissions with the NMB in
connection with the election interference charge, and the matter will be decided
by the NMB in due course. If the NMB rules in favor of IBT, a rerun election
will be ordered.
In September 1996, the TWU filed an application with the NMB to represent
the Company's approximately 40 dispatchers. The NMB has scheduled a
representation election to occur during late October and November 1996.
There have been numerous attempts by unions to organize the employees of
the Company, and the Company expects such organization efforts to continue in
the future. The Company cannot predict the terms of any future collective
bargaining agreement and therefore the effect, if any, on the Company's
operations or financial performance.
COMPETITION AND MARKETING
The airline industry is highly competitive and is susceptible to price
discounting, which involves the offering of discount or promotional fares to
passengers. Any such fares offered by one airline are normally matched by
competing airlines, resulting in lower industry yields with little or no
increase in traffic levels. America West competes with other major full service
airlines based on price and, due to its low cost structure, is able to compete
with other low cost carriers in its short haul local markets. The entry of
additional carriers on many of the Company's routes (as well as increased
competition from or the introduction of new services by established carriers)
could negatively impact America West's results of operations. America West
competes with a number of major airlines on medium- and long-haul routes through
its hubs and with Southwest Airlines for short-haul flights at its Phoenix and
Las Vegas hubs and with USAir at its Columbus mini-hub.
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Most tickets for travel on America West are sold by travel agents through
computer reservation systems that have been developed and are controlled by
other airlines. Travel agents generally receive commissions based on the price
of tickets sold. Accordingly, airlines compete not only with respect to the
price of tickets sold but also with respect to the amount of commissions paid.
Airlines often pay additional commissions in connection with special revenue
programs. Federal regulations have been promulgated that are intended to
diminish preferential schedule displays and other practices with respect to the
reservation systems that place the Company and other similarly situated users at
a competitive disadvantage to the airlines controlling the systems. Effective
January 8, 1996, the Company implemented electronic or paperless ticketing,
which the Company believes will reduce distribution costs in the future.
FREQUENT FLYER PROGRAM
All major U.S. airlines have established frequent flyer programs to
encourage travel on that particular carrier. America West offers the FlightFund
program that allows members to earn mileage credits by flying America West, by
using the services of other program participants such as hotels, car rental
firms and other specialty services and by flying certain partner carriers.
Through the Company's alliance agreement with Continental, the Company has
formed a frequent flyer program partnership. FlightFund and Continental's One
Pass program members may now earn and redeem mileage credit in connection with
flights to all America West and Continental destinations. In addition, the
Company periodically offers special short-term promotions that allow members to
earn additional free travel awards or mileage credits. When a FlightFund member
accumulates mileage credits of 20,000 miles, the Company issues mileage award
certificates that can be redeemed for various travel awards, including first
class upgrades and tickets on America West or other airlines participating in
America West's frequent flyer program. Most travel awards are subject to
blackout dates and capacity controlled seating. Mileage award certificates
automatically expire after two years if issued prior to April 1, 1993 and after
three years for certificates issued after that date. Travel is valid up to one
year from the date of ticketing. FlightFund awards may also be redeemed for
flights to certain international destinations and Hawaii. America West is
required to purchase space on other airlines to accommodate such award
redemption.
The Company accounts for the FlightFund program under the incremental cost
method whereby travel awards are valued at the incremental cost of carrying one
additional passenger. Costs including passenger food, beverages, supplies, fuel,
liability insurance, purchased space on other airlines and denied boarding
compensation are accrued as frequent flyer program participants accumulate
mileage to their accounts. Such unit costs are based upon expenses expected to
be incurred on a per passenger basis. No profit or overhead margin is included
in the accrual for these incremental costs.
FlightFund's current membership is approximately 2.6 million participants.
At December 31, 1995, 1994 and 1993, the Company estimated that approximately
342,000, 369,000 and 238,000 travel awards were expected to be redeemed.
Correspondingly, the Company had an accrued liability of $10.7 million, $9.8
million and $7.4 million for 1995, 1994 and 1993, respectively. The accrual is
based upon the Company's estimates of mileage earned that will eventually be
redeemed for a travel award.
The number of FlightFund travel awards redeemed for round-trip travel for
the years ended December 31, 1995, 1994 and 1993, was approximately 111,000,
109,000 and 99,000, respectively, representing 2.3%, 2.6% and 2.8% of total
revenue passenger miles for each respective period. The Company does not believe
that the usage of free travel awards results in any significant displacement of
revenue passengers due to the Company's ability to manage frequent flyer travel
by use of blackout dates and limited seat availability.
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GOVERNMENT REGULATIONS
NOISE ABATEMENT AND OTHER RESTRICTIONS
The Airport Noise and Capacity Act of 1990 provides, with certain
exceptions, that after December 31, 1999, no person may operate certain large
civilian turbo-jet aircraft in the United States that do not comply with Stage
III noise levels, which is the FAA designation for the quietest commercial jets.
These regulations will require carriers to gradually phase out their noisier
jets, either replacing them with quieter Stage III jets or equipping them with
hush kits to comply with noise abatement regulations, over a five-year period
commencing December 31, 1994. At September 30, 1996, the Company's fleet
consisted of 99 aircraft of which 21 aircraft meet the FAA's Stage II (but not
Stage III) noise reduction requirements and must be retired or significantly
modified prior to the year 2000. Management is currently considering its options
regarding such aircraft.
Numerous airports, including those serving Boston, Denver, Los Angeles,
Minneapolis-St. Paul, New York City, San Diego, San Francisco, San Jose, Orange
County, Washington, D.C., Burbank and Long Beach have imposed restrictions such
as curfews, limits on aircraft noise levels, mandatory flight paths, runway
restrictions and limits on number of average daily departures, which limit the
ability of air carriers to provide service to or increase service at such
airports. In February 1995, the Company obtained approval to increase service at
Orange County's John Wayne Airport, which is a capacity controlled airport, by
five daily flights. The Port Authority of New York and New Jersey is considering
a phaseout of Stage II aircraft on a more accelerated basis than that of the FAA
requirement. The Company's Boeing 757-200s, 737-300s and Airbus A320s all comply
with the current noise abatement requirements of the airports listed above.
FUEL TAX INCREASES
In August 1993, the federal government increased taxes on fuel, including
aircraft fuel, by 4.3 cents per gallon. Initially, commercial aviation fuel was
exempt from this tax; however, the exemption expired on September 30, 1995 and
the Company began paying such tax on October 1, 1995. The expiration of such
exemption increased the Company's annual operating expenses which increase is
expected to be approximately $14.6 million for 1996 based upon the Company's
expected 1996 fuel consumption levels. Debate continues in the Congress as to
whether the exemption from the federal fuel tax previously granted to the
commercial airlines should be reinstated, but there can be no assurance that the
jet fuel tax will be repealed, either temporarily or permanently.
EXCISE TAXES
Effective August 27, 1996, the federal air transportation excise taxes (the
10% domestic tax based on the price of the ticket, the 6.25% air cargo tax based
on freight charges and the $6.00 per passenger international departure tax) were
reinstated. The reinstated federal air transportation excise taxes expire on
December 31, 1996 and it is unclear at this time whether the taxes will be
reenacted in 1997.
PASSENGER FACILITY CHARGES
During 1990, Congress enacted legislation to permit airport authorities,
with prior approval from the DOT, to impose passenger facility charges ("PFCs")
as a means of funding local airport projects. These charges, which are intended
to be collected by the airlines from their passengers, are limited to $3.00 per
enplanement, and to no more than $12.00 per round trip. As a result of
competitive pressure, the Company and other airlines have been limited in their
abilities to pass on the cost of the PFCs to passengers through fare increases.
ENVIRONMENTAL MATTERS
The Company is subject to regulation under major environmental laws
administered by federal, state and local agencies, including laws governing air,
water and waste discharge activities. While the Company strives to comply with
environmental laws and regulations, the Company has incurred and may incur costs
to comply with applicable environmental laws including soil and groundwater
cleanup and other related response costs.
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The Company believes, however, that under current environmental laws and
regulations these costs would not have a material adverse effect on the
Company's financial condition.
The Comprehensive Environmental Response Compensation and Liability Act of
1980, also known as Superfund, and comparable state laws impose liability
without regard to fault on certain classes of persons that may have contributed
to the release or threatened release of a "hazardous substance" into the
environment. These persons include the owner or operator of a facility and
persons that disposed or arranged for the disposal of hazardous substances. Many
airports in the United States, including the Phoenix Sky Harbor International
Airport, are the subject of Superfund investigations or state implemented
groundwater investigations. Although the Company occupies facilities at some of
these affected airports, the Company does not believe that its operations have
been included within the ambit of any of these investigations.
The trend in environmental regulation is to place more restrictions and
limitations on activities that may affect the environment, and the Company
expects that the costs of compliance will continue to increase.
AGING AIRCRAFT MAINTENANCE
The FAA issued several Airworthiness Directives ("ADs") in 1990 mandating
changes to the older aircraft maintenance programs. These ADs were issued to
ensure that the oldest portion of the nation's aircraft fleet remains airworthy.
The FAA requires that these aircraft undergo extensive structural modifications.
These modifications are required upon the accumulation of 20 years time in
service, prior to the accumulation of a designated number of flight cycles or
prior to 1994 deadlines established by the various ADs, whichever occurs later.
Five of the Company's 99 aircraft are currently affected by these aging aircraft
ADs and are in compliance with such ADs. The Company constantly monitors its
fleet of aircraft to ensure safety levels which meet or exceed those mandated by
the FAA or the DOT.
FAA FUNDING
Congress recently enacted the FAA Reauthorization Act of 1996, which
established a 21 member National Aviation Civilian Review Commission (the
"Review Commission"). The Review Commission, with the assistance of the DOT,
will conduct an independent study of FAA funding requirements through the year
2002, and develop a cost allocation model for distribution of the cost of using
the United States aviation system to each segment of the system. The Review
Commission will also analyze funding alternatives to the existing excise taxes
(the 10% domestic ticket tax, the 6.25% air cargo tax and the $6.00
international departure tax) which currently fund the FAA and is scheduled to
expire December 31, 1996.
The Company cannot forecast the results of the Review Commission's
activities or what proposals the Review Commission will make. Congress has
indicated an interest in renewing the current excise tax structure for 18 months
beginning January 1, 1997. Implementation of these proposals could significantly
increase the cost of airline operations and could have a material adverse impact
on the Company's operating results.
SAFETY
America West is subject to the jurisdiction of the FAA with respect to
aircraft maintenance and operations, including equipment, dispatch,
communications, training, flight personnel and other matters affecting air
safety. The FAA has the authority to issue new or additional regulations. To
ensure compliance with its regulations, the FAA conducts regular safety audits
and requires the Company to obtain operating, airworthiness and other
certificates which are subject to suspension or revocation for cause. In
addition, a combination of FAA and Occupational Safety and Health Administration
regulations on both federal and state levels apply to all of America West's
ground-based operations. America West is also subject to the jurisdiction of the
Department of Defense with respect to its voluntary participation in their
Commercial Passenger Airlift program administered by the Air Force's Air
Mobility Command. The carrier recently underwent its biannual capability survey
and has been approved for continued use by the military with a follow-up review
to be completed by January 1997.
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SECURITY AND SAFETY MEASURES
The President's Commission on Aviation Safety and Security (the "Aviation
Safety Commission") and the U.S. Congress have recently adopted increased safety
and security measures designed to increase airline passenger security and
protect against terrorist acts, which have resulted in additional operating
costs to the airline industry. Examples of immediate increased security measures
include increased passenger profiling, enhanced pre-board screening of
passengers and carry-on baggage, positive bag match for profile selections,
continuous physical bag search at checkpoints, additional airport security
personnel, expanded employment, criminal background and FBI fingerprint checks
for selected airport employees, significantly expanded use of bomb-sniffing
dogs, certification of screening companies and aggressive testing of existing
security systems.
The future agenda of the Aviation Safety Commission and related legislative
oversight activities includes feasibility analyses of the deployment and use of
positive bag match systems, enhanced passenger profiling procedures, advanced
cockpit voice and flight data recorders, synthetic vision equipment and advanced
sensors, and the use of new composite materials in aircraft. Such agenda and
activities include consideration of the safety of aging aircraft and other
related issues.
Future decisions which place increased security and safety requirements on
the airline industry could be significant. The Company cannot forecast the
future outcome of the Aviation Safety Commission's deliberations, what
additional security and safety requirements may be imposed in the future or the
costs or revenue impact that would be associated with complying with such
requirements.
SLOT RESTRICTIONS
At New York City's John F. Kennedy Airport and LaGuardia Airport, Chicago's
O'Hare International Airport and Washington's National Airport, which have been
designated "High Density Airports" by the FAA, there are restrictions on the
number of aircraft that may land and take-off during peak hours. In the future,
these take-off and landing time slot restrictions and other restrictions on the
use of various airports and their facilities may result in further curtailment
of services by, and increased operating costs for, individual airlines,
including America West, particularly in light of the increase in the number of
airlines operating at such airports. In general, the FAA rules relating to
allocated slots at the High Density Airports contain provisions requiring the
relinquishment of slots for nonuse and permits carriers, under certain
circumstances, to sell, lease or trade their slots to other carriers. All slots
must be used on 80% of the dates during each two-month reporting period. Failure
to satisfy the 80% use rate will result in loss of the slot. The slot would
revert to the FAA and be reassigned through a lottery arrangement.
The Company currently utilizes two slots at New York City's Kennedy
Airport, four slots at New York City's LaGuardia Airport, four slots at
Chicago's O'Hare International Airport and six slots at Washington's National
Airport. Four of the slots at Washington's National airport are subject to
expiration in December 1997, and the Company presently intends to file a timely
application for renewal which is discretionary with the FAA. The average
utilization rates by the Company of all the foregoing slots ranged from 86% to
100% in 1995.
CIVIL RESERVE AIR FLEET PROGRAM
In time of war or during a national emergency, U.S. air carriers may be
required to provide airlift services to the Military Airlift Command under the
Civil Reserve Air Fleet Program.
LEGAL PROCEEDINGS
The Company emerged from bankruptcy on August 25, 1994 after operating as a
debtor-in-possession since June 27, 1991, when the Company filed a voluntary
petition to reorganize under Chapter 11 of the Bankruptcy Code. The Bankruptcy
Court confirmed the Company's plan of reorganization (the "Reorganization Plan")
on August 10, 1994. Pursuant to the Reorganization Plan, the previously
outstanding equity interests in the Company were canceled as of the Effective
Date and new stock was issued. In addition, the Company's obligations to certain
prepetition creditors were restructured and general
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unsecured nonpriority prepetition creditors received, in full satisfaction of
their claims, shares of Class B Common Stock and cash. The Reorganization Plan
also provided for the disposition of numerous other matters, including the
satisfaction of certain other prepetition claims in accordance with negotiated
settlement agreements, the disposition of various types of claims asserted
against the Company, the adherence to the Company's aircraft lease agreements,
the amendment of the Company's aircraft purchase agreements and the release of
the Company's employees from all obligations arising under the Company's stock
purchase plan in consideration for the cancellation of the shares of the stock
securing such obligations. As contemplated by the Reorganization Plan, certain
administrative and priority tax claims remain pending against the Company,
which, if ultimately allowed by the Bankruptcy Court, would represent general
obligations of the Company. Such claims include claims of various state and
local tax authorities, most of which represent ordinary course pre-bankruptcy
tax obligations not paid during the pendency of the bankruptcy proceedings and
various other matters. In connection with the state and local tax claims, the
Company has reserved certain amounts believed by management to be adequate. At
September 30, 1996, approximately 398,000 shares of the Company's Class B Common
Stock remained with an escrow agent pending final resolution of claims in
connection with the bankruptcy. All other securities issued pursuant to the
bankruptcy have been distributed.
In August 1991, the Commission informally requested that the Company
provide the Commission with certain information and documentation underlying
disclosures made by the Company in annual and quarterly reports filed with the
Commission by the Company in 1991. The Company cooperated with the Commission's
informal inquiry. On March 29, 1994, the Company's Board of Directors approved
the submission of an offer of settlement for the purpose of resolving the
inquiry through the entry of a consent decree pursuant to which the Company
would, while neither admitting nor denying any violation of the securities laws,
agree to comply with its future reporting obligations under Section 13 of the
Exchange Act. The Company was advised on May 6, 1994 that the Commission agreed
to accept the Company's offer of settlement. In order to implement the
settlement, on May 12, 1994 the Commission issued an "Order Instituting
Proceedings Pursuant to Section 21C of the Exchange Act and Opinion and Order of
the Commission" (the "Order") finding the Company's Form 10-K for the year
ending December 31, 1990, violated Section 13(a) of the Exchange Act and Rule
13a-1 thereunder, and that the Company's Form 10-Q for the first quarter of 1991
violated Section 13(a) of the Exchange Act and Rule 13a-13 thereunder, and
ordered that the Company cease and desist from violating Section 13(a) of the
Exchange Act and Rules 13a-1 and 13a-13 promulgated under the Exchange Act. The
Order provides that the Company neither admits nor denies any violation of the
securities laws.
An Original Lessee has informed the Company that one of the Owner
Participants may assert a claim in an unspecified amount as a result of the
Internal Revenue Service potentially disallowing investment tax credits and
accelerated depreciation claimed by such Owner Participant in respect of six
aircraft (including three Aircraft). Such a claim, if asserted, would be based
on indemnity agreements between such Original Lessee and such Owner Participant.
Under the terms of the corresponding indemnity agreements between the applicable
Original Lessee and the Company, if such tax benefits were fully or partially
disallowed, the Company's monthly obligation could be increased by up to
approximately $15,000 per aircraft (approximately $1,080,000 per year for all
six aircraft) for the term of the related Leases. The increase applicable to
periods prior to the determination of an indemnity obligation would be payable
monthly over a 24-month period, with interest calculated at a specified prime
rate. The Company is unable to predict whether the Internal Revenue Service will
prevail in matters asserted against the affected Owner Participant and,
consequently, whether the Company will incur any liability in connection with
such claims or the amount of any such liability, if incurred. Based on
information and relevant documents available to the Company, however, management
currently believes that it is unlikely that the disposition of these matters
will have a material adverse effect on the Company's financial condition.
On November 9, 1995, a group of 71 individuals, who are current or former
employees of Continental, commenced a lawsuit against Continental, Air Partners
II, AmWest Partners, AmWest Genpar, Inc. and the Company. The complaint, which
was filed in the Federal District Court for the Western District of Washington,
alleges that the plaintiffs were discharged from their employment as part of a
plan to replace Continental's employees at certain stations with the relatively
younger employees of the Company. The
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plaintiffs allegedly were discharged from their employment after Continental and
the Company executed agreements under which the Company provides ground handling
services for Continental at certain locations. The plaintiffs pleaded claims
against the Company for conspiracy in violation of federal equal protection laws
and state law claims for wrongful discharge in violation of public policy,
intentional interference with business expectancy, and intentional and negligent
infliction of emotional distress. These claims, as well as claims for violation
of the Federal Age Discrimination in Employment Act and for violation of various
state anti-discrimination statutes, also were asserted against the other
defendants. The court has not yet ruled on the certification issue. The
plaintiffs seek reinstatement and damages including back pay, front pay and
compensatory, punitive and liquidated damages, as well as attorneys' fees.
In response to the Company's motion for judgment on the pleadings, the
plaintiffs amended their complaint, dropping the claims of negligent infliction
of emotional distress and wrongful discharge in violation of public policy and
adding the Company as a defendant on the claims under the Age Discrimination in
Employment Act and state anti-discrimination statutes. The Company filed an
answer denying all substantive allegations, and all defendants filed motions for
summary judgment in June 1996. The court granted summary judgment to Continental
and the Company with respect to age discrimination claims brought under the
federal statute by 35 of the 76 plaintiffs who were not 40 at the time of their
termination, granted summary judgment to Continental and the Company on all
claims for intentional infliction of emotional distress, and granted summary
judgment to the Company on the conspiracy claim. Thus, the remaining claims
pending against the Company include (i) federal age discrimination claims
(absent the 35 plaintiffs under 40 years of age); (ii) state age discrimination
claims (it is unclear from the decision whether the court's order allows the 35
plaintiffs under 40 years of age to proceed with these claims); and (iii) an
intentional interference with business relationship claim. On September 30,
1996, the court granted plaintiffs' motion to certify a class with respect to
their claim under the Age Discrimination Act. Discovery proceedings are
currently being conducted and are scheduled to continue through November, 1996.
The trial date is scheduled for March 18, 1997.
The Association of Flight Attendants ("AFA"), the union which represents
the Company's flight attendants, filed a complaint on April 29, 1996 in the
Federal District Court for the Northern District of Arizona, alleging that the
Company's failure to pay AWArd Pay to flight attendants violated provisions of
federal labor laws prohibiting discrimination, retaliation or punishing
employees for exercising their statutory right to choose union representation.
The complaint requested that the Company be enjoined from refusing to pay AWArd
Pay to the flight attendants and from taking any action to interfere with,
undermine or subvert the AFA's status as the exclusive bargaining representative
of the flight attendants, damages (presumably payment of AWArd Pay) and punitive
damages in the amount of $250,000. On June 24, 1996, the Company filed a motion
to dismiss the complaint claiming (i) that the AFA's claim is barred by the six
month statute of limitations under federal labor law, (ii) that the complaint
fails to state a claim on which relief can be granted because under federal
labor law the Company would have been entitled to unilaterally change the
compensation program of the flight attendants, and the denial of AWArd Pay does
not rise to the level of extraordinary conduct required for judicial
intervention in the collective bargaining process, and (iii) pursuant to an
agreement between the AFA and the Company, the AFA's claim is to be adjudicated
pursuant to an agreed binding dispute resolution procedure, outside of court.
The court set a hearing on the Company's motion to dismiss for December 9, 1996.
Following the Company's outsourcing of its heavy maintenance, on December
27, 1995 the IBT and five individuals commenced a lawsuit against the Company in
the Federal District Court for the Northern District of Arizona. The complaint
alleged that the individual plaintiffs were terminated because they were IBT
committee members or open supporters of the union and that the Company
wrongfully terminated approximately 378 members of the mechanics and related
craft or class in connection with the outsourcing in violation of federal labor
laws. The plaintiffs requested that the litigation be certified as a class
action, asked for a judgment that the Company violated federal labor laws, and
sought reinstatement for the individual plaintiffs, compensatory damages for all
plaintiffs and punitive damages for the IBT. On January 16, 1996, the Company
filed a motion to dismiss the claims of the IBT (because it was not the
certified representative of the mechanics at the time of the alleged wrongdoing,
the IBT could not assert a claim under the federal labor laws) and four of the
individual plaintiffs (because each had signed a release agreement) and an
answer in
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respect of the claims of the fifth individual plaintiff. On September 4, 1996,
the court issued an order dismissing the claims of the four discharged mechanics
who had signed release agreements; the court also ruled that the class action
allegations in the complaint were rendered moot with respect to other discharged
mechanics who had signed releases. In addition, the court held that the IBT did
not have standing in its own behalf to pursue a claim under the Railway Labor
Act because the outsourcing of heavy maintenance and termination of the
mechanics took place before the IBT received its certification from the National
Mediation Board to represent the Company's mechanics, and that the IBT could not
pursue any claims for monetary damages on behalf of any individual mechanics.
Finally, the court ruled that the IBT could attempt to file an amended complaint
asserting non-damages claims on behalf of current mechanics and discharged
mechanics who had not signed release agreements. On November 6, 1996, the IBT
and the four individual plaintiff's whose claims were dismissed filed a motion
for certification under Rule 54(b) of the Federal Rules of Civil Procedure,
seeking the right to appeal the Court's order dismissing them from the case. The
Company has opposed that motion.
On September 16, 1996, the IBT filed a second supplemental amended
complaint seeking to assert claims under the Railway Labor Act on behalf of the
current mechanics and the discharged mechanics who did not sign releases. The
main relief requested by the IBT is an injunction requiring the Company to
discontinue the subcontracting of heavy maintenance, and an order of
reinstatement for the discharged mechanics who did not release their claims. The
fifth individual plaintiff who did not sign a release asserted an Arizona
wrongful discharge claim and sought punitive damages. On October 4, 1996, the
Company filed a motion to dismiss plaintiffs' second supplemental amended
complaint on the grounds that the IBT does not have standing to pursue claims on
behalf of current mechanics, or former mechanics who did not sign releases, and
that the individual failed to state a claim for wrongful discharge under Arizona
law, and that, in any event, his claim was preempted by the Railway Labor Act.
The court has scheduled a hearing on the Company's motion to dismiss for January
13, 1997.
On April 18, 1996, immediately following the vote tally on the IBT's
application to represent the Company's mechanics and related, the Company filed
a complaint in the Federal District Court of the Northern District of Arizona,
alleging that the decision by the NMB to allow the workers who were terminated
as the result of the Company's outsourcing of heavy maintenance to vote violated
federal labor laws and seeking a ruling that the certification by the NMB of the
IBT as the collective bargaining representative of the Company's mechanics and
related be declared invalid. The Company's complaint also alleged that the IBT
violated federal labor laws by filing a meritless lawsuit, challenging the
outsourcing and reduction in force (see above), for the sole purpose of enabling
the discharged mechanics to vote in the representation election. On the next
day, the Company filed a motion for a preliminary injunction declaring that the
Company had no obligation to recognize the IBT as that collective bargaining
representative or to negotiate with the IBT. On May 2, 1996, the NMB filed a
motion seeking to dismiss the lawsuit or, alternatively, requesting that the
court grant summary judgment in favor of the NMB, arguing that the NMB has
exclusive jurisdiction over elections and the determination of collective
bargaining representatives. On May 10, 1996, the IBT filed an answer, including
counterclaims alleging that the Company's refusal to meet and bargain with the
IBT violated federal labor laws. On May 31, 1996, the IBT filed a motion for a
preliminary injunction requesting that the court order the Company to commence
bargaining with the IBT. On September 3, 1996, the court issued an order
granting the NMB's motion to dismiss, denying the Company's motion for
preliminary injunction and granting the IBT's request for preliminary relief on
its counterclaims.
On September 24, 1996, the Company filed a motion seeking certification of
the court's order dismissing the NMB and seeking a stay of the court's order
granting preliminary relief to the IBT pending the Company's appeal of that
order. In an order filed October 30, 1996, the court granted the Company's
motion for certification, and denied the Company's motion for stay of the
preliminary injunction. On October 31, 1996, the Company filed its notice of
appeal in the district court regarding both the court's dismissal of the
Company's claims against the NMB and the grant of the preliminary injunction in
favor of the IBT.
On October 11, 1996, the IBT filed a motion to consolidate this case with
the lawsuit filed by the IBT in December 1995, as described above, on behalf of
discharged Company mechanics. The Company filed an opposition on October 28,
1996. To date, there has been no ruling from the Court.
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HOLDING COMPANY STRUCTURE
Effective on or about December 31, 1996, the Company intends to reorganize
its corporate structure by the formation of a holding company organized under
Delaware law, to be named America West Holdings Corporation ("Holdings"). As the
result of that reorganization, the Company will become a wholly owned subsidiary
of Holdings. Holdings' Class B Common Stock will be listed on the New York Stock
Exchange. Holdings will not have any obligations with respect to any of the
Leases or the other documents relating to the Leases, the Equipment Notes or the
Certificates.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to the executive officers and directors of the
Company is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------- --- --------------------------------------------------------------
<S> <C> <C>
William A. Franke.............. 59 Chairman of the Board, President and Chief Executive Officer
Richard R. Goodmanson.......... 49 Director, Executive Vice President and Chief Operating Officer
Julia Chang Bloch.............. 54 Director
Stephen F. Bollenbach.......... 54 Director
Frederick W. Bradley, Jr. ..... 69 Director
James G. Coulter............... 36 Director
John F. Fraser................. 66 Director
John L. Goolsby................ 54 Director
Richard C. Kraemer............. 53 Director
John R. Power, Jr.............. 40 Director
Larry L. Risley................ 52 Director
Frank B. Ryan.................. 60 Director
Richard P. Schifter............ 43 Director
John F. Tierney................ 51 Director
Raymond S. Troubh.............. 70 Director
Ronald A. Aramini.............. 51 Senior Vice President -- Operations
John R. Garel.................. 38 Senior Vice President -- Marketing and Sales
Stephen L. Johnson............. 40 Senior Vice President -- Legal Affairs
W. Douglas Parker.............. 35 Senior Vice President and Chief Financial Officer
Michael A. Vescuso............. 51 Senior Vice President -- Human Resources
Michael R. Carreon............. 43 Vice President and Controller
C. A. Howlett.................. 53 Vice President -- Public Affairs
</TABLE>
DIRECTORS OF THE COMPANY
Set forth below is information regarding the Company's directors:
WILLIAM A. FRANKE. Chairman of the Board and Chief Executive Officer --
(Executive Committee). Mr. Franke was named Chairman of the Board of Directors
in September 1992. On January 1, 1994, Mr. Franke was also elected to serve as
the Company's Chief Executive Officer and on May 23, 1996, he was elected
President. In addition to his responsibilities at America West, Mr. Franke
serves as president of Franke & Company, Inc., a financial services company he
has owned since May 1987. From November 1989 until June 1990, Mr. Franke served
as the Chairman of Circle K Corporation's executive committee with the
responsibility for Circle K Corporation's restructuring. In May 1990, the Circle
K Corporation filed a voluntary petition to reorganize under Chapter 11 of the
Bankruptcy Code. From June 1990 until August 1993, Mr. Franke served as the
chairman of a special committee of directors overseeing the reorganization of
the Circle K Corporation. From 1990 until 1993, Mr. Franke also served in
various other capacities at Circle K Corporation. Mr. Franke was also involved
in the restructuring of the Valley National Bank of Arizona (now Bank One of
Arizona). Mr. Franke serves as a director of Phelps Dodge Corp., Central
Newspapers Inc. and the Air Transport Association of America and as a Director
and chairman of the board of Airplanes Limited and a controlling trustee and
chairman of Airplanes U.S. Trust, entities formed to acquire indirectly certain
aircraft from GPA.
RICHARD R. GOODMANSON. Director, Executive Vice President and Chief
Operating Officer. Mr. Goodmanson joined the Company in June 1996 and became a
member of America West's Board of Directors effective on October 15, 1996. Prior
to joining the Company, he served for four years as Senior Vice
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President of Operations at Frito-Lay, Inc. Before that, Mr. Goodmanson served as
a principal at the consulting firm of McKinsey and Company, Inc.
JULIA CHANG BLOCH. Ms. Bloch has been a member of America West's Board of
Directors since August 26, 1994. From June 1993 to June 1996, she served as the
group executive vice president, corporate relations of Bank of America
Corporation. She is currently the president of the U.S. Japan Foundation. Ms.
Bloch served as the U.S. Ambassador to Nepal from September 1989 through May
1993. Ms. Bloch is a board member of the American Refugee Committee and the
Himalaya Foundation and serves as a trustee of the Asian Art Museum Foundation
and the Asia Society.
STEPHEN F. BOLLENBACH. (Compensation Committee.) Mr. Bollenbach has been a
member of America West's Board of Directors since August 26, 1994. He has been
chief executive officer and a director of Hilton Hotels Corporation since
February 1996. He served as senior executive vice president and chief financial
officer of The Walt Disney Company from May 1995 to February 1996. Prior to May
1995, he was president and chief executive officer of Host Marriott Corp. He
served as executive vice president and chief financial officer of The Marriott
Corporation from 1992 until 1993. Mr. Bollenbach served as chief financial
officer of the Promus Companies from 1986 to 1990 and served as chief financial
officer for the Trump Organization from 1990 to 1992.
FREDERICK W. BRADLEY, JR. (Compensation Committee, Executive Committee.)
Mr. Bradley has been a member of America West's Board of Directors since
September 1992. Immediately prior to joining the Board of Directors, Mr. Bradley
was a senior advisor with Simat, Helliesen & Eichner, Inc. Mr. Bradley formerly
was a senior vice president of Citibank/Citicorp's Global Airline and Aerospace
business. Mr. Bradley joined Citibank/Citicorp in 1958. In addition, Mr. Bradley
is a member of the board of directors of Shuttle, Inc. (USAir Shuttle) and the
Institute of Air Transport, Paris, France. Mr. Bradley also is chairman of the
board of directors of Aircraft Lease Portfolio Securitization 92-1 Ltd. and
Aircraft Lease Portfolio Securitization 94-1 Ltd.
JAMES G. COULTER. (Executive Committee.) Mr. Coulter has been a member of
America West's Board of Directors since August 26, 1994. Since 1992, Mr. Coulter
has been a managing director of Texas Pacific Group, an investment firm. From
1986 to August 1992, Mr. Coulter was vice president of Keystone, Inc. (formerly
Robert M. Bass Group, Inc.), a private investment firm based in Fort Worth,
Texas. From April 1993 until he became a member of the Company's Board, Mr.
Coulter was a member of the board of directors of Continental. Mr. Coulter also
serves as a director of American Savings Bank and Allied Waste Industries, Inc.
JOHN F. FRASER. Mr. Fraser has been a member of America West's Board of
Directors since August 26, 1994. Mr. Fraser currently serves as vice chairman of
Russel Metals, Inc. (formerly Federal Industries Ltd.), and has served in such
position since May 1995. Mr. Fraser joined Federal Industries Ltd. as president
and chief executive officer in 1978 and was elected chairman of the board in May
1992. Mr. Fraser is a director and chairman of the board of Air Canada, and a
director of Bank of Montreal, Centra Gas Manitoba Inc., Coca-Cola Beverages
Ltd., Inter-City Products Corporation, Shell Canada Limited and The Thomson
Corporation.
JOHN L. GOOLSBY. (Audit Committee.) Mr. Goolsby has been a member of
America West's Board of Directors since August 26, 1994. He is the president and
chief executive officer of The Hughes Corporation and The Howard Hughes
Corporation (formerly named the Summa Corporation), an entity engaged in the
development and management of office and industrial buildings and large scale
land development in Nevada and Southern California. In addition, Mr. Goolsby
serves as a director of Nevada Power Company and Bank of America Nevada. He also
serves as a trustee of The Donald W. Reynolds Foundation.
RICHARD C. KRAEMER. (Compensation Committee.) Mr. Kraemer has been a
member of America West's Board of Directors since September 1992. He served as
chief executive officer and president of UDC Homes, Inc. ("UDC "), a
Phoenix-based homebuilding company, from October 1994 until March 1996. Mr.
Kraemer was President and Chief Operating Officer of UDC from 1985 until October
1994. He was also a director of UDC from 1980 until March 1996. UDC filed for
protection under Chapter 11 of the
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Bankruptcy Code in May 1995. The plan for the reorganization of UDC was
confirmed by the bankruptcy court on October 3, 1995 and consummated on November
14, 1995.
JOHN R. POWER, JR. (Executive Committee.) Mr. Power has been a member of
America West's Board of Directors since August 26, 1994. He is president of The
Patrician Corporation, an investment company. Prior to joining The Patrician
Corporation, Mr. Power served as senior manager at Continental Bank. Mr. Power
also serves as a director of MRS Services and a subsidiary of J.I. Case
Corporation.
LARRY L. RISLEY. (Audit Committee.) Mr. Risley has been a member of
America West's Board of Directors since August 26, 1994. He has been the chief
executive officer and chairman of the board of directors of Mesa since the
founding of the company in 1983. From 1979 to 1982, Mr. Risley was president of
Mesa Aviation Services, Inc.
FRANK B. RYAN. (Audit Committee.) Dr. Ryan has been a member of America
West's Board of Directors since March 17, 1995. Since August 1990, Dr. Ryan has
been a professor of mathematics and of computational and applied mathematics,
and was formerly the vice president of external affairs, of Rice University.
From 1988 to 1990, Dr. Ryan served as president and chief executive officer of
Contex Electronics, Inc., an electronic component manufacturing company. Dr.
Ryan serves on the board of directors of Danielson Holding Corporation and
Sequoia Systems, Inc. and as a governor advisor to Rice University.
RICHARD P. SCHIFTER. (Compensation Committee.) Mr. Schifter has been a
member of America West's Board of Directors since August 26, 1994. He has been a
managing director of Texas Pacific Group, an investment firm, since July 1994.
Mr. Schifter serves of counsel to the Washington D.C. based law firm of Arnold &
Porter, where he was an associate from 1979 to 1986 and a partner from 1986 to
July 1994. Mr. Schifter serves on the board of directors of Favorite Brands,
Inc.
JOHN F. TIERNEY. Mr. Tierney has served as a member of America West's
Board of Directors since December 1993. Mr. Tierney is the assistant chief
executive and finance director of GPA and has served in such capacity since
1993. From 1981 to 1993, he served as chief financial officer of GPA.
RAYMOND S. TROUBH. (Audit Committee.) Mr. Troubh has been a member of
America West's Board of Directors since August 26, 1994. He is a financial
consultant and currently serves on the board of directors of ADT Limited,
Applied Power Inc., ARIAD Pharmaceuticals, Inc., Becton, Dickinson and Company,
Diamond Offshore Drilling, Inc., Foundation Health Corporation, General American
Investors Company, Olsten Corporation, Petrie Stores Corporation, Time Warner
Inc., Triarc Companies, Inc. and WHX Corporation.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is information regarding the executive officers of the
Company other than Mr. Franke and Mr. Goodmanson, who are described above.
RONALD A. ARAMINI. Senior Vice President -- Operations. Mr. Aramini joined
the Company in September 1996. From October 1993 until September 1996, Mr.
Aramini served as President and Chief Executive Officer of Allegheny Airlines, a
Pennsylvania-based regional airline subsidiary of US Air Group, Inc. Before
that, he served for three years at Air Wisconsin, including in positions as Vice
President -- Operations, Senior Vice President -- Operations, and President and
Chief Executive Officer. Prior to his position at Air Wisconsin, Mr. Aramini
served in various positions at Continental Airlines.
JOHN R. GAREL. Senior Vice President -- Marketing and Sales. Mr. Garel
joined the Company in April 1995. From 1993 until early 1995, Mr. Garel was the
Chief Executive Officer of Cadmus Journal Services, a division of Cadmus
Communications located in Baltimore. Prior to that, Mr. Garel was with Northwest
Airlines, serving from 1990 to 1992 as Vice President, Financial Planning and
Analysis and, thereafter, as Vice President, Market Development and Area
Marketing. Prior to that, Mr. Garel worked for American Airlines in several
management capacities.
STEPHEN L. JOHNSON. Senior Vice President -- Legal Affairs. Mr. Johnson
joined the Company in February 1995. From 1993 to 1994, Mr. Johnson served as
Senior Vice President and General Counsel
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to GE Capital Aviation Services Limited in Shannon, Ireland. From 1989 to 1993
Mr. Johnson was employed by GPA, also in Shannon, from 1989 to 1991 as Vice
President and Senior Counsel and from 1991 to 1993 as Senior Vice President and
General Counsel to GPA's Leasing Division. Prior to joining GPA, Mr. Johnson was
engaged in the private practice of law.
W. DOUGLAS PARKER. Senior Vice President and Chief Financial Officer. Mr.
Parker joined the Company in June 1995. From 1991 through June of 1995, he
worked in various capacities at Northwest Airlines, including positions as Vice
President -- Assistant Treasurer and Vice President -- Financial Planning and
Analysis. Prior to his employment at Northwest, Mr. Parker served in various
positions at American Airlines.
MICHAEL A. VESCUSO. Senior Vice President -- Human Resources. Mr. Vescuso
joined the Company in September 1994. Prior to such time, Mr. Vescuso worked as
an organizational and management development consultant. From 1990 to 1992 he
was the Director, Organization and Development of Frito-Lay, Inc. From 1978 to
1990, he held several senior management positions at HBJ, Inc., including the
position of human resources officer.
MICHAEL R. CARREON. Vice President and Controller. Mr. Carreon joined the
Company in December 1994 as Senior Director -- Corporate Audit. On January 1,
1996, he was appointed Vice President and Controller. From 1986 to 1994, Mr.
Carreon held accounting and audit-related management positions at United
Airlines. Prior to that, he served for five years in the Audit Services Practice
of Arthur Andersen & Co. in Chicago.
C. A. HOWLETT. Vice President -- Public Affairs. Mr. Howlett joined the
Company in January 1995. Prior to such time, Mr. Howlett maintained a government
relations practice as a principal at the law firm of Lewis and Roca in Phoenix.
Mr. Howlett's prior work experience has included senior positions with Salt
River Project, the City of Phoenix and The White House where he served as
special assistant to President Ronald Reagan for intergovernmental affairs.
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CERTAIN TRANSACTIONS
The Company has certain alliance agreements with Continental and Mesa. See
"Business -- Operations". Pursuant to a codesharing agreement with Mesa entered
into in December 1992 (which was prior to Mesa becoming a significant
stockholder), the Company assesses a per passenger charge for facilities,
reservations and other services from Mesa for enplanements on the Mesa system.
Such payments by Mesa to the Company totalled approximately $2.9 million for
1995. The Company entered into several agreements in 1994 and 1995 with
Continental relating to codesharing arrangements and ground handling operations.
The Company paid Continental approximately $14 million and received
approximately $11 million from Continental in 1995 for such services.
On October 14, 1994, the Company issued $13 million of its 11 1/4% Senior
Unsecured Notes due 2001 ("11 1/4% Notes") to Fidelity Management Trust Company
and certain of its affiliates ("Fidelity") and $10 million of such notes to
Lehman Brothers, Inc. ("Lehman") in satisfaction of certain claims and other
prepetition obligations totalling approximately $25 million held by Fidelity and
Lehman. Fidelity and Lehman are stockholders of the Company. See "Underwriting".
