UNITED STATES SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON~~ Washington, D.C. 20549

~~FORM~~ Form 10-Q

(Mark One)


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended June 30, 2005

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2005

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 1-12649

~~AMERICA~~ America ~~WEST~~West ~~HOLDINGS~~Holdings ~~CORPORATION~~Corporation

(Exact name of registrant as specified in its charter)

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

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

(480) 693-0800

(~~480) 693-0800 (~~Registrant’s telephone number, including area code)

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

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

Commission file number 0-12337

~~AMERICA~~ America ~~WEST~~West ~~AIRLINES~~Airlines, ~~INC~~Inc.

(Exact name of registrant as specified in its charter)

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

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

(480) 693-0800

(~~480) 693-0800 (~~Registrant’s telephone number, including area code)

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

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

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

Indicate by check mark whether the Registrants are accelerated filers (as defined in Exchange Act Rule 12b-2).


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

As of ~~April~~July 2521, 2005, America West Holdings Corporation has 859,117 shares of Class A common stock ~~and~~ and 35,~~316~~238,~~871~~ 357 shares of Class B common stock outstanding. As of ~~April~~July 2521, 2005, America West Airlines, Inc. has 1,000 shares of Class B common stock outstanding, all of which are held by America West Holdings Corporation.

America West Airlines, Inc. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with reduced disclosure format pursuant to General Instruction H(2) of Form 10-Q.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
PART I -- FINANCIAL INFORMATION
	ITEM 1A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – AMERICA WEST HOLDINGS CORPORATION
	Item 1A. Condensed Consolidated Financial Statements -- America West Holdings Corporation.
	ITEM 1B. CONDENSED FINANCIAL STATEMENTS — AMERICA WEST AIRLINES, INC
	Item 1B. Condensed Consolidated Financial Statements -- America West Airlines, Inc.
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	Item 3. Quantitative and Qualitative Disclosures about Market Risk.
	ITEM 4. CONTROLS AND PROCEDURES
	Item 4. Controls and Procedures.
PART II — OTHER INFORMATION
PART II -- OTHER INFORMATION
	ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES
	Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	Item 4. Submission of Matters to a Vote of Security Holders.
	ITEM 6. EXHIBITS
	Item 6. Exhibits
SIGNATURE
SIGNATURE
Exhibit Index
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-31.3
EX-31.4
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

America West Holding Corporation (“Holdings” or the “Company”) is the holding company that owns all of the stock of America West Airlines, Inc. (“AWA” or the “Airline”). AWA, the eighth largest passenger airline and the second largest low cost carrier in the United States, accounted for most of Holdings’ revenues and expenses in 2004. Through its America West Vacations division, AWA also sells individual and group travel packages. This combined Form 10-Q is filed by both Holdings and AWA and includes the financial statements of each company in Item 1A and Item 1B, respectively.

~~ITEM~~Item 1A. ~~CONDENSED~~Condensed ~~CONSOLIDATED~~Consolidated ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements –— ~~AMERICA~~America ~~WEST~~West ~~HOLDINGS~~Holdings ~~CORPORATION~~Corporation.

~~AMERICA WEST HOLDINGS CORPORATION~~ ~~Condensed~~America ~~Consolidated~~West ~~Balance~~Holdings ~~Sheets~~Corporation ~~(in thousands except share data) (unaudited)~~

	March 31,		December 31,
	2005		2004
Assets
Current assets:
Cash and cash equivalents	$	129,197	$	149,091
Short-term investments		104,513		126,651
Restricted cash		—		41,264
Accounts receivable, net		156,037		108,837
Expendable spare parts and supplies, net		55,643		57,563
Prepaid expenses		208,811		141,571
Total current assets		654,201		624,977
Property and equipment:
Flight equipment		914,853		926,930
Other property and equipment		297,406		290,897
Equipment purchase deposits		70,450		63,450
		1,282,709		1,281,277
Less accumulated depreciation and amortization		606,958		624,742
Net property and equipment		675,751		656,535
Other assets:
Investments in debt securities		20,000		30,000
Restricted cash		91,548		72,091
Other assets, net		138,900		91,661
Total other assets		250,448		193,752
	$	1,580,400	$	1,475,264

Condensed Consolidated Balance Sheets

~~See~~ (in ~~accompanying~~thousands ~~notes~~except toshare ~~condensed consolidated financial statements.~~data)

2 (unaudited)


			June 30,			December 31,
			2005			2004

ASSETS
Current assets:
	Cash and cash equivalents		$	116,061		$	149,091
	Short-term investments			206,217			126,651
	Restricted cash			—			41,264
	Accounts receivable, net			122,517			108,837
	Expendable spare parts and supplies, net			51,090			57,563
	Prepaid expenses			198,121			141,571

		Total current assets		694,006			624,977

Property and equipment:
	Flight equipment			931,264			926,930
	Other property and equipment			298,760			290,897
	Equipment purchase deposits			73,950			63,450

				1,303,974			1,281,277
	Less accumulated depreciation and amortization			619,771			624,742

		Net property and equipment		684,203			656,535

Other assets:
	Investments in debt securities			—			30,000
	Restricted cash			91,633			72,091
	Other assets, net			134,975			91,661

		Total other assets		226,608			193,752

			$	1,604,817		$	1,475,264


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current maturities of long-term debt		$	115,964		$	151,183
	Current obligations under capital leases			3,312			3,475
	Accounts payable			189,189			173,887
	Air traffic liability			265,727			194,718
	Accrued compensation and vacation benefits			47,035			42,699
	Accrued taxes			65,417			32,796
	Other accrued liabilities			85,910			65,958

		Total current liabilities		772,554			664,716

Long-term debt, less current maturities				588,060			635,129
Capital leases, less current obligations				5,124			5,061
Deferred credits and other liabilities				154,941			133,911
Stockholders’ equity:
	Preferred stock, $.01 par value. Authorized 48,800,000 shares; no shares issued			—			—
	Class A common stock, $.01 par value. Authorized 1,200,000 shares; issued and outstanding 859,117 shares at June 30, 2005 and December 31, 2004			8			8
	Class B common stock, $.01 par value. Authorized 100,000,000 shares; issued and outstanding 51,628,599 shares at June 30, 2005 and 51,564,865 shares at December 31, 2004			516			516
	Additional paid-in capital			632,652			632,446
	Accumulated deficit			(241,132	)		(288,617	)

				392,044			344,353
	Less: Cost of Class B common stock in treasury, 16,437,575 shares at June 30, 2005 and December 31, 2004			(307,906	)		(307,906	)

		Total stockholders’ equity		84,138			36,447

			$	1,604,817		$	1,475,264

~~AMERICA~~ See ~~WEST~~accompanying ~~HOLDINGS~~Notes ~~CORPORATION~~ to Condensed Consolidated ~~Balance Sheets~~Financial ~~(in thousands except share data)~~Statements. ~~(unaudited)~~

	March 31,			December 31,
	2005			2004
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	114,674		$	151,183
Current obligations under capital leases		3,291			3,475
Accounts payable		184,840			173,887
Air traffic liability		276,108			194,718
Accrued compensation and vacation benefits		51,207			42,699
Accrued taxes		48,759			32,796
Other accrued liabilities		87,006			65,958
Total current liabilities		765,885			664,716
Long-term debt, less current maturities		588,589			635,129
Capital leases, less current obligations		5,124			5,061
Deferred credits and other liabilities		150,672			133,911
Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 48,800,000 shares; no shares issued		—			—
Class A common stock, $.01 par value. Authorized 1,200,000 shares; issued and outstanding 859,117 shares at March 31, 2005 and December 31, 2004		8			8
Class B common stock, $.01 par value. Authorized 100,000,000 shares; issued and outstanding 51,600,766 shares at March 31, 2005 and 51,564,865 shares at December 31, 2004		516			516
Additional paid-in capital		632,553			632,446
Accumulated deficit		(255,041	)		(288,617	)
		378,036			344,353
Less: Cost of Class B common stock in treasury, 16,437,575 shares at March 31, 2005 and December 31, 2004		(307,906	)		(307,906	)
Total stockholders’ equity		70,130			36,447
	$	1,580,400		$	1,475,264

SeeTable accompanyingof notes to condensed consolidated financial statements. Contents

3 America West Holdings Corporation

~~Table~~ Condensed Consolidated Statements of ~~Contents~~Operations

~~AMERICA WEST HOLDINGS CORPORATION~~ ~~Condensed Consolidated Statements of Operations~~ (in thousands except per share data) ~~(unaudited)~~

	Three Months Ended
	March 31,
	2005			2004
Operating revenues:
Passenger	$	575,413		$	537,333
Express		103,356			72,651
Cargo		8,644			6,903
Other		35,399			32,440
Total operating revenues		722,812			649,327
Operating expenses:
Salaries and related costs		175,148			166,275
Aircraft rents		76,837			75,185
Other rents and landing fees		41,539			41,241
Aircraft fuel		151,863			114,212
Realized and unrealized gains on fuel hedging instruments, net		(60,483	)		(404	)
Agency commissions		5,554			6,750
Aircraft maintenance materials and repairs		47,988			50,054
Depreciation and amortization		11,860			13,791
Special charges (credits), net		811			(600	)
Express expenses		110,826			73,302
Other		110,791			94,432
Total operating expenses		672,734			634,238
Operating income		50,078			15,089
Nonoperating income (expenses):
Interest income		1,899			1,518
Interest expense, net		(18,979	)		(19,752	)
Other, net		578			1,582
Total nonoperating expenses, net		(16,502	)		(16,652	)
Income (loss) before income taxes		33,576			(1,563	)
Income taxes		—			—
Net income (loss)	$	33,576		$	(1,563	)
Earnings (loss) per share:
Basic	$	0.93		$	(0.04	)
Diluted	$	0.62		$	(0.04	)
Shares used for computation:
Basic		36,152			35,851
Diluted		62,372			35,851

(unaudited)

See accompanying notes to condensed consolidated financial statements.


			Three Months Ended						Six Months Ended
			June 30,						June 30,

			2005			2004			2005			2004

Operating revenues:
	Passenger		$	654,893		$	569,166		$	1,230,306		$	1,106,499
	Express			129,426			85,466			232,782			158,117
	Cargo			8,126			6,817			16,770			13,720
	Other			40,752			32,709			76,151			65,149

		Total operating revenues		833,197			694,158			1,556,009			1,343,485

Operating expenses:
	Salaries and related costs			173,752			161,977			348,900			328,252
	Aircraft rents			80,673			75,346			157,510			150,531
	Other rents and landing fees			45,727			42,011			87,266			83,252
	Aircraft fuel			191,006			132,977			342,869			247,189
	Realized and unrealized gains on fuel hedging instruments, net			(8,673	)		(9,485	)		(69,156	)		(9,889	)
	Agency commissions			6,710			6,253			12,264			13,003
	Aircraft maintenance materials and repairs			49,359			52,350			97,347			102,404
	Depreciation and amortization			11,587			12,587			23,447			26,378
	Special charges (credits), net			—			—			811			(600	)
	Express expenses			136,048			89,802			246,874			163,104
	Other			116,731			104,525			227,521			198,957

		Total operating expenses		802,920			668,343			1,475,653			1,302,581

Operating income				30,277			25,815			80,356			40,904

Nonoperating income (expenses):
	Interest income			2,476			1,779			4,375			3,297
	Interest expense, net			(19,736	)		(19,237	)		(38,715	)		(38,989	)
	Other, net			891			2,304			1,469			3,886

		Total nonoperating expenses, net		(16,369	)		(15,154	)		(32,871	)		(31,806	)

Income before income taxes				13,908			10,661			47,485			9,098

Income taxes				—			—			—			—

Net income			$	13,908		$	10,661		$	47,485		$	9,098

Earnings per share:
	Basic		$	0.39		$	0.30		$	1.32		$	0.25

	Diluted		$	0.29		$	0.20		$	0.92		$	0.17

Shares used for computation:
	Basic			36,032			36,005			36,015			35,928

	Diluted			53,553			52,020			62,551			52,070

4 See accompanying Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~3

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

	Three Months Ended
	March 31,
	2005			2004
Net cash provided by (used in) operating activities	$	113,929		$	(1,432	)
Cash flows from investing activities:
Purchases of property and equipment		(56,613	)		(36,979	)
Purchases of short-term investments		(99,650	)		(164,565	)
Sales of short-term investments		131,644			172,710
Purchases of investments in debt securities		—			(15,000	)
Sales of investments in debt securities		—			15,000
Decrease (increase) in restricted cash		(19,457	)		1,081
Proceeds from disposition of assets		584			1,397
Net cash used in investing activities		(43,492	)		(26,356	)
Cash flows from financing activities:
Repayment of debt		(86,189	)		(47,370	)
Other		(4,142	)		373
Net cash used in financing activities		(90,331	)		(46,997	)
Net decrease in cash and cash equivalents		(19,894	)		(74,785	)
Cash and cash equivalents at beginning of period		149,091			153,357
Cash and cash equivalents at end of period	$	129,197		$	78,572
Cash paid for:
Interest, net of amounts capitalized	$	4,727		$	7,700
Income taxes paid	$	18		$	1,374
Non-cash investing and financing activities:
Reclassification of investments in debt securities to short-term investments	$	10,000		$	5,344
Notes payable issued under the aircraft purchase agreement	$	5,250		$	3,500
Notes payable cancelled under the aircraft purchase agreement	$	(3,500	)	$	—
Payment in kind notes issued, net of returns	$	—		$	379
Exercise of warrants	$	—		$	2
Acquisition of shares due to loan default	$	—		$	800

America West Holdings Corporation

~~See~~ Condensed ~~accompanying~~Consolidated ~~notes~~Statements toof ~~condensed~~Cash ~~consolidated financial statements.~~Flows

5 (in thousands)

~~Table of Contents~~ (unaudited)

AMERICA WEST HOLDINGS CORPORATION Notes To Condensed Consolidated Financial Statements March 31, 2005


			Six Months Ended
			June 30,

			2005			2004

Net cash provided by operating activities			$	223,545		$	83,557

Cash flows from investing activities:
	Purchases of property and equipment			(97,210	)		(77,173	)
	Purchases of short-term investments			(283,750	)		(273,533	)
	Sales of short-term investments			233,961			289,610
	Purchases of investments in debt securities			—			(35,000	)
	Sales of investments in debt securities			—			15,000
	Decrease (increase) in restricted cash			(19,542	)		1,270
	Proceeds from disposition of other assets			1,227			1,848

		Net cash used in investing activities		(165,314	)		(77,978	)

Cash flows from financing activities:
	Repayment of debt			(86,717	)		(47,980	)
	Other			(4,544	)		843

		Net cash used in financing activities		(91,261	)		(47,137	)

Net decrease in cash and cash equivalents				(33,030	)		(41,558	)
Cash and cash equivalents at beginning of period				149,091			153,357

Cash and cash equivalents at end of period			$	116,061		$	111,799

Cash paid for:
	Interest, net of amounts capitalized		$	17,047		$	10,339

	Income taxes		$	112		$	1,440

Non-cash investing and financing activities:
	Reclassification of investments in debt securities to short-term investments		$	30,000		$	5,730

	Notes payable issued under the aircraft purchase agreement		$	8,750		$	7,000

	Notes payable cancelled under the aircraft purchase agreement		$	(7,000	)	$	—

	Acquisition of property and equipment under capital leases		$	17		$	—

	Payment in kind notes issued, net of returns		$	—		$	4,672

	Exercise of warrants		$	—		$	2

	Acquisition of shares due to loan default		$	—		$	1,700

1. See ~~BASIS~~accompanying OFNotes ~~PRESENTATION~~to Condensed Consolidated Financial Statements.

~~The unaudited condensed consolidated financial statements include the accounts of Holdings and~~4 ~~its wholly owned subsidiary, AWA. These statements have been prepared pursuant to the rules and~~ regulations of the Securities and Exchange Commission and, in accordance with those rules and regulations, certain information and footnotes required by generally accepted accounting principles have been omitted. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

TheTable Company has a regional airline alliance agreement with Mesa Airlines (“Mesa”). Mesa, operating as America West Express (“Express”), provides regional feeder service for AWA. Express operations have grown substantially and, as of March 31, 2005, comprise approximately 12% of the Company’s total capacity as measured by available seat miles (“ASMs”). To improve the visibility of Express operating results, effective with the first quarter of 2005, the Company has changed its method of reporting for this agreement to the gross basis of presentation. Previously, AWA used the net basis of presentation. Contents

~~Using the gross basis of presentation, the passenger revenues and operating expenses~~ associated with the Express agreement are reported gross (i.e.; as “Operating Revenues – Express” and “Operating Expenses – Express Expenses”) in the Condensed Consolidated Statement of Operations. Under the net basis of presentation, Express passenger revenues and the associated operating expenses were netted and classified in “Operating Revenues – Other.” Prior period amounts have been reclassified to be consistent with the first quarter 2005 presentation. These reclassifications did not impact our operating income or net income (loss) for each period presented. See Note 7, “Change in Method of Reporting for America West ~~Express~~Holdings ~~Results” for~~Corporation ~~additional information about this agreement and the reclassifications related to the change in presentation.~~

~~Certain other prior year amounts have been reclassified~~ Notes to ~~conform~~Condensed ~~with~~Consolidated ~~current~~Financial ~~year~~Statements ~~presentation.~~

2. June 30, ~~STOCK OPTIONS~~2005

~~The Company accounts for its stock option plans in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No~~1. ~~25,~~ ~~“Accounting~~Basis ~~for Stock Issued to Employees,” and related interpretations. As such, compensation expense would be recorded on the date~~ of grant only if the current market price of the underlying stock exceeded the exercise price. The Company issues its stock options at a price equal to fair market value on the date of grant. Accordingly, no compensation cost has been recognized for stock options in the accompanying condensed consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” the Company’s net income (loss) and income (loss) per share would have been decreased to the pro forma amounts indicated below: Presentation

	Three Months Ended
	March 31,
	2005			2004
	(in thousands except per share data)
Net income (loss), as reported	$	33,576		$	(1,563	)
Stock-based compensation expense		(1,270	)		(1,270	)
Pro forma net income (loss)	$	32,306		$	(2,833	)
Income (loss) per share:
Basic — as reported	$	0.93		$	(0.04	)
Basic — pro forma	$	0.89		$	(0.08	)
Diluted — as reported	$	0.62		$	(0.04	)
Diluted — pro forma	$	0.60		$	(0.08	)

The unaudited condensed consolidated financial statements include the accounts of Holdings and its wholly owned subsidiary, AWA. These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and, in accordance with those rules and regulations, certain information and footnotes required by generally accepted accounting principles have been omitted. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

6 The Company has a regional airline alliance agreement with Mesa Airlines (“Mesa”). Mesa, operating as America West Express (“Express”), provides regional feeder service for AWA. To improve the visibility of Express operating results, effective with the first quarter of 2005, the Company has changed its method of reporting for this agreement to the gross basis of presentation. Previously, AWA used the net basis of presentation.

~~Table~~ Using the gross basis of ~~Contents~~presentation, the passenger revenues and operating expenses associated with the Express agreement are reported gross (i.e., as “Operating Revenues — Express” and “Operating Expenses — Express Expenses”) in the Condensed Consolidated Statements of Operations. Under the net basis of presentation, Express passenger revenues and the associated operating expenses were netted and classified in “Operating Revenues — Other.” Prior period amounts have been reclassified to be consistent with the 2005 presentation. These reclassifications did not impact our operating income or net income for each period presented. See Note 7, “Change in Method of Reporting for America West Express Results” for additional information about this agreement and the reclassifications related to the change in presentation.

~~AMERICA~~ Certain ~~WEST~~other ~~HOLDINGS~~prior ~~CORPORATION Notes~~year Toamounts ~~Condensed~~have ~~Consolidated~~been ~~Financial~~reclassified ~~Statements~~to ~~March 31,~~conform ~~2005~~with current year presentation.

32. ~~FLIGHT~~Stock ~~EQUIPMENT~~ Options

In The ~~January~~Company accounts for its stock option plans in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. ~~2005~~25, “Accounting for Stock Issued to Employees,” and related interpretations. As such, compensation expense would be recorded on the ~~Company~~date ~~entered~~of ~~into~~grant anonly ~~operating~~if ~~lease~~the ~~for~~current ~~one~~market ~~new~~price ~~Airbus~~of ~~A320~~the underlying ~~aircraft~~stock exceeded the exercise price. The Company issues ~~with~~its stock options at a ~~lease~~price ~~term~~equal to fair market value on the date of ~~5 years~~grant. Accordingly, no compensation cost has been recognized for stock options in the accompanying condensed consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” the

~~In March 2005, the Company completed a sale-leaseback transaction on one Airbus A320 aircraft~~5 ~~resulting in a loss of $3.7 million. This amount was recorded in “Operating Expenses – Other.”~~ ~~The term of the leaseback is 12 years.~~

DuringTable the first quarter of 2005, the Company returned one Boeing 737-200 aircraft to the aircraft lessor in accordance with the renegotiated lease term. Contents

4. Company’s ~~SPECIAL~~net ~~CHARGES~~income and earnings per share would have been decreased to the pro forma amounts indicated below:

In the first quarter of 2005, the Company recorded $0.8 million in special charges, of which $0.7 million is accrued at March 31, 2005. This is related to continued costs associated with the retirement of the 737-200 fleet.


	Three Months Ended						Six Months Ended
	June 30,						June 30,

	2005			2004			2005			2004

	(in thousands except per share data)
Net income, as reported	$	13,908		$	10,661		$	47,485		$	9,098
Stock-based compensation expense		(1,055	)		(1,650	)		(2,345	)		(2,916	)

Pro forma net income	$	12,853		$	9,011		$	45,140		$	6,182

Income per share:
Basic — as reported	$	0.39		$	0.30		$	1.32		$	0.25

Basic — pro forma	$	0.36		$	0.25		$	1.25		$	0.17

Diluted — as reported	$	0.29		$	0.20		$	0.92		$	0.17

Diluted — pro forma	$	0.27		$	0.17		$	0.88		$	0.12

~~The~~3. ~~following~~Flight ~~table presents the payments and other settlements made during the three months ended March 31, 2005 related to the special charge accruals:~~ Equipment

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

In April 2005, the Company entered into an operating lease for one new Airbus A320 aircraft with a lease term of five years.

~~The~~ In May 2005, the Company ~~expects~~entered tointo ~~make~~operating ~~payments~~leases ~~related~~for toone new ~~these~~Airbus ~~special~~A319 ~~charges~~and ~~through~~one ~~the~~new ~~fourth~~Airbus A320 aircraft, each with a ~~quarter~~lease term of ~~2005~~five years.

5 In June 2005, the Company completed sale-leaseback transactions on two new IAE V2500-A5 engines resulting in gains of $0.3 million ~~INCOME~~and ~~(LOSS)~~$2.6 ~~PER~~million, ~~SHARE~~respectively. These amounts have been deferred and will be amortized over the lease terms, each of which is seven years. The Company also completed a sale-leaseback transaction on one Airbus A320 aircraft resulting in a loss of $4.3 million. This amount was recorded in “Operating Expenses — Other.” The term of the leaseback is 12 years.

~~The~~4. ~~following~~Special ~~table presents the computation of basic and diluted income (loss) per share (“EPS”).~~ Charges

	Three Months Ended
	March 31,
	2005		2004
	(in thousands except per share data)
BASIC INCOME (LOSS) PER SHARE
Income (loss) applicable to common stock	$	33,576	$	(1,563	)
Weighted average common shares outstanding		36,152		35,851
Basic income (loss) per share	$	0.93	$	(0.04	)
DILUTED INCOME (LOSS) PER SHARE
Income (loss) as reported	$	33,576	$	(1,563	)
Interest expense on 7.5% convertible senior notes		3,133		—
Interest expense on 7.25% senior exchangeable notes		1,735		—
Income (loss) for purposes of computing diluted net income (loss) per share	$	38,444	$	(1,563	)
SHARE COMPUTATION
Weighted average common shares outstanding		36,152		35,851
Assumed exercise of stock options and warrants		8,766		—
Assumed conversion of 7.5% convertible senior notes		9,358		—
Assumed conversion of 7.25% senior exchangeable notes		8,096		—
Weighted average common shares outstanding, as adjusted		62,372		35,851
Diluted income (loss) per share	$	0.62	$	(0.04	)

The following table presents the payments and other settlements made during the six months ended June 30, 2005 related to the special charge accruals:


				Contract
	Fleet			Termination/
	Restructuring			Other Costs			Total

Balance at December 31, 2004	$	643		$	121		$	764

Special charges		690			—			690
Payments		(305	)		(111	)		(416	)
Revision of estimate		—			147			147

Balance at March 31, 2005		1,028			157			1,185

Special charges		—			—			—
Payments		—			—			—

Balance at June 30, 2005	$	1,028		$	157		$	1,185

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

~~AMERICA WEST HOLDINGS CORPORATION~~6 ~~Notes To Condensed Consolidated Financial Statements~~ ~~March 31, 2005~~

ForTable the three months ended March 31, 2005, 7,245,251 incremental shares from the assumed exercise of stock options are not included in the computation of diluted EPS because the option exercise prices were greater than the average market price of the Company’s Class B common stock for the period. Contents

For the three months ended March 31, 2004, 2,711,887 incremental shares from the assumed exercise of stock options and 14,400,403 warrants issued in conjunction with the government guaranteed loan and related transactions are not included in the computation of diluted EPS because of the antidilutive effect on EPS. In addition, 8,694,000 and 8,095,842 incremental shares from assumed conversion of the 7.5~~% convertible senior notes due 2009 and the 7~~.~~25%~~ ~~senior~~Earnings ~~exchangeable notes~~Per ~~due 2023, respectively, are not included in the computation of diluted EPS because of the antidilutive effect on EPS.~~ Share

6. The ~~SEGMENT~~following ~~DISCLOSURES~~table presents the computation of basic and diluted earnings per share (“EPS”).

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2005		2004		2005		2004

	(in thousands except per share data)
BASIC EARNINGS PER SHARE
Income applicable to common stock	$	13,908	$	10,661	$	47,485	$	9,098

Weighted average common shares outstanding		36,032		36,005		36,015		35,928

Basic earnings per share	$	0.39	$	0.30	$	1.32	$	0.25

DILUTED EARNINGS PER SHARE
Income as reported	$	13,908	$	10,661	$	47,485	$	9,098
Interest expense on 7.5% convertible senior notes		—		—		6,283		—
Interest expense on 7.25% senior exchangeable notes		1,735		—		3,470		—

Income for purposes of computing diluted earnings per share	$	15,643	$	10,661	$	57,238	$	9,098

SHARE COMPUTATION
Weighted average common shares outstanding		36,032		36,005		36,015		35,928
Assumed exercise of stock options and warrants		9,425		16,015		9,082		16,142
Assumed conversion of 7.5% convertible senior notes		—		—		9,358		—
Assumed conversion of 7.25% senior exchangeable notes		8,096		—		8,096		—

Weighted average common shares outstanding, as adjusted		53,553		52,020		62,551		52,070

Diluted earnings per share	$	0.29	$	0.20	$	0.92	$	0.17

For the three and six months ended June 30, 2005, 6,851,419 and 7.,048,335 ~~CHANGE~~stock INoptions, ~~METHOD~~respectively, OFare ~~REPORTING~~not ~~FOR~~included ~~AMERICA~~in the ~~WEST~~computation ~~EXPRESS~~of ~~RESULTS~~diluted EPS because the option exercise prices were greater than the average market price of the Company’s Class B common stock for the period. In addition, 9,358,276 incremental shares from assumed conversion of the 7.5% convertible senior notes are not included in the computation of diluted EPS for the second quarter because of the antidilutive effect on EPS.

~~The~~ For ~~Company~~the ~~has~~three aand ~~regional~~six ~~airline~~months ~~alliance~~ended ~~agreement~~June 30, ~~(the~~2004, ~~“Agreement”)~~5,251,892 and ~~with~~3,981,890 ~~Mesa~~stock ~~that commenced~~options, respectively, are not included in the ~~February 2001.~~computation ~~Pursuant~~of todiluted EPS because the ~~Agreement,~~option ~~Mesa,~~exercise prices ~~using~~were ~~aircraft~~greater ~~owned~~than ~~and~~the ~~operated~~average bymarket ~~Mesa~~price ~~under~~of the Company’s ~~name~~Class B common stock for the period. In ~~Express~~addition, ~~provides~~8,694,000 ~~feeder~~incremental ~~service~~shares tofrom ~~destinations~~assumed inconversion of the ~~western~~7.5% convertible ~~United~~senior ~~States,~~notes ~~Canada~~are not included in the computation of diluted EPS for the second quarter and ~~northern~~the ~~Mexico.~~six-month Asperiod because of ~~March 31~~the antidilutive effect on EPS. Similarly, ~~2005~~the 8,095,842 shares issuable upon conversion of the ~~Express~~7.25% Senior ~~fleet~~Exchangeable Notes due 2023 were not included 49in ~~aircraft~~the ~~comprised~~computation of 27diluted ~~86-seat~~earnings ~~CRJ 900s,~~per 16share ~~50-seat~~for the ~~CRJ~~three ~~200s~~ and six ~~37-seat~~months ~~Dash~~ended 8June 30, ~~turbo~~2004 ~~prop~~because ~~aircraft~~of the antidilutive effect on EPS.

~~Under the Agreement, Mesa is required to fly the routes and flights designated by AWA using Mesa’s aircraft, flight crews and other related services~~6. ~~Mesa~~Segment maintains and operates the aircraft, employs, trains, manages and compensates personnel necessary to provide the flight services and provides related passenger handling services for and on the flights. AWA is responsible for establishing the routes, scheduling Express flights, pricing of the tickets, marketing and selling the tickets, collecting all sales amounts, paying all costs of sales and marketing and taking inventory risk on the inventory of seats for sale on Mesa. The ground handling of aircraft is performed by either AWA or Mesa, depending upon the airport. Disclosures

~~AWA~~ Holdings ~~collects~~is ~~the~~one ~~revenue~~reportable ~~and~~operating ~~income~~segment. ~~generated~~Accordingly, ~~from~~ the ~~services provided by Mesa pursuant to~~ ~~the~~segment ~~Agreement.~~reporting Infinancial ~~return,~~data ~~AWA:~~required ~~(i) reimburses Mesa for actual non-controllable costs incurred~~ by ~~Mesa such as fuel, insurance, taxes, fees and security; (ii)~~SFAS ~~pays Mesa for actual controllable non-maintenance costs~~No. 131, ~~subject~~“Disclosures toAbout aSegments ~~cap, such as aircraft lease expense and crew expense; (iii) pays Mesa for controllable maintenance costs at fixed rates (subject to reimbursement~~ of ~~excess~~ ~~costs~~an ifEnterprise ~~actual~~and ~~costs~~Related ~~during~~Information” ~~term~~is ~~are~~included ~~less than fixed amount paid by AWA); (iv) reimburses Mesa~~in ~~costs~~the ~~and~~accompanying ~~expenses~~condensed ~~incurred~~consolidated atbalance ~~stations~~sheets ~~maintained~~ and ~~operated by Mesa; and (v) shares with Mesa a~~ ~~percentage~~statements of ~~the revenue allocated to the flight segments flown by Mesa on a pro rata basis~~operations.

~~The~~7. ~~agreement~~Change isin ~~anticipated~~Method toof ~~expire~~Reporting infor ~~June 2012.~~ America West Express Results

As The ~~discussed~~Company inhas ~~Note~~a 1,regional ~~“Basis~~airline ofalliance ~~Presentation,”~~agreement (the “Agreement”) ~~Company~~with isMesa ~~reporting~~that ~~the~~commenced ~~passenger~~in February ~~revenues~~2001. ~~and~~Pursuant ~~operating~~to ~~expenses associated with~~ the Agreement, onMesa, ausing ~~gross~~aircraft ~~basis.~~owned ~~Previously, these~~and ~~revenues~~operated ~~and~~by ~~expenses~~Mesa ~~were~~under ~~reported~~the ~~net~~name inExpress, ~~“Operating~~provides ~~Revenues~~feeder –service to ~~Other”~~destinations in ~~our Condensed Consolidated Statements of Operations. The following table presents~~ the ~~effect~~western ofUnited ~~this reclassification~~States, ~~for~~Canada ~~the~~and ~~three months ended March 31, 2004:~~northern

~~AMERICA~~ Mexico. ~~WEST~~As ~~HOLDINGS~~of ~~CORPORATION Notes~~June 30 To2005, ~~Condensed~~the ~~Consolidated~~Express ~~Financial~~fleet ~~Statements~~included 59 ~~March 31~~aircraft comprised of 35 86-seat CRJ 900s, ~~2005~~18 50-seat CRJ 200s and six 37-seat Dash 8 turbo prop aircraft.

	As Reported		Adjustments			As Reclassified
Operating revenues:
Passenger	$	537,333	$	—		$	537,333
Express		—		72,651	(1)		72,651
Cargo and other		39,211		132			39,343
Total operating revenues	$	576,544	$	72,783		$	649,327
Operating expenses:
Operating expenses	$	561,455	$	(519	)	$	560,936
Express expenses		—		73,302	(2)		73,302
Total operating expenses	$	561,455	$	72,783		$	634,238

Under the Agreement, Mesa is required to fly the routes and flights designated by AWA using Mesa’s aircraft, flight crews and other related services. Mesa maintains and operates the aircraft, employs, trains, manages and compensates personnel necessary to provide the flight services and provides related passenger handling services for and on the flights. AWA is responsible for establishing the routes, scheduling Express flights, pricing of the tickets, marketing and selling the tickets, collecting all sales amounts, paying all costs of sales and marketing and taking inventory risk on the inventory of seats for sale on Mesa. The ground handling of aircraft is performed by either AWA or Mesa, depending upon the airport.

	1.	Reclassification of Express passenger revenues from “Operating Revenues – Other.”
	2.	Reclassification of $72.8 million and $0.5 million of Express operating expenses from “Operating Revenues – Other” and “Operating Expenses – Other,” respectively.

AWA collects the revenue and income generated from the services provided by Mesa pursuant to the Agreement. In return, AWA: (i) reimburses Mesa for actual non-controllable costs incurred by Mesa such as fuel, insurance, taxes, fees and security; (ii) pays Mesa for actual controllable non-maintenance costs, subject to a cap, such as aircraft lease expense and crew expense; (iii) pays Mesa for controllable maintenance costs at fixed rates (subject to reimbursement of excess costs if actual costs during term are less than fixed amount paid by AWA); (iv) reimburses Mesa costs and expenses incurred at stations maintained and operated by Mesa; and (v) shares with Mesa a percentage of the revenue allocated to the flight segments flown by Mesa on a pro rata basis.

The operating margin that results from using the gross basis of presentation for Express revenues and expenses does not include any beyond contribution passenger revenue generated by feed into AWA’s mainline operations from Express flights. Overall, the Mesa alliance agreement ~~adds~~is anticipated to ~~the~~ ~~total~~expire ~~profitability~~in ofJune ~~AWA~~2012.

9 As discussed in Note 1, “Basis of Presentation,” the Company is reporting the passenger revenues and operating expenses associated with the Agreement on a gross basis to improve the visibility of Express operating results. Previously, these revenues and expenses were reported net in “Operating Revenues — Other” in our Condensed Consolidated Statements of Operations. The following table presents the effect of this reclassification for the three and six months ended June 30, 2004:


	Three Months Ended June 30, 2004

	As Reported		Adjustments			As Reclassified

Operating revenues:
Passenger	$	569,166	$	—		$	569,166
Express		—		85,466	(1)		85,466
Cargo and other		35,908		3,618			39,526

Total operating revenues	$	605,074	$	89,084		$	694,158

Operating expenses:
Operating expenses	$	579,259	$	(718	)	$	578,541
Express expenses		—		89,802	(2)		89,802

Total operating expenses	$	579,259	$	89,084		$	668,343

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


	Six Months Ended June 30, 2004

	As Reported		Adjustments			As Reclassified

Operating revenues:
Passenger	$	1,106,499	$	—		$	1,106,499
Express		—		158,117	(1)		158,117
Cargo and other		75,119		3,750			78,869

Total operating revenues	$	1,181,618	$	161,867		$	1,343,485

Operating expenses:
Operating expenses	$	1,140,714	$	(1,237	)	$	1,139,477
Express expenses		—		163,104	(3)		163,104

Total operating expenses	$	1,140,714	$	161,867		$	1,302,581

~~The unaudited condensed consolidated balance sheets of AWA, a wholly-owned subsidiary of~~8 ~~Holdings, as of March 31, 2005 and December 31, 2004, and the condensed consolidated statements of~~ ~~operations and cash flows for the three months ended March 31, 2005 and 2004, together with the~~ ~~related notes, are set forth on the following pages.~~

AMERICATable WESTof AIRLINES, INC. Condensed Consolidated Balance Sheets (in thousands except share data) (unaudited) Contents

		March 31,		December 31,
(1)	Reclassification of Express passenger revenues from “Operating Revenues — Other.”
		2005		2004
(2)	Reclassification of $89.1 million and $0.7 million of Express operating expenses from “Operating Revenues — Other” and “Operating Expenses — Other,” respectively.
Assets
(3)	Reclassification of $161.9 million and $1.2 million of Express operating expenses from “Operating Revenues — Other” and “Operating Expenses — Other,” respectively
Current assets:
Cash and cash equivalents		$	108,372	$	128,497
Short-term investments			104,513		126,651
Restricted cash			—		41,264
Accounts receivable, net			156,037		108,837
Expendable spare parts and supplies, net			55,643		57,563
Prepaid expenses			208,775		141,571
Total current assets			633,340		604,383
Property and equipment:
Flight equipment			914,853		926,930
Other property and equipment			295,788		289,279
Equipment purchase deposits			70,450		63,450
			1,281,091		1,279,659
Less accumulated depreciation and amortization			606,409		624,193
Net property and equipment			674,682		655,466
Other assets:
Investments in debt securities			20,000		30,000
Restricted cash			91,548		72,091
Advances to parent company, net			259,362		258,777
Other assets, net			137,613		90,270
Total other assets			508,523		451,138
		$	1,816,545	$	1,710,987

~~See~~ The ~~accompanying~~operating ~~notes~~margin tothat ~~condensed~~results ~~consolidated~~from ~~financial~~using ~~statements.~~the gross basis of presentation for Express revenues and expenses does not include any beyond contribution passenger revenue generated by feed into AWA’s mainline operations from Express flights. Overall, the Mesa alliance agreement adds to the total profitability of AWA.

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

~~Table~~ On May 19, 2005, US Airways Group, Inc. (“US Airways Group”), Holdings, and Barbell Acquisition Corp., a wholly owned subsidiary of ~~Contents~~US Airways Group (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Holdings, with Holdings continuing as the surviving corporation. The merger is expected to create the first full-service airline with the consumer-friendly pricing structure of a low-fare carrier.

~~AMERICA~~ In ~~WEST~~the ~~AIRLINES~~merger, ~~INC~~holders of Holdings Class A common stock will receive 0.5362 of a share of new US Airways Group common ~~Condensed~~stock ~~Consolidated~~for ~~Balance~~each ~~Sheets~~share of Holdings Class A common stock they ~~(in~~own, ~~thousands~~and ~~except~~holders of Holdings Class B common stock will receive 0.4125 of a share ~~data)~~of new US Airways Group common stock ~~(unaudited)~~for each share of Holdings Class B common stock they own, on the terms specified in the Merger Agreement. The merger cannot be completed unless Holdings’ stockholders adopt the merger agreement and approve the merger. The obligations of Holdings and US Airways Group to complete the merger are also subject to the satisfaction or waiver of several other conditions, including clearance from regulatory agencies.

	March 31,			December 31,
	2005			2004
Liabilities and Stockholder’s Equity
Current liabilities:
Current maturities of long-term debt	$	114,674		$	151,183
Current obligations under capital leases		3,291			3,475
Accounts payable		183,943			173,196
Air traffic liability		276,108			194,718
Accrued compensation and vacation benefits		51,207			42,699
Accrued taxes		36,608			20,651
Other accrued liabilities		87,006			65,958
Total current liabilities		752,837			651,880
Long-term debt, less current maturities		588,589			635,129
Capital leases, less current maturities		5,124			5,061
Deferred credits and other liabilities		148,864			132,103
Stockholder’s equity:
Common Stock $.01 par value. Authorized, issued and outstanding; 1,000 shares		—			—
Additional paid-in capital		555,114			555,114
Accumulated deficit		(233,983	)		(268,300	)
Total stockholder’s equity		321,131			286,814
	$	1,816,545		$	1,710,987

SeeTable accompanyingof notes to condensed consolidated financial statements. Contents

11 Item 1B. Condensed Consolidated Financial Statements — America West Airlines, Inc.

~~Table~~ The unaudited condensed consolidated balance sheets of ~~Contents~~AWA, a wholly-owned subsidiary of Holdings, as of June 30, 2005 and December 31, 2004, and the condensed consolidated statements of operations and cash flows for the three and six months ended June 30, 2005 and 2004, together with the related notes, are set forth on the following pages.

~~AMERICA~~ America ~~WEST~~West ~~AIRLINES~~Airlines, ~~INC~~Inc. ~~Condensed Consolidated Statements of Operations (in thousands) (unaudited)~~

	Three Months Ended
	March 31,
	2005			2004
Operating revenues:
Passenger	$	575,413		$	537,333
Express		103,356			72,651
Cargo		8,644			6,903
Other		35,229			32,270
Total operating revenues		722,642			649,157
Operating expenses:
Salaries and related costs		174,853			165,929
Aircraft rents		76,837			75,185
Other rents and landing fees		41,539			41,241
Aircraft fuel		151,863			114,212
Realized and unrealized gains on fuel hedging instruments, net		(60,483	)		(404	)
Agency commissions		5,554			6,750
Aircraft maintenance materials and repairs		47,988			50,054
Depreciation and amortization		11,860			13,791
Special charges (credits), net		811			(600	)
Express expenses		110,826			73,302
Other		110,049			93,812
Total operating expenses		671,697			633,272
Operating income		50,945			15,885
Nonoperating income (expenses):
Interest income		3,464			3,201
Interest expense, net		(20,670	)		(21,462	)
Other, net		578			1,582
Total nonoperating expenses, net		(16,628	)		(16,679	)
Income (loss) before income taxes		34,317			(794	)
Income taxes		—			—
Net income (loss)	$	34,317		$	(794	)

Condensed Consolidated Balance Sheets

~~See~~ (in ~~accompanying~~thousands ~~notes~~except toshare ~~condensed consolidated financial statements.~~data)

12 (unaudited)


			June 30,			December 31,
			2005			2004

ASSETS
Current assets:
	Cash and cash equivalents		$	95,278		$	128,497
	Short-term investments			206,217			126,651
	Restricted cash			—			41,264
	Accounts receivable, net			122,517			108,837
	Expendable spare parts and supplies, net			51,090			57,563
	Prepaid expenses			198,096			141,571

		Total current assets		673,198			604,383

Property and equipment:
	Flight equipment			931,264			926,930
	Other property and equipment			297,142			289,279
	Equipment purchase deposits			73,950			63,450

				1,302,356			1,279,659
	Less accumulated depreciation and amortization			619,222			624,193

		Net property and equipment		683,134			655,466

Other assets:
	Investments in debt securities			—			30,000
	Restricted cash			91,633			72,091
	Advances to parent company, net			260,648			258,777
	Other assets, net			133,793			90,270

		Total other assets		486,074			451,138

			$	1,842,406		$	1,710,987


LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
	Current maturities of long-term debt		$	115,964		$	151,183
	Current obligations under capital leases			3,312			3,475
	Accounts payable			188,528			173,196
	Air traffic liability			265,727			194,718
	Accrued compensation and vacation benefits			47,035			42,699
	Accrued taxes			53,296			20,651
	Other accrued liabilities			85,910			65,958

		Total current liabilities		759,772			651,880

Long-term debt, less current maturities				588,060			635,129
Capital leases, less current maturities				5,124			5,061
Deferred credits and other liabilities				153,133			132,103
Stockholder’s equity:
	Common Stock $.01 par value. Authorized, issued and outstanding; 1,000 shares			—			—
	Additional paid-in capital			555,114			555,114
	Accumulated deficit			(218,797	)		(268,300	)

		Total stockholder’s equity		336,317			286,814

			$	1,842,406		$	1,710,987

~~AMERICA~~ See ~~WEST~~accompanying ~~AIRLINES,~~Notes ~~INC.~~ to Condensed Consolidated Financial Statements ~~of Cash Flows~~. ~~(in thousands) (unaudited)~~

	Three Months Ended
	March 31,
	2005			2004
Net cash provided by (used in) operating activities	$	113,806		$	(1,079	)
Cash flows from investing activities:
Purchases of property and equipment		(56,613	)		(36,979	)
Purchases of short-term investments		(99,650	)		(164,565	)
Sales of short-term investments		131,644			172,710
Purchases of investments in debt securities		—			(15,000	)
Sales of investments in debt securities		—			15,000
Decrease (increase) in restricted cash		(19,457	)		1,081
Proceeds from disposition of assets		584			1,397
Net cash used in investing activities		(43,492	)		(26,356	)
Cash flows from financing activities:
Repayment of debt		(86,189	)		(47,370	)
Other		(4,250	)		(7	)
Net cash used in financing activities		(90,439	)		(47,377	)
Net decrease in cash and cash equivalents		(20,125	)		(74,812	)
Cash and cash equivalents at beginning of period		128,497			134,150
Cash and cash equivalents at end of period	$	108,372		$	59,338
Cash paid for:
Interest, net of amounts capitalized	$	4,727		$	7,700
Income taxes paid (refunded)	$	(17	)	$	325
Non-cash investing and financing activities:
Reclassification of investments in debt securities to short-term investments	$	10,000		$	5,344
Notes payable issued under the aircraft purchase agreement	$	5,250		$	3,500
Notes payable cancelled under the aircraft purchase agreement	$	(3,500	)	$	—
Payment in kind notes issued, net of returns	$	—		$	379

SeeTable accompanyingof notes to condensed consolidated financial statements. Contents

13 America West Airlines, Inc.

~~Table~~ Condensed Consolidated Statements of ~~Contents~~Operations

~~AMERICA WEST AIRLINES, INC.~~ ~~Notes~~(in ~~to Condensed Consolidated Financial Statements~~thousands) ~~March 31, 2005~~

~~1. BASIS OF PRESENTATION~~ (unaudited)

The unaudited condensed consolidated financial statements included herein have been prepared by AWA, a wholly owned subsidiary of Holdings, pursuant to the rules and regulations of the Securities and Exchange Commission and, in accordance with those rules and regulations, certain information and footnotes required by generally accepted accounting principles have been omitted. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in AWA’s Annual Report on Form 10-K for the year ended December 31, 2004.


			Three Months Ended						Six Months Ended
			June 30,						June 30,

			2005			2004			2005			2004

Operating revenues:
	Passenger		$	654,893		$	569,166		$	1,230,306		$	1,106,499
	Express			129,426			85,466			232,782			158,117
	Cargo			8,126			6,817			16,770			13,720
	Other			40,582			32,539			75,811			64,809

		Total operating revenues		833,027			693,988			1,555,669			1,343,145

Operating expenses:
	Salaries and related costs			173,399			161,617			348,252			327,546
	Aircraft rents			80,673			75,346			157,510			150,531
	Other rents and landing fees			45,727			42,011			87,266			83,252
	Aircraft fuel			191,006			132,977			342,869			247,189
	Realized and unrealized gains on fuel hedging instruments, net			(8,673	)		(9,485	)		(69,156	)		(9,889	)
	Agency commissions			6,710			6,253			12,264			13,003
	Aircraft maintenance materials and repairs			49,359			52,350			97,347			102,404
	Depreciation and amortization			11,587			12,587			23,447			26,378
	Special charges (credits), net			—			—			811			(600	)
	Express expenses			136,048			89,802			246,874			163,104
	Other			115,469			103,779			225,518			197,591

		Total operating expenses		801,305			667,237			1,473,002			1,300,509

Operating income				31,722			26,751			82,667			42,636

Nonoperating income (expenses):
	Interest income			4,021			3,418			7,485			6,619
	Interest expense, net			(21,448	)		(20,948	)		(42,118	)		(42,410	)
	Other, net			891			2,304			1,469			3,886

		Total nonoperating expenses, net		(16,536	)		(15,226	)		(33,164	)		(31,905	)

Income before income taxes				15,186			11,525			49,503			10,731

Income taxes				—			—			—			—

Net income			$	15,186		$	11,525		$	49,503		$	10,731

~~AWA has a regional airline alliance agreement with Mesa Airlines (“Mesa”). Mesa, operating as~~ ~~America~~See ~~West~~accompanying ~~Express~~Notes (“Express”), provides regional feeder service for AWA. Express operations have grown substantially and, as of March 31, 2005, comprise approximately 12% of AWA’s total capacity as measured by available seat miles (“ASMs”). To improve the visibility of Express operating results, effective with the first quarter of 2005, AWA has changed its method of reporting for this agreement to ~~the~~Condensed ~~gross~~Consolidated ~~basis of presentation. Previously, AWA used the net~~Financial ~~basis of presentation~~Statements.

~~Using the gross basis of presentation, the passenger revenues and operating expenses~~11 ~~associated with the Express agreement are reported gross (i.e.; as “Operating Revenues – Express”~~ ~~and “Operating Expenses – Express Expenses”) in the Condensed Consolidated Statement of Operations.~~ Under the net basis of presentation, Express passenger revenues and the associated operating expenses were netted and classified in “Operating Revenues – Other.” Prior period amounts have been reclassified to be consistent with the first quarter 2005 presentation. These reclassifications did not impact our operating income or net income (loss) for each period presented. See Note 7, “Change in Method of Reporting for America West Express Results” for additional information about this agreement and the reclassifications related to the change in presentation.

CertainTable otherof prior year amounts have been reclassified to conform with current year presentation. Contents

2. America ~~ADVANCES~~West TOAirlines, ~~PARENT COMPANY AND AFFILIATE~~Inc.

~~As of March 31, 2005, AWA had net advances to Holdings of $259.4 million, which were~~ ~~classified~~Condensed inConsolidated ~~“Other~~Statements ~~Assets” on AWA’s condensed consolidated balance sheet due to certain restrictions related to the timing~~ of ~~repayment~~Cash ~~under the government guaranteed loan, of which~~Flows ~~$300.3 million remains outstanding.~~

3. (in ~~STOCK OPTIONS~~thousands)

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

		Three Months Ended
				Six Months Ended June 30,
		March 31,
				2005				2004
		2005				2004
Net cash provided by operating activities				$	223,562			$	84,205
		(in thousands)
Cash flows from investing activities:
Net income (loss), as reported		$	34,317			$	(794	)
	Purchases of property and equipment				(97,210	)			(77,173	)
Stock-based compensation expense			(1,270	)			(1,270	)
	Purchases of short-term investments				(283,750	)			(273,533	)
Pro forma net income (loss)		$	33,047			$	(2,064	)
	Sales of short-term investments				233,961				289,610
	Purchases of investments in debt securities				—				(35,000	)
	Sales of investments in debt securities				—				15,000
	Decrease (increase) in restricted cash				(19,542	)			1,270
	Proceeds from disposition of assets				1,227				1,848
		Net cash used in investing activities			(165,314	)			(77,978	)
Cash flows from financing activities:
	Repayment of debt				(86,717	)			(47,980	)
	Other				(4,750	)			(8	)
		Net cash used in financing activities			(91,467	)			(47,988	)
Net decrease in cash and cash equivalents					(33,219	)			(41,761	)
Cash and cash equivalents at beginning of period					128,497				134,150
Cash and cash equivalents at end of period				$	95,278			$	92,389
Cash paid for:
	Interest, net of amounts capitalized			$	17,047			$	10,339
	Income taxes			$	6			$	325
Non-cash investing and financing activities:
	Reclassification of investments in debt securities to short-term investments			$	30,000			$	5,730
	Notes payable issued under the aircraft purchase agreement			$	8,750			$	7,000
	Notes payable cancelled under the aircraft purchase agreement			$	(7,000	)		$	—
	Acquisition of property and equipment under capital leases			$	17			$	—
	Payment in kind notes issued, net of returns			$	—			$	4,672

14 See accompanying Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~12

AMERICATable WESTof AIRLINES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2005 Contents

4. America ~~FLIGHT~~West ~~EQUIPMENT~~Airlines, Inc.

In Notes ~~January 2005,~~to ~~AWA~~Condensed ~~entered~~Consolidated ~~into~~Financial ~~an operating lease for one new Airbus A320 aircraft with a~~Statements ~~lease term of 5 years.~~

~~In March~~ June ~~2005~~30, ~~AWA completed a sale-leaseback transaction on one Airbus A320 aircraft~~2005 ~~resulting in a loss of $3.7 million. This amount was recorded in “Operating Expenses – Other.” The term of the leaseback is 12 years.~~

~~During~~1. ~~the~~Basis ~~first quarter~~ of ~~2005, AWA returned one Boeing 737-200 aircraft with the aircraft lessor in accordance with the renegotiated lease term.~~ Presentation

5 The unaudited condensed consolidated financial statements included herein have been prepared by AWA, a wholly owned subsidiary of Holdings, pursuant to the rules and regulations of the Securities and Exchange Commission and, in accordance with those rules and regulations, certain information and footnotes required by generally accepted accounting principles have been omitted. ~~SPECIAL~~In ~~CHARGES~~the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in AWA’s Annual Report on Form 10-K for the year ended December 31, 2004.

In AWA ~~the~~has ~~first~~a ~~quarter~~regional ofairline ~~2005,~~alliance ~~AWA~~agreement ~~recorded~~with $0Mesa Airlines (“Mesa”).~~8 million~~ inMesa, ~~special~~operating ~~charges~~as ofAmerica ~~which~~West ~~$0.7~~Express ~~million~~(“Express”), isprovides ~~accrued~~regional atfeeder ~~March 31,~~service ~~2005~~for AWA. To ~~This~~improve isthe ~~related~~visibility toof ~~continued~~Express ~~costs~~operating ~~associated~~results, effective with the first quarter of 2005, AWA has changed its ~~retirement~~method of reporting for this agreement to the ~~737-200~~gross ~~fleet~~basis of presentation. Previously, AWA used the net basis of presentation.

~~The~~ Using ~~following~~the ~~table~~gross ~~presents~~basis of presentation, the ~~payments~~passenger revenues and ~~other~~operating ~~settlements~~expenses ~~made~~associated ~~during~~with the ~~three~~Express ~~months~~agreement are ~~ended~~reported ~~March~~gross (i.e., as “Operating Revenues 31— Express” and “Operating Expenses — Express Expenses”) in the Condensed Consolidated Statements of Operations. Under the net basis of presentation, Express passenger revenues and the associated operating expenses were netted and classified in “Operating Revenues — Other.” Prior period amounts have been reclassified to be consistent with the 2005 presentation. These reclassifications did not impact our operating income or net income for each period presented. See Note 7, “Change in Method of Reporting for America West Express Results” for additional information about this agreement and the reclassifications related to the ~~special~~change ~~charge accruals:~~in presentation.

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

Certain other prior year amounts have been reclassified to conform with current year presentation.

~~AWA~~2. ~~expects~~Advances to ~~make~~Parent ~~payments~~Company ~~related~~and ~~to these special charges through the fourth quarter of 2005.~~ Affiliate

6 As of June 30, 2005, AWA had net advances to Holdings of $260.6 million, ~~SEGMENT~~which ~~DISCLOSURES~~were classified in “Other Assets” on AWA’s condensed consolidated balance sheet due to certain restrictions related to the timing of repayment under the government guaranteed loan, of which $300.3 million remains outstanding.

~~AWA is one reportable operating segment~~3. ~~Accordingly,~~Stock the segment reporting financial data required by SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” is included in the accompanying condensed balance sheets and statements of operations. Options

7 Certain of AWA’s employees are eligible to participate in the stock option plans of Holdings. ~~CHANGE~~Holdings INaccounts ~~METHOD~~for OFits stock ~~REPORTING~~option ~~FOR~~plans ~~AMERICA~~in ~~WEST~~accordance ~~EXPRESS~~with ~~RESULTS~~the provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Holdings issues its stock options at a price equal to the fair market value on the date of grant. Accordingly, no compensation cost has been recognized for stock options in Holdings’ condensed consolidated financial statements. Had Holdings determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, “Accounting for Stock-Based Compensation,” and

~~The Company has a regional airline alliance agreement (the “Agreement”) with Mesa that commenced in~~13 ~~February 2001. Pursuant to the Agreement, Mesa, using aircraft owned and operated by Mesa under the name~~ ~~Express, provides feeder service to destinations in the western United States, Canada and northern~~ ~~Mexico. As of March 31, 2005, the Express fleet included 49 aircraft comprised of 27 86-seat CRJ 900s, 16 50-seat CRJ 200s and six 37-seat Dash 8 turbo prop aircraft.~~

UnderTable the Agreement, Mesa is required to fly the routes and flights designated by AWA using Mesa’s aircraft, flight crews and other related services. Mesa maintains and operates the aircraft, employs, trains, manages and compensates personnel necessary to provide the flight services and provides related passenger handling services for and on the flights. AWA is responsible for establishing the routes, scheduling Express flights, pricing of the tickets, marketing and selling the tickets, collecting all sales amounts, paying all costs of sales and marketing and taking inventory risk on the inventory of seats for sale on Mesa. The ground handling of aircraft is performed by either AWA or Mesa, depending upon the airport. Contents

15 allocated the compensation expense to AWA for its employees participating in the stock option plans, AWA’s net income would have been decreased to the pro forma amounts indicated below:


	Three Months Ended						Six Months Ended
	June 30,						June 30,

	2005			2004			2005			2004

	(in thousands)
Net income, as reported	$	15,186		$	11,525		$	49,503		$	10,731
Stock-based compensation expense		(1,055	)		(1,650	)		(2,345	)		(2,916	)

Pro forma net income	$	14,131		$	9,875		$	47,158		$	7,815

~~AMERICA WEST AIRLINES, INC~~4. ~~Notes~~ toFlight ~~Condensed Consolidated Financial Statements March 31, 2005~~ Equipment

~~AWA collects the revenue and income generated from the services provided by Mesa pursuant to~~ ~~the Agreement.~~ In ~~return,~~April ~~AWA: (i) reimburses Mesa for actual non-controllable costs incurred by Mesa such as fuel~~2005, ~~insurance,~~the ~~taxes,~~Company ~~fees~~entered ~~and~~into ~~security;~~an ~~(ii) pays~~operating ~~Mesa for actual controllable non-maintenance costs, subject to a cap, such as aircraft~~ lease ~~expense and crew expense; (iii) pays Mesa~~ for ~~controllable maintenance costs at fixed rates (subject to reimbursement of excess~~ ~~costs~~one ifnew ~~actual costs during term are less than fixed amount paid by AWA); (iv)~~Airbus ~~reimburses~~A320 ~~Mesa costs~~aircraft ~~and expenses incurred at stations maintained and operated by Mesa; and (v) shares~~ with ~~Mesa~~ a ~~percentage~~ oflease ~~the~~term ~~revenue~~of ~~allocated to the flight segments flown by Mesa on a pro rata basis~~five years.

~~The~~ In ~~Agreement~~May is2005, ~~anticipated~~the toCompany ~~expire~~entered ininto ~~June~~operating leases for one new Airbus ~~2012~~A319 and one new Airbus A320 aircraft, each with a lease term of five years.

As In ~~discussed~~June in2005, ~~Note~~the 1,Company ~~“Basis~~completed ofsale-leaseback ~~Presentation,”~~transactions on ~~AWA~~two isnew ~~reporting~~IAE V2500-A5 ~~the~~engines ~~passenger~~resulting ~~revenues~~in gains of $0.3 million and $2.6 million, respectively. These ~~operating~~amounts ~~expenses~~have ~~associated~~been ~~with~~deferred ~~the~~and ~~Agreement~~will onbe aamortized ~~gross~~over ~~basis.~~the ~~Previously~~lease term, ~~these~~each ~~revenues~~of ~~and expenses~~which ~~were~~is ~~reported~~seven ~~net~~years. inThe ~~“Operating~~Company ~~Revenues~~also –completed ~~Other”~~a sale-leaseback intransaction ~~our~~on ~~Condensed~~one ~~Consolidated~~Airbus A320 ~~Statements~~aircraft resulting in a loss of ~~Operations~~$4.3 million. ~~The~~This ~~following~~amount ~~table~~was recorded ~~presents~~in ~~the~~“Operating ~~effect~~Expenses — ofOther.” The ~~this~~term ~~reclassification~~of ~~for~~ the ~~three months~~leaseback ~~ended~~is ~~March~~12 ~~31, 2004:~~years.

	As Reported		Adjustments			As Reclassified
Operating revenues:
Passenger	$	537,333	$	—		$	537,333
Express		—		72,651	(1)		72,651
Cargo and other		39,041		132			39,173
Total operating revenues	$	576,374	$	72,783		$	649,157
Operating expenses:
Operating expenses	$	560,489	$	(519	)	$	559,970
Express expenses		—		73,302	(2)		73,302
Total operating expenses	$	560,489	$	72,783		$	633,272


5.	Special Charges

	1.	Reclassification of Express passenger revenues from “Operating Revenues – Other.”
	2.	Reclassification of $72.8 million and $0.5 million of Express operating expenses from “Operating Revenues – Other” and “Operating Expenses – Other,” respectively.

The following table presents the payments and other settlements made during the six months ended June 30, 2005 related to the special charge accruals:


	Fleet			Contract Termination/
	Restructuring			Other Costs			Total

Balance at December 31, 2004	$	643		$	121		$	764

Special charges		690			—			690
Payments		(305	)		(111	)		(416	)
Revision of estimate		—			147			147

Balance at March 31, 2005		1,028			157			1,185

Special charges		—			—			—
Payments		—			—			—

Balance at June 30, 2005	$	1,028		$	157		$	1,185

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

~~Table~~6. ofSegment ~~Contents~~Disclosures

~~AMERICA~~ AWA ~~WEST~~is ~~HOLDINGS~~one ~~CORPORATION~~reportable ~~ANDAMERICA~~operating ~~WEST~~segment. ~~AIRLINES~~Accordingly, ~~INC.~~the segment reporting financial data required by ~~March~~SFAS 31No. 131, ~~2005~~“Disclosures About Segments of an Enterprise and Related Information” is included in the accompanying condensed balance sheets and statements of operations.

~~ITEM 2~~7. ~~MANAGEMENT’S~~Change ~~DISCUSSION~~in ~~AND~~Method ~~ANALYSIS~~of OFReporting ~~FINANCIAL~~for ~~CONDITION~~America ~~AND~~West ~~RESULTS~~Express ~~OF OPERATIONS.~~Results

~~Holdings~~ The isCompany ~~the~~has ~~parent~~a ~~company~~regional ofairline ~~AWA.~~alliance ~~AWA~~agreement is (the ~~eighth largest passenger airline and the~~ ~~second~~“Agreement”) ~~largest~~with ~~low~~Mesa ~~cost~~that ~~carrier~~commenced in ~~the United States operating through its hubs located in Phoenix,~~February ~~Arizona and Las Vegas, Nevada~~2001. AsPursuant ofto ~~March 31,~~the ~~2005~~Agreement, ~~AWA served 63 destinations in North America~~Mesa, ~~including~~ ~~eight~~using ~~destinations~~aircraft inowned ~~Mexico, three in Canada~~ and operated ~~one~~by inMesa ~~Costa~~under ~~Rica.~~the ~~Through~~name ~~its America West Vacations (“AWV”) division~~Express, ~~AWA~~provides ~~also~~feeder ~~arranges and sells vacation packages primarily~~ service to ~~Las Vegas,~~destinations ~~Nevada~~in ~~that~~the ~~may~~western ~~include~~United ~~airfare~~States, ~~hotel~~Canada ~~accommodations~~ and ~~ground transportation. Holdings’~~northern ~~primary business activity is ownership of all the capital stock of AWA.~~

~~Overview~~14

DuringTable the first quarter of 2005, our improved revenue performance substantially offset the impact of record high jet fuel prices as follows: Contents

	•	Passenger revenues were $575.4 million for the quarter, an increase of $38.1 million from the first quarter of 2004. Passenger revenue per available seat mile (“RASM”) was 7.88 cents for the first quarter of 2005, an increase of 7.8% versus the 2004 first quarter, driven by a 5.5 point increase in load factor with no deterioration in yield. The Company’s strong unit revenue improvement was due to more aggressive yield management in the 2005 first quarter and more balanced capacity in the markets served by AWA. Reductions in late 2004 of the Company’s transcontinental flying, which yields were negatively impacted by competitive responses, also contributed to improved period-over-period RASM and yield performance.
	•	The airline industry and AWA incurred and continue to face an increase in costs resulting from record high jet fuel prices. The average price per gallon of fuel increased 34.6% from 105.3 cents in the first quarter of 2004 to 141.7 cents per gallon in the first quarter of 2005. As a result, aircraft fuel expense for the quarter was $151.9 million, an increase of $37.7 million, or 33.0% from the first quarter of 2004.

Mexico. As of June 30, 2005, the Express fleet included 59 aircraft comprised of 35 86-seat CRJ 900s, 18 50-seat CRJ 200s and six 37-seat Dash 8 turbo prop aircraft.

~~Holdings~~ Under ~~realized~~the ~~a pretax and net profit of $33.6 million~~Agreement, orMesa ~~$0.62~~is ~~per~~required ~~diluted~~to ~~share,~~fly ~~for~~ the ~~first~~routes ~~quarter~~and flights ofdesignated ~~2005.~~by ~~During~~AWA ~~the~~using ~~first quarter we benefited from a $60.5 million gain associated with the Company~~Mesa’s ~~fuel hedging transactions. Of this amount~~aircraft, ~~$11.6 million was net~~flight ~~realized~~crews ~~gains~~and onother ~~settled~~related ~~hedge transactions~~services. ~~The~~Mesa ~~remaining~~maintains ~~$48.9 million~~and ~~was unrealized gains~~operates ~~resulting from~~ the ~~application~~aircraft, ofemploys, ~~mark-to-market~~trains, ~~accounting~~manages ~~for~~and ~~changes~~compensates inpersonnel necessary ~~the~~to ~~fair~~provide ~~value of~~ the ~~Company’s~~ ~~fuel~~flight ~~hedging~~services ~~instruments.~~and ~~The~~provides ~~Company is required to use mark-to-market accounting as~~related ~~its~~passenger ~~fuel~~handling ~~hedging~~services ~~instruments~~for doand ~~not~~on ~~meet~~ the ~~requirements~~flights. ~~for~~AWA ~~hedge accounting as established by~~is ~~Statement~~responsible offor ~~Financial~~establishing ~~Accounting~~the ~~Standards No. 133~~routes, ~~“Accounting~~scheduling ~~for Derivative Instruments and~~Express ~~Hedging~~flights, ~~Activities.”~~pricing Ifof ~~these~~the ~~instruments had qualified for hedge accounting treatment~~tickets, ~~any unrealized~~marketing ~~gains~~and orselling ~~losses~~the tickets, ~~including~~collecting ~~the~~all ~~$48.9 million~~sales ~~discussed above~~amounts, ~~would~~paying beall ~~deferred~~costs inof ~~other~~sales ~~comprehensive~~and ~~income,~~marketing aand ~~subset~~taking ofinventory ~~stockholders’~~risk ~~equity~~on ~~until~~ the ~~jet~~inventory ~~fuel is purchased and the~~of ~~underlying~~seats ~~fuel~~for ~~hedging~~sale ~~instrument~~on ~~is settled~~Mesa. ~~Given~~The ~~the~~ground ~~market~~handling ~~volatility~~ of ~~jet~~aircraft ~~fuel, the fair~~is ~~value~~performed ofby ~~these~~either ~~fuel~~AWA ~~hedging~~or ~~instruments~~Mesa, isdepending ~~expected~~upon tothe ~~change until settled~~airport.

As AWA ofcollects ~~March 31,~~the ~~2005,~~revenue ~~Holdings unrestricted~~ and ~~restricted~~income ~~cash,~~generated ~~cash~~from ~~equivalents,~~the ~~short-term~~services ~~investments,~~provided ~~and~~by ~~investments~~Mesa inpursuant ~~debt~~to ~~securities~~the ~~totaled $345~~Agreement.~~3 million,~~ ofIn ~~which~~return, ~~$253.7~~AWA: (i) ~~million~~reimburses ~~was~~Mesa for actual non-controllable costs ~~unrestricted.~~incurred ~~Although~~by ~~there~~Mesa ~~can~~such beas nofuel, ~~assurances~~insurance, wetaxes, ~~believe~~fees ~~that~~and security; ~~cash~~(ii) pays ~~flows~~Mesa ~~from~~for ~~operating~~actual controllable ~~activities~~non-maintenance costs, ~~combined~~subject ~~with~~to ~~these~~a ~~cash~~cap, ~~balances~~such as aircraft lease expense and ~~our~~crew ~~financing~~expense; ~~commitments,~~(iii) pays ~~will~~Mesa befor ~~adequate~~controllable maintenance costs at fixed rates (subject to reimbursement of ~~fund~~excess ~~our~~costs ~~operating~~if ~~and~~actual ~~capital~~costs ~~needs~~during asterm ~~well~~are asless ~~enable~~than usfixed amount topaid ~~maintain~~by ~~compliance~~AWA); ~~with~~(iv) reimburses ~~our~~Mesa ~~various~~costs and ~~debt~~expenses ~~agreements~~incurred ~~through~~ at ~~least~~stations ~~December~~maintained and operated by Mesa; and (v) ~~31,~~shares ~~2005.~~with Mesa a percentage of the revenue allocated to the flight segments flown by Mesa on a pro rata basis.

17 The Agreement is anticipated to expire in June 2012.

~~Table~~ As discussed in Note 1, “Basis of Presentation,” ~~Contents~~AWA is reporting the passenger revenues and operating expenses associated with the Agreement on a gross basis to improve the visibility of Express operating results. Previously, these revenues and expenses were reported net in “Operating Revenues — Other” in our Condensed Consolidated Statements of Operations. The following table presents the effect of this reclassification for the three and six months ended June 30, 2004:

AMERICA WEST HOLDINGS CORPORATION ANDAMERICA WEST AIRLINES, INC. March 31, 2005


	Three Months Ended June 30, 2004

	As Reported		Adjustments			As Reclassified

Operating revenues:
Passenger	$	569,166	$	—		$	569,166
Express		—		85,466	(1)		85,466
Cargo and other		35,738		3,618			39,356

Total operating revenues	$	604,904	$	89,084		$	693,988

Operating expenses:
Operating expenses	$	578,153	$	(718	)	$	577,435
Express expenses		—		89,802	(2)		89,802

Total operating expenses	$	578,153	$	89,084		$	667,237

Airline Operations Update


	Six Months Ended June 30, 2004

	As Reported		Adjustments			As Reclassified

Operating revenues:
Passenger	$	1,106,499	$	—		$	1,106,499
Express		—		158,117	(1)		158,117
Cargo and other		74,779		3,750			78,529

Total operating revenues	$	1,181,278	$	161,867		$	1,343,145

Operating expenses:
Operating expenses	$	1,138,642	$	(1,237	)	$	1,137,405
Express expenses		—		163,104	(3)		163,104

Total operating expenses	$	1,138,642	$	161,867		$	1,300,509

~~AWA reported the following operating statistics to the U.S. Department of Transportation~~15 ~~(“DOT”) for aircraft operated by AWA (“mainline”) for the first quarter of 2005 and 2004:~~

													Percent Change
	2005						2004						2005 – 2004
	Jan		Feb		Mar		Jan		Feb		Mar		Jan			Feb		Mar
On-time performance (a)		71.9		76.3		81.8		76.3		71.7		74.8		(5.9	)		6.4		9.3
Completion factor (b)		97.2		98.5		99.0		98.1		98.2		98.6		(0.9	)		0.3		0.4
Mishandled baggage (c)		5.89		4.51		3.83		3.96		3.58		3.50		48.7			26.0		9.4
Customer complaints (d)		2.15		1.85		1.24		1.23		0.97		1.17		74.8			90.7		6.3

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


(1)	Reclassification of Express passenger revenues from “Operating Revenues — Other.”

(2)	Reclassification of $89.1 million and $0.7 million of Express operating expenses from “Operating Revenues — Other” and “Operating Expenses — Other,” respectively.

(3)	Reclassification of $161.9 million and $1.2 million of Express operating expenses from “Operating Revenues — Other” and “Operating Expenses — Other,” respectively.

~~All~~ The ~~measures~~operating ~~showed~~margin ~~marked~~that ~~improvement~~results ~~throughout~~from using the ~~quarter~~gross basis of presentation for Express revenues and ~~the~~expenses ~~key~~does ~~reliability~~not include ~~measures,~~any ~~on-time~~beyond ~~performance~~contribution ~~and~~passenger ~~completion~~revenue ~~factor,~~generated ~~were~~by ~~much~~feed ~~improved~~into AWA’s ~~versus~~mainline ~~2004~~operations from Express flights. Overall, the Mesa alliance agreement adds to the total profitability of AWA.

~~Summary~~8. Agreement to Merge with Subsidiary of ~~Holdings’~~U.S. ~~Financial~~Airways ~~Results~~ Group

~~Holdings~~ On ~~recorded~~May 19, ~~consolidated~~2005, ~~net~~US Airways ~~income~~Group, ~~of $33~~Inc.6 (“US ~~million~~Airways inGroup”), ~~the first quarter of 2005~~Holdings, orand Barbell ~~$0.62~~Acquisition ~~per diluted share~~Corp., ~~This compares to~~ a ~~consolidated~~wholly ~~net~~owned ~~loss~~subsidiary of ~~$1.6~~US ~~million~~Airways Group (“Merger Sub”), orentered ~~$0.04~~into ~~per~~an Agreement and ~~diluted~~Plan ~~share,~~of inMerger (the ~~first~~“Merger ~~quarter of 2004~~Agreement”). The ~~2005 results~~Merger ~~include~~Agreement ~~$60.5 million~~provides ~~net~~that, ~~gains associated~~upon ~~with~~ the ~~Company’s~~terms ~~fuel~~and ~~hedging~~subject ~~transactions.~~to ~~Of this amount, $48.9 million resulted~~the ~~from~~conditions ~~mark-to-market~~set ~~accounting~~forth ~~for changes~~ in the ~~fair~~Merger ~~value~~Agreement, ofMerger ~~the~~Sub ~~Company’s fuel hedging~~will ~~instruments~~merge with and ~~$11.6 million~~into ~~was~~Holdings, ~~net~~with ~~realized~~Holdings ~~gains~~continuing onas ~~settled~~the surviving ~~hedge transactions~~corporation. The ~~2005 quarter~~merger ~~also~~is ~~includes~~expected ~~$0.8 million of special charges related~~ to create the first ~~write~~full-~~down~~service ofairline ~~deferred aircraft rent payments associated~~ with the ~~return of one Boeing 737~~consumer-~~200~~friendly ~~aircraft and a $3.7 million~~pricing ~~loss~~structure ~~on the sale and leaseback~~ of ~~one~~a ~~new~~low-fare ~~Airbus A320 aircraft acquired during the period~~carrier.

~~The~~ ~~2004~~In ~~results~~the ~~include~~merger, ~~$0.4 million~~holders ~~net~~of ~~gains~~Holdings ~~associated~~Class A ~~with~~common ~~the Company’s fuel hedging~~stock ~~transactions.~~will Ofreceive ~~this amount $2~~0.~~9 million~~5362 ~~was~~of ~~net~~a ~~realized~~share ~~gains~~of onnew ~~settled~~US Airways ~~hedge transactions,~~Group ~~which~~common ~~was~~stock ~~offset~~for ineach ~~part~~share ~~by $2.5 million~~ of ~~losses~~Holdings ~~resulting~~Class A ~~from mark-to-market accounting for~~common ~~changes~~stock inthey ~~the~~own, ~~fair~~and ~~value~~holders of ~~the~~Holdings ~~Company’s~~Class B ~~fuel~~common stock ~~hedging~~will ~~instruments~~receive 0.4125 ~~The~~of ~~2004~~a ~~quarter~~share ~~also included~~of anew ~~$2.5~~US ~~million~~Airways Group ~~credit~~common tostock ~~other~~for ~~operating~~each ~~revenues~~share ~~related to the reduction~~ of ~~certain~~Holdings Class B ~~obligations~~common ~~based~~stock ~~upon~~they ~~a settlement with Mesa Airlines~~own, aon ~~$2.0 million~~the ~~reduction~~terms specified in ~~operating expenses resulting from~~ the ~~settlement~~Merger Agreement. ofThe amerger ~~lawsuit~~cannot ~~related~~be tocompleted ~~certain~~unless ~~computer hardware and~~Holdings’ ~~software~~stockholders ~~that~~adopt ~~previously~~the ~~had~~merger ~~been~~agreement ~~written~~and ~~off,~~approve athe $1merger.~~7 million~~ The ~~reduction~~obligations inof ~~bad~~Holdings ~~debt~~and ~~expense~~US Airways ~~due~~Group to acomplete ~~recovery~~the ofmerger aare ~~previously~~also ~~reserved~~subject ~~debt~~to ~~and~~the asatisfaction ~~$0.6 million reduction in special charges due to a~~or ~~revision~~waiver of ~~the~~several ~~estimated~~other ~~costs~~conditions, ~~related~~including toclearance ~~certain~~from regulatory ~~aircraft sale-leaseback transactions~~agencies.

~~The Company did not record income tax expense in the first quarter as it currently expects to~~16 ~~realize a loss for the full year 2005. The Company did not record an income tax benefit in the~~ ~~first quarter of 2004 as it continued to record a full valuation allowance on any future tax~~ ~~benefits until it achieves several quarters of profitable results coupled with an expectation of continued profitability.~~

18 Table of Contents

~~Table~~ America ofWest ~~Contents~~Holdings Corporation and

~~AMERICA~~ America ~~WEST~~West ~~HOLDINGS CORPORATION ANDAMERICA WEST AIRLINES~~Airlines, ~~INC~~Inc. ~~March 31, 2005~~

~~RESULTS~~ June 30, ~~OF OPERATIONS~~2005

~~The~~Item ~~following~~2. ~~discussion provides an analysis of AWA~~Management’s ~~results~~Discussion ofand ~~operations~~Analysis ~~for the first quarter~~ of ~~2005~~Financial Condition and ~~material~~Results ~~changes compared to the first quarter~~ of ~~2004~~Operations.

~~The~~ Holdings ~~table~~is ~~below~~the ~~sets~~parent ~~forth~~company ~~selected~~of ~~mainline~~AWA. AWA is the eighth largest passenger airline and the second largest low cost carrier in the United States operating ~~data~~through ~~for~~its hubs located in Phoenix, Arizona and Las Vegas, Nevada. As of June 30, 2005, AWA served 63 destinations in North America, including eight destinations in Mexico, three in Canada and one in Costa Rica. Through its America West Vacations (“AWV”) division, AWA also arranges and sells vacation packages primarily to Las Vegas, Nevada that may include airfare, hotel accommodations and ground transportation. Holdings’ primary business activity is ownership of all the capital stock of AWA.

	Three Months Ended
	March 31,				Percent Change
	2005		2004		2005-2004
Revenue passenger miles (in millions) (a)		5,671		5,306		6.9
Available seat miles (in millions) (b)		7,301		7,352		(0.7	)
Passenger load factor (percent) (c)		77.7		72.2	5.5 pts
Yield per revenue passenger mile (cents) (d)		10.15		10.13		0.2
Passenger revenue per available seat mile (cents) (e)		7.88		7.31		7.8
Total revenue per available seat mile (cents) (f)		8.48		7.84		8.2
Passenger enplanements (in thousands) (g)		5,172		4,897		5.6
Aircraft (end of period)		138		138		—
Average daily aircraft utilization (hours) (h)		11.0		10.8		1.9
Block hours (i)		136,497		136,678		(0.1	)
Average stage length (miles) (j)		1,022		1,037		(1.4	)
Average passenger journey (miles) (k)		1,624		1,594		1.9
Fuel consumption (gallons in millions)		107.2		108.5		(1.2	)
Average fuel price (cents per gallon)		141.7		105.3		34.6
Average number of full-time equivalent employees		12,154		11,827		2.8

Overview

~~(a)~~ During ~~Revenue~~the ~~passenger~~second ~~mile~~quarter ~~(“RPM”) – A basic measure~~ of ~~sales~~2005, ~~volume.~~our Itimproved is one passenger flown one mile. (b) Available seat mile (“ASM”) – A basic measure of production. It is one seat flown one mile. (c) Load factor – The percentage of available seats that are filled with revenue performance ~~passengers.~~helped ~~(d)~~to ~~Yield~~mitigate – A measure of airline revenue derived by dividing passenger revenue by revenue passenger miles and expressed in cents per mile. (e) Passenger revenue per available seat mile (“RASM”) – Total passenger revenues divided by total available seat miles. (f) Total revenue per available seat mile – Total operating revenues divided by total available seat miles. (g) Passenger enplanements – The number of passengers on board an aircraft including local, connecting and through passengers. (h) Average daily aircraft utilization – The average number of block hours per day for all aircraft in service. (i) Block hours – The hours measured from the ~~moment~~impact ~~an aircraft first moves under its own power, including taxi time, for the purposes~~ of ~~flight~~record ~~until~~high ~~the~~jet fuel ~~aircraft~~prices isas docked at the next point of landing and its power is shut down. (j) Average stage length – The average of the distances flown on each segment of every route. (k) Average passenger journey – The average one-way trip measured in miles for one passenger origination.follows:


	•	Passenger revenues were $654.9 million for the quarter, an increase of $85.7 million from the second quarter of 2004. Passenger revenue per available seat mile (“RASM”) was 8.44 cents for the second quarter of 2005, an increase of 11.9% versus the 2004 second quarter, driven by a 4.0 point increase in load factor as well as a 6.5% increase in yield. The Company’s strong unit revenue improvement was due to more aggressive peak day yield management in the 2005 second quarter, more balanced capacity in the markets served by AWA in the western United States and the positive impact of numerous legacy and low cost carrier fare increases in the winter and spring of 2005. Reductions in late 2004 of the Company’s transcontinental flying, which yields were negatively impacted by competitive responses, also contributed to improved period-over-period RASM and yield performance.

	•	The airline industry and AWA incurred and continue to face an increase in costs resulting from record high jet fuel prices. The average price per gallon of fuel increased 43.0% from 116.7 cents in the second quarter of 2004 to 166.9 cents per gallon in the second quarter of 2005. As a result, aircraft fuel expense for the quarter was $191.0 million, an increase of $58.0 million, or 43.6%, from the second quarter of 2004.

~~Table~~ Holdings realized net income of ~~Contents~~$13.9 million, or $0.29 per diluted share, for the second quarter of 2005. Net income for the second quarter included an $8.7 million net gain associated with the Company’s fuel hedging transactions. Of this amount, $11.4 million resulted from realized gains on settled hedge transactions which was offset in part by $2.7 million of unrealized losses resulting from the application of mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments. The Company is required to use mark-to-market accounting as its fuel hedging instruments do not meet the requirements for hedge accounting as established by Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities.” If these instruments had qualified for hedge accounting treatment, any unrealized gains or losses, including the $2.7 million discussed above, would be deferred in other comprehensive income, a subset of stockholders’ equity until the jet fuel is purchased and the underlying fuel hedging instrument is settled. Given the market volatility of jet fuel, the fair value of these fuel hedging instruments is expected to change until settled.

~~AMERICA~~ As ~~WEST~~of ~~HOLDINGS~~June 30, ~~CORPORATION~~2005, ~~ANDAMERICA~~Holdings ~~WEST~~unrestricted ~~AIRLINES~~and restricted cash, ~~INC~~cash equivalents and short-term investments totaled $413.9 million, of which $322.3 million was unrestricted. Although there can be no assurances, we believe ~~March 31~~that cash flows from operating activities, ~~2005~~combined with these cash balances and our financing commitments, will be adequate to fund our operating and capital needs as well as enable us to maintain compliance with our various debt agreements through at least December 31, 2005.

~~Three Months Ended March 31, 2005 and 2004~~17

ForTable the first quarter of 2005, AWA realized operating income of $50.9 million as compared to $15.9 million in last year’s quarter. Operating income in the 2005 period includes a $60.5 million net gain associated with the Company’s fuel hedging transactions. Of this amount $48.9 million resulted from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments and $11.6 million was net realized gains on settled hedge transactions. The 2004 period includes a $0.4 million net gain associated with the Company’s fuel hedging transactions. Of this amount $2.9 million was net realized gains on settled hedge transactions, which was offset in part by $2.5 million of losses resulting from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments. Income before income taxes for the first quarter of 2005 was $34.3 million as compared to a loss before income taxes of $0.8 million for the comparable 2004 period. Contents

~~Total operating revenues for the first quarter of 2005 were $722.6 million. Passenger~~ ~~revenues~~Agreement were $575.4 million for the first quarter of 2005, an increase of $38.1 million from the comparable 2004 quarter. RPMs increased 6.9% as ASMs decreased 0.7%, resulting in a 5.5 point increase in load factor to ~~77.7%.~~Merge ~~This increase in load factor was achieved~~ with noSubsidiary ~~deterioration in~~of ~~yield, which was relatively flat period-over-period~~U. ~~As a result, RASM increased 7~~S.~~8% to 7.88~~ Airways ~~cents in the first quarter 2005 from 7.31 cents in the 2004 quarter. The Company’s strong unit~~Group revenue improvement was driven by more aggressive yield management in the 2005 first quarter and more balanced capacity in the markets served by AWA. Reductions in late 2004 of the Company’s transcontinental flying, which yields were negatively impacted by competitive responses, also contributed to improved period-over-period RASM and yield performance.

~~Express~~ On ~~revenues~~May 19, ~~were~~2005, ~~$103.4 million~~US ~~for~~Airways ~~the~~Group, ~~first~~Holdings ~~quarter~~and ofMerger ~~2005~~Sub, a anwholly ~~increase~~owned subsidiary of ~~$30.7 million~~US Airways ~~from~~Group, entered into the ~~comparable~~Merger ~~2004~~Agreement. ~~quarter~~The ~~due~~Merger Agreement provides that, upon the terms and subject to ~~increased~~the ~~flying~~conditions byset ~~Mesa~~forth ~~Airlines~~in ~~under~~the ~~its~~Merger ~~alliance~~Agreement, ~~agreement~~Merger Sub will merge with ~~AWA~~and into Holdings, with Holdings continuing as the surviving corporation. The merger is expected to create the first full-service airline with the consumer-friendly pricing structure of a low-fare carrier.

~~Cargo~~ In ~~revenues~~the ~~increased~~merger, ~~25.2%~~holders inof ~~the~~Holdings ~~first~~Class A ~~quarter~~common stock will receive 0.5362 of ~~2005~~a toshare ~~$8.6 million~~of ~~due~~new toUS Airways ~~increased~~Group ~~mail~~common ~~volume.~~stock ~~Other~~for ~~revenues~~each ~~increased~~share ~~9.2%~~of toHoldings ~~$35.2~~Class ~~million~~A incommon stock ~~the~~they ~~first~~own, ~~quarter~~and holders of ~~2005~~Holdings ~~from $32.3~~Class ~~million~~B incommon stock ~~the~~will ~~first~~receive ~~quarter~~0.4125 of ~~2004~~a ~~due~~share ~~principally~~of tonew anUS ~~increase~~Airways inGroup common ~~ticket~~stock ~~change~~for ~~and~~each share of Holdings Class B common ~~service~~stock ~~fees~~they own, on the terms specified in the Merger Agreement.

The ~~table~~merger ~~below~~is ~~sets~~one ~~forth~~of a series of transactions that require the approval ~~mainline~~of ~~and~~the ~~Express~~United ~~operating~~States ~~expenses~~Bankruptcy Court for ~~AWA~~the Eastern District of Virginia, Alexandria Division, in the pending bankruptcy proceeding of US Airways Group and its domestic subsidiaries. The other transactions that must be approved by the bankruptcy court, as part of a comprehensive plan of reorganization of US Airways Group and its domestic subsidiaries, include receipt by US Airways Group of new equity financing concurrently with the merger. US Airways Group has entered into agreements with new equity investors which have agreed to contribute a total of $565 million in equity to the reorganized US Airways Group, subject to a variety of conditions, including confirmation of the plan of reorganization and completion of the merger. The merger is a key component of the plan of reorganization and is also conditioned upon, among other things, the receipt of at least $375 million from these equity investors. The plan of reorganization contemplates the cancellation of existing US Airways Group common stock and the issuance of new shares of reorganized US Airways Group upon emergence from the bankruptcy proceedings and in connection with the merger. On June 30, 2005, US Airways Group filed the plan of reorganization and its related disclosure statement with the Bankruptcy Court.

	Three Months Ended
	March 31,
	2005			2004
Operating expenses:
Salaries and related costs	$	174,853		$	165,929
Aircraft rents		76,837			75,185
Other rents and landing fees		41,539			41,241
Aircraft fuel		151,863			114,212
Realized and unrealized gains on fuel hedging instruments, net		(60,483	)		(404	)
Agency commissions		5,554			6,750
Aircraft maintenance materials and repairs		47,988			50,054
Depreciation and amortization		11,860			13,791
Special charges (credits), net		811			(600	)
Other		110,049			93,812
Total mainline operating expenses		560,871			559,970
Express expenses		110,826			73,302
Total operating expenses	$	671,697		$	633,272

Assuming that US Airways Group receives $565 million in equity financing at the effective time of the merger, we expect that former America West Holdings stockholders will hold approximately 37% of new US Airways Group common stock outstanding immediately following the merger. Certain former US Airways Group creditors and new equity investors as a group will hold approximately 11% and 52%, respectively, of new US Airways Group common stock outstanding immediately following the merger. In each case, those percentages are subject to dilution as a result of any additional equity issuances, including as a result of the proposed rights offering discussed below, and are subject to certain assumptions concerning the likely exchange of certain convertible debt and securities that are dilutive at the per share purchase price paid by the equity investors for new US Airways Group common stock shortly after the merger.

~~Total~~ The ~~operating~~merger ~~expenses~~cannot inbe ~~the~~completed ~~first~~unless ~~quarter~~Holdings’ stockholders ofadopt ~~2005~~the ~~were~~merger ~~$671.7 million,~~agreement anand ~~increase~~approve ~~of $38.4 million~~the ~~or 6~~merger.~~1%,~~ The ~~compared~~obligations toof ~~the~~Holdings ~~2004~~and ~~quarter.~~US ~~Mainline~~Airways ~~operating~~Group ~~expenses~~to ~~were~~complete ~~$560.9~~the ~~million~~merger inare ~~the~~also ~~first~~subject ~~quarter~~to ofthe ~~2005,~~satisfaction anor ~~increase~~waiver of ~~$0.9 million~~several other ~~from~~conditions, ~~the~~including ~~first~~clearance ~~quarter~~from ofregulatory ~~2004,~~agencies. ~~while~~On ~~ASMs~~June 23, ~~decreased~~2005, 0the U.7%S. Department ~~Mainline~~of ~~CASM~~Justice notified ~~increased~~Holdings ~~0.9%~~and toUS ~~7.68~~Airways ~~cents~~that in the ~~first~~Department ~~quarter of 2005~~has ~~from~~completed ~~7.61~~its ~~cents~~review ~~for~~of the ~~comparable~~proposed ~~2004~~merger ~~period.~~of ~~The~~the ~~increase~~two ~~in CASM~~airlines ~~was~~and ~~driven~~that by the ~~decline~~waiting inperiod ~~capacity~~under ~~which~~the ~~was not met with a~~Hart-Scott-Rodino ~~commensurate~~Antitrust Improvements ~~reduction~~Act inof ~~costs~~1976 ~~and~~will aexpire ~~34.6%~~without ~~increase in the average~~a ~~fuel~~formal ~~price~~request ~~per~~from ~~gallon offset by a $60.5 million gain associated with~~ the ~~fuel~~Department ~~hedging~~for ~~transaction discussed~~additional ~~above~~information.

20 During the first six months of 2005, we incurred approximately $3.0 million in merger-related costs and we expect to incur significant additional merger-related costs in the remainder of 2005. If the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement, we may be required to pay a termination fee of $15.0 million to US Airways Group.

~~Table of Contents~~18

AMERICATable WESTof HOLDINGS CORPORATION AND AMERICA WEST AIRLINES, INC. March 31, 2005 Contents

~~The~~ Airline ~~table~~Operations ~~below sets forth the major components of mainline CASM for AWA.~~Update

	Three Months Ended						Percent
	March 31,						Change
	2005			2004			2005-2004
(in cents)
Salaries and related costs		2.39			2.27			6.1
Aircraft rents		1.05			1.02			2.9
Other rents and landing fees		0.57			0.56			1.4
Aircraft fuel		2.08			1.55			33.9
Realized and unrealized gains on fuel hedging instruments, net		(0.83	)		(0.01	)		—
Agency commissions		0.08			0.09			(17.1	)
Aircraft maintenance materials and repairs		0.66			0.68			(3.5	)
Depreciation and amortization		0.16			0.19			(13.4	)
Special charges		0.01			(0.01	)		—
Other		1.51			1.27			18.1
		7.68			7.61			0.9

AWA reported the following operating statistics to the U.S. Department of Transportation (“DOT”) for aircraft operated by AWA (“mainline”) for the second quarter of 2005 and 2004:

Significant changes in the components of mainline CASM are explained as follows:


													Percent Change
	2005						2004						2005 - 2004

	Apr		May		Jun		Apr		May		Jun		Apr			May		Jun

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

~~• Salaries and related costs per ASM increased 6.1% primarily due to an increase in benefit related expenses~~ (~~$7.8 million~~a) ~~including~~Percentage ~~defined~~of ~~contribution~~reported ~~plan~~flight ~~payments~~operations ~~which~~arriving ~~our pilots became eligible for~~ on ~~January 1, 2005 ($3~~time.2 ~~million), self-funded disability requirements~~ (~~$2.1 million~~b) ~~and~~Percentage ~~workers~~of ~~compensation~~scheduled ~~claim~~flight ~~coverage~~operations ~~($1~~completed.1 ~~million~~(c). •Rate Aircraft rent expense per ASM increased 2.9% due to mix as previously owned and leased Boeing 737-200 aircraft were retired or returned to aircraft lessors and replaced with leased Airbus A320 and A319 aircraft at higher monthly lease rates. • Aircraft fuel expense per ASM increased 33.9% primarily due to a 34.6% increase in the average price per gallon of ~~fuel~~mishandled tobaggage ~~141.7~~reports ~~cents in the first quarter of 2005 from 105.3 cents in the comparable 2004 quarter. • Agency commissions expense~~ per ~~ASM decreased 17.~~1% due to the continued shift in bookings to lower cost distribution channels and continued reductions in travel agency incentive programs. • Aircraft maintenance materials and repairs expense per ASM decreased 3.5% primarily due to decreases in aircraft C-Check ($1.3 million),000 ~~airframe maintenance ($1~~passengers.2 ~~million), and other maintenance related expenses~~ (~~$1.2 million~~d), ~~which~~Rate was offset in part by an increase in capitalized maintenance amortization ($1.6 million). The decrease in other maintenance related expenses resulted from a reduction in the rates charged for the repair of ~~certain~~customer ~~rotable~~complaints ~~equipment~~filed ~~under~~with ~~a power-by-~~the~~-hour~~ ~~agreement.~~DOT ~~• Depreciation and amortization expense~~ per ~~ASM decreased 13.4% primarily due to lower amortization expense related to computer hardware and software ($1.1 million) as a result of AWA’s cash conservation program~~100,000 ~~which reduced capital expenditures~~passengers. Aircraft depreciation expense was lower by $0.8 million in the 2005 first quarter due primarily to the retirement of the Company’s Boeing 737-200 fleet during 2004. • Other operating expenses per ASM increased 18.1% due primarily to a $3.7 million loss related to an aircraft sale-leaseback transaction in the first quarter of 2005 and increases in property taxes ($2.1 million), airport guard services ($2.0 million), credit card fees ($1.0 million), crew per diem ($1.3 million) and ground handling services ($1.6 million). The first quarter of 2004 included a $2.0 million gain resulting from the settlement of a lawsuit related to certain computer hardware and software that had previously been written off and a $1.7 million reduction in bad debt expense due to a recovery of a previously reserved debt.

~~Express~~ AWA ~~expenses~~had ~~increased~~record ~~51.2%~~load infactors each month during the ~~first~~2005 second quarter, ofwhich ~~2005~~contributed to ~~$110~~the Company’s improved revenue performance during the period.~~8 million~~ ~~due~~Record toload ~~higher~~factor does, ~~fuel~~however, put pressure on operations and ~~aircraft~~AWA’s operating ~~expenses~~ performance. Despite these load factors, the key reliability measures, on-time performance and completion factor, were much improved versus 2004.

21 Summary of Holdings’ Financial Results

~~Table~~ Holdings recorded consolidated net income of ~~Contents~~$13.9 million in the second quarter of 2005, or $0.29 per diluted share. This compares to consolidated net income of $10.7 million, or $0.20 per diluted share, in the second quarter of 2004. The 2005 results include $8.7 million of net gains associated with the Company’s fuel hedging transactions. Of this amount, $11.4 million resulted from realized gains on settled hedge transactions which was offset in part by $2.7 million of unrealized losses resulting from the application of mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments. The 2005 quarter also includes a $4.3 million loss on the sale and leaseback of one new Airbus A320 aircraft acquired during the period.

~~AMERICA~~ The ~~WEST~~2004 ~~HOLDINGS~~results ~~CORPORATION~~include ~~AND~~$9.5 million of net gains ~~AMERICA~~associated ~~WEST~~with ~~AIRLINES,~~the ~~INC~~Company’s fuel hedging transactions. ~~March~~This amount includes $2.3 31million of net realized gains on settled hedge transactions, ~~2005~~and $7.2 million of gains resulting from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments.

~~AWA~~ Holdings ~~had~~recorded consolidated net ~~nonoperating~~income ~~expenses~~ of $1647.65 million in the first ~~quarter~~six months of 2005, ~~compared~~or $0.92 per diluted share. This compares to consolidated net income of $169.71 million, or $0.17 per diluted share in the first six ~~quarter~~months of 2004. asThe ~~interest~~2005 ~~income~~results included $69.2 million of net gains associated with the Company’s fuel hedging transactions. Of this amount, $46.3 million resulted from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments and ~~interest~~$22.9 million was ~~expense~~net ~~remained~~realized gains on settled hedge transactions. The 2005 ~~relatively~~six-month ~~flat~~period also includes $0.8 million of special charges related to the write-down of deferred aircraft rent payments associated with the return of one Boeing 737-200 aircraft and an $8.0 million aggregate loss on the sale and leaseback of two new Airbus A320 aircraft acquired during the period.

