US Airways 2008 Annual Report Download - page 21

Table of Contents
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 flight 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. We are also at risk should one of these service providers cease
operations, and there is no guarantee that we could replace these providers on a timely basis with comparably priced providers. Recent
volatility in fuel prices, disruptions to capital markets and the current economic downturn in general have subjected certain of these third
party service providers to strong financial pressures. Any material problems with the efficiency and timeliness of contract services,
resulting from financial hardships or otherwise, could have a material adverse effect on our business, financial condition and results of
operations.
Our business is dependent on the price and availability of aircraft fuel. Continued periods of high volatility in fuel costs, increased
fuel prices and significant disruptions in the supply of aircraft fuel could have a significant negative impact on our operating
results and liquidity.
Our operating results are significantly impacted by changes in the availability, price volatility and the cost of aircraft fuel, which
represents the largest single cost item in our business. Fuel prices have fluctuated substantially over the past several years and sharply in
the last year.
Because of the amount of fuel needed to operate the airline, even a relatively small increase in the price of fuel can have a
significant adverse aggregate effect on our costs. Due to the competitive nature of the airline industry and unpredictability of the market,
we can offer no assurance that we may be able to increase our fares or otherwise increase revenues sufficiently to offset fuel prices.
Although we are currently able to obtain adequate supplies of aircraft fuel, we cannot predict the future availability, price volatility
or cost of aircraft fuel. Natural disasters, political disruptions or wars involving oil-producing countries, changes in fuel-related
governmental policy, changes in aircraft fuel production capacity, environmental concerns and other unpredictable events may result in
fuel supply shortages and additional fuel price volatility and cost increases in the future.
From time to time we enter into hedging arrangements to protect against rising fuel costs. Our ability to hedge in the future,
however, may be limited, particularly if the financial condition of the airline worsens. Also, our fuel hedging arrangements do not
completely protect us against price increases and are limited in both volume of fuel and duration. Finally, a rapid decline in the price of
fuel can adversely impact our short-term liquidity as our hedge counterparties require that we post collateral in the form of cash or letters
of credit when the projected future market price of fuel drops below the strike price on existing hedging arrangements. See also the
discussion in Part II, Item 7A. "Quantitative and Qualitative Disclosures About Market Risk."
We rely heavily on automated systems to operate our business and any failure or disruption of these systems could harm our
business.
To operate our business, we depend on automated systems, including our computerized airline reservation systems, our flight
operations systems, our telecommunication systems, our airport customer self-service kiosks and our websites. Our website and
reservation systems must be able to accommodate a high volume of traffic and deliver important flight information on a timely and
reliable basis. Substantial or repeated disruptions or failures of any of these automated systems could impair our operations, reduce the
attractiveness of our services and could result in lost revenues and increased costs. In addition, these automated systems require periodic
maintenance, upgrades and replacements, and our business may be harmed if we fail to properly maintain, upgrade or replace such
systems.
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