Daniel Cravens - William Douglas Parker - Executive Chairman, Chief Executive Officer, Chairman of Labor Committee, Chairman of US Airways and Director of AWA Derek J. Kerr - Chief Financial officer, Chief Financial officer of America West Airlines Inc, Executive Vice President and Principal Accounting officer J. Scott Kirby - President

William J. Greene - Morgan Stanley, Research Division Hunter K. Keay - Stifel, Nicolaus & Co., Inc., Research Division Jamie N. Baker - JP Morgan Chase & Co, Research Division Daniel McKenzie - Rodman & Renshaw, LLC, Research Division Helane R. Becker - Dahlman Rose & Company, LLC, Research Division Michael Linenberg - Deutsche Bank AG, Research Division Glenn D. Engel - BofA Merrill Lynch, Research Division Raymond Neidl - Maxim Group LLC, Research Division Bob McAdoo - Avondale Partners, LLC, Research Division David E. Fintzen - Barclays Capital, Research Division Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division Michael W. Derchin - CRT Capital Group LLC, Research Division

Ladies and gentlemen, today, welcome to the US Airways First Quarter Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] Now I would like to turn the conference over to your moderator, Director of Investor Relations, Mr. Daniel Cravens. Please go ahead.

Thanks, Peter, and thanks, everybody for joining us for the US Airways First Quarter 2012 Earnings Conference Call. In the room with us in Phoenix this morning are Doug Parker, our Chairman and CEO; Scott Kirby our President; and Derek Kerr, our Chief Financial Officer. Also in the room available for questions are -- is Elise Eberwein, our EVP of People and Communications. Like we typically do, we're going to start with Doug, and he'll provide an overview of our first quarter financial results. Derek will then walk us through the details on the quarter, including our cost, liquidity and provide some color on our updated guidance. Scott will then follow with commentary on the revenue environment and our operational performance. And then after we hear from those comments, we will open the call for analyst questions and, lastly, questions from the media. But before we begin, we must state that today's call does contain forward-looking statements, including statements concerning future revenues and fuel prices. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties could cause actual results to differ materially from those projected. Information about some of these risks and uncertainties can be found in our earnings press release that was issued this morning, our Form 10-Q for the quarter ended March 31, 2012, and our 2011 Form 10-K. In addition, we will be discussing certain non-GAAP financial measures this morning, such as net loss and CASM, excluding unusual items. A reconciliation of those numbers to the GAAP financial measures is also included in the earnings release, and that can be found on our website at usairways.com. A webcast of this call is also available on our website and will be archived for approximately one month. The information that we're giving you on the call is as of today's date, and we undertake no obligation to update the information subsequently. Thanks, again, for joining us. And at this point, we'll turn the call over to Doug.

Thank you, Dan, and thanks to everybody for being on. We announced this morning our first quarter net loss, excluding some special credits of $22 million. That compares very favorably to last year's net loss of $110 million. That improvement in earnings occurred despite a 13% increase in our fuel price per gallon and had fuel prices remained at the -- what we thought were quite high first short quarter for 2011 levels, our fuel expense would have been $133 million lower here in the first quarter of 2012. So our earnings -- our loss was nearly $100 million lower than it was last year, even though fuel expense was $133 million higher. The reason for that improvement is strong revenue growth. Our revenues were up 10% year-over-year. That's driven by record load bankers, record yield, record unit revenues, that is passenger revenue per ASM. And Scott will talk about that in more detail in a minute. We also -- the team also did an excellent job of controlling our nonfuel expense. Cost per ASM, excluding fuel, declined by 0.6% on a year-over-year basis, and Derek will talk more about that. And the credit for all this, of course, goes to the outstanding team we have at US Airways, who just continue to do an amazing job of taking care of our customers. We had our best first quarter ever and on-time performance and baggage handling and completion factor. So I want to conclude my comments by just thanking very much the 32,000 hardworking people at US Airways. And with that, I will turn it over to Derek and then Scott.

Thanks, Doug. We just filed our first quarter 10-Q this morning, and in that Q, we reported a net loss, excluding net special credits of $22 million or a loss of $0.13 per diluted share. This compares favorably to the net loss, excluding special items of $110 million or $0.68 loss per share a year ago. On a GAAP basis, the company reported a net profit for the first quarter of $48 million or $0.28 per diluted share versus a net loss of $114 million or $0.71 loss per diluted share in the first quarter of last year. This quarter's results were once again impacted by the significant year-over-year increase in fuel prices. And as Doug said, if average fuel price had remained the same as first quarter 2011, the company's fuel expense would've been approximately $133 million lower. The company did recognize $70 million of net special credits in the first quarter of 2012. This was principally a gain associated with the Delta slot transaction completed in December 2011. This transaction resulted in a gain of $147 million, all of which was deferred as of December 31, 2011, due to certain DOT restrictions on the operations of the slots. The gain on the transaction is being recognized, as these DOT restrictions lapse, so March 2012 and July 2012, so we recognized approximately $73 million of the gain in the first quarter, and we expect to recognize the remaining $74 million of gain in the third quarter of 2012. For the quarter, total capacity was 21.1 billion ASMs, up 3% from 2011, primarily due to a higher year-over-year completion factor of approximately 3%. Thanks to the efforts of all of our team members, we, US Airways, achieved our best-ever, first quarter completion factor, on-time performance and mishandled bag ratio. Just…

