US Airways 2006 Annual Report Download - page 9

Table of Contents
service from Philadelphia to Portland, Oregon using AWA aircraft and crew, thus further realizing the synergies from our merger by
easily adding service from the former east coast route network to the west coast route network.
In addition, US Airways continued to enhance its fleet mix in 2006. We announced an agreement with Embraer for the firm order of
twenty five 99-seat Embraer 190 aircraft. The aircraft began regularly scheduled flights in February 2007. Also, through an agreement
with our regional airline partner Republic Airways Holdings ("Republic"), we added thirty 86-seat Embraer 175 aircraft, which replaced
twenty 50-seat Embraer 145 aircraft. The remaining ten aircraft can be used for either replacement or growth purposes in 2008. Finally,
we announced that we have restructured and increased our existing order with Airbus for seven new A321 Aircraft. This brings the total
aircraft on order with Airbus to 37, with fifteen A321 aircraft to be delivered between 2008 and 2010.
To modernize our international product and improve the efficiency of our international network, we were scheduled to begin
accepting deliveries of A350 aircraft in 2011 pursuant to an Airbus A350 Purchase Agreement that US Airways Group, US Airways and
AWA entered into in September 2005 with Airbus. US Airways Group has been notified that the A350 will be undergoing significant
design changes and will be delivered several years beyond the originally scheduled delivery dates. We are currently evaluating the
revised technical and commercial aspects of the A350 program.
Express Operations
US Airways Express Network
Certain air carriers have code share arrangements with US Airways to operate under the trade name "US Airways Express".
Typically, under a code share arrangement, one air carrier places its designator code and sells tickets on the flights of another air carrier,
which is referred to generically as its code share partner. US Airways Express carriers are an integral component of our operating
network. US Airways relies heavily on feeder traffic from its US Airways Express partners, which carry passengers from low-density
markets that are uneconomical for US Airways to serve with large jets to US Airways' hubs. In addition, US Airways Express operators
offer complementary service in existing US Airways mainline markets by operating flights during off-peak periods between US Airways
mainline flights. As of December 2006, the US Airways Express network served 133 airports in the continental United States, Canada
and the Caribbean, including 40 airports also served by US Airways. During 2006, approximately 20 million passengers boarded
US Airways Express air carriers' planes, approximately 42% of whom connected to US Airways' flights. Of these 20 million passengers,
approximately 8 million were enplaned by our wholly owned regional airlines Piedmont and PSA, approximately 1 million were
enplaned by US Airways' former MidAtlantic division, approximately 10 million were enplaned by third-party carriers operating under
capacity purchase agreements and approximately 1 million were enplaned by carriers operating under prorate agreements, as described
below.
The US Airways Express code share arrangements are either in the form of capacity purchase or prorate agreements. The capacity
purchase agreements provide that all revenues, including passenger, mail and freight revenues, go to US Airways. In return, US Airways
agrees to pay predetermined fees to these airlines for operating an agreed-upon number of aircraft, without regard to the number of
passengers on board. In addition, these agreements provide that certain variable costs, such as fuel and airport landing fees, will be
reimbursed 100% by US Airways. US Airways controls marketing, scheduling, ticketing, pricing and seat inventories. Under the prorate
agreements, the prorate carriers pay certain service fees to US Airways and receive a prorated share of ticket revenue paid for connecting
customers. US Airways is responsible for the pricing and marketing of connecting services to and from the prorate carrier. The prorate
carrier is responsible for pricing and marketing the local, point to point markets, and is responsible for all costs incurred operating the
aircraft. All US Airways Express carriers use US Airways' reservation systems, and have logos, service marks, aircraft paint schemes and
uniforms similar to those of US Airways.
6