043010 Aboutus Outlook

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April 30, 2010 Issue 261A US Airways Employee Publication

INSIDE

New Boarding Starts May 5 page 2

Earnings Illustrated page 3

Doug on Industry Consolidation page 6

On Tuesday US Airways reported nancial results

or the rst quarter o 2010, showing an improving

revenue environment compared to a year earlier. The

company reported a net loss o $45 million in the

rst quarter, compared to a net loss o $103 million

during the same period a year earlier. First quarter

revenue increased 7.9 percent to $2.65 billion, while

expenses grew 7.3 percent to $2.66 billion.

On the company conference call with nancial analysts

and journalists, Chairman and CEO Doug Parker said our

improving operational and nancial performance came despite

the effects of severe storms during February We saw a $30

million negative impact to revenue because of the storms, which

closed operations at DCA, PHL and LGA for multiple days and

forced us to cancel seven percent of ights.

Doug said, “The improvement would have been even more

pronounced except for extreme winter storms along the East

Coast during the quarter, which impacted US Airways more than

many of our competitors We are grateful to our 30,000 fellow

employees who did an exceptional job of taking care of our

customers during a very difcult operational quarter.”

He added, “Looking forward, we believe we are well-positioned

for success in a dynamic and improving industry environment

The steps we have taken to improve our airline — focusing our

ying on areas of competitive strength, increasing ancillary

revenue generation, establishing industry-leading operating

reliability and keeping our costs in check — have clearly made

a difference and are now complemented by a much-improved

industry revenue environment. We anticipate a proftable second

quarter and expect our revenue momentum and cost discipline

to continue.”

On Tuesday afternoon, Doug and other members of senior

management hosted the quarterly State of the Airline meeting

with employees A replay of the meeting is available on Wings

1Q Loss Shrinks with Improving Environment

Not a numbers person? Check out our

earnings-made-easy Earnings Illustrated on

pg. 3-4 or a breakdown o our rst quarter

income statement.

Unable to listen to State o the Airline live?

Sign on to Wings or the replay.

President Scott Kirby answers a question during Tuesday’s State

of the Airline meeting.



Last May, US Airways implemented

a new streamlined boarding process

to board planes more efciently

while continuing to provide priority

boarding to our most valuable

customers. The rest o our customers

were then boarded in a random

method in Zone 4. Around the same

time, increases in checked baggage

ees drove more customers to bring

bags to the gate.

Our airport agents and ight attendants

have told us that the combination of these

two changes have created challenges in

managing carry-on and gate-checked

bags Both groups have done a great job

tackling these challenges, delivering

industry-leading on-time departure performance (D:00) for the full year 2009

and during the rst months of 2010.

In response to employee feedback and

input, beginning May 5 we will again

revise our boarding process We will

continue to offer priority boarding to our

Preferred, Choice Seat and Web Check-in

customers, and will add an additional zone

to create a back-to-front general boarding

process Our goal with this change is

to maintain the efciency and on-time

performance of our current process while

attempting to create a calmer, more

organized boarding environment for our

customers and employees

Thank you to our airport customer service

agents and ight attendants for their

partnership in designing and consistently

executing processes that best meet the

needs of our customers, our operation and

our employees

Bags, bags and more bagsSince US Airways and other airlines began charging or checked bags, we’ve seen an increase in the

number o bags brought into the cabin. This has created new challenges or our gate agents and

fight attendants. Here’s what US Airways is doing to ensure a smooth process or our customers

and employees:

• 1+1: Ensuring only the allowable bags within 1+1 carry-on policy are taken past security. A better

management of carry-on bags starts at the security checkpoint. We are currently nishing a study

to determine how many customers make it past security with more than what’s allowed Once

completed, the study will be used to determine what level of monitoring, if any, is needed to reduce

the number of bags taken to the gate

• A more helpful gate reader: The current gate reader alerts gate agents when overhead bin

space might be running out, but it’s only based on aircraft type and load factor, not a specic

market or day of the week Starting June 7, a new, scanable bag tag (shown at right) will be

placed on bags that are gate checked. This will help us track more specic data for individual

ights, which will allow us to update our gate reader alerts by market so agents can be more

accurately notied when overhead bins are likely to be full.

• Start on time. End on time. Depart on time: We’re shifting our focus to start boarding

on time, regardless of high or low the load factor is Starting boarding on time, every

time, helps give us a little extra time at the end of boarding process to better manage

the unexpected and still depart on time Stay tuned…there’s more to come on this

initiative as we prepare for the busy summer travel season

Zone

1

Star Alliance Gold, First Class,

Dividend Miles Chairman’s,

Gold, Platinum, bulkhead

and some exit row seating

Zone

2

Dividend Miles Silver, Choice

Seats and tickets purchasedwith US Airways Premier

World MasterCard and US

Airways Visa Signature cards

Zone

3Web Check-in

Zone

4General boarding (back o

aircrat)

Zone

5General boarding (middle /

ront o aircrat)

Zone

6Additional zone or ront o

A321, A330 and B767 aircrat

New boarding process starts May 5Who’s in what zone?



