US Airways 2008 Annual Report Download - page 20

Table of Contents
have certain guaranteed costs associated with our regional alliances. 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.
• We may have to use our working capital to fund these fixed costs instead of funding general corporate requirements, including
capital expenditures.
• We may not have sufficient liquidity to respond to competitive developments and adverse economic conditions.
Our obligations also impact our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business.
Our existing indebtedness is secured by substantially all of our assets. Moreover, the terms of our Citicorp credit facility and certain of
our other financing arrangements require us to maintain consolidated unrestricted cash and cash equivalents of not less than $850 million,
with not less than $750 million (subject to partial reductions upon certain reductions in the outstanding principal amount of the loan) of
that amount held in accounts subject to control agreements.
Our ability to pay the fixed costs associated with our contractual obligations depends on our operating performance and cash flow,
which in turn depend on general economic and political conditions. A failure to pay our fixed costs or a breach of the contractual
obligations could result in a variety of adverse consequences, including the acceleration of our indebtedness, the withholding of credit
card proceeds by the credit card servicers and the exercise of remedies by our creditors and lessors. In such a situation, it is unlikely that
we would be able to fulfill our contractual obligations, repay the accelerated indebtedness, make required lease payments or otherwise
cover our fixed costs.
If our financial condition worsens, provisions in our credit card processing and other commercial agreements may adversely affect
our liquidity.
We have agreements with companies that process customer credit card transactions for the sale of air travel and other services.
These agreements allow these processing companies, under certain conditions, to hold an amount of our cash (referred to as a "holdback")
equal to a portion of advance ticket sales that have been processed by that company, but for which we have not yet provided the air
transportation. These holdback requirements can be modified at the discretion of the processing companies upon the occurrence of
specific events, including material adverse changes in our financial condition. An increase in the current holdback balances to higher
percentages up to and including 100% of relevant advanced ticket sales could materially reduce our liquidity. Likewise, other of our
commercial agreements contain provisions that allow other entities to impose less favorable terms, including an acceleration of amounts
due, in the event of material adverse changes in our financial condition.
Union disputes, employee strikes and other labor-related disruptions may adversely affect our operations.
Relations between air carriers and labor unions in the United States are governed by the Railway Labor Act (the "RLA"). Under the
RLA, collective bargaining agreements generally contain "amendable dates" rather than expiration dates, and the RLA requires that a
carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy
series of bargaining processes overseen by the National Mediation Board. These processes do not apply to our current and ongoing
negotiations for post-merger integrated labor agreements, and this means unions may not lawfully engage in concerted refusals to work,
such as strikes, slow-downs, sick-outs or other similar activity. Nonetheless, after more than three years of negotiations without a
resolution to the bargaining issues that arose from the merger, there is a risk that disgruntled employees, either with or without union
involvement, could engage in one or more concerted refusals to work that could individually or collectively harm the operation of the
airline and impair its financial performance. Likewise, employees represented by unions that have reached post-merger integrated
agreements could engage in improper actions that disrupt our operations.
18