UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2016
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number |
Exact Name of Registrant as Specified in its Charter, Principal Office Address, Zip Code and Telephone Number, Including Area Code |
State of Incorporation |
I.R.S. Employer Identification No. | |||
001-06033 |
United Continental Holdings, Inc. 233 South Wacker Drive Chicago, Illinois 60606 (872) 825-4000 |
Delaware | 36-2675207 | |||
001-10323 |
United Airlines, Inc. 233 South Wacker Drive Chicago, Illinois 60606 (872) 825-4000 |
Delaware | 74-2099724 |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Name of Each Exchange on Which Registered | |||
United Continental Holdings, Inc. |
Common Stock, $0.01 par value | New York Stock Exchange | ||
United Airlines, Inc. |
None | None |
Securities registered pursuant to Section 12(g) of the Act:
United Continental Holdings, Inc. |
None | |||||||
United Airlines, Inc. |
None |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
United Continental Holdings, Inc. |
Yes ☒ No ☐ | |||||
United Airlines, Inc. |
Yes ☒ No ☐ |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
United Continental Holdings, Inc. |
Yes ☐ No ☒ | |||||
United Airlines, Inc. |
Yes ☐ No ☒ |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
United Continental Holdings, Inc. |
Yes ☒ No ☐ | |||||
United Airlines, Inc. |
Yes ☒ No ☐ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
United Continental Holdings, Inc. |
Yes ☒ No ☐ | |||||
United Airlines, Inc. |
Yes ☒ No ☐ |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
United Continental Holdings, Inc. |
☒ | |||||
United Airlines, Inc. |
☒ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
United Continental Holdings, Inc. |
Large accelerated filer ☒ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company ☐ | ||||
United Airlines, Inc. |
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Smaller reporting company ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
United Continental Holdings, Inc. |
Yes ☐ No ☒ | |||||
United Airlines, Inc. |
Yes ☐ No ☒ |
The aggregate market value of common stock held by non-affiliates of United Continental Holdings, Inc. was $12,558,237,332 as of June 30, 2016, based on the closing price of $41.04 on the New York Stock Exchange reported for that date. There is no market for United Airlines, Inc. common stock.
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of February 13, 2017.
United Continental Holdings, Inc. |
314,622,651 shares of common stock ($0.01 par value) | |
United Airlines, Inc. |
1,000 (100% owned by United Continental Holdings, Inc.) |
This combined Form 10-K is separately filed by United Continental Holdings, Inc. and United Airlines, Inc.
OMISSION OF CERTAIN INFORMATION
United Airlines, Inc. meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and are therefore filing this form with the reduced disclosure format allowed under that General Instruction.
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Items 10, 11, 12 and 13 of Part III of this Form 10-K are incorporated by reference for United Continental Holdings, Inc. from its definitive proxy statement for its 2017 Annual Meeting of Stockholders.
United Continental Holdings, Inc. and Subsidiary Companies
United Airlines, Inc. and Subsidiary Companies
For the Year Ended December 31, 2016
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This Form 10-K contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements represent our expectations and beliefs concerning future events, based on information available to us on the date of the filing of this Form 10-K, and are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from those referenced in the forward-looking statements are listed in Part I, Item 1A, Risk Factors and in Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations. We disclaim any intent or obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise, except as required by applicable law.
ITEM 1. | BUSINESS. |
Overview
United Continental Holdings, Inc. (together with its consolidated subsidiaries, UAL or the Company) is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, United). As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. Uniteds operating revenues and operating expenses comprise nearly 100% of UALs revenues and operating expenses. In addition, United comprises approximately the entire balance of UALs assets, liabilities and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words we, our, us, and the Company in this report for disclosures that relate to all of UAL and United.
UAL was incorporated under the laws of the State of Delaware on December 30, 1968. Our principal executive office is located at 233 South Wacker Drive, Chicago, Illinois 60606 (telephone number (872) 825-4000).
The Companys website is www.unitedcontinentalholdings.com. The information contained on or connected to the Companys website is not incorporated by reference into this annual report on Form 10-K and should not be considered part of this or any other report filed with the U.S. Securities and Exchange Commission (SEC). Through this website, the Companys filings with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, as well as our proxy statement for our annual meeting of stockholders, are accessible without charge, as soon as reasonably practicable, after such material is electronically filed with or furnished to the SEC. Such filings are also available on the SECs website at www.sec.gov.
Operations
The Company transports people and cargo through its mainline and regional operations. With key global aviation rights in North America, Asia-Pacific, Europe, Middle East and Latin America, UAL has the worlds most comprehensive global route network. UAL, through United and its regional carriers, operates more than 4,500 flights a day to 339 airports across five continents from the Companys hubs at Newark Liberty International Airport (Newark), Chicago OHare International Airport (Chicago OHare), Denver International Airport (Denver), George Bush Intercontinental Airport (Houston Bush), Los Angeles International Airport (LAX), A.B. Won Pat International Airport (Guam), San Francisco International Airport (SFO) and Washington Dulles International Airport (Washington Dulles).
All of the Companys domestic hubs are located in large business and population centers, contributing to a large amount of origin and destination traffic. The hub and spoke system allows us to transport passengers between a large number of destinations with substantially more frequent service than if each route were served directly. The
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hub system also allows us to add service to a new destination from a large number of cities using only one or a limited number of aircraft. As discussed under Alliances below, United is a member of Star Alliance, the worlds largest alliance network.
Financial information on the Companys operating revenues by geographic regions, as reported to the U.S. Department of Transportation (the DOT), can be found in Note 17 to the financial statements included in Part II, Item 8 of this report.
Regional. The Company has contractual relationships with various regional carriers to provide regional jet and turboprop service branded as United Express. These regional operations are an extension of the Companys mainline network. This regional service complements our operations by carrying traffic that connects to our mainline service and allows flights to smaller cities that cannot be provided economically with mainline aircraft. Republic Airlines (Republic), Champlain Enterprises, LLC d/b/a CommutAir (CommutAir), ExpressJet Airlines (ExpressJet), GoJet Airlines (GoJet), Mesa Airlines (Mesa), Shuttle America (Shuttle), SkyWest Airlines (SkyWest) and Trans States Airlines (Trans States) are all regional carriers, which operate most of their capacity contracted to United under capacity purchase agreements (CPAs) with United. Under these CPAs, the Company pays the regional carriers contractually agreed fees (carrier-controlled costs) for operating these flights plus a variable reimbursement (incentive payment for operational performance) based on agreed performance metrics. The fees for carrier-controlled costs are based on specific rates for various operating expenses of the regional carriers, such as crew expenses, maintenance and aircraft ownership, some of which are multiplied by specific operating statistics (e.g., block hours, departures) while others are fixed monthly amounts. Under these CPAs, the Company is responsible for all fuel costs incurred as well as landing fees, facilities rent and other costs, which are either passed through by the regional carrier to the Company without any markup or directly incurred by the Company. In return, the regional carriers operate this capacity exclusively for United, on schedules determined by the Company. The Company also determines pricing and revenue management, assumes the inventory and distribution risk for the available seats and permits mileage accrual and redemption for regional flights through its MileagePlus® loyalty program.
Alliances. United is a member of Star Alliance, a global integrated airline network and the largest and most comprehensive airline alliance in the world. As of January 1, 2017, Star Alliance carriers served 1,300 airports in 190 countries with 18,450 daily departures. Star Alliance members, in addition to United, are Adria Airways, Aegean Airlines, Air Canada, Air China, Air India, Air New Zealand, All Nippon Airways (ANA), Asiana Airlines, Austrian Airlines, Avianca, Avianca Brasil, Brussels Airlines, Copa Airlines, Croatia Airlines, EGYPTAIR, Ethiopian Airlines, EVA Air, LOT Polish Airlines, Lufthansa, SAS Scandinavian Airlines, Shenzhen Airlines, Singapore Airlines, South African Airways, SWISS, TAP Portugal, THAI Airways International and Turkish Airlines. In October 2016, Star Alliance announced the future inclusion of Juneyao Airlines as a new connecting partner.
United has a variety of bilateral commercial alliance agreements and obligations with Star Alliance members, addressing, among other things, reciprocal earning and redemption of frequent flyer miles, access to airport lounges and, with certain Star Alliance members, codesharing of flight operations (whereby one carriers selected flights can be marketed under the brand name of another carrier). In addition to the alliance agreements with Star Alliance members, United currently maintains independent marketing alliance agreements with other air carriers, including Aeromar, Aer Lingus, Air Dolomiti, Azul, Cape Air, Eurowings, Germanwings, Great Lakes Airlines, Hawaiian Airlines, Island Air, Jet Airways and Silver Airways. In addition to the marketing alliance agreements with air partners, United also offers a train-to-plane codeshare and frequent flyer alliance with Amtrak from Newark on select city pairs in the northeastern United States.
United also participates in three passenger joint ventures, one with Air Canada and the Lufthansa Group (which includes Lufthansa and its affiliates Austrian Airlines, Brussels Airlines, Eurowings and SWISS) covering transatlantic routes, one with ANA covering certain transpacific routes and one with Air New Zealand covering certain routes between the United States and New Zealand. These passenger joint ventures enable the participating carriers to integrate the services they provide in the respective regions, capturing revenue synergies and delivering highly competitive flight schedules, fares and services. United has also begun implementation of a
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cargo joint venture with ANA for transpacific cargo services. This cargo joint venture offers expanded and more seamless access to cargo space across the carriers respective combined networks.
Loyalty Program. Uniteds MileagePlus program builds customer loyalty by offering awards, benefits and services to program participants. Members in this program earn miles for flights on United, United Express, Star Alliance members and certain other airlines that participate in the program. Members can also earn miles by purchasing the goods and services of our network of non-airline partners, such as credit card issuers, retail merchants, hotels and car rental companies. Members can redeem miles for free (other than taxes and government imposed fees), discounted or upgraded travel and non-travel awards.
The Company has an agreement with Chase Bank USA, N.A. (Chase), pursuant to which members of the Companys MileagePlus loyalty program who are residents of the United States can earn miles for making purchases using a MileagePlus credit card issued by Chase. The agreement also provides for joint marketing and other support for the MileagePlus credit card and provides Chase with other benefits such as permission to market to the Companys customer database.
Approximately 5.2 million and 5.0 million MileagePlus flight awards were used on United in 2016 and 2015, respectively. These awards represented 7.7% and 7.5% of Uniteds total revenue passenger miles in 2016 and 2015, respectively. Total miles redeemed for flights on United in 2016, including class-of-service upgrades, represented approximately 84% of the total miles redeemed. In addition, excluding miles redeemed for flights on United, MileagePlus members redeemed miles for approximately 2.0 million other awards in 2016 as compared to 1.8 million in 2015. These awards include United Club memberships, car and hotel awards, merchandise and flights on other air carriers.
Aircraft Fuel. The table below summarizes UALs aircraft fuel consumption and expense during the last three years.
Year |
Gallons Consumed (in millions) |
Fuel Expense (in millions) |
Average Price Per Gallon |
Percentage of Total Operating Expense |
||||||||||||||||||
2016 | 3,904 | $ | 5,813 | $ | 1.49 | 18% | ||||||||||||||||
2015 | 3,886 | $ | 7,522 | $ | 1.94 | 23% | ||||||||||||||||
2014 | 3,905 | $ | 11,675 | $ | 2.99 | 32% |
Our operational and financial results can be significantly impacted by changes in the price and availability of aircraft fuel. To provide adequate supplies of fuel, the Company routinely enters into purchase contracts that are customarily indexed to market prices for aircraft fuel, and the Company generally has some ability to cover short-term fuel supply and infrastructure disruptions at some major demand locations. The price of aircraft fuel has fluctuated substantially in the past several years and in order to lower its exposure to unpredictable increases in the market prices of aircraft fuel, the Company has historically hedged a portion of its planned fuel requirements. As of December 31, 2016, the Company did not have any outstanding fuel hedging contracts. The Companys current strategy is to not enter into transactions to hedge its fuel consumption, although the Company regularly reviews its strategy based on market conditions and other factors.
Third-Party Business. United generates third-party business revenue that includes frequent flyer award non-air redemptions, maintenance services, catering and ground handling. Third-party business revenue is recorded in Other operating revenue. Expenses associated with third-party business are recorded in Other operating expenses.
Distribution Channels. The Companys airline seat inventory and fares are distributed through the Companys direct channels, traditional travel agencies and on-line travel agencies. The use of the Companys direct sales website, united.com, the Companys mobile applications and alternative distribution systems, provides the Company with an opportunity to de-commoditize its services, better present its content, make more targeted offerings, better retain its customers, enhance its brand and lower its ticket distribution costs. Agency sales are
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primarily sold using global distribution systems (GDS). United has developed capabilities to sell certain ancillary products through the GDS channel to provide an enhanced buying experience for customers who purchase in that channel. To increase the Companys opportunities to sell its full range of products and services and lower distribution costs, the Company will continue to develop new selling capabilities in third-party channels and expand the capabilities of its website and mobile applications.
Industry Conditions
Domestic Competition. The domestic airline industry is highly competitive and dynamic. The Companys competitors consist primarily of other airlines and, to a certain extent, other forms of transportation. Currently, any U.S. carrier deemed fit by the DOT is free to operate scheduled passenger service between any two points within the United States. Competition can be direct, in the form of another carrier flying the exact non-stop route, or indirect, where a carrier serves the same two cities non-stop from an alternative airport in that city or via an itinerary requiring a connection at another airport. Air carriers cost structures are not uniform and there are numerous factors influencing cost structure. Carriers with lower costs may offer lower fares to passengers, which could have a potential negative impact on the Companys revenues. Decisions on domestic pricing are based on intense competitive pressure exerted on the Company by other U.S. airlines. In order to remain competitive and maintain passenger traffic levels, we often find it necessary to match competitors discounted fares. Since we compete in a dynamic marketplace, attempts to generate additional revenue through increased fares oftentimes fail.
International Competition. Internationally, the Company competes not only with U.S. airlines, but also with foreign carriers. International competition has increased and may increase in the future as a result of airline mergers and acquisitions, joint ventures, alliances, restructurings, liberalization of aviation bilateral agreements and new or increased service by competitors, including government subsidized competitors from certain Middle East countries. Competition on international routes is subject to varying degrees of governmental regulation. The Companys ability to compete successfully with non-U.S. carriers on international routes depends in part on its ability to generate traffic to and from the entire United States via its integrated domestic route network and its ability to overcome business and operational challenges across its network worldwide. Foreign carriers currently are prohibited by U.S. law from carrying local passengers between two points in the United States and the Company generally experiences comparable restrictions in foreign countries. Separately, fifth freedom rights allow the Company to operate between points in two different foreign countries and foreign carriers may also have fifth freedom rights between the U.S. and another foreign country. In the absence of fifth freedom rights, or some other extra-bilateral right to conduct operations between two foreign countries, U.S. carriers are constrained from carrying passengers to points beyond designated international gateway cities. To compensate partially for these structural limitations, U.S. and foreign carriers have entered into alliances, joint ventures and marketing arrangements that enable these carriers to exchange traffic between each others flights and route networks. See Alliances, above, for additional information.
Seasonality. The air travel business is subject to seasonal fluctuations. Historically, demand for air travel is higher in the second and third quarters, driving higher revenues, than in the first and fourth quarters, which are periods of lower travel demand.
Industry Regulation
Domestic Regulation
All carriers engaged in air transportation in the United States are subject to regulation by the DOT. Absent an exemption, no air carrier may provide air transportation of passengers or property without first being issued a DOT certificate of public convenience and necessity. The DOT also grants international route authority, approves international codeshare arrangements and regulates methods of competition. The DOT regulates consumer protection and maintains jurisdiction over advertising, denied boarding compensation, tarmac delays, baggage liability and other areas and may add additional expensive regulatory burdens in the future. The DOT has
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launched investigations or claimed rulemaking authority to regulate commercial agreements among carriers or between carriers and third parties in a wide variety of contexts.
Airlines are also regulated by the Federal Aviation Administration (the FAA), an agency within the DOT, primarily in the areas of flight safety, air carrier operations and aircraft maintenance and airworthiness. The FAA issues air carrier operating certificates and aircraft airworthiness certificates, prescribes maintenance procedures, oversees airport operations, and regulates pilot and other employee training. From time to time, the FAA issues directives that require air carriers to inspect or modify aircraft and other equipment, potentially causing the Company to incur substantial, unplanned expenses. The airline industry is also subject to numerous other federal laws and regulations. The U.S. Department of Homeland Security (DHS) has jurisdiction over virtually every aspect of civil aviation security. The Antitrust Division of the U.S. Department of Justice (DOJ) has jurisdiction over certain airline competition matters. The U.S. Postal Service has authority over certain aspects of the transportation of mail by airlines. Labor relations in the airline industry are generally governed by the Railway Labor Act (RLA), a federal statute. The Company is also subject to investigation inquiries by the DOT, FAA, DOJ, DHS and other U.S. and international regulatory bodies.
Airport Access. Access to landing and take-off rights, or slots, at several major U.S. airports and many foreign airports served by the Company are, or recently have been, subject to government regulation. Federally mandated domestic slot restrictions that limit operations and regulate capacity currently apply at Reagan National Airport in Washington, D.C. and at John F. Kennedy International Airport and LaGuardia Airport in the New York City metropolitan region. Additional restrictions on airline routes and takeoff and landing slots at these and other airports may be proposed in the future that could affect the Companys rights of ownership and transfer. In April 2016, the FAA announced that it was lifting slot controls at Newark as of the winter 2016 season. This change may result in additional congestion at Newark and in the New York City metropolitan region airspace as a whole. If slots are eliminated at an airport, or if the number of hours of operation governed by slots is reduced at an airport, the lack of controls on takeoffs and landings could result in greater congestion both at the affected airport or in the regional airspace (e.g., the New York City metropolitan airspace) and could significantly impact the Companys operations.
Legislation. The airline industry is subject to legislative activity that may have an impact on operations and costs. In 2017, the U.S. Congress will continue to consider legislation to reauthorize the FAA, which encompasses all significant aviation tax and policy-related issues. As with previous reauthorization legislation, the U.S. Congress may consider a range of policy changes that could impact operations and costs. Finally, aviation security continues to be the subject of legislative and regulatory action, requiring changes to the Companys security processes, potentially increasing the cost of its security procedures and affecting its operations.
International Regulation
International air transportation is subject to extensive government regulation. In connection with the Companys international services, the Company is regulated by both the U.S. government and the governments of the foreign countries the Company serves. In addition, the availability of international routes to U.S. carriers is regulated by aviation agreements between the U.S. and foreign governments, and in some cases, fares and schedules require the approval of the DOT and/or the relevant foreign governments.
Legislation. Foreign countries are increasingly enacting passenger protection laws, rules and regulations that meet or exceed U.S. requirements. In cases where this activity exceeds U.S. requirements, additional burden and liability may be placed on the Company. Certain countries have regulations requiring passenger compensation and/or enforcement penalties from the Company in addition to changes in operating procedures due to canceled and delayed flights.
Airport Access. Historically, access to foreign markets has been tightly controlled through bilateral agreements between the U.S. and each foreign country involved. These agreements regulate the markets served, the number of carriers allowed to serve each market and the frequency of carriers flights. Since the early 1990s, the U.S. has pursued a policy of Open Skies (meaning all U.S.-flag carriers have access to the destination), under which the
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U.S. government has negotiated a number of bilateral agreements allowing unrestricted access between U.S. and foreign markets. Currently, there are more than 100 Open Skies agreements in effect. However, even with Open Skies, many of the airports that the Company serves in Europe, Asia and Latin America maintain slot controls. A large number of these slot controls exist due to congestion, environmental and noise protection and reduced capacity due to runway and air traffic control (ATC) construction work, among other reasons. London Heathrow International Airport, Frankfurt Rhein-Main Airport, Shanghai Pudong International Airport, Beijing Capital International Airport, Sao Paulo Guarulhos International Airport and Tokyo Haneda International Airport are among the most restrictive foreign airports due to slot and capacity limitations.
The Companys ability to serve some foreign markets and expand into certain others is limited by the absence of aviation agreements between the U.S. government and the relevant foreign governments. Shifts in U.S. or foreign government aviation policies may lead to the alteration or termination of air service agreements. Depending on the nature of any such change, the value of the Companys international route authorities and slot rights may be materially enhanced or diminished.
Environmental Regulation
The airline industry is subject to increasingly stringent federal, state, local and international environmental requirements, including those regulating emissions to air, water discharges, safe drinking water and the use and management of hazardous substances and wastes.
Climate Change. There is an increasing global regulatory focus on greenhouse gas (GHG) emissions and their potential impacts relating to climate change. In October 2013, the International Civil Aviation Organization (ICAO), a United Nations body, agreed to develop a global market based measure to address carbon emissions from international aviation, which was adopted in October 2016. The program, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), is intended to create a single global market-based measure to achieve carbon-neutral growth for international aviation after 2020, which will be achieved through airline purchases of carbon offset credits. Certain CORSIA program details remain to be developed and the impact of CORSIA cannot be fully predicted, but CORSIA is expected to increase operating costs for airlines that operate internationally. In 2016, ICAO also adopted a carbon dioxide (CO2) emission standard for aircraft and the U.S. Environmental Protection Agency has started the process required to adopt the standard. While the precise timing and final form of these various programs and requirements continue to evolve, the Company is taking various actions that are expected to help to reduce its CO2 emissions over time such as fleet renewal, aircraft retrofits and the commercialization of aviation alternative fuels.
Other Regulations. Our operations are subject to a variety of other environmental laws and regulations both in the United States and internationally. These include noise-related restrictions on aircraft types and operating times, which have or could in the future, result in curtailments in services, increased operating costs or limits on expansion. Certain foreign airports and/or governments either have or are seeking to establish environmental fees applicable to carbon emissions, local air quality pollutants and/or noise. In the United States, new regulations affecting underground storage tanks became effective in 2015, which are expected to affect certain airport fuel hydrant systems, potentially impacting operating costs. The implementation of revised national ambient air quality standards for ozone by individual affected states, scheduled for early 2020, is expected to trigger restrictions on mobile sources such as cars, trucks and airport ground support equipment in those jurisdictions where ozone levels exceed the new standards. Finally, environmental cleanup laws can require the Company to undertake or subject the Company to liability for investigation and remediation costs at owned or leased locations or third party disposal locations.
Until applicability of new regulations to our specific operations is better defined and/or when new regulations are finalized, future costs to comply with such regulations will remain uncertain but are likely to increase our operating costs over time. While we continue to monitor these developments, the precise nature of future requirements and their applicability to the Company are difficult to predict, but the financial impact to the Company and the aviation industry could be significant.
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Employees
As of December 31, 2016, UAL, including its subsidiaries, had approximately 88,000 employees. Approximately 80% of the Companys employees were represented by various U.S. labor organizations as of December 31, 2016.
Collective bargaining agreements between the Company and its represented employee groups are negotiated under the RLA. Such agreements typically do not contain an expiration date and instead specify an amendable date, upon which the agreement is considered open for amendment. In 2016, the Company finalized new or extension agreements with all 11 of its U.S. employee groups, including joint collective bargaining agreements with its flight attendants and technicians and related employees.
The following table reflects the Companys represented employee groups, the number of employees per represented group, union representation for each of Uniteds employee groups, and the amendable date for each employee groups collective bargaining agreement as of December 31, 2016:
Employee Group |
|
Number of Employees |
|
Union |
Agreement Open for Amendment | |||||
Flight Attendants |
22,779 | Association of Flight Attendants (the AFA) | August 2021 | |||||||
Fleet Service |
12,812 | International Association of Machinists and Aerospace Workers (the IAM) | December 2021 | |||||||
Passenger Service |
12,012 | IAM | December 2021 | |||||||
Pilots |
11,454 | Air Line Pilots Association, International | January 2019 | |||||||
Technicians and Related & Flight Simulator Technicians |
9,521 | International Brotherhood of Teamsters (the IBT) | December 2022 | |||||||
Storekeeper Employees | 977 | IAM | December 2021 | |||||||
Dispatchers | 396 | Professional Airline Flight Control Association | December 2021 | |||||||
Fleet Tech Instructors | 128 | IAM | December 2021 | |||||||
Load Planners | 67 | IAM | December 2021 | |||||||
Security Officers | 50 | IAM | December 2021 | |||||||
Maintenance Instructors | 42 | IAM | December 2021 |
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ITEM 1A. | RISK FACTORS. |
The following risk factors should be read carefully when evaluating the Companys business and the forward-looking statements contained in this report and other statements the Company or its representatives make from time to time. Any of the following risks could materially and adversely affect the Companys business, operating results, financial condition and the actual outcome of matters as to which forward-looking statements are made in this report.
Global economic, political and industry conditions constantly change and unfavorable conditions may have a material adverse effect on the Companys business and results of operations.
The Companys business and results of operations are significantly impacted by global economic and industry conditions. The airline industry is highly cyclical, and the level of demand for air travel is correlated to the strength of the U.S. and global economies. The Company is a global business with operations outside of the United States from which it derives significant operating revenues. The Companys international operations are a vital part of its worldwide airline network. Volatile economic, political and market conditions in these international regions may have a negative impact on the Companys operating results and its ability to achieve its business objectives.
Robust demand for the Companys air transportation services depends largely on favorable economic conditions, including the strength of the domestic and foreign economies, low unemployment levels, strong consumer confidence levels and the availability of consumer and business credit. Air transportation is often a discretionary purchase that leisure travelers may limit or eliminate during difficult economic times. In addition, during periods of unfavorable economic conditions, business travelers usually reduce the volume of their travel, either due to cost-saving initiatives or as a result of decreased business activity requiring travel. During such periods, the Companys business and results of operations may be adversely affected due to significant declines in industry passenger demand, particularly with respect to the Companys business and premium cabin travelers, and a reduction in fare levels.
Stagnant or weakening global economic conditions either in the United States or in other geographic regions, and any future volatility in U.S. and global financial and credit markets may have a material adverse effect on the Companys revenues, results of operations and liquidity. If such economic conditions were to disrupt capital markets in the future, the Company may be unable to obtain financing on acceptable terms (or at all) to refinance certain maturing debt and to satisfy future capital commitments.
Recently, United Kingdom (UK) voters voted for the UK to exit the European Union (the EU), a non-binding referendum that, if passed into law, could adversely affect European and worldwide economic and market conditions and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the British pound and European euro, additional travel restrictions on passengers traveling between the UK and other EU countries and legal uncertainty and potentially divergent national laws and regulations. These adverse effects in European market conditions could negatively impact the Companys business, results of operations and financial condition.
In addition, significant or volatile changes in exchange rates between the U.S. dollar and other currencies may have a material adverse impact upon the Companys liquidity, revenues, costs and operating results.
The airline industry is highly competitive and susceptible to price discounting and changes in capacity, which could have a material adverse effect on the Company.
The U.S. airline industry is characterized by substantial price competition including from low-cost carriers. The significant market presence of low-cost carriers, which engage in substantial price discounting, may diminish our ability to achieve sustained profitability on domestic and international routes.
Airlines also compete for market share by increasing or decreasing their capacity, including route systems and the number of markets served. Several of the Companys domestic and international competitors have increased
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their international capacity by including service to some destinations that the Company currently serves, causing overlap in destinations served and therefore increasing competition for those destinations. This increased competition in both domestic and international markets may have a material adverse effect on the Companys results of operations, financial condition or liquidity.
Terrorist attacks or international hostilities, or the fear of terrorist attacks or hostilities, even if not made directly on the airline industry, could negatively affect the Company and the airline industry.
The terrorist attacks on September 11, 2001 involving commercial aircraft severely and adversely impacted the Companys financial condition and results of operations, as well as the prospects for the airline industry. Among the effects experienced from the September 11, 2001 terrorist attacks were substantial flight disruption costs caused by the FAA-imposed temporary grounding of the U.S. airline industrys fleet, significantly increased security costs and associated passenger inconvenience, increased insurance costs, substantially higher ticket refunds and significantly decreased traffic and passenger revenue.
Additional terrorist attacks, even if not made directly on the airline industry, or the fear of or the precautions taken in anticipation of such attacks (including elevated national threat warnings or selective cancellation or redirection of flights) could materially and adversely affect the Company and the airline industry. Wars and other international hostilities could also have a material adverse impact on the Companys financial condition, liquidity and results of operations. The Companys financial resources may not be sufficient to absorb the adverse effects of any future terrorist attacks or other international hostilities.
Increasing privacy and data security obligations or a significant data breach may adversely affect the Companys business.
The Company is subject to increasing legislative, regulatory and customer focus on privacy issues and data security. Also, a number of the Companys commercial partners, including credit card companies, have imposed data security standards that the Company must meet and these standards continue to evolve. The Company will continue its efforts to meet its privacy and data security obligations; however, it is possible that certain new obligations may be difficult to meet and could increase the Companys costs. Additionally, the Company must manage evolving cybersecurity risks. The loss, disclosure, misappropriation of or access to customers, employees or business partners information or the Companys failure to meet its obligations could result in legal claims or proceedings, liability or regulatory penalties. A significant data breach or the Companys failure to meet its obligations may adversely affect the Companys reputation, business, results of operations and financial condition.
The Company relies heavily on technology and automated systems to operate its business and any significant failure or disruption of the technology or these systems could materially harm its business.
The Company depends on automated systems and technology to operate its business, including computerized airline reservation systems, flight operations systems, revenue management systems, accounting systems, telecommunication systems and commercial websites, including www.united.com. Uniteds website and other automated systems must be able to accommodate a high volume of traffic, maintain secure information and deliver important flight and schedule information, as well as process critical financial transactions. These systems could suffer substantial or repeated disruptions due to various events, some of which are beyond the Companys control, including natural disasters, power failures, terrorist attacks, equipment or software failures, computer viruses or cyber security attacks. Substantial or repeated systems failures or disruptions, including failures or disruptions related to the Companys complex integration of systems, could reduce the attractiveness of the Companys services versus those of its competitors, materially impair its ability to market its services and operate its flights, result in the unauthorized release of confidential or otherwise protected information, result in increased costs, lost revenue and the loss or compromise of important data, and may adversely affect the Companys business, results of operations and financial condition.
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Current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or arrangement relating to these actions, could have a material adverse impact on the Company.
From time to time, we are subject to litigation and other legal and regulatory proceedings relating to our business or investigations or other actions by governmental agencies, including as described in Part I, Item 3 Legal Proceedings of this annual report on Form 10-K. No assurances can be given that the results of these or new matters will be favorable to us. An adverse resolution of lawsuits, arbitrations, investigations or other proceedings or actions could have a material adverse effect on our financial condition and results of operations, including as a result of non-monetary remedies. Defending ourselves in these matters may be time-consuming, expensive and disruptive to normal business operations and may result in significant expense and a diversion of managements time and attention from the operation of our business, which could impede our ability to achieve our business objectives. Additionally, any amount that we may be required to pay to satisfy a judgment, settlement, fine or penalty may not be covered by insurance. If we fail to comply with the terms contained in any settlement, order or agreement with a governmental authority relating to these matters, we could be subject to criminal or civil penalties, which could have a material adverse impact on the Company. Under our charter and certain indemnification agreements that we have entered into (and may in the future enter into) with our officers, directors and certain third parties, we could be required to indemnify and advance expenses to them in connection with their involvement in certain actions, suits, investigations and other proceedings. There can be no assurance that any of these payments will not be material.
Disruptions to the Companys regional network and United Express flights provided by third-party regional carriers could adversely affect the Companys operations and financial condition.
The Company has contractual relationships with various regional carriers to provide regional jet and turboprop service branded as United Express. These regional operations are an extension of the Companys mainline network and complement the Companys operations by carrying traffic that connects to mainline service and allows flights to smaller cities that cannot be provided economically with mainline aircraft. The Companys business and operations are dependent on its regional flight network, with regional capacity accounting for approximately 11% of the Companys total capacity as of December 31, 2016.
Although the Company has agreements with its regional carriers that include contractually agreed performance metrics, the Company does not control the operations of these carriers. A number of factors may impact the Companys regional network, including weather-related effects and seasonality. In addition, the decrease in qualified pilots driven by federal regulations has adversely impacted and could continue to affect the Companys regional flying. For example, the FAAs expansion of minimum pilot qualification standards, including a requirement that a pilot have at least 1,500 total flight hours, as well as the FAAs revised pilot flight and duty time rules, effective January 2014, have contributed to a smaller supply of pilots available to regional carriers. The decrease in qualified pilots resulting from the regulations as well as factors including a decreased student pilot population and a shrinking U.S. military from which to hire qualified pilots, could adversely impact the Companys operations and financial condition, and also require the Company to reduce regional carrier flying.
If a significant disruption occurs to the Companys regional network or flights or if one or more of the regional carriers with which the Company has relationships is unable to perform their obligations over an extended period of time, there could be a material adverse effect on the Companys business, financial condition and operations.
The Companys business relies extensively on third-party service providers. Failure of these parties to perform as expected, or interruptions in the Companys relationships with these providers or their provision of services to the Company, could have an adverse effect on the Companys financial position and results of operations.
The Company has engaged third-party service providers to perform a large number of functions that are integral to its business, including regional operations, operation of customer service call centers, distribution and sale of airline seat inventory, provision of information technology infrastructure and services, transmitting or uploading of data, provision of aircraft maintenance and repairs, provision of various utilities and performance of aircraft
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fueling operations, among other vital functions and services. The Company does not directly control these third-party service providers, although it does enter into agreements with most of them that define expected service performance. Any of these third-party service providers, however, may materially fail to meet their service performance commitments to the Company, may suffer disruptions to their systems that could impact their services, or the agreements with such providers may be terminated. For example, flight reservations booked by customers and travel agencies via third-party GDSs may be adversely affected by disruptions in the business relationships between the Company and GDS operators. Such disruptions, including a failure to agree upon acceptable contract terms when contracts expire or otherwise become subject to renegotiation, may cause the Companys flight information to be limited or unavailable for display, significantly increase fees for both the Company and GDS users and impair the Companys relationships with its customers and travel agencies. The failure of any of the Companys third-party service providers to perform their service obligations adequately, or other interruptions of services, may reduce the Companys revenues and increase its expenses, prevent the Company from operating its flights and providing other services to its customers or result in adverse publicity or harm to its brand. In addition, the Companys business and financial performance could be materially harmed if its customers believe that its services are unreliable or unsatisfactory.
Orders for new aircraft typically must be placed years in advance of scheduled deliveries, and changes in the Companys route network over time may make aircraft on order less economic for the Company, but any modification or termination of such orders could result in material liability for the Company.
The Companys orders for new aircraft are typically made years in advance of actual delivery of such aircraft, and the financial commitment required for purchases of new aircraft is substantial. At December 31, 2016, the Company had firm commitments to purchase 257 new aircraft from The Boeing Company (Boeing), Airbus S.A.S (Airbus) and Embraer S.A. (Embraer), as well as related agreements with engine manufacturers, maintenance providers and others. At December 31, 2016, the Companys commitments relating to the acquisition of aircraft and related spare engines, aircraft improvements and other related obligations aggregated $23.6 billion.
Subsequent to the Company placing an order for new aircraft, the Companys route network may change, such that the aircraft on order become less economic to operate flights in the Companys network. As a result, the Companys preference for a particular aircraft that it has ordered, often years in advance, may be decreased or eliminated. If the Company were to seek to modify or terminate its existing aircraft order commitments, it may be responsible for material obligations to its counterparties arising from any such change. However, the Company expects that any such change that it makes would be in the long-term best economic interest of the Company.
The Company could experience adverse publicity, harm to its brand, reduced travel demand and potential tort liability as a result of an accident, catastrophe, or incident involving its aircraft, the aircraft of its regional carriers or the aircraft of its codeshare partners, which may result in a material adverse effect on the Companys results of operations or financial position.
An accident, catastrophe, or incident involving an aircraft that the Company operates, or an aircraft that is operated by a codeshare partner or one of the Companys regional carriers, could have a material adverse effect on the Company if such accident, catastrophe, or incident created a public perception that the Companys operations, or the operations of its codeshare partners or regional carriers, are not safe or reliable, or are less safe or reliable than other airlines. Such public perception could in turn result in adverse publicity for the Company, cause harm to the Companys brand and reduce travel demand on the Companys flights, or the flights of its codeshare partners or regional carriers.
In addition, any such accident, catastrophe, or incident could expose the Company to significant tort liability. Although the Company currently maintains liability insurance in amounts and of the type the Company believes to be consistent with industry practice to cover damages arising from any such accident or catastrophe, and the Companys codeshare partners and regional carriers carry similar insurance and generally indemnify the
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Company for their operations, if the Companys liability exceeds the applicable policy limits or the ability of another carrier to indemnify it, the Company could incur substantial losses from an accident, catastrophe or incident which may result in a material adverse effect on the Companys results of operations or financial position.
If we experience changes in, or are unable to retain, our senior management team or other key employees, our operating results could be adversely affected.
Much of our future success depends on the continued availability of skilled personnel with industry experience and knowledge, including our senior management team and other key employees. If we are unable to attract and retain talented, highly qualified senior management and other key employees, or if we are unable to effectively provide for the succession of senior management, our business may be adversely affected.
High and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel could have a material adverse impact on the Companys strategic plans, operating results, financial position and liquidity.
Aircraft fuel is critical to the Companys operations and is one of its single largest operating expenses. The timely and adequate supply of fuel to meet operational demand depends on the continued availability of reliable fuel supply sources, as well as related service and delivery infrastructure. Although the Company has some ability to cover short-term fuel supply and infrastructure disruptions at some major demand locations, it can neither predict nor guarantee the continued timely availability of aircraft fuel throughout the Companys system. The Company generally sources fuel at prevailing market prices.
Aircraft fuel has historically been the Companys most volatile operating expense due to the highly unpredictable nature of market prices for fuel. Market prices for aircraft fuel have historically fluctuated substantially in short periods of time and continue to be highly volatile due a dependence on a multitude of unpredictable factors beyond the Companys control. These factors include changes in global crude oil prices, the balance between aircraft fuel supply and demand, natural disasters, prevailing inventory levels and fuel production and transportation infrastructure. Prices of fuel are also impacted by indirect factors that may potentially impact fuel supply or demand balance, such as geopolitical events, economic growth indicators, fiscal/monetary policies, fuel tax policies, environmental concerns and financial investments in energy markets. Both actual changes in these factors, as well as changes in market expectations of these factors can potentially drive rapid changes in fuel price levels in short periods of time.
Given the highly competitive nature of the airline industry, the Company may not be able to increase its fares and fees sufficiently to offset the full impact of increases in fuel prices, especially if these increases are significant, rapid and sustained. Further, such fare and fee increases may not be sustainable, may reduce the general demand for air travel and may also eventually impact the Companys strategic growth and investment plans for the future. In addition, decreases in fuel prices for an extended period of time may result in increased industry capacity, increased competitive actions for market share and lower fares or surcharges in general. If fuel prices were to then subsequently rise quickly, there may be a lag between the rise in fuel prices and any improvement of the revenue environment.
To protect against increases in the market prices of fuel, the Company may hedge a portion of its future fuel requirements. However, the Companys hedging program may not be successful in mitigating higher fuel costs, and any price protection provided may be limited due to choice of hedging instruments and market conditions, including breakdown of correlation between hedging instrument and market price of aircraft fuel and failure of hedge counterparties. To the extent that the Company decides to hedge a portion of its future fuel requirements and uses hedge contracts that have the potential to create an obligation to pay upon settlement if fuel prices decline significantly, such hedge contracts may limit the Companys ability to benefit fully from lower fuel costs in the future. If fuel prices decline significantly from the levels existing at the time the Company enters into a hedge contract, the Company may be required to post collateral (margin) beyond certain thresholds. There can be no assurance that the Companys hedging arrangements will provide any particular level of protection against
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rises in fuel prices or that its counterparties will be able to perform under the Companys hedging arrangements. Additionally, deterioration in the Companys financial condition could negatively affect its ability to enter into new hedge contracts in the future.
See Note 10 to the financial statements included in Part II, Item 8 of this report for additional information on the Companys hedging activities.
Union disputes, employee strikes or slowdowns, and other labor-related disruptions could adversely affect the Companys operations and could result in increased costs that impair its financial performance.
United is a highly unionized company. As of December 31, 2016, the Company and its subsidiaries had approximately 88,000 active employees, of whom approximately 80% were represented by various U.S. labor organizations.
There is a risk that unions or individual employees might pursue judicial or arbitral claims arising out of changes implemented as a result of the Company entering into collective bargaining agreements with its represented employee groups. There is also a possibility that employees or unions could engage in job actions such as slowdowns, work-to-rule campaigns, sick-outs or other actions designed to disrupt the Companys normal operations, in an attempt to pressure the Company in collective bargaining negotiations. Although the RLA makes such actions unlawful until the parties have been lawfully released to self-help, and the Company can seek injunctive relief against premature self-help, such actions can cause significant harm even if ultimately enjoined. In addition, collective bargaining agreements with the Companys represented employee groups increase the Companys labor costs, which increase could be material for any applicable reporting period.
See Notes 15 and 16 to the financial statements included in Part II, Item 8 of this report for additional information on labor negotiations and costs.
An outbreak of a disease or similar public health threat could have a material adverse impact on the Companys business, financial position and results of operations.
An outbreak of a disease or similar public health threat that affects travel demand or travel behavior, or travel restrictions or reduction in the demand for air travel caused by an outbreak of a disease or similar public health threat in the future, could have a material adverse impact on the Companys business, financial condition and results of operations.
Extensive government regulation could increase the Companys operating costs and restrict its ability to conduct its business.
Airlines are subject to extensive regulatory and legal oversight. Compliance with U.S. and international regulations imposes significant costs and may have adverse effects on the Company. Laws, regulations, taxes and airport rates and charges, both domestically and internationally, have been proposed from time to time that could significantly increase the cost of airline operations or reduce airline revenue.
United provides air transportation under certificates of public convenience and necessity issued by the DOT. If the DOT altered, amended, modified, suspended or revoked these certificates, it could have a material adverse effect on the Companys business. The FAA regulates the safety of Uniteds operations. United operates pursuant to an air carrier operating certificate issued by the FAA. In January 2014, the FAAs more stringent pilot flight and duty time requirements under Part 117 of the Federal Aviation Regulations took effect, which has increased costs for all carriers. In July 2014, minimum qualifications took effect for air carrier first officers. These regulations will continue to impact the industry and the Company for years to come, as they have caused mainline airlines to hire regional pilots, while simultaneously significantly reducing the pool of new pilots from which regional carriers themselves can hire. Although this is an industry issue, it directly affects the Company and requires it to reduce regional partner flying, as several regional partners have experienced difficulty flying their schedules due to reduced pilot availability. From time to time, the FAA also issues orders, airworthiness
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directives and other regulations relating to the maintenance and operation of aircraft that require material expenditures or operational restrictions by the Company. These FAA orders and directives could include the temporary grounding of an entire aircraft type if the FAA identifies design, manufacturing, maintenance or other issues requiring immediate corrective action. These FAA directives or requirements could have a material adverse effect on the Company.
In addition, the Companys operations may be adversely impacted due to the existing antiquated ATC system utilized by the U.S. government. During peak travel periods in certain markets, the current ATC systems inability to handle ATC demand has led to short-term capacity constraints imposed by government agencies and resulted in delays and disruptions of air traffic. In addition, the current system will not be able to effectively handle projected future air traffic growth. Imposition of these ATC constraints on a long-term basis may have a material adverse effect on the Companys operations. Failure to update the ATC system in a timely manner, and the substantial funding requirements of a modernized ATC system that may be imposed on air carriers may have an adverse impact on the Companys financial condition or results of operations.
Access to landing and take-off rights, or slots, at several major U.S. airports and many foreign airports served by the Company are, or recently have been, subject to government regulation. Certain of the Companys major hubs are among the most congested airports in the United States and have been or could be the subject of regulatory action that might limit the number of flights and/or increase costs of operations at certain times or throughout the day. The FAA may limit the Companys airport access by limiting the number of departure and arrival slots at high density traffic airports, which could affect the Companys ownership and transfer rights, and local airport authorities may have the ability to control access to certain facilities or the cost of access to their facilities, which could have an adverse effect on the Companys business. The FAA historically has taken actions with respect to airlines slot holdings that airlines have challenged; if the FAA were to take actions that adversely affect the Companys slot holdings, the Company could incur substantial costs to preserve its slots or may lose slots. If slots are eliminated at an airport, or if the number of hours of operation governed by slots is reduced at an airport, the lack of controls on takeoffs and landings could result in greater congestion both at the affected airport or in the regional airspace (e.g., the New York City metropolitan region airspace) and could significantly impact the Companys operations. Further, the Companys operating costs at airports, including the Companys major hubs, may increase significantly because of capital improvements at such airports that the Company may be required to fund, directly or indirectly. Such costs could be imposed by the relevant airport authority without the Companys approval and may have a material adverse effect on the Companys financial condition.
The ability of carriers to operate flights on international routes between the United States and other countries may be subject to change. Applicable arrangements between the United States and foreign governments may be amended from time to time, government policies with respect to airport operations may be revised, and the availability of appropriate slots or facilities may change. The Company currently operates a number of flights on international routes under government arrangements, regulations or policies that designate the number of carriers permitted to operate on such routes, the capacity of the carriers providing services on such routes, the airports at which carriers may operate international flights, or the number of carriers allowed access to particular airports. Any further limitations, additions or modifications to such arrangements, regulations or policies could have a material adverse effect on the Companys financial position and results of operations. Additionally, a change in law, regulation or policy for any of the Companys international routes, such as Open Skies, could have a material adverse impact on the Companys financial position and results of operations and could result in the impairment of material amounts of related tangible and intangible assets. In addition, competition from revenue-sharing joint ventures and other alliance arrangements by and among other airlines could impair the value of the Companys business and assets on the Open Skies routes. The Companys plans to enter into or expand U.S. antitrust immunized alliances and joint ventures on various international routes are subject to receipt of approvals from applicable U.S. federal authorities and obtaining other applicable foreign government clearances or satisfying the necessary applicable regulatory requirements. There can be no assurance that such approvals and clearances will be granted or will continue in effect upon further regulatory review or that changes in regulatory requirements or standards can be satisfied.
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Many aspects of the Companys operations are also subject to increasingly stringent federal, state, local and international laws protecting the environment. Future environmental regulatory developments, such as climate change regulations in the United States and abroad could adversely affect operations and increase operating costs in the airline industry. In addition, there is the potential for additional regulatory actions in regard to the emission of GHGs by the aviation industry. The precise nature of future requirements and their applicability to the Company are difficult to predict, but the financial impact to the Company and the aviation industry would likely be adverse and could be significant.
In 2017, the U.S. Congress will continue to consider legislation to reauthorize the FAA, which encompasses all significant aviation tax and policy related issues. As with previous reauthorization legislation, the U.S. Congress may consider a range of policy changes that could impact the Companys operations and costs.
See Part I, Item 1, BusinessIndustry Regulation, of this report for additional information on government regulation impacting the Company.
The airline industry may undergo further change with respect to alliances and joint ventures or due to consolidations, any of which could have a material adverse effect on the Company.
The Company faces and may continue to face strong competition from other carriers due to the modification of alliances and formation of new joint ventures. Carriers may improve their competitive positions through airline alliances, slot swaps and/or joint ventures. Certain types of airline joint ventures further competition by allowing multiple airlines to coordinate routes, pool revenues and costs, and enjoy other mutual benefits, achieving many of the benefits of consolidation. Open Skies agreements, including the agreements between the United States and the EU and between the United States and Japan, may also give rise to better integration opportunities among international carriers. Movement of airlines between current global airline alliances could reduce joint network coverage for members of such alliances while also creating opportunities for joint ventures and bilateral alliances that did not exist before such realignment. There is ongoing speculation that further airline and airline alliance consolidations or reorganizations could occur in the future, especially if new Open Skies agreements between Brazil and the United States are fully implemented. The Company routinely engages in analysis and discussions regarding its own strategic position, including current and potential alliances, asset acquisitions and divestitures and may have future discussions with other airlines regarding strategic activities. If other airlines participate in such activities, those airlines may significantly improve their cost structures or revenue generation capabilities, thereby potentially making them stronger competitors of the Company and potentially impairing the Companys ability to realize expected benefits from its own strategic relationships.
Insufficient liquidity may have a material adverse effect on the Companys financial position and business.
The Company has a significant amount of financial leverage from fixed obligations, including aircraft lease and debt financings, leases of airport property and other facilities, and other material cash obligations. In addition, the Company has substantial noncancelable commitments for capital expenditures, including for the acquisition of new aircraft and related spare engines.
Although the Companys cash flows from operations and its available capital, including the proceeds from financing transactions, have been sufficient to meet these obligations and commitments to date, the Companys future liquidity could be negatively affected by the risk factors discussed in this Item 1A., including, but not limited to, substantial volatility in the price of fuel, adverse economic conditions, disruptions in the global capital markets and catastrophic external events.
If the Companys liquidity is materially diminished due to the various risk factors noted in this Item 1A. or otherwise, the Company might not be able to timely pay its leases and debts or comply with certain operating and financial covenants under its financing and credit card processing agreements or with other material provisions of its contractual obligations. Certain of these covenants require the Company or United, as applicable, to maintain minimum liquidity and/or minimum collateral coverage ratios. The Companys or Uniteds ability to comply with these covenants may be affected by events beyond its control, including the overall industry revenue environment, the level of fuel costs and the appraised value of the collateral.
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If the Company does not timely pay its leases and debts or comply with such covenants, a variety of adverse consequences could result. These potential adverse consequences include an increase of required reserves under credit card processing agreements, withholding of credit card sale proceeds by its credit card service providers, loss of undrawn lines of credit, the occurrence of one or more events of default under the relevant agreements, the acceleration of the maturity of debt and/or the exercise of other remedies by its creditors and equipment lessors that could result in a material adverse effect on the Companys financial position and results of operations. The Company cannot provide assurance that it would have sufficient liquidity to repay or refinance such debt if it were accelerated. In addition, an event of default or acceleration of debt under certain of its financing agreements could result in one or more events of default under certain of the Companys other financing agreements due to cross default and cross acceleration provisions.
Furthermore, insufficient liquidity may limit the Companys ability to withstand competitive pressures and downturns in the travel business and the economy in general.
The Companys substantial level of indebtedness and non-investment grade credit rating, as well as market conditions and the availability of assets as collateral for loans or other indebtedness, may make it difficult for the Company to raise additional capital if needed to meet its liquidity needs on acceptable terms, or at all.
See Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, of this report for additional information regarding the Companys liquidity.
Increases in insurance costs or reductions in insurance coverage may materially and adversely impact the Companys results of operations and financial condition.
The Company could be exposed to significant liability or loss if its property or operations were to be affected by a natural catastrophe or other event, including aircraft accidents. If the Company is unable to obtain sufficient insurance (including but not limited to terrorism, aviation hull and liability, workers compensation and property and business interruption insurance) with acceptable terms or if the coverage obtained is insufficient relative to actual liability or losses that the Company experiences, whether due to insurance market conditions or otherwise, its results of operations and financial condition could be materially and adversely affected.
The Companys results of operations fluctuate due to seasonality and other factors associated with the airline industry.
Due to greater demand for air travel during the spring and summer months, revenues in the airline industry in the second and third quarters of the year are generally stronger than revenues in the first and fourth quarters of the year, which are periods of lower travel demand. The Companys results of operations generally reflect this seasonality, but have also been impacted by numerous other factors that are not necessarily seasonal including, among others, the imposition of excise and similar taxes, extreme or severe weather, ATC congestion, geological events, natural disasters, changes in the competitive environment due to industry consolidation, general economic conditions and other factors. As a result, the Companys quarterly operating results are not necessarily indicative of operating results for an entire year and historical operating results in a quarterly or annual period are not necessarily indicative of future operating results.
The Company may never realize the full value of its intangible assets or its long-lived assets causing it to record impairments that may negatively affect its financial position and results of operations.
In accordance with applicable accounting standards, the Company is required to test its indefinite-lived intangible assets for impairment on an annual basis, or more frequently if conditions indicate that an impairment may have occurred. In addition, the Company is required to test certain of its other assets for impairment if conditions indicate that an impairment may have occurred.
The Company may be required to recognize impairments in the future due to, among other factors, extreme fuel price volatility, tight credit markets, a decline in the fair value of certain tangible or intangible assets,
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unfavorable trends in historical or forecasted results of operations and cash flows and an uncertain economic environment, as well as other uncertainties. The Company can provide no assurance that a material impairment charge of tangible or intangible assets will not occur in a future period. The value of the Companys aircraft could be impacted in future periods by changes in supply and demand for these aircraft. Such changes in supply and demand for certain aircraft types could result from grounding of aircraft by the Company or other carriers. An impairment charge could have a material adverse effect on the Companys financial position and results of operations.
The Companys ability to use its net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be significantly limited due to various circumstances, including certain possible future transactions involving the sale or issuance of UAL common stock, or if taxable income does not reach sufficient levels.
As of December 31, 2016, UAL reported consolidated federal net operating loss (NOL) carryforwards of approximately $4.4 billion.
The Companys ability to use its NOL carryforwards may be limited if it experiences an ownership change as defined in Section 382 (Section 382) of the Internal Revenue Code of 1986, as amended. An ownership change generally occurs if certain stockholders increase their aggregate percentage ownership of a corporations stock by more than 50 percentage points over their lowest percentage ownership at any time during the testing period, which is generally the three-year period preceding any potential ownership change.
There is no assurance that the Company will not experience a future ownership change under Section 382 that may significantly limit or possibly eliminate its ability to use its NOL carryforwards. Potential future transactions involving the sale or issuance of UAL common stock, including the exercise of conversion options under the terms of any convertible debt that UAL may issue in the future, the repurchase of such debt with UAL common stock, any issuance of UAL common stock for cash, and the acquisition or disposition of such stock by a stockholder owning 5% or more of UAL common stock, or a combination of such transactions, may increase the possibility that the Company will experience a future ownership change under Section 382.
Under Section 382, a future ownership change would subject the Company to additional annual limitations that apply to the amount of pre-ownership change NOLs that may be used to offset post-ownership change taxable income. This limitation is generally determined by multiplying the value of a corporations stock immediately before the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may, subject to certain limits, be carried over to later years, and the limitation may under certain circumstances be increased by built-in gains in the assets held by such corporation at the time of the ownership change. This limitation could cause the Companys U.S. federal income taxes to be greater, or to be paid earlier, than they otherwise would be, and could cause all or a portion of the Companys NOL carryforwards to expire unused. Similar rules and limitations may apply for state income tax purposes. The Companys ability to use its NOL carryforwards will also depend on the amount of taxable income it generates in future periods. Its NOL carryforwards may expire before the Company can generate sufficient taxable income to use them in full.
Our significant investments in airlines in other parts of the world and the commercial relationships that we have with those carriers may not produce the returns or results we expect.
An important part of our strategy to expand our global network includes making significant investments in airlines in other parts of the world and expanding our commercial relationships with these carriers. In 2015, we made a $100 million investment in Azul Linhas Aéreas Brasileiras S.A. (Azul) and enhanced our commercial arrangements with Azul. We expect to continue exploring similar non-controlling investments in, and entering into joint ventures, commercial agreements, loan transactions and strategic alliances with, other carriers as part of our global business strategy. These transactions and relationships (including our strategic partnership with, and investment in, Azul) involve significant challenges and risks, including that we may not realize a satisfactory return on our investment, that we may not receive repayment of invested funds, that they may distract
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management from our operations or that they may not generate the expected revenue synergies. These events could have a material adverse effect on our operating results or financial condition.
In addition, we are dependent on these other carriers for significant aspects of our network in the regions in which they operate. While we work closely with these carriers, we do not have control over their operations or business methods. We may be subject to consequences from any improper behavior of joint venture partners, including for failure to comply with anti-corruption laws such as the United States Foreign Corrupt Practices Act. Furthermore, our relationships with these carriers may be subject to the laws and regulations of non-U.S. jurisdictions in which these carriers are located or conduct business. Any political or regulatory change in these jurisdictions that negatively impact or prohibit our arrangements with these carriers could have an adverse effect on our results of operations or financial condition. To the extent that the operations of any of these carriers are disrupted over an extended period of time or their actions subject us to the consequences of failure to comply with laws and regulations, our results of operations may be adversely affected.
ITEM 1B. | UNRESOLVED STAFF COMMENTS. |
None.
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ITEM 2. | PROPERTIES. |
Fleet
Including aircraft operated by Uniteds regional carriers, Uniteds fleet consisted of 1,231 aircraft as of December 31, 2016, the details of which are presented in the tables below:
Aircraft Type |
Total | Owned | Leased | Seats in Standard Configuration |
Average Age (In Years) |
|||||||||||||||||||
Mainline: |
||||||||||||||||||||||||
747-400 |
20 | 15 | 5 | 374 | 20.9 | |||||||||||||||||||
777-300ER |
2 | 2 | | 366 | | |||||||||||||||||||
777-200ER |
55 | 38 | 17 | 267-269 | 16.8 | |||||||||||||||||||
777-200 |
19 | 19 | | 266-364 | 19.5 | |||||||||||||||||||
787-9 |
18 | 18 | | 252 | 1.4 | |||||||||||||||||||
787-8 |
12 | 12 | | 219 | 3.5 | |||||||||||||||||||
767-400ER |
16 | 14 | 2 | 242 | 15.3 | |||||||||||||||||||
767-300ER |
35 | 22 | 13 | 183-214 | 21.5 | |||||||||||||||||||
757-300 |
21 | 9 | 12 | 213 | 14.3 | |||||||||||||||||||
757-200 |
56 | 47 | 9 | 142-169 | 19.9 | |||||||||||||||||||
737-900ER |
136 | 136 | | 167-179 | 4.0 | |||||||||||||||||||
737-900 |
12 | 8 | 4 | 167-179 | 15.3 | |||||||||||||||||||
737-800 |
137 | 64 | 73 | 154-166 | 13.2 | |||||||||||||||||||
737-700 |
40 | 14 | 26 | 118-126 | 17.8 | |||||||||||||||||||
A320-200 |
97 | 57 | 40 | 150 | 18.5 | |||||||||||||||||||
A319-100 |
61 | 47 | 14 | 128 | 16.3 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total mainline |
737 | 522 | 215 | 13.9 | ||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Aircraft Type |
Capacity Purchase Agreement Total |
Owned | Leased | Owned or Leased by Regional Carrier |
Regional Carrier Operator and Number of Aircraft |
Seats in Standard Configuration |
||||||||||||||||||
Regional: |
||||||||||||||||||||||||
Embraer E175 |
118 | 30 | | 88 | |
SkyWest: 54 Mesa:
48 |
|
76 | ||||||||||||||||
Embraer 170 |
38 | | | 38 | |
Republic: 34 Shuttle: 4 |
|
70 | ||||||||||||||||
CRJ700 |
79 | | | 79 | |
SkyWest: 34 GoJet: 25 Mesa: 20 |
|
70 | ||||||||||||||||
CRJ200 |
50 | | 29 | 21 | SkyWest: 50 | 50 | ||||||||||||||||||
Embraer ERJ 145 (XR/LR/ER) |
183 | 16 | 167 | | |
ExpressJet: 139 Trans States: 34 CommutAir: 10 |
|
50 | ||||||||||||||||
Q300 |
5 | | | 5 | CommutAir: 5 | 50 | ||||||||||||||||||
Embraer ERJ 135 |
5 | | 5 | | ExpressJet: 5 | 37 | ||||||||||||||||||
Q200 |
16 | | | 16 | CommutAir: 16 | 37 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total regional |
494 | 46 | 201 | 247 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
1,231 | 568 | 416 | 247 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
21
In addition to the aircraft presented in the tables above, United owns or leases the following aircraft listed below as of December 31, 2016:
| One owned Boeing 767-200, which is being subleased to another airline; |
| Four Boeing 757-200s, which are owned and being held for disposition; |
| Ten leased Embraer ERJ 135s, which are permanently grounded; and |
| Three owned Embraer ERJ 145s, which are temporarily grounded. |
Firm Order and Option Aircraft
As of December 31, 2016, United had firm commitments and options to purchase aircraft from Boeing, Embraer and Airbus presented in the table below:
Aircraft Type |
Number of Firm | |
Airbus A350-1000 |
35 | |
Boeing 737NG/737MAX |
165 | |
Boeing 777-300ER |
12 | |
Boeing 787-8/-9/-10 |
21 | |
Embraer E175 |
24 | |
|
||
(a) United also has options and purchase rights for additional aircraft. |
In 2016, United announced a modification to its then-existing narrow body order book by converting its original order for 65 Boeing 737-700 aircraft into four 737-800s to be delivered in 2017 and 61 Boeing 737MAX aircraft with delivery dates to be determined.
The aircraft listed in the table above are scheduled for delivery from 2017 through 2027. In 2017, United expects to take delivery of four Boeing 737NG aircraft, three Boeing 787-9 aircraft, 12 Boeing 777-300ER aircraft, 24 Embraer aircraft and six used Airbus A319s. In addition, up to 14 additional used Airbus A319s may be delivered between 2018 and 2021, subject to certain conditions. To the extent the Company and the aircraft manufacturers with whom the Company has existing orders for new aircraft agree to modify the contracts governing those orders, the amount and timing of the Companys future capital commitments could change. See Notes 11 and 15 to the financial statements included in Part II, Item 8 of this report for additional information.
Facilities
Uniteds principal facilities relate to leases of airport facilities, gates, hangar sites, terminal buildings and other facilities in the municipalities it serves. United has major terminal facility leases at SFO, Washington Dulles, Chicago OHare, LAX, Denver, Newark, Houston Bush, Hopkins International Airport and Guam with expiration dates ranging from 2018 to 2041. Substantially all of these facilities are leased on a net-rental basis, resulting in the Companys responsibility for maintenance, insurance and other facility-related expenses and services.
United also maintains administrative offices, catering, cargo, training facilities, maintenance facilities and other facilities to support operations in the cities served. United also has multiple leases, which expire from 2017 through 2029 for its principal executive office and operations center in downtown Chicago, and certain administrative offices in downtown Houston.
