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

Hunter K. Keay - Wolfe Research, LLC Jamie N. Baker - JP Morgan Chase & Co, Research Division Michael Linenberg - Deutsche Bank AG, Research Division John D. Godyn - Morgan Stanley, Research Division Daniel McKenzie - The Buckingham Research Group Incorporated Glenn D. Engel - BofA Merrill Lynch, Research Division Helane R. Becker - Cowen and Company, LLC, Research Division Savanthi Syth - Raymond James & Associates, Inc., Research Division Bob McAdoo - Imperial Capital, LLC, Research Division David Koenig

Good day, and welcome to the US Airways Second Quarter Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] And now I would like to turn the conference over to your moderator, Managing Director of Investor Relations, Mr. Daniel Cravens. Please begin.

Thank you, Jessica, and welcome, everyone, to the US Airways Second Quarter 2013 Earnings Conference Call. Joining us on the call today are Doug Parker, our Chairman and CEO; Scott Kirby, President; Derek Kerr, Chief Financial Officer; and also available for the Q&A session are Robert Isom, our Chief Operating Officer; Steve Johnson, our EVP of Corporate; and Elise Eberwein, our EVP of People Communications. Like we typically do, we're going to start with Doug, and he will provide an overview of our financial results. Derek will then walk us through the details on the quarter and provide some color on our guidance for the remainder of the year. Scott will then follow with commentary on the revenue environment and our operational performance. And then after we hear from those comments, we'll 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. The numerous risks and uncertainties could cause actual results to differ materially from those projected. Information about some of those risks and uncertainties can be found in our earnings -- press release issued this morning, our Form 10-Q for the quarter ended June 30, 2013, and our 2012 Form 10-K. In addition, we will be discussing certain non-GAAP financial measures this morning such as net profit and CASM excluding unusual items. A reconciliation of those numbers to the GAAP financial measures is included in the earnings release and that can be found on our website at usairways.com under the Company Information Investor Relations tab. A webcast of this call will be archived on our website for a period of about a 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 for our call this morning, and I'd like to turn over -- turn the call over to our Chairman and CEO, Doug Parker.

Thanks, Dan. Well, as you have seen by now, we reported this morning net income for the quarter of $287 million, and that compares to $306 million last year. However, please note that last year, we were not booking income taxes, and this year, we are due to our success of earnings. Derek will explain more but that's a major difference, of course, in the year-over-year financials. It's non-cash income taxes still, but being booked nonetheless. That has a major effect on the year-over-year financials. So if you adjust for that and look at the pre-tax number and look at pretax, excluding special items, what you will see is we had a record $409 million pretax profit for the quarter. We're extremely pleased with that. To give you some perspective, the prior record pretax earnings for the quarter at US Airways was last year's $321 million or up 27% versus the prior record. To give you some further perspective, $409 million for 1 quarter compares awfully closely to the best year in the company's history. Last year, we made $537 million pretax. That was the best year in the company's history of $537 million. So $409 million on any standard is a fantastic quarter for us, and we're extremely pleased with it. And then, not only versus our own earnings is it impressive, it's also, as you look at it versus our competitors, it's comparing very well. Everyone hasn't reported yet, but of those who have, our 10.6% pretax margin for this quarter is the best that anyone has reported thus far. We expect it will be the best of anyone, certainly, of our size. So really, just phenomenal performance. We couldn't be happier. It's very rewarding for our last earnings report as an independent company to be the best in our history. It validates the work that our team has done and gives us all great confidence as we head into our merger with American Airlines. That's of course, all thanks to our 32,000 team members who have done just a phenomenal job of taking care of our customers and running a great airline, and producing these kinds of results. So with that said, we are indeed focusing on getting the merger completed and closed. That's going very well. The teams at American and US Airways are working extraordinarily well together, and we're very pleased to see that work come together. And we continue to look forward to a third quarter close, which is what we said on the day we announced the merger back in February, we anticipate closing in the third quarter. We continue to anticipate that, and indeed expect this will be the last earnings call for US Airways as an independent company. And again, I couldn't be happier with the results. Really phenomenal job by the team, and we can't thank them enough. So with that said, I will turn it over to Scott. Before I do that, I should note, excuse me, that, again, we're -- the team is spread throughout the country working on this merger. So we're not all together. So if we sound a little disjointed, that's why, but I think we pulled it off last time. I'm sure we can pull it off again. I will turn it off to Scott, who is in Tempe. Scott? Derek J. Kerr: It's Derek.

Oh, I'm sorry, Derek. Derek was in Tempe and then Scott. Sorry, Derek. Derek J. Kerr: When we're together, we can turn it to the right person.

