United Airlines 2012 Annual Report Download - page 17

Table of Contents
Extensive government regulation could increase the Company’s operating costs and restrict its ability to conduct its business.
Airlines are subject to extensive regulatory and legal oversight. Compliance with U.S. and international regulations imposes significant costs and may have
adverse effects on the Company. Laws, regulations, taxes and airport rates and charges, both domestically and internationally, have been proposed from time
to time that could significantly increase the cost of airline operations or reduce airline revenue. The Company cannot provide any assurance that current laws
and regulations, or laws or regulations enacted in the future, will not adversely affect its financial condition or results of operations.
Each of United and Continental provides air transportation under certificates of public convenience and necessity issued by the DOT. If the DOT altered,
amended, modified, suspended or revoked these certificates, it could have a material adverse effect on the Company’s business. The DOT is also responsible
for promulgating consumer protection and other regulations that may impose significant compliance costs on the Company. The FAA regulates the safety of
United’s and Continental’s operations. United and Continental are operators pursuant to a single air carrier operating certificate issued by the FAA. From time
to time, the FAA also issues orders, airworthiness directives and other regulations relating to the maintenance and operation of aircraft that require material
expenditures or operational restrictions by the Company. These FAA orders and directives could include the temporary grounding of an entire aircraft type if
the FAA identifies design, manufacturing, maintenance or other issues requiring immediate corrective action. For example, on January 11, 2013, the FAA
announced a review of the Boeing 787 aircraft’s critical systems and in-service issues and, on January 16, 2013, the FAA issued an emergency airworthiness
directive that requires U.S. Boeing 787 operators, including the Company, to temporarily cease operations of such aircraft. If the directive were to continue for
an extended period of time, it could adversely affect the Company’s business and results of operations. FAA requirements cover, among other things,
retirement of older aircraft, security measures, collision avoidance systems, airborne windshear avoidance systems, noise abatement and other environmental
concerns, aircraft operation and safety and increased inspections and maintenance procedures to be conducted on older aircraft. These FAA directives or
requirements could have a material adverse effect on the Company.
In addition, the Company’s operations may be adversely impacted due to the existing antiquated air traffic control (“ATC”) system utilized by the U.S.
government. During peak travel periods in certain markets, the current ATC system’s inability to handle existing travel demand has led to short-term capacity
constraints imposed by government agencies and resulted in delays and disruptions of air traffic. In addition, the current system will not be able to effectively
handle projected future air traffic growth. Imposition of these ATC constraints on a long-term basis may have a material adverse effect on our results of
operations. Failure to update the ATC system in a timely manner, and the substantial funding requirements of a modernized ATC system that may be imposed
on air carriers may have an adverse impact on the Company’s financial condition or results of operations.
The airline industry is subject to extensive federal, state and local taxes and fees that increase the cost of the Company’s operations. In addition to taxes and
fees that the Company is currently subject to, proposed taxes and fees are currently pending and if imposed, would increase the Company’s operating
expenses.
Access to landing and take-off rights, or “slots,” at several major U.S. airports and many foreign airports served by the Company are, or recently have been,
subject to government regulation. Certain of the Company’s major hubs are among increasingly congested airports in the United States and have been or could
be the subject of regulatory action that might limit the number of flights and/or increase costs of operations at certain times or throughout the day. The FAA
may limit the Company’s airport access by limiting the number of departure and arrival slots at high density traffic airports, which could affect the
Company’s ownership and transfer rights, and local airport authorities may have the ability to control access to certain facilities or the cost of access to its
facilities, which could have an adverse effect on the Company’s business. The FAA historically has taken actions with respect to airlines’ slot holdings that
airlines have challenged; if the FAA were to take actions to adversely affect the Company’s slot holdings, the Company could incur substantial costs to
preserve its slots. Further, the Company’s operating costs at airports at which it operates, including the Company’s major hubs, may increase
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