United Airlines 2014 Annual Report Download - page 4

Download and view the complete annual report

Please find page 4 of the 2014 United Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 161

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161

Table of Contents
O’Hare”), Denver International Airport (“Denver”), George Bush Intercontinental Airport (“Houston Bush”), Los Angeles International Airport (“LAX”), A.B.
Won Pat International Airport (“Guam”), San Francisco International Airport (“SFO”) and Washington Dulles International Airport (“Washington Dulles”).
All of the Company’s domestic hubs are located in large business and population centers, contributing to a large amount of “origin and destination”
traffic. The hub and spoke system allows us to transport passengers between a large number of destinations with substantially more frequent service than if
each route were served directly. The hub system also allows us to add service to a new destination from a large number of cities using only one or a limited
number of aircraft. As discussed under  below, United is a member of Star Alliance, the world’s largest alliance network.
Financial information on the Company’s operating revenues by geographic regions, as reported to the U.S. Department of Transportation (the “DOT”), can be
found in Note 18 to the financial statements included in Part II, Item 8 of this report.
Regional. The Company has contractual relationships with various regional carriers to provide regional jet and turboprop service branded as United Express.
These regional operations are an extension of the Company’s mainline network. This regional service complements our operations by carrying traffic that
connects to our mainline service and allows flights to smaller cities that cannot be provided economically with mainline aircraft. Republic Airlines
(“Republic”), CommutAir Airlines (“CommutAir”), ExpressJet Airlines (“ExpressJet”), GoJet Airlines (“GoJet”), Mesa Airlines (“Mesa”), Shuttle America
(“Shuttle”), SkyWest Airlines (“SkyWest”) and Trans States Airlines (“Trans States”) are all regional carriers, which operate most of their capacity contracted
to United under capacity purchase agreements (“CPAs”) with United. Under these CPAs, the Company pays the regional carriers contractually-agreed fees
(carrier-controlled costs) for operating these flights plus a variable reimbursement (incentive payment for operational performance) based on agreed
performance metrics. The fees for carrier-controlled costs are based on specific rates for various operating expenses of the regional carriers, such as crew
expenses, maintenance and aircraft ownership, some of which are multiplied by specific operating statistics (e.g., block hours, departures) while others are
fixed monthly amounts. Under these CPAs, the Company is responsible for all fuel costs incurred as well as landing fees, facilities rent and other costs, which
are passed through by the regional carrier to the Company without any markup. In return, the regional carriers operate this capacity exclusively for United, on
schedules determined by the Company. The Company also determines pricing and revenue management, assumes the inventory and distribution risk for the
available seats, and permits mileage accrual and redemption for regional flights through its MileagePlus loyalty program.
While the regional carriers operating under CPAs comprise more than 95% of all regional flights, the Company also has prorate agreements with Hyannis Air
Service, Inc. (“Cape Air”), SkyWest and Trans States. Under these commercial flying agreements, the Company and its regional carriers agree to divide
revenue collected from each passenger according to a formula, while both the Company and its regional carriers are individually responsible for their own
costs of operations. Unlike CPAs, under a prorate agreement, the regional carrier retains the control and risk of scheduling, and in most cases, market
selection, local seat pricing and inventory for its flights, although the Company and its regional carriers may coordinate schedules to maximize connections.
Alliances. United has a number of strategic bilateral and multilateral alliances with other airlines, including marketing alliances and joint ventures, which
enhance travel options for customers by providing greater time of day coverage to common destinations, additional mileage accrual and redemption
opportunities, and expanded global network access. These marketing alliances typically include one or more of the following features: loyalty program
reciprocity; codesharing of flight operations (whereby one carrier’s selected flights can be marketed under the brand name of another carrier); coordination of
reservations, ticketing, passenger check-in, baggage handling, airport lounge access and flight schedules, and other resource-sharing activities that include
joint sales and marketing.
United is a member of Star Alliance, a global integrated airline network co-founded by United in 1997 and the largest and most comprehensive airline
alliance in the world. As of January 1, 2015, Star Alliance carriers served over 1,300 airports in more than 190 countries with over 18,500 daily departures.
Current Star Alliance members, in addition to United, are Adria Airways, Aegean Airlines, Air Canada, Air China, Air India, Air New Zealand,
4