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,
20172021
☐ | | | | | |
| ☐ | 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
Executive
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:
| | | | | | | | | | | | |
| Commission
File Number | United Continental Holdings, Inc.
| Exact Name of Registrant as Specified in its Charter, Principal Executive Office Address and Telephone Number | | NoneState of
Incorporation | | I.R.S. Employer
Identification No. | | |
| 001-06033 | | United Airlines Holdings, Inc. | | Delaware | | 36-2675207 | | |
| | | 233 South Wacker Drive, | Chicago, | Illinois | 60606 | | | | | | |
| | | (872) | 825-4000 | | | | | | | | | |
| | | | | | | | | | | | | |
| 001-10323 | | United Airlines, Inc. | | Delaware | None | 74-2099724 | | |
| | | 233 South Wacker Drive, | Chicago, | Illinois | 60606 | | | | | | |
| | | (872) | 825-4000 | | | | | | | | | |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | | | | | | | |
| | Title of Each Class | | Trading Symbol | | Name of Each Exchange on Which Registered |
| United Airlines Holdings, Inc. | | Common Stock, $0.01 par value | | UAL | | The Nasdaq Stock Market LLC |
| | Preferred Stock Purchase Rights | | None | | The Nasdaq Stock Market LLC |
| United Airlines, Inc. | | None | | None | | None |
Securities registered pursuant to Section 12(g) of the Act:
| | | | | | | | | | | | | | |
| United Airlines 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.Act | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | United ContinentalAirlines Holdings, Inc. | | Yes ☒ No ☐ | | |
| Yes | ☒ | No | ☐ | | | United Airlines, Inc. | | Yes ☒ No ☐ | | | 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
ActAct. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | United ContinentalAirlines Holdings, Inc. | | Yes ☐ No ☒ | | |
| Yes | ☐ | No | ☒ | | | United Airlines, Inc. | | Yes ☐ No ☒ | | | Yes | ☐ | No | ☒ |
Indicate by check mark whether the
Registrantregistrant (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
Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | United ContinentalAirlines Holdings, Inc. | | Yes ☒ No ☐ | | |
| Yes | ☒ | No | ☐ | | | United Airlines, Inc. | | Yes ☒ No ☐ | | | 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)Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | United ContinentalAirlines Holdings, Inc. | | Yes ☒ No ☐ | | |
| Yes | ☒ | No | ☐ | | | United Airlines, Inc. | | Yes ☒ No ☐ | | |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.
| | Yes | ☒ | No | | |
| | 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, a smaller reporting company, or an emerging growth company. See the definitions of
“large"large accelerated filer,
” “accelerated" "accelerated filer,
” “smaller" "smaller reporting company,
”" and
“emerging"emerging growth
company”company" in Rule 12b-2 of the Exchange Act.
(Check one): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
United Continental
Airlines Holdings, Inc. | | Large accelerated filer ☒ | ☒ | Accelerated filer ☐ | ☐ | Non-accelerated filer ☐ | ☐ | Smaller reporting company ☐ | ☐ | Emerging growth company | ☐ |
United Airlines, Inc. | | Large accelerated filer ☐ | ☐ | Accelerated filer ☐ | ☐ | Non-accelerated filer ☒ | ☒ | Smaller reporting company ☐ | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | |
| | United ContinentalAirlines Holdings, Inc. | | ☐ | | United Airlines, Inc. | | ☐ |
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
| | | | | | | | | | | | | | | | | | | | |
| United Airlines Holdings, Inc. | | ☒ | | United Airlines, Inc. | | ☐ | | | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the
Exchange Act).
| | | | | | | | | | | | | | | | | | | | |
| | United ContinentalAirlines Holdings, Inc. | | Yes ☐ No ☒ | ☐ | No | ☒ | |
| | United Airlines, Inc. | | Yes ☐ No ☒ | ☐ | No | ☒ | |
The aggregate market value of common stock held by non-affiliates of United
ContinentalAirlines Holdings, Inc. was
$21,673,390,018$16.9 billion as of June 30,
2017,2021 based on the closing
sale price of
$75.25$52.29 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
registrant’sregistrant's classes of common stock, as of February
14, 2018.10, 2022. | | | | | | | | | | | |
United ContinentalAirlines Holdings, Inc. | | 284,700,547 324,626,332 | shares of common stock ($0.01 par value) |
United Airlines, Inc. | | 1,000 | shares of common stock ($0.01 par value) (100% owned by United ContinentalAirlines Holdings, Inc.) |
This combined Form
10-K is separately filed by United
ContinentalAirlines 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 is therefore filing this form with the reduced disclosure format allowed under that General Instruction.
DOCUMENTS INCORPORATED BY REFERENCE
Information
Certain information required by Items 10, 11, 12 and 13 of Part III of thisForm 10-K is incorporated by reference for United ContinentalAirlines Holdings, Inc. from its definitive proxy statement for its 20182022 Annual Meeting of Stockholders.
United
ContinentalAirlines Holdings, Inc. and Subsidiary Companies
United Airlines, Inc. and Subsidiary Companies
Annual Report on
Form 10-KFor the Year Ended December 31,
20172021 | | | | | | | | | | | |
| | | | Page | |
| | PART I | | | | |
Item 1.
| | Business | | | 3 | Page |
PART I |
| Item 1. | | | |
| | | |
| Item 1A. | | | | | 10 | |
Item 1B. | | | | | 20 | |
Item 2. | | | | | 21 | |
Item 3. | | | | | 22 | |
Item 4. | | | | | 23 | |
| | | | | | |
| PART II |
| Item 5. | | |
| | PART II | | | | |
Item 5.
| | | | | 24 | |
Item 6. | | | | | 26 | |
Item 7. | | | | | 28 | |
Item 7A. | | | | | 45 | |
Item 8. | | | | | 47 | |
| | | | | 61 | |
Item 9. | | | | | 102 | |
Item 9A. | | | | | 102 | |
Item 9B. | | | | | 105 | |
| Item 9C. | | | |
| | | |
| PART III |
| Item 10. | | |
| | PART III | | | | |
Item 10.
| | | | | 105 | |
Item 11. | | | | | 106 | |
Item 12. | | | | | 106 | |
Item 13. | | | | | 107 | |
Item 14. | | | | | 107 | |
| | | | | | |
| PART IV |
| Item 15. | | |
| | PART IV | | | | |
Item 15.
| | | | | 108 | |
Item 16. | | | | | 132 | |
This
Annual Report on Form 10-K ("Form 10-K") contains various
“forward-looking statements”"forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”"Exchange Act"). Forward-looking statements represent our expectations and beliefs concerning future
results or 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
or events to differ materially from those referenced in the forward-looking statements are listed in Part I, Item
1A,1A. Risk Factors and in Part II, Item
7, Management’s7. Management's 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.
United ContinentalAirlines Holdings, Inc. (together with its consolidated subsidiaries, “UAL”"UAL" or the “Company”"Company") is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”"United"). United's shared purpose is "Connecting People. Uniting the World." United has the most comprehensive route network among North American carriers, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C.
As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted.
United’sUnited's operating revenues and operating expenses comprise nearly 100% of
UAL’sUAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of
UAL’sUAL's 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,”"we," "our," "us," and the
“Company”"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
The Company's principal executive office is located at 233 South Wacker Drive, Chicago, Illinois 60606 (telephone number
(872) 825-4000).The Company’sCompany's website is www.united.com.located at www.united.com and its investor relations website is located at ir.united.com. The information contained on or connected to the Company’s websiteCompany's websites is not incorporated by reference into this annual report onForm 10-K and should not be considered part of this or any other report filed with the U.S. Securities and Exchange Commission (“SEC”("SEC"). Through this website, the Company’sThe Company's filings with the SEC, including annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K, and all amendments to those reports, as well as ourUAL's proxy statement for ourits annual meeting of stockholders, are accessible without charge on the Company's investor relations website, as soon as reasonably practicable, after we electronically file such material is electronically filed with, or furnishedfurnish such material to, the SEC.SEC pursuant to Section 13(a) or 15(d) of the Exchange Act. Such filings are also available on the SEC’sSEC's website at www.sec.gov.
The Company transports people and cargo
through its mainline and regional operations. With key global aviation rights inthroughout North America
Asia-Pacific,and to destinations in Asia, Europe,
Africa, the Pacific, the Middle East and Latin
America, UAL has the world’s most comprehensive global route network.America. UAL, through United and its regional carriers, operates
more than 4,500 flights a day to 338 airports across
fivesix continents, with hubs at Newark Liberty International Airport
(“Newark”("EWR"), Chicago
O’HareO'Hare International Airport
(“Chicago O’Hare”("ORD"), Denver International Airport
(“Denver”("DEN"), George Bush Intercontinental Airport
(“Houston Bush”("IAH"), Los Angeles International Airport
(“LAX”("LAX"), A.B. Won Pat International Airport
(“Guam”("GUM"), San Francisco International Airport
(“SFO”("SFO") and Washington Dulles International Airport
(“Washington Dulles”("IAD").
All of the Company’sCompany's domestic hubs are located in large business and population centers, contributing to a large amount of “origin"origin and destination”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
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 underAlliances below, United is a member of Star Alliance, the world’sworld's largest alliance network.
Financial information
COVID-19 Impact. The novel coronavirus (COVID-19) pandemic, together with the measures implemented or recommended by governmental authorities and private organizations in response to the pandemic, has had an adverse impact that has been material to the Company's business, operating results, financial condition and liquidity. The Company has seen increasing demand for travel both domestically and in countries where entry is permitted compared to demand at the start of the COVID-19 pandemic; however, as the situation surrounding the COVID-19 pandemic remains fluid, the pandemic has
continued to negatively impact travel demand. It remains difficult to reasonably assess or predict the full extent of the ongoing impact of the COVID-19 pandemic on the
Company’sCompany's longer-term operational and financial performance, which will depend on a number of future developments, many of which are outside the Company's control, such as the ultimate duration of and factors impacting the recovery from the pandemic (including the efficacy and speed of vaccination programs in curbing the spread of the virus in different markets, the efficacy and availability of various treatment options, the introduction and spread of new variants of the virus that may be resistant to currently approved vaccines or treatment options, and the continuation of existing or implementation of new government travel restrictions), customer behavior changes and fluctuations in demand for air travel, among others. The COVID-19 pandemic and the measures taken in response may continue to impact many aspects of our business, operating
revenues by geographic region, as reportedresults, financial condition and liquidity in a number of ways, including labor shortages (including reductions in available staffing and related impacts to the
U.S. Department of Transportation (the “DOT”)Company's flight schedules and reputation),
can be found in Note 15facility closures and related costs, disruptions to the
Company's and its business partners' operations, reduced travel demand and consumer spending, increased operating costs, supply chain disruptions, logistics constraints, volatility in the price of our securities, our ability to access capital markets and volatility in the global economy and financial
statements includedmarkets generally. The Company's recovery from the COVID-19 pandemic has not followed a linear path, and due to the significant uncertainty that remains, its future operating performance, particularly in
Part II, Item 8the short-term, may be subject to volatility. The Company is taking steps to be prepared for recovery as demand for travel continues to generally increase, which include investing in innovative technology, focusing on process improvements and implementing the United Next transformative strategy. During 2021, the Company operated approximately 63% of
this report.its 2019 capacity.
United Next. In the second quarter of 2021, United announced its United Next plan, which we believe will have a transformational effect on the customer experience and earnings power of the business. It is expected to increase United's average gauge in North America, the total number of available seats per departure, by almost 30% by 2026 versus 2019, as well as significantly lower carbon emissions per seat. New aircraft will come with a new signature interior that includes seat-back entertainment in every seat, larger overhead bins for every passenger's carry-on bag and the industry's fastest available in-flight WiFi, as well as a bright look-and-feel with LED lighting. New aircraft are expected to increase North America premium seat counts by 75% per short-haul departure by 2026 versus 2019. The Company plans to replace older, smaller mainline jets and at least 200 single-class regional jets with larger aircraft, which we expect will lead to significant sustainability benefits compared to older planes: an expected 11% overall improvement in fuel efficiency and an expected 17-20% lower carbon emission per seat compared to older planes. We believe United Next will allow us to differentiate our network and segment our products with a greater premium offering, while also maintaining fare competitiveness with low-cost carriers.
Regional. The Company's business and operations are dependent on its regional flight network, with regional capacity accounting for approximately 13% of the Company's total capacity for the year ended December 31, 2021. The Company has contractual relationships with various regional carriers to provide regional aircraft service branded as United Express. These regional operations are an extension of the Company’s mainline network. This regional service complements our operations by carrying traffic that connects to our mainline servicehubs 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”("CommutAir"), ExpressJet Airlines (“ExpressJet”Republic Airways Inc. ("Republic"), GoJet Airlines (“GoJet”LLC ("GoJet"), Mesa Airlines, (“Mesa”Inc. ("Mesa"), SkyWest Airlines, (“SkyWest”Inc. ("SkyWest"), and Air Wisconsin Airlines (“LLC ("Air Wisconsin”), and Trans States Airlines (“Trans States”Wisconsin") are all regional carriers that operate with capacity contracted to United under capacity purchase agreements (“CPAs”("CPAs"). Under these CPAs, the Company pays the regional carriers contractually agreed fees (carrier costs) for operating these flights plus a variable reimbursement (incentive payment for operational performance)rate adjustment based on agreed performance metrics, subject to annual inflation adjustments. The fees for carrier 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 areas well as fixed monthly amounts. Under these CPAs, the Company is also responsible for all fuel costs incurred, as well as landing fees 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 some cases, the Company owns some or all of the aircraft subject to the CPA and leases such aircraft to the regional carrier. In return, the regional carriers operate thisthe capacity of the aircraft included within the scope of such CPA 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. AsDespite the global challenges posed by the COVID-19 pandemic, Star Alliance carriers continued to serve more than 1,000 airports in 186 countries with close to 15,000 daily departures as of January 1, 2018, Star Alliance carriers served 1,300 airports in 191 countries with 18,400 daily departures.2022. 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”("ANA"), Asiana Airlines, Austrian Airlines, Avianca, Avianca Brasil,Aerovías del Continente Americano S.A., 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 Air Portugal, THAI Airways International and Turkish Airlines. In May 2017,addition to its members, Star Alliance addedincludes Shanghai-based Juneyao Airlines and Thailand-based Thai Smile Airways, a subsidiary of THAI Airways International, as an additional connecting partner.partners.
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 Alliancemembers, codesharing of flight operations (whereby one carrier’scarrier's 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, Airlink Proprietary Limited, Azul Linhas Aéreas Brasileiras S.A. ("Azul"), Boutique Air, Cape Air, Edelweiss, Eurowings, Great Lakes Airlines,Eurowings Discover, Hawaiian Airlines, Olympic Air, Silver Airways and Silver Airways. In addition to the marketing alliance agreements with air partners, United also offers atrain-to-plane codeshare and frequent flyer alliance with Amtrak from Newark on select city pairs in the northeastern United States.Vistara.
United also participates in three passenger joint ventures,business arrangements ("JBAs"): one with Air Canada and the Lufthansa Group (which includes Lufthansa and its affiliates Air Dolomiti, Austrian Airlines, Brussels Airlines, Edelweiss, Eurowings, Eurowings Discover 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 venturesJBAs enable the participating carriers to integrate the services they provide in the respective regions, capturing revenue synergies and delivering enhanced customer benefits, such as highly competitive flight schedules, fares and services. Separate from the passenger JBAs, United has also implementedparticipates in cargo joint
venturesJBAs with ANA for transpacific cargo services and continues to implement a cargo joint venture with Lufthansa for transatlantic cargo services. These cargo joint venturesJBAs offer expanded and more seamless access to cargo space across the carriers’carriers' respective combined networks.
Loyalty Program. United’s United's MileagePlus loyalty 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 offrom our network ofnon-airline partners, such as domestic and international credit card issuers, retail merchants, hotels and car rental companies. Members can redeem miles for free (other than taxes and government imposedgovernment-imposed fees), discounted or upgraded travel andnon-travel awards. United has an agreement with
JPMorgan Chase Bank,
USA, N.A.
(“Chase”("Chase"), pursuant to which members of
United’sUnited's MileagePlus loyalty program who are residents of the United States can earn miles for making purchases using a MileagePlus credit card issued by
Chase.Chase (the "Co-Brand Agreement"). The
agreementCo-Brand 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
Company’sCompany's customer database.
Approximately 5.4 million and 5.2
In 2021, approximately 3.6 million MileagePlus flight awards were used on United
in 2017 and
2016, respectively.United Express. These awards represented
7.5% and 7.7%approximately 7% of
United’sUnited's total revenue passenger
miles in 2017 and 2016, respectively.miles. Total miles redeemed for flights on United
in 2017,and United Express, including
class-of-service upgrades, represented approximately
85%90% of the total miles redeemed. In addition, excluding miles redeemed for flights on United
and United Express, MileagePlus members redeemed miles for approximately
2.31.0 million other
awards in 2017 as compared to 2.0 million in 2016.awards. These awards include United Club memberships, car and hotel awards, merchandise and flights on other air carriers.
Aircraft Fuel. The table below summarizes UAL’s 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 | | | | |
| | 2017 | | | 3,978 | | | $ | 6,913 | | | $ | 1.74 | | | | 20% | | | | | |
| | 2016 | | | 3,904 | | | $ | 5,813 | | | $ | 1.49 | | | | 18% | | | | | |
| | 2015 | | | 3,886 | | | $ | 7,522 | | | $ | 1.94 | | | | 23% | | | | | |
Our operational and financial results can be significantly Redemptions in 2021 were adversely impacted by changes in the priceCOVID-19 pandemic and availabilitydecreased 37% as compared to 2019 redemptions.
In response to the impact of aircraft fuel. To provide adequate supplies of fuel,COVID-19, the Company routinely enters into purchase contractsmade changes to its MileagePlus® Premier® program that made it easier to earn status in 2021 for the 2022 program year. Early in 2021, United deposited 25% of the Premier Qualifying Points ("PQP")-only requirements in Premier members' accounts based on their 2021 Premier status level. Premier members earned double the PQP on each of the first three PQP-eligible trips completed January 1 through March 31, 2021 (up to 1,500 PQP per trip), helping their flights go further toward reaching status.
Air Cargo. United provides freight and mail services (air cargo). The majority of cargo services are customarily indexedprovided to market prices for aircraft fuel,commercial businesses, freight forwarder and logistic firms and the Company generally has some abilityUnited States Postal Service. Through our global network, our cargo operations are able to cover short-term fuel supplyconnect the world's major freight gateways. We generate cargo revenues in domestic and infrastructure disruptions at some majorinternational markets through the use of cargo space on regularly scheduled passenger aircraft, and starting in 2020, the use of our passenger aircraft for cargo-only flights. We expect to reduce and ultimately cease cargo-only flights as long haul passenger demand locations.increases.
Distribution Channels. The price of aircraft fuel has fluctuated substantially in the past several years. As of December 31, 2017, the Company did not have any outstanding fuel hedging contracts. The Company’s 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 awardnon-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 Company’sCompany's airline seat inventory and fares are distributed through the Company’sCompany's direct channels, traditional travel agencies andon-line online travel agencies.agencies ("OTA"). The use of the Company’sCompany's direct sales website, www.united.com, the Company’sCompany's mobile applications and alternative distribution systems provides the Company with an opportunity tode-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
primarily sold using global distribution systems (“GDS”("GDS"). United has developed and expects to continue to develop 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
Third-Party Business. United generates third-party business revenue that includes maintenance services, frequent flyer award non-travel redemptions, flight academy and ground handling. Third-party business revenue is recorded in Other operating revenue. Expenses associated with third-party business, except non-travel redemptions, are recorded in Other operating expenses. Non-travel redemptions expenses are recorded to Other operating revenue.
Aircraft Fuel. The table below summarizes the Company’s opportunitiesfuel consumption and expense of UAL's aircraft (including the operations of our regional partners operating under CPAs) during the last three years.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Gallons Consumed
(in millions) | | Fuel Expense
(in millions) | | Average Price Per Gallon | | Percentage of Total Operating Expense | | |
| 2021 | | 2,729 | | | $ | 5,755 | | | $ | 2.11 | | | 22 | % | | |
| 2020 | | 2,004 | | | $ | 3,153 | | | $ | 1.57 | | | 15 | % | | |
| 2019 | | 4,292 | | | $ | 8,953 | | | $ | 2.09 | | | 23 | % | | |
Our operational and financial results can be significantly impacted by changes in the price and availability of aircraft fuel. The Company routinely enters into purchase contracts based on expected fuel requirements for UAL aircraft (including regional partners operating under CPAs) that are generally indexed to
sellvarious market price benchmarks for aircraft fuel. These contracts customarily do not provide material protection against changes in market prices or guarantee the uninterrupted availability of adequate quantities of aircraft fuel. The price of aircraft fuel used by our operations has fluctuated substantially in the past several years. The Company's current strategy is to not enter into financial transactions to hedge the market price exposure of its
full range of products and services and lower distribution costs,expected fuel consumption, although the Company
will continueregularly reviews its strategy based on market conditions and other factors. Due to
develop new selling capabilitiesthe partial recovery in
third-party channels and expand the capabilities of its website and mobile applications.operations experienced in 2021, our aircraft fuel consumption has increased from 2020 levels.
Domestic Competition. The domestic airline industry is highly competitive and dynamic. The Company’sCompany's competitors consist primarily of other airlines and, to a certain extent, other forms of transportation. Currently, any U.S. carrier deemed fit by the DOTU.S. Department of Transportation (the "DOT") is largely 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 exactnon-stop route, or indirect, where a carrier serves the same two citiesnon-stop from an alternative airport in that city or via an itinerary requiring a connection at another airport. Air carriers’carriers' cost structures are not uniform and there are influenced by numerous factors influencing cost structure.factors. Carriers with lower costs may offer lower fares to passengers, which could have a potential negative impact on the Company’sCompany's revenues. Decisions on domesticDomestic pricing decisions are based onimpacted by 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’competitors' discounted fares. Since we compete in a dynamic marketplace, attempts to generate additional revenue through increased fares oftentimesoften fail.
International Competition. Internationally, the Company competes not only with U.S. airlines, but also with foreign carriers. International competition has increased and may continue to increase in the future as a result of airline mergers and acquisitions, joint ventures,JBAs, alliances, restructurings, liberalization of aviation bilateral agreements and new or increased service by competitors, including government subsidized competitors from certain Middle East countries.competitors. Competition on international routes is subject to varying degrees of governmental regulation. The Company’sCompany's ability to compete successfully withnon-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"fifth freedom rights”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 venturesimmunized JBAs and marketing arrangements that enable these carriers to exchange traffic between each other’sother's flights and route networks. Through these arrangements, the Company strives to provide consumers with a growing number of seamless, cost-effective and convenient travel options. SeeAlliances, 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.
Environmental, Social and Governance Approach and Highlights
Climate Strategy
The Company's commitment to operating an environmentally sustainable and responsible airline is woven into its long-term strategy and its values. The Company believes that it is critical, now more than ever, to continue to enhance its services connecting people and uniting the world, and is committed to finding solutions, both individually as a company, and together with partners in both the private and public sectors, to do so sustainably and responsibly while also achieving its financial goals. The Company is continuously looking for new ways to reduce its environmental impact in the air, on the ground and at its facilities, which benefits its employees, customers and stockholders. At the end of 2020, the Company pledged to become 100% green by eliminating its greenhouse gas ("GHG") emissions by 2050 without relying on the use of traditional carbon offsets, the only airline globally to make this commitment. Given the airline industry's designation as a 'hard-to-abate sector', the Company believes that not relying on carbon offsets is important and the right priority because the airline industry should focus on real decarbonization within its own activities as the industry cannot afford to divert resources and attention toward offset programs that do not effectuate real progress within aviation operations.
Since making the announcement of the Company's pledge to become 100% green by eliminating GHG emissions by 2050, management has identified multiple pathways to accomplish this goal wholly independent of any current regulatory requirement to do so. The Company's earnest intention on meeting the net zero GHG emission goal led the Company to commit to a mid-term objective of reducing, compared to 2019, its carbon intensity by 50% by 2035. This carbon intensity target aligns with the temperature limits of the Paris Agreement and will allow the Company to show progress towards its 2050 net zero GHG emissions goal in the nearer term.
Even with the challenges presented by the COVID-19 pandemic, the Company is committed to redefining the future of air travel with environmental sustainability in the forefront because it believes that it is the Company's responsibility to take tangible steps to mitigate climate change. Its strategy to achieve its climate goals is centered around four key pathways, each of which is described in further detail below: (i) reducing the Company's environmental footprint, (ii) innovating for potentially transformative carbon reduction technology, (iii) removing the Company's atmospheric carbon impacts and (iv) collaborating with employees, customers, airports, suppliers, cross-industry partners and policymakers to facilitate faster action and the commercialization of technology solutions concerning climate change. The Company's Board of Directors (the "Board"), including through its Public Responsibility Committee, provides oversight of its climate goals and strategy to ensure integration with its core business strategy and management periodically updates the Board on the implementation of the Company's climate strategy.
•Reducing Environmental Footprint: As part of this plan, the Company is keyed on maximizing fuel efficiency and reducing fuel usage in its operations. The main focus in realizing this objective is reducing its fossil jet fuel consumption, which is both the largest contributor to its environmental footprint and a sizable expense for the Company. The Company's primary effort in reducing its fossil jet fuel consumption is directed on working with strategic partners to employ and commercialize the use of sustainable aviation fuel ("SAF"). SAF is the only technology solution realized today that can abate emissions from the Company's flight operations. SAF can reduce lifecycle GHG emissions by up to 85% compared with conventional jet fuel and has the added benefits of having a limited impact on performance or safety and providing energy diversification. However, SAF supply in the jet fuel market is constrained today, with it contributing to far less than 1% of global commercial aviation fuel usage. Additionally, the purchase of SAF today comes with a price premium, compared to conventional jet fuel, to account for the additional costs of this early-stage solution. These challenges with present-day SAF have informed the Company's strategy of investing in SAF producers and technology to help scale the SAF market and unlock future supply for the Company. The Company uses SAF from World Energy in its daily operations at LAX and has sourced more than five million gallons of SAF since 2016.
◦In 2015, the Company made a $30 million equity investment in Fulcrum BioEnergy, Inc. ("Fulcrum"), a company that has developed a process for transforming municipal solid waste into low carbon transportation fuels, and entered into a long-term supply agreement with Fulcrum which provides United the opportunity to purchase at least 900 million gallons of SAF.
◦In 2016, the Company became the first airline globally to use SAF in regular operations on a continuous basis with SAF from World Energy.
◦In 2021, the Company launched its first-of-its-kind Eco-Skies Alliance program with two separate enrollments in which corporate partners agreed to collectively fund the price premium for approximately 7.1 million gallons of SAF.
◦In September 2021, the Company made a joint investment with Honeywell UOP in Alder Fuels, a new clean tech venture developing a first-of-its-kind low-carbon crude oil technology to accelerate large-scale SAF production. The Company also agreed to purchase 1.5 billion gallons (enough to fly more than 57 million passengers) of SAF from Alder Fuels.
◦In December 2021, the Company made aviation history by operating the first passenger flight using 100% SAF, in one engine, from Chicago to Washington, D.C. The flight showcased the safety of SAF and the potential for a dramatically reduced carbon footprint for aviation.
Alongside developing and using SAF, the Company is concentrated on introducing newer, more fuel-efficient aircraft into its fleet as well as improving the efficiency of its existing fleet. From 1990 to 2021, the Company improved its mainline fuel efficiency more than 30%. In the second quarter of 2021, the Company announced United Next and entered into firm narrow-body aircraft orders for 200 Boeing 737 MAX aircraft and 70 Airbus A321neo aircraft, which are expected to have an 11% overall improvement in fuel efficiency and an expected 17-20% lower carbon emission per seat compared to older planes. In conjunction with its SAF mission and improving the fuel efficiency of its fleet, the Company has been revamping its flight and ground operations, implementing operational and procedural initiatives to drive fuel conservation. Over 4,000 units of the Company's ground service equipment ("GSE") around the world are electric or use alternative fuels and, as of the end of 2021, nearly 32% of its GSE fleet have been electrified. The Company has worked collaboratively across its organization and with Air Traffic Control ("ATC") providers to improve fuel efficiency through the implementation of best practices, by providing training to its pilots and dispatchers and supplying them with the tools needed to execute on those strategies.
•Innovating in Carbon Reduction Technology: The Company has been forming partnerships with, as well as investing in, early-stage climate technology companies that have the potential to scale and support the Company's climate targets or are generally supportive of advancing sustainability within the broader economy. In June 2021, the Company launched a new corporate venture capital fund, United Airlines Ventures, Ltd. ("UAV"), to focus the Company's efforts in these investments.
◦In February 2021, the Company announced an investment in, and agreement to work with, Archer Aviation Inc. to accelerate the development and production of their electric aircraft – an urban mobility solution that has the potential to serve as an "air taxi," giving the Company an opportunity to accelerate the development of clean technologies on a broader scale and its customers another opportunity to reduce their carbon footprint before they even board a United flight.
◦In July 2021, UAV announced that, along with Breakthrough Energy Ventures and Mesa, it invested in electric aircraft startup Heart Aerospace Incorporated. Heart Aerospace is developing the ES-19, a 19-seat electric aircraft that has the potential to fly customers up to 250 miles with zero emissions when powered by renewable electricity.
◦In December 2021, the Company became the largest airline to invest in zero-emission engines for regional aircraft with a new equity stake in hydrogen-electric engine developer, ZeroAvia, Inc. These engines support the retrofit of select regional aircraft engines, replacing fossil fuel burning engines with zero-emission alternatives.
•Removing Carbon Impact: The Company intends to extend its environmental sustainability efforts beyond reducing emissions by also focusing on carbon removal by investing in carbon capture technologies to either sequester carbon or to potentially utilize captured carbon to make low-carbon fuels. In 2020, the Company became the first airline to announce a commitment to invest in direct air capture, a carbon capture and sequestration technology.
•Collaborating with Partners: The Company has devoted a significant amount of time and energy on defining a better future of flying by collaborating with employees, customers, airports, suppliers, cross-industry partners and policymakers to scale the supply of decarbonization technology solutions, minimize its environmental impact, boost environmental sustainability of the airline industry and protect the environment, all of which are key to advancing the Company's climate goals.
◦The Company worked with federal policymakers to champion the Sustainable Skies Act SAF Blender's Tax Credit with the intent to create an economic incentive for increased SAF production within the United States.
◦The Company is a founding member of the Biden Administration's First Movers Coalition, a collective of leading companies committing to purchase low-carbon technologies in hard-to-abate sectors. As part of its membership, the Company has committed to using emerging technologies with significant emissions reductions by 2030 and has also set a target of replacing at least 5% of conventional jet fuel demand with SAF that reduces lifecycle GHG emissions by 85% or more compared with conventional jet fuel by 2030.
◦At the international level, the Company was the only airline whose chief executive officer attended the 2021 UN Conference of the Parties ("COP26") climate conference, supporting the pathway to net-zero emissions for air travel through the use of SAF and other technologies.
◦During the COP26 conference, the Sustainable Aviation Buyers Alliance ("SABA"), a non-profit initiative of the Environmental Defense Fund and Rocky Mountain Institute that is developing a sustainability framework for SAF, announced that United and other airlines have founded its new Aviators Group. Through SABA, the Company intends to work collaboratively with its customers and industry peers to support low-carbon technologies such as SAF.
◦The Company has supported the adoption of more aggressive industry targets, with both Airlines for America ("A4A") and the International Air Transport Association committing to net-zero emissions by 2050 for domestic and international carriers, respectively. In addition, the Company along with other A4A members have pledged to work towards the Biden Administration's SAF Grand Challenge to collectively make 3 billion gallons of SAF available domestically by 2030.
Additional quantitative emissions data follows this paragraph. The Company believes that its absolute GHG emissions will rise in the immediate future as the impact of the COVID-19 pandemic on the Company's operations lessens and the Company implements its United Next strategy and expects to return to growth with the anticipated increase in travel demand. In addition, even though investing in carbon offsets could present near-term emissions reductions, as outlined above, the Company is resolute in attaining its mid-term and long-term climate goals without relying on the use of traditional carbon offsets and has made progress towards implementing solutions that are needed to permanently change aviation and reduce the environmental impact of air travel to protect our planet for generations to come. It is also important to note that certain of these technology solutions need time to reach commercial availability. Despite this and other hurdles, the Company believes that its investment in these solutions are sound, particularly given that the Company's climate goals and overall climate strategy are increasingly important factors in its relationships with its employees and customers.
| | | | | | | | | | | | | | |
| Carbon Emissions | | 2020 | | 2019 |
Direct (Scope 1) GHG Emissions in Metric Tons CO2e | | | | |
| Gross GHG emissions | | 15,490,070 | | 34,413,790 |
| SAF emissions reductions | | (4,708) | | (6,850) |
| Net GHG emissions | | 15,485,363 | | 34,406,941 |
Indirect Emissions in Metric Tons CO2e | | | | |
| Indirect (Scope 2) GHG emissions | | 175,087 | | 189,682 |
| Other indirect (Scope 3) GHG emissions | | 4,280,317 | | 7,471,298 |
Total GHG Emissions in Metric Tons CO2e | | | | |
| Gross GHG emissions | | 19,940,767 | | 42,067,921 |
| Carbon offsets (a) | | (4,106) | | (15,425) |
| Net GHG emissions | | 19,936,661 | | 42,052,496 |
| | | | |
| Carbon Emissions Intensity Rates (b) | | 2020 | | 2019 |
| Emissions Intensity per Revenue ton-mile | | | | |
| Revenue ton-mile ("RTMs") (millions) (c) | | 9,755 | | 26,655 |
Metric tons CO2e/1,000 RTMs (d) | | 1.605 | | 1.298 |
| Emissions Intensity per Available seat-mile | | | | |
| Available seat-miles ("ASMs") (millions) (e) | | 122,804 | | 284,999 |
Metric tons CO2e/1,000 ASMs (f) | | 161 | | 146 |
(a)Offset purchases made in 2019 and 2020 were part of discrete promotional campaigns originally offered in late 2019 through the beginning of 2020. These promotions were offered prior to the Company's announcement in December 2020 of its commitment to reduce 100% of its GHG emissions by 2050 without the voluntary use of traditional offsets and are no longer part of the Company's promotional campaigns. The Company may be subject to future regulatory requirements that require the purchase of carbon offsets. (b)Intensity rates and operational figures are calculated based on third-party verified data of 2020 and 2019. (c)The number of revenue, passenger and cargo, tons transported multiplied by the number of miles flown on each segment. (d)Scope 1+2 emissions/Mainline RTMs; metric used for tracking progress against industry goal of 1.5%/year efficiency improvement. (e)The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown. (f)Scope 1+2+3 Regional emissions/Mainline+Regional ASMs; metric used for tracking progress against our 2035 and 2050 climate change goals. |
Additional information on United's commitment to environmental sustainability is available at united.com/sustainability. The information contained on or connected to the Company's website is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report filed with the SEC.
Human CapitalManagement and Resources
Our employees around the world are joined in a shared purpose of "Connecting People. Uniting the World" by enabling connections that matter and move society – whether it is connecting people across cultures, flying a loved one to a wedding, connecting medical professionals at a breakthrough conference or getting a business traveler to an important meeting or back home in time for a child's big game. Our ability to make these connections, as well as to build long-term value for our shareholders and contribute to the broader community, depends on our commitment to attract and retain the best talent at all levels of our organization and across our global workforce. To facilitate talent attraction and retention, we strive through our human capital management strategy to create lifelong careers for the people of United. That includes professional development and promotional opportunities and the ability to qualify for retirement benefits, health and wellness benefits and, of course, travel privileges as we remain dedicated in providing the best place for our employees to work. Our Core4 (we are safe, then caring, dependable and efficient) serves as the framework for how we take care of our customers and each other and how we make decisions as a team. For United, our shared purpose is about more than getting people from one place to another and executing our strategic priorities: it means that as a global company that operates in hundreds of locations around the world with millions of customers, we have a unique responsibility and opportunity to drive meaningful change in the places where we fly by creating exciting, rewarding and long-term careers for tens of thousands of people who live in the communities that we serve.
Demographics: As of December 31, 2021, UAL, including its subsidiaries, had approximately 84,100 employees, including employees on voluntary leave programs, consisting of approximately 21,700 flight attendants, 15,400 passenger service agents, 12,600 ramp service agents, 12,200 pilots, 8,100 technicians and related Flight Simulator Technicians, 900 storekeeper employees, 400 dispatchers, 300 fleet tech instructors, load planners, maintenance instructors and security officers and 12,500 management and other personnel. Approximately 85% of the Company's employees were represented by various U.S. labor organizations at year-end 2021.
As of December 1, 2021, of our U.S. employees, approximately 38% were female and approximately 46% self-identified as part of an underrepresented racial or ethnic group. Our workforce diversity metrics are reported regularly to the executive team and to the Board. The Board believes that its membership should continue to reflect a diversity of gender, race, ethnicity, age, sexual orientation and gender identity and is committed to actively seeking women and minority candidates for the pool from which director candidates are chosen in support of the Board's commitment to diversity. The following table contains aggregate information regarding certain self-identified characteristics of our U.S. employees and directors: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Employees and Directors (a) | | Female | | Male | | Asian | | American Indian/Alaska Native | | Black/African American | | Hispanic/
Latino | | Hawaiian/
Pacific Island | | Not disclosed | | Two or more races | | White |
| Board of Directors | | 3 | | | 11 | | | — | | | — | | | 2 | | | — | | | — | | | — | | | — | | | 12 | |
| Company-wide | | 26,221 | | | 41,930 | | | 8,400 | | | 297 | | | 9,128 | | | 10,788 | | | 1,572 | | | 689 | | | 1,272 | | | 36,002 | |
| Frontline | | 22,780 | | | 36,828 | | | 7,113 | | | 275 | | | 8,240 | | | 9,685 | | | 1,436 | | | 580 | | | 1,123 | | | 31,153 | |
Professional/
Supervisory | | 2,268 | | | 3,033 | | | 690 | | | 16 | | | 678 | | | 834 | | | 109 | | | 77 | | | 101 | | | 2,796 | |
Senior Professional/
Leaders | | 1,094 | | | 1,916 | | | 583 | | | 5 | | | 194 | | | 257 | | | 26 | | | 29 | | | 44 | | | 1,872 | |
| Senior Leaders | | 79 | | | 153 | | | 14 | | | 1 | | | 16 | | | 12 | | | 1 | | | 3 | | | 4 | | | 181 | |
(a)Diversity representation data is for U.S. workforce only, excluding employees on leave and those directly employed by United subsidiaries, as of December 1, 2021. Diversity tracking is prohibited by law in some international locations. Numbers may not sum due to rounding. |
Connecting People. Uniting the World: The following programs, policies and initiatives encompass some of the objectives and measures that we continue to focus on as part of our human capital management strategy:
•Workplace Safety: At United, safety is first in everything we do and is our first Core4 service standard. We have implemented policies and training programs, as well as performed self-audits, designed to ensure our employees are safe every day. United has onsite clinic locations in four of its hubs that provide care to active employees, including, but not limited to, services related to occupational injury, Company-directed exams, acute care for personal illness, pre-employment exams, travel immunizations and the Occupational Safety and Health Administration ("OSHA")
audiometric testing. For all other locations, United has partnered with third-party clinics to provide such services. United also has a Drug Abatement organization that has implemented programs aimed at supporting United's goal of maintaining a drug- and alcohol-free workplace. Additionally, since the start of the COVID-19 pandemic, the Company has implemented additional safety measures in compliance with CDC guidelines and we actively follow their recommendations. During the third quarter of 2021, the Company implemented a COVID-19 vaccine requirement for U.S.-based employees, subject to certain exemptions. Early in 2021, the Company advocated with state and local government and public health officials to administer COVID-19 vaccines to both employees and the airport community at its onsite clinic locations in Guam, Houston, Chicago and Newark and is now offering COVID-19 boosters at its four onsite clinics and is continuing to work with airport partners in other locations to provide booster access to United employees. Thousands of the Company's employees and their families were vaccinated through United's efforts.
•Diversity, Equity and Inclusion: We believe that we are changing the face of the aviation industry and creating pathways for more diverse representation, equitable opportunities and inclusion in all areas of our business. This starts in our workplace and extends to enhancing the customer experience and using our voice and buying power to make a difference in our communities.
In the summer of 2021, United set a goal to train 5,000 pilots by 2030 at our new facility – the United Aviate Academy – and for at least half of the pilots to be women or people of color. Our inaugural class of 30 students, 80% of whom are women and people of color, will complete a rigorous, year-long training program. The academy is designed to set its graduates up for a career that reflects United's high standard of professionalism and deep commitment to delivering a safe, caring, dependable and efficient travel experience. Moving forward, we anticipate welcoming between 25 and 50 new students each month and expect to train at least 500 students yearly.
Not only does United Aviate Academy publicly establish our commitment to diversity, but our partnerships for pilot recruiting at three Historically Black Colleges and Universities ("HBCUs") enables us to support organizations that have a long history of serving underrepresented communities. The Aviate pilot recruiting program provides a new and effective path to a United flight deck and partnering with HBCUs will give United the opportunity to further its efforts to diversify its employee base and flight deck. Elizabeth City State University, Hampton University and Delaware State University are the beginning of United Aviate Academy's commitment to HBCUs.
We are taking a comprehensive approach toward sustainable progress by building customized strategies for each functional area of our business to attract diverse talent, develop our team members and support them in the advancement of their careers at United. Our highly engaged, employee-led Business Resource Groups ("BRG") are helping to drive these strategies and grow our inclusive culture. Our 30 BRG chapters with 2021 memberships totaling over 8,000 members worldwide build cultural awareness and allyship for the various communities they represent — Black, LGBTQ+, Multicultural, Multigenerational, People with disabilities, Veterans, Women, and Working Parents and Caregivers. Each of our BRGs is sponsored by a member of our executive team.
Pay equity is a key tenet of our rewards strategy because it promotes an environment in which all employees feel valued and respected. In 2020, we first announced that we achieved near-perfect pay equity for employees of all genders and races performing comparable work across our U.S. operations. We continued our commitment in 2021 with our annual reviews of our pay practices, including among managers, to maintain pay equity.
Our commitment to diversity and empowerment extends from our workforce and continues in our relationships with our suppliers as we recognize that we can meet our business needs while supporting economic growth in marginalized communities. In 2021 we announced our aspiration to become a member of the Billion Dollar Roundtable ("BDR") by 2025 (the BDR is a group of corporations recognized for spending at least $1 billion annually with diverse-owned businesses). We have built a strong foundation to keep us on track to meet that goal and are working to improve the rate of inclusion for diverse-owned businesses in our supply chain. In 2021, we added 23 new BDR count-eligible certified diverse-owned firms to our supply chain.
•Board Oversight: Our Board, assisted by its committees, plays a key role in the strategic oversight of management regarding the development, implementation and effectiveness of the Company's policies and strategies relating to human capital management. Many of our Board members have experience overseeing workforce issues as CEOs and presidents of other companies or organizations. The Compensation Committee also engages an independent compensation and benefits consulting firm to help evaluate our executive compensation and benefit programs and to provide benchmarking against a group of peer companies, including peers within the airline industry.
•Career Growth and Development and Succession Planning: We offer a broad range of professional training and education for the career advancement and leadership development of our employees. About 69% of our senior leaders
were internally promoted and more than 1,500 frontline employees have been promoted into management roles in the past seven years. Our key leadership development programs include structured nomination programs for high potential leaders and opportunities for all employees to develop their careers. Rise and LEAD are 6-month targeted programs for high-potential directors, senior managers and managers who are focused on developing strategic thinking, innovation, business acumen and executive presence skills, including through executive coaching and action learning projects. The Airport Operations Leadership Academy provides development opportunities for all employees and supports United's goal to build a robust, diverse leadership talent pipeline. The Airport Operations Leadership Academy provides courses, experiential learning and mentoring that can lead to certification in technical, technology and leadership skills. Our commitment to sponsorship and mentoring is highlighted in our Advancing Leadership and Learning in Inclusion Equity and Diversity (ALLIED) program, which pairs the executive leadership team and officers with diverse managing directors and directors for a mutual learning experience that includes facilitated discussion sessions, 360-degree feedback and opportunities to mentor and network. This commitment to mentoring and sponsorship is expanded through several programs implemented through BRGs, departments such as Inflight and Airport Operations, and the United Aviate Academy. Succession planning is performed and tracked by our executive team members for all executives and critical key manager positions globally and across all business areas with the goal of establishing strong leadership at the Company for the future. Executives engage in succession planning by continuously evaluating, developing and mentoring our high potential talent and providing them with advancement opportunities to ensure they are prepared when executive and management positions become available. The Board also engages in annual succession planning and talent development discussions with our Chief Executive Officer, focusing on our ability to identify, attract, prepare and retain talented employees for future leadership positions.
•Employee Engagement: We routinely conduct confidential employee engagement surveys of our global workforce, which provide feedback on employee satisfaction and engagement and cover a variety of topics such as company culture, safety and values, execution of our strategy, diversity, equity and inclusion and individual development, among others. Survey results are reviewed by our executive team, who analyze opportunities for progress both at a company level as well as at a function level. Individual managers also use survey results to implement actions and activities intended to increase the well-being of our employees. We believe that our employee engagement initiatives, competitive pay and benefit programs and career growth and development opportunities help increase employee satisfaction and tenure and reduce voluntary turnover.
•Talent and Pay: While our rewards package for most of our employees is defined by our collective bargaining agreements, it includes competitive base pay, travel privileges and other comprehensive benefits, including health, wellness and retirement programs for all our employees, including part-time employees. We also review both industry and local market data at least annually to identify trends and market gaps in order to maintain the competitiveness of our compensation and employee benefit programs. With respect to executives, a substantial proportion of their total rewards is variable, at-risk pay that is based on Company performance and delivered in the form of equity, supporting alignment over the long term between our executives and our shareholders. We align our executives' long-term equity compensation with our shareholders' interests by linking realizable pay with stock performance. In addition, the Company has performance-based compensation programs for other management employee leaders, including managers, supervisors and team leads. During the COVID-19 pandemic, United implemented new benefits and enhanced existing benefits to assist employees, including enhanced telemedicine offerings to all employees, contact tracing benefits related to COVID-19 exposure, modified absence management practices and additional mental health programs and resources.
•Collective Bargaining Agreements: Collective bargaining agreements between the Company and its represented employee groups are negotiated under the Railway Labor Act ("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." The following table reflects the Company's represented employee groups, the number of employees per represented group, union representation for each employee group, and the amendable date for each employee group's collective bargaining agreement as of December 31, 2021:
| | | | | | | | | | | | | | | | | | | | |
Employee
Group | | Number of Employees | | Union | | Agreement Open for Amendment |
| | | | | | |
| United Airlines, Inc.: | | | | | | |
| Flight Attendants | | 21,678 | | Association of Flight Attendants (the "AFA") | | August 2021 |
| Fleet Service | | 12,564 | | International Association of Machinists and Aerospace Workers (the "IAM") | | December 2021 |
| Pilots | | 12,231 | | Air Line Pilots Association | | January 2019 |
| Passenger Service | | 11,034 | | IAM | | December 2021 |
| Technicians | | 8,065 | | International Brotherhood of Teamsters | | December 2022 |
| Storekeepers | | 899 | | IAM | | December 2021 |
| Dispatchers | | 389 | | Professional Airline Flight Control Association | | December 2021 |
| Fleet Tech Instructors | | 158 | | IAM | | December 2021 |
| Load Planners | | 60 | | IAM | | December 2021 |
| Security Officers | | 45 | | IAM | | December 2021 |
| Food Service Employees | | 37 | | UNITE HERE | | N/A |
| Maintenance Instructors | | 35 | | IAM | | December 2021 |
| | | | | | |
| United Ground Express, Inc.: | | | | | | |
| Passenger Service | | 4,399 | | IAM | | March 2025 |
•Additional Information: See our Corporate Responsibility Report, which is available on our website at crreport.united.com, for additional information on our human capital management programs, initiatives and measures. We are committed to transparency and accountability as we work to better reflect the diversity of the communities we serve in all areas of our business and, to track our progress, have committed to sharing our U.S. workforce demographic data by self-identified race, ethnicity and gender on an annual basis on our website. The information contained on or connected to the Company's website is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report filed with the SEC.
Airlines are subject to extensive domestic and international regulatory oversight. The following discussion summarizes the principal elements of the regulatory framework applicable to our business. Regulatory requirements, including but not limited to those discussed below, affect our operations and increase our operating costs, and future regulatory developments may continue to do the same in the future. In addition, should any of our governmental authorizations or certificates be modified, suspended or revoked, our business and competitive position could be materially adversely affected. See Part I, Item 1A. Risk Factors—"The airline industry is subject to extensive government regulation, which imposes significant costs and may adversely impact our business, operating results and financial condition" for additional information on the material effects of compliance with government regulations.
Domestic RegulationRegulation.
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 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”"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, modify or modifyground 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”("DHS")
has jurisdiction over virtually every aspect of civil aviation security. The Antitrust Division of the U.S. Department of Justice
(“DOJ”("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”),RLA, a federal statute. The Company is also subject to investigation inquiries by the DOT, FAA, DOJ, DHS, the U.S. Food and Drug Administration
(“FDA”("FDA"), the U.S. Department of Agriculture
(“USDA”("USDA")
, Centers for Disease Control and Prevention ("CDC"), OSHA, and other U.S. and international regulatory bodies.
Airport Access. Access to landing andtake-off rights, or “slots,”"slots," at several major U.S. 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 three airports: Reagan National Airport in Washington, D.C. (“Reagan National”), and John F. Kennedy International Airport and LaGuardia Airport in the New York City metropolitan region (“LaGuardia”). Of these three airports, United currently operates at two: Reagan National and LaGuardia.region. Additional restrictions on takeoff and landing slots at these and other airports may be implemented in the future and could affect the Company’sCompany's rights of ownership and transfer as well as its operations.
Legislation. The airline industry is subject to legislative activityactions (or inactions) that may have an impact on operations and costs. In 2018, the U.S. Congress will continue to consider legislation to reauthorizeapproved a five-year reauthorization for the FAA, which encompasses all significant aviation tax and policy-related issues. As with previous reauthorization legislation,The law includes a range of policy changes related to airline customer service and aviation safety. Implementation of some items continues and, depending on how they are implemented, could impact our operations and costs. U.S. Congressional action in response to the COVID-19 pandemic has provided funding for U.S. airlines, in both grants and loans. The U.S. Congress has imposed limited conditions on airlines accepting funding, including workforce retention and minimum service requirements. With the current U.S. Congress and presidential administration, any future funding or other pandemic relief could include additional requirements that could impact our operations and costs. Additionally, the U.S. Congress may consider a range of policy changes thatlegislation related to environmental issues or increases to the U.S. federal corporate income tax rate, which could impact operations and costs. Finally, aviation security continues to be the subject of legislative and regulatory action, requiring changes to the Company’s security processes, potentially increasing the cost of its security procedures and affecting its operations.Catering Operations. The Company owns and operates catering kitchens at airports in Denver, Cleveland, Newark, Houston, and Honolulu, which prepareready-to-eat food for United flights, as well as other domestic and international airlines. In addition, the Cleveland flight kitchen produces a small volume of food products for retail sale. These operations are subject to regulation by the FDA and the USDA, as well as other regulatory agencies. The FDA recently began implementing the Federal Food Safety Modernization Act which requires all food manufacturers to implement more stringent preventive controls. As a result, airline catering operations have recently become the focus of enhanced scrutiny by the FDA with inspections and greater enforcement.
industry.
International RegulationRegulation.
International air transportation is subject to extensive government regulation. In connection with the Company’sCompany's international services, the Company is regulated by both the U.S. government and the governments of the foreign countries or regions 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 from the Company and/or enforcement penalties from the Company in addition to changes in operating procedures due to overbooked, canceled andor delayed flights.
Airport Access. Historically, access to foreign marketsroutes has been tightly controlled through bilateral agreements between the U.S. and each foreign countryjurisdiction involved. These agreements regulate the marketsroutes served, the number of carriers allowed to serve each marketroute and the frequency of carriers’carriers' flights. Since the early 1990s, the U.S. has pursued a policy of “Open Skies”"Open Skies" (meaning all U.S.-flagU.S. and foreign carriers have access to the destination), under which the U.S. government has negotiated a number of bilateral agreements allowing unrestricted access between U.S. and foreign markets.points. 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 Africa, the Middle East, Asia/Pacific, 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”)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
Company’sCompany's ability to serve some foreign
marketsroutes 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
Company’sCompany's international route authorities and slot rights may be materially enhanced or diminished. Similarly, foreign governments control their airspace and can restrict our ability to overfly their territory,
enhancingwhich may enhance or
diminishingdiminish the value of the
Company’sCompany's existing international route
authoritiesauthorizations and slot rights.
The COVID-19 pandemic has caused many governments to restrict entry to foreign nationals (with some exceptions) and/or to impose multiple health management rules which can include COVID-19 vaccinations, boosters, testing, quarantine upon arrival, health declarations, and temperature screens, among others. Such requirements have resulted in reduced demand for travel in certain circumstances and have caused the Company to suspend some international service. Certain foreign governments have granted waivers for limited periods that allow the Company to maintain existing slot rights and route authorizations while not operating at a particular foreign point. The airline industry is advocating for the continuation of such waivers until the operating and demand environment return to normal, but future waivers are not guaranteed.
Environmental Regulation. The airline industry is subject to increasingly stringent federal, state, local and international environmental requirements,regulations, including those regulating emissions to air, water discharges, safe drinking water and the use and management of hazardous substances and wastes. The Company endeavors to comply with all applicable environmental regulations.
Climate Change. ThereAs outlined above, the Company's commitment to becoming a more environmentally sustainable company extends beyond seeking to comply with regulatory requirements. At the same time, efforts to reduce carbon emissions through environmental sustainability legislation and regulation, or non-binding standards or accords, is an increasingincreased focus of global, regulatory focus on greenhouse gas (“GHG”) emissionsnational and their potential impacts relating to climate change. Initiativesregional regulators. A policy to regulate GHG emissions from aviation had previously been adopted byknown as the European Union (“EU”("EU") Emission Trading System ("ETS") was adopted in 2009, but applicability to flights arriving at or departing from airports outside the EU havehas been postponed several times. In December 2017, the European Parliament voted to extend exemptions forextra-EU flights until December 2023 in order to align the extension date with the completion of the pilot phase of the International Civil Aviation Organization’s (“ICAO”Organization's ("ICAO") Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”("CORSIA"). More recently, the European Parliament released its Fit for 55 proposals to revise and update EU legislation in line with a goal of reducing GHG emissions 55% by 2030, including provisions purporting to implement CORSIA through the EU ETS. The current proposals, if adopted, could require airlines to comply with duplicative requirements under both EU ETS and CORSIA for intra-EU international flights. CORSIA, which was adopted in October 2016, 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 eligible carbon offset credits.credits and the use of eligible sustainable fuels. The unprecedented nature of the COVID-19 pandemic prompted ICAO to include only 2019 emissions (as opposed to the originally planned average of 2019-20 emissions) as the baseline upon which offsetting obligations would be calculated for the pilot phase (2021-23) of the scheme; the applicable baseline for the subsequent phases of the scheme, however, is still uncertain. The ICAO Assembly will review CORSIA in 2022, and this review will include the impact of COVID-19 on the scheme, including the changed baseline to 2019. Certain CORSIA program details remain to be developed andaspects could potentially be affected by political developments in participating countries or the results of the pilot phase of the program, and thus the impact of CORSIA cannot be fully predicted. However, 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. TheDomestically, in December 2020, the U.S. Environmental Protection Agency ("EPA") adopted its own aircraft and aircraft engine GHG emissions standards, which are aligned with the 2017 ICAO airplane CO2 emission standards, but the U.S. government has commencedrecently indicated that it will seek more ambitious aircraft CO2 standards within ICAO. Additionally, in November 2021 the procedural steps necessaryFAA released the U.S. Aviation Climate Action Plan, which indicates the administration will be assessing policy measures for domestic aviation GHG emissions which could include similar requirements to CORSIA to purchase offsets for domestic flights.
The Company believes that policies that incentivize the production of SAF, such as a blender's tax credit, or economy-wide carbon prices or taxes, would enable the Company to decarbonize its operations more cost efficiently than a patchwork of regulatory requirements on aviation, particularly those that require airlines to reduce flights or impose the cost of transitioning to low-carbon alternatives disproportionately on airlines. The Company is working with policymakers to adopt
its own standard, in consultation withpolicies that incentivize the
ICAO. Whileproduction of SAF to allow the
precise timing and final form of these various programs and requirements continueindustry to
evolve,transition to a lower carbon future. In addition, while the Company is
taking various actionsresolute in attaining its mid-term and long-term climate goals without relying on voluntary use of traditional carbon offsets, the Company may be subject to future regulatory requirements that
are expectedrequire the purchase of carbon offsets, which may expose the Company to
help to reduce its CO2 emissions over time such as fleet renewal, aircraft retrofits andadditional costs associated with the
commercializationprocurement of
aviation alternative fuels.offsets or limited supply in the carbon offsets market.
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 and state and local air quality initiatives which have resulted, or could in the future result in curtailments in services, increased operating costs, limits on expansion, or further emission reduction requirements. Certain airports and/or governments, both domestically and internationally, either have established or are seeking to establish environmental fees and other requirements applicable to carbon emissions, local air quality pollutants and/or noise. The implementation of state plans to achieve national standards for ozonethese requirements is expected to result in restrictions on mobile sources of air pollutants such as cars, trucks and airport ground support equipment in somecorresponding locations.
CertainVarious states may also electhave passed legislation restricting the use of Class B fire-fighting foam agents that contain intentionally added per- and polyfluoroalkyl substances ("PFAS"), which are expected to impose restrictions apartrequire the Company to continue to incur costs to convert existing fixed foam fire suppression systems to accommodate PFAS-free firefighting foam agents. In addition, the EPA has developed a comprehensive strategic plan for PFAS regulatory actions across a wide spectrum of its statutory authorities, including the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), the Resource Conservation and Recovery Act, the Clean Water Act, the Toxic Substances Control Act and the Safe Drinking Water Act. The Company expects these broad regulatory policies will impact its operations that currently have or historically used fire-fighting foam agents containing PFAS. To mitigate these risks, the Company is working to remove PFAS-containing fire-fighting foam from the revised national standards.its hangars through a phased retrofit strategy, and is committed to transitioning to PFAS-free materials for fire suppression. Finally, environmental cleanup laws could require the Company to undertake or subject the Company to liability for investigation and remediation costs at certain owned or leased locations or third partythird-party disposal locations.
Because certain
PFAS are expected to be regulated under CERCLA and other environmental cleanup laws, the Company may become subject to potential liability for its historic usage of PFAS-containing materials, although such potential liability is not expected to be significant. Until the applicability of new regulations to our specific operations is better defined and/or until pending 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 continuethe Company is required to
monitorcomply with numerous applicable environmental regulations, the Company believes that these
developments,regulations and programs, including the pilot phase of CORSIA, EPA regulations regarding PFAS and GHG emissions, and other existing environmental regulations is not reasonably likely to have a material effect on the Company's results or competitive position. However, the precise nature of future requirements and their applicability to the Company are difficult to predict
butand the financial impact to the Company and the aviation industry could be significant.
Employees
As of December 31, 2017, UAL, including its subsidiaries, had approximately 89,800 employees. Approximately 80%
Information about Our Executive Officers
Below is a list of the
Company’s employees were represented by various U.S. labor organizations.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.”
The following table reflects the Company’s represented employee groups, the number of employees per represented group, union representation for each of United’s employee groups, and the amendable date for each employee group’s collective bargaining agreementCompany's executive officers as of December 31, 2017:
the date hereof, including their name, office(s) held and age. | | | | | | | | | | | | | | |
| Name | | Position | | Age |
Employee
Group
Torbjorn (Toby) J. Enqvist | |
Executive Vice President and Chief Customer Officer | Number of
Employees |
| | Union
| | Agreement Open
for Amendment
50 |
Flight Attendants
Kate Gebo | | Executive Vice President Human Resources and Labor Relations | 22,676 | | | Association of Flight Attendants (the “AFA”) | | August 202153 |
Passenger Service
Brett J. Hart | | President | 13,299 | | | International Association of Machinists and Aerospace Workers (the “IAM”) | | December 202152 |
Fleet Service
Linda P. Jojo | | Executive Vice President Technology and Chief Digital Officer | 13,187 | | | IAM | | December 202156 |
Pilots
J. Scott Kirby | | Chief Executive Officer | 11,492 | | | Air Line Pilots Association, International | | January 201954 |
TechniciansGerald Laderman | | Executive Vice President and Related & Flight Simulator TechniciansChief Financial Officer | | | 9,535 | | | International Brotherhood of Teamsters (the “IBT”) | | December 202264 |
Storekeeper EmployeesAndrew Nocella | | Executive Vice President and Chief Commercial Officer | 1,000 | | | IAM | | December 202152 |
DispatchersJonathan Roitman | | Executive Vice President and Chief Operations Officer | 402 | | | Professional Airline Flight Control Association | | December 2021 |
Fleet Tech Instructors | | | 111 | | | IAM | | December 2021 |
Load Planners | | | 71 | | | IAM | | December 2021 |
Security Officers | | | 51 | | | IAM | | December 2021 |
Maintenance Instructors | | | 40 | | | IAM | | December 202156 |
UNITE HERE
Set forth below is attemptinga description of the background of each of the Company's executive officers. Executive officers are elected by UAL's Board for an initial term that continues until the first Board meeting following the next Annual Meeting of Shareholders and thereafter, are elected for a one-year term or until their successors have been chosen, or until their earlier death, resignation or removal. Executive officers serve at the discretion of the Board. Unless otherwise stated, employment is by UAL and United. There are no family relationships between any executive officer or director of UAL.
Torbjorn (Toby) J. Enqvist. Mr. Enqvist has served as the Executive Vice President and Chief Customer Officer of UAL and United since June 1, 2021. From August 2018 to organize United’sMay 2021, he served as Senior Vice President and Chief Customer Officer of UAL and United. From December 2017 to August 2018, he served as Senior Vice President of Network Operations and Customer Solutions of UAL and United. From July 2017 to December 2017, he served as Senior Vice President of Customer Solutions and Recovery of UAL and United. From April 2015 to July 2017, he served as Vice President of Airport Innovations of UAL and United.
Kate Gebo. Ms. Gebo has served as Executive Vice President Human Resources and Labor Relations of UAL and United since December 2017. From November 2016 to November 2017, Ms. Gebo served as Senior Vice President, Global Customer Service Delivery and Chief Customer Officer of United. From October 2015 to November 2016, Ms. Gebo served as Vice President of the Office of the Chief Executive Officer of United. From November 2009 to October 2015, Ms. Gebo served as Vice President of Corporate Real Estate of United.
Brett J. Hart. Mr. Hart has served as President of UAL and United since May 2020. From March 2019 to May 2020, he served as Executive Vice President and Chief Administrative Officer of UAL and United. From May 2017 to March 2019, he served as Executive Vice President, Chief Administrative Officer and General Counsel of UAL and United. From February 2012 to May 2017, he served as Executive Vice President and General Counsel of UAL and United. 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 Airlines, Inc. ("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.
Linda P. Jojo. Ms. Jojo has served as Executive Vice President Technology and Chief Digital Officer of UAL and United since May 2017. From November 2014 to May 2017, Ms. Jojo served as Executive Vice President and Chief Information Officer of UAL and United. 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.
J. Scott Kirby. Mr. Kirby has served as Chief Executive Officer of UAL and United since May 2020. Mr. Kirby served as President of UAL and United from August 2016 to May 2020. 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 President—Sales and Marketing (2001 to 2006); Senior Vice President, e-business (2000 to 2001); Vice President, Revenue Management (1998 to 2000); 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.
Gerald Laderman. Mr. Laderman has served as Executive Vice President and Chief Financial Officer since August 2018. Mr. Laderman served as Senior Vice President Finance, Procurement and Treasurer for UAL and United from 2013 to August 2015, and again from August 2016 to May 2018. Mr. Laderman additionally was acting Chief Financial Officer from August 2015 to August 2016 and from May 2018 to August 2018. Mr. Laderman served as Senior Vice President Finance and Treasurer for the Company from 2010 to 2013. From 2001 to 2010, Mr. Laderman served as Senior Vice President of Finance and Treasurer for Continental. Mr. Laderman joined Continental in 1988 as senior director legal affairs, finance and aircraft programs.
Andrew Nocella. Mr. Nocella has served as Executive Vice President and Chief Commercial Officer of UAL and United since September 2017. From February 2017 to September 2017, he served as Executive Vice President and Chief Revenue Officer of UAL and United. Prior to joining the Company, from August 2016 to February 2017, Mr. Nocella served as Senior Vice President, Alliances and Sales of American Airlines, Inc. From December 2013 to August 2016, he served as Senior Vice President and Chief Marketing Officer of American Airlines, Inc. From August 2007 to December 2013, he served as Senior Vice President, Marketing and Planning of US Airways.
