US Airways 2008 Annual Report Download - page 23

Table of Contents
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 our flying and revenue. We would also be materially impacted in the event of
further terrorist attacks or perceived terrorist threats.
Changes in government regulation could increase our operating costs and limit our ability to conduct our business.
Airlines are subject to extensive regulatory requirements. In the last several years, Congress has passed laws, and the DOT, the
FAA, the TSA and the Department of Homeland Security have issued a number of directives and other regulations. These requirements
impose substantial costs on airlines. On October 10, 2008, the FAA finalized new rules governing flight operations at the three major
New York airports. These rules did not take effect because of a legal challenge, but the FAA has pushed forward with a reduction in the
number of flights per hour at LaGuardia. Currently, the FAA is attempting to work with airlines to implement its new operations cap at
LaGuardia through voluntary methods. If this is not successful, the FAA may resort to other methods to reduce congestion in New York.
Additionally, the DOT recently finalized a policy change that will permit airports to charge differentiated landing fees during congested
periods, which could impact our ability to serve certain markets in the future. The new rule is being challenged in court by the industry.
Additional laws, regulations, taxes and policies have been proposed or discussed from time to time, including recently introduced
federal legislation on a "passenger bill of rights," that, if adopted, could significantly increase the cost of airline operations or reduce
revenues. The state of New York's attempt to adopt such a measure has been successfully challenged by the airline industry. Other states,
however, are contemplating similar legislation. The DOT also has a rulemaking pending and recently completed a stakeholder task force
working on various initiatives that could lead to additional expansion of airline obligations in the customer service area and increase our
costs.
Finally, the ability of U.S. carriers to operate international routes is subject to change because the applicable arrangements between
the U.S. and foreign governments may be amended from time to time, or because appropriate slots or facilities may not be available. We
cannot assure you that laws or regulations enacted in the future will not adversely affect our operating costs. In addition, increased
environmental regulation may increase costs or restrict our operations. The EU has been particularly aggressive in this area.
The inability to maintain labor costs at competitive levels could harm our financial performance.
Our business plan includes assumptions about labor costs going forward. Currently, our labor costs are very competitive. However,
we cannot assure you that labor costs going forward will remain competitive, because some of our agreements are amendable now and
others may become amendable, because competitors may significantly reduce their labor costs or because we may agree to higher-cost
provisions in our current labor negotiations. Approximately 87% of the employees within US Airways Group are represented for
collective bargaining purposes by labor unions, including unionized groups of our employees abroad.
Some of our unions have brought and may continue to bring grievances to binding arbitration. Unions may also bring court actions
and may seek to compel us to engage in the bargaining processes where we believe we have no such obligation. If successful, there is a
risk these judicial or arbitral avenues could create additional costs that we did not anticipate.
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