United Airlines 2009 Annual Report Download - page 27

Table of Contents
other actions short of a full strike that could individually or collectively harm the operation of the airline and materially impair its financial performance.
Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results.
The terrorist attacks of September 11, 2001 led to a significant increase in insurance premiums and a decrease in the insurance coverage available to
commercial airlines. Accordingly, the Company’s insurance costs increased significantly and its ability to continue to obtain certain types of insurance remains
uncertain. The Company has obtained third-party war risk (terrorism) insurance through a special program administered by the FAA, resulting in lower premiums
than if it had obtained this insurance in the commercial insurance market. Should the government discontinue this coverage, obtaining comparable coverage from
commercial underwriters could result in substantially higher premiums and more restrictive terms, if it is available at all. If the Company is unable to obtain
adequate war risk insurance, its business could be materially and adversely affected.
If any of United’s aircraft were to be involved in an accident, the Company could be exposed to significant liability. The insurance it carries to cover
damages arising from any future accidents may be inadequate. If the Company’s insurance (including, but not limited to, aviation, hull and liability insurance and
property insurance) is inadequate, it may be forced to bear substantial losses from an accident.
The Company relies heavily on automated systems to operate its business and any significant failure of these systems could harm its business.
The Company depends on automated systems to operate its business, including its computerized airline reservation systems, flight operations systems,
telecommunication systems and commercial websites, including www.united.com. United’s website and reservation systems must be able to accommodate a high
volume of traffic and deliver important flight and schedule information, as well as process critical financial transactions. Substantial or repeated website,
reservations systems or telecommunication systems failures could reduce the attractiveness of United’s services versus its competitors and materially impair its
ability to market its services and operate its flights.
The Company’s business relies extensively on third-party providers. Failure of these parties to perform as expected, or unexpected interruptions in the
Company’s relationships with these providers or their provision of services to the Company, could have an adverse effect on the Company’s financial
position and results of operations.
The Company has engaged a growing number of third-party service providers to perform a large number of functions that are integral to its business, such
as operation of United Express flights, operation of customer service call centers, provision of information technology infrastructure and services, provision of
aircraft maintenance and repairs, provision of various utilities and performance of aircraft fueling operations, among other vital functions and services. The
Company does not directly control these third-party providers, although it does enter into agreements with many of them that define expected service
performance. Any of these third-party providers, however, may materially fail to meet their service performance commitments to the Company. The failure of
these providers to adequately perform their service obligations, or other unexpected interruptions of services, may reduce the Company’s revenues and increase
its expenses or prevent United from operating its flights and providing other services to its customers. In addition, the Company’s business and financial
performance could be materially harmed if its customers believe that its services are unreliable or unsatisfactory.
The Company’s high level of fixed obligations could limit its ability to fund general corporate requirements and obtain additional financing, could limit its
flexibility in responding to competitive developments and could increase its vulnerability to adverse economic and industry conditions.
The Company has a significant amount of financial leverage from fixed obligations, including its Amended Credit Facility, aircraft lease and debt
financings, leases of airport property and other facilities, and other
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