United Airlines 2009 Annual Report Download - page 9

Table of Contents
UAL’s operating revenues attributed to Mainline domestic operations were $7.7 billion, $9.7 billion and $10.9 billion in 2009, 2008 and 2007,
respectively. Operating revenues attributed to Mainline international operations were $5.6 billion, $7.4 billion and $6.1 billion in 2009, 2008 and 2007,
respectively. For purposes of the Company’s geographic revenue reporting, the Company considers destinations in Mexico and the Caribbean to be part of the
Latin America region as opposed to the Domestic region.
The Mainline segment operated 360 aircraft as of December 31, 2009, and produced 122.7 billion available seat miles (“ASMs”) and 100.5 billion revenue
passenger miles (“RPMs”) during 2009; in 2008, the Mainline segment produced 135.8 billion ASMs and 110.1 billion RPMs.
Regional Affiliates. Regional Affiliates operating revenues were approximately $3.1 billion in years 2009, 2008 and 2007. United has contractual
relationships with various regional carriers to provide regional jet and turboprop service branded as United Express. United Express is an extension of the United
Mainline network. Atlantic Southeast Airlines, Colgan Airlines, ExpressJet, GoJet Airlines, Mesa Airlines (“Mesa”), Shuttle America, SkyWest Airlines
(“SkyWest”) and Trans States Airlines are all regional carriers, most of which operate under capacity purchase agreements with United. Under these agreements,
United pays the regional carriers contractually-agreed fees (carrier-controlled costs) for operating these flights plus a variable reimbursement (incentive payment)
based on agreed performance metrics. The carrier-controlled costs are based on specific rates for various operating expenses of the regional carriers, such as crew
expenses, maintenance and aircraft ownership, some of which are multiplied by specific operating statistics (e.g., block hours, departures) while others are fixed
monthly amounts. The incentive payment is a markup applied to the carrier-controlled costs for superior operational performance. Under these capacity purchase
agreements, United is responsible for all fuel costs incurred as well as landing fees, facilities rent and deicing costs, which are passed through without any
markup. In return, the regional carriers operate this capacity on schedules determined by United. United also determines pricing, revenues and inventory levels
and assumes the inventory and distribution risk for the available seats. In January 2010, Mesa filed for Chapter 11 bankruptcy reorganization. The Company does
not expect this filing to have any material effect on its Regional Affiliates flight operations, financial position or results of operations.
The capacity purchase agreements between the regional carriers and United do not include the provision of ground handling services. As a result, Regional
Affiliates obtain ground handling services from a variety of third-party providers in addition to utilizing internal United resources in some cases. Regional
Affiliates carriers operated 292 aircraft under capacity purchase agreements as of December 31, 2009, and produced 18.0 billion ASMs and 13.8 billion RPMs
during 2009, while producing 16.2 billion ASMs and 12.1 billion RPMs in 2008.
While the regional carriers operating under capacity purchase agreements comprise more than 95% of Regional Affiliates flights, the Company also has
limited prorate agreements with Colgan Airlines, SkyWest and Trans States Airlines. Under these prorate agreements, United and its prorate partners agree to
divide revenue collected from each passenger according to a formula, while both United and the prorate partners are individually responsible for their own costs
of operations. United also collects a program fee from Colgan Airlines to cover certain marketing and distribution costs such as credit card transaction fees,
global distribution systems (“GDS”) transaction fees and frequent flyer costs. Unlike capacity purchase agreements, these prorate agreements require the regional
carrier to retain the control and risk of scheduling, market selection, seat pricing and inventory for its flights.
United Cargo. United Cargo offers both domestic and international shipping through a variety of services including United Small Package Delivery,
Express and General cargo services. Freight shipments comprise approximately 88% of United Cargo’s volumes, with mail shipments comprising the remainder.
During 2009, United Cargo accounted for approximately 3% of the Company’s operating revenues by generating $536 million in freight and mail revenue, a 37%
decrease versus 2008.
United Services. United Services is a global airline support business offering customers comprehensive aircraft maintenance, repair and overhaul services
which include engine, line and global emergency maintenance
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