Thanks, Derek. Before discussing the revenue environment, I'd like to thank all the employees of US Airways for all the hard work for the great airline that we're running today. We, once again, had record operational results in the first quarter. Turning to the revenue environment. I'll start with a review of the first quarter, and then give you a little bit of commentary on the outlook going forward. We were pleased with our 8% year-over-year increase in passenger RASM. Both leisure and business demand were strong during the quarter. During the quarter, we successfully passed through all of the increase in fuel prices in the form of higher fares. January was strong and in line with our expectations. But February RASM was weaker than we expected due partially to a much higher completion factor but also due to some relative booking weakness that lasted for about 3 weeks at the beginning of the month. March RASM rebounded and was strong and in line with our expectations. Our view of the February data point is that it's just normal volatility and is similar to what happened in June of last year, when the comps got worse for a single month before rebounding. While leisure demand was strong, corporate demand was extremely strong, with corporate account revenue, up 29% during the quarter. During the quarter, our transatlantic RASM was up 11%. Domestic was up 8%, and Latin Caribbean was up 7%. Turning to the outlook going forward. The second quarter picked up where March left off. The strong demand environment is leading to a strong pricing environment. There'd been several well reported fare increases, but more significantly the fare sale environment is less aggressive this year than last year, as airlines have been forced to pass on the increase in fuel prices. Regionally, we continue to see strength in both the Atlantic and domestic markets. We currently anticipate Atlantic and domestic RASM to each be up a similar amount year-over-year in the second quarter. Also, we continue to see strength in business demand and expect that to continue throughout the quarter. As we move forward, the costs do a little get -- do get a little more difficult, particularly in May. We expect April RASM to be up about 9% year-over-year and May to be up a little less on a year-over-year basis in April just based on more difficult comps. The June costs get easier, so while we don't have enough bookings to have a reliable forecast yet, I expect June will be better on a year-over-year basis than May. So in conclusion, we continue to run the best operation in the industry and in our history, and the demand environment remains strong. With that I'll turn it back to Doug.

Thank you, Derek. Thank you, Scott. Okay, before I get to questions, I know there are -- I think, other than our earnings, a number of you would like to talk about -- and ask us questions about those include what is going on with the situation, US Airways and AMR. So before we get to questions, we're going to talk a little bit about AMR, because, again, we know it's -- you're interested in where we are on that process. I'll tell you upfront we're going to share what we can now. However, we will only be taking questions on our earnings, not the situation when we get to the Q&A. So -- but we'll tell you a good little bit of what we can at this point, and I'll start, and then Scott will add some as well. So first, a little bit on the process. We told you all in our last earnings call that we'd hired advisors to help us assess the situation in AMR and to determine if this might create a strategic opportunity for a business combination. Now we've been hard at work over the past 3 months and have concluded that there's an opportunity to do something that we think is in the best interest of both companies, owners or creditors, in the case of AMR, both companies' employees, our customers and the communities we serve. AMR, however, has made it clear they would like to focus only on a standalone emergence from bankruptcy. So while we would prefer to be working in concert with the AMR management team and its board and hope to be doing so before too long, we understand where their focus is, and instead, we've been working with the creditors and employees of AMR. Our goal has been…

Thanks, Doug. And the answer to that is pretty straightforward. There's a tremendous amount of value created by merging US Airways and AMR, and we can and should do the portion of that to give employees more than AMR can on a standalone basis. It's premature to get into all the details about the source of synergies or the mechanics of any potential transaction, but I think that we can help on this point about the synergies. First off, I think every airline analyst and probably everyone listening to this call appreciates that a merger of US Airways and American Airlines would create enormous revenue synergies. Like United Continental, Delta-Northwest, US Airways AMR would have a network that could generate much more revenue than the 2 airlines can independently. We can also generate significant cost savings, even though we wouldn't shrink the combined airline by reducing or eliminating redundant facility space, management headcount, by combining IT systems and by much improved purchasing power. For perspective, Delta-Northwest generated $2 billion in synergies, which was 6.3% of their combined revenues. Continental-United generated $1.1 billion in synergies, 3.9% of their combined revenues. And US Airways-America West generated $680 million in synergies or 6.5% of our combined revenues. As to the agreements we've signed with AMR's unions, I can describe them at a high level. Prior to bankruptcy, AMR said that their labor costs were $800 million over industry standards. In bankruptcy, however, American is asked for concessionary contract of $1.25 billion, meaning AMR's asked and labor went beyond industry average. And for what it worth -- for what it's worth, it appears AMR's $800 million disadvantage to the industry was basically all pensions and productivity. We agree with all 3 unions that the merged American needs to have contracts that have neither a…

Great, all right. Thanks, Scott. Hopefully, that was helpful to those of you that had been asking that question. I mean, the issue for us, of course, is we can't really address that question without having information public. And now we do, and hopefully that addresses that question that we've heard from a number of you. But now as we head into our Q&A, I'm going to thank you in advance for your understanding and cooperation. We know you have your more questions, and would like to ask more about AMR or more about what we just said. But please understand, we now said all we're going to say at this time. And we'll, instead, turn our attention to the strong results that our team reported today. So questions, please.

[Operator Instructions] Our first question will come from Bill Greene.