Jonathan Roitman. Mr. Roitman has served as Executive Vice President and Chief Operations Officer of UAL and United since September 2020. Mr. Roitman served as Senior Vice President and Chief Operations Officer of the Company from June 2020 to September 2020. Mr. Roitman served as Senior Vice President Airport and Network Operations of United from November 2019 to May 2020. From August 2018 to November 2019, Mr. Roitman served as Senior Vice President Airport and Catering Operations, employees, who are currently unrepresented, and filed an applicationfrom January 2015 to do soAugust 2018, he served as Senior Vice President Airport Operations of United. From December 1997 through January 2015, Mr. Roitman held positions of increasing responsibility at United and at Continental prior to its merger with the National Mediation Board on January 24, 2018.Company, including as Senior Vice President Operations and Cargo, Vice President, Newark Hub, and Vice President, Cleveland Hub. Prior to joining Continental in December 1997, Mr. Roitman was the manager of business development for BWAB Incorporated, a real estate development and oil and gas production firm, and served in the U.S. Army.
The following risk factors should be read carefully when evaluating the Company’s business and the forward-looking statements contained in this report and other statements the Company or its representatives make from time to time.
ITEM 1A. RISK FACTORS.
Any of the following risks and uncertainties described below could significantly and negatively affect our business operations, financial condition, operating results (including components of our financial results), cash flows, prospects, reputation or credit ratings, which could cause the trading price of our common stock to decline significantly. Additional risks and uncertainties that are not presently known to us, or risks that we currently consider immaterial, could also impair our business operations, financial condition, operating results, cash flows, prospects, reputation or credit ratings.
COVID-19 Pandemic Risks
The COVID-19 pandemic has materially and adversely affect the Company’simpacted our business, operating results, financial condition and liquidity. The full extent of the impact will depend on future developments and how quickly we can return to more normal operations, among other things. If the impacts from the COVID-19 pandemic extend beyond our assumed timelines, our actual outcomeresults may vary significantly from our expectations.
The COVID-19 pandemic prompted governments and businesses to take unprecedented measures in response that have included international and domestic travel restrictions or advisories, restrictions on business operations, limitations on public gatherings, social distancing recommendations, temporary closures of mattersbusinesses, remote work arrangements, closures of tourist destinations and attractions as well as quarantine and shelter-in-place orders. As a result, we experienced a precipitous decline in passenger demand and bookings for both business and leisure travel, which has had an adverse impact that has been material to the Company's business, operating results, financial condition and liquidity and has materially disrupted our strategic operating plans. The Company has seen increasing demand for travel both domestically and internationally; however, as the situation surrounding the COVID-19 pandemic remains fluid, the pandemic has continued to negatively impact travel demand. It remains difficult to reasonably predict the full extent of the ongoing impact of the COVID-19 pandemic on the Company's longer-term operational and financial performance, which forward-looking statementswill depend on a number of future developments, many of which are madeoutside the Company's control, such as the ultimate duration of and factors impacting the recovery from the pandemic (including the efficacy and speed of vaccination programs in curbing the spread of the virus in different markets, the efficacy and availability of various treatment options, the introduction and spread of new variants of the virus that may be resistant to currently approved vaccines or treatment options and the continuation of existing or implementation of new government travel restrictions), the volatility of aircraft fuel prices, customer behavior changes and fluctuations in demand for air travel, among others. The COVID-19 pandemic and the measures taken in response may continue to impact many aspects of our business, operating results, financial condition and liquidity in a number of ways, including labor shortages (including reductions in available staffing and related impacts to the Company's flight schedules and reputation), facility closures and related costs and disruptions to the Company's and its business partners' operations, reduced travel demand and consumer spending, increased fuel and other operating costs (including due to inflation), supply chain disruptions, logistics constraints, volatility in the price of our securities, our ability to access capital markets and volatility in the global economy and financial markets generally. If the negative impacts from the COVID-19 pandemic extend beyond our assumed timelines, our actual results may vary significantly from our expectations.
In addition, the outbreak and spread of the COVID-19 pandemic have adversely impacted customer perceptions of the health, safety, ease and predictability of air travel and these negative perceptions could continue even after the pandemic subsides. Actual or perceived risk of infection on our flights, at airports and during other travel-related activities has had, and may continue to have, a material adverse effect on the public's perception of air travel, which has harmed, and may continue to harm, our reputation and brand and result in reduced demand for the Company's flights or the flights of its codeshare partners or regional carriers. We have incurred, and expect that we will continue to incur, COVID-19-related costs as we sanitize aircraft, implement additional hygiene-related protocols and take other actions to limit the threat of infection among our employees and passengers and combat negative customer perceptions of the health and safety of travel on our aircraft and at our terminals.
Our level of indebtedness has increased as we managed through the effects of the COVID-19 pandemic and may continue to increase. As a result of the Company's various financing activities in response to the pandemic, the Company is subjected to more substantial risk of default, cross-default and cross-acceleration in the event of breach of its covenants under such financings. For example, under certain of the Company's credit card processing agreements with financial institutions, the financial institutions in certain circumstances have the right to require that the Company maintain certain cash or other collateral reserves related to advance ticket sales. The COVID-19 pandemic has resulted in an increase in demand from consumers for refunds on their tickets, and if increased demand for refunds continues, we are at risk of triggering liquidity covenants in these processing agreements. If such covenants were triggered, it could force us to post cash collateral. In addition, under the terms of certain assistance received by the Company under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and related legislation, the Company's business is subject to certain restrictions, including requirements to maintain certain levels of scheduled service. Moreover, the Company may plan to seek additional liquidity in the near-term and the Company's ability to obtain additional financing is subject to certain limitations, including covenants in several of the
Company's debt agreements that limit its ability to incur additional indebtedness. In addition, the terms of any additional financing may subject the Company to additional covenants limiting its operational and financial flexibility.
We, as well as our partners, are facing and could continue to face potential other negative consequences stemming from the COVID-19 pandemic, including but not limited to increased cyber threats, such as phishing, social engineering and malware attacks partly due to the increase in remote work arrangements, supply chain constraints and an increasingly competitive labor market due to an industry-wide sustained labor shortage, including for skilled labor. If a regional carrier, supplier, third party vendor or service provider were unable to timely provide adequate products or support for its products (including aircraft), or otherwise fulfill its commitments to the Company, the Company's operations could be materially adversely affected.
It is possible that COVID-19 could exacerbate any of the other risks described in this
report.GlobalForm 10-K as well. At this time, we cannot predict the full extent of the negative impact that the COVID-19 pandemic will have on our business, operating results, financial condition, and liquidity.
Strategic and Business Development Risks
We may not be successful in executing elements of our strategic operating plan, which may have a material adverse impact on our business, financial results and market capitalization.
In June 2021, the Company announced its United Next plan, including firm orders of 270 aircraft, retrofitting plans and plans to increase mainline daily departures and available seats across the Company's North American network. In developing our United Next plan, we made certain assumptions including, but not limited to, those related to the duration and scope of the continued impacts from the COVID-19 pandemic, customer demand, delivery of aircraft, potential labor and supply chain shortages, inflation rates, voluntary or mandatory groundings of aircraft, our regional network, competition, market consolidation and other macroeconomic and geopolitical factors. Actual conditions may be different from our assumptions and could cause the Company to adjust its strategic operating plan. In addition, we cannot provide any assurance that we will be able to successfully execute our strategic plan, our strategic plan will not result in additional unanticipated costs, the growth that we anticipate will occur through execution of our strategic plan will not exacerbate any other risk described in this Form 10-K (especially relating to our supply chain or our ability to attract, train and retain talent), our partners will timely provide adequate products or support for our products (including delivery of aircraft) or our strategic plan will result in improvements in future financial performance. If we do not successfully execute our United Next or other strategic plans, or if actual results vary significantly from our expectations, our business, operating results, financial condition and market capitalization could be materially and adversely impacted. The failure to successfully structure our business to meet market conditions could have a material adverse effect on our business, operating results and financial condition.
Changes in the Company's network strategy over time or other factors outside of the Company's control may make aircraft on order less economic politicalfor the Company, result in costs related to modification or termination of aircraft orders or cause the Company to enter into orders for new aircraft on less favorable terms, and any inability to accept or integrate new aircraft into the Company's fleet as planned could increase costs or affect the Company's flight schedules.
The Company's 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. As a result of our network strategy changing or our demand expectations not being realized, our preference for the aircraft that we previously ordered may decrease; however, the Company may be responsible for material liabilities to its counterparties if it were to attempt to modify or terminate any of its existing aircraft order commitments and our financial condition could be adversely impacted. These risks are heightened as a result of the Company's United Next order in the second quarter of 2021, which was the largest order in the Company's history. Additionally, the Company may have a need for additional aircraft that are not available under its existing orders and may seek to acquire aircraft from other sources, such as through lease arrangements, which may result in higher costs or less favorable terms, or through the purchase or lease of used aircraft. The Company may not be able to acquire such aircraft when needed on favorable terms or at all.
Furthermore, if, for any reason, the Company is unable to accept deliveries of new aircraft or integrate such new aircraft into its fleet as planned, the Company may face higher financing and operating costs than planned, or be required to seek extensions of the terms for certain leased aircraft or otherwise delay the exit of other aircraft from its fleet. Such unanticipated extensions or delays may require the Company to operate existing aircraft beyond the point at which it is economically optimal to retire them, resulting in increased maintenance costs, or reductions to the Company's schedule, thereby reducing revenues.
The imposition of new tariffs, or any increase in existing tariffs, on the importation of commercial aircraft that the Company orders may also result in higher costs.
Failure to effectively manage acquisitions, divestitures, investments, joint ventures and other portfolio actions could adversely impact our operating results. In addition, any businesses or assets that we acquire in the future may underperform.
Although we are committed to reducing our debt over the long term, an important part of the Company's strategy to expand its global network has included making significant investments, both domestically and in other parts of the world, including in other airlines and other aviation industry participants, producers of sustainable aviation fuel and manufacturers of electric and other new generation aircraft. The Company plans to continue to make additional investments through its corporate venture capital arm, UAV. However, increased competition in forming and maintaining relationships with other airlines (since there are a limited number of potential arrangements and other airlines and industry conditions constantly changeparticipants seek to enter into similar relationships) may make it difficult for the Company to complete strategic investments on commercially reasonable terms or at all.
Future revenues, profits and unfavorable conditionscash flows of these and future investments and repayment of invested or loaned funds may not materialize due to safety concerns, regulatory issues, supply chain problems or other factors beyond our control. Where we acquire debt or equity securities as all or part of the consideration for business development activities, such as in connection with a joint venture, the value of those securities will fluctuate and may depreciate in value. We may not control the companies in which we make investments, and as a result, we will have limited ability to determine its management, operational decisions, internal controls and compliance and other policies, which can result in additional financial and reputational risks.
From time to time we also divest assets. We may not be successful in separating any such assets, and losses on the divestiture of, or lost operating income from, such assets may adversely affect our earnings. Any divestitures also may result in continued financial exposure to the divested businesses following the transaction, such as through guarantees or other financial arrangements or potential litigation.
In addition, we may incur asset impairment charges related to acquisitions or divestitures that reduce our earnings. For example, in 2020, United recorded a full credit loss allowance against the $515 million carrying value of the BRW Term Loan (as defined in Note 8 to the financial statements included in Part II, Item 8 of this report) and related receivable. Moreover, new or revised accounting standards, rules and interpretations could result in changes to the recognition of income and expense that may materially and adversely affect our financial results.
If the execution or implementation of acquisitions, divestitures, investments, joint ventures and other portfolio actions is not successful, it could adversely impact our financial condition, cash flows and results of operations. In addition, due to the Company's substantial amount of debt, there can be no assurance of when we will be able to expand our business development capacity. Pursuing these opportunities may require us to obtain additional equity or debt financing and could result in increased leverage and/or a downgrade of our credit ratings.
Business, Operational and Industry Risks
The Company could experience adverse publicity, harm to its brand, reduced travel demand, potential tort liability and operational restrictions as a result of an accident, catastrophe or incident involving its aircraft or its operations or the aircraft or operations of another airline, which may result in a material adverse effect on the Company's business, operating results or financial condition.
An accident, catastrophe or incident involving an aircraft that the Company operates, or an aircraft or aircraft type that is operated by another airline, or an incident involving the Company's operations, or the operations of another airline, could have a material adverse effect on the Company if such accident, catastrophe or incident created a public perception that the Company's 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. Further, any such accident, catastrophe or incident involving the Company, its regional carriers or its codeshare partners could expose the Company to significant 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, catastrophe or incident, and the Company's codeshare partners and regional carriers carry similar insurance and generally indemnify the Company for their operations, if the Company's 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 Company's business, operating results or financial condition. In addition, any such accident, catastrophe or incident involving the Company, its regional carriers or its codeshare partners could result in operational restrictions on the Company, including voluntary or mandatory groundings of aircraft. Voluntary or involuntary groundings have also impacted, and could in the future impact, the Company's financial results and operations in numerous ways, including reduced revenue, redistributions of other aircraft and deferrals of capital expenditure and other spending. A prolonged period of time operating a reduced fleet in these circumstances could result in a material adverse effect on the Company's business, operating results or financial condition. For example, the Company decided to voluntarily ground its Boeing 737 aircraft following certain electrical issues, and in February 2021, the FAA issued an Emergency Airworthiness
Directive regarding certain Boeing 777 Pratt & Whitney powered aircraft. The grounding of the Boeing 777 Pratt & Whitney powered aircraft and Boeing 737 aircraft has adversely affected our business and could adversely affect our business going forward if their return to service is significantly delayed.
The global airline industry is highly competitive and susceptible to price discounting and changes in capacity, which could have a material adverse effect on our business, operating results and financial condition.
The airline industry is highly competitive, marked by significant competition with respect to routes, fares, schedules (both timing and frequency), services, products, customer service and frequent flyer programs. Consolidation in the airline industry, the rise of well-funded government sponsored international carriers, changes in international alliances, swaps of landing and slots and the creation of immunized JBAs have altered and are expected to continue to alter the competitive landscape in the industry, resulting in the formation of airlines and alliances with increased financial resources, more extensive global networks and services and competitive cost structures. Open Skies agreements, including the longstanding agreements between the United States and each of the EU, Canada, Japan, Korea, New Zealand, Australia, Colombia and Panama, as well as the more recent agreements between the United States and each of Mexico and Brazil, 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 JBAs and bilateral alliances that did not exist before such realignment. Further airline and airline alliance consolidations or reorganizations could occur in the future, and other airlines participating in such activities may significantly improve their cost structures or revenue generation capabilities, thereby potentially making them stronger competitors of the Company and impairing the Company's ability to realize expected benefits from its own strategic relationships.
Airlines also compete by increasing or decreasing their capacity, including route systems and the number of destinations served. Several of the Company's domestic and international competitors have increased 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 Company’sCompany's business, operating results and financial condition.
The Company's U.S. operations are subject to competition from traditional network carriers, national point-to-point carriers and discount carriers, including low-cost carriers and ultra-low-cost carriers that may have lower costs and provide service at lower fares to destinations also served by the Company. The significant presence of low-cost carriers and ultra-low-cost carriers, which engage in substantial price discounting, may diminish our ability to achieve sustained profitability on domestic and international routes and has also caused us to reduce fares for certain routes, resulting in lower yields on many domestic markets. Our ability to compete in the domestic market effectively depends, in part, on our ability to maintain a competitive cost structure. If we cannot maintain our costs at a competitive level, then our business, operating results and financial condition could continue to be materially and adversely affected. In addition, our competitors have established new routes and destinations, including some at our hub airports, in light of the expansion opportunities presented by the COVID-19 pandemic, which may compete with our existing routes and destinations and expansion plans.
Our international operations are subject to competition from both foreign and domestic carriers. For instance, competition is significant from government-subsidized competitors from certain Middle East countries. These carriers have large numbers of international widebody aircraft on order and are increasing service to the U.S. from their hubs in the Middle East. The government support provided to these carriers has allowed them to grow quickly, reinvest in their product, invest in other airlines and expand their global presence. We also face competition from foreign carriers operating under "fifth freedom" rights permitted under international treaties that allow certain carriers to provide service to and from stopover points between their home countries and ultimate destinations, including points in the United States, in competition with service provided by us.
Through alliance and other marketing and codesharing agreements with foreign carriers, U.S. carriers have increased their ability to sell international transportation, such as services to and beyond traditional global gateway cities. Similarly, foreign carriers have obtained increased access to interior U.S. passenger traffic beyond traditional U.S. gateway cities through these relationships. In addition, several JBAs among U.S. and foreign carriers have received grants of antitrust immunity allowing the participating carriers to coordinate schedules, pricing, sales and inventory. If we are not able to continue participating in these types of alliance and other marketing and codesharing agreements in the future, our business, operating results and financial condition could be materially and adversely affected.
Our MileagePlus frequent flyer program benefits from the attractiveness and competitiveness of United Airlines as a material purchaser of award miles and the majority recipient for mileage redemption. If we are not able to maintain a competitive and attractive airline business, our ability to acquire, engage and retain customers in the loyalty program may be adversely affected, which could adversely affect the loyalty program's and our operating results and financial condition.
Further, our MileagePlus frequent flyer program also faces significant and increasing direct competition from the frequent flyer programs offered by other airlines, as well as from similar loyalty programs offered by banks and other financial services companies. Competition among loyalty programs is intense regarding customer acquisition incentives, the value and utility of program currency, rewards range and value, fees, required usage, and other terms and conditions of these programs. If we are not able to maintain a competitive frequent flyer program, our ability to attract and retain customers to MileagePlus and United alike may be adversely affected, which could adversely affect our operating results and financial condition.
Substantially all of the Company's aircraft, engines and certain parts are sourced from a limited number of suppliers; therefore, the Company would be materially and adversely affected if it were unable to obtain timely deliveries, additional equipment or support from any of these suppliers.
The Company currently sources substantially all of its aircraft and many related aircraft parts from The Boeing Company ("Boeing") or Airbus S.A.S. ("Airbus"). In addition, our aircraft suppliers are dependent on other suppliers for certain other aircraft parts. Therefore, if the Company is unable to acquire additional aircraft at acceptable prices from Boeing or Airbus, or if Boeing or Airbus fails to make timely deliveries of aircraft (whether as a result of any failure or delay in obtaining regulatory approval or certification for new model aircraft, such as the 737 MAX 10 aircraft, which has not yet been certified, or manufacturing delays or otherwise) or to provide adequate support for its products, including with respect to the aircraft subject to firm orders under our United Next plan, the Company's operations could be materially and adversely affected. The Company is also dependent on a limited number of suppliers for engines and certain other aircraft parts and could, therefore, also be materially and adversely affected in the event of the unavailability or increased cost of these engines and other aircraft parts.
Disruptions to our regional network and United Express flights provided by third-party regional carriers could adversely affect our business, operating results and financial condition.
While the Company has contractual relationships that are material to its business with various regional carriers to provide regional aircraft service branded as United Express that include contractually agreed performance metrics, each regional carrier is a separately certificated commercial air carrier, and the Company does not control the operations of these carriers. A number of factors may impact the Company's regional network, including weather-related effects, seasonality, equipment or software failures and cybersecurity attacks and any significant declines in demand for air travel services, including as a result of the COVID-19 pandemic.
In addition, the decrease in qualified pilots driven primarily by changes to federal regulations has adversely impacted and could continue to affect the Company's regional flying. For example, the FAA's expansion of minimum pilot qualification standards, including a requirement that a pilot have at least 1,500 total flight hours, as well as the FAA's revised pilot flight and duty time requirements under Part 117 of the Federal Aviation Regulations, have contributed to a smaller supply of pilots available to regional carriers. The decrease in qualified pilots resulting from the regulations as well as other factors, including a decreased student pilot population and a shrinking U.S. military from which to hire qualified pilots, has led to increased competition from large, mainline carriers attempting to meet their hiring needs and has adversely impacted our regional carriers. Our regional partners have been unable to hire adequate numbers of pilots to meet their needs, resulting in a reduction in the number of flights offered, disruptions in scheduled flights, increased costs of operations, financial difficulties and other adverse effects and these circumstances may become more severe in the future and thereby cause a material adverse effect on our business. In response, the Company has been and may in the future be required to provide additional financial compensation and other support to its regional carriers or reduce its regional carrier flying, which could require the Company to fly routes at a greater cost, reduce the number of destinations the Company is able to serve or lead to negative public perceptions of the Company.
Disruptions to our regional networks as a result of the COVID-19 pandemic, pilot shortage or other factors could adversely affect our business, operating results and financial condition.
Unfavorable economic and political conditions, in the United States and globally, may have a material adverse effect on our business, operating results and financial condition.
The Company's business and
operating results
of operations.The Company’s business and results of operations are significantly impacted by U.S. and global economic and industrypolitical 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 Company’s 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 Company’s operating results and its ability to achieve its business objectives.
Robust demand for the Company’sCompany's 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. Short-haul travelers, in particular, have the option to replace air travel with surface travel. In addition, during periods of unfavorable economic conditions, business travelers usually reducehistorically have reduced the volume of their travel, either due to cost-saving initiatives, the replacement of travel with alternatives such as videoconferencing or as a result of decreased business activity requiring travel. In addition, an increase in price levels generally or in price levels in a particular sector (such as current inflation related to domestic and global supply chain issues, which has
led to both overall price increases and pronounced price increases in certain sectors) could result in a shift in consumer demand away from both leisure and business travel. During such periods, the
Company’sCompany's business and
operating results
of operationshave been and may
in the future be adversely
affected due to significantaffected. Significant declines in industry passenger demand, particularly with respect to the
Company’sCompany's business and premium cabin travelers and a reduction in fare
levels.Stagnantlevels, could lead to a material reduction in revenue, changes to the Company's operations and deferrals of capital expenditure and other spending. Additionally, any deterioration in global trade relations, such as increased tariffs or weakening global economic conditions eitherother trade barriers, could result in a decrease in the United Statesdemand for international air travel.
The Company's business relies extensively on third-party service providers, including certain technology providers. Failure of these parties to perform as expected, 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 Company’s revenues, results of operations and liquidity. If such economic conditions were to disrupt capital marketsinterruptions in the
future,Company's relationships with these providers or their provision of services to 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.In June 2016, United Kingdom (“UK”) voters voted for the UK to exit the EU. The UK parliament voted in favor of allowing the government to commence negotiations to determine the future terms of the UK’s relationship with the EU, including the terms of trade between the UK and the EU and other nations. A process of negotiation is now taking place to determine the future terms of the UK’s relationship with the EU. Depending on the outcome of these negotiations, we could face new challenges in our operations, such as 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 Company’s 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 Company’s 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.
Company's business, operating results and financial condition.
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 airport ground services, aircraft fueling operations and catering services, among other vital functions and services. Although generally the Company enters into agreements that define expected service performance and compliance requirements, there can be no assurance that our third-party service providers will adhere to these requirements. Accordingly, any of these third-party service providers may materially fail to meet its service performance commitments to the Company or may suffer disruptions to its systems that could impact its services. For example, failures in certain third-party technology or communications systems may cause flight delays or cancellations. The failure of any of the Company's third-party service providers to perform their service obligations adequately, or other interruptions of services, may reduce the Company's 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 our brand. We may also be subject to consequences from any illegal conduct of our third-party service providers, including for their failure to comply with anti-corruption laws, such as the U.S. airline industry is characterized by substantial price competition including fromlow-cost carriers. Foreign Corrupt Practices Act. In addition, the Company's business and financial performance could be materially harmed if its customers believe that its services are unreliable or unsatisfactory.
The significant market presence oflow-cost carriers, which engage in substantial price discounting,Company may diminish our ability to achieve sustained profitability on domestic and international routes.
Airlines also compete for market share by increasinghave disagreements with such providers or decreasing their capacity, including route systems andsuch contracts may be terminated or may not be extended or renewed. For example, the number of markets served. Several offlight reservations booked through third-party GDSs or OTAs may be adversely affected by disruptions in the Company’s domestic and international competitors have increased their international capacity by including service to some destinations thatbusiness relationships between the Company currently serves, causing overlapand these suppliers. Such disruptions, including a failure to agree upon acceptable contract terms when contracts expire or otherwise become subject to renegotiation, may cause the Company's flight information to be limited or unavailable for display by the affected GDS or OTA operator, significantly increase fees for both the Company and GDS/OTA users and impair the Company's relationships with its customers and travel agencies. Any such disruptions or contract terminations may adversely impact our operations and financial results.
If we are not able to negotiate or renew agreements with third-party service providers, or if we renew existing agreements on less favorable terms, our operations and financial results may be adversely affected.
Extended interruptions or disruptions in destinations served and therefore increasing competition for those destinations. This increased competition in both domestic and international markets mayservice at major airports where we operate could have a material adverse effectimpact on our operations, and space, facility and infrastructure constraints at our hubs or other airports may prevent the Company from maintaining existing service and/or implementing new service in a commercially viable manner.
The airline industry is heavily dependent on business models that concentrate operations in major airports in the United States and throughout the world. An extended interruption or disruption at one of our hubs or other airports where we have a significant presence resulting from ATC delays, weather conditions, natural disasters, growth constraints, relations with third-party service providers, failure of computer systems, disruptions to government agencies or personnel (including as a result of government shutdowns), disruptions at airport facilities or other key facilities used by us to manage our operations, labor relations, power supplies, fuel supplies, terrorist activities, international hostilities or otherwise could result in the cancellation or delay of a significant portion of our flights and, as a result, could have a material impact on our business, operating results and financial condition. We have a significant portion of our maintenance operations at our SFO airport hub and any disruption or interruption at our SFO hub could have a serious impact on our overall operations. We have minimal control over the operation, quality or maintenance of these services or whether vendors will improve or continue to provide services that are essential to our business.
In addition, as airports around the world become more congested, space, facility and infrastructure constraints at our hubs or other airports may prevent the Company from maintaining existing service and/or implementing new service in a commercially viable manner because of a number of factors, including capital improvements at such airports being imposed by the relevant airport authority without the Company's approval. Capital spending projects of airport authorities currently underway and
additional projects that we expect to commence over the next several years is expected to result in increased costs to airlines and the traveling public that use those facilities as the airports seek to recover their investments through increased rental, landing and other facility costs. These actions have caused and may continue to cause the Company to experience increased space rental rates at various airports in its network, including a number of our hubs and gateways, and increased operating costs. Furthermore, the Company is not able to control decisions by other airlines to reduce their capacity, causing certain fixed airport costs to be allocated among fewer total flights and resulting in increased landing fees and other costs for the Company.
Geopolitical conflict, terrorist attacks or security events may adversely affect our business, financial condition and results of operations.
As a global business with operations outside of the United States from which it derives significant operating revenues, volatile conditions in certain international regions may have a negative impact on the
Company’sCompany's operating results
and its ability to achieve its business objectives. The Company's international operations are a vital part of
operations, financial condition or liquidity.its worldwide airline network. Political disruptions and instability in certain regions have negatively impacted the demand and network availability for air travel, as well as fuel prices, and may continue to have a negative impact on these and other items. Terrorist attacks or international hostilities, or the fear of terrorist attacks or hostilities, even if not made on or targeted 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 Company’s 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 theFAA-imposed temporary grounding of the U.S. airline industry’s 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 onat the airline industry, or the fear of or the precautions taken in anticipation of such attacks (including elevated national threat warnings, travel restrictions, or selective cancellation or redirection of flights)flights and new security regulations) could materially and adversely affect the Company and the airline industry. WarsThe Company's financial resources and other international hostilities could also have a material adverse impact on the Company’s financial condition, liquidity and results of operations. The Company’s financial resourcesinsurance coverage may not be sufficient to absorb the adverse effects of any future terrorist attacks, international hostilities or other international hostilities.
Increasing privacysecurity events, which could have a material adverse impact on the Company's financial condition, liquidity and data security obligationsoperating results. In addition, due to threats against the aviation industry, the Company has incurred, and may continue to incur, significant expenditures to comply with security-related requirements to mitigate threats and protect the safety of our employees and customers.
Any damage to our reputation or a significant data breach maybrand image could adversely affect the Company’sour business or financial results.
We operate in a public-facing industry and maintaining a good reputation is critical to our business.
The Company is subject to increasing legislative, regulatory and customer focus on privacy issues and data security. Also, a number of the Company’s 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 mayCompany's reputation or brand image could be difficult to meet and could increase the Company’s 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 Company’sadversely impacted by any failure to meet its obligations could result in legal claims or proceedings, liability or regulatory penalties. A significant data breach or the Company’smaintain satisfactory practices for all of our operations and activities, any failure to meet its obligations mayachieve and/or make progress toward our environmental and sustainability goals or our diversity, equity and inclusion goals, public pressure from investors or policy groups to change our policies, customer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs, or customer perceptions of statements made by us, our employees and executives, agents or other third parties. Damage to our reputation or brand image or loss of customer confidence in our services could adversely affect the Company’s reputation,our business results of operations and financial condition.
results, as well as require additional resources to rebuild our reputation.
Information Technology, Cybersecurity and Data Privacy Risks
The Company relies heavily on technology and automated systems to operate its business and any significant failure or disruption of,
the technology or
failure to effectively integrate and implement, these
technologies or systems could materially harm its business.
The Company depends on technology and automated systems and technology to operate its business, including, but not limited to, computerized airline reservation systems, electronic tickets, electronic airport kiosks, demand prediction software, flight operations systems, revenue management systems, accounting systems, telecommunicationin-flight wireless internet, cloud-based technologies, technical and business operations systems and commercial websites and applications, including www.united.com. United’s websitewww.united.com 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.the United Airlines mobile app. These systems could suffer substantial or repeated disruptions due to various events, some of which are beyond the Company’sCompany's control including(including natural disasters, power failures, terrorist attacks, dependencies on third-party technology services, equipment or software failures, computer virusescybersecurity attacks or cyberother security attacks. Substantial or repeated systems failures or disruptions, including failures or disruptions related tobreaches and the Company’s complex integrationdeployment by certain wireless carriers of systems,new "5G" service networks), which could reduce the attractiveness of the Company’sCompany's services versus those of itsour competitors, materially impair itsour ability to market itsour services and operate itsour flights, result in the unauthorized release of confidential or otherwise protected information, negatively impact our reputation among our customers and the public, subject us to liability to third parties, regulatory action or contract termination and result in other increased costs, lost revenue and the loss or compromise of important data, anddata. As a result, substantial or repeated systems failures or disruptions may adversely affect the Company’sCompany's business, operating results and financial condition. We have resiliency initiatives and disaster recovery plans in place to prevent and mitigate disruptions, and we continue to invest in improvements to these initiatives and plans. We also maintain property and business interruption insurance. However, these measures may not be adequate to prevent or mitigate disruptions or provide coverage for all of the Company's associated costs.
The Company may also face challenges in implementing, integrating and modifying the automated systems and technology required to operate its business, which may require significant expenditures, human resources, the development of effective
internal controls and the transformation of business and financial processes. If the Company is unable to timely or effectively implement, integrate or modify its systems and technology, the Company's operations could be adversely affected.
Increasing privacy and data security obligations or a significant data breach may adversely affect the Company's business.
In our regular business operations, we collect, process, store and transmit to commercial partners sensitive data, including personal information of our customers and employees such as payment processing information and information of our business partners, to provide our services and operate our business.
The Company must manage increasing legislative, regulatory and consumer focus on privacy issues, data security and cybersecurity risk management in a variety of jurisdictions across the globe. For example, the EU's General Data Protection Regulation imposes significant privacy and data security requirements, as well as potential for substantial penalties for non-compliance that have resulted in substantial adverse financial consequences to non-compliant companies. Also, some of the Company's commercial partners, such as credit card companies, have imposed data security standards that the Company must meet. The Company will continue its efforts to meet its privacy, data security and cybersecurity risk management obligations; however, it is possible that certain new obligations or customer expectations may be difficult to meet and could require changes in the Company's operating processes and increase the Company's costs.
Additionally, the Company must manage the increasing threat of continually evolving cybersecurity risks. Our network, systems and storage applications, and those systems and applications maintained by our third-party commercial partners (such as credit card companies, our regional carriers and international airline partners) may be subject to attempts to gain unauthorized access, breach, malfeasance or other system disruptions, including those involving criminal hackers, denial of service attacks, hacktivists, state-sponsored actors, corporate espionage, employee malfeasance and human or technological error. In some cases, it is difficult to anticipate or to detect immediately such incidents and the damage caused thereby. In addition, as attacks by cybercriminals become more sophisticated, frequent and intense, the costs of proactive defense measures have increased and may continue to increase. In addition, several large organizations recently have been affected by "ransomware" attacks, and these highly publicized events may embolden individuals or groups to target our systems or the third party systems on which we rely. Furthermore, the Company's remote work arrangements make it more vulnerable to targeted activity from cybercriminals and significantly increase the risk of cyberattacks or other security breaches. While we continually work to safeguard our network, systems and applications, including through risk assessments, system monitoring, cybersecurity and data protection security policies, processes and technologies and employee awareness and training, and require third-party security standards, there is no assurance that such actions will be sufficient to prevent cyberattacks or data breaches.
Any such cyberattacks or data breaches could result in significant costs, including monetary damages, operational impacts, including service interruptions and delays, and reputational harm. Furthermore, the loss, disclosure, misappropriation of or access to sensitive Company information, customers', employees' or business partners' information or the Company's failure to meet its privacy obligations could result in legal claims or proceedings, penalties and remediation costs. A significant data breach or the Company's failure to meet its obligations may adversely affect the Company's operations, reputation, relationships with our business partners, business, operating results and financial condition.
Increased use of social media platforms present risks and challenges.
We are increasing our use of social media to communicate Company news and events. The inappropriate and/or unauthorized use of certain media vehicles could cause brand damage or information leakage or could lead to legal implications, including from the improper collection and/or dissemination of personally identifiable information from employees, customers or other stakeholders. In addition, negative or inaccurate posts or comments about us on any social networking website could damage our reputation, brand image and goodwill. Further, the disclosure of non-public Company-sensitive information by our workforce or others, whether intentional or unintentional, through external media channels could lead to information loss.
Human Capital Management Risks
Union disputes, employee strikes or slowdowns, and other labor-related disruptions could adversely affect the Company's operations and could result in increased costs that impair its financial performance.
United is a highly unionized company. As of December 31, 2021, the Company and its subsidiaries had approximately 84,100 employees, of whom approximately 85% were represented by various U.S. labor organizations (See Part I, Item 1. Business—Human Capital Management and Resources, of this report for additional information on our represented employee groups and collective bargaining agreements). 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 Company's 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. Similarly, if the operations of our third-party regional carriers, ground handlers or other vendors are impacted by labor-related disruptions, our operations could be adversely affected. In addition, collective bargaining agreements with the Company's represented employee groups increase the Company's labor costs, and such costs could become material.
If we are unable to attract, train or retain skilled personnel, including our senior management team or other key employees, our business could be adversely affected.
Much of our future success is largely dependent on our continued ability to attract, train and retain skilled personnel with industry experience and knowledge, including our senior management team and other key employees. Competition for qualified talent in the aviation industry is intense, especially during the COVID-19 pandemic, and the tight labor markets have led to operational challenges that we expect to continue during 2022. If we are unable to attract, train and retain talented, highly qualified employees or experience a shortage of skilled labor, the cost of hiring and retaining quality talent could materially increase and our operations could continue to be impacted, which could impair our ability to adjust capacity or otherwise execute our strategic operating plan. In addition, if we are unable to effectively provide for the succession of senior management or other key employees, our business, ability to execute our strategic operating plan or company culture may be adversely affected.
Regulatory, Tax, Litigation and Legal Compliance Risks
The airline industry is subject to extensive government regulation, which imposes significant costs and may adversely impact our business, operating results and financial condition.
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.
United provides air transportation under certificates of public convenience and necessity issued by the DOT. If the DOT modified, suspended or revoked these certificates, it could have a material adverse effect on the Company's business. The DOT also regulates consumer protection and, through its investigations or rulemaking authority (including, for example, any rulemakings or initiatives in response to the Executive Order on Promoting Competition in the American Economy issued by the President on July 9, 2021), could impose restrictions that materially impact the Company's business. United also operates pursuant to an air carrier operating certificate issued by the FAA, and FAA orders and directives have previously resulted in the temporary grounding of an entire aircraft type when the FAA identifies design, manufacturing, maintenance or other issues requiring immediate corrective action (including the FAA Emergency Airworthiness Directive grounding our Boeing 777 Pratt & Whitney powered aircraft), which has had an effect that has been material to the Company's business, operating results and financial condition.
In 2018, the U.S. Congress approved a five-year reauthorization for the FAA, which encompasses a range of policy issues related to aviation tax, airline customer service and aviation safety. Depending on how the issues are implemented, our operations and costs could be materially impacted. Additionally, the U.S. Congress may consider legislation related to environmental issues or increases to the U.S. federal corporate income tax rate, as outlined in the proposed Build Back Better Act or otherwise, which could negatively impact the Company and the airline industry.
The Company's operations may also be adversely impacted due to the existing antiquated ATC system utilized by the U.S. government and regulated by the FAA, which may not be able to effectively handle projected future air traffic growth. The outdated ATC system has led to short-term capacity constraints imposed by government agencies and has resulted in delays and disruptions of air traffic during peak travel periods in certain markets due to its inability to handle demand and reduced resiliency in the event of a failure causing flight cancellations and delays. 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 Company's financial condition or operating results.
Access to slots at several major U.S. airports and many foreign airports served by the Company is subject to government regulation on airspace management and competition that might limit the number of slots or change the rules on the use and transfer of slots. If slots are eliminated at one of our hubs or other airports, or if the number of hours of operation governed by slots is reduced at an airport, the lack of controls on take-offs and landings could result in greater congestion both at the affected airport and in the regional airspace and could significantly impact the Company's operations. Similarly, a government or regulatory agency, including DOT, could choose to impose slots at one of our hubs or other airports or grant increased access to another carrier and limit or reduce our operations at an airport, whether or not slot-controlled, which could have significant impact on our operations. The DOT (including FAA) may limit the Company's airport access by limiting the number of
departure and arrival slots at congested airports, which could affect the Company's ownership and transfer rights, and local airport authorities may have the ability to control access to certain facilities or the cost to access their facilities, which could have an adverse effect on the Company's business. If the DOT were to take actions that adversely affect the Company's slot holdings, the Company could incur substantial costs to preserve its slots or may lose slots.
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. Applicable arrangements between the United States and foreign governments (such as Open Skies) 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, which could have a material adverse impact on the Company's financial condition and operating results and could result in the impairment of material amounts of related tangible and intangible assets. For instance, the COVID-19 pandemic has resulted in increased regulatory burdens in the U.S. and around the globe, which include closure of international borders to flights and/or passengers from specific countries, passenger and crew quarantine requirements and other regulations promulgated to protect public health but that have had and may continue to have a negative impact on travel and airline operations.
In addition, disruptions to the Company's business could result from the deployment by certain wireless carriers of new "5G" cellular networks, which, due to potential interference with aircraft systems, could cause flights to be cancelled or diverted, which in turn could affect consumer perceptions of the safety of air travel. Thus far, regulators have addressed potential "5G" interference on a temporary and piecemeal basis tailored to specific aircraft and airports and uncertainty over the nature, extent, timing and duration of limitations on aircraft operations as a result of "5G" deployment is anticipated to continue over the near term. Systematic regulation of "5G" cellular networks may not occur in the near term, or may not involve terms that are favorable to the Company.
In addition, competition from revenue-sharing JBAs and other alliance arrangements by and among other airlines could impair the value of the Company's business and assets on the Open Skies routes. The Company's plans to enter into or expand U.S. antitrust immunized alliances and JBAs on various international routes are subject to receipt of approvals from applicable U.S. federal authorities and other applicable foreign government clearances or satisfaction of other 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.
See Part I, Item 1. Business—Industry Regulation, of this report for additional information on government regulation impacting the Company.
Current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or
arrangementagreement 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 3,3. Legal Proceedings, of this report. In addition, the Company is subject to an increased risk of litigation and other proceedings as a result of the COVID-19 pandemic and responsive measures. For example, the Company is involved in litigation relating to its vaccination requirements for employees. 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 operating results, of operations, including as a result ofnon-monetary remedies, and could also result in adverse publicity. 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 management’smanagement's 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. Any of these payments may be material.
We are subject to many forms of environmental regulation and liability and risks associated with climate change and may incur substantial costs as a result. In addition, failure to achieve or demonstrate progress towards our climate goals may expose us to liability and reputational harm.
Many aspects of the Company's operations are subject to increasingly stringent federal, state, local and international laws protecting the environment, including those relating to water discharges, safe drinking water and the use and management of
hazardous materials and wastes. Compliance with existing and future environmental laws and regulations can require significant expenditures and operational changes and violations can lead to significant fines and penalties and reputational harm. In addition, from time to time we are identified as a responsible party for environmental investigation and remediation costs under applicable environmental laws due to the disposal of hazardous substances generated by our operations. We could also be subject to environmental liability claims from various parties, including airport authorities and other third parties, related to our operations at our owned or leased premises or the off-site disposal of waste generated at our facilities.
As discussed in Part I, Item 1. Business—Environmental, Social and Governance Approach and Highlights—Climate Strategy, the Company has made several commitments regarding its intended reduction of carbon emissions, including becoming 100% green by eliminating its GHG emissions by 2050 and by reducing its carbon intensity by 50% by 2035 compared to 2019. The Company has incurred, and expects to continue to incur, costs to achieve its goal of net zero carbon emissions and to comply with environmental sustainability legislation and regulation and non-binding standards and accords. Such activity may require the Company to modify its supply chain practices, make capital investments to modify certain aspects of its operations or increase its operating costs (including fuel costs). The precise nature of future binding or non-binding legislation, regulation, standards and accords, which is an increased focus of global, national and regional regulators, is difficult to predict and the financial impact to the Company would likely be significant if future legal standards do not align with the Company's plans to achieve its climate goals or if proposed U.S. legislation to accelerate the production of SAF development fails to be enacted into law. For instance, CORSIA-related costs cannot be fully predicted at this time, but the program is expected to increase operating costs for airlines that operate internationally. There is also a risk that the increased regulatory focus on airline GHG emissions could result in a patchwork of inconsistent or conflicting regional requirements that could unduly shift excessive cost burden to airlines and inhibit the development of carbon reduction technologies that the Company needs to reach its climate goals.
There can be no assurance
of the extent to which any of our climate goals will be achieved or that any
future investments that we make in furtherance of
these paymentsachieving our climate goals will
not be material.Disruptions toproduce the Company’s regional networkexpected results or meet increasing stakeholder environmental, social and United Express flights provided by third-party regional carriersgovernance expectations. Moreover, future events could adversely affect the Company’s operations and financial condition.
The Company has contractual relationships with various regional carriers to provide regional aircraft service branded as United Express. These regional operations are an extension of the Company’s mainline network and complement the Company’s operations by carrying traffic that connects to mainline service and allows flights to smaller cities that cannot be provided economically with mainline aircraft. The Company’s business and operations are dependent on its regional flight network, with regional capacity accounting for approximately 11% of the Company’s total capacity for the year ended December 31, 2017.
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 Company’s 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 Company’s regional flying. For example, the FAA’s expansion of minimum pilot qualification standards, including a requirement that a pilot have at least 1,500 total flight hours, as well as the FAA’s 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 Company’s operations and financial condition, and also requirelead the Company to reduce regional carrier flying.
If a significant disruption occurs to the Company’s regional networkprioritize other nearer-term interests over progressing toward our current climate goals based on business strategy, economic, regulatory and social factors, business strategy 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 Company’s business, financial condition and operations.
The Company’s business relies extensively on third-party service providers. Failure of these parties to perform as expected, or interruptions in the Company’s relationships with these providers or their provision of services to the Company, could have an adverse effect on the Company’s 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
fueling operations, and catering services, 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 Company’s flight information to be limited or unavailable for display, significantly increase fees for both the Company and GDS users and impair the Company’s relationships with its customers and travel agencies. The failure of any of the Company’s third-party service providers to perform their service obligations adequately,potential pressure from investors, activist groups or other interruptions of services, may reduce the Company’s 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 Company’s 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 Company’s 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 Company’s 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, 2017, the Company had firm commitments to purchase 228 new aircraft from The Boeing Company (“Boeing”) and Airbus S.A.S (“Airbus”), as well as related agreements with engine manufacturers, maintenance providers and others. At December 31, 2017, the Company’s commitments relating to the acquisition of aircraft and related spare engines, aircraft improvements and other related obligations aggregated to a total of $22.2 billion.
Subsequent to the Company placing an order for new aircraft, the Company’s route network may change, such that the aircraft on order become less economic to operate flights in the Company’s network. As a result, the Company’s 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 or its operations, the aircraft or operations of its regional carriers or the aircraft or operations of its codeshare partners, which may result in a material adverse effect on the Company’s 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 Company’s regional carriers, or an incident involving the Company’s operations, could have a material adverse effect on the Company if such accident, catastrophe, or incident created a public perception that the Company’s 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 Company’s brand and reduce travel demand on the Company’s 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 Company’s codeshare partners and regional carriers carry similar insurance and generally indemnify the Company for their operations, if the Company’s 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 Company’s 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.stakeholders. If we are unable to attractmeet or properly report on our progress toward achieving our climate change goals and retain talented, highly qualified senior managementcommitments, we could face adverse publicity and reactions from other investors, activist groups, or other stakeholders, which could result in reputational harm or other adverse effects to the Company.
The Company is likely to incur substantial costs and operational disruptions as a result of increases in the frequency, severity or duration of severe weather events caused by climate change (including thunderstorms, hurricanes, flooding, typhoons, tornados and other key employees,severe weather events) that could result in increases in delays and cancellations, turbulence-related injuries and fuel consumption to avoid such weather, any of which could result in significant loss of revenue and higher costs. In addition, we could incur significant costs to improve the climate resiliency of our infrastructure and supply chain and otherwise prepare for, respond to, and mitigate the effects of climate change. We are not able to predict accurately the materiality of any potential losses or if we are unable to effectively providecosts associated with the effects of climate change.
See Part I, Item 1. Business—Industry Regulation—Environmental Regulation, of this report for
additional information on environmental regulation impacting the
succession of senior management, our business may be adversely affected.Company.
Market, Liquidity, Accounting and Financial Risks
High and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel could have a material adverse impact on the
Company’sCompany's strategic plans, operating results, financial
positioncondition and liquidity.
Aircraft fuel is critical to the
Company’sCompany's operations and is one of
its singleour largest operating expenses.
During the year ended December 31, 2021, the Company's fuel expense was approximately $5.8 billion. 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
depends significantly on the continued performance of its vendors and service providers to maintain supply integrity. Consequently, the Company can neither predict nor guarantee the continued timely availability of aircraft fuel throughout the
Company’sCompany's system.
The Company generally sources fuel at prevailing market prices.Aircraft fuel has historically been the Company’sCompany's most volatile operating expense due to the highly unpredictable nature of market prices for fuel. MarketThe Company generally sources fuel at prevailing market prices, for aircraft fuelwhich have historically fluctuated substantially in short periods of time and continue to be highly volatile due to a dependence on a multitude of unpredictable factors beyond the Company’s control. These factors includeCompany's control, including 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,
changes in regulations, environmental concerns and financial investments in energy markets. Both actual changes in these factors, as well as changes in
related market expectations,
of these factors can potentially drive rapid changes in fuel
price levelsprices in short periods of time.
Rising fuel prices can also lead to constraints on the Company's regional partners, reduced capital available for other spending or other outcomes that could adversely impact the Company.
Given the highly competitive nature of the airline industry, the Company
has not been able to previously, and may not be able to
in the future, 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, any such fare
andor fee
increasesincrease may not be sustainable, may reduce the general demand for air travel and may also eventually impact the
Company’sCompany's operations, 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.surcharges. 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 Company does not currently hedge its future fuel requirements. However, to the market prices of fuel,extent the Company maydecides to start a hedging program to hedge a portion of its future fuel requirements. However, the Company’srequirements, such hedging program may not be successful in mitigating higher fuel costs and any price protection provided may be limited due to the 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 usesuse 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 Company’sCompany's ability to benefit fully from lower fuel costsprices 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 Company’sCompany's hedging arrangements, willif any, would provide any particular level of protection against rises in fuel prices or that its counterparties will be able to perform under the Company’sCompany's hedging arrangements.
Additionally, deterioration in the Company’sCompany's financial condition could negatively affect its ability to enter into new hedge contracts in the future.
Union disputes, employee strikes or slowdowns, and other labor-related disruptions could adversely affect the Company’s operations and could result in increased costs that impair its
The Company has a significant amount of financial
performance.United is a highly unionized company. As of December 31, 2017, the Company and its subsidiaries had approximately 89,800 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 Company’s 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 Company’s represented employee groups increase the Company’s labor costs, which increase could be material for any applicable reporting period.
An outbreak of a disease or similar public health threat could have a material adverse impact on the Company’s business, financial position and results of operations.
An outbreak of a disease or similar public health threat that affects travel demand, travel behavior, or travel restrictions could have a material adverse impact on the Company’s business, financial condition and results of operations.
Extensive government regulation could increase the Company’s 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 costsleverage from fixed obligations 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 Company’s business. The FAA regulates the safety of United’s operations. United operates pursuant to an air carrier operating certificate issued by the FAA. In 2014, the FAA’s 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. Additionally, 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 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 2018, 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 Company’s operations and costs.
In addition, the Company’s 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 system’s 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 Company’s 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 Company’s financial condition or results of operations.
Access to landing andtake-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 Company’s 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 Company’s airport access by limiting the number of departure and arrival slots at high density traffic airports, which could affect the Company’s 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 Company’s 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 Company’s 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 Company’s operations. Further, the Company’s operating costs at airports, including the Company’s 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 Company’s approval and may have a material adverse effect on the Company’s financial condition.
Many aspects of the Company’s 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.
See Part I, Item 1, Business—Industry Regulation, of this report for additional information on government regulation impacting the Company.
Extensive government regulation on international routes could restrict the Company’s ability to conduct its business and have a material adverse effect on the Company’s financial position and results of operations.
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 Company’s financial position and results of operations. Additionally, a change in law, regulation or policy for any of the Company’s international routes, such as Open Skies, could have a
material adverse impact on the Company’s financial position and results of operations and could result in the impairment ofseek 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 Company’s business and assets on the Open Skies routes. The Company’s 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.
See Part I, Item 1, Business—Industry 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 occurfinancial liquidity in the future, especially if new “Open Skies” agreements between Brazilshort-term, 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 Company’s ability to realize expected benefits from its own strategic relationships.
Insufficientinsufficient liquidity may have a material adverse effect on the Company’sCompany's financial positioncondition and business.
The Company has a significant amount of financial leverage from fixed obligations, including aircraft lease and debt financings, leases of airport property,
secured bonds, secured loan facilities 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
and used aircraft and related spare engines.
Although the Company’s 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 Company’s future liquidity could be negatively affected by the risk factors discussed in this report, 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 Company’sCompany's liquidity is materially diminished, due to the various risk factors noted in this report,Company's substantial level of indebtedness, the Company's non-investment grade credit ratings and the lack of availability of Company assets as collateral for loans or otherwise,other indebtedness may make it difficult for the Company mightto raise additional capital if needed to meet its liquidity needs on acceptable terms, or at all, and the Company may not be able to timely pay its leases and debts or comply with certain operating and financialmaterial provisions of its contractual obligations, including covenants under its financing and credit card processing agreements.
In addition to the foregoing, the degree to which we are leveraged could have important consequences to holders of our securities, including the following: (1) we must dedicate a substantial portion of cash flow from operations to the payment of principal and interest on applicable indebtedness, which, in turn, reduces funds available for operations and capital expenditures; (2) our flexibility in planning for, or reacting to, changes in the markets in which we compete may be limited; (3) we may be at a competitive disadvantage relative to our competitors with less indebtedness; (4) we are rendered more vulnerable to general adverse economic and industry conditions; (5) we are exposed to increased interest rate risk given that a portion of our indebtedness obligations are at variable interest rates; and (6) our credit ratings may be reduced and our debt and equity securities may significantly decrease in value.
See Part II, Item 7., Management's Discussion and Analysis of Financial Condition and Results of Operations, of this report for additional information regarding the Company's liquidity.
Agreements governing our debt include financial and other covenants. Failure to comply with these covenants could result in events of default.
Our financing agreements or withinclude various financial and other material provisions of its contractual obligations.covenants. Certain of these covenants require the CompanyUAL or United, as applicable, to maintain minimum liquidity and/or minimum collateral coverage ratios. The Company’sUAL's or United’sUnited's 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. In addition, our financing agreements contain other negative covenants
customary for such financings. If the Company does not timely pay its leases and debts orwe fail to comply with suchthese covenants and are unable to remedy or obtain a variety of adverse consequences could result. These potential adverse consequences includewaiver or amendment, 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 eventsevent of default underwould result.
If an event of default were to occur, the
relevant agreements, the acceleration of the maturity of debt and/or the exercise oflenders could, among other
remedies by its creditorsthings, declare outstanding amounts immediately due and
equipment lessors that could result in a material adverse effect on the Company’s 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.payable. In addition, an event of default or
declaration of acceleration
of debt under
certain of itsone financing
agreementsagreement could
also result in
one or more eventsan event of default under
certainother of
the Company’s otherour financing agreements due to
cross defaultcross-default and
crosscross-acceleration provisions. The acceleration
provisions.Furthermore, insufficient liquidity may limitof significant amounts of debt could require us to renegotiate, repay or refinance the Company’s abilityobligations under our financing arrangements, and there can be no assurance that we will be able to withstand competitive pressures and downturns in the travel business and the economy in general.
The Company’s substantial level of indebtedness andnon-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 needsdo so on acceptablecommercially reasonable terms or at all.
See Part II, Item 7, Management’s Discussion
The MileagePlus Financing agreements in particular contain stringent covenants, limit our flexibility to manage our capital structure and
Analysislimit our ability to make financial and operational changes to the MileagePlus program. If we were to default under the MileagePlus Financing agreements, the lenders' exercise of
Financial Condition and Resultsremedies could result in our loss of
Operations, of this report for additional information regarding the
Company’s liquidity.Increases in insurance costs or reductions in insurance coverage may materially and adversely impact the Company’sMileagePlus program, which would have a material adverse effect on our business, results of operations and financial condition.
As a result we may take actions to ensure that the MileagePlus Financing debt is satisfied or that the lenders' remedies under such debt are not exercised, potentially to the detriment of our other creditors.
The proposed phase out of the London interbank offer rate could have a material adverse effect on us.
There is currently uncertainty around the phase out of London interbank offered rates ("LIBOR"). As of December 31, 2021, the Company could be exposedhad $13.0 billion in variable rate indebtedness, all or a portion of which uses LIBOR as a benchmark for establishing applicable rates. In July 2017, the United Kingdom regulator that regulates LIBOR announced its intention to significant liabilityphase out LIBOR rates by the end of 2021. However, the ICE Benchmark Administration, in its capacity as administrator of USD-LIBOR, has announced that it intends to extend publication of USD LIBOR (other than one-week and two-month tenors) by 18 months to June 2023. Notwithstanding this possible extension, a joint statement by key regulatory authorities calls on banks to cease entering into new contracts that use USD-LIBOR as a reference rate by no later than December 31, 2021. The Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has proposed replacing USD-LIBOR with a new index calculated by short-term repurchase agreements - the Secured Overnight Financing Rate ("SOFR"). At this time, uncertainty remains as to what rate or loss if its property or operations wererates may become accepted alternatives to LIBOR, and it is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR and whether LIBOR rates presently expected to be affectedpublished until June 2023 will cease to be so published or supported before or after such time. We have issued variable rate debt based on LIBOR and have undertaken interest rate swaps that contain a variable element based on LIBOR. While many of our LIBOR-based obligations provide for alternative methods of calculating the interest rate payable if LIBOR is not reported, the extent and manner of any future changes with respect to methods of calculating LIBOR or replacing LIBOR with another benchmark remain uncertain and impossible to predict at this time, and changes to implement a replacement benchmark may require renegotiation of relevant agreements. We have also entered into certain agreements that look to SOFR as an alternative interest rate method to LIBOR, with the potential for spread adjustments, and we cannot predict what the impact of these agreements and any transition to or use of SOFR could have on us. Although SOFR appears to be the preferred replacement rate for USD LIBOR at this time, if the financial market coalesces around an alternative benchmark rate method to LIBOR that is different than SOFR, we may need to renegotiate these agreements. We may be negatively impacted by renegotiated terms in connection with any replacements to LIBOR as a benchmark, which may adversely affect our interest rates and result in higher borrowing costs that we cannot predict. In addition, the phase out or replacement of LIBOR could cause disruptions in the credit markets that lead to a downgrade of our current credit rating, which could increase our future borrowing costs and our cost of capital, impair our ability to access capital and credit markets on terms commercially acceptable to us and adversely affect our liquidity and capital resources.
The Company's ability to use its net operating loss carryforwards and certain other tax attributes 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, 2021, UAL reported consolidated U.S. federal net operating loss ("NOL") carryforwards of approximately $9.9 billion. The Company's ability to use its NOL carryforwards and certain other tax attributes will depend on the amount of taxable income it generates in future periods and, as a result, certain of the Company's NOL carryforwards and other tax attributes may expire before it can generate sufficient taxable income to use them in full. In addition, the Company's ability to use its NOL carryforwards and certain other tax attributes to offset future taxable income may be limited if it experiences an "ownership change" as defined in Section 382 of the Internal Revenue Code of 1986, as amended. Potential future transactions involving the sale or issuance of UAL common stock may increase the possibility that the Company will experience a future "ownership change" under Section 382. Such transactions may include the exercise of warrants issued in connection with the CARES Act programs, the issuance of UAL common stock for cash, the conversion of any future convertible debt, the
repurchase of any debt with the Company's common stock, the acquisition or disposition of any stock by a natural catastrophestockholder owning 5% or more of the outstanding shares of UAL common stock, or a combination of the foregoing.
At the Company's annual meeting of stockholders held on May 26, 2021, the Company's stockholders approved a tax benefits preservation plan (the "Plan") in order to preserve the Company's ability to use its NOLs and certain other event, including aircraft accidents.tax attributes to reduce potential future income tax obligations. The Company maintains insurance policies, including, but not limitedPlan is designed to terrorism, aviation hull and liability, workers’ compensation and property and business interruption insurance, but we are not fully insured against all potential hazards and risks incident to our business. Ifreduce the Company is unable to obtain sufficient insurance with acceptable terms or if the coverage obtained is insufficient relative to actual liability or losseslikelihood that the Company experiences whetheran "ownership change" by deterring certain acquisitions of Company securities. There is no assurance, however, that the deterrent mechanism in the Plan will be effective, and such acquisitions may still occur. In addition, the Plan may adversely affect the marketability of UAL common stock by discouraging existing or potential investors from acquiring UAL common stock or additional shares of UAL common stock because any non-exempt third party that acquires 4.9% or more of the then-outstanding shares of UAL common stock would suffer substantial dilution of its ownership interest in the Company.
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 condition and operating results.
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 where there is an indication of impairment, and certain of its other assets for impairment where there is any indication that an asset may be impaired. The Company may be required to recognize losses in the future due to, insurance market conditions, policy limitationsamong other factors, extreme fuel price volatility, tight credit markets, government regulatory changes, decline in the fair values of certain tangible or intangible assets, such as our aircraft, route authorities, airport slots and exclusionsfrequent flyer database, unfavorable trends in historical or otherwise, itsforecasted results of operations and cash flows and an uncertain economic environment, as well as other uncertainties. For example, during the fiscal year ended December 31, 2021, the Company recorded $97 million of impairments, which includes impairments resulting from current market conditions for used aircraft that are being held for sale and the decision to retire 50-seat regional aircraft as a result of the United Next order. Also in 2020, the Company recognized $130 million of impairment charges related to its China routes, which were primarily caused by the COVID-19 pandemic, the Company's subsequent suspension of flights to China and a further delay in the expected return of full capacity to the China markets. Adverse changes to our forecasted results caused by COVID-19 or other factors could require the Company to recognize additional impairments to its China route indefinite-lived intangible assets in future periods. The Company can provide no assurance that a material impairment loss of tangible or intangible assets will not occur in a future period.
The price of our common stock may fluctuate significantly.
The closing price for our common stock has varied between a high of $62.45 and a low of $39.06 in the year ended December 31, 2021. Volatility in the market price of our common stock may prevent holders from selling shares at or above the prices paid for them. The market price of our common stock could fluctuate significantly for various reasons which include: the market reaction to the COVID-19 pandemic and our responses thereto; the sale of substantial amounts of our common stock; changes in the prices or availability of oil or jet fuel; our quarterly or annual earnings or those of other companies in our industry; the public's reaction to our press releases, our other public announcements and our filings with the SEC; changes in our earnings or recommendations by research analysts who track our common stock or the stock of other airlines; changes in general conditions in the United States and global economy, financial
condition could be materiallymarkets or airline industry, including those resulting from changes in fuel prices or fuel shortages, war, incidents of terrorism, pandemics or responses to such events; changes in the competitive landscape for the airline industry, including any changes resulting from industry consolidation whether or not involving our Company; our liquidity position; and
adversely affected.the other risks described in these "Risk Factors."
In addition, in recent periods, the stock market has experienced extreme declines and volatility. This volatility has had a significant negative impact on the market price of securities issued by many companies, including us and other companies in our industry.
The
Company’sCompany's operating results
of operations fluctuate due to seasonality and other factors associated with the airline
industry.industry, many of which are beyond the Company's control.
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 Company’sCompany's operating 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, outbreaks of disease, public health issues (including global health epidemics or pandemics such as the COVID-19 pandemic as well as the potential increased government restrictions and regulation), ATC congestion, geological events, political instability, terrorism, natural disasters, changes in the competitive environment due to industry consolidation, tax obligations, general economic conditions and other factors.factors, as well as related consumer perceptions. As a result, the Company’sCompany's 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.
Major global public health issues, including pandemics such as the COVID-19 pandemic, have adversely affected, and could in the future adversely affect, the Company.
Increases in insurance costs or inadequate insurance coverage may materially and adversely impact our business, operating results and financial condition.
The Company
may never realize the full value of its intangible assets or its long-lived assets causing itmaintains insurance policies, including, but not limited to,
record impairments that may negatively affect its financial positionterrorism, aviation hull and
results of operations.In accordance with applicable accounting standards,liability, workers' compensation and property and business interruption insurance, but we are not fully insured against all potential hazards and risks incident to our business. If the Company is requiredunable 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,obtain sufficient insurance with acceptable terms, the Company is required to test certaincosts 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, 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 Company’s 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 Company’s financial position and results of operations.
The Company’s 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,such insurance increase materially, or if taxable income does not reach sufficient levels.
As of December 31, 2017, UAL reported consolidated federal net operating loss (“NOL”) carryforwards of approximately $2.4 billion.
The Company’s abilitythe coverage obtained is unable 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 (the “Code”). An ownership change generally occurs if certain stockholders increase their aggregate percentage ownership of a corporation’s stock by more than 50 percentage points over their lowest percentage ownership at any time during the testing period, whichpay or is generally the three-year period preceding any potential ownership change.
There is no assuranceinsufficient relative to actual liability or losses that the Company will not experience a future ownership change under Section 382 that may significantly limitexperiences, whether due to insurance market conditions, policy limitations and exclusions 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,otherwise, our business, operating results 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 ofpre-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 corporation’s stock immediately before the ownership change by the applicable long-termtax-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 bybuilt-in gains in the assets held by such corporation at the time of the ownership change. This limitation could cause the Company’s 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 Company’s NOL carryforwards to expire unused. Similar rules and limitations may apply for state income tax purposes. The Company’s ability to use its NOL carryforwards will also depend on the amount of taxable income it generates in future periods. The Company’s NOL carryforwards may expire before it can generate sufficient taxable income to use them in full.
The final impacts of the Tax Cuts and Jobs Actfinancial condition could be materially different from our current estimates.
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law (the “Tax Act”). The Tax Act introduced significant changes to the Code. We continue to examine the impact the Tax Act may have on our business. Notwithstanding the reduction in the federal corporate income tax rate as a result of Tax Act, the estimated impact of the new law is based on management’s current knowledge and assumptions and recognized impacts could be materially different from current estimates based upon our further analysis of the new law.
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 similarnon-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 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 U.S. Foreign Corrupt Practices Act. Furthermore, our relationships with these carriers may be subject to the laws and regulations ofnon-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. |
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
Fleet
Including aircraft operated by United’s regional carriers, United’s fleet consisted of 1,262 aircraft as
ITEM 2. PROPERTIES.