~~LIQUIDITY~~ The ~~AND~~2004 ~~CAPITAL~~results ~~RESOURCES~~include $9.9 million of net gains associated with the Company’s fuel hedging transactions. Of this amount $5.2 million was net realized gains on settled hedge transactions and $4.7 million was net gains resulting from mark-to-market accounting for changes in the fair value of the Company’s fuel hedging instruments. The 2004 six month period also included a $2.5 million credit to other operating revenues related to the reduction of certain obligations based upon a settlement with Mesa Airlines, a $2.0 million reduction in operating expenses resulting from the settlement of a lawsuit related to certain computer hardware and software that previously had been written off, a $1.7 million reduction in bad debt

~~Sources and Uses of Cash~~19

AtTable of March 31, 2005, Holdings and AWA’s total cash, cash equivalents, short-term investments, investments in debt securities and restricted cash were $345.3 million and $324.4 million, respectively. Net cash provided by operating activities for Holdings and AWA was $113.9 million and $113.8 million, respectively, for the first three months of 2005. This compares to net cash used by operating activities for Holdings and AWA of $1.4 million and $1.1 million, respectively, for the first three months of 2004. The year-over-year increase in net cash provided by operating activities of $115.4 million and $114.9 million for Holdings and AWA, respectively, was primarily due to the net earnings in the 2005 period and the period-over-period change in air traffic liability which grew by 41.8% in the 2005 period as compared to 25.4% in the 2004 period. Contents

~~In the first three months of 2005, net cash used in investing activities was $43.5 million for~~ ~~Holdings~~expense ~~and~~due ~~AWA. This compares~~ to ~~net~~a ~~cash~~recovery ~~used in investing activities~~ of ~~$26.4 million~~a ~~for Holdings~~previously ~~and~~reserved ~~AWA~~debt ~~in the first three months of 2004. Principal investing activities during the first three months of 2005 included purchases of property~~ and ~~equipment totaling $56.6 million,~~a ~~offset in part by net sales of short-term investments totaling~~ $~~32.~~0 ~~million~~. ~~Restricted cash increased by $19.5~~6 million ~~during~~reduction ~~the~~in ~~2005~~special ~~period~~charges due to ana ~~increase in reserves required under an~~revision ~~agreement~~of ~~for processing~~ the ~~Company’s~~estimated ~~Visa~~costs ~~and~~related ~~MasterCard~~to ~~credit~~certain ~~card transactions. The first~~aircraft ~~quarter of 2004 included purchases of property and equipment totaling $37.0 million, offset in part by net sales of short~~sale-~~term~~leaseback ~~investments totaling $8~~transactions.~~1 million.~~

In The ~~the~~Company ~~first~~did ~~quarter~~not ofrecord ~~2005,~~income ~~net~~tax ~~cash~~expense ~~used~~ in ~~financing~~the ~~activities~~second quarter byor ~~Holdings~~for ~~and~~the ~~AWA~~first ~~was $90.3 million~~six ~~and~~months ~~$90.4 million,~~of ~~respectively.~~2005 ~~Principal~~as ~~financing~~it ~~activities~~currently expects into ~~2005~~realize ~~included~~ a ~~$42.9 million~~ ~~payment~~loss for the ~~government~~full ~~guaranteed~~year ~~loan and redemption of $39~~2005.~~5 million~~ ofSimilarly, the Company’s ~~remaining~~did ~~outstanding~~not ~~10.75%~~record ~~Senior~~income ~~Secured~~tax ~~Notes~~expense ~~which~~in ~~was~~the ~~included~~second ~~in current~~quarter ~~restricted~~or ~~cash~~for atthe ~~December 31,~~first ~~2004.~~six ~~This~~months ~~compares to $47.4 million~~ of ~~debt repayments during the comparable~~ 2004 ~~period,~~as ~~including~~it ~~the~~expected ~~first~~to ~~principal~~realize ~~payment~~a loss ~~of $42.9 million~~ for the ~~government guaranteed~~full ~~loan~~year 2004.

~~Capital expenditures for the first quarter of 2005 were approximately $56.6 million for both~~ ~~Holdings and~~ AWA’s asResults ~~compared to capital expenditures~~ of ~~approximately $37.0 million for both~~ ~~Holdings and AWA for the first quarter of 2004. Included in these amounts are capital expenditures~~Operations ~~for capitalized maintenance of approximately $45.8 million and $29.8 million for both Holdings and AWA for the first quarter of 2005 and 2004, respectively.~~

~~Off-Balance~~ The ~~Sheet~~following ~~Arrangements~~discussion provides an analysis of AWA’s results of operations for the three and six months ended June 30, 2005 and material changes compared to the three and six months ended June 30, 2004.

The ~~Pass~~table ~~Through~~below ~~Trusts~~sets forth selected mainline operating data for AWA.

Since AWA’s restructuring in 1994, AWA has set up 19 pass through trusts, which have issued over $1.4 billion of pass through trust certificates (also known as “Enhanced Equipment Trust Certificates” or “EETC”) covering the financing of 54 aircraft. These trusts are off-balance sheet entities, the primary purpose of which is to finance the acquisition of aircraft. Rather than finance each aircraft separately when such aircraft is purchased or delivered, these trusts allow the Company to raise the financing for several aircraft at one time and place such funds in escrow pending the purchase or delivery of the relevant aircraft. The trusts also are structured to provide for certain credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust certificates and, as a result, reduce the cost of aircraft financing to AWA.


	Three Months							Six Months
	Ended June 30,				Percent			Ended June 30,				Percent
					Change							Change
	2005		2004		2005 - 2004			2005		2004		2005 - 2004

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

~~Each~~(a) ~~trust~~Revenue ~~covered~~passenger amile ~~set~~(“RPM”) ~~amount~~— A basic measure of ~~aircraft~~sales ~~scheduled~~volume. toIt beis ~~delivered~~one ~~within~~passenger aflown ~~specific~~one ~~period~~ mile. (b) Available seat mile (“ASM”) — A basic measure of ~~time~~production. AtIt ~~the~~is ~~time~~one seat flown one mile. (c) Load factor — The percentage of ~~each~~available ~~covered~~seats ~~aircraft~~that ~~financing,~~are ~~the~~filled ~~relevant~~with ~~trust~~revenue ~~used~~passengers. ~~the~~(d) ~~funds~~Yield — A measure of airline revenue derived by dividing passenger revenue by revenue passenger miles and expressed in ~~escrow~~ tocents ~~purchase~~per ~~equipment~~mile. ~~notes~~(e) ~~relating~~Passenger torevenue ~~the~~per ~~financed~~available ~~aircraft~~seat mile (“RASM”) — Total passenger revenues divided by total available seat miles. ~~The~~(f) ~~equipment~~Total ~~notes~~revenue ~~were issued,~~per atavailable ~~AWA’s~~seat ~~election,~~mile ~~either~~— Total operating revenues divided by ~~AWA~~total inavailable ~~connection~~seat ~~with~~miles. a(g) ~~mortgage~~Passenger ~~financing~~enplanements — The number of ~~the~~passengers on board an aircraft ~~or by~~including alocal, ~~separate~~connecting ~~owner~~and ~~trust~~through inpassengers. ~~connection~~(h) ~~with~~Average adaily ~~leveraged~~aircraft ~~lease~~utilization ~~financing~~— The average number of ~~the~~block hours per day for all aircraft in service. In(i) Block hours — The hours measured from the ~~case~~ ofmoment aan ~~leveraged~~aircraft ~~lease~~first ~~financing~~moves under its own power, including taxi time, for the ~~owner~~purposes ~~trust~~of ~~then~~flight ~~leased~~until the aircraft tois ~~AWA.~~docked Inat ~~both cases,~~ the ~~equipment~~next ~~notes~~point ~~are~~of ~~secured~~landing byand aits ~~security~~power ~~interest~~is inshut down. (j) Average stage length — The average of the ~~aircraft~~distances flown on each segment of every route. (k) Average passenger journey — The ~~pass~~average ~~through trust~~one-way ~~certificates~~trip ~~are~~measured ~~not~~in ~~direct~~ miles for one passenger origination.

2220

~~AMERICA~~Three ~~WEST~~Months ~~HOLDINGS~~Ended ~~CORPORATION~~June ~~AND AMERICA WEST AIRLINES~~30, ~~INC. March 31,~~ 2005 and 2004

~~obligations~~ For ~~of,~~the ~~nor~~second ~~guaranteed~~quarter byof 2005, ~~Holdings~~AWA orrealized ~~AWA~~operating income of $31.7 million ~~However,~~as compared to $26.8 million in last ~~the~~year’s ~~case~~quarter. ofOperating ~~mortgage~~income ~~financings,~~in the ~~equipment~~2005 ~~notes~~period includes ~~issued~~an to$8.7 million net gain associated with the Company’s ~~trusts~~fuel ~~are~~hedging ~~direct~~transactions. ~~obligations~~Of ofthis amount, ~~AWA~~$11.4 million ~~and~~resulted infrom ~~the~~realized ~~case~~gains ofon ~~leveraged~~settled ~~lease~~hedge transactions ~~financings,~~which ~~the~~was ~~leases~~offset ~~are~~in ~~direct~~part ~~obligations~~by ~~of AWA~~$2.7 million Inof ~~addition,~~unrealized ~~neither~~losses ~~Holdings~~resulting ~~nor~~from ~~AWA~~the ~~guarantee~~application orof mark-to-market ~~participate~~accounting infor ~~any~~changes ~~way~~ in the ~~residual~~fair value of the ~~leased~~Company’s ~~aircraft.~~fuel ~~All~~hedging ~~aircraft~~instruments. ~~financed~~The by2004 ~~these~~period includes ~~trusts~~a ~~are~~$9.5 million ~~currently~~net ~~structured~~gain asassociated ~~leveraged~~with ~~lease~~the ~~financings,~~Company’s ~~which~~fuel ~~are~~hedging ~~not~~transactions. ~~reflected~~This asamount ~~debt~~includes $2.3 million of net realized gains on settled hedge transactions and $7.2 million of net gains resulting from mark-to-market accounting for changes in the ~~balance~~fair ~~sheets~~value of ~~either~~the Company’s ~~AWA~~fuel orhedging ~~Holdings~~instruments. InIncome before income taxes for the ~~first~~second quarter of 2005, ~~AWA~~was ~~made~~ $7715.2 million inas compared ~~lease~~to ~~payments~~$11.5 million infor ~~respect of~~ the ~~leveraged lease~~comparable ~~financings~~2004 ~~under the pass through trusts~~period.

~~Other~~ Total ~~Operating~~operating ~~Leases~~revenues for the second quarter of 2005 were $833.0 million. Passenger revenues were $654.9 million for the second quarter of 2005, an increase of $85.7 million from the comparable 2004 quarter. RPMs increased 8.0% as ASMs increased 2.7%, resulting in a 4.0 point increase in load factor to 82.3%. This increase in load factor was achieved with higher passenger yield, which increased 6.5% in the 2005 second quarter. As a result, RASM increased 11.9% to 8.44 cents in the second quarter 2005 from 7.54 cents in the 2004 quarter. The Company’s strong unit revenue improvement was driven by more aggressive peak day yield management in the 2005 second quarter, more balanced capacity in the markets served by AWA in the western United States and the positive impact of numerous legacy and low cost carrier fare increases in the winter and spring of 2005. Reductions in late 2004 of the Company’s transcontinental flying, which yields were negatively impacted by competitive responses, also contributed to improved period-over-period RASM and yield performance.

In Express ~~addition~~revenues towere ~~the~~$129.4 million ~~aircraft~~for ~~financed by~~ the ~~pass~~second ~~through trust certificates, AWA has~~quarter ~~noncancelable operating leases covering 82 aircraft,~~ of ~~which three aircraft will be delivered in~~ 2005, asan ~~well~~increase asof ~~leases for certain terminal space, ground facilities and computer and other equipment~~$44.0 million Infrom the ~~first~~comparable 2004 quarter ofdue ~~2005,~~to ~~AWA~~increased ~~made~~flying ~~$60.0 million~~by inMesa ~~lease~~Airlines ~~payments~~under ~~related~~its alliance toagreement ~~these operating~~with ~~leases~~AWA.

~~Special~~ Cargo ~~Facility~~revenues ~~Revenue~~increased ~~Bonds~~19.2% in the second quarter of 2005 to $8.1 million due to increased mail volume. Other revenues increased 24.7% to $40.6 million in the second quarter of 2005 from $32.5 million in the second quarter of 2004 due principally to an increase in ticket change and service fees.

~~In June 1999, Series 1999 special facility revenue bonds (“new bonds”) were issued by a~~ municipality to fund the retirement of the Series 1994A bonds (“old bonds”) and the construction of a new concourse with 14 gates at Terminal 4 in Phoenix Sky Harbor International Airport in support of AWA’s strategic growth plan. The ~~new~~table ~~bonds~~below ~~are~~sets ~~due~~forth ~~June 2019~~mainline ~~with interest accruing at 6.25% per annum payable semiannually on June 1~~ and ~~December 1,~~Express ~~commencing on December 1, 1999. The new~~operating ~~bonds~~expenses are subject to optional redemption prior to the maturity date on or after June 1, 2009 in whole or in part, on any interest payment date at the following redemption prices: 101% on June 1 or December 1, 2009; 100.5% on June 1 or December 1, 2010; and 100% on June 1, 2011 and thereafter. In accordance with Emerging Issues Task Force (“EITF”) Issue No. 97-10, “The Effect of Lessee Involvement in Asset Construction,” the Company accounts for ~~this as an operating lease~~AWA.

In connection with these bonds, AWA entered into an Amended and Restated Airport Use Agreement, pursuant to which AWA agreed to make sufficient payments to the Industrial Development Authority (“IDA”) to cover the principal and interest of the bonds and to indemnify the IDA for any claims arising out of the issuance and sale of the bonds and the use and occupancy of the concourses financed by these bonds and the old bonds. At March 31, 2005, the outstanding principal amount of the bonds was $21.8 million. The Company estimates its remaining payments to cover the principal and interest of these bonds will be approximately $43.6 million.


			Three Months Ended
			June 30,

			2005			2004

Operating expenses:
	Salaries and related costs		$	173,399		$	161,617
	Aircraft rents			80,673			75,346
	Other rents and landing fees			45,727			42,011
	Aircraft fuel			191,006			132,977
	Realized and unrealized gains on fuel hedging instruments, net			(8,673	)		(9,485	)
	Agency commissions			6,710			6,253
	Aircraft maintenance materials and repairs			49,359			52,350
	Depreciation and amortization			11,587			12,587
	Other			115,469			103,779

		Total mainline operating expenses		665,257			577,435
	Express expenses			136,048			89,802

		Total operating expenses	$	801,305		$	667,237

~~Commitments~~ Total operating expenses in the second quarter of 2005 were $801.3 million, an increase of $134.1 million or 20.1%, compared to the 2004 quarter. Mainline operating expenses were $665.3 million in the second quarter of 2005, an increase of $87.8 million from the second quarter of 2004, while ASMs

~~As of March 31, 2005, we had $703.3 million of long-term debt (including current maturities).~~21 ~~This amount consisted primarily of the $300.3 million government guaranteed loan, a secured term~~ ~~loan financing with General Electric Capital Corporation (“GECC”), of which $110.6 million remains~~ outstanding, $36.0 million principal amount of senior secured discount notes, $112.3 million principal amount of 7.5% convertible senior notes (including interest through December 31, 2004 as a deemed loan added to the principal thereof) and $252.7 million issue price of 7.25% senior exchangeable notes, of which $86.8 million was received at issuance.

GovernmentTable Guaranteedof Loan Contents

~~In January 2002, AWA closed a $429 million loan supported by a $380 million guarantee provided~~ byincreased ~~the~~2.7%. ~~Air~~Mainline ~~Transportation~~CASM ~~Stabilization~~increased ~~Board (“ATSB”)~~12.2% ~~Certain~~to ~~third-party~~8.58 ~~counter-guarantors have~~cents ~~fully and unconditionally guaranteed~~ in the ~~payment~~second ofquarter ~~an aggregate~~ of ~~$45 million~~2005 offrom ~~the original principal amount under the government guaranteed loan plus accrued and unpaid interest thereon~~7.65 Incents ~~addition,~~for ~~Holdings has fully and unconditionally guaranteed~~ the ~~payment of all~~comparable ~~principal,~~2004 ~~premium,~~period. ~~interest~~The ~~and~~increase ~~other~~in ~~obligations~~CASM ~~outstanding~~was ~~under~~driven ~~the~~by ~~government~~a ~~guaranteed~~43.0% ~~loan~~increase ~~and~~in ~~has pledged~~ the ~~stock~~average offuel ~~AWA~~price toper ~~secure~~gallon ~~its~~from ~~obligations under such guarantee~~116.7 ~~Principal~~cents ~~amounts under this loan become due~~ in ~~ten installments of $42.9 million on each March 31 and September~~the ~~30, which began on March 31,~~ 2004 ~~and~~second ~~end~~quarter onto ~~September 30, 2008~~166.9 ~~The~~cents ~~Company~~per ~~has~~gallon ~~made~~in the ~~first~~second ~~three~~quarter of ~~these~~2005. ~~payments~~As asa ~~scheduled.~~result, ~~Principal~~aircraft ~~amounts~~fuel ~~outstanding~~expense ~~under~~for the ~~government~~ ~~guaranteed~~quarter ~~loan~~was ~~bear interest at a rate per annum equal to LIBOR plus 40 basis points~~$191.0 million, Wewhich ~~also~~accounted ~~pay~~for ~~guarantees~~$58.0 million ~~fees~~ of ~~approximately 8% of~~ the ~~outstanding~~period-over-period ~~guaranteed~~increase ~~principal balance~~ in ~~2005 through~~ ~~2008~~operating ~~to the U~~expenses.~~S. Treasury Department and other loan participants.~~

23 The table below sets forth the major components of mainline CASM for AWA.


	Three
	Months
	Ended
	March 31,						Percent
							Change
	2005			2004			2005-2004

	(in cents)
Salaries and related costs		2.24			2.14			4.5
Aircraft rents		1.04			1.00			4.3
Other rents and landing fees		0.59			0.56			6.0
Aircraft fuel		2.46			1.76			39.9
Realized and unrealized gains on fuel hedging instruments, net		(0.11	)		(0.12	)		(11.0	)
Agency commissions		0.09			0.08			4.5
Aircraft maintenance materials and repairs		0.63			0.69			(8.2	)
Depreciation and amortization		0.15			0.17			(10.4	)
Other		1.49			1.37			8.4

		8.58			7.65			12.2

~~AMERICA~~ Significant ~~WEST~~changes ~~HOLDINGS~~in ~~CORPORATION~~the ~~AND AMERICA~~components ~~WEST~~of ~~AIRLINES,~~mainline ~~INC.~~CASM are ~~March 31,~~explained ~~2005~~as follows:

~~Subject~~• Salaries and related costs per ASM increased 4.5% primarily due to ~~certain~~an ~~exceptions~~increase in benefit related expenses ($9.2 million) including defined contribution plan payments which our pilots became eligible for on January 1, we2005 ~~are~~($3.4 ~~required~~million), self-funded disability requirements ($1.1 million) and higher medical insurance costs ($3.8 million). • Aircraft rent expense per ASM increased 4.3% due principally to ~~prepay~~mix ~~the~~as ~~government~~previously ~~guaranteed~~owned ~~loan~~and leased Boeing 737-200 aircraft were retired or returned to aircraft lessors and replaced with: leased Airbus A320 and A319 aircraft at higher monthly lease rates. • Aircraft fuel expense per ASM increased 39.9% primarily due to a 43.0% increase in the average price per gallon of fuel to 166.9 cents in the second quarter of 2005 from 116.7 cents in the comparable 2004 quarter. • Aircraft maintenance materials and repairs expense per ASM decreased 8.2% primarily due to decreases in aircraft C-Check ($3.9 million) which was offset in part by an increase in capitalized maintenance amortization ($1.3 million). • Depreciation and amortization expense per ASM decreased 10.4% primarily due to lower amortization expense related to computer hardware and software ($1.0 million) as a result of AWA’s cash conservation program, which reduced capital expenditures. • Other operating expenses per ASM increased 8.4% due primarily to a $4.3 million loss related to an aircraft sale-leaseback transaction in the second quarter of 2005 and increases in credit card fees ($2.9 million), and ground handling services ($1.5 million). The second quarter of 2004 included a $3.5 million gain resulting from the settlement of a claim in bankruptcy for amounts earned under an executory contract and a $1.0 million volume incentive earned due to certain Affinity Card sales levels meeting certain contract thresholds.

• Express ~~the~~expenses ~~net~~increased ~~proceeds~~51.5% ofin ~~all~~the ~~issuances~~second quarter of ~~debt~~2005 to or$136.0 million ~~equity by either Holdings or AWA after January 2002; • proceeds~~ from ~~asset sales in excess of~~ $20 89.8 million in ~~any~~the ~~fiscal~~second quarter ~~year;~~of ~~and~~2004. •Aircraft ~~insurance~~operating ~~proceeds~~expense infor ~~excess~~the ofquarter was $2 91.7 million ~~to the extent such proceeds are not used to restore or replace the assets from~~ which ~~such~~accounted ~~proceeds are derived.~~for

~~In addition, we are required to prepay the government guaranteed loan upon a change in control~~22 ~~and we may be required to prepay portions of the loan if our employee compensation costs exceed a~~ certain threshold. We may, at our option, prepay the government guaranteed loan without premium or penalty, subject to reimbursement of the lenders’ breakage costs in the case of prepayment of LIBOR loans.

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

~~GECC~~ $25.6 million ~~Term~~of ~~Loan~~the ~~Financing~~period-over-period increase in Express operating expenses. In addition, aircraft fuel expense was $44.3 million which accounted for $20.6 million of the period-over-period increase.

~~In September 2004,~~ AWA ~~entered~~had ~~into~~net anonoperating ~~term~~expenses ~~loan financing with GECC providing for loans in an aggregate amount~~ of $~~110~~16.65 million. ~~The~~in ~~term~~the second ~~loan~~quarter ~~financing consists~~ of ~~two~~2005 ~~secured~~compared ~~term~~to ~~loan facilities: a~~ $7515.62 million ~~term~~in ~~loan~~the second ~~facility~~quarter ~~secured~~of ~~primarily~~2004 byas ~~spare~~interest ~~parts,~~income ~~rotables~~ and interest expense ~~appliances~~remained ~~(the~~relatively ~~“Spare~~flat. ~~Parts~~The ~~Facility”);~~2004 ~~and~~second aquarter included a $351.04 million ~~term~~gain ~~loan~~on ~~facility~~the ~~secured~~disposition ~~primarily by~~of ~~aircraft~~property ~~engines~~ and equipment, ~~parts~~due ~~installed~~principally into ~~such~~the ~~engines~~sale ~~(the~~of ~~“Engine~~one ~~Facility”)~~Boeing 737-200 aircraft.

~~The facilities are cross-collateralized on a subordinated basis and the collateral securing~~ ~~the~~Six ~~facilities~~Months ~~also~~Ended ~~secures~~June 30, on2005 ~~a subordinated basis certain of AWA’s other existing debt~~ and ~~lease~~2004 ~~obligations to GECC and its affiliates.~~

~~The~~ For ~~loans~~the ~~under~~six ~~the~~months ~~Spare~~ended ~~Parts~~June 30, ~~Facility~~2005, ~~are~~AWA ~~payable~~realized operating inincome ~~full~~of at$82.7 million ~~maturity~~as oncompared ~~September 10,~~to ~~2010~~$42.6 million ~~The~~in ~~loans~~the ~~under~~first ~~the~~six ~~Engine~~months ~~Facility~~of ~~are~~2004. ~~payable~~Operating income in ~~equal~~the ~~quarterly~~2005 ~~installments~~period ofincludes a $169.3 2 million ~~beginning~~net ongain associated ~~March 10,~~with ~~2006~~the ~~through~~Company’s ~~June 10,~~fuel ~~2010~~hedging ~~with~~transactions. ~~the~~Of this ~~remaining loan~~ amount of $1146.8 3 million ~~payable~~resulted atfrom ~~maturity~~mark-to-market accounting onfor ~~September 10,~~changes ~~2010.~~in ~~The~~the ~~loans~~fair ~~under~~value ~~each~~of ~~facility~~the ~~may be prepaid in~~Company’s anfuel ~~amount~~hedging ~~not~~instruments ~~less~~and ~~than~~ $522.9 million atwas ~~any~~net ~~time after the 30th monthly anniversary of the~~realized ~~funding~~gains ~~date~~on ~~under~~settled ~~such~~hedge ~~facility~~transactions. IfThe ~~AWA~~2004 ~~fails~~period toincludes ~~maintain~~ a $9.9 million ~~certain~~net ~~ratio~~gain ofassociated ~~rotables~~with tothe ~~loans~~Company’s ~~under~~fuel ~~the~~hedging ~~Spare~~transactions. ~~Parts~~Of ~~Facility,~~this itamount ~~may~~$5.2 million bewas net ~~required~~realized togains ~~pledge~~on ~~additional~~settled ~~rotables~~hedge ortransactions ~~cash as~~and ~~collateral,~~$4.7 million ~~provide~~was agains ~~letter~~resulting offrom ~~credit~~mark-to-market accounting orfor ~~prepay~~changes ~~some~~in orthe ~~all~~fair value of the ~~loans~~Company’s fuel ~~under~~hedging ~~the Spare Parts Facility~~instruments. InIncome ~~addition,~~before ~~the~~income ~~loans~~taxes ~~under~~for the ~~Engine~~six months ~~Facility~~ended ~~are~~June 30, ~~subject~~2005 towas ~~mandatory~~$49.5 million ~~prepayment~~as ~~upon~~compared ~~the occurrence of certain events of loss applicable~~ to, or$10.7 million ~~certain~~for ~~dispositions~~the ~~of,~~comparable ~~aircraft engines~~2004 ~~securing the facility~~period.

~~Principal~~ Total ~~amounts~~operating ~~outstanding~~revenues ~~under~~for the ~~loans~~six ~~bear~~months ~~interest~~ended atJune 30, 2005 awere ~~rate~~$1.56 billion. ~~per~~Passenger ~~annum~~revenues ~~based on~~were ~~three~~$1.23 billion for the six-month ~~LIBOR~~period, ~~plus~~an increase of $123.8 million from the comparable 2004 period. RPMs increased 7.4% as ASMs increased 1.0%, resulting in a ~~margin~~4.8 ~~Both~~point increase ~~facilities~~in ~~contain~~load ~~customary~~factor ~~events~~to of80.1%. ~~default~~This increase in load factor was achieved with higher passenger yield, ~~including~~which increased 3.4% ~~payment~~in ~~defaults~~the 2005 period. As a result, ~~cross-defaults~~RASM increased 10.1% to 8.17 cents in the six months ended June 30, ~~breach~~2005 offrom ~~covenants~~7.42 cents in the 2004 period. The Company’s strong unit revenue improvement was driven by more aggressive peak day yield management in the 2005 period, ~~bankruptcy~~more balanced capacity in the markets served by AWA (principally in the western United States) and ~~insolvency~~the ~~defaults~~positive impact of numerous legacy and low cost carrier ~~judgment~~fare ~~defaults~~increases in the winter and spring of 2005. Reductions in late 2004 of the Company’s transcontinental flying, which yields were negatively impacted by competitive responses, also contributed to improved period-over-period RASM and yield performance.

~~Senior~~ Express ~~Secured~~revenues ~~Discount~~were ~~Notes~~$232.8 million ~~Due~~for ~~2009~~the six months ended June 30, 2005, an increase of $74.7 million from the comparable 2004 quarter due to increased flying by Mesa Airlines under its alliance agreement with AWA.

~~In December 2004, AWA raised additional capital by financing its Phoenix maintenance facility~~ ~~and~~Cargo ~~flight~~revenues ~~training~~increased ~~center~~22.2% ~~Using~~for ~~its~~the ~~leasehold~~six ~~interests~~months ~~in these two facilities as collateral, AWA,~~ended ~~through a wholly owned subsidiary named FTCHP LLC~~June 30, ~~raised~~2005 to $3016.8 million ~~through~~due ~~the~~to ~~issuance~~increased ofmail volume. ~~senior~~Other ~~secured~~revenues ~~discount~~increased ~~notes~~17. ~~The~~0% ~~notes were issued by FTCHP at a discount pursuant~~ to ~~the terms of a senior secured term loan agreement among the Company, FTCHP, Heritage Bank, SSB, as administrative agent, Citibank, N~~$75.~~A.,~~8 million asin the ~~initial~~2005 ~~lender,~~period ~~and the other lenders~~ from ~~time to time party thereto~~$64.8 million ~~Citibank,~~in ~~N.A. subsequently~~the ~~assigned~~comparable ~~all~~ period of ~~its~~2004 ~~interests~~due inprincipally ~~the~~to ~~notes~~an toincrease ~~third~~in ~~party~~ticket ~~lenders~~change and service fees.

2423

~~AMERICA~~ The ~~WEST~~table ~~HOLDINGS~~below ~~CORPORATION~~sets ~~AND AMERICA~~forth ~~WEST~~the ~~AIRLINES,~~mainline ~~INC.~~and Express operating ~~March 31,~~expenses ~~2005~~for AWA.

AWA has fully and unconditionally guaranteed the payment and performance of FTCHP’s obligations under the notes and the loan agreement. The notes require aggregate principal payments of $36.0 million with principal payments of $1.5 million due on December 27, 2005 and 2006 and the remaining principal amount due on December 27, 2009. The notes may be prepaid in full at any time (subject to customary LIBOR breakage costs) and in partial amounts of $1.5 million on December 27, 2007 and 2008. The unpaid principal amount of the notes bears interest based on LIBOR plus a margin subject to adjustment based on a loan to collateral value ratio.


			Six Months Ended June 30,

			2005			2004

Operating expenses:
	Salaries and related costs		$	348,252		$	327,546
	Aircraft rents			157,510			150,531
	Other rents and landing fees			87,266			83,252
	Aircraft fuel			342,869			247,189
	Realized and unrealized gains on fuel hedging instruments, net			(69,156	)		(9,889	)
	Agency commissions			12,264			13,003
	Aircraft maintenance materials and repairs			97,347			102,404
	Depreciation and amortization			23,447			26,378
	Special charges (credits), net			811			(600	)
	Other			225,518			197,591

		Total mainline operating expenses		1,226,128			1,137,405
	Express expenses			246,874			163,104

		Total operating expenses	$	1,473,002		$	1,300,509

~~The~~ Total ~~loan~~operating ~~agreement~~expenses ~~contains~~for ~~customary~~the ~~covenants~~six ~~applicable~~months toended ~~loans~~June 30, 2005 ofwere ~~this type~~$1.47 billion, ~~including~~an increase of $172.5 million ~~obligations~~or ~~relating~~13.3%, compared to the ~~preservation~~2004 ofsix-month ~~the~~period. ~~collateral~~Mainline operating ~~and~~expenses ~~restrictions~~were on$1.23 billion in the ~~activities~~six ofmonth ~~FTCHP.~~period Inin ~~addition~~2005, ~~the~~an ~~loan~~increase ~~agreement~~of ~~contains~~$88.7 million ~~events~~from ofthe ~~default~~same period in 2004, ~~including~~while ~~payment~~ASMs ~~defaults,~~increased 1.0%. Mainline CASM ~~cross-defaults~~increased 6.7% to ~~other~~8.14 ~~debt~~cents ofin ~~FTCHP,~~the iffirst ~~any,~~six ~~breach~~months of ~~covenants,~~2005 from ~~bankruptcy~~7.63 ~~and~~cents ~~insolvency~~for the comparable 2004 period. The increase in ~~defaults~~CASM ~~and~~was ~~judgment~~driven ~~defaults~~principally by a 39.2% increase in the average fuel price per gallon offset by the $69.2 million net gain associated with the fuel hedging transactions discussed above.

In The ~~connection~~table ~~with~~below ~~this~~sets ~~financing,~~forth ~~AWA~~the ~~sold~~major ~~all~~components of ~~its~~mainline ~~leasehold interests in the maintenance~~CASM ~~facility and flight training center to FTCHP and entered into subleases~~ for ~~the facilities with FTCHP at lease rates expected to approximate the interest payments due under the notes. In addition,~~ AWA ~~agreed to make future capital contributions to FTCHP in amounts sufficient to cover principal payments and other amounts owing pursuant to the notes and the loan agreement~~.

The proceeds from this financing, together with $10.5 million from operating cash flow, were irrevocably deposited with the trustee for AWA’s 10 3/4% senior unsecured notes due 2005 and subsequently redeemed on January 26, 2005.