ITEM 3. | LEGAL PROCEEDINGS. |
On June 30, 2015, UAL received a Civil Investigative Demand (CID) from the Antitrust Division of the DOJ seeking documents and information from the Company in connection with a DOJ investigation related to statements and decisions about airline capacity. The Company is working with the DOJ and has completed its response to the CID. The Company is not able to predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of the investigation. Beginning on July 1, 2015, subsequent to the announcement of the CID, UAL and United were named as defendants in multiple class action lawsuits that
22
asserted claims under the Sherman Antitrust Act, which have been consolidated in the United States District Court for the District of Columbia. The complaints generally allege collusion among U.S. airlines on capacity impacting airfares and seek treble damages. The Company intends to vigorously defend against the class action lawsuits.
On October 13, 2015, United received a CID from the Civil Division of the DOJ. The CID requested documents and oral testimony from United in connection with an industry-wide DOJ investigation related to delivery scan and other data purportedly required for payment for the carriage of mail under Uniteds International Commercial Air Contracts with the United States Postal Service. The Company has been responding to the DOJs request and cooperating in the investigation since that time. On November 8, 2016, the DOJ Criminal Division met with representatives from the Company and advised they are conducting an industry-wide investigation into the same matter. The Company is also cooperating with the government in this aspect of their investigation and on December 21, 2016 representatives from the Company met with both the Civil and Criminal Divisions to provide additional information. The Company cannot predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of these investigations.
As disclosed in the Companys prior two Annual Reports on Form 10-K for fiscal years 2014 and 2015, the Company and certain of its current and former executive officers and employees received federal grand jury subpoenas requesting records and testimony related to certain individuals formerly associated with the Port Authority of New York and New Jersey and related operations of the Company. As announced on September 8, 2015, certain of the Companys executives stepped down in connection with its related internal investigation. The Company cooperated with the investigation by the USAO in respect of the Port Authority matter and, as announced on July 14, 2016, the Company reached a resolution in the form of a Non-Prosecution Agreement with the USAO. As announced on December 2, 2016, the Company also resolved the previously disclosed related investigation by the SEC in respect of the Port Authority matter.
Other Legal Proceedings
The Company is involved in various other claims and legal actions involving passengers, customers, suppliers, employees and government agencies arising in the ordinary course of business. Additionally, from time to time, the Company becomes aware of potential non-compliance with applicable environmental regulations, which have either been identified by the Company (through internal compliance programs such as its environmental compliance audits) or through notice from a governmental entity. In some instances, these matters could potentially become the subject of an administrative or judicial proceeding and could potentially involve monetary sanctions. After considering a number of factors, including (but not limited to) the views of legal counsel, the nature of contingencies to which the Company is subject and prior experience, management believes that the ultimate disposition of these other claims and legal actions will not materially affect its consolidated financial position or results of operations. However, the ultimate resolutions of these matters are inherently unpredictable. As such, the Companys financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these matters.
ITEM 4. | MINE SAFETY DISCLOSURES. |
Not applicable.
23
ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
UALs common stock is listed on the New York Stock Exchange (NYSE) under the symbol UAL. The following table sets forth the ranges of high and low sales prices per share of UAL common stock during the last two fiscal years, as reported by the NYSE:
UAL | ||||||||||||||||
2016 | 2015 | |||||||||||||||
High | Low | High | Low | |||||||||||||
1st quarter |
$ | 61.41 | $ | 42.17 | $ | 74.52 | $ | 62.37 | ||||||||
2nd quarter |
58.90 | 37.41 | 65.85 | 49.85 | ||||||||||||
3rd quarter |
54.53 | 37.64 | 62.21 | 49.20 | ||||||||||||
4th quarter |
76.80 | 51.34 | 61.87 | 49.76 |
Based on reports by the Companys transfer agent for UAL common stock, as of February 13, 2017, there were 8,049 holders of record of UAL common stock.
UAL did not pay any dividends in 2016 or 2015. Under the restricted payment provisions of the Companys Credit and Guaranty Agreement, dated as of March 27, 2013 (the Credit Agreement), and certain indentures, UALs ability to pay dividends on or repurchase UALs common stock is subject to limits on the amount of such payments and to certain conditions, including that no default or event of default exists under those instruments and that after giving effect to the making of any such payments, UAL would be in compliance with a minimum fixed charge coverage ratio. Any future determination regarding dividend or distribution payments will be at the discretion of the UAL Board of Directors, subject to the foregoing limits and applicable limitations under Delaware law.
United paid dividends of $2.6 billion and $1.2 billion to UAL in 2016 and 2015, respectively.
The following graph shows the cumulative total stockholder return for UALs common stock during the period from December 31, 2011 to December 31, 2016. The graph also shows the cumulative returns of the Standard and Poors (S&P) 500 Index and the NYSE Arca Airline Index (AAI) of 15 investor-owned airlines. The comparison assumes $100 was invested on December 31, 2011 in UAL common stock.
24
Note: The stock price performance shown in the graph above should not be considered indicative of potential future stock price performance. The foregoing performance graph is being furnished as part of this report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish our stockholders with such information, and therefore, shall not be deemed to be filed or incorporated by reference into any filings by the Company under the Securities Act or the Exchange Act.
The following table presents repurchases of UAL common stock made in the fourth quarter of 2016:
Period | Total number of shares purchased (a)(b) |
Average price paid per share (b)(c) |
Total number of shares purchased as part of publicly announced plans or programs (a) |
Approximate dollar value (in millions) (a) |
||||||||||||||
October 1, 2016 through October 31, 2016 | 1,282,714 | $ | 54.19 | 1,282,714 | $ | 1,930 | ||||||||||||
November 1, 2016 through November 30, 2016 | 1,368,204 | 62.96 | 1,368,204 | 1,844 | ||||||||||||||
December 1, 2016 through December 31, 2016 | | | | 1,844 | ||||||||||||||
|
|
|
|
|||||||||||||||
Total |
2,650,918 | 2,650,918 | ||||||||||||||||
|
|
|
|
|
(a) In 2016, UAL repurchased approximately 50 million shares of UAL common stock for $2.6 billion. In July 2016, UALs Board of Directors authorized a $2 billion share repurchase program to acquire UALs common stock. As of December 31, 2016, the Company had approximately $1.8 billion remaining to purchase shares under its share repurchase program. UAL may repurchase shares through the open market, privately negotiated transactions, block trades or accelerated share repurchase transactions from time to time in accordance with applicable securities laws.
(b) The table does not include shares withheld from employees to satisfy certain tax obligations due upon the vesting of restricted stock units. The United Continental Holdings, Inc. 2008 Incentive Compensation Plan provides for the withholding of shares to satisfy tax obligations due upon the vesting of restricted stock units. However, this plan does not specify a maximum number of shares that may be withheld for this purpose. A total of 502 shares were withheld under this plan in the fourth quarter of 2016 at an average share price of $62.50. These shares of common stock withheld to satisfy tax withholding obligations may be deemed to be issuer purchases of shares that are required to be disclosed pursuant to this Item.
(c) Average price paid per share is calculated on a settlement basis and excludes commission.
25
ITEM 6. | SELECTED FINANCIAL DATA. |
UALs consolidated financial statements and statistical data are provided in the tables below:
Year Ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Income Statement Data (in millions, except per share amounts): |
||||||||||||||||||||
Operating revenue |
$ | 36,556 | $ | 37,864 | $ | 38,901 | $ | 38,279 | $ | 37,152 | ||||||||||
Operating expense |
32,218 | 32,698 | 36,528 | 37,030 | 37,113 | |||||||||||||||
Operating income |
4,338 | 5,166 | 2,373 | 1,249 | 39 | |||||||||||||||
Net income (loss) |
2,263 | 7,340 | 1,132 | 571 | (723) | |||||||||||||||
Basic earnings (loss) per share |
6.86 | 19.52 | 3.05 | 1.64 | (2.18) | |||||||||||||||
Diluted earnings (loss) per share |
6.85 | 19.47 | 2.93 | 1.53 | (2.18) | |||||||||||||||
Balance Sheet Data at December 31 (in millions): |
||||||||||||||||||||
Unrestricted cash, cash equivalents and short-term investments |
$ | 4,428 | $ | 5,196 | $ | 4,384 | $ | 5,121 | $ | 6,543 | ||||||||||
Total assets | 40,140 | 40,861 | 36,595 | 36,021 | 36,963 | |||||||||||||||
Debt and capital lease obligations |
11,705 | 11,759 | 11,947 | 12,293 | 13,043 |
26
Year Ended December 31, | ||||||||||||||||||||
|
|
|||||||||||||||||||
Mainline | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Passengers (thousands) (a) |
101,007 | 96,327 | 91,475 | 91,329 | 93,595 | |||||||||||||||
Revenue passenger miles (RPMs) (millions) (b) |
186,181 | 183,642 | 179,015 | 178,578 | 179,416 | |||||||||||||||
Available seat miles (ASMs) (millions) (c) |
224,692 | 219,989 | 214,105 | 213,007 | 216,330 | |||||||||||||||
Cargo ton miles (millions) |
2,805 | 2,614 | 2,487 | 2,213 | 2,460 | |||||||||||||||
Passenger load factor (d) |
82.9% | 83.5% | 83.6% | 83.8% | 82.9% | |||||||||||||||
Passenger revenue per available seat mile (PRASM) (cents) |
11.31 | 11.97 | 12.51 | 12.20 | 11.93 | |||||||||||||||
Total revenue per available seat mile (cents) |
13.50 | 14.19 | 14.81 | 14.51 | 13.92 | |||||||||||||||
Average yield per revenue passenger mile (Yield) (cents) (e) |
13.65 | 14.34 | 14.96 | 14.56 | 14.38 | |||||||||||||||
Cost per available seat mile (CASM) (cents) |
12.22 | 12.42 | 14.03 | 14.31 | 14.12 | |||||||||||||||
Average price per gallon of fuel, including fuel taxes |
$ | 1.49 | $ | 1.96 | $ | 2.98 | $ | 3.12 | $ | 3.27 | ||||||||||
Fuel gallons consumed (millions) |
3,261 | 3,216 | 3,183 | 3,204 | 3,275 | |||||||||||||||
Average stage length (miles) (f) |
1,859 | 1,922 | 1,958 | 1,934 | 1,895 | |||||||||||||||
Average daily utilization of each aircraft (hours) (g) |
10:06 | 10:24 | 10:26 | 10:28 | 10:38 | |||||||||||||||
Consolidated |
||||||||||||||||||||
Passengers (thousands) (a) |
143,177 | 140,369 | 138,029 | 139,209 | 140,441 | |||||||||||||||
RPMs (millions) (b) |
210,309 | 208,611 | 205,559 | 205,167 | 205,485 | |||||||||||||||
ASMs (millions) (c) |
253,590 | 250,003 | 246,021 | 245,354 | 248,860 | |||||||||||||||
Passenger load factor (d) |
82.9% | 83.4% | 83.6% | 83.6% | 82.6% | |||||||||||||||
PRASM (cents) |
12.40 | 13.11 | 13.72 | 13.50 | 13.09 | |||||||||||||||
Total revenue per available seat mile (cents) |
14.42 | 15.15 | 15.81 | 15.60 | 14.93 | |||||||||||||||
Yield (cents) (e) |
14.96 | 15.72 | 16.42 | 16.14 | 15.86 | |||||||||||||||
CASM (cents) |
12.70 | 13.08 | 14.85 | 15.09 | 14.91 | |||||||||||||||
Average price per gallon of fuel, including fuel taxes |
$ | 1.49 | $ | 1.94 | $ | 2.99 | $ | 3.13 | $ | 3.27 | ||||||||||
Fuel gallons consumed (millions) |
3,904 | 3,886 | 3,905 | 3,947 | 4,016 | |||||||||||||||
Average stage length (miles) (f) |
1,473 | 1,487 | 1,480 | 1,445 | 1,429 |
(a) The number of revenue passengers measured by each flight segment flown.
(b) The number of scheduled miles flown by revenue passengers.
(c) The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown.
(d) RPM divided by ASM.
(e) The average passenger revenue received for each revenue passenger mile flown.
(f) Average stage length equals the average distance a flight travels weighted for size of aircraft.
(g) The average number of hours per day that an aircraft flown in revenue service is operated (from gate departure to gate arrival).
27
ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Overview
United Continental Holdings, Inc. (together with its consolidated subsidiaries, UAL or the Company) is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, United). As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. Uniteds operating revenues and operating expenses comprise nearly 100% of UALs revenues and operating expenses. In addition, United comprises approximately the entire balance of UALs assets, liabilities and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words we, our, us, and the Company in this report for disclosures that relate to all of UAL and United.
2016 Financial Highlights
| 2016 net income was $2.3 billion, or $6.85 diluted earnings per share. |
| Uniteds consolidated PRASM decreased 5.4% in 2016 compared to 2015. |
| Aircraft fuel cost decreased 23% year-over-year due mainly to lower fuel prices. |
| 2016 CASM decreased 2.9% year-over-year on a consolidated capacity increase of 1.4%. |
| In 2016, UAL repurchased approximately 50 million shares of UAL common stock for $2.6 billion. As of December 31, 2016, the Company had approximately $1.8 billion remaining to purchase shares under its share repurchase program. |
| UAL ended the year with $5.8 billion in unrestricted liquidity, which consisted of unrestricted cash, cash equivalents, short-term investments and available capacity under the revolving credit facility of the Companys Credit Agreement. |
2016 Operational Highlights
| Consolidated RPMs for 2016 increased 0.8% as compared to 2015, and consolidated ASMs increased 1.4% from the prior year, resulting in a consolidated load factor of 82.9% in 2016 versus 83.4% in 2015. |
| For 2016 and 2015, the Company recorded a DOT on-time arrival rate of 81.3% and 78.1%, respectively, and a system completion factor of 99.0% and 98.7%, respectively. |
| The Company took delivery of five new Boeing 787-9 Dreamliners, eight new Boeing 737-900ERs, seven new Boeing 737-800s, two new Boeing 777-300ERs and six used Airbus A319s. United exited from scheduled service four Boeing 757-200s, 16 Embraer ERJ 145s and two Boeing 747-400s. The Company took delivery of the first Boeing 777-300ER in the Companys fleet, named the New Spirit of United, featuring the all-new United Polaris business class seat. |
| The Company introduced new products to its industry-leading existing portfolio of products such as United Polaris service and announced Basic Economy fares which will expand its customers options. |
| During 2016, the Company reached new agreements with every domestic unionized work group. |
Outlook
Set forth below is a discussion of the principal matters that we believe could impact our financial and operating performance and cause our results of operations in future periods to differ materially from our historical
28
operating results and/or from our anticipated results of operations described in the forward-looking statements in this report. See Part I, Item 1A., Risk Factors, of this report and the factors described under Forward-Looking Information below for additional discussion of these and other factors that could affect us.
The Company is committed to improving the efficiency and quality of all aspects of its business in 2017. In order to continue improving operational performance in 2017, our top focus will be on further improvements in completion factor, departure performance and baggage handling.
As outlined at our 2016 Investor Day presentation, the Company expects to drive significant incremental value by 2020 relative to 2015. United anticipates capturing this value through a variety of initiatives including a re-fleeting and upgauge program, additional customer choice through segmentation, improvements to the revenue management systems, ongoing sensible cost management, realizing our full network potential through improved schedule quality and enhancements to the MileagePlus program. In addition, the Company will continue to focus on improving reliability while increasing the efficiency of the operation.
Economic Conditions. The economic outlook for the aviation industry in 2017 is characterized by moderate U.S. and global economic growth. In such conditions, we expect a moderate increase in the demand for air travel. Continuing economic uncertainty, along with the strengthening U.S. dollar, is providing uncertainty in key Asian, South American and European markets, and continued political and socioeconomic tensions may result in diminished demand for air travel.
Capacity. In 2017, the Company expects consolidated ASMs to grow between 1% and 2% year-over-year.
Fuel. The Companys average aircraft fuel price per gallon including related taxes was $1.49 in 2016 as compared to $1.94 in 2015. Since 2014, the price of jet fuel has declined and remains volatile. Based on projected fuel consumption in 2017, a one dollar change in the price of a barrel of crude oil would change the Companys annual fuel expense by approximately $95 million.
Labor. As of December 31, 2016, United had approximately 80% of employees represented by unions. In 2016, United reached contract extensions with its pilots and dispatchers, amended collective bargaining agreements with its IAM represented employees, reached a five-year contract with the AFA covering all of its flight attendants and reached a six-year contract with the IBT covering its technicians and related employees. Additionally, the Company will be increasing pay for its pilots in order to align with a recently implemented contract of another airline. The costs associated with all these agreements is expected to add approximately $900 million of costs for full-year 2017. The Company cannot predict the outcome of future negotiations with its unionized employee groups. Increases in the pay and benefits resulting from new collective bargaining agreements could have a material financial impact on the Company.
Results of Operations
In this section, we compare results of operations for the year ended December 31, 2016 with results of operations for the year ended December 31, 2015, and results of operations for the year ended December 31, 2015 with results of operations for the year ended December 31, 2014.
29
2016 compared to 2015
Operating Revenue
The table below illustrates the year-over-year percentage change in the Companys operating revenues for the years ended December 31 (in millions, except percentage changes):
2016 | 2015 | Increase (Decrease) |
% Change | |||||||||||||
PassengerMainline |
$ | 25,414 | $ | 26,333 | $ | (919) | (3.5) | |||||||||
PassengerRegional |
6,043 | 6,452 | (409) | (6.3) | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total passenger revenue |
31,457 | 32,785 | (1,328) | (4.1) | ||||||||||||
Cargo |
876 | 937 | (61) | (6.5) | ||||||||||||
Other operating revenue |
4,223 | 4,142 | 81 | 2.0 | ||||||||||||
|
|
|
|
|
|
|||||||||||
$ | 36,556 | $ | 37,864 | $ | (1,308) | (3.5) | ||||||||||
|
|
|
|
|
|
The table below presents the Companys selected passenger revenue and selected operating data based on geographic region (regional flights consist primarily of domestic routes):
Increase (decrease) in 2016 from 2015 (a): | ||||||||||||||||||||||||||||
Domestic | Atlantic | Pacific | Latin | Total Mainline |
Regional | Consolidated | ||||||||||||||||||||||
Passenger revenue (in millions) |
$ | (118) | $ | (512) | $ | (215) | $ | (74) | $ | (919) | $ | (409) | $ | (1,328) | ||||||||||||||
Passenger revenue |
(0.9)% | (8.6)% | (4.9)% | (2.7)% | (3.5)% | (6.3)% | (4.1)% | |||||||||||||||||||||
Average fare per passenger | (6.6)% | (5.2)% | (5.6)% | (8.0)% | (8.0)% | (2.2)% | (5.9)% | |||||||||||||||||||||
Yield |
(3.2)% | (4.6)% | (7.4)% | (7.8)% | (4.8)% | (3.1)% | (4.8)% | |||||||||||||||||||||
PRASM |
(3.8)% | (8.4)% | (6.7)% | (5.5)% | (5.5)% | (2.7)% | (5.4)% | |||||||||||||||||||||
Passengers |
6.1 % | (3.7)% | 0.7 % | 5.8 % | 4.9 % | (4.3)% | 2.0 % | |||||||||||||||||||||
RPMs (traffic) |
2.3 % | (4.3)% | 2.7 % | 5.5 % | 1.4 % | (3.4)% | 0.8 % | |||||||||||||||||||||
ASMs (capacity) |
3.1 % | (0.2)% | 2.0 % | 2.8 % | 2.1 % | (3.7)% | 1.4 % | |||||||||||||||||||||
Passenger load factor (points) |
(0.6) | (3.3) | 0.6 | 2.2 | (0.6) | 0.3 | (0.5) |
(a) See Part II, Item 6 of this report for the definition of these statistics.
Consolidated passenger revenue decreased $1.3 billion, or 4.1%, in 2016 as compared to 2015. Consolidated PRASM decreased 5.4% in 2016 as compared to 2015. The decline in PRASM was driven by factors including a competitive domestic fare environment, lower surcharges, a strong U.S. dollar and reductions from energy-related corporate travel.
Cargo revenue decreased $61 million, or 6.5%, in 2016 as compared to 2015 due to lower freight yields and lower mail volumes year-over-year, partially offset by an increase in freight volumes. Freight yields were negatively impacted as air freighter competitors increased capacity in response to lower fuel prices. Another contributing factor to the year-over-year decrease was a U.S. West Coast port labor dispute that resulted in an increase in air freight results in the first quarter of 2015. The labor dispute was resolved during the first quarter of 2015.
30
Operating Expense
The table below includes data related to the Companys operating expense for the year ended December 31 (in millions, except percentage changes):
2016 | 2015 | Increase (Decrease) |
% Change | |||||||||||||
Salaries and related costs |
$ | 10,275 | $ | 9,713 | $ | 562 | 5.8 | |||||||||
Aircraft fuel |
5,813 | 7,522 | (1,709) | (22.7) | ||||||||||||
Regional capacity purchase |
2,197 | 2,290 | (93) | (4.1) | ||||||||||||
Landing fees and other rent |
2,165 | 2,203 | (38) | (1.7) | ||||||||||||
Depreciation and amortization |
1,977 | 1,819 | 158 | 8.7 | ||||||||||||
Aircraft maintenance materials and outside repairs |
1,749 | 1,651 | 98 | 5.9 | ||||||||||||
Distribution expenses |
1,303 | 1,342 | (39) | (2.9) | ||||||||||||
Aircraft rent |
680 | 754 | (74) | (9.8) | ||||||||||||
Special charges |
638 | 326 | 312 | NM | ||||||||||||
Other operating expenses |
5,421 | 5,078 | 343 | 6.8 | ||||||||||||
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$ | 32,218 | $ | 32,698 | $ | (480) | (1.5) | ||||||||||
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Salaries and related costs increased $562 million, or 5.8%, in 2016 as compared to 2015 primarily due to higher pay rates and benefit expenses driven by new and extended collective bargaining agreements, an increase in employee incentive expenses due to improvements in operational performance and a 2.2% increase in average full-time equivalent employees, partially offset by a reduction in profit sharing expense in 2016 as compared to 2015, a reduction in medical and dental costs and the results of certain costs savings initiatives in 2016.
The decrease in aircraft fuel expense was primarily attributable to decreased fuel prices and a reduction in fuel hedge losses, partially offset by the impact of a 1.4% increase in capacity. 2016 fuel expense includes the benefit of a $20 million fuel tax refund. The table below presents the significant changes in aircraft fuel cost per gallon for the year ended December 31 (in millions, except percentage changes):
(In millions) | % Change |
Average price per gallon | ||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | % Change |
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Total aircraft fuel purchase cost excluding fuel hedge impacts | $ | 5,596 | $ | 6,918 | (19.1) | $ | 1.43 | $ | 1.78 | (19.7) | ||||||||||||||
Hedge losses reported in fuel expense | (217) | (604) | NM | (0.06) | (0.16) | NM | ||||||||||||||||||
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Fuel expense |
5,813 | 7,522 | (22.7) | 1.49 | 1.94 | (23.2) | ||||||||||||||||||
Total fuel consumption (gallons) | 3,904 | 3,886 | 0.5 |
Depreciation and amortization increased $158 million, or 8.7%, in 2016 as compared to 2015 primarily due to additions of new aircraft, conversions of operating leases to capital leases, aircraft improvements, accelerated depreciation of certain assets related to several fleet types and increases in information technology assets.
Aircraft maintenance materials and outside repairs increased $98 million, or 5.9%, in 2016 as compared to 2015 primarily due to a year-over-year increase in airframe maintenance visits as a result of the cyclical timing of these visits and volume-driven increases in component costs, partially offset by a reduction in costs due to the timing of maintenance on certain engines.
Aircraft rent decreased $74 million, or 9.8%, in 2016 as compared to 2015 primarily due to lease expirations, the purchase or capital lease conversion of several operating leased aircraft and lower lease renewal rates for certain aircraft.
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The table below presents special charges incurred by the Company during the years ended December 31 (in millions):
2016 | 2015 | |||||||
Impairment of assets |
$ | 412 | $ | 79 | ||||
Cleveland airport lease restructuring |
74 | | ||||||
Labor agreement costs |
64 | 18 | ||||||
Severance and benefit costs |
37 | 107 | ||||||
(Gains) losses on sale of assets and other special charges |
51 | 122 | ||||||
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Total special charges |
$ | 638 | $ | 326 | ||||
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See Note 16 to the financial statements included in Part II, Item 8 of this report for additional information.
Other operating expenses increased $343 million, or 6.8%, in 2016 as compared to 2015 primarily due to increases in ground handling costs, food and technology costs associated with the Companys enhanced customer experience initiatives, rate-driven increases in hotel expenses for crews, increases in marketing expenses related to the 2016 Summer Olympics and volume-driven increases in cargo costs.
Nonoperating Income (Expense)
The following table illustrates the year-over-year dollar and percentage changes in the Companys nonoperating income (expense) (in millions, except percentage changes):
2016 | 2015 | Increase (Decrease) |
% Change | |||||||||||||
Interest expense |
$ | (614) | $ | (669) | $ | (55) | (8.2) | |||||||||
Interest capitalized |
72 | 49 | 23 | 46.9 | ||||||||||||
Interest income |
42 | 25 | 17 | 68.0 | ||||||||||||
Miscellaneous, net |
(19) | (352) | (333) | (94.6) | ||||||||||||
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Total |
$ | (519) | $ | (947) | $ | (428) | (45.2) | |||||||||
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The decrease in interest expense of $55 million, or 8.2%, in 2016 as compared to 2015 was primarily due to the prepayment of certain debt issuances in 2015 and declining balances of other debt, partially offset by interest expense on debt issued for the acquisition of new aircraft, the conversion of certain operating leases to capital leases and certain constructed airport assets accounted for as capital leases.
In 2015, Miscellaneous, net included losses of $80 million from fuel derivatives not qualifying for hedge accounting. Foreign currency losses were approximately $43 million and $129 million in 2016 and 2015, respectively. Foreign currency results included $8 million and $61 million of foreign exchange losses for 2016 and 2015, respectively, related to the Companys cash holdings in Venezuela. Miscellaneous, net for 2015 also includes a $134 million special charge related to the write-off of unamortized non-cash debt discounts for the early redemption of the 6% Notes due 2026 (the 2026 Notes) and the 6% Notes due 2028 (the 2028 Notes).
32
2015 compared to 2014
Operating Revenue
The table below illustrates the year-over-year percentage change in the Companys operating revenues for the years ended December 31 (in millions, except percentage changes):
2015 | 2014 | Increase (Decrease) |
% Change | |||||||||||||
PassengerMainline |
$ | 26,333 | $ | 26,785 | $ | (452) | (1.7) | |||||||||
PassengerRegional |
6,452 | 6,977 | (525) | (7.5) | ||||||||||||
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Total passenger revenue |
32,785 | 33,762 | (977) | (2.9) | ||||||||||||
Cargo |
937 | 938 | (1) | (0.1) | ||||||||||||
Other operating revenue |
4,142 | 4,201 | (59) | (1.4) | ||||||||||||
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$ | 37,864 | $ | 38,901 | $ | (1,037) | (2.7) | ||||||||||
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The table below presents the Companys selected passenger revenue and selected operating data based on geographic region (regional flights consist primarily of domestic routes):
Increase (decrease) in 2015 from 2014 (a): | ||||||||||||||||||||||||||||
Domestic | Pacific | Atlantic | Latin | Total Mainline |
Regional | Consolidated | ||||||||||||||||||||||
Passenger revenue (in millions) |
$ | 132 | $ | (331) | $ | (159) | $ | (94) | $ | (452) | $ | (525) | $ | (977) | ||||||||||||||
Passenger revenue |
1.0 % | (7.0)% | (2.6)% | (3.4)% | (1.7)% | (7.5)% | (2.9)% | |||||||||||||||||||||
Average fare per passenger |
(5.0)% | (7.5)% | (1.2)% | (10.2)% | (6.6)% | (2.2)% | (4.5)% | |||||||||||||||||||||
Yield |
(1.9)% | (9.4)% | (1.7)% | (10.3)% | (4.1)% | (1.7)% | (4.3)% | |||||||||||||||||||||
PRASM |
(1.6)% | (9.2)% | (3.1)% | (11.3)% | (4.3)% | (1.6)% | (4.4)% | |||||||||||||||||||||
Passengers |
6.3 % | 0.5 % | (1.4)% | 7.6 % | 5.3 % | (5.4)% | 1.7 % | |||||||||||||||||||||
RPMs (traffic) |
3.0 % | 2.7 % | (0.9)% | 7.7 % | 2.6 % | (5.9)% | 1.5 % | |||||||||||||||||||||
ASMs (capacity) |
2.6 % | 2.4 % | 0.5 % | 8.9 % | 2.7 % | (6.0)% | 1.6 % | |||||||||||||||||||||
Passenger load factor (points) |
0.3 | 0.2 | (1.0) | (1.0) | (0.1) | | (0.2) |
(a) See Part II, Item 6 of this report for the definition of these statistics.
Consolidated passenger revenue in 2015 decreased $977 million, or 2.9%, as compared to 2014 primarily due to a decrease in consolidated yield of 4.3% year-over-year. Yields were impacted by a competitive domestic fare environment, unfavorable foreign currency results due to the strengthening of the U.S. dollar, international surcharge declines, travel reductions from corporate customers in the energy sector and increased industry capacity in certain regions. The decline in yields was partially offset by a 1.5% year-over-year increase in traffic.
33
Operating Expense
The table below includes data related to the Companys operating expense for the year ended December 31 (in millions, except percentage changes):
2015 | 2014 | Increase (Decrease) |
% Change | |||||||||||||
Salaries and related costs |
$ | 9,713 | $ | 8,935 | $ | 778 | 8.7 | |||||||||
Aircraft fuel |
7,522 | 11,675 | (4,153) | (35.6) | ||||||||||||
Regional capacity purchase |
2,290 | 2,344 | (54) | (2.3) | ||||||||||||
Landing fees and other rent |
2,203 | 2,274 | (71) | (3.1) | ||||||||||||
Depreciation and amortization |
1,819 | 1,679 | 140 | 8.3 | ||||||||||||
Aircraft maintenance materials and outside repairs |
1,651 | 1,779 | (128) | (7.2) | ||||||||||||
Distribution expenses |
1,342 | 1,373 | (31) | (2.3) | ||||||||||||
Aircraft rent |
754 | 883 | (129) | (14.6) | ||||||||||||
Special charges |
326 | 443 | (117) | NM | ||||||||||||
Other operating expenses |
5,078 | 5,143 | (65) | (1.3) | ||||||||||||
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$ | 32,698 | $ | 36,528 | $ | (3,830) | (10.5) | ||||||||||
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Salaries and related costs increased $778 million, or 8.7%, in 2015 as compared to 2014 primarily due to a $463 million increase in profit sharing costs as a result of improved profitability, higher pay rates driven by new collective bargaining agreements, an increase in medical and dental costs and an increase in pension expense resulting from changes in actuarial assumptions.
The decrease in aircraft fuel expense was primarily attributable to decreased fuel prices partially offset by losses from fuel hedging activity and a 1.6% increase in capacity. The table below presents the significant changes in aircraft fuel cost per gallon for the year ended December 31 (in millions, except percentage changes):
(In millions) | % Change |
Average price per gallon | ||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | % Change |
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Total aircraft fuel purchase cost excluding fuel hedge impacts | $ | 6,918 | $ | 11,586 | (40.3) | $ | 1.78 | $ | 2.97 | (40.1) | ||||||||||||||
Hedge losses reported in fuel expense | (604) | (89) | NM | (0.16) | (0.02) | NM | ||||||||||||||||||
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Fuel expense as reported |
7,522 | 11,675 | (35.6) | 1.94 | 2.99 | (35.1) | ||||||||||||||||||
Total fuel consumption (gallons) | 3,886 | 3,905 | (0.5) |
Depreciation and amortization increased $140 million, or 8.3%, in 2015 as compared to 2014 primarily due to additions in owned property and equipment, specifically related to new aircraft, information technology assets and several aircraft capital lease conversions from operating leases.
Aircraft maintenance materials and outside repairs decreased $128 million, or 7.2%, in 2015 as compared to 2014 primarily due to a year-over-year decrease in significant airframe maintenance visits as a result of the cyclical timing of these visits, improvements in the efficiency of in-house maintenance programs, a reduced volume of seat and landing gear maintenance and a reduction of flying hours under certain power-by-the-hour engine maintenance agreements, partially offset by increases in expenses related to aircraft reliability projects and Wi-Fi systems maintenance.
Aircraft rent decreased $129 million or 14.6% in 2015 as compared to 2014 primarily due to lease expirations, the purchase or capital lease conversion of several operating leased aircraft and lower lease renewal rates for certain aircraft.
34
The table below presents special charges incurred by the Company during the years ended December 31 (in millions):
2015 | 2014 | |||||||
Severance and benefit costs |
$ | 107 | $ | 199 | ||||
Impairment of assets |
79 | 49 | ||||||
Labor agreement costs |
18 | | ||||||
(Gains) losses on sale of assets and other miscellaneous (gains) losses, net |
122 | 195 | ||||||
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Total special charges |
$ | 326 | $ | 443 | ||||
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See Note 16 to the financial statements included in Part II, Item 8 of this report for additional information.
Nonoperating Income (Expense)
The following table illustrates the year-over-year dollar and percentage changes in UALs nonoperating income (expense) (in millions, except percentage changes):
2015 | 2014 | Increase (Decrease) |
% Change | |||||||||||||
Interest expense |
$ | (669) | $ | (735) | $ | (66) | (9.0) | |||||||||
Interest capitalized |
49 | 52 | (3) | (5.8) | ||||||||||||
Interest income |
25 | 22 | 3 | 13.6 | ||||||||||||
Miscellaneous, net |
(352) | (584) | (232) | (39.7) | ||||||||||||
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Total |
$ | (947) | $ | (1,245) | $ | (298) | (23.9) | |||||||||
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The decrease in interest expense of $66 million, or 9.0%, in 2015 as compared to 2014 was primarily due to the prepayment of certain debt issuances and declining balances of other debt, partially offset by interest expense on debt issued for the acquisition of new aircraft.
Miscellaneous, net included losses of $80 million and $462 million from fuel derivatives not qualifying for hedge accounting in 2015 and 2014, respectively. Foreign currency losses were approximately $129 million and $41 million in 2015 and 2014, respectively. Foreign currency results included $61 million and $10 million of foreign exchange losses for 2015 and 2014, respectively, related to the Companys cash holdings in Venezuela. Miscellaneous, net for 2015 includes a $134 million special charge related to the write-off of unamortized non-cash debt discounts for the early redemption of the 2026 Notes and the 2028 Notes. 2014 Miscellaneous, net includes a $64 million debt extinguishment charge related to the retirement of the $248 million 6% Convertible Junior Subordinated Debentures due 2030.
Liquidity and Capital Resources
As of December 31, 2016, the Company had $4.4 billion in unrestricted cash, cash equivalents and short-term investments, a decrease of $0.8 billion from December 31, 2015. The Company had its entire commitment capacity of $1.35 billion under the Credit Agreement available for letters of credit or borrowings as of December 31, 2016. As of December 31, 2016, the Company had $124 million of restricted cash and cash equivalents, which is primarily collateral for letters of credit and estimated future workers compensation claims. We may be required to post significant additional cash collateral to provide security for obligations. Restricted cash and cash equivalents at December 31, 2015 totaled $206 million.
We have a significant amount of fixed obligations, including debt, aircraft leases and financings, leases of airport property and other facilities and pension funding obligations. At December 31, 2016, the Company had
35
approximately $11.7 billion of debt and capital lease obligations, including $1.0 billion that are due within the next 12 months. In addition, we have substantial noncancelable commitments for capital expenditures, including the acquisition of new aircraft and related spare engines. As of December 31, 2016, our current liabilities exceeded our current assets by approximately $5.0 billion. However, approximately $5.9 billion of our current liabilities are related to our advance ticket sales and frequent flyer deferred revenue, both of which largely represent revenue to be recognized for travel in the near future and not actual cash outlays. The deficit in working capital does not have an adverse impact to our cash flows, liquidity or operations. The Company made principal payments of debt and capital lease obligations totaling $1.4 billion in 2016.
The Company will continue to evaluate opportunities to prepay its debt, including open market repurchases, to reduce its indebtedness and related interest.
For 2017, the Company expects between $4.2 billion and $4.4 billion of gross capital expenditures. See Notes 11 and 15 to the financial statements included in Part II, Item 8 of this report for additional information on commitments.
As of December 31, 2016, a substantial portion of the Companys assets, principally aircraft, route authorities, airport slots and loyalty program intangible assets, was pledged under various loan and other agreements. We must sustain our profitability and/or access the capital markets to meet our significant long-term debt and capital lease obligations and future commitments for capital expenditures, including the acquisition of aircraft and related spare engines. See Note 11 to the financial statements included in Part II, Item 8 of this report for additional information on assets provided as collateral by the Company.
The following is a discussion of the Companys sources and uses of cash from 2014 through 2016.
Cash Flows from Operating Activities
2016 compared to 2015
Cash flow provided by operations for the year ended December 31, 2016 was $5.5 billion compared to $6.0 billion in the same period in 2015. Working capital changes reduced cash flow from operations by $0.5 billion year-over-year in 2016 as compared to 2015. The following were significant working capital items in 2016:
| Frequent flyer and advance purchase of miles decreased $0.6 billion due to increased utilization of pre-purchased miles. |
| Other assets, including spare parts, increased by $0.3 billion as part of the Companys efforts to improve fleet reliability. |
| Accounts payable increased $0.2 billion, driven by the timing of payments. |
2015 compared to 2014
Cash flow provided by operations for the year ended December 31, 2015 was $6.0 billion compared to $2.6 billion in the same period in 2014. The $3.4 billion increase is primarily attributable to an increase of $3.1 billion in income before income taxes and a $0.4 billion increase in non-cash items for the year ended December 31, 2015 as compared to the same period in 2014. Working capital changes reduced cash flow from operations by $0.1 billion year-over-year in 2015 as compared to 2014. The following were significant working capital items in 2015:
| Cash flow increased by $0.2 billion from the return of hedge collateral net of the impact of changes in fuel derivative positions. |
| Other liabilities, including accrued wages, decreased $0.2 billion, which included $0.8 billion in pension contributions offset by $0.7 billion in profit sharing accruals. |
| Frequent flyer deferred revenue and advanced purchase of miles decreased $0.2 billion. |
36
Cash Flows from Investing Activities
2016 compared to 2015
The Companys capital expenditures were $3.2 billion and $2.7 billion in 2016 and 2015, respectively. The Companys capital expenditures for both years were primarily attributable to the purchase of aircraft, facility and fleet-related costs and the purchase of information technology assets.
2015 compared to 2014
The Companys capital expenditures were $2.7 billion and $2.0 billion in 2015 and 2014, respectively. The Companys capital expenditures for both years were primarily attributable to the purchase of aircraft, facility and fleet-related costs. In 2015, the Company announced a strategic partnership with Azul. Through a wholly-owned subsidiary, the Company invested $100 million for an economic stake of approximately five percent in Azul, Brazils largest carrier by cities served, which provides a range of customer benefits including codesharing of flights, joint loyalty program participation and expanded connection opportunities on routes between the U.S. and Brazil, a key market for United, in addition to other points in North and South America.
Cash Flows from Financing Activities
Significant financing events in 2016 were as follows:
Share Repurchases
The Company used $2.6 billion of cash to purchase 50 million shares of its common stock during 2016 under its share repurchase programs. As of December 31, 2016, the Company has $1.8 billion remaining to spend under its share repurchase program.
Debt Issuances
In 2016, United completed two enhanced equipment trust certificate (EETC) offerings for a total principal amount of $2.0 billion. Of the $2.0 billion, United received and recorded $708 million of proceeds as debt as of December 31, 2016 to finance the purchase of 17 aircraft. United expects to receive all proceeds from the pass-through trusts by the end of the second quarter of 2017.
In 2016, United borrowed approximately $369 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2016.
Debt and Capital Lease Principal Payments
During the year ended December 31, 2016, the Company made debt and capital lease principal payments of $1.4 billion.
Significant financing events in 2015 were as follows:
Share Repurchases
The Company used $1.2 billion of cash to purchase 21 million shares of its common stock during 2015 under its share repurchase programs.
Debt Issuances
During 2015, United issued $1.4 billion of debt related to EETC offerings to finance aircraft.
In 2015, United borrowed approximately $590 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2015.
37
Debt and Capital Lease Principal Payments
During the year ended December 31, 2015, the Company made debt and capital lease principal payments of $2.3 billion, including the following prepayments:
| UAL used cash to repurchase all $321 million par value 2026 Notes. |
| UAL used cash to repurchase all $311 million par value 2028 Notes. |
| UAL used cash to prepay, at par, $300 million principal amount of its $500 million term loan due September 2021 under the Credit Agreement. |
Financing Activities Not Affecting Cash
The holders of substantially all of the remaining $202 million principal amount of Uniteds 4.5% Convertible Notes due 2015 exercised their conversion option resulting in the issuance of 11 million shares of UAL common stock.
Significant financing events in 2014 were as follows:
Share Repurchases
The Company used $320 million of cash to purchase approximately 7 million shares of its common stock under the 2014 Program.
Debt Issuances
During 2014, United issued $1.8 billion of debt related to EETC offerings to finance aircraft.
United borrowed a $500 million term loan under the Credit Agreement.
Debt and Capital Lease Principal Payments
During the year ended December 31, 2014, the Company made debt and capital lease principal payments of $2.6 billion, including the following prepayments:
| UAL retired, at par, $400 million principal balance of its 8% Notes due 2024. |
| United used cash to purchase approximately $276 million principal amount of convertible notes and retired the notes. |
| United retired, at par, the entire $800 million principal balance of its 6.75% Senior Secured Notes. |
Financing Activities Not Affecting Cash
UAL amended its revolving credit facility under the Credit Agreement, increasing the capacity from $1.0 billion to $1.35 billion and establishing the maturity date for $1.315 billion in lender commitments as January 2, 2019.
UAL issued approximately 17 million shares in exchange for, or conversion of, $260 million of convertible notes and retired the notes.
For additional information regarding these Liquidity and Capital Resource matters, see Notes 3, 11, 13 and 14 to the financial statements included in Part II, Item 8 of this report. For information regarding non-cash investing and financing activities, see the Companys statements of consolidated cash flows.
Other significant financing event was as follows:
Debt Issuance
In January 2017, United issued $300 million aggregate principal amount of 5% Senior Notes due February 1, 2024. See Note 11 to the financial statements included in Part II, Item 8 of this report for additional information.
38
Credit Ratings. As of the filing date of this report, UAL and United had the following corporate credit ratings:
S&P | Moodys | Fitch | ||||||||
UAL | BB- | Ba2 | BB | |||||||
United | BB- | * | BB | |||||||
*The credit agency does not issue corporate credit ratings for subsidiary entities. |
These credit ratings are below investment grade levels. Downgrades from these rating levels, among other things, could restrict the availability or increase the cost of future financing for the Company.
Other Liquidity Matters
Below is a summary of additional liquidity matters. See the indicated notes to our consolidated financial statements included in Part II, Item 8 of this report for additional details related to these and other matters affecting our liquidity and commitments.
Pension and other postretirement plans |
Note 8 | |
Hedging activities |
Note 10 | |
Long-term debt and debt covenants |
Note 11 | |
Leases and capacity purchase agreements |
Note 13 | |
Commitments and contingencies |
Note 15 |
Contractual Obligations. The Companys business is capital intensive, requiring significant amounts of capital to fund the acquisition of assets, particularly aircraft. In the past, the Company has funded the acquisition of aircraft through outright purchase, by issuing debt, by entering into capital or operating leases, or through vendor financings. The Company also often enters into long-term lease commitments with airports to ensure access to terminal, cargo, maintenance and other required facilities.
The table below provides a summary of the Companys material contractual obligations as of December 31, 2016 (in billions):
2017 | 2018 | 2019 | 2020 | 2021 | After 2021 |
Total | ||||||||||||||||||||||
Long-term debt (a) |
$ | 0.8 | $ | 1.4 | $ | 1.9 | $ | 1.0 | $ | 1.2 | $ | 4.6 | $ | 10.9 | ||||||||||||||
Capital lease obligationsprincipal portion |
0.1 | 0.1 | 0.1 | | | 0.6 | 0.9 | |||||||||||||||||||||
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Total debt and capital lease obligations |
0.9 | 1.5 | 2.0 | 1.0 | 1.2 | 5.2 | 11.8 | |||||||||||||||||||||
Interest on debt and capital lease obligations (b) |
0.5 | 0.5 | 0.4 | 0.3 | 0.3 | 0.9 | 2.9 | |||||||||||||||||||||
Aircraft operating lease obligations |
1.3 | 1.1 | 0.9 | 0.7 | 0.5 | 2.0 | 6.5 | |||||||||||||||||||||
Regional CPAs (c) |
1.9 | 1.9 | 1.3 | 1.0 | 1.0 | 4.3 | 11.4 | |||||||||||||||||||||
Other operating lease obligations |
1.2 | 1.1 | 1.0 | 1.1 | 0.9 | 6.7 | 12.0 | |||||||||||||||||||||
Postretirement obligations (d) |
0.1 | 0.1 | 0.1 | 0.1 | 0.1 | 0.7 | 1.2 | |||||||||||||||||||||
Pension obligations (e) |
| | | 0.4 | 0.3 | 1.1 | 1.8 | |||||||||||||||||||||
Capital purchase obligations (f) |
4.5 | 3.2 | 3.1 | 2.5 | 2.2 | 7.8 | 23.3 | |||||||||||||||||||||
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Total contractual obligations |
$ | 10.4 | $ | 9.4 | $ | 8.8 | $ | 7.1 | $ | 6.5 | $ | 28.7 | $ | 70.9 | ||||||||||||||
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(a) | Long-term debt presented in the Companys financial statements is net of $124 million of debt discount, premiums and debt issuance costs which are being amortized over the debt terms. Contractual payments are not net of the debt discount, premiums and debt issuance costs. |
(b) | Includes interest portion of capital lease obligations of $67 million in 2017, $57 million in 2018, $50 million in 2019, $47 million in 2020, $44 million in 2021 and $339 million thereafter. Future interest payments on variable rate debt are estimated using estimated future variable rates based on a yield curve. |
39
(c) | Represents our estimates of future minimum noncancelable commitments under our CPAs and does not include the portion of the underlying obligations for aircraft and facility rent that is disclosed as part of aircraft and nonaircraft operating leases. Amounts also exclude a portion of Uniteds capital lease obligation recorded for certain of its CPAs. See Note 13 to the financial statements included in Part II, Item 8 of this report for the significant assumptions used to estimate the payments. |
(d) | Amounts represent postretirement benefit payments, net of subsidy receipts, through 2026. Benefit payments approximate plan contributions as plans are substantially unfunded. |
(e) | Represents estimate of the minimum funding requirements as determined by government regulations for Uniteds material pension plans. Amounts are subject to change based on numerous assumptions, including the performance of assets in the plan and bond rates. See Critical Accounting Policies, below, for a discussion of our current year assumptions regarding Uniteds pension plans. |
(f) | Represents contractual commitments for firm order aircraft, spare engines and other capital purchase commitments. See Note 15 to the financial statements included in Part II, Item 8 of this report for a discussion of our purchase commitments. |
Off-Balance Sheet Arrangements. An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity, or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support, or that engages in leasing, hedging or research and development arrangements. The Companys primary off-balance sheet arrangements include operating leases, which are summarized in the contractual obligations table in Contractual Obligations, above, and certain municipal bond obligations, as discussed below.
As of December 31, 2016, United had cash collateralized $72 million of letters of credit. United also had $383 million of surety bonds securing various obligations at December 31, 2016. Most of the letters of credit have evergreen clauses and are expected to be renewed on an annual basis and the surety bonds have expiration dates through 2021.
As of December 31, 2016, United is the guarantor of approximately $1.9 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon. These bonds, issued by various airport municipalities, are payable solely from rentals paid under long-term agreements with the respective governing bodies. The leasing arrangements associated with a majority of these obligations are accounted for as operating leases. The leasing arrangements associated with a portion of these obligations are accounted for as capital leases. The annual lease payments for those obligations accounted for as operating leases are included in the operating lease payments in the contractual obligations table above.
As of December 31, 2016, United is the guarantor of $168 million of aircraft mortgage debt issued by one of Uniteds regional carriers. The aircraft mortgage debt is subject to increased cost provisions and the Company would potentially be responsible for those costs under the guarantees. The increased cost provisions in the $168 million of aircraft mortgage debt are similar to those in certain of the Companys debt agreements. See Note 15 to the financial statements included in Part II, Item 8 of this report for additional information on increased cost provisions related to the Companys debt.
EETCs. In June 2016 and September 2016, United completed two separate EETC offerings for a total principal amount of $2.0 billion. United has received and recorded $708 million of the proceeds from these offerings as debt as of December 31, 2016. See Notes 11 and 14 to the financial statements included in Part II, Item 8 of this report for additional information on EETC pass-through trusts and variable interest entity consideration.
Increased Cost Provisions. See Note 15 to the financial statements included in Part II, Item 8 of this report for additional information on increased cost provisions related to the Companys debt.
Fuel Consortia. United participates in numerous fuel consortia with other air carriers at major airports to reduce the costs of fuel distribution and storage. Interline agreements govern the rights and responsibilities of the consortia members and provide for the allocation of the overall costs to operate the consortia based on usage. The consortia (and in limited cases, the participating carriers) have entered into long-term agreements to lease certain airport fuel storage and distribution facilities that are typically financed through tax-exempt bonds (either special facilities lease revenue bonds or general airport revenue bonds), issued by various local municipalities. In general, each consortium lease agreement requires the consortium to make lease payments in amounts sufficient
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to pay the maturing principal and interest payments on the bonds. As of December 31, 2016, approximately $1.5 billion principal amount of such bonds were secured by significant fuel facility leases in which United participates, as to which United and each of the signatory airlines has provided indirect guarantees of the debt. As of December 31, 2016, the Companys contingent exposure was approximately $234 million principal amount of such bonds based on its recent consortia participation. The Companys contingent exposure could increase if the participation of other air carriers decreases. The guarantees will expire when the tax-exempt bonds are paid in full, which ranges from 2017 to 2049. The Company did not record a liability at the time these indirect guarantees were made. See Note 15 to the financial statements included in Part II, Item 8 of this report for additional information related to the Companys fuel consortia.
Critical Accounting Policies
Critical accounting policies are defined as those that are affected by significant judgments and uncertainties which potentially could result in materially different accounting under different assumptions and conditions. The Company has prepared the financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), which requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates under different assumptions or conditions. The Company has identified the following critical accounting policies that impact the preparation of the financial statements.
Revenue Recognition. The Company records passenger ticket sales and tickets sold by other airlines for use on United as passenger revenue when the transportation is provided or upon estimated breakage. The value of unused passenger tickets is included in current liabilities as Advance ticket sales. Tickets sold by other airlines are recorded at the estimated values to be billed to the other airlines. Differences between amounts billed and the actual amounts may be rejected and rebilled or written off if the amount recorded was different from the original estimate. When necessary, the Company records a reserve against its interline billings and payables if historical experience indicates that these amounts are different. Non-refundable tickets generally expire on the date of the intended flight, unless the date is extended by notification from the customer on or before the intended flight date.
Fees charged in association with changes or extensions to non-refundable tickets are recorded as other revenue at the time the fee is incurred. The fare on the changed ticket, including any additional collection of fare, is deferred and recognized in accordance with our transportation revenue recognition policy at the time the transportation is provided. Change fees related to non-refundable tickets are considered a separate transaction from the air transportation because they represent a charge for the Companys additional service to modify a previous sale. Therefore, the pricing of the change fee and the initial customer order are separately determined and represent distinct earnings processes.
The Company records an estimate of breakage revenue on the flight date for tickets that will expire unused. These estimates are based on the evaluation of actual historical results and forecasted trends. Refundable tickets expire after one year from the date of issuance.
The Financial Accounting Standards Board (FASB) amended the FASB Accounting Standards Codification and created a new Topic 606, Revenue from Contracts with Customers. This amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Accounting Standards Codification. The Company currently plans to use the full-retrospective approach in adopting this standard on January 1, 2018. Under the new standard, certain airline ancillary fees directly related to passenger revenue tickets, such as ticket change fees and baggage fees, are likely to no longer be considered distinct performance obligations separate from the passenger travel component. In addition, the ticket change fees which were previously recognized when received and booking fees when paid, will likely be recognized when transportation is provided. The Company
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has previously recorded ancillary fees and change fees in other operating revenue but will record these in passenger revenue under the new standard. The Company is evaluating other possible impacts from the new standard on its consolidated financial statements.
Frequent Flyer Accounting. The Companys MileagePlus program is designed to increase customer loyalty. Program participants earn miles by flying on United and certain other participating airlines. Program participants can also earn miles through purchases from other non-airline partners that participate in the Companys loyalty program. We sell miles to these partners, which include credit card issuers, retail merchants, hotels, car rental companies and our participating airline partners. Miles can be redeemed for free (other than taxes and government imposed fees), discounted or upgraded air travel and non-travel awards. The Company records its obligation for future award redemptions using a deferred revenue model.
When frequent flyers earn miles for flights, the Company recognizes a portion of the ticket sales as revenue when the air transportation occurs and defers a portion of the ticket sale representing the value of the related miles as a multiple-deliverable revenue arrangement. The Company determines the estimated selling price of air transportation and miles as if each element is sold on a separate basis. The total consideration from each ticket sale is then allocated to each of these elements, individually, on a pro rata basis. The miles are recorded in Frequent flyer deferred revenue on the Companys consolidated balance sheet and recognized into revenue when the transportation is provided.
The Companys estimated selling price of miles is based on an equivalent ticket value less fulfillment discount, which incorporates the expected redemption of miles, as the best estimate of selling price for these miles. The equivalent ticket value is based on the prior 12 months weighted average equivalent ticket value of similar fares as those used to settle award redemptions while taking into consideration such factors as redemption pattern, cabin class, loyalty status and geographic region. The estimated selling price of miles is adjusted by a fulfillment discount that considers a number of factors, including redemption patterns of various customer groups.
United has a significant contract to sell MileagePlus miles to its co-branded credit card partner, Chase. United identified the following significant revenue elements in its Second Amended and Restated Co-Branded Card Marketing Services Agreement (the Co-Brand Agreement): the air transportation element represented by the value of the mile (generally resulting from its redemption for future air transportation and whose fair value is described above); use of the United brand and access to MileagePlus member lists; advertising; and other travel related benefits.
The fair value of the elements is determined using managements estimated selling price of each element. The objective of using the estimated selling price based methodology is to determine the price at which we would transact a sale if the product or service were sold on a stand-alone basis. Accordingly, we determine our best estimate of selling price by considering multiple inputs and methods including, but not limited to, discounted cash flows, brand value, volume discounts, published selling prices, number of miles awarded and number of miles redeemed. The Company estimated the selling prices and volumes over the term of the Co-Brand Agreement in order to determine the allocation of proceeds to each of the multiple elements to be delivered. We also evaluate volumes on an annual basis, which may result in a change in the allocation of estimated selling price on a prospective basis.
The Company records passenger revenue related to the air transportation element when the transportation is delivered. The other elements are generally recognized as Other operating revenue when earned.
The Company accounts for miles sold and awarded that will never be redeemed by program members, which we refer to as breakage. The Company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns. Miles expire after 18 months of member account inactivity. The Companys estimate of the expected expiration of miles requires significant management judgment. Current and future changes to expiration assumptions or to the expiration policy, or to program rules and program redemption opportunities, may result in material changes to the deferred revenue balance as well as recognized revenues from the programs.
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The following table summarizes information related to the Companys Frequent flyer deferred revenue liability:
Frequent flyer deferred revenue at December 31, 2016 (in millions) |
$ | 4,883 | ||
% of miles earned expected to expire |
16% | |||
Impact of 1% change in outstanding miles or weighted average ticket value on deferred revenue (in millions) |
$ | 54 |
Long-Lived Assets. The net book value of operating property and equipment for the Company was $23 billion and $22 billion at December 31, 2016 and 2015, respectively. The assets recorded value is impacted by a number of accounting policy elections, including the estimation of useful lives and residual values and, when necessary, the recognition of asset impairment charges.
The Company records assets acquired, including aircraft, at acquisition cost. Depreciable life is determined through economic analysis, such as reviewing existing fleet plans, obtaining appraisals and comparing estimated lives to other airlines that operate similar fleets. As aircraft technology has improved, useful life has increased and the Company has generally estimated the lives of those aircraft to be 30 years. Residual values are estimated based on historical experience with regard to the sale of both aircraft and spare parts and are established in conjunction with the estimated useful lives of the related fleets. Residual values are based on when the aircraft are acquired and typically reflect asset values that have not reached the end of their physical life. Both depreciable lives and residual values are revised periodically as facts and circumstances arise to recognize changes in the Companys fleet plan and other relevant information. A one-year increase in the average depreciable life of the Companys flight equipment would reduce annual depreciation expense on flight equipment by approximately $57 million.
The Company evaluates the carrying value of long-lived assets and intangible assets subject to amortization whenever events or changes in circumstances indicate that an impairment may exist. For purposes of this testing, the Company has generally identified the aircraft fleet type as the lowest level of identifiable cash flows for purposes of testing aircraft for impairment. An impairment charge is recognized when the assets carrying value exceeds its net undiscounted future cash flows and its fair market value. The amount of the charge is the difference between the assets carrying value and fair market value.
In 2016, the Company determined that the FAAs action impaired the entire value of its Newark slots because the slots no longer were the mechanism that governed take-off and landing rights, and the Company recorded a special charge to write off the intangible asset. See Notes 16 to the financial statements included in Part II, Item 8 of this report for additional information.
Defined Benefit Plan Accounting. We sponsor defined benefit pension plans for eligible employees and retirees. The most critical assumptions impacting our defined benefit pension plan obligations and expenses are the weighted average discount rate and the expected long-term rate of return on the plan assets.
Uniteds pension plans under-funded status was $1.9 billion at December 31, 2016. Funding requirements for tax-qualified defined benefit pension plans are determined by government regulations. In 2017, we anticipate contributing at least $400 million to our pension plans. The fair value of the plans assets was $3.4 billion at December 31, 2016.
When calculating pension expense for 2017, the Company assumed that its plans assets would generate a long-term rate of return of approximately 7.0%. The expected long-term rate of return assumption was developed based on historical experience and input from the trustee managing the plans assets. The expected long-term rate of return on plan assets is based on a target allocation of assets, which is based on a goal of earning the highest rate of return while maintaining risk at acceptable levels. Our projected long-term rate of return reflects the active management of our plans assets. The plans strive to have assets sufficiently diversified so that adverse or unexpected results from one security class will not have an unduly detrimental impact on the entire portfolio. Plan fiduciaries regularly review actual asset allocation and the pension plans investments are periodically rebalanced to the targeted allocation when considered appropriate.
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The defined benefit pension plans assets consist of return generating investments and risk mitigating investments which are held through direct ownership or through interests in common collective trusts. Return generating investments include primarily equity securities, fixed-income securities and alternative investments (e.g. private equity and hedge funds). Risk mitigating investments include primarily U.S. government and investment grade corporate fixed-income securities. The allocation of assets was as follows at December 31, 2016:
Percent of Total | Expected Long-Term Rate of Return |
|||||||
Equity securities |
35 % | 9.5 % | ||||||
Fixed-income securities |
39 | 5.0 | ||||||
Alternatives |
17 | 7.3 | ||||||
Other |
9 | 7.0 |
Pension expense increases as the expected rate of return on plan assets decreases. Lowering the expected long-term rate of return on plan assets by 50 basis points (from 7.0% to 6.5%) would increase estimated 2017 pension expense by approximately $17 million. Future pension obligations for Uniteds plans were discounted using a weighted average rate of 4.18% at December 31, 2016. The Company selected the discount rate for substantially all of its plans by using a hypothetical portfolio of high quality bonds at December 31, 2016 that would provide the necessary cash flows to match the projected benefit payments. The pension liability and future pension expense both increase as the discount rate is reduced. Lowering the discount rate by 50 basis points (from 4.18% to 3.68%) would increase the pension liability at December 31, 2016 by approximately $575 million and increase the estimated 2017 pension expense by approximately $73 million. Future changes in plan asset returns, plan provisions, assumed discount rates, pension funding law and various other factors related to the participants in our pension plans will impact our future pension expense and liabilities. We cannot predict with certainty what these factors will be in the future.
Actuarial gains or losses are triggered by changes in assumptions or experience that differ from the original assumptions. Under the applicable accounting standards for defined benefit pension plans, those gains and losses are not required to be recognized currently as pension benefit expense, but instead may be deferred as part of accumulated other comprehensive income and amortized into expense over the average remaining service life of the covered active employees. All gains and losses in accumulated other comprehensive income are amortized to expense over the remaining years of service of the covered active employees. At December 31, 2016 and 2015, the Company had unrecognized actuarial losses for pension benefit plans of $1.5 billion and $844 million, respectively, recorded in accumulated other comprehensive income.
Other Postretirement Benefit Plan Accounting. Uniteds postretirement plan provides certain health care benefits, primarily in the United States, to retirees and eligible dependents, as well as certain life insurance benefits to certain retirees reflected as Other Benefits. United also has retiree medical programs that permit retirees who meet certain age and service requirements to continue medical coverage between retirement and Medicare eligibility. Eligible employees are required to pay a portion of the costs of their retiree medical benefits, which in some cases may be offset by accumulated unused sick time at the time of their retirement. Plan benefits are subject to co-payments, deductibles and other limits as described in the plans.
The Company accounts for other postretirement benefits by recognizing the difference between plan assets and obligations, or the plans funded status, in its financial statements. Other postretirement benefit expense is recognized on an accrual basis over employees approximate service periods and is generally calculated independently of funding decisions or requirements. United has not been required to pre-fund its plan obligations, which has resulted in a significant net obligation, as discussed below. The Companys benefit obligation was $1.7 billion and $2.0 billion for the other postretirement benefit plans at December 31, 2016 and 2015, respectively.