Fleet.As of December 31, 2017,2021, United's mainline and regional fleets consisted of the details of which are presented in the tables below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Aircraft Type | | Total | | | Owned | | | Leased | | | | | | Seats in Standard
Configuration | | | Average Age (In
Years) | |
Mainline: | | | | | | | | | | | | | | | | | | | | | | | | |
777-300ER | | | 14 | | | | 14 | | | | — | | | | | | | | 366 | | | | 0.7 | |
777-200ER | | | 55 | | | | 40 | | | | 15 | | | | | | | | 267-269 | | | | 17.8 | |
777-200 | | | 19 | | | | 19 | | | | — | | | | | | | | 364 | | | | 20.5 | |
787-9 | | | 21 | | | | 21 | | | | — | | | | | | | | 252 | | | | 2.1 | |
787-8 | | | 12 | | | | 12 | | | | — | | | | | | | | 219 | | | | 4.5 | |
767-400ER | | | 16 | | | | 14 | | | | 2 | | | | | | | | 242 | | | | 16.3 | |
767-300ER | | | 35 | | | | 22 | | | | 13 | | | | | | | | 183-214 | | | | 22.5 | |
757-300 | | | 21 | | | | 9 | | | | 12 | | | | | | | | 213 | | | | 15.3 | |
757-200 | | | 56 | | | | 50 | | | | 6 | | | | | | | | 142-169 | | | | 21.7 | |
737-900ER | | | 136 | | | | 136 | | | | — | | | | | | | | 179 | | | | 5.0 | |
737-900 | | | 12 | | | | 8 | | | | 4 | | | | | | | | 179 | | | | 16.3 | |
737-800 | | | 141 | | | | 77 | | | | 64 | | | | | | | | 154-166 | | | | 13.8 | |
737-700 | | | 40 | | | | 20 | | | | 20 | | | | | | | | 118-126 | | | | 18.8 | |
A320-200 | | | 99 | | | | 66 | | | | 33 | | | | | | | | 150 | | | | 19.3 | |
A319-100 | | | 67 | | | | 50 | | | | 17 | | | | | | | | 128 | | | | 16.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total mainline | | | 744 | | | | 558 | | | | 186 | | | | | | | | | | | | 14.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
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 | | | 152 | | | | 54 | | | | — | | | | 98 | | |
| SkyWest:
Mesa: Republic: |
| |
| 65
59 28 |
| | | 76 | |
Embraer 170 | | | 38 | | | | — | | | | — | | | | 38 | | | | Republic: | | | | 38 | | | | 70 | |
CRJ700 | | | 65 | | | | — | | | | — | | | | 65 | | |
| SkyWest:
GoJet: Mesa: |
| |
| 20
25 20 |
| | | 70 | |
CRJ200 | | | 85 | | | | — | | | | — | | | | 85 | | |
| SkyWest:
Air Wisconsin: |
| |
| 55
30 |
| | | 50 | |
Embraer ERJ 145 (XR/LR/ER) | | | 168 | | | | 29 | | | | 139 | | | | — | | |
| ExpressJet:
Trans States: CommutAir: |
| |
| 110
36 22 |
| | | 50 | |
Q200 (a) | | | 7 | | | | — | | | | — | | | | 7 | | | | CommutAir: | | | | 7 | | | | 37 | |
Embraer ERJ 135 (a) | | | 3 | | | | — | | | | 3 | | | | — | | | | ExpressJet: | | | | 3 | | | | 37 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total regional | | | 518 | | | | 83 | | | | 142 | | | | 293 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 1,262 | | | | 641 | | | | 328 | | | | 293 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) United exited service of both the Q200 and ERJ 135 aircraft types in January 2018.
following: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Aircraft Type | | Total | | Owned | | Leased | | Seats in Standard Configuration | | Average Age
(In Years) |
| Mainline: | | | | | | | | | | |
| 777-300ER | | 22 | | | 22 | | | — | | | 350 | | | 4.0 | |
| 777-200ER | | 55 | | | 52 | | | 3 | | | 276-362 | | 21.8 | |
| 777-200 | | 19 | | | 19 | | | — | | | 364 | | | 24.5 | |
| 787-10 | | 13 | | | 13 | | | — | | | 318 | | | 2.6 | |
| 787-9 | | 38 | | | 28 | | | 10 | | | 252-257 | | 4.3 | |
| 787-8 | | 12 | | | 12 | | | — | | | 243 | | | 8.5 | |
| 767-400ER | | 16 | | | 16 | | | — | | | 240 | | | 20.3 | |
| 767-300ER | | 38 | | | 31 | | | 7 | | | 167-214 | | 25.9 | |
| 757-300 | | 21 | | | 9 | | | 12 | | | 234 | | | 19.3 | |
| 757-200 | | 40 | | | 35 | | | 5 | | | 169-176 | | 24.9 | |
| 737 MAX 9 | | 30 | | | 14 | | | 16 | | | 179 | | | 2.1 | |
| 737 MAX 8 | | 16 | | | — | | | 16 | | | 166 | | | 0.3 | |
| 737-900ER | | 136 | | | 136 | | | — | | | 179 | | | 9.0 | |
| 737-900 | | 12 | | | 8 | | | 4 | | | 179 | | | 20.3 | |
| 737-800 | | 141 | | | 108 | | | 33 | | | 166 | | | 17.8 | |
| 737-700 | | 40 | | | 32 | | | 8 | | | 126 | | | 22.8 | |
| A320-200 | | 96 | | | 78 | | | 18 | | | 150 | | | 23.4 | |
| A319-100 | | 81 | | | 52 | | | 29 | | | 126 | | | 20.1 | |
| Total mainline | | 826 | | | 665 | | | 161 | | | | | 16.5 | |
In addition to the aircraft presented in the
tablestable above, United
ownsowned or
leases the following aircraft listed belowleased, as of December 31,
2017:2021, seven Boeing 757-200s, 13 Boeing 737-700s, 17 Airbus A319s, three Airbus A320s and one Boeing 767-200 that are not used in its operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Aircraft Type | | Total | | Owned | | | | Owned or Leased by Regional Carrier | | Regional Carrier Operator and Number of Aircraft | | Seats in Standard Configuration |
| Regional: | | | | | | | | | | | | | | |
| Embraer E175/E175LL | | 198 | | | 99 | | | | | 99 | | | SkyWest:
Mesa:
Republic: | 90
80
28 | | 70/76 | |
| Embraer 170 | | 38 | | | — | | | | | 38 | | | Republic: | 38 | | | 70 | | |
| CRJ700 | | 19 | | | — | | | | | 19 | | | SkyWest: | 19 | | | 70 | | |
| CRJ550 | | 55 | | | 6 | | | | | 49 | | | GoJet: | 55 | | | 50 | | |
| CRJ200 | | 133 | | | — | | | | | 133 | | | SkyWest:
Air Wisconsin: | 70
63 | | 50 | | |
| Embraer ERJ 145 (XR/LR) | | 75 | | | 75 | | | | | — | | | CommutAir: | 75 | | | 50 | | |
| Total regional | | 518 | | | 180 | | | | | 338 | | | | | | | |
| | | | | | | | | | | | | | |
In addition to the aircraft presented in the table above, United owned Boeing767-200, which is being subleasedor leased the following regional aircraft as of December 31, 2021:
•11 CRJ700s awaiting conversion to another airline;CRJ550s; and
12 owned and three leased Boeing 747s, which are permanently grounded; and
11 owned•85 Embraer ERJ 145s, which are temporarily grounded.grounded, 56 of which are currently held for sale.
Firm Order and Option AircraftAircraft.
As of December 31, 2017,2021, United had firm commitments and options to purchase aircraft from Boeing and Airbus presented in the table below: | | |
Aircraft Type
| | Number of Firm
Commitments (a)
|
Airbus A350
| | 45 |
Boeing 737 MAX
| | 161 |
Boeing777-300ER
| | 4 |
Boeing 787
| | 18 |
| | |
(a) United also has options and purchase rights for additional aircraft. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Scheduled Aircraft Deliveries |
| Aircraft Type | | Number of Firm
Commitments (a) | | 2022 | | 2023 | | After 2023 |
| Airbus A321XLR | | 50 | | | — | | | — | | | 50 | |
| Airbus A321neo | | 70 | | | — | | | 12 | | | 58 | |
| Airbus A350 | | 45 | | | — | | | — | | | 45 | |
| Boeing 737 MAX | | 367 | | | 53 | | | 109 | | | 205 | |
| Boeing 787 | | 8 | | | 8 | | | — | | | — | |
| (a) United also has options and purchase rights for additional aircraft. | | | | |
| | | | | | | | |
| | | | | | |
The aircraft listed in the table above are scheduled for delivery from 2018 through 2027. In 2018, United expects to take delivery of 10 Boeing 737 MAX aircraft, seven Boeing 787 aircraft and four Boeing777-300ER aircraft.2030. 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, or to the extent rights are exercised pursuant to the relevant agreements to modify the timing of deliveries, the amount and timing of the Company’sCompany's future capital commitments could change. Additionally, the Company has entered into a contract to purchase three used Boeing767-300ER aircraft from Hawaiian Airlines, Inc. with expected delivery dates in the second half of 2018.
See Notes 10 and 13 to the financial statements included in Part II, Item 8 of this report for additional information.
Facilities
United’s principal facilities relate to
Facilities.United leases of airport facilities, gates, hangar sites, terminal buildings and other airport facilities in the municipalities it serves. United has major terminal facility leases at SFO, Washington Dulles, Chicago O’Hare,IAD, ORD, LAX, Denver, Newark, Houston Bush, Cleveland Hopkins International AirportDEN, EWR, IAH and GuamGUM with expiration dates ranging from 20182022 through 2054.2053. Substantially all of these facilities are leased on anet-rental basis, resulting in the Company’sCompany having financial 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
its operations in the cities
served.it serves. In addition, United
also has multiple leases, which expire from
20182029 through
2029,2033, for its principal executive office and operations center in downtown Chicago and administrative offices in downtown Houston.
In November 2021, United purchased off-lease its backup network operations center in Arlington Heights, Illinois, which, effective April 1, 2022, will become the Company's primary network operations center.ITEM 3. | LEGAL PROCEEDINGS. |
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in legal proceedings, including litigation, arbitration and other claims, and investigations, inspections, subpoenas, audits, inquiries and similar action, involving its passengers, customers, suppliers and employees as well as government agencies arising in the ordinary course of business and that have not been fully resolved. Legal proceedings, in general, and securities, class action and multi-district litigation, in particular, can be expensive and disruptive. Some of these suits may purport or may be determined to be class actions and/or involve parties seeking large and/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years. 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.
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 its defenses and assertions in pending legal proceedings have merit and the ultimate disposition of any pending matter will not materially affect the Company's financial position, results of operations or cash flows. However, the ultimate resolutions of the Company's legal proceedings and other contingencies are inherently unpredictable and subject to significant uncertainties. There can be no assurance that there will not be an increase in the scope of one or more of these pending matters or any other or future lawsuits, claims, government investigations or other legal proceedings will not be material to the Company's financial position, results of operations or cash flows for a particular period. As such, the Company's 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.
Antitrust Litigation
On June 30, 2015, UAL received a Civil Investigative Demand (“CID”("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 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 United’s International Commercial Air Contracts with the U.S. Postal Service. The Company has been responding to the DOJ’s 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.
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 potentialnon-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 Company’s 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. |
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
UAL’s
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
UAL's common stock is listed on the New York Stock Exchange (“NYSE”Nasdaq Global Select Market ("Nasdaq") under the symbol “UAL.” The following table sets forth the ranges"UAL."
Holders of
high and low sales prices per share of UAL common stock during the last two fiscal years, as reported by the NYSE: | | | | | | | | | | | | | | | | |
| | | UAL | |
| | | 2017 | | | 2016 | |
| | | High | | | Low | | | High | | | Low | |
1st quarter | | $ | 76.75 | | | $ | 64.16 | | | $ | 61.41 | | | $ | 42.17 | |
2nd quarter | | | 83.04 | | | | 67.55 | | | | 58.90 | | | | 37.41 | |
3rd quarter | | | 81.39 | | | | 57.34 | | | | 54.53 | | | | 37.64 | |
4th quarter | | | 69.62 | | | | 56.51 | | | | 76.80 | | | | 51.34 | |
Common Stock
As of February
14, 2018,10, 2022, there were
7,5345,920 holders of record of UAL common stock.
UAL did
The number of record holders is based upon the actual number of holders registered on our books at such date based on information provided by Computershare Investor Services, our transfer agent, and does not
pay any dividendsinclude holders of shares in
2017"street name" or
2016. Under debt agreements and certain indentures, UAL’s ability to pay dividends on or repurchase UAL’s 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 beother holders identified 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 $1.8 billion and $2.6 billion to UAL in 2017 and 2016, respectively.
security position listings maintained by depository trust companies.
Performance Graph
The following graph
showscompares the cumulative total stockholder return
for UAL’s common stock during the period from December 31,
20122016 to December 31,
2017. The graph also shows the cumulative returns2021 of
UAL's common stock to the Standard and
Poor’sPoor's 500 Index
(“SPX”("SPX") and the NYSE Arca Airline Index
(“XAL”("XAL")
of 15 investor-owned airlines over the same five-year period.. The comparison assumes $100 was invested on December 31,
20122016 in
UALour common stock
and in each of the
SPXforegoing indices and
the XAL.
assumes that all dividends were reinvested.
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 Rule14a-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 2017:
| | | | | | | | | | | | | | | | | | |
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
of shares that may yet be
purchased under the
plans or programs (in
millions) (a) | |
| October 2017 | | | | | 2,852,917 | | | $ | 59.59 | | | | 2,852,917 | | | $ | 383 | |
| November 2017 | | | | | 5,342,435 | | | | 58.93 | | | | 5,342,435 | | | | 68 | |
| December 2017 | | | | | 1,084,498 | | | | 63.06 | | | | 1,084,498 | | | | 3,000 | |
| | | | | | | | | | | | | | | | | | |
Total | | | | | 9,279,850 | | | | | | | | 9,279,850 | | | | | |
| | | | | | | | | | | | | | | | | | |
(a) In 2017, UAL repurchased approximately 28 million shares of UAL common stock for $1.8 billion, completing its July 2016 repurchase authorization. In December 2017, UAL’s Board of Directors authorized a new $3.0 billion share repurchase program to acquire UAL’s common stock. As of December 31, 2017, the Company had approximately $3.0 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. 2017 Incentive Compensation Plan and the United Continental Holdings, Inc. 2008 Incentive Compensation Plan, provide for the withholding of shares to satisfy tax obligations due upon the vesting of restricted stock units. However, the plans do not specify a maximum number of shares that may be withheld for this purpose. A total of 1,446 shares were withheld under the plans in the fourth quarter of 2017 at an average price of $64.46 per share. 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.
ITEM 6. | SELECTED FINANCIAL DATA. |
UAL’s consolidated financial statements and statistical data are provided in the tables below:
| | | | | | | | | | | | | | | | | | | | |
| |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Income Statement Data (in millions, except per share amounts): | | | | | | | | | | | | | | | | | | | | |
Operating revenue | | $ | 37,736 | | | $ | 36,556 | | | $ | 37,864 | | | $ | 38,901 | | | $ | 38,279 | |
Operating expense | | | 34,238 | | | | 32,218 | | | | 32,698 | | | | 36,528 | | | | 37,030 | |
Operating income | | | 3,498 | | | | 4,338 | | | | 5,166 | | | | 2,373 | | | | 1,249 | |
Net income | | | 2,131 | | | | 2,263 | | | | 7,340 | | | | 1,132 | | | | 571 | |
Basic earnings per share | | | 7.04 | | | | 6.86 | | | | 19.52 | | | | 3.05 | | | | 1.64 | |
Diluted earnings per share | | | 7.02 | | | | 6.85 | | | | 19.47 | | | | 2.93 | | | | 1.53 | |
Balance Sheet Data at December 31 (in millions): | | | | | | | | | | | | | | | | | | | | |
Unrestricted cash, cash equivalents and short-term investments | | $ | 3,798 | | | $ | 4,428 | | | $ | 5,196 | | | $ | 4,384 | | | $ | 5,121 | |
| Total assets | | | 42,326 | | | | 40,140 | | | | 40,861 | | | | 36,595 | | | | 36,021 | |
Debt and capital lease obligations | | | 14,392 | | | | 11,705 | | | | 11,759 | | | | 11,947 | | | | 12,293 | |
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | |
| Mainline | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Passengers (thousands) (a) | | | 108,017 | | | | 101,007 | | | | 96,327 | | | | 91,475 | | | | 91,329 | |
Revenue passenger miles (“RPMs”) (millions) (b) | | | 193,444 | | | | 186,181 | | | | 183,642 | | | | 179,015 | | | | 178,578 | |
Available seat miles (“ASMs”) (millions) (c) | | | 234,576 | | | | 224,692 | | | | 219,989 | | | | 214,105 | | | | 213,007 | |
Cargo ton miles (millions) | | | 3,316 | | | | 2,805 | | | | 2,614 | | | | 2,487 | | | | 2,213 | |
Passenger load factor (d) | | | 82.5% | | | | 82.9% | | | | 83.5% | | | | 83.6% | | | | 83.8% | |
Passenger revenue per available seat mile (“PRASM”) (cents) | | | 11.32 | | | | 11.31 | | | | 11.97 | | | | 12.51 | | | | 12.20 | |
Total revenue per available seat mile (cents) | | | 13.51 | | | | 13.50 | | | | 14.19 | | | | 14.81 | | | | 14.51 | |
Average yield per revenue passenger mile (“Yield”) (cents) (e) | | | 13.73 | | | | 13.65 | | | | 14.34 | | | | 14.96 | | | | 14.56 | |
Cost per available seat mile (“CASM”) (cents) | | | 12.59 | | | | 12.22 | | | | 12.42 | | | | 14.03 | | | | 14.31 | |
Average price per gallon of fuel, including fuel taxes | | $ | 1.72 | | | $ | 1.49 | | | $ | 1.96 | | | $ | 2.98 | | | $ | 3.12 | |
Fuel gallons consumed (millions) | | | 3,357 | | | | 3,261 | | | | 3,216 | | | | 3,183 | | | | 3,204 | |
Average stage length (miles) (f) | | | 1,806 | | | | 1,859 | | | | 1,922 | | | | 1,958 | | | | 1,934 | |
Average daily utilization of each aircraft (hours) (g) | | | 10:27 | | | | 10:06 | | | | 10:24 | | | | 10:26 | | | | 10:28 | |
Consolidated | | | | | | | | | | | | | | | | | | | | |
Passengers (thousands) (a) | | | 148,067 | | | | 143,177 | | | | 140,369 | | | | 138,029 | | | | 139,209 | |
RPMs (millions) (b) | | | 216,261 | | | | 210,309 | | | | 208,611 | | | | 205,559 | | | | 205,167 | |
ASMs (millions) (c) | | | 262,386 | | | | 253,590 | | | | 250,003 | | | | 246,021 | | | | 245,354 | |
Passenger load factor (d) | | | 82.4% | | | | 82.9% | | | | 83.4% | | | | 83.6% | | | | 83.6% | |
PRASM (cents) | | | 12.35 | | | | 12.40 | | | | 13.11 | | | | 13.72 | | | | 13.50 | |
Total revenue per available seat mile (cents) | | | 14.38 | | | | 14.42 | | | | 15.15 | | | | 15.81 | | | | 15.60 | |
Yield (cents) (e) | | | 14.98 | | | | 14.96 | | | | 15.72 | | | | 16.42 | | | | 16.14 | |
CASM (cents) | | | 13.05 | | | | 12.70 | | | | 13.08 | | | | 14.85 | | | | 15.09 | |
Average price per gallon of fuel, including fuel taxes | | $ | 1.74 | | | $ | 1.49 | | | $ | 1.94 | | | $ | 2.99 | | | $ | 3.13 | |
Fuel gallons consumed (millions) | | | 3,978 | | | | 3,904 | | | | 3,886 | | | | 3,905 | | | | 3,947 | |
Average stage length (miles) (f) | | | 1,460 | | | | 1,473 | | | | 1,487 | | | | 1,480 | | | | 1,445 | |
(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).
ITEM 6. [RESERVED]
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results of operations is provided as a supplement to and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-K and the description of our business and reportable segments in Item 1 above to enhance the understanding of our results of operations, financial condition and cash flows.
This section generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 are not included in this Form 10-K and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the U.S. Securities and Exchange Commission (the "SEC") on March 1, 2021 (the "2020 Annual Report").
Executive Summary
United ContinentalAirlines Holdings, Inc. (together with its consolidated subsidiaries, “UAL”"UAL" or the “Company”"Company") is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”"United"). The Company's shared purpose is "Connecting People. Uniting the World." The Company has the most comprehensive route network among North American carriers, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C.
As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted.
United’sUnited's operating revenues and operating expenses comprise nearly 100% of
UAL’sUAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of
UAL’sUAL's 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,”"we," "our," "us," and the
“Company”"Company" in this report for disclosures that relate to all of UAL and United.
2017 Financial Highlights
2017 net income was $2.1 billion,
Our business and operating results for 2021 continued to be significantly impacted by the COVID-19 pandemic. Given the more significant impact of the pandemic on our business and operating results in 2020, we believe that a comparison of our 2021 results to 2019 for certain key metrics in this financial overview discussion is more reflective of the impact of the COVID-19 pandemic.
Our current expectations described below are forward-looking statements and our actual results and timing may vary materially based on various factors that include, but are not limited to, those discussed below under "Cautionary Statement Regarding Forward-Looking Statements" and in Part I, Item 1A. Risk Factors, of this Form 10-K. The Company is unable to reconcile forward-looking projections to accounting principles generally accepted in the United States of America ("GAAP"); refer to "Supplemental Information" below for further details.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic, together with the measures implemented or $7.02 diluted earnings per share.
United’s consolidated PRASM decreased 0.4%recommended by governmental authorities and private organizations in 2017 comparedresponse to 2016.
Aircraftthe pandemic, has had an adverse impact that has been material to the Company's business, operating results, financial condition and liquidity. The Company has seen increasing demand for travel both domestically and in countries where entry is permitted; however, as the situation surrounding the COVID-19 pandemic remains fluid, the pandemic has continued to negatively impact travel demand. It remains difficult to reasonably assess or predict the full extent of the ongoing impact of the COVID-19 pandemic on the Company's longer-term operational and financial performance, which will depend on a number of future developments, many of which are outside the Company's control, such as the ultimate duration of and factors impacting the recovery from the pandemic (including the efficacy and speed of vaccination programs in curbing the spread of the virus in different markets, the efficacy and availability of various treatment options, the introduction and spread of new variants of the virus that may be resistant to currently approved vaccines or treatment options, and the continuation of existing or implementation of new government travel restrictions), customer behavior changes and fluctuations in demand for air travel, among others. The COVID-19 pandemic and the measures taken in response may continue to impact many aspects of our business, operating results, financial condition and liquidity in a number of ways, including labor shortages (including reductions in available skilled labor and related impacts to the Company's flight schedules and reputation), facility closures and related costs, disruptions to the Company's and its business partners' operations, reduced travel demand and consumer spending, increased fuel cost increased 18.9% year-over-year due mainlyand other operating costs, supply chain disruptions, logistics constraints, inflation, volatility in the price of our securities, our ability to higher fuel prices.access capital markets and volatility in the global economy and financial markets generally.
In 2017, UAL repurchasedWe have reduced our capacity as we managed through the effects of the COVID-19 pandemic, which in 2021 remained significantly lower than capacity prior to the pandemic and resulted in a significant reduction to our revenue through the date of this report. We operated at approximately 28 million shares63% of UAL common stockour full year 2019 capacity during the full year of 2021. We have delayed a portion of our previously planned capacity increases for $1.8 billion, completingfull year 2022 and may need to implement further modifications. The Company is taking steps to be prepared for recovery as demand for travel continues to generally increase, which include investing in innovative technology, focusing on process improvements and implementing the $2.0 billion share repurchase program authorized by UAL’s BoardUnited Next transformative strategy.
We have taken steps to strengthen our financial position during this period of Directorsmarket uncertainty, which has resulted in July 2016. In December 2017, UAL’s Boardan increase of Directors authorized a new $3.0 billion share repurchase program to acquire UAL’s common stock.our overall debt levels. As of December 31, 2017, the Company had approximately $3.0 billion remaining to purchase shares under its share repurchase program.
UAL ended the year with $5.8 billion in unrestricted liquidity, which consisted of2021, unrestricted cash, cash equivalents and short-term investments totaled $18.4 billion, an increase of approximately $13.5 billion from December 31, 2019. We had approximately $41.1 billion of debt, finance lease, operating lease and available capacity undersale-leaseback obligations as of December 31, 2021 (including $4.5 billion that will become due in the revolving credit facility.
2017 Operational Highlights
Consolidated RPMs for 2017 increased 2.8%next 12 months), up from approximately $20.5 billion as compared to 2016, and consolidated ASMs increased 3.5%of December 31, 2019.
The Company's recovery from the prior year, resulting inCOVID-19 pandemic has not followed a consolidated load factor of 82.4% in 2017 versus 82.9% in 2016.
For 2017linear path, and 2016,due to the Company recorded a DOTon-time arrival rate of 81.9% and 81.3%, respectively, and a system completion factor of 99.0% for each year.
During 2017, the Company took delivery of three new Boeing787-9s, four new Boeing737-800s, 12 new Boeing777-300ERs, 24 new Embraer E175s, two used Airbus A320s and six used Airbus A319s and retired 20 Boeing747-400s.
Outlook
Set forth below is a discussion of the principal matterssignificant uncertainty that we believe could impact our financial andremains, its future operating performance, particularly in the short-term, may be subject to volatility. Risks and cause our results of operations in future periodsuncertainties related to differ materially from our historical operating results and/or from our anticipated results of operationsthe COVID-19 pandemic are further described in the forward-looking statements in this report. See Part I, Item 1A., Risk Factors,Factors— "The COVID-19 pandemic has materially and adversely impacted our business, operating results, financial condition and liquidity. The full extent of the impact will depend on future developments and how quickly we can return to more normal operations, among other things. If the impacts from the COVID-19 pandemic extend beyond our assumed timelines, our actual results may vary significantly from our expectations" of this reportreport.
Outlook for Full Year 2022
Capacity. The Company expects its scheduled capacity for full year 2022 to be down versus 2019.
Adjusted cost per available seat mile ("CASM-ex"). The Company expects full year 2022 CASM-ex (a non-GAAP financial measure defined as CASM excluding fuel, profit sharing, third-party business expense and special charges; see "Supplemental Information" below) to be higher than 2019.
Strategic Objectives
In the
factors described under “Forward-Looking Information” below for additional discussionsecond quarter of
these2021, United announced its United Next plan, which we believe will have a transformational effect on the customer experience and
other factors that could affect us.In 2017,earnings power of the Company had its best operational performance in its post-merger history. Operational reliability, service and experience underpin the Company’s long-term strategy. Our priorities for 2018 are continuedtop-tier operational reliability while strengthening our domestic network through growth, driving efficiency and productivity and continued investment in our employees, product and technology.
Economic Conditions. The aviation industry in 2018business. It is expected to show continued growthincrease United's average gauge in North America, the demandtotal number of available seats per departure, by almost 30% by 2026 versus 2019, as well as significantly lower carbon emissions per seat. New aircraft will come with a new signature interior that includes seat-back entertainment in every seat, larger overhead bins for air travel. Passenger numbersevery passenger's carry-on bag and the industry's fastest available in-flight WiFi, as well as a bright look-and-feel with LED lighting. New aircraft are expected to increase. Cargo volumes are alsoincrease North America premium seat counts by 75% per short-haul departure by 2026 versus 2019. The Company plans to replace older, smaller mainline jets and at least 200 single-class regional jets with larger aircraft, which we expect will lead to significant sustainability benefits compared to older planes: an expected 11% overall improvement in fuel efficiency and an expected 17-20% lower carbon emission per seat compared to grow, with some recovery in yields. Passenger revenue in all regions are expected to demonstrate improved performance in 2018.
Capacity. In 2018, the Company expects its consolidated ASMs to grow between 4% and 6% year-over-year. Most of this growth will be concentrated in our domestic network, especially in ourmid-continent hubs.older planes. We believe United Next will allow us to differentiate our network and segment our products with a greater scalepremium offering, while also maintaining fare competitiveness with low-cost carriers.
Results of Operations
Select financial data and
connectivity at our hubs reinforces our relevance and value proposition to our customers. Rebanking at our hubs is expected to drive significant additional connection opportunities. We will also expand flights innon-peak times of the year to more efficiently use our aircraft and facilities with the objective of driving an increase in profitability.Fuel.The Company’s average aircraft fuel price per gallon including related taxes was $1.74 in 2017 as compared to $1.49 in 2016. The price of jet fuel has increased since January 2016 and remains volatile. Based on projected fuel consumption in 2018, a one dollar changeoperating statistics are provided in the price of a barrel of crude oil would change the Company’s annual fuel expense by approximately $96 million.
Results of Operations
In this section, we compare results of operations for the year ended December 31, 2017 with results of operations for the year ended December 31, 2016, and results of operations for the year ended December 31, 2016 with results of operations for the year ended December 31, 2015.
2017 compared to 2016
tables below:
| | | | | | | | | | | | | | | | | |
| (in millions) | 2021 | | 2020 | | 2019 |
| Operating revenue | $ | 24,634 | | | $ | 15,355 | | | $ | 43,259 | |
| Operating expense | 25,656 | | | 21,714 | | | 38,958 | |
| Operating income (loss) | (1,022) | | | (6,359) | | | 4,301 | |
| Nonoperating expense, net | (1,535) | | | (2,463) | | | (387) | |
| Income tax expense (benefit) | (593) | | | (1,753) | | | 905 | |
| Net income (loss) | $ | (1,964) | | | $ | (7,069) | | | $ | 3,009 | |
| | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | 2019 |
| Passengers (thousands) (a) | 104,082 | | 57,761 | | 162,443 |
| Revenue passenger miles ("RPMs") (millions) (b) | 128,979 | | 73,883 | | 239,360 |
| ASMs (millions) | 178,684 | | 122,804 | | 284,999 |
| Cargo revenue ton miles (millions) (c) | 3,285 | | 2,711 | | 3,329 |
| Passenger load factor (d) | 72.2 | % | | 60.2 | % | | 84.0 | % |
| Passenger revenue per available seat mile ("PRASM") | 11.30 | | 9.61 | | 13.90 |
| Total revenue per available seat mile ("TRASM") | 13.79 | | 12.50 | | 15.18 |
| Average yield per revenue passenger mile ("Yield") (e) | 15.66 | | 15.98 | | 16.55 |
| CASM | 14.36 | | 17.68 | | 13.67 |
| Average stage length (miles) (f) | 1,315 | | 1,307 | | 1,460 |
| Employee headcount, as of December 31 | 84,100 | | 74,400 | | 95,900 |
(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 cargo revenue tons transported multiplied by the number of miles flown. (d)RPMs divided by ASMs. (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. |
Operating RevenueRevenue.
The table below illustrates the year-over-year percentage change in the Company’sCompany's operating revenues for the years ended December 31 (in millions, except percentage changes): | | | | | | | | | | | | | | | | |
| | | 2017 | | | 2016 | | | Increase
(Decrease) | | | % Change | |
Passenger—Mainline | | $ | 26,552 | | | $ | 25,414 | | | $ | 1,138 | | | | 4.5 | |
Passenger—Regional | | | 5,852 | | | | 6,043 | | | | (191) | | | | (3.2) | |
| | | | | | | | | | | | | | | | |
Total passenger revenue | | | 32,404 | | | | 31,457 | | | | 947 | | | | 3.0 | |
Cargo | | | 1,035 | | | | 876 | | | | 159 | | | | 18.2 | |
Other operating revenue | | | 4,297 | | | | 4,223 | | | | 74 | | | | 1.8 | |
| | | | | | | | | | | | | | | | |
Total operating revenue | | $ | 37,736 | | | $ | 36,556 | | | $ | 1,180 | | | | 3.2 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | Increase (Decrease) | | % Change |
| | | | | | | |
| | | | | | | |
| Passenger revenue | $ | 20,197 | | | $ | 11,805 | | | $ | 8,392 | | | 71.1 | |
| Cargo | 2,349 | | | 1,648 | | | 701 | | | 42.5 | |
| Other operating revenue | 2,088 | | | 1,902 | | | 186 | | | 9.8 | |
| Total operating revenue | $ | 24,634 | | | $ | 15,355 | | | $ | 9,279 | | | 60.4 | |
The table below presents
selected passenger revenue and
select operating data of the Company, broken out by geographic region, expressed as year-over-year changes:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Increase (decrease) from 2016 (a): | |
| | | Domestic | | | Atlantic | | | Pacific | | | Latin | | | Total
Consolidated | | | Mainline | | | Regional | |
Passenger revenue (in millions) | | $ | 809 | | | $ | 103 | | | $ | (128) | | | $ | 163 | | | $ | 947 | | | $ | 1,138 | | | $ | (191) | |
Passenger revenue | | | 4.2 % | | | | 1.9% | | | | (3.1)% | | | | 5.8% | | | | 3.0 % | | | | 4.5 % | | | | (3.2)% | |
| Average fare per passenger | | | 0.1 % | | | | 1.4% | | | | — % | | | | 4.1% | | | | (0.4)% | | | | (2.3)% | | | | 2.0 % | |
Yield | | | (0.4)% | | | | 0.9% | | | | (2.2)% | | | | 4.1% | | | | 0.1 % | | | | 0.6 % | | | | 2.4 % | |
PRASM | | | (0.6)% | | | | 1.5% | | | | (5.8)% | | | | 3.3% | | | | (0.4)% | | | | 0.1 % | | | | 0.6 % | |
Passengers | | | 4.2 % | | | | 0.5% | | | | (3.1)% | | | | 1.7% | | | | 3.4 % | | | | 6.9 % | | | | (5.0)% | |
RPMs (traffic) | | | 4.7 % | | | | 0.9% | | | | (0.9)% | | | | 1.6% | | | | 2.8 % | | | | 3.9 % | | | | (5.4)% | |
ASMs (capacity) | | | 4.9 % | | | | 0.4% | | | | 2.9 % | | | | 2.4% | | | | 3.5 % | | | | 4.4 % | | | | (3.8)% | |
Passenger load factor (points) | | | (0.2) | | | | 0.4 | | | | (3.0) | | | | (0.7) | | | | (0.5) | | | | (0.4) | | | | (1.5) | |
(a) See Part II, Item 6, Selected Financial Data, of this report for the definition of these statistics.
Consolidated passenger
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Increase (decrease) from 2020: |
| | Domestic | | Atlantic | | Pacific | | Latin | | Total |
| Passenger revenue (in millions) | | $ | 6,727 | | | $ | 795 | | | $ | (307) | | | $ | 1,177 | | | $ | 8,392 | |
| Passenger revenue | | 83.2 | % | | 52.6 | % | | (33.4) | % | | 91.5 | % | | 71.1 | % |
| Average fare per passenger | | 1.8 | % | | (9.5) | % | | 21.9 | % | | (12.9) | % | | (5.1) | % |
| Yield | | (2.0) | % | | (10.9) | % | | 49.0 | % | | (7.7) | % | | (2.0) | % |
| PRASM | | 23.8 | % | | 7.4 | % | | (18.3) | % | | (2.3) | % | | 17.6 | % |
| Passengers | | 79.9 | % | | 68.5 | % | | (45.4) | % | | 119.9 | % | | 80.2 | % |
| RPMs | | 86.9 | % | | 71.3 | % | | (55.3) | % | | 107.6 | % | | 74.6 | % |
| ASMs | | 48.0 | % | | 42.2 | % | | (18.3) | % | | 96.2 | % | | 45.5 | % |
| Passenger load factor (points) | | 16.7 | | | 10.2 | | | (23.9) | | | 3.8 | | | 12.0 | |
Passenger revenue increased $0.9$8.4 billion, or 3.0%71.1%, in 20172021 as compared to 20162020, primarily due to a 2.8%an increase in traffic. Consolidated PRASM decreased 0.4%the demand for air travel as a result of the increased availability of COVID-19 vaccines and the easing of travel and quarantine restrictions in 2017the United States and various other jurisdictions.
Cargo revenue increased $701 million, or 42.5%, in 2021 as compared to
2016. The decline in PRASM was driven by factors including more aggressivelow-cost carrier pricing in our hub markets, temporary share loss duringroll-out2020, primarily due to stronger yields on freight revenue and higher cargo tonnage from increased wide-body departures of
our Basic Economy pricing, and softer demand in China and Guam. Our revenue in 2017 was negatively impacted by severe storms during the third quarter.Cargopassenger flights as well as cargo-only flights.
Other operating revenue increased
$159$186 million, or
18.2%9.8%, in
20172021 as compared to
20162020, primarily due to
higher year-over-year international freight volume and yield.an increase in mileage revenue from non-airline partners, including the Company's co-branded credit card partner, JPMorgan Chase Bank, N.A.
Operating ExpenseExpense.
The table below includes data related to the Company’sCompany's operating expense for the years ended December 31 (in millions, except percentage changes): | | | | | | | | | | | | | | | | |
| | | 2017 | | | 2016 | | | Increase
(Decrease) | | | % Change | |
Salaries and related costs | | $ | 11,045 | | | $ | 10,275 | | | $ | 770 | | | | 7.5 | |
Aircraft fuel | | | 6,913 | | | | 5,813 | | | | 1,100 | | | | 18.9 | |
Landing fees and other rent | | | 2,240 | | | | 2,165 | | | | 75 | | | | 3.5 | |
Regional capacity purchase | | | 2,232 | | | | 2,197 | | | | 35 | | | | 1.6 | |
Depreciation and amortization | | | 2,149 | | | | 1,977 | | | | 172 | | | | 8.7 | |
Aircraft maintenance materials and outside repairs | | | 1,856 | | | | 1,749 | | | | 107 | | | | 6.1 | |
Distribution expenses | | | 1,349 | | | | 1,303 | | | | 46 | | | | 3.5 | |
Aircraft rent | | | 621 | | | | 680 | | | | (59) | | | | (8.7) | |
Special charges | | | 176 | | | | 638 | | | | (462) | | | | NM | |
Other operating expenses | | | 5,657 | | | | 5,421 | | | | 236 | | | | 4.4 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | $ | 34,238 | | | $ | 32,218 | | | $ | 2,020 | | | | 6.3 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | Increase (Decrease) | | % Change |
| Salaries and related costs | $ | 9,566 | | | $ | 9,522 | | | $ | 44 | | | 0.5 | |
| Aircraft fuel | 5,755 | | | 3,153 | | | 2,602 | | | 82.5 | |
| Depreciation and amortization | 2,485 | | | 2,488 | | | (3) | | | (0.1) | |
| Landing fees and other rent | 2,416 | | | 2,127 | | | 289 | | | 13.6 | |
| Regional capacity purchase | 2,147 | | | 2,039 | | | 108 | | | 5.3 | |
| Aircraft maintenance materials and outside repairs | 1,316 | | | 858 | | | 458 | | | 53.4 | |
| Distribution expenses | 677 | | | 459 | | | 218 | | | 47.5 | |
| Aircraft rent | 228 | | | 198 | | | 30 | | | 15.2 | |
| Special charges (credits) | (3,367) | | | (2,616) | | | 751 | | | NM |
| Other operating expenses | 4,433 | | | 3,486 | | | 947 | | | 27.2 | |
| Total operating expenses | $ | 25,656 | | | $ | 21,714 | | | $ | 3,942 | | | 18.2 | |
Salaries and related costs increased $770$44 million, or 7.5%0.5%, in 20172021 as compared to 20162020, primarily due to an increase in front-line employees' wages as a result of higher pay rates and benefit expenses driven by collective bargaining agreements finalized in 2016, and a 2.5% increase
in average full-time equivalent employees,flight activity, partially offset by a decrease$225 million increase in profit sharing and other employee incentives.
tax credits provided by the Employee Retention Credit under the CARES Act.
Aircraft fuel expense increased
$1.1$2.6 billion, or
18.9%82.5%,
primarily duein 2021 as compared to
increased fuel prices and a 3.5% increase in capacity.2020. The table below presents the significant changes in aircraft fuel cost per gallon for the years ended December 31 (in millions, except percentage
changes)changes and per gallon data):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | (In millions) | | | %
Change | | | Average price per gallon | |
| | | 2017 | | | 2016 | | | | 2017 | | | 2016 | | | %
Change | |
| Total aircraft fuel purchase cost excluding fuel hedge impacts | | $ | 6,911 | | | $ | 5,596 | | | | 23.5 | | | $ | 1.74 | | | $ | 1.43 | | | | 21.7 | |
| Hedge losses reported in fuel expense | | | 2 | | | | 217 | | | | NM | | | | — | | | | 0.06 | | | | NM | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Fuel expense | | | 6,913 | | | | 5,813 | | | | 18.9 | | | | 1.74 | | | | 1.49 | | | | 16.8 | |
| Total fuel consumption (gallons) | | | 3,978 | | | | 3,904 | | | | 1.9 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | %
Change |
| | | | | | |
| | | | | | |
| Fuel expense | | $ | 5,755 | | | $ | 3,153 | | | 82.5 | |
| Total fuel consumption (gallons) | | 2,729 | | | 2,004 | | | 36.2 | |
| Average price per gallon | | $ | 2.11 | | | $ | 1.57 | | | 34.4 | |
Landing fees and other rent increased
$75$289 million, or
3.5%13.6%, in
20172021 as compared to
theyear-ago period2020, primarily due to
higher rentalan increase in the number of flights and
passengers. The increase was not directly proportionate to the volume of activity as some landing
fee rates.fees and other rents are fixed.
Regional capacity purchase costs increased
$35$108 million, or
1.6%5.3%, in
20172021 as compared to
theyear-ago period despite regional capacity being down 3.8% in 2017 as compared to 2016 due to increases in annual rates, maintenance cycle-related costs and lease return costs.Depreciation and amortization increased $172 million, or 8.7%, in 2017 as compared to 20162020, primarily due to additions of newincreased regional flying and used aircraft, aircraft improvements and increases in information technology infrastructure and application development projects.
increased pass-through maintenance costs.
Aircraft maintenance materials and outside repairs increased
$107$458 million, or
6.1%53.4%, in
20172021 as compared to
20162020, primarily due to
an increase in airframehigher volumes of flying and
engineincreased heavy check maintenance
visits and additional repairs to wireless and inflight entertainment equipment.Aircraft rent decreased $59events.
Distribution expenses increased $218 million, or
8.7%47.5%, in
20172021 as compared to
20162020, primarily due to
higher credit card fees and commissions and a higher volume of global distribution fees as a result of the
purchaseoverall increase in passenger revenue. Distribution expenses were also impacted by the mix of
leased aircraftleisure travel versus business travel, which requires the use of different distribution channels and
lower lease renewal rates.forms of payment.
The table below presents special charges
incurred(credits) recorded by the Company during the years ended December 31 (in millions):
| | | | | | | | |
| | | 2017 | | | 2016 | |
Severance and benefit costs | | $ | 116 | | | $ | 37 | |
Impairment of assets | | | 25 | | | | 412 | |
Cleveland airport lease restructuring | | | — | | | | 74 | |
Labor agreement costs | | | — | | | | 64 | |
(Gains) losses on sale of assets and other special charges | | | 35 | | | | 51 | |
| | | | | | | | |
Total special charges | | $ | 176 | | | $ | 638 | |
| | | | | | | | |
| | | | | | | | | | | |
| 2021 | | 2020 |
| CARES Act grant | $ | (4,021) | | | $ | (3,536) | |
| Severance and benefit costs | 438 | | | 575 | |
| Impairment of assets | 97 | | | 318 | |
| (Gains) losses on sale of assets and other special charges | 119 | | | 27 | |
| Total special charges (credits) | $ | (3,367) | | | $ | (2,616) | |
See Note 14 to the financial statements included in Part II, Item 8 of this report for additional information.
Other operating expenses increased $236$947 million, or 4.4%27.2%, in 20172021 as compared to 20162020, primarily due to increased costs in food, marketing and technology associated with the Company’s enhanced customer experience initiatives, and due to volume-driven increases in cargo truckingground handling, passenger services and handling costs.personnel-related costs as a direct result of increased flying and higher expenditures on information technology projects.
Nonoperating Income (Expense)
. The following table illustrates the year-over-year dollar and percentage changes in the Company’sCompany's nonoperating income (expense) for the years ended December 31 (in millions, except percentage changes):
| | | | | | | | | | | | | | | | |
| | | 2017 | | | 2016 | | | Increase
(Decrease) | | | % Change | |
Interest expense | | $ | (643) | | | $ | (614) | | | $ | 29 | | | | 4.7 | |
Interest capitalized | | | 84 | | | | 72 | | | | 12 | | | | 16.7 | |
Interest income | | | 57 | | | | 42 | | | | 15 | | | | 35.7 | |
Miscellaneous, net | | | 3 | | | | (19) | | | | (22) | | | | NM | |
| | | | | | | | | | | | | | | | |
Total nonoperating expense, net | | $ | (499) | | | $ | (519) | | | $ | (20) | | | | (3.9) | |
| | | | | | | | | | | | | | | | |
2016 compared to 2015
Operating Revenue
The table below illustrates the year-over-year percentage change in the Company’s operating revenues for the years ended December 31 (in millions, except percentage changes):
| | | | | | | | | | | | | | | | |
| | | 2016 | | | 2015 | | | Increase
(Decrease) | | | % Change | |
Passenger—Mainline | | $ | 25,414 | | | $ | 26,333 | | | $ | (919) | | | | (3.5) | |
Passenger—Regional | | | 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 | |
| | | | | | | | | | | | | | | | |
Total operating revenue | | $ | 36,556 | | | $ | 37,864 | | | $ | (1,308) | | | | (3.5) | |
| | | | | | | | | | | | | | | | |
The table below presents selected passenger revenue and operating data of the Company, broken out by geographic region, expressed as year-over-year changes:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Increase (decrease) in 2016 from 2015 (a): | |
| | | Domestic | | | Atlantic | | | Pacific | | | Latin | | | Total
Consolidated | | | Mainline | | | Regional | |
Passenger revenue (in millions) | | $ | (523) | | | $ | (512) | | | $ | (215) | | | $ | (78) | | | $ | (1,328) | | | $ | (919) | | | $ | (409) | |
Passenger revenue | | | (2.7)% | | | | (8.6)% | | | | (4.9)% | | | | (2.7)% | | | | (4.1)% | | | | (3.5)% | | | | (6.3)% | |
Average fare per passenger | | | (4.7)% | | | | (5.2)% | | | | (5.6)% | | | | (7.9)% | | | | (5.9)% | | | | (8.0)% | | | | (2.2)% | |
Yield | | | (3.8)% | | | | (4.6)% | | | | (7.4)% | | | | (7.7)% | | | | (4.8)% | | | | (4.8)% | | | | (3.1)% | |
PRASM | | | (4.2)% | | | | (8.4)% | | | | (6.7)% | | | | (5.5)% | | | | (5.4)% | | | | (5.5)% | | | | (2.7)% | |
Passengers | | | 2.1 % | | | | (3.7)% | | | | 0.7 % | | | | 5.7 % | | | | 2.0 % | | | | 4.9 % | | | | (4.3)% | |
RPMs (traffic) | | | 1.1 % | | | | (4.3)% | | | | 2.7 % | | | | 5.4 % | | | | 0.8 % | | | | 1.4 % | | | | (3.4)% | |
ASMs (capacity) | | | 1.6 % | | | | (0.2)% | | | | 2.0 % | | | | 2.9 % | | | | 1.4 % | | | | 2.1 % | | | | (3.7)% | |
Passenger load factor (points) | | | (0.3) | | | | (3.3) | | | | 0.6 | | | | 2.0 | | | | (0.5) | | | | (0.6) | | | | 0.3 | |
(a) See Part II, Item 6, Selected Financial Data, of this report for the definition of these statistics.
Consolidated passenger revenue decreased $1.3 billion,
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | Increase (Decrease) | | % Change |
| Interest expense | $ | (1,657) | | | $ | (1,063) | | | $ | 594 | | | 55.9 | |
| Interest capitalized | 80 | | | 71 | | | 9 | | | 12.7 | |
| Interest income | 36 | | | 50 | | | (14) | | | (28.0) | |
| Unrealized gains (losses) on investments, net | (34) | | | (194) | | | (160) | | | (82.5) | |
| Miscellaneous, net | 40 | | | (1,327) | | | (1,367) | | | NM |
| Total nonoperating expense, net | $ | (1,535) | | | $ | (2,463) | | | $ | (928) | | | (37.7) | |
Interest expense increased $594 million, or 4.1%55.9%, in 20162021 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.
Operating Expense
The table below includes data related to the Company’s operating expense for the years 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 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | $ | 32,218 | | | $ | 32,698 | | | $ | (480) | | | | (1.5) | |
| | | | | | | | | | | | | | | | |
Salaries and related costs increased $562 million, or 5.8%, in 2016 as compared to 20152020, primarily due to higher pay ratesthe issuance of additional debt, mainly in the second half of 2020 and benefit expenses driven by new and extended collective bargaining agreements, an increase in employee incentive expenses duefirst half of 2021, 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 comparedprovide additional liquidity 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 years ended December 31 (in millions, except percentage changes):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | (In millions) | | | %
Change | | | Average price per gallon | |
| | | 2016 | | | 2015 | | | | 2016 | | | 2015 | | | %
Change | |
| 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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.
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 | |
| | | | | | | | |
Total special charges | | $ | 638 | | | $ | 326 | |
| | | | | | | | |
COVID-19 pandemic.
Unrealized losses on investments, net decreased $160 million in 2021 as compared to 2020, primarily due to the change in the market value of the Company's investments in equity securities. See
NoteNotes 9 and 14 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%,
Miscellaneous, net expense decreased $1.4 billion in
20162021 as compared to
2015 primarily due to increases in ground handling costs, food and technology costs associated with the Company’s 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 Company’s nonoperating income (expense) for the years ended December 31 (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) | |
| | | | | | | | | | | | | | | | |
Total nonoperating expense, net | | $ | (519) | | | $ | (947) | | | $ | (428) | | | | (45.2) | |
| | | | | | | | | | | | | | | | |
The decrease in interest expense of $55 million, or 8.2%, in 2016 as compared to 2015 was2020, primarily due to the prepayment$697 million of certain debt issuances in 2015credit loss allowances associated with the Company's Term Loan Agreement with, among others, BRW Aviation Holding LLC and declining balances of other debt, partially offset by interest expense on debt issued forBRW Aviation LLC and the acquisition of new aircraft, the conversion of certain operating leases to capital leasesrelated guarantee 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$687 million in 2016settlement losses and 2015, respectively. Foreign currency resultsspecial termination benefits related to
voluntary separation programs under the Company's defined benefit pension plan covering certain non-pilot U.S. employees and postretirement medical programs recorded in 2020. See Notes 7, 8, 13 and 14 to the financial statements included $8 million and $61 millionin Part II, Item 8 of foreign exchange lossesthis report for 2016 and 2015, respectively,additional information.
Income Taxes. See Note 6 to the financial statements included in Part II, Item 8 of this report for information related to the Company’s cash holdings in Venezuela. Miscellaneous, net for 2015 also includes a $134 million special charge related to thewrite-off of unamortizednon-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”).income taxes.
Liquidity and Capital Resources
As of December 31,
2017,2021, the Company had
$3.8$18.4 billion in unrestricted cash, cash equivalents and short-term investments,
a decreasean increase of
$0.6approximately $6.7 billion from December 31,
2016. The Company had its entire commitment capacity2020. We believe that our existing cash, cash equivalents and short-term investments, together with cash generated from operations, will be sufficient to satisfy our anticipated liquidity needs for the next twelve months, and we expect to meet our long-term liquidity needs with our anticipated access to the capital markets and projected cash from operations. We regularly assess our anticipated working capital needs, debt and leverage levels, debt maturities, capital expenditure requirements (including in connection with our capital commitments for our firm order aircraft) and future investments or acquisitions in order to maximize shareholder return, efficiently finance our ongoing operations and maintain flexibility for future strategic transactions. We also regularly evaluate our liquidity and capital structure to ensure financial risks, adequate liquidity access and lower cost of
$2.0 billion undercapital are efficiently managed. We expect to maintain an elevated level of liquidity in the
revolving credit facilitynear term as we navigate through 2022, which may lead to the issuance of additional debt securities, the repurchase or redemption of debt securities prior to maturity or the issuance of common stock, as well as to the pursuit of financing options for our firm aircraft orders and other related capital expenditures consistent with our historical practice prior to the onset of the
Company’s Amended and Restated Credit and Guaranty Agreement, dated as of March 29, 2017 (as amended byCOVID-19 pandemic. While we have been able to access the
First Amendmentcapital markets to
the Amended and Restated Credit and Guaranty Agreement, dated as of November 15, 2017, the “2017 Credit Agreement”) available for borrowings as of December 31, 2017. As of December 31, 2017, the Company had $109 million of restricted cash and cash equivalents, which is primarily collateral for letters of credit and collateral associated with obligations for facility leases and workers’ compensation. We may be required to postmeet our significant
additional cash collateral to provide security for obligations. Restricted cash and cash equivalents at December 31, 2016 totaled $124 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, 2017, the Company had approximately $14.4 billion oflong-term debt and capitalfinance lease obligations including $1.7 billion that are due within the next 12 months. In addition, we have substantial noncancelableand future commitments for capital expenditures, including the acquisition of new aircraft and related spare engines. As of December 31, 2017,engines, we must return to profitability in order to service our current liabilities exceededdebt and maintain appropriate liquidity levels for our current assets by approximately $5.6 billion. However, approximately $6.1 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 cash outlays. The deficit in working capital does not have an adverse impact to our cash flows, liquidity or operations.
The Company will continue to evaluate opportunities to prepay its debt, including open market repurchases, to reduce its indebtedness and related interest.
long-term operating needs. For 2018,2022, the Company expects between $3.6 billion and $3.8approximately $5.9 billion of gross capital expenditures.expenditures (including expenditures for assets acquired through the issuance of debt, finance leases and other financial liabilities). See Note 13 to the financial statements included in Part II, Item 8 of this report for additional information on commitments.
The Revolving Credit and Guaranty Agreement, under the Term Loan Credit and Guaranty Agreement (the "2021 Term Loan Facility"), provides revolving loan commitments of up to $1.75 billion until April 21, 2025, subject to certain customary conditions. No borrowings were outstanding under this facility at December 31, 2021. In addition, the Company has backstop financing commitments available from certain of its aircraft manufacturers for a limited number of its future aircraft deliveries, subject to certain customary conditions.
We have a significant amount of fixed obligations, including debt, leases of aircraft, airport and other facilities, and pension funding obligations. As of December 31, 2017,2021, the Company had approximately $41.1 billion of debt, finance lease, operating lease and sale-leaseback obligations, including $4.5 billion that will become due in the next 12 months. In addition, we have substantial noncancelable commitments for capital expenditures, including the acquisition of certain new aircraft and related spare engines.
Our debt agreements contain customary terms and conditions as well as various affirmative, negative and financial covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness and pay dividends or repurchase stock. As of December 31, 2021, UAL and United were in compliance with their respective debt covenants.
As of December 31, 2021, a substantial portion of the Company’sCompany's assets, principally aircraft and certain related assets, its loyalty program, route authorities and 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 10 to the financial statements included in Part II, Item 8 of this report for additional information on assetsaircraft financing and other debt instruments.
The following table summarizes our cash flow for the years ended December 31 (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| Total cash provided by (used in): | | | | | | |
| Operating activities | | $ | 2,067 | | | $ | (4,133) | | | $ | 6,909 | |
| Investing activities | | (1,672) | | | 50 | | | (4,560) | |
| Financing activities | | 6,396 | | | 12,957 | | | (1,280) | |
| Net increase in cash, cash equivalents and restricted cash | | $ | 6,791 | | | $ | 8,874 | | | $ | 1,069 | |
See the Statements of Consolidated Cash Flows include in Part II, Item 8 of this report for additional information.
Operating Activities. Cash flows provided by operating activities for 2021 were higher than 2020 primarily due to improvements in the demand for passenger travel as well as total government grant funding provided under the PSP2 and PSP3 Agreements, discussed below, partially offset by operating losses as a result of the COVID-19 pandemic.
In 2021, United entered into two Payroll Support Program Extension Agreements (collectively, the "PSP2 and PSP3 Agreements") with the U.S. Treasury Department ("Treasury") providing the Company with total funding of approximately $5.8 billion, pursuant to the Payroll Support Program. These funds were used to pay for the wages, salaries and benefits of United employees, including the payment of lost wages, salaries and benefits to returning employees who were previously impacted by involuntary furloughs. Approximately $4.1 billion was provided as
collaterala direct grant and $1.7 billion as indebtedness evidenced by
two 10-year senior unsecured promissory notes (collectively, the
Company.The following is"PSP2 and PSP3 Notes"). See Note 2 to the financial statements included in Part II, Item 8 of this report for additional information on the warrants issued in connection with the PSP2 and PSP3 Notes and Note 10 to such financial statements for a discussion of the Company’s sourcesPSP2 and uses of cash from 2015 through 2017.
Operating Activities
2017 compared to 2016
Cash flow provided by operations for the year ended December 31, 2017 was $3.4PSP3 Notes.
Investing Activities. Capital expenditures were $2.1 billion compared to $5.5and $1.7 billion in the same period2021and 2020, respectively, mainly related to advance deposits for future aircraft purchases. Also, maturities and sales of short-term and other investments provided $0.4 billion of liquidity in 2016, the decrease resulting from lower operating income and reduced cash flows from certain changes in working capital items. Excludingthe non-cash impairment of the Newark slots, operating income for 2017 was approximately $1.2 billion lower than 2016. Working capital changes reduced cash flow from operations by an additional $1.2 billion year-over-year in 20172021 as compared to 2016. The following were significant working capital items in 2017:$0.9 billion decrease in advanced purchase of miles due to increased utilizationof pre-purchased miles.
$0.4 billion increase in prepayments for maintenance contracts.
2016 compared to 2015
Cash flow provided by operations for the year ended December 31, 2016 was $5.5 billion compared to $6.0$2.3 billion in the same period in 2015. Working capital changes reduced cash flow from operations by
2020. $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 ofpre-purchased miles.
Other assets, including spare parts, increased by $0.3 billion as part of the Company’s efforts to improve fleet reliability.
Accounts payable increased $0.2 billion, driven by the timing of payments.
Investing Activities
2017 compared to 2016
The Company’s capital expenditures were $4.0 billion and $3.2 billion in 2017and 2016, respectively. The Company’s capital expenditures for both years were primarily attributable to the purchase of new aircraft, aircraft improvements, facility and fleet-related costs and the purchase of information technology assets.
2016 compared to 2015
The Company’s capital expenditures were $3.2 billion and $2.7 billion in 2016and 2015, respectively. The Company’s 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.
Financing Activities
Activities. Significant financing events in 20172021 were as follows:
Share Repurchases
Debt, Finance Lease and Other Financing Liability Principal Payments. During 2021, the Company made payments for debt, finance leases, and other financing liabilities of $5.2 billion. The Company used $1.8Company:
•repaid in full the $1.4 billion aggregate principal amount outstanding under the term loan facility included in the Amended and Restated Credit and Guaranty Agreement, dated as of March 29, 2017 (the "2017 Credit Agreement");
•repaid in full the $1.0 billion aggregate principal amount outstanding under the revolving credit facility included in the 2017 Credit Agreement;
•repaid in full the $520 million aggregate principal amount outstanding under the Loan and Guarantee Agreement, dated as of September 28, 2020, among United, UAL, Treasury and the Bank of New York Mellon, as administrative agent, as amended, which was entered into pursuant to the loan program established pursuant to the CARES Act; and
•made $1.9 billion of aircraft-related debt principal payments.
Debt Issuances. During 2021, United received and recorded:
•$5.0 billion from the 2021 Term Loan Facility;
•$4.0 billion from two series of notes, consisting of $2.0 billion in aggregate principal amount of 4.375% senior secured notes due 2026 and $2.0 billion in aggregate principal amount of 4.625% senior secured notes due 2029;
•$1.7 billion from the PSP2 and PSP3 Notes; and
•$600 million from the enhanced equipment trust certificates ("EETC") pass-through trusts established in February 2021.
See Note 10 to the financial statements included in Part II, Item 8 of this report for additional information.
Share Issuances. During 2021, the Company raised approximately $532 million in net cash to purchase approximately 28 million sharesproceeds from the issuance and sale of itsUAL common stock during 2017, completing its July 2016 repurchase authorization. In December 2017, UAL’s Board of Directors authorized a new $3.0 billion share repurchase program to acquire UAL’s common stock. As of December 31, 2017,through "at the Company had approximately $3.0 billion remaining to purchase sharesmarket offerings" under its share repurchase program.equity distribution agreements entered into in June 2020 and March 2021.
Significant financing events in 2020 were as follows:
Debt Issuances. During 2017,2020, United received and recorded $1.8$16.8 billion from various credit agreements, including the MileagePlus Financing (as defined in Part I, Item 1A. Risk Factors, of proceeds asthis report), loans provided under the CARES Act and EETC pass-through trusts established in September 2019 and October 2020. In 2020, United had recorded approximately $159 million of debt related to enhanced equipment trust certificate (“EETC”) offerings created in 2016 and 2017 to finance the purchaseconstruction of aircraft.In 2017, UAL issued,an aircraft maintenance and United guaranteed, (i) $400 million aggregate principal amount of unsecured 4.25% Senior Notes due October 1, 2022, and (ii) $300 million aggregate principal amount of unsecured 5% Senior Notes due February 1, 2024.
In 2017, United and UAL, as borrower and guarantor, respectively, increased the term loan under the 2017 Credit Agreement by approximately $440 million.
During 2017, United borrowed approximately $497 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2017.
ground service equipment complex at Los Angeles International Airport.
Debt and CapitalFinance Lease Principal PaymentsPayments.
During the year ended December 31, 2017,2020, the Company made debt and capitalfinance lease principal payments of $1.0$4.4 billion. Significant financing eventsShare Issuances. During 2020, the Company raised approximately $2.1 billion in 2016 were as follows:
cash proceeds from the issuance and sale of UAL common stock through "at the market offerings" under an equity distribution agreement entered into in June 2020.
Share RepurchasesThe Company used $2.6 billion
. In 2020, UAL's Board of cashDirectors terminated the share repurchase program. In 2020, prior to purchase 50the termination of the program, UAL repurchased approximately 4 million shares of itsUAL common stock during 2016 under its share repurchase programs.Debt Issuances
In 2016, United completed two EETC offeringsin open market transactions for a total principal amount of $2.0$0.3 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.
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.
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.
For additional information regarding these Liquidity and Capital Resource matters, see Notes 3,2, 10, 11 and 12 13to the financial statements included in Part II, Item 8 of this report. For information regardingnon-cash investing and financing activities, see the Company’sCompany's statements of consolidated cash flows.
For a discussion of the Company's sources and uses of cash in 2020 as compared to 2019, see "Liquidity and Capital Resources" in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2020 Annual Report.Credit Ratings. As of the filing date of this report, UAL and United had the following corporate credit ratings: | | | | | | | | | | | | | | | | | |
| S&P | | Moody's | S&P | | Moody’s | | Fitch | | |
| UAL | B+ | UAL | Ba2 | BB- | | Ba2 | | BB | | B+ |
| United | B+ | United | * | BB- | | * | | BB | | B+ |
| | *The credit agency does not issue corporate credit ratings for subsidiary entities. | | |
These credit ratings are below investment grade levels.levels; however, the Company has been able to secure financing with investment grade credit ratings for certain EETCs, term loans and secured bond financings. Downgrades from these rating levels, among other things, could restrict the availability, or increase the cost, of future financing for the Company.
Companyas well as affect the fair market value of existing debt. A rating reflects only the view of a rating agency and is not a recommendation to buy, sell or hold securities. Ratings can be revised upward or downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change.
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 87 |
Long-term debt and debt covenants | | Note 10 |
Leases and capacity purchase agreements | | Note 11 |
Commitments and contingencies | | Note 13 |
Contractual Obligations.
