US Airways 2008 Annual Report Download - page 11

Table of Contents
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. In addition, 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 US Airways.
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.
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 DOT. These certificates may be altered, amended, modified or suspended by the DOT if the public convenience
and necessity so require, or may be revoked for failure to comply with the terms and conditions of the certificates.
Airlines are also regulated by the Federal Aviation Administration ("FAA"), primarily in the areas of flight operations, maintenance,
ground facilities and other operational and safety areas. Pursuant to these regulations, our airline subsidiaries have FAA-approved
maintenance programs for each type of aircraft they operate. The programs provide for the ongoing maintenance of such aircraft, ranging
from periodic routine inspections to major overhauls. From time to time, the FAA issues airworthiness directives and other regulations
affecting our airline subsidiaries or one or more of the aircraft types they operate. In recent years, for example, the FAA has issued or
proposed mandates relating to, among other things, enhanced ground proximity warning systems, fuselage pressure bulkhead
reinforcement, fuselage lap joint inspection rework, increased inspections and maintenance procedures to be conducted on certain
aircraft, increased cockpit security, fuel tank flammability reductions and domestic reduced vertical separation. Regulations of this sort
tend to enhance safety and increase operating costs.
The DOT allows local airport authorities to implement procedures designed to abate special noise problems, provided such
procedures do not unreasonably interfere with interstate or foreign commerce or the national transportation system. Certain locales,
including Boston, Washington, D.C., Chicago, San Diego and San Francisco, among others, have established airport restrictions to limit
noise, including restrictions on aircraft types to be used and limits on the number of hourly or daily operations or the time of these
operations. In some instances these restrictions have caused curtailments in services or increases in operating costs, and these restrictions
could limit the ability of our airline subsidiaries to expand their operations at the affected airports. Authorities at other airports may
consider adopting similar noise regulations.
The airline industry is also subject to increasingly stringent federal, state and local laws aimed at protecting the environment. Future
regulatory developments and actions could affect operations and increase operating costs for the airline industry, including our airline
subsidiaries. For more discussion of environmental regulation, see
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