, ' ',,,) 1 BONNETT, FAIRBOURN, FRIEDMAN 2 & BALINT, P.C. ANDREW S. FRIEDMAN (AZ005425) 3 DAVID D. WEINZWEIG (AZ018687) , , 4041 N. Central Avenue, Suite 1100 4 Phoenix, AZ 85012-3311 I , Telephone: 602/274-1100 , 5 MILBERG WEISS BERSHAD 6 HYNES & LERACH LLP WILLIAM S. LERACH 7 ALAN SCHULMAN DARREN J. ROBBINS 8 PATRICK W. DANIELS 600 West Broadway, Suite 1800 9 San Diego, CA 92101 Telephone: 619/231-1058 10 - and - EDWARD P. DIETRICH 11 355 South Grand Avenue Suite 4170 12 Angeles, CA 90071 — Telephone: 213/617-9007 13 Attorneys for Plaintiff 14 (Additional counsel appear on signature page.] 15 UNITED STATES DISTRICT COURT . 16 DISTRICT OW AMZONA 17 LI tr',.1 kl — U 4‘ ( : .• ' ' '' '' ' EMPLOYER-TEAMSTERS JOINT ) No. ''' I -' 1- 11-;.,„ ' '.- 18 COUNCIL NO. 84 PENSION TRUST FUND,) On Behalf of Itself and All Others Similarly ) CLASS ACTION 19 Situated, ) ) COMPLAINT FOR VIOLATION 20 Plaintiff, ) OF THE SECURITIES ) EXCHANGE ACT OF 1934 vs. ) 21 ) 22 AMERICA WEST HOLDINGS CORP., ) AMERICA WEST AIRLINES, INC., TEXAS ) 23 PACIFIC GROUP, INC., TPG GENPAR, ) L.P., TPG PARTNERS, L.P., TPG ) 24 ADVISORS, INC., CONTINENTAL ) AIRLINES, INC., WILLIAM A. FRANKE, ) 25 RICHARD R. GOODMANSON, RONALD ) A. ARAMINI, JOHN R. GAREL, W. ) 26 DOUGLAS PARKER, MICHAEL R. ) CARREON, C.A. HOWLETT, STEPHEN F. ) 27 BOLLENBACH, FRANK B. RYAN, JOHN ) F. FRASER, JAMES G. COULTER and ) 28 RICHARD P. SCHIFTER, ) Defendants. ) ) Plaintiff Demands A Trial By Jury 1 SUMMARY AND OVERVIEW 2 1. This is a class action on behalf of purchasers of the publicly traded Class 3 B common stock of America West Holdings Corp. ("Holdings") between 11/19/97 and 4 9/3/98 (the "Class Period") against Holdings and its subsidiary America West Airlines, 5 Inc. (collectively, "America West" or the "Company"), America West's top officers and 6 directors and its controlling shareholders -- Continental Airlines, Inc. ("Continental") and 7 Texas Pacific Group, Inc., TPG GenPar, L.P., TPG Partners, L.P., and TPG Advisors, 8 Inc. (collectively "TPG"). By issuing false statements about America West's supposed 9 competitive advantages due to its exceptionally low operating costs, industry-leading 10 aircraft utilization rates, cost-savings outsourced aircraft maintenance procedures, 11 improving financial results, record earnings per share ("EPS") and prospects for 12 continued BPS growth, and using $99 million of America West's cash to repurchase 4.8 13 million shares of the Company's stock on the open market, defendants' artificially inflated 14 America West's stock to a Class Period and all-time high of $31-5/16 on 4/21/98. This 15 enabled America West's insiders to complete a massive insider bailout, selling off 2.4 16 million shares of their publicly traded America West stock -- 97% of the publicly traded 17 stock they owned -- in just 90 days, i.e., between 4/23/98 and 7/24/98, pocketing $67.8 18 million in illegal insider-trading proceeds. In late 6/98, when it became public that 19 America West was under increased surveillance by the Federal Aviation Administration 20 ("FAA"), America West assured investors this was "routine" and the FAA had discovered 21 no "significant maintenance or operational problems." As a result, America West's stock 22 continued to perform well, trading as high as $30 in early 7/98. On 7/14/98, the FAA 23 fined America West $5 million for violating the FAA's aircraft inspection and 24 maintenance requirements -- the largest FAA fine in history -- and required America 25 West to undertake remedial maintenance action and upgrade its aircraft maintenance 26 program. However, America West represented that the maintenance problems cited by 27 the FAA had been "fully addressed" and its settlement with the FAA would not have any 28 "adverse affect on the Company's operations or financial results." Nevertheless, America

- 1 - 1 West's stock began to decline and fell to S20-5/16 by 9/2/98, despite America West's 2 continued assurances that it would achieve 3rdQ and 4thQ 98 EPS of S.61+ and $.59+, 3 respectively, followed by strong 99 EPS of $2.60+ . Then, on 9/3/98, America West 4 suddenly revealed that, due to major operational disruptions resulting from serious 5 maintenance problems, its 3rdQ and 4thQ 98 BPS would be well below levels previously 6 forecast and that America West had to incur millions of dollars in additional costs to 7 purchase more spare planes and spare parts, to build nine additional "overnight" 8 maintenance facilities and hire hundreds of additional aircraft mechanics -- even offering 9 to re-hire the 375 aircraft mechanics America West had fired in 12/95 as part of an 10 attempt to lower its operating costs. On 9/3/98, America West's stock collapsed by 31% 11 from $20-5/16 on 9/2/98 to $14, on volume of almost 2.6 million shares -- the largest 12 one-da stock ',rice decline on the lap est one-da tradirL volume in America West's 13 history! As the market digested the negative impact of these revelations on America 14 West's competitive position, costs of operations and earning power, America West's stock 15 fell to S9-5/8 in early 10/98, its lowest price over three years. It was also reported that 16 America West's serious maintenance problems with the FAA dated back to late 97 and 17 that the FAA and America West had been in secret discussions as early as 5/98 for a 18 settlement that America West knew would impose onerous remedial and ongoing 19 maintenance obligations on it, severely disrupt its current operations, curtail its aircraft 20 utilization and add millions in costs to its aircraft maintenance going forward -- just as 21 America West's insiders were bailing out, selling off nearly 100% of their America West 22 stock: 23 // 24

25 // 26

27 // 28

-2- America West Holding Corp. 1 May 30, 1997 - October 13, 1998 2 Daily Stock Prices 35 3 516-5128198 619-6/22/98 Insiders sell 2,029,359 shares „to( lisiders sell 317,959 .. . . shares for $8,944,899 200 4 for $56,548,607 . . .- 30 ...: :-.: - . : . . ..; ::. .44r”' 7/23-7/24/98. 180 5 4/23/98 ...„,...-Alir .z.-: '' ' ' Insider sells Insiders sell 18,000 - 66,000 shares for 6 shares for $546,360 $1,779,132 160 z0 ...4,) 25 0< co Total Insider Sales .,c g 7 Cl) S&P Airline 140 it 2,431,318 shares for , $67,818,998 _, Group ID 8 a, ..... u) '20 — - , / , 120 (13 1- 1 A('' to (0 -.t t if f _ u fa America West 100 c,8 repurchases 10 15 — 4.25 million shares for $87.9 million - 80 11 -m------w- i n 60 r.t.,,,, De,riesti. 12 1...itaa t ,...t ,,,,,.. 11/19/97 - 9/3/98 13 5 I 1 I I I I 1 : 1 L—L—: I I 14 05/30/97 08/27/97 11/24/97 02/25/98 05/27/98 08/24/98 04/13/98 07/10/98 15 07/15/97 10/10/97 01/09/98 10107/98

16 In early 99, it became public that, given America West's impaired competitive position, 17 America West was "shopping" itself to other airlines to be acquired by them and had 18 engaged in discussions with several other airlines in that regard. This caused America 19 West's stock to recover somewhat, as it is now an acquisition candidate. 20 2. Due to overly-rapid expansion in the late 1980's, America West went 21 bankrupt in 6/91. America West obtained new management and emerged from 22 bankruptcy in 8/94 as a "low-cost" airline. During 95, America West's stock was a 23 strong performer, increasing to over S18 by 12/95. To enhance its low-cost operating 24 structure, in 12/95 America West fired 375 of its aircraft mechanics -- half of the 25 Company's maintenance work force -- and "outsourced" a substantial amount of its 26 aircraft maintenance. Fueled by its image as a successful "low-cost" operator with 27 competitive advantages, by 6/96 America West's stock advanced to $22. However, in 28 mid-96, America West suffered substantial operating difficulties, including increased

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1 cancelled and delayed departures and slower-than-anticipated maintenance cycles, due to 2 serious aircraft maintenance problems discovered by the FAA. America West's stock fell 3 sharply to just $11-1/4, as it reported a 3rdQ 96 loss due to these problems. America 4 West's top executives were humiliated by this fiasco, the value of their America West 5 stock options were wiped out, the value of the shares of America West stock owned by 6 America West's controlling shareholders was cut in half and analysts following America 7 West and America West's public investors were extremely upset over this disaster and 8 its impact on America West's stock. After this mid-96 disaster, America West stock was 9 a very poor performer and, as the graph below shows, consistently under-performed 10 compared to an index of other airline stocks: 11 12 13 America West Holdings Corp. 14 vs. S&P Airlines Group (1) January 1996 - January 1, 1998 15 200 200 16 S&P Airlines 17 150 - 150 18 19 oak - 100 100 20 21 America West 22 50 - 50 23 24 0 0 JFM AM JJA SON DJ FMAM JJA SO ND 1997 25 1996 26 27 28

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3. This terrible stock performance placed enormous pressure on America 2 West's top executives and controlling shareholders and they were determined to push 3 America West's stock price up to much higher levels so that they could sell off their 4 publicly traded American West stock in what they knew was a troubled airline with an 5 impaired competitive position. However, to do this they knew that America West would 6 have to convince analysts and investors that the previous maintenance shortfalls which had 7 led to FAA intervention and America West's 96 operating problems and America West's 8 3rdQ 96 loss had not only been overcome, but that America West's top executives had 9 turned the Company around and were successfully implementing and pursuing a business 10 model which efficiently controlled America West's costs and increased its aircraft 11 utilization and revenues, which would lead to strong EPS growth going forward. 4. The U. S. airline industry is intensely competitive. When analysts and 13 investors evaluate an airline as a potential investment, they pay close attention to an 14 airline's ability to control its costs and its ability to enhance its revenue through revenue 15 management techniques which increase the airline's "yield, " i.e., revenue per-mile-flown. 16 Because one of the largest elements of an airline's operating cost is aircraft maintenance, 17 the extent and frequency of which is mandated by the FAA and the standards for which 18 therefore apply uniformly to all airlines, airline executives who are able to keep their 19 airline's operating costs below and aircraft utilization rates above industry averages are 20 viewed as highly successful managers, as this creates powerful BPS leverage, which is 21 prized by analysts and investors as a very favorable factor for that airline's stock 22 performance. 23 5. Thus, during 97, America West's top executives were desperate to demon- 24 strate that America West's 96 maintenance and operational problems were solved and 25 behind America West, its costs were under control and its aircraft utilization and revenues 26 were increasing so that its BPS would grow and its stock price would advance. To this 27 end, defendants represented that America West "aggressively moved on Fits] operational 28 issues and, as a result," the Company has "experienced increased reliability" and "the

-5- 1 problems that caused this revenue decline in the third quarter" were behind America 2 West. Defendants also represented that America West improved "operational reliability 3 by establishing two new overnight maintenance operations, hiring approximately 60 new 4 mechanics and acquiring an additional spare aircraft, as well as committing more than $10 5 million for additional spare and replacement aircraft parts." They stated that the "impact 6 of these and related efforts has been significant," there was "hard evidence of 7 improvement in the airline's operations during late 1996 and early 1997," and the 8 Company had taken "steps to maintain the momentum achieved in the fourth quarter 1996 9 and to generate further improvements to [the Company's] operations." In short, America 10 West's "lower costs stem from higher aircraft utilization" -- thus, America West "has the 11 lowest costs. . . of any major carrier and above average growth prospects." While these representations were successful in halting the decline in America West's stock, by 10/97, 13 the stock still traded at only $14-S15 -- far below the levels desired by America West's 14 insiders and controlling shareholders, especially since in just a few months, i.e., on 15 5/20/98, TPG and Continental would be permitted, for the first time since America West 16 emerged from bankruptcy, under the Shareholders Agreement to sell their publicly traded 17 Class B America West stock without also selling shares of their Class A supervoting 18 stock. 19 6. Thus, beginning in 11/97, America West's executives, with the concurrence 20 of its controlling shareholders, TPG and Continental began a concerted effort to push 21 America West stock much higher in price so that they could unload their publicly traded 22 shares at artificially inflated prices and pocket millions in illegal insider trading proceeds. 23 In order to accomplish this end, defendants employed a two-prong strategy to mislead 24 investors and artificially inflate the stock. 25 7. First, they mounted a campaign to get more Wall Street analysts to start 26 covering America West and/or raise their ratings on America West stock by causing 27 America West to report better-than-expected EPS and representing that America West's 28 improving financial results and record BPS were due to exceptionally efficient

-6- 1 management by America West's top executives who had implemented and were success- 2 fully pursuing a business strategy of controlling America West's costs, increasing its 3 aircraft utilization and enhancing its revenues and therefore yields, which gave America 4 West a competitive advantage and would lead to strong BPS growth. Defendants 5 represented that "folne of the biggest drivers of our financial success is the improvement 6 . to the airline's operating performance . . . " "[1997's] financial performance was 7 clearly the best in our Company's history. These strong results reflect a successful 8 ongoing effort to maintain our industry _leading unit cost structure while making 9 significant progress in improving our revenj_x_p_elformance." The defendants also 10 represented that America West "widened fits] strategic cost advantage over fits] 11 competitors" and America West "has achieved this low cost structure primarily through 19 employee productivity . . and industry-leading aircraft utilization." Defendants also 13 stated that "Ftlhe significant progress achieved in 1997 provides America West Airlines 14 with tremendous impetus for 1998 . . . " America West also reported much better than 15 expected 4thQ 97, lstQ and 2ndQ 98 BPS, attributing them to the above positive factors. 16 When it became public in 6/98 that the FAA had increased its surveillance of America 17 West's maintenance activities, defendants represented that this action was "routine," had 18 been undertaken because America West was involved in protracted negotiations with its 19 aircraft mechanics and "no significant maintenance or operating problems have been 20 discovered" as the result of these inspections, which were "not having or expected to have 21 an impact on America West's flights." When America West was fined $5 million by the 22 FAA in 7/98 and agreed to upgrade its maintenance activities, defendants represented that 23 the FAA settlement "will not have a material adverse affect on the Company's operations 24 or financial results." 25 8. But, the truth was that America West's purported low-cost structure and 26 industry-leading aircraft utilization rates and much of America West's improved financial 27 results and BPS were due to defendants artificially depressing America West's costs by 28 violating FAA-mandated aircraft inspection and maintenance requirements, including

-7 - 1 flying planes that had not been properly maintained or inspected and allowing its 2 outsourced subcontractors to violate FAA maintenance standards. For example, 3 according to an Associated Press report, America West's maintenance problems with the 4 FAA "date back to December . . . ." They were detected in routine inspections by the 5 FAA. Defendants knew these tactics would temporarily lower America West's costs and 6 boost America West's aircraft utilization, revenues and EPS; but when inevitably later 7 discovered by the FAA, would result in FAA enforcement action leading to severe 8 operational problems and greatly increased costs due to the need to perform previously 9 neglected aircraft inspections and maintenance and vastly expand America West's 10 maintenance facilities, personnel and procedures going forward, which would hurt 11 America West's competitive position and earning power by sharply increasing its costs, 12 i.e., a repeat of the misdeeds of 96 and the ensuing disaster! 13 9. Second, defendants caused America West to spend almost S100 million of 14 America West's corporate cash to re-purchase 4.9 million shares of its stock on the open 15 market, representing that this was being done because America West's stock was a "gojAl_ 16 investment" In fact, these stock re-purchases were a manipulative device utilized by 17 defendants to artificially inflate America West's stock price. Also, defendants vastly 18 increased these stock purchases at a key time, causing America West re-purchase 4.2 19 million shares of its stock on the open market for $87 million in the 2ndQ and 3rdQ of 20 98 alone -- the same time when America West's insiders and controlling shareholders 21 were selling off 2.4 million of their shares for S67.8 million -- 97% of the publicly traded 22 shares they owned -- thus supporting and inflating that stock at this key time, while these 23 insiders were bailing out. 24 10. In response to defendants' false statements and America West's stock re- 25 purchases, America West's stock soared from $14-1/2 on 11/18/97 to its all-time high of 26 $31-5/16 on 4/21/98. Unlike its 96-97 under-performance, compared to other airline 27 stocks, America West's stock vastly out performed similar airline stocks during the Class 28 Period, i.e., 11/19/97-9/3/98:

- 8 -

1 2 America West Holdings Corp. 3 vs. S&P Airlines Group (1) 4 November 19, 1997 - October 9, 1998 200 200 5 America West\ . . -___ - -. 6 _---- - , 150 , 150 7 , , S&P Airlines ------o -,./ 8 , _. , - -- . % 9 oi-- 100 --di ' 100 .ra E 10 ru o> z 11 50 50 12 13 0 0 D J F M A M J J A S 0 14 1998 15

16 11. The positive statements about America West's business issued during the 17 Class Period were false and misleading. The true but concealed facts were: 18 (a) America West's maintenance problems were never alleviated after 19 America West laid off 375 maintenance workers in 12195 and "outsourced" its aircraft 20 maintenance. For example, FAA inspectors later cited significant problems with America 21 West's "downsized" maintenance organization and its inability to adequately supervise 22 outsourced maintenance work. The FAA also found that the Company's maintenance 23 control office was not adequately staffed and that America West paid only superficial 24 attention to important regulatory requirements. Moreover, America West was not 25 properly supervising its outside maintenance contractors and its controls were not 26 adequate to verify whether its planes received scheduled maintenance as required by FAA 27 regulations; 28

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1 (b) America West's apparent financial success and record BPS, as 2 reported during the Class Period, were due in substantial part to America West avoiding 3 mandatory inspections and expenditures required to maintain its aircraft in accordance

4 with FAA maintenance schedules and levels and then flying, i.e., utilizing aircraft that

5 had not been properly inspected or maintained to boost its revenues and BPS; 6 (c) America West's apparent financial success as reported during the 7 Class Period was due in substantial part to its avoiding necessary expenditures for 8 maintenance personnel which were required to maintain America West's fleet of aircraft 9 in accordance with standards mandated by the FAA and flying, i.e., utilizing aircraft that

