United Airlines 2013 Annual Report Download - page 80
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Table of Contents
The table below summarizes UAL stock option activity for the years ended December 31 (in millions, except as noted):
Outstanding at December 31, 2010 11 $ 21.70
Exercised (2) 10.77 $ 33
Surrendered (2) 29.07
Outstanding at December 31, 2011 7 23.80
Exercised (1) 12.42 14
Surrendered (1) 30.50
Outstanding at December 31, 2012 5 25.60
Exercised (2) 16.28 27
Surrendered — 27.49
Outstanding at December 31, 2013 3 31.63 2.2 18
Exercisable at December 31, 2013 3 32.00 2.2 16
The fair value of options is determined at the grant date, and at the Merger date in the case of Continental options, using a Black Scholes option pricing model,
which requires the Company to make several assumptions. The risk-free interest rate is based on the U.S. treasury yield curve in effect for the expected term
of the option at the time of grant. The dividend yield on UAL’s common stock was assumed to be zero since UAL did not have any plans to pay dividends at
the time of the option grants.
The volatility assumptions were based upon historical volatilities of UAL and other comparable airlines whose shares are traded using daily stock price
returns equivalent to the contractual term of the option. In addition, implied volatility data for both UAL and other comparable airlines, using current
exchange-traded options, was utilized.
The expected lives of the options were determined based upon either a simplified assumption that the option will be exercised evenly from vesting to expiration
or estimated using historical experience for the assumed options. The terms of certain awards do not provide for the acceleration of vesting upon retirement. In
addition, certain awards and the assumed options awarded to employees that are retirement eligible either at the grant date or within the vesting period are
considered vested at the respective retirement eligibility date.
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