United Airlines 2009 Annual Report Download - page 134

Table of Contents
The Amendment requires that our co-branded credit card partner make annual guaranteed payments to United between 2008 and 2017. Between 2008 and
2012, our co-branded credit card partner’s annual guaranteed payment is satisfied through the purchase of a specified minimum amount of miles. Afterwards, our
co-branded credit card partner’s annual guaranteed payment is satisfied through awarding pre-purchased miles, purchasing miles and through other contractual
payments. Between 2008 and 2012, our co-branded credit card partner is allowed to carry forward those miles purchased subject to the annual guarantee that
have not been awarded to its cardholders. Any miles carried forward subject to this provision will result in a net increase to our “Advance purchase of miles”
obligation in our Financial Statements.
In connection with the Amendment, the Company received a payment of $100 million in exchange for the extension of the license previously granted to its
co-branded credit card partner to be the exclusive issuer of Mileage Plus Visa cards through 2017. This amount is reflected as Mileage Plus deferred revenue in
our Financial Statements and is being recognized as revenue over the period the fees are earned.
As part of the Amendment, the Company granted its co-branded credit card partner a first lien in specified Mileage Plus assets and a second lien on those
assets that are provided as collateral under our Amended Credit Facility. See Note 11, “Debt Obligations and Card Processing Agreements,” for additional
information regarding these assets. The Amendment may be terminated by either party upon the occurrence of certain events as defined, including but not limited
to a change in law that has a material adverse impact, insolvency of one of the parties, or failure of the parties to perform their obligations. The security interest is
released if the Company repurchases the full balance of the pre-purchased miles or the Company achieves a certain fixed charge coverage ratio.
(17) Related Party Transactions
During 2009, UAL contributed cash of $559 million to United consisting of the net proceeds that UAL generated from 2009 UAL stock and debt
issuances.
In 2008, United contributed cash of $257 million to UAL for use in UAL’s payment of its January 2008 special distribution to its common shareholders. In
addition, UAL contributed cash and other assets totaling $173 million to United during 2008.
At December 31, 2006, United, through one of its wholly-owned subsidiaries, MPI, had a $200 million note receivable from UAL. During 2007, UAL,
United and MPI executed a note payment agreement to pay and thereby cancel this note payable (plus accrued interest). This transaction had no effect in the
UAL consolidated financial statements and was treated as a forgiveness of debt in United’s financial statements, resulting in a decrease in paid in capital equal to
the total decrease in notes and interest receivable.
(18) Special Items
2009 and 2008
Special charges primarily relate to the Company’s operational plans as discussed in Note 2, “Company Operational Plans,” and assets impairment charges
as discussed in Note 3, “Asset Impairments and Intangible Assets.” Also, see Note 20, “UAL Selected Quarterly Financial Data (Unaudited),” for a discussion of
special items and asset impairments and other charges.
2007
SFO Municipal Bonds Security Interest. In the first quarter of 2007, the Company recorded a $3 million benefit to operating income as a special item to
reduce the Company’s recorded obligation for the SFO municipal bonds to the amount considered probable of being allowed by the Bankruptcy Court.
LAX Municipal Bonds Security Interest. In the first and third quarters of 2007, the Company recorded special items of $19 million and $8 million,
respectively, as favorable adjustments to operating income to adjust
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