US Airways 2007 Annual Report Download - page 21

Table of Contents
offs and landings. We have been able to accommodate local noise restrictions imposed to date, but our operations could be adversely
affected if locally-imposed regulations become more restrictive or widespread.
The travel industry continues to face ongoing security concerns.
The attacks of September 11, 2001 and continuing terrorist threats materially impacted and continue to impact air travel. The
Aviation and Transportation Security Act mandates improved flight deck security; deployment of federal air marshals on board flights;
improved airport perimeter access security; airline crew security training; enhanced security screening of passengers, baggage, cargo,
mail, employees and vendors; enhanced training and qualifications of security screening personnel; additional provision of passenger data
to U.S. Customs and enhanced background checks. These increased security procedures introduced at airports since the attacks and other
such measures as may be introduced in the future generate higher operating costs for airlines. A concurrent increase in airport security
charges and procedures, such as restrictions on carry-on baggage, has also had and may continue to have a disproportionate impact on
short-haul travel, which constitutes a significant portion of US Airways' flying and revenue. We would also be materially impacted in the
event of further terrorist attacks or perceived terrorist threats.
If we incur problems with any of our third party service providers, our operations could be adversely affected by a resulting decline
in revenue or negative public perception about our services.
Our reliance upon others to provide essential services on behalf of our operations may result in the relative inability to control the
efficiency and timeliness of contract services. We have entered into agreements with contractors to provide various facilities and services
required for our operations, including Express operations, aircraft maintenance, ground services and facilities, reservations and baggage
handling. Similar agreements may be entered into in any new markets we decide to serve. These agreements are generally subject to
termination after notice by the third party service provider. Any material problems with the efficiency and timeliness of contract services
could have a material adverse effect on our business, financial condition and results of operations.
Fluctuations in interest rates and increased costs of financing could adversely affect our liquidity, operating expenses and results.
A substantial portion of our indebtedness bears interest at fluctuating interest rates. These are primarily based on the London
interbank offered rate for deposits of U.S. dollars, or LIBOR. LIBOR tends to fluctuate based on general economic conditions, general
interest rates, federal reserve rates and the supply of and demand for credit in the London interbank market. We have not hedged our
interest rate exposure and, accordingly, our interest expense for any particular period may fluctuate based on LIBOR and other variable
interest rates. To the extent these interest rates increase, our interest expense will increase, in which event we may have difficulties
making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be
adversely affected. See also the discussion of interest rate risk in Part II, Item 7A. Also, changes in the financial markets may increase our
costs to obtain funding needed for the acquisition of aircraft that we have contractual commitments to purchase.
Our high level of fixed obligations limits our ability to fund general corporate requirements and obtain additional financing, limits
our flexibility in responding to competitive developments and increases our vulnerability to adverse economic and industry
conditions.
We have a significant amount of fixed obligations, including debt, aircraft leases and financings, aircraft purchase commitments,
leases and developments of airport and other facilities and other cash obligations. We also have guaranteed costs associated with our
regional alliances and commitments to purchase aircraft. As a result of the substantial fixed costs associated with these obligations:
• A decrease in revenues results in a disproportionately greater percentage decrease in earnings.
• We may not have sufficient liquidity to fund all of these fixed costs if our revenues decline or costs increase.
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