United Airlines 2007 Annual Report Download - page 9

The most significant of these arrangements is the Star Alliance, a global integrated airline network co-founded by United in 1997. As of February 1, 2008,
Star Alliance carriers serve nearly 900 destinations in 160 countries with over 17,000 average daily flights. Current Star Alliance partners, in addition to United,
are Air Canada, Air China, Air New Zealand, All Nippon Airways, Asiana, the Austrian Airlines Group, bmi, LOT Polish Airlines, Lufthansa, SAS, Shanghai
Airlines, Singapore Airlines, South African Airways, Spanair, Swiss, TAP Portugal, THAI and US Airways. Regional member carriers are Adria Airways
(Slovenia), Blue1 (Finland) and Croatia Airlines. Air India, EgyptAir and Turkish Airlines have been accepted as future members and are expected to join the
Star Alliance soon.
United also has independent marketing agreements with other air carriers including Aloha, Gulfstream International, Great Lakes Aviation, Island Air, Qatar
Airways, TACA Group, TAM and Virgin Blue. In February 2008, US Airways and United reached final agreement on amendments to the contracts governing
their code share and Star Alliance relationship; and the Bankruptcy Court approved these amendments.
Mileage Plus. Mileage Plus builds customer loyalty by offering awards and services to frequent travelers. Mileage Plus members can earn mileage credit
for flights on United, United Express, Ted, members of the Star Alliance, and certain other airlines that participate in the program. Miles also can be earned by
purchasing the goods and services of our non-airline partners, such as hotels, car rental companies, and credit card issuers. Mileage credits can be redeemed for
free, discounted or upgraded travel and non-travel awards. There are more than 52 million members enrolled in Mileage Plus. In 2007, 2.2 million Mileage Plus
travel awards were used on United, as compared to 2.3 million in 2006 and 2.2 million in 2005. These amounts represent the number of awards for which travel
was provided and not the number of available seats that were allocated to award travel. These awards represented 8.0% of United's total revenue passenger miles
in 2007, 8.1% in 2006 and 7.4% in 2005. In addition, Mileage Plus members redeemed miles for 928,000 non-United awards in 2007 as compared to 610,000 in
2006. Non-United awards include awards such as Red Carpet club memberships, car and hotel awards, merchandise, and travel solely on another air carrier.
Total miles redeemed for travel on United in 2007, including travel awards and class-of-service upgrades, represented 88% of the total miles redeemed (for both
completed and future travel).
For a detailed description of the accounting treatment of Mileage Plus program activity, which was changed to a deferred revenue model upon the adoption
of fresh-start reporting on the Effective Date, see "Critical Accounting Policies" in Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations.
UAL Loyalty Services, LLC ("ULS"). ULS focuses on expanding the non-core marketing businesses of United and building airline customer loyalty.
ULS operates substantially all United-branded travel distribution and customer loyalty e-commerce activities, such as united.com. In addition, ULS owns and
operates Mileage Plus, being responsible for member relationships, communications and account management; while United is responsible for other aspects of
Mileage Plus, including elite membership programs such as Global Services, Premier, Premier Executive and Premier Executive 1K, and the establishment of
award mileage redemption programs and airline-related customer loyalty recognition policies. United is also responsible for managing relationships with its
Mileage Plus airline partners, while ULS manages relationships with non-airline business partners, such as the Mileage Plus Visa Card, hotels, car rental
companies and dining programs, among others.
Distribution Channels. The majority of United's airline seat inventory continues to be distributed through the traditional channels of travel agencies and
GDS, such as Sabre and Galileo. The growing use of alternative distribution systems, including www.united.com and GDS new entrants, however, provides
United with an opportunity to lower its ticket distribution costs. To encourage customer use of
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008