In connection with the issuance of such notes, Fidelity and Lehman also received
cash payments of $2.1 million and $1.3 million, respectively, representing the
portion of claims and other prepetition obligations not satisfied by the
issuance of the notes and other payments made in connection with the settlement
of such claims. In addition, Fidelity held an additional $100 million principal
amount of the 11 1/4% Notes. In August 1995, the Company prepaid $48 million
principal amount of the 11 1/4% Notes and exchanged the remaining $75 million
principal amount of such notes, held solely by Fidelity, for $75 million of the
Company's 10 3/4% Senior Unsecured Notes due 2005 (the "10 3/4% Notes"). In
connection with such transaction, Fidelity was paid a fee equal to 3 5/8% of the
principal amount of the new notes ($2,718,750). In the second quarter of 1996,
the Company prepaid $25 million of the 10 3/4% Notes.
In 1994 and 1995, the Company loaned Mr. Franke $470,282 and $203,136,
respectively, for the purpose of enabling him to pay income taxes attributable
to certain grants of Class B Common Stock made to Mr. Franke in 1994. In January
1996, the Company loaned Mr. Franke an additional $40,000 in connection with
such grants. The loans are each payable in two equal installments on September
26, 2000 and September 26, 2001. The 1994 loan bears interest (payable
semi-annually) at the rate of 8% per annum (11% per annum after maturity) and
the 1995 and 1996 loans bear interest at the rate of 6.02% per annum (10% per
annum after maturity). The loans are secured by a portion of the shares granted
to Mr. Franke, but are otherwise non-recourse to Mr. Franke.
In May 1996, the Company purchased Warrants to purchase 802,860 and
1,384,615 shares of the Company's Class B Common Stock from Continental and GPA,
respectively, for $6,531,266 and $11,609,997, respectively.
At September 30, 1996, the Company had leased one B737-300 aircraft and
three A320-200 aircraft, and was obligated to lease four additional aircraft
prior to June 30, 1999 under the GPA Put Agreement. Under the agreement, new or
used B737-300, B757-200, or new or "like new" A320-200 aircraft may be put to
the Company at a rate of no more than one aircraft in 1996 and three aircraft
per year thereafter. In addition, for every new A320 aircraft put to the
Company, the Company has the right to reduce deliveries under the AVSA A320
purchase contract on a one-for-one basis. In connection with the transactions
described in this Prospectus, the GPA Put Agreement will be terminated pursuant
to the GPA Put Termination Agreement and, as a result, GPA's right under the GPA
Put Agreement to put aircraft to the Company and the Company's obligation to
accept and lease such aircraft under the GPA Put Agreement will be terminated.
Pursuant to the GPA Put Termination Agreement, America West will be
obligated to pay the Original Lessees, over the life of the Leases, certain
amounts generally equal in the aggregate to (x) the amounts which the Company
would have been required to pay as monthly lease payments under the subleases
between the Company and the applicable Original Lessees with respect to the
Equipment (the "Prior Subleases", which will be terminated in connection with
the Company entering into the Leases) minus (y) the amount which the Company is
required to pay as Basic Rent under the Leases minus (z) an amount which results
in a rent savings to the Company, under the Leases as compared to the Prior
Subleases, of approximately
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$8 million. With respect to a particular item of Equipment, an amount, generally
equal to the portion of the amount described in the preceding sentence to be
paid with respect to such item of Equipment discounted to present value, must be
paid in connection with an Event of Loss (as defined herein) with respect
thereto (as described under "Description of the Equipment Notes -- The
Leases -- Events of Loss").
Pursuant to the GPA Put Termination Agreement and subject to a number of
conditions specified therein, GPA will be obligated to indemnify and reimburse
America West for certain of its costs and expenses (including certain of those
arising from indemnification obligations of the Company) incurred in connection
with the transactions contemplated by this Prospectus. In addition, GPA has
agreed to indemnify the Company against certain liabilities arising under
applicable securities laws with respect to certain information in this
Prospectus, and the Company has agreed to indemnify GPA against certain
liabilities arising under applicable securities laws with respect to certain
other information in this Prospectus.
After the consummation of the transactions described in this Prospectus,
the Company will continue to sublease eight of its A320-200 aircraft from the
Original Lessees.
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DESCRIPTION OF THE CERTIFICATES
The Certificates offered hereby will be issued pursuant to five separate
Trust Supplements to be entered into between America West and the Trustee
pursuant to the terms of the Basic Agreement. The following summary describes
certain terms of the Certificates, the Basic Agreement and the Trust
Supplements, forms of which have been filed as exhibits to the Registration
Statement. In addition, forms of the Basic Agreement and each Trust Supplement
will be filed by America West with the Commission as exhibits to a Current
Report on Form 8-K. The statements under this caption are a summary and do not
purport to be complete. The summary makes use of terms defined in, and is
qualified in its entirety by reference to, all of the provisions of the Basic
Agreement and the Trust Supplements. Except as otherwise indicated, the
following summary relates to each of the Trusts and the Certificates issued by
each Trust. The terms and conditions governing each of the Trusts will be
substantially the same, except as described under "-- Subordination" below and
except that the principal amount, the interest rate, scheduled repayments of
principal and maturity date applicable to the Equipment Notes held by each Trust
and the Final Expected Distribution Date applicable to each Trust will differ.
Section references in parentheses are to the relevant sections of the Basic
Agreement, unless otherwise indicated.
GENERAL
The Certificates of each Trust will be issued in fully registered form only
and will be subject to the provisions described below under "-- Delivery and
Form; Book-Entry". (Section 3.01) Each Certificate will represent a fractional
undivided interest in the Trust created by the Pass Through Trust Agreement
pursuant to which such Certificate is issued. (Section 2.01) The Trust Property
will consist of (i) the Equipment Notes held in such Trust, all monies at any
time paid thereon and all monies due and to become due thereunder, (ii) the
rights of such Trust under the Intercreditor Agreement (including all monies
receivable in respect of such rights), (iii) except for the Class D and Class E
Trusts, all monies receivable under the Liquidity Facility for such Trust and
(iv) funds from time to time deposited with the Trustee in accounts relating to
such Trust. (Section 1.01) Certificates will represent pro rata shares of the
Equipment Notes and other property held in the related Trust and will be issued
in denominations of $1,000 and integral multiples thereof. (Sections 2.01 and
3.01)
The Certificates represent interests in the respective Trusts and all
payments and distributions there will be made only from the Trust Property of
the related Trust. (Section 3.08) The Certificates do not represent an interest
in or obligation of America West, any Trustee, Indenture Trustee, Owner Trustee,
Owner Participant, or any affiliate of any thereof. Each Certificateholder by
its acceptance of a Certificate agrees to look solely to the income and proceeds
from the Trust Property of the related Trust as provided in the Pass Through
Trust Agreements.
The Equipment Notes issued under an Indenture may be held in more than one
Trust and one Trust may hold Equipment Notes issued under more than one
Indenture.
SUBORDINATION
Pursuant to the Intercreditor Agreement to which the Trustees, the
Subordination Agent and the Liquidity Provider will be parties, on each
Distribution Date, so long as no Triggering Event shall have occurred (whether
or not continuing), all payments received by the Subordination Agent in respect
of the Equipment Notes and certain other payments will be distributed in the
following order: (a) payment of the Liquidity Obligations to the Liquidity
Provider and, if applicable to replenish Cash Collateral Accounts up to their
respective Required Amounts; (b) payment of Expected Distributions to the
holders of Class A Certificates; (c) payment of Expected Distributions to the
holders of Class B Certificates; (d) payment of Expected Distributions to the
holders of Class C Certificates; (e) payment of Expected Distributions to the
holders of Class D Certificates; (f) payment of Expected Distributions to the
holders of the Class E Certificates; and (g) payment of certain fees and
expenses of the Subordination Agent and each Trustee.
Upon the occurrence of a Triggering Event and at all times thereafter, all
payments received by the Subordination Agent in respect of the Equipment Notes
and certain other payments will be distributed in the
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following order: (a) to reimburse the Subordination Agent, each Trustee, the
Liquidity Provider, and any Certificateholder, as the case may be, for the
payment of Administration Expenses; (b) to the Liquidity Provider in payment of
Liquidity Obligations and, so long as no Performing Note Deficiency exists and
no Liquidity Event of Default has occurred and is continuing, to replenish Cash
Collateral Accounts up to their respective Required Amounts; (c) to reimburse
the Subordination Agent, each Trustee and each Certificateholder, as the case
may be, for the payment of Certain Taxes and Fees; (d) to pay Adjusted Expected
Distributions to the holders of Class A Certificates; (e) to pay Adjusted
Expected Distributions to the holders of Class B Certificates; (f) to pay
Adjusted Expected Distributions to the holders of Class C Certificates; (g) to
pay Adjusted Expected Distributions to the holders of Class D Certificates; and
(h) to pay Adjusted Expected Distributions to the holders of Class E
Certificates.
The priority of distributions after a Triggering Event will have the effect
in certain circumstances of distributing payments received in respect of one or
more junior series of Equipment Notes to more senior Classes of Certificates. If
this should occur, the interest accruing on the remaining Equipment Notes would
be less than the interest accruing on the remaining Certificates because the
Certificates would have a greater proportion of high interest rate junior
Classes of Certificates. As a result of such possible interest shortfalls, the
holders of one or more junior Classes of Certificates may not receive the full
amount due them after a Triggering Event even if all the Equipment Notes are
eventually paid in full.
PAYMENTS AND DISTRIBUTIONS
Payments of principal, Make-Whole Amount (if any) and interest with respect
to the Equipment Notes or other Trust Property held in each Trust will be
distributed by the Trustee to Certificateholders of such Trust on the date
receipt of such payment is confirmed except in the case of certain types of
Special Payments.
The Equipment Notes held in each Trust will accrue interest at the
applicable rate per annum for the Certificates issued by such Trust as set forth
on the cover page of this Prospectus, payable on January 2 and July 2 of each
year, commencing January 2, 1997, and such interest payments will be passed
through to Certificateholders of such Trust on each such date until the final
Distribution Date for such Trust, in each case subject to the Intercreditor
Agreement. Interest is calculated on the basis of a 360-day year consisting of
twelve 30-day months. Payments of interest on the Certificates to be issued by
each Trust (other than the Class D and the Class E Trusts) will be supported by
a separate Liquidity Facility to be provided by the Liquidity Provider for the
benefit of the holders of such Certificates in an amount sufficient to pay
interest thereon at the Stated Interest Rate for such Trust on three successive
Regular Distribution Dates. Notwithstanding the subordination provisions of the
Intercreditor Agreement, the Liquidity Facility for any Class of Certificates
does not provide for drawings thereunder to pay principal of or interest or
Make-Whole Amount on the Certificates of any other Class. Therefore, only the
holders of the Certificates to be issued by a particular Trust will be entitled
to receive and retain the proceeds of drawings under the Liquidity Facility for
such Trust. There is no Liquidity Facility for the Class D and Class E Trusts.
See "Description of the Liquidity Facilities".
Payments of principal on the Equipment Notes held in each Trust are
scheduled to be received by the Trustee on January 2 or July 2 or both, in
certain years depending upon the terms of the Equipment Notes held in such
Trust, commencing January 2, 1997, in accordance with the principal repayment
schedule set forth herein in each case subject to the Intercreditor Agreement.
Scheduled payments of interest and principal on the Equipment Notes are herein
referred to as "Scheduled Payments", and January 2 and July 2 of each year are
herein referred to as "Regular Distribution Dates". See "Description of the
Equipment Notes -- Principal and Interest Payments". The Final Expected
Distribution Date for each Class of Certificates is set forth on the cover page
of this Prospectus.
The Trustee of each Trust will distribute, subject to the Intercreditor
Agreement, on each Regular Distribution Date to the Certificateholders of such
Trust all Scheduled Payments, the receipt of which is confirmed by the Trustee
on such Regular Distribution Date. Each Certificateholder of each Trust will be
entitled to receive a pro rata share of any distribution in respect of Scheduled
Payments made on the Equipment Notes held in such Trust. Each such distribution
of Scheduled Payments will be made by the
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Trustee of each Trust to the Certificateholders of record of such Trust on the
Record Date applicable to such Scheduled Payment subject to certain exceptions.
(Section 4.02) If a Scheduled Payment is not received by the Trustee on a
Regular Distribution Date but is received within five days thereafter, it will
be distributed to such holders of record on the date received. If it is received
after such five-day period, it will be treated as a Special Payment (as defined
below) and distributed as described below, except that payments received by the
Trustee following default in respect of the Equipment Notes on a Regular
Distribution Date as a result of a drawing under the Liquidity Facility shall be
distributed on such Regular Distribution Date.
Any payment in respect of, or any proceeds of, any Equipment Note or the
Trust Indenture Estate under (and as defined in) each Indenture (other than a
Scheduled Payment) (each, a "Special Payment") will be scheduled to be
distributed to the Certificateholders on the first business day which follows
the later to occur of (x) the 22nd day after the date the Trustees receive
written notice from the Subordination Agent of such Special Payment or (y) the
date the Subordination Agent receives or expects to receive such Special Payment
(the "Special Distribution Date"). (Intercreditor Agreement, Section 2.4(a))
Each Trustee will mail notice to the Certificateholders of the applicable Trust
stating the scheduled Special Distribution Date, the related Record Date, the
amount of such Special Payment, and the reason for the Special Payment. In the
case of a redemption or purchase of the Equipment Notes held in the related
Trust, such notice will be mailed not less than 20 days prior to the date such
Special Payment is scheduled to be distributed, and in the case of any other
Special Payment, such notice will be mailed as soon as practicable after the
Trustee has confirmed that it has received funds for such Special Payment.
(Section 4.02(c)) Each distribution of a Special Payment, other than a final
distribution, on a Distribution Date for any Trust will be made by the Trustee
to the Certificateholders of record of such Trust on the Record Date applicable
to such Special Payment. (Section 4.02(b)) See "-- Indenture Events of Default
and Certain Rights Upon an Indenture Event of Default" and "Description of the
Equipment Notes -- Redemption".
Each Pass Through Trust Agreement requires that the Trustee establish and
maintain, for the related Trust and for the benefit of the Certificateholders of
such Trust, one or more accounts (the "Certificate Account") for the deposit of
payments representing Scheduled Payments on the Equipment Notes held in such
Trust. Each Pass Through Trust Agreement also requires that the Trustee
establish and maintain, for the related Trust and for the benefit of the
Certificateholders of such Trust, one or more accounts (the "Special Payments
Account") for the deposit of payments representing Special Payments, which
account shall be non-interest bearing except in certain circumstances where the
Trustee may invest amounts in such account in certain permitted investments.
Pursuant to the terms of each Pass Through Trust Agreement, the Trustee is
required to deposit any Scheduled Payments relating to the applicable Trust
received by it in the Certificate Account of such Trust and to deposit any
Special Payments so received by it in the Special Payments Account of such
Trust. (Section 4.01) All amounts so deposited will be distributed by the
Trustee on a Regular Distribution Date or a Special Distribution Date, as
appropriate. (Section 4.02)
Distributions by the Trustee from the Certificate Account or the Special
Payments Account of each Trust on a Regular Distribution Date or a Special
Distribution Date in respect of Certificates issued by such Trust in definitive
form will be made to each Certificateholder of record of such Certificates on
the applicable Record Date. (Section 4.02) The final distribution for each
Trust, however, will be made only upon presentation and surrender of the
Certificates for such Trust at the office or agency of the Trustee specified in
the notice given by the Trustee of such final distribution. The Trustee will
mail such notice of the final distribution to the Certificateholders of such
Trust, specifying the date set for such final distribution and the amount of
such distribution. (Section 11.01) See "-- Termination of the Trusts".
Distributions in respect of Certificates issued in global form will be made as
described in "-- Delivery and Form; Book-Entry" below.
If any Regular Distribution Date or Special Distribution Date is not a
business day, distributions scheduled to be made on such Regular Distribution
Date or Special Distribution Date will be made on the next succeeding business
day without additional interest.
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<PAGE> 72
POOL FACTORS
Unless there has been a redemption, purchase or a default in the payment of
principal or interest in respect of one or more issues of the Equipment Notes
held in a Trust, as described in "-- Indenture Events of Default and Certain
Rights Upon an Indenture Event of Default" and "Description of the Equipment
Notes Redemption", the Pool Factor with respect to each Trust will decline in
proportion to the scheduled repayments of principal on the Equipment Notes held
in such Trust as described below in "Description of the Equipment Notes --
General". In the event of such redemption, purchase or default, the Pool Factor
and the Pool Balance of each Trust so affected will be recomputed after giving
effect thereto and notice thereof will be mailed to the Certificateholders of
such Trust. Each Trust will have a separate Pool Factor.
The "Pool Balance" for each Trust or for the Certificates issued by any
Trust indicates, as of any date, the original aggregate face amount of the
Certificates of such Trust less the aggregate amount of all payments made in
respect of the Certificates of such Trust other than payments made in respect of
interest or Make-Whole Amount thereon or reimbursement of any costs and expenses
in connection therewith. The Pool Balance for each Trust or for the Certificates
issued by any Trust as of any Regular Distribution Date or Special Distribution
Date shall be computed after giving effect to the payment of principal, if any,
on the Equipment Notes or other Trust Property held in such Trust and the
distribution thereof to be made on that date. (Section 1.01)
The "Pool Factor" for each Trust as of any Regular Distribution Date or
Special Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (i) the Pool Balance of such Trust as of such date by (ii)
the original aggregate face amount of the Certificates of such Trust. The Pool
Factor for each Trust as of any Regular Distribution Date or Special
Distribution Date shall be computed after giving effect to the payment of
principal, if any, on the Equipment Notes or other Trust Property held in such
Trust and the distribution thereof to be made on that date. (Section 1.01)
Assuming that no redemption, purchase or default, in respect of any Equipment
Notes shall have occurred, the Pool Factor for each Trust will be 1.0000000 on
the date of issuance of the Certificates; thereafter, the Pool Factor for each
Trust will decline as described herein to reflect reductions in the Pool Balance
of such Trust. The amount of a Certificateholder's pro rata share of the Pool
Balance of a Trust can be determined by multiplying the par value of the
holder's Certificate of such Trust by the Pool Factor for such Trust as of the
applicable Regular Distribution Date or Special Distribution Date. Notice of the
Pool Factor and the Pool Balance for each Trust will be mailed to
Certificateholders of such Trust on each Regular Distribution Date and Special
Distribution Date. (Section 4.03)
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<PAGE> 73
As of the date of sale by the Trustee of the Certificates and assuming that
no redemption, purchase or default in the payment of principal, in respect of
any Equipment Notes shall occur, the Scheduled Payments of principal on the
Equipment Notes held in the Class A Trust, the Class B Trust, the Class C Trust,
the Class D Trust and the Class E Trust, and the resulting Pool Factors for such
Trusts after taking into account each Scheduled Payment, are set forth below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
TRUST TRUST TRUST TRUST
EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT
NOTES CLASS A NOTES CLASS B NOTES CLASS C NOTES
SCHEDULED TRUST SCHEDULED TRUST SCHEDULED TRUST SCHEDULED
PAYMENTS OF EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF
DATES PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR PRINCIPAL
- ---------------------------- ----------- ----------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
November 26, 1996........... $ 0 1.0000000 $ 0 1.0000000 $ 0 1.0000000 $ 0
January 2, 1997............. 0 1.0000000 0 1.0000000 0 1.0000000 4,891,774
July 2, 1997................ 957,998 0.9903740 359,249 0.9903243 754,954 0.9799996 2,533,536
January 2, 1998............. 0 0.9903740 909,397 0.9658314 0 0.9799996 5,056,624
July 2, 1998................ 1,929,223 0.9709891 1,980,551 0.9124890 754,957 0.9599992 3,995,139
January 2, 1999............. 600,275 0.9649575 3,692,711 0.8130327 0 0.9599992 4,627,316
July 2, 1999................ 1,901,888 0.9458473 2,735,705 0.7393516 1,650,545 0.9162727 3,145,864
January 2, 2000............. 0 0.9458473 2,208,190 0.6798782 4,311,287 0.8020573 3,076,780
July 2, 2000................ 1,771,423 0.9280480 395,705 0.6692206 7,926,045 0.5920792 29,397
January 2, 2001............. 478,258 0.9232424 0 0.6692206 9,248,501 0.3470663 0
July 2, 2001................ 1,771,420 0.9054432 395,708 0.6585630 7,342,101 0.1525581 141,585
January 2, 2002............. 817,344 0.8972305 1,341,070 0.6224438 3,530,080 0.0590386 1,566,800
July 2, 2002................ 3,062,904 0.8664543 6,310,591 0.4524798 23,766 0.0584090 553,185
January 2, 2003............. 4,212,911 0.8241229 0 0.4524798 657,567 0.0409886 0
July 2, 2003................ 5,412,429 0.7697386 31,497 0.4516315 630,129 0.0242951 0
January 2, 2004............. 4,590,437 0.7236138 0 0.4516315 98,301 0.0216909 0
July 2, 2004................ 5,873,809 0.6645936 3,446,800 0.3587984 818,767 0.0000000 0
January 2, 2005............. 5,170,154 0.6126437 8,090,478 0.1408965 0 0.0000000 0
July 2, 2005................ 5,883,786 0.5535233 3,190,972 0.0549537 0 0.0000000 0
January 2, 2006............. 8,345,111 0.4696713 568,506 0.0396421 0 0.0000000 0
July 2, 2006................ 9,115,653 0.3780770 0 0.0396421 0 0.0000000 0
January 2, 2007............. 9,427,862 0.2833455 0 0.0396421 0 0.0000000 0
July 2, 2007................ 8,908,893 0.1938287 0 0.0396421 0 0.0000000 0
January 2, 2008............. 7,676,294 0.1166971 1,471,870 0.0000000 0 0.0000000 0
July 2, 2008................ 6,347,996 0.0529122 0 0.0000000 0 0.0000000 0
January 2, 2009............. 4,342,646 0.0092772 0 0.0000000 0 0.0000000 0
July 2, 2009................ 923,286 0.0000000 0 0.0000000 0 0.0000000 0
<CAPTION>
CLASS E
TRUST
EQUIPMENT
CLASS D NOTES CLASS E
TRUST SCHEDULED TRUST
EXPECTED PAYMENTS OF EXPECTED
DATES POOL FACTOR PRINCIPAL POOL FACTOR
- ---------------------------- ----------- ----------- -----------
<S> <<C> <C> <C>
November 26, 1996........... 1.0000000 $ 0 1.0000000
January 2, 1997............. 0.8348378 883,389 0.9392484
July 2, 1997................ 0.7492974 3,716,529 0.6836588
January 2, 1998............. 0.5785693 2,725,405 0.4962298
July 2, 1998................ 0.4436804 412,962 0.4678299
January 2, 1999............. 0.2874472 497,820 0.4335943
July 2, 1999................ 0.1812326 347,556 0.4096925
January 2, 2000............. 0.0773505 548,451 0.3719750
July 2, 2000................ 0.0763580 400,845 0.3444084
January 2, 2001............. 0.0763580 604,539 0.3028336
July 2, 2001................ 0.0715776 347,691 0.2789226
January 2, 2002............. 0.0186773 3,042,940 0.0696564
July 2, 2002................ 0.0000000 766,984 0.0169100
January 2, 2003............. 0.0000000 62,238 0.0126299
July 2, 2003................ 0.0000000 0 0.0126299
January 2, 2004............. 0.0000000 183,651 0.0000000
July 2, 2004................ 0.0000000 0 0.0000000
January 2, 2005............. 0.0000000 0 0.0000000
July 2, 2005................ 0.0000000 0 0.0000000
January 2, 2006............. 0.0000000 0 0.0000000
July 2, 2006................ 0.0000000 0 0.0000000
January 2, 2007............. 0.0000000 0 0.0000000
July 2, 2007................ 0.0000000 0 0.0000000
January 2, 2008............. 0.0000000 0 0.0000000
July 2, 2008................ 0.0000000 0 0.0000000
January 2, 2009............. 0.0000000 0 0.0000000
July 2, 2009................ 0.0000000 0 0.0000000
</TABLE>
Any failure to make expected principal distributions on any Class of
Certificates on any Regular Distribution Date (other than the Final Legal
Distribution Date) will not constitute a PTC Event of Default with respect to
such Certificates.
REPORTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date and Special Distribution Date, the
applicable Trustee will include with each distribution of a Scheduled Payment or
Special Payment, respectively, to Certificateholders of the related Trust a
statement, giving effect to such distribution to be made on such Regular
Distribution Date or Special Distribution Date, setting forth the following
information (per $1,000 aggregate principal amount of Certificate for such
Trust, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the amount
allocable to Make-Whole Amount (if any);
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Trust. (Section 4.03)
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<PAGE> 74
With respect to the Certificates registered in the name of DTC's nominee on
the Record Date prior to each Distribution Date, the applicable Trustee will
request from DTC a securities position listing setting forth the names of all
DTC Participants reflected on DTC's books as holding interests in the
Certificates on such Record Date. On each Distribution Date, the applicable
Trustee will mail to each such DTC Participant the statement described above and
will make available additional copies as requested by such DTC participant for
forwarding to holders of Certificates. (Section 4.03(a)) See "-- Delivery and
Form; Book-Entry".
In addition, after the end of each calendar year, the applicable Trustee
will furnish to each Certificateholder of each Trust at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (i) and (ii) above with respect to the Trust for such
calendar year or, in the event such person was a Certificateholder during only a
portion of such calendar year, for the applicable portion of such calendar year,
and such other items as are readily available to such Trustee and which a
Certificateholder shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its U.S. federal income tax returns. With
respect to Certificates registered in the name of DTC's nominee, such report and
such other items shall be prepared on the basis of information supplied to the
applicable Trustee by the DTC Participants and shall be delivered by such
Trustee to such DTC Participants to be available for forwarding by such DTC
Participants to Certificate Owners in the manner described above. (Section
4.03(b))
INDENTURE EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN INDENTURE EVENT OF
DEFAULT
An event of default under an Indenture (an "Indenture Event of Default")
will include an event of default under the related Lease (a "Lease Event of
Default"). See "Description of Equipment Notes -- Indenture Events of Default;
Notice and Waiver". Since the Equipment Notes issued under an Indenture will be
held in more than one Trust, a continuing Indenture Event of Default under such
Indenture would affect the Equipment Notes held by each such Trust. There are no
cross-default provisions in the Indentures or the Leases. Consequently, events
resulting in an Indenture Event of Default under any particular Indenture may or
may not result in an Indenture Event of Default under any other Indenture. If an
Indenture Event of Default occurs in fewer than all of the Indentures,
notwithstanding the treatment of Equipment Notes issued under any Indenture
under which an Indenture Event of Default has occurred, payments of principal
and interest on the Equipment Notes issued pursuant to Indentures with respect
to which an Indenture Event of Default has not occurred will continue to be
distributed to the holders of the Certificates as originally scheduled, subject
to the Intercreditor Agreement. See "Description of the Intercreditor Agreement
- -- Priority of Distributions".
With respect to each Aircraft or Spare Engine, the applicable Owner Trustee
and Owner Participant will, under the related Indenture, have the right under
certain circumstances to cure Indenture Events of Default that result from the
occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee or the Owner Participant exercises any such cure right, the Indenture
Event of Default will be deemed to have been cured.
Because the Equipment Notes outstanding under an Indenture will be held by
more than one Trust, the ability of the Certificateholders with respect to any
one Trust to cause the Indenture Trustee with respect to any Equipment Notes
held in such Trust to accelerate the Equipment Notes under the related Indenture
or to direct the exercise of remedies by the Indenture Trustee under the related
Indenture will depend, in part, upon the proportion between the aggregate unpaid
principal amount of the Equipment Notes outstanding under such Indenture and
held in such Trust and the aggregate unpaid principal amount of all Equipment
Notes outstanding under such Indenture. Because the Equipment Notes outstanding
under an Indenture will be held by more than one Trust, each Trust will hold
Equipment Notes with different terms from the Equipment Notes held in the other
Trusts and therefore the Certificateholders of a Trust may have divergent or
conflicting interests from those of the Certificateholders of the other Trusts
holding Equipment Notes relating to the same Indenture.
In the event that the same institution acts as Trustee of multiple Trusts,
in the absence of instructions from the Certificateholders of any such Trust,
such Trustee could be faced with a potential conflict of interest
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upon an Indenture Event of Default. In such event, one or more Trustees may
resign as Trustee of one or all such Trusts, and a successor trustee would then
be appointed in accordance with the terms of the applicable Pass Through Trust
Agreement. Fleet National Bank will be the initial Trustee under each Trust.
Upon the occurrence and during the continuation of any Indenture Event of
Default under any Indenture, the Controlling Party shall direct the Indenture
Trustee under such Indenture in the exercise of remedies thereunder and may
accelerate and sell all (but not less than all) of the Equipment Notes issued
under such Indenture to any person, subject to certain limitations. See
"Description of the Intercreditor Agreement -- Sale of Equipment Notes and
Equipment". The proceeds of such sale will be distributed pursuant to the
provisions of the Intercreditor Agreement. Any proceeds received by the
applicable Trustee upon any such sale shall be deposited in the applicable
Special Payments Account and shall be distributed to the Certificateholders of
such Trust on a Special Distribution Date. (Sections 4.01 and 4.02) The market
for Equipment Notes at the time of the existence of any Indenture Event of
Default may be very limited, and there can be no assurance as to the price at
which they could be sold. If the Controlling Party sells any such Equipment
Notes for less than their outstanding principal amount, certain
Certificateholders will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against America West,
any Owner Trustee, any Owner Participant or any Trustee.
Any amount, other than Scheduled Payments received on a Regular
Distribution Date, distributed to the Trustee of any Trust by the Subordination
Agent on account of the Equipment Notes or other Trust Property held in such
Trust following an Indenture Event of Default under any Indenture shall be
deposited in the Special Payments Account for such Trust and shall be
distributed to the Certificateholders of such Trust on a Special Distribution
Date. (Sections 4.01 and 4.02) In addition, if, following an Indenture Event of
Default under any Indenture, the applicable Owner Participant or Owner Trustee
exercises its option to purchase the outstanding Equipment Notes issued under
such Indenture, the price paid by such Owner Participant or Owner Trustee for
the Equipment Notes issued under such Indenture and distributed to such Trust by
the Subordination Agent shall be deposited in the Special Payments Account for
such Trust and shall be distributed to the Certificateholders of such Trust on a
Special Distribution Date. (Sections 4.01 and 4.02)
Any funds representing payments received with respect to any defaulted
Equipment Notes held in a Trust, or the proceeds from the sale of any Equipment
Notes, held by such Trustee in the Special Payments Account for such Trust
shall, to the extent practicable, be invested and reinvested by such Trustee in
Permitted Investments pending the distribution of such funds on a Special
Distribution Date. (Section 4.04) Permitted Investments are defined as
obligations of the United States or agencies or instrumentalities thereof the
payment of which is backed by the full faith and credit of the United States and
which mature in not more than 60 days or such lesser time as is required for the
distribution of any such funds on a Special Distribution Date. (Section 1.01)
Each Pass Through Trust Agreement provides that the Trustee of the related
Trust shall, within 90 days after the occurrence of any default, give to the
Certificateholders of such Trust notice, transmitted by mail, of all uncured or
unwaived defaults with respect to such Trust known to it, provided that, except
in the case of default in the payment of principal, Make-Whole Amount, if any,
or interest on any Equipment Note the applicable Trustee shall be protected in
withholding such notice if and so long as it in good faith determines that the
withholding of such notice is in the interests of such Certificateholders.
(Section 7.01) The term "default" as used in this paragraph with respect to any
Trust only means the occurrence of an Indenture Event of Default under any
Indenture pursuant to which Equipment Notes held by such Trust were issued, as
described above, except that in determining whether any such Indenture Event of
Default has occurred, any grace period or notice in connection therewith shall
be disregarded.
Each Pass Through Trust Agreement contains a provision entitling the
Trustee of the related Trust, subject to the duty of such Trustee during a
default to act with the required standard of care, to be offered reasonable
security or indemnity by the holders of the Certificates of such Trust before
proceeding to exercise any right or power under such Pass Through Agreement at
the request of such Certificateholders. (Section 7.02(e))
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<PAGE> 76
In certain cases, the holders of the Certificates of a Trust evidencing
fractional undivided interests aggregating not less than a majority in interest
of such Trust may on behalf of the holders of all the Certificates of such Trust
waive any past default under the related Pass Through Trust Agreement or, if the
Trustee of such Trust is the Controlling Party, may direct the Trustee to
instruct the applicable Indenture Trustee to waive any past Indenture Event of
Default with respect to Equipment Notes held in such Trust and thereby annul any
direction given by such holders or the Trustee to such Indenture Trustee with
respect thereto, except (i) a default in the deposit of any Scheduled Payment or
Special Payment or in the distribution thereof, (ii) a default in payment of the
principal, Make-Whole Amount, if any, or interest with respect to any of the
Equipment Notes held in such Trust and (iii) a default in respect of any
covenant or provision of the related Pass Through Trust Agreement that cannot be
modified or amended without the consent of each Certificateholder of such Trust
affected thereby. (Section 6.05) Each Indenture will provide that, with certain
exceptions, the holders of the majority in aggregate unpaid principal amount of
the Equipment Notes issued thereunder may on behalf of all such holders waive
any past Indenture Event of Default thereunder. Notwithstanding the foregoing
provisions of this paragraph, however, pursuant to the Intercreditor Agreement,
only the Controlling Party will be entitled to waive any such past default or
Indenture Event of Default.
PURCHASE RIGHTS OF CERTIFICATEHOLDERS
Upon the occurrence and during the continuation of a Triggering Event, with
ten days' written notice to the Trustee and each other Certificateholder of the
same Class, (i) the Class B Certificateholders shall have the right to purchase
all, but not less than all, of the Class A Certificates, (ii) the Class C
Certificateholders shall have the right to purchase all, but not less than all,
of the Class A Certificates and the Class B Certificates, (iii) the Class D
Certificateholders shall have the right to purchase all, but not less than all,
of the Class A Certificates, the Class B Certificates and the Class C
Certificates and (iv) the Class E Certificateholders shall have the right to
purchase all, but not less than all, of the Class A Certificates, the Class B
Certificates, the Class C Certificates and the Class D Certificates, in each
case at a purchase price equal to the Pool Balance of the relevant Class or
Classes of Certificates plus accrued and unpaid interest thereon to the date of
purchase without any Make-Whole Amount but including any other amounts due to
the Certificateholders of such Class or Classes. In each case, if prior to the
end of the ten-day period, any other Certificateholder of the same Class
notifies the purchasing Certificateholder that the other Certificateholder wants
to participate in such purchase, then such other Certificateholder may join with
the purchasing Certificateholder to purchase the Certificates pro rata based on
the interest in the Trust held by each Certificateholder. (Section 6.01(b))
PTC EVENT OF DEFAULT
A PTC Event of Default is defined under each Pass Through Trust Agreement
as the failure to pay within 10 business days of the due date thereof: (i) the
outstanding Pool Balance of the applicable Class of Certificates on the Final
Legal Distribution Date for such Class or (ii) interest due on such Class of
Certificates on any Distribution Date (unless, in the case of the Class A, B or
C Certificates, the Subordination Agent shall have made an Interest Drawing with
respect thereto in an amount sufficient to pay such interest and shall have
distributed such amount to the Certificateholders entitled thereto). A PTC Event
of Default with respect to the most senior Class of Certificates resulting from
an Indenture Event of Default under all Indentures will constitute a Triggering
Event.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
America West will be prohibited from consolidating with or merging into any
other corporation or transferring substantially all of its assets as an entirety
to any other corporation unless (i) the surviving successor or transferee
corporation shall (a) be a "citizen of the United States" as defined in Section
40102(a)(15) of Title 49 of the United States Code, as amended, relating to
aviation (the "Federal Aviation Act"), (b) be a United States certificated air
carrier and (c) expressly assume all of the obligations of America West
contained in the Pass Through Trust Agreements, the Refunding Agreements, the
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<PAGE> 77
Indentures, the Leases, and certain related documents; (ii) immediately after
giving effect to such transaction, no Indenture Event of Default shall have
occurred and be continuing; and (iii) America West shall have delivered a
certificate and an opinion or opinions of counsel indicating that such
transaction complies with such conditions. (Section 5.02)
The Pass Through Trust Agreements, the Leases, the Indentures and the
Refunding Agreements will not contain any covenants or provisions which may
afford the applicable Trustee or Certificateholders protection in the event of a
highly leveraged transaction, including transactions effected by management or
affiliates, which may or may not result in a change in control of America West.
MODIFICATIONS OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER AGREEMENTS
Each Pass Through Trust Agreement contains provisions permitting the
execution by the Company and the Trustee of one or more agreements supplemental
to such Pass-Through Trust Agreement or, if applicable, to the Intercreditor
Agreement, any Refunding Agreement, any Liquidity Facility or any Indenture,
without the consent of the holders of any of the Certificates of the related
Trust, (i) to evidence the succession of another corporation to America West and
the assumption by such corporation of America West's obligations under such Pass
Through Trust Agreement, (ii) to add to the covenants of America West for the
benefit of holders of such Certificates or to surrender any right or power in
such Pass Through Trust Agreement conferred upon America West, (iii) to correct
or supplement any provision of such Pass Through Trust Agreement, the
Intercreditor Agreement, any Refunding Agreement, any Liquidity Facility or any
Indenture which may be defective or inconsistent with any other provision in
such Pass Through Trust Agreement or to cure any ambiguity, correct any mistake,
or to modify any other provisions with respect to matters or questions arising
under such Pass Through Trust Agreement, the Intercreditor Agreement, any
Refunding Agreement, any Liquidity Facility or any Indenture, provided such
action shall not materially adversely affect the interests of the holders of
such Certificates, (iv) to add to such Pass Through Trust Agreement such other
provisions as may be expressly permitted by the Trust Indenture Act and (v) to
provide for a successor Trustee or to add to or change any provision of such
Pass Through Trust Agreement as shall be necessary to facilitate the
administration of the Trust thereunder by more than one Trustee, provided that
in each case, such modification does not adversely affect the status of the
Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of
Subtitle A of the Code for U.S. federal income tax purposes. (Section 9.01)
Each Pass Through Trust Agreement also contains provisions permitting the
execution, with the consent of the holders of the Certificates of the related
Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust, and with the consent of the applicable Owner
Trustee (such consent not to be unreasonably withheld), of supplemental trust
agreements adding any provisions to or changing or eliminating any of the
provisions of such Pass Through Trust Agreement or, if applicable, the
Intercreditor Agreement, any Liquidity Facility or any Refunding Agreement or
modifying the rights of the Certificateholders, except that no such supplemental
agreement may, without the consent of the holder of each Certificate so affected
thereby, (a) reduce in any manner the amount of, or delay the timing of, any
receipt by the Trustee of payments on the Equipment Notes held in such Trust or
distributions in respect of any Certificate related to such Trust, or change the
date or place of any payment in respect of any Certificate, or make
distributions payable in coin or currency other than that provided for in such
Certificates, or impair the right of any Certificateholder of such Trust to
institute suit for the enforcement of any such payment when due, (b) permit the
disposition of any Equipment Note held in such Trust, except as provided in such
Pass Through Trust Agreement, or otherwise deprive any Certificateholder of the
benefit of the ownership of the applicable Equipment Notes, (c) alter the
priority of distributions specified in the Intercreditor Agreement, (d) reduce
the percentage of the aggregate fractional undivided interests of the Trust
provided for in such Pass Through Trust Agreement, the consent of the holders of
which is required for any such supplemental agreement or for any waiver provided
for in such Pass Through Trust Agreement, (e) modify any of the provisions
relating to supplemental agreements that may be executed with the consent of
Certificateholders as described in this paragraph or relating to the rights of
the Certificateholders in respect of the waiver of Events of Default or receipt
of payment or (f) adversely affect the status of the Trust as a grantor trust
under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Code
for U.S. federal income tax purposes. (Section 9.02)
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TERMINATION OF THE TRUSTS
The obligations of America West, if any, and the Trustee with respect to a
Trust will terminate upon the distribution to Certificateholders of such Trust
of all amounts required to be distributed to them pursuant to the applicable
Pass Through Trust Agreement and the disposition of all property held in such
Trust. The Trustee will send to each Certificateholder of record of such Trust
notice of the termination of such Trust, the amount of the proposed final
payment and the proposed date for the distribution of such final payment for
such Trust. The final distribution to any Certificateholder of such Trust will
be made only upon surrender of such Certificateholder's Certificates at the
office or agency of the applicable Trustee specified in such notice of
termination. (Section 11.01)
THE TRUSTEE
Fleet National Bank will act as Trustee and as paying agent and registrar
for the Certificates of each Trust. With certain exceptions, the Trustee makes
no representations as to the validity or sufficiency of the Basic Agreement, the
Trust Supplements, the Refunding Agreements, the Intercreditor Agreement, the
Certificates, the Equipment Notes, the Indentures, the Leases or other related
documents. (Sections 7.03 and 7.14) The Trustee of any Trust shall not be
liable, with respect to the Certificates of such Trust, for any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
holders of a majority in principal amount of outstanding Certificates of such
Trust. Subject to certain provisions, the Trustee shall be under no obligation
to exercise any of its rights or powers under any Pass Through Trust Agreement
at the request of any holders of Certificates issued thereunder unless there
shall have been offered to the Trustee reasonable indemnity. (Section 7.02(e))
Each Pass Through Trust Agreement provides that the Trustee, in its individual
or any other capacity, may acquire and hold Certificates issued thereunder and,
subject to certain conditions, may otherwise deal with America West, any Owner
Trustees or the Indenture Trustees with the same rights it would have if it were
not the Trustee. (Section 7.04)
The Trustee may resign with respect to any or all of the Trusts at any
time, in which event America West will be obligated to appoint a successor
trustee. If the Trustee ceases to be eligible to continue as Trustee with
respect to a Trust or becomes incapable of acting as Trustee or becomes
insolvent, America West may remove such Trustee, or, alternatively, any
Certificateholder of such Trust for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of such Trustee and the appointment of a successor
trustee. (Sections 7.07 and 7.08). Any resignation or removal of the Trustee
with respect to a Trust and appointment of a successor trustee for such Trust
does not become effective until acceptance of the appointment by the successor
trustee. Pursuant to such resignation and successor trustee provisions, it is
possible that a different trustee could be appointed to act as the successor
trustee with respect to each Trust. All references in this Prospectus to the
Trustee should be read to take into account the possibility that the Trusts
could have different successor trustees in the event of such a resignation or
removal.