10 had not been properly inspected or maintained to boost its revenues and BPS; 11 (d) That America West's apparent successful rapid growth, low cost of operations, high aircraft utilization and increasing BPS were not due to an unusually 13 talented management team or its development or implementation of successful revenue

14 enhancement and cost control programs; but rather, due to its illegal avoidance of 15 inspection and maintenance procedures mandated by the FAA; 16 (e) One of the reasons for America West's apparent financial success was 17 that it had deliberately avoided making expenditures required to purchase sufficient spare 18 parts for its aircraft fleet and purchase sufficient spare aircraft to permit adequate service 19 when FAA-mandated maintenance and inspection schedules and activities on its aircraft

20 fleet were complied with; 21 (f) In order to artificially depress its operating costs, America West was 22 deliberately not inspecting or maintaining its fleet of aircraft or causing its outsourced 23 subcontractors to inspect or maintain in accordance with the procedures and levels 24 mandated by the FAA and flying, i.e., utilizing, aircraft that had not been properly

25 inspected or maintained to boost its revenues and BPS; 26 (g) America West was not properly monitoring or auditing the firms to 27 which it had subcontracted maintenance of much of its aircraft fleet, so as to permit those

28 firms to avoid performing FAA-required or mandated inspections and maintenance and

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1 so America West could fly, i.e., utilize, aircraft that had not been properly maintained 2 or inspected to boost its revenues and EPS; 3 (h) America West had failed to perform structural checks on its oldest 4 737's that were mandated by a 1993 airworthiness directive; 5 (i) American West's aircraft maintenance and inspection problems with 6 the FAA, which began in 11/97-12/97, were not at all routine, but very serious and were 7 materially adversely impacting America West's operations by 5/98. As a result, by 5/98 8 the FAA and America West were holding secret settlement discussions, from which

9 America West knew that FAA-mandated remedial maintenance steps and enhanced 10 ongoing aircraft inspection and maintenance activities would cost it millions of dollars in 11 short-term expenditures and ongoing increased operating costs; 14 (j) America West did not comply with the 4/98 FAA airworthiness

13 directive concerning Boeing 737 fuel tanks to protect against voltage spikes or short 14 circuits or the early 5/98 FAA airworthiness directive which grounded all 737's with 15 more than 50,000 flight hours and gave airlines 14 days to inspect 737's with more than 16 40,000 flight hours; 17 (k) The better-than-expected EPS reported by America West during the 18 4thQ 97 and 1stQ and 2ndQ 98 were misleading, as they were artificially inflated and 19 were not an accurate presentation of the real earnings or real earning power of America

20 West because those EPS were artificially inflated by the illegal maintenance cost 21 avoidance activities and improper aircraft utilization pleaded above;

22 (1) Defendants knew that America West would be required, before the 23 end of 98, to perform huge amounts of previously avoided aircraft inspections, testing and

24 maintenance and vastly upgrade its aircraft maintenance procedures, facilities and 25 personnel, which would require the expenditure of millions of dollars for new 26 maintenance facilities, additional auditors and enhanced computer systems to track and 27 oversee aircraft maintenance that had been outsourced to third parties, the purchase of 28 large amounts of additional spare parts and the purchase of two additional or spare

- 11 - 1 aircraft and the hiring of a large number of additional maintenance mechanics and other 2 personnel, all of which would adversely impact America West's operating costs, aircraft 3 utilization and BPS growth going forward; 4 (m) America West's revenue enhancement program did not have the 5 ability to significantly increase America West's yields beyond current levels because when 6 America West was required to maintain its fleet of aircraft in accordance with FAA- 7 mandated procedures and perform previously avoided inspections and maintenance on its 8 aircraft fleet -- and defendants' knew America West would have to comply with all FAA 9 regulations -- this would raise America West's operations costs by millions and result in 10 severe service disruptions and operational difficulties, which would hurt America West's 11 competitive position, especially with high fare business travelers and thus have a material 12 adverse impact on its yields; and 13 (n) Due to the foregoing undisclosed negative conditions which existed 14 inside America West's business during the Class Period, the defendants knew that the 15 forecasts of BPS of S.61+ and $.59+ for America West's 3rdQ and 4thQ 98 and of 16 $2.60+ for 99 were false when made as in light of these problems and adverse 17 conditions, those results could not and would not be achieved. 18 12. On 9/3/98, in stark contrast to defendants' previous representations, 19 America West revealed an "unsatisfactory operational performance" and that "fbjased on 20 the recent trends in the Airline's operational performance . . . the Company [would not1 21 meet third quarter. . . consensus earnings estimaterst " America West also revealed that 22 it had to purchase two additional spare aircraft, greatly increase its inventory of spare 23 parts, and hire over 100 additional mechanics and was increasing the number of cities 24 where overnight maintenance capabilities were available from four to 13 cities -- all at 25 a very substantial cost. America West even offered to hire back all 375 aircraft 26 mechanics it had fired in 12/95. Analysts slashed the forecasts for America West's 3rdQ 27 and 4thQ 98 BPS and lowered the 99 BPS forecast as well -- to levels flat with or below 28 America West's 98 BPS. DLJ Securities issued a report on America West, stating:

- 12 - 1 a America West preannounced early yesterday a third quarter earnings 2 shortfall . . . The problem is operational, related to ... a far more smothering 3 presence of the Federal Aviation Administration (FAA) on the "property' 4 than we had understood. * * * 5 1. Problems are two-fold. The problems with AWA's earnings 6 appear to be 100% operational, and in turn are driven by the maintenance slowdown and the FAA's intervention . . . and general slowdown in 7 maintenance procedures that have kept aircraft out of the system and trashed the carrier's schedule integrity. . . . The problems had started in the 8 second quarter, but grew substantially in July and August. The company is responding by increasing the number of spare aircraft, raising from four 9 to 13 the number of cities where overnight maintenance capabilities are available, and holding substantially greater amounts of spare parts in 10 inventory. All of this has a cost . . . . 11 As if these maintenance issues weren't bad enough, their presence has drawn the FAA to America West to perform a smothering oversight of 12 the company's operations, both inside and outside the maintenance areas. The FAA's mere presence appears to be making employees -- who can be 13 directly and personally fined and/or relieved of their licenses -- work far more cautiously. That dynamic is only exacerbating the schedule integrity 14 problems . . . . 15 * * * ,

16 Two disturbing aspects of yesterday's announcement (beyond the obvious disappointment) were the facts that the current scenario is 17 reminiscent of operationally-related earnings shortfalls in 1996, and that we 18 had no inkling from the company of the problems . . . . 19 13. On 9/3/98, America West's stock collapsed -- falling from S20-5/16 on 20 9/2/98 to $14 011 9/3/98 on 2.6 million shares volume -- a 31% one-day drop, the largest 21 one-day price drop (on an absolute or percentage basis) on the largest one-day stock 22 volume in America West's history. The stock continued to fall to as low as $9-518 in 23 early 10/98 -- its lowest price since 6/95 -- as the market digested the negative 24 implications of the 9/3/98 revelations on America West's business, operating costs and 25 earning power. When America West tried to blame its problems on its union employees, 26 14. 27 Donald Steinman, chairman of the America West Pilots Association, said "Blaming the 28 Teamsters for the airline's operational problems demonstrates a genuine head-in-the-sand

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1 approach to management' . . . [America West's claims] only further[s] the perception 2 that America West management is unwilling to address the airline's operational problems. 3 'After receiving the largest fine ever assessed against an airline by the FAA, the company 4 now shows the poorest on-time record in the industry. . . Years of cost-cutting have 5 taken their toll on the airline's infrastructure,'" Steinman continued. 6 15. Public investors who purchased America West stock at as high as 531-5/16 7 during the Class Period have suffered millions in damages. However, America West's 8 insiders and controlling shareholders who knew the truth about America West's avoidance 9 of FAA-mandated aircraft inspection, testing and maintenance procedures and improper 10 utilization of under-inspected and inadequately maintained planes, the FAA's smothering 11 surveillance of America West's operations and America West's continued failure to 12 perform and supervise maintenance and its lack of necessary spare parts and planes, did 13 not fare nearly so poorly. Shortly before the revelations of 9/3/98 occurred and America 14 West's stock collapsed, America West's insiders and controlling shareholders unloaded 15 2.4 million shares of their America West stock at as high as 530.56, pocketing over 567 16 million in illegal insider trading proceeds. Five of the Individual Defendants sold 100% 17 of the America West stock they owned, one sold 93.6% of the America West stock he 18 owned and the other sold 88% of the America West stock he owned. TPG, America 19 West's largest shareholder, sold 99.8% of its publicly traded America West stock. In the 20 aggregate, these top America West insiders and controlling shareholders, collectively 21 unloaded 97% of the publicly traded America West stock they actually owned, while it 22 was selling at artificially inflated levels due to their false statements about America 23 West's business, its financial results and its prospects for continued BPS growth. 24 16. Defendants' America West stock sales occurred at suspicious times and 25 involved unusual amounts of stock -- taking place while America West's stock traded 26 between $27-$30 and just prior to the stock's steep fall from S30-3/8 on 7/15/98 to 27 $21-5/16 on 8/4/98 and to $14 on 9/3/98 -- a period during which the FAA had 28 established a "smothering presence" at America West -- and was uncovering serious

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1 maintenance and operational violations, resulting in major operational problems which 2 were very adversely impacting America West's financial results by 5/98 and while 3 America West was engaged in secret settlement negotiations with the FAA which 4 defendants knew would vastly increase America West's costs, impair its operations and 5 competitive position and hurt its financial results going forward. Defendants' illegal 6 insider selling during the Class Period is summarized below: 7 Shares % of Total 8 Defendants Sold Holdings Proceeds 9 Aramini, Ronald 34,000 100% $ 1,007,420 Bollenbach, Stephen 12,819 100% $ 379,311 Carreon, Michael 10,000 100% $ 296,300 10 Continental Airlines 317,140 100% $ 8,921,148 11 Fraser, John 12,000 93.6% $ 363,000 Garet, John 66,000 100% $ 1,779,132 12 Howlett, C.A. 27,000 100% $ 800,010 Ryan, Frank 6,000 88% $ 183,360 13 TPG GenPar LP/Coulter/ Schifter 1,946,359 99.8% $54,089,317 14 Totals: 2,431,318 97% S67,818,998 15 This insider selling was unusual in timing and amount, as the graphs below show: 16 America West Holdings, Corp.

17 All Defendants' Insider Sales Monthly Dollar Volume September 1996 - October 1998 18 $60 $35 19 — Class Period 11/19197 - 9/3/98-

' $30 $50 ;-n 20 l . ' -- - .-1 - • ;i ' No Pre-Class Period Stock Sales . .-1 21 $25 i 1 $40 - - - "I I 22 .2 0 $20 '-1-_' 23 I $30 _., - , .. ,. , , _, _. rn >) _ _ - $15 7, 24 La a

Class Period Sales: I ' $10 25 Shares Sold', 2,431,318 I Proceeds: $67,818,998 n I 26 ,;, r : $5 , 27 , so ..„,„ M n $0 SON DJ FM AM J J A SO NDJ FM AM J J ASO 28 1996 1997 1998

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America West Holding Corp. 1 January 23, 1995 - October 13, 1998 Daily Stock Prices 2 35 516-5128198 . • . • ; Insiders sell 2,029,359 i Insiders sell shares for $56,548,607 : 317,959 shares 200 3 for $8,944,899 : 4 30 ‘111 7/23-7/24/98 180 4/23/98 : ,11(. Insider sells Insiders sell i8,000/ 66,000 shares 5 shares for $E.46,360 for $1,779,132 ,„ 8- I" g 0 25 i 3 6 1 Total Insider Sales = !l g u)-c AI 2,431,318 shares for ,'.- A li s&p 140 7,1 7 , , , 1 r $67,818,998 I ' ,- Airline I° O. ..z .dtj 1 /Group (0to u., 20 _ 1 Id 120 -4 8 6- , , t P II • ' America ? .i 13 . g -6 West 100 9 C3 . tepurr-hastas i 15 -- : I. \iiil ,i it 25 millioft shares fof 10 - $87.9 0 80 million - .„.. 11 .. -----ra. 60 i 0 z 12 ii.. , 2/15198 - 11/19/97 : . Class Period No Insider Stock Sal i- lit turut - u/3/95 --,--4I --, 13 _i_____i_i_____L__1L.:_l_L___1_...,..1._thil—ii—d--- 01/23/95 07/10/95 12/21/95 06/07/96 11/20196 05/13/97 10/27/97 04/15/98 10/02/98 14 15 04/17/95 09/29/95 03/15/96 08/29/96 02/18/97 08/05/97 01/21/98 07/13/98

16 JURISDICTION AND VENUE 17 17. The claims asserted arise under §§10(b) and 20(a) of the Securities 18 Exchange Act of 1934 ( 11 1934 Act") and Rule 10b-5. Jurisdiction is conferred by §27 of 19 the 1934 Act. Venue is proper pursuant to §27 of the 1934 Act. 20 THE PARTIES 21 Plaintiff 22 18. Plaintiff Employer-Teamsters Joint Council No. 84 Pension Trust Fund 23 purchased shares of America West common stock as detailed in the attached Certification 24 and was damaged thereby. 25 Defendants 26 19. Holdings and America West Airlines, Inc. are headquartered in Arizona. 27 Effective 12/31/96, America West Airlines, Inc. became a wholly owned subsidiary of 28 Holdings. Holdings has outstanding both supervoting, non-trading Class A stock and

- 16 -

publicly traded Class B stock. Its Class B stock trades in an efficient market on the New 2 York Stock Exchange. 3 20. TPG Partners, L.P., is a partnership whose general partner is TPG GenPar, 4 L.P. The general partner of TPG GenPar, L.P. is TPG Advisors, Inc. TPG Partners, 5 L.P., TPG GenPar, L.P. and TPG Advisors, Inc. are subsidiaries of Texas Pacific 6 Group, Inc., a venture capital firm. James G. Coulter ("Coulter") is a principal in Texas 7 Pacific Group, Inc. TPG Advisors, Inc. are: Coulter (director and vice president) and 8 Richard D. Schifter ("Schifter") (vice president). Coulter and Schifter are also directors 9 of America West and TPG Advisors, Inc. TPG controls 49% of America West Class A 10 voting stock. During the Class Period, TPG sold 1,946,359 shares of its publicly traded 11 Class B America West stock based on inside information, pocketing over $54 million in 12 illegal insider trading proceeds. These sales constituted 99.8% of America West's 13 publicly traded stock actually owned by TPG. These stock sales were unusual in timing 14 and amount, as shown below: 15 16 America West Holdings, Corp. 17 TPG Genpar Insider Sales Monthly Dollar Volume

18 September 1996 - October 1998

$60 $35 — Class Period 11119197 913/98- 19

$30 20 $50 - No Pre-Class Period Stock Sales 21 $25 $40 22 .2 - $20 9- 'g a 23 $3D

< - $15 (S. 1,3 24 t;

25 Class Period Sales: $10 Shares Sold: 1,946,359 Proceeds: $54 „089 317 _ 26 sio $5 27 $0 $0 SON DJ FMAM J JA SO NDJ FMAM J J A S 0 28 1996 1997 1998

- 17 -

1 21. Continental Airlines, Inc. ("Continental") owns 8.3% of America West's 2 Class A voting stock. During the Class Period, Continental sold 317,140 shares of its 3 publicly traded Class B America West stock based on inside information, pocketing 4 almost $9 million in illegal insider trading proceeds. These sales constituted 100% of 5 America West's publicly traded stock actually owned by Continental. These stock sales 6 were unusual in timing and amount, as shown below: 7 8 America West Holdings, Corp,. 9 Continental Airlines Insider Sales Monthly Dollar Volume 10 September 1996 - October 1998

11 $10 $35 -- Class Period 11/19197 - 913/98- 12 $30 $8 4 13 No Pre-Class Period Stock Sales $25 14 , .2 $6 •4 0 15 $20 -o

16 $15 $4 - - 5 17 Class Period Sales: Shares Sold: 317,140 41\ $10 Proceeds: $8,921,148 18 $2 -t $5 19 so 20 SON DJ F MAM J J A SO NDJ FMAM J J ASO $0 1996 1997 1998 21 22

23 22. (a) William A. Franke ("Franke") was Chairman and CEO of Holdings 24 and Chairman of America West and a member of its Executive Committee. Franke was 25 named Chairman of America West in 9/92. From 1/1/94 to 4/4/97, Franke served as 26 America West's CEO and from 5/23/96 to 2/4/97 as its President. Franke has served in 27 his present capacities with Holdings since 1/1/97. On 2/17/98, Franke received options 28 to purchase 350,000 shares of America West Class B stock.