Yes, exactly. Derek J. Kerr: Thanks, Doug, and good morning, everybody. We did file our second quarter 10-Q this morning, and in that Q, as Doug said, we reported a record second quarter net profit, excluding net special items of $324 million versus a net profit excluding net special items of $321 million last year. As Doug said, for the first time in many years, we were required to book a noncash provision for income tax due to the use of our remaining valuation allowance. As we now recognize income tax expense for this quarter, we believe pretax earnings, excluding special items, is a better measure for evaluating year-over-year performance than net income. Pretax income, excluding special items for the second quarter, was a record profit of $409 million, resulting in a 200 basis point year-over-year improvement in pretax margin to 10.6%. This is the highest quarterly pretax earnings and margin in company history. On a GAAP basis, the company reported a net profit of $287 million or $1.40 per share versus a net profit of $306 million or $1.54 per share last year. The company did recognize approximately $55 million in net special charges before taxes in the second quarter. This consisted of $24 million of operating special items that primarily included merger-related costs and a $31 million nonoperating special item primarily related to the noncash debt extinguishment charges in connection with the conversions of our 7 1/4 convertible senior notes and the refinancing of the company's term loan. For the quarter, total capacity was 23.8 billion ASMs, up 3.4% from 2012, primarily due to use of larger gauge aircraft as a result of our fleet replacement plan and longer average stage length. Mainline capacity for the quarter was 20.2 billion ASMs, up 4.2% from a year ago, and express capacity was 3.6 billion ASMs, down 0.3% from 2012. In the second quarter, we took delivery of 4 new A321 aircraft and 2 new A330 aircraft. For the rest of the year, deliveries are fairly consistent with 6 in the third quarter and 5 in the fourth quarter, and at year end, we expect to be at 339 aircraft. On the express side, we expect the year-end fleet count to be 279 aircraft. During the quarter, we did reach agreement with SkyWest Airlines to replace 4 of its CRJ200 aircraft with the used CRJ900 aircraft, 3 replaced in service in July, with the remaining aircraft scheduled to enter service in August. We're maintaining our previous ASM guidance. Total consistent capacity is expected to be up approximately 3.5% versus 2012, primarily due to larger gauge aircraft and a higher stage length. Total domestic capacity is forecasted to be up 3.8%, while international capacity is up about 3.2%. Total mainline ASMs are projected to be approximately $77.4 billion for 2013. By quarter, that breaks down to $20.4 billion in the third quarter, $18.8 billion in the fourth quarter. Express capacity will be approximately $3.63 billion in the third quarter and $3.59 billion in the fourth quarter. Total operating revenues for the quarter set a record at $3.9 billion, up 2.9 % from the same period in 2012. Mainline passenger revenues were $2.6 billion, up 4.9%, driven by strong leisure demand and a record load factor. Cargo revenues were down $3 million or 7% to $36 million due to lower international freight and mail revenue. Other operating revenues were 3 -- $181 million, up 7.6% in the second quarter due primarily to higher revenues associated with our dividend miles frequent flyer program and increased change fee volume. Total passenger RASM was down 0.9% to $0.1447 in the second quarter of 2013. For the same period, our combined load factor was a record 85.1%, up 1.7 points, while the combined yield decreased 2.8% to $0.17. Total RASM in the second quarter of 2013 was down 0.5 versus 2012. The airlines operating expenses for the second quarter were $3.4 billion, up 1% as compared to the same period a year ago. Mainline operating cost per ASM, excluding special items, was $0.1276, down 2.5% year-over-year due primarily to a decrease in fuel price and lower aircraft rent, driven by a decrease in the number of leased aircraft and lower rental rates in the second quarter of 2013. These decreases were in part offset by increases in other rent and landing fees due to a timing of a rent credit and depreciation due to an increase in owned aircraft. Salaries and benefits were up $27 million, due primarily to profit-sharing and our new flight attendant contract. Our average mainline fuel price, including taxes for the second quarter of 2013, was $2.92 per gallon, an 8% decrease compared to $3.17 per gallon in the second quarter of 2012. Our policy to not hedge fuel continues to work in our favor, as we believe we will continue to report the lowest fuel price paid in the industry. We are forecasting mainline fuel price to increase slightly from previous guidance based on the July 23 forward curve. We expect fuel price to be in the range of $3.03 to $3.08 for 2013. Our forecast breaks down by quarters as: $2.98 to $3.03 in the third quarter and $3.03 and $3.08 in the fourth quarter. A disciplined approach to cost management and outstanding operational reliability allow the company to maintain its relative cost advantage. Excluding special items, fuel and profit sharing, our mainline cost per ASM was $0.0821 in the second quarter of 2013, a decrease of 0.4% versus 2012. Express operating cost per ASM x special items and fuel was $0.1434 for the quarter, which was 1.1% higher than 2012. Our second quarter consolidated CASM x fuel, special items and profit sharing was down 0.4% versus the second quarter 2012. Our full year cost guidance remains unchanged from previous guidance. For the full year, we forecast mainline CASM x special items, fuel and profit sharing to be flat versus 2012. The third quarter is forecasted to be up 1% to 3%, while the fourth quarter should be down 3% to 5%. Express CASM is forecasted to be up approximately 2.4% in 2013. Despite challenging weather conditions, our 32,000 team members delivered outstanding operational results, and thereby, earned $2 million incentive payments in the second quarter and that's $8 million year-to-date. We also accrued an additional $47 million in profit sharing based on a record second quarter 2013, bringing the year-to-date total to $53 million. I'd like to thank and congratulate all of our 32,000 team members for continuing to do an outstanding job. Next, I'll talk a little bit about the balance sheet. We did end the quarter, with $3.97 billion in total cash and investments, of which $350 million was restricted. This is up $1.1 billion from the end of the first quarter of 2013 and is our highest total quarterly cash balance in company history. During the second quarter, the company raised approximately $870 million in net incremental cash through a series of financing transactions. These transactions include the refinancing of the company's existing term loan, the issuance of high-yield bonds in aggregate principal amount of $500 million and the addition of $100 million C-tranche to our 2012-2 EETC. During the quarter, we also closed on our 2013-1 EETC transaction, which will be used to finance our purchase of 18 Airbus aircraft scheduled to be delivered from September 2013 to June 2014. As a result, we have now secured financing commitments for all of our aircraft deliveries taking us into June 2014. Additionally, due to the run-up in our stock price, as of today, holders have converted $127 million principal amount of the 7 1/4 convertible senior notes, resulting in the issuance of approximately 27.8 million shares of the company's stock. The current amount of outstanding shares is approximately $192 million. And in July, we repaid in full the Barclays prepaid miles loan at its base amount of $200 million, eliminating high-cost debt from our balance sheet. In the second quarter of 2013, the company generated $520 million of positive cash flow from operations and approximately $446 million of free cash flow, defined as operating cash flow less net capital expenditures, and we also paid down $98 million of debt during the quarter net of all the refinancings. Looking at CapEx, we're still forecasting total net CapEx to be $297 million, non-aircraft CapEx, $170 million and net aircraft CapEx, $127 million. So in summary, we reported our highest quarterly profit x specials in our company's history. These outstanding results, of course, wouldn't be possible without our 32,000 team members who have worked extremely hard to get us where we are, and I would like to again thank and congratulate them. We have made tremendous progress over the years in positioning the company as an industry leader in revenue management, cost control and margin expansion. Our actions have worked exceedingly well and have resulted in a solid foundation to build upon as we plan for our integration with American Airlines. And with that, I will turn it over to Scott. J. Scott Kirby: Thanks, Derek. Before beginning and since this is likely our last earnings call as US Airways, I'd like to start by briefly reviewing some operational and financial statistics from the past few years. Operationally, of the network U.S. carriers from 2008 through 2012, US Airways has had the #1 on-time performance, the #1 breaking and departures is 0, has had the lowest mishandled baggage ratio and the lowest cancellation rate. In the areas that matter most to customers, I want to thank all the people of US Airways for literally making us #1 in all of these operational metrics for the last 5 years. That strong operational performance has led to strong revenue result. Over the past 24 months, US Airways has outperformed the industry domestically in 19 of 24 months and in 16 of 24 months across the Atlantic, despite the fact that we've had higher capacity growth in the industry, and our cost discipline has been equally impressive. First, since US Airways stopped hedging fuel, we've had the lowest or second lowest cost of fuel in 10 of the last 14 quarters, a strong validation of our no-hedging strategy. And from 2008 through 2012, our state-adjusted CASM, excluding fuel, is up only 1.4%. Three of the big 5 are up double digits over that timeframe, while the fourth, and I'm happy to report is our merger partner, was just under 10%. So I want to take this opportunity to again thank all of the people of US Airways. Over the past 5 years, we've become the industry leader on all fronts: operationally, revenue performance, fuel expense and CASM x fuel discipline. That, of course, is the foundation that led to the strong financial results we've produced, including the highest ever quarterly pretax earnings in our last quarter as US Airways. But as enjoyable as that historical retrospective was for me, I'll now turn to some more real time commentary on the revenue environment. As you know, demand weakened towards the end of the first quarter, about the same time as the sequester kicked in. Demand did improve throughout the second quarter, however. And in June, in particular, booking volumes for business demand got stronger, which led to June RASM of 1% compared to our initial guidance of flat to down 2%. For some regional color, domestic RASM was down 1%, Atlantic RASM was up 4% despite 5% capacity growth and Latin RASM was down 8%. Latin RASM was negatively impacted by 25% more capacity to Brazil year-over-year, as we started new service to São Paulo. Going forward, the demand environment remains quite good for both leisure and business demand. Stronger consumer confidence, business confidence and macroeconomic performance seem to be combining to drive the improved revenue environment. Business demand strength, in particular, is continuing into the third quarter. Some of the summer strength is probably due to high demand period, which allows our yield management team more opportunity to hold out for higher fares. That said, the underlying demand environment certainly seemed stronger in June, and thus far, into July than it was from March to May, and the strength in business demand leaves us optimistic, looking out even to an off-peak month like September. Regionally, we expect the continuation of first quarter trends, with Transatlantic RASM up more than domestic or Latin RASM. We currently expect June RASM to be up 4%, and we're projecting each of August and September to be at 2% to 4% on a stand-alone US Airways basis. In conclusion, we've had a great run here at US Airways, and it's nice to be ending our time as a stand-alone entity on a high note. We're all looking forward to joining our new colleagues at AA, and I look forward to hopefully starting a conference call in a few years with a similar story about the new American leading the industry in operations, revenue, cost discipline and employee engagement, which will, of course, if we execute, produce industry-leading margins. Doug?

