United Airlines 2009 Annual Report Download - page 132

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Table of Contents
The Company has various operating leases for 103 aircraft in which the lessors are trusts established specifically to purchase, finance and lease aircraft to
United. These leasing entities related to 92 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 December 2009, United entered into a $40 million sale-leaseback involving five previously unencumbered aircraft. The final maturities of the leases
under this agreement have terms of approximately five years. All of the leased aircraft were classified as capital leases resulting in an increase to capital lease
assets and capital lease obligations. An $11 million deferred loss on sale will be recognized in future periods.
In October 2009, the Company amended a capacity agreement with one of its regional flying partners. The amendment extended the lease terms on 40
existing aircraft and added 14 new aircraft to the amended agreement. As a result of this amendment, capital lease assets and obligations increased by $250
million.
In August 2009, the Company completed a $41 million sale-leaseback for five aircraft. The aircraft are being leased back over an average period of 6.5
years. These leases are considered to be capital leases resulting in an increase to capital lease assets and capital lease obligations. A $13 million deferred loss on
sale will be recognized in future periods.
In January 2009, the Company completed a $94 million sale-leaseback agreement for nine aircraft. The leaseback agreement, which has a one-year term, a
single one-year renewal option, and a bargain purchase option, was accounted for as a capital lease. This transaction resulted in a $94 million increase to the
Company’s capital lease assets and capital lease obligations. An $84 million deferred loss on the sale will be recognized in future periods.
In January 2009, the Company amended its lease of the Chicago O’Hare International Airport cargo facility. This amendment resulted in proceeds to the
Company of approximately $160 million in return for the Company’s agreement to vacate its currently leased cargo facility earlier than the lease expiration date
in order for the airport authority to continue with its long-term airport modernization plan. The Company currently has not determined its future cargo plans, as
the Company is not required to vacate its current facility until approximately mid-2011. The Company has recorded a noncurrent deferred credit of $160 million
as of December 31, 2009. As of December 31, 2009, the Company had leasehold improvements in its current cargo facility of approximately $23 million. The
Company will ratably accelerate the amortization of these assets so that they are fully amortized by the Company’s required relocation date in mid-2011.
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.
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 increases to capital lease assets and capital lease obligations.
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