- 18 -

(b) Richard R. Goodmanson ("Goodmanson") was President and Director 2 of Holdings and President, CEO and a Director of America West. Goodmanson joined 3 America West as EVP and COO in 6/96 and became a member of its Board in 10/96. 4 On 2/4/97, Goodmanson became President of Holdings and President and CEO of 5 America West. In 3/98, Goodmanson received options to purchase 110,000 shares of 6 America West Class B stock. 7 (c) W. Douglas Parker ("Parker") was SVP and CFO of America West 8 and Holdings. Parker joined the Company in 6/95 as CFO. In 7/97, Parker's 9 responsibilities were expanded to include oversight of America West's schedule planning, 10 pricing and yield management. In 3/98, Parker received options to purchase 35,000 11 shares of America West Class B stock. 12 (d) Ronald A. Aramini ("Aramini") was SVP-Operations of America 13 West. Aramini jointed America West in 9/96. During the Class Period, Aramini sold 14 34,000 shares of his America West stock based on inside information, pocketing over $1 15 million in illegal insider trading proceeds. These sales constituted 100% of the America 16 West stock actually owned by Aramini. These stock sales were unusual in timing and 17 amount as set forth below: 18 America West Holdings, Corp. R. Aramini Insider Sales Monthly Dollar Volume 19 September 1996 - October 1998

20 $1,200 $35 Class Period 11/19/97 - 913198 21 $30 $1,000 22 No Pre-Class Period Stock Sales $25 23 8 $20

24 $600 c/1 - $15 g- 25

Class Period Sales: , $10 26 Shares Sold: 34,000 , Proceeds: $1,007420 27 5200 $5

28 $0 $0 SON DJ FMAM J JA SO NDJ FMAM JJ A SO 1996 1997 1998

- 19 -

I (e) John R. Garel ("Garel") was America West's SVP-Marketing and 2 Sales, a position he held since 4/95. During the Class Period, Garel sold 66,000 shares 3 of his America West stock based on inside information, pocketing over $1.7 million in 4 illegal insider trading proceeds. These sales constituted 100% of the America West stock 5 actually owned by Garel. These stock sales were unusual in timing and amount as set 6 forth below: 7 8 America West Holdings, Corp. J. Garel Insider Sales Monthly Dollar Volume 9 September 1996 - October 1998 10 $2,000 $35 - Class Period 11/19197 11 ml $30 12 JIL„,A, ' $1,500 $25 13 No Pre-Class Period Stock Sales . _ g 0 14 8 $20

a $1,000 -a 15 > _ .P, $15 d*, 7,- 0 Class Period Sales 16 Shares Sold 66,000 Proceeds $1,779,132 I $10 17 $500 IL 1 . $5 18 ' 19 so 1 so SON DJ FMAM J .1 A SO NDJ FMAM .1 J ASO 20 1996 1997 1998 21

22 (f) Michael R. Carreon ("Carreon”) was VP/Controller of America 23 West. Carreon joined America West in 12/94 as Senior Director-Corporate Audit and 24 in 1/96 assumed his current position. During the Class Period, Carreon sold 10,000 25 shares of his America West stock based on inside information, pocketing over $296,000 26 in illegal insider trading proceeds. These sales constituted 100% of the America West 27 stock actually owned by Carreon. These stock sales were unusual in timing and amount 28 as set forth below:

- 20 -

1 2 America West Holdings, Corp. 3 M. Carreon Insider Sales Monthly Dollar Volume September 1996 - October 1998 4 $350 I ....-- Class Period 11/19197 - $35 5 , : $300 .. $30 6 :-, , 7 $250 $25 No Pre Class Period Stock Sales i I 0 8 o8 $200 $20 1 :- a I 9 0. , _ _ - , s."0 $150 , ... , .. $15 g 75 , 10 1 . $100 I- 1-- - $10 11 1 Class Period Sales 1 Shares Sold 10,000 i , Proceeds $296,300 $50 I 'I 12 : $5 1 i 0 , 1 , 13 $0 $0 SON DJ F MANI JJA SO NDJ FMAM J J ASO 14 1996 1997 1998 15

16 (g) C.A. Howlett ("Howlett") was VP-Public Affairs of America West 17 and Holdings. During the Class Period, Howlett sold 27,000 shares of his America West 18 stock based on inside information, pocketing over $800,000 in illegal insider trading 19 proceeds. These sales constituted 100% of the America West stock actually owned by 20 Howlett. These stock sales were unusual in timing and amount as set forth below: 21 /- 22 /- 23 // 24 /- 25 // 26 /- 27 /- 28

- 21 -

1 America West Holdings, Corp. 2 C.A. Howlett Insider Sales Monthly Dollar Volume 3 September 1996 - October 1998

4 $1,000 $35 Class Period 11/19/97 - 9/3/98— 5 , $30 - 6 $800 No Pre-Class Period Stock Sales $25 7 • 0 $600 8 $20& 3 $15 9 - — $400 - --+ Class Period Sales: 10 Shares Sold: 27,000 Proceeds: $800,010 $10

11 $200 $5 12

$0 $0 13 SON DJ FMAM JJA SO ND J FMAM J J ASO 1996 1997 1998 14 15

16 (h) Stephen F. Bollenbach ("Bollenbach") was a director of America 17 West. During the Class Period, Bollenbach sold 12,819 shares of his America West 18 stock based on inside information, pocketing over $379,000 in illegal insider trading 19 proceeds. These sales constituted 100% of the America West stock actually owned by 20 Bollenbach. These stock sales were unusual in timing and amount as set forth below: 21 /- 22 /- 23 /- 24 // 25 /- 26 /- 27 /- 28

- 22 -

1 America West Holdings, Corp. 2 S. Bollenbach Insider Sales Monthly Dollar Volume 3 September 1996 - October 1998 $400 $35 4 --- Class Period 11/19197 - 913!98--

$30 5

$300 r 6 $25 No Pre-Class Period Stock Sales

'7 0 § $20 a-°- - 3 8 t $200 - > $15 73 6- 1 1wri"/ 9 025 _. - Class Period Sales Shares Sold 12,819 Proceeds $379,311 i , ' $10 10 $100 i

11 $5 12 so Ii $0 SON DJ FMANI JJA SO NDJ FMAM J J ASO 13 1996 1997 1998 14 15

16 (i) Frank B. Ryan ("Ryan") was a director of America West. During 17 the Class Period, Ryan sold 6,000 shares of his America West stock based on inside 18 information, pocketing over S183,000 in illegal insider trading proceeds. These sales 19 constituted 88% of the America West stock actually owned by Ryan. These stock sales 20 were unusual in timing and amount as set forth below: 21 /- 22 /- 23 /- 24 // 25 // 26 27 28

- 23 -

1 2 America West Eloldings, Corp. 3 F. Ryan Insider Sales Monthly Dollar Volume 4 September 1996 - October 1998

$200 $35 5 Class Period 11/19/97 - 9/3/98

6 $30

7 $150 $25 No Pre-Class Period Stock Sales 8 - c3 8 $20 9 $100 10 $15 Class Period Sales Shares Sold 6,000 11 Proceeds $183,360 " $10 $50 12 $5 13 so so 14 SON DJ FMAM JJA SO NDJ FMAM J J ASO 1996 1997 1998 15

16 (j) John F. Fraser ("Fraser") was a director of America West. During 17 the Class Period, Fraser sold 12,000 shares of his America West stock based on inside 18 information, pocketing over S363,000 in illegal insider trading proceeds. These sales 19 constituted 93.6% of the America West stock actually owned by Fraser. These stock 20 sales were unusual in timing and amount as set forth below: 21 /- 22 /- 23 /- 24 /- 25 /- 26

27 /- 28

-24-

1 2 America West Holdings, Corp. 3 J. Fraser Insider Sales Monthly Dollar Volume

4 September 1996 - October 1998

$400 $35 5 — Class Period 11/19/97 - 9/3/98 --. , . 6 1J _ $30 ,, 7 $300 r ir , , $26 No Pre-Class Period Stock Sales 8 . 8o $20 -C-' 41 9 E i --- a $200 ._, fg >) __ ... w 16 ..,_, - . _, $15 e; 10 t--, . , 0 . .- ' __...„ -- Class Period Sales: -' Shares Sold: 12,000 11 Proceeds: $363,000 - , ' $10 $1.0 L I 12 i $6 i 13 , $0 I $0 SON DJ FMAM JJA SO NOJ FMAM J J ASO 14 1996 1997 1998 15

16 (k) James G. Coulter ("Coulter") was a director of America West and 17 a director and Vice President of TPG Advisors, Inc. which is the general partner of TPG 18 GenPar, L.P. During the Class Period, TPG sold 1,946,359 shares of America West 19 stock based on inside information, pocketing over $54 million in illegal insider trading 20 proceeds. These sales constituted 99.8% of the America West stock actually owned by 21 TPG. These stock sales were unusual in timing and amount as set forth below: 22 /- 23 /- 24 // 25

26 /- 27 /- 28

- 25 - 1 2 Americn WrilA Holdings Corp.

3 TPG Genpar Insider Sales Monthly Dollar Volume September 1996 - October 1998 4 $60 $35 -- Class Period 11/19/97 - 9/3/98 --.. 5

$30 6 $50 -1 ' - -

No Pre-Class Period Stock Sales - , 7 $25 $40 --4 I 8 2 [ o I ' $20 <1,- - R $30 9 ; 54 $15 F, 10 0-6 . $20 Class Period Sales $10 11 Shares Sold 1,946,359 Proceeds $54,089,317 12 $10

13 so so SON DJ FMAM JJA SO NDJ FMAM J J ASO 14 1996 1997 1998 15 16 (1) Richard P. Schiller ("Schifter") was a director of America West and 17 a director and Vice President of TPG Advisors, Inc. which is the general partner of TPG 18 GenPar, L.P. During the Class Period, TPG sold 1,946,359 shares of America West 19 stock based on inside information, pocketing over $54 million in illegal insider trading 20 proceeds. These sales constituted 99.8% of the America West stock actually owned by 21 TPG. These stock sales were unusual in timing and amount as set forth below: 22 /- 23 /- 24 /- 25

26 /- 27 /- 28

- 26 - 1 2 America West Holdings, Corp.

3 TPG Genpar Insider Sales Monthly Dollar Volume 4 September 1996 - October 1998 $60 $35 — Class Period 11/19/97 - 9/3/98* 5

$30 6 $50 --1

No Pre-Class Period Stock Sales 7 $25 1 " -.3', - 8 2 0 $20 a 1 0 { , a 9 E$30 co - $15 " a04 10 0T.) -- Class Period Sales $10 1 1 Shares Sold 1,946,359 Proceeds $54,089,317 $10 -4 12 $5 13 $0 $0 SON DJ FMAM J J A SO NO FMAM J J ASO 14 1996 1997 1998 15

16 (m) The above individuals referenced in ¶22(a)-(1) are hereinafter referred 17 to as the "Individual Defendants." They are each liable for the false statements pleaded 18 in 1156-57, 65-66, 80, 82, 86, 98 and 101, as those statements were "group-published" 19 information. 20 CONTROLLING PERSONS 21 23. As part of America West's 94 reorganization, TPG and Continental obtained 22 millions of shares of Class A and B stock of America West and signed a Shareholders 23 Agreement which provided that America West's Board would be comprised of 15 24 members, including nine members designated by them and one director from among the 25 executive officers of the Company designated by the Board. 26 24. America West's 97 10-K stated: 27 Concentration of Voting Power, Influence of Certain Principal Stockholders 28

- 27 - 1 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")) and 2 Continental Airlines collectively control approximately 57.4% of the total voting power of Holdings. As a result, if such stockholders act in concert 3 they will be able to elect a majority of their designees to the Board of Directors and otherwise control Holdings. . . Each of TPG, TPG Parallel 4 and Air Partners II are controlled by TPG Advisors, Inc 5 Under the Stockholders' Agreement, Continental and TPG could not sell any of their 6 publicly traded America West stock without also selling some of their Class A 7 supervoting stock until 5/20/98. 8 25. Defendants Franke, Goodmanson, Coulter, Schifter, TPG and Continental, 9 by reason of their stock ownership and positions with America West or representation on 10 America West's Board, were controlling persons of America West. America West 11 controlled each of the Individual Defendants who were officers of America West. TPG also controlled Schifter and Coulter. These controlling persons are each liable under the 13 1934 Act §20(a). 14 SCIENTER AND SCHEME ALLEGATIONS 15 Scheme 16 26. Each defendant is liable for (i) making false statements, or (ii) for failing 17 to disclose adverse facts while selling America West stock, or (iii) for participating in a 18 scheme or course of business which operated as a fraud or deceit on purchasers of 19 America West stock. 20 Knowledge 21 27. Franke, Goodmanson, Aramini, Garel, Parker, Carreon and Howlett were 22 the top executives of America West. They ran America West as "hands-on" managers, 23 dealing with important issues facing America West's business. 24 28. TPG was the largest shareholder of America West and was concerned over 25 its investment in America West. TPG was in frequent contact with Coulter, Schifter, 26 Franke, Goodmanson, Aramini, and Parker to get information concerning America 27 West's business and received copies of America West's internal operating and budget 28 reports that were circulated to its top executives.

- 28 - 1 29. Because Coulter and Schifter represented TPG on America West's Board 2 and TPG was concerned over its investment in America West, they were much more

3 involved in its day-to-day operations than is normally the case with outside directors.

4 Coulter and Schifter were also in frequent contact with Goodmanson, Aramini, and 5 Parker to get information about America West's business, and received copies of America 6 West's operating and budget reports that were circulated to executives. 7 30. Continental was the second largest shareholder of America West. It was 8 concerned over the status of its large investment in America West and constantly 9 monitored America West's operations by way of conversations with Franke, 10 Goodmanson, Aramini, and Parker, and received copies of America West's operating and 11 budget reports that were circulated to executives. 12 31. Percentage of completed flights, number of flights canceled, maintenance 13 turn times, on-time performance, revenue passenger miles, revenue per available seat

14 mile, yield per revenue passenger mile, aircraft utilization, and maintenance cost and 15 repair expenses were indispensable elements to America West meeting its internally

16 budgeted and publicly disseminated 98 and 99 revenue and EPS forecasts. Therefore, 17 defendants constantly monitored each of these, and other, key factors affecting America 18 West's business. Every morning, 12 to 15 executives, including the America West 19 officers named as defendants, met to review the previous day's flights and identify 20 problems. 21 32. Because of their top executive positions with America West and involvement 22 in the day-to-day management of its business, each Individual Defendant actually knew 23 from internal corporate documents and conversations with other corporate officers and 24 employees and their attendance at management and Board meetings, and in the case of

25 TPG and Continental, the information they got from Franke, Goodmanson, Parker, 26 Coulter, Schifter and America West, the adverse non-public information about America 27 West's operational problems and the impact of the FAA's scrutiny. Thus, each America 28 West defendant actually knew or recklessly disregarded the public statements about

- 29 - 1 America West pleaded at 1151, 53-54, 56-60, 63-77, 79-82, 85-90, 92-93, 96, 98-99, 2 101-104 and 106 were false or misleading when made. 3 33. The defendants closely monitored the performance of America West's 4 business via reports which America West's Finance Department (under Parker and 5 Carreon) generated on a weekly and monthly basis. The Finance Department also 6 distributed monthly financial reports comparing America West's actual financial results 7 to projected results. 8 34. Defendants deliberately caused or allowed America West and its 9 maintenance subcontractors to avoid complying with the FAA-mandated inspection and 10 maintenance requirements for America West's aircraft fleet and to allow its maintenance 11 subcontractors to do the same by not adequately overseeing or auditing their maintenance 19 activities. This allowed America West to greatly reduce its maintenance costs and 13 increase its aircraft utilization by flying under-inspected and maintained planes -- boosting 14 America West's revenues and BPS. Defendants knew these steps would temporarily 15 decrease America West's costs and temporarily boost its aircraft utilization and revenues 16 during the critical months prior to the expiration of the Shareholders Agreement, which 17 restricted the controlling shareholders' ability to sell off their America West's publicly 18 traded stock. Defendants knew this would lead to America West reporting much better- 19 than-expected BPS and, in combination with spending almost $100 million of America 20 West's corporate cash to re-purchase over 4 million of its shares, would artificially inflate 21 America West's stock. 22 35. Defendants thus knew the adverse non-public information about America 23 West pleaded in detail in 1111, 62, 83, 95 and 108, and that America West's financial 24 statements had been falsified (as pleaded in 11115-122). As a result, defendants knew 25 that America West would not be able to achieve the 3rdQ 98, 4thQ 98 and the 98-99 BPS 26 growth being forecast by and for it. 27 28

- 30 - 1 Motive/Opportunity 2 36. In addition to having actual knowledge of the falsity of their false 3 statements, each of the defendants had the motive and the opportunity to perpetrate the 4 fraudulent scheme and course of business described herein. 5 37. During the Class Period, while defendants were continuing to issue 6 misleading statements about America West and use its cash to re-purchase its shares, four 7 of America West's top officers, Howlett, Carreon, Garel and Aramini -- and three 8 directors -- Bollenbach, Fraser and Ryan -- sold 167,819 shares of their America West 9 stock for proceeds of $4.8 million; TPG sold 1,946,359 shares for proceeds of over $54 10 million; Continental sold 317,140 shares for S8.9 million; thereby personally profiting 11 from their participation in the scheme to artificially inflate America West's stock. Thus, these America West insiders sold over 97% of their America West publicly traded stock 13 at artificially inflated prices. 14 38. America West's compensation structure provided an additional motive for 15 its executives and directors to participate in the fraud. The Company's executive 16 compensation program included an Incentive Equity Plan, under which executives were 17 awarded stock options, stock appreciation rights, restricted stock, unrestricted stock, 18 phantom shares, performance units and cash tax rights. The Incentive Plan also provided 19 for automatic grants of unrestricted stock on 12/31 in each year to each non-employee 20 director. The number of shares included in each annual grant was determined by dividing 21 $13,000 by the closing market price of the Company's Class B Common Stock on 22 December 31 of the year preceding the year of the grant. 23 39. The officers of America West were motivated to inflate America West's 24 financial results and stock price. The amount of the executive bonuses were determined 25 by the Compensation Committee at the end of each year and were based principally on 26 the Company's financial performance for the year. 27 28

- 31 - 1 40. Because the Company's financial performance for 96 did not meet the 2 established threshold goal, no payments were made to executives under the Company's 3 annual incentive compensation plan for 96. 4 41. Stock options were an integral part of America West's executive 5 compensation program. As explained in its proxy, "[t]he Compensation Committee 6 believes that stock options are an important and appropriate incentive to employees to 7 meet the Company's long-term goals. By working to increase the Company's stock 8 value, one of the Company's performance goals is met, and the executives and employees 9 are likewise compensated through option value." 10 42. There were no option grants to any America West executive officer in 97. 11 However, in 2/17/98, America West granted 350,000 options to Franke. On 3/2/98, 12 America West granted 110,000 options to Goodrnanson, 35,000 options to Parker and 13 20,000 options to Garel. 14 43. By late 97, America West's top executives and controlling shareholders 15 faced a terrible dilemma. Despite improved operating results during 97 and assurances 16 to investors that its maintenance related operating problems had been fixed and were 17 behind it, America West's stock was trading no higher than earlier in 97 and lower than 18 it sold for in mid-96 -- despite a very strong stock market advance and good performance 19 by airline stocks during that period. Worse yet, the date when America West's 20 controlling shareholders could sell their publicly traded stock was now fast approaching, 21 i.e., 5/20/98. Thus, America West's top executives and controlling shareholders 22 desperately wanted to push America West's stock up to much higher prices so that their 23 options would be more valuable and so they could sell off the stock they owned and 24 pocket millions of dollars in illegal insider trading proceeds. 25 BACKGROUND TO CLASS PERIOD 26 44. In 12/95, America West outsourced its heavy aircraft maintenance and fired 27 over 375 members of its maintenance work force because "maintaining our low-cost 28 advantage relative to our competitors is imperative to America West's financial security

