UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20152018

OR

¨
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

 unitedcoverlogo.jpg

Commission

File Number

 

Exact Name of Registrant as

Specified in its Charter, Principal
Executive

Office Address, Zip Code and

Telephone Number, Including Area Code

 

State of

Incorporation

 

I.R.S. Employer

Identification No.

001-06033

 United Continental Holdings, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
(872) 825-4000		 Delaware 36-2675207

001-10323

 United Airlines, Inc.
233 South Wacker Drive
Chicago, Illinois 60606
(872) 825-4000		 Delaware 74-2099724

Securities registered pursuant to Section 12(b) of the Act:

  

Title of Each Class

 

Name of Each Exchange on Which Registered

United Continental Holdings, Inc.

 Common Stock, $0.01 par value   New YorkThe Nasdaq Stock ExchangeMarket LLC

United Airlines, Inc.

 None None

Securities registered pursuant to Section 12(g) of the Act:

United Continental Holdings, Inc.None
United Airlines, Inc.None

        United Continental Holdings, Inc.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.		  None
United Continental Holdings, Inc.
Yes  x    No  o
  

        United Airlines, Inc.

  None
United Airlines, Inc.
Yes  x    No  o
  

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act
United Continental Holdings, Inc.

 
Yes  o   No  x    No  ¨
 
 

United Airlines, Inc.

 
Yes  o   No  x    No  ¨
 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
United Continental Holdings, Inc.

 
Yes  ¨x    No  xo
 
 

United Airlines, Inc.

 
Yes  ¨x    No  xo
 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
United Continental Holdings, Inc.

 
Yes  x    No  ¨o
 
 

United Airlines, Inc.

 
Yes  x    No  ¨o
 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
United Continental Holdings, Inc.

Yes  x    No  ¨

United Airlines, Inc.

Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

United Continental Holdings, Inc.            

 x 
 

United Airlines, Inc.

 x 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

United Continental

Holdings, Inc.

 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
United Continental Holdings, Inc.
Large accelerated filer  x
 
Accelerated filer  ¨o
 
Non-accelerated filer  ¨o
 
Smaller reporting company  ¨o
Emerging growth company o

United Airlines, Inc.

 
Large accelerated filer  ¨o
 
Accelerated filer  ¨o
 
Non-accelerated filer  x
 
Smaller reporting company  ¨o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

 

Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
United Continental Holdings, Inc.

 Yes  ¨    No  xo 
 

United Airlines, Inc.

 Yes  ¨    No  xo 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
United Continental Holdings, Inc.
Yes  o   No  x
United Airlines, Inc.
Yes  o   No  x

The aggregate market value of common stock held by non-affiliates of United Continental Holdings, Inc. was $20,035,996,479$17,844,650,113 as of June 30, 2015,29, 2018, based on the closing sale price of $53.01$69.73 on the New York Stock Exchange reported for that date. There is no market for United Airlines, Inc. common stock.

Indicate the number of shares outstanding of each of the registrant’sregistrant's classes of common stock, as of February 9, 2016.

22, 2019.

United Continental Holdings, Inc.

 359,484,808266,727,577 shares of common stock ($0.01 par value)

United Airlines, Inc.

 1,000 shares of common stock ($0.01 par value) (100% owned by United Continental Holdings, Inc.)

This combined Form 10-K is separately filed by United Continental Holdings, Inc. and United Airlines, Inc.

OMISSION OF CERTAIN INFORMATION

United Airlines, Inc. meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and areis therefore filing this form with the reduced disclosure format allowed under that General Instruction.

DOCUMENTS INCORPORATED BY REFERENCE

Information

Certain information required by Items 10, 11, 12 and 13 of Part III of this Form 10-K areis incorporated by reference for United Continental Holdings, Inc. from its definitive proxy statement for its 20162019 Annual Meeting of Stockholders.


United Continental Holdings, Inc. and Subsidiary Companies

United Airlines, Inc. and Subsidiary Companies

Annual Report on Form 10-K

For the Year Ended December 31, 20152018

            Page        
PART I

Item 1.

Business  3Page
PART I 

Item 1A.

1.		 
Business
3
Item 1A.
Risk Factors
8
Item 1B.
Unresolved Staff Comments
18
Item 2.
Properties
19
Item 3.
Legal Proceedings
20
Item 4.
Mine Safety Disclosures
21
  11
PART II 

Item 1B.

5.		 Unresolved Staff Comments21

Item 2.

Properties22

Item 3.

Legal Proceedings24

Item 4.

Mine Safety Disclosures24
PART II

Item 5.

Market for Registrant’sRegistrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
21
Item 6. 25

Item 6.

Selected Financial Data
22
Item 7. 27

Item 7.

Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations
24
Item 7A. 31

Item 7A.

Quantitative and Qualitative Disclosures aboutAbout Market Risk
39
Item 8. 50

Item 8.

Financial Statements and Supplementary Data
40
  53
Combined Notes to Consolidated Financial Statements
54
Item 9. 67

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
90
Item 9A.
Controls and Procedures
90
Item 9B.
Other Information
93
  109
PART III 

Item 9A.

10.		 Controls and Procedures110

Item 9B.

Other Information113
PART III

Item 10.

Directors, Executive Officers and Corporate Governance
93
Item 11. 
Executive Compensation
113
94

Item 11.

12.		 Executive Compensation114

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
94
Item 13. 114

Item 13.

Certain Relationships and Related Transactions, and Director Independence
94
Item 14. 114

Item 14.

Principal Accountant Fees and Services
94
  115
PART IV 
Item 15. 
PART IV

Item 15.

Exhibits and Financial Statement Schedules
96
Item 16. 
Form 10-K Summary
116
96

2


This Annual Report on Form 10-K ("Form 10-K") contains various “forward-looking statements”"forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act"). Forward-looking statements represent the Company’sour expectations and beliefs concerning future events, based on information available to the Companyus on the date of the filing of this Form 10-K, and are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from those referenced in the forward-looking statements are listed in Part I, Item 1A, Risk Factors and in Part II, Item 7, Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations. The Company disclaimsWe disclaim any intent or obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise, except as required by applicable law.

PART I


ITEM 1.BUSINESS.

ITEM 1.    BUSINESS.
Overview

United Continental Holdings, Inc. (together with its consolidated subsidiaries, “UAL”"UAL" or the “Company”"Company") is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”"United"). As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United’sUnited's operating revenues and operating expenses comprise nearly 100% of UAL’sUAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL’sUAL'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,”"we," "our," "us," and the “Company”"Company" in this report for disclosures that relate to all of UAL and United.

UAL was incorporated under the laws of the State of Delaware on December 30, 1968. Our world headquartersprincipal executive office is located at 233 South Wacker Drive, Chicago, Illinois 60606 (telephone number (872) 825-4000).

The Company’sCompany's website is www.unitedcontinentalholdings.com.located at www.united.com and its investor relations website is located at ir.united.com. The information contained on or connected to the Company’s websiteCompany's websites is not incorporated by reference into this annual reportAnnual Report on Form 10-K and should not be considered part of this or any other report filed with the U.S. Securities and Exchange Commission (“SEC”("SEC"). Through this website, the Company’sThe Company's filings with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, as well as ourUAL's proxy statement for ourits annual meeting of stockholders, are accessible without charge on the Company's investor relations website, as soon as reasonably practicable, after such material is electronically filed with, or furnished to, the SEC. Such filings are also available on the SEC’sSEC's website at www.sec.gov.

Operations

The Company transports people and cargo through its mainline and regional operations. See Part I, Item 2 Properties, for a description of the Company’s mainline and regional aircraft.

With key global air rights inthroughout North America Asia-Pacific,and to destinations in Asia, Europe, the Middle East Africa and Latin America, UAL has the world’s most comprehensive global route network.America. UAL, through United and its regional carriers, operates an average of nearly 5,000more than 4,800 flights a day to 342353 airports across sixfive continents, from the Company’swith hubs at Newark Liberty International Airport (“Newark Liberty”("Newark"), Chicago O’HareO'Hare International Airport (“("Chicago O’Hare”O'Hare"), Denver International Airport (“Denver”("Denver"), George Bush Intercontinental Airport (“("Houston Bush”Bush"), Los Angeles International Airport (“LAX”("LAX"), A.B. Won Pat International Airport (“Guam”("Guam"), San Francisco International Airport (“SFO”("SFO") and Washington Dulles International Airport (“("Washington Dulles”Dulles").

3

All of the Company’sCompany's domestic hubs are located in large business and population centers, contributing to a large amount of “origin"origin and destination”destination" traffic. The hub and spoke system allows us to transport passengers between a large number of destinations with substantially more frequent service than if each route were served directly. The hub system also allows us to add service to a new destination from a large number of cities using only one or a limited number of aircraft. As discussed underAlliances below, United is a member of Star Alliance, the world’sworld's largest alliance network.

Financial information on the Company’s operating revenues by geographic regions, as reported to the U.S. Department of Transportation (the “DOT”), can be found in Note 17 to the financial statements included in Part II, Item 8 of this report.

Regional. The Company has contractual relationships with various regional carriers to provide regional jet and turbopropaircraft service branded as United Express. These regional operations are an extension of the Company’s mainline network. This regional service complements our operations by carrying traffic that connects to our mainline servicehubs and allows flights to smaller cities that cannot be provided economically with mainline aircraft. Republic Airlines (“Republic”("Republic"), Champlain Enterprises, LLC d/b/a CommutAir Airlines (“CommutAir”("CommutAir"), ExpressJet Airlines (“ExpressJet”("ExpressJet"), GoJet Airlines (“GoJet”("GoJet"), Mesa Airlines (“Mesa”), Shuttle America (“Shuttle”("Mesa"), SkyWest Airlines (“SkyWest”("SkyWest"), Air Wisconsin Airlines ("Air Wisconsin"), and Trans States Airlines (“("Trans States”States") are all regional carriers whichthat operate most of theirwith capacity contracted to United under capacity purchase agreements (“CPAs”("CPAs") with United.. Under these CPAs, the Company pays the regional carriers contractually agreed fees (carrier-controlled(carrier costs) for operating these flights plus a variable reimbursement (incentive payment for operational performance) based on agreed performance metrics.metrics, subject

to annual adjustments. The fees for carrier-controlledcarrier costs are based on specific rates for various operating expenses of the regional carriers, such as crew expenses, maintenance and aircraft ownership, some of which are multiplied by specific operating statistics (e.g., block hours, departures), while others are fixed monthly amounts. Under these CPAs, the Company is responsible for all fuel costs incurred, as well as landing fees facilities rent and other costs, which are either passed through by the regional carrier to the Company without any markup or directly incurred by the Company.Company, and, in some cases, the Company owns or leases some or all of the aircraft subject to the CPA, and leases or subleases, as applicable, such aircraft to the regional carrier. In return, the regional carriers operate thisthe capacity of the aircraft included within the scope of such CPA exclusively for United, on schedules determined by the Company. The Company also determines pricing and revenue management, assumes the inventory and distribution risk for the available seats and permits mileage accrual and redemption for regional flights through its MileagePlus® loyalty program.

While the regional carriers operating under CPAs comprise more than 95% of all regional flights, the Company also has prorate agreements with Hyannis Air Service, Inc. (“Cape Air”), SkyWest and Trans States. Under these commercial flying agreements, the Company and its regional carriers agree to divide revenue collected from each passenger according to a formula, while both the Company and its regional carriers are individually responsible for their own costs of operations. Unlike CPAs, under a prorate agreement, the regional carrier retains the control and risk of scheduling, and in most cases, market selection, local seat pricing and inventory for its flights, although the Company and its regional carriers may coordinate schedules to maximize connections.

Alliances. United is a member of Star Alliance, a global integrated airline network co-founded by United in 1997 and the largest and most comprehensive airline alliance in the world. As of January 1, 2016,2019, Star Alliance carriers served over 1,300 airports in more than 190193 countries with over 18,50018,800 daily departures. Current Star Alliance members, in addition to United, are Adria Airways, Aegean Airlines, Air Canada, Air China, Air India, Air New Zealand, All Nippon Airways (“ANA”("ANA"), Asiana Airlines, Austrian Airlines, Avianca,Aerovías del Continente Americano S.A. ("Avianca"), Avianca Brasil, Brussels Airlines, Copa Airlines, Croatia Airlines, EGYPTAIR, Ethiopian Airlines, EVA Air, LOT Polish Airlines, Lufthansa, SAS Scandinavian Airlines, Shenzhen Airlines, Singapore Airlines, South African Airways, SWISS, TAP Air Portugal, THAI Airways International and Turkish Airlines. In addition to its members, Star Alliance includes Shanghai-based Juneyao Airlines as a connecting partner.

United has a variety of bilateral commercial alliance agreements and obligations with Star Alliance members, addressing, among other things, reciprocal earning and redemption of frequent flyer miles, and access to airport lounges and, with certain Star Alliancemembers, codesharing of flight operations (whereby one carrier’scarrier's selected flights can be marketed under the brand name of another carrier). In addition to the alliance agreements with Star Alliance members, United currently maintains independent marketing alliance agreements with other air carriers, currently unaffiliated with a global alliance, including Aeromar, Aer Lingus, Air Dolomiti, Azul Linhas Aéreas Brasileiras S.A. ("Azul"), Boutique Air, Cape Air,

4

Eurowings, Germanwings, Great Lakes Airlines, Hawaiian Airlines, Island Air, Jet Airways and Silver Airways. In addition to the marketing alliance agreements with air partners, United also offers a train-to-plane codeshare and frequent flyer alliance with Amtrak from Newark Liberty on select city pairs in the Northeasternnortheastern United States.

United also participates in four passenger joint ventures,business arrangements ("JBAs"): one with Air Canada and the Lufthansa Group (which includes Lufthansa and its affiliates Austrian Airlines, Brussels Airlines, Eurowings and SWISS) covering transatlantic routes, and anotherone with ANA covering certain transpacific routes.routes, one with Air New Zealand covering certain routes between the United States and New Zealand and one with Avianca and Copa Airlines, which, upon receipt of regulatory approvals will cover routes between the United States and Central and South America, excluding Brazil. These joint venturespassenger JBAs enable the participating carriers to integrate the services they provide in the respective regions, capturing revenue synergies and delivering enhanced customer benefits, such as highly competitive flight schedules, fares and services.

United also participates in cargo JBAs with ANA for transpacific cargo services and with Lufthansa for transatlantic cargo services. These cargo JBAs offer expanded and more seamless access to cargo space across the carriers' respective combined networks.

Loyalty Program. United’s United's MileagePlus loyalty program builds customer loyalty by offering awards, benefits and services to program participants. Members in this program earn mileage creditmiles for flights on United, United Express, airlines in Star Alliance members and certain other airlines that participate in the program. Members can also earn miles by purchasing the goods and services of our network of non-airline partners, such as domestic and international credit card issuers, retail merchants, hotels and car rental companies. Members can redeem mileage creditsmiles for free (other than taxes and government imposed fees), discounted or upgraded travel and non-travel awards.

The Company

United has an agreement with Chase Bank USA, N.A. (“Chase”("Chase"), pursuant to which members of the Company’sUnited's MileagePlus® loyalty program who are residents of the United States can earn miles for making purchases using a MileagePlus® credit card issued by Chase.Chase (the "Co-Brand Agreement"). The agreementCo-Brand Agreement also provides for joint marketing and other support for the MileagePlus® credit card and provides Chase with other benefits such as permission to market to the Company’sCompany's customer database.

Approximately 5.05.6 million and 4.85.4 million MileagePlus flight awards were used on United in 20152018 and 2014,2017, respectively. These awards represented 7.1% and 7.5% and 7.1% of United’sUnited's total revenue passenger miles in 20152018 and 2014,2017, respectively. Total miles redeemed for flights on United in 2015,2018, including class-of-service upgrades, represented approximately 83%86% of the total miles redeemed.

In addition, excluding miles redeemed for flights on United, MileagePlus members redeemed miles for approximately 1.82.4 million other awards in 20152018 as compared to 1.752.3 million other awards in 2014.2017. These awards include United Club memberships, car and hotel awards, merchandise and flights on other air carriers.



Aircraft Fuel. The table below summarizes UAL’sUAL's aircraft fuel consumption and expense during the last three years.

  

  Year

  Gallons
Consumed
(in millions)		   Fuel Expense
(in millions)		   Average Price
Per Gallon		   Percentage of
Total
Operating
Expense (a)		    
   2015   3,886      $7,522     $1.94      23%    
   2014   3,905      $11,675     $2.99      32%    
   2013   3,947      $12,345     $3.13      34%    

(a) Calculation excludes special charges identified

Year 
Gallons Consumed
(in millions)
 
Fuel Expense
(in millions)
 Average Price Per Gallon Percentage of Total Operating Expense Available Seat Miles per Fuel Gallon
2018 4,137
 $9,307
 $2.25
 24% 67
2017 3,978
 $6,913
 $1.74
 20% 66
2016 3,904
 $5,813
 $1.49
 18% 65
Our operational and financial results can be significantly impacted by changes in Note 16 to the financial statements included in Part II, Item 8 of this report.

Theprice and availability and price of aircraft fuel significantly affect the Company’s operations, results of operations, financial position and liquidity.fuel. To provide adequate supplies of fuel, the Company routinely enters into short-term and long-term purchase contracts that are generallycustomarily indexed to floating market prices for aircraft fuel, and the Company generally has some ability to storecover short-term fuel close to itssupply and infrastructure disruptions at certain major hubdemand locations. To lower its exposure to unpredictable increases in the floating market pricesThe price of aircraft fuel has fluctuated substantially in the past several years. The Company's current strategy is to not enter into transactions to hedge its fuel consumption, although the Company may hedge a portion ofregularly reviews its planned fuel requirements. The Company generally employs commonly used financial hedge instrumentsstrategy based on aircraft fuel or closely related commodities including diesel fuelmarket conditions and crude oil.

other factors.

Third-Party Business.United generates third-party business revenue that includes fuel sales, catering, ground handling, maintenance services and frequent flyer award non-air redemptions, maintenance services, catering and third-partyground handling. Third-party business revenue isrecorded in Other operating revenue. United also incursExpenses associated with third-party business, expenses, such as maintenance,ground handling and catering services for third parties, fuel sales andexcept non-air mileage redemptions, and those third-party business expenses are recorded in Other operating expenses. Non-air redemptions expenses are recorded to Other operating revenue.

5

Distribution Channels. The Company’sCompany's airline seat inventory and fares are distributed through the Company’sCompany's direct channels, traditional travel agencies and on-line travel agencies. The use of the Company’sCompany's direct sales website, united.com,www.united.com, the Company’sCompany's mobile applications and alternative distribution systems provides the Company with an opportunity to de-commoditize its services, better present its content, make more targeted offerings, better retain its customers, enhance its brand and lower its ticket distribution costs. Agency sales are primarily sold using global distribution systems (“GDS”("GDS"). United has developed and expects to continue to develop capabilities to sell certain ancillary products through the GDS channel to provide an enhanced buying experience for customers who purchase in that channel. To increase the Company’s opportunities to sell its full range of products and services and lower distribution costs, the Company will continue to develop new selling capabilities in third-party channels and expand the capabilities of its website and mobile applications.

Industry Conditions

Domestic Competition. The domestic airline industry is highly competitive and dynamic. The Company’sCompany's competitors consist primarily of other airlines and, to a certain extent, other forms of transportation. Currently, any U.S. carrier deemed fit by the DOTU.S. Department of Transportation (the "DOT") is largely free to operate scheduled passenger service between any two points within the United States. Competition can be direct, in the form of another carrier flying the exact non-stop route, or indirect, where a carrier serves the same two cities non-stop from an alternative airport in that city or via an itinerary requiring a connection at another airport. Air carriers’carriers' cost structures are not uniform and there are numerous factors influencing cost structure. Carriers with lower costs may offer lower fares to passengers, which could have a potential negative impact on the Company’sCompany's revenues. Decisions on domestic pricing are based on intense competitive pressure exerted on the Company by other U.S. airlines. In order to remain competitive and maintain passenger traffic levels, we often find it necessary to match competitors’competitors' discounted fares. Since we compete in a dynamic marketplace, attempts to generate additional revenue through increased fares oftentimes fail.

International Competition. Internationally, the Company competes not only with U.S. airlines, but also with foreign carriers. International competition has increased and may continue to increase in the future as a result of airline mergers and acquisitions, joint ventures,JBAs, alliances, restructurings, liberalization of aviation bilateral agreements and new or increased service by competitors, including government subsidized competitors from certain Middle East countries. Competition on international routes is subject to varying degrees of governmental regulation. The Company’sCompany's ability to compete successfully with non-U.S. carriers on international routes depends in part on its ability to generate traffic to and from the entire United States via its integrated domestic route network and its ability to overcome business and operational challenges across its network worldwide. Foreign carriers currently are prohibited by U.S. law from carrying local passengers between two points in the United States and the Company generally experiences comparable restrictions in foreign countries. Separately, "fifth freedom rights" allow the Company to operate between points in two different foreign countries except where “fifthand foreign carriers may also have fifth freedom rights” have been negotiatedrights between the U.S. government and other countries.another foreign country. In addition, in the absence of open skies and fifth freedom rights, or some other extra-bilateral right to conduct operations between two foreign countries, U.S. carriers are constrained from carrying passengers to points beyond designated international gateway cities due to limitations in air service agreements and restrictions imposed unilaterally by foreign governments.cities. To compensate partially for these structural limitations, U.S. and foreign carriers have entered into alliances, joint venturesimmunized JBAs and marketing arrangements that enable these carriers to exchange traffic between each other’sother's flights and route networks. SeeAlliances, above, for additional information.


Seasonality. The air travel business is subject to seasonal fluctuations. Historically, demand for air travel is higher in the second and third quarters, driving higher revenues, than in the first and fourth quarters, which are periods of lower travel demand.

Industry Regulation

Domestic Regulation

All carriers engaged in air transportation in the United States are subject to regulation by the DOT. Absent an exemption, no air carrier may provide air transportation of passengers or property without first being issued a DOT certificate of public convenience and necessity. The DOT also grants international route authority, approves

6

international codeshare arrangements and regulates methods of competition. The DOT regulates consumer protection and maintains jurisdiction over advertising, denied boarding compensation, tarmac delays, baggage liability and other areas and may add additional expensive regulatory burdens in the future. The DOT has launched investigations or claimed rulemaking authority to regulate commercial agreements among carriers or between carriers and third parties in a wide variety of contexts.

Airlines are also regulated by the Federal Aviation Administration (the “FAA”"FAA"), an agency within the DOT, primarily in the areas of flight safety, air carrier operations and aircraft maintenance and airworthiness. The FAA issues air carrier operating certificates and aircraft airworthiness certificates, prescribes maintenance procedures, oversees airport operations, and regulates pilot and other employee training. From time to time, the FAA issues directives that require air carriers to inspect or modify aircraft and other equipment, potentially causing the Company to incur substantial, unplanned expenses. The airline industry is also subject to numerous other federal laws and regulations. The U.S. Department of Homeland Security (“DHS”("DHS") has jurisdiction over virtually every aspect of civil aviation security. The Antitrust Division of the U.S. Department of Justice (“DOJ”("DOJ") has jurisdiction over certain airline competition matters. The U.S. Postal Service has authority over certain aspects of the transportation of mail by airlines. Labor relations in the airline industry are generally governed by the Railway Labor Act (“RLA”("RLA"), a federal statute. The Company is also subject to investigation inquiries by the DOT, FAA, DOJ, DHS, the U.S. Food and Drug Administration ("FDA"), the U.S. Department of Agriculture ("USDA") and other U.S. and international regulatory bodies.

Airport Access. Access to landing and take-off rights, or “slots,”"slots," at several major U.S. airports and many foreign airports served by the Company are or recently have been, subject to government regulation. Federally mandatedFederally-mandated domestic slot restrictions that limit operations and regulate capacity currently apply at three airports: Reagan National Airport in Washington, D.C. ("Reagan National"), and at John F. Kennedy International Airport (“JFK”),and LaGuardia Airport (“LaGuardia”) and Newark Liberty in the metropolitan New York region. In addition, to address concerns about airport congestion, the FAA has imposed operating restrictionsCity metropolitan region ("LaGuardia"). Of these three airports, United currently operates at certain airports, including Newark Liberty, JFK,two: Reagan National and LaGuardia, which may include capacity reductions.LaGuardia. Additional restrictions on airline routes and takeoff and landing slots at these and other airports may be proposedimplemented in the future thatand could affect the Company’sCompany's rights of ownership and transfer. In January 2015, the FAA issued a notice of proposed rulemaking to revise and alter the current methods to manage congestion and delay at the New York area’s three major commercial airports which may alter use of slots and congestion at those airports.transfer as well as its operations.

Legislation.Legislation. The airline industry is subject to legislative activityactions (or inactions) that may have an impact on operations and costs. In 2016,2018, the U.S. Congress will continue to consider legislation to reauthorizeapproved a five-year reauthorization for the FAA, which encompasses all significant aviation tax and policy-related issues. As with previous reauthorization legislation, the U.S. Congress may considerThe law includes a range of policy changes thatrelated to airline customer service and aviation safety which, depending on how they are implemented, could impact our operations and costs. Climate change legislation is also likelyAdditionally, the U.S. Congress may fail to be a significant areacontinue to fund the operations of legislative and regulatory focus andone or more federal government agencies which could adverselynegatively impact the Company’s costs. SeeEnvironmental Regulation, below.Company and the airline industry.

Finally, aviation security continues

Catering Operations. The Company owns and operates catering kitchens at airports in Denver, Cleveland, Newark, Houston, and Honolulu, which prepare ready-to-eat food for United flights. Some of the Company's kitchens also prepare ready-to-eat food for other domestic and international airlines. These operations are subject to beregulation by the subjectFDA and the USDA, as well as other federal, state, and local regulatory agencies. The FDA has begun enforcing the Federal Food Safety Modernization Act which requires all food manufacturers to implement stringent risk-based preventive controls. As a result, ready-to-eat catering operations are a focus of legislativeenhanced scrutiny by the FDA with inspections and regulatory action, requiring changes to the Company’s security processes, increasing the cost of its security procedures, and affecting its operations.

greater enforcement.

International Regulation

International air transportation is subject to extensive government regulation. In connection with the Company’sCompany's international services, the Company is regulated by both the U.S. government and the governments of the foreign countries the Company serves. In addition, the availability of international routes to U.S. carriers is regulated by aviation agreements between the U.S. and foreign governments, and in some cases, fares and schedules require the approval of the DOT and/or the relevant foreign governments.

Legislation.Foreign countries are increasingly enacting passenger protection laws, rules and regulations that meet or exceed U.S. requirements. In cases where this activity exceeds U.S. requirements, additional burden and liability may be placed on the Company. Certain countries have regulations requiring passenger compensationand/compensation and/or enforcement penalties from the Company in addition to changes in operating procedures due to canceled and delayed flights.

7


Airport Access. Historically, access to foreign markets has been tightly controlled through bilateral agreements between the U.S. and each foreign country involved. These agreements regulate the markets served, the number of carriers allowed to serve each market and the frequency of carriers’carriers' flights. Since the early 1990s, the U.S. has pursued a policy of “open skies”"Open Skies" (meaning all U.S.-flag carriers have access to the destination), under which the U.S. government has negotiated a number of bilateral agreements allowing unrestricted access between U.S. and foreign markets. Currently, there are more than 100 open skiesOpen Skies agreements in effect. However, even with Open Skies, many of the airports that the Company serves in Europe, Asia and Latin America maintain slot controls. A large number of these are restrictiveslot controls exist due to congestion, at these airports.environmental and noise protection and reduced capacity due to runway and air traffic control ("ATC") construction work, among other reasons. London Heathrow International Airport, Frankfurt Rhein-Main Airport, Shanghai Pudong International Airport, Beijing Capital International Airport, Sao Paulo Guarulhos International Airport and Tokyo Haneda International Airport are among the most restrictive foreign airports due to slot and capacity limitations.

The Company’sCompany's ability to serve some foreign markets and expand into certain others is limited by the absence of aviation agreements between the U.S. government and the relevant foreign governments. Shifts in U.S. or foreign government aviation policies may lead to the alteration or termination of air service agreements. Depending on the nature of any such change, the value of the Company’sCompany's international route authorities and slot rights may be materially enhanced or diminished.

Similarly, foreign governments control their airspace and can restrict our ability to overfly their territory, enhancing or diminishing the value of the Company's existing international route authorities and slot rights.

Environmental Regulation

The airline industry is subject to increasingly stringent federal, state, local and international environmental requirements, including those regulating emissions to air, water discharges, safe drinking water and the use and management of hazardous substances and wastes.

Climate Change. There is an increasing global regulatory focus on greenhouse gas (“GHG”("GHG") emissions and their potential impacts relating to climate change. Initiatives to regulate GHG emissions from aviation havehad previously been underway inadopted by the European Union (“EU”("EU") sincein 2009, but applicability to flights arriving or departing from airports outside the EU washave been postponed several times. In December 2017, the European Parliament voted to provideextend exemptions for extra-EU flights until December 2023 in order to align the extension date with the completion of the pilot phase of the International Civil Aviation Organization (“ICAO”Organization's ("ICAO") the opportunityCarbon Offsetting and Reduction Scheme for International Aviation ("CORSIA"). CORSIA, which was adopted in October 2016, is intended to reach agreement oncreate a single global approachmarket-based measure to achieve carbon-neutral growth for international aviation. ICAOaviation after 2020, which can be achieved through airline purchases of carbon offset credits. Certain CORSIA program details remain to be developed and could potentially be affected by political developments in participating countries or the results of the pilot phase of the program, and thus the impact of CORSIA cannot be fully predicted. However, CORSIA is expected to reach a resolution in 2016 advancing a global market-based measureincrease operating costs for international aviation emissions starting in 2021. Separately, inairlines that operate internationally. In 2016, ICAO is expected to adoptalso adopted a carbon dioxide (“CO2”("CO2") emission standard for aircraft andaircraft. In 2016, the U.S. Environmental Protection Agency has already started the process required("EPA") commenced procedural steps necessary to adopt such an aircraft standard. In considerationits own standard, but the timing of further action by the EPA is unknown. While the precise timing and final form of these futurevarious programs and requirements continue to evolve, in 2018, the Company announced a pledge to reduce its greenhouse gas emissions by 50 percent relative to 2005 levels by the year 2050 and is taking various actions that willare expected to help to reduce its CO2 emissions over time such as improving fuel efficiency, fleet renewal, aircraft retrofits and seeking to stimulate the commercialization of aviation alternative fuels.

Other Regulations. Our operations are subject to a variety of other environmental laws and regulations both in the United States and internationally. These include noise-related restrictions on aircraft types and operating times and state and local air quality initiatives which have, or could in the future, result in curtailments in services, increased operating costs, or limits on expansion.expansion, or further emission reduction requirements. Certain foreign airports and/or governments, both domestically and internationally, either have or are seeking to establish environmental fees and other requirements applicable to carbon emissions, local air quality pollutants and/or noise. In the United States, new regulations affecting storm water and underground storage tanks became effective in 2015, which could affect airport fuel hydrant systems or airport storm water management, potentially impacting operating costs. Also, in October 2015, a final ruleThe implementation of state plans to reduce theachieve national ambient air quality standards for ozone was issued which, if upheld, is expected to triggerresult in restrictions on mobile sources such as cars, trucks and airport ground support equipment incertain jurisdictions.in some locations. Certain states may also elect to impose restrictions apart from the revised national standards. Finally, environmental cleanup laws cancould require the Company to undertake or subject the Company to liability for investigation and remediation costs at certain owned or leased locations or third partythird-party disposal locations.

Until applicability of new regulations to our specific operations is better defined and/or in the case of the referenced GHG and ozone standards, these implementation measuresuntil pending regulations are actually developed,finalized, future costs to comply with such regulations will remain uncertain.uncertain but are likely to increase our operating costs over time. While we continue to monitor these developments, we do not currently believe that such developments or resulting expenditures will have a materialthe precise nature of future requirements and their applicability to the Company are difficult to predict, but the financial impact on our capital expenditures or otherwise materially adversely affect our operations, operating costs or competitive position.

8

to the Company and the aviation industry could be significant.


Employees

As of December 31, 2015,2018, UAL, including its subsidiaries, had approximately 84,00092,000 employees. Approximately 80%83% of the Company’sCompany's employees were represented by various U.S. labor organizations as of December 31, 2015.

organizations.

Collective bargaining agreements between the Company and its represented employee groups are negotiated under the RLA. Such agreements typically do not contain an expiration date and instead specify an amendable date, upon which the contractagreement is considered “open"open for amendment.” The Company has reached joint collective bargaining agreements with the majority of its employee groups since the merger transaction in 2010. The Company continues to negotiate in mediation for a joint flight attendant collective bargaining agreement, extensions to the IAM represented employees’ agreements and a joint technician and related employees’ collective bargaining agreement following the rejected proposal for ratification of a joint technician and related employees’ agreement. The Company can provide no assurance that a successful or timely resolution of these labor negotiations will be achieved.

9

"

The following table reflects the Company’sCompany's represented employee groups, the number of employees per represented group, union representation for each of United’sUnited's employee groups, where applicable, and the amendable date for each employee group’sgroup's collective bargaining agreement:

agreement as of December 31, 2018:    
Employee
Group
Number of Employees
Union
Agreement Open for Amendment

Employee

Group


Number of
Employees (a)

Union

Contract Open
for Amendment (b)

Flight Attendants

23,19321,078
Association of Flight Attendants (the "AFA")

December 2014/

February 2016

August 2021

Fleet Service

13,077
12,210

Int’lInternational Association of Machinists and Aerospace Workers (“IAM”(the "IAM")

January 2017December 2021

Passenger Service

11,93211,998
IAMJanuary 2017December 2021

Pilots

11,74211,204
Air Line Pilots Association, InternationalJanuary 2019

Technicians and Related &

Flight Simulator Technicians

9,236
8,899Int’lInternational Brotherhood of Teamsters (the "IBT")

December 2012/

June 2013 & January 2013

2022
Storekeeper EmployeesPassenger Service - United Ground Express, Inc.2,923936
IAMJanuary 2017March 2025
DispatchersCatering Operations2,668
383UNITE HERE(a)
Storekeeper Employees1,012
IAMDecember 2021
Dispatchers399
Professional Airline Flight Control AssociationJuly 2018December 2021
Fleet Tech Instructors131134
IAMJanuary 2019December 2021
Load Planners6467
IAMMay 2018December 2021
Security Officers4845
IAMJanuary 2017December 2021
Maintenance Instructors4142
IAMJanuary 2019
Food Service Employees24IAMJanuary 2010December 2021

(a) The table includesOn October 23, 2018, United's Catering Operations employees voted to unionize under the Company’s U.S. (and Guam) union represented employees only.

(b) The respective amendable dates for those joint negotiations in progress reflectRLA. In an election overseen by the remaining United, Continental Airlines, Inc. (“Continental”) and/or Continental Micronesia, Inc. stand-alone agreements.

National Mediation Board, UNITE HERE received the majority of the votes and was officially certified to represent United's frontline Catering Operations employees. The Company cannot predict the outcome ofexpects contract negotiations with its unionized employee groups, although significant increasesto begin in the pay and benefits resulting from new collective bargaining agreements would have an adverse financial impact on the Company. See Notes 15 and 16 to the financial statements included in Part II, Item 8 of this report for additional information on labor negotiations and costs.

10

2019.
ITEM 1A.RISK FACTORS.

The following risk factors should be read carefully when evaluating the Company’sCompany's business and the forward-looking statements contained in this report and other statements the Company or its representatives make from time to time. Any of the following risks could materially and adversely affect the Company’sCompany's business, operating results, financial condition and the actual outcome of matters as to which forward-looking statements are made in this report.

Global

If we do not successfully execute our strategic operating plan, or if our strategic operating plan is unsuccessful, our business, operating results and financial condition could be materially and adversely affected.
We have announced several strategic plans in recent years, including several revenue-generating initiatives and plans to optimize our revenue, such as our plans to add capacity, including international expansion and new or increased service to mid-size airports, and initiatives and plans to optimize and control our costs. We also continue to explore opportunities to enhance our segmentation, including the introduction of Polaris, Basic Economy and United Premium Plus, and are implementing many programs and policies to improve the customer experience at all points in air travel. In developing our strategic operating plan, we make certain assumptions including, but not limited to, those related to customer demand, competition, market consolidation and the global economy. Actual economic, market and other conditions may be different from our assumptions and we may not be able to successfully execute our strategic operating plan. If we do not successfully execute our strategic operating plan, or if actual results vary significantly from our assumptions, our business, operating results and financial condition could be materially and adversely impacted.

Unfavorable economic and political conditions, in the United States and industry conditions constantly change and unfavorable conditionsglobally, may have a material adverse effect on the Company’sour business, operating results and financial condition.
The Company's business and operating results of operations.

The Company’s business and results of operations are significantly impacted by generalU.S. and global economic and industrypolitical conditions. The airline industry is highly cyclical, and the level of demand for air travel is correlated to the strength of the U.S. and global economies. The Company is a global business with operations outside of the United States from which it derives significant operating revenues. The Company’s international operations are a vital part of its worldwide airline network. Volatile economic, political and market conditions in these international regions may have a negative impact on the Company’s operating results and its ability to achieve its business objectives.

Robust demand for the Company’sCompany's air transportation services depends largely on favorable economic conditions, including the strength of the domestic and foreign economies, low unemployment levels, strong consumer confidence levels and the availability of consumer and business credit. Air transportation is often a discretionary purchase that leisure travelers may limit or eliminate during difficult economic times. Short-haul travelers, in particular, have the option to replace air travel with surface travel. In addition, during periods of unfavorable economic conditions, business travelers usually reducehistorically have reduced the volume of their travel, either due to cost-saving initiatives, the replacement of travel with alternatives such as videoconferencing, or as a result of decreased business activity requiring travel. During such periods, the Company’sCompany's business and operating results of operations may be adversely affected due to significant declines in industry passenger demand, particularly with respect to the Company’sCompany's business and premium cabin travelers, and a reduction in fare levels.

As a global business with operations outside of the United States from which it derives significant operating revenues, volatile conditions in certain international regions may have a negative impact on the Company's operating results and its ability to achieve its business objectives. The Company's international operations are a vital part of its worldwide airline network. Political disruptions and instability in certain regions can negatively impact the demand and network availability for air travel.
Stagnant or weakening global economic conditions either in the United States or in other geographic regions and any future volatility in U.S. and global financial and credit markets may have a material adverse effect on the Company’sCompany's revenues, operating results of operations and liquidity. If such economic conditions were to disrupt capital markets in the future, the Company may be unable to obtain financing on acceptable terms (or at all) to refinance certain maturing debt and to satisfy future capital commitments.

In addition, significant or volatile changes in exchange rates between the U.S. dollar and other currencies may have a material adverse impact upon the Company’s liquidity, revenues, costs and operating results.

The global airline industry is highly competitive and susceptible to price discounting and changes in capacity, which could have a material adverse effect on the Company.

our business, operating results and financial condition.


The U.S. airline industry is characterizedhighly competitive, marked by substantial pricesignificant competition including from low-cost carriers. The significant market presencewith respect to routes, fares, schedules (both timing and frequency), services, products, customer service and frequent flyer programs. Consolidation in the airline industry, the rise of low-costwell-funded government sponsored international carriers, which engagechanges in substantial price discounting, may diminish our abilityinternational alliances and the creation of immunized JBAs have altered and are expected to achieve sustained profitability on domesticcontinue to alter the competitive landscape in the industry, resulting in the formation of airlines and international routes.

alliances with increased financial resources, more extensive global networks and services and competitive cost structures.

Airlines also compete for market share by increasing or decreasing their capacity, including route systems and the number of marketsdestinations served. Several of the Company’sCompany's domestic and international competitors have increased their international capacity by including service to some destinations that the Company currently serves, causing overlap in destinations served and therefore increasing competition for those destinations. In addition, the Company has implemented significant capacity reductions in recent years in response to high and volatile fuel prices and stagnant global economic growth. This increased competition in both domestic and international markets may have a material adverse effect on the Company’sCompany's business, operating results of operations, financial condition or liquidity.

11

Terrorist attacks or international hostilities, or the fear of terrorist attacks or hostilities, even if not made directly on the airline industry, could negatively affect the Company and the airline industry.

The terrorist attacks on September 11, 2001 involving commercial aircraft severely and adversely impacted the Company’s financial condition and results of operations, as well as the prospects for the airline industry. Among the effects experienced from the September 11, 2001 terrorist attacks were substantial flight disruption costs caused by the FAA-imposed temporary grounding of the U.S. airline industry’s fleet, significantly increased security costs and associated passenger inconvenience, increased insurance costs, substantially higher ticket refunds and significantly decreased traffic and passenger revenue.

Additional terrorist attacks, even if not made directly on the airline industry, or the fear of or the precautions taken in anticipation of such attacks (including elevated national threat warnings or selective cancellation or redirection of flights) could materially and adversely affect the Company and the airline industry. Wars and other international hostilities could also have a material adverse impact on the Company’s financial condition, liquidity and results of operations. The Company’s financial resources may not be sufficient to absorb the adverse effects of any future terrorist attacks or other international hostilities.

A significant data breach or the Company’s inability to comply with legislative or regulatory standards may adversely affect the Company’s business.

The Company is subject to increasing legislative, regulatory and customer focus on privacy issues and data security. A number of the Company’s commercial partners, including credit card companies, have imposed data security standards that the Company must meet and these standards continue to evolve. The Company will continue its efforts to meet new and increasing privacy and security standards; however, it is possible that certain new standards may be difficult to meet and could increase the Company’s costs. Additionally, any compromise of the Company’s technology systems could result in the loss, disclosure, misappropriation of or access to customers’, employees’ or business partners’ information. Any such loss, disclosure, misappropriation or access could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information. Any significant data breach or the Company’s failure to comply with applicable U.S. and foreign privacy or data security regulations or security standards imposed by the Company’s commercial partners may adversely affect the Company’s reputation, business, results of operations and financial condition.

The Company relies heavily on technology and automated systems to operate its business and any significant failure or disruption of the technology or these systems could materially harm its business.

The Company depends on automated systems and technology to operate its business, including computerized airline reservation systems, flightCompany's U.S. operations systems, revenue management systems, accounting systems, telecommunication systems and commercial websites, including www.united.com. United’s website and other automated systems must be able to accommodate a high volume of traffic, maintain secure information and deliver important flight and schedule information, as well as process critical financial transactions. These systems could suffer substantial or repeated disruptions due to various events, some of which are beyond the Company’s control, including natural disasters, power failures, terrorist attacks, equipment or software failures, computer viruses or cyber security attacks. Substantial or repeated systems failures or disruptions, including failures or disruptions related to the Company’s complex integration of systems, could reduce the attractiveness of the Company’s services versus those of its competitors, materially impair its ability to market its services and operate its flights, result in the unauthorized release of confidential or otherwise protected information, result in increased costs, lost revenue and the loss or compromise of important data, and may adversely affect the Company’s business, results of operations and financial condition.

Current or future litigation and regulatory actions could have a material adverse impact on the Company.

From time to time, we are subject to litigationcompetition from traditional network carriers, national point-to-point carriers, and other legaldiscount carriers, including low-cost carriers and regulatory proceedings relatingultra-low-cost carriers. Such carriers may have lower costs and provide service at lower fares to our business or investigations or other actionsdestinations also served by governmental agencies, including as describedthe Company. The significant presence of low-cost carriers, which engage in Part I, Item 3 “Legal

12

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 matterssubstantial price discounting, 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 impedediminish our ability to achieve our business objectives. Additionally, any amount that we may be requiredsustained profitability on domestic and international routes. Our ability 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 maycompete in the future enter into) withdomestic market effectively depends, in part, on our officers, directors and certain third parties,ability to maintain a competitive cost structure. If 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, includingmaintain our costs at 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’scompetitive level, then our 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

13

renegotiation, may cause the Company’s flight information to be limited or unavailable for display, significantly increase fees for both the Company and GDS users, and impair the Company’s relationships with its customers and travel agencies. The failure of any of the Company’s third-party service providers to perform their service obligations adequately, or other interruptions of services, may reduce the Company’s revenues and increase its expenses, prevent the Company from operating its flights and providing other services to its customers or result in adverse publicity or harm to its brand. In addition, the Company’s business and financial performance could be materially harmed if its customers believe that its services are unreliable or unsatisfactory.

The Company could experience adverse publicity, harm to its brand, reduced travel demand and potential tort liability as a result of an accident, catastrophe, or incident involving its aircraft, the aircraft of its regional carriers or the aircraft of its codeshare partners, which may result in a material adverse effect on the Company’s results of operations or financial position.

An accident, catastrophe, or incident involving an aircraft that the Company operates, or an aircraft that is operated by a codeshare partner or one of the Company’s regional carriers, could have a material adverse effect on the Company if such accident, catastrophe, or incident created a public perception that the Company’s operations, or the operations of its codeshare partners or regional carriers, are not safe or reliable, or are less safe or reliable than other airlines. Such public perception could in turn result in adverse publicity for the Company, cause harm to the Company’s brand and reduce travel demand on the Company’s flights, or the flights of its codeshare partners or regional carriers.

In addition, any such accident, catastrophe, or incident could expose the Company to significant tort liability. Although the Company currently maintains liability insurance in amounts and of the type the Company believes to be consistent with industry practice to cover damages arising from any such accident or catastrophe, and the Company’s codeshare partners and regional carriers carry similar insurance and generally indemnify the Company for their operations, if the Company’s liability exceeds the applicable policy limits or the ability of another carrier to indemnify it, the Company could incur substantial losses from an accident, catastrophe or incident which may result in a material adverse effect on the Company’s results of operations or financial position.

If we experience changes in, or are unable to retain, our senior management team or other key employees, our operating results could be materially and adversely affected.

Much

Our international operations are subject to competition from both foreign and domestic carriers. Competition is significant from government subsidized competitors from certain Middle East countries. These carriers have large numbers of our future success dependsinternational widebody aircraft on order and are increasing service to the continued availability of skilled personnel with industry experienceU.S. from their hubs in the Middle East. The government support provided to these carriers has allowed them to grow quickly, reinvest in their product, invest in other airlines and knowledge, including our senior management teamexpand their global presence.
Through alliance and other key employees.marketing and codesharing agreements with foreign carriers, U.S. carriers have increased their ability to sell international transportation, such as services to and beyond traditional European and Asian gateway cities. Similarly, foreign carriers have obtained increased access to interior U.S. passenger traffic beyond traditional U.S. gateway cities through these relationships. In addition, several JBAs among U.S. and foreign carriers have received grants of antitrust immunity allowing the participating carriers to coordinate schedules, pricing, sales and inventory. If we are unablenot able to attract and retain talented, highly qualified senior managementcontinue participating in these types of alliance and other key employees, or if we are unable to effectively provide formarketing and codesharing agreements in the succession of senior management, including our Chief Executive Officer and Chief Financial Officer,future, our business, mayfinancial condition and operating results could be materially and adversely affected.


High and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel could have a material adverse impact on the Company’sCompany's strategic plans, operating results, financial positioncondition and liquidity.

Aircraft fuel is critical to the Company’sCompany's operations and is one of itsour single largest operating expenses. Aircraftexpense. During the year ended December 31, 2018, the Company's fuel has also been the Company’s most volatile operating expense for the past several years.was $9.3 billion. The Company generally sources adequate supplies of fuel at prevailing market prices and has some ability to store fuel close to major hub locations to ensure supply continuity in the short term. Timelytimely and adequate supply of aircraft fuel to meet operational demand depends on the continued availability of reliable fuel supply sources, as well as related service and delivery infrastructure. Although the Company has some ability to cover short-term fuel supply and infrastructure disruptions at itssome major demand locations, it depends significantly on the continued performance of its vendors and service providers to maintain supply integrity. Consequently, the Company can neither predict nor guarantee the continued timely availability of aircraft fuel throughout the Company’sCompany's system.

Aircraft fuel has historically been the Company's most volatile operating expense due to the highly unpredictable nature of market prices for fuel. The Company generally sources fuel at prevailing market prices. Market prices for aircraft fuel dependhave historically fluctuated substantially in short periods of time and continue to be highly volatile due to a dependence on a multitude of unpredictable factors beyond the Company’sCompany's control. These factors include changes in global crude oil prices, the balance between aircraft fuel supply-demand balance,supply and demand, natural disasters, prevailing inventory levels and fuel production and transportation capacity, as well asinfrastructure. Prices of fuel are also impacted by indirect factors, such as geopolitical events, economic

14

growth indicators, fiscal/monetary policies, fuel tax policies, changes in regulations, environmental concerns and financial investments.investments in energy markets. Both actual changes in these factors, as well as changes in market expectations of these factors, can potentially drive rapid changes in fuel price levels and price volatility.

in short periods of time.

Given the highly competitive nature of the airline industry, the Company may not be able to increase its fares and fees sufficiently to offset the full impact of increases in fuel prices, especially if these increases are significant, rapid and sustained. Further, any such fare andor fee increasesincrease may not be sustainable, may reduce the general demand for air travel and may also eventually impact the Company’sCompany's strategic growth and investment plans for the future. In addition, decreases in fuel prices for an extended period of time may result in increased industry capacity, increased competitive actions for market share and lower fares or surcharges in general. If fuel prices were to then subsequently to rise quickly, there may be a lag between the rise in fuel prices and any improvement of the revenue and the adverse impact of higher fuel prices.

environment.

To protect against increases in the market prices of fuel, the Company may hedge a portion of its future fuel requirements. The Company does not currently hedge its future fuel requirements. However, to the Company’sextent the Company decides to start a hedging program, such hedging program may not be successful in mitigating higher fuel costs, and any price protection provided may be limited due to choice of hedging instruments and market conditions, including breakdown of correlation between hedging instrument and market price of aircraft fuel and failure of hedge counterparties. To the extent that the Company decides to hedge a portion of its future fuel requirements and uses hedge contracts that have the potential to create an obligation to pay upon settlement if fuel prices decline significantly, such hedge contracts may limit the Company’sCompany's ability to benefit fully from lower fuel costs in the future. If fuel prices decline significantly from the levels existing at the time the Company enters into a hedge contract, the Company may be required to post collateral (margin) beyond certain thresholds. There can be no assurance that the Company’sCompany's hedging arrangements, if any, will provide any particular level of protection against rises in fuel prices or that its counterparties will be able to perform under the Company’sCompany's hedging arrangements. Additionally, deterioration in the Company’sCompany's financial condition could negatively affect its ability to enter into new hedge contracts in the futurefuture.
The Company relies heavily on technology and automated systems to operate its business and any significant failure or disruption of the technology or these systems could materially harm its business.
The Company depends on automated systems and technology to operate its business, including, but not limited to, computerized airline reservation systems, demand prediction software, flight operations systems, revenue management systems, accounting systems, technical and business operations systems, telecommunication systems and commercial websites and applications, including www.united.com and the United Airlines app. United's website and other automated systems must be able to accommodate a high volume of traffic, maintain secure information and deliver important flight and schedule information, as well as process critical financial transactions. These systems could suffer substantial or repeated disruptions due to various events, some of which are beyond the Company's control, including natural disasters, power failures, terrorist attacks, equipment or software failures, computer viruses or cyber security attacks. Substantial or repeated systems failures or disruptions, including failures or disruptions related to the Company's complex integration of systems, could reduce the attractiveness of the Company's services versus those of its competitors, materially impair its ability to market its services and operate its flights, result in the unauthorized release of confidential or otherwise protected information, result in increased costs, lost revenue and the loss or compromise of important data, and may potentiallyadversely affect the Company's business, operating results and financial condition.

The Company's business relies extensively on third-party service providers, including certain technology 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 business, operating results and financial condition.
The Company has engaged 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, performance of aircraft fueling operations and catering services, among other vital functions and services. The Company does not directly control these third-party service providers, although it does enter into agreements that define expected service performance.
Any of these third-party service providers, however, may materially fail to meet its service performance commitments to the Company or may suffer disruptions to its systems that could impact its services. For example, failures in certain third-party technology or communications systems may cause flight delays or cancellations. The failure of any of the Company's third-party service providers to perform its service obligations adequately, or other interruptions of services, may reduce the Company's revenues and increase its expenses, prevent the Company from operating its flights and providing other services to its customers or result in adverse publicity or harm to its brand. In addition, the Company's business and financial performance could be materially harmed if its customers believe that its services are unreliable or unsatisfactory.
The Company may also have disagreements with such providers or such contracts may be terminated or may not be extended or renewed. For example, the number of flight reservations booked through third-party GDSs or online travel agents ("OTAs") may be adversely affected by disruptions in the business relationships between the Company and these suppliers. Such disruptions, including a failure to agree upon acceptable contract terms when contracts expire or otherwise become subject to renegotiation, may cause the Company's flight information to be limited or unavailable for display by the affected GDS or OTA operator, significantly increase fees for both the Company and GDS/OTA users and impair the Company's relationships with its customers and travel agencies. Any such disruptions or contract terminations may adversely impact our operations and financial results.
If we are not able to negotiate or renew agreements with third-party service providers, or if we renew existing agreements on less favorable terms, our operations and financial results may be adversely affected.
The Company could experience adverse publicity, harm to its brand, reduced travel demand and potential tort liability as a result of an accident, catastrophe or incident involving its aircraft or its operations, the aircraft or operations of its regional carriers, the aircraft or operations of its codeshare partners, or the aircraft or operations of another airline, which may result in a material adverse effect on the Company's business, operating results and financial condition.
An accident, catastrophe or incident involving an aircraft that the Company operates, or an aircraft that is operated by a codeshare partner, one of the Company's regional carriers or another airline, or an incident involving the Company's operations, or the operations of a codeshare partner, one of the Company's regional carriers or of another airline, could have a material adverse effect on the Company if such accident, catastrophe or incident created a public perception that the Company's operations, or the operations of its codeshare partners or regional carriers, are not safe or reliable, or are less safe or reliable than other airlines. Such public perception could, in turn, result in adverse publicity for the Company, cause harm to the Company's brand and reduce travel demand on the Company's flights, or the flights of its codeshare partners or regional carriers.
In addition, any such accident, catastrophe or incident involving the Company, its regional carriers or its codeshare partners could expose the Company to significant tort liability. Although the Company currently maintains liability insurance in amounts and of the type the Company believes to be consistent with industry practice to cover damages arising from any such accident, catastrophe or incident, and the Company's codeshare partners and regional carriers carry similar insurance and generally indemnify the Company for their operations, if the Company's liability exceeds the applicable policy limits or the ability of another carrier to indemnify it, the Company could incur substantial losses from an accident, catastrophe or incident which may result in a material adverse effect on the Company's operating results and financial condition.
Terrorist attacks, international hostilities or other security events, or the fear of terrorist attacks or hostilities, even if not made directly on the airline industry, could negatively affect the Company and the airline industry.
Terrorist attacks or international hostilities, even if not made on or targeted directly at the airline industry, or the fear of or the precautions taken in anticipation of such attacks (including elevated national threat warnings, travel restrictions, selective cancellation or redirection of flights and new security regulations) could materially and adversely affect the Company and the airline industry. Security events pose a significant risk to our passenger and cargo operations. These events could include acts of violence in public areas that we cannot control. The Company's financial resources may not be sufficient to absorb the

adverse effects of any future terrorist attacks, international hostilities or other security events. Any such events could have a material adverse impact on the Company's financial condition, liquidity and operating results.
Increasing privacy and data security obligations or a significant data breach may adversely affect the Company's business.
The Company is subject to increasing legislative, regulatory and customer focus on privacy issues and data security. Also, a number of the Company's commercial partners, including credit card companies, have imposed data security standards that the Company must meet. These standards continue to evolve. The Company will continue its efforts to meet its privacy and data security obligations; however, it is possible that certain new obligations may be difficult to meet and could increase the Company's costs.
Additionally, the Company must manage evolving cybersecurity risks. Our network systems and storage applications, and those systems and storage and other business applications maintained by our third-party providers, may be subject to attempts to gain unauthorized access, breach, malfeasance or other system disruptions. In some cases, it is difficult to anticipate or to detect immediately such incidents and the damage caused thereby. While we continually work to safeguard our internal network systems and validate the security of our third-party providers, including through information security policies and employee awareness and training, there is no assurance that such actions will be sufficient to prevent cyber-attacks or security breaches. The loss, disclosure, misappropriation of or access to customers', employees' or business partners' information or the Company's failure to meet its obligations could result in legal claims or proceedings, penalties and remediation costs. A significant data breach or the Company's failure to meet its obligations may adversely affect the Company's reputation, business, operating results and financial condition.
Disruptions to our regional network and United Express flights provided by third-party regional carriers could adversely affect our business, operating results and financial condition.
The Company has contractual relationships with various regional carriers to provide regional aircraft 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 11% of the Company's total capacity for the year ended December 31, 2018.
Although the Company has agreements with its regional carriers that include contractually agreed performance metrics, each regional carrier is a separately certificated commercial air carrier and 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 changes to 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 requirements under Part 117 of the Federal Aviation Regulations, have contributed to a smaller supply of pilots available to 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 could also require the Company to post increased amounts of collateral under its fuel hedging agreements.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and regulations promulgated by the Commodity Futures Trading Commission (the “CFTC”) require centralized clearing for over-the-counter derivatives and record-keeping and reporting requirements that are applicablereduce regional carrier flying.

If a significant disruption occurs to the Company’s fuel hedge contracts. The UAL Board of Directors (“Board of Directors”) has approved the Company’s electionCompany's regional network or flights or if one or more of the CFTC’s end-user exception,regional carriers with which permits 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 operating results.
Current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or arrangement relating to these actions, could have a material adverse impact on the Company.
From time to time, we are subject to litigation and other legal and regulatory proceedings relating to our business or investigations or other actions by governmental agencies, including as described in Part I, Item 3, Legal Proceedings, of this 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 operating results, including as a non-financial end userresult of derivativesnon-monetary remedies, and could also result in adverse publicity. Defending ourselves in these matters may be time-consuming, expensive and disruptive to hedge commercial risknormal business operations and be exemptmay result in significant expense and a diversion of management's time and attention from the CFTC mandatory clearing requirements. However,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. If we fail to comply with the terms contained in any settlement, order or agreement with a governmental authority relating to these matters, we could be subject to criminal or civil penalties, which could have a material adverse impact on the Company. 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.
Our significant investments in other airlines, including in other parts of the world, and the commercial relationships that we have with those carriers may not produce the returns or results we expect.
An important part of our strategy to expand our global network includes making significant investments in airlines in other parts of the world and expanding our commercial relationships with these carriers. For example, in November 2018, United entered into a revenue-sharing joint business agreement with Avianca, Copa and several of the Company’s hedge counterparties are alsotheir respective affiliates, subject to these requirements, which may raiseregulatory approval. Concurrently with this transaction, United advanced a loan of $456 million to affiliates of Synergy Aerospace Corporation ("Synergy"), the counterparties’ costs. Those increased costs may in turn be passed on tomajority shareholder of Avianca Holdings S.A. ("AVH"), the parent company of Avianca, and entered into certain other related agreements, including a put arrangement with Avianca's significant minority shareholder, Kingsland Holdings Limited ("Kingsland"). The loan is secured by a pledge of Synergy's equity and Synergy's shares of AVH stock, and the loan and other agreements contain several provisions whereby the Company resultingmay acquire AVH stock. We also have an equity investment in increased transaction costs to execute hedge contracts and lower credit thresholds to post collateral (margin).

Azul. See Note 109 to the financial statements included in Part II, Item 8 of this report for additional information regarding our investments in Avianca and Azul.

