United Airlines 2012 Annual Report Download - page 11

Table of Contents
The Company’s ability to serve some foreign markets and expand into certain others is limited by the absence of aviation agreements between the U.S.
government and the relevant foreign governments. Shifts in U.S. or foreign government aviation policies may lead to the alteration or termination of air service
agreements. Depending on the nature of any such change, the value of the Company’s international route authorities and slot rights may be materially enhanced
or diminished.
Environmental Regulation
 The airline industry is subject to increasingly stringent federal, state, local and international environmental laws and regulations concerning
emissions to the air, discharges to surface and subsurface waters, safe drinking water, aircraft noise, and the management of hazardous substances, oils and
waste materials. Areas of either proposed regulations or implementation of new regulations include regulations surrounding the emission of greenhouse gases
(discussed further below), State of California regulations regarding air emissions from ground support equipment, and a federal rule-making seeking to
regulate airport fuel hydrant systems under the underground storage tank regulations.
There are certain laws and regulations relating to climate change that apply to the Company, including the EU Emissions Trading Scheme
(“EU ETS”) (which is subject to international dispute), environmental taxes for certain international flights (including the United Kingdom’s Air Passenger
Duty and Germany’s departure ticket tax), limited greenhouse gas reporting requirements, and the State of California’s cap and trade regulations (which
impacts United’s San Francisco maintenance center). In addition, there are land-based planning laws that could apply to airport expansion projects, requiring
a review of greenhouse gas emissions, and could affect airlines in certain circumstances.
In 2009, the EU issued a directive to member states to include aviation in its greenhouse gas emissions trading scheme. The application of the EU ETS to
aviation, including the requirement for foreign airlines to surrender carbon allowances for emissions occurring outside of the EU airspace, has been the subject
of significant international dispute among countries, with more than forty non-EU countries having gone on record opposing the scheme.
On November 12, 2012, the EU announced a one-year stay of the requirements for international flights to the EU, which the EU attributed to recent progress
by the International Civil Aviation Organization (“ICAO”) towards a global regulatory program to regulate aviation greenhouse gas emissions. On
November 27, 2012, the President of the United States signed the European Union Emissions Trading Scheme Prohibition Act of 2011, which encourages the
DOT to seek an international solution through the ICAO, and if necessary, prohibit U.S. airlines from participation in the EU ETS and take other actions to
hold the airlines harmless from the scheme.
The future of the EU ETS legislation as applied to international flights into Europe is uncertain but the Company will continue to monitor developments. The
precise cost to the Company should the scheme apply to international flights in the future is difficult to calculate due to a number of variables, including the
Company’s future carbon emissions with respect to flights to and from the EU, the price of carbon credits, and whether the DOT will take action to prohibit
U.S. airlines from participation in the scheme and hold U.S. airlines harmless from such scheme.
The EU ETS stay has increased international attention in its focus on the ICAO process with the intent to reach an international agreement that would apply to
international aviation and prohibit the application of regional schemes. Without an international agreement, there could be other regulatory actions taken in the
future by the U.S. government, state governments within the U.S., or foreign governments, to regulate the emission of greenhouse gases by the aviation
industry, which could result in multiple schemes applying to the same emissions. The precise nature of any such requirements and their applicability to the
Company are difficult to predict, but the financial impact to the Company and the aviation industry would likely be adverse and could be significant,
including the potential for increased fuel costs, carbon taxes or fees, or a requirement to purchase carbon credits.
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