United Airlines 2015 Annual Report Download - page 104

which the interest rate is based on LIBOR, for certain other increased costs that the lenders incur in carrying these loans as a result of any change in law,
subject in most cases to obligations of the lenders to take certain limited steps to mitigate the requirement for, or the amount of, such increased costs. At
December 31, 2015, the Company had $2.4 billion of floating rate debt and $118 million of fixed rate debt, with remaining terms of up to 12 years, that are
subject to these increased cost provisions. In several financing transactions involving loans or leases from non-U.S. entities, with remaining terms of up to 12
years and an aggregate balance of $2.4 billion, the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder to
non-U.S. entities to withholding taxes, subject to customary exclusions.
Fuel Consortia. United participates in numerous fuel consortia with other air carriers at major airports to reduce the costs of fuel distribution and storage.
Interline agreements govern the rights and responsibilities of the consortia members and provide for the allocation of the overall costs to operate the
consortia based on usage. The consortia (and in limited cases, the participating carriers) have entered into long-term agreements to lease certain airport fuel
storage and distribution facilities that are typically financed through tax-exempt bonds (either special facilities lease revenue bonds or general airport
revenue bonds), issued by various local municipalities. In general, each consortium lease agreement requires the consortium to make lease payments in
amounts sufficient to pay the maturing principal and interest payments on the bonds. As of December 31, 2015, approximately $1.3 billion principal amount
of such bonds were secured by significant fuel facility leases in which United participates, as to which United and each of the signatory airlines has provided
indirect guarantees of the debt. As of December 31, 2015, the Company’s contingent exposure was approximately $224 million principal amount of such
bonds based on its recent consortia participation. The Company’s contingent exposure could increase if the participation of other air carriers decreases. The
guarantees will expire when the tax-exempt bonds are paid in full, which ranges from 2017 to 2041. The Company did not record a liability at the time these
indirect guarantees were made.
Regional Capacity Purchase. As of December 31, 2015, United had 279 call options to purchase regional jet aircraft being operated by certain regional
carriers. At December 31, 2015, none of the call options was exercisable because none of the required conditions to make an option exercisable by United
was met.
Credit Card Processing Agreements. The Company has agreements with financial institutions that process customer credit card transactions for the sale of air
travel and other services. Under certain of the Company’s credit card processing agreements, the financial institutions in certain circumstances have the right
to require that the Company maintain a reserve equal to a portion of advance ticket sales that has been processed by that financial institution, but for which
the Company has not yet provided the air transportation. Such financial institutions may require additional cash or other collateral reserves to be established
or additional withholding of payments related to receivables collected if the Company does not maintain certain minimum levels of unrestricted cash, cash
equivalents and short-term investments (collectively, “Unrestricted Liquidity”). The Company’s current level of Unrestricted Liquidity is substantially in
excess of these minimum levels.
Labor Negotiations. As of December 31, 2015, United, including its subsidiaries, had approximately 84,000 employees. Approximately 80% of United’s
employees were represented by various U.S. labor organizations as of December 31, 2015.
The Company has reached joint collective bargaining agreements with the majority of its employee groups since the merger transaction in 2010. The
Company continues to negotiate in mediation for a joint flight attendant collective bargaining agreement, extensions to the IAM represented employees’
agreements and a joint technician and related employees’ collective bargaining agreement following the rejected proposal for ratification of a joint
technician and related employees’ agreement. The Company can provide no assurance that a successful or timely resolution of these labor negotiations will
be achieved.
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Source: United Continental Holdings, Inc., 10-K, February 18, 2016 Powered by Morningstar® Document Research℠
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