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The calculation of other postretirement benefit expense and obligations requires the use of a number of assumptions, including the assumed discount rate for measuring future payment obligations and the health care cost trend rate. The Company determines the appropriate discount rate for each of the plans based on current rates on high quality corporate bonds that would generate the cash flow necessary to pay plan benefits when due. The Companys weighted average discount rate to determine its benefit obligations as of December 31, 2016 was 4.07%, as compared to 4.49% for December 31, 2015. The health care cost trend rate assumed for 2016 was 6.75%, declining to 5.0% in 2023, as compared to assumed trend rate for 2017 of 6.50%, declining to 5.0% in 2023. A 1% increase in assumed health care trend rates would increase the Companys total service and interest cost for the year ended December 31, 2016 by $13 million; whereas, a 1% decrease in assumed health care trend rates would decrease the Companys total service and interest cost for the year ended December 31, 2016 by $11 million. A one percentage point decrease in the weighted average discount rate would increase the Companys postretirement benefit liability by approximately $181 million and increase the estimated 2016 benefits expense by approximately $11 million.
Actuarial gains or losses are triggered by changes in assumptions or experience that differ from the original assumptions and prior service credits result from a retroactive reduction in benefits due under the plans. Under the applicable accounting standards for postretirement welfare benefit plans, actuarial gains and losses and prior service credits are not required to be recognized currently, but instead may be deferred as part of accumulated other comprehensive income and amortized into expense over the average remaining service life of the covered active employees or the average life expectancy of inactive participants. At December 31, 2016 and 2015, the Company had unrecognized actuarial gains for postretirement welfare benefit plans of $384 million and $236 million, respectively, recorded in accumulated other comprehensive income.
Income Taxes. The Company has a net deferred tax asset totaling $655 million as of December 31, 2016, including $1.6 billion of federal and state NOL carryforwards and $108 million of alternative minimum tax credit carryforwards, net of a $8 million valuation allowance, which do not expire. The federal NOL carryforwards will expire beginning in 2026 if unused. In addition, the majority of tax benefits of the state net operating losses of $56 million, net of a $36 million valuation allowance, will expire over a five to 20-year period. At the end of 2016, the Company maintained a valuation allowance of $68 million against certain state and local NOLs and credit carryforwards which will expire unused due to limited carryforward periods.
The Company periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets. The Company establishes valuation allowances if it is not likely it will realize its deferred income tax assets. In making this determination, the Company considers all available positive and negative evidence and makes certain assumptions. The Company considers, among other things, projected future taxable income, scheduled reversals of deferred tax liabilities, the overall business environment, the Companys historical financial results and tax planning strategies. In evaluating the likelihood of utilizing the Companys net deferred income tax assets, the significant factors that the Company considers include (1) the Companys recent history and forecasted profitability; (2) growth in the U.S. and global economies; and (3) future impact of taxable temporary differences. During 2015, after considering all positive and negative evidence and the four sources of taxable income, the Company concluded that its deferred income tax assets were more likely than not to be realized. Therefore, the Company released almost all of its valuation allowance in 2015, resulting in a $3.1 billion benefit in its provision for income taxes.
Forward-Looking Information
Certain statements throughout Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this report are forward-looking and thus reflect the Companys current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to the Companys operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as expects, will, plans, anticipates, indicates, believes, forecast, guidance, outlook, goals and similar expressions are intended to identify forward-looking statements.
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Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this report are based upon information available to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law.
Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans and revenue-generating initiatives, including optimizing our revenue; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; costs associated with any modification or termination of our aircraft orders; our ability to utilize our net operating losses; our ability to attract and retain customers; demand for transportation in the markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic and political conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); economic and political instability and other risks of doing business globally; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the effects of any technology failures or cybersecurity breaches; disruptions to our regional network; the costs and availability of aviation and other insurance; industry consolidation or changes in airline alliances; the success of our investments in airlines in other parts of the world; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including Open Skies agreements and environmental regulations); the impact of regulatory, investigative and legal proceedings and legal compliance risks; the impact of any management changes; labor costs; our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth under Part I, Item 1A., Risk Factors of this report, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Interest Rates. Our net income (loss) is affected by fluctuations in interest rates (e.g. interest expense on variable rate debt and interest income earned on short-term investments). The Companys policy is to manage interest rate risk through a combination of fixed and variable rate debt. The following table summarizes information related to the Companys interest rate market risk at December 31 (in millions):
2016 | 2015 | |||||||
Variable rate debt |
||||||||
Carrying value of variable rate debt at December 31 |
$ | 2,582 | $ | 2,345 | ||||
Impact of 100 basis point increase on projected interest expense for the following year | 25 | 23 | ||||||
Fixed rate debt |
||||||||
Carrying value of fixed rate debt at December 31 |
8,185 | 8,552 | ||||||
Fair value of fixed rate debt at December 31 |
8,469 | 9,022 | ||||||
Impact of 100 basis point increase in market rates on fair value |
(340) | (369) |
A change in market interest rates would also impact interest income earned on our cash, cash equivalents and short-term investments. Assuming our cash, cash equivalents and short-term investments remain at their average
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2016 levels, a 100 basis point increase in interest rates would result in a corresponding increase in the Companys interest income of approximately $47 million during 2017.
Commodity Price Risk (Aircraft Fuel). The price level of aircraft fuel can significantly affect the Companys operations, results of operations, financial position and liquidity. Since 2014, the price of jet fuel has declined but remains volatile.
Our operational and financial results can be significantly impacted by changes in the price and availability of aircraft fuel. To provide adequate supplies of fuel, the Company routinely enters into purchase contracts that are customarily indexed to market prices for aircraft fuel, and the Company generally has some ability to cover short-term fuel supply and infrastructure disruptions at some major demand locations. The price of aircraft fuel has fluctuated substantially in the past several years and in order to lower its exposure to unpredictable increases in the market prices of aircraft fuel, the Company has historically hedged a portion of its planned fuel requirements. As of December 31, 2016, the Company did not have any outstanding fuel hedging contracts. The Companys current strategy is to not enter into transactions to hedge its fuel consumption, although the Company regularly reviews its policy based on market conditions and other factors. The Companys 2017 forecasted fuel consumption is presently approximately four billion gallons, and based on this forecast, a one dollar change in the price of a barrel of crude oil would change the Companys annual fuel expense by approximately $95 million.
Foreign Currency. The Company generates revenues and incurs expenses in numerous foreign currencies. Changes in foreign currency exchange rates impact the Companys results of operations through changes in the dollar value of foreign currency-denominated operating revenues and expenses. Some of the Companys more significant foreign currency exposures include the Canadian dollar, Chinese renminbi, European euro, British pound and Japanese yen. The Companys current strategy is to not enter into transactions to hedge its foreign currency sales, although the Company regularly reviews its policy based on market conditions and other factors. As of December 31, 2016, the Company did not have any foreign currency derivative contracts outstanding. The last of the Companys foreign currency derivatives expired in December 2016.
The result of a uniform 10 percent strengthening in the value of the U.S. dollar from December 31, 2016 levels relative to each of the currencies in which the Company has foreign currency exposure would result in a decrease in pre-tax income of approximately $239 million for the year ending December 31, 2017. This sensitivity analysis was prepared based upon projected 2017 foreign currency-denominated revenues and expenses as of December 31, 2016.
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ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
United Continental Holdings, Inc.
We have audited the accompanying consolidated balance sheets of United Continental Holdings, Inc. (the Company) as of December 31, 2016 and 2015, and the related statements of consolidated operations, comprehensive income (loss), cash flows, and stockholders equity for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and the financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of December 31, 2016, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 23, 2017, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Chicago, Illinois
February 23, 2017
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholder of
United Airlines, Inc.
We have audited the accompanying consolidated balance sheets of United Airlines, Inc. (the Company) as of December 31, 2016 and 2015, and the related statements of consolidated operations, comprehensive income (loss), cash flows, and stockholders equity for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ Ernst & Young LLP
Chicago, Illinois
February 23, 2017
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UNITED CONTINENTAL HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS
(In millions, except per share amounts)
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Operating revenue: |
||||||||||||
PassengerMainline |
$ | 25,414 | $ | 26,333 | $ | 26,785 | ||||||
PassengerRegional |
6,043 | 6,452 | 6,977 | |||||||||
|
|
|
|
|
|
|||||||
Total passenger revenue |
31,457 | 32,785 | 33,762 | |||||||||
Cargo |
876 | 937 | 938 | |||||||||
Other operating revenue |
4,223 | 4,142 | 4,201 | |||||||||
|
|
|
|
|
|
|||||||
36,556 | 37,864 | 38,901 | ||||||||||
|
|
|
|
|
|
|||||||
Operating expense: | ||||||||||||
Salaries and related costs |
10,275 | 9,713 | 8,935 | |||||||||
Aircraft fuel |
5,813 | 7,522 | 11,675 | |||||||||
Regional capacity purchase |
2,197 | 2,290 | 2,344 | |||||||||
Landing fees and other rent |
2,165 | 2,203 | 2,274 | |||||||||
Depreciation and amortization |
1,977 | 1,819 | 1,679 | |||||||||
Aircraft maintenance materials and outside repairs |
1,749 | 1,651 | 1,779 | |||||||||
Distribution expenses |
1,303 | 1,342 | 1,373 | |||||||||
Aircraft rent |
680 | 754 | 883 | |||||||||
Special charges (Note 16) |
638 | 326 | 443 | |||||||||
Other operating expenses |
5,421 | 5,078 | 5,143 | |||||||||
|
|
|
|
|
|
|||||||
32,218 | 32,698 | 36,528 | ||||||||||
|
|
|
|
|
|
|||||||
Operating income | 4,338 | 5,166 | 2,373 | |||||||||
Nonoperating income (expense): |
||||||||||||
Interest expense |
(614) | (669) | (735) | |||||||||
Interest capitalized |
72 | 49 | 52 | |||||||||
Interest income |
42 | 25 | 22 | |||||||||
Miscellaneous, net (Note 16) |
(19) | (352) | (584) | |||||||||
|
|
|
|
|
|
|||||||
(519) | (947) | (1,245) | ||||||||||
|
|
|
|
|
|
|||||||
Income before income taxes | 3,819 | 4,219 | 1,128 | |||||||||
Income tax expense (benefit) |
1,556 | (3,121) | (4) | |||||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 2,263 | $ | 7,340 | $ | 1,132 | ||||||
|
|
|
|
|
|
|||||||
Earnings per share, basic |
$ | 6.86 | $ | 19.52 | $ | 3.05 | ||||||
|
|
|
|
|
|
|||||||
Earnings per share, diluted |
$ | 6.85 | $ | 19.47 | $ | 2.93 | ||||||
|
|
|
|
|
|
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
50
UNITED CONTINENTAL HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(In millions)
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Net income |
$ | 2,263 | $ | 7,340 | $ | 1,132 | ||||||
Other comprehensive income (loss), net change related to: |
||||||||||||
Employee benefit plans, net of taxes |
(313) | 70 | (1,171) | |||||||||
Fuel derivative financial instruments, net of taxes |
316 | 182 | (510) | |||||||||
Investments and other, net of taxes |
(1) | (4) | (6) | |||||||||
|
|
|
|
|
|
|||||||
2 | 248 | (1,687) | ||||||||||
|
|
|
|
|
|
|||||||
Total comprehensive income (loss), net |
$ | 2,265 | $ | 7,588 | $ | (555) | ||||||
|
|
|
|
|
|
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
51
UNITED CONTINENTAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
At December 31, | ||||||||
|
|
|
|
|||||
ASSETS | 2016 | 2015 | ||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 2,179 | $ | 3,006 | ||||
Short-term investments |
2,249 | 2,190 | ||||||
Receivables, less allowance for doubtful accounts (2016$10; 2015$18) |
1,176 | 1,128 | ||||||
Fuel hedge collateral deposits |
| 26 | ||||||
Aircraft fuel, spare parts and supplies, less obsolescence allowance |
873 | 738 | ||||||
Prepaid expenses and other |
832 | 740 | ||||||
|
|
|
|
|||||
7,309 | 7,828 | |||||||
|
|
|
|
|||||
Operating property and equipment: |
||||||||
Owned |
||||||||
Flight equipment |
25,873 | 23,728 | ||||||
Other property and equipment |
5,652 | 4,542 | ||||||
|
|
|
|
|||||
31,525 | 28,270 | |||||||
LessAccumulated depreciation and amortization |
(9,975) | (8,339) | ||||||
|
|
|
|
|||||
21,550 | 19,931 | |||||||
|
|
|
|
|||||
Purchase deposits for flight equipment |
1,059 | 788 | ||||||
Capital leases |
||||||||
Flight equipment |
1,319 | 1,527 | ||||||
Other property and equipment |
331 | 332 | ||||||
|
|
|
|
|||||
1,650 | 1,859 | |||||||
LessAccumulated amortization |
(941) | (998) | ||||||
|
|
|
|
|||||
709 | 861 | |||||||
|
|
|
|
|||||
23,318 | 21,580 | |||||||
|
|
|
|
|||||
Other assets: |
||||||||
Goodwill |
4,523 | 4,523 | ||||||
Intangibles, less accumulated amortization (2016$1,234; 2015$1,144) |
3,632 | 4,136 | ||||||
Deferred income taxes |
655 | 2,037 | ||||||
Restricted cash |
124 | 204 | ||||||
Other, net |
579 | 553 | ||||||
|
|
|
|
|||||
9,513 | 11,453 | |||||||
|
|
|
|
|||||
$ | 40,140 | $ | 40,861 | |||||
|
|
|
|
(continued on next page)
52
UNITED CONTINENTAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
At December 31, | ||||||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY | 2016 | 2015 | ||||||
Current liabilities: |
||||||||
Advance ticket sales |
$ | 3,730 | $ | 3,753 | ||||
Frequent flyer deferred revenue |
2,135 | 2,117 | ||||||
Accounts payable |
2,139 | 1,869 | ||||||
Accrued salaries and benefits |
2,307 | 2,350 | ||||||
Current maturities of long-term debt |
849 | 1,224 | ||||||
Current maturities of capital leases |
116 | 135 | ||||||
Fuel derivative instruments |
| 124 | ||||||
Other |
1,010 | 842 | ||||||
|
|
|
|
|||||
12,286 | 12,414 | |||||||
|
|
|
|
|||||
Long-term debt |
9,918 | 9,673 | ||||||
Long-term obligations under capital leases |
822 | 727 | ||||||
Other liabilities and deferred credits: | ||||||||
Frequent flyer deferred revenue |
2,748 | 2,826 | ||||||
Postretirement benefit liability |
1,581 | 1,882 | ||||||
Pension liability |
1,892 | 1,488 | ||||||
Advanced purchase of miles |
430 | 1,010 | ||||||
Lease fair value adjustment, net |
277 | 359 | ||||||
Other |
1,527 | 1,516 | ||||||
|
|
|
|
|||||
8,455 | 9,081 | |||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock |
| | ||||||
Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 314,612,744 and 364,609,108 shares at December 31, 2016 and 2015, respectively |
3 | 4 | ||||||
Additional capital invested |
6,569 | 7,946 | ||||||
Retained earnings |
3,427 | 3,457 | ||||||
Stock held in treasury, at cost |
(511) | (1,610) | ||||||
Accumulated other comprehensive loss |
(829) | (831) | ||||||
|
|
|
|
|||||
8,659 | 8,966 | |||||||
|
|
|
|
|||||
$ | 40,140 | $ | 40,861 | |||||
|
|
|
|
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
53
UNITED CONTINENTAL HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions)
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Cash Flows from Operating Activities: |
||||||||||||
Net income |
$ | 2,263 | $ | 7,340 | $ | 1,132 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities - |
||||||||||||
Deferred income taxes |
1,648 | (3,177) | 13 | |||||||||
Depreciation and amortization |
1,977 | 1,819 | 1,679 | |||||||||
Special charges, non-cash portion |
391 | 247 | 78 | |||||||||
Other operating activities |
109 | 115 | (21) | |||||||||
Changes in operating assets and liabilities - |
||||||||||||
(Increase) decrease in fuel hedge collateral |
26 | 551 | (577) | |||||||||
(Decrease) increase in fuel derivatives |
(20) | (305) | 436 | |||||||||
Decrease in other liabilities |
(114) | (198) | (238) | |||||||||
Decrease in frequent flyer deferred revenue and advanced purchase of miles |
(641) | (200) | (88) | |||||||||
Increase in other assets |
(298) | (160) | (34) | |||||||||
Increase (decrease) in accounts payable |
239 | (77) | (251) | |||||||||
Increase (decrease) in advance ticket sales |
(22) | 52 | 296 | |||||||||
(Increase) decrease in receivables |
(16) | (15) | 209 | |||||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
5,542 | 5,992 | 2,634 | |||||||||
|
|
|
|
|
|
|||||||
Cash Flows from Investing Activities: |
||||||||||||
Capital expenditures |
(3,223) | (2,747) | (2,005) | |||||||||
Purchases of short-term and other investments |
(2,768) | (2,517) | (3,569) | |||||||||
Proceeds from sale of short-term and other investments |
2,712 | 2,707 | 3,112 | |||||||||
Proceeds from sale of property and equipment |
28 | 86 | 94 | |||||||||
Other, net |
13 | (136) | 37 | |||||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities |
(3,238) | (2,607) | (2,331) | |||||||||
|
|
|
|
|
|
|||||||
Cash Flows from Financing Activities: |
||||||||||||
Repurchases of common stock |
(2,614) | (1,233) | (312) | |||||||||
Payments of long-term debt |
(1,215) | (2,178) | (2,503) | |||||||||
Proceeds from issuance of long-term debt |
808 | 1,073 | 1,432 | |||||||||
Principal payments under capital leases |
(136) | (123) | (127) | |||||||||
Capitalized financing costs |
(64) | (37) | (104) | |||||||||
Proceeds from the exercise of stock options |
6 | 16 | 60 | |||||||||
Other, net |
2 | (13) | (42) | |||||||||
|
|
|
|
|
|
|||||||
Net cash used in financing activities |
(3,213) | (2,495) | (1,596) | |||||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
(909) | 890 | (1,293) | |||||||||
Cash, cash equivalents and restricted cash at beginning of year |
3,212 | 2,322 | 3,615 | |||||||||
|
|
|
|
|
|
|||||||
Cash, cash equivalents and restricted cash at end of year |
$ | 2,303 | $ | 3,212 | $ | 2,322 | ||||||
|
|
|
|
|
|
|||||||
Investing and Financing Activities Not Affecting Cash: |
||||||||||||
Property and equipment acquired through the issuance of debt |
$ | 386 | $ | 866 | $ | 1,114 | ||||||
Airport construction financing |
91 | 17 | 14 | |||||||||
Operating lease conversions to capital lease |
12 | 285 | | |||||||||
Exchange of convertible notes for common stock |
| 202 | 260 | |||||||||
Cash Paid (Refunded) During the Period for: |
||||||||||||
Interest |
$ | 584 | $ | 660 | $ | 748 | ||||||
Income taxes |
14 | 15 | (16) |
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
54
UNITED CONTINENTAL HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS EQUITY
(In millions)
Common Stock |
Additional Capital Invested |
Treasury Stock |
Retained Earnings (Accumulated Deficit) |
Accumulated Other Comprehensive Income (Loss) |
Total | |||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
Balance at December 31, 2013 |
362 | $ | 4 | $ | 7,425 | $ | (38) | $ | (5,015) | $ | 608 | $ | 2,984 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income |
| | | | 1,132 | | 1,132 | |||||||||||||||||||||
Other comprehensive loss |
| | | | | (1,687) | (1,687) | |||||||||||||||||||||
Convertible debt redemption |
17 | | 260 | | | | 260 | |||||||||||||||||||||
Repurchase of convertible debt |
| | (34) | | | | (34) | |||||||||||||||||||||
Share-based compensation |
| | 10 | | | | 10 | |||||||||||||||||||||
Proceeds from exercise of stock options |
2 | | 60 | | | | 60 | |||||||||||||||||||||
Repurchases of common stock |
(6) | | | (320) | | | (320) | |||||||||||||||||||||
Other |
| | | (9) | | | (9) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2014 |
375 | 4 | 7,721 | (367) | (3,883) | (1,079) | 2,396 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income |
| | | | 7,340 | | 7,340 | |||||||||||||||||||||
Other comprehensive income |
| | | | | 248 | 248 | |||||||||||||||||||||
Convertible debt redemptions |
11 | | 202 | | | | 202 | |||||||||||||||||||||
Share-based compensation |
| | 7 | | | | 7 | |||||||||||||||||||||
Proceeds from exercise of stock options |
| | 16 | | | | 16 | |||||||||||||||||||||
Repurchases of common stock |
(21) | | | (1,232) | | | (1,232) | |||||||||||||||||||||
Other |
| | | (11) | | | (11) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2015 |
365 | 4 | 7,946 | (1,610) | 3,457 | (831) | 8,966 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income |
| | | | 2,263 | | 2,263 | |||||||||||||||||||||
Other comprehensive income |
| | | | | 2 | 2 | |||||||||||||||||||||
Share-based compensation |
| | 32 | | | | 32 | |||||||||||||||||||||
Proceeds from exercise of stock options |
| | 6 | | | | 6 | |||||||||||||||||||||
Repurchases of common stock |
(50) | | | (2,607) | | | (2,607) | |||||||||||||||||||||
Treasury stock retired |
| (1) | (1,415) | 3,709 | (2,293) | | | |||||||||||||||||||||
Other |
| | | (3) | | | (3) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2016 |
315 | $ | 3 | $ | 6,569 | $ | (511) | $ | 3,427 | $ | (829) | $ | 8,659 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
55
UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS
(In millions)
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Operating revenue: |
||||||||||||
PassengerMainline |
$ | 25,414 | $ | 26,333 | $ | 26,785 | ||||||
PassengerRegional |
6,043 | 6,452 | 6,977 | |||||||||
|
|
|
|
|
|
|||||||
Total passenger revenue |
31,457 | 32,785 | 33,762 | |||||||||
Cargo |
876 | 937 | 938 | |||||||||
Other operating revenue |
4,223 | 4,142 | 4,201 | |||||||||
|
|
|
|
|
|
|||||||
36,556 | 37,864 | 38,901 | ||||||||||
|
|
|
|
|
|
|||||||
Operating expense: | ||||||||||||
Salaries and related costs |
10,275 | 9,713 | 8,935 | |||||||||
Aircraft fuel |
5,813 | 7,522 | 11,675 | |||||||||
Regional capacity purchase |
2,197 | 2,290 | 2,344 | |||||||||
Landing fees and other rent |
2,165 | 2,203 | 2,274 | |||||||||
Depreciation and amortization |
1,977 | 1,819 | 1,679 | |||||||||
Aircraft maintenance materials and outside repairs |
1,749 | 1,651 | 1,779 | |||||||||
Distribution expenses |
1,303 | 1,342 | 1,373 | |||||||||
Aircraft rent |
680 | 754 | 883 | |||||||||
Special charges (Note 16) |
638 | 326 | 443 | |||||||||
Other operating expenses |
5,418 | 5,076 | 5,139 | |||||||||
|
|
|
|
|
|
|||||||
32,215 | 32,696 | 36,524 | ||||||||||
|
|
|
|
|
|
|||||||
Operating income | 4,341 | 5,168 | 2,377 | |||||||||
|
|
|
|
|
|
|||||||
Nonoperating income (expense): | ||||||||||||
Interest expense |
(614) | (670) | (742) | |||||||||
Interest capitalized |
72 | 49 | 52 | |||||||||
Interest income |
42 | 25 | 22 | |||||||||
Miscellaneous, net (Note 16) |
(19) | (351) | (599) | |||||||||
|
|
|
|
|
|
|||||||
(519) | (947) | (1,267) | ||||||||||
|
|
|
|
|
|
|||||||
Income before income taxes | 3,822 | 4,221 | 1,110 | |||||||||
Income tax expense (benefit) |
1,558 | (3,080) | (4) | |||||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 2,264 | $ | 7,301 | $ | 1,114 | ||||||
|
|
|
|
|
|
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
56
UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(In millions)
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Net income |
$ | 2,264 | $ | 7,301 | $ | 1,114 | ||||||
Other comprehensive income (loss), net change related to: |
||||||||||||
Employee benefit plans, net of taxes |
(313) | 70 | (1,171) | |||||||||
Fuel derivative financial instruments, net of taxes |
316 | 182 | (510) | |||||||||
Investments and other, net of taxes |
(1) | (4) | (6) | |||||||||
|
|
|
|
|
|
|||||||
2 | 248 | (1,687) | ||||||||||
|
|
|
|
|
|
|||||||
Total comprehensive income (loss), net |
$ | 2,266 | $ | 7,549 | $ | (573) | ||||||
|
|
|
|
|
|
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
57
UNITED AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
At December 31, | ||||||||
|
|
|
|
|||||
ASSETS | 2016 | 2015 | ||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 2,173 | $ | 3,000 | ||||
Short-term investments |
2,249 | 2,190 | ||||||
Receivables, less allowance for doubtful accounts (2016$10; 2015$18) |
1,176 | 1,128 | ||||||
Fuel hedge collateral deposits |
| 26 | ||||||
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2016$295; 2015$235) |
873 | 738 | ||||||
Prepaid expenses and other |
832 | 787 | ||||||
|
|
|
|
|||||
7,303 | 7,869 | |||||||
|
|
|
|
|||||
Operating property and equipment: |
||||||||
Owned |
||||||||
Flight equipment |
25,873 | 23,728 | ||||||
Other property and equipment |
5,652 | 4,542 | ||||||
|
|
|
|
|||||
31,525 | 28,270 | |||||||
LessAccumulated depreciation and amortization |
(9,975) | (8,339) | ||||||
|
|
|
|
|||||
21,550 | 19,931 | |||||||
|
|
|
|
|||||
Purchase deposits for flight equipment |
1,059 | 788 | ||||||
Capital leases |
||||||||
Flight equipment |
1,319 | 1,527 | ||||||
Other property and equipment |
331 | 332 | ||||||
|
|
|
|
|||||
1,650 | 1,859 | |||||||
LessAccumulated amortization |
(941) | (998) | ||||||
|
|
|
|
|||||
709 | 861 | |||||||
|
|
|
|
|||||
23,318 | 21,580 | |||||||
|
|
|
|
|||||
Other assets: |
||||||||
Goodwill |
4,523 | 4,523 | ||||||
Intangibles, less accumulated amortization (2016$1,234; 2015$1,144) |
3,632 | 4,136 | ||||||
Deferred income taxes |
612 | 1,995 | ||||||
Restricted cash |
124 | 204 | ||||||
Other, net |
579 | 554 | ||||||
|
|
|
|
|||||
9,470 | 11,412 | |||||||
|
|
|
|
|||||
$ | 40,091 | $ | 40,861 | |||||
|
|
|
|
58
(continued on next page)
UNITED AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
At December 31, | ||||||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY | 2016 | 2015 | ||||||
Current liabilities: |
||||||||
Advance ticket sales |
$ | 3,730 | $ | 3,753 | ||||
Frequent flyer deferred revenue |
2,135 | 2,117 | ||||||
Accounts payable |
2,144 | 1,874 | ||||||
Accrued salaries and benefits |
2,307 | 2,350 | ||||||
Current maturities of long-term debt |
849 | 1,224 | ||||||
Current maturities of capital leases |
116 | 135 | ||||||
Fuel derivative instruments |
| 124 | ||||||
Other |
1,009 | 840 | ||||||
|
|
|
|
|||||
12,290 | 12,417 | |||||||
|
|
|
|
|||||
Long-term debt |
9,918 | 9,673 | ||||||
Long-term obligations under capital leases |
822 | 727 | ||||||
Other liabilities and deferred credits: | ||||||||
Frequent flyer deferred revenue |
2,748 | 2,826 | ||||||
Postretirement benefit liability |
1,581 | 1,882 | ||||||
Pension liability |
1,892 | 1,488 | ||||||
Advanced purchase of miles |
430 | 1,010 | ||||||
Lease fair value adjustment, net |
277 | 359 | ||||||
Other |
1,527 | 1,516 | ||||||
|
|
|
|
|||||
8,455 | 9,081 | |||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock at par, $0.01 par value; authorized 1,000 shares; issued and outstanding 1,000 shares at December 31, 2016 and 2015 |
| | ||||||
Additional capital invested |
3,573 | 6,138 | ||||||
Retained earnings |
5,937 | 3,673 | ||||||
Accumulated other comprehensive loss |
(829) | (831) | ||||||
Receivable from related parties |
(75) | (17) | ||||||
|
|
|
|
|||||
8,606 | 8,963 | |||||||
|
|
|
|
|||||
$ | 40,091 | $ | 40,861 | |||||
|
|
|
|
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
59
UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions)
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Cash Flows from Operating Activities: |
||||||||||||
Net income |
$ | 2,264 | $ | 7,301 | $ | 1,114 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities - |
||||||||||||
Deferred income taxes |
1,650 | (3,136) | 13 | |||||||||
Depreciation and amortization |
1,977 | 1,819 | 1,679 | |||||||||
Special charges, non-cash portion |
391 | 247 | 78 | |||||||||
Other operating activities |
108 | 115 | 4 | |||||||||
Changes in operating assets and liabilities - |
||||||||||||
(Increase) decrease in fuel hedge collateral |
26 | 551 | (577) | |||||||||
(Decrease) increase in fuel derivatives |
(20) | (305) | 436 | |||||||||
Decrease in other liabilities |
(112) | (199) | (236) | |||||||||
Decrease in frequent flyer deferred revenue and advanced purchase of miles |
(641) | (200) | (88) | |||||||||
Increase in other assets |
(251) | (160) | (34) | |||||||||
Increase (decrease) in accounts payable |
239 | (77) | (251) | |||||||||
Increase (decrease) in advance ticket sales |
(22) | 52 | 296 | |||||||||
(Increase) decrease in receivables |
(16) | (15) | 209 | |||||||||
Increase in intercompany receivables |
(58) | (12) | | |||||||||
Decrease in intercompany payables |
| | (118) | |||||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
5,535 | 5,981 | 2,525 | |||||||||
|
|
|
|
|
|
|||||||
Cash Flows from Investing Activities: |
||||||||||||
Capital expenditures |
(3,223) | (2,747) | (2,005) | |||||||||
Purchases of short-term and other investments |
(2,768) | (2,517) | (3,569) | |||||||||
Proceeds from sale of short-term and other investments |
2,712 | 2,707 | 3,112 | |||||||||
Proceeds from sale of property and equipment |
28 | 86 | 94 | |||||||||
Other, net |
13 | (136) | 37 | |||||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities |
(3,238) | (2,607) | (2,331) | |||||||||
|
|
|
|
|
|
|||||||
Cash Flows from Financing Activities: |
||||||||||||
Dividend to UAL |
(2,614) | (1,233) | (212) | |||||||||
Payments of long-term debt |
(1,215) | (2,178) | (2,503) | |||||||||
Proceeds from issuance of long-term debt |
808 | 1,073 | 1,432 | |||||||||
Principal payments under capital leases |
(136) | (123) | (127) | |||||||||
Capitalized financing costs |
(64) | (37) | (104) | |||||||||
UAL contributions related to stock plans |
6 | 16 | 60 | |||||||||
Other, net |
9 | (2) | (33) | |||||||||
|
|
|
|
|
|
|||||||
Net cash used in financing activities |
(3,206) | (2,484) | (1,487) | |||||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
(909) | 890 | (1,293) | |||||||||
Cash, cash equivalents and restricted cash at beginning of year |
3,206 | 2,316 | 3,609 | |||||||||
|
|
|
|
|
|
|||||||
Cash, cash equivalents and restricted cash at end of year |
$ | 2,297 | $ | 3,206 | $ | 2,316 | ||||||
|
|
|
|
|
|
|||||||
Investing and Financing Activities Not Affecting Cash: |
||||||||||||
Property and equipment acquired through the issuance of debt |
$ | 386 | $ | 866 | $ | 1,114 | ||||||
Airport construction financing |
91 | 17 | 14 | |||||||||
Operating lease conversions to capital lease |
12 | 285 | | |||||||||
Transfer of UAL subsidiaries to United |
| | 186 | |||||||||
Exchange of convertible notes for common stock |
| | 156 | |||||||||
Cash Paid (Refunded) During the Period for: |
||||||||||||
Interest |
$ | 584 | $ | 660 | $ | 748 | ||||||
Income taxes |
14 | 15 | (16) |
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
60
UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS EQUITY
(In millions)
Additional Capital Invested |
Retained Earnings (Accumulated Deficit) |
Accumulated Other Comprehensive Income (Loss) |
Receivable from Related Parties, Net |
Total | ||||||||||||||||
Balance at December 31, 2013 |
$ | 7,590 | $ | (4,743) | $ | 608 | $ | (232) | $ | 3,223 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
| 1,114 | | | 1,114 | |||||||||||||||
Other comprehensive loss |
| | (1,687) | | (1,687) | |||||||||||||||
Convertible debt redemption |
156 | | | | 156 | |||||||||||||||
Dividend and other capital distributions to UAL |
(469) | 1 | | 232 | (236) | |||||||||||||||
Share-based compensation |
10 | | | | 10 | |||||||||||||||
UAL contribution related to stock plans |
60 | | | | 60 | |||||||||||||||
Other |
| | | (5) | (5) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2014 |
7,347 | (3,628) | (1,079) | (5) | 2,635 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
| 7,301 | | | 7,301 | |||||||||||||||
Other comprehensive income |
| | 248 | | 248 | |||||||||||||||
Dividend to UAL |
(1,232) | | | | (1,232) | |||||||||||||||
Share-based compensation |
7 | | | | 7 | |||||||||||||||
UAL contribution related to stock plans |
16 | | | | 16 | |||||||||||||||
Other |
| | | (12) | (12) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2015 |
6,138 | 3,673 | (831) | (17) | 8,963 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
| 2,264 | | | 2,264 | |||||||||||||||
Other comprehensive income |
| | 2 | | 2 | |||||||||||||||
Dividend to UAL |
(2,603) | | | | (2,603) | |||||||||||||||
Share-based compensation |
32 | | | | 32 | |||||||||||||||
UAL contribution related to stock plans |
6 | | | | 6 | |||||||||||||||
Other |
| | | (58) | (58) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2016 |
$ | 3,573 | $ | 5,937 | $ | (829) | $ | (75) | $ | 8,606 | ||||||||||
|
|
|
|
|
|
|
|
|
|
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
61
UNITED CONTINENTAL HOLDINGS, INC.
UNITED AIRLINES, INC.
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Overview
United Continental Holdings, Inc. (together with its consolidated subsidiaries, UAL or the Company) is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, United). As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. Uniteds operating revenues and operating expenses comprise nearly 100% of UALs revenues and operating expenses. In addition, United comprises approximately the entire balance of UALs assets, liabilities and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words we, our, us, and the Company in this report for disclosures that relate to all of UAL and United.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(a) | Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. |
(b) | Revenue RecognitionThe Company records passenger ticket sales and tickets sold by other airlines for use on United as passenger revenue when the transportation is provided or upon estimated breakage. The value of unused passenger tickets is included in current liabilities as Advance ticket sales. Tickets sold by other airlines are recorded at the estimated values to be billed to the other airlines. Differences between amounts billed and the actual amounts may be rejected and rebilled or written off if the amount recorded was different from the original estimate. When necessary, the Company records a reserve against its interline billings and payables if historical experience indicates that these amounts are different. Non-refundable tickets generally expire on the date of the intended flight, unless the date is extended by notification from the customer on or before the intended flight date. |
Fees charged in association with changes or extensions to non-refundable tickets are recorded as other revenue at the time the fee is incurred. The fare on the changed ticket, including any additional collection of fare, is deferred and recognized in accordance with our transportation revenue recognition policy at the time the transportation is provided. Change fees related to non-refundable tickets are considered a separate transaction from the air transportation because they represent a charge for the Companys additional service to modify a previous sale. Therefore, the pricing of the change fee and the initial customer order are separately determined and represent distinct earnings processes.
The Company records an estimate of breakage revenue on the flight date for tickets that will expire unused. These estimates are based on the evaluation of actual historical results and forecasted trends. Refundable tickets expire after one year from the date of issuance.
The Company recognizes cargo and other revenue as service is provided.
Under our capacity purchase agreements (CPAs) with regional carriers, we purchase all of the capacity related to aircraft covered by the contracts and are responsible for selling all of the related seat inventory. We record the passenger revenue and related expenses as separate operating revenue and expense in the consolidated statement of operations.
Accounts receivable primarily consist of amounts due from credit card companies and customers of our aircraft maintenance and cargo transportation services. We provide an allowance for uncollectible
62
accounts equal to the estimated losses expected to be incurred based on historical write-offs and other specific analyses. Bad debt expense and write-offs were not material for the years ended December 31, 2016, 2015 and 2014.
(c) | Frequent Flyer AccountingUniteds MileagePlus® program builds customer loyalty by offering awards, benefits and services to program participants. Members in this program earn miles for flights on United, United Express, Star Alliance members and certain other airlines that participate in the program. Members can also earn miles by purchasing the goods and services of our network of non-airline partners. We sell miles to these partners, which include credit card issuers, retail merchants, hotels, car rental companies and our participating airline partners. Miles can be redeemed for free (other than taxes and government imposed fees), discounted or upgraded air travel and non-travel awards. The Company records its obligation for future award redemptions using a deferred revenue model. |
Miles Earned in Conjunction with Flights
When frequent flyers earn miles for flights, the Company recognizes a portion of the ticket sales as revenue when the air transportation occurs and defers a portion of the ticket sale representing the value of the related miles as a multiple-deliverable revenue arrangement. The Company determines the estimated selling price of air transportation and miles as if each element is sold on a separate basis. The total consideration from each ticket sale is then allocated to each of these elements, individually, on a pro rata basis. The miles are recorded in Frequent flyer deferred revenue on the Companys consolidated balance sheet and recognized into revenue when the transportation is provided.
The Companys estimated selling price of miles is based on an equivalent ticket value less fulfillment discount, which incorporates the expected redemption of miles, as the best estimate of selling price for these miles. The equivalent ticket value is based on the prior 12 months weighted average equivalent ticket value of similar fares as those used to settle award redemptions while taking into consideration such factors as redemption pattern, cabin class, loyalty status and geographic region. The estimated selling price of miles is adjusted by a fulfillment discount that considers a number of factors, including redemption patterns of various customer groups.
Co-branded Credit Card Partner Mileage Sales
United has a significant contract, the Second Amended and Restated Co-Branded Card Marketing Services Agreement (the Co-Brand Agreement), to sell MileagePlus miles to its co-branded credit card partner, Chase Bank USA, N.A. (Chase). United identified the following significant revenue elements in the Co-Brand Agreement: the air transportation element represented by the value of the mile (generally resulting from its redemption for future air transportation and whose fair value is described above); use of the United brand and access to MileagePlus member lists; advertising; and other travel related benefits.
The fair value of the elements is determined using managements estimated selling price of each element. The objective of using the estimated selling price based methodology is to determine the price at which we would transact a sale if the product or service were sold on a stand-alone basis. Accordingly, we determine our best estimate of selling price by considering multiple inputs and methods including, but not limited to, discounted cash flows, brand value, volume discounts, published selling prices, number of miles awarded and number of miles redeemed. The Company estimated the selling prices and volumes over the term of the Co-Brand Agreement in order to determine the allocation of proceeds to each of the multiple elements to be delivered. We also evaluate volumes on an annual basis, which may result in a change in the allocation of estimated selling price on a prospective basis.
The Company records passenger revenue related to the air transportation element when the transportation is delivered. The other elements are generally recognized as Other operating revenue when earned.
63
Expiration of Miles
The Company accounts for miles sold and awarded that will never be redeemed by program members, which we refer to as breakage. The Company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns. Miles expire after 18 months of member account inactivity.
The Companys estimate of the expected expiration of miles requires significant management judgment. Current and future changes to expiration assumptions or to the expiration policy, or to program rules and program redemption opportunities, may result in material changes to the deferred revenue balance as well as recognized revenues from the programs.
Other Information
The following table provides additional information related to the frequent flyer program (in millions):
Year Ended |
Cash Proceeds from Miles Sold and Earned |
Other Revenue Recognized Upon Award of Miles to Third-Party Customers (a) |
Increase in Frequent Flyer Deferred Revenue for Miles Awarded (b) |
Decrease in Advanced Purchase of Miles (c) |
||||||||||||
2016 |
$ | 3,022 | $ | 1,221 | $ | 2,050 | $ | (249) | ||||||||
2015 |
2,999 | 1,050 | 2,173 | (224) | ||||||||||||
2014 |
2,861 | 882 | 2,178 | (199) | ||||||||||||
|
||||||||||||||||
(a) This amount represents other revenue recognized during the period from the sale of miles to third parties, representing the marketing-related deliverable services component of the sale. | ||||||||||||||||
(b) This amount represents the increase to Frequent flyer deferred revenue during the period. | ||||||||||||||||
(c) This amount represents the net decrease in the advance purchase of miles obligation due to cash payments for the sale of miles less than miles awarded to customers. |
(d) | Cash and Cash Equivalents and Restricted CashHighly liquid investments with a maturity of three months or less on their acquisition date are classified as cash and cash equivalents. |
Restricted cash primarily includes cash collateral associated with workers compensation obligations and reserves for institutions that process credit card ticket sales. Restricted cash is classified as short-term or long-term in the consolidated balance sheets based on the expected timing of return of the assets to the Company.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statements of consolidated cash flows:
UAL | United | |||||||||||||||||||||||
At December 31, | At December 31, | |||||||||||||||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 2,179 | $ | 3,006 | $ | 2,002 | $ | 2,173 | $ | 3,000 | $ | 1,996 | ||||||||||||
Restricted cash included in Prepaid expenses and other |
| 2 | 44 | | 2 | 44 | ||||||||||||||||||
Other assets: |
||||||||||||||||||||||||
Restricted cash |
124 | 204 | 276 | 124 | 204 | 276 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows | $ | 2,303 | $ | 3,212 | $ | 2,322 | $ | 2,297 | $ | 3,206 | $ | 2,316 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
64
(e) | Short-term InvestmentsShort-term investments are classified as available-for-sale and are stated at fair value. Realized gains and losses on sales of investments are reflected in nonoperating income (expense) in the consolidated statements of operations. Unrealized gains and losses on available-for-sale securities are reflected as a component of accumulated other comprehensive income (loss). |
(f) | Aircraft Fuel, Spare Parts and SuppliesThe Company accounts for aircraft fuel, spare parts and supplies at average cost and provides an obsolescence allowance for aircraft spare parts with an assumed residual value of 10% of original cost. |
(g) | Property and EquipmentThe Company records additions to owned operating property and equipment at cost when acquired. Property under capital leases and the related obligation for future lease payments are recorded at an amount equal to the initial present value of those lease payments. Modifications that enhance the operating performance or extend the useful lives of airframes or engines are capitalized as property and equipment. It is the Companys policy to record compensation from delays in delivery of aircraft as a reduction of the cost of the related aircraft. |
Depreciation and amortization of owned depreciable assets is based on the straight-line method over the assets estimated useful lives. Leasehold improvements are amortized over the remaining term of the lease, including estimated facility renewal options when renewal is reasonably assured at key airports, or the estimated useful life of the related asset, whichever is less. Properties under capital leases are amortized on the straight-line method over the life of the lease or, in the case of certain aircraft, over their estimated useful lives, whichever is shorter. Amortization of capital lease assets is included in depreciation and amortization expense. The estimated useful lives of property and equipment are as follows:
Estimated Useful Life (in years) | ||||
Aircraft and related rotable parts |
25 to 30 | |||
Buildings |
25 to 45 | |||
Other property and equipment |
3 to 15 | |||
Computer software |
5 | |||
Building improvements |
1 to 40 |
As of December 31, 2016 and 2015, the Company had a carrying value of computer software of $356 million and $279 million, respectively. For the years ended December 31, 2016, 2015 and 2014, the Companys depreciation expense related to computer software was $108 million, $93 million and $81 million, respectively. Aircraft and aircraft spare parts were assumed to have residual values of approximately 10% of original cost, and other categories of property and equipment were assumed to have no residual value.
(h) | Maintenance and RepairsThe cost of maintenance and repairs, including the cost of minor replacements, is charged to expense as incurred, except for costs incurred under our power-by-the-hour (PBTH) engine maintenance agreements. PBTH contracts transfer certain risk to third-party service providers and fix the amount we pay per flight hour or per cycle to the service provider in exchange for maintenance and repairs under a predefined maintenance program. Under PBTH agreements, the Company recognizes expense at a level rate per engine hour, unless the level of service effort and the related payments during the period are substantially consistent, in which case the Company recognizes expense based on the amounts paid. |
(i) | Lease Fair Value AdjustmentsLease fair value adjustments, which arose from recording operating leases at fair value under fresh start or business combination accounting, are amortized on a straight-line basis over the related lease term. |
(j) | Regional Capacity PurchasePayments made to regional carriers under CPAs are reported in Regional capacity purchase in our consolidated statements of operations. |
65
(k) | AdvertisingAdvertising costs, which are included in Other operating expenses, are expensed as incurred. Advertising expenses were $220 million, $201 million and $179 million for the years ended December 31, 2016, 2015 and 2014, respectively. |
(l) | IntangiblesThe Company has finite-lived and indefinite-lived intangible assets, including goodwill. Finite-lived intangible assets are amortized over their estimated useful lives. Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment annually or more frequently if events or circumstances indicate that the asset may be impaired. Goodwill and indefinite-lived assets are reviewed for impairment on an annual basis as of October 1, or on an interim basis whenever a triggering event occurs. See Note 2 of this report for additional information related to intangibles. |
(m) | Long-Lived Asset ImpairmentsThe Company evaluates the carrying value of long-lived assets subject to amortization whenever events or changes in circumstances indicate that an impairment may exist. For purposes of this testing, the Company has generally identified the aircraft fleet type as the lowest level of identifiable cash flows. An impairment charge is recognized when the assets carrying value exceeds its net undiscounted future cash flows and its fair market value. The amount of the charge is the difference between the assets carrying value and fair market value. See Note 16 of this report for additional information related to asset impairments. |
(n) | Share-Based CompensationThe Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period. Obligations for cash-settled restricted stock units (RSUs) are remeasured at fair value throughout the requisite service period on the last day of each reporting period based upon UALs stock price. In addition to the service requirement, certain RSUs have performance metrics that must be achieved prior to vesting. These awards are accrued based on the expected level of achievement at each reporting period. A cumulative adjustment is recorded on the last day of each reporting period to adjust compensation expense based on both UALs stock price and the then current level of expected performance achievement for the performance-based awards. See Note 5 of this report for additional information on UALs share-based compensation plans. |
(o) | Ticket TaxesCertain governmental taxes are imposed on the Companys ticket sales through a fee included in ticket prices. The Company collects these fees and remits them to the appropriate government agency. These fees are recorded on a net basis (excluded from operating revenue). |
(p) | Retirement of Leased AircraftThe Company accrues for estimated lease costs over the remaining term of the lease at the present value of future minimum lease payments, net of estimated sublease rentals (if any), in the period that aircraft are permanently removed from service. When reasonably estimable and probable, the Company estimates maintenance lease return condition obligations for items such as minimum aircraft and engine conditions specified in leases and accrues these amounts over the lease term while the aircraft are operating, and any remaining unrecognized estimated obligations are accrued in the period that an aircraft is removed from service. |
(q) | Uncertain Income Tax PositionsThe Company has recorded reserves for income taxes and associated interest that may become payable in future years. Although management believes that its positions taken on income tax matters are reasonable, the Company nevertheless has established tax and interest reserves in recognition that various taxing authorities may challenge certain of the positions taken by the Company, potentially resulting in additional liabilities for taxes and interest. The Companys uncertain tax position reserves are reviewed periodically and are adjusted as events occur that affect its estimates, such as the availability of new information, the lapsing of applicable statutes of limitation, the conclusion of tax audits, the measurement of additional estimated liability, the identification of new tax matters, the release of administrative tax guidance affecting its estimates of tax liabilities, or the rendering of relevant court decisions. The Company records penalties and interest relating to uncertain tax positions in Other operating expense and Interest expense, respectively, in its |
66
consolidated statements of operations. The Company has not recorded any material expense or liabilities related to interest or penalties in its consolidated financial statements. |
(r) | Labor CostsThe Company records expenses associated with amendable labor agreements when the amounts are probable and estimable. These include costs associated with lump sum cash payments that would be made in conjunction with the ratification of labor agreements. To the extent these upfront costs are in lieu of future pay increases, they would be capitalized and amortized over the term of the labor agreements. If not, these amounts would be expensed. |
(s) | Third-Party BusinessThe Company has third-party business revenue that includes fuel sales, catering, ground handling, maintenance services and frequent flyer award non-air redemptions, and third-party business revenue is recorded in Other operating revenue. The Company also incurs third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, and those third-party business expenses are recorded in Other operating expenses. |
(t) | Recently Issued Accounting StandardsThe Financial Accounting Standards Board (FASB) amended the FASB Accounting Standards Codification and created a new Topic 606, Revenue from Contracts with Customers. This amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Accounting Standards Codification. The Company currently plans to use the full-retrospective approach in adopting this standard on January 1, 2018. Under the new standard, certain airline ancillary fees directly related to passenger revenue tickets, such as ticket change fees and baggage fees, are likely to no longer be considered distinct performance obligations separate from the passenger travel component. In addition, the ticket change fees which were previously recognized when received and booking fees when paid, will likely be recognized when transportation is provided. The Company has previously recorded ancillary fees and change fees in other operating revenue but will record these in passenger revenue under the new standard. The Company is evaluating other possible impacts from the new standard on its consolidated financial statements. |
In 2016, the FASB amended the FASB Accounting Standards Codification and created a new Topic 842, Leases (Topic 842). The guidance requires lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) at the commencement date and recognize expenses on their income statements similar to the current Topic 840, Leases. It is effective for fiscal years and interim periods beginning after December 15, 2018, and early adoption is permitted. Lessees and lessors are required to adopt Topic 842 using a modified retrospective approach for all leases existing at or commencing after the date of initial application with an option to use certain practical expedients. The Company is evaluating the impact the adoption of this standard will have on its consolidated financial statements and believes this standard will have a significant impact on its consolidated balance sheets.
In 2016, the FASB issued Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). The update requires excess tax benefits and tax deficiencies, which arise due to differences between the measure of compensation expense and the amount deductible for tax purposes, to be recorded directly through earnings as a component of income tax expense. Under current GAAP, these differences are generally recorded in additional paid-in capital and thus have no impact on net income. The change in treatment of excess tax benefits and tax deficiencies will also impact the computation of diluted earnings per share and the cash flows associated with those items will be classified as operating activities on the statements of consolidated cash flows. Additionally, entities will be permitted to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required under current GAAP, or recognized when they occur. The amendments in this update are
67
effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not expect the adoption of ASU 2016-09 to have a material impact on its consolidated financial statements.
In 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). The update amends the guidance in Accounting Standards Codification 230, Statement of Cash Flows (ASC 230), and clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows with the objective of reducing the existing diversity in practice related to eight specific cash flow issues. The Company adopted ASU 2016-15 as of December 31, 2016 and the standard did not have a material impact on its consolidated financial statements.
In 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The update amends ASC 230 to add guidance on the classification and presentation of restricted cash in the statement of cash flows. Furthermore, a reconciliation between the statement of financial position and the statement of cash flows must be disclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents. The Company adopted this standard as of December 31, 2016 and included $124 million, $206 million and $320 million of restricted cash in the total of cash, cash equivalents and restricted cash in its statements of consolidated cash flows for the year ended December 31, 2016, 2015 and 2014, respectively. A reconciliation of restricted cash for each period of the Companys balance sheet to its statement of consolidated cash flows is included in Note 1(d) Cash and Cash Equivalents and Restricted Cash of this report.
The FASB issued Accounting Standards Update No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). Under the standard, investments for which fair value is measured at net asset value (NAV) per share (or its equivalent) using the practical expedient are no longer categorized in the fair value hierarchy. The Company adopted this standard on January 1, 2016. As of December 31, 2016, the Company had approximately $182 million of such investments as part of Short-term investments on its consolidated balance sheets. In addition, pension plan investments measured at NAV per share are no longer categorized within the fair value hierarchy. As of December 31, 2016, the Company had approximately $1.8 billion of such investments.
68
NOTE 2 - GOODWILL AND OTHER INTANGIBLE ASSETS
The following table presents information about the Companys goodwill and other intangible assets at December 31 (in millions):
2016 | 2015 | |||||||||||||||||||
Item |
Asset life (a) | Gross
Carrying Amount |
Accumulated Amortization |
Gross
Carrying Amount |
Accumulated Amortization |
|||||||||||||||
Goodwill |
$ | 4,523 | $ | 4,523 | ||||||||||||||||
|
|
|
|
|||||||||||||||||
Finite-lived intangible assets |
||||||||||||||||||||
Frequent flyer database (b) |
22 | $ | 1,177 | $ | 771 | $ | 1,177 | $ | 702 | |||||||||||
Hubs |
20 | 145 | 82 | 145 | 74 | |||||||||||||||
Contracts |
13 | 135 | 95 | 135 | 86 | |||||||||||||||
Patents and tradenames |
3 | 108 | 108 | 108 | 108 | |||||||||||||||
Airport slots and gates |
8 | 97 | 97 | 97 | 97 | |||||||||||||||
Other |
25 | 109 | 81 | 109 | 77 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 1,771 | $ | 1,234 | $ | 1,771 | $ | 1,144 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Indefinite-lived intangible assets |
||||||||||||||||||||
Route authorities |
$ | 1,562 | $ | 1,570 | ||||||||||||||||
Airport slots and gates |
536 | 942 | ||||||||||||||||||
Tradenames and logos |
593 | 593 | ||||||||||||||||||
Alliances |
404 | 404 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||
Total |
$ | 3,095 | $ | 3,509 | ||||||||||||||||
|
|
|
|
(a) Weighted average life expressed in years.
(b) The frequent flyer database is amortized based on an accelerated amortization schedule to reflect utilization of the assets. Estimated cash flows correlating to the expected attrition rate of customers in the frequent flyer database is considered in the determination of the amortization schedules.
Amortization expense in 2016, 2015 and 2014 was $90 million, $105 million and $128 million, respectively. Projected amortization expense in 2017, 2018, 2019, 2020 and 2021 is $79 million, $70 million, $64 million, $58 million and $53 million, respectively.
See Note 16 of this report for additional information related to impairment of intangible assets.
NOTE 3 - COMMON STOCKHOLDERS EQUITY AND PREFERRED SECURITIES
In 2016, UAL repurchased approximately 50 million shares of UAL common stock for $2.6 billion. As of December 31, 2016, the Company had approximately $1.8 billion remaining to purchase shares under its share program. UAL may repurchase shares through the open market, privately negotiated transactions, block trades or accelerated share repurchase transactions from time to time in accordance with applicable securities laws. UAL may repurchase shares of UAL common stock subject to prevailing market conditions, and may discontinue such repurchases at any time. See Part II, Item 5, Market for registrants common equity, related stockholder matters and issuer purchases of equity securities of this report for additional information.
In 2016, the Company retired 70 million treasury shares that were originally acquired at an average cost of approximately $53 per share.
At December 31, 2016, approximately 5 million shares of UALs common stock were reserved for future issuance related to the issuance of equity-based awards under the Companys incentive compensation plans.
As of December 31, 2016, UAL had two shares of junior preferred stock (par value $0.01 per share) outstanding. In addition, UAL is authorized to issue 250 million shares of preferred stock (without par value) under UALs amended and restated certificate of incorporation.
69
NOTE 4 - EARNINGS PER SHARE
The computations of UALs basic and diluted earnings per share are set forth below for the years ended December 31 (in millions, except per share amounts):
2016 | 2015 | 2014 | ||||||||||
Basic earnings per share: |
||||||||||||
Earnings available to common stockholders |
$ | 2,263 | $ | 7,340 | $ | 1,132 | ||||||
|
|
|
|
|
|
|||||||
Basic weighted-average shares outstanding |
329.9 | 376.1 | 371.1 | |||||||||
|
|
|
|
|
|
|||||||
Earnings per share, basic |
$ | 6.86 | $ | 19.52 | $ | 3.05 | ||||||
|
|
|
|
|
|
|||||||
Diluted earnings per share: |
||||||||||||
Earnings available to common stockholders |
$ | 2,263 | $ | 7,340 | $ | 1,132 | ||||||
Effect of dilutive securities |
| | 11 | |||||||||
|
|
|
|
|
|
|||||||
Earnings available to common stockholders including the effect of dilutive securities |
$ | 2,263 | $ | 7,340 | $ | 1,143 | ||||||
|
|
|
|
|
|
|||||||
Diluted shares outstanding: |
||||||||||||
Basic weighted-average shares outstanding |
329.9 | 376.1 | 371.1 | |||||||||
Effect of convertible notes |
| 0.3 | 17.7 | |||||||||
Effect of employee stock awards |
0.4 | 0.5 | 0.9 | |||||||||
|
|
|
|
|
|
|||||||
Diluted weighted-average shares outstanding |
330.3 | 376.9 | 389.7 | |||||||||
|
|
|
|
|
|
|||||||
Earnings per share, diluted |
$ | 6.85 | $ | 19.47 | $ | 2.93 | ||||||
|
|
|
|
|
|
The number of antidilutive securities excluded from the computation of diluted earnings per share amounts was not material.
NOTE 5 - SHARE-BASED COMPENSATION PLANS
UAL maintains several share-based compensation plans. These plans provide for grants of qualified and non-qualified stock options, stock appreciation rights, restricted stock awards, RSUs, performance compensation awards, performance units, cash incentive awards and other types of equity-based and equity-related awards.
All awards are recorded as either equity or a liability in the Companys consolidated balance sheets. The share-based compensation expense is directly recorded in salaries and related costs or integration-related expense.
During 2016, UAL granted share-based compensation awards pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan. These share-based compensation awards include approximately 1.9 million RSUs, 0.4 million shares of restricted stock and 0.4 million stock options. The time-vested RSUs and the restricted stock awards vest in one-third increments over the first three anniversaries of the date of grant. The time-vested RSUs are generally stock-settled for domestic employees and cash-settled for international employees based on the 20-day average closing price of UAL common stock immediately prior to the vesting date. The remainder of the RSUs are performance-based and vest based on the Companys return on invested capital and the Companys relative improvement in pre-tax margin for the three years ending December 31, 2018. If the applicable performance conditions are achieved, cash payments will be made after the end of the performance period based on the 20-day average closing price of UAL common stock immediately prior to the vesting date. The stock options vest in one-third increments over either (i) the first three anniversaries of the date of grant (for seven-year term options) or (ii) the fourth, fifth and sixth anniversaries of the date of grant (for ten-year term options).
70
The following table provides information related to UALs share-based compensation plan cost for the years ended December 31 (in millions):
2016 | 2015 | 2014 | ||||||||||
Compensation cost (a): |
||||||||||||
RSUs |
$ | 58 | $ | 52 | $ | 104 | ||||||
Restricted stock |
11 | 6 | 10 | |||||||||
Stock options |
1 | | | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 70 | $ | 58 | $ | 114 | ||||||
|
|
|
|
|
|
|
(a) All compensation cost is recorded to Salaries and related costs, with the exception of $3 million in 2014 that was recorded in integration-related costs as a component of special items.
The table below summarizes UALs unearned compensation and weighted-average remaining period to recognize costs for all outstanding share-based awards that are probable of being achieved as of December 31, 2016 (in millions, except as noted):
Unearned Compensation |
Weighted- Average Remaining Period (in years) |
|||||||
RSUs |
$ | 49 | 1.5 | |||||
Restricted stock |
11 | 1.5 | ||||||
Stock options |
5 | 3.2 | ||||||
|
|
|||||||
Total |
$ | 65 | ||||||
|
|
RSUs and Restricted Stock. All performance-based RSUs, as well as a portion of the time-vested RSUs, will be settled in cash. As of December 31, 2016, UAL had recorded a liability of $70 million related to its RSUs. UAL paid $69 million, $85 million and $86 million related to its RSUs during 2016, 2015 and 2014, respectively.
71
The table below summarizes UALs RSUs and restricted stock activity for the years ended December 31 (shares in millions):
RSUs | Restricted Stock | Weighted- Average Grant Price |
||||||||||
Non-vested at December 31, 2013 |
5.4 | 0.9 | $ | 25.02 | ||||||||
Granted |
0.9 | 0.3 | 43.33 | |||||||||
Vested |
(2.2) | (0.4) | 24.66 | |||||||||
Forfeited |
(0.3) | (0.1) | 28.88 | |||||||||
|
|
|
|
|||||||||
Non-vested at December 31, 2014 |
3.8 | 0.7 | 32.55 | |||||||||
Granted |
1.0 | 0.2 | 66.53 | |||||||||
Vested |
(1.6) | (0.4) | 31.14 | |||||||||
Forfeited |
(0.6) | (0.2) | 46.23 | |||||||||
|
|
|
|
|||||||||
Non-vested at December 31, 2015 |
2.6 | 0.3 | 48.68 | |||||||||
Granted |
1.9 | 0.4 | 50.63 | |||||||||
Vested |
(1.4) | (0.1) | 41.47 | |||||||||
Forfeited |
(0.2) | (0.1) | 53.42 | |||||||||
|
|
|
|
|||||||||
Non-vested at December 31, 2016 |
2.9 | 0.5 | 52.00 | |||||||||
|
|
|
|
The fair value of RSUs and restricted stock that vested in 2016, 2015 and 2014 was $80 million, $92 million and $97 million, respectively. The fair value of the restricted stock awards was based upon the UAL common stock price on the date of grant. These awards are accounted for as equity awards. The fair value of the RSUs was based on the UAL common stock price as of the last day preceding the settlement date. These awards were accounted for as either equity or liability awards based on their method of settlement. Restricted stock vesting and the recognition of the expense is similar to the stock option vesting described below.
Stock Options. During 2016, UAL granted 0.1 million stock options with exercise prices equal to the fair market value of UALs common stock on the date of grant and an additional 0.3 million stock options with exercise prices at a 25% premium of the grant date fair market value resulting in a weighted-average exercise price of $56.19 and a weighted-average grant date fair value of approximately $2.3 million. Prior to 2016, UAL had not granted any stock options since 2010. Expense related to each portion of an option grant is recognized on a straight-line basis over the specific vesting period for those options.
The Company determined the fair value of stock options at the grant date using a Black Scholes option pricing model, which requires the use of several assumptions. The risk-free interest rate is based on the U.S. treasury yield curve in effect for the expected term of the option at the time of grant. The dividend yield on UALs common stock was assumed to be zero since UAL did not have any plans to pay dividends at the time of the option grants. The volatility assumptions were based upon historical volatilities of UAL using daily stock price returns equivalent to the expected term of the option. The expected lives of the options were determined based upon a simplified assumption that the option will be exercised evenly from vesting to expiration due to the Companys lack of relevant historical data.
