United Airlines 2013 Annual Report Download - page 112

Table of Contents
In United’s financing transactions that include loans, United typically agrees to reimburse lenders for any reduced returns with respect to the loans due to any
change in capital requirements and, in the case of loans in 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, 2013, the Company had $2.1 billion of floating rate debt and $286 million of fixed rate debt,
with remaining terms of up to twelve 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 twelve years and an aggregate balance of $2.3 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, 2013, approximately $1.2 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, 2013, the Company’s contingent exposure was approximately $250 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 2014 to 2041. The Company did not record a liability at the time these indirect guarantees were
made.
Credit Card Processing Agreements. United has agreements with financial institutions that process customer credit card transactions for the sale of air
travel and other services. Under certain of United’s credit card processing agreements, the financial institutions either require, or under certain circumstances
have the right to require, that United maintains a reserve equal to a portion of advance ticket sales that has been processed by that financial institution, but for
which United 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 United does not maintain certain minimum levels of unrestricted cash, cash
equivalents and short term investments. United’s current level of unrestricted cash, cash equivalents and short term investments is substantially in excess of
these minimum levels.
Labor Negotiations. As of December 31, 2013, United, including its subsidiaries, had approximately 87,000 employees. Approximately 80% of United’s
employees were represented by various U.S. labor organizations as of December 31, 2013.
In the fourth quarter 2013, the Company announced that the fleet service, passenger service and storekeeper work groups at its United, CMI and MileagePlus
subsidiaries ratified new joint labor agreements. We are in the process of negotiating amended collective bargaining agreements with our remaining employee
groups without joint collective bargaining agreements, including our technicians, flight attendants and dispatchers.
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