United Airlines 2009 Annual Report Download - page 129

Table of Contents
of legal counsel, the nature of contingencies to which the Company is subject and prior experience, that the ultimate disposition of these contingencies will not
materially affect the Company’s consolidated financial position or results of operations.
The Company records liabilities for legal and environmental claims when a loss is probable and reasonably estimable. These amounts are recorded based
on the Company’s assessments of the likelihood of their eventual disposition. The amounts of these liabilities could increase or decrease in the near term, based
on revisions to estimates relating to the various claims.
Given the Air Transportation Safety and System Stabilization Act of 2001, the resolution of the majority of the wrongful death and personal injury cases
by settlement and the withdrawal of all related proofs of claim from the Company’s Chapter 11 reorganization, and that claimants’ recoveries are limited to
insurance proceeds, the Company believes that it will have no financial exposure for claims arising out of the events of September 11, 2001.
The Company continues to analyze whether any potential liability may result from air cargo/passenger surcharge cartel investigations following the receipt
of a Statement of Objections that the European Commission (the “Commission”) issued to 26 companies on December 18, 2007. The Statement of Objections
sets out evidence related to the utilization of fuel and security surcharges and exchange of pricing information that the Commission views as supporting the
conclusion that an illegal price-fixing cartel had been in operation in the air cargo transportation industry. United received a copy of the Statement of Objections
and has provided written and oral responses vigorously disputing the Commission’s allegations against the Company. Nevertheless, United will continue to
cooperate with the Commission’s ongoing investigation. Based on its evaluation of all information currently available, the Company has determined that no
reserve for potential liability is required and will continue to defend itself against all allegations that it was aware of or participated in cartel activities. However,
penalties for violation of European competition laws can be substantial and a finding that the Company engaged in improper activity could have a material
adverse impact on our consolidated financial position and results of operations.
Contingent Senior Unsecured Notes. UAL is obligated to issue up to $500 million of the 8% Contingent Senior Notes to the PBGC in up to eight equal
tranches of $62.5 million upon the occurrence of certain financial triggering events. An issuance trigger event occurs when, among other things, the Company’s
EBITDAR exceeds $3.5 billion over the prior twelve months ending June 30 or December 31 of any applicable fiscal year, beginning with the fiscal year ended
December 31, 2009 and ending with the fiscal year ended December 31, 2017. In certain circumstances, UAL common stock may be issued in lieu of issuance of
the 8% Notes. See Note 11, “Debt Obligations and Card Processing Agreements,” for further information.
Commitments. As of December 31, 2009, the Company had commitments of $622 million that would require the payment of an estimated $200 million in
2010, $201 million in 2011, $99 million in 2012, $43 million in 2013 and $40 million in 2014 and $39 million thereafter. These purchase commitments are for
the acquisition of property and equipment, including aircraft enhancements, information technology assets and the relocation of the Company’s operations center.
In addition, the Company has cancellable orders to purchase 42 A319 and A320 aircraft for $2.3 billion in years 2011 to 2015.
Guarantees and Off-Balance Sheet Financing.
Fuel Consortia. The Company participates in numerous fuel consortia with other carriers at major airports to reduce the costs of fuel distribution and
storage. Interline agreements govern the rights and responsibilities of the consortia members and provide for the allocation of the overall costs to operate the
consortia based on usage. The consortium (and in limited cases, the participating carriers) have entered into long-term agreements to lease certain airport fuel
storage and distribution facilities that are typically financed through tax-exempt bonds (either special facilities lease revenue bonds or general airport revenue
bonds), issued by various local municipalities. In
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