United Airlines 2007 Annual Report Download - page 142

UAL Corporation and Subsidiary Companies
Combined Notes to Consolidated Financial Statements (Continued)
(19) Related Party Transactions
At December 31, 2006, United, through one of its wholly-owned subsidiaries, Mileage Plus, Inc. ("MPI"), had a $200 million note receivable from UAL.
During 2007, UAL, United and MPI executed a note payment agreement to pay and thereby cancel this note payable (plus accrued interest). This transaction had
no effect in the UAL consolidated financial statements and was treated as a forgiveness of debt in United's financial statements, resulting in a decrease in paid in
capital equal to the total decrease in notes and interest receivable.
(20) Special Items
2007—Successor Company
SFO Municipal Bonds Security Interest. In the first quarter of 2007, the Company recorded a $3 million benefit to operating income as a special item to
reduce the Company's recorded obligation for the SFO municipal bonds to the amount considered probable of being allowed by the Bankruptcy Court.
LAX Municipal Bonds Security Interest. In the first and third quarters of 2007, the Company recorded special items of $19 million and $8 million,
respectively, as favorable adjustments to operating income to adjust the Company's recorded obligation for the LAX municipal bonds to the amount considered
probable of being allowed by the Bankruptcy Court. See Note 1, "Voluntary Reorganization Under Chapter 11—Significant Matters Remaining to be Resolved
in Chapter 11 Cases" for further information related to the SFO and LAX litigation.
Change in Estimate. In the third quarter of 2007, the Company recorded a change in estimate of $59 million for certain liabilities relating to bankruptcy
administrative claims. This adjustment resulted directly from the progression of the Company's ongoing efforts to resolve certain bankruptcy pre-confirmation
contingencies. Therefore, the Company recorded a special operating revenue credit of $45 million and a special operating expense credit of $14 million for these
changes in estimate.
2006—Successor Company
SFO Municipal Bonds Security Interest. In October 2006, the Bankruptcy Court issued an order declaring that the owners of certain municipal bonds,
issued before the Petition Date to finance construction of certain leasehold improvements at SFO, should be allowed a secured claim of approximately
$27 million, based upon the court-determined fair value of the Company's underlying leasehold. After the denial of post-trial motions, both parties have appealed
to the District Court. In accordance with SOP 90-7, as of the Effective Date, the Company recorded $60 million as its best estimate of the probable security
interest to be awarded in this unresolved litigation. In the third quarter of 2006 the Company recorded a special item of $30 million benefit to operating income,
to reduce the Company's recorded obligation for the SFO municipal bonds to the amount the Company estimated liability at that time.
ALPA Non-Qualified Pension Plan. In the fourth quarter of 2006, the Company recorded a special item of $24 million as a benefit to operating income to
reduce the Company's recorded obligation for this matter. This adjustment was based on the receipt of a favorable court ruling in ongoing litigation and the
Company's determination that it was probable the Company would not be required to satisfy this obligation.
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008