As of December 31, 2016, there were approximately 0.5 million outstanding stock option awards, 0.1 million of which were exercisable, with weighted-average exercise prices of $46.83 and $18.58, respectively, intrinsic values of $14 million and $7 million, respectively, and weighted-average remaining contractual lives (in years) of 6.3 and 1.6, respectively.
72
NOTE 6 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The tables below present the components of the Companys accumulated other comprehensive income (loss) (AOCI), net of tax (in millions):
Deferred Taxes | ||||||||||||||||||||||||
Pension and Other Postretirement Liabilities |
Fuel Derivatives Contracts |
Investments and Other |
Pension and Other Postretirement Liabilities |
Fuel Derivative Contracts |
Total | |||||||||||||||||||
Balance at December 31, 2013 |
$ | 699 | $ | 11 | $ | 13 | $ | (115) | $ | | (c) | $ | 608 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive loss before reclassifications (a) |
(1,106) | (b) | (599) | | | | (1,705) | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (a) |
(65) | 89 | (6) | | | 18 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net current-period other comprehensive income (loss) |
(1,171) | (510) | (6) | | | (1,687) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2014 |
$ | (472) | $ | (499) | $ | 7 | $ | (115) | $ | | (c) | $ | (1,079) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income (loss) before reclassifications |
78 | (b) | (320) | (4) | (28) | 115 | (159) | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive income |
31 | 604 | | (11) | (217) | 407 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net current-period other comprehensive income (loss) |
109 | 284 | (4) | (39) | (102) | 248 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2015 |
$ | (363) | $ | (215) | $ | 3 | $ | (154) | $ | (102) | $ | (831) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income (loss) before reclassifications |
(517) | (b) | (4) | | 186 | 1 | (334) | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive income |
26 | 217 | (1) | (8) | 102 | 336 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net current-period other comprehensive income (loss) |
(491) | 213 | (1) | 178 | 103 | 2 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2016 |
$ | (854) | $ | (2) | $ | 2 | $ | 24 | $ | 1 | $ | (829) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Details about AOCI Components |
Amount Reclassified from AOCI to Income |
Affected Line Item in the Statement Where Net Income is Presented |
||||||||||||||
Year Ended December 31, | ||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||
Fuel derivative contracts |
||||||||||||||||
Fuel contracts-reclassifications of losses into earnings |
$ | 217 | $ | 604 | $ | 89 | Aircraft fuel | |||||||||
Pension and Postretirement liabilities |
||||||||||||||||
Amortization of unrecognized (gains) losses and prior service cost and the effect of curtailments and settlements (d) |
26 | 31 | (65) | Salaries and related costs | ||||||||||||
Investments and other |
||||||||||||||||
Available-for-sale securitiesreclassifications of gains into earnings |
(1) | | (6) | Miscellaneous, net |
(a) Income tax expense for these items was offset by the Companys valuation allowance.
(b) Prior service credits increased by $30 million, $0 million and $3 million and actuarial gains (losses) increased (decreased) by approximately $560 million, $78 million and $(1.1) billion for 2016, 2015 and 2014, respectively.
(c) Deferred tax balance was offset by the Companys valuation allowance.
(d) This AOCI component is included in the computation of net periodic pension and other postretirement costs (see Note 8 of this report for additional information).
Prior to the release of the deferred income tax valuation allowance in the third quarter of 2015, the Company recorded approximately $465 million of valuation allowance adjustments in AOCI. Subsequent to the release of
73
the deferred income tax valuation allowance in 2015, the $465 million debit remained within AOCI, of which $180 million related to losses on fuel hedges designated for hedge accounting and $285 million related to pension and other postretirement liabilities. Accounting rules required the adjustments to remain in AOCI as long as the Company had fuel derivatives designated for cash flow hedge accounting and the Company continues to provide pension and postretirement benefits. In 2016, we settled all of our fuel hedges and have not entered into any new fuel derivative contracts for hedge accounting. Accordingly, the Company reclassified the $180 million to income tax expense in 2016.
NOTE 7 - INCOME TAXES
The significant components of the income tax expense (benefit) are as follows (in millions):
2016 |
UAL | United | ||||||
Current |
$ | (92) | $ | (92) | ||||
Deferred |
1,648 | 1,650 | ||||||
|
|
|
|
|||||
$ | 1,556 | $ | 1,558 | |||||
|
|
|
|
|||||
2015 |
||||||||
Current |
$ | 56 | $ | 56 | ||||
Deferred |
(3,177) | (3,136) | ||||||
|
|
|
|
|||||
$ | (3,121) | $ | (3,080) | |||||
|
|
|
|
|||||
2014 |
||||||||
Current |
$ | (17) | $ | (17) | ||||
Deferred |
13 | 13 | ||||||
|
|
|
|
|||||
$ | (4) | $ | (4) | |||||
|
|
|
|
74
The income tax provision differed from amounts computed at the statutory federal income tax rate, as follows (in millions):
UAL |
2016 | 2015 | 2014 | |||||||||
Income tax provision at statutory rate |
$ | 1,337 | $ | 1,477 | $ | 395 | ||||||
State income taxes, net of federal income tax |
38 | 38 | 10 | |||||||||
Foreign income taxes |
3 | 4 | 2 | |||||||||
Nondeductible employee meals |
16 | 15 | 15 | |||||||||
Income tax adjustment |
180 | | | |||||||||
State rate change |
(12) | | | |||||||||
Valuation allowance |
20 | (4,662) | (435) | |||||||||
Other, net |
(26) | 7 | 9 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,556 | $ | (3,121) | $ | (4) | |||||||
|
|
|
|
|
|
|||||||
United |
2016 | 2015 | 2014 | |||||||||
Income tax provision at statutory rate |
$ | 1,338 | $ | 1,477 | $ | 388 | ||||||
State income taxes, net of federal income tax |
38 | 38 | 10 | |||||||||
Foreign income taxes |
3 | 4 | 2 | |||||||||
Nondeductible employee meals |
16 | 15 | 15 | |||||||||
Derivative market adjustment |
| | (7) | |||||||||
Income tax adjustment |
180 | | | |||||||||
State rate change |
(12) | | | |||||||||
Valuation allowance |
20 | (4,621) | (421) | |||||||||
Other, net |
(25) | 7 | 9 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,558 | $ | (3,080) | $ | (4) | |||||||
|
|
|
|
|
|
The Companys effective tax rate for the year ended December 31, 2016 differed from the federal statutory rate of 35% primarily because of the non-cash income tax expense of $180 million that was related to losses on fuel derivatives designated for hedge accounting. Subsequent to the release of the valuation allowance in 2015, this deferred income tax expense of $180 million remained in AOCI until all fuel derivatives were settled in December 2016. The change in the effective tax rate each period is impacted by a number of factors, including the relative mix of domestic and state income tax expense in the U.S., adjustments to the valuation allowances and discrete items.
75
Temporary differences and carryforwards that give rise to deferred tax assets and liabilities at December 31, 2016 and 2015 were as follows (in millions):
UAL | United | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Deferred income tax asset (liability): |
||||||||||||||||
Federal and state net operating loss (NOL) carryforwards |
$ | 1,613 | $ | 2,897 | $ | 1,571 | $ | 2,855 | ||||||||
Deferred revenue |
2,096 | 2,160 | 2,096 | 2,160 | ||||||||||||
Employee benefits, including pension, postretirement and medical |
1,662 | 1,662 | 1,662 | 1,662 | ||||||||||||
Alternative minimum tax (AMT) credit carryforwards |
116 | 232 | 116 | 232 | ||||||||||||
Other |
523 | 566 | 522 | 566 | ||||||||||||
Less: Valuation allowance |
(68) | (48) | (68) | (48) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total deferred tax assets |
$ | 5,942 | $ | 7,469 | $ | 5,899 | $ | 7,427 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Depreciation |
$ | (3,961) | $ | (3,921) | $ | (3,961) | $ | (3,921) | ||||||||
Intangibles |
(1,326) | (1,511) | (1,326) | (1,511) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total deferred tax liabilities |
$ | (5,287) | $ | (5,432) | $ | (5,287) | $ | (5,432) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net deferred tax asset |
$ | 655 | $ | 2,037 | $ | 612 | $ | 1,995 | ||||||||
|
|
|
|
|
|
|
|
United and its domestic consolidated subsidiaries file a consolidated federal income tax return with UAL. Under an intercompany tax allocation policy, United and its subsidiaries compute, record and pay UAL for their own tax liability as if they were separate companies filing separate returns. In determining their own tax liabilities, United and each of its subsidiaries take into account all tax credits or benefits generated and utilized as separate companies and they are each compensated for the aforementioned tax benefits only if they would be able to use those benefits on a separate company basis.
The Companys federal and state NOL carryforwards relate to prior years NOLs, which may be used to reduce tax liabilities in future years. These tax benefits are mostly attributable to federal pre-tax NOL carryforwards of $4.4 billion for UAL. If not utilized these federal pre-tax NOLs will expire as follows (in billions): $0.5 in 2026, $1.4 in 2027 and $2.5 after 2028. In addition, the majority of tax benefits of the state net operating losses of $56 million, net of a valuation allowance of $36 million, for UAL will expire over a five to 20-year period. Additionally, the Company has $108 million of AMT credit carryforwards, net of a valuation allowance of $8 million, which do not expire.
The Company periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets. The Company establishes valuation allowances if it is not likely it will realize its deferred income tax assets. In making this determination, the Company considers all available positive and negative evidence and makes certain assumptions. The Company considers, among other things, projected future taxable income, scheduled reversals of deferred tax liabilities, the overall business environment, the Companys historical financial results and tax planning strategies. In evaluating the likelihood of utilizing the Companys net deferred income tax assets, the significant factors that the Company considers include (1) the Companys recent history and forecasted profitability; (2) growth in the U.S. and global economies; and (3) future impact of taxable temporary differences. In 2015, the Company concluded that its deferred income tax assets were more likely than not to be realized and released almost all of its valuation allowance in 2015, resulting in a $3.1 billion benefit in its provision for income taxes. The valuation allowance recorded in AOCI in prior years was released through the income statement.
76
The Company has a valuation allowance of $68 million for certain state and local NOLs and credit carryforwards. The Company expects these NOLs and credits will expire unused due to limited carryforward periods. The ability to utilize these state NOLs and credits will be evaluated on a quarterly basis to determine if there are any significant events or any prudent and feasible tax planning strategies that would affect the Companys ability to realize these deferred tax assets.
The Companys unrecognized tax benefits related to uncertain tax positions were $74 million, $24 million and $9 million at 2016, 2015 and 2014, respectively. Included in the ending balance at 2016 is $20 million that would affect the Companys effective tax rate if recognized. The changes in unrecognized tax benefits relating to settlements with taxing authorities, unrecognized tax benefits as a result of tax positions taken during a prior period and unrecognized tax benefits relating from a lapse of the statute of limitations were immaterial during 2016, 2015 and 2014. The Company does not expect significant increases or decreases in their unrecognized tax benefits within the next 12 months.
There are no material amounts included in the balance at December 31, 2016 for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Companys federal income tax returns for tax years after 2002 remain subject to examination by the Internal Revenue Service (IRS) and state taxing jurisdictions. Currently, there are no ongoing examinations of the Companys prior year tax returns being conducted by the IRS.
NOTE 8 - PENSION AND OTHER POSTRETIREMENT PLANS
The following summarizes the significant pension and other postretirement plans of United:
Pension Plans
United maintains two primary defined benefit pension plans, one covering certain pilot employees and another covering certain U.S. non-pilot employees. Each of these plans provide benefits based on a combination of years of benefit accruals service and an employees final average compensation. Additional benefit accruals are frozen under the plan covering certain pilot employees and management and administrative employees. Benefit accruals for certain non-pilot employees continue. United maintains additional defined benefit pension plans, which cover certain international employees.
Other Postretirement Plans
United maintains postretirement medical programs which provide medical benefits to certain retirees and eligible dependents, as well as life insurance benefits to certain retirees participating in the plan. Benefits provided are subject to applicable contributions, co-payments, deductibles and other limits as described in the specific plan documentation.
Actuarial assumption changes are reflected as a component of the net actuarial gains/(losses) during 2016 and 2015. These amounts will be amortized over the average remaining service life of the covered active employees or the average life expectancy of inactive participants and will impact 2016 and 2015 pension and retiree medical expense as described below.
77
The following table sets forth the reconciliation of the beginning and ending balances of the benefit obligation and plan assets, the funded status and the amounts recognized in these financial statements for the defined benefit and other postretirement plans (in millions):
Pension Benefits | ||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
|||||||
Accumulated benefit obligation: |
$ | 4,158 | $ | 3,795 | ||||
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Change in projected benefit obligation: |
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Projected benefit obligation at beginning of year |
$ | 4,473 | $ | 4,803 | ||||
Service cost |
112 | 124 | ||||||
Interest cost |
200 | 200 | ||||||
Actuarial (gain) loss |
738 | (298) | ||||||
Gross benefits paid and settlements |
(243) | (343) | ||||||
Other |
(27) | (13) | ||||||
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|
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Projected benefit obligation at end of year |
$ | 5,253 | $ | 4,473 | ||||
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Change in plan assets: |
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Fair value of plan assets at beginning of year |
$ | 2,975 | $ | 2,562 | ||||
Actual gain (loss) on plan assets |
230 | (59) | ||||||
Employer contributions |
421 | 824 | ||||||
Gross benefits paid and settlements |
(243) | (343) | ||||||
Other |
(28) | (9) | ||||||
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Fair value of plan assets at end of year |
$ | 3,355 | $ | 2,975 | ||||
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Funded statusNet amount recognized |
$ | (1,898) | $ | (1,498) | ||||
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Pension Benefits | ||||||||
December 31, 2016 | December 31, 2015 | |||||||
Amounts recognized in the consolidated balance sheets consist of: |
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Noncurrent asset |
$ | 2 | $ | 2 | ||||
Current liability |
(8) | (12) | ||||||
Noncurrent liability |
(1,892) | (1,488) | ||||||
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Total liability |
$ | (1,898) | $ | (1,498) | ||||
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Amounts recognized in accumulated other comprehensive loss consist of: |
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Net actuarial loss |
$ | (1,482) | $ | (844) | ||||
Prior service loss |
(1) | (1) | ||||||
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Total accumulated other comprehensive loss |
$ | (1,483) | $ | (845) | ||||
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78
Other Postretirement Benefits | ||||||||
Year Ended December 31, 2016 |
Year Ended December 31, 2015 |
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Change in benefit obligation: |
||||||||
Benefit obligation at beginning of year |
$ | 2,002 | $ | 2,052 | ||||
Service cost |
19 | 21 | ||||||
Interest cost |
86 | 82 | ||||||
Plan participants contributions |
69 | 68 | ||||||
Benefits paid |
(191) | (205) | ||||||
Actuarial gain |
(165) | (22) | ||||||
Plan amendments |
(138) | | ||||||
Other |
5 | 6 | ||||||
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Benefit obligation at end of year |
$ | 1,687 | $ | 2,002 | ||||
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|||||
Change in plan assets: |
||||||||
Fair value of plan assets at beginning of year |
$ | 56 | $ | 57 | ||||
Actual return on plan assets |
2 | 1 | ||||||
Employer contributions |
119 | 135 | ||||||
Plan participants contributions |
69 | 68 | ||||||
Benefits paid |
(191) | (205) | ||||||
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|
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Fair value of plan assets at end of year |
55 | 56 | ||||||
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|
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Funded statusNet amount recognized |
$ | (1,632) | $ | (1,946) | ||||
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Other Postretirement Benefits | ||||||||
December 31, 2016 | December 31, 2015 | |||||||
Amounts recognized in the consolidated balance sheets consist of: |
||||||||
Current liability |
$ | (51) | $ | (64) | ||||
Noncurrent liability |
(1,581) | (1,882) | ||||||
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Total liability |
$ | (1,632) | $ | (1,946) | ||||
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Amounts recognized in accumulated other comprehensive income consist of: | ||||||||
Net actuarial gain |
$ | 384 | $ | 236 | ||||
Prior service credit |
245 | 246 | ||||||
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|
|||||
Total accumulated other comprehensive income |
$ | 629 | $ | 482 | ||||
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The following information relates to all pension plans with an accumulated benefit obligation and a projected benefit obligation in excess of plan assets at December 31 (in millions):
2016 | 2015 | |||||||
Projected benefit obligation |
$ | 5,025 | $ | 4,292 | ||||
Accumulated benefit obligation |
3,985 | 3,655 | ||||||
Fair value of plan assets |
3,164 | 2,794 |
79
Net periodic benefit cost for the years ended December 31 included the following components (in millions):
2016 | 2015 | 2014 | ||||||||||||||||||||||
Pension Benefits |
Other Postretirement Benefits |
Pension Benefits |
Other Postretirement Benefits |
Pension Benefits |
Other Postretirement Benefits |
|||||||||||||||||||
Service cost | $ | 112 | $ | 19 | $ | 124 | $ | 21 | $ | 98 | $ | 19 | ||||||||||||
Interest cost | 200 | 86 | 200 | 82 | 201 | 88 | ||||||||||||||||||
Expected return on plan assets | (216) | (2) | (194) | (2) | (180) | (2) | ||||||||||||||||||
Curtailment gain | | (107) | | | | | ||||||||||||||||||
Amortization of unrecognized actuarial (gain) loss | 76 | (19) | 85 | (22) | 12 | (47) | ||||||||||||||||||
Amortization of prior service credits | | (31) | | (32) | | (31) | ||||||||||||||||||
Other | 5 | | 4 | | 1 | | ||||||||||||||||||
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Net periodic benefit cost | $ | 177 | $ | (54) | $ | 219 | $ | 47 | $ | 132 | $ | 27 | ||||||||||||
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As part of the ratified contract with the Association of Flight Attendants (AFA) in 2016, the Company amended two of its flight attendant postretirement medical plans. The amendments triggered curtailment accounting, resulting in the recognition of a one-time $47 million gain for accelerated recognition of a prior service credit in one of the plans. Also, as part of the ratified contract with the International Brotherhood of Teamsters (the IBT) in 2016, the Company amended some of its technicians and related employees postretirement medical plans. The amendments triggered curtailment accounting, resulting in the recognition of a one-time $60 million gain for accelerated recognition of a prior service credit in one of the plans.
The estimated amounts that will be amortized in 2017 out of accumulated other comprehensive income (loss) into net periodic benefit cost are as follows (in millions):
Pension Benefits |
Other Postretirement Benefits |
|||||||
Actuarial (gain) loss |
$ | 127 | $ | (36) | ||||
Prior service credit |
| (37) |
The assumptions used for the benefit plans were as follows:
|
Pension Benefits | |||||||
Assumptions used to determine benefit obligations |
2016 | 2015 | ||||||
Discount rate |
4.18% | 4.58% | ||||||
Rate of compensation increase |
3.54% | 3.66% | ||||||
Assumptions used to determine net expense |
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Discount rate |
4.58% | 4.20% | ||||||
Expected return on plan assets |
7.04% | 7.40% | ||||||
Rate of compensation increase |
3.53% | 3.51% |
80
|
Other Postretirement Benefits | |||||||
Assumptions used to determine benefit obligations |
2016 | 2015 | ||||||
Discount rate |
4.07% | 4.49% | ||||||
Assumptions used to determine net expense |
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Discount rate |
4.49% | 4.07% | ||||||
Expected return on plan assets |
3.00% | 3.00% | ||||||
Health care cost trend rate assumed for next year |
6.50% | 6.75% | ||||||
Rate to which the cost trend rate is assumed to decline (ultimate trend rate in 2023) |
5.00% | 5.00% |
The Company used the Society of Actuaries 2014 mortality tables, modified to reflect the Social Security Administration Trustees Report on current projections regarding expected longevity improvements.
The Company selected the 2016 discount rate for substantially all of its plans by using a hypothetical portfolio of high quality bonds at December 31, 2016, that would provide the necessary cash flows to match projected benefit payments.
We develop our expected long-term rate of return assumption for our defined benefit plans based on historical experience and by evaluating input from the trustee managing the plans assets. Our expected long-term rate of return on plan assets for these plans is based on a target allocation of assets, which is based on our goal of earning the highest rate of return while maintaining risk at acceptable levels. The plans strive to have assets sufficiently diversified so that adverse or unexpected results from one security class will not have an unduly detrimental impact on the entire portfolio. Plan fiduciaries regularly review our actual asset allocation and the pension plans investments are periodically rebalanced to our targeted allocation when considered appropriate. Uniteds plan assets are allocated within the following guidelines:
Percent of Total |
Expected Long-Term Rate of Return |
|||||||
Equity securities |
30-40 % | 9.5 % | ||||||
Fixed-income securities |
34-44 | 5.0 | ||||||
Alternatives |
14-27 | 7.3 | ||||||
Other |
0-10 | 7.0 |
One-hundred percent of other postretirement plan assets are invested in a deposit administration fund.
Assumed health care cost trend rates have a significant effect on the amounts reported for the other postretirement plans. A 1% change in the assumed health care trend rate for the Company would have the following additional effects (in millions):
1% Increase | 1% Decrease | |||||||
Effect on total service and interest cost for the year ended December 31, 2016 |
$ | 13 | $ | (11) | ||||
Effect on postretirement benefit obligation at December 31, 2016 |
169 | (149) |
A one percentage point decrease in the weighted average discount rate would increase the postretirement benefit liability by approximately $181 million and increase the estimated 2016 benefits expense by approximately $11 million.
81
Fair Value Information. Accounting standards require us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:
Level 1 |
Unadjusted quoted prices in active markets for assets or liabilities identical to those to be reported at fair value | |
Level 2 |
Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs | |
Level 3 |
Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants would price the assets or liabilities |
Assets and liabilities measured at fair value are based on the valuation techniques identified in the tables below. The valuation techniques are as follows:
(a) Market approach. Prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities; and
(b) Income approach. Techniques to convert future amounts to a single current value based on market expectations (including present value techniques, option-pricing and excess earnings models).
The following tables present information about Uniteds pension and other postretirement plan assets at December 31 (in millions):
2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||
Pension Plan Assets: | Total | Level 1 | Level 2 | Level 3 | Assets Measured at NAV(a) |
Total | Level 1 | Level 2 | Level 3 | Assets Measured at NAV(a) |
||||||||||||||||||||||||||||||||||
Equity securities funds |
$ | 1,173 | $ | 230 | $ | 111 | $ | | $ | 832 | $ | 1,135 | $ | 254 | $ | 135 | $ | | $ | 746 | ||||||||||||||||||||||||
Fixed-income securities |
1,298 | | 824 | 11 | 463 | 1,109 | | 877 | 9 | 223 | ||||||||||||||||||||||||||||||||||
Alternatives |
586 | | | 134 | 452 | 527 | | 1 | 125 | 401 | ||||||||||||||||||||||||||||||||||
Other investments |
298 | 47 | 68 | 87 | 96 | 204 | 37 | 56 | 18 | 93 | ||||||||||||||||||||||||||||||||||
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Total |
$ | 3,355 | $ | 277 | $ | 1,003 | $ | 232 | $ | 1,843 | $ | 2,975 | $ | 291 | $ | 1,069 | $ | 152 | $ | 1,463 | ||||||||||||||||||||||||
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Other Postretirement Benefit Plan Assets: |
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Deposit administration fund | $ | 55 | $ | | $ | | $ | 55 | $ | | $ | 56 | $ | | $ | | $ | 56 | $ | | ||||||||||||||||||||||||
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(a) In accordance with the relevant accounting standards, certain investments that are measured at fair value using the NAV per share (or its equivalent) have not been classified in the fair value hierarchy. These investments are commingled funds that invest in fixed-income instruments including bonds, debt securities, and other similar instruments issued by various U.S. and non-U.S. public- or private-sector entities. Redemption periods for these investments range from daily to annually.
Equity and Fixed-Income. Equities include investments in both developed market and emerging market equity securities. Fixed-income includes primarily U.S. and non-U.S. government fixed-income securities and U.S. and non-U.S corporate fixed-income securities.
Deposit Administration Fund. This investment is a stable value investment product structured to provide investment income.
Alternatives. Alternative investments consist primarily of investments in hedge funds, real estate and private equity interests.
Other investments. Other investments consist of cash, insurance contracts and other funds.
82
The reconciliation of Uniteds defined benefit plan assets measured at fair value using unobservable inputs (Level 3) for the years ended December 31, 2016 and 2015 is as follows (in millions):
2016 | 2015 | |||||||
Balance at beginning of year |
$ | 208 | $ | 188 | ||||
Actual return on plan assets: |
||||||||
Sold during the year |
4 | 8 | ||||||
Held at year end |
3 | (1) | ||||||
Purchases, sales, issuances and settlements (net) |
72 | 13 | ||||||
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Balance at end of year |
$ | 287 | $ | 208 | ||||
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Funding requirements for tax-qualified defined benefit pension plans are determined by government regulations. Uniteds contributions reflected above have satisfied its required contributions through the 2016 calendar year. In 2017, employer anticipated contributions to all of Uniteds pension and postretirement plans are at least $400 million and approximately $108 million, respectively.
The estimated future benefit payments, net of expected participant contributions, in Uniteds pension plans and other postretirement benefit plans as of December 31, 2016 are as follows (in millions):
Pension | Other Postretirement |
Other Postretirement subsidy receipts |
||||||||||
2017 |
$ | 303 | $ | 112 | $ | 6 | ||||||
2018 |
300 | 117 | 6 | |||||||||
2019 |
310 | 122 | 7 | |||||||||
2020 |
319 | 126 | 7 | |||||||||
2021 |
337 | 130 | 8 | |||||||||
Years 2022 2026 |
1,782 | 682 | 44 |
Defined Contribution Plans
Depending upon the employee group, employer contributions consist of matching contributions and/or non-elective employer contributions. Uniteds employer contribution percentages vary from 1% to 16% of eligible earnings depending on the terms of each plan. United recorded contributions to its defined contribution plans of $592 million, $522 million and $503 million in the years ended December 31, 2016, 2015 and 2014, respectively.
83
Multi-Employer Plans
Uniteds participation in the IAM National Pension Plan (IAM Plan) for the annual period ended December 31, 2016 is outlined in the table below. There have been no significant changes that affect the comparability 2016 and 2015 contributions. The risks of participating in these multi-employer plans are different from single-employer plans, as United may be subject to additional risks that others do not meet their obligations, which in certain circumstances could revert to United. The IAM Plan reported $395 million in employers contributions for the year ended December 31, 2015. For 2015, the Companys contributions to the IAM Plan represented more than 5% of total contributions to the IAM Plan.
Pension Fund |
IAM National Pension Fund | |
EIN/ Pension Plan Number |
51-6031295 - 002 | |
Pension Protection Act Zone Status (2016 and 2015) |
Green Zone. Plans in the green zone are at least 80 percent funded. | |
FIP/RP Status Pending/Implemented |
No | |
Uniteds Contributions |
$41 million, $40 million and $39 million in the years ended December 31, 2016, 2015 and 2014, respectively | |
Surcharge Imposed |
No | |
Expiration Date of Collective Bargaining Agreement |
N/A |
At the date the financial statements were issued, Forms 5500 were not available for the plan year ending in 2016.
Profit Sharing
Substantially all employees participate in profit sharing based on a percentage of pre-tax earnings, excluding special items, profit sharing expense and share-based compensation. Profit sharing percentages range from 5% to 20% depending on the work group, and in some cases profit sharing percentages vary above and below certain pre-tax margin thresholds. Eligible U.S. co-workers in each participating work group receive a profit sharing payout using a formula based on the ratio of each qualified co-workers annual eligible earnings to the eligible earnings of all qualified co-workers in all domestic work groups. Eligible non-U.S. co-workers receive profit sharing based on the calculation under the U.S. profit sharing plan for management and administrative employees. The Company recorded profit sharing and related payroll tax expense of $628 million, $698 million and $235 million in 2016, 2015 and 2014, respectively. Profit sharing expense is recorded as a component of Salaries and related costs in the Companys statements of consolidated operations.
84
NOTE 9 - FAIR VALUE MEASUREMENTS
Fair Value Information. Accounting standards require us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are described in Note 8 of this report. The table below presents disclosures about the fair value of financial assets and liabilities measured at fair value on a recurring basis in the Companys financial statements as of December 31 (in millions):
2016 | 2015 | |||||||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
UAL | ||||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 2,179 | $ | 2,179 | $ | | $ | | $ | 3,006 | $ | 3,006 | $ | | $ | | ||||||||||||||||
Short-term investments: |
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Corporate debt |
835 | | 835 | | 891 | | 891 | | ||||||||||||||||||||||||
Asset-backed securities |
792 | | 792 | | 710 | | 710 | | ||||||||||||||||||||||||
Certificates of deposit placed through an account registry service (CDARS) |
246 | | 246 | | 281 | | 281 | | ||||||||||||||||||||||||
U.S. government and agency notes |
140 | | 140 | | 72 | | 72 | | ||||||||||||||||||||||||
Auction rate securities |
| | | | 9 | | | 9 | ||||||||||||||||||||||||
Other fixed-income securities |
54 | | 54 | | 26 | | 26 | | ||||||||||||||||||||||||
Other investments measured at NAV (a) |
182 | | | | 201 | | | | ||||||||||||||||||||||||
Restricted cash |
124 | 124 | | | 206 | 206 | | | ||||||||||||||||||||||||
Enhanced equipment trust certificates (EETC) |
23 | | | 23 | 26 | | | 26 | ||||||||||||||||||||||||
Fuel derivatives liability, net |
| | | | 124 | | 124 | |
(a) In accordance with the relevant accounting standards, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position. The investments measured using NAV are shares of mutual funds that invest in fixed-income instruments including bonds, debt securities, and other similar instruments issued by various U.S. and non-U.S. public- or private-sector entities. The Company can redeem its shares at any time at NAV subject to a three-day settlement period.
Available-for-sale investment maturitiesThe short-term investments shown in the table above are classified as available-for-sale. As of December 31, 2016, asset-backed securities have remaining maturities of less than one year to approximately 30 years, corporate debt securities have remaining maturities of less than one year to approximately five years and CDARS have maturities of less than one year. U.S. government and other securities have maturities of less than one year to approximately three years. The EETC securities mature in 2019.
Derivative instruments and investments presented in the table above have the same fair value as their carrying value. The table below presents the carrying values and estimated fair values of financial instruments not presented in the tables above as of December 31 (in millions):
Fair Value of Debt by Fair Value Hierarchy Level | ||||||||||||||||||||||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||||||||||||||||||||||
Carrying Amount |
Fair Value | Carrying Amount |
Fair Value | |||||||||||||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||
Long-term debt |
$ | 10,767 | $ | 11,055 | $ | | $ | 8,184 | $ | 2,871 | $ | 10,897 | $ | 11,371 | $ | | $ | 8,646 | $ | 2,725 |
85
Fair value of the financial instruments included in the tables above was determined as follows:
Description |
Fair Value Methodology | |
Cash and cash equivalents | The carrying amounts approximate fair value because of the short-term maturity of these assets. | |
Short-term investments and Restricted cash | Fair value is based on (a) the trading prices of the investment or similar instruments, (b) an income approach, which uses valuation techniques to convert future amounts into a single present amount based on current market expectations about those future amounts when observable trading prices are not available, (c) internally-developed models of the expected future cash flows related to the securities, or (d) broker quotes obtained by third-party valuation services. | |
Fuel derivatives |
Derivative contracts are privately negotiated contracts and are not exchange traded. Fair value measurements are estimated with option pricing models that employ observable inputs. Inputs to the valuation models include contractual terms, market prices, yield curves, fuel price curves and measures of volatility, among others. | |
Debt | Fair values were based on either market prices or the discounted amount of future cash flows using our current incremental rate of borrowing for similar liabilities. |
NOTE 10HEDGING ACTIVITIES
Fuel Derivatives
As of December 31, 2016, the Company did not have any fuel hedging contracts outstanding to hedge its fuel consumption. The last of the Companys fuel hedge derivatives designated for cash flow hedge accounting expired in December 2016. The Companys current strategy is to not enter into transactions to hedge its fuel consumption, although the Company regularly reviews its strategy based on market conditions and other factors.
The Company records each derivative instrument as a derivative asset or liability (on a gross basis) in its consolidated balance sheets, and, accordingly, records any related collateral on a gross basis. The table below presents the fair value amounts of fuel derivative assets and liabilities and the location of amounts recognized in the Companys financial statements.
At December 31, the Companys derivatives were reported in its consolidated balance sheets as follows (in millions):
Classification |
Balance Sheet Location |
2016 | 2015 | |||||||
Derivatives designated as cash flow hedges |
||||||||||
Liabilities: |
||||||||||
Fuel contracts due within one year |
Fuel derivative instruments | $ | | $ | 119 | |||||
Derivatives not designated for hedge accounting |
||||||||||
Liabilities: |
||||||||||
Fuel contracts due within one year |
Fuel derivative instruments | $ | | $ | 5 | |||||
Total derivatives |
||||||||||
|
|
|
|
|||||||
Total liabilities |
$ | | $ | 124 | ||||||
|
|
|
|
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The following tables present the fuel hedge gains (losses) recognized during the periods presented and their classification in the financial statements (in millions):
Derivatives designated as cash flow hedges
Amount of
Loss Recognized in AOCI on Derivatives (Effective Portion) |
Loss Reclassified from AOCI into Income (Fuel Expense) (Effective Portion) |
Amount of Loss Recognized in Nonoperating income (expense): Miscellaneous, net (Ineffective Portion) |
||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
Fuel contracts |
$ | (4) | $ | (320) | $ | (217) | $ | (604) | $ | | $ | |
Derivatives not designated for hedge accounting
Amount of Loss Recognized in Nonoperating income (expense): Miscellaneous, net |
||||||||||||||
2016 | 2015 | 2014 | ||||||||||||
Fuel contracts |
$ | | $ | (80 | ) | $ | (462) |
Foreign Currency Derivatives
As of December 31, 2016, the Company did not have any foreign currency contracts outstanding to hedge its foreign currency sales. The last of the Companys foreign currency derivatives designated for cash flow hedge accounting expired in December 2016. The Companys current strategy is to not enter into transactions to hedge its foreign currency sales, although the Company regularly reviews its strategy based on market conditions and other factors.
NOTE 11 - DEBT
(In millions) |
At December 31, | |||||||
2016 | 2015 | |||||||
Secured |
||||||||
Notes payable, fixed interest rates of 1.42% to 9.75% (weighted average rate of 4.85% as of December 31, 2016), payable through 2028 | $ | 7,586 | $ | 7,971 | ||||
Notes payable, floating interest rates of the London Interbank Offered Rate (LIBOR) plus 0.20% to 2.85%, payable through 2028 | 1,546 | 1,302 | ||||||
Term loan, LIBOR subject to a 0.75% floor, plus 2.50%, or alternative rate based on certain market rates plus 1.50%, due 2019 | 866 | 875 | ||||||
Term loan, LIBOR subject to a 0.75% floor, plus 2.75%, or alternative rate based on certain market rates plus 1.75%, due 2021 | 192 | 194 | ||||||
Unsecured | ||||||||
6% Senior Notes due 2020 (a) | 300 | 300 | ||||||
6.375% Senior Notes due 2018 (a) | 300 | 300 | ||||||
Other | 101 | 100 | ||||||
|
|
|
|
|||||
10,891 | 11,042 | |||||||
|
|
|
|
|||||
Less: unamortized debt discount, premiums and debt issuance costs |
(124) | (145) | ||||||
Less: current portion of long-term debt |
(849) | (1,224) | ||||||
|
|
|
|
|||||
Long-term debt, net | $ | 9,918 | $ | 9,673 | ||||
|
|
|
|
(a) UAL is the issuer of this debt. United is a guarantor.
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The table below presents the Companys contractual principal payments at December 31, 2016 under then-outstanding long-term debt agreements in each of the next five calendar years (in millions):
2017 |
$ | 849 | ||
2018 |
1,427 | |||
2019 |
1,852 | |||
2020 |
1,007 | |||
2021 |
1,174 | |||
After 2021 |
4,582 | |||
|
|
|||
$ | 10,891 | |||
|
|
As of December 31, 2016, a substantial portion of the Companys assets, principally aircraft, route authorities, airport slots and loyalty program intangible assets, was pledged under various loan and other agreements. As of December 31, 2016, UAL and United were in compliance with their respective debt covenants. Continued compliance depends on many factors, some of which are beyond the Companys control, including the overall industry revenue environment and the level of fuel costs.
Secured debt
2013 Credit and Guaranty Agreement. United and UAL are parties to a Credit and Guaranty Agreement (the Credit Agreement) as the borrower and guarantor, respectively. The Credit Agreement consists of a $900 million term loan due April 2019 (of which $866 million was outstanding as of December 31, 2016) (the Term Loan due 2019), a $500 million term loan due September 2021 (of which $192 million was outstanding as of December 31, 2016) (the Term Loan due 2021) and a $1.35 billion revolving credit facility, with $1.35 billion being available for drawing until April 2018 and $1.315 billion being available for drawing until January 2019.
Borrowings under the revolving credit facility of the Credit Agreement bear interest at a variable rate equal to LIBOR plus a margin of 3.0% per annum, or another rate based on certain market interest rates, plus a margin of 2.0% per annum. The principal amount of the term loans must be repaid in consecutive quarterly installments of 0.25% of the original principal amount thereof, with any unpaid balance due, in the case of the Term Loan due 2019, on April 1, 2019 and, in the case of the Term Loan due 2021, on September 15, 2021. United may prepay all or a portion of the term loans from time to time, at par plus accrued and unpaid interest. United pays a commitment fee equal to 0.75% per-annum on the undrawn amount available under the revolving credit facility.
The Term Loan due 2021 ranks pari passu with the Term Loan due 2019 that United originally borrowed under the Credit Agreement. The Credit Agreement requires United to repay the term loans and any other outstanding borrowings under the Credit Agreement at par plus accrued and unpaid interest if certain changes of control of UAL occur.
As of December 31, 2016, United had its entire capacity of $1.35 billion available under the revolving credit facility of the Companys Credit Agreement.
As of December 31, 2016, United had cash collateralized $72 million of letters of credit. United also had $383 million of surety bonds securing various obligations at December 31, 2016. Most of the letters of credit have evergreen clauses and are expected to be renewed on an annual basis and the surety bonds have expiration dates through 2021.
EETCs. United has $7.5 billion principal amount of equipment notes outstanding issued under EETC financings included in notes payable in the table of outstanding debt above. Generally, the structure of these EETC financings consists of pass-through trusts created by United to issue pass-through certificates, which represent fractional undivided interests in the respective pass-through trusts and are not obligations of United. The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes which are issued
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by United and secured by its aircraft. The payment obligations under the equipment notes are those of United. Proceeds received from the sale of pass-through certificates are initially held by a depositary in escrow for the benefit of the certificate holders until United issues equipment notes to the trust, which purchases such notes with a portion of the escrowed funds. These escrowed funds are not guaranteed by United and are not reported as debt on Uniteds consolidated balance sheet because the proceeds held by the depositary are not Uniteds assets.
In September 2016 and June 2016, United created separate EETC pass-through trusts, each of which issued pass-through certificates. The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes issued by United and secured by its aircraft. The Company records the debt obligation upon issuance of the equipment notes rather than upon the initial issuance of the pass-through certificates. United expects to receive all proceeds from the September 2016 and June 2016 pass-through trusts by the end of the second quarter of 2017. Certain details of the pass-through trusts with proceeds received from issuance of debt in 2016 are as follows (in millions, except stated interest rate):
EETC Date |
Class | Principal | Final expected distribution date |
Stated interest rate |
Total
debt recorded as of December 31, 2016 |
Proceeds received from issuance of debt during 2016 |
Remaining proceeds from issuance of debt to be received in future periods |
|||||||||||||||||
September 2016 |
AA | $ | 637 | October 2028 | 2.875% | $ | 80 | $ | 80 | $ | 557 | |||||||||||||
September 2016 |
A | 283 | October 2028 | 3.10% | 36 | 36 | 247 | |||||||||||||||||
June 2016 |
AA | 729 | July 2028 | 3.10% | 410 | 410 | 319 | |||||||||||||||||
June 2016 |
A | 324 | July 2028 | 3.45% | 182 | 182 | 142 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
$ | 1,973 | $ | 708 | $ | 708 | $ | 1,265 | |||||||||||||||||
|
|
|
|
|
|
|
|
In 2016, United borrowed approximately $369 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2016. The notes evidencing these borrowings, which are secured by the related aircraft, have maturity dates ranging from 2026 to 2028 and have interest rates comprised of the LIBOR plus a specified margin.
Unsecured debt
5% Senior Notes due 2024. In January 2017, United issued $300 million aggregate principal amount of 5% Senior Notes due February 1, 2024 (the 5% Senior Notes due 2024). These notes are fully and unconditionally guaranteed and recorded by United on its balance sheet as debt. The indenture for the 5% Senior Notes due 2024 requires UAL to offer to repurchase the notes for cash if certain changes of control of UAL occur at a purchase price equal to 101% of the principal amount of notes repurchased plus accrued and unpaid interest.
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The collateral, covenants and cross default provisions of the Companys principal debt instruments that contain such provisions are summarized in the table below:
Debt Instrument | Collateral, Covenants and Cross Default Provisions | |
Various equipment notes and other notes payable |
Secured by certain aircraft. The indentures contain events of default that are customary for aircraft financing, including in certain cases cross default to other related aircraft. | |
Credit Agreement |
Secured by certain of Uniteds international route authorities, specified take-off and landing slots at certain airports and certain other assets.
The Credit Agreement requires the Company to maintain at least $3.0 billion of unrestricted liquidity at all times, which includes unrestricted cash, short-term investments and any undrawn amounts under any revolving credit facility, and to maintain a minimum ratio of appraised value of collateral to the outstanding obligations under the Credit Agreement of 1.67 to 1.0 at all times. The Credit Agreement contains covenants that, among other things, restrict the ability of UAL and its restricted subsidiaries (as defined in the Credit Agreement) to incur additional indebtedness and to pay dividends on or repurchase stock, although the Company currently has ample ability under these restrictions to repurchase stock under the Companys share repurchase program.
The Credit Agreement contains events of default customary for this type of financing, including a cross default and cross acceleration provision to certain other material indebtedness of the Company. | |
6.375% Senior Notes due 2018
6% Senior Notes due 2020
5% Senior Notes due 2024 |
The indentures for these notes contain covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries (as defined in the indenture) to incur additional indebtedness and pay dividends on or repurchase stock, although the Company currently has ample ability under these restrictions to repurchase stock under the Companys share repurchase program. |
NOTE 12 - ADVANCED PURCHASE OF MILES
United previously sold MileagePlus miles to Chase which United recorded as Advanced purchase of miles. The remaining balance of pre-purchased miles is eligible to be allocated by Chase to MileagePlus members accounts in 2017. The Company has recorded these amounts as Advanced purchase of miles in the liabilities section of the Companys consolidated balance sheets. The Co-Brand Agreement contains termination penalties that may require United to make certain payments and repurchase outstanding pre-purchased miles in cases such as Uniteds insolvency, bankruptcy or other material breaches.
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NOTE 13 - LEASES AND CAPACITY PURCHASE AGREEMENTS
United leases aircraft, airport passenger terminal space, aircraft hangars and related maintenance facilities, cargo terminals, other airport facilities, other commercial real estate, office and computer equipment and vehicles.
At December 31, 2016, Uniteds scheduled future minimum lease payments under operating leases having initial or remaining noncancelable lease terms of more than one year, aircraft leases, including aircraft rent under CPAs and capital leases (substantially all of which are for aircraft) were as follows (in millions):
Capital Leases | Facility and Other Operating Leases |
Aircraft Operating Leases |
||||||||||
2017 |
$ | 183 | $ | 1,256 | $ | 1,271 | ||||||
2018 |
170 | 1,106 | 1,074 | |||||||||
2019 |
105 | 991 | 894 | |||||||||
2020 |
85 | 1,104 | 669 | |||||||||
2021 |
84 | 888 | 551 | |||||||||
After 2021 |
915 | 6,702 | 2,049 | |||||||||
|
|
|
|
|
|
|||||||
Minimum lease payments |
$ | 1,542 | $ | 12,047 | $ | 6,508 | ||||||
|
|
|
|
|||||||||
Imputed interest |
(604) | |||||||||||
|
|
|||||||||||
Present value of minimum lease payments |
938 | |||||||||||
Current portion |
(116) | |||||||||||
|
|
|||||||||||
Long-term obligations under capital leases |
$ | 822 | ||||||||||
|
|
As of December 31, 2016, Uniteds aircraft capital lease minimum payments relate to leases of 38 mainline and 29 regional aircraft as well as to leases of nonaircraft assets. Imputed interest rate ranges are 3.5% to 20.8%.
Aircraft operating leases have initial terms of five to 26 years, with expiration dates ranging from 2017 through 2028. Under the terms of most leases, United has the right to purchase the aircraft at the end of the lease term, in some cases at fair market value, and in others, at fair market value or a percentage of cost. United has facility operating leases that extend to 2041.
During 2015, the Company reached an agreement with AerCap Holdings N.V., a major aircraft leasing company, to lease used Airbus S.A.S (Airbus) A319s. Five such aircraft are expected to be delivered in 2017. In addition, up to 14 more aircraft may be delivered over the next four years subject to certain conditions.
United is the lessee of real property under long-term operating leases at a number of airports where we are also the guarantor of approximately $1.4 billion of underlying debt and interest thereon as of December 31, 2016. These leases are typically with municipalities or other governmental entities, which are excluded from the consolidation requirements concerning a variable interest entity (VIE). To the extent Uniteds leases and related guarantees are with a separate legal entity other than a governmental entity, United is not the primary beneficiary because the lease terms are consistent with market terms at the inception of the lease and the lease does not include a residual value guarantee, fixed-price purchase option, or similar feature.
In 2016, United signed a seven year lease extension through 2024 with the Metropolitan Washington Airports Authority to continue its use of terminals at Washington Dulles International Airport.
Uniteds nonaircraft rent expense was approximately $1.2 billion, $1.3 billion and $1.4 billion for the years ended December 31, 2016, 2015 and 2014, respectively.
In addition to nonaircraft rent and aircraft rent, which is separately presented in the consolidated statements of operations, United had aircraft rent related to regional aircraft operating leases, which is included as part of Regional capacity purchase expense in Uniteds consolidated statement of operations, of $439 million, $461 million and $442 million for the years ended December 31, 2016, 2015 and 2014, respectively.
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In connection with UAL Corporations and United Air Lines, Inc.s fresh-start reporting requirements upon their exit from Chapter 11 bankruptcy protection in 2006 and the Companys acquisition accounting adjustments related to the Companys merger transaction in 2010, lease valuation adjustments for operating leases were initially recorded in the consolidated balance sheet, representing the net present value of the differences between contractual lease rates and the fair market lease rates for similar leased assets at the time. An asset (liability) results when the contractual lease rates are more (less) favorable than market lease terms at the valuation date. The lease valuation adjustment is amortized on a straight-line basis as an increase (decrease) to rent expense over the individual applicable remaining lease terms, resulting in recognition of rent expense as if United had entered into the leases at market rates. The related remaining lease terms, primarily related to aircraft which make up the majority of the fair value lease adjustment balance, are one to eight years for United. The lease valuation adjustments are classified within other noncurrent liabilities and the net accretion amounts are $82 million, $107 million and $160 million for the years ended December 31, 2016, 2015 and 2014, respectively.
Regional CPAs
United has CPAs with certain regional carriers. We purchase all of the capacity from the flights covered by the CPA at a negotiated price. We pay the regional carrier a predetermined rate, subject to annual inflation adjustments, primarily for block hours flown (the hours from gate departure to gate arrival) and other operating factors and reimburse the regional carrier for various pass-through expenses related to the flights. Under the CPAs, we are responsible for the cost of providing fuel for all flights and for paying aircraft rent for all of the aircraft covered by the CPAs. Generally, the CPAs contain incentive bonus and rebate provisions based upon each regional carriers operational performance. Uniteds CPAs are for 494 regional aircraft, and the CPAs have terms expiring through 2029. Aircraft operated under CPAs include aircraft leased directly from the regional carriers and those owned by United or leased from third-party lessors and operated by the regional carriers. See Part I, Item 2, Properties of this report for additional information.
In 2016 and 2015, Republic Airline Inc. (Republic), a wholly-owned subsidiary of Republic Airways Holdings (Republic Airways), purchased and took delivery of 16 new 76-seat Embraer S.A. (Embraer) E175 aircraft, and placed these aircraft into service under the United Express brand. Subsequent to the Chapter 11 bankruptcy filing by Republic Airways and certain of its subsidiaries in the first quarter of 2016, United entered into amendments to its CPA with Republic in 2016 for Republic to operate a total of 28 Embraer E175 aircraft, 16 of which were delivered as previously described and 12 of which remain to be delivered in 2017. In connection with the amended CPA, United will own the 12 remaining Embraer E175 aircraft.
In 2016, United agreed to purchase 12 new Embraer E175 aircraft that were previously expected to be purchased by one of its United Express operators, and in the first quarter of 2017, United entered into a CPA amendment with Mesa Air Group, Inc. (Mesa Air Group) and Mesa Airlines, Inc. (Mesa), a wholly-owned subsidiary of Mesa Air Group, for Mesa to operate these 12 additional Embraer E175 aircraft under the United Express brand. As of December 31, 2016, all 12 of these aircraft are expected to be delivered in 2017.
In 2015, United entered into amendments to the CPA with SkyWest Airlines, Inc. (SkyWest), a wholly-owned subsidiary of SkyWest, Inc., to operate an additional 25 new 76-seat Embraer E175 aircraft under the United Express brand. SkyWest purchased all of these 76-seat aircraft directly from the manufacturer with seven deliveries remaining in 2017.
In 2015, United entered into a new CPA with Champlain Enterprises, LLC d/b/a CommutAir (CommutAir), pursuant to which CommutAir will operate 40 used Embraer ERJ145 aircraft under the United Express brand that are currently being operated by a different United Express regional carrier, with transfers that are continuing through 2018. As of December 31, 2016, 28 aircraft are still pending transfer.
Our future commitments under our CPAs are dependent on numerous variables, and are therefore difficult to predict. The most important of these variables is the number of scheduled block hours. Although we are not required to purchase a minimum number of block hours under certain of our CPAs, we have set forth below estimates of our future payments under the CPAs based on our assumptions. Uniteds estimates of its future
92
payments under all of the CPAs do not include the portion of the underlying obligation for any aircraft leased to a regional carrier or deemed to be leased from other regional carriers and facility rent that are disclosed as part of aircraft and nonaircraft operating leases. For purposes of calculating these estimates, we have assumed (1) the number of block hours flown is based on our anticipated level of flight activity or at any contractual minimum utilization levels if applicable, whichever is higher, (2) that we will reduce the fleet as rapidly as contractually allowed under each CPA, (3) that aircraft utilization, stage length and load factors will remain constant, (4) that each carriers operational performance will remain at historic levels and (5) an annual projected inflation rate. These amounts exclude variable pass-through costs such as fuel and landing fees, among others. Based on these assumptions as of December 31, 2016, our future payments through the end of the terms of our CPAs are presented in the table below (in billions):
2017 |
$ | 1.9 | ||
2018 |
1.9 | |||
2019 |
1.3 | |||
2020 |
1.0 | |||
2021 |
1.0 | |||
After 2021 |
4.3 | |||
|
|
|||
$ | 11.4 | |||
|
|
The actual amounts we pay to our regional operators under CPAs could differ materially from these estimates. For example, a 10% increase or decrease in scheduled block hours for all of Uniteds regional operators (whether as a result of changes in average daily utilization or otherwise) in 2017 would result in a corresponding change in annual cash obligations under the CPAs of approximately $147 million.
NOTE 14 - VARIABLE INTEREST ENTITIES
Variable interests are contractual, ownership or other monetary interests in an entity that change with fluctuations in the fair value of the entitys net assets exclusive of variable interests. A VIE can arise from items such as lease agreements, loan arrangements, guarantees or service contracts. An entity is a VIE if (a) the entity lacks sufficient equity or (b) the entitys equity holders lack power or the obligation and right as equity holders to absorb the entitys expected losses or to receive its expected residual returns. Therefore, if the equity owners as a group do not have the power to direct the entitys activities that most significantly impact its economic performance, the entity is a VIE.
If an entity is determined to be a VIE, the entity must be consolidated by the primary beneficiary. The primary beneficiary is the holder of the variable interests that has the power to direct the activities of a VIE that (i) most significantly impact the VIEs economic performance and (ii) has the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE. Therefore, the Company must identify which activities most significantly impact the VIEs economic performance and determine whether it, or another party, has the power to direct those activities.
The Companys evaluation of its association with VIEs is described below:
Aircraft Leases. We are the lessee in a number of operating leases covering the majority of our leased aircraft. The lessors are trusts established specifically to purchase, finance and lease aircraft to us. These leasing entities meet the criteria for VIEs. We are generally not the primary beneficiary of the leasing entities if the lease terms are consistent with market terms at the inception of the lease and do not include a residual value guarantee, fixed-price purchase option or similar feature that obligates us to absorb decreases in value or entitles us to participate in increases in the value of the aircraft. This is the case for many of our operating leases; however, leases of 37 mainline jet aircraft contain a fixed-price purchase option that allow United to purchase the aircraft at predetermined prices on specified dates during the lease term. Additionally, leases covering 192 leased
93
regional jet aircraft contain an option to purchase the aircraft at the end of the lease term at prices that, depending on market conditions, could be below fair value. United has not consolidated the related trusts because, even taking into consideration these purchase options, United is still not the primary beneficiary. Uniteds maximum exposure under these leases is the remaining lease payments, which are reflected in future lease commitments in Note 13 of this report.
EETCs. United evaluated whether the pass-through trusts formed for its EETC financings, treated as either debt or aircraft operating leases, are VIEs required to be consolidated by United under applicable accounting guidance, and determined that the pass-through trusts are VIEs. Based on Uniteds analysis as described below, United determined that it does not have a variable interest in the pass-through trusts.
The primary risk of the pass-through trusts is credit risk (i.e. the risk that United, the issuer of the equipment notes, may be unable to make its principal and interest payments). The primary purpose of the pass-through trust structure is to enhance the credit worthiness of Uniteds debt obligation through certain bankruptcy protection provisions, a liquidity facility (in certain of the EETC structures) and improved loan-to-value ratios for more senior debt classes. These credit enhancements lower Uniteds total borrowing cost. Pass-through trusts are established to receive principal and interest payments on the equipment notes purchased by the pass-through trusts from United and remit these proceeds to the pass-through trusts certificate holders.
United does not invest in or obtain a financial interest in the pass-through trusts. Rather, United has an obligation to make interest and principal payments on its equipment notes held by the pass-through trusts. United did not intend to have any voting or non-voting equity interest in the pass-through trusts or to absorb variability from the pass-through trusts. Based on this analysis, the Company determined that it is not required to consolidate the pass-through trusts.
NOTE 15 - COMMITMENTS AND CONTINGENCIES
Commitments. As of December 31, 2016, United had firm commitments and options to purchase aircraft from The Boeing Company (Boeing), Embraer and Airbus presented in the table below:
Aircraft Type |
Number of Firm Commitments (a) |
|||
Airbus A350-1000 |
35 | |||
Boeing 737NG/737MAX |
165 | |||
Boeing 777-300ER |
12 | |||
Boeing 787-8/-9/-10 |
21 | |||
Embraer E175 |
24 | |||
(a) United also has options and purchase rights for additional aircraft. |
The aircraft listed in the table above are scheduled for delivery from 2017 through 2027. To the extent the Company and the aircraft manufacturers with whom the Company has existing orders for new aircraft agree to modify the contracts governing those orders, the amount and timing of the Companys future capital commitments could change.
94
The table below summarizes Uniteds commitments as of December 31, 2016, which primarily relate to the acquisition of aircraft and related spare engines, aircraft improvements and include other capital purchase commitments for the years ended December 31 (in billions). Any new firm aircraft orders, including through the exercise of purchase options and purchase rights, will increase the total future capital commitments of the Company.
2017 |
$ | 4.5 | ||
2018 |
3.2 | |||
2019 |
3.1 | |||
2020 |
2.5 | |||
2021 |
2.2 | |||
After 2021 |
7.8 | |||
|
|
|||
$ | 23.3 | |||
|
|
In the first quarter of 2017, the Company announced that it will retire its fleet of Boeing 747 aircraft from scheduled service by the end of 2017. The Company does not expect there to be a material impact to depreciation and amortization expense.
As of December 31, 2016, United had $1.3 billion in financing available through EETC transactions for the financing of all of its aircraft deliveries scheduled in the first half of 2017. See Note 11 of this report for additional information on aircraft financing. The Company has also secured backstop financing commitments from certain of its aircraft manufacturers for a limited number of its future aircraft deliveries, subject to certain customary conditions. Financing may be necessary to satisfy the Companys capital commitments for its firm order aircraft and other related capital expenditures.
Legal and Environmental. The Company has certain contingencies resulting from litigation and claims incident to the ordinary course of business. As of December 31, 2016, management believes, after considering a number of factors, including (but not limited to) the information currently available, the views of legal counsel, the nature of contingencies to which the Company is subject and prior experience, that the ultimate disposition of the litigation and claims will not materially affect the Companys consolidated financial position or results of operations. The Company records liabilities for legal and environmental claims when a loss is probable and reasonably estimable. These amounts are recorded based on the Companys assessments of the likelihood of their eventual disposition.
Guarantees and Indemnifications. In the normal course of business, the Company enters into numerous real estate leasing and aircraft financing arrangements that have various guarantees included in the contracts. These guarantees are primarily in the form of indemnities under which the Company typically indemnifies the lessors and any tax/financing parties against tort liabilities that arise out of the use, occupancy, operation or maintenance of the leased premises or financed aircraft. Currently, the Company believes that any future payments required under these guarantees or indemnities would be immaterial, as most tort liabilities and related indemnities are covered by insurance (subject to deductibles). Additionally, certain leased premises such as fueling stations or storage facilities include indemnities of such parties for any environmental liability that may arise out of or relate to the use of the leased premises.
As of December 31, 2016, United is the guarantor of approximately $1.9 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon. These bonds, issued by various airport municipalities, are payable solely from rentals paid under long-term agreements with the respective governing bodies. The leasing arrangements associated with $1.4 billion of these obligations are accounted for as operating leases with the associated expense recorded on a straight-line basis resulting in ratable accrual of the lease obligation over the expected lease term. These tax-exempt special facilities revenue bonds are included in our lease commitments disclosed in Note 13 of this report. The leasing arrangements associated with $400 million of these obligations are accounted for as capital leases. All of these bonds are due between 2017 and 2038.
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In Uniteds financing transactions that include loans, United typically agrees to reimburse lenders for any reduced returns with respect to the loans due to any change in capital requirements and, in the case of loans in which the interest rate is based on LIBOR, for certain other increased costs that the lenders incur in carrying these loans as a result of any change in law, subject, in most cases, to obligations of the lenders to take certain limited steps to mitigate the requirement for, or the amount of, such increased costs. At December 31, 2016, the Company had $2.6 billion of floating rate debt and $90 million of fixed rate debt, with remaining terms of up to 12 years, that are subject to these increased cost provisions. In several financing transactions involving loans or leases from non-U.S. entities, with remaining terms of up to 12 years and an aggregate balance of $2.6 billion, the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder to non-U.S. entities to withholding taxes, subject to customary exclusions.
As of December 31, 2016, United is the guarantor of $168 million of aircraft mortgage debt issued by one of Uniteds regional carriers. The aircraft mortgage debt is subject to similar increased cost provisions as described above for the Companys debt and the Company would potentially be responsible for those costs under the guarantees.
Fuel Consortia. United participates in numerous fuel consortia with other air carriers at major airports to reduce the costs of fuel distribution and storage. Interline agreements govern the rights and responsibilities of the consortia members and provide for the allocation of the overall costs to operate the consortia based on usage. The consortia (and in limited cases, the participating carriers) have entered into long-term agreements to lease certain airport fuel storage and distribution facilities that are typically financed through tax-exempt bonds (either special facilities lease revenue bonds or general airport revenue bonds), issued by various local municipalities. In general, each consortium lease agreement requires the consortium to make lease payments in amounts sufficient to pay the maturing principal and interest payments on the bonds. As of December 31, 2016, approximately $1.5 billion principal amount of such bonds were secured by significant fuel facility leases in which United participates, as to which United and each of the signatory airlines has provided indirect guarantees of the debt. As of December 31, 2016, the Companys contingent exposure was approximately $234 million principal amount of such bonds based on its recent consortia participation. The Companys contingent exposure could increase if the participation of other air carriers decreases. The guarantees will expire when the tax-exempt bonds are paid in full, which ranges from 2017 to 2049. The Company did not record a liability at the time these indirect guarantees were made.
Regional Capacity Purchase. As of December 31, 2016, United had 223 call options to purchase regional jet aircraft being operated by certain regional carriers. At December 31, 2016, none of the call options were exercisable because none of the required conditions to make an option exercisable by United was met.
Credit Card Processing Agreements. The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of the Companys credit card processing agreements, the financial institutions in certain circumstances have the right to require that the Company maintain a reserve equal to a portion of advance ticket sales that has been processed by that financial institution, but for which the Company has not yet provided the air transportation. Such financial institutions may require additional cash or other collateral reserves to be established or additional withholding of payments related to receivables collected if the Company does not maintain certain minimum levels of unrestricted cash, cash equivalents and short-term investments (collectively, Unrestricted Liquidity). The Companys current level of Unrestricted Liquidity is substantially in excess of these minimum levels.
