United Airlines 2011 Annual Report Download - page 16

Table of Contents
strength of the U.S. and global economies. Robust demand for our air transportation services depends largely on favorable economic conditions, including the
strength of the domestic and foreign economies, low unemployment levels, strong consumer confidence levels and the availability of consumer and business
credit.
Air transportation is often a discretionary purchase that leisure travelers may limit or eliminate during difficult economic times. In addition, during periods of
unfavorable economic conditions, business travelers usually reduce the volume of their travel, either due to cost-saving initiatives or as a result of decreased
business activity requiring travel. During the global recession in 2008 and 2009, the Company’s business and results of operations were adversely affected
due to significant declines in industry passenger demand, particularly with respect to the Company’s business and premium cabin travelers, and a reduction
in fare levels. In addition to its effect on demand for the Company’s services, the recession severely disrupted the global capital markets, resulting in a
diminished availability of financing and a higher cost for financing that was obtainable.
While some economic indicators that may reflect an economic recovery have exhibited growth, other economic indicators, such as unemployment, may not
improve materially for an extended period of time. Stagnant or worsening global economic conditions either in the United States or in other geographic regions
and continued volatility in U.S. and global financial and credit markets may have a material adverse effect on the Company’s revenues, results of operations
and liquidity. If such economic conditions were to disrupt capital markets in the future, the Company may be unable to obtain financing on acceptable terms
(or at all) to refinance certain maturing debt and to satisfy future capital commitments.
The Company is subject to economic and political instability and other risks of doing business globally.
The Company is a global business with operations outside of the United States from which it derives approximately one-third of its operating revenues, as
measured and reported to the DOT. The Company’s operations in Asia, Europe, Latin America, Africa and the Middle East are a vital part of its worldwide
airline network. Volatile economic, political and market conditions in these international regions may have a negative impact on the Company’s operating
results and its ability to achieve its business objectives. In addition, significant or volatile changes in exchange rates between the U.S. dollar and other
currencies, and the imposition of exchange controls or other currency restrictions, may have a material adverse impact upon the Company’s liquidity,
revenues, costs and operating results.
The Company may not be able to maintain adequate liquidity.
The Company has a significant amount of financial leverage from fixed obligations, including aircraft lease and debt financings, leases of airport property
and other facilities, and other material cash obligations. In addition, the Company has substantial non-cancelable commitments for capital expenditures,
including the acquisition of new aircraft and related spare engines.
Although the Company’s cash flows from operations and its available capital, including the proceeds from financing transactions, have been sufficient to
meet these obligations and commitments to date, the Company’s future liquidity could be negatively impacted by the risk factors discussed in this Item 1A,
including, but not limited to, substantial volatility in the price of fuel, adverse economic conditions, disruptions in the global capital markets and catastrophic
external events.
If the Company’s liquidity is constrained due to the various risk factors noted in this Item 1A or otherwise, the Company’s failure to comply with certain
financial covenants under its financing and credit card processing agreements, timely pay its debts, or comply with other material provisions of its contractual
obligations could result in a variety of adverse consequences, including the acceleration of the Company’s indebtedness, increase of required reserves under
credit card processing agreements, the withholding of credit card sale proceeds by its credit card service providers and the exercise of other remedies by its
creditors and equipment lessors that could result in material adverse effects on the Company’s financial position and results of operations. Furthermore,
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