United Airlines 2012 Annual Report Download - page 21

Table of Contents
and its intent to exit Star Alliance as a result of such merger. The Company is also facing stronger competition from expanded airline alliances and joint
ventures. Carriers may improve their competitive positions through airline alliances, slot swaps, and/or joint ventures. Certain airline joint ventures further
competition by allowing airlines to coordinate routes, pool revenues and costs, and enjoy other mutual benefits, achieving many of the benefits of
consolidation. “Open skies” agreements, including the agreements between the United States and the European Union and between the United States and
Japan, may also give rise to additional consolidation or better integration opportunities among international carriers.
There is ongoing speculation that further airline consolidations or reorganizations could occur in the future. The Company routinely engages in analysis and
discussions regarding its own strategic position, including alliances, asset acquisitions and divestitures and may have future discussions with other airlines
regarding strategic activities. If other airlines participate in such activities, those airlines may significantly improve their cost structures or revenue generation
capabilities, thereby potentially making them stronger competitors of the Company and potentially impairing the Company’s ability to realize expected benefits
from its own strategic relationships.
Increases in insurance costs or reductions in insurance coverage may materially and adversely impact the Company’s results of operations and
financial condition.
Following the terrorist attacks on September 11, 2001, the Company’s insurance costs increased significantly and the availability of third-party war risk
(terrorism) insurance decreased significantly. The Company has obtained third-party war risk (terrorism) insurance through a special program administered
by the FAA. Should the government discontinue this coverage, obtaining comparable coverage from commercial underwriters could result in substantially
higher premiums and more restrictive terms, if such coverage is available at all. If the Company is unable to obtain adequate third-party war risk (terrorism)
insurance, its business could be materially and adversely affected.
If any of the Company’s aircraft were to be involved in an accident or if the Company’s property or operations were to be affected by a significant natural
catastrophe or other event, the Company could be exposed to significant liability or loss. If the Company is unable to obtain sufficient insurance (including
aviation hull and liability insurance and property and business interruption coverage) to cover such liabilities or losses, whether due to insurance market
conditions or otherwise, its results of operations and financial condition could be materially and adversely affected.
The Company could experience adverse publicity, harm to its brand, reduced travel demand and potential tort liability as a result of an accident,
catastrophe, or incident involving its aircraft, the aircraft of its regional carriers or the aircraft of its codeshare partners, which may result in a
material adverse effect on the Company’s results of operations or financial position.
An accident, catastrophe, or incident involving an aircraft that the Company operates, or an aircraft that is operated by a codeshare partner or one of the
Company’s regional carriers, could have a material adverse effect on the Company if such accident, catastrophe, or incident created a public perception that
the Company’s operations, or the operations of its codeshare partners or regional carriers, are not safe or reliable, or less safe or reliable than other airlines.
Such public perception could in turn result in adverse publicity for the Company, cause harm to the Company’s brand and reduce travel demand on the
Company’s flights, or the flights of its codeshare partners or regional carriers.
In addition, any such accident, catastrophe, or incident could expose the Company to significant tort liability. Although the Company currently maintains
liability insurance in amounts and of the type the Company believes to be consistent with industry practice to cover damages arising from any such accident
or catastrophe, and the Company’s codeshare partners and regional carriers carry similar insurance and generally indemnify the Company for their
operations, if the Company’s liability exceeds the applicable policy limits or the ability of another carrier to indemnify it, the Company could incur substantial
losses from an accident, catastrophe or incident which may result in a material adverse effect on the Company’s results of operations or financial position.
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