Labor Negotiations. As of December 31, 2016, United, including its subsidiaries, had approximately 88,000 employees. Approximately 80% of Uniteds employees were represented by various U.S. labor organizations as of December 31, 2016. In January 2016, Uniteds pilots, represented by the Air Line Pilots Association, International (ALPA), agreed to extend their contract through January 31, 2019. In March 2016, the Companys dispatchers, represented by the Professional Airline Flight Control Association, agreed to extend their current contract through 2021. In April 2016, the fleet service, passenger service, storekeeper and other employees represented by the International Association of Machinists and Aerospace Workers (IAM) ratified seven new contracts with the Company which extended the contracts through 2021. In August 2016, Uniteds
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flight attendants, represented by the AFA, ratified a five-year joint collective bargaining agreement through 2021. In December 2016, the technicians and related employees, represented by the IBT, ratified a six-year joint collective bargaining agreement which extended the contract through 2022. The agreements with ALPA and IBT contain provisions that require the Company to align contract terms with other airlines workgroups under certain conditions.
NOTE 16 - SPECIAL ITEMS
Special items classified as special charges in the statements of consolidated operations consisted of the following for the years ended December 31 (in millions):
Operating: | 2016 | 2015 | 2014 | |||||||||
Impairment of assets |
$ | 412 | $ | 79 | $ | 49 | ||||||
Cleveland airport lease restructuring |
74 | | | |||||||||
Labor agreement costs |
64 | 18 | | |||||||||
Severance and benefit costs |
37 | 107 | 199 | |||||||||
(Gains) losses on sale of assets and other special charges | 51 | 122 | 195 | |||||||||
|
|
|
|
|
|
|||||||
Special charges |
638 | 326 | 443 | |||||||||
Nonoperating and income taxes: |
||||||||||||
Losses (gain) on extinguishment of debt and other | (1) | 202 | 74 | |||||||||
Income tax benefit related to special charges | (229) | (11) | (10) | |||||||||
Income tax adjustments (Notes 6 and 7) | 180 | (3,130 | ) | | ||||||||
|
|
|
|
|
|
|||||||
Total operating and nonoperating special items, net of income taxes |
$ | 588 | $ | (2,613 | ) | $ | 507 | |||||
|
|
|
|
|
|
2016
In April 2016, the Federal Aviation Administration (FAA) announced that it will designate Newark Liberty International Airport (Newark) as a Level 2 schedule-facilitated airport under the International Air Transport Association Worldwide Slot Guidelines effective October 30, 2016. The designation was associated with an updated demand and capacity analysis of Newark by the FAA. In 2016, the Company determined that the FAAs action impaired the entire value of its Newark slots because the slots are no longer the mechanism that governs take-off and landing rights. Accordingly, the Company recorded a $412 million special charge ($264 million net of taxes) to write off the intangible asset.
In 2016, the City of Cleveland agreed to amend the Companys lease, which runs through 2029, associated with certain excess airport terminal space (principally Terminal D) and related facilities at Hopkins International Airport (Cleveland). The Company recorded an accrual for remaining payments under the lease for facilities that the Company no longer uses and will continue to incur costs under the lease without economic benefit to the Company. This liability was measured and recorded at its fair value when the Company ceased its right to use such facilities leased to it pursuant to the lease. The Company recorded a net charge of $74 million ($47 million net of taxes) related to the amended lease.
The fleet service, passenger service, storekeeper and other employees represented by the IAM ratified seven new contracts with the Company which extended the contracts through 2021. The technicians and related employees represented by the IBT ratified a six-year joint collective bargaining agreement which extended the contract through 2022. During 2016, the Company recorded $171 million ($110 million net of taxes) of special charges primarily for payments in conjunction with the IAM and IBT agreements described above. As part of the ratified
97
contract with the IBT, the Company amended some of its technicians and related employees postretirement medical plans. The amendments triggered curtailment accounting, resulting in the recognition of a one-time $60 million gain ($38 million net of taxes) for accelerated recognition of a prior service credit in one of the plans. Also, as part of the ratified contract with the AFA, the Company amended two of its flight attendant postretirement medical plans. The amendments triggered curtailment accounting, resulting in the recognition of a one-time $47 million gain ($30 million net of taxes) for accelerated recognition of a prior service credit.
During 2016, the Company recorded $37 million ($24 million net of taxes) of severance and benefit costs related to a voluntary early-out program for the Companys flight attendants and other severance agreements. In 2014, more than 2,500 flight attendants elected to voluntarily separate from the Company for a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through the end of 2016.
During 2016, the Company recorded gains and losses on sale of assets and other special charges of $51 million ($33 million net of taxes). In addition, the Company recorded $8 million ($5 million net of taxes) of losses due to exchange rate changes in Venezuela applicable to funds held in local currency and recorded a $9 million ($6 million net of taxes) gain on the sale of an affiliate.
2015
During its annual assessment in the fourth quarter, the Company recorded $33 million ($22 million net of related income tax benefit) related to the impairment of its indefinite-lived intangible assets (certain domestic slots and international Pacific routes), $8 million for the write-off of unexercised aircraft purchase options and $7 million for inventory held for sale. For the full-year 2015, the Company also recorded other impairments, including $10 million for discontinued internal software projects and $10 million for the impairment of several engines held for sale.
The Company recorded $107 million of severance and benefit costs primarily related to a voluntary early-out program for its flight attendants. In 2014, more than 2,500 flight attendants elected to voluntarily separate from the Company for a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through the end of 2016.
During 2015, the Company also recorded $18 million related to collective bargaining agreements, $60 million of integration-related costs primarily related to systems integration and training for employees, $32 million related to charges for settlements in connection with legal matters, $16 million for the cease use of an aircraft under lease and $14 million for losses on the sale of aircraft and other miscellaneous gains and losses.
The Company recorded $202 million of losses as part of Nonoperating income (expense): Miscellaneous, net due primarily to the write-off of $134 million related to the unamortized non-cash debt discount from the extinguishment of the 6% Notes due 2026 and the 6% Notes due 2028. During 2015, the Company also recorded a $61 million foreign exchange loss related to its cash holdings in Venezuela. The Venezuelan government has maintained currency controls and fixed official exchange rates (i.e. Sistema Complementario de Administracion de Divisas (SICAD), and Sistema Marginal de Divisas (SIMADI)) for many years. Previously, airlines were permitted to use the more favorable SICAD rate (13.5 Venezuelan bolivars to one U.S. dollar) if repatriating profits and for payments of local goods and services in Venezuela. During 2015, many of the payments for local goods and services transitioned to utilizing the SIMADI rate (200 Venezuelan bolivars to one U.S. dollar) or were required to be paid in U.S. dollars. Furthermore, the Venezuelan government has not permitted the exchange and repatriations of local currency since mid-2014. As a result, the Company changed the exchange rate from historical SICAD rates to a combination of SIMADI and SICAD rates based on projections of future cash payments. Including this adjustment, the Companys resulting cash balance held in Venezuelan bolivars at December 31, 2015 was approximately $13 million.
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2014
The Company recorded a charge of $16 million ($10 million net of related income tax benefits) related to its annual assessment of impairment of its indefinite-lived intangible assets (certain international Pacific routes). The Company also recorded $33 million for charges related primarily to impairment of its flight equipment held for disposal associated with its Boeing 737-300 and 737-500 fleets.
The Company recorded $141 million of severance and benefit costs related primarily to a voluntary early-out program for its flight attendants. More than 2,500 participants elected a one-time opportunity to voluntarily separate from the Company for a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through the end of 2016. In addition, the Company recorded $58 million of severance and benefits primarily related to reductions of management and front-line employees, including from Cleveland, as part of its cost savings initiatives.
The Company recorded $66 million for the permanent grounding of 21 of the Companys Embraer ERJ 135 regional aircraft under lease through 2018, which included an accrual for remaining lease payments and an amount for maintenance return conditions. The Company decided to permanently ground these 21 Embraer ERJ 135 aircraft as a result of new Embraer E175 regional jet deliveries, the impact of pilot shortages at regional carriers and fuel prices. The Company also recorded $33 million for losses on the sale of assets and other special charges. In addition, $96 million of integration-related costs included compensation costs related to systems integration, training, severance and relocation for employees.
United used cash to retire, at par, the entire $248 million principal balance of the 6% Convertible Debentures and the 6% Convertible Preferred Securities, Term Income Deferrable Equity Securities (TIDES) and incurred $64 million of expense primarily associated with the write-off of the related non-cash debt discounts. The Company also recorded $10 million of foreign exchange losses in Venezuela in 2014.
Accrual Activity
Activity related to the accruals for severance and medical costs and future lease payments on permanently grounded aircraft is as follows (in millions):
Severance/ Benefit Costs |
Permanently Grounded Aircraft |
|||||||
Balance at December 31, 2013 |
$ | 91 | $ | 11 | ||||
Accrual |
199 | 102 | ||||||
Payments |
(181) | (11) | ||||||
|
|
|
|
|||||
Balance at December 31, 2014 |
109 | 102 | ||||||
Accrual |
107 | 30 | ||||||
Payments |
(189) | (54) | ||||||
|
|
|
|
|||||
Balance at December 31, 2015 |
27 | 78 | ||||||
Accrual and related adjustments |
37 | (17) | ||||||
Payments |
(50) | (20) | ||||||
|
|
|
|
|||||
Balance at December 31, 2016 |
$ | 14 | $ | 41 | ||||
|
|
|
|
The Companys accrual and payment activity is primarily related to severance and other compensation expense associated with voluntary employee early retirement programs.
NOTE 17 - SEGMENT INFORMATION
Operating segments are defined as components of an enterprise with separate financial information, which are evaluated regularly by the chief operating decision maker and are used in resource allocation and performance assessments.
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The Company deploys its aircraft across its route network through a single route scheduling system to maximize its value. When making resource allocation decisions, the Companys chief operating decision maker evaluates flight profitability data, which considers aircraft type and route economics. The Companys chief operating decision maker makes resource allocation decisions to maximize the Companys consolidated financial results. Managing the Company as one segment allows management the opportunity to maximize the value of its route network.
The Companys operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) for the years ended December 31 is presented in the table below (in millions):
2016 | ||||
Domestic (U.S. and Canada) |
$ | 22,202 | ||
Pacific |
4,959 | |||
Atlantic |
6,157 | |||
Latin America |
3,238 | |||
|
|
|||
Total |
$ | 36,556 | ||
|
|
|||
2015 | ||||
Domestic (U.S. and Canada) |
$ | 21,931 | ||
Pacific |
5,498 | |||
Atlantic |
7,068 | |||
Latin America |
3,367 | |||
|
|
|||
Total |
$ | 37,864 | ||
|
|
|||
2014 | ||||
Domestic (U.S. and Canada) |
$ | 22,320 | ||
Pacific |
5,767 | |||
Atlantic |
7,321 | |||
Latin America |
3,493 | |||
|
|
|||
Total |
$ | 38,901 | ||
|
|
The Company attributes revenue among the geographic areas based upon the origin and destination of each flight segment. The Companys operations involve an insignificant level of dedicated revenue-producing assets in geographic regions as the overwhelming majority of the Companys revenue producing assets (primarily U.S. registered aircraft) can be deployed in any of its geographic regions.
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NOTE 18 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
UAL |
Quarter Ended | |||||||||||||||
(In millions, except per share amounts) |
March 31 | June 30 | September 30 | December 31 | ||||||||||||
2016 |
||||||||||||||||
Operating revenue |
$ | 8,195 | $ | 9,396 | $ | 9,913 | $ | 9,052 | ||||||||
Income from operations |
649 | 1,060 | 1,624 | 1,005 | ||||||||||||
Net income |
313 | 588 | 965 | 397 | ||||||||||||
Basic earnings per share |
0.88 | 1.78 | 3.02 | 1.26 | ||||||||||||
Diluted earnings per share |
0.88 | 1.78 | 3.01 | 1.26 | ||||||||||||
2015 |
||||||||||||||||
Operating revenue |
$ | 8,608 | $ | 9,914 | $ | 10,306 | $ | 9,036 | ||||||||
Income from operations |
741 | 1,445 | 1,899 | 1,081 | ||||||||||||
Net income |
508 | 1,193 | 4,816 | 823 | ||||||||||||
Basic earnings per share |
1.33 | 3.14 | 12.83 | 2.24 | ||||||||||||
Diluted earnings per share |
1.32 | 3.14 | 12.82 | 2.24 |
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UALs quarterly financial data is subject to seasonal fluctuations and historically its second and third quarter financial results, which reflect higher travel demand, are better than its first and fourth quarter financial results. UALs quarterly results were impacted by the following significant items (in millions):
Quarter Ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||||
2016 |
||||||||||||||||
Operating: |
||||||||||||||||
Impairment of assets |
$ | | $ | 412 | $ | | $ | | ||||||||
Cleveland airport lease restructuring |
74 | | | | ||||||||||||
Labor agreement costs and related items |
100 | 10 | 14 | (60) | ||||||||||||
Severance and benefit costs |
8 | 6 | 13 | 10 | ||||||||||||
(Gains) losses on sale of assets and other special charges |
8 | 6 | 18 | 19 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Special charges |
190 | 434 | 45 | (31) | ||||||||||||
Nonoperating and income taxes: |
||||||||||||||||
Losses (gain) on extinguishment of debt and other |
8 | (9) | | | ||||||||||||
Income tax expense (benefit) related to special charges |
(72) | (153) | (16) | 12 | ||||||||||||
Income tax adjustments (Note 6) |
| | | 180 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating and nonoperating special items, net of income taxes |
$ | 126 | $ | 272 | $ | 29 | $ | 161 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
2015 |
||||||||||||||||
Operating: |
||||||||||||||||
Impairment of assets |
$ | 2 | $ | 11 | $ | 18 | $ | 48 | ||||||||
Labor agreement costs and related items |
| | | 18 | ||||||||||||
Severance and benefit costs |
50 | 25 | 28 | 4 | ||||||||||||
(Gains) losses on sale of assets and other special charges |
12 | 19 | 30 | 61 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Special charges |
64 | 55 | 76 | 131 | ||||||||||||
Nonoperating and income taxes: |
||||||||||||||||
Losses on extinguishment of debt and other |
6 | 128 | 61 | 7 | ||||||||||||
Income tax benefit related to special charges |
| | | (11) | ||||||||||||
Income tax expense (benefit) associated with valuation allowance release |
| | (3,218) | 88 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating and nonoperating special items, net of income taxes |
$ | 70 | $ | 183 | $ | (3,081) | $ | 215 | ||||||||
|
|
|
|
|
|
|
|
See Note 16 of this report for additional information of these items.
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ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
None.
ITEM 9A. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Control and Procedures
UAL and United each maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted by UAL and United to the Securities and Exchange Commission (SEC) is recorded, processed, summarized and reported, within the time periods specified by the SECs rules and forms, and is accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The management of UAL and United, including the Chief Executive Officer and Chief Financial Officer, performed an evaluation to conclude with reasonable assurance that UALs and Uniteds disclosure controls and procedures were designed and operating effectively to report the information each company is required to disclose in the reports they file with the SEC on a timely basis. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer of UAL and United have concluded that as of December 31, 2016, disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting during the Quarter Ended December 31, 2016
During the three months ended December 31, 2016, there was no change in UALs or Uniteds internal control over financial reporting during their most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, their internal control over financial reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
United Continental Holdings, Inc.
We have audited United Continental Holdings, Inc.s (the Company) internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). The Companys management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Over Financial Reporting in Item 9A. Our responsibility is to express an opinion on the companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2016 of the Company and our report dated February 23, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Chicago, Illinois
February 23, 2017
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United Continental Holdings, Inc. Management Report on Internal Control Over Financial Reporting
February 23, 2017
To the Stockholders of United Continental Holdings, Inc.
Chicago, Illinois
The management of United Continental Holdings, Inc. (UAL) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the design and operating effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, management used the framework set forth in Internal ControlIntegrated Framework (2013 Framework) issued by the Committee of the Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was effective as of December 31, 2016.
Our independent registered public accounting firm, Ernst & Young LLP, who audited UALs consolidated financial statements included in this Form 10-K, has issued a report on UALs internal control over financial reporting, which is included herein.
United Airlines, Inc. Management Report on Internal Control Over Financial Reporting
February 23, 2017
To the Stockholder of United Airlines, Inc.
Chicago, Illinois
The management of United Airlines, Inc. (United) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Uniteds internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including Uniteds Chief Executive Officer and Chief Financial Officer, United conducted an evaluation of the design and operating effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, management used the framework set forth in Internal ControlIntegrated Framework (2013 Framework) issued by the Committee of the Sponsoring Organizations of the Treadway Commission. Based on this evaluation, Uniteds Chief Executive Officer and Chief Financial Officer concluded that its internal control over financial reporting was effective as of December 31, 2016.
This annual report does not include an attestation report of Uniteds registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by Uniteds registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit United to provide only managements report in this annual report.
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ITEM 9B. | OTHER INFORMATION. |
None.
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
Certain information required by this item with respect to UAL is incorporated by reference from UALs definitive proxy statement for its 2017 Annual Meeting of Stockholders. Information regarding the executive officers of UAL is presented below.
Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10-K.
EXECUTIVE OFFICERS OF UAL
The executive officers of UAL as of February 23, 2017 are listed below, along with their ages, tenure as officer and business background for at least the last five years.
Michael P. Bonds. Age 54. Mr. Bonds has served as Executive Vice President Human Resources and Labor Relations of UAL and United since October 2010. From June 2005 to September 2010, Mr. Bonds served as Senior Vice President Human Resources and Labor Relations of Continental Airlines, Inc. (Continental). Mr. Bonds joined Continental in 1995.
Brett J. Hart. Age 47. Mr. Hart has served as Executive Vice President and General Counsel of UAL and United since February 2012. Mr. Hart served as acting Chief Executive Officer and principal executive officer of the Company, on an interim basis, from October 2015 to March 2016. From December 2010 to February 2012, he served as Senior Vice President, General Counsel and Secretary of UAL, United and Continental. From June 2009 to December 2010, Mr. Hart served as Executive Vice President, General Counsel and Corporate Secretary at Sara Lee Corporation, a consumer food and beverage company. From March 2005 to May 2009, Mr. Hart served as Deputy General Counsel and Chief Global Compliance Officer of Sara Lee Corporation. Mr. Hart joined UAL in 2010.
Gregory L. Hart. Age 51. Mr. Hart has served as Executive Vice President and Chief Operations Officer of UAL and United since February 2014. From December 2013 to February 2014, he served as Senior Vice President Operations of UAL and United. From September 2012 to December 2013, Mr. Hart served as Senior Vice President Technical Operations of United. From October 2010 to September 2012, Mr. Hart served as Senior Vice President Network of United and Continental. From September 2008 to September 2010, Mr. Hart served as Vice President Network Strategy of Continental. Mr. Hart joined Continental in 1997.
Linda P. Jojo. Age 51. Ms. Jojo has served as Executive Vice President and Chief Information Officer of UAL and United since November 2014. From July 2011 to October 2014, Ms. Jojo served as Executive Vice President and Chief Information Officer of Rogers Communications, Inc., a Canadian communications and media company. From October 2008 to June 2011, Ms. Jojo served as Chief Information Officer of Energy Future Holdings, a Dallas-based privately held energy company and electrical utility provider.
Chris Kenny. Age 52. Mr. Kenny has served as Vice President and Controller of UAL and United since October 2010. From September 2003 to September 2010, Mr. Kenny served as Vice President and Controller of Continental. Mr. Kenny joined Continental in 1997.
J. Scott Kirby. Age 49. Mr. Kirby has served as President of UAL and United since August 2016. Prior to joining the Company, from December 2013 to August 2016, Mr. Kirby served as President of American Airlines Group and American Airlines, Inc. Mr. Kirby also previously served as President of US Airways from October 2006 to December 2013. Mr. Kirby held significant other leadership roles at US Airways and at America West prior to the 2005 merger of those carriers, including Executive Vice PresidentSales and Marketing (2001 to 2006); Senior Vice President, e-business (2000 to 2001); Vice President, Revenue Management (1998 to 2000);
106
Vice President, Planning (1997 to 1998); and Senior Director, Scheduling and Planning (1995 to 1998). Prior to joining America West, Mr. Kirby worked for American Airlines Decision Technologies and at the Pentagon.
Andrew C. Levy. Age 47. Mr. Levy has served as Executive Vice President and Chief Financial Officer since August 2016. From November 2014 to August 2016, he was the Chief Executive Officer and Managing Partner of AML Ventures, LLC, an investment and advisory firm specializing in the airline industry. Previously, Mr. Levy held leadership roles at Allegiant Travel Company (Allegiant) for thirteen years, including as Chief Operating Officer and a Director from September 2013 to October 2014; President from September 2009 to October 2014; Chief Financial Officer from October 2007 to May 2010; and Managing Director, Planning & Treasurer from April 2001 to October 2010. Prior to joining Allegiant, Mr. Levy worked at Mpower Communications, Inc., Savoy Capital and ValuJet Airlines, Inc.
Oscar Munoz. Age 58. Mr. Munoz has served as Chief Executive Officer since September 2015, and also as President from September 2015 until August 2016. From February 2015 to September 2015, Mr. Munoz served as President and Chief Operating Officer of CSX Corporation (CSX), a railroad and intermodal transportation services company, overseeing operations, sales and marketing, human resources, service design and information technology. Prior to his appointment as President and Chief Operating Officer of CSX, Mr. Munoz served as Executive Vice President and Chief Operating Officer of CSX Transportation from January 2012 to February 2015 and as Executive Vice President and Chief Financial Officer of CSX from 2003 to 2012. Mr. Munoz has been a member of the UAL Board of Directors (Board of Directors) since 2010.
There are no family relationships among the executive officers or the directors of UAL. The executive officers are elected by the Board of Directors each year and hold office until the next annual meeting of stockholders, until their successors are elected and qualified, or until their earlier death, resignation or removal.
The Company has a code of ethics, the Ethics and Compliance Principles, for its directors, officers and employees. The code serves as a Code of Ethics as defined by SEC regulations, and as a Code of Business Conduct and Ethics under the listed Company Manual of the NYSE. The code is available on the Companys website at http://ir.united.com. Waivers granted to certain officers from compliance with or future amendments to the code will be disclosed on the Companys website in accordance with Item 5.05 of Form 8-K.
ITEM 11. | EXECUTIVE COMPENSATION. |
Information required by this item with respect to UAL is incorporated by reference from UALs definitive proxy statement for its 2017 Annual Meeting of Stockholders.
Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10-K.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
Information required by this item with respect to UAL is incorporated by reference from UALs definitive proxy statement for its 2017 Annual Meeting of Stockholders.
Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10-K.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
Information required by this item with respect to UAL is incorporated by reference from UALs definitive proxy statement for its 2017 Annual Meeting of Stockholders.
Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10-K.
107
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
The Audit Committee of the Board of Directors has adopted a policy on pre-approval of services of the Companys independent registered public accounting firm. As a wholly-owned subsidiary of UAL, Uniteds audit services are determined by UAL. The policy provides that the Audit Committee shall pre-approve all audit and non-audit services to be provided to UAL and its subsidiaries and affiliates by its independent auditors. The process by which this is carried out is as follows:
For recurring services, the Audit Committee reviews and pre-approves the independent registered public accounting firms annual audit services in conjunction with the annual appointment of the outside auditors. The reviewed materials include a description of the services along with related fees. The Audit Committee also reviews and pre-approves other classes of recurring services along with fee thresholds for pre-approved services. In the event that the additional services are required prior to the next scheduled Audit Committee meeting, pre-approvals of additional services follow the process described below.
Any requests for audit, audit related, tax and other services not contemplated with the recurring services approval described above must be submitted to the Audit Committee for specific pre-approval and cannot commence until such approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings. However, the authority to grant specific pre-approval between meetings, as necessary, has been delegated to the Chair of the Audit Committee. The Chair must update the Audit Committee at the next regularly scheduled meeting of any services that were granted specific pre-approval.
On a periodic basis, the Audit Committee reviews the status of services and fees incurred year-to-date and a list of newly pre-approved services since its last regularly scheduled meeting. The Audit Committee has considered whether the 2016 and 2015 non-audit services provided by Ernst & Young LLP, the Companys independent registered public accounting firm, are compatible with maintaining auditor independence.
All of the services in 2016 and 2015 under the Audit Fees, Audit Related Fees, Tax Fees and All Other Fees categories below have been approved by the Audit Committee pursuant to paragraph (c)(7) of Rule 2-01 of Regulation S-X of the Exchange Act.
The aggregate fees billed for professional services rendered by the Companys independent auditors in 2016 and 2015 are as follows (in thousands):
Service |
2016 | 2015 | ||||||
Audit Fees |
$ | 3,751 | $ | 4,193 | ||||
Audit Related Fees |
215 | 98 | ||||||
Tax Fees |
1,252 | 2,050 | ||||||
All Other Fees |
2 | 5 | ||||||
|
|
|
|
|||||
$ | 5,220 | $ | 6,346 | |||||
|
|
|
|
Note: UAL and United amounts are the same.
AUDIT FEES
For 2016 and 2015, audit fees consist primarily of the audit and quarterly reviews of the consolidated financial statements and the audit of the effectiveness of internal control over financial reporting of United Continental Holdings, Inc. and its wholly-owned subsidiaries. Audit fees also include the audit of the consolidated financial statements of United, employee benefit plan audits, attestation services required by statute or regulation, comfort letters, consents, assistance with and review of documents filed with the SEC, and accounting and financial reporting consultations and research work necessary to comply with generally accepted auditing standards.
108
AUDIT RELATED FEES
For 2016 and 2015, fees for audit related services consisted of professional services related to due diligence and understanding key process changes and identifying and testing changes in the internal control environment prior to implementation of system conversions.
TAX FEES
Tax fees for 2016 and 2015 include professional services provided for foreign and state tax returns, research and consultations regarding tax accounting, and tax compliance matters and assistance in assembling data to prepare for and respond to governmental reviews of past tax filings, exclusive of tax services rendered in connection with the audit.
ALL OTHER FEES
Fees for all other services billed in 2016 and 2015 consist of subscriptions to Ernst & Young LLPs on-line accounting research tool.
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
(a)(1) | Financial Statements. The financial statements required by this item are listed in Part II, Item 8, Financial Statements and Supplementary Data herein. | |
(2) | Financial Statement Schedules. The financial statement schedule required by this item is listed below and included in this report after the signature page hereto. | |
Schedule II-Valuation and Qualifying Accounts for the years ended December 31, 2016, 2015 and 2014. | ||
All other schedules are omitted because they are not applicable, not required or the required information is shown in the consolidated financial statements or notes thereto. | ||
(b) | Exhibits. The exhibits required by this item are listed in the Exhibit Index which immediately precedes the exhibits filed with this Form 10-K and is incorporated herein by this reference. Each management contract or compensatory plan or arrangement is denoted with a in the Exhibit Index. |
ITEM 16. | FORM 10-K SUMMARY. |
None.
109
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
UNITED CONTINENTAL HOLDINGS, INC. UNITED AIRLINES, INC. (Registrants) | ||
By:
|
/s/ Andrew C. Levy | |
Andrew C. Levy | ||
Executive Vice President and Chief Financial Officer |
Date: February 23, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on behalf of United Continental Holdings, Inc. and in the capacities and on the date indicated.
Signature |
Capacity | |
/s/ Oscar Munoz Oscar Munoz |
Chief Executive Officer, Director (Principal Executive Officer) | |
/s/ Andrew C. Levy Andrew C. Levy |
Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |
/s/ Chris Kenny Chris Kenny |
Vice President and Controller (Principal Accounting Officer) | |
/s/ Carolyn Corvi Carolyn Corvi |
Director | |
/s/ Jane C. Garvey Jane C. Garvey |
Director | |
/s/ Barney Harford Barney Harford |
Director | |
/s/ Todd M. Insler Todd M. Insler |
Director | |
/s/ Walter Isaacson Walter Isaacson |
Director | |
/s/ James A.C. Kennedy James A.C. Kennedy |
Director |
110
Signature |
Capacity | |
/s/ Robert A. Milton Robert A. Milton |
Director | |
/s/ William R. Nuti William R. Nuti |
Director | |
/s/ Sito Pantoja Sito Pantoja |
Director | |
/s/ Edward M. Philip Edward M. Philip |
Director | |
/s/ Edward L. Shapiro Edward L. Shapiro |
Director | |
/s/ Laurence E. Simmons Laurence E. Simmons |
Director | |
/s/ David J. Vitale David J. Vitale |
Director | |
/s/ James M. Whitehurst James M. Whitehurst |
Director |
Date: February 23, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on behalf of United Airlines, Inc. and in the capacities and on the date indicated.
Signature |
Capacity | |
/s/ Oscar Munoz Oscar Munoz |
Chief Executive Officer (Principal Executive Officer) | |
/s/ Andrew C. Levy Andrew C. Levy |
Executive Vice President and Chief Financial Officer and Director (Principal Financial Officer) | |
/s/ Chris Kenny Chris Kenny |
Vice President and Controller (Principal Accounting Officer) | |
/s/ Gregory L. Hart Gregory L. Hart |
Director | |
/s/ J. Scott Kirby J. Scott Kirby |
Director |
Date: February 23, 2017
111
Schedule II
Valuation and Qualifying Accounts
For the Years Ended December 31, 2016, 2015 and 2014
(In millions)
Description |
Balance at Beginning of Period |
Additions Charged to Costs and Expenses |
Deductions (a) |
Other | Balance at End of Period |
|||||||||||||||
Allowance for doubtful accountsUAL and United: |
||||||||||||||||||||
2016 |
$ | 18 | $ | 18 | $ | 26 | $ | | $ | 10 | ||||||||||
2015 |
22 | 25 | 29 | | 18 | |||||||||||||||
2014 |
13 | 45 | 36 | | 22 | |||||||||||||||
Obsolescence allowancespare partsUAL and United: |
||||||||||||||||||||
2016 |
$ | 235 | $ | 61 | $ | 16 | $ | 15 | $ | 295 | ||||||||||
2015 |
169 | 38 | | 28 | 235 | |||||||||||||||
2014 |
162 | 35 | 28 | | 169 | |||||||||||||||
Valuation allowance for deferred tax assetsUAL: |
||||||||||||||||||||
2016 |
$ | 48 | $ | 47 | $ | 27 | $ | | $ | 68 | ||||||||||
2015 |
4,751 | | 4,703 | | 48 | |||||||||||||||
2014 |
4,591 | 156 | | 4 | 4,751 | |||||||||||||||
Valuation allowance for deferred tax assetsUnited: |
||||||||||||||||||||
2016 |
$ | 48 | $ | 47 | $ | 27 | $ | | $ | 68 | ||||||||||
2015 |
4,721 | | 4,673 | | 48 | |||||||||||||||
2014 |
4,561 | 167 | | (7) | 4,721 |
(a) Deduction from reserve for purpose for which reserve was created.
112
EXHIBIT INDEX
Exhibit No. |
Registrant |
Exhibit | ||||
Plan of Merger | ||||||
*2.1 | UAL United |
Agreement and Plan of Merger, dated as of May 2, 2010, by and among UAL Corporation, Continental Airlines, Inc. and JT Merger Sub Inc. (schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K) (filed as Exhibit 2.1 to UALs Form 8-K filed May 4, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||||
*2.2 | United | Agreement and Plan of Merger, dated as of March 28, 2013, by and between Continental Airlines, Inc. and United Air Lines, Inc. (filed as Exhibit 2.1 to UALs Form 8-K filed April 3, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||||
Articles of Incorporation and Bylaws | ||||||
*3.1 | UAL | Amended and Restated Certificate of Incorporation of United Continental Holdings, Inc. (filed as Exhibit 3.1 to UALs Form 8-K filed October 1, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||||
*3.2 | UAL | Amended and Restated Bylaws of United Continental Holdings, Inc. (filed as Exhibit 3.1 to UALs Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||||
*3.3 | United | Amended and Restated Certificate of Incorporation of United Airlines, Inc. (filed as Exhibit 3.1 to UALs Form 8-K filed April 3, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||||
*3.4 | United | Amended and Restated By-laws of United Airlines, Inc. (filed as Exhibit 3.2 to UALs Form 8-K filed April 3, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||||
Instruments Defining Rights of Security Holders, Including Indentures | ||||||
*4.1 | UAL United |
Amended and Restated Indenture, dated as of January 11, 2013, by and among United Continental Holdings, Inc. as Issuer, United Air Lines, Inc. as Guarantor, and the Bank of New York Mellon Trust Company, N.A. as Trustee, providing for issuance of 6% Notes due 2028, 6% Notes due 2026 and 8% Notes due 2024 (filed as Exhibit 4.6 to UALs Form 10-K for the year ended December 31, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||||
*4.2 | UAL United |
First Supplemental Indenture, dated as of April 1, 2013, by and among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Amended and Restated Indenture, dated as of January 11, 2013 (filed as Exhibit 4.1 to UALs Form 8-K filed April 3, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||||
*4.3 | UAL United |
Second Supplemental Indenture, dated as of September 13, 2013, by and among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Amended and Restated Indenture, dated as of January 11, 2013 (filed as Exhibit 4.1 to UALs Form 8-K filed September 19, 2013, Commission file number 1-6033, and incorporated herein by reference) |
113
*4.4 | United | Indenture, dated as of July 15, 1997, between Continental Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor to Bank One, N.A.), as trustee related to Continental Airlines, Inc.s 4.5% Convertible Notes due 2015 (filed as Exhibit to 4.1 to Continentals Form S-3/A filed July 18, 1997, Commission file number 1-10323, and incorporated herein by reference) | ||
*4.5 | UAL United |
Fourth Supplemental Indenture, dated as of October 1, 2010, by and among Continental Airlines, Inc., United Continental Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, with respect to the Indenture, dated as of July 15, 1997, between Continental Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor to Bank One, N.A.), as trustee related to Continental Airlines, Inc.s 4.5% Convertible Notes due 2015 (filed as Exhibit 4.3 to UALs Form 8-K dated October 1, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*4.6 | UAL United |
Fifth Supplemental Indenture, dated as of May 15, 2014, among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.1 to UALs Form 8-K filed on May 19, 2014, Commission file number 1-6033, and incorporated herein by reference) | ||
*4.7 | UAL United |
Indenture, dated as of May 7, 2013, among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (filed as Exhibit 4.1 to UALs Form 8-K filed on May 10, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*4.8 | UAL United |
First Supplemental Indenture, dated as of May 7, 2013, among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee, providing for the issuance of 6.375% Senior Notes due 2018 (filed as Exhibit 4.2 to UALs Form 8-K filed on May 10, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*4.9 | UAL United |
Form of 6.375% Senior Notes due 2018 (filed as Exhibit A to Exhibit 4.2 to UALs Form 8-K filed on May 10, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*4.10 | UAL United |
Form of Notation of Note Guarantee (filed as Exhibit B to Exhibit 4.2 to UALs Form 8-K filed on May 10, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*4.11 | UAL United |
Second Supplemental Indenture, dated as of November 8, 2013, among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee, providing for the issuance of 6.000% Senior Notes due 2020 (filed as Exhibit 4.2 to UALs Form 8-K filed on November 12, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*4.12 | UAL United |
Form of 6.000% Senior Notes due 2020 (filed as Exhibit 4.3 to UALs Form 8-K filed on November 12, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*4.13 | UAL United |
Form of Notation of Note Guarantee (filed as Exhibit 4.4 to UALs Form 8-K filed on November 12, 2013, Commission file number 1-6033, and incorporated herein by reference) |
114
Material Contracts | ||||
*10.1 | UAL | Agreement, dated April 19, 2016, by and among PAR Capital Management, Inc., Altimeter Capital Management, LP, United Continental Holdings, Inc. and the other signatories listed on the signature page thereto (filed as Exhibit 10.1 to UALs Form 8-K filed April 20, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
10.2 | UAL | United Continental Holdings, Inc. Profit Sharing Plan (amended and restated effective January 1, 2016) | ||
*10.3 | UAL United |
Employment Agreement, dated December 31, 2015, among United Continental Holdings, Inc., United Airlines, Inc. and Oscar Munoz (filed as Exhibit 10.1 to UALs Form 8-K/A filed January 7, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.4 | UAL United |
Amendment to Employment Agreement, dated April 19, 2016, by and among United Continental Holdings, Inc., United Airlines, Inc. and Oscar Munoz (filed as Exhibit 10.1 to UALs Form 8-K filed April 20, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.5 | UAL | SERP Agreement, dated as of October 1, 2010, by and among United Continental Holdings, Inc., Continental Airlines, Inc. and James E. Compton (filed as Exhibit 10.12 to UALs Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.6 | UAL United |
SERP Agreement, dated as of October 1, 2010, by and among United Continental Holdings, Inc., Continental Airlines, Inc. and Gerald Laderman (filed as Exhibit 10.2 to UALs Form 10-Q for the quarter ended September 30, 2015, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.7 | UAL |
SERP Agreement, dated as of October 1, 2010, by and among United Continental Holdings, Inc., Continental Airlines, Inc. and Michael P. Bonds (filed as Exhibit 10.10 to UALs Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.8 | UAL United |
United Continental Holdings, Inc. Senior Officer Severance Plan (effective October 1, 2014) (filed as Exhibit 10.1 to UALs Form 10-Q for the quarter ended September 30, 2015, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.9 | UAL | Employment Agreement, dated as of October 1, 2010, by and among United Continental Holdings, Inc., United Air Lines, Inc., Continental Airlines, Inc. and Jeffery A. Smisek (filed as Exhibit 10.21 to UALs Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.10 | UAL United |
Performance Award Agreement, dated May 5, 2016, by and among United Continental Holdings, Inc., United Airlines, Inc. and Brett J. Hart (filed as Exhibit 10.3 to UALs Form 10-Q for the quarter ended June 30, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.11 | UAL | Form of Stock Option Award Notice pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (filed as Exhibit 10.1 to UALs Form 10-Q for the quarter ended September 30, 2016, Commission file number 1-6033, and incorporated herein by reference) |
115
*10.12 | UAL | Form of Restricted Stock Unit Award Notice pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (filed as Exhibit 10.2 to UALs Form 10-Q for the quarter ended September 30, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.13 | UAL | Confidentiality and Non-Competition Agreement, dated April 23, 2009, by and among Continental Airlines, Inc. and Jeffery A. Smisek (filed as Exhibit 10.1 to Continental Airlines, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.14 | UAL United |
Separation Agreement, dated as of September 8, 2015, by and among United Continental Holdings, Inc., United Airlines, Inc. and Jeffery A. Smisek (filed as Exhibit 10.1 to UALs Form 8-K filed September 8, 2015, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.15 | UAL | Description of Benefits for Officers of United Continental Holdings, Inc. and United Airlines, Inc. (filed as Exhibit 10.11 to UALs Form 10-K for the year ended December 31, 2015, Commission file number 1-6033 and incorporated herein by reference) | ||
*10.16 | UAL | United Continental Holdings, Inc. Officer Travel Policy (filed as Exhibit 10.24 to UALs Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.17 | UAL | United Continental Holdings, Inc. 2008 Incentive Compensation Plan (filed as Annex A to UAL Corporations 2013 Definitive Proxy Statement filed on April 26, 2013, Commission file number 1-6033, and incorporated herein by reference) (now named the United Continental Holdings, Inc. 2008 Incentive Compensation Plan) | ||
*10.18 | UAL | First Amendment to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (changing the name to United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (filed as Annex A to UALs Definitive Proxy Statement filed on April 26, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
10.19 | UAL | Second Amendment to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan | ||
*10.20 | UAL | Form of Stock Option Award Notice pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (filed as Exhibit 10.25 to UALs Form 10-Q for the quarter ended June 30, 2008, Commission file number 1-6033, and incorporated herein by reference) | ||
10.21 | UAL | Form of Restricted Stock Unit Award Notice pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (stock settled) | ||
*10.22 | UAL | Form of Restricted Share Award Notice pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (awards during and after 2014) (filed as Exhibit 10.27 to UALs Form 10-K for the year ended December 31, 2013, Commission file number 1-6033, and incorporated by reference) | ||
*10.23 | UAL | United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (adopted pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (filed as Exhibit 10.31 to UALs Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference) |
116
*10.24 | UAL | First Amendment to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (adopted pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (effective with respect to performance periods beginning on or after January 1, 2012) (filed as Exhibit 10.33 to UALs Form 10-K for the year ended December 31, 2011, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.25 | UAL | Second Amendment to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (adopted pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (filed as Exhibit 10.29 to UALs Form 10-K for the year ended December 31, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.26 | UAL | Third Amendment to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (adopted pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (filed as Exhibit 10.1 to UALs Form 10-Q for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.27 | UAL | Fourth Amendment to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (adopted pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (filed as Exhibit 10.22 to UALs Form 10-K for the year ended December 31, 2015, Commission file number 1-6033 and incorporated herein by reference) | ||
*10.28 | UAL | Form of Performance-Based Restricted Stock Unit Award Notice pursuant to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (ROIC awards) (filed as Exhibit 10.23 to UALs Form 10-K for the year ended December 31, 2015, Commission file number 1-6033 and incorporated herein by reference) | ||
*10.29 | UAL | Form of Performance-Based Restricted Stock Unit Award Notice pursuant to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (Relative Pre-tax Margin awards) (for performance periods beginning on or after January 1, 2015) (filed as Exhibit 10.2 to UALs Form 10-Q for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.30 | UAL | United Continental Holdings, Inc. Incentive Plan 2010, as amended and restated February 17, 2011 (previously named the Continental Airlines, Inc. Incentive Plan 2010) (filed as Annex B to UALs Definitive Proxy Statement filed April 26, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.31 | UAL | First Amendment to the United Continental Holdings, Inc. Incentive Plan 2010, as amended and restated February 17, 2011 (filed as Annex B to UALs 2013 Definitive Proxy Statement filed on April 26, 2013, Commission file number 1-6033, incorporated herein by reference) | ||
*10.32 | UAL | United Continental Holdings, Inc. Annual Incentive Program (adopted pursuant to the United Continental Holdings, Inc. Incentive Plan 2010) (as amended and restated February 21, 2013) (filed as Exhibit 10.43 to UALs Form 10-K for the year ended December 31, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.33 | UAL | United Continental Holdings, Inc. Long-Term Relative Performance Program (adopted pursuant to the United Continental Holdings, Inc. Incentive Plan 2010) (filed as Exhibit 10.43 to UALs Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference) |
117
*10.34 | UAL | First Amendment to the United Continental Holdings, Inc. Long-Term Relative Performance Program (adopted pursuant to the United Continental Holdings, Inc. Incentive Plan 2010) (effective with respect to performance periods beginning on or after January 1, 2012) (filed as Exhibit 10.49 to UALs Form 10-K for the year ended December 31, 2011, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.35 | UAL | Second Amendment to the United Continental Holdings, Inc. Long-Term Relative Performance Program (adopted pursuant to the United Continental Holdings, Inc. Incentive Plan 2010) (effective with respect to performance periods beginning on or after January 1, 2014) (filed as Exhibit 10.40.2 to UALs Form 10-K for the year ended December 31, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.36 | UAL | Form of Annual Incentive Program Award Notice pursuant to the United Continental Holdings, Inc. Annual Incentive Program (for fiscal years beginning on or after January 1, 2013) (filed as Exhibit 10.47 to UALs Form 10-K for the year ended December 31, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.37 | UAL | Form of Long-Term Relative Performance Award Notice pursuant to the United Continental Holdings, Inc. Long-Term Relative Performance Program (for use with respect to performance periods beginning January 1, 2014) (filed as Exhibit 10.45 to UALs Form 10-K for the year ended December 31, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.38 | UAL | Description of Compensation and Benefits for United Continental Holdings, Inc. Non-Employee Directors (filed as Exhibit 10.30 to UALs Form 10-K for the year ended December 31, 2014, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.39 | UAL | United Continental Holdings, Inc. 2006 Director Equity Incentive Plan (as amended and restated, effective February 20, 2014, filed as Annex A to UALs Definitive Proxy Statement filed April 25, 2014, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.40 | UAL | Form of Share Unit Award Notice pursuant to the United Continental Holdings, Inc. 2006 Director Equity Incentive Plan (filed as Exhibit 10.9 to UALs Form 10-Q for the quarter ended June 30, 2014, Commission file number 1-6033, and incorporated herein by reference) (for awards granted on or after June 2011) | ||
*10.41 | UAL | Continental Airlines, Inc. 1998 Stock Incentive Plan (filed as Exhibit 4.3 to Continentals Form S-8 Registration Statement (No. 333-57297), Commission file number 1-10323, and incorporated herein by reference) | ||
*10.42 | UAL | Amendment No. 1 to 1998 Incentive Plan, 1997 Incentive Plan and 1994 Incentive Plan (filed as Exhibit 10.2 to Continentals Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, Commission file no. 1-10323, and incorporated herein by reference) | ||
*10.43 | UAL | Amendment to 1998 Incentive Plan, 1997 Incentive Plan and 1994 Incentive Plan (filed as Exhibit 10.5 to Continentals Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, Commission file no. 1-10323 and incorporated herein by reference) | ||
*10.44 | UAL | Form of Outside Director Stock Option Grant pursuant to the Continental Airlines, Inc. 1998 Incentive Plan (filed as Exhibit 10.12(c) to Continentals Form 10-K for the year ended December 31, 2006, Commission file number 1-10323, and incorporated herein by reference) |
118
*10.45 | UAL | Continental Airlines, Inc. Incentive Plan 2000, as amended and restated (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended March 31, 2002, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.46 | UAL | Amendment to Incentive Plan 2000, dated as of March 12, 2004 (filed as Exhibit 10.6 to Continentals Form 10-Q for the quarter ended March 31, 2004, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.47 | UAL | Second Amendment to Incentive Plan 2000, dated as of June 6, 2006 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended June 30, 2006, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.48 | UAL | Third Amendment to Incentive Plan 2000, dated as of September 14, 2006 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended September 30, 2006, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.49 | UAL | Form of Outside Director Stock Option Agreement pursuant to Incentive Plan 2000 (filed as Exhibit 10.14(b) to Continentals Form 10-K for the year ended December 31, 2000, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.50 | UAL | Form of Outside Director Stock Option Grant pursuant to Incentive Plan 2000 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended March 31, 2008, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.51 | UAL | Form of Non-Employee Director Option Grant Document pursuant to Continental Airlines, Inc. Incentive Plan 2010, as amended and restated through February 17, 2010 (filed as Exhibit 10.2(a) to Continentals Form 10-K for the year ended December 31, 2009, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.52 | UAL | United Air Lines, Inc. Management Cash Direct & Cash Match Program (amended and restated effective January 1, 2014) (filed as Exhibit 10.64 to UALs Form 10-K for the year ended December 31, 2013, Commission file number 1-10323, and incorporated herein by reference) | ||
*10.53 | UAL | United Continental Holdings, Inc. Executive Severance Plan (effective October 1, 2014) (filed as Exhibit 10.1 to UALs Form 8-K filed June 20, 2014, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.54 | UAL United |
Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.27 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.55 | UAL United |
Letter Agreement No. 1 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.28 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.56 | UAL United |
Letter Agreement No. 2 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.29 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.57 | UAL United |
Amended and Restated Letter Agreement No. 2 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.9 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) |
119
*^10.58 | UAL United |
Letter Agreement No. 3 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.30 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.59 | UAL United |
Amended and Restated Letter Agreement No. 3 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.10 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.60 | UAL United |
Letter Agreement No. 4 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.31 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.61 | UAL United |
Amended and Restated Letter Agreement No. 4 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.11 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.62 | UAL United |
Letter Agreement No. 5 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.32 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.63 | UAL United |
Letter Agreement No. 6 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.33 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.64 | UAL United |
Letter Agreement No. 7 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.34 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.65 | UAL United |
Letter Agreement No. 8 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.35 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.66 | UAL United |
Letter Agreement No. 9 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.36 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.67 | UAL United |
Letter Agreement No. 10 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.37 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.68 | UAL United |
Letter Agreement No. 11 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.38 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.69 | UAL United |
Letter Agreement No. 12 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.39 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) |
120
*^10.70 | UAL United |
Letter Agreement No. 13 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.40 to UALs Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.71 | UAL United |
Amendment No. 1 to the Airbus A350-900XWB Purchase Agreement, dated June 25, 2010, by and among Airbus S.A.S and United Air Lines, Inc. (filed as Exhibit 10.6 to UALs Form 10-Q for the quarter ended June 30, 2010, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.72 | UAL United |
Amendment No. 2 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.8 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.73 | UAL United |
Amended and Restated Letter Agreement No. 5 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.12 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.74 | UAL United |
Amended and Restated Letter Agreement No. 6 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.13 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.75 | UAL United |
Amended and Restated Letter Agreement No. 7 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.14 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.76 | UAL United |
Amended and Restated Letter Agreement No. 10 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.15 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.77 | UAL United |
Amended and Restated Letter Agreement No. 12 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.16 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.78 | UAL United |
Letter Agreement No. 14 to the Airbus A350-900XWB Purchase Agreement, dated May 6, 2016, between Airbus S.A.S. and United Airlines, Inc. (filed as Exhibit 10.6 to UALs Form 10-Q for the quarter ended June 30, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.79 | UAL United |
Purchase Agreement No. 1951, including exhibits and side letters thereto, dated July 23, 1996, by and among Continental and Boeing (filed as Exhibit 10.8 to Continentals Form 10-Q for the quarter ended June 30, 1996, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.80 | UAL United |
Supplemental Agreement No. 1 to Purchase Agreement No. 1951, dated October 10, 1996 (filed as Exhibit 10.14(a) to Continentals Form 10-K for the year ended December 31, 1996, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.81 | UAL United |
Supplemental Agreement No. 2 to Purchase Agreement No. 1951, dated March 5, 1997 (filed as Exhibit 10.3 to Continentals Form 10-Q for the quarter ended March 31, 1997, Commission file number 1-10323 and incorporated herein by reference) |
121
*^10.82 | UAL United |
Supplemental Agreement No. 3, including exhibit and side letter, to Purchase Agreement No. 1951, dated July 17, 1997 (filed as Exhibit 10.14(c) to Continentals Form 10-K for the year ended December 31, 1997, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.83 | UAL United |
Supplemental Agreement No. 4, including exhibits and side letters, to Purchase Agreement No. 1951, dated October 10, 1997 (filed as Exhibit 10.14(d) to Continentals Form 10-K for the year ended December 31, 1997, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.84 | UAL United |
Supplemental Agreement No. 5, including exhibits and side letters, to Purchase Agreement No. 1951, dated October 10, 1997 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended June 30, 1998, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.85 | UAL United |
Supplemental Agreement No. 6, including exhibits and side letters, to Purchase Agreement No. 1951, dated July 30, 1998 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended September 30, 1998, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.86 | UAL United |
Supplemental Agreement No. 7, including side letters, to Purchase Agreement No. 1951, dated November 12, 1998 (filed as Exhibit 10.24(g) to Continentals Form 10-K for the year ended December 31, 2008, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.87 | UAL United |
Supplemental Agreement No. 8, including side letters, to Purchase Agreement No. 1951, dated December 7, 1998 (filed as Exhibit 10.24(h) to Continentals Form 10-K for the year ended December 31, 2008, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.88 | UAL United |
Letter Agreement No. 6-1162-GOC-131R1 to Purchase Agreement No. 1951, dated March 26, 1998 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended March 31, 1998, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.89 | UAL United |
Supplemental Agreement No. 9, including side letters, to Purchase Agreement No. 1951, dated February 18, 1999 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended March 31, 1999, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.90 | UAL United |
Supplemental Agreement No. 10, including side letters, to Purchase Agreement No. 1951, dated March 19, 1999 (filed as Exhibit 10.4(a) to Continentals Form 10-Q for the quarter ended March 31, 1999, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.91 | UAL United |
Supplemental Agreement No. 11, including side letters, to Purchase Agreement No. 1951, dated March 14, 1999 (filed as Exhibit 10.4(a) to Continentals Form 10-Q for the quarter ended June 30, 1999, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.92 | UAL United |
Supplemental Agreement No. 12, including side letters, to Purchase Agreement No. 1951, dated July 2, 1999 (filed as Exhibit 10.8 to Continentals Form 10-Q for the quarter ended September 30, 1999, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.93 | UAL United |
Supplemental Agreement No. 13 to Purchase Agreement No. 1951, dated October 13, 1999 (filed as Exhibit 10.25(n) to Continentals Form 10-K for the year ended December 31, 1999, Commission file number 1-10323, and incorporated herein by reference) |
122
*^10.94 | UAL United |
Supplemental Agreement No. 14 to Purchase Agreement No. 1951, dated December 13, 1999 (filed as Exhibit 10.25(o) to Continentals Form 10-K for the year ended December 31, 1999, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.95 | UAL United |
Supplemental Agreement No. 15, including side letters, to Purchase Agreement No. 1951, dated January 13, 2000 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended March 31, 2000, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.96 | UAL United |
Supplemental Agreement No. 16, including side letters, to Purchase Agreement No. 1951, dated March 17, 2000 (filed as Exhibit 10.2 to Continentals Form 10-Q for the quarter ended March 31, 2000, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.97 | UAL United |
Supplemental Agreement No. 17, including side letters, to Purchase Agreement No. 1951, dated May 16, 2000 (filed as Exhibit 10.2 to Continentals Form 10-Q for the quarter ended June 30, 2000, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.98 | UAL United |
Supplemental Agreement No. 18, including side letters, to Purchase Agreement No. 1951, dated September 11, 2000 (filed as Exhibit 10.6 to Continentals Form 10-Q for the quarter ended September 30, 2000, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.99 | UAL United |
Supplemental Agreement No. 19, including side letters, to Purchase Agreement No. 1951, dated October 31, 2000 (filed as Exhibit 10.20(t) to Continentals Form 10-K for the year ended December 31, 2000, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.100 | UAL United |
Supplemental Agreement No. 20, including side letters, to Purchase Agreement No. 1951, dated December 21, 2000 (filed as Exhibit 10.20(u) to Continentals Form 10-K for the year ended December 31, 2000, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.101 | UAL United |
Supplemental Agreement No. 21, including side letters, to Purchase Agreement No. 1951, dated March 30, 2001 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended March 31, 2001, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.102 | UAL United |
Supplemental Agreement No. 22, including side letters, to Purchase Agreement No. 1951, dated May 23, 2001 (filed as Exhibit 10.3 to Continentals Form 10-Q for the quarter ended June 30, 2001, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.103 | UAL United |
Supplemental Agreement No. 23, including side letters, to Purchase Agreement No. 1951, dated June 29, 2001 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended June 30, 2001, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.104 | UAL United |
Supplemental Agreement No. 24, including side letters, to Purchase Agreement No. 1951, dated August 31, 2001 (filed as Exhibit 10.11 to Continentals Form 10-Q for the quarter ended September 30, 2001, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.105 | UAL United |
Supplemental Agreement No. 25, including side letters, to Purchase Agreement No. 1951, dated December 31, 2001 (filed as Exhibit 10.22(z) to Continentals Form 10-K for the year ended December 31, 2001, Commission file number 1-10323, and incorporated herein by reference) |
123
*^10.106 | UAL United |
Supplemental Agreement No. 26, including side letters, to Purchase Agreement No. 1951, dated March 29, 2002 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended March 31, 2002, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.107 | UAL United |
Supplemental Agreement No. 27, including side letters, to Purchase Agreement No. 1951, dated November 6, 2002 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended March 31, 2002, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.108 | UAL United |
Supplemental Agreement No. 28, including side letters, to Purchase Agreement No. 1951, dated April 1, 2003 (filed as Exhibit 10.2 to Continentals Form 10-Q for the quarter ended March 31, 2003, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.109 | UAL United |
Supplemental Agreement No. 29, including side letters, to Purchase Agreement No. 1951, dated August 19, 2003 (filed as Exhibit 10.2 to Continentals Form 10-Q for the quarter ended September 30, 2003, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.110 | UAL United |
Supplemental Agreement No. 30 to Purchase Agreement No. 1951, dated November 4, 2003 (filed as Exhibit 10.23(ae) to Continentals Form 10-K for the year ended December 31, 2003, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.111 | UAL United |
Supplemental Agreement No. 31 to Purchase Agreement No. 1951, dated August 20, 2004 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended September 30, 2004, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.112 | UAL United |
Supplemental Agreement No. 32, including side letters, to Purchase Agreement No. 1951, dated December 29, 2004 (filed as Exhibit 10.21(ag) to Continentals Form 10-K for the year ended December 31, 2004, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.113 | UAL United |
Supplemental Agreement No. 33, including side letters, to Purchase Agreement No. 1951, dated December 29, 2004 (filed as Exhibit 10.21(ah) to Continentals Form 10-K for the year ended December 31, 2004, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.114 | UAL United |
Supplemental Agreement No. 34 to Purchase Agreement No. 1951, dated June 22, 2005 (filed as Exhibit 10.3 to Continentals Form 10-Q for the quarter ended June 30, 2005, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.115 | UAL United |
Supplemental Agreement No. 35 to Purchase Agreement No. 1951, dated June 30, 2005 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended June 30, 2005, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.116 | UAL United |
Supplemental Agreement No. 36 to Purchase Agreement No. 1951, dated July 28, 2005 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended September 30, 2005, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.117 | UAL United |
Supplemental Agreement No. 37 to Purchase Agreement No. 1951, dated March 30, 2006 (filed as Exhibit 10.2 to Continentals Form 10-Q for the quarter ended March 31, 2006, Commission file number 1-10323, and incorporated herein by reference) |
124
*^10.118 | UAL United |
Supplemental Agreement No. 38 to Purchase Agreement No. 1951, dated June 6, 2006 (filed as Exhibit 10.3 to Continentals Form 10-Q for the quarter ended June 30, 2006, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.119 | UAL United |
Supplemental Agreement No. 39 to Purchase Agreement No. 1951, dated August 3, 2006 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended September 30, 2006, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.120 | UAL United |
Supplemental Agreement No. 40 to Purchase Agreement No. 1951, dated December 5, 2006 (filed as Exhibit 10.23(ao) to Continentals Form 10-K for the year ended December 31, 2006, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.121 | UAL United |
Supplemental Agreement No. 41 to Purchase Agreement No. 1951, dated June 1, 2007 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended June 30, 2007, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.122 | UAL United |
Supplemental Agreement No. 42 to Purchase Agreement No. 1951, dated June 12, 2007 (filed as Exhibit 10.2 to Continentals Form 10-Q for the quarter ended June 30, 2007, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.123 | UAL United |
Supplemental Agreement No. 43 to Purchase Agreement No. 1951, dated July 18, 2007 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended September 30, 2007, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.124 | UAL United |
Supplemental Agreement No. 44 to Purchase Agreement No. 1951, dated December 7, 2007 (filed as Exhibit 10.21(as) to Continentals Form 10-K for the year ended December 31, 2007, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.125 | UAL United |
Supplemental Agreement No. 45 to Purchase Agreement No. 1951, dated February 20, 2008 (filed as Exhibit 10.2 to Continentals Form 10-Q for the quarter ended March 31, 2008, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.126 | UAL United |
Supplemental Agreement No. 46 to Purchase Agreement No. 1951, dated June 25, 2008 (filed as Exhibit 10.5 to Continentals Form 10-Q for the quarter ended June 30, 2008, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.127 | UAL United |
Supplemental Agreement No. 47 to Purchase Agreement No. 1951, dated October 30, 2008 (filed as Exhibit 10.21(av) to Continentals Form 10-K for the year ended December 31, 2008, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.128 | UAL United |
Supplemental Agreement No. 48 to Purchase Agreement No. 1951, dated January 29, 2009 (filed as Exhibit 10.3 to Continentals Form 10-Q for the quarter ended June 30, 2009, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.129 | UAL United |
Supplemental Agreement No. 49 to Purchase Agreement No. 1951, dated May 1, 2009 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended June 30, 2009, Commission file number 1-10323, and incorporated herein by reference) |
125
*^10.130 | UAL United |
Supplemental Agreement No. 50 to Purchase Agreement No. 1951, dated July 23, 2009 (filed as Exhibit 10.2 to Continentals Form 10-Q for the quarter ended September 30, 2009, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.131 | UAL United |
Supplemental Agreement No. 51 to Purchase Agreement No. 1951, dated August 5, 2009 (filed as Exhibit 10.3 to Continentals Form 10-Q for the quarter ended September 30, 2009, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.132 | UAL United |
Supplemental Agreement No. 52 to Purchase Agreement No. 1951, dated August 31, 2009 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended September 30, 2009, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.133 | UAL United |
Supplemental Agreement No. 53 to Purchase Agreement No. 1951, dated December 23, 2009 (filed as Exhibit 10.22(bb) to Continentals Form 10-K for the year ended December 31, 2009, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.134 | UAL United |
Supplemental Agreement No. 54 to Purchase Agreement No. 1951, dated March 2, 2010 (filed as Exhibit 10.2 to Continentals Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.135 | UAL United |
Supplemental Agreement No. 55 to Purchase Agreement No. 1951, dated March 31, 2010 (filed as Exhibit 10.3 to Continentals Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.136 | UAL United |
Supplemental Agreement No. 56 to Purchase Agreement No. 1951, dated August 12, 2010 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended September 30, 2010, Commission File Number 1-10323, and incorporated herein by reference) | ||
*^10.137 | UAL United |
Supplemental Agreement No. 57 to Purchase Agreement No. 1951, dated March 2, 2011 (filed as Exhibit 10.1 to UALs Form 10-Q for the quarter ended March 31, 2011, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.138 | UAL United |
Supplemental Agreement No. 58 to Purchase Agreement No. 1951, dated January 6, 2012 (filed as Exhibit 10.1 to UALs Form 10-Q for the quarter ended March 31, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.139 | UAL United |
Supplemental Agreement No. 59 to Purchase Agreement No. 1951, dated July 12, 2012 (filed as Exhibit 10.5 to UALs Form 10-Q for the quarter ended June 30, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.140 | UAL United |
Supplemental Agreement No. 60 to Purchase Agreement No. 1951, dated November 7, 2012 (filed as Exhibit 10.2 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.141 | UAL United |
Supplemental Agreement No. 61 to Purchase Agreement No. 1951, dated September 11, 2013 (filed as Exhibit 10.1 for the quarter ended September 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.142 | UAL United |
Supplemental Agreement No. 62 to Purchase Agreement No. 1951, dated January 14, 2015 (filed as Exhibit 10.3 for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference) |
126
*^10.143 | UAL United |
Supplemental Agreement No. 63 to Purchase Agreement No. 1951, dated May 26, 2015 (filed as Exhibit 10.1 for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.144 | UAL United |
Supplemental Agreement No. 64 to Purchase Agreement No. 1951, dated June 12, 2015 (filed as Exhibit 10.2 for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.145 | UAL United |
Aircraft General Terms Agreement, dated October 10, 1997, by and among Continental and Boeing (filed as Exhibit 10.15 to Continentals Form 10-K for the year ended December 31, 1997, Commission File Number 1-10323, and incorporated herein by reference) | ||
*^10.146 | UAL United |
Letter Agreement 6-1162-CHL-048, dated February 8, 2002, by and among Continental and Boeing (filed as Exhibit 10.44 to Continentals Form 10-K for the year ended December 31, 2001, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.147 | UAL United |
Purchase Agreement No. 2484, including exhibits and side letters, dated December 29, 2004, by and among Continental and Boeing (filed as Exhibit 10.27 to Continentals Form 10-K for the year ended December 31, 2004, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.148 | UAL United |
Supplemental Agreement No. 1 to Purchase Agreement No. 2484, dated June 30, 2005 (filed as Exhibit 10.5 to Continentals Form 10-Q for the quarter ended June 30, 2005, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.149 | UAL United |
Supplemental Agreement No. 2, including exhibits and side letters, to Purchase Agreement No. 2484, dated January 20, 2006 (filed as Exhibit 10.27(b) to Continentals Form 10-K for the year ended December 31, 2005, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.150 | UAL United |
Supplemental Agreement No. 3 to Purchase Agreement No. 2484, dated May 3, 2006 (filed as Exhibit 10.4 to Continentals Form 10-Q for the quarter ended June 30, 2006, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.151 | UAL United |
Supplemental Agreement No. 4 to Purchase Agreement No. 2484, dated July 14, 2006 (filed as Exhibit 10.5 to Continentals Form 10-Q for the quarter ended September 30, 2006, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.152 | UAL United |
Supplemental Agreement No. 5 to Purchase Agreement No. 2484, dated March 12, 2007 (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended March 31, 2007, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.153 | UAL United |
Supplemental Agreement No. 6 to Purchase Agreement No. 2484, dated October 22, 2008 (filed as Exhibit 10.25(f) to Continentals Form 10-K for the year ended December 31, 2008, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.154 | UAL United |
Supplemental Agreement No. 7 to Purchase Agreement No. 2484, dated November 7, 2012 (filed as Exhibit 10.179 to UALs Form 10-K for the year ended December 31, 2012, Commission file number 1-6033, and incorporated herein by reference) |
127
*^10.155 | UAL United |
Supplemental Agreement No. 8 to Purchase Agreement No. 2484, dated June 17, 2013 (filed as Exhibit 10.4 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.156 | UAL United |
Supplemental Agreement No. 9 to Purchase Agreement No. 2484, dated June 6, 2014 (filed as Exhibit 10.4 to UALs Form 10-Q for the quarter ended June 30, 2014, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.157 | UAL United |
Supplemental Agreement No. 10 to Purchase Agreement No. 2484, dated January 14, 2015 (filed as Exhibit 10.4 to UALs Form 10-Q for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.158 | UAL United |
Supplemental Agreement No. 11 to Purchase Agreement No. 2484, dated April 30, 2015 (filed as Exhibit 10.3 to UALs Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.159 | UAL United |
Amended and Restated Letter Agreement No. 11, dated August 8, 2005, by and among Continental and General Electric Company (filed as Exhibit 10.3 to Continentals Form 10-Q for the quarter ended September 30, 2005, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.160 | UAL United |
Agreement, dated May 7, 2003, by and among Continental and the United States of America, acting through the Transportation Security Administration (filed as Exhibit 10.1 to Continentals Form 10-Q for the quarter ended June 30, 2003, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.161 | UAL United |
Purchase Agreement No. PA-03784, dated July 12, 2012, between The Boeing Company and United Air Lines, Inc. (filed as Exhibit 10.1 to UALs Form 10-Q for the quarter ended September 30, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.162 | UAL United |
Supplemental Agreement No. 01 to Purchase Agreement No. PA-03784, dated September 27, 2012 (filed as Exhibit 10.1 to UALs Form 10-Q for the quarter ended September 30, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.163 | UAL United |
Supplemental Agreement No. 02 to Purchase Agreement Number PA-03784, dated March 1, 2013 (filed as Exhibit 10.3 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.164 | UAL United |
Supplemental Agreement No. 03 to Purchase Agreement Number PA-03784, dated June 27, 2013 (filed as Exhibit 10.7 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.165 | UAL United |
Supplemental Agreement No. 04 to Purchase Agreement Number PA-03784, dated September 11, 2013 (filed as Exhibit 10.2 to UALs Form 10-Q for the quarter ended September 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.166 | UAL United |
Supplemental Agreement No. 05 to Purchase Agreement Number PA-03784, dated March 3, 2014 (filed as Exhibit 10.2 to UALs Form 10-Q for the quarter ended June 30, 2014, Commission file number 1-6033 and incorporated herein by reference) |
128
*^10.167 | UAL United |
Supplemental Agreement No. 06 to Purchase Agreement Number PA-03784, dated June 6, 2014 (filed as Exhibit 10.3 to UALs Form 10-Q for the quarter ended June 30, 2014, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.168 | UAL United |
Supplemental Agreement No. 07 to Purchase Agreement Number PA-03784, dated May 26, 2015 (filed as Exhibit 10.6 to UALs Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323 and incorporated herein by reference) | ||
*^10.169 | UAL United |
Supplemental Agreement No. 08 to Purchase Agreement Number PA-03784, dated June 12, 2015 (filed as Exhibit 10.7 to UALs Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323 and incorporated herein by reference) | ||
*^10.170 | UAL United |
Supplemental Agreement No. 9 to Purchase Agreement No. 03784, dated January 20, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.2 to UALs Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.171 | UAL United |
Supplemental Agreement No. 10 to Purchase Agreement No. 03784, dated February 8, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.4 to UALs Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.172 | UAL United |
Supplemental Agreement No. 11 to Purchase Agreement Number No. 03784, dated March 7, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.6 to UALs Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.173 | UAL United |
Supplemental Agreement No. 12 to Purchase Agreement No. 03784, dated June 24, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.7 to UALs Form 10-Q for the quarter ended June 30, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
^10.174 | UAL United |
Supplemental Agreement No. 13 to Purchase Agreement No. 03784, dated December 27, 2016, between The Boeing Company and United Airlines, Inc. | ||
*^10.175 | UAL United |
Purchase Agreement No. PA-03776, dated July 12, 2012, between The Boeing Company and United Continental Holdings, Inc. (filed as Exhibit 10.3 to UALs Form 10-Q for the quarter ended September 30, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.176 | UAL United |
Supplemental Agreement No. 01 to Purchase Agreement No. 03776, dated June 17, 2013 (filed as Exhibit 10.5 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.177 | UAL United |
Purchase Agreement Assignment to Purchase Agreement No. 03776, dated October 23, 2013, between United Continental Holdings, Inc. and United Airlines, Inc. (filed as Exhibit 10.3 to UALs Form 10-Q for the quarter ended September 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.178 | UAL United |
Supplemental Agreement No. 02 to Purchase Agreement No. 03776, dated January 14, 2015 (filed as Exhibit 10.5 to UALs Form 10-Q for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.179 | UAL United |
Supplemental Agreement No. 03 to Purchase Agreement No. 03776, dated May 26, 2015 (filed as Exhibit 10.4 to UALs Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference) |
129
*^10.180 | UAL United |
Supplemental Agreement No. 04 to Purchase Agreement No. 03776, dated June 12, 2015 (filed as Exhibit 10.5 to UALs Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference) | ||
*^10.181 | UAL United |
Supplemental Agreement No. 5 to Purchase Agreement No. 03776, dated January 20, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.1 to UALs Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.182 | UAL United |
Supplemental Agreement No. 6 to Purchase Agreement No. 03776, dated February 8, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.3 to UALs Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
^10.183 | UAL United |
Supplemental Agreement No. 7 to Purchase Agreement No. 03776, dated December 27, 2016, between The Boeing Company and United Airlines, Inc. | ||
*^10.184 | UAL United |
Letter Agreement No. 6-1162-KKT-080, dated July 12, 2012, among Boeing, United Continental Holdings, Inc., United Air Lines, Inc., and Continental Airlines, Inc. (filed as Exhibit 10.4 to UALs Form 10-Q for the quarter ended September 30, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.185 | UAL United |
Purchase Agreement No. 3860, dated September 27, 2012, between Boeing and United Air Lines, Inc. (filed as Exhibit 10.6 to UALs Form 10-Q for the quarter ended September 30, 2012, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.186 | UAL United |
Supplemental Agreement No. 1 to Purchase Agreement No. 3860, dated June 17, 2013 (filed as Exhibit 10.6 to UALs Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*^10.187 | UAL United |
Supplemental Agreement No. 2 to Purchase Agreement No. 3860, dated December 16, 2013 (filed as Exhibit 10.1 to UALs Form 10-Q for the quarter ended June 30, 2014, Commission file number 1-6033, and incorporated by reference) | ||
*^10.188 | UAL United |
Supplemental Agreement No. 3 to Purchase Agreement No. 3860, dated as of July 22, 2014 (filed as Exhibit 10.3 to UALs Form 10-Q for the quarter ended September 30, 2014, Commission file number 1-6033, and incorporated by reference) | ||
*^10.189 | UAL United |
Supplemental Agreement No. 4 to Purchase Agreement No. 3860, dated as of January 14, 2015 (filed as Exhibit 10.6 to UALs Form 10-Q for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated by reference) | ||
*^10.190 | UAL United |
Supplemental Agreement No. 5 to Purchase Agreement No. 3860, dated as of April 30, 2015 (filed as Exhibit 10.8 to UALs Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated by reference) | ||
*^10.191 | UAL United |
Supplemental Agreement No. 6 to Purchase Agreement No. 3860, dated as of December 31, 2015 (filed as Exhibit 10.178 to UALs Form 10-K for the year ended December 31, 2015, Commission file number 1-6033, and incorporated by reference) | ||
*^10.192 | UAL United |
Supplemental Agreement No. 7 to Purchase Agreement No. 3860, dated March 7, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.5 to UALs Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference) |
130
*^10.193 | UAL United |
Letter Agreement to Purchase Agreement No. 3860, dated May 5, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.5 to UALs Form 10-Q for the quarter ended June 30, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
^10.194 | UAL United |
Letter Agreement No. UAL-LA-1604287 to Purchase Agreement Nos. 3776, 3784 and 3860, dated December 27, 2016, between The Boeing Company and United Airlines, Inc. | ||
*10.195 | UAL United |
Credit and Guaranty Agreement, dated as of March 27, 2013, among Continental Airlines, Inc. and United Air Lines, Inc., as co-borrowers, United Continental Holdings, Inc., as parent and a guarantor, the subsidiaries of United Continental Holdings, Inc. other than the co-borrowers party thereto from time to time, as guarantors, the lenders party thereto from time to time, and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.1 to UALs Form 8-K filed March 28, 2013, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.196 | UAL United |
First Amendment to Credit and Guaranty Agreement, dated as of March 27, 2014 (filed as Exhibit 10.1 to UALs Form 10-Q for the quarter ended March 31, 2014, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.197 | UAL United |
Second Amendment to Credit and Guaranty Agreement, dated as of July 25, 2014 (filed as Exhibit 10.1 to UALs Form 8-K filed September 19, 2014, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.198 | UAL United |
Third Amendment to Credit and Guaranty Agreement, dated as of September 15, 2014 (filed as Exhibit 10.2 to UALs Form 8-K filed September 19, 2014, Commission file number 1-6033, and incorporated herein by reference) | ||
*10.199 | UAL United |
Fourth Amendment to Credit and Guaranty Agreement, dated as of May 24, 2016 (filed as Exhibit 10.4 to UALs Form 10-Q for the quarter ended June 30, 2016, Commission file number 1-6033, and incorporated herein by reference) | ||
Computation of Ratios | ||||
12.1 | UAL | United Continental Holdings, Inc. and Subsidiary Companies Computation of Ratio of Earnings to Fixed Charges | ||
12.2 | United | United Airlines, Inc. and Subsidiary Companies Computation of Ratio of Earnings to Fixed Charges | ||
List of Subsidiaries | ||||
21 | UAL United |
List of United Continental Holdings, Inc. and United Airlines, Inc. Subsidiaries | ||
Consents of Experts and Counsel | ||||
23.1 | UAL | Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP) for United Continental Holdings, Inc. | ||
23.2 | United | Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP) for United Airlines, Inc. | ||
Rule 13a-14(a)/15d-14(a) Certifications | ||||
31.1 | UAL | Certification of the Principal Executive Officer of United Continental Holdings, Inc. pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002) |
131
31.2 | UAL | Certification of the Principal Financial Officer of United Continental Holdings, Inc. pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002) | ||
31.3 | United | Certification of the Principal Executive Officer of United Airlines, Inc. pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002) | ||
31.4 | United | Certification of the Principal Financial Officer of United Airlines, Inc. pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002) | ||
Section 1350 Certifications | ||||
32.1 | UAL | Certification of the Chief Executive Officer and Chief Financial Officer of United Continental Holdings, Inc. pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) | ||
32.2 | United | Certification of the Chief Executive Officer and Chief Financial Officer of United Airlines, Inc. pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) | ||
Interactive Data File | ||||
101 | UAL United |
The following materials from each of United Continental Holdings, Inc.s and United Airlines, Inc.s Annual Reports on Form 10-K for the year ended December 31, 2016, formatted in XBRL (Extensible Business Reporting Language): (i) the Statements of Consolidated Operations, (ii) the Statements of Consolidated Comprehensive Income (Loss), (iii) the Consolidated Balance Sheets, (iv) the Statements of Consolidated Cash Flows, (v) the Statements of Consolidated Stockholders Equity (Deficit) and (vi) the Combined Notes to Consolidated Financial Statements. |
* | Previously filed. |
| Indicates management contract or compensatory plan or arrangement. Pursuant to Item 601(b)(10), United and Continental are permitted to omit certain compensation-related exhibits from this report and therefore only UAL is identified as the registrant for purposes of those items. |
^ | Confidential portion of this exhibit has been omitted and filed separately with the SEC pursuant to a request for confidential treatment. |
132
Exhibit 10.2
UNITED CONTINENTAL HOLDINGS, INC.