From our operating revenue, the following costs, known as operating expenses, must be subtracted

Fuel and related taxes is the cost of jet fuel consumed (plus taxes)-$534

Salaries and related costs include salaries and benets for all employees.......-$556

Next come Express expenses, which include the costs of our wholly owned

ubsidiaries, and what we pay to purchase capacity from contract carriers-$650

8. We need airplanes to y, and we rent the majority of our eet. Th

charges are simply called aircrat rent.........................................-$

9. The cost to maintain and repair our eet rolls up into aircrat

maintenance expenses................................................................-$

Money collected from the services we provide is known a

operating revenues

1. We’re in the business of carrying passengers, so it’s no

surprise that our largest revenue source is our customers

Mainline revenue includes passenger revenue collected

from mainline ights..................................................+$1,

2 Our Express passengers – both from wholly owned a

contract Express carriers – are also an important source o

revenue .........................................................................+$

Cargo revenues come from transporting mail and freight........................................................................................................+

Operating revenue also comes from other sources like our new revenue initiatives such as baggage fees and other a la carte

evenues, ground handling for other airlines, interline handling fees and selling frequent yer miles .......................................+$

First Quarter 2010 Financial Recap

A. The sum of items 1-4 are our Total Operating Revenues = $2,651

cont'd on next p

This week, US Airways reported nancial results or the rst quarter. For the quarter, we reported a net loss o $45 million,

or ($0.28) per share. Excluding net special credits totaling $44 million, the company reported a net loss o $89 million, or($0.55) per share or the quarter. Special items or the quarter include a $49 million net realized gain related to the sale o

certain investments in auction rate securities ofset in part by $5 million in aircrat costs related to previously announced

capactiy reductions. (Note: all numbers are in millions, except earnings per share numbers.)



10. Other rent and landing ees includes rent for facilities at airports,

airports' landing fees, etc.............................................................................-$

11. Selling expenses include the distribution costs such as credit card fees a

fees we pay to the global distribution systems (Sabre, Apollo, etc), as well as

advertising expenses-

12. Special charges, net includes $5 million in aircraft costs associated w

previously announced capacity reductions

3. Depreciation and amortization is the cost for usage of aircraft parts, ofce

quipment, ground equipment and any other assets that the company owns and that we

xpense over the lifetime of the asset.........................................................................-$61

4. Other expenses include hotels, per diem, telephone and utility costs, etc-$298

Next, we add our non-operating expenses and income into the equation

15. Interest earned from money in the bank is interest income..................

16. We incur expenses for borrowed money (debt), called interestexpense-$

17. Other net, includes $49 million of net realized gains related to the sale

certain investments in auction rate securities offset by foreign currency los

......................................................................................................................+$

ontinued from previous page

E Combine the Operating Loss(C) and Non-OperatingExpenses (D) for Loss Beore Taxes = -$45

C Total Operating Revenues (A) less Total Operating Expenses (B) equals our

Total Operating Loss = -$10

F That brings us to our net loss (including net special credits) = -$45 or -$028 per sha

8. Finally, because the company reported a net loss, there was no provision for

ncome taxes$0

B. The sum of items 5-14 is our Total Operating Expenses = -$2,661

D. Combine items 15-17 for Total Non-Operating Expenses, Net = -$3

4



On Wednesday, more than 30 journalists rom local and

national media, including bloggers and pundits, came

together at CHQ or US Airways’ annual Media Day. Media

Day is an opportunity or the reporters who cover the

aviation industry to spend the day with members o

US Airways’ senior management team, and get a look at

how we stacked up or 2009 and learn what’s ahead or2010. They also had time to network and test their airline

knowledge by playing a Jeopardy-style trivia game and an

airline pricing game.

CEO Doug Parker started the day by discussing his views on

consolidation and US Airways’ role in shaping the industry,

regardless of whether or not we participate directly in a

merger Other hot topics during the executive question and

answer session included long onboard delays, Wi-Fi and labor

negotiations Read more about Doug’s views on consolidation on

page 6

Ted Reed from theStreetcom said, “US Airways is to be

commended as only one of two airlines that regularly hosts

Media Day and makes a big effort to get people together.”

The Arizona Republic’s Dawn Gilbertson shared, “It’s nice to

interact with US Airways’ leaders in an unscripted environment

when I’m not under deadline pressure.”

Other attendees included journalists, bloggers and pundits from

the Wall Street Journal , Reuters, The New York Times, The

Philadelphia Inquirer , The Cranky Flier and FareComparecom

Mingling with the media

CFO Derek Kerr with Airline Business/Air Transport

Intelligence’s Lori Ranson and Aviation Daily’s Adrian

Schofeld.