	Three
	Months
	Ended
	March 31,						Percent
							Change
	2005			2004			2005-2004

	(in cents)
Salaries and related costs		2.31			2.20			5.2
Aircraft rents		1.04			1.00			3.6
Other rents and landing fees		0.58			0.56			3.8
Aircraft fuel		2.28			1.67			37.3
Realized and unrealized gains on fuel hedging instruments, net		(0.46	)		(0.07	)		—
Agency commissions		0.08			0.09			(6.6	)
Aircraft maintenance materials and repairs		0.65			0.69			(5.9	)
Depreciation and amortization		0.15			0.17			(12.0	)
Special charges		0.01			—			—
Other		1.50			1.32			13.0

		8.14			7.63			6.7

10 Significant ~~3/4%~~changes ~~Senior~~in ~~Notes~~the ~~due~~components ~~2005~~of mainline CASM are explained as follows:

~~AWA had~~• Salaries and related costs per ASM increased 5.2% primarily due to an increase in benefit related expenses ($3917.5 0 million) ~~principal~~including ~~amount~~defined ofcontribution 10plan ~~3/4%~~payments ~~senior~~which ~~unsecured~~our ~~notes~~pilots ~~due 2005~~became ~~outstanding~~eligible atfor ~~December 31~~on January 1, ~~2004~~2005 ($6.6 ~~As discussed~~million), ~~above~~self-funded disability requirements ($3.2 million), ~~the~~higher ~~senior~~medical ~~notes~~insurance ~~were~~costs ~~subsequently~~($3.5 ~~redeemed~~million) inand ~~January~~workers ~~2005~~compensation claim coverage ($1. 1 million).

~~7.5% Convertible Senior Notes due 2009~~24

InTable connection with the closing of the government guaranteed loan and the related transactions, Holdings issued $104.5 million of 7.5% convertible senior notes due 2009, of which approximately $112.3 million remained outstanding at March 31, 2005 (including interest paid through December 31, 2004 as a deemed loan added to the principal thereof). These notes are convertible into shares of class B common stock, at the option of the holders, at an initial conversion price of $12.00 per share or a conversion ratio of approximately 83.333 shares per $1,000 principal amount of such notes, subject to standard anti-dilution adjustments. Interest on the 7.5% convertible senior notes is payable semiannually in arrears on June 1 and December 1 of each year. At Holdings’ option, the first six interest payments were payable in the form of a deemed loan added to the principal amount of these notes. The 7.5% convertible senior notes will mature on January 18, 2009 unless earlier converted or redeemed. The payment of principal, premium and interest on the 7.5% convertible senior notes is fully and unconditionally guaranteed by AWA. Contents

~~Holdings~~• ~~may~~Aircraft ~~redeem~~rent expense per ASM increased 3.6% due principally to mix as previously owned and leased Boeing 737-200 aircraft were retired or returned to aircraft lessors and replaced with leased Airbus A320 and A319 aircraft at higher monthly lease rates. • Aircraft fuel expense per ASM increased 37.3% primarily due to a 39.2% increase in the average price per gallon of fuel to 154.7 cents in the first six months of 2005 from 111.2 cents in the comparable 2004 quarter. • Aircraft maintenance materials and repairs expense per ASM decreased 5.9% ~~convertible~~primarily ~~senior~~due ~~notes,~~to decreases in ~~whole~~aircraft orC-Check ($5.2 million), airframe maintenance ($1.4 million), and other maintenance related expenses ($1.1 million), which was offset in part, atby ~~the~~an ~~following redemption~~increase ~~prices~~in capitalized maintenance amortization (~~expressed~~$2.9 asmillion). ~~percentages~~The decrease in other maintenance related expenses resulted from a reduction in the rates charged for the repair of certain rotable equipment under a power-by-the-hour ~~principal~~agreement. ~~amount~~• ~~thereof~~Depreciation and amortization expense per ASM decreased 12.0% due principally to lower amortization expense related to computer hardware and software ($2.1 million) as a result of AWA’s cash conservation program, ifwhich ~~redeemed~~reduced ~~during the~~capital ~~twelve~~expenditures. • Other operating expenses per ASM increased 13.0% due primarily to a $8.0 million aggregate loss associated with two aircraft sale-~~month~~leaseback ~~period~~transactions ~~commencing~~in onthe ~~January 18~~first six months of ~~the~~2005 ~~years~~and ~~set~~increases ~~forth~~in ~~below~~credit card fees ($3.9 million), ~~plus~~ground handling services ($3.0 million), inairport ~~each~~guard ~~case~~services ($2.3 million), ~~accrued~~ property taxes ($1.9 million) and ~~unpaid~~crew ~~interest,~~per ifdiem ~~any,~~($1.8 million). The first six months of 2004 included a $2.0 million gain resulting from the settlement of a lawsuit related to certain computer hardware and software that had previously been written off and a $1.7 million reduction in bad debt expense due to a recovery of a previously reserved debt. A $3.5 million gain resulting from the ~~date~~settlement of ~~redemption:~~ a claim in bankruptcy for amounts earned under an executory contract and a $1.0 million volume incentive earned due to certain Affinity Card sales levels meeting certain contract thresholds in the 2004 period also contributed to the increase.

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

Express expenses increased 51.4% in the first six months of 2005 to $246.9 million from $163.1 million in the second quarter of 2004. Aircraft operating expense for the quarter was $170.2 million which accounted for $48.2 million of the period-over-period increase in Express operating expenses. In addition, aircraft fuel expense was $76.7 million which accounted for $35.6 million of the period-over-period increase.

25 AWA had net nonoperating expenses of $33.2 million in the first six months of 2005 compared to $31.9 million in the 2004 period. Interest income increased $0.9 million or 13.1% due to higher average rates of return on investments, while interest expense remained relatively flat. The 2004 period benefited from a $2.1 million gain on the disposition of property and equipment due principally to the sale of one Boeing 737-200 aircraft.

~~Table~~Liquidity ofand ~~Contents~~Capital Resources

~~AMERICA~~Sources ~~WEST~~and ~~HOLDINGS~~Uses ~~CORPORATION~~of ~~AND AMERICA WEST AIRLINES, INC. March 31, 2005~~ Cash

7 As of June 30, 2005, Holdings and AWA’s total cash, cash equivalents, short-term investments and restricted cash were $413.~~25%~~9 million ~~Senior~~and ~~Exchangeable~~$393.1 million, ~~Notes~~respectively. Net cash provided by operating activities for Holdings and AWA was $223.5 million and $223.6 million, respectively, for the first six months of 2005. This compares to net cash provided by operating activities for Holdings and AWA of $83.6 million and $84.2 million, respectively, for the first six months of 2004. The year-over-year increase in net cash provided by operating activities of $139.9 million and $139.4 million for Holdings and AWA, respectively, was due to ~~2023~~higher net earnings in the 2005 period and a $20.4 million year-over-year increase in air traffic liability and the associated taxes due to higher passenger demand and improved pricing during 2005. The 2004 period included a decrease in accounts payable ($42.8 million), due to the timing of vendor payments and the payment in February 2004 of $19.9 million related to the execution of a new pilot agreement, which was accrued at December 31, 2003. In addition, the 2004 period was impacted by a decrease in accrued

~~In July and August of 2003, AWA completed a private placement of approximately $86.8 million issue price of 7.~~25~~% Senior Exchangeable Notes due 2023. The notes bear cash interest until July~~ ~~30, 2008. Thereafter, the notes will cease bearing cash interest and begin accruing original issue~~ ~~discount daily at a rate of 7.25% per year until maturity. Each note was issued at a price of~~ $343.61 and is exchangeable for class B common stock of Holdings at an exchange ratio of 32.038 shares per $1,000 principal amount at maturity of the notes (subject to adjustment in certain circumstances). This represents an equivalent conversion price of approximately $10.73 per share. The aggregate amount due at maturity, including accrued original issue discount from July 31, 2008, will be $252,695,000. The notes are unconditionally guaranteed on a senior unsecured basis by Holdings.

HoldersTable may exchange their notes for the shares of class B common stock of Holdings in any fiscal quarter commencing after September 30, 2003, if, as of the last day of the preceding fiscal quarter, the closing sale price of the class B common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such preceding fiscal quarter is more than 110% of the accreted exchange price per share of Class B common stock on the last day of such preceding fiscal quarter. If the foregoing condition is satisfied, then the notes will be exchangeable at any time at the option of the holder through maturity. The accreted exchange price per share as of any day will equal the issue price of a note plus accrued original issue discount to that day divided by 32.038, subject to any adjustments to the exchange rate through that day. Contents

On compensation orand ~~before~~vacation ~~July 30,~~benefits ~~2018,~~primarily adue ~~holder~~to ~~also may exchange its notes for shares of~~ the ~~Class B~~payment ~~common stock at any time after a 10 consecutive trading-day period~~ in ~~which~~March ~~the~~2004 ~~average~~ of the ~~trading~~ ~~prices~~Company’s ~~for~~obligation ~~the notes~~ for ~~that 10 trading-day period was less than 103% of the average~~employee ~~exchange~~performance ~~value~~bonuses ~~for~~and ~~the~~AWArd ~~notes~~pay ~~during that period~~($20. ~~Exchange value is equal to the product of the closing sale price for the shares of Class~~1 ~~B common stock on a given day multiplied by the then current exchange rate~~million), which was isaccrued ~~the~~at ~~number of shares of Class~~December B31, ~~common stock for which each note is then exchangeable~~2003.

In ~~addition~~the first six months of 2005, net cash used in investing activities was $165.3 million for Holdings and AWA. This compares to net cash used in investing activities of $78.0 million for Holdings and AWA in the ~~holders~~first ~~may~~six ~~exchange~~months of 2004. Principal investing activities during the ~~notes~~first ifsix months of 2005 included purchases of property and equipment totaling $97.2 million, and net purchases of short-term investments totaling $49.8 million. Restricted cash increased by $19.5 million during the ~~notes~~2005 ~~have~~period ~~been~~due ~~called~~to an increase in reserves required under an agreement for ~~redemption~~processing orthe ifCompany’s ~~certain~~Visa ~~specified~~and ~~corporate~~MasterCard credit card transactions. The ~~have~~2004 ~~occurred~~period included purchases of property and equipment totaling $77.2 million, and net purchases of short-term investments and investments in debt securities totaling $3.9 million.

~~Holders~~ In of the ~~notes~~first ~~may~~six ~~require~~months ~~AWA~~of to2005, ~~repurchase~~net ~~the~~cash ~~notes~~used atin ~~a price equal to the original~~financing ~~issue~~activities ~~price~~by ~~plus~~Holdings ~~accrued cash interest~~ and ~~original~~AWA ~~issue~~was ~~discount,~~$91.3 million ~~if any, on July~~and $91.5 30million, ~~2008, 2013 and 2018~~respectively. ~~The~~Principal ~~purchase~~financing ~~price~~activities in of2005 ~~such~~included ~~notes~~a ~~may~~$42.9 million bepayment ~~paid~~for inthe ~~cash~~government guaranteed orloan ~~class~~and Bredemption ~~common~~of ~~stock~~$39.5 million of the ~~Holdings,~~Company’s ~~subject~~remaining tooutstanding ~~certain restrictions~~10.75% Senior ~~In addition~~Secured Notes, ~~each~~which ~~holder~~was ~~may~~included ~~require~~in ~~AWA~~current torestricted ~~purchase~~cash at ~~all~~December 31, or2004. aThis ~~portion~~compares ofto ~~such~~$48.0 million ~~holder’s notes upon the occurrence~~ of ~~certain change of control events~~ ~~concerning~~debt ~~AWA~~repayments orduring ~~Holdings. AWA may redeem~~ the ~~notes,~~comparable in2004 ~~whole or in part~~period, onincluding ~~or after July 30,~~the ~~2008~~first atprincipal apayment ~~price~~of ~~equal~~$42.9 million tofor the ~~original issue price plus accrued cash interest and original issue~~government ~~discount,~~guaranteed ~~if any~~loan.

26 Capital expenditures for the first six months of 2005 were approximately $97.2 million for both Holdings and AWA as compared to capital expenditures of approximately $77.2 million for both Holdings and AWA for the first six months of 2004. Included in these amounts are capital expenditures for capitalized maintenance of approximately $75.8 million and $58.4 million for both Holdings and AWA for the first six months of 2005 and 2004, respectively.

~~Table~~Off-Balance ofSheet ~~Contents~~Arrangements

~~AMERICA~~The ~~WEST~~Pass ~~HOLDINGS~~Through ~~CORPORATION AND AMERICA WEST AIRLINES, INC. March 31, 2005~~ Trusts

~~Other~~ Since ~~Indebtedness~~AWA’s restructuring in 1994, AWA has set up 19 pass through trusts, which have issued over $1.4 billion of pass through trust certificates (also known as “Enhanced Equipment Trust Certificates” or “EETC”) covering the financing of 54 aircraft. These trusts are off-balance sheet entities, the primary purpose of which is to finance the acquisition of aircraft. Rather than finance each aircraft separately when such aircraft is purchased or delivered, these trusts allow the Company to raise the financing for several aircraft at one time and ~~Obligations~~place such funds in escrow pending the purchase or delivery of the relevant aircraft. The trusts also are structured to provide for certain credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust certificates and, as a result, reduce the cost of aircraft financing to AWA.

In Each ~~addition~~trust covered a set amount of aircraft scheduled to be delivered within a specific period of time. At the ~~above~~time ~~described~~of ~~indebtedness~~each covered aircraft financing, wethe ~~had~~relevant ~~$35~~trust used the funds in escrow to purchase equipment notes relating to the financed aircraft.~~8 million~~ The equipment notes were issued, at AWA’s election, either by AWA in connection with a mortgage financing of ~~secured~~the aircraft or by a separate owner trust in connection with a leveraged lease financing of the aircraft. In the case of a leveraged lease financing, the owner trust then leased the aircraft to AWA. In both cases, the equipment notes are secured by a security interest in the aircraft. The pass through trust certificates are not direct obligations of, nor guaranteed by, Holdings or AWA. However, in the case of mortgage financings, the equipment notes issued to the trusts are direct obligations of AWA and ~~$47~~in the case of leveraged lease financings, the leases are direct obligations of AWA.~~6 million~~ In addition, neither Holdings nor AWA guarantee or participate in any way in the residual value of the ~~other~~leased ~~unsecured~~aircraft. ~~indebtedness~~All aircraft financed by these trusts are currently structured as leveraged lease financings, ~~including~~which are not reflected as debt on the balance sheets of either AWA or Holdings. In the second quarter of 2005, AWA made $2928.34 million in lease payments in respect of ~~industrial~~the leveraged ~~revenue~~lease ~~bonds~~financings under the pass through trusts.

~~The following table sets forth our cash obligations as of March 31, 2005.~~26

	2005		2006		2007		2008		2009		Beyond 2009		Total
	(in thousands)
Long-term debt:
Equipment notes – non-EETC (1)	$	4,686	$	8,305	$	7,772	$	15,082	$	—	$	—	$	35,845
GECC term loan (2)		—		5,158		5,158		5,158		5,158		89,932		110,564
7.5% convertible senior notes due 2009(3)		—		—		—		—		112,299		—		112,299
7.25% senior exchangeable notes due 2023 (4)		—		—		—		—		—		252,695		252,695
Government guaranteed loan (5)		42,900		85,800		85,800		85,800		—		—		300,300
State loan (6)		250		250		250		—		—		—		750
Industrial development bonds (7)		—		—		—		—		—		29,300		29,300
AVSA promissory notes (8)		12,250		5,250		—		—		—		—		17,500
Senior Secured Discount Notes (9)		1,530		1,529		1,529		1,530		29,870		—		35,988
		61,616		106,292		100,509		107,570		147,327		371,927		895,241
Cash aircraft rental payments (10)		217,666		323,908		305,809		255,340		229,736		1,703,734		3,036,193
Lease payments on equipment and facility operating leases (11)		16,191		19,213		17,099		16,782		15,214		53,087		137,586
Capital lease obligations		4,464		4,988		1,773		—		—		—		11,225
Special facility revenue bonds (12)		1,363		1,363		1,362		1,362		2,044		36,106		43,600
Aircraft purchase commitments (13)		223,480		464,792		47,719		—		—		—		735,991
Engine maintenance commitments (14)		9,000		6,000		3,000		1,000		—		—		19,000
Total	$	533,780	$	926,556	$	477,271	$	382,054	$	394,321	$	2,164,854	$	4,878,836

(1)	Includes approximately $35.8 million of equipment notes with variable interest rates of 3.94% to 4.34%, averaging 4.00% at March 31, 2005, installments due 2005 through 2008.
(2)	The amount consists of the Spare Parts Facility and the Engine Facility with a variable interest rate of 6.92% at March 31, 2005. See “—GECC Term Loan Financing” above.
(3)	Includes $90.7 million principal amount of 7.5% convertible senior notes, due 2009, and $21.6 million of interest paid in kind of issuance through December 31, 2004. For financial reporting purposes, we initially recorded the convertible senior notes at their fair market value on the date of issuance. As of March 31, 2005, the accreted balance of the convertible senior notes in the accompanying consolidated balance sheet is approximately $69.5 million.
(4)	Includes $252.7 million principal amount of 7.25% senior exchangeable notes due July 2023 with cash interest payable through July 2008 at a rate of 2.49% on the principal amount at maturity. Thereafter, the notes will cease bearing cash interest and begin accruing original issue discount at a rate of 7.25% until maturity. The aggregate amount due at maturity, including accrued original issue discount from July 31, 2008, will be $252.7 million.
(5)	Government guaranteed loan includes $300.3 million with a variable interest rate of 2.96% at March 31, 2005 and ratable principal payments due 2005 through 2008. Guarantee fees of approximately 8.0% of the outstanding guaranteed principal balance in 2005 through 2008 are payable to the U.S. Treasury Department and other loan participants.
(6)	Includes Arizona State loan of $0.8 million due December 2007 with a variable interest rate of 7.55% at March 31, 2005.
(7)	Includes $29.3 million of 6.3% industrial development bonds due April 2023.
(8)	Includes AVSA promissory notes of $17.5 million due 2005 with a variable interest rate of 4.05% at March 31, 2005.
(9)	Includes $36.0 million of senior secured discount notes due 2009 with a variable interest rate of 6.44% at March 31, 2005.


	Other Operating Leases

27 In addition to the aircraft financed by the pass through trust certificates, AWA has noncancelable operating leases covering 83 aircraft, as well as leases for certain terminal space, ground facilities and computer and other equipment. In the second quarter of 2005, AWA made $50.0 million in lease payments related to these operating leases.

~~Table~~Special ofFacility ~~Contents~~Revenue Bonds

~~AMERICA~~ In ~~WEST~~June ~~HOLDINGS~~1999, ~~CORPORATION~~Series 1999 ~~AND~~special facility revenue bonds ~~AMERICA~~(“new ~~WEST~~bonds”) ~~AIRLINES~~were issued by a municipality to fund the retirement of the Series 1994A bonds (“old bonds”) and the construction of a new concourse with 14 gates at Terminal 4 in Phoenix Sky Harbor International Airport in support of AWA’s strategic growth plan. The new bonds are due June 2019 with interest accruing at 6.25% per annum payable semiannually on June 1 and December 1, ~~INC~~commencing on December 1, 1999. The new ~~March~~bonds are subject to optional redemption prior to the maturity date on or after June 311, ~~2005~~2009 in whole or in part, on any interest payment date at the following redemption prices: 101% on June 1 or December 1, 2009; 100.5% on June 1 or December 1, 2010; and 100% on June 1, 2011 and thereafter. In accordance with Emerging Issues Task Force (“EITF”) Issue No. 97-10, “The Effect of Lessee Involvement in Asset Construction,” the Company accounts for this as an operating lease.

(10)	Includes non-cancelable operating leases for 136 aircraft with remaining terms ranging from three months to approximately 19 years. Management estimates the debt equivalent value of these operating leases approximates $1.9 billion using an interest rate of 10%.
(11)	Includes leases for terminal space, ground facilities, the flight training center and computer and other equipment under non-cancelable operating leases.
(12)	Includes Series 1999 Terminal 4 Improvements Bonds, due 2019.
(13)	Includes commitments to purchase a total of 19 Airbus aircraft and seven spare engines for delivery in 2005 through 2007.
(14)	Includes minimum commitments under AWA’s rate per engine hour agreement with General Electric Engine Services for overhaul maintenance services on CFM56-3B engines through April 2008. Minimum monthly commitment amounts: for the period through and including April 2006 — $1.0 million, for the period May 2006 through and including April 2008 — $250,000.

In connection with these bonds, AWA entered into an Amended and Restated Airport Use Agreement, pursuant to which AWA agreed to make sufficient payments to the Industrial Development Authority (“IDA”) to cover the principal and interest of the bonds and to indemnify the IDA for any claims arising out of the issuance and sale of the bonds and the use and occupancy of the concourses financed by these bonds and the old bonds. At June 30, 2005, the outstanding principal amount of the bonds was $21.8 million. The Company estimates its remaining payments to cover the principal and interest of these bonds will be approximately $43.6 million.

We expect to fund these cash obligations from funds provided by operations and future financings, if necessary. The cash available to us from these sources, however, may not be sufficient to cover these cash obligations because economic factors outside our control may reduce the amount of cash generated by operations or increase our costs. For instance, an economic downturn or general global instability caused by military actions, terrorism, disease outbreaks and natural disasters could reduce the demand for air travel, which would reduce the amount of cash generated by operations. An increase in our costs, either due to an increase in borrowing costs caused by a reduction in our credit rating or a general increase in interest rates or due to an increase in the cost of fuel, maintenance, aircraft and aircraft engines and parts, could decrease the amount of cash available to cover the cash obligations. In addition, we may be required to prepay portions of the government guaranteed loan if our employee compensation costs exceed a certain threshold and we may be required to prepay portions of the term loan to the extent the value of the collateral securing the term loan decreases. In any of these cases, our liquidity may be adversely affected and we may not have sufficient cash to prepay the government loan and meet our other obligations. Moreover, the government guaranteed loan contains a $100 million minimum cash balance requirement. As a result, we cannot use all of our available cash to fund operations, capital expenditures and cash obligations without violating this requirement. Commitments

~~Although~~ As ~~there~~of ~~can~~June 30, be2005, nowe ~~assurances,~~had ~~management~~$704.0 million ~~believes~~of long-term ~~that~~debt ~~cash~~(including ~~flow~~current ~~from~~maturities). ~~operating~~This amount ~~activities~~consisted primarily of the $300.3 million government guaranteed loan, ~~coupled~~a secured term loan financing with ~~existing~~General Electric ~~cash~~Capital ~~balances~~Corporation ~~and~~(“GECC”), ~~financing~~of ~~commitments~~which $110.6 million remains outstanding, ~~will~~$36.0 million principal beamount ~~adequate~~of tosenior ~~fund~~secured discount notes, ~~the~~$112.3 million ~~Company’s~~principal ~~operating~~amount ~~and~~of ~~capital~~7.5% convertible senior ~~needs~~notes as(including ~~well~~interest through December 31, 2004 as ~~enable~~a itdeemed loan added to ~~maintain~~the ~~compliance~~principal ~~with~~thereof) ~~its~~and ~~various~~$252.7 million ~~debt~~issue ~~agreements~~price atof ~~least~~7.25% senior exchangeable ~~through~~notes, ~~December~~of which $86.8 ~~31,~~million ~~2005~~was received at issuance.

~~Financial~~Government ~~Covenants~~Guaranteed ~~and Credit Rating~~ Loan

In ~~addition~~January to2002, AWA closed a $429 million loan supported by a $380 million guarantee provided by the ~~minimum~~Air Transportation ~~cash~~Stabilization ~~balance~~Board ~~requirements,~~(“ATSB”). ~~our~~Certain third-party ~~long~~counter-~~term~~guarantors ~~debt~~have ~~agreements~~fully ~~contain~~and unconditionally ~~various~~guaranteed ~~negative~~the ~~covenants~~payment ~~that~~of ~~restrict~~an ~~our~~aggregate ~~actions,~~of ~~including~~$45 million ~~our~~of the ~~ability~~original toprincipal ~~pay~~amount ~~dividends,~~under orthe government guaranteed ~~make~~loan ~~other~~plus ~~restricted~~accrued ~~payments~~and unpaid interest thereon. ~~Finally~~In addition, Holdings ~~our~~has ~~long-term~~fully ~~debt~~and ~~agreements~~unconditionally ~~contain~~guaranteed ~~cross-default~~the payment of ~~provisions~~all principal, ~~which~~premium, ~~may~~interest beand ~~triggered~~other byobligations outstanding ~~defaults~~under bythe usgovernment ~~under~~guaranteed ~~other~~loan ~~agreements~~and ~~relating~~has topledged ~~indebtedness.~~the ~~See~~stock ~~“Risk~~of ~~Factors~~AWA ~~Relating~~ to ~~the~~secure ~~Company~~its ~~and~~obligations ~~Industry~~under ~~Related~~such ~~Risks~~guarantee. Principal —amounts ~~Our~~under ~~high level~~this loan become due in ten installments of ~~fixed~~$42.9 million ~~obligations~~on ~~limits~~each ~~our~~March 31 ~~ability~~and September 30, towhich ~~fund~~began ~~general~~on ~~corporate~~March 31, ~~requirements~~2004 and ~~obtain additional~~end ~~financing~~on September 30, ~~limits~~2008. ~~our~~The ~~flexibility~~Company inhas ~~responding~~made tothe ~~competitive~~first ~~developments~~three ~~and~~of ~~increases~~these ~~our~~payments ~~vulnerability~~as toscheduled. ~~adverse~~Principal ~~economic~~amounts ~~and~~outstanding ~~industry~~under the ~~conditions.”~~government Asguaranteed ofloan ~~March 31,~~bear ~~2005,~~interest at a rate per annum ~~Holdings~~equal ~~and~~to ~~AWA~~LIBOR ~~were~~plus in40 basis ~~compliance~~points. ~~with~~We also pay guarantees fees of approximately 8% of the ~~covenants~~outstanding guaranteed principal balance in ~~their~~2005 ~~long-term~~through ~~debt~~2008 ~~agreements~~to the U.S. Treasury Department and other loan participants.

~~Our credit ratings, like most airlines, are relatively low, with Moody’s assessment of AWA’s~~27 ~~senior implied rating and senior unsecured debt rating at B3 and Caa2, respectively, Standard &~~ ~~Poor’s assessment of AWA’s and Holdings’ corporate credit ratings at B- and AWA’s senior unsecured~~ rating at CCC and Fitch Ratings’ assessment of AWA’s long-term and unsecured debt rating at CCC. In addition, Standard & Poor’s recently placed AWA’s aircraft debt on CreditWatch with negative implications as part of a broader review of aircraft-backed debt. Low credit ratings could cause our borrowing costs to increase, which would increase our interest expense and could affect our net income and our credit ratings could adversely affect our ability to obtain additional financing. The rating agencies base their ratings on our financial performance and operations, our cash flow and liquidity, the level of our indebtedness and industry conditions in general. If our financial performance or industry conditions do not improve, we may face future downgrades, which could further negatively impact our borrowing costs and the prices of our

28 Table of Contents

~~Table~~ Subject ofto ~~Contents~~certain exceptions, we are required to prepay the government guaranteed loan with:

~~AMERICA~~• ~~WEST~~the ~~HOLDINGS~~net ~~CORPORATION~~proceeds ~~AND AMERICA~~of ~~WEST~~all ~~AIRLINES,~~issuances ~~INC. March 31,~~of ~~2005~~ debt or equity by either Holdings or AWA after January 2002; • proceeds from asset sales in excess of $20 million in any fiscal year; and • insurance proceeds in excess of $2 million to the extent such proceeds are not used to restore or replace the assets from which such proceeds are derived.

~~equity or debt securities.~~ In addition, ~~any~~we ~~downgrade~~are ofrequired ~~our credit~~to ~~ratings~~prepay ~~may~~the ~~indicate~~government guaranteed loan upon a ~~decline~~change in ~~our~~control ~~business~~ and inwe ~~our~~may ~~ability~~be required to ~~satisfy~~prepay portions ~~our~~of ~~obligations under~~the loan if our ~~indebtedness.~~employee ~~See~~compensation ~~“Risk~~costs ~~Factors~~exceed ~~Relating~~a certain tothreshold. ~~the~~We ~~Company~~may, ~~and~~at ~~Industry~~our ~~Related~~option, ~~Risks~~prepay -the government ~~Because~~guaranteed ofloan ~~our~~without ~~relatively~~premium ~~low~~or ~~credit ratings~~penalty, ~~our~~subject ~~borrowing~~to reimbursement ~~costs~~of ~~may~~the belenders’ ~~high~~breakage ~~and~~costs ~~our~~in ~~ability~~the tocase of ~~incur~~prepayment ~~additional~~of ~~debt~~LIBOR ~~may be impaired~~loans.”

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

~~Labor~~GECC ~~Relations~~ Term Loan Financing

~~A large majority of the employees of the major airlines in the United States are represented~~ byIn ~~labor~~September ~~unions.~~2004, ~~The majority of~~ AWA ~~employees~~entered ~~have~~into ~~selected~~a ~~union~~term ~~representation~~loan ~~and~~financing ~~have~~with ~~negotiated~~GECC orproviding ~~are~~for loans in ~~the~~an ~~process~~aggregate ofamount ~~negotiating collective bargaining agreements with AWA.~~of ~~Although~~$110.6 million. ~~there~~The ~~are~~term ~~few~~loan ~~remaining~~financing ~~employee~~consists ~~groups~~of ~~who could engage in organization efforts, we~~two ~~cannot~~secured ~~predict~~term ~~the~~loan ~~outcome~~facilities: ofa ~~any~~$75.6 million ~~future~~term ~~efforts to organize those remaining employees or the terms~~loan offacility ~~any~~secured ~~future~~primarily ~~labor~~by ~~agreements~~spare ~~or the effect~~parts, ifrotables ~~any,~~and appliances on (the ~~Company’s~~“Spare orParts ~~AWA’s~~Facility”); ~~operations~~and ora ~~financial performance~~$35.0 million ~~For~~term ~~more~~loan ~~discussion,~~facility ~~see~~secured ~~“Risk~~primarily ~~Factors Relating to the Company and Industry~~by ~~Related~~aircraft ~~Risks~~engines ~~— Negotiations with labor unions could divert management attention~~ and ~~disrupt operations~~parts ~~and~~installed ~~new~~in ~~collective~~such ~~bargaining~~engines ~~agreements or amendments to existing collective bargaining~~(the ~~agreements~~“Engine ~~could increase our labor costs and operating expenses.~~Facility”).

~~Related~~ The ~~Party~~facilities ~~Transactions~~are cross-collateralized on a subordinated basis and the collateral securing the facilities also secures on a subordinated basis certain of AWA’s other existing debt and lease obligations to GECC and its affiliates.

~~Texas~~ The ~~Pacific~~loans ~~Group~~under ~~agreed~~the toSpare ~~reimburse~~Parts Facility are payable in full at maturity on September 10, 2010. The loans under the ~~Company~~Engine Facility ~~approximately~~are payable in equal quarterly installments of $21.53 million ~~for~~beginning ~~expenses~~on March 10, 2006 through ~~incurred~~June 10, by2010 with the ~~Company~~remaining loan amount of $11.8 million payable at maturity on ~~its~~September 10, 2010. ~~behalf~~The loans under each facility may be prepaid in an amount not less than $5 million at any time after the 30th monthly anniversary of the funding date under such facility. AsIf AWA fails to maintain a ~~result,~~certain ratio of rotables to loans under the Spare ~~Company~~Parts ~~recorded~~Facility, ~~this~~it may be required to pledge additional rotables or cash as collateral, provide a ~~receivable~~letter asof credit or prepay some or all of ~~December 31,~~the ~~2004~~loans under the Spare Parts Facility. In ~~Subsequent~~addition, the loans under the Engine Facility are subject to mandatory ~~December 31,~~prepayment ~~2004,~~upon the ~~Company~~occurrence ~~received~~of ~~$2.4 million~~certain inevents ~~such~~of ~~reimbursement~~loss ~~and~~applicable anto, ~~additional~~or ~~$0.1 million~~certain indispositions ~~2005~~of, aircraft engines securing the facility.

~~Application~~ Principal ofamounts ~~Critical~~outstanding ~~Accounting~~under ~~Policies~~the loans bear interest at a rate per annum based on three-month LIBOR plus a margin. Both facilities contain customary events of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.

