US Airways 2010 Annual Report Download - page 9

Table of Contents
members also have access to certain partner carriers' airport lounges. We also benefit from the distribution strengths of each of our
partner carriers.
US Airways is a member of the Star Alliance, the world's largest airline alliance, which now has 27 member airlines serving
approximately 1,160 destinations in 181 countries. Membership in the Star Alliance further enhances the value of our domestic and
international route network by allowing customers wide access to the global marketplace. Expanded benefits for customers include
network expansion, frequent flyer program benefits, airport lounge access, convenient single-ticket pricing with electronic tickets, one-
stop check-in and coordinated baggage handling. We also have bilateral marketing/code sharing agreements with Star Alliance members
Air China, Air New Zealand, ANA, Asiana, bmi, Brussels Airlines, Lufthansa, Singapore Airlines, Spanair, Swiss International, TAP
Portugal, Turkish Airlines and United. Other international code sharing partners include EVA Airways, Qatar Airways, Royal Jordanian
Airlines, TACA and Virgin Atlantic Airways. Marketing/code sharing agreements are maintained with two smaller regional carriers in
the Caribbean that operate collectively as the "GoCaribbean" network. Each of these code share agreements funnel international traffic
onto our domestic flights or support specific European and Caribbean markets in which we operate. Domestically, we code share with
Hawaiian Airlines on intra-Hawaii flights.
Competition in the Airline Industry
The markets in which we operate are highly competitive. Price competition occurs on a market-by-market basis through price
discounts, changes in pricing structures, fare matching, target promotions and frequent flyer initiatives. Airlines typically use discount
fares and other promotions to stimulate traffic during normally slack travel periods, when they begin service to new cities or when they
have excess capacity, to generate cash flow and maximize revenue per ASM and to establish, increase or preserve market share. Discount
and promotional fares are generally non-refundable and may be subject to various restrictions such as minimum stay requirements,
advance ticketing, limited seating and change fees. We have often elected to match discount or promotional fares initiated by other air
carriers in certain markets in order to compete in those markets. Most airlines will quickly match price reductions in a particular market.
Our ability to compete on the basis of price is limited by our fixed costs and depends on our ability to manage effectively our operating
costs. Some of our competitors have greater financial resources and/or lower cost structures than we do. In addition, recent years have
seen the growth of low-fare, low-cost competitors in many of the markets in which we operate. These competitors include Southwest,
AirTran, JetBlue, Allegiant, Frontier and Virgin America. These low cost carriers generally have lower cost structures than US Airways.
In addition to price competition, airlines compete for market share by increasing the size of their route system and the number of
markets they serve. Airlines with international operations are less exposed to domestic economic conditions and may be able to offset less
profitable domestic fares with more profitable international fares. We also compete on the basis of scheduling (frequency and flight
times), availability of nonstop flights, on-time performance, type of equipment, cabin configuration, amenities provided to passengers,
frequent flyer programs, the automation of travel agent reservation systems, on-board products, markets served and other services. We
compete with both major full service airlines and low-cost airlines throughout our network.
Additionally, because we operate a significant number of flights in the eastern United States, our average trip distance, or stage length,
is shorter than those of other major airlines. This makes us more susceptible than other major airlines to competition from surface
transportation such as automobiles and trains. Surface competition can be more significant during economic downturns when consumers
cut back on discretionary spending.
Industry Regulation and Airport Access
General
Our airline subsidiaries operate under certificates of public convenience and necessity or certificates of commuter authority, both of
which are issued by the DOT. These certificates may be altered, amended, modified or suspended by the DOT if the public convenience
and necessity so require, or may be revoked for failure to comply with the terms and conditions of the certificates.
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