PROFIT SHARING PLAN
(Amended and Restated Effective January 1, 2016,
Except As Otherwise Provided Herein)
I. General
A. | Purpose. United Continental Holdings, Inc. (the Company) sponsors this United Continental Holdings, Inc. Profit Sharing Plan (the Plan) for the benefit of certain employees of United Air Lines, Inc., Continental Airlines, Inc., and other participating Affiliates. |
B. | Collective Bargaining. As it relates to Qualified Employees who are in the class or craft of employees covered by a collective bargaining agreement with the Employer pursuant to which the Employer has agreed to provide such Qualified Employees with participation in a profit sharing bonus plan, this Plan is maintained pursuant to such agreement. |
C. | Cash Bonus Plan. The Plan is a cash bonus plan and is not intended to be (and will not be construed or administered as) an employee benefit plan within the meaning of ERISA. The Plan is intended to be a discretionary cash bonus plan and payments under the Plan will not constitute a part of an employees regular rate of pay for any purpose; provided, however, all Awards will be paid to Qualified Employees in accordance with the terms of the Plan and the applicable collective bargaining agreements. Except to the extent specifically provided under a particular pension, insurance, profit sharing, retirement, welfare or other employee benefit plan or arrangement maintained or contributed to by the Company or an Affiliate, the payments to an employee under the Plan will not be treated as salary, wages, or cash compensation to the employee for the purpose of computing benefits to which the employee may be entitled under any such plan or arrangement. |
D. | Effective Date. The Plan commenced on January 1, 2006 as the UAL Corporation Success Sharing Program Profit Sharing Plan, was previously amended and restated effective January 1, 2011, and again effective January 1, 2014, and is hereby amended and restated effective January 1, 2016, to incorporate the requirements of certain collective bargaining agreements. This amendment and restatement is effective for the 2016 Plan Year and future Plan Years, except as otherwise stated herein, and does not apply to 2015 Plan Year profit sharing payments made in 2016. |
E. | Term. The provisions of the Plan shall continue indefinitely subject to termination by the Company, or, as it relates to any Qualified Employees who are in the class or craft of employees covered by a collective bargaining agreement with the Employer pursuant to which the Employer has agreed to provide such Qualified Employees with participation in a profit sharing bonus plan, subject to termination pursuant to the terms of such collective bargaining agreement. |
UCH PSP | January 1, 2016 (FINAL) |
F. | Definitions. Unless otherwise specified, the capitalized terms under the Plan have the meanings given below: |
Affiliate. Affiliate means any entity, corporate or otherwise, in which the Company, directly or indirectly, owns or controls a greater than 80% interest.
Award. Award means the dollar value of the award payable to a Qualified Employee for an Award Year as determined under the Plan.
Award Year. Award Year means the Plan Year for which a profit sharing Award, if any, is determined under the Plan.
Base Percentage A. Base Percentage A means the percentage determined in accordance with Section III.B.1.
Base Percentage B. Base Percentage B means the percentage determined in accordance with Section III.B.2.
Board. Board means the Board of Directors of the Company.
Code. Code means the Internal Revenue Code of 1986, as amended (including, when the context requires, all regulations, interpretations and rulings issued thereunder).
Committee. Committee means the Compensation Committee of the Board or such other committee appointed by the Board to exercise the powers and perform the duties assigned to the Compensation Committee under this Plan.
Company. Company means United Continental Holdings, Inc.
Disability. Disability means the Qualified Employee has been determined to be disabled under the Employers long-term disability plan in which such Qualified Employee participates, under the union-sponsored long-term disability plan in which such Qualified Employee participates, or by the Company pursuant to Plan Rules.
Domestic Employee. Domestic Employee means any regular full-time or regular part-time U.S. employee of an Employer, and also includes (1) any internationally based flight attendant covered by the collective bargaining agreement between United Air Lines, Inc. and the Association of Flight Attendants, (2) any employee of Continental Micronesia, Inc. on the U.S. payroll, and (3) any employee designated by the Employer as an expatriate.
Employer. Employer means United Airlines, Inc., Continental Airlines, Inc., Continental Micronesia, Inc., Mileage Plus, Inc., and any other Affiliate which is designated by the Company from time to time as participating in the Plan.
ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as from time to time amended, including any related regulations.
UCH PSP | 2 | January 1, 2016 (FINAL) |
Furlough. Furlough means a Qualified Employees termination of employment with the Employer in connection with which such Qualified Employee has reemployment rights, or, in the case of a Qualified Employee who is in a class or craft of employees covered by a collective bargaining agreement with the Employer pursuant to which the Employer has agreed to provide such Qualified Employees with participation in a profit sharing bonus plan, such other employment action as may be defined as a furlough in the applicable collective bargaining agreement.
International Employee. International Employee means any regular full-time or regular part-time employee of an Employer whose regular work is in a location outside of the United States, but does not include (1) any internationally based flight attendant covered by the collective bargaining agreement between United Air Lines, Inc. and AFA, (2) any employee of Continental Micronesia, Inc. on the U.S. payroll, or (3) any employee designated by the Company as an expatriate. In addition, any full-time or regular part-time employee who is not classified by an Employer as a U.S. employee shall be considered an International Employee.
Management and Administrative Employee Group. Management and Administrative Employee Group means those Domestic Employees of the Employer (i) who are classified by the Employer as management and administrative employees (on other than a temporary reclassification basis), (ii) whose employment is for an indefinite period, and (iii) who are employed in an Employer established job classification not covered by a collective bargaining agreement. In addition, the term Management and Administrative Employee Group includes any class or craft of U.S. employees who are not covered by a collective bargaining agreement between an Employer and a union and who are not classified by the Employer as management and administrative employees but who nevertheless generally receive the same benefits as the Management and Administrative Employee Group.
Officer. Officer means (i) an officer of the Company as such term is defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended (Rule 16a-1(f)), or (ii) a designated senior officer of the subsidiaries of the Company, including any officer of United Air Lines, Inc. or Continental Airlines, Inc. who is an officer of the Company under Rule 16a-1(f) or who reports directly to the Chairman or the CEO.
Participating Employee Group. Each employee group set forth in Appendix B is a Participating Employee Group. Expressly excluded from the definition are: (i) any class or craft of employees represented by a union but not covered by an agreement between an Employer and such union expressly providing for coverage under a Company-sponsored (or Employer-sponsored) profit sharing plan; and (ii) International Employees. In the event of any conflict between Appendix B and a collective bargaining agreement, the collective bargaining agreement shall govern.
Plan. Plan means the United Continental Holdings, Inc. Profit Sharing Plan as set forth herein. The Plan is an amendment and restatement of the UAL Corporation Success Sharing Program Profit Sharing Plan.
UCH PSP | 3 | January 1, 2016 (FINAL) |
Plan Rules. Plan Rules means rules, procedures, policies or practices established by the Company (or the Committee) with respect to the administration of the Plan, which need not be reflected in a written instrument and may be changed at any time without notice.
Plan Year. Plan Year means the 12-month period that corresponds to the Companys fiscal year.
Pre-Tax Margin. Pre-Tax Margin means Pre-Tax Profit divided by Total Revenue as determined under U.S. generally accepted accounting principles.
Pre-Tax Profit. Pre-Tax Profit means the Companys consolidated net income as determined under U.S. generally accepted accounting principles, but excluding as determined by the Committee: (i) consolidated federal, state and local income tax expense (or credit); (ii) unusual, special, or non-recurring charges, (iii) charges with respect to the grant, exercise or vesting of equity, securities or options granted to employees of the Company or any Affiliate, and (iv) expense associated with the profit sharing contributions.
Qualified Employee. Qualified Employee means a Domestic Employee of an Employer who, in accordance with the Employers personnel policies, has completed a year of service as of December 31 of the Award Year and satisfies the eligibility requirements of Section II.A.
Retirement. Retirement means the Employee has retired in accordance with the Employers employment policies and regulations, including under an early out program in which the Company specifies (or otherwise determines in its sole discretion) that the Employee is to be considered retired for purposes of this Plan.
Total Revenue. Total Revenue means the Companys consolidated total revenue as determined under U.S. generally accepted accounting principles, but excluding, as determined by the Committee, any unusual, special or non-recurring revenue item.
Wages. Wages has the meaning provided in Section III.C.
II. Participation.
A. | Eligibility. A Qualified Employee who is employed for any portion of an Award Year is eligible to receive payment of an Award for such Award Year, unless (1) prior to the end of the Award Year he or she voluntarily terminates employment or (2) prior to the payment date he or she is terminated for cause as determined by the Company. Termination of employment due to other reasons, such as involuntary termination (not for cause), voluntary termination after the end of the Award Year, death, Disability, Retirement, or Furlough do not disqualify a Qualified Employee from receiving payment of an Award for an Award Year. |
B. | Employee Classifications. The classification by an Employer of an individual as an |
UCH PSP | 4 | January 1, 2016 (FINAL) |
employee of an Employer within the meaning of the Plan, or as a person who is not an employee of an Employer or as being within a particular employee classification will be conclusive for all purposes of this Plan. For purposes of this Plan, a temporary reclassification or special assignment will be disregarded for purposes of determining a Qualified Employees classification. No reclassification of an individual as an employee of an Employer, whether by judicial or administrative action or otherwise, will be effective to qualify the individual as a Qualified Employee under this Plan except as the Company agrees, and no reclassification will be given retroactive effect, except as the Company agrees. |
III. Profit Sharing Awards.
A. | Annual Threshold. After the end of each Award Year, if the Companys Pre-Tax Profit for that year exceeds ten million dollars ($10,000,000), Awards will be determined in accordance with Section III.B. If this threshold is not met, no Awards will be payable under the Plan for the Award Year. |
B. | Determination of Awards. Awards will be determined as follows: |
1. | Determination of Base Percentage A: Base Percentage A is equal to one percent (1%) of Pre-Tax Profit up to and including a Pre-Tax Margin of 6.9%, divided by the total Wages of all Qualified Employees of the Employers for the Award Year. Notwithstanding the foregoing, for the group of Qualified Employees covered by the collective bargaining agreement between the Company and the Association of Flight Attendants CWA, Base Percentage A is equal to one percent (1%) of Pre-Tax Profit up to and including Pre-Tax Profit for the previous Plan Year. |
2. | Determination of Base Percentage B: Base Percentage B is equal to one percent (1%) of Pre-Tax Profit in excess of a Pre-Tax Margin of 6.9%, divided by the total Wages of all Qualified Employees of the Employers for the Award Year. Notwithstanding the foregoing, for the group of Qualified Employees covered by the collective bargaining agreement between the Company and the Association of Flight Attendants CWA, Base Percentage A is equal to one percent (1%) of Pre-Tax Profit in excess of Pre-Tax Profit for the previous Plan Year. |
3. | Calculation. Each Qualified Employee eligible under Section II shall be entitled to an Award equal to the following: |
a. The Qualified Employees Wages x Base Percentage A x the Factor for Base Percentage A set forth in Appendix B applicable to such Qualified Employees Participating Employee Group;
Plus
UCH PSP | 5 | January 1, 2016 (FINAL) |
b. The Qualified Employees Wages x Base Percentage B x the Factor for Base Percentage B set forth in Appendix B applicable to such Qualified Employees Participating Employee Group.
C. | Wages. Wages for a Plan Year will be determined as follows: |
1. | Compensation Included. Wages will only include compensation paid (or payable) during a Plan Year to a Qualified Employee for the period he or she is a Qualified Employee and shall include the items listed in Paragraph A-1 of Appendix A. Wages will include compensation not paid as a result of an earnings reduction election made by the Qualified Employee under a Code Sec. 125 cafeteria plan or under any qualified cash or deferred arrangement under Code Sec. 401(k). |
2. | Exclusions. Wages will not include the items of compensation or other payments listed in Paragraph A-2 of Appendix A. |
3. | Reemployment. In the event a Qualified Employee terminates employment and is reemployed by an Employer, such employees Wages will include amounts paid during the applicable Plan Year, both prior to the termination and following such reemployment. |
4. | Change of Position. In the event that a Qualified Employee transfers from one Employee Group to another Employee Group during the calendar year, the Qualified Employees Wages while a member of each Employee Group shall be distinguished and applied to the appropriate formula under Section III.B. |
5. | Determination of Wages. Subject to the provisions of Appendix A, the Companys Executive Vice President Human Resources and Labor Relations will determine, in his or her discretion (subject to a contrary requirement under any applicable collective bargaining agreement determination under any applicable collective bargaining agreement grievance procedure in the case of an employee who is in the class or craft of employees covered by a collective bargaining agreement), whether an item of compensation is included or excluded from the definition of Wages. |
D. | Time of Payment. Award payments will be made following determination of the Companys Pre-Tax Profit for the fiscal year, but not later than March 15 or as soon as administratively practicable thereafter. Notwithstanding the foregoing, the Committee may, in its reasonable discretion, vary the time for making the payments provided herein, provided such modification does not cause the payments to become subject to the tax under Section 409A of the Code. Nothing herein shall be construed to grant to any Qualified Employee who is entitled to payment of an Award or to any person claiming under or through such Qualified Employee the right to elect a modification of the time for receiving payments hereunder. |
UCH PSP | 6 | January 1, 2016 (FINAL) |
E. | Payment Methods. Each Qualified Employee entitled to an Award will receive payment of the Award in cash, subject to such employees right, if any, to elect to defer receipt of a portion of such cash payment as may be permitted under any Employer-sponsored 401(k) plan in which the Qualified Employee is eligible to participate. Payment is subject to any applicable withholding taxes and other amounts the Company reasonably determines it is obligated to withhold or deduct pursuant to federal, state or local laws. Notwithstanding the foregoing: |
1. | The Committee shall have the right, in its reasonable discretion, to vary the form of payment of Awards payable to Officers by payment in shares of the Companys common stock. In the event the Company reasonably anticipates that the Companys deduction with respect to a payment otherwise would be limited or eliminated by application of Section 162(m) of the Code, the Committee may enter into an agreement with an Officer to provide payment of an Award on a deferred basis through a bookkeeping account, the value of which may be determined by reference to the Companys common stock, provided such written deferred payment arrangement complies with the requirements of Section 409A of the Code, including the requirement that the payment be made either at the earliest date at which the Company reasonably anticipates the payment of the amount will not be limited or eliminated by application of Section 162(m) of the Code or the calendar year in which the officer separates from service with the Company and all affiliates. |
2. | Payment of Awards for any employee group shall be made as a profit sharing contribution to the applicable Employer-sponsored 401(k) plan if required under the terms of the applicable collective bargaining agreement or, in the case of the Management and Administrative Employee Group, if so determined by the Company. |
IV. Plan Administration.
A. | Plan Administration. The Company or its delegate has the authority and responsibility to manage and control the general administration of the Plan, except as to matters expressly reserved in the Plan to the Committee. Determinations, decisions and actions of the Company or, if applicable, the Committee, in connection with the construction, interpretation, administration, or application of the Plan will be final, conclusive, and binding upon any person, including any employee of any Employer, any Qualified Employee and any person claiming under or through the Qualified Employee. No employee of an Employer, any member of the Board, any delegate of the Board, or any member of the Committee will be liable for any determination, decision, or action made in good faith with respect to the Plan or any Award made under the Plan. |
B. | Committee. The Committee has the sole authority and responsibility to administer Awards payable to Officers. |
UCH PSP | 7 | January 1, 2016 (FINAL) |
V. Amendment or Termination.
A. | Authority to Amend or Terminate Plan. The Plan may at any time be amended, modified, suspended or terminated, as the Company in its sole discretion determines. Such amendment, modification, or termination of the Plan will not require any notice or the consent, ratification, or approval of any party, including any Qualified Employee who is then eligible to participate in the Plan. |
B. | Authority to Amend Awards. The Committee in its sole discretion may reduce or eliminate an Award payable to any member of the Management and Administrative Employee Group classified by the Company as a management employee. In addition, the Company may reduce any Award other than an Award payable to an Officer, prior to the payment of the Award, to the extent it deems necessary or appropriate to comply with laws, including applicable securities laws, local laws outside the United States and the pooling of interests requirements in connection with a merger, provided that nothing in this Section V.B affects the rights of any employee to an Award required under the terms of a collective bargaining agreement. |
VI. Miscellaneous.
A. | No Contract of Employment, etc. Neither this Plan nor any award under the Plan constitutes a contract of employment and participation in the Plan will not give any employee the right to be retained in the service of the Company or any Affiliate or to continue in any position or at any level of compensation. Nothing contained in the Plan will prohibit or interfere with the Companys or an Affiliates right to assign projects, tasks and responsibilities to any employee or to alter the nature of the Companys or an Affiliates rights with respect to the employees employment relationship, including the right to terminate any employee at any time, with or without prior notice, and for any reason within the constraints of existing law. |
B. | Governing Law. The validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the United States and the State of Illinois, notwithstanding the conflicts of law principles of any jurisdiction. |
C. | Conflict. Notwithstanding anything to the contrary in the Plan, the Plan Rules or Plan administration, the Employers obligations to any employees covered by collective bargaining agreements shall be governed by the applicable terms of such agreements, and any conflict between the terms of the Plan, the Plan Rules or Plan administration and the applicable collective bargaining agreements with respect to such employees shall be resolved in favor of the Employers obligations under the applicable collective bargaining agreements. |
UCH PSP | 8 | January 1, 2016 (FINAL) |
IN WITNESS WHEREOF, the Company has caused this amendment and restatement of the Plan to be executed on its behalf, effective as of January 1, 2016, except as otherwise provided herein.
UNITED CONTINENTAL HOLDINGS, INC. | ||||||
/s/ Michael P. Bonds | ||||||
Michael P. Bonds | ||||||
Executive Vice President | ||||||
Human Resources and Labor Relations | ||||||
Dated: | December 20, 2016 |
UCH PSP | 9 | January 1, 2016 (FINAL) |
APPENDIX AWAGES
A-1. Inclusions. For purposes of Section III.C.1. the following items are included in the definition of Wages:
| base pay |
| overtime pay |
| holiday pay |
| longevity pay |
| sick pay |
| lead/purser/service director pay |
| high skill premium/longevity pay |
| language premium |
| international and night flying premium pay |
| pay for time taken as vacation |
| payment for accrued vacation not taken as vacation when paid on account of (i) a leave or (ii) a termination of employment due to a reduction in force or for a military leave |
| shift differential pay |
| back pay to the extent such pay is otherwise categorized as Wages related to the applicable Plan Year (other than judicial or administrative awards of grievance pay or back pay (including settlements thereof)) |
| delayed activation pay |
| bypass pay |
| check pilot premium pay |
| double town salary expense |
| senior/junior manning pay |
| operational integrity pay |
| temporary reclass pay |
| Hawaiian override |
A-2. Exclusions. For purposes of Section III.C.2. the following items are excluded in the definition of Wages:
| deferred compensation (other than pursuant to Code Sec. 125 or 401(k)) |
| moving expense and similar allowances |
| performance incentive awards, profit sharing awards or sales incentive awards |
| expense reimbursements and per diems |
| severance, termination pay and related payments |
| payment for accrued vacation time not taken as vacation when paid on account of termination of employment, other than on account of a reduction in force or for a military leave |
| disability and workers compensation payments |
| duty-free commissions |
| recognition lump sums |
| flight expense |
UCH PSP | Appendix A-1 | January 1, 2016 (FINAL) |
| retropay created by execution of a collective bargaining agreement, unless the collective bargaining agreement requires inclusion |
| reimbursable cleaning |
| Employer contributions to employee benefit plans |
| solely for purposes of making an award payment under this Plan, judicial or administrative awards for grievance pay or back pay (including settlements thereof) |
| imputed income for employee or dependent life insurance coverage |
| imputed income from pass service charges |
| taxable travel |
| imputed income from domestic partner benefits |
| cash payments made pursuant to any agreement, program, arrangement or plan designed to compensate an employee for amounts that may not be credited or allocated to the employee under a qualified retirement plan due to limitations imposed by tax laws |
| taxable fringe benefits, including taxable reimbursement of insurance premiums |
| expatriate allowances |
| hiring bonuses or other special payments relating to the initiation of employment |
| amounts realized with respect to restricted stock, non-qualified stock options or stock appreciation rights |
| lost luggage advance |
| interest payments |
| taxable distributions of the Companys common stock or notes (including cash in lieu of such stock or notes) made in connection with UAL Corporations confirmed plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code |
| payments made to employees domiciled outside of the United States that are in lieu of Employer contributions to a retirement plan |
| any amount counted as wages under this Plan or any other profit sharing plan for a prior Award Year. |
A-3. Special Crediting Rule. For purposes of allocating Wages earned by a Qualified Employee for services rendered during a Plan Year but received following termination of employment, such Wages will be treated as received on the Qualified Employees last day of employment with the Employer.
UCH PSP | Appendix A-2 | January 1, 2016 (FINAL) |
APPENDIX BFACTORS
Labor Group | Union Representation | Union Code | Factor for Base Percentage A |
Factor for Base Percentage B |
||||||||
Joint Agreements
|
||||||||||||
Customer Service Representatives |
IAM | PCE | 5 | 10 | ||||||||
Dispatchers |
PAFCA | DIS | 5 | 10 | ||||||||
Fleet Service Employees |
IAM | RMP | 5 | 10 | ||||||||
Pilots |
ALPA | PT, SPT | 10 | 20 | ||||||||
Reservations Representatives |
IAM | PCE | 5 | 10 | ||||||||
Storekeeper Employees |
IAM | RMP | 5 | 10 | ||||||||
Flight Attendants |
AFA | FA, IFA | 10 | 20 | ||||||||
Maintenance Instructors |
IAM | MTI | 5 | 10 | ||||||||
Emergency Procedure Instructors |
IAM | FTI | 5 | 10 | ||||||||
Individual Agreements
|
||||||||||||
Central Load Planners |
IAM | CLP | 5 | 10 | ||||||||
Food Service Personnel |
IAM | FS | 15 | 15 | ||||||||
Simulator Technicians* |
IBT | MEC, MGT | 5 | 10 | ||||||||
Technicians* |
IBT | MEC | 5 | 10 | ||||||||
Non-Union
|
||||||||||||
Chelsea Food Service |
None | FS | 5 | 10 | ||||||||
FQM (Flight Qualified Management) |
None | FMT | 5 | 10 | ||||||||
Management & Administrative |
None | SAL, MGT, OFC, SIA, SLS, TPT | 5 | 10 |
* | Factors for Technicians and Simulator Technicians for 2016 profit sharing paid in 2017 are 15 and 15. |
UCH PSP | Appendix A-3 | January 1, 2016 (FINAL) |
Exhibit 10.19
SECOND AMENDMENT TO
UNITED CONTINENTAL HOLDINGS, INC.
2008 INCENTIVE COMPENSATION PLAN
WHEREAS, United Continental Holdings, Inc. (the Company) has heretofore adopted the United Continental Holdings, Inc. 2008 Incentive Compensation Plan, as amended (the Plan); and
WHEREAS, the Company wishes to amend the Plan to eliminate certain provisions in the Change of Control definition in the Plan;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of February 23, 2017:
1. The beginning clause of Section 2(f) is deleted and replaced with the following:
(f) | Change of Control shall mean the first of the following events to occur: |
2. Section 2(f) is amended to delete clause (F); to add or following the end of clause (D), and to delete the ; or at the end of clause (E) and to replace it with .
IN WITNESS WHEREOF, the undersigned officer of the Company acting pursuant to authority granted to him by the Board of Directors of the Company has executed this instrument on this 23 day of February, 2017.
UNITED CONTINENTAL HOLDINGS, INC. | ||
By: | /s/ Brett J. Hart |
Name: Brett J. Hart |
Title: Executive Vice President and General Counsel |
Exhibit 10.21
RESTRICTED STOCK UNIT AWARD NOTICE
to [NAME]
Pursuant to the United Continental Holdings, Inc.
2008 Incentive Compensation Plan
This Restricted Stock Unit Award Notice (the Award Notice), dated as of (the Grant Date), sets forth the terms and conditions of an award of restricted stock units (the Award) that are subject to the terms and conditions specified herein (RSUs) and that are granted to (you) by United Continental Holdings, Inc., a Delaware corporation (the Company), under the United Continental Holdings, Inc. 2008 Incentive Compensation Plan, as amended (the Plan).
SECTION 1. The Plan. This Award is made pursuant to the Plan, all the terms of which are hereby incorporated in this Award Notice. In the event of any conflict between the terms of the Plan and the terms of this Award Notice, the terms of the Plan shall govern.
SECTION 2. Definitions. Capitalized terms used in this Award Notice that are not defined in this Award Notice have the meanings as used or defined in the Plan. As used in this Award Notice, the term Vesting Date means each date on which you become vested in any of the RSUs that are subject to this Award Notice, as provided in Section 3(a) of this Award Notice. As used in this Award Notice, the term retirement means your separation from employment upon having achieved age 50 with 20 years of service, age 55 with 10 years of service, or age 65.
SECTION 3. Vesting and Settlement.
(a) Vesting. Your RSUs shall vest according to the schedule set forth in
Section 3(a)(i) below, provided that you must be actively employed by the Company or an Affiliate on the relevant Vesting Date, except as set forth in
Section 3(a)(iii) and (iv) below or as otherwise determined by the Committee in its sole discretion, provided further that, in the event of your Termination of Employment by reason of death or Disability, you shall immediately become
entitled to vesting and settlement of all outstanding RSUs.
(i) Subject to the terms and conditions of this Award Notice and to the provisions of the Plan, your RSUs shall vest and no longer be subject to any restriction in accordance with the following schedule: [vesting increments to be determined at date of grant]of the RSUs shall vest on [vesting dates to be determined at date of grant]. In the event that this vesting schedule results in a fractional share, the fractional share will be rounded down on the first [number of vesting dates to be determined at date of grant] Vesting Dates and carried forward to the final Vesting Date.
(ii) Notwithstanding Section 8(a) of the Plan, the RSUs granted to you pursuant to this Award shall not automatically vest and restrictions and forfeiture provisions shall not automatically lapse in the event of a Change in Control.
(iii) If you experience an involuntary Termination of Employment (other than an involuntary termination for cause as determined by the Committee in its sole discretion) during the two-year period following a Change in Control that occurs after the Grant Date, the RSUs shall immediately vest upon such Termination of Employment and
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you shall be entitled to settlement of all then outstanding RSUs within 60 days of your Termination of Employment. Notwithstanding the foregoing, your rights with respect to such RSUs shall be forfeited in accordance with Section 4 unless on or before the 60th day following your Termination of Employment, you have executed and delivered to the Company a valid waiver and release of all claims against the Company and its Subsidiaries and Affiliates, and you have not revoked such waiver and release of claims in accordance with its terms.
(iv) In the event of your Termination of Employment by reason of retirement, your then outstanding RSUs shall vest on a pro-rata basis effective as of the date of your Termination of Employment as follows:
A. | If such retirement occurs on or before the first vest date, the number of RSUs scheduled to vest on such vest date pursuant to Section 3(a)(i) shall be multiplied by a fraction, the numerator of which is the number of days during the period beginning on the grant date and ending on the date of your retirement and the denominator of which is 365, up to a maximum fraction equivalent to 100%. All remaining unvested RSUs shall be forfeited. |
B. | If such retirement occurs after the first vest date but on or before the second vest date, the number of RSUs scheduled to vest on the second vest date pursuant to Section 3(a)(i) shall be multiplied by a fraction, the numerator of which is the number of days during the period beginning on the day following the first vest date and ending on the date of your retirement and the denominator of which is 365. All remaining unvested RSUs shall be forfeited. |
C. | If such retirement occurs after the second vest date, but on or before the final vest date pursuant to Section 3(a)(i), the number of RSUs scheduled to vest on the [final vest date][to be completed based on vesting dates determined at date of grant] pursuant to Section 3(a)(i) shall be multiplied by a fraction, the numerator of which is the number of days during the period beginning on the day following the second vest date and ending on the date of your retirement and the denominator of which is 365. |
(b) Settlement of RSUs. The RSUs granted to you pursuant to this Award will be settled in Shares. The Company shall deliver to you, within 15 days after the Vesting Date on which the RSUs become vested, one Share for each RSU that becomes vested in accordance with the terms of this Award Notice; provided that if you are eligible for retirement, such delivery date shall not be later than March 15th of the year following the year in which you are eligible for pro-rata vesting in accordance with this Award Notice. Upon settlement, a number of RSUs equal to the number of shares of Common Stock represented thereby shall be extinguished and such number of RSUs will no longer be considered to be held by you for any purpose.
SECTION 4. Forfeiture of RSUs. Unless the Committee determines otherwise, and except as otherwise provided in Section 3 of this Award Notice, if the Vesting Date with respect to any RSUs awarded to you pursuant to this Award Notice has not occurred prior to the date of your Termination of Employment, your rights with respect to such RSUs shall immediately terminate upon your Termination of Employment, and you will be entitled to no further payments or benefits with respect thereto.
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SECTION 5. Voting Rights; Dividend Equivalents. You do not have any of the rights of a stockholder with respect to the RSUs granted to you pursuant to this Award. Further, you do not have the right to vote or to receive any dividends or any dividend equivalents relating to such dividends declared or paid on the Shares with respect to the RSUs granted to you pursuant to this Award.
SECTION 6. Non-Transferability of RSUs. Unless otherwise provided by the Committee in its discretion and notwithstanding clause (ii) of Section 10(a) of the Plan, prior to the date that they become vested, RSUs may not be sold, assigned, alienated, transferred, pledged, attached or otherwise encumbered by you, otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company, provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
SECTION 7. Data Privacy. You hereby explicitly consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Award Notice by and among, as applicable, the Company, its Affiliates and its Subsidiaries for the exclusive purpose of implementing, administering and managing your participation in the Plan. You understand that the Company (and/or your local employer, if applicable) holds certain personal information about you, which information may include, but is not limited to, your name, home address and telephone number, date of birth, email address, family size, marital status, sex, beneficiary information, emergency contacts, passport/visa information, age, language skills, drivers license information, nationality, resume, wage history, employment references, social insurance number or other identification number, salary, job title, employment or severance contract details, current wage and benefit information, personal bank account number, tax related information, plan or benefit enrollment forms and elections, option or benefit statements, any shares of stock or directorships in the company, details of all shares (if any) granted, canceled, purchased, vested, unvested or outstanding for purpose of managing and administering the Plan (Data). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipients country may have different data privacy laws and protections than your country. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom you may elect to deposit any proceeds acquired. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing Human Resources. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact Human Resources.
SECTION 8. Restrictive Covenants. You acknowledge that the Company is engaged in a highly competitive business and that the preservation of its Proprietary or
3
Confidential Information (as defined in Section 8(a) below) to which you have been exposed or acquired, and will continue to be exposed to and acquire, is critical to the Companys continued business success. You also acknowledge that the Companys relationships with its business partners (which shall mean companies with whom the Company has corporate volume agreements or other high volume business, preferred vendors/suppliers, and travel distribution channel providers, hereinafter Business Partners), are extremely valuable and that, by virtue of your employment with the Company, you have had or may have contact with such Business Partners on behalf of and for the benefit of the Company. As a result, your engaging in or working for or with any business which is directly or indirectly competitive with the Companys business, given your knowledge of the Companys Proprietary or Confidential Information, would cause the Company great and irreparable harm if not done in strict compliance with the provisions of this Section 8. You, therefore, acknowledge and agree that in exchange for the Award and/or access to the Companys Proprietary or Confidential Information (as defined in Section 8(a) below) you will be bound by, and comply in all respects with, the provisions of this Section 8.
(a) Confidentiality. You shall at all times hold in strict confidence any Proprietary or Confidential Information related to the Company or any of its Affiliates, except that you may disclose such information as required by law, court order, regulation, or similar order or as otherwise provided in Section 8(i) below. For purposes of this Award Notice, the term Proprietary or Confidential Information shall mean all non-public information relating to the Company or any of its Affiliates (including but not limited to all marketing, alliance, social media, advertising, and sales plans and strategies; pricing information; financial, advertising, and product development plans and strategies; compensation and incentive programs for employees; alliance agreements, plans, and processes; plans, strategies, and agreements related to the sale of assets; third party provider agreements, relationships, and strategies; business methods and processes used by the Company and its employees; all personally identifiable information regarding Company employees, contractors, and applicants; lists of actual or potential Business Partners; and all other business plans, trade secrets, or financial information of strategic importance to the Company or its Affiliates) that is not generally known in the airline industry, that was learned, discovered, developed, conceived, originated, or prepared during your employment with Company, and the competitive use or disclosure of which would be harmful to the business prospects, financial status, or reputation of the Company or its Affiliates at the time of any disclosure by you.
The relationship between you and the Company and its Affiliates is and shall continue to be one in which the Company and its Affiliates repose special trust and confidence in you, and one in which you have and shall have a fiduciary relationship to the Company and its Affiliates. As a result, the Company and its Affiliates shall, in the course of your duties to the Company, entrust you with, and disclose to you, Proprietary or Confidential Information. You recognize that Proprietary or Confidential Information has been developed or acquired, or will be developed or acquired, by the Company and its Affiliates at great expense, is proprietary to the Company and its Affiliates, and is and shall remain the property of the Company and its Affiliates. You acknowledge the confidentiality of Proprietary or Confidential Information and further acknowledge that you could not competently perform your duties and responsibilities in your position with the Company and/or its Affiliates without access to such information. You acknowledge that any use of Proprietary or Confidential Information by persons not in the employ of the Company and its Affiliates would provide such persons with an unfair competitive advantage which they would not have without the knowledge and/or use of the Proprietary or
4
Confidential Information and that this would cause the Company and its Affiliates irreparable harm. You further acknowledge that because of this unfair competitive advantage, and the Companys and its Affiliates legitimate business interests, which include their need to protect their goodwill and the Proprietary or Confidential Information, you have agreed to the post-employment restrictions set forth in this Section 8. Nothing in this Section 8(a) is intended, or shall be construed, to limit the protection of any applicable law or policy of the Company or its Affiliates that relates to the protection of trade secrets or confidential or proprietary information.
(b) Non-Solicitation of Employees. During your employment and for the one-year period following termination of your employment for any reason (the Coverage Period), you hereby agrees not to, directly or indirectly, solicit, hire, seek to hire, or assist any other person or entity (on your own behalf or on behalf of such other person or entity) in soliciting or hiring any person who is at that time an employee, consultant, independent contractor, representative, or other agent of the Company or any of its Affiliates to perform services for any entity (other than the Company or its Affiliates), or attempt to induce or encourage any such employee to leave the employ of the Company or its Affiliates.
(c) Notice of Intent to Resign. In the event you wish to voluntarily terminate your employment, you agree to provide the Company with four (4) weeks advance written notice (the Notice Period) of your intent to do so, and, if you intend or contemplate alternative employment, you also agree to provide the Company with accurate information concerning such alternative employment in sufficient detail to allow the Company to meaningfully exercise its rights under this Section 8. After receipt of such notice, the Company, in its sole, absolute and unreviewable discretion, may (i) require you to continue working during the Notice Period, (ii) relieve you of some or all of your work responsibilities during the Notice Period, or (iii) shorten the Notice Period and make your voluntary termination of employment effective immediately. Notwithstanding the foregoing, if you provide notice of resignation, in no event shall your separation of employment be considered an involuntary termination by the Company, even if the effective date of termination is accelerated by the Company.
(d) Non-Competition.
(i) In return for, among other things, this Award and the Companys promise to provide the Proprietary or Confidential Information described herein, you agree that during your employment and the Coverage Period, you shall not compete with the Company by providing work, services or any other form of assistance (whether or not for compensation) in any capacity, whether as an employee, consultant, partner, or otherwise, to any Competitor (as defined below) that (1) are the same or similar to the services you provided to the Company or (2) creates the reasonable risk that you will (willfully, inadvertently or inevitably) use or disclose the Companys Proprietary or Confidential Information. Competitor means any airline or air carrier that operates or does business in any State, territory, or protectorate of the United States in which the Company or an Affiliate does business and/or in any foreign country in which the Company or an Affiliate has an office, station, or branch or conducts business through its worldwide route structure, as of the date of your termination of employment with the Company or any of its Affiliates. You acknowledge that the Company and its Affiliates compete in a world-wide air transportation market that includes passenger transportation and services, air cargo services, repair and maintenance of aircraft and staffing services for third parties, logistics management and consulting, private jet operations and fuel deployment and management, and that the Companys business plan is international in scope. You agree that, because the
5
Companys business is global in scope, this restriction is reasonable. You further acknowledge and agree that the restrictions imposed in this paragraph will not prevent you from earning a livelihood.
(ii) Notwithstanding the foregoing, should you consider working for or with any actually, arguably, or potentially competing business following the termination of your employment with the Company or any of its Affiliates and during the Coverage Period, then you agree to provide the Company with two (2) weeks advance written notice of your intent to do so, and also to provide the Company with accurate information concerning the nature of your anticipated job responsibilities in sufficient detail to allow the Company to meaningfully exercise its rights under this paragraph. After receipt of such notice, the Company may then agree, in its sole, absolute, and unreviewable discretion, to waive, modify, or condition its rights under this Section 8. In particular, the Company may agree to modify Section 8(d)(i) if the Company concludes that (1) the work you will be performing for a Competitor is different from the work you were performing during your employment with the Company or any of its Affiliates; and/or (2) there is no reasonable risk that you will (willfully, inadvertently or inevitably) use or disclose the Companys Proprietary or Confidential Information.
(iii) Further, notwithstanding
the foregoing, you will not be subject to the non-competition obligations of
Section 8(d) if the termination of your employment with the Company constitutes an involuntary termination (which means your termination for any reason other
than resignation, death, termination for cause, retirement under the Companys retirement policy or program generally applicable to similarly situated employees, or disability) or, if applicable to you, termination by you for good
reason under the terms of any applicable employment agreement or other agreement or Company plan.
(e) Non-Solicitation of Business Partners. You acknowledge that, by virtue of your employment by the Company or its Affiliates, you have gained or will gain knowledge of the identity, characteristics, and preferences of the Companys Business Partners, among other Proprietary or Confidential Information, and that you would inevitably have to draw on such information if you were to solicit or service the Companys Business Partners on behalf of a Competitor. Accordingly, during your employment and the Coverage Period, you agree not to, directly or indirectly, solicit the business of or perform any services of the type you performed or sell any products of the type you sold during your employment with the Company for or to actual or prospective Business Partners of the Company (i) as to which you performed services, sold products or as to which employees or persons under your supervision or authority performed such services, or had direct contact, or (ii) as to which you had access to Proprietary or Confidential Information during the course of your employment by the Company, or in any manner encourage or induce any such actual or prospective Business Partner to cease doing business with or in any way interfere with the relationship between the Company and its Affiliates and such actual or prospective Business Partner. You further agree that during your employment and the Covered Period, you will not encourage or assist any Competitor to solicit or service any actual or prospective Business Partners or otherwise seek to encourage or induce any Business Partners to cease doing business with, or reduce the extent of its business dealings with the Company.
(f) Non-Interference. During your employment and the Coverage Period, you agrees that you shall not, directly or indirectly, induce or encourage any Business Partner or other third party, including any provider of goods or services to the Company, to terminate or diminish its business relationship with the Company; nor will you take any other action that
6
could, directly or indirectly, be detrimental to the Companys relationships with its Business Partners and providers of goods or services or other business affiliates or that could otherwise interfere with the Companys business.
(g) Non-Disparagement. You agree during and following employment not to make, or cause to be made, any statement, observation, or opinion, or communicate any information (whether oral or written, directly or indirectly) that (i) accuses or implies that the Company or its Affiliates engaged in any wrongful, unlawful or improper conduct, whether relating to your employment (or the termination thereof), the business or operations of the Company or its Affiliates, or otherwise; or (ii) disparages, impugns, or in any way reflects adversely upon the business or reputation of the Company or its subsidiaries or affiliates. Nothing herein will be deemed to preclude you from providing truthful testimony or information pursuant to subpoena, court order, or similar legal process, instituting and pursuing legal action, or engaging in other legally protected speech or other activities as set forth in Section 8(i) below.
(h) Breach. You acknowledge that the restrictions contained in this Award Notice are fair, reasonable, and necessary for the protection of the legitimate business interests of the Company, that the Company will suffer irreparable harm in the event of any actual or threatened breach by you, and that it is difficult to measure in money the damages which will accrue to the Company by reason of a failure by you to perform any of your obligations under this Section 8. Accordingly, if the Company or any of its subsidiaries or affiliates institutes any action or proceeding to enforce their rights under this Section 8, to the extent permitted by applicable law, you hereby waive the claim or defense that the Company or its Affiliates has an adequate remedy at law, you shall not claim that any such remedy at law exists, and you consent to the entry of a restraining order, preliminary injunction, or other preliminary, provisional, or permanent court order to enforce this Award Notice, and expressly waives any security that might otherwise be required in connection with such relief. You also agree that any request for such relief by the Company shall be in addition and without prejudice to any claim for monetary damages and/or other relief which the Company might elect to assert. In the event you violate any provision of this Section 8, the Company shall be entitled to recover all costs and expenses of enforcement, including reasonable attorneys fees, and the time periods set forth above shall be extended for the period of time you remain in violation of the provisions.
(i) Protected Rights. You understand that nothing contained in this Award Notice limits your ability to report possible violations of law or regulation to, or file a charge or complaint with, the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Department of Justice, the Congress, any Inspector General, or any other federal, state or local governmental agency or commission (Government Agencies). You further understand that this Agreement does not limit your ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. Nothing in this Agreement shall limit your ability under applicable United States federal law to (i) disclose in confidence trade secrets to federal, state, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law or (ii) disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure.
7
(j) Blue Pencil. In the event any of the prohibitions or restrictions set forth in this Section 8 is found by a court or arbitrator of competent jurisdiction to be unreasonable or otherwise unenforceable, it is the purpose and intent of the parties that any such prohibitions or restrictions be deemed modified or limited so that, as modified or limited, such prohibitions or restrictions may be enforced to the fullest extent possible.
SECTION 9. Tax Withholding and Consents.
(a) Tax Withholding. The delivery of Shares pursuant to Section 3(b) of this Award Notice is conditioned on satisfaction of any applicable withholding taxes in accordance with Section 10(d) of the Plan. The Company will withhold from the number of Shares otherwise deliverable to you pursuant to Section 3(b) a number of Shares (or, to the extent applicable, such other securities) having a Fair Market Value equal to such withholding liability; provided that you may elect alternatively to satisfy your tax withholding obligation, in whole or in part, by any of the following means: (i) a cash payment to the Company or (ii) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously owned whole Shares having an aggregate Fair Market Value equal to such withholding liability. Notwithstanding the foregoing, the Company shall be authorized to take such actions as the Company may deem necessary (including, without limitation, in accordance with applicable law, withholding amounts from any compensation or other amounts owing from the Company to you) to satisfy all obligations for the payment of such taxes. Subject to the terms of the Plan and as a condition of the Award, you acknowledge that, regardless of any action taken by the Company, or if different, your employer, the ultimate liability for all applicable Federal, state, local or foreign income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to your participation in the plan and legally applicable to you (Tax-Related Items), is and remains your responsibility and may exceed the amount actually withheld by the Company, or if different, your employer. You further acknowledge that the Company and/or your employer (1) make no representations or undertaking regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including but not limited to, the grant, vesting or settlement of the Award; and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. Further, if you are subject to Tax-Related Items in more than one jurisdiction between the date of grant and the date of any relevant taxable or tax withholding event, as applicable, you acknowledge that the Company and/or the employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b) Consents. Your rights in respect of the RSUs are conditioned on the receipt to the full satisfaction of the Committee of any required consents that the Committee may determine to be necessary or advisable (including, without limitation, your consenting to the Companys supplying to any third-party recordkeeper of the Plan such personal information as the Committee deems advisable to administer the Plan).
SECTION 10. Successors and Assigns of the Company. The terms and conditions of this Award Notice shall be binding upon and shall inure to the benefit of the Company and its successors and assigns.
SECTION 11. Committee Discretion. Pursuant to Section 3(e) of the Plan, the Committee may delegate to one or more senior officers of the Company the authority to make grants of Awards and all necessary and appropriate decisions and determinations with respect
8
thereto. The Committee, and any officer to whom the Committee has delegated authority pursuant to the Plan, shall have full and plenary discretion with respect to any actions to be taken or determinations to be made in connection with this Award Notice, and any such determinations shall be final, binding and conclusive. Any references in this Award Notice to the Committee shall be deemed to include any officer to whom the Committee has delegated authority pursuant to the Plan.
SECTION 12. Amendment of this Award Notice. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Award Notice prospectively or retroactively; provided, however, that, except as set forth in Section 10(e) of the Plan relating to Section 409A of the Code, any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely impair your rights under this Award Notice shall not to that extent be effective without your consent (it being understood, notwithstanding the foregoing proviso, that this Award Notice and the RSUs shall be subject to the provisions of Section 7(c) of the Plan relating to the adjustment of Awards upon the occurrence of certain unusual or nonrecurring events).
SECTION 13. Priority of Interpretation. To the extent permitted by the Plan, in the event of any conflict between the terms of this Award Notice and the terms of any plan, program, agreement or arrangement of the Company or any of its Subsidiaries applicable to you, the terms of such plan, program, agreement or arrangement shall govern; provided that the restrictions in Section 8 of this Award Notice shall apply in addition to, and shall not supersede or preclude or be superseded or precluded by, any similar restrictions in any other plan, program, agreement or arrangement applicable to you.
SECTION 14. Miscellaneous.
(a) Continuation of Employment; Not a Contract of Employment; No Acquired Rights. This Award Notice shall not confer upon you any right to continuation of employment by the Company, its Affiliates, and/or its Subsidiaries, nor shall this Award Notice interfere in any way with the Companys, its Affiliates, and/or its Subsidiaries right to terminate your employment at any time, except to the extent expressly provided otherwise in a written agreement between you and the Company, an Affiliate or Subsidiary or as prohibited by law.
(b) Not a Part of Salary. In accepting the grant of an Award under the Plan, you acknowledge that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, suspended or terminated by the Company at any time, as provided in the Plan and this Award Notice; (ii) the grant of the RSUs is voluntary and occasional and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted repeatedly in the past; (iii) all decisions with respect to future grants, if any, will be at the sole discretion of the Company; (iv) your participation in the Plan is voluntary; (v) the RSUs and any Shares received upon vesting of the RSUs is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vi) the grant of RSUs is provided for future services to the Company and its Affiliates and is not under any circumstances to be considered compensation for past services; (vii) in the event that you are an employee of the Company, Affiliate or Subsidiary, the grant will not be interpreted to
9
form an employment contract or relationship with the Company; and furthermore, the grant will not be interpreted to form an employment contract with the Affiliate or Subsidiary that is your employer; (viii) the future value of the Shares is unknown and cannot be predicted with certainty; (ix) no claim or entitlement to compensation or damages arises from forfeiture or termination of the RSUs or diminution in value of the RSUs and you irrevocably release the Company, its Affiliates and its Subsidiaries from any such claim that may arise; and (x) in the event of involuntary termination of your employment, your right to receive RSUs and vest in RSUs and/or receive Shares under the Plan, if any, will terminate in accordance with the terms of the Plan and will not be extended by any notice period mandated under local law; furthermore, your right to vest in the RSUs after such termination of employment, if any, will be measured by the date of termination of your active employment and will not be extended by any notice period mandated under local law.
(c) Electronic Delivery. The Company may, in its sole discretion, deliver any documents related to the RSUs or other awards granted to you under the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party-designated by the Company.
(d) Foreign Indemnity. You agree to indemnify the Company for your portion of any social insurance obligations or taxes arising under any foreign law with respect to the grant or settlement of this Award.
(e) Not a Public Offering in Non-U.S. Jurisdictions. If you are resident or employed outside of the United States, neither the grant of the RSUs under the Plan nor the issuance of Shares upon vesting of the RSUs is intended to be a public offering of securities in your country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filings to the local securities authorities in jurisdictions outside of the United States unless otherwise required under local law.
(f) English Language. If you are resident and/or employed outside of the United States, you acknowledge and agree that it is your express intent that the Award Notice, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the RSUs, be drawn up in English. If you have received the Award Notice, the Plan or any other documents related to the RSUs translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version will control.