If I ask to start on revenue trends, Scott, you went through a pretty detailed sort of outlook here. But one of the things -- with the fare increases that haven't stuck. Is that because the real impact here is the fare sales that aren't occurring? Is that really kind of what we would reconcile here? Or is the industry still just a little bit too big on capacity? I'm just not sure how to reconcile failures on fare increases.

Okay. I guess I'd start with saying that, while the fare increases are easy to follow through ATPT [ph] reporting, and they get a lot of the headlines, they really aren't -- they're a third or fourth in terms of importance in what our actual yields wind up being. And if you look historically, I think about 1 and 3 of those fare increases through successfully even in strong demand environment for a whole host of reasons if they don't go through successfully. So I wouldn't read anything negative about a failure of a fare increase into that. What's more important, or at least as important, is the lack of deeply discounted fare sales, I mean, just do the math. If last year, there was a fare sale that was 40% off, and this year, there's no fare sale, then that's almost over a 60% increase in the selling fare in those markets. And so that's far more impactful. There's also been a lot of, what I would call, cleanups going on in the market with getting fares that used to be a 7-day advance purchased and somehow became 0-day advance purchase, back to 7-day advance purchase and a lot of other initiatives like that, which have an impact on fares and demand. So if you just look at our results, look at the results across the industry, the demand environment certainly feels good, it feels strong. Yields are robust and the industry, I think, is successfully passing on the increase in fuel prices.

That makes sense. So essentially, it's rebuilding fences and some revenue management? Is that sort of the short version of it?

Well, those -- I mean, all of those things are occurring, yes.

Is that a process that has a lot further to go, or -- because I'm trying to figure out, like if we see this sort of continue, maybe it's not something to worry about as much, because there's enough that you can do on the margin with RM and whatnot to keep the RASM trend without fare increases of sort of a public and significant size.

Well, without commenting on future fare actions, I certainly think there's opportunity to do that. And from an investor perspective, it's going to be really hard for you as an analyst or an individual investor to track the pricing market and get an idea of exactly what's happening, other than looking at all of our monthly disclosures on RASM and you can -- and load factor which you can have back in the yield. And I think that will give you a much more comprehensive view of what's really happening on the ground.

Okay, that makes sense. And then, Doug, just one question for you on industry structure -- I know, we can leave consolidations out. But we haven't seen any efforts to see any new entrants into this business for a while. Do you think that's kind of a more permanent change? Or is that simply -- there's more attractive opportunities elsewhere? Or maybe it's fuel? Or how do you think about if the industry has sort of permanently addressed that aspect of what has always been a big challenge?

Look, I hope it's permanent though, but who knows. My own view is it's really hard -- why would you possibly invest in a start-up airline at this point. You've got an industry that is -- as we've said for a while now, mature on the domestic front. So there aren't growth opportunities to exploit in the domestic United States, and fuel prices are very high, so your -- the ability getting cost advantage primarily, just by labor, which is what these airlines always have is a cost advantage, driven entirely by labor cost is -- creates less of an advantage when oil prices are your largest expense instead of back when they used to be our second or third largest expense. So your cost advantage is less, and furthermore, through all the restructuring that's happened in this industry, the labor cost have gotten more in line with what a start-up airline can put in place. So I think, if you put that all together and anyone that truly looks at the potential for a return quickly realizes there's no potential for return. And again, I know that hasn't stopped people in the past, but I think they could at least look at some analysis and convince themselves. I think anyone who's going to put capital in this business, getting into a startup airline right now would have to be extremely aggressive in their assumptions to get themselves to believe they have any chance of making a return.

Yes. Of course, the risk would be with consolidation, if the returns rise as that calculus change, right? So you -- either we create a more permanent barrier somehow or seems like the risk doesn't change if returns are higher. But we'll see, I suppose.

Our next question comes from Hunter Keay. Hunter K. Keay - Stifel, Nicolaus & Co., Inc., Research Division: So I keep seeing airlines talking about how great these bag handling stats are. And the pessimist in me just immediately concludes that fewer and fewer people are checking or paying for checked bags. So I guess the question is, without getting to specifics, is it time to address some of maybe the cost savings that could be extracted now, if 30%, 40% fewer bags are being checked. Is there anything that can be done in the infrastructure side or on the headcount side that can basically just permanently start to strip out some of the costs that existed before, when people were checking a lot of bags? Or is there other more revenues -- other more sort of levers you could pull on the revenue side?

Okay, well, look, first off, you shouldn't be pessimistic about this. This is one of the nice things that happens as result of charging for bags, as people don't check bags, and they don't want to pay to have it checked and there are fewer bags that ride in the belly. And this, like any other system that has capacity constraints, you take out 20%, 25% of the bags in the belly, and you dramatically reduce the number of bags that are mishandled, much more than 20%, 25%, because you're not stressing the capacity. So that's a good thing. And we've always known it was going to be a good thing about these baggage fees. It's not just about raising revenues. It makes the operation run better, and then that has happened. So anyway, to your point, now that, that's happened can you do things about cost? I'll let Derek or Scott chime in, because I don't know that we've had a long conversation about this. But the problem, I think, Hunter, is you still need to do the -- you still need to connect bags. You still need the bag belts, you still need people running bags, even though there aren't as many, as long as you need any less of any of those things. So I don't know that you're going to see a lot of cost in terms of infrastructure cost reductions but – I'll let these guys chime in. But you do see a lot of cost savings in terms of mishandled baggage delivery, costs and things like that, we're already seeing those. Your question is -- there's question on infrastructure. I don't -- I'm not sure how we get rid of the infrastructure, as long as people still check bags, even though they're checking fewer.