We also have investments in several domestic regional airlines. In January 2019, we completed the acquisition of a 49.9% interest in ManaAir LLC, which, as of immediately following the closing of that investment, owns 100% of the equity interests in ExpressJet Airlines, Inc., a domestic regional airline. We also have minority equity interests in CommutAir and Republic Airways Holdings, Inc. See Note 9 to the financial statements included in Part II, Item 8 of this report for additional information regarding our investments in regional airlines.
We expect to continue exploring similar non-controlling investments in, and entering into JBAs, commercial agreements, loan transactions and strategic alliances with, other carriers as part of our regional and global business strategy. These transactions and relationships involve significant challenges and risks. We are dependent on these other carriers for significant aspects of our network in the regions in which they operate. While we work closely with these carriers, each is a separately certificated commercial air carrier and we do not have control over their operations, strategy, management or business methods. These airlines also are subject to a number of the same risks as our business, which are described in this Item 1A., Risk Factors, including competitive pressures on pricing, demand and capacity; changes in aircraft fuel pricing; and the impact of global and local political and economic conditions on operations and customer travel patterns, among others.
As a result of these and other factors, we may not realize a satisfactory return on our investment, and we may not receive repayment of any invested or loaned funds. Further, these investments may not generate the revenue or operational synergies we expect, and they may distract management focus from our operations or other strategic options. Finally, our reliance on these other carriers in the regions in which they operate may negatively impact our regional and global operations and results if those carriers are impacted by general business risks or perform below our expectations or needs. Any one or more of these events could have a material adverse effect on our operating results or financial condition.
We may also be subject to consequences from any improper behavior of JBA partners, including for failure to comply with anti-corruption laws such as the U.S. Foreign Corrupt Practices Act. Furthermore, our relationships with these carriers may be subject to the laws and regulations of non-U.S. jurisdictions in which these carriers are located or conduct business. Any political or regulatory change in these jurisdictions that negatively impact or prohibit our arrangements with these carriers could have an adverse effect on our operating results or financial condition. To the extent that the operations of any of these carriers are disrupted over an extended period of time or their actions subject us to the consequences of failure to comply with laws and regulations, our operating results may be adversely affected.
The airline industry may undergo further change with respect to alliances and JBAs or due to consolidations, any of which could have a material adverse effect on the Company’s hedging programs.

Company.

The Company faces and may continue to face strong competition from other carriers due to the modification of alliances and formation of new JBAs. Carriers may improve their competitive positions through airline alliances, slot swaps and/or JBAs. Certain types of airline JBAs further competition by allowing multiple airlines to coordinate routes, pool revenues and costs, and enjoy other mutual benefits, achieving many of the benefits of consolidation. Open Skies agreements, including the longstanding agreements between the United States and each of the EU, Canada, Japan, Korea, New Zealand, Australia, Colombia and Panama, as well as the more recent agreements between the United States and each of Mexico and Brazil, may also give rise to better integration opportunities among international carriers. Movement of airlines between current global airline alliances could reduce joint network coverage for members of such alliances while also creating opportunities for JBAs and bilateral alliances that did not exist before such realignment. Further airline and airline alliance consolidations or reorganizations could occur in the future. The Company routinely engages in analyses and discussions regarding its own strategic position, including current and potential alliances, asset acquisitions and divestitures and may have future discussions

with other airlines regarding strategic activities. If other airlines participate in such activities, those airlines may significantly improve their cost structures or revenue generation capabilities, thereby potentially making them stronger competitors of the Company and potentially impairing the Company's ability to realize expected benefits from its own strategic relationships.
Orders for new aircraft typically must be placed years in advance of scheduled deliveries, and changes in the Company's network strategy over time may make aircraft on order less economic for the Company, result in costs related to modification or termination of aircraft orders or cause the Company to enter into orders for new aircraft on less favorable terms.
The Company's orders for new aircraft are typically made years in advance of actual delivery of such aircraft, and the financial commitment required for purchases of new aircraft is substantial. At December 31, 2018, the Company had firm commitments to purchase 273 new aircraft from The Boeing Company ("Boeing"), Airbus S.A.S ("Airbus") and Embraer S.A. ("Embraer"), as well as related agreements with engine manufacturers, maintenance providers and others. As of December 31, 2018, the Company's commitments relating to the acquisition of aircraft and related spare engines, aircraft improvements and other related obligations aggregated to a total of $24.7 billion.
Subsequent to the Company placing an order for new aircraft, the Company's network strategy may change. As a result, the Company's preference for a particular aircraft that it has ordered, often years in advance, may be decreased or eliminated. If the Company were to modify or terminate any of its existing aircraft order commitments, it may be responsible for material liabilities to its counterparties arising from any such change. Additionally, the Company may have a need for additional aircraft that are not available under its existing orders. In such cases, the Company may seek to acquire aircraft from other sources, such as through lease arrangements, which may result in higher costs or less favorable terms, or through the purchase or lease of used aircraft. The Company may not be able to acquire such aircraft when needed on favorable terms or at all.
A majority of the Company's aircraft and certain parts are sourced from single suppliers; therefore, the Company would be materially and adversely affected if it were unable to obtain additional equipment or support from any of these suppliers.
The Company currently sources the majority of its aircraft and many related aircraft parts from Boeing. In addition, our aircraft suppliers are dependent on other suppliers for certain other aircraft parts. Therefore, if the Company was unable to acquire additional aircraft from Boeing, or if Boeing was unable or unwilling to make timely deliveries of aircraft or to provide adequate support for its products, the Company's operations could be materially and adversely affected. The Company is also dependent on a limited number of suppliers for aircraft engines and certain other aircraft parts and could therefore also be materially and adversely affected in the event of the unavailability of these engines and other parts.
Union disputes, employee strikes or slowdowns, and other labor-related disruptions as well as the integration of United’s workforces in connection with the Company’s merger transaction in 2010, could adversely affect the Company’sCompany's operations and could result in increased costs that impair its financial performance.

United is a highly unionized company. As of December 31, 2015,2018, the Company and its subsidiaries had approximately 84,00092,000 active employees, of whom approximately 80%83% were represented by various U.S. labor organizations.

The successful integration of United’s workforces in connection with the Company’s merger transaction in 2010 and achievement of the anticipated benefits of the combined company depend in part on integrating employee groups and maintaining productive employee relations. In order to fully integrate the Company’s pre-merger represented employee groups, the Company must negotiate a joint collective bargaining agreement covering each combined group. The process for integrating the labor groups is governed by a combination of the RLA, the McCaskill-Bond Amendment, and where applicable, the existing provisions of collective bargaining agreements

15

and union policies. A delay in or failure to integrate employee groups presents the potential for increased operating costs and labor disputes that could adversely affect the Company’s operations.

The Company has reached joint collective bargaining agreements with the majority of its employee groups since the merger transaction in 2010 with only two groups remaining without combined collective bargaining agreements. We continue to negotiate for a joint flight attendant collective bargaining agreement and its technician and related employees are in the process of submitting a recent Company proposal for ratification by its membership. The Company can provide no assurance that a successful or timely resolution of these labor negotiations will be achieved.

There is a risk that unions or individual employees might pursue judicial or arbitral claims arising out of changes implemented as a result of the Company’s merger transaction in 2010.Company entering into collective bargaining agreements with its represented employee groups. There is also a possibility that employees or unions could engage in job actions such as slowdowns, work-to-rule campaigns, sick-outs or other actions designed to disrupt the Company’sCompany's normal operations, in an attempt to pressure the Company in collective bargaining negotiations. Although the RLA makes such actions unlawful until the parties have been lawfully released to self-help, and the Company can seek injunctive relief against premature self-help, such actions can cause significant harm even if ultimately enjoined. In addition, joint collective bargaining agreements with the Company’sCompany's represented employee groups increase the Company’sCompany's labor costs, which increase could be material for any applicable reporting period.

See Notes 15 and 16 to the financial statements included in Part II, Item 8 of this report for additional information on labor negotiations and costs.

An outbreak of a disease or similar public health threat could have a material adverse impact on the Company’sCompany's business, operating results and financial position and results of operations.

condition.

An outbreak of a disease or similar public health threat that affects travel demand, or travel behavior, or travel restrictions or reduction in the demand for air travel caused by an outbreak of a disease or similar public health threat in the future, could have a material adverse impact on the Company’sCompany's business, financial condition and operating results.
If we experience changes in, or are unable to retain, our senior management team or other key employees, our operating results could be adversely affected.
Much of our future success depends on the continued availability of skilled personnel with industry experience and knowledge, including our senior management team and other key employees. If we are unable to attract and retain talented, highly qualified senior management and other key employees, or if we are unable to effectively provide for the succession of senior management, our business may be adversely affected.

Extended interruptions or disruptions in service at major airports where we operate could have a material adverse impact on our operations.
The airline industry is heavily dependent on business models that concentrate operations in major airports in the United States and throughout the world. An extended interruption or disruption at an airport where we have significant operations could have a material impact on our business, financial condition and results of operations.

Extensiveoperation.

We operate principally through our domestic hubs in at Newark, Chicago O'Hare, Denver, Houston Bush, LAX, Guam, SFO and Washington Dulles. Substantially all of our flights either originate in or fly into one of these locations. A significant interruption or disruption in service at one of our hubs or other airports where we have a significant presence resulting from ATC delays, weather conditions, natural disasters, growth constraints, relations with third-party service providers, failure of computer systems, disruptions to government agencies or personnel, disruptions at airport facilities or other key facilities used by us to manage our operations, labor relations, power supplies, fuel supplies, terrorist activities, international hostilities or otherwise could result in the cancellation or delay of a significant portion of our flights and, as a result, could have a material impact on our business, operating results and financial condition. We have minimal control over the operation, quality or maintenance of these services or whether vendors will improve or continue to provide services that are essential to our business.
The airline industry is subject to extensive government regulation, could increase the Company’s operatingwhich imposes significant costs and restrict its ability to conduct its business.

may adversely impact our business, operating results and financial condition.

Airlines are subject to extensive regulatory and legal oversight. Compliance with U.S. and international regulations imposes significant costs and may have adverse effects on the Company. Laws, regulations, taxes and airport rates and charges, both domestically and internationally, have been proposed from time to time that could significantly increase the cost of airline operations or reduce airline revenue.

United provides air transportation under certificates of public convenience and necessity issued by the DOT. If the DOT altered, amended, modified, suspended or revoked these certificates, it could have a material adverse effect on the Company’sCompany's business. The FAA regulates the safety of United’sUnited's operations. United operates pursuant to an air carrier operating certificate issued by the FAA. In January 2014, the FAA’s moreThe FAA's regulations include stringent pilot flight and duty time requirements under Part 117 of the Federal Aviation Regulations, took effect, which has increased costs for all carriers. In July 2014,as well as minimum qualifications took effect for air carrier first officers. These regulations impact the Company and its regional partner flying, as they have caused mainline airlines to hire regional pilots, while simultaneously significantly reducing the pool of new pilots from which regional carriers themselves can hire. Although this is an industry issue, it directly affects the Company and requireshas required it to reduce regional partner flying, as several regional partners have experienced difficulty flying their schedules due to reduced pilot availability. From time to time, the FAA also issues orders, airworthiness directives and other regulations relating to the maintenance and operation of aircraft that require material expenditures or operational restrictions by the Company. These FAA orders and directives could include the temporary grounding of an entire aircraft type if the FAA identifies design, manufacturing, maintenance or other issues requiring immediate corrective action. FAA requirements cover, among other things, retirement of older aircraft, collision avoidance

16

systems, airborne windshear avoidance systems, noise abatement and other environmental concerns, aircraft operation and safety and increased inspections and maintenance procedures to be conducted on older aircraft. These FAA directives or requirements could have a material adverse effect on the Company.

In addition,2018, the Company’sU.S. Congress approved a five-year reauthorization for the FAA, which encompasses significant aviation tax and policy-related issues. The law includes a range of policy changes related to airline customer service and aviation safety which, depending on how they are implemented, could impact our operations and costs. Additionally, the U.S. Congress may fail to continue to fund the operations of one or more federal government agencies which could negatively impact the Company and the airline industry.
The Company's operations may also be adversely impacted due to the existing antiquated air traffic control (“ATC”)ATC system utilized by the U.S. government.government and regulated by the FAA. During peak travel periods in certain markets, the current ATC system’ssystem's inability to handle ATC demand has led to short-term capacity constraints imposed by government agencies and resulted in delays and disruptions of air traffic. In addition, the current system will not be able to effectively handle projected future air traffic growth. The outdated technologies also cause the ATC to be less resilient in the event of a failure, causing flight cancellations and delays. Imposition of these ATC constraints on a long-term basis may have a material adverse effect on the Company’s results ofCompany's operations. Failure to update the ATC system in a timely manner, and the substantial funding requirements of a modernized ATC system that may be imposed on air carriers may have an adverse impact on the Company’sCompany's financial condition or results of operations.

operating results.

Access to landing and take-off rights, or “slots,”"slots," at several major U.S. airports and many foreign airports served by the Company are, or recently have been, subject to government regulation. Certain of the Company’sCompany's major hubs are among the most congested airports in the United States and have been or could be the subject of regulatory action that might limit the number of flights and/or increase costs of operations at certain times or throughout the day. The FAA may limit the Company’s Company's

airport access by limiting the number of departure and arrival slots at high density traffic airports, which could affect the Company’sCompany's ownership and transfer rights, and local airport authorities may have the ability to control access to certain facilities or the cost of access to their facilities, which could have an adverse effect on the Company’sCompany's business. The FAA historically has taken actions with respect to airlines’airlines' slot holdings that airlines have challenged; if the FAA were to take actions that adversely affect the Company’sCompany's slot holdings, the Company could incur substantial costs to preserve its slots or may lose slots. If slots are eliminated at an airport, or if the number of hours of operation governed by slots is reduced at an airport, the lack of controls on takeoffs and landings could result in greater congestion both at the affected airport or in the regional airspace (e.g., the New York City metropolitan region airspace) and could significantly impact the Company's operations. Further, the Company’sCompany's operating costs at airports, including the Company’sCompany's major hubs, may increase significantly because of capital improvements at such airports that the Company may be required to fund, directly or indirectly. Such costs could be imposed by the relevant airport authority without the Company’sCompany's approval and may have a material adverse effect on the Company’sCompany's financial condition.

The ability of carriers to operate flights on international routes between the United States and other countries may be subject to change.is highly regulated. Applicable arrangements between the United States and foreign governments may be amended from time to time, government policies with respect to airport operations may be revised, and the availability of appropriate slots or facilities may change. The Company currently operates a number of flights on international routes under government arrangements, regulations or policies that designate the number of carriers permitted to operate on such routes, the capacity of the carriers providing services on such routes, the airports at which carriers may operate international flights, or the number of carriers allowed access to particular airports. Any further limitations, additions or modifications to such arrangements, regulations or policies could have a material adverse effect on the Company’sCompany's financial positioncondition and results of operations.operating results. Additionally, a change in law, regulation or policy for any of the Company’sCompany's international routes, such as open skies,Open Skies, could have a material adverse impact on the Company’sCompany's financial positioncondition and operating results of operations and could result in the impairment of material amounts of related tangible and intangible assets. In addition, competition from revenue-sharing joint venturesJBAs and other alliance arrangements by and among other airlines could impair the value of the Company’sCompany's business and assets on the open skiesOpen Skies routes. The Company’sCompany's plans to enter into or expand U.S. antitrust immunized alliances and joint venturesJBAs on various international routes are subject to receipt of approvals from applicable U.S. federal authorities and obtaining other applicable foreign government clearances or satisfying the necessary applicable regulatory requirements. There can be no assurance that such approvals and clearances will be granted or will continue in effect upon further regulatory review or that changes in regulatory requirements or standards can be satisfied.

See Part I, Item 1, Business—Industry Regulation, of this report for additional information on government regulation impacting the Company.
We are subject to many forms of environmental regulation and liability and risks associated with climate change, and may incur substantial costs as a result.
Many aspects of the Company’sCompany's operations are also subject to increasingly stringent federal, state, local and international laws protecting the environment. Futureenvironment, including those relating to emissions to the air, water discharges, safe drinking water and the use and management of hazardous materials and wastes. Compliance with existing and future environmental regulatory developments,laws and regulations can require significant expenditures and violations can lead to significant fines and penalties. In addition, from time to time we are identified as a responsible party for environmental investigation and remediation costs under applicable environmental laws due to the disposal of hazardous substances generated by our operations. We could also be subject to environmental liability claims from various parties, including airport authorities, related to our operations at our leased premises or the off-site disposal of waste generated at our facilities.
We may incur substantial costs as a result of changes in weather patterns due to climate change. Increases in the frequency, severity or duration of severe weather events such as thunderstorms, hurricanes, flooding, typhoons, tornados and other severe weather events could result in increases in delays and cancellations, turbulence-related injuries and fuel consumption to avoid such weather, any of which could result in significant loss of revenue and higher costs.
To address climate change regulationsrisks, CORSIA has been developed by ICAO, a UN specialized agency. CORSIA is intended to create a single global market-based measure to achieve carbon-neutral growth for international aviation after 2020 through airline purchases of carbon offset credits. Certain CORSIA program details remain to be developed and could potentially be affected by political developments in participating countries or the United Statesresults of the pilot phase of the program, and abroad could adversely affect operations andthus the impact of CORSIA cannot be fully predicted. However, CORSIA is expected to increase operating costs for airlines that operate internationally.
In addition to CORSIA, the EPA had begun preliminary work to adopt its own aircraft engine GHG emission standards which were expected to be aligned with recent ICAO carbon dioxide emission standards. The timing of any U.S. EPA aircraft engine GHG emission standards is currently unknown, but some jurisdictions in the airline industry. Therewhich United operates have adopted or are certain climate change laws and regulations that have already gone into effect

17

and that apply to the Company, including the European Union’s Emissions Trading Scheme, the State of California’sconsidering GHG cap and trade regulations, environmental taxes for certain international flights, limited GHG reporting requirements and land-use planning lawsemission reduction initiatives, which could apply to airports and could affect airlines in certain circumstances. In addition, there isimpact various aspects of the potential for additional regulatory actions in regard to the emission of GHGs by the aviation industry.Company's business. The precise


nature of future requirements and their applicability to the Company are difficult to predict, but the financial impact to the Company and the aviation industry would likely be adverse and could be significant.

In 2016, the U.S. Congress will continue to consider legislation to reauthorize the FAA, which encompasses all significant aviation tax and policy related issues. As with previous reauthorization legislation, the U.S. Congress may consider a range of policy changes that could impact the Company’s operations and costs.

See Part I, Item 1, Business—IndustryBusiness-Industry Regulation-Environmental Regulation, of this report for additional information on governmentenvironmental regulation impacting the Company.

The United Kingdom's withdrawal from the EU may adversely impact our operations in the United Kingdom and elsewhere.
In June 2016, United Kingdom ("UK") voters approved an advisory referendum for the UK to exit the EU. The UK parliament voted in favor of allowing the government to commence negotiations to determine the future terms of the UK's relationship with the EU, including the terms of trade between the UK and the EU and other nations. The timing of the proposed exit is currently scheduled for March 29, 2019, with a transition period potentially running through December 2020. A withdrawal plan was presented to the UK parliament in January 2019 and rejected, creating further uncertainty in negotiations and the process of withdrawal.
Depending on the outcome of these negotiations, we could face new challenges in our operations, such as instability in global financial and foreign exchange markets. This instability could include volatility in the value of the British pound and European euro, additional travel restrictions on passengers traveling between the UK and other EU countries, changes to the legal status of EU-resident employees, legal uncertainty and potentially divergent national laws and regulations. At this time, we cannot predict the impact that an actual exit from the EU will have on our business generally and our UK and European operations more specifically, and no assurance can be given that our operating results, financial condition and prospects would not be adversely impacted by the result.
The Company's operating results fluctuate due to seasonality and other factors associated with the airline industry, may undergo further change with respect to alliances and joint ventures, eithermany of which couldare beyond the Company's control.
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 operating results generally reflect this seasonality, but have also been impacted by numerous other factors that are not necessarily seasonal, including, among others, extreme or severe weather, outbreaks of disease or pandemics, ATC congestion, geological events, political instability, terrorism, natural disasters, changes in the competitive environment due to industry consolidation, tax obligations, general economic conditions and other factors. As a material adverse effect onresult, the Company.

Company's quarterly operating results are not necessarily indicative of operating results for an entire year and historical operating results in a quarterly or annual period are not necessarily indicative of future operating results.

Increases in insurance costs or inadequate insurance coverage may materially and adversely impact our business, operating results and financial condition.
The Company facescould 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. The Company maintains insurance policies, including, but not limited to, terrorism, aviation hull and may continueliability, workers' compensation and property and business interruption insurance, but we are not fully insured against all potential hazards and risks incident to face strong competition from other carriersour business. If the Company is unable to obtain sufficient insurance with acceptable terms, the costs of such insurance increase materially, or if the coverage obtained is insufficient relative to actual liability or losses that the Company experiences, whether due to the modification of alliancesinsurance market conditions, policy limitations and formation of new joint ventures. Carriers may improve their competitive positions through airline alliances, slot swaps and/exclusions or joint ventures. Certain types of airline joint ventures further competition by allowing multiple airlines to coordinate routes, pool revenuesotherwise, its operating results and costs,financial condition could be materially and enjoy other mutual benefits, achieving many of the benefits of consolidation. “Open Skies” agreements, including the agreements between the United States and the European Union and between the United States and Japan, may also give rise to better integration opportunities among international carriers. Movement of airlines between current global airline alliances could reduce joint network coverage for members of such alliances while also creating opportunities for joint ventures and bilateral alliances that did not exist before such realignment. There is ongoing speculation that further airline and airline alliance consolidations or reorganizations could occur in the future, especially if new “Open Skies” agreements between Brazil and the United States and Mexico and the United States are fully implemented. adversely affected.
The Company routinely engages in analysishas a significant amount of financial leverage from fixed obligations, and discussions regarding its own strategic position, including current and potential alliances, asset acquisitions and divestitures and may have future discussions with other airlines regarding strategic activities. If other airlines participate in such activities, those airlines may significantly improve their cost structures or revenue generation capabilities, thereby potentially making them stronger competitors of the Company and potentially impairing the Company’s ability to realize expected benefits from its own strategic relationships.

Inadequateinsufficient liquidity or a negative impact on the Company’s liquidity from factors beyond the Company’s control may have a material adverse effect on the Company’sCompany's financial positioncondition and business.

The Company has a significant amount of financial leverage from fixed obligations, including aircraft lease and debt financings, leases of airport property and other facilities, and other material cash obligations. In addition, the Company has substantial noncancelable commitments for capital expenditures, including for the acquisition of new aircraft and related spare engines.

Although the Company’sCompany's cash flows from operations and its available capital, including the proceeds from financing transactions, have been sufficient to meet these obligations and commitments to date, the Company’sCompany's future liquidity could be negatively affected by the risk factors discussed in this Item 1A., including, but not limited to, substantial volatility in the price of fuel, adverse economic conditions, disruptions in the global capital markets and catastrophic external events.

report. If the Company’sCompany's liquidity is constrained due to the various risk factors noted in this Item 1A. or otherwise,materially diminished, the Company might not be able to timely pay its leases and debts or comply with certain operating and financial covenants under its financing and credit card processing agreements or with other material provisions of its contractual obligations. These covenants require the Company or United, as applicable, to maintain minimum liquidity and/

18

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’sCompany'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.

In addition, our variable rate indebtedness may use


London interbank offered rates ("LIBOR") as a benchmark for establishing the rate. As announced in July 2017, LIBOR is expected to be phased out by the end of 2021. Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR may adversely impact the availability and cost of borrowings.
See Part II, Item 7, Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations, of this report for additional information regarding the Company’sCompany's liquidity.

Increases

Agreements governing our debt include financial and other covenants. Failure to comply with these covenants could result in insurance costsevents of default.
Our financing agreements include various financial and other covenants. Certain of these covenants require UAL or reductions in insuranceUnited, as applicable, to maintain minimum liquidity and/or minimum collateral coverage may materially and adversely impact the Company’s results of operations and financial condition.

The Company could be exposedratios. UAL's or United's ability to significant liability or loss if its property or operations were tocomply with these covenants may be affected by a natural catastrophe orevents beyond its control, including the overall industry revenue environment, the level of fuel costs and the appraised value of the collateral. In addition, our financing agreements contain other event, including aircraft accidents.negative covenants customary for such financings. These covenants are subject to important exceptions and qualifications. If the Company iswe fail to comply with these covenants and are unable to remedy or obtain sufficient insurance (including but not limiteda waiver or amendment, an event of default would result.

If an event of default were to aviation hulloccur, the lenders could, among other things, declare outstanding amounts due and liability insurance, workers’ compensation, and property and business interruption coverage) to cover such liabilitiespayable. In addition, an event of default or losses, whetherdeclaration of acceleration under one financing agreement could also result in an event of default under other of our financing agreements due to insurance market conditionscross-default and cross-acceleration provisions. The acceleration of significant amounts of debt could require us to renegotiate, repay or otherwise, its results of operations and financial condition could be materially and adversely affected.

Followingrefinance 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,

19

general economic conditions and other factors. As a result, the Company’s quarterly operating results are not necessarily indicative of operating results for an entire year and historical operating results in a quarterly or annual period are not necessarily indicative of future operating results.

obligations under our financing arrangements.

The Company may never realize the full value of its intangible assets or its long-lived assets causing it to record impairments that may negatively affect its financial positioncondition and results of operations.

operating results.

In accordance with applicable accounting standards, the Company is required to test its indefinite-lived intangible assets for impairment on an annual basis, on October 1 of each year, or more frequently if conditions indicate thatwhere there is an impairment may have occurred.indication of impairment. In addition, the Company is required to test certain of its other assets for impairment if conditions indicatewhere there is any indication that an impairmentasset may have occurred.

be impaired.

The Company may be required to recognize impairmentslosses in the future due to, among other factors, extreme fuel price volatility, tight credit markets, agovernment regulatory changes, decline in the fair valuevalues of certain tangible or intangible assets, such as aircraft, route authorities, airport slots and frequent flyer database, unfavorable trends in historical or forecasted results of operations and cash flows and an uncertain economic environment, as well as other uncertainties. The Company can provide no assurance that a material impairment chargeloss of tangible or intangible assets will not occur in a future period. The value of the Company’sCompany's aircraft could be impacted in future periods by changes in supply and demand for these aircraft. Such changes in supply and demand for certain aircraft types could result from grounding of aircraft by the Company or other carriers. An impairment chargeloss could have a material adverse effect on the Company’sCompany's financial positioncondition and results of operations.

The Company’s ability to use its net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be significantly limited due to various circumstances, including certain possible future transactions involving the sale or issuance of UAL common stock, or if taxable income does not reach sufficient levels.

As of December 31, 2015, UAL reported consolidated federal net operating loss (“NOL”) carryforwards of approximately $8.0 billion.

The Company’s ability to use its NOL carryforwards may be limited if it experiences an “ownership change” as defined in Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended. An ownership change generally occurs if certain stockholders increase their aggregate percentage ownership of a corporation’s stock by more than 50 percentage points over their lowest percentage ownership at any time during the testing period, which is generally the three-year period preceding any potential ownership change.

There is no assurance that the Company will not experience a future ownership change under Section 382 that may significantly limit or possibly eliminate its ability to use its NOL carryforwards. Potential future transactions involving the sale or issuance of UAL common stock, including the exercise of conversion options under the terms of any convertible debt that UAL may issue in the future, the repurchase of such debt with UAL common stock, any issuance of UAL common stock for cash and the acquisition or disposition of such stock by a stockholder owning 5% or more of UAL common stock, or a combination of such transactions, may increase the possibility that the Company will experience a future ownership change under Section 382.

Under Section 382, a future ownership change would subject the Company to additional annual limitations that apply to the amount of pre-ownership change NOLs that may be used to offset post-ownership change taxable income. This limitation is generally determined by multiplying the value of a corporation’s stock immediately before the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may, subject to certain limits, be carried over to later years, and the limitation may under certain circumstances be increased by built-in gains in the assets held by such corporation at the time of the ownership change. This limitation could cause the Company’s U.S. federal income taxes to be greater, or to be paid earlier, than they otherwise would be, and could cause all or a portion of the Company’s NOL carryforwards to expire unused. Similar rules and limitations may apply for state income tax purposes. The Company’s ability to use its NOL

20

carryforwards will also depend on the amount of taxable income it generates in future periods. Its NOL carryforwards may expire before the Company can generate sufficient taxable income to use them in full.

UAL’s amended and restated certificate of incorporation limits certain transfers of its stock, which limits are intended to preserve our ability to use our NOL carryforwards, and these limits could have an effect on the market price of UAL common stock.

To reduce the risk of a potential adverse effect on the Company’s ability to use its NOL carryforwards for federal income tax purposes, UAL’s amended and restated certificate of incorporation contains a 5% ownership limitation. This limitation generally remains effective until February 1, 2017, or until such later date as may be approved by the Board of Directors in its sole discretion. The limitation prohibits (i) an acquisition by a single stockholder of shares that results in that stockholder owning 5% or more of UAL common stock and (ii) any acquisition or disposition of common stock by a stockholder that already owns 5% or more of UAL common stock, unless prior written approval is granted by the Board of Directors.

Any transfer of common stock in violation of these restrictions will be void and will be treated as if such transfer never occurred. This provision of UAL’s amended and restated certificate of incorporation may impair or prevent a sale of common stock by a stockholder and adversely affect the price at which a stockholder can sell UAL common stock. In addition, this limitation may have the effect of delaying or preventing a change in control of the Company, creating a perception that a change in control cannot occur or otherwise discouraging takeover attempts that some stockholders may consider beneficial, which could also adversely affect the market price of the UAL common stock. The Company cannot predict the effect that this provision in UAL’s amended and restated certificate of incorporation may have on the market price of the UAL common stock. For additional information regarding the 5% ownership limitation, please refer to UAL’s amended and restated certificate of incorporation available on the Investor Relations section of the Company’s website at http://ir.united.com.

results.

ITEM 1B.UNRESOLVED STAFF COMMENTS.

None.

21


ITEM 2.PROPERTIES.

Fleet
Fleet

Including aircraft operatingoperated by United’sUnited's regional carriers, United operated 1,236United's fleet consisted of 1,329 aircraft as of December 31, 2015,2018, the details of which are presented in the tables below:

Aircraft Type

  Total       Owned           Leased           Seats in Standard
Configuration		   Average Age (In
Years)		 

Mainline:

            

747-400

   22       15       7         374       20.1    

777-200ER

   55       38       17         267-269       15.8    

777-200

   19       19       —         266-348       18.9    

787-9

   13       13       —         252       0.6    

787-8

   12       12       —         219       2.5    

767-400ER

   16       14       2         242       14.3    

767-300ER

   35       22       13         183-214       20.5    

757-300

   21       9       12         213       13.3    

757-200

   60       45       15         142-182       20.0    

737-900ER

   128       128       —         167-179       3.3    

737-900

   12       8       4         167       14.3    

737-800

   130       57       73         154-166       12.9    

737-700

   40       14       26         118-124       16.8    

A320-200

   97       52       45         150       17.5    

A319-100

   55       45       10         128       15.9    
  

 

 

   

 

 

   

 

 

       

 

 

 

Total mainline

               715       491       224           13.5    
  

 

 

   

 

 

   

 

 

       

Aircraft Type

  Capacity
Purchase
Agreement
Total		       Owned           Leased       Owned or
Leased by
Regional
Carrier		   Regional Carrier
Operator and
Number of
Aircraft		   Seats in Standard
Configuration		 

Regional:

            

Embraer E175

   80       30       —       50       

 
 

SkyWest: 40  

Mesa: 30  
Republic:10  

  

  
  

   76    

Bombardier Q400

   13       —       —       13       Republic: 13       71    

Embraer 170

   38       —       —       38       
 		Shuttle: 28  
Republic: 10  		  
  		   70    

CRJ700

   115       —       —       115       
 
 		SkyWest: 70  
GoJet: 25  
Mesa: 20  		  
  
  		   70    

CRJ200

   50       —       29       21       SkyWest: 50       50    

Embraer ERJ 145 (XR/LR/ER)

   199       16       175       8       
 		ExpressJet:166
Trans States: 33  		  
  		   50    

Q300

   5       —       —       5       CommutAir: 5       50    

Embraer ERJ 135

   5       —       5       —       ExpressJet: 5       37    

Q200

   16       —       —       16       CommutAir: 16       37    
  

 

 

   

 

 

   

 

 

   

 

 

     

Total regional

   521       46       209       266        
  

 

 

   

 

 

   

 

 

   

 

 

     

Total

   1,236       537       433       266        
  

 

 

   

 

 

   

 

 

   

 

 

     

22

Aircraft Type Total Owned Leased   Seats in Standard Configuration  Average Age (In Years)
Mainline:             
777-300ER 18
 18
 —
   350-366  1.5
777-200ER 55
 46
 9
   269-274  18.8
777-200 19
 19
 —
   364  21.5
787-10 3
 3
 —
   318  0.1
787-9 25
 25
 —
   252  2.8
787-8 12
 12
 —
   219  5.5
767-400ER 16
 14
 2
   242  17.3
767-300ER 38
 25
 13
   167-214  22.9
757-300 21
 9
 12
   213-234  16.3
757-200 56
 50
 6
   142-169  22.8
737 MAX 9 9
 9
 —
   179  0.4
737-900ER 136
 136
 —
   179  6.0
737-900 12
 8
 4
   179  17.3
737-800 141
 90
 51
   166  14.8
737-700 40
 25
 15
   126  19.8
A320-200 99
 70
 29
   150  20.3
A319-100 70
 55
 15
   128  17.6
Total mainline 770
 614
 156
      15.1
Aircraft Type Capacity Purchase Agreement Total Owned Leased Owned or Leased by Regional Carrier Regional Carrier Operator and Number of Aircraft Seats in Standard Configuration
Regional:  
  
  
       
Embraer E175 153
 54
 —
 99
 
SkyWest:
Mesa:
Republic:
65
60
28

 76
Embraer 170 38
 —
 —
 38
 Republic:38
 70
CRJ700 64
 —
 —
 64
 
SkyWest:
GoJet:
Mesa:
19
25
20

 70
CRJ200 128
 —
 —
 128
 
SkyWest:
Air Wisconsin:
ExpressJet:
60
56
12

 50
Embraer ERJ 145 (XR/LR/ER) 176
 82
 90
 4
 
ExpressJet:
Trans States:
CommutAir:
105
40
31

 50
Total regional 559
 136
 90
 333
     
Total 1,329
 750
 246
 333
     
In addition to the aircraft operating in scheduled service presented in the tables above, United owns or leasesowned the following aircraft listed below as of December 31, 2015:

2018:

One ownedBoeing 737 MAX 9 and one Airbus 319-100, which were delivered in December 2018 but were awaiting operating certificates as of December 31, 2018;

One Boeing 767-200, which is being subleased to another airline;

EightNine Boeing 757-200s, seven of747s, which are in the process of being returned to the lessorpermanently grounded; and one of which is owned and being held for disposition;

One owned Airbus A330, which is subleased to another airline; and

25 leasedThree Embraer ERJ 135s that145s, which are permanentlytemporarily grounded.




Firm Order and Option Aircraft

In January 2016, UAL entered into a purchase agreement amendment with The Boeing Company (“Boeing”) for a firm narrowbody aircraft order of 40 Boeing 737 Next Generation (“737NG”) aircraft.

As of December 31, 2015 (as adjusted to include the order discussed above),2018, United had firm commitments and options to purchase new aircraft from Boeing, Airbus and Embraer S.A. (“Embraer”) and Airbus S.A.S. (“Airbus”)as presented in the table below:

Aircraft Type

 

Number of Firm


Commitments (a)

Airbus A350-1000

A350		 35  45

Boeing 737NG/737 MAX 9

 155  175

Boeing 777-300ER

 10  4

Boeing 787-8/-9/-10

787		 30  24

Embraer E175

 10  25

(a) United also has options and purchase rights for additional aircraft.

The aircraft listed in the table above are scheduled for delivery from 20162019 through 2024.2027. To the extent the Company and the aircraft manufacturers with whom the Company has existing orders for new aircraft agree to modify the contracts governing those orders, the amount and timing of the Company's future capital commitments could change. In 2016,2019, United expects to take delivery of 1525 Embraer E175 aircraft, 20 Boeing 737NG737 MAX aircraft, five8 Boeing 787-9787 aircraft oneand 2 Boeing 777-300ER aircraft. United also has agreements to purchase 20 used Airbus A319 aircraft and 10 Embraer E175 aircraft.with expected delivery dates through 2022. See Notes 1110 and 1513 to the financial statements included in Part II, Item 8 of this report for additional information.

United expects to take delivery of nine and five used Airbus A319s in 2016 and 2017, respectively. In addition, up to 14 additional used Airbus A319s may be delivered between 2018 and 2021, subject to certain conditions.

In 2015, the Company continued its multi-year initiative to reduce its reliance on 50-seat regional aircraft operated by regional carriers doing business as United Express. The Company expects to reduce its remaining 50-seat regional fleet by approximately half by the end of 2019. Republic is scheduled to complete removal of the Bombardier Q400 aircraft from United Express service by the second quarter of 2016.

Facilities

United’s

United's principal facilities relate to leases of airport facilities, gates, hangar sites, terminal buildings and other facilities in most of the municipalities it serves with its most significant leases at airport hub locations.serves. United has major terminal facility leases at SFO, Washington Dulles, Chicago O’Hare,O'Hare, LAX, Denver, Newark, Liberty, Houston Bush Hopkins International Airport and Guam with expiration dates ranging from 2016 to 2041.2019 through 2055. Substantially all of these facilities are leased on a net-rental basis, resulting in the Company’sCompany's responsibility for maintenance, insurance and other facility-related expenses and services.

United also maintains administrative offices, terminal, catering, cargo, and other airport facilities, training facilities, maintenance facilities and other facilities to support operations in the cities served. In addition, United also has multiple leases, which expire from 20222019 through 2028 and include approximately 1,100,000 square feet of office space2029, for its corporate headquartersprincipal executive office and operations center in downtown Chicago and certain administrative offices in downtown Houston.

23

ITEM 3.LEGAL PROCEEDINGS.

In 2001, the California Regional Water Quality Control Board (“CRWQCB”) mandated a field study of the area surrounding Continental’s aircraft maintenance hangar in Los Angeles. The study was completed in September 2001 and identified aircraft fuel and solvent contamination on and adjacent to this site. In April 2005, Continental began environmental remediation of aircraft fuel contamination surrounding its aircraft maintenance hangar pursuant to a workplan submitted to and approved by the CRWQCB and its landlord, the Los Angeles World Airports. The Company accrued a reserve in an amount expected by the Company to cover environmental remediation costs for this site.

On October 13, 2015, United received a Civil Investigative Demand (“CID”) from the Civil Division of the United States Department of Justice (“DOJ”). The CID requested documents and oral testimony from United in connection with a DOJ investigation related to delivery scan and other data purportedly required for payment for the carriage of mail under United’s International Commercial Air Contracts with the United States Postal Service. The Company is responding to the DOJ’s request. The Company cannot predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of the investigation.


On June 30, 2015, UAL received a CIDCivil Investigative Demand ("CID") from the Antitrust Division of the DOJ seeking documents and information from the Company in connection with a DOJ investigation related to statements and decisions about airline capacity. The Company is working with the DOJ and has completed its response to the CID. The Company is not able to predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of the investigation. Beginning on July 1, 2015, subsequent to the announcement of the CID, UAL and United were named as defendants in multiple class action lawsuits that asserted claims under the Sherman Antitrust Act, which have been consolidated in the United States District Court for the District of Columbia. The complaints generally allege collusion among U.S. airlines on capacity impacting airfares and seek treble damages. The Company intends to vigorously defend against the class action lawsuits.

As disclosed


On October 13, 2015, United received a CID from the Civil Division of the DOJ. The CID requested documents and oral testimony from United in connection with an industry-wide DOJ investigation related to delivery scan and other data purportedly required for payment for the carriage of mail under United's International Commercial Air Contracts with the U.S. Postal Service. The Company has been responding to the DOJ's request and cooperating in the Company’s annual report on Form 10-K forinvestigation since that time. On November 8, 2016, the year ended December 31, 2014,DOJ Criminal Division met with representatives from the Company and certain of its current and former executive officers and employees have received federal grand jury subpoenas requesting records and testimony related to certain individuals formerly associated withadvised they are conducting an industry-wide investigation into the Port Authority of New York and New Jersey and related operations of the Company and the Company continues to conduct an internal investigation in response. As announced in September 2015, certain of the Company’s executives stepped down in connection with this internal investigation.same matter. The Company is also cooperating with the ongoinggovernment in this aspect of their investigation byand, on December 21, 2016, representatives from the U.S. Attorney’s Office forCompany met with both the District of New JerseyCivil and a related investigation by the SEC, and has participated in discussions with representatives of governmental authorities.Criminal Divisions to provide additional information. The Company cannot predict what action, if any, might be taken in the future by government authorities.

the DOJ or other governmental authorities as a result of these investigations.




Other Legal Proceedings

The Company is involved in various other claims and legal actions involving passengers, customers, suppliers, employees and government agencies arising in the ordinary course of business. Additionally, from time to time, the Company becomes aware of potential non-compliance with applicable environmental regulations, which have either been identified by the Company (through internal compliance programs such as its environmental compliance audits) or through notice from a governmental entity. In some instances, these matters could potentially become the subject of an administrative or judicial proceeding and could potentially involve monetary sanctions. After considering a number of factors, including (but not limited to) the views of legal counsel, the nature of contingencies to which the Company is subject and prior experience, management believes that the ultimate disposition of these other claims and legal actions will not materially affect its consolidated financial position or results of operations. However, the ultimate resolutions of these matters are inherently unpredictable. As such, the Company’sCompany's financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these matters.

ITEM 4.MINE SAFETY DISCLOSURES.

Not applicable.

24

PART II

ITEM 5.MARKET FOR REGISTRANT’SREGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

UAL’s

Since September 7, 2018, UAL's common stock is listedhas traded on the Nasdaq Global Select Market ("Nasdaq") under the symbol "UAL." Previously, UAL's common stock was traded on the New York Stock Exchange (“NYSE”("NYSE") under the symbol “UAL.” The following table sets forth the ranges of high and low sales prices per share of UAL common stock during the last two fiscal years, as reported by the NYSE:

   UAL 
   2015   2014 
   High   Low   High   Low 

1st quarter

    $    74.52          $    62.37          $    49.20          $    37.50      

2nd quarter

   65.85         49.85         48.20         38.06      

3rd quarter

   62.21         49.20         52.45         36.65      

4th quarter

   61.87         49.76         67.77         39.46      

Based on reports by the Company’s transfer agent for UAL common stock, as. As of February 9, 2016,22, 2019, there were 8,9945,615 holders of record of UAL common stock.

UAL did not pay any dividends in 2015 or 2014. Under the restricted payment provisions of the Company’s Credit and Guaranty Agreement, dated as of March 27, 2013 (the “Credit Agreement”), and certain indentures, UAL’s ability to pay dividends on or repurchase UAL’s common stock is subject to limits on the amount of such payments and to certain conditions, including that no default or event of default exists under those instruments and that after giving effect to the making of any such payments, UAL would be in compliance with a minimum fixed charge coverage ratio. Any future determination regarding dividend or distribution payments will be at the discretion of the UAL Board of Directors, subject to the foregoing limits and applicable limitations under Delaware law.

United paid dividends of $1.2 billion and $212 million to UAL in 2015 and 2014, respectively.

The following graph shows the cumulative total stockholder return for UAL’sUAL's common stock during the period from December 31, 20102013 to December 31, 2015.2018. The graph also shows the cumulative returns of the Standard and Poor’s (“S&P”)Poor's 500 Index ("SPX") and the NYSE Arca Airline Index (“AAI”("XAL") of 1815 investor-owned airlines.airlines over the same five-year period. The comparison assumes $100 was invested on December 31, 20102013 in each of UAL common stock.

25

stock, the SPX and the XAL.

ualperformancechart2018.jpg
Note:The stock price performance shown in the graph above should not be considered indicative of potential future stock price performance. The foregoing performance graph is being furnished as part of this report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish our stockholders with such information, and therefore, shall not be deemed to be filed or incorporated by reference into any filings by the Company under the Securities Act or the Exchange Act.



The following table presents repurchases of UAL common stock made in the fourth quarter of 2015:

Period    Total number of
shares
purchased (a)(b)		  Average price
paid per share (c)		  Total number of
shares purchased
as part of publicly
announced plans or
programs (a)(b)		  

Approximate dollar value
of shares that may yet be
purchased under the
plans or programs

(in millions) (a)(b)

 
October 1, 2015 through October 31, 2015    6,212,103     $57.09      6,212,103     $2,552    
November 1, 2015 through November 30, 2015    1,905,963      58.49      1,905,963      2,502    
December 1, 2015 through December 31, 2015    925,099      58.18      925,099      2,448    
   

 

 

   

 

 

  

Total

    9,043,165       9,043,165     

 

   

 

 

   

 

 

  

2018:

Period Total number of shares purchased (a) (b) Average price paid per share (b)(c) Total number of shares purchased as part of publicly announced plans or programs (a) Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) (a)
October 2018 572,349
 $85.76
 572,349
 $1,941
November 2018 927,969
 91.76
 927,969
 1,856
December 2018 1,228,339
 85.87
 1,228,339
 1,750
Total 2,728,657
   2,728,657
  
(a) In 2014, UAL’s2018, UAL repurchased approximately 17.5 million shares of UAL common stock for $1.2 billion. In December 2017, UAL's Board of Directors authorized a $3.0 billion share repurchase program to acquire up to $1 billion of UAL’sUAL's common stock (the “2014 Program”). On July 21, 2015, UAL’s Board of Directors authorized a $3 billion share repurchase program, which the Company expects to complete substantially earlier than its original expected completion datestock. As of December 31, 2017 (the “2015 Program”). Under2018, the programs,Company had approximately $1.8 billion remaining to purchase shares under its share repurchase program. UAL may repurchase shares through the open market, privately negotiated transactions, block trades or accelerated share repurchase transactions from time to time in accordance with applicable securities laws. UAL will repurchase
(b) The table does not include shares withheld from employees to satisfy certain tax obligations due upon the vesting of common stock subject to prevailing market conditions,restricted stock. The United Continental Holdings, Inc. 2017 Incentive Compensation Plan and may discontinue such repurchases at any time. In October, 2015, pursuant to the 2015 Program,United Continental Holdings, Inc. 2008 Incentive Compensation Plan, each provide for the Company entered into agreements to repurchase approximately $300 millionwithholding of shares to satisfy tax obligations due upon the vesting of UAL common stock through an accelerated share repurchase program (the “ASR Program”). The ASR Program was completedrestricted stock. However, these plans do not specify a maximum number of shares that may be withheld for this purpose. A total of 1,368 shares were withheld under the plans in November 2015 and in total, United purchased approximately 5 million sharesthe fourth quarter of 2018 at an average price of $58.14 under the program. The aggregate number$91.79 per share. These shares of common stock withheld to satisfy tax withholding obligations may be deemed to be "issuer purchases" of shares repurchased by UAL under the ASR Program was based on the volume-weighted average price per share of UAL’s common stock during the calculation period, less a discount. In additionthat are required to the ASR Program, UAL spent $932 millionbe disclosed pursuant to repurchase approximately 16 million shares of UAL common stock in open market transactions in the year ended December 31, 2015. As of December 31, 2015, the Company had completed purchases under the 2014 Program and had $2.4 billion remaining to spend under the 2015 Program.

(b) UAL made open market purchases of approximately 4 million shares of UAL common stock at an average price of $56.65 per share in the fourth quarter of 2015.

this Item.

(c) Average price paid per share is calculated on a settlement basis and excludes commission.

26

ITEM 6.SELECTED FINANCIAL DATA.

The Company’s

UAL's consolidated financial statements and statistical data are provided in the tables below.

UAL Statement of Consolidated Operations Data

  

(In millions, except per

share amounts)

  Year Ended December 31, 

 

  2015   2014   2013   2012   2011 

Income Statement Data:

          

Operating revenue

   $        37,864      $        38,901      $        38,279      $        37,152      $        37,110   

Operating expense

   32,698      36,528      37,030      37,113      35,288   

Operating income

   5,166      2,373      1,249      39      1,822   

Net income (loss)

   7,340      1,132      571      (723)     840   

Basic earnings (loss) per share

   19.52      3.05      1.64      (2.18)     2.55   

Diluted earnings (loss) per share

   19.47      2.93      1.53      (2.18)     2.26   

Balance Sheet Data at

December 31:

          

Unrestricted cash, cash equivalents and short-term investments

  $5,196     $4,384     $5,121     $6,543     $7,762   
Total assets (a)   40,861      36,595      36,021      36,963      37,266   

Debt and capital lease obligations (a)

   11,759      11,947      12,293      13,043      12,629   

below:

  Year Ended December 31,
  2018 2017 (a) 2016 (a) 2015 2014
Income Statement Data (in millions, except per share amounts):          
Operating revenue $41,303
 $37,784
 $36,558
 $37,864
 $38,901
Operating expense 38,011
 34,113
 32,214
 32,698
 36,528
Operating income 3,292
 3,671
 4,344
 5,166
 2,373
Net income 2,129
 2,144
 2,234
 7,340
 1,132
Basic earnings per share 7.73
 7.08
 6.77
 19.52
 3.05
Diluted earnings per share 7.70
 7.06
 6.76
 19.47
 2.93
           
Balance Sheet Data at December 31 (in millions):          
Unrestricted cash, cash equivalents and short-term investments $3,950
 $3,798
 $4,428
 $5,196
 $4,384
Total assets 44,792
 42,346
 40,208
 40,861
 36,595
Debt and capital lease obligations 14,728
 14,392
 11,705
 11,759
 11,947
(a) Amounts for years 2014, 2013, 2012 and 2011 differ from prior Form 10-K reportsadjusted due to the adoption of an accounting standard update in 2015.

Accounting Standards Update No. 2014-09,��Revenue from Contracts with Customers (Topic 606) andAccounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. See Note 1(t) Recently Issued Accounting Standards1 to the financial statements includedcontained in Part II, Item 8 of this report for additional information.

27



 Year Ended December 31,
 2018 2017 (a) 2016 (a) 2015 2014
Consolidated (b)         
Passengers (thousands) (c)158,330
 148,067
 143,177
 140,369
 138,029
Revenue passenger miles ("RPMs") (millions) (d)230,155
 216,261
 210,309
 208,611
 205,559
Available seat miles ("ASMs") (millions) (e)275,262
 262,386
 253,590
 250,003
 246,021
Cargo revenue ton miles (millions) (f)3,425
 3,316
 2,805
 2,614
 2,487
Passenger load factor (g)83.6% 82.4% 82.9% 83.4% 83.6%
Passenger revenue per available seat mile ("PRASM") (cents)13.70
 13.13
 13.18
 13.11
 13.72
Total revenue per available seat mile ("TRASM") (cents)15.00
 14.40
 14.42
 15.15
 15.81
Average yield per revenue passenger mile ("Yield") (cents) (h)16.38
 15.93
 15.90
 15.72
 16.42
Cost per available seat mile ("CASM") (cents)13.81
 13.00
 12.70
 13.08
 14.85
Average price per gallon of fuel, including fuel taxes$2.25
 $1.74
 $1.49
 $1.94
 $2.99
Fuel gallons consumed (millions)4,137
 3,978
 3,904
 3,886
 3,905
Average stage length (miles) (i)1,446
 1,460
 1,473
 1,487
 1,480
Average daily utilization of each mainline aircraft (hours:minutes) (j)  10:45
   10:27
 10:06
 10:24
 10:26
UAL Selected Operating Data

Presented below is(a) PRASM, TRASM, Yield, and CASM are adjusted due to the Company’sadoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) andAccounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.

(b) Includes data from our regional carriers operating data for the years ended December 31.

   Year Ended December 31, 
  

 

 

 
Mainline  2015   2014   2013   2012   2011 

Passengers (thousands) (a)

   96,327        91,475        91,329        93,595        96,360     

Revenue passenger miles (“RPMs”) (millions) (b)

   183,642        179,015        178,578        179,416        181,763     

Available seat miles (“ASMs”) (millions) (c)

   219,989        214,105        213,007        216,330        219,437     

Cargo ton miles (millions)

   2,614        2,487        2,213        2,460        2,646     

Passenger load factor (d)

   83.5%     83.6%     83.8%     82.9%     82.8%  

Passenger revenue per available seat mile (“PRASM”) (cents)

   11.97        12.51        12.20        11.93        11.84     

Total revenue per available seat mile (cents)

   14.19        14.81        14.51        13.92        13.77     

Average yield per revenue passenger mile (“Yield”) (cents) (e)

   14.34        14.96        14.56        14.38        14.29     

Cost per available seat mile (“CASM”) (cents)

   12.42        14.03        14.31        14.12        13.15     

Average price per gallon of fuel, including fuel taxes

  $1.96       $2.98       $3.12       $3.27       $3.01     

Fuel gallons consumed (millions)

   3,216        3,183        3,204        3,275        3,303     

Average stage length (miles) (f)

   1,922        1,958        1,934        1,895        1,844     

Average daily utilization of each aircraft (hours) (g)

   10:24        10:26        10:28        10:38        10:42     
          

Consolidated

          

Passengers (thousands) (a)

   140,369        138,029        139,209        140,441        141,799     

RPMs (millions) (b)

   208,611        205,559        205,167        205,485        207,531     

ASMs (millions) (c)

   250,003        246,021        245,354        248,860        252,528     

Passenger load factor (d)

   83.4%     83.6%     83.6%     82.6%     82.2%  

PRASM (cents)

   13.11        13.72        13.50        13.09        12.87     

Yield (cents) (e)

   15.72        16.42        16.14        15.86        15.67     

CASM (cents)

   13.08        14.85        15.09        14.91        13.97     

Average price per gallon of fuel, including fuel taxes

  $1.94       $2.99       $3.13       $3.27       $3.06     

Fuel gallons consumed (millions)

   3,886        3,905        3,947        4,016        4,038     

(a)under CPAs.

(c) The number of revenue passengers measured by each flight segment flown.

(b)

(d) The number of scheduled miles flown by revenue passengers.

(c)

(e) The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown.

(d)

(f) The number of cargo revenue tons transported multiplied by the number of miles flown.
(g) RPM divided by ASM.

(e)

(h) The average passenger revenue received for each revenue passenger mile flown.

(f)

(i) Average stage length equals the average distance a flight travels weighted for size of aircraft.

(g)

(j) The average number of hours per day that an aircraft flown in revenue service is operated (from gate departure to gate arrival).

28

Reconciliation of GAAP to Non-GAAP Financial Measures

The Company evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (“GAAP”) and Non-GAAP financial measures including net income/loss excluding special charges, net earnings/loss per share excluding special charges and CASM, among others. CASM is a common metric used in the airline industry to measure an airline’s cost structure and efficiency. The Company believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management’s performance excluding the effects of a significant cost item over which management has limited influence. The Company believes that adjusting for special items is useful to investors because the special items are non-recurring items not indicative of the Company’s ongoing performance. The Company also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, provides more meaningful disclosure because these expenses are not directly related to the Company’s core business. In addition, the Company believes that reflecting “Hedge Program Adjustments,” consisting of mark-to-market (“MTM”) gains and losses recorded in Nonoperating expense from fuel derivative contracts settling in future periods and of prior period gains and losses recorded in Nonoperating expense on fuel derivative contracts settled in the current period, is useful because the adjustments allow investors to better understand the cash impact of settled hedges in a given period. The Company excludes profit sharing because this exclusion allows investors to better understand and analyze its recurring cost performance and provides a more meaningful comparison of its core operating costs to the airline industry. Pursuant to SEC Regulation G, the Company has included the following reconciliation of reported Non-GAAP financial measures to comparable financial measures reported on a GAAP basis (in millions, except CASM amounts). For additional information related to special items, see Note 16 to the financial statements included in Part II, Item 8 of this report.

29

   Year ended December 31, 
   2015   2014   2013 
Special operating and nonoperating items (millions)      

Severance and benefit costs

   $107      $199      $105   
Impairment of assets   79      49      33   

Integration-related costs

   60      96      205   
Labor agreement costs   18      —      127   

(Gains) losses on sale of assets and other miscellaneous (gains) losses, net

   62      99      50   
  

 

 

   

 

 

   

 

 

 

Special operating expense

   326      443      520   
  

 

 

   

 

 

   

 

 

 

Loss on extinguishment of debt and other, net

   202      74      —   
Income tax benefit related to special charges   (11)     (10)     (7)  

Income tax benefit associated with valuation allowance release

   (3,130)     —      —   
  

 

 

   

 

 

   

 

 

 

Total operating and nonoperating special items, net of income taxes (a)

   $(2,613)     $507      $513   
  

 

 

   

 

 

   

 

 

 
Net income excluding operating and nonoperating special items, net and reflecting Hedge Program Adjustments (millions):   2015     2014     2013  
  

 

 

   

 

 

   

 

 

 
Net income—GAAP   $7,340      $1,132      $571   

Operating and nonoperating special items, net

   (2,613)     507      513   

MTM (gains) losses from fuel derivative contracts settling in future periods

   (8)     244      (84)  

Prior period gains (losses) on fuel derivative contracts settled in the current period

   (241)     83      39   
  

 

 

   

 

 

   

 

 

 
Net income excluding operating and nonoperating special items, net and reflecting Hedge Program Adjustments—Non-GAAP   $4,478      $1,966      $1,039   
  

 

 

   

 

 

   

 

 

 
Diluted earnings per share excluding operating and nonoperating special items, net and reflecting Hedge Program Adjustments—Non-GAAP   2015     2014     2013  
  

 

 

   

 

 

   

 

 

 
Diluted earnings per share—GAAP   $19.47      $2.93      $1.53   

Operating and nonoperating special items, net

   (6.93)     1.29      1.31   

MTM (gains) losses from fuel derivative contracts settling in future periods

   (0.02)     0.62      (0.21)  

Prior period gains (losses) on fuel derivative contracts settled in the current period

   (0.64)     0.21      0.10   

Impact of dilution

   —      0.01      —   
  

 

 

   

 

 

   

 

 

 
Diluted earnings per share excluding operating and nonoperating special items, net and reflecting Hedge Program Adjustments—Non-GAAP   $11.88      $5.06      $2.73   
  

 

 

   

 

 

   

 

 

 
Consolidated CASM    
(expense in millions, ASM in millions, CASM in cents)  2015   2014   2013 

Operating expense

   $32,698      $36,528      $37,030   

Special charges

   326      443      520   

Third-party business expenses

   291      534      694   

Aircraft fuel and related taxes

   7,522      11,675      12,345   

Profit sharing

   698      235      190   
  

 

 

   

 

 

   

 

 

 

Operating expense excluding above items

   $23,861      $23,641      $23,281   
  

 

 

   

 

 

   

 

 

 

ASMs—consolidated

   250,003      246,021      245,354   

CASM

   13.08      14.85      15.09   

CASM, excluding special charges

   12.95      14.67      14.88   

CASM, excluding special charges and third-party business expenses

   12.83      14.45      14.60   

CASM, excluding special charges, third-party business expenses and fuel

   9.82      9.70      9.57   

CASM, excluding special charges, third-party business expenses, fuel and profit sharing

   9.54      9.61      9.49   

(a)See Note 16 to the financial statements included in Part II, Item 8 of this report for additional information.

30


ITEM 7.MANAGEMENT’SMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

United Continental Holdings, Inc. (together with its consolidated subsidiaries, “UAL”"UAL" or the “Company”"Company") is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”"United"). As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United’sUnited's operating revenues and operating expenses comprise nearly 100% of UAL’sUAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL’sUAL'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,”"we," "our," "us," and the “Company”"Company" in this report for disclosures that relate to all of UAL and United.

2015

2018 Financial Highlights

20152018 net income was $7.3$2.1 billion, or $19.47$7.70 diluted earnings per share, which reflects $3.1as compared to $2.1 billion, of income tax benefits primarily due to the release of the income tax valuation allowance. Non-GAAP net income was $4.5 billion for 2015, or $11.88$7.06 diluted earnings per share, which excludes $2.6in 2017.

