United Airlines 2011 Annual Report Download - page 149

Table of Contents
million at December 31, 2011, and a final scheduled maturity in 2015. If both US Airways and Delta default on these obligations, Continental would be
obligated to cure the default and would have the right to occupy the terminal after US Airways’ and Delta’s interest in the lease had been terminated.
In the Company’s financing transactions that include loans, the Company typically agrees to reimburse lenders for any reduced returns with respect to the
loans due to any change in capital requirements and, in the case of loans in which the interest rate is based on the LIBOR for certain other increased costs that
the lenders incur in carrying these loans as a result of any change in law, subject in most cases to certain mitigation obligations of the lenders. At
December 31, 2011, UAL had $2.9 billion of floating rate debt (consisting of United’s $2.1 billion and Continental’s $820 million of debt) and $405 million
of fixed rate debt (consisting of United’s $205 million and Continental’s $200 million of debt), with remaining terms of up to ten years, that are subject to
these increased cost provisions. In several financing transactions involving loans or leases from non-U.S. entities, with remaining terms of up to ten years and
an aggregate balance of $3.3billion (consisting of United’s $2.3 billion and Continental’s $964 million balance), the Company bears the risk of any change
in tax laws that would subject loan or lease payments thereunder to non-U.S. entities to withholding taxes, subject to customary exclusions.
Houston Bush Terminal B Redevelopment Project. In May 2011, UAL, in partnership with the Houston Airport System, announced that it would begin
construction of the first phase of a three-phase $1 billion terminal improvement project for Terminal B at George Bush Intercontinental Airport (“Houston
Bush”) by the end of 2011. In November 2011, the City of Houston issued approximately $113 million of special facilities revenue bonds to finance the
construction of a new south concourse at Houston Bush dedicated to the Company’s regional jet operations. The bonds are guaranteed by Continental and are
payable from certain rentals paid by Continental under a special facilities lease agreement with the City of Houston. UAL’s initial commitment is to construct
the first phase of the currently anticipated three-phase project. UAL’s cost of construction of phase one of the project is currently estimated to be approximately
$100 million and is funded by special facilities revenue bonds. Construction of the remaining phases of the project will be based on demand over the next 7 to
10 years, with phase one currently expected to be completed in late 2013.
Based on a qualitative assessment of the Houston Bush Terminal B Redevelopment Project due to the fact that Continental is guaranteeing the special facilities
revenue bonds and the requirement that UAL or one of its subsidiaries fund cost overruns with no stated limits, the Company being considered the owner of
the property during the construction period for accounting purposes. As a result, the construction project is being treated as a financing transaction such that
the property and related financing will be included on UAL’s consolidated balance sheet as an asset under operating property and equipment and an obligation
under long-term liabilities.
Labor Negotiations. As of December 31, 2011, UAL and its subsidiaries had approximately 87,000 active employees, of whom approximately 72% are
represented by various U.S. labor organizations. United and Continental had approximately 82% and 61%, respectively, of their active employees represented
by various U.S. labor organizations. We are in the process of negotiating amended collective bargaining agreements with our employee groups.
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