United Airlines 2008 Annual Report Download - page 49

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Operating Expenses.
2008 compared to 2007
The table below includes data related to UAL and United operating expenses. Significant
fluctuations are discussed below.
(In millions) 2008 2007
$
Change
%
Change
Year Ended
December 31,
Aircraft fuel.......................................... $ 7,722 $ 5,003 $2,719 54.3
Salaries and related costs . .............................. 4,311 4,261 50 1.2
Regional affiliates ..................................... 3,248 2,941 307 10.4
Purchased services..................................... 1,375 1,346 29 2.2
Aircraft maintenance materials and outside repairs ........... 1,096 1,166 (70) (6.0)
Depreciation and amortization ........................... 932 925 7 0.8
Landing fees and other rent ............................. 862 876 (14) (1.6)
Distribution expenses .................................. 710 779 (69) (8.9)
Aircraft rent ......................................... 409 406 3 0.7
Cost of third party sales . . .............................. 272 316 (44) (13.9)
Goodwill impairment .................................. 2,277 — 2,277 —
Other impairment and special items ....................... 339 (44) 383 —
Other operating expenses . .............................. 1,079 1,131 (52) (4.6)
UAL total ......................................... $24,632 $19,106 $5,526 28.9
United total ........................................ $24,630 $19,099 $5,531 29.0
The increase in aircraft fuel expense and regional affiliates expense was primarily attributable to
increased market prices for crude oil and related fuel products as highlighted in table below, which
presents several key variances for mainline and regional affiliate aircraft fuel expense in the 2008 period
as compared to the year-ago period.
(In millions, except per gallon) 2008 2007
%
Change 2008 2007
%
Change
Year Ended December 31,
$ Average price per gallon (in cents)
Mainline fuel purchase cost ................... $7,114 $5,086 39.9 326.0 221.9 46.9
Non-cash fuel hedge (gains) losses in mainline
fuel.................................... 568 (20) — 26.0 (0.9) —
Cash fuel hedge (gains) losses in mainline fuel .... 40 (63) — 1.9 (2.7) —
Total mainline fuel expense.................. 7,722 5,003 54.3 353.9 218.3 62.1
Regional affiliates fuel expense(a) .............. 1,257 915 37.4 338.8 242.7 39.6
UAL system operating fuel expense ........... $8,979 $5,918 51.7 351.7 221.7 58.6
Non-cash fuel hedge (gains) losses in nonoperating
income (loss)............................. $ 279 $ — —
Cash fuel hedge (gains) losses in nonoperating
income (loss)............................. 249 — —
Mainline fuel consumption (gallons) ............ 2,182 2,292 (4.8)
Regional affiliates fuel consumption (gallons) ..... 371 377 (1.6)
Total fuel consumption (gallons) ............... 2,553 2,669 (4.3)
(a) Regional affiliate fuel costs are classified as part of Regional affiliate expense.
Salaries and related costs increased $50 million in 2008. The Company’s costs in 2008 include the
negative impact of average wage increases and higher benefits expense, as well as severance expense of
$106 million due to the implementation of the Company’s operating plans, as more fully explained in
Note 2, “Company Operational Plans,” in Combined Notes to Consolidated Financial Statements. In
addition, the Company recorded $87 million of expense in 2008 from certain benefit obligation
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