The Basic Agreement provides that America West will pay, or cause to be
paid, the Trustee's fees and expenses and indemnify, or cause to be indemnified,
the Trustee against certain liabilities. (Section 7.06)
DELIVERY AND FORM; BOOK-ENTRY
GENERAL
Upon issuance, each Class of Certificates will be represented by one or
more fully registered global certificates (the "Global Certificates"). Each
Global Certificate will be deposited with, or on behalf of, The Depository Trust
Company ("DTC ") and registered in the name of Cede & Co. ("Cede") or its
nominee. No person acquiring an interest in such Global Certificates
("Certificate Owner") will be entitled to receive a certificate representing
such person's interest in such Certificates, except as set forth below under "--
Definitive Certificates." Unless and until Definitive Certificates are issued
under the limited circumstances described herein, all references to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
DTC Participants (as defined below), and all references herein to distributions,
notices, reports and statements to Certificateholders shall refer, as the case
may be, to distributions, notices,
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reports and statements to DTC or Cede, as the registered holder of such Global
Certificates, or to DTC Participants for distribution to Certificate Owners in
accordance with DTC procedures.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
"clearing agency" registered pursuant to section 17A of the Exchange Act. DTC
was created to hold securities for its participants ("DTC Participants") and to
facilitate the clearance and settlement of securities transactions between DTC
Participants through electronic book-entries, thereby eliminating the need for
physical transfer of certificates. DTC Participants include securities brokers
and dealers, banks, trust companies and clearing corporations. Indirect access
to the DTC system also is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a DTC Participant either directly or indirectly ("Indirect Participants").
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, the Global Certificates may do so only through DTC Participants
and Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Trustee through DTC
Participants or Indirect Participants, as the case may be. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, because such payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward such payments in same-day funds to DTC
Participants who are credited with ownership of the Certificates in amounts
proportionate to the principal amount of each such DTC Participant's respective
holdings of beneficial interests in the Global Certificates. DTC Participants
will thereafter forward payments to Indirect Participants or Certificate Owners,
as the case may be, in accordance with customary industry practices. The
forwarding of such distributions to the Certificate Owners will be the
responsibility of such DTC Participants. Unless and until the Definitive
Certificates are issued under the limited circumstances described herein, the
only "Certificateholder" will be Cede, as nominee of DTC. Certificate Owners
will not be recognized by the Trustee as Certificateholders, as such term is
used in the Basic Agreement, and Certificate Owners will be permitted to
exercise the rights of Certificateholders only indirectly through DTC and DTC
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Certificates among DTC Participants on whose behalf it acts with respect to
the Certificates and to receive and transmit distributions of principal,
Make-Whole Amount, if any, and interest with respect to the Certificates. DTC
Participants and Indirect Participants with which Certificate Owners have
accounts with respect to the Certificates similarly are required to make book-
entry transfers and receive and transmit such payments on behalf of their
respective customers. Accordingly, although Certificate Owners will not possess
the Certificates, the Rules provide a mechanism by which Certificate Owners will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
the Certificates to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Certificates, may be limited
due to the lack of a physical certificate for such Certificates.
DTC will take any action permitted to be taken by a Certificateholder under
the Basic Agreement only at the direction of one or more DTC Participants to
whose accounts with DTC the Certificates are credited. Additionally, DTC has
advised that in the event any action requires approval by Certificateholders of
a certain percentage of beneficial interest in each Trust, DTC will take such
action only at the direction of and on behalf of DTC Participants whose holders
include undivided interests that satisfy any such percentage. DTC may take
conflicting actions with respect to other undivided interests to the extent that
such actions are taken on behalf of DTC Participants whose holders include such
undivided interests.
Neither America West nor the Trustee will have any liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in the Certificates held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that America West believes to be reliable, but
America West takes no responsibility for the accuracy thereof.
DEFINITIVE CERTIFICATES
Certificates will be issued in certificated form ("Definitive
Certificates") to Certificate Owners or their nominees, rather than to DTC or
its nominee, only if (i) DTC advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as depository
with respect to such Certificates and America West is unable to locate a
qualified successor, (ii) America West, at its option, elects to terminate the
book-entry system through DTC or (iii) after the occurrence of an Indenture
Event of Default, Certificate Owners with fractional undivided interests
aggregating not less than a majority in interest in such Trust advise the
Trustee, America West and DTC through DTC Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto) is no
longer in the Certificate Owners' best interest. (Section 3.09(c))
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify all Certificate Owners through
DTC Participants of the availability of Definitive Certificates. Upon surrender
by DTC of the certificates representing the Certificates and receipt of
instructions for re-registration, the Trustee will reissue the Certificates as
Definitive Certificates to Certificate Owners. (Section 3.09(c))
Distributions of principal, Make-Whole Amount, if any, and interest with
respect to Certificates will thereafter be made by the Trustee directly in
accordance with the procedures set forth in the Basic Agreement and the
applicable Trust Supplements, to holders in whose names the Definitive
Certificates were registered at the close of business on the applicable record
date. Such distributions will be made by check mailed to the address of such
holder as it appears on the register maintained by the Trustee. (Section 4.02(a)
The final payment on any Certificate, however, will be made only upon
presentation and surrender of such Certificate at the office or agency specified
in the notice of final distribution to Certificateholders. (Section 11.01)
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee upon compliance with the requirements set forth in the
Pass Through Trust Agreements. No service charge will be imposed for any
registration of transfer or exchange, but payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection therewith
shall be required. (Section 3.04)
If any Definitive Certificate at any time is mutilated, destroyed, stolen
or lost, such Definitive Certificate may be replaced at the cost of the
applicant (including a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any fees and expenses of the
Trustee and any registrar) at the office of the Trustee or the registrar, if
applicable, upon provision of evidence satisfactory to the Trustee or the
registrar, if applicable, that such Definitive Certificate was destroyed, stolen
or lost, together with such indemnity as the Trustee and the registrar may
require. Mutilated Definitive Certificates must be surrendered before
replacements will be issued. (Section 3.05)
CERTIFICATE AS TO COMPLIANCE
Each Pass Through Trust Agreement provides that the Company is required to
furnish to the Trustee, not less often than annually, a brief certificate from
the principal executive officer, principal financial officer or principal
accounting officer as to his or her knowledge of the Company's compliance with
all conditions and covenants under such Pass Through Trust Agreement (for such
purposes, such compliance shall be determined without regard to any period of
grace or requirement of notice provided under such Pass Through Trust
Agreement). (Section 8.04(d))
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DESCRIPTION OF THE LIQUIDITY FACILITIES
The following summary describes certain terms of the Liquidity Facilities
and certain provisions of the Intercreditor Agreement relating to the Liquidity
Facilities. Forms of the Liquidity Facilities and the Intercreditor Agreement
have been filed as exhibits to the Registration Statement. In addition, forms of
the Liquidity Facilities and the Intercreditor Agreement will be filed by
America West with the Commission as exhibits to a Current Report on Form 8-K.
The statements under this caption are a summary and do not purport to be
complete. The summary makes use of terms defined in, and is qualified in its
entirety by reference to, all of the provisions of the Liquidity Facilities and
the Intercreditor Agreement. The provisions of the Liquidity Facilities are
substantially identical except as otherwise indicated. Section references in
parentheses are to relevant sections of the Liquidity Facilities and the
Intercreditor Agreement.
GENERAL
With respect to the Certificates to be issued by each Trust (other than the
Class D and the Class E Trusts), the Subordination Agent will enter into a
separate Liquidity Facility with the Liquidity Provider pursuant to which the
Liquidity Provider will make one or more advances to the Subordination Agent to
pay interest on such Certificates subject to certain limitations. The Liquidity
Facility for each Trust is intended to enhance the likelihood of timely receipt
by the Certificateholders of such Trust of the interest payable on the
Certificates of such Trust at the Stated Interest Rate therefor on three
consecutive Regular Distribution Dates. If interest payment defaults occur which
exceed the amount covered by or available under the Liquidity Facility for any
Trust, the Certificateholders of such Trust will bear their allocable share of
the deficiencies to the extent that there are no other sources of funds.
Although Kredietbank N.V., acting through its New York branch, is the Liquidity
Provider for each Trust entitled to the benefits of a Liquidity Facility, it may
be replaced by another entity with respect to one or more such Trusts under
certain circumstances. Therefore, the Liquidity Provider for a given Trust at
any given time may be different from the Liquidity Provider for any other Trust.
DRAWINGS
The initial stated amount available under the Liquidity Facilities for the
Class A Trust, the Class B Trust and the Class C Trust will be $10,225,886,
$3,859,560 and $3,884,166, respectively. Except as otherwise provided below, the
Liquidity Facility for each Trust will enable the Subordination Agent to make
Interest Drawings thereunder promptly after any Regular Distribution Date to pay
interest then due and payable on the Certificates of such Trust at the Stated
Interest Rate for such Trust to the extent that the amount, if any, available to
the Subordination Agent on such Regular Distribution Date is not sufficient to
pay such interest; provided, however, that the maximum amount available to be
drawn under such Liquidity Facility on any Regular Distribution Date to fund any
shortfall of interest on such Certificates will not exceed the Required Amount
with respect to such Liquidity Facility. The Liquidity Facility for any Trust
does not provide for drawings thereunder to pay for principal of, or Make-Whole
Amount on the Certificates of such Trust or any interest on the Certificates of
such Trust in excess of the Stated Interest Rate or principal of or interest or
Make-Whole Amount on, the Certificates of any other Trust. (Liquidity
Facilities, Section 2.2; Intercreditor Agreement, Section 3.6)
Each payment by the Liquidity Provider under each Liquidity Facility
reduces pro tanto the amount available to be drawn under such Liquidity
Facility, subject to reinstatement as hereinafter described. With respect to any
Interest Drawings under the Liquidity Facility for any Trusts, upon
reimbursement of the Liquidity Provider in full for the amount of such Interest
Drawings plus interest thereon, the amount available to be drawn under such
Liquidity Facility in respect of interest on the Certificates of such Trust
shall be reinstated to the then Required Amount of such Liquidity Facility;
provided, however, that such Liquidity Facility shall not be so reinstated at
any time if (i) a Liquidity Event of Default shall have occurred and be
continuing or (ii) both (A) a Triggering Event shall have occurred and be
continuing and (B) a Performing Note Deficiency exists. With respect to any
other drawings under such Liquidity Facility, amounts available to be drawn
thereunder are not subject to reinstatement. The stated amount of the Liquidity
Facility for any Trust will be automatically reduced from time to time to an
amount equal to the next three successive interest
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payments due on the Certificates of such Trust (without regard to expected
future payment of principal of such Certificates) at the Stated Interest Rate
for such Trust. The Liquidity Provider will be paid a fee on the average amount
available to be drawn under the initial Liquidity Facility until the earlier of
the date when the commitment under the Liquidity Facility terminates and the
date when a Downgrade Drawing, if any, is made, in an amount and on the dates
specified in the Liquidity Facilities. (Liquidity Facilities, Sections 2.2, 2.3
and 2.4(a); Intercreditor Agreement, Section 3.6(j))
If at any time the debt rating of the Liquidity Provider issued by either
Rating Agency is lower than the applicable Threshold Rating, then the Liquidity
Provider for the related Trust or the Subordination Agent may arrange for a
Replacement Facility (as defined below). In the event that such Liquidity
Facility is not replaced with a Replacement Facility within the period specified
in the Intercreditor Agreement after notice of the downgrading and as otherwise
provided in the Intercreditor Agreement, the Subordination Agent shall request
the Downgrade Drawing in an amount equal to all available and undrawn amounts
thereunder and shall hold the proceeds thereof in the Cash Collateral Account
for such Trust as cash collateral to be used for the same purposes and under the
same circumstances as cash payments of Interest Drawings under such Liquidity
Facility would be used. (Liquidity Facilities, Sections 2.2(b) and 2.6;
Intercreditor Agreement, Section 3.6(c) and (f))
A "Replacement Facility" for any Trust will mean an irrevocable liquidity
facility in substantially the form of the initial Liquidity Facility for such
Trust, including reinstatement provisions, or, subject to certain conditions, in
such other form (which may include a letter of credit) as shall permit the
Rating Agencies to confirm in writing their respective ratings then in effect
for the Certificates (before downgrading of such ratings, if any, as a result of
the downgrading of the Liquidity Provider), in a face amount equal to the
Required Amount for such Liquidity Facility and issued by a person having debt
ratings which are equal to or higher than the Threshold Rating. (Intercreditor
Agreement, Section 1.1)
The Liquidity Facility for each Trust provides that the Liquidity
Provider's obligations thereunder will expire on the earliest of (i) 15 days
later than the Final Legal Distribution Date for the Certificates of such Trust;
(ii) the date on which the Subordination Agent delivers a certificate certifying
that all of the Certificates of such Trust have been paid in full; (iii) the
date on which the Subordination Agent delivers a certificate certifying that a
Replacement Facility has been substituted for such Liquidity Facility; (iv) the
date on which the Liquidity Provider makes the Final Drawing; and (v) the date
on which no amount is or may (by reason of reinstatement) become available for
drawing under such Liquidity Facility. (Liquidity Facilities, Sections 1.1(a)
and 2.4(b))
The Subordination Agent, in consultation with America West (whose
recommendations the Subordination Agent will accept), may, subject to certain
limitations, arrange for a Replacement Facility at any time to replace the
Liquidity Facility for any Trust. If such replacement facility is provided at
any time after a Downgrade Drawing under such Liquidity Facility, all funds on
deposit in the relevant Cash Collateral Account will be returned to the
Liquidity Provider being replaced. (Intercreditor Agreement, Section 3.6(e))
The Intercreditor Agreement provides that the Subordination Agent shall
hold the proceeds of a Final Drawing (defined below) made in accordance with the
provisions set forth under "-- Liquidity Events of Default" below in the Cash
Collateral Account for the related Trust as cash collateral to be used for the
same purposes and under the same circumstances, and subject to the same
conditions, as cash payments of Interest Drawings under such Liquidity Facility
would be used. The Intercreditor Agreement further provides that the
Subordination Agent shall not fail to take any action which may be expressly
required to be taken by the Subordination Agent in order to make a Final Drawing
under a Liquidity Facility. (Intercreditor Agreement, Section 3.6(i))
Drawings (other than a Final Drawing) under any Liquidity Facility will be
made by delivery by the Subordination Agent of a certificate in the form
required by such Liquidity Facility. Upon receipt of such a certificate, the
Liquidity Provider is obligated to make payment of the drawing requested thereby
in immediately available funds. Upon payment by the Liquidity Provider of the
amount specified in any drawing
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under any Liquidity Facility, the Liquidity Provider will be fully discharged of
its obligations under such Liquidity Facility with respect to such drawing and
will not thereafter be obligated to make any further payments under such
Liquidity Facility in respect of such drawing to the Subordination Agent or any
other person or entity who makes a demand for payment in respect of interest on
the related Certificates. (Liquidity Facilities, Section 2.2)
REIMBURSEMENT OF DRAWINGS
Amounts drawn under any Liquidity Facility by reason of an Interest Drawing
or a Final Drawing, and any portion of a Downgrade Drawing applied to the
payment of interest on the Certificates, will be immediately due and payable,
together with interest on the amount of such drawing at a rate equal to (i) in
the case of an Interest Drawing or the portion of a Downgrade Drawing applied to
the payment of interest or the Certificates, with respect to the period from the
date of its borrowing to (but excluding) the third business day following the
applicable Liquidity Provider's receipt of the notice of the applicable drawing,
at the Base Rate plus 1.50% per annum, and thereafter, at LIBOR for the
applicable Interest Period plus 1.50% per annum and (ii) in the case of a Final
Drawing, at the Base Rate; provided that the Subordination Agent will be
obligated to reimburse such amounts only to the extent that the Subordination
Agent has available funds therefor. The "Base Rate" will be a per annum interest
rate, determined as provided in each Liquidity Facility, generally equal to the
higher of (i) the base commercial lending rate announced from time to time by
the Liquidity Provider and (ii) the rate quoted by the Liquidity Provider to
dealers in the New York federal funds market for overnight offering of dollars
by the Liquidity Provider for deposit, plus 0.50% per annum. "LIBOR" with
respect to an Interest Period will be an interest rate, determined as provided
in each Liquidity Facility, generally equal to the rate per annum at which
deposits in U.S. dollars are offered for such Interest Period by the Liquidity
Provider to prime banks in the London interbank market. The "Interest Period "
with respect to a drawing which bears interest based on LIBOR will be each of
the following periods: (i) the period beginning on the date such drawing began
to bear interest based on LIBOR and ending on the next Regular Distribution Date
and (ii) each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the next Regular Distribution Date.
(Liquidity Facilities, Sections 1.1, 2.5 and 3.7)
The amount drawn under the Liquidity Facility for any Trust by reason of
the Downgrade Drawing and deposited in the Cash Collateral Account will be
treated as follows: (i) such amount will be released on any Regular Distribution
Date to the Liquidity Provider to the extent that such amount exceeds the
Required Amount for such Trust; (ii) any portion of such amount withdrawn from
the Cash Collateral Account for such Trust to pay interest on the related
Certificates will be treated in the same way (including interest payable
thereon) as Interest Drawings; and (iii) the balance of such amount will be
invested in Eligible Investments. (Liquidity Facilities, Section 2.6;
Intercreditor Agreement, Section 3.6(f)) The Downgrade Drawing under any
Liquidity Facility (other than any portion thereof applied to the payment of
interest on the Certificates) will bear interest at a rate equal to (i) during
the period from the date of its borrowing to (but excluding) the third business
day following the applicable Liquidity Provider's receipt of the notice of such
Downgrade Drawing, at the Base Rate, and (ii) thereafter, at LIBOR for the
applicable Interest Period plus 0.40% per annum; provided that the Subordination
Agent will be obligated to pay such amount only to the extent that the
Subordination Agent has funds available therefor. (Liquidity Facilities,
Sections 2.6 and 3.7)
LIQUIDITY EVENTS OF DEFAULT
Events of Default under each Liquidity Facility (each, a "Liquidity Event
of Default ") will consist of: (i) the acceleration of all the Equipment Notes;
and (ii) the failure to pay all of the Equipment Notes at maturity. A Liquidity
Event of Default shall not occur upon an automatic acceleration of the Equipment
Notes as a result of certain bankruptcy events related to America West.
(Liquidity Facilities, Section 1.1)
If (i) both (A) a Triggering Event shall have occurred and be continuing
and (B) a Performing Note Deficiency exists or (ii) a Liquidity Event of Default
shall have occurred and be continuing, the Liquidity Provider may, in its
discretion, make a final drawing ("Final Drawing") of all available and undrawn
amounts under the Liquidity Facilities whereupon (i) the Liquidity Provider
shall have no further obligation to make Drawings under the Liquidity Facility,
(ii) any Drawing remaining unreimbursed shall be automatically
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converted into a Final Drawing under such Liquidity Facility, and (iii) all
amounts owing to the Liquidity Provider shall automatically become accelerated.
(Liquidity Facilities, Section 6.1) Notwithstanding the foregoing, the
Subordination Agent will be obligated to pay amounts owing to the Liquidity
Provider only to the extent of funds available therefor after giving effect to
the payments in accordance with the provisions set forth under "Description of
the Intercreditor Agreement -- Priority of Distributions". (Liquidity
Facilities, Section 2.9)
Upon the circumstances described below under "Description of the
Intercreditor Agreement -- Intercreditor Rights", the Liquidity Provider may
become the Controlling Party with respect to the exercise of remedies under the
Indentures. (Intercreditor Agreement, Section 2.6(c))
LIQUIDITY PROVIDER
The Liquidity Provider will be the Belgian bank Kredietbank N.V., acting
through its New York branch. Kredietbank N.V. was established in 1935. As of
December 31, 1995 Kredietbank N.V. had total assets in excess of 3,076 billion
Belgian francs (approximately $100 billion). Kredietbank N.V. provides
commercial, investment banking and capital market services nationally and
internationally to public, corporate and banking customers and has offices in 26
countries. Kredietbank N.V. currently has long-term unsecured debt ratings of
Aa2 from Moody's and AA- from Standard & Poor's, and short-term unsecured debt
ratings of P-1 from Moody's and A1+ from Standard & Poor's.
The New York branch of Kredietbank N.V. is licensed and subject to
supervision and regulation by the Superintendent of Banks of the State of New
York. It is examined by the New York State Banking Department and is subject to
banking laws and regulations applicable to a foreign bank that operates a New
York branch. It is also subject to review and supervision by the Federal Reserve
Bank.
Kredietbank N.V. has been active in aircraft finance since the mid 1980s
and has a significant portfolio of loans secured by modern commercial jet and
turboprop aircraft. Kredietbank N.V. has established business relationships with
most leading international airlines and aircraft manufacturing companies.
The information set forth above concerning Kredietbank N.V. and its New
York branch was provided by Kredietbank N.V. and America West takes no
responsibility for the accuracy thereof.
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DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following summary describes certain provisions of the Intercreditor
Agreement. A form of the Intercreditor Agreement has been filed as an exhibit to
the Registration Statement. In addition, a form of the Intercreditor Agreement
will be filed by America West with the Commission as an exhibit to a Current
Report on Form 8-K. The summary does not purport to be complete. The summary
makes use of terms defined in, and is qualified in its entirety by reference to,
all of the provisions of the Intercreditor Agreement. Section references in
parentheses are to relevant sections of the Intercreditor Agreement, unless
otherwise indicated.
INTERCREDITOR RIGHTS
CONTROLLING PARTY
Pursuant to the Intercreditor Agreement, each Trustee and the Liquidity
Provider shall agree that, with respect to any Indenture at any given time, the
Indenture Trustee will be directed (a) in taking, or refraining from taking, any
action with respect to such Indenture or the related Equipment Notes by the
holders of at least a majority of the outstanding principal amount of such
Equipment Notes (provided that, for so long as the Subordination Agent is the
registered holder of the Equipment Notes, the Subordination Agent shall act with
respect to this clause (a) in accordance with the directions of the Trustees
representing holders of Certificates representing an undivided interest in such
principal amount of Equipment Notes), so long as no Indenture Event of Default
shall have occurred and be continuing thereunder, and (b) after the occurrence
and during the continuance of an Indenture Event of Default thereunder, in
taking, or refraining from taking, any action with respect to such Indenture or
such Equipment Notes, including exercising remedies thereunder (including
accelerating such Equipment Notes or foreclosing the lien on the Equipment
securing such Equipment Notes), by the Controlling Party. (Section 2.6(a)) See
"Description of the Certificates -- Indenture Events of Default and Certain
Rights Upon an Indenture Event of Default" for a description of the rights of
the Certificateholders of each Trust to direct the respective Trustee.
The Person who shall be the Controlling Party with respect to any Indenture
shall be: (v) the Class A Trustee; (w) upon payment of Final Distributions to
the holders of Class A Certificates, the Class B Trustee; (x) upon payment of
Final Distributions to the holders of Class B Certificates, the Class C Trustee;
(y) upon payment of Final Distributions to the holders of Class C Certificates,
the Class D Trustee; and (z) upon payment of Final Distributions to the holders
of the Class D Certificates, the Class E Trustee. For purposes of giving effect
to the foregoing, the Trustees (other than the Controlling Party) shall
irrevocably agree (and the Certificateholders (other than the Certificateholders
represented by the Controlling Party) shall be deemed to agree by virtue of
their purchase of Certificates) that the Subordination Agent, as record holder
of the Equipment Notes, shall exercise its voting rights in respect of the
Equipment Notes as directed by the Controlling Party. (Section 2.6(b))
Notwithstanding the foregoing, the Liquidity Provider with the greatest amount
of unreimbursed Liquidity Obligations payable to it under the Liquidity
Facilities shall have the right to elect to become the Controlling Party with
respect to any such Indenture at any time from and including the date which is
18 months after the earlier of (i) the acceleration of the Equipment Notes under
such Indenture and (ii) a Final Drawing with respect to the Liquidity
Facilities, if, in the case of clause (i) or (ii) above, at the time of such
election all Liquidity Obligations have not been paid in full. (Section 2.6(c))
SALE OF EQUIPMENT NOTES OR EQUIPMENT
Following the occurrence and during the continuation of any Indenture Event
of Default under any Indenture, the Controlling Party shall direct the related
Indenture Trustee in the exercise of remedies thereunder and may accelerate and,
subject to the provisions of the immediately following sentence, sell all (but
not less than all) of the Equipment Notes issued under such Indenture to any
person. So long as any Certificates remain outstanding, during the period ending
on the date which is nine months after the earlier of (x) the acceleration of
the Equipment Notes issued under any Indenture or (y) the bankruptcy or
insolvency of America West, then without the consent of each Trustee, (a) no
Equipment subject to the lien of such Indenture or such Equipment Notes may be
sold if the net proceeds from such sale would be less than the
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<PAGE> 86
Minimum Sale Price for such Equipment or such Equipment Notes, and (b) the
amount and payment dates of rentals payable by America West under the Lease for
such Equipment may not be adjusted if, as a result of such adjustment, the
discounted present value of all such rentals would be less than 75% of the
discounted present value of the rentals payable by America West under such Lease
before giving effect to such adjustment, in each case, using the weighted
average interest rate of the Equipment Notes then outstanding under such
Indenture as the discount rate. (Section 4.1(a))
After a Triggering Event occurs and any Equipment Note becomes a
Non-Performing Equipment Note, the Subordination Agent will be required to
obtain LTV Appraisals for the Equipment as soon as practicable and additional
LTV Appraisals on or prior to each anniversary of the date of such initial LTV
Appraisals; provided that, if the Controlling Party reasonably objects to any
such LTV Appraisals, the Controlling Party shall have the right to obtain or
cause to be obtained substitute LTV Appraisals (including any LTV Appraisals
based upon physical inspection of the Equipment). (Section 4.1(a))
PRIORITY OF DISTRIBUTIONS
So long as no Triggering Event shall have occurred, the payments in respect
of the Equipment Notes and certain other payments received on each Distribution
Date will be promptly distributed by the Subordination Agent on such
Distribution Date in the following order of priority:
(i) all accrued and unpaid Liquidity Obligations (other than the
principal amount of any Drawing under the Liquidity Facilities and
any interest accrued thereon) (the "Liquidity Expenses") to each
Liquidity Provider;
(ii) interest accrued on all Liquidity Obligations to each Liquidity
Provider;
(iii) such amount necessary to pay or reimburse the Liquidity Provider for
all Liquidity Obligations then due (other than amounts payable as
described in clauses (i) and (ii) above) and, if applicable, to
replenish each Cash Collateral Account up to its respective Required
Amount;
(iv) Expected Distributions to the holders of Class A Certificates;
(v) Expected Distributions to the holders of Class B Certificates;
(vi) Expected Distributions to the holders of Class C Certificates;
(vii) Expected Distributions to the holders of Class D Certificates;
(viii) Expected Distributions to the holders of Class E Certificates; and
(ix) certain fees and expenses of the Subordination Agent and the
Trustee. (Section 3.2)
Upon the occurrence of a Triggering Event and at all times thereafter, all
funds received by the Subordination Agent in respect of the Equipment Notes and
certain other payments will be promptly distributed by the Subordination Agent
in the following order of priority:
(i) such amount necessary to reimburse (a) the Subordination Agent for
any out-of-pocket costs and expenses actually incurred by it in the
protection of, or the realization of value of, the Equipment Notes or
any Trust Indenture Estate, (b) each Trustee for any amounts of the
nature described in clause (a) above, and (c) each Liquidity Provider
or any Certificateholder for payments, if any, made by it to the
Subordination Agent or any Trustee in respect of amounts described in
clause (a) above (collectively, the "Administration Expenses");
(ii) all accrued and unpaid Liquidity Expenses to each Liquidity Provider;
(iii) all accrued and unpaid interest on the Liquidity Obligations as
provided in the Liquidity Facilities to each Liquidity Provider;
(iv) such amount necessary to the Liquidity Provider (a) to pay in full
all Liquidity Obligations, whether or not then due (other than
amounts payable pursuant to clauses (ii) and (iii) above) and/or (b)
if applicable, so long as no Performing Note Deficiency exists and no
Liquidity Event of
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<PAGE> 87
Default has occurred and is continuing, to replenish the Cash
Collateral Accounts up to their respective Required Amounts;
(v)
such amount necessary to reimburse or pay (a) the Subordination
Agent for any tax (other than taxes imposed on compensation paid
under the Intercreditor Agreement), expense, fee, charge or other
loss incurred by or any other amount payable to the Subordination
Agent in connection with the transactions contemplated thereunder
(to the extent not previously reimbursed), (b) each Trustee for any
tax (other than taxes imposed on compensation paid under the
applicable Trust Agreement), expense, fee, charge, loss or any
other amount payable to such Trustee under the applicable Trust
Agreements (to the extent not previously reimbursed), and (c) each
Certificateholder for payments, if any, made by it in respect of
amounts described in clause (a) above, which shall be distributed
to the applicable Trustee for the account of such
Certificateholder, in each such case pari passu on the basis of all
amounts described in clauses (a) through (c) above (collectively,
"Certain Taxes and Fees");
(vi) Adjusted Expected Distributions to the holders of Class A
Certificates;
(vii) Adjusted Expected Distributions to the holders of Class B
Certificates;
(viii) Adjusted Expected Distributions to the holders of Class C
Certificates;
(ix) Adjusted Expected Distributions to the holders of Class D
Certificates; and
(x) Adjusted Expected Distributions to the holders of Class E
Certificates (Section 3.3).
Interest Drawings under the Liquidity Facility and withdrawals from the
Cash Collateral Account, in each case in respect of interest on the Certificates
of any Trust (other than the Class D and Class E Trusts), will be distributed to
the Trustee for such Trust, notwithstanding the priority of distributions set
forth in the Intercreditor Agreement. All amounts on deposit in the Cash
Collateral Account for any Trust which are in excess of the Required Amount for
such Trust and all investment earnings on such amounts on deposit in the Cash
Collateral Account shall be deposited in an account maintained by the
Subordination Agent pursuant to the Intercreditor Agreement. (Section 3.6).
VOTING OF EQUIPMENT NOTES
In the event that the Subordination Agent, as the registered holder of any
Equipment Notes, receives a request for its consent to any amendment,
modification or waiver under such Equipment Notes, the related Indenture, Lease,
Refunding Agreement or other related document, if no Indenture Event of Default
with respect thereto shall have occurred and be continuing, the Subordination
Agent shall request instructions with respect to each Series of Equipment Notes
from the Trustee of the Trust which holds such Equipment Notes. (Section
9.1(b)). The Trustee in turn will request directions from Certificateholders of
such Trust, provided that the Trustee is not required to request directions if
such consent will not adversely affect the Certificateholders or an Indenture
Event of Default shall have occurred and be continuing under the Pass Through
Agreement of such Trust. (Basic Agreement, Section 10.01) If any Indenture Event
of Default shall have occurred and be continuing with respect to such Indenture,
the Subordination Agent will exercise its voting rights as directed by the
Controlling Party. (Section 9.1(b))
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<PAGE> 88
THE SUBORDINATION AGENT
Fleet National Bank will be the Subordination Agent under the Intercreditor
Agreement. America West and its affiliates may from time to time enter into
banking and trustee relationships with the Subordination Agent and its
affiliates. The Subordination Agent's address is 777 Main Street, Hartford,
Connecticut 06115, Attention: Corporate Trust Administration.
The Subordination Agent may resign at any time by so notifying the Trustees
and the Liquidity Providers, in which event a successor Subordination Agent will
be promptly appointed. Either the Controlling Party or the Liquidity Provider
may remove the Subordination Agent for cause and appoint a successor
Subordination Agent. No resignation or removal of the Subordination Agent will
be effective until a successor is appointed. No appointment of a successor
Subordination Agent will be effective until the Rating Agencies have delivered
written confirmation that such action would not result in a downgrade,
withdrawal or suspension of the rating of any Class of Certificates. (Section
8.1)
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<PAGE> 89
DESCRIPTION OF THE EQUIPMENT AND THE APPRAISALS
THE EQUIPMENT
The Equipment is comprised of eight Airbus Industrie model A320-231
aircraft and three IAE model V2500-A1 engines. The Equipment is designed to be
in compliance with Stage III noise level standards, which constitute the most
restrictive Federal regulatory standards currently in effect in the United
States for aircraft noise abatement. The table below sets forth certain
additional information concerning the Equipment.
<TABLE>
<CAPTION>
APPRAISED VALUE
MANUFACTURER'S EQUIPMENT ENGINE DELIVERY ----------------------------------------------
SERIAL NUMBER TYPE TYPE DATE(1) AISI BK MBA
- -------------- ---------------- ---------- ------------------- ------------ ------------ ------------
<C> <S> <C> <C> <C> <C> <C>
55 Airbus A320-231 IAE V2500 September 25, 1989 $ 29,290,000 $ 29,900,000 $ 30,335,000
65 Airbus A320-231 IAE V2500 December 22, 1989 29,400,000 29,900,000 30,412,500
77 Airbus A320-231 IAE V2500 December 22, 1989 29,620,000 30,300,000 30,567,500
82 Airbus A320-231 IAE V2500 December 28, 1989 29,730,000 30,300,000 30,645,000
091 Airbus A320-231 IAE V2500 September 28, 1990 29,830,000 30,500,000 30,722,500
092 Airbus A320-231 IAE V2500 September 28, 1990 29,830,000 30,500,000 30,722,500
098 Airbus A320-231 IAE V2500 September 28, 1990 30,160,000 30,700,000 30,955,000
099 Airbus A320-231 IAE V2500 September 28, 1990 29,940,000 30,700,000 30,800,000
V0019 IAE V2500-A1 -- March 27, 1991 3,500,000 5,250,000 3,100,000
V0025 IAE V2500-A1 -- March 27, 1991 3,500,000 5,250,000 3,100,000
V0049 IAE V2500-A1 -- March 27, 1991 3,500,000 5,250,000 3,100,000
------------ ------------ ------------
$248,300,000 $258,550,000 $254,460,000
============ ============ ============
</TABLE>
- ---------------
(1) The delivery date indicated is for the purpose of the Leases. The original
delivery dates for the Aircraft and Spare Engines from the manufacturer were
in 1989 and 1990.
APPRAISED VALUE
The appraised values set forth in the foregoing chart were determined by BK
as of July 2, 1996, AISI as of July 11, 1996 and MBA as of July 12, 1996. As
part of this process, all three Appraisers performed "desktop" appraisals
without any physical inspection of the Equipment. The Appraisals are based on
differing assumptions and methodologies, which vary among the Appraisers. The
Appraisers have delivered letters setting forth their respective Appraisals,
copies of which are annexed to this Prospectus as Appendix II. For a discussion
of the assumptions and methodologies used in preparing each of the Appraisals,
reference is hereby made to such reports. The appraised value presented in this
Prospectus for each of the Spare Engines indicates a value for each such Spare
Engine that is less than the Notes Amount in respect of such Spare Engine. Two
of the Appraisers appraised each of the Spare Engines at a value lower than the
corresponding Notes Amount, while one Appraiser appraised each of the Spare
Engines at a value greater than the corresponding Notes Amount.
An appraisal is only an estimate of value and should not be relied upon as
a measure of realizable value. The proceeds realized upon a sale of any
Equipment may be less than the appraised value thereof. In addition, the value
of the Equipment in the event of the exercise of remedies under the applicable
Indenture will depend on market and economic conditions at the time, the
availability of buyers, the condition of the Equipment, whether the Equipment is
sold separately or as a block and other factors. Accordingly, there can be no
assurance that the proceeds realized upon any such exercise with respect to the
Equipment Notes and the Equipment pursuant to the applicable Indenture would be
as appraised or sufficient to satisfy in full remaining payments due on the
Equipment Notes issued thereunder or the Certificates.
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<PAGE> 90
DESCRIPTION OF THE EQUIPMENT NOTES
The following summary describes certain provisions of the Equipment Notes,
the Indentures, the Leases, the Owner Trust Agreements and the Refunding
Agreements. Forms of the Equipment Notes, the Indentures, the Leases and the
Refunding Agreements have been filed as exhibits to the Registration Statement.
In addition, forms of the Indentures, the Leases, and the Refunding Agreements
will be filed by America West with the Commission as exhibits to a Current
Report on Form 8-K. The statements under this caption are summaries and do not
purport to be complete. The summaries make use of terms defined in and are
qualified in their entirety by reference to all of the provisions of the
Equipment Notes, the Indentures, the Leases, the Owner Trust Agreements and the
Refunding Agreements. Except as otherwise indicated, the following summaries
relate to the Equipment Notes, the Indenture, the Lease, the Owner Trust
Agreement and the Refunding Agreement relating to each Aircraft and Spare
Engine. Section references in parentheses are to relevant sections of the
Indentures, the Leases, the Basic Agreement, and the Refunding Agreements.
GENERAL
The Equipment Notes with respect to each Aircraft and Spare Engine will be
issued in up to five series under a separate Indenture between the related Owner
Trustee, as trustee of the related Owner Trust created for the benefit of the
applicable Owner Participant who is the beneficial owner of the related
Equipment pursuant to a trust agreement (each, an "Owner Trust Agreement "), and
the related Indenture Trustee. The Equipment Notes issued will be nonrecourse
obligations of the applicable Owner Trust. All Equipment Notes issued under the
same Indenture will relate to, and be secured by, an item of Equipment, and such
Equipment will be leased to America West pursuant to a Lease between the Owner
Trustee under the applicable Owner Trust and America West. Each Equipment Note
will be authenticated under an Indenture by the applicable Indenture Trustee.
The Chase Manhattan Bank will act as Indenture Trustee with respect to the issue
of Equipment Notes relating to four of the Aircraft, and Fleet National Bank
will act as Indenture Trustee with respect to the issue of Equipment Notes
relating to four of the Aircraft and the three Spare Engines.
Under each Lease, until the lien of the related indenture is discharged,
America West will be unconditionally obligated to make or cause to be made
rental and other payments to the related Indenture Trustee on behalf of the
related Owner Trustee, which rental and other payments will be at least
sufficient to pay in full when due all scheduled payments required to be made on
the Equipment Notes issued with respect to the related Equipment. The rental
obligations of America West under each Lease will be general obligations of
America West. However, the Equipment Notes will not be obligations of, or
guaranteed by, America West.
SUBORDINATION
Series B Equipment Notes issued in respect of any Equipment will be
subordinated in right of payment to Series A Equipment Notes issued in respect
of such Equipment; Series C Equipment Notes issued in respect of such Equipment
will be subordinated in right of payment to Series A and B Equipment Notes
issued in respect of such Equipment; Series D Equipment Notes issued in respect
of such Equipment will be subordinated in right of payment to Series A, B and C
Equipment Notes issued in respect of such Equipment; and Series E Equipment
Notes issued in respect of such Equipment will be subordinated in right of
payment to Series A, B, C and D Equipment Notes issued in respect of such
Equipment. On each Equipment Note payment date, (i) payments of interest and
principal due on Series A Equipment Notes issued in respect of any Equipment
will be made prior to payments of interest and principal due on any Series B, C,
D and E Equipment Notes issued in respect of such Equipment, (ii) payments of
interest and principal due on Series B Equipment Notes will be made prior to
payments of interest and principal due on any Series C, D and E Equipment Notes
issued in respect of such Equipment, (iii) payments of interest and principal
due on Series C Equipment Notes will be made prior to payments of interest and
principal due on any Series D and E Equipment Notes issued in respect of such
Equipment and (iv) payments of interest and principal due on Series D Equipment
Notes will be made prior to payments of interest and principal due on any Series
E Equipment Notes issued in respect of such Equipment.
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<PAGE> 91
Only Equipment Notes having the same priority of payment may be held by the
same Trust; accordingly all of the Series A Equipment Notes will be held by the
Class A Trust, all of the Series B Equipment Notes will be held by the Class B
Trust, all of the Series C Equipment Notes will be held by the Class C Trust,
all of the Series D Equipment Notes will be held by the Class D Trust, and all
of the Series E Equipment Notes will be held by the Class E Trust.
PRINCIPAL AND INTEREST PAYMENTS
Subject to the provisions of the Intercreditor Agreement, interest paid on
the Equipment Notes held in each Trust will be passed through to the
Certificateholders of such Trust on the dates and at the rate per annum set
forth on the cover page of this Prospectus until the principal balance of such
Certificates has been reduced to zero. Subject to the provisions of the
Intercreditor Agreement, scheduled principal payments made on the Equipment
Notes held in each Trust will be passed through to the Certificateholders of
each such Trust in accordance with the principal repayment schedule set forth
herein until the principal balance of such Certificates has been reduced to
zero. See "Description of the Intercreditor Agreement -- Priority of
Distributions".
