US Airways (NYSE: LCC) announced that it is making additional domestic capacity reductions, reducing headcount and implementing several new revenue initiatives to help expedite the airline’s return to sustained profitability in this new and challenging environment.

Major changes and initiatives announced today include:

-- Reducing fourth quarter domestic mainline capacity by six to eight percent on a year-over-year basis.

-- Returning 10 mainline aircraft in 2008 and 2009, canceling the leases of two A330 aircraft that were scheduled for delivery in 2009, and planning to reduce additional aircraft in 2009 and 2010.

-- Decreasing staffing levels by approximately 1,700 employees across the airline's system as a result of the reduced flying.

-- Introducing a first-checked-bag service fee of $15.

-- Introducing a new in-flight beverage purchase program.

-- Amending the airline's Dividend Miles frequent flyer program.

-- Increasing the fee associated with the airline's employee guest and parent discounted travel pass program.

US Airways Chairman and CEO Doug Parker said, “Our industry is profoundly challenged by the dramatic increase in fuel prices, and we must write a new playbook for running a profitable airline in this new and challenging environment. We are taking every action to operate a strong and competitive airline, while ensuring that our customers have continued access to competitively-priced air travel.”

The airline cited the high cost of fuel as the primary force working against the entire U.S. airline industry and US Airways, of note:

-- The cost of jet fuel has increased more than 90 percent over the last 12 months (and more than 200 percent since 2000).

-- US Airways estimates its total annual fuel expense (mainline and Express) will be $1.9 billion more in 2008 than it was in 2007 when the airline reported a net profit of $427 million.

-- In 2008, fuel represents 39 percent of total (mainline and Express) expenses; in 2000, fuel represented 14 percent of the airline's total expenses.

-- At current fuel prices, US Airways will spend an average of $299 in fuel costs alone to carry one mainline passenger on a roundtrip journey, which is up from an average of $151 in 2007, and $70 in 2000.

Capacity Reductions

In response to the sustained surge in record high fuel prices, the airline will reduce its fourth quarter domestic mainline capacity by six to eight percent on a year-over-year basis. The airline had previously planned a two to four percent decrease in domestic mainline capacity in its fourth quarter 2008. Domestic mainline capacity for 2009 is planned to be reduced seven to nine percent from 2008 levels.

The airline’s new revenue streams and fees will be generated through the following initiatives.

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First-Checked-Bag Fee: The airline announced plans to implement a first-checked-bag service fee of $15. The new fee goes into effect for tickets booked on or after July 9, 2008, and will apply to all flights within the U.S., to/from Canada, Latin America, and the Caribbean. The airline will waive the fee for its most frequent customers including: all Dividend Miles Preferred members (Silver, Gold, Platinum and Chairman's Preferred), confirmed First Class and Envoy passengers at time of check in, and Star Alliance Silver and Gold status members. The following customers will also be exempt from paying the fee: military personnel on active duty, unaccompanied minors and passengers checking assistive devices.

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In-Flight Beverage Purchase Program: In addition to current sales of alcoholic beverages on all domestic flights, US Airways will begin selling all non-alcoholic beverages (including sodas, juices, bottled water and coffee) in its domestic coach cabins for $2 effective Aug. 1, 2008. Alcoholic beverages will be available for $7 (currently $5). More details will be forthcoming and will include new premium beverage and hearty snack choices.

Complimentary beverages will continue to be served in domestic First Class, US Airways Shuttle flights, trans-Atlantic Envoy and trans-Atlantic economy class. Unaccompanied minors will also receive complimentary non-alcoholic beverages.

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Call Center Ticket Fees: US Airways has instituted a $25 service fee for domestic tickets and a $35 service fee for international tickets purchased through its call center reservations line (previous domestic and international ticketing service fee was $15). Tickets purchased at airport / city ticket offices will be assessed a $35 (domestic) and $45 (International) service fee. Prior to this change, the airport / city ticket office service fee (domestic and international) was $20.

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Dividend Miles Changes: A new award redemption processing fee will be assessed to all Dividend Miles award tickets issued on/after Aug. 6, 2008. The fee will be based on destination ($25 for domestic/Canada tickets, $35 for tickets to Mexico / Caribbean, and $50 for Hawaii / international). US Airways is also eliminating its bonus miles program for Preferred status Dividend Miles members. Preferred members currently receive mileage bonuses based on their status level. The Preferred bonus program will be discontinued for tickets purchased on/after Aug. 6, 2008.

The airline's frequent flyer program continues to be one of the best programs in the industry and presents the most generous upgrade opportunities. Dividend Miles Preferred members are eligible for unlimited complimentary upgrades up to seven days prior to departure versus five days, often accompanied by a fee, in other airlines' frequent flyer programs.

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Employee Guest Pass Price Increase: While US Airways employees and their eligible dependents will continue to enjoy free travel throughout the airline's domestic and international network, the airline has increased fees paid by employees' guests and parents, who travel on a standby basis. These changes go into effect for travel on/after June 12, 2008.

About US Airways

US Airways is the fifth largest domestic airline employing more than 36,000 aviation professionals worldwide. US Airways, US Airways Shuttle and US Airways Express operate approximately 3,500 flights per day and serve more than 230 communities in the U.S., Canada, Europe, the Caribbean and Latin America. US Airways is a member of the Star Alliance network, which offers our customers 18,000 daily flights to 965 destinations in 162 countries worldwide.

For more information, visit www.usairways.com