- 32 -

1 now and in the future." America West said the "outsourcing" would have a positive 2 financial impact while assuring cost-effective maintenance of its fleet. But, in 8/96, The 3 Arizona Republic reported that aircraft maintenance at America West Airlines had 4 deteriorated in the wake of these cost cuts. According to the FAA, since the mechanics 5 were laid off in December, remaining maintenance personnel were short-handed and 6 under intense pressure, resulting in serious maintenance shortfalls and violations of FAA 7 standards. 8 45. America West suffered a huge 3rdQ 96 loss due to operating difficulties, 9 as cancellations and delays rose sharply, resulting from maintenance problems. To 10 remedy this, America West announced it would hire additional mechanics and increase 11 the number of internal auditors who make sure paperwork was completed properly and 12 outside maintenance companies were performing properly. By 10/96, America West was 13 representing that: 14 America West Airlines says it has overcome a troubled third quarter that saw numerous flight delays and cancellations rasj it has moved 15 aggressively to resolve operational problems involving aircraft maintenance 16 • • • • * * * 17 America West executives said Friday that they're confident about 18 efforts to improve operations . . . . 19 "A new team, headed by COO Richard Goodmanson has aggressively moved on our operational issues and, as a result, we have 20 experienced increased reliability during August, September and October," 21 said William Franke, the airline's chairman. 22 46. During the rest of 96-97, America West reassured investors these problems 23 were being fixed. For instance: "We are optimistic about current cost and revenue trends. . . . 24 kept costs in check during the third quarter -- something we expect to continue to do. . . A new team, headed by COO Richard Goodmanson, 25 has aggressively moved on our operational issues and as a result we have 26 experienced increased reliability . . . ." 27 (a) On 10/25/96, Reuters published an article stating: 28

- 33 - 1 America West's . . . [CFO] Parker said . . "Much of the problems that caused this revenue decline in the third quarter we believe are behind us . 2 . . . 3 (b) In 1/97, America West stated: "we have also seen significant 4 progress in our operational reliability." In 2/97, DLJ issued a report on America West, 5 which stated: 6 In meetings with senior management. . . . 1-W1e came away feeling that management understands what went wrong last year, and is 7 implementing changes . . 8 *

9 AWA's dependability problems last year were directly related to its . . . the outsourcing of heavy maintenance at the beginning of 1996, that 10 created aircraft and manning shortages . . . The result was a dramatic increase in flight cancellations and the related costs of rerouting passengers 11 on other airlines . . . . America West is making significant progress in 12 addressing the worst problems with its operational integrity. . . 13 (c) America West's 96 10-K filed in 3/97 stated: As a result of certain customer service and operational issues in the 14 third quarter of 1996, AWA initiated a program . . . aimed at maximizing the airline's on-time performance and further improving customer service. 15 . . . [Mlanagement believes this program will achieve significant advances in reliability . . . . Management anticipates that those initiatives . . . will 16 all operate together to improve customer satisfaction during 1997. 17 * *

18 In the third quarter, the Company experienced . . . a net loss of S45.7 million . . . . The decline in earnings resulted from a number of 19 factors, including . . . lower yields . . . and operating dependability diffi- culties encountered during the summer of 1996. The Company took action 20 to address these problems . . . . 21 * * *

22 - Initiated . . . a comprehensive program designed to improve operational and customer service performance, including increasing the 23 airline's maintenance workforce, adding two additional overnight 24 maintenance stations and increasing reservations staffing and technology. 25 (d) America West's 96 Annual Report issued in 3/97 stated: In mid-year, the airline was adversely impacted by a number of factors, 26 including revenue management and operational reliability issues. . . 27 The Company has learned from these challenges. . . In the second half of 1996 and early 1997, we've instituted a companywide initiative . 28 . .

- 34 -

1 * *

2 • Improving our operational reliability by establishing two new overnight maintenance operations, hiring approximately 60 new mechanics 3 and acquiring an additional spare aircraft, as well as committing more than 4 $10 million for additional spare and replacement aircraft parts . . . . * * * 5 The impact of these and related efforts has been significant. There 6 is hard evidence of improvement in the airline's operations during late 1996 7 and early 1997. * 8 During the 1996 fourth quarter, America West began opening new 9 overnight maintenance facilities . . . The new facilities, which were fully operational by February 1997, allow for the performance of routine 10 maintenance on an additional four to six aircraft each night. The facilities also allow the airline to increase revenue by flying an extra four flights each 11 day with aircraft that were previously scheduled into the Phoenix overnight 19 maintenance rotation. * * * 13 In early 1997, the Company began taking steps to maintain the 14 momentum achieved in the fourth quarter 1996 and to generate further 15 improvements to its operations. 16 (e) In 4/97, America West stated: "We continue to see material improvement in the airline's operating 17 performance . . . the initiatives taken have produced significant results." 18 (0 On 6/1/97, Air Transport World published an article reporting: 19 In management's view, America West's most significant competitive advantage is its low costs. . . . "We have a nice niche," says Douglas 20 Parker, senior VP and chief financial officer. "We can compete against the low-cost point-to-point carriers because we have a similar cost structure, 21 and we offer amenities they don't . . . ." 22 . . . "I've looked at all the data," says Goodmanson . . . . "We underestimated the amount of time and preparation and integration and so 23 on, and they started missing the time it was taking to turn the airplanes. 24 " . . . fWle've streamlined a lot of our own processes . . . the net of 25 it is we've both explored in great detail what went well and what went 26 wrong, and we have fixes in place." 27 28

- 35 -

1 (g) On 9/4/97, PaineWebber issued a report on America West after 2 discussions with Goodmanson and Parker which repeated information provided by them. 3 It stated: 4 In AWA's case, we can say that AWA has the lowest costs of any major full-service carrier. AWA's lower costs stem from higher aircraft 5 utilization and lower labor costs. 6 * * *

7 In summary, AWA has the lowest costs; . . of any major carrier and 8 above average growth prospects. 9 47. In 10/97, America West reported its 3rdQ 97 results. Franke claimed: "Our third quarter financial performance demonstrates the dramatic 10 improvements made in the performance of the airline over the past 11 year". . . "The airline has . . experienced . . . a decline in unit costs." 48. However, America West's 3rdQ 97 operating results were actually below

13 expectations and analysts quickly uncovered that America West had boosted its reported 14 results by a S5 million interest charge reversal. This led some analysts to cut their 97-98 15 EPS forecasts for America West. One brokerage firm characterized it as "the 16 disappointing airline," and stated "(lin our opinion, these results continue a string of 17 quarters composed of lackluster revenue performances and subpar financial results relative

18 to the industry under remarkably strong operating conditions." Another major brokerage 19 firm wrote: Terrible stock — AWA shares have been the poorest performing 20 shares of any major airline in 1997. Year to date, AWA shares have 21 declined 20% against a 23% average gain for the majors. As such AWA shares have underperformed the group by a stunning 40% in 1997 -- despite no material erosion in consensus estimates -- albeit other airline estimates 22 have moved up moderately from 1/97 levels. 23 America West's very poor stock performance in 96-97 relative to other airline stocks is 24 graphically displayed below: 25 // 26 // 27 // 28 //

- 36 -

1 2 3 America West Floklings Corp. vs. S&P Airlines Group (1) 4 January 1996 - January 1, 1998 5 200 200 6 S&P Airlines

7 150 150

11 9 100 100 10

1 I. America West 50 50 12 13 0 0 14 JFM AM JJA SON DJ FMAM JJA SO ND 1996 1997 15

16 49. By late 97, America West's top executives and controlling shareholders 17 faced a terrible dilemma. On 11/18/97, America West's stock traded at $14-1/2, down 18 from S16-1/2 in 1/97, S16-112 in 4/97, $16 in 9/97. Despite improved Operating results 19 during 97 and assurances to investors its maintenance related operating problems had been 20 fixed and were behind it, America West's stock was trading no higher than at the 21 beginning of the year and lower than it sold for in mid-96 -- despite a very strong stock 22 market advance and good performance by airline stocks during that period. Worse yet, 23 the date when America West's controlling shareholders could sell their publicly traded 24 stock was now fast approaching, i.e., 5/20/98. Thus, America West's top executives and 25 controlling shareholders desperately wanted to push America West's stock up higher. 26 50. Beginning in 11/97, America West executives, with the concurrence of its 27 controlling shareholders, began a concerted effort to push America West stock much 28 higher in price so that they could unload their publicly traded shares at much higher and

- 37 -

1 artificially inflated prices and pocket millions of dollars of illegal insider trading 2 proceeds. In order to accomplish this end, defendants employed a two-prong strategy to 3 mislead investors and artificially inflate the stock. First, they mounted a campaign to get 4 more Wall Street analysts to start covering America West and/or raise their ratings on 5 America West stock by having America West report better-than-expected BPS and 6 representing that America West's strongly improving financial results were due to 7 exceptionally efficient management by America West's top executives who had 8 successfully implemented and were pursuing a business strategy of controlling America 9 West's costs and increasing its aircraft utilization, while enhancing its revenues and 10 therefore yields, which gave America West a competitive advantage and would lead to 11 strong BPS growth, Second, defendants caused America West to spend almost $100 12 million of America West's corporate cash to re-purchase 4.9 million shares of its stock 13 on the open market, representing that this was being done because America West's stock 14 represented a "good investment." 15 FALSE AND MISLEADING STATEMENTS 16 51. On 11/19/97, DLJ issued a report on America West which repeated 17 information provided by Franke, Goodmanson or Parker who assured DLJ this report was 18 accurate. 19 We met with America West's senior management yesterday in Phoenix and came away with substantially enhanced confidence about the 20 carrier's revenue prospects which are, we believe, the primary concern among investors. . . This same optimism about revenues carries into 21 1998, when carefully planned growth should help keep the momentum 22 ping. * * * 23 Many factors contribute to bright revenue prospects. Investors appear to 24 be justifiably skittish about America West's revenue prospects given an extremely disappointing 1996 experience that lingered into the early part of 25 1997. In retrospect, a well conceived growth plan that sought to leverage the strength of the carrier's hubs collided last year with a poorly executed 26 move to outsource heavy maintenance that temporarily undermined schedule 27 integrity. . . But those issues are behind the company . . lA111 of this 28 optimism augurs well for an improved 1998 outlook.

- 38 - 1 * *

2 Savings should be forthcoming from the consolidation of maintenance 3 overhaul activity . . . 4 52. In late 11/97 and on 12/1/97, Salomon Smith Barney and Goldman Sachs 5 both raised their ratings on America West and Gruntal also initiated coverage of America 6 West with a buy rating, all as a result of discussions with Franke, Goodmanson or Parker 7 and very favorable representations and BPS forecasts made by them. 8 53. On 12/5/97, BT Alex. Brown issued a report on America West which raised 9 its rating on America West. This report was based on and repeated information provided 10 by Franke, Goodmanson or Parker. They reviewed this report before it was issued and 11 assured BT Alex. Brown it was accurate. It stated: The Company also is benefiting from improved revenue management 12 systems . . . . [W]e believe the Company is evidencing success from a new 13 focus on improvement in revenue performance, not just low costs. . . . Given the attractive cash flow valuations and our relatively 14 greater conviction in a sustainable earnings growth forecast, we have 15 Lip_glacl_cdourinvegment rating mAc 16 54. On 12/30/97, DLJ issued a report on America West which repeated 17 information provided by Franke, Goodmanson or Parker. They reviewed this report 18 before it was issued and assured DLJ it was accurate. It stated: America West has disappointed investors on several occasions over the past 19 few years by not managing revenues well. Recent results prove to us, however, that the company has a far better grasp of how to optimize the top 20 line than it has ever before evidenced. . . . But the apparent fact that America West has consciously steered toward an inherently more profitable 21 higher yielding, lower load factor mix of business speaks volumes about the come an 's im Droved analytical capabilities and revenue management 22 technology. While investors appear to remain skittish about the past here, we believe current results are proving that that anxiety is seriously 23 overblown. 24 55. As a result of this publicity barrage, by 12/30/97 America West stock hit 25 S18-7/8, exceeding its earlier 97 high of $16-7/8 and trading at its highest price in 17 26 months. 27 28

- 39 - •

1 56. On 1/15/98, America West issued a release stating that it had repurchased 2 S20 million of its outstanding common stock. . . 'These transactions reflect our belief 3 that America West equity is an attractive investment . . .' said W. A. Franke." 4 57. On 1/20/98, America West issued a release reporting its 4thQ 97 BPS of 5 $.43, via a release headlined "America West Holdings Corporation Reports Best Financial 6 Results in Company History" which stated: 7 These strong results reflect a successful ongoing effort to maintain our 8 industry leading unit cost structure while making significant progress in improving our revenue performance, said W. A. Franke . . . 9 58. On 1/20/98 subsequent to the release of its 4thQ 97 results, America West 10 held a conference call for analysts, money and portfolio managers, institutional investors 11 and large America West shareholders to discuss America West's results, its business and 12 prospects. During the call, and in follow-up conversations with analysts, Parker or 13 Goodmanson stated: 14 The maintenance and operational problems America West had suffered in 15 96 had been fixed and were behind America West. Due to increased aircraft utilization and other factors America West's revenues and yields were growing 16 very strongly which would lead to much higher BPS. 17 America West was implementing a new revenue management system which by inter alia, increasing aircraft utilization would result in strong revenue growth. 18 America West's operating costs, including aircraft maintenance costs, were 19 well below industry averages, in part due to America West's outsourcing much of its maintenance, allowing it to employ fewer high-priced mechanics. Because 20 America West's operating costs were decreasing and its aircraft utilization and revenues were increasing, America West's BPS leverage was much stronger than 21 in the past. 22 America West's outsourcing, or subcontracting, of its heavy aircraft maintenance was a success, helping lower America West's costs and contributing 23 to its increased aircraft utilization. Outsourcing other aircraft maintenance (such as engine maintenance) was also benefitting operations by lowering costs. 24 America West had an attractive cost advantage versus the industry and 25 America West expected this cost advantage to persist. 26 • Due to America West's growing revenue and controlled costs, America West was achieving better-than-expected BPS growth, a trend that would continue. 27 America West had substantially enhanced and improved its management controls, in part through implementing upgraded technology, which was bolstering 28 revenues, margins and cost control.

- 40 - 1 America West was now poised for substantial ongoing BPS growth due to 2 its strong momentum. 3 59. On 1/21/98, Merrill Lynch issued a report on America West which was 4 based on and repeated information provided in the 1/20/98 conference call and follow-up 5 conversations with Franke, Goodmanson or Parker. The report stated: 6 What Has Changed? AWA revenues increased 7.5% in the December quarter. . . . We 7 expect these changes in yield management will be reflected positively in 8 AWA's revenue trends over the next 2-3 quarters. On the expense side the company continues to have the lowest unit 9 costs of any major hub-and-spoke airline. 10 60. On 1/21/98, DLJ issued a report on America West which was based on and 11 repeated information provided by Franke, Goodmanson or Parker in the 1/20/98 12 conference call and follow-up conversations. It stated: 13 America West reported extremely strong BPS of S0.43 yesterday . . . . [W]e are bumping our target price somewhat higher, to reflect 14 greater confidence in the outlook here, . . and our belief that management is making good progress at converting the naysayers who have lagged in 15 their appreciation of the changes within this company that are producing a 16 much more robust and stable stream of revenues. * * * 17 Increased investor confidence may be the best development at America 18 West. After a second half of 1996 that was no less than a disaster from the standpoint of operating integrity and revenue management, AWA has come 19 roaring back. Tighter management controls in numerous operational areas, 20 and increased analytical capability in the revenue management function bolstering improve [sic] technology, are the two major factors in this turnaround. We are coming to believe that investors are finally starting to 21 catch on to the fact that this company can indeed not only shoot straight but 22 hit the bull's eye. After such a sterling quarter that was produced in large part through 23 disciplined revenue management, we expect investors to have not only a 24 better appreciation for the earnings power here but a whole new attitude about this company's dependability as an earnings generator. . . . AWA shares are riding the crest of a wave of extremely strong industry 25 fundamentals and improving investor psychology . . . 26 61. On 1/21/98, Morgan Stanley Dean Witter raised its rating on America West 27 to "out perform," based on the information disseminated by America West on the 1/20/98 28 conference call.