Thanks, Scott. Operator, we are ready for questions.

[Operator Instructions] And our first question will come from Hunter Keay with Wolfe Research. Hunter K. Keay - Wolfe Research, LLC: So great stuff on the -- great commentary on the yield environment. I appreciate that, Scott. I'm wondering if you're seeing any benefit from the change fees, not necessarily in terms of how they're hurting the other revenue line, but how it's impacting your ability to manage yields. Are you seeing -- maybe it's early, but are you seeing more of a mix of refundable fares being sold since the higher change fees? Or do you feel like the booking patterns have changed to your advantage? You mentioned more risk-taking on the yield management side, how much of that has to do with the change fees?

I don't know. It would be really hard to tease that answer out of the data. There's been nothing that sticks out in the data that would make you think there's been any fundamental change in behavior. Our booking curves haven't really shifted with the exception that bookings close in have been stronger, but I think that's much more a function of just improved business demand, and perhaps, backlog of business demand when sequester kicked in, and we've talked about headlines before on these calls. But when the headlines were bad, and catastrophe around the corner, businesses tend to pull their horns in, and that lasts for a short period of time, but then for those -- for other businesses to be successful, they need to get out on the road and meet with clients and sell their products. And so as we've seen that kick back in, has been the only real change in the booking curve, and I don't think that's a change in the booking curve as much as just an improvement in the business demand environment. Hunter K. Keay - Wolfe Research, LLC: Okay. Thanks, Scott. And in terms of when the deal closes, can you just give us a reminder about how the MOU was structured with labor in terms of are we going to see an immediate uptick the day the merger closes or is there a period where you negotiate and then you start accruing for the new deals after you have a ratified CBA? And if there is an immediate uptick in labor rates because of the MOU, what is that rate increase for the pilot specifically, obviously? J. Scott Kirby: There is an immediate uptick. It's not just for the pilots. It's for all the groups that have CWs [ph] at American and HDFA [ph], the [indiscernible] at American. And for the pilots on both sides, that is approximately $400 million on an annual basis across all those groups.

And we'll now go to Jamie Baker from JPMorgan. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Doug, as I recall back in February, I believe you said the merger would be meaningfully accretive to LCC in 2014 before the onetime merger expenses. And I'm digging through here, I'm not sure if you have been on record since then, and of course, shareholders have already approved the deal, I'll admit to being a bit underwhelmed by AMR's standalone results year-to-date. Is your view still that this is meaningfully accretive in '14?

I believe that's the answer, Jamie, I'll defer to Derek. I can't imagine anything has changed. The -- by my recollection, the other synergies offset any of the transition cost in the first year. Is that right, Derek? Derek J. Kerr: Yes, it is. Jamie N. Baker - JP Morgan Chase & Co, Research Division: But there's nothing specific to American's performance year-to-date that has caused you to rethink any component of the analysis?

No. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Okay, fair enough. And Scott, a quick question on Q4. Obviously, quite a bit mainline capacity entering the system. As we think about RASM in the fourth quarter or your contribution to a merged entity, it seems reasonable, but you'd expect a decline. Is there anything specific though about the markets themselves? Or in the prior year period that we should be taking into consideration that might lead to RASM doing something other than declining in Q4? J. Scott Kirby: Well, first, I understand what the capacity increase in Q4 is. It's about 6%. One point of that is just running a higher completion factor because there was a lot of storm impacted last year. Almost 2 percentage points of that is we'll have fewer aircraft and seat check during that period. So it's just a timing issue of when planes are scheduled versus when they were in the hangar last year. And the remaining 3 points are more seats on the aircraft as we continue to put more seats on airplanes. And so all of those are, from a financial perspective, really efficient ways to add capacity because, obviously, the marginal CASM of flying an airplane that was in seat check last year is low. The marginal CASM of adding more seats to the aircraft is extremely low. And the marginal RASM, particularly on extra seats, will be lower, but it's financially positive. If you look kind of 2008 to 2012, I talked about our -- CASM x fuel was up 1.4% over a full 5-year period. That's partly because we've been doing things like that, adding more seats to airplanes and increasing the gauge of the airplanes. That’s been really efficient, and that's helped us have the best improvement in industry margins over that same time period as well. So there is more capacity. I suspect it will put pressure on RASM. It's too far out for me to really give you a good forecast of -- does that mean it's going to be above 0 or below 0. But I'm confident that the capacity we have will be earnings- and margin-accretive because it's such low-cost capacity. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Okay. That's perfect. I mean, you answered the question well. As long as it's not new route activity, that certainly gives us some RASM optimism. Okay.

And we'll now move to Mike Linenberg from Deutsche Bank. Michael Linenberg - Deutsche Bank AG, Research Division: A question here to Derek. The -- you've been very active in the market and there's been a sizable amount of financing. What is that earmarked for? Or when you mentioned the fact that you had all of your commitments, your aircraft commitments through 2014, is all of that capital, is it for those purchases? Can you just elaborate? Derek J. Kerr: Yes, a couple of things. One is for those purchases, so we've gone off and financed aircraft for that. The second one is refinancing the term loan, which we had to do because it became current and had to be refinanced in early 2014. So we took advantage of where the market was and refinanced that at very favorable rates, and also repaid a couple other loans at that point in time. Then we did go out and do the unsecured deal at just over 6% because we thought the market was there for that. As you've noticed, we've now taken $200 million of that $500 million and paid off the Barclays term loan. So that has been done. So as we go look forward to the combined carrier, we, number one, want have a cash balance that's good enough to get us through the transition, but also, as we look forward, we're going to look at higher price debt on both sides after the merger to see if there's much -- other opportunity to pay down higher cost debt as we move forward. So I think, number one, it's for -- to have a big enough cash balance to get through everything we need to do in the merger, and two, after that point, we will start working on paying off some debt as we move forward. Michael Linenberg - Deutsche Bank AG, Research Division: Okay. Great. And then just my second question, post-merger, is there any sort of -- is there maybe a compelling reason why it would make sense to have 2 affinity credit card programs or does going to 1 make the most sense economically? Can you just talk about that, Doug or Scott?

