U'S AIRWAYS

October 4, 2011                               Scanned and Sent Via E-Mail
Read Receipt Reguested


Port of Seattle Commission
Attn: Mr. Paul White, Commission Records
Pier 69, 2711 Alaskan Way
Seattle, WA 98111

RE:  US Airways, Inc.'s Concerns with Port of Seattle's Proposed FY 2012 Budget

Dear Commissioners:

On behalf ofUS Airways, Inc., and with concurrence from Virgin America, whose representative
for
was unable to attend the Port of Seattle's 10/4/11 Commission Meeting, I'd like to thank you
the opportunity to provide the following comments pertaining to the Port's proposed FY 2012
Budget. I'd like to start by emphasizing US Airways values its excellent working relationships
with Port staff, and while US Airways may disagree with certain Port policy decisions or
components of the proposed Budget, the following comments are not intended to diminish the
high regard US Airways has for the dedication, talent, and experience of the Port team members.

US Airways believes there are several Port assumptions used in developing the proposed FY
2012 Budget which imply overly-optimistic assessments of the airline industry's recovery. First,
the proposed Budget notes the airline industry was protable in 2010, and is projected to break
This
even in 2011. US. passenger airlines achieved a combined net prot of $2.23 for 2010.
equates to a 1.9% prot margin. For the 2001  2009 timeframe, U.S. passenger airlines incurred
$65.1B of combined losses. (Source: ATA Economics, 10/1/11, "The Economic Climb-Out for
US. Airlines: Global Competitiveness and Long-Term Viability). US Airways has worked
feverishly to offset rising fuel and airport costs, and has adopted signicant changes to its
business model. Unfortunately, this has included a reduction of approximately 3,000 employees
over the past three (3) years. Protability will only become a trend when it is achieved in
consecutive years. Airlines, similarly to other businesses, need to replenish their reserves in order
to prepare for the next industry downturn.

Second, the Port contends the airline industry has gured out how to survive high fuel costs.
Airline fuel savings result not only in overall operating expense reductions, but also in reduced
greenhouse gas emissionsa goal shared by US Airways and the Port. To continue this progress,
airlines must have nancial capital available to continue with aircraft eet replacement and
technological enhancements. Increases to airport rates and charges drain airline nancial
resources for these programs. Airlines have reduced their workforces. We strive to do more with
less, and we ask our partners, including airport operators, to seek out efciencies within their
organizations and operations.

4000 East Sky Harbor Blvd., Phoenix, AZ 85034

Third, the US. airline industry will experience limited domestic growth, which will be focused at
large and medium hub airports, especially at those airports with limited regional competition.
Capacity and grth plans obviously vary among airlines. Limited growth, coupled with
increased consolidation of operations at larger airports, will generally result in a downward push
in revenues airlines can derive from airfares. While this is a positive trend for our mutual
customers, it is only sustainable when operating expenses (including airport rents, fees, and
charges) are reduced in proportion to the decrease in revenues.

US Airways concurs with several items included in the Port's proposed FY 2012 Budget which
are projected to yield favorable nancial impacts to Port customers, including the addition of
energy management team members which are intended to assist with identifying and
implementing energy cost savings measures. The preliminary proposed FY 2012 Operating
Budget indicates an increase from $140M to $163M (17% increase)a large component Of
which is the expenses associated with the Airline Realignment Project ($8.2M). US Airways
supports the Airline Realignment Project, which benets the Port, the airlines, and our mutual
customers1) direct efciency gains in operations by consolidating airline locations and co
locating alliance partners, and 2) deferral of terminal complex expansion by increasing utilization
of existing facilities.

Although US Airways supports the Airline Realignment Project, $8.2M of this project will ow
into the FY 2012 Operating Budget, and $14M will ow into the FY 2013 Operating Budget,
resulting in substantial impacts to airline rates and charges. US airways recognizes the Port seeks
to maximize non-airline sources of revenues whenever possible. Nonetheless, the proposed FY
2012 Operating Budget will increase signicantly. At a time when the proposed FY 2012
Operating Budget includes several large limited-time items, such as the Airline Realignment
Project, only "must have items" should be included in the Budget.

Excluding incremental increases to certain line items associated with the Airline Realignment
Project and the opening of the new Consolidated Rental Car Facility, the overall Operating
Budget is slated to increase approximately $6.3M (4.5% increase), primarily consisting of
compensation and contractual increases ($5M). However, FY 2012 total enplanements at Seattle-
Tacoma International Airport (SEA) are forecast to increase only 1.5%. US Airways requests all
discretionary increases to compensation, including salary/wage adjustments and most requests for
additional staff positions, be deleted or at least deferred to FY 2014 (after the expense impacts
from the Airline Realignment Project are realized). Rather than add staff proportionately to the
projected FY 2012 Budget increases in ight and customer activity, US Airways requests the Port
use its existing staff resources more efciently, then reconsider the addition of staff resources for
the FY 2014 Budget.

We appreciate the opportunity afforded to US Airways in sharing its comments with the
Commission, and we look forward to continued collaboration with the Port for future budgets. If
you have any questions or need additional information, please contact me at your earliest
convenience. Thank you for your consideration.
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David J. Anderson
Regional Manager, Airport Affairs

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