United Airlines 2007 Annual Report Download - page 21

Company would be able to fulfill its obligations to repay the accelerated indebtedness, make required lease payments, or otherwise cover its fixed costs.
The Company's net operating loss carry forward may be limited or possibly eliminated.
The Company has a net operating loss ("NOL") carry forward tax benefit of approximately $2.5 billion for federal and state income tax purposes that
primarily originated before UAL's emergence from bankruptcy and will expire over a five to twenty year period. This tax benefit is mostly attributable to federal
pre-tax NOL carry forwards of $6.6 billion. If the Company were to have a change of ownership within the meaning of Section 382 of the Internal Revenue
Code, under certain conditions, its annual federal NOL utilization could be limited to an amount equal to its market capitalization at the time of the ownership
change multiplied by the federal long-term tax exempt rate. A change of ownership under Section 382 of the Internal Revenue Code is defined as a cumulative
change of 50 percentage points or more in the ownership positions of certain stockholders owning 5% or more of the Company's common stock over a three year
rolling period.
To reduce the risk of a potential adverse effect on the Company's ability to utilize its NOL carry forward for federal income tax purposes, UAL's restated
certificate of incorporation contains a "5% Ownership Limitation," applicable to all stockholders except the Pension Benefit Guaranty Corporation ("PBGC").
The 5% Ownership Limitation remains effective until February 1, 2011. The 5% Ownership Limitation prohibits (i) the acquisition by a single stockholder of
shares representing 5% or more of the common stock of UAL Corporation and (ii) any acquisition or disposition of common stock by a stockholder that already
owns 5% or more of UAL Corporation's common stock, unless prior written approval is granted by the UAL Board of Directors. The percentage ownership of a
single stockholder can be computed by dividing the number of shares of common stock held by the stockholder by the sum of the shares of common stock issued
and outstanding plus the number of shares of common stock still held in reserve for payment to unsecured creditors under the Plan of Reorganization. For
additional information regarding the 5% Ownership Limitation, please refer to UAL's restated certificate available on its website.
While the purpose of these transfer restrictions is to prevent a change of ownership from occurring within the meaning of Section 382 of the Internal
Revenue Code (which ownership change might materially and adversely affect the Company's ability to utilize its NOL carry forward or other tax attributes), no
assurance can be given that such an ownership change will not occur, in which case the availability of the Company's substantial NOL carry forward and other
federal income tax attributes might be significantly limited or possibly eliminated.
The Company is subject to economic and political instability and other risks of doing business globally.
The Company is a global business with operations outside of the United States from which it derives approximately one-third of its operating revenues, as
measured and reported to the DOT. The Company's operations in Asia, Latin America, the Middle East and Europe are a vital part of its worldwide airline
network. Volatile economic, political and market conditions in these international regions may have a negative impact on the Company's operating results and its
ability to achieve its business objectives. In addition, significant or volatile changes in exchange rates between the U.S. dollar and other currencies, and the
imposition of exchange controls or other currency restrictions may have a material adverse impact upon the Company's liquidity, revenues, costs, or operating
results.
The loss of skilled employees upon whom the Company depends to operate its business or the inability to attract additional qualified personnel could
adversely affect its results of operations.
The Company believes that its future success will depend in large part on its ability to attract and retain highly qualified management, operational, technical
and other personnel. The Company may not be successful in retaining key personnel or in attracting and retaining other highly qualified personnel.
20
Source: UNITED AIR LINES INC, 10-K, February 29, 2008