United Airlines 2007 Annual Report Download - page 138

UAL Corporation and Subsidiary Companies
Combined Notes to Consolidated Financial Statements (Continued)
(15) Commitments, Contingent Liabilities and Uncertainties (Continued)
participation of other carriers decreases. The guarantees will expire when the tax-exempt bonds are paid in full, which ranges from 2010 to 2028. The Company
did not record a liability at the time these indirect guarantees were made.
Municipal Bond Guarantees. The Company has entered into long-term agreements to lease certain airport and maintenance facilities that are financed
through tax-exempt municipal bonds. These bonds were issued by various local municipalities to build or improve airport and maintenance facilities. Under these
lease agreements, United is required to make rental payments in amounts sufficient to pay the maturing principal and interest payments on the bonds. However,
as a result of the bankruptcy filing, United was not permitted to make payments on unsecured pre-petition debt. The Company was advised that these municipal
bonds may be unsecured (or in certain instances, partially secured). In 2006, as a result of the final Bankruptcy Court decisions, certain leases (SFO and LAX)
were considered to be financings resulting in the Company's guarantees being discharged in bankruptcy. The DEN lease related to the 1992 bonds, as discussed
in Note 12, "Debt Obligations," was not rejected. The Company has guaranteed interest and principal payments on $270 million of the DEN bonds, which were
originally issued in 1992, redeemed and reissued in 2007 and are due in 2032 unless the Company elects not to extend its lease in which case the bonds are due in
2023. The outstanding bonds and related guarantee are not recorded in the Company's Statements of Consolidated Financial Position at December 31, 2007 or
2006. The related lease agreement is recorded on a straight-line basis resulting in ratable accrual of the final $270 million lease obligation over the lease term.
The annual lease payments through 2023 and the final payment for the principal amount of the bonds are included in the future operating lease payments
disclosed in Non-aircraft lease payments in Note 16, "Lease Obligations." There remains an issue as to whether the LAX and SFO bondholders have a secured
interest in certain of the Company's leasehold improvements. The Company has accrued an amount which it estimates is probable to be approved by the
Bankruptcy Court for these secured interests. See Note 1, "Voluntary Reorganization Under Chapter 11—Significant Matters Remaining to be Resolved in
Chapter 11 Cases," for a discussion of ongoing litigation with respect to certain of these obligations.
Collective Bargaining Agreements.
Approximately 81% of United's employees are represented by various U.S. labor organizations. During 2005, United reached new agreements with its labor
unions for new collective bargaining agreements which became effective in January 2005. These agreements are not amendable until January 2010.
(16) Lease Obligations
The Company 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. As allowed under Section 365 of the Bankruptcy Code, during its reorganization the
Company assumed, assumed and assigned, or rejected certain executory contracts and unexpired leases, including leases of real property, aircraft and aircraft
engines, subject to the approval of the Bankruptcy Court and certain other conditions. During bankruptcy, the Company also entered into numerous aircraft
financing term sheets with financiers, some of which were implemented before the Effective Date, and others of which were implemented on the Effective Date.
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008