The aggregate original principal amounts of the Equipment Notes to be
issued with respect to each Aircraft and Spare Engine, as such Equipment Notes
will be held in each of the Trusts, are as follows:
<TABLE>
<CAPTION>
MANUFACTURER'S CLASS A TRUST CLASS B TRUST CLASS C TRUST CLASS D TRUST CLASS E TRUST
SERIAL NUMBER EQUIPMENT NOTES EQUIPMENT NOTES EQUIPMENT NOTES EQUIPMENT NOTES EQUIPMENT NOTES
- -------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
55 $11,936,661 $4,476,247 $4,476,247 $2,288,832 $ 0
65 11,936,662 4,476,246 4,476,247 3,575,831 0
77 11,936,662 4,476,246 4,476,247 3,575,831 0
82 12,089,958 4,533,177 4,532,787 1,711,069 0
091 11,897,518 4,413,774 4,552,621 4,249,113 2,541,597
092 11,897,518 4,413,774 4,552,621 4,249,113 2,541,597
098 11,897,518 4,413,774 4,552,621 4,249,113 2,541,597
099 11,897,518 4,413,774 4,552,621 4,249,113 2,541,597
V0019 1,343,995 503,996 524,996 489,995 1,458,204
V0025 1,343,995 503,996 524,996 489,995 1,458,204
V0049 1,343,995 503,996 524,996 489,995 1,458,204
------------- ------------- ------------- ------------- -------------
Total $99,522,000 $37,129,000 $37,747,000 $29,618,000 $14,541,000
============= ============= ============= ============= =============
<CAPTION>
MANUFACTURER'S
SERIAL NUMBER TOTAL
- -------------- -----------
<S> <C>
55 $23,177,987
65 24,464,986
77 24,464,986
82 22,866,991
091 27,654,623
092 27,654,623
098 27,654,623
099 27,654,623
V0019 4,321,186
V0025 4,321,186
V0049 4,321,186
------------
Total $218,557,000
============
</TABLE>
Interest will be payable on the unpaid principal amount of each Equipment
Note at the rate applicable to such Equipment Note on January 2 and July 2 in
each year, commencing January 2, 1997. Such interest will be computed on the
basis of a 360-day year of twelve 30-day months. Overdue amounts of principal
and interest on each Series of Equipment Notes will bear interest at a rate
equal to 1% per annum over the applicable rate on such Series of Equipment
Notes. The principal of the Equipment Notes purchased by each Trust will be
payable on the dates and in the amounts set forth in Appendix III.
The final payment made under each Equipment Note is provided to be in an
amount sufficient to discharge in full the unpaid principal amount of, all
accrued and unpaid interest on, and any other amounts due under, such Equipment
Note. (Indentures, Section 2.02)
If any date on which a payment under the Equipment Notes becomes due and
payable is not a business day, such payment will be made on the next succeeding
business day without any additional interest.
All payments of the principal amount of, interest on and all other amounts
due with respect to an Equipment Note will be payable only from the income and
proceeds from the collateral pledged pursuant to the related Indenture (the
"Trust Indenture Estate"). (Indentures, Section 2.03) In the case of each
Equipment Note, each payment of principal amount and interest or other amounts
due thereon will be applied in the following order: (i) to the payment of
accrued interest on such Equipment Note (as well as any interest on any overdue
principal amounts, any overdue interest and any other overdue amounts
thereunder) to the
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<PAGE> 92
date of such payment; (ii) to the payment of the principal amount of such
Equipment Note (or a portion thereof) then due thereunder; (iii) to the payment
of Make-Whole Amount, if any, and any other amount due under the related
Indenture or under such Equipment Note; and (iv) the balance, if any, remaining
thereafter, to the payment of the principal amount of such Equipment Note
remaining unpaid (applied to the installments of principal amount in the inverse
order of their normal maturity). (Indentures, Section 2.05)
REDEMPTION
The Equipment Notes issued with respect to any Equipment will be redeemed,
in whole, in each case at a price equal to the aggregate unpaid principal amount
thereof together with accrued interest thereon to, but not including, the date
of redemption, and all other amounts payable under the related Indenture or
Refunding Agreement but without any Make-Whole Amount, upon the occurrence of an
Event of Loss with respect to such Equipment if such Equipment is not replaced
by America West under the related Lease. (Indentures, Section 2.10)
Either the Owner Trustee or the Owner Participant may purchase all, but not
less than all, of the outstanding Equipment Notes issued under the related
Indentures at a price equal to the aggregate unpaid principal amount thereof,
plus accrued and unpaid interest thereon to, but not including, the date of
purchase and all other amounts then payable under the related Indenture or
Refunding Agreement but without any Make-Whole Amount (except as described in
the second following sentence). This option may be exercised (i) upon the
Indenture Trustee with respect to the related Equipment Notes taking action, or
notifying the applicable Owner Trustee that it intends to take action to
foreclose the lien of the related Indenture or otherwise commence the exercise
of any significant remedy under such Indenture or the related Lease, (ii) upon
the Equipment Notes with respect to an Aircraft or a Spare Engine having been
accelerated or (iii) in the event there shall have occurred and be continuing a
Lease Event of Default. If such option is exercised at a time when a Lease Event
of Default shall have occurred and be continuing for less than 120 days (and the
events described in clauses (i) and (ii) of the preceding sentence do not
apply), then the Make-Whole Amount will be added to the purchase price.
(Indentures, Section 2.12)
"Make-Whole Amount" means, with respect to any Equipment Note, the amount
(as determined by an independent investment banker selected by America West and
reasonably acceptable to the related Indenture Trustee and Owner Participant) by
which (a) the present value of the remaining scheduled payments of principal and
interest from the redemption date to maturity of such Equipment Note computed by
discounting such payments on a semi-annual basis from its respective Payment
Date (assuming a 360-day year of twelve 30-day months) using a discount rate
equal to (i) in the case of Series A Equipment Notes and Series B Equipment
Notes, the Treasury Yield and (ii) in the case of Series C Equipment Notes,
Series D Equipment Notes and Series E Equipment Notes, the Treasury Yield plus
0.75% exceeds (b) the outstanding principal amount of such Equipment Note plus
accrued interest. (Indentures, Section 1.01)
For purposes of determining the Make-Whole Amount, "Treasury Yield " means,
at the time of determination with respect to any Equipment Note, the interest
rate (expressed as a semi-annual equivalent and as a decimal and, in the case of
United States Treasury bills, converted to a bond equivalent yield) determined
to be the per annum rate equal to the semi-annual yield to maturity for United
States Treasury securities maturing on the Average Life Date of such Equipment
Note and trading in the public securities markets either as determined by
interpolation between the most recent weekly average yield to maturity for two
series of United States Treasury securities, trading in the public securities
markets, (A) one maturing as close as possible to, but earlier than, the Average
Life Date of such Equipment Note and (B) the other maturing as close as possible
to, but later than, the Average Life Date of such Equipment Note, in each case
as published in the most recent H.15 (519) or, if a weekly average yield to
maturity for United States Treasury securities maturing on the Average Life Date
of such Equipment Note is reported on the most recent H.15 (519), such weekly
average yield to maturity as published in such H.15 (519). "H.15 (519)" means
the weekly statistical release designated as such, or any successor publication,
published by the Board of Governors of the Federal Reserve System. The date of
determination of a Make-Whole Amount shall be the third business day prior to
the applicable redemption date and the "most recent H.15 (519)" means the
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<PAGE> 93
H.15 (519) published prior to the close of business on the third business day
prior to the applicable redemption date. (Indentures, Section 1.01)
"Average Life Date" for any Equipment Note is the date which follows the
redemption date by a period equal to the Remaining Weighted Average Life at the
redemption date of such Equipment Note. "Remaining Weighted Average Life" with
respect to any Equipment Note, at the redemption date of such Equipment Note, is
the number of days equal to the quotient obtained by dividing (a) the sum of
each of the products obtained by multiplying (i) the amount of each then
remaining scheduled payment of principal of such Equipment Note, including the
payment due on the maturity date of such Equipment Note, by (ii) the number of
days from and including such redemption date to but excluding the date on which
payment of principal is scheduled to be made; by (b) the then outstanding
principal amount of such Equipment Note. (Indentures, Section 1.01)
SECURITY
The Equipment Notes issued with respect to each Aircraft and Spare Engine
will be secured by a perfected security interest in such Aircraft or Spare
Engine and an assignment to the related Indenture Trustee of certain of the
Owner Trustee's rights under the related Lease, including the right to receive
certain payments of rent thereunder, all profits, revenues and other income of
such Aircraft or Spare Engine, all required hull insurance and similar proceeds
with respect to such Aircraft or Spare Engine, all monies and securities
deposited with the related Indenture Trustee, and all proceeds of the foregoing.
Basic Rent (as defined herein) payments for each Aircraft and Spare Engine are
payable semi-annually on each Basic Rent payment date. Such payments, together
with certain other payments that America West is obligated to make or cause to
be made under the related Lease, have been assigned by the Owner Trustee under
the related Indenture to provide the funds necessary to make payments of
principal and interest due or expected to be due from the Owner Trustee on the
Equipment Notes issued under such Indenture and Liquidity Obligations under the
related Liquidity Facility. The balance of any such Basic Rent and other
payments, after payment of amounts due on the related Equipment Notes and
certain other amounts, including certain amounts owing to the Liquidity
Provider, will be paid over to the related Owner Participant. (Indentures,
Sections 3.01 and 3.06)
Under the terms of each Lease, America West's obligations in respect of
each Aircraft and Spare Engine will be those of a lessee under a "net lease".
Accordingly, America West will be obligated, among other things and at its
expense, to cause each Aircraft to be duly registered, to pay all costs of
operating the Equipment and to maintain, service, repair and overhaul (or cause
to be maintained, serviced, repaired and overhauled) the Equipment. Unless an
Indenture Event of Default with respect to an item of Equipment has occurred and
is continuing, the related Indenture Trustee may not exercise the Owner
Trustee's rights under the related Lease except such Owner Trustee's right to
receive rent. The assignment by the Owner Trustee to the Indenture Trustee of
its rights under the related Lease excludes certain rights of the Owner Trustee
and the Owner Participant, including the rights of the Owner Trustee, the Owner
Participant and their respective affiliates relating to the proceeds of certain
letters of credit issued for the account of America West referred to under "The
Leases -- Lease Events of Default" in the amount of $1 million in the case of
each Aircraft Lease and $200,000 in the case of each Spare Engine Lease in
respect of certain amounts which may become payable by America West, indemnity
payments and interest in respect thereof payable by America West for certain
matters, insurance proceeds payable to Wilmington Trust Company, in its
individual capacity and not as Owner Trustee (the "Trust Company"), the
Indenture Trustee in its individual capacity and to the Owner Participant under
public liability insurance maintained in respect of the Aircraft, insurance
proceeds payable to the Trust Company or to such Owner Participant under certain
insurance maintained by or for the benefit of the Owner Participant (whether
directly or through the Owner Trustee) and certain costs and expenses payable by
America West to the Trust Company, the Owner Trustee, the Indenture Trustee or
such Owner Participant. (Indenture, Granting Clause and Section 1.01) The
Equipment Notes are not cross-collateralized, and consequently the Equipment
Notes issued in respect of any one item of Equipment are not secured by any of
the other Equipment (as described in "-- The Leases -- Events of Loss") or the
Leases related thereto.
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<PAGE> 94
Subject to the right of America West to re-register the Aircraft in other
jurisdictions, and subject to the cooperation of the applicable Owner Trustee
and Indenture Trustee, America West will keep each Aircraft registered under the
Federal Aviation Act and will record the Indenture and the Lease and other
relevant documents with respect to each Aircraft and Spare Engine under the
Federal Aviation Act. Such recordation of the Indenture, the Lease and other
relevant documents with respect to each Aircraft and Spare Engine will give the
related Indenture Trustee a perfected security interest in the related Equipment
whenever it is located in the United States or any of its territories and
possessions.
In addition, the Convention on the International Recognition of Rights in
Aircraft (the "Convention") provides that such security interest will also be
recognized, with certain limited exceptions, in those jurisdictions that have
ratified or adhere to the Convention. Each Aircraft may also be registered under
the laws of, and each Aircraft and Spare Engine may be operated by America West
or be under sublease or interchange arrangements in, countries that are not
parties to the Convention. The extent to which the related Indenture Trustee's
security interest would be recognized in Equipment registered under the laws of
or located in a country that is not a party to the Convention is uncertain.
Moreover, in the case of an Indenture Event of Default, the ability of the
related Indenture Trustee to realize upon its security interest in an Aircraft
or a Spare Engine could be adversely affected as a legal or practical matter if
such Equipment were registered under the laws of any jurisdiction other than the
United States or located outside the United States.
Certain of the Aircraft are subject to Cross-Border Leases. In connection
with the realization by the Indenture Trustee of its security interest in such
Aircraft, it may be desirable to have such Cross-Border Leases terminated. See
"-- Cross-Border Leases".
Funds, if any, held from time to time by an Indenture Trustee with respect
to any Equipment, including funds held as the result of an Event of Loss to such
Equipment or termination of the Lease, if any, relating thereto, will be
invested and reinvested by such Indenture Trustee. Such investment and
reinvestment will be at the direction of the related Owner Trustee or, in the
event the Owner Trustee shall so specify, by the Lessee, in certain investments
described in the related Indenture. (Indentures, Section 3.07) The net amount of
any gain or loss resulting from any such investments will be for the account of
America West.
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
The following table sets forth LTV Ratios for the Equipment Notes issued in
respect of each Aircraft and Spare Engine as of the dates specified and was
obtained by dividing (i) the outstanding balance (assuming no payment default)
of such Equipment Notes determined immediately after giving effect to the
payments scheduled to be made on each such date by (ii) the assumed value (the
"Assumed Equipment Value") of the Equipment securing such Equipment Notes.
The tables contain forward-looking information that is based on the
assumption that the value of each Aircraft and Spare Engine included in the
Assumed Equipment Value opposite November 26, 1996 depreciates by 2% per year
until the fifteenth year after the year of delivery of such Equipment by the
manufacturers, by 4% per year thereafter until the twentieth year after the year
of such delivery and by 6% per year thereafter. Other rates or methods of
depreciation would result in materially different LTV Ratios and no assurance
can be given (i) that the depreciation rates and methods assumed for the
purposes of the table are the ones most likely to occur or (ii) as to the actual
value of any Equipment. Thus the table should not be considered a forecast or
prediction of expected or likely LTV Ratios but simply a mathematical
calculation based on one set of assumptions.
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<PAGE> 95
<TABLE>
<CAPTION>
AIRCRAFT MANUFACTURER'S SERIAL AIRCRAFT MANUFACTURER'S SERIAL AIRCRAFT MANUFACTURER'S SERIAL
NUMBER 55 NUMBER 65 NUMBER 77
---------------------------------- ---------------------------------- ----------------------------------
EQUIPMENT EQUIPMENT EQUIPMENT
NOTE ASSUMED NOTE ASSUMED NOTE ASSUMED
OUTSTANDING EQUIPMENT OUTSTANDING EQUIPMENT OUTSTANDING EQUIPMENT
BALANCE VALUE LTV BALANCE VALUE LTV BALANCE VALUE LTV
DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO
- ------------------- ----------- ---------- ------- ----------- ---------- ------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 26, 1996.. $ 23.18 $29.84 77.7% $ 24.46 $29.90 81.8% $ 24.46 $30.16 81.1%
July 2, 1997....... 20.61 29.24 70.5 21.96 29.30 74.9 21.96 29.56 74.3
July 2, 1998....... 18.51 28.65 64.6 19.96 28.70 69.6 19.96 28.96 68.9
July 2, 1999....... 16.26 28.05 58.0 17.82 28.11 63.4 17.82 28.35 62.8
July 2, 2000....... 13.85 27.45 50.5 15.52 27.51 56.4 15.52 27.75 55.9
July 2, 2001....... 11.28 26.86 42.0 13.07 26.91 48.6 13.07 27.15 48.1
July 2, 2002....... 8.53 26.26 32.5 10.44 26.31 39.7 10.44 26.54 39.3
July 2, 2003....... 5.58 25.66 21.7 7.63 25.71 29.7 7.63 25.94 29.4
July 2, 2004....... 2.43 25.07 9.7 4.62 25.12 18.4 4.62 25.34 18.2
July 2, 2005....... 0.00 NA NA 1.40 23.92 5.9 1.40 24.13 5.8
July 2, 2006....... 0.00 NA NA 0.00 NA NA 0.00 NA NA
July 2, 2007....... 0.00 NA NA 0.00 NA NA 0.00 NA NA
July 2, 2008....... 0.00 NA NA 0.00 NA NA 0.00 NA NA
July 2, 2009....... 0.00 NA NA 0.00 NA NA 0.00 NA NA
</TABLE>
<TABLE>
<CAPTION>
AIRCRAFT MANUFACTURER'S SERIAL AIRCRAFT MANUFACTURER'S SERIAL AIRCRAFT MANUFACTURER'S SERIAL
NUMBER 82 NUMBER 091 NUMBER 092
---------------------------------- ---------------------------------- --------------------------------
EQUIPMENT EQUIPMENT EQUIPMENT
NOTE ASSUMED NOTE ASSUMED NOTE ASSUMED
OUTSTANDING EQUIPMENT OUTSTANDING EQUIPMENT OUTSTANDING EQUIPMENT
BALANCE VALUE LTV BALANCE VALUE LTV BALANCE VALUE LTV
DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO
- --------------------- ----------- ---------- ------- ----------- ---------- ------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 26, 1996.... $ 22.87 $30.23 75.7% $ 27.65 $30.35 91.1% $ 27.65 $30.35 91.1%
July 2, 1997......... 21.72 29.62 73.3 26.46 29.74 89.0 26.46 29.74 89.0
July 2, 1998......... 19.68 29.02 67.8 24.28 29.14 83.3 24.28 29.14 83.3
July 2, 1999......... 17.48 28.41 61.5 21.92 28.53 76.8 21.92 28.53 76.8
July 2, 2000......... 15.13 27.81 54.4 19.37 27.92 69.4 19.37 27.92 69.4
July 2, 2001......... 14.45 27.20 53.1 16.64 27.32 60.9 16.64 27.32 60.9
July 2, 2002......... 14.45 26.60 54.3 13.73 26.71 51.4 13.73 26.71 51.4
July 2, 2003......... 14.45 25.99 55.6 13.48 26.10 51.7 13.48 26.10 51.7
July 2, 2004......... 13.39 25.39 52.8 12.46 25.49 48.9 12.46 25.49 48.9
July 2, 2005......... 10.76 24.18 44.5 9.96 24.89 40.0 9.96 24.89 40.0
July 2, 2006......... 7.94 22.97 34.6 7.21 23.67 30.4 7.21 23.67 30.4
July 2, 2007......... 4.92 21.76 22.6 3.61 22.46 16.1 3.61 22.46 16.1
July 2, 2008......... 1.70 20.55 8.3 0.54 21.25 2.6 0.54 21.25 2.6
July 2, 2009......... 0.00 NA NA 0.00 NA NA 0.00 NA NA
</TABLE>
95
<PAGE> 96
<TABLE>
<CAPTION>
AIRCRAFT MANUFACTURER'S SERIAL AIRCRAFT MANUFACTURER'S SERIAL
NUMBER 098 NUMBER 099
---------------------------------- --------------------------------
EQUIPMENT EQUIPMENT
NOTE ASSUMED NOTE ASSUMED
OUTSTANDING EQUIPMENT OUTSTANDING EQUIPMENT
BALANCE VALUE LTV BALANCE VALUE LTV
DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO
- --------------------------------------------------- ----------- ---------- ------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
November 26, 1996.................................. $ 27.65 $30.61 90.4% $ 27.65 $30.48 90.7 %
July 2, 1997....................................... 26.46 29.99 88.2 26.46 29.87 88.6
July 2, 1998....................................... 24.28 29.38 82.6 24.28 29.26 83.0
July 2, 1999....................................... 21.92 28.77 76.2 21.92 28.65 76.5
July 2, 2000....................................... 19.37 28.16 68.8 19.37 28.04 69.1
July 2, 2001....................................... 16.64 27.54 60.4 16.64 27.43 60.7
July 2, 2002....................................... 13.73 26.93 51.0 13.73 26.82 51.2
July 2, 2003....................................... 13.48 26.32 51.2 13.48 26.21 51.4
July 2, 2004....................................... 12.46 25.71 48.5 12.46 25.60 48.7
July 2, 2005....................................... 9.96 25.10 39.7 9.96 24.99 39.8
July 2, 2006....................................... 7.21 23.87 30.2 7.21 23.77 30.3
July 2, 2007....................................... 3.61 22.65 15.9 3.61 22.56 16.0
July 2, 2008....................................... 0.54 21.42 2.5 0.54 21.34 2.5
July 2, 2009....................................... 0.00 NA NA 0.00 NA NA
</TABLE>
<TABLE>
<CAPTION>
ENGINE MANUFACTURER'S SERIAL ENGINE MANUFACTURER'S SERIAL ENGINE MANUFACTURER'S SERIAL
NUMBER V0019 NUMBER V0025 NUMBER V0049
---------------------------------- ---------------------------------- ----------------------------------
EQUIPMENT EQUIPMENT EQUIPMENT
NOTE ASSUMED NOTE ASSUMED NOTE ASSUMED
OUTSTANDING EQUIPMENT OUTSTANDING EQUIPMENT OUTSTANDING EQUIPMENT
BALANCE VALUE LTV BALANCE VALUE LTV BALANCE VALUE LTV
DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO
- ------------------- ----------- ---------- ------- ----------- ---------- ------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 26, 1996.. $4.32 $ 3.50 123.5% $4.32 $ 3.50 123.5% $4.32 $ 3.50 123.5%
July 2, 1997....... 4.13 3.43 120.4 4.13 3.43 120.4 4.13 3.43 120.4
July 2, 1998....... 3.82 3.36 113.7 3.82 3.36 113.7 3.82 3.36 113.7
July 2, 1999....... 3.48 3.29 105.8 3.48 3.29 105.8 3.48 3.29 105.8
July 2, 2000....... 3.10 3.22 96.4 3.10 3.22 96.4 3.10 3.22 96.4
July 2, 2001....... 2.69 3.15 85.4 2.69 3.15 85.4 2.69 3.15 85.4
July 2, 2002....... 2.24 3.08 72.7 2.24 3.08 72.7 2.24 3.08 72.7
July 2, 2003....... 1.75 3.01 58.1 1.75 3.01 58.1 1.75 3.01 58.1
July 2, 2004....... 1.52 2.94 51.5 1.52 2.94 51.5 1.52 2.94 51.5
July 2, 2005....... 1.25 2.87 43.5 1.25 2.87 43.5 1.25 2.87 43.5
July 2, 2006....... 0.78 2.73 28.5 0.78 2.73 28.5 0.78 2.73 28.5
July 2, 2007....... 0.46 2.59 17.9 0.46 2.59 17.9 0.46 2.59 17.9
July 2, 2008....... 0.46 2.45 19.0 0.46 2.45 19.0 0.46 2.45 19.0
July 2, 2009....... 0.00 NA NA 0.00 NA NA 0.00 NA NA
</TABLE>
LIMITATION OF LIABILITY
The Equipment Notes will not be obligations of, or guaranteed by, America
West, the Owner Participants or the Owner Trustees in their individual capacity.
None of the Owner Trustees, the Owner Participants or the Indenture Trustees, or
any affiliates thereof, will be personally liable to any holder of an Equipment
Note or, in the case of the Owner Trustees and the Owner Participants, to the
Indenture Trustees for any amounts payable under the Equipment Notes or, except
with respect to the Owner Trustee as provided in each Indenture, for any
liability under such Indenture. All payments of principal amount of, interest
on, and all other amounts due with respect to an Equipment Note will be payable
only from the related Trust Indenture Estate. (Indentures, Section 2.03)
Except as otherwise provided in the Indentures, each Owner Trustee in its
individual capacity will not be answerable or accountable under the Indentures
or under the Equipment Notes under any circumstances except for its own willful
misconduct, gross negligence, the inaccuracy of a representation or warranty
when made or the failure to perform certain specified covenants. None of the
Owner Participants will have any duty or responsibility under any of the
Indentures or the Equipment Notes to the Indenture Trustees or to any holder of
any Equipment Note.
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<PAGE> 97
INDENTURE EVENTS OF DEFAULT; NOTICE AND WAIVER
Indenture Events of Default under each Indenture will include: (a) the
occurrence and continuance of any Lease Event of Default under the related Lease
(other than the failure to make certain indemnity payments and other payments to
the related Trust Company, Owner Trustee, Indenture Trustee or Owner
Participant), (b) the failure by the Owner Trustee (other than as a result of a
Lease Default) to pay any amount when due under such Indenture or under any
Equipment Note issued thereunder and such failure shall have continued for, in
the case of principal and interest, ten calendar days and in all other cases
fifteen calendar days after notice thereof being given to the Owner Trustee from
the Indenture Trustee or any holder of the Equipment Notes, (c) the failure by
the Owner Participant, the Trust Company or the Owner Trustee to discharge
certain liens, continued for a period of thirty calendar days after an officer
of the Trust Company or of the Owner Participant with responsibility for or
familiarity with the transactions contemplated under the related Indenture or
Refunding Agreement (or any vice president) shall have actual knowledge of such
lien, (d) any representation or warranty made by the related Owner Trustee,
Trust Company or Owner Participant in such Indenture or the related Refunding
Agreement or by any person guaranteeing or supporting the obligations of the
Owner Participant under certain related documents or in any related guarantee or
support agreement being false or incorrect when made and in any respect
materially adverse to the rights and interests of the holders of the related
Equipment Notes and remaining unremedied after notice and specified cure
periods, (e) certain failures by the related Owner Trustee, Trust Company or
Owner Participant to perform or observe certain covenants or obligations for the
benefit of the Indenture Trustee or holders of Equipment Notes under such
Indenture or the related Refunding Agreement that are not remedied after notice
and specified cure periods, (f) the occurrence of certain events of bankruptcy,
reorganization or insolvency of the related Owner Trustee or Owner Participant
or (g) any time when the related Aircraft shall be registered in a jurisdiction
outside the United States and the related Owner Trustee, the Trust Company or
the Owner Participant shall breach certain covenants agreed upon pursuant to the
related Refunding Agreement as a result of which the lien of the related
Indenture shall cease to be a valid and duly perfected lien on the related Trust
Indenture Estate. (Indentures, Section 4.02) There will not be any cross-default
provisions in the Indentures or the Leases. Consequently, events resulting in an
Indenture Default under any particular Indenture may or may not result in an
Indenture Event of Default occurring under any other Indenture.
The Indenture Trustee will give the holders of the Equipment Notes, the
Owner Trustee, America West and the Owner Participant prompt written notice of
any Indenture Event of Default of which the Indenture Trustee has knowledge.
(Indentures, Section 5.01) If an Indenture Event of Default shall have occurred
and be continuing, the Indenture Trustee may exercise certain rights and powers
as enumerated under the related Indenture; if such Indenture Event of Default is
a Lease Event of Default, the Indenture Trustee may exercise certain remedies
pursuant to the related Lease, provided that such Indenture Trustee gives (i)
ten days' written notice to the related Owner Trustee and the Owner Participant
prior to the initial exercise of such remedies under the related Lease (if not
stayed or otherwise precluded by applicable law from giving such notice) and
(ii) twenty days' written notice to the related Owner Trustee and the Owner
Participant of its intention to sell the related Aircraft. See "-- Remedies"
below. (Indentures, Section 4.04)
In the event that America West fails to pay any installment of Basic Rent
(as defined herein) due under the related Lease, the Owner Participant may,
within a specified period after notice of such default, pay a sum equal to the
amount of all, but not less than all of the principal amount and interest due
and payable on the Equipment Notes (without regard to any acceleration thereof),
unless America West shall have theretofore failed to pay Basic Rent in the
manner required under the related Lease as to each of the three immediately
preceding Basic Rent payment dates or in the aggregate more than six Basic Rent
payment dates. In the event that America West defaults in any obligation under
the related Lease (other than the payment of Basic Rent) and such default can be
remedied by the payment of money, the Owner Participant may, within a specified
period after notice of such default, instruct the Owner Trustee to exercise the
Owner Trustee's rights under the related Lease to perform such obligation on
behalf of America West. In the event such Lease Event of Default shall have been
so remedied, then any declaration that the Lease is in default and that the
related Equipment Notes are due and payable based upon such Lease Event of
Default shall be deemed to be rescinded, and the Owner Participant or the Owner
Trustee, as the case may be, shall be subrogated to the rights of the holders of
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<PAGE> 98
the Equipment Notes to receive the applicable payment from the Indenture
Trustee. (Indentures, Section 4.03)
The holders of a majority in principal amount of the outstanding Equipment
Notes issued with respect to any Equipment, by notice to the Indenture Trustee,
may on behalf of all the holders waive any existing default and its consequences
under the Indenture with respect to such Equipment, except a default in the
payment of the principal amount of, or interest on, any such Equipment Notes or
a default in respect of certain other covenants or provisions of such Indenture
that cannot be modified or amended without the consent of each holder of
Equipment Notes affected thereby. (Indentures, Section 4.08)
REMEDIES
Each Indenture will provide that if an Indenture Event of Default occurs
and is continuing, the related Indenture Trustee may, and upon receipt of
written demand from the holders of a majority in aggregate unpaid principal
amount of the Equipment Notes outstanding under such Indenture shall, subject to
the applicable Owner Participant's or Owner Trustee's right to cure, as
discussed above, declare the unpaid principal amount of all such Equipment Notes
issued thereunder immediately due and payable, together with all accrued but
unpaid interest thereon (without a Make-Whole Amount); provided, however, that
such principal and interest will immediately and without further act become due
and payable upon the occurrence of certain events of bankruptcy, reorganization
or insolvency with respect to the related Owner Trustee, the related Owner
Participant or America West. The holders of a majority in aggregate unpaid
principal amount of Equipment Notes outstanding under such Indenture may rescind
any such declaration at any time before the judgment or decree for the payment
of the money so due shall be entered if (i) there has been paid to the related
Indenture Trustee an amount sufficient to pay all overdue principal amount of
and interest on any such Equipment Notes, to the extent such amounts have become
due otherwise than by such declaration of acceleration and (ii) all other
Indenture Events of Default and potential Indenture Events of Default with
respect to any covenant or provision of such Indenture have been cured or
waived. (Indentures, Section 4.04)
Each Indenture will provide that if an Indenture Event of Default under
such Indenture has occurred and is continuing, the related Indenture Trustee may
exercise certain rights or remedies available to it under such Indenture or
under applicable law, including (if the corresponding Lease has been declared in
default) one or more of the remedies under such Indenture or such Lease with
respect to the Equipment subject to such Lease. If there shall have occurred or
be continuing a Lease Event of Default, the related Indenture Trustee's right to
exercise remedies under such Indenture will be subject, with certain exceptions,
to its having proceeded to exercise one or more of the remedies under the Lease
to terminate the Lease or take possession of and/or sell the Equipment; provided
that the requirement to exercise such remedies under such Lease shall not apply
in circumstances where such exercise has been stayed or prohibited by applicable
law or court order for a continuous period in excess of 60 days or such other
period as may be specified in Section 1110(a)(1)(A) of the Bankruptcy Code (plus
an additional period, if any, resulting from (i) the trustee or the
debtor-in-possession in such proceeding agreeing to perform its obligations
under such Lease with the approval of the applicable court, (ii) such Indenture
Trustee's consent to an extension of such 60-day period, (iii) America West's
assumption during such 60-day period with the approval of the relevant court of
the related Lease pursuant to Section 365 of the Bankruptcy Code or (iv) such
Indenture Trustee's own failure to give any requisite notice (unless such
Indenture Trustee is stayed or otherwise precluded by applicable law from giving
such notice)). (Indentures, Section 4.04(a)) Except as otherwise provided, such
remedies may be exercised by the related Indenture Trustee to the exclusion of
the related Owner Trustee, subject to certain conditions specified in such
Indenture, and of America West, subject to the terms of such Lease. Any
Equipment sold in the exercise of such remedies will be free and clear of any
rights of those parties, including the rights of America West under the Lease
with respect to such Equipment. (Indentures, Section 4.04; Leases, Section 18)
If the Equipment Notes issued in respect of one or more Aircraft or Spare
Engine are in default and the Equipment Notes issued in respect of the remaining
Equipment are not in default, no remedies will be exercisable under the
applicable Indentures with respect to such remaining Equipment.
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<PAGE> 99
Pursuant to each Indenture, notwithstanding any of the provisions of such
Indenture or the related Owner Trust Agreement to the contrary, each holder of
the related Equipment Notes, the related Indenture Trustee and the related Owner
Trustee will agree for the benefit of America West that it will not take any
action contrary to America West's rights under the related Lease, including the
right of America West to possession and use and quiet enjoyment of the related
Equipment, except in accordance with the provisions of such Lease. (Indentures,
Section 10.05)
Section 1110 of the Bankruptcy Code provides that the right of lessors,
conditional vendors and holders of security interests with respect to
"equipment" (as defined in Section 1110 of the Bankruptcy Code) to take
possession of such equipment in compliance with the provisions of a lease,
conditional sale contract or security agreement, as the case may be, is not
affected by (a) the automatic stay provision of the Bankruptcy Code, which
provision enjoins repossessions by creditors for the duration of the
reorganization period, (b) the provision of the Bankruptcy Code allowing the
trustee in reorganization to use property of the debtor during the
reorganization period, (c) Section 1129 of the Bankruptcy Code (which governs
the confirmation of plans of reorganization in Chapter 11 cases) and (d) any
power of the bankruptcy court to enjoin a repossession. Section 1110 of the
Bankruptcy Code provides, however, that the right to take possession of
equipment may not be exercised for 60 days following the date of commencement of
the reorganization proceedings and may not be exercised at all after such 60-day
period (or such longer period consented to by the lessor, conditional vendor or
holder of a security interest), if the trustee in reorganization agrees to
perform the debtor's obligations that become due on or after such date and cures
all existing defaults and within 30 days thereof, any future defaults (other
than defaults resulting solely from the financial condition, bankruptcy,
insolvency or reorganization of the debtor). "Equipment" is defined in Section
1110 of the Bankruptcy Code, in part, as "an aircraft, aircraft engine,
propeller, appliance, or spare part (as defined in section 40102 of title 49)
that is subject to a security interest granted by, leased to, or conditionally
sold to a debtor that is a citizen of the United States (as defined in section
40102 of title 49) holding an air carrier operating certificate issued by the
Secretary of Transportation pursuant to chapter 447 of title 49 for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo".
The Bankruptcy Reform Act amended Section 1110 by, among other things,
providing that all lessors of equipment first placed in service after the date
of enactment of that Act will be entitled to the benefits of Section 1110 even
if such lease is in essence a security interest. The Bankruptcy Reform Act also
provides that the lessor under a lease of equipment first placed in service on
or prior to the date of the enactment of that Act will be entitled to the
benefits of Section 1110 if the lessor and the lessee have expressed in the
applicable agreement or in a substantially contemporaneous writing that the
applicable agreement is to be treated as a lease for federal income tax
purposes. Each of the Leases relating to Equipment placed in service prior to
the enactment of the Bankruptcy Reform Act contains such a written statement.
Milbank, Tweed, Hadley & McCloy, counsel to the Underwriters, has advised
the Indenture Trustees that, if America West were to become a debtor under
Chapter 11 of the Bankruptcy Code, the applicable Owner Trustee, as lessor under
each Lease, and the related Indenture Trustee, as assignee of such Owner
Trustee's rights under such Lease pursuant to such related Indenture, would be
entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to
the airframe and engines comprising the related Aircraft or with respect to the
related Spare Engine. This opinion is subject to certain qualifications and
assumptions, including the assumption that America West is and will be a citizen
of the United States holding an air carrier operating certificate issued by the
Secretary of Transportation pursuant to chapter 447 of title 49 of the U.S. Code
for aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo and the assumption that the applicable Aircraft or Spare Engine has a
useful life in excess of the term of the related Lease, without giving effect to
any optional renewal period during which fair market rent would be paid (which
assumption will be supported by a letter to such effect issued by one of the
Appraisers). See "-- The Leases -- Events of Loss". The opinion of Milbank,
Tweed, Hadley & McCloy will not address the availability of Section 1110 with
respect to the bankruptcy proceedings of any possible sublessee of Equipment
which may be subleased by America West. The opinion of Milbank, Tweed, Hadley &
McCloy will not address the possible substitution or replacement of Equipment
after an Event of Loss in the future, the consummation of which is conditioned
upon the contemporaneous delivery of an opinion of counsel to the
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<PAGE> 100
effect that the related Indenture Trustee's entitlement to Section 1110 benefits
should not be diminished as a result of such substitution or replacement. For a
description of certain limitations on the Indenture Trustee's exercise of rights
contained in the Indentures, see "-- Indenture Events of Default; Notice and
Waiver".
In the event of bankruptcy, insolvency, receivership or similar proceedings
involving an Owner Participant, it is possible that, notwithstanding that the
applicable Equipment is owned by the related Owner Trustee in trust, such
Equipment and the related Lease and Equipment Notes might become part of such
proceeding. In such event, payments under such Lease or on such Equipment Notes
may be interrupted and the ability of the related Indenture Trustee to exercise
its remedies under the related Indenture might be restricted, though such
Indenture Trustee would retain its status as a secured creditor in respect of
the related Lease and the related Equipment. Certain of the Aircraft are subject
to Cross-Border Leases. In connection with the realization by the Indenture
Trustee of its security interest in such Aircraft, it may be desirable to have
such Cross-Border Leases terminated. In this regard, the bankruptcy, insolvency,
receivership or like proceeding involving the Cross-Border Lessor or investor
therein might also impede the ability of the Indenture Trustee to exercise its
remedies under the related Indenture. See "-- Cross-Border Leases".
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority in aggregate unpaid principal
amount of the Equipment Notes outstanding under any Indenture, the provisions of
such Indenture and the Lease, the Refunding Agreement and the Owner Trust
Agreement corresponding thereto may not be amended or modified, except to the
extent indicated below.
Certain provisions of any Indenture, and of the Lease, the Refunding
Agreement, and the Owner Trust Agreement related thereto, may be amended or
modified by the parties thereto without the consent of the relevant Indenture
Trustee or the holders of the Equipment Notes outstanding under such Indenture,
subject to certain conditions. In the case of each Lease, such provisions
include, among others, provisions relating to maintenance of, and modifications
to, the related Equipment and the return to the related Owner Trustee of the
related Equipment at the end of the term of such Lease. (Indentures, Section
9.01(a))
Without the consent of each holder of an affected Equipment Note then
outstanding, no amendment of or supplement to the related Indenture, Refunding
Agreement or any other related document may (a) modify certain provisions of
such Indenture, certain definitions under such Indenture, or the percentage of
holders of the Equipment Notes required to take or approve any action under such
Indenture, (b) reduce the amount, or change the time of payment or method of
calculation of any amount of principal, Make-Whole Amount, if any, or interest
with respect to any Equipment Note, or alter or modify certain provisions of
such Indenture with respect to the order of priorities in which distributions
thereunder shall be made among the holders of Equipment Notes, the related Owner
Trustee and America West, (c) reduce, modify or amend any indemnities in favor
of the holders of Equipment Notes, (d) consent to any change in such Indenture
or the related Lease which would permit redemption of Equipment Notes earlier
than permitted under such Indenture, (e) release America West from its
obligations in respect of certain payments under the related Lease or (f) permit
the creation of any lien on the related Trust Indenture Estate or deprive any
holder of Equipment Notes of the benefit of the lien of such Indenture on such
Trust Indenture Estate. (Indentures, Section 9.01(b))
INDEMNIFICATION
America West will be required to indemnify each Indenture Trustee, each
Owner Participant, each Owner Trustee, each Pass Through Trustee and the
Subordination Agent, but not any Certificateholder, for certain losses, claims
and other matters (for example, among other things, America West is not
responsible for any losses, claims, and other matters relating to any of such
persons' failure to make a payment to another person, which payment was made by
America West to such first person). Under certain circumstances America West is
required to counter-indemnify each Original Lessee for indemnities owing by such
Original Lessee to each Owner Participant against the loss of depreciation
deductions and certain other benefits allowable for certain income tax purposes
with respect to the related Equipment. Each Owner Trustee
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indemnifies the Indenture Trustee for certain losses, claims and other matters
to the extent not reimbursed by America West; however, recourse is limited to
the related Trust Indenture Estate. Prior to seeking indemnification from the
Trust Indenture Estate for any amount indemnified against by America West under
the related lease, the Indenture Trustee will demand and take necessary action
to pursue indemnification under such Lease. If necessary, the Indenture Trustee
is entitled to indemnification from the related Trust Indenture Estate for any
liability, obligation, loss, damage, penalty, claim or action to the extent not
reimbursed by America West or others. The Indenture Trustee is not indemnified,
however, for, among other things, actions arising from its gross negligence (or
negligence in the handling of funds), willful misconduct or for the inaccuracy
of any representation or warranty made in its individual capacity under the
relevant Refunding Agreement. (Indentures, Section 7.01)
No Trust Company, Owner Participant or any director, officer, employee,
stockholder, agent or affiliate of the Trust Company or Owner Participant (the
"Exculpated Person") will have any obligation, duty or liability of any kind
whatsoever to the Indenture Trustee or holders of any Equipment Notes in
connection with the exercise by any Exculpated Person of any rights of an Owner
Trustee under the related Lease and the other Operative Documents, or the taking
of any action or the failure to take any action, in each case in connection with
any rights of such Owner Trustee under the applicable Indenture and the related
Lease. (Indentures, Section 7.02)
Each Trust Company, Owner Trustee and Owner Participant is required to
indemnify the related Indenture Trustee and the holders of the Equipment Notes
issued with respect to the Equipment in which such Owner Trustee has an interest
for certain losses that may be suffered as a result of its failure to discharge
certain liens or claims on or against the assets subject to the lien of the
related Indenture (Refunding Agreements, Section 13). The Indenture Trustee is
not under any obligation to take any action, risk liability or expend its own
funds under the relevant Indenture if it has reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk is not
reasonably assured to it. (Indentures, Section 5.03)
THE LEASES
Each Aircraft and each Spare Engine is leased by an Owner Trustee to
America West under the relevant Lease.