~~The~~Senior ~~preparation~~Secured ofDiscount ~~our~~Notes ~~consolidated~~Due financial statements in accordance with generally accepted accounting principles requires that we make certain estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of our financial statements. We believe our estimates and assumptions are reasonable; however, actual results could differ from those estimates. We have identified the following critical accounting policies that require the use of significant judgments and estimates relating to matters that are inherently uncertain and may result in materially different results under different assumptions and conditions. 2009

	•	Passenger Revenue – Passenger revenue is recognized when transportation is provided. Ticket sales for transportation that has not yet been provided are recorded as air traffic liability. Passenger traffic commissions and related fees are expensed when the related revenue is recognized. Passenger traffic commissions and related fees not yet recognized are included as a prepaid expense. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based on the statistical analysis of our historical data. Any adjustments resulting from periodic evaluations of the estimated air traffic liability are included in results of operations during the period in which the evaluations are completed.
	•	Accounting For Long-Lived Assets – Owned property and equipment are recorded at cost and depreciated to residual values over the estimated useful lives using the straight-line method. Leasehold improvements relating to flight equipment and other property on operating leases are amortized over the life of the lease, or the life of the asset, whichever is shorter. Interest on advance payments for aircraft acquisitions and on expenditures for aircraft improvements is capitalized and added to the cost of the asset. The estimated useful lives of our owned aircraft, jet engines, flight equipment and rotable parts range from five to 25 years. The estimated useful lives of our technical support facility and flight training center in Phoenix, Arizona are 22 years and 30 years, respectively. The estimated useful lives of our ground property and equipment range from three to 12 years. We test for impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired as defined by SFAS No. 144, “Accounting for the

In December 2004, AWA raised additional capital by financing its Phoenix maintenance facility and flight training center. Using its leasehold interests in these two facilities as collateral, AWA, through a wholly owned subsidiary named FTCHP LLC, raised $30.8 million through the issuance of senior secured discount notes. The notes were issued by FTCHP at a discount pursuant to the terms of a senior secured term loan agreement among the Company, FTCHP, Heritage Bank, SSB, as administrative agent, Citibank, N.A., as the

2928

~~AMERICA~~ initial ~~WEST~~lender, ~~HOLDINGS~~and ~~CORPORATION~~the ~~AND AMERICA~~other ~~WEST~~lenders ~~AIRLINES~~from time to time party thereto. Citibank, ~~INC~~N.A. subsequently assigned all of its ~~March 31,~~interests ~~2005~~in the notes to third party lenders.

~~Impairment~~ AWA orhas ~~Disposal~~fully ofand ~~Long-Lived~~unconditionally ~~Assets.”~~guaranteed ~~An impairment loss is recognized if~~ the ~~carrying~~payment ~~amount~~and performance of ~~the~~FTCHP’s ~~asset~~obligations isunder ~~not recoverable from its undiscounted cash flows and is measured as~~ the ~~difference~~notes ~~between the carrying amount~~ and ~~fair value of~~ the loan ~~asset~~agreement. •The ~~Frequent~~notes ~~Flyer~~require ~~Accounting~~aggregate –principal ~~We maintain a frequent travel award program known as “FlightFund” that provides a variety~~ payments of ~~awards to program members based on accumulated mileage~~$36.0 million ~~The~~with ~~estimated~~principal ~~cost~~payments of ~~providing the free travel is recognized as a liability and charged to operations as program members accumulate mileage~~ $1.5 million ~~Travel~~due ~~awards are valued at the incremental cost of carrying one passenger, based~~ on ~~expected redemptions. Incremental costs are based on expectations of expenses to be incurred on a per passenger basis and include fuel~~December 27, ~~liability~~2005 ~~insurance, food, beverages, supplies~~ and ~~ticketing~~2006 ~~costs. We also sell mileage credits to companies participating in our FlightFund program, such as hotels, car rental agencies~~ and ~~credit card companies. Transportation-related revenue from~~ the remaining ~~sale~~principal ofamount ~~mileage~~due ~~credits~~on isDecember 27, ~~deferred and recognized when transportation is provided~~2009. AThe notes ~~change~~may ~~to the estimated cost per mile, minimum award level, percentage of revenue to~~ be ~~deferred~~prepaid ~~or deferred recognition period could have a significant impact on our revenues or mileage liability accrual~~ in ~~the~~full ~~year~~at ofany ~~the~~time ~~change~~(subject ~~as well as future years. • Long-Term Maintenance Reserve – We record an accrual for the estimated cost of scheduled airframe and engine overhauls required~~ to becustomary LIBOR ~~performed~~breakage ~~on leased aircraft upon their return to the lessors. These estimates are based on historical~~ costs) and ~~our~~in ~~assumptions~~partial ~~regarding~~amounts ~~the renewal~~ of ~~aircraft leases~~ $1.5 million ~~A significant change to AWA’s fleet plan could have a material impact~~ on ~~our reserve requirements. • Deferred Tax Asset Valuation Allowance – The Company initially recorded a full valuation allowance relating to its net deferred tax assets at~~ December 31 27, ~~2001~~2007 and ~~to tax benefits generated in 2002~~2008. In recording that valuation allowance, we considered whether it was more likely than not that all or a portion of the deferred tax assets will not be realized, in accordance with SFAS No. 109, “Accounting for Income Taxes.” The ~~Company~~unpaid principal ~~was~~amount ~~in a cumulative loss position three out~~ of ~~four years between December 31, 2001 through December 31, 2004, which weighed heavily in~~ the ~~overall~~notes ~~determination~~bears ~~that~~interest abased ~~valuation~~on ~~allowance~~LIBOR ~~was needed. As of March 31, 2005, the Company had recorded~~ plus a ~~valuation~~margin ~~allowance~~subject ~~of $115.3 million against its net deferred tax assets. The Company expects~~ to ~~continue~~adjustment tobased ~~record~~on a ~~full~~loan ~~valuation~~to ~~allowance~~collateral value ~~on any future tax benefits until we have achieved several quarters of consecutive profitable results coupled with an expectation of continued profitability~~ratio.

~~Recently~~ The ~~Issued~~loan ~~Accounting~~agreement ~~Pronouncements~~contains customary covenants applicable to loans of this type, including obligations relating to the preservation of the collateral and restrictions on the activities of FTCHP. In addition, the loan agreement contains events of default, including payment defaults, cross-defaults to other debt of FTCHP, if any, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.

In ~~November 2004,~~connection ~~the~~with ~~FASB~~this ~~issued Revised Statement No. 123~~financing, ~~“Accounting~~AWA ~~for~~sold ~~Share-Based Payment”~~all ~~(“SFAS No. 123R”). This statement requires the Company to recognize the grant-date fair value~~ of ~~stock options in~~ its ~~Statement of Operations. In addition, the Company will be required~~leasehold tointerests ~~calculate~~in ~~this compensation using~~ the ~~fair-value~~maintenance ~~based~~facility ~~method,~~and ~~versus~~flight ~~the~~training ~~intrinsic value method~~center ~~previously~~to ~~allowed~~FTCHP ~~under~~and ~~SFAS~~entered ~~No. 123.~~into Assubleases ~~issued, this revision was effective~~ for ~~interim periods beginning after June 15, 2005. On April 14, 2005,~~ the ~~Securities~~facilities ~~and Exchange Commission amended~~with ~~the~~FTCHP ~~compliance~~at ~~date~~lease ~~for~~rates ~~SFAS~~expected ~~No. 123R~~ to ~~the~~approximate ~~beginning of~~ the ~~next fiscal year that begins after~~interest ~~June 15,~~payments ~~2005.~~due ~~Accordingly,~~under the ~~Company~~notes. ~~will~~In ~~adopt~~addition, ~~this~~AWA ~~revised~~agreed ~~SFAS~~to ~~effective January 1, 2006.~~make ~~The~~future ~~Company~~capital iscontributions ~~currently~~to ~~evaluating~~FTCHP ~~how~~in itamounts ~~will~~sufficient ~~adopt~~to cover ~~SFAS~~principal ~~No. 123R~~payments and ~~has~~other ~~not~~amounts ~~determined~~owing ~~the method~~pursuant ~~it will use~~ to ~~value granted stock options. The adoption of SFAS No. 123R is expected to~~the ~~have~~notes aand ~~material effect on~~ the ~~Company’s~~loan ~~results of operations~~agreement.

~~Forward-Looking~~ The ~~Information~~proceeds from this financing, together with $10.5 million from operating cash flow, were irrevocably deposited with the trustee for AWA’s 103/4% senior unsecured notes due 2005 and subsequently redeemed on January 26, 2005.

~~This quarterly report on Form 10-Q contains various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)~~7. ~~These~~5% ~~statements~~Convertible ~~are~~Senior ~~based~~Notes ondue management’s beliefs as well as assumptions made by and information currently available to management. When used in this document, the words “anticipate,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or expected. Among the key factors that may have a direct bearing on our results are: 2009

In connection with the closing of the government guaranteed loan and the related transactions, Holdings issued $104.5 million of 7.5% convertible senior notes due 2009, of which approximately $112.3 million remained outstanding at June 30, 2005 (including interest paid through December 31, 2004 as a deemed loan added to the principal thereof). These notes are convertible into shares of class B common stock, at the option of the holders, at an initial conversion price of $12.00 per share or a conversion ratio of approximately 83.333 shares per $1,000 principal amount of such notes, subject to standard anti-dilution adjustments. Interest on the 7.5% convertible senior notes is payable semiannually in arrears on June 1 and December 1 of each year. At Holdings’ option, the first six interest payments were payable in the form of a deemed loan added to the principal amount of these notes. The 7.5% convertible senior notes will mature on January 18, 2009 unless earlier converted or redeemed. The payment of principal, premium and interest on the 7.5% convertible senior notes is fully and unconditionally guaranteed by AWA.

~~Table~~ Holdings may redeem 7.5% convertible senior notes, in whole or in part, at the following redemption prices (expressed as percentages of ~~Contents~~the principal amount thereof), if redeemed during the twelve-month period commencing on January 18 of the years set forth below, plus, in each case, accrued and unpaid interest, if any, to the date of redemption:

AMERICA WEST HOLDINGS CORPORATION AND AMERICA WEST AIRLINES, INC. March 31, 2005


Year	Redemption Price

2005		103.75	%
2006		102.50	%
2007		101.25	%
2008 and thereafter		100.00	%

•7.25% ~~general~~Senior ~~economic~~Exchangeable ~~conditions;~~Notes ~~• the impact of global instability caused by military actions, terrorism, disease outbreaks and natural disasters; • limitations on our flexibility in responding to industry conditions~~ due to high fixed costs and restrictions imposed by our debt instruments; • changes in federal and state laws and regulations; • changes in prevailing interest rates and the availability of and terms of financing to fund our business; • the ability to attract and retain qualified personnel; • the cyclical nature of the airline industry; • competitive practices in the airline industry; • the impact of changes in fuel prices; and • relations with unionized employees generally and the impact and outcome of labor negotiations.2023

~~For~~ In ~~additional~~July ~~discussion of these factors~~ and ~~other~~August ~~risks~~of 2003, ~~see~~AWA ~~“Business~~completed –a ~~Risk~~private ~~Factors~~placement of ~~Relating~~approximately to$86.8 million ~~the~~issue ~~Company~~price ~~and~~of 7.25% Senior ~~Industry~~Exchangeable ~~Related~~Notes ~~Risks”~~due ~~discussed below~~2023. InThe ~~light~~notes ofbear cash ~~these~~interest ~~risks~~until July 30, ~~uncertainties~~ ~~and~~2008. ~~assumptions~~Thereafter, the ~~forward-looking events described in this quarterly report on~~notes ~~Form~~will ~~10-Q~~cease ~~might~~bearing ~~not~~cash ~~occur.~~interest ~~Any~~and ~~forward-looking~~begin ~~statements~~accruing ~~speak~~original issue ~~only~~discount asdaily ofat ~~the~~a ~~date of this~~rate ~~report.~~

3129

~~AMERICA~~ of ~~WEST~~7.25% per ~~HOLDINGS~~year ~~CORPORATION~~until ~~AND~~maturity. Each note was issued at a ~~AMERICA~~price ~~WEST~~of ~~AIRLINES~~$343.61 and is exchangeable for class B common stock of Holdings at an exchange ratio of 32.038 shares per $1,000 ~~INC~~principal amount at maturity of the notes (subject to adjustment in certain circumstances). This represents an ~~March~~equivalent conversion price of approximately $10.73 per share. The aggregate amount due at maturity, including accrued original issue discount from July 31, ~~2005~~2008, will be $252,695,000. The notes are unconditionally guaranteed on a senior unsecured basis by Holdings.

~~Risk~~ Holders ~~Factors~~may ~~Relating~~exchange totheir ~~America~~notes ~~West~~for ~~and~~the ~~Industry~~shares ~~Related~~of ~~Risks~~class B common stock of Holdings in any fiscal quarter commencing after September 30, 2003, if, as of the last day of the preceding fiscal quarter, the closing sale price of the class B common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such preceding fiscal quarter is more than 110% of the accreted exchange price per share of Class B common stock on the last day of such preceding fiscal quarter. If the foregoing condition is satisfied, then the notes will be exchangeable at any time at the option of the holder through maturity. The accreted exchange price per share as of any day will equal the issue price of a note plus accrued original issue discount to that day divided by 32.038, subject to any adjustments to the exchange rate through that day.

We On ~~caution~~or ~~the~~before ~~reader~~July 30, ~~that~~2018, ~~these~~a ~~risk~~holder ~~factors~~also may ~~not~~exchange beits notes ~~exhaustive.~~for Weshares ~~operate~~of inthe Class B common stock at any time after a 10 consecutive trading-day period in which the average ~~continually~~of ~~changing~~the ~~business~~trading ~~environment~~prices ~~and~~for ~~new~~the ~~risk~~notes ~~factors~~for ~~emerge~~that ~~from~~10 ~~time~~trading-day period towas ~~time.~~less than 103% of the average exchange value for the ~~Management~~notes ~~cannot~~during ~~predict~~that ~~such~~period. ~~new~~Exchange ~~risk~~value ~~factors,~~is ~~nor~~equal ~~can~~to itthe ~~assess~~product of the ~~impact,~~closing ifsale ~~any,~~price for the shares of ~~such~~Class B ~~new~~common ~~risk~~stock ~~factors~~ on ~~our~~a ~~business~~given orday multiplied by the ~~extent~~then tocurrent exchange rate, which ~~any~~is ~~factor~~the ornumber ~~combination~~of shares of ~~factors~~Class B ~~may~~common ~~impact~~stock ~~our~~for ~~business~~which each note is then exchangeable.

We In ~~have sustained~~addition, ~~and~~the holders may ~~continue~~exchange tothe ~~sustain~~notes ~~significant~~if ~~operating~~the ~~losses.~~notes have been called for redemption or if certain specified corporate transactions have occurred.

~~For~~ Holders of the ~~year~~notes ~~ended~~may ~~December 31,~~require ~~2004,~~AWA weto ~~incurred~~repurchase anthe ~~operating~~notes ~~loss of $43.8 million. In~~at ~~addition,~~a weprice ~~incurred~~equal ~~operating~~to ~~losses for~~ the ~~years~~original ~~ended~~issue ~~December 31,~~price ~~2001~~plus ~~and~~accrued ~~2002 resulting~~cash ~~primarily~~interest ~~from the decrease in revenue~~ and ~~passenger~~original ~~demand~~issue ~~and~~discount, ~~the~~if ~~increase~~any, inon ~~operating costs after the terrorist attacks of September~~July 1130, ~~2001. Recently~~ 2008, ~~the~~2013 ~~operating~~and ~~losses~~2018. ~~resulted primarily~~The ~~from~~purchase aprice ~~substantial increase in the cost~~ of ~~jet~~such ~~fuel~~notes ~~and~~may ~~excess domestic industry capacity~~be ~~resulting~~paid in ~~lower~~cash ~~revenue~~or ~~per~~class B ~~available~~common ~~seat~~stock ~~mile. We expect the threat~~ of ~~further~~Holdings, ~~terrorist~~subject ~~attacks~~to ~~and~~certain ~~continued~~restrictions. ~~instability~~In inaddition, ~~oil~~each ~~producing~~holder ~~regions~~may torequire AWA ~~continue~~ to ~~negatively~~purchase ~~impact~~all ~~our revenues~~or ~~and~~a ~~costs~~portion inof ~~the~~such ~~near-term.~~holder’s Wenotes upon ~~may~~the ~~not~~occurrence beof ~~able~~certain tochange ~~effectively~~of ~~counteract~~control ~~increasing costs~~events ~~through~~concerning ~~our~~AWA ~~cost~~or ~~reduction initiatives, customer service initiatives and revised pricing structures~~Holdings. ~~Moreover,~~AWA ~~our liquidity and borrowing options are limited and we~~ may ~~not~~redeem bethe ~~able to survive a prolonged economic downturn~~notes, ~~decreases~~ in ~~demand for air travel~~ whole or ~~further increases~~ in ~~jet~~ ~~fuel~~part, ~~costs.~~on ~~The~~or ~~inability~~after toJuly 30, ~~sustain~~2008 ~~profitability~~at ~~may~~a ~~impair~~price ~~our~~equal ~~ability~~ to ~~satisfy our~~ ~~obligations~~the asoriginal ~~they~~issue ~~become~~price ~~due,~~plus ~~obtain~~accrued ~~future~~cash ~~equity~~interest orand ~~debt~~original issue ~~financing~~discount, ~~respond~~if ~~to competitive developments and otherwise sustain or expand our business~~any.

~~Global~~ In ~~instability~~addition, ~~caused~~completion byof ~~events~~the ~~such~~proposed asmerger ~~terrorism,~~with ~~has~~a ~~had~~subsidiary of US Airways Group will constitute a “change of control” under AWA’s 7.25% senior exchangeable notes due 2023 and ~~may~~will inrequire AWA to make an offer to purchase those notes within 30 days after the ~~future~~effective ~~have~~time of the merger at a purchase price of $343.61 per $1,000 principal ~~material~~amount ~~impact~~at onmaturity. Under the ~~airline~~terms ~~industry~~of the notes and the related guarantee and exchange agreement, asHoldings may satisfy AWA’s obligation to purchase those notes by delivery of shares of new US Airways Group common stock having a ~~result,~~“fair market ~~our~~value” ~~financial~~of ~~condition~~not less than $343.61 per $1,000 principal ~~operations~~amount ~~and~~at maturity for a total of $86.8 million ~~prospects~~plus accrued but unpaid interest. For this purpose “fair market value” means 95% of the average market price of the new US Airways Group common stock calculated over the 5 business days ending on the third business day before the purchase date.

~~Over~~Other ~~the~~Indebtedness ~~past several years, global instability, caused by military action, terrorism, disease outbreaks~~ and natural disasters, has had a profound impact on the airline industry. The terrorist attacks of September 11, 2001 resulted in a severe strain on our and the other airlines’ liquidity as the government temporarily suspended all flights, passenger demand dropped precipitously and financial institutions tried to reduce their exposure by restricting the industry’s access to capital. In addition, the terrorist attacks led to a decrease in the value of aircraft and aircraft-related equipment and facilities and cost increases for enhanced security measures, aviation insurance, airport rents and landing fees. Subsequent to the terrorist attacks, other events, such as military action in Iraq and Afghanistan, general political and economic instability in oil producing regions, and the Severe Acute Respiratory Syndrome (“SARS”) outbreak in Asia, continued to adversely impact passenger demand and operating costs, especially jet fuel costs. These kinds of events (including natural disasters such as the recent tsunamis in the Indian Ocean) are likely to continue to impact the airline industry. Depending on the severity and geographical impact of such events, they may have a substantial adverse impact on our passenger demand, our costs, the value of our assets and our access to, and cost of capital. We cannot predict whether we will have sufficient liquidity or access to capital to withstand the adverse impact of a prolonged decrease in passenger demand or a substantial increase in costs caused by such global events. Obligations

~~Increases~~ In inaddition ~~insurance~~to ~~costs~~the orabove ~~reductions~~described inindebtedness, ~~insurance~~we ~~coverage~~had $35.3 million ~~may~~of ~~adversely~~secured ~~impact~~equipment ~~our operations~~notes and $47.6 million ~~financial~~of ~~results~~other unsecured indebtedness, including $29.3 million of industrial revenue bonds.

~~The terrorist attacks of September 11, 2001 led to a significant increase in insurance~~30 ~~premiums and a decrease in the insurance coverage available to commercial airline carriers.~~ Accordingly, our insurance costs increased significantly and our ability to continue to obtain insurance even at current prices remains uncertain. In addition, AWA and other airlines have been unable to obtain third party war risk (terrorism) insurance at reasonable rates from the commercial insurance market and have been obtaining this insurance through a special program administered by the FAA. If the Federal insurance program terminates, we would likely face a material increase in the cost of war risk insurance. Because of competitive pressures in our industry, our ability to pass additional insurance costs to passengers is limited. As a result, further increases in insurance costs or reductions in available insurance coverage could harm our earnings.

32 Table of Contents

~~Table~~ The following table sets forth our cash obligations as of June 30, ~~Contents~~2005.

AMERICA WEST HOLDINGS CORPORATION AND AMERICA WEST AIRLINES, INC. March 31, 2005


		2005		2006		2007		2008		2009		Beyond 2009		Total

		(in thousands)
Long-term debt:
	Equipment notes — non-EETC(1)	$	4,153	$	8,305	$	7,772	$	15,082	$	—	$	—	$	35,312
	GECC term loan(2)		—		5,158		5,158		5,158		5,158		89,932		110,564
	7.5% convertible senior notes due 2009(3)		—		—		—		—		112,299		—		112,299
	7.25% senior exchangeable notes due 2023(4)		—		—		—		—		—		252,695		252,695
	Government guaranteed loan(5)		42,900		85,800		85,800		85,800		—		—		300,300
	State loan(6)		250		250		250		—		—		—		750
	Industrial development bonds(7)		—		—		—		—		—		29,300		29,300
	AVSA promissory notes(8)		8,750		8,750		—		—		—		—		17,500
	Senior Secured Discount Notes(9)		1,530		1,529		1,529		1,530		29,870		—		35,988

			57,583		109,792		100,509		107,570		147,327		371,927		894,708
Cash aircraft rental payments(10)			149,933		331,798		307,568		259,409		230,610		1,666,132		2,945,450
Lease payments on equipment and facility operating leases(11)			10,924		20,687		18,183		17,866		16,299		55,708		139,667
Capital lease obligations			4,472		4,991		1,773		—		—		—		11,236
Special facility revenue bonds(12)			1,363		1,363		1,362		1,362		2,044		36,106		43,600
Aircraft purchase commitments(13)			173,042		468,136		48,142		—		—		—		689,320
Engine maintenance commitments(14)			6,000		6,000		3,000		1,000		—		—		16,000

Total		$	403,317	$	942,767	$	480,537	$	387,207	$	396,280	$	2,129,873	$	4,739,981

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


	(1)	Includes approximately $35.3 million of equipment notes with variable interest rates of 3.94% to 4.72%, averaging 4.07% at June 30, 2005, installments due 2005 through 2008.

	(2)	The amount consists of the Spare Parts Facility and the Engine Facility with a variable interest rate of 7.33% at June 30, 2005. See “— GECC Term Loan Financing” above.

	(3)	Includes $90.7 million principal amount of 7.5% convertible senior notes, due 2009, and $21.6 million of interest paid in kind of issuance through December 31, 2004. For financial reporting purposes, we initially recorded the convertible senior notes at their fair market value on the date of issuance. As of June 30, 2005, the accreted balance of the convertible senior notes in the accompanying consolidated balance sheet is approximately $70.6 million.

	(4)	Includes $252.7 million principal amount of 7.25% senior exchangeable notes due July 2023 with cash interest payable through July 2008 at a rate of 2.49% on the principal amount at maturity. Thereafter, the notes will cease bearing cash interest and begin accruing original issue discount at a rate of 7.25% until maturity. The aggregate amount due at maturity, including accrued original issue discount from July 31, 2008, will be $252.7 million.

	(5)	Government guaranteed loan includes $300.3 million with a variable interest rate of 3.49% at June 30, 2005 and ratable principal payments due 2005 through 2008. Guarantee fees of approximately 8.0% of

We have a significant amount of fixed obligations, including debt, aircraft leases and financings, aircraft purchase commitments, leases of airport and other facilities and other cash obligations. As of March 31~~, 2005, we had approximately $703.3 million of outstanding debt, of~~ ~~which $182.4 million was secured. In addition, we had $11.2 million of payments to satisfy capital~~ ~~lease obligations and $3.2 billion of operating lease obligations through lease expiration dates~~ incurred primarily in connection with off-balance sheet aircraft financings. See “Managements’ Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Off Balance Sheet Arrangements.” We also have guaranteed costs associated with our regional alliance with Mesa and commitments to purchase aircraft from Airbus. As a result of the substantial fixed costs associated with these obligations:

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

Our obligations also impair our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business. Our existing indebtedness is secured by substantially all of our assets, leaving us with limited collateral for additional financing. Moreover, the terms of the government guaranteed loan restrict our ability to incur additional indebtedness or issue equity unless we use the proceeds of those transactions to repay the loan, require prepayment if our employee compensation costs exceed a certain threshold, require us to maintain a minimum cash balance of $100 million, and restrict our ability to take certain other actions, including mergers and acquisitions, investments and asset sales.


		the outstanding guaranteed principal balance in 2005 through 2008 are payable to the U.S. Treasury Department and other loan participants.

	(6)	Includes Arizona State loan of $0.8 million due December 2007 with a variable interest rate of 7.87% at June 30, 2005.

	(7)	Includes $29.3 million of 6.3% industrial development bonds due April 2023.

	(8)	Includes AVSA promissory notes of $17.5 million due 2005 with variable interest rates averaging 4.47% at June 30, 2005.

	(9)	Includes $36.0 million of senior secured discount notes due 2009 with a variable interest rate of 6.98% at June 30, 2005.

Our ability to pay the fixed costs associated with our contractual obligations depends on our operating performance and cash flow, which in turn depend on general economic and political conditions. A failure to pay our fixed costs or breach of the contractual obligations could result in a variety of adverse consequences, including the acceleration of our indebtedness, the withholding of credit card proceeds by the credit card servicers and the exercise of remedies by our creditors and lessors. In such a situation, it is unlikely that we would be able to fulfill our obligations under or repay the accelerated indebtedness, make required lease payments or otherwise cover our fixed costs.


(10)	Includes non-cancelable operating leases for 137 aircraft with remaining terms ranging from three months to approximately 19 years. Management estimates the debt equivalent value of these operating leases approximates $1.9 billion using an interest rate of 10%.

(11)	Includes leases for terminal space, ground facilities, the flight training center and computer and other equipment under non-cancelable operating leases.

(12)	Includes Series 1999 Terminal 4 Improvements Bonds, due 2019.

(13)	Includes commitments to purchase a total of 18 Airbus aircraft and five spare engines for delivery in 2005 through 2007.

(14)	Includes minimum commitments under AWA’s rate per engine hour agreement with General Electric Engine Services for overhaul maintenance services on CFM56-3B engines through April 2008. Minimum monthly commitment amounts: for the period through and including April 2006 — $1.0 million, for the period May 2006 through and including April 2008 — $250,000.

~~Fluctuations~~ We expect to fund these cash obligations from funds provided by operations and future financings, if necessary. The cash available to us from these sources, however, may not be sufficient to cover these cash obligations because economic factors outside our control may reduce the amount of cash generated by operations or increase our costs. For instance, an economic downturn or general global instability caused by military actions, terrorism, disease outbreaks and natural disasters could reduce the demand for air travel, which would reduce the amount of cash generated by operations. An increase in ~~jet~~our ~~fuel~~costs, either due to an increase in borrowing costs caused by a reduction in our credit rating or a general increase in interest rates or due to an increase in the cost of fuel, maintenance, aircraft and aircraft engines and parts, could decrease ~~adversely~~the ~~affect~~amount of cash available to cover the cash obligations. In addition, we may be required to prepay portions of the government guaranteed loan if our ~~operating~~employee ~~expenses~~compensation costs exceed a certain threshold and ~~results~~we may be required to prepay portions of the term loan to the extent the value of the collateral securing the term loan decreases. In any of these cases, our liquidity may be adversely affected and we may not have sufficient cash to prepay the government loan and meet our other obligations. Moreover, the government guaranteed loan contains a $100 million minimum cash balance requirement. As a result, we cannot use all of our available cash to fund operations, capital expenditures and cash obligations without violating this requirement.

~~The price and supply of jet fuel are unpredictable and fluctuate based on events outside our~~ ~~control,~~Although ~~including~~there ~~geopolitical~~can ~~developments,~~be ~~supply~~no ~~interruptions~~assurances, ~~regional~~management ~~production~~believes ~~patterns~~that ~~and~~cash ~~environmental~~flow ~~concerns.~~from ~~Since~~operating ~~jet~~activities, ~~fuel~~coupled iswith ~~the~~existing ~~principal raw material consumed by our business,~~cash ~~accounting~~balances ~~for 23% of our total operating expenses in the first quarter of 2005~~ and ~~18%~~financing ~~of our total operating expenses in 2004~~commitments, ~~price~~will ~~escalations~~be oradequate ~~reductions~~to infund the ~~supply of jet fuel will~~ ~~increase~~Company’s ~~our~~ operating ~~expenses~~ and ~~cause~~capital ~~our~~needs ~~operating~~as ~~results~~well ~~and~~as ~~net~~enable ~~income~~ it to ~~decline.~~maintain ~~For example,~~compliance ~~based~~with onits ~~our~~various ~~current~~debt ~~level~~agreements ofat ~~fuel~~least through ~~consumption which includes our Mesa alliance~~December 31, ~~we estimate that a one-cent per gallon increase in jet fuel prices will cause our annual operating expense to increase by $5~~2005.~~7 million.~~

WeFinancial ~~have~~Covenants ~~implemented a fuel-hedging program to manage the risk~~ and ~~effect~~Credit of fluctuating jet fuel prices on our business. Our hedging program is intended to offset increases in jet fuel costs by using fuel hedging instruments keyed to the future price of heating oil, which is highly correlated to the price of jet fuel delivered on the East Coast of the United States. Our hedging program does not fully protect us against increasing jet fuel costs because our hedging program does not cover all of our projected jet fuel volumes for 2005. Hedging transactions are in place with respect to approximately 47% and 4% of remaining projected 2005 and 2006 jet fuel requirements, respectively. Rating

33 In addition to the minimum cash balance requirements, our long-term debt agreements contain various negative covenants that restrict our actions, including our ability to pay dividends, or make other restricted payments. Finally, our long-term debt agreements contain cross-default provisions, which may be triggered by defaults by us under other agreements relating to indebtedness. See “Risk Factors Relating to the Company and Industry Related Risks — Our high level of fixed obligations limits our ability to fund general corporate requirements and obtain additional financing, limits our flexibility in responding to competitive developments

~~Table of Contents~~32

AMERICATable WESTof HOLDINGS CORPORATION AND AMERICA WEST AIRLINES, INC. March 31, 2005 Contents

~~Furthermore, our ability to effectively hedge jet fuel prices is limited because we~~ ~~purchase~~and aincreases ~~substantially larger portion of~~ our ~~jet~~vulnerability ~~fuel requirements on the West Coast of the United States compared~~ to ~~our~~adverse ~~large~~economic ~~competitors~~ and ~~West Coast fuel prices are less correlated to~~ ~~heating~~industry ~~oil prices and other viable fuel hedging instruments than East Coast fuel prices and, therefore, more difficult to hedge~~conditions.” ~~The~~As ~~effectiveness~~ of ~~our~~June 30, ~~fuel-hedging program also may be~~2005, ~~negatively~~Holdings ~~impacted~~and byAWA ~~continued~~were ~~instability~~ in ~~oil~~compliance ~~producing~~with ~~regions such as~~ the ~~Middle~~covenants ~~East,~~in their ~~Nigeria,~~long-term ~~Russia~~debt ~~and Venezuela~~agreements.

~~Because~~ Our ofcredit ~~our~~ratings, like most airlines, are relatively low, with Moody’s assessment of AWA’s senior implied rating and senior unsecured debt rating at B3 and Caa2, respectively, Standard & Poor’s assessment of AWA’s and Holdings’ corporate credit ratings, at B- and AWA’s senior unsecured rating at CCC and Fitch Ratings’ assessment of AWA’s long-term and unsecured debt rating at CCC. Both S&P and Fitch placed AWA on “Watch Negative” and Moody’s revised its outlook to “Negative” following the merger announcement. Low credit ratings could cause our borrowing costs ~~may~~to beincrease, which ~~high~~would increase our interest expense and could affect our net ~~ability~~income and our credit ratings could adversely affect our ability to ~~incur~~obtain additional ~~debt~~financing. The rating agencies base their ratings on our financial performance and operations, our cash flow and liquidity, the level of our indebtedness and industry conditions in general. If our financial performance or industry conditions do not improve, we may beface ~~impaired~~future downgrades, which could further negatively impact our borrowing costs and the prices of our equity or debt securities. In addition, any downgrade of our credit ratings may indicate a decline in our business and in our ability to satisfy our obligations under our indebtedness.