The
Company’sCompany's 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,with cash, by
issuing debt,using EETC financing, by entering into
capitalfinance or operating leases, or through
vendorother 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
Company’sCompany's current and long-term material
contractual obligationscash requirements as of December 31,
20172021 (in billions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2018 | | | 2019 | | | 2020 | | | 2021 | | | 2022 | | | After
2022 | | | Total | |
Long-term debt (a) | | $ | 1.6 | | | $ | 1.2 | | | $ | 1.2 | | | $ | 1.2 | | | $ | 1.5 | | | $ | 6.9 | | | $ | 13.4 | |
Capital lease obligations—principal portion | | | 0.1 | | | | 0.1 | | | | 0.1 | | | | 0.1 | | | | 0.1 | | | | 0.8 | | | | 1.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total debt and capital lease obligations | | | 1.7 | | | | 1.3 | | | | 1.3 | | | | 1.3 | | | | 1.6 | | | | 7.7 | | | | 14.5 | |
Interest on debt and capital lease obligations (b) | | | 0.6 | | | | 0.5 | | | | 0.5 | | | | 0.4 | | | | 0.4 | | | | 1.0 | | | | 3.4 | |
Aircraft operating lease obligations | | | 1.0 | | | | 0.9 | | | | 0.6 | | | | 0.5 | | | | 0.4 | | | | 1.5 | | | | 4.9 | |
Regional CPAs (c) | | | 2.0 | | | | 1.8 | | | | 1.6 | | | | 1.5 | | | | 1.4 | | | | 3.2 | | | | 11.5 | |
Other operating lease obligations | | | 1.2 | | | | 1.1 | | | | 1.2 | | | | 0.9 | | | | 0.8 | | | | 6.1 | | | | 11.3 | |
Postretirement obligations (d) | | | 0.1 | | | | 0.1 | | | | 0.1 | | | | 0.1 | | | | 0.1 | | | | 0.6 | | | | 1.1 | |
Pension obligations (e) | | | — | | | | — | | | | — | | | | — | | | | 0.1 | | | | 0.7 | | | | 0.8 | |
Capital purchase obligations (f) | | | 3.2 | | | | 2.9 | | | | 2.1 | | | | 2.4 | | | | 1.8 | | | | 9.8 | | | | 22.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total contractual obligations | | $ | 9.8 | | | $ | 8.6 | | | $ | 7.4 | | | $ | 7.1 | | | $ | 6.6 | | | $ | 30.6 | | | $ | 69.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Long-term debt presented in the Company’s
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | After 2026 | | Total | | Long-term debt (a) | | $ | 3.0 | | | $ | 2.9 | | | $ | 3.9 | | | $ | 3.4 | | | $ | 5.1 | | | $ | 15.6 | | | $ | 33.9 | | | Finance leases—principal portion | | 0.1 | | | 0.1 | | | — | | | — | | | — | | | 0.1 | | | 0.3 | | | Interest on debt and finance leases (b) | | 1.4 | | | 1.3 | | | 1.1 | | | 0.9 | | | 0.7 | | | 1.2 | | | 6.6 | | | Operating leases (c) | | 0.9 | | | 0.8 | | | 0.8 | | | 0.6 | | | 0.6 | | | 4.0 | | | 7.7 | | | Leases not yet commenced (d) | | — | | | — | | | — | | | — | | | 0.1 | | | 0.3 | | | 0.4 | | | Sale-leasebacks | | 0.9 | | | 0.1 | | | 0.1 | | | 0.1 | | | 0.1 | | | 0.5 | | | 1.8 | | | Regional CPAs (e) | | 2.1 | | | 2.1 | | | 2.0 | | | 1.7 | | | 1.5 | | | 4.2 | | | 13.6 | | | Postretirement benefit payments (f) | | 0.1 | | | 0.1 | | | 0.1 | | | 0.1 | | | 0.1 | | | 0.4 | | | 0.9 | | | Pension funding (g) | | — | | | — | | | — | | | — | | | — | | | 1.1 | | | 1.1 | | | Capital and other purchases (h) | | 5.7 | | | 6.9 | | | 5.0 | | | 4.3 | | | 3.3 | | | 8.9 | | | 34.1 | | | Total | | $ | 14.2 | | | $ | 14.3 | | | $ | 13.0 | | | $ | 11.1 | | | $ | 11.5 | | | $ | 36.3 | | | $ | 100.4 | |
(a)Long-term debt presented in the Company's financial statements is net of $163 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 $72 million in 2018, $63 million in 2019, $59 million in 2020, $56 million in 2021, $52 million in 2022 and $391 million thereafter. Interest payments on variable interest rate debt were calculated using London interbank offered rates (“LIBOR”) applicable at December 31, 2017. |
(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 United’s capital lease obligation recorded for certain of its CPAs. See Note 11 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 an estimate of the minimum funding requirements as determined by government regulations for United’s U.S. pension plans. Amounts are subject to change based on numerous assumptions, including the performance of assets in the plans and bond rates. SeeCritical Accounting Policies, below, for a discussion of our current year assumptions regarding United’s pension plans. |
(f) | Represents contractual commitments for firm order aircraft, spare engines and other capital purchase commitments. See Note 13 to the financial statements included in Part II, Item 8 of this report for a discussion of our purchase commitments. |
Off-Balance Sheet Arrangements.Anoff-balance sheet arrangement is any transaction, agreement ornet of $513 million of debt discount, premiums and debt issuance costs which are being amortized over the debt terms. Cash requirements do not include the debt discount, premiums and debt issuance costs.
(b)Future interest payments on variable rate debt were determined using the rates as of December 31, 2021.
(c)Represents future payments under fixed rate lease obligations. See Note 11 to the financial statements included in Part II, Item 8 of this report for information on variable rate and short-term operating leases.
(d)Represents future payments under leases that have not yet commenced and are not included in the consolidated balance sheet. See Note 11 to the financial statements included in Part II, Item 8 of this report for information on these leases.
(e)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 operating lease obligations. Amounts also exclude a portion of United's finance lease obligations recorded for certain of its CPAs. See Note 11 to the financial statements included in Part II, Item 8 of this report for the significant assumptions used to estimate the payments.
(f)Amounts represent postretirement benefit payments through 2031. Benefit payments approximate plan contributions as plans are substantially unfunded.
(g)Represents an estimate of the minimum funding requirements as determined by government regulations for United's U.S. pension plans. Amounts are subject to change based on numerous assumptions, including the performance of assets in the plans and bond rates.
(h)Represents contractual commitments for firm order aircraft, spare engines and other contractual arrangement involving an unconsolidated entity under whichcapital purchase commitments. See Note 13 to the financial statements included in Part II, Item 8 of this report for a companydiscussion of our purchase commitments.
In addition to the material cash requirements discussed above, the Company has (1) made certain 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 ofthat could have 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 researchfuture effect on the Company's cash requirements:
Letters of Credit and development arrangements. The Company’s primaryoff-balance sheet arrangements include operating leases, which are summarized in the contractual obligations table underContractual Obligations,above,and certain municipal bond obligations, as discussed below.Surety Bonds.
As of December 31, 2017,2021, United had cash collateralized $75approximately $438 million of letters of credit. United also had $362 million ofcredit and surety bonds securing various obligations at December 31, 2017. Mostwith expiration dates through 2031. Certain of these amounts are cash collateralized and reported within Restricted cash on our statement of financial position. See Note 13 to the financial statements included in Part II, Item 8 of this report for more information related to these letters of credit have evergreen clauses and are expected to be renewed on an annual basis. The surety bonds have expiration dates through 2021.bonds.
Guarantee of Debt of Others. As of December 31, 2017,2021, United is the guarantor of approximately $1.8 billion in aggregate principal amount oftax-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 are included in the contractual obligations table underContractual Obligations,above.As of December 31, 2017, United is the guarantor of $157$106 million of aircraft mortgage debt issued by one of United’sUnited's 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 $157$106 million of aircraft mortgage debt are similar to those in certain of the Company’sCompany's debt agreements. See discussion underIncreased Cost Provisions,
below, for additional information on increased cost provisions related to the Company’sCompany's debt.EETCs.
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, 2017, United had $8.62021, approximately $1.8 billion principal amount of equipment notes outstanding issued under EETC financings. Generally, the structure of these EETC financings consists of pass-through trusts createdsuch bonds were secured by significant fuel facility leases in which United participates, as to issue pass-through certificates, which represent fractional undivided interests in the respective pass-through trustsUnited and are not obligations of United. The proceedseach of the issuancesignatory airlines has provided indirect guarantees of the pass-through certificatesdebt. As of December 31, 2021, the Company's contingent exposure was approximately $343 million principal amount of such bonds based on its recent consortia participation. The Company's contingent exposure could increase if the participation of other air carriers decreases. The guarantees will expire when the tax-exempt bonds are usedpaid in full, which ranges from 2022 to purchase equipment notes which are issued by United and secured by its aircraft.2056. The payment obligations under the equipment notes are those of United. Proceeds received from the sale of pass-through certificates are initially held byCompany concluded it was not necessary to record a depositary in escrowliability 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 United’s consolidated balance sheet because the proceeds held by the depositary are not United’s assets.these indirect guarantees.
Increased Cost Provisions. In United’sUnited's financing transactions that include loans in which United is the borrower, 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 inwith respect to 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, 2017,2021, the Company had $3.4$13.2 billion of floating rate debt and $60 million of fixed rate debt with remaining terms of up to 11 years that are subject to these increased cost provisions. In several financing transactions involving loans or leases fromnon-U.S. entities, with remaining terms of up to 11 years and an aggregate balance of $3.3$10.1 billion, the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder tonon-U.S. entities to withholding taxes, subject to customary exclusions.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 throughtax-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, 2017, 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, 2017, the Company’s contingent exposure was approximately $244 million principal amount of such bonds based on its recent consortia participation. The Company’s contingent exposure could increase if the participation of other air carriers decreases. The guarantees will expire when thetax-exempt bonds are paid in full, which ranges from 2022 to 2049. The Company did not record a liability at the time these indirect guarantees were made.
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”),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.Recognition. Passenger revenue is recognized when transportation is provided. Passenger tickets and related ancillary services sold by the Company for flights are purchased primarily via credit card transactions, with payments collected by the Company in advance of the performance of related services. The Company initially 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 asits Advance ticket sales.sales liability, deferring revenue recognition until the travel occurs. For travel that has more than one flight segment, the Company deems each segment as a separate performance obligation and recognizes revenue for each segment as travel occurs. Tickets sold by other airlines where the Company provides the transportation are recordedrecognized as passenger revenue at the estimated valuesvalue to be billed to the other airlines.airline when travel is provided. 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 ifwith other airlines based on historical experience indicatesexperience.
The Company sells certain tickets with connecting flights with one or more segments operated by its other airline partners. For segments operated by its other airline partners, the Company has determined that
these amounts are different.Non-refundable tickets generally expireit is acting as an agent on
the datebehalf of the
intended flight, unlessother airlines as they are responsible for their portion of the
date is extended by notification fromcontract (i.e. transportation of the
customer on or beforepassenger). The Company, as the
intended flight date. Basic Economy tickets cannot be extended and refunds are not allowed except for ticket cancellations that areagent, recognizes revenue within
24 hours of purchase and one week or more prior to the original scheduled departure flight.Fees charged in association with changes or extensions tonon-refundable tickets are recorded as otherOther operating revenue at the time of the fee is incurred.travel for the net amount representing commission to be retained by the Company for any segments flown by other airlines.
Advance ticket sales represent the Company's liability to provide air transportation in the future. All tickets sold at any given point of time have travel dates extending up to 12 months. 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 feesCompany defers amounts related to
non-refundable tickets future travel in its Advance ticket sales liability account. The Company's Advance ticket sales liability also includes credits issued to customers on electronic travel certificates ("ETCs") and future flight credits ("FFCs"), primarily for ticket cancellations, which can be applied towards a purchase of a new ticket. ETCs are
considered a separate transaction from the air transportation because they represent a charge for the Company’s additional servicevalid up 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 yeartwo years from the date of issuance.
issuance; however, all ETCs due to expire prior to December 31, 2022 have been extended until December 31, 2022. FFCs are valid for 12 months from the original ticket date; however, all FFCs issued on or before December 31, 2021 have been extended to be valid until December 31, 2022. As of December 31, 2021, the Company's Advance ticket sales liability included $3.2 billion related to ETCs and FFCs.
The Financial Accounting Standards Board (“FASB”Company estimates the value of Advance ticket sales that will expire unused ("breakage") issued Accounting Standards UpdateNo. 2014-09,Revenueand recognizes revenue at the scheduled flight date. To determine breakage, the Company uses its historical experience with expired tickets and other facts, such as recent aging trends, program changes and modifications that could affect the ultimate expiration patterns of tickets. Given the uncertainty of travel demand caused by COVID-19, a significant portion of the ETCs and FFCs may expire unused in future periods and get recognized as revenue from Contracts with Customers (Topic 606)(“Topic 606”). Topic 606 prescribes that an entity should recognize revenuebreakage. The Company will update its breakage estimates as future information is received. Changes in estimates of breakage are recognized prospectively in proportion to depict the transferremaining usage of promised goods orthe related tickets.
Frequent Flyer Accounting. United's MileagePlus loyalty program builds customer loyalty by offering awards, benefits and services to customersprogram participants. Members in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard impacts the classification of certain revenue streams and affects the timing of revenue and expense recognition for others. For the Company, the most significant impact of the standard is the reclassification of certain ancillary fees from other operating revenue into passenger revenue on the statement of consolidated operations. For 2016 and 2017, the amount to be
reclassified at adoption of the new standard from other operating revenue into passenger revenue under Topic 606 is approximately $2.0 billion and $2.1 billion, respectively. These ancillary fees are directly related to passenger travel, such as ticket change fees and baggage fees, and will 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, will be recognized when transportation is provided. On January 1, 2018, we adopted Topic 606 using the full-retrospective approach. See Note 1 to the financial statements included in Part II, Item 8 of this report for additional information on recently issued accounting standards.
Frequent Flyer Accounting.United’s MileagePlus program is designed to increase customer loyalty. Program participants earn miles by flyingfor travel on United, United Express, Star Alliance members and certain other participating airlines. Program participantsairlines that participate in the program. Members can also earn miles through purchasesby purchasing goods and services from otherour network of non-airline partners that participate in United’s loyalty program. partners. We have contracts to sell miles to these partners whichwith the terms extending from one to eight years. These partners include domestic and international 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 imposedgovernment-imposed fees), discounted or upgraded air travel andnon-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
Co-Brand Agreement. United has a significant contract (the "Co-Brand Agreement") to sell MileagePlus miles to itsco-branded credit card partner Chase.JPMorgan Chase Bank USA, N.A. ("Chase"). Chase awards miles to MileagePlus members based on their credit card activity. United identified the following significant separately identifiable performance obligations in the Co-Brand Agreement:
•MileagePlus miles awarded – United has a performance obligation to provide MileagePlus cardholders with miles to be used for air travel and non-travel award redemptions. The Company records Passenger revenue elementsrelated to the travel awards when the transportation is provided and records Other revenue related to the non-travel awards when the goods or services are delivered. The Company records the cost associated with non-travel awards in its Second AmendedOther operating revenue, as an agent.
•Marketing – United has a performance obligation to provide Chase access to United's customer list and RestatedCo-Branded Cardthe use of United's brand. Marketing Services Agreement (the“Co-Brand Agreement”): the air transportation element represented by the valuerevenue is recorded to Other operating revenue as miles are delivered to Chase.
•Advertising – United has a performance obligation to provide advertising in support of the mile (generally resulting from its redemption for future air transportationMileagePlus card in various customer contact points such as United's website, email promotions, direct mail campaigns, airport advertising and whose fair valuein-flight advertising. Advertising revenue is described above);recorded to Other operating revenue as miles are delivered to Chase.
•Other travel-related benefits – United's performance obligations are comprised of various items such as waived bag fees, seat upgrades and lounge passes. Lounge passes are recorded to Other operating revenue as customers use the lounge passes. Bag fees and seat upgrades are recorded to Passenger revenue at the time of the United brand and accessassociated travel.
We account for all the payments received under the Co-Brand Agreement by allocating them to
MileagePlus member lists; advertising; and other travel related benefits.the separately identifiable performance obligations. The fair value of the elementsseparately identifiable performance obligations is determined using management’smanagement's estimated selling price of each element.component. 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 theCo-Brand Agreement in order to determine the allocation of proceeds to each of the multiple elementscomponents to be delivered. We also evaluate volumes on an annual basis, which may result in a change in the allocation of the estimated selling priceconsideration from the Co-Brand Agreement 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 Company’s 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.
The following table summarizes information related to the Company’s Frequent flyer deferred revenue liability:
| | | | |
Frequent flyer deferred revenue at December 31, 2017 (in millions)
| | $ | 4,741 | |
Percentage of miles earned expected to expire
| | | 18% | |
Impact of 1% change in outstanding miles or weighted average ticket value on deferred revenue (in millions)
| | $ | 53 | |
Long-Lived Assets.The net book value of operating property and equipment for the Company was $26 billion and $23 billion at December 31, 2017 and 2016, 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. The Company has generally estimated the lives of those aircraft to be between 25 and 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 Company’s fleet plan and other relevant information. Aone-year increase in the average depreciable life of the Company’s flight equipment would reduce annual depreciation expense on flight equipment by approximately $76 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 asset’s carrying value exceeds its net undiscounted future cash flows and its fair market value. The amount of the charge is the difference between the asset’s carrying value and fair market value.
See Note 14 to the financial statements included in Part II, Item 8 of this report for additional information.
Indefinite-lived intangible assets.The Company has indefinite-lived intangible assets, including goodwill. Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment on an annual basis as of October 1, or on an interim basis whenever a triggering event occurs. An impairment occurs when the fair value of an intangible asset is less than its carrying value. In 2017,The Company determines the Hong Kong routes had a fair value cushion that was less than 10% of its carrying value. The valueusing a variation of the routes was negatively impactedincome approach known as the excess earnings method, which discounts an asset's projected future net cash flows to determine the current fair value. Assumptions used in the discounted cash flow methodology include a discount rate, which is based upon the Company's current weighted average cost of capital plus an asset-specific risk factor, and a projection of sales, expenses, gross margin, tax rates and contributory asset charges for several future years and a terminal growth rate. The assumptions used for future projections are determined based upon the Company's asset-specific forecasts along with the Company's strategic plan. These assumptions are inherently uncertain as they relate to future events and circumstances. Actual results will be influenced by the slowdowncompetitive environment, fuel costs and other expenses, and potentially other unforeseen events or circumstances that could have a material impact on future results. In light of the Hong Kong market coupled with industry oversupply. Asongoing impact of the COVID-19 pandemic on both the U.S. and global economies, the significant, sustained impact on the demand for travel and government policies that restrict air travel, the exact timing of a result, this intangible asset is susceptiblecomplete recovery from the COVID-19 pandemic, and the speed at which such recovery could occur, continues to impairment risk from adverse changes in this particular market. While management has implemented strategies to address the shifts in supply and demand dynamics, further adverse changes could reduce the underlying cash flows used to estimate fair value and could triggerremain uncertain. We recorded impairment charges of $130 million related to our China route indefinite-lived intangible assets during 2020 as a result of the Hong Kong routes.
impact of COVID-19. Adverse changes to our forecasted results caused by COVID-19 or the other factors discussed above could result in additional impairment charges in the future.
See
Note 2Notes 1 and 14 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
Tax valuation allowance. A tax valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company's management assesses available positive and retirees.negative evidence regarding the Company's ability to realize its deferred tax assets and records a valuation allowance when it is more likely than not that deferred tax assets will not be realized. In order to form a conclusion, management considers positive evidence in the form of taxable income in prior carryback years, reversing temporary differences, tax planning strategies and projections of future taxable income during the periods in which those temporary differences become deductible, as well as negative evidence such as historical losses. Although the Company incurred losses in 2021 and 2020, management determined that these results were not indicative of future results due to the impact of the COVID-19 pandemic on its operations. The most critical assumptions impacting our defined benefit pension plan obligationsCompany concluded that the positive evidence outweighs the negative evidence, primarily driven by approval and expensesdistribution of COVID-19 vaccines as well as increased confidence with the timing of the recovery. The Company has $7.5 billion of deferred tax assets,
of which $2.1 billion (tax effected) are
the weighted average discount rate and the expected long-term rate of return on the plan assets.United’s pension plans’ under-funded status was $1.9 billionattributable to federal net operating losses ("NOLs") at December 31, 2017. Funding requirements fortax-qualified defined benefit pension plans are determined by government regulations. In 2018, we anticipate
contributing at least $420 million to our pension plans.2021. The fair valuemajority of the plans’NOLs do not expire and the Company expects to realize the benefits of the NOLs through the reversal of certain existing deferred tax liabilities of $6.2 billion and the remaining $1.3 billion (the income tax equivalent to approximately two years of average pre-COVID-19 pre-tax income) through projected future taxable income. Assumptions about our future taxable income are consistent with the plans and estimates used to manage our business. Therefore, we have not recorded a valuation allowance on our deferred tax assets was $3.9 billion atother than the capital loss carryforwards and certain state attributes that have short expiration periods. While the Company expects to generate sufficient future income to fully utilize its deferred tax assets (including NOLs), the Company may have to record a valuation allowance, which could be material, against deferred tax assets if negative evidence such as prolonged losses or reduced forecasted income outweigh positive evidence.
Recording a valuation allowance against our NOLs would not impact our ability to use them to offset cash taxes payable. However, our ability to use NOLs may be significantly limited due to various circumstances, as discussed in more detail in Part I, Item 1A. Risk Factors—"The Company's ability to use its net operating loss carryforwards and certain other tax attributes 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,
2017.When calculating pension expense for 2018,2021, the Company assumed thathas recorded $183 million of valuation allowance against its plans’ assets would generatecapital loss deferred tax assets. Capital losses have a long-term ratelimited carryforward period of return of approximately 7.3%. The expected long-term rate of return assumption was developed based on historical experiencefive years, 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 rebalancedthey can be utilized only to the targeted allocation when considered appropriate.
The defined benefit pension plans’ assets consistextent 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, 2017:
| | | | | | | | |
| | | Percent of Total | | | Expected Long-Term
Rate of Return | |
Equity securities | | | 36 % | | | | 9.5 % | |
Fixed-income securities | | | 37 | | | | 5.5 | |
Alternatives | | | 16 | | | | 7.3 | |
Other | | | 11 | | | | 7.3 | |
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 7.3% to 6.8%) would increase estimated 2018 pension expense by approximately $20 million. Future pension obligations for United’s plans were discounted using a weighted average rate of 3.65% at December 31, 2017.capital gains. The Company selecteddoes not anticipate generating sufficient capital gains to utilize the discount rate for substantially all of its plans by usinglosses before they expire, therefore, a hypothetical portfolio of high quality bonds at December 31, 2017 that would provide thevaluation allowance is 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 3.65% to 3.15%) would increase the pension liability at December 31, 2017 by approximately $651 million and increase the estimated 2018 pension expense by approximately $80 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, 2017 and 2016, the Company had unrecognized actuarial losses for pension benefit plans of $1.6 billion and $1.5 billion, respectively, recorded in accumulated other comprehensive income.
Other Postretirement Benefit Plan Accounting.United’s 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 toco-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 plan’s 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 topre-fund its plan obligations, which has resulted in a significant net obligation, as discussed below. The Company’s benefit obligation was $1.7 billion for the other postretirement benefit plans at December 31, 2017 and 2016.
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 Company’s weighted average discount rate to determine its benefit obligations as of December 31, 2017 was 3.63%,2021. Additionally, the Company recorded a valuation allowance of $27 million on certain state deferred tax assets primarily due to state NOLs that have short expiration periods.
Supplemental Information
The Company evaluates its financial performance utilizing various GAAP and non-GAAP financial measures, including CASM-ex. The Company has provided CASM-ex, a non-GAAP financial measure, which is not calculated or presented in accordance with GAAP, as comparedsupplemental information and in addition to 4.07%the financial measures that are calculated and presented in accordance with GAAP. Management believes that adjusting for December 31, 2016. special charges (credits) is useful to investors because special charges (credits) are not indicative of UAL's ongoing performance. Management also believes that excluding third-party business expenses, such as maintenance and ground handling for third parties, provides more meaningful disclosure because these expenses are not directly related to UAL's core business. Management also believes that excluding fuel costs is useful to investors because it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence. Management also believes that excluding profit sharing allows investors to better understand and analyze UAL's operating cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.
Because this non-GAAP financial measure is not calculated in accordance with GAAP, it should not be considered superior to, and is not intended to be considered in isolation or as a substitute for, the related GAAP financial measure and may not be the same as or comparable to any similarly titled measure presented by other companies due to possible differences in method and in the items being adjusted. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
The health care cost trend rate assumedCompany is not providing a target for 2017 was 6.50%, decliningCASM or a reconciliation for CASM-ex projections to 5.0%CASM, the most directly comparable GAAP measure, because the Company is unable to predict certain items contained in 2023, as comparedthe GAAP measure without unreasonable efforts and it does not provide a reconciliation of forward-looking measures where it believes such a reconciliation would imply a degree of precision and certainty that could be confusing to assumed trend rate for 2018investors and is unable to reasonably predict certain items contained in the GAAP measure without unreasonable efforts. This is due to the inherent difficulty of 6.25%, decliningforecasting the timing or amount of various items that have not yet occurred and are out of the Company's control or cannot be reasonably predicted. For the same reasons, the Company is unable to 5.0% in 2023. A 1% increase in assumed health care trend rates would increaseaddress the Company’s total service and interest costprobable significance of the unavailable information. Forward-looking measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures. See "Cautionary Statement Regarding Forward-Looking Statements" below. Below is a reconciliation of the non-GAAP financial measure (CASM-ex) to the most directly comparable GAAP financial measure (CASM) for the year ended December 31, 2017 by $11 million; whereas, a 1% decrease in assumed health care trend rates would decrease2019 (in cents):
| | | | | | | | | | | | |
| | | | | | 2019 |
| CASM (GAAP) | | | | | | 13.67 |
| Special charges (credits) | | | | | | 0.09 |
| Third-party business expenses | | | | | | 0.06 |
| Fuel expense | | | | | | 3.14 |
| Profit sharing | | | | | | 0.17 |
| CASM-ex (Non-GAAP) | | | | | | 10.21 |
Cautionary Statement Regarding Forward-Looking Statements
This report contains certain "forward-looking statements," within the Company’s total service and interest cost for the year ended December 31, 2017 by $8 million. A one percentage point decrease in the weighted average discount rate would increase the Company’s postretirement benefit liability by approximately $185 million and increase the estimated 2017 benefits expense by approximately $8 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 partmeaning of accumulated other comprehensive income and amortized into expense over the average remaining service lifeSection 27A of the covered active employees or the average life expectancySecurities Act of inactive participants. At December 31, 20171933, as amended, and 2016, the Company had unrecognized actuarial gains for postretirement welfare benefit plans of $301 million and $384 million, respectively, recorded in accumulated other comprehensive income.
Income Taxes. The Tax Act, among other changes, reduces the federal corporate income tax rate to 21% beginning in 2018, requires companies to pay aone-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. As of December 31, 2017, we had not completed our analysis of all aspectsSection 21E of the Tax Act. However, we have made a provisional estimate for its effect on our existing deferred tax balances and theone-time transition tax. We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverseSecurities Exchange Act of 1934, as amended, including in the future, which is generally 21%. We are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.
Forward-Looking Information
Certain statements throughout Part II, Item 7, Management’s7. Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere, relating to, among other things, the potential impacts of the COVID-19 pandemic and steps the Company plans to take in this report are forward-lookingresponse thereto and thus reflectgoals, plans and projections regarding the Company’s current expectationsCompany's financial position, results of operations, market position, capacity, fleet, product development, ESG targets and beliefs with respect to certain current and future events and anticipated financial and operating performance.business strategy. Such forward-looking statements are based on historical performance and will be subject to manycurrent expectations, estimates, forecasts and projections about the Company's future financial results, goals, plans and objectives and involve inherent risks, assumptions and uncertainties, relatingknown or unknown, including internal or external factors that could delay, divert or change any of them, that are difficult to predict, may be beyond the Company’s operationsCompany's control and business environment that maycould cause actualthe Company's future financial results, goals, plans and objectives to differ materially from any future resultsthose expressed in, or implied in such forward-lookingby, the statements. Words such as “expects,” “will,” “plans,” “anticipates,” “indicates,” “believes,” “estimates,” “forecast,” “guidance,” “outlook,” “goals”"should," "could," "would," "will," "may," "expects," "plans," "intends," "anticipates," "indicates," "remains," "believes," "estimates," "projects," "forecast," "guidance," "outlook," "goals", "targets" and other words and terms of similar expressionsmeaning and expression are intended to identify forward-looking statements.
Additionally,statements, although not all forward-looking statements includecontain such terms.All statements, other than those that do not relate solely to historical facts, such asare forward-looking statements.
Additionally, forward-looking statements
whichinclude conditional statements and statements that identify uncertainties or trends, discuss the possible future effects of
current known trends or uncertainties, or
whichthat 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 us on the date of this report. We undertake 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.law or regulation.
Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: generalthe adverse impacts of the ongoing COVID-19 global pandemic on our business, operating results, financial condition and liquidity; execution risks associated with our strategic operating plan; changes in our network strategy or other factors outside our control resulting in less economic conditions (including interest rates, foreign currency exchange rates, investmentaircraft orders, costs related to modification or credit market conditions, crude oil prices, coststermination of aircraft fuelorders or entry into less favorable aircraft orders, as well as any inability to accept or integrate new aircraft into our fleet as planned; any failure to effectively manage, and energy refining capacity in relevant markets); economicreceive anticipated benefits and political instabilityreturns from, acquisitions, divestitures, investments, joint ventures and other risksportfolio actions; adverse publicity, harm to our brand, reduced travel demand, potential tort liability and voluntary or mandatory operational restrictions as a result of doingan accident, catastrophe or incident involving us, our regional carriers, our codeshare partners or another airline; the highly competitive nature of the global airline industry and susceptibility of the industry to price discounting and changes in capacity, including as a result of alliances, joint business globally; demand for travelarrangements or other consolidations; our reliance on a limited number of suppliers to source a majority of our aircraft and certain parts, and the impact that globalof any failure to obtain timely deliveries, additional equipment or support from any of these suppliers; disruptions to our regional network and United Express flights provided by third-party regional carriers; unfavorable economic and political conditions have on customer travel patterns; competitive pressures on pricing and on demand; demand for transportation in the markets in which we operate; our capacity decisionsUnited States and the capacity decisions of our competitors; the effects of any hostilities, act of war or terrorist attack; the effects of any technology failures or cybersecurity breaches; the impact of regulatory, investigativeglobally; reliance on third-party service providers and legal proceedings and legal compliance risks; disruptions to our regional network; 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; costs associated with any modification or termination of our aircraft orders; potential reputational or other impact from adverse events in our operations, the operations of our regional carriers or the operations of our code share partners; our ability to attract and retain customers; 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; the impact of any management changes;significant failure of these parties to perform as expected, or interruptions in our abilityrelationships with these providers or their provision of services; extended interruptions or disruptions in service at major airports where we operate and space, facility and infrastructure constrains at our hubs or other airports; geopolitical conflict, terrorist attacks or security events; any damage to cost-effectively hedge against increases in the price of aircraft fuel if we decideour reputation or brand image; our reliance on technology and automated systems to do so; any potential realized or unrealized gains or losses related to any fuel or currency hedging programs; labor costs;operate our ability to maintain satisfactory labor relationsbusiness and the resultsimpact of any collective bargaining agreement process withsignificant failure or disruption of, or failure to effectively integrate and implement, the technology or systems; increasing privacy and data security obligations or a significant data breach; increased use of social media platforms by us, our employees and others; the impacts of union groups; any disruptions to operations due to any potential actions by our labor groups; an outbreak of a disease that affects travel demanddisputes, employee strikes or travel behavior; U.S. or foreign governmental legislation, regulationslowdowns, and other labor-related disruptions on our operations; any failure to attract, train or retain skilled personnel, including our senior management team or other key employees; the monetary and operational costs of compliance with extensive government regulation of the airline industry; current or future litigation and regulatory actions, (including Open Skies agreements and environmental regulations); industry consolidation or changes in airline alliances; our abilityfailure to comply with the terms of any settlement, order or arrangement relating to these
actions; costs, liabilities and risks associated with environmental regulation and climate change, including our
variousclimate goals; high and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel; the impacts of our significant amount of financial leverage from fixed obligations, the possibility we may seek material amounts of additional financial liquidity in the short-term, and the impacts of insufficient liquidity on our financial condition and business; failure to comply with financial and other covenants governing our debt, including our MileagePlus® financing
arrangements;agreements; the
costs and availabilityimpacts of
financing;the proposed phase out of the London interbank offer rate; limitations on our ability to
maintain adequate liquidity; the costs and availability of aviation and other insurance; weather conditions; our ability to utilizeuse our net operating
lossesloss carryforwards and certain other tax attributes to offset future taxable
income;income for U.S. federal income tax purposes; our failure to realize the
impact of changes in tax laws; the successfull value of our
investmentsintangible assets or our long-lived assets, causing us to record impairments; fluctuations in
airlinesthe price of our common stock; the impacts of seasonality and other factors associated with the airline industry; increases in
other parts of the world;insurance costs or inadequate insurance coverage 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.
The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties. In addition, certain forward-looking outlook provided in this report relies on assumptions about the duration and severity of the COVID-19 pandemic, the timing of the return to a more stable business environment, the volatility of aircraft fuel prices, customer behavior changes and return in demand for air travel, among other things (together, the "Recovery Process"). If the actual Recovery Process differs materially from our assumptions, the impact of the COVID-19 pandemic on our business could be worse than expected, and our actual results may be negatively impacted and may vary materially from our expectations and projections. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change. For instance, we regularly monitor future demand and booking trends and adjust capacity, as needed. As such, our actual flown capacity may differ materially from currently published flight schedules or current estimations.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk resulting from changes in currency exchange rates and interest rates. These risks, along with other business risks, impact our cost of capital. It is our policy to manage our debt structure and foreign exchange exposure in order to manage capital costs, control financial risks and maintain financial flexibility over the long term. In managing market risks, we may employ derivatives according to documented policies and procedures, including interest rate swaps, interest rate locks, foreign currency exchange contracts and combined interest rate foreign currency contracts (cross-currency swaps). We do not use derivatives for trading or speculative purposes. We do not foresee significant changes in the strategies we use to manage market risk in the near future. All of our financial instruments, including derivatives, are subject to counterparty credit risk considered as part of the overall fair value measurement.
Interest Rates. Our net income is affected by fluctuations in interest rates (e.g. interest expense on variable rate debt and interest income earned on short-term investments). The Company’sCompany's policy is to manage interest rate risk through a combination of fixed and variable rate debt. The following table summarizes information related to the Company’sCompany's interest rate market risk at December 31, 2021 (in millions): | | | | | | | | |
| | | 2017 | | | 2016 | |
Variable rate debt | | | | | | | | |
Carrying value of variable rate debt at December 31 | | $ | 3,342 | | | $ | 2,582 | |
| Impact of 100 basis point increase on projected interest expense for the following year | | | 33 | | | | 25 | |
Fixed rate debt | | | | | | | | |
Carrying value of fixed rate debt at December 31 | | | 9,926 | | | | 8,185 | |
Fair value of fixed rate debt at December 31 | | | 10,349 | | | | 8,469 | |
Impact of 100 basis point increase in market rates on fair value | | | (403) | | | | (340) | |
| | | | | | | |
| | | |
| Variable rate debt | | | |
| Carrying value of variable rate debt at December 31 | $ | 13,003 | | | |
| Impact of 100 basis point increase on projected interest expense for the following year | 98 | | | |
| Fixed rate debt | | | |
| Carrying value of fixed rate debt at December 31 | 20,360 | | | |
| Fair value of fixed rate debt at December 31 | 21,514 | | | |
| Impact of 100 basis point increase in market rates on fair value | (657) | | | |
LIBOR is being phased out starting on January 1, 2022 for the one-week and two-month USD LIBOR settings and starting on July 1, 2023 for the remaining USD LIBOR settings. Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR may adversely impact our interest rates and related interest expense. See Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Other Liquidity Matters, of this report for more information on interest expense. Risks and uncertainties related to the LIBOR phase out are further described in Part I, Item 1A. Risk Factors— "The proposed phase out of the London interbank offer rate could have a material adverse effect on us."
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
20172021 levels, a 100 basis point increase in interest rates would result in a corresponding increase in the
Company’sCompany's interest income of approximately
$45$178 million during
2018.2022.
Commodity Price Risk (Aircraft Fuel). The price level of aircraft fuel can significantly affect the Company’sCompany's operations, results of operations, financial position and liquidity. 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. The Company’sCompany's current strategy is to not enter into transactions to hedge fuel price volatility, although the Company regularly reviews its policy based on market conditions and other factors.
The Company’s 2018 forecasted fuel consumption is presently approximately four billion gallons, and based on this forecast, a one dollarA one-dollar change in the price of a barrel of
crude oilaircraft fuel would change the
Company’sCompany's annual fuel expense by approximately
$96 million.$102 million, assuming flying levels similar to 2019.
Foreign Currency.The Company generates revenues and incurs expenses in numerous foreign currencies. Changes in foreign currency exchange rates impact the Company’sCompany's results of operations through changes in the dollar value of foreign currency-denominated operating revenues and expenses. Some of the Company’sCompany's more significant foreign currency exposures include the Canadian dollar, Chinese renminbi, European euro, British pound and Japanese yen. The Company’sCompany's current strategy is to not enter into transactions to hedge its foreign currency sales,exposure, although the Company regularly reviews its policy based on market conditions and other factors. The result of a uniform 10 percent1% strengthening in the value of the U.S. dollar from December 31, 20172021 levels relative to each of the currencies in which the Company has foreign currency exposure would result in a decrease inpre-tax income of approximately $245$14 million for the year ending December 31, 2018.2022. This sensitivity analysis was prepared based upon projected 20182022 foreign currency-denominated revenues and expenses as of December 31, 2017.2021.
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
United ContinentalAirlines Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of United
ContinentalAirlines Holdings, Inc. (the
“Company”"Company") as of December 31,
20172021 and
2016,2020, the related consolidated statements of operations, comprehensive income (loss), cash flows, and
stockholders’stockholders' equity for each of the three years in the period ended December 31,
2017,2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the
“consolidated"consolidated financial
statements”statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31,
20172021 and
2016,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2017,2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB)("PCAOB"), the
Company’sCompany's internal control over financial reporting as of December 31,
2017,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February
22, 2018,18, 2022, expressed an unqualified opinion thereon.
These financial statements are the responsibility of the
Company’sCompany's management. Our responsibility is to express an opinion on the
Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| | | | | | | | |
| | Indefinite-lived Intangible Asset (China Route Authorities) Impairment Analysis |
| | |
| Description of the matter | | At December 31, 2021, the carrying value of the Company's China route authorities indefinite-lived intangible assets (the China intangible assets) was $1.02 billion. As discussed in Note 1 of the consolidated financial statements, 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. |
|
| Auditing management's annual China intangible assets impairment test was complex and highly judgmental due to the significant estimation required in determining the fair value of the assets. The fair value estimate was sensitive to significant assumptions such as revenue growth rate, operating margin and the discount rate, each of which is affected by expectations about future market or economic conditions. As a result of the subjectivity of the assumptions, adverse changes to management's estimates could reduce the underlying cash flows used to estimate fair value and trigger impairment charges. |
| | |
| How we addressed the matter in our audit | | We tested the Company's design and operating effectiveness of internal controls that address the risk of material misstatement relating to the estimate of fair value of the China intangible assets used in the annual impairment test. This included testing controls over management's review of the significant assumptions used in the discounted cash flow methodology, including revenue growth rate, operating margin and the discount rate. |
|
| To test the estimated fair value of the Company's China intangible assets, we performed audit procedures that included, among others, assessing the fair value methodology used by management and evaluating the significant assumptions used in the valuation model. We compared significant assumptions to current industry, market and economic trends, and to the Company's historical results. We assessed the historical accuracy of management's estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the China intangible assets that would result from changes in assumptions. We also involved a valuation specialist to assist in our evaluation of the Company's valuation methodology and discount rate. |
| | |
| | Deferred Tax Assets—Valuation Allowance |
| | |
| Description of the matter | | As more fully described in Note 6 to the consolidated financial statements, at December 31, 2021, the Company had deferred tax assets of $7.5 billion. In addition, the Company had deferred tax liabilities available to offset deferred tax assets of $6.2 billion. Deferred tax assets are reduced by a valuation allowance if, based on the weight of all available evidence, in management's judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. |
| |
| Auditing management's assessment of the realizability of its deferred tax assets involved complex auditor judgment because management's judgement involves significant assumptions about the ability to generate future taxable income that may be affected by future market or economic conditions. |
| | |
| How we addressed the matter in our audit | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risks of material misstatement relating to the realizability of deferred tax assets. This included controls over management's scheduling of the future reversal of existing taxable temporary differences (deferred tax liabilities) and projections of future taxable income. |
| |
| Among other audit procedures performed, we tested the Company's scheduling of the reversal of existing temporary taxable differences and tested the underlying data used to schedule the reversals. We evaluated the assumptions used by the Company to develop projections of future taxable income and tested the completeness and accuracy of the underlying data used in its projections. For example, we compared the projections of future taxable income with the actual results of prior periods, as well as management's consideration of current industry and economic trends. |
| | |
We have served as the
Company’sCompany's auditor since 2009.
February 22, 201818, 2022
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholder and the Board of Directors ofUnited Airlines, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of United Airlines, Inc. (the
“Company”"Company") as of December 31,
20172021 and
2016,2020, and the related consolidated statements of operations, comprehensive income (loss), cash flows, and
stockholder’sstockholder's equity, for each of the three years in the period ended December 31,
2017,2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the
“consolidated"consolidated financial
statements”statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31,
20172021 and
2016,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2017,2021, in conformity with U.S. generally accepted accounting principles.
These financial statements are the responsibility of the
Company’sCompany's management. Our responsibility is to express an opinion on the
Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB)("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of the
Company’sCompany's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’sCompany's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| | | | | | | | |
| | Indefinite-lived Intangible Asset (China Route Authorities) Impairment Analysis |
| | |
| Description of the matter | | At December 31, 2021, the carrying value of the Company's China route authorities indefinite-lived intangible assets (the China intangible assets) was $1.02 billion. As discussed in Note 1 of the consolidated financial statements, 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. |
| |
| Auditing management's annual China intangible assets impairment test was complex and highly judgmental due to the significant estimation required in determining the fair value of the assets. The fair value estimate was sensitive to significant assumptions such as revenue growth rate, operating margin and the discount rate, each of which is affected by expectations about future market or economic conditions. As a result of the subjectivity of the assumptions, adverse changes to management's estimates could reduce the underlying cash flows used to estimate fair value and trigger impairment charges. |
| | |
| How we addressed the matter in our audit | | We tested the Company's design and operating effectiveness of internal controls that address the risk of material misstatement relating to the estimate of fair value of the China intangible assets used in the annual impairment test. This included testing controls over management's review of the significant assumptions used in the discounted cash flow methodology, including revenue growth rate, operating margin and the discount rate. |
| |
| To test the estimated fair value of the Company's China intangible assets, we performed audit procedures that included, among others, assessing the fair value methodology used by management and evaluating the significant assumptions used in the valuation model. We compared significant assumptions to current industry, market and economic trends, and to the Company's historical results. We assessed the historical accuracy of management's estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the China intangible assets that would result from changes in assumptions. We also involved a valuation specialist to assist in our evaluation of the Company's valuation methodology and discount rate. |
| | |
| | Deferred Tax Assets - Valuation Allowance |
| | |
| Description of the matter | | As more fully described in Note 6 to the consolidated financial statements, at December 31, 2021, the Company had deferred tax assets of $7.5 billion. In addition, the Company had deferred tax liabilities available to offset deferred tax assets of $6.2 billion. Deferred tax assets are reduced by a valuation allowance if, based on the weight of all available evidence, in management’s judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. |
| |
| Auditing management's assessment of the realizability of its deferred tax assets involved complex auditor judgment because management's judgement involves significant assumptions about the ability to generate future taxable income that may be affected by future market or economic conditions. |
| | |
| How we addressed the matter in our audit | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risks of material misstatement relating to the realizability of deferred tax assets. This included controls over management's scheduling of the future reversal of existing taxable temporary differences (deferred tax liabilities) and projections of future taxable income. |
| |
| Among other audit procedures performed, we tested the Company's scheduling of the reversal of existing temporary taxable differences and tested the underlying data used to schedule the reversals. We evaluated the assumptions used by the Company to develop projections of future taxable income and tested the completeness and accuracy of the underlying data used in its projections. For example, we compared the projections of future taxable income with the actual results of prior periods, as well as management's consideration of current industry and economic trends. |
| | |
We have served as the
Company’sCompany's auditor since 2009.
February 22, 201818, 2022
UNITED
CONTINENTALAIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS
(In millions, except per share amounts)
| | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | |
Operating revenue: | | | | | | | | | | | | |
Passenger—Mainline | | $ | 26,552 | | | $ | 25,414 | | | $ | 26,333 | |
Passenger—Regional | | | 5,852 | | | | 6,043 | | | | 6,452 | |
| | | | | | | | | | | | |
Total passenger revenue | | | 32,404 | | | | 31,457 | | | | 32,785 | |
Cargo | | | 1,035 | | | | 876 | | | | 937 | |
Other operating revenue | | | 4,297 | | | | 4,223 | | | | 4,142 | |
| | | | | | | | | | | | |
Total operating revenue | | | 37,736 | | | | 36,556 | | | | 37,864 | |
| | | | | | | | | | | | |
| Operating expense: | | | | | | | | | | | | |
Salaries and related costs | | | 11,045 | | | | 10,275 | | | | 9,713 | |
Aircraft fuel | | | 6,913 | | | | 5,813 | | | | 7,522 | |
Landing fees and other rent | | | 2,240 | | | | 2,165 | | | | 2,203 | |
Regional capacity purchase | | | 2,232 | | | | 2,197 | | | | 2,290 | |
Depreciation and amortization | | | 2,149 | | | | 1,977 | | | | 1,819 | |
Aircraft maintenance materials and outside repairs | | | 1,856 | | | | 1,749 | | | | 1,651 | |
Distribution expenses | | | 1,349 | | | | 1,303 | | | | 1,342 | |
Aircraft rent | | | 621 | | | | 680 | | | | 754 | |
Special charges (Note 14) | | | 176 | | | | 638 | | | | 326 | |
Other operating expenses | | | 5,657 | | | | 5,421 | | | | 5,078 | |
| | | | | | | | | | | | |
Total operating expenses | | | 34,238 | | | | 32,218 | | | | 32,698 | |
| | | | | | | | | | | | |
| Operating income | | | 3,498 | | | | 4,338 | | | | 5,166 | |
| | | | | | | | | | | | |
Nonoperating income (expense): | | | | | | | | | | | | |
Interest expense | | | (643) | | | | (614) | | | | (669) | |
Interest capitalized | | | 84 | | | | 72 | | | | 49 | |
Interest income | | | 57 | | | | 42 | | | | 25 | |
Miscellaneous, net (Note 14) | | | 3 | | | | (19) | | | | (352) | |
| | | | | | | | | | | | |
Total nonoperating expense, net | | | (499) | | | | (519) | | | | (947) | |
| | | | | | | | | | | | |
| Income before income taxes | | | 2,999 | | | | 3,819 | | | | 4,219 | |
Income tax expense (benefit) (Note 14) | | | 868 | | | | 1,556 | | | | (3,121) | |
| | | | | | | | | | | | |
Net income | | $ | 2,131 | | | $ | 2,263 | | | $ | 7,340 | |
| | | | | | | | | | | | |
Earnings per share, basic | | $ | 7.04 | | | $ | 6.86 | | | $ | 19.52 | |
| | | | | | | | | | | | |
Earnings per share, diluted | | $ | 7.02 | | | $ | 6.85 | | | $ | 19.47 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Operating revenue: | | | | | |
| Passenger revenue | $ | 20,197 | | | $ | 11,805 | | | $ | 39,625 | |
| Cargo | 2,349 | | | 1,648 | | | 1,179 | |
| Other operating revenue | 2,088 | | | 1,902 | | | 2,455 | |
| Total operating revenue | 24,634 | | | 15,355 | | | 43,259 | |
| Operating expense: | | | | | |
| Salaries and related costs | 9,566 | | | 9,522 | | | 12,071 | |
| Aircraft fuel | 5,755 | | | 3,153 | | | 8,953 | |
| Depreciation and amortization | 2,485 | | | 2,488 | | | 2,288 | |
| Landing fees and other rent | 2,416 | | | 2,127 | | | 2,543 | |
| Regional capacity purchase | 2,147 | | | 2,039 | | | 2,849 | |
| Aircraft maintenance materials and outside repairs | 1,316 | | | 858 | | | 1,794 | |
| Distribution expenses | 677 | | | 459 | | | 1,651 | |
| Aircraft rent | 228 | | | 198 | | | 288 | |
| Special charges (credits) | (3,367) | | | (2,616) | | | 246 | |
| Other operating expenses | 4,433 | | | 3,486 | | | 6,275 | |
| Total operating expense | 25,656 | | | 21,714 | | | 38,958 | |
| Operating income (loss) | (1,022) | | | (6,359) | | | 4,301 | |
| | | | | |
| Nonoperating income (expense): | | | | | |
| Interest expense | (1,657) | | | (1,063) | | | (731) | |
| Interest capitalized | 80 | | | 71 | | | 85 | |
| Interest income | 36 | | | 50 | | | 133 | |
| Unrealized gains (losses) on investments, net | (34) | | | (194) | | | 153 | |
| Miscellaneous, net | 40 | | | (1,327) | | | (27) | |
| Total nonoperating expense, net | (1,535) | | | (2,463) | | | (387) | |
| Income (loss) before income taxes | (2,557) | | | (8,822) | | | 3,914 | |
| Income tax expense (benefit) | (593) | | | (1,753) | | | 905 | |
| Net income (loss) | $ | (1,964) | | | $ | (7,069) | | | $ | 3,009 | |
| Earnings (loss) per share, basic | $ | (6.10) | | | $ | (25.30) | | | $ | 11.63 | |
| Earnings (loss) per share, diluted | $ | (6.10) | | | $ | (25.30) | | | $ | 11.58 | |
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
UNITED
CONTINENTALAIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(In millions)
| | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | |
Net income | | $ | 2,131 | | | $ | 2,263 | | | $ | 7,340 | |
| | | | | | | | | | | | |
Other comprehensive income (loss), net change related to: | | | | | | | | | | | | |
Employee benefit plans, net of taxes | | | (195) | | | | (313) | | | | 70 | |
Fuel derivative financial instruments, net of taxes | | | 1 | | | | 316 | | | | 182 | |
Investments and other, net of taxes | | | (6) | | | | (1) | | | | (4) | |
| | | | | | | | | | | | |
Total other comprehensive income (loss), net | | | (200) | | | | 2 | | | | 248 | |
| | | | | | | | | | | | |
Total comprehensive income, net | | $ | 1,931 | | | $ | 2,265 | | | $ | 7,588 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | | | | |
| Net income (loss) | $ | (1,964) | | | $ | (7,069) | | | $ | 3,009 | |
| | | | | |
| Other comprehensive income (loss), net of tax: | | | | | |
| Employee benefit plans | 199 | | | (421) | | | 80 | |
| Investments and other | (2) | | | — | | | 5 | |
| Total other comprehensive income (loss), net of tax | 197 | | | (421) | | | 85 | |
| Total comprehensive income (loss), net | $ | (1,767) | | | $ | (7,490) | | | $ | 3,094 | |
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
UNITED AIRLINES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
| | | | | | | | | | | |
| At December 31, |
| ASSETS | 2021 | | 2020 |
| Current assets: | | | |
| Cash and cash equivalents | $ | 18,283 | | | $ | 11,269 | |
| Short-term investments | 123 | | | 414 | |
| Restricted cash | 37 | | | 255 | |
| Receivables, less allowance for credit losses (2021—$28; 2020—$78) | 1,663 | | | 1,295 | |
| Aircraft fuel, spare parts and supplies, less obsolescence allowance (2021—$546; 2020—$478) | 983 | | | 932 | |
| Prepaid expenses and other | 745 | | | 635 | |
| Total current assets | 21,834 | | | 14,800 | |
| Operating property and equipment: | | | |
| Flight equipment | 39,584 | | | 38,218 | |
| Other property and equipment | 8,764 | | | 8,511 | |
| Purchase deposits for flight equipment | 2,215 | | | 1,166 | |
| Total operating property and equipment | 50,563 | | | 47,895 | |
| Less—Accumulated depreciation and amortization | (18,489) | | | (16,429) | |
| Total operating property and equipment, net | 32,074 | | | 31,466 | |
| | | |
| Operating lease right-of-use assets | 4,645 | | | 4,537 | |
| | | |
| Other assets: | | | |
| Goodwill | 4,527 | | | 4,527 | |
| Intangibles, less accumulated amortization (2021—$1,544; 2020—$1,495) | 2,803 | | | 2,838 | |
| Restricted cash | 213 | | | 218 | |
| Deferred income taxes | 659 | | | 131 | |
| Notes receivable, less allowance for credit losses (2021—$622; 2020—$522) | 76 | | | 31 | |
| Investments in affiliates and other, net | 1,344 | | | 1,000 | |
| Total other assets | 9,622 | | | 8,745 | |
| Total assets | $ | 68,175 | | | $ | 59,548 | |
UNITED
CONTINENTALAIRLINES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
| | | | | | | | |
| | | At December 31, | |
| | | | | | | | |
| ASSETS | | 2017 | | | 2016 | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 1,482 | | | $ | 2,179 | |
Short-term investments | | | 2,316 | | | | 2,249 | |
Receivables, less allowance for doubtful accounts (2017—$7; 2016—$10) | | | 1,340 | | | | 1,176 | |
Aircraft fuel, spare parts and supplies, less obsolescence allowance
(2017—$354; 2016—$295) | | | 924 | | | | 873 | |
Prepaid expenses and other | | | 1,051 | | | | 832 | |
| | | | | | | | |
Total current assets | | | 7,113 | | | | 7,309 | |
| | | | | | | | |
Operating property and equipment: | | | | | | | | |
Owned— | | | | | | | | |
Flight equipment | | | 28,692 | | | | 25,873 | |
Other property and equipment | | | 6,946 | | | | 5,652 | |
| | | | | | | | |
Total owned property and equipment | | | 35,638 | | | | 31,525 | |
Less—Accumulated depreciation and amortization | | | (11,159) | | | | (9,975) | |
| | | | | | | | |
Total owned property and equipment, net | | | 24,479 | | | | 21,550 | |
| | | | | | | | |
| | | | | | | | |
Purchase deposits for flight equipment | | | 1,344 | | | | 1,059 | |
| | | | | | | | |
Capital leases— | | | | | | | | |
Flight equipment | | | 1,151 | | | | 1,319 | |
Other property and equipment | | | 11 | | | | 331 | |
| | | | | | | | |
Total capital leases | | | 1,162 | | | | 1,650 | |
Less—Accumulated amortization | | | (777) | | | | (941) | |
| | | | | | | | |
Total capital leases, net | | | 385 | | | | 709 | |
| | | | | | | | |
Total operating property and equipment, net | | | 26,208 | | | | 23,318 | |
| | | | | | | | |
Other assets: | | | | | | | | |
Goodwill | | | 4,523 | | | | 4,523 | |
Intangibles, less accumulated amortization (2017—$1,313; 2016—$1,234) | | | 3,539 | | | | 3,632 | |
Deferred income taxes | | | — | | | | 655 | |
Restricted cash | | | 91 | | | | 124 | |
Investments in affiliates and other, net | | | 852 | | | | 579 | |
| | | | | | | | |
Total other assets | | | 9,005 | | | | 9,513 | |
| | | | | | | | |
Total assets | | $ | 42,326 | | | $ | 40,140 | |
| | | | | | | | |
UNITED CONTINENTAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
| | | | | | | | |
| | | At December 31, | |
| | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | 2017 | | | 2016 | |
Current liabilities: | | | | | | | | |
Advance ticket sales | | $ | 3,876 | | | $ | 3,730 | |
Frequent flyer deferred revenue | | | 2,176 | | | | 2,135 | |
Accounts payable | | | 2,196 | | | | 2,139 | |
Accrued salaries and benefits | | | 2,166 | | | | 2,307 | |
Current maturities of long-term debt | | | 1,565 | | | | 849 | |
Current maturities of capital leases | | | 128 | | | | 116 | |
Other | | | 569 | | | | 1,010 | |
| | | | | | | | |
Total current liabilities | | | 12,676 | | | | 12,286 | |
| | | | | | | | |
| | | | | | | | |
Long-term debt | | | 11,703 | | | | 9,918 | |
Long-term obligations under capital leases | | | 996 | | | | 822 | |
| | | | | | | | |
Other liabilities and deferred credits: | | | | | | | | |
Frequent flyer deferred revenue | | | 2,565 | | | | 2,748 | |
Postretirement benefit liability | | | 1,602 | | | | 1,581 | |
Pension liability | | | 1,921 | | | | 1,892 | |
Advanced purchase of miles | | | — | | | | 430 | |
Deferred income taxes | | | 225 | | | | — | |
Lease fair value adjustment, net | | | 198 | | | | 277 | |
Other | | | 1,634 | | | | 1,527 | |
| | | | | | | | |
Total other liabilities and deferred credits | | | 8,145 | | | | 8,455 | |
| | | | | | | | |
Commitments and contingencies | | | | | | | | |
Stockholders’ equity: | | | | | | | | |
Preferred stock | | | — | | | | — | |
Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 286,973,195 and 314,612,744 shares at December 31, 2017 and 2016, respectively | | | 3 | | | | 3 | |
Additional capital invested | | | 6,098 | | | | 6,569 | |
Retained earnings | | | 4,621 | | | | 3,427 | |
Stock held in treasury, at cost | | | (769) | | | | (511) | |
Accumulated other comprehensive loss | | | (1,147) | | | | (829) | |
| | | | | | | | |
Total stockholders’ equity | | | 8,806 | | | | 8,659 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 42,326 | | | $ | 40,140 | |
| | | | | | | | |
| | | | | | | | | | | |
| | At December 31, |
| LIABILITIES AND STOCKHOLDERS' EQUITY | 2021 | | 2020 |
| Current liabilities: | | | |
| Accounts payable | $ | 2,562 | | | $ | 1,595 | |
| Accrued salaries and benefits | 2,121 | | | 1,960 | |
| Advance ticket sales | 6,354 | | | 4,833 | |
| Frequent flyer deferred revenue | 2,239 | | | 908 | |
| Current maturities of long-term debt | 3,002 | | | 1,911 | |
| Current maturities of other financial liabilities | 834 | | | 18 | |
| Current maturities of operating leases | 556 | | | 612 | |
| Current maturities of finance leases | 76 | | | 182 | |
| Other | 560 | | | 706 | |
| Total current liabilities | 18,304 | | | 12,725 | |
| | | |
| Long-term debt | 30,361 | | | 24,836 | |
| Long-term obligations under operating leases | 5,152 | | | 4,986 | |
| Long-term obligations under finance leases | 219 | | | 224 | |
| | | |
| Other liabilities and deferred credits: | | | |
| Frequent flyer deferred revenue | 4,043 | | | 5,067 | |
| Pension liability | 1,920 | | | 2,460 | |
| Postretirement benefit liability | 1,000 | | | 994 | |
| Other financial liabilities | 863 | | | 1,140 | |
| Other | 1,284 | | | 1,156 | |
| Total other liabilities and deferred credits | 9,110 | | | 10,817 | |
| Commitments and contingencies | 0 | | 0 |
| Stockholders' equity: | | | |
| Preferred stock | — | | | — | |
| Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 323,810,825 and 311,845,232 shares at December 31, 2021 and 2020, respectively | 4 | | | 4 | |
| Additional capital invested | 9,156 | | | 8,366 | |
| Stock held in treasury, at cost | (3,814) | | | (3,897) | |
| Retained earnings | 625 | | | 2,626 | |
| Accumulated other comprehensive loss | (942) | | | (1,139) | |
| Total stockholders' equity | 5,029 | | | 5,960 | |
| Total liabilities and stockholders' equity | $ | 68,175 | | | $ | 59,548 | |
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
UNITED
CONTINENTALAIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions)
| | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | |
Operating Activities: | | | | | | | | | | | | |
Net income | | $ | 2,131 | | | $ | 2,263 | | | $ | 7,340 | |
Adjustments to reconcile net income to net cash provided by operating activities - | | | | | | | | | | | | |
Deferred income taxes | | | 945 | | | | 1,648 | | | | (3,177) | |
Depreciation and amortization | | | 2,149 | | | | 1,977 | | | | 1,819 | |
Special charges,non-cash portion | | | 35 | | | | 391 | | | | 247 | |
Other operating activities | | | 142 | | | | 109 | | | | 115 | |
Changes in operating assets and liabilities - | | | | | | | | | | | | |
Decrease in fuel hedge collateral | | | — | | | | 26 | | | | 551 | |
Decrease in fuel derivatives | | | — | | | | (20) | | | | (305) | |
Decrease in other liabilities | | | (478) | | | | (446) | | | | (180) | |
Decrease in advanced purchase of miles | | | (865) | | | | (249) | | | | (224) | |
Increase (decrease) in frequent flyer deferred revenue | | | (142) | | | | (60) | | | | 6 | |
Increase in other assets | | | (533) | | | | (298) | | | | (160) | |
Increase (decrease) in accounts payable | | | 66 | | | | 239 | | | | (77) | |
Increase (decrease) in advance ticket sales | | | 146 | | | | (22) | | | | 52 | |
Increase in receivables | | | (183) | | | | (16) | | | | (15) | |
| | | | | | | | | | | | |
Net cash provided by operating activities | | | 3,413 | | | | 5,542 | | | | 5,992 | |
| | | | | | | | | | | | |
Investing Activities: | | | | | | | | | | | | |
Capital expenditures | | | (3,998) | | | | (3,223) | | | | (2,747) | |
Purchases of short-term and other investments | | | (3,241) | | | | (2,768) | | | | (2,517) | |
Proceeds from sale of short-term and other investments | | | 3,177 | | | | 2,712 | | | | 2,707 | |
Proceeds from sale of property and equipment | | | 12 | | | | 28 | | | | 86 | |
Other, net | | | 120 | | | | 13 | | | | (136) | |
| | | | | | | | | | | | |
Net cash used in investing activities | | | (3,930) | | | | (3,238) | | | | (2,607) | |
| | | | | | | | | | | | |
Financing Activities: | | | | | | | | | | | | |
Proceeds from issuance of long-term debt and airport construction financing | | | 2,765 | | | | 808 | | | | 1,073 | |
Repurchases of common stock | | | (1,844) | | | | (2,614) | | | | (1,233) | |
Payments of long-term debt | | | (901) | | | | (1,215) | | | | (2,178) | |
Principal payments under capital leases | | | (124) | | | | (136) | | | | (123) | |
Capitalized financing costs | | | (80) | | | | (64) | | | | (37) | |
Proceeds from the exercise of stock options | | | 2 | | | | 6 | | | | 16 | |
Other, net | | | (13) | | | | 2 | | | | (13) | |
| | | | | | | | | | | | |
Net cash used in financing activities | | | (195) | | | | (3,213) | | | | (2,495) | |
| | | | | | | | | | | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | | (712) | | | | (909) | | | | 890 | |
Cash, cash equivalents and restricted cash at beginning of year | | | 2,303 | | | | 3,212 | | | | 2,322 | |
| | | | | | | | | | | | |
Cash, cash equivalents and restricted cash at end of year | | $ | 1,591 | | | $ | 2,303 | | | $ | 3,212 | |
| | | | | | | | | | | | |
Investing and Financing Activities Not Affecting Cash: | | | | | | | | | | | | |
Property and equipment acquired through the issuance of debt and capital leases | | $ | 935 | | | $ | 386 | | | $ | 866 | |
Equity interest in Republic Airways Holdings, Inc. received in consideration for
bankruptcy claims | | | 92 | | | | — | | | | — | |
Airport construction financing | | | 42 | | | | 91 | | | | 17 | |
Operating lease conversions to capital lease | | | — | | | | 12 | | | | 285 | |
Exchange of convertible notes for common stock | | | — | | | | — | | | | 202 | |
Cash Paid During the Period for: | | | | | | | | | | | | |
Interest | | $ | 571 | | | $ | 584 | | | $ | 660 | |
Income taxes | | | 20 | | | | 14 | | | | 15 | |
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Operating Activities: | | | | | |
| Net income (loss) | $ | (1,964) | | | $ | (7,069) | | | $ | 3,009 | |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities - | | | | | |
| Deferred income tax (benefit) | (583) | | | (1,741) | | | 882 | |
| Depreciation and amortization | 2,485 | | | 2,488 | | | 2,288 | |
| Operating and non-operating special charges, non-cash portion | 32 | | | 1,448 | | | 175 | |
| Unrealized (gains) losses on investments | 34 | | | 194 | | | (153) | |
| Other operating activities | 393 | | | 320 | | | 185 | |
| Changes in operating assets and liabilities - | | | | | |
| (Increase) decrease in receivables | (448) | | | 135 | | | 44 | |
| (Increase) decrease in other assets | (292) | | | 484 | | | (252) | |
| Increase in advance ticket sales | 1,521 | | | 14 | | | 438 | |
| Increase in frequent flyer deferred revenue | 307 | | | 699 | | | 271 | |
| Increase (decrease) in accounts payable | 985 | | | (1,079) | | | 324 | |
| Decrease in other liabilities | (403) | | | (26) | | | (302) | |
| Net cash provided by (used in) operating activities | 2,067 | | | (4,133) | | | 6,909 | |
| Investing Activities: | | | | | |
| Capital expenditures, net of flight equipment purchase deposit returns | (2,107) | | | (1,727) | | | (4,528) | |
| Purchases of short-term and other investments | (68) | | | (552) | | | (2,933) | |
| Proceeds from sale of short-term and other investments | 397 | | | 2,319 | | | 2,996 | |
| Proceeds from sale of property and equipment | 107 | | | 6 | | | 49 | |
| Loans made to others | — | | | — | | | (174) | |
| Other, net | (1) | | | 4 | | | 30 | |
| Net cash provided by (used in) investing activities | (1,672) | | | 50 | | | (4,560) | |
| Financing Activities: | | | | | |
| Repurchases of common stock | — | | | (353) | | | (1,645) | |
| Proceeds from issuance of debt, net of discounts and fees | 11,096 | | | 15,676 | | | 1,786 | |
| Proceeds from equity issuance | 532 | | | 2,103 | | | — | |
| Payments of long-term debt, finance leases and other financing liabilities | (5,205) | | | (4,449) | | | (1,391) | |
| Other, net | (27) | | | (20) | | | (30) | |
| Net cash provided by (used in) financing activities | 6,396 | | | 12,957 | | | (1,280) | |
| Net increase in cash, cash equivalents and restricted cash | 6,791 | | | 8,874 | | | 1,069 | |
| Cash, cash equivalents and restricted cash at beginning of year | 11,742 | | | 2,868 | | | 1,799 | |
| Cash, cash equivalents and restricted cash at end of year | $ | 18,533 | | | $ | 11,742 | | | $ | 2,868 | |
| | | | | |
| Investing and Financing Activities Not Affecting Cash: | | | | | |
| Property and equipment acquired through the issuance of debt, finance leases and other | $ | 814 | | | $ | 1,968 | | | $ | 515 | |
| Right-of-use assets acquired through operating leases | 771 | | | 198 | | | 498 | |
| Equity interest in Avianca Group International Limited ("AVG") received in consideration for a loan | 164 | | | — | | | — | |
| Notes receivable and warrants received for entering into aircraft and other ancillary business agreements | 131 | | | — | | | — | |
| Lease modifications and lease conversions | 123 | | | 527 | | | (2) | |
| | | | | |
| Cash Paid (Refunded) During the Period for: | | | | | |
| Interest | $ | 1,424 | | | $ | 874 | | | $ | 648 | |
| Income taxes | — | | | (29) | | | 29 | |
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
UNITED
CONTINENTALAIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED
STOCKHOLDERS’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, 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | | — | | | | — | | | | — | | | | — | | | | 2,131 | | | | — | | | | 2,131 | |
Other comprehensive loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | (200) | | | | (200) | |
Share-based compensation | | | — | | | | — | | | | 56 | | | | — | | | | — | | | | — | | | | 56 | |
Proceeds from exercise of stock options | | | — | | | | — | | | | 2 | | | | — | | | | — | | | | — | | | | 2 | |
Repurchases of common stock | | | (28) | | | | — | | | | — | | | | (1,844) | | | | — | | | | — | | | | (1,844) | |
Treasury stock retired | | | — | | | | — | | | | (508) | | | | 1,576 | | | | (1,068) | | | | — | | | | — | |
Net treasury stock issued for share-based awards | | | — | | | | — | | | | (21) | | | | 10 | | | | (1) | | | | — | | | | (12) | |
Excess tax benefits from share-based awards | | | — | | | | — | | | | — | | | | — | | | | 14 | | | | — | | | | 14 | |
Reclassification of stranded tax effects (Note 1) | | | — | | | | — | | | | — | | | | — | | | | 118 | | | | (118) | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2017 | | | 287 | | | $ | 3 | | | $ | 6,098 | | | $ | (769) | | | $ | 4,621 | | | $ | (1,147) | | | $ | 8,806 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common
Stock | | Additional
Capital Invested | | Treasury Stock | | Retained Earnings | | Accumulated
Other Comprehensive Income (Loss) | | Total |
| Shares | | Amount | | | | | |
| Balance at December 31, 2018 | 269.9 | | | $ | 3 | | | $ | 6,120 | | | $ | (1,993) | | | $ | 6,715 | | | $ | (803) | | | $ | 10,042 | |
| Net income | — | | | — | | | — | | | — | | | 3,009 | | | — | | | 3,009 | |
| Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 85 | | | 85 | |
| Stock-settled share-based compensation | — | | | — | | | 66 | | | — | | | — | | | — | | | 66 | |
| Repurchases of common stock | (19.2) | | | — | | | — | | | (1,641) | | | — | | | — | | | (1,641) | |
| Stock issued for share-based awards, net of shares withheld for tax | 0.5 | | | — | | | (57) | | | 35 | | | (8) | | | — | | | (30) | |
| Balance at December 31, 2019 | 251.2 | | | 3 | | | 6,129 | | | (3,599) | | | 9,716 | | | (718) | | | 11,531 | |
| Net loss | — | | | — | | | — | | | — | | | (7,069) | | | — | | | (7,069) | |
| Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (421) | | | (421) | |
| Stock-settled share-based compensation | — | | | — | | | 97 | | | — | | | — | | | — | | | 97 | |
| Issuance of common stock | 64.6 | | | 1 | | | 2,102 | | | — | | | — | | | — | | | 2,103 | |
| Repurchases of common stock | (4.4) | | | — | | | — | | | (342) | | | — | | | — | | | (342) | |
| Stock issued for share-based awards, net of shares withheld for tax | 0.4 | | | — | | | (59) | | | 44 | | | (4) | | | — | | | (19) | |
| Warrants issued | — | | | — | | | 97 | | | — | | | — | | | — | | | 97 | |
| Adoption of new accounting standard (a) | — | | | — | | | — | | | — | | | (17) | | | — | | | (17) | |
| Balance at December 31, 2020 | 311.8 | | | 4 | | | 8,366 | | | (3,897) | | | 2,626 | | | (1,139) | | | 5,960 | |
| Net loss | — | | | — | | | — | | | — | | | (1,964) | | | — | | | (1,964) | |
| Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 197 | | | 197 | |
| Stock-settled share-based compensation | — | | | — | | | 232 | | | — | | | — | | | — | | | 232 | |
| Warrants issued | — | | | — | | | 99 | | | — | | | — | | | — | | | 99 | |
| Issuance of common stock | 11.0 | | | — | | | 532 | | | — | | | — | | | — | | | 532 | |
| Stock issued for share-based awards, net of shares withheld for tax | 1.0 | | | — | | | (73) | | | 83 | | | (37) | | | — | | | (27) | |
| Balance at December 31, 2021 | 323.8 | | | $ | 4 | | | $ | 9,156 | | | $ | (3,814) | | | $ | 625 | | | $ | (942) | | | $ | 5,029 | |
(a) Transition adjustment due to the adoption of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses.
