US Airways 2010 Annual Report Download - page 16

Table of Contents
Item 1A. Risk Factors
Below are a series of risk factors that may affect our results of operations or financial performance. We caution the reader that these
risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time to
time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of these risk factors on our business or the
extent to which any factor or combination of factors may impact our business.
Risk Factors Relating to the Company and Industry Related Risks
US Airways Group could experience significant operating losses in the future.
There are several reasons, including those addressed in these risk factors, why US Airways Group might fail to achieve profitability
and might experience significant losses. In particular, the weakened condition of the economy and the high volatility of fuel prices have
had and continue to have an impact on our operating results, and increase the risk that we will experience losses.
Downturns in economic conditions adversely affect our business.
Due to the discretionary nature of business and leisure travel spending, airline industry revenues are heavily influenced by the
condition of the U.S. economy and economies in other regions of the world. Unfavorable conditions in these broader economies have
resulted, and may result in the future, in decreased passenger demand for air travel and changes in booking practices, both of which in
turn have had, and may have in the future, a strong negative effect on our revenues. In addition, during challenging economic times,
actions by our competitors to increase their revenues can have an adverse impact on our revenues. See "The airline industry is intensely
competitive and dynamic" below. Certain labor agreements to which we are a party limit our ability to reduce the number of aircraft in
operation, and the utilization of such aircraft, below certain levels. As a result, we may not be able to optimize the number of aircraft in
operation in response to a decrease in passenger demand for air travel.
Increased costs of financing, a reduction in the availability of financing and fluctuations in interest rates could adversely affect our
liquidity, operating expenses and results.
Global market and economic conditions were unprecedented and challenging in 2008 and 2009, with tighter credit conditions imposed
on borrowers. Continued concerns about the systemic impact of inflation, the availability and cost of credit, energy costs and geopolitical
issues, combined with declining business activity levels and consumer confidence, increased unemployment and volatile oil prices, have
contributed to unprecedented levels of volatility in the capital markets. As a result of these market conditions, the cost and availability of
credit have been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. These changes in the
domestic and global financial markets may increase our costs of financing and adversely affect our ability to obtain financing needed for
the acquisition of aircraft that we have contractual commitments to purchase and for other types of financings we may seek in order to
refinance debt maturities, raise capital or fund other types of obligations. Any downgrades to our credit rating may likewise increase the
cost and reduce the availability of financing.
In addition, we have substantial non-cancelable commitments for capital expenditures, including the acquisition of new aircraft and
related spare engines. We have not yet secured financing commitments for some of the aircraft we have on order, commencing with
deliveries scheduled for 2013, and cannot assure you of the availability or cost of that financing. If we are not able to arrange financing
for such aircraft at customary advance rates and on terms and conditions acceptable to us, we expect we would seek to negotiate deferrals
of aircraft deliveries with the manufacturer or financing at lower than customary advance rates, or, if required, use cash from operations
or other sources to purchase the aircraft.
Further, a substantial portion of our indebtedness bears interest at fluctuating interest rates, primarily based on the London interbank
offered rate for deposits of U.S. dollars ("LIBOR"). LIBOR tends to fluctuate based on general economic conditions, general interest
rates, federal reserve rates and the supply of and demand for credit in the London interbank market. We have not hedged our interest rate
exposure and, accordingly, our interest expense for
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