Revenue for 2018 increased $3.5 billion over 2017 due to a 4.9% growth in ASMs and a PRASM increase of special items and reflects $249 million of Hedge Program Adjustments. See Part II, Item 6 of this report for a reconciliation of GAAP to Non-GAAP net income.

United’s consolidated PRASM decreased 4.4%4.3% in 20152018 compared to 2014.

2017.

Aircraft fuel cost decreased 36% year-over-yearfor 2018 increased 34.6% over 2017 mainly due mainly to lowerhigher fuel prices.

2015 consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, decreased 0.7% year-over-year on a consolidated capacity increase of 1.6%. 2015 CASM, including those items, decreased 11.9% year-over-year.

The Company used $1.2 billion of cash to purchase 21In 2018, UAL repurchased approximately 17.5 million shares of its common stock during 2015for $1.2 billion. As of December 31, 2018, the Company had approximately $1.8 billion remaining to purchase shares under its share repurchase programs. As of December 31, 2015, the Company has $2.4 billion remaining to spend under the 2015 Program. See Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this report for additional information.

program.

UAL ended the year2018 with $6.5$6.0 billion in unrestricted liquidity, which consisted of unrestricted cash, cash equivalents, short-term investments and available capacity under the revolving credit facility of its Amended and Restated Credit and Guaranty Agreement (as amended, the Company’s Credit Agreement.

"Credit Agreement").

•

UAL, United and Mileage Plus Holdings, LLC, a wholly-owned subsidiary of UAL and United, entered into a Second Amended and Restated Co-Branded Card Marketing Services Agreement (the “Co-Brand Agreement”) with Chase Bank USA, N.A. (“Chase”), pursuant to which members of the Company’s MileagePlus® loyalty program earn frequent flyer miles for making purchases using a MileagePlus® credit card issued by Chase. The Co-Brand Agreement also provides for joint marketing and other support for the MileagePlus® credit card. This increased 2015 operating revenues by approximately $200 million from the combined impact of the Co-Brand Agreement, agreements ancillary to the Co-Brand Agreement and updated accounting assumptions for accounting purposes.

2015

2018 Operational Highlights

Consolidated RPMs for 20152018 increased 1.5%6.4% as compared to 2014,2017, and consolidated ASMs increased 1.6%4.9% from the prior year, resulting in a consolidated load factor of 83.4%83.6% in 2015.

2018 versus 82.4% in 2017.

For 20152018 and 2014,2017, the Company recorded a DOTU.S. Department of Transportation on-time arrival raterates of 78.1%79.8% and 76.0%81.9%, respectively, and a systemmainline completion factorfactors of 98.7%99.2% and 98.6%99.0%, respectively.

31

The Company took delivery of 11 new Boeing 787-9 Dreamliners in 2015, bringing its total Dreamliner fleet to 25 aircraft. The Company also took delivery of 23 new Boeing 737-900ERs, 11 new Embraer E175s and four used Boeing 737-700 aircraft in 2015. United exited from scheduled service 13 Boeing 757-200s, 46 Embraer ERJ 145s and one Boeing 747-400. The Company also exited one Boeing 747-400 operating exclusively in charter service.

Outlook

Effective March 1, 2015, the Company modified its MileagePlus program for most tickets from the prior model in which members earn redeemable miles based on distance traveled to the current model, which is based on ticket price (including base fare and carrier imposed surcharges). Members are now able to earn between five and eleven miles per dollar spent based on their MileagePlus status. The modified program enhances the rewards for customers who spend more with United and gives them improved mileage-earning opportunities.

2016 Outlook

Set forth below is a discussion of the principal matters that we believe could impact our financial and operating performance and cause our results of operations in future periods to differ materially from our historical operating results and/or from our anticipated results of operations described in the forward-looking statements in this report. See Part I, Item 1A., Risk Factors, of this report and the factors described under “Forward-Looking Information”"Forward-Looking Information" below for additional discussion of these and other factors that could affect us.

The

Growth Strategy. In 2018, the Company is committed to improvingcompleted the efficiency and quality of all aspectsfirst year of its business in 2016. Key initiativesmulti-year growth strategy, increasing ASMs 4.9% compared to 2017. Our priorities for the year include improving our2019 are delivering top-tier operational reliability and the handling of customers during irregular operations, such as adverse weather, refurbishing aircraft interiors,customer service while continuing to execute on our growth plan by strengthening our domestic network through strategic and efficient growth and investing in our airportspeople and taking delivery of more than 30 new, highly-efficient and customer-pleasing aircraft.

product.

Economic Conditions.Fuel. The economic outlook for the aviation industry in 2016 is characterized by expected slow or modest U.S. and global economic growth. In such conditions, we expect a modest increase in the demand for air travel. Continuing economic uncertainty, along with the strengthening U.S. dollar, is providing uncertainty in key Asian and European markets, and along with continued political and socioeconomic tensions in regions such as the Middle East, may result in diminished demand for air travel. The global economy is also being impacted by declining oil prices, putting pressure on certain geographic markets.

Capacity. Over the past three years, the Company leveraged the flexibility of its fleet to better match capacity with market demand. In 2016, the Company expects consolidated ASMs to grow between 1.5% and 2.5% year-over-year.

Fuel.The Company’sCompany's average aircraft fuel price per gallon including related taxes was $1.94$2.25 in 20152018 as compared to $2.99$1.74 in 2014. Since 2014,2017. Based on the price of jet fuel has declined and remains volatile. Based onCompany's projected fuel consumption in 2016,2019, a one dollarone-dollar change in the price of a barrel of crude oil would change the Company’s annualCompany's projected fuel expense by approximately $94$104 million. To protect against increases in the prices of aircraft fuel, the Company may hedge a portion of its future fuel requirements.

Labor.As of December 31, 2015, United had approximately 80% of employees represented by unions. We are in the process of negotiating joint collective bargaining agreements with our technicians and flight attendants and negotiating extensions to the IAM represented employees’ agreements. The Company cannot predict the outcome of negotiations with its unionized employee groups, although significant increases in the pay and benefits resulting from new collective bargaining agreements would have a material financial impact on the Company. The cost associated with the ratification of the pilots’ agreement will add an additional approximate 1.5 points of non-fuel unit cost in both the first-quarter and full-year 2016 versus 2015.

CASM.In 2016, the Company expects CASM, excluding fuel, third-party business expense, profit sharing, special charges and the impact of the recently ratified pilot agreement to be up between 0.5% and 1.5% year-over-year. We are unable to project CASM on a GAAP basis as the nature and amount of special charges are not determinable at this time.

32

The Company’s cost initiative project that began in 2014 has a goal to reduce the Company’s annual costs by $2 billion and generate an incremental $700 million in additional ancillary revenue by the end of 2017. The anticipated savings are comprised of $1 billion in annual fuel savings, based on fuel prices in 2013, and $1 billion of non-fuel savings. In 2015, the Company achieved approximately $555 million in fuel savings and $851 million in non-fuel savings.

Income Taxes. The Company anticipates its effective tax rate will be approximately 37%, which reflects a more normalized rate after the release of the tax valuation allowance in 2015 and is based on the Company’s relative mix of domestic, foreign and state income tax expense.


Results of Operations

In this section, we compare results of operations for the year ended December 31, 2015 with results of operations for the year ended December 31, 2014, and results of operations for the year ended December 31, 2014 with results of operations for the year ended December 31, 2013. Non-GAAP financial measures are presented because they provide management and investors with the ability

2018 Compared to measure and monitor the Company’s performance on a consistent basis.

2015 compared to 20142017

Operating Revenue

The table below illustrates the year-over-year percentage change in the Company’sCompany's operating revenues for the years ended December 31 (in millions, except percentage changes):

    2015   2014   Increase
(Decrease)		   % Change 

Passenger—Mainline

   $26,333      $26,785     $(452)     (1.7)  

Passenger—Regional

   6,452      6,977      (525)     (7.5)  
  

 

 

   

 

 

   

 

 

   

Total passenger revenue

   32,785      33,762      (977)     (2.9)  

Cargo

   937      938      (1)     (0.1)  

Other operating revenue

   4,142      4,201      (59)     (1.4)  
  

 

 

   

 

 

   

 

 

   
  $37,864     $38,901     $(1,037)     (2.7)  
  

 

 

   

 

 

   

 

 

   

 2018 2017 Increase (Decrease) % Change
Passenger revenue$37,706
 $34,460
 $3,246
 9.4
Cargo1,237
 1,114
 123
 11.0
Other operating revenue2,360
 2,210
 150
 6.8
Total operating revenue$41,303
 $37,784
 $3,519
 9.3
The table below presents the Company’s selected passenger revenue and selected operating data based onof the Company, broken out by geographic region, (regional flights consist primarily of domestic routes):

  Increase (decrease) in 2015 from 2014 (a): 
    Domestic        Pacific        Atlantic        Latin      Total
  Mainline     		    Regional        Consolidated     
Passenger revenue (in millions)  $132        $(331)       $(159)       $(94)       $(452)       $(525)       $(977)     

Passenger revenue

  1.0 %    (7.0)%    (2.6)%    (3.4)%    (1.7)%    (7.5)%    (2.9)%  
Average fare per passenger  (5.0)%    (7.5)%    (1.2)%    (10.2)%    (6.6)%    (2.2)%    (4.5)%  

Yield

  (1.9)%    (9.4)%    (1.7)%    (10.3)%    (4.1)%    (1.7)%    (4.3)%  

PRASM

  (1.6)%    (9.2)%    (3.1)%    (11.3)%    (4.3)%    (1.6)%    (4.4)%  

Average stage length

  (2.9)%    3.9 %    1.3 %    1.1 %    (1.8)%    (0.4)%    0.4 %  

Passengers

  6.3 %    0.5 %    (1.4)%    7.6 %    5.3 %    (5.4)%    1.7 %  

RPMs (traffic)

  3.0 %    2.7 %    (0.9)%    7.7 %    2.6 %    (5.9)%    1.5 %  

ASMs (capacity)

  2.6 %    2.4 %    0.5 %    8.9 %    2.7 %    (6.0)%    1.6 %  
Passenger load factor (points)  0.3        0.2        (1.0)       (1.0)       (0.1)       —         (0.2)     

 

  (a) See Part II, Item 6 of this report for the definition of these statistics.

33

Consolidated passengerexpressed as year-over-year changes:

  Increase (decrease) from 2017 (a):
  Domestic Atlantic Pacific 
Latin 
 Total
Passenger revenue (in millions) $2,340
 $688
 $185
 $33
 $3,246
Passenger revenue 11.1% 11.7 % 4.3 % 1.0 % 9.4%
Average fare per passenger 2.8% 0.2 % 8.5 % 2.5 % 2.3%
Yield 3.8% (0.4)% 2.7 % (0.3)% 2.8%
PRASM 4.1% 6.3 % 3.0 % 0.8 % 4.3%
Passengers 8.1% 11.5 % (3.9)% (1.4)% 6.9%
RPMs (traffic) 7.0% 12.1 % 1.5 % 1.3 % 6.4%
ASMs (capacity) 6.7% 5.1 % 1.3 % 0.3 % 4.9%
Passenger load factor (points) 0.2
 5.1
 0.2
 0.8
 1.2
(a) See Part II, Item 6, Selected Financial Data, of this report for the definition of these statistics.      
Passenger revenue increased $3.2 billion, or 9.4%, in 2015 decreased $977 million, or 2.9%,2018 as compared to 20142017, primarily due to a decrease6.4% increase in consolidated yield oftraffic. PRASM increased 4.3% year-over-year. Yields were impactedin 2018 as compared to 2017. The increase in PRASM was driven by a competitiveimprovements in scheduling, higher corporate demand, increases in close-in bookings in the domestic fare environment, unfavorable foreign currency resultsmarkets and premium cabin demand improvements in the Atlantic and Pacific markets.
Cargo revenue increased $123 million, or 11.0%, in 2018 as compared to 2017, primarily due to the strengthening of the U.S. dollar, international surcharge declines, travel reductions from corporate customersfreight volume and higher yield in the energy sectorAtlantic and Pacific markets.
Other operating revenue increased industry capacity$150 million, or 6.8%, in certain regions. The decline in yields was partially offset by a 1.5% year-over-year increase in traffic.

2018 as compared to 2017, primarily due to increased revenue related to MileagePlus miles sales.












Operating Expense

The table below includes data related to the Company’sCompany's operating expense for the yearyears ended December 31 (in millions, except percentage changes):

   2015   2014   Increase
(Decrease)		   % Change 

Salaries and related costs

   $9,713      $8,935      $778      8.7   

Aircraft fuel

   7,522      11,675      (4,153)     (35.6)  

Regional capacity purchase

   2,290      2,344      (54)     (2.3)  

Landing fees and other rent

   2,203      2,274      (71)     (3.1)  

Depreciation and amortization

   1,819      1,679      140      8.3   

Aircraft maintenance materials and outside repairs

   1,651      1,779      (128)     (7.2)  

Distribution expenses

   1,342      1,373      (31)     (2.3)  

Aircraft rent

   754      883      (129)     (14.6)  

Special charges (Note 16)

   326      443      (117)     NM   

Other operating expenses

   5,078      5,143      (65)     (1.3)  
  

 

 

   

 

 

   

 

 

   
   $32,698      $36,528      $(3,830)     (10.5)  
  

 

 

   

 

 

   

 

 

   

 2018 2017 Increase (Decrease) % Change
Salaries and related costs$11,458
 $10,941
 $517
 4.7
Aircraft fuel9,307
 6,913
 2,394
 34.6
Regional capacity purchase2,601
 2,232
 369
 16.5
Landing fees and other rent2,359
 2,240
 119
 5.3
Depreciation and amortization2,240
 2,149
 91
 4.2
Aircraft maintenance materials and outside repairs1,767
 1,856
 (89) (4.8)
Distribution expenses1,558
 1,435
 123
 8.6
Aircraft rent433
 621
 (188) (30.3)
Special charges487
 176
 311
 NM
Other operating expenses5,801
 5,550
 251
 4.5
Total operating expenses$38,011
 $34,113
 $3,898
 11.4
Salaries and related costs increased $778$517 million, or 8.7%4.7%, in 20152018 as compared to 20142017, primarily due to a $463 million increase in profit sharing costs as a result of improved profitability, higher pay rates, driven by new collective bargaining agreements, anhigher benefit expenses (primarily health and pension costs), and a 0.7% increase in medical and dental costs and an increase in pension expense resulting from changes in actuarial assumptions.

The decrease in aircraftaverage full-time employees.

Aircraft fuel expense wasincreased $2.4 billion, or 34.6%, in 2018 as compared to 2017, primarily attributabledue to decreasedincreased fuel prices partially offset by losses from fuel hedging activity and a 1.6%4.9% increase in capacity. The table below presents the significant changes in aircraft fuel cost per gallon for the yearyears ended December 31 (in millions, except percentage changes)changes and per gallon data):

  (In millions)  %
Change		  Average price per gallon 
   2015  2014   2015  2014  %
Change		 
Total aircraft fuel purchase cost excluding fuel hedge impacts  $  6,918     $  11,586     (40.3)    $1.78    $2.97     (40.1)  
Hedge losses reported in fuel expense  (604)    (89)    NM     (0.16)    (0.02)    NM   
 

 

 

  

 

 

   

 

 

  

 

 

  

Fuel expense as reported

  7,522     11,675     (35.6)    1.94     2.99     (35.1)  
Cash paid on settled hedges that did not qualify for hedge accounting  (329)    (138)    NM     (0.08)    (0.04)    NM   
 

 

 

  

 

 

   

 

 

  

 

 

  
Fuel expense including all losses from settled hedges  $7,851     $  11,813     (33.5)    $2.02     $3.03     (33.3)  
 

 

 

  

 

 

   

 

 

  

 

 

  

Total fuel consumption (gallons)

  3,886     3,905     (0.5)     

  2018 2017 
%
Change
Fuel expense $9,307
 $6,913
 34.6
Total fuel consumption (gallons) 4,137
 3,978
 4.0
Average price per gallon $2.25
 $1.74
 29.3
Regional capacity purchase costs increased $369 million, or 16.5%, in 2018 as compared to 2017, primarily due to increased flying related to the Company's initiative to improve connectivity at its domestic hubs, as well as rate increases under various capacity purchase agreements ("CPAs") with regional carriers.
Landing fees and other rent increased $119 million, or 5.3%, in 2018 as compared to 2017, primarily due to increased rates and our capacity growth.
Depreciation and amortization increased $140$91 million, or 8.3%4.2%, in 20152018 as compared to 20142017, primarily due to additions in owned propertyof new and equipment, specifically related to newused aircraft, aircraft improvements and increases in information technology assetsinfrastructure and several aircraft capital lease conversions from operating leases.

34

application development projects.

Aircraft maintenance materials and outside repairs decreased $128$89 million, or 7.2%4.8%, in 20152018 as compared to 20142017, primarily due to a year-over-year decreaseoptimization of fleet retirement schedules and related maintenance costs for those aircraft and timing of certain maintenance events.
Distribution expenses increased $123 million, or 8.6%, in significant airframe maintenance visits2018 as compared to 2017, primarily due to higher credit card and travel agency booking fees as a result of the cyclical timing of these visits, improvementsoverall increase in the efficiency of in-house maintenance programs, a reduced volume of seat and landing gear maintenance and a reduction of flying hours under certain power-by-the-hour engine maintenance agreements, partially offset by increases in expenses related to aircraft reliability projects and Wi-Fi systems maintenance.

passenger revenue.

Aircraft rent decreased $129$188 million, or 14.6%30.3%, in 20152018 as compared to 20142017, primarily due to lease expirations, the purchase or capital leaseof leased aircraft, conversion of severalcertain operating leased aircraftleases to capital leases and lower lease renewal rates for certain aircraft.

term expirations.

The table below presents special itemscharges incurred by the Company during the years ended December 31 (in millions):

   2015   2014 

Severance and benefit costs

   $107      $199   

Impairment of assets

   79      49   

Integration-related costs

   60      96   

Labor agreement costs

   18      —   

(Gains) losses on sale of assets and other miscellaneous (gains) losses, net

   62      99   
  

 

 

   

 

 

 

Total special charges

   $326      $443   
  

 

 

   

 

 

 


 2018 2017
Impairment of assets$377
 $25
Termination of an engine maintenance service agreement64
 —
Severance and benefit costs41
 116
(Gains) losses on sale of assets and other special charges5
 35
Total special charges$487
 $176
See Note 1614 to the financial statements included in Part II, Item 8 of this report for additional information.

Other operating expenses increased $251 million, or 4.5%, in 2018 as compared to 2017, primarily due to an increase in purchased services related to our airport operations resulting from capacity growth, technology initiatives, facility projects, crew-related lodging and trucking and handling of cargo shipments.
Nonoperating Income (Expense)

The following table illustrates the year-over-year dollar and percentage changes in the Company’sCompany's nonoperating income (expense) for the years ended December 31 (in millions, except percentage changes):

   2015   2014   Increase
(Decrease)		   % Change 

Interest expense

   $(669)     $(735)     $(66)     (9.0)  

Interest capitalized

   49      52      (3)     (5.8)  

Interest income

   25      22      3      13.6   

Miscellaneous, net

   (352)     (584)     (232)     (39.7)  
  

 

 

   

 

 

   

 

 

   

Total

   $(947)     $(1,245)     $(298)     (23.9)  
  

 

 

   

 

 

   

 

 

   

The decrease in interest

 2018 2017 Increase (Decrease) % Change
Interest expense$(729) $(671) $58
 8.6
Interest capitalized70
 84
 (14) (16.7)
Interest income101
 57
 44
 77.2
Miscellaneous, net(76) (101) (25) (24.8)
Total nonoperating expense, net$(634) $(631) $3
 0.5
Interest expense of $66increased $58 million, or 9.0%8.6%, in 20152018 as compared to 2014 was2017, primarily due to the prepayment of certain debt issuances and declining balances of other debt, partially offset by interest expense on debt issued for the acquisition of new aircraft.

aircraft and the conversion of certain operating leases to capital leases.

Interest income increased $44 million, or 77.2%, in 2018 as compared to 2017, primarily due to increased interest rates.
Miscellaneous, net included losses of $80decreased $25 million, and $462 million from fuel derivatives not qualifying for hedge accountingor 24.8%, in 2015 and 2014, respectively. Foreign currency losses were approximately $129 million and $41 million2018 as compared to 2017, primarily due to a decrease in 2015 and 2014, respectively. Foreign currency results included $61 million and $10 million ofpension benefit costs that was partially offset by an increase in foreign exchange losses for 2015 and 2014, respectively, relatedan increase in equity earnings from affiliates.
2017 Compared to the Company’s cash holdings in Venezuela. Miscellaneous, net for 2015 includes a $134 million special charge related to the write-off of unamortized non-cash debt discounts for the early redemption of the 6% Notes due 2026 (“2026 Notes”) and the 6% Notes due 2028 (“2028 Notes”). 2014 Miscellaneous, net includes a $64 million debt extinguishment charge related to the retirement of the $248 million 6% Convertible Junior Subordinated Debentures due 2030.

35

2014 compared to 20132016

Operating Revenue

The table below illustrates the year-over-year percentage change in the Company’sCompany's operating revenues for the years ended December 31 (in millions, except percentage changes):

   2014   2013   Increase
(Decrease)		   % Change 

Passenger—Mainline

   $26,785      $25,997      $788      3.0   

Passenger—Regional

   6,977      7,125      (148)     (2.1)  
  

 

 

   

 

 

   

 

 

   

Total passenger revenue

   33,762      33,122      640      1.9   

Cargo

   938      882      56      6.3   

Other operating revenue

   4,201      4,275      (74)     (1.7)  
  

 

 

   

 

 

   

 

 

   
   $38,901      $38,279      $622      1.6   
  

 

 

   

 

 

   

 

 

   

 2017 2016 Increase (Decrease) % Change
Passenger revenue$34,460
 $33,429
 $1,031
 3.1
Cargo1,114
 934
 180
 19.3
Other operating revenue2,210
 2,195
 15
 0.7
Total operating revenue$37,784
 $36,558
 $1,226
 3.4
The table below presents the Company’s selected passenger revenue and selected operating data based onof the Company, broken out by geographic region, (regional flights consist primarily of domestic routes):

  Increase (decrease) in 2014 from 2013 (a): 
      Domestic        Pacific        Atlantic        Latin          Total
  Mainline    		    Regional      Consolidated   

Passenger revenue (in millions)

  $490        $(41)       $169        $170         $788         $(148)       $640      

Passenger revenue

  3.9 %    (0.9)%    2.9 %    6.5 %    3.0 %    (2.1)%    1.9 %  

Average fare per passenger

  4.7 %    2.2 %    4.1 %    (4.2)%    2.9 %    0.7 %    2.8 %  

Yield

  4.9 %    (1.6)%    3.6 %    (1.9)%    2.7 %    (1.9)%    1.7 %  

PRASM

  5.2 %    (3.6)%    2.6 %    — %    2.5 %    (0.8)%    1.6 %  

Average stage length

  0.5 %    4.8 %    0.9 %    (1.8)%    1.2 %    3.5 %    2.4 %  

Passengers

  (0.8)%    (3.0)%    (1.2)%    11.2 %    0.2 %    (2.8)%    (0.8)%  

RPMs (traffic)

  (1.0)%    0.8 %    (0.8)%    8.5 %    0.2 %    (0.2)%    0.2 %  

ASMs (capacity)

  (1.3)%    2.8 %    0.3 %    6.5 %    0.5 %    (1.3)%    0.3 %  

Passenger load factor (points)

  0.3        (1.6)       (0.8)       1.5        (0.2)       1.0        —      

  (a) See Part II, Item 6 of this report for the definition of these statistics.

Consolidated passengerexpressed as year-over-year changes:


 Increase (decrease) in 2017 from 2016 (a):
 Domestic Atlantic Pacific 
Latin 
 Total
Passenger revenue (in millions)$885
 $117
 $(144) $173
 $1,031
Passenger revenue4.4 % 2.0% (3.2)% 5.8% 3.1 %
Average fare per passenger0.2 % 1.5% (0.1)% 4.0% (0.3)%
Yield(0.3)% 1.1% (2.4)% 4.1% 0.2 %
PRASM(0.5)% 1.6% (6.0)% 3.3% (0.4)%
Passengers4.2 % 0.5% (3.1)% 1.7% 3.4 %
RPMs (traffic)4.7 % 0.9% (0.9)% 1.6% 2.8 %
ASMs (capacity)4.9 % 0.4% 2.9 % 2.4% 3.5 %
Passenger load factor (points)(0.2) 0.4
 (3.0) (0.7) (0.5)
(a) See Part II, Item 6, Selected Financial Data, of this report for the definition of these statistics.

Passenger revenue increased $1.0 billion, or 3.1%, in 2014 increased $640 million, or 1.9%,2017 as compared to 2013. This increase was2016, primarily due to ana 2.8% increase in consolidated yield of 1.7% and an increasetraffic. PRASM decreased 0.4% in average fare per passenger of 2.8%. There was also an increase in capacity and traffic of 0.3% and 0.2%, respectively,2017 as compared to 2013.2016. The 2014 average fare increasedecline in PRASM was duedriven by factors including more aggressive low-cost carrier pricing in part to a strong domesticour hub markets, temporary share loss during roll-out of our Basic Economy pricing, and softer demand environmentin China and a number of new long-haul routes that generated higher fares than the system average. AlsoGuam. Our revenue in 2014, the Company improved its revenue management demand forecast process related to close-in bookings which improved yields. 2013 consolidated passenger revenue2017 was negatively impacted by factors including additional competitive capacity in China andsevere storms during the Japanese yen weakening against the U.S. dollar, resulting in lower Pacific yields.

third quarter.


Cargo revenue increased by $56$180 million, or 6.3%19.3%, in 20142017 as compared to 2013, which was primarily2016 due to higher year-over-year international freight volumesvolume and an improvement in mail revenue year-over-year, partially offset by lower yield on freight.

Other operating revenue decreased $74 million, or 1.7%, in 2014 as compared to 2013, which was primarily due to the Company’s decision to discontinue sales of aircraft fuel to a third party, partially offset by increases in ancillary, MileagePlus and contract services revenue.

36

yield.

Operating Expense

The table below includes data related to the Company’sCompany's operating expense for the yearyears ended December 31 (in millions, except percentage changes):

    2014   2013   Increase
(Decrease)		   % Change 

Aircraft fuel

   $11,675      $12,345      $(670)     (5.4)  

Salaries and related costs

   8,935      8,625      310      3.6   

Regional capacity purchase

   2,344      2,419      (75)     (3.1)  

Landing fees and other rent

   2,274      2,090      184     8.8   

Depreciation and amortization

   1,679      1,689      (10)     (0.6)  

Aircraft maintenance materials and outside repairs

   1,779      1,821      (42)     (2.3)  

Distribution expenses

   1,373      1,390      (17)     (1.2)  

Aircraft rent

   883      936      (53)     (5.7)  

Special charges

   443      520      (77)     NM   

Other operating expenses

   5,143      5,195      (52)     (1.0)  
  

 

 

   

 

 

   

 

 

   
   $36,528      $37,030      $(502)     (1.4)  
  

 

 

   

 

 

   

 

 

   

The decrease

 2017 2016 Increase (Decrease) % Change
Salaries and related costs$10,941
 $10,176
 $765
 7.5
Aircraft fuel6,913
 5,813
 1,100
 18.9
Landing fees and other rent2,240
 2,165
 75
 3.5
Regional capacity purchase2,232
 2,197
 35
 1.6
Depreciation and amortization2,149
 1,977
 172
 8.7
Aircraft maintenance materials and outside repairs1,856
 1,749
 107
 6.1
Distribution expenses1,435
 1,395
 40
 2.9
Aircraft rent621
 680
 (59) (8.7)
Special charges176
 745
 (569) NM
Other operating expenses5,550
 5,317
 233
 4.4
Total operating expenses$34,113
 $32,214
 $1,899
 5.9
Salaries and related costs increased $765 million, or 7.5%, in aircraft fuel expense was2017 as compared to 2016, primarily attributabledue to decreased fuel priceshigher pay rates and benefit expenses driven by collective bargaining agreements finalized in 2016, and a 2.5% increase in average full-time equivalent employees, partially offset by losses froma decrease in profit sharing and other employee incentives.
Aircraft fuel hedge activityexpense increased $1.1 billion, or 18.9%, in 2017 as compared to 2016, primarily due to increased fuel prices and a 0.3%3.5% increase in capacity. The table below presents the significant changes in aircraft fuel cost per gallon for the yearyears ended December 31 (in millions, except percentage changes):

  (In millions)  %
Change		  Average price per gallon 
   2014  2013   2014  2013  %
Change		 
Total aircraft fuel purchase cost excluding fuel hedge impacts  $  11,586     $  12,363     (6.3)   $  2.97     $  3.13     (5.1)  
Hedge gains (losses) reported in fuel expense  (89)    18     NM     (0.02)    —     NM   
 

 

 

  

 

 

   

 

 

  

 

 

  
Fuel expense as reported  11,675     12,345     (5.4)   2.99     3.13     (4.5)  
Cash received (paid) on settled hedges that did not qualify for hedge accounting  (138)    39     NM     (0.04)    0.01     NM   
 

 

 

  

 

 

   

 

 

  

 

 

  
Fuel expense including all gains (losses) from settled hedges  $  11,813     $  12,306     (4.0)   $3.03     $3.12     (2.9)  
 

 

 

  

 

 

   

 

 

  

 

 

  
Total fuel consumption (gallons)  3,905     3,947     (1.1)    

Salarieschanges and related costs increased $310 million, or 3.6%, in 2014 as compared to 2013 primarily due to higher pay rates driven by collective bargaining agreements, increased medical and dental costs and costs associated with crew shortages and new crew rest rules, partially offset by lower post-employment benefit costs.

per gallon data):

 (In millions)   Average price per gallon
 2017 2016 
%
Change
 2017 2016 
%
Change
Total aircraft fuel purchase cost excluding fuel hedge impacts$6,911
 $5,596
 23.5 $1.74
 $1.43
 21.7
Hedge losses reported in fuel expense2
 217
 NM —
 0.06
 NM
Fuel expense$6,913

$5,813
 18.9 $1.74
 $1.49
 16.8
Total fuel consumption (gallons)3,978
 3,904
 1.9      

Landing fees and other rent increased $184$75 million, or 8.8%3.5%, in 20142017 as compared to 2013the year-ago period due to higher rental and landing fee rates.
Regional capacity purchase costs increased $35 million, or 1.6%, in 2017 as compared to the year-ago period despite regional capacity being down 3.8% in 2017 as compared to 2016 due to increases in annual rates, maintenance cycle-related costs and lease return costs.
Depreciation and amortization increased $172 million, or 8.7%, in 2017 as compared to 2016, primarily due to a transition from paying regional carriers for landing feesadditions of new and used aircraft, aircraft improvements and increases in information technology infrastructure and application development projects.
Aircraft maintenance materials and outside repairs increased $107 million, or 6.1%, in 2017 as compared to paying airports directly. Landing fees also increased2016, primarily due to airport security servicesan increase in airframe and modernization projects at certain airport locations.

engine maintenance visits and additional repairs to wireless and inflight entertainment equipment.

Aircraft rent decreased $53$59 million, or 5.7%8.7%, in 20142017 as compared to 20132016, primarily due to aircraft lease expirations and terminations of several Boeing 757-200 aircraft leases resulting from the Company’s purchase of the leased aircraft.

37

aircraft and lower lease renewal rates.

The table below presents special itemscharges incurred by UALthe Company during the years ended December 31 (in millions):

   2014   2013 

Severance and benefit costs

   $199      $105   

Impairment of assets

   49      33   

Integration-related costs

   96      205   

Labor agreement costs

   —      127   

(Gains) losses on sale of assets and other miscellaneous (gains) losses, net

   99      50   
  

 

 

   

 

 

 

Total special charges

   $443      $520   
  

 

 

   

 

 

 

 2017 2016
Severance and benefit costs$116
 $37
Impairment of assets25
 412
Cleveland airport lease restructuring—
 74
Labor agreement costs—
 171
(Gains) losses on sale of assets and other special charges35
 51
Total special charges$176
 $745
See Note 1614 to the financial statements included in Part II, Item 8 of this report for additional information.

Other operating expenses increased $233 million, or 4.4%, in 2017 as compared to 2016, primarily due to increased costs in food, marketing and technology associated with the Company's enhanced customer experience initiatives, and due to volume-driven increases in cargo trucking and handling costs.
Nonoperating Income (Expense)

The following table illustrates the year-over-year dollar and percentage changes in UAL’sthe Company's nonoperating income (expense) for the years ended December 31 (in millions, except percentage changes):

   2014   2013   Increase
(Decrease)		   % Change 

Interest expense

   $(735)     $(783)     $(48)     (6.1)  

Interest capitalized

   52      49      3      6.1   

Interest income

   22      21      1      4.8   

Miscellaneous, net

   (584)     3      (587)     NM   
  

 

 

   

 

 

   

 

 

   

Total

   $(1,245)     $(710)     $535      75.4   
  

 

 

   

 

 

   

 

 

   

The decrease

 2017 2016 Increase (Decrease) % Change
Interest expense$(671) $(674) $(3) (0.4)
Interest capitalized84
 72
 12
 16.7
Interest income57
 42
 15
 35.7
Miscellaneous, net(101) (11) 90
 NM
Total nonoperating expense, net$(631) $(571) $60
 10.5

Miscellaneous, net increased $90 million in interest expense of $48 million, or 6.1%, in 20142017 as compared to 2013 was2016 primarily due to the Company’s extinguishment of certain of its debt instruments and the refinancing of certain of its debt instruments at lower interest rates.

In 2014, Miscellaneous, net included a MTM loss of $462 million from fuel derivatives not qualifying for hedge accounting as compared to a gain of $79 million in 2013. Miscellaneous, net also included foreign currency losses of $41 million and $29 million in 2014 and 2013, respectively. 2014 Miscellaneous, net includes a $64 million debt extinguishment charge2016 curtailments gains related to the retirement of the $248 million 6% Convertible Junior Subordinated Debentures due 2030.

United’s nonoperating expense also included a net gain of $19 million associated with marking to market the fair value of derivative assets and liabilities related to agreements that provide for United’s convertible debt to be settled with UAL common stock as compared to a net gain of $70 million in 2013. These net gains and related derivatives are reflected onlychanges in the United stand-alone financial statements as they are eliminated at the consolidated level.new labor agreements. See Note 914 to the financial statements included in Part II, Item 8 of this report for additional information.

Liquidity and Capital Resources

As of December 31, 2015,2018, the Company had $5.2$4.0 billion in unrestricted cash, cash equivalents and short-term investments, an increase of $0.8$0.2 billion from December 31, 2014.2017. The Company had its entire commitment capacity of $1.35$2.0 billion under the revolving credit facility of the Credit Agreement available for letters of credit or borrowings as of December 31, 2015. As of December 31, 2015, the Company had $206 million of restricted cash and cash equivalents, which is primarily collateral for performance bonds, letters of credit and estimated future workers’ compensation claims. We may be required to post significant additional cash collateral to provide security for obligations. Restricted cash and cash equivalents at December 31, 2014 totaled $320 million.

38

As is the case with many of our principal competitors, we have a high proportion of debt compared to capital. 2018.

We have a significant amount of fixed obligations, including debt, aircraft leases and financings, leases of airport property and other facilities and pension funding obligations. At December 31, 2015,2018, the Company had approximately $11.8$14.7 billion of debt and capital lease obligations, including $1.4 billion that are due within the next 12 months. In addition, we have substantial noncancelable commitments for capital expenditures, including the acquisition of new aircraft and related spare engines. As of

December 31, 2015,2018, our current liabilities exceeded our current assets by approximately $4.6$6.0 billion. However, approximately $5.9$6.7 billion of our current liabilities are related to our Advanceadvance ticket sales and Frequentfrequent flyer deferred revenue, both of which largely represent revenue to be recognized for travel in the near future and not actual cash outlays. The deficit in working capital does not have an adverse impact to our cash flows, liquidity or operations. The Company made principal payments of debt and capital lease obligations totaling $2.3 billion in 2015.

The Company will continue to evaluate opportunities to prepay its debt, including open market repurchases, to reduce its indebtedness and related interest.

For 2016,2019, the Company expects between $2.7 billion and $2.9approximately $4.7 billion of gross capital expenditures. See Notes 11 and 15Note 13 to the financial statements included in Part II, Item 8 of this report for additional information on commitments.

As of December 31, 2015,2018, a substantial portion of the Company’sCompany's assets, principally aircraft, route authorities and loyalty program intangible assets,airport slots, was pledged under various loan and other agreements. See Note 11Collateral pledged under these loans continues to be sufficient to satisfy the financial statements included in Part II, Item 8 of this report for additional information on assets provided as collateral by the Company.

Although access to the capital markets improved in recent years as evidenced by our financing transactions, we cannot give any assurances that we will be able to obtain additional financing or otherwise access the capital markets in the future on acceptable terms, or at all.loan covenants. We must sustain our profitability and/or access the capital markets to meet our significant long-term debt and capital lease obligations and future commitments for capital expenditures, including the acquisition of aircraft and related spare engines.

See Note 10 to the financial statements included in Part II, Item 8 of this report for additional information on assets provided as collateral by the Company.

The following is a discussion of the Company’sCompany's sources and uses of cash from 20132016 through 2015.

Cash Flows from 2018.

Operating Activities

2015 compared2018 Compared to 20142017

Cash flow provided by operations for the year ended December 31, 20152018 was $6.0$6.2 billion compared to $2.6$3.4 billion in the same period in 2014. The $3.4 billion increase is primarily attributable to an increase of $3.1 billion in income before income taxes and a $0.4 billion increase in non-cash items for the year ended December 31, 2015 as compared to the same period in 2014. Working capital changes reduced cash flow from operations by $0.1 billion year-over-year in 2015 as compared to 2014.2017. The following were significant working capital items in 2015: Cash flow increased by $0.22018:
MileagePlus sales. In 2018, we received $1.3 billion frommore for MileagePlus miles sales to our partners as compared to 2017, mainly due to our domestic co-branded credit card partner fully utilizing the return of hedge collateral net of the impact of changes$0.9 billion remaining balance in fuel derivative positions. Cash flow from other liabilities, including accrued wages, decreased $0.2 billion, which included $0.8 billionits pre-purchased miles in pension contributions offset by2017.
Advance ticket sales and deferred revenue. Our 2018 traffic growth and yield improvements contributed to a $0.7 billion increase in profit sharing accruals to be paid in 2016. Frequentadvance ticket sales and frequent flyer deferred revenue and advanced purchase of miles decreased $0.2 billion.

2014 comparedrevenue.

2017 Compared to 2013

2016

Cash flow provided by operations for the year ended December 31, 20142017 was $2.6$3.4 billion compared to $1.4$5.5 billion in the same period in 2013. The $1.2 billion increase was primarily attributable to an increase of $0.6 billion in2016, the decrease resulting from lower operating income before income taxes and $0.6 billion ofreduced cash flows from certain changes in working capital itemsitems. Excluding the non-cash impairment of the Newark slots, operating income for 2017 was approximately $1.2 billion lower than 2016. Working capital changes reduced cash flow from operations by an additional $1.2 billion year-over-year in 20142017 as compared to 2013.2016. The following were significant working capital items in 2014: Cash flow from advance ticket sales increased by $0.3 billion. Accounts receivable decreased by $0.22017:
$0.9 billion mainlydecrease in advanced purchase of miles due to the timingincreased utilization of settlements with airline partnerspre-purchased miles.
$0.4 billion increase in prepayments for interline billing. Cash flow from other liabilities, including accrued

39

wages, decreased $0.2 billion, which included $0.5 billion in pension contributions offset by $0.2 billion in profit sharing accruals. In 2014, cash flow decreased by $0.1 billion from the posting of fuel hedge collateral, net of changes in fuel derivative positions. Accounts payable decreased by $0.3 billion primarily duemaintenance contracts.

Investing Activities
2018 Compared to the timing of settlements with airline partners for interline billing along with changes in various accruals.

2017

Cash Flows from Investing Activities

2015 compared to 2014

The Company’sCompany's capital expenditures were $2.7$4.2 billion and $2.0$4.0 billion in 2015 2018and 2014,2017, respectively. The Company’sCompany's capital expenditures for both years were primarily attributable to the purchase of aircraft, aircraft improvements, facility and fleet-related costs. costs and the purchase of information technology assets.

On November 29, 2018, United, as lender, entered into a Term Loan Agreement (the "Synergy Loan Agreement") with affiliates of Synergy Aerospace Corporation ("Synergy"), as borrower and guarantor, respectively, and on November 30, 2018, pursuant to the Synergy Loan Agreement, United provided a secured $456 million term loan to Synergy. Synergy is the majority shareholder of Avianca Holdings S.A. ("AVH"), the parent company of Avianca. The loan was made in conjunction with a revenue-sharing joint business agreement among United, Avianca and Copa Airlines as described in Part 1, Item 1 of this report. For additional information regarding the Synergy Loan Agreement and related agreements, see Notes 9 and 13 to the financial statements included in Part II, Item 8 of this report.
In 2015, the Company announced a strategic partnership with Azul Linhas Aereas Brasileiras S.A. (“Azul”). ThroughApril 2018, through a wholly-owned subsidiary, the Company invested $100$138 million for an economic stake of approximately five percent in Azul Brazil’s largest carrier by cities served, which provides a rangeLinhas Aéreas Brasileiras S.A. ("Azul") thus increasing its preferred equity stake in Azul to approximately 8% (representing approximately 2% of customer benefits including codesharingthe total capital stock of flights, joint loyalty program participation and expanded connection opportunities on routes between the U.S. and Brazil, a key market for United, in additionAzul).

2017 Compared to other points in North and South America.

2016

2014 compared to 2013

The Company’sCompany's capital expenditures were $2.0$4.0 billion and $2.2$3.2 billion in 2014 2017and 2013,2016, respectively. The Company’sCompany's capital expenditures for both years were primarily attributable to the purchase of aircraft, aircraft improvements, facility and fleet-related costs.

Cash Flows from costs and the purchase of information technology assets.

Financing Activities

Significant financing events in 20152018 were as follows:

Share Repurchases

The Company used $1.2 billion of cash to purchase 21approximately 17.5 million shares of its common stock during 20152018. As of December 31, 2018, the Company had approximately $1.8 billion remaining to purchase shares under its share repurchase programs. Asprogram.
Debt Issuances
During 2018, United received and recorded $1.2 billion of December 31, 2015, the Company has $2.4 billion remaining to spend under its share repurchase program. See Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this report for additional information.

Debt Issuances

During 2015, United issued $1.4 billion ofproceeds as debt related to enhanced equipment trust certificate (“EETC”("EETC") offerings created in 2018 to finance aircraft. United has received and recorded allthe purchase of the proceeds from its pass-through trusts as debt as of December 31, 2015.

In 2015,aircraft.

During 2018, United borrowed approximately $590$424 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2015.

2018.

Debt and Capital Lease Principal Payments

During the year ended December 31, 2015,2018, the Company made debt and capital lease principal payments of $2.3 billion, including the following prepayments:

$1.9 billion.

UAL used cash to repurchase all $321 million par value 2026 Notes.

UAL used cash to repurchase all $311 million par value 2028 Notes.

UAL used cash to prepay, at par, $300 million principal amount of its $500 million term loan due September 2021 under the Credit Agreement.

40

Financing Activities Not Affecting Cash

The holders of substantially all of the remaining $202 million principal amount of United’s 4.5% Convertible Notes due 2015 exercised their conversion option resulting in the issuance of 11 million shares of UAL common stock.

Significant financing events in 20142017 were as follows:

Share Repurchases

The Company used $320 million$1.8 billion of cash to purchase approximately 727.8 million shares of its common stock during 2017, completing its July 2016 repurchase authorization. In December 2017, UAL's Board of Directors authorized a new $3.0 billion share repurchase program to acquire UAL's common stock. As of December 31, 2017, the Company had approximately $3.0 billion remaining to purchase shares under the 2014 Program. See Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this report for additional information.

its share repurchase program.

Debt Issuances

During 2014,2017, United issued debt related to three separate EETC offerings to finance new aircraft deliveries, bringing the total issued at year end 2014 pursuant to these three EETC offerings to $2.0 billion. Including the EETC offering in 2013, Unitedreceived and recorded $1.8 billion of proceeds as debt during 2014.

related to enhanced equipment trust certificate ("EETC") offerings created in 2016 and 2017 to finance the purchase of aircraft.

In 2017, UAL issued, and United borrowed a $500guaranteed, (i) $400 million aggregate principal amount of unsecured 4.25% Senior Notes due October 1, 2022, and (ii) $300 million aggregate principal amount of unsecured 5% Senior Notes due February 1, 2024.
In 2017, United and UAL, as borrower and guarantor, respectively, increased the term loan under the Credit Agreement.

Agreement by approximately $440 million.

During 2017, United borrowed approximately $497 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2017.
Debt and Capital Lease Principal Payments

During the year ended December 31, 2014,2017, the Company made debt and capital lease principal payments of $2.6 billion, including the following prepayments:

UAL retired, at par, $400 million principal balance of its 8% Notes due 2024.

United used cash to purchase approximately $276 million principal amount of convertible notes and retired the notes.

United retired, at par, the entire $800 million principal balance of its 6.75% Senior Secured Notes.

Financing Activities Not Affecting Cash

UAL amended its revolving credit facility under the Credit Agreement increasing the capacity from $1.0 billion to $1.35 billion and establishing the maturity date for $1.315 billion in lender commitments as January 2, 2019.

UAL issued approximately 17 million shares in exchange for, or conversion of, $260 million of convertible notes and retired the notes.

billion.

Significant financing events in 20132016 were as follows:

Share Repurchases
The Company used $2.6 billion of cash to purchase 50.3 million shares of its common stock during 2016 under its share repurchase programs.

Debt Issuances

During 2013,

In 2016, United issued debt related to three separatecompleted two EETC offerings to finance new aircraft deliveries, bringingfor a total principal amount of $2.0 billion. Of the total issued at year end 2013 pursuant to these three EETC offerings to $1.5 billion. Including the EETC offerings in 2012,$2.0 billion, United received and recorded $900$708 million of proceeds as debt during 2013.

UAL issued $600as of December 31, 2016 to finance the purchase of 17 aircraft. In 2016, United borrowed approximately $369 million unsecured Senior Notes.

United and UAL entered intoaggregate principal amount from various financial institutions to finance the Credit Agreement as the borrower and guarantor, respectively. The Company’s Credit Agreement originally consistedpurchase of a $900 million term loan due April 1, 2019 and a $1.0 billion revolving credit facility available for drawing until April 1, 2018.

41

several aircraft delivered in 2016.

Debt and Capital Lease Principal Payments

During the year ended December 31, 2013,2016, the Company made debt and capital lease principal payments of $2.3 billion, including the following prepayments:

$1.4 billion.

The Company used $900 million from the Credit Agreement, together with approximately $300 million of cash to retire the entire principal balance of a $1.2 billion term loan due 2014 that was outstanding under United’s Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement, dated as of February 2, 2007.

United redeemed all of the $400 million aggregate principal amount of its 9.875% Senior Secured Notes due 2013 and $200 million aggregate principal amount of 12.0% Senior Second Lien Notes due 2013.

United redeemed $303 million aggregate principal amount of EETC notes.

Financing Activities Not Affecting Cash

UAL issued approximately 28 million shares of UAL common stock pursuant to agreements that UAL entered into with certain of its securityholders in exchange for approximately $240 million in aggregate principal amount of UAL’s outstanding 6% Convertible Senior Notes held by the holders of these notes. The Company retired the 6% Convertible Senior Notes acquired in the exchange.

For additional information regarding these Liquidity and Capital Resource matters, see Notes 3, 10, 11 13 and 14 12to the financial statements included in Part II, Item 8 of this report. For information regarding non-cash investing and financing activities, see the Company’sCompany's statements of consolidated cash flows.

Credit Ratings. As of the filing date of this report, UAL and United had the following corporate credit ratings:

 S&P Moody’sMoody's Fitch
UALBB UALBa2 BB-Ba3BB-BB
UnitedBB-BB * BB-BB
*The credit agency does not issue corporate credit ratings for subsidiary entities.

*The credit agency does not issue corporate credit ratings for subsidiary entities.

These credit ratings are below investment grade levels. Downgrades from these rating levels, among other things, could restrict the availability, or increase the cost, of future financing for the Company.

Other Liquidity Matters


Below is a summary of additional liquidity matters. See the indicated notes to our consolidated financial statements included in Part II, Item 8 of this report for additional details related to these and other matters affecting our liquidity and commitments.

Pension and other postretirement plans

Note 8

Hedging activities

Long-term debt and debt covenantsNote 10

Long-term debtLeases and debt covenants

capacity purchase agreementsNote 11

LeasesCommitments and capacity purchase agreements

contingenciesNote 13

Commitments and contingencies

Note 15

Contractual Obligations. The Company’sCompany's business is capital intensive, requiring significant amounts of capital to fund the acquisition of assets, particularly aircraft. In the past, the Company has funded the acquisition of aircraft through outright purchase,with cash, by issuing debt,using EETC financing, by entering into capital or operating leases, or through vendorother financings. The Company also often enters into long-term lease commitments with airports to ensure access to terminal, cargo, maintenance and other required facilities.

42

The table below provides a summary of the Company’sCompany's material contractual obligations as of December 31, 20152018 (in billions):

  2016  2017  2018  2019  2020  After
2020		  Total 

Long-term debt (a)

   $1.2       $0.8       $1.4       $1.8       $0.9       $4.9       $11.0    

Capital lease obligations—principal portion

  0.1      0.1      0.1      0.1      —      0.5      0.9    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total debt and capital lease obligations

  1.3      0.9      1.5      1.9      0.9      5.4      11.9    

Interest on debt and capital lease obligations (b)

  0.6      0.5      0.4      0.3      0.3      0.9      3.0    

Aircraft operating lease obligations

  1.3      1.3      1.1      0.9      0.7      2.7      8.0    

Regional CPAs (c)

  1.8      1.9      1.6      1.3      1.2      4.8      12.6    

Other operating lease obligations

  1.3      1.2      0.9      0.8      0.9      6.7      11.8    

Postretirement obligations (d)

  0.1      0.1      0.1      0.1      0.2      0.8      1.4    

Pension obligations (e)

  —      —      —      —      0.4      1.6      2.0    

Capital purchase obligations (f)

  3.4      3.1      3.3      2.9      2.8      7.7      23.2    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total contractual obligations

   $9.8       $9.0       $8.9       $8.2       $7.4       $30.6       $73.9    

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
(a)Long-term debt presented in the Company’s financial statements is net of $145 million of debt discount, premiums and debt issuance costs which are being amortized over the debt terms. Contractual payments are not net of the debt discount, premiums and debt issuance costs. Contractual long-term debt includes $20 million of non-cash obligations as these debt payments are made directly to the creditor by a company that leases one aircraft from United. The creditor’s only recourse to United is repossession of the aircraft.
(b)Includes interest portion of capital lease obligations of $71 million in 2016, $55 million in 2017, $45 million in 2018, $39 million in 2019, $37 million in 2020 and $309 million thereafter. Future interest payments on variable rate debt are estimated using estimated future variable rates based on a yield curve.
(c)Represents our estimates of future minimum noncancelable commitments under our CPAs and does not include the portion of the underlying obligations for aircraft and facility rent that is disclosed as part of aircraft and nonaircraft operating leases. Amounts also exclude a portion of United’s capital lease obligation recorded for certain of its CPAs. See Note 13 to the financial statements included in Part II, Item 8 of this report for the significant assumptions used to estimate the payments.
(d)Amounts represent postretirement benefit payments, net of subsidy receipts, through 2025. Benefit payments approximate plan contributions as plans are substantially unfunded.
(e)Represents estimate of the minimum funding requirements as determined by government regulations for United’s material pension plans. Amounts are subject to change based on numerous assumptions, including the performance of assets in the plan and bond rates. See Critical Accounting Policies, below, for a discussion of our current year assumptions regarding United’s pension plans.
(f)Represents contractual commitments for firm order aircraft and spare engines only and noncancelable commitments to purchase goods and services, primarily information technology support. In January 2016, UAL entered into a purchase agreement amendment with Boeing for a firm narrowbody aircraft order of 40 Boeing 737NG aircraft and the table above is adjusted to include that impact. See Note 15 to the financial statements included in Part II, Item 8 of this report for a discussion of our purchase commitments.

  2019 2020 2021 2022 2023 After 2023 Total
Long-term debt (a) $1.2
 $1.3
 $1.3
 $1.7
 $0.7
 $7.4
 $13.6
Capital lease obligations—principal portion 0.2
 0.1
 0.1
 0.1
 —
 0.9
 1.3
Total debt and capital lease obligations 1.4
 1.4
 1.4
 1.8
 0.7
 8.3
 14.9
Interest on debt and capital lease obligations (b) 0.7
 0.6
 0.5
 0.4
 0.4
 1.1
 3.6
Aircraft operating lease obligations 0.8
 0.7
 0.6
 0.4
 0.4
 1.2
 4.1
Regional CPAs (c) 2.2
 2.0
 1.8
 1.4
 0.8
 3.1
 11.3
Other operating lease obligations 1.3
 1.4
 1.1
 1.0
 1.0
 7.0
 12.8
Postretirement obligations (d) 0.1
 0.1
 0.1
 0.1
 0.1
 0.5
 1.0
Pension obligations (e) —
 —
 —
 0.3
 0.2
 0.5
 1.0
Capital purchase obligations (f) 4.2
 5.3
 3.5
 2.8
 1.9
 7.0
 24.7
Total contractual obligations $10.7
 $11.5
 $9.0
 $8.2
 $5.5
 $28.7
 $73.4

(a) Long-term debt presented in the Company's financial statements is net of $191 million of debt discount, premiums and debt issuance costs which are being amortized over the debt terms. Contractual payments do not include the debt discount, premiums and debt issuance costs.
(b) Includes interest portion of capital lease obligations of $124 million in 2019, $104 million in 2020, $80 million in 2021, $63 million in 2022, $57 million in 2023 and $410 million thereafter. Interest payments on variable interest rate debt were calculated using London interbank offered rates ("LIBOR") applicable at December 31, 2018.
(c) Represents our estimates of future minimum noncancelable commitments under our CPAs and does not include the portion of the underlying obligations for aircraft and facility rent that is disclosed as part of aircraft and nonaircraft operating leases. Amounts also exclude a portion of United's capital lease obligation recorded for certain of its CPAs. See Note 11 to the financial statements included in Part II, Item 8 of this report for the significant assumptions used to estimate the payments.
(d) Amounts represent postretirement benefit payments, net of subsidy receipts, through 2028. Benefit payments approximate plan contributions as plans are substantially unfunded.
(e) Represents an estimate of the minimum funding requirements as determined by government regulations for United's U.S. pension plans. Amounts are subject to change based on numerous assumptions, including the performance of assets in the plans and bond rates. See Critical Accounting Policies, below, for a discussion of our current year assumptions regarding United's pension plans.
(f) Represents contractual commitments for firm order aircraft, spare engines and other capital purchase commitments. See Note 13 to the financial statements included in Part II, Item 8 of this report for a discussion of our purchase commitments.
Off-Balance Sheet Arrangements.An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity, or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support, or that engages in leasing, hedging or research and development arrangements. The Company’sCompany's primary off-balance sheet arrangements include operating leases, which are summarized in the contractual obligations table inunder Contractual Obligations,above,and certain municipal bond obligations, as discussed below.

As of December 31, 2015,2018, United had cash collateralized $70$73 million of letters of credit. United also had $437 million of performance bonds relating to various real estate, customs and aircraft financing obligations at December 31, 2015. Most of the letters of credit, which generally have evergreen clauses and are expected to be renewed on an annual basis and the performance bonds have expiration dates through 2019.

basis. As of December 31, 2015,2018, United also had $418 million of surety bonds securing various obligations with expiration dates through 2022.

As of December 31, 2018, United is the guarantor of approximately $1.9 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon. These bonds, issued by various airport municipalities, are payable solely from rentals paid under long-term agreements with the respective governing

43

bodies. The leasing arrangements associated with a majority of these obligations are accounted for as operating leases. The leasing arrangements associated with a portion of these obligations are accounted for as capital leases. The annual lease payments for those obligations accounted for as operating leases are included in the operating lease payments in the contractual obligations table under Contractual Obligations, above.

EETCs.In November 2015connection with funding the Synergy Loan Agreement, the Company entered into an agreement with AVH's significant minority shareholder, Kingsland Holdings Limited ("Kingsland"), pursuant to which, in return for Kingsland's pledge of its 144.8 million shares of AVH common stock (equivalent to 18.1 million American Depositary Receipts ("ADRs")) and August 2014,its consent to Synergy's pledge of its AVH common stock to United completed two separate EETC offeringsunder the Synergy Loan Agreement, United (1) granted to Kingsland the right to put its shares of AVH common stock to United at market price on the fifth anniversary of the Synergy Loan Agreement, and (2) guaranteed Synergy's obligation to pay Kingsland (which amount, if paid by United, will increase United's secured loan to Synergy by such amount) if the market price of AVH common stock on the fifth anniversary is less than $12 per ADR on the NYSE, for an aggregate maximum possible combined put payment and guarantee amount on the fifth anniversary of $217.2 million. Accordingly, the Company recorded a totalliability of $31 million for the fair value of its guarantee to loan additional funds to Synergy if required. Any additional loans to Synergy would be collateralized by Synergy's shares of AVH stock and other collateral.
As of December 31, 2018, United is the guarantor of $145 million of aircraft mortgage debt issued by one of United's regional carriers. The aircraft mortgage debt is subject to increased cost provisions and the Company would potentially be responsible for those costs under the guarantees. The increased cost provisions in the $145 million of aircraft mortgage debt are similar to those in certain of the Company's debt agreements. See discussion under Increased Cost Provisions,below, for additional information on increased cost provisions related to the Company's debt.
EETCs. As of December 31, 2018, United had $8.8 billion principal amount of $1.5 billion.equipment notes outstanding issued under EETC financings. Generally, the structure of these EETC financings consists of pass-through trusts created by United has receivedto issue pass-through certificates, which represent fractional undivided interests in the respective pass-through trusts and recorded allare not obligations of United. The proceeds of the proceedsissuance of the pass-through certificates are used to purchase equipment notes which

are issued by United and secured by its aircraft. The payment obligations under the equipment notes are those of United. Proceeds received from these offeringsthe sale of pass-through certificates are initially held by a depositary in escrow for the benefit of the certificate holders until United issues equipment notes to the trust, which purchases such notes with a portion of the escrowed funds. These escrowed funds are not guaranteed by United and are not reported as debt as of December 31, 2015.on United's consolidated balance sheet because the proceeds held by the depositary are not United's assets. In February 2019, United completed a $1.0 billion EETC offering to finance certain 2018 and 2019 aircraft deliveries. See Notes 11 and 14Note 10 to the financial statements included in Part II, Item 8 of this report for additional information on EETC pass-through trusts and variable interest entity consideration.

information.

Increased Cost Provisions.See Note 15 In United's financing transactions that include loans, United typically agrees to reimburse lenders for any reduced returns with respect to the financial statements includedloans due to any change in Part II, Item 8capital requirements and, in the case of this reportloans in which the interest rate is based on LIBOR, for additional information oncertain 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, 2018, the Company had $3.5 billion of floating rate debt and $27 million of fixed rate debt, with remaining terms of up to 12 years, that are subject to these increased cost provisions relatedprovisions. In several financing transactions involving loans or leases from non-U.S. entities, with remaining terms of up to 12 years and an aggregate balance of $3.2 billion, the Company’s debt.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, (eithereither special facilities lease revenue bonds or general airport revenue bonds),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, 2015,2018, approximately $1.3$1.7 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, 2015,2018, the Company’sCompany's contingent exposure was approximately $224$164 million principal amount of such bonds based on its recent consortia participation. The Company’sCompany'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 20172022 to 2041.2051. The Company did not record a liability at the time these indirect guarantees were made. See Note 15 to the financial statements included in Part II, Item 8 of this report for additional information related to the Company’s fuel consortia.

