Media

Testimony of W. Douglas Parker
Chairman & Chief Executive Officer
US Airways, Inc.

My name is W. Douglas Parker and I am the Chairman and Chief Executive Officer of US Airways, Inc. On behalf of our airline and our 36,000 dedicated employees, I am proud to submit this testimony in support of our application for a designation and seven weekly frequencies to serve China beginning in 2009.

Today, US Airways is one of two major U.S. network carriers that does not have access to China. Our application proposes to correct that deficiency for travelers and shippers throughout the Eastern United States, by offering daily nonstop service from the nation’s 5th largest city, Philadelphia, to China’s capital, Beijing.

The service we propose offers a new competitive choice for millions of consumers and shippers throughout the United States; it is also a landmark for our company, reflecting the significant progress US Airways has made in just a few years. Since 2005, we have:

• Merged two carriers into a strong airline that last year reported full-year 2006 profits in excess of $500 million (excluding special items), and that shared more than $50 million of that profit with its employees;
• Invested nearly $200 million in facilities, equipment and information technology to improve the travel experience of our customers;
• Placed a multibillion dollar order with Airbus for more than 100 new airplanes, an order that will make US Airways the North American launch customer for the A350 widebody aircraft;
• Worked with community leaders across the country to lower our fares and create competitive choices for hundreds of thousands of customers, primarily in smaller towns and cities.

These achievements have been possible thanks to the efforts of our dedicated employees. In the less than two years since our merger with America West Airlines, Inc., we have combined frequent flyer programs, launched a combined reservations system, reached labor agreements with four of our work groups, combined our information technology systems, recalled over 1,000 pilots, flight attendants and others laid off in US Airways’ bankruptcy, hired more than 12,500 new employees, entered into codeshare agreements with additional carriers, and launched new service to 19 city-pair markets. We are well on our way to a combined FAA operating certificate this fall.

We have also focused on building our network, reinventing the airline experience and offering our passengers more choices and more value. As mentioned above, within weeks of the merger, we brought a customer-friendly approach to pricing to hundreds of markets and thousands of passengers by lowering leisure and walk-up fares, in many cases by hundreds of dollars.

In addition to lowering fares, we also looked for new ways to expand the reach of our network services. Within months of the merger closing, we began service to three new European destinations during the summer of 2006 from Philadelphia to Milan, Lisbon and Stockholm. Employees from America West and US Airways worked together to launch these services, and did so in a lead time far shorter than the norm for new international service.

This summer, we added more service from Philadelphia to Athens, Brussels and Zurich. We wasted no time in taking full advantage of the recently signed U.S.-EU Open Skies Agreement, by announcing year-round service to Dublin starting this fall, and we will expand our codeshare relationships with our European Star Alliance partners when the U.S.-EU Open Skies Agreement goes into effect in March 2008.

Today, we serve more European destinations with our own aircraft than all but two other U.S. airlines. We are committed to further growth in Europe, with firm plans to add service to cities in Eastern Europe and the Mediterranean region.

We are proud of what we have accomplished; looking to the future, we intend to build on these successes. US Airways is the first U.S. airline to place firm orders for the high-technology A350 – a long-haul, wide-body aircraft that will largely eliminate range constraints on the global network we envision. As the North American launch customer, we will add 22 of these remarkable aircraft to our fleet. We have also ordered ten A330/A340 aircraft for deliveries starting in 2009. These state-of-the-art international aircraft will serve passengers connecting through our hubs on 97 brand new A320-series aircraft that arrive starting in 2010. We are also upgrading our regional fleet with the addition of 25 Embraer 190 aircraft. No other U.S. airline has made such a robust commitment to fleet renewal and expansion.

This multi-billion dollar investment in our future evidences our commitment to serving our customers, both domestic and international. Only a few short years ago, US Airways was in bankruptcy and returning airplanes in an effort to survive. Soon we will have an aircraft fleet that will offer our customers enhanced comfort and convenience, and allow US Airways to project its brand globally beyond North America and Europe.

The critical next step in the global expansion of our airline is Asia, by far the world’s fastest growing aviation region. To date, US Airways’ only access to Asia is through codesharing with some of our Star Alliance partners. We have actively pursued such codesharing as a means of access to key Asian markets in Japan, Hong Kong, and India. We plan to continue expanding our Asian codeshare links through agreements with Air China, Shanghai Airlines, Singapore Airlines and others.

While codesharing has afforded US Airways marketing visibility and experience in the Asian market, we are ready to take the next step, opening Charlotte-Philadelphia-Beijing service to Asia’s fastest-growing market – China. When the Department issues its Final Order in this case, US Airways looks forward to being able to finally serve China. Philadelphia-Beijing service will represent the 37th international destination from Philadelphia and the first Asia service for both Philadelphia and US Airways.

An award to US Airways will add new competition by a company that has transformed itself from an airline focused on domestic service into an emerging global carrier. Moreover, an award to US Airways will benefit passengers in the Philadelphia tri-state area, and throughout the Eastern United States, offering convenient connections to more than 37 cities from Philadelphia, our largest international hub. We will also provide widebody-to-widebody service for passengers from Charlotte, North Carolina, our largest hub overall, and will provide 28 smaller communities with their first ever service to China.

