US Airways 2007 Annual Report Download - page 23

Table of Contents
expose us to fines, sanctions or other penalties, which could materially and adversely affect our results of operations and overall business.
In addition, failure to address appropriately these issues could also give rise to additional legal risks, which, in turn, could increase the
size and number of litigation claims and damages asserted or subject us to enforcement actions, fines and penalties and cause us to incur
further related costs and expenses.
Increases in insurance costs or reductions in insurance coverage may adversely impact our operations and financial results.
The terrorist attacks of September 11, 2001 led to a significant increase in insurance premiums and a decrease in the insurance
coverage available to commercial air carriers. Accordingly, our insurance costs increased significantly and our ability to continue to
obtain insurance even at current prices remains uncertain. In addition, we have obtained third party war risk (terrorism) insurance through
a special program administered by the FAA, resulting in lower premiums than if we had obtained this insurance in the commercial
insurance market. The program has been extended, with the same conditions and premiums, until March 31, 2008. Under Vision 100 -
Century of Aviation Reauthorization Act, the President may continue the insurance program until December 31, 2008. If the federal
insurance program terminates, we would likely face a material increase in the cost of war risk insurance. Because of competitive
pressures in our industry, our ability to pass additional insurance costs to passengers is limited. As a result, further increases in insurance
costs or reductions in available insurance coverage could have an adverse impact on our financial results.
The airline industry is intensely competitive and dynamic.
Our competitors include other major domestic airlines as well as foreign, regional and new entrant airlines, some of which have
more financial resources or lower cost structures than ours, and other forms of transportation, including rail and private automobiles. In
many of our markets we compete with at least one low-cost air carrier. Our revenues are sensitive to numerous factors, and the actions of
other carriers in the areas of pricing, scheduling and promotions can have a substantial adverse impact on overall industry revenues.
These factors may become even more significant in periods when the industry experiences large losses, as airlines under financial stress,
or in bankruptcy, may institute pricing structures intended to achieve near-term survival rather than long-term viability. In addition,
because a significant portion of US Airways' traffic is short-haul travel, US Airways is more susceptible than other major airlines to
competition from surface transportation such as automobiles and trains.
Low cost carriers have a profound impact on industry revenues. Using the advantage of low unit costs, these carriers offer lower
fares, particularly those targeted at business passengers, in order to shift demand from larger, more-established airlines. Some low cost
carriers, which have cost structures lower than ours, have better financial performance and significant numbers of aircraft on order for
delivery in the next few years. These low-cost carriers are expected to continue to increase their market share through growth and could
continue to have an impact on the overall performance of US Airways Group.
Industry consolidation could weaken our competitive position.
If mergers or other forms of industry consolidation take place, US Airways Group might or might not be included as a participant.
Depending on which carriers combine and which assets, if any, are sold or otherwise transferred to other carriers in connection with such
combinations, our competitive position relative to the post-combination carriers or other carriers that obtain assets could be harmed.
The loss of key personnel upon whom we depend to operate our business or the inability to attract additional qualified personnel
could adversely affect the results of our operations or our financial performance.
We believe that our future success will depend in large part on our ability to attract and retain highly qualified management,
technical and other personnel. We may not be successful in retaining key personnel or in attracting and retaining other highly qualified
personnel. Any inability to retain or attract significant numbers of qualified management and other personnel could adversely affect our
business.
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