(g) Section 409A. This Award is intended to comply with the requirements of Section 409A of the Code, and shall be interpreted and construed consistently with such intent. The payments to you pursuant to this Award Notice are also intended to be exempt from Section 409A of the Code to the maximum extent possible as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4). In the event the terms of this Award Notice would subject you to taxes or penalties under Section 409A of the Code (409A Penalties), the Company and you shall cooperate diligently to amend the terms of this Award Notice to avoid such 409A Penalties, to the extent possible; provided that in no event shall the Company be responsible for any 409A Penalties that arise in connection with any amounts payable under this Award Notice. To the extent any amounts under this Award Notice are payable by reference to your termination of employment, such term shall be deemed to refer to your separation from
10
service, within the meaning of Section 409A of the Code. Notwithstanding any other provision in this Award Notice, if you are a specified employee, as defined in Section 409A of the Code, as of the date of your separation from service, then to the extent any amount payable to you (i) constitutes the payment of nonqualified deferred compensation, within the meaning of Section 409A of the Code, (ii) is payable upon your separation from service and (iii) under the terms of this Award Notice would be payable prior to the six-month anniversary of your separation from service, such payment shall be delayed until the earlier to occur of (a) the first business day following the six-month anniversary of the separation from service and (b) the date of your death.
(h) Compliance with Local Law. If you are resident or employed outside of the United States, as a condition to the grant of RSUs, you agree to repatriate all payments attributable to the cash acquired under the Plan, if any, in accordance with local foreign exchange rules and regulations in your country of residence (and country of employment, if different). In addition, you agree to take any and all actions, and consent to any and all actions taken by the Company and the Companys Affiliates and Subsidiaries, as may be required to allow the Company and the Companys Affiliates and Subsidiaries to comply with local laws, rules and regulations in your country of residence (and country of employment, if different). Finally, you agree to take any and all actions as may be required to comply with your personal legal and tax obligations under local laws, rules and regulations in your country of residence (and country of employment, if different).
(i) Requirements of Law. The grant of RSUs under the Plan, and the issuance of Shares upon the vesting of the RSUs shall be subject to, and conditioned upon, satisfaction of all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(j) Governing Law. All questions concerning the construction, validity and interpretation of this Award Notice and the Plan shall be governed and construed according to the laws of the State of Delaware, without regard to the application of the conflicts of laws provisions thereof. Any disputes regarding this Award or the Plan shall be brought only in the state or federal courts of the State of Delaware.
(k) Additional Requirements. The Company reserves the right to impose other requirements on the RSUs, and your participation in the Plan, to the extent the Company determines, in its sole discretion, that such other requirements are necessary or advisable in order to comply with local laws, rules and regulations, or to facilitate the administration of the Award and the Plan. Such requirements may include (but are not limited to) requiring you to sign any agreements or undertakings that may be necessary to accomplish the foregoing.
(l) Additional Information. If you have any questions regarding this Award Notice, please contact at , or your HR Partner. If you wish to obtain a copy of the Plan or a list of names and addresses of any potential recipients of the Data please contact .
11
Exhibit 10.174
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Supplemental Agreement No. 13
to
Purchase Agreement Number 03784
Between
The Boeing Company
and
United Airlines, Inc.
Relating to Boeing Model 737NG Aircraft
THIS SUPPLEMENTAL AGREEMENT is entered into as of December 27th, 2016 by and between THE BOEING COMPANY (Boeing) and UNITED AIRLINES, INC. (Customer);
WHEREAS, the parties hereto entered into Purchase Agreement Number 03784 dated July 12, 2012 (Purchase Agreement), as amended and supplemented, relating to the purchase and sale of Boeing Model 737NG aircraft (Aircraft for all purposes within the Purchase Agreement); and
WHEREAS, Customer and Boeing agree to cross model substitute four (4) 737-700 aircraft with four (4) 737-800 aircraft as specified below in Figure 1:
Figure 1
Aircraft Type at SA-12 |
Delivery Month at SA-12 |
Aircraft Type as of SA-13 |
New Delivery Month | |||||
1 | 737-700 | ***-2017 | 737-800 | ***-2017 | ||||
2 | 737-700 | ***-2017 | 737-800 | ***-2017 | ||||
3 | 737-700 | ***-2017 | 737-800 | ***-2017 | ||||
4 | 737-700 | ***-2017 | 737-800 | ***-2017 |
Each resulting 737-800 aircraft shall be designated as 737-800 substitution aircraft (737-800 Substitution Aircraft).
UAL-PA-03784 |
SA-13 | Page 1 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
Supplemental Agreement No. 13 to
Purchase Agreement PA-03784
WHEREAS, Customer and Boeing agree to cross model substitute sixty-one (61) 737-700 aircraft with sixty-one (61) 737-9 aircraft as specified further in Purchase Agreement 3776 and specified below in Figure 2 and to incorporate applicable amendments to the Purchase Agreement:
Figure 2
UAL-PA-03784 |
SA-13 | Page 2 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
Supplemental Agreement No. 13 to
Purchase Agreement PA-03784
NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties agree to amend the Purchase Agreement as follows:
1. | Table of Contents, Tables, Exhibits, Supplemental Exhibits, and Letter Agreements: |
1.1 The Table of Contents is deleted in its entirety and replaced with the attached Table of Contents (identified by SA-13).
1.2 Table 1B entitled 2016 737-700 Aircraft Delivery, Description, Price and *** is deleted in its entirety due to elimination of 2016 737-700 Aircraft from the Purchase Agreement.
1.3 Table 1D entitled Aircraft Information Table 737-800 Substitution Aircraft is added to the Purchase Agreement to incorporate the 737-800 Substitution Aircraft.
1.4 Exhibit A1 entitled Aircraft Configuration - 2016 737-700 Aircraft is deleted in its entirety due to elimination of 2016 737-700 Aircraft from the Purchase Agreement.
1.5 Supplemental Exhibit BFE2 entitled Buyer Furnished Equipment Variables for 2016 737-700 Aircraft and Attachment A1 thereto entitled Attachment A1: BFE Variables for the *** 2016 737-700 Aircraft Incorporated by SA-11 are deleted in their entirety due to elimination of 2016 737-700 Aircraft from the Purchase Agreement.
1.6 Attachment A2 to Supplemental Exhibit BFE3 entitled Buyer Furnished Equipment Variables for Firm 737-800 Aircraft and 737-800 Substitution Aircraft is added to the Purchase Agreement.
1.7 Letter Agreement UAL-PA-03784-LA-1207879R4 entitled 737-700 *** Aircraft is deleted in its entirety due to expiration of Customers rights in 737-700 *** Aircraft.
1.8 Letter Agreement UAL-PA-03784-LA-1208155R2 entitled *** Matters: 737-900ER and 2016 737-700 Aircraft is deleted in its entirety and replaced with UAL-PA-03784-LA-1208155R3 entitled 737-900ER, Firm 737-800 Aircraft and 737-800 Substitution Aircraft to reflect addition of 737-800 Substitution Aircraft and elimination of 2016 737-700 Aircraft from the Purchase Agreement.
1.9 Letter Agreement UAL-PA-03784-LA-1208156R1 entitled *** for the 737NG Aircraft is deleted in its entirety and replaced with UAL-PA-03784- LA-1208156R2 entitled *** for the 737NG Aircraft to reflect addition of Firm 737-800 Aircraft, 737-800 Substitution Aircraft and elimination of 2016 737NG *** Aircraft from the Purchase Agreement.
1.10 Letter Agreement UAL-PA-03784-LA-1208172 entitled *** is deleted in its entirety and replaced with UAL-PA-03784- LA-1208172R1 entitled *** to reflect revised corrected definition of Aircraft incorporated by this Supplemental Agreement No. 13.
UAL-PA-03784 |
SA-13 | Page 3 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
Supplemental Agreement No. 13 to
Purchase Agreement PA-03784
1.11 Letter Agreement UAL-PA-03784-LA-1208173 entitled *** is deleted in its entirety and replaced with UAL-PA-03784-LA-1208173R1 entitled *** to reflect revised corrected definition of Aircraft incorporated by this Supplemental Agreement No. 13.
1.12 Letter Agreement UAL-PA-03784-LA-1208939 entitled Aircraft Model *** (relating to 737-700 and 737-800 aircraft) is deleted in its entirety due to agreement by the parties that there will be no *** permitted for any of the 737-800 Substitution Aircraft.
1.13 Letter Agreement UAL-PA-03784-LA-1504843 entitled Open Matters 2016 737-700 Aircraft is deleted in its entirety due to elimination of 2016 737-700 Aircraft from the Purchase Agreement.
1.14 Letter Agreement UAL-PA-03784-LA-1504844 entitled Special Matters-2016 737-700 Aircraft is deleted in its entirety due to elimination of 2016 737-700 Aircraft from the Purchase Agreement.
1.15 Letter Agreement UAL-PA-03784-LA-1600041 entitled Special Matters Firm 737-800 Aircraft, as defined in Supplemental Agreement No. 10 to the Purchase Agreement is deleted in its entirety and replaced with Letter Agreement UAL-PA-03784-LA-1600041R1 entitled Special Matters Firm 737-800 Aircraft, as defined in Supplemental Agreement No. 10 to the Purchase Agreement and 737-800 Substitution Aircraft as defined in Supplemental Agreement No. 13 to the Purchase Agreement (individually and collectively 737-800 Special Matters Aircraft).
1.16 Letter Agreement UAL-PA-03784-LA-1600586 entitled 737-900ER *** Aircraft is deleted in its entirety due to expiration of Customers rights in 737-900ER *** Aircraft.
1.17 Letter Agreement UAL-PA-03784-LA-1601963 entitled Aircraft Performance Guarantees Firm 737-800 Aircraft is deleted in its entirety and replaced with UAL-PA-03784-LA-1601963R1 entitled Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft to reflect addition of 737-800 Substitution Aircraft to the Purchase Agreement.
1.18 Letter Agreement UAL-LA-1604287 entitled Certain *** is hereby incorporated by the Purchase Agreement.
2. | Miscellaneous. |
2.1 If Boeing or Customer determines that an Exhibit, a Supplemental Exhibit or a Letter Agreement should be further amended to incorporate Firm 737-800 Aircraft and/or 737-800 Substitution Aircraft, then Boeing and Customer will work together for a mutually agreeable solution.
UAL-PA-03784 |
SA-13 | Page 4 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
Supplemental Agreement No. 13 to
Purchase Agreement PA-03784
2.2 Boeing and Customer agree to apply the following amounts received by Boeing from Customer as follows:
*** in the aggregate amount of *** from the expired rights in *** 737-700 *** Aircraft;
*** in the aggregate amount of *** from the expired rights in *** 737-900ER *** Aircraft; and
*** in the amount of *** from the *** former *** 737-700 Aircraft.
The resulting aggregate amount of *** will be applied first toward the payment obligation of *** due at the effective date of this Supplemental Agreement No. 13 for the *** 737-800 Substitution Aircraft. The remaining aggregate amount of *** of *** will be *** on the effective date of this Supplemental Agreement No. 13 exclusively to Customer purchase agreement payment obligations as follows:
Purchase Agreement No. 3784 |
Purchase Agreement No. 3776 |
Purchase Agreement No. 3860 |
Purchase Agreement No. 4308 |
TOTAL | ||||||||||||||||||||
Amount due for SA-7 to Purchase Agreement No. 3776: (61) 737-9 Aircraft |
$ | *** | $ | *** | ||||||||||||||||||||
Payment Application Date |
Payment Due Date |
|||||||||||||||||||||||
Effective date of SA 13 for 737NG |
*** | $ | *** | $ | *** | $ | *** | $ | *** | $ | *** | |||||||||||||
Effective date SA 13 for 737NG |
*** | $ | *** | $ | *** | $ | *** | $ | *** | |||||||||||||||
Effective date SA 13 for 737NG |
*** | $ | *** | $ | *** | $ | *** | $ | *** | $ | *** | |||||||||||||
Effective date SA 13 for 737NG |
*** | $ | *** | $ | *** | $ | *** | $ | *** | $ | *** | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | *** | $ | *** | $ | *** | $ | *** | $ | *** | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
The Purchase Agreement will be deemed to be supplemented to the extent provided herein as of the date hereof and as so supplemented will continue in full force and effect.
UAL-PA-03784 |
SA-13 | Page 5 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
Supplemental Agreement No. 13 to
Purchase Agreement PA-03784
EXECUTED IN DUPLICATE as of the day and year first written above.
THE BOEING COMPANY | UNITED AIRLINES, INC. | |||
/s/ Irma L. Krueger |
/s/ Gerald Laderman | |||
Signature | Signature | |||
Irma L. Krueger |
Gerald Laderman | |||
Printed Name | Printed Name | |||
Attorney-in-Fact |
Senior Vice President Finance, Procurement and Treasurer | |||
Title | Title |
UAL-PA-03784 |
SA-13 | Page 6 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
TABLE OF CONTENTS
ARTICLES | SA NUMBER | |||
Article 1. |
Quantity, Model and Description |
|||
Article 2. |
Delivery Schedule |
|||
Article 3. |
Price |
|||
Article 4. |
Payment |
|||
Article 5. |
Additional Terms |
|||
TABLE | ||||
1A. | Aircraft Information Table 737-900ER |
SA-8 | ||
1B. | Aircraft Information Table 2016 737-700 Aircraft (DELETED) |
Per §1.2 of SA-13 | ||
1C. | Aircraft Information Table Firm 737-800 Aircraft |
SA-10 | ||
1D. | Aircraft Information Table 737-800 Substitution Aircraft |
SA-13 | ||
EXHIBITS | ||||
A. |
Aircraft Configuration - 737-900ER |
|||
A1. | Aircraft Configuration 2016 737-700 Aircraft (DELETED) |
Per §1.4 of SA-13 | ||
A2. |
Aircraft Configuration Firm 737-800 Aircraft |
SA-10 | ||
B. |
Aircraft Delivery Requirements and Responsibilities |
|||
SUPPLEMENTAL EXHIBITS | ||||
AE1. |
Escalation Adjustment/Airframe and Optional Features |
SA-9 | ||
BFE1. |
BFE Variables for 737-900ER Aircraft |
SA-1 | ||
BFE2. | BFE Variables for 2016 737-700 Aircraft Incorporated by SA-9 (DELETED) |
Per §1.5 of SA-13 | ||
Attachment A1: BFE Variables for the *** 2016 737-700 Aircraft Incorporated by SA-11 (DELETED) |
Per §1.5 of SA-13 | |||
BFE3. |
BFE Variables for Firm 737-800 Aircraft and 737-800 Substitution Aircraft |
SA-10 | ||
Attachment A1: BFE Variables for the 737-800 Substitution Aircraft |
SA-13 | |||
CS1. |
Customer Support Variables |
|||
EE1. |
Engine Escalation, Engine Warranty and *** |
|||
SLP1. |
Service Life Policy Components |
P.A. 03784 |
TABLE OF CONTENTS, Page 1 of 4 | SA-13 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
SA NUMBER | ||||
LETTER AGREEMENTS |
||||
UAL-PA-03784-LA-1207868 | Performance Guarantees |
|||
UAL-PA-03784-LA-1207870 | Spare Parts Initial Provisioning |
|||
UAL-PA-03784-LA-1207871 | Special Matters |
|||
UAL-PA-03784-LA-1207878 | Demonstration Flight Waiver |
|||
UAL-PA-03784-LA-1207879R2 | *** Aircraft (DELETED) |
SA-9 | ||
UAL-PA-03784-LA-1207879R4 | 737-700 *** Aircraft (DELETED) |
Per §1.7 of SA-13 | ||
UAL-PA-03784-LA-1207881 | Seller Purchased Equipment 737-900ER |
|||
Attachment AR1 to Letter Agreement UAL-PA-03784-LA-1207881 |
SA-9 | |||
UAL-PA-03784-LA-1208155R3 |
*** Matters 737-900ER, Firm 737-800 Aircraft AND 737-800 Substitution Aircraft |
SA-13 | ||
UAL-PA-03784-LA-1208156R2 |
*** for the 737NG Aircraft |
SA-13 | ||
Attachment A: *** |
SA-13 | |||
Attachment B1: *** |
SA-13 | |||
Attachment B2: *** |
SA-13 | |||
UAL-PA-03784-LA-1208172R1 |
*** |
SA-13 | ||
UAL-PA-03784-LA-1208173R1 | *** |
SA-13 | ||
UAL-PA-03784-LA-1208169 | 737 Production Adjustments |
|||
UAL-PA-03784-LA-1208938 | Privileged and Confidential Matters |
|||
UAL-PA-03784-LA-1208939 |
Aircraft Model *** (DELETED) |
Per §1.9 of SA-13 | ||
UAL-PA-03784-LA-1209115 | *** |
|||
hUAL-PA-03784-LA-1300306 | Aircraft *** |
SA-2 | ||
UAL-PA-03784-LA-1400240 | Aircraft *** |
SA-5 |
UAL-PA-03784 |
SA-13 | Page 3 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
TABLE OF CONTENTS, Continued
UAL-PA-03784-LA-1504843 | Open Matters 2016 737-700 Aircraft (DELETED ) |
Per §1.10 of SA-13 | ||
UAL-PA-03784-LA-1504844 | Special Matters 2016 737-700 Aircraft (DELETED ) |
Per §1.11 of SA-13 | ||
UAL-PA-03784-LA-1600041R1 | Special Matters Firm 737-800 Aircraft and 737-800 Substitution Aircraft (individually and collectively 737-800 Special Matters Aircraft) |
SA-10 | ||
UAL-PA-03784-LA-1600586 | 737-900ER *** Aircraft (DELETED) |
Per §1.12 of SA-13 | ||
UAL-PA-03784-LA-1600829 | *** for 2016 737-700 Aircraft |
SA-11 | ||
UAL-PA-03784-LA-1601973R1 | Aircraft Performance Guarantees - Firm 737-800 Aircraft and 737-800 Substitution Aircraft |
SA-13 | ||
UAL-LA-1604287 | Certain *** |
Dec. 2016 Letter Agreement No. 1 |
P.A. 03784 | TABLE OF CONTENTS, Page 3 of 4 | SA-13 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
TABLE OF CONTENTS, Continued
SUPPLEMENTAL AGREEMENTS |
DATED AS OF | |
Supplemental Agreement No. 1 | September 27, 2012 | |
Supplemental Agreement No. 2 | March 1, 2013 | |
Supplemental Agreement No. 3 | June 27, 2013 | |
Supplemental Agreement No. 4 | September 11, 2013 | |
Supplemental Agreement No. 5 | March 3, 2014 | |
Supplemental Agreement No. 6 | June 6, 2014 | |
Supplemental Agreement No. 7 | May 26, 2015 | |
Supplemental Agreement No. 8 | June 12, 2015 | |
Supplemental Agreement No. 9 | January 20, 2016 | |
Supplemental Agreement No. 10 | February 8, 2016 | |
Supplemental Agreement No. 11 | March 7, 2016 | |
Supplemental Agreement No. 12 | June 24, 2016 | |
Supplemental Agreement No. 13 | December 27, 2016 | |
Dec. 2016 Letter Agreement No. 1 UAL-LA-1604287 entitled Certain *** |
December 27, 2016 |
P.A. 03784 | TABLE OF CONTENTS, Page 4 of 4 | SA-13 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
Table 1D To
Purchase Agreement No. PA-03784
737-800 Substitution Aircraft Delivery, Description, Price and ***
Airframe Model/MTOW: |
737-800 | *** pounds # | Detail Specification: |
*** | ||||||||||||||||||||||||
Engine Model/Thrust: |
CFM56-7B*** | *** pounds | Airframe Price Base Year/Escalation Formula: |
*** | *** | |||||||||||||||||||||||
Airframe Price: |
$ | *** | Engine Price Base Year/Escalation Formula: |
*** | *** | |||||||||||||||||||||||
Optional Features: |
$ | *** | Airframe Escalation Data: |
|||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Sub-Total of Airframe and Features: |
$ | *** | Base Year Index (ECI): |
*** | ||||||||||||||||||||||||
Engine Price (Per Aircraft): |
$ | *** | Base Year Index (CPI): |
*** | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Aircraft Basic Price (Excluding BFE/SPE): |
$ | *** | ||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Buyer Furnished Equipment (BFE) Estimate: |
$ | *** | ||||||||||||||||||||||||||
Seller Purchased Equipment (SPE) Estimate: |
$ | *** | ||||||||||||||||||||||||||
Deposit per Aircraft: |
$ | *** | * |
Delivery Date |
Number of Aircraft |
Escalation Factor (Airframe) |
|
|
Escalation Estimate *** Base Price Per A/P |
*** Per Aircraft (Amts. Due/*** Prior to Delivery): | ||||||||||||||||||||
*** | *** | *** | *** | |||||||||||||||||||||||
*** |
*** |
*** |
*** | |||||||||||||||||||||||
*** | *** | *** | $*** | $*** | $*** | $*** | $*** | |||||||||||||||||||
|
||||||||||||||||||||||||||
Total: | 4 |
* | - Immediately prior to effective date of SA-13, *** had been received from Customer by Boeing. See §2 of SA-13 |
# | - Purchased MTOW is *** pounds. Aircraft are eligible for the provisions of Letter Agreement 6-1162-MMF-311R8 entitled |
Provisions Relating to Buyers *** for Model 737 Aircraft |
UAL-PA-03784 83313-1F.TXT | BOEING / UNITED AIRLINES PROPRIETARY | SA-13 | ||
Page 1 |
Attachment A2 to Supplemental Exhibit BFE3 to Purchase Agreement Number PA 03784
Preliminary BFE On-Dock Dates for the 737-800 Substitution Aircraft
*** |
*** |
*** |
*** |
*** |
*** |
*** |
*** |
*** |
*** |
*** |
*** | |||||||||||
*** |
*** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | |||||||||||
|
||||||||||||||||||||||
Total |
4 |
The above dates apply solely if Customer selects a BFE component specified above; e.g., if BFE avionics are not selected by Customer, then the dates specified above in the Avionics column do not apply.
Attachment A2 to UAL-PA-03784-BFE3 | SA-13 | Attachment A2, Page 1 | ||
BOEING / UNITED AIRLINES PROPRIETARY |
|
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |||
UAL-PA-03784-LA-1208155R3
United Airlines, Inc.
233 South Wacker Drive
Chicago, IL 60606
Subject: | *** Matters: 737-900ER, Firm 737-800 Aircraft and 737-800 Substitution Aircraft |
Reference: | Purchase Agreement No. PA-03784 (Purchase Agreement) between The Boeing Company (Boeing) and United Airlines, Inc. (Customer) relating to Model 737NG aircraft (Aircraft) |
This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement UAL-PA-03784-LA-1208155R2.
The Purchase Agreement incorporates the terms and conditions of AGTA-UAL between Boeing and Customer. This Letter Agreement modifies certain terms and conditions of the AGTA with respect to the Aircraft.
1. ***. |
1.1 ***.
UAL-PA-03784-LA-1208155R3 |
SA-13 | |||
*** Matters: 737-900ER, Firm 737-800 Aircraft | ||||
and 737-800 Substitution Aircraft | Page 1 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
|
1.2 *** |
||||
*** | *** | |||
*** | ***% | |||
Total | ***% |
1.3 [Reserved]
1.4 ***.
1.4.1 With respect to (i) each aircraft in Table 1A as of the effective date of the Purchase Agreement (ii) each aircraft in Table 1C as of the effective date of the Purchase Agreement, and (iii) each aircraft in Table 1D as of the effective date of the Purchase Agreement, *** agrees *** on *** pursuant to Article 1.1 of this Letter Agreement ***. The *** will be the *** on *** will be *** will ***.
1.4.2 *** the *** for each Aircraft covered by Table 1A, Table 1C or Table 1D, will be ***.
1.4.3 *** for each 737-*** Aircraft (resulting from Customers *** aircraft under Supplemental Agreement No. 8 to the Purchase Agreement) scheduled to deliver in 2016 *** to the scheduled delivery date for such Aircraft.
UAL-PA-03784-LA-1208155R3 |
SA-13 | |||
*** Matters: 737-900ER, Firm 737-800 Aircraft | ||||
and 737-800 Substitution Aircraft | Page 2 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
|
1.5 Delivery *** Impact on *** Calculations. If the delivery of any Aircraft covered by Table 1A, Table 1C or Table 1D is *** due to ***, then interest on the *** in respect of each such Aircraft will not *** during the time period from ***. Payment of *** that has *** prior to the start of the *** but remains unpaid will be paid on the normal quarterly *** payment schedule set forth in Article 2 of this Letter Agreement or on the delivery date of such *** Aircraft, whichever comes first.
2. | Boeing Invoice for ***. |
Boeing shall submit to Customer, not less than *** days prior to the end of each quarter, an invoice for *** during each such quarter. Customers payment is due and payable to Boeing on the first business day of the following month. Boeings invoice will show *** during the quarter for each Aircraft covered by Table 1A, Table 1C, or Table 1D for which *** have been ***. The invoice will also include *** on *** with respect to other aircraft in other purchase agreements between Customer and Boeing.
3. | *** Rights. |
3.1 ***.
3.2 In the event Boeing seeks to *** the Purchase Agreement as amended by this Letter Agreement. Customer will ***.
UAL-PA-03784-LA-1208155R3 |
SA-13 | |||
*** Matters: 737-900ER, Firm 737-800 Aircraft | ||||
and 737-800 Substitution Aircraft |
Page 3 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
|
3.3 For all purposes of this Article 3 including without limitation, notice, *** or any other application, the term Boeing means and includes The Boeing Company, its divisions, subsidiaries, affiliates and the assignees of each. Nothing herein shall constitute an election or waiver of any remedy of Boeing; all such remedies shall be cumulative. Boeing expressly reserves all of its rights and remedies under any agreement and applicable law.
3.4 Notwithstanding Article 3.1, Boeing shall not *** under the Purchase Agreement with respect to any Aircraft that is subject to ***.
4. | Confidentiality. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-03784-LA-1208938.
5. | Assignment. |
Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customers becoming the operator of the Aircraft and cannot be assigned in whole or, in part.
If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated above, please indicate your acceptance and approval below.
Very truly yours, | ||
THE BOEING COMPANY | ||
By: | /s/ Irma L. Krueger | |
Its: |
Attorney-in-Fact |
UAL-PA-03784-LA-1208155R3 |
SA-13 | |||
*** Matters: 737-900ER, Firm 737-800 Aircraft | ||||
and 737-800 Substitution Aircraft |
Page 4 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
|
ACCEPTED AND AGREED TO this | ||
Date: |
December 27, 2016 | |
UNITED AIRLINES, INC. | ||
By: |
/s/ Gerald Laderman | |
Its: |
Senior Vice President Finance, Procurement and Treasurer |
UAL-PA-03784-LA-1208155R3 |
SA-13 | |||
***: 737-900ER, Firm 737-800 Aircraft | ||||
and 737-800 Substitution Aircraft |
Page 5 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
|
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |||
UAL-PA-03784-LA-1208156R2
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | *** for the 737NG Aircraft |
Reference: | Purchase Agreement No. 03784 (Purchase Agreement) between The Boeing Company (Boeing) and United Airlines, Inc. (Customer) relating to 737NG aircraft |
This letter agreement UAL-PA-03784-LA-1208156R2 (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety UAL-PA-03784-LA-1208156R1.
1. | Definitions. |
*** Notice means the written communication provided by Boeing to Customer in accordance with the requirements of Article 4.1, below.
*** Aircraft means each Aircraft.
2. | Applicability. |
Notwithstanding any other provision of the Purchase Agreement to the contrary, the parties agree that the *** for the Airframe Price and Optional Features Prices for each Program Aircraft shall be determined in accordance with this Letter Agreement.
3. | *** Forecast. |
Boeing will release an *** forecast in *** of each year based on Boeings then current standard ***. Only one *** forecast shall be used to conduct the *** analysis performed in accordance with Article 4.1, below, for a given Program Aircraft. The *** forecast applicable to a given Program Aircraft is set forth in Attachment A.
UAL-PA-03784-LA-1208156R2 |
SA-9 | |||
*** for the 737NG Aircraft | Page 1 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
|
4. | ***. |
4.1 If the *** forecast, as set forth in Article 3 above, ***, as set forth in Attachments B1 and B2 as applicable (collectively Attachment B), *** any Program Aircraft that is *** to such *** forecast, as set forth in Attachment A, then Boeing shall issue an *** Notice to the Customer by the date set forth in Attachment A. Such *** Notice shall, ***, either:
4.1.1 *** for such affected Program Aircraft *** as set forth in Attachment B; or
4.1.2 provide Customer with the *** as set forth in Attachment B and ***; or
4.1.3 provide Customer with the *** as set forth in Attachment B, with Boeing and Customer *** as set forth in Attachment B ***.
4.1.4 In the event that Boeing *** the *** Notice as detailed in Article 4.1.2 or Article 4.1.3 and Customer ***, then Customer *** the Purchase Agreement with respect to such affected Program Aircraft.
4.2 If Boeing provides Customer the *** described in Article 4.1.2 or Article 4.1.3 above, then Customer shall notify Boeing *** contained in Articles 4.1.2, 4.1.3, or 4.1.4 above within *** days of its receipt of the *** Notice from Boeing. In the event Customer *** in accordance with Article 4.1.4 above, then Boeing *** to Customer, *** for the *** Program Aircraft.
4.2.1 Within *** days of Boeings receipt of *** notice for any such *** Program Aircraft under Article 4.2 above, Boeing *** written notice to Customer to *** related to such *** Program Aircraft ***, by Customer.
4.2.2 Should Customer *** any notice to Boeing in accordance with Article 4.2 above, then the *** for such Program Aircraft *** be calculated in accordance with Article 4.1.2.
UAL-PA-03784-LA-1208156R2 |
SA-13 | |||
*** for the 737NG Aircraft | Page 2 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
4.3 In the event that the *** of a Program Aircraft that is subject to either Article 4.1.1, Article 4.1.2 or Article 4.1.3 above, *** applicable to such Program Aircraft will be determined pursuant to Article 5 below.
5. | *** |
5.1 If the *** forecast, as set forth in Article 3, *** any Program Aircraft *** as set forth in Attachment B and *** as set forth in Attachment B, *** for such Program Aircraft *** as set forth in Attachment B *** as set forth in Attachment B ***.
5.2 In the event the *** at *** of a Program Aircraft subject to Article 5.1 above, *** applicable to such Program Aircraft will be determined pursuant to Article 6 below.
6. | ***. |
If the *** forecast, as set forth in Article 3, above, ***, as set forth in Attachment B, *** any Program Aircraft *** such *** forecast, as set forth in Attachment A, then such cumulative annual escalation applicable to such Program Aircraft ***:
6.1 If the *** of a Program Aircraft, *** as set forth in Attachment B for such Program Aircraft, then the *** for such Program Aircraft.
6.2 *** of a Program Aircraft, *** factor as set forth in Attachment B for such Program Aircraft ***, as set forth in Attachment B, then the *** for such Program Aircraft *** as set forth in Attachment B.
UAL-PA-03784-LA-1208156R2 | SA-13 | |||
*** for the 737NG Aircraft | Page 3 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
7. | Applicability to ***. |
The ***, identified in the Purchase Agreement as subject to *** pursuant to Supplemental Exhibit AE1, and which pertains to the Program Aircraft shall be *** established in this Letter Agreement for such Program Aircraft *** provisions of the Purchase Agreement ***.
8. | Assignment. |
Except for an assignment by Customer to a wholly-owned subsidiary as permitted under Article 9, entitled Assignment, Resale, or Lease of the AGTA, this Letter Agreement is provided as an accommodation to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or in part.
9. | Confidential Treatment. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-03784-LA-1208938.
THE BOEING COMPANY | ||
By: | /s/ Irma L. Krueger | |
Its: |
Attorney-in-Fact |
UAL-PA-03784-LA-1208156R2 | SA-13 | |||
*** for the 737NG Aircraft | Page 4 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
ACCEPTED AND AGREED TO this | ||||
Date: | December 27, 2016 |
UNITED AIRLINES, INC. | ||||
By: | /s/ Gerald Laderman |
|||
Its: | Senior Vice President Finance, | |||
Procurement and Treasurer |
UAL-PA-03784-LA-1208156R2 |
SA-13 | |||
*** for the 737NG Aircraft |
Page 5 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
ATTACHMENT A
*** Forecast & *** Notice Date
*** Forecast |
Applicable to Program Aircraft Delivering in Time Period |
*** Notice Date | ||
*** |
*** |
*** |
Attachment A to UAL-PA-03784-LA-1208156R2 |
SA-13 | |||
*** for the 737NG Aircraft |
Att. A, Page 1 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
ATTACHMENT B1
*** Factors *** Aircraft
*** |
*** |
*** |
*** | |||
*** | *** | *** | *** |
Attachment B1 to UAL-PA-03784-LA-1208156R2 |
SA-13 | |||
*** for the 737NG Aircraft |
Att. B1, Page 1 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
ATTACHMENT B2
*** Factors *** Aircraft
*** |
*** |
*** |
*** | |||
*** | *** | *** | *** |
Attachment B2 to UAL-PA-03784-LA-1208156R2 |
SA-13 | |||
*** for the 737NG Aircraft |
Att. B2, Page 1 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
|
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |||
UAL-PA-03784-LA-1208172R1
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | *** |
Reference: | Purchase Agreement No. 3784 (Purchase Agreement) between The Boeing Company (Boeing) and United Airlines, Inc. (Customer) relating to 737NG aircraft |
This Letter Agreement amends and supplements the Purchase Agreement. All terms used herein and in the Agreement, and not defined herein, will have the same meaning as in the Agreement.
Subject to the terms, provisions, and conditions described herein, Boeing *** to Customer *** Aircraft, as of the effective date (Effective Date) of the ***.
1. | Customers ***. |
Boeing *** Customer, at a charge as described in paragraph 3 below, *** an Aircraft *** for the respective model type. The Effective Date of such *** shall be the date that Boeing provides ***, unless otherwise mutually agreed to. *** for the applicable Aircraft is ***. Boeing will use its best reasonable efforts to provide *** not later than *** after receipt of Customers written request.
2. | ***. |
At the time of delivery of each Aircraft, or *** after delivery of an Aircraft, *** as requested by Customer. Such *** shall be ***, identifying the Aircraft Manufacturers Serial Number (MSN), the delivery date and the Effective Date of ***. The *** shall also indicate ***; the ***; and the ***. Customer may*** subsequent to the Effective Date. If ***, then Customer *** as outlined in paragraph 3 below.
UAL-PA-03784-LA-1208172R1 |
SA-13 | |||
*** | Page 1 | |||
BOEING/UNITED AIRLINES, INC. PROPRIETARY |
3. | ***. |
*** in accordance with either the *** set forth below, at Customers option.
3.1 | ***. |
If Customer elects to ***, then Customer shall ***
3.2 | ***. |
***
3.3 | ***. |
***
3.4 | Customers ***. |
If Customer *** shall be calculated as follows:
***
3.5 | *** |
***
4. | *** |
***
UAL-PA-03784-LA-1208172R1 |
SA-13 | |||
*** |
Page 2 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
5. | Confidential Treatment. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-03784-LA-1208938.
Very truly yours,
THE BOEING COMPANY | ||
By | /s/ Irma L. Krueger | |
Its |
Attorney-in-Fact | |
ACCEPTED AND AGREED TO this | ||
Date: | December 27, 2016 | |
UNITED AIRLINES, INC. | ||
By: | /s/ Gerald Laderman | |
Its: | Senior Vice President Finance, | |
Procurement and Treasurer |
UAL-PA-03784-LA-1208172R1 |
SA-13 | |||
*** |
Page 3 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
Attachment A to Letter Agreement UAL-PA-03784-LA-1208172R1
Date:
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Attention: |
*** | |
Reference: |
Letter Agreement UAL-PA-03784-LA-1208172R1 to Purchase | |
Agreement 03784 |
***
Very truly yours,
THE BOEING COMPANY
By:
Its:
Attachment A to UAL-PA-03784-LA-1208172R1 |
SA-13 | |||
*** | Page 8 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
Attachment B to Letter Agreement UAL-PA-03784-LA-1208172R1
***
Attachment B to UAL-PA-03784-LA-1208172R1 |
SA-13 | |||
*** | Page 1 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
|
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |
UAL-PA-03784-LA-1208173R1
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | *** |
Reference: | Purchase Agreement No. 3784 (Purchase Agreement) between The Boeing Company (Boeing) and United Airlines, Inc. (Customer) relating to 737NG aircraft |
This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.
1. | Special Consideration for *** |
In the event that Customer elects to have the *** installed on an Aircraft at time of delivery, Boeing shall provide at the time of delivery of each such Aircraft ***.
In the event that Customer elects to install the *** as a post delivery modification, Boeing shall *** such *** in a manner similar to what is currently being done with ***, i.e. *** will be ***.
2. | Assignment ***. |
The *** described in this Letter Agreement are ***. This Letter Agreement cannot be assigned, in whole or in part, without the prior written consent of Boeing.
3. | Confidential Treatment. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-03784-LA-1208938.
UAL-PA-03784-LA-1208173R1 |
SA-13 | |||
*** | Page 1 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
Very truly yours, | ||
THE BOEING COMPANY | ||
By: | /s/ Irma L. Krueger | |
Its: |
Attorney-in-Fact | |
ACCEPTED AND AGREED TO this | ||
Date: | December 27, 2016 |
UNITED AIRLINES, INC.
By: | /s/ Gerald Laderman | |
Its: | Senior Vice President Finance, | |
Procurement and Treasurer |
UAL-PA-03784-LA-1208173R1 |
SA-13 | |||
*** | Page 2 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
![]() |
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |
UAL-PA-03784-LA-1600041R1
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | Special Matters Firm 737-800 Aircraft, as defined in Supplemental Agreement No. 10 to the Purchase Agreement and 737-800 Substitution Aircraft as defined in Supplemental Agreement No. 13 to the Purchase Agreement (individually and collectively 737-800 Special Matters Aircraft) |
Reference: | Purchase Agreement No. 3784 (Purchase Agreement) between The Boeing Company (Boeing) and United Airlines, Inc. (Customer) relating to 737NG aircraft |
Ladies and Gentlemen:
This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.
1. | ***. |
1.1. | Firm 737-800 Aircraft ***. |
In consideration of Customers purchase of 737-800 Special Matters Aircraft, Boeing *** at the time of delivery of each 737-800 Special Matters Aircraft *** (737-800 Special Matters ***). The 737-800 Special Matters *** amount is subject to the *** as *** the *** at time of delivery. Such 737-800 Special Matters *** may be used by *** for the *** of Boeing *** or *** to *** at the time of delivery of the applicable Aircraft. The 737-800 Special Matters *** may not,***however, be used for the ***.
UAL-PA-03784-LA-1600041 |
Page 1 | |||
Special Matters 737-800 Special Matters Aircraft | P.A. No. 3784, SA 13 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
1.2. | ***. |
In consideration of Customers purchase of 737-800 Special Matters Aircraft, Boeing shall *** at the time of delivery of each 737-800 Special Matters Aircraft a ***. The *** amount is *** the *** at time of delivery. Such *** may be used by *** for the *** of Boeing *** or *** to *** at the time of delivery of the applicable Aircraft. The *** may not, however, be used for the ***.
***.
1.3. | ***. |
In consideration of Customer configuring and taking delivery of 737-800 Special Matters Aircraft with ***, Boeing will *** to Customer a *** at delivery of each 737-800 Special Matters Aircraft in the *** of the respective 737-800 Special Matters Aircraft delivery pursuant to the *** set forth in Supplemental Exhibit AE1 to the Purchase Agreement. Such *** may be used by Customer for the *** of Boeing *** at the time of delivery of the applicable Aircraft. ***.
1.4. | Applicability of ***. |
The *** described in this Letter Agreement will only apply to the 737-800 Special Matters Aircraft.
2. | Assignment of ***. |
Customer may not assign the *** described in this Letter Agreement without Boeings prior written consent ***.
UAL-PA-03784-LA-1600041 |
Page 2 | |||
Special Matters 737-800 Special Matters Aircraft | P.A. No. 3784, SA 13 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
|
||
3. | Confidentiality. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-03784-LA-1208938.
Very truly yours, | ||
THE BOEING COMPANY | ||
By: | /s/ Irma L. Krueger | |
Its: |
Attorney-in-Fact |
UAL-PA-03784-LA-1600041 |
Page 3 | |||
Special Matters 737-800 Special Matters Aircraft | P.A. No. 3784, SA 13 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
![]() |
||
ACCEPTED AND AGREED TO this | ||||
Date: | December 27, 2016 | |||
UNITED AIRLINES, INC. | ||||
By: | /s/ Gerald Laderman | |||
Its: | Senior Vice President Finance, | |||
Procurement and Treasurer |
UAL-PA-03784-LA-1600041 |
Page 4 | |||
Special Matters 737-800 Special Matters Aircraft | P.A. No. 3784, SA 13 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
|
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |
UAL-PA-03784-LA-1601973R1
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft |
Reference: Purchase | Agreement No. PA-03784 (Purchase Agreement) between The Boeing Company (Boeing) and |
United Airlines, | Inc. (Customer) relating to 737NG (Aircraft) |
This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.
Boeing agrees to provide Customer with the performance guarantees in the Attachment for the Firm 737-800 Aircraft and 737-800 Substitution Aircraft. These guarantees are exclusive and expire upon delivery of the Aircraft to Customer.
1. | Assignment. |
Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or, in part.
2. | Confidentiality. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-03784-LA-1208938.
UAL-PA-03784-LA-1601973R1 |
SA-13 | |||
Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft |
Page 1 | |||
BOEING PROPRIETARY |
|
Very truly yours, | ||
THE BOEING COMPANY | ||
By: | /s/ Irma L. Krueger | |
Its: |
Attorney-In-Fact | |
ACCEPTED AND AGREED TO this | ||
Date: | December 27, 2016 | |
UNITED AIRLINES, INC. | ||
By | /s/ Gerald Laderman | |
Its | Senior Vice President Finance, Procurement and Treasuer |
UAL-PA-03784-LA-1601973R1 |
SA-13 | |||
Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft |
Page 2 | |||
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 1
MODEL 737-800 WITH WINGLETS PERFORMANCE GUARANTEES
FOR UNITED AIRLINES, INC.
SECTION | CONTENTS | |
1 | AIRCRAFT MODEL APPLICABILITY | |
2 | FLIGHT PERFORMANCE | |
3 | AIRCRAFT CONFIGURATION | |
4 | GUARANTEE CONDITIONS | |
5 | GUARANTEE COMPLIANCE | |
6 | EXCLUSIVE GUARANTEES |
UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft |
SA-13
Page 1 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 2
1 | AIRCRAFT MODEL APPLICABILITY |
The guarantees contained in this Attachment (the Performance Guarantees) are applicable to the 737-800 Aircraft with winglets and short field performance enhancement option 0222C472A09 and a maximum takeoff weight of *** pounds, a maximum landing weight of *** pounds, and a maximum zero fuel weight of *** pounds, and equipped with Boeing furnished CFM56-7B*** engines.
2 | FLIGHT PERFORMANCE |
2.1 | Mission |
2.1.1 | Mission Payload |
The payload for a stage length of *** nautical miles in still air (equivalent to a distance of *** nautical miles with a *** knot headwind, representative of a *** route) using the conditions and operating rules defined below, shall not be less than the following guarantee value:
NOMINAL: | *** Pounds |
TOLERANCE: | *** Pounds |
GUARANTEE: | *** Pounds |
Conditions and operating rules:
Stage Length: |
The stage length is defined as the sum of the distances for climb, cruise, and descent. |
Takeoff: | The airport altitude is *** feet. |
The airport temperature is ***°C.
The runway length is *** feet.
The runway slope is *** percent uphill.
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 2 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 3
The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:
Distance | Height | |||||||
1. | *** feet | *** feet | ||||||
2. | *** feet | *** feet | ||||||
3. | *** feet | *** feet |
Takeoff performance is based on an alternate forward center of gravity limit of *** percent of the mean aerodynamic chord.
Maximum takeoff thrust is used for the takeoff.
The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver: |
Following the takeoff to *** feet, the Aircraft accelerates to the recommended speed of *** KCAS while climbing to *** feet above the departure airport altitude and retracting flaps and landing gear. |
Climb: | The Aircraft climbs from *** feet above the departure airport altitude to *** feet altitude at the recommended speed of *** KCAS. |
The Aircraft then accelerates at a rate of climb of *** feet per minute to the recommended climb speed for minimum block fuel.
The climb continues at the recommended climb speed for minimum block fuel until *** Mach number is reached.
The climb continues at *** Mach number to the initial cruise altitude.
The temperature is ISA***°C during climb.
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 3 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 4
Maximum climb thrust is used during climb.
Cruise: | The Aircraft cruises at *** Mach number. |
The initial cruise altitude is *** feet.
A step climb or multiple step climbs of *** feet altitude may be used when beneficial to minimize fuel burn.
The temperature is ISA***°C during cruise.
The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent: | The Aircraft descends from the final cruise altitude at *** Mach number until *** KCAS is reached. |
The descent continues at *** KCAS to an altitude of *** feet above the destination airport altitude.
Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to *** feet per minute ***.
The temperature is ISA***°C during descent.
Approach and Landing Maneuver: |
The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands. |
The destination airport altitude is *** feet.
Fixed Allowances: |
For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances: |
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 4 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 5
Taxi-Out:
Fuel | *** Pounds |
Time | *** Minutes |
Takeoff and Climbout Maneuver:
Fuel | *** Pounds |
Distance | *** Miles |
Time | *** Minutes |
Approach and Landing Maneuver:
Fuel | *** Pounds |
Time | *** Minutes |
Taxi-In (shall be consumed from the reserve fuel):
Fuel | *** Pounds |
Time | *** Minutes |
Usable reserve fuel remaining upon completion of the approach and landing maneuver: *** Pounds
For information purposes, the reserve fuel is either the greater of a minimum *** pounds, or is based on a standard day temperature and a) a contingency fuel allowance equivalent to a continued cruise at the LRC Mach number at final cruise altitude and weight for a time equal to *** percent of the mission time from takeoff through the completion of the approach and landing maneuver at the destination airport, b) a missed approach and flight to a *** nautical mile alternate, c) an approach and landing maneuver at the alternate airport, and d) a *** minute hold at *** feet above the alternate airport with an altitude of *** feet.
2.1.2 | Mission Payload |
The payload for a stage length of *** nautical miles in still air (equivalent to a distance of *** nautical miles with a *** knot headwind, representative of a *** route) using
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 5 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 6
the conditions and operating rules defined below, shall not be less than the following guarantee value:
NOMINAL: | *** Pounds |
TOLERANCE: | *** Pounds |
GUARANTEE: | *** Pounds |
Conditions and operating rules:
Stage | The stage length is defined as the sum of the distances for climb, cruise, and descent. | |
Length: |
||
Takeoff: |
The airport altitude is *** feet. |
The airport temperature is ***°C.
The runway length is *** feet.
The stopway is *** feet.
The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:
Distance | Height | |||||||||
1. | *** feet | *** feet | ||||||||
2. | *** feet | *** feet | ||||||||
3. | *** feet | *** feet | ||||||||
4. | *** feet | *** feet |
Takeoff performance is based on an alternate forward center of gravity limit of *** percent of the mean aerodynamic chord. Maximum takeoff thrust is used for the takeoff.
The takeoff gross weight shall conform to FAA Regulations.
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 6 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 7
Climbout Maneuver: | Following the takeoff to *** feet, the Aircraft accelerates to the recommended speed of *** KCAS while climbing to *** feet above the departure airport altitude and retracting flaps and landing gear. |
Climb: | The Aircraft climbs from *** feet above the departure airport altitude to *** feet altitude at the recommended speed of *** KCAS. |
The Aircraft then accelerates at a rate of climb of *** feet per minute to the recommended climb speed for minimum block fuel.
The climb continues at the recommended climb speed for minimum block fuel until *** Mach number is reached.
The climb continues at *** Mach number to the initial cruise altitude.
The temperature is ISA***°C during climb.
Maximum climb thrust is used during climb.
Cruise: | The Aircraft cruises at *** Mach number. |
The initial cruise altitude is *** feet.
A step climb or multiple step climbs of *** feet altitude may be used when beneficial to minimize fuel burn.
The temperature is ISA***°C during cruise.
The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent: | The Aircraft descends from the final cruise altitude at *** KCAS to an altitude of *** feet above the destination airport altitude. |
Attachment to UAL-PA-03784-LA-1601973R1 |
SA-13 | |
Aircraft Performance Guarantees Firm 737-800 Aircraft | ||
and 737-800 Substitution Aircraft |
Page 7 | |
AERO-B-BBA4-M15-0858 | SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 8
Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to *** feet per minute ***.
The temperature is ISA***°C during descent.
Approach and Landing Maneuver: | The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands. |
The destination airport altitude is *** feet.
Attachment to UAL-PA-03784-LA-1601973R1 |
SA-13 | |||
Aircraft Performance Guarantees Firm 737-800 Aircraft | ||||
and 737-800 Substitution Aircraft |
Page 8 | |||
AERO-B-BBA4-M15-0858 | SS15-0360 | |||
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 9
Fixed Allowances: |
For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances: |
Taxi-Out:
Fuel | *** Pounds |
Time | *** Minutes |
Takeoff and Climbout Maneuver:
Fuel | ***Pounds |
Distance | ***Miles |
Time | ***Minutes |
Approach and Landing Maneuver:
Fuel | *** Pounds |
Time | *** Minutes |
Taxi-In (shall be consumed from the reserve fuel):
Fuel | *** Pounds |
Time | *** Minutes |
Usable reserve fuel remaining upon completion of the approach and landing maneuver: *** Pounds
For information purposes, the reserve fuel is based on a standard day temperature and a) a contingency fuel allowance equivalent to *** minutes of continued cruise starting at the end of the mission cruise and at the LRC Mach number, b) a missed approach and flight to a *** nautical mile alternate, c) an approach and landing maneuver at the alternate airport, and d) a *** minute hold at *** feet above the destination airport.
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 9 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 10
2.1.3 | Mission Payload |
The payload for a stage length of *** nautical miles in still air (equivalent to a distance of *** nautical miles with a *** knot headwind, representative of a *** route) using the conditions and operating rules defined below, shall not be less than the following guarantee value:
NOMINAL: | *** Pounds |
TOLERANCE: | *** Pounds |
GUARANTEE: | *** Pounds |
Conditions and operating rules:
Stage | The stage length is defined as the sum of the distances for climb, cruise, and descent. | |
Length: |
||
Takeoff: |
The airport altitude is *** feet. |
The airport temperature is ***°C. The runway length is *** feet.
The runway slope is *** percent downhill.
Takeoff performance is based on an alternate forward center of gravity limit of *** percent of the mean aerodynamic chord.
Maximum takeoff thrust is used for the takeoff. The takeoff gross weight shall conform to FAA Regulations.
Climbout |
Following the takeoff to *** feet, the Aircraft accelerates to the recommended speed of *** | |
Maneuver: |
KCAS while climbing to *** feet above the departure airport altitude and retracting flaps and . | |
landing gear |
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 10 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 11
Climb: | The Aircraft climbs from *** feet above the departure airport altitude to *** feet altitude at the recommended speed of *** KCAS. |
The Aircraft then accelerates at a rate of climb of *** feet per minute to the recommended climb speed for minimum block fuel.
The climb continues at the recommended climb speed for minimum block fuel until *** Mach number is reached.
The climb continues at *** Mach number to the initial cruise altitude.
The temperature is ISA***°C during climb.
Maximum climb thrust is used during climb.
Cruise: | The Aircraft cruises at *** Mach number. |
The initial cruise altitude is *** feet.
A step climb or multiple step climbs of *** feet altitude may be used when beneficial to minimize fuel burn.
The temperature is ISA***°C during cruise.
The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent: | The Aircraft descends from the final cruise altitude at *** KCAS to an altitude of *** feet above the destination airport altitude. |
Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to *** feet per minute ***.
The temperature is ISA***°C during descent.
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 11 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 12
Approach and Landing Maneuver: | The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands. |
The destination airport altitude is *** feet.
Fixed Allowances: |
For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances: |
Taxi-Out:
Fuel | *** Pounds |
Time | *** Minutes |
Takeoff and Climbout Maneuver:
Fuel | ***Pounds |
Distance | ***Miles |
Time | ***Minutes |
Approach and Landing Maneuver:
Fuel | *** Pounds |
Time | *** Minutes |
Taxi-In (shall be consumed from the reserve fuel):
Fuel | *** Pounds |
Time | *** Minutes |
Usable reserve fuel remaining upon completion of the approach and landing maneuver: *** Pounds
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 12 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 13
For information purposes, the reserve fuel is either the greater of a minimum *** pounds, or is based on a standard day temperature and a) a contingency fuel allowance equivalent to a continued cruise at the LRC Mach number at final cruise altitude and weight for a time equal to *** percent of the mission time from takeoff through the completion of the approach and landing maneuver at the destination airport, b) a missed approach and flight to a *** nautical mile alternate, c) an approach and landing maneuver at the alternate airport, and d) a *** minute hold at *** feet above the alternate airport with an altitude of *** feet.
2.1.4 | Mission Payload |
The payload for a stage length of *** nautical miles in still air (equivalent to a distance of *** nautical miles with a *** knot headwind, representative of a *** route) using the conditions and operating rules defined below, shall not be less than the following guarantee value:
NOMINAL: | *** Pounds |
TOLERANCE: | *** Pounds |
GUARANTEE: | *** Pounds |
Conditions and operating rules:
Stage | The stage length is defined as the sum of the distances for climb, cruise, and descent. | |
Length: |
||
Takeoff: |
The airport altitude is *** feet. |
The airport temperature is ***°C.
The runway length is *** feet.
The runway slope is *** percent downhill.
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 13 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 14
The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:
Distance | Height | |||||||||
1. | *** feet | *** feet | ||||||||
2. | *** feet | *** feet |
Takeoff performance is based on an alternate forward center of gravity limit of *** percent of the mean aerodynamic chord.
Maximum takeoff thrust is used for the takeoff.
The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver: |
Following the takeoff to *** feet, the Aircraft accelerates to the recommended speed of *** KCAS while climbing to *** feet above the departure airport altitude and retracting flaps and landing gear. |
Climb: | The Aircraft climbs from *** feet above the departure airport altitude to *** feet altitude at the recommended speed of *** KCAS. |
The Aircraft then accelerates at a rate of climb of *** feet per minute to the recommended climb speed for minimum block fuel.
The climb continues at the recommended climb speed for minimum block fuel until *** Mach number is reached.
The climb continues at *** Mach number to the initial cruise altitude.
The temperature is ISA***°C during climb.
Maximum climb thrust is used during climb.
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 14 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 15
Cruise: | The Aircraft cruises at *** Mach number. |
The initial cruise altitude is *** feet.
A step climb or multiple step climbs of *** feet altitude may be used when beneficial to minimize fuel burn.
The temperature is ISA***°C during cruise.
The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent: | The Aircraft descends from the final cruise altitude at *** KCAS to an altitude of *** feet above the destination airport altitude. |
Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to *** feet per minute ***.
The temperature is ISA***°C during descent.
Approach and Landing Maneuver: | The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands. |
The destination airport altitude is *** feet.
Fixed Allowances: | For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances: |
Taxi-Out:
Fuel | *** Pounds |
Time | *** Minutes |
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 15 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 16
Takeoff and Climbout Maneuver:
Fuel | *** Pounds |
Distance | *** Miles |
Time | *** Minutes |
Approach and Landing Maneuver:
Fuel | *** Pounds |
Time | *** Minutes |
Taxi-In (shall be consumed from the reserve fuel):
Fuel | *** Pounds |
Time | *** Minutes |
Usable reserve fuel remaining upon completion of the approach and landing maneuver: *** Pounds
For information purposes, the reserve fuel is based on a standard day temperature and a) a contingency fuel allowance equivalent to *** minutes of continued cruise starting at the end of the mission cruise and at the LRC Mach number, b) a missed approach and flight to a *** nautical mile alternate, c) an approach and landing maneuver at the alternate airport, and d) a *** minute hold at *** feet above the destination airport.
2.1.5 | Mission Block Fuel |
The block fuel for a stage length of *** nautical miles in still air with a *** pound payload using the conditions and operating rules defined below, shall not be more than the following guarantee value:
NOMINAL: | *** Pounds |
TOLERANCE: | *** Pounds |
GUARANTEE: | *** Pounds |
Conditions and operating rules:
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 16 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 17
Stage Length: | The stage length is defined as the sum of the distances for climb, cruise, and descent. |
Block Fuel: | The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, and taxi-in. |
Takeoff: | The airport altitude is ***. |
The takeoff gross weight is not limited by the airport conditions.
Takeoff performance is based on an alternate forward center of gravity limit of *** percent of the mean aerodynamic chord.
Maximum takeoff thrust is used for the takeoff.
The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver: |
Following the takeoff to *** feet, the Aircraft accelerates to the recommended speed of *** KCAS while climbing to *** feet above the departure airport altitude and retracting flaps and landing gear. |
Climb: | The Aircraft climbs from *** feet above the departure airport altitude to *** feet altitude at the recommended speed of *** KCAS. |
The Aircraft then accelerates at a rate of climb of *** feet per minute to the recommended climb speed for minimum block fuel.
The climb continues at the recommended climb speed for minimum block fuel until *** Mach number is reached.
The climb continues at *** Mach number to the initial cruise altitude.
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 17 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 18
The temperature is ISA***°C during climb.
Maximum climb thrust is used during climb.
Cruise: | The Aircraft cruises at *** Mach number. |
The initial cruise altitude is *** feet.
A step climb or multiple step climbs of *** feet altitude may be used when beneficial to minimize fuel burn.
The temperature is ISA***°C during cruise.
The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent: | The Aircraft descends from the final cruise altitude at *** Mach number until *** KCAS is reached. |
The descent continues at *** KCAS to an altitude of *** feet above the destination airport altitude.
Throughout the descent, the cabin pressure is controlled to a maximum rate of descent equivalent to *** feet per minute ***.
The temperature is ISA***°C during descent.
Approach and Landing Maneuver: |
The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands. |
The destination is *** airport.
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 18 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 19
Fixed Allowances: |
For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances: |
Taxi-Out:
Fuel | *** Pounds |
Time | *** Minutes |
Takeoff and Climbout Maneuver:
Fuel | *** Pounds |
Distance | *** Miles |
Time | *** Minutes |
Approach and Landing Maneuver:
Fuel | *** Pounds |
Time | *** Minutes |
Taxi-In (shall be consumed from the reserve fuel):
Fuel | *** Pounds |
Time | *** Minutes |
Usable reserve fuel remaining upon completion of the approach and landing maneuver: *** Pounds
For information purposes, the reserve fuel is based on a standard day temperature and a) a contingency fuel allowance equivalent to *** minutes of continued cruise starting at the end of the mission cruise and at the LRC Mach number, b) a missed approach and flight to a *** nautical mile alternate, c) an approach and landing maneuver at the alternate airport, and d) a *** minute hold at *** feet above the destination airport.
2.1.6 | Operational Empty Weight Basis |
The Operational Empty Weight (OEW) derived in Paragraph 2.1.7 is the basis for the mission guarantees of Paragraphs 2.1.1, 2.1.2, 2.1.3, 2.1.4, and 2.1.5.
