United Airlines 2007 Annual Report Download - page 8

Caribbean. As of December 31, 2007, Ted provided service from all of United's hubs to 11 destinations in the U.S., including its territories, and five in Mexico.
United Cargo. United Cargo offers both domestic and international shipping through a variety of services including United Small Package Delivery,
Express and General cargo services. Freight shipments comprise approximately 90% of United Cargo's volumes, with mail comprising the remainder. During
2007, United Cargo accounted for approximately 4% of the Company's operating revenues by generating $770 million in freight and mail revenue, a 3% increase
versus 2006.
United Services. United Services is a global airline support business offering customers comprehensive aircraft maintenance, repair and overhaul
("MRO") services which include engine maintenance, maintenance of high-tech components, line maintenance and landing gear maintenance. United Services
brings nearly 80 years of experience to serve approximately 110 airline customers worldwide. During 2007, United Services generated approximately
$183 million in third-party revenue, a 15% decrease as compared to 2006 as a result of the discontinuance of some low margin contracts. Revenues from ground
handling and flight crew training services, which were $67 million in 2006, are not classified as part of United Services in 2007.
Fuel. Since 2005, fuel has been the Company's largest operating expense. The Company's annual mainline and United Express fuel costs and consumption
for 2007 and 2006 were as follows:
2007 2006
Mainline
United
Express Mainline
United
Express
Gallons consumed (in millions) 2,292 377 2,290 373
Average price per gallon, including tax and
hedge impact $ 2.18 $ 2.43 $ 2.11 $ 2.23
Cost (in millions) $ 5,003 $ 915 $ 4,824 $ 834
United Express fuel expense is classified as Regional affiliates expense in the Statements of Consolidated Operations.
The price and availability of jet fuel significantly affect the Company's results of operations. A significant rise in jet fuel prices was the primary reason that
the Company's fuel expense increased in each of the last three years. The Company may not be able to offset all of any future fuel expense increases through
higher revenues and the use of fuel hedge contracts.
To ensure adequate supplies of fuel and to provide a measure of control over fuel costs, the Company arranges to have fuel shipped on major pipelines and
stored close to its major hub locations. Although the Company currently does not anticipate a significant reduction in the availability of jet fuel, a number of
factors make predicting fuel prices and fuel availability uncertain, including changes in world energy demand, geopolitical uncertainties affecting energy supplies
from oil-producing nations, industrial accidents, threats of terrorism directed at oil supply infrastructure, extreme weather conditions causing temporary
shutdowns of production and refining capacity, and changes in relative demand for other petroleum products that may impact the quantity and price of jet fuel
produced from period to period.
Alliances. United has entered into a number of bilateral and multilateral alliances with other airlines, expanding travel choices for our customers through
these relationships by participating in markets worldwide that United does not serve directly. These marketing alliances typically include one or more of the
following features: joint frequent flyer program participation; code sharing of flight operations (whereby selected seats on one carrier's flights can be marketed
under the brand name of another carrier); coordination of reservations, ticketing, passenger check-in, baggage handling and flight schedules; and other
resource-sharing activities.
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008