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
STATEMENTS OF CONSOLIDATED OPERATIONS
(In millions)
| | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | |
Operating revenue: | | | | | | | | | | | | |
Passenger—Mainline | | $ | 26,552 | | | $ | 25,414 | | | $ | 26,333 | |
Passenger—Regional | | | 5,852 | | | | 6,043 | | | | 6,452 | |
| | | | | | | | | | | | |
Total passenger revenue | | | 32,404 | | | | 31,457 | | | | 32,785 | |
Cargo | | | 1,035 | | | | 876 | | | | 937 | |
Other operating revenue | | | 4,297 | | | | 4,223 | | | | 4,142 | |
| | | | | | | | | | | | |
Total operating revenue | | | 37,736 | | | | 36,556 | | | | 37,864 | |
| | | | | | | | | | | | |
| Operating expense: | | | | | | | | | | | | |
Salaries and related costs | | | 11,045 | | | | 10,275 | | | | 9,713 | |
Aircraft fuel | | | 6,913 | | | | 5,813 | | | | 7,522 | |
Landing fees and other rent | | | 2,240 | | | | 2,165 | | | | 2,203 | |
Regional capacity purchase | | | 2,232 | | | | 2,197 | | | | 2,290 | |
Depreciation and amortization | | | 2,149 | | | | 1,977 | | | | 1,819 | |
Aircraft maintenance materials and outside repairs | | | 1,856 | | | | 1,749 | | | | 1,651 | |
Distribution expenses | | | 1,349 | | | | 1,303 | | | | 1,342 | |
Aircraft rent | | | 621 | | | | 680 | | | | 754 | |
Special charges (Note 14) | | | 176 | | | | 638 | | | | 326 | |
Other operating expenses | | | 5,655 | | | | 5,418 | | | | 5,076 | |
| | | | | | | | | | | | |
Total operating expenses | | | 34,236 | | | | 32,215 | | | | 32,696 | |
| | | | | | | | | | | | |
| Operating income | | | 3,500 | | | | 4,341 | | | | 5,168 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Nonoperating income (expense): | | | | | | | | | | | | |
Interest expense | | | (643) | | | | (614) | | | | (670) | |
Interest capitalized | | | 84 | | | | 72 | | | | 49 | |
Interest income | | | 57 | | | | 42 | | | | 25 | |
Miscellaneous, net (Note 14) | | | 3 | | | | (19) | | | | (351) | |
| | | | | | | | | | | | |
Total nonoperating expense, net | | | (499) | | | | (519) | | | | (947) | |
| | | | | | | | | | | | |
| Income before income taxes | | | 3,001 | | | | 3,822 | | | | 4,221 | |
Income tax expense (benefit) (Note 14) | | | 852 | | | | 1,558 | | | | (3,080) | |
| | | | | | | | | | | | |
Net income | | $ | 2,149 | | | $ | 2,264 | | | $ | 7,301 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Operating revenue: | | | | | |
| Passenger revenue | $ | 20,197 | | | $ | 11,805 | | | $ | 39,625 | |
| Cargo | 2,349 | | | 1,648 | | | 1,179 | |
| Other operating revenue | 2,088 | | | 1,902 | | | 2,455 | |
| Total operating revenue | 24,634 | | | 15,355 | | | 43,259 | |
| Operating expense: | | | | | |
| Salaries and related costs | 9,566 | | | 9,522 | | | 12,071 | |
| Aircraft fuel | 5,755 | | | 3,153 | | | 8,953 | |
| Depreciation and amortization | 2,485 | | | 2,488 | | | 2,288 | |
| Landing fees and other rent | 2,416 | | | 2,127 | | | 2,543 | |
| Regional capacity purchase | 2,147 | | | 2,039 | | | 2,849 | |
| Aircraft maintenance materials and outside repairs | 1,316 | | | 858 | | | 1,794 | |
| Distribution expenses | 677 | | | 459 | | | 1,651 | |
| Aircraft rent | 228 | | | 198 | | | 288 | |
| Special charges (credits) | (3,367) | | | (2,616) | | | 246 | |
| Other operating expenses | 4,431 | | | 3,484 | | | 6,273 | |
| Total operating expense | 25,654 | | | 21,712 | | | 38,956 | |
| Operating income (loss) | (1,020) | | | (6,357) | | | 4,303 | |
| | | | | |
| Nonoperating income (expense): | | | | | |
| Interest expense | (1,657) | | | (1,063) | | | (731) | |
| Interest capitalized | 80 | | | 71 | | | 85 | |
| Interest income | 36 | | | 50 | | | 133 | |
| Unrealized gains (losses) on investments, net | (34) | | | (194) | | | 153 | |
| Miscellaneous, net | 40 | | | (1,327) | | | (27) | |
| Total nonoperating expense, net | (1,535) | | | (2,463) | | | (387) | |
| Income (loss) before income taxes | (2,555) | | | (8,820) | | | 3,916 | |
| Income tax expense (benefit) | (593) | | | (1,753) | | | 905 | |
| Net income (loss) | $ | (1,962) | | | $ | (7,067) | | | $ | 3,011 | |
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(In millions)
| | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | |
Net income | | $ | 2,149 | | | $ | 2,264 | | | $ | 7,301 | |
| | | | | | | | | | | | |
Other comprehensive income (loss), net change related to: | | | | | | | | | | | | |
Employee benefit plans, net of taxes | | | (195) | | | | (313) | | | | 70 | |
Fuel derivative financial instruments, net of taxes | | | 1 | | | | 316 | | | | 182 | |
Investments and other, net of taxes | | | (6) | | | | (1) | | | | (4) | |
| | | | | | | | | | | | |
Total other comprehensive income (loss), net | | | (200) | | | | 2 | | | | 248 | |
| | | | | | | | | | | | |
Total comprehensive income, net | | $ | 1,949 | | | $ | 2,266 | | | $ | 7,549 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | | | | |
| Net income (loss) | $ | (1,962) | | | $ | (7,067) | | | $ | 3,011 | |
| | | | | |
| Other comprehensive income (loss), net of tax: | | | | | |
| Employee benefit plans | 199 | | | (421) | | | 80 | |
| Investments and other | (2) | | | — | | | 5 | |
| Total other comprehensive income (loss), net of tax | 197 | | | (421) | | | 85 | |
| Total comprehensive income (loss), net | $ | (1,765) | | | $ | (7,488) | | | $ | 3,096 | |
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
| | | | | | | | |
| | | At December 31, | |
| | | | | | | | |
| ASSETS | | 2017 | | | 2016 | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 1,476 | | | $ | 2,173 | |
Short-term investments | | | 2,316 | | | | 2,249 | |
Receivables, less allowance for doubtful accounts (2017—$7; 2016—$10) | | | 1,340 | | | | 1,176 | |
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2017—$354; 2016—$295) | | | 924 | | | | 873 | |
Prepaid expenses and other | | | 1,051 | | | | 832 | |
| | | | | | | | |
Total current assets | | | 7,107 | | | | 7,303 | |
| | | | | | | | |
Operating property and equipment: | | | | | | | | |
Owned— | | | | | | | | |
Flight equipment | | | 28,692 | | | | 25,873 | |
Other property and equipment | | | 6,946 | | | | 5,652 | |
| | | | | | | | |
Total owned property and equipment | | | 35,638 | | | | 31,525 | |
Less—Accumulated depreciation and amortization | | | (11,159) | | | | (9,975) | |
| | | | | | | | |
Total owned property and equipment, net | | | 24,479 | | | | 21,550 | |
| | | | | | | | |
| | | | | | | | |
Purchase deposits for flight equipment | | | 1,344 | | | | 1,059 | |
| | | | | | | | |
Capital leases— | | | | | | | | |
Flight equipment | | | 1,151 | | | | 1,319 | |
Other property and equipment | | | 11 | | | | 331 | |
| | | | | | | | |
Total capital leases | | | 1,162 | | | | 1,650 | |
Less—Accumulated amortization | | | (777) | | | | (941) | |
| | | | | | | | |
Total capital leases, net | | | 385 | | | | 709 | |
| | | | | | | | |
Total operating property and equipment, net | | | 26,208 | | | | 23,318 | |
| | | | | | | | |
Other assets: | | | | | | | | |
Goodwill | | | 4,523 | | | | 4,523 | |
Intangibles, less accumulated amortization (2017—$1,313; 2016—$1,234) | | | 3,539 | | | | 3,632 | |
Deferred income taxes | | | — | | | | 612 | |
Restricted cash | | | 91 | | | | 124 | |
Investments in affiliates and other, net | | | 852 | | | | 579 | |
| | | | | | | | |
Total other assets | | | 9,005 | | | | 9,470 | |
| | | | | | | | |
Total assets | | $ | 42,320 | | | $ | 40,091 | |
| | | | | | | | |
57
| | | | | | | | | | | |
| | At December 31, |
| ASSETS | 2021 | | 2020 |
| Current assets: | | | |
| Cash and cash equivalents | $ | 18,283 | | | $ | 11,269 | |
| Short-term investments | 123 | | | 414 | |
| Restricted cash | 37 | | | 255 | |
| Receivables, less allowance for credit losses (2021—$28; 2020—$78) | 1,663 | | | 1,295 | |
| Aircraft fuel, spare parts and supplies, less obsolescence allowance (2021—$546; 2020—$478) | 983 | | | 932 | |
| Prepaid expenses and other | 745 | | | 635 | |
| Total current assets | 21,834 | | | 14,800 | |
| Operating property and equipment: | | | |
| Flight equipment | 39,584 | | | 38,218 | |
| Other property and equipment | 8,764 | | | 8,511 | |
| Purchase deposits for flight equipment | 2,215 | | | 1,166 | |
| Total operating property and equipment | 50,563 | | | 47,895 | |
| Less—Accumulated depreciation and amortization | (18,489) | | | (16,429) | |
| Total operating property and equipment, net | 32,074 | | | 31,466 | |
| | | |
| Operating lease right-of-use assets | 4,645 | | | 4,537 | |
| | | |
| Other assets: | | | |
| Goodwill | 4,527 | | | 4,527 | |
| Intangibles, less accumulated amortization (2021—$1,544; 2020—$1,495) | 2,803 | | | 2,838 | |
| Restricted cash | 213 | | | 218 | |
| Deferred income taxes | 631 | | | 103 | |
| Notes receivable, less allowance for credit losses (2021—$622; 2020—$522) | 76 | | | 31 | |
| Investments in affiliates and other, net | 1,344 | | | 1,000 | |
| Total other assets | 9,594 | | | 8,717 | |
| Total assets | $ | 68,147 | | | $ | 59,520 | |
(continued on next page)
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
| | | | | | | | |
| | | At December 31, | |
| LIABILITIES AND STOCKHOLDER’S EQUITY | | 2017 | | | 2016 | |
Current liabilities: | | | | | | | | |
Advance ticket sales | | $ | 3,876 | | | $ | 3,730 | |
Frequent flyer deferred revenue | | | 2,176 | | | | 2,135 | |
Accounts payable | | | 2,196 | | | | 2,144 | |
Accrued salaries and benefits | | | 2,166 | | | | 2,307 | |
Current maturities of long-term debt | | | 1,565 | | | | 849 | |
Current maturities of capital leases | | | 128 | | | | 116 | |
Other | | | 574 | | | | 1,009 | |
| | | | | | | | |
Total current liabilities | | | 12,681 | | | | 12,290 | |
| | | | | | | | |
| | | | | | | | |
Long-term debt | | | 11,703 | | | | 9,918 | |
Long-term obligations under capital leases | | | 996 | | | | 822 | |
| | | | | | | | |
| Other liabilities and deferred credits: | | | | | | | | |
Frequent flyer deferred revenue | | | 2,565 | | | | 2,748 | |
Postretirement benefit liability | | | 1,602 | | | | 1,581 | |
Pension liability | | | 1,921 | | | | 1,892 | |
Advanced purchase of miles | | | — | | | | 430 | |
Deferred income taxes | | | 252 | | | | — | |
Lease fair value adjustment, net | | | 198 | | | | 277 | |
Other | | | 1,634 | | | | 1,527 | |
| | | | | | | | |
Total other liabilities and deferred credits | | | 8,172 | | | | 8,455 | |
| | | | | | | | |
Commitments and contingencies | | | | | | | | |
Stockholder’s equity: | | | | | | | | |
Common stock at par, $0.01 par value; authorized 1,000 shares; issued and outstanding 1,000 shares at December 31, 2017 and 2016 | | | — | | | | — | |
Additional capital invested | | | 1,787 | | | | 3,573 | |
Retained earnings | | | 8,218 | | | | 5,937 | |
Accumulated other comprehensive loss | | | (1,147) | | | | (829) | |
Receivable from related parties | | | (90) | | | | (75) | |
| | | | | | | | |
Total stockholder’s equity | | | 8,768 | | | | 8,606 | |
| | | | | | | | |
Total liabilities and stockholder’s equity | | $ | 42,320 | | | $ | 40,091 | |
| | | | | | | | |
| | | | | | | | | | | |
| | At December 31, |
| LIABILITIES AND STOCKHOLDER'S EQUITY | 2021 | | 2020 |
| Current liabilities: | | | |
| Accounts payable | $ | 2,562 | | | $ | 1,595 | |
| Accrued salaries and benefits | 2,121 | | | 1,960 | |
| Advance ticket sales | 6,354 | | | 4,833 | |
| Frequent flyer deferred revenue | 2,239 | | | 908 | |
| Current maturities of long-term debt | 3,002 | | | 1,911 | |
| Current maturities of other financial liabilities | 834 | | | 18 | |
| Current maturities of operating leases | 556 | | | 612 | |
| Current maturities of finance leases | 76 | | | 182 | |
| Other | 563 | | | 710 | |
| Total current liabilities | 18,307 | | | 12,729 | |
| | | |
| Long-term debt | 30,361 | | | 24,836 | |
| Long-term obligations under operating leases | 5,152 | | | 4,986 | |
| Long-term obligations under finance leases | 219 | | | 224 | |
| | | |
| Other liabilities and deferred credits: | | | |
| Frequent flyer deferred revenue | 4,043 | | | 5,067 | |
| Pension liability | 1,920 | | | 2,460 | |
| Postretirement benefit liability | 1,000 | | | 994 | |
| Other financial liabilities | 863 | | | 1,140 | |
| Other | 1,284 | | | 1,156 | |
| Total other liabilities and deferred credits | 9,110 | | | 10,817 | |
| Commitments and contingencies | 0 | | 0 |
| Stockholder's equity: | | | |
| Common stock at par, $0.01 par value; authorized 1,000 shares; issued and outstanding 1,000 shares at December 31, 2021 and 2020 | — | | | — | |
| Additional capital invested | 317 | | | 85 | |
| Retained earnings | 2,977 | | | 4,939 | |
| Accumulated other comprehensive loss | (942) | | | (1,139) | |
| Payable to parent | 2,646 | | | 2,043 | |
| Total stockholder's equity | 4,998 | | | 5,928 | |
| Total liabilities and stockholder's equity | $ | 68,147 | | | $ | 59,520 | |
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions)
| | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | |
Operating Activities: | | | | | | | | | | | | |
Net income | | $ | 2,149 | | | $ | 2,264 | | | $ | 7,301 | |
Adjustments to reconcile net income to net cash provided by operating activities - | | | | | | | | | | | | |
Deferred income taxes | | | 929 | | | | 1,650 | | | | (3,136) | |
Depreciation and amortization | | | 2,149 | | | | 1,977 | | | | 1,819 | |
Special charges,non-cash portion | | | 35 | | | | 391 | | | | 247 | |
Other operating activities | | | 142 | | | | 108 | | | | 115 | |
Changes in operating assets and liabilities - | | | | | | | | | | | | |
Decrease in fuel hedge collateral | | | — | | | | 26 | | | | 551 | |
Decrease in fuel derivatives | | | — | | | | (20) | | | | (305) | |
Decrease in other liabilities | | | (479) | | | | (444) | | | | (181) | |
Decrease in advanced purchase of miles | | | (865) | | | | (249) | | | | (224) | |
Increase (decrease) in frequent flyer deferred revenue | | | (142) | | | | (60) | | | | 6 | |
Increase in other assets | | | (533) | | | | (251) | | | | (160) | |
Increase (decrease) in accounts payable | | | 66 | | | | 239 | | | | (77) | |
Increase (decrease) in advance ticket sales | | | 146 | | | | (22) | | | | 52 | |
Increase in receivables | | | (183) | | | | (16) | | | | (15) | |
Increase in intercompany receivables | | | (15) | | | | (58) | | | | (12) | |
| | | | | | | | | | | | |
Net cash provided by operating activities | | | 3,399 | | | | 5,535 | | | | 5,981 | |
| | | | | | | | | | | | |
Investing Activities: | | | | | | | | | | | | |
Capital expenditures | | | (3,998) | | | | (3,223) | | | | (2,747) | |
Purchases of short-term and other investments | | | (3,241) | | | | (2,768) | | | | (2,517) | |
Proceeds from sale of short-term and other investments | | | 3,177 | | | | 2,712 | | | | 2,707 | |
Proceeds from sale of property and equipment | | | 12 | | | | 28 | | | | 86 | |
Other, net | | | 120 | | | | 13 | | | | (136) | |
| | | | | | | | | | | | |
Net cash used in investing activities | | | (3,930) | | | | (3,238) | | | | (2,607) | |
| | | | | | | | | | | | |
Financing Activities: | | | | | | | | | | | | |
Dividend to UAL | | | (1,844) | | | | (2,614) | | | | (1,233) | |
Payments of long-term debt | | | (901) | | | | (1,215) | | | | (2,178) | |
Proceeds from issuance of long-term debt | | | 2,765 | | | | 808 | | | | 1,073 | |
Principal payments under capital leases | | | (124) | | | | (136) | | | | (123) | |
Capitalized financing costs | | | (80) | | | | (64) | | | | (37) | |
UAL contributions related to stock plans | | | 2 | | | | 6 | | | | 16 | |
Other, net | | | 1 | | | | 9 | | | | (2) | |
| | | | | | | | | | | | |
Net cash used in financing activities | | | (181) | | | | (3,206) | | | | (2,484) | |
| | | | | | | | | | | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | | (712) | | | | (909) | | | | 890 | |
Cash, cash equivalents and restricted cash at beginning of year | | | 2,297 | | | | 3,206 | | | | 2,316 | |
| | | | | | | | | | | | |
Cash, cash equivalents and restricted cash at end of year | | $ | 1,585 | | | $ | 2,297 | | | $ | 3,206 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Investing and Financing Activities Not Affecting Cash: | | | | | | | | | | | | |
Property and equipment acquired through the issuance of debt and capital leases | | $ | 935 | | | $ | 386 | | | $ | 866 | |
Equity interest in Republic Airways Holdings, Inc. received in consideration for bankruptcy claims | | | 92 | | | | — | | | | — | |
Airport construction financing | | | 42 | | | | 91 | | | | 17 | |
Operating lease conversions to capital lease | | | — | | | | 12 | | | | 285 | |
Cash Paid During the Period for: | | | | | | | | | | | | |
Interest | | $ | 571 | | | $ | 584 | | | $ | 660 | |
Income taxes | | | 20 | | | | 14 | | | | 15 | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Operating Activities: | | | | | |
| Net income (loss) | $ | (1,962) | | | $ | (7,067) | | | $ | 3,011 | |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities - | | | | | |
| Deferred income tax (benefit) | (583) | | | (1,741) | | | 882 | |
| Depreciation and amortization | 2,485 | | | 2,488 | | | 2,288 | |
| Operating and non-operating special charges, non-cash portion | 32 | | | 1,448 | | | 175 | |
| Unrealized (gains) losses on investments | 34 | | | 194 | | | (153) | |
| Other operating activities | 393 | | | 320 | | | 186 | |
| Changes in operating assets and liabilities - | | | | | |
| Increase (decrease) in receivables | (448) | | | 135 | | | 44 | |
| Increase in intercompany receivables | (28) | | | (14) | | | (33) | |
| (Increase) decrease in other assets | (293) | | | 484 | | | (252) | |
| Increase in advance ticket sales | 1,521 | | | 14 | | | 438 | |
| Increase in frequent flyer deferred revenue | 307 | | | 699 | | | 271 | |
| Increase (decrease) in accounts payable | 985 | | | (1,079) | | | 324 | |
| Decrease in other liabilities | (403) | | | (26) | | | (302) | |
| Net cash provided by (used in) operating activities | 2,040 | | | (4,145) | | | 6,879 | |
| Investing Activities: | | | | | |
| Capital expenditures, net of flight equipment purchase deposit returns | (2,107) | | | (1,727) | | | (4,528) | |
| Purchases of short-term and other investments | (68) | | | (552) | | | (2,933) | |
| Proceeds from sale of short-term and other investments | 397 | | | 2,319 | | | 2,996 | |
| Proceeds from sale of property and equipment | 107 | | | 6 | | | 49 | |
| Loans made to others | — | | | — | | | (174) | |
| Other, net | (1) | | | 4 | | | 30 | |
| Net cash provided by (used in) investing activities | (1,672) | | | 50 | | | (4,560) | |
| Financing Activities: | | | | | |
| Proceeds from issuance of debt, net of discounts and fees | 11,096 | | | 15,676 | | | 1,786 | |
| Payments of long-term debt, finance leases and other financing liabilities | (5,205) | | | (4,449) | | | (1,391) | |
| Proceeds from issuance of parent company stock | 532 | | | 2,103 | | | — | |
| Dividend to UAL | — | | | (353) | | | (1,645) | |
| Other, net | — | | | (2) | | | — | |
| Net cash provided by (used in) financing activities | 6,423 | | | 12,975 | | | (1,250) | |
| Net increase in cash, cash equivalents and restricted cash | 6,791 | | | 8,880 | | | 1,069 | |
| Cash, cash equivalents and restricted cash at beginning of year | 11,742 | | | 2,862 | | | 1,793 | |
| Cash, cash equivalents and restricted cash at end of year | $ | 18,533 | | | $ | 11,742 | | | $ | 2,862 | |
| | | | | |
| Investing and Financing Activities Not Affecting Cash: | | | | | |
| Property and equipment acquired through the issuance of debt, finance leases and other | $ | 814 | | | $ | 1,968 | | | $ | 515 | |
| Right-of-use assets acquired through operating leases | 771 | | | 198 | | | 498 | |
| Equity interest in AVG received in consideration for a loan | 164 | | | — | | | — | |
| Notes receivable and warrants received for entering into aircraft and other ancillary business agreements | 131 | | | — | | | — | |
| Lease modifications and lease conversions | 123 | | | 527 | | | (2) | |
| | | | | |
| Cash Paid (Refunded) During the Period for: | | | | | |
| Interest | $ | 1,424 | | | $ | 874 | | | $ | 648 | |
| Income taxes | — | | | (29) | | | 29 | |
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
STATEMENTS OF CONSOLIDATED
STOCKHOLDER’SSTOCKHOLDER'S 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, 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 | |
| | | | | | | | | | | | | | | | | | | | |
Net income | | | — | | | | 2,149 | | | | — | | | | — | | | | 2,149 | |
Other comprehensive loss | | | — | | | | — | | | | (200) | | | | — | | | | (200) | |
Dividend to UAL | | | (1,844) | | | | — | | | | — | | | | — | | | | (1,844) | |
Share-based compensation | | | 56 | | | | — | | | | — | | | | — | | | | 56 | |
UAL contribution related to stock plans | | | 2 | | | | — | | | | — | | | | — | | | | 2 | |
Excess tax benefits from share-based awards | | | — | | | | 14 | | | | — | | | | — | | | | 14 | |
Reclassification of stranded tax effects (Note 1) | | | — | | | | 118 | | | | (118) | | | | — | | | | — | |
Other | | | — | | | | — | | | | — | | | | (15) | | | | (15) | |
| | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2017 | | $ | 1,787 | | | $ | 8,218 | | | $ | (1,147) | | | $ | (90) | | | $ | 8,768 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Additional
Capital
Invested | | Retained Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | (Receivable from) Payable to Related Parties, Net | | Total |
| Balance at December 31, 2018 | $ | 598 | | | $ | 10,319 | | | $ | (803) | | | $ | (110) | | | $ | 10,004 | |
| Net income | — | | | 3,011 | | | — | | | — | | | 3,011 | |
| Other comprehensive income | — | | | — | | | 85 | | | — | | | 85 | |
| Dividend to UAL | (664) | | | (977) | | | — | | | — | | | (1,641) | |
| Stock-settled share-based compensation | 66 | | | — | | | — | | | — | | | 66 | |
| Other | — | | | — | | | — | | | (33) | | | (33) | |
| Balance at December 31, 2019 | — | | | 12,353 | | | (718) | | | (143) | | | 11,492 | |
| Net loss | — | | | (7,067) | | | — | | | — | | | (7,067) | |
| Other comprehensive loss | — | | | — | | | (421) | | | — | | | (421) | |
| Dividend to UAL | (12) | | | (330) | | | — | | | — | | | (342) | |
| Stock-settled share-based compensation | 97 | | | — | | | — | | | — | | | 97 | |
| Adoption of new accounting standard (a) | — | | | (17) | | | — | | | — | | | (17) | |
| Impact of UAL common stock issuance | — | | | — | | | — | | | 2,103 | | | 2,103 | |
| Other | — | | | — | | | — | | | 83 | | | 83 | |
| Balance at December 31, 2020 | 85 | | | 4,939 | | | (1,139) | | | 2,043 | | | 5,928 | |
| Net loss | — | | | (1,962) | | | — | | | — | | | (1,962) | |
| Other comprehensive loss | — | | | — | | | 197 | | | — | | | 197 | |
| Stock-settled share-based compensation | 232 | | | — | | | — | | | — | | | 232 | |
| Impact of UAL common stock issuance | — | | | — | | | — | | | 532 | | | 532 | |
| Other | — | | | — | | | — | | | 71 | | | 71 | |
| Balance at December 31, 2021 | $ | 317 | | | $ | 2,977 | | | $ | (942) | | | $ | 2,646 | | | $ | 4,998 | |
(a) Transition adjustment due to the adoption of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses.
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.
UNITED
CONTINENTALAIRLINES HOLDINGS, INC.
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
United ContinentalAirlines Holdings, Inc. (together with its consolidated subsidiaries, “UAL”"UAL" or the “Company”"Company") is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”"United"). As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United’sUnited's operating revenues and operating expenses comprise nearly 100% of UAL’sUAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL’sUAL's 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,”"we," "our," "us," and the “Company”"Company" in this report for disclosures that relate to all of UAL and United.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(a) | Use of Estimates—(a)Use of Estimates—The 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 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. Basic Economy tickets cannot be extended and refunds are not allowed except for ticket cancellations that are within 24 hours of purchase and one week or more prior to the original scheduled departure flight. |
Fees charged in associationconformity with changesaccounting 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 Recognition—Passenger revenue is recognized when transportation is provided and Cargo revenue is recognized when shipments arrive at their destination. Other operating revenue is recognized as the related performance obligations are satisfied.
Passenger tickets and related ancillary services sold by the Company for flights are purchased primarily via credit card transactions, with payments collected by the Company in advance of the performance of related services. The Company initially records ticket sales in its Advance ticket sales liability, deferring revenue recognition until the travel occurs. For travel that has more than one flight segment, the Company deems each segment as a separate performance obligation and recognizes revenue for each segment as travel occurs. Tickets sold by other airlines where the Company provides the transportation are recognized as passenger revenue at the estimated value to be billed to the other airline when travel is provided. Differences between amounts billed and the actual amounts may be rejected and rebilled or extensions tonon-refundablewritten off if the amount recorded was different from the original estimate. When necessary, the Company records a reserve against its billings and payables with other airlines based on historical experience.
The Company sells certain tickets
with connecting flights with one or more segments operated by its other airline partners. For segments operated by its other airline partners, the Company has determined that it is acting as an agent on behalf of the other airlines as they are
recordedresponsible for their portion of the contract (i.e. transportation of the passenger). The Company, as
otherthe agent, recognizes revenue within Other operating revenue at the time
of 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 tonon-refundable tickets are considered a separate transaction from the air transportation because they represent a chargetravel for the
Company’s additional servicenet amount representing commission to
modify a previous sale. Therefore,be retained by 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. any segments flown by other airlines.
Refundable tickets expire after one year from the date of issuance.
Non-refundable tickets generally expire on the date of the intended travel, unless the date is extended by notification from the customer on or before the intended travel date.
United initially capitalizes the costs of selling airline travel tickets and then recognizes those costs as Distribution expense at the time of travel. Passenger ticket costs include credit card fees, travel agency and other commissions paid, as well as global distribution systems booking fees.
Advance Ticket Sales. Advance ticket sales represent the Company's liability to provide air transportation in the future. All tickets sold at any given point of time have travel dates extending up to 12 months. The Company defers amounts related to future travel in its Advance ticket sales liability account. The Company's Advance ticket sales liability also includes credits issued to customers on electronic travel certificates ("ETCs") and future flight credits ("FFCs"), primarily for ticket cancellations, which can be applied towards a purchase of a new ticket. ETCs are valid up to two years from the date of issuance; however, all ETCs due to expire prior to December 31, 2022 have been extended until December 31, 2022. FFCs are valid for 12 months from the original ticket date; however, all FFCs issued on or before
December 31, 2021 have been extended to be valid until December 31, 2022. As of December 31, 2021, the Company's Advance ticket sales liability included $3.2 billion related to ETCs and FFCs.
The Company estimates the value of Advance ticket sales that will expire unused ("breakage") and recognizes
cargorevenue at the scheduled flight date. To determine breakage, the Company uses its historical experience with expired tickets and other
revenuefacts, such as
service is provided.Under our capacity purchase agreements (“CPAs”) with regional carriers, we purchase allrecent aging trends, program changes and modifications that could affect the ultimate expiration patterns of tickets. Given the uncertainty of travel demand caused by COVID-19, a significant portion of the capacity relatedETCs and FFCs may expire unused in future periods and get recognized as revenue from breakage. The Company will update its breakage estimates as future information is received. Changes in estimates of breakage are recognized prospectively in proportion to aircraft covered by the contracts and are responsible for selling allremaining usage of the related seat inventory. We recordtickets.
In the years ended December 31, 2021, 2020 and 2019, the Company recognized approximately $1.8 billion, $3.0 billion and $3.4 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods.
Revenue by Geography. The Company further disaggregates revenue by geographic regions.
Operating segments are defined as components of an enterprise with separate financial information, which are evaluated regularly by the chief operating decision maker and related expensesare used in resource allocation and performance assessments. 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 Company's chief operating decision maker evaluates flight profitability data, which considers aircraft type and route economics. The Company's chief operating decision maker makes resource allocation decisions to maximize the Company's consolidated financial results. Managing the Company as separate1 segment allows management the opportunity to maximize the value of its route network.
The Company's operating revenue and expense inby principal geographic region (as defined by the consolidated statementU.S. Department 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 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 materialTransportation) for the years ended December 31 2017, 2016is presented in the table below (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| Domestic (U.S. and Canada) | | $ | 16,845 | | | $ | 9,911 | | | $ | 26,960 | |
| Atlantic | | 3,414 | | | 2,226 | | | 7,387 | |
| Pacific | | 1,507 | | | 1,706 | | | 5,132 | |
| Latin America | | 2,868 | | | 1,512 | | | 3,780 | |
| Total | | $ | 24,634 | | | $ | 15,355 | | | $ | 43,259 | |
The Company attributes revenue among the geographic areas based upon the origin and
2015.(c) | Frequent Flyer Accounting—United’s 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 ofnon-airline partners. We sell miles to these partners, which include domestic and international 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 andnon-travel awards. The Company records its obligation for future award redemptions using a deferred revenue model. |
destination of each flight segment. The Company's operations involve an insignificant level of revenue-producing assets in geographic regions as the overwhelming majority of the Company's revenue-producing assets (primarily U.S. registered aircraft) can be deployed in any of its geographic regions.
Ancillary Fees.The Company charges fees, separately from ticket sales, for certain ancillary services that are directly related to passengers' travel, such as baggage fees, premium seat fees, inflight amenities fees, and other ticket-related fees. These ancillary fees are part of the travel performance obligation and, as such, are recognized as passenger revenue when the travel occurs. The Company recorded $2.2 billion, $1.3 billion and $3.6 billion of ancillary fees within passenger revenue in the years ended December 31, 2021, 2020 and 2019, respectively.
(c)Ticket Taxes—Certain governmental taxes are imposed on the Company's 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 and, as a result, are excluded from revenue.
(d)Frequent Flyer Accounting—United's MileagePlus loyalty program builds customer loyalty by offering awards, benefits and services to program participants. Members in this program earn miles for travel on United, United Express, Star Alliance members and certain other airlines that participate in the program. Members can also earn miles by purchasing goods and services from our network of non-airline partners. We have contracts to sell miles to these partners with the terms extending from one to eight years. These partners include domestic and international 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.
Miles Earned in Conjunction with FlightsTravel.
When frequent flyers earn miles for flights, the Company recognizes a portion of the ticket sales as revenue when the air transportationtravel occurs and defers a portion of the ticket sale representing the value of the related miles as a multiple-deliverable revenue arrangement.separate performance obligation. The Company determines the estimated selling price of air transportationtravel 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 ratapro-rata basis. TheAt the time of travel, the Company records the portion allocated to the miles are recorded into Frequent flyer deferred revenue on the Company’sCompany's consolidated balance sheet and recognizedsubsequently recognizes it into revenue when the transportation is provided.miles are redeemed for air travel and non-air travel awards.
Estimated Selling Price of Miles. The Company’sCompany's 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’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 discountbreakage that considers a number of factors, including redemption patterns of various customer groups.Co-branded Credit Card Partner Mileage Sales
Estimate of Miles Not Expected to be Redeemed ("Breakage"). The Company's breakage model is based on the assumption that the likelihood that an account will redeem its miles can be estimated based on a consideration of the account's historical behavior. The Company uses a logit regression model to estimate the probability that an account will redeem its current miles balance. The Company reviews its breakage estimates annually based upon the latest available information. The Company's estimate of the expected breakage of miles requires management judgment and current and future changes to breakage assumptions, 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 program. For the portion of the outstanding miles that we estimate will not be redeemed, we recognize the associated value proportionally as the remaining miles are redeemed.
Co-Brand Agreement. United has a significant contract the Second Amended and RestatedCo-Branded Card Marketing Services Agreement (the“Co-Brand Agreement” "Co-Brand Agreement"), to sell MileagePlus miles to itsco-branded credit card partner JPMorgan Chase Bank USA, N.A. (“Chase”("Chase"). Chase awards miles to MileagePlus members based on their credit card activity. United identified the following significant revenue elementsseparately identifiable performance obligations in theCo-Brand Agreement:
•MileagePlus miles awarded – United has a performance obligation to provide MileagePlus cardholders with miles to be used for air travel and non-travel award redemptions. The Company records Passenger revenue related to the airtravel awards when the transportation element represented byis provided and records Other revenue related to the valuenon-travel awards when the goods or services are delivered. The Company records the cost associated with non-travel awards in Other operating revenue, as an agent.
•Marketing – United has a performance obligation to provide Chase access to United's customer list and the use of United's brand. Marketing revenue is recorded to Other operating revenue as miles are delivered to Chase.
•Advertising – United has a performance obligation to provide advertising in support of the mile (generally resulting from its redemption for future air transportationMileagePlus card in various customer contact points such as United's website, email promotions, direct mail campaigns, airport advertising and whose fair valuein-flight advertising. Advertising revenue is described above);recorded to Other operating revenue as miles are delivered to Chase.
•Other travel-related benefits – United's performance obligations are comprised of various items such as waived bag fees, seat upgrades and lounge passes. Lounge passes are recorded to Other operating revenue as customers use the lounge passes. Bag fees and seat upgrades are recorded to Passenger revenue at the time of the United brand and accessassociated travel.
We account for all the payments received under the Co-Brand Agreement by allocating them to
MileagePlus member lists; advertising; and other travel related benefits.the separately identifiable performance obligations. The fair value of the elementsseparately identifiable performance obligations is determined using management’smanagement's estimated selling price of each element.component. 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 theCo-Brand Agreement in order to determine the allocation of proceeds to each of the multiple elementscomponents to be delivered. We also evaluate volumes on an annual basis, which may result in a change in the allocation of the estimated selling priceconsideration from the Co-Brand Agreement on a prospective basis.
Frequent Flyer Deferred Revenue. Miles in MileagePlus members' accounts are combined into one homogeneous pool and are thus not separately identifiable, for award redemption purposes, between miles earned in the current period and those in their beginning balance. Of the miles expected to be redeemed, the majority of these miles have historically been redeemed within two years. The table below presents a roll forward of Frequent flyer deferred revenue (in millions): | | | | | | | | | | | |
| Twelve Months Ended
December 31, |
| 2021 | | 2020 |
| Total Frequent flyer deferred revenue - beginning balance | $ | 5,975 | | | $ | 5,276 | |
| Total miles awarded | 1,545 | | | 1,336 | |
| Travel miles redeemed (Passenger revenue) | (1,171) | | | (568) | |
| Non-travel miles redeemed (Other operating revenue) | (67) | | | (69) | |
| Total Frequent flyer deferred revenue - ending balance | $ | 6,282 | | | $ | 5,975 | |
In the years ended December 31, 2021, 2020 and 2019, the Company
records passengerrecognized, in Other operating revenue,
$1.8 billion, $1.7 billion and $2.0 billion, respectively, related to the
air transportation element when the transportation is delivered. Themarketing, advertising, non-travel miles redeemed (net of related costs) and other
elements are generally recognized as Other operating revenue when earned.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 Company’s estimatetravel-related benefits of the expected expiration of miles requires significant management judgment. Current and future changesmileage revenue associated with our various partner agreements including, but not limited to, expiration assumptions orour Co-Brand Agreement. The portion related to the expiration policy, or to program rulesMileagePlus miles awarded of the total amounts received is deferred and program redemption opportunities, may resultpresented in material changes to the deferred revenue balancetable above as well as recognized revenues from the programs.
Other Information
The following table provides additional information relatedan increase to the frequent flyer program (in millions):
liability. We determine the current portion of our frequent flyer liability based on expected redemptions in the next 12 months. | | | | | | | | | | | | | | | | |
Year Ended December 31, | | 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) | |
2017 | | $ | 2,343 | | | $ | 1,183 | | | $ | 2,025 | | | $ | (865) | |
2016 | | | 3,022 | | | | 1,221 | | | | 2,050 | | | | (249) | |
2015 | | | 2,999 | | | | 1,050 | | | | 2,173 | | | | (224) | |
| | | | | | | | | | | | | |
| (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 Cash—(e)Cash and Cash Equivalents and Restricted Cash—Highly 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 for letters of credit and collateral associated with obligations for facility leases and workers’ compensation. 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.
Company or payment to an outside party.Restricted cash-current—The December 31, 2021 balance includes amounts to be used for the payment of fees, principal and interest on the $6.8 billion of senior secured notes and a secured term loan facility (the "MileagePlus Financing") secured by substantially all of the assets of Mileage Plus Holdings, LLC ("MPH"), a direct wholly-owned subsidiary of United.
Restricted cash-non-current—The December 31, 2021 balanceprimarily includes collateral associated with the MileagePlus Financing, collateral for letters of credit and collateral associated with facility leases and other insurance-related obligations.
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:flows (in millions): | | | | UAL | | United | | | UAL | | United |
| | | At December 31, | | At December 31, | | | At December 31, | | At December 31, |
| | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 | | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
Current assets: | | | | | | | | | | | | | Current assets: | | | | | | | | | | | |
Cash and cash equivalents | | $ | 1,482 | | | $ | 2,179 | | | $ | 3,006 | | | $ | 1,476 | | | $ | 2,173 | | | $ | 3,000 | | Cash and cash equivalents | $ | 18,283 | | | $ | 11,269 | | | $ | 2,762 | | | $ | 18,283 | | | $ | 11,269 | | | $ | 2,756 | |
Restricted cash included in Prepaid expenses and other | | 18 | | | | — | | | 2 | | | 18 | | | | — | | | 2 | | |
| Restricted cash | | Restricted cash | 37 | | | 255 | | | — | | | 37 | | | 255 | | | — | |
Other assets: | | | | | | | | | | | | | Other assets: | |
Restricted cash | | 91 | | | 124 | | | 204 | | | 91 | | | 124 | | | 204 | | Restricted cash | 213 | | | 218 | | | 106 | | | 213 | | | 218 | | | 106 | |
| | | | | | | | | | | | | | | | | | | |
| Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows | | $ | 1,591 | | | $ | 2,303 | | | $ | 3,212 | | | $ | 1,585 | | | $ | 2,297 | | | $ | 3,206 | | Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows | $ | 18,533 | | | $ | 11,742 | | | $ | 2,868 | | | $ | 18,533 | | | $ | 11,742 | | | $ | 2,862 | |
| | | | | | | | | | | | | | | | | | | |
(e) | Short-term Investments—Short-term investments are classified asavailable-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 onavailable-for-sale securities are reflected as a component of accumulated other comprehensive income (loss). |
(f) | Aircraft Fuel, Spare Parts and Supplies—The 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 Equipment—The 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 Company’s policy to record compensation from delays in delivery of aircraft as a reduction of the cost of the related aircraft. |
(f)Investments—Debt investments are classified as available-for-sale and are stated at fair value. Realized gains and losses on sales of these investments are reflected in Miscellaneous, net 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). Equity investments are accounted for under the equity method if we are able to exercise significant influence over an investee. Equity investments for which we do not have significant influence are recorded at fair value or at cost, if fair value is not readily determinable, with adjustments for observable changes in
price or impairments (referred to as the measurement alternative). Changes in fair value are recorded in Unrealized gains (losses) on investments, net in the consolidated statements of operations. See Note 9 of this report for additional information related to investments.
(g)Accounts Receivable—Accounts receivable primarily consist of amounts due from credit card companies, non-airline partners, and cargo customers. We provide an allowance for credit losses expected to be incurred. We base our allowance on various factors including, but not limited to, aging, payment history, write-offs, macro-economic indicators and other credit monitoring indicators. Credit loss expense and write-offs related to trade receivables were not material for the years ended December 31, 2021 and 2020.
(h)Aircraft Fuel, Spare Parts and Supplies—The 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.
(i)Property and Equipment—The Company records additions to owned operating property and equipment at cost when acquired. Property under finance 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. We periodically receive credits in connection with the acquisition of aircraft and engines including those related to contractual damages related to delays in delivery. These credits are deferred until the aircraft and engines are delivered and then applied as a reduction to the cost of the related equipment.
Depreciation and amortization of owned depreciable assets is based on the straight-line method over the
assets’assets' estimated useful lives. Leasehold improvements are amortized over the remaining term of the lease, including estimated facility renewal options when renewal is reasonably
assuredcertain at key airports, or the estimated useful life of the related asset, whichever is less. Properties under
capitalfinance leases are amortized
onusing 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
capitalfinance 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, spare engines and related rotable parts | | | 25 to 30 | |
Buildings
Aircraft seats | | 10 to 15 |
| Buildings | | 25 to 45 | |
Other property and equipment | | | 3 to 15 | |
Computer software | | | 5 to 15 | |
Building improvements | | | 1 to 40 | |
As of December 31, 20172021 and 2016,2020, the Company had a carrying value of computer software of $345$499 million and $356$548 million, respectively. For the years ended December 31, 2017, 20162021, 2020 and 2015,2019, the Company’s depreciationCompany's amortization expense related to computer software was $117$182 million, $108$172 million and
$93 $135 million, respectively. Aircraft, spare engines and aircraft sparerelated rotable 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 Repairs—The cost of maintenance and repairs, including the cost of minor replacements, is charged to expense as incurred, except for costs incurred under ourpower-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 Adjustments—Lease 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 Purchase—Payments made to regional carriers under CPAs are reported in Regional capacity purchase in our consolidated statements of operations. |
(k) | Advertising—Advertising costs, which are included in Other operating expenses, are expensed as incurred. Advertising expenses were $217 million, $220 million and $201 million for the years ended December 31, 2017, 2016 and 2015, respectively. |
(l) | Intangibles—The 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 Impairments—(j)Long-Lived Asset Impairments—The 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 for its mainline fleet and the contract level for its regional fleet under capacity purchase agreements ("CPAs"). An impairment charge is recognized when the asset's carrying value exceeds its net undiscounted future cash flows. An impairment charge is recognized when the asset’s carrying value exceeds its net undiscounted future cash flows and its fair market value. The amount of the charge is the difference between the asset’s carrying value and fair market value. See Note 14 of this report for additional information related to asset impairments. |
(n) | Share-Based Compensation—The 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 UAL’s 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 UAL’s 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 UAL’s share-based compensation plans. |
(o) | Ticket Taxes—Certain governmental taxes are imposed on the Company’s 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 Aircraft—The 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 Positions—The 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 Company’s 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 as part of income tax expense in its 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 Costs—The 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 Business—The Company has third-party business revenue that includes fuel sales, catering, ground handling, maintenance services and frequent flyer awardnon-air redemptions. 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 andnon-air mileage redemptions. The third-party business expenses are recorded in Other operating expenses. |
(t) | Recently Issued Accounting Standards—In 2014,the Financial Accounting Standards Board (“FASB”) amended the FASB Accounting Standards Codification and created a new Topic 606,Revenue from Contracts with Customers(“Topic 606”). 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 used the full-retrospective approach in adopting this standard on January 1, 2018. The standard impacts the classification of certain revenue streams and affects the timing of revenue and expense recognition for others. For the Company, the most significant impact of this standard is the reclassification of certain ancillary fees from other operating revenue into passenger revenue on the statement of consolidated operations. These ancillary fees are directly related to passenger travel, such as ticket change fees and baggage fees, and will 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, will be recognized when transportation is provided. While the classification of certain transactions within operating revenue and between operating revenue and operating expenses will change, the adoption of the standard will not have a material impact on our earnings. Further, adoption of the standard will have no impact on cash provided by or used in
|
| operating, financing, or investing activities in our consolidated cash flows statements. Adoption of Topic 606 is expected to impact our reported results as shown in the table below:
|
Statements of Consolidated Operations for the Years Ended December 31,
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | As Reported | | | Adjustment | | | As Adjusted
for Adoption of
Topic 606 | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Operating revenue: | | | | | | | | | | | | | | | | | | | | | | | | |
Passenger—Mainline | | $ | 26,552 | | | $ | 25,414 | | | $ | 1,707 | | | $ | 1,615 | | | $ | 28,259 | | | $ | 27,029 | |
Passenger—Regional | | | 5,852 | | | | 6,043 | | | | 349 | | | | 357 | | | | 6,201 | | | | 6,400 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total passenger revenue | | | 32,404 | | | | 31,457 | | | | 2,056 | | | | 1,972 | | | | 34,460 | | | | 33,429 | |
Cargo | | | 1,035 | | | | 876 | | | | 79 | | | | 58 | | | | 1,114 | | | | 934 | |
Other operating revenue | | | 4,297 | | | | 4,223 | | | | (2,087) | | | | (2,028) | | | | 2,210 | | | | 2,195 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total operating revenue | | | 37,736 | | | | 36,556 | | | | 48 | | | | 2 | | | | 37,784 | | | | 36,558 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating expenses | | | 34,238 | | | | 32,218 | | | | (21) | | | | (12) | | | | 34,217 | | | | 32,206 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating income | | | 3,498 | | | | 4,338 | | | | 69 | | | | 14 | | | | 3,567 | | | | 4,352 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Nonoperating expense, net | | | (499) | | | | (519) | | | | (28) | | | | (60) | | | | (527) | | | | (579) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 2,999 | | | | 3,819 | | | | 41 | | | | (46) | | | | 3,040 | | | | 3,773 | |
Income tax expense (benefit) | | | 868 | | | | 1,556 | | | | 28 | | | | (17) | | | | 896 | | | | 1,539 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 2,131 | | | $ | 2,263 | | | $ | 13 | | | $ | (29) | | | $ | 2,144 | | | $ | 2,234 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Earnings per share, basic | | $ | 7.04 | | | $ | 6.86 | | | $ | 0.04 | | | $ | (0.09) | | | $ | 7.08 | | | $ | 6.77 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Earnings per share, diluted | | $ | 7.02 | | | $ | 6.85 | | | $ | 0.04 | | | $ | (0.09) | | | $ | 7.06 | | | $ | 6.76 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated Balance Sheets as of December 31,
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | As Reported | | | Adjustment | | | As Adjusted
for Adoption of
Topic 606 | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Current assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Prepaid expenses and other | | $ | 1,051 | | | $ | 832 | | | $ | 20 | | | $ | 20 | | | $ | 1,071 | | | $ | 852 | |
Other assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred income taxes | | | — | | | | 655 | | | | — | | | | 48 | | | | — | | | | 703 | |
Current liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
Advance ticket sales | | | 3,876 | | | | 3,730 | | | | 64 | | | | 65 | | | | 3,940 | | | | 3,795 | |
Frequent flyer deferred revenue | | | 2,176 | | | | 2,135 | | | | 16 | | | | 14 | | | | 2,192 | | | | 2,149 | |
Other | | | 569 | | | | 1,010 | | | | 7 | | | | 79 | | | | 576 | | | | 1,089 | |
Other liabilities and deferred credits: | | | | | | | | | | | | | | | | | | | | | | | | |
Frequent flyer deferred revenue | | | 2,565 | | | | 2,748 | | | | 26 | | | | (8 | ) | | | 2,591 | | | | 2,740 | |
Advanced purchase of miles | | | — | | | | 430 | | | | — | | | | 3 | | | | — | | | | 433 | |
Deferred income taxes | | | 225 | | | | — | | | | (21) | | | | — | | | | 204 | | | | — | |
Stockholders’ equity: | | | | | | | | | | | | | | | | | | | | | | | | |
Retained earnings | | | 4,621 | | | | 3,427 | | | | (72) | | | | (85 | ) | | | 4,549 | | | | 3,342 | |
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 aright-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. We have not completed our evaluation of the impact of the new standard, but believe that it will have a significant impact on our consolidated balance sheets. The new standard is not expected to have a material impact on the Company’s results of operations or cash flows. The primary effect of adopting the new standard will be to record assets and obligations for its operating leases.
In 2016, the FASB issued Accounting Standards UpdateNo. 2016-01,Financial Instruments—Overall (Subtopic825-10) (“ASU2016-01”). This standard makes several changes, including the elimination of theavailable-for-sale classification of equity investments, and requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. It is effective for interim and annual periods beginning after December 15, 2017. Based on its portfolio of investments as of December 31, 2017, the Company does not expect the adoption of ASU2016-01 to have a material impact on its consolidated financial statements.
In 2017, the FASB issued Accounting Standards UpdateNo. 2017-07,Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost(“ASU2017-07”). The update requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income. Employers will have to disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement.ASU2017-07 is effective for fiscal years and interim periods beginning after December 15, 2017, and early adoption is permitted. The Company does not expect the adoption of ASU2017-07 to have a material impact on its consolidated financial statements. Early adoption of ASU2017-07 would have impacted the statement of consolidated operations as shown in the table below:
Statements of Consolidated Operations for the Years Ended December 31,
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | As Reported | | | Adjustment | | | As Adjusted for
Adoption of
ASU2017-07 | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Operating expense: | | | | | | | | | | | | | | | | | | | | | | | | |
Salaries and related costs | | $ | 11,045 | | | $ | 10,275 | | | $ | (104) | | | $ | (99 | ) | | $ | 10,941 | | | $ | 10,176 | |
Special charges | | | 176 | | | | 638 | | | | — | | | | 107 | | | | 176 | | | | 745 | |
Nonoperating income (expense): | | | | | | | | | | | | | | | | | | | | | | | | |
Miscellaneous, net | | | 3 | | | | (19) | | | | (104) | | | | 8 | | | | (101) | | | | (11) | |
In February 2018, the FASB issued Accounting Standards UpdateNo. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income(“ASU2018-02”). This standard focuses on a targeted improvement to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017 from accumulated other comprehensive income (“AOCI”) to retained earnings (“RE”). The amount of the reclassification would becharge is the difference between the amount initially charged
asset's carrying value and fair market value.or credited directlyIn February 2021, the Company voluntarily and temporarily removed all 52 Boeing 777-200/200ER aircraft powered by Pratt & Whitney 4000 series engines from its schedule due to other comprehensive income atan engine failure incident with one of its aircraft. The Company viewed this incident as an indicator of potential impairment. Accordingly, as required under relevant accounting standards, United performed forecasted cash flow analyses and determined that the previously enacted U.S. federal corporate income tax ratecarrying value of the Boeing 777-200/200ER fleet is expected to be recoverable from future cash flows expected to be generated by that remains in AOCIfleet and, the amount that would have been charged or credited directlyconsequently, no impairment was recorded.
The Company recorded impairment charges related to
other comprehensive income using the newly enacted U.S. federal corporate income tax rate, excluding the effectcertain of
any valuation allowance previously charged to income from continuing operations. ASU2018-02 is effective for interimits aircraft, related engines and
annual periods beginning after December 15, 2018,spare parts of $97 million, $94 million, and
early adoption is permitted. We have elected to early adopt this standard$81 million for the
yearyears ended December 31,
2017. We have reclassified $118 million from AOCI to RE as a result of this adoption. See Note 6 of this report for additional information.NOTE 2 - GOODWILL AND OTHER INTANGIBLE ASSETS
The following table presents information about the Company’s goodwill2021, 2020 and other intangible assets at December 31 (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | | | | | 2017 | | | 2016 | |
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 | | | $ | 832 | | | $ | 1,177 | | | $ | 771 | |
Hubs | | | 20 | | | | 145 | | | | 89 | | | | 145 | | | | 82 | |
Contracts | | | 13 | | | | 121 | | | | 103 | | | | 135 | | | | 95 | |
Patents and tradenames | | | 3 | | | | 108 | | | | 108 | | | | 108 | | | | 108 | |
Airport slots and gates | | | 8 | | | | 97 | | | | 97 | | | | 97 | | | | 97 | |
Other | | | 25 | | | | 109 | | | | 84 | | | | 109 | | | | 81 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | $ | 1,757 | | | $ | 1,313 | | | $ | 1,771 | | | $ | 1,234 | |
| | | | | | | | | | | | | | | | | | | | |
Indefinite-lived intangible assets | | | | | | | | | | | | | | | | | | | | |
Route authorities | | | | | | $ | 1,562 | | | | | | | $ | 1,562 | | | | | |
Airport slots and gates | | | | | | | 536 | | | | | | | | 536 | | | | | |
Tradenames and logos | | | | | | | 593 | | | | | | | | 593 | | | | | |
Alliances | | | | | | | 404 | | | | | | | | 404 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | $ | 3,095 | | | | | | | $ | 3,095 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
(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 2017, 2016 and 2015 was $79 million, $90 million and $105 million,2019, respectively. Projected amortization expense in 2018, 2019, 2020, 2021 and 2022 is $67 million, $61 million, $55 million, $50 million and $40 million, respectively.
See Note 14 of this report for additional information related to impairments.
(k)Intangibles—The 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 on an annual basis as of October 1, or more frequently if events or circumstances indicate that the asset may be impaired.
We value goodwill and indefinite-lived intangible assets.assets primarily using market and income approach valuation techniques. These measurements include the following key assumptions: (1) forecasted revenues, expenses and cash flows, (2) terminal period revenue growth and cash flows, (3) an estimated weighted average cost of capital, (4) assumed discount rates depending on the asset and (5) a tax rate. These assumptions are consistent with those that hypothetical market participants would use. Because we are required to make estimates and assumptions when evaluating goodwill and indefinite-lived intangible assets for impairment, actual transaction amounts may differ materially from these estimates.
In 2021, the Company evaluated its intangible assets for possible impairments. For certain of its intangible assets, including the Company's China routes and alliances, the Company performed a quantitative assessment which involved determining the fair value of the asset and comparing that amount to the asset's carrying value. For all other intangible assets, the Company performed a qualitative assessment of whether it was more likely than not that an impairment had occurred. To determine fair value, the Company used discounted cash flow methods appropriate for each asset. Key inputs into the models included forecasted capacity, revenues, fuel costs, other operating costs and an overall discount rate. The assumptions used for future projections include that demand will continue to recover throughout 2022 and beyond. These assumptions are inherently uncertain as they relate to future events and circumstances. See Note 14 of this report for additional information related to impairments.
The following table presents information about the Company's goodwill and other intangible assets at December 31 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 |
| | Gross
Carrying
Amount | | Accumulated
Amortization | | Gross
Carrying
Amount | | Accumulated
Amortization |
| Goodwill | | $ | 4,527 | | | | | $ | 4,527 | | | |
| | | | | | | | |
| Indefinite-lived intangible assets | | | | | | | | |
| Route authorities | | $ | 1,020 | | | | | $ | 1,020 | | | |
| Airport slots | | 574 | | | | | 560 | | | |
| Tradenames and logos | | 593 | | | | | 593 | | | |
| Alliances | | 404 | | | | | 404 | | | |
| Total | | $ | 2,591 | | | | | $ | 2,577 | | | |
| | | | | | | | |
| Finite-lived intangible assets | | | | | | | | |
| Frequent flyer database | | $ | 1,177 | | | $ | 1,008 | | | $ | 1,177 | | | $ | 971 | |
| Hubs | | 145 | | | 118 | | | 145 | | | 111 | |
| Contracts | | 120 | | | 120 | | | 120 | | | 116 | |
| Other | | 314 | | | 298 | | | 314 | | | 297 | |
| Total | | $ | 1,756 | | | $ | 1,544 | | | $ | 1,756 | | | $ | 1,495 | |
Amortization expense in 2021, 2020 and 2019 was $49 million, $55 million and $60 million, respectively. Projected amortization expense in 2022, 2023, 2024, 2025 and 2026 is $40 million, $37 million, $32 million, $28 million and $18 million, respectively.
(l)Labor Costs—The Company records expenses associated with new or 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.
(m)Share-Based Compensation—The 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 at the close of the reporting period based upon UAL's 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. An adjustment is recorded each reporting period to adjust compensation expense based on the then current level of expected performance achievement for the performance-based awards. See Note 4 of this report for additional information on UAL's share-based compensation plans.
(n)Maintenance and Repairs—The 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.
(o)Advertising—Advertising costs, which are included in Other operating expenses, are expensed as incurred. Advertising expenses were $99 million, $87 million and $212 million for the years ended December 31, 2021, 2020 and 2019, respectively.
(p)Third-Party Business—The Company has third-party business revenue that includes ground handling, maintenance services, flight academy and frequent flyer award non-travel redemptions. Third-party business revenue is recorded in Other operating revenue. Expenses associated with these third-party business activities are recorded in Other operating expenses, except for non-travel mileage redemption. Non-travel mileage redemption expenses are recorded to Other operating revenue.