Critical Accounting Policies

Critical accounting policies are defined as those that are affected by significant judgments and uncertainties which potentially could result in materially different accounting under different assumptions and conditions. The Company has prepared the financial statements in conformity with GAAP,accounting principles generally accepted in the United States of America ("GAAP"), which requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates under different assumptions or conditions. The Company has identified the following critical accounting policies that impact the preparation of the financial statements.

Revenue Recognition. The Company records passenger ticket salesFrequent Flyer Accounting. United's MileagePlus loyalty program builds customer loyalty by offering awards, benefits and tickets sold by other airlinesservices to program participants. Members in this program earn miles for usetravel 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.

44

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.

In May 2014, the Financial Accounting Standards Board (“FASB”) amended the FASB Accounting Standards Codification and created a new Topic 606,Revenue from Contracts with Customers. This amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment supersedes the revenue recognition requirements in Topic 605,Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. The amendment will become effective for the Company’s annual and interim reporting periods beginning after December 15, 2017. Under the new standard, certain airline ancillary fees directly related to passenger revenue tickets, such as airline change fees and baggage fees, are likely to no longer be considered distinct performance obligations separate from the passenger travel component. In addition, the change fees which were previously recognized when received, will likely be recognized when transportation is provided. The Company is evaluating other impacts on its consolidated financial statements.

Frequent Flyer Accounting.The Company’s MileagePlus program is designed to increase customer loyalty. Program participants earn miles by flying on United Express, Star Alliance members and certain other participating airlines. Program participantsairlines that participate in the program. Members can also earn miles through purchases from otherby purchasing the goods and services of our network of non-airline partners that participate in the Company’s loyalty program.partners. We have contracts to sell miles to these partners whichwith the terms extending from one to eight years. These partners include domestic and international credit card issuers, retail merchants, hotels, car rental companies and our participating airline partners. Miles can be redeemed for free (other than taxes and government imposed fees), discounted or upgraded air travel and non-travel awards. The Company records its obligationMiles expire after 18 months of member account inactivity.


Miles Earned in Conjunction with Travel. When frequent flyers earn miles for future award redemptions using a deferred revenue model.

In the case of the sale of air services,flights, the Company recognizes a portion of the ticket sales as revenue when the air transportationtravel occurs and defers a portion of the ticket sale representing the value of the related miles as a multiple-deliverable revenue arrangement. The miles are recorded in Frequent flyer deferred revenue on the Company’s consolidated balance sheet and recognized into revenue when the transportation is provided.

separate performance obligation. The Company determines the estimated selling price of air transportationtravel and miles as if each element is sold on a separate basis. The total consideration from each ticket sale is then allocated to each of these elements, individually, on a pro ratapro-rata basis.

At the time of travel, the Company records the portion allocated to the miles to Frequent flyer deferred revenue on the Company's consolidated balance sheet and subsequently recognizes it into revenue when miles are redeemed for air travel and non-air travel awards.


The Company’sCompany's estimated selling price of miles is based on an equivalent ticket value less fulfillment discount,breakage, which incorporates the expected redemption of miles, as the best estimate of selling price for these miles. The equivalent ticket value is based on the prior 12 months’months' weighted average equivalent ticket value of similar fares as those used to settle award redemptions while

taking into consideration such factors as redemption pattern, cabin class, loyalty status and geographic region. The estimated selling price of miles is adjusted by a fulfillment discountbreakage that considers a number of factors, including redemption patterns of various customer groups.

The Company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns. The Company's estimate of the expected expiration of miles requires significant management judgment. Current and future changes to expiration assumptions or to the expiration policy, or to program rules and program redemption opportunities, may result in material changes to the deferred revenue balance as well as recognized revenues from the program. For the portion of the outstanding miles that we estimate will not be redeemed, we recognize the associated value proportionally as the remaining miles are redeemed.


Co-Brand Agreement. United has a significant contract (the "Co-Brand Agreement") to sell MileagePlus miles to its co-branded credit card partner Chase.Chase Bank USA, N.A. ("Chase"). Chase awards miles to MileagePlus members based on their credit card activity. United identified the following significant revenue elementsseparately identifiable performance obligations in the Co-Brand Agreement:

MileagePlus miles awarded – United has a performance obligation to provide MileagePlus cardholders with miles to be used for air travel and non-travel award redemptions. The Company records Passenger revenue related to the airtravel awards when the transportation element represented byis provided and records Other revenue related to the valuenon-travel awards when the goods or services are delivered. The Company records the cost associated with non-travel awards in Other operating revenue.
Marketing – United has a performance obligation to provide Chase access to its customer list and the use of its brand. Marketing revenue is recorded to Other operating revenue as miles are delivered to Chase.
Advertising – United has a performance obligation to provide advertising in support of the mile (generally resulting from its redemption for future air transportationMileagePlus card in various customer contact points such as United's website, email promotions, direct mail campaigns, airport advertising and whose fair valuein-flight advertising. Advertising revenue is described above);recorded to Other operating revenue as miles are delivered to Chase.
Other travel-related benefits – United's performance obligations are comprised of various items such as waived bag fees, seat upgrades and lounge passes. Lounge passes are recorded to Other operating revenue as customers use the lounge passes. Bag fees and seat upgrades are recorded to Passenger revenue at the time of the United brandassociated travel.

We account for all the payments received (including monthly and accessone-time payments) under the Co-Brand Agreement by allocating them to MileagePlus member lists; advertising; and other travel related benefits.

the separately identifiable performance obligations. The fair value of the elementsseparately identifiable performance obligations is determined using management’smanagement's estimated selling price of each element.component. The objective of using the estimated selling price based methodology is to determine the price at which we would transact a sale if the product or service were sold on a stand-alone basis. Accordingly, we determine our best estimate of selling price by considering multiple inputs and methods including, but not limited to, discounted cash flows, brand value, volume discounts, published selling prices, number of miles awarded and number of miles redeemed. The Company estimated the selling prices and volumes over the term of the Co-Brand Agreement in order to determine the allocation of proceeds to each of the multiple elementscomponents to be delivered. We also evaluate volumes on an annual basis, which may result in a change in the allocation of the estimated selling priceconsideration from the Co-Brand Agreement on a prospective basis.

45

The Company records passenger revenue related


Frequent flyer deferred revenue. Miles in MileagePlus members' accounts are combined into one homogeneous pool and are thus not separately identifiable, for award redemption purposes, between miles earned in the current period and those in their beginning balance. Of the miles expected to the air transportation element when the transportation is delivered. The other elements are generally recognized as Other operating revenue when earned.

The Company accounts for miles sold and awarded that will never be redeemed, by program members, which we referthe Company expects the majority of these miles to as breakage. The Company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns. Miles expire after 18 months of member account inactivity. The Company’s estimate of the expected expiration of miles requires significant management judgment. Current and future changes to expiration assumptions or to the expiration policy, or to program rules and program redemption opportunities, may result in material changes to the deferred revenue balance as well as recognized revenues from the programs.

be redeemed within two years.

The following table summarizes information related to the Company’sCompany's Frequent flyer deferred revenue liability:

Frequent flyer deferred revenue at December 31, 2015 (in millions)

$4,943   

% of miles earned expected to expire

16%

Impact of 1% change in outstanding miles or weighted average ticket value on deferred revenue (in millions)

$60   

Effective March 1, 2015,

Frequent flyer deferred revenue at December 31, 2018 (in millions) $5,005
Percentage of miles earned expected to expire 14.5%
Impact of 1% change in outstanding miles expected to be redeemed or weighted average ticket value on deferred revenue (in millions) $50
Revenue Recognition. The Company presents Passenger revenue, Cargo revenue and Other operating revenue on its income statement. Passenger revenue is recognized when transportation is provided and Cargo revenue is recognized when shipments arrive at their destination. Other operating revenue is recognized as the related performance obligations are satisfied.

Passenger tickets and related ancillary services sold by the Company modifiedfor mainline and regional flights are purchased primarily via credit card transactions, with payments collected by the Company in advance of the performance of related services. The Company initially records ticket sales in its MileagePlus programAdvance ticket sales liability, deferring revenue recognition until the travel occurs. For travel that has more than one flight segment, the Company deems each segment as a separate performance obligation and recognizes revenue for most ticketseach segment as travel occurs. Tickets sold by other airlines where the Company provides the

transportation are recognized as passenger revenue at the estimated value to be billed to the other airline when travel is provided. 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 model in which members earned redeemable milesreserve against its billings and payables with other airlines based on distance traveledhistorical experience.

The Company sells certain tickets with connecting flights with one or more segments operated by its other airline partners. For segments operated by its other airline partners, the Company has determined that it is acting as an agent on behalf of the other airlines as they are responsible for their portion of the contract (i.e. transportation of the passenger). The Company, as the agent, recognizes revenue within Other operating revenue at the time of the travel for the net amount representing commission to be retained by the Company for any segments flown by other airlines.

Refundable tickets expire after one basedyear from the date of issuance. Non-refundable tickets generally expire on ticket price (including base fare and carrier imposed surcharges). Members now earn between five and eleven miles per dollar spent basedthe date of the intended travel, unless the date is extended by notification from the customer on their MileagePlus status.or before the intended travel date. The updated program enhances the rewards for customers who spend more with United and gives them improved mileage-earning opportunities. This modification had no material impact to the Frequent flyer deferredCompany records breakage revenue on the Company’s consolidated balance sheet.

travel date for its estimate of tickets that will expire unused. To determine breakage, the Company uses its historical experience with refundable and nonrefundable expired tickets and other facts, such as recent aging trends, program changes and modifications that could affect the ultimate expiration patterns of tickets. Fees charged in association with changes or extensions to non-refundable tickets are considered part of the Company's passenger travel obligation. As such, those fees are deferred at the time of collection and recognized at the time the travel is provided. 


United initially capitalizes the costs of selling airline travel tickets and then recognizes those costs as Distribution expense at the time of travel. Passenger ticket costs include credit card fees, travel agency and other commissions paid, as well as global distribution systems booking fees.
Long-Lived Assets.The net book value of operating property and equipment for the Company was $22$28 billion and $19$26 billion at December 31, 20152018 and December 31, 2014,2017, respectively. The assets’assets' recorded value is impacted by a number of accounting policy elections, including the estimation of useful lives and residual values and, when necessary, the recognition of asset impairment charges.

The Company records assets acquired, including aircraft, at acquisition cost. Depreciable life is determined through economic analysis, such as reviewing existing fleet plans, obtaining appraisals and comparing estimated lives to other airlines that operate similar fleets. As aircraft technology has improved, useful life has increased and theThe Company has generally estimated the lives of those aircraft to be between 25 and 30 years. Residual values are estimated based on historical experience with regard to the sale of both aircraft and spare parts and are established in conjunction with the estimated useful lives of the related fleets. Residual values are based on when the aircraft are acquired and typically reflect asset values that have not reached the end of their physical life. Both depreciable lives and residual values are revised periodically as facts and circumstances arise to recognize changes in the Company’sCompany's fleet plan and other relevant information. A one-year increase in the average depreciable life of the Company’sCompany's flight equipment would reduce annual depreciation expense on flight equipment by approximately $50$85 million.

The Company evaluates the carrying value of long-lived assets and intangible assets subject to amortization whenever events or changes in circumstances indicate that an impairment may exist. For purposes of this testing, the Company has generally identified the aircraft fleet type as the lowest level of identifiable cash flows for purposes of testing aircraft for impairment. An impairment charge is recognized when the asset’sasset's carrying value exceeds its net undiscounted future cash flows and its fair market value. The amount of the charge is the difference between the asset’sasset's carrying value and fair market value.

See Note 14 to the financial statements included in Part II, Item 8 of this report for additional information.
Indefinite-lived intangible assets. The Company has indefinite-lived intangible assets, including goodwill. Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment on an annual basis as of October 1, or on an interim basis whenever a triggering event occurs. An impairment occurs when the fair value of an intangible asset is less than its carrying value.
See Note 2 to the financial statements included in Part II, Item 8 of this report for additional information.
Defined Benefit Plan Accounting.We sponsor defined benefit pension plans for eligible employees and retirees. The most critical assumptions impacting our defined benefit pension plan obligations and expenses are the weighted average discount rate and the expected long-term rate of return on the plan assets.

United’s

United's pension plans’plans' under-funded status was $1.5$1.6 billion at December 31, 2015.2018. Funding requirements for tax-qualified defined benefit pension plans are determined by government regulations. In 2016,2019, we anticipate contributing at least $400$318 million to our pension plans. The fair value of the plans’plans' assets was $3.0$3.8 billion at December 31, 2015.

46

2018.


When calculating pension expense for 2016,2019, the Company assumed that its plans’plans' assets would generate a long-term rate of return of approximately 7.0%7.4%. The expected long-term rate of return assumption was developed based on historical experience and input from the trustee managing the plans’plans' assets.The expected long-term rate of return on plan assets is based on a target allocation of assets, which is based on a goal of earning the highest rate of return while maintaining risk at acceptable levels. Our projected long-term rate of return reflects the active management of our plans’plans' assets. The plans strive to have assets sufficiently diversified so that adverse or unexpected results from one security class will not have an unduly detrimental impact on the entire portfolio. Plan fiduciaries regularly review actual asset allocation and the pension plans’plans' investments are periodically rebalanced to the targeted allocation when considered appropriate.

The defined benefit pension plans’plans' assets consist of return generating investments and risk mitigating investments which are held through direct ownership or through interests in common collective trusts. Return generating investments include primarily equity securities, fixed-income securities and alternative investments (e.g. private equity and hedge funds). Risk mitigating investments include primarily U.S. government and investment grade corporate fixed-income securities. The allocation of assets was as follows at December 31, 2015:

   Percent of Total   Expected Long-Term
Rate of Return		 

  Equity securities

   38  %     9.5  %  

  Fixed-income securities

   37          5.0       

  Alternatives

   18          7.3       

  Other

   7          7.0       

2018:

 Percent of Total 
Expected Long-Term
Rate of Return
Equity securities36% 9.5%
Fixed-income securities37  5.8 
Alternatives16  7.3 
Other11  7.8 
Pension expense increases as the expected rate of return on plan assets decreases. Lowering the expected long-term rate of return on plan assets by 50 basis points (from 7.0%7.4% to 6.5%6.9%) would increase estimated 20162019 pension expense by approximately $15$20 million.

Future pension obligations for United’sUnited's plans were discounted using a weighted average rate of 4.58%4.2% at December 31, 2015.2018. The Company selected the discount rate for substantially all of its plans by using a hypothetical portfolio of high quality bonds at December 31, 20152018 that would provide the necessary cash flows to match the projected benefit payments.

The pension liability and future pension expense both increase as the discount rate is reduced. Lowering the discount rate by 50 basis points (from 4.58%4.2% to 4.08%3.7%) would increase the pension liability at December 31, 20152018 by approximately $477 $585million and increase the estimated 20162019 pension expense by approximately $55$69 million.

Future changes in plan asset returns, plan provisions, assumed discount rates, pension funding law and various other factors related to the participants in our pension plans will impact our future pension expense and liabilities. We cannot predict with certainty what these factors will be in the future.

Actuarial gains or losses are triggered by changes in assumptions or experience that differ from the original assumptions. Under the applicable accounting standards for defined benefit pension plans, those gains and losses are not required to be recognized currently as pension benefit expense, but instead may be deferred as part of accumulated other comprehensive income and amortized into expense over the average remaining service life of the covered active employees. All gains and losses in accumulated other comprehensive income are amortized to expense over the remaining years of service of the covered active employees. At December 31, 20152018 and 2014,2017, the Company had unrecognized actuarial losses for pension benefit plans of $844 million$1.4 billion and $982 million,$1.6 billion, respectively, recorded in accumulated other comprehensive income.

Other Postretirement Benefit Plan Accounting.United’sUnited's postretirement plan provides certain health care benefits, primarily in the United States, to retirees and eligible dependents, as well as certain life insurance

47

benefits to certain retirees reflected as “Other"Other Benefits.”" United also has retiree medical programs that permit retirees who meet certain age and service requirements to continue medical coverage between retirement and Medicare eligibility. Eligible employees are required to pay a portion of the costs of their retiree medical benefits, which in some cases may be offset by accumulated unused sick time at the time of their retirement. Plan benefits are subject to co-payments, deductibles and other limits as described in the plans.

The Company accounts for other postretirement benefits by recognizing the difference between plan assets and obligations, or the plan’splan's funded status, in its financial statements. Other postretirement benefit expense is recognized on an accrual basis over employees’employees' approximate service periods and is generally calculated independently of funding decisions or requirements. United has not been required to pre-fund its plan obligations, which has resulted in a significant net obligation, as discussed below. The Company’sCompany's benefit obligation was $2.0$1.4 billion and $2.1$1.7 billion for the other postretirement benefit plans at December 31, 20152018 and 2014,2017, respectively.

The calculation of other postretirement benefit expense and obligations requires the use of a number of assumptions, including the assumed discount rate for measuring future payment obligations and the health care cost trend rate. The Company determines the appropriate discount rate for each of the plans based on current rates on high quality corporate bonds that would generate the cash flow necessary to pay plan benefits when due. The Company’sCompany's weighted average discount rate to determine its

benefit obligations as of December 31, 20152018 was 4.49%4.30%, as compared to 4.07%3.63% for December 31, 2014.2017. The health care cost trend rate assumed for 20152018 was 7.00%6.25%, declining to 5.0% in 2023, as compared to assumed trend rate for 20162019 of 6.75%6.0%, declining to 5.0% in 2023. A 1% increase in assumed health care trend rates would increase the Company’sCompany's total service and interest cost for the year ended December 31, 20152018 by $13$9 million; whereas, a 1% decrease in assumed health care trend rates would decrease the Company’sCompany's total service and interest cost for the year ended December 31, 20152018 by $11$7 million. A one percentage point decrease in the weighted average discount rate would increase the Company’sCompany's postretirement benefit liability by approximately $227$139 million and increase the estimated 20152018 benefits expense by approximately $12$10 million.

Actuarial gains or losses are triggered by changes in assumptions or experience that differ from the original assumptions and prior service credits result from a retroactive reduction in benefits due under the plans. Under the applicable accounting standards for postretirement welfare benefit plans, actuarial gains and losses and prior service credits are not required to be recognized currently, but instead may be deferred as part of accumulated other comprehensive income and amortized into expense over the average remaining service life of the covered active employees or the average life expectancy of inactive participants. At December 31, 20152018 and 2014,2017, the Company had unrecognized actuarial gains for postretirement welfare benefit plans of $236$554 million and $233$301 million, respectively, recorded in accumulated other comprehensive income.

Income Taxes.The Company’s income tax benefit was $3.1 billion for the year ended December 31, 2015. A discrete tax benefit of $3.1 billion for the reduction to the U.S. net federal and state deferred tax asset valuation allowance was included in the income tax benefit for the year ended December 31, 2015.

During 2015, after considering all positive and negative evidence and the four sources of taxable income, the Company concluded that its deferred income tax assets are more likely than not to be realized. In evaluating the likelihood of utilizing the Company’s net federal and state deferred tax assets, the significant relevant factors that the Company considered are: (1) its recent history and forecasted profitability; (2) growth in the U.S. and global economies; and (3) future impact of taxable temporary differences. Although the Company was not in a three-year cumulative loss position at December 31, 2014, management concluded that the low level of cumulative pre-tax income, coupled with the Company’s history of operating losses resulted in a determination that a valuation allowance was still necessary. We considered past profitability and future expectations of profitability to determine whether it is more likely than not that we will generate sufficient taxable income to realize our net deferred tax assets. Management placed significant weight on past performance (i.e., losses or near break-even results in 2009 to 2013) as it is more objectively verifiable than projections of future taxable income. However, during 2015, the Company’s pre-tax profit of $4.2 billion benefited from lower oil prices and improved efficiency that resulted in significant taxable income. Additionally, based upon current projection of future

48

earnings, the Company evaluated the NOLs expiration periods and change in ownership limitations under Section 382 of the Internal Revenue Code of 1986, as amended, and determined the NOLs would be realized before expiring beginning in 2025. Therefore, the Company released almost all of its valuation allowance in 2015, resulting in a $3.1 billion benefit in its provision for income taxes. The valuation allowance recorded in accumulated other comprehensive income (loss) (“AOCI”) in prior years was released through the income statement and resulted in remaining debits within AOCI of $285 million and $180 million related to pension and derivatives, respectively, which will not be recognized into income tax expense until either the plans are exited or the Company no longer has any outstanding derivatives.

The Company has retained a valuation allowance of $48 million against certain state and local NOLs and credit carryforwards at the end of 2015. The Company expects these NOLs and credits will expire unused due to limited carryforward periods. The ability to utilize these state NOLs and credits will be evaluated on a quarterly basis to determine if there are any significant events or any prudent and feasible tax planning strategies that would affect the Company’s ability to realize these deferred tax assets.

The Company has a net deferred tax asset totaling $2.0 billion as of December 31, 2015 that relates primarily to its federal and state NOL carryforwards. The federal and state NOL carryforwards relate to prior years’ NOLs, which may be used to reduce tax liabilities in future years. These tax benefits are mostly attributable to federal pre-tax NOL carryforwards of $8.0 billion for UAL. If not utilized, these federal pre-tax NOLs will expire as follows (in billions): $2.1 in 2025, $2.0 in 2026, $1.4 in 2027 and $2.5 after 2028. In addition, the majority of tax benefits of the state net operating losses of $103 million for UAL will expire over a five to 20-year period. Additionally, the Company has $232 million of alternative minimum tax credit carryforwards which do not expire.

Forward-Looking Information

Certain statements throughout Part II, Item 7, Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this report are forward-looking and thus reflect the Company’sCompany's current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to the Company’sCompany's operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as “expects,” “will,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook,” “goals”"expects," "will," "plans," "anticipates," "indicates," "believes," "estimates," "forecast," "guidance," "outlook," "goals" and similar expressions are intended to identify forward-looking statements.

Additionally, forward-looking statements include statements whichthat do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this report are based upon information available to the Companyus on the date of this report. The Company undertakesWe undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law.

The Company’s

Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: its ability to comply with the terms of its various financing arrangements; the costs and availability of financing; its ability to maintain adequate liquidity; itsour ability to execute its operational plansour strategic operating plan, including our growth, revenue-generating and revenue-generating initiatives, including optimizing its revenue; its ability to control its costs, including realizing benefits from its resource optimization efforts, cost reduction initiatives and fleet replacement programs; its ability to utilize its net operating losses; its ability to attract and retain customers; demand for transportation in the markets in which it operates; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income;cost-control initiatives; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil

49

prices, costs of aircraft fuel and energy refining capacity in relevant markets); economic and political instability and other risks of doing business globally; itsglobally, including instability and political developments that may impact our operations in certain countries; demand for travel and the impact that global economic and political conditions have on customer travel patterns; our capacity decisions and the capacity decisions of our competitors; competitive pressures on pricing and on demand; changes in aircraft fuel prices; disruptions in our supply of aircraft fuel; our ability to cost-effectively hedge against increases in the price of aircraft fuel; any potential realized or unrealized gains or losses relatedfuel, if we decide to fuel or currency hedging programs;do so; the effects of any technology failures or cybersecurity breaches; disruptions to services provided by third-party service providers; potential reputational or other impact from adverse events involving our aircraft or operations, the aircraft or operations of our regional carriers or our code share partners or the aircraft or operations of another airline; our ability to attract and retain customers; the effects of any terrorist attacks, international hostilities actor other security events, or the fear of warsuch events; disruptions to our regional network; the impact of regulatory, investigative and legal proceedings and legal compliance risks; the success of our investments in other airlines, including in other parts of the world; industry consolidation or terrorist attack;changes in airline alliances; the ability of other air carriers with whom the Company haswe have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; costs associated with any modification or termination of our aircraft orders; disruptions to its regional network;in the costs and availability of aviation and other insurance; industry consolidationaircraft, parts or changes in airline alliances; competitive pressures on pricing and demand; its capacity decisions and the capacity decisions of its competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements and environmental regulations); the impact of regulatory, investigative and legal proceedings and legal compliance risks; the impact of any management changes;support from our CEO’s health prognosis and return to work on a full-time basis; labor costs; itssuppliers; our ability to maintain satisfactory labor relations and the results of theany collective bargaining agreement process with itsour union groups; any disruptions to operations due to any potential actions by itsour labor groups; labor costs; an outbreak of a disease that affects travel demand or travel behavior; the impact of any management changes; extended interruptions or disruptions in service at major airports where we operate; U.S. or foreign governmental legislation, regulation and other actions (including Open Skies agreements, environmental regulations and the United Kingdom's withdrawal from the European Union); the seasonality of the airline industry; weather conditions; the costs and availability of aviation and other insurance; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to comply with the terms of our various financing arrangements; our ability to realize the full value of our intangible assets and long-lived assets; and other risks and uncertainties set forth under Part I, Item 1A., Risk Factors, of this report, as well as other risks and uncertainties set forth from time to time in the reports the Company fileswe file with the SEC.


ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rates. Our net income (loss) is affected by fluctuations in interest rates (e.g. interest expense on variable rate debt and interest income earned on short-term investments). The Company’sCompany's policy is to manage interest rate risk through a combination of fixed and variable rate debt. The following table summarizes information related to the Company’sCompany's interest rate market risk at December 31 (in millions):

   2015   2014 

  Variable rate debt

    

  Carrying value of variable rate debt at December 31

   $2,345     $2,495 (a) 
  Impact of 100 basis point increase on projected interest expense for the following year   23      24   

  Fixed rate debt

    

  Carrying value of fixed rate debt at December 31

   8,552      8,771 (a) 

  Fair value of fixed rate debt at December 31

   9,022      9,971   

  Impact of 100 basis point increase in market rates on fair value

   (369)     (385)  

(a) 2014 amount differs from the amount reported in the Company’s Form 10-K for the fiscal year ended December 31, 2014 due to the adoption of an accounting standard update in 2015. See Note 1(t) to the financial statements included in Part II, Item 8 of this report for additional information.

 2018 2017
Variable rate debt   
Carrying value of variable rate debt at December 31$3,500
 $3,342
Impact of 100 basis point increase on projected interest expense for the following year35
 33
Fixed rate debt   
Carrying value of fixed rate debt at December 319,945
 9,926
Fair value of fixed rate debt at December 319,901
 10,349
Impact of 100 basis point increase in market rates on fair value(378) (403)
A change in market interest rates would also impact interest income earned on our cash, cash equivalents and short-term investments. Assuming our cash, cash equivalents and short-term investments remain at their average 20152018 levels, a 100 basis point increase in interest rates would result in a corresponding increase in the Company’sCompany's interest income of approximately $54$45 million during 2016.

2019.

Commodity Price Risk (Aircraft Fuel). The price level of aircraft fuel can significantly affect the Company’sCompany's operations, results of operations, financial position and liquidity.

To protect against increases

Our operational and financial results can be significantly impacted by changes in the pricesprice and availability of aircraft fuel. To provide adequate supplies of fuel, the Company may hedge a portion of its future fuel requirements. The Company may restructure hedges in responseroutinely enters into purchase contracts that are customarily indexed to market conditions prior to their original settlement dates which may result in changes in hedge coverage levelsprices for aircraft fuel, and the potential recognition of gains or losses on such hedge contracts. The Company generally uses financialhas some ability to cover short-term fuel supply and infrastructure disruptions at some major demand locations. The Company's current strategy is to not enter into transactions to hedge instruments including fixed-price swaps, purchased call options, and commonly used combinations using put and call options including collars (a sold put option combined with a purchased call option), three-ways (a collar with a higher strike sold call option) and four-way collars (a collar with a higher strike sold call option and a lower strike purchased put option). These hedge instruments are generallyfuel price volatility, although the Company regularly reviews its policy based on aircraft fuel or closely related commodities including diesel fuel and crude oil.

50

If the prices of the underlying commodity drop and stay below specified floor prices in some hedge contracts such as fixed-price swaps and collars, the Company may incur losses. However, the negative impact of these losses would be significantly outweighed by the benefit of lower aircraft fuel cost since the Company typically hedges only a portion of its future fuel requirements. In addition, the Company continually monitors its portfolio of hedge contracts and may take actions to curtail or limit its losses from such hedge contracts if market conditions change.

Ifand other factors. The Company's 2019 forecasted fuel prices decline significantly from the levels existing at the time we enter into a hedge contract, we may be required to post collateral (margin) with our hedge counterparties. The Company frequently monitors this margin riskconsumption is presently approximately 4.3 billion gallons, and assesses the potential of depositing additional collateral with each of its counterparties. At times, when the fair market value of the Company’s hedge contracts is net positive to the Company, it is exposed to the event of non-performance by the counterparty to the hedge contract. The Company periodically monitors the credit worthiness of its counterparties, requires its counterparties to post collateral above certain thresholds and generally limits its exposure to any single counterparty.

The Company may adjust its hedging program based on changes in market conditions. The following table summarizes information related to the Company’s cost of fuel and hedging (in millions, except percentages):

Fuel Costs

In 2015, fuel cost as a percent of total operating expenses (a)

23%

Impact of $1 increase in price per barrel of aircraft fuel on annual fuel expense (b)

 $94   

Fuel Hedges

Liability fair value at December 31, 2015 (c)

 $124   

Increase in fuel hedge liability that would result from a concurrent 10% decrease in forward prices of the underlying commodities of fuel hedges (d)

 $13   

Collateral deposited with fuel hedge counterparties as of December 31, 2015

 $26   

Additional collateral the Company would be required to deposit with fuel hedge counterparties upon a concurrent 10% decrease in forward prices of the underlying commodities of fuel hedges (e)

 $5   

(a) Includes related taxes and fuel hedge impacts and excludes special charges. In 2014, the Company’s fuel cost was 32% of total operating expenses.

(b) Based on 2016 projected fuel consumption. Does not include the impact of fuel hedges.

(c) As of December 31, 2014, the net fair value of the Company’s fuel hedges wasthis forecast, a liability of $717 million.

(d) Based on fuel hedge positions at December 31, 2015.

(e) Assumes instantaneousone-dollar change in prices.

Asthe price of December 31, 2015,a barrel of crude oil would change the Company had hedgedCompany's annual fuel expense by approximately 17% of its projected fuel requirements (652 million gallons) for 2016, with commonly used financial hedge instruments based on aircraft fuel or crude oil. As of December 31, 2015, the Company had fuel hedges expiring through December 2016.

51

The fuel hedge portfolio is comprised of many individual hedge contracts (primarily option contracts) on multiple underlying commodities and entered into at various points in time, resulting in a wide range of strike prices with several hedge counterparties. The table below provides a view of the economic impact of the hedge portfolio on the Company’s 2016 fuel costs given significant moves (up to +/-30%) in market fuel prices from December 31, 2015 (in millions).

Year ending December 31, 2016
    
Change in market
fuel prices (a)		 (Increase) decrease
to unhedged fuel
cost (b)		 Hedge gain (loss) (c) Net (increase)
decrease to fuel cost

30%

 $(1,351) $95 $(1,256)

20%

 (900) 71 (829)

10%

 (450) 34 (416)

(10)%

 450 (13) 437

(20)%

 900 (25) 875

(30)%

 1,351 (37) 1,314

(a) Projected using equal shifts in spot and forward prices for aircraft fuel and crude oil underlying hedge contracts from December 31, 2015 levels.

(b) Projection based on a price of $1.14 per gallon, excluding taxes and other delivery costs and estimated consumption of 3.95 billion gallons for the year ending December 31, 2016.

(c) Change in projected cash gain/(loss) on existing fuel derivatives as of December 31, 2015. Includes all fuel derivatives whether or not the fuel derivatives are designated for hedge accounting.

$104 million.

Foreign Currency.The Company generates revenues and incurs expenses in numerous foreign currencies. Changes in foreign currency exchange rates impact the Company’sCompany's results of operations through changes in the dollar value of foreign currency-denominated operating revenues and expenses. Some of the Company’sCompany's more significant foreign currency exposures include the Canadian dollar, Chinese renminbi, European euro, British pound and Japanese yen. At times, the Company uses derivative financial instruments, such as options, collars and forward contracts,The Company's current strategy is to not enter into transactions to hedge its exposure to foreign currency. At December 31, 2015,currency sales, although the Company had foreign currency derivative contracts in place to hedge European euro denominated sales. The notional amount of the hedges equates to 18% of the Company’s projected European euro denominated net cash inflows for 2016. Net cash relates primarily to passenger ticket sales inflows partially offset by expenses paid in local currencies. At December 31, 2015, the fair value of the Company’s foreign currency derivatives was not material to the Company’s financial statements.regularly reviews its policy based on market conditions and other factors.

The result of a uniform 10 percent1% strengthening in the value of the U.S. dollar from December 31, 20152018 levels relative to each of the currencies in which the Company has foreign currency exposure would result in a decrease in pre-tax income of approximately $236$24 million for the year ending December 31, 2016.2019. This sensitivity analysis was prepared based upon projected 20162019 foreign currency-denominated revenues and expenses as of December 31, 2015 and reflects the potential benefit of the European euro hedges mentioned above.

52

2018.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The


To the Stockholders and the Board of Directors and Stockholders

of United Continental Holdings, Inc.


Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of United Continental Holdings, Inc. (the “Company”"Company") as of December 31, 20152018 and 2014, and2017, the related statements of consolidated operations, comprehensive income (loss), cash flows, and stockholders’stockholders' equity for each of the three years in the period ended December 31, 2015. Our audits also included2018, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the "consolidated financial statements"). TheseIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the financial statement schedule are the responsibilityresults of its operations and its cash flows for each of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.


We conducted our auditsalso have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2019, expressed an unqualified opinion thereon.

Adoption of ASU No. 2014-09

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2018, 2017 and 2016 due to the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).
Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ Ernst & Young LLP

We have served as the Company's auditor since 2009.



Chicago, Illinois
February 28, 2019








REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholder and the Board of Directors of United Airlines, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of United Airlines, Inc. (the "Company") as of December 31, 2018 and 2017, and the related statements of consolidated operations, comprehensive income (loss), cash flows, and stockholder's equity, for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 20152018 and 2014,2017, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015,2018, in conformity with U.S. generally accepted accounting principles. Also,

Adoption of ASU No. 2014-09

As discussed in our opinion, the related financial statement schedule, when considered in relationNote 1 to the basic consolidated financial statements, taken as a whole, presents fairly,the Company changed its method of accounting for revenue in all material respects,2018, 2017 and 2016 due to the information set forth therein.

We also have audited, in accordanceadoption of ASU No. 2014-09, Revenue from Contracts with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 18, 2016, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Chicago, Illinois

February 18, 2016

53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCustomers (Topic 606).

The Board of Directors and Stockholder of

United Airlines, Inc.

We have audited the accompanying consolidated balance sheets of United Airlines, Inc. (the “Company”) as of December 31, 2015 and 2014, and the related statements of consolidated operations, comprehensive income (loss), cash flows, and stockholder’s equity


Basis for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a). Opinion

These financial statements and financial statement schedule are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on thesethe Company's financial statements and financial statement schedule based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Wemisstatement, whether due to error or fraud. The Company is not required to have, nor were notwe engaged to perform an audit of the Company’sCompany's internal control over financial reporting. OurAs part of our audits included considerationwe are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’sCompany's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.



/s/ Ernst & Young LLP


We have served as the Company's auditor since 2009.


Chicago, Illinois

February 18, 2016

54

28, 2019





UNITED CONTINENTAL HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS

(In millions, except per share amounts)
 Year Ended December 31,
 2018 2017 (a) 2016 (a)
Operating revenue:     
Passenger revenue$37,706
 $34,460
 $33,429
Cargo1,237
 1,114
 934
Other operating revenue2,360
 2,210
 2,195
Total operating revenue41,303
 37,784
 36,558
Operating expense:     
Salaries and related costs11,458
 10,941
 10,176
Aircraft fuel9,307
 6,913
 5,813
Regional capacity purchase2,601
 2,232
 2,197
Landing fees and other rent2,359
 2,240
 2,165
Depreciation and amortization2,240
 2,149
 1,977
Aircraft maintenance materials and outside repairs1,767
 1,856
 1,749
Distribution expenses1,558
 1,435
 1,395
Aircraft rent433
 621
 680
Special charges487
 176
 745
Other operating expenses5,801
 5,550
 5,317
Total operating expense38,011
 34,113
 32,214
Operating income3,292
 3,671
 4,344
      
Nonoperating income (expense):     
Interest expense(729) (671) (674)
Interest capitalized70
 84
 72
Interest income101
 57
 42
Miscellaneous, net(76) (101) (11)
Total nonoperating expense, net(634) (631) (571)
Income before income taxes2,658
 3,040
 3,773
Income tax expense529
 896
 1,539
Net income$2,129
 $2,144
 $2,234
Earnings per share, basic$7.73
 $7.08
 $6.77
Earnings per share, diluted$7.70
 $7.06
 $6.76

(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

   Year Ended December 31, 
           2015                   2014                   2013         

Operating revenue:

      

Passenger—Mainline

   $26,333      $26,785      $25,997   

Passenger—Regional

   6,452      6,977      7,125   
  

 

 

   

 

 

   

 

 

 

Total passenger revenue

   32,785      33,762      33,122   

Cargo

   937      938      882   

Other operating revenue

   4,142      4,201      4,275   
  

 

 

   

 

 

   

 

 

 
   37,864      38,901      38,279   
  

 

 

   

 

 

   

 

 

 
Operating expense:      

Salaries and related costs

   9,713      8,935      8,625   

Aircraft fuel

   7,522      11,675      12,345   

Regional capacity purchase

   2,290      2,344      2,419   

Landing fees and other rent

   2,203      2,274      2,090   

Depreciation and amortization

   1,819      1,679      1,689   

Aircraft maintenance materials and outside repairs

   1,651      1,779      1,821   

Distribution expenses

   1,342      1,373      1,390   

Aircraft rent

   754      883      936   

Special charges (Note 16)

   326      443      520   

Other operating expenses

   5,078      5,143      5,195   
  

 

 

   

 

 

   

 

 

 
   32,698      36,528      37,030   
  

 

 

   

 

 

   

 

 

 
Operating income   5,166      2,373      1,249   
      
Nonoperating income (expense):      

Interest expense

   (669)     (735)     (783)  

Interest capitalized

   49      52      49   

Interest income

   25      22      21   

Miscellaneous, net (Note 16)

   (352)     (584)     3   
  

 

 

   

 

 

   

 

 

 
   (947)     (1,245)     (710)  
  

 

 

   

 

 

   

 

 

 
Income before income taxes   4,219      1,128      539   

Income tax benefit

   (3,121)     (4)     (32)  
  

 

 

   

 

 

   

 

 

 

Net income

   $7,340      $1,132      $571   
  

 

 

   

 

 

   

 

 

 

Earnings per share, basic

   $19.52      $3.05      $1.64   
  

 

 

   

 

 

   

 

 

 

Earnings per share, diluted

   $19.47      $2.93      $1.53   
  

 

 

   

 

 

   

 

 

 

Revenue from Contracts with Customers (Topic 606) andAccounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.

55



UNITED CONTINENTAL HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(In millions)


 Year Ended December 31,
 2018 2017 (a) 2016 (a)
      
Net income$2,129
 $2,144
 $2,234
      
Other comprehensive income (loss), net change related to:     
Employee benefit plans, net of taxes342
 (195) (313)
Fuel derivative financial instruments, net of taxes—
 1
 316
Investments and other, net of taxes(4) (6) (1)
Total other comprehensive income (loss), net338
 (200) 2
Total comprehensive income, net$2,467
 $1,944
 $2,236

(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

   Year Ended December 31, 
           2015                   2014                   2013         

Net income

   $7,340      $1,132      $571   
      

Other comprehensive income (loss), net change related to:

      

Employee benefit plans

   70      (1,171)     1,626   

Fuel derivative financial instruments

   182      (510)     21   

Investments and other

   (4)     (6)     7   
  

 

 

   

 

 

   

 

 

 
   248      (1,687)     1,654   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss), net

   $7,588      $(555)     $2,225   
  

 

 

   

 

 

   

 

 

 

Revenue from Contracts with Customers (Topic 606). See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.

56



UNITED CONTINENTAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except shares)

   At December 31, 
  

 

 

  

 

 

 
ASSETS          2015                  2014         

Current assets:

   

Cash and cash equivalents

   $3,006     $2,002   

Short-term investments

   2,190     2,382   

Receivables, less allowance for doubtful accounts (2015—$18; 2014—$22)

   1,128     1,146   

Fuel hedge collateral deposits

   26     577   

Aircraft fuel, spare parts and supplies, less obsolescence allowance

(2015—$235; 2014—$169)

   738     666   

Prepaid expenses and other

   740     774   
  

 

 

  

 

 

 
   7,828     7,547   
  

 

 

  

 

 

 

Operating property and equipment:

   

Owned—

   

Flight equipment

   23,728     21,107   

Other property and equipment

   4,542     4,016   
  

 

 

  

 

 

 
   28,270     25,123   

Less—Accumulated depreciation and amortization

   (8,339)    (7,079)  
  

 

 

  

 

 

 
   19,931     18,044   
  

 

 

  

 

 

 
   

Purchase deposits for flight equipment

   788     706   
   

Capital leases—

   

Flight equipment

   1,527     1,272   

Other property and equipment

   332     331   
  

 

 

  

 

 

 
   1,859     1,603   

Less—Accumulated amortization

   (998)    (886)  
  

 

 

  

 

 

 
   861     717   
  

 

 

  

 

 

 
   21,580     19,467   
  

 

 

  

 

 

 

Other assets:

   

Goodwill

   4,523     4,523   

Intangibles, less accumulated amortization (2015—$1,144; 2014—$1,049)

   4,136     4,284   

Deferred income taxes

   2,037     —   

Restricted cash

   204     276   

Other, net

   553     498   
  

 

 

  

 

 

 
   11,453     9,581   
  

 

 

  

 

 

 
   $40,861     $36,595   
  

 

 

  

 

 

 

 At December 31,
ASSETS2018 2017 (a)
Current assets:   
Cash and cash equivalents$1,694
 $1,482
Short-term investments2,256
 2,316
Receivables, less allowance for doubtful accounts (2018—$8; 2017—$7)1,346
 1,340
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2018—$412; 2017—$354)985
 924
Prepaid expenses and other913
 1,071
Total current assets7,194
 7,133
Operating property and equipment:   
Owned—   
Flight equipment31,607
 28,692
Other property and equipment7,919
 6,946
Total owned property and equipment39,526
 35,638
Less—Accumulated depreciation and amortization(12,760) (11,159)
Total owned property and equipment, net26,766
 24,479
    
Purchase deposits for flight equipment1,177
 1,344
    
Capital leases—   
Flight equipment1,029
 1,151
Other property and equipment11
 11
Total capital leases1,040
 1,162
Less—Accumulated amortization(654) (777)
Total capital leases, net386
 385
Total operating property and equipment, net28,329
 26,208
Other assets:   
Goodwill4,523
 4,523
Intangibles, less accumulated amortization (2018—$1,380; 2017—$1,313)3,159
 3,539
Restricted cash105
 91
Notes receivable, net516
 46
Investments in affiliates and other, net966
 806
Total other assets9,269
 9,005
Total assets$44,792
 $42,346

(continued on next page)

57


UNITED CONTINENTAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except shares)
 At December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY2018 2017 (a)
Current liabilities:   
Advance ticket sales$4,381
 $3,940
Frequent flyer deferred revenue2,286
 2,192
Accounts payable2,363
 2,196
Accrued salaries and benefits2,184
 2,166
Current maturities of long-term debt1,230
 1,565
Current maturities of capital leases149
 128
Other619
 576
Total current liabilities13,212
 12,763
    
Long-term debt12,215
 11,703
Long-term obligations under capital leases1,134
 996
    
Other liabilities and deferred credits:   
Frequent flyer deferred revenue2,719
 2,591
Postretirement benefit liability1,295
 1,602
Pension liability1,576
 1,921
Deferred income taxes814
 204
Other1,832
 1,832
Total other liabilities and deferred credits8,236
 8,150
Commitments and contingencies
 
Stockholders' equity:   
Preferred stock—
 —
Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 269,914,769 and 286,973,195 shares at December 31, 2018 and 2017, respectively3
 3
Additional capital invested6,120
 6,098
Retained earnings6,668
 4,549
Stock held in treasury, at cost(1,993) (769)
Accumulated other comprehensive loss(803) (1,147)
Total stockholders' equity9,995
 8,734
Total liabilities and stockholders' equity$44,792
 $42,346

(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

   At December 31, 
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY  2015   2014 

Current liabilities:

    

Advance ticket sales

   $3,753     $3,701   

Frequent flyer deferred revenue

   2,117      2,058   

Accounts payable

   1,869      1,882   

Accrued salaries and benefits

   2,350      1,818   

Current maturities of long-term debt

   1,224      1,313   

Current maturities of capital leases

   135      110   

Fuel derivative instruments

   124      694   

Other

   842      932   
  

 

 

   

 

 

 
   12,414      12,508   
  

 

 

   

 

 

 
    

Long-term debt

   9,673      9,953   

Long-term obligations under capital leases

   727      571   
    
Other liabilities and deferred credits:    

Frequent flyer deferred revenue

   2,826      2,879   

Postretirement benefit liability

   1,882      1,933   

Pension liability

   1,488      2,226   

Advanced purchase of miles

   1,010      1,217   

Deferred income taxes

   —      1,000   

Lease fair value adjustment, net

   359      466   

Other

   1,516      1,446   
  

 

 

   

 

 

 
   9,081      11,167   
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ equity:

    

Preferred stock

   —      —   

Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 364,609,108 and 374,525,916 shares at December 31, 2015 and 2014, respectively

   4      4   

Additional capital invested

   7,946      7,721   

Retained earnings (accumulated deficit)

   3,457      (3,883)  

Stock held in treasury, at cost

   (1,610)     (367)  

Accumulated other comprehensive loss

   (831)     (1,079)  
  

 

 

   

 

 

 
   8,966      2,396   
  

 

 

   

 

 

 
   $40,861     $36,595   
  

 

 

   

 

 

 

Revenue from Contracts with Customers (Topic 606). See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.

58



UNITED CONTINENTAL HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED CASH FLOWS

(In millions)
 Year Ended December 31,
 2018 2017 (a) 2016 (a)
Operating Activities:     
Net income$2,129
 $2,144
 $2,234
Adjustments to reconcile net income to net cash provided by operating activities -     
Deferred income taxes515
 973
 1,631
Depreciation and amortization2,240
 2,149
 1,977
Special charges, non-cash portion416
 35
 391
Other operating activities170
 141
 109
Changes in operating assets and liabilities -     
Increase in receivables(29) (183) (16)
(Increase) decrease in other assets29
 (533) (296)
Increase (decrease) in advance ticket sales441
 145
 (28)
Increase (decrease) in frequent flyer deferred revenue222
 (107) (55)
Increase in accounts payable130
 66
 239
Decrease in advanced purchase of miles—
 (942) (206)
Decrease in other liabilities(82) (475) (438)
Net cash provided by operating activities6,181
 3,413
 5,542
Investing Activities:     
Capital expenditures(4,177) (3,998) (3,223)
Purchases of short-term and other investments(2,552) (3,241) (2,768)
Proceeds from sale of short-term and other investments2,616
 3,177
 2,712
Loans made to others(466) (30) (56)
Investment in affiliates(139) (2) (14)
Other, net155
 164
 111
Net cash used in investing activities(4,563) (3,930) (3,238)
Financing Activities:     
Proceeds from issuance of long-term debt and airport construction financing1,740
 2,765
 808
Payments of long-term debt(1,727) (901) (1,215)
Repurchases of common stock(1,235) (1,844) (2,614)
Principal payments under capital leases(134) (124) (136)
Capitalized financing costs(37) (80) (64)
Other, net(17) (11) 8
Net cash used in financing activities(1,410) (195) (3,213)
Net increase (decrease) in cash, cash equivalents and restricted cash208
 (712) (909)
Cash, cash equivalents and restricted cash at beginning of year1,591
 2,303
 3,212
Cash, cash equivalents and restricted cash at end of year$1,799
 $1,591
 $2,303
      
Investing and Financing Activities Not Affecting Cash:     
Property and equipment acquired through the issuance of debt and capital leases$174
 $935
 $386
Debt associated with termination of a maintenance service agreement163
 —
 —
Investment in Republic Airways Holdings, Inc. received from bankruptcy claims—
 92
 —
Airport construction financing12
 42
 91
Operating lease conversions to capital lease52
 —
 12
      
Cash Paid During the Period for:     
Interest$651
 $571
 $584
Income taxes19
 20
 14
(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

   Year Ended December 31, 
           2015                   2014                   2013         

 Cash Flows from Operating Activities:

      

Net income

   $7,340      $1,132      $571   

Adjustments to reconcile net income to net cash provided by operating activities -

      

Deferred income taxes

   (3,177)     13      (14)  

Depreciation and amortization

   1,819      1,679      1,689   

Special charges, non-cash portion

   247      78      50   

Other operating activities

   115      (21)     18   

Changes in operating assets and liabilities -

      

(Increase) decrease in fuel hedge collateral

   551      (577)     —   

Unrealized (gain) loss on fuel derivatives

   (305)     436      (56)  

Decrease in other liabilities

   (198)     (238)     (201)  

Decrease in frequent flyer deferred revenue and advanced purchase of miles

   (200)     (88)     (415)  

(Increase) decrease in other assets

   (160)     (34)     164   

Decrease in accounts payable

   (77)     (251)     (265)  

Increase in advance ticket sales

   52      296      45   

(Increase) decrease in receivables

   (15)     209      (142)  
  

 

 

   

 

 

   

 

 

 

 Net cash provided by operating activities

   5,992      2,634      1,444   
  

 

 

   

 

 

   

 

 

 

 Cash Flows from Investing Activities:

      

Capital expenditures

   (2,747)     (2,005)     (2,164)  

Proceeds from sale of short-term and other investments

   2,707      3,112      2,827   

Purchases of short-term and other investments

   (2,517)     (3,569)     (2,947)  

Proceeds from sale of property and equipment

   86      94      152   

Other, net

   (22)     112      110   
  

 

 

   

 

 

   

 

 

 

 Net cash used in investing activities

   (2,493)     (2,256)     (2,022)  
  

 

 

   

 

 

   

 

 

 

 Cash Flows from Financing Activities:

      

Payments of long-term debt

   (2,178)     (2,503)     (2,185)  

Repurchases of common stock

   (1,233)     (312)     —   

Proceeds from issuance of long-term debt

   1,073      1,432      1,423  

Principal payments under capital leases

   (123)     (127)     (134)  

Capitalized financing costs

   (37)     (104)     (103)  

Proceeds from the exercise of stock options

   16      60      29   

Other

   (13)     (42)     (2)  
  

 

 

   

 

 

   

 

 

 

 Net cash used in financing activities

   (2,495)     (1,596)     (972)  
  

 

 

   

 

 

   

 

 

 

 Net increase (decrease) in cash and cash equivalents

   1,004      (1,218)     (1,550)  

 Cash and cash equivalents at beginning of year

   2,002      3,220      4,770   
  

 

 

   

 

 

   

 

 

 

 Cash and cash equivalents at end of year

   $3,006      $2,002      $3,220   
  

 

 

   

 

 

   

 

 

 

 Investing and Financing Activities Not Affecting Cash:

      

Property and equipment acquired through the issuance of debt

   $866      $1,114      $229   

Operating lease conversions to capital lease

   285      —      —   

Exchange of convertible notes for common stock

   202      260      240   

Airport construction financing

   17      14      40   

 Cash Paid (Refunded) During the Period for:

      

Interest (net of amounts capitalized)

   $660      $748      $752   

Income taxes

   15      (16)     (20)  

Revenue from Contracts with Customers (Topic 606). See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.

59


UNITED CONTINENTAL HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’STOCKHOLDERS' EQUITY

(In millions)
 
Common
Stock
 
Additional
Capital Invested
 Treasury Stock Retained Earnings (Accumulated Deficit) 
Accumulated
Other Comprehensive Income (Loss)
 Total
 Shares Amount     
Balance at December 31, 2015364.6
 $4
 $7,946
 $(1,610) $3,457
 $(831) $8,966
Net income (a)—
 —
 —
 —
 2,234
 —
 2,234
Other comprehensive income—
 —
 —
 —
 —
 2
 2
Stock-settled share-based compensation—
 —
 32
 —
 —
 —
 32
Proceeds from exercise of stock options0.3
 —
 6
 —
 —
 —
 6
Repurchases of common stock(50.3) —
 —
 (2,607) —
 —
 (2,607)
Treasury stock retired—
 (1) (1,415) 3,709
 (2,293) —
 —
Other (a)—
 —
 —
 (3) (56) —
 (59)
Balance at December 31, 2016314.6
 3
 6,569
 (511) 3,342
 (829) 8,574
Net income (a)—
 —
 —
 —
 2,144
 —
 2,144
Other comprehensive loss—
 —
 —
 —
 —
 (200) (200)
Stock-settled share-based compensation—
 —
 56
 —
 —
 —
 56
Proceeds from exercise of stock options—
 —
 2
 —
 —
 —
 2
Repurchases of common stock(27.8) —
 —
 (1,844) —
 —
 (1,844)
Treasury stock retired—
 —
 (508) 1,576
 (1,068) —
 —
Net treasury stock issued for share-based awards0.2
 —
 (21) 10
 (1) —
 (12)
Excess tax benefits from share-based awards—
 —
 —
 —
 14
 —
 14
Reclassification of stranded tax effects—
 —
 —
 —
 118
 (118) —
Balance at December 31, 2017287.0
 3
 6,098
 (769) 4,549
 (1,147) 8,734
      Net income—
 —
 —
 —
 2,129
 —
 2,129
Other comprehensive loss—
 —
 —
 —
 —
 338
 338
Stock-settled share-based compensation—
 —
 60
 —
 —
 —
 60
Repurchases of common stock(17.5) —
 —
 (1,250) —
 —
 (1,250)
Net treasury stock issued for share-based awards0.4
 —
 (38) 26
 (4) —
 (16)
Adoption of accounting standard related to equity investments—
 —
 —
 —
 (6) 6
 —
Balance at December 31, 2018269.9
 $3
 $6,120
 $(1,993) $6,668
 $(803) $9,995

(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

   Common
Stock		   Additional
Capital
   Invested  		   Treasury
Stock		   Retained
Earnings
(Accumulated
Deficit)		   Accumulated
Other
Comprehensive
Income (Loss)		   Total 
   Shares   Amount           

 Balance at December 31, 2012

   332      $3      $7,145      $(35)     $(5,586)     $(1,046)     $481   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   —      —      —      —      571      —      571   

Other comprehensive income

   —      —      —      —      —      1,654      1,654   

Convertible debt redemption

   28      1     240      —      —      —      241   

Share-based compensation

   —      —      11      —      —      —      11   

Proceeds from exercise of stock options

   2      —      29      —      —      —      29   

Other

   —      —      —      (3)     —      —      (3)  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Balance at December 31, 2013

   362      4      7,425      (38)     (5,015)     608      2,984   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   —      —      —      —      1,132      —      1,132   

Other comprehensive loss

   —      —      —      —      —      (1,687)     (1,687)  

Convertible debt redemption

   17      —      260      —      —      —      260   

Repurchase of convertible debt

   —      —      (34)     —      —      —      (34)  

Share-based compensation

   —      —      10      —      —      —      10   

Proceeds from exercise of stock options

   2      —      60      —      —      —      60   

Repurchases of common stock

   (6)     —      —      (320)     —      —      (320)  

Other

   —      —      —      (9)     —      —      (9)  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Balance at December 31, 2014

   375      4      7,721      (367)     (3,883)     (1,079)     2,396   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   —      —      —      —      7,340      —      7,340   

Other comprehensive income

   —      —      —      —      —   ��  248      248   

Convertible debt redemptions

   11     —      202      —      —      —      202   

Share-based compensation

   —      —      7      —      —      —      7   

Proceeds from exercise of stock options

   —      —      16      —      —      —      16   

Repurchases of common stock

   (21)     —      —      (1,232)     —      —      (1,232)  

Other

   —      —      —      (11)     —      —      (11)  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Balance at December 31, 2015

   365      $4      $7,946      $(1,610)     $3,457      $(831)     $8,966   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenue from Contracts with Customers (Topic 606). See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.

60



UNITED AIRLINES, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS

(In millions)
 Year Ended December 31,
 2018 2017 (a) 2016 (a)
Operating revenue:     
Passenger revenue$37,706
 $34,460
 $33,429
Cargo1,237
 1,114
 934
Other operating revenue2,360
 2,210
 2,195
Total operating revenue41,303
 37,784
 36,558
Operating expense:     
Salaries and related costs11,458
 10,941
 10,176
Aircraft fuel9,307
 6,913
 5,813
Regional capacity purchase2,601
 2,232
 2,197
Landing fees and other rent2,359
 2,240
 2,165
Depreciation and amortization2,240
 2,149
 1,977
Aircraft maintenance materials and outside repairs1,767
 1,856
 1,749
Distribution expenses1,558
 1,435
 1,395
Aircraft rent433
 621
 680
Special charges487
 176
 745
Other operating expenses5,799
 5,548
 5,315
Total operating expense38,009
 34,111
 32,212
Operating income3,294
 3,673
 4,346
      
Nonoperating income (expense):     
Interest expense(729) (671) (674)
Interest capitalized70
 84
 72
Interest income101
 57
 42
Miscellaneous, net(76) (101) (11)
Total nonoperating expense, net(634) (631) (571)
Income before income taxes2,660
 3,042
 3,775
Income tax expense529
 879
 1,541
Net income$2,131
 $2,163
 $2,234

(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

   Year Ended December 31, 
   2015   2014   2013 

Operating revenue:

      

Passenger—Mainline

   $26,333      $26,785      $25,997   

Passenger—Regional

   6,452      6,977      7,125   
  

 

 

   

 

 

   

 

 

 

Total passenger revenue

   32,785      33,762      33,122   

Cargo

   937      938      882   

Other operating revenue

   4,142      4,201      4,283   
  

 

 

   

 

 

   

 

 

 
   37,864      38,901      38,287   
  

 

 

   

 

 

   

 

 

 

Operating expense:

      

Salaries and related costs

   9,713      8,935      8,625   

Aircraft fuel

   7,522      11,675      12,345   

Regional capacity purchase

   2,290      2,344      2,419   

Landing fees and other rent

   2,203      2,274      2,090   

Depreciation and amortization

   1,819      1,679      1,689   

Aircraft maintenance materials and outside repairs

   1,651      1,779      1,821   

Distribution expenses

   1,342      1,373      1,390   

Aircraft rent

   754      883      936   

Special charges (Note 16)

   326      443      520   

Other operating expenses

   5,076      5,139      5,193   
  

 

 

   

 

 

   

 

 

 
   32,696      36,524      37,028   
  

 

 

   

 

 

   

 

 

 

Operating income

   5,168      2,377      1,259   
  

 

 

   

 

 

   

 

 

 
      

Nonoperating income (expense):

      

Interest expense

   (670)     (742)     (781)  

Interest capitalized

   49      52      49   

Interest income

   25      22      21   

Miscellaneous, net (Note 16)

   (351)     (599)     89   
  

 

 

   

 

 

   

 

 

 
   (947)     (1,267)     (622)  
  

 

 

   

 

 

   

 

 

 

Income before income taxes

   4,221      1,110      637   

Income tax benefit

   (3,080)     (4)     (17)  
  

 

 

   

 

 

   

 

 

 

Net income

   $7,301      $1,114      $654   
  

 

 

   

 

 

   

 

 

 

Revenue from Contracts with Customers (Topic 606) andAccounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.

