US Airways Group the holding company for US Airways reported the following income statements for 1997 and 1998 (in millions of dollars):

a. Reported operating income before interest and taxes increased by 73.6 percent in 1998 over 1997 while revenues increased by only 2.0 percent. Why?

b. Despite the increase in operating income, net income available to common dropped by 44.6 percent. Why?

c. What might explain the negative tax expense in 1997? The following from the tax foot note might help you:

d. If you were to forecast net income for 1999, would you rely on the 1998 or 1997 net income as an indication of "sustainable"income?

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1998 1997 Passenge transportation $7,826 7.712 Other rent and landirg fees Other selling expenses Depreciation and amortization ndome Equity in earings o aiates Gans on sales of interests in affliates Other income (expense), net Provision (credit) for income taxes Earnings applicable to common stockholders Earnings per common share 1997 1996 Deferred tax assets (in thousands) Leasing transactions Tax benefits purchased/soid Gai on sale and leaseback transactions Employee benefits Net operating loss carryforwards Alternative minimum tax credit carryforwards Investment tax credit carryforwards Other deferred tax assets S 170,966 31,352 125,169 683,416 193,575 158,441 17,841 94,640 1475,400 1,377 S 1S4,732 43,441 135,308 608,948 540,495 33,459 49,802 82,744 1,648,929 43,546 1005,383 Total gross deferred tax assets Less valuation alowance Net deferred tax assets 474,02 1997 1996 Deferred tax liabilities Equipment depreciation and amortization Other deferred tax labilities Total deferred tax liabilities Net deferred tax liabities (assets) 940,784 62.791 (470,448) 966,874 45,415 1,012,289 6,906