(q)Uncertain Income Tax Positions—The 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 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 Company's 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 as part of income tax expense in its consolidated statements of operations. See Note 6 of this report for additional information on UAL's uncertain tax positions.
NOTE
3 –2 - COMMON
STOCKHOLDERS’STOCKHOLDERS' EQUITY AND PREFERRED SECURITIES
On April 24, 2020, UAL's Board of Directors terminated its share repurchase program. Under the agreements entered into pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), the Company and its business are subject to certain restrictions, including restrictions on the ability to repurchase UAL's equity securities through September 30, 2022.
During 2021, UAL entered into two Payroll Support Program Extension Agreements (collectively, the "PSP2 and PSP3 Agreements") with U.S. Treasury Department ("Treasury") pursuant to which UAL issued to Treasury warrants to purchase up to approximately 3.5 million shares of UAL common stock (collectively, the "PSP2 and PSP3 Warrants"). The fair value of the PSP2 and PSP3 Warrants was calculated using a Black-Scholes options pricing model, and approximately $99 million was recorded within stockholders' equity with an offset to the CARES Act grant credit. The PSP2 and PSP3 Warrants are exercisable either through net share settlement in cash or in shares of UAL common stock, at UAL's option. The PSP2 and PSP3 Warrants contain customary anti-dilution provisions and registration rights and are freely transferable. Pursuant to the terms of the PSP2 and PSP3 Warrants, warrant holders do not have any voting rights. As of December 31, 2021, the Company had the following warrants outstanding:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Warrant Description | | Number of Shares of UAL Common Stock (in millions) | | Exercise Price | | Expiration Dates |
| PSP1 Warrants (a) | | 4.8 | | | $ | 31.50 | | | 4/20/2025 | — | 9/30/2025 |
| CARES Act Loan Warrants (b) | | 1.7 | | | 31.50 | | | 9/28/2025 |
| PSP2 Warrants | | 2.0 | | | 43.26 | | | 1/15/2026 | — | 4/29/2026 |
| PSP3 Warrants | | 1.5 | | | 53.92 | | | 4/29/2026 | — | 6/10/2026 |
| Total | | 10.0 | | | | | | | |
(a)Warrants issued in fiscal year 2020 in connection with the $1.5 billion 10-year senior unsecured promissory note with Treasury provided under the Payroll Support Program of the CARES Act ("PSP1 Note"). (b)Warrants issued in fiscal year 2020 in connection with the $520 million Loan and Guarantee Agreement, dated as of September 28, 2020, among United, UAL, Treasury and the Bank of New York Mellon, as administrative agent, as amended (the "CARES Act Loan"), which was entered into pursuant to the loan program established pursuant to the CARES Act. |
In 2017,2020, UAL repurchasedentered into an underwriting agreement with Morgan Stanley & Co. LLC and Barclays Capital Inc. relating to the issuance and sale by UAL of approximately 43 million shares of its common stock at a price to the public of $26.50 per share, resulting in total proceeds of approximately $1.1 billion. On June 15, 2020, UAL entered into an equity distribution agreement relating to the issuance and sale from time to time by UAL (the "2020 ATM Offering") of up to 28 million shares of UAL common stock for $1.8 billion, completing its July 2016 repurchase authorization. In December 2017, UAL’s Boardstock. During 2020, approximately 21 million shares were sold in the 2020 ATM Offering at an average price of Directors authorized a new $3.0 billion$46.70 per share, repurchase programwith net proceeds to acquire UAL’s common stock. As of December 31, 2017, the Company hadtotaling approximately $3.0 billion$989 million. In 2021, the Company sold the remaining authorized amount of approximately 7 million shares at an average price of $42.98 per share, with net proceeds to purchase shares under its existing share repurchase authority. UAL may repurchase shares through the open market, privately negotiated transactions, block trades or accelerated share repurchase transactionsCompany of approximately $282 million.
On March 3, 2021, the Company entered into an equity distribution agreement (the "Distribution Agreement") with several financial institutions (collectively, the "Managers"), relating to the issuance and sale from time to time in accordance with applicable securities laws.by UAL may repurchase(the "2021 ATM Offering"), through the Managers, of up to 37 million shares of UAL common stock subject(the "2021 ATM Shares"). Sales of the 2021 ATM Shares under the Distribution Agreement may be made in any transactions that are deemed to prevailingbe "at the market conditions, andofferings" as defined in Rule 415 under the Securities Act of 1933, as amended. Under the terms of the Distribution Agreement, UAL may discontinuealso sell the 2021 ATM Shares to any Manager, as principal for its own account, at a price agreed upon at the time of sale. If UAL sells the 2021 ATM Shares to a Manager as principal, UAL will enter into a separate terms agreement with such repurchases at any time. See Part II, Item 5, Market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities, of this report for additional information.
In 2017,Manager. During 2021, approximately 4 million shares were sold in the Company retired 25 million treasury shares that were originally acquired2021 ATM Offering at an average costprice of $57.50 per share, with net proceeds to the Company totaling approximately $63 per share.
$250 million.
At December 31,
2017,2021, approximately
106 million shares of
UAL’sUAL's common stock were reserved for future issuance related to the issuance of equity-based awards under the
Company’sCompany's incentive compensation plans.
As of December 31,
2017,2021, UAL had
two2 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
UAL’sUAL's amended and restated certificate of incorporation.
NOTE
43 - EARNINGS
(LOSS) PER SHARE
The computations of
UAL’sUAL's basic and diluted earnings
(loss) per share are set forth below for the years ended December 31 (in millions, except per share amounts):
| | | | | | | | | | | | |
| | | 2017 | | | 2016 | | | 2015 | |
Earnings available to common stockholders | | $ | 2,131 | | | $ | 2,263 | | | $ | 7,340 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Basic weighted-average shares outstanding | | | 302.7 | | | | 329.9 | | | | 376.1 | |
Effect of convertible notes | | | — | | | | — | | | | 0.3 | |
Effect of employee stock awards | | | 0.9 | | | | 0.4 | | | | 0.5 | |
| | | | | | | | | | | | |
Diluted weighted-average shares outstanding | | | 303.6 | | | | 330.3 | | | | 376.9 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Earnings per share, basic | | $ | 7.04 | | | $ | 6.86 | | | $ | 19.52 | |
| | | | | | | | | | | | |
Earnings per share, diluted | | $ | 7.02 | | | $ | 6.85 | | | $ | 19.47 | |
| | | | | | | | | | | | |
The number
| | | | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| Earnings (loss) available to common stockholders | | $ | (1,964) | | | $ | (7,069) | | | $ | 3,009 | |
| | | | | | |
| Basic weighted-average shares outstanding | | 321.9 | | | 279.4 | | | 258.8 | |
| Dilutive effect of employee stock awards | | — | | | — | | | 1.1 | |
| Diluted weighted-average shares outstanding | | 321.9 | | | 279.4 | | | 259.9 | |
| | | | | | |
| Earnings (loss) per share, basic | | $ | (6.10) | | | $ | (25.30) | | | $ | 11.63 | |
| Earnings (loss) per share, diluted | | $ | (6.10) | | | $ | (25.30) | | | $ | 11.58 | |
| | | | | | |
| Potentially dilutive securities (a) | | | | | | |
| Stock warrants | | 0.9 | | | — | | | — | |
| Employee stock awards | | 0.7 | | | 1.0 | | | 0.1 | |
(a) Weighted-average potentially dilutive securities outstanding excluded from the computation of diluted earnings per share amounts was not material.because the securities would have had an antidilutive effect.
NOTE
54 - SHARE-BASED COMPENSATION PLANS
UAL maintains
several share-based compensation
plans. In May 2017, UAL’splans for our management employees and our non-employee directors. During 2021, UAL's Board of Directors and stockholders approved the United
ContinentalAirlines Holdings, Inc.
20172021 Incentive Compensation Plan (the
“2017 Plan”"2021 Plan"). The
20172021 Plan is an incentive compensation plan that allows the Company to use different forms of
long-term equity incentives to attract, retain and reward officers and
employees (including prospective officers and employees). The 2017 Plan replaced the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (the “2008 Plan”). Any awards granted under the 2008 Plan prior to the approval of the 2017 Plan remain in effect pursuant to their terms. Awards may not be granted under the 2017 Plan after May 24, 2027.employees. Under the
20172021 Plan, the Company may grant:
non-qualified nonqualified stock
options,options; incentive stock options (within the meaning of Section 422 of the Internal Revenue Code of 1986)
,; stock appreciation rights
("SARs"); restricted
shares, RSUs,stock ("RSAs"); RSUs; performance
compensation awards, performance units,units; cash incentive awards
and other equity-based and equity-related
awards, andawards. An award (other than an option, SAR or cash incentive award) may provide the holder with dividends
andor dividend equivalents.
The 2021 Plan replaces the United Continental Holdings, Inc. 2017 Incentive Compensation Plan (the "2017 Plan"). Any awards granted under the 2017 Plan prior to the approval of the 2021 Plan remain in effect pursuant to their terms. The number of shares of UAL common stock that remained available for issuance under the 2017 Plan as of the effective date of the 2021 Plan are now available for issuance under the 2021 Plan.
All awards are recorded as either equity or a liability in the
Company’sCompany's consolidated balance sheets. The share-based compensation expense is recorded in salaries and related costs.
During 2017,2021, UAL granted share-based compensation awards pursuant to both the 20082017 Plan and the 20172021 Plan. These share-based compensation awards includeincluded approximately 1.63 million RSUs consisting of 1.0approximately 1 million time-vested RSUs and 0.6approximately 2 million performance-based RSUs, and approximately 36,000 stock options. TheRSUs. A majority of the time-vested RSUs vestpro-rata, a majority of which vest on February 28th of each year equally in 25% increments every 6 months over a three yeartwo-year period from the date
of grant. TheseThe short-term performance-based RSUs vest upon the achievement of established goals based on financial and customer satisfaction metrics for the performance period January 1, 2021 to December 31, 2021. RSUs are generally equity awards settled in stock for domestic employees and liability awards settled in cash for international employees. The cash payments are based on the20-day average closing price of UAL common stock immediately prior to the vesting date. The performance-based RSUs vest based on the Company’s relative improvement inpre-tax margin compared to a group of airline industry peers for the three years ending December 31, 2019. If the performance condition is achieved, cash payments will be made after the end of the performance period based on the20-day average closing price of UAL common stock immediately prior to the vesting date and based on the level, if any, of the performance goal achieved. The Company accounts for the performance-based RSUs as liability awards. The stock options have aten-year term and vestpro-rata over the third, fourth and fifth anniversaries of the date of grant.
The following table provides information related to
UAL’sUAL's share-based compensation plan cost for the years ended December 31 (in millions):
| | | | | | | | | | | | |
| | | 2017 | | | 2016 | | | 2015 | |
Compensation cost: | | | | | | | | | | | | |
RSUs | | $ | 63 | | | $ | 58 | | | $ | 52 | |
Restricted stock | | | 8 | | | | 11 | | | | 6 | |
Stock options | | | 2 | | | | 1 | | | | — | |
| | | | | | | | | | | | |
Total | | $ | 73 | | | $ | 70 | | | $ | 58 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| Compensation cost: | | | | | | |
| RSUs | | $ | 236 | | | $ | 106 | | | $ | 98 | |
| Stock options | | 2 | | | 2 | | | 1 | |
| RSAs | | — | | | — | | | 1 | |
| Total | | $ | 238 | | | $ | 108 | | | $ | 100 | |
The table below summarizes
UAL’sUAL's 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,
20172021 (in millions, except as noted):
| | | | | | | | |
| | | Unearned
Compensation | | | Weighted-
Average
Remaining
Period
(in years) | |
RSUs | | $ | 46 | | | | 1.9 | |
Stock options | | | 4 | | | | 3.9 | |
Restricted stock | | | 3 | | | | 1.2 | |
| | | | | | | | |
Total | | $ | 53 | | | | | |
| | | | | | | | |
RSUs and Restricted Stock. All performance-based RSUs, as well as a portion
| | | | | | | | | | | | | | |
| | Unearned Compensation | | Weighted-Average
Remaining Period
(in years) |
| RSUs | | $ | 60 | | | 0.7 |
| Stock options | | 6 | | | 3.9 |
| Total | | $ | 66 | | | |
RSUs. As of December 31, 2017,2021, UAL had recorded a liability of $38approximately $7 million related to its cash-settled RSUs. UAL paid $50approximately $29 million, $69$26 million and $85$41 million related to its cash-settled RSUs during 2017, 20162021, 2020 and 2015,2019, respectively.
The table below summarizes UAL’s RSUs and restricted stockUAL's RSU activity for the years ended December 31 (shares in millions):
| | | | | | | | | | | | |
| | | RSUs | | | Restricted Stock | | | Weighted-
Average
Grant Price | |
Outstanding 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 | |
| | | | | | | | | | | | |
Outstanding 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 | |
| | | | | | | | | | | | |
Outstanding at December 31, 2016 | | | 2.9 | | | | 0.5 | | | | 52.00 | |
| | | | | | | | | | | | |
Granted | | | 1.6 | | | | — | | | | — | |
Vested | | | (1.0) | | | | (0.2) | | | | 51.60 | |
Forfeited | | | (0.3) | | | | — | | | | 51.88 | |
| | | | | | | | | | | | |
Outstanding at December 31, 2017 | | | 3.2 | | | | 0.3 | | | | 52.30 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Liability Awards | | Equity Awards |
| | RSUs | |
RSUs | | Weighted-
Average
Grant Price |
| Outstanding at December 31, 2018 | | 1.9 | | | 1.8 | | | $ | 66.29 | |
| Granted | | 0.1 | | | 1.1 | | | 86.72 | |
| Vested | | (0.5) | | | (0.8) | | | 64.85 | |
| Forfeited | | (0.9) | | | (0.1) | | | 76.48 | |
| Outstanding at December 31, 2019 | | 0.6 | | | 2.0 | | | 78.03 | |
| Granted | | 0.1 | | | 2.4 | | | 40.80 | |
| Vested | | (0.3) | | | (0.8) | | | 74.54 | |
| Forfeited | | — | | | (0.4) | | | 54.21 | |
| Outstanding at December 31, 2020 | | 0.4 | | | 3.2 | | | 53.41 | |
| Granted | | 0.4 | | | 2.9 | | | 52.18 | |
| Vested | | (0.6) | | | (1.5) | | | 51.35 | |
| Forfeited | | — | | | (0.2) | | | 46.77 | |
| Outstanding at December 31, 2021 | | 0.2 | | | 4.4 | | | 53.63 | |
The fair value of RSUs and restricted stockRSAs that vested in 2017, 20162021, 2020 and 20152019 was $76approximately $104 million, $80$87 million and $92$99 million, respectively. The fair valuelast vesting of the restricted stockRSAs occurred in 2019 and the stock-settled RSUs was based upon theCompany has not granted RSAs since 2016.
Stock Options. UAL common stock price on the date of grant. These awards are accounted for as equity awards. The fair value of the cash-settled RSUs was based on the UAL common stock price as of the last day preceding the settlement date. These awards are accounted for as liability awards. Restricted stock vesting and the recognition of the expense is similar to thedid not grant any stock option vesting described below.Stock Options. During 2017,awards during either 2020 or 2021. In 2019, UAL granted an award of approximately 36,000307,000 premium-priced stock options with an exercise prices equal toprice that was 25% higher than the fair market valueclosing price of UAL’sUAL's common stock on the date of grant, with a weighted-averagerepresenting an exercise price of $77.56 and a weighted-average grant date fair value of approximately $0.7 million. In 2016, UAL granted approximately 0.1 million stock options with exercise prices equal to the fair market value of UAL’s common stock on the date of grant and an additional approximately 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. UAL did not grant any stock options in 2015.$110.21. 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 grant date fair value of stock options 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 UAL’s 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 term of the options was determined based upon a simplified assumption that the option will be exercised evenly from vesting to expiration due to the Company’s lack of relevant historical data related to stock options.
As of December 31, 2017,2021, there were approximately 0.50.7 million outstanding stock option awards, 0.10.3 million of which were exercisable, with weighted-average exercise prices of $51.67$82.12 and $34.74,$59.05, respectively, intrinsic values of $8 million and $5 million, respectively, and weighted-average remaining contractual lives (in years) of 6.35.3 and 3.7, respectively.
2.9, respectively, and intrinsic values of zero as all of the strike prices exceeded the closing stock price on that date.
NOTE
65 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
("AOCI")
The tables below present the components of the
Company’sCompany's AOCI, net of tax (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | | Pension and
Other
Postretirement
Liabilities | | | Fuel
Derivatives
Contracts | | | Investments
and Other | | | Deferred
Taxes | | | Total | |
Balance at December 31, 2014 | | $ | (472) | | | $ | (499) | | | $ | 8 | | | $ | (116) | | | $ | (1,079) | |
| | | | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) before reclassifications | | | 78 | (a) | | | (320) | | | | (5) | | | | 88 | | | | (159) | |
Amounts reclassified from accumulated other comprehensive income | | | 31 | | | | 604 | | | | — | | | | (228) | | | | 407 | |
| | | | | | | | | | | | | | | | | | | | |
Net other comprehensive income (loss) | | | 109 | | | | 284 | | | | (5) | | | | (140) | | | | 248 | |
| | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2015 | | $ | (363) | | | $ | (215) | | | $ | 3 | | | $ | (256) | | | $ | (831) | |
| | | | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) before reclassifications | | | (517) | (a) | | | (4) | | | | — | | | | 187 | | | | (334) | |
Amounts reclassified from accumulated other comprehensive income | | | 26 | | | | 217 | | | | (2) | | | | 95 | | | | 336 | |
| | | | | | | | | | | | | | | | | | | | |
Net other comprehensive income (loss) | | | (491) | | | | 213 | | | | (2) | | | | 282 | | | | 2 | |
| | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2016 | | $ | (854) | | | $ | (2) | | | $ | 1 | | | $ | 26 | | | $ | (829) | |
| | | | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) before reclassifications | | | (306) | (a) | | | — | | | | (7) | | | | 74 | | | | (239) | |
Amounts reclassified from accumulated other comprehensive income | | | 58 | | | | 2 | | | | — | | | | (21) | | | | 39 | |
Reclassification of stranded tax effects | | | — | | | | — | | | | — | | | | (118) | (b) | | | (118) | |
| | | | | | | | | | | | | | | | | | | | |
Net other comprehensive income (loss) | | | (248) | | | | 2 | | | | (7) | | | | (65) | | | | (318) | |
| | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2017 | | $ | (1,102) | | | $ | — | | | $ | (6) | | | $ | (39) | (c) | | $ | (1,147) | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
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, | | | | |
| | | 2017 | | | 2016 | | | 2015 | | | | |
Fuel derivative contracts | | | | | | | | | | | | | | | | |
Fuel contracts-reclassifications of losses into earnings (d) | | $ | 2 | | | $ | 217 | | | $ | 604 | | | | Aircraft fuel | |
Pension and Postretirement liabilities | | | | | | | | | | | | | | | | |
Amortization of unrecognized (gains) losses and prior service cost (e) | | | 58 | | | | 26 | | | | 31 | | | | Salaries and related costs | |
Investments and other | | | | | | | | | | | | | | | | |
Available-for-sale securities—reclassifications of gains into earnings | | | — | | | | (2 | ) | | | — | | | | Miscellaneous, net | |
(a) Prior service credits increased by $0 million, $30 million and $0 million and actuarial losses increased by approximately $306 million, $560 million and $78 million for 2017, 2016 and 2015, respectively.
(b) This amount represents the reclassification from AOCI to RE of the stranded tax effects resulting from the enactment of the Tax Act.
(c) Deferred tax balance relates mainly to Pension and Other Postretirement Liabilities.
(d) The last of the Company’s fuel hedge derivatives designated for cash flow hedge accounting expired in December 2016. The 2017 amount reclassified from AOCI into fuel expense represents hedge losses on December 2016 settled trades, but for which the associated fuel purchased in December 2016 was not consumed until January 2017. The Company’s 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.
(e) 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 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, the Company settled all of its fuel hedges and has not entered into any new fuel derivative contracts for hedge accounting. Accordingly, the Company reclassified the $180 million to income tax expense in 2016.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pension and
Other
Postretirement
Liabilities | | Investments and Other | | Deferred Taxes (a) | | Total |
| Balance at December 31, 2018 | | $ | (663) | | | $ | (4) | | | $ | (136) | | | $ | (803) | |
| Change in value | | 105 | | | 7 | | | (24) | | | 88 | |
| Amounts reclassified to earnings | | (2) | | (b) | (1) | | | — | | | (3) | |
| Balance at December 31, 2019 | | (560) | | | 2 | | | (160) | | | (718) | |
| Change in value | | (993) | | | — | | | 221 | | | (772) | |
| Amounts reclassified to earnings | | 451 | | (b) | — | | | (100) | | | 351 | |
| Balance at December 31, 2020 | | (1,102) | | | 2 | | | (39) | | | (1,139) | |
| Change in value | | 239 | | | (2) | | | (53) | | | 184 | |
| Amounts reclassified to earnings | | 16 | | (b) | — | | | (3) | | | 13 | |
| Balance at December 31, 2021 | | $ | (847) | | | $ | — | | | $ | (95) | | | $ | (942) | |
(a)Relates primarily to pension and other postretirement benefit liabilities and includes approximately $285 million of deferred income tax expense that will not be recognized in net income until these obligations are fully extinguished. We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to results from operations. (b)This AOCI component is included in the computation of net periodic pension and other postretirement costs. See Note 7 of this report for additional information on pensions and other postretirement liabilities. |
The income tax provision (benefit) differed from amounts computed at the statutory federal income tax rate and consisted of the following significant components as follows (in millions): | | | | | | | | | | | | |
UAL | | 2017 | | | 2016 | | | 2015 | |
Income tax provision at statutory rate | | $ | 1,050 | | | $ | 1,337 | | | $ | 1,477 | |
State income taxes, net of federal income tax benefit | | | 29 | | | | 38 | | | | 38 | |
Foreign tax rate differential | | | (43) | | | | — | | | | — | |
Foreign income taxes | | | 3 | | | | 3 | | | | 4 | |
Nondeductible employee meals | | | 17 | | | | 16 | | | | 15 | |
Impact of Tax Act | | | (192) | | | | — | | | | — | |
Income tax adjustment from AOCI | | | — | | | | 180 | | | | — | |
State rate change | | | 12 | | | | (12) | | | | — | |
Valuation allowance | | | (16) | | | | 20 | | | | (4,662) | |
Other, net | | | 8 | | | | (26) | | | | 7 | |
| | | | | | | | | | | | |
| | $ | 868 | | | $ | 1,556 | | | $ | (3,121) | |
| | | | | | | | | | | | |
Current | | $ | (77) | | | $ | (92) | | | $ | 56 | |
Deferred | | | 945 | | | | 1,648 | | | | (3,177) | |
| | | | | | | | | | | | |
| | $ | 868 | | | $ | 1,556 | | | $ | (3,121) | |
| | | | | | | | | | | | |
| | | |
United | | 2017 | | | 2016 | | | 2015 | |
Income tax provision at statutory rate | | $ | 1,051 | | | $ | 1,338 | | | $ | 1,477 | |
State income taxes, net of federal income tax | | | 29 | | | | 38 | | | | 38 | |
Foreign tax rate differential | | | (43) | | | | — | | | | — | |
Foreign income taxes | | | 3 | | | | 3 | | | | 4 | |
Nondeductible employee meals | | | 17 | | | | 16 | | | | 15 | |
Impact of Tax Act | | | (209) | | | | — | | | | — | |
Income tax adjustment from AOCI | | | — | | | | 180 | | | | — | |
State rate change | | | 12 | | | | (12) | | | | — | |
Valuation allowance | | | (16) | | | | 20 | | | | (4,621) | |
Other, net | | | 8 | | | | (25) | | | | 7 | |
| | | | | | | | | | | | |
| | $ | 852 | | | $ | 1,558 | | | $ | (3,080) | |
| | | | | | | | | | | | |
Current | | $ | (77) | | | $ | (92) | | | $ | 56 | |
Deferred | | | 929 | | | | 1,650 | | | | (3,136) | |
| | | | | | | | | | | | |
| | $ | 852 | | | $ | 1,558 | | | $ | (3,080) | |
| | | | | | | | | | | | |
The Company’s effective tax rate for the year ended December 31, 2017 differed from the federal statutory rate of 35% primarily because of the provisionalone-time income tax benefit of $192 million as a result of the enactment of the Tax Act. This provisional benefit is the result of the remeasurement of deferred tax assets and liabilities, partially offset by a write-down of the employee benefit deferred tax asset for futurenon-deductible compensation, and aone-time transition tax on foreign earnings and profits. The Company’s effective tax rate for the year ended December 31, 2016 differed from the federal statutory rate of
35% primarily because of thenon-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.
Total income tax expense in 2017 includes the provisionalone-time transition tax of $19 million on previously deferred foreign earnings. The undistributed cumulative earnings of foreign subsidiaries contributing to theone-time transition tax were $122 million. The Company expects to repatriate these earnings in 2018.
As of December 31, 2017, we had not completed our analysis of all aspects of the Tax Act. However, we have made a provisional estimate for its effect on our existing deferred tax balances and theone-time transition tax. We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. We are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.
| | | | | | | | | | | | | | | | | | | | |
| UAL and United | | 2021 | | 2020 | | 2019 |
| Income tax provision (benefit) at statutory rate | | $ | (537) | | | $ | (1,852) | | | $ | 822 | |
| State income tax provision (benefit), net of federal income tax benefit | | (34) | | | (110) | | | 50 | |
| Foreign tax rate differential | | — | | | — | | | (90) | |
| Global intangible low-taxed income | | — | | | — | | | 90 | |
| Nondeductible employee meals | | 7 | | | 5 | | | 12 | |
| Valuation allowance | | (38) | | | 197 | | | (4) | |
| Other, net | | 9 | | | 7 | | | 25 | |
| | $ | (593) | | | $ | (1,753) | | | $ | 905 | |
| | | | | | |
| Current | | $ | (10) | | | $ | (12) | | | $ | 23 | |
| Deferred | | (583) | | | (1,741) | | | 882 | |
| | $ | (593) | | | $ | (1,753) | | | $ | 905 | |
Temporary differences and carryforwards that give rise to deferred tax assets and liabilities at December 31,
20172021 and
20162020 were as follows (in millions):
| | | | | | | | | | | | | | | | |
| | | UAL | | | United | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Deferred income tax asset (liability): | | | | | | | | | | | | | | | | |
Federal and state net operating loss (“NOL”) carryforwards | | $ | 601 | | | $ | 1,613 | | | $ | 574 | | | $ | 1,571 | |
Deferred revenue | | | 1,069 | | | | 2,096 | | | | 1,069 | | | | 2,096 | |
Employee benefits, including pension, postretirement and medical | | | 1,051 | | | | 1,662 | | | | 1,051 | | | | 1,662 | |
Alternative minimum tax credit carryforwards | | | — | | | | 116 | | | | — | | | | 116 | |
Other | | | 351 | | | | 523 | | | | 351 | | | | 522 | |
Less: Valuation allowance | | | (63) | | | | (68) | | | | (63) | | | | (68) | |
| | | | | | | | | | | | | | | | |
Total deferred tax assets | | $ | 3,009 | | | $ | 5,942 | | | $ | 2,982 | | | $ | 5,899 | |
| | | | | | | | | | | | | | | | |
Depreciation | | $ | (2,431) | | | $ | (3,961) | | | $ | (2,431) | | | $ | (3,961) | |
Intangibles | | | (803) | | | | (1,326) | | | | (803) | | | | (1,326) | |
| | | | | | | | | | | | | | | | |
Total deferred tax liabilities | | $ | (3,234) | | | $ | (5,287) | | | $ | (3,234) | | | $ | (5,287) | |
| | | | | | | | | | | | | | | | |
Net deferred tax asset (liability) | | $ | (225) | | | $ | 655 | | | $ | (252) | | | $ | 612 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | UAL | | United |
| | 2021 | | 2020 | | 2021 | | 2020 |
| Deferred income tax asset (liability): | | | | | | | | |
| Federal and state net operating loss ("NOL") carryforwards | | $ | 2,229 | | | $ | 2,476 | | | $ | 2,201 | | | $ | 2,448 | |
| Deferred revenue | | 2,349 | | | 1,409 | | | 2,349 | | | 1,409 | |
| Employee benefits, including pension, postretirement and medical | | 986 | | | 1,103 | | | 986 | | | 1,103 | |
| Operating lease liabilities | | 1,272 | | | 1,247 | | | 1,272 | | | 1,247 | |
| Other financing liabilities | | 327 | | | 260 | | | 327 | | | 260 | |
| Other | | 535 | | | 362 | | | 535 | | | 362 | |
| Less: Valuation allowance | | (210) | | | (247) | | | (210) | | | (247) | |
| Total deferred tax assets | | $ | 7,488 | | | $ | 6,610 | | | $ | 7,460 | | | $ | 6,582 | |
| | | | | | | | |
| Depreciation | | $ | (5,122) | | | $ | (4,789) | | | $ | (5,122) | | | $ | (4,789) | |
| Operating lease right-of-use asset | | (1,051) | | | (1,028) | | | (1,051) | | | (1,028) | |
| Intangibles | | (656) | | | (662) | | | (656) | | | (662) | |
| Total deferred tax liabilities | | $ | (6,829) | | | $ | (6,479) | | | $ | (6,829) | | | $ | (6,479) | |
| Net deferred tax asset | | $ | 659 | | | $ | 131 | | | $ | 631 | | | $ | 103 | |
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 Company’sCompany's federal and state NOL and tax credit carryforwards relate to current and prior years’years' NOLs and credits, which may be used to reduce tax liabilities in future years. These tax benefits are mostly attributable to federalpre-tax NOL carryforwards of $2.4$9.9 billion ($2.1 billion tax effected) for UAL. If not utilized these federalpre-tax NOLs will expire as follows (in billions): $0.2 in 2026, $0.5 in 2028, $0.4 in 2029, $0.2 in 2032 and $1.7 thereafter. In addition, for UAL the majority$0.4 in 2033. The remaining $8.4 billion of tax benefits of the stateNOLs has no expiration date. State pre-tax NOLs of $49 million, net$3.3 billion ($0.2 billion tax effected) expire over a five to twenty year period. Federal tax credits of a valuation allowance of $52$40 million will expire over a five to20-yearone-to-eighteen-year period and state tax credits of $45 million will expire over a one-to-eleven-year period.The Company periodically assesses whether
A tax valuation allowance is recognized if it is more likely than not that itsome portion or all of the deferred tax assets will generate sufficient taxable income to realize its deferred income tax assets.not be realized. The Company establishes valuation allowances if it is not more
likely than not that it will realize its deferred income tax assets. In making this determination, the Company considers allCompany's management assesses available positive and negative evidence and makes certain assumptions. The Company considers, among other things, projected future taxable income, scheduled reversals ofregarding the Company's ability to realize its deferred tax liabilities, the overall business environment, the Company’s historical financial resultsassets and tax planning strategies. In evaluating the likelihood of utilizing the Company’s net deferred income tax assets, the significant factors that the Company considers include (1) the Company’s recent history and forecasted profitability; (2) growth in the U.S. and global economies; and (3) the future impact of taxable temporary differences. In 2015, the Company concluded that its deferred income tax assets wererecords a valuation allowance when it is more likely than not that deferred tax assets will not be realized. In order to be realizedform a conclusion, management considers positive evidence in the form of taxable income in prior carryback years, reversing temporary differences, tax planning strategies and released almost allprojections of future taxable income during the periods in which those temporary differences become deductible, as well as negative evidence such as historical losses. Although the Company incurred losses in 2021 and 2020, management determined that these results were not indicative of future results due to the impact of the COVID-19 pandemic on its operations. The Company concluded that the positive evidence outweighs the negative evidence, primarily driven by approval and distribution of COVID-19 vaccines as well as increased confidence with the timing of the recovery. One of the Company's largest deferred tax assets was its federal pre-tax NOLs which were $9.9 billion ($2.1 billion tax effected) at December 31, 2021. The majority of the NOLs do not expire and the Company expects to realize the benefits of the NOLs through the reversal of certain existing deferred tax liabilities of $6.2 billion and the remaining $1.3 billion (the income tax equivalent to approximately two years of average pre-COVID-19 pre-tax income) through projected future taxable income. Therefore, we have not recorded a valuation allowance in 2015, resulting inon our deferred tax assets other than the capital loss carryforwards and certain state attributes that have short expiration periods. While the Company expects to generate sufficient future income to fully utilize its deferred tax assets (including NOLs), the Company may have to record a $3.1 billion benefit invaluation allowance, which could be material, against deferred tax assets if negative evidence such as prolonged losses or reduced forecasted income outweigh positive evidence. Assumptions about future taxable income are consistent with the plans and estimates used to manage our business. Management will continue to evaluate future financial performance to determine whether such performance is both sustained and significant enough to provide sufficient evidence to support not recording valuation allowance on these NOLs. As of December 31, 2021, the Company has recorded $183 million of valuation allowance against its provision for income taxes.
capital loss deferred tax assets. Capital losses have a limited carryforward period of five years, and they can be utilized only to the extent of capital gains. The Company hasdoes not anticipate generating sufficient capital gains to utilize the losses before they expire, therefore, a valuation allowance is necessary as of December 31, 2021.
Additionally, the Company recorded a valuation allowance of
$63$27 million
foron certain state
and local NOLs and credit carryforwards. The Company expects these NOLs and credits will expire unuseddeferred tax assets primarily 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 Company’s ability to realize these deferred tax assets.have short expiration periods.
The
Company’sCompany's unrecognized tax benefits related to uncertain tax positions were
$21$55 million,
$74$57 million and
$24$53 million at December 31,
2017, 20162021, 2020 and
2015,2019, respectively. Included in the ending balance at December 31,
20172021 is
$21$55 million that would affect the
Company’sCompany's 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
2017, 20162021, 2020 and
2015.2019. 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, 20172021 for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company’sCompany's federal income tax returns for tax years after 20012002 remain subject to examination by the Internal Revenue Service (“IRS”(the "IRS") and state taxing jurisdictions. Currently, there are no ongoing examinationsThe IRS concluded its audit of the Company’s prior year2016 and 2017 tax returns being conducted by the IRS.years with no material adjustments.
NOTE
87 - PENSION AND OTHER POSTRETIREMENT PLANS
The following summarizes the significant pension and other postretirement plans of United:
Pension PlansPlans.
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 employee’semployee's final average compensation. Additional benefit accruals are frozen under the plan covering certain pilot employees and for management and administrative employees.employees covered under the non-pilot plan. Benefit accruals for certainnon-pilot employees continue. United maintains additional defined benefit pension plans, which cover certain international employees.
The Company did not have any minimum required contributions for 2021; however, during the third quarter of 2021, the Company made a voluntary contribution of $375 million to its U.S. domestic tax-qualified defined benefit pension plan covering certain U.S. non-pilot employees.
Other Postretirement PlansPlans.
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. In 2021 and 2020, the Company offered several voluntary leave programs and voluntary separation programs ("Voluntary Programs") to certain eligible employees, which in some cases included a partially-paid leave of absence with active health benefits and travel privileges. Under these Voluntary Programs, employees generally separated (or will separate) from employment with certain post-employment health benefits and travel privileges. Included in the Voluntary Programs offered during the first quarter of 2021, the Company offered special separation benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees. The subsidies are in the form of a one-time contribution to a notional Retiree Health Account of $125,000 for full-time employees and $75,000 for part-time employees. As a result, the Company recorded $31 million for those additional benefits in 2021.
During the second and third quarters of 2020, the Company offered certain of its eligible front-line employees special separation benefits in the form of additional years of pension service and additional subsidies for retiree medical costs (based on employee group, age and completed years of service) as a part of the Voluntary Programs. As a result, the Company recorded, in 2020, $54 million for those additional pension benefits and $201 million for those additional retiree medical benefits. Also, the Company recognized, in 2020, $430 million in settlement losses related to the defined benefit pension plan covering certain U.S. non-pilot employees.
Actuarial assumption changes are reflected as a component of the net actuarial gains/(losses)(gain) loss during 20172021 and 2016. These amounts2020. The 2021 actuarial gains were mainly related to an increase in the discount rate applied at December 31, 2021 compared to December 31, 2020. Actuarial (gains) losses 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 2017 and 2016 pension and retiree medical expense as described below.participants.
The following
table setstables set 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, 2017 | | | Year Ended
December 31, 2016 | |
Accumulated benefit obligation: | | $ | 4,739 | | | $ | 4,158 | |
| | | | | | | | |
| | | | | | | | |
Change in projected benefit obligation: | | | | | | | | |
Projected benefit obligation at beginning of year | | $ | 5,253 | | | $ | 4,473 | |
Service cost | | | 195 | | | | 112 | |
Interest cost | | | 220 | | | | 200 | |
Actuarial loss | | | 525 | | | | 738 | |
Gross benefits paid and settlements | | | (366) | | | | (243) | |
Other | | | 25 | | | | (27) | |
| | | | | | | | |
Projected benefit obligation at end of year | | $ | 5,852 | | | $ | 5,253 | |
| | | | | | | | |
Change in plan assets: | | | | | | | | |
Fair value of plan assets at beginning of year | | $ | 3,355 | | | $ | 2,975 | |
Actual return on plan assets | | | 510 | | | | 230 | |
Employer contributions | | | 419 | | | | 421 | |
Gross benefits paid and settlements | | | (366) | | | | (243) | |
Other | | | 14 | | | | (28) | |
| | | | | | | | |
Fair value of plan assets at end of year | | $ | 3,932 | | | $ | 3,355 | |
| | | | | | | | |
Funded status—Net amount recognized | | $ | (1,920) | | | $ | (1,898) | |
| | | | | | | | |
| | | | | | | | |
| | | Pension Benefits | |
| | | December 31, 2017 | | | December 31, 2016 | |
Amounts recognized in the consolidated balance sheets consist of: | | | | | | | | |
Noncurrent asset | | $ | 9 | | | $ | 2 | |
Current liability | | | (8) | | | | (8) | |
Noncurrent liability | | | (1,921) | | | | (1,892) | |
| | | | | | | | |
Total liability | | $ | (1,920) | | | $ | (1,898) | |
| | | | | | | | |
Amounts recognized in accumulated other comprehensive loss consist of: | | | | | | | | |
Net actuarial loss | | $ | (1,610) | | | $ | (1,482) | |
Prior service cost | | | (1) | | | | (1) | |
| | | | | | | | |
Total accumulated other comprehensive loss | | $ | (1,611) | | | $ | (1,483) | |
| | | | | | | | |
| | | | | | | | |
| | | Other Postretirement Benefits | |
| | | Year Ended
December 31, 2017 | | | Year Ended
December 31, 2016 | |
Change in benefit obligation: | | | | | | | | |
Benefit obligation at beginning of year | | $ | 1,687 | | | $ | 2,002 | |
Service cost | | | 13 | | | | 19 | |
Interest cost | | | 66 | | | | 86 | |
Plan participants’ contributions | | | 68 | | | | 69 | |
Benefits paid | | | (178) | | | | (191) | |
Actuarial loss (gain) | | | 40 | | | | (165) | |
Plan amendments | | | — | | | | (138) | |
Other | | | 14 | | | | 5 | |
| | | | | | | | |
Benefit obligation at end of year | | $ | 1,710 | | | $ | 1,687 | |
| | | | | | | | |
Change in plan assets: | | | | | | | | |
Fair value of plan assets at beginning of year | | $ | 55 | | | $ | 56 | |
Actual return on plan assets | | | 1 | | | | 2 | |
Employer contributions | | | 108 | | | | 119 | |
Plan participants’ contributions | | | 68 | | | | 69 | |
Benefits paid | | | (178) | | | | (191) | |
| | | | | | | | |
Fair value of plan assets at end of year | | | 54 | | | | 55 | |
| | | | | | | | |
Funded status—Net amount recognized | | $ | (1,656) | | | $ | (1,632) | |
| | | | | | | | |
| | | | Pension Benefits |
| | | Year Ended December 31, 2021 | | Year Ended December 31, 2020 |
| Accumulated benefit obligation: | | Accumulated benefit obligation: | $ | 5,496 | | | $ | 5,387 | |
| | Change in projected benefit obligation: | | Change in projected benefit obligation: | |
| Projected benefit obligation at beginning of year | | Projected benefit obligation at beginning of year | $ | 6,525 | | | $ | 6,398 | |
| Service cost | | Service cost | 239 | | | 216 | |
| Interest cost | | Interest cost | 184 | | | 209 | |
| Actuarial (gain) loss | | Actuarial (gain) loss | (188) | | | 1,181 | |
| Special termination benefit | | Special termination benefit | — | | | 54 | |
| Benefits paid | | Benefits paid | (263) | | | (1,445) | |
| Curtailment | | Curtailment | (12) | | | (105) | |
| Other | | Other | (12) | | | 17 | |
| Projected benefit obligation at end of year | | Projected benefit obligation at end of year | $ | 6,473 | | | $ | 6,525 | |
| | Change in plan assets: | | Change in plan assets: | |
| Fair value of plan assets at beginning of year | | Fair value of plan assets at beginning of year | $ | 4,069 | | | $ | 4,964 | |
| Actual return on plan assets | | Actual return on plan assets | 437 | | | 521 | |
| Employer contributions | | Employer contributions | 387 | | | 16 | |
| Benefits paid | | Benefits paid | (263) | | | (1,445) | |
| Other | | Other | (4) | | | 13 | |
| Fair value of plan assets at end of year | | Fair value of plan assets at end of year | $ | 4,626 | | | $ | 4,069 | |
| Funded status—Net amount recognized | | Funded status—Net amount recognized | $ | (1,847) | | | $ | (2,456) | |
| | | | | Other Postretirement Benefits | | | Pension Benefits |
| | | December 31, 2017 | | December 31, 2016 | | | December 31, 2021 | | December 31, 2020 |
Amounts recognized in the consolidated balance sheets consist of: | | | | | Amounts recognized in the consolidated balance sheets consist of: | | | |
| Noncurrent asset | | Noncurrent asset | $ | 75 | | | $ | 8 | |
Current liability | | $ | (54) | | | $ | (51) | | Current liability | (2) | | | (4) | |
Noncurrent liability | | (1,602) | | | (1,581) | | Noncurrent liability | (1,920) | | | (2,460) | |
| | | | | | | |
Total liability | | $ | (1,656) | | | $ | (1,632) | | Total liability | $ | (1,847) | | | $ | (2,456) | |
| | | | | | | | | | |
Amounts recognized in accumulated other comprehensive income consist of: | | | | | |
Net actuarial gain | | $ | 301 | | | $ | 384 | | |
Prior service credit | | 208 | | | 245 | | |
| | | | | | | |
Total accumulated other comprehensive income | | $ | 509 | | | $ | 629 | | |
| | | | | | | |
| Amounts recognized in accumulated other comprehensive loss consist of: | | Amounts recognized in accumulated other comprehensive loss consist of: | |
| Net actuarial loss | | Net actuarial loss | $ | (1,406) | | | $ | (1,924) | |
| Prior service cost | | Prior service cost | (1) | | | (3) | |
| Total accumulated other comprehensive loss | | Total accumulated other comprehensive loss | $ | (1,407) | | | $ | (1,927) | |
| | | | | | | | | | | |
| Other Postretirement Benefits |
| Year Ended December 31, 2021 | | Year Ended December 31, 2020 |
| Change in benefit obligation: | | | |
| Benefit obligation at beginning of year | $ | 1,082 | | | $ | 842 | |
| Service cost | 10 | | | 10 | |
| Interest cost | 25 | | | 28 | |
| Plan participants' contributions | 66 | | | 58 | |
| Benefits paid | (199) | | | (164) | |
| Actuarial loss | 114 | | | 107 | |
| Special termination benefit | 31 | | | 201 | |
| Benefit obligation at end of year | $ | 1,129 | | | $ | 1,082 | |
| | | |
| Change in plan assets: | | | |
| Fair value of plan assets at beginning of year | $ | 51 | | | $ | 52 | |
| Actual return on plan assets | 1 | | | 1 | |
| Employer contributions | 130 | | | 104 |
| Plan participants' contributions | 66 | | | 58 | |
| Benefits paid | (199) | | | (164) | |
| Fair value of plan assets at end of year | 49 | | | 51 | |
| Funded status—Net amount recognized | $ | (1,080) | | | $ | (1,031) | |
| | | | | | | | | | | |
| Other Postretirement Benefits |
| December 31, 2021 | | December 31, 2020 |
| Amounts recognized in the consolidated balance sheets consist of: | | | |
| Current liability | $ | (80) | | | $ | (37) | |
| Noncurrent liability | (1,000) | | | (994) | |
| Total liability | $ | (1,080) | | | $ | (1,031) | |
| | | |
| Amounts recognized in accumulated other comprehensive income consist of: | | | |
| Net actuarial gain | $ | 113 | | | $ | 255 | |
| Prior service credit | 447 | | | 570 | |
| Total accumulated other comprehensive income | $ | 560 | | | $ | 825 | |
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):
| | | | | | | | |
| | | 2017 | | | 2016 | |
Projected benefit obligation | | $ | 5,637 | | | $ | 5,025 | |
Accumulated benefit obligation | | | 4,567 | | | | 3,985 | |
Fair value of plan assets | | | 3,709 | | | | 3,164 | |
| | | | | | | | | | | |
| 2021 | | 2020 |
| Projected benefit obligation | $ | 6,231 | | | $ | 6,250 | |
| Accumulated benefit obligation | 5,255 | | | 5,163 | |
| Fair value of plan assets | 4,309 | | | 3,786 | |
Net periodic benefit cost for the years ended December 31 included the following components (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | | 2016 | | | 2015 | |
| | | Pension
Benefits | | | Other
Postretirement
Benefits | | | Pension
Benefits | | | Other
Postretirement
Benefits | | | Pension
Benefits | | | Other
Postretirement
Benefits | |
Service cost | | $ | 195 | | | $ | 13 | | | $ | 112 | | | $ | 19 | | | $ | 124 | | | $ | 21 | |
Interest cost | | | 220 | | | | 66 | | | | 200 | | | | 86 | | | | 200 | | | | 82 | |
Expected return on plan assets | | | (243) | | | | (2) | | | | (216) | | | | (2) | | | | (194) | | | | (2) | |
Curtailment gain | | | — | | | | — | | | | — | | | | (107) | | | | — | | | | — | |
| Amortization of unrecognized actuarial (gain) loss | | | 128 | | | | (33) | | | | 76 | | | | (19) | | | | 85 | | | | (22) | |
| Amortization of prior service credits | | | — | | | | (37) | | | | — | | | | (31) | | | | — | | | | (32) | |
Other | | | 5 | | | | — | | | | 5 | | | | — | | | | 4 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net periodic benefit cost (credit) | | $ | 305 | | | $ | 7 | | | $ | 177 | | | $ | (54) | | | $ | 219 | | | $ | 47 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See Note 14 of this report for additional information related to the curtailment gain
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | 2019 |
| Pension Benefits | | Other Postretirement Benefits | | Pension Benefits | | Other Postretirement Benefits | | Pension Benefits | | Other Postretirement Benefits |
| Service cost | $ | 239 | | | $ | 10 | | | $ | 216 | | | $ | 10 | | | $ | 184 | | | $ | 10 | |
| Interest cost | 184 | | | 25 | | | 209 | | | 28 | | | 226 | | | 47 | |
| Expected return on plan assets | (283) | | | (1) | | | (328) | | | (1) | | | (291) | | | (1) | |
| | | | | | | | | | | |
| Amortization of unrecognized actuarial (gain) loss | 170 | | | (28) | | | 162 | | | (40) | | | 118 | | | (52) | |
| Amortization of prior service credits | — | | | (123) | | | — | | | (124) | | | — | | | (73) | |
| Settlement loss - Voluntary Programs | — | | | — | | | 430 | | | — | | | — | | | — | |
| Special termination benefit - Voluntary Programs | — | | | 31 | | | 54 | | | 201 | | | — | | | — | |
| Curtailment | (8) | | | — | | | 1 | | | — | | | — | | | — | |
| Other | 5 | | | — | | | 22 | | | — | | | 5 | | | — | |
| Net periodic benefit cost (credit) | $ | 307 | | | $ | (86) | | | $ | 766 | | | $ | 74 | | | $ | 242 | | | $ | (69) | |
Service cost is recorded in
2016.The estimated amounts that will be amortized in 2018 outSalaries and related costs on the statement of accumulatedconsolidated operations. All other comprehensive income (loss) intocomponents of net periodic benefit costcosts are as follows (in millions):
| | | | | | | | |
| | | Pension
Benefits | | | Other
Postretirement
Benefits | |
Actuarial (gain) loss | | $ | 132 | | | $ | (32) | |
Prior service (credit) cost | | | — | | | | (37) | |
recorded in Miscellaneous, net on the statement of consolidated operations.
The assumptions used for the benefit plans were as follows: | | | | | | | | |
| | | Pension Benefits | |
Assumptions used to determine benefit obligations | | | 2017 | | | | 2016 | |
Discount rate | | | 3.65% | | | | 4.18% | |
Rate of compensation increase | | | 3.89% | | | | 3.54% | |
| | | | | | | | |
Assumptions used to determine net expense | | | | | | | | |
Discount rate | | | 4.19% | | | | 4.58% | |
Expected return on plan assets | | | 7.02% | | | | 7.04% | |
Rate of compensation increase | | | 3.54% | | | | 3.53% | |
| | | Other Postretirement Benefits | | | Pension Benefits |
Assumptions used to determine benefit obligations | | 2017 | | | 2016 | | Assumptions used to determine benefit obligations | | 2021 | | 2020 |
Discount rate | | | 3.63% | | | | 4.07% | | Discount rate | | 2.90 | % | | 2.72 | % |
| Rate of compensation increase | | Rate of compensation increase | | 3.83 | % | | 3.88 | % |
| | | | | |
Assumptions used to determine net expense | | | | | Assumptions used to determine net expense | | |
Discount rate | | | 4.07% | | | | 4.49% | | Discount rate | | 2.72 | % | | 3.51 | % |
Expected return on plan assets | | | 3.00% | | | | 3.00% | | Expected return on plan assets | | 7.28 | % | | 7.31 | % |
Health care cost trend rate assumed for next year | | | 6.25% | | | | 6.50% | | |
Rate to which the cost trend rate is assumed to decline (ultimate trend rate in 2023) | | | 5.00% | | | | 5.00% | | |
| Rate of compensation increase | | Rate of compensation increase | | 3.88 | % | | 3.88 | % |
A 50 basis points decrease in the weighted average discount rate would have increased the Company's December 31, 2021 pension benefit liability by approximately $0.7 billion and increased the estimated 2021 pension benefit expense by approximately $85 million.
| | | | | | | | | | | | | | |
| | Other Postretirement Benefits |
| Assumptions used to determine benefit obligations | | 2021 | | 2020 |
| Discount rate | | 2.82 | % | | 2.43 | % |
| | | | |
| Assumptions used to determine net expense | | | | |
| Discount rate | | 2.43 | % | | 3.35 | % |
| Expected return on plan assets | | 3.00 | % | | 3.00 | % |
| Health care cost trend rate assumed for next year | | 5.70 | % | | 5.80 | % |
| Rate to which the cost trend rate is assumed to decline (ultimate trend rate in 2033) | | 4.50 | % | | 4.50 | % |
A 50 basis points decrease in the weighted average discount rate would have increased the Company's December 31, 2021 postretirement benefit liability by approximately $46 million and increased the estimated 2021 benefits expense by approximately $2 million.
The Company used the Society of
Actuaries’ 2014 mortality tables, modified to reflectActuaries' PRI-2012 Private Retirement Plans Mortality Tables projected generationally using the
Social Security Administration Trustee’s Report on current projections regarding expected longevity improvements.Society of Actuaries' MP-2021 projection scale.
The Company selected the
20172021 discount rate for substantially all of its plans by using a hypothetical portfolio of
high qualityhigh-quality bonds at December 31,
2017,2021 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’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’plans' investments are periodically rebalanced to our targeted allocation when considered appropriate. United’sUnited's plan assets are allocated within the following guidelines: | | | | | | | | | | | | | | | | | |
| | Percent of Total | | | Expected Long-Term
Rate of Return
| |
| Equity securities | 30-45 | % | | 10 | | % |
| Fixed-income securities | 35-50 | | | 4 | | |
| Alternatives | 15-25 | | | 7 | | |
| | | | | | | |
Equity securities
| | | 27-42 % | | | | 9.5 % | |
Fixed-income securities
| | | 30-40 | | | | 5.5 | |
Alternatives
| | | 10-25 | | | | 7.3 | |
Other
| | | 0-10 | | | | 7.3 | |
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, 2017 | | $ | 11 | | | $ | (8) | |
Effect on postretirement benefit obligation at December 31, 2017 | | | 170 | | | | (149) | |
A one percentage point50 basis points decrease in the weighted average discountexpected long-term rate of return on plan assets would increase the Company’s postretirement benefit liability by approximately $185 million and increase thehave increased estimated 2017 benefits2021 pension expense by approximately $8$20 million.
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
United’sUnited's pension and other postretirement plan assets at December 31 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | | | | | 2016 | |
| 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 | | $ | 1,406 | | | $ | 269 | | | $ | 133 | | | $ | — | | | $ | 1,004 | | | | | | | $ | 1,173 | | | $ | 230 | | | $ | 111 | | | $ | — | | | $ | 832 | |
Fixed-income securities | | | 1,470 | | | | — | | | | 834 | | | | 18 | | | | 618 | | | | | | | | 1,298 | | | | — | | | | 824 | | | | 11 | | | | 463 | |
Alternatives | | | 637 | | | | — | | | | — | | | | 139 | | | | 498 | | | | | | | | 586 | | | | — | | | | — | | | | 134 | | | | 452 | |
Other investments | | | 419 | | | | 32 | | | | 124 | | | | 172 | | | | 91 | | | | | | | | 298 | | | | 47 | | | | 68 | | | | 87 | | | | 96 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 3,932 | | | $ | 301 | | | $ | 1,091 | | | $ | 329 | | | $ | 2,211 | | | | | | | $ | 3,355 | | | $ | 277 | | | $ | 1,003 | | | $ | 232 | | | $ | 1,843 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other Postretirement Benefit Plan Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposit administration fund | | $ | 54 | | | $ | — | | | $ | — | | | $ | 54 | | | $ | — | | | | | | | $ | 55 | | | $ | — | | | $ | — | | | $ | 55 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2021 | | | 2020 |
| 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 | | $ | 1,754 | | | $ | 71 | | | $ | 44 | | | $ | 147 | | | $ | 1,492 | | | | $ | 1,606 | | | $ | 55 | | | $ | 125 | | | $ | 96 | | | $ | 1,330 | |
| Fixed-income securities | | 1,850 | | | — | | | 739 | | | 15 | | | 1,096 | | | | 1,644 | | | — | | | 548 | | | 49 | | | 1,047 | |
| Alternatives | | 847 | | | — | | | — | | | 216 | | | 631 | | | | 669 | | | — | | | — | | | 195 | | | 474 | |
| Other investments | | 175 | | | 108 | | | 59 | | | 8 | | | — | | | | 150 | | | 132 | | | 8 | | | 10 | | | — | |
| Total | | $ | 4,626 | | | $ | 179 | | | $ | 842 | | | $ | 386 | | | $ | 3,219 | | | | $ | 4,069 | | | $ | 187 | | | $ | 681 | | | $ | 350 | | | $ | 2,851 | |
| Other Postretirement Benefit Plan Assets: | | | | | | | | | | | | | | | | | | | | | |
| Deposit administration fund | | $ | 49 | | | $ | — | | | $ | — | | | $ | 49 | | | $ | — | | | | $ | 51 | | | $ | — | | | $ | — | | | $ | 51 | | | $ | — | |
(a) In accordance with the relevant accounting standards, certain investments that are measured at fair value using the net asset value
(“NAV”("NAV") per share (or its equivalent) have not been classified in the fair value hierarchy. These investments are commingled funds that invest in
equity securities and 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.semiannually.
Equity and Fixed-Income.Equities include investments in both developed market and emerging market equity securities. Fixed-income includes primarily U.S. andnon-U.S. government fixed-income securities and U.S. andnon-U.Snon-U.S. corporate fixed-income securities, as well as securitized debt 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 primarily cash, as well as insurance contracts and other funds.contracts.
The reconciliation of United’s definedUnited's benefit plan assets measured at fair value using unobservable inputs (Level 3) for the years ended December 31, 20172021 and 20162020 is as follows (in millions):
| | | | | | | | |
| | | 2017 | | | 2016 | |
Balance at beginning of year | | $ | 287 | | | $ | 208 | |
Actual return on plan assets: | | | | | | | | |
Sold during the year | | | 7 | | | | 4 | |
Held at year end | | | 16 | | | | 3 | |
Purchases, sales, issuances and settlements (net) | | | 73 | | | | 72 | |
| | | | | | | | |
Balance at end of year | | $ | 383 | | | $ | 287 | |
| | | | | | | | |
| | | | | | | | | | | |
| 2021 | | 2020 |
| Balance at beginning of year | $ | 401 | | | $ | 409 | |
| Actual return (loss) on plan assets: | | | |
| Sold during the year | 2 | | | 4 | |
| Held at year end | 48 | | | 13 | |
| Purchases, sales, issuances and settlements (net) | (14) | | | (25) | |
| Balance at end of year | $ | 437 | | | $ | 401 | |
Funding requirements for
tax-qualified defined benefit pension plans are determined by government regulations.
United’s contributions reflected above have satisfied itsThe Company does not expect any minimum required contributions
through the 2017 calendar year. In 2018, employer anticipatedfor 2022. The Company expects to make approximately $124 million in contributions to
all of United’s pension andUnited's postretirement plans
are at least $420 million and approximately $109 million, respectively.in 2022.
The estimated future benefit payments, net of expected participant contributions, in
United’sUnited's pension plans and other postretirement benefit plans as of December 31,
20172021 are as follows (in millions):
| | | | | | | | | | | | |
| | | Pension | | | Other
Postretirement | | | Other Postretirement—
subsidy receipts | |
2018 | | $ | 305 | | | $ | 113 | | | $ | 6 | |
2019 | | | 326 | | | | 118 | | | | 6 | |
2020 | | | 331 | | | | 121 | | | | 6 | |
2021 | | | 357 | | | | 124 | | | | 7 | |
2022 | | | 369 | | | | 126 | | | | 7 | |
Years 2023 – 2027 | | | 1,912 | | | | 646 | | | | 43 | |
| | | | | | | | | | | | | |
| Pension | | Other Postretirement | | |
| 2022 | $ | 546 | | | $ | 131 | | | |
| 2023 | 321 | | | 124 | | | |
| 2024 | 320 | | | 107 | | | |
| 2025 | 349 | | | 98 | | | |
| 2026 | 374 | | | 92 | | | |
| Years 2027 – 2031 | 2,070 | | | 365 | | | |
Defined Contribution PlansPlans.
United offers several defined contribution plans to its employees. Depending upon the employee group, employer contributions consist of matching contributions and/ornon-elective employer contributions. United’sUnited's employer contribution percentages to its primary 401(k) defined contribution plans vary from 1% to 16% of eligible earnings depending on the terms of each plan. United recorded contributions toexpenses for its primary 401(k) defined contribution plans of $656$651 million, $592$687 million and $522$735 million in the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively. Multi-Employer Plans
United’sPlans.United's participation in the IAM National Pension Plan (“("IAM Plan”Plan") for the annual period ended December 31, 20172021 is outlined in the table below. There have been no significant changes that affectIn addition to the comparability of 2017additional required contributions described in table below, contributions in 2021 were affected by COVID-19 impacts on United's operations and 2016 contributions.consequently employee hours paid. 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 $414$494 million in employers’employers' contributions for the year ended December 31, 2016.2020. For 2016,2020, the Company’sCompany's contributions to the IAM Plan represented more than 5% of total contributions to the IAM Plan.
The 2021 information is not available as the applicable Form 5500 is not final for the plan year.
| | | | | |
Pension Fund | | IAM National Pension Fund ("Fund") |
EIN/ Pension Plan Number | | 51-6031295 -— 002 |
Pension Protection Act Zone Status (2017(2021 and 2016) 2020) | | Green Zone. PlansCritical (2021 and 2020). A plan is in "critical" status if the green zone are at least 80 percent funded.funded percentage is less than 65 percent. On April 17, 2019, the IAM National Pension Fund Board of Trustees voluntarily elected for the Fund to be in critical status effective for the plan year beginning January 1, 2019 to strengthen the Fund's financial health. The Fund's funded percentage was 85.1% as of January 1, 2020. |
FIP/RP Status Pending/Implemented | | NoA 10-year Rehabilitation Plan effective, January 1, 2022, was adopted on April 17, 2019 that requires the Company to make an additional contribution of 2.5% of the hourly contribution rate, compounded annually for the length of the Rehabilitation Plan, effective June 1, 2019. |
United’sUnited's Contributions
| | $5058 million, $41$53 million and $40$59 million in the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively |
Surcharge Imposed | | No |
Expiration Date of Collective Bargaining Agreement | | N/A |
At the date the Consolidated Financial Statements were issued, Forms 5500 were not available for the plan year ending in 2017.
Profit SharingSharing.
Substantially all employees participate in profit sharing based on a percentage ofpre-tax earnings, excluding special charges, 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 certainpre-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 qualifiedco-worker’s co-worker's annual eligible earnings to the eligible earnings of all qualifiedco-workers in all domestic work groups. Eligiblenon-U.S.co-workers non-U.S. co-workers receive profit sharing based on the calculation under the U.S. profit sharing plan for management and administrative employees. TheAs a result of the pre-tax losses in 2021 and 2020, no profit sharing was recorded. However, the Company recorded profit sharing and related payroll tax expense of $349 million, $628 million and $698$491 million in 2017, 2016 and 2015, respectively.2019. Profit sharing expense is recorded as a component of Salaries and related costs in the Company’sCompany's statements of consolidated operations. NOTE 8 - NOTES RECEIVABLE
BRW Term Loan. In November 2018, United, as lender, entered into a Term Loan Agreement (the "BRW Term Loan Agreement") with, among others, BRW Aviation Holding LLC and BRW Aviation LLC ("BRW"), as guarantor and borrower, respectively. BRW Aviation Holding LLC and BRW are affiliates of Synergy Aerospace Corporation ("Synergy"), and BRW was the majority shareholder of Avianca Holdings S.A. ("AVH"). Pursuant to the BRW Term Loan Agreement, United provided to BRW a $456 million term loan (the "BRW Term Loan"), secured by a pledge of BRW's equity, as well as BRW's 516 million common shares of AVH (which were eligible to be converted into the same number of preferred shares, which could have been deposited with the depositary for AVH's American Depositary Receipts ("ADRs"), the class of AVH securities that traded on the New York Stock Exchange (the "NYSE"), in exchange for 64.5 million ADRs) (such shares and equity, collectively, the "BRW Loan Collateral"). AVH and certain of its affiliates filed voluntary reorganization proceedings under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York on May 10, 2020 (the "AVH Reorganization Proceedings"). AVH successfully completed its financial restructuring process and emerged from Chapter 11 on December 1, 2021 as AVG. The common shares of AVH are in the process of being cancelled and extinguished and holders, including BRW, were not entitled to any recovery upon AVH's exit from bankruptcy. BRW is not a shareholder in the emerged entity. See Note 9 of this report for additional information on the Company's investment in AVG.
In 2020, United recorded a full credit loss allowance against the $515 million carrying value of the BRW Term Loan and related receivables. United recorded the allowance based on United's assessment of AVH's financial uncertainty due to its high level of leverage and the fact that the airline had ceased operations due to the COVID-19 pandemic. The credit loss allowance was recorded as part of Nonoperating income (expense): Miscellaneous, net on the Company's statements of consolidated operations.
Boom Note. The Company received a note receivable (the "Boom Note") from Boom Technology, Inc. ("Boom") related to a commercial agreement to add supersonic aircraft to its global fleet as well as a cooperative sustainability initiative. As of December 31, 2021, the Boom Note had a carrying value of $44 million and was recorded in Investments in affiliates and other, less allowance for credit losses on the Company's consolidated balance sheet. The initial value of the Boom Note was recorded as a deferred credit that will either be recognized into income or as a reduction to the cost of the aircraft received in future periods.
Other. The Company has$32 million of other notes receivable, net of allowance for credit losses, the majority of which is from certain of its regional carriers.