- 41 - 62. Each of the statements made between 11/19/97-1/21/98 were false or 2 misleading when issued. The true but concealed facts were: 3 (a) America West's maintenance problems were never alleviated after 4 America West laid off 375 maintenance workers in 12/95 and "outsourced" its main- 5 tenance operations. For example, FAA inspectors later cited significant problems with 6 America West's "downsized" maintenance organization and its inability to adequately 7 supervise outsourced maintenance work. The FAA also found that the Company's 8 maintenance control office was not adequately staffed and that America West paid only 9 superficial attention to important regulatory requirements. Moreover, America West was 10 not properly supervising its outside maintenance contractors and its controls were not 11 adequate to verify whether planes received scheduled maintenance as required by FAA 12 regulations; 13 (b) America West's apparent financial success and record EPS were due 14 in substantial part to America West avoiding mandatory expenditures required to maintain 15 its aircraft in accordance with FAA maintenance schedules and levels and then flying, 16 i.e., utilizing aircraft that had not been properly inspected or maintained to boost its 17 revenues and BPS; 18 (c) America West's apparent financial success as reported was due in 19 substantial part to its avoiding necessary expenditures for maintenance personnel which 20 were required to maintain America West's fleet of aircraft in accordance with standards 21 mandated by the FAA and flying, i.e., utilizing, aircraft that had not been properly 22 inspected or maintained to boost its revenues and BPS; 23 (d) America West's apparent successful rapid growth, low cost of 24 operations, high aircraft utilization and increasing BPS were not due to an unusually 25 talented management team or its development or implementation of successful revenue 26 enhancement and cost control programs; but rather, due to its illegal avoidance of 27 required maintenance procedures mandated by the FAA; 28

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1 (e) One of the reasons for America West's reported financial success was 2 that America West had deliberately avoided making expenditures required to purchase 3 sufficient spare parts for its aircraft fleet and purchase sufficient spare aircraft to permit 4 adequate customer service when FAA-mandated maintenance and inspection schedules and 5 activities on its aircraft fleet were complied with; 6 (f) In order to achieve artificially low operating costs, America West was 7 deliberately not maintaining its fleet of aircraft or causing its outsourced subcontractors 8 to inspect or maintain in accordance with the maintenance procedures and levels mandated 9 by the FAA and flying, i.e., utilizing, aircraft that had not been properly inspected or 10 maintained to boost its revenues and EPS; 11 (g) America West was not properly monitoring or auditing the firms to 12 which it had subcontracted or outsourced heavy maintenance of its aircraft fleet, so as to 13 permit those firms to avoid performing FAA-required or mandated maintenance and so 14 America West could fly, i.e., utilize, aircraft that had not been properly maintained or 15 inspected to boost its revenues and EPS; 16 (h) America West had failed to perform a structural check on its oldest 17 737's that was mandated by a 1993 airworthiness directive;

18 (i) The better-than-expected BPS reported by America West during the 19 4thQ 97 was misleading, as it was artificially inflated and was not an accurate indication

20 of or presentation of the real earnings or real earning power of America West because 21 that EPS was artificially inflated by the illegal cost avoidance activities and aircraft

22 utilization pleaded above; and 23 (j) America West knew it would be required, before the end of 98, to 24 perform huge amounts of previously avoided aircraft inspections, , testing and maintenance 25 and vastly upgrade its aircraft maintenance procedures, facilities and personnel, which 26 would require the expenditure of millions of dollars for prior maintenance and new 27 maintenance facilities, auditors and enhanced computer systems to track and oversee 28 aircraft maintenance that had been contracted out to third parties, the purchase of

- 43 - 1 additional spare parts and the purchase of additional or spare aircraft and the hiring of 2 a large number of additional maintenance personnel, all of which would adversely impact 3 America West's operating costs, aircraft utilization and BPS growth going forward. 4 63. On 3/10/98, Gruntal issued a report on America West after discussions with 5 Franke, Goodmanson or Parker and which was based on and repeated information 6 provided by them. Franke, Goodmanson or Parker reviewed this report before it was 7 issued and assured Gruntal it was accurate. It stated: 8 Unit costs appear pretty much under control . . 9 * * *

10 • AWA is a low-cost carrier. 11 By 3/10/98 America West stock reached $27-1/4, exceeding its 96 pre-fiasco high of $23- 12 3/4 and the highest price America West stock had traded at since emerging from 13 bankruptcy in 94. 14 64. On 3/24/98, DLJ issued a report on America West raising its rating on the 15 stock after discussions with Franke, Goodmanson or Parker which repeated information 16 provided by them. They reviewed this report before it was issued and assured DLJ it was 17 accurate. The report forecast 3rdQ and 4thQ 98 BPS of $.60 and $.52, respectively, for 18 America West and stated: 19 This company has made a remarkable turnaround over the last year or so in its revenue management capabilities and . . . appears to be doing better 20 even than our bullish expectations. 21 65. In late 3/98 or early 4/98, America West's 97 Annual Report to 22 Shareholders was issued. In it, Franke and Goodmanson represented that: 23 Driven by strong customer demand, America West in 1997 produced the best financial results in its history and realized substantial improvements 24 in its operational performance . . . . 25 * * *

26 Improved Revenue Management 27 Key to the Company's record financial results was a dramatic improvement in the management of America West Airlines' seat-class 28

- 44 - 1 inventory, resulting in a noteworthy upswing in the Company's 2 revenue. . . . As the Company increased revenues, we also widened our strategic 3 cost advantage over our competitors. . . . T his im sortant comeetitive 4 advantage remains a top priority at every level of the ompany. * * 5 As our airline grew last year, it generated widespread improvements. 6 In mid-1996, America West Airlines experienced levels of customer service and operational reliability that did not meet customers' expectations -- and 7 certainly didn't meet our own high standards. In late 1996 and throughout 1997, we took necessary steps to achieve the quality performance that 8 customers expect from our airline. 9 * * *

10 Through this full-spectrum approach to building a better airline, 11 significant results were achieved. * * 12

13 The significant progress achieved in 1997 provides America West Airlines with tremendous impetus for 1998 and beyond. . . Several 14 strategies that have proven effective during the airline's recent success will 15 remain in place. 16 66. America West's 97 10-K, issued on or about 3/31/98, was signed by 17 Franke, Goodmanson, Parker, Bollenbach, Ryan, Fraser, Coulter and Schifter. It 18 represented that: 19 Maintain its Strategic Cost Advantage 20 The Company is committed to maintaining AWA's low cost structure, which offers AWA a significant competitive advantage over other major airlines. AWA has achieved this low cost structure primarily through 21 employee productivity, favorable labor costs per ASM and industry-leading aircraft utilization. In 1997, the Company widened its strategic cost 22 advantage versus the industry . . . 23 * * *

24 Aircraft Maintenance and Operations 25 AWA is subject to the jurisdiction of the FAA with respect to aircraft maintenance and operations, including equipment. . . . The FAA has the 26 authority to issue new or additional regulations. To ensure compliance with its regulations, the FAA conducts regular safety audits . . 27 . All of AWA's currently affected aircraft are in compliance with 28 the aging aircraft mandates. AWA constantly monitors its fleet of aircraft

- 45 - 1 to ensure safety levels that meet or exceed those mandated by the FAA . 2 " • 3 67. After New York investment meetings by America West and analysts on 4 4/6/98, DLJ issued a report on America West after discussions with Goodmanson and 5 Parker which repeated information provided by them at the meeting and in private 6 conversations. It forecast 3rdQ and 4thQ 98 BPS of $.64 and $.58, respectively, and

7 stated: America West Airlines senior management held a day of upbeat 8 meetings with investors on Friday that provided considerable support for our view that the company is making tremendous strides in improving its 9 revenue stream so as to create increasingly profitable growth. Because of specific initiatives the company is undertaking we are raising our earnings 10 estimates for 1998 and 1999 by S0.10 and $0.40 per share, respectively . . . We also believe that . . America West is improving its core 11 franchise . . . . [Nlo airline has the earnings momentum of America West 12 . . . 13 68. On 4/7/98, Merrill Lynch issued a report on America West after attending 14 the 4/6/98 analyst meeting and having discussions with Franke, Goodmanson or Parker. 15 It forecast 3rdQ 98 BPS of S.67, 4thQ 98 EPS of $.51 and 99 BPS of S2.60, and stated: On Friday, we attended an analyst conference held by America West. 16 The company remains the lowest unit cost carrier with significant growth opportunities . . . There were two main messages at the conference, both 17 of which are a direct result of the company upgrading its people and 18 computer systems over the last 18 months. 19 Enhanced Revenue Production In the past, America West ran its revenue management on the basis 20 of load factor. In a presentation entitled "A Day in the Life of a Reformed Discounter" the head of revenue management described how last year the 21 company changed people, processes and the computer systems in revenue management. The upshot thus far has been a 4% unit revenue increase in 22 the December quarter, most of which was due to changes in the pricing structure itself. Going forward, we think these pricing changes will 23 produce unit revenue improvements for at least the next 3 quarters and that these unit revenue increases will be augmented in 1999 when the company 24 introduces an upgraded yield management system, which alone is expected 25 to contribute $18 million of pretax income annually. 26 69. On 4/7/98, Salomon Smith Barney raised its rating on America West and 27 increased the 99 EPS forecast to $2.55. Its report stated: In it's [sic] purest form, revenue management is synonymous with 28 inventory management, the ability to efficiently price one's product.

- 46 - 1 America West is in the midst of revamping it's [sic] revenue management system . . . . 2 * * * 3 4 The airline uses a manual aircraft scheduling process that incrementally layers additional aircraft onto the system. As a result, revenue and operational inefficiencies (decreased aircraft utilization) are 5 built into the system due to the difficulty that is associated with aircraft gauge. Essentially, a manual system cannot take into account the revenue 6 impact from every possible scheduling scenario. In 1Q96 the airline purchased two automated scheduling system, Airline Profitability Model and 7 Airflite. The systems will be fully operational for the summer 1988 8 schedule, at which time a computer will consider millions of possible combinations, evaluate the optimal revenue impact, identify the optimal schedule, and assign actual aircraft to specific flights. Management 9 estimates a $5 million pre-tax income improvement per quarter beginning 3Q98. 10 70. On 4/8/98, America West issued a release which stated: 11 America West . . . announced that [it] has awarded to GE a multi-million 12 dollar, long-term contract to maintain the airline's CFM56-3, V2500A1, and JT8D-15 aircraft engines. 13 * * * 14 "This contract provides engine maintenance based on a flat rate per 15 engine hour offering significant savings in operating expenses for America West " said Ron A. Aramini senior vice president of operations at America 16 West. . . . 17 The contract extends significant operational and economic benefits to America West . . . . 18 71. On 4/15/98 Morgan Stanley Dean Witter issued a report on America West 19 based on the 4/6/98 analyst meeting in New York and follow-up conversations with 20 Goodmanson and Parker, and stated: 21 • We recently attended an America West analyst meeting at which 22 management outlined its growth strategies. 23 * * *

24 Over the past two years, America West has brought in a new leadership team and invested $30 million in systems. This has lead to 25 scheduling, operations, and in-flight improvements. Financial results have also improved . . . . 26 * 27

28

- 47 - 1 Poised for Growth 2 In our view, America West is well positioned to implement its 3 growth strategy . . . . 4 72. On 4/21/98, America West reported much better-than-expected lstQ 98 5 results in a release entitled "America West Reports 80 Percent Increase In First Quarter 6 Earnings," which stated: America West . . today reported record first quarter 1998 net income of 7 $25 million, an 80 percent increase over the previous record of $14 million established in the first quarter for 1997. Diluted earnings per share (BPS) 8 for the 1998 first quarter were $0.53 compared with $0.30 in last year's 9 quarter. * * * 10 "The record quarter reflects our employees' efforts to improve the 11 service and profitability of the Airline," said William A. Franke, chairman and chief executive officer, America West Holdings Corporation. "Our 12 enhanced capabilities and a reengineered revenue management strategy have resulted in significant increases in yields and improvements in unit revenues 13 year-over-year. Fuel prices, management of the Airline's cost structure and employee productivity drove a year-over-year decrease in unit costs. These 14 factors together with our continued growth provide great momentum." 15 73. On 4/21/98, subsequent to the release of its lstQ 98 results, America West 16 held a conference call for analysts, money and portfolio managers, institutional investors 17 and large America West shareholders to discuss America West's lstQ results, its business 18 and prospects. During the call, and in follow-up conversations with analysts, Parker and 19 Goodmanson stated: 20 • The maintenance and operational problems America West had suffered in 96 had been fixed and were behind America West. Due to increased aircraft 21 utilization and other factors America West's yields were growing very strongly and 22 would lead to much higher BPS. • America West was implementing a new revenue management system which 23 by inter alia, increasing aircraft utilization would result in strong revenue growth. 24 • America West's operating costs, including aircraft maintenance costs, were well below industry averages, in part due to America West's outsourcing much of 25 its maintenance, allowing it to employ fewer high-priced mechanics. Because America West's operating costs were decreasing and its aircraft utilization and 26 revenues were increasing, America West's EPS leverage was much stronger than 27 in the past. Due to America West's growing revenue and controlled costs, America 28 West was achieving better-than-expected EPS growth, a trend that would continue.

- 48 - 1 • America West's outsourcing, or subcontracting, of its heavy aircraft maintenance was a success, helping lower America West's costs and contributing 2 to its increased aircraft utilization. Outsourcing other aircraft maintenance (such 3 as engine maintenance) was also benefitting operations by lowering costs. • America West had substantially enhanced and improved its management 4 controls, in part through implementing upgraded technology, which was bolstering 5 revenue margins and cost control. * America West was now poised for substantial ongoing BPS growth due to 6 its strong business momentum. 7 • America West now had an attractive cost advantage of about 25% versus the industry, America West expected this cost advantage to persist even after 8 America West completed its new labor contracts with flight attendants and 9 mechanics. • America West's maintenance expenses were increasing in the 2ndQ 98 due 10 to a cycle of heavy checks on aircraft. 11 • As a result of the foregoing America West was poised for very strong BPS growth in 98 and 99 with 3rdQ and 4thQ 98 BPS of $.67-$.75 and S.64. 12 74. On 4/22/98, issued a report on America West which was based on and 13 DLJ repeated information provided in the 4/21/98 conference call and follow-up conversations 14 with Franke, Goodmanson or Parker. The report forecast 3rdQ and 4thQ 98 BPS of $.66 15 16 and $.61, and 99 BPS of $2.60 and stated: America West reported 1Q98 BPS of S0.53, well above our estimate 17 . . . . A strong revenue performance complimented by costs that came in 18 better than our model produced this strong performance. An upbeat conference call with investors reaffirmed our conviction about the robust revenue story here . . . . We are . . . raising our full year 1998 and 1999 19 estimates . . . [as] the first quarter exceeded our expectations. . . . 20 75. On 4/22/98, Salomon Smith Barney issued a report on America West which 21 was based on and repeated information provided in the 4/21/98 conference call and 22 follow-up conversations with Goodmanson or Parker. It forecasted 98 BPS of $2.32 and 23 stated: 24 America West . . reported better-than-expected first-quarter 25 earnings results of S0.53 . . . . For the quarter ended March 31, total operating revenues increased 26 by 1.9%, operating expenses decreased by 2.0%, resulting in a 56.7% 27 increase to operating income. . . . In a conference call with analysts the following main points were 28 made:

- 49 - 1 1) The airline's business to leisure passenger mix continues to improve, largely due to scheduling and service initiatives that are aimed at the 2 business traveler. 3 * * *

4 2) The load factor strength that was experienced in the month of March is 5 expected to continue throughout the second-quarter. 76. On 4/22/98, Warburg issued a report on America West which was based 6 7 on and repeated information provided in the 4/21/98 conference call and follow-up 8 conversations with Franke, Goodmanson or Parker. It stated: AWA: 1Q Reported Ahead of Robust Expectations; Raising 9 Estimates 10 * * *

11 The stock has been a recent star performer, rising 27.9% in the 12 fourth quarter of 1997 and 37.6% in the first Quarter of 1998. . . . The big changes underway at America West are more a function of 13 management changes than at perhaps any other airline in the industry. The revenue side of the airline is being run fundamentally differently than in the 14 recent past. After a bad revenue management misstep in the summer of 1996 that hobbled earnings, the company set out to recruit a new revenue 15 management team. That team, . . . has been quite effective in redirecting the revenue management goals toward a higher yield/lower load factor mix. 16 The level of revenue garnered from higher-fare unrestricted tickets has 17 steadily been rising. . . . The result in the first quarter was that yield rose 11.5% year over 18 year . . . . 19 77. On 4/24/98, Dow Jones News Service published an article on America 20 West, which stated: 21 In response to analysts who have said the company has done all it can to bolster revenue and growth, Parker said America West has several 22 avenues to continue its expansion. 23 * * *

24 "Our ability to attract higher yielding passengers has just begun," he 25 continued. . . . "There is substantially more upside in that regard. . . ." he said. 26 On 4/21/98, America West stock traded as high as S31-5/16, its highest 27 78. 28 price since it emerged from bankruptcy four years earlier in 94. Having inflated America

- 50 - 1 West's stock to its all-time high, America West insiders now started their bail-out. 2 Between 4/23/98 to 5/6/98, top America West insiders sold 101,000 shares at as high as 3 $30.56, pocketing $3 + million in illegal insider trading proceeds. 4 79. On 5/4/98, Airline Financial News published an article, which quoted 5 Franke as stating: 6 "Th4lanagement of the airline's cost structure and employee productivity drove a year-over-year decrease in unit costs, said William A. Franke, 7 chairman and CEO . . . "These factors, together with our continued 8 growth, provide great momentum." 9 80. On 5/10/98, America West issued a release entitled "America West Airlines 10 Completes B737 Inspections Ordered May 7," which stated: 11 America West Airlines has completed today the inspections of B737 aircraft ordered by the Federal Aviation Administration (FAA) through an Airworthiness Directive (AD) issued Thursday, May 7, 1998. In addition, 12 America West has implemented an aggressive schedule to complete the 13 additional B737 inspections ordered by the FAA today. . . . Completing the required work today, America West is in 14 compliance with the May 7 order four days in advance of the original 15 deadline. "We have complied with all conditions of the first Airworthiness 16 Directive and all aircraft affected have returned to service," said Ron Aramini, senior vice president, operations. "We completed the inspections 17 for the first AD at minimal cost and very limited inconvenience to our 18 customers over the last three days." America West has an additional 18 B737 aircraft with between 19 40,000 and 49,999 flight hours. The inspections required for those aircraft ordered by the FAA AD issued May 10 have already begun and will be 20 completed as soon as practicable and within the 14 days required by the AD. America West expects that the cost of compliance with today's AD 21 will not be material and will be completed with minimal disruption to the 22 Airline's schedule and very little inconvenience to customers. 81. On 5/19/98, America West executives Goodmanson and Parker appeared 23 24 at an investors' luncheon hosted by Morgan Stanley Dean Witter. In an formal 25 presentation and other discussions with analysts, they told the analysts, money and portfolio managers, institutional investors, brokers and stock traders present that: 26 The maintenance and operational problems America West had suffered in 27 96 had been fixed and were behind America West. Due to increased aircraft utilization and other factors America West's yields were growing very strongly and 28 would lead to much higher EPS.

