United Airlines 2007 Annual Report Download - page 136

UAL Corporation and Subsidiary Companies
Combined Notes to Consolidated Financial Statements (Continued)
(14) Financial Instruments and Risk Management (Continued)
long-term debt at December 31, 2007 and 2006, respectively, as disclosed in Note 12, "Debt Obligations."
2007 2006
(In millions) Carrying Amount Fair Value Carrying Amount Fair Value
Long-term debt (including current portion) $ 7,093 $ 6,796 $ 9,140 $ 9,510
Preferred stock 371 401 361 443
Fuel derivative contracts—gains (losses) 20 20 (2) (2)
Interest rate swap loss — — 12 12
Foreign currency derivative contract gains 1 1 — —
Lease deposits 516 531 539 574
(15) Commitments, Contingent Liabilities and Uncertainties
General 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. In both leasing and financing
transactions, the Company typically indemnifies the lessors, and any tax/financing parties, against tort liabilities that arise out of the use, occupancy, operation or
maintenance of the leased premises or financed aircraft. Currently, the Company believes that any future payments required under these guarantees or
indemnities would be immaterial, as most tort liabilities and related indemnities are covered by insurance (subject to deductibles). Additionally, certain leased
premises such as fueling stations or storage facilities include indemnities of such parties for any environmental liability that may arise out of or relate to the use
of the leased premises.
Legal and Environmental Contingencies. The Company has certain contingencies resulting from litigation and claims (including environmental issues)
incident to the ordinary course of business. Management believes, after considering a number of factors, including (but not limited to) the information currently
available, the views of legal counsel, the nature of contingencies to which the Company is subject and prior experience, that the ultimate disposition of these
contingencies will not materially affect the Company's consolidated financial position or results of operations.
The Company records liabilities for legal and environmental claims when a loss is probable and reasonably estimatable. These amounts are recorded based
on the Company's assessments of the likelihood of their eventual disposition. The amounts of these liabilities could increase or decrease in the near term, based
on revisions to estimates relating to the various claims.
The Company anticipates that if ultimately found liable, its damages from claims arising from the events of September 11, 2001 could be significant;
however, the Company believes that, under the Air Transportation Safety and System Stabilization Act of 2001, its liability will be limited to its insurance
coverage.
The Company is also currently analyzing whether any potential liability may result from air cargo/passenger surcharge cartel investigations following the
receipt of a Statement of Objections that the European Commission (the "Commission") issued to 26 carriers on December 18, 2007. The Statement of
Objections sets out evidence related to the utilization of fuel and security surcharges and exchange of pricing information that the Commission views as
supporting the conclusion that an illegal price-
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008