United Airlines 2015 Annual Report Download - page 68

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



United Continental Holdings, Inc. (together with its consolidated subsidiaries, “UAL” or the “Company”) is a holding company and its principal, wholly-
owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”). As UAL consolidates United for financial statement
purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United’s operating revenues and operating expenses
comprise nearly 100% of UAL’s revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL’s assets, liabilities
and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and
any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words “we,”
“our,” “us,” and the “Company” in this report for disclosures that relate to all of UAL and United.

(a) The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in these financial statements and
accompanying notes. Actual results could differ from those estimates.
(b) The Company records passenger ticket sales and tickets sold by other airlines for use on United as passenger revenue
when the transportation is provided or upon estimated breakage. The value of unused passenger tickets is included in current liabilities as
Advance ticket sales. Tickets sold by other airlines are recorded at the estimated values to be billed to the other airlines. Differences between
amounts billed and the actual amounts may be rejected and rebilled or written off if the amount recorded was different from the original estimate.
When necessary, the Company records a reserve against our interline billings and payables if historical experience indicates that these amounts are
different. Non-refundable tickets generally expire on the date of the intended flight, unless the date is extended by notification from the customer
on or before the intended flight date.
Fees charged in association with changes or extensions to non-refundable tickets are recorded as other revenue at the time the fee is incurred. The
fare on the changed ticket, including any additional collection of fare, is deferred and recognized in accordance with our transportation revenue
recognition policy at the time the transportation is provided. Change fees related to non-refundable tickets are considered a separate transaction
from the air transportation because they represent a charge for the Company’s additional service to modify a previous sale. Therefore, the pricing
of the change fee and the initial customer order are separately determined and represent distinct earnings processes.
The Company records an estimate of breakage revenue on the flight date for tickets that will expire unused. These estimates are based on the
evaluation of actual historical results and forecasted trends. Refundable tickets expire after one year from the date of issuance.
The Company recognizes cargo and other revenue as service is provided.
Under our capacity purchase agreements (“CPAs”) with regional carriers, we purchase all of the capacity related to aircraft covered by the contracts
and are responsible for selling all of the related seat inventory. We record the passenger revenue and related expenses as separate operating
revenue and expense in the consolidated statement of operations.
67
Source: United Continental Holdings, Inc., 10-K, February 18, 2016 Powered by Morningstar® Document Research℠
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