61



UNITED AIRLINES, INC.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(In millions)
 Year Ended December 31,
 2018 2017 (a) 2016 (a)
      
Net income$2,131
 $2,163
 $2,234
      
Other comprehensive income (loss), net change related to:     
Employee benefit plans, net of taxes342
 (195) (313)
Fuel derivative financial instruments, net of taxes—
 1
 316
Investments and other, net of taxes(4) (6) (1)
Total other comprehensive income (loss), net338
 (200) 2
Total comprehensive income, net$2,469
 $1,963
 $2,236

(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

   Year Ended December 31, 
   2015   2014   2013 

Net income

   $7,301      $1,114      $654   
      

Other comprehensive income (loss), net change related to:

      

Employee benefit plans

   70      (1,171)     1,626   

Fuel derivative financial instruments

   182      (510)     21   

Investments and other

   (4)     (6)     8   

Other

   —      —      6   
  

 

 

   

 

 

   

 

 

 
   248      (1,687)     1,661   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss), net

   $7,549      $(573)     $2,315   
  

 

 

   

 

 

   

 

 

 

Revenue from Contracts with Customers (Topic 606). See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.

62



UNITED AIRLINES, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except shares)

   At December 31, 
ASSETS  2015   2014 

Current assets:

    

Cash and cash equivalents

   $3,000      $1,996   

Short-term investments

   2,190      2,382   

Receivables, less allowance for doubtful accounts (2015—$18; 2014—$22)

   1,128      1,146   

Fuel hedge collateral deposits

   26      577   

Aircraft fuel, spare parts and supplies, less obsolescence allowance (2015—$235; 2014—$169)

   738      666   

Prepaid expenses and other

   787      823   
  

 

 

   

 

 

 
   7,869      7,590   
  

 

 

   

 

 

 

Operating property and equipment:

    

Owned—

    

Flight equipment

   23,728      21,107   

Other property and equipment

   4,542      4,016   
  

 

 

   

 

 

 
   28,270      25,123   

Less—Accumulated depreciation and amortization

   (8,339)     (7,079)  
  

 

 

   

 

 

 
   19,931      18,044   
  

 

 

   

 

 

 
    

Purchase deposits for flight equipment

   788      706   
    

Capital leases—

    

Flight equipment

   1,527      1,272   

Other property and equipment

   332      331   
  

 

 

   

 

 

 
   1,859      1,603   

Less—Accumulated amortization

   (998)     (886)  
  

 

 

   

 

 

 
   861      717   
  

 

 

   

 

 

 
   21,580      19,467   
  

 

 

   

 

 

 

Other assets:

    

Goodwill

   4,523      4,523   

Intangibles, less accumulated amortization (2015—$1,144; 2014—$1,049)

   4,136      4,284   

Deferred income taxes

   1,995      —   

Restricted cash

   204      276   

Other, net

   554      1,210   
  

 

 

   

 

 

 
   11,412      10,293   
  

 

 

   

 

 

 
   $40,861      $37,350   
  

 

 

   

 

 

 

 At December 31,
ASSETS2018 2017 (a)
Current assets:   
Cash and cash equivalents$1,688
 $1,476
Short-term investments2,256
 2,316
Receivables, less allowance for doubtful accounts (2018—$8; 2017—$7)1,346
 1,340
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2018—$412; 2017—$354)985
 924
Prepaid expenses and other913
 1,071
Total current assets7,188
 7,127
Operating property and equipment:   
Owned—   
Flight equipment31,607
 28,692
Other property and equipment7,919
 6,946
Total owned property and equipment39,526
 35,638
Less—Accumulated depreciation and amortization(12,760) (11,159)
Total owned property and equipment, net26,766
 24,479
    
Purchase deposits for flight equipment1,177
 1,344
    
Capital leases—   
Flight equipment1,029
 1,151
Other property and equipment11
 11
Total capital leases1,040
 1,162
Less—Accumulated amortization(654) (777)
Total capital leases, net386
 385
Total operating property and equipment, net28,329
 26,208
Other assets:   
Goodwill4,523
 4,523
Intangibles, less accumulated amortization (2018—$1,380; 2017—$1,313)3,159
 3,539
Restricted cash105
 91
Notes receivable, net516
 46
Investments in affiliates and other, net966
 806
Total other assets9,269
 9,005
Total assets$44,786
 $42,340

(continued on next page)

63



UNITED AIRLINES, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except shares)
 At December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY2018 2017 (a)
Current liabilities:   
Advance ticket sales$4,381
 $3,940
Frequent flyer deferred revenue2,286
 2,192
Accounts payable2,363
 2,196
Accrued salaries and benefits2,184
 2,166
Current maturities of long-term debt1,230
 1,565
Current maturities of capital leases149
 128
Other624
 581
Total current liabilities13,217
 12,768
    
Long-term debt12,215
 11,703
Long-term obligations under capital leases1,134
 996
    
Other liabilities and deferred credits:   
Frequent flyer deferred revenue2,719
 2,591
Postretirement benefit liability1,295
 1,602
Pension liability1,576
 1,921
Deferred income taxes842
 231
Other1,831
 1,832
Total other liabilities and deferred credits8,263
 8,177
Commitments and contingencies
 
Stockholder's equity:   
Common stock at par, $0.01 par value; authorized 1,000 shares; issued and outstanding 1,000 shares at December 31, 2018 and 2017—
 —
Additional capital invested598
 1,787
Retained earnings10,272
 8,146
Accumulated other comprehensive loss(803) (1,147)
Receivable from related parties(110) (90)
Total stockholder's equity9,957
 8,696
Total liabilities and stockholder's equity$44,786
 $42,340

(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

   At December 31, 
LIABILITIES AND STOCKHOLDER’S EQUITY  2015   2014 

Current liabilities:

    

Advance ticket sales

   $3,753      $3,701   

Frequent flyer deferred revenue

   2,117      2,058   

Accounts payable

   1,874      1,886   

Accrued salaries and benefits

   2,350      1,818   

Current maturities of long-term debt

   1,224      1,313   

Current maturities of capital leases

   135      110   

Fuel derivative instruments

   124      694   

Other

   840      933   
  

 

 

   

 

 

 
   12,417      12,513   
  

 

 

   

 

 

 
    

Long-term debt

   9,673      9,953   

Long-term obligations under capital leases

   727      571   
    

Other liabilities and deferred credits:

    

Frequent flyer deferred revenue

   2,826      2,879   

Postretirement benefit liability

   1,882      1,933   

Pension liability

   1,488      2,226   

Advanced purchase of miles

   1,010      1,217   

Deferred income taxes

   —      1,000   

Lease fair value adjustment, net

   359      466   

Other

   1,516      1,957   
  

 

 

   

 

 

 
   9,081      11,678   
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholder’s equity:

    

Common stock at par, $0.01 par value; authorized 1,000 shares; issued and outstanding 1,000 shares at December 31, 2015 and 2014

   —      —   

Additional capital invested

   6,138      7,347   

Retained earnings (accumulated deficit)

   3,673      (3,628)  

Accumulated other comprehensive loss

   (831)     (1,079)  

Receivable from related parties

   (17)     (5)  
  

 

 

   

 

 

 
   8,963      2,635   
  

 

 

   

 

 

 
   $40,861      $37,350   
  

 

 

   

 

 

 

Revenue from Contracts with Customers (Topic 606). See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.

64



UNITED AIRLINES, INC.

STATEMENTS OF CONSOLIDATED CASH FLOWS

(In millions)
 Year Ended December 31,
 2018 2017 (a) 2016 (a)
Operating Activities:     
Net income$2,131
 $2,163
 $2,234
Adjustments to reconcile net income to net cash provided by operating activities -     
Deferred income taxes515
 956
 1,633
Depreciation and amortization2,240
 2,149
 1,977
Special charges, non-cash portion416
 35
 391
Other operating activities170
 140
 109
Changes in operating assets and liabilities -     
Increase in receivables(29) (183) (16)
Increase in intercompany receivables(20) (15) (57)
(Increase) decrease in other assets29
 (533) (250)
Increase (decrease) in advance ticket sales441
 145
 (28)
Increase (decrease) in frequent flyer deferred revenue222
 (107) (55)
Increase in accounts payable130
 66
 239
Decrease in advanced purchase of miles—
 (942) (206)
Decrease in other liabilities(82) (475) (436)
Net cash provided by operating activities6,163
 3,399
 5,535
Investing Activities:     
Capital expenditures(4,177) (3,998) (3,223)
Purchases of short-term and other investments(2,552) (3,241) (2,768)
Proceeds from sale of short-term and other investments2,616
 3,177
 2,712
Loans made to others(466) (30) (56)
Investment in affiliates(139) (2) (14)
Other, net155
 164
 111
Net cash used in investing activities(4,563) (3,930) (3,238)
Financing Activities:     
Proceeds from issuance of long-term debt and airport construction financing1,740
 2,765
 808
Payments of long-term debt(1,727) (901) (1,215)
Dividend to UAL(1,235) (1,844) (2,614)
Principal payments under capital leases(134) (124) (136)
Capitalized financing costs(37) (80) (64)
Other, net1
 3
 15
Net cash used in financing activities(1,392) (181) (3,206)
Net increase (decrease) in cash, cash equivalents and restricted cash208
 (712) (909)
Cash, cash equivalents and restricted cash at beginning of year1,585
 2,297
 3,206
Cash, cash equivalents and restricted cash at end of year$1,793
 $1,585
 $2,297
      
Investing and Financing Activities Not Affecting Cash:     
Property and equipment acquired through the issuance of debt and capital leases$174
 $935
 $386
Debt associated with termination of a maintenance service agreement163
 —
 —
Investment in Republic Airways Holdings, Inc. received from bankruptcy claims—
 92
 —
Airport construction financing12
 42
 91
Operating lease conversions to capital lease52
 —
 12
      
Cash Paid During the Period for:     
Interest$651
 $571
 $584
Income taxes19
 20
 14
(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

   Year Ended December 31, 
       2015           2014           2013     

Cash Flows from Operating Activities:

      

Net income

   $7,301      $1,114      $654   

Adjustments to reconcile net income to net cash provided by operating activities -

      

Deferred income taxes

   (3,136)     13      1   

Depreciation and amortization

   1,819      1,679      1,689   

Special charges, non-cash portion

   247      78      50   

Other operating activities

   115      4      (41)  

Changes in operating assets and liabilities -

      

(Increase) decrease in fuel hedge collateral

   551      (577)     —   

Unrealized (gain) loss on fuel derivatives

   (305)     436      (56)  

Decrease in other liabilities

   (199)     (236)     (203)  

Decrease in frequent flyer deferred revenue and advanced purchase of miles

   (200)     (88)     (415)  

(Increase) decrease in other assets

   (160)     (34)     163   

Decrease in accounts payable

   (77)     (251)     (265)  

Increase in advance ticket sales

   52      296      45   

(Increase) decrease in receivables

   (15)     209      (142)  

Increase in intercompany receivables

   (12)     —      (5)  

Decrease in intercompany payables

   —      (118)     (34)  
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

   5,981      2,525      1,441   
  

 

 

   

 

 

   

 

 

 

Cash Flows from Investing Activities:

      

Capital expenditures

   (2,747)     (2,005)     (2,164)  

Proceeds from sale of short-term and other investments

   2,707      3,112      2,827   

Purchases of short-term and other investments

   (2,517)     (3,569)     (2,947)  

Proceeds from sale of property and equipment

   86      94      152   

Other, net

   (22)     112      109   
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

   (2,493)     (2,256)     (2,023)  
  

 

 

   

 

 

   

 

 

 

Cash Flows from Financing Activities:

      

Payments of long-term debt

   (2,178)     (2,503)     (2,185)  

Dividend to UAL

   (1,233)     (212)     —   

Proceeds from issuance of long-term debt

   1,073      1,432      1,423   

Principal payments under capital leases

   (123)     (127)     (134)  

Capitalized financing costs

   (37)     (104)     (103)  

UAL contributions related to stock plans

   16      60      29   

Other, net

   (2)     (33)     1   
  

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

   (2,484)     (1,487)     (969)  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

   1,004      (1,218)     (1,551)  

Cash and cash equivalents at beginning of year

   1,996      3,214      4,765   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of year

   $3,000      $1,996      $3,214   
  

 

 

   

 

 

   

 

 

 

Investing and Financing Activities Not Affecting Cash:

      

Property and equipment acquired through the issuance of debt

   $866      $1,114      $229   

Operating lease conversions to capital lease

   285      —      —   

Airport construction financing

   17      14      40   

Transfer of UAL subsidiaries to United

   —      186      —   

Exchange of convertible notes for common stock

   —      156      —   

Cash Paid (Refunded) During the Period for:

      

Interest (net of amounts capitalized)

   $660      $748      $752   

Income taxes

   15      (16)     (15)  

Revenue from Contracts with Customers (Topic 606). See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.



The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.

65


UNITED AIRLINES, INC.

STATEMENTS OF CONSOLIDATED STOCKHOLDER’SSTOCKHOLDER'S EQUITY

(In millions)
 
Additional
Capital
Invested
 
Retained Earnings (Accumulated
Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 Receivable from Related Parties, Net Total
Balance at December 31, 2015$6,138
 $3,673
 $(831) $(17) $8,963
Net income (a)—
 2,234
 —
 —
 2,234
Other comprehensive income—
 —
 2
 —
 2
Dividend to UAL(2,603) —
 —
 —
 (2,603)
Stock-settled share-based compensation32
 —
 —
 —
 32
UAL contribution related to stock plans6
 —
 —
 —
 6
Other (a)—
 (56) —
 (58) (114)
Balance at December 31, 20163,573
 5,851
 (829) (75) 8,520
Net income (a)—
 2,163
 —
 —
 2,163
Other comprehensive loss—
 —
 (200) —
 (200)
Dividend to UAL(1,844) —
 —
 —
 (1,844)
Stock-settled share-based compensation56
 —
 —
 —
 56
UAL contribution related to stock plans2
 —
 —
 —
 2
Excess tax benefits from share-based awards—
 14
 —
 —
 14
Reclassification of stranded tax effects—
 118
 (118) —
 —
Other—
 —
 —
 (15) (15)
Balance at December 31, 20171,787
 8,146
 (1,147) (90) 8,696
Net income—
 2,131
 —
 —
 2,131
Other comprehensive loss—
 —
 338
 —
 338
Dividend to UAL(1,249) —
 —
 —
 (1,249)
Stock-settled share-based compensation60
 —
 —
 —
 60
Other—
 (5) 6
 (20) (19)
Balance at December 31, 2018$598
 $10,272
 $(803) $(110) $9,957

(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

  Common
Stock		  Additional
Capital
Invested		  Retained
Earnings
(Accumulated
Deficit)		  Accumulated
Other
Comprehensive
Income (Loss)		  Receivable
from Related
Parties, Net		  Total 

Balance at December 31, 2012

  —     $7,611     $(5,397)    $(1,053)    $—     $1,161   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  —     —     654     —     —     654   

Other comprehensive income

  —     —     —     1,661     —     1,661   

Income taxes

  —     (68)    —     —     —     (68)  

Contribution of asset by UAL

   7     —     —     —     7   

Share-based compensation

  —     11     —     —     —     11   

UAL contribution related to stock plans

  —     29     —     —     —     29   

Reclassification of related party receivables to equity

  —     —     —     —     (232)    (232)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2013

  —     7,590     (4,743)    608     (232)    3,223   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  —     —     1,114     —     —     1,114   

Other comprehensive loss

  —     —     —     (1,687)    —     (1,687)  

Convertible debt redemption

  —     156     —     —     —     156   

Dividend and other capital distributions to UAL

  —     (469)    1     —     232     (236)  

Share-based compensation

  —     10     —     —     —     10   

UAL contribution related to stock plans

  —     60     —     —     —     60   

Other

  —     —     —     —     (5)    (5)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2014

  —     7,347     (3,628)    (1,079)    (5)    2,635   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  —     —     7,301     —     —     7,301   

Other comprehensive income

  —     —     —     248     —     248   

Dividend to UAL

  —     (1,232)    —     —     —     (1,232)  

Share-based compensation

  —     7     —     —     —     7   

UAL contribution related to stock plans

  —     16     —     —     —     16   

Other

  —     —     —     —     (12)    (12)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2015

  —     $6,138     $3,673     $(831)    $(17)    $8,963   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Revenue from Contracts with Customers (Topic 606). See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements.

66


UNITED CONTINENTAL HOLDINGS, INC.

UNITED AIRLINES, INC.

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Overview

United Continental Holdings, Inc. (together with its consolidated subsidiaries, “UAL”"UAL" or the “Company”"Company") is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”"United"). As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United’sUnited's operating revenues and operating expenses comprise nearly 100% of UAL’sUAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL’sUAL'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,”"we," "our," "us," and the “Company”"Company" in this report for disclosures that relate to all of UAL and United.

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

(a)
Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”("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)
Revenue Recognition—The Company records passenger ticket salespresents Passenger revenue, Cargo revenue and tickets sold by other airlines for useOther operating revenue on United as passengerits income statement. Passenger revenue is recognized when the transportation is provided or upon estimated breakage. The value of unused passenger ticketsand Cargo revenue is included in current liabilitiesrecognized when shipments arrive at their destination. Other operating revenue is recognized as Advance ticket sales. Tickets sold by other airlinesthe related performance obligations 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.satisfied.


Passenger tickets and related ancillary services sold by the Company for mainline and regional flights are purchased primarily via credit card transactions, with payments collected by the Company in advance of the performance of related services. The Company initially records ticket sales in its Advance ticket sales liability, deferring revenue recognition until the travel occurs. For travel that has more than one flight segment, the Company deems each segment as a separate performance obligation and recognizes revenue for each segment as travel occurs. Tickets sold by other airlines where the Company provides the transportation are recognized as passenger revenue at the estimated value to be billed to the other airline when travel is provided. 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 its billings and payables with other airlines based on historical experience.

The Company sells certain tickets with connecting flights with one or more segments operated by its other airline partners. For segments operated by its other airline partners, the Company has determined that it is acting as an agent on behalf of the other airlines as they are responsible for their portion of the contract (i.e. transportation of the passenger). The Company, as the agent, recognizes revenue within Other operating revenue at the time of the travel for the net amount representing commission to be retained by the Company for any segments flown by other airlines.

Refundable tickets expire after one year from the date of issuance. Non-refundable tickets generally expire on the date of the intended travel, unless the date is extended by notification from the customer on or before the intended travel date. The Company records breakage revenue on the travel date for its estimate of tickets that will expire unused. To determine breakage, the Company uses its historical experience with refundable and nonrefundable expired tickets and other facts, such as recent aging trends, program changes and modifications that could affect the ultimate expiration patterns of tickets. Fees charged in association with changes or extensions to non-refundable tickets are recorded as other revenueconsidered part of the Company's passenger travel obligation. As such, those fees are deferred at the time of collection and recognized at the time the feetravel is incurred. The fare onprovided. 

United initially capitalizes the changed ticket, including any additional collectioncosts of fare, is deferredselling airline travel tickets and recognized in accordance with our transportation revenue recognition policythen recognizes those costs as Distribution expense at the time of travel. Passenger ticket costs include credit card fees, travel agency and other commissions paid, as well as global distribution systems booking fees.


Advance Ticket Sales. Advance ticket sales represent the transportation is provided. Change fees relatedCompany's liability to non-refundable tickets are considered a separate transaction from theprovide air transportation because they represent a charge forin the Company’s additional service to modify a previous sale. Therefore,future. In the pricingyears ended December 31, 2018 and 2017, the Company recognized approximately $3.1 billion and $2.9 billion, respectively, of the change fee and the initial customer order are separately determined and represent distinct earnings processes.

The Company records an estimate of breakagepassenger revenue on the flight date for tickets that were included in Advance ticket sales at the beginning of those periods. All tickets sold at any given point of time have travel dates extending up to twelve months. As a result, the balance of the Company's Advance ticket sales liability represents activity that will expire unused. These estimates are based onbe recognized in the evaluation of actual historical results and forecasted trends. Refundable tickets expire after one year from the date of issuance.

next twelve months.

Revenue by Geography. The Company further disaggregates revenue by geographic regions. Operating segments are defined as components of an enterprise with separate financial information, which are evaluated regularly by the chief operating decision maker and are used in resource allocation and performance assessments.
The Company recognizes cargodeploys its aircraft across its route network through a single route scheduling system to maximize its value. When making resource allocation decisions, the Company's chief operating decision maker evaluates flight profitability data, which considers aircraft type and otherroute economics. The Company's chief operating decision maker makes resource allocation decisions to maximize the Company's consolidated financial results. Managing the Company as one segment allows management the opportunity to maximize the value of its route network.
The Company's operating revenue as service is provided.

Under our capacity purchase agreements (“CPAs”) with regional carriers, we purchase all of the capacity related to aircraft coveredby principal geographic region (as defined by the contracts and are responsible for selling allU.S. Department 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

Accounts receivable primarily consist of amounts due from credit card companies and customers of our aircraft maintenance and cargo transportation services. We provide an allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical write-offs and other specific analyses. Bad debt expense and write-offs were not materialTransportation) for the years ended December 31 2015, 2014is presented in the table below (in millions):

  2018 2017¹ 2016¹
Domestic (U.S. and Canada) $25,552
 $23,114
 $22,151
Atlantic 7,103
 6,340
 6,194
Pacific 5,188
 4,914
 4,984
Latin America 3,460
 3,416
 3,229
Total $41,303
 $37,784
 $36,558
(1) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). See (u) below for additional information.
The Company attributes revenue among the geographic areas based upon the origin and 2013.

destination of each flight segment. The Company's operations involve an insignificant level of dedicated revenue-producing assets in geographic regions as the overwhelming majority of the Company's revenue-producing assets (primarily U.S. registered aircraft) can be deployed in any of its geographic regions.
Ancillary Fees.The Company charges fees, separately from ticket sales, for certain ancillary services that are directly related to passengers' travel, such as ticket change fees, baggage fees, inflight amenities fees, and other ticket-related fees. These ancillary fees are part of the travel performance obligation and, as such, are recognized as passenger revenue when the travel occurs. The Company recorded $2.2 billion, $2.0 billion, and $1.9 billion of ancillary fees within passenger revenue in the years ended December 31, 2018, 2017 and 2016 respectively.
(c)
Frequent Flyer Accounting—United’sUnited's MileagePlus loyalty program is designedbuilds customer loyalty by offering awards, benefits and services to increase customer loyalty. Program participantsprogram participants. Members in this program earn miles by flyingfor travel on United, United Express, Star Alliance members and certain other participating airlines. Program participantsairlines that participate in the program. Members can also earn miles through purchases from otherby purchasing the goods and services of our network of non-airline partners that participate in United’s loyalty program.partners. We have contracts to sell miles to these partners whichwith the terms extending from one to eight years. These partners include domestic and international credit card issuers, retail merchants, hotels, car rental companies and our participating airline partners. Miles can be redeemed for free (other than taxes and government imposed fees), discounted or upgraded air travel and non-travel awards. The Company records its obligation for future award redemptions using a deferred revenue model.Miles expire after 18 months of member account inactivity.


Miles Earned in Conjunction with FlightsTravel.

In the case of the sale of air services, When frequent flyers earn miles for flights, the Company recognizes a portion of the ticket sales as revenue when the air transportationtravel occurs and defers a portion of the ticket sale representing the value of the related miles as a multiple-deliverable revenue arrangement. The miles are recorded in Frequent flyer deferred revenue on the Company’s consolidated balance sheet and recognized into revenue when the transportation is provided.

separate performance obligation. The Company determines the estimated selling price of air transportationtravel and miles as if each element is sold on a separate basis. The total consideration from each ticket sale is then allocated to each of these elements, individually, on a pro ratapro-rata basis.

At the time of travel, the Company records the portion allocated to the miles to Frequent flyer deferred revenue on the Company's consolidated balance sheet and subsequently recognizes it into revenue when miles are redeemed for air travel and non-air travel awards.


The Company’sCompany's estimated selling price of miles is based on an equivalent ticket value less fulfillment discount,breakage, which incorporates the expected redemption of miles, as the best estimate of selling price for these miles. The equivalent ticket value is based on the prior 12 months’months' weighted average equivalent ticket value of similar fares as those used to

settle award redemptions while taking into consideration such factors as redemption pattern, cabin class, loyalty status and geographic region. The estimated selling price of miles is adjusted by a fulfillment discountbreakage that considers a number of factors, including redemption patterns of various customer groups.

The Company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns. The Company's estimate of the expected expiration of miles requires significant management judgment. Current and future changes to expiration assumptions or to the expiration policy, or to program rules and program redemption opportunities, may result in material changes to the deferred revenue balance as well as recognized revenues from the program. For the portion of the outstanding miles that we estimate will not be redeemed, we recognize the associated value proportionally as the remaining miles are redeemed.

Co-branded Credit Card Partner Mileage SalesCo-Brand Agreement

. United has a significant contract the Consolidated Amended and Restated Co-Branded Card Marketing Services Agreement (the “Co-Brand Agreement”"Co-Brand Agreement"), to sell MileagePlus miles to its co-branded credit card partner Chase Bank USA, N.A. (“Chase”("Chase"). Chase awards miles to MileagePlus members based on their credit card activity. United identified the following significant revenue elementsseparately identifiable performance obligations in the Co-Brand Agreement:

MileagePlus miles awarded – United has a performance obligation to provide MileagePlus cardholders with miles to be used for air travel and non-travel award redemptions. The Company records Passenger revenue related to the airtravel awards when the transportation element represented byis provided and records Other revenue related to the valuenon-travel awards when the goods or services are delivered. The Company records the cost associated with non-travel awards in Other operating revenue.
Marketing – United has a performance obligation to provide Chase access to its customer list and the use of its brand. Marketing revenue is recorded to Other operating revenue as miles are delivered to Chase.
Advertising – United has a performance obligation to provide advertising in support of the mile (generally resulting from its redemption for future air transportationMileagePlus card in various customer contact points such as United's website, email promotions, direct mail campaigns, airport advertising and whose fair valuein-flight advertising. Advertising revenue is described above);recorded to Other operating revenue as miles are delivered to Chase.
Other travel-related benefits – United's performance obligations are comprised of various items such as waived bag fees, seat upgrades and lounge passes. Lounge passes are recorded to Other operating revenue as customers use the lounge passes. Bag fees and seat upgrades are recorded to Passenger revenue at the time of the United brandassociated travel.

We account for all the payments received (including monthly and accessone-time payments) under the Co-Brand Agreement by allocating them to MileagePlus member lists; advertising; and other travel related benefits.

the separately identifiable performance obligations. The fair value of the elementsseparately identifiable performance obligations is determined using management’smanagement's estimated selling price of each element.component. The objective of using the estimated selling price based methodology is to determine the price at which we would transact a sale if the product or service were sold on a stand-alone basis. Accordingly, we determine our best estimate of selling price by considering multiple inputs and methods including, but not limited to, discounted cash flows, brand value, volume discounts, published selling prices, number of miles awarded and number of miles redeemed. The Company estimated the selling prices and volumes over the term of the Co-Brand Agreement in order to determine the allocation of proceeds to each of the multiple elementscomponents to be delivered. We also evaluate volumes on an annual basis, which may result in a change in the allocation of the estimated selling priceconsideration from the Co-Brand Agreement on a prospective basis.

68


Frequent flyer deferred revenue. Miles in MileagePlus members' accounts are combined into one homogeneous pool and are thus not separately identifiable, for award redemption purposes, between miles earned in the current period and those in their beginning balance. Of the miles expected to be redeemed, the Company expects the majority of these miles to be redeemed within two years. The table below presents a roll forward of Frequent flyer deferred revenue (in millions):
 Twelve Months Ended
December 31,
 2018 2017
Total Frequent flyer deferred revenue - beginning balance$4,783
 $4,889
Total miles awarded2,451
 2,077
Travel miles redeemed (Passenger revenue)(2,068) (2,004)
Non-travel miles redeemed (Other operating revenue)(161) (179)
Total Frequent flyer deferred revenue - ending balance$5,005
 $4,783

In the year ended December 31, 2018, 2017 and 2016, the Company records passengerrecognized, in Other operating revenue, $2.0 billion, $1.8 billion and $1.7 billion, respectively, related to the air transportation element when the transportation is delivered. Themarketing, advertising, non-travel miles redeemed (net of related costs) and other elements are generally recognized as Other operating revenue when earned.

Expiration of Miles

The Company accounts for miles sold and awarded that will never be redeemed by program members, which we refer to as breakage. The Company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns. Miles expire after 18 months of member account inactivity.

The Company’s estimatetravel-related benefits of the expected expiration of miles requires significant management judgment. Current and future changesmileage revenue associated with our various partner agreements including, but not limited to, expiration assumptions orour Chase co-brand agreement. The portion related to the expiration policy, or to program rulesMileagePlus miles awarded of the total amounts received is deferred and program redemption opportunities, may resultpresented in material changes to the deferred revenue balancetable above as well as recognized revenues from the programs.

Other Information

The following table provides additional information relatedan increase to the frequent flyer program (in millions):

Year Ended

December 31,

  Cash Proceeds
from Miles Sold
and Earned		   Other Revenue
Recognized Upon
Award of Miles
to Third-Party
Customers (a)		   Increase in Frequent
Flyer Deferred
Revenue for Miles
Awarded (b)		   Increase
(Decrease) in
Advanced
Purchase of
Miles (c)		 

2015

   $2,999      $1,050      $2,173      $(224)  

2014

   2,861      882      2,178      (199)  

2013

   2,903      903      2,174      (174)  

 

       
(a) This amount represents other revenue recognized during the period from the sale of miles to third parties, representing the marketing-related deliverable services component of the sale.   
(b) This amount represents the increase to Frequent flyer deferred revenue during the period.  
(c) This amount represents the net increase (decrease) in the advance purchase of miles obligation due to cash payments for the sale of miles in excess of (less than) miles awarded to customers.   
liability.

(d)
Cash and Cash Equivalents and Restricted Cash— Highly liquid investments with a maturity of three months or less on their acquisition date are classified as cash and cash equivalents.

Restricted cash primarily includes cash collateral for letters of credit and collateral associated with workers’ compensation obligations reserves for institutions that process credit card ticket salesfacility leases and cash collateral received from fuel hedge counterparties.other insurance-related obligations. Restricted cash is classified as short-term or long-term in the consolidated balance sheets based on the expected timing of return of the assets to the Company. Airline industry practice includes classification
The following table provides a reconciliation of cash, cash equivalents and restricted cash flows as either investingreported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statements of consolidated cash flows or operating cash flows. Cash flows related to restricted cash activity are classified as investing activities because the Company considers restricted cash arising from these activities similar to an investment. The Company’s net cash inflows associated with its restricted cash balances for the years ended December 31, 2015, 2014 and 2013 were $114 million, $75 million and $52 million, respectively.

(in millions):
 UAL United
 At December 31, At December 31,
 2018 2017 2016 2018 2017 2016
Current assets:           
Cash and cash equivalents$1,694
 $1,482
 $2,179
 $1,688
 $1,476
 $2,173
Restricted cash included in Prepaid expenses and other—
 18
 —
 —
 18
 —
Other assets:           
Restricted cash105
 91
 124
 105
 91
 124
Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows$1,799
 $1,591
 $2,303
 $1,793
 $1,585
 $2,297
(e)
Short-term Investments—Short-termDebt investments are classified as available-for-sale and are stated at fair value. Realized gains and losses on sales of these investments are reflected in nonoperating income (expense)Miscellaneous, net in the consolidated statements of operations. Unrealized gains and losses on available-for-sale securities are reflected as a component of accumulated other comprehensive income (loss). Equity investments with readily determinable fair values are measured at fair value. Equity investments without readily determinable fair values are measured using the equity method, or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative). Changes in fair value are recorded in Miscellaneous, net in the consolidated statements of operations.

(f)
Accounts Receivable. Accounts receivable primarily consist of amounts due from credit card companies, non-airline partners, and cargo transportation customers. We provide an allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical write-offs and other specific analyses. Bad debt expense and write-offs were not material for the year ended December 31, 2018 and 2017.
(g)
Aircraft Fuel, Spare Parts and Supplies—The Company accounts for aircraft fuel, spare parts and supplies at average cost and provides an obsolescence allowance for aircraft spare parts with an assumed residual value of 10% of original cost.

69

(g)
(h)
Property and Equipment—The Company records additions to owned operating property and equipment at cost when acquired. Property under capital leases and the related obligation for future lease payments are recorded at an amount equal to the initial present value of those lease payments. Modifications that enhance the operating performance or extend the useful lives of airframes or engines are capitalized as property and equipment. It is the Company’sCompany's policy to record compensation from delays in delivery of aircraft as a reduction of the cost of the related aircraft.

Depreciation and amortization of owned depreciable assets is based on the straight-line method over the assets’assets' estimated useful lives. Leasehold improvements are amortized over the remaining term of the lease, including estimated facility renewal options when renewal is reasonably assured at key airports, or the estimated useful life of the related asset, whichever is less. Properties under capital leases are amortized on the straight-line method over the life of the lease or, in the case of certain aircraft, over their estimated useful lives, whichever is shorter. Amortization

of capital lease assets is included in depreciation and amortization expense. The estimated useful lives of property and equipment are as follows:

  Estimated Useful Life (in years)

Aircraft and related rotable parts

 25 to 30
Aircraft seats 10 to 15

Buildings

 25 to 45

Other property and equipment

 3 to 15

Computer software

 5 to 15

Building improvements

 1 to 40

As of December 31, 20152018 and 2014,2017, the Company had a carrying value of computer software of $279$359 million and $281$345 million, respectively. For the years ended December 31, 2015, 20142018, 2017 and 2013,2016, the Company’sCompany's depreciation expense related to computer software was $93$122 million, $81$117 million and $72$108 million, respectively. Aircraft and aircraft spare parts were assumed to have residual values of approximately 10% of original cost, and other categories of property and equipment were assumed to have no residual value.

(h)
(i)
Maintenance and Repairs—The cost of maintenance and repairs, including the cost of minor replacements, is charged to expense as incurred, except for costs incurred under our power-by-the-hour (“PBTH”("PBTH") engine maintenance agreements. PBTH contracts transfer certain risk to third-party service providers and fix the amount we pay per flight hour or per cycle to the service provider in exchange for maintenance and repairs under a predefined maintenance program. Under PBTH agreements, the Company recognizes expense at a level rate per engine hour, unless the level of service effort and the related payments during the period are substantially consistent, in which case the Company recognizes expense based on the amounts paid.

(i)
(j)
Lease Fair Value Adjustments—Lease fair value adjustments, which arose from recording operating leases at fair value under fresh start or business combination accounting, are amortized on a straight-line basis over the related lease term.

(j)
(k)
Regional Capacity Purchase—Payments made to regional carriers under CPAscapacity purchase agreements ("CPAs") are reported in Regional capacity purchase in our consolidated statements of operations.

(k)
(l)
Advertising—Advertising costs, which are included in Other operating expenses, are expensed as incurred. Advertising expenses were $201$211 million, $179$217 million and $178$220 million for the years ended December 31, 2015, 20142018, 2017 and 2013,2016 respectively.

(l)

(m)
Intangibles—The Company has finite-lived and indefinite-lived intangible assets, including goodwill. Finite-lived intangible assets are amortized over their estimated useful lives. Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment annually or more frequently if

70

events or circumstances indicate that the asset may be impaired. Goodwill and indefinite-lived assets are reviewed for impairment on an annual basis as of October 1, or on an interim basis whenever a triggering event occurs. See Note 2 of this report for additional information related to intangibles.

(m)
(n)
Long-Lived Asset Impairments—The Company evaluates the carrying value of long-lived assets subject to amortization whenever events or changes in circumstances indicate that an impairment may exist. For purposes of this testing, the Company has generally identified the aircraft fleet type as the lowest level of identifiable cash flows. An impairment charge is recognized when the asset’sasset's carrying value exceeds its net undiscounted future cash flows and its fair market value. The amount of the charge is the difference between the asset’sasset's carrying value and fair market value. See Note 1614 of this report for additional information related to asset impairments.

(n)
(o)
Share-Based Compensation—The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-dategrant date fair value of the award. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period. Obligations for cash-settled restricted stock units (“RSUs”("RSUs") are remeasured at fair value throughout the requisite service period onat the last dayclose of eachthe reporting period based upon UAL’sUAL's stock price. In addition to the service requirement, certain RSUs have performance metrics that must be achieved prior to vesting. These awards are accrued based on the expected level of achievement at each reporting period. A cumulativeAn adjustment is recorded on the last day of each reporting period to adjust compensation expense based on both UAL’sUAL's stock price and the then current level of expected performance achievement for the performance-based awards. See Note 5 of this report for additional information on UAL’s share-based compensation plans.


expected performance achievement for the performance-based awards. See Note 5 of this report for additional information on UAL's share-based compensation plans.
(o)
(p)
Ticket Taxes—Certain governmental taxes are imposed on the Company’sCompany's ticket sales through a fee included in ticket prices. The Company collects these fees and remits them to the appropriate government agency. These fees are recorded on a net basis (excludedand, as a result, are excluded from operating revenue).revenue.

(p)
(q)
Retirement of Leased Aircraft—The Company accrues for estimated lease costs over the remaining term of the lease at the present value of future minimum lease payments, net of estimated sublease rentals (if any), in the period that aircraft are permanently removed from service. When reasonably estimable and probable, the Company estimates maintenance lease return condition obligations for items such as minimum aircraft and engine conditions specified in leases and accrues these amounts over the lease term while the aircraft are operating, and any remaining unrecognized estimated obligations are accrued in the period that an aircraft is removed from service.

(q)
(r)
Uncertain Income Tax Positions—The Company has recorded reserves for income taxes and associated interest that may become payable in future years. Although management believes that its positions taken on income tax matters are reasonable, the Company nevertheless has established tax and interest reserves in recognition that various taxing authorities may challenge certain of the positions taken by the Company, potentially resulting in additional liabilities for taxes and interest. The Company’sCompany's uncertain tax position reserves are reviewed periodically and are adjusted as events occur that affect its estimates, such as the availability of new information, the lapsing of applicable statutes of limitation, the conclusion of tax audits, the measurement of additional estimated liability, the identification of new tax matters, the release of administrative tax guidance affecting its estimates of tax liabilities, or the rendering of relevant court decisions. The Company records penalties and interest relating to uncertain tax positions in Other operatingas part of income tax expense and Interest expense, respectively, in its consolidated statements of operations. The Company has not recorded any significant expense or liabilities related to interest or penalties in its consolidated financial statements.See Note 7 of this report for additional information on UAL's uncertain tax positions.

(r)
(s)
Labor Costs—The Company records expenses associated with amendable labor agreements when the amounts are probable and estimable. These include costs associated with lump sum cash payments that would be made in conjunction with the ratification of labor agreements. To the extent these upfront costs are in lieu of future pay increases, they would be capitalized and amortized over the term of the labor agreements. If not, these amounts would be expensed.

71

(s)
(t)
Third-Party Business—The Company has third-party business revenue that includes fuel sales, catering, ground handling, maintenance services and frequent flyer award non-air redemptions, and third-partyredemptions. Third-party business revenue is recorded in Other operating revenue. The Company also incurs third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, and thoseredemptions. The third-party business expenses are recorded in Other operating expenses.expenses, except for non-air mileage redemption. Non-air mileage redemption expenses are recorded to Other operating revenue.

(t)
(u)
Recently Issued Accounting Standards—The Company adopted Financial Accounting Standards Board (“FASB”("FASB") amended the FASB Accounting Standards Codification and created a new Topic 606,Revenue from Contracts with Customers. This amendmentCustomers (the "New Revenue Standard"), effective January 1, 2018 using the full-retrospective method. Topic 606 prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment supersedesFor the revenue recognition requirements in Topic 605,Revenue Recognition, andCompany, the most industry-specific guidance throughout the Industry Topicssignificant impact of the Codification, and is effective for annual and interim reporting periods beginning after December 15, 2017. Understandard was the new standard,reclassification of certain airline ancillary fees from other operating revenue into passenger revenue on the statement of consolidated operations. These ancillary fees are directly related to passenger revenue tickets,travel, such as airlineticket change fees and baggage fees, and are likely to no longer be considered distinct performance obligations separate from the passenger travel component. In addition, the ticket change fees, which were previously recognized when received, will likely beare now recognized when transportation is provided. The Company is evaluating other impactsAdoption of the standard had no impact on itsthe Company's consolidated financialcash flows statements.

The Company adopted Accounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (the "New Retirement Standard"), effective January 1, 2018 using the full-retrospective method. The New Retirement Standard requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income. The Company elected to apply the practical expedient and use the amounts disclosed in Note 8 to the financial statements included in Part II, Item 8 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as the estimation basis for applying the retrospective presentation requirements of the standard.

The New Revenue Standard and the New Retirement Standard had the same impact on the financial statements of United as they had on the financial statements of UAL. The tables below present the impact of the adoption of the New Revenue Standard and the New Retirement Standard on select accounts and captions of UAL's statements of consolidated operations for the twelve months ended December 31, 2017 and 2016 (in millions, except per share amounts) and the impact on UAL's balance sheet accounts and captions as of December 31, 2017 (in millions):
Statements of Consolidated Operations for the Years Ended December 31,
 As Previously Reported New Revenue Standard Adjustments New Retirement Standard Adjustments As Adjusted
 2017 2016 2017 2016 2017 2016 2017 2016
Operating revenue:               
Passenger revenue$32,404
 $31,457
 $2,056
 $1,972
 $—
 $—
 $34,460
 $33,429
Cargo1,035
 876
 79
 58
 —
 —
 1,114
 934
Other operating revenue4,297
 4,223
 (2,087) (2,028) —
 —
 2,210
 2,195
Total operating revenue37,736
 36,556
 48
 2
 —
 —
 37,784
 36,558
Operating expenses34,238
 32,218
 (21) (12) (104) 8
 34,113
 32,214
Operating income3,498
 4,338
 69
 14
 104
 (8) 3,671
 4,344
Nonoperating expense, net(499) (519) (28) (60) (104) 8
 (631) (571)
Income before income taxes2,999
 3,819
 41
 (46) —
 —
 3,040
 3,773
Income tax expense868
 1,556
 28
 (17) —
 —
 896
 1,539
Net income$2,131
 $2,263
 $13
 $(29) $—
 $—
 $2,144
 $2,234
                
Earnings per share, basic$7.04
 $6.86
 $0.04
 $(0.09) $—
 $—
 $7.08
 $6.77
Earnings per share, diluted$7.02
 $6.85
 $0.04
 $(0.09) $—
 $—
 $7.06
 $6.76
Consolidated Balance Sheet as of December 31, 2017

 As Previously Reported New Revenue Standard Adjustments As Adjusted
Current assets:     
Prepaid expenses and other$1,051
 $20
 $1,071
Current liabilities:     
Advance ticket sales3,876
 64
 3,940
Frequent flyer deferred revenue2,176
 16
 2,192
Other569
 7
 576
Other liabilities and deferred credits:     
Frequent flyer deferred revenue2,565
 26
 2,591
Deferred income taxes225
 (21) 204
Stockholders' equity:     
Retained earnings$4,621
 $(72) $4,549

The Company adopted Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10) effective January 1, 2018. This standard made several changes, including the elimination of the available-for-sale classification of equity investments, and requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in earnings. The Company reclassified to retained earnings $6 million of unrealized loss, net of tax, on the Company's investment in Azul, S.A. ("Azul") which was previously classified as an available-for-sale security. See Notes 6 and 9 to the financial statements included in this Part II, Item 8 for additional information.

In June 2016, the FASB issued Accounting Standards Update No. 2015-03,Interest—Imputation2016-13, Financial Instruments—Credit Losses ("ASU 2016-13"). The main objective is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this update replace the incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of Interest (Subtopic 835-30): Simplifying the Presentationa broader range of Debt Issuance Costs. This standard amends existing guidancereasonable and supportable information to require the presentation ofcalculate credit loss estimates. For trade receivables, loans and held-to-maturity debt issuance costs in the balance sheet assecurities, entities will be required to estimate lifetime expected credit losses. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a deduction fromreduction to the carrying amountvalue of the related debt liability instead of a deferred charge.asset. The amendments are effective for public business entities for fiscal years and interim periods beginning after December 15, 2019. The Company adoptedis evaluating the standard as of December 31, 2015. As a result ofimpact the adoption unamortized debt issuance costs previously recorded as an assetof ASU 2016-13 will have on its consolidated financial statements and believes that it will not have a material impact on its consolidated financial statements.
In 2016, the Company’s balance sheet included underFASB amended the caption Other, net are now reclassified and presented as a deduction from the carrying amount of the related debt liability. The reclassified amounts were $170 million and $167 million as of December 31, 2015 and 2014, respectively.

The FASB issued Accounting Standards Update No. 2015-07,Fair Value Measurement (Topic 820): DisclosuresCodification and created a new Topic 842, Leases (the "New Lease Standard"). The guidance requires lessees to recognize a right-of-use asset and a lease liability for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).Underall leases (with the standard, investments for which fair value is measuredexception of short-term leases) at net asset value per share (or its equivalent) using the practical expedient will no longer be categorized incommencement date and recognize expenses on their income statements similar to the fair value hierarchy. Itcurrent Topic 840, Leases ("Topic 840"). The New Lease Standard is effective for fiscal years and interim periods beginning after December 15, 2015, but early adoption is permitted. As of December 31, 2015, the Company had approximately $200 million of such investments as part of Short-term investments balance sheet total. In addition, pension plan investments measured at net asset value per share will no longer be categorized within the fair value hierarchy. As of December 31, 2015, the Company had approximately $1.4 billion of such investments.2018. The Company is evaluating other impacts on its consolidated financial statements.

The FASB issued Accounting Standards Update No. 2015-17,Balance Sheet Classification of Deferred Taxes. This standard amends existing guidance to require companies to classify all deferred tax assets and liabilities as noncurrent in the statement of financial position. For a particular tax-paying component of an entity and within a particular tax jurisdiction, all deferred tax liabilities and assets, as well as any related valuation allowance, shall be offset and presented as a single noncurrent amount. As a result, companies will no longer allocate valuation allowances between current and noncurrent deferred tax assets because those allowances also will be classified as noncurrent. As of December 31, 2015, the Company adopted this standard on January 1, 2019 using a modified retrospective approach for all leases existing at or commencing after the date of initial application and utilizing certain practical expedients.

The adoption of the New Lease Standard is expected to impact our reported results as shown in the tables below (in millions, except per share amounts):

Consolidated Balance Sheets as of December 31,
 As Reported New Lease Standard Adjustments As Adjusted
 2018 2017 2018 2017 2018 2017
Current assets:           
Receivables, less allowance for doubtful accounts$1,346
 $1,340
 $80
 $126
 $1,426
 $1,466
Prepaid expenses and other913
 1,071
 (180) (208) 733
 863
     
 
    
Operating property and equipment:    
 
 

 

Other property and equipment (owned)7,919
 6,946
 (1,041) (922) 6,878
 6,024
Less-Accumulated depreciation and amortization (owned)(12,760) (11,159) 140
 92
 (12,620) (11,067)
Flight equipment (finance leases) (a)1,029
 1,151
 (37) (211) 992
 940
Less-Accumulated amortization(654) (777) 8
 169
 (646) (608)
            
Operating lease assets    
 
    
Flight equipment—
 —
 2,380
 3,102
 2,380
 3,102
Other property and equipment—
 —
 2,882
 2,975
 2,882
 2,975
           
 
    
Current liabilities:    
 
 

 

Current maturities of finance leases (a)149
 128
 (26) (50) 123
 78
Current maturities of operating leases—
 —
 719
 949
 719
 949
Other619
 576
 (66) (58) 553
 518
            
Long-term obligations under finance leases (a)1,134
 996
 (910) (766) 224
 230
Long-term obligations under operating leases—
 —
 5,276
 5,789
 5,276
 5,789
            
Other liabilities and deferred credits:    
 
    
Deferred income taxes814
 204
 14
 16
 828
 220
Other1,832
 1,832
 (822) (811) 1,010
 1,021
            
Stockholders' equity:    
 
 

 

Retained earnings6,668
 4,549
 47
 54
 6,715
 4,603
(a) Finance leases, under the New Lease Standard, are the equivalent of capital leases under Topic 840.

The adoption of the New Lease Standard primarily resulted in the recording of assets and obligations of our operating leases on our consolidated balance sheets. Certain amounts recorded for prepaid and accrued rent associated with historical operating leases were reclassified approximately $1.5 billionto the newly captioned Operating lease assets in the consolidated balance sheets. Also, certain leases designated under Topic 840 as owned assets and capitalized finance leases will not be considered assets under the New Lease Standard and will be removed from Current assets: Deferredthe consolidated balance sheets, along with the related capital lease liability.


Statements of Consolidated Operations for the Years Ended December 31,
 As Reported New Lease Standard Adjustments As Adjusted
 2018 2017 2018 2017 2018 2017
Operating expense:           
Regional capacity purchase$2,601
 $2,232
 $48
 $36
 $2,649
 $2,268
Landing fees and other rent2,359
 2,240
 90
 70
 2,449
 2,310
Depreciation and amortization2,240
 2,149
 (75) (53) 2,165
 2,096
Total operating expenses38,011
 34,113
 63
 53
 38,074
 34,166
Operating income3,292
 3,671
 (63) (53) 3,229
 3,618
            
Nonoperating income (expense):           
Interest expense(729) (671) 59
 45
 (670) (626)
Interest capitalized70
 84
 (5) (10) 65
 74
Total nonoperating expense, net(634) (631) 53
 36
 (581) (595)
Income before income taxes2,658
 3,040
 (10) (17) 2,648
 3,023
Income tax expense529
 896
 (3) (16) 526
 880
Net income$2,129
 $2,144
 $(7) $(1) $2,122
 $2,143
Earnings per share, basic$7.73
 $7.08
 $(0.03) $—
 $7.70
 $7.08
Earnings per share, diluted$7.70
 $7.06
 $(0.03) $—
 $7.67
 $7.06
The expense for leases under the New Lease Standard will continue to be classified in their historical income taxesstatement captions (primarily in Aircraft rent, Landing fees and other rent and Regional capacity purchase in our statements of consolidated operations). The adoption of the New Lease Standard also resulted in the recharacterization of certain leases from capital leases under Topic 840 to Other assets: Deferred income taxes asoperating leases under the New Lease Standard. This change will result in less depreciation and amortization and interest expense associated with capital leases offset by higher lease expense associated with operating leases. The change is associated with leases of December 31, 2015,aircraft under certain CPAs and reclassified $591 million from Current assets: Deferred income taxes to Other liabilities and deferred credits: Deferred income taxes as of December 31, 2014.

72

certain airport facilities. The reduction in capitalized interest is also associated with the same airport facilities.





NOTE 2 - GOODWILL AND OTHER INTANGIBLE ASSETS

The following table presents information about the Company’sCompany's goodwill and other intangible assets at December 31 (in millions):

     2015  2014 

Item

  Asset life (a) Gross  Carrying
Amount		  Accumulated
Amortization		  Gross  Carrying
Amount		  Accumulated
Amortization		 

Goodwill

    $4,523      $4,523    
   

 

 

   

 

 

  
      

Finite-lived intangible assets

      

Frequent flyer database (b)

  22  $1,177     $702     $1,177    $624   

Hubs

  20  145     74     145     67   

Contracts

  12  135     86     155     86   

Patents and tradenames

  3  108     108     108     108   

Airport slots and gates

  8  97     97     97     97   

Other

  25  109     77     109     67   
   

 

 

  

 

 

  

 

 

  

 

 

 

Total

    $1,771     $1,144     $1,791     $1,049   
   

 

 

  

 

 

  

 

 

  

 

 

 

Indefinite-lived intangible assets

      

Route authorities

    $1,570      $1,589    

Airport slots and gates

    942      956    

Tradenames and logos

    593      593    

Alliances

    404      404    
   

 

 

   

 

 

  

Total

    $3,509      $3,542    
   

 

 

   

 

 

  

(a) Weighted average life expressed in years.

(b) The frequent flyer database is amortized based on an accelerated amortization schedule to reflect utilization of the assets. Estimated cash flows correlating to the expected attrition rate of customers in the frequent flyer database is considered in the determination of the amortization schedules.

  2018 2017
Item 
Gross 
Carrying
Amount
 
Accumulated
Amortization
 
Gross 
Carrying
Amount
 
Accumulated
Amortization
Goodwill $4,523
   $4,523
  
         
Finite-lived intangible assets        
Frequent flyer database $1,177
 $884
 $1,177
 $832
Hubs 145
 97
 145
 89
Contracts 120
 106
 121
 103
Patents and tradenames 108
 108
 108
 108
Airport slots and gates 97
 97
 97
 97
Other 109
 88
 109
 84
Total $1,756
 $1,380
 $1,757
 $1,313
Indefinite-lived intangible assets        
Route authorities $1,240
   $1,562
  
Airport slots and gates 546
   536
  
Tradenames and logos 593
   593
  
Alliances 404
   404
  
Total $2,783
   $3,095
  
Amortization expense in 2015, 20142018, 2017 and 20132016 was $105$67 million, $128$79 million and $142$90 million, respectively. Projected amortization expense in 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 20202023 is $90$61 million, $79$55 million, $70$50 million, $64$40 million and $58$37 million, respectively.

See Note 1614 of this report for additional information related to impairment of intangible assets.

NOTE 3 - COMMON STOCKHOLDERS’STOCKHOLDERS' EQUITY AND PREFERRED SECURITIES

In 2014, UAL’s2018, UAL repurchased approximately 17.5 million shares of UAL common stock for $1.2 billion. In December 2017, UAL's Board of Directors authorized a $3.0 billion share repurchase program to acquire up to $1 billion of UAL’sUAL's common stock (the “2014 Program”). On July 21, 2015, UAL’s Board of Directors authorized a $3 billion share repurchase program, which the Company expects to complete substantially earlier than its original expected completion datestock. As of December 31, 2017 (the “2015 Program”). Under2018, the programs,Company had approximately $1.8 billion remaining to purchase shares under its share repurchase program. UAL may repurchase shares through the open market, privately negotiated transactions, block trades or accelerated share repurchase transactions from time to time in accordance with applicable securities laws. UAL willmay repurchase shares of UAL common stock subject to prevailing market conditions, and may discontinue such repurchases at any time. In October 2015, pursuant to the 2015 Program, the Company entered into agreements to repurchase approximately $300 million of shares of UAL common stock through an accelerated share repurchase program (the “ASR Program”). The ASR Program was completed in November 2015 and in total, United purchased approximately 5 million shares at an average price of $58.14 under the program. The aggregate number of shares repurchased by UAL under the ASR Program was based on the volume-weighted average price per share of UAL’s common stock during the calculation period, less a discount. In addition to the ASR Program, UAL spent $932 million to repurchase approximately 16 million shares of UAL common stock in open market transactions in the year ended December 31, 2015. As of December 31, 2015, the Company had completed purchases under the 2014 Program and had $2.4 billion remaining to spend under the 2015 Program. See Part II, Item 5, “MarketMarket for registrant’sregistrant's common equity, related stockholder matters and issuer purchases of equity securities”securities, of this report for additional information.

73

At December 31, 2015,2018, approximately 810 million shares of UAL’sUAL's common stock were reserved for future issuance related to the issuance of equity-based awards under the Company’sCompany's incentive compensation plans.

As of December 31, 2015,2018, UAL had two shares of junior preferred stock (par value $0.01 per share) outstanding. In addition, UAL is authorized to issue 250 million shares of preferred stock (without par value) under UAL’sUAL's amended and restated certificate of incorporation.



NOTE 4 - EARNINGS PER SHARE

The computations of UAL’sUAL's basic and diluted earnings per share are set forth below for the years ended December 31 (in millions, except per share amounts):

           2015                   2014                   2013         

Basic earnings per share:

      

Earnings available to common stockholders

   $7,340      $1,132      $571   
  

 

 

   

 

 

   

 

 

 

Basic weighted-average shares outstanding

   376      371      348   
  

 

 

   

 

 

   

 

 

 

Earnings per share, basic

   $19.52      $3.05      $1.64   
  

 

 

   

 

 

   

 

 

 
      

Diluted earnings per share:

      

Earnings available to common stockholders

   $7,340      $1,132      $571   

Effect of dilutive securities

   —      11      26   
  

 

 

   

 

 

   

 

 

 

Earnings available to common stockholders including the effect of dilutive securities

   $7,340      $1,143      $597   
  

 

 

   

 

 

   

 

 

 
      

Diluted shares outstanding:

      

Basic weighted-average shares outstanding

   376      371      348   

Effect of convertible notes

   —      18      42   

Effect of employee stock awards

   1      1      1   
  

 

 

   

 

 

   

 

 

 

Diluted weighted-average shares outstanding

   377      390      391   
  

 

 

   

 

 

   

 

 

 

Earnings per share, diluted

   $19.47      $2.93      $1.53   
  

 

 

   

 

 

   

 

 

 

  2018 2017 (a) 2016 (a)
Earnings available to common stockholders $2,129
 $2,144
 $2,234
       
Basic weighted-average shares outstanding 275.5
 302.7
 329.9
Effect of employee stock awards 1.2
 0.9
 0.4
Diluted weighted-average shares outstanding 276.7
 303.6
 330.3
       
Earnings per share, basic $7.73
 $7.08
 $6.77
Earnings per share, diluted $7.70
 $7.06
 $6.76
(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.
The number of antidilutive securities excluded from the computation of diluted earnings per share amounts werewas not material.

See Notes 3 and 11 of this report for additional information related to the ASR Program, open market share repurchases, open market purchases of the Company’s convertible debt and exchange of shares for redemption of convertible debt.

NOTE 5 - SHARE-BASED COMPENSATION PLANS

UAL maintains several share-based compensation plans. These plans provide for grants of qualified and non-qualified stock options, incentive stock options (within the meaning of Section 422 of the Internal Revenue Code of 1986), stock appreciation rights, restricted stock awards,shares, RSUs, performance compensation awards, performance units, cash incentive awards, and other types of equity-based and equity-related awards.

awards, and dividends and dividend equivalents.

All awards are recorded as either equity or a liability in the Company’sCompany's consolidated balance sheets. The share-based compensation expense is directly recorded in salaries and related costs or integration-related expense.

The Company generally grants incentive compensation awards, including long-term equity-based awards, during the first quarter of the calendar year. In the first quarter of 2015,costs.

During 2018, UAL granted share-based compensation awards

74

pursuant to the United Continental Holdings, Inc. 20082017 Incentive Compensation Plan. These share-based compensation awards includeincluded approximately 0.21.8 million sharesRSUs consisting of restricted stock and 0.31.1 million of time-vested RSUs that vest pro-rata over three years on the anniversary of the grant date.and 0.7 million performance-based RSUs. The time-vested RSUs vest pro-rata, a majority of which vest on February 28th of each year over a three-year period from the date of grant. These RSUs are cash-settledgenerally equity awards settled in stock for domestic employees and liability awards settled in cash for international employees. The cash payments are based on the 20-day average closing price of UAL common stock immediately prior to the vesting date. In addition, UAL granted 0.6 millionThe performance-based RSUs that will vest based on UAL’s return on invested capital and the Company’sCompany's relative improvement in pre-tax margin compared to a group of airline industry peers for the three years ending December 31, 2017.2020. If thesethe performance conditions arecondition is achieved, cash payments will be made after the end of the performance period based on the 20-day average closing price of UAL common stock immediately prior to the vesting date.date and based on the level, if any, of the performance goal achieved. The Company accounts for the performance-based RSUs as liability awards.

