United Airlines 2011 Annual Report Download - page 55

Table of Contents
allowances by the Company. As the scheme continues to be the subject of international dispute, it is unclear whether or not the inclusion of aviation in the EU
ETS will be sustained. Management continues to evaluate what the impact would be for the Company in 2012.
Off-Balance Sheet Arrangements. An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an
unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under
derivative instruments classified as equity, or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing,
liquidity, market risk or credit risk support, or that engages in leasing, hedging or research and development arrangements. The Company’s primary off-
balance sheet arrangements include operating leases, which are summarized in the contractual obligations table in 
above, and certain municipal bond obligations, as discussed below. As of December 31, 2011, the Company had cash collateralized
$194 million of letters of credit, most of which had previously been issued and collateralized under the Amended Credit Facility, and $163 million of
performance bonds. Continental had letters of credit and performance bonds relating to various real estate, customs and aircraft financing obligations at
December 31, 2011 in the amount of $71 million. Most of the United and Continental letters of credit have evergreen clauses and are expected to be renewed on
an annual basis and the bonds have expiration dates through 2015.
As of December 31, 2011, United and Continental are the guarantors of approximately $270 million and $1.6 billion, respectively, in aggregate principal
amount of tax-exempt special facilities revenue bonds and interest thereon, excluding the US Airways contingent liability described below. These bonds, issued
by various airport municipalities, are payable solely from rentals paid under long-term agreements with the respective governing bodies. The leasing
arrangements associated with a majority of these obligations are accounted for as operating leases and are not recorded in United’s and Continental’s financial
statements. The leasing arrangements associated with a minority of these obligations are accounted for as capital leases. The annual lease payments for those
obligations accounted for as operating leases are included in the operating lease payments in the contractual obligations table in 
above.
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 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.
Increased Cost Provisions. 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 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), we bear 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.
Fuel Consortia. The Company participates in numerous fuel consortia with other carriers at major airports to reduce the costs of fuel distribution and
storage. Interline agreements govern the rights and responsibilities of the
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