United Airlines 2007 Annual Report Download - page 140

UAL Corporation and Subsidiary Companies
Combined Notes to Consolidated Financial Statements (Continued)
(16) Lease Obligations (Continued)
Certain of the Company's aircraft lease transactions contain provisions such as put options giving the lessor the right to require us to purchase the aircraft at
lease termination for a certain amount resulting in residual value guarantees. Leases containing this or similar provisions are recorded as capital leases on the
balance sheet and, accordingly, all residual value guarantee amounts contained in the Company's aircraft leases are fully reflected as capital lease obligations in
the Statements of Consolidated Financial Position.
In connection with certain euro-denominated aircraft financings accounted for as capital leases, United had on deposit in certain banks at December 31,
2007 an aggregate 338 million euros ($497 million) and $19 million in U.S. denominated deposits, and had pledged an irrevocable security interest in such
deposits to certain of the aircraft lessors. These deposits will be used to repay an equivalent amount of recorded capital lease obligations, and are classified as
aircraft lease deposits in the Statements of Consolidated Financial Position.
Amounts charged to rent expense, net of minor amounts of sublease rentals, were $934 million and $936 million for UAL and United, respectively, for the
year ended December 31, 2007; $833 million and $834 million for UAL and United, respectively, for the eleven months ended December 31, 2006; $76 million
for both UAL and United for the month ended January 31, 2006; and $1.0 billion for the year ended December 31, 2005 for both UAL and United. Included in
Regional affiliates expense in the Statements of Consolidated Operations were operating rents for United Express aircraft of $425 million and $403 million for
the Successor Company for the year ended December 31, 2007 and the eleven months ended December 31, 2006, respectively; and $35 million and $449 million
for the month ended January 31, 2006 and the year ended December 31, 2005, respectively, for the Predecessor Company.
The Company has various operating leases for 121 aircraft in which the lessors are trusts established specifically to purchase, finance and lease aircraft to
United. These leasing entities meet the criteria for VIEs; however, the Company does not hold a significant variable interest in, and is not considered the primary
beneficiary of the leasing entities since the lease terms are consistent with market terms at the inception of the lease and do not include a residual value
guarantee, fixed-price purchase option or similar feature that obligates us to absorb decreases in value, or entitles the Company to participate in increases in the
value of the financed aircraft. In addition, of the Company's total aircraft operating leases only 10 of these aircraft leases allow the Company to purchase the
aircraft at other than fair market value; these leases have fixed price buy out options specified in the lease agreements.
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008