Yes. I would agree to that, Doug. We did get rid of a fair amount of infrastructure off the bat, so having fewer people at the check-in counter that has happened. The one thing that does happen though is down at the gate area, since there are more bags that go down at the gate area, we've had to adjust from a ramp worker's standpoint as adding some ramp workers to make sure that all those bags that sometimes can't fit on the plane need to get down and get in the belly from that area. So we've added a little bit there. But I think there have been a tremendous amount of cost savings, as Doug said, from delivery and from not losing the bag and also some savings that we have had in place for a couple of years at the ticket counters. And that has all been put in place. But right now, we don't expect to go any deeper than that moving forward. Hunter K. Keay - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And again, without getting into specifics, of course, that caveat. If you were in charge of running an airline that was almost as big as UAL but a little bit bigger than Del -- Delta, would you still not hedge fuel? Or is that something that you think is unique to your company right now, as you sit here? Or do you think that's a broader strategy that has proven itself to work that could work, if you were in charge of a bigger airline?

Okay. Let's ignore the conditional part of that question. And I'll just restate it as follows. Does it make sense for any airline to hedge? We don't think so, and I don't think it would matter if we were other airlines. Those are management decisions. But for all the reasons we stated in the past, that it is extremely expensive to do one; two, the cost of doing it does not protect you from -- certainly, from long enough from what appears airlines are trying to protect themselves from, point two; and then point three, that you, actually -- you're not reducing the risk of the firm, because you're creating yet another risk, which is the fuel prices could fall only because the economy gets soft, and you then find yourself paying higher prices, at the same time, your revenues are falling, you're paying them in advance. It's a highly risky proposition that no one protects themselves from when they hedge. And allow me to say that we have a natural hedge in place, which the revenue stream for most of this activity. And the activity is not protected by that. It's going to create -- or would create bigger issues for the industry than anyone's hedging position can protect them from. So for all those reasons, I don't think it matters where we are. But that's US Airways position, and obviously, not the other [indiscernible].

Jamie Baker has our next question. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Guess what, I'm going to ask a question on consolidation, but I think it's one that actually you can hopefully answer. It relates to pricing. If you look at airline revenue as a percentage of GDP, as we all do, it has been fairly steady, post 9/11 with the obvious exception of financial crisis. But clearly that relationship, the percentage of economic output that the US shares with its airline industry is materially lower than what it was in the decades leading up to the Internet. So do you think it's reasonable that with a bit more industry consolidation, we might finally see some real improvement in this metric? I mean, perhaps not back to pre-Internet levels, but something better than where we've been for the past decade. I guess, I'm a little surprised we haven't seen more progress already. I guess my question is how much incremental pricing power is the market share of the big 3 plus Southwest going to be, if events push big 3 in Southwest to 90% market share?

Well, I'll start with the caveat, that I don't think this is a consolidation-driven answer. But what we saw happen for years after deregulation was a decline in industry revenues as a percentage of GDP. That hit a trough, as you said in 2009 levels that were, I think, artificially low and significantly below where they were historically. We have started rebounding from that as an industry. Airline industry revenues have grown more quickly than GDP in 2010, '11. And then it appears we're going to do the same in '12. They certainly started off going faster than GDP in 2012. And I think we are recovering as an industry to a more normalized levels. To be clear I don't think that's a consolidation driven effect. I think it is as the industry matures and becomes more disciplined that we're doing a better job of passing our costs on to the customer, in particularly higher fuel prices. But I certainly think there's upside, if you just look at the metric -- I like that metric as well, Jamie. If you look at the metric of airline revenues as a percentage of GDP, and where it was historically. You can make a credible argument that there's a lot of potential left to -- for the airline industry to continue outperforming GDP growth going forward. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Yes. I mean, I would happen to agree. I mean, it seems -- I mean, that's the metric that I always draw people's attention to. When there's a fare increase investors will ask, is there any pricing resistance, sticker shock? And you look at that metric, and it's just seems to suggest a lot of incremental potential from here. So I appreciate your insight on that, Scott.

Dan McKenzie, please go ahead. Daniel McKenzie - Rodman & Renshaw, LLC, Research Division: My first question's really housecleaning. And that is if the entire cost of the shift of aircraft from LaGuardia to Reagan was included in your special charges or were there some other charges tied to the slot swap that were not stripped out of the first quarter cost.

Dan, that's not a cost. It's just the value we had for the slots on the books. So it's really just a write-off of that. The cost is in our guidance, so the shift of us moving from LaGuardia to DCA, all of those costs are in our guidance. So any savings that we're going to have from that are in there. But that's just the value of what we had for the slots on the books. And so that, we had them booked down lower, and so the gain we have to take all at one point in time. So we've taken a gain, and we've split it over half and half is when we've transitioned to the set of slots. So each slot, the value that we had on the books for the slots, what we received for them was higher, so we had to take that gain. So that's just slot related and not cost related. Daniel McKenzie - Rodman & Renshaw, LLC, Research Division: Okay. Though I appreciate the clarification, it looked like there was an operating charge of $3 million that jumped out at me. But then, I guess, how much is that inflating cost in the first and second quarter as a result? Is it material?

