United Airlines 2012 Annual Report Download - page 54

Table of Contents
(a) Long-term debt presented in UAL’s financial statements is net of a $152 million debt discount which is being amortized over the debt terms. Contractual payments are not net of the debt discount. Contractual
long-term debt includes $83 million of non-cash obligations as these debt payments are made directly to the creditor by a company that leases three aircraft from United. The creditor’s only recourse to United is
repossession of the aircraft.
(b) Includes interest portion of capital lease obligations of $92 million in 2013, $81 million in 2014, $63 million in 2015, $57 million in 2016, $37 million in 2017 and $210 million thereafter. Future interest
payments on variable rate debt are estimated using estimated future variable rates based on a yield curve.
(c) Represents our estimates of future minimum noncancelable commitments under our capacity purchase agreements and does not include the portion of the underlying obligations for aircraft and facility rent that
is disclosed as part of aircraft and nonaircraft operating leases. Amounts also exclude a portion of United’s capital lease obligation recorded for certain of its capacity purchase agreements. See Note 15 to the
financial statements included in Item 8 of this report for the significant assumptions used to estimate the payments.
(d) Amounts represent postretirement benefit payments, net of subsidy receipts, through 2022. Benefit payments approximate plan contributions as plans are substantially unfunded.
(e) Represents estimate of the minimum funding requirements as determined by government regulations for Continental plans only, as the United plans are not material. Amounts are subject to change based on
numerous assumptions, including the performance of assets in the plan and bond rates. See below, for a discussion of our assumptions regarding UAL’s pension plans.
(f) Represents contractual commitments for firm order aircraft and spare engines only, net of previously paid purchase deposits, and noncancelable commitments to purchase goods and services, primarily
information technology support. See Note 17 to the financial statements included in Item 8 of this report for a discussion of our purchase commitments.
Contingencies
Continental EETCs.
In October 2012, Continental created two pass-through trusts, one of which issued $712 million aggregate principal amount of Class A pass-through
certificates with a stated interest rate of 4% and the second of which issued $132 million aggregate principal amount of Class B pass-through certificates with
a stated interest rate of 5.5%. The proceeds of the issuance of the Class A and Class B pass-through certificates, which amounted to $844 million, are used to
purchase equipment notes issued by Continental. Of the $844 million in proceeds raised by the pass-through trusts, Continental received $293 million as of
December 31, 2012, Continental expects to receive the remaining proceeds from the issuance during the first seven months of 2013 as aircraft are delivered to
Continental and Continental issues equipment notes to the trusts. Continental records the debt obligation upon issuance of the equipment notes rather than
upon the initial issuance of the pass-through certificates. The proceeds have been and are expected to be used to fund the acquisition of new aircraft.
In December 2012, Continental created one pass-through trust which issued $425 million aggregate principal amount of Class C pass-through certificates with
a stated interest rate of 6.125%. The proceeds of the issuance of the Class C pass-through certificates are used to purchase equipment notes issued by
Continental related to the aircraft financed in both the March and October 2012 EETC financings. Of the $425 million in proceeds raised by the pass-through
trusts, Continental had received $278 million as of December 31, 2012. Continental expects to receive the remaining proceeds from the issuance during the
first seven months of 2013 as aircraft are delivered to Continental and Continental issues equipment notes to the trusts. Continental records the debt obligation
upon issuance of the equipment notes rather than upon the initial issuance of the pass-through certificates.
The Company evaluated whether the pass-through trusts formed are variable interest entities (“VIEs”) required to be consolidated by the Company under
applicable accounting guidance, and determined that the pass-through trusts are VIEs. The Company determined that it does not have a variable interest in the
pass-through trusts. The Company does not invest in or obtain a financial interest in the pass-through trusts. Rather, Continental has an obligation to make
interest and principal payments on its equipment notes held by the pass-through trusts. The Company did not intend to have any voting or non-voting equity
interest in the pass-through trusts or to absorb variability from the pass-through trusts. Based on this analysis, the Company determined that it is not required
to consolidate the pass-through trusts.
Legal and Environmental. The Company has certain contingencies resulting from litigation and claims incident to the ordinary course of business.
Management believes, after considering a number of factors, including (but not limited to) the information currently available, the views of legal counsel, the
nature of contingencies to
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