US Airways 2007 Annual Report Download - page 14

Table of Contents
On November 14, 2007, the National Mediation Board notified the Company that an application for representation of the pilots of
US Airways had been filed by the US Airline Pilots Association ("USAPA"). An investigation by the Board is now underway to
determine whether USAPA, ALPA or neither union should be the certified representative of the pilots. We cannot predict the outcome of
the investigation by the National Mediation Board or the effect, if any, on US Airways' operational or financial performance.
There are few remaining unrepresented employee groups that could engage in organization efforts. We cannot predict the outcome
of any future efforts to organize those remaining employees or the terms of any future labor agreements or the effect, if any, on US
Airways' operations or financial performance. For more discussion, see Item 1A. "Risk Factors, Risk Factors Relating to the Company
and Industry Related Risks — Union disputes, employee strikes and other labor-related disruptions may adversely affect our operations."
Aviation Fuel
In 2007 and 2006, aviation fuel was our largest expense. The average cost of a gallon of aviation fuel for our mainline operations
increased 6% from 2006 to 2007 after increasing 8% from 2005 to 2006. Because the operations of our airline are dependent upon
aviation fuel, increases in aviation fuel costs could materially and adversely affect liquidity, results of operations and financial condition.
We maintain an active fuel hedging program. As part of our fuel hedging program, we have periodically entered into certain fixed
price swaps, collar structures and other similar derivative contracts. As of December 31, 2007, we had entered into hedging transactions
using costless collars, which establish an upper and lower limit on heating oil futures prices. These transactions are in place with respect
to approximately 22% of our 2008 fuel consumption requirements. During 2007, 2006 and 2005, we recognized a net gain of
$245 million, a net loss of $79 million and a net gain of $75 million, respectively, related to hedging activities.
The following table shows annual aircraft fuel consumption and costs for mainline for 2005 through 2007 (gallons and aircraft fuel
expense in millions):
Average Price Aircraft Fuel Percentage of Total
Year Gallons per Gallon(1) Expense(1) Operating Expenses
2007 1,195 $ 2.20 $ 2,630 30.7%
2006 1,210 2.08 2,518 29.8%
2005(2) 628 1.93 1,214 28.8%
(1) Includes fuel taxes and excludes the impact of fuel hedges. The impact of fuel hedges is described in Item 7 under "US Airways
Group's Results of Operations."
(2) The 2005 data includes AWA for the 269 days through September 27, 2005, the effective date of the merger, and consolidated data
for AWA and US Airways for the 96 days from September 27, 2005 to December 31, 2005.
In addition, we incur fuel expense related to our US Airways Express operations. For the years ended December 31, 2007, 2006 and
2005, total fuel expense for US Airways' former MidAtlantic division, US Airways Group's wholly owned regional airlines and affiliate
regional airlines operating as US Airways Express was $765 million, $764 million, and $327 million, respectively.
Prices and availability of all petroleum products are subject to political, economic and market factors that are generally outside of
our control. Accordingly, the price and availability of aviation fuel, as well as other petroleum products, can be unpredictable. Prices may
be affected by many factors, including:
• the impact of global political instability on crude production;
• unexpected changes to the availability of petroleum products due to disruptions in distribution systems or refineries, as evidenced
in the third quarter of 2005 when Hurricane Katrina and Hurricane Rita caused widespread disruption to oil production, refinery
operations and pipeline capacity along certain portions of the U.S. Gulf Coast. As a result of these disruptions, the price of jet
fuel increased significantly and the availability of jet fuel supplies was diminished;
• unpredictable increases to oil demand due to weather or the pace of economic growth;
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