United Airlines 2008 Annual Report Download - page 138

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leases on the balance sheet and, accordingly, all residual value guarantee amounts contained in the
Company’s aircraft leases are fully reflected as capital lease obligations in the Statements of Consolidated
Financial Position.
The Company has various operating leases for 119 aircraft in which the lessors are trusts established
specifically to purchase, finance and lease aircraft to United. These leasing entities related to 108 of
these aircraft meet the criteria for VIEs; however, the Company does not hold a significant variable
interest in and is not considered the primary beneficiary of the leasing entities since the lease terms are
consistent with market terms at the inception of the lease and do not include a residual value guarantee,
fixed-price purchase option or similar feature that obligates us to absorb decreases in value, or entitles
the Company to participate in increases in the value of the financed aircraft. In addition, of the
Company’s total aircraft operating leases only 11 of these aircraft leases have leasing entities that meet
the criteria for VIEs and allow the Company to purchase the aircraft at other than fair market value.
These leases have fixed price purchase options specified in the lease agreements which at the inception
of the lease approximated the aircraft’s expected fair market value at the option date.
In October 2008, United entered into a $125 million sale-leaseback involving nine previously
unencumbered aircraft. This financing agreement terminates in 2010; however, United has the option to
extend the financing agreement for one year provided it meets the minimum loan to asset value
requirement. Interest payments are based on LIBOR plus a margin. The lease is considered a capital
lease resulting in non-cash increases to capital lease assets and capital lease obligations.
In December 2008, United entered into a $149 million sale-leaseback involving 15 previously
unencumbered aircraft. The final maturities of the leases under this agreement vary and have an average
term of seven years. Two of the leased aircraft are being accounted for as operating leases, with the
remaining 13 accounted for as capital leases.
Amounts charged to rent expense, net of minor amounts of sublease rentals, were $926 million and
$928 million and $934 million and $936 million for UAL and United, respectively, for the years ended
December 31, 2008 and 2007, respectively; $833 million and $834 million for UAL and United,
respectively, for the eleven months ended December 31, 2006; $76 million for both UAL and United for
the month ended January 31, 2006. Included in Regional affiliates expense in the Statements of
Consolidated Operations were operating rents for United Express aircraft of $413 million, $425 million
and $403 million for the Successor Company for the years ended December 31, 2008 and 2007 and the
eleven months ended December 31, 2006, respectively; and $35 million for the month ended January 31,
2006 for the Predecessor Company.
138