In addition to the passenger service advantages associated with the widebody-to-widebody Charlotte flights, the aircraft we have chosen for our Charlotte-Philadelphia-Beijing service will allow US Airways to benefit shippers and consignees throughout the East Coast. US Airways will easily transfer cargo pallets and containers at Philadelphia from one widebody aircraft to another. Our service will allow goods manufactured in the Charlotte region on a Tuesday to be in the hands of customers in China on a Thursday.

While China is the world’s fastest growing aviation market, air links between the United States and China have been severely limited. The U.S- China market-opening agreement will help correct these imbalances and we at US Airways have eagerly awaited such a significant opening. This proceeding represents the first meaningful opportunity for US Airways to seek a designation and an award of frequencies. At the time of the Department’s last award of a new combination designation, in the 2005-2006 U.S.-China Air Services Case and Designations, US Airways was in the midst of a challenging reorganization.

Since successfully reorganizing and merging, however, US Airways has vigorously pursued China access – participating in the 2006 China case (in which no new designations were available) in support of our codeshare partner, United Airlines, in its successful effort to launch Washington Dulles-Beijing service. With the prospect of new entry to China, we announced our intention to compete for the then available 2008 designation. And, as U.S.-China negotiations over new rights intensified, US Airways took an active role, supporting the efforts of the Departments of Transportation and State to secure additional rights for new U.S.-China market access.

Aside from the importance of China access to US Airways’ goals, the broad public interest in allowing each major U.S. airline network to offer its passengers access to the China market will only be fulfilled by an award to US Airways. US Airways’ proposal will close a service gap by greatly improving access to China for the large and dynamic Philadelphia market and for travelers from more than 106 cities with nonstop service on our network to our Philadelphia hub. At present, the typical Philadelphia traveler must begin a journey to China with a congested surface journey to either New York or to Washington.

US Airways will not only serve an unserved point-to-point market, but will offer connections beyond Beijing through codeshare relationships with key Chinese carriers. US Airways is working with two leading Chinese carriers – Air China and Shanghai Airlines – and we fully anticipate that, at the time of the first US Airways flight to China in March 2009, we will have codesharing agreements with both carriers. Those agreements will allow us to offer seamless service to our customers wishing to connect to other Chinese cities. We also look forward to making our vast domestic network available, via codeshare, to customers of those carriers seeking to travel throughout the United States.

By virtually any demographic measure, Philadelphia stands “next in line” for nonstop service to China. Fortunately, the new opportunities in the U.S.-China market make possible service from major gateways like Philadelphia and Atlanta.

As the seventh largest metropolitan area in the U.S., Philadelphia ranks just behind the San Francisco and Washington D.C. regions, both of which enjoy nonstop service to Beijing. Indeed, Philadelphia is the second largest U.S. metropolitan area without nonstop service to China, just after Boston, and ahead of Dallas, Atlanta, and Detroit.

The Philadelphia region has the fourth highest GDP among major U.S. cities and generates more jobs than all but five other metropolitan areas in the entire country. Philadelphia also ranks fourth in the nation in high-tech jobs – after only New York, Washington, and Los Angeles – each of which has nonstop China service. Median income in Philadelphia is also fifth in the nation, and the region is among the top six in the percent of population with advanced degrees.

DOT correctly reaffirmed in its Instituting Order that the public interest is best served by ensuring that new entrants are given priority for a daily service, before incumbents are awarded additional frequencies. This longstanding policy for new entrants should continue to apply to the long-haul U.S.-China market, where less than daily service is not a realistic commercial alternative.

Awarding US Airways the right to serve Beijing from Philadelphia substantially enhances the competitive options available to U.S. consumers in the Eastern United States. With one-third of all U.S.-China passengers generated in the Eastern U.S., our flight will offer a competitive option for the many China-bound travelers in the New York-Washington corridor. It will also add new competition with gateways in New York and Washington for connecting passengers.

Philadelphia’s airport is in the midst of transformation and regeneration, thanks in large part to US Airways’ recent substantial investments in the hub. As one of the most financially stable U.S. airlines, US Airways has been able to invest millions of dollars in new equipment and enhanced ground facilities, and has committed to investing more. We have also hired hundreds of new employees to improve our customers’ experience at the airport. These investments, which affect all aspects of our operation at Philadelphia, are already yielding results. We look forward to continuing our partnership with Philadelphia International Airport, and plan to expand our services as the airport makes new facilities available.

The changes at Philadelphia are just one example of the investments we are making across US Airways to build our new airline -- new employees, improved onboard service, more state-of-the-art airport kiosks and other changes designed to improve the customer experience from the time of booking a flight until baggage is delivered at the final destination.

We have come a long way since the dark days of our bankruptcy proceedings, and we are all proud of what US Airways’ employees have achieved to this point. On behalf of the millions of US Airways customers and tens of thousands of US Airways employees, we look forward to building on those achievements as a new entrant in the U.S.-China market in 2009.

Thank you,

W. Douglas Parker