No, it should be reducing cost. Daniel McKenzie - Rodman & Renshaw, LLC, Research Division: Yes, sorry. So how much is that...

Yes, it should be reducing cost. We said all along that the transaction is worth $75 million to us. Part of that is in the cost in our cost guidance. Most of it in the third and fourth quarters. Daniel McKenzie - Rodman & Renshaw, LLC, Research Division: Yes. No, I understand that. I guess, my question really was there's -- as you transition aircraft from LaGuardia to Reagan National, there would be some costs associated with that, but I guess, evidently not...

No, not really, not at all. Daniel McKenzie - Rodman & Renshaw, LLC, Research Division: Okay. And then, I guess, my second question is, I look at competitive seats overlapping your market from competitors, it looks like it was down about 5% in the first quarter, which is a little unusual in size. And I'm just wondering if you can share what kind of revenue tailwind that helped provide for you folks?

I guess, I wouldn't have measured the numbers being as large. There were some competitive good guys in the quarter in Philadelphia and towards the end of the quarter some competitive bad guys in Philadelphia. But certainly, we had a tailwind compared to last year, where we had the opposite where we have more competitive capacity growth in our market. I think it's just the normal ebb and flow. Sometimes you get more -- sometimes you get good guys, sometimes you get a bad guy. And the first and the -- in the first quarter, we had a net good guy. In the second quarter, I think, it's still a net good guy, though it's smaller. But not a huge impact one way or the other.

Helane Becker has the next question. Helane R. Becker - Dahlman Rose & Company, LLC, Research Division: So this is my first question. I think your PSA flight attendants approved a contract last week. And so therefore, number one, is there -- are there other contracts in that regional group that are coming up that we should be prepared for? And b, that's a. And b, the other part of the question is, are the costs associated with that included in the guidance you're giving us for the second quarter?

Yes, Helane, the cost of that contract is in our guidance going forward from -- for Express.

Yes. And, Helane, thanks for noting it. We did indeed get a contract on our flight attendants. We have contract negotiations currently underway now with the pilot group as well at PMAN [ph] anyway. So but those, again, nothing really to report on those, other than they're underway. And we don't expect material cost increases, just because of the relative size as we complete those. Helane R. Becker - Dahlman Rose & Company, LLC, Research Division: Okay. And then you have to go back -- could you just maybe walk through the timing and what happens now with your flight attendant -- your main flight attendant who rejected a contract. Because, I guess, you have to go back and start over? Or it's probably going to be another year before anything happens there. Can you just talk about that a little?

I don't want to -- let me answer your question, I don't know that I'd agree with that timing or not, but frankly, we just don't know at this point. We did indeed come to terms with our flight attendants on a tentative agreement, which was unanimously approved by the negotiating committee after a lot of work with -- that negotiating committee and under the guidance and jurisdiction of the National Mediation Board. We all worked together and came up with a contract that the committee again unanimously approved. The company also approved but then as sometimes is the case, it went out for ratification and didn't get passed. So we have to go work on figuring out what to do next. That's where the company and our flight attendants at the FAA is at this point. It was -- clearly, we were disappointed by that. I don't think it's good for our flight attendants. It is going to delay what would've been some nice increases, but also what it shows is we barely didn't have the right mix in there to get to where -- more than 1/2 of the flight attendants wanted to approve it. So what happens now is we have to go figure out what happened. FAA is out surveying numbers, trying to figure out why -- what it was they did or didn't like, that process needs to take place. FAA needs to put a new negotiating team together. They have some leadership issues they are working through that need to get addressed. And all that needs to take place. And then lastly, the National Mediation Board, which is extremely busy and thought they were done with this one. We'll need to let us know when they're ready to start working with us again. So all those things will indeed take some time, I don't know how much time. But right now, that's what's going on, which is we're regrouping. And it will take some time to regroup. I don't want to speculate as to how much time that will take, but we will -- we'll regroup, and we'll eventually get this done but we -- it didn't get passed the first time through. Helane R. Becker - Dahlman Rose & Company, LLC, Research Division: Okay. And then can I just ask a question about the competitive position in Philadelphia, where a lot of low fare capacity has come out and some of what is US Airways' core would be considered traditional or core markets like Boston and Pittsburgh. Can you say how much the revenue increase you're seeing overall in your domestic -- is maybe related to Philadelphia? And how much is related to the rest of the system?

I can't give you a specific number, but those markets in Philadelphia, while that was an important event for us, and it's good for US Airways. On a system-level, that's surrounding on the revenue, I think, because they're just not a big -- enough ASMs to make a difference across the whole system. And while we have those markets like Pittsburgh and Boston that we had a competitive capacity reduction, we have others like Los Angeles and San Francisco, where we have new competitive capacity convergence. So you win with one hand and lose on the other in that analysis. But I don't think it's a meaningful impact to our revenue and RASM one way or the other.

A question now from Michael Linenberg.

Just 2 questions here for Scott. Scott, we heard on the Delta call that -- they indicated that their performance from LaGuardia, the margin in that hub was -- saw the biggest year-over-year increase. And on an absolute basis it was the highest, and they attribute it to slot swap and the fact that they're only saying half of it, they don't leave you and they won't get the full benefit until June. My sense is that your DCA hub historically has been a bit more profitable than LaGuardia. Is there any color that you can provide maybe similar along the lines, what, they've provided, what you're seeing thus far?

