United Airlines 2015 Annual Report Download - page 14

Proceedings” of this annual report. No assurances can be given that the results of these or new matters will be favorable to us. An adverse resolution of
lawsuits, arbitrations, investigations or other proceedings or actions could have a material adverse effect on our financial condition and results of operations,
including as a result of non-monetary remedies. Defending ourselves in these matters may be time-consuming, expensive and disruptive to normal business
operations and may result in significant expense and a diversion of management’s time and attention from the operation of our business, which could impede
our ability to achieve our business objectives. Additionally, any amount that we may be required to pay to satisfy a judgment, settlement, fine or penalty may
not be covered by insurance. Under our charter and certain indemnification agreements that we have entered into (and may in the future enter into) with our
officers, directors and certain third parties, we could be required to indemnify and advance expenses to them in connection with their involvement in certain
actions, suits, investigations and other proceedings. There can be no assurance that any of these payments will not be material.
Disruptions to the Company’s regional network and United Express flights provided by third-party regional carriers could adversely affect the Company’s
operations and financial condition.
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 and complement the Company’s operations by carrying traffic that connects to
mainline service and allows flights to smaller cities that cannot be provided economically with mainline aircraft. The Company’s business and operations are
dependent on its regional flight network, with regional capacity accounting for approximately 12% of the Company’s total as of December 31, 2015.
Although the Company has agreements with its regional carriers that include contractually agreed performance metrics, the Company does not control the
operations of these carriers. A number of factors may impact the Company’s regional network, including weather-related effects and seasonality. In addition,
the decrease in qualified pilots driven by federal regulations has adversely impacted and could continue to affect the Company’s regional flying. For
example, the FAA’s expansion of minimum pilot qualification standards, including a requirement that a pilot have at least 1,500 total flight hours, as well as
the FAA’s revised pilot flight and duty time rules, effective January 2014, have contributed to an increasing need for pilots for regional carriers. The decrease
in qualified pilots resulting from the regulations as well as factors including a decreased student pilot population and a shrinking U.S. military from which to
hire qualified pilots, could adversely impact the Company’s operations and financial condition, and also require the Company to reduce regional carrier
flying.
If a significant disruption occurs to the Company’s regional network or flights or if one or more of the regional carriers with which the Company has
relationships is unable to perform their obligations over an extended period of time, there could be a material adverse effect on the Company’s business,
financial condition and operations.
The Company’s business relies extensively on third-party service providers. Failure of these parties to perform as expected, or interruptions in the
Company’s relationships with these providers or their provision of services to the Company, could have an adverse effect on the Company’s financial
position and results of operations.
The Company has engaged an increasing number of third-party service providers to perform a large number of functions that are integral to its business,
including regional operations, operation of customer service call centers, distribution and sale of airline seat inventory, provision of information technology
infrastructure and services, transmitting or uploading of data, provision of aircraft maintenance and repairs, provision of various utilities and performance of
aircraft fueling operations, among other vital functions and services. The Company does not directly control these third-party service providers, although it
does enter into agreements with many of them that define expected service performance. Any of these third-party service providers, however, may materially
fail to meet their service performance commitments to the Company, may suffer disruptions to their systems that could impact their services, or the
agreements with such providers may be terminated. For example, flight reservations booked by customers and travel agencies via third-party GDSs may be
adversely affected by disruptions in the business relationships between the Company and GDS operators. Such disruptions, including a failure to agree upon
acceptable contract terms when contracts expire or otherwise become subject to
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Source: United Continental Holdings, Inc., 10-K, February 18, 2016 Powered by Morningstar® Document Research℠
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