United Airlines 2011 Annual Report Download - page 148

Table of Contents
Credit Card Processing Agreements
United and Continental have agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services.
Under certain of United’s and Continental’s credit card processing agreements, the financial institutions either require, or under certain circumstances have the
right to require, that United and Continental maintain a reserve equal to a portion of advance ticket sales that have been processed by that financial institution,
but for which United and Continental have not yet provided the air transportation.
As of December 31, 2011, United and Continental provided a reserve of $25 million, as required under their combined credit card processing agreement with
JPMorgan Chase Bank, N.A. and Paymentech, LLC. Additional reserves may be required under this or other credit card processing agreements of United or
Continental if the amount of unrestricted cash, cash equivalents, short-term investments and undrawn amounts under any revolving credit facilities held by
United and Continental is less than $3.5 billion as of any calendar month-end measurement date. In addition, in certain circumstances, an increase in the
future reserve requirements and the posting of a significant amount of cash collateral as provided by the terms of any or all of United’s and Continental’s
material credit card processing agreements could materially reduce the Company’s liquidity.
Guarantees and Off-Balance Sheet Financing
Fuel Consortia. The Company participates in numerous fuel consortia with other air carriers at major airports to reduce the costs of fuel distribution and
storage. Interline agreements govern the rights and responsibilities of the consortia members and provide for the allocation of the overall costs to operate the
consortia based on usage. The consortium (and in limited cases, the participating carriers) have entered into long-term agreements to lease certain airport fuel
storage and distribution facilities that are typically financed through tax-exempt bonds (either special facilities lease revenue bonds or general airport revenue
bonds), issued by various local municipalities. In general, each consortium lease agreement requires the consortium to make lease payments in amounts
sufficient to pay the maturing principal and interest payments on the bonds. As of December 31, 2011, approximately $1.4 billion principal amount of such
bonds were secured by significant fuel facility leases in which UAL participates, as to which UAL and each of the signatory airlines has provided indirect
guarantees of the debt. As of December 31, 2011, UAL’s contingent exposure was approximately $271 million principal amount of such bonds based on its
recent consortia participation. As of December 31, 2011, United’s and Continental’s contingent exposure related to these bonds, based on its recent consortia
participation, was approximately $214 million and $57 million, respectively. The Company’s contingent exposure could increase if the participation of other
air carriers decreases. The guarantees will expire when the tax-exempt bonds are paid in full, which ranges from 2011 to 2041. The Company did not record a
liability at the time these indirect guarantees were made.
Guarantees. United has guaranteed interest and principal payments on $270 million of the Denver Bonds, which were originally issued in 1992, but were
subsequently redeemed and reissued in 2007 and are due in 2032 unless United elects not to extend its equipment and ground lease in which case the bonds are
due in 2023. The related lease obligation is accounted for as an operating lease with the associated expense recorded on a straight-line basis resulting in ratable
accrual of the final $270 million lease obligation over the expected lease term through 2032, and is included in our lease commitments disclosed in Note 15.
Continental has guaranteed approximately $1.6 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon,
excluding the US Airways contingent liability described below.
Continental is contingently liable for US Airways’ obligations under a lease agreement between US Airways and the Port Authority of New York and New
Jersey related to the East End Terminal at LaGuardia (which lease agreement was assigned by US Airways to Delta Air Lines, Inc. (“Delta”)). These
obligations include the payment of ground rentals to the Port Authority and the payment of other rentals in respect of the full amounts owed on special facilities
revenue bonds issued by the Port Authority having an outstanding par amount of $79
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