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 19 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 20
2.1.7 737-800 Weight Summary - United Airlines
Pounds | ||
Standard Model Specification MEW | *** |
*** |
||||
*** Passengers |
||||
CFM56-7 Engines |
||||
*** lb (*** kg) Maximum Taxi Weight |
||||
*** U.S. Gallons (*** Liters) Fuel Capacity |
||||
Changes for United Airlines |
||||
*** * |
*** | |||
***Interior |
||||
*** Maximum Taxi Weight |
*** | |||
*** |
*** | |||
*** |
*** | |||
*** |
*** | |||
*** |
*** | |||
*** |
*** | |||
*** |
*** | |||
*** |
*** | |||
*** |
*** | |||
*** |
*** | |||
United Airlines Manufacturers Empty Weight (MEW) |
*** | |||
Standard and Operational Items Allowance |
*** | |||
United Airlines Operational Empty Weight (OEW) |
*** |
Quantity | Pounds | Pounds | ||||||
* ***: |
*** | |||||||
*** |
*** | *** | ||||||
*** |
*** | *** | ||||||
*** |
*** | *** |
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
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Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 21
2.1.8 Standard and Operational Items Allowance
Qty | Pounds | Pounds | Pounds | |||||||||||||
Standard Items Allowance |
*** | |||||||||||||||
Unusable Fuel |
*** | |||||||||||||||
Oil |
*** | |||||||||||||||
Oxygen Equipment |
*** | |||||||||||||||
Miscellaneous Equipment |
*** | |||||||||||||||
Galley Structure & Fixed Inserts |
*** | |||||||||||||||
Operational Items Allowance |
*** | |||||||||||||||
Crew and Crew Baggage |
*** | |||||||||||||||
Flight Crew |
*** | *** | ||||||||||||||
Cabin Crew |
*** | *** | ||||||||||||||
Crew Baggage |
*** | *** | ||||||||||||||
Catering Allowance & Removable Inserts |
*** | |||||||||||||||
First Class |
*** | *** | ||||||||||||||
Premium Economy Class |
*** | *** | ||||||||||||||
Economy Class |
*** | *** | ||||||||||||||
Passenger Service Equipment |
*** | *** | ||||||||||||||
Potable Water - *** USG |
*** | |||||||||||||||
Waste Tank Disinfectant |
*** | |||||||||||||||
Emergency Equipment (Incl. Life Vests & Life Rafts/ELT) |
*** | |||||||||||||||
Total Standard and Operational Items Allowance |
* | ** |
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 21 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 22
3 | AIRCRAFT CONFIGURATION | |
3.1 | The guarantees contained in this Attachment are based on the Aircraft configuration as defined in ***, plus any changes mutually agreed upon or otherwise allowed by the Purchase Agreement to be incorporated into the Customers Detail Specification (herein referred to as the Detail Specification). Appropriate adjustment shall be made for changes in such Detail Specification approved by the Customer and Boeing or otherwise allowed by the Purchase Agreement which cause changes to the flight performance and/or weight and balance of the Aircraft. Such adjustment shall be accounted for by Boeing in its evidence of compliance with the guarantees. | |
3.2 | The guarantee payloads of Paragraph 2.1.1, 2.1.2, 2.1.3, and 2.1.4 and the specified payload of the Paragraph 2.1.5 block fuel guarantee will be adjusted by Boeing for the effect of the following on OEW in its evidence of compliance with the guarantees: | |
(1) Changes to the Detail Specification or any other changes mutually agreed upon between the Customer and Boeing or otherwise allowed by the Purchase Agreement. | ||
(2) The difference between the component weight allowances given in Appendix E of the Detail Specification and the actual weights. | ||
4 | GUARANTEE CONDITIONS | |
4.1 | All guaranteed performance data are based on the International Standard Atmosphere (ISA) and specified variations therefrom; altitudes are pressure altitudes. | |
4.2 | The Federal Aviation Administration (FAA) regulations referred to in this Attachment are, unless otherwise specified, the 737-800 Certification Basis regulations specified in the Type Certificate Data Sheet A16WE, Revision 44, dated August 24, 2009. | |
4.3 | In the event a change is made to any law, governmental regulation or requirement, or in the interpretation of any such law, governmental regulation or requirement that affects the certification basis for the Aircraft as described in Paragraph 4.2, and as a result thereof, a |
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 22 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B*** Engines
Page 23
change is made to the configuration and/or the performance of the Aircraft in order to obtain certification, the guarantees set forth in this Attachment shall be appropriately modified to reflect any such change. | ||
4.4 | The takeoff portion of the mission guarantees are based on hard surface, level and dry runways with no wind or obstacles, no clearway or stopway, *** mph tires, with *** brakes and anti-skid operative, *** minute takeoff thrust, and with the Aircraft center of gravity at the most forward limit unless otherwise specified. The takeoff performance is based on no engine bleed for air conditioning or thermal anti-icing and ***. Unbalanced field length calculations and the improved climb performance procedure will be used for takeoff as required. | |
4.5 | The climb, cruise and descent portions of the mission guarantees include allowances for normal power extraction and engine bleed for normal operation of the air conditioning system. Normal electrical power extraction shall be defined as not less than a *** kilowatts total electrical load. Normal operation of the air conditioning system shall be defined as pack switches in the Auto position, the temperature control switches in the Auto position that results in a nominal cabin temperature of ***°F, and all air conditioning systems operating normally. This operation allows a maximum cabin pressure differential of *** pounds per square inch at higher altitudes, with a nominal Aircraft cabin ventilation rate of *** cubic feet per minute including passenger cabin recirculation (nominal recirculation is *** percent). ***. | |
4.6 | The climb, cruise and descent portions of the mission guarantees are based on an Aircraft center of gravity location of *** percent of the mean aerodynamic chord. | |
4.7 | Performance, where applicable, is based on a fuel Lower Heating Value (LHV) of *** BTU per pound and a fuel density of *** pounds per U.S. gallon. |
Attachment to UAL-PA-03784-LA-1601973R1 Aircraft Performance Guarantees Firm 737-800 Aircraft and 737-800 Substitution Aircraft AERO-B-BBA4-M15-0858 |
SA-13
Page 23 SS15-0360 | |
BOEING PROPRIETARY |
Attachment to Letter Agreement
No. UAL-PA-03784-LA-1601973R1
CFM56-7B26E Engines
Page 24
5 | GUARANTEE COMPLIANCE | |
5.1 | Compliance with the guarantees of Section 2 shall be based on the conditions specified in those sections, the Aircraft configuration of Section 3 and the guarantee conditions of Section 4. | |
5.2 | Compliance with the takeoff portion of the mission guarantee shall be based on the FAA approved Airplane Flight Manual for the Model 737-800. | |
5.3 | Compliance with the climb, cruise and descent portions of the mission guarantees shall be established by calculations based on flight test data obtained from an aircraft in a configuration similar to that defined by the Detail Specification. | |
5.4 | The OEW used for compliance with the mission guarantees shall be the actual MEW plus the Standard and Operational Items Allowance in Appendix E of the Detail Specification. | |
5.5 | The data derived from tests shall be adjusted as required by conventional methods of correction, interpolation or extrapolation in accordance with established engineering practices to show compliance with these guarantees. | |
5.6 | Compliance shall be based on the performance of the airframe and engines in combination, and shall not be contingent on the engine meeting its manufacturers performance specification. | |
6 | EXCLUSIVE GUARANTEES | |
The only performance guarantees applicable to the Aircraft are those set forth in this Attachment. |
Attachment to UAL-PA-03784-LA-1601973R1 | SA-13 | |
Aircraft Performance Guarantees Firm 737-800 Aircraft | ||
and 737-800 Substitution Aircraft | Page 24 | |
AERO-B-BBA4-M15-0858 | SS15-0360 |
BOEING PROPRIETARY |
|
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |||
UAL-LA-1604287
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | Certain*** (Letter Agreement) | |
References: | (1) Aircraft General Terms Agreement between The Boeing Company (Boeing) and United Airlines, Inc. (Customer) identified as AGTA-UAL (AGTA); | |
(2) Purchase Agreement No. 3776 between the parties relating to Model 737-9 aircraft, including Letter Agreement UAL-PA-03776-LA- 1207637 entitled *** Matters (MAX PDP Letter); | ||
(3) Purchase Agreement No. 3784 between the parties relating to Model 737NG aircraft, including Letter Agreement UAL-PA-03784-LA- 1208155R2 entitled *** Matters: 737-*** and 2016 737NG Aircraft (NG PDP Letter); | ||
(4) Purchase Agreement No. 3860 between the parties relating to Model 787 aircraft, including Section 3 of Letter Agreement UAL-PA-03860- LA-1209413R1 entitled Special Matters (787 PDP Matters Section of the Special Matters Letter); and | ||
(5) Purchase Agreement No. 04308 between the parties relating to Model 777-300ER aircraft, including Letter Agreement UAL-PA- 04308-LA-1404408R1 entitled *** Matters (777 PDP Letter), (references (2) through (5) are referred to herein as the Purchase Agreement or Purchase Agreements as the context requires). |
Ladies and gentlemen:
All terms used but not defined in this Letter Agreement shall have the same meaning as in the corresponding purchase agreement or AGTA, as applicable.
UAL-LA-1604287 |
||||
Certain *** | LA Page 1 | |||
|
1. | *** Matter ***. |
Notwithstanding the *** Schedule contained in Table 1 of each of the Purchase Agreements or the terms set forth in the 777 PDP Letter, the 787 PDP Matters Section of the Special Matters Letter, the NG PDP Letter and the MAX PDP Letter (collectively, the UAL PDP Letters or UAL PDP Letter as the context requires), Customer *** for any Aircraft on order as of the date of signing the applicable Purchase Agreement, and for any *** Aircraft in accordance with the terms of the applicable UAL PDP Letter; provided, however, that Customer shall retain the right to either (a) *** set forth in any of the UAL PDP Letters, and to the extent that Customer *** then Customers *** shall be *** or (b) *** provided that (1) Boeing *** to such *** and (2) such ***.
2. | Confidential Treatment. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-04308-LA-1404407 of the 777 Purchase Agreement entitled Privileged and Confidential Matters.
Very truly yours,
THE BOEING COMPANY
By: |
/s/ Irma L. Krueger | |
Its: |
Attorney-In-Fact |
UAL-LA-1604287 |
||||
Certain *** | LA Page 2 | |||
|
AGREED AND ACCEPTED this 27th day of December of 2016
UNITED AIRLINES, INC.
/s/ Gerald Laderman |
Signature |
Gerald Laderman |
Printed Name |
Senior Vice President Finance, |
Title |
UAL-LA-1604287 | ||||
Certain *** | LA Page 3 | |||
Exhibit 10.183
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Supplemental Agreement No. 7
to
Purchase Agreement No. 03776
between
The Boeing Company
and
United Airlines, Inc.
Relating to Boeing Model 737-9 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of December 27th, 2016, by and between THE BOEING COMPANY (Boeing) and UNITED AIRLINES, INC. (Customer);
WHEREAS, the parties hereto entered into Purchase Agreement No. 3776 dated July 12, 2012, as amended and supplemented (Purchase Agreement), relating to the purchase and sale of Boeing model 737-9 aircraft (Aircraft). This Supplemental Agreement is an amendment to the Purchase Agreement;
WHEREAS, Boeing and Customer agree to *** 737-9 Aircraft as follows:
Manufacturer Serial Number |
Original Delivery Month Prior to SA-7 |
New Delivery Month Commencing With SA-7 | ||||
*** |
*** | *** | *** |
UAL-PA-03776 |
SA-7 | Page 1 | ||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
Supplemental Agreement No. 7 to
Purchase Agreement No. 03776
WHEREAS, Customer and Boeing agree to cross model substitute sixty-one (61) 737-700 aircraft with sixty-one (61) 737-9 aircraft as specified below in Figure 1 and in Purchase Agreement No. 3784 with each such 737-9 aircraft being referred to as a Special MAX9 Aircraft and to incorporate applicable amendments to the Purchase Agreement:
Figure 1
UAL-PA-03776 |
SA-7 | Page 2 | ||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
Supplemental Agreement No. 7 to
Purchase Agreement No. 03776
NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties agree to amend the Purchase Agreement as follows:
1. | Table of Contents. |
The Table of Contents is deleted in its entirety and replaced with the attached Table of Contents (identified by SA-7).
2. | Tables. |
Table 1 entitled 737-9 Aircraft Delivery, Description, Price and *** is deleted in its entirety and replaced with the attached similarly titled Table 1 (identified by SA-7).
3. | Supplemental Exhibits. |
Supplemental Exhibit BFE1 entitled Buyer Furnished Equipment Variables is deleted in its entirety and replaced with the attached similarly titled Supplemental Exhibit BFE1 (identified by SA-7) to incorporate the Special MAX9 Aircraft.
4. | Letter Agreements. |
4.1. Letter Agreement No. UAL-PA-03776-LA-1207644 entitled *** Aircraft is deleted in its entirety and replaced with Letter Agreement No. UAL-PA-03776-LA-1207644R1 to incorporate certain revisions regarding the aggregate quantity of *** Aircraft under the Purchase Agreement.
4.2. Letter Agreement No. UAL-PA-03776-LA-1207650 entitled Special Matters is deleted in its entirety and replaced with Letter Agreement No. UAL-PA-03776-LA-1207650R1 to incorporate the Special MAX9 Aircraft.
4.3. Letter Agreement UAL-PA-03776-LA-1208055 entitled *** is deleted in its entirety and replaced with Letter Agreement No. UAL-PA-03776-LA-1208055R1 to incorporate the Special MAX9 Aircraft.
4.4. Letter Agreement No. UAL-PA-3776-LA-1606848 entitled *** Special MAX9 Aircraft is added to the Purchase Agreement to provide certain delivery ***.
4.5. Letter Agreement UAL-LA-1604287 entitled Certain *** is hereby incorporated by the Purchase Agreement.
5. | Miscellaneous. |
5.1. If Boeing or Customer determines that an Exhibit, a Supplemental Exhibit or a Letter Agreement should be further amended to incorporate Special MAX9 Aircraft, then Boeing and Customer will work together for a mutually agreeable solution.
UAL-PA-03776 |
SA-7 | Page 3 | ||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
Supplemental Agreement No. 7 to
Purchase Agreement No. 03776
5.2. Boeing and Customer agree to *** of *** pursuant to §2.2 of Supplemental Agreement No. 13 to Purchase Agreement No. 3784 (SA-13 for 737NG) for application on the effective date of SA-13 for 737NG exclusively to Customer purchase agreement payment obligations as follows:
Purchase Agreement No. 3784 |
Purchase Agreement No. 3776 |
Purchase Agreement No. 3860 |
Purchase Agreement No. 4308 |
TOTAL | ||||||||||||||||||||||||||
Amount due for SA-7 to Purchase Agreement No. 3776: (61) 737-9 Aircraft |
$*** | $*** | ||||||||||||||||||||||||||||
Payment Application Date |
Payment Due Date |
|||||||||||||||||||||||||||||
Effective date of SA 13 for 737NG |
*** | $ | *** | $ | *** | $ | *** | $ | *** | $ | *** | |||||||||||||||||||
Effective date SA 13 for 737NG |
*** | $ | *** | $ | *** | $ | *** | $ | *** | |||||||||||||||||||||
Effective date SA 13 for 737NG |
*** | $ | *** | $ | *** | $ | *** | $ | *** | $ | *** | |||||||||||||||||||
Effective date SA 13 for 737NG |
*** | $ | *** | $ | *** | $ | *** | $ | *** | $ | *** | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total |
$ | *** | $ | *** | $ | *** | $ | *** | $ | *** | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
The Purchase Agreement will be deemed supplemented to the extent provided herein as of the date hereof and as so supplemented will continue in full force and effect.
The rest of this page is left intentionally blank.
UAL-PA-03776 |
SA-7 | Page 4 | ||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
Supplemental Agreement No. 7 to
Purchase Agreement No. 03776
EXECUTED IN DUPLICATE as of the day and year first written above.
THE BOEING COMPANY | UNITED AIRLINES, INC. | |||||||
/s/ Irma L. Krueger |
/s/ Gerald Laderman | |||||||
Signature | Signature | |||||||
Irma L. Krueger |
Gerald Laderman | |||||||
Printed Name | Printed Name | |||||||
Attorney-in-Fact |
Senior Vice President Finance, | |||||||
Title | Title |
UAL-PA-03776 |
SA-7 | Page 5 | ||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
TABLE OF CONTENTS
ARTICLES |
SA NUMBER | |||
Article 1. |
Quantity, Model and Description | |||
Article 2. |
Delivery Schedule | |||
Article 3. |
Price | |||
Article 4. |
Payment | |||
Article 5. |
Additional Terms | |||
TABLE |
||||
1. |
Aircraft Information Table 737-9 | SA-7 | ||
EXHIBITS |
||||
A. |
Aircraft Configuration | |||
B. |
Aircraft Delivery Requirements and Responsibilities | |||
SUPPLEMENTAL EXHIBITS |
||||
AE1. |
Escalation Adjustment/Airframe and Optional Features | |||
BFE1. |
BFE Variables | SA-7 | ||
CS1. |
Customer Support Variables | |||
EE1. |
Engine Warranty *** | |||
SLP1. |
Service Life Policy Components | |||
LETTER AGREEMENTS |
||||
UAL-PA-03776-LA-1207637 |
*** Matters | |||
UAL-PA-03776-LA-1207638 |
*** | |||
UAL-PA-03776-LA-1207640 |
Demonstration Flight Waiver | |||
UAL-PA-03776-LA-1207643 |
Open Matters | |||
UAL-PA-03776-LA-1207644R1 |
*** Aircraft | SA-7 | ||
*** Aircraft - Attachment A | SA-6 | |||
UAL-PA-03776-LA-1207646 |
Promotional Support | |||
UAL-PA-03776-LA-1207647 |
Seller Purchased Equipment | |||
UAL-PA-03776-LA-1207649 |
Spare Parts Initial Provisioning | |||
UAL-PA-03776-LA-1207650R1 |
Special Matters | SA-7 | ||
UAL-PA-03776-LA-1208055R1 |
*** | SA-7 | ||
UAL-PA-03776-LA-1208122 |
*** | |||
UAL-PA-03776-LA-1208123 |
*** Matters | |||
UAL-PA-03776-LA-1208157 |
*** |
UAL-PA-03776 |
TABLE OF CONTENTS | SA-7, Page 1 of 2 | ||
BOEING/UNITED AIRLINES, INC. PROPRIETARY |
TABLE OF CONTENTS, CONTINUED
LETTER AGREEMENTS, continued |
SA NUMBER | |||
UAL-PA-03776-LA-1208234 |
Privileged and Confidential Matters | |||
UAL-PA-03776-LA-1208596 |
AGTA Matters | |||
UAL-PA-03776-LA-1208238 |
Assignment Matters | |||
UAL-PA-03776-LA-1208869 |
Delivery *** Matters | |||
UAL-PA-03784-LA-1207869 |
737 Production Adjustments | |||
UAL-PA-3776-LA-1606848 |
*** Special MAX9 Aircraft | SA-7 | ||
UAL-LA-1604287 |
Certain *** | Dec. 2016 | ||
Letter | ||||
Agreement | ||||
No. 1 |
SUPPLEMENTAL AGREEMENTS |
DATED AS OF |
|||
Supplemental Agreement No. 1 |
June 17, 2013 | |||
Supplemental Agreement No. 2 |
January 14, 2015 | |||
Supplemental Agreement No. 3 |
May 26, 2015 | |||
Supplemental Agreement No. 4 |
June 12, 2015 | |||
Supplemental Agreement No. 5 |
January 20, 2016 | |||
Supplemental Agreement No. 6 |
February 8, 2016 | |||
Supplemental Agreement No. 7 |
December 27, 2016 | |||
Dec. 2016 Letter Agreement No. 1: UAL-LA-1604287 entitled Certain *** |
December 27, 2016 |
UAL-PA-03776 |
TABLE OF CONTENTS | SA-7, Page 2 of 2 | ||
BOEING/UNITED AIRLINES, INC. PROPRIETARY |
Table 1 To Purchase Agreement No. 03776
737-9 Aircraft Delivery, Description, Price and ***
Airframe Model/MTOW: |
737-9 | *** pounds | Detail Specification: |
*** | ||||||||||||||||||||||||
Engine Model/Thrust: |
*** | *** pounds | Airframe Price Base Year/Escalation Formula: |
*** | *** | |||||||||||||||||||||||
Airframe Price: |
$ | *** | Engine Price Base Year/Escalation Formula: |
*** | *** | |||||||||||||||||||||||
Optional Features: |
$ | *** | Airframe Escalation Data: |
|||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Sub-Total of Airframe and Features: |
$ | *** | Base Year Index (ECI): |
*** | ||||||||||||||||||||||||
Engine Price (Per Aircraft): |
$ | *** | Base Year Index (CPI): |
*** | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Aircraft Basic Price (Excluding BFE/SPE): |
$ | *** | ||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Buyer Furnished Equipment (BFE) Estimate: |
$ | *** | ||||||||||||||||||||||||||
Seller Purchased Equipment (SPE) Estimate: |
$ | *** | ||||||||||||||||||||||||||
Deposit per Aircraft: |
$ | *** |
# of Aircraft |
Delivery Date | Number of Aircraft |
Escalation Factor (Airframe) |
Manufacturer Serial Number |
Actual or Nominal Delivery Month* |
Escalation Estimate *** Base Price Per A/P |
*** Per Aircraft (Amts. Due/*** Prior to Delivery): | |||||||||||||
*** | *** | *** | *** | |||||||||||||||||
*** |
*** |
*** |
*** | |||||||||||||||||
*** |
*** | *** | *** | *** | *** | $*** | $*** | $*** | $*** | $*** | ||||||||||
|
||||||||||||||||||||
Total: | *** |
* | Nominal delivery month, *** pursuant to Letter Agreement number UAL-PA-03776-LA-1207643. |
Note: Serial Numbers are provided as guidance only and are subject to change.
***
UAL-PA-03776 64721-1F.TXT | Boeing / United Airlines, Inc. Proprietary | Table 1 per SA-7, Page 1 |
BUYER FURNISHED EQUIPMENT VARIABLES
between
THE BOEING COMPANY
and
United Airlines, Inc.
Supplemental Exhibit BFE1
to Purchase Agreement Number PA-03776
UAL-PA-03776-BFE1, Page 1 | SA-7 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
BUYER FURNISHED EQUIPMENT VARIABLES
relating to
BOEING MODEL 737-9 AIRCRAFT
This Supplemental Exhibit BFE1 contains supplier selection dates, on-dock dates and other requirements applicable to the Aircraft.
1. | Supplier Selection. |
Customer will:
Select and notify Boeing of the suppliers and part numbers of the following BFE items by the following dates:
*** |
***** |
|||
*** |
***** |
|||
*** |
***** |
|||
*** |
***** |
|||
*** |
*** |
|||
*** |
***** |
|||
**** |
||||
*** |
***** |
* | For a new certification, supplier requires notification *** prior to |
*** | on-dock date. |
** | Actual Supplier Selection dates will be provided when the final monthly delivery positions are available to Customer. |
Customer will enter into initial agreements with the selected *** suppliers on or before *** after the above supplier selection dates to actively participate with Customer and Boeing in coordination actions including the Initial Technical Coordination Meeting (ITCM).
UAL-PA-03776-BFE1, Page 2 | SA-7 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
2. | On-dock Dates and Other Information. |
On or before ***, Boeing will provide to Customer the BFE Requirements electronically through My Boeing Fleet (MBF in My Boeing Configuration (MBC). These requirements may be periodically revised, setting forth the items, quantities, on-dock dates and shipping instructions and other requirements relating to the in-sequence installation of BFE. For planning purposes, preliminary BFE on-dock dates are set forth in Attachment 1.
3. | Additional Delivery Requirements - Import. |
Customer will be the importer of record (as defined by the U.S. Customs and Border Protection) for all BFE imported into the United States, and as such, it has the responsibility to ensure all of Customers BFE shipments comply with U.S. Customs Service regulations. In the event Customer requests Boeing, in writing, to act as importer of record for Customers BFE, and Boeing agrees to such request, Customer is responsible for ensuring Boeing can comply with all U.S. Customs Import Regulations by making certain that, at the time of shipment, all BFE shipments comply with the requirements in the International Shipment Routing Instructions, including the Customs Trade Partnership Against Terrorism (C-TPAT), as set out on the Boeing website referenced below. Customer agrees to include the International Shipment Routing Instructions, including C-TPAT requirements, in each contract between Customer and BFE supplier.
http://www.boeing.com/companyoffices/doingbiz/supplier portal/index general.html
UAL-PA-03776-BFE1, Page 1 | SA-7 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
Attachment 1 to Supplemental Exhibit BFE1
Nominal Del Date |
Aircraft Qty |
*** |
*** |
*** |
*** |
*** |
*** |
*** |
*** |
*** |
*** | |||||||||||
*** |
**** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | |||||||||||
|
||||||||||||||||||||||
*** |
UAL-PA-03776-BFE1 | SA-7 | |||
Attachment 1, Page 1 | ||||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
|
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |
UAL-PA-03776-LA-1207644R1
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | *** Aircraft 737-9 |
Reference: Purchase | Agreement No. PA-03776 (Purchase Agreement) between The Boeing Company (Boeing) and |
United | Continental Holdings, Inc. (Customer) relating to Model 737-9 aircraft (Aircraft) |
This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.
1. | Right to Purchase *** Aircraft. |
Subject to the terms and conditions contained in this Letter Agreement, in addition to the Aircraft described in Table 1 to the Purchase Agreement as of the date of execution of this Letter Agreement, Customer will have the *** Model 737-9 aircraft as *** aircraft (*** Aircraft).
2. | Delivery. |
The number of aircraft and delivery months are listed in the Attachment A to this Letter Agreement. The scheduled delivery position of each *** Aircraft listed in Attachment A provides the delivery schedule in *** consisting of a nominal delivery month (Nominal Delivery Month) plus and minus ***. No later than *** prior to Nominal Delivery Month of Customers first *** Aircraft in each calendar year, Boeing will provide written notice with a revised Attachment A of the scheduled delivery month for each *** Aircraft with a Nominal Delivery Month in such calendar year.
3. | Configuration. |
3.1 Subject to the provisions of Article 3.2, below, the configuration for the *** Aircraft will be the Detail Specification for Boeing Model 737-9 aircraft at the revision level in effect at the time of Definitive Agreement (as defined below). Such Detail Specification will be revised to include (i) changes applicable to the Detail Specification that are developed by Boeing between the *** (as defined below) and the signing of the Definitive Agreement, (ii) changes required to obtain required regulatory certificates, and (iii) other changes as mutually agreed.
UAL-PA-03776-LA-1207644R1 | ||||
*** Aircraft 737-9 | Page 1 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
|
3.2 Subject to ***, the *** Aircraft ***, provided that it can achieve *** which would result pursuant to the provisions of Article ***.
4. | Price. |
4.1 The Airframe Price and Optional Features Prices for each of the *** Aircraft is identified in Attachment A to this Letter Agreement. ***.
4.2 The Airframe Price, Optional Features Prices, and Aircraft Basic Price for each of the *** Aircraft shall be adjusted in accordance with the terms set forth in Article 2.1.5 (Escalation Adjustment) of the AGTA.
4.3 The *** Price shall be developed in accordance with the terms of the Purchase Agreement and determined at the time of Definitive Agreement.
5. | Payment. |
5.1 ***
5.2 Notwithstanding the amount shown in Attachment A, the *** Deposit will be *** for each *** Aircraft.
UAL-PA-03776-LA-1207644R1 | ||||
*** Aircraft 737-9 | Page 2 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY
Execution Version SA-7 to 737*** Purchase Agreement No. 03776, Page 25 of 52 |
|
5.3 At Definitive Agreement for the *** Aircraft, *** will be payable as specified in the Purchase Agreement. The remainder of the Aircraft Price for the *** Aircraft will be paid ***.
6. | ***. |
6.1 Customer may *** by giving written notice to Boeing on or before the date *** prior to the earlier of the first day of either the Nominal Delivery Month or the delivery month listed in Attachment A (*** Date).
6.2 ***
6.3 If at any given time, the aggregate number of *** Aircraft *** Aircraft, then Customer may request for Boeing to *** Aircraft in *** Aircraft under the Purchase Agreement on the basis of the terms of this Letter Agreement.
6.3.1 Boeing will accommodate Customers request for *** Aircraft in accordance with the terms of Letter Agreement 6-1162-KKT-080, as amended; provided, however, that such Boeing accommodation is further conditioned upon Boeing having *** for *** Aircraft.
6.3.2 In response to any Customer request for ***, Boeing will provide a written notice for Customers consideration and written acceptance within *** of such Boeing notice. Delivery months will be specified in Boeings notice for confirmation by Customer through execution of a supplemental agreement incorporating *** Aircraft. Delivery positions of *** Aircraft will be subject to mutual agreement and will take into account ***.
7. | Definitive Agreement. |
Following Customers *** the parties will sign a definitive agreement for the purchase of such *** Aircraft (Definitive Agreement) within *** of such exercise. The Definitive Agreement will include the provisions of the Purchase Agreement as modified to reflect the provisions of this Letter Agreement. In the event the parties have not entered into a Definitive Agreement within *** days following ***, either party may *** such *** Aircraft by giving written notice to the other within ***. If Customer and Boeing fail to enter into the Definitive Agreement, Boeing will *** for *** Aircraft and shall have no further obligation with respect to *** Aircraft.
UAL-PA-03776-LA-1207644R1 | ||||
*** Aircraft 737-9 | Page 3 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
|
8. | Assignment. |
Except as provided in Letter Agreement No. UCH-PA-03776-LA-1208238, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customers becoming the operator of the Aircraft and cannot be assigned in whole or in part.
9. | Confidential Treatment. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-03776-LA-1208234.
Very truly yours,
THE BOEING COMPANY | ||
By: | Irma L. Krueger | |
Its: |
Attorney-in-Fact |
UAL-PA-03776-LA-1207644R1 | ||||
*** Aircraft 737-9 | Page 4 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
|
ACCEPTED AND AGREED TO this
Date: |
December 27, 2016 | |
UNITED AIRLINES, INC. | ||
By: |
/s/ Gerald Laderman | |
Senior Vice President | ||
Its: |
Finance, Procurement & Treasurer |
UAL-PA-03776-LA-1207644R1 | ||||
*** Aircraft 737-9 | Page 5 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
|
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |
UAL-PA-03776-LA-1207650R1
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | Special Matters 737 MAX Aircraft | |
References: | 1) Purchase Agreement No. PA-03776 (Purchase Agreement) between The Boeing Company (Boeing) and United Airlines, Inc. (Customer) relating to Model 737 MAX aircraft (Aircraft); and | |
2) Letter Agreement UAL-PA-03776-1207638 entitled Aircraft *** (*** Letter) |
This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement UAL-PA-0 3776-LA-1207650 dated July 12, 2012.
1. | ***. |
1.1 ***. At the *** of each 737-9 Aircraft, Boeing *** to Customer *** in an *** the 737-9 Aircraft ***.
1.2 737-9 ***. At the *** of each 737-9 Aircraft, Boeing *** to Customer *** in an ***. Boeing represents that *** of this 737-9 *** is consistent with the terms of Letter Agreement 6-1162-KKT-080, as amended.
1.3 737-8 *** Aircraft ***. Pursuant to the *** Letter, Customer may *** of 737-8 aircraft *** (737-8 *** Aircraft). At the *** of each 737-8 *** Aircraft, Boeing *** to Customer *** (737-8 *** Aircraft ***).
UAL-PA-03776-LA-1207650R1 |
SA-7 | |||
Special Matters | Page 1 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
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1.4 737-7 *** Aircraft ***. Pursuant to the *** Letter, Customer may *** 737-7 aircraft in place of certain Aircraft (737-7 *** Aircraft). At the time of delivery of each 737-7 *** Aircraft, Boeing *** to Customer *** 737-7 *** Aircraft *** (737-7 *** Aircraft ***).
1.5 *** 737 *** and ***.
The parties agree to the following *** which will *** Aircraft (*** Aircraft).
1.5.1 At the time *** of each applicable *** 737-9 Aircraft, Boeing *** to Customer *** 737-9 Aircraft *** and *** to be used solely for the *** of Boeing *** and *** and shall not be applied to *** or ***.
1.5.2 Boeing and Customer will work together to assess and agree to determine whether and how *** established in Attachment 1 is *** provided in Attachment 2 to this Letter Agreement. Such assessment will incorporate the methodology and .assumptions incorporated in development of Attachment 1 to this Letter Agreement including *** to the effective date of Supplemental Agreement No. 7 to the 787 Purchase Agreement No. 3860 and *** in Attachment 1 to this Letter Agreement.
2. | ***. |
Unless otherwise noted, the *** stated in Paragraphs 1.1 through 1.5 *** are in *** dollars and will be *** to the scheduled month of the respective Aircraft delivery pursuant to the *** formula set forth in the Purchase Agreement applicable to the Aircraft. The *** may, at the election of Customer, be *** Boeing *** and *** (but shall ***).
3. | 737-9 *** Configuration. |
Boeing agrees to make the 737 *** available for the 737-9 through Boeings standard pricing and offerability process (Offerable). In the event that Boeing does not make the 737 *** Offerable for delivery starting with Customers *** 737-9 aircraft by its scheduled delivery month, then Boeing will *** of each 737-9 equal to *** for each
UAL-PA-03776-LA-1207650R1 |
SA-7 | |||
Special Matters | Page 2 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
|
passenger seat *** in the Aircraft configuration with the 737 *** as set forth in Attachment 1 to this Letter Agreement as opposed to the number of passenger seats in a 737-9 aircraft configuration (subject to the requirements in Attachment 3, unless otherwise mutually agreed) without the 737 *** per 737-9 Aircraft). For the avoidance of doubt, Boeings *** the 737 *** will *** when the 737 *** (or any improved version of such which does not ***) becomes, and remains, Offerable for the 737-9 aircraft not yet delivered to Customer.
4. | 737 Supplier Management. |
It is Boeings 737 MAX design intent to maintain as much commonality with the 737NG while also achieving the 737 MAX performance requirements (including, but not limited to, fuel bum, range, payload, etc.) that the market demands. If a *** leads to a Supplier Product to be available *** for the 737 MAX where *** on the 737NG, or if an existing 737NG ***, then Boeing will ensure that *** the *** 737 MAX operators ***. These *** agreements, known as ***, will include (but not be limited to) enforceable provisions related to *** Boeing will utilize *** efforts to ensure that the terms of such *** agreements are ***.
5. | Supplier Diversity. |
Customer and Boeing agree to work towards a mutually agreeable solution for meeting diversity requirements in the supply base. Notwithstanding the foregoing sentence, Boeing agrees to (i) identify parts and equipment where Customer makes the procurement decision for potential opportunities; (ii) submit indirect reports until other options are vetted and approved; and (iii) continue to engage with Customer with regard to supplier diversity to ensure Boeing supports Customers requirements.
6. | Delivery ***. |
Customer and Boeing agree that both Customer and Boeing will have certain Aircraft ***. Such *** are provided to Customer and Boeing pursuant to Letter Agreement No. UAL-PA-03776-LA-1208869.
7. | Assignment. |
Unless otherwise noted herein, the *** described in this Letter Agreement are provided as *** to Customer and in consideration of ***
UAL-PA-03776-LA-1207650R1 |
SA-7 | |||
Special Matters | Page 3 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
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***. Except as provided in Letter Agreement No. UAL-PA-03776-LA-1208238, this Letter Agreement cannot be assigned, in whole or in part, without the prior written consent of Boeing. ***
8. | Confidentiality |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-03776-LA-1208234.
Very truly yours,
THE BOEING COMPANY | ||
By: | Irma L. Krueger | |
Its: |
Attorney-in-Fact |
UAL-PA-03776-LA-1207650R1 |
SA-7 | |||
Special Matters | Page 4 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
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ACCEPTED AND AGREED TO this
Date: |
December 27, 2016 |
UNITED AIRLINES, INC.
By: | /s/ Gerald Laderman | |
Its: | Senior Vice President Finance, | |
Procurement and Treasurer |
UAL-PA-03776-LA-1207650R1 |
SA-7 | |||
Special Matters | Page 5 | |||
BOEING / UNITED AIRLINES PROPRIETARY |
Attachment 1 to Letter Agreement UAL-PA-03776-LA-1207650R1: ***
***
Current scenario:
Year |
787-10 ***- | 787-10 *** | 777-300*** | 737 *** and *** |
Fixed *** and ***+ |
*** | ||||||||||||||||||||||||||
*** |
*** | *** | *** | |||||||||||||||||||||||||||||
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Discount Rate |
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PV (***%) |
*** | *** | *** | *** | *** | *** | *** | $ | *** | |||||||||||||||||||||||
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Alternative scenario:
Col. 1 |
Col. 2 | Col. 3 | Col. 4 | Col. 5 | Col. 6 | Col. 7 | ||||||||||||||||||||||||||
Year |
787-10 ***- | 787-10 *** | 777-300*** | Special 737-7 *** and *** |
*** + | *** | ||||||||||||||||||||||||||
*** |
*** | *** | *** | *** | *** | *** | ||||||||||||||||||||||||||
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Discount Rate |
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***% | |||||||||||||||||||||||||||||
Total |
*** | *** | *** | *** | *** | *** | ||||||||||||||||||||||||||
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PV (***%) |
*** | *** | *** | *** | *** | *** | *** | $ | *** | |||||||||||||||||||||||
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*** of Boeing ***: | *** | |||||||||||||||||||||||||||||||
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+ - Note: Payment dates for the Fixed *** and *** amounts and other related payments to Customer will be subject to adjustment as mutually agreed by the parties to reflect *** incorporated by the Supplemental Agreements executed on March 7 and this Supplemental Agreement 7. *** subsequent to March 7 should be reviewed for *** to be issued in columns (5) and (6).
UAL-PA-03776-LA-1207650R1 | SA-7 | |
Special Matters | Attachment 1 to UAL-PA-03776-LA-1207650R1, Page 1 |
BOEING / UNITED AIRLINES PROPRIETARY
Attachment 2 to Letter Agreement UAL-PA-03776-LA-1207650R1: Limited 737-9 Aircraft ***
***
Current scenario:
Year |
787-10 *** | 787-10 *** | 777-300*** | 737 *** and *** |
*** and *** |
Total Cashflow |
||||||||||||||||||||||||||
*** |
*** | *** | *** | |||||||||||||||||||||||||||||
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Discount Rate |
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***% | |||||||||||||||||||||||||||||
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Total |
*** | *** | | | *** | |||||||||||||||||||||||||||
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PV (***%) |
*** | *** | | | *** | *** | $ | *** | ||||||||||||||||||||||||
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Alternative scenario: ***s & 4th Quarter *** Forecast:
Year |
787-10 *** | 787-10 *** | 777-300*** | 737 MAX9 *** *** |
*** | *** | ||||||||||||||||||||||||||
*** |
*** | *** | *** | *** | *** | *** | ||||||||||||||||||||||||||
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Discount Rate |
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***% | |||||||||||||||||||||||||||||
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Total |
*** | *** | *** | *** | *** | *** | ||||||||||||||||||||||||||
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PV (***%) |
*** | *** | *** | *** | *** | *** | *** | $ | *** | |||||||||||||||||||||||
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UAL-PA-03776-LA-1207650R1 | SA-7 | |
Special Matters | Attachment 2 to UAL-PA-03776-LA-1207650R1, Page 1 |
BOEING / UNITED AIRLINES PROPRIETARY
Execution Version SA-7 to 737MAX Purchase Agreement No. 03776, Page 35 of 52
Attachment 3 to Letter Agreement UAL-PA-03776-LA-1207650R1
***
Attachment 3 to Letter Agreement UAL-PA-03776-LA-1207650R1
01-20-12
UAL-PA-03776-LA-1207650R1 Special Matters |
Attachment 3 to UAL-PA-03776-LA-1207650R1, | SA-7 | ||
BOEING / UNITED AIRLINES PROPRIETARY | Page 1 |
|
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |||
UAL-PA-03776-LA-1208055R1
United Continental Holdings, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: |
*** Program | |
Reference: |
Purchase Agreement No. PA-03776 (Purchase Agreement) between The Boeing Company (Boeing) and United Continental Holdings, Inc. (Customer) relating to Model 737-9 MAX aircraft (Aircraft) |
This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement UAL-PA-03776-LA-1208055 dated July 12, 2012.
1. | Definitions. |
*** Notice means the written communication provided by Boeing to Customer in accordance with the requirements of Article 4.1, below.
*** Aircraft will have the meaning specified in letter agreement UAL-PA-03776-LA-1207644 relating to 737-9 *** Aircraft.
Program Aircraft means each Aircraft specified in Table 1 of the Purchase Agreement as of the date of this Letter Agreement and any *** Aircraft for which Customer has ***.
2. | Applicability. |
Notwithstanding any other provision of the Purchase Agreement to the contrary, the parties agree that the *** for the Airframe Price and *** Features Prices for each Program Aircraft shall be determined in accordance with this Letter Agreement.
3. | *** Forecast. |
Boeing will release an *** forecast in *** of each year based on Boeings then current standard ***. Only one *** forecast shall be used to conduct the *** analysis performed in accordance with Article 4.1, below, for a given Program Aircraft. The *** forecast applicable to a given Program Aircraft is set forth in Attachment A.
4. | ***. |
4.1 If the *** forecast, as set forth in Article 3, above, ***
UAL-PA-03776-LA-1208055R1 | SA-7 | |||
*** Program | Page 1 | |||
BOEING / UNITED AIRLINES, INC. PROPRIETARY |
|
***, as set forth in Attachment B, *** any Program Aircraft that is *** such *** forecast, as set forth in Attachment A, then Boeing shall issue an *** Notice to the Customer by the date set forth in Attachment A. Such *** Notice shall, ***, either:
4.1.1 *** for such affected Program Aircraft *** as set forth in Attachment B; or
4.1.2 provide Customer with the *** as set forth in Attachment B and the actual *** factor determined in accordance with ***; or
4.1.3 provide Customer with *** as set forth in Attachment B, with Boeing and Customer *** as set forth in Attachment B ***.
4.1.4 In the event that Boeing *** the *** Notice as detailed in Article 4.1.2 or Article 4.1.3 and Customer ***, then Customer *** the Purchase Agreement with respect to such affected Program Aircraft.
4.2 If Boeing provides Customer the *** described in Article 4.1.2 or Article 4.1.3 above, then Customer shall notify Boeing *** contained in Articles 4.1.2, 4.1.3, or 4.1.4 above within *** of its receipt of the *** Notice from Boeing. In the event Customer *** in accordance with Article 4.1.4 above, then Boeing *** Customer, *** for the *** Program Aircraft.
4.2.1 Within *** of Boeings receipt of *** notice for any such *** Program Aircraft under Article 4.2 above, Boeing *** written notice to Customer to *** related to such *** Program Aircraft ***, by Customer.
4.2.2 Should Customer *** any notice to Boeing in accordance with Article 4.2 above, then the *** for such Program Aircraft shall be *** in accordance with Article 4.1.2.
UAL-PA-03776-LA-1208055R1 *** Program |
SA-7 Page 2 | |||
BOEING/UNITED AIRLINES, INC. PROPRIETARY |
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4.3 In the event that the *** of a Program Aircraft that is subject to either Article 4.1.1, Article 4.1.2 or Article 4.1.3 above, *** applicable to such Program Aircraft will be determined pursuant to Article 5 below.
5. | ***. |
5.1 If the *** forecast, as set forth in Article 3, *** any Program Aircraft *** as set forth in Attachment B and *** as set forth in Attachment B, *** for such Program Aircraft *** as set forth in Attachment B *** as set forth in Attachment B ***.
5.2 In the event the *** at *** a Program Aircraft subject to Article 5.1 above, *** applicable to such Program Aircraft will be determined pursuant to Article 6 below.
6. ***.
If the *** forecast, as set forth in Article 3, above, ***, as set forth in Attachment B, *** any Program Aircraft *** such *** forecast, as set forth in Attachment A, then such *** applicable to such Program Aircraft ***:
6.1 If the *** of a Program Aircraft, *** as set forth in Attachment B for such Program Aircraft, then the *** for such Program Aircraft.
6.2 *** of a Program Aircraft, *** as set forth in Attachment B for such Program Aircraft, then the *** for such Program Aircraft *** as set forth in Attachment B.
UAL-PA-03776-LA-1208055R1 |
SA-7 | |||
*** Program | Page 3 | |||
BOEING/UNITED AIRLINES, INC. PROPRIETARY |
|
7. | Applicability to ***. |
The ***, identified in the Purchase Agreement as subject to *** pursuant to Supplemental Exhibit AE1, and which pertains to the Program Aircraft shall be *** established in this Letter Agreement for such Program Aircraft *** provisions of the Purchase Agreement ***.
8. | Assignment. |
Except as provided in Letter Agreement No. UAL-PA-03776-LA-1208238, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customers becoming the operator of the Aircraft and cannot be assigned in whole or, in part.
9. | Confidential Treatment. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-03776-LA-1208234.
Very truly yours,
THE BOEING COMPANY
By |
/s/ Irma L. Krueger | |
Its |
Attorney-in-Fact | |
ACCEPTED AND AGREED TO this | ||
Date: |
December 27, 2016 | |
UNITED AIRLINES, INC. | ||
By | /s/ Gerald Laderman | |
Its | Senior Vice President Finance, | |
Procurement and Treasurer |
UAL-PA-03776-LA-1208055R1 *** Program |
SA-7 | |||
Page 4 | ||||
BOEING/UNITED AIRLINES, INC. PROPRIETARY |
|
ATTACHMENT A
*** Forecast & *** Notice Date
*** Forecast |
Applicable to Program Aircraft Delivering in Time Period |
*** Notice Date | ||
*** |
*** |
*** |
UAL-PA-03776-LA-1208055R1 |
SA-7 | |||
*** Program | Page 1 | |||
BOEING/UNITED AIRLINES, INC. PROPRIETARY |
|
ATTACHMENT B
*** Factors - ***
*** |
*** |
*** |
*** | |||
*** | *** | *** | *** |
UAL-PA-03776-LA-1208055R1 |
SA-7 | |||
*** Program | Page 1 | |||
BOEING/UNITED AIRLINES, INC. PROPRIETARY |
![]() |
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |||
UAL-PA-3776-LA-1606848
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | *** Special MAX9 Aircraft |
Reference: | Purchase Agreement No. PA-03776 (Purchase Agreement) between The Boeing Company (Boeing) and United Airlines, Inc. (Customer) relating to Model 737 MAX aircraft (Aircraft) |
This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement. References to the Purchase Agreement are to the Purchase Agreement as amended from time to time, including by way of this Letter Agreement and other letter agreements between Boeing and Customer.
1. | *** |
Customer has the right to *** the delivery of any of the *** Special MAX9 Aircraft from *** delivery month into ***, pursuant to the terms of this Letter Agreement ***. For the avoidance of doubt, the aggregate maximum number of *** is ***.
2. | Notice Requirement. |
Customer will provide written notice (*** Notice) of its intent to *** purchase of any eligible Special MAX9 Aircraft no later than the Exercise Notice Due Date specified in Attachment 1 to this Letter Agreement. Each such ***Special MAX9 Aircraft, once confirmed with Boeing as specified in Section 4 herein, is referred to herein as an *** Aircraft.
3. | ***. |
The *** of Special MAX9 Aircraft which can be *** into *** is specified in Attachment 1 to this Letter Agreement.
UAL-PA-3776-LA-1606848 |
SA-7 | |||
*** | LA Page 1 | |||
BOEING PROPRIETARY |
![]() |
4. | Definitive Agreement. |
If Customer agrees with the *** in the *** Confirmation, then the parties will sign a definitive agreement to incorporate the *** for each *** Aircraft (Supplemental Agreement) within *** of the *** Confirmation. The Supplemental Agreement will include the provisions of the Purchase Agreement as modified to reflect the provisions of this Letter Agreement. In the event the parties *** a Supplemental Agreement within *** following *** Confirmation, either party may *** of a Special MAX9 Aircraft by giving written notice to the other within ***. If Customer and Boeing *** Supplemental Agreement, then the delivery month of such Special MAX9 Aircraft is *** specified in the *** Confirmation.
5. | BFE. |
The BFE *** dates will *** to support the scheduled delivery month of any applicable *** Aircraft.
6. | Assignment. |
Except as provided in Letter Agreement No. UAL-PA-03776-LA-1208238, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customers becoming the operator of the Aircraft and cannot be assigned in whole or in part.
7. | Confidential Treatment. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-03776-LA-1208234.
Very truly yours,
THE BOEING COMPANY | ||
By: | Irma L. Kreuger | |
Its: |
Attorney-In-Fact |
UAL-PA-3776-LA-1606848 |
SA-7 | |||
*** | LA Page 2 | |||
BOEING PROPRIETARY |
![]() |
ACCEPTED AND AGREED TO this | ||
Date: | December 27, 2016 | |
UNITED AIRLINES, INC. | ||
By: | Gerald Laderman | |
Its: | Senior Vice President Finance, | |
Procurement and Treasurer |
UAL-PA-3776-LA-1606848 |
SA-7 | |||
*** | LA Page 3 | |||
BOEING PROPRIETARY |
Attachment 1: *** Notice Due Date for ***Special MAX9 Aircraft
*** |
Annual Limitation Specifics |
*** Delivery Month |
*** Due Date | |||
*** | *** | *** | *** |
Attachment 1 to UAL-PA-3776-LA-1606848 |
SA- 7 | |||
*** | Attachment 1, Page 1 | |||
BOEING PROPRIETARY |
![]() |
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |||
UAL-LA-1604287
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | Certain *** (Letter Agreement) |
References: | (1) Aircraft General Terms Agreement between The Boeing Company (Boeing) and United Airlines, Inc. (Customer) identified as AGTA-UAL (AGTA); | |
(2) Purchase Agreement No. 3776 between the parties relating to Model 737-9 aircraft, including Letter Agreement UAL-PA-03776-LA- 1207637 entitled *** Matters (MAX PDP Letter); | ||
(3) Purchase Agreement No. 3784 between the parties relating to Model 737NG aircraft, including Letter Agreement UAL-PA-03784-LA-1208155R2 entitled *** Matters: 737-*** and 2016 737NG Aircraft (NG PDP Letter); | ||
(4) Purchase Agreement No. 3860 between the parties relating to Model 787 aircraft, including Section 3 of Letter Agreement UAL-PA-03860- LA-1209413R1 entitled Special Matters (787 PDP Matters Section of the Special Matters Letter); and | ||
(5) Purchase Agreement No. 04308 between the parties relating to Model 777-300ER aircraft, including Letter Agreement UAL-PA- 04308-LA-1404408R1 entitled *** Matters (777 PDP Letter), (references (2) through (5) are referred to herein as the Purchase Agreement or Purchase Agreements as the context requires). |
Ladies and gentlemen:
All terms used but not defined in this Letter Agreement shall have the same meaning as in the corresponding purchase agreement or AGTA, as applicable.
UAL-LA-1604287 |
||||
Certain *** | LA Page 1 |
![]() |
1. | *** Matter ***. |
Notwithstanding the *** Schedule contained in Table 1 of each of the Purchase Agreements or the terms set forth in the 777 PDP Letter, the 787 PDP Matters Section of the Special Matters Letter, the NG PDP Letter and the MAX PDP Letter (collectively, the UAL PDP Letters or UAL PDP Letter as the context requires), Customer *** for any Aircraft on order as of the date of signing the applicable Purchase Agreement, and for any *** Aircraft in accordance with the terms of the applicable UAL PDP Letter; provided, however, that Customer shall retain the right to either (a) *** set forth in any of the UAL PDP Letters, and to the extent that Customer *** then Customers *** shall be *** or (b) *** provided that (1) Boeing *** to such *** and (2) such ***.
2. | Confidential Treatment. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-04308-LA-1404407 of the 777 Purchase Agreement entitled Privileged and Confidential Matters.
Very truly yours, | ||
THE BOEING COMPANY | ||
By: | /s/ Irma L. Krueger | |
Its: |
Attorney-In-Fact |
UAL-LA-1604287 |
||||
Certain *** | LA Page 2 |
![]() |
AGREED AND ACCEPTED this 27th day of December of 2016
UNITED AIRLINES, INC.
/s/ Gerald Laderman |
Signature |
Gerald Laderman |
Printed Name |
Senior Vice President Finance, |
Procurement and Treasurer |
Title |
UAL-LA-1604287 |
||||
Certain *** | LA Page 3 |
Exhibit 10.194
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
![]() |
The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 | |||
UAL-LA-1604287
United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Subject: | Certain *** (Letter Agreement) |
References: | (1) Aircraft General Terms Agreement between The Boeing Company (Boeing) and United Airlines, Inc. (Customer) identified as AGTA-UAL (AGTA); | |
(2) Purchase Agreement No. 3776 between the parties relating to Model 737-9 aircraft, including Letter Agreement UAL-PA-03776-LA- 1207637 entitled *** Matters (MAX PDP Letter); | ||
(3) Purchase Agreement No. 3784 between the parties relating to Model 737NG aircraft, including Letter Agreement UAL-PA-03784-LA- 1208155R2 entitled *** Matters: 737-*** and 2016 737NG Aircraft (NG PDP Letter); | ||
(4) Purchase Agreement No. 3860 between the parties relating to Model 787 aircraft, including Section 3 of Letter Agreement UAL-PA-03860- LA-1209413R1 entitled Special Matters (787 PDP Matters Section of the Special Matters Letter); and | ||
(5) Purchase Agreement No. 04308 between the parties relating to Model 777-300ER aircraft, including Letter Agreement UAL-PA- 04308-LA-1404408R1 entitled *** Matters (777 PDP Letter), (references (2) through (5) are referred to herein as the Purchase Agreement or Purchase Agreements as the context requires). |
Ladies and gentlemen:
All terms used but not defined in this Letter Agreement shall have the same meaning as in the corresponding purchase agreement or AGTA, as applicable.
UAL-LA-1604287 |
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Certain *** | LA Page 1 |
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1. | *** Matter ***. |
Notwithstanding the *** Schedule contained in Table 1 of each of the Purchase Agreements or the terms set forth in the 777 PDP Letter, the 787 PDP Matters Section of the Special Matters Letter, the NG PDP Letter and the MAX PDP Letter (collectively, the UAL PDP Letters or UAL PDP Letter as the context requires), Customer *** for any Aircraft on order as of the date of signing the applicable Purchase Agreement, and for any *** Aircraft in accordance with the terms of the applicable UAL PDP Letter; provided, however, that Customer shall retain the right to either (a) *** set forth in any of the UAL PDP Letters, and to the extent that Customer *** then Customers *** shall be *** or (b) *** provided that (1) Boeing *** to such *** and (2) such ***.
2. | Confidential Treatment. |
Customer and Boeing understand that certain commercial and financial information contained in this Letter Agreement are considered by Boeing and Customer as confidential and are subject to the terms and conditions set forth in Letter Agreement No. UAL-PA-04308-LA-1404407 of the 777 Purchase Agreement entitled Privileged and Confidential Matters.
Very truly yours, | ||
THE BOEING COMPANY | ||
By: | /s/ Irma L. Krueger | |
Its: |
Attorney-In-Fact |
UAL-LA-1604287 |
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Certain *** | LA Page 2 |
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AGREED AND ACCEPTED this 27th day of December of 2016
UNITED AIRLINES, INC.
/s/ Gerald Laderman |
Signature |
Gerald Laderman |
Printed Name |
Senior Vice President Finance, |
Procurement and Treasurer |
Title |
UAL-LA-1604287 |
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Certain *** | LA Page 3 |
Exhibit 12.1
United Continental Holdings, Inc. and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
(In millions, except ratios) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||
Earnings (losses): |
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Earnings (loss) before income taxes | $ | 3,819 | $ | 4,219 | $ | 1,128 | $ | 539 | $ | (724) | ||||||||||||
Add (deduct): |
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Fixed charges, from below |
1,370 | 1,428 | 1,648 | 1,629 | 1,526 | |||||||||||||||||
Amortization of capitalized interest |
11 | 12 | 12 | 11 | 9 | |||||||||||||||||
Distributed earnings of affiliates |
1 | 1 | 1 | | | |||||||||||||||||
Interest capitalized |
(72) | (49) | (52) | (49) | (37) | |||||||||||||||||
Equity earnings in affiliates |
| (2) | (1) | (1) | (4) | |||||||||||||||||
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Earnings as adjusted |
$ | 5,129 | $ | 5,609 | $ | 2,736 | $ | 2,129 | $ | 770 | ||||||||||||
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Fixed charges: |
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Interest expense | $ | 614 | $ | 669 | $ | 735 | $ | 783 | $ | 835 | ||||||||||||
Portion of rent expense representative of the interest factor (a) | 756 | 759 | 913 | 846 | 691 | |||||||||||||||||
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Fixed charges |
$ | 1,370 | $ | 1,428 | $ | 1,648 | $ | 1,629 | $ | 1,526 | ||||||||||||
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Ratio of earnings to fixed charges |
3.74 | 3.93 | 1.66 | 1.31 | (b) | |||||||||||||||||
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(a) Imputed interest applied to rent expense.
(b) Earnings were inadequate to cover fixed charges by $756 million in 2012.
Exhibit 12.2
United Airlines, Inc. and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
(In millions, except ratios) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Earnings (losses): |
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Earnings (loss) before income taxes | $ | 3,822 | $ | 4,221 | $ | 1,110 | $ | 637 | $ | (657) | ||||||||||
Add (deduct): |
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Fixed charges, from below |
1,370 | 1,429 | 1,655 | 1,627 | 1,514 | |||||||||||||||
Amortization of capitalized interest |
11 | 12 | 12 | 11 | 9 | |||||||||||||||
Distributed earnings of affiliates |
1 | 1 | 1 | | | |||||||||||||||
Interest capitalized |
(72) | (49) | (52) | (49) | (37) | |||||||||||||||
Equity earnings in affiliates |
| (2) | (1) | (1) | (4) | |||||||||||||||
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Earnings as adjusted |
$ | 5,132 | $ | 5,612 | $ | 2,725 | $ | 2,225 | $ | 825 | ||||||||||
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Fixed charges: |
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Interest expense | $ | 614 | $ | 670 | $ | 742 | $ | 781 | $ | 823 | ||||||||||
Portion of rent expense representative of the interest factor (a) | 756 | 759 | 913 | 846 | 691 | |||||||||||||||
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Fixed charges |
$ | 1,370 | $ | 1,429 | $ | 1,655 | $ | 1,627 | $ | 1,514 | ||||||||||
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Ratio of earnings to fixed charges | 3.75 | 3.93 | 1.65 | 1.37 | (b) | |||||||||||||||
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(a) Imputed interest applied to rent expense.
(b) Earnings were inadequate to cover fixed charges by $689 million in 2012.
Exhibit 21
United Continental Holdings, Inc. and United Airlines, Inc. Subsidiaries
(as of February 23, 2017)
Entity |
Jurisdiction of Incorporation | |
United Continental Holdings, Inc. | Delaware | |
Wholly-owned subsidiaries*: | ||
United Airlines, Inc. | Delaware | |
Air Wis Services, Inc. |
Wisconsin | |
Air Wisconsin, Inc. |
Delaware | |
Domicile Management Services, Inc. ** |
Delaware | |
Air Micronesia, Inc. |
Delaware | |
Continental Micronesia, Inc. |
Delaware | |
CAL Cargo, S.A. de C.V.** |
Mexico | |
CALFINCO Inc. |
Delaware | |
Century Casualty Company |
Vermont | |
Continental Airlines de Mexico, S.A.** |
Mexico | |
Continental Airlines Domain Name Limited |
England | |
Continental Airlines Finance Trust II |
Delaware | |
Continental Airlines Fuel Purchasing Group, LLC |
Delaware | |
Continental Airlines, Inc. Supplemental Retirement |
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Plan for Pilots Trust Agreement |
Delaware | |
Continental Airlines Purchasing Holdings LLC |
Delaware | |
Continental Airlines Purchasing Services LLC** |
Delaware | |
Continental Express, Inc. |
Delaware | |
Covia LLC |
Delaware | |
Mileage Plus Holdings, LLC |
Delaware | |
MPH I, Inc. |
Delaware | |
Mileage Plus Marketing, Inc. |
Delaware | |
Mileage Plus, Inc. |
Delaware | |
Presidents Club of Guam, Inc. |
Delaware | |
UABSPL Holdings, Inc. |
Delaware | |
UAL Benefits Management, Inc. |
Delaware | |
United Aviation Fuels Corporation |
Delaware | |
United Airlines Business Private Services Limited** |
India | |
United Ground Express, Inc. |
Delaware | |
United Vacations, Inc. |
Delaware |
* | Subsidiaries of United Continental Holdings, Inc. are wholly owned unless otherwise indicated |
** | Domicile Management Services Inc. is 99.9% owned by Air Wis Services, Inc. and 0.1% owned by United Airlines, Inc. CAL Cargo, S.A. de C.V. is 99.99% owned by United Airlines, Inc. and .01% owned by CALFINCO Inc. Continental Airlines de Mexico, S.A. is 99.9997% owned by United Airlines, Inc. and .0003% owned by private entities. Continental Airlines Purchasing Services LLC is 99% owned by Continental Airlines Purchasing Holdings LLC and 1% owned by United Airlines, Inc. United Airlines Business Private Services Limited is 99.99% owned by United Airlines, Inc. and 0.01% owned by David Kinzelman, on behalf of United Airlines, Inc. |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
(1) | Registration Statement (Form S-3 No. 333-203630), |
(2) | Registration Statement (Form S-4 No. 333-167801), |
(3) | Registration Statement (Form S-8 No. 333-197815), |
(4) | Registration Statement (Form S-8 No. 333-151778), |
(5) | Registration Statement (Form S-8 No. 333-131434), |
of our reports dated February 23, 2017, with respect to the consolidated financial statements and schedule of United Continental Holdings, Inc. and the effectiveness of internal control over financial reporting of United Continental Holdings, Inc., included in this Annual Report (Form 10-K) of United Continental Holdings, Inc. for the year ended December 31, 2016.
/s/ Ernst & Young LLP
Chicago, Illinois
February 23, 2017
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-203630-1) of our report dated February 23, 2017, with respect to the consolidated financial statements and schedule of United Airlines, Inc., included in this Annual Report (Form 10-K) of United Airlines, Inc. for the year ended December 31, 2016.
/s/ Ernst & Young LLP
Chicago, Illinois
February 23, 2017
Exhibit 31.1
Certification of the Principal Executive Officer
Pursuant to 15 U.S.C. 78m(a) or 78o(d)
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, Oscar Munoz, certify that:
(1) | I have reviewed this annual report on Form 10-K for the period ended December 31, 2016 of United Continental Holdings, Inc. (the Company); |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
(4) | The Companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and |
(5) | The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
/s/ Oscar Munoz |
Oscar Munoz Chief Executive Officer |
Date: February 23, 2017
Exhibit 31.2
Certification of the Principal Financial Officer
Pursuant to 15 U.S.C. 78m(a) or 78o(d)
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, Andrew C. Levy, certify that:
(1) | I have reviewed this annual report on Form 10-K for the period ended December 31, 2016 of United Continental Holdings, Inc. (the Company); |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
(4) | The Companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and |
(5) | The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
/s/ Andrew C. Levy |
Andrew C. Levy Executive Vice
President and Chief |
Date: February 23, 2017
Exhibit 31.3
Certification of the Principal Executive Officer
Pursuant to 15 U.S.C. 78m(a) or 78o(d)
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, Oscar Munoz, certify that:
(1) | I have reviewed this annual report on Form 10-K for the period ended December 31, 2016 of United Airlines, Inc. (the Company); |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
(4) | The Companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and |
(5) | The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
/s/ Oscar Munoz |
Oscar Munoz Chief Executive Officer |
Date: February 23, 2017
Exhibit 31.4
Certification of the Principal Financial Officer
Pursuant to 15 U.S.C. 78m(a) or 78o(d)
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, Andrew C. Levy, certify that:
(1) | I have reviewed this annual report on Form 10-K for the period ended December 31, 2016 of United Airlines, Inc. (the Company); |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
(4) | The Companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and |
(5) | The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
/s/ Andrew C. Levy |
Andrew C. Levy Executive Vice President and Chief Financial Officer |
Date: February 23, 2017
Exhibit 32.1
Certification of United Continental Holdings, Inc.
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
Each undersigned officer certifies that to the best of his knowledge based on a review of the annual report on Form 10-K for the period ended December 31, 2016 of United Continental Holdings, Inc. (the Report):
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of United Continental Holdings, Inc. |
Date: February 23, 2017
/s/ Oscar Munoz |
Oscar Munoz |
Chief Executive Officer |
/s/ Andrew C. Levy |
Andrew C. Levy |
Executive Vice President and Chief Financial Officer |
Exhibit 32.2
Certification of United Airlines, Inc.
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
Each undersigned officer certifies that to the best of his knowledge based on a review of the annual report on Form 10-K for the period ended December 31, 2016 of United Airlines, Inc. (the Report):
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of United Airlines, Inc. |
Date: February 23, 2017
/s/ Oscar Munoz |
Oscar Munoz |
Chief Executive Officer |
/s/ Andrew C. Levy |
Andrew C. Levy |
Executive Vice President and Chief Financial Officer |