Sure. I'll take a shot at it, and I'm not going to give you much specifics because we're hot and heavy in negotiations with Barclays and Citi right now on the outcome of that. I would simply say that we are agnostic as to whether we have a single provider or dual providers. We care about the total economics that we think we can achieve. There's some advantages to having dual, but those come through in the economics. So if we have an offer that makes it compelling to go to a single, we will. And if it is more economically attractive to have 2, then we will have 2.

Our next question comes from John Godyn from Morgan Stanley. John D. Godyn - Morgan Stanley, Research Division: I wanted to ask Robert Isom a question. Robert, I remember -- I know it's a team effort, but I remember after you joined, it wasn't long before we started to see a range different operating metrics tick up, reliability, on-time baggage handling, and for a while, US Airways a clear leader on a lot of those metrics. Can you just take us back to the playbook at that time and also just talk about the extent to which the same principles could be applied to a larger network.

Robert, are you there? Robert's in Miami working on just that. Robert D. Isom: John, you get me at a good time. I'm just -- we're getting our -- the new ops teams all together to talk about this very topic down here today and tomorrow. So anyway, I take a look at small airline, big airline. At the end of the day, the most efficient or the most cost effective way to run an airline is to run a reliable airline. And that's -- when you take a look at the cost of running off-schedule, there's an employee impact, there's passenger compensation, crew cost, fuel burn, mishandled bags, customer complaints, all those kind of things. In addition to the fact that you're upsetting a lot of customers and they're booking away, and you're potentially losing sales contracts and the like. So U.S. Airways, it was -- look, we knew where we were at, and we had to make some improvements really quickly. And it started with taking a look at just how we were running the airline on a day-to-day basis. And clearly, one of the things that we were doing was we just weren't getting started off right, and there were a lot of reasons behind it. There were technology deficiencies. There were training issues with the team and there was management issues. And so we kind of took a top-to-bottom look, came up with a strategy that basically said, "Look, outside of schedule and price, the thing that customers care most about is core reliability, and that's getting to your destination on time with your bags. And we set a program that was really designed to ensure that, that core reliability was held really supreme in the operations. Started with building a schedule that really facilitated running an on-time airline. And then it really then went to getting a management team involved that really all believed in the same thing, which was really a look to departing on time. It sounds easy, but when you think of all the resources that you need to get, all the technology you need to have in place to pull that off, there's work, and months and months of work involved in every organization to pull that off. So we did that, and it started to show some improvement and it was really self-perpetuating. You set up goals, not only to achieve that, but then also reward systems to achieve it and pretty much -- pretty quickly, you have enthusiasm around it. So as we take a look at what's coming next, I think that the importance of running a really tight schedule, which we do today, but one that is operated incredibly efficiently and on time along the core reliability metrics, is going to be incredibly important. I think it's the key and the baseline that you have to have in place before you can move on to the other things. And we will clearly have to be great at a lot of other things, including making sure that we're providing amenities that customers will pay for and that we can generate a return on. So I think a lot of the same holds true for what we're looking for -- looking at going forward. I'm excited to get started with the new team working on it. John D. Godyn - Morgan Stanley, Research Division: Okay, great. That's really good color. And Scott, if I could ask something on revenue. In the past, we've talked about kind of using a revenue as a percent of GDP framework for thinking about where the industry might go over a longer period of time, and we've also kind of talked about how domestic revenue or domestic returns kind of might be the driver on the margin of getting back there. I was hoping that we could go one layer deeper because I don't have this data, but when you think back to kind of the segments that will take us back if we're going to get back to a higher revenue as a percent of GDP, would we expect a lot of that to come from corporate or leisure as the major driver on the margin of revenue growth? J. Scott Kirby: I don't really know. It is true that revenue, as a percentage of GDP, is still relatively low today compared to what it's been historically. And I think whether that occurs on the business side -- if it improves and occurs on the business side or the leisure side, it's somewhat dependent on the macro economy and what happens really around the world on the macro economy. So I don't know that I would make a forecast of that today. One of the things, though, that when you bring that up that's important to recognize is that airline margins have improved and we have this -- a lot of you and other talked about capacity discipline. Well, capacity discipline is really met over the past 12 or 13 years, more than anything, is accommodating the same number of customers that we had before, but on more efficient flying. So canceling low-load factor flights. The 5 p.m. departure out of New York to Dallas or wherever was running full 13 years ago and is running full today. But airlines have all kind of independently gotten rid of capacity that ran really low load factors and we accommodated those same customers. So we've had an improvement in our costs. And in fact, load factors from 2000 up to the last 12 months have increased by 15% across the industry on average. Over that same time period, by the way, real fares have declined by 15%. So really, the story of the industry in the last 12 to 13 years, I think, has been about being more efficient about scheduling our capacity. We cancel 50% of our flying on the Thursday after Thanksgiving particularly -- on Thursday of Thanksgiving, particularly in the afternoon, where nobody flies. Ten, 12 years ago, we didn't do that. So that really is the story of what's happened with the industry in the last decade or so.

