United Airlines 2007 Annual Report Download - page 17

From time to time the U.S. airline industry has undergone consolidation, as in the merger of US Airways and America West, and may experience additional
consolidation in the future. United routinely monitors changes in the competitive landscape and engages in analysis and discussions regarding its strategic
position, including alliances, asset acquisitions and business combinations. There is ongoing speculation that some type of airline industry consolidation could
occur in the near-term. The Company has had, and expects to continue to have, discussions with other airlines regarding strategic alternatives. If other airlines
participate in merger activity, and United does not, those airlines may significantly improve their cost structures or revenue generation capabilities, thereby
potentially making them stronger competitors of United.
Additional security requirements may increase the Company's costs and decrease its revenues and traffic.
Since September 11, 2001, the DHS and the TSA have implemented numerous security measures that affect airline operations and costs, and are likely to
implement additional measures in the future. In addition, foreign governments have also instituted additional security measures at foreign airports United serves.
A substantial portion of the costs of these security measures is borne by the airlines and their passengers, increasing the Company's costs and/or reducing its
revenue and traffic. Additional measures taken to enhance either passenger or cargo security procedures and/or to recover associated costs in the future may
result in similar adverse effects on United's results of operations.
Extensive government regulation could increase the Company's operating costs and restrict its ability to conduct its business.
Airlines are subject to extensive regulatory and legal compliance requirements that result in significant costs. In addition to the enactment of the Aviation
Security Act, laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline
operations or reduce airline revenue. The FAA from time to time also issues directives and other regulations relating to the maintenance and operation of aircraft
that require significant expenditures by United. The Company expects to continue incurring material expenses to comply with the regulations of the FAA and
other agencies.
United operates under a certificate of public convenience and necessity issued by the DOT. If the DOT altered, amended, modified, suspended or revoked
our certificate, it could have a material adverse effect on the Company's business. The FAA can also limit United's airport access by limiting the number of
departure and arrival slots at "high density traffic airports" and local airport authorities may have the ability to control access to certain facilities or the cost of
access to such facilities, which could have an adverse effect on the Company's business.
In addition, access to landing and take-off rights or "slots" at several major U.S. airports and many foreign airports served by United are, or recently have
been, subject to government regulation. As passenger travel has continued to increase in recent years, many U.S. and foreign airports have become increasingly
congested. Certain of United's major hubs are among the more congested airports in the U.S. and have been or could be the subject of regulatory action that
might limit the number of flights and/or increase costs of operations at certain times or throughout the day.
In addition, the Company's operations may be adversely impacted due to the existing outdated air traffic control ("ATC") system utilized by the U.S.
government. During peak travel periods in certain markets the current ATC system's inability to handle existing travel demand has led to short-term capacity
constraints imposed by government agencies as discussed above, and has also resulted in delays and disruptions of traffic using the ATC system. In addition, the
current system will not be able to effectively handle projected future air traffic growth. Therefore, imposition of these air traffic constraints on a long-term basis
may have a material adverse effect on our results of operations. Failure to update the ATC system in a timely manner, and the substantial funding requirements of
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008