The year started on a healthy note for US Airways (NYSE:LCC) with the stock outperforming the broader market to record over a 10% jump since the beginning of the month. This was largely driven by the traffic gains and improvement in occupancy rates across the mainline and regional flight services for the month of December. The airline reported a 3.4% rise in y-o-y consolidated traffic as measured by revenue passenger miles following a 2% growth in capacity and 1% improvement in the occupancy rate. Traffic and occupancy has also improved y-o-y during Q4 and for the fiscal 2011. 
In another noticeable development this month, US Airways announced the expansion of its schedule at Reagan National Airport with the addition of new destinations and increased frequency to existing destinations following the recent closing of its slot transaction agreement with Delta Air Lines (NYSE:DAL). The new flights from Reagan National Airport enable US Airways to focus on its core service areas of Washington D.C., Philadelphia, Phoenix and Charlotte, N.C. The carrier will however operate a reduced schedule at New York’s LaGuardia Airport over current levels as it gave up slots at the airport post the slot-swap transaction. 
However, there was some bad news for the US airline players as the European Union carbon emissions law came into effect on January 1.
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US Airways raised fares this past week to match Delta Air Lines’ $6 price hike on round-trip tickets between the U.S. and Europe. The hike is expected to be a result of the additional cost burden from the European Union carbon emissions law, under which the airlines touching down or taking off in the European Union and three neighboring nations must acquire permits for the carbon they emit.
The biggest part of the carbon footprint for airlines is fuel consumption so the additional cost burden from ETS is expected to motivate airlines to curb their fuel expenses by investing in more fuel efficient fleet or reducing consumption, thereby bringing down overall fuel bill. The levy was however strongly condemned by the U.S. and about 25 other countries as it threatened to hamper recovery and further weigh on airline sector profitability.
We discussed the implications of the imposition of the new levy in an article. (See EU’s New Airline Carbon Emissions Levy Could Cost Industry Over $20bn by 2020)Notes: