US Airways 2008 Annual Report Download - page 9

Table of Contents
levels. We anticipate that these capacity reductions will enable us to minimize the impact of reduced passenger demand on revenue and
reduce costs.
Despite the capacity reductions in 2008, we were able to increase service in certain markets. Domestically, we added new non-stop
service from our Charlotte hub to Montreal, Quebec; Austin and San Antonio, Texas; Fort Walton Beach and Daytona Beach, Florida;
Gulfport, Mississippi and Sacramento, California, and from our Philadelphia hub to Sacramento, California. In January 2009, we began
service from Washington National to Akron/Canton, Ohio. In 2008, we also added new transatlantic service from our Philadelphia hub to
London's Heathrow Airport and announced three new transatlantic flights to begin in Spring 2009, including service from our
Philadelphia hub to Birmingham, U.K. and Oslo, Norway as well as service from our Charlotte hub to Paris, France. We also announced
additional non-stop service from Boston's Logan International Airport to eight destinations in Latin America and the Caribbean to operate
in January-March 2009. In addition, we received Department of Transportation ("DOT") approval to operate daily non-stop service from
our Philadelphia hub to Tel Aviv, Israel. Service, which is awaiting Israeli government approval, is slated to begin in July 2009 utilizing a
new A330-200 aircraft.
In 2007, US Airways and Airbus executed definitive purchase agreements for the acquisition of 97 aircraft, including 60 single-aisle
A320 family aircraft and 37 widebody aircraft comprised of 22 A350 Xtra Wide Body ("XWB") aircraft and 15 A330-200 aircraft. These
were in addition to orders for 37 single-aisle A320 family aircraft from a previous Airbus purchase agreement. The A320 aircraft will be
used to replace older narrowbody aircraft in our fleet. In 2008, we took delivery of five A321 aircraft. In 2009, we plan to take delivery of
18 A321 aircraft and two A320 aircraft, with deliveries of the remaining 72 A320 family aircraft to continue from 2010 through 2012.
We also plan to take delivery of five A330-200 aircraft in 2009, with the remaining ten A330-200 aircraft to be delivered in 2010-2011.
In October 2008, we amended the terms of the A350 XWB Purchase Agreement for deliveries of the 22 firm order A350 XWB aircraft to
begin in 2015 rather than 2014 and extending through 2018. We plan to use the A330-200 and A350 XWB aircraft to replace older
widebody aircraft in our fleet and to facilitate international growth. In 2008, we also took delivery of the 14 remaining firm Embraer 190
aircraft on order under our Amended and Restated Purchase Agreement with Embraer.
Express Operations
Certain air carriers have code share arrangements with us to operate under the trade name "US Airways Express." Typically, under a
code share arrangement, one air carrier places its designator code and sells tickets on the flights of another air carrier, which is referred to
generically as its code share partner. US Airways Express carriers are an integral component of our operating network. We rely heavily
on feeder traffic from our US Airways Express partners, which carry passengers to our hubs from low-density markets that are
uneconomical for us to serve with large jets. In addition, US Airways Express operators offer complementary service in our existing
mainline markets by operating flights during off-peak periods between mainline flights. During 2008, the US Airways Express network
served 187 airports in the continental United States, Canada and Latin America, including 77 airports also served by our mainline
operation. During 2008, approximately 27 million passengers boarded US Airways Express air carriers' planes, approximately 43% of
whom connected to mainline flights. Of these 27 million passengers, approximately 8 million were enplaned by our wholly owned
regional airlines Piedmont and PSA, approximately 19 million were enplaned by third-party carriers operating under capacity purchase
agreements and less than one million were enplaned by carriers operating under prorate agreements, as described below.
The US Airways Express code share arrangements are in the form of either capacity purchase or prorate agreements. The capacity
purchase agreements provide that all revenues, including passenger, mail and freight revenues, go to us. In return, we agree to pay
predetermined fees to these airlines for operating an agreed-upon number of aircraft, without regard to the number of passengers on
board. In addition, these agreements provide that certain variable costs, such as airport landing fees and passenger liability insurance, will
be reimbursed 100% by us. We control marketing, scheduling, ticketing, pricing and seat inventories. Under the prorate agreements, the
prorate carriers receive a prorated share of ticket revenue and pay certain service fees to us. The prorate carrier is responsible for pricing
the local, point to point markets to the extent that we do not have competing existing service in that market. We are responsible for
pricing all other prorate carrier tickets. The prorate carrier is also responsible
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