- 51 -

1 • America West was implementing a new revenue management system which 2 by inter alia, increasing aircraft utilization would result in strong revenue growth. • America West's operating costs, including aircraft maintenance costs were 3 well below industry averages, in part due to America West's outsourcing much of its maintenance, allowing it to employ fewer high-priced mechanics. Because 4 America West's operating costs were decreasing and its aircraft utilization and revenues were increasing, America West's EPS leverage was much stronger than 5 in the past. 6 • Due to America West's growing revenue and controlled costs, America 7 West was achieving better-than-expected EPS growth, a trend that would continue. • America West's outsourcing, or subcontracting, of its heavy aircraft 8 maintenance was a success, helping lower America West's costs and contributing to its increased aircraft utilization. Outsourcing other aircraft maintenance (such 9 as engine maintenance) was also benefitting operations by lowering costs. 10 • America West had substantially enhanced and improved its management controls, in part through implementing upgraded technology, which was bolstering 11 revenue margins and cost control. 12 • America West was now poised for substantial ongoing EPS growth due to 13 its strong business momentum. • America West had completed or would shortly complete all FAA mandated 14 aircraft inspections quickly, with minimal cost, and no service disruptions. 15 • America West now had an attractive cost advantage of about 25% versus the industry, America West expected this cost advantage to persist even after 16 America West completed its new labor contracts with flight attendants and 17 mechanics. • As a result of the foregoing America West was poised for very strong EPS 18 growth in 98 and 99 with 3rdQ and 4thQ 98 EPS of $.67-$.75 and $.64. 19 82. On 5/27/98, America West issued a release entitled "America West Airlines 20 Completes B737 Fuel Tank Wiring Inspections," which stated: 21 America West Airlines has completed the fuel tank wiring inspection of its entire fleet of B737 aircraft ordered by the Federal Aviation Administration 22 (FAA) through three Airworthiness Directives (AD) issued earlier this 23 month. America West operates 63 B737 aircraft. "We have complied with all conditions of the Ads and all aircraft 24 have returned to service," said Ron Aramini, senior vice president, operations. "We completed the final inspections more than a month ahead 25 of the deadline at minimal cost and with very limited inconvenience to our 26 customers." 83. Each of the statements made between 3/10/98-5/27/98 were false or 27 misleading when issued. The true but concealed facts were: 28

- 52 - 1 (a) America West's maintenance problems were never alleviated after 2 America West laid off 375 maintenance workers in 12/95 and "outsourced" its main- 3 tenance operations. For example, FAA inspectors later cited significant problems with 4 America West's "downsized" maintenance organization and its inability to adequately 5 supervise outsourced maintenance work. The FAA also found that the Company's main- 6 tenance control office was not adequately staffed and that America West paid only 7 superficial attention to important regulatory requirements. Moreover, America West was 8 not properly supervising its outside maintenance contractors and its controls were not 9 adequate to verify whether planes received scheduled maintenance as required by FAA 10 regulations; 11 (b) America West's apparent financial success and record BPS was due

12 in substantial part to America West avoiding mandatory expenditures required to maintain

13 its aircraft in accordance with FAA maintenance schedules and levels and then flying, 14 i.e., utilizing aircraft that had not been properly inspected or maintained to boost its 15 revenues and BPS; 16 (c) America West's apparent financial success was due in substantial part 17 to its avoiding necessary expenditures for maintenance personnel which were required to 18 maintain America West's fleet of aircraft in accordance with standards mandated by the 19 FAA and flying, i.e., utilizing, aircraft that had not been properly inspected or

20 maintained to boost its revenues and BPS; 21 (d) That America West's apparent successful rapid growth, low cost of 22 operations, high aircraft utilization and increasing BPS were not due to an unusually 23 talented management team or its development or implementation of successful revenue 24 enhancement and cost control programs; but rather, due to its illegal avoidance of

25 inspections and maintenance procedures mandated by the FAA; 26 (e) One of the reasons for America West's financial success reported 27 during the Class Period was that America West had deliberately avoided making 28 expenditures required to purchase sufficient spare parts for its aircraft fleet and purchase

- 53 -

1 sufficient spare aircraft to permit adequate customer service when FAA-mandated 2 maintenance and inspection schedules and activities on its aircraft fleet were complied 3 with; 4 (f) In order to achieve artificially low operating costs, America West was 5 deliberately not maintaining its fleet of aircraft or causing its outsourced subcontractors 6 to inspect or maintain in accordance with the maintenance procedures and levels mandated 7 by the FAA and flying, i.e., utilizing, aircraft that had not been properly inspected or 8 maintained to boost its revenues and EPS; 9 (g) America West was not properly monitoring or auditing the firms to 10 which it had subcontracted heavy maintenance of its aircraft fleet, so as to permit those 11 firms to avoid performing FAA-required or mandated maintenance and so America West 12 could fly, i.e., utilize, aircraft that had not been properly maintained or inspected to boost 13 its revenues and EPS; 14 (h) America West had failed to perform a structural check on its oldest 15 737's that was mandated by a 1993 airworthiness directive; 16 (i) American West's aircraft maintenance and inspection problems with 17 the FAA had begun in 11/97-12/97 and, by 5/98, were materially adversely impacting 18 America West's operations, as FAA inspectors found numerous cases of maintenance and 19 operational violations between 12/97 and 5/98 that were so serious that the FAA had 20 indicated to America West it would seek the largest civil fine against it in the history of 21 the airline industry. As a result, the FAA and America West were holding secret 22 discussions by 5/98, from which America West knew that FAA-mandated remedial 23 maintenance steps and enhanced ongoing aircraft inspection and maintenance activities 24 would cost it millions of dollars in short-term expenditures and increased ongoing 25 operating costs; 26 (j) America West did not comply with the 4/98 FAA airworthiness 27 directive concerning Boeing 737 fuel tanks to protect against voltage spikes or short 28 circuits or the early 5/98 airworthiness directive, which grounded all 737's with more

- 54 - 1 than 50,000 flight hours and gave airlines 14 days to inspect 737's with more than 40,000 2 flight hours; 3 (k) The better-than-expected BPS reported by America West for the 1stQ 4 98 was misleading, as it was artificially inflated and was not an accurate indication of or 5 presentation of the real earnings or real earning power of America West because that BPS 6 was artificially inflated by the illegal cost avoidance activities and aircraft utilization 7 pleaded above; 8 (1) Defendants knew that America West would be required, before the 9 end of 98, to perform huge amounts of previously avoided aircraft inspections, testing and 10 maintenance and vastly upgrade its aircraft maintenance procedures, facilities and 11 personnel, which would require the expenditure of millions of dollars for prior 12 maintenance and new maintenance facilities, auditors and enhanced computer systems to 13 track and oversee aircraft maintenance that had been contracted out to third parties, the 14 purchase of additional spare parts and the purchase of additional or spare aircraft and the 15 hiring of a large number of additional maintenance mechanics, all of which would 16 adversely impact America West's operating costs, aircraft utilization and BPS growth 17 going forward; 18 (m) America West's revenue enhancement program did not have the 19 ability to significantly increase America West's yields beyond current levels because when 20 America West was required, as it knew it shortly would be required to do, to maintain 21 its fleet of aircraft in accordance with FAA mandated procedures and perform previously 22 avoided maintenance on its aircraft fleet, this would result in severe service disruptions 23 and operational difficulties, which would hurt America West's competitive position, 24 especially with high fare business travelers and thus have a material adverse impact on 25 its yields; and 26 (n) Due to the foregoing negative conditions which existed inside 27 America West's business during the Class Period, the defendants knew that the forecasts 28 of BPS of S.61+ and $.59+ for America West's 3rdQ and 4thQ 98 and of S2.60+ for

- 55 - 1 99 were false when made as in light of these problems and adverse conditions, those 2 results could not and would not be achieved. 3 84. On 5/20/98 the provision of the America West Shareholders Agreement 4 allowing its controlling shareholders to sell their publicly traded Class B shares without 5 selling any of their supervoting Class A shares became operative. On 5/28/98 TPG sold 6 99.8% of its publicly traded America West stock, 1,946,359 shares for S27.79, pocketing 7 over $54 million in illegal insider trading proceeds. 8 85. On 6/3/98, CS First Boston issued a report "initiating coverage" on America 9 West with a "buy" rating. Because this was CS First Boston's first report on America 10 West, it was issued only after it had extensive discussions with Goodmanson and Parker 11 and was based on and repeated information provided by them. Goodmanson or Parker 12 reviewed this report before it was issued and assured First Boston it was accurate. The 13 report forecast 3rdQ and 4thQ 98 BPS of S.64 and $.59, respectively, and 99 BPS of 14 $2.90 and stated: 15 America West is just beginning to realize the benefits of a nascent 16 transformation of its people, processes and systems which has driven a shift to a more optimized higher yielding revenue stream that should drive improving Revenue per Available Seat Mile (RASM) and attendant upside 17 to earnings. This is all against the backdrop of attractive unit costs (approximately 25% below industry average) that drive an industry leading 18 EBITDAR margin. 19 The bottom line is that America West nicely fits the profile of 20 carriers that should emerge as outperformers in the industry . . . * * * 21 22 America West is clearly positioned to benefit from those fundamental drivers which make the industry reasonably attractive . . . In addition it is positioned to grow considerably faster than the rest of the U.S. network 23 carriers . . . 24 Bottom line from a strategic, management and growth perspective we find America West very attractive. Its solid fundamentals, higher than 25 industry-average growth rate and the nascent benefits of powerful new scheduling, revenue and yield management technology are likely to continue 26 to show better than expected returns . . . 27 28

- 56 - 1 86. On 6/5/98, America West issued a release which stated: 2 America West Airlines today reported May 1998 traffic statistics . . . . "We are very pleased with our May revenue performance," said William 3 A. Franke, chairman. "Our load factors are returning to historical levels as we continue to improve yields through our restructured revenue 4 management initiatives resulting in strong unit revenue performance." 5 87. On 6/5/98, CS First Boston issued another report on America West after 6 discussions with Franke, Goodmanson or Parker which was based on and repeated 7 information provided by them. The report forecast 99 EPS of $2.90, and stated: 8 America West's Fundamental Prospects 9 The continued success of America West hinges upon its ability to grow capacity and earnings at a rate faster than the rest of the U.S. airline 10 industry. Fortunately for America West its . . yield management 11 technology make this prospect likely. * * * 12 The technology and people necessary to facilitate a transition to a 13 more optimized stream of revenue are being implemented which should 14 drive continued meaningful improvement in unit revenue. * * * 15 16 The beauty of the above is that it is against the backdrop of a very attractive cost advantage of about 25% versus the industry. This is due to high productivity and is expected to persist even after the new labor 17 contracts with the flight attendants and mechanics that are expected to be 18 completed by year-end. * * * 19 20 Investing in Technology The leverage in technology investments, and in the people to 21 implement and interpret the information, is enormous in the airline industry, especially when starting from a very rudimentary base. This is because it 22 permits improved asset utilization (through better scheduling), better revenue optimization (through yield management), and it facilitates a shift 23 to being a more business-oriented carrier with a better pattern of service. In addition it improves employee productivity by creating less paid down- 24 time (especially for the expensive pilots) due to better use of expensive 25 aircraft time. The benefits of the scheduling technology are expected to begin to 26 occur in the second quarter of 1998, with the scheduling component alone expected to drive an incremental $5 million per quarter beginning in the 27 third quarter of 1998. 28

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1 The new revenue management technology will drive benefits over the 2 next two years, which should permit America West to move from exploiting 53 % of revenue opportunity to closing to the industry leaders at 60-63 %. The first phase will be in place in 1999, with the enhancement to provide 3 more refined origination and destination control expected in the year 2000. The total benefits from this implementation could approach $50 million 4 am-litany. 5 88. On 6/9/98 America West executives Goodmanson and Parker appeared at 6 a Merrill Lynch Conference. In a formal presentation and break-out session, they told 7 the assembled analysts, money and portfolio managers, institutional investors, brokers and 8 stock traders that: 9 0 The maintenance and operational problems America West had suffered in 96 had been fixed and were behind America West. Due to increased aircraft 10 utilization and other factors America West's yields were growing very strongly and 11 would lead to much higher BPS. • America West was implementing a new revenue management system which 12 by inter alia, increasing aircraft utilization would result in strong revenue growth. 13 America West's operating costs, including aircraft maintenance costs, were well below industry averages, in part due to America West's outsourcing much of 14 its maintenance, allowing it to employ fewer high-priced mechanics. Because America West's operating costs were decreasing and its aircraft utilization and 15 revenues were increasing, America West's EPS leverage was much stronger than in the past. 16 • Due to America West's growing revenue and controlled costs, America 17 West was achieving better-than-expected BPS growth, a trend that would continue. 18 0 America West's outsourcing, or subcontracting, of its heavy aircraft maintenance was a success, helping lower America West's costs and contributing 19 to its increased aircraft utilization. Outsourcing other aircraft maintenance (such •as engine maintenance) was also benefitting operations by lowering costs. 20 • America West had substantially enhanced and improved its management 21 controls, in part through implementing upgraded technology, which was bolstering 22 revenue margins and cost control. O America West was now poised for substantial ongoing BPS growth due to 23 its strong business momentum. 24 America West had completed or would shortly complete all FAA mandated aircraft inspections quickly with minimal cost and no service disruptions. 25 • America West now had an attractive cost advantage of about 25 % versus 26 the industry, America West expected this cost advantage to persist even after America West completed its new labor contracts with flight attendants and 27 mechanics. 28

- 58 - 1 0 America West was continuing to repurchase its common stock on the open market because it believed the stock was undervalued and represented a good, 2 attractive investment. 3 • As a result of the foregoing America West was poised for very strong EPS growth in 98 and 99 with 3rdQ and 4thQ 98 BPS of $.61+ and $.59+ and 99 4 BPS of at least $2.60+. 5 89. On 6/9/98, Merrill Lynch issued a report on America West based on the 6 presentation at its Conference. It stated: 7 • AWA gave a strong presentation this morning at our conference. 8 0 The fundamentals remain sound and it remains one of lowest cost major 9 carriers in the industry. * * * 10 11 The company forecasts strong BPS growth going forward. 12 90. On 6/12/98, Gruntal issued a report on America West which was based on 13 and repeated information provided by Franke, Goodmanson or Parker. Franke, 14 Goodmanson or Parker reviewed this report before it was issued and assured Gruntal it 15 was accurate. The report raised the BPS forecast for America West and now forecast 16 3rdQ 98 BPS of $.65 and 99 BPS of $2.65. 17 91. On 6/22/98, Continental sold 100% of its publicly traded America West 18 stock -- 317,140 shares at $28.13 for over $8.9 million in illegal insider trading proceeds. 19 92. On 6/23/98, The Wall Street Journal reported: America West faces the prospect of substantial federal sanctions for 20 failing to properly oversee the work of outside maintenance contractors on 21 its jetliners. The Federal Aviation Administration is seeking to impose at least $1 22 million in civil penalties, according to administration officials familiar with 23 negotiations between the FAA and the nation's ninth-largest airline. 24 The agency has greatly stepped up its scrutiny of aircraft main- tenance, in-house and outsourced, since the 1996 ValuJet Airlines crash. It has uncovered problems with America West's supervision of outside 25 aircraft overhauls and repairs, these officials said yesterday. 26 In some instances, they said, America West's controls may not have been adequate to verify whether aircraft underwent scheduled heavy 27 maintenance, as required by FAA regulations. 28 * * *

- 59 - 1 Separately, the FAA put America West on its "watch list" June 9 because of labor unrest among maintenance workers and flight attendants. 2 It is customary for the agency to perform more safety inspections than normal whenever an airline faces protracted contract talks. The airline 3 spokeswoman said the enhanced surveillance hasn't turned up any 4 "significant maintenance or operational problems." 5 93. On 6/24/98, Knight-Ridder Tribune Business News published an article 6 entitled "American West Brass Calls FAA Scrutiny 'Routine'," which stated: America West Airlines' top management, reacting to news reports of 7 heightened scrutiny of the airline by the Federal Aviation Administration, 8 tried to reassure employees that the action is routine. 9 In a memo to employees late Monday, after The Arizona Republic asked about an internal FAA memo detailing the increased surveillance, Chief Executive Officer Richard Goodmanson revealed the action. He said 10 it means FAA personnel will perform more than the usual number of hangar, ramp and in-flight inspections of America West over the next few 11 weeks. 12 "The FAA performs daily inspections on every air carrier to ensure the airlines are meeting its standards," he wrote. "Additional surveillance 13 is a routine FAA procedure, especially in circumstances where an airline 14 is involved in protracted labor negotiations." * * 15 Goodmanson reiterated America West's official comment Monday 16 that no significant maintenance or operating problems have been discovered as the result of the additional inspections. He said the inspections are not 17 having or expected to have an impact on America West's flights. 18 94. Because of America West's reassurance and characterization of the FAA's 19 action as routine, America West's stock held up well and by 7/9/98 was trading at $30. 20 95. Each of the statements made between 6/3/98-6/23/98 were false or 21 misleading when issued. The true but concealed facts were: 22 (a) America West's maintenance problems were never alleviated after 23 America West laid off 375 maintenance workers in 12/95 and "outsourced" its main- 24 tenance operations. For example, FAA inspectors later cited significant problems with 25 America West's "downsized" maintenance organization and its inability to adequately 26 supervise outsourced maintenance work. The FAA also found that the Company's 27 maintenance control office was not adequately staffed and that America West paid only 28 superficial attention to important regulatory requirements. Moreover, America West was

- 60 - 1 not properly supervising its outside maintenance contractors and its controls were not 2 adequate to verify whether planes received scheduled maintenance as required by FAA 3 regulations; 4 (b) America West's apparent financial success and record BPS, as 5 reported during the Class Period, were due in substantial part to America West avoiding 6 mandatory expenditures required to maintain its aircraft in accordance with FAA main- 7 tenance schedules and levels and then flying, i.e., utilizing aircraft that had not been 8 properly inspected or maintained to boost its revenues and BPS; 9 (c) America West's apparent financial success as reported during the 10 Class Period was due in substantial part to its avoiding necessary expenditures for 11 maintenance personnel which were required to maintain America West's fleet of aircraft 12 in accordance with standards mandated by the FAA and flying, i.e., utilizing, aircraft that 13 had not been properly inspected or maintained to boost its revenues and BPS; 14 (d) That America West's apparent successful rapid growth, low cost of 15 operations, high aircraft utilization and increasing BPS were not due to an unusually 16 talented management team or its development or implementation of successful revenue 17 enhancement and cost control programs; but rather, due to its illegal avoidance of 18 inspections and maintenance procedures mandated by the FAA; 19 (e) One of the reasons for America West's financial success reported 20 during the Class Period was that America West had deliberately avoided making 21 expenditures required to purchase sufficient spare parts for its aircraft fleet and purchase 22 sufficient spare aircraft to permit adequate customer service when FAA-mandated 23 maintenance and inspection schedules and activities on its aircraft fleet were complied 24 with; 25 (f) In order to achieve artificially low operating costs, America West was 26 deliberately not maintaining its fleet of aircraft in accordance with the maintenance 27 procedures and levels mandated by the FAA and flying, i.e., utilizing, aircraft that had 28 not been properly inspected or maintained to boost its revenues and BPS;

- 61 -

1 (g) America West was not properly monitoring or auditing the firms to 2 which it had subcontracted heavy maintenance of its aircraft fleet, so as to permit those 3 firms to avoid performing FAA-required or mandated maintenance and so America West 4 could fly, i.e., utilize, aircraft that had not been properly maintained or inspected to boost 5 its revenues and EPS; 6 (h) America West had failed to perform a structural check on its oldest 7 737's that was mandated by a 1993 airworthiness directive; 8 (i) American West's aircraft maintenance and inspection problems with

9 the FAA, which began in 11/97-12/97, were not at all routine, but were, in fact, very 10 serious and were by 5/98 materially adversely impacting America West's operations, as 11 FAA inspectors found numerous instances of maintenance and operational violations 12 between 12/97 and 5/98 that were so serious that the FAA had told America West it 13 would seek the largest civil fine against America West in the history of the airline 14 industry. As a result, the FAA and America West were holding secret settlement

15 discussions by 5/98, from which America West knew that FAA-mandated remedial 16 maintenance steps and enhanced ongoing inspection and maintenance activities would cost 17 it millions of dollars in short-term expenditures and ongoing increased operating costs;

18 (j) Defendants knew that America West would be required, before the 19 end of 98, to perform huge amounts of previously avoided aircraft inspections, testing and

20 maintenance and vastly upgrade its aircraft maintenance procedures, facilities and 21 personnel, which would require the expenditure of millions of dollars for prior 22 maintenance and new maintenance facilities, auditors and enhanced computer systems to 23 track and oversee aircraft maintenance that had been contracted out to third parties, the 24 purchase of additional spare parts and the purchase of additional or spare aircraft and the 25 hiring of a large number of additional maintenance mechanics and other personnel, all of 26 which would adversely impact America West's operating costs, aircraft utilization and

27 EPS growth going forward; 28

- 62 - 1 (k) The better-than-expected EPS reported by America West during the 2 lstQ 98 was misleading, as it was artificially inflated and was not an accurate indication 3 of or presentation of the real earnings or real earning power of America West because 4 that EPS was artificially inflated by the illegal cost avoidance activities and aircraft 5 utilization pleaded above; 6 (1) America West's revenue enhancement program did not have the 7 ability to significantly increase America West's yields beyond current levels because when 8 America West was required, as it knew it shortly would be required to do, to maintain 9 its fleet of aircraft in accordance with FAA mandated procedures and perform previously 10 avoided maintenance on its aircraft fleet, this would result in severe service disruptions 11 and operational difficulties, which would hurt America West's competitive position, 12 especially with high fare business travelers and thus have a material adverse impact on 13 its yields; and 14 (m) Due to the foregoing negative conditions which existed inside 15 America West's business during the Class Period, the defendants knew that the forecasts 16 of EPS of $.61+ and $.59+ for America West's 3rdQ and 4thQ 98 and of $2.60+ for 17 99 were false when made as in light of these problems and adverse conditions, those 18 results could not and would not be achieved. 19 96. On 7/13/98 CS First Boston issued a report on America West which was 20 based on and repeated information provided by Franke, Goodmanson and Parker. They 21 reviewed this report before it was issued and assured CS First Boston it was accurate. 22 The report forecast 3rdQ 98 and 4thQ 98 BPS of $.64 and $.59, and 99 BPS of $2.90 23 and stated: 24 On June 5, 1998, we initiated our coverage of America West Airlines with a Buy rating . . . . We focused on the company's strengths 25 (domestic orientation, refreshed management, and technology transformation) and the power of those attributes to drive higher-than- 26 industry-average returns. 27 In the following text, we will focus on . . concerns raised by investors about America West, and why we believe that investment in AWA 28 is attractive. .