Christina Estes interviews CEO Doug Parker for KFYI Radio.

From left to right, theStreet.com’s Ted Reed, Vice President,

Airport Customer Service, Donna Paladini and Air

Transportation Association’s David Castlevetter.

President Scott Kirby talks with Perry Flint from Air Transport

World and Scott McCartney from the Wall Street Journal.



AboutUS sat down with Doug Parker this week to talk

consolidation.

AboutUS: Doug, thanks for taking a few minutes to talk with

us. There’s been a lot of action in the industry consolidation

front and we’d like to get some insight. So, let’s start by

going back to last week when we told the world in a press

release that we were ending merger discussions with United

Airlines. That came as a surprise to many as we had never

conrmed media reports that we were talking to United. Can

you tell us why we did that?

Doug Parker: That announcement took some creativity but we

did it because of how widely reported, and frankly, accurate,

most of the media reports were about the proposed transaction

But simply put, when our Board of Directors ultimately decided

to end talks with United, we felt that was the right thing to do

AU: But what really happened with

United? Some reports suggest that we

were in discussions for months and were

close to a deal.

DP: It seems that details of our proposed

transaction were leaked to the media,

and according to media reports, that wasenough to spur Continental into opening

up discussions with United Those media

reports continue nearly daily and I suspect

that they are accurate

AU: Why would United rather do a deal with Continental

then with us?

DP: I can’t speculate what United’s leadership team might be

thinking specically but on several occasions, they’ve madeit clear that they believe consolidation is perhaps the most

compelling solution to what ails this industry

I have said many times that consolidation is good for the

industry There are many challenges that prevent the industry

from delivering a reasonable and sustained prot. My rm

view is that the fragmented state of our business is the largest

contributor to why we can’t do this And that’s why you see us

not being consistently protable and weathering the shocks of

economic downturns and volatile fuel prices

As I said on our earnings conference call with Wall Street

analysts and reporters this week, we would prefer to participate

in consolidation rather than not We have been open about that

point and aggressive in our actions That does not, however,

mean that we need to participate I believe very strongly

that consolidation among our competitors will only serve to

strengthen our standalone prospects and not weaken them

Continued on pg. 7

“There are many challenges that prevent the

industry rom delivering a reasonable and sustained

proft. My frm view is that the ragmented state o

our business is the largest contributor to why we

can’t do this.”

Doug on Industry Consolidation



AU: So does this mean we sit out this round on

consolidation? Haven’t you said that the number of hub-and-

spoke airlines in the U.S. should be three?

DP: Yes, I have said that before and I think that a number of years into the future that will occur again, but we don’t have to

participate in consolidation in order to benet from it. In 2005,

the America West/US Airways merger took a eld of seven

hub-and-spoke airlines to six The Delta/Northwest merger,

which was spurred on by a new board and CEO at Delta after we

made an aggressive move to merge with Delta in 2006, further

shrunk the eld to ve. There’s still too much fragmentation, but

it’s a more rational set of competition and a potential UA/CO

combination reduces it further to four We might not have been

an active player in either Delta/Northwest or a potential United/

Continental merger, but I think US Airways had a big role in

stirring the pot to get other airlines thinking about consolidation

for the good of the industry

AU: What should US Airways be doing?

DP: The 30,000 employees of this airline continue to perform

extremely well That’s what we need to keep doing Ninety-nine

percent of our ying is focused at Philadelphia, Washington,

DC, Charlotte and Phoenix because those are our assets They

don’t have the revenue generating capabilities of hubs like

Atlanta, Chicago and Newark for example, but we do have a cost

advantage that offsets the smaller revenue generation compared

to other hub-and-spoke airlines

I couldn’t be more proud of what we’ve accomplished over the

past two years Running a solid operation allows us to make

progress we wouldn’t have otherwise, and has helped us raise

money from our partners when we’ve needed it The revenue

environment is improving, the industry is keeping capacity in

check and we expect that the industry will be modestly protable

for the year 2010. We’re well on our way to go where we need to

go, which is to get this company back to protability and run a

great stand-alone airline

Doug on Industry Consolidation, cont.

“We might not have been an active

player in either Delta/Northwest or a

potential United/Continental merger,

but I think US Airways had a big role

in stirring the pot to get other airlines

thinking about consolidation or the

good o the industry.”

7

“Running a solid operation allows us

to make progress we wouldn’t have

done otherwise, and has helped us

raise money rom our partners when

we’ve needed it...We’re well on our way

to go where we need to go, which is to

get this company back to proftability and run a great stand-alone airline.”

AboutUS April 30, 2010 ISSUE 261

past issues available onWings

Contact: Liz Landau, [email protected]

Contributors: Morgan Durrant, Mike Miller, Michelle Mohr,

Matt Snow and Tina Swail

Documents

043010 Aboutus Outlook