TERMS AND RENTALS
Each Aircraft and Spare Engine is leased separately under its respective
Lease for a term commencing on the date of the delivery of such Equipment to the
applicable Original Lessee and expiring between 2010 and 2013, which in all
cases is not earlier than the latest maturity date of the Equipment Notes issued
pursuant to the related Indenture, unless earlier terminated as provided by the
related Lease. Basic Rent payments for each Aircraft and Spare Engine are
payable semi-annually on each Basic Rent payment date. (Leases, Section 4 and
Exhibit C) America West's obligations to pay rent and to make, or cause to be
made, other payments under each Lease are unsubordinated unsecured obligations
of America West and will rank pari passu in right of payment with all other
unsubordinated unsecured indebtedness of America West. The rental obligations
will be effectively subordinated to any secured indebtedness of America West to
the extent of the value of the assets securing such indebtedness and would be
effectively subordinated to all obligations of America West's subsidiaries (if
any). America West has no right to purchase any Equipment at the conclusion of
the Term of such Lease.
NET LEASE; MINIMUM PAYMENTS
America West's obligations in respect of each Lease of an Aircraft and
Spare Engine are those of a lessee under a "net lease". Lessee's obligations to
pay all rent and perform all other obligations under the Leases are, by the
terms of the Leases, stated to be absolute and unconditional. The Leases provide
that (i) the Stipulated Loss Value for each item of Equipment, together with the
payment of all rent then due thereunder, as of any time shall be sufficient to
pay in full the unpaid principal amount of the related Equipment Notes and all
accrued and unpaid interest and (ii) Basic Rent payable on any Basic Rent
payment date shall at least equal the amount of principal and interest due and
payable on the related Equipment Notes on such Basic Rent payment date. (Leases,
Section 4(b))
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REGISTRATION; MAINTENANCE; MODIFICATIONS
America West is obligated to cause the Aircraft to be duly registered with
the FAA in the name of the Owner Trustee (or with the aviation authority in
certain other jurisdictions in connection with the re-registration of the
Aircraft in such jurisdictions). Registration of the Aircraft in specified
jurisdictions outside the United States is subject to, among other conditions
specified in the related Refunding Agreement, the lien of the related Indenture
continuing as a valid and duly perfected security interest in the related
Aircraft and the related Lease. America West is also obligated to the extent set
forth in the related Lease, to maintain, service, repair and overhaul the
Equipment (or cause the Equipment to be maintained, serviced, repaired and
overhauled) in accordance with good industry practice and so as to keep the
Equipment in as good a condition as when delivered to America West under such
Lease, ordinary wear and tear excepted, and in such condition as is necessary to
enable the airworthiness certification of such Equipment to be maintained in
good standing at all times (a) under the Federal Aviation Act and any other
applicable law, or (b) under the applicable laws of any other jurisdiction in
which the Aircraft may be registered, except when any grounding of the Aircraft
is fleetwide in nature so long as America West or a Permitted Sublessee is
contesting in good faith such grounding. America West is also required to cause
the Aircraft then subject to such Leases to be maintained in accordance with
maintenance standards required by, or substantially equivalent to those required
by, the central civil aviation authority of the country of registry, and, to the
extent not inconsistent therewith, the FAA. America West will maintain, service,
repair and overhaul the Equipment in the same manner and with the same care as
used by America West with respect to similar aircraft and engines owned by
America West and, during any period in which a sublease permitted by the related
Lease is in effect, will cause to be performed all maintenance, service, repair
and overhaul of the Equipment in the same manner and with the same care as used
by the Permitted Sublessee with respect to similar aircraft and engines owned by
such Permitted Sublessee. (Leases, Section 6(d) and 6(e))
America West will not permit the Aircraft to be maintained, used, serviced,
repaired or operated in violation of any law of any government having
jurisdiction, or in violation of any airworthiness certificate, license or
registration to the extent mandatory for operators similar to America West or
the Permitted Sublessee, except to the extent America West (or any Permitted
Sublessee) is in good faith contesting the validity of any such requirements by
appropriate proceedings which, among other things specified in each Lease, do
not impair the interest of the Owner Trustee in the Aircraft or the validity or
the priority of the Lien of the Indenture. (Leases, Section 6(c)) America West
must make (or cause to be made) all alterations, modifications and additions to
each Airframe, Engine and Spare Engine necessary to meet the applicable
standards of the FAA or any other applicable governmental authority having
jurisdiction. America West (or a Permitted Sublessee) may make other
alterations, modifications and additions to any Airframe, any Engine or any
Spare Engine as America West (or a Permitted Sublessee) may deem desirable in
the proper conduct of its business, so long as such alterations, modifications
or additions do not, among other things specified in the related Lease, diminish
the value, utility or remaining useful life, or impair the condition or
airworthiness of such Airframe, Engine or Spare Engine, below the value, utility
or remaining useful life or condition or airworthiness thereof immediately prior
to such alteration, modification or addition (assuming such Airframe, Engine or
Spare Engine was in the condition required by the terms of the related Lease).
Title to parts incorporated or installed in or added to such Airframe, Engine or
Spare Engine as a result of such alterations, modifications or additions vests
in the Owner Trustee subject to certain exceptions (including, in the case of
any Aircraft subject to a Cross-Border Lease, that title to the relevant parts
shall remain with the relevant Cross-Border Lessor). In certain circumstances,
America West (or a Permitted Sublessee) is permitted to remove from an Airframe,
Engine or Spare Engine parts which were added by America West (or a Permitted
Sublessee) so long as certain conditions are met and any such removal does not,
among other things specified in the related Lease, diminish or impair the value,
utility, remaining useful life, condition or airworthiness, which such Airframe,
Engine or Spare Engine would have had at such time had such addition, alteration
or modification not occurred. (Leases, Section 9)
Subject to certain exceptions, including as set forth above, America West
is obligated to replace or cause to be replaced all parts incorporated or
installed in or attached to any Airframe, any Engine or any Spare Engine that
become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or
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permanently rendered unfit for use. Replacement parts become subject to the
related Lease and the lien of the related Indenture in lieu of the part
replaced. (Leases, Section 9(a))
SUBLEASING AND POSSESSION
America West is permitted, subject to certain limitations, to sublease any
Equipment to any Certificated Air Carrier or to certain foreign entities so long
as the term of any such sublease does not extend beyond the term of the related
Lease. In addition, subject to certain limitations, America West is permitted to
transfer possession of any Airframe, any Engine or any Spare Engine other than
by sublease, including transfers of possession by America West in connection
with certain interchange and pooling arrangements, transfers to the United
States government and any instrumentality or agency thereof, "wet leases" and
transfers in connection with maintenance or modifications.
Except for certain Aircraft described in "Description of the Equipment
Notes -- Cross-Border Leases", there are no general geographical restrictions on
America West's (or any Permitted Sublessee's) ability to operate the Equipment.
The extent to which the relevant Indenture Trustee's lien would be recognized in
any Equipment if such Equipment were located in certain countries is uncertain.
See "Description of the Equipment Notes -- Security". While the Indenture
Trustees' rights and remedies in the event of a default under each Lease include
the right to terminate such Lease and repossess the Equipment subject thereto,
it may be difficult, expensive and time-consuming to obtain possession of
Equipment, particularly when the Equipment has been registered in a foreign
jurisdiction or is located outside the United States or is subleased to a
foreign operator. Any such exercise of the right to repossess the Equipment will
be subject to the limitations and requirements of applicable law, which could
include the need to obtain approvals for deregistration or re-export of the
Aircraft, which may be subject to delays and to political risk. When a
defaulting Permitted Sublessee or other permitted transferee is the subject of a
bankruptcy, insolvency or similar event, such as protective administration,
additional limitations on the exercise of remedies may apply. Furthermore,
certain jurisdictions may accord higher priority to certain other liens or other
third-party rights over the Equipment.
In addition, at the time of obtaining repossession of the Equipment under
the related Lease or foreclosing on the lien on the Equipment under the related
Indenture, an Airframe subject to such Lease may not be equipped with Engines
owned by the applicable Owner Trustee and, in such case, America West is
required to deliver engines attached to such Airframe of the same model and
equivalent modification status as the Engines or, at America West's option, an
engine of an improved model suitable for installation and use on the Airframe
without diminishing the value, utility and remaining useful life of such
Airframe, in each case having a value, utility and remaining useful life at
least equal to, and being in an operating condition as good as, the Engines
subject to such Lease. (Leases, Section 16(c)) Notwithstanding America West's
agreement in the related Lease, in the event America West fails to transfer
title to engines not owned by the applicable Owner Trustee that are attached to
an Airframe on repossession or return thereof, at the time of obtaining
repossession of the Aircraft it could be difficult, expensive and time-consuming
to assemble an Aircraft consisting of an Airframe and related Engines subject to
such Lease. See "Risk Factors -- Factors Relating to the Certificates and the
Offering -- Repossession".
LIENS
America West is required to maintain each Aircraft, Airframe, Engine and
Spare Engine free of any liens, other than specified permitted liens including
the respective rights of America West, the relevant Owner Trustee, Owner
Participant and Indenture Trustee and any other rights as provided in the
related Lease and any rights of others to possession of the Equipment in
accordance with the terms of the related Lease (including Permitted Sublessees);
liens, the removal of which is the responsibility of other parties; liens for
taxes either not yet due or being diligently contested in good faith by
appropriate proceedings so long as such proceedings or such liens do not, among
other things as may be specified in the related Lease, involve any material
danger of the sale, forfeiture or loss of such Aircraft, Airframe, Engine or
Spare Engine or any interest of the related Owner Trustee or Indenture Trustee
therein; inchoate materialmen's, mechanics' and other similar inchoate liens
arising in the ordinary course of America West's business for sums not overdue
for a period of more than 45 days or being diligently contested in good faith so
long as such proceedings or such
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liens do not involve any material danger of the sale, forfeiture or loss of such
Aircraft, Airframe, Engines or Spare Engines or any interest of the related
Owner Trustee or Indenture Trustee therein; judgment liens discharged, vacated
or reversed within a period of 30 days as specified in, and subject to other
limitations which may be contained in, the related Lease, and any other lien
with respect to which America West (or a Permitted Sublessee) has provided a
bond adequate in the reasonable opinion of the Owner Participant and the
Indenture Trustee. (Leases, Section 14)
INSURANCE
Subject to certain exceptions, America West is obligated, at its expense,
to maintain or cause to be maintained on each Aircraft, with reputable and
creditworthy insurers of recognized responsibility and standing experienced in
aircraft insurance, comprehensive aircraft and general public liability
insurance (exclusive of manufacturer's product liability insurance) and property
damage insurance in an amount not less than $350 million, combined single limit,
per occurrence or such higher amount, and of such types and terms as are
customarily carried by prudent certificated air carriers, similarly situated to
America West, operating aircraft of similar size and engines. America West is
also obligated, at its expense, to maintain or cause to be maintained,
"all-risk" ground and flight aircraft hull insurance and "all-risk" coverage
including transit insurance with respect to Engines while not installed on an
Airframe, of such type, on such terms and in such amounts as customarily
maintained by prudent certificated air carriers, similarly situated to America
West, operating aircraft of similar size and engines; provided, however, that,
subject to permitted deductibles, such all-risk insurance shall be for an amount
on an "agreed value" basis not less than the Stipulated Loss Value (as set forth
in the related Lease) determined from time to time for such Equipment. (Leases,
Sections 12(a) and 12(b))
Subject to certain exceptions, the proceeds of policies covering loss of or
damage to an Aircraft shall be payable, up to the Stipulated Loss Value for such
Aircraft, to the related Indenture Trustee for any loss involving proceeds in
excess of $500,000 and the entire amount of any loss involving proceeds of
$500,000 or less shall be paid to America West (or a Permitted Sublessee) so
long as no Lease Event of Default or Lease Default exists. America West (and any
Permitted Sublessee) may self-insure for such loss or damage to the extent of up
to a $1 million deductible per Aircraft and Spare Engine. (Leases, Sections
12(b) and 12(d))
In respect of each Aircraft and Spare Engine, America West is required to
cause the related Owner Trustee, Owner Participant and Indenture Trustee and
certain other persons, but not the Certificateholders, to be included as
additional insureds as their respective interests may appear under all insurance
policies required by the terms of the Lease with respect to such Equipment.
(Leases, Sections 12(a) and 12(b))
America West may not operate (or permit any Permitted Sublessee to operate)
any Equipment in any area that is excluded from coverage by any insurance policy
in effect with respect to such Equipment and required by the related Lease
unless the Equipment is covered by a United States government indemnity.
(Leases, Section 6(c))
America West's obligation to provide any insurance required by any Lease
shall be satisfied if indemnification from the United States government is
provided to the extent and subject to the terms and conditions of such Lease.
(Leases, Section 12(k))
RENEWAL OPTION
Prior to the end of the Basic Term and subject to certain conditions,
America West will have an option to renew each Lease for one Renewal Term
consisting of a period equal to five years. The Renewal Rent for the Renewal
Term shall be the "fair market rental value" of the Equipment for such Renewal
Term as determined in accordance with the related Lease. (Leases, Section 20(a))
EVENTS OF LOSS
If an Event of Loss occurs with respect to any Airframe or any Airframe and
any Engines then installed thereon or any Spare Engine, America West is
obligated either (i) to replace such Airframe, Airframe and
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Engines or Spare Engine or (ii) to pay to the related Owner Trustee the
applicable Stipulated Loss Value, as adjusted, together with certain additional
amounts. If America West elects to replace such Airframe, Airframe and Engines
or Spare Engine, it must do so not later than the 120th day after the related
Event of Loss, with an airframe or airframe and engine(s) or engine, as
applicable, meeting required specifications and free and clear of all liens
(other than certain permitted liens) and having a value, utility and remaining
useful life at least equal to, and being in at least as good operating condition
as, such item of Equipment prior to the Event of Loss, assuming maintenance
thereof in accordance with the related Lease. If America West elects to pay the
Stipulated Loss Value for such Airframe, Airframe and Engines or Spare Engine,
America West must make such payment not later than 120 days after the related
Event of Loss. Upon making such payment, together with all other amounts then
due under the related Lease with respect to such Airframe, Airframe and Engines
or Spare Engine, the Lease for such Aircraft or Spare Engine shall terminate and
the obligation of America West to make the scheduled Basic Rent payments with
respect thereto shall cease. (Leases, Section 11(a))
If an Event of Loss occurs with respect to an Engine, America West is
required to replace such Engine within 60 days from the date of such Event of
Loss with another engine, free and clear of all liens (other than certain
permitted liens), meeting required specifications and having a value, utility
and remaining useful life at least equal to, and being in at least as good
operating condition as, the Engine being replaced (assuming that such Engine had
been maintained in accordance with the related Lease) suitable for installation
and use on the Airframe without diminishing the value, remaining useful life or
utility of such Airframe. (Leases, Section 11(b))
An "Event of Loss" with respect to an Aircraft, Airframe, any Engine or any
Spare Engine means any of the following events with respect thereto:
(a) loss, or, in the case of certain Aircraft, the actual or constructive
total loss, of such Equipment or the use thereof due to theft or
disappearance for the period set forth in the relevant Lease;
(b) destruction or damage of such Equipment that renders repair uneconomic
or such property permanently unfit for normal use by America West (or
a Permitted Sublessee) for any reason whatsoever;
(c) any loss or disappearance of or damage to or destruction of such
Equipment which results in an insurance settlement with respect to
such property on the basis of an actual or constructive total loss;
(d) the condemnation, confiscation, appropriation, seizure or requisition
of title to any such Equipment by any governmental entity which
results in the loss of title by Owner Trustee for ten days or more but
excluding requisition for use or hire which does not involve
requisition of title;
(e) the condemnation, confiscation, appropriation, seizure or requisition
of the use of such Equipment by any governmental entity (other than a
requisition for use by the federal government of the United States or
any instrumentality or agency thereof bearing the full faith and
credit of the United States of America), which in any such case shall
have resulted in the loss of possession thereof by America West for
the period set forth in the relevant Lease (or for such shorter period
ending on the date which is the next business day after the date of
receipt of an insurance settlement with respect to such Equipment on
the basis of a total loss);
(f) the requisition for use of such Equipment by the federal government of
the United States or any agency or instrumentality thereof bearing the
full faith and credit of the United States of America, which purports
to or does continue beyond the Term of the relevant Lease;
(g) as a result of any law, rule, regulation, order or other action by the
FAA, the Department of Transportation or any other governmental entity
having jurisdiction, the use of such Equipment in the normal course of
America West's (or a Permitted Sublessee's) business of air
transportation of passengers shall have been prohibited for a period
of six consecutive months, unless America West (or a Permitted
Sublessee), prior to the expiration of such six-month period, has
undertaken and is
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diligently carrying forward all steps which are necessary or desirable
to permit normal use of such Equipment by America West (or a Permitted
Sublessee), or, in any event, if such normal use shall have been so
prohibited by any such governmental entity for the period set forth in
the relevant Lease; or
(h) as otherwise provided in the relevant Lease.
An Event of Loss with respect to an Aircraft is deemed to have occurred if
an Event of Loss occurs with respect to the Airframe which is a part of such
Aircraft. An Event of Loss with respect to an Engine shall not, absent an Event
of Loss with respect to the relevant Airframe, be deemed an Event of Loss with
respect to such Airframe. (Leases, Section 1)
INDEMNIFICATION
Subject to certain exceptions, America West has agreed to indemnify, among
others, each Owner Participant, each Owner Trustee, each of the Trustees and
each of the Indenture Trustees, but not the holders of the Certificates, for
certain liabilities, losses, fees and expenses and for certain other matters
arising out of the transactions described herein or relating to the Equipment.
In addition, under certain circumstances America West is required to indemnify
such persons, but not the holders of the Certificates, against certain taxes,
levies, duties, withholdings and for certain other matters (but excluding, among
other things, certain income and capital gains taxes) relating to such
transactions or the Equipment. (Leases, Sections 10 and 13)
LEASE EVENTS OF DEFAULT
The Lease Events of Default include, among other things, (i) failure by
America West to make any payment of Basic Rent, Renewal Rent or Stipulated Loss
Value within three business days after such payment is due, or any other payment
of Supplemental Rent within ten business days after the same shall have become
due and America West has received written demand therefor by the party entitled
thereto (provided that failure to pay amounts owed under certain related
documents shall not constitute an Event of Default unless the Owner Trustee or
the Owner Participant delivers notice to America West and the relevant Indenture
Trustee (as applicable) that such failure shall constitute an Event of Default);
(ii) failure by America West to perform or observe any covenant, condition or
agreement to be performed or observed by it under the related Lease or certain
related documents, and such failure shall have continued unremedied after notice
and specified cure periods; (iii) any representation or warranty made by America
West under the related Refunding Agreement and certain related documents or in
any certificate furnished by America West in connection therewith, shall have
proved to have been incorrect in any material respect when made and continued
unremedied after notice and specified cure periods; (iv) the occurrence of
certain events of bankruptcy, reorganization or insolvency of America West; (v)
America West's loss or suspension of its United States air carrier license or
certificate under Part 121 of the Federal Aviation Regulations or its
certificate of public convenience and necessity under Section 41102(a) of the
Federal Aviation Act or, subject to certain exceptions, its cessation of
business as, or cessation of a preponderance of its business to be, that of a
commercial passenger Certificated Air Carrier and (vi) subject to certain
exceptions, the failure of America West to obtain and maintain (or cause to be
obtained and maintained) insurance on or in respect of any Equipment in
accordance with the provisions of the relevant Lease, or the operation of any
Equipment outside of the scope or in violation of the terms of such insurance.
(Leases, Section 17) The Leases require America West to provide to the relevant
Owner Trustee as beneficiary thereof irrevocable standby letters of credit for
drawdown upon the occurrence of certain Lease Defaults or Lease Events of
Default. These letters of credit will not be assigned to the related Indenture
Trustee under its Indenture.
There are no cross-default provisions in the Leases. Consequently, events
resulting in a Lease Event of Default under any particular Lease may or may not
result in a Lease Event of Default occurring under any other Lease. (Leases,
Section 17)
If a Lease Event of Default has occurred and is continuing and the related
Lease has been declared to be in default, the Owner Trustee may, subject to
certain limitations imposed by law, exercise one or more of the remedies
provided in such Lease with respect to the related Equipment. Such remedies
include the right to
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repossess such Equipment, to sell or re-lease such Equipment free and clear of
America West's rights and retain the proceeds and to require America West to pay
liquidated damages as computed in accordance with such Lease. (Leases, Section
18)
SECTION 1110
In each Lease, America West covenants and agrees that it will support any
motion, petition or application filed by the related Owner Trustee, as lessor
under the related Lease, with any bankruptcy court having jurisdiction over
America West, whereby such Owner Trustee seeks recovery of possession of the
Equipment under Section 1110 of the Bankruptcy Code. (Lease, Section 8(i)) See
"Description of the Equipment Notes -- Remedies".
CERTAIN DEFINED TERMS UNDER THE LEASES
"Airframe" means, with respect to each Aircraft, such Aircraft (except
Engines or engines from time to time installed thereon) and any such model
aircraft (except Engines or engines from time to time installed thereon) which
may from time to time be substituted for such Aircraft (except Engines or
engines from time to time installed thereon) in accordance with the provisions
of the related Lease.
"Basic Rent" means, for any Equipment, the scheduled basic rent in respect
of such Equipment payable semi-annually for the Term of the related Lease.
"Basic Term" means, for any Equipment, a term commencing on the date of
delivery of such Equipment to the applicable Original Lessee under the related
Lease and expiring not earlier than the latest maturity date of the Equipment
Notes issued pursuant to the related Indenture, unless earlier terminated as
provided by the related Lease.
"Certificated Air Carrier" means any corporation (except the United States
government) domiciled in the United States of America and holding a Certificate
of Convenience and Necessity issued under Section 41102(a) of the Federal
Aviation Act by the Department of Transportation.
"Engine" means with respect to each Aircraft, (i) each of the two IAE Model
V2500 engines initially installed on the Airframe whether or not from time to
time thereafter no longer installed on the Airframe or installed on any other
aircraft or airframe, and (ii) any replacement engine which may from time to
time be substituted for any Engine in accordance with the provisions of the
related Lease.
"Lease Default" means an event or condition which would constitute a Lease
Event of Default with the lapse of time or the giving of notice or both.
"Lease Payment Dates" means, with respect to each Lease, January 2 and July
2 of each year, commencing on January 2, 1997.
"Permitted Sublessee" means any sublessee permitted under a Lease from time
to time.
"Renewal Rent" means the rent payable during the Renewal Term for any
Equipment pursuant to the related Lease.
"Renewal Term" means the period following the end of the Basic Term if
America West has exercised its renewal option for such Equipment pursuant to the
related Lease.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent or Renewal Rent) which America West assumes or agrees to pay
under each Lease or the other agreements related thereto.
"Term" means, with respect to a Lease, collectively, the Basic Term and, if
America West has exercised its renewal option for such Equipment pursuant to
such Lease, the Renewal Term.
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CROSS-BORDER LEASES
"Cross-Border Lease" means each of the lease agreements between a
Cross-Border Lessor and the applicable Cross-Border Lessee.
"Cross-Border Lessee" means each of the lessees of an Aircraft under a
Cross-Border Lease.
"Cross-Border Lessor" means each of the foreign lessors of an Aircraft.
Two Aircraft securing the obligations under the two related Indentures are
subject to Japanese Cross-Border Lease financings with terms expiring in 1999.
The rights of the Cross-Border Lessee under each of these financings have been
assigned to the relevant Owner Trustees.
Under the terms of each of the Cross-Border Lease financings, title to the
relevant Aircraft is held by a special purpose Japanese entity. In summary, the
Japanese lease financing documentation provides that, subject to various terms
and conditions, the relevant Cross-Border Lessee is entitled to acquire title to
the relevant Aircraft on termination thereof, upon not less than 90 days' notice
and upon payment of an agreed sum upon voluntary termination, and otherwise
whether or not an agreed sum is paid. To the extent, if any, that passage of
title is conditioned upon payment of an agreed sum, the obligation to pay such
sum has been assumed (against receipt of cash) by a foreign financial
institution or, to the extent not so assumed, cash collateralized by or on
behalf of the relevant Cross-Border Lessee. In addition, each Cross-Border
Lessor has expressly agreed that its interest in the Aircraft is subject and
subordinate to the security interest of the relevant Indenture Trustee.
The ability of an Indenture Trustee to realize upon its security interest
in an Aircraft that is subject to a Cross-Border Lease financing could be
adversely affected if the relevant Cross-Border Lessor or any investor in such
lessor were to become a debtor in a bankruptcy or similar proceeding in its home
jurisdiction and a creditor, trustee in bankruptcy, liquidator, receiver or
similar official were to take the position that the related Aircraft should be
treated as part of the estate of such lessor or investor, as the case may be
(particularly, if at the same time the Indenture Trustee is seeking to exercise
remedies under the related Indenture). If such a position were to be taken in
such a proceeding, a delay in the transfer or re-acquisition of title to such
Aircraft to or by the relevant Owner Trustee following the occurrence and
continuance of a Lease Event of Default under the related Lease could occur.
Such a delay might impede the ability of an Indenture Trustee to realize upon
the Aircraft collateral securing the related Equipment Notes.
Legal opinions from Japanese counsel (based on certain assumptions and
qualifications) will be given to the effect that the interests of the relevant
Cross-Border Lessor have been validly subordinated to the lien of the relevant
Indenture Trustee, and that any liquidator, receiver, trustee or any other
similar officer of the Cross-Border Lessor should not be entitled to deny or
contest such subordination in a bankruptcy or similar proceeding in Japan. There
can be no assurance, however, that the circumstances or the law upon which such
counsel based their opinions will not change, that a court of competent
jurisdiction in Japan would not find differently, that such opinions would prove
to be correct or that the law of another jurisdiction would not apply.
In connection with the realization by the Indenture Trustee of its security
interest in the Aircraft, it may be desirable to have such Cross-Border Leases
terminated.
The information set forth above concerning Cross-Border Lease financings
was provided by GPA and America West takes no responsibility for the accuracy
thereof.
THE REFUNDING AGREEMENTS
TRANSFER OF OWNER PARTICIPANT INTERESTS
Subject to certain restrictions, each Owner Participant may transfer its
beneficial interest in the relevant Owner Trust. (Refunding Agreements, Section
10)
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<PAGE> 109
REGISTRATION OF AIRCRAFT
The Aircraft (including the Aircraft subject to the Cross-Border Leases)
have been registered under the Federal Aviation Act in the name of the relevant
Owner Trustee. America West may, under certain circumstances, request the
re-registration of such Aircraft in certain jurisdictions outside of the United
States, subject to, among other conditions specified in the related Refunding
Agreement, the lien of the related Indenture continuing as a perfected security
interest in such Aircraft and the related Lease. (Refunding Agreements, Section
11)
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<PAGE> 110
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion describes the principal U.S. federal income tax
consequences to Certificateholders of the purchase, ownership and disposition of
the Certificates. In the opinion of Andrews & Kurth L.L.P., special tax counsel
to America West ("Special Tax Counsel") such discussion is accurate in all
material respects of the matters discussed herein. Except as otherwise
specified, the discussion is addressed to beneficial owners of Certificates
("U.S. Certificateholders") that are citizens or residents of the United States,
corporations, partnerships or other entities created or organized in or under
the laws of the United States or any State, or estates or trusts the income of
which is subject to U.S. federal income taxation regardless of its source ("U.S.
Persons") that will hold the Certificates as capital assets. This discussion
does not address the tax treatment of U.S. Certificateholders that may be
subject to special tax rules, such as banks, insurance companies, dealers in
securities or commodities, tax-exempt entities, holders that will hold
Certificates as part of a straddle or holders that have a "functional currency"
other than the U.S. Dollar, nor does it address the tax treatment of U.S.
Certificateholders that do not acquire Certificates at the initial offering
price as part of the initial offering. This discussion does not describe any tax
consequences arising under the laws of any State, locality or taxing
jurisdiction other than the United States.
This discussion is based upon the tax laws of the United States as in
effect on the date of this Prospectus, as well as judicial and administrative
interpretations thereof (in final or proposed form) available on or before such
date. All of the foregoing are subject to change or differing interpretations,
which could apply retroactively. Prospective investors should note that no
rulings have been or will be sought from the Internal Revenue Service (the
"IRS ") with respect to any of the federal income tax consequences discussed
below, and no assurance can be given the IRS will not take contrary positions.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
TAX STATUS OF THE TRUSTS
In the opinion of Special Tax Counsel, each Trust will be classified as a
grantor trust under subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A
of the Code and not as an association taxable as a corporation for U.S. federal
income tax purposes. Accordingly, each U.S. Certificateholder will be subject to
federal income taxation as if it owned directly a pro rata undivided interest in
each asset owned by the corresponding Trust and paid directly, its share of fees
and expenses paid by such Trust.
TAXATION OF CERTIFICATEHOLDERS GENERALLY
A U.S. Certificateholder will be treated as owning its pro rata undivided
interest in each of the Equipment Notes and any other property held by the
related Trust. Accordingly, each U.S. Certificateholder's share of interest paid
on the Equipment Notes will be taxable as ordinary income, as it is paid or
accrued, in accordance with such owner's method of accounting for U.S. federal
income tax purposes. Any amounts received by a Trust from Interest Drawings
under the relevant Liquidity Facility will be treated for U.S. federal income
tax purposes as having the same characteristics as the payments they replace.
Each U.S. Certificateholder will be entitled to deduct, consistent with its
method of accounting, its pro rata share of fees and expenses paid or incurred
by the corresponding Trust as provided in Section 162 or 212 of the Code.
Certain fees and expenses, including fees paid to the Trustee and the Liquidity
Provider, will be borne by parties other than the Certificateholders. It is
possible that such fees and expenses will be treated as constructively received
by the Trust, in which event a U.S. Certificateholder will be required to
include in income and will be entitled to deduct its pro rata share of such fees
and expenses. If a U.S. Certificateholder is an individual, estate or trust, the
deduction for such holder's share of such fees or expenses will be allowed only
to the extent that all of such holder's miscellaneous itemized deductions,
including such holder's share of such fees and expenses, exceed 2% of such
holder's adjusted gross income. In addition, in the case of U.S.
Certificateholders who are individuals, certain otherwise allowable itemized
deductions will be subject generally to additional limitations on itemized
deductions under the applicable provisions of the Code.
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<PAGE> 111
EFFECT OF SUBORDINATION OF SUBORDINATED CERTIFICATEHOLDERS
If any of the Class B Trust, the Class C Trust, the Class D Trust or the
Class E Trust (such Trusts being the "Subordinated Trusts" and the related
Certificates being the "Subordinated Certificates") receives less than the full
amount of the receipts of principal or interest paid with respect to the
Equipment Notes held by it (any shortfall in such receipts being the "Shortfall
Amounts") because of the subordination of the Equipment Notes held by such Trust
under the Intercreditor Agreement, the corresponding owners of beneficial
interests in the Subordinated Certificates (the "Subordinated
Certificateholders") would probably be treated for federal income tax purposes
as if they had (1) received as distributions their full share of such receipts,
(2) paid over to the relevant preferred class of Certificateholders an amount
equal to their share of such Shortfall Amount, and (3) retained the right to
reimbursement of such amounts to the extent of future amounts payable to such
Subordinated Certificateholders with respect to such Shortfall Amount.
Under this analysis, (1) Subordinated Certificateholders incurring a
Shortfall Amount would be required to include as current income any interest or
other income of the corresponding Subordinated Trust that was a component of the
Shortfall Amount, even though such amount was in fact paid to another class of
Certificateholders, (2) a loss would only be allowed to such Subordinated
Certificateholders when their right to receive reimbursement of such Shortfall
Amount became worthless (i.e., when it becomes clear that funds will not be
available from any source to reimburse such loss), and (3) reimbursement of such
Shortfall Amount prior to such a claim of worthlessness would not be taxable
income to Subordinated Certificateholders because such amount was previously
included in income. These results should not significantly affect the inclusion
of income for Subordinated Certificateholders on the accrual method of
accounting, but could accelerate inclusion of income to Subordinated
Certificateholders on the cash method of accounting by, in effect, placing them
on the accrual method.
SALE OR OTHER DISPOSITION OF THE CERTIFICATES
Upon the sale, exchange or other disposition of a Certificate, a U.S.
Certificateholder generally will recognize capital gain or loss equal to the
difference between the amount realized on the disposition (other than any amount
attributable to accrued interest which will be taxable as ordinary income) and
the U.S. Certificateholder's adjusted tax basis in the related Equipment Notes
and any other assets held by the corresponding Trust. A U.S. Certificateholder's
adjusted tax basis will equal the holder's cost for its Certificate, plus any
accrued OID or market discount previously included in income or less any
amortized bond premium or any previously recognized losses or prior principal
payments. Any gain or loss generally will be capital gain or loss (other than
accrued market discount not previously included in income) if the Certificate
was held as a capital asset.
FOREIGN CERTIFICATEHOLDERS
Subject to the discussion of backup withholding below, payments of
principal and interest on the Equipment Notes to, or on behalf of, any
beneficial owner of a Certificate that is not a U.S. Person (a "Non-U.S.
Certificateholder") will not be subject to U.S. federal withholding tax;
provided, in the case of interest, that (i) such Non-U.S. Certificateholder does
not actually or constructively own 10% or more of the total combined voting
power of all classes of the stock of any Owner Participant or any transferee of
such interest, (ii) such Non-U.S. Certificateholder is not a controlled foreign
corporation for U.S. tax purposes that is related to an Owner Participant or any
transferee of such interest and (iii) either (A) the Non-U.S. Certificateholder
certifies, under penalties of perjury, that it is not a U.S. Person and provides
its name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") and holds the Certificate
certifies, under penalties of perjury, that such statement has been received
from the Non-U.S. Certificateholder by it or by another financial institution
and furnishes the payor with a copy thereof. America West has no obligation to
indemnify any Certificateholder with respect to withholding taxes.
Any capital gain realized upon the sale, exchange, retirement or other
disposition of a Certificate by a Non-U.S. Certificateholder will not be subject
to U.S. federal income or withholding taxes if (i) such gain is
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<PAGE> 112
not effectively connected with a U.S. trade or business of the holder and (ii)
in the case of an individual, such holder is not present in the United States
for 183 days or more in the taxable year of the sale, exchange, retirement or
other disposition or receipt.
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of
Certificates will not be subject to a backup withholding tax of 31% unless, in
general, the Certificateholder fails to comply with certain reporting procedures
or otherwise fails to establish an exemption from such tax under applicable
provisions of the Code.
STATE TAX CONSIDERATIONS
The Trustee is a national banking association with its principal corporate
trust office in Hartford, Connecticut. Shipman & Goodwin LLP, special counsel
for the Trustee, has advised the Company that, in its opinion, prior to a
default and under currently applicable law, assuming that each Trust will not be
classified as an association taxable as a corporation for federal income tax
purposes, but rather will be classified as a grantor trust under Section 671 of
the Code, (i) the Trust will not be subject to any tax, fee or other
governmental charge under the laws of the State of Connecticut or any political
subdivision thereof and (ii) Certificateholders that are not residents of or
otherwise subject to tax in the State of Connecticut will not be subject to any
tax, fee or other governmental charge under the laws of the State of Connecticut
or any political subdivision thereof as a result of purchasing, owning or
selling a Certificate.
112
<PAGE> 113
ERISA CONSIDERATIONS
IN GENERAL
Title I of ERISA imposes certain requirements on employee benefit plans
subject to ERISA ("ERISA Plans"), and on those persons who are fiduciaries with
respect to ERISA Plans. Investments by ERISA Plans are subject to ERISA's
general fiduciary requirements, including the requirement of investment prudence
and diversification and the requirement that an ERISA Plan's investment be made
in accordance with the documents governing the ERISA Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions involving the assets of Plans and certain persons (referred to as
"parties in interest" or "disqualified persons") having certain relationships to
such Plans, unless a statutory or administrative exemption is applicable to the
transaction. A party in interest or disqualified person who engages in a
prohibited transaction may be subject to excise taxes and other penalties and
liabilities under ERISA and the Code.
The U.S. Department of Labor has promulgated a regulation, 29 CFR Section
2510.3-101 (the "Plan Asset Regulation"), describing what constitutes the assets
of a Plan with respect to the Plan's investment in an entity for purposes of
ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan
invests in a Certificate, the Plan's assets would include both the Certificate
and an undivided interest in each of the underlying assets of the corresponding
Trust, including the Equipment Notes held by such Trust, unless it is
established that equity participation in the Trust by "benefit plan investors"
(including Plans and entities whose underlying assets include plan assets by
reason of an employee benefit plan's investment in the entity) is not
"significant" within the meaning of the Plan Asset Regulation. In that regard,
the extent to which there is equity participation in a particular Trust on the
part of benefit plan investors will not be monitored. If the assets of a Trust
were deemed to constitute the assets of a Plan, transactions involving the
assets of such Trust could be subject to the prohibited transaction provisions
of ERISA and Section 4975 of the Code unless a statutory or administrative
exemption were applicable to the transaction.
The fiduciary of a Plan that proposes to purchase and hold any Certificates
should consider whether such purchase and holding may involve the indirect
extension of credit to a party in interest or a disqualified person. In
addition, whether or not the assets of a Trust are deemed to be Plan Assets
under the Plan Asset Regulation, if Certificates are purchased by a Plan and
Certificates of a subordinate Class are held by a party in interest or a
disqualified person with respect to such Plan, the exercise by the holder of the
subordinate Class of Certificates of its right to purchase the senior Classes of
Certificates upon the occurrence and during the continuation of a Triggering
Event could be considered to constitute a prohibited transaction unless a
statutory or administrative exemption were applicable. Depending on the identity
of the Plan fiduciary making the decision to acquire or hold Certificates on
behalf of a Plan, PTCE 91-38 (relating to investments by bank collective
investment funds), PTCE 84-14 (relating to transactions effected by a "qualified
professional asset manager"), PTCE 95-60 (relating to investment by an insurance
company general account), PTCE 90-1 (relating to investments by insurance
company pooled separate accounts) or PTCE 96-23 (relating to transactions
effected by an "in-house asset manager") (collectively, the "Class Exemptions")
could provide an exemption from the prohibited transaction provisions of ERISA
and Section 4975 of the Code. There can be no assurance that any of these Class
Exemptions or any other exemption will be available with respect to any
particular transaction involving the Certificates.
Governmental plans and certain church plans, while not subject to the
fiduciary responsibility provisions of ERISA or the provisions of Section 4975
of the Code, may nevertheless be subject to state or other federal laws that are
substantially similar to the foregoing provisions of ERISA and the Code.
Fiduciaries of any such plans should consult with their counsel before
purchasing any Certificates.
Any Plan fiduciary which proposes to cause a Plan to purchase any
Certificates should consult with its counsel regarding the applicability of the
fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code to such an investment, and to confirm that such
purchase and holding will not constitute or result in a non-exempt prohibited
transaction or any other violation of an applicable requirement of ERISA.
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<PAGE> 114
CLASS A CERTIFICATES
In addition to the Class Exemptions, an individual exemption may apply to
the purchase, holding and secondary market sale of Class A Certificates by
Plans, provided that certain specified conditions are met. In particular, the
U.S. Department of Labor has issued individual administrative exemptions to
certain of the Underwriters which are substantially the same as the
administrative exemption issued to Morgan Stanley & Co. Incorporated, Prohibited
Transaction Exemption 90-24 (55 Fed. Reg. 20,548 (1990)) (the "Underwriters
Exemption"), which generally exempts from the application of certain, but not
all, of the prohibited transaction provisions of Section 406 of ERISA and
Section 4975 of the Code certain transactions relating to the initial purchase,
holding and subsequent secondary market sale of pass-through certificates which
represent an interest in a trust, the assets of which include equipment notes
secured by leases, provided that certain conditions set forth in the
Underwriters Exemption are satisfied.
The Underwriters Exemption sets forth a number of general and specific
conditions which must be satisfied for a transaction involving the initial
purchase, holding or secondary market sale of Class A Certificates to be
eligible for exemptive relief thereunder. In particular, the acquisition of
Class A Certificates by a Plan must be on terms that are at least as favorable
to the Plan as they would be in an arm's length transaction with an unrelated
party; the rights and interests evidenced by the Certificates must not be
subordinated to the rights and interests evidenced by other Certificates of the
same trust estate; the certificates at the time of acquisition by the Plan must
be rated in one of the three highest generic rating categories by Moody's,
Standard & Poor's, Duff & Phelps Inc. or Fitch Investors Services, L.P.; and the
investing Plan must be an accredited investor as defined in Rule 501(a)(1) of
Regulation D of the Commission under the Securities Act.
The Underwriters Exemption does not apply to the Class B Certificates, the
Class C Certificates, the Class D Certificates or the Class E Certificates. Even
if all of the conditions of the Underwriters Exemption are satisfied with
respect to the Class A Certificates, no assurance can be given that the
Underwriters Exemption would apply with respect to all transactions involving
the Class A Certificates or the assets of the Class A Trust. In particular, it
appears that the Underwriters Exemption would not apply to the purchase by Class
B Certificateholders, Class C Certificateholders, Class D Certificateholders or
Class E Certificateholders of Class A Certificates in connection with the
exercise of their rights upon the occurrence and during the continuance of a
Triggering Event. Therefore, the fiduciary of a Plan considering the purchase of
a Class A Certificate should consider the availability of the exemptive relief
provided by the Underwriters Exemption, as well as the availability of any other
exemptions with respect to transactions to which the Underwriters Exemption may
not apply.
By acceptance of a Class A Certificate, each Certificateholder that is a
Plan will be deemed to have represented that it is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities
Act.
CLASS B, CLASS C, CLASS D AND CLASS E CERTIFICATES
The Class B Certificates, Class C Certificates, Class D Certificates and
Class E Certificates may not be acquired with the assets of a Plan; provided,
however, that such Certificates may be acquired with the assets of an insurance
company general account that may be deemed to contain Plan assets if the
conditions of Prohibited Transaction Class Exemption 95-60 (60 Fed. Reg. 35,925)
have been satisfied. By the acceptance of a Class B, C, D or E Certificates,
each Certificateholder will be deemed to have represented that either (i) no
Plan assets have been used to purchase such Certificate or (ii) the purchase and
holding of such Certificate is exempt from the prohibited transaction
restrictions of ERISA and the Code pursuant to PTCE 95-60.