NOTE 9 -
INVESTMENTS AND FAIR VALUE MEASUREMENTS
AND INVESTMENTS
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 87 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 Company’sCompany's financial statements as of December 31 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | | 2016 | |
| | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | |
Cash and cash equivalents | | $ | 1,482 | | | $ | 1,482 | | | $ | — | | | $ | — | | | $ | 2,179 | | | $ | 2,179 | | | $ | — | | | $ | — | |
Short-term investments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate debt | | | 958 | | | | — | | | | 958 | | | | — | | | | 835 | | | | — | | | | 835 | | | | — | |
Asset-backed securities | | | 753 | | | | — | | | | 753 | | | | — | | | | 792 | | | | — | | | | 792 | | | | — | |
Certificates of deposit placed through an account registry service (“CDARS”) | | | 120 | | | | — | | | | 120 | | | | — | | | | 246 | | | | — | | | | 246 | | | | — | |
U.S. government and agency notes | | | 113 | | | | — | | | | 113 | | | | — | | | | 140 | | | | — | | | | 140 | | | | — | |
Other fixed-income securities | | | 188 | | | | — | | | | 188 | | | | — | | | | 54 | | | | — | | | | 54 | | | | — | |
Other investments measured at NAV | | | 184 | | | | — | | | | — | | | | — | | | | 182 | | | | — | | | | — | | | | — | |
Restricted cash | | | 109 | | | | 109 | | | | — | | | | — | | | | 124 | | | | 124 | | | | — | | | | — | |
Long-term investments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Equity securities | | | 99 | | | | 99 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Enhanced equipment trust certificates (“EETC”) | | | 22 | | | | — | | | | — | | | | 22 | | | | 23 | | | | — | | | | — | | | | 23 | |
Available-for-sale investment maturities—The short-term investments shown in the table above are classified asavailable-for-sale. As of December 31, 2017, asset-backed securities have remaining maturities of less than one year to approximately 17 years, corporate debt securities have remaining maturities of less than one year to approximately three 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.
Restricted cash—Restricted cash primarily includes cash collateral for letters of credit and collateral associated with obligations for facility leases and workers’ compensation.
Equity securities—Equity securities represent United’s investment in Azul Linhas Aereas Brasileiras S.A. (“Azul”), which was previously accounted for as a cost-method investment. The fair value of Azul’s shares became readily determinable in the second quarter of 2017 upon its initial public offering and the investment is now accounted for asavailable-for-sale.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 |
| Total | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 |
| Cash and cash equivalents | $ | 18,283 | | | $ | 18,283 | | | $ | — | | | $ | — | | | $ | 11,269 | | | $ | 11,269 | | | $ | — | | | $ | — | |
| Restricted cash - current (Note 1) | 37 | | | 37 | | | — | | | — | | | 255 | | | 255 | | | — | | | — | |
| Restricted cash - non-current (Note 1) | 213 | | | 213 | | | — | | | — | | | 218 | | | 218 | | | — | | | — | |
| Short-term investments: | | | | | | | | | | | | | | | |
| Corporate debt | 95 | | | — | | | 95 | | | — | | | 330 | | | — | | | 330 | | | — | |
| Asset-backed securities | 26 | | | — | | | 26 | | | — | | | 51 | | | — | | | 51 | | | — | |
| U.S. government and agency notes | 2 | | | — | | | 2 | | | — | | | 33 | | | — | | | 33 | | | — | |
| Long-term investments: | | | | | | | | | | | | | | | |
| Equity securities | 229 | | | 229 | | | — | | | — | | | 241 | | | 205 | | | — | | | 36 | |
Investments presented in the table above have the same fair value as their carrying value.
Short-term investments — The short-term investments ("STIs") shown in the table above are classified as available-for-sale. The STIs had maturities of less than two years as of December 31, 2021.
Equity securities — Represents equity and equity-linked securities (such as vested warrants) that make up United's
investments in Azul Linhas Aéreas Brasileiras S.A., Clear Secure, Inc. and Archer Aviation Inc. ("Archer"). The Company received equity securities in exchange for assisting Archer in the development of battery-powered, short haul aircraft. The Company will account for equity securities it receives from Archer as a deferred credit that will either be recognized into income or as a reduction to the cost of the aircraft received in future periods.
Other fair value information - 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 | |
| | | 2017 | | | 2016 | |
| | | 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 | | $ | 13,268 | | | $ | 13,787 | | | $ | — | | | $ | 10,115 | | | $ | 3,672 | | | $ | 10,767 | | | $ | 11,055 | | | $ | — | | | $ | 8,184 | | | $ | 2,871 | |
. Carrying amounts include any related discounts, premiums and issuance costs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 |
| 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 | $ | 33,363 | | | $ | 34,550 | | | $ | — | | | $ | 29,088 | | | $ | 5,462 | | | $ | 26,747 | | | $ | 27,441 | | | $ | — | | | $ | 21,985 | | | $ | 5,456 | |
| | | | | | | | | | | | | | | | | | | |
Fair value of the financial instruments included in the tables above was determined as follows:
| | | | | |
Description | | Fair Value Methodology |
Cash and cash equivalents and
Restricted cash (current and non-current) | | The carrying amounts of these assets approximate fair value because of the short-term maturity of these assets.value. |
| |
Short-term investments and
Equity securities EETC 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, or (c) broker quotes obtained by third-party valuation services. |
| |
Other investments measured at NAV | | 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 the table above 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. andnon-U.S. public- or private-sector entities. The Company can redeem its shares at any time at NAV subject to athree-day settlement period. |
| |
| Long-term 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.liabilities or assets. |
Investments in Regional Carriers. United holds investments in several regional carriers that fly or used to fly for the
Company as United Express under its CPAs. The combined carrying value of the investments was approximately $171 million as of December 31, 2021. United accounts for each investment using the equity method. Each investment and United's ownership stake are listed below.
•Champlain Enterprises, LLC ("Champlain"). United owns a 40% minority ownership stake in Champlain. Champlain
does business as CommutAir. CommutAir currently operates 75 regional aircraft under a CPA that has a term through 2026.
•Republic Airways Holdings Inc. ("Republic Holdings"). United holds a 19% minority interest in Republic Holdings.
Republic Holdings is the parent company of Republic Airways Inc. ("Republic"). Republic currently operates 66
regional aircraft under CPAs that have terms through 2036.
•ManaAir, LLC ("ManaAir"). United holds a 49.9% minority ownership stake in ManaAir. ManaAir is the parent
company of ExpressJet Airlines LLC ("ExpressJet"). The Company terminated its CPA with ExpressJet. ExpressJet
flew its last commercial flight on behalf of United, on September 30, 2020.
Other Investments. United holds other equity investments in companies with emerging technologies and sustainable solutions, such as Fulcrum BioEnergy, Inc., Boom, Alder Fuels LLC, Heart Aerospace Incorporated and ZeroAvia, Inc., which do not have readily determinable fair values. We account for these investments at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. As of December 31, 2021, the carrying value of these investments was $84 million.
AVG Investment. In consideration for the Company's agreement to convert its portion of the debtor-in-possession term loan under the terms of that certain Equity Conversion and Commitment Agreement dated September 1, 2020 (as amended from time to time) as part of the AVH Reorganization Proceedings, in December 2021 the Company received warrants to purchase equity in the reorganized AVG for a de minimus amount. The Company subsequently exercised the warrants in full and on December 29, 2021 received common stock representing 16.4% of AVG's outstanding equity, the carrying value of which was $164 million as of December 31, 2021. We account for this investment at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer.
NOTE 10 - DEBT
| | | | | | | | |
(In millions) | | At December 31, | |
| | | 2017 | | | 2016 | |
Secured | | | | | | | | |
| Notes payable, fixed interest rates of 2.88% to 9.52% (weighted average rate of 4.39% as of December 31, 2017), payable through 2028 | | $ | 8,661 | | | $ | 7,586 | |
| Notes payable, floating interest rates of the London interbank offered rate (“LIBOR”) plus 0.2% to 2.25%, payable through 2028 | | | 1,880 | | | | 1,546 | |
| Term loan, LIBOR plus 2.00%, or alternative rate based on certain market rates plus 1.00%, due 2024 | | | 1,489 | | | | — | |
| 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 | |
| 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 | |
| Unsecured | | | | | | | | |
| 6.375% Senior Notes due 2018 (a) | | | 300 | | | | 300 | |
| 6% Senior Notes due 2020 (a) | | | 300 | | | | 300 | |
| 4.25% Senior Notes due 2022 (a) | | | 400 | | | | — | |
| 5% Senior Notes due 2024 (a) | | | 300 | | | | — | |
| Other | | | 101 | | | | 101 | |
| | | | | | | | |
| | | 13,431 | | | | 10,891 | |
| | | | | | | | |
Less: unamortized debt discount, premiums and debt issuance costs | | | (163) | | | | (124) | |
Less: current portion of long-term debt | | | (1,565) | | | | (849) | |
| | | | | | | | |
| Long-term debt, net | | $ | 11,703 | | | $ | 9,918 | |
| | | | | | | | |
(a) UAL is the issuer of this debt. United is a guarantor.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | Maturity Dates | | Interest Rate(s) at December 31, 2021 | | At December 31, |
| | | | 2021 | | 2020 |
| | | | | | | | | | | | |
| Aircraft notes (a) | | 2022 | — | 2033 | | 0.62 | % | — | 6.90 | % | | $ | 13,293 | | | $ | 14,538 | |
| MileagePlus Senior Secured Notes | | | 2027 | | | | 6.50 | % | | | 3,800 | | | 3,800 | |
| MileagePlus Term Loan Facility (a) | | | 2027 | | | | 6.25 | % | | | 3,000 | | | 3,000 | |
| 2026 and 2029 Notes | | 2026 | — | 2029 | | 4.38 | % | — | 4.63 | % | | 4,000 | | | — | |
| 2021 Term Loans (a) | | | 2028 | | | | 4.50 | % | | | 4,963 | | | — | |
| Revolving Credit Facility | | | | | | | | | | — | | | 1,000 | |
| CARES Act Loan | | | | | | | | | | — | | | 520 | |
| Term Loan Facility | | | | | | | | | | — | | | 1,444 | |
| Unsecured | | | | | | | | | | | | |
| Notes (b) | | 2022 | — | 2025 | | 4.25 | % | — | 5.00 | % | | 1,041 | | | 1,050 | |
| PSP Notes (c) | | 2030 | — | 2031 | | | 1.00 | % | | | 3,181 | | | 1,501 | |
| Other unsecured debt | | 2023 | — | 2029 | | 0.00 | % | — | 5.75 | % | | 598 | | | 448 | |
| | | | | | | | | | 33,876 | | | 27,301 | |
| Less: unamortized debt discount, premiums and debt issuance costs | | | | | | | | | | (513) | | | (554) | |
| Less: current portion of long-term debt | | | | | | | | | | (3,002) | | | (1,911) | |
| Long-term debt, net | | | | | | | | | | $ | 30,361 | | | $ | 24,836 | |
(a)Financing includes variable rate debt based on LIBOR (or another index rate), generally subject to a floor, plus a specified margin ranging from 0.49% to 5.25%. (b)On January 14, 2022, the Company gave notice for the redemption of all $400 million outstanding principal amount of the 4.250% senior notes due 2022 (the "2022 Notes"), scheduled to occur on February 28, 2022. The redemption price will be calculated in accordance with the terms of the indenture governing the 2022 Notes, and will include accrued and unpaid interest on the principal amount being redeemed to such redemption date. (c)Includes PSP1 Note, PSP2 Note and PSP3 Note. |
The table below presents the Company’sCompany's contractual principal payments (not including debt discount or debt issuance costs) at December 31, 20172021 under then-outstanding long-term debt agreements in each of the next five calendar years (in millions): | | | | |
2018 | | $ | 1,565 | |
2019 | | | 1,165 | |
2020 | | | 1,170 | |
2021 | | | 1,157 | |
2022 | | | 1,492 | |
After 2022 | | | 6,882 | |
| | | | |
| | $ | 13,431 | |
| | | | |
Secured debt
2017 Credit
| | | | | | | | |
| 2022 | | $ | 3,002 | |
| 2023 | | 2,853 | |
| 2024 | | 3,908 | |
| 2025 | | 3,378 | |
| 2026 | | 5,134 | |
| After 2026 | | 15,601 | |
| | $ | 33,876 | |
2026 and Guaranty Agreement.2029 Notes. On March 29, 2017,April 21, 2021, United issued, through a private offering to eligible purchasers, $4.0 billion in aggregate principal amount of two series of notes, consisting of $2.0 billion in aggregate principal amount of 4.375% senior secured notes due 2026 (the "2026 Notes") and UAL, as borrower$2.0 billion in aggregate principal amount of 4.625% senior secured notes due 2029 (the "2029 Notes" and, guarantor, respectively,together with the 2026 Notes, the "2026 and 2029 Notes"). The 2026 Notes, issued at a price of 100% of their principal amount, bear interest at a rate of 4.375% per annum and will mature on April 15, 2026. The 2029 Notes, issued at a price of 100% of their principal amount, bear interest at a rate of 4.625% per annum and will mature on April 15, 2029. The 2026 and 2029 Notes are guaranteed on an unsecured basis by UAL.
2021 Loan Facilities. Concurrently with the closing of the offering of the 2026 and 2029 Notes, United also entered into an Amended and Restateda new Term Loan Credit and Guaranty Agreement (as amended by the First Amendment(the "2021 Term Loan Facility") initially providing term loans (the "2021 Term Loans") up to the Amendedan aggregate amount of $5.0 billion and Restateda new Revolving Credit and Guaranty Agreement dated as(the "2021 Revolving Credit Facility" and, together with the 2021 Term Loan Facility, the "2021 Loan Facilities") initially providing revolving loan commitments of November 15, 2017,up to $1.75 billion. United borrowed the “November 2017 Amendment,” and as so amended, the “2017 Credit Agreement”). The 2017 Credit Agreement consists of a $1.5 billion term loan due April 1, 2024, which was used to retire the entire principal balancefull amount of the term loans under the credit and guaranty agreement, dated March 27, 2013 (as amended, the “2013 Credit Agreement”), and increased the term loan balance by approximately $440 million. The 2017 Credit Agreement
also includes a $2.0 billion revolving credit facility available for drawing until2021 Term Loans on April 1, 2022,21, 2021, which increased the available capacity under the revolving credit facility by $650 million as compared to that in the 2013 Credit Agreement. The primary purpose of the November 2017 Amendment was to reduce the interest rate on borrowings by 0.25%. The obligations of United under the amended 2017 Credit Agreement are secured by liens on certain international route authorities, certaintake-off and landing rights and related assets of United.
Borrowings under the 2017 Credit Agreement bear interest at a variable rate equal to LIBOR (but not less than 0.75% per annum) plus a margin of 2.00% per annum, or another rate based on certain market interest rates, plus a margin of 1.00%3.75% per annum. The principal amount of the term loan2021 Term Loan Facility must be repaid in consecutive quarterly installments of 0.25% of the original principal amount thereof commencing on June 30, 2017, with any unpaidthe balance due on April 1, 2024. United may prepay all orat maturity. Borrowings under the 2021 Revolving Credit Facility bear interest at a portionvariable rate equal to LIBOR plus a margin of the loan from time3.00% to time, at par plus accrued and unpaid interest.3.50% per annum. United pays a commitment fee equal to 0.75% per annum on the undrawn amount available under the revolving credit facility.
As of2021 Revolving Credit Facility. No borrowings were outstanding under the 2021 Revolving Credit Facility at December 31, 2021.
United used the net proceeds from the offering of the 2026 and 2029 Notes and borrowings under the 2021 Term Loan Facility (i) to repay in full the $1.4 billion aggregate principal amount outstanding under the term loan facility (the "2017 Term Loan Facility") included in the Amended and Restated Credit and Guaranty Agreement, dated as of March 29, 2017
United had its entire capacity of $2.0(the "2017 Credit Agreement"), the $1.0 billion
availableaggregate principal amount outstanding under the revolving credit facility
(the "2017 Revolving Credit Facility") included in the 2017 Credit Agreement and the $520 million aggregate principal amount outstanding under the CARES Act Loan and, together with the 2017 Term Loan Facility and the 2017 Revolving Credit Facility, the "2017 Loan Facilities"), (ii) to pay fees and expenses relating to the offering of the
Company’s2026 and 2029 Notes and (iii) for United's general corporate purposes. As a result of such repayments, the 2017
Credit Agreement.Loan Facilities were terminated on April 21, 2021, and no further borrowings may be made thereunder.
PSP2 Note. During2021, UAL issued an $870 million indebtedness evidenced by a 10-year senior unsecured promissory note (the "PSP2 Note") to Treasury. The PSP2 Note is guaranteed by United and will mature on January 15, 2031 (the "PSP2 Note Maturity Date"). If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness of UAL with a principal balance in excess of a specified amount, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP2 Note. UAL may, at its option, prepay the PSP2 Note, at any time, and from time to time, at par. UAL is required to prepay the PSP2 Note upon the occurrence of certain change of control triggering events. The PSP2 Note does not require any amortization and is to be repaid in full on the PSP2 Note Maturity Date. Interest on the PSP2 Note is payable semi-annually in arrears on the last business day of March and September of each year, beginning on March 31, 2021, at a rate of 1.00% in years 1 through 5, and at the Secured Overnight Financing Rate (SOFR) plus 2.00% in years 6 through 10.
PSP3 Note. During2021, UAL issued an $810 million indebtedness evidenced by a 10-year senior unsecured promissory note (the "PSP3 Note") to Treasury. The PSP3 Note is guaranteed by United and will mature on April 29, 2031 (the "PSP3 Note Maturity Date"). If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness of UAL with a principal balance in excess of a specified amount, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP3 Note. UAL may, at its option, prepay the PSP3 Note, at any time, and from time to time, at par. UAL is required to prepay the PSP3 Note upon the occurrence of certain change of control triggering events. The PSP3 Note does not require any amortization and is to be repaid in full on the PSP3 Note Maturity Date. Interest on the PSP3 Note is payable semi-annually in arrears on the last business day of March and September of each year, beginning on September 30, 2021, at a rate of 1.00% in years 1 through 5, and at the Secured Overnight Financing Rate (SOFR) plus 2.00% in years 6 through 10.
Aircraft Notes.As of December 31, 2017,2021, United had cash collateralized $75 million of letters of credit. United also had $362 million of surety bonds securing various obligations at December 31, 2017. Most of the letters of credit have evergreen clauses and are expected to be renewed on an annual basis. The surety bonds have expiration dates through 2021.EETCs. As of December 31, 2017, United had $8.6$11.2 billion principal amount of equipment notes outstanding issued under EETC financings included in notes payable in the table of outstanding debt above.financings. 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 by United and secured by its aircraft. Theaircraft and, in certain structures, spare engines and spare parts. United is responsible for the payment obligations under the equipment notes are those of United. Proceedsnotes. In certain EETC structures, 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 United’sUnited's consolidated balance sheet because the proceeds held by the depositary are not United’sUnited's assets.
In February 2018, November 2017, 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. Certain details of the pass-through trusts with proceeds received from issuance of debt in 20172021 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,
2017 | | | Proceeds
received from
issuance of
debt during
2017 | | | Remaining
proceeds from
issuance of debt
to be received
in future
periods | |
February 2018 | | AA | | $ | 677 | | | March 2030 | | | 3.50% | | | $ | — | | | $ | — | | | $ | 677 | |
February 2018 | | A | | | 258 | | | March 2030 | | | 3.70% | | | | — | | | | — | | | | 258 | |
November 2017 | | B | | | 258 | | | January 2026 | | | 3.65% | | | | 258 | | | | 258 | | | | — | |
November 2017 | | B | | | 236 | | | October 2025 | | | 3.65% | | | | 236 | | | | 236 | | | | — | |
September 2016 | | AA | | | 637 | | | October 2028 | | | 2.875% | | | | 637 | | | | 557 | | | | — | |
September 2016 | | A | | | 283 | | | October 2028 | | | 3.10% | | | | 283 | | | | 247 | | | | — | |
June 2016 | | AA | | | 729 | | | July 2028 | | | 3.10% | | | | 729 | | | | 319 | | | | — | |
June 2016 | | A | | | 324 | | | July 2028 | | | 3.45% | | | | 324 | | | | 142 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | 3,402 | | | | | | | | | $ | 2,467 | | | $ | 1,759 | | | $ | 935 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
In 2017, United borrowed approximately $497 million aggregate principal amount from | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| EETC Issuance Date | | Class | | Face Amount | | Final expected distribution date | | Stated interest rate | | Total proceeds received from issuance of debt and recorded as debt as of December 31, 2021 |
| February 2021 | | B | | $ | 600 | | | January 2026 | | 4.88% | | $ | 600 | |
Our debt agreements contain customary terms and conditions as well as various
affirmative, negative and financial
institutions to financecovenants that, among other things, restrict the
purchase of several aircraft delivered in 2017. The notes evidencing these borrowings, which are secured by the related aircraft, mature in 2027 and have interest rates comprisedability of the
LIBOR plus a specified margin.Unsecured debt
4.25% Senior Notes due 2022.In September 2017, UAL issued $400 million aggregate principal amount of 4.25% Senior Notes due October 1, 2022 (the “4.25% Senior Notes due 2022”). These notes are fullyCompany and unconditionally guaranteedits subsidiaries to incur additional indebtedness and recorded by United on its balance sheet as debt. The indenture for the 4.25% Senior Notes due 2022 requires UAL to offer topay dividends or 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.
5% Senior Notes due 2024.In January 2017, UAL 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.
stock. As of December 31, 2017, UAL and United were2021, the Company was in compliance with theirits respective debt covenants. The collateral, covenants and cross default provisions of the Company’sCompany's 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.aircraft, spare engines and spare parts. The indentures contain events of default that are customary for aircraft financing,financings, including in certain cases cross default to other related aircraft. |
Credit Agreement
2021 Loan Facilities
| | Secured on a senior basis by certainsecurity interests granted by the Company to the collateral trustee for the benefit of United’s internationalthe lenders under the 2021 Loan Facilities, among other parties, on the following: (i) all of the Company's route authorities specifiedtake-offgranted by the U.S. Department of Transportation to operate scheduled service between any international airport located in the United States and any international airport located in any country other than the United States (except Cuba), (ii) the Company's rights to substantially all of its landing and take-off slots at foreign and domestic airports, including at John F. Kennedy International Airport, LaGuardia Airport and Ronald Reagan Washington National Airport (subject to certain airportsexclusions), and (iii) the Company's rights to use or occupy space at airport terminals, each to the extent necessary at the relevant time for servicing scheduled air carrier service authorized by an applicable route authority. The 2021 Loan Facilities contain negative covenants that, among other things, limit our ability under certain circumstances to create liens on the collateral, make certain dividends, conduct stock repurchases, make certain restricted investments and other restricted payments, and consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets. The 2017 Credit Agreement requires2021 Loan Facilities also contain financial covenants that require the Company to maintain at least $2.0 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 obligationsdebt secured by such collateral (including under the 2017 Credit Agreement2021 Loan Facilities) of 1.6 to 1.0, tested semi-annually. The 2021 Loan Facilities contain events of default customary for similar financings, including a cross-payment default and cross-acceleration to other material indebtedness. |
| |
| 2026 and 2029 Notes | The 2026 and 2029 Notes are secured on a senior basis by security interests granted by the Company to the collateral trustee for the benefit of the holders of the 2026 and 2029 Notes, among other parties, on the following: (i) all of the Company's route authorities granted by the U.S. Department of Transportation to operate scheduled service between any international airport located in the United States and any international airport located in any country other than the United States (except Cuba), (ii) the Company's rights to substantially all of its landing and take-off slots at all times. foreign and domestic airports, including at John F. Kennedy International Airport, LaGuardia Airport and Ronald Reagan Washington National Airport (subject to certain exclusions), and (iii) the Company's rights to use or occupy space at airport terminals, each to the extent necessary at the relevant time for servicing scheduled air carrier service authorized by an applicable route authority. The 2017 Credit Agreementindenture for these 2026 and 2029 Notes contains covenants that, among other things, restrictlimit our ability under certain circumstances to create liens on the abilityCollateral, make certain dividends, stock repurchases, restricted investments and other restricted payments, and consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets. The indenture also contains a financial covenant that requires UAL and its restricted subsidiaries (as defined in the 2017 Credit Agreement) to incur additional indebtedness and to pay dividends on or repurchase stock, althoughspecial interest in an additional amount equal to 2.0% per year of the Company currently has ample ability under these restrictionsprincipal amount of the 2026 and 2029 Notes for so long as it is unable to repurchase stock underdemonstrate that it maintains a minimum ratio of appraised value of collateral to the Company’s share repurchase program.outstanding debt secured by such collateral (including the 2026 and 2029 Notes) of 1.6 to 1.0, tested semi-annually. The 2017 Credit Agreementindenture contains events of default customary for this type of financing,similar financings, including a crosscross-payment default and cross acceleration provisioncross-acceleration to other material indebtedness. |
| MileagePlus Notes | Secured by first-priority security interests in substantially all of the assets of the Issuers, other than excluded property and subject to certain other materialpermitted liens, including security interests in specified cash accounts that include the accounts into which MileagePlus revenues are or will be paid by the Company's marketing partners and by the Company. |
| CARES Act Loan | Though the CARES Act Loan was terminated and repaid in full on April 20, 2021, United and its affiliates agreed in the corresponding term loan and guarantee agreement to comply with certain surviving provisions (i) prohibiting the payment of dividends and the repurchase of certain equity until April 20, 2022, (ii) requiring compliance with certain continuation of service requirements until March 1, 2022, and (iii) restricting the payment of certain executive compensation until April 20, 2022. |
| | | | | |
| PSP Notes | The PSP Notes represent senior unsecured indebtedness of UAL. The PSP Notes are guaranteed by United. If any subsidiary of UAL (other than United) becomes, or is required to become, an obligor on unsecured indebtedness of UAL or any of its subsidiaries with a principal balance in excess of a specified amount, then such subsidiary shall be required to guarantee the Company.obligations of the Company under the PSP Notes. Pursuant to the PSP Agreements, the Company and its affiliates will be required to comply with certain provisions including, among others, prohibiting certain reductions in employee wages, salaries and benefits; provisions prohibiting the payment of dividends and the repurchase of certain equity until September 30, 2022; audit and reporting requirements; provisions to comply with certain continuation of service requirements until March 1, 2022; and provisions restricting the payment of certain executive compensation until April 1, 2023. |
6.375% Senior Notes due 2018
6% Senior Notes due 2020
4.25% Senior Notes due 2022
5% Senior Notes due 2024
| Unsecured notes | 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 indentures) to incur additional indebtedness and paymake certain dividends, on or repurchase stock although the Company currently has ample ability under these restrictions to repurchase stock under the Company’s share repurchase program.repurchases, restricted investments and other restricted payments. |
NOTE 11 - 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.vehicles, among other items. Certain of these leases include provisions for variable lease payments which are based on several factors, including, but not limited to, relative leased square footage, available seat miles, enplaned passengers, passenger facility charges, terminal equipment usage fees, departures, and airports' annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on our balance sheet as a right-of-use asset and lease liability.
AtFor leases with terms greater than 12 months, we record the related right-of-use asset and lease liability at the present value of fixed lease payments over the lease term. To the extent a lease agreement includes an extension option that is reasonably certain to be exercised, we have recognized those amounts as part of our right-of-use assets and lease liabilities. Leases with an initial term of 12 months or less with purchase options or extension options that are not reasonably certain to be exercised are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the term of the lease. We combine lease and non-lease components, such as common area maintenance costs, in calculating the right-of-use assets and lease liabilities for all asset groups except for our CPAs, which contain embedded leases for regional aircraft. In addition to the lease component cost for regional aircraft, our CPAs also include non-lease components primarily related to the regional carriers' operating costs incurred in providing regional aircraft services. We allocate consideration for the lease components and non-lease components of each CPA based on their relative standalone values.
Lease Cost. The Company's lease cost for the years ended December 31 2017, United’s scheduled future minimum lease payments under operatingincluded the following components (in millions):
| | | | | | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 | | |
| Operating lease cost | | $ | 958 | | | $ | 933 | | | $ | 1,038 | | | |
| Variable and short-term lease cost | | 2,291 | | | 1,968 | | | 2,548 | | | |
| Amortization of finance lease assets | | 89 | | | 88 | | | 68 | | | |
| Interest on finance lease liabilities | | 16 | | | 16 | | | 85 | | | |
| Sublease income | | (26) | | | (23) | | | (32) | | | |
| Total lease cost | | $ | 3,328 | | | $ | 2,982 | | | $ | 3,707 | | | |
Lease terms and commitments. United's leases having initial or remaining noncancelable lease terms of more than one year,include aircraft leases includingfor aircraft rentthat are directly leased by United and aircraft that are operated by regional carriers on United's behalf under CPAs (but excluding aircraft owned by United) and capitalnon-aircraft leases. Aircraft operating leases (substantially all of which are for aircraft) were as follows (in millions): | | | | | | | | | | | | |
| | | Capital Leases (a) | | | Facility and Other
Operating Leases | | | Aircraft Operating
Leases | |
2018 | | $ | 200 | | | $ | 1,234 | | | $ | 1,038 | |
2019 | | | 133 | | | | 1,075 | | | | 855 | |
2020 | | | 113 | | | | 1,169 | | | | 628 | |
2021 | | | 110 | | | | 935 | | | | 510 | |
2022 | | | 105 | | | | 797 | | | | 388 | |
After 2022 | | | 1,156 | | | | 6,109 | | | | 1,513 | |
| | | | | | | | | | | | |
Minimum lease payments | | $ | 1,817 | | | $ | 11,319 | | | $ | 4,932 | |
| | | | | | | | | | | | |
Imputed interest | | | (693) | | | | | | | | | |
| | | | | | | | | | | | |
Present value of minimum lease payments | | | 1,124 | | | | | | | | | |
Current portion | | | (128) | | | | | | | | | |
| | | | | | | | | | | | |
Long-term obligations under capital leases | | $ | 996 | | | | | | | | | |
| | | | | | | | | | | | |
(a) Includes airport construction projects managed by United in which United has construction risk, including project cost overruns. The Company recorded an asset for project costs and a related liability equal to project costs funded by parties other than United. As of December 31, 2017, United had an asset balance of $814 million recorded in operating property and equipment and $777 million recorded in current and long-term obligations under capital leases for these airport construction projects.
As of December 31, 2017, United’s aircraft capital lease minimum payments relate to leases of 31118 mainline and 43282 regional aircraft as well aswhile finance leases relate to leases of nonaircraft assets. Imputed interest rate ranges are 3.5% to 20.8%.
Aircraft operating25 mainline and 58 regional aircraft. United's aircraft leases have initialremaining lease terms of five1 month to 2612 years with expiration dates ranging from 20182022 through 2029.2033. Under the terms of most aircraft 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.
During 2015,
Non-aircraft leases have remaining lease terms of 1 month to 31 years, with expiration dates ranging from 2022 through 2053.
The table below summarizes the
Company reached an agreement with AerCap Holdings N.V., a major aircraft leasing company, toCompany's scheduled future minimum lease
used Airbus S.A.S (“Airbus”) A319s. Eleven aircraft have been delivered sincepayments under operating and finance leases, recorded on the
inception of this agreement, and seven more aircraft are expected to be delivered between 2019 and 2020. In addition, United has options for seven more A319 aircraft, 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 thereonbalance sheet, as of December 31, 2017.2021 (in millions):
| | | | | | | | | | | | | | |
| | Operating Leases | | Finance Leases |
| 2022 | | $ | 857 | | | $ | 89 | |
| 2023 | | 825 | | | 57 | |
| 2024 | | 775 | | | 53 | |
| 2025 | | 655 | | | 41 | |
| 2026 | | 637 | | | 26 | |
| After 2026 | | 3,982 | | | 72 | |
| Minimum lease payments | | 7,731 | | | 338 | |
| Imputed interest | | (2,023) | | | (43) | |
| Present value of minimum lease payments | | 5,708 | | | 295 | |
| Less: current maturities of lease obligations | | (556) | | | (76) | |
| Long-term lease obligations | | $ | 5,152 | | | $ | 219 | |
As of December 31, 2021, we have additional leases of approximately $415 million for several regional aircraft under CPAs and airport facilities and office space leases that have not yet commenced. These leases are typicallywill commence in 2022 through 2024 with municipalities or other governmental entities, which are excluded fromlease terms of up to 12 years.
In August 2021, at the consolidation requirements concerningrequest of United, the City of Houston, Texas issued its approximately $289 million special facilities revenue bonds for the purpose of (a) financing the costs of construction of a variable interest entity (“VIE”). To the extent United’s leasesmulti-terminal baggage handling system, tenant improvements, fixtures, equipment, personnel areas and related guarantees arefacilities, as well as an early baggage system building (together with a separate legal entityrelated fire pump room) at George Bush Intercontinental Airport (IAH), all to be installed by and for use by United and (b) paying related costs of issuance. The bonds bear interest at 4.0% per annum, payable semiannually, commencing in January 2022 through the July 2041 maturity date. United is accounting for the payments for these special facilities revenue bonds as lease payments under an operating lease recognized as a right-of-use asset and lease liability on the Company's balance sheet.
In 2020, United entered into agreements with third parties to finance through sale and leaseback transactions new Boeing model 787 aircraft and Boeing model 737 MAX aircraft subject to purchase agreements between United and Boeing. In connection with the delivery of each aircraft from Boeing, United assigned its right to purchase such aircraft to the buyer, and simultaneous with the buyer's purchase from Boeing, United entered into a long-term lease for such aircraft with the buyer as lessor. NaN Boeing model aircraft were delivered in 2021 under these transactions (and each is presently subject to a long-term lease to United). Upon delivery of aircraft in these sale and leaseback transactions in 2021, the Company accounted for 7 of these aircraft, which have a repurchase option at a price other than
a governmental entity, United is notfair value, as part of Flight equipment on the
primary beneficiary because the lease terms are consistent with market terms at the inception of the leaseCompany's consolidated balance sheet and the
related obligation recorded in Current maturities of other financial liabilities and Other financial liabilities since they do not qualify for sale recognition. The remaining 17 aircraft that qualified for sale recognition were recorded as Operating lease
does not include a residual value guarantee, fixed-price purchase option, or similar feature. United has facilityright-of-use assets and Current/Long-term obligations under operating leases
that extendon the Company's consolidated balance sheet after recognition of related gains on such sale. See Note 14 of this report for additional information. In 2021, under these sale and leaseback agreements, United gave notice of its intent to
2054.United’s nonaircraft rent expense was approximately $1.3 billion, $1.2 billionexercise repurchase options in 2022 for 6 Boeing 787 aircraft. The liabilities associated with these aircraft are reflected in Current maturities of other financial liabilities on the Company's consolidated balance sheet at December 31, 2021. In January 2022, the Company gave notice of its intent to exercise repurchase options in 2023 for 8 Boeing 737 MAX aircraft under these sale and $1.3 billion forleaseback agreements. The liabilities associated with these aircraft are reflected in Other financial liabilities on the yearsCompany's consolidated balance sheet at December 31, 2021.
Our lease agreements do not provide a readily determinable implicit rate nor is it available to us from our lessors. Instead, we estimate United's incremental borrowing rate based on information available at lease commencement in order to discount lease payments to present value. The table below presents additional information related to our leases as of December 31:
| | | | | | | | | | | | | | | |
| | 2021 | | 2020 | |
| Weighted-average remaining lease term - operating leases | | 10 years | | 11 years | |
| Weighted-average remaining lease term - finance leases | | 6 years | | 4 years | |
| Weighted-average discount rate - operating leases | | 5.0 | % | | 5.1 | % | |
| Weighted-average discount rate - finance leases | | 4.8 | % | | 4.4 | % | |
The table below presents supplemental cash flow information related to leases during the year ended December 31
2017, 2016 and 2015, 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 (in millions):
| | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | 2019 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | |
| Operating cash flows for operating leases | $ | 977 | | | $ | 788 | | | $ | 902 | |
| Operating cash flows for finance leases | 18 | | | 20 | | | 70 | |
| Financing cash flows for finance leases | 216 | | | 66 | | | 151 | |
Regional capacity purchase expense in United’s consolidated statement of operations, of $458 million, $439 million and $461 million for the years ended December 31, 2017, 2016 and 2015, respectively.In connection with UAL Corporation’s and United Air Lines, Inc.’s (predecessors to UAL and United) fresh-start reporting requirements upon their exit from Chapter 11 bankruptcy protection in 2006 and the Company’s
acquisition accounting adjustments related to the Company’s 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 seven years for United. The lease valuation adjustments are classified within other noncurrent liabilities and the net accretion amounts are $79 million, $82 million and $107 million for the years ended December 31, 2017, 2016 and 2015, respectively.
Regional CPAs
CPAs. United has contractual relationships with various regional carriers to provide regional aircraft service branded as United Express. Under these CPAs, the Company pays the regional carriers contractually agreed fees (carrier costs) for operating these flights plus a variable reimbursement (incentive payment for operational performance)rate adjustment based on agreed performance metrics, subject to annual inflation adjustments. The fees for carrier 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 areas well as fixed monthly amounts. Under these CPAs, the Company is also responsible for all fuel costs incurred, as well as landing fees and other costs, which are either passed through by the regional carrier to the Company without any markup or directly incurred by the Company. United’sIn some cases, the Company owns some or all of the aircraft subject to the CPA and leases such aircraft to the regional carrier. United's CPAs are for 518 regional aircraft as of December 31, 2017,2021, and the CPAs have terms expiring through 2029.2036. 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 2,2. Properties, of this report for additional information.
In
2017,September 2021, United entered into a
five-yearnew CPA with
Air Wisconsin AirlinesRepublic for
regional service under the United Express brandRepublic to operate
up to 65 CRJ200 aircraft. In addition, United extended38 Embraer E175LL aircraft on United's behalf starting in 2022 for a 12-year term. The new Embraer E175LL aircraft will replace the
term of its existing CPA with ExpressJet Airlines to operate up to approximately 125Embraer E170 aircraft
through December 31, 2022. In January 2018, United removed all Bombardier Q200 turboprop aircraft and Embraer ERJ 135 aircraft from service.United holds a minority equity interest in two of its regional carriers, Champlain Enterprises, Inc. andcurrently being flown by Republic Airways Holdings, Inc. The contracts with these related parties are executed in the ordinary course of business. for United.
United recorded approximately
$538 million, $486 million$0.6 billion, $0.6 billion and
$366 million$1.0 billion in expenses related to its
capacity purchase agreementsCPAs with
theseits regional carriers
in which United is a minority shareholder, for the years ended December 31,
2017, 20162021, 2020 and
2015,2019, respectively. There were approximately
$24$102 million and
$32$68 million in accounts payable due to these companies as of December 31,
20172021 and December 31,
2016,2020, respectively. There were no material accounts
receivablereceivables due from these companies as of December 31,
20172021 and December 31,
2016.2020. The CPAs with these related parties were executed in the ordinary course of business.
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. United’sUnited's estimates of its future 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.leases above. 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 carrier’scarrier's operational performance will remain at recent 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, 2017,2021, our future payments through the end of the terms of our CPAs are presented in the table below (in billions):
| | | | |
2018 | | $ | 2.0 | |
2019 | | | 1.8 | |
2020 | | | 1.6 | |
2021 | | | 1.5 | |
2022 | | | 1.4 | |
After 2022 | | | 3.2 | |
| | | | |
| | $ | 11.5 | |
| | | | |
| | | | | |
| 2022 | $ | 2.1 | |
| 2023 | 2.1 | |
| 2024 | 2.0 | |
| 2025 | 1.7 | |
| 2026 | 1.5 | |
| After 2026 | 4.2 | |
| $ | 13.6 | |
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
United’sUnited's regional operators (whether as a result of changes in average daily utilization or otherwise) in
20182022 would result in a corresponding change in annual cash obligations under the CPAs of approximately
$147$125 million.
NOTE 12 - VARIABLE INTEREST ENTITIES
("VIE")
Variable interests are contractual, ownership or other monetary interests in an entity that change with fluctuations in the fair value of the
entity’sentity's 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
entity’sentity's equity holders lack power or the obligation and right as equity holders to absorb the
entity’sentity's 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 entity’s 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
VIE’sVIE's 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
VIE’sVIE's economic performance and determine whether it, or another party, has the power to direct those activities.
The Company’s evaluation of its association with VIEs
Airport Leases. United is described below:Aircraft Leases. We are the lessee inof real property under long-term operating leases at a number of operatingairports where we are also the guarantor of approximately $2.1 billion of tax-exempt special facilities revenue bonds and interest thereon as of December 31, 2021. These leases coveringare typically with municipalities or other governmental entities, which are excluded from the majority of our leased aircraft. The lessorsconsolidation requirements concerning a VIE. To the extent United's leases and related guarantees are trusts established specifically to purchase, finance and lease aircraft to us. These leasing entities meet the criteria for VIEs. We are generallywith a separate legal entity other than a governmental entity, United is not the primary beneficiary of the leasing entities ifbecause the lease terms are consistent with market terms at the inception of the lease and dothe lease does 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 valuefeature. See Note 13 of this report for more information regarding United's guarantee of the aircraft. This is the case for many of our operating leases; however, leases of 38 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 158 leased 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. United’s maximum exposure under these leases is the remaining lease payments, which are reflected in future lease commitments in Note 11 of this report.
tax-exempt special facilities revenue bonds.
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 United’sUnited's 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 United’sUnited's debt obligation through certain bankruptcy protection provisions, a liquidity facility (in certain of the EETC structures) and improvedloan-to-value ratios for more senior debt classes. These credit enhancements lower United’sUnited's 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’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 diddoes not intend to have any voting ornon-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.
ManaAir. United concluded that ManaAir is a VIE as of December 31, 2021. United holds a variable interest in ManaAir in the form of equity interest, but United is not the primary beneficiary because it does not have power to direct the activities that most significantly impact ManaAir's economic performance.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
Commitments.As of December 31, 2017,2021, United had firm commitments and options to purchase aircraft from The Boeing Company (“Boeing”("Boeing") and Airbus S.A.S. ("Airbus") presented in the table below: | | | | |
Aircraft Type
| | Number of Firm
Commitments (a) | |
Airbus A350
| | | 45 | |
Boeing 737 MAX
| | | 161 | |
Boeing777-300ER
| | | 4 | |
Boeing 787
| | | 18 | |
(a) United also has options and purchase rights for additional aircraft. | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Scheduled Aircraft Deliveries |
| Aircraft Type | | Number of Firm
Commitments (a) | | 2022 | | 2023 | | After 2023 |
| Airbus A321XLR | | 50 | | | — | | | — | | | 50 | |
| Airbus A321neo | | 70 | | | — | | | 12 | | | 58 | |
| Airbus A350 | | 45 | | | — | | | — | | | 45 | |
| Boeing 737 MAX | | 367 | | | 53 | | | 109 | | | 205 | |
| Boeing 787 | | 8 | | | 8 | | | — | | | — | |
| (a) United also has options and purchase rights for additional aircraft. | | | | |
The aircraft listed in the table above are scheduled for delivery
from 2018 through
2027. In 2018, United expects to take delivery of 10 Boeing 737 MAX aircraft, seven Boeing 787 aircraft and four Boeing777-300ER aircraft.2030. 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,
or to the extent rights are exercised pursuant to the relevant agreements to modify the timing of deliveries, the amount and timing of the
Company’sCompany's future capital commitments could change.
Additionally, the Company has entered into a contract to purchase three used Boeing767-300ER aircraft from Hawaiian Airlines, Inc. with expected delivery dates in the second half of 2018.The table below summarizes
United’sUnited's commitments as of December 31,
2017,2021, which
primarily relate to the acquisition ofinclude 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 futureall non-aircraft capital commitments
of the Company. | | | | |
2018 | | $ | 3.2 | |
2019 | | | 2.9 | |
2020 | | | 2.1 | |
2021 | | | 2.4 | |
2022 | | | 1.8 | |
After 2022 | | | 9.8 | |
| | | | |
| | $ | 22.2 | |
| | | | |
In February 2018, the Company secured $935 million of EETC financing to finance certain aircraft deliveries in 2017 and the first half of 2018. 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
(in billions):conditions. Financing may be necessary to satisfy the Company’s capital commitments for its firm order aircraft and other related capital expenditures.
| | | | | | | | |
| 2022 | | $ | 5.7 | |
| 2023 | | 6.9 | |
| 2024 | | 5.0 | |
| 2025 | | 4.3 | |
| 2026 | | 3.3 | |
| After 2026 | | 8.9 | |
| | $ | 34.1 | |
Legal and Environmental.The Company has certain contingencies resulting from litigation and claims incident to the ordinary course of business. As of December 31, 2017,2021, 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 theits defenses and assertions in pending legal proceedings have merit and the ultimate disposition of the litigation and claimsany pending matter will not materially affect the Company’s consolidatedCompany's financial position, or results of operations.operations or cash flows. The Company records liabilities for legal and environmental claims when it is probable that a loss has been incurred and the amount is probable and reasonably estimable. These amounts are recorded based on the Company’sCompany's 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 or relate to 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 facilitiesreal estate leases 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,
2017,2021, United is the guarantor of approximately
$1.8$2.1 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
recognized on the Company's consolidated balance sheet with the associated expense recorded on a straight-line basis
resulting in ratable accrual of the lease obligation over the expected lease term.
TheseThe obligations associated with these tax-exempt special facilities revenue bonds are included in our lease commitments disclosed in Note 11 of this report.
The leasing arrangements associated with approximately $441 million of these obligations are accounted for as capital leases. All of these bonds are due between
20192023 and
2038.2041.
As of December 31, 2021, United is the guarantor of $106 million of aircraft mortgage debt issued by one of United's regional carriers. The aircraft mortgage debt is subject to similar increased cost provisions as described below for the Company's debt, and the Company would potentially be responsible for those costs under the guarantees.
As of December 31, 2021, United had $371 million of surety bonds securing various insurance related obligations with expiration dates through 2025.
Increased Cost Provisions. In United’sUnited's financing transactions that include loans in which United is the borrower, 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 inwith respect to 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, 2017,2021, the Company had $3.4$13.2 billion of floating rate debt and $60 million of fixed rate debt with remaining terms of up to 11 years that are subject to these increased cost provisions. In several financing transactions involving loans or leases fromnon-U.S. entities, with remaining terms of up to 11 years and an aggregate balance of $3.3$10.1 billion, the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder tonon-U.S. entities to withholding taxes, subject to customary exclusions.As
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 throughtax-exempt bonds, (eithereither special facilities lease revenue bonds or general airport revenue bonds),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, 2017,2021, approximately $1.5$1.8 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, 2017,2021, the Company’sCompany's contingent exposure was approximately $244$343 million principal amount of such bonds based on its recent consortia participation. The Company’sCompany's contingent exposure could increase if the participation of other air carriers decreases. The guarantees will expire when thetax-exempt bonds are paid in full, which ranges from 2022 to 2049.2056. The Company didconcluded it was not necessary to record a liability at the timefor these indirect guarantees were made.
guarantees.
Regional Capacity Purchase.As of December 31, 2017,2021, United had 257251 call options to purchase regional jet aircraft being operated by certain of its regional carriers with contract dates extending until 2029. These call options are exercisable upon wrongful termination or breach of contract, among other conditions. None of the call options were exercisable at December 31, 2017.
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 Company’sCompany's 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”"Unrestricted Liquidity"). The Company’sCompany's current level of Unrestricted Liquidity is substantially in excess of these minimum levels.
Labor Negotiations. As of December 31, 2017,2021, United, including its subsidiaries, had approximately 89,80084,100 employees. Approximately 80%85% of United’sUnited's employees were represented by various U.S. labor organizations as of December 31, 2017. The agreement with the International Brotherhood of Teamsters (the “IBT”) contains provisions that requireorganizations. This total includes employees who elected to voluntarily separate from the Company pursuant to align contract terms with other airlines’ workgroups under certain conditions.UNITE HERE is attempting to organize United’s Catering Operations employees,the Voluntary Programs but who are currently unrepresented,still on pre-separation leave of absence with pay and filed an application to do so with the National Mediation Board on January 24, 2018.
benefits.
NOTE 14 - SPECIAL CHARGES
(CREDITS) AND UNREALIZED (GAINS) LOSSES ON INVESTMENTS
Special charges
(credits) and unrealized (gains) and losses on investments in the statements of consolidated operations consisted of the following for the years ended December 31 (in millions):
| | | | | | | | | | | | |
| Operating: | | 2017 | | | 2016 | | | 2015 | |
Severance and benefit costs | | $ | 116 | | | $ | 37 | | | $ | 107 | |
Impairment of assets | | | 25 | | | | 412 | | | | 79 | |
Cleveland airport lease restructuring | | | — | | | | 74 | | | | — | |
Labor agreement costs | | | — | | | | 64 | | | | 18 | |
| (Gains) losses on sale of assets and other special charges | | | 35 | | | | 51 | | | | 122 | |
| | | | | | | | | | | | |
Total operating special charges | | | 176 | | | | 638 | | | | 326 | |
Nonoperating: | | | | | | | | | | | | |
| (Gains) losses on extinguishment of debt and other | | | — | | | | (1) | | | | 202 | |
| | | | | | | | | | | | |
| Total operating and nonoperating special charges before income taxes | | | 176 | | | | 637 | | | | 528 | |
| Income tax benefit related to special charges | | | (63) | | | | (229) | | | | (11) | |
| Income tax adjustments (Notes 6 and 7) | | | (192) | | | | 180 | | | | (3,130) | |
| | | | | | | | | | | | |
Total operating and nonoperating special charges, net of income taxes and income tax adjustments | | $ | (79) | | | $ | 588 | | �� | $ | (2,613) | |
| | | | | | | | | | | | |
2017
| | | | | | | | | | | | | | | | | | | | |
| Operating: | | 2021 | | 2020 | | 2019 |
| CARES Act grant | | $ | (4,021) | | | $ | (3,536) | | | $ | — | |
| Severance and benefit costs | | 438 | | | 575 | | 16 | |
| Impairment of assets | | 97 | | | 318 | | | 171 | |
| (Gains) losses on sale of assets and other special charges | | 119 | | | 27 | | | 59 | |
| Total operating special charges (credits) | | (3,367) | | | (2,616) | | | 246 | |
| Nonoperating unrealized (gains) losses on investments, net | | 34 | | | 194 | | | (153) | |
| Nonoperating debt extinguishment and modification fees | | 50 | | | — | | | — | |
| Nonoperating special termination benefits and settlement losses | | 31 | | | 687 | | | — | |
| Nonoperating credit loss on BRW Term Loan and related guarantee | | — | | | 697 | | | — | |
| Total nonoperating special charges and unrealized (gains) losses on investments, net | | 115 | | | 1,578 | | | (153) | |
| Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net | | (3,252) | | | (1,038) | | | 93 | |
| Income tax expense (benefit), net of valuation allowance | | 728 | | | 404 | | | (21) | |
| Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net of income taxes | | $ | (2,524) | | | $ | (634) | | | $ | 72 | |
2021
CARES Act grant.During 2017,2021, the Company received approximately $5.8 billion in funding pursuant to the PSP2 Agreement and the PSP3 Agreement, which included an approximately $1.7 billion unsecured loan. The Company recorded $4.0 billion as grant income in Special charges (credits). The Company also recorded $99 million for the PSP2 Warrants and PSP3 Warrants issued to Treasury as part of the PSP2 Agreement and PSP3 Agreement, within stockholders' equity, as an offset to the grant income.
Severance and benefit costs. During 2021, the Company recorded $83$438 million ($53of charges related to pay continuation and benefits-related costs provided to employees who chose to voluntarily separate from the Company. The Company offered, based on employee group, age and completed years of service, pay continuation, health care coverage, and travel benefits. Approximately 4,500 employees elected to voluntarily separate from the Company.
Impairment of assets. During 2021, the Company recorded the following impairment charges:
•$61 million, primarily comprised of impairment charges for 13 Airbus A319 aircraft and 13 Boeing 737-700 airframes as a result of current market conditions for used aircraft, along with charges for cancelled induction projects related to these aircraft. These aircraft are all considered held for sale and classified as part of other assets.
•$36 million of impairments related to 64 Embraer EMB 145LR aircraft and related spare engines that United retired from its regional fleet. The decision to retire these aircraft was triggered by the United Next aircraft order. Almost all of these aircraft are classified as held for sale.
(Gains) losses on sale of assets and other special charges. During 2021, the Company recorded net charges of taxes)$119 million primarily related to a one-time bonus paid to employees for their continued efforts during the COVID-19 pandemic, incentives for its employees to receive a COVID-19 vaccination and the termination of the lease associated with three floors of its headquarters at the Willis Tower in Chicago, partially offset by gains primarily related to the sale of its former headquarters in suburban Chicago, aircraft sale-leaseback transactions and aircraft component manufacturer credits.
Nonoperating unrealized (gains) losses on investments, net. During 2021, the Company recorded losses of $34 million primarily for the change in the market value of its investments in equity securities.
Nonoperating debt extinguishment and modification fees. During 2021, the Company recorded $50 million of charges for fees and discounts related to the entry into the 2021 Loan Facilities and the prepayment of the 2017 Loan Facilities.
Nonoperating special termination benefits and settlement losses.During 2021, as part of the first quarter Voluntary Programs, the Company recorded $31 million of special termination benefits in the form of additional subsidies for retiree medical costs
for certain U.S.-based front-line employees. The subsidies were in the form of a one-time contribution to a notional Retiree Health Account of $125,000 for full-time employees and $75,000 for part-time employees. See Note 7 of this report for additional information.
2020
CARES Act grant. During 2020, the Company received approximately $5.1 billion in funding pursuant to the Payroll Support Program under the CARES Act, which consisted of a $3.6 billion grant and a $1.5 billion unsecured loan. The Company recorded $3.5 billion as grant income in Special charges (credits). The Company also recorded $66 million for warrants issued to Treasury, within stockholders' equity, as an offset to the grant income.
Severance and benefit costs. During 2020, the Company recorded $575 million related to its workforce reduction and voluntary plans for employee severance, pay continuance from voluntary retirements and benefits-related costs.
Impairment of assets. During 2020, the Company recorded the following impairment charges:
• $130 million for its China routes which were primarily caused by the COVID-19 pandemic, the Company's subsequent suspension of flights to China and a further delay in the expected return of full capacity to the China markets.
• $94 million related to 11 permanently-grounded Boeing 757-200 aircraft and the related engines and spare parts.
• $38 million related to the right-of-use asset associated with the embedded aircraft lease in one of the Company's CPAs. This impairment was primarily due to the impact to cash flows from the pandemic and the relatively short remaining term under the CPA.
• $56 million related to various cancelled facility, aircraft induction and information technology capital projects. The decisions driving these impairments were the result of the COVID-19 pandemic's impact on the Company's operations.
(Gains) losses on sale of assets and other special charges. During 2020, the Company recorded losses on certain asset sales and charges for legal reserves, partially offset by gains on aircraft sale-leaseback transactions.
Nonoperating unrealized gains (losses) on investments, net.During 2020, the Company recorded losses of $194 million primarily for changes in the fair value of its investments in equity securities.
Nonoperating special termination benefits and settlement losses.During 2020, the Company recorded $687 million of settlement losses related to the Company's primary defined benefit pension plan covering certain U.S. non-pilot employees, and special termination benefits offered, under Voluntary Programs. See Note 7 of this report for additional information.
Nonoperating credit loss on BRW Term Loan and related guarantee.During 2020, the Company recorded a $697 million expected credit loss allowance for the BRW Term Loan and related guarantee. See Note 8 of this report for additional information.
2019
Severance and benefit costs. During 2019, the Company recorded $14 million of management severance and $2 million of severance and benefit costs related to a voluntaryearly-out program for its technicians and related employees represented by the IBT. In the first quarterInternational Brotherhood of 2017, approximately 1,000 technicians and related employees elected to voluntarily separate from the Company and will receive a severance payment, with a maximum valueTeamsters.
Impairment of $100,000 per participant, based on years of service, with retirement dates through early 2019. Also during 2017, the Company recorded $33 million ($21 million net of taxes) of severance primarily related to its management reorganization initiative.assets.
During 20172019, the Company recorded a $10$90 million ($6 million net of taxes) impairment charge related to obsolete spare parts inventory and a $15 million ($10 million net of taxes) intangible asset impairment charge related to a maintenance service agreement.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. The designation was associated with an updated demand and capacity analysis of Newark by the FAA. In 2016, theits Hong Kong routes. The Company determined that the FAA’s action impaired the entirefair value of its Newark slots because the slots are no longerHong Kong routes using a variation of the mechanism that governstake-off and landing rights. Accordingly,income approach known as the excess earnings method, which discounts an asset's projected future net cash flows to determine the current fair value. Also during 2019, the Company recorded a $412$43 million special charge ($264 million net of taxes) to write off the intangible asset.
In 2016, the City of Cleveland agreed to amend the Company’s 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 International Association of Machinists and Aerospace Workers (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 asix-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 chargesimpairment primarily for payments in conjunction with the IAM and IBT agreements described above. As part of the ratified 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 aone-time $60surplus Boeing 767 aircraft engines removed from operations, an $18 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 Association of Flight Attendants, the Company amended two of its flight attendant postretirement medical plans. The amendments triggered curtailment accounting, resulting in the recognition of aone-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 voluntaryearly-out programcharge primarily for the Company’s 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.
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 thewrite-off of unexercised aircraft purchase options, and $7$20 million for inventory held for sale. For the full-year 2015,in other aircraft impairments.
(Gains) losses on sale of assets and other special charges. During 2019, the Company also recorded other impairments, including $10charges of $25 million for discontinued internal software projects and $10related to contract terminations, $18 million for the impairmentsettlement of several engines held for sale.The Company recorded $107 million of severance and benefit costs primarily related to a voluntaryearly-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 withcertain 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 thewrite-off of $134 millioncosts related to the unamortizednon-cash debt discount from the extinguishmenttransition of the 6% Notes due 2026fleet types within a regional carrier contract and the 6% Notes due 2028. $2 million of other charges.
Nonoperating unrealized gains (losses) on investments, net. During 2015,2019, the Company also recorded a $61gains of $153 million foreign exchange loss related to its cash holdingsprimarily for the change 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 sincemid-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 Company’s resulting cash balance held in Venezuelan bolivars at December 31, 2015 was approximately $13 million.
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, 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 | |
Accrual | | | 116 | | | | (4) | |
Payments | | | (93) | | | | (15) | |
| | | | | | | | |
Balance at December 31, 2017 | | $ | 37 | | | $ | 22 | |
| | | | | | | | |
The Company’s accrual and payment activity is primarily related to severance and other compensation expense associated with voluntary employee early retirement programs.
NOTE 15 - 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.
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 Company’s chief operating decision maker evaluates flight profitability data, which considers aircraft type and route economics. The Company’s chief operating decision maker makes resource allocation decisions to maximize the Company’s consolidated financial results. Managing the Company as one segment allows management the opportunity to maximize themarket value of its route network.
The Company’s 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):
| | | | | | | | | | | | |
| | | 2017 | | | 2016 | | | 2015 | |
Domestic (U.S. and Canada) | | $ | 23,131 | | | $ | 22,202 | | | $ | 21,931 | |
Pacific | | | 4,898 | | | | 4,959 | | | | 5,498 | |
Atlantic | | | 6,285 | | | | 6,157 | | | | 7,068 | |
Latin America | | | 3,422 | | | | 3,238 | | | | 3,367 | |
| | | | | | | | | | | | |
Total | | $ | 37,736 | | | $ | 36,556 | | | $ | 37,864 | |
| | | | | | | | | | | | |
The Company attributes revenue among the geographic areas based upon the origin and destination of each flight segment. The Company’s operations involve an insignificant level of dedicated revenue-producing assets in
geographic regions as the overwhelming majority of the Company’s revenue producing assets (primarily U.S. registered aircraft) can be deployed in anycertain of its geographic regions.
NOTE 16 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
| | | | | | | | | | | | | | | | |
UAL | | Quarter Ended | |
(In millions, except per share amounts) | | March 31 | | | June 30 | | | September 30 | | | December 31 | |
2017 | | | | | | | | | | | | | | | | |
Operating revenue | | $ | 8,420 | | | $ | 10,000 | | | $ | 9,878 | | | $ | 9,438 | |
Income from operations | | | 278 | | | | 1,399 | | | | 1,092 | | | | 729 | |
Net income | | | 96 | | | | 818 | | | | 637 | | | | 580 | |
Basic earnings per share | | | 0.31 | | | | 2.67 | | | | 2.12 | | | | 1.99 | |
Diluted earnings per share | | | 0.31 | | | | 2.66 | | | | 2.12 | | | | 1.99 | |
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 | |
UAL’s 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. UAL’s quarterly results were impacted by the following significant items (in millions):
| | | | | | | | | | | | | | | | |
| | | Quarter Ended | |
| | | March 31 | | | June 30 | | | September 30 | | | December 31 | |
2017 | | | | | | | | | | | | | | | | |
Operating: | | | | | | | | | | | | | | | | |
Severance and benefit costs | | $ | 37 | | | $ | 41 | | | $ | 23 | | | $ | 15 | |
Impairment of assets | | | — | | | | — | | | | 15 | | | | 10 | |
(Gains) losses on sale of assets and other special charges | | | 14 | | | | 3 | | | | 12 | | | | 6 | |
| | | | | | | | | | | | | | | | |
Total operating special charges | | | 51 | | | | 44 | | | | 50 | | | | 31 | |
Income taxes: | | | | | | | | | | | | | | | | |
Income tax benefit related to special charges | | | (18) | | | | (16) | | | | (18) | | | | (11) | |
Income tax adjustments (Note 7) | | | — | | | | — | | | | — | | | | (192) | |
| | | | | | | | | | | | | | | | |
Total operating special charges, net of income taxes and income tax adjustments | | $ | 33 | | | $ | 28 | | | $ | 32 | | | $ | (172) | |
| | | | | | | | | | | | | | | | |
2016 | | | | | | | | | | | | | | | | |
Operating: | | | | | | | | | | | | | | | | |
Labor agreement costs and related items | | $ | 100 | | | $ | 10 | | | $ | 14 | | | $ | (60) | |
Cleveland airport lease restructuring | | | 74 | | | | — | | | | — | | | | — | |
Severance and benefit costs | | | 8 | | | | 6 | | | | 13 | | | | 10 | |
Impairment of assets | | | — | | | | 412 | | | | — | | | | — | |
(Gains) losses on sale of assets and other special charges | | | 8 | | | | 6 | | | | 18 | | | | 19 | |
| | | | | | | | | | | | | | | | |
Total operating 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 charges, net of income taxes and income tax adjustments | | $ | 126 | | | $ | 272 | | | $ | 29 | | | $ | 161 | |
| | | | | | | | | | | | | | | | |
See Note 14
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
ITEM 9A. | CONTROLS AND PROCEDURES |
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 SEC is recorded, processed, summarized and reported, within the time periods specified by the
SEC’sSEC's 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
UAL’sUAL's and
United’sUnited's disclosure controls and procedures
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act") 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,
2017,2021, disclosure controls and procedures were effective.
Management's Reports on Internal Control Over Financial Reporting
UAL and United Management's Reports on Internal Control Over Financial Reporting are included herein.
Ernst & Young LLP, an independent registered public accounting firm, has audited the Company's financial statements included in this Form 10-K and issued its report on the effectiveness of the Company's internal control over financial reporting as of December 31, 2021, which is included herein.
Changes in Internal Control over Financial Reporting during the Quarter Ended December 31,
20172021
During the three months ended December 31, 2017,2021, there was no change in UAL’sUAL's or United’sUnited's internal control over financial reporting that materially affected, or is reasonably likely to materially affect, their internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of United
ContinentalAirlines Holdings, Inc.
Opinion on Internal Control over Financial Reporting
We have audited United
ContinentalAirlines Holdings, Inc.
’s's (the
“Company”"Company") internal control over financial reporting as of December 31,
2017,2021, 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)"COSO criteria"). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2017,2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”("PCAOB"), the
2021 consolidated financial statements
as of and for the year ended December 31, 2017 of the Company and our report dated February
22, 201818, 2022 expressed an unqualified opinion thereon.
The
Company’sCompany's 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 ReportManagement's Reports on Internal Control
overOver Financial Reporting in Item 9A. Our responsibility is to express an opinion on the
company’sCompany's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control Over Financial Reporting
A
company’scompany's 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
company’scompany's 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
company’scompany's 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.
February 22, 201818, 2022
United
ContinentalAirlines Holdings, Inc. Management Report on Internal Control Over Financial Reporting
February
22, 201818, 2022
To the Stockholders of United
ContinentalAirlines Holdings, Inc.
The management of United
ContinentalAirlines Holdings, Inc.
(“UAL”("UAL") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
RulesRule 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, 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 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, 2017.2021. In making this assessment, management used the framework set forth in Internal Control—Integrated 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, 2017.2021.
Our independent registered public accounting firm, Ernst & Young LLP, who audited
UAL’sUAL's consolidated financial statements included in this Form
10-K, has issued a report on
UAL’sUAL's internal control over financial reporting, which is included herein.
United Airlines, Inc. Management Report on Internal Control Over Financial Reporting
February
22, 201818, 2022
To the Stockholder of United Airlines, Inc.
The management of United Airlines, Inc.
(“United”("United") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
RulesRule 13a-15(f). United’s United's 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,
United’sUnited's 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
United’sUnited's Chief Executive Officer and Chief Financial Officer, United conducted an evaluation of the design and operating effectiveness of its internal control over financial reporting as of December 31,
2017.2021. In making this assessment, management used the framework set forth in Internal Control—Integrated Framework (2013 Framework) issued by the Committee of the Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
United’sUnited's Chief Executive Officer and Chief Financial Officer concluded that its internal control over financial reporting was effective as of December 31,
2017.2021.
