United Airlines 2009 Annual Report Download - page 98

Table of Contents
exceeded the sum of the undiscounted cash flows attributable to their use. As of February 28, 2009, the Company also tested its aircraft for impairment. For all
but two fleet types, the Company determined that the fleet types were not impaired as estimated cash flows exceeded carrying value. For the two fleet types
which had estimated undiscounted cash flows less than carrying value, the Company estimated the fair value of these fleet types and determined that the aircraft
were not impaired as the estimated fair value exceeded the carrying value.
In the fourth quarter of 2009, the Company tested five of its owned regional jets which are leased to a third party for impairment due to a weak market for
these aircraft and a remaining lease term of approximately one year. As a result of this testing, the Company recorded impairment charges of $19 million to
record the regional aircraft at estimated fair value.
On a quarterly basis in 2009, the Company reviewed the carrying values of its nonoperating B737 and five B747 aircraft, which are being marketed for
sale, to assess whether the carrying values were recoverable. As a result of this testing, the carrying value of the nonoperating B737s and five nonoperating B747
aircraft were reduced to a lower estimated fair value resulting in a charge of $19 million and $55 million in the third and fourth quarters of 2009, respectively.
2008 Impairment Testing
The Company tested all aircraft for impairment as of May 31, 2008. Based on the results of these tests, the Company determined that an impairment of
$38 million existed which was attributable to the Company’s fleet of owned B737 aircraft and related spare parts. In addition, as of December 31, 2008, the
Company performed an impairment test of its B737 aircraft. Based on this analysis, the Company recorded an additional charge of $107 million to reduce the
carrying value of the B737 aircraft.
Due to the unfavorable economic and industry factors described above, the Company also determined in the second quarter of 2008 that it was required to
perform an impairment test of its $105 million of pre-delivery aircraft deposits and related capitalized interest. The Company determined that these aircraft
deposits were completely impaired and wrote off their full carrying value. The Company believes that it is highly unlikely that it will take these future aircraft
deliveries and, therefore, the Company will be required to forfeit the deposits, which are not transferable based on existing contract terms.
Indefinite-lived intangible assets
2009 Interim Impairment Test
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.
The only impairment of indefinite-lived intangible assets was related to a $110 million impairment of United’s tradenames. In addition, the Company performed
a second interim impairment test of only tradenames as of May 31, 2009. As a result of both of the impairment tests, the Company recorded an impairment
charge 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 below, 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.
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