EACH PLAN FIDUCIARY (AND EACH FIDUCIARY FOR A GOVERNMENTAL OR CHURCH PLAN
SUBJECT TO RULES SIMILAR TO THOSE IMPOSED ON PLANS UNDER ERISA) SHOULD CONSULT
WITH ITS LEGAL ADVISOR CONCERNING AN INVESTMENT IN ANY OF THE CERTIFICATES.
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<PAGE> 115
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated November 20, 1996 with America West, GPA and certain U.S. domiciled
subsidiaries of GPA (the "Underwriting Agreement") the underwriters named below
(the "Underwriters") have severally agreed to purchase from the Trusts, at the
price set forth on the cover page of this Prospectus, Certificates of each Trust
in the initial aggregate principal amounts set forth in the following chart:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A CLASS B CLASS C CLASS D CLASS E
UNDERWRITERS CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
- --------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Morgan Stanley & Co.
Incorporated............. $ 24,882,000 $ 9,283,000 $ 9,439,000 $ 29,618,000 $ 14,541,000
Citicorp Securities,
Inc. .................... 24,880,000 9,282,000 9,436,000 0 0
Lehman Brothers Inc........ 24,880,000 9,282,000 9,436,000 0 0
Salomon Brothers Inc....... 24,880,000 9,282,000 9,436,000 0 0
------------ ------------ ------------ ------------ ------------
Total............ $ 99,522,000 $ 37,129,000 $ 37,747,000 $ 29,618,000 $ 14,541,000
============ ============ ============ ============ ============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Certificates is subject to
the approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the
Certificates to be purchased by it if any are taken.
The Underwriters initially propose to offer all or part of the Certificates
directly to the public at the public offering price indicated on the cover page
of this Prospectus, and may offer a portion of the Certificates to dealers at a
price which represents a concession not in excess of the amounts set forth below
for the respective designations of the Certificates. The Underwriters may allow
to certain dealers, and such dealers may reallow, a concession not in excess of
the amounts set forth below for the respective designations of the Certificates.
After the initial public offering of the Certificates, the public offering
prices, such concessions and other selling terms may from time to time be varied
by the Underwriters.
<TABLE>
<CAPTION>
PASS THROUGH CONCESSION REALLOWANCE
CERTIFICATE DESIGNATIONS TO DEALERS CONCESSION
- ------------------------ ---------- -----------
<S> <C> <C>
Class A 0.450% 0.250%
Class B 0.500 0.250
Class C 0.550 0.250
Class D 0.250 0.125
Class E 0.250 0.125
</TABLE>
In connection with the sale of Certificates, Underwriters may be deemed to
have received compensation from America West or GPA in the form of commissions
and may also receive commissions from purchasers of Certificates for whom they
may act as agent. When the Underwriters sell the Certificates to or through
dealers, such dealers may receive commissions from the Underwriters and/or
commissions (which may be changed from time to time) from the purchasers for
whom they act as agent.
Underwriters, dealers and agents participating in the distribution of the
Certificates may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Certificates
may be deemed to be underwriting discounts and commissions under the Securities
Act.
The Underwriting Agreement provides that America West, on the one hand, and
GPA and certain GPA subsidiaries party thereto, on the other hand, will,
severally and not jointly, indemnify the Underwriters against certain
liabilities, including liabilities under applicable securities laws or will
contribute to payments the Underwriters may be required to make in respect
thereof. In addition GPA and such subsidiaries will reimburse the Underwriters
for certain of their expenses incurred in connection with the offering of the
Certificates, including certain fees and expenses of counsel for the
Underwriters.
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<PAGE> 116
The Certificates are new securities for which there currently is no market.
America West does not intend to apply for listing of the Certificates on a
national securities exchange, but has been advised by the Underwriters that they
currently intend to make a market in the Certificates. No Underwriter is
obligated, however, to make a market in the Certificates, and any such
market-making may be discontinued at any time at the sole discretion of such
Underwriter. Accordingly, no assurance can be given as to the development or
liquidity of any market for the Certificates.
Certain of the Underwriters and their respective affiliates have provided
or are currently providing investment banking and other advisory or financial
services to America West and GPA and certain of their respective affiliates for
which they receive customary compensation, and may continue to provide such
services in the future.
Morgan Stanley & Co. Incorporated ("Morgan Stanley") holds the Equipment
Trust Certificate. The proceeds from the offering of the Certificates will be
used to purchase Equipment Notes, a portion of the proceeds of which will repay
the Equipment Trust Certificate. Apart from stated interest on the Equipment
Trust Certificate, Morgan Stanley has received no fees in connection with its
purchase of the Equipment Trust Certificate.
Lehman Brothers Holdings Inc., the parent of Lehman, beneficially owned as
of November 6, 1996 1,831,223 shares of the Company's Class B Common Stock and
293,242 Warrants to purchase Class B Common Stock. See "Certain Transactions".
Citicorp Securities, Inc. ("Citicorp") held as of November 6, 1996 claims
aggregating over $11 million in the Company's Chapter 11 bankruptcy proceedings.
Upon settlement of these claims, Citicorp expects to receive shares of the
Company's Class B Common Stock. Additionally, Citicorp holds $1,750,000 of the
Company's 7.375% Senior Notes due August 1, 1998.
It is expected that delivery of the Certificates will be made against
payment therefor on or about the Closing Date, which will be the fourth business
day following the date of pricing of the Certificates (such settlement cycle
being herein referred to as "T+4"). Under Rule 15c6-1 under the Exchange Act,
trades in the secondary market generally are required to settle in three
business days, unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade Certificates on any day prior to the
third business day before the Closing Date will be required, by virtue of the
fact that the Certificates initially will settle in T+4, to specify an alternate
settlement cycle at the time of any such trade to prevent a failed settlement.
Purchasers of Certificates who wish to trade Certificates on any day prior to
the third business day before the Closing Date should consult their own advisor.
LEGAL MATTERS
The validity of the Certificates offered hereby will be passed upon for
America West by Andrews & Kurth L.L.P., Houston, Texas, and for the Underwriters
by Milbank, Tweed, Hadley & McCloy, New York, New York. Certain federal income
tax matters with respect to the Trust and Certificateholders will be passed upon
by Andrews & Kurth L.L.P., special tax counsel to America West. The respective
counsel for America West and the Underwriters may rely upon Shipman & Goodwin
LLP, counsel to the Trustee, as to certain matters relating to the
authorization, execution and delivery of the Basic Agreement, each Trust
Supplement and the issuance of the Certificates.
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<PAGE> 117
EXPERTS
The financial statements and financial statement schedule of America West
as of December 31, 1995 and 1994, for the year ended December 31, 1995, the
period August 26, 1994 to December 31, 1994, the period January 1, 1994 to
August 25, 1994 and for the year ended December 31, 1993, have been included
herein and in the Registration Statement in reliance upon the reports of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
The reports of KPMG Peat Marwick LLP as of December 31, 1995 and 1994, for
the year ended December 31, 1995, the period August 26, 1994 to December 31,
1994, the period January 1, 1994 to August 25, 1994, and for the year ended
December 31, 1993 contain an explanatory paragraph that states the financial
statements of the Reorganized Company reflect the impact of adjustments to
reflect the fair value of assets and liabilities under fresh start reporting. As
a result, the financial statements of the Reorganized Company are presented on a
different basis than those of the Predecessor Company and therefore, are not
comparable in all respects.
The references to BK, AISI, and MBA, and to their respective appraisal
reports, dated as of July 2, 1996 in the case of BK, July 11, 1996 in the case
of AISI and July 12, 1996 in the case of MBA, are included herein in reliance
upon the authority of each such firm as an expert with respect to the matters
contained in its appraisal report.
117
<PAGE> 118
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
CONDENSED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1996
Condensed Balance Sheets as of September 30, 1996 (Unaudited) and December 31, 1995... F-2
Condensed Statements of Operations for the three months ended September 30, 1996 and
1995 and the nine months ended September 30, 1996 and 1995 (Unaudited).............. F-4
Condensed Statements of Cash Flows for the nine months ended September 30, 1996 and
1995 (Unaudited).................................................................... F-5
Notes to Condensed Financial Statements............................................... F-6
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995
Independent Auditors' Report.......................................................... F-9
Balance Sheets as of December 31, 1995 and 1994....................................... F-10
Statements of Income for the year ended December 31, 1995 and for the periods August
26, 1994 to December 31, 1994, January 1, 1994 to August 25, 1994 and the year ended
December 31, 1993................................................................... F-11
Statements of Cash Flows for the year ended December 31, 1995 and for the periods
August 26, 1994 to December 31, 1994, January 1, 1994 to August 25, 1994 and the
year ended December 31, 1993........................................................ F-13
Statements of Stockholders' Equity (Deficiency) for the year ended December 31, 1995
and for the periods August 26, 1994 to December 31, 1994, January 1, 1994 to August
25, 1994 and the years ended December 31, 1993...................................... F-14
Notes to Financial Statements......................................................... F-15
</TABLE>
F-1
<PAGE> 119
AMERICA WEST AIRLINES, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 149,635 $ 224,367
Short-term investments......................................... 50,899 --
Accounts receivable, less allowance for doubtful accounts of
$2,987 in 1996 and $2,515 in 1995........................... 61,209 69,094
Expendable spare parts and supplies, less allowance for
obsolescence of $1,842 in 1996 and $2,115 in 1995........... 20,472 28,643
Prepaid expenses............................................... 45,220 43,315
----------- -----------
Total current assets........................................ 327,435 365,419
----------- -----------
Property and equipment:
Flight equipment............................................... 637,309 546,591
Other property and equipment................................... 106,836 104,106
Equipment purchase deposits.................................... 46,803 27,489
----------- -----------
790,948 678,186
Less accumulated depreciation and amortization................. 141,139 76,123
----------- -----------
Total property and equipment................................ 649,809 602,063
----------- -----------
Other assets:
Restricted cash................................................ 24,796 31,694
Reorganization value in excess of amounts allocable to
identifiable assets, net.................................... 435,863 489,045
Deferred income taxes.......................................... 74,700 74,700
Other assets, net.............................................. 26,786 25,788
----------- -----------
Total other assets.......................................... 562,145 621,227
----------- -----------
$ 1,539,389 $ 1,588,709
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
F-2
<PAGE> 120
AMERICA WEST AIRLINES, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt........................... $ 46,242 $ 54,157
Accounts payable............................................... 125,603 89,157
Air traffic liability.......................................... 208,767 191,744
Accrued compensation and vacation benefits..................... 27,268 41,616
Accrued taxes.................................................. 16,705 34,359
Other accrued liabilities...................................... 39,317 24,802
----------- -----------
Total current liabilities................................... 463,902 435,835
----------- -----------
Long-term debt, less current maturities.......................... 336,235 373,964
Deferred credits and other liabilities........................... 129,757 129,438
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 1,200,000 shares............. 12 12
Class B common stock, $.01 par value. Authorized 100,000,000
shares; issued and outstanding 44,613,981 shares at
September 30, 1996 and 44,141,330 shares at December 31,
1995........................................................ 446 441
Additional paid-in capital..................................... 576,471 588,927
Retained earnings.............................................. 58,070 61,632
----------- -----------
634,999 651,012
Less treasury stock at cost, Class B Common Stock, 1,382,000
shares at September 30, 1996 and 112,000 shares at December
31, 1995.................................................... 25,504 1,540
----------- -----------
Total stockholders' equity.................................. 609,495 649,472
----------- -----------
$ 1,539,389 $ 1,588,709
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
F-3
<PAGE> 121
AMERICA WEST AIRLINES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------------
1996 1995 1996 1995
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Operating revenues:
Passenger.................................... $397,892 $384,420 $1,225,494 $1,082,858
Cargo........................................ 10,966 10,302 32,714 32,613
Other........................................ 13,660 13,905 41,409 38,862
-------- -------- ---------- ----------
Total operating revenues.................. 422,518 408,627 1,299,617 1,154,333
-------- -------- ---------- ----------
Operating expenses:
Salaries and related costs................... 98,572 98,818 290,894 283,869
Aircraft rents............................... 51,855 44,442 148,993 128,927
Other rents and landing fees................. 28,420 27,818 82,251 81,276
Aircraft fuel................................ 60,456 44,183 165,775 126,664
Agency commissions........................... 32,390 32,822 99,596 93,147
Aircraft maintenance materials and repairs... 34,151 17,856 90,382 44,735
Depreciation and amortization................ 12,895 12,460 39,615 36,374
Amortization of reorganization value in
excess of amounts allocable to
identifiable assets....................... 6,081 7,858 19,181 24,274
Nonrecurring special charge.................. 65,098 -- 65,098 --
Other........................................ 85,743 68,210 254,574 203,055
-------- -------- ---------- ----------
Total operating expenses.................. 475,661 354,467 1,256,359 1,022,321
-------- -------- ---------- ----------
Operating income (loss)................... (53,143) 54,160 43,258 132,012
-------- -------- ---------- ----------
Nonoperating income (expenses):
Interest income.............................. 3,026 4,155 9,557 11,114
Interest expense............................. (10,933) (14,003) (34,910) (45,461)
Gain (loss) on disposition of property and
equipment................................. (140) (1,290) 261 (2,515)
Other, net................................... (330) 91 (476) 128
-------- -------- ---------- ----------
Total nonoperating expenses, net............... (8,377) (11,047) (25,568) (36,734)
-------- -------- ---------- ----------
Income (loss) before income taxes (benefit) and
extraordinary item........................... (61,520) 43,113 17,690 95,278
-------- -------- ---------- ----------
Income taxes (benefit)......................... (15,813) 20,414 20,148 46,496
-------- -------- ---------- ----------
Extraordinary item, net of taxes............... -- (984) (1,105) (984)
-------- -------- ---------- ----------
Net income (loss).............................. $(45,707) $ 21,715 $ (3,563) $ 47,798
======== ======== ========== ==========
Earnings (loss) per share:
Primary:
Income (loss) before extraordinary item... $ (1.03) $ 0.48 $ (0.05) $ 1.06
Extraordinary item........................ -- (0.02) (0.03) (0.02)
-------- -------- ---------- ----------
Net income (loss)....................... $ (1.03) $ 0.46 $ (0.08) $ 1.04
======== ======== ========== ==========
Fully diluted:
Income (loss) before extraordinary item... $ (1.03) $ 0.47 $ (0.05) $ 1.05
Extraordinary item........................ -- (0.02) (0.03) (0.02)
-------- -------- ---------- ----------
Net income (loss)....................... $ (1.03) $ 0.45 $ (0.08) $ 1.03
======== ======== ========== ==========
Shares used for computation:
Primary...................................... 44,381 48,728 45,065 46,354
======== ======== ========= ==========
Fully diluted................................ 44,381 48,728 45,065 48,256
======== ======== ========= ==========
</TABLE>
See accompanying notes to condensed financial statements.
F-4
<PAGE> 122
AMERICA WEST AIRLINES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................. $ (3,563) $ 47,798
Adjustments to reconcile net income (loss) to cash provided by
operating activities:
Depreciation and amortization.................................. 39,615 36,374
Amortization of reorganization value in excess of amounts
allocable to identifiable assets.............................. 19,181 24,274
Amortization of capitalized maintenance........................ 26,080 6,647
Amortization of deferred credits............................... (8,924) (8,121)
Loss (gain) on disposition of property and equipment........... (261) 2,515
Nonrecurring special charge.................................... 65,098 --
Extraordinary loss on extinguishment of debt, net of taxes..... 1,105 984
Other.......................................................... 1,833 3,433
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net................ 7,885 (34,275)
Increase in spare parts and supplies, net...................... (2,842) (4,395)
Decrease (increase) in prepaid expenses, net................... 858 (12,535)
Decrease in other assets and restricted cash................... 39,097 37,907
Increase in accounts payable................................... 36,446 13,073
Increase in air traffic liability.............................. 17,023 100,070
Increase (decrease) in accrued compensation and vacation
benefits...................................................... (14,348) 12,051
Increase (decrease) in accrued taxes........................... (17,654) 27,146
Increase (decrease) in other accrued liabilities............... 1,752 (172)
Decrease in other liabilities.................................. (7,819) (7,601)
--------- --------
Net cash provided by operating activities.................... 200,562 245,173
Cash flows from investing activities:
Purchases of property and equipment............................... (117,388) (81,102)
Increase in short-term investments................................ (50,899) --
Other............................................................. (1,659) (153)
--------- --------
Net cash used in investing activities........................ (169,946) (81,255)
Cash flows from financing activities:
Repayment of debt................................................. (66,171) (96,654)
Exercise of stock options and warrants............................ 2,928 9
Acquisition of treasury stock..................................... (23,964) --
Acquisition of warrants........................................... (18,141) --
--------- --------
Net cash used in financing activities........................ (105,348) (96,645)
--------- --------
Net increase (decrease) in cash and cash equivalents......... (74,732) 67,273
--------- --------
Cash and cash equivalents at beginning of period.................... 224,367 182,581
--------- --------
Cash and cash equivalents at end of period.......................... $ 149,635 $249,854
========= ========
Cash and cash equivalents and short-term investments at end of
period............................................................ $ 200,534 $249,854
========= ========
</TABLE>
See accompanying notes to condensed financial statements.
F-5
<PAGE> 123
AMERICA WEST AIRLINES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
The unaudited condensed financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission but do not include all information and footnotes
required by generally accepted accounting principles. 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 the 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, 1995.
2. SHORT-TERM INVESTMENTS
Short-term investments consist of cash invested in certain debt securities
with maturities greater than 90 days. The debt securities are classified as
held-to-maturity and are carried at amortized cost which approximates fair
value.
3. RESTRICTED STOCK AND STOCK OPTIONS
Under the America West Airlines, Inc. 1994 Incentive Equity Plan
("Incentive Plan"), up to 3,500,000 shares of Class B Common Stock may be issued
to cover awards under the Incentive Plan, of which no more than 1,500,000 will
be issued as restricted stock or bonus stock. As of September 30, 1996, 199,334
shares of restricted stock and options to purchase 2,316,000 shares of Class B
Common Stock at the fair market value on the date of grant (which range from
$8.75 to $23.00) had been granted pursuant to the Incentive Plan. Also, options
to purchase 117,000 shares of Class B Common Stock at the fair market value on
the date of grant (which range from $8.00 to $19.625) were issued to members of
the Board of Directors who are not employees of the Company. As of September 30,
1996, 73,889 shares of restricted stock were vested and 700,002 options to
purchase shares of Class B Common Stock were exercisable.
4. COMMON STOCK AND WARRANTS
In September 1995, the Board of Directors authorized the purchase of up to
2.5 million shares of Class B Common Stock and all of its publicly traded
Warrants on the open market over a two-year period. In July 1996, the Company
purchased 500,000 shares of Class B Common Stock at per share prices ranging
from $14.50 to $16.63. As of September 30, 1996, 1,382,000 shares of Class B
Common Stock and 2.2 million Warrants have been repurchased. The repurchased
shares are held as treasury shares by the Company.
5. INCOME TAXES
The Company recorded income tax expense (benefit) (exclusive of
extraordinary item) as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
1996 1995 1996 1995
-------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current taxes:
Federal........................................ $ (658) $ 660 $ 404 $ 1,274
State.......................................... (588) 1,252 362 2,420
-------- ------- ------- -------
(1,246) 1,912 766 3,694
Deferred taxes................................... -- -- -- --
Income tax expense (benefit) attributable to
reorganization items and other................. (14,567) 18,502 19,382 42,802
-------- ------- ------- -------
Income tax expense............................... $(15,813) $20,414 $20,148 $46,496
======== ======= ======= =======
</TABLE>
F-6
<PAGE> 124
AMERICA WEST AIRLINES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
As reflected in the above table, income tax expense (benefit) pertains both
to income (loss) before extraordinary item as well as certain fresh start
adjustments to the Company's financial statements stemming from the Company's
reorganization in 1994. The Company's reorganization gave rise to significant
items of expense for financial reporting purposes that are not deductible for
income tax purposes. In large measure, it is these nondeductible (for income tax
purposes) expenses that result in income tax expense (for financial reporting
purposes) significantly greater than taxes computed at the current U.S.
corporate statutory rate of 35 percent. Nevertheless, the Company's actual cash
income tax liability (i.e., income taxes payable) is considerably lower than
income tax expense shown for financial reporting purposes.
6. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Cash paid for interest and income taxes:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest (net of amounts capitalized of $2,404 in 1996 and $2,044 in
1995).............................................................. $31,300 $42,734
Income taxes......................................................... 498 60
</TABLE>
Non-cash investing and financing activities:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Notes payable........................................................ $19,250 $ 5,723
Exchange of debt..................................................... -- 75,000
</TABLE>
7. NONRECURRING SPECIAL CHARGE
During the third quarter of 1996, the Company recorded a nonrecurring
special charge of approximately $65.1 million.
Approximately $49.7 million of the charge was associated with the Company's
renegotiation of an aircraft purchase agreement with AVSA S.A.R.L., an affiliate
of Airbus Industrie ("AVSA"), the re-evaluation of its facilities, and
completing its plan for the disposition of certain aircraft inventories and
equipment. The charge includes $18.8 million for cancellation penalty payments;
write-off of capitalized interest on advance payments; a provision for
maintenance costs on certain leased aircraft currently scheduled to be returned
due to accelerated deliveries under the new agreement; $7.5 million to reduce
the carrying value to estimated fair value of certain under-utilized facilities
and $23.4 million to write-down certain aircraft related inventories and
equipment to estimated fair value.
The remaining $15.4 million of the charge represents loss contingencies
based on estimated settlements of pending and threatened litigation. (See Note
8 -- Commitments and Contingencies.)
The $65.1 million represents the Company's best estimate of the expected
charge. However, the actual charge may be different from the amount estimated.
8. COMMITMENTS AND CONTINGENCIES
Certain administrative and priority tax claims are pending against the
Company which, if ultimately allowed by the bankruptcy court, would represent
general obligations of the Company. Such claims include claims of various state
and local tax authorities and certain potential contractual indemnification
obligations.
F-7
<PAGE> 125
AMERICA WEST AIRLINES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
The Company is also a defendant in various lawsuits. Management cannot
reasonably predict the outcome of the pending lawsuits and administrative and
priority tax claims. However, management believes, after considering a number of
factors, including the advice of outside counsel, the nature of the
contingencies to which the Company is subject and its prior experience, that
although the outcome of those matters could adversely affect future operating
results, the resolution of these actions will not have a material adverse effect
on the Company's financial condition.
9. SUBSEQUENT EVENTS
PROPOSED FINANCING TRANSACTION
On October 23, 1996 the Company filed a Registration Statement on Form S-3
(the "Registration Statement") with the Securities and Exchange Commission (the
"SEC"). On November 8, 1996, the Company filed Amendment No. 1 and on November
20, 1996, the Company filed Amendment No. 2 to the Registration Statement with
the SEC. The Registration Statement relates to pass-through certificates, as
referred to below which are proposed to be issued in connection with the
refinancing of the current indebtedness of the owner/lessors of eight aircraft
and three spare engines currently subleased by the Company. In connection with
these refinancings, the Company will lease such aircraft and spare engines
directly from the owner trusts that are the owners/lessors (the "Owner Trusts")
rather than directly from the equipment provider. The lower borrowing costs
anticipated to be obtained in the refinancing will lower America West's leasing
costs by approximately $8 million over the 15 year life of the leases. In
connection with the refinancing pass-through trusts ("Trusts") will be created
to hold new non-recourse equipment notes issued by the Owner Trusts. The Trusts
will issue pass-through certificates representing interests in the equipment
notes. Inasmuch as (i) the owner/lessor has a substantial investment in the
equipment, (ii) the equipment notes are secured by the rentals payable by
America West, and (iii) neither the equipment notes nor the pass-through
certificates are direct obligations of, or guaranteed by, America West, the
Trusts (and the corresponding debt and interest expense) will not be included in
the Company's financial statements.
F-8
<PAGE> 126
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
America West Airlines, Inc.
We have audited the accompanying balance sheets of America West Airlines,
Inc. as of December 31, 1995 and 1994, and the related statements of income,
cash flows and stockholders' equity (deficiency) for the year ended December 31,
1995, the period August 26, 1994 through December 31, 1994, the period January
1, 1994 through August 25, 1994, and for the year ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of America West Airlines, Inc.
as of December 31, 1995 and 1994, the results of its operations and its cash
flows for the year ended December 31, 1995, the period August 26, 1994 through
December 31, 1994, the period January 1, 1994 through August 25, 1994 and for
the year ended December 31, 1993, in conformity with generally accepted
accounting principles.
As discussed in Notes 14 and 15 to the financial statements, on August 25,
1994, America West Airlines, Inc. emerged from bankruptcy. The financial
statements of the Reorganized Company reflect the impact of adjustments to
reflect the fair value of assets and liabilities under fresh start reporting. As
a result, the financial statements of the Reorganized Company are presented on a
different basis of accounting than those of the Predecessor Company and,
therefore, are not comparable in all respects.
KPMG Peat Marwick LLP
Phoenix, Arizona
March 20, 1996
F-9
<PAGE> 127
AMERICA WEST AIRLINES, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
ASSETS
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................... $ 224,367 $ 182,581
Accounts receivable, less allowance for doubtful accounts of $2,515 in 1995
and $3,531 in 1994......................................................... 69,094 57,474
Expendable spare parts and supplies, less allowance for obsolescence of
$2,115 in 1995 and $483 in 1994............................................ 28,643 24,179
Prepaid expenses............................................................. 43,315 29,284
---------- ----------
Total current assets.................................................. 365,419 293,518
---------- ----------
Property and equipment:
Flight equipment............................................................. 546,591 452,177
Other property and equipment................................................. 104,106 92,169
Equipment purchase deposits.................................................. 27,489 26,074
---------- ----------
678,186 570,420
Less accumulated depreciation and amortization............................... 76,123 15,882
---------- ----------
Total property and equipment.......................................... 602,063 554,538
---------- ----------
Other assets:
Restricted cash.............................................................. 31,694 28,578
Reorganization value in excess of amounts allocable to identifiable assets,
net........................................................................ 489,045 645,703
Deferred income taxes........................................................ 74,700 --
Other assets, net............................................................ 25,788 22,755
---------- ----------
Total other assets.................................................... 621,227 697,036
---------- ----------
$1,588,709 $1,545,092
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt......................................... $ 54,157 $ 65,198
Accounts payable............................................................. 89,157 77,569
Air traffic liability........................................................ 191,744 127,356
Accrued compensation and vacation benefits................................... 41,616 15,776
Accrued taxes................................................................ 34,359 27,061
Other accrued liabilities.................................................... 24,802 28,485
---------- ----------
Total current liabilities............................................. 435,835 341,445
---------- ----------
Long-term debt, less current maturities........................................ 373,964 465,598
Deferred credits and other liabilities......................................... 129,438 142,603
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 1,200,000 shares............................................... 12 12
Class B common stock, $.01 par value. Authorized 100,000,000 shares; issued
and outstanding 44,141,330 shares in 1995, and 43,936,272 shares in 1994... 441 439
Additional paid-in capital................................................... 588,927 587,149
Retained earnings............................................................ 61,632 7,846
---------- ----------
651,012 595,446
Less treasury stock, 112,000 shares of Class B common stock at cost.......... (1,540) --
---------- ----------
Total stockholders' equity............................................ 649,472 595,446
---------- ----------
$1,588,709 $1,545,092
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE> 128
AMERICA WEST AIRLINES, INC.
STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY
----------------------------- ----------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED AUGUST 26 TO JANUARY TO YEAR ENDED
DECEMBER 31, DECEMBER 31, AUGUST 25, DECEMBER 31,
1995 1994 1994 1993
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues:
Passenger.............................. $ 1,452,261 $ 437,775 $ 882,140 $ 1,246,564
Cargo.................................. 44,425 16,648 27,645 40,161
Other.................................. 53,956 15,343 29,243 38,639
----------- ----------- --------- -----------
Total operating revenues............ 1,550,642 469,766 939,028 1,325,364
----------- ----------- --------- -----------
Operating expenses:
Salaries and related costs............. 382,032 117,562 213,722 305,429
Aircraft rents......................... 173,571 54,983 105,547 164,978
Other rents and landing fees........... 108,264 35,839 68,163 109,730
Aircraft fuel.......................... 174,195 58,165 100,646 166,313
Agency commissions..................... 124,146 37,265 78,988 106,368
Aircraft maintenance materials and
repairs............................. 65,925 17,590 28,109 31,000
Depreciation and amortization.......... 81,041 26,684 56,694 81,894
Restructuring charge................... 10,500 -- -- --
Other.................................. 276,236 82,807 179,653 238,598
----------- ----------- --------- -----------
Total operating expenses............ 1,395,910 430,895 831,522 1,204,310
----------- ----------- --------- -----------
Operating income.................... 154,732 38,871 107,506 121,054
----------- ----------- --------- -----------
Nonoperating income (expenses):
Interest income........................ 15,045 3,834 470 728
Interest expense (contractual interest
of $44,747 and $72,961 for the
periods ended August 25, 1994 and
December 31, 1993, respectively).... (58,598) (22,636) (33,998) (54,192)
Loss on disposition of property and
equipment........................... (2,734) (398) (1,659) (4,562)
Reorganization expense, net............ -- -- (273,659) (25,015)
Other, net............................. (67) 65 131 (89)
----------- ----------- --------- -----------
Total nonoperating expenses, net.... (46,354) (19,135) (308,715) (83,130)
----------- ----------- --------- -----------
Income (loss) before income taxes
and extraordinary items........... 108,378 19,736 (201,209) 37,924
----------- ----------- --------- -----------
Income taxes............................. 53,608 11,890 2,059 759
----------- ----------- --------- -----------
Income (loss) before extraordinary
items............................. 54,770 7,846 (203,268) 37,165
----------- ----------- --------- -----------
Extraordinary items, net of tax.......... (984) -- 257,660 --
----------- ----------- --------- -----------
Net income.......................... $ 53,786 $ 7,846 $ 54,392 $ 37,165
=========== =========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE> 129
AMERICA WEST AIRLINES, INC.
STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY
--------------------------- ---------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED AUGUST 26 TO JANUARY 1 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, AUGUST 25, DECEMBER 31,
1995 1994 1994 1993
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Earnings (loss) per share:
Primary:
Income (loss) before
extraordinary items..... $ 1.18 $ .17 $(7.03) $ 1.50
Extraordinary items....... (.02) -- 9.02 --
------ ------ ------ ------
Net income................ $ 1.16 $ .17 $ 1.99 $ 1.50
====== ====== ====== ======
Fully Diluted:
Income (loss) before
extraordinary items..... $ 1.17 $ .17 $(4.96) $ 1.04
Extraordinary items....... (.02) -- 6.37 --
------ ------ ------ ------
Net income................ $ 1.15 $ .17 $ 1.41 $ 1.04
====== ====== ====== ======
Shares used for computation:
Primary................... 47,666 45,127 28,550 27,525
====== ====== ====== ======
Fully diluted............. 47,666 45,127 40,452 41,509
====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE> 130
AMERICA WEST AIRLINES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY
----------------------------- ----------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED AUGUST 26 TO JANUARY 1 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, AUGUST 25, DECEMBER 31,
1995 1994 1994 1993
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 53,786 $ 7,846 $ 54,392 $ 37,165
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................. 49,083 15,538 56,694 81,894
Amortization of deferred overhauls............ 11,934 356 -- --
Amortization of reorganization value in excess
of amounts allocable to identifiable
assets...................................... 31,958 11,145 -- --
Amortization of deferred credits.............. (10,952) (3,961) (2,966) (5,186)
Loss on disposition of property and
equipment................................... 2,734 398 1,659 4,562
Reorganization items.......................... -- -- 185,226 18,167
Extraordinary items........................... 984 -- (257,660) --
Other......................................... 4,465 1,178 (383) (554)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable,
net......................................... (11,172) 27,439 (18,769) (927)
Decrease (increase) in expendable spare parts
and supplies, net........................... (4,819) 1,165 397 6,320
Decrease (increase) in prepaid expenses....... (14,031) 4,371 1,284 2,627
Decrease (increase) in other assets, net...... 45,601 1,219 12,971 (5,295)
Increase (decrease) in accounts payable....... 10,308 (17,289) (15,557) 9,014
Increase (decrease) in air traffic
liability................................... 64,388 (26,452) 30,510 8,749
Increase (decrease) in accrued compensation
and vacation benefits....................... 25,840 (11,667) 15,739 (1,300)
Increase (decrease) in accrued taxes.......... 7,298 (2,104) 25,999 (1,764)
Increase (decrease) in other accrued
liabilities................................. (663) (13,785) 67,429 644
Increase (decrease) in other liabilities...... (6,314) 2,521 (14,749) (758)
---------- -------- --------- --------
Net cash provided by (used in) operating
activities............................... 260,428 (2,082) 142,216 153,358
Cash flows from investing activities:
Purchases of property and equipment.............. (107,387) (14,658) (61,271) (54,324)
Long-term investments............................ (1,750) -- -- --
Proceeds from disposition of property............ 1,741 600 334 3,715
---------- -------- --------- --------
Net cash used in investing activities....... (107,396) (14,058) (60,937) (50,609)
Cash flows from financing activities:
Proceeds from issuance of debt................... 29,300 -- 100,000 --
Repayment of debt................................ (137,421) (23,355) (173,699) (77,501)
Issuance of common stock......................... 1,545 3 114,862 --
Debt issuance cost............................... (3,130) -- -- --
Acquisition of treasury stock.................... (1,540) -- -- --
---------- -------- --------- --------
Net cash provided by (used in) financing
activities............................... (111,246) (23,352) 41,163 (77,501)
---------- -------- --------- --------
Net increase (decrease) in cash and cash
equivalents.............................. 41,786 (39,492) 122,442 25,248
---------- -------- --------- --------
Cash and cash equivalents at beginning of period... 182,581 222,073 99,631 74,383
---------- -------- --------- --------
Cash and cash equivalents at end of period......... $ 224,367 $182,581 $ 222,073 $ 99,631
========== ======== ========= ========
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE> 131
AMERICA WEST AIRLINES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEAR ENDED DECEMBER 31, 1995, THE PERIOD AUGUST 26 TO DECEMBER 31, 1994,
THE PERIOD JANUARY 1 TO AUGUST 25, 1994 AND THE YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DEFERRED
COMPENSATION
CLASS CLASS AND NOTES
CONVERTIBLE A B ADDITIONAL RETAINED CLASS B RECEIVABLE --
PREFERRED COMMON COMMON COMMON PAID-IN EARNINGS/ TREASURY EMPLOYEE STOCK
STOCK STOCK STOCK STOCK CAPITAL (DEFICIT) STOCK PURCHASE PLANS TOTAL
----------- ------ ------ ------- ---------- --------- -------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1,
1993................. $ 91 $ -- $ -- $5,992 $195,407 $(475,791) $ -- $(20,312) $(294,613)
---- --- ---- ------- -------- --------- ------- -------- ---------
Issuance of 170,173
shares of common
stock pursuant to
Series B convertible
subordinated
debentures........... -- -- -- 43 1,896 -- -- -- 1,939
Issuance of 1,164,596
shares of common
stock pursuant to
convertible preferred
stock................ (73) -- -- 291 (218) -- -- -- --
Employee restricted
stock deferred
compensation......... -- -- -- -- -- -- -- 21 21
Employee stock purchase
plan:
Cancellation of
11,330 shares of
common stock at:
$.22 - $1.59 per
share............ -- -- -- (3) (38) -- -- 49 8
Deferred
compensation..... -- -- -- -- (37) -- -- 1,255 1,218
Net income............. -- -- -- -- -- 37,165 -- -- 37,165
---- --- ---- ------- -------- --------- ------- -------- ---------
BALANCE AT DECEMBER 31,
1993................. 18 -- -- 6,323 197,010 (438,626) -- (18,987) (254,262)
---- --- ---- ------- -------- --------- ------- -------- ---------
Issuance of 336,277
shares of common
stock pursuant to
convertible preferred
stock dividends...... -- -- -- 84 2,932 -- -- -- 3,016
Employee stock purchase
plan:
Cancellation of 7,678
shares of common
stock at:
$1.19 - $4.03 per
share............ -- -- -- (2) (49) -- -- 43 (8)
Deferred
compensation..... -- -- -- -- (1) -- -- 606 605
Issuance of 108,825
shares of common
stock pursuant to
exercise of stock
options.............. -- -- -- 27 166 -- -- -- 193
Net income............. -- -- -- -- -- 54,392 -- -- 54,392
Eliminate predecessor
equity accounts in
connection with fresh
start................ (18) -- -- (6,432) (200,058) 206,508 -- -- --
Eliminate employee
stock receivable..... -- -- -- -- -- (18,338) -- 18,338 --
Record excess of
reorganization value
over identifiable
assets............... -- -- -- -- -- 668,702 -- -- 668,702
Sale of 1,200,000
shares of Class A
common stock and
14,000,000 shares of
Class B common
stock................ -- 12 140 -- 114,710 -- -- -- 114,862
Issuance of 29,925,000
shares of new Class B
common stock......... -- -- 299 -- 472,339 (472,638) -- -- --
---- --- ---- ------- -------- --------- ------- -------- ---------
BALANCE AT AUGUST 25,
1994................. -- 12 439 -- 587,049 -- -- -- 587,500
---- --- ---- ------- -------- --------- ------- -------- ---------
Issuance of 272 shares
of common stock
pursuant to exercise
of stock warrants.... -- -- -- -- 3 -- -- -- 3
Issuance of 11,000
shares of restricted
stock................ -- -- -- -- 97 -- -- -- 97
Net income............. -- -- -- -- -- 7,846 -- -- 7,846
---- --- ---- ------- -------- --------- ------- -------- ---------
BALANCE AT DECEMBER 31,
1994................. -- 12 439 -- 587,149 7,846 -- -- 595,446
---- --- ---- ------- -------- --------- ------- -------- ---------
Issuance of 4,057
shares and 170,667
shares of common
stock pursuant to the
exercise of stock
warrants and stock
options including tax
benefit from the
exercise of stock
options of $44,000... -- -- 2 -- 1,543 -- -- -- 1,545
Issuance of 30,334
shares of restricted
stock................ -- -- -- -- 235 -- -- -- 235
Acquisition of 112,000
shares of treasury
stock at:
$13.63 - $14.00 per
share............ -- -- -- -- -- -- (1,540) -- (1,540)
Net income............. -- -- -- -- -- 53,786 -- -- 53,786
---- --- ---- ------- -------- --------- ------- -------- ---------
BALANCE AT DECEMBER 31,
1995................. $ -- $ 12 $441 $ -- $588,927 $ 61,632 $(1,540) $ -- $ 649,472
==== === ==== ======= ======== ========= ======= ======== =========
</TABLE>
See accompanying notes to financial statements.
F-14
<PAGE> 132
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994, AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
America West Airlines, Inc., D.I.P. (the "Predecessor Company") filed a
voluntary petition on June 27, 1991, to reorganize under Chapter 11 of the
Federal Bankruptcy Code. On August 10, 1994, the Plan of Reorganization
("Plan"), filed by the Predecessor Company, was confirmed and became effective
on August 25, 1994 (the "Effective Date"). On August 25, 1994, America West
Airlines, Inc., (the "Reorganized Company" or the "Company") adopted fresh start
reporting in accordance with Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7") of the
American Institute of Certified Public Accountants. Accordingly, the Company's
post-reorganization balance sheet and statements of income have not been
prepared on a consistent basis with such pre-reorganization financial statements
and are not comparable in all respects to financial statements prior to
reorganization. For accounting purposes, the inception date of the Reorganized
Company is deemed to be August 26, 1994. A vertical black line is shown in the
financial statements to separate the Reorganized Company from the Predecessor
Company since they have not been prepared on a consistent basis of accounting.
During the reorganization period, pursuant to SOP 90-7, prepetition
liabilities were reported on the basis of the expected amounts of such allowed
claims, as opposed to the amounts for which those allowed claims may be settled
and were classified as "Liabilities Subject to Chapter 11 Proceedings". The
accrual for interest on such unsecured or undersecured liabilities was
discontinued from the period June 27, 1991 to August 25, 1994, the Effective
Date of the Plan.
(b) Cash and Cash Equivalents
Cash equivalents consist of all highly liquid debt instruments purchased
with original maturities of three months or less. The debt instruments are
classified as held-to-maturity and are carried at amortized cost which
approximates fair value.
(c) Expendable Spare Parts and Supplies
Flight equipment expendable spare parts and supplies are valued at average
cost. Allowances for obsolescence are provided, over the estimated useful life
of the related aircraft and engines, for spare parts expected to be on hand at
the date the aircraft are retired from service.
(d) Property and Equipment
Property and equipment are recorded at cost. Interest capitalized on
advance payments for aircraft acquisitions and on expenditures for aircraft
improvements are part of these costs. Interest capitalized was $2.7 million and
$621,000 for the year ended December 31, 1995 and the period August 26, 1994
through December 31, 1994, respectively. Property and equipment is depreciated
and amortized to residual values over the estimated useful lives or the lease
term, whichever is less, using the straight-line method.
The estimated useful lives for the Company's ground property and equipment
range from three to twelve years for owned property and equipment and to thirty
years for the reservation and training center and technical support facilities.
The estimated useful lives of the Company's owned aircraft, jet engines, flight
equipment and rotable parts range from eleven to twenty-two years. 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.
F-15
<PAGE> 133
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(e) Restricted Cash
Restricted cash includes cash deposits securing certain letters of credit
and cash held in Company accounts, but pledged to an institution which processes
credit card sales transactions.
(f) Aircraft Maintenance and Repairs
Routine maintenance and repairs are charged to expense as incurred. The
cost of major scheduled airframe, engine and certain component overhauls are
capitalized and amortized over the periods benefited and are included in
aircraft maintenance materials and repairs expense for the Reorganized Company
as part of fresh start reporting and in depreciation and amortization expense
for the Predecessor Company. The balance of capitalized overhauls relating to
aircraft and engines was reduced as part of the revaluation of property and
equipment and operating leases under fresh start reporting.
