US Airways 2009 Annual Report Download - page 19

Table of Contents
credit in the London interbank market. We have not hedged our interest rate exposure and, accordingly, our interest expense for any
particular period may fluctuate based on LIBOR and other variable interest rates. To the extent these interest rates increase, our interest
expense will increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our
available cash flow for general corporate requirements may be adversely affected. See also the discussion of interest rate risk in Part II,
Item 7A, "Quantitative and Qualitative Disclosures About Market Risk."
Our high level of fixed obligations limits our ability to fund general corporate requirements and obtain additional financing, limits
our flexibility in responding to competitive developments and increases our vulnerability to adverse economic and industry
conditions.
We have a significant amount of fixed obligations, including debt, aircraft leases and financings, aircraft purchase commitments,
leases and developments of airport and other facilities and other cash obligations. We also have certain guaranteed costs associated with
our regional alliances. Our existing indebtedness is secured by substantially all of our assets.
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; and
• we may have to use our working capital to fund these fixed costs instead of funding general corporate requirements, including
capital expenditures.
These obligations also impact our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business.
Any failure to comply with the liquidity covenants contained in our financing arrangements would likely have a material adverse
effect on our business, financial condition and results of operations.
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 comply with these covenants while paying the fixed costs associated with our contractual obligations and our other
expenses will depend on our operating performance and cash flow, which are seasonal, as well as factors including fuel costs and general
economic and political conditions.
The factors affecting our liquidity (and our ability to comply with related covenants) will remain subject to significant fluctuations and
uncertainties, many of which are outside our control. Any breach of our liquidity covenants or failure to timely pay our obligations could
result in a variety of adverse consequences, including the acceleration of our indebtedness, the withholding of credit card proceeds by our
credit card processors 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.
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 one of the largest single cost items in our business. Fuel prices have fluctuated substantially over the past several years and
sharply in the last year.
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