United Airlines 2012 Annual Report Download - page 48

Table of Contents
• Regional capacity purchase expense increased $133 million, or 16%, in 2012 as compared to the year-ago period due to a contractual amendment
with one of our regional carrier partners to shift the arrangement from a prorate agreement to a capacity purchase agreement;
• Aircraft maintenance materials and outside repairs increased by $59 million, or 9.9%, in 2012 as compared to the combined 2011 period,
primarily due to increased rates and volume on aircraft engine maintenance;
• An increase of $180 million in special charges in 2012 as compared to the year-ago period primarily due to United and Continental pilots’
ratification of a new joint collective bargaining agreement with the Company; and
• Other operating expenses increased by $113 million, or 5.5%, in 2012 primarily due to aircraft redeployment as a result of the Merger and
additional trip interruption costs, hotel and per diem expenses, personnel-related expenses, and additional denied boarding costs.
Nonoperating expense includes a $1 million loss from fuel hedge ineffectiveness in 2012 as compared to a $38 million loss from fuel hedge ineffectiveness in
the year ago period. Continental’s nonoperating expense also includes a net gain of $42 million associated with marking to market the fair value of derivative
assets and liabilities related to agreements that provide for Continental’s convertible debt to be settled with UAL common stock. This net gain and related
derivatives are reflected only in the Continental stand-alone financial statements. See Note 12 to the financial statements included in Item 8 of this report for
additional information.
Liquidity and Capital Resources
As of December 31, 2012, UAL had $6.5 billion in unrestricted cash, cash equivalents and short-term investments, a decrease of $1.2 billion from
December 31, 2011. The Company also has a $500 million undrawn Credit and Guaranty Agreement (the “Revolving Credit Facility”) as of December 31,
2012. As of December 31, 2012, UAL had $447 million of restricted cash and cash equivalents, which is primarily collateral for performance bonds, letters
of credit, credit card processing agreements and estimated future workers’ compensation claims. We may be required to post significant additional cash
collateral to provide security for obligations that are not currently backed by cash. Restricted cash and cash equivalents at December 31, 2011 totaled $569
million. As of December 31, 2012, United had cash collateralized $77 million of letters of credit, most of which had previously been issued and collateralized
under the provisions of the Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement, dated as of February 2, 2007 (the “Amended Credit
Facility”). As of December 31, 2012, the Company had all of its commitment capacity under its $500 million Revolving Credit Facility available for letters of
credit or borrowings.
As is the case with many of our principal competitors, we have a high proportion of debt compared to capital. We have a significant amount of fixed
obligations, including debt, aircraft leases and financings, leases of airport property and other facilities and pension funding obligations. At December 31,
2012, UAL had approximately $13.2 billion of debt and capital lease obligations, including $1.9 billion that are due within the next 12 months. In addition,
we have substantial non-cancelable commitments for capital expenditures, including the acquisition of new aircraft and related spare engines. The Company
had principal payments of debt and capital lease obligations totaling $1.5 billion in 2012.
The Company will continue to evaluate opportunities to repurchase its debt in open market transactions to reduce its indebtedness and the amount of interest
paid on its indebtedness.
As of December 31, 2012, UAL had firm commitments to purchase 100 Boeing 737 MAX 9 aircraft scheduled for delivery from 2018 through 2022. UAL
also had options to purchase an additional 100 Boeing 737 MAX 9 aircraft. UAL had the right, and intends in the future, to assign its interest under the
purchase agreement for the 737 MAX 9 aircraft with respect to one or more of the aircraft to either United or Continental.
As of December 31, 2012, United had firm commitments to purchase 100 new aircraft (25 Boeing 787 aircraft, 50 Boeing 737-900ER aircraft and 25 Airbus
A350XWB aircraft) scheduled for delivery from 2013 through
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