Sure. While I don't think the slot swap had a real impact on our first quarter profitability, it didn't -- the first half of it didn't get effectuated until March 25, so just wasn't enough time to make a real difference in DCA. We've been pleased with the result so far. It's still, of course, early, so it's hard to have real good data. But this wasn't also the kind of transaction that was speculative in nature. So we're highly confident of the $75 million in annual benefits that we're going to get from this transaction when it's completed. And everything that we see so far is consistent with that and expect that to continue. And you're right that DCA is -- starts from a nicely profitable position for us.

Very good. And then just my second question, just to follow up on the point that Jamie brought up about airline revenue relative to U.S. GDP. And you made a comment that you've seen it outpaced for the past couple of years. Is that -- are you referring to -- is that also similar on the domestic number? Or were you referring on a domestic revenue number? Or is that on a system number? And I just -- I wanted -- started distinguish between the 2, because as a whole, it does seem like the U.S. airline industry today has a lot more exposure to faster growing GDP economies than maybe what it had 5 or 10 years ago. So it seems like a mix issue, although, I think, in your case, most of your revenue is actually -- your international revenue seems to be tied to some of the older economies, which actually are growing at a slower rate than the U.S. So just any clarification on that?

Well, the number that I referred to is domestic only, because you're looking at domestic GDP, and you'd have to include what's flying on international carriers to and from the U.S. and so it would be -- it will be hard to consider. So the number is domestic though. If you did the proper adjustments, I think you'd see something similar including international revenue. For us, we're very happy with the route network we have. We do have growth opportunities in the near term. Latin America, we're looking forward to being able to start São Paulo service. Soon we're working with the Brazilian regulatory authorities to be able to start that. And then longer-term, service to Asia as we begin taking delivery of A350.

Moving on, let's go to Glenn Engel.

A couple of questions. One, are there any of your core markets, your hubs, which stood out on the upside or on the downside?

If you look through a list of 300 markets there's always going to be some that are positive and some that are less positive.

I was thinking of the main core ones, Philly, Charlotte, DC and Phoenix.

This is creative markets that relatively better and for one big market that did really well, Charlotte to Rio, as that continues to ramp up, and we continue to get more recognition in that market. Charlotte-Rio did extremely well. But really, all of our hubs, the business-oriented markets in all of our hubs did well.

The salary per employee was up about 4% year-over-year. What drove that? Is that something I'd expect to continue?

Yes, Glenn. Let's try and [indiscernible] we have been trying to get through thinking about this, but we have across-the-board increases. For the most part, you can go through step increases that run something to that level. We give about a 3% adjustment. And there also might be a mix issue in there, as we have...

Well, part of it is RAS, because we've in-sourced RAS, so you've had a little bit of change on the RAS side, bringing that back in. Dispatchers -- we had a contract that got put in place last year, so the dispatchers was an increase year-over-year. And then from a benefit standpoint, the way we deal with stock compensation and accrue for stock compensation year-over-year went up about $10 million, just from the fact that our stock price went up, so there's things like that in there. But from a total salary and related year-over-year that CASM was only about 1.7%. Pilots and flight attendants were actually -- and mechanics were actually down. So those were the areas that hit us from a -- from that standpoint, Glenn.

Is that stock comp issue a onetime thing or continue?

Something that we've gone. In certain, cases the cash settled stock compensation. And at that point, you have to market-to-market every quarter. So it can fluctuate up and down, and year-over-year, that was a change for us of about $9.5 million in our cost in 2012 versus 2011.

And I'm going to cheat now and say is there comments you can make on how your labor fits in this consolidation process, how your negotiations then?

This is important since a lot of our employees are listening in. But what we told them early last week is we don't -- US Airways doesn't need to do -- again, all I'm doing is reiterating what was said last Friday. US Airways, as these results confirm, we don't have to do anything. We used to talk about our performance, but I know you guys will go compare these other airlines, and when you do, what you'll see is first quarter is a difficult quarter, as you guys all know for all airlines. But we have margin performance now. This quarter, anyway, equals Southwest. That's never happened to this airline. It's pretty much right in line with Delta. I suspect it'll be better than what United reports tomorrow. We are doing quite well on our own and have no need to do anything. Having said that, and for all the reasons always stated, they may make sense in the future for us to do something. And if we do, making sure that US Airways employees are better off because of it is on the forefront of anything we're going to do. So anyway, without giving any details or pretending to, we have consistently said, and I'm happy to continue saying that if we do anything, what's nice to know is it's ours to decide if we want to do something, because we're doing really well standalone. And if we decide to do something, it'll because -- it'll be because we think it makes sense for everyone at US Airways. And that certainly includes the people that have gotten us here, which is the 32,000 people that are working really hard for this airline.

Moving on, we go to Ray Neidl.

Scott, with your excellent background in statistics. I have complete faith in your policy of not trying to fuel-hedge. But what do you think about an airline buying a refinery, would that help? Have you ever looked at that, or is that just a laughing matter. I guess, it's a laughing matter from your reaction.

Doug's not going to allow me to comment.

But look, one thing I will note is we made a lot of progress if airlines are looking at investing their capital and things like that. I think we're not -- people at Delta are really smart people, and we have a lot of respect for them. Whatever they think makes -- just do with their capital. I'm just really excited to see we got this business to a point that people are looking at investing capital into things like that instead of taking it and buying more airplanes that don't get a return.

