United Airlines 2007 Annual Report Download - page 7

including Aruba and seasonal service to Montego Bay, Punta Cana, and St. Maarten; and Central America including Guatemala City, Liberia and Costa Rica
(seasonal).
UAL's operating revenues attributed to mainline domestic operations were $10.9 billion in 2007, $10.0 billion in 2006 and $9.0 billion in 2005. Operating
revenues attributed to mainline international operations were $6.1 billion in 2007, $6.4 billion in 2006 and $6.0 billion in 2005. For purposes of the Company's
geographic revenue reporting, the Company considers destinations in Mexico and the Caribbean to be part of the Latin America region as opposed to the North
America region.
The mainline segment operated 460 aircraft as of December 31, 2007, and produced approximately 142 billion available seat miles ("ASMs") and
117 billion revenue passenger miles ("RPMs") during 2007; in 2006, the mainline segment produced approximately 143 billion ASMs and 117 billion RPMs.
United Express. United Express operating revenues were $3.1 billion in 2007, $2.9 billion in 2006 and $2.4 billion in 2005. United has contractual
relationships with various regional carriers to provide regional jet and turboprop service branded as United Express. United Express is an extension of the United
mainline network (United, Ted and p.s.). SkyWest Airlines, Mesa Airlines, Colgan Airlines, Chautauqua Airlines, Shuttle America, Trans States Airlines, GoJet
Airlines and ExpressJet Airlines are all United Express carriers, most of which operate under capacity purchase agreements. Under these agreements, United
pays the regional carriers contractually-agreed fees (carrier-controlled costs) for operating these flights plus a variable reimbursement (incentive payment) based
on agreed performance metrics. The carrier-controlled costs are based on specific rates for various operating expenses of the United Express carriers, such as
crew expenses, maintenance and aircraft ownership, some of which are multiplied by specific operating statistics (e.g., block hours, departures) while others are
fixed monthly amounts. The incentive payment is a markup applied to the carrier-controlled costs for superior operational performance. Under these capacity
agreements, United is responsible for all fuel costs incurred as well as landing fees, facilities rent and de-icing costs, which are passed through without any
markup. In return, the regional carriers operate this capacity on schedules determined by United, which also determines pricing, revenues and inventory levels
and assumes the inventory and distribution risk for the available seats.
The capacity agreements which United has entered into with United Express carriers do not include the provision of ground handling services. As a result,
United Express sources ground handling support from a variety of third-party providers as well as by utilizing internal United resources in some cases.
While the regional carriers operating under capacity purchase agreements comprise over 95% of United Express flying, the Company also has limited
prorate agreements with SkyWest Airlines and Colgan Airlines. Under these prorate agreements, United and its prorate partners agree to divide revenue collected
from each passenger according to a formula, while both United and the prorate partners are individually responsible for their own costs of operations. United also
collects a program fee from Colgan Airlines to cover certain marketing and distribution costs such as credit card transaction fees, global distribution systems
("GDS") transaction fees, and frequent flyer costs. Unlike capacity purchase agreements, these prorate agreements require the regional carrier to retain the control
and risk of scheduling, market selection, seat pricing and inventory for its flights.
United Express carriers operated 279 aircraft as of December 31, 2007, and produced approximately 16 billion ASMs and 13 billion RPMs during 2007,
while producing approximately 16 billion ASMs and 12 billion RPMs in 2006.
Ted. In February of 2004, United launched Ted in Denver to provide a tailored single-class service, including Economy Plus seating, to better serve leisure
destinations in the United network. Currently 56 A320 aircraft are configured for Ted service. Ted provides service from United's five domestic hubs to
destinations in Arizona, California, Florida, Louisiana, Nevada, Mexico and the
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008