US Airways 2007 Annual Report Download - page 17

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flying US Airways. The addition of a $50 surcharge to most customers requiring paper tickets has allowed US Airways to continue to
support 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 Travel Network®, 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 US Airways reduce
distribution costs. In 2007, we received 55% of our sales from internet sites. Our website, www.usairways.com, accounted for 26% of our
sales, while other internet sites accounted for 29% of our 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 companies have entered the distribution industry, such as ITA Software, G2 Switchworks, Navitaire
and others, which provide low-cost GDSs. 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, US Airways has 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 our sales.
US Airways Vacations
Through US Airways Vacations ("USV"), we sell individual and group travel packages including air transportation on US Airways,
US Airways 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 has 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 private-label basis. In 2007, approximately 78% of USV's total bookings
were made electronically, compared to 71% in 2006.
During 2007, USV operated co-branded websites for ten partner companies, including Costco Travel, Vegas.com, BestFares.com
and MandalayBay.com. These co-branded sites provide a retail presence via distribution channels such as Costco wholesale warehouses
and other company websites where we and USV may not otherwise be a part of the consumer's consideration set. USV intends to
continue to add new co-branded websites as opportunities present themselves.
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