The following table provides information related to UAL’sUAL's share-based compensation plan cost for the years ended December 31 (in millions):

       2015           2014           2013     

Compensation cost (a):

      

RSUs

   $52      $104      $88   

Restricted stock

   6      10      11   

Other

   —      —      1   
  

 

 

   

 

 

   

 

 

 

Total

   $58      $114      $100   

 

  

 

 

   

 

 

   

 

 

 

(a) All compensation cost is recorded to Salaries and related costs, with the exception of $3 million and $9 million in 2014 and 2013, respectively, that was recorded in integration-related costs as a component of special items.

  2018 2017 2016
Compensation cost:      
RSUs $98
 $63
 $58
Restricted stock 2
 8
 11
Stock options 1
 2
 1
Total $101
 $73
 $70

The table below summarizes UAL’sUAL's unearned compensation and weighted-average remaining period to recognize costs for all outstanding share-based awards that are probable of being achieved for the year endedas of December 31, 20152018 (in millions, except as noted):

   Unearned
Compensation		   Weighted-
Average
Remaining
Period
(in years)		 

RSUs

   $37      1.5   

Restricted stock

   4      1.4   
  

 

 

   

Total

   $41     
  

 

 

   

  Unearned Compensation 
Weighted-
Average
Remaining Period
(in years)
RSUs $66
 1.6
Stock options 2
 2.6
Total $68
  
RSUs and Restricted Stock. All performance-based RSUs, as well as a portion of the outstanding time-vested RSUs, are towill be settled in cash. As of December 31, 2015,2018, UAL had recorded a liability of $102$51 million related to its RSUs. UAL paid $85$28 million, $86$50 million and $29$69 million related to its RSUs during 2015, 20142018, 2017 and 2013,2016, respectively.

75

The table below summarizes UAL’sUAL's RSUs and restricted stock activity for the years ended December 31 (shares in millions):

   RSUs     Restricted Stock   Weighted-
Average
Grant Price		 

Non-vested at December 31, 2012

   4.3        0.8     $23.94   

Granted

   1.8        0.5      25.98   

Vested

   (0.5)       (0.3)     23.93   

Forfeited

   (0.2)       (0.1)     24.76   
  

 

 

     

 

 

   

Non-vested at December 31, 2013

   5.4        0.9      25.02   

Granted

   0.9        0.3      43.33   

Vested

   (2.2)       (0.4)     24.66   

Forfeited

   (0.3)       (0.1)     28.88   
  

 

 

     

 

 

   

Non-vested at December 31, 2014

   3.8        0.7      32.55   

Granted

   1.0        0.2      66.53   

Vested

   (1.6)       (0.4)     31.14   

Forfeited

   (0.6)       (0.2)     46.23   
  

 

 

     

 

 

   

Non-vested at December 31, 2015

   2.6        0.3      48.68   
  

 

 

     

 

 

   

  Liability Awards Equity Awards
  RSUs 

RSUs
 
Weighted-
Average
Grant Price
 
Restricted 
Stock
 
Weighted-
Average
Grant Price
Outstanding at December 31, 2015 2.6
 —
 $—
 0.3
 $48.68
Granted 1.0
 0.9
 51.60
 0.4
 50.63
Vested (1.4) —
 —
 (0.1) 41.47
Forfeited (0.1) (0.1) 50.57
 (0.1) 53.42
Outstanding at December 31, 2016 2.1
 0.8
 51.67
 0.5
 52.00
Granted 0.6
 1.0
 71.68
 —
 —
Vested (0.7) (0.3) 51.81
 (0.2) 51.60
Forfeited (0.2) (0.1) 57.49
 —
 —
Outstanding at December 31, 2017 1.8
 1.4
 63.99
 0.3
 52.30
Granted 0.7
 1.1
 67.74
 —
 —
Vested (0.5) (0.5) 63.02
 (0.2) 53.24
Forfeited (0.1) (0.2) 67.34
 —
 —
Outstanding at December 31, 2018 1.9
 1.8
 66.29
 0.1
 51.17
The fair value of RSUs and restricted stock that vested in 2015, 20142018, 2017 and 20132016 was $92$70 million, $97$76 million and $22$80 million, respectively. The fair value of the restricted stock awardsand the stock-settled RSUs was based upon the UAL common stock price on the date of grant. These awards are accounted for as equity awards. The fair value of the cash-settled RSUs was based on the UAL common stock price as of the last day preceding the settlement date. These awards wereare accounted for as liability awards. Restricted stock vesting and the recognition of the expense is similar to the stock option vesting described below.

Stock Options. During 2018, UAL hasdid not grantedgrant any stock options since 2010. Historically,option awards. In 2017, UAL granted approximately 36,000 stock options were awarded with exercise prices equal to the fair market value of UAL’sUAL's common stock on the date of grant.grant with a weighted-average exercise price of $77.56 and a weighted-average grant date fair value of approximately $0.7 million. In 2016, UAL granted approximately 0.1 million stock options generally vested overwith exercise prices equal to the fair market value of UAL's common stock on the date of grant and an additional approximately 0.3 million stock options with exercise prices at a period25% premium of either three or four yearsthe grant date fair market value resulting in a weighted-average exercise price of $56.19 and have a contractual lifeweighted-average grant date fair value of 10 years.approximately $2.3 million. Expense related to each portion of an option grant wasis recognized on a straight-line basis over the specific vesting period for those options.
The Company determined the grant date fair value of stock options using a Black-Scholes option pricing model, which requires the use of 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 grant datetime 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 using daily stock price returns equivalent to the expected term of the option. The expected term of the

options was determined based upon a Black Scholessimplified assumption that the option pricing model. will be exercised evenly from vesting to expiration due to the Company's lack of relevant historical data related to stock options.
As of December 31, 2015,2018, there were less than 0.5approximately 0.4 million outstanding stock option awards, all0.2 million of which were exercisable, with a weighted-average exercise priceprices of $26.80.

76

$55.62 and $47.07, respectively, intrinsic values of $12 million and $6 million, respectively, and weighted-average remaining contractual lives (in years) of 5.8 and 3.8, respectively.

NOTE 6 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The tables below present the components of the Company’s accumulated other comprehensive income (loss) (“AOCI”),Company's AOCI, net of tax (in millions):

            Deferred Taxes    

UAL (a)

 Pension and
Other
Postretirement
Unrecognized
Actuarial
Gains (Losses)
and Prior
Service Cost		  Unrealized
Gains  (Losses)
on Derivatives		  Investments
and Other		  Pension and
Other
Postretirement
Liabilities		  Derivative
Contracts		  Total 

Balance at December 31, 2012

  $(927)    $(10)    $6     $(115)    $— (d)   $(1,046)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income before reclassifications (b)

  1,584 (c)   39     7     —     —     1,630   

Amounts reclassified from accumulated other comprehensive income (b)

  42     (18)    —     —     —     24   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net current-period other comprehensive income (loss)

  1,626     21     7     —     —     1,654   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2013

  $699     $11     $13     $(115)    $— (d)   $608   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive loss before reclassifications (b)

  (1,106)(c)   (599)    —     —     —     (1,705)  

Amounts reclassified from accumulated other comprehensive income (b)

  (65)     89     (6)    —     —     18   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net current-period other comprehensive income (loss)

  (1,171)    (510)    (6)    —     —     (1,687)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2014

  $(472)    $(499)    $7     $(115)    $— (d)   $    (1,079)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss) before reclassifications

  78 (c)   (320)    (4)    (28)    115     (159)  

Amounts reclassified from accumulated other comprehensive income

  31     604     —     (11)    (217)    407   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net current-period other comprehensive income (loss)

  109     284     (4)    (39)    (102)    248   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2015

  $(363)    $(215)    $3     $(154)    $(102)    $(831)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Details about AOCI Components

 Amount Reclassified from AOCI to
Income		  Affected Line Item in
the Statement Where
Net Income is Presented
  Year Ended December 31,   
  2015   2014   2013   

Derivatives designated as cash flow hedges

      

Fuel contracts-reclassifications of (gains) losses into earnings

  $604      $89     $(18)   Aircraft fuel

Amortization of pension and postretirement items

      

Amortization of unrecognized (gains) losses and prior

service cost and the effect of curtailments and settlements (e)

  31      (65)     42    Salaries and related costs

Investments and other

      

Available-for-sale securities—reclassifications of gains into earnings

  —      (6)     —    Miscellaneous, net

 
Pension and
Other
Postretirement
Liabilities
 Fuel Derivatives Contracts Investments and Other Deferred Taxes 
 
 
Total
Balance at December 31, 2015$(363) $(215) $3
 $(256) $(831)
Other comprehensive income (loss) before reclassifications(517)(a)(4) —
 187
 (334)
Amounts reclassified from accumulated other comprehensive income26
 217
 (2) 95
 336
Balance at December 31, 2016(854) (2) 1
 26
 (829)
Other comprehensive income (loss) before reclassifications(306)(a)—
 (7) 74
 (239)
Amounts reclassified from accumulated other comprehensive income58
 2
 —
 (21) 39
Reclassification of stranded tax effects—
 —
 —
 (118)(b)(118)
Balance at December 31, 2017(1,102) —
 (6) (39) (1,147)
Other comprehensive income (loss) before reclassifications377
(a)—
 (5) (83) 289
Amounts reclassified from accumulated other comprehensive income62
 —
 —
 (13) 49
Amounts reclassified to retained earnings—
 —
 7
 (1) 6
Balance at December 31, 2018$(663) $—
 $(4) $(136)
$(803)
Details about AOCI Components Amount Reclassified from AOCI to Income Affected Line Item in the Statement Where Net Income is Presented
  Year Ended December 31,  
  2018 2017 2016  
Fuel derivative contracts        
Fuel contracts-reclassifications of losses into earnings $—
 $2
 $217
 Aircraft fuel
Pension and Postretirement liabilities and other        
Amortization of unrecognized (gains) losses and prior service cost (c) 62
 58
 26
 Miscellaneous, net
Investments and other        
Available-for-sale securities - reclassifications of gains into earnings —
 —
 (2) Miscellaneous, net
(a) UAL and United amounts are substantially the same except for an additional $1 million and $6 million of additional gains related to investments and other and an income tax benefit, respectively, at United in 2013.

(b) Income tax expense for these items was offset by the Company’s valuation allowance.

(c) Prior service credits decreased by $3 million, $0 million and increased by $0 million, $3 million and $331$30 million and actuarial gains (losses) increasedlosses decreased by approximately $78$380 million, $(1.1) billion and $1.3 billionincreased $306 million and $560 million for 2015, 20142018, 2017 and 2013,2016, respectively.

(d) Deferred

(b) This amount represents the reclassification from AOCI to RE of the stranded tax balance was offset byeffects resulting from the Company’s valuation allowance.

(e)enactment of the Tax Cuts and Jobs Act (the "Tax Act").

(c) This accumulated other comprehensive incomeAOCI component is included in the computation of net periodic pension and other postretirement costs (see Note 8 of this report for additional information).

77



NOTE 7 - INCOME TAXES

The significant components of the income tax expense (benefit) are as follows (in millions):

2015

  UAL   United 

Current

   $56      $56   

Deferred

   (3,177)     (3,136)  
  

 

 

   

 

 

 
   $(3,121)     $(3,080)  
  

 

 

   

 

 

 

2014

        

Current

   $(17)     $(17)  

Deferred

   13      13   
  

 

 

   

 

 

 
   $(4)     $(4)  
  

 

 

   

 

 

 

2013

        

Current

   $(18)     $(18)  

Deferred

   (14)     1   
  

 

 

   

 

 

 
   $(32)     $(17)  
  

 

 

   

 

 

 

78


The income tax provision (benefit) differed from amounts computed at the statutory federal income tax rate and consisted of the following significant components, as follows (in millions):

UAL

 2015  2014  2013��

Income tax provision at statutory rate

  $1,477     $395     $189   

State income taxes, net of federal income tax

  60     16     5   

Foreign income taxes

  4     2     3   

Nondeductible employee meals

  15     15     15   

State rate change

  —     —     (33)  

Valuation allowance

  (4,684)    (441)    (219)  

Other, net

  7     9     8   
 

 

 

  

 

 

  

 

 

 
  $(3,121)    $(4)    $(32)  
 

 

 

  

 

 

  

 

 

 

United

 2015  2014  2013 

Income tax provision at statutory rate

  $1,477     $388     $223   

State income taxes, net of federal income tax

  60     15     5   

Foreign income taxes

  4     2     3   

Nondeductible employee meals

  15     15     15   

Derivative market adjustment

  —     (7)    (24)  

State rate change

  —     —     (33)  

Valuation allowance

  (4,643)    (426)    (229)  

Other, net

  7     9     23   
 

 

 

  

 

 

  

 

 

 
  $(3,080)    $(4)    $(17)  
 

 

 

  

 

 

  

 

 

 


UAL 2018 2017 (a) 2016 (a)
Income tax provision at statutory rate $558
 $1,064
 $1,320
State income taxes, net of federal income tax benefit 29
 30
 38
Foreign tax rate differential (84) (43) —
Global intangible low-taxed income 4
 —
 —
Foreign income taxes 2
 3
 3
Nondeductible employee meals 12
 17
 16
Impact of Tax Act (5) (179) —
Income tax adjustment from AOCI (b) —
 —
 180
State rate change 3
 12
 (12)
Valuation allowance (3) (16) 20
Other, net 13
 8
 (26)
  $529
 $896
 $1,539
       
Current $14
 $(77) $(92)
Deferred 515
 973
 1,631
  $529
 $896
 $1,539
       
United 2018 2017 (a) 2016 (a)
Income tax provision at statutory rate $559
 $1,065
 $1,321
State income taxes, net of federal income tax 29
 30
 38
Foreign tax rate differential (84) (43) —
Global intangible low-taxed income 4
 —
 —
Foreign income taxes 2
 3
 3
Nondeductible employee meals 12
 17
 16
Impact of Tax Act (5) (196) —
Income tax adjustment from AOCI (b) —
 —
 180
State rate change 3
 12
 (12)
Valuation allowance (3) (16) 20
Other, net 12
 7
 (25)
  $529
 $879
 $1,541
       
Current $14
 $(77) $(92)
Deferred 515
 956
 1,633
  $529
 $879
 $1,541
(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.
(b) Prior to the release of the deferred income tax valuation allowance in the third quarter of 2015, the Company recorded approximately $465 million of valuation allowance adjustments in AOCI. Subsequent to the release of the deferred income tax valuation allowance in 2015, the $465 million debit remained within AOCI, of which $180 million related to losses on fuel hedges designated for hedge accounting and $285 million related to pension and other postretirement liabilities. Accounting rules required the adjustments to remain in AOCI as long as the Company had fuel derivatives designated for cash flow hedge accounting and the Company continues to provide pension and postretirement benefits. In 2016, the Company settled all of its fuel hedges and has not entered into any new fuel derivative contracts for hedge accounting. Accordingly, the Company reclassified the $180 million to income tax expense in 2016.
The Company's effective tax rate for the year ended December 31, 2018 differed from the federal statutory rate of 21% due to a blend of federal, state and foreign taxes as well as the impact of certain nondeductible items.
On December 22, 2017, Congress enacted the Tax Act, which made significant changes to U.S. federal income tax laws, including reducing the corporate rate from 35% to 21% effective January 1, 2018. In December 2017, the SEC issued Staff Accounting Bulletin No. 118 ("SAB 118"), which allowed the Company to record provisional amounts related to the impact of

the Tax Act and to adjust those amounts during a measurement period not to extend more than one year from the date of enactment. Based on our current interpretation of the Tax Act and published Treasury and Internal Revenue Service ("IRS") guidance as of December 31, 2018, the Company's accounting for the impacts of the Tax Act is complete and the Company has not recorded any material adjustments to the provisional amounts under SAB 118. In 2018, we recorded an income tax benefit for the one-time transition tax of $4 million and have completed the re-measurement of our net deferred tax balances. The Tax Act included a Global Intangible Low-Taxed Income ("GILTI") provision which introduced a new tax on foreign income in excess of a deemed return on tangible business property of foreign subsidiaries. The GILTI provisions of the Tax Act became effective for the Company during 2018 and we elected to account for it in the period incurred (the "period cost method").
Temporary differences and carryforwards that give rise to deferred tax assets and liabilities at December 31, 20152018 and 20142017 were as follows (in millions):

  UAL  United 
  December 31,  December 31, 
  2015  2014  2015  2014 

Deferred income tax asset (liability):

    

Federal and state net operating loss (“NOL”) carryforwards

  $2,897     $3,491     $2,855     $3,423   

Deferred revenue

  2,160     2,287     2,160     2,287   

Employee benefits, including pension, postretirement and medical

  1,662     1,943     1,662     1,943   

Alternative minimum tax (“AMT”) credit carryforwards

  232     214     232     214   

Other

  566     657     566     659   

Less: Valuation allowance

  (48)    (4,751)    (48)    (4,721)  
 

 

 

  

 

 

  

 

 

  

 

 

 

Total deferred tax assets

  $   7,469     $3,841     $7,427     $3,805   
 

 

 

  

 

 

  

 

 

  

 

 

 

Depreciation, capitalized interest and other

 $(3,921)    $(3,212)    $(3,921)    $(3,212)  

Intangibles

  (1,511)    (1,545)    (1,511)    (1,545)  

Other

  —     (84)    —     (48)  
 

 

 

  

 

 

  

 

 

  

 

 

 

Total deferred tax liabilities

  $(5,432)    $(4,841)    $(5,432)    $(4,805)  
 

 

 

  

 

 

  

 

 

  

 

 

 

Net deferred tax asset (liability)

  $2,037     $(1,000)    $1,995     $(1,000)  
 

 

 

  

 

 

  

 

 

  

 

 

 

79

  UAL United
  2018 2017 2018 2017
Deferred income tax asset (liability):        
Federal and state net operating loss ("NOL") carryforwards $398
 $601
 $372
 $574
Deferred revenue 1,232
 1,090
 1,232
 1,090
Employee benefits, including pension, postretirement and medical 885
 1,051
 885
 1,051
Other 408
 351
 406
 351
Less: Valuation allowance (59) (63) (59) (63)
Total deferred tax assets $2,864
 $3,030
 $2,836
 $3,003
         
Depreciation $(2,929) $(2,431) $(2,929) $(2,431)
Intangibles (749) (803) (749) (803)
Total deferred tax liabilities $(3,678) $(3,234) $(3,678) $(3,234)
Net deferred tax liability $(814) $(204) $(842) $(231)
United and its domestic consolidated subsidiaries file a consolidated federal income tax return with UAL. Under an intercompany tax allocation policy, United and its subsidiaries compute, record and pay UAL for their own tax liability as if they were separate companies filing separate returns. In determining their own tax liabilities, United and each of its subsidiaries take into account all tax credits or benefits generated and utilized as separate companies and they are each compensated for the aforementioned tax benefits only if they would be able to use those benefits on a separate company basis.

The Company's federal and state NOL carryforwards relate to prior years’years' NOLs, which may be used to reduce tax liabilities in future years. These tax benefits are mostly attributable to federal pre-tax NOL carryforwards of $8.0$1.6 billion for UAL. If not utilized these federal pre-tax NOLs will expire as follows (in billions): $2.1$0.6 in 2025, $2.0 in 2026, $1.4 in 2027 and $2.5 after 2028.2030, $1.0 thereafter. In addition, for UAL the majority of tax benefits of the state net operating lossesNOLs of $103$83 million for UAL will expire over a five to 20-yeartwenty year period. Additionally, the Company has $232We have recorded a $48 million of AMT credit carryforwards which do not expire.

The Company’s income tax benefit was $3.1 billion for the year ended December 31, 2015. A discrete tax benefit of $3.1 billion for the reduction to the U.S. net federal and state deferred tax asset valuation allowance was included in the income tax benefit for the year ended December 31, 2015.

During 2015, after considering all positive and negative evidence and the four sources of taxable income, the Company concluded that its deferred income tax assets are more likely than not to be realized. In evaluating the likelihood of utilizing the Company’s net federal and state deferred tax assets, the significant relevant factors that the Company considered are: (1) its recent history and forecasted profitability; (2) growth in the U.S. and global economies; and (3) future impact of taxable temporary differences. Although the Company was not in a three-year cumulative loss position at December 31, 2014, management concluded that the low level of cumulative pre-tax income, coupled with the Company’s history of operating losses resulted in a determination that a valuation allowance was still necessary. We considered past profitability and future expectations of profitability to determine whether it is more likely than not that we will generate sufficient taxable income to realize our net deferred tax assets. Management placed significant weight on past performance (i.e., losses or near break-even results in 2009 to 2013) as it is more objectively verifiable than projections of future taxable income. However, during 2015, the Company’s pre-tax profit of $4.2 billion benefited from lower oil prices and improved efficiency that resulted in significant taxable income. Additionally, based upon current projection of future earnings, the Company evaluated the NOLs expiration periods and change in ownership limitations under Section 382 of the Internal Revenue Code of 1986, as amended, and determined the NOLs would be realized before expiring beginning in 2025. Therefore, the Company released almost all of its valuation allowance in 2015, resulting in a $3.1 billion benefit in its provision for income taxes. The valuation allowance recorded in AOCI in prior years was released through the income statement and resulted in remaining debits within AOCI of $285 million and $180 million related to pension and derivatives, respectively, which will not be recognized into income tax expense until either the plans are exited or the Company no longer has any outstanding derivatives.

The Company has retained a valuation allowance of $48 million against certain state and local NOLs and credit carryforwards at the end of 2015. The Company expects these NOLs and credits will expire unused due to limited carryforward periods. The ability to utilize these state NOLs and credits will be evaluated on a quarterly basis to determine if there are any significant events or any prudent and feasible tax planning strategies that would affect the Company’s ability to realize these deferred tax assets.

NOLs.

The Company’s effective tax rates differ from the federal statutory rate of 35% primarily because of the impact of changes to existing valuation allowances. The change in the effective tax rate each period is impacted by a number of factors, including the relative mix of domestic and state income tax expense in the U.S., adjustments to the valuation allowances and discrete items. During 2015, the Company reversed a significant portion of valuation allowances. Of the $4.7 billion reversed, $1.5 billion relates to current year income.

The Company’sCompany's unrecognized tax benefits related to uncertain tax positions were $24$39 million, $9$21 million and $14$74 million at 2015, 2014December 31, 2018, 2017 and 2013,2016, respectively. Included in the ending balance at 2015December 31, 2018 is $21$39 million that would affect the Company’sCompany's effective tax rate if recognized. The changes in unrecognized tax benefits relating to

80

settlements with taxing authorities, unrecognized tax benefits as a result of tax positions taken during a prior period and unrecognized tax benefits relating from a lapse of the statute of limitations were immaterial during 2015, 20142018, 2017 and 2013.2016. The Company does not expect significant increases or decreases in their unrecognized tax benefits within the next 12 months.

There are no significantmaterial amounts included in the balance at December 31, 20152018 for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

The Company’sCompany's federal income tax returns for tax years after 2002 remain subject to examination by the Internal Revenue Service (“IRS”)IRS and state taxing jurisdictions. Currently, there are no ongoing examinations of the Company’sCompany's prior year tax returns being conducted by the IRS.

NOTE 8 - PENSION AND OTHER POSTRETIREMENT PLANS

The following summarizes the significant pension and other postretirement plans of United:

Pension PlansPlans.

United maintains two primary defined benefit pension plans, one covering certain pilot employees and another covering certain U.S. non-pilot employees. Each of these plans provide benefits based on a combination of years of benefit


accruals service and an employee’semployee's final average compensation. Additional benefit accruals wereare frozen under the plan covering certain pilot employees during 2005 and management and administrative employees as of December 31, 2013 at which time any existing accrued benefits for those employees were preserved.employees. Benefit accruals for certain non-pilot employees under its other primary defined benefit pension plan continue. United maintains additional defined benefit pension plans, which cover certain international employees.

Other Postretirement PlansPlans.

We maintainUnited maintains postretirement medical programs which provide medical benefits to certain retirees and eligible dependents, as well as life insurance benefits to certain retirees participating in the plan. Benefits provided are subject to applicable contributions, co-payments, deductibles and other limits as described in the specific plan documentation.

Changes in benefits that either qualified as curtailments (which reduced prior actuarial losses) or negative plan amendments are detailed in the tables below.

Actuarial assumption changes are reflected as a component of the net actuarial gains/(losses)loss/(gain) during 20152018 and 2014.2017. The 2018 actuarial gains were mainly related to an increase in the discount rate applied in 2018 compared to 2017. These amounts will be amortized over the average remaining service life of the covered active employees or the average life expectancy of inactive participantsparticipants. The impacts on 2018 and will impact 2015 and 20142017 pension and retiree medical expense as describedare presented below.

81

The following table setstables set forth the reconciliation of the beginning and ending balances of the benefit obligation and plan assets, the funded status and the amounts recognized in these financial statements for the defined benefit and other postretirement plans (in millions):

   Pension Benefits 
   Year Ended
December 31, 2015		   Year Ended
December 31, 2014		 

Accumulated benefit obligation:

   $3,795      $4,068   
  

 

 

   

 

 

 
    

Change in projected benefit obligation:

    

Projected benefit obligation at beginning of year

   $4,803      $4,000   

Service cost

   124      98   

Interest cost

   200      201   

Actuarial (gain) loss

   (298)     807   

Gross benefits paid and settlements

   (343)     (281)  

Other

   (13)     (22)  
  

 

 

   

 

 

 

Projected benefit obligation at end of year

   $4,473      $4,803   
  

 

 

   

 

 

 

Change in plan assets:

    

Fair value of plan assets at beginning of year

   $2,562      $2,397   

Actual gain (loss) on plan assets

   (59)     151   

Employer contributions

   824      307   

Gross benefits paid and settlements

   (343)     (281)  

Other

   (9)     (12)  
  

 

 

   

 

 

 

Fair value of plan assets at end of year

   $2,975      $2,562   
  

 

 

   

 

 

 

Funded status—Net amount recognized

   $(1,498)     $(2,241)  
  

 

 

   

 

 

 

   Pension Benefits 
   December 31, 2015   December 31, 2014 

Amounts recognized in the consolidated balance sheets consist of:

    

Noncurrent asset

   $2      $2   

Current liability

   (12)     (17)  

Noncurrent liability

   (1,488)     (2,226)  
  

 

 

   

 

 

 

Total liability

   $(1,498)     $(2,241)  
  

 

 

   

 

 

 

Amounts recognized in accumulated other comprehensive loss consist of:

    

Net actuarial loss

   $(844)     $(982)  

Prior service loss

   (1)     (1)  
  

 

 

   

 

 

 

Total accumulated other comprehensive loss

   $(845)     $(983)  
  

 

 

   

 

 

 

82

   Other Postretirement Benefits 
   Year Ended
December 31, 2015		   Year Ended
December 31, 2014		 

Change in benefit obligation:

    

Benefit obligation at beginning of year

   $2,052      $1,819   

Service cost

   21      19   

Interest cost

   82      88   

Plan participants’ contributions

   68      67   

Benefits paid

   (205)     (212)  

Actuarial (gain) loss

   (22)     262   

Other

   6      9   
  

 

 

   

 

 

 

Benefit obligation at end of year

   $2,002      $2,052   
  

 

 

   

 

 

 

Change in plan assets:

    

Fair value of plan assets at beginning of year

   $57      $57   

Actual return on plan assets

   1      1   

Employer contributions

   135      144   

Plan participants’ contributions

   68      67   

Benefits paid

   (205)     (212)  

Fair value of plan assets at end of year

   56      57   
  

 

 

   

 

 

 

Funded status—Net amount recognized

   $(1,946)     $(1,995)  
  

 

 

   

 

 

 

  Other Postretirement Benefits 
  December 31, 2015  December 31, 2014 

Amounts recognized in the consolidated balance sheets consist of:

  

Current liability

  $(64)    $(62)  

Noncurrent liability

  (1,882)    (1,933)  
 

 

 

  

 

 

 

Total liability

  $(1,946)    $(1,995)  
 

 

 

  

 

 

 
Amounts recognized in accumulated other comprehensive income consist of:  

Net actuarial gain

  $236     $233   

Prior service credit

  246     278   
 

 

 

  

 

 

 

Total accumulated other comprehensive income

  $482     $511   
 

 

 

  

 

 

 

 Pension Benefits
 Year Ended December 31, 2018 Year Ended December 31, 2017
Accumulated benefit obligation:$4,448
 $4,739
    
Change in projected benefit obligation:   
Projected benefit obligation at beginning of year$5,852
 $5,253
Service cost228
 195
Interest cost217
 220
Actuarial (gain) loss(601) 525
Gross benefits paid and settlements(292) (366)
Other(8) 25
Projected benefit obligation at end of year$5,396
 $5,852
    
Change in plan assets:   
Fair value of plan assets at beginning of year$3,932
 $3,355
Actual (loss) return on plan assets(215) 510
Employer contributions413
 419
Gross benefits paid and settlements(292) (366)
Other(11) 14
Fair value of plan assets at end of year$3,827
 $3,932
Funded status—Net amount recognized$(1,569) $(1,920)





 Pension Benefits
 December 31, 2018 December 31, 2017
Amounts recognized in the consolidated balance sheets consist of:   
Noncurrent asset$13
 $9
Current liability(6) (8)
Noncurrent liability(1,576) (1,921)
Total liability$(1,569) $(1,920)
    
Amounts recognized in accumulated other comprehensive loss consist of:   
Net actuarial loss$(1,382) $(1,610)
Prior service cost(5) (1)
Total accumulated other comprehensive loss$(1,387) $(1,611)
    
 Other Postretirement Benefits
 Year Ended December 31, 2018 Year Ended December 31, 2017
Change in benefit obligation:   
Benefit obligation at beginning of year$1,710
 $1,687
Service cost12
 13
Interest cost61
 66
Plan participants' contributions68
 68
Benefits paid(181) (178)
Actuarial loss (gain)(285) 40
Other6
 14
Benefit obligation at end of year$1,391
 $1,710
    
Change in plan assets:   
Fair value of plan assets at beginning of year$54
 $55
Actual return on plan assets1
 1
Employer contributions111
 108
Plan participants' contributions68
 68
Benefits paid(181) (178)
Fair value of plan assets at end of year53
 54
Funded status—Net amount recognized$(1,338) $(1,656)
 Other Postretirement Benefits
 December 31, 2018 December 31, 2017
Amounts recognized in the consolidated balance sheets consist of:   
Current liability$(43) $(54)
Noncurrent liability(1,295) (1,602)
Total liability$(1,338) $(1,656)
Amounts recognized in accumulated other comprehensive income consist of:   
Net actuarial gain$554
 $301
Prior service credit170
 208
Total accumulated other comprehensive income$724
 $509

The following information relates to all pension plans with an accumulated benefit obligation and a projected benefit obligation in excess of plan assets at December 31 (in millions):

      2015          2014     

Projected benefit obligation

  $4,292     $4,625   

Accumulated benefit obligation

  3,655     3,930   

Fair value of plan assets

  2,794     2,387   

83

 2018 2017
Projected benefit obligation$5,196
 $5,637
Accumulated benefit obligation4,286
 4,567
Fair value of plan assets3,614
 3,709
Net periodic benefit cost for the years ended December 31 included the following components (in millions):

   2015   2014   2013 
   Pension
Benefits		   Other
Postretirement
Benefits		   Pension
Benefits		   Other
Postretirement
Benefits		   Pension
Benefits		   Other
Postretirement
Benefits		 
Service cost   $124      $21      $98      $19      $121      $52   
Interest cost   200      82      201      88      191      110   
Expected return on plan assets   (194)     (2)     (180)     (2)     (163)     (2)  
Amortization of unrecognized actuarial (gain) loss   85      (22)     12      (47)     48      3   
Amortization of prior service credits   —      (32)     —      (31)     —      (3)  
Other   4      —      1      —      (8)     2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Net periodic benefit cost   $219      $47      $132      $27      $189      $162   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The estimated amounts that will be amortized

 2018 2017 2016
 Pension Benefits Other Postretirement Benefits Pension Benefits Other Postretirement Benefits Pension Benefits Other Postretirement Benefits
Service cost$228
 $12
 $195
 $13
 $112
 $19
Interest cost217
 61
 220
 66
 200
 86
Expected return on plan assets(292) (2) (243) (2) (216) (2)
Curtailment gain—
 —
 —
 —
 —
 (107)
Amortization of unrecognized actuarial (gain) loss130
 (32) 128
 (33) 76
 (19)
Amortization of prior service credits—
 (37) —
 (37) —
 (31)
Other1
 —
 5
 —
 5
 —
Net periodic benefit cost (credit)$284
 $2
 $305
 $7
 $177
 $(54)
Service cost is recorded in 2016 outSalaries and related costs on the statement of accumulatedconsolidated operations. All other comprehensive income (loss) intocomponents of net periodic benefit costcosts are as follows (in millions):

   Pension
Benefits		   Other
Postretirement
Benefits		 

Actuarial (gain) loss

   $71      $(22)  

Prior service credit

   —      (32)  

recorded in Miscellaneous, net on the statement of consolidated operations.

See Note 14 of this report for additional information related to the curtailment gain recorded in 2016.
The assumptions used for the benefit plans were as follows:

 

      Pension Benefits      

Assumptions used to determine benefit obligations

      2015            2014      

Discount rate

  4.58%    4.20%  

Rate of compensation increase

  3.66%    3.66%  
  

Assumptions used to determine net expense

  

Discount rate

  4.20%    5.10%  

Expected return on plan assets

  7.40%    7.36%  

Rate of compensation increase

  3.51%    3.50%  

 

  Other Postretirement Benefits 

Assumptions used to determine benefit obligations

      2015           2014     

Discount rate

   4.49%     4.07%  
    

Assumptions used to determine net expense

    

Discount rate

   4.07%     4.94%  

Expected return on plan assets

   3.00%     4.00%  

Health care cost trend rate assumed for next year

   6.75%     7.00%  

Rate to which the cost trend rate is assumed to decline (ultimate trend rate in 2023)

   5.00%     5.00%  

84

During 2015, the Company experienced changes in its benefit obligations related to changes in discount rates and mortality tables in its pension plans and other postretirement benefit plans.

  Pension Benefits
Assumptions used to determine benefit obligations 2018 2017
Discount rate 4.20% 3.65%
Rate of compensation increase 3.89% 3.89%
     
Assumptions used to determine net expense  
Discount rate 3.65% 4.19%
Expected return on plan assets 7.31% 7.02%
Rate of compensation increase 3.89% 3.54%
 
  Other Postretirement Benefits
Assumptions used to determine benefit obligations 2018 2017
Discount rate 4.30% 3.63%
     
Assumptions used to determine net expense    
Discount rate 3.63% 4.07%
Expected return on plan assets 3.00% 3.00%
Health care cost trend rate assumed for next year 6.00% 6.25%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate in 2023) 5.00% 5.00%

The Company used the Society of Actuaries’Actuaries' 2014 mortality tables, modified to reflect the Social Security Administration Trustee’s
Trustee's Report on current projections regarding expected longevity improvements.

The Company selected the 20152018 discount rate for substantially all of its plans by using a hypothetical portfolio of high quality bonds at December 31, 2015,2018, that would provide the necessary cash flows to match projected benefit payments.


We develop our expected long-term rate of return assumption for suchour defined benefit plans based on historical experience and by evaluating input from the trustee managing the plans’plans' assets.Our expected long-term rate of return on plan assets for these plans is based on a target allocation of assets, which is based on our goal of earning the highest rate of return while maintaining risk at acceptable levels. The plans strive to have assets sufficiently diversified so that adverse or unexpected results from one security class will not have an unduly detrimental impact on the entire portfolio. Plan fiduciaries regularly review our actual asset allocation and the pension plans’plans' investments are periodically rebalanced to our targeted allocation when considered appropriate. United’sUnited's plan assets are allocated within the following guidelines:

  

Percent of Total

 

Expected Long-Term

Rate of Return

Equity securities30-45% 9.5%

EquityFixed-income securities

30-40  30-40    %5.8     9.5    %

Fixed-income securities

Alternatives		10-25 34-445.0

Alternatives

14-27 7.3

Other

0-10  0-107.8 7.0

One-hundred percent of other postretirement plan assets are invested in a deposit administration fund.

Assumed health care cost trend rates have a significant effect on the amounts reported for the other postretirement plans. A 1% change in the assumed health care trend rate for the Company would have the following additional effects (in millions):

   1% Increase   1% Decrease 

Effect on total service and interest cost for the year ended December 31, 2015

   $13      $(11)  

Effect on postretirement benefit obligation at December 31, 2015

   219      (191)  

A one percentage point decrease in the weighted average discount rate would increase the Company's postretirement benefit liability by approximately $227$139 million and increase the estimated 20152018 benefits expense by approximately $12$10 million.

Fair Value Information. Accounting standards require us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

Level 1

Unadjusted quoted prices in active markets for assets or liabilities identical to those to be reported at fair value

Level 2

Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs

Level 3

Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants would price the assets or liabilities

85


Assets and liabilities measured at fair value are based on the valuation techniques identified in the tables below. The valuation techniques are as follows:


(a)Market approach.Prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities; and


(b)Income approach. Techniques to convert future amounts to a single current value based on market expectations (including present value techniques, option-pricing and excess earnings models).


The following tables present information about United’sUnited's pension and other postretirement plan assets at December 31, (in millions):

   2015     2014 
Pension Plan Assets:  Total   Level 1   Level 2   Level 3         Total       Level 1   Level 2   Level 3 

Equity securities funds

   $1,135      $254      $881      $—       $1,181      $388      $793      $—   

Fixed-income securities

   1,109      —      1,100      9       813      —      813      —   

Alternatives

   527      —      267      260       359      —      148      211   

Insurance contract

   18      —      —      18       21      —      —      21   

Other investments

   186      37      149      —       188      —      165      23   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $2,975      $291      $2,397      $287       $2,562      $388      $1,919      $255   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
Other Postretirement Benefit Plan Assets:                 

Deposit administration fund

   $56      $—      $—      $56       $57      $—      $—      $57   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

  2018  2017
Pension Plan Assets: Total Level 1 Level 2 Level 3 Assets Measured at NAV(a)  Total Level 1 Level 2 Level 3 Assets Measured at NAV(a)
Equity securities funds $1,394
 $254
 $106
 $—
 $1,034
  $1,406
 $269
 $133
 $—
 $1,004
Fixed-income securities 1,431
 —
 605
 21
 805
  1,470
 —
 834
 18
 618
Alternatives 596
 —
 —
 134
 462
  637
 —
 —
 139
 498
Other investments 406
 224
 40
 142
 —
  419
 32
 124
 172
 91
Total $3,827
 $478
 $751
 $297
 $2,301
  $3,932
 $301
 $1,091
 $329
 $2,211
Other Postretirement Benefit Plan Assets:                     
Deposit administration fund $53
 $—
 $—
 $53
 $—
  $54
 $—
 $—
 $54
 $—
(a) In accordance with the relevant accounting standards, certain investments that are measured at fair value using the net asset value ("NAV") per share (or its equivalent) have not been classified in the fair value hierarchy. These investments are commingled funds that invest in fixed-income instruments including bonds, debt securities, and other similar instruments issued by various U.S. and non-U.S. public- or private-sector entities. Redemption periods for these investments range from daily to semiannually.

Equity and Fixed-Income.Equities include investments in both developed market and emerging market equity securities. Fixed-income includes primarily U.S. and non-U.S. government fixed-income securities and U.S. and non-U.Snon-U.S. corporate fixed-income securities.

Insurance Contract and Deposit Administration Fund.Each of these investments areThis investment is a stable value investment productsproduct structured to provide investment income.

Alternatives.Alternative investments consist primarily of investments in hedge funds, real estate and private equity interests.

Other investments.Other investments consist of cash, insurance contracts and other funds.

The reconciliation of United’sUnited's defined benefit plan assets measured at fair value using unobservable inputs (Level 3) for the years ended December 31, 20152018 and 20142017 is as follows (in millions):

   2015   2014 

Balance at beginning of year

    $  312     $  293    

Actual return on plan assets:

    

Sold during the year

   11      7    

Held at year end

   (1)     6    

Purchases, sales, issuances and settlements (net)

   21      6    
  

 

 

   

 

 

 

Balance at end of year

    $343       $  312    
  

 

 

   

 

 

 

 2018 2017
Balance at beginning of year$383
 $287
Actual return (loss) on plan assets:   
Sold during the year10
 7
Held at year end(21) 16
Purchases, sales, issuances and settlements (net)(22) 73
Balance at end of year$350
 $383
Funding requirements for tax-qualified defined benefit pension plans are determined by government regulations. United’sUnited's contributions reflected above have satisfied its required contributions through the 20152018 calendar year. In 2016,2019, employer anticipated contributions to all of United’sUnited's pension and postretirement plans are at least $400$318 million and approximately $120$95 million, respectively.

86

The estimated future benefit payments, net of expected participant contributions, in United’sUnited's pension plans and other postretirement benefit plans as of December 31, 20152018 are as follows (in millions):

         Pension         Other
   Postretirement  		     Other Postretirement—  
subsidy receipts		 

2016

    $282        $125        $5    

2017

   287       128       5    

2018

   286       131       6    

2019

   292       135       6    

2020

   293       140       7    

Years 2021 – 2025

   1,577       761       40    

 Pension Other
Postretirement		 Other Postretirement—
subsidy receipts
2019$329
 $100
 $5
2020327
 104
 6
2021353
 108
 6
2022367
 111
 6
2023379
 113
 7
Years 2024 – 20282,022
 575
 38

Defined Contribution Plans

Depending upon the employee group, employer contributions consist of matching contributions and/or non-elective employer contributions. United’sUnited's employer contribution percentages vary from 1% to 16% of eligible earnings depending on the terms of each plan. United recorded contributions toexpenses for its defined contribution plans of $522$693 million, $503$656 million and $433$592 million in the years ended December 31, 2015, 20142018, 2017 and 2013,2016, respectively.

Multi-Employer Plans

United’s

United's participation in the IAM National Pension Plan (“("IAM Plan”Plan") for the annual period ended December 31, 20152018 is outlined in the table below. There have been no significant changes that affect the comparability 2015of 2018 and 20142017 contributions. The risks of participating in these multi-employer plans are different from single-employer plans, as United may be subject to additional risks that others do not meet their obligations, which in certain circumstances could revert to United. The IAM Plan reported $382$435 million in employers’employers' contributions for the year ended December 31, 2014.2017. For 2014,2017, the Company’sCompany's contributions to the IAM Plan represented more than 5% of total contributions to the IAM Plan.

The 2018

information is not available as Form 5500 is not final for the plan year.

Pension Fund

IAM National Pension Fund

EIN/ Pension Plan Number

51-6031295 - 002

Pension Protection Act Zone Status (2015(2018 and 2014)

2017)Green Zone. Plans in the green zone are at least 80 percent funded.

FIP/RP Status Pending/Implemented

No

United’sUnited's Contributions

$4052 million, $39$50 million and $38$41 million in the years ended December 31, 2015, 20142018, 2017 and 2013,2016, respectively

Surcharge Imposed

No

Expiration Date of Collective Bargaining Agreement

N/A

At the date the financial statements were issued, Forms 5500 were not available for the plan year ending in 2015.

Profit Sharing

Substantially all employees participate in profit sharing based on a percentage of pre-tax earnings, excluding special items,charges, profit sharing expense and share-based compensation. Profit sharing percentages range from 5% to 20% depending on the work group, and in some cases profit sharing percentages vary above and below certain pre-tax margin thresholds. Eligible U.S. co-workers in each participating work group receive a profit sharing payout using a formula based on the ratio of each qualified co-worker’sco-worker's annual eligible earnings to the eligible earnings of all qualified co-workers in all domestic work groups. Eligible non-U.S. co-workers receive profit sharing based on the calculation under the U.S. profit sharing plan for management and administrative employees. The Company recorded profit sharing and related payroll tax expense of $698$334 million, $235$349 million and $190$628 million in 2015, 20142018, 2017 and 2013,2016, respectively. Profit sharing expense is recorded as a component of Salaries and related costs in the Company’sCompany's statements of consolidated operations.

87


NOTE 9 - INVESTMENTS AND FAIR VALUE MEASUREMENTS

Fair Value Information. Accounting standards require us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are described in Note 8 of this report. The table below presents disclosures about the fair value of financial assets and financial liabilities measured at fair value on a recurring basis in the Company’sCompany's financial statements as of December 31 (in millions):

   2015   2014 
   Total   Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3 
   UAL 

Cash and cash equivalents

    $3,006     $3,006       $—       $—       $2,002       $2,002       $—       $—   

Short-term investments:

                

Corporate debt

   891      —      891      —      876      —      876      —   

Asset-backed securities

   710      —      710      —      901      —      901      —   

Certificates of deposit placed

through an account registry

service (“CDARS”)

   281      —      281      —      256      —      256      —   

U.S. government and agency notes

   72      —      72      —      68      —      68      —   

Auction rate securities

   9      —      —      9      26      —      —      26   

Other fixed-income securities

   227      —      227      —      255      —      255      —   

Enhanced equipment trust

certificates (“EETC”)

   26      —      —      26      28      —      —      28   

Fuel derivatives liability, net

   124      —      124      —      717      —      717      —   

Foreign currency derivatives

   —      —      —      —      2      —      2      —   

Restricted cash

   206      206      —      —      320      320      —      —   
   United 

Cash and cash equivalents

    $    3,000       $    3,000       $—       $—       $    1,996       $    1,996       $—       $—   

Short-term investments:

                

Corporate debt

   891      —      891      —      876      —      876      —   

Asset-backed securities

   710      —      710      —      901      —      901      —   

CDARS

   281      —      281      —      256      —      256      —   

U.S. government and agency notes

   72      —      72      —      68      —      68      —   

Auction rate securities

   9      —      —      9      26      —      —      26   

Other fixed-income securities

   227      —      227      —      255      —      255      —   

EETC

   26      —      —      26      28      —      —      28   

Fuel derivatives liability, net

   124      —      124      —      717      —      717      —   

Foreign currency derivatives

   —      —      —      —      2      —      2      —   

Restricted cash

   206      206      —      —      320      320      —      —   

Convertible debt derivative asset

   —      —      —      —      712      —      —      712   

Convertible debt derivative option liability

   —      —      —      —      511      —      —      511   

88

United’s debt-related derivatives presented in the tables above related to (a) supplemental indentures that provided that United’s convertible debt was convertible into shares of UAL common stock upon the terms and conditions specified in the indentures, and (b) the embedded conversion options in United’s convertible debt that were required to be separated and accounted for as though they were free-standing derivatives as a result of the United debt becoming convertible into the common stock of a different reporting entity. The derivatives described above related to the 4.5% Convertible Notes due 2015 (the “4.5% Convertible Notes”). Gains (losses) on these derivatives were recorded in Nonoperating income (expense): Miscellaneous, net in United’s statements of consolidated operations. These derivatives along with their gains (losses) were reported in United’s separate financial statements and were eliminated in consolidation for UAL. In January 2015, the holders of substantially all of the remaining $202 million principal amount of the 4.5% Convertible Notes exercised their conversion option resulting in the issuance of 11 million shares of UAL common stock. The derivative assets and liabilities associated with the 4.5% Convertible Notes were settled in connection with the retirement of the related convertible debt, and the final accounting did not materially impact UAL’s or United’s statements of consolidated operations.

 2018 2017
 Total Level 1
 Level 2
 Level 3
 Total Level 1
 Level 2
 Level 3
Cash and cash equivalents$1,694
 $1,694
 $—
 $—
 $1,482
 $1,482
 $—
 $—
Short-term investments:               
Corporate debt1,023
 —
 1,023
 —
 958
 —
 958
 —
Asset-backed securities746
 —
 746
 —
 753
 —
 753
 —
U.S. government and agency notes108
 —
 108
 —
 113
 —
 113
 —
Certificates of deposit placed through an account registry service ("CDARS")75
 —
 75
 —
 120
 —
 120
 —
Other fixed-income securities116
 —
 116
 —
 188
 —
 188
 —
Other investments measured at NAV188
 —
 —
 —
 184
 —
 —
 —
Restricted cash105
 105
 —
 —
 109
 109
 —
 —
Long-term investments:
              
Equity securities249
 249
 —
 —
 99
 99
 —
 —
Enhanced equipment trust certificates ("EETC")18
 —
 —
 18
 22
 —
 —
 22
Avianca Holdings S.A. ("AVH") Derivative Assets11
 —
 —
 11
 —
 —
 —
 —
Available-for-sale investment maturities—The - The short-term investments shown in the table above are classified as available-for-sale.available-for-sale, with the exception of investments measured at NAV. As of December 31, 2015,2018, asset-backed securities have remaining maturities of less than one year to approximately 3416 years, corporate debt securities have remaining maturities of less than one year to approximately sixthree years and CDARS have maturities of less than one year. U.S. government and other securities have maturities of less than one year to approximately threetwo years. The EETC securities mature in 2019.

Restricted cash - Restricted cash primarily includes cash collateral for letters of credit and collateral associated with obligations for facility leases and other insurance-related obligations.
Equity securities - Equity securities represent United's investment in Azul. In 2018, the Company invested $138 million in Azul thus increasing its preferred equity stake in Azul to approximately 8% (representing approximately 2% of the total capital

stock of Azul). The Company recognizes changes to the fair value of its equity investment in Azul in Miscellaneous, net in its statements of consolidated operations.
Synergy Term Loan - On November 29, 2018, United, as lender, entered into a Term Loan Agreement (the "Synergy Loan Agreement") with affiliates of Synergy Aerospace Corporation ("Synergy"), as borrower and guarantor, respectively, and, pursuant to the Synergy Loan Agreement, on November 30, 2018, United provided a $456 million term loan to Synergy (the "Synergy Term Loan"), secured by a pledge of borrower's equity, as well as Synergy's 516 million shares of common stock of AVH, the parent company of Avianca (equivalent to 64.5 million American Depositary Receipts ("ADRs"), the class of AVH securities that trades on the New York Stock Exchange ("NYSE")). Pursuant to the Synergy Loan Agreement, the Synergy Term Loan is due and payable in five annual installments beginning on November 30, 2021, to be repaid in full on November 30, 2025 (a portion of which is subject to extension in limited circumstances). Subject to the satisfaction of collateral coverage thresholds, minimum share price levels and certain other conditions, Synergy may repay United in shares of AVH common stock, at market value, in an amount up to 25 percent of any principal installment, or with cash from the sale of Synergy's shares of AVH stock. The Synergy Term Loan bears interest at an annual rate of 3 percent per annum, payable quarterly in arrears. United also obtained an option to acquire, on a gross or net basis and at a fixed price, up to 77.4 million shares of AVH common stock from Synergy (the "AVH Call Options"), and agreed with Synergy to share in any increase in value of the remaining 438.6 million shares of Synergy's AVH common stock within certain price ranges (the "AVH Share Appreciation Rights"). Until the third anniversary of funding, Synergy has the option to capitalize interest that would have been due, adding it to the outstanding principal balance of the Synergy Term Loan. Pursuant to the Synergy Loan Agreement, Synergy has agreed to certain financial and non-financial covenants, as well as customary events of default.
In connection with funding the Synergy Loan Agreement, on November 29, 2018, United also entered into an agreement with AVH's significant minority shareholder, Kingsland Holdings Limited ("Kingsland"), pursuant to which, in return for Kingsland's pledge of its 144.8 million shares of AVH common stock (equivalent to 18.1 million ADRs) and its consent to Synergy's pledge of its AVH common stock to United under the Synergy Loan Agreement, United (1) granted to Kingsland the right to put its shares of AVH common stock to United at market price on the fifth anniversary of the Synergy Loan Agreement, and (2) guaranteed Synergy's obligation to pay Kingsland (which amount, if paid by United, will increase United's secured loan to Synergy by such amount) if the market price of AVH common stock on the fifth anniversary is less than $12 per ADR on the NYSE, for an aggregate maximum possible combined put payment and guarantee amount on the fifth anniversary of $217.2 million. United also agreed with Kingsland to share in any increase in value of AVH common stock within certain price ranges (the "Upside Sharing Agreement").
AVH Derivative instrumentsAssets - The AVH Call Options, AVH Share Appreciation Rights and investmentsthe Upside Sharing Agreement (collectively, the "AVH Derivative Assets") are recorded at fair value as Other assets on the Company's balance sheet and are included in the table above. Changes in the fair value of the AVH Derivative Assets are recorded as part of Nonoperating income (expense): Miscellaneous, net on the Company's statements of consolidated operations.
Investments presented in the tablestable above have the same fair value as their carrying value. The table below presents the carrying values and estimated fair values of financial instruments not presented in the tables above as of December 31 (in millions):

  Fair Value of Debt by Fair Value Hierarchy Level 
  2015  2014 
  Carrying
Amount		  Fair Value  Carrying
Amount (a)		  Fair Value 
     Total  Level 1  Level 2  Level 3     Total  Level 1  Level 2  Level 3 

Long-term debt

  $  10,897    $  11,371    $—     $  8,646    $  2,725    $  11,266    $  12,386    $—      $  8,568    $  3,818  

(a) 2014 amount differs from the amount reported in the Company’s Form 10-K for the fiscal year ended December 31, 2014 due to the adoption of an accounting standard update in 2015. See Note 1(t) Recently Issued Accounting Standards of this report for additional information.

. Carrying amounts include any related discounts, premiums, issuance costs and origination costs:

 2018 2017
 Carrying Amount Fair Value Carrying Amount Fair Value
   Total Level 1 Level 2 Level 3   Total Level 1 Level 2 Level 3
Long-term debt$13,445
 $13,450
 $—
 $9,525
 $3,925
 $13,268
 $13,787
 $—
 $10,115
 $3,672
Synergy Term Loan478
 422
 —
 —
 422
 —
 —
 —
 —
 —
Fair value of the financial instruments included in the tables above was determined as follows:


Description

Fair Value Methodology

Cash and cash equivalentsThe carrying amounts approximate fair value because of the short-term maturity of these assets.
Short-term investments,
Equity securities, EETC and
Restricted cash
Fair value is based on (a) the trading prices of the investment or similar instruments, (b) an income approach, which uses valuation techniques to convert future amounts into a single present amount based on current market expectations about those future amounts when observable trading prices are not available, (c) internally-developed models of the expected future cash flows related to the securities, or (d)(c) broker quotes obtained by third-party valuation services.
Other investments measured at NAVIn accordance with the relevant accounting standards, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position. The investments measured using NAV are shares of mutual funds that invest in fixed-income instruments including bonds, debt securities, and other similar instruments issued by various U.S. and non-U.S. public- or private-sector entities. The Company can redeem its shares at any time at NAV subject to a three-day settlement period.

Fuel derivatives

Derivative contracts are privately negotiated contracts and are not exchange traded. Fair value measurements are estimated with option pricing models that employ observable inputs. Inputs to the valuation models include contractual terms, market prices, yield curves, fuel price curves and measures of volatility, among others.

89

Description

Fair Value Methodology

Foreign currency derivativesFair value is determined with a formula utilizing observable inputs. Significant inputs to the valuation models include contractual terms, risk-free interest rates and forward exchange rates.

Debt

Long-term debtFair values were based on either market prices or the discounted amount of future cash flows using our current incremental rate of borrowing for similar liabilities.liabilities or assets.
Synergy Term Loan and AVH Derivative Assets
Convertible debt derivative assetFair values are calculated using a Monte Carlo simulation approach. Unobservable inputs include expected volatility, expected dividend yield and option liabilityUnited used a binomial lattice model to value the conversion optionscontrol and the supplemental derivative assets. Significant binomial model inputs that are not objectively determinable include volatility and the Company’s credit risk component of the discount rate.acquisition premiums.

NOTE 10 - HEDGING ACTIVITIESInvestments in Regional Carriers

Fuel Derivatives

. United holds investments in several regional carriers that fly for the Company as United Express under CPAs. The combined carrying value of the investments was approximately $144 million as of the date of this report. United accounts for each investment using the equity method. Each investment and United's ownership stake is listed below.

Republic Airways Holdings Inc. ("Republic"). United holds a 19% minority interest in Republic which the Company may hedgereceived in 2017 in consideration for its unsecured claim in Republic's bankruptcy case. Republic does business as Republic Airways.
ManaAir, LLC ("ManaAir"). In a portionseries of transactions completed in January 2019, United obtained a 49.9% minority ownership stake in ManaAir, LLC ("ManaAir") and ManaAir purchased 100% of the equity of ExpressJet Airlines, Inc.
Champlain Enterprises LLC ("Champlain"). United owns a 40% minority ownership stake in Champlain. Champlain does business as CommutAir.
Other Investments. United owns approximately 9% of the preferred shares of Fulcrum BioEnergy, Inc. ("Fulcrum"), a company that is developing a process for transforming municipal solid waste into transportation fuels, including jet fuel and diesel. United records its future fuel requirements to protect against increasesinvestment in theFulcrum at cost less impairment, adjusted for observable price of fuel. The Company may restructure hedges in response to market conditions prior to their original settlement dates which may result in changes in hedge coverage levels andorderly transactions for an identical or similar investment of the potential recognition of gains or losses on such hedge contracts.same issuer. As of December 31, 2015,2018, the Company had hedged approximately 17% of its projected fuel requirements (652 million gallons) for 2016, with commonly used financial hedge instruments based on aircraft fuel or crude oil. As of December 31, 2015, the Company had fuel hedges expiring through December 2016.

As required, the Company assesses the effectiveness of each of its individual hedges on a quarterly basis. The Company also examines the effectiveness of its entire hedging program on a quarterly basis utilizing statistical analysis. This analysis involves utilizing regression and other statistical analyses that compare changes in the price of aircraft fuel to changes in the prices of the commodities used for hedging purposes.

Upon proper qualification, the Company accounts for certain fuel derivative instruments as cash flow hedges. All derivatives designated as hedges that meet certain requirements are granted hedge accounting treatment. The types of instruments the Company utilizes that qualify for hedge accounting treatment typically include swaps, call options, collars (which consist of a purchased call option and a sold put option), four-way collars (a collar with a higher strike sold call option and a lower strike purchased put option) and other combinations of options. Generally, utilizing hedge accounting, all periodic changes in the faircarrying value of derivatives designated as hedges that are considered to be effective are recorded in AOCI until the underlying fuel is consumed and recorded in fuel expense. The Company is exposed to the risk that its hedges may not be effective in offsetting changes in the cost of fuel and that its hedges may not continue to qualify for hedge accounting. Hedge ineffectiveness results when the change in the fair value of the derivative instrument exceeds the change in the value of the Company’s expected future cash outlay to purchase and consume fuel. To the extent that the periodic changes in the fair value of the derivatives are not effective, that ineffectiveness is classified as Nonoperating income (expense): Miscellaneous, net in the statements of consolidated operations.

The Company also uses certain combinations of derivative contracts that are economic hedges but do not qualify for hedge accounting under GAAP. Additionally, the Company may enter into contracts at different times and later combine those contracts into structures designated for hedge accounting. As with derivatives that qualify for hedge accounting, the economic hedges and individual contracts are part of the Company’s program to mitigate the adverse financial impact of potential increases in the price of fuel. The Company records changes in the fair value of these various contracts that are not designated for hedge accounting to Nonoperating income (expense): Miscellaneous, net in the statements of consolidated operations.

If the Company settles a derivative prior to its contractual settlement date, then the cumulative gain or loss recognized in AOCI at the termination date remains in AOCI until the forecasted transaction occurs. In a

90

situation where it becomes probable that a hedged forecasted transaction will not occur, any gains and/or losses that have been recorded to AOCI would be required to be immediately reclassified into earnings. All cash flows associated with purchasing and settling derivatives are classified as operating cash flows in the statements of consolidated cash flows.

