United Airlines 2009 Annual Report Download - page 25

Table of Contents
Further, the Company’s operations in foreign countries are subject to a variety of laws and regulations in those countries. The Company cannot provide
any assurance that current laws and regulations, or laws or regulations enacted in the future, will not adversely affect its financial condition or results of
operations.
The Company’s results of operations fluctuate due to seasonality and other factors associated with the airline industry.
Due to greater demand for air travel during the spring and summer months, revenues in the airline industry in the second and third quarters of the year are
generally stronger than revenues in the first and fourth quarters of the year. The Company’s results of operations generally reflect this seasonality, but have also
been impacted by numerous other factors that are not necessarily seasonal including, among others, the imposition of excise and similar taxes, extreme or severe
weather, air traffic control congestion, changes in the competitive environment due to industry consolidation and other factors and general economic conditions.
As a result, the Company’s quarterly operating results are not necessarily indicative of operating results for an entire year and historical operating results in a
quarterly or annual period are not necessarily indicative of future operating results.
The Company may never realize the full value of its intangible assets or our long-lived assets causing it to record impairments that may negatively affect its
results of operations.
In accordance with applicable accounting standards, the Company is required to test its indefinite-lived intangible assets for impairment on an annual basis
on October 1 of each year, or more frequently if conditions indicate that an impairment may have occurred. In addition, the Company is required to test certain of
its other assets for impairment if conditions indicate that an impairment may have occurred.
During the years ended December 31, 2009 and 2008, the Company performed impairment tests of certain intangible assets and certain long-lived assets
(principally aircraft, related spare engines and spare parts). The interim impairment tests were due to events and changes in circumstances that indicated an
impairment might have occurred. The primary factors deemed by management to have collectively constituted a potential impairment triggering event was, in
2009, a significant decrease in actual and forecasted revenues, and in 2008, record high fuel prices, significant losses, a softening U.S. economy, analyst
downgrade of UAL common stock, rating agency changes in outlook for the Company’s debt instruments from stable to negative, the announcement of the
planned removal from UAL’s fleet of 100 aircraft and a significant decrease in the fair value of the UAL’s outstanding equity and debt securities, including a
decline in UAL’s market capitalization to significantly below book value.
As a result of the impairment testing described above, the Company recorded goodwill and tangible and intangible asset impairment charges of
approximately $243 million and $2.6 billion during the years ended December 31, 2009 and 2008, respectively. The Company determined that goodwill was
completely impaired in 2008. However, as of December 31, 2009, the Company had approximately $9.8 billion of operating property and equipment and $2.5
billion of intangible assets that could be subject to future impairment charges. The Company may be required to recognize additional impairments in the future
due to, among other factors, extreme fuel price volatility, tight credit markets, a decline in the fair value of certain tangible or intangible assets, unfavorable
trends in historical or forecasted results of operations and cash flows and the uncertain economic environment, as well as other uncertainties. The Company can
provide no assurance that a material impairment charge of tangible or intangible assets will not occur in a future period. The value of our aircraft could be
impacted in future periods by changes in supply and demand for these aircraft. Such changes in supply and demand for certain aircraft types could result from
grounding of aircraft by the Company or other carriers. An impairment charge could have a material adverse effect on the Company’s financial position and
results of operations.
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