Additionally, a provision for the estimated cost of scheduled airframe and
engine overhauls required to be performed on leased aircraft prior to their
return to the lessors has been provided.
(g) Reorganization Value in Excess of Amounts Allocable to Identifiable Assets
Reorganization value in excess of amounts allocable to identifiable assets
is amortized on a straight line basis over 20 years. Accumulated amortization at
December 31, 1995 and 1994 is approximately $43.1 million and $11.1 million,
respectively. During the year ended December 31, 1995 and the period August 26
to December 31, 1994, reductions in reorganization value of $50 million and
$11.9 million were recorded as a result of the utilization of the Predecessor
Company tax attributes including net operating loss carryforwards. Additionally,
in 1995 the Company established a deferred tax asset, which reduced
reorganization value by $74.7 million. The Company assesses the recoverability
of this asset based upon expected future undiscounted cash flows and other
relevant information.
(h) Frequent Flyer Awards
The Company maintains 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, using the incremental
cost method as adjusted for estimated redemption rates, is recognized as a
liability and charged to operations as program members accumulate mileage.
(i) Deferred Credit -- Operating Leases
Operating leases were adjusted to fair market value at the Effective Date.
The net present value of the difference between the stated lease rates and the
fair market rates has been recorded as a deferred credit in the accompanying
balance sheets. The deferred credit will be increased through charges to
interest expense and decreased on a straight-line basis as a reduction in rent
expense over the applicable lease periods. At December 31, 1995 and 1994, the
unamortized balance of the deferred credit was $107.2 million and $116.9
million, respectively.
(j) Passenger Revenue
Passenger revenue is recognized when the transportation is provided. Ticket
sales for transportation which 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.
F-16
<PAGE> 134
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(k) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(l) Per Share Data
Primary earnings per share is based upon the weighted average number of
shares of common stock outstanding and dilutive common stock equivalents (stock
options and warrants). Primary earnings per share reflects net income adjusted
for interest on borrowings effectively reduced by the proceeds from the assumed
exercise of common stock equivalents but only if the effect of such adjustments
are dilutive.
Fully diluted earnings per share is based on the average number of shares
of common stock, dilutive common stock equivalents (stock options and warrants)
and the conversion of outstanding convertible preferred stock (none outstanding
at December 31, 1995) as well as for the Predecessor Company the conversion of
convertible subordinated debentures. Fully diluted earnings per share reflects
net income adjusted for interest on borrowings effectively reduced by the
proceeds from the assumed exercise of common stock equivalents or conversion of
debentures but only if the effect of such adjustments are dilutive.
(m) Use of Estimates
Management of the Company has made certain estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(n) Reclassification
Certain reclassifications have been made in the prior year's financial
statements to conform them to the current presentation.
F-17
<PAGE> 135
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
SECURED
Notes payable, primarily fixed interest rates of 9.53% to 10.79%,
averaging 10.1%, installments due 1999 through 2008.................. $274,751 $307,077
Borrowings under lines of credit, floating interest rates of Prime + 1%
to three month LIBOR + 4%, averaging 9.61%,installments due through
1999. No available borrowings remain................................. 14,794 24,225
Industrial development revenue bonds, variable interest rate of 4.25%
to 5.6%, averaging 4.94%, due 2016(a)................................ 29,300 --
Notes payable, floating interest rate of Prime + 1%, averaging 8.50%,
installments due through 1999(a)..................................... -- 34,097
-------- --------
318,845 365,399
UNSECURED
10 3/4% Senior Notes, face amount of $75 million, interest only payment
until due in 2005(b)................................................. 71,984 --
Notes payable, interest rates of 90-day LIBOR + 3% to 8%, averaging
8.25%, installments due through 2000................................. 36,708 41,752
11 1/4% Senior notes, face amount of $123 million, interest only
payments until due in 2001(b)........................................ -- 120,843
Other.................................................................. 584 2,802
-------- --------
109,276 165,397
-------- --------
Total long-term debt......................................... 428,121 530,796
Less: current maturities..................................... 54,157 65,198
-------- --------
$373,964 $465,598
======== ========
</TABLE>
- ---------------
(a) In December 1995, the Company completed the remarketing of The Industrial
Development Authority of the City of Phoenix, Arizona Variable Rate Airport
Facility Revenue Bonds (America West Airlines, Inc. Project) Series 1986
due August 1, 2016. These bonds were originally issued to finance the
construction of the Company's maintenance facility at Sky Harbor
International Airport. As required under the existing reimbursement
agreement, the Company used the net proceeds to prepay the then existing
debt in the amount of $28.9 million. The new bonds are backed by an
irrevocable direct pay letter of credit issued by the Industrial Bank of
Japan, Limited, Los Angeles Agency; the letter of credit is secured by the
Company's maintenance facility and related improvements, seventeen spare
engines and a flight simulator with a combined net book value of $51.2
million and a pledge of $1.9 million in cash.
The interest rate varies weekly and from the date of issue to December 31,
1995 ranged from 4.25% to 5.6%. The bondholders have the right to put the
bonds back to the Company on a weekly basis if the bonds bear interest at
the weekly rate or monthly if the bonds bear interest at a monthly rate. If
the bonds are put back to the Company, the remarketing agent or the
transfer agent will, at the direction of the Company, remarket such bonds.
Any bonds not remarketed will be retired utilizing the $29.9 million letter
of credit which represents the principal plus 60 days of interest at a
maximum rate of 12%. The
F-18
<PAGE> 136
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
letter of credit expires on November 27, 1996 and is subject to mandatory
redemption under certain circumstances. The estimated annual cost for the
letter of credit is approximately $1.1 million.
(b) On the Effective Date, the Company issued $100 million of 11 1/4% Senior
Unsecured Notes (the "11 1/4% Senior Notes") at a discount of 1.575% as
part of the investment by the partners of AmWest Partners LP ("AmWest") and
on October 14, 1994, the Company issued an additional $23 million of the
11 1/4% Senior Notes. In August 1995, the Company prepaid $48 million of
the $123 million 11 1/4% Senior Notes and exchanged the remaining $75
million of such notes for $75 million 10 3/4% Senior Unsecured Notes due
2005 ("10 3/4% Senior Notes"). The 10 3/4% Senior Notes mature on September
1, 2005 and interest is payable in arrears semi-annually commencing on
March 1, 1996. The 10 3/4% Senior Notes may be redeemed at the option of
the Company on or after September 1, 2001 at any time in whole or from time
to time in part, at a redemption price equal to the following percentage of
principal redeemed, plus accrued and unpaid interest to the date of
redemption, if redeemed during the 12-month period beginning:
<TABLE>
<CAPTION>
SEPTEMBER 1, PERCENTAGE
------------ ----------
<S> <C>
2000.............................................. 105.375%
2001.............................................. 103.583%
2002.............................................. 101.792%
2003 and thereafter............................... 100.000%
</TABLE>
Secured financings totaling $318.8 million are collateralized by assets,
primarily aircraft and engines, with a net book value of $424.9 million at
December 31, 1995.
At December 31, 1995, the estimated maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996........................................... $ 54,157
1997........................................... 46,176
1998........................................... 43,212
1999........................................... 45,401
2000........................................... 28,000
Thereafter..................................... 211,175
--------
$428,121
========
</TABLE>
Certain of the Company's long-term debt agreements contain minimum cash balance
requirements, leverage ratios, coverage ratios, limitation on investments, a
$165.4 million limitation on restricted payments including cash dividends, and
other financial covenants with which the Company was in compliance at December
31, 1995.
3. CAPITAL STOCK
Preferred Stock
The Company's Board of Directors by resolution may authorize the issuance
of the Preferred Stock as a class, in one or more series, having the number of
shares, designations, relative voting rights, dividend rights, liquidation and
other preferences and limitations that the Board of Directors fixes without any
stockholder approval. No shares of Preferred Stock have been issued.
F-19
<PAGE> 137
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Common Stock
The holders of Class A Common Stock are entitled to fifty votes per share,
and the holders of Class B Common Stock are entitled to one vote per share, on
all matters submitted to a vote of common stockholders except that voting rights
of non-U.S. citizens are limited. The Class A Common Stock is convertible into
an equal number of Class B shares at any time at the election of the holders of
the Class A Common Stock.
Holders of Common Stock of all classes participate equally as to any
dividends or distributions on the Common Stock, except that dividends payable in
shares of Common Stock, or securities to acquire Common Stock, will be made in
the same class of Common Stock as that held by the recipient of the dividend.
Holders of Common Stock have no right to cumulate their votes in the election of
directors. The Common Stock votes together as a single class, subject to the
right to a separate class vote in certain instances required by law.
Pursuant to the Stockholder's Agreement, AmWest and GPA Group plc ("GPA")
will vote all shares of the Common Stock owned by them in favor of the
reelection of the initially designated Independent Directors for as long as such
Independent Directors continue to serve or until the first annual meeting after
August 25, 1997.
In addition to the voting and other provisions of the Stockholders'
Agreement, AmWest and GPA have agreed that (i) the partners and assignees of
AmWest will vote in favor of GPA's nominee to the Company's Board of Directors,
and (ii) GPA will vote in favor of the partners and assignees of AmWest's nine
nominees to the Company's Board of Directors for so long as (a) the partners and
assignees of AmWest own at least 5% of the voting equity securities of the
Company, and (b) GPA owns at least 2% of the voting equity securities of the
Company.
Warrants
The Company issued approximately 10.4 million Warrants to purchase Class B
Common Stock with an exercise price of $12.74 per share as part of the
reorganization. The Warrants are exercisable by the holders anytime before
August 25, 1999 and 10.4 million shares of Class B Common Stock have been
reserved for the exercise of these warrants. As of December 31, 1995, 4,329
warrants were exercised at $12.74 per share.
4. STOCK OPTIONS AND AWARDS
The Company has reserved 3.5 million shares of Class B Common Stock for
issuance as awards under its 1994 Incentive Equity Plan, of which no more than
1.5 million shares will be issued as Restricted Stock or Bonus Stock. Options to
purchase Class B Common Stock are granted at fair market value and generally
become exercisable over a three-year period, and ultimately lapse if unexercised
at the end of ten years.
On January 1, 1995 and on December 1, 1994, the Company granted 30,334
shares and 11,000 shares of Restricted Stock, respectively. Compensation expense
of $235,000 in 1995 and $97,000 in 1994 was recorded based upon the fair value
at the date of grant and applicable vesting provisions. At December 31, 1995,
41,334 shares of Restricted Stock were vested.
F-20
<PAGE> 138
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Option activity under the 1994 Incentive Equity Plan is as follows:
<TABLE>
<CAPTION>
EXERCISE PRICE
SHARES PER SHARE
--------- ---------------
<S> <C> <C>
1994:
Granted.................................................. 1,111,000 $8.75
---------
Outstanding at December 31, 1994......................... 1,111,000 $8.75
=========
1995:
Granted.................................................. 1,354,000 $7.75 - 18.00
Exercised................................................ (170,667) $8.75
Cancelled................................................ (214,000) $8.75 - 12.875
---------
Outstanding at December 31, 1995......................... 2,080,333 $7.75 - 18.00
=========
Exercisable at December 31, 1995......................... 556,001
=========
</TABLE>
The 1994 Incentive Equity Plan also provides for the issuance of Restricted
Stock and grant of stock options to non-employee directors. The Company has
granted options to purchase 78,000 shares of Class B Common Stock to members of
the Board of Directors who are not employees of the Company. The options have a
ten-year term and are exercisable six months after the date of grant. At
December 31, 1995, 78,000 options to purchase Class B Common Stock were
exercisable at prices ranging from $8.00 to $9.75 per share.
5. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) defined contribution plan, covering essentially
all employees of the Company. Participants may contribute from 1 to 15% of their
pre-tax earnings to a maximum of $9,240 in 1995. Currently, the Company matches
50% of a participant's contributions up to 6% of the participant's annual
pre-tax earnings. The Company's contribution expense to the plan totaled $5.9
million, $3.8 million and $2.1 million in 1995, 1994 and 1993, respectively.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short maturity
of these instruments.
Long-term Debt
At December 31, 1995 and 1994, the fair value of long-term debt was
approximately $431 million and $515 million, respectively, based on quoted
market prices for the same or similar debt including debt of comparable
remaining maturities.
F-21
<PAGE> 139
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The Company recorded income tax expense for the periods shown below
(exclusive of extraordinary items) as follows:
<TABLE>
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY
-------------------------------- -----------------------------------
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, AUGUST 26 TO JANUARY 1 TO YEAR ENDED
1995 DECEMBER 31, 1994 AUGUST 25, 1994 DECEMBER 31, 1993
------------ ----------------- --------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current Taxes:
Federal................. $ 505 $ -- $ 1,869 $ 675
State................... 190 36 190 84
-------- ------- ------- -------
Total current
taxes.............. 695 36 2,059 759
-------- ------- ------- -------
Deferred taxes............ -- -- -- --
-------- ------- ------- -------
Income tax expense
attributable to
reorganization items and
other................... 52,913 11,854 -- --
-------- ------- ------- -------
Total income tax
expense................. $ 53,608 $11,890 $ 2,059 $ 759
======== ======= ======= =======
</TABLE>
With respect to the year ended December 31, 1995 and the period August 26,
1994 to December 31, 1994, income tax expense pertains both to income before
extraordinary items as well as certain adjustments necessitated by the
effectiveness of the Plan and the resultant fresh start adjustments to the
Company's financial statements. The Company's reorganization and the associated
implementation of fresh start reporting gave rise to significant items of
expense for financial reporting purposes that are not deductible for income tax
purposes. In large measure, it is these nondeductible (for income tax purposes)
expenses that result in an effective tax rate (for financial reporting purposes)
significantly greater than the current U.S. corporate statutory rate of 35
percent. Nevertheless, the Company's actual cash income tax liability (i.e.,
income taxes payable) is considerably lower than income tax expense shown for
financial reporting purposes. This difference in financial expense compared to
actual income tax liability is in part attributable to the utilization of
certain tax attributes of the Predecessor Company that serve to reduce the
Company's actual income tax liability. The excess of financial expense over the
Company's actual income tax liability ($50 million) is applied to reduce the
carrying balance of the Company's reorganization value in excess of amounts
allocable to identifiable assets.
For the year ended December 31, 1995, the Company recognized an income tax
benefit of $984,000 arising from an extraordinary loss. For the periods January
1, 1994 to August 25, 1994, and the year ended December 31, 1993, income tax
expense pertains solely to income before extraordinary item. No income tax
expense was recognized with respect to the extraordinary gain resulting from the
cancellation of indebtedness that occurred in connection with the effectiveness
of the Plan as such gain is not subject to income taxation.
F-22
<PAGE> 140
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense, exclusive of extraordinary items, recorded for the
periods shown below, differs from amounts computed at the federal statutory
income tax rate as follows:
<TABLE>
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY
-------------------------------- ------------------------------
YEAR ENDED PERIOD FROM PERIOD FROM YEAR ENDED
DECEMBER 31, AUGUST 26 TO JANUARY 1 TO DECEMBER 31,
1995 DECEMBER 31, 1994 AUGUST 25, 1994 1993
------------ ----------------- --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Income tax expense at U.S.
statutory rate.............. $ 37,932 $ 6,908 $ 19,758 $ 13,273
State income taxes, net of
federal
income tax benefit.......... 4,505 1,663 190 84
Nondeductible amortization of
reorganization value in
excess of amounts allocable
to identifiable assets...... 11,188 3,901 -- --
Benefit of loss
carryforwards............... -- -- (17,889) (12,598)
Other, net.................... (17) (582) -- --
-------- ------- --------- --------
Total............... $ 53,608 $11,890 $ 2,059 $ 759
======== ======= ========= ========
</TABLE>
As of December 31, 1995, the Company has available net operating loss,
business tax credit and alternative minimum tax credit carryforwards for Federal
income tax purposes of approximately $533.6 million, $12.7 million and $1.1
million, respectively. The net operating loss carryforwards expire during the
years 1999 through 2009 while the business credit carryforwards expire during
the years 1997 through 2006. However, such carryforwards are not fully available
to offset federal (and in certain circumstances, state) alternative minimum
taxable income. Further, as a result of a statutory "ownership change" (as
defined for purposes of sec. 382 of the Internal Revenue Code) that occurred as
a result of the effectiveness of the Company's Plan of Reorganization, the
Company's ability to utilize its net operating loss and business tax credit
carryforwards may be restricted. The alternative minimum tax credit may be
carried forward without expiration and is available to offset future income tax
payable.
F-23
<PAGE> 141
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Composition of Deferred Tax Items:
For the year ended December 31, 1995 the Company recognized a deferred tax
asset of $74.7 million. The Company did not recognize any net deferred tax items
for the year ended December 31, 1994. Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets and
liabilities are a result of the temporary differences related to the items
described as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax liabilities:
Property and equipment, principally
depreciation and "fresh start" differences.................... $ (89,766) $ (71,425)
---------- ----------
Deferred tax assets:
Aircraft leases.................................................. 39,812 63,354
Reorganization expenses.......................................... 23,591 32,654
Net operating loss carryforwards................................. 203,879 215,119
Tax credit carryforwards......................................... 13,777 13,272
Other............................................................ 14,240 10,892
---------- ----------
Total deferred tax assets..................................... 295,299 335,291
---------- ----------
Valuation allowance.............................................. (130,833) (263,866)
---------- ----------
Net deferred asset............................................... $ 74,700 $ --
========== ==========
</TABLE>
SFAS 109 requires a "more likely than not" criterion be applied when
evaluating the realizability of a deferred tax asset. The Company's financial
performance has improved significantly and steadily over the past three years.
Taking into account certain adjustments necessitated by the Plan of
Reorganization, the Company's earnings for income tax purposes have shown a
commensurate improvement. After due consideration of, (i) this recent history of
earnings for income tax purposes; (ii) positive earnings trends for both
financial reporting and income tax purposes; (iii) prudent and feasible tax
planning strategies and (iv) the overall financial improvement of the airline
industry, the Company has reduced the valuation allowance by $133.0 million in
1995, principally for the portion of its net operating loss carryforwards (a
Predecessor Company tax attribute) that it anticipates will, more likely than
not, be utilized. This reduction in the valuation allowance and the resultant
recognition of a net deferred tax asset of a like amount serves to reduce the
carrying balance of reorganization value in excess of amounts allocable to
identifiable assets. The remaining valuation allowance of $130.8 million is
necessary as at this time, the Company has not determined it is more likely than
not that the balance of the deferred tax assets will be realized. The Company
continues to monitor the valuation allowance and will make adjustments as
appropriate. If in future tax periods, the Company were to recognize additional
tax benefits related to items attributable to the Predecessor Company such as
net operating loss and other carryforwards, such benefits would be applied to
further reduce reorganization value in excess of amounts allocable to
identifiable assets.
F-24
<PAGE> 142
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information and non-cash investing and
financing activities were as follows.
<TABLE>
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY
------------------------------ ----------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED AUGUST 26 TO JANUARY 1 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, AUGUST 25, DECEMBER 31,
1995 1994 1994 1993
------------ ------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Non-cash transactions
Notes payable.................. $ 5,723 $ -- $ -- $ 818
Accrued interest reclassified
to long-term debt........... 65 -- 5,563 15,137
Issuance of stock as success
bonus....................... -- -- 1,224 --
Equipment acquired through
capital leases.............. -- -- 138 709
Notes payable issued for
administrative claims....... -- -- -- 11,597
Conversion of long-term debt to
stock....................... -- -- -- 1,938
Cash transactions
Interest paid, net of amounts
capitalized................. 50,293 11,262 29,253 43,731
Income taxes paid.............. 795 425 1,253 537
</TABLE>
Cash flows from reorganization items in connection with the Chapter 11
proceedings were as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO YEAR ENDED
AUGUST 25, 1994 DECEMBER 31, 1993
--------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Interest received on cash accumulations.............. $ 3,711 $ 2,635
Professional fees paid for services rendered......... (23,563) (7,372)
D.I.P. financing issuance costs paid................. -- (1,378)
</TABLE>
9. INVESTMENT IN SECURITIES
Cash equivalents consist of highly liquid debt instruments with original
maturities of three months or less. The highly liquid debt instruments are
classified as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Held to Maturity:
Debt securities issued by the U.S. Treasury and other U.S.
government agencies....................................... $129,288 $151,448
Bankers acceptances.......................................... 37,686 --
Corporate debt securities.................................... 20,466 11,975
Other debt securities........................................ 1,341 --
-------- --------
188,781 163,423
Cash........................................................... 35,586 19,158
-------- --------
Total.......................................................... $224,367 $182,581
======== ========
</TABLE>
F-25
<PAGE> 143
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. EXTRAORDINARY GAINS AND LOSSES
In August 1995, the Company had an extraordinary loss of $984,000, net of a
tax benefit of $984,000, or $.02 per common share for the write-off of debt
issuance cost, relating to the prepayment of $48 million of its $123 million
11 1/4% Senior Notes and the exchange of the remaining $75 million of such notes
for $75 million of 10 3/4% Senior Notes.
The extraordinary gain recorded in the period January 1 through August 25,
1994 includes $257.7 million from the discharge of indebtedness pursuant to the
consummation of the Plan of Reorganization. No income tax expense was recognized
with respect to the extraordinary gain resulting from the cancellation of
indebtedness that occurred in connection with the effectiveness of the Plan as
such gain is not subject to income taxation.
11. COMMITMENTS AND CONTINGENCIES
(a) Leases
As of December 31, 1995, the Company had 74 aircraft under operating leases
with remaining terms ranging from one month to approximately 22 years. The
Company has options to purchase certain of the aircraft at fair market values at
the end of the lease terms. Certain of the Company's aircraft lessors have the
option to call their respective aircraft. Usually, if such call options are
exercised, the Company has the right of first refusal to retain the aircraft.
None of these options have been exercised and the last of these call options
expires in July 1997. The Company does not believe that the possible exercise of
any or all of these options will have a material effect on its operations.
Certain of the agreements require security deposits, minimum return provisions,
maintenance reserve payments and provides the aircraft lessor the option to
reset their respective rentals to the greater of the existing rentals being paid
under the leases or the then current fair market rates. The Company also leases
certain terminal space, ground facilities and computer and other equipment under
noncancelable operating leases.
At December 31, 1995, the scheduled future minimum cash rental payments
under noncancelable operating leases with initial terms of more than one year
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996................................................................... $ 226,694
1997................................................................... 199,183
1998................................................................... 165,447
1999................................................................... 159,344
2000................................................................... 149,473
Thereafter............................................................. 1,031,029
----------
$1,931,170
==========
</TABLE>
Rent expense (excluding landing fees) was approximately $251 million, $81
million, $154 million, and $245 million for the year ended December 31, 1995,
for the period August 26 through December 31, 1994, the period January 1 through
August 25, 1994 and the year ended December 31, 1993, respectively.
Collectively, the operating lease agreements require security deposits with
lessors of $14.2 million and bank letters of credit of $17.6 million. The
letters of credit are collateralized by $17.6 million of restricted cash as of
December 31, 1995 and 1994.
(b) Revenue Bonds
Special facility revenue bonds (the Series 1989 and 1990 Bonds) issued by a
municipality have been used to fund the acquisition of leasehold improvements at
the Phoenix Sky Harbor airport which have been leased
F-26
<PAGE> 144
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
by the Company. Under the operating lease agreements, which commenced in 1990,
the Company is required to make rental payments sufficient to pay principal and
interest when due on the bonds.
On August 25, 1994, the Company entered into a Restated and Amended Trust
Indenture in which the Series 1989 and Series 1990 Bonds were retired
contemporaneously with the issuance of the Series 1994A and Series 1994B Bonds.
Pursuant to the agreement, payment of principal and interest at 8.3% on the
Series 1994A Bonds commenced on October 1, 1994 and ends on January 1, 2006
while payment of principal and interest at 8.2% on the Series 1994B Bonds
commenced on October 1, 1994 and ends on January 1, 1999. At December 31, 1995,
the outstanding balance of Series 1994 Bonds was $18.7 million.
(c) Aircraft Acquisitions
At December 31, 1995, the Company was obligated to lease five aircraft
under a put agreement with GPA (the "GPA Put Agreement") with deliveries to
start no earlier than January 1, 1996 and end by June 30, 1999. Under the
agreement, new or used B737-300, B757-200, or new or "like new" A320-200
aircraft may be put to the Company at a rate of no more than two aircraft in
1996 and three aircraft per year thereafter. In addition, no more than four used
aircraft may be put to the Company, and for every new A320 aircraft put to the
Company, the Company has the right to reduce deliveries under the AVSA A320
purchase contract (discussed below) on a one-for-one basis. The Company is
currently negotiating with GPA for the lease of one new Airbus A320-200 for
delivery in May 1996. If those negotiations are successfully completed, the
Company will receive credit for one aircraft under the GPA Put Agreement (and
the number of aircraft that GPA will be entitled to put to the Company will be
reduced to four) and the Company will be entitled to reduce the deliveries (see
below) under the AVSA A320 purchase agreement by one additional aircraft.
The Company has commitments to AVSA S.A.R.L., an affiliate of Airbus
Industrie ("AVSA"), for a total of 24 Airbus A320-200 aircraft with delivery
dates that fall in the years 1999 through 2001. The aggregate net cost of such
aircraft is based on formulae that include certain price indices (including
indices for various aircraft components such as metal products) for periods
preceding the various delivery dates. Based on an assumed 5% annual price
escalation, the Company estimates such aggregate net cost to be approximately
$1.2 billion. The Company has the option to cancel without cause up to four of
these aircraft. In addition, if new A320 aircraft are delivered as a result of
the GPA Put Agreement, the Company has the right to cancel on a one-for-one
basis, up to a maximum of seven non-consecutive aircraft deliveries under the
AVSA agreement, subject to certain conditions. In April 1995, the Company took
delivery of two new A320 aircraft under the GPA Put Agreement. If the Company
were to exercise its existing rights to cancel six aircraft under the AVSA
agreement, the aggregate net cost (based upon the assumptions described above)
of commitments under such agreement would be reduced to approximately $900
million.
As part of the agreement, certain cash payments and securities were issued
to the put holder pursuant to the Plan (See Note 12).
In December 1994, the Company entered into a support contract with
International Aero Engines ("IAE") which provides for the purchase by the
Company of six new V2500-A5 spare engines scheduled for delivery beginning in
1998 through 2000 for use on the A320 fleet. Such engines have an estimated
aggregate cost of $42.2 million.
F-27
<PAGE> 145
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table reflects estimated cash payments under the aircraft and
engine purchase contracts. Actual payments may vary due to inflation factor
adjustments and changes in the delivery schedule of the equipment. The estimated
cash payments include the progress payments that will be made in cash, as
opposed to being financed under an existing progress payment financing facility.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996................................................................... $ 4,600
1997................................................................... 36,800
1998................................................................... 71,900
1999................................................................... 379,900
2000................................................................... 367,300
2001................................................................... 349,500
----------
$1,210,000
==========
</TABLE>
At December 31, 1995, the Company has significant capital commitments for a
number of aircraft, as discussed above. Although the Company has arranged for
financing for up to one-half of such commitment, the Company will require
substantial capital from external sources to meet the remaining financial
commitments. The Company intends to seek additional financing (which may include
public debt financing or private financing) in the future when and as
appropriate. There can be no assurance that sufficient financing will be
obtained for all aircraft and other capital requirements. A default by the
Company under any such commitment could have a material adverse effect on the
Company.
(d) Concentration Of Credit Risk
The Company does not believe it is subject to any significant concentration
of credit risk. Most of the Company's receivables result from tickets sold to
individual passengers through the use of major credit cards or to tickets sold
by other airlines and used by passengers on America West. These receivables are
short-term, generally being settled shortly after the sale.
(e) Contingent Legal Obligations
Certain administrative and priority tax claims are pending against the
Company which, if ultimately allowed by the Bankruptcy Court, would represent
general obligations of the Company. Such claims include claims of various state
and local tax authorities and certain contractual indemnification obligations.
The Company is also a defendant in various lawsuits. Management cannot
reasonably predict the outcome of the pending lawsuits and administrative and
priority tax claims. However, management believes, after considering a number of
factors, including the advice of outside counsel, the nature of the
contingencies to which the Company is subject and its prior experience, that
although the outcome of these matters could adversely affect future operating
results, the resolution of these actions will not have a material adverse effect
on the Company's financial condition.
12. RELATED PARTY TRANSACTIONS
In exchange for certain concessions principally arising from cancellation
of the right of GPA to lease to America West 10 Airbus A320 aircraft at
specified rates, GPA received (i) 900,000 shares of Class B Common Stock; (ii)
1,384,615 Warrants to purchase shares of Class B Common Stock at an exercise
price of $12.74 per share; (iii) a cash payment of approximately $30.5 million
and (iv) the rights to require the Company to lease up to eight aircraft of
types operated by the Company, which rights must be exercised by June 30, 1999.
F-28
<PAGE> 146
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company has entered into various aircraft acquisitions and leasing
arrangements with GPA at terms comparable to those obtained from third parties
for similar transactions. The Company currently leases 17 aircraft from GPA and
the rental payments for such leases amount to $65.7 million, $63.1 million, and
$63.1 million for the twelve months ended December 31, 1995, 1994 and 1993,
respectively. As of December 31, 1995, the Company was obligated to pay
approximately $1.0 billion under these leases which expire at various times
through the year 2013.
As part of the Reorganization, both Continental Airlines, Inc.
("Continental") and Mesa Air Group ("Mesa") made an investment in the Company,
and the Company entered into Alliance agreements with Continental and Mesa.
Pursuant to a code-sharing agreement with Mesa entered into in December 1992,
the Company collects a per-passenger charge for facilities, reservations and
other services from Mesa for enplanements in Phoenix on the Mesa system. Such
payments by Mesa to the Company totaled $2.9 million, $2.5 million and $1.9
million for the twelve months ended December 31, 1995, 1994 and 1993,
respectively. In addition the Company entered into several agreements in 1995
and 1994 with Continental related to code-sharing arrangements and ground
handling operations. The Company paid Continental approximately $14 million and
$2 million and also received approximately $11 million and $1 million in 1995
and 1994, respectively, from Continental for such services.
In October 1994, the Company issued an additional $23.0 million of 11 1/4%
Senior Notes to Fidelity Investments ("Fidelity") and Lehman Brothers Holding
Inc. ("Lehman") in exchange for full settlement of certain prepetition unsecured
claims. Additionally, cash payments of $2.1 million and $1.3 million were paid
to Fidelity and Lehman, respectively. In August 1995, the Company prepaid $48.0
million of its $123 million 11 1/4% Senior Unsecured Notes and exchanged the
remaining $75 million of the 11 1/4% Senior Unsecured Notes due 2001 for $75
million of 10 3/4% Senior Unsecured Notes due 2005.
13. RESTRUCTURING CHARGE
In December 1995, the Company recorded a $10.5 million restructuring charge
($.14 fully diluted earnings per share after taxes). The amount includes
severance costs of approximately $9.5 million for approximately 500 employees,
and $1.0 million for other costs related to the outsourcing of the heavy
aircraft maintenance work. At December 31, 1995, the outstanding balance was
$8.0 million. It is currently anticipated that the remaining balance will be
disbursed by the end of 1996.
14. CHAPTER 11 REORGANIZATION
The following occurred upon the Effective Date:
- The partners of AmWest Partners, L.P., a limited partnership which
includes TPG Partners, L.P. ("TPG"); Continental; and Mesa; together with
Lehman and Fidelity, as assignees of AmWest, invested $205.3 million in
consideration for the issuance of securities by the Reorganized Company,
consisting of (i) 1,200,000 shares of Class A Common Stock at a price of
$7.467 per share; (ii) 12,981,636 shares of Class B Common Stock,
consisting of 12,259,821 shares at a price of $7.467 per share and
721,815 shares at $8.889 per share (representing shares acquired as a
result of cash elections made by unsecured creditors); (iii) 2,769,231
Warrants to purchase shares of Class B Common Stock at an exercise price
of $12.74 per share and (iv) $100 million principal amount of 11 1/4%
Senior Unsecured Notes, due September 1, 2001.
- TPG and Fidelity, the holders of preferred equity interests of the
Predecessor Company received their pro rata share of (i) $500,000 in cash
and (ii) purchased 125,000 shares of Class B Common Stock (acquired
pursuant to certain subscription rights at a price of $8.889 per share).
- In exchange for certain concessions principally arising from cancellation
of the right of GPA and/or its affiliates to lease to America West 10
Airbus A320 aircraft, GPA received Class B Common Stock, a cash payment
and certain rights (See Note 12).
F-29
<PAGE> 147
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- Continental, Mesa and the Company entered into certain Alliance
Agreements relating to code-sharing, schedule coordination and certain
other relationships and agreements. With respect to Mesa, a pre-existing
code share agreement was extended to August 2004.
- The Company executed letter agreements with Fidelity and Lehman relating
to the settlement of certain prepetition claims. In October 1994,
Fidelity and Lehman received 11 1/4% Senior Notes and certain cash
payments. (See Note 12).
- The Plan also provided for many other matters, including the satisfaction
of certain other prepetition claims in accordance with negotiated
settlement agreements, the disposition of the various types of claims
asserted against the Company, the adherence to the Company's aircraft
lease agreements, the amendment of the Company's aircraft purchase
agreements and the release of the Company's employees from all
obligations arising under the Company's stock purchase plan in
consideration for the cancellation of the shares of Predecessor Company
stock securing such obligations.
In October 1995, the Company made an interim distribution based upon a
revised reserve estimate of $312 million which was authorized by the Bankruptcy
Court.
As of December 31, 1995, distributions on $305.6 million of allowed general
unsecured claims have been made. Approximately 25.5 million shares of the
Company's Class B Common Stock and cash proceeds equivalent to an additional
711,000 shares have been distributed in settlement. The remaining shares will be
distributed as the remaining general unsecured claims are allowed. To the extent
that the total allowed amount of claims is less than the $312 million reserve
set by the Bankruptcy Court, the holders of such claims will receive a
supplemental distribution.
Reorganization expense recorded by the Predecessor Company consisted of the
following:
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
JANUARY 1 TO DECEMBER 31,
AUGUST 25, 1994 1993
--------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Professional fees and other expenses directly related to
the Chapter 11 proceedings............................. $ 31,959 $ 9,419
Adjustments of assets and liabilities to fair value...... 166,829 --
Provisions for settlement of claims...................... 66,626 18,231
Reorganization success bonuses........................... 11,956 --
Interest income.......................................... (3,711) (2,635)
--------- --------
$ 273,659 $ 25,015
========= ========
</TABLE>
15. FRESH START REPORTING
In connection with its emergence from bankruptcy, the Company adopted fresh
start reporting in accordance with SOP 90-7. The fresh start reporting common
equity value of $587.5 million was determined by the Company with the assistance
of its financial advisors. The significant factors used in the determination of
this value were analyses of industry, economic and overall market conditions and
the historical and estimated performance of the Company as well as of the
airline industry, discussions with various potential investors and certain other
financial analyses.
Under fresh start reporting, the reorganization value of the entity has
been allocated to the Company's assets and liabilities on a basis substantially
consistent with purchase accounting. The portion of reorganization value not
attributable to specific tangible assets has been recorded as "Reorganization
Value in Excess of Amounts Allocable to Identifiable Assets" in the accompanying
balance sheet. The fresh start reporting adjustments, primarily related to the
adjustment of the Company's assets and liabilities to fair market values, will
have a significant effect on the Company's future statements of income. The more
significant of these adjustments relate to reduced depreciation
F-30
<PAGE> 148
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
expense on property and equipment, increased amortization expense relating to
reorganization value in excess of amounts allocable to identifiable assets and
increased interest expense.
The effects of the Plan and fresh start reporting on the balance sheet at
the Effective Date are as follows:
<TABLE>
<CAPTION>
(a) (b) (c)
PREDECESSOR REORGANIZED
COMPANY ISSUE OF COMPANY
------------- DEBT DEBT & FRESH START -------------
AUG. 25, 1994 DISCHARGE STOCK ADJUSTMENTS AUG. 25, 1994
------------- --------- -------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ 156,401 $(140,284) $205,956 $ -- $ 222,073
Accounts receivable, net................ 77,682 -- 6,831 -- 84,513
Expendable spare parts and supplies..... 27,715 -- -- (2,371) 25,344
Prepaid expenses........................ 34,540 -- -- (885) 33,655
----------- --------- -------- --------- -----------
Total current assets...................... 296,338 (140,284) 212,787 (3,256) 365,585
Property and equipment, net............... 702,442 -- -- (138,830) 563,612
Restricted cash........................... 30,503 -- -- -- 30,503
Reorganization value in excess of amounts
allocable to identifiable assets........ -- -- -- 668,702 668,702
Other assets, net......................... 24,497 -- 1,575 (2,449) 23,623
----------- --------- -------- --------- -----------
Total assets.............................. $ 1,053,780 $(140,284) $214,362 $ 524,167 $ 1,652,025
=========== ========= ======== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Current maturities of long-term debt.... $ 119,185 $ (65,014) $ -- $ -- $ 54,171
Accounts payable........................ 98,080 6,500 -- 969 105,549
Air traffic liability................... 153,808 -- -- -- 153,808
Accrued compensation and vacation
benefits.............................. 27,443 -- -- -- 27,443
Accrued interest........................ 5,620 -- -- -- 5,620
Accrued taxes........................... 26,613 14,405 -- -- 41,018
Other accrued liabilities............... 29,161 -- -- -- 29,161
----------- --------- -------- --------- -----------
Total current liabilities................. 459,910 (44,109) -- 969 416,770
Estimated liabilities subject to Chapter
11 proceedings.......................... 382,769 (382,769) -- -- --
Long-term debt, less current maturities... 368,939 28,934 100,000 -- 497,873
Manufacturers' and deferred credits....... 70,625 -- -- 51,530 122,155
Other liabilities......................... 57,932 -- -- (30,205) 27,727
Stockholders' equity (deficiency)
Preferred stock......................... 18 -- -- (18) --
Common stock, Predecessor Company....... 6,432 -- -- (6,432) --
Common stock, Reorganized Company....... -- -- 152 299 451
Additional paid in capital.............. 200,058 -- 114,710 272,281 587,049
Accumulated deficit..................... (474,565) 257,660 (500) 217,405 --
----------- --------- -------- --------- -----------
(268,057) 257,660 114,362 483,535 587,500
Deferred compensation and notes
receivable -- employee stock purchase
plans................................. 18,338 -- -- (18,338) --
----------- --------- -------- --------- -----------
Total stockholders' equity (deficiency)... (286,395) 257,660 114,362 501,873 587,500
----------- --------- -------- --------- -----------
Total liabilities & stockholders' equity
(deficiency)............................ $ 1,053,780 $(140,284) $214,362 $ 524,167 $ 1,652,025
=========== ========= ======== ========= ===========
</TABLE>
- ---------------
(a) To record the discharge or reclassification of prepetition obligations
pursuant to the Plan of Reorganization, as well as the repayment in cash of
$77.6 million of D.I.P. financing and a $62.7 million priority term loan.
F-31
<PAGE> 149
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(b) To record proceeds received from the issuance of new debt and equity
securities and to record the preferred stock settlement payment of $500,000
and the receipt of approximately $1.1 million for the purchase of Class B
Common Stock.
(c) To record adjustments to reflect assets and liabilities at fair market
values and to record reorganization value in excess of amounts allocable to
identifiable assets.
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1995 and 1994 are as follows (in
thousands of dollars except per share amounts):
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
1995 -- REORGANIZED COMPANY QUARTER QUARTER QUARTER QUARTER
---------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Total operating revenues................ $345,790 $399,916 $408,627 $396,309
Operating income(a)..................... 24,895 52,957 54,160 22,720
Nonoperating expense, net............... (13,927) (11,760) (11,047) (9,620)
Income tax expense...................... (5,758) (20,324) (20,414) (7,112)
Net income(a)........................... 5,210 20,873 21,715 5,988
Earnings per share:
Primary............................... .12 .46 .46 .13
Fully diluted......................... .12 .45 .45 .12
</TABLE>
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
1994 -- REORGANIZED COMPANY QUARTER QUARTER QUARTER QUARTER
---------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Total operating revenues................ $ $ $127,315 $342,451
Operating income........................ 8,336 30,535
Nonoperating expense, net............... (5,293) (13,842)
Income tax expense...................... (1,825) (10,065)
Net income.............................. 1,218 6,628
Earnings per share:
Primary............................... .03 .15
Fully diluted......................... .03 .15
</TABLE>
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
1994 -- PREDECESSOR COMPANY QUARTER QUARTER QUARTER QUARTER
---------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Total operating revenues................ $345,264 $363,351 $230,413 $
Operating income........................ 37,750 44,146 25,610
Nonoperating expense, net(b)............ (21,943) (23,171) (263,601)
Income tax expense...................... (632) (839) (588)
Net income(b)........................... 15,175 20,136 19,081
Earnings per share:
Primary............................... .56 .74 .69
Fully diluted......................... .40 .52 .49
</TABLE>
- ---------------
(a) During the fourth quarter of 1995, the Company recorded restructuring
charges of $10.5 million. See note 13 for more information.
(b) During the third quarter of 1994, the Company recorded reorganization
expenses of $255.4 million as well as an extraordinary gain of $257.7
million from the discharge of debt pursuant to the Plan of Reorganization.
F-32
<PAGE> 150
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
17. SUBSEQUENT EVENT
In February 1996, certain stockholders of the Company who hold shares of
Class B Common Stock registered under the Company's shelf registration statement
sold 7.2 million of such shares pursuant to an underwritten public offering. The
selling stockholders were affiliates of Texas Pacific Group, Mesa, Continental
and Lehman. The shares offered were purchased by the selling stockholders in
connection with America West's emergence from bankruptcy in August 1994.
