United Airlines 2007 Annual Report Download - page 137

UAL Corporation and Subsidiary Companies
Combined Notes to Consolidated Financial Statements (Continued)
(15) Commitments, Contingent Liabilities and Uncertainties (Continued)
fixing cartel had been in operation in the air cargo transportation industry. United received a copy of the Statement of Objections and is currently evaluating the
Commission's evidence related to the Company and its personnel. United is cooperating with the Commission's investigation. United intends to defend itself
vigorously against these charges in its formal response to the Commission and in the European Court of Justice if necessary. The Company's evaluation of this
matter is still in the early stages, and based upon the information currently available no reserve for potential liability has been recorded as of December 31, 2007.
However, penalties for violation of European competition laws can be substantial and a finding that the Company engaged in improper activity could have a
material adverse impact on our consolidated financial position and results of operations.
Contingent Senior Unsecured Notes. UAL is obligated to issue up to $500 million of 8% senior unsecured notes to the PBGC in up to eight equal
tranches of $62.5 million upon the occurrence of certain financial triggering events. Beginning with fiscal year ending December 31, 2009 and ending with fiscal
year December 31, 2017, a triggering event may occur when, among other things, the Company's EBITDAR exceeds $3.5 billion over a prior twelve month
period. In certain circumstances, UAL common stock may be issued in lieu of issuance of the notes. See Note 12, "Debt Obligations" for further information.
Commitments. At December 31, 2007, future commitments for the purchase of property and equipment, principally aircraft, approximated $2.9 billion,
after deducting advance payments. The Company's current commitments are primarily for the purchase of, in the aggregate, 42 A319 and A320 aircraft. In
January 2006, United reached an agreement with the airframe manufacturer to delay, with the right to cancel these future orders. Such action could cause the
forfeiture of $91 million of advance payments if United does not take future delivery of these aircraft. The Company also reached an agreement with the engine
manufacturer eliminating all provisions pertaining to firm commitments and support for future Airbus aircraft. While this permits future negotiations on engine
pricing with any engine manufacturer, restructured aircraft manufacturer commitments have assumed that aircraft will be delivered with installed engines at list
price. The Company's current commitments would require the payment of an estimated $0.4 billion in 2008, $0.3 billion for the combined years of 2009 and
2010, $0.7 billion for the combined years of 2011 and 2012 and $1.5 billion thereafter.
Guarantees and Off-Balance Sheet Financing.
Fuel Consortia. The Company participates in numerous fuel consortia with other 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 consortium (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, 2007, approximately $890 million 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. United's contingent exposure is approximately $195 million principal amount of such bonds based on its recent consortia participation. The Company's
contingent exposure could increase if the
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008