In addition to cash flow hedges, the Company from time to time enters into fair value hedges related to its aircraft fuel inventory using derivatives such as swaps and futures contracts based on aircraft fuel. Under fair value hedge accounting, the Company records changes in the fair value of both the hedging derivative and the hedged aircraft fuel inventory as fuel expense. The Company records ineffectiveness on fair value hedges as Nonoperating income (expense): Miscellaneous, net in the statements of consolidated operations. As of December 31, 2015, fair value hedges related to aircraft fuel were not material to the Company’s financial statements.

The Company records each derivative instrument as a derivative asset or liability (on a gross basis) in its consolidated balance sheets, and, accordingly, records any related collateral on a gross basis. The table below presents the fair value amounts of fuel derivative assets and liabilities and the location of amounts recognized in the Company’s financial statements.

At December 31, the Company’s derivatives were reported in its consolidated balance sheets as follows (in millions):

Classification

  

Balance Sheet Location

      2015           2014     

Derivatives designated as cash flow hedges

      

Liabilities:

      

Fuel contracts due within one year

  Fuel derivative instruments   $119      $450   

Fuel contracts with maturities greater than one year

  Other liabilities and deferred credits: Other   —      27   
    

 

 

   

 

 

 
     $119      $477   
    

 

 

   

 

 

 

Derivatives not designated for hedge accounting

      

Assets:

      

Fuel contracts due within one year

  Receivables   $—      $6   

Liabilities:

      

Fuel contracts due within one year

  Fuel derivative instruments   $5      $244   

Fuel contracts with maturities greater than one year

  Other liabilities and deferred credits: Other     —      2   
    

 

 

   

 

 

 

Total liabilities

     $5      $246   
    

 

 

   

 

 

 

Total derivatives

      

Assets:

      

Fuel contracts due within one year

  Receivables   $—      $6   

Liabilities:

      

Fuel contracts due within one year

  Fuel derivative instruments   $124      $694   

Fuel contracts with maturities greater than one year

  Other liabilities and deferred credits: Other   —      29   
    

 

 

   

 

 

 

Total liabilities

     $124      $723   
    

 

 

   

 

 

 

Derivative Credit Risk and Fair Value

The Company is exposed to credit losses in the event of non-performance by counterparties to its derivative instruments. While the Company records derivative instruments on a gross basis, the Company monitors its net derivative position with each counterparty to monitor credit risk. Based on the fair value of our fuel derivative

91

instruments, our counterparties may require us to post collateral when the price of the underlying commodity decreases, and we may require our counterparties to provide us with collateral when the price of the underlying commodity increases. The Company had on deposit $26 million and $577 million of collateral with fuel derivative counterparties as of December 31, 2015 and December 31, 2014, respectively. The collateral is recorded as Fuel hedge collateral deposits on the Company’s consolidated balance sheets.

We have master trading agreements with all of our fuel hedging counterparties that allow us to net our fuel hedge derivative positions. We have elected not to net the fair value positions and collateral recorded on our consolidated balance sheets. The following table shows the potential net fair value positions (including fuel derivatives and related collateral) had we elected to offset. The table reflects offset at the counterparty level (in millions):

   December 31, 2015   December 31, 2014 

Fuel derivative instruments

   $98      $209   

Other liabilities and deferred credits: Other

   —      30   
  

 

 

   

 

 

 

Hedge derivatives liabilities, net

   $98      $239   
  

 

 

   

 

 

 

The following tables present the fuel hedge gains (losses) recognized during the periods presented and their classification in the financial statements (in millions):

Derivatives designated as cash flow hedges

   Amount of Loss
Recognized
in AOCI on Derivatives
(Effective Portion)		   Loss Reclassified from
AOCI into Income
(Fuel Expense)
(Effective Portion)		   Amount of Loss
Recognized in
Nonoperating income
(expense): Miscellaneous,
net (Ineffective Portion)		 
           2015                   2014                   2015                   2014                   2015                   2014         

Fuel contracts

   $(320)     $(599)     $(604)     $(89)     $—      $(3)  

Derivatives not designated for hedge accounting

   Amount of Gain (Loss) Recognized
in Nonoperating income  (expense):
Miscellaneous, net		    
           2015                   2014                  2013            

Fuel contracts

   $(80)     $(462)   $79     

Foreign Currency Derivatives

The Company generates revenues and incurs expenses in numerous foreign currencies. Changes in foreign currency exchange rates impact the Company’s results of operations through changes in the dollar value of foreign currency-denominated operating revenues and expenses. Some of the Company’s more significant foreign currency exposures include the Canadian dollar, Chinese renminbi, European euro, British pound and Japanese yen. At times, the Company uses derivative financial instruments, such as options, collars and forward contracts, to hedge its exposure to foreign currency. At December 31, 2015, the Company had foreign currency derivative contracts in place to hedge European euro denominated sales. The notional amount of the hedges equates to 18% of the Company’s projected European euro denominated net cash inflows for 2016. Net cash relates primarily to passenger ticket sales inflows partially offset by expenses paid in local currencies. At December 31, 2015, the fair value of the Company’s foreign currency derivativesUnited's investment was not material to the Company’s financial statements.

92

$48 million.


NOTE 1110 - DEBT

(In millions)

  At December 31, 
   2015  2014 

Secured

   
Notes payable, fixed interest rates of 1.42% to 12.00% (weighted average rate of 5.37% as of December 31, 2015), payable through 2027   $7,971     $7,464   
Notes payable, floating interest rates of the London Interbank Offered Rate (“LIBOR”) plus 0.20% to 2.85%, payable through 2027   1,302     1,151   
Term loan, LIBOR subject to a 0.75% floor, plus 2.75%, or alternative rate based on certain market rates plus 1.75%, due 2019   875     884   
Term loan, LIBOR subject to a 0.75% floor, plus 3.00%, or alternative rate based on certain market rates plus 2%, due 2021   194     499   
Unsecured   
6% Notes due 2026 to 2028 (a)   —     632   
6% Senior Notes due 2020 (a)   300     300   
6.375% Senior Notes due 2018 (a)   300     300   
4.5% Convertible Notes due 2015   —     202   
Other   100     101   
  

 

 

  

 

 

 
    11,042      11,533   
  

 

 

  

 

 

 

Less: unamortized debt discount, premiums and debt issuance costs

   (145)    (267) (b) 

Less: current portion of long-term debt

   (1,224)    (1,313)  
  

 

 

  

 

 

 

Long-term debt, net

   $    9,673     $    9,953   
  

 

 

  

 

 

 

(In millions) At December 31,
  2018 2017
Secured    
Notes payable, fixed interest rates of 0.0% to 9.52% (weighted average rate of 4.18% as of December 31, 2018), payable through 2030 $8,811
 $8,661
Notes payable, floating interest rates of the London interbank offered rate ("LIBOR") plus 1.05% to 1.75%, payable through 2030 2,051
 1,880
Term loan, LIBOR plus 1.75%, or alternative rate based on certain market rates plus 0.75%, due 2024 1,474
 1,489
Unsecured    
6.375% Senior Notes due 2018 (a) —
 300
6% Senior Notes due 2020 (a) 300
 300
4.25% Senior Notes due 2022 (a) 400
 400
5% Senior Notes due 2024 (a) 300
 300
Other 300
 101
  13,636
 13,431
Less: unamortized debt discount, premiums and debt issuance costs (191) (163)
           Less: current portion of long-term debt (1,230) (1,565)
Long-term debt, net $12,215
 $11,703
(a) UAL is the issuer of this debt. United is a guarantor.

(b) 2014 amount differs from the amount reported in the Company’s Form 10-K for the fiscal year ended December 31, 2014 due to the adoption of an accounting standard update in 2015. See Note 1(t) Recently Issued Accounting Standards of this report for additional information.

The table below presents the Company’sCompany's contractual principal payments (not including debt discount or debt issuance costs) at December 31, 20152018 under then-outstanding long-term debt agreements in each of the next five calendar years (in millions):

2016

   $1,224   

2017

   822   

2018

   1,359   

2019

   1,788   

2020

   942   

After 2020

   4,907   
  

 

 

 
   $    11,042   
  

 

 

 

As of December 31, 2015, a substantial portion of the Company’s assets, principally aircraft, route authorities and loyalty program intangible assets, was pledged under various loan and other agreements. As of December 31, 2015, UAL and United were in compliance with their respective debt covenants. Continued compliance depends on many factors, some of which are beyond the Company’s control, including the overall industry revenue environment and the level of fuel costs.

2019 $1,230
2020 1,310
2021 1,300
2022 1,653
2023 703
After 2023 7,440
  $13,636
Secured debt

2013 Credit and Guaranty Agreement.On March 29, 2017, United and UAL, are parties to aas borrower and guarantor, respectively, entered into an Amended and Restated Credit and Guaranty Agreement (the “Credit Agreement”) as(as amended, the borrower and guarantor, respectively."Credit Agreement"). The Credit Agreement consists of a $900

93

million$1.5 billion term loan due April 2019 (of which $875 million was outstanding as of December 31, 2015) (the “Term Loan due 2019”), a $500 million term loan due September 2021 (of which $194 million was outstanding as of December 31, 2015) (the “Term Loan due 2021”)1, 2024 and a $1.35$2.0 billion revolving credit facility with $1.35 billion being available for drawing until April 1, 2022. The obligations of United under the amended Credit Agreement are secured by liens on certain international route authorities, certain take-off and landing rights and related assets of United.

Term loan borrowings under the Credit Agreement bear interest at a variable rate equal to LIBOR plus a margin of 1.75% per annum, or another rate based on certain market interest rates, plus a margin of 0.75% per annum. The principal amount of the term loan must be repaid in consecutive quarterly installments of 0.25% of the original principal amount thereof, commencing on June 30, 2017, with any unpaid balance due on April 1, 2024. United may prepay all or a portion of the loan from time to time, at par plus accrued and unpaid interest.
As of December 31, 2018, and $1.315United had its entire capacity of $2.0 billion being available for drawing until January 2019.

The termunder the revolving credit facility of the Company's Credit Agreement. United pays a commitment fee equal to 0.75% per annum on the undrawn amount available under the revolving credit facility. If drawn, revolving loans under the Credit Agreement bear interest at a variable rate equal to LIBOR plus a margin of in the case of the Term Loan due 2019, 2.75% per annum and, in the case of the Term Loan due 2021, 3.0% per annum, subject in each case to a 0.75% floor. Borrowings under the revolving credit facility of the Credit Agreement bear interest at a variable rate equal to LIBOR plus a margin of 3.0%2.25% per annum, or another rate based on certain market interest rates, plus a margin of 2.0%1.25% per annum. The principal amount of the term loans must be repaid in consecutive quarterly installments of 0.25% of the original principal amount thereof, with any unpaid balance due, in the case of the Term Loan due 2019, on April 1, 2019 and, in the case of the Term Loan due 2021, on September 15, 2021. United may prepay all or a portion of the term loans from time to time, at par plus accrued and unpaid interest. United pays a commitment fee equal to 0.75% per-annum on the undrawn amount available under the revolving credit facility.

The Term Loan due 2021 ranks pari passu with the Term Loan due 2019 that United originally borrowed under the Credit Agreement. The Credit Agreement requires United to repay the term loans and any other outstanding borrowings under the Credit Agreement at par plus accrued and unpaid interest if certain changes of control of UAL occur.

As of December 31, 2015, United had its entire capacity of $1.35 billion available under the revolving credit facility of the Company’s Credit Agreement.

As of December 31, 2015,2018, United had cash collateralized $70$73 million of letters of credit. United also had $437 million of performance bonds relating to various real estate, customs and aircraft financing obligations at December 31, 2015. Most of the letters of credit, which generally have evergreen clauses and are expected to be renewed on an annual basis and the performancebasis. As of December 31, 2018, United also had $418 million of surety bonds havesecuring various obligations with expiration dates through 2019.

2022.


EETCs. As of December 31, 2018, United has $7.8had $8.8 billion principal amount of equipment notes outstanding issued under EETC financings included in notes payable in the table of outstanding debt above. Generally, the structure of these EETC financings consistconsists of pass-through trusts created by United to issue pass-through certificates, which represent fractional undivided interests in the respective pass-through trusts and are not obligations of United. The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes which are issued by United and secured by its aircraft. The payment obligations under the equipment notes are those of United. Proceeds received from the sale of pass-through certificates are initially held by a depositary in escrow for the benefit of the certificate holders until United issues equipment notes to the trust, which purchases such notes with a portion of the escrowed funds. These escrowed funds are not guaranteed by United and are not reported as debt on United’sUnited's consolidated balance sheet because the proceeds held by the depositary are not United’sUnited's assets.

94

In November 2015February 2018, May 2018 and August 2014,February 2019, United created separate EETC pass-through trusts, each of which issued pass-through certificates. The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes issued by United and secured by its aircraft. The Company records the debt obligation upon issuance of the equipment notes rather than upon the initial issuance of the pass-through certificates. United has received and recorded all of the proceeds from the November 2015 and August 2014 pass-through trusts as debt as of December 31, 2015. Certain details of the pass-through trusts with proceeds received from issuance of debt in 20152018 are as follows (in millions, except stated interest rate):

EETC Date

 

Class

 Principal  

Final expected
distribution
date

 Stated
interest
rate		  Total debt
recorded
as of December 31,
2015		  Proceeds
received from
issuance of
debt during
2015		  Remaining
proceeds from
issuance of debt
to be received
in future
periods		 

November 2015

 AA  $334    December 2027  3.45%    $334     $334     $—   

November 2015

 A  100    December 2022  3.70%    100     100     —   

August 2014

 A  823    September 2026  3.75%    823     711     —   

August 2014

 B  238    September 2022  4.625%    238     206     —   
  

 

 

    

 

 

  

 

 

  

 

 

 
   $1,495       $1,495     $1,351     $—   
  

 

 

    

 

 

  

 

 

  

 

 

 

EETC Date Class Principal Final expected distribution date Stated interest rate Total debt recorded
as of December 31, 2018		 Proceeds received from issuance of debt during 2018 Remaining proceeds from issuance of debt to be received in future periods
February 2019 AA $717
 August 2031 4.15% $—
 $—
 $717
February 2019 A 296
 August 2031 4.55% —
 —
 296
May 2018 B 226
 March 2026 4.60% 226
 226
 —
February 2018 AA 677
 March 2030 3.50% 677
 677
 —
February 2018 A 258
 March 2030 3.70% 258
 258
 —
    $2,174
     $1,161
 $1,161
 $1,013
In 2015,2018, United borrowed approximately $590$424 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2015.2018. The notes evidencing these borrowings, which are secured by the related aircraft, mature in 2030 and have maturity dates ranging from 2025 to 2027 and interest rates comprised of the LIBOR plus a specified margin.

Unsecured debt

6%4.25% Senior Notes due 2026.2022. In 2015,September 2017, UAL used cash to repurchase all $321 million par value 6% Notes due 2026 (the “2026 Notes”).

6% Notes due 2028.In 2015, UAL used cash to repurchase all $311 million par value 6% Notes due 2028 (the “2028 Notes”).

In 2015, the Company recorded a nonoperating special charge of $134 million for the extinguishment of the 2026 Notes and the 2028 Notes. The nonoperating special charge is related to the write-off of unamortized debt discounts.

4.5% Convertible Notes due 2015.The 4.5% Convertible Notes were convertible by holders into shares of UAL common stock at a conversion price of approximately $18.93 per share. During 2014, United used $62 million of cash to purchase and retire $28issued $400 million aggregate principal amount of 4.25% Senior Notes due October 1, 2022 (the "4.25% Senior Notes due 2022"). These notes are fully and unconditionally guaranteed and recorded by United on its 4.5% Convertiblebalance sheet as debt. The indenture for the 4.25% Senior Notes in market transactions.due 2022 requires UAL recorded $34 millionto offer to repurchase the notes for cash if certain changes of control of UAL occur at a purchase price equal to 101% of the repurchase cost as a reduction of additional paid-in capital. In January 2015, the holders of substantially all of the remaining $202 million principal amount of the 4.5% Convertible Notes exercised their conversion option resulting in the issuance of 11 million shares of UAL common stock.

4.5% Senior Limited-Subordination Convertible Notes due 2021. In January 2014, holders of substantially all of the remaining $156 million outstanding principal amount of the 4.5% Senior Limited-Subordination Convertible Notes due 2021 exercised their right to convert such notes into approximately 5 million shares of UAL common stock.

Convertible Debt Securitiesrepurchased plus accrued and Derivatives. UAL, United and the trustee for the 4.5% Convertible Notes were parties to a supplemental indenture that made United’s convertible debt convertible into shares of UAL common stock. For purposes of United separate-entity reporting, as a result of the remaining outstanding debt having beenconvertible into the stock of a non-consolidated entity, the embedded conversion options in United’s convertible debt were required to be separated and accounted for as though they were free-standing derivatives.unpaid interest.

95

In addition, UAL’s contractual commitment to provide common stock to satisfy United’s obligation upon conversion of the debt was an embedded call option on UAL common stock that was also required to be separated and accounted for as though it were a free-standing derivative. The fair value of the indenture derivative on a separate-entity reporting basis as of December 31, 2014 was an asset of $712 million. The fair value of the embedded conversion options as of December 31, 2014 was a liability of $511 million. The 4.5% Convertible Notes and their related indenture derivative and conversion options were retired in 2015. The initial contribution of the indenture derivatives to United by UAL was accounted for as additional paid-in capital in United’s separate-entity financial statements. Changes in fair value of both the indenture derivative and the embedded conversion options subsequent to October 1, 2010 were recognized in Nonoperating income (expense).

6% Convertible5% Senior Notes due 2029.2024. In 2014,January 2017, UAL issued approximately 12$300 million shares of UAL common stock in exchange for, or upon conversion of, $104 million in aggregate principal amount of UAL’s outstanding 6% Convertible5% Senior Notes due 2029 heldFebruary 1, 2024 (the "5% Senior Notes due 2024"). These notes are fully and unconditionally guaranteed and recorded by United on its balance sheet as debt. The indenture for the holders5% Senior Notes due 2024 requires UAL to offer to repurchase the notes for cash if certain changes of these notes.control of UAL occur at a purchase price equal to 101% of the principal amount of notes repurchased plus accrued and unpaid interest.

96


As of December 31, 2018, UAL and United were in compliance with their respective debt covenants. The collateral, covenants and cross default provisions of the Company’sCompany's principal debt instruments that contain such provisions are summarized in the table below:

Debt InstrumentCollateral, Covenants and Cross Default Provisions

Various equipment notes and other notes payable

Secured by certain aircraft. The indentures contain events of default that are customary for aircraft financing, including in certain cases cross default to other related aircraft.

Credit Agreement


Secured by certain of United’sUnited's international route authorities, specified take-off and landing slots at certain airports and certain other assets.



The Credit Agreement requires the Company to maintain at least $3.0$2.0 billion of unrestricted liquidity at all times, which includes unrestricted cash, short-term investments and any undrawn amounts under any revolving credit facility, and to maintain a minimum ratio of appraised value of collateral to the outstanding obligations under the Credit Agreement of 1.671.6 to 1.0 at all times. The Credit Agreement contains covenants that, among other things, restrict the ability of UAL and its restricted subsidiaries (as defined in the Credit Agreement) to incur additional indebtedness and to pay dividends on or repurchase stock, although, as of December 31, 2018, the Company currently hashad ample ability under these restrictions to repurchase stock under the Company’sCompany's share repurchase program.



The Credit Agreement contains events of default customary for this type of financing, including a cross default and cross acceleration provision to certain other material indebtedness of the Company.

6.375% Senior Notes due 2018

6% Senior Notes due 2020

4.25% Senior Notes due 2022
5% Senior Notes due 2024

The indentures for these notes contain covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries (as defined in the indenture)indentures) to incur additional indebtedness and pay dividends on or repurchase stock, although the Company currently has ample ability under these restrictions to repurchase stock under the Company’sCompany's share repurchase program.

The indentures contain events of default that are customary for similar financings.

NOTE 12 - ADVANCED PURCHASE OF MILES

United previously sold MileagePlus miles to Chase which United recorded as Advanced purchase of miles. The balance of pre-purchased miles is eligible to be allocated by Chase to MileagePlus members’ accounts by a maximum of $249 million in 2016 and the remainder in 2017. The Co-Brand Agreement contains termination penalties that may require United to make certain payments and repurchase outstanding pre-purchased miles in cases such as United’s insolvency, bankruptcy or other material breaches. The Company has recorded these amounts as Advanced purchase of miles in the liabilities section of the Company’s consolidated balance sheets.

97

The obligations of UAL, United and Mileage Plus Holdings, LLC to Chase under the Co-Brand Agreement are joint and several. Certain of United’s obligations under the Co-Brand Agreement are secured by a junior lien in all collateral pledged by United under the Credit Agreement. United also provides a first priority lien to Chase on its MileagePlus assets to secure certain of its obligations under the Co-Brand Agreement and its obligations under the credit card processing agreement among United, Paymentech, LLC and JPMorgan Chase Bank, N.A.

NOTE 1311 - LEASES AND CAPACITY PURCHASE AGREEMENTS

United leases aircraft, airport passenger terminal space, aircraft hangars and related maintenance facilities, cargo terminals, other airport facilities, other commercial real estate, office and computer equipment and vehicles.

In 2018, United entered into a new Airline Use and Lease Agreement at Chicago O'Hare International Airport ("Chicago O'Hare") with the City of Chicago with a lease term of approximately 15 years, effective May 12, 2018 through December 31, 2033. United also entered into several new ground and facility leases at Chicago O'Hare, effective May 12, 2018, for hangars, a ground equipment maintenance building, and employee parking with lease terms ranging from 15 years to 30 years.
At December 31, 2015, United’s2018, United's scheduled future minimum lease payments under operating leases having initial or remaining noncancelable lease terms of more than one year, aircraft leases, including aircraft rent under CPAs and capital leases (substantially

(substantially all of which are for aircraft) were as follows (in millions):

   Capital Leases   Facility and Other
Operating Leases		   Aircraft Operating
Leases		 

  2016

   $206      $1,252      $1,317   

  2017

   162      1,161      1,317   

  2018

   151      899      1,100   

  2019

   86      809      918   

  2020

   66      920      708   

  After 2020

   747      6,799      2,660   
  

 

 

   

 

 

   

 

 

 

  Minimum lease payments

   $1,418      $11,840      $8,020   
    

 

 

   

 

 

 

Imputed interest

   (556)      
  

 

 

     

Present value of minimum lease payments

   862       

Current portion

   (135)      
  

 

 

     

Long-term obligations under capital leases

   $727       
  

 

 

     

  Capital Leases (b) Facility and Other Operating Leases Aircraft Operating Leases
2019 $308
 $1,330
 $845
2020 170
 1,351
 682
2021 147
 1,107
 583
2022 123
 970
 407
2023 104
 953
 379
After 2023 1,268
 7,029
 1,160
Minimum lease payments (a) $2,120
 $12,740
 $4,056
Imputed interest (837)    
Present value of minimum lease payments 1,283
    
Current portion (149)    
Long-term obligations under capital leases $1,134
    
(a) Includes fair value lease and deferred financing fee balances, which are being amortized over the terms of their respective leases.
(b) Includes airport construction projects managed by United in which United has construction risk, including project cost overruns. The Company recorded an asset for project costs and a related liability equal to project costs funded by parties other than United. As of December 31, 2015, United’s2018, United had an asset balance of $886 million recorded in operating property and equipment and $920 million recorded in current and long-term obligations under capital leases for these airport construction projects.
As of December 31, 2018, United's aircraft capital lease minimum payments relate to leases of 4728 mainline and 2990 regional aircraft as well as to leases of nonaircraft assets. Imputed interest rate ranges are 3.5% to 20.8%115.1%.

Aircraft operating leases have initial terms of five to twenty-six26 years, with expiration dates ranging from 20162019 through 2024.2029. Under the terms of most leases, United has the right to purchase the aircraft at the end of the lease term, in some cases, at fair market value, and in others, at fair market value or a percentage of cost. United has facility operating leases that extend to 2041.

During 2015, the Company reached an agreement with AerCap Holdings N.V., a major aircraft leasing company, to lease used Airbus A319s. Eleven aircraft will be delivered over the next two years beginning in early 2016. In addition, up to 14 more aircraft may be delivered over the next five years subject to certain conditions.

United is the lessee of real property under long-term operating leases at a number of airports where we are also the guarantor of approximately $1.5$1.3 billion of underlying debt and interest thereon as of December 31, 2015.2018. These leases are typically with municipalities or other governmental entities, which are excluded from the consolidation requirements concerning a variable interest entity (“VIE”("VIE"). To the extent United’sUnited's leases and related guarantees are with a separate legal entity other than a governmental entity, United is not the primary beneficiary because the lease terms are consistent with market terms at the inception of the lease and the lease does not include a residual value guarantee, fixed-price purchase option, or similar feature.

United’s United has facility operating leases that extend to 2055.

United's nonaircraft rent expense was approximately $1.3 billion, $1.4$1.3 billion and $1.3$1.2 billion for the years ended December 31, 2015, 20142018, 2017 and 2013,2016, respectively.

98

In addition to nonaircraft rent and aircraft rent, which is separately presented in the consolidated statements of operations, United had aircraft rent related to regional aircraft operating leases, which is included as part of Regional capacity purchase expense in United’sUnited's consolidated statement of operations, of $461$505 million, $442$458 million and $428$439 million for the years ended December 31, 2015, 20142018, 2017 and 2013,2016, respectively.

In connection with UAL Corporation’sCorporation's and United Air Lines, Inc.’s's (predecessors to UAL and United) fresh-start reporting requirements upon their exit from Chapter 11 bankruptcy protection in 2006 and the Company’sCompany's acquisition accounting adjustments related to the Company’sCompany's merger transaction in 2010, lease valuation adjustments for operating leases were initially recorded in the consolidated balance sheet, representing the net present value of the differences between contractual lease rates and the fair market lease rates for similar leased assets at the time. An asset (liability) results when the contractual lease rates are more (less) favorable than market lease terms at the valuation date. The lease valuation adjustment is amortized on a straight-line basis as an increase (decrease) to rent expense over the individual applicable remaining lease terms, resulting in recognition of rent expense as if United had entered into the leases at market rates. The related remaining lease terms, primarily related to aircraft which make up the majority of the fair value lease adjustment balance, are one to ninesix years for United. The lease valuation adjustments are classified within other noncurrent liabilities and the net accretion amounts are $107$60 million, $160$79 million and $173$82 million for the years ended December 31, 2015, 20142018, 2017 and 2013,2016, respectively.

Regional CPAs

United has contractual relationships with various regional carriers to provide regional aircraft service branded as United Express. Under these CPAs, with certainthe Company pays the regional carriers. We purchase allcarriers contractually agreed fees (carrier costs) for operating these

flights plus a variable reimbursement (incentive payment for operational performance) based on agreed performance metrics, subject to annual adjustments. The fees for carrier costs are based on specific rates for various operating expenses of the capacity fromregional carriers, such as crew expenses, maintenance and aircraft ownership, some of which are multiplied by specific operating statistics (e.g., block hours, departures), while others are fixed monthly amounts. Under these CPAs, the flights coveredCompany is responsible for all fuel costs incurred, as well as landing fees and other costs, which are either passed through by the CPA at a negotiated price. We pay the regional carrier a predetermined rate, subject to annual inflation adjustments, primarily for block hours flown (the hours from gate departure to gate arrival) and other operating factors and reimburse the regional carrier for various pass-through expenses related to the flights. UnderCompany without any markup or directly incurred by the CPAs, we are responsible forCompany, and, in some cases, the cost of providing fuel for all flights and for paying aircraft rent forCompany owns or leases some or all of the aircraft covered bysubject to the CPAs. Generally,CPA, and leases or subleases, as applicable, such aircraft to the CPAs contain incentive bonus and rebate provisions based upon each regional carrier’s operational performance. United’scarrier. United's CPAs are for 521559 regional aircraft as of December 31, 2018, and the CPAs have terms expiring through 2029. Aircraft operated under CPAs include aircraft leased directly from the regional carriers and those owned by United or leased from third-party lessors and operated by the regional carriers. See Part I, Item 2, “Properties”Properties, of this report for additional information.

In 2015,2017, United entered into amendments to thea five-year CPA with SkyWestAir Wisconsin Airlines Inc. (“SkyWest”), a wholly-owned subsidiary of SkyWest, Inc., to operate an additional 25 new 76-seat Embraer S.A. (“Embraer”) E175 aircraft under the United Express brand. SkyWest will purchase all of these 76-seat aircraft directly from the manufacturer with deliveries in 2016 and 2017.

In 2015, United also entered into amendments to the CPA with Mesa Air Group, Inc. and Mesa Airlines, Inc. (“Mesa”), a wholly-owned subsidiary of Mesa Air Group, Inc., pursuant to which Mesa will operatefor regional service under the United Express brand new Embraer E175 aircraft, 15 of which have delivered or are scheduled to deliver in 2016. United will assign its purchase obligations to Mesa with respect to 10 Embraer E175 aircraft at the time of each aircraft’s delivery, subject to certain conditions. Mesa will purchase the remaining five aircraft directly from Embraer; however, United has agreed that United will, under certain conditions, purchase these five aircraft directly from Embraer.

In 2015, United entered into a new Embraer ERJ 145 CPA with Champlain Enterprises, Inc. operating as CommutAir, pursuant to which CommutAir will operate under the United Express brand 40 used Embraer ERJ145 aircraft that are currently being operated by a different carrier operating under the United Express brand, with transfers that started in December 2015 and will continue through 2017.

In 2014 and 2015, United entered into amendments to a contract with Shuttle America Corporation (“Shuttle America”), a wholly-owned subsidiary of Republic Airways Holdings, for Shuttle America to operate 40 new Embraer E175 aircraft under theup to 65 CRJ200 aircraft. In addition, United Express brand and extendextended the term of 38its existing Embraer 170CPA with ExpressJet Airlines to operate up to approximately 125 aircraft operating underthrough December 31, 2022.

United recorded approximately $979 million, $907 million and $935 million in expenses related to its CPAs with its regional carriers, in which United is a minority shareholder, for the United Express brand. Shuttle America will acquire forty 76-seat Embraer E175 aircraftyears ended December 31, 2018, 2017 and 2016, respectively. There were approximately $53 million and $24 million in accounts payable due to these companies as of December 31, 2018 and December 31, 2017, respectively. There were no material accounts receivables due from these companies as of December 31, 2018 and December 31, 2017. The CPAs with remaining deliveries from 2016 through 2017, although United has the right to acquire the aircraft under certain circumstances and lease the aircraft to Shuttle America. These 40 aircraft are in addition to United’s other 113 Embraer E175 aircraft that are currently being operated or willthese related parties were executed in the future be operated by different United

99

Express carriers under CPAs. In a separate but related amendment with Republic Airways Holdings Inc. and its subsidiary, Republic Airline Inc. (“Republic”), United and Republic agreed to remove the remaining 13 Q400 aircraft from United Express service by the second quarterordinary course of 2016.

business.

Our future commitments under our CPAs are dependent on numerous variables, and are, therefore, difficult to predict. The most important of these variables is the number of scheduled block hours. Although we are not required to purchase a minimum number of block hours under certain of our CPAs, we have set forth below estimates of our future payments under the CPAs based on our assumptions. United’sUnited's estimates of its future payments under all of the CPAs do not include the portion of the underlying obligation for any aircraft leased to ExpressJeta regional carrier or deemed to be leased from other regional carriers and facility rent that are disclosed as part of aircraft and nonaircraft operating leases. For purposes of calculating these estimates, we have assumed (1) the number of block hours flown is based on our anticipated level of flight activity or at any contractual minimum utilization levels if applicable, whichever is higher, (2) that we will reduce the fleet as rapidly as contractually allowed under each CPA, (3) that aircraft utilization, stage length and load factors will remain constant, (4) that each carrier’scarrier's operational performance will remain at historic levels and (5) an annual projected inflation rate. These amounts exclude variable pass-through costs such as fuel and landing fees, among others. Based on these assumptions as of December 31, 2015,2018, our future payments through the end of the terms of our CPAs are presented in the table below (in millions)billions):

2016

   $1,834   

2017

   1,884   

2018

   1,550   

2019

   1,290   

2020

   1,155   

After 2020

   4,932   
  

 

 

 
   $        12,645   
  

 

 

 

It is important to note that the

2019$2.2
20202.0
20211.8
20221.4
20230.8
After 20233.1
 $11.3

The actual amounts we pay to our regional operators under CPAs could differ materially from these estimates. For example, a 10% increase or decrease in scheduled block hours for all of United’sUnited's regional operators (whether as a result of changes in average daily utilization or otherwise) in 20162019 would result in a corresponding change in annual cash obligations under the CPAs of approximately $144 million (7.9%).

$160 million.

NOTE 1412 - VARIABLE INTEREST ENTITIES

Variable interests are contractual, ownership or other monetary interests in an entity that change with fluctuations in the fair value of the entity’sentity's net assets exclusive of variable interests. A VIE can arise from items such as lease agreements, loan arrangements, guarantees or service contracts. An entity is a VIE if (a) the entity lacks sufficient equity or (b) the entity’sentity's equity holders lack power or the obligation and right as equity holders to absorb the entity’sentity's expected losses or to receive its expected residual returns. Therefore, if the equity owners as a group do not have the power to direct the entity’s activities that most significantly impact its economic performance, the entity is a VIE.

If an entity is determined to be a VIE, the entity must be consolidated by the primary beneficiary. The primary beneficiary is the holder of the variable interests that has the power to direct the activities of a VIE that (i) most significantly impact the VIE’sVIE's economic performance and (ii) has the obligation to absorb losses of or the right to receive benefits from the VIE that could

potentially be significant to the VIE. Therefore, the Company must identify which activities most significantly impact the VIE’sVIE's economic performance and determine whether it, or another party, has the power to direct those activities.

100

The Company’s evaluation of its association with VIEs is described below:

Aircraft Leases. We are the lessee in a number of operating leases covering the majority of our leased aircraft. The lessors are trusts established specifically to purchase, finance and lease aircraft to us. These leasing entitiesmeet the criteria for VIEs. We are generally not the primary beneficiary of the leasing entities if the lease terms are consistent with market terms at the inception of the lease and do not include a residual value guarantee, fixed-price purchase option or similar feature that obligates us to absorb decreases in value or entitles us to participate in increases in the value of the aircraft. This is the case for many of our operating leases; however, leases of approximately 4723 mainline jet aircraft contain a fixed-price purchase option that allow United to purchase the aircraft at predetermined prices on specified dates during the lease term. Additionally, leases covering approximately 20790 leased regional jet aircraft contain an option to purchase the aircraft at the end of the lease term at prices that, depending on market conditions, could be below fair value. United has not consolidated the related trusts because, even taking into consideration these purchase options, United is still not the primary beneficiary. United’sUnited's maximum exposure under these leases is the remaining lease payments, which are reflected in future lease commitments in Note 1311 of this report.

EETCs. United evaluated whether the pass-through trusts formed for its EETC financings, treated as either debt or aircraft operating leases, are VIEs required to be consolidated by United under applicable accounting guidance, and determined that the pass-through trusts are VIEs. Based on United’sUnited's analysis as described below, United determined that it does not have a variable interest in the pass-through trusts.

The primary risk of the pass-through trusts is credit risk (i.e. the risk that United, the issuer of the equipment notes, may be unable to make its principal and interest payments). The primary purpose of the pass-through trust structure is to enhance the credit worthiness of United’sUnited's debt obligation through certain bankruptcy protection provisions, a liquidity facility (in certain of the EETC structures) and improved loan-to-value ratios for more senior debt classes. These credit enhancements lower United’sUnited's total borrowing cost. Pass-through trusts are established to receive principal and interest payments on the equipment notes purchased by the pass-through trusts from United and remit these proceeds to the pass-through trusts’trusts' certificate holders.

United does not invest in or obtain a financial interest in the pass-through trusts. Rather, United has an obligation to make interest and principal payments on its equipment notes held by the pass-through trusts. United did not intend to have any voting or non-voting equity interest in the pass-through trusts or to absorb variability from the pass-through trusts. Based on this analysis, the Company determined that it is not required to consolidate the pass-through trusts.

Synergy affiliates.
BRW Aviation LLC ("BRW"): Synergy's wholly-owned affiliate, BRW, is a special purpose entity created to be the borrower of the Synergy Term Loan. BRW is also the owner of the collateral that secures the Synergy Term Loan, including Synergy's shares of AVH. BRW is a VIE and United holds variable interests in BRW including the Synergy Term Loan. However, United is not the primary beneficiary of BRW because it does not hold BRW equity and does not have management rights at BRW and therefore does not have the power to direct the activities that most significantly impact BRW's economic performance.
AVH: United concluded that AVH is a VIE and that United holds a variable interest through its call option on Synergy's AVH shares. However, United is not the primary beneficiary because it does not hold a material number of shares of AVH and does not have the power through any other agreements to direct the activities that most significantly impact AVH's economic performance.

NOTE 1513 - COMMITMENTS AND CONTINGENCIES
Commitments.

Commitments.In January 2016, UAL entered into a purchase agreement amendment with The Boeing Company (“Boeing”) for a firm narrowbody aircraft order of 40 Boeing 737 Next Generation (“737NG”) aircraft. As of December 31, 2015 (as adjusted to include the order discussed above),2018, United had firm commitments and options to purchase aircraft from The Boeing Embraer andCompany ("Boeing"), Airbus S.A.S. (“Airbus”("Airbus") and Embraer S.A. ("Embraer") presented in the table below:

Aircraft Type

 Number of Firm
Commitments (a)

Airbus A350-1000

A350		 4535 

Boeing 737NG/737 MAX 9

 175155 

Boeing 777-300ER

 410 

Boeing 787-8/-9/-10

787		 2430 

Embraer E175

 2510 
(a) United also has options and purchase rights for additional aircraft.

101


The aircraft listed in the table above are scheduled for delivery from 20162019 through 2024.

2027. To the extent the Company and the aircraft manufacturers with whom the Company has existing orders for new aircraft agree to modify the contracts governing those orders, the amount and timing of the Company's future capital commitments could change. In 2019, United expects to take delivery of 25 Embraer E175 aircraft, 20 Boeing 737 MAX aircraft, 8 Boeing 787 aircraft and 2 Boeing 777-300ER aircraft. United also has agreements to purchase 20 used Airbus A319 aircraft with expected delivery dates through 2022.

During the third quarter of 2018, United entered into an agreement with the lessor of 54 Embraer ERJ 145 aircraft to purchase those aircraft in 2019. The provisions of such agreement resulted in a change in accounting classification of the applicable leases from operating leases to capital leases up until the applicable purchase date.
The table below summarizes United’sUnited's commitments as of December 31, 2015,2018, which primarily relate to the acquisition of aircraft and related spare engines, aircraft improvements and include other capital purchase commitments primarily to acquire information technology services and assets for the years ended December 31 (in billions). The table below is adjusted to include the impact of the January 2016 Boeing 737NG aircraft order discussed above. Any new firm aircraft orders, including through the exercise of purchase options and purchase rights, will increase the total future capital commitments of the Company.

2016

   $                    3.4   

2017

   3.1   

2018

   3.3   

2019

   2.9   

2020

   2.8   

After 2020

   7.7   
  

 

 

 
   $23.2   
  

 

 

 

As

2019$4.2
20205.3
20213.5
20222.8
20231.9
After 20237.0
 $24.7
In February 2019, the Company secured $1.0 billion of December 31, 2015 (as adjustedEETC financing to include the order discussed above), Unitedfinance certain aircraft deliveries in 2018 and 2019. The Company has also secured backstop financing commitments from certain of its aircraft manufacturers for a limited number of its future aircraft deliveries, subject to certain customary conditions. Financing may be necessary to satisfy the Company’sCompany's capital commitments for its firm order aircraft and other related capital expenditures.

Legal and Environmental.The Company has certain contingencies resulting from litigation and claims incident to the ordinary course of business. As of December 31, 2015,2018, management believes, after considering a number of factors, including (but not limited to) the information currently available, the views of legal counsel, the nature of contingencies to which the Company is subject and prior experience, that the ultimate disposition of the litigation and claims will not materially affect the Company’sCompany's consolidated financial position or results of operations. The Company records liabilities for legal and environmental claims when a loss is probable and reasonably estimable. These amounts are recorded based on the Company’sCompany's assessments of the likelihood of their eventual disposition.

Guarantees and Indemnifications. In the normal course of business, the Company enters into numerous real estate leasing and aircraft financing arrangements that have various guarantees included in the contracts. These guarantees are primarily in the form of indemnities under which the Company typically indemnifies the lessors and any tax/financing parties against tort liabilities that arise out of the use, occupancy, operation or maintenance of the leased premises or financed aircraft. Currently, the Company believes that any future payments required under these guarantees or indemnities would be immaterial, as most tort liabilities and related indemnities arecovered by insurance (subject to deductibles). Additionally, certain leased premises such as fueling stations or storage facilities include indemnities of such parties for any environmental liability that may arise out of or relate to the use of the leased premises.

As of December 31, 2015,2018, United is the guarantor of approximately $1.9 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon. These bonds, issued by various airport municipalities, are payable solely from rentals paid under long-term agreements with the respective governing bodies. The leasing arrangements associated with $1.5approximately $1.3 billion of these obligations are accounted for as operating leases with the associated expense recorded on a straight-line basis resulting in ratable accrual of the lease obligation over the expected lease term. These tax-exempt special facilities revenue bonds are included in our lease commitments disclosed in Note 1311 of this report. The leasing arrangements associated with $302approximately $466 million of these obligations are accounted for as capital leases. All of these bonds are due between 20172019 and 2038.

In United’sconnection with funding the Synergy Loan Agreement, the Company entered into an agreement with AVH's significant minority shareholder, Kingsland Holdings Limited ("Kingsland"), pursuant to which, in return for Kingsland's pledge of its 144.8 million shares of AVH common stock (equivalent to 18.1 million American Depositary Receipts ("ADRs")) and its consent to Synergy's pledge of its AVH common stock to United under the Synergy Loan Agreement, United (1) granted to Kingsland the right to put its shares of AVH common stock to United at market price on the fifth anniversary of the Synergy

Loan Agreement, and (2) guaranteed Synergy's obligation to pay Kingsland (which amount, if paid by United, will increase United's secured loan to Synergy by such amount) if the market price of AVH common stock on the fifth anniversary is less than $12 per ADR on the NYSE, for an aggregate maximum possible combined put payment and guarantee amount on the fifth anniversary of $217.2 million. Accordingly, the Company recorded a liability of $31 million for the fair value of its guarantee to loan additional funds to Synergy if required. Any additional loans to Synergy would be collateralized by Synergy's shares of AVH stock and other collateral.
Increased Cost Provisions. 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

102

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, 2015,2018, the Company had $2.4$3.5 billion of floating rate debt and $118$27 million of fixed rate debt, with remaining terms of up to 12 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 12 years and an aggregate balance of $2.4$3.2 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.

As of December 31, 2018, United is the guarantor of $145 million of aircraft mortgage debt issued by one of United's regional carriers. The aircraft mortgage debt is subject to similar increased cost provisions as described above for the Company's debt, and the Company would potentially be responsible for those costs under the guarantees.
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, (eithereither special facilities lease revenue bonds or general airport revenue bonds),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, 2015,2018, approximately $1.3$1.7 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, 2015,2018, the Company’sCompany's contingent exposure was approximately $224$164 million principal amount of such bonds based on its recent consortia participation. The Company’sCompany'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 20172022 to 2041.2051. The Company did not record a liability at the time these indirect guarantees were made.

Regional Capacity Purchase.As of December 31, 2015,2018, United had 279292 call options to purchase regional jet aircraft being operated by certain of its regional carriers. At December 31, 2015, nonecarriers with contract dates extending until 2029. These call options are exercisable upon wrongful termination or breach of contract, among other conditions. None of the call options waswere exercisable because none of the required conditions to make an option exercisable by United was met.at December 31, 2018.

Credit Card Processing Agreements.The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of the Company’sCompany's credit card processing agreements, the financial institutions in certain circumstances have the right to require that the Company maintain a reserve equal to a portion of advance ticket sales that has been processed by that financial institution, but for which the Company 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 the Company does not maintain certain minimum levels of unrestricted cash, cash equivalents and short-term investments (collectively, “Unrestricted Liquidity”"Unrestricted Liquidity"). The Company’sCompany's current level of Unrestricted Liquidity is substantially in excess of these minimum levels.

Labor Negotiations. As of December 31, 2015,2018, United, including its subsidiaries, had approximately 84,00092,000 employees. Approximately 80%83% of United’sUnited's employees were represented by various U.S. labor organizations as of December 31, 2015.2018.

The agreement with the International Brotherhood of Teamsters (the "IBT") contains provisions that require the Company has reached joint collective bargaining agreementsto align contract terms with other airlines' workgroups under certain conditions.

On October 23, 2018, United's Catering Operations employees voted to unionize under the Railway Labor Act. In an election overseen by the National Mediation Board, UNITE HERE received the majority of its employee groups since the merger transaction in 2010.votes and was officially certified to represent United's frontline Catering Operations employees. The Company continuesexpects contract negotiations to negotiatebegin in mediation for a joint flight attendant collective bargaining agreement, extensions to the IAM represented employees’ agreements and a joint technician and related employees’ collective bargaining agreement following the rejected proposal for ratification of a joint technician and related employees’ agreement. The Company can provide no assurance that a successful or timely resolution of these labor negotiations will be achieved.

103

2019.



NOTE 1614 - SPECIAL ITEMS

CHARGES

Special items classified as special charges in the statements of consolidated operations consisted of the following for the years ended December 31 (in millions):

Operating:          2015                   2014                   2013         

Severance and benefit costs

   $                107     $                199     $                105   

Impairment of assets

   79      49      33   

Integration-related costs

   60      96      205   

Labor agreement costs

   18      —      127   
(Gains) losses on sale of assets and other miscellaneous (gains) losses, net   62      99      50   
  

 

 

   

 

 

   

 

 

 

Special charges

   326      443      520   

Nonoperating and income taxes:

      
Loss on extinguishment of debt and other, net   202      74      —   
Income tax benefit related to special charges   (11)     (10)     (7)  

Income tax benefit associated with

valuation allowance release (Note 7)

   (3,130)     —      —   
  

 

 

   

 

 

   

 

 

 

Total operating and nonoperating

special charges, net of income taxes

   $(2,613)    $507     $513   
  

 

 

   

 

 

   

 

 

 

Operating: 2018 2017 (a) 2016 (a)
Impairment of assets $377
 $25
 $412
Termination of an engine maintenance service agreement 64
 —
 —
Severance and benefit costs 41
 116
 37
Cleveland airport lease restructuring —
 —
 74
Labor agreement costs —
 —
 171
(Gains) losses on sale of assets and other special charges 5
 35
 51
Total operating special charges 487
 176
 745
Nonoperating:      
Postretirement curtailment gain —
 —
 (107)
Gains on extinguishment of debt and other —
 —
 (1)
Total operating and nonoperating special charges before income taxes 487
 176
 637
Nonoperating mark-to-market ("MTM") losses on financial instruments 5
 —
 —
Total special charges and MTM losses on financial instruments 492
 176
 637
Income tax benefit (110) (63) (229)
Income tax adjustments (Note 7) (5) (179) 180
Total special charges and MTM losses on financial instruments, net of income taxes and income tax adjustments $377
 $(66) $588
2015(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

Revenue from Contracts with Customers (Topic 606) andAccounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.

2018

The Company conducted its annual impairment review of intangible assets in the fourth quarter of 2018, which consisted of a comparison of the book value of specific assets to the fair value of those assets. Due to increased costs without sufficient corresponding increases in revenue in the Hong Kong market, the Company determined that the value of its Hong Kong routes had been impaired. Accordingly, in the fourth quarter of 2018, the Company recorded $107a special non-cash impairment charge of $206 million ($160 million net of taxes) associated with its Hong Kong routes. The collateral pledged under the Company's term loan, including the Hong Kong routes, continues to be sufficient to satisfy the loan covenants. The Company determined the fair value of the Hong Kong routes using a variation of the income approach known as the excess earnings method, which discounts an asset's projected future net cash flows to determine the current fair value. Assumptions used in the discounted cash flow methodology include a discount rate, which is based upon the Company's current weighted average cost of capital plus an asset-specific risk factor, and a projection of sales, expenses, gross margin, tax rates and contributory asset charges for four future years and a terminal growth rate. The assumptions used for future projections are determined based upon the Company's asset-specific forecasts along with the Company's strategic plan. These assumptions are inherently uncertain as they relate to future events and circumstances. Actual results will be influenced by the competitive environment, fuel costs and other expenses, and potentially other unforeseen events or circumstances that could have a material negative impact on future results.

In May 2018, the Brazil–United States open skies agreement was ratified, which provides air carriers with unrestricted access between the United States and Brazil. The Company determined that the approval of the open skies agreement impaired the entire value of its Brazil route authorities because the agreement removes all limitations or reciprocity requirements for flights between the United States and Brazil. Accordingly, the Company recorded a $105 million special charge ($82 million net of taxes) to write off the entire value of the intangible asset associated with its Brazil routes. This asset is not part of any collateral pledged against any of the Company's borrowings. The Company continues to maintain its slot assets related to Brazil since airport access is still regulated by slot allocations that are limited by airport facility constraints.

During 2018, the Company also recorded $66 million ($51 million net of taxes) of fair value adjustments related to aircraft purchased off lease, write-offs of unexercised aircraft purchase options and other impairments related to certain fleet types and international slots no longer in use.

During 2018, the Company recorded a one-time termination charge of $64 million ($50 million net of tax) related to one of its engine maintenance service agreements.

During 2018, the Company recorded severance and benefit costs primarily related to a voluntary early-out program for its flight attendants.technicians and related employees represented by the IBT of $22 million ($17 million net of taxes). In 2014, more than 2,500 flight attendantsthe first quarter of 2017, approximately 1,000 technicians and related employees elected to voluntarily separate from the Company and will receive a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through the end of 2016.

The2018. Also during 2018, the Company recorded $33other management severance of $19 million ($15 million net of taxes).


During 2018, the Company recorded gains of $28 million ($22 million net of related income tax benefit)taxes) for the change in market value of certain of its equity investments. Also, the Company recorded losses of $33 million ($26 million net of taxes) for the change in fair value of certain derivative assets related to its annual assessmentequity of impairment of its indefinite-lived intangibleAvianca Holdings S.A. For equity investments and derivative assets (certain domestic slots and international Pacific routes), $8 million for the write-off of unexercised aircraft purchase options and $7 million for inventory held for sale. The Company also recorded other impairments, including $10 million for discontinued internal software projects and $10 million for the impairment of several engines held for sale.

Integration-related costs include compensation costs related primarilysubject to systems integration and training for employees.

During 2015,MTM accounting, the Company also recorded $32 million related to charges for legal matters, $18 million related to collective bargaining agreements, $16 million for the cease use of an aircraft under lease and $14 million for losses on the sale of aircraft and other miscellaneousrecords gains and losses.

The Company recorded $202 million of losses as part of Nonoperating income (expense): Miscellaneous, net due primarily toin its statements of consolidated operations.


2017

During 2017 the write-offCompany recorded a $10 million ($6 million net of $134 milliontaxes) impairment charge related to the unamortized non-cash debt discount from the extinguishmentobsolete spare parts inventory and a $15 million ($10 million net of the 2026 Notes and the 2028 Notes. taxes) intangible asset impairment charge related to a maintenance service agreement.
During 2015,2017, the Company also recorded a $61$83 million foreign exchange loss related to its cash holdings in Venezuela. The Venezuelan government has maintained currency controls and fixed official exchange rates (i.e. Sistema Complementario de Administracion de Divisas (“SICAD”), and Sistema Marginal de Divisas (“SIMADI”)) for many years. Previously, airlines were permitted to use the more favorable SICAD rate (currently 13.5 Venezuelan bolivars to one U.S. dollar) if repatriating profits and for payments($53 million net of local goods and services in Venezuela. During 2015, many of the payments for local goods and services have transitioned to utilizing the SIMADI rate (currently 200 Venezuelan bolivars to one U.S. dollar) or have been required to be paid in U.S. dollars. Furthermore, the Venezuelan government has not

104

permitted the exchange and repatriations of local currency since mid-2014. As a result, the Company changed the exchange rate from historical SICAD rates to a combination of SIMADI and SICAD rates based on projections of future cash payments. Including this adjustment, the Company’s resulting cash balance held in Venezuelan bolivars at December 31, 2015 is approximately $13 million.

2014

The Company recorded $141 milliontaxes) of severance and benefit costs related primarilyto the voluntary early-out program for its technicians and related employees represented by the IBT as described above. Also during 2017, the Company recorded $33 million ($21 million net of taxes) of other management severance.

2016
In April 2016, the Federal Aviation Administration ("FAA") announced that it will designate Newark Liberty International Airport ("Newark") as a Level 2 schedule-facilitated airport under the International Air Transport Association Worldwide Slot Guidelines. The designation was associated with an updated demand and capacity analysis of Newark by the FAA. In 2016, the Company determined that the FAA's action impaired the entire value of its Newark slots because the slots are no longer the mechanism that governs take-off and landing rights. Accordingly, the Company recorded a $412 million special charge ($264 million net of taxes) to write off the intangible asset.
During 2016, the Company recorded $37 million ($24 million net of taxes) of severance and benefit costs related to a voluntary early-out program for itsthe Company's flight attendants. Moreattendants and other severance agreements. In 2014, more than 2,500 participantsflight attendants elected a one-time opportunity to voluntarily separate from the Company and will receivefor a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through the end of 2016.
In addition,2016, the Company recorded $58 millionCity of severanceCleveland agreed to amend the Company's lease, which runs through 2029, associated with certain excess airport terminal space (principally Terminal D) and benefits primarily related to reductions of management and front-line employees, including fromfacilities at Hopkins International Airport (“Cleveland”("Cleveland"), as part of its cost savings initiatives.. The Company is currently evaluatingrecorded an accrual for remaining payments under the lease for facilities that the Company no longer uses and will continue to incur costs under the lease without economic benefit to the Company. This liability was measured and recorded at its options regardingfair value when the Company ceased its long-term contractual lease commitments at Cleveland. The capacity reductions at Cleveland may result in further special charges, which could be significant, relatedright to our contractual commitments.

use such facilities leased to it pursuant to the lease. The Company recorded a net charge of $16$74 million ($1047 million net of related income tax benefits)taxes) related to its annual assessment of impairment of its indefinite-lived intangible assets (certain international Pacific routes). In addition, the Company also recorded $33 million for charges related primarily to impairment of its flight equipment held for disposal associated with its Boeing 737-300 and 737-500 fleets.

Integration-related costs included compensation costs related to systems integration, training, severance and relocation for employees.

amended lease.

The Company recorded $66 million for the permanent grounding of 21 of the Company’s Embraer ERJ 135 regional aircraft under lease through 2018, which included an accrual for remaining lease payments and an amount for maintenance return conditions. The Company decided to permanently ground these 21 Embraer ERJ 135 aircraft as a result of new Embraer E175 regional jet deliveries, the impact of pilot shortages at regional carriers and fuel prices. In addition, the Company also recorded $33 million for losses on the sale of assets and other special charges.

United used cash to retire, at par, the entire $248 million principal balance of the 6% Convertible Debentures and the 6% Convertible Preferred Securities, Term Income Deferrable Equity Securities (TIDES) and incurred $64 million of expense primarily associated with the write-off of the related non-cash debt discounts. The Company also recorded $10 million of foreign exchange losses in Venezuela in 2014.

2013

The Company offered a voluntary retirement program for its fleet service, passenger service, storekeeper and pilot work groups. Approximately 1,200 employees volunteered under the program during the fourth quarter of 2013 and United recorded approximately $64 million of severance and benefit costs for the programs. The Company also offered voluntary leave of absence programs which allowed for continued medical coverage for flight attendants who volunteered during the leave of absence period, resulting in a charge of approximately $26 million. The remaining $15 million of severance and benefit costs was related to involuntary severance programs associated with flight attendants and other work groups.

The Company recorded $32 million of impairment charges of its flight equipment held for disposal associated with its Boeing 737-300 and 737-500 fleets and $1 million on an intangible asset for a route to Manila in order to reflect the estimated fair value of this asset as part of the Company’s annual impairment test of indefinite-lived intangible assets.

Integration-related costs included compensation costs related to systems integration and training, branding activities, new uniforms, write-off or acceleration of depreciation on systems and facilities that were no longer

105

used or planned to be used for significantly shorter periods, relocation for employees and severance primarily associated with administrative headcount reductions.

The fleet service, passenger service and storekeeper employees represented by the International Association of Machinists and Aerospace Workers (the "IAM") ratified seven new contracts with the Company which extended the contracts through 2021. The technicians and related employees represented by the IBT ratified a six-year joint collective bargaining agreement withwhich extended the contract through 2022. During 2016, the Company during 2013. The Company recorded a $127$171 million ($110 million net of taxes) of special chargecharges primarily for lump sum payments made in conjunction with the ratification. The lump sum payments were not in lieuIAM and IBT agreements described above.

As part of future pay increases. The Company completed substantially all cash payments in 2013.

The Company recorded $18 million associatedthe ratified contract with the temporary groundingIBT, the Company amended some of its Boeing 787 aircraft.technicians and related employees' postretirement medical plans. The charges were comprisedamendments triggered curtailment accounting, resulting in the recognition of aircraft depreciation expense and dedicated personnel costs thata one-time $60 million gain ($38 million net of taxes) for accelerated recognition of a prior service credit in one of the plans. Also, as part of the ratified contract with the Association of Flight Attendants, the Company incurred whileamended two of its flight attendant postretirement medical plans. The amendments triggered curtailment accounting, resulting in the aircraft were grounded. The aircraft returned to service in May 2013. In addition, the Company adjusted its reserves for certain legal matters by $29 million and recorded approximately $11 million in accruals for future rent associated with the early retirementrecognition of four leased Boeing 757-200 aircraft. Additionally, the Company recorded a $5one-time $47 million gain related to($30 million net of taxes) for accelerated recognition of a contract termination and $3 million in gains on the sale of assets.

prior service credit.



Accrual Activity

Activity related to the accruals for severance and medical costs and future lease payments on permanently grounded aircraft is as follows (in millions):

   Severance/
  Medical Costs  		       Permanently    
Grounded Aircraft		 

Balance at December 31, 2012

   $65      $5   

Accrual

   120      10   

Payments

   (94)     (4)  
  

 

 

   

 

 

 

Balance at December 31, 2013

   91      11   

Accrual

   199      102   

Payments

   (181)     (11)  
  

 

 

   

 

 

 

Balance at December 31, 2014

   109      102   

Accrual

   107      30   

Payments

   (189)     (54)  
  

 

 

   

 

 

 

Balance at December 31, 2015

   $27     $78   
  

 

 

   

 

 

 

The Company’s accrual and payment activity is primarily related to severance and other compensation expense associated with voluntary employee early retirement programs.

106

 Severance/ Benefit Costs Permanently Grounded Aircraft
Balance at December 31, 2015$27
 $78
Accrual and related adjustments37
 (17)
Payments(50) (20)
Balance at December 31, 201614
 41
Accrual116
 (4)
Payments(93) (15)
Balance at December 31, 201737
 22
Accrual41
 (7)
Payments(53) (3)
Balance at December 31, 2018$25
 $12
NOTE 17 - SEGMENT INFORMATION

Operating segments are defined as components of an enterprise with separate financial information, which are evaluated regularly by the chief operating decision maker and are used in resource allocation and performance assessments.

The Company deploys its aircraft across its route network through a single route scheduling system to maximize its value. When making resource allocation decisions, the Company’s chief operating decision maker evaluates flight profitability data, which considers aircraft type and route economics. The Company’s chief operating decision maker makes resource allocation decisions to maximize the Company’s consolidated financial results. Managing the Company as one segment allows management the opportunity to maximize the value of its route network.