Our next question comes from Dan McKenzie from Buckingham Research. Daniel McKenzie - The Buckingham Research Group Incorporated: I believe the sequester backdrop actually gets uglier as we move into the fall, but that certainly doesn't seem to be the case in your revenue outlook. So I guess, I'm wondering if you can help us peel back the onion on revenues here. I guess, first off, what was the margin impact in the second quarter from the sequester? And then looking ahead, how does that dynamic between, call it sequester-related revenues and all others, play out as we look ahead? J. Scott Kirby: Dan, the sequester impact, at least, for government travel remains the same, about the same as what it was in March when we closed those statistics. Government revenue in the quarter was down 37%, which compared to where it was last year, would have been a full point -- over a full point of RASM. So that impact is still there. I think what happened in kind of the March, April timeframe though was all of the noise about sequester and problems in Washington caused other business demand to decline and people worried about the future. And again, we've seen this over the years that when the media is amped up about economic crisis or potential for economic crisis, we think they’re just pulling their horns, but they quickly get back to traveling because they need to for running their own businesses. And so I think we had a magnified effect in March, April, May because businesses beyond government employees also pulled back at the same time, and they've gradually gotten back to traveling and getting back on the road as the economy is doing okay and consumer and business confidence are okay. They've gradually gotten back on the road, but we still are suffering a full point of RASM just from government travel. And I'm sure that there's some revenue defense-related or others that would be traveling to meet with the government or involved with the government. That travel is also not occurring because of the sequester. So it's probably more than a point, but the other business and leisure demand is making up for it and still leading to positive, nice positive year-over-year results. But certainly, if this sequester ever goes away, you'd expect that there's upside to any of the RASM forecast. Daniel McKenzie - The Buckingham Research Group Incorporated: And then I guess, Scott, capacity to the PIIGs countries accelerates in the back half of the year, and that part of the network seems to be working pretty well from a revenue standpoint. So I'm just wondering if you can help me understand. It's a little bit counterintuitive. Europe's weakest economies actually seem to be doing and holding up quite well for US Airways. What's driving that? J. Scott Kirby: Dan, I can -- we can barely hear you here. I think you asked about Europe, and we see strong business demand and leisure demand in Europe. Leisure demand is clearly strong. We've also increased our penetration of selling tickets to Europeans coming to the U.S. And then particularly, in business, we've done a much better job in getting business traffic on our planes. We actually, in the quarter, one statistic we watch is Envoy demand from corporate customers, which is clearly one of the focus areas, and that was up 16% in the second quarter. So as we continued to improve our penetration -- have continued to improve our penetration in corporate accounts on the continent, that has helped European performance significantly.

We'll now go to Glenn Engel from Bank of America Merrill Lynch. Glenn D. Engel - BofA Merrill Lynch, Research Division: The question I have is on seasonality. If I look at your capacity in the off-peak quarters, you cut capacity about 10% versus the peak quarters. And I look at American Airlines, and they only cut capacity about 3%. Is there something in the labor contracts that when you join together will make it harder for you to cut back capacity off-peak or be -- is there something about American's network that they can keep capacity higher in the off-peak periods than you? J. Scott Kirby: There's nothing contractual that prevents American from doing more flight scheduling like we do, running higher capacity in the peak periods and lower capacity during the off-peak periods. There's no systems. There's no constraints about doing that. That's something that's evolved over the years for us, and I talked about more efficient utilization of capacity. That's partly what we've done, is fly more when customers want to fly. It's not just flying less capacity in the off-peak periods. It's about flying more capacity in the peak periods. So just a simple example, the Sunday before Thanksgiving is just a normal Sunday schedule for us like all of the rest of the year. But the Sunday after Thanksgiving, we fly 9% more seats. We start the day earlier, and we end the day later because that's the biggest revenue day of the year. And so capacity optimization is about really concentrating your capacity when customers -- when demand is highest and customers want to fly. Glenn D. Engel - BofA Merrill Lynch, Research Division: And is there anything about American's network that has a different seasonality than yours? J. Scott Kirby: No.

We'll now go to Helane Becker from Cowen. Helane R. Becker - Cowen and Company, LLC, Research Division: Did [ph] you say, or have you thought or have you said when you will be leaving the Star Alliance and joining the oneworld alliance? J. Scott Kirby: I'm not sure if we've said, but we plan to be transitioned to oneworld by the beginning of next year. Elise is telling me we have said that. Helane R. Becker - Cowen and Company, LLC, Research Division: Okay. And then the other question I have was just -- with respect to the -- I guess, let me think how to ask this. So I guess my question really has to do with your pilot workforce. You have a very senior pilot workforce, and I know new rules are going into effect with respect to hours and so on. And as your pilots start retiring over the next year or so, are you going to -- are there American Airlines pilots who will be able to shift over to your operations or are you concerned at all about attracting pilots? J. Scott Kirby: Robert, do you want to take that one? Robert D. Isom: Sure, Scott. I'll kick it off. With the new flight and duty time regulations, they are going to have an impact on all airlines. There will be an uptick in terms of the total number of pilot that we'll need to fly our schedule. At US Airways today, we're reasonably confident that we'll be in good shape to take on that extra flying. We do have attrition that will start because of age 65 retirements, but the same thing. We should be in good shape to address that. With the pilots, one of the things to keep in mind is that you have to start the training program well in advance from the time that you actually need them. So we do get a 6-month, for sure, look out into the future. And as I take a look at US Airways, as I mentioned, we'll be in reasonably good shape for the foreseeable future to manage our staffing needs, and as we get a chance to take a look at more -- American's operations, I'm hoping to find the same.