~~Our credit ratings are relatively low, with Moody’s assessment of AWA’s senior implied rating~~ ~~and~~Other ~~senior unsecured debt rating at B3 and Caa2, respectively, Standard & Poor’s assessment of~~Information AWA’s and Holdings’ corporate credit ratings at B- and AWA’s senior unsecured rating at CCC, and Fitch Ratings’ assessment of AWA’s long-term and senior unsecured debt rating at CCC. In addition, Standard & Poor’s recently placed AWA’s aircraft debt on CreditWatch with negative implications as part of a broader review of aircraft-backed debt. Low credit ratings could cause our future borrowing costs to increase, which would increase our interest expense and could affect our earnings and our credit ratings could adversely affect our ability to obtain additional financing. The rating agencies base their ratings on our financial performance and operations, our cash flow and liquidity, the level of our indebtedness and industry conditions in general. If our financial performance or industry conditions do not improve, we may face future downgrades, which could further negatively impact our borrowing costs and the prices of our equity or debt securities. In addition, any downgrade of our credit ratings may indicate a decline in our business and in our ability to satisfy our obligations under our indebtedness.

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

~~Some~~ A large majority of ~~our~~the employees of the major airlines in the United States are represented by labor unions. ~~and~~The ~~other~~majority ~~groups~~ of AWA ~~our~~ employees ~~may~~have ~~seek~~ selected union representation inand ~~the~~have negotiated ~~future.~~or ~~Negotiations~~are ~~with~~in the ~~IBT~~process ~~for~~of anegotiating ~~second~~ collective ~~bargaining~~ ~~agreement~~bargaining ~~covering~~agreements ~~the~~with ~~Airline’s~~AWA. ~~mechanics~~Although ~~and~~there ~~related~~are ~~employees~~few ~~commenced~~remaining employee ongroups ~~October 9,~~who ~~2003~~could ~~and are~~engage ~~ongoing.~~in ~~Negotiations~~organization ~~with~~efforts, ~~the~~we cannot ~~AFA~~predict onthe aoutcome ~~second~~of ~~contract~~any ~~covering~~future ~~the~~efforts ~~Company’s~~to ~~flight~~organize ~~attendants~~those ~~commenced~~remaining onemployees ~~February 4,~~or ~~2004~~the ~~and~~terms ~~are~~of ~~ongoing.~~any ~~Negotiations~~future ~~with~~labor agreements or the ~~IBT~~effect, ~~for~~if anany, ~~initial contract~~on ~~covering~~ the ~~Airline~~Company’s ~~passenger~~or AWA’s ~~service~~operations ~~employees~~or ~~commenced~~financial onperformance. ~~April 5~~For more discussion, ~~2005~~see ~~and~~“Risk ~~are ongoing.~~Factors ~~Negotiations~~Relating ~~with~~to the ~~TWU~~Company and ~~for~~Industry aRelated ~~second~~Risks — ~~contract~~Union ~~covering~~disputes, ~~AWA’s~~employee strikes ~~fleet~~and ~~service~~other ~~employees are~~labor-related ~~scheduled~~disruptions tomay ~~commence~~adversely onaffect our ~~June 15, 2005~~operations.”

WeRegulatory cannot predict the outcome of the negotiations with the IBT or AFA or any future negotiations relating to union representation or collective bargaining agreements. Agreements reached in collective bargaining may increase operating expenses and lower operating results and net income. This is particularly significant because our current employee costs contribute substantially to the low cost structure that we believe is one of our competitive strengths and because we are required to repay a portion of the government guaranteed loan if our labor costs exceed a certain threshold. In addition, negotiations with unions could divert management attention and disrupt operations, which may result in increased operating expenses and lower net income. If we are unable to negotiate acceptable collective bargaining agreements, we might have to address the threat of, or wait through, “cooling off” periods, which could be followed by union-initiated work actions, including strikes. Depending on the nature of the threat or the type and duration of any work action, these actions could disrupt our operations and, as a result, have a significant adverse affect on our operating results. Matters

~~Fluctuations~~ Certain inaspects ~~interest~~of ~~rates~~the ~~could~~proposed ~~adversely~~merger ~~affect~~of ~~our~~America ~~liquidity~~West Holdings and US Airways Group are subject to regulatory review by the DOT. Specifically, the change in ownership resulting from the merger requires that the restructured US Airways Group and its various operating ~~expenses~~subsidiaries, including America West Airlines, undergo a continuing fitness review of their managements, operations, finances and citizenship. In addition, the DOT must ~~results~~approve the consolidation under common ownership of the various international route authorities, now independently held by AWA, US Airways and PSA. While we anticipate that the DOT review will be concluded favorably, any complications in the review process that hinder or delay the closing of the transaction could have a severe impact on our operations and financial results.

A AWA ~~substantial~~currently ~~portion~~holds ofeight ~~our~~exemption ~~indebtedness~~slots ~~bears interest~~ at ~~fluctuating~~Ronald ~~interest rates based~~Reagan onNational ~~the~~Airport ~~London~~in ~~interbank~~Washington, ~~offered~~DC ~~rate~~(DCA) awarded ~~for~~to ~~deposits~~it ofby the UDOT.S. ~~dollars,~~These orexemption ~~LIBOR.~~slots ~~LIBOR~~were ~~tends~~awarded to ~~fluctuate~~ ~~based~~AWA onspecifically to ~~general~~operate ~~economic~~three ~~conditions,~~daily ~~general~~roundtrips ~~interest~~between ~~rates,~~DCA ~~including~~and ~~the~~Phoenix ~~prime rate,~~ and one ~~the~~daily ~~supply~~round oftrip between DCA and ~~demand~~Las ~~for~~Vegas. ~~credit~~The infederal ~~the~~law creating ~~London~~these ~~interbank~~exemption ~~market.~~slots Weprohibits ~~have~~the ~~not~~sale ~~hedged~~or ~~our~~transfer of ~~interest~~these ~~rate~~exemptions. ~~exposure~~AWA ~~and,~~believes ~~accordingly,~~that ~~our~~the ~~interest~~proposed ~~expense~~merger ~~for~~does ~~any~~not constitute ~~particular~~a ~~period~~prohibited ~~may fluctuate~~transfer ~~based~~of onthese ~~LIBOR~~exemptions. ToShould the DOT ~~extent~~conclude ~~LIBOR~~that ~~increases,~~the ~~our~~proposed ~~interest~~merger, ~~expense~~if ~~will increase~~consummated, inwould ~~which~~constitute ~~event~~a transfer, weit may ~~have~~withdraw ~~difficulties~~some ~~making~~or ~~interest~~all ~~payments~~of ~~and funding our other fixed costs~~these ~~and~~exemptions ~~our~~from ~~available~~AWA, ~~cash~~forcing ~~flow~~the ~~for~~Company ~~general~~to ~~corporate~~reduce ~~requirements~~or ~~may~~terminate this beservice ~~adversely~~to ~~affected~~our hubs.

34 Related Party Transactions

~~Table~~ Texas Pacific Group agreed to reimburse the Company approximately $2.5 million for expenses incurred by the Company on its behalf. As a result, the Company recorded this as a receivable as of ~~Contents~~December 31, 2004. Subsequent to December 31, 2004, the Company received $2.5 million in such reimbursement.

~~AMERICA WEST HOLDINGS CORPORATION AND~~33 ~~AMERICA WEST AIRLINES, INC.~~ ~~March 31, 2005~~

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

~~The~~Application airline industry is heavily regulated. Both federal and state governments from time to time propose new laws and regulations that impose additional requirements and restrictions on airline operations. Implementing these measures, such as aviation ticket taxes and passenger safety measures, has increased operating costs for us and the airline industry as a whole. In addition, new security measures imposed by the ATSA, or otherwise by Congress, the Department of ~~Homeland~~ ~~Security~~Critical orAccounting the FAA as a result of concern over continuing terrorist threats are expected to continue to increase costs for us and the airline industry as a whole. Furthermore, certain governmental agencies, such as the DOT and the FAA, have the authority to impose mandatory orders, such as Airworthiness Directives in connection with our aircraft and civil penalties for violations of applicable laws and regulations, each of which can result in material costs and adverse publicity. For example, the FAA from time to time may require us to retrofit our aircraft to meet enhanced safety standards. Depending on the implementation of these laws, regulations and other measures, our operating costs could increase significantly. We cannot predict which laws, regulations and other measures will be adopted or what other action regulators might take. Accordingly, we cannot guarantee that future legislative and regulatory acts will not have a material impact on our operating results. Policies

~~Interruptions~~ The orpreparation ~~disruptions~~of our consolidated financial statements in accordance ~~service~~with generally accepted accounting principles requires that we make certain estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at ~~one~~the date of our ~~hub~~financial ~~airports~~statements. We believe our estimates and assumptions are reasonable; however, actual results could differ from those estimates. We have aidentified the ~~material~~following ~~adverse~~critical accounting policies that require the use ~~impact~~of onsignificant ~~our~~judgments ~~operations.~~and estimates relating to matters that are inherently uncertain and may result in materially different results under different assumptions and conditions.

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

~~The airline industry and the markets we serve are highly competitive and we may be unable to~~34 ~~compete effectively against carriers with substantially greater resources or lower cost structures.~~

TheTable airline industry and most of the markets we serve are highly competitive. We compete with other airlines on the basis of pricing, scheduling (frequency and flight times), on-time performance, type of equipment, cabin configuration, amenities provided to passengers, frequent flyer programs, the automation of travel agent reservation systems, on-board products and other services. We compete with other low cost carriers primarily on the basis of pricing. Price competition occurs on a market-by-market basis through price discounts, changes in pricing structures, fare matching, target promotions and frequent flyer initiatives. Most airlines will quickly match price reductions in a particular market and certain airlines have in the past engaged in retaliatory activities, including steep pricing discounts in certain markets and termination of alliance agreements, in response to changes in our pricing structure. Our ability to compete on the basis of price is limited by our fixed costs and depends on our ability to maintain low operating costs. Our principal competitor, Southwest Airlines, and certain other low cost carriers have lower operating cost structures than we do. We also compete against the legacy carriers, many of which offer more extensive routes, frequencies and customer loyalty, marketing and advertising programs and have substantially greater resources than we do. We may be unable to compete effectively against carriers with substantially greater resources or lower cost structures. Contents

~~Recent~~renewal ~~airline~~of ~~restructurings~~aircraft ~~and~~leases. ~~bankruptcies~~A significant change to AWA’s fleet plan could ~~alter~~have a material impact on our reserve requirements. • Deferred Tax Asset Valuation Allowance — The Company initially recorded a full valuation allowance relating to its net deferred tax assets at December 31, 2001 and to tax benefits generated in 2002. In recording that valuation allowance, we considered whether it was more likely than not that all or a portion of the ~~competitive~~deferred ~~environment~~tax assets will not be realized, in accordance with SFAS No. 109, “Accounting for Income Taxes.” The Company was in a cumulative loss position three out of four years between December 31, 2001 through December 31, 2004, which weighed heavily in the ~~airline~~ ~~industry~~overall determination that a valuation allowance was needed. As of June 30, 2005, the Company had recorded a valuation allowance of $109.3 million against its net deferred tax assets. The Company expects to ~~our~~continue ~~detriment~~to record a full valuation allowance on any future tax benefits until we have achieved several quarters of consecutive profitable results coupled with an expectation of continued profitability.

~~The~~Recently ~~terrorist~~Issued ~~attacks~~Accounting of September 11, 2001, the continued military presence in Iraq and Afghanistan, increased competition from low cost carriers and soft economic conditions have led to the airline industry’s significant losses since 2001. Largely as a result of these losses, ATA Airlines, U.S. Airways, Aloha Airlines, Hawaiian Airlines and United Airlines filed for bankruptcy protection. Because bankruptcy protection may allow for greater flexibility in reducing costs by voiding contracts and renegotiating existing business obligations, current and future airline bankruptcies could have a substantial impact on industry competition. Continued weakness in the airline industry also may result in additional industry consolidation, greater reliance on industry alliances and increased price competition among the existing airlines, each of which could dramatically alter competitive environments in the markets we serve. Pronouncements

35 In November 2004, the FASB issued Revised Statement No. 123, “Accounting for Share-Based Payment” (“SFAS No. 123R”). This statement requires the Company to recognize the grant-date fair value of stock options in its Statement of Operations. In addition, the Company will be required to calculate this compensation using the fair-value based method, versus the intrinsic value method previously allowed under SFAS No. 123. As issued, this revision was effective for interim periods beginning after June 15, 2005. On April 14, 2005, the Securities and Exchange Commission amended the compliance date for SFAS No. 123R to the beginning of the next fiscal year that begins after June 15, 2005. Accordingly, the Company will adopt this revised SFAS effective January 1, 2006. The Company is currently evaluating how it will adopt SFAS No. 123R and has not determined the method it will use to value granted stock options. The adoption of SFAS No. 123R is expected to have a material effect on the Company’s results of operations.

~~Table~~Change ofin ~~Contents~~Accounting Policy

~~AMERICA~~ America ~~WEST~~West ~~HOLDINGS~~records ~~CORPORATION~~the ~~AND AMERICA~~cost ~~WEST~~of ~~AIRLINES~~major scheduled airframe, engine ~~INC~~and certain component overhauls as capitalized assets that are subsequently amortized over the periods benefited (deferral method). US Airways Group charges maintenance and ~~March~~repair costs for owned and leased flight equipment to operating expense as incurred. Upon the earlier of the completion of the merger (See Note 8, “Proposed Merger of America West Holdings and US Airways Group” in Notes to Condensed Consolidated Financial Statements) or December 31, 2005, America West Holdings will change its accounting policy from the deferral method to the expense as incurred method. While the deferral method is permitted under accounting principles generally accepted in the United States of America, America West Holdings believes that the expense as incurred method is preferable and the predominant method used in the airline industry. The effect of this change in accounting for aircraft maintenance and repairs will be treated as a cumulative effect of a change in accounting principle.

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

~~The air travel business historically fluctuates on a seasonal basis and in response to general~~ ~~economic~~Certain ~~conditions.~~of ~~Due to~~ the ~~greater~~statements ~~demand~~contained ~~for~~in ~~air~~this ~~and~~quarterly ~~leisure~~report ~~travel~~on Form 10-Q ~~during~~should ~~the~~be ~~summer~~considered “forward-looking ~~months,~~statements” ~~revenues~~within in the ~~airline~~meaning ~~industry~~of in the ~~second~~Private ~~and~~Securities Litigation ~~third~~Reform ~~quarters~~Act of ~~the~~1995. ~~year~~These ~~tend~~forward-looking tostatements may be ~~greater~~ ~~than~~identified ~~revenues~~by inwords ~~the~~such ~~first~~as ~~and~~“may,” “will,” ~~fourth~~“expect,” ~~quarters~~“intend,” “anticipate,” of“believe,” “estimate,” ~~the~~“plan,” ~~year.~~“project,” “could,” ~~In addition~~“should,” ~~the~~and ~~airline~~“continue” ~~industry~~and issimilar ~~highly~~terms ~~susceptible~~used ~~to unforeseen events that result~~ in ~~declines~~connection inwith ~~revenues~~statements orregarding ~~increased~~our ~~costs~~outlook, ~~such~~expected asfuel ~~political instability~~costs, ~~regional~~the ~~hostilities,~~revenue ~~terrorist attacks~~environment, ~~recession,~~and ~~fuel~~our ~~price~~expected ~~escalation,~~2005 ~~inflation,~~financial ~~infectious~~performance. ~~disease~~These ~~outbreaks,~~statements ~~adverse weather conditions,~~are ~~consumer~~based ~~preferences,~~upon ~~labor~~the ~~instability~~current orbeliefs ~~regulatory~~and ~~oversight.~~expectations ~~Also, our results~~ of ~~operations~~management ~~for~~and ~~interim~~are ~~periods~~subject ~~are~~to ~~not~~significant ~~necessarily~~risks ~~indicative~~and ofuncertainties ~~those~~that could ~~for~~cause anour ~~entire~~actual ~~year~~results and ~~our~~financial ~~prior results~~position ~~are~~to ~~not~~differ materially ~~necessarily~~from ~~indicative~~these ofstatements. ~~our~~These ~~future~~risks ~~results.~~and uncertainties include,

~~We depend on the expertise of our management team. If key individuals leave unexpectedly, our~~35 ~~business and operations could suffer.~~

ManyTable of our executive officers are key to the management of our business and operations. Our future success depends on our ability to retain these officers and other capable managers. Although we believe we could replace key personnel given adequate prior notice, the unexpected departure of key executive officers could cause substantial disruption to our business and operations. In addition, we may not be able to retain and recruit talented personnel without incurring substantial costs. Moreover, we must repay a portion of the government guaranteed loan if our labor costs exceed a certain threshold. As a result, our ability to spend additional amounts to retain and recruit talented personnel is limited. Contents

~~The~~ but ~~stockholders~~are ~~who~~not ~~effectively~~limited ~~control~~to, ~~the~~those ~~voting~~described ~~power~~below ofunder ~~Holdings~~the ~~could~~heading “Risk ~~take~~Factors ~~actions~~Relating ~~that would~~to ~~favor~~America ~~their~~West ~~own~~and ~~personal~~Industry Related ~~interests~~Risks” toand the ~~detriment of our interests.~~following:

~~Currently,~~• ~~two~~the ~~stockholders~~ability ~~collectively~~of ~~control~~Holdings ~~more~~to ~~than~~consummate ~~50%~~the ofproposed ~~the~~merger ~~total~~with ~~voting~~a ~~power~~subsidiary of ~~Holdings.~~ ~~These~~US ~~stockholders,~~Airways ~~TPG Partners~~Group, LInc.P. ~~and~~• ~~TPG~~the ~~Parallel~~impact Iof global instability caused by military actions, ~~L.P~~terrorism, ordisease ~~collectively,~~outbreaks ~~the~~and ~~TPG Stockholders,~~natural ~~are~~disasters; ~~controlled~~• bylimitations ~~the~~on ~~same~~our ~~company,~~flexibility ~~TPG~~in ~~Advisors,~~responding ~~Inc.~~to ~~Since~~industry ~~TPG~~conditions ~~Advisors,~~due ~~Inc.~~to ~~is an~~high ~~investment~~fixed ~~firm,~~costs ~~its~~and ~~strategic~~restrictions ~~objectives~~imposed ~~may~~by beour ~~different~~debt ~~than~~instruments; ~~both~~• changes in federal and state laws and regulations; • changes in prevailing interest rates; • the ~~short-term~~ability orto ~~long-term objectives~~attract ofand ~~our~~retain ~~board~~qualified personnel; • the ability of ~~directors~~AWA ~~and~~to ~~management.~~attract Weand ~~cannot~~retain ~~guarantee~~customers; ~~that~~• the ~~TPG~~cyclical ~~Stockholders will~~nature ~~not~~of ~~try~~the toairline ~~influence~~industry; ~~Holdings’~~• ~~business~~competitive practices in athe ~~way~~airline ~~that~~industry, ~~would~~including ~~favor~~significant ~~their~~fare ~~own~~restructuring ~~personal~~by ~~interests to~~major airlines; • the ~~detriment~~impact of ~~our~~historically ~~interests~~high fuel prices; • economic conditions; • reliance on automated systems and ~~those~~the impact of ~~our~~any ~~other~~failure ~~stockholders~~of these systems; • labor costs; • security-related and insurance costs; • weather conditions; • government legislation and regulation; and • relations with unionized employees generally and the impact and outcome of labor negotiations.

We There ~~are~~may atbe ~~risk~~other factors not identified above of ~~losses~~which the companies are not currently aware that may affect matters discussed in the forward-looking statements, and ~~adverse~~may ~~publicity~~also ~~stemming~~cause actual results to differ materially from ~~any~~those ~~accident~~discussed. ~~involving~~The companies assume no obligation to publicly update any forward-looking ofstatement ~~our~~to reflect actual results, changes in ~~aircraft~~assumptions or changes in other factors affecting these estimates other than as required by law.

~~If one of our aircraft were to crash or be involved in an accident, we could be exposed to~~36 ~~significant tort liability. There can be no assurance that the insurance we carry to cover damages~~ ~~arising from any future accidents will be adequate. In the event that our insurance is not~~ adequate, we may be forced to bear substantial losses from an accident. Claims resulting from an accident in excess of our insurance coverage would harm our business and results of operations. Accidents could also result in unforeseen mechanical and maintenance costs. In addition, any accident involving an aircraft that we operate could create a public perception that our aircraft are not safe or reliable, which could harm our reputation, result in air travelers being reluctant to fly on our aircraft and harm our business.

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

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

36 We caution the reader that these risk factors may not be exhaustive. We operate in a continually changing business environment and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or the extent to which any factor or combination of factors may impact our business.

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

~~AMERICA~~ Our ~~WEST~~operating ~~HOLDINGS~~results ~~CORPORATION~~are ~~AND~~significantly impacted by changes in ~~AMERICA~~the ~~WEST~~availability ~~AIRLINES~~or price of aircraft fuel. Fuel prices increased substantially in 2004 compared with 2003 and have continued to increase in 2005. Since jet fuel is the principal raw material consumed by our business, ~~INC~~accounting for 23.3% of ~~March~~our total operating expenses in the first six months of 2005 and 19% of our total operating expenses in 2004, price escalations or reductions in the supply of jet fuel will increase our operating expenses and cause our operating results and net income to decline. For example, based on our current level of fuel consumption which includes our Mesa alliance, we estimate that a one-cent per gallon increase in jet fuel prices will cause our annual operating expense to increase by $5.5 31million. Due to the competitive nature of the airline industry, ~~2005~~we generally have not been able to increase our fares when fuel prices have risen in the past and we may not be able to do so in the future. Although we are currently able to obtain adequate supplies of aircraft fuel, it is impossible to predict the future availability or price of aircraft fuel.

We ~~rely~~have ~~heavily~~implemented ona ~~automated~~fuel-hedging ~~systems~~program to ~~operate~~manage the risk and effect of fluctuating jet fuel prices on our business. Our hedging program is intended to offset increases in jet fuel costs by using fuel hedging instruments keyed to the future price of heating oil, which is highly correlated to the price of jet fuel delivered on the East Coast of the United States. Our hedging program does not fully protect us against increasing jet fuel costs because our hedging program does not cover all of our projected jet fuel volumes for 2005. Hedging transactions are in place with respect to approximately 53% and ~~any~~12% ~~failure~~of remaining projected 2005 and 2006 jet fuel requirements, respectively. Furthermore, our ability to effectively hedge jet fuel prices is limited because we purchase a substantially larger portion of our ~~these~~jet ~~systems~~fuel requirements on the West Coast of the United States ~~could~~compared ~~harm~~to our ~~business~~large competitors and West Coast fuel prices are less correlated to heating oil prices and other viable fuel hedging instruments than East Coast fuel prices and, therefore, more difficult to hedge. The effectiveness of our fuel hedging program also may be negatively impacted by continued instability in oil producing regions such as the Middle East, Nigeria, Russia and Venezuela.

WeFailure ~~depend on automated systems~~ to ~~operate~~complete ~~our~~the ~~business,~~proposed ~~including~~merger ~~our~~with computerized airline reservation system, our telecommunication systems and our website. In 2004, approximately 96% of our tickets were issued electronically. Our website and reservation system must be able to accommodate a ~~high~~subsidiary ~~volume~~ of ~~traffic~~US ~~and~~Airways ~~deliver~~Group ~~important flight information. Substantial or repeated website, reservations system or telecommunication systems failures~~ could ~~reduce~~negatively impact the ~~attractiveness~~ ofstock ~~our~~price ~~services~~ and ~~could cause~~ our ~~customers~~future tobusiness ~~purchase tickets from another airline. Any disruption in these systems could result in the loss of important data, increase our expenses~~ and ~~generally~~financial ~~harm our business~~results.

~~Shares~~ Completion of ~~our~~the ~~Class B~~proposed ~~common~~merger ~~stock~~is ~~issuable~~subject ~~upon~~to ~~exercise~~the satisfaction or ~~conversion~~waiver of ~~outstanding securities~~various ~~could~~conditions, ~~adversely~~including ~~affect~~the receipt of approvals from our ~~stock~~stockholders, ~~price~~receipt of various regulatory approvals and ~~dilute~~authorizations, including approval of US Airways Group’s plan of reorganization, and the absence ~~ownership~~of ~~interests~~any order, injunction or decree preventing the completion of ~~existing~~the proposed merger. There is no assurance that ~~stockholders~~all of the various conditions will be satisfied or waived. If the proposed merger is not completed for any reason, we may be subject to several risks, including the following:

~~Sales~~• ~~and~~having ~~potential~~incurred ~~sales~~certain ofcosts ~~substantial~~relating ~~amounts~~to ofthe ~~our~~proposed ~~Class B~~merger ~~common~~that ~~stock~~are orpayable ~~securities exercisable~~whether ~~for~~ or ~~into~~not ~~our~~the ~~Class B~~merger ~~common~~is ~~stock~~completed, inincluding ~~the~~legal, ~~public market~~accounting, orfinancial ~~the~~advisor ~~perception~~and ~~that~~printing ~~these sales~~fees; ~~could~~and ~~occur,~~• ~~could~~having ~~adversely~~had ~~affect~~ the ~~market~~focus ~~price~~ of ~~our~~management ~~Class B~~directed ~~common~~toward ~~stock. A substantial number of additional shares of our Class B common stock are issuable upon~~ the ~~conversion~~ orproposed ~~exercise~~merger ofand ~~outstanding~~integration ~~securities.~~planning Asinstead of ~~April 25,~~our ~~2005,~~business ~~the~~and ~~outstanding~~other ~~shares~~opportunities ~~of our~~that ~~Class B~~could ~~common~~have ~~stock~~been ~~were~~beneficial ~~subject~~ to ~~dilution by:~~ us.

	•	19,692,000 shares of Class B common stock that are issuable upon the exercise, at a price of $3.00 per share, of certain warrants issued in connection with the government guaranteed loan, including 18,754,000 shares of Class B common stock issuable upon exercise of a warrant issued to the Air Transportation Stabilization Board, or ATSB; and
	•	10,924,364 shares of our Class B common stock that are issuable upon the exercise of outstanding options.

In addition, we would not realize any of the expected benefits of having completed the proposed merger. If the proposed merger is not completed, we cannot assure you that these risks will not materialize or materially adversely affect its business, financial results, financial condition and stock price.

~~In addition, 859,117 shares of Class B common stock are issuable upon conversion of the~~37 ~~outstanding shares of Holdings’ Class A common stock held by the TPG Stockholders (but subject to~~ ~~certain contractual restrictions on transfer), up to 8,095,842 shares of Holdings’ Class B common~~ stock are issuable upon the exchange of AWA’s 7.25% senior exchangeable notes due 2023 (which exchange may not occur until the trading price of Holdings’ Class B common stock reaches certain thresholds, or other triggering events occur) and up to approximately 9,400,000 shares of Holdings’ Class B common stock are issuable upon conversion of Holdings’ 7.5% convertible senior notes due 2009. Holdings has registered either the issuance or resale of all of these shares, meaning that upon exercise, exchange or conversion, as applicable, such shares could be sold in the public market at any time.

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

~~Provisions~~The incombined company created by our ~~charter~~merger ~~documents~~into ~~might~~a ~~deter~~subsidiary ~~acquisition~~of ~~bids~~US ~~for~~Airways usGroup may not perform as well financially as we expect following the merger.

In deciding to enter into the merger agreement, Holdings’ ~~Certificate~~and US Airways Group considered the benefits of ~~Incorporation~~operating as a combined company, including, among others: an enhanced ability to compete in the airline industry and ~~Bylaws~~the ~~contain~~fact ~~provisions~~that the proprietary brands of the combined company would permit the combined entity to further differentiate itself from other airline companies. The success of the merger will depend, in part, on our ability to realize the anticipated revenue opportunities and cost savings from combining the businesses of Holdings and US Airways Group. We cannot assure you, however, that any expected operating cost and revenue synergies will be realized. To realize the anticipated benefits from the merger, ~~among~~we must successfully combine the businesses of Holdings and US Airways Group in a manner that permits those costs savings and other ~~things:~~synergies to be realized in a timely fashion. In addition, we must achieve these savings without adversely affecting revenues or suffering a business interruption. If we are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. We cannot assure you that the merger, even if achieved in an efficient, effective and timely manner, will result in combined results of operations and financial condition consistent with our expectations or superior to what Holdings and US Airways Group could have achieved independently.

•The ~~authorize~~integration ~~Holdings’ board~~ of directors to issue preferred stock ranking senior to our Class B common stock without any action on the part of the stockholders; • establish advance notice procedures for stockholder proposals, including nominations of directors, to be considered at stockholders’ meetings; • authorize Holdings’ ~~board~~and ofUS ~~directors~~Airways toGroup ~~fill~~following ~~vacancies on~~ the ~~board~~merger ~~resulting~~will ~~from~~present ansignificant ~~increase in the authorized number of directors or any other cause; and • restrict the ability of stockholders to call special meetings of stockholders~~challenges.

37 Holdings and US Airways Group have operated and, until the completion of the merger, will continue to operate, independently. Holdings and US Airways Group will face significant challenges in consolidating functions, integrating their organizations, procedures and operations in a timely and efficient manner and retaining key Holdings and US Airways Group personnel. The integration of Holdings and US Airways Group will be costly, complex and time consuming, and the managements of Holdings and US Airways Group will have to devote substantial effort to such integration that could otherwise be spent on operational matters or other strategic opportunities.

~~Table~~We ofhave ~~Contents~~sustained, and may continue to sustain significant operating losses.

~~AMERICA~~ For ~~WEST~~the ~~HOLDINGS~~year ~~CORPORATION~~ended ~~AND~~December 31, 2004, we incurred an ~~AMERICA~~operating ~~WEST~~loss ~~AIRLINES,~~of ~~INC~~$43.8 million. In addition, we incurred ~~March~~operating losses for the years ended December 31, ~~2005~~2001 and 2002 resulting primarily from the decrease in revenue and passenger demand and the increase in operating costs after the terrorist attacks of September 11, 2001. Our operating losses resulted primarily from a substantial increase in the cost of jet fuel and excess domestic industry capacity resulting in lower revenue per available seat mile. In addition, we expect the threat of further terrorist attacks and continued instability in oil producing regions to continue to negatively impact our revenues and costs in the near-term. We may not be able to effectively counteract increasing costs through our cost reduction initiatives, customer service initiatives and revised pricing structures. Moreover, our liquidity and borrowing options are limited and we may not be able to survive a prolonged economic downturn, decreases in demand for air travel or further increases in jet fuel costs. The inability to sustain profitability may impair our ability to satisfy our obligations as they become due, obtain future equity or debt financing, respond to competitive developments and otherwise sustain or expand our business.

~~These~~Union ~~provisions~~disputes, ~~might~~employee ~~make~~strikes itand ~~more~~other ~~difficult~~labor-related ~~for~~disruptions amay ~~third~~adversely ~~party~~affect toour ~~acquire us, even if doing so would benefit the stockholders~~operations.

~~Our~~ Approximately ~~stock~~81% ~~price~~of ~~may~~our ~~continue~~employees toare berepresented ~~volatile~~for collective bargaining purposes by labor unions. These employees are organized into seven labor groups represented by four different unions at AWA. Relations between air carriers and labor ~~could~~unions ~~decline~~in ~~substantially~~the United States are governed by the Railway Labor Act, or the RLA. Under the RLA, collective bargaining agreements generally contain “amendable dates” rather than expiration dates, and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the National Mediation Board. This process continues until either the parties have

~~The stock market has, from time to time, experienced extreme price and volume fluctuations.~~38 ~~Many factors may cause the market price for the Class B common stock to decline including, among~~ ~~others, the following:~~

•Table our operating results failing to meet the expectations of securities analysts or investors in any quarter; • downward revisions in securities analysts’ estimates; • material announcements by us or our competitors; • public sales of a substantial number of shares of our Class B common stock; • governmental regulatory action; and • adverse changes in general market conditions or economic trends.Contents

~~ITEM~~ reached 3agreement on a new collective bargaining agreement, or the parties have been released to “self-help” by the National Mediation Board. ~~QUANTITATIVE~~Although ~~AND~~in ~~QUALITATIVE~~most ~~DISCLOSURES~~circumstances ~~ABOUT~~the ~~MARKET~~RLA prohibits ~~RISK~~strikes, after release by the National Mediation Board carriers and unions are free to engage in self-help measures such as strikes and lock-outs. Of our labor agreements, three are currently amendable, a fourth becomes amendable soon and negotiations are proceeding with a fifth group for an initial collective bargaining agreement. See “Other Information — Labor Relations.”

~~Market~~ We ~~Risk~~cannot ~~Sensitive~~predict ~~Instruments~~the outcome of current negotiations or any future negotiations relating to union representation or collective bargaining agreements. Agreements reached in collective bargaining may increase operating expenses and lower operating results and net income. This is particularly significant because our current employee costs contribute substantially to the low cost structure that we believe is one of our competitive strengths and because we are required to repay a portion of the government guaranteed loan if our labor costs exceed a certain threshold. In addition, negotiations with unions could divert management attention and disrupt operations, which may result in increased operating expenses and lower net income.

~~(a) Commodity~~Fluctuations ~~Price~~in ~~Risk~~ interest rates could adversely affect our liquidity, operating expenses and results.

