United Airlines 2012 Annual Report Download - page 149

Table of Contents
Voluntary severance and benefits
During 2012, the Company recorded $125 million of severance and benefits associated with various voluntary retirement and leave of absence programs for
its various employee groups. During the first quarter of 2012, approximately 400 mechanics offered to retire early in exchange for a cash severance payment
that was based on the number of years of service each employee had accumulated. The expense for this voluntary program was approximately $32 million.
The Company also offered a voluntary leave of absence program that approximately 1,800 flight attendants accepted, which allows for continued medical
coverage during the leave of absence period. The expense for this voluntary program was approximately $17 million. During the second quarter of 2012, as
part of the recently amended collective bargaining agreement with the Association of Flight Attendants, the Company offered a voluntary program for flight
attendants at United to retire early in exchange for a cash severance payment. The payments are dependent on the number of years of service each employee has
accumulated. Approximately 1,300 flight attendants accepted this program and the expense for this voluntary program is approximately $76 million.
Merger-related costs
Merger-related costs in 2010 include charges related to the planning and execution of the Merger, including costs for items such as financial advisor, legal and
other advisory fees. Salary and severance related costs are primarily associated with administrative headcount reductions and compensation costs related to the
Merger.
Intangible asset impairments
During 2012 and 2011, Continental recorded impairment charges of $30 million and $4 million, respectively, on certain intangible assets related to European
take-off and landing slots to reflect the estimated fair value of these assets as part of its annual impairment test of indefinite-lived intangible assets.
During 2010, the U.S. and Brazilian governments reached an open skies aviation agreement that removed the restriction on the number of flights into Sao
Paulo by October 2015. As a result of these changes, United recorded a $29 million non-cash charge to write-down its indefinite-lived route asset in
Brazil. These impairments were based on estimated fair values, which were primarily developed using income methodologies, as described in Note 12.
Gains on sale of assets and other special charges
During 2012, the Company recorded net gains of $46 million related to gains and losses on the disposal of aircraft and related parts and other assets.
Aircraft impairments
The aircraft impairments summarized in the table above for 2010 relate to United’s nonoperating Boeing 737 and Boeing 747 aircraft which declined in value,
as older, less fuel efficient models became less valuable with increasing fuel costs. The carrying values of these nonoperating aircraft were reduced to estimated
fair values.
Goodwill impairment credit
During 2010, UAL determined that it overstated its deferred tax liabilities by approximately $64 million when it applied fresh start accounting upon its exit
from Chapter 11 bankruptcy protection in 2006. Under applicable standards in 2008, this error would have been corrected with a decrease to goodwill, which
would have resulted in a decrease in the amount of UAL’s 2008 goodwill impairment charge. Therefore, UAL corrected this overstatement in the fourth quarter
of 2010 by reducing its deferred tax liabilities and recorded it as goodwill impairment credit in its consolidated statement of operations. The adjustment was not
made to prior periods as UAL does not believe the correction was material to 2010 or any prior period. As the goodwill from fresh start accounting was pushed
down to United, the above disclosure also applies to United.
Termination charges
During 2011, United recorded $58 million of charges related to the early termination of a maintenance service contract. During 2009, United incurred $104
million primarily for aircraft lease termination charges related to its operational plans to significantly reduce its operating fleet.
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