Okay, great. And Scott, on ancillary revenue type plane, you guys have been leader here. Is that pretty much topped out right now, with people packing less and revenues going down on bag charges, or have you reconsidered maybe charging for carry-on bags?

The general counsel won't let me comment on things like that, because they're pricing-related actions, future -- forward-looking pricing-related actions. I don't think we're topped out on ancillary revenues without regard to the question about bags. I think the next big opportunity is choice seats, which is already big for us and is going to be running at a run rate of $100 million here by the end of this year, and which I think can be $300 million-plus line of business in a few years once we get that, able to be sold through all distribution channels. And today, we're working with online travel agencies to hopefully start selling that. And we're also working with Sabre, and have a product that Sabre travel agency will be able to sell choice seats as well.

Okay, great. And Derek, do you have a target for your debt-to-capitalization ratio? I imagine, if that the ratio improves, your stock could probably get a higher multiple?

No, we don't have a target for that right now. I mean our goal is to continue to raise cash. During the quarter, we did a good job of bringing in $100 million and deferring some debt payments. So our goal is to really just to continue to increase cash at this point in time.

And a question now from Bob McAdoo.

The comments with Michael Linenberg took care most of my questions, but just one last little thing on the slot swaps. With the new markets that you're in, in Washington, how many of them are brand new markets that people just haven't had nonstop service to DCA? And is there a spool-up kind of thing, or do those things start up pretty well? The rest of it has been handled with your discussion with Michael.

Okay. I got it. No, I'm saying I'm not sure, but I think there are 8 markets that didn't have nonstop service before. Some of which started now. Some of which start in June. And yes, some of those markets will have a little bit of spool-up. But these are more business-oriented markets, so the spool-up will be pretty small -- will be pretty quick.

Dan Fintzen, please go ahead.

Just a follow-up on some of the leisure commentary. Just curious as some of the relative outperformance in business. Is that reflective of what you think is going on in the broader economy in terms of corporate profits are high and maybe your overall economy is not as good, or is that just a product of years of capacity discipline, where leisure starts to get priced down become a smaller portion of vehicle of your revenue?

Well, my opinion's no better than yours, but my view is that it's the former. It's more reflective of strong corporate profit and business in the United States and businesses that are doing well in the U.S. Leisure demand and leisure revenues are still growing, and they're still growing faster than GDP. So I don't think by any stretch of the imagination that consumers are getting priced out of air travel. It's just that business is growing stronger. And in that regard, I'd also say that if you look at inflation and adjusted fares from the time of deregulation, there's today about 50% below where they were in 1980. So air travel remains a fantastic bargain, and I don't see any evidence that we're pricing consumers out of the market, and demand remains strong and again is growing faster than GDP.

And then just -- I mean, on that cyclical side, in the past, the booking curve, again, the leisure side may have been a little shorter than historical, and there's maybe a little more certainty in the economy. Are you seeing anything change there, or is it been pretty stable recently?

I think it's stable there. And the booking curve movement, I think, are less about changes from a consumer psychology perspective and more about changes to airline fare structures. The booking curve moved in because airlines took what used to be a 21-day advance purchase fare with Saturday night stay required and made it a 0-day advance purchase fare one-way ticket. And so because of that, you move the booking curve as opposed to some structural change in consumer psychology.

Moving on, let's go to Jeff Kauffman. Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division: I just wanted to follow-up on Mike and Glenn's question on the 4 core hubs. We were talking about some of the differences you were seeing. Could you give us a feel for how the RASMs may have differed amongst the hubs in the quarter? It's just different trends, you don't have to get specific about exactly what they were. You would -- the business markets...

Well, all did well. And on a year-over-year basis, in the first quarter Charlotte and Philly did the best, but that's largely driven by higher mix of business traffic. As we look forward, Phoenix is actually doing better. But they're all pretty similar.

Our next question comes from Michael Derchin.

Just one final -- again related to the profitability of your 4 key cities. You mentioned that Washington in national is very profitable, nicely profitable, and certainly upside coming from the swap. How do you rank those 4 in terms of profitability? Is Washington the most profitable? And what is Philly and Charlotte and Phoenix rank?

In terms of profit margin, DCA is typically our highest market, Charlotte is #2, and then Philly and Phoenix are all -- are very similar.

Okay. And in terms of just the upside potential of the 4?

I think they all have upside potential.

Similar?

Yes.

Jamie Baker, your line is open. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Quick follow-up question for Scott. You did $345 million of other revenue in the first quarter. You're guiding to only $340 million of other revenue in the second quarter, despite the fact that sequentially, you're going to carry more passengers, you're going to have materially higher ASMs. You're entitled to your guidance. I'm just wondering if there's something structurally taking place that would imply lower other revenue collection per passenger. Or I just want to make sure there hasn't been an accounting change that is flipping some of what used to be other up in the passenger RASM, which might explain that 9% figure that you gave for April.

Jamie, it's really in the -- right now the difference is in the Dividend Miles that we had about $90 million in first quarter and Dividend Miles, and we don't expect that. We have some benefits early on where people renewed and things like that. That we don't expect going into the second, third and fourth quarter. I think from a baggage perspective, it's pretty equal all the way across and in-flight revenue equal all the way across. So the real difference right now is in the Dividend Miles section. Hopefully, we do better than that, as we go forward in the forecast. But right now, that's the area that is reduced going into the second, third and fourth quarter.

