US Airways, Inc. Notes to Consolidated Financial Statements

1. Basis of Presentation and Summary of Significant Accounting Policies (a) Nature of Operations and Operating Environment US Airways, Inc. (“US Airways”) is a Delaware corporation whose primary business activity is the operation of a major network air carrier. US Airways is a wholly owned subsidiary of US Airways Group, Inc. (“US Airways Group”), which owns all of US Airways’ outstanding common stock, par value $1 per share. The accompanying consolidated financial statements include the accounts of US Airways and its wholly owned subsidiary, FTCHP LLC. US Airways operates the fifth largest airline in the as measured by domestic revenue passenger miles (“RPMs”) and available seat miles (“ASMs”). US Airways has hubs in Charlotte, Philadelphia and Phoenix and a focus city in Washington, D.C. at Ronald Reagan Washington National Airport (“Washington National”). US Airways offers scheduled passenger service on more than 3,200 flights daily to more than 200 communities in the United States, Canada, Mexico, Europe, the Middle East, the Caribbean, Central and South America. US Airways also has an established East Coast route network, including the US Airways Shuttle service. US Airways had approximately 52 million passengers boarding its flights in 2010. During 2010, US Airways’ mainline operation provided regularly scheduled service or seasonal service at 132 airports, while the US Airways Express network served 155 airports in the United States, Canada and Mexico, including 75 airports also served by the mainline operation. US Airways Express air carriers had approximately 28 million passengers boarding their planes in 2010. As of December 31, 2010, US Airways operated 339 mainline jets and is supported by US Airways Group’s subsidiaries and affiliates operating as US Airways Express under capacity purchase agreements, which operated 231 regional jets and 50 turboprops. US Airways’ prorate carriers operated 10 turboprops and three regional jets at December 31, 2010. As of December 31, 2010, US Airways employed approximately 30,900 active full-time equivalent employees. Approximately 85% of employees are covered by collective bargaining agreements with various labor unions. US Airways’ pilots and flight attendants are currently working under the terms of their respective US Airways or , Inc. (“AWA”) collective bargaining agreements, as modified by transition agreements reached in connection with the merger.

(b) Basis of Presentation The accompanying consolidated financial statements include the accounts of US Airways and its wholly owned subsidiary. US Airways Group has the ability to move funds freely between its operating subsidiaries to support operations. These transfers are recognized as intercompany transactions. In the accompanying consolidated statements of cash flows, these intercompany transactions are designated as payables to related parties, net and are classified as operating or financing activities depending upon the nature of the transaction. All significant intercompany accounts and transactions between US Airways and its wholly owned subsidiary have been eliminated. The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The principal areas of judgment relate to passenger revenue recognition, impairment of long-lived and intangible assets, valuation of investments in marketable securities, the frequent traveler program and the deferred tax asset valuation allowance.

(c) Cash and Cash Equivalents Cash equivalents consist of cash in money market securities and certificates of deposit. All highly liquid investments purchased within three months of maturity are classified as cash equivalents. Cash equivalents are

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