As A substantial portion of ~~March 31,~~our ~~2005,~~indebtedness ~~the~~bears ~~Company~~interest ~~had~~at fluctuating ~~entered~~interest ~~into~~rates. ~~costless~~These ~~collar~~are ~~transactions,~~primarily ~~which establish~~based anon ~~upper~~the London ~~and~~interbank ~~lower~~offered ~~limit~~rate onfor ~~heating~~deposits ~~oil~~of ~~futures~~U.S. dollars, or ~~prices~~LIBOR. ~~These~~LIBOR ~~transactions~~tends ~~are~~to influctuate ~~place~~based on general economic ~~with~~conditions, ~~respect~~general tointerest ~~approximately~~rates, ~~47%~~federal reserve rates and the 4%supply of ~~remaining~~and ~~projected~~demand ~~2005~~for ~~and~~credit ~~2006~~in ~~fuel~~the ~~requirements,~~London interbank ~~respectively,~~market. ~~including~~We ~~58%~~have ~~related~~not tohedged ~~the~~our ~~second~~interest ~~quarter~~rate ofexposure ~~2005~~and, accordingly, ~~46%~~our ~~related~~interest toexpense ~~the~~for ~~third~~any ~~quarter~~particular period may offluctuate ~~2005~~based on LIBOR and ~~38%~~other ~~related~~variable tointerest rates. To the ~~fourth~~extent ~~quarter~~these ofinterest ~~2005.~~rates ~~See~~increase, ~~“Risk~~our ~~Factors~~interest ~~Relating~~expense will toincrease, ~~America~~in ~~West~~which event, we may have difficulties making interest payments and ~~Industry~~funding ~~Related~~our ~~Risks~~other —fixed ~~Fluctuations~~costs inand ~~fuel~~our available ~~costs~~cash ~~could~~flow ~~adversely~~for ~~affect~~general ~~our~~corporate ~~operating expenses~~requirements ~~and~~may ~~results~~be adversely affected.”

~~The~~We ~~use~~rely ofheavily ~~such~~on ~~hedging~~automated ~~transactions~~systems into ~~the~~operate ~~Company’s~~our ~~fuel~~business ~~hedging program could result in the Company not fully benefiting from certain declines in heating oil futures prices or certain declines in the differential between jet fuel~~ and ~~heating~~any ~~oil~~failure ~~futures prices. At March 31, 2004, the Company estimates that a 10% increase in heating oil futures prices would increase the fair value~~ of ~~the~~these ~~costless~~systems ~~collar~~could ~~transactions~~harm byour ~~approximately $29~~business.~~7 million. The Company estimates that a 10% decrease in heating oil futures prices would decrease the fair value of the costless collar transactions by approximately $26.3 million.~~

As We ofdepend ~~April 25~~on automated systems to operate our business, including ~~2005~~our computerized airline reservation systems, ~~approximately~~our flight ~~47%~~operations systems, our telecommunication systems and 5our websites. In 2004, approximately 96% of ~~AWA’s~~our ~~remaining~~tickets ~~2005~~were issued electronically. Our website and ~~2006~~reservation ~~projected~~systems ~~fuel~~must be able ~~requirements,~~to ~~respectively,~~accommodate ~~are~~a ~~hedged~~high volume of traffic and deliver important flight information. Substantial or repeated website, reservations systems or telecommunication systems failures could reduce the attractiveness of our services and could cause our customers to purchase tickets from another airline.

~~(b) Interest~~If ~~Rate~~we ~~Risk~~ incur problems with any of our third party service providers, our operations could be adversely affected by a resulting decline in revenue or negative public perception about our services.

~~The~~ Our ~~Company’s~~reliance ~~exposure~~upon others to ~~interest~~provide ~~rate~~essential ~~risk~~services ~~relates~~on ~~primarily~~behalf of toour ~~its~~operations ~~variable~~may ~~rate~~result ~~long-term debt~~in ~~obligations.~~the Atrelative ~~March 31,~~inability ~~2005,~~to control the ~~Company’s~~efficiency ~~variable-rate~~and ~~long-term~~timeliness ~~debt~~of ~~obligations~~contract ofservices. We ~~approximately~~have ~~$500.9 million~~entered ~~represented~~into ~~approximately~~agreements ~~71%~~with ofcontractors ~~its~~to ~~total~~provide ~~long-term~~various facilities ~~debt~~and services required for our operations, including aircraft maintenance, ground facilities and baggage handling. IfIt ~~interest~~is ~~rates~~likely ~~increased~~that ~~10%~~similar agreements will be entered into in ~~2005,~~any new ~~the~~markets ~~impact~~we ondecide ~~the~~to ~~Company’s~~serve. ~~results~~All of ~~operations~~these ~~would~~agreements ~~not~~are besubject ~~material~~to termination after notice. Any material problems with the efficiency and timeliness of contract services could have a material adverse effect on our business, financial condition and results of operations.

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

~~Table~~ The attacks of ~~Contents~~September 11, 2001 materially impacted and continue to impact air travel. In November 2001, the President signed into law the Aviation and Transportation Security Act, or the Aviation Security Act. This law federalized substantially all aspects of civil aviation security, creating a new Transportation Security Administration, or TSA. Under the Aviation Security Act, substantially all security screeners at airports are now federal employees and significant other elements of airline and airport security are now

~~AMERICA WEST HOLDINGS CORPORATION AND~~39 ~~AMERICA WEST AIRLINES, INC.~~ ~~March 31, 2005~~

ITEMTable 4.of CONTROLS AND PROCEDURES.Contents

~~(a) Evaluation~~ overseen and performed by federal employees, including federal security managers, federal law enforcement officers, federal air marshals and federal security screeners. Among other matters, the law mandates improved flight deck security, deployment of federal ~~disclosure~~air ~~controls~~marshals onboard flights, improved airport perimeter access security, airline crew security training, enhanced security screening of passengers, baggage, cargo, mail, employees and ~~procedures~~vendors, enhanced training and qualifications of security screening personnel, additional provision of passenger data to U.S. Customs and enhanced background checks. These increased security procedures introduced at airports since the attacks have increased costs to airlines. We would also be materially impacted in the event of further terrorist attacks or perceived terrorist threats.

AnIncreases ~~evaluation~~in ~~was~~insurance ~~performed~~costs ~~under~~or ~~the~~reductions supervision and with the participation of Holdings’ and AWA’s management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in ~~the~~insurance ~~rules~~coverage ~~promulgated~~may ~~under~~adversely ~~the~~impact ~~Exchange Act) as of March 31, 2005. Based on that evaluation,~~ our ~~management,~~operations ~~including the CEO~~ and ~~CFO,~~financial ~~concluded that our disclosure controls and procedures were effective as of March 31, 2005~~results.

The terrorist attacks of September 11, 2001 led to a significant increase in insurance premiums and a decrease in the insurance coverage available to commercial airline carriers. Accordingly, our insurance costs increased significantly and our ability to continue to obtain insurance even at current prices remains uncertain. In addition, we have obtained third party war risk (bterrorism) ~~Changes~~insurance through a special program administered by the FAA resulting in ~~internal~~lower ~~control~~premiums ~~over~~than ~~financial~~if ~~reporting~~we had obtained this insurance in the commercial insurance market. If the federal insurance program terminates, we would likely face a material increase in the cost of war risk insurance. Because of competitive pressures in our industry, our ability to pass additional insurance costs to passengers is limited. As a result, further increases in insurance costs or reductions in available insurance coverage could harm our earnings.

InChanges ~~connection with the preparation of our Annual Report on Form 10-K for the fiscal year ended December 31, 2004, our management,~~ in ~~consultation~~government ~~with~~regulation ~~the~~could ~~Audit~~increase ~~Committee of Holdings’ Board of Directors, identified a material weakness in~~ our ~~disclosure~~operating ~~controls~~costs and ~~procedures~~limit ~~associated~~our ~~with the~~ability ~~accounting for AWA’s fuel hedging program that resulted in a need~~ to ~~restate~~conduct our ~~financial statements for prior periods, as described below~~business.

In Airlines ~~February 2005,~~are ~~management~~subject ~~undertook~~to aextensive ~~review~~regulatory ofrequirements. ~~AWA’s~~In the ~~accounting~~last ~~for~~several ~~its~~years, ~~fuel~~Congress ~~hedging transactions.~~has Aspassed alaws ~~result~~and ofthe U.S. Federal ~~this~~Aviation ~~review,~~Administration ~~management~~has ~~concluded~~issued ~~that~~a ~~AWA’s~~number ~~fuel hedging~~of ~~transactions~~maintenance ~~did~~directives ~~not~~and ~~qualify~~other ~~for~~regulations. ~~hedge~~These ~~accounting~~requirements impose ~~under~~substantial ~~U.S.~~costs ~~generally~~on ~~accepted~~airlines. ~~accounting~~Additional laws, ~~principles~~regulations, taxes and ~~that~~airport ~~the~~rates ~~Company’s~~and ~~financial~~charges ~~statements~~have ~~for~~been proposed ~~prior~~from ~~periods~~time ~~required restatement~~ to ~~reflect~~ ~~the~~time ~~fair~~that ~~value~~could ofsignificantly ~~fuel~~increase ~~hedging~~the cost ~~contracts~~of inairline ~~the~~operations ~~balance~~or ~~sheets~~reduce ~~and~~revenues. ~~statements~~The ability of ~~stockholders~~U.S. carriers ~~equity~~to ~~and~~operate ~~comprehensive~~international ~~income~~routes ofis ~~Holdings~~subject ~~and~~to change ~~AWA.~~because ~~The~~the ~~Company~~applicable ~~concluded~~arrangements ~~that~~between ~~these accounting errors were~~ the ~~result~~U.S. ofand foreign ~~deficiencies~~governments inmay ~~its~~be ~~internal~~amended ~~control~~from ~~over~~time ~~financial~~to ~~reporting~~time, or because ~~from~~appropriate ~~the~~slots ~~lack~~or offacilities ~~effective~~may ~~reviews~~not ofbe ~~hedge~~available. ~~transaction~~We ~~documentation~~cannot assure ~~and~~you ofthat ~~quarterly mark-to-market~~laws ~~accounting~~or ~~entries~~regulations onenacted ~~open~~in ~~fuel~~the ~~hedging~~future ~~contracts~~will not byadversely ~~personnel~~affect atour anoperating ~~appropriate level~~costs.

ToThe ~~correct~~airline ~~this~~industry material weakness, we have implemented a review process that verifies the quarterly mark-to-market adjustment on open fuel hedging positions. In addition, the Company will utilize the mark-to-market method of accounting for its fuel hedging instruments going forward until such time it is ~~able~~intensely ~~to implement processes and controls necessary to ensure that appropriate hedge documentation is obtained at hedge inception~~competitive. ~~At that time, the Company will evaluate whether it will re-apply hedge accounting.~~

~~Other~~ Our ~~than~~competitors ~~the~~include ~~actions~~other ~~mentioned~~major ~~above~~domestic airlines as well as foreign, ~~there~~regional ~~has~~and ~~been~~new noentrant ~~change~~airlines, tosome ~~the~~of ~~Company’s~~which ~~internal~~have ~~control~~more ~~over~~ financial ~~reporting~~resources ~~that~~or ~~occurred~~lower ~~during~~cost ~~the~~structures ~~quarter~~than ~~ended~~ours, ~~March 31~~and other forms of transportation, ~~2005~~including ~~that~~rail ~~has~~and private ~~materially~~automobiles. ~~affected,~~In ormost isof ~~reasonably~~our ~~likely~~markets towe ~~materially~~compete ~~affect~~with at least one low-cost air carrier. Our revenues are sensitive to numerous factors, and the ~~Company’s~~actions ~~internal~~of ~~control~~other carriers in the areas of ~~over~~pricing, ~~financial~~scheduling ~~reporting~~and promotions can have a substantial adverse impact on overall industry revenues. These factors may become even more significant in periods when the industry experiences large losses, as airlines under financial stress, or in bankruptcy, may institute pricing structures intended to achieve near-term survival rather than long-term viability.

~~(c) Limitation~~Recent onairline restructurings and bankruptcies could alter the ~~effectiveness~~competitive environment of ~~controls~~the airline industry to our detriment.

We The ~~believe~~terrorist ~~that~~attacks aof ~~controls~~September 11, ~~system~~2001, nothe ~~matter~~continued military ~~how~~presence ~~well~~in ~~designed~~Iraq and ~~operated~~Afghanistan, ~~cannot~~increased ~~provide~~competition ~~absolute~~from ~~assurance~~low ~~that~~cost ~~the~~carriers ~~objectives~~and ofsoft ~~the~~economic ~~controls~~conditions ~~system~~have ~~are~~led ~~met and no evaluation of controls~~to ~~can~~the ~~provide~~airline ~~absolute~~industry’s ~~assurance~~significant ~~that~~losses ~~all~~since ~~control~~2001. Largely ~~issues~~as ~~and~~a ~~instances~~result of ~~fraud,~~these ~~if any~~losses, ~~within~~ATA aAirlines, ~~company~~U.S. Airways, ~~have~~Aloha ~~been~~Airlines, ~~detected.~~Hawaiian ~~Our~~Airlines ~~disclosure~~and ~~controls~~United Airlines ~~and~~filed ~~procedures~~for ~~are~~bankruptcy ~~designed~~protection. toBecause ~~provide~~bankruptcy ~~reasonable~~protection ~~assurance~~may ofallow ~~achieving~~for ~~their~~greater ~~objectives,~~flexibility ~~and, following the changes~~ in ~~our~~reducing ~~internal~~costs ~~controls~~by ~~implemented~~voiding ~~prior~~contracts toand ~~the~~renegotiating ~~filing~~existing ~~of this report~~business obligations, ~~the~~current ~~CEO~~ and ~~CFO~~future ~~believe~~airline ~~that~~bankruptcies ~~our~~could have ~~disclosure~~a ~~controls~~substantial ~~and~~impact ~~procedures~~on ~~were~~industry ~~effective~~competition. atContinued weakness in the ~~“reasonable~~airline ~~assurance”~~industry ~~level~~also asmay ofresult ~~March~~in additional industry 31consolidation, ~~2005.~~greater

3940

~~AMERICA~~ reliance ~~WEST~~on ~~HOLDINGS~~industry ~~CORPORATION~~alliances ~~AND~~and increased price competition ~~AMERICA~~among ~~WEST~~the ~~AIRLINES~~existing airlines, ~~INC.~~each of which could dramatically ~~March 31,~~alter ~~2005~~competitive environments in the markets we serve.

~~PART~~Our IIhigh —level ~~OTHER~~of ~~INFORMATION~~ fixed obligations limits our ability to fund general corporate requirements and obtain additional financing, limits our flexibility in responding to competitive developments and increases our vulnerability to adverse economic and industry conditions.

~~ITEM~~ We 2have a significant amount of fixed obligations, including debt, aircraft leases and financings, aircraft purchase commitments, leases of airport and other facilities and other cash obligations. ~~CHANGES~~As INof ~~SECURITIES~~June 30, ~~USE~~2005, OFwe ~~PROCEEDS~~had ~~AND~~approximately $704.0 million ~~ISSUER~~of ~~PURCHASES~~outstanding OFdebt, ~~EQUITY~~of ~~SECURITIES~~which $181.9 million was secured. In addition, we had $11.2 million of payments to satisfy capital lease obligations and $3.1 billion of operating lease obligations through lease expiration dates incurred primarily in connection with off-balance sheet aircraft financings. See “Liquidity and Capital Resources — Off Balance Sheet Arrangements.” We also have guaranteed costs associated with our regional alliance with Mesa and commitments to purchase aircraft from Airbus. As a result of the substantial fixed costs associated with these obligations:

~~The~~• ~~following~~A ~~table~~decrease ~~sets~~in ~~forth~~revenues ~~all~~results ~~purchases~~in ~~made~~a bydisproportionately usgreater orpercentage ~~any~~decrease ~~“affiliated~~in ~~purchaser”~~earnings. ~~as defined~~• inWe ~~Rule 10b-18(a)(3)~~may ofnot ~~the~~have ~~Securities~~sufficient ~~Exchange~~liquidity ~~Act~~to fund all of ~~1934,~~these asfixed ~~amended,~~costs ofif our ~~Class B common~~revenues ~~stock~~decline ~~during~~or ~~each~~costs ~~month~~increase. ~~within~~• ~~the~~We ~~first~~may ~~quarter~~have to use our working capital to fund these fixed costs instead of ~~2005~~funding general corporate requirements, including capital expenditures. No• ~~purchases~~We ~~were~~may ~~made~~not ~~pursuant~~ have sufficient liquidity to arespond ~~publicly~~to ~~announced~~competitive ~~repurchase~~developments ~~plan~~and oradverse ~~program~~economic conditions.

				(d) Maximum Number
				(or Approximate
			(c) Total Number of	Dollar Value) of
			Shares Purchased as	Shares that May Yet
	(a) Total Number of		Part of Publicly	be Purchased Under
	Shares Purchased	(b) Average Price	Announced Plans or	the Plans or
Period	(1)	Paid per Share	Programs	Programs
January 1, 2005 – January 31, 2005	65,400	4.81	—	—
February 1, 2005 – February 28, 2005	18,800	5.15	—	—
March 1, 2005 – March 31, 2005	12,000	4.61	—	—

~~(1)~~ Our ~~Amounts~~ability ~~consist~~to pay the fixed costs associated with our contractual obligations depends on our operating performance and cash flow, which in turn depend on general economic and political conditions. A failure to pay our fixed costs or breach of ~~shares~~the contractual obligations could result in a variety of adverse consequences, including the acceleration of our indebtedness, ~~Class~~the Bwithholding ~~common~~of ~~stock~~credit ~~purchased~~card onproceeds by the credit ~~open~~card ~~market~~servicers and the exercise of remedies by our creditors and lessors. In such a situation, it is unlikely that we would be able to fulfill our obligations under or repay the accelerated ~~America~~indebtedness, ~~West~~make ~~Holdings~~required ~~Corporation~~lease ~~Future~~payments ~~Care~~or otherwise ~~401(k)~~cover ~~Plan~~our fixed costs.

~~ITEM~~Interruptions 4.or ~~SUBMISSION~~disruptions OFin ~~MATTERS~~service TOat Aone ~~VOTE~~our OFhub ~~SECURITY~~airports ~~HOLDERS~~could have a material adverse impact on our operations.

~~None~~ We operate primarily through our hubs in Phoenix and Las Vegas. A majority of our flights either originate or fly into one of these hubs. A significant interruption or disruption in service at one of our hubs could result in the cancellation or delay of a significant portion of our flights and, as a result, could have a severe impact on our business, operations and financial performance.

~~ITEM~~We 6.are ~~EXHIBITS~~at risk of losses and adverse publicity stemming from any accident involving any of our aircraft.

EXHIBIT
NUMBER		DESCRIPTION AND METHOD OF FILING
10.1+		Annual Incentive Bonus Plan.
31.1		Certification of Holdings’ Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.2		Certification of Holdings’ Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.3		Certification of AWA’s Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.4		Certification of AWA’s Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
32.1		Certification of Holdings’ Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of AWA’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

If one of our aircraft were to crash or be involved in an accident, we could be exposed to significant tort liability. The insurance we carry to cover damages arising from any future accidents may be inadequate. In the event that our insurance is inadequate, we may be forced to bear substantial losses from an accident. In addition, any accident involving an aircraft that we operate could create a public perception that our aircraft

~~(+) Represents a management contract or compensatory plan or arrangement.~~41

40 Table of Contents

~~Table~~ are ofnot ~~Contents~~safe or reliable, which could harm our reputation, result in air travelers being reluctant to fly on our aircraft and adversely impact our financial condition and operations.

~~AMERICA~~Our ~~WEST~~business ~~HOLDINGS~~is ~~CORPORATION March 31~~subject to weather factors and seasonal variations in airline travel, ~~2005~~ which cause our results to fluctuate.

~~SIGNATURE~~ Our operations are vulnerable to severe weather conditions in parts of our network that could disrupt service, create air traffic control problems, decrease revenue, and increase costs. In addition, the air travel business historically fluctuates on a seasonal basis. Due to the greater demand for air and leisure travel during the summer months, revenues in the airline industry in the second and third quarters of the year tend to be greater than revenues in the first and fourth quarters of the year.

~~Pursuant~~Employee tobenefit ~~the~~plans ~~requirements~~represent ofsignificant ~~the~~continuing ~~Securities~~costs ~~Exchange Act of 1934, the Registrant has duly caused this report~~ to ~~be signed on its behalf by the undersigned thereunto duly authorized~~us.

~~AMERICA~~ We ~~WEST~~sponsor ~~HOLDINGS~~employee ~~CORPORATION~~benefit Byplans ~~/s/~~and ~~Derek~~arrangements Jthat provide retirement, medical, disability, and other benefits to our employees and participating retirees. ~~Kerr~~Many ~~Derek~~of Jthe benefits provided under these plans are mandated under various collective bargaining agreements, while others are provided on a voluntary basis as a means to recruit and retain valuable employees. ~~Kerr~~The benefit ~~Senior~~obligations ~~Vice~~associated ~~President~~with our employee benefit plans represent a substantial continuing cost to us. In addition, many of these employee benefit plans are subject to federal laws such as the Employee Retirement Income Security Act of 1974 and ~~Chief~~the Internal ~~Financial~~Revenue ~~Officer~~Code, and must be maintained accordingly. Continued compliance with these rules is necessary, as even unintentional failures to comply can result in significant fines and penalties. Employee benefit plans in general also are increasingly the subject of protracted litigation, especially following significant plan design changes.

~~DATED:~~We ~~April 25~~depend on the expertise of our management team. If key individuals leave unexpectedly, ~~2005~~ our business and operations could suffer.

41 Many of our executive officers are key to the management of our business and operations. Our future success depends on our ability to retain these officers and other capable managers. Our ability to retain key executive officers may be adversely impacted by the proposed merger with US Airways Group. Although we believe we could replace key personnel given adequate prior notice, the unexpected departure of key executive officers could cause substantial disruption to our business and operations. In addition, we may not be able to retain and recruit talented personnel without incurring substantial costs. Moreover, we must repay a portion of the government guaranteed loan if our labor costs exceed a certain threshold. As a result, our ability to spend additional amounts to retain and recruit talented personnel is limited.

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

~~AMERICA~~ Currently, ~~WEST~~two ~~AIRLINES,~~stockholders ~~INC~~collectively control more than 50% of the total voting power of Holdings. These stockholders, TPG ~~March~~Partners, L.P. and TPG Parallel 31I, ~~2005~~L.P, or collectively, the TPG Stockholders, are controlled by the same company, TPG Advisors, Inc. Since TPG Advisors, Inc. is an investment firm, its strategic objectives may be different than both the short-term or long-term objectives of our board of directors and management. We cannot guarantee that the TPG Stockholders will not try to influence Holdings’ business in a way that would favor their own personal interests to the detriment of our interests and those of our other stockholders.

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

~~Pursuant~~ Sales toand ~~the~~potential ~~requirements~~sales of ~~the~~substantial ~~Securities~~amounts ~~Exchange~~of ~~Act~~our Class B ofcommon ~~1934,~~stock ~~the~~or ~~Registrant~~securities ~~has~~exercisable ~~duly~~for or into ~~caused~~our ~~this~~Class B ~~report~~common tostock bein ~~signed~~the onpublic ~~its~~market, ~~behalf~~or bythe perception that these sales could occur, could adversely affect the ~~undersigned~~market ~~thereunto~~price ~~duly~~of ~~authorized~~our Class B common stock. A substantial number of additional

~~AMERICA WEST AIRLINES, INC. By /s/ Derek J. Kerr Derek J. Kerr Senior Vice President and Chief Financial Officer~~42

DATED:Table April 25,of 2005 Contents

42 shares of our Class B common stock are issuable upon the conversion or exercise of outstanding securities. As of July 21, 2005, the outstanding shares of our Class B common stock were subject to dilution by:

~~Table~~• 19,692,000 shares of ~~Contents~~Class B common stock that are issuable upon the exercise, at a price of $3.00 per share, of certain warrants issued in connection with the government guaranteed loan, including 18,754,000 shares of Class B common stock issuable upon exercise of a warrant issued to the Air Transportation Stabilization Board, or ATSB; • 10,287,644 shares of our Class B common stock that are issuable upon the exercise of outstanding options; • 859,117 shares of Class B common stock are issuable upon conversion of the outstanding shares of Holdings’ Class A common stock held by the TPG Stockholders (but subject to certain contractual restrictions on transfer); • up to 8,095,842 shares of Holdings’ Class B common stock are issuable upon the exchange of AWA’s 7.25% senior exchangeable notes due 2023 (which exchange may not occur until the trading price of Holdings’ Class B common stock reaches certain thresholds, or other triggering events occur); and • up to approximately 9,400,000 shares of Holdings’ Class B common stock are issuable upon conversion of Holdings’ 7.5% convertible senior notes due 2009.

~~Exhibit~~ Holdings ~~Index~~has registered either the issuance or resale of all of these shares, meaning that upon exercise, exchange or conversion, as applicable, such shares could be sold in the public market at any time. The conversion or exercise of some or all of these notes, warrants and options will dilute the ownership interests of existing stockholders and any sales in the public market of our Class B common stock issuable upon such conversion or exercise could adversely affect prevailing market prices of our Class B common stock. The existence of the notes, warrants and options may also encourage short selling by market participants because conversion or exercise of the notes or warrants could depress the price of our Class B common stock.

EXHIBIT
NUMBER		DESCRIPTION AND METHOD OF FILING
10.1+		Annual Incentive Bonus Plan.
31.1		Certification of Holdings’ Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.2		Certification of Holdings’ Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.3		Certification of AWA’s Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.4		Certification of AWA’s Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
32.1		Certification of Holdings’ Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of AWA’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

In addition, completion of the merger with a subsidiary of US Airways Group may result in the issuance of additional shares of new US Airways Group common stock in satisfaction of certain put rights granted to the holders of the 7.25% senior exchangeable notes upon the occurrence of a “change of control.” See “Liquidity and Capital Resources — Commitments — 7.25% Senior Exchangeable Notes due 2023.”

~~(+)~~Provisions ~~Represents~~in aour ~~management~~charter ~~contract~~documents ormight ~~compensatory~~deter ~~plan~~acquisition orbids ~~arrangement~~for us.

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


	•	authorize Holdings’ board of directors to issue preferred stock ranking senior to our Class B common stock without any action on the part of the stockholders;

	•	establish advance notice procedures for stockholder proposals, including nominations of directors, to be considered at stockholders’ meetings;

	•	authorize Holdings’ board of directors to fill vacancies on the board resulting from an increase in the authorized number of directors or any other cause; and

	•	restrict the ability of stockholders to call special meetings of stockholders.

These provisions might make it more difficult for a third party to acquire us, even if doing so would benefit the stockholders.


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

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


	•	the failure to complete the proposed merger with a subsidiary of US Airways Group;

	•	our operating results failing to meet the expectations of securities analysts or investors in any quarter;

	•	downward revisions in securities analysts’ estimates;

	•	material announcements by us or our competitors;

	•	public sales of a substantial number of shares of our Class B common stock;

	•	governmental regulatory action; and

	•	adverse changes in general market conditions or economic trends.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Market Risk Sensitive Instruments


(a)	Commodity Price Risk

As of June 30, 2005, the Company had entered into costless collar transactions, which establish an upper and lower limit on heating oil futures prices. These transactions are in place with respect to approximately 53% and 12% of remaining projected 2005 and 2006 fuel requirements, respectively, including 55% related to the third quarter of 2005 and 50% related to the fourth quarter of 2005. See “Risk Factors Relating to America West and Industry Related Risks — Fluctuations in fuel costs could adversely affect our operating expenses and results.”

The use of such hedging transactions in the Company’s fuel hedging program could result in the Company not fully benefiting from certain declines in heating oil futures prices or certain declines in the differential between jet fuel and heating oil futures prices. At June 30, 2005, the Company estimates that a 10% increase in heating oil futures prices would increase the fair value of the costless collar transactions by approximately $29.5 million. The Company estimates that a 10% decrease in heating oil futures prices would decrease the fair value of the costless collar transactions by approximately $25.6 million.

As of July 21, 2005, approximately 53% and 12% of AWA’s remaining 2005 and 2006 projected fuel requirements, respectively, are hedged.


(b)	Interest Rate Risk

The Company’s exposure to interest rate risk relates primarily to its variable rate long-term debt obligations. At June 30, 2005, the Company’s variable-rate long-term debt obligations of approximately $500.4 million represented approximately 71% of its total long-term debt. If interest rates increased 10% in 2005, the impact on the Company’s results of operations would not be material.


Item 4.	Controls and Procedures.


(a)	Evaluation of disclosure controls and procedures.

An evaluation was performed under the supervision and with the participation of Holdings’ and AWA’s management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the rules promulgated under the Exchange Act) as of June 30, 2005. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of June 30, 2005.


(b)	Changes in internal control over financial reporting.

There has been no change to the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


(c)	Limitation on the effectiveness of controls.

We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and, following the changes in our internal controls implemented prior to the filing of this report, the CEO and CFO believe that our disclosure controls and procedures were effective at the “reasonable assurance” level as of June 30, 2005.

PART II — OTHER INFORMATION


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

The following table sets forth all purchases made by us or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, as amended, of our Class B common stock during each month within the second quarter of 2005. No purchases were made pursuant to a publicly announced repurchase plan or program.

(d)

Maximum Number

(c)

(or Approximate

Total Number of

Dollar Value) of

(a)

Shares Purchased as

Shares that May Yet

Total Number

(b)

Part of Publicly

be Purchased Under

of Shares

Average Price

Announced Plans or

the Plans or

Period

Purchased(1)

Paid per Share

Programs

April 1, 2005 - April 30, 2005

64,200

4.54

—

May 1, 2005 - May 31, 2005

112,500

4.68

—

June 1, 2005 - June 30, 2005

33,700

6.11

—


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


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

At our annual meeting of stockholders held on May 17, 2005 (the “Annual Meeting”), the stockholders approved the election of the following directors to hold office until the Company’s annual meeting in 2006 and until their successors are elected and qualified, or until their earlier death or resignations.


	Number of Shares

	For		Withheld

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

The following directors’ term of office as a director continued after the Annual Meeting: Herbert M. Baum, John L. Goolsby, Walter T. Klenz, Richard C. Kraemer, Denise M. O’Leary, Richard P. Schifter and J. Steven Whisler.

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Item 6.	Exhibits


Exhibit
number			Description and Method of Filing
	2	.1	Agreement and Plan of Merger, dated May 19, 2005, among US Airways Group, Inc., Holdings and Barbell Acquisition Corp. — Incorporated by reference to Exhibit 2.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.1+	Summary of Officer Benefits.
	10	.2*	Master Memorandum of Understanding, dated as of June 13, 2005, among US Airways, Inc., US Airways Group, Inc., Holdings, AWA, General Electric Capital Corporation acting through its agent, GE Commercial Aviation Services LLC, and General Electric Company/ GE Transport Component.
	10	.3	Advisory Agreement, dated May 19, 2005, between America West Holdings Corporation and TPG Advisory, Inc. — Incorporated by reference to Exhibit 10.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.4	Investment Agreement, dated May 19, 2005, among Eastshore Aviation, LLC, Holdings and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 2.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.5	Investment Agreement, dated May 19, 2005, among Par Investment Partners, L.P., Holdings and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 10.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.6	Investment Agreement, dated May 19, 2005, among Peninsula Investment Partners, L.P., Holdings and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 10.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.7	Investment Agreement, dated May 19, 2005, among ACE Aviation Holdings, Holdings and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 10.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	10	.8	Investment Agreement, dated May 27, 2005, among Wellington Management Company, LLP, Holdings and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 10.1 to Holdings’ Form 8-K filed on June 2, 2005 (File no. 001-12649).
	99	.1	Voting Agreement, dated May 19, 2005, among TPG Partners, L.P., TPG Parallel I, L.P., Air Partners II, L.P. and U.S. Airways Group, Inc. — Incorporated by reference to Exhibit 2.1 to Holdings’ Form 8-K filed on May 25, 2005 (File no. 001-12649).
	31	.1	Certification of Holdings’ Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
	31	.2	Certification of Holdings’ Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
	31	.3	Certification of AWA’s Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
	31	.4	Certification of AWA’s Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
	32	.1	Certification of Holdings’ Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2	Certification of AWA’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


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


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

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AMERICA WEST HOLDINGS CORPORATION

June 30, 2005

SIGNATURE

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


	AMERICA WEST HOLDINGS CORPORATION


	By	/s/ Derek J. Kerr



	Derek J. Kerr
	Senior Vice President and Chief Financial Officer

DATED: July 21, 2005

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AMERICA WEST AIRLINES, INC.

June 30, 2005

SIGNATURE

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


	AMERICA WEST AIRLINES, INC.


	By	/s/ Derek J. Kerr



	Derek J. Kerr
	Senior Vice President and Chief Financial Officer

DATED: July 21, 2005

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