United Airlines 2012 Annual Report Download - page 19

Table of Contents
The Company’s business relies extensively on third-party service providers. Failure of these parties to perform as expected, or interruptions in the
Company’s relationships with these providers or their provision of services to the Company, could have an adverse effect on the Company’s
financial position and results of operations.
The Company has engaged an increasing number of third-party service providers to perform a large number of functions that are integral to its business,
including regional operations, operation of customer service call centers, distribution and sale of airline seat inventory, provision of information technology
infrastructure and services, provision of aircraft maintenance and repairs, provision of various utilities and performance of aircraft fueling operations, among
other vital functions and services. The Company does not directly control these third-party service providers, although it does enter into agreements with many
of them that define expected service performance. Any of these third-party service providers, however, may materially fail to meet their service performance
commitments to the Company or agreements with such providers may be terminated. For example, flight reservations booked by customers and/or travel
agencies via third-party GDSs may be adversely affected by disruptions in the business relationships between the Company and GDS operators. Such
disruptions, including a failure to agree upon acceptable contract terms when contracts expire or otherwise become subject to renegotiation, may cause the
carriers’ flight information to be limited or unavailable for display, significantly increase fees for both the Company and GDS users, and impair the
Company’s relationships with its customers and travel agencies. The failure of any of the Company’s third-party service providers to adequately perform their
service obligations, or other interruptions of services, may reduce the Company’s revenues and increase its expenses or prevent the Company from operating
its flights and providing other services to its customers. In addition, the Company’s business and financial performance could be materially harmed if its
customers believe that its services are unreliable or unsatisfactory.
UAL’s obligations for funding Continental’s defined benefit pension plans are affected by factors beyond UAL’s control.
Continental has defined benefit pension plans covering substantially all of its U.S. employees, other than the employees of its Chelsea Food Services division
and Continental Micronesia, Inc. The timing and amount of UAL’s funding requirements under Continental’s plans depend upon a number of factors,
including labor negotiations with the applicable employee groups and changes to pension plan benefits as well as factors outside of UAL’s control, such as the
number of applicable retiring employees, asset returns, interest rates and changes in pension laws. Changes to these and other factors that can significantly
increase UAL’s funding requirements, such as its liquidity requirements, could have a material adverse effect on UAL’s financial condition.
Union disputes, employee strikes or slowdowns, and other labor-related disruptions, as well as the integration of the United and Continental
workforces in connection with the Merger, present the potential for a delay in achieving expected Merger synergies, could adversely affect the
Company’s operations, and could result in increased costs that impair its financial performance.
United and Continental are both highly unionized companies. As of December 31, 2012, the Company and its subsidiaries had approximately 88,000 active
employees, of whom approximately 80% were represented by various U.S. labor organizations.
The successful integration of United and Continental and achievement of the anticipated benefits of the combined company depend in part on integrating
United and Continental employee groups and maintaining productive employee relations. In order to fully integrate the pre-Merger represented employee groups,
the Company must negotiate a joint collective bargaining agreement covering each combined group. The process for integrating the labor groups of United and
Continental is governed by a combination of the RLA, the McCaskill-Bond Amendment, and where applicable, the existing provisions of each company’s
collective bargaining agreements and union policy. A delay in or failure to integrate the United and Continental employee groups presents the potential for
delays in achieving expected Merger synergies, increased operating costs and labor disputes that could adversely affect our operations.
During 2012, various labor agreements were reached between union representatives and the Company. On December 15, 2012, the pilots for both United and
Continental ratified a joint collective bargaining agreement
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