And we'll now go to Savi Syth from Raymond James. Savanthi Syth - Raymond James & Associates, Inc., Research Division: Just on American, with their -- just standalone restructuring, a big part of their improvement was going to come from just flying these larger great regional aircraft. I was just wondering now that once you combine the US Airways and American fleet together, is that transition necessary given what you have on your side? Or do you still see a lot of benefit to restructuring their regional fleet to up-gauge it? J. Scott Kirby: We do see a lot of benefit to up-gauging to a large regional aircraft. We were doing that independently at US Airways. American was doing it. The reality is in a world with high fuel prices and low fares around the country, it gets harder and harder to make the economics for 50-seat regional jets work, and that's a trend that for U.S. carriers, I think, makes sense for everyone. Savanthi Syth - Raymond James & Associates, Inc., Research Division: Great. And then on the -- just as a follow-up onto the fuel side of what we've seen, I'm guessing the fare increases that we've seen year-to-date are sufficient to offset the current fuel levels? Is that fair? J. Scott Kirby: Well, I don't know if it's fare increase. In the U.S., in the second, quarter our RASM was actually down slightly. But there has historically been a pretty high correlation with about a 3-month lag between fuel and revenue, and fuel prices were down even more this quarter than revenue was. Revenue or RASM was down a little bit, and fuel prices were down even more, which led to, by a wide margin, the record pretax earnings. Savanthi Syth - Raymond James & Associates, Inc., Research Division: But fuel has since moved up, and my guess is that it hasn't offset the revenue trends. Is that fair? J. Scott Kirby: Yes. Well, if you do the math, back of the envelope math, we just guided a roughly 3.5% RASM growth in the quarter and for the quarter, and fuel hasn't gone up nearly that much.

Our next question comes from Bob McAdoo from Imperial Capital. Bob McAdoo - Imperial Capital, LLC, Research Division: Just a quick little clarification. You had talked about the increased Envoy demand, up 16% from corporate accounts. Were those European corporate accounts or both sides? The way the question was answered, I couldn't tell because you kind of tied it to the growth of the business being sold in Europe. I'm just curious, are you getting demand from both sides or are these basically from European customers? J. Scott Kirby: It was -- the number was from both sides, but it has grown more quickly in Europe than domestic. I don't have the exact breakout here right now, but it's grown more quickly in Europe for us than domestically. Bob McAdoo - Imperial Capital, LLC, Research Division: What is it that makes this growth that we've been hearing about the last several quarters in terms of your penetration in Europe, what have you guys been doing there, and how do you sense what you have been doing relates to what American has done obviously over the years in Europe? J. Scott Kirby: Well, I don't really want to contrast it with American. So Bob, I'll just talk about us. We were one of the first airlines to put a fully lie-flat seat, and get it on all of our A330s. So in the big business markets for a number of years now, we've had the fully lie-flat Envoy seat. That is probably the #1 product concern and consideration for the high-fare business customers flying across the Atlantic. And secondly, we've made a real push to be more aggressive by having a sales force in Europe, who’s off signing up European accounts. We historically haven't done that as aggressively in 3 or 4 years ago. We decided to try making equipment [ph] to that. We did. That sales team has done a fantastic job, and we continue to add more resources to help do that because we've had great result from getting actual corporate accounts in Europe signed up, and I think getting them to fly and follow through on their commitments to fly with us.

And we'll now take a follow-up question from Hunter Keay from Wolfe Research. Hunter K. Keay - Wolfe Research, LLC: Scott, a little more on the revenue environment. Obviously, great RASM guide. Wondering how much of that might be specific to you guys because I -- correct me if I'm wrong, but I think competitive capacity, your market was down something like 4% in the third quarter, driven, I think, a lot by capacity adjustment from Southwest. Is that right? J. Scott Kirby: I don't think it's that much, but maybe there's some, but Delta guided at 3% today, and Delta got tougher comps than us. So if I was just looking at it just from those 2 data points, I'd say it's more of an industry phenomenon than something that's necessarily specific to us.

[Operator Instructions] We'll now go to David Koenig from the Associated Press.

If I could ask this question about this, and you gave a lot of color about revenue, and I want to ask it maybe in a slightly different way. Your yield was down. Delta’s was pretty flat. What should -- I know you talked about the correlation with fuel, but how should we think about that? What does that say about the pricing environment that you faced in the quarter? J. Scott Kirby: Air travel continues to be a great bargain for consumers. And I said earlier that prices in real terms from 2000 to 2013 over this period have declined by 15%. That is in spite of the fact that oil prices or that same window are up 291%, and our security costs have also increased dramatically in a post-9/11 world. So even in a world where we've had those big increases in cost, fares have continued to decline. And I think air travel is one of the greatest bargains around for consumers. Perhaps, I'm not objective, but I certainly think it's a fantastic bargain for consumers. One of the ways we've done that as US Airways, but the industry has done similar stuff, is to be more efficient about where we fly capacity. That goes back to the Thanksgiving example. Flying a lot more seats on the day after -- the Sunday after Thanksgiving than you do on the Sunday before Thanksgiving by being more efficient about how we allocate capacity and keeping our costs down. That's wound up being good for consumers.

