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US Airways to study low-fare wing

As it maps out a strategy to compete with discount airlines in Florida and elsewhere, US Airways Group Inc. on Wednesday formed an employee task force to begin planning its low-cost, low-fare airline.

US Airways is moving ahead with the discount airline, which it is calling US2, after its pilots signed off on a new labor agreement Friday that is designed to help the airline revamp its high cost structure.

The airline, the biggest carrier at Tampa International Airport, is giving few details about its US2 plans so far, saying much of the planning will be in the hands of the task force.

But Florida is likely to be a big part of those plans.

According to the contract it struck with pilots, US2 initially will operate 54 aircraft in a separate company. Fares will be no greater than 90 percent of current US Airways fares on average. Most trips will be between cities 1,000 miles apart or less, with the exception of Florida flights and a few others.

The task force must figure out how and where the new airline will operate. It also will be charged with finding ways to keep costs down. That will include lower employee costs. As part of its agreement with US Airways, pilots and officers have agreed to fly US2 routes for less pay.

Arlington, Va.-based US Airways has said it needs to start the low-cost carrier to compete with discount airlines such as Southwest, Delta Express, Midway and others. Those discounters and others have significant operations in Florida and are tough competition for traditional airlines such as US Airways.

US Airways loses money on virtually all of its current Florida flights, largely because they're typically filled with tourists whose tickets are cheaper than those sold to business travelers. By operating more cheaply with US2, it could make the flights profitable.

"Our low-cost division will provide us with an unprecedented opportunity to respond to the low-fare demands of the marketplace and to put in place another of the key building blocks of a carrier of choice," said US Airways President Rakesh Gangwal.

After years of losing money, US Airways is starting to improve financially. But chairman Stephen Wolf has said the company needs to continue cutting costs, improve efficiencies and find ways to compete with the discount airlines in order to survive.

_ Information from Bloomberg News was used in this report.

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