United Airlines 2015 Annual Report Download - page 20

or minimum collateral coverage ratios, depending on the particular agreement. The Company’s ability to comply with these covenants may be affected by
events beyond its control, including the overall industry revenue environment, the level of fuel costs and the appraised value of certain collateral.
If the Company does not timely pay its debts or comply with such covenants, a variety of adverse consequences could result. These potential adverse
consequences include an increase of required reserves under credit card processing agreements, withholding of credit card sale proceeds by its credit card
service providers, loss of undrawn lines of credit, the occurrence of one or more events of default under the relevant agreements, the acceleration of the
maturity of debt and/or the exercise of other remedies by its creditors and equipment lessors that could result in a material adverse effect on the Company’s
financial position and results of operations. The Company cannot provide assurance that it would have sufficient liquidity to repay or refinance such debt if
it were accelerated. In addition, an event of default or acceleration of debt under certain of its financing agreements could result in one or more events of
default under certain of the Company’s other financing agreements due to cross default and cross acceleration provisions.
Furthermore, constrained liquidity may limit the Company’s ability to withstand competitive pressures and downturns in the travel business and the
economy in general.
The Company’s substantial level of indebtedness and non-investment grade credit rating, as well as market conditions and the availability of assets as
collateral for loans or other indebtedness, may make it difficult for the Company to raise additional capital if needed to meet its liquidity needs on acceptable
terms, or at all.
See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report for additional information
regarding the Company’s liquidity.
Increases in insurance costs or reductions in insurance coverage may materially and adversely impact the Company’s results of operations and financial
condition.
The Company could be exposed to significant liability or loss if its property or operations were to be affected by a natural catastrophe or other event,
including aircraft accidents. If the Company is unable to obtain sufficient insurance (including but not limited to aviation hull and liability insurance,
workers’ compensation, and property and business interruption coverage) to cover such liabilities or losses, whether due to insurance market conditions or
otherwise, its results of operations and financial condition could be materially and adversely affected.
Following the terrorist attacks on September 11, 2001, the Company’s insurance costs increased significantly and the availability of third-party war risk
(terrorism) insurance decreased significantly. From September 2001 through May 2014, the Company obtained third-party war risk (terrorism) insurance
through a FAA-administered program. In anticipation of the government discontinuing this program, effective May 2014, the Company terminated its FAA-
administered insurance and returned to the commercial insurance markets to obtain third-party war risk (terrorism) insurance. The government subsequently
discontinued the FAA-administered program in December 2014. If the Company is unable in the future to obtain third-party war risk (terrorism) insurance
with acceptable terms, or if the coverage obtained is insufficient relative to actual liability or losses that the Company experiences, its results of operations
and financial condition could be materially and adversely affected.
The Company’s results of operations fluctuate due to seasonality and other factors associated with the airline industry.
Due to greater demand for air travel during the spring and summer months, revenues in the airline industry in the second and third quarters of the year are
generally stronger than revenues in the first and fourth quarters of the year, which are periods of lower travel demand. The Company’s results of operations
generally reflect this seasonality, but have also been impacted by numerous other factors that are not necessarily seasonal including, among others, the
imposition of excise and similar taxes, extreme or severe weather, ATC control congestion, geological events, natural disasters, changes in the competitive
environment due to industry consolidation,
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Source: United Continental Holdings, Inc., 10-K, February 18, 2016 Powered by Morningstar® Document Research℠
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