- 63 - 1 First, there is the prospect for increased Federal Aviation Administration scrutiny and for a substantial fine for noncompliance with 2 FAA regulations. 3 * * *

4 FAA and labor fears should never be too readily discounted for airlines, but, in our view, the fear is greater than the likely reality in both 5 cases. 6 With respect to the FAA, we believe that the maximum likely fine is $5 million; more likely, the fine will be $2 million or less. If this fine 7 were levied and accounted for in the third quarter, it could represent between $0.065 and $0.025 or less per share. Our reasoning for these fine 8 levels is that thus far the highest fine levied by the FAA was $2.8 million on Sabretech for loading the cargo on Valujet that caused the crash. The 9 highest fine on an airline has been $800,000. FAA situations are not to be taken lightly, and it is our sense that the management of AWA will 10 aggressively work to ensure that all issues receive attention at senior levels. 11 97. On 7/14/98, the Associated Press published an article which stated: 12 The government levied a S5 million fine against America West Airlines. . . 13 saying the . . . carrier violated aircraft maintenance and operating rules. The fine . . . was based on findings that included 17 America West 14 aircraft being flown after they were overdue for structural tests, according 15 to the Federal Aviation Administration. 16 98. On 7/14/98, America West issued a release which stated: America West will implement a series of new practices and procedures 17 regarding certain maintenance activities . . . . 18 * * *

19 "We believe the problems cited have been fully addressed, and the 20 new practices and procedures will exceed minimum FAA regulations." * * * 21 America West said that the settlement agreement's provisions will not 22 have a material adverse affect on the Company's operations or financial 23 results. 24 99. On 7/15/98, CS First Boston issued a report on America West, after 25 discussions with Goodmanson and Parker which was based on and repeated information 26 provided by them. Goodmanson or Parker reviewed this report before it was issued and 27 assured CS First Boston it was accurate. The report forecast 3rdQ and 4thQ 98 EPS of 28 $.64 and $.59, respectively, and 99 EPS of $2.90 and stated:

- 64 - It was announced late Tuesday night that America West would 2 receive a fine of $5 million from the FAA . . . . The announcement of this fine should remove a major source of 3 uncertainty surrounding this stock, and remove any fears that the maintenance/safety situation is likely to blossom into a more significant 4 problem. 5 100. As a result of defendants' continued reassurances that the FAA action would 6 not have an adverse impact on America West's operations or financial results, America 7 West's stock traded as high as $30-318 on 7/14-15/98. 8 101. On 7/21/98, America West issued a release headlined "America West 9 Reports 80% Increase in Second Quarter Earnings; The Best Quarterly Results in 10 Company History," which stated: 11 America West. . . today reported the best quarterly earnings in its history. The record second quarter 1998 net income of $41.4 million was up 80 12 percent over second quarter 1997's net income of $23.0 million. 13 * * *

14 "We are obviously very pleased with the 80 percent increase in our June quarterly earnings performance -- the best in our 15-year history," said 15 William A. Franke, chairman and chief executive officer, America West Holdings Corporation. "Our enhanced product and arm' ineei-ed revenue 16 management strategy at the Airline have resulted in significant increases in yields and improvements in unit revenues year-over-year. We also 17 continued to keep unit costs in check as fuel prices and improved 18 productivity drove a year-over-year decrease in the Airline's unit costs. 19 102. On 7/21/98, subsequent to the release of its 2ndQ 98 results, America West 20 held a conference call for analysts, money and portfolio managers, institutional investors 21 and large America West shareholders to discuss America West's results, its business and 22 prospects. During the call, and in follow-up conversations with analysts, Parker and 23 Goodmanson stated: 0 America West was implementing a new revenue management system which 24 by inter alia, increasing aircraft utilization would result in strong revenue growth. Due to increased aircraft utilization and other factors America West's yields were 25 growing very strongly and would lead to much higher BPS. 26 0 Due to America West's growing revenue and controlled costs America West 27 was achieving better-than-expected BPS growth, a trend that would continue. America West's outsourcing, or subcontracting, of its heavy aircraft 28 maintenance was a success, helping lower America West's costs and contributing

- 65 - 1 to its increased aircraft utilization. Outsourcing other aircraft maintenance (such 2 as engine maintenance) was also benefitting operations by lowering costs. O America West was now poised for substantial ongoing EPS growth due to 3 its strong business momentum. 4 0 America West now had an attractive cost advantage versus the industry, America West expected this cost advantage to persist even after the FAA 5 settlement and after America West completed its new labor contracts with flight 6 attendants and mechanics. • The maintenance problems discovered by the FAA which had led to the fine 7 and settlement had been fixed and the FAA settlement requiring enhanced maintenance steps and record-keeping would not have any adverse impact on 8 America West's operations or financial results. 9 America West was continuing to repurchase its common stock on the open market because it believed the stock was undervalued and represented a good, 10 attractive investment. 11 • As a result of the foregoing America West was poised for very strong BPS growth in 98 and 99 with 3rd0 and 4thQ 98 BPS of $.61+ and S.59+ and 99 12 BPS of at least $2.60+. 13 103. On 7/22/98, Knight-Ridder Tribune Business News published an article on 14 America West, which stated: 15 "We couldn't be happier with the financial performance of the quarter," said Doug Parker, America West's chief financial officer. "We 16 certainly expect 1998 to be a record year when it's done." 17 * * *

18 Looking forward, Parker said America West's third quarter bookings are stron• . He downelayed concerns, raised this year by analysts, that the 19 airline has taken its new "yield management" strategy as far as it can ga,. 20 dampening the outlook for future earnings growth. 21 "We actually have a good bit of upside left," he said. Parker said America West hasn't noticed any impact from the 22 national publicity surrounding the FAA settlement. 23 Asked whether the airline's repeated delays and cancellations in the past month will hurt future results, as they did two years ago, Parker said 24 the current situation is "nothing of that magnitude." 25 * * *

26 Today, it's mainly dealing with poor on-time performance . . . . Part of the problem is increased FAA inspections, he said, but he also 27 attributed the delays to weather and a lack of spare aircraft. 28

- 66 - 1 "This is related to a number of issues, most of which we think are easily fixed by ourselves," he said. "We expect the third quarter to have 2 better operational performance than the second quarter," he said. 3 104. On 7/22/98, CS First Boston issued a report on America West which was 4 based on and repeated information provided by Goodmanson and Parker in the 7/21/98 5 conference call and follow-up conversations. The report forecast 3rdQ and 4thQ 98 BPS 6 of $.64 and $.55, respectively, and 99 BPS of $2.95 and stated: 7 America West's expected significant growth, very attractive valuation (particularly on an Enterprise Value to EBITDAR and VBA basis), and the 8 expected benefits from its rollout of new revenue management, scheduling 9 and other systems causes us to continue to recommend it as a Buy . . . . * * * 10 The earnings report, guidance on costs and revenues, and the context 11 from other carrier's earnings reports leads us to believe that it is on track 12 to perform as we expected in our initiation report of June 5, 1998. 13 105. As America West's stock continued to hold up well after disclosure of the 14 FAA fine and enforcement action, America West's insiders took advantage of this last 15 chance to unload and sold 66,000 shares on 7/23-24/98 at as high as $27.88, pocketing 16 another $1.77 million in illegal insider trading proceeds. 17 106. On 8/5/98, Oppenheimer issued a report "initiating coverage" on America 18 West with a "strong buy" rating. Because this was Oppenheimer's first report on 19 America West, it was issued only after analysts had extensive discussions with 20 Goodmanson and Parker which was based on and repeated information provided by them. 21 Goodmanson or Parker reviewed this report before it was issued and assured 22 Oppenheimer it was accurate. The report forecast 3rdQ and 4thQ 98 EPS of $.62 and 23 $.55, respectively, and 99 BPS of $2.80. The report stated: We are initiating coverage of America West. . . with a Strong Buy 24 rating . . . based on . . . our fiscal 1999E earnings estimates of $2.80 . . . We believe that the company is well positioned for. . . the integration 25 of upgraded yield management and scheduling systems. 26 107. On 8/6/98, America West issued a release, which stated: 27 America West . . announced today . . a new program authorizing the Company's purchase of up to five million shares of its publicly traded Class 28 B common stock . .

- 67 - 1 . . . William A. Franke, chairman and chief executive officer [said], "The program reflects both our belief that America West stock is an 2 attractive investment . 3 108. Each of the statements made between 7/13/98-8/5/98 were false or 4 misleading when issued. The true but concealed facts were: 5 (a) America West's apparent financial success and record BPS, as 6 reported during the Class Period, was due in substantial part to America West avoiding 7 mandatory expenditures required to maintain its aircraft in accordance with FAA main- 8 tenance schedules and levels and then flying, i.e., utilizing aircraft that had not been 9 properly inspected or maintained to boost its revenues and BPS; 10 (b) America West's financial success as reported during the Class Period 11 was due in substantial part to its avoiding necessary expenditures for maintenance 12 personnel which were required to maintain America West's fleet of aircraft in accordance 13 with standards mandated by the FAA and flying, i.e., utilizing, aircraft that had not been 14 properly inspected or maintained to boost its revenues and BPS; 15 (c) That America West's apparently successful rapid growth, low cost 16 of operations, high aircraft utilization and increasing BPS were not due to an unusually 17 talented management team or its development or implementation of successful revenue 18 enhancement and cost control programs; but rather, due to its illegal avoidance of 19 required maintenance procedures mandated by the FAA; 20 (d) The better-than-expected BPS reported by America West during the 21 lstQ and 2ndQ 98 were misleading, as they were artificially inflated and were not an 22 accurate indication of or presentation of the real earnings or real earning power of 23 America West because those BPS were artificially inflated by the illegal cost avoidance 24 activities and aircraft utilization pleaded above; 25 (e) In order to achieve artificially low operating costs, America West had 26 been deliberately not maintaining its fleet of aircraft in accordance with the maintenance 27 procedures and levels mandated by the FAA and flying, i.e. , utilizing, aircraft that had 28 not been properly inspected or maintained to boost its revenues and BPS;

- 68- 1 (f) That, due to its settlement with the FAA, defendants knew that 2 America West would be required, before the end of 98, to perform huge amounts of 3 previously avoided aircraft inspections, testing and maintenance and vastly upgrade its 4 aircraft maintenance procedures, personnel and facilities, which would require the 5 expenditure of millions of dollars for prior maintenance and new maintenance facilities, 6 auditors and enhanced computer systems to track and oversee aircraft maintenance that 7 had been contracted out to third parties, the purchase of additional spare parts and the 8 purchase of additional or spare aircraft and the hiring of a large number of additional 9 maintenance mechanics, which would adversely impact America West's operating costs, 10 aircraft utilization and BPS growth going forward; 11 (g) America West's revenue enhancement program did not have the 12 ability to significantly increase America West's yields beyond current levels because when 13 America West was required, as it knew it shortly would be required to do, to maintain 14 its fleet of aircraft in accordance with FAA mandated procedures and perform previously 15 avoided maintenance on its aircraft fleet, this would result in severe service disruptions 16 and operational difficulties, which would hurt America West's competitive position, 17 especially with high fare business travelers and thus have a material adverse impact on 18 its yields; and 19 (h) Due to the foregoing negative conditions which existed inside 20 America West's business during the Class Period, the defendants knew that the forecasts 21 of BPS of $.61+ and S.59+ for America West's 3rdQ and 4thQ 98 and of $2.60+ for 22 99 were false when made as in light of these problems and adverse conditions, those 23 results could not and would not be achieved. 24 109. On 9/3/98, in stark contrast to defendants' previous representations, 25 America West revealed an "unsatisfactory operational performance" and that "[biased on 26 the recent trends in the Airline's operational performance . . . the Company [would not] 27 meet third quarter. . consensus earnings estimate[sl." America West also revealed that 28 it was purchasing two additional spare aircraft, increasing the number of cities where

- 69 -

1 overnight maintenance capabilities are available from four to 13 and greatly increasing 2 its inventory of spare parts, and hiring over 100 additional mechanics, all at a very 3 substantial cost. Later, America West even offered to re-hire all of the 375 aircraft 4 mechanics it had fired in 12/95. 5 110. Analysts slashed the forecasts for America West's 3rdQ and 4thQ 98 BPS 6 and lowered the 99 BPS forecast as well -- to levels flat with or below America West's 7 98 BPS. On 9/3/98, Oppenheimer downgraded America West due to its "operational 8 disruptions" that are "negatively affecting dispatch reliability, on-time performance and 9 therefore earnings." DLJ Securities issued a report on America West, stating: 10 e America West preannounced early yesterday a third quarter earnings 11 shortfall . . . . a The pro blem operational, related to slowdowns by maintenance 12 workers who are in contentious contract negotiations with the company, plus a far more smothering presence of the Federal Aviation Administration 13 (FAA) on the "property" than we had understood. 14 * *

15 1. Problems are two-fold. The problems with AWA's earnings 16 appear to be 100% operational, and in turn are driven by the maintenance slowdown and the FAA's intervention. . . . and general slowdown in maintenance procedures that have kept aircraft out of the system and trashed 17 the carrier's schedule integrity. . . . The problems had started in the second quarter, but grew substantially in July and August. The company 18 is responding by increasing the number of spare aircraft, raising from four to 13 the number of cities where overnight maintenance capabilities are 19 available, and holding substantially greater amounts of spare parts in 20 inventory. All of this has a cost . . . . As if these maintenance issues weren't bad enough, their presence 21 has drawn the FAA to America West to perform a smothering oversight of 22 the company's operations, both inside and outside the maintenance areas. The FAA's mere presence appears to be making employees -- who can be directly and personally fined and/or relieved of their licenses -- work far 23 more cautiously. That dynamic is only exacerbating the schedule integrity 24 problems . . . . * * * 25 Two disturbing aspects of yesterday's announcement (beyond the 26 obvious disappointment) were the facts that the current scenario is reminiscent of operationally-related earnings shortfalls in 1996, and that we 27 had no inkling from the company of the problems . . . 28

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1 111. On 9/3/98, America West's stock collapsed -- falling from $20-5116 on 2 9/2/98 to S14 on 9/3/98 on 2.5 million shares volume -- a 31% one-day drop, the largest 3 one-day price drop (on an absolute or percentage basis) on the largest one-day stock 4 volume since America West emerged from bankruptcy in 94. The stock continued to fall 5 to as low as $9-5/8 in early 10/98 -- its lowest price since 6/95 -- as the market digested 6 the negative implications of the 9/3/98 revelations. 7 112. When America West tried to blame its operational problems on its union 8 employees, Donald Steinman, chairman of the Air Line Pilots Association unit at America 9 West, said 1314_1-iin g the Teamsters for the airline's operational problems demonstrates 10 a genuine head-in-the-sand approach to management." Steinman also said that America 11 West's claims only furthers the perception that America West management is unwilling 12 to address the airline's operational problems. "After receiving the largest fine ever 13 assessed against an airline by the FAA, the company now shows the poorest on-time 14 record in the industry. Years of cost-cutting have taken their toll on the airline's 15 infrastructure," Steinman continued. 16 113. On 9/18/98, The Wall Street Journal published an article on America West 17 entitled "America West Loses Altitude Just After Its Comeback" which stated: 18 The FAA said it uncovered serious lapses in maintenance and operations, and struck a settlement with the airline requiring a major 19 overhaul of its maintenance and flight operations, including setting up joint teams with the FAA to revamp procedures and beefing up oversight of 20 outsourced maintenance work. 21 Leaders of America West's main unions say the FAA findings resulted from cost cutting by management. The airline needs more 22 equipment, more spare parts and more employees, they say, and frequent 23 turnover in operations management has hurt as well, they say. 24 114. The Associated Press reported, based on an interview with FAA officials, 25 that: "The airline understands it must meet the FAA's stringent standards, 26 and we expect full accountability for any air carrier's failure to comply with 27 safety regulations," said FAA Administrator Jane Garvey. 28

