United Airlines 2012 Annual Report Download - page 20

Table of Contents
with the Company. In February 2013, the Company reached tentative agreements on new joint collective bargaining agreements with the IAM for the fleet
service, passenger service and storekeeper workgroups at the United, Continental, Continental Micronesia and Mileage Plus subsidiaries. The tentative
agreements with the IAM cover more than 28,000 employees and are subject to ratification by the IAM members. We are also currently in the process of
negotiating joint collective bargaining agreements with all of our other major represented groups. Several other collective bargaining agreements were reached
with unions at each of our subsidiaries during 2012, including with the United flight attendants in February 2012, the Continental Micronesia aircraft
technicians in May 2012, the Continental pilot ground instructors in June 2012 and the Continental Micronesia flight attendants in August 2012.
The Company can provide no assurance that a successful or timely resolution of labor negotiations for all amendable collective bargaining agreements will be
achieved. There is a risk that unions or individual employees might pursue judicial or arbitral claims arising out of changes implemented as a result of the
Merger. Employee dissatisfaction with the results of the seniority integration may lead to litigation that in some cases can delay implementation of the integrated
seniority list. There is also a possibility that employees or unions could engage in job actions such as slow-downs, work-to-rule campaigns, sick-outs or other
actions designed to disrupt United’s and Continental’s normal operations, in an attempt to pressure the companies in collective bargaining negotiations.
Although the RLA makes such actions unlawful until the parties have been lawfully released to self-help, and United and Continental can seek injunctive
relief against premature self-help, such actions can cause significant harm even if ultimately enjoined. In addition, achieving joint collective bargaining
agreements, including the pilot agreement, with our represented employee groups is likely to increase our labor costs, which increase could be material.
The airline industry is highly competitive and susceptible to price discounting and changes in capacity, which could have a material adverse effect
on the Company.
The U.S. airline industry is characterized by substantial price competition. In recent years, the market share held by low-cost carriers has increased
significantly and is expected to continue to increase. The increased market presence of low-cost carriers, which engage in substantial price discounting, has
diminished the ability of large network carriers to achieve sustained profitability on domestic and international routes.
Airlines also compete for market share by increasing or decreasing their capacity, including route systems and the number of markets served. Several of the
Company’s domestic and international competitors have increased their international capacity by including service to some destinations that the Company
currently serves, causing overlap in destinations served and therefore increasing competition for those destinations. In addition, the Company and certain of its
competitors have implemented significant capacity reductions in recent years in response to high and volatile fuel prices and stagnant global economic growth.
Further, certain of the Company’s competitors may not reduce capacity or may increase capacity, impacting the expected benefit to the Company from
capacity reductions. This increased competition in both domestic and international markets may have a material adverse effect on the Company’s results of
operations, financial condition or liquidity.
The airline industry may undergo further bankruptcy restructuring, industry consolidation, or the creation or modification of alliances or joint
ventures, any of which could have a material adverse effect on the Company.
The Company faces and may continue to face strong competition from other carriers due to bankruptcy restructuring, industry consolidation, and the creation
and modification of alliances and joint ventures. A number of carriers have filed for bankruptcy protection in recent years and other domestic and international
carriers could restructure in bankruptcy or threaten to do so in the future to reduce their costs. Most recently, AMR Corporation, the parent company of
American Airlines, Inc., filed for bankruptcy protection in November 2011 and is currently under going a restructuring under Chapter 11 of the U.S.
Bankruptcy Code. Carriers operating under bankruptcy protection can operate in a manner that could be adverse to the Company and could emerge from
bankruptcy as more vigorous competitors.
Both the U.S. and international airline industries have experienced consolidation through a number of mergers and acquisitions. On February 14, 2013, US
Airways announced an agreement to merge with AMR Corporation
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