F-33
<PAGE> 151
APPENDIX I -- INDEX OF CERTAIN DEFINED TERMS
The following is an index showing the page in this Prospectus where certain
terms are defined.
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------------------------------- -----
<S> <C>
10 3/4% Notes........................ 67
11 1/4% Notes........................ 67
Adjusted Expected Distributions...... 19
Administration Expenses.............. 86
ADs.................................. 57
Aggregate LTV Collateral Amount...... 20
Aircraft............................. 2
Airframe............................. 107
Air Partners II...................... 26
AISI................................. 8
ALPA................................. 26
America West......................... Cover
AmWest............................... 27
Appraisals........................... 29
Appraised Current Market Value....... 20
Appraisers........................... 8
ASM.................................. 6
Assumed Aggregate Equipment Value.... 8
Assumed Equipment Value.............. 94
Average Life Date.................... 93
Aviation Safety Commission........... 58
AVSA................................. 41
AVSA Term Sheet...................... 48
AWArd Pay............................ 53
Bankruptcy Code...................... 15
Base Rate............................ 83
Basic Agreement...................... Cover
Basic Rent........................... 107
Basic Term........................... 107
BK................................... 8
Cash Collateral Account.............. 18
Cede................................. 78
Certain Taxes and Fees............... 87
Certificate Account.................. 71
Certificate Owner.................... 78
Certificated Air Carrier............. 107
Certificateholders................... 13
Certificates......................... Cover
Citicorp............................. 116
Class A Certificates................. Cover
Class A Common Stock................. 26
Class A Trust........................ Cover
Class B Certificates................. Cover
Class B Common Stock................. 26
Class B Trust........................ Cover
Class C Certificates................. Cover
Class C Trust........................ Cover
Class D Certificates................. Cover
Class D Trust........................ Cover
Class E Certificates................. Cover
Class E Trust........................ Cover
Class Exemptions..................... 113
<CAPTION>
DEFINED TERM PAGE
- ------------------------------------- -----
<S> <C>
Closing Date......................... 2
Code................................. 22
Commission........................... 3
Common Stock......................... 26
Company.............................. Cover
Continental.......................... 6
Controlling Party.................... 21
Convention........................... 94
Cross-Border Lease................... 108
Cross-Border Lessee.................. 108
Cross-Border Lessor.................. 108
CRS.................................. 42
Current Distribution Date............ 19
Definitive Certificates.............. 80
Distribution Date.................... 13
DOT.................................. 28
Downgrade Drawing.................... 18
DTC.................................. 78
DTC Participants..................... 79
Effective Date....................... 27
Engine............................... 107
Equipment............................ 2
Equipment Notes...................... 2
Equipment Trust Certificate.......... 34
Exculpated Person.................... 101
ERISA................................ 22
ERISA Plans.......................... 113
Event of Loss........................ 105
Exchange Act......................... 3
Expected Distributions............... 19
FAA.................................. 28
Federal Aviation Act................. 76
Fidelity............................. 67
Final Distributions.................. 21
Final Drawing........................ 83
Final Expected Distribution Date..... 12
Final Legal Distribution Date........ 13
Financial institution................ 111
Global Certificates.................. 78
GPA.................................. 27
GPA Put Agreement.................... 48
GPA Put Termination Agreement........ 48
IBT.................................. 26
Indenture............................ 12
Indenture Event of Default........... 74
Indenture Trustee.................... 12
Indirect Participants................ 79
Intercreditor Agreement.............. 18
Interest Drawings.................... 16
Interest Period...................... 83
IRS.................................. 110
Lease................................ 2
</TABLE>
I-1
<PAGE> 152
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------------------------------- -----
<S> <C>
Lease Default........................ 107
Lease Event of Default............... 74
Lease Payment Dates.................. 107
Lehman............................... 67
LIBOR................................ 83
Liquidity Event of Default........... 83
Liquidity Expenses................... 86
Liquidity Facility................... 16
Liquidity Obligations................ 17
Liquidity Provider................... Cover
Long Settlement...................... 2
LTV Appraisal........................ 20
LTV Collateral Amount................ 20
LTV Ratio............................ 8
Make-Whole Amount.................... 92
MBA.................................. 8
Mesa................................. 6
Minimum Sale Price................... 22
Moody's.............................. 17
Morgan Stanley....................... 116
NMB.................................. 26
NOL.................................. 47
Non-Performing Equipment Notes....... 17
Non-U.S. Certificateholder........... 111
Notes Amount......................... 29
Order................................ 59
Original Lessee...................... 34
Owner Participant.................... 15
Owner Trust.......................... 2
Owner Trust Agreement................ 90
Owner Trustee........................ 2
Pass Through Trust Agreements........ Cover
Performing Equipment Notes........... 17
Performing Note Deficiency........... 17
Permitted Sublessee.................. 107
PFCs................................. 56
Plan Asset Regulation................ 113
Plans................................ 22
Pool Balance......................... 72
Pool Factor.......................... 72
Prior Subleases...................... 67
PTC Event of Default................. 13
PTCE................................. 22
RASM................................. 41
Rating Agencies...................... 17
Record Date.......................... 13
Refunding Agreement.................. 12
Registration Statement............... 3
Regular Distribution Dates........... 13
Remaining Weighted Average Life...... 93
<CAPTION>
DEFINED TERM PAGE
- ------------------------------------- -----
Renewal Rent......................... 107
Renewal Term......................... 107
Reorganization....................... 25
Reorganization Plan.................. 58
Replacement Facility................. 82
Required Amount...................... 16
Review Commission.................... 57
Rules................................ 79
Scheduled Payments................... 70
Section 1110 Period.................. 17
Section 382 Limitation............... 48
Securities Act....................... 3
Series A Equipment Notes............. 2
Series B Equipment Notes............. 2
Series C Equipment Notes............. 2
Series D Equipment Notes............. 2
Series E Equipment Notes............. 2
Shortfall Amounts.................... 111
SOP 90-7............................. 39
Spare Engines........................ 2
Special Distribution Date............ 71
Special Payment...................... 71
Special Payments Account............. 71
Standard & Poor's.................... 17
Stated Interest Rates................ 16
Stockholder's Agreement.............. 27
Subordinated Certificateholders...... 111
Subordinated Certificates............ 111
Subordinated Trusts.................. 111
Subordination Agent.................. 12
Supplemental Rent.................... 107
Term................................. 107
Threshold Rating..................... 23
TPG.................................. 26
TPG Parallel......................... 26
Treasury Yield....................... 92
Triggering Event..................... 14
Trust Company........................ 93
Trust Indenture Estate............... 91
Trust Property....................... 12
Trust Supplement..................... Cover
Trustee.............................. Cover
Trusts............................... Cover
TWU.................................. 54
U.S. Certificateholders.............. 110
U.S. Persons......................... 110
Underwriting Agreement............... 115
Underwriters......................... 115
Underwriters Exemption............... 114
Warrants............................. 26
</TABLE>
I-2
<PAGE> 153
APPENDIX II -- AIRCRAFT APPRAISALS
[AIRCRAFT INFORMATION SERVICES, INC. LETTERHEAD]
11 July 1996
Mr. Eugene Peppard
GPA Group plc
GPA House
Shannon Co. Clare
IRELAND
Subject: AISI Report No. A6S022BVO
AISI Short Form Sight Unseen Appraisal
Twelve A320-200 aircraft and 3 Spare V2500-A1 Engines
Reference: GPA Group plc Fax Message dated 27 June 1996
Dear Mr. Peppard:
As requested, Aircraft Information Services, Inc. (AISI) is pleased to
offer GPA Group plc our opinion of the sight unseen half-life base value twelve
A320-200 aircraft plus three spare V2500-A1 engines as identified in Table I of
this report.
1. METHODOLOGY AND DEFINITIONS
The historical standard term of reference for commercial aircraft value has
been "half-life fair market value" of an "average" aircraft. However, "fair
market value" could mean a fair value in the given market or a value in a
hypothetical "fair" or balanced market, and the two definitions are not
equivalent. Recently, the term "base value" has been created to describe the
theoretical balanced market condition and to avoid the potentially misleading
term "fair market value" which has now become synonymous with the term "current
market value" or a "fair" value in the actual current market. AISI value
definitions are consistent with those of the International Society of Transport
Aircraft Trading (ISTAT) of 01 January 1994; AISI is a member of that
organization and employs an ISTAT Certified Senior Aircraft Appraiser.
AISI defines a "base value" as that of a transaction between equally
willing and informed buyer and seller, neither under compulsion to buy or sell,
for a single unit cash transaction with no hidden value or liability, and with
supply and demand of the sale item roughly in balance. Base values are typically
given for aircraft in "new" condition, "average half-life" condition, or in a
specifically described condition unique to a single aircraft at a specific time.
An "average" aircraft is an operable airworthy aircraft in average physical
condition and with average accumulated flight hours and cycles, with clear title
and standard unrestricted certificate of airworthiness, and registered in an
authority which does not represent a penalty to aircraft value or liquidity,
with no damage history and with inventory configuration and level of
modification which is normal for its intended use and age. "Half-life" condition
assumes that every component or maintenance service which has a prescribed
interval that determines its service life, overhaul interval or interval between
maintenance services, is at a condition which is one-half of the total interval.
Headquarters, 23232 Peralta Drive, Suite 115, Laguna Hills, CA 92653
TEL: 714-830-0101 FAX: 714-830-1101
II-1
<PAGE> 154
AISI defines a "current market value" as that value which reflects the real
market conditions, whether at, above or below the base value conditions.
Definitions of aircraft condition, buyer/seller qualifications and type of
transaction remain unchanged from that of base value. Current market value takes
into consideration the status of the economy in which the aircraft is used, the
status of supply and demand for the particular aircraft type, the value of
recent transactions and the opinions of informed buyers and sellers. Current
market value assumes that there is no short term time constraint to buy or sell.
AISI encourages the use of base values only to consider historical trends,
as a basis for long term future value considerations, or to consider how actual
market values vary from theoretical base values. Base values are inappropriate
to determine near term values. AISI encourages the use of current marker values
to consider the probable near term value of an aircraft.
2. VALUATION
The half-life base valuations are presented below subject to the
assumptions, definitions and disclaimers herein.
TABLE I
<TABLE>
<CAPTION>
HALF-LIFE
BASE VALUE
DATE OF MTOW 1996
AIRCRAFT/EQUIPMENT TYPE S/N MANUFACTURE (LBS.) ENGINES U.S. DOLLARS
- ----------------------- --- ----------- ------- -------- ------------
<S> <C> <C> <C> <C> <C>
A320-200........................... 55 Jun 89 162,000 V2500-A1 $29,290,000
A320-200........................... 65 Jul 89 162,000 V2500-A1 $29,400,000
A320-200........................... 66 Jul 89 162,000 V2500-A1 $29,400,000
A320-200........................... 67 Jul 89 162,000 V2500-A1 $29,400,000
A320-200........................... 76 Sep 89 162,000 V2500-A1 $29,620,000
A320-200........................... 77 Sep 89 162,000 V2500-A1 $29,620,000
A320-200........................... 81 Sep 89 162,000 V2500-A1 $29,620,000
A320-200........................... 82 Oct 89 162,000 V2500-A1 $29,730,000
A320-200........................... 91 Nov 89 162,000 V2500-A1 $29,830,000
A320-200........................... 92 Nov 89 162,000 V2500-A1 $29,830,000
A320-200........................... 98 Feb 90 162,000 V2500-A1 $30,160,000
A320-200........................... 99 Dec 89 162,000 V2500-A1 $29,940,000
V2500-A1........................... 19 -- -- -- $ 3,500,000
V2500-A1........................... 25 -- -- -- $ 3,500,000
V2500-A1........................... 49 -- -- -- $ 3,500,000
</TABLE>
This report is offered as a fair and impartial assessment of subject
aircraft based on data supplied by others, with no physical inspection or
verification by AISI. AISI has no past, present nor contemplated future interest
in subject aircraft. This report is an opinion and is for the sole use of the
client/addressee and AISI shall not be liable to any party for damages arising
out of reliance or alleged reliance on it, or for any parties action or failure
to act as a result of reliance or alleged reliance on this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
/s/ FRED E. BEARDEN
--------------------------------------
Fred E. Bearden
President
II-2
<PAGE> 155
[BK ASSOCIATES, INC. LETTERHEAD]
July 2, 1996
Mr. Declan Treacy
GPA Group plc
GPA House
Shannon, Co. Clare
Ireland
Dear Declan:
In response to your recent request, BK Associates, Inc. is pleased to
provide an opinion on the current base value (BV) of 16 Airbus A320-231
aircraft, each powered by International Aero Engines V2500-A1 engines (Aircraft)
and three V2500-A1 spare engines (Engines). The Aircraft which are on lease to
America West Airlines are further identified below.
Based on our knowledge of the A320-200 aircraft, its capabilities and uses
to which it is put worldwide; the current supply and demand for A320s and
competitive types; the operation of the appraised Aircraft and our knowledge of
the used commercial aircraft market; it is our opinion that the current base
value of each of the Aircraft and Engines is as shown below.
<TABLE>
<CAPTION>
CURRENT
SERIAL DATE BASE
REGISTRATION NUMBER DELIVERED VALUE
------------ ------ --------- ------------------
<S> <C> <C> <C>
N620AW........................ 52 07/89 $29,500,000
N621AW........................ 53 09/89 29,900,000
N622AW........................ 54 09/89 29,000,000
N624AW........................ 55 09/89 29,000,000
N625AW........................ 64 09/89 29,000,000
N626AW........................ 65 09/89 29,900,000
N627AW........................ 66 11/89 30,150,000
N628AW........................ 67 11/89 30,150,000
N629AW........................ 76 11/89 30,150,000
N631AW........................ 77 12/89 30,300,000
N632AW........................ 81 12/89 30,300,000
N633AW........................ 82 12/89 30,300,000
N634AW........................ 91 02/90 30,500,000
N635AW........................ 92 02/90 30,500,000
N636AW........................ 98 04/90 30,700,000
N637AW........................ 99 04/90 30,700,000
Engine........................ 19 5,250,000
Engine........................ 25 5,250,000
Engine........................ 49 5,250,000
</TABLE>
According to the International Society of Transport Aircraft Trading's
(ISTAT) definition of base value, to which BK Associates subscribes, base value
is the Appraiser's opinion of the underlying economic value of an aircraft in an
open, unrestricted, stable market environment with a reasonable balance of
supply and demand, and assumes full consideration of its "highest and best use".
An aircraft's Base Value is founded in the historical trend of values and in the
projection of value trends and presumes an arm's length, cash transaction
between willing, able and knowledgeable parties, acting prudently, with an
absence of duress and with a reasonable period of time available marketing.
II-3
<PAGE> 156
Ultimately aircraft values depend almost entirely on supply and demand. A
shortage of aircraft or an unexpected increase in demand for air transportation
tends to increase values of aircraft. If the market is balanced between supply
and demand, the long term trend of the base value is determined from historical
and projected value trends, adjusted to account for factors that influence the
base value. These factors include:
- Suitability of available aircraft to the operator's requirements.
- Operating cost and purchase price.
- Regulatory factors.
- Remaining useful life.
For a new or relatively new aircraft in a balanced market, the factor that
affects base value most is the new aircraft price and the methodology relates
the current value and forecast future values to the new price or replacement
cost, adjusted to account for the estimated time cycles used to date on the
aircraft. Considering the new price for these aircraft was about $36 million
each, allowing for the average utilization to date and allowing for inflation
suggests the current base values above.
It is emphasized that BK Associates has neither inspected the Aircraft or
Engines nor their maintenance records, but has relied upon the information you
have provided in your request and our own database. The assumptions have been
made that all Airworthiness Directives have been complied with; accident damage
has not been incurred that would affect market values; and maintenance has been
accomplished in accordance with a civil airworthiness authority's approved
maintenance program and accepted industry standards. Further, it is assumed the
Aircraft and Engines are at half-time between high cost maintenance events.
Deviations from these assumptions can change significantly our opinion regarding
the Aircrafts' values.
BK Associates, Inc. has no present or contemplated future interest in the
Aircraft, nor any interest that would preclude our making a fair and unbiased
estimate. This appraisal represents the opinion of BK Associates, Inc. and
reflects our best judgment based on the information available to us at the time
of preparation and the time and budget constraints imposed by the client. It is
not given as a recommendation, or as an inducement, for any financial
transaction and further, BK Associates, Inc. assumes no responsibility or legal
liability for any action taken or not taken by the addressee, or any other
party, with regard to the appraised equipment. By accepting this appraisal, the
addressee agrees that BK Associates, Inc. shall bear no such responsibility or
legal liability. This appraisal is prepared for the use of the addressee and
shall not be provided to other parties without the express consent of the
addressee.
Sincerely yours,
BK ASSOCIATES, INC.
/s/ JOHN F. KEITZ
--------------------------------------
John F. Keitz
Vice President
ISTAT Certified Senior Appraiser
II-4
<PAGE> 157
[MORTEN BEYER AND ASSOCIATES LETTERHEAD]
July 12, 1996
Mr. Declan Treacy
GPA Group plc
GPA House
Shannon, County Clare
Ireland
Dear Mr. Treacy:
GPA Group plc (GPA) has requested Morten Beyer and Associates (MBA) to
render its expert opinion as to the Base Value of twelve Airbus A320-230
aircraft equipped with V-2500-A1 engines, operated by America West Airlines,
together with three spare V-2500-A1 engines. GPA has requested that all aircraft
and engines be assumed to be in half-time condition as that term is generally
understood in the industry. In addition, we have made the following generic
assumptions that underlie a Base Value determination.
1. The aircraft is in good overall condition
2. The overhaul status of the airframe, engines, landing gear, and other major
components are the equivalent of mid-time/mid-life
3. The historical maintenance documentation has been maintained to acceptable
international standards
4. The specifications of the aircraft are those most common for an aircraft of
its type and vintage
5. The aircraft is in a standard airline configuration
6. The aircraft is current as to all Airworthiness Directives and Service
Bulletins
7. The modifications status is comparable to that most common for an aircraft
of its type and vintage
8. Utilization has been comparable to industry averages
9. There is no history of accident or incident damage
10. The aircraft is not encumbered by any attached lease, tax benefit
recapture, or other extraneous factor
The twelve A320-230 aircraft were delivered between June, 1989 and
February, 1990, and their values have been adjusted to reflect this fact. It is
assumed that the spare engines were delivered at the mid-point in the aircraft
delivery cycle, or October, 1989. Engines are assumed to be equipped with
neutral QEC's.
MBA has not inspected the aircraft or engines or their records, but rather
has made the assumptions outlined above with respect to their configuration and
condition.
The current market for the Airbus A320 is strong. Only one aircraft is
known to be on the market for sale. As of June 30, 1996, 535 had been delivered,
and 213 were on backlog, with an additional 140 options. At current delivery
rates the backlog will take four to five years to work off.
The A320 has won worldwide acceptance due to its advanced engineering,
passenger comfort, and fuel efficiency. The A320's principal rivals, the B-737
and MD-80, are built on platforms that are more than 30 years old, while the
A320 technology is 20 years younger. The cabin is six inches wider than the
B-737, permitting roomier seats and a wider aisle. Fuel consumption per seat is
approximately 9.5 percent less than a B-737-300 and 17.5 percent less than an
MD-80.
The aircraft, with its V-2500 engines, is measurably quieter than either
the B-737-300 or MD-80, and thus has a lower noise footprint and is less likely
to be impacted by future tightening of noise restrictions.
II-5
<PAGE> 158
APPRAISED VALUE
The table following sets forth the Base Value as of July 1, 1996 of the
twelve aircraft in half-time condition and other assumed factors:
<TABLE>
<CAPTION>
REGISTRATION BUILD DATE BASE VALUE
------------ ---------- -----------
<S> <C> <C>
N624AW................................... Jun-89 $30,335,000
N626AW................................... Jul-89 30,412,500
N627AW................................... Jul-89 30,412,500
N628AW................................... Jul-89 30,412,500
N629AW................................... Sep-89 30,567,500
N631AW................................... Sep-89 30,567,500
N632AW................................... Sep-89 30,567,500
N633AW................................... Oct-89 30,645,000
N634AW................................... Nov-89 30,722,500
N635AW................................... Nov-89 30,722,500
N636AW................................... Feb-90 30,955,000
N637AW................................... Dec-89 30,800,000
------------
$367,120,000
============
</TABLE>
The appraised value of the V-2500-A1 engines in half-time serviceable
condition is $3,100,000 each, or a total of $9,300,000 for the three. It is
assumed that the spare engines have a neutral QEC installed.
It is noted that MBA appraises the Current Fair Market Value of these
aircraft at ten percent higher than Base Value due to the current shortage of
aircraft on the market, the long delivery queue for new orders, and their
superior economics.
COVENANTS
This report has been prepared for the exclusive use of GPA and shall not be
provided to other parties by MBA without the express consent of GPA.
MBA certifies that this report has been independently prepared and that it
fully and accurately represents MBA's opinion of the Current Market Value, as of
the date of this report, of the subject aircraft. MBA further certifies that it
does not have, and does not expect to have, any financial or other interest in
the subject aircraft.
This report represents the opinion of MBA and is intended to be advisory
only in nature. Therefore, MBA assumes no responsibility or legal liability for
any actions taken or not taken by GPA or any other party with regard to the
subject aircraft. By accepting this report, all parties agree that MBA shall
bear no such responsibility or legal liability.
Sincerely,
/s/ MORTEN S. BEYER
--------------------------------------
Morten S. Beyer
President
ISTAT Certified Senior Appraiser
II-6
<PAGE> 159
APPENDIX III -- EQUIPMENT NOTES PRINCIPAL PAYMENT SCHEDULE
SERIES A
<TABLE>
<CAPTION>
MANUFACTURER'S SERIAL NUMBER
REGULAR ------------------------------------------------------------------------------------------------
DISTRIBUTION DATES 55 65 77 82 091 092 098
- ------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 2, 1997.......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 1997............. 238,733.00 238,733.00 238,733.00 241,799.00 0.00 0.00 0.00
January 2, 1998.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 1998............. 238,733.00 238,733.00 238,733.00 241,800.00 242,806.00 242,806.00 242,806.00
January 2, 1999.......... 0.00 0.00 0.00 600,275.00 0.00 0.00 0.00
July 2, 1999............. 238,733.00 238,733.00 238,733.00 130,465.00 242,806.00 242,806.00 242,806.00
January 2, 2000.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2000............. 238,733.00 238,733.00 238,733.00 0.00 242,806.00 242,806.00 242,806.00
January 2, 2001.......... 0.00 0.00 0.00 478,258.00 0.00 0.00 0.00
July 2, 2001............. 238,733.00 238,733.00 238,733.00 0.00 242,806.00 242,806.00 242,806.00
January 2, 2002.......... 817,344.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2002............. 1,400,046.00 303,817.00 303,817.00 0.00 242,806.00 242,806.00 242,806.00
January 2, 2003.......... 1,447,997.00 1,382,457.00 1,382,457.00 0.00 0.00 0.00 0.00
July 2, 2003............. 1,497,591.00 1,429,807.00 1,429,807.00 0.00 242,806.00 242,806.00 242,806.00
January 2, 2004.......... 1,548,884.00 1,478,778.00 1,478,778.00 0.00 0.00 0.00 0.00
July 2, 2004............. 1,601,933.00 1,529,426.00 1,529,426.00 241,800.00 242,806.00 242,806.00 242,806.00
January 2, 2005.......... 1,656,799.00 1,581,809.00 1,581,809.00 0.00 0.00 0.00 0.00
July 2, 2005............. 772,402.00 1,635,986.00 1,635,986.00 868,188.00 242,806.00 242,806.00 242,806.00
January 2, 2006.......... 0.00 1,400,917.00 1,400,917.00 1,386,113.00 1,039,291.00 1,039,291.00 1,039,291.00
July 2, 2006............. 0.00 0.00 0.00 1,433,587.00 1,709,003.00 1,709,003.00 1,709,003.00
January 2, 2007.......... 0.00 0.00 0.00 1,482,687.00 1,767,536.00 1,767,536.00 1,767,536.00
July 2, 2007............. 0.00 0.00 0.00 1,533,470.00 1,828,075.00 1,828,075.00 1,828,075.00
January 2, 2008.......... 0.00 0.00 0.00 113,550.00 1,890,686.00 1,890,686.00 1,890,686.00
July 2, 2008............. 0.00 0.00 0.00 1,640,900.00 1,176,774.00 1,176,774.00 1,176,774.00
January 2, 2009.......... 0.00 0.00 0.00 1,697,066.00 543,705.00 543,705.00 543,705.00
July 2, 2009............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
<CAPTION>
REGULAR
DISTRIBUTION DATES 099 V0019 V0025 V0049
- ------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
January 2, 1997.......... $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 1997............. 0.00 0.00 0.00 0.00
January 2, 1998.......... 0.00 0.00 0.00 0.00
July 2, 1998............. 242,806.00 0.00 0.00 0.00
January 2, 1999.......... 0.00 0.00 0.00 0.00
July 2, 1999............. 242,806.00 28,000.00 28,000.00 28,000.00
January 2, 2000.......... 0.00 0.00 0.00 0.00
July 2, 2000............. 242,806.00 28,000.00 28,000.00 28,000.00
January 2, 2001.......... 0.00 0.00 0.00 0.00
July 2, 2001............. 242,806.00 27,999.00 27,999.00 27,999.00
January 2, 2002.......... 0.00 0.00 0.00 0.00
July 2, 2002............. 242,806.00 28,000.00 28,000.00 28,000.00
January 2, 2003.......... 0.00 0.00 0.00 0.00
July 2, 2003............. 242,806.00 28,000.00 28,000.00 28,000.00
January 2, 2004.......... 0.00 27,999.00 27,999.00 27,999.00
July 2, 2004............. 242,806.00 0.00 0.00 0.00
January 2, 2005.......... 0.00 116,579.00 116,579.00 116,579.00
July 2, 2005............. 242,806.00 0.00 0.00 0.00
January 2, 2006.......... 1,039,291.00 0.00 0.00 0.00
July 2, 2006............. 1,709,003.00 282,018.00 282,018.00 282,018.00
January 2, 2007.......... 1,767,536.00 291,677.00 291,677.00 291,677.00
July 2, 2007............. 1,828,075.00 21,041.00 21,041.00 21,041.00
January 2, 2008.......... 1,890,686.00 0.00 0.00 0.00
July 2, 2008............. 1,176,774.00 0.00 0.00 0.00
January 2, 2009.......... 543,705.00 156,920.00 156,920.00 156,920.00
July 2, 2009............. 0.00 307,762.00 307,762.00 307,762.00
January 2, 2010.......... 0.00 0.00 0.00 0.00
</TABLE>
III-1
<PAGE> 160
SERIES B
<TABLE>
<CAPTION>
MANUFACTURER'S SERIAL NUMBER
REGULAR ------------------------------------------------------------------------------------------------
DISTRIBUTION DATES 55 65 77 82 091 092 098
- ------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 2, 1997.......... $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
July 2, 1997............. 89,525.00 89,525.00 89,525.00 90,674.00 0.00 0.00 0.00
January 2, 1998.......... 896,098.00 0.00 0.00 13,299.00 0.00 0.00 0.00
July 2, 1998............. 739,672.00 178,397.00 178,397.00 711,057.00 43,257.00 43,257.00 43,257.00
January 2, 1999.......... 1,104,807.00 1,054,309.00 1,054,309.00 479,286.00 0.00 0.00 0.00
July 2, 1999............. 814,831.00 762,583.00 762,583.00 0.00 91,052.00 91,052.00 91,052.00
January 2, 2000.......... 829,354.00 689,418.00 689,418.00 0.00 0.00 0.00 0.00
July 2, 2000............. 0.00 0.00 0.00 0.00 91,052.00 91,052.00 91,052.00
January 2, 2001.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2001............. 0.00 0.00 0.00 0.00 91,052.00 91,052.00 91,052.00
January 2, 2002.......... 1,960.00 669,555.00 669,555.00 0.00 0.00 0.00 0.00
July 2, 2002............. 0.00 1,032,459.00 1,032,459.00 0.00 1,053,544.00 1,053,544.00 1,053,544.00
January 2, 2003.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2003............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2004............. 0.00 0.00 0.00 0.00 777,472.00 777,472.00 777,472.00
January 2, 2005.......... 0.00 0.00 0.00 1,295,151.00 1,586,562.00 1,586,562.00 1,586,562.00
July 2, 2005............. 0.00 0.00 0.00 471,840.00 679,783.00 679,783.00 679,783.00
January 2, 2006.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2006............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2007............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008.......... 0.00 0.00 0.00 1,471,870.00 0.00 0.00 0.00
July 2, 2008............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2009............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
<CAPTION>
REGULAR
DISTRIBUTION DATES 099 V0019 V0025 V0049
- ------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
January 2, 1997.......... $0.00 $0.00 $0.00 $0.00
July 2, 1997............. 0.00 0.00 0.00 0.00
January 2, 1998.......... 0.00 0.00 0.00 0.00
July 2, 1998............. 43,257.00 0.00 0.00 0.00
January 2, 1999.......... 0.00 0.00 0.00 0.00
July 2, 1999............. 91,052.00 10,500.00 10,500.00 10,500.00
January 2, 2000.......... 0.00 0.00 0.00 0.00
July 2, 2000............. 91,052.00 10,499.00 10,499.00 10,499.00
January 2, 2001.......... 0.00 0.00 0.00 0.00
July 2, 2001............. 91,052.00 10,500.00 10,500.00 10,500.00
January 2, 2002.......... 0.00 0.00 0.00 0.00
July 2, 2002............. 1,053,544.00 10,499.00 10,499.00 10,499.00
January 2, 2003.......... 0.00 0.00 0.00 0.00
July 2, 2003............. 0.00 10,499.00 10,499.00 10,499.00
January 2, 2004.......... 0.00 0.00 0.00 0.00
July 2, 2004............. 777,472.00 112,304.00 112,304.00 112,304.00
January 2, 2005.......... 1,586,562.00 149,693.00 149,693.00 149,693.00
July 2, 2005............. 679,783.00 0.00 0.00 0.00
January 2, 2006.......... 0.00 189,502.00 189,502.00 189,502.00
July 2, 2006............. 0.00 0.00 0.00 0.00
January 2, 2007.......... 0.00 0.00 0.00 0.00
July 2, 2007............. 0.00 0.00 0.00 0.00
January 2, 2008.......... 0.00 0.00 0.00 0.00
July 2, 2008............. 0.00 0.00 0.00 0.00
January 2, 2009.......... 0.00 0.00 0.00 0.00
July 2, 2009............. 0.00 0.00 0.00 0.00
January 2, 2010.......... 0.00 0.00 0.00 0.00
</TABLE>
III-2
<PAGE> 161
SERIES C
<TABLE>
<CAPTION>
MANUFACTURER'S SERIAL NUMBER
REGULAR -----------------------------------------------------------------------------------------------
DISTRIBUTION DATES 55 65 77 82 091 092 098
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 2, 1997......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 1997............ 89,525.00 89,525.00 89,525.00 90,674.00 91,052.00 91,052.00 91,052.00
January 2, 1998......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 1998............ 89,525.00 89,525.00 89,525.00 90,674.00 91,052.00 91,052.00 91,052.00
January 2, 1999......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 1999............ 89,525.00 89,525.00 89,525.00 986,262.00 91,052.00 91,052.00 91,052.00
January 2, 2000......... 353,215.00 439,093.00 439,093.00 1,155,026.00 481,215.00 481,215.00 481,215.00
July 2, 2000............ 984,689.00 928,728.00 928,728.00 1,194,643.00 964,440.00 964,440.00 964,440.00
January 2, 2001......... 1,265,374.00 1,207,493.00 1,207,493.00 196,741.00 1,342,850.00 1,342,850.00 1,342,850.00
July 2, 2001............ 1,070,043.00 1,010,177.00 1,010,177.00 0.00 1,055,051.00 1,055,051.00 1,055,051.00
January 2, 2002......... 534,351.00 622,181.00 622,181.00 0.00 435,909.00 435,909.00 435,909.00
July 2, 2002............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2003......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2003............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2004............ 0.00 0.00 0.00 818,767.00 0.00 0.00 0.00
January 2, 2005......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2006............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2007............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2008............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2009............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
<CAPTION>
REGULAR
DISTRIBUTION DATES 099 V0019 V0025 V0049
- ------------------------
<S> <C> <C> <C> <C>
January 2, 1997......... $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 1997............ 91,052.00 10,499.00 10,499.00 10,499.00
January 2, 1998......... 0.00 0.00 0.00 0.00
July 2, 1998............ 91,052.00 10,500.00 10,500.00 10,500.00
January 2, 1999......... 0.00 0.00 0.00 0.00
July 2, 1999............ 91,052.00 10,500.00 10,500.00 10,500.00
January 2, 2000......... 481,215.00 0.00 0.00 0.00
July 2, 2000............ 964,440.00 10,499.00 10,499.00 10,499.00
January 2, 2001......... 1,342,850.00 0.00 0.00 0.00
July 2, 2001............ 1,055,051.00 10,500.00 10,500.00 10,500.00
January 2, 2002......... 435,909.00 2,577.00 2,577.00 2,577.00
July 2, 2002............ 0.00 7,922.00 7,922.00 7,922.00
January 2, 2003......... 0.00 219,189.00 219,189.00 219,189.00
July 2, 2003............ 0.00 210,043.00 210,043.00 210,043.00
January 2, 2004......... 0.00 32,767.00 32,767.00 32,767.00
July 2, 2004............ 0.00 0.00 0.00 0.00
January 2, 2005......... 0.00 0.00 0.00 0.00
July 2, 2005............ 0.00 0.00 0.00 0.00
January 2, 2006......... 0.00 0.00 0.00 0.00
July 2, 2006............ 0.00 0.00 0.00 0.00
January 2, 2007......... 0.00 0.00 0.00 0.00
July 2, 2007............ 0.00 0.00 0.00 0.00
January 2, 2008......... 0.00 0.00 0.00 0.00
July 2, 2008............ 0.00 0.00 0.00 0.00
January 2, 2009......... 0.00 0.00 0.00 0.00
July 2, 2009............ 0.00 0.00 0.00 0.00
January 2, 2010......... 0.00 0.00 0.00 0.00
</TABLE>
III-3
<PAGE> 162
SERIES D
<TABLE>
<CAPTION>
MANUFACTURER'S SERIAL NUMBER
REGULAR -----------------------------------------------------------------------------------------------------
DISTRIBUTION DATES 055 065 077 082 091 092 098
- ----------------------- ------------- ------------- ------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 2, 1997........ $1,577,829.00 $1,567,327.00 $1,567,327.00 $179,291.00 $ 0.00 $ 0.00 $ 0.00
July 2, 1997........... 575,739.00 522,801.00 522,801.00 542,870.00 84,982.00 84,982.00 84,982.00
January 2, 1998........ 135,264.00 976,264.00 976,264.00 988,908.00 494,981.00 494,981.00 494,981.00
July 2, 1998........... 0.00 509,439.00 509,439.00 0.00 736,716.00 736,716.00 736,716.00
January 2, 1999........ 0.00 0.00 0.00 0.00 1,156,829.00 1,156,829.00 1,156,829.00
July 2, 1999........... 0.00 0.00 0.00 0.00 779,116.00 779,116.00 779,116.00
January 2, 2000........ 0.00 0.00 0.00 0.00 769,195.00 769,195.00 769,195.00
July 2, 2000........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2001........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2001........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2002........ 0.00 0.00 0.00 0.00 227,294.00 227,294.00 227,294.00
July 2, 2002........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2003........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2003........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2004........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2005........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2006........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2007........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2008........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2009........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
<CAPTION>
REGULAR
DISTRIBUTION DATES 099 V0019 V0025 V0049
- ----------------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
January 2, 1997........ $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 1997........... 84,982.00 9,799.00 9,799.00 9,799.00
January 2, 1998........ 494,981.00 0.00 0.00 0.00
July 2, 1998........... 736,716.00 9,799.00 9,799.00 9,799.00
January 2, 1999........ 1,156,829.00 0.00 0.00 0.00
July 2, 1999........... 779,116.00 9,800.00 9,800.00 9,800.00
January 2, 2000........ 769,195.00 0.00 0.00 .00
July 2, 2000........... 0.00 9,799.00 9,799.00 9,799.00
January 2, 2001........ 0.00 0.00 0.00 0.00
July 2, 2001........... 0.00 47,195.00 47,195.00 47,195.00
January 2, 2002........ 227,294.00 219,208.00 219,208.00 219,208.00
July 2, 2002........... 0.00 184,395.00 184,395.00 184,395.00
January 2, 2003........ 0.00 0.00 0.00 0.00
July 2, 2003........... 0.00 0.00 0.00 0.00
January 2, 2004........ 0.00 0.00 0.00 0.00
July 2, 2004........... 0.00 0.00 0.00 0.00
January 2, 2005........ 0.00 0.00 0.00 0.00
July 2, 2005........... 0.00 0.00 0.00 0.00
January 2, 2006........ 0.00 0.00 0.00 0.00
July 2, 2006........... 0.00 0.00 0.00 0.00
January 2, 2007........ 0.00 0.00 0.00 0.00
July 2, 2007........... 0.00 0.00 0.00 0.00
January 2, 2008........ 0.00 0.00 0.00 0.00
July 2, 2008........... 0.00 0.00 0.00 0.00
January 2, 2009........ 0.00 0.00 0.00 0.00
July 2, 2009........... 0.00 0.00 0.00 0.00
January 2, 2010........ 0.00 0.00 0.00 0.00
</TABLE>
III-4
<PAGE> 163
SERIES E
<TABLE>
<CAPTION>
MANUFACTURER'S SERIAL NUMBER
REGULAR -----------------------------------------------------
DISTRIBUTION DATES 091 092 098 099
- ----------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
January 2, 1997........................................................ $183,123.00 $183,123.00 $183,123.00 $183,123.00
July 2, 1997........................................................... 837,198.00 837,198.00 837,198.00 837,198.00
January 2, 1998........................................................ 568,795.00 568,795.00 568,795.00 568,795.00
July 2, 1998........................................................... 0.00 0.00 0.00 0.00
January 2, 1999........................................................ 0.00 0.00 0.00 0.00
July 2, 1999........................................................... 0.00 0.00 0.00 0.00
January 2, 2000........................................................ 0.00 0.00 0.00 0.00
July 2, 2000........................................................... 0.00 0.00 0.00 0.00
January 2, 2001........................................................ 0.00 0.00 0.00 0.00
July 2, 2001........................................................... 0.00 0.00 0.00 0.00
January 2, 2002........................................................ 760,735.00 760,735.00 760,735.00 760,735.00
July 2, 2002........................................................... 191,746.00 191,746.00 191,746.00 191,746.00
January 2, 2003........................................................ 0.00 0.00 0.00 0.00
July 2, 2003........................................................... 0.00 0.00 0.00 0.00
January 2, 2004........................................................ 0.00 0.00 0.00 0.00
July 2, 2004........................................................... 0.00 0.00 0.00 0.00
January 2, 2005........................................................ 0.00 0.00 0.00 0.00
July 2, 2005........................................................... 0.00 0.00 0.00 0.00
January 2, 2006........................................................ 0.00 0.00 0.00 0.00
July 2, 2006........................................................... 0.00 0.00 0.00 0.00
January 2, 2007........................................................ 0.00 0.00 0.00 0.00
July 2, 2007........................................................... 0.00 0.00 0.00 0.00
January 2, 2008........................................................ 0.00 0.00 0.00 0.00
July 2, 2008........................................................... 0.00 0.00 0.00 0.00
January 2, 2009........................................................ 0.00 0.00 0.00 0.00
July 2, 2009........................................................... 0.00 0.00 0.00 0.00
January 2, 2010........................................................ 0.00 0.00 0.00 0.00
<CAPTION>
REGULAR
DISTRIBUTION DATES V0019 V0025 V0049
- ----------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
January 2, 1997........................................................ $ 50,299.00 $ 50,299.00 $ 50,299.00
July 2, 1997........................................................... 122,579.00 122,579.00 122,579.00
January 2, 1998........................................................ 150,075.00 150,075.00 150,075.00
July 2, 1998........................................................... 137,654.00 137,654.00 137,654.00
January 2, 1999........................................................ 165,940.00 165,940.00 165,940.00
July 2, 1999........................................................... 115,852.00 115,852.00 115,852.00
January 2, 2000........................................................ 182,817.00 182,817.00 182,817.00
July 2, 2000........................................................... 133,615.00 133,615.00 133,615.00
January 2, 2001........................................................ 201,513.00 201,513.00 201,513.00
July 2, 2001........................................................... 115,897.00 115,897.00 115,897.00
January 2, 2002........................................................ 0.00 0.00 0.00
July 2, 2002........................................................... 0.00 0.00 0.00
January 2, 2003........................................................ 20,746.00 20,746.00 20,746.00
July 2, 2003........................................................... 0.00 0.00 0.00
January 2, 2004........................................................ 61,217.00 61,217.00 61,217.00
July 2, 2004........................................................... 0.00 0.00 0.00
January 2, 2005........................................................ 0.00 0.00 0.00
July 2, 2005........................................................... 0.00 0.00 0.00
January 2, 2006........................................................ 0.00 0.00 0.00
July 2, 2006........................................................... 0.00 0.00 0.00
January 2, 2007........................................................ 0.00 0.00 0.00
July 2, 2007........................................................... 0.00 0.00 0.00
January 2, 2008........................................................ 0.00 0.00 0.00
July 2, 2008........................................................... 0.00 0.00 0.00
January 2, 2009........................................................ 0.00 0.00 0.00
July 2, 2009........................................................... 0.00 0.00 0.00
January 2, 2010........................................................ 0.00 0.00 0.00
</TABLE>
III-5
<PAGE> 164
[AMERICA WEST LOGO]
