United Airlines 2009 Annual Report Download - page 70

Table of Contents
Indefinite-lived Intangible Assets
2009 Interim Impairment Test
As of February 28, 2009, the Company performed an interim impairment test of all indefinite-lived intangible assets due to events and changes in
circumstances during the first quarter of 2009 that indicated an impairment might have occurred, as discussed above.
Indefinite-lived intangible assets tested for impairment included tradenames, international route authorities, London Heathrow slots and codesharing
agreements. The Company utilized appropriate valuation techniques to separately estimate the fair values of all of its indefinite-lived intangible assets as of
February 28, 2009, and compared those estimates to related carrying values. The methods used to test these assets were primarily income methodologies, which
were based on estimated future cash flows, except for the valuation of the London Heathrow slots, for which fair value was estimated using the market approach.
As of February 28, 2009, the only impairment of indefinite-lived intangible assets was related to the carrying value of United’s tradenames in the amount $40
million. In addition, the Company performed a second interim impairment test of only tradenames as of May 31, 2009, which resulted in an additional
impairment of $110 million. As a result of both of the impairment tests, the Company recorded impairment charges of $150 million to decrease the carrying
value of the tradenames to estimated fair value as of May 31, 2009.
2008 Interim Impairment Test
The Company utilized appropriate valuation techniques to separately estimate the fair values of all of its indefinite-lived intangible assets as of May 31,
2008 and compared those estimates to related carrying values. Tested assets included tradenames, international route authorities, London Heathrow slots and
codesharing agreements. The Company used a market or income valuation approach, as described above, to estimate fair values. Based on the results of this
testing, the Company recorded a $64 million impairment charge to indefinite-lived intangible assets for the year ended December 31, 2008.
Annual Impairment Tests
United performed annual impairment reviews of its indefinite-lived intangible assets as of October 1, 2009 and 2008 and determined that no impairment
was indicated.
Goodwill.
For purposes of testing goodwill in 2008, the Company estimated the fair value of the Mainline reporting unit (to which all goodwill is allocated) utilizing
several fair value measurement techniques, including two market estimates and one income estimate and using relevant data available through, and as of,
May 31, 2008. The market approach is a valuation technique in which fair value is estimated based on observed prices in actual transactions and on asking prices
for similar assets. The valuation process is essentially that of comparison and correlation between the subject asset and other similar assets. The income approach
is a technique in which fair value is estimated based on the cash flows that an asset could be expected to generate over its useful life, including residual value
cash flows. These cash flows are discounted to their present value equivalents using a rate of return that accounts for the relative risk of not realizing the
estimated annual cash flows and for the time value of money.
Under the market approaches, the fair value of the Mainline reporting unit was estimated based upon the fair value of invested capital for UAL, as well as
a separate comparison to revenue and EBITDAR multiples for similar publicly traded companies in the airline industry. The fair value estimates using both
market approaches included a control premium similar to those observed for historical airline and transportation company market transactions.
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