United Airlines 2010 Annual Report Download - page 165

Municipal bond litigation
United’s other charges in 2009 included a $27 million expense related to a bankruptcy matter that was
finalized in 2009 as the final settlement was greater than United’s estimated obligation.
Lease termination and other
During 2009 and 2008, United incurred $104 million and $25 million, respectively, primarily for aircraft
lease termination charges related to its operational plans to significantly reduce operating fleet during 2008 and
2009.
Continental Predecessor
2010
During 2010, Continental Predecessor incurred aircraft-related charges of $6 million related to Boeing
737-500 aircraft and other special charges of $12 million which primarily related to an increase in Continental’s
reserve for unused facilities due to a reduction in expected sublease income for a maintenance hangar in Denver.
2009
For the year ended December 31, 2009, Continental recorded a $31 million impairment charge on the
Boeing 737-300 and 737-500 fleets related to its decision in June 2008 to retire all of its Boeing 737-300 aircraft
and a significant portion of its Boeing 737-500 aircraft by early 2010. Continental recorded an initial impairment
charge in 2008 for each of these fleet types. The additional write-down in 2009 reflects the further reduction in
the fair value of these fleet types due to the economic conditions at that time. In both periods, Continental
determined that indicators of impairment were present for these fleets. Fleet assets include owned aircraft,
improvements on leased aircraft, rotable spare parts, spare engines, and simulators. Based on the evaluations,
Continental determined that the carrying amounts of these fleets were impaired and wrote them down to their
estimated fair value. Continental estimated the fair values based on current market quotes and their expected
proceeds from the sale of these assets.
In addition, Continental recorded $39 million of other charges for its mainline fleet, primarily related to the
grounding and sale of Boeing 737-300 and 737-500 aircraft and the write-off of certain obsolete spare parts. The
737-300 and 737-500 aircraft fleets and spare parts experienced further declines in fair values during the fourth
quarter of 2009 primarily as the result of additional 737 aircraft being grounded by other airlines. During 2009,
Continental sold eight 737-500 aircraft to foreign buyers. Its gain on these sales was not material.
In December 2009, Continental agreed with ExpressJet to amend their capacity purchase agreement to
permit ExpressJet to fly eight ERJ-145 aircraft for another carrier. These eight aircraft are subleased from
Continental and were previously flown for them under capacity purchase agreements. Continental recorded a
$13 million charge based on the difference between the sublease rental and the contracted rental payments on
those aircraft during the two and one-half year average initial term of the related sublease agreement.
In July 2009, Continental entered into agreements to sublease five temporarily grounded ERJ-135 aircraft to
Chautauqua beginning in the third quarter of 2009. These aircraft are not operated for Continental. The subleases
have terms of five years, but may be canceled by the lessee under certain conditions after an initial term of two
years. Continental recorded a $6 million charge for the difference between the sublease rental income and the
contracted rental payments on those aircraft during the initial term of the agreement. Continental has also
temporarily grounded 25 leased 37-seat ERJ-135 aircraft. The leases on these 30 ERJ-135 aircraft expire in 2016
through 2018.
163