US Airways 2006 Annual Report Download - page 18

Table of Contents
Dividend Miles participants is generally not permitted on blackout dates, which correspond to certain holiday periods or peak travel
dates. US Airways reserves the right to terminate Dividend Miles or portions of the program at any time. Program rules, partners, special
offers, blackout dates, awards and requisite mileage levels for awards are subject to change. On January 31, 2007, we changed our
program regarding active membership status to require members to have either earned or redeemed miles within a consecutive 18 month
period to maintain active membership status. Prior to the change in the program, members were granted a 36 month period to maintain
active status.
Ticket Distribution
The now common usage of electronic tickets within North America, and the rapid expansion of electronic ticketing in Europe and
elsewhere, have allowed for the streamlining of processes and the increased efficiency of customer servicing and support. During 2006,
electronic tickets represented 98.5% of all tickets issued to customers flying AWA and US Airways. The addition of a $50 surcharge to
most customers requiring paper tickets has allowed AWA and US Airways to continue to support the exceptional requests, while
offsetting any cost variance associated with the issuance and postal fulfillment of paper tickets. Airlines based in North America have
recently proposed a mandate that airlines move to 100% electronic ticketing over the next couple of years, which we believe would, if
enacted, serve to enhance customer service and control costs for ticketing services supported by the airline and distribution partners.
The shift of consumer bookings that began several years ago from traditional travel agents, airline ticket offices and reservation
centers to online travel agent sites (e.g., Orbitz, Travelocity, Expedia and others) as well as airline direct websites (e.g.,
www.usairways.com) has continued to occur within the industry. Historically, traditional and online travel agencies used Global
Distribution Systems ("GDSs"), such as Sabre, to obtain their fare and inventory data from airlines. Bookings made through these
agencies result in a fee, referred to as a "GDS fee," that is charged to the airline. Bookings made directly with an airline, through its
reservation call centers or website, do not generate a GDS fee. The growth of the airline direct websites and travel agent sites that connect
directly to airline host systems, effectively by-passing the traditional connection via GDSs, helps AWA and US Airways reduce
distribution costs. In 2006, we received 49%, of our combined sales from internet sites. Our website, www.usairways.com, accounted for
23% of our combined sales, while other internet sites accounted for 26% of our combined sales.
Due to the continued pressure on legacy airlines to lower distribution fees more aggressively than in the past in order to compete
with low-cost airlines, many new low-cost GDSs have entered the distribution industry, such as ITA Software, G2 Switchworks,
Navitaire and others. These new entrants are providing airlines with alternative economic models to do business with traditional travel
agents by charging substantially lower GDS fees.
In an effort to further reduce distribution costs through internal channels, AWA and US Airways have instituted service fees for
customer interaction in the following internal distribution channels: reservation call centers ($10.00 per ticket), airline ticket offices
($20.00 per ticket) and city ticket offices ($20.00 per ticket). Other services provided through these channels remain available with no
extra fees. The goals of these service fees are to reduce the cost to us of providing customer service as required by the traveler and to
promote the continued goal of shifting customers to our lowest cost distribution channel, www.usairways.com. Other airlines have
instituted similar fee structures. Internal channels of distribution account for 37% of all our combined sales.
Through US Airways Vacations ("USV"), a division that prior to the merger was called America West Vacations, we sell individual
and group travel packages including air transportation on US Airways, US Airways Express, AWA, America West Express and all
US Airways codeshare partners, hotel accommodations, car rentals and other travel products. USV packages are marketed directly to
consumers and through retail travel agencies in several countries and include travel to destinations throughout the U.S., Latin America,
the Caribbean and Europe.
USV is focused on high-volume leisure travel products that have traditionally provided high profit margins. USV negotiated several
strategic partnerships with hotels, Internet travel sites and media companies to capitalize on the continued growth in online travel sales.
USV sells vacation packages and hotel rooms through its call center; via the Internet and its websites, www.usairwaysvacations.com and
www.usvtravelagents.com; through global distribution systems Sabre Vacations, Amadeus AgentNet and VAX; and through third-party
websites on a co-branded or
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