US Airways 2007 Annual Report Download - page 10

Table of Contents
arrangements provide members with extended networks for earning and redeeming miles on partner carriers. Our US Airways Club
members also have access to certain partner carriers' airport lounges. We also benefit from the distribution strengths of each of the partner
carriers.
In May 2004, US Airways joined the Star Alliance, the world's largest airline alliance, with 19 member airlines serving
approximately 897 destinations in 160 countries. Two additional international carriers based in Egypt and Turkey, respectively, are
scheduled to join in 2008. Membership in the Star Alliance further enhances the value of US Airways' domestic and international route
network by allowing customers wide access to the global marketplace. Expanded benefits for customers include network expansion
through code share service, frequent flyer program benefits, airport lounge access, convenient single-ticket pricing, one-stop check-in and
coordinated baggage handling. US Airways also has bilateral marketing/code sharing agreements with Star Alliance members Lufthansa,
Spanair, bmi, TAP Portugal, Asiana, Air New Zealand, and Singapore Airlines. Other international code sharing partners include Italy's
Air One, Royal Jordanian Airlines, EVA Airways and Virgin Atlantic Airways. Marketing/code sharing agreements are maintained with
two smaller regional carriers in the Caribbean that operate collectively as the "GoCaribbean" network. Each of these code share
agreements funnel international traffic onto US Airways' domestic flights or support specific markets operated by US Airways in Europe
and the Caribbean. Domestically, US Airways code shares with Hawaiian Airlines on intra-Hawaii flights.
In addition, US Airways has comprehensive marketing and code sharing agreements with United Airlines, a member of the Star
Alliance, which began in July 2002. United, as well as its parent company, UAL Corporation, and certain of its affiliates, filed for
protection under Chapter 11 of the Bankruptcy Code on December 9, 2002 and emerged on February 1, 2006. United assumed these
marketing agreements in its bankruptcy proceedings. In February 2008, US Airways and United reached final agreement on amendments
to the contracts governing their relationship, and approval of these agreements by the Bankruptcy Court is expected by the end of
February.
Competition in the Airline Industry
Most of the markets in which we operate are highly competitive. Price competition occurs on a market-by-market basis through
price discounts, changes in pricing structures, fare matching, target promotions and frequent flyer initiatives. Airlines typically use
discount fares and other promotions to stimulate traffic during normally slack travel periods to generate cash flow and to maximize
revenue per ASM. Discount and promotional fares are generally non-refundable and may be subject to various restrictions such as
minimum stay requirements, advance ticketing, limited seating and change fees. We have often elected to match discount or promotional
fares initiated by other air carriers in certain markets in order to compete in those markets. Most airlines will quickly match price
reductions in a particular market. Our ability to compete on the basis of price is limited by our fixed costs and depends on our ability to
maintain our operating costs.
We also compete on the basis of scheduling (frequency and flight times), availability of nonstop flights, 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, markets served and other services. We compete with both major full service airlines and low-cost airlines
throughout our network of hubs and focus cities.
We believe the growth of low-fare low-cost competition will continue. Recent years have seen the entrance and growth of low-fare
low-cost competitors in many of the markets in which we operate. These competitors include Southwest Airlines Co., AirTran Airways,
Inc., Frontier Airlines, Inc. and JetBlue Airways. Some of these low cost carriers have lower operating cost structures than we have.
In addition, because we operate a significant number of flights in the eastern United States, our average trip distance, or stage
length, is shorter than those of other major airlines. This makes us more susceptible than other major airlines to competition from surface
transportation such as automobiles and trains.
Industry Regulation and Airport Access
Our airline subsidiaries operate under certificates of public convenience and necessity or certificates of commuter authority, both of
which are issued by the Department of Transportation (the "DOT"). These certificates
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