-71 - 1 * * *

2 The problems date back to December . . . 3 AMERICA WEST'S MISLEADING FINANCIAL 4 STATEMENTS AND DISCLOSURES 5 115. America West's 4thQ 97 and lstQ and 2ndQ 98 financial statements and 6 related disclosures were materially false and misleading due to the Company's failure to 7 accurately and fully disclose the impact of its illegal practices with regard to maintenance 8 and repairs of its aircraft which caused its operating expenses to be materially lower than 9 they would have been during the Class Period. These practices made America West's 10 operating results not indicative of America West's underlying business nor of the business 11 trends investors could expect based on those results and America West's failure to 12 disclose these practices was a violation of Generally Accepted Accounting Principles 13 ("GAAP") and SEC rules. 14 116. The SEC requires that as to annual and interim financial statements filed 15 with the SEC, that registrants include a management discussion and analysis section 16 which provides information with respect to the results of operations and "also shall 17 provide such other information that the registrant believes to be necessary to an

18 understanding of its financial condition, changes in financial condition and results of operations." See Regulation S-K (17 CFR §229.303). Regulation S-K states that as to 19 20 annual results this management discussion and analysis section shall: 21 i.Describe any unusual or infrequent events or transactions or any significant economic changes that materially affected the amount of reported income from continuing operations and, in each case, indicate the extent to 22 which income was so affected. In addition, describe any other significant components of revenues or expenses that, in the registrant's judgment, 23 should be described in order to understand the registrant's results of 24 operations. 25 Describe any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations. If 26 the registrant knows of events that will cause a material change in the 27 28

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1 relationship between costs and revenues (such as known future increases in costs of labor or materials or price increases or inventory adjustments), the 2 change in the relationship shall be disclosed. 3 17 C.F.R. §229.303(a)(3). 4 117. As to interim financial statements, the discussion shall include the following: 5 4. The registrant's discussion of material changes in results of operations shall identify any significant elements of the registrant's income 6 or loss from continuing operations which do not arise from or are not 7 necessarily representative of the registrant's ongoing business. 8 17 C.F.R. §229.303(b)(2). 9 118. GAAP, as set forth in FASB Statement of Concepts No. 1, 1134 and 42 10 states that: Financial reporting should provide information that is useful to 11 present and potential investors and creditors and other users in making rational investment, credit, and similar decisions. The information should 12 be comprehensible to those who have a reasonable understanding business and economic activities and are willing to study the information 13 with reasonable diligence. 14 * * *

15 Financial reporting should provide information about an enterprise's financial performance during a period. Investors and creditors often use 16 information about the past to help in assessing the prospects of an enterprise. Thus, although investment and credit decisions reflect investors' 17 and creditors' expectations about future enterprise performance, those expectations are commonly based at least partly on evaluations of past 18 enterprise performance. 19 119. For these reasons, financial reporting includes not only financial statements 20 but also other means of communicating information that relates directly or indirectly to 21 the information in the financial statements. See FASB Statement of Concepts No. 1, 17. 22 120. For 97, America West reported salaries and related costs of $418.2 million, 23 compared to 5385.8 million in 96. America West reported 97 aircraft maintenance 24 materials and repairs expense of $146.6 million versus $125.8 million in 96. As the 25 Individual Defendants knew, these costs were artificially low and were not representative 26 of the costs that America West would be incurring in the future as it knew that the 27 outsourcing of its maintenance function had been a complete failure and the Company 28 would soon have to rehire workers at higher wages resulting in higher costs and

- 73 - 1 additionally because it was not complying with FAA regulations with respect to its 2 maintenance which would ultimately result in higher maintenance costs. The defendants 3 knew that when America West was ultimately forced to comply with such regulations 4 costs would materially increase. Contrary to the requirements of GAAP and SEC 5 regulations, America West did not disclose these events which would cause a material 6 change in the relationship between costs and revenues, and which made the currently 7 reported results unrepresentative of America West's core profitability. Rather, the 8 disclosures in the 97 Form 10-K with respect to these maintenance expense stated only 9 the following: 10 Aircraft maintenance materials and repairs expense per ASM 11 increased 6.9% or $20.8 million due primarily to an increase in capitalized maintenance cost which has increased capitalized maintenance amortization expense by $26.5 million in 1997 compared to 1996. The unamortized 12 balance of capitalized maintenance grew to $122.9 million as of December 13 31, 1997, an increase of $20.4 million from December 31, 1996. 14 121. For the istQ ended 3/31/98, salaries and related costs increased to S105.6 15 million from $101 million in the lstQ ended 3/31/97, and aircraft maintenance materials 16 and repairs increased to $42.4 million from $31.3 million in the lstQ of 97. Once again 17 in this quarter, the Company's illicit practice of not making all required maintenance 18 expenditures and caused its expenses to be materially lower than could be expected in 19 future quarters. The insiders once again knew that this low expense was a trend which 20 could not continue as the Company would have to eventually do the maintenance required 21 by the FAA and salaries would increase as America West hired full-time maintenance 22 staff and thus maintenance expenses would increase significantly. Nevertheless, in violation of GAAP and SEC rules, the Company stated only the following in its MD&A 23 24 section about these expenses: • Salaries and related costs per ASM increased 5.9 percent as a salary 25 level increase in the pilot contract that was effective in 5/97 increased pilot salaries $3.9 million in the 98 quarter over the comparable 97 period and 26 increase in the accrual for Award Pay (S1.2 million) resulting from higher 27 operating income in 98. O Aircraft maintenance materials and repairs expense per ASM 28 increased 35.2 percent due primarily to an increase in capitalized

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1 maintenance amortization expense of S3.8 million for the lstQ 98 when 2 compared to the lstQ 97. 3 122. Ultimately, America West has reached an agreement with the FAA that it 4 will perform required maintenance and has also reached an agreement for hiring certain 5 maintenance personnel which both have dramatically increased costs. In the 4thQ ended 6 12/31/98, salaries and related costs increased to 24% of revenues versus the 21% to 22% 7 range during the Class Period and maintenance materials and repairs expense has 8 increased to nearly 10% versus the 8% to 9% range during the Class Period. Both of 9 these increases have had a material adverse effect on America West's post-Class Period 10 results.

11 INSIDER SELLING ahniit 12 123. While America West's top insiders were iss uing favorable statements 13 America West, a number of America West's insiders sold 2,431,318 shares of America 14 West stock, for more than S67 million in illegal insider trading proceeds -- over 97% of 15 their collective holdings of America West stock -- to personally profit from the artificial 16 inflation in America West's stock price. Notwithstanding their access to material non- 17 public information and their duty to disclose all material facts before trading in America

18 West stock, they sold significant amounts of their America West stock at artificially 19 inflated prices. Defendants' insider selling during the Class Period is detailed below: SHARES SHARE 20 INSIDER NAME DATE SOLD PRICE PROCEEDS 21 Aramini 05/06/98 34,000 S29.63 $1,007,420 34,000 S1,007,420 22 Percent of Class B shares actually owned sold: 100% 23 Bollenbach 05/06/98 12,000 S29.63 $ 355,560 06/09/98 819 $29.00 $ 23,751 24 12,819 S 379,311 25 Percent of Class B shares actually owned sold: 100% Carreon 05/06/98 10,000 $29.63 S 296,300 26 10,000 S 296,300 27 Percent of Class B shares actually owned sold: 100% 28

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1 Continental 06/22/98 317,140 S28.13 $8,921,148 Airlines 317,140 $8,921,148 2 Percent of Class B shares actually owned sold: 100% 3 Fraser 04/23/98 12,000 $30.25 $ 363,000 12,000 $ 363,000 4 Percent of Class B shares actually owned sold: 93.6% 5 Garel 07/23/98 18,400 $27.50 $ 506,000 6 07/23/98 500 $27.56 13,780 07/23/98 2,200 $27.88 61,336 07/23/98 400 527.63 11,052 7 07/24/98 5,000 S26.56 132,800 07/24/98 500 $26.88 13,440 8 07/24/98 4,000 $26.69 106,760 9 07/24/98 2,000 $27.25 54,500 07/24/98 11,200 526.25 294,000 07/24/98 1,000 $26.75 26,750 10 07/24/98 7,800 $26.63 207,714 07/24/98 13,000 $27.00 S 351,000 11 66,000 $1,779,132 12 Percent of Class B shares actually owned sold: 100% 13 Howlett 05/06/98 27,000 $29.63 $ 800,010 27,000 $ 800,010 14 Percent of Class B shares actually owned sold: 100% Ryan 04/23/98 6,000 $30.56 $ 183,360 15 6,000 $ 183,360 16 Percent of Class B shares actually owned sold: 88% TPG GenPar LP 05/28/98 1,613,586 $27.79 $44,841,555 17 Coulter/Schifter 05/28/98 162,592 $27.79 4,518,432 05/28/98 170,181 $27.79 $ 4,729,330 18 1,946,359 $54,089,317 19 Percent of Class B shares actually owned sold: 99.8% 20 124. The defendants' stock sales occurred at suspicious times and involved 21 suspicious amounts. Defendants' sales took place while the stock traded between 22 approximately $27-530 per share and just prior to the stock's steep decline from S29 on 23 7/22/98 to S21-5/16 on 8/4/98, and then plunging to approximately S14 per share on 24 9/3/98 during a period in which the FAA found 11 serious cases of maintenance and 25 operational violations, America West was under "heightened surveillance" by the FAA,

26 the Company was engaged in secret settlement negotiations with the FAA, and while 27 operational problems were reducing revenue by $27 million, earnings by $11 million and

28 EPS by 5.26. Continental sold 100% of its stock on 6/22/98, the day before the FAA's

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1 increased surveillance of America West was reported in The Wall Street Journal on 2 6/23/98. 3 125. The stock sales by each Individual Defendant were unusual. During 3/96- 4 4/98, America West's insiders sold no America West stock. 5 (a) Aramini sold 34,000 shares of America West stock during the Class 6 Period for over $1 million. This compares with $0 in proceeds received by Aramini from 7 the sale of America West stock in the 20 months prior to the Class Period. Aramini sold 8 no stock after the Class Period through 12/31/98; 9 (b) Bollenbach sold 12,819 shares of America West stock during the 10 Class Period for S379,311. This compares with $0 in proceeds received by Bollenbach 11 from the sale of America West stock in the 20 months prior to the Class Period. 12 Bollenbach sold no stock after the Class Period through 12/31/98; 13 (c) Carreon sold 10,000 shares of America West stock during the Class 14 Period for $296,300. This compares with SO in proceeds received by Carreon from the 15 sale of America West stock in the 20 months prior to the Class Period. Carreon sold no 16 stock after the Class Period through 12/31/98; 17 (d) Fraser sold 12,000 shares of America West stock during the Class 18 Period for $363,000. This compares with $0 in proceeds received by Fraser from the 19 sale of America West stock in the 20 months prior to the Class Period. Fraser sold no 20 stock after the Class Period through 12/31/98; 21 (e) Garel sold 66,000 shares of America West stock during the Class 22 Period for almost $1.8 million. This compares with SO in proceeds received by Garel 23 from the sale of America West stock in the 20 months prior to the Class Period. Garet 24 sold no stock after the Class Period through 12/31/98; 25 (t) Howlett sold 27,000 shares of America West stock during the Class 26 Period for $800,000. This compares with $0 in proceeds received by Howlett from the 27 sale of America West stock in the 20 months prior to the Class Period. Howlett sold no 28 stock after the Class Period through 12/31/98:

- 77 - 1 (g) Ryan sold 6,000 shares of America West stock during the Class 2 Period for $183,360. This compares with $0 in proceeds received by Ryan from the sale 3 of America West stock in the 20 months prior to the Class Period. Ryan sold no stock 4 after the Class Period through 12/31/98; and 5 (h) TPG/Coulter/Schifter sold 1,946,359 shares of America West stock 6 during the Class Period for over S54 million. This compares with $0 in proceeds 7 received by TPG/Coulter/Schifter from the sale of America West stock in the 20 months 8 prior to the Class Period. TPG/Coulter/Schifter sold no stock after the Class Period 9 through 12/31/98. 10 SAFE HARBOR 11 126. The safe harbor provided for forward-looking statements ("FLS") does not 12 apply to the false FLS pleaded. The safe harbor does not apply to America West's 13 allegedly false financial statements. None of the FLS pleaded herein were identified as 14 a "forward-looking statement" when made, it was not stated that actual results "could 15 differ materially from those projected," nor did meaningful cautionary statements 16 identifying important factors that could cause actual results to differ materially from those 17 in the FLS accompany those FLS. None of the particular oral FLS in America West's 18 1/20/98, 4/21/98 and 7/21/98 conference calls or other oral presentations pleaded at ¶81 19 and 88, were so identified as required. The defendants are liable for the false FLS 20 pleaded because, at the time each FLS was made, the speaker knew the FLS was false 21 and the FLS was authorized and/or approved by an executive officer of America West 22 who knew that the FLS was false. None of the historic or present tense statements made 23 by defendants were assumptions underlying or relating to any plan, projection or 24 statement of future economic performance, as they were not stated to be such assumptions 25 underlying or relating to any projection or statement of future economic performance 26 when made nor were any of the projections or forecasts made by defendants expressly 27 related to or stated to be dependent on those historic or present tense statements when 28 made.

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1 CLASS ACTION ALLEGATIONS 2 127. This is a class action on behalf of purchasers of America West stock 3 between 11/19/97-9/3/98. Class members are so numerous that joinder of them is 4 impracticable. 5 128. Common questions of law and fact predominate and include whether 6 defendants: (i) violated the 1934 Act; (ii) omitted and/or misrepresented material facts; 7 (iii) knew or recklessly disregarded that their statements were false; (iv) artificially 8 inflated America West's stock price; and (v) the extent of and appropriate measure of 9 damages. 10 129. Plaintiff's claims are typical of those of the Class. Prosecution of individual 11 actions would create a risk of inconsistent adjudications. Plaintiff will adequately protect 12 the interests of the Class. A class action is superior to other available methods for the 13 fair and efficient adjudication of this controversy. 14 CLAIM FOR RELIEF 15 130. Defendants violated §10(b) and Rule lOb-5 by: 16 (a) Employing devices, schemes and artifices to defraud; 17 (b) Making untrue statements of material facts and omitting to state 18 material facts necessary in order to make the statements made, in light of the 19 circumstances under which they were made, not misleading; and 20 (c) Engaging in acts, practices and a course of business that operated as 21 a fraud or deceit upon the Class in connection with their purchases of America West 22 stock. 23 131. Class Members were damaged. In reliance on the integrity of the market, 24 they paid artificially inflated prices for America West stock. 25 BASIS OF ALLEGATIONS 26 132. The Private Securities Litigation Reform Act of 1995, §21D(c) of the 1934 27 Act [15 U.S.C. §78u-4(c)j, requires compliance with Rule 11. Plaintiff has alleged the 28 foregoing based upon the investigation of its counsel, including a review of America

- 79 - 1 West's SEC filings, securities analysts' reports, America West's press releases, media 2 reports and discussions with consultants. Plaintiff believes that, after reasonable 3 opportunity for discovery, substantial additional evidentiary support will likely exist for 4 the allegations set forth at 1111, 27-35, 62, 83, 95, 108 and 115-122. 5 PRAYER 6 WHEREFORE, plaintiff prays for judgment, declaring this action to be a proper 7 class action; awarding damages including interest and such other relief as the Court may 8 deem proper. 9 JURY DEMAND 10 Plaintiff demands a trial by jury. 11 DATED: March 3, 1999 12 BONNETT, FAIRBOURN, FRIEDMAN & BALINT, P.C. 13 ANDREW S. FRIEDMAN 14 DAVID D. WEINZWEIG 15 a4D ww7 16 DAVID D. 'IN WEIG 17 4041 N. Central Avenue Suite 1100 18 Phoenix, AZ 85012-3311 19 Telephone: 602/274-1100 MILBERG WEISS BERSHAD 20 HYNES & LERACH LLP WILLIAM S. LERACH 21 ALAN SCHULMAN DARREN J. ROBBINS 22 PATRICK W. DANIELS 600 West Broadway, Suite 1800 23 San Diego, CA 92101 24 Telephone: 619/231-1058 MILBERG WEISS BERSHAD 25 HYNES & LERACH LLP EDWARD P. DIETRICH 26 355 South Grand Avenue Suite 4170 27 Los Angeles, CA 90071 28 Telephone: 213/617-9007

- 80 - I LAW OFFICES OF BRUCE G. MURPHY 2 BRUCE G. MURPHY 265 Llwyds Lane 3 Vero Beach, FL 32963 4 Telephone: 561/231-4202 THE CUNEO LAW GROUP, P.C. 5 JONATHAN W. CUNEO MICHAEL LENETT 6 317 Massachusetts Avenue, N.E. Suite 300 7 Washington, D.C. 20002 8 Telephone: 202/789-3960 GALLOWAY & ASSOCIATES 9 THOMAS L. GALLOWAY 2260 Baseline Road, Suite 212 10 Boulder, CO 80302 11 Telephone: 303/938-0445 12 Attorneys for Plaintiff 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

28 CASES \COMPLNTS \ AMWEST2 CPT

- 81 - ; I CERTIFICATION OF N r • I 1

Le_ L-1 ,741/1=BEIP".: A

EMPLO 14 JOINT COUNCIL #84 PENSION TRUST PUNA

("Plaintiff") declares:

I. Plaintiff has reviewed a complaint Plad authorized its filing.

2. PlaiRtiff did not purGbase the security mat is tlie subject of this action at the

direction of Plaintiff's counsel or in order to participate in this private action or any other

litigation under the federal securities laws.

3. mint:ff is wil)Ing to serve as a Teprette__ntativa party or behalf of the Own.

includinn providing testimony at dvasitian and trial, if noornioary,

4. Plitindee has ruddy tlauswaou(s) during the ClaSS Period in the debt or equity

securities that are the subject of' this action except those sat forth below;

ffAS

Sqirit TALILUiN RIZ biPA_Per Sham

COTIMIOR Stock Purchased 6,500 lbws 011/21/911 $22.00 Common StOck furciwed 200 ohms 00/01/98 $19-3M Common Stock Forchased 200 shares 09/02195 $20.00

Common Stock Sold 3,400 shares 0941198 $14-7/1 6 comtruln stock Sold 3,201 shorn 10/10/00 $12,5420

5. rzwing the three years prior to the nate of tnts Certifir.ate, Plaintiff has not sought

to serve or served as a representative party for a class in any actions filed under the federal

securities laws other than this case.

• 6. The Plaintiff will not accept any payment for serving es c.; representative party on

behalf of the class beyond the Plaintiff's pro rata share of any recovery, except such reasonable

; costs and expenses (including lost wages) directly relating to the representation of the el , .s as

ordered or approved by the court.

I declare under penalty or realty that the foregoing is true and correct. Executed this

citty of March, W99.

Fuiployer-Tearnstm Joint , 4/1 = } 4 0 eliW;;_e By: A 'USTEB

2