That's great. I guess, what I was getting at was whether the yield decline indicated that you were having trouble selling seats without discounting them or either that or you're not selling as many seats at full fare as you're used to. J. Scott Kirby: Yes, I think you're probably reading too much into it. We had a small yield decline, stage length increases. So on a stage adjusted basis, it's about flat year-over-year. You have mix changes occurring with less business demand early in the quarter as compared to June. So I think that's a little bit of a stretch to read that much into it.

And David, we gave guidance in the third quarter, we expect it to be up. J. Scott Kirby: Right. Very good.

We'll now go to Karen Jacobs from Thomson Reuters.

Actually, David did ask part of what I was going to ask, so I'm going to move to something else. It's kind of a big picture question. We have seen a number of airlines this year, Delta and most recently, Alaska, has talked about taking moves to increase returns to shareholders. I wanted to know if, Mr. Parker, if you have any specific -- any specific thoughts on that, especially as you prepare to run a much larger shift with the new American?

Sure. Look, we were happy to see those moves by our competitors. And we have been saying for a while now that this -- that it feels different this time as the analysts will know what I'm talking about there, as we talk about this industry in the past has gone through these violent prose between profitable times that quickly turn to very unprofitable times, and we have been suggesting that this time around, it feels different, but indeed, we have an industry where it appears that it's going to be a much better industry for shareholders. Because we've all learned from the past and it's -- it makes it better for customers, by the way, the communities we serve, to have a more strong -- have a stronger and more viable industry. So at any rate, we -- these actions by our competitors seem to validate what we have been suggesting was the case that, indeed, there are -- the industry is in a better position to provide returns to shareholders. So as it relates to US Airways, as Derek noted, we have a healthy cash balance, as does our merger partners. So when we combine, we will have a healthy cash balance. We're -- we've been using that US Airways of late to pay down some lower cost debt, and we, certainly, at the new airline, are going to need some cash to facilitate transition costs to facilitate the merger, and we know that. But if there is excess cash, we will look to return to our shareholders. That's their money. We know that. And if we happen to have more cash on hand than we need to run the business, and continue to invest in the business, we will return to the shareholders as we should, and it's too early for that now, but I'm certain that will be an early topic of conversation at our new Board of Directors as to when that -- when, if ever, the right time to do that is, but we're happy to see it from our competitors. I think it's a good indication of the industry being more shareholder-friendly, and we have always been shareholder-friendly so it's good news.

And we'll now go to Ely Portillo from Charlotte Observer.

I just wanted to ask if guys you have any concerns about the legislation and now law suit around Charlotte Douglas, and who's going to control the airport as well as the ouster of Jerry Orr after so many years as Aviation Director last week?

As you know, we've commented on this a couple of times. Happy to do so again, but it will be the same comments. The fact of the matter is we think the Charlotte Airport is incredibly important to the community. It's very important to US Airways. And under Jerry's leadership, it has been exceptionally well run and is a model, I think, of what communities and airlines like to see from an airport, highly efficient both in terms of cost and in terms of operating capabilities, and we love Charlotte. We love the Charlotte Airport and we don't like to see any suggestions that things might change there. So what's going on there, we believe, is unfortunate because everything was running so well. So you hate to see something that's running really well go through any sort of controversy like this. But having said all that, we have received assurances from Gov. McCrory, from the new mayor, from everyone involved in the situation that this political issue will not affect the operating performance of the airport, and we take everyone on their word on that point. And I believe that will be the case and look forward to getting this behind us and getting to where we have a more normal state of affairs there. But most importantly, making sure that this political issue doesn't have any impact on the operating -- on the great operating performance of that airport, and we're confident that, that will be the case. And everyone there has been very forthcoming in talking to us at US Airways, I'm sure other airlines, I'm sure Charlotte as well, and letting them know that while this is a political issue over governance of the airport that both sides understand the importance of the airport, and are going to make sure whatever happens in terms of governance doesn't affect operating performance.

And do you hope that Jerry will be director again? J. Scott Kirby: I'm sorry, Eli?

Do you hope that Jerry will return and be director again? There's a possibility of that. J. Scott Kirby: Yes, no comment on that.

And it appears there are no further questions. I'll turn the conference back over to our presenters for any additional or closing remarks.

I think we're good. Thank you, all, very much again. We couldn't be any more excited with these results and again one, because of how good they are, but two, because what a great way it is to close out the US Airways story, at least, as it relates to earnings calls. We still obviously -- we got a lot of work ahead of us with the merger, but what a great way to go into a merger with this kind of momentum and similar momentum on the American Airlines side. We feel really good about the prospects ahead and what we have ahead and look forward to working with all of you as we go forward to do what's best for our shareholders, as well as our employees and the communities we serve. So thank you, all, very much, and we'll talk to you again next quarter. Hopefully, we'll be doing that as a combined American Airlines call. Thank you, all, very much.

This concludes today's presentation. Thank you for your participation.