This annual report does not include an attestation report of United’sUnited's registered public accounting firm regarding internal control over financial reporting. Management’sManagement's report was not subject to attestation by United’sUnited's registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit United to provide only management’smanagement's report in this annual report.
ITEM 9B. | OTHER INFORMATION. |
ITEM 9B. OTHER INFORMATION.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
Certain
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Reference is made to the 2022 Proxy Statement with respect to information about UAL's directors and corporate governance, which is incorporated herein by reference and made a part hereof in response to the information required by
this itemItem 10 with respect to
UAL is incorporated by reference from UAL’s definitive proxy statement for its 2018 Annual Meeting of Stockholders. Information regarding the executive officers of UAL is presented below.InformationUAL.
The information required by
this itemItem 10 with respect to
United is omitted pursuant to General Instruction I(2)(c) of Form10-K.EXECUTIVE OFFICERS OF UAL
TheUAL's and United's executive officers has been included in Part I of UAL as of February 23, 2018 are listed below, alongthis Form 10-K under the caption "Information about Our Executive Officers" and is incorporated herein by reference and made a part hereof in response to the information required by Item 10 with their ages, tenure as officer and business background for at leastrespect to UAL.
Reference is made to the
last five years.Kate Gebo.Age 49. Ms. Gebo has served as Executive Vice President Human Resources and Labor Relations of UAL and United since December 2017. From November 20162022 Proxy Statement with respect to November 2017, Ms. Gebo served as Senior Vice President Global Customer Service Delivery and Chief Customer Officer of United. From October 2015 to November 2016, Ms. Gebo served as Vice PresidentUAL's non-compliance with Section 16(a) of the Office of the Chief Executive Officer. From November 2009 to October 2015, Ms. Gebo served as Vice President of Corporate Real Estate of United.
Brett J. Hart.Age 48. Mr. Hart has served as Executive Vice President, Chief Administrative OfficerExchange Act, if applicable, which is incorporated herein by reference and General Counsel of UAL and United since May 2017. From February 2012 to May 2017, he served as Executive Vice President and General Counsel of UAL and United. 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 Airlines, Inc. (“Continental”). From June 2009 to December 2010, Mr. Hart served as Executive Vice President, General Counsel and Corporate Secretary at Sara Lee Corporation,made 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.
Gregory L. Hart.Age 52. 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 Continentalpart hereof in 1997.
Linda P. Jojo.Age 52. Ms. Jojo has served as Executive Vice President Technology and Chief Digital Officer of UAL and United since May 2017. From November 2014 to May 2017, Ms. Jojo served as Executive Vice President and Chief Information Officer of UAL and United. 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 53. 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 50. 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 priorresponse to the 2005 mergerinformation required by Item 10 with respect to UAL.
Code of those carriers, including Executive Vice President—Sales and Marketing (2001 to 2006); Senior Vice President,e-business (2000 to 2001); Vice President, Revenue Management (1998 to 2000); 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 48. Mr. Levy has served as Executive Vice President and Chief Financial Officer of UAL and United 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 59. Mr. Munoz has served as Chief Executive Officer of UAL and United since September 2015, and also as President of UAL and United 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 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 since 2010.
Andrew P. Nocella.Age 48. Mr. Nocella has served as Executive Vice President and Chief Commercial Officer of UAL and United since September 2017. From February 2017 to September 2017, he served as Executive Vice President and Chief Revenue Officer of UAL and United. Prior to joining the Company, from August 2016 to February 2017, Mr. Nocella served as Senior Vice President, Alliances and Sales of American Airlines, Inc. From December 2013 to August 2016, he served as Senior Vice President and Chief Marketing Officer of American Airlines, Inc. From August 2007 to December 2013, he served as Senior Vice President, Marketing and Planning of US Airways.
There are no family relationships among the executive officers or the directors of UAL. The executive officers are elected by UAL’s 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.
Ethics.
The Company has a code of ethics, the “Code"Code of Ethics and Business Conduct,”" for its directors, officers and employees. The code serves as a “Code"Code of Ethics”Ethics" as defined by SEC regulations, and as a “Code"Code of Business Conduct and Ethics”Conduct" under the listed Company Manual of the NYSE.Nasdaq Listing Rule 5610. The code is available on the Company’sCompany's investor relations 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 Company’sCompany's investor relations website in accordance with Item 5.05 of Form8-K. Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10-K.
ITEM 11. | EXECUTIVE COMPENSATION. |
Information required by this item
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the 2022 Proxy Statement with respect to
UALinformation about UAL's executive and director compensation and certain related matters, which is incorporated
herein by reference
from UAL’s definitive proxy statement for its 2018 Annual Meeting of Stockholders.and made a part hereof in response to the information required by Item 11 with respect to UAL.
Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form10-K.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
Information required by this item
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Reference is made to the 2022 Proxy Statement with respect to
UALthe security ownership of certain beneficial owners and management and certain equity compensation plan information, which is incorporated
herein by reference
from UAL’s definitive proxy statement for its 2018 Annual Meeting of Stockholders.and made a part hereof in response to the information required by Item 12 with respect to UAL.
Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form10-K.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
Information required by this item
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Reference is made to the 2022 Proxy Statement with respect to
UALinformation about certain relationships and related transactions and director independence, which is incorporated
herein by reference
from UAL’s definitive proxy statement for its 2018 Annual Meeting of Stockholders.and made a part hereof in response to the information required by Item 13 with respect to UAL.
Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form
10-K.
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The Audit Committee of the UAL Board of Directors has adopted a policy on
pre-approval of services of the
Company’sCompany's independent registered public accounting firm. As a wholly-owned subsidiary of UAL,
United’sUnited's 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
firm’sfirm's 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 preapproval 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
20172021 and
20162020 non-audit services provided by Ernst & Young LLP
(PCAOB ID No. 42), the
Company’sCompany's independent registered public accounting firm, are compatible with maintaining auditor independence.
All of the services in
20172021 and
20162020 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
Company’sCompany's independent auditors in
20172021 and
20162020 are as follows (in thousands):
| | | | | | | | |
Service | | 2017 | | | 2016 | |
Audit Fees | | $ | 4,548 | | | $ | 3,751 | |
Audit Related Fees | | | 565 | | | | 215 | |
Tax Fees | | | 584 | | | | 1,252 | |
All Other Fees | | | 2 | | | | 2 | |
| | | | | | | | |
| | $ | 5,699 | | | $ | 5,220 | |
| | | | | | | | |
Note: UAL and United amounts are the same. | | | | | | | | |
AUDIT FEES
| | | | | | | | | | | | | | |
| Service | | 2021 | | 2020 |
| Audit Fees | | $ | 4,477 | | | $ | 6,000 | |
| Audit Related Fees | | — | | | 302 |
| Tax Fees | | 37 | | 170 |
| Total Fees | | $ | 4,514 | | | $ | 6,472 | |
Note: UAL and United amounts are the same.
Audit Fees.For 20172021 and 2016,2020, 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.the Company and its wholly-ownedwholly owned subsidiaries. Audit fees also include the audit of the consolidated financial statements of United employee benefit plan audits,Airlines, 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.AUDIT RELATED FEES
Audit Related Fees.For 2017 and 2016,2020, fees for audit relatedaudit-related services primarily consisted of professional servicesaudits and/or agreed upon audit procedures related to due diligence and consultations related toprior years' audits of subsidiaries of the adoption of new accounting standards.TAX FEES
Company.
Tax Fees.Tax fees for 20172021 and 20162020 relate to professional services provided for research and consultations regarding tax accounting and tax compliance matters and review of U.S. and international tax impacts of certain transactions, 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 2017 and 2016 consist
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. | | | | | | | |
| (a) | | List of documents filed as part of this report: |
| | |
| (1) | |
(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. |
| | | | | | | | |
| | ScheduleII-Valuation and Qualifying Accounts for the years ended December 31, 2017, 20162021, 2020 and 2015.2019. |
| | |
| | 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 provided in the Exhibit Index. |
ITEM 16. FORM 10-K SUMMARY.
None.
| | | | | | | | |
| Exhibit No. | Registrant | | Registrant
| | Exhibit |
| | |
| | | | | | PlanArticles of Merger
Incorporation and Bylaws |
| | |
| 3.1 | *2.1UAL | | | 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 RegulationS-K) (filed as Exhibit 2.1 to UAL’sForm 8-K filed May 4, 2010, Commission file number1-6033, 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 UAL’s Form8-K filed April 3, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| | | | | | Articles of Incorporation and Bylaws
|
| | |
| *3.1 | | | UAL | | |
| | |
| 3.2 | *3.2UAL | | | UAL | | |
| | |
| 3.3 | UAL | |
| | |
| 3.4 | *3.3United | | | United | | |
| | |
| 3.5 | *3.4United | | | United | | |
| | |
| | | | | | Instruments Defining Rights of Security Holders, Including Indentures |
| | |
| 4.1 | *4.1UAL
United | | | 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 UAL’s Form10-K for the year ended December 31, 2012, Commission file number1-6033, 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 UAL’s Form8-K filed April 3, 2013, Commission file number1-6033, 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 UAL’s Form8-K filed September 19, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | | | | | |
| | |
| *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 Continental’s FormS-3/A filed July 18, 1997, Commission file number1-10323, 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 UAL’s Form8-K dated October 1, 2010, Commission file number1-6033, 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 UAL’s Form8-K filed on May 19, 2014, Commission file number1-6033, 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 UAL’sUAL's Form8-K filed on May 10, 2013 Commission file number1-6033,and incorporated herein by reference) |
| | |
| 4.2 | *4.8UAL
United | | | 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 UAL’s Form8-K filed on May 10, 2013, Commission file number1-6033, 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 UAL’s Form8-K filed on May 10, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *4.10 | | | UAL
United
| | Form of Notation of Note Guarantee (filed as Exhibit B to Exhibit 4.2 to UAL’s Form8-K filed on May 10, 2013, Commission file number1-6033, 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 UAL’s Form8-K filed on November 12, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *4.12 | | | UAL
United
| | Form of 6.000% Senior Notes due 2020 (filed as Exhibit 4.3 to UAL’s Form8-K filed on November 12, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *4.13 | | | UAL
United
| | Form of Notation of Note Guarantee (filed as Exhibit 4.4 to UAL’s Form8-K filed on November 12, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *4.14 | | | UAL
United | | Third Supplemental Indenture, dated as of January 26, 2017, 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 5.000% Senior Notes due 2024 (filed as Exhibit 4.2 to UAL’sUAL's Form 8-K filed January 27, 2017 Commission filenumber 1-6033, and incorporated herein by reference) |
| | |
| | | | | | |
| | |
| 4.3 | *4.15UAL
United | | | UAL
United | | |
| | |
| 4.4 | *4.16UAL
United | | | UAL
United | | |
| | |
| 4.5 | *4.17UAL
United | | | UAL
United | | Fourth Supplemental Indenture, dated as of September 29, 2017, 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 4.250% Senior Notes due 2022 (filed as Exhibit 4.2 to UAL’sUAL's Form 8-K filed October 4, 2017 Commission filenumber 1-6033, and incorporated herein by reference) |
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| 4.6 | *4.18UAL
United | | | UAL
United | | |
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| 4.7 | *4.19UAL
United | | | UAL
United | | |
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| 4.8 | UAL
United | |
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| 4.9 | UAL
United | |
| | |
| 4.10 | UAL
United | |
| | |
| 4.11 | UAL
United | |
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| 4.12 | UAL | |
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| 4.13 | UAL
United | Indenture (including Form of 6.50% Senior Secured Notes due 2027), dated as of July 2, 2020, by and among Mileage Plus Holdings, LLC, Mileage Plus Intellectual Property Assets, Ltd., the guarantors named therein and Wilmington Trust, National Association, as trustee and collateral custodian, governing the 6.50% Senior Secured Notes due 2027 (filed as Exhibit 4.1 to UAL's Form 8-K filed July 2, 2020 and incorporated herein by reference) |
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| 4.14 | UAL
United | |
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| 4.15 | UAL | |
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| 4.16 | UAL | |
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| 4.17 | UAL | |
| | | | | | | | |
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| 4.18 | UAL
United | |
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| 4.19 | UAL | |
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| 4.20 | UAL | |
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| 4.21 | UAL
United | |
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| 4.22 | UAL
United | |
| | |
| 4.23 | UAL
United | |
| | |
| 4.24 | UAL
United | |
| | |
| 4.25 | UAL
United | |
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| 4.26 | UAL
United | |
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| 4.27 | UAL | |
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| 4.28 | UAL | |
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| 4.29 | UAL
United | |
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| | | | | | Material Contracts |
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| †10.1 | *†10.1UAL | | | 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 UAL’sUAL's Form8-K filed April 20, 2016 Commission file number1-6033, and incorporated herein by reference) |
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| †10.2 | *†10.2UAL | | | UAL | | |
| | |
| †10.3 | | | UAL | | First Amendment, dated January 29, 2018, to United Continental Holdings, Inc Profit Sharing Plan |
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| *†10.4 | | | 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 UAL’s Form8-K/A filed January 7, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *†10.5 | | | 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 UAL’s Form8-K filed April 20, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *†10.6 | | | UAL
United | | Second Amendment to Employment Agreement, dated April 21, 2017, by and among United Continental Holdings, Inc., United Airlines, Inc. and Oscar Munoz (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form8-K filed on April 21, 2017, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *†10.7 | | | UAL
United | | 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 UAL’s Form10-K for the year ended December 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
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| †10.3 | *†10.8UAL
United | | | UAL
United | | |
| | |
| †10.4 | *†10.9UAL
United | | | UAL
United | | SERP Agreement,Stock Option Award Notice, dated as of October 1, 2010, by and amongDecember 4, 2019, to J. Scott Kirby pursuant to the United Continental Holdings, Inc., Continental Airlines, Inc. and Michael P. Bonds 2017 Incentive Compensation Plan (filed as Exhibit 10.1010.2 to UAL’sUAL's Form10-K for the year ended 8-K filed December 31, 2010, Commission file number1-6033,6, 2019 and incorporated herein by reference) |
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| †10.5 | *†10.10UAL | | | UAL
United | | United Continental Holdings, Inc. Senior Officer Severance Plan (effective October 1, 2014) (filed as Exhibit 10.1 to UAL’s Form10-Q for the quarter ended September 30, 2015, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *†10.11 | | | UAL
United | | 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 UAL’s Form10-K for the year ended December 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *†10.12 | | | 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 UAL’s Form10-Q for the quarter ended June 30, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *†10.13 | | | UAL | | |
| | |
| †10.6 | *†10.14UAL | | | 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 UAL’s Form10-Q for the quarter ended September 30, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *†10.15 | | | UAL
United | | Confidentiality andNon-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 Form10-Q for the quarter ended March 31, 2009, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *†10.16 | | | 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 UAL’s Form8-K filed September 8, 2015, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *†10.17 | | | UAL
United | | |
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| †10.7 | *†10.18UAL | | | UAL | | |
| | | | | | |
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| †10.8 | *†10.19UAL | | | UAL | | |
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| †10.9 | *†10.20UAL | | | UAL | | |
| | |
| †10.10 | *†10.21UAL | | | UAL | | |
| | |
| †10.11 | *†10.22UAL | |
| | UAL |
| †10.12 | UAL | |
| | |
| †10.13 | UAL | |
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| †10.14 | *†10.23UAL | | | UAL | | |
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| †10.15 | *†10.24UAL | | | UAL | | |
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| †10.16 | *†10.25UAL | | | UAL | | |
| | |
| *†10.26 | | | UAL | | | | |
| †10.17 | UAL | |
| | |
| †10.18 | *†10.27UAL | | | 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 UAL’s Form10-K for the year ended December 31, 2012, Commission file number1-6033, and incorporated herein by reference) |
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| *†10.28 | | | 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 UAL’s Form10-Q for the quarter ended March 31, 2015, Commission file number1-6033, and incorporated herein by reference) |
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| *†10.29 | | | 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 UAL’s Form10-K for the year ended December 31, 2015, Commission file number1-6033 and incorporated herein by reference) |
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| *†10.30 | | | UAL | | Form of Performance-Based Restricted Stock UnitRSU Award Notice pursuant to the United Continental Holdings, Inc. Performance-Based Restricted Stock UnitRSU Program (ROIC(Relative Pre-tax Margin awards) (stock settled form of award) (filed as Exhibit 10.2310.35 to UAL’sUAL's Form10-K for the year ended December 31, 2015, Commission file number1-60332018 and incorporated herein by reference) |
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| †10.19 | *†10.31UAL | | | UAL | | |
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| †10.20 | *†10.32UAL | | | UAL | | |
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| *†10.33 | | | UAL | | First Amendment to the United Continental Holdings, Inc. Incentive Plan 2010, as amended and restated February 17, 2011 (filed as Annex B to UAL’s 2013 Definitive Proxy Statement filed on April 26, 2013, Commission file number1-6033, incorporated herein by reference) |
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| *†10.34 | | | UAL | | United Continental Holdings, Inc. Annual Incentive ProgramForm of Performance-Based RSU Award Notice (adopted pursuant to the United Continental Holdings, Inc. 2017 Incentive Plan 2010) (as amended and restated February 21, 2013)Compensation Plan) (filed as Exhibit 10.4310.22 to UAL’sUAL's Form10-K for the year ended December 31, 2012, Commission file number1-6033,2020 and incorporated herein by reference) |
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| †10.21 | *†10.35UAL | | | UAL | | |
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| †10.22 | *†10.36UAL | | | 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 UAL’s Form10-K for the year ended December 31, 2011, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *†10.37 | | | 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 UAL’s Form10-K for the year ended December 31, 2013, Commission file number1-6033, and incorporated herein by reference) |
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| | |
| *†10.38 | | | 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 UAL’s Form10-K for the year ended December 31, 2012, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *†10.39 | | | 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 UAL’s Form10-K for the year ended December 31, 2013, Commission file number1-6033, and incorporated herein by reference) |
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| *†10.40 | | | UAL | | Description of Compensation and Benefits for United ContinentalAirlines Holdings, Inc.Non-Employee Directors (filed as Exhibit 10.3010.36 to UAL’sUAL's Form10-K for the year ended December 31, 2014, Commission file number1-6033,2019 and incorporated herein by reference) |
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| †10.23 | *†10.41UAL | | | UAL | | |
| | |
| †10.24 | *†10.42UAL | |
| | UAL |
| †10.25 | UAL | |
| | |
| †10.26 | *†10.43UAL | | | UAL | | Continental Airlines, Inc. 1998 Stock Incentive Plan (filed as Exhibit 4.3 to Continental’s FormS-8 Registration Statement (No.333-57297), Commission file number1-10323, and incorporated herein by reference) |
| | |
| *†10.44 | | | UAL | | Amendment No. 1 to 1998 Incentive Plan, 1997 Incentive Plan and 1994 Incentive Plan (filed as Exhibit 10.2 to Continental’s Quarterly Report on Form10-Q for the quarter ended June 30, 2001, Commission file no.1-10323, and incorporated herein by reference) |
| | |
| *†10.45 | | | UAL | | Amendment to 1998 Incentive Plan, 1997 Incentive Plan and 1994 Incentive Plan (filed as Exhibit 10.5 to Continental’s Quarterly Report on Form10-Q for the quarter ended March 31, 2004, Commission file no.1-10323 and incorporated herein by reference) |
| | |
| *†10.46 | | | UAL | | Form of Outside Director Stock Option Grant pursuant to the Continental Airlines, Inc. 1998 Incentive Plan (filed as Exhibit 10.12(c) to Continental’s Form10-K for the year ended December 31, 2006, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *†10.47 | | | UAL | | Continental Airlines, Inc. Incentive Plan 2000, as amended and restated (filed as Exhibit 10.1 to Continental’s Form10-Q for the quarter ended March 31, 2002, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *†10.48 | | | UAL | | Amendment to Incentive Plan 2000, dated as of March 12, 2004 (filed as Exhibit 10.6 to Continental’s Form10-Q for the quarter ended March 31, 2004, Commission file number1-10323, and incorporated herein by reference) |
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| *†10.49 | | | UAL | | Second Amendment to Incentive Plan 2000, dated as of June 6, 2006 (filed as Exhibit 10.1 to Continental’s Form10-Q for the quarter ended June 30, 2006, Commission file number1-10323, and incorporated herein by reference) |
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| *†10.50 | | | UAL | | Third Amendment to Incentive Plan 2000, dated as of September 14, 2006 (filed as Exhibit 10.1 to Continental’s Form10-Q for the quarter ended September 30, 2006, Commission file number1-10323, and incorporated herein by reference) |
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| *†10.51 | | | UAL | | Form of Outside Director Stock Option Agreement pursuant to Incentive Plan 2000 (filed as Exhibit 10.14(b) to Continental’s Form10-K for the year ended December 31, 2000, Commission file number1-10323, and incorporated herein by reference) |
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| *†10.52 | | | UAL | | Form of Outside Director Stock Option Grant pursuant to Incentive Plan 2000 (filed as Exhibit 10.1 to Continental’s Form10-Q for the quarter ended March 31, 2008, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *†10.53 | | | UAL | | Form ofNon-Employee Director Option Grant Document pursuant to Continental Airlines, Inc. Incentive Plan 2010, as amended and restated through February 17, 2010 (filed as Exhibit 10.12(a) to Continental’s Form10-K for the year ended December 31, 2009, Commission file number1-10323, and incorporated herein by reference) |
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| *†10.54 | | | UAL | | United Air Lines, Inc. Management Cash Direct & Cash Match Program (amended and restated effective January 1, 2014) (filed as Exhibit 10.64 to UAL’s Form10-K for the year ended December 31, 2013, Commission file number1-10323, and incorporated herein by reference) |
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| *†10.55 | | | UAL | | United ContinentalAirlines Holdings, Inc. Executive Severance Plan (effective October 1, 2014) (filed as Exhibit 10.1 to UAL’s Form8-K filed June 20, 2014, Commission file number1-6033,Amended and incorporated herein by reference) |
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| *†10.56 | | | UAL
United | | Separation Agreement, dated as of February 9, 2017, by and among United Continental Holdings, Inc., United Airlines, Inc. and Julia Haywood (filed as Exhibit 10.2 to UAL’sForm 10-Q for the quarter ended March 31, 2017, Commission file number1-6033, and incorporated herein by reference) |
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| *†10.57 | | | UAL | | First Amendment to the United Continental Holdings, Inc. 2006 Director Equity Incentive Plan (as amended and restated on February 20, 2014) (filed as Exhibit 10.3 to UAL’sForm 10-Q for the quarter ended March 31, 2017, Commission file number1-6033, and incorporated herein by reference) |
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| *†10.58 | | | UAL | | United Continental Holdings, Inc. 2017Restated 2021 Incentive Compensation Plan (filed as Exhibit 10.1 to UAL’sUAL's Form 8-K filed on May 30, 2017, Commission file number1-6033,28, 2021 and incorporated herein by reference) |
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| †10.27 | *†10.59UAL | | | UAL | | |
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| †10.28 | *†10.60UAL | | | UAL | | Form of Stock Option Award Notice pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan (filed as Exhibit 10.7 to UAL’s Form10-Q for the quarter ended June 30, 2017, Commission file number1-6033, and incorporated herein by reference) |
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| *†10.61 | | | UAL | | United Continental Holdings, Inc. Performance-Based RSU Program (adopted pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan) (filed as Exhibit 10.8 to UAL’s Form10-Q for the quarter ended June 30, 2017, Commission file number1-6033, and incorporated herein by reference) |
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| *†10.62 | | | UAL | | Form of Performance-Based RSU Award Notice pursuant to the United Continental Holdings, Inc. Performance-Based RSU Program (RelativePre-tax Margin awards)2021 Incentive Compensation Plan (filed as Exhibit 10.910.17 to UAL’sUAL's Form10-Q for the quarter ended June 30, 2017, Commission file number1-6033,2021 and incorporated herein by reference) |
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| ^10.29 | †10.63UAL
United | | | UAL | | United Continental Holdings, Inc. Annual Incentive Program (adopted pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan) |
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| †10.64 | | | UAL | | Form of Annual Incentive Plan Award Notice pursuant to the United Continental Holdings, Inc. Annual Incentive Program (adopted pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan) |
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| *^10.65 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.66 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.67 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
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| *^10.68 | | | UAL
United | | |
| | |
| *^10.69 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
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| *^10.70 | | | 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 UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
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| *^10.71 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
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| *^10.72 | | | 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 UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
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| *^10.73 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
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| *^10.74 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.75 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.76 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
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| *^10.77 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.78 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.79 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.80 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.81 | | | 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 UAL’sForm 10-Q for the quarter ended March 31, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.82 | | | 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 UAL’sForm 10-Q for the quarter ended June 30, 2010, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.83 | | | UAL
United | | Amendment No. 2 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.8 to UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.84 | | | 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 UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.85 | | | 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 UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
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| | |
| *^10.86 | | | 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 UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.87 | | | 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 UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.88 | | | 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 UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.89 | | | 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 UAL’s Form10-Q for the quarter ended June 30, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.90 | | | UAL
United | | Amendment No. 3, dated March 14, 2017, to Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S. and United Airlines, Inc. (filed as Exhibit 10.1 to UAL’s Form10-Q for the quarter ended March 31, 2017, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.91 | | | UAL
United | | Amended andRestated A350-900 Purchase Agreement, dated September 1, 2017, including letter agreements related thereto, between Airbus S.A.S. and United Airlines, Inc. (filed as Exhibit 10.1 to UAL’sUAL's Form10-Q for the quarter ended September 30, 2017 Commission file number1-6033,and incorporated herein by reference) |
| | |
| *^10.92 | | | 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 Continental’s Form10-Q for the quarter ended June 30, 1996, Commission file number1-10323, and incorporated herein by reference) |
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| *^10.93 | | | UAL
United | | Supplemental Agreement No. 1 to Purchase Agreement No. 1951, dated October 10, 1996 (filed as Exhibit 10.14(a) to Continental’s Form10-K for the year ended December 31, 1996, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.94 | | | UAL
United | | Supplemental Agreement No. 2 to Purchase Agreement No. 1951, dated March 5, 1997 (filed as Exhibit 10.3 to Continental’s Form10-Q for the quarter ended March 31, 1997, Commission file number1-10323 and incorporated herein by reference) |
| | |
| *^10.95 | | | 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 Continental’s Form10-K for the year ended December 31, 1997, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.96 | | | 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 Continental’s Form10-K for the year ended December 31, 1997, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.97 | | | 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 Continental’s Form10-Q for the quarter ended June 30, 1998, Commission file number1-10323, and incorporated herein by reference) |
| | | | | | |
| | |
| ^10.30 | *^10.98UAL
United | | | UAL
United | | Supplemental AgreementAmendment No. 6, including exhibits1, dated as of July 18, 2019, to the Amended and side letters, toRestated A350-900 Purchase Agreement, No. 1951, dated July 30, 1998as of September 1, 2017, including letter agreements related thereto, between Airbus S.A.S. and United Airlines, Inc. (filed as Exhibit 10.1 to Continental’sUAL's Form10-Q for the quarter ended September 30, 1998, Commission file number1-10323,2019 and incorporated herein by reference) |
| | |
| ^10.31 | *^10.99UAL
United | | | UAL
United | | Supplemental AgreementAmendment No. 7, including side letters,2, dated as of December 3, 2019, to the Amended and Restated A350-900 Purchase Agreement, No. 1951, dated November 12, 1998as of September 1, 2017, including letter agreements related thereto, between Airbus S.A.S. and United Airlines, Inc. (filed as Exhibit 10.24(g)10.42 to Continental’sUAL's Form10-K for the year ended December 31, 1998, Commission file number1-10323,2019 and incorporated herein by reference) |
| | |
| ^10.32 | *^10.100UAL
United | | | 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 Continental’s Form10-K for the year ended December 31, 1998, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.101 | | | UAL
United | | Letter Agreement No.6-1162-GOC-131R1 to Purchase Agreement No. 1951, dated March 26, 1998 (filed as Exhibit 10.1 to Continental’s Form10-Q for the quarter ended March 31, 1998, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.102 | | | UAL
United | | Supplemental Agreement No. 9, including side letters, to Purchase Agreement No. 1951, dated February 18, 1999 (filed as Exhibit 10.4 to Continental’s Form10-Q for the quarter ended March 31, 1999, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.103 | | | 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 Continental’s Form10-Q for the quarter ended March 31, 1999, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.104 | | | UAL
United | | Supplemental Agreement No. 11, including side letters, to Purchase Agreement No. 1951, dated March 14, 1999 (filed as Exhibit 10.7 to Continental’s Form10-Q for the quarter ended June 30, 1999, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.105 | | | UAL
United | | Supplemental Agreement No. 12, including side letters, to Purchase Agreement No. 1951, dated July 2, 1999 (filed as Exhibit 10.8 to Continental’s Form10-Q for the quarter ended September 30, 1999, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.106 | | | UAL
United | | Supplemental Agreement No. 13 to Purchase Agreement No. 1951, dated October 13, 1999 (filed as Exhibit 10.25(n) to Continental’s Form10-K for the year ended December 31, 1999, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.107 | | | UAL
United | | Supplemental Agreement No. 14 to Purchase Agreement No. 1951, dated December 13, 1999 (filed as Exhibit 10.25(o) to Continental’s Form10-K for the year ended December 31, 1999, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.108 | | | UAL
United | | Supplemental Agreement No. 15, including side letters, to Purchase Agreement No. 1951, dated January 13, 2000 (filed as Exhibit 10.1 to Continental���s Form10-Q for the quarter ended March 31, 2000, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.109 | | | UAL
United | | Supplemental Agreement No. 16, including side letters, to Purchase Agreement No. 1951, dated March 17, 2000 (filed as Exhibit 10.2 to Continental’s Form10-Q for the quarter ended March 31, 2000, Commission file number1-10323, and incorporated herein by reference) |
| | | | | | |
| | |
| *^10.110 | | | UAL
United | | Supplemental Agreement No. 17, including side letters, to Purchase Agreement No. 1951, dated May 16, 2000 (filed as Exhibit 10.2 to Continental’s Form10-Q for the quarter ended June 30, 2000, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.111 | | | UAL
United | | Supplemental Agreement No. 18, including side letters, to Purchase Agreement No. 1951, dated September 11, 2000 (filed as Exhibit 10.6 to Continental’s Form10-Q for the quarter ended September 30, 2000, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.112 | | | 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 Continental’s Form10-K for the year ended December 31, 2000, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.113 | | | 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 Continental’s Form10-K for the year ended December 31, 2000, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.114 | | | UAL
United | | Supplemental Agreement No. 21, including side letters, to Purchase Agreement No. 1951, dated March 30, 2001 (filed as Exhibit 10.1 to Continental’s Form10-Q for the quarter ended March 31, 2001, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.115 | | | UAL
United | | Supplemental Agreement No. 22, including side letters, to Purchase Agreement No. 1951, dated May 23, 2001 (filed as Exhibit 10.3 to Continental’s Form10-Q for the quarter ended June 30, 2001, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.116 | | | UAL
United | | Supplemental Agreement No. 23, including side letters, to Purchase Agreement No. 1951, dated June 29, 2001 (filed as Exhibit 10.4 to Continental’s Form10-Q for the quarter ended June 30, 2001, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.117 | | | UAL
United | | Supplemental Agreement No. 24, including side letters, to Purchase Agreement No. 1951, dated August 31, 2001 (filed as Exhibit 10.11 to Continental’s Form10-Q for the quarter ended September 30, 2001, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.118 | | | 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 Continental’s Form10-K for the year ended December 31, 2001, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.119 | | | UAL
United | | Supplemental Agreement No. 26, including side letters, to Purchase Agreement No. 1951, dated March 29, 2002 (filed as Exhibit 10.4 to Continental’s Form10-Q for the quarter ended March 31, 2002, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.120 | | | UAL
United | | Supplemental Agreement No. 27, including side letters, to Purchase Agreement No. 1951, dated November 6, 2002 (filed as Exhibit 10.22(ab) to Continental’s Form10-K for the year ended December 31, 2002, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.121 | | | UAL
United | | Supplemental Agreement No. 28, including side letters, to Purchase Agreement No. 1951, dated April 1, 2003 (filed as Exhibit 10.6 to Continental’s Form10-Q for the quarter ended March 31, 2003, Commission file number1-10323, and incorporated herein by reference) |
| | | | | | |
| | |
| *^10.122 | | | UAL
United | | Supplemental Agreement No. 29, including side letters, to Purchase Agreement No. 1951, dated August 19, 2003 (filed as Exhibit 10.2 to Continental’s Form10-Q for the quarter ended September 30, 2003, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.123 | | | UAL
United | | Supplemental Agreement No. 30 to Purchase Agreement No. 1951, dated November 4, 2003 (filed as Exhibit 10.23(ae) to Continental’s Form10-K for the year ended December 31, 2003, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.124 | | | UAL
United | | Supplemental Agreement No. 31 to Purchase Agreement No. 1951, dated August 20, 2004 (filed as Exhibit 10.4 to Continental’s Form10-Q for the quarter ended September 30, 2004, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.125 | | | 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 Continental’s Form10-K for the year ended December 31, 2004, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.126 | | | 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 Continental’s Form10-K for the year ended December 31, 2004, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.127 | | | UAL
United | | Supplemental Agreement No. 34 to Purchase Agreement No. 1951, dated June 22, 2005 (filed as Exhibit 10.3 to Continental’s Form10-Q for the quarter ended June 30, 2005, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.128 | | | UAL
United | | Supplemental Agreement No. 35 to Purchase Agreement No. 1951, dated June 30, 2005 (filed as Exhibit 10.4 to Continental’s Form10-Q for the quarter ended June 30, 2005, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.129 | | | UAL
United | | Supplemental Agreement No. 36 to Purchase Agreement No. 1951, dated July 28, 2005 (filed as Exhibit 10.1 to Continental’s Form10-Q for the quarter ended September 30, 2005, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.130 | | | UAL
United | | Supplemental Agreement No. 37 to Purchase Agreement No. 1951, dated March 30, 2006 (filed as Exhibit 10.2 to Continental’s Form10-Q for the quarter ended March 31, 2006, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.131 | | | UAL
United | | Supplemental Agreement No. 38 to Purchase Agreement No. 1951, dated June 6, 2006 (filed as Exhibit 10.3 to Continental’s Form10-Q for the quarter ended June 30, 2006, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.132 | | | UAL
United | | Supplemental Agreement No. 39 to Purchase Agreement No. 1951, dated August 3, 2006 (filed as Exhibit 10.4 to Continental’s Form10-Q for the quarter ended September 30, 2006, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.133 | | | UAL
United | | Supplemental Agreement No. 40 to Purchase Agreement No. 1951, dated December 5, 2006 (filed as Exhibit 10.23(ao) to Continental’s Form10-K for the year ended December 31, 2006, Commission file number1-10323, and incorporated herein by reference) |
| | | | | | |
| | |
| *^10.134 | | | UAL
United | | Supplemental Agreement No. 41 to Purchase Agreement No. 1951, dated June 1, 2007 (filed as Exhibit 10.1 to Continental’s Form10-Q for the quarter ended June 30, 2007, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.135 | | | UAL
United | | Supplemental Agreement No. 42 to Purchase Agreement No. 1951, dated June 12, 2007 (filed as Exhibit 10.2 to Continental’s Form10-Q for the quarter ended June 30, 2007, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.136 | | | UAL
United | | Supplemental Agreement No. 43 to Purchase Agreement No. 1951, dated July 18, 2007 (filed as Exhibit 10.1 to Continental’s Form10-Q for the quarter ended September 30, 2007, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.137 | | | UAL
United | | Supplemental Agreement No. 44 to Purchase Agreement No. 1951, dated December 7, 2007 (filed as Exhibit 10.21(as) to Continental’s Form10-K for the year ended December 31, 2007, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.138 | | | UAL
United | | Supplemental Agreement No. 45 to Purchase Agreement No. 1951, dated February 20, 2008 (filed as Exhibit 10.2 to Continental’s Form10-Q for the quarter ended March 31, 2008, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.139 | | | UAL
United | | Supplemental Agreement No. 46 to Purchase Agreement No. 1951, dated June 25, 2008 (filed as Exhibit 10.5 to Continental’s Form10-Q for the quarter ended June 30, 2008, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.140 | | | UAL
United | | Supplemental Agreement No. 47 to Purchase Agreement No. 1951, dated October 30, 2008 (filed as Exhibit 10.21(av) to Continental’s Form10-K for the year ended December 31, 2008, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.141 | | | UAL
United | | Supplemental Agreement No. 48 to Purchase Agreement No. 1951, dated January 29, 2009 (filed as Exhibit 10.3 to Continental’s Form10-Q for the quarter ended June 30, 2009, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.142 | | | UAL
United | | Supplemental Agreement No. 49 to Purchase Agreement No. 1951, dated May 1, 2009 (filed as Exhibit 10.4 to Continental’s Form10-Q for the quarter ended June 30, 2009, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.143 | | | UAL
United | | Supplemental Agreement No. 50 to Purchase Agreement No. 1951, dated July 23, 2009 (filed as Exhibit 10.2 to Continental’s Form10-Q for the quarter ended September 30, 2009, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.144 | | | UAL
United | | Supplemental Agreement No. 51 to Purchase Agreement No. 1951, dated August 5, 2009 (filed as Exhibit 10.3 to Continental’s Form10-Q for the quarter ended September 30, 2009, Commission file number1-10323, and incorporated herein by reference) |
| | | | | | |
| | |
| *^10.145 | | | UAL
United | | Supplemental Agreement No. 52 to Purchase Agreement No. 1951, dated August 31, 2009 (filed as Exhibit 10.4 to Continental’s Form10-Q for the quarter ended September 30, 2009, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.146 | | | UAL
United | | Supplemental Agreement No. 53 to Purchase Agreement No. 1951, dated December 23, 2009 (filed as Exhibit 10.22(bb) to Continental’s Form10-K for the year ended December 31, 2009, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.147 | | | UAL
United | | Supplemental Agreement No. 54 to Purchase Agreement No. 1951, dated March 2, 2010 (filed as Exhibit 10.2 to Continental’s Form10-Q for the quarter ended March 31, 2010, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.148 | | | UAL
United | | Supplemental Agreement No. 55 to Purchase Agreement No. 1951, dated March 31, 2010 (filed as Exhibit 10.3 to Continental’s Form10-Q for the quarter ended March 31, 2010, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.149 | | | UAL
United | | Supplemental Agreement No. 56 to Purchase Agreement No. 1951, dated August 12, 2010 (filed as Exhibit 10.4 to Continental’s Form10-Q for the quarter ended September 30, 2010, Commission File Number1-10323, and incorporated herein by reference) |
| | |
| *^10.150 | | | UAL
United | | Supplemental Agreement No. 57 to Purchase Agreement No. 1951, dated March 2, 2011 (filed as Exhibit 10.1 to UAL’s Form10-Q for the quarter ended March 31, 2011, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.151 | | | UAL
United | | Supplemental Agreement No. 58 to Purchase Agreement No. 1951, dated January 6, 2012 (filed as Exhibit 10.1 to UAL’s Form10-Q for the quarter ended March 31, 2012, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.152 | | | UAL
United | | Supplemental Agreement No. 59 to Purchase Agreement No. 1951, dated July 12, 2012 (filed as Exhibit 10.5 to UAL’s Form10-Q for the quarter ended September 30, 2012, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.153 | | | UAL
United | | Supplemental Agreement No. 60 to Purchase Agreement No. 1951, dated November 7, 2012 (filed as Exhibit 10.2 to UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.154 | | | 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 number1-6033, and incorporated herein by reference) |
| | |
| *^10.155 | | | 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 number1-6033, and incorporated herein by reference) |
| | |
| *^10.156 | | | 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 number1-10323, and incorporated herein by reference) |
| | |
| *^10.157 | | | 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 number1-10323, and incorporated herein by reference) |
| | | | | | |
| | |
| *^10.158 | | | UAL
United | | Aircraft General Terms Agreement, dated October 10, 1997, by and among Continental Airlines, Inc. and The Boeing Company (filed as Exhibit 10.15 to Continental’sUAL's Form10-K for the year ended December 31, 1997 Commission File Number1-10323,and incorporated herein by reference) |
| | |
| ^10.33 | *^10.159UAL
United | | | UAL
United | | Letter Agreement6-1162-CHL-048, dated February 8, 2002, by and among Continental and Boeing (filed as Exhibit 10.44 to Continental’s Form10-K for the year ended December 31, 2001, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.160 | | | UAL
United | | |
| | |
| *^10.161 | | | UAL
United | | Supplemental Agreement No. 1 to Purchase Agreement No. 2484, dated June 30, 2005 (filed as Exhibit 10.5 to Continental’s Form10-Q for the quarter ended June 30, 2005, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.162 | | | 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 Continental’s Form10-K for the year ended December 31, 2005, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.163 | | | UAL
United | | Supplemental Agreement No. 3 to Purchase Agreement No. 2484, dated May 3, 2006 (filed as Exhibit 10.4 to Continental’s Form10-Q for the quarter ended June 30, 2006, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.164 | | | UAL
United | | Supplemental Agreement No. 4 to Purchase Agreement No. 2484, dated July 14, 2006 (filed as Exhibit 10.5 to Continental’s Form10-Q for the quarter ended September 30, 2006, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.165 | | | UAL
United | | Supplemental Agreement No. 5 to Purchase Agreement No. 2484, dated March 12, 2007 (filed as Exhibit 10.1 to Continental’s Form10-Q for the quarter ended March 31, 2007, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.166 | | | UAL
United | | Supplemental Agreement No. 6 to Purchase Agreement No. 2484, dated October 22, 2008 (filed as Exhibit 10.25(f) to Continental’s Form10-K for the year ended December 31, 2008, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.167 | | | UAL
United | | Supplemental Agreement No. 7 to Purchase Agreement No. 2484, dated November 7, 2012 (filed as Exhibit 10.179 to UAL’s Form10-K for the year ended December 31, 2012, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.168 | | | UAL
United | | Supplemental Agreement No. 8 to Purchase Agreement No. 2484, dated June 17, 2013 (filed as Exhibit 10.4 to UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.169 | | | UAL
United | | Supplemental Agreement No. 9 to Purchase Agreement No. 2484, dated June 6, 2014 (filed as Exhibit 10.4 to UAL’s Form10-Q for the quarter ended June 30, 2014, Commission file number1-6033, and incorporated herein by reference) |
| | | | | | |
| | |
| *^10.170 | | | UAL
United | | Supplemental Agreement No. 10 to Purchase Agreement No. 2484, dated January 14, 2015 (filed as Exhibit 10.4 to UAL’s Form10-Q for the quarter ended March 31, 2015, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.171 | | | UAL
United | | Supplemental Agreement No. 11 to Purchase Agreement No. 2484, dated April 30, 2015 (filed as Exhibit 10.3 to UAL’s Form10-Q for the quarter ended June 30, 2015, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.172 | | | 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 Continental’s Form10-Q for the quarter ended September 30, 2005, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.173 | | | 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 Continental’s Form10-Q for the quarter ended June 30, 2003, Commission file number1-10323, and incorporated herein by reference) |
| | |
| *^10.174 | | | 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 UAL’s Form10-Q for the quarter ended September 30, 2012, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.175 | | | UAL
United | | Supplemental Agreement No. 01 to Purchase Agreement No.PA-03784, dated September 27, 2012 (filed as Exhibit 10.2 to UAL’s Form10-Q for the quarter ended September 30, 2012, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.176 | | | UAL
United | | Supplemental Agreement No. 02 to Purchase Agreement NumberPA-03784, dated March 1, 2013 (filed as Exhibit 10.3 to UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.177 | | | UAL
United | | Supplemental Agreement No. 03 to Purchase Agreement NumberPA-03784, dated June 27, 2013 (filed as Exhibit 10.7 to UAL’s Form10-Q for the quarter ended June 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.178 | | | UAL
United | | Supplemental Agreement No. 04 to Purchase Agreement NumberPA-03784, dated September 11, 2013 (filed as Exhibit 10.2 to UAL’s Form10-Q for the quarter ended September 30, 2013, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.179 | | | UAL
United | | Supplemental Agreement No. 05 to Purchase Agreement NumberPA-03784, dated March 3, 2014 (filed as Exhibit 10.2 to UAL’s Form10-Q for the quarter ended June 30, 2014, Commission file number1-6033 and incorporated herein by reference) |
| | |
| *^10.180 | | | UAL
United | | Supplemental Agreement No. 06 to Purchase Agreement NumberPA-03784, dated June 6, 2014 (filed as Exhibit 10.3 to UAL’s Form10-Q for the quarter ended June 30, 2014, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.181 | | | UAL
United | | Supplemental Agreement No. 07 to Purchase Agreement NumberPA-03784, dated May 26, 2015 (filed as Exhibit 10.6 to UAL’s Form10-Q for the quarter ended June 30, 2015, Commission file number1-10323 and incorporated herein by reference) |
| | | | | | |
| | |
| *^10.182 | | | UAL
United | | Supplemental Agreement No. 08 to Purchase Agreement NumberPA-03784, dated June 12, 2015 (filed as Exhibit 10.7 to UAL’s Form10-Q for the quarter ended June 30, 2015, Commission file number1-10323 and incorporated herein by reference) |
| | |
| *^10.183 | | | 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 UAL’s Form10-Q for the quarter ended March 31, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.184 | | | 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 UAL’s Form10-Q for the quarter ended March 31, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.185 | | | 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 UAL’s Form10-Q for the quarter ended March 31, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.186 | | | 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 UAL’s Form10-Q for the quarter ended June 30, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.187 | | | UAL
United | | Supplemental Agreement No. 13 to Purchase Agreement No. 03784, dated December 27, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.174 to UAL’s Form10-K for the year ended December 31, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *^10.188 | | | 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 UAL’sUAL's Form10-Q for the quarter ended September 30, 2012 Commission file number1-6033,and incorporated herein by reference) |
| | |
| ^10.34 | *^10.189UAL
United | | | UAL
United | | |
| | |
| ^10.35 | *^10.190UAL
United | | | UAL
United | | |
| | |
| ^10.36 | *^10.191UAL
United | | | UAL
United | | |
| | |
| ^10.37 | *^10.192UAL
United | | | UAL
United | | |
| | |
| ^10.38 | *^10.193UAL
United | | | UAL
United | | |
| | | | | | |
| | |
| ^10.39 | *^10.194UAL
United | | | UAL
United | | |
| | |
| ^10.40 | *^10.195UAL
United | | | UAL
United | | |
| | |
| ^10.41 | *^10.196UAL
United | | | UAL
United | | |
| | |
| ^10.42 | *^10.197UAL
United | | | UAL
United | | |
| | |
| *^10.198 | | | UAL
United | | | | |
| ^10.43 | UAL
United | |
| | |
| ^10.44 | *^10.199UAL
United | |
| | UAL
United |
| ^10.45 | UAL
United | |
| | |
| ^10.46 | UAL
United | |
| | |
| ^10.47 | UAL
United | |
| | |
| ^10.48 | UAL
United | |
| | |
| ^10.49 | UAL
United | |
| | |
| ^10.50 | UAL
United | |
| | |
| ^10.51 | UAL
United | |
| | |
| ^10.52 | UAL
United | |
| | |
| ^10.53 | UAL
United | |
| | |
| ^10.54 | UAL
United | Letter Agreement No.6-1162-KKT-080, dated July 12, 2012, among The Boeing Company, United Continental Holdings, Inc., United Air Lines, Inc., and Continental Airlines, Inc. (filed as Exhibit 10.4 to UAL’sUAL's Form10-Q for the quarter ended September 30, 2012 Commission file number1-6033,and incorporated herein by reference) |
| | |
| ^10.55 | *^10.200UAL
United | | | UAL
United | | |
| | |
| *^10.201 | | | UAL
United | | | | |
| ^10.56 | UAL
United | |
| | |
| ^10.57 | *^10.202UAL
United | | | UAL
United | | |
| | |
| ^10.58 | *^10.203UAL
United | | | UAL
United | | |
| | |
| ^10.59 | *^10.204UAL
United | | | UAL
United | | |
| | | | | | |
| | |
| ^10.60 | *^10.205UAL
United | | | UAL
United | | |
| | |
| ^10.61 | *^10.206UAL
United | | | UAL
United | | |
| | |
| ^10.62 | *^10.207UAL
United | | | UAL
United | | |
| | |
| ^10.63 | *^10.208UAL
United | | | UAL
United | | |
| | |
| ^10.64 | *^10.209UAL
United | | | UAL
United | | |
| | |
| ^10.65 | *^10.210UAL
United | | | UAL
United | | |
| | |
| ^10.66 | *^10.211UAL
United | |
| | UAL
United |
| ^10.67 | UAL
United | |
| | |
| ^10.68 | UAL
United | |
| | |
| | | | | | | | |
| ^10.69 | UAL
United | |
| | |
| ^10.70 | UAL
United | |
| | |
| ^10.71 | UAL
United | |
| | |
| ^10.72 | *^10.212UAL
United | | | UAL
United | | |
| | |
| ^10.73 | UAL
United | |
| | |
| ^10.74 | UAL
United | |
| | |
| ^10.75 | UAL
United | |
| | |
| ^10.76 | UAL
United | |
| | |
| ^10.77 | UAL
United | |
| | |
| ^10.78 | UAL
United | |
| | |
| ^10.79 | UAL
United | |
| | |
| ^10.80 | UAL
United | |
| | |
| ^10.81 | UAL
United | |
| | |
| ^10.82 | *10.213UAL
United | | | UAL
United | | Credit and GuarantySupplemental Agreement No. 8 to Purchase Agreement No. 04761, dated as of March 27, 2013, among ContinentalSeptember 8, 2021, between The Boeing Company and United Airlines, Inc. and United Air Lines, Inc., asco-borrowers, United Continental Holdings, Inc., as parent and a guarantor, the subsidiaries of United Continental Holdings, Inc. other than theco-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 10.110.4 to UAL’sUAL's Form8-K filed March 28, 2013, Commission file number1-6033, 10-Q for the quarter ended September 30, 2021 and incorporated herein by reference) |
| | |
| ^10.83 | *10.214UAL
United | | | UAL
United | | |
| | | | | | | | |
| | |
| 10.84 | *10.215UAL
United | | | UAL
United | | Second Amendment to Credit and Guaranty Agreement, dated as of July 25, 2014 (filed as Exhibit 10.1 to UAL’s Form8-K filed September 19, 2014, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *10.216 | | | UAL
United | | Third Amendment to Credit and Guaranty Agreement, dated as of September 15, 2014 (filed as Exhibit 10.2 to UAL’s Form8-K filed September 19, 2014, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *10.217 | | | UAL
United | | Fourth Amendment to Credit and Guaranty Agreement, dated as of May 24, 2016 (filed as Exhibit 10.4 to UAL’s Form10-Q for the quarter ended June 30, 2016, Commission file number1-6033, and incorporated herein by reference) |
| | |
| *10.218 | | | UAL
United | | Amended and Restated Credit and Guaranty Agreement, dated as of March 29, 2017, among United Airlines, Inc., as borrower, United Continental Holdings, Inc., as parent and a guarantor, the subsidiaries of United Continental Holdings, Inc. from time to time party thereto other than the borrower party thereto from time to time, as guarantors, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.1 to UAL’sUAL's Form8-K filed April 3, 2017 Commission file number1-6033, and incorporated herein by reference) |
| | |
| 10.85 | 10.219UAL
United | | | UAL
United | | |
| | |
| 10.86 | UAL
United | |
| | |
| 10.87 | UAL
United | |
| | |
| *10.88 | UAL
United | Credit Agreement, dated as of July 2, 2020, by and among Mileage Plus Holdings, LLC, Mileage Plus Intellectual Property Assets, Ltd., the guarantors named therein, the lenders named therein, the lead arrangers named therein, Goldman Sachs Bank USA, as administrative agent, and Wilmington Trust, National Association, as master collateral agent and collateral administrator (filed as Exhibit 10.1 to UAL's Form 8-K filed July 2, 2020 and incorporated herein by reference) |
| | |
| 10.89 | UAL
United | Loan and Guarantee Agreement, among United, as borrower, United Airlines Holdings, Inc., as parent and guarantor, the subsidiaries of United Airlines Holdings, Inc. other than United Airlines, Inc. party thereto from time to time, as guarantors, The United States Department of the Treasury, as lender, and The Bank of New York Mellon, as administrative agent and collateral agent (filed as Exhibit 10.1 to UAL's Form 8-K filed September 30, 2020 and incorporated herein by reference) |
| | |
| *10.90 | UAL
United | Restatement Agreement, dated as of November 6, 2020, to that certain Loan and Guarantee Agreement, dated as of September 28, 2020, among United Airlines, Inc., United Airlines Holdings, Inc., the guarantors party thereto from time to time, The United States Department of the Treasury, as initial lender, and the Bank of New York Mellon, as administrative agent and collateral agent (and including the Loan and Guarantee Agreement dated as of September 28, 2020, and as amended and restated as of November 6, 2020, among United Airlines, Inc., as Borrower, the guarantors party thereto from time to time, The United States Department of the Treasury and The Bank of New York Mellon, as administrative agent) (filed as Exhibit 10.73 to UAL's Form 10-K for the year ended December 31, 2020 and incorporated herein by reference) |
| | |
| 10.91 | UAL
United | Second Amendment to Loan and Guarantee Agreement, dated as of December 8, 2020, to the Loan and Guarantee Agreement, among United Airlines, Inc., United Airlines Holdings, Inc., the guarantors party thereto, the United State Department of the Treasury, as initial lender and a lender, and The Bank of New York Treasury, as administrative agent (filed as Exhibit 10.74 to UAL's Form 10-K for the year ended December 31, 2020 and incorporated herein by reference) |
| | |
| 10.92 | UAL
United | |
| | |
| 10.93 | UAL
United | Equity Distribution Agreement, dated as of March 3, 2021, by and among United Airlines Holdings, Inc., Morgan Stanley & Co. LLC, AmeriVet Securities, Inc., Barclays Capital Inc., BofA Securities, Inc., BBVA Securities Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Loop Capital Markets LLC and Wells Fargo Securities, LLC (filed as Exhibit 1.1 to UAL's Form 8-K filed March 3, 2021 and incorporated herein by reference) |
| | |
| | | | | | | | |
| 10.94 | UAL
United | Term Loan Credit and Guaranty Agreement, dated as of April 21, 2021, among United Airlines, Inc., United Airlines Holdings, Inc., each of the several banks and other financial institutions or entities from time to time party thereto, as lenders, JPMorgan Chase Bank, N.A., as administrative agent, and Wilmington Trust, National Association, as collateral trustee (filed as Exhibit 10.1 to UAL's Form 8-K filed April 22, 2021 and incorporated herein by reference) |
| | |
| 10.95 | UAL
United | Revolving Credit and Guaranty Agreement, dated as of April 21, 2021, among United Airlines, Inc., United Airlines Holdings, Inc., each of the several banks and other financial institutions or entities from time to time party thereto, as lenders, JPMorgan Chase Bank, N.A., as administrative agent, and Wilmington Trust, National Association, as collateral trustee (filed as Exhibit 10.2 to UAL's Form 8-K filed April 22, 2021 and incorporated herein by reference) |
| | |
| 10.96 | UAL
United | |
| | |
| | | | | | ComputationList of Ratios
Subsidiaries |
| | |
| 21 | 12.1UAL
United | | | UAL | | |
| | |
| 12.2 | | | United | | United Airlines, Inc. and Subsidiary Companies Computation of Ratio of Earnings to Fixed ChargesSubsidiaries |
| | |
| | | | | | ListConsents of Subsidiaries
Experts and Counsel |
| | |
| 23.1 | 21UAL | | | UAL
United
| | List of United Continental Holdings, Inc. and United Airlines, Inc. Subsidiaries |
| | |
| | | | | | Consents of Experts and Counsel
|
| | |
| 23.1 | | | UAL | | |
| | |
| 23.2 | 23.2United | | | United | | |
| | |
| | | | | | Rule13a-14(a)/15d-14(a) Certifications |
| | |
| 31.1 | 31.1UAL | | | UAL | | |
| | |
| 31.2 | 31.2UAL | | | UAL | | |
| | |
| 31.3 | 31.3United | | | United | | |
| | |
| 31.4 | 31.4United | | | United | | |
| | | | | | |
| | |
| | | | | | Section 1350 Certifications |
| | |
| 32.1 | 32.1UAL | | | UAL | | |
| | |
| 32.2 | 32.2United | | | United | | |
| | |
| | | | | | Interactive Data File |
| | |
| 101 | | | UAL
United
| | | | |
| 101 | UAL
United | The following materialsfinancial statements from eachthe combined Annual Report of United Continental Holdings, Inc.‘sUAL and United Airlines, Inc.‘s Annual Reports on Form10-K for the year ended December 31, 2017,2021, formatted in XBRL (Extensible Business Reporting Language):Inline XBRL: (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’Stockholders' Equity (Deficit) and (vi) the Combined Notes to Condensed Consolidated Financial Statements.Statements, tagged as blocks of text and including detailed tags. |
†104 | Indicates management contract or compensatory plan or arrangement. Pursuant to Item 601(b)(10), UAL
United is permitted to omit certain compensation-related exhibits from this report and therefore only UAL is identified as | Cover Page Interactive Data File - the registrant for purposes of those items.cover page XBRL tags are embedded within the Inline XBRL document |
^ | Confidential portion of this exhibit has been omitted and filed separately with the SEC pursuant to a request for confidential treatment. | |
ITEM 16. | FORM10-K SUMMARY. |
None.
† Indicates management contract or compensatory plan or arrangement. Pursuant to Item 601(b)(10), United is permitted to omit certain compensation-related exhibits from this report and therefore only UAL is identified as the registrant for purposes of those items.
^ Portions of the referenced exhibit have been omitted pursuant to Item 601(b) of Regulation S-K.
* Exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be furnished on a supplemental basis to the Securities and Exchange Commission upon request.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
| | |
| | UNITED CONTINENTALAIRLINES HOLDINGS, INC.
UNITED AIRLINES, INC.
(Registrants)
|
| |
By: | | /s/ Andrew C. Levy
/s/ Gerald Laderman |
| | Andrew C. Levy
Gerald Laderman |
| | Executive Vice President and Chief Financial Officer |
| | |
| | |
| Date: | | February 18, 2022 |
Date: February 22, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of United
ContinentalAirlines Holdings, Inc. and in the capacities and on the date indicated.
| | | | | | | | |
Signature | | Capacity |
| | |
/s/ Oscar Munoz
Oscar Munoz
/s/ J. Scott Kirby | | Chief Executive Officer, Director |
| J. Scott Kirby | | (Principal Executive Officer) |
| | |
/s/ Andrew C. Levy
Andrew C. Levy
/s/ Gerald Laderman | | Executive Vice President and Chief Financial Officer |
| Gerald Laderman | | (Principal Financial Officer) |
| | |
/s//s/ Chris Kenny
Chris Kenny
| | Vice President and Controller |
| Chris Kenny | | (Principal Accounting Officer) |
| | |
/s//s/ Carolyn Corvi
Carolyn Corvi
| | Director |
| Carolyn Corvi | |
/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
|
| | |
Signature
/s/ Matthew Friend | | Capacity
Director |
| Matthew Friend | | |
| | |
/s/ James A.C. Kennedy
James A.C. Kennedy
/s/ Barney Harford | | Director |
| Barney Harford | | |
| | |
/s/ Robert A. Milton
Robert A. Milton
/s/ Michele J. Hooper | | Director |
| Michele J. Hooper | | |
| | |
/s/ William R. Nuti
William R. Nuti
/s/ Todd M. Insler | | Director |
| Todd M. Insler | | |
| | |
/s/ Sito Pantoja
Sito Pantoja
/s/ Walter Isaacson | | Director |
| Walter Isaacson | | |
| | | | | | | | |
| /s/ Richard Johnsen | | Director |
| Richard Johnsen | | |
| | |
/s/ Edward M. Philip
Edward M. Philip
/s/ James A.C. Kennedy | | Director |
| James A.C. Kennedy | | |
| | |
/s//s/ Edward L. Shapiro
M. Philip | | Director |
Edward L. ShapiroM. Philip | | Director
|
| | |
/s/ Laurence E. Simmons
Laurence E. Simmons
/s/ Edward L. Shapiro | | Director |
| Edward L. Shapiro | | |
| | |
/s//s/ David J. Vitale
| | Director |
| David J. Vitale | | Director
|
| | |
/s//s/ Laysha Ward
| | Director |
| Laysha Ward | | |
| | |
| /s/ James M. Whitehurst | | Director |
| James M. Whitehurst | | Director
|
Date: February 22, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report 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
/s/ J. Scott Kirby | | Chief Executive Officer, Director |
| J. Scott Kirby | | (Principal Executive Officer) |
| | |
/s/ Andrew C. Levy
Andrew C. Levy
/s/ Gerald Laderman | | Executive Vice President and Chief Financial Officer, Director |
| Gerald Laderman | | (Principal Financial Officer) |
| | |
| /s/ Chris Kenny | | Vice President and Controller |
| Chris Kenny | | (Principal Accounting Officer) |
| | |
| /s/ Brett J. Hart | | Director |
| Brett J. Hart | | |
| | |
/s/ Chris Kenny
Chris Kenny
| | Vice President and Controller
(Principal Accounting Officer)
|
| | |
/s/ Gregory L. Hart
Gregory L. Hart
Date: | | Director
|
| |
/s/ J. Scott Kirby
J. Scott Kirby
| | Director
February 18, 2022 |
Date: February 22, 2018
Valuation and Qualifying Accounts
For the Years Ended December 31,
2017, 20162021, 2020 and
2015 | | | | | | | | | | | | | | | | | | | | |
(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 accounts—UAL and United: | | | | | | | | | | | | | | | | | | | | |
2017 | | $ | 10 | | | $ | 20 | | | $ | 23 | | | $ | — | | | $ | 7 | |
2016 | | | 18 | | | | 18 | | | | 26 | | | | — | | | | 10 | |
2015 | | | 22 | | | | 25 | | | | 29 | | | | — | | | | 18 | |
Obsolescence allowance—spare parts—UAL and United: | | | | | | | | | | | | | | | | | | | | |
2017 | | $ | 295 | | | $ | 75 | | | $ | 17 | | | $ | 1 | | | $ | 354 | |
2016 | | | 235 | | | | 61 | | | | 16 | | | | 15 | | | | 295 | |
2015 | | | 169 | | | | 38 | | | | — | | | | 28 | | | | 235 | |
Valuation allowance for deferred tax assets—UAL: | | | | | | | | | | | | | | | | | | | | |
2017 | | $ | 68 | | | $ | 11 | | | $ | 27 | | | $ | 11 | | | $ | 63 | |
2016 | | | 48 | | | | 47 | | | | 27 | | | | — | | | | 68 | |
2015 | | | 4,751 | | | | — | | | | 4,703 | | | | — | | | | 48 | |
Valuation allowance for deferred tax assets—United: | | | | | | | | | | | | | | | | | | | | |
2017 | | $ | 68 | | | $ | 11 | | | $ | 27 | | | $ | 11 | | | $ | 63 | |
2016 | | | 48 | | | | 47 | | | | 27 | | | | — | | | | 68 | |
2015 | | | 4,721 | | | | — | | | | 4,673 | | | | — | | | | 48 | |
(a) Deduction from reserve for purpose for which reserve was created.
135
2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) Description | Balance at
Beginning of
Period | | Additions
Charged to
Costs and
Expenses | | Deductions | | Other | | Balance at
End of
Period |
| Allowance for credit losses - receivables: | | | | | | | | | |
| 2021 | $ | 78 | | | $ | 3 | | | $ | 53 | | | $ | — | | | $ | 28 | |
| 2020 | 9 | | | 70 | | | 16 | | | 15 | | | 78 | |
| 2019 | 8 | | | 17 | | | 16 | | | — | | | 9 | |
| Obsolescence allowance—spare parts: | | | | | | | | | |
| 2021 | $ | 478 | | | $ | 79 | | | $ | 11 | | | $ | — | | | $ | 546 | |
| 2020 | 425 | | | 88 | | | 35 | | | — | | | 478 | |
| 2019 | 412 | | | 76 | | | 63 | | | — | | | 425 | |
| Allowance for credit losses - notes receivable: | | | | | | | | | |
| 2021 | $ | 522 | | | $ | 1 | | | $ | — | | | $ | 99 | | | $ | 622 | |
| 2020 | — | | | 518 | | | — | | | 4 | | | 522 | |
| Valuation allowance for deferred tax assets: | | | | | | | | | |
| 2021 | $ | 247 | | | $ | (38) | | | $ | — | | | $ | 1 | | | $ | 210 | |
| 2020 | 58 | | | 197 | | | 8 | | | — | | | 247 | |
| 2019 | 59 | | | — | | | 1 | | | — | | | 58 | |