United Airlines 2012 Annual Report Download - page 9

Table of Contents
worldwide. Foreign carriers currently are prohibited by U.S. law from carrying local passengers between two points in the United States and the Company
experiences comparable restrictions in foreign countries. In addition, in the absence of open skies and fifth freedom rights, U.S. carriers are constrained from
carrying passengers to points beyond designated international gateway cities due to limitations in air service agreements and restrictions imposed unilaterally
by foreign governments. To compensate partially for these structural limitations, U.S. and foreign carriers have entered into alliances, joint ventures and
marketing arrangements that enable these carriers to exchange traffic between each other’s flights and route networks. See  above, for further
information.
Seasonality. The air travel business is subject to seasonal fluctuations. Historically, demand for air travel is higher in the second and third quarters, driving
higher revenues, than in the first and fourth quarters, which are periods of lower travel demand.
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Domestic Regulation
 All carriers engaged in air transportation in the United States are subject to regulation by the DOT. Absent an exemption, no air carrier may provide
air transportation of passengers or property without first being issued a DOT certificate of public convenience and necessity. The DOT also grants
international route authority, approves international codeshare arrangements, and regulates methods of competition. The DOT regulates consumer protection
and maintains jurisdiction over advertising, denied boarding compensation, tarmac delays, and baggage liability, and may add additional expensive regulatory
burdens in the future.
Airlines are also regulated by the Federal Aviation Administration (the “FAA”), an agency within the DOT, primarily in the areas of flight safety, air carrier
operations, and aircraft maintenance and airworthiness. The FAA issues air carrier operating certificates and aircraft airworthiness certificates, prescribes
maintenance procedures, oversees airport operations, and regulates pilot and other employee training. From time to time, the FAA issues directives that require
air carriers to inspect or modify aircraft and other equipment, potentially causing the Company to incur substantial, unplanned expenses. The airline industry
is also subject to numerous other federal laws and regulations. The U.S. Department of Homeland Security (“DHS”) has jurisdiction over virtually every
aspect of civil aviation security. See , below. The Antitrust Division of the U.S. Department of Justice (“DOJ”) has jurisdiction over certain airline
competition matters. The U.S. Postal Service has authority over certain aspects of the transportation of mail. Labor relations in the airline industry are
generally governed by the Railway Labor Act (“RLA”), a federal statute. The Company is also subject to investigation inquiries by the DOT, FAA, DOJ and
other U.S. and international regulatory bodies.
 Access to landing and take-off rights, or “slots,” at several major U.S. airports and many foreign airports served by the Company are, or
recently have been, subject to government regulation. Federally mandated domestic slot restrictions currently apply at Reagan National Airport in Washington
D.C. (“Washington Reagan”), John F. Kennedy International Airport (“JFK”), LaGuardia Airport (“LaGuardia”) and Newark Liberty. In addition, to address
concerns about airport congestion, the FAA has designated certain airports, including Newark Liberty, JFK, and LaGuardia as “high density traffic airports”
and has imposed operating restrictions at these three airports, which may include capacity reductions. Additional restrictions on airline routes and takeoff and
landing slots may be proposed in the future that could affect the Company’s rights of ownership and transfer.
 The airline industry is subject to legislative activity that may have an impact on operations and costs. In addition to significant federal, state and
local taxes and fees that the Company is currently subject to, proposed taxes and fees are currently pending that may increase the Company’s operating costs if
imposed on the Company. Congress may pass legislation that could increase labor and operating costs. Recently, Congress has enacted two laws, the Airline
Safety and Federal Aviation Extension Act of 2010 and the FAA Modernization and Reform Act of 2012, which have increased regulation and are likely to
cause increased costs in the areas of
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