United Airlines 2015 Annual Report Download - page 12

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Global economic, political and industry conditions constantly change and unfavorable conditions may have a material adverse effect on the Company’s
business and results of operations.
The Company’s business and results of operations are significantly impacted by general economic and industry conditions. The airline industry is highly
cyclical, and the level of demand for air travel is correlated to the strength of the U.S. and global economies. The Company is a global business with
operations outside of the United States from which it derives significant operating revenues. The Company’s international operations are a vital part of its
worldwide airline network. Volatile economic, political and market conditions in these international regions may have a negative impact on the Company’s
operating results and its ability to achieve its business objectives.
Robust demand for the Company’s air transportation services depends largely on favorable economic conditions, including the strength of the domestic and
foreign economies, low unemployment levels, strong consumer confidence levels and the availability of consumer and business credit. Air transportation is
often a discretionary purchase that leisure travelers may limit or eliminate during difficult economic times. In addition, during periods of unfavorable
economic conditions, business travelers usually reduce the volume of their travel, either due to cost-saving initiatives or as a result of decreased business
activity requiring travel. During such periods, the Company’s business and results of operations may be adversely affected due to significant declines in
industry passenger demand, particularly with respect to the Company’s business and premium cabin travelers, and a reduction in fare levels.
Stagnant or weakening global economic conditions either in the United States or in other geographic regions, and any future volatility in U.S. and global
financial and credit markets may have a material adverse effect on the Company’s revenues, results of operations and liquidity. If such economic conditions
were to disrupt capital markets in the future, the Company may be unable to obtain financing on acceptable terms (or at all) to refinance certain maturing debt
and to satisfy future capital commitments.
In addition, significant or volatile changes in exchange rates between the U.S. dollar and other currencies may have a material adverse impact upon the
Company’s liquidity, revenues, costs and operating results.
The airline industry is highly competitive and susceptible to price discounting and changes in capacity, which could have a material adverse effect on the
Company.
The U.S. airline industry is characterized by substantial price competition including from low-cost carriers. The significant market presence of low-cost
carriers, which engage in substantial price discounting, may diminish our ability to achieve sustained profitability on domestic and international routes.
Airlines also compete for market share by increasing or decreasing their capacity, including route systems and the number of markets served. Several of the
Company’s domestic and international competitors have increased their international capacity by including service to some destinations that the Company
currently serves, causing overlap in destinations served and therefore increasing competition for those destinations. In addition, the Company has
implemented significant capacity reductions in recent years in response to high and volatile fuel prices and stagnant global economic growth. This increased
competition in both domestic and international markets may have a material adverse effect on the Company’s results of operations, financial condition or
liquidity.
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Source: United Continental Holdings, Inc., 10-K, February 18, 2016 Powered by Morningstar® Document Research℠
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