Ladies and gentlemen we are now done taking questions from analysts at this time. [Operator Instructions] Josh Freed, your line is open.

All right. Back at the time of the merger, there was some financing, I believe, from Airbus. Is that -- has that long since gone away? And what's the nature of your relationship with Airbus today? Is it -- obviously, you guys are an Airbus customer. Is there anything more to it than that? Or has it gone back to being just a fairly basic airline relationship with a Airbus supplier?

I wouldn't call it basic. We're the largest -- we fly more Airbus aircraft around than any other airline in the world, so we have a really -- we have a very good relationship. They do a nice job for us. But as it relates -- is there anything else in there? Yes, I mean, we have – I'll let Derek chime in, but I know really what we did was some things that we are paying back over time, and I assume we still have something to pay back. Go ahead, Derek.

No, I think, we -- back in 2008, we raised a couple of hundred million dollars over that timeframe, and we're paying that back as some of that is paid back this year, about $78 million are in this year's guidance from a cash perspective. And then we do have some more to pay back in 2015, '16 and '17, but we have paid back already a significant portion of what we borrowed in 2008, but we do have a little bit more to pay down in 2015, '16 and '17. And then, of course, we have the order that we'll still be going on through taking deliveries through 2014 and then A350s start to show up in '17 -- 2017, '18 and '19. So significant relationship with Airbus and a really good relationship with them.

Sure, sure. Obviously, sitting here today, your orders are all Airbus as opposed to Boeing. And is that a requirement of any of those relationships, or is it just simply the...

That's really not. No.

Next up, let's go to Mary Schlangenstein.

I had 2 really quick questions. The first one, Doug, when you and Scott talked about looking at that $800 million difference to bring American labor costs down to industry consensus, American is now saying, that it's $990 million, only when you count unions. Does that make any difference at all in terms of your forecast of the numbers that you guys have worked with?

Yes. Okay, fair enough. I mean, you're asking about -- made his clarifications. We used that number, because its American's number to provide people some idea as to what we -- the impact on our synergies. So if they said that number's different, no, it doesn't make any difference to. The important number that Scott disclosed, which is that conservatively we know what we have agreed to and what it would do to the total cost structure of the combined airlines. And we believe that conservatively, having done that we still are able to produce -- we still would be able to produce the airlines together conservatively, $1.2 billion of synergies.

Okay. My other quick question was, Derek, on the $100 million loan that you talked about, can you give any more specific details on that?

We can't get any more color on it. It will be in our Q. It will be -- the information will be in the Q. But as I said, I can give you that it was a 2-year deal, standalone credit facility and just used the collateral that you'll recall back in December we put out $47 million to reacquire the legal title of those slots. So we just refinanced those slots.

[Operator Instructions] Let's next go to Ted Reed.

My questions are all for Scott on international. First, Delta said that counter intuitively despite the European economies, they see a lot of growth in business traffic to Europe. Do you see the same thing?

We do.

All right. I'll move to the next question. The recent agreements with Brazil, when the negotiators were here, is that increasing your chance of getting the say, Apollo route from Charlotte more quickly?

Well, we've already got the authority to fly in São Paulo, so we're working with the regulators in São Paulo on issues like getting appropriate slot times, getting a place to park our airplane. So directly, the answer is probably no. But a better government to government relationship, where the industry is good helping smooth out some of those issues.

Okay. And third thing I heard you -- last thing, I heard you mention Asia. What would be the most likely hub from which you would serve Asia?

Philadelphia.

And the question is now from Ely Portillo.

I'm just wondering if you can give any color about Charlotte, Douglas. And whether you expect any large changes in traffic there this year? And also whether you guys have any concerns similar to Philly over the expansion plans that are being talked about and decided on by Jerry Orr and his crew over there?

Charlotte is a fantastic hub for us, one that we've actually grown quite a bit over the last few years. We think there continues to be opportunities to grow, add more small cities in particular to Charlotte. We've got Charlotte-São Paulo service on the plate, so it can be international growth as well. And as to the airport relationship there, we have a fantastic relationship with Jerry Orr and his team. I wish all of our airport relationships everywhere in the world could be as good, and we're supportive of what they're doing.

With that, we'll conclude our question-and-answer session for today. I'll turn the conference back to our presenters for any additional or closing remarks.

Okay, great. Thanks a lot. One thing I do want to close with -- Derek's sitting here next to me, just wanted to note -- I noted how great the entire team of 32,000 employees has been doing but our management team has gotten some nice awards of late, that's what I wanted to out to point you. Derek was in New York this week being on his -- the treasury team, being honored by Airfinance Journal as the Treasury Team of the Year. I told you on the last call that our Investor Relations team, which is a team of one led by Dan Cravens was honored by Institutional Investor as the investor relations -- as the Best Investor Relations team in the business. We also had something we're extremely proud of and just during this quarter, our team was named the 2012 Maintenance Organization of the Year by Aviation Week. So anyway, these are the kind of things you usually see the fourth largest airline winning all these awards. But we're doing it because we have a phenomenal team, and we're really proud of them. So I just want to point that to you guys as well. Anyway, thanks very much for your time. Thanks very much for your understanding and cooperation in the Q&A period. We appreciate it. We will be in touch and let you know more as it develops. Thanks a lot.

Ladies and gentlemen, we again conclude today's conference call. Thank you very much for your participation.