The Company’s operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) for the years ended December 31 is presented in the table below (in millions):

2015

Domestic (U.S. and Canada)

 $21,931

Pacific

5,498

Atlantic

7,068

Latin America

3,367

Total

 $37,864

2014

Domestic (U.S. and Canada)

 $22,320

Pacific

5,767

Atlantic

7,321

Latin America

3,493

Total

 $38,901

2013

Domestic (U.S. and Canada)

 $22,092

Pacific

5,794

Atlantic

7,132

Latin America

3,261

Total

 $    38,279 (a) 

(a) UAL and United amounts are substantially the same.

The Company attributes revenue among the geographic areas based upon the origin and destination of each flight segment. The Company’s operations involve an insignificant level of dedicated revenue-producing assets in geographic regions as the overwhelming majority of the Company’s revenue producing assets (primarily U.S. registered aircraft) can be deployed in any of its geographic regions.

107

NOTE 1815 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

UAL Quarter Ended
(In millions, except per share amounts) March 31 June 30 September 30 December 31
2018        
Operating revenue $9,032
 $10,777
 $11,003
 $10,491
Income from operations 276
 1,161
 1,203
 652
Net income 147
 684
 836
 462
Basic earnings per share 0.52
 2.49
 3.07
 1.71
Diluted earnings per share 0.52
 2.48
 3.06
 1.70
         
2017 (a)        
Operating revenue $8,426
 $10,008
 $9,899
 $9,451
Income from operations 320
 1,437
 1,138
 776
Net income 99
 821
 645
 579
Basic earnings per share 0.32
 2.67
 2.15
 1.99
Diluted earnings per share 0.32
 2.67
 2.15
 1.98
(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, 

UAL                                                                    

 Quarter Ended 

(In millions, except per share amounts)            

     March 31          June 30          September 30          December 31     

2015

    

Operating revenue

 $      8,608    $      9,914    $10,306    $9,036   

Income from operations

  741     1,445     1,899     1,081   

Net income

  508     1,193     4,816     823   

Basic earnings per share

  1.33     3.14     12.83     2.24   

Diluted earnings per share

  1.32     3.14     12.82     2.24   

2014

    

Operating revenue

 $8,696    $10,329    $10,563    $9,313   

Income (loss) from operations

  (349)    906     1,191     625   

Net income (loss)

  (609)    789     924     28   

Basic earnings (loss) per share

  (1.66)    2.11     2.49     0.08   

Diluted earnings (loss) per share

  (1.66)    2.01     2.37     0.07   

108

UAL’sRevenue from Contracts with Customers (Topic 606) andAccounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information.

UAL's quarterly financial data is subject to seasonal fluctuations and historically its second and third quarter financial results, which reflect higher travel demand, are better than its first and fourth quarter financial results. UAL’sUAL's quarterly results were

impacted by the following significant items (in millions):

   Quarter Ended 
   March 31   June 30   September 30   December 31 

2015

        

Operating:

        

Severance and benefit costs

   $50      $25     $28      $4   

Impairment of assets

   2      11      18      48   

Integration-related costs

   18      14      15      13   

(Gains) losses on sale of assets and other miscellaneous (gains) losses, net

   (6)     5      15      66   
  

 

 

   

 

 

   

 

 

   

 

 

 

Special charges

   64      55      76      131   

Nonoperating and income taxes:

        

Loss on extinguishment of debt and other, net

   6      128      61      7   

Income tax benefit related to special charges

   —      —      —      (11)  

Income tax expense (benefit) associated with valuation allowance release

   —      —      (3,218)     88   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating and nonoperating special items, net of income taxes

   $          70      $          183      $(3,081)     $215   
  

 

 

   

 

 

   

 

 

   

 

 

 

2014

        

Operating:

        

Severance and benefit costs

   $14     $38     $6      $141   

Impairment of assets

   1      32      —      16   

Integration-related costs

   34      17      28      17   

Costs associated with permanently grounding Embraer ERJ 135 aircraft

   —      66      —      —   

Losses on sale of assets and other special (gains) losses, net

   3      16      9      5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Special charges

   52      169      43      179   

Nonoperating and income taxes:

        

Loss on extinguishment of debt and other, net

   21      —      —      53   

Income tax benefit related to special charges

   (1)     —      (3)     (6)  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating and nonoperating special charges, net of income taxes

   $72      $169      $40      $226   
  

 

 

   

 

 

   

 

 

   

 

 

 

  Quarter Ended
  March 31 June 30 September 30 December 31
2018        
Operating:        
Impairment of assets $23
 $111
 $11
 $232
Termination of an engine maintenance service agreement —
 —
 —
 64
Severance and benefit costs 14
 11
 9
 7
(Gains) losses on sale of assets and other special charges 3
 7
 (3) (2)
Total operating special charges 40
 129
 17
 301
Nonoperating:        
Nonoperating mark-to-market ("MTM") (gains) losses on financial instruments (45) 135
 (29) (56)
Total special charges and MTM (gains) losses on financial instruments (5) 264
 (12) 245
Income taxes:        
Income tax expense (benefit) related to special charges and MTM gains and losses on financial instruments 1
 (59) 3
 (55)
Income tax adjustments —
 —
 —
 (5)
Total special charges and MTM (gains) losses on financial instruments, net of tax $(4) $205
 $(9) $185
         
2017 (a)        
Operating:        
Severance and benefit costs $37
 $41
 $23
 $15
Impairment of assets —
 —
 15
 10
(Gains) losses on sale of assets and other special charges 14
 3
 12
 6
Total operating special charges 51
 44
 50
 31
Income taxes: 

 

 

 

Income tax benefit related to special charges (18) (16) (18) (11)
Income tax adjustments —
 —
 —
 (179)
Total operating special charges, net of income taxes and income tax adjustments $33
 $28
 $32
 $(159)
(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). See Note 161 to the financial statements contained in Part II, Item 8 of this report for additional information.
See Note 14 of this report for additional information ofrelated to these items.


ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

109

ITEM 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Control and Procedures

UAL and United each maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted by UAL and United to the Securities and Exchange Commission (“SEC”)SEC is recorded, processed, summarized and reported, within the time periods specified by the SEC’sSEC's rules and forms, and is accumulated and communicated to management including the acting Chief Executive Officer and acting Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The management of UAL and United, including the acting Chief Executive Officer and acting Chief Financial Officer, performed an evaluation to conclude with reasonable assurance that UAL’sUAL's and United’sUnited's disclosure controls and procedures were designed and operating effectively to report the information each company is required to disclose in the reports they file with the SEC on a timely basis. Based on that evaluation, the acting Chief Executive Officer and the acting Chief Financial Officer of UAL and United have concluded that as of December 31, 2015,2018, disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting during the Quarter Ended December 31, 20152018

During the three months ended December 31, 2015,2018, there was no change in UAL’sUAL's or United’sUnited's internal control over financial reporting during their most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, their internal control over financial reporting.

110


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Stockholders and Board of Directors and Stockholders of

United Continental Holdings, Inc.


Opinion on Internal Control over Financial Reporting

We have audited United Continental Holdings, Inc.’s's (the “Company”"Company") internal control over financial reporting as of December 31, 2015,2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”)COSO criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated financial statements as of and for the year ended December 31, 2018 of the Company and our report dated February 28, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’sCompany's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Overover Financial Reporting in Item 9A. Our responsibility is to express an opinion on the company’sCompany's internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.


Definition and Limitations of Internal Control Over Financial Reporting

A company’scompany's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’scompany's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’scompany's assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2015 of the Company and our report dated February 18, 2016 expressed an unqualified opinion thereon.




/s/ Ernst & Young LLP


Chicago, Illinois

February 18, 2016

111

28, 2019


United Continental Holdings, Inc. Management Report on Internal Control Over Financial Reporting

February 18, 2016

28, 2019

To the Stockholders of United Continental Holdings, Inc.

Chicago, Illinois

The management of United Continental Holdings, Inc. (“UAL”("UAL") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including our acting Chief Executive Officer and acting Chief Financial Officer, we conducted an evaluation of the design and operating effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, management used the framework set forth in Internal Control—Integrated Framework (2013 Framework) issued by the Committee of the Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our acting Chief Executive Officer and acting Chief Financial Officer concluded that our internal control over financial reporting was effective as of December 31, 2015.

Our independent registered public accounting firm, Ernst & Young LLP, who audited UAL’s consolidated financial statements included in this Form 10-K, has issued a report on UAL’s internal control over financial reporting, which is included herein.

United Airlines, Inc. Management Report on Internal Control Over Financial Reporting

February 18, 2016

To the Stockholder of United Airlines, Inc.

Chicago, Illinois

The management of United Airlines, Inc. (“United”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). United’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including United’s actingour Chief Executive Officer and acting Chief Financial Officer, Unitedwe conducted an evaluation of the design and operating effectiveness of our internal control over financial reporting as of December 31, 2015.2018. In making this assessment, management used the framework set forth in Internal Control—Integrated Framework (2013 Framework)issued by the Committee of the Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was effective as of December 31, 2018.

Our independent registered public accounting firm, Ernst & Young LLP, who audited UAL's consolidated financial statements included in this Form 10-K, has issued a report on UAL's internal control over financial reporting, which is included herein.

United Airlines, Inc. Management Report on Internal Control Over Financial Reporting
February 28, 2019
To the Stockholder of United Airlines, Inc.
Chicago, Illinois
The management of United Airlines, Inc. ("United") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). United's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, United's internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including United's Chief Executive Officer and Chief Financial Officer, United conducted an evaluation of the design and operating effectiveness of its internal control over financial reporting as of December 31, 2018. In making this assessment, management used the framework set forth in Internal Control—Integrated Framework (2013 Framework) issued by the Committee of the Sponsoring Organizations of the Treadway Commission. Based on this evaluation, United’s actingUnited's Chief Executive Officer and acting Chief Financial Officer concluded that its internal control over financial reporting was effective as of December 31, 2015.

2018.

This annual report does not include an attestation report of United’sUnited's registered public accounting firm regarding internal control over financial reporting. Management’sManagement's report was not subject to attestation by United’sUnited's registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit United to provide only management’smanagement's report in this annual report.

112


ITEM 9B.OTHER INFORMATION.

None.


PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Certain information required by this item with respect to UAL is incorporated by reference from UAL’sUAL's definitive proxy statement for its 20162019 Annual Meeting of Stockholders.Stockholders under the captions "Election of Directors," "Corporate Governance" and "Beneficial Ownership of Securities—Section 16(a) Beneficial Ownership Reporting Compliance." Information regarding the executive officers of UAL is presented below.

Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10-K.

EXECUTIVE OFFICERS OF UAL
Kate Gebo.

The executive officers of UAL are listed below, along with their ages, tenure as officer and business background for at least the last five years.

Michael P. Bonds.Age 53. Mr. Bonds50. Ms. Gebo has beenserved as Executive Vice President Human Resources and Labor Relations of UAL and United since October 2010.December 2017. From June 2005November 2016 to September 2010, Mr. BondsNovember 2017, Ms. Gebo served as Senior Vice President, Human Resources and Labor Relations of Continental Airlines, Inc. (“Continental”). Mr. Bonds joined Continental in 1995.

James E. Compton. Age 60. Mr. Compton has been Vice ChairmanGlobal Customer Service Delivery and Chief RevenueCustomer Officer of United. From October 2015 to November 2016, Ms. Gebo served as Vice President of the Office of the Chief Executive Officer. From November 2009 to October 2015, Ms. Gebo served as Vice President of Corporate Real Estate of United.

Brett J. Hart. Age 49. Mr. Hart has served as Executive Vice President, Chief Administrative Officer and General Counsel of UAL and United since December 2012.May 2017. From October 2010February 2012 to December 2012, Mr. ComptonMay 2017, he served as Executive Vice President and Chief Revenue OfficerGeneral Counsel of UAL United and Continental. From January 2010 to September 2010,United. Mr. ComptonHart served as Executive Vice President and Chief Marketing Officer of Continental. From August 2004 to December 2009, Mr. Compton served as Executive Vice President—Marketing of Continental. Mr. Compton joined Continental in 1995.

Brett J. Hart. Age 46. Mr. Hart has been acting Chief Executive Officer and principal executive officer of the Company, sinceon an interim basis, from October 2015. Previously, Mr. Hart served as Executive Vice President, General Counsel and Secretary of UAL and United since February 2012.2015 to March 2016. From December 2010 to February 2012, he served as Senior Vice President, General Counsel and Secretary of UAL, United and Continental.Continental Airlines, Inc. ("Continental"). From June 2009 to December 2010, Mr. Hart served as Executive Vice President, General Counsel and Corporate Secretary at Sara Lee Corporation, a consumer food and beverage company. From March 2005 to May 2009, Mr. Hart served as Deputy General Counsel and Chief Global Compliance Officer of Sara Lee Corporation. Mr. Hart joined UAL in 2010.

Gregory L. Hart.Age 50.53. Mr. Hart has beenserved as Executive Vice President and Chief Operations Officer of UAL and United since February 2014. From December 2013 to February 2014, he served as Senior Vice President Operations of UAL and United. From September 2012 to December 2013, Mr. Hart served as Senior Vice President Technical Operations of United. From October 2010 to September 2012, Mr. Hart served as Senior Vice President Network of United and Continental. From September 2008 to September 2010, Mr. Hart served as Vice President Network Strategy of Continental. Mr. Hart joined Continental in 1997.

Linda P. Jojo.Age 50.53. Ms. Jojo has beenserved as Executive Vice President Technology and Chief Digital Officer of UAL and United since May 2017. From November 2014 to May 2017, Ms. Jojo served as Executive Vice President and Chief Information Officer of UAL and United since November 2014.United. From July 2011 to October 2014, Ms. Jojo served as Executive Vice President and Chief Information Officer of Rogers Communications, Inc., a Canadian communications and media company. From October 2008 to June 2011, Ms. Jojo served as Chief Information Officer of Energy Future Holdings, a Dallas-based privately held energy company and electrical utility provider.

Chris Kenny. Age 51.54. Mr. Kenny has beenserved as Vice President and Controller of UAL and United since October 2010. From September 2003 to September 2010, Mr. Kenny served as Vice President and Controller of Continental. Mr. Kenny joined Continental in 1997.

113

J. Scott Kirby. Age 51. Mr. Kirby has served as President of UAL and United since August 2016. Prior to joining the Company, from December 2013 to August 2016, Mr. Kirby served as President of American Airlines Group and American Airlines, Inc. Mr. Kirby also previously served as President of US Airways from October 2006 to December 2013. Mr. Kirby held significant other leadership roles at US Airways and at America West prior to the 2005 merger of those carriers, including Executive Vice President—Sales and Marketing (2001 to 2006); Senior Vice President, e-business (2000 to 2001); Vice President, Revenue Management (1998 to 2000); Vice President, Planning (1997 to 1998); and Senior Director, Scheduling and Planning (1995 to 1998). Prior to joining America West, Mr. Kirby worked for American Airlines Decision Technologies and at the Pentagon.

Gerald Laderman.Age 58. 61. Mr. Laderman has been Seniorserved as Executive Vice President Finance and acting Chief Financial Officer since August 2015.2018. Mr. Laderman served as Senior Vice President Finance, Procurement and Treasurer for UAL and United sincefrom 2013 to August 2015, and again from August 2016 to May 2018. Mr. Laderman additionally was acting Chief Financial Officer from

August 2015 to August 2016 and from May 2018 to August 2018. Mr. Laderman served as Senior Vice President Finance and Treasurer for the Company from 2010 to 2013. From 2001 to 2010, Mr. Laderman served as Senior Vice President of Finance and Treasurer for Continental. Mr. Laderman joined Continental in 1988 as senior director legal affairs, finance and aircraft programs.

Oscar Munoz. Age 57.60. Mr. Munoz was named President andhas served as Chief Executive Officer effectiveof UAL and United since September 8, 2015.2015, and also as President of UAL and United from September 2015 until August 2016. From February 2015 to September 2015, Mr. Munoz served as President and Chief Operating Officer of CSX Corporation (“CSX”("CSX"), a railroad and intermodal transportation services company, overseeing operations, sales and marketing, human resources, service design and information technology. Prior to his appointment as President and Chief Operating Officer of CSX, Mr. Munoz served as Executive Vice President and Chief Operating Officer of CSX Transportation from January 2012 to February 2015 and as Executive Vice President and Chief Financial Officer of CSX from 2003 to 2012. Mr. Munoz has been a directormember of the Company and Chairman of the Audit Committee of theUAL Board of Directors since 2010.

Andrew Nocella. Age 49. Mr. Nocella has served as Executive Vice President and Chief Commercial Officer of UAL and United since September 2017. From February 2017 to September 2017, he served as Executive Vice President and Chief Revenue Officer of UAL and United. Prior to joining the Company, from August 2016 to February 2017, Mr. Nocella served as Senior Vice President, Alliances and Sales of American Airlines, Inc. From December 2013 to August 2016, he served as Senior Vice President and Chief Marketing Officer of American Airlines, Inc. From August 2007 to December 2013, he served as Senior Vice President, Marketing and Planning of US Airways.
There are no family relationships among the executive officers or the directors of UAL. The executive officers are elected by theUAL's Board of Directors each year and hold office until the organizationnext annual meeting of the Board of Directors in the subsequent year,stockholders, until his or her successor is chosentheir successors are elected and qualified, or until his or hertheir earlier death, resignation or removal.

The Company has a code of ethics, the “Ethics"Code of Ethics and Compliance Principles,”Business Conduct," for its directors, officers and employees. The code serves as a “Code"Code of Ethics”Ethics" as defined by SEC regulations, and as a “Code"Code of Business Conduct and Ethics”Conduct" under the listed Company Manual of the NYSE.Nasdaq Listing Rule 5610. The code is available on the Company’sCompany's investor relations website at http://ir.united.com. Waivers granted to certain officers from compliance with or future amendments to the code will be disclosed on the Company’sCompany's investor relations website in accordance with Item 5.05 of Form 8-K.

ITEM 11.EXECUTIVE COMPENSATION.

Information required by this item with respect to UAL is incorporated by reference from UAL’sUAL's definitive proxy statement for its 20162019 Annual Meeting of Stockholders.

Stockholders under the captions "Executive Compensation," "2018 Director Compensation" and "Corporate Governance—Compensation Committee Interlocks and Insider Participation."

Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10-K.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Information required by this item with respect to UAL is incorporated by reference from UAL’sUAL's definitive proxy statement for its 20162019 Annual Meeting of Stockholders.

Stockholders under the caption "Beneficial Ownership of Securities."

Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10-K.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Information required by this item with respect to UAL is incorporated by reference from UAL’sUAL's definitive proxy statement for its 20162019 Annual Meeting of Stockholders.

Stockholders under the captions "Corporate Governance—Certain Relationships and Related Transactions," "Corporate Governance—Committees of the Board" and "Corporate Governance—Director Independence."

Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10-K.

114

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The Audit Committee of the UAL Board of Directors has adopted a policy on pre-approval of services of the Company’sCompany's independent registered public accounting firm. As a wholly-owned subsidiary of UAL, United’sUnited's audit services are determined by UAL. The policy provides that the Audit Committee shall pre-approve all audit and non-audit services to be provided to UAL and its subsidiaries and affiliates by its independent auditors. The process by which this is carried out is as follows:


For recurring services, the Audit Committee reviews and pre-approves the independent registered public accounting firm’sfirm's annual audit services in conjunction with the annual appointment of the outside auditors. The reviewed materials include a description of the services along with related fees. The Audit Committee also reviews and pre-approves other classes of recurring services along with fee thresholds for pre-approved services. In the event that the additional services are required prior to the next scheduled Audit Committee meeting, pre-approvals of additional services follow the process described below.

Any requests for audit, audit related, tax and other services not contemplated with the recurring services approval described above must be submitted to the Audit Committee for specific pre-approval and cannot commence until such approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings. However, the authority to grant specific pre-approval between meetings, as necessary, has been delegated to the Chair of the Audit Committee. The Chair must update the Audit Committee at the next regularly scheduled meeting of any services that were granted specific pre-approval.

On a periodic basis, the Audit Committee reviews the status of services and fees incurred year-to-date and a list of newly pre-approved services since its last regularly scheduled meeting. The Audit Committee has considered whether the 20152018 and 20142017 non-audit services provided by Ernst & Young LLP, the Company’sCompany's independent registered public accounting firm, are compatible with maintaining auditor independence.

All of the services in 20152018 and 20142017 under the Audit Fees, Audit Related Fees, Tax Fees and All Other Fees categories below have been approved by the Audit Committee pursuant to paragraph (c)(7) of Rule 2-01 of Regulation S-X of the Exchange Act.

The aggregate fees billed for professional services rendered by the Company’sCompany's independent auditors in 20152018 and 20142017 are as follows (in thousands):

Service

      2015           2014     

Audit Fees

   $4,193      $3,827   

Audit Related Fees

   98      181   

Tax Fees

   2,050      560   

All Other Fees

   5      5   
  

 

 

   

 

 

 
   $        6,346      $        4,573   
  

 

 

   

 

 

 

Note: UAL

Service 2018 2017
Audit Fees $3,992
 $4,548
Audit Related Fees 375
 565
Tax Fees 166
 584
All Other Fees 2
 2
Total Fees $4,535
 $5,699
Note: UAL and United amounts are the same.    
AUDIT FEES
For 2018 and United amounts are the same.

AUDIT FEES

For 2015 and 2014,2017, audit fees consist primarily of the audit and quarterly reviews of the consolidated financial statements and the audit of the effectiveness of internal control over financial reporting of United Continental Holdings, Inc. and its wholly-owned subsidiaries. Audit fees also include the audit of the consolidated financial statements of United, employee benefit plan audits, attestation services required by statute or regulation, comfort letters, consents, assistance with and review of documents filed with the SEC, and accounting and financial reporting consultations and research work necessary to comply with generally accepted auditing standards.

115

AUDIT RELATED FEES

For 20152018 and 2014,2017, fees for audit related services primarily consisted of understanding key process changesprofessional services related to due diligence and identifying and testing changes inconsultations related to the internal control environment prior to implementationadoption of system conversions, and an assessment of certain information technology security related controls.

new accounting standards.

TAX FEES

Tax fees for 20152018 and 2014 include2017 relate to professional services provided for preparation of tax returns of federal, foreign and state tax returns, research and consultations regarding tax accounting and tax compliance matters and assistance in assembling data to prepare forreview of U.S. and respond to governmental reviewsinternational tax impacts of past tax filings,certain transactions, exclusive of tax services rendered in connection with the audit.

ALL OTHER FEES

Fees for all other services billed in 20152018 and 20142017 consist of subscriptions to Ernst & Young LLP’sLLP's on-line accounting research tool.


PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)List of documents filed as part of this report:
(a)
(1) 
Financial Statements. The financial statements required by this item are listed in Part II, Item 8, Financial Statements and Supplementary Data herein.
(2) 
Financial Statement Schedules.Schedules. The financial statement schedule required by this item is listed below and included in this report after the signature page hereto.
     Schedule II-Valuation and Qualifying Accounts for the years ended December 31, 2018, 2017 and 2016.
Schedule II-Valuation and Qualifying Accounts for the years ended December 31, 2015, 2014 and 2013.
 All other schedules are omitted because they are not applicable, not required or the required information is shown in the consolidated financial statements or notes thereto.
(b) 
Exhibits.Exhibits. The exhibits required by this item are listed in the Exhibit Index which immediately precedes the exhibits filed with this Form 10-K and is incorporated herein by this reference. Each management contract or compensatory plan or arrangement is denoted with a “†”provided in the Exhibit Index.

116

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each registrant has duly caused this Form


ITEM 16. FORM 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

SUMMARY.

None.

EXHIBIT INDEX

 UNITED CONTINENTAL HOLDINGS, INC.

 UNITED AIRLINES, INC.

 (Registrants)

 By:

 /s/    Gerald Laderman

 Gerald Laderman

 Senior Vice President Finance and acting Chief Financial Officer

Date: February 18, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on behalf of United Continental Holdings, Inc. and in the capacities and on the date indicated.

Signature                    

Capacity                    

 /s/    Brett J. Hart

 Brett J. Hart

Acting Chief Executive Officer

(Principal Executive Officer)

 /s/    Gerald Laderman

 Gerald Laderman

Senior Vice President Finance and acting Chief Financial Officer

(Principal Financial Officer)

 /s/    Chris Kenny

 Chris Kenny

Vice President and Controller

(Principal Accounting Officer)

 /s/    Carolyn Corvi

 Carolyn Corvi

Director

 /s/    Richard A. Delaney

 Richard A. Delaney

Director

 /s/    Jane C. Garvey

 Jane C. Garvey

Director

 /s/    James J. Heppner

 James J. Heppner

Director

 /s/    Walter Isaacson

 Walter Isaacson

Director

117

Signature                    

Capacity                    

 /s/    Henry L. Meyer III

 Henry L. Meyer III

Director

 /s/    Oscar Munoz

 Oscar Munoz

Director

 /s/    William R. Nuti

 William R. Nuti

Director

 /s/    Laurence E. Simmons

 Laurence E. Simmons

Director

 /s/    David J. Vitale

 David J. Vitale

Director

 /s/    John H. Walker

 John H. Walker

Director

 /s/    Charles A. Yamarone

 Charles A. Yamarone

Director

Date:    February 18, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on behalf of United Airlines, Inc. and in the capacities and on the date indicated.

Signature                    

Capacity                    

 /s/    Brett J. Hart

 Brett J. Hart

Acting Chief Executive Officer and Director

(Principal Executive Officer)

 /s/    Gerald Laderman

 Gerald Laderman

Senior Vice President Finance and acting Chief Financial Officer and Director

(Principal Financial Officer)

 /s/    Chris Kenny

 Chris Kenny

Vice President and Controller

(Principal Accounting Officer)

 /s/    James E. Compton

 James E. Compton

Director

 /s/    Gregory L. Hart

 Gregory L. Hart

Director

Date: February 18, 2016

118

Schedule II

Valuation and Qualifying Accounts

For the Years Ended December 31, 2015, 2014 and 2013

(In millions)

 

Description

  Balance at
Beginning  of
Period		   Additions
Charged  to
Costs and
Expenses		   Deductions
(a)		   Other  Balance at
End of
Period		 

Allowance for doubtful accounts—UAL and United:

         

2015

   $22      $25      $29      $—    $18   

2014

   13      45      36      —    22   

2013

   13      35      35      —    13   

Obsolescence allowance—spare parts—UAL and United:

         

2015

   $169      $38      $—      $28    $235   

2014

   162      35      28      —    169   

2013

   125      38      1      —    162   

Valuation allowance for deferred tax assets—UAL:

         

2015

   $4,751      $—      $4,703      $—    $48   

2014

   4,591      156      —      4(b)   4,751   

2013

   5,388      7      888      84(b)   4,591   

Valuation allowance for deferred tax assets—United:

         

2015

   $4,721      $—      $4,673      $—    $48   

2014

   4,561      167      —      (7)(b)   4,721   

2013

   5,288      8      898      163(b)   4,561   

(a) Deduction from reserve for purpose for which reserve was created.

(b) See Note 7 to the financial statements included in Part II, Item 8 of this report for additional information related to other valuation allowance adjustments.

119

EXHIBIT INDEX

Exhibit No.

Registrant

Exhibit

Exhibit No.Registrant

Plan of Merger

    *2.1

UAL

United

Agreement and Plan of Merger, dated as of May 2, 2010, by and among UAL Corporation, Continental Airlines, Inc. and JT Merger Sub Inc. (schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K) (filed as Exhibit 2.1 to UAL’s Form 8-K filed May 4, 2010, Commission file number 1-6033, and incorporated herein by reference)
    *2.2UnitedAgreement and Plan of Merger, dated as of March 28, 2013, by and between Continental Airlines, Inc. and United Air Lines, Inc. (filed as Exhibit 2.1 to UAL’s Form 8-K filed April 3, 2013, Commission file number 1-6033, and incorporated herein by reference)
   
  

Articles of Incorporation and Bylaws

  *3.1 
3.1UAL
Amended and Restated Certificate of Incorporation of United Continental Holdings, Inc. (filed as Exhibit 3.1 to UAL’sUAL's Form 8-K filed October 1, 2010, Commission file number 1-6033, and incorporated herein by reference)
  *3.2 
3.2UAL
Amended and Restated Bylaws of United Continental Holdings, Inc. (filed as Exhibit 3.23.1 to UAL’sUAL's Form 10-K filed February 20, 2014,10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference)
  *3.3 
3.3United
Amended and Restated Certificate of Incorporation of United Airlines, Inc. (filed as Exhibit 3.1 to UAL’sUAL's Form 8-K filed April 3, 2013, Commission file number 1-6033, and incorporated herein by reference)
  *3.4 
3.4United
Amended and Restated By-laws of United Airlines, Inc. (filed as Exhibit 3.2 to UAL’sUAL's Form 8-K filed April 3, 2013, Commission file number 1-6033, and incorporated herein by reference)
   
  

Instruments Defining Rights of Security Holders, Including Indentures

  *4.1 
4.1

UAL

United

Amended and Restated Indenture, dated as of January 11, 2013, by and among United Continental Holdings, Inc. as Issuer, United Air Lines, Inc. as Guarantor, and the Bank of New York Mellon Trust Company, N.A. as Trustee, providing for issuance of 6% Notes due 2028, 6% Notes due 2026 and 8% Notes due 2024 (filed as Exhibit 4.6 to UAL’sUAL's Form 10-K for the year ended December 31, 2012, Commission file number 1-6033, and incorporated herein by reference)
  *4.2 
4.2

UAL

United

First Supplemental Indenture, dated as of April 1, 2013, by and among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Amended and Restated Indenture, dated as of January 11, 2013 (filed as Exhibit 4.1 to UAL’sUAL's Form 8-K filed April 3, 2013, Commission file number 1-6033, and incorporated herein by reference)

4.3    *4.3
UAL
United

UAL

United

Second Supplemental Indenture, dated as of September 13, 2013, by and among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Amended and Restated Indenture, dated as of January 11, 2013 (filed as Exhibit 4.1 to UAL’sUAL's Form 8-K filed September 19, 2013, Commission file number 1-6033, and incorporated herein by reference)

120

 *4.4 UnitedIndenture, dated as of July 15, 1997, between Continental Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor to Bank One, N.A.), as trustee related to Continental Airlines, Inc.’s 4.5% Convertible Notes due 2015 (filed as Exhibit to 4.1 to Continental’s Form S-3/A filed July 18, 1997, Commission file number 1-10323, and incorporated herein by reference)
 *4.54.4
UAL
United

UAL

United

Fourth Supplemental Indenture, dated as of October 1, 2010, by and among Continental Airlines, Inc., United Continental Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, with respect to the Indenture, dated as of July 15, 1997, between Continental Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor to Bank One, N.A.), as trustee related to Continental Airlines, Inc.’s 4.5% Convertible Notes due 2015 (filed as Exhibit 4.3 to UAL’s Form 8-K dated October 1, 2010, Commission file number 1-6033, and incorporated herein by reference)
    *4.6

UAL

United

Fifth Supplemental Indenture, dated as of May 15, 2014, among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.1 to UAL’s Form 8-K filed on May 19, 2014, Commission file number 1-6033, and incorporated herein by reference)
    *4.7

UAL

United

Indenture, dated as of May 7, 2013, among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (filed as Exhibit 4.1 to UAL’sUAL's Form 8-K filed on May 10, 2013, Commission file number 1-6033, and incorporated herein by reference)
 *4.8 

UAL

United

 4.5
UAL
United
First Supplemental Indenture, dated as of May 7, 2013, among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee, providing for the issuance of 6.375% Senior Notes due 2018 (filed as Exhibit 4.2 to UAL’sUAL's Form 8-K filed on May 10, 2013, Commission file number 1-6033, and incorporated herein by reference)
 *4.9 

UAL

United

 4.6
UAL
United
Form of 6.375% Senior Notes due 2018 (filed as Exhibit A to Exhibit 4.2 to UAL’sUAL's Form 8-K filed on May 10, 2013, Commission file number 1-6033, and incorporated herein by reference)
 *4.10 

UAL

United

 4.7
UAL
United
Form of Notation of Note Guarantee (filed as Exhibit B to Exhibit 4.2 to UAL’sUAL's Form 8-K filed on May 10, 2013, Commission file number 1-6033, and incorporated herein by reference)
 *4.11 

UAL

United

 4.8
UAL
United
Second Supplemental Indenture, dated as of November 8, 2013, among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee, providing for the issuance of 6.000% Senior Notes due 2020 (filed as Exhibit 4.2 to UAL’sUAL's Form 8-K filed on November 12, 2013, Commission file number 1-6033, and incorporated herein by reference)
 *4.12 

UAL

United

 4.9
UAL
United
Form of 6.000% Senior Notes due 2020 (filed as Exhibit 4.3 to UAL’sUAL's Form 8-K filed on November 12, 2013, Commission file number 1-6033, and incorporated herein by reference)
 *4.13 

UAL

United

 4.10
UAL
United
Form of Notation of Note Guarantee (filed as Exhibit 4.4 to UAL’sUAL's Form 8-K filed on November 12, 2013, Commission file number 1-6033, and incorporated herein by reference)

121

   
 4.11

Material Contracts

UAL
United
Third Supplemental Indenture, dated as of January 26, 2017, among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee, providing for the issuance of 5.000% Senior Notes due 2024 (filed as Exhibit 4.2 to UAL's Form 8-K filed January 27, 2017, Commission file number 1-6033, and incorporated herein by reference)
*†10.1 
 4.12UAL
United
Form of 5.000% Senior Notes due 2024 (filed as Exhibit A to Exhibit 4.2 to UAL's Form 8-K filed January 27, 2017, Commission file number 1-6033, and incorporated herein by reference)
 
 4.13UAL
United
Form of Notation of Note Guarantee (filed as Exhibit B to Exhibit 4.2 to UAL's Form 8-K filed January 27, 2017, Commission file number 1-6033, and incorporated herein by reference)
 4.14UAL
United
Fourth Supplemental Indenture, dated as of September 29, 2017, among United Continental Holdings, Inc., United Airlines, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee, providing for the issuance of 4.250% Senior Notes due 2022 (filed as Exhibit 4.2 to UAL's Form 8-K filed October 4, 2017, Commission file number 1-6033, and incorporated herein by reference)
 4.15UAL
United
Form of 4.250% Senior Notes due 2022 (filed as Exhibit A to Exhibit 4.2 to UAL's Form 8-K filed October 4, 2017, Commission file number 1-6033, and incorporated herein by reference)
 4.16UAL
United
Form of Notation of Note Guarantee (filed as Exhibit B to Exhibit 4.2 to UAL's Form 8-K filed October 4, 2017, Commission file number 1-6033, and incorporated herein by reference)
Material Contracts
 †10.1UAL
Agreement, dated April 19, 2016, by and among PAR Capital Management, Inc., Altimeter Capital Management, LP, United Continental Holdings, Inc. and the other signatories listed on the signature page thereto (filed as Exhibit 10.1 to UAL's Form 8-K filed April 20, 2016, Commission file number 1-6033, and incorporated herein by reference)
 †10.2UAL
United Continental Holdings, Inc. Profit Sharing Plan (amended and restated effective January 1, 2014, except as otherwise provided therein) (filed2016) (Filed as Exhibit 10.110.2 to UAL’sUAL's Form 10-K for the year ended December 31, 2013,2016, Commission file number 1-6033, and incorporated herein by reference)

*†10.2 †10.3UAL
First Amendment, dated January 29, 2018, to United Continental Holdings, Inc.Inc Profit Sharing Plan (effective January 1, 2014) (filed(Filed as Exhibit 10.210.3 to UAL’sUAL's Form 10-K for the year ended December 31, 2014,2017, Commission file number 1-6033, and incorporated herein by reference)
 †10.3 UALSecond Amendment to United Continental Holdings, Inc. Profit Sharing Plan (effective January 1, 2015)
 †10.4UAL
United
*†10.4

UAL

United

Employment Agreement, dated December 31, 2015, among United Continental Holdings, Inc., United Airlines, Inc. and Oscar Munoz (filed as Exhibit 10.1 to UAL’sUAL's Form 8-K8-K/A filed January 7, 2016, Commission file number 1-10323, and incorporated herein by reference)
*†10.5UALSERP Agreement, dated as of October 1, 2010, by and among United Continental Holdings, Inc., Continental Airlines, Inc. and James E. Compton (filed as Exhibit 10.12 to UAL’s Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*†10.6 

 †10.5UAL


United

Amendment to Employment Agreement, dated April 19, 2016, by and among United Continental Holdings, Inc., United Airlines, Inc. and Oscar Munoz (filed as Exhibit 10.1 to UAL's Form 8-K filed April 20, 2016, Commission file number 1-6033, and incorporated herein by reference)
 
 †10.6UAL
United
Second Amendment to Employment Agreement, dated April 21, 2017, by and among United Continental Holdings, Inc., United Airlines, Inc. and Oscar Munoz (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on April 21, 2017, Commission file number 1-6033, and incorporated herein by reference)
 †10.7UAL
United
SERP Agreement, dated as of October 1, 2010, by and among United Continental Holdings, Inc., Continental Airlines, Inc. and Gerald Laderman (filed as Exhibit 10.2 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2015, Commission file number 1-10323, and incorporated herein by reference)
*†10.7 

 †10.8UAL


United

Performance Award Agreement, dated May 5, 2016, by and among United Continental Holdings, Inc., United Airlines, Inc. and Brett J. Hart (filed as Exhibit 10.3 to UAL's Form 10-Q for the quarter ended June 30, 2016, Commission file number 1-6033, and incorporated herein by reference)
 
 †10.9UAL
Form of Stock Option Award Notice pursuant to the United Continental Holdings, Inc. Senior Officer Severance2008 Incentive Compensation Plan (effective October 1, 2014) (filed as Exhibit 10.1 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2015,2016, Commission file number 1-10323,1-6033, and incorporated herein by reference)
*†10.8 
 †10.10UALEmployment Agreement, dated as
Form of October 1, 2010, by and amongRestricted Stock Unit Award Notice pursuant to the United Continental Holdings, Inc., United Air Lines, Inc., Continental Airlines, Inc. and Jeffery A. Smisek 2008 Incentive Compensation Plan (filed as Exhibit 10.2110.2 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2016, Commission file number 1-6033, and incorporated herein by reference)
 †10.11UAL
United
Description of Benefits for Officers of United Continental Holdings, Inc. and United Airlines, Inc. (filed as Exhibit 10.11 to UAL's Form 10-K for the year ended December 31, 2015, Commission file number 1-6033 and incorporated herein by reference)
 †10.12UAL
United Continental Holdings, Inc. Officer Travel Policy (filed as Exhibit 10.24 to UAL's Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*†10.9 UALConfidentiality and Non-Competition Agreement, dated April 23, 2009, by and among Continental Airlines, Inc. and Jeffery A. Smisek (filed as Exhibit 10.1 to Continental Airlines, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, Commission file number 1-10323, and incorporated herein by reference)
*†10.10

UAL

United

Separation Agreement, dated as of September 8, 2015, by and among United Continental Holdings, Inc., United Airlines, Inc. and Jeffery A. Smisek (filed as Exhibit 10.1 to UAL’s Form 8-K filed September 8, 2015, Commission file number 1-6033, and incorporated herein by reference)
 †10.11†10.13UALDescription of Benefits for Officers of United Continental Holdings, Inc. and United Airlines, Inc.
*†10.12UALUnited Continental Holdings, Inc. Officer Travel Policy (filed as Exhibit 10.24 to UAL’s Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference)

122

*†10.13UAL
United Continental Holdings, Inc. 2008 Incentive Compensation Plan (filed as Annex A to UAL Corporation’sCorporation's 2013 Definitive Proxy Statement filed on April 26, 2013, Commission file number 1-6033, and incorporated herein by reference) (now named the United Continental Holdings, Inc. 2008 Incentive Compensation Plan)
*†10.14 
 †10.14UAL
First Amendment No. 1 to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (changing the name to United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (filed as Annex A to UAL’sUAL's Definitive Proxy Statement filed on April 26, 2013, Commission file number 1-6033, and incorporated herein by reference)
*†10.15 
 †10.15UAL
Second Amendment to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (filed as Exhibit 10.19 to UAL's Form 10-K for the year ended December 31, 2016, Commission file number 1-6033, and incorporated herein by reference)
 
 †10.16UAL
Form of Stock Option Award Notice pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (filed as Exhibit 10.2510.5 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2008, Commission file number 1-6033, and incorporated herein by reference)
*†10.16 
 †10.17UAL
Form of Restricted ShareStock Unit Award Notice pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (2012 and 2013 awards)(stock settled) (filed as Exhibit 10.3710.21 to UAL’sUAL's Form 10-K for the year ended December 31, 2011,2016, Commission file number 1-6033, and incorporated herein by reference)
*†10.17 
 †10.18UAL
Form of Restricted Share Award Notice pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan (awards during and after 2014) (filed as Exhibit 10.27 to UAL’sUAL's Form 10-K for the year ended December 31, 2013, Commission file number 1-6033, and incorporated by reference)

*†10.18 
 †10.19UAL
United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (adopted pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (filed as Exhibit 10.31 to UAL’sUAL's Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*†10.19 
 †10.20UAL
First Amendment to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (adopted pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (effective with respect to performance periods beginning on or after January 1, 2012) (filed as Exhibit 10.33 to UAL’sUAL's Form 10-K for the year ended December 31, 2011, Commission file number 1-6033, and incorporated herein by reference)
*†10.20 
 †10.21UAL
Second Amendment to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (adopted pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (filed as Exhibit 10.29 to UAL’sUAL's Form 10-K for the year ended December 31, 2012, Commission file number 1-6033, and incorporated herein by reference)
*†10.21 
 †10.22UAL
Third Amendment to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (adopted pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan) (filed as Exhibit 10.1 to UAL’sUAL's Form 10-Q for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference)
 †10.22 
 †10.23UAL
Fourth Amendment to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (adopted pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan)

123

(filed as Exhibit 10.22 to UAL's Form 10-K for the year ended December 31, 2015, Commission file number 1-6033 and incorporated herein by reference)
†10.23 
 †10.24UAL
Form of Performance-Based Restricted Stock Unit Award Notice pursuant to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (ROIC awards) (filed as Exhibit 10.23 to UAL's Form 10-K for the year ended December 31, 2015, Commission file number 1-6033 and incorporated herein by reference)
*†10.24 
 †10.25UAL
Form of Performance-Based Restricted Stock Unit Award Notice pursuant to the United Continental Holdings, Inc. Performance-Based Restricted Stock Unit Program (Relative Pre-tax Margin awards) (for performance periods beginning on or after January 1, 2015) (filed as Exhibit 10.2 to UAL’sUAL's Form 10-Q for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference)
*†10.25 
 †10.26UAL
United Continental Holdings, Inc. Incentive Plan 2010, as amended and restated February 17, 2011 (previously named the Continental Airlines, Inc. Incentive Plan 2010) (filed as Annex B to UAL’sUAL's Definitive Proxy Statement filed April 26, 2013, Commission file number 1-6033, and incorporated herein by reference)
*†10.26 
 †10.27UAL
First Amendment to the United Continental Holdings, Inc. Incentive Plan 2010, as amended and restated February 17, 2011 (filed as Annex B to UAL’sUAL's 2013 Definitive Proxy Statement filed on April 26, 2013, Commission file number 1-6033, incorporated herein by reference)
 †10.28UAL
United Air Lines, Inc. Management Cash Direct & Cash Match Program (amended and restated effective January 1, 2016)
 †10.29UAL
United Continental Holdings, Inc. Executive Severance Plan (effective October 1, 2014) (filed as Exhibit 10.1 to UAL's Form 8-K filed June 20, 2014, Commission file number 1-6033, and incorporated herein by reference)
 †10.30UAL
United Continental Holdings, Inc. 2017 Incentive Compensation Plan (filed as Exhibit 10.1 to UAL's Form 8-K filed on May 30, 2017, Commission file number 1-6033, and incorporated herein by reference)
 †10.31UAL
Form of Restricted Stock Unit Award Notice pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan (filed as Exhibit 10.6 to UAL's Form 10-Q for the quarter ended June 30, 2017, Commission file number 1-6033, and incorporated herein by reference)
 †10.32UAL
Form of Stock Option Award Notice pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan (filed as Exhibit 10.7 to UAL's Form 10-Q for the quarter ended June 30, 2017, Commission file number 1-6033, and incorporated herein by reference)
 †10.33UAL
United Continental Holdings, Inc. Performance-Based RSU Program (adopted pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan) (filed as Exhibit 10.8 to UAL's Form 10-Q for the quarter ended June 30, 2017, Commission file number 1-6033, and incorporated herein by reference)

*†10.2710.34UAL
First Amendment to the United Continental Holdings, Inc. Performance-Based RSU Program (adopted pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan)
 
 †10.35UAL
Form of Performance-Based RSU Award Notice pursuant to the United Continental Holdings, Inc. Performance-Based RSU Program (Relative Pre-tax Margin awards) (stock settled form of award)
 
 †10.36UAL
Form of Performance-Based RSU Award Notice pursuant to the United Continental Holdings, Inc. Performance-Based RSU Program (Relative Pre-tax Margin awards) (filed as Exhibit 10.9 to UAL's Form 10-Q for the quarter ended June 30, 2017, Commission file number 1-6033, and incorporated herein by reference)
†10.37UAL
United Continental Holdings, Inc. Annual Incentive Program (cash settled form of award) (adopted pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan) (filed as Exhibit 10.63 to UAL's Form 10-K for the year ended December 31, 2017, Commission file number 1-6033, and incorporated herein by reference)
 †10.38UAL
Form of Annual Incentive Plan Award Notice pursuant to the United Continental Holdings, Inc. Annual Incentive Program (adopted pursuant to the United Continental Holdings, Inc. 2017 Incentive Plan 2010) (as amended and restated February 21, 2013)Compensation Plan) (filed as Exhibit 10.4310.64 to UAL’sUAL's Form 10-K for the year ended December 31, 2012,2017, Commission file number 1-6033, and incorporated herein by reference)
*†10.28 UALUnited Continental Holdings, Inc. Long-Term Relative Performance Program (adopted pursuant to the United Continental Holdings, Inc. Incentive Plan 2010) (filed as Exhibit 10.43 to UAL’s Form 10-K for the year ended December 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*†10.29 †10.39UALFirst Amendment to the United Continental Holdings, Inc. Long-Term Relative Performance Program (adopted pursuant to the United Continental Holdings, Inc. Incentive Plan 2010) (effective with respect to performance periods beginning on or after January 1, 2012) (filed as Exhibit 10.49 to UAL’s Form 10-K for the year ended December 31, 2011, Commission file number 1-6033, and incorporated herein by reference)
*†10.30UALSecond Amendment to the United Continental Holdings, Inc. Long-Term Relative Performance Program (adopted pursuant to the United Continental Holdings, Inc. Incentive Plan 2010) (effective with respect to performance periods beginning on or after January 1, 2014) (filed as Exhibit 10.40.2 to UAL’s Form 10-K for the year ended December 31, 2013, Commission file number 1-6033, and incorporated herein by reference)
*†10.31UALForm of Annual Incentive Program Award Notice pursuant to the United Continental Holdings, Inc. Annual Incentive Program (for fiscal years beginning on or after January 1, 2013) (filed as Exhibit 10.47 to UAL’s Form 10-K for the year ended December 31, 2012, Commission file number 1-6033, and incorporated herein by reference)

124

*†10.32UALForm of Long-Term Relative Performance Award Notice pursuant to the United Continental Holdings, Inc. Long-Term Relative Performance Program (for use with respect to performance periods beginning January 1, 2012 and 2013) (filed as Exhibit 10.53 to UAL’s Form 10-K for the year ended December 31, 2011, Commission file number 1-6033, and incorporated herein by reference)
*†10.33UALForm of Long-Term Relative Performance Award Notice pursuant to the United Continental Holdings, Inc. Long-Term Relative Performance Program (for use with respect to performance periods beginning January 1, 2014) (filed as Exhibit 10.45 to UAL’s Form 10-K for the year ended December 31, 2013, Commission file number 1-6033, and incorporated herein by reference)
*†10.34UAL
Description of Compensation and Benefits for United Continental Holdings, Inc. Non-Employee Directors (filed as Exhibit 10.30 to UAL’s Form 10-K for the year ended December 31, 2014, Commission file number 1-6033, and incorporated herein by reference)
*†10.35 
 †10.40UAL
United Continental Holdings, Inc. 2006 Director Equity Incentive Plan (as amended and restated, effective February 20, 2014, filed as Annex A to UAL’sUAL's Definitive Proxy Statement filed April 25, 2014, Commission file number 1-6033, and incorporated herein by reference)
*†10.36 
 †10.41UAL
First Amendment to the United Continental Holdings, Inc. 2006 Director Equity Incentive Plan (as amended and restated on February 20, 2014) (filed as Exhibit 10.3 to UAL's Form 10-Q for the quarter ended March 31, 2017, Commission file number 1-6033, and incorporated herein by reference)
 
†10.42UAL
Form of Share Unit Award Notice pursuant to the United Continental Holdings, Inc. 2006 Director Equity Incentive Plan (for awards granted on or after June 2011) (filed as Exhibit 10.9 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2014, Commission file number 1-6033, and incorporated herein by reference) (for awards granted on or after June 2011)
*†10.37 UAL
†10.43UAL
United		Continental
Amended and Restated A350-900 Purchase Agreement, dated September 1, 2017, including letter agreements related thereto, between Airbus S.A.S. and United Airlines, Inc. 1998 Stock Incentive Plan (filed as Exhibit 4.3 to Continental’s Form S-8 Registration Statement (No. 333-57297), Commission file number 1-10323, and incorporated herein by reference)
*†10.38UALAmendment No. 1 to 1998 Incentive Plan, 1997 Incentive Plan and 1994 Incentive Plan (filed as Exhibit 10.2 to Continental’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, Commission file no. 1-10323, and incorporated herein by reference)
*†10.39UALAmendment to 1998 Incentive Plan, 1997 Incentive Plan and 1994 Incentive Plan (filed as Exhibit 10.5 to Continental’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, Commission file no. 1-10323 and incorporated herein by reference)
*†10.40UALForm of Outside Director Stock Option Grant pursuant to the Continental Airlines, Inc. 1998 Incentive Plan (filed as Exhibit 10.12(c) to Continental’s Form 10-K for the year ended December 31, 2006, Commission file number 1-10323, and incorporated herein by reference)
*†10.41UALContinental Airlines, Inc. Incentive Plan 2000, as amended and restated (filed as Exhibit 10.1 to Continental’s Form 10-Q for the quarter ended March 31, 2002, Commission file number 1-10323, and incorporated herein by reference)
*†10.42UALAmendment to Incentive Plan 2000, dated as of March 12, 2004 (filed as Exhibit 10.6 to Continental’s Form 10-Q for the quarter ended March 31, 2004, Commission file number 1-10323, and incorporated herein by reference)
*†10.43UALSecond Amendment to Incentive Plan 2000, dated as of June 6, 2006 (filed as Exhibit 10.1 to Continental’s Form 10-Q for the quarter ended June 30, 2006, Commission file number 1-10323, and incorporated herein by reference)

125

*†10.44UALThird Amendment to Incentive Plan 2000, dated as of September 14, 2006 (filed as Exhibit 10.1 to Continental’sUAL's Form 10-Q for the quarter ended September 30, 2006, Commission file number 1-10323, and incorporated herein by reference)
*†10.45UALForm of Outside Director Stock Option Agreement pursuant to Incentive Plan 2000 (filed as Exhibit 10.14(b) to Continental’s Form 10-K for the year ended December 31, 2000, Commission file number 1-10323, and incorporated herein by reference)
*†10.46UALForm of Outside Director Stock Option Grant pursuant to Incentive Plan 2000 (filed as Exhibit 10.1 to Continental’s Form 10-Q for the quarter ended March 31, 2008, Commission file number 1-10323, and incorporated herein by reference)
*†10.47UALForm of Non-Employee Director Option Grant Document pursuant to Continental Airlines, Inc. Incentive Plan 2010, as amended and restated through February 17, 2010 (filed as Exhibit 10.2(a) to Continental’s Form 10-K for the year ended December 31, 2009, Commission file number 1-10323, and incorporated herein by reference)
*†10.48UALUnited Air Lines, Inc. Management Cash Direct & Cash Match Program (amended and restated effective January 1, 2014) (filed as Exhibit 10.64 to UAL’s Form 10-K for the year ended December 31, 2013, Commission file number 1-10323, and incorporated herein by reference)
*†10.49UALUnited Continental Holdings, Inc. Executive Severance Plan (effective October 1, 2014) (filed as Exhibit 10.1 to UAL’s Form 8-K filed June 20, 2014, Commission file number 1-10323, and incorporated herein by reference)
*^10.50

UAL

United

Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.27 to UAL’s

Form 10-Q for the quarter ended March 31, 2010,2017, Commission file number 1-6033, and incorporated herein by reference)

*^10.51 

UAL

United

Letter Agreement No. 1 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.28 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
†10.44UAL
United
*^10.52

UAL

United

Letter Agreement No. 2 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.29 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.53

UAL

United

Letter Agreement No. 3 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.30 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.54

UAL

United

Letter Agreement No. 4 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.31 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.55

UAL

United

Letter Agreement No. 5 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.32 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)

126

*^10.56

UAL

United

Letter Agreement No. 6 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.33 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.57

UAL

United

Letter Agreement No. 7 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.34 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.58

UAL

United

Letter Agreement No. 8 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.35 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.59

UAL

United

Letter Agreement No. 9 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.36 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.60

UAL

United

Letter Agreement No. 10 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.37 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.61

UAL

United

Letter Agreement No. 11 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.38 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.62

UAL

United

Letter Agreement No. 12 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.39 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.63

UAL

United

Letter Agreement No. 13 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, by and among Airbus S.A.S and United Air Lines. Inc. (filed as Exhibit 10.40 to UAL’s Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.64

UAL

United

Amendment No. 1 to the Airbus A350-900XWB Purchase Agreement, dated June 25, 2010, by and among Airbus S.A.S and United Air Lines, Inc. (filed as Exhibit 10.6 to UAL’s Form 10-Q for the quarter ended June 30, 2010, Commission file number 1-6033, and incorporated herein by reference)
*^10.65

UAL

United

Amendment No. 2 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.8 to UAL’s Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.66

UAL

United

Amended and Restated Letter Agreement No. 2 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.9 to UAL’s

Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)

127

*^10.67

UAL

United

Amended and Restated Letter Agreement No. 3 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.10 to UAL’s Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.68

UAL

United

Amended and Restated Letter Agreement No. 4 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.11 to UAL’s Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.69

UAL

United

Amended and Restated Letter Agreement No. 5 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.12 to UAL’s Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.70

UAL

United

Amended and Restated Letter Agreement No. 6 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.13 to UAL’s Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.71

UAL

United

Amended and Restated Letter Agreement No. 7 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.14 to UAL’s Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.72

UAL

United

Amended and Restated Letter Agreement No. 10 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.15 to UAL’s Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.73

UAL

United

Amended and Restated Letter Agreement No. 12 to the Airbus A350-900XWB Purchase Agreement, dated June 19, 2013 (filed as Exhibit 10.16 to UAL’s Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.74

UAL

United

Purchase Agreement No. 1951, including exhibits and side letters thereto, dated

July 23, 1996, by and among Continental and Boeing (filed as Exhibit 10.8 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 1996, Commission file number 1-10323, and incorporated herein by reference)

*^10.75 

UAL

United

^10.45UAL
United
Supplemental Agreement No. 1 to Purchase Agreement No. 1951, dated October 10, 1996 (filed as Exhibit 10.14(a) to Continental’sContinental's Form 10-K for the year ended December 31, 1996, Commission file number 1-10323, and incorporated herein by reference)
*^10.76 

UAL

United

^10.46UAL
United
Supplemental Agreement No. 2 to Purchase Agreement No. 1951, dated March 5, 1997 (filed as Exhibit 10.3 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 1997, Commission file number 1-10323 and incorporated herein by reference)
*^10.77 

UAL

United

^10.47UAL
United
Supplemental Agreement No. 3, including exhibit and side letter, to Purchase Agreement No. 1951, dated July 17, 1997 (filed as Exhibit 10.14(c) to Continental’sContinental's Form 10-K for the year ended December 31, 1997, Commission file number 1-10323, and incorporated herein by reference)

128

*^10.78 

UAL

United

^10.48UAL
United
Supplemental Agreement No. 4, including exhibits and side letters, to Purchase Agreement No. 1951, dated October 10, 1997 (filed as Exhibit 10.14(d) to Continental’sContinental's Form 10-K for the year ended December 31, 1997, Commission file number 1-10323, and incorporated herein by reference)
*^10.79 

UAL

United

^10.49UAL
United
Supplemental Agreement No. 5, including exhibits and side letters, to Purchase Agreement No. 1951, dated October 10, 1997 (filed as Exhibit 10.1 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 1998, Commission file number 1-10323, and incorporated herein by reference)

*^10.8010.50UAL
United

UAL

United

Supplemental Agreement No. 6, including exhibits and side letters, to Purchase Agreement No. 1951, dated July 30, 1998 (filed as Exhibit 10.1 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 1998, Commission file number1-10323, and incorporated herein by reference)
*^10.81 

UAL

United

^10.51UAL
United
Supplemental Agreement No. 7, including side letters, to Purchase Agreement No. 1951, dated November 12, 1998 (filed as Exhibit 10.24(g) to Continental’sContinental's Form10-K for the year ended December 31, 2008,1998, Commission file number 1-10323, and incorporated herein by reference)
*^10.82 

UAL

United

 ^10.52UAL
United
Supplemental Agreement No. 8, including side letters, to Purchase Agreement No. 1951, dated December 7, 1998 (filed as Exhibit 10.24(h) to Continental’sContinental's Form10-K for the year ended December 31, 2008,1998, Commission file number 1-10323, and incorporated herein by reference)
*^10.83 

UAL

United

 ^10.53UAL
United
Letter Agreement No. 6-1162-GOC-131R1 to Purchase Agreement No. 1951, dated March 26, 1998 (filed as Exhibit 10.1 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 1998, Commission file number 1-10323, and incorporated herein by reference)
*^10.84 

UAL

United

 ^10.54UAL
United
Supplemental Agreement No. 9, including side letters, to Purchase Agreement No. 1951, dated February 18, 1999 (filed as Exhibit 10.4 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 1999, Commission file number 1-10323, and incorporated herein by reference)
*^10.85 

UAL

United

 ^10.55UAL
United
Supplemental Agreement No. 10, including side letters, to Purchase Agreement No. 1951, dated March 19, 1999 (filed as Exhibit 10.4(a) to Continental’sContinental's Form 10-Q for the quarter ended March 31, 1999, Commission file number 1-10323, and incorporated herein by reference)
*^10.86 

UAL

United

 ^10.56UAL
United
Supplemental Agreement No. 11, including side letters, to Purchase Agreement No. 1951, dated March 14, 1999 (filed as Exhibit 10.4(a)10.7 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 1999, Commission file number 1-10323, and incorporated herein by reference)
*^10.87 

UAL

United

 ^10.57UAL
United
Supplemental Agreement No. 12, including side letters, to Purchase Agreement No. 1951, dated July 2, 1999 (filed as Exhibit 10.8 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 1999, Commission file number 1-10323, and incorporated herein by reference)
*^10.88 

UAL

United

 ^10.58UAL
United
Supplemental Agreement No. 13 to Purchase Agreement No. 1951, dated October 13, 1999 (filed as Exhibit 10.25(n) to Continental’sContinental's Form 10-K for the year ended December 31, 1999, Commission file number 1-10323, and incorporated herein by reference)

129

*^10.89 

UAL

United

 ^10.59UAL
United
Supplemental Agreement No. 14 to Purchase Agreement No. 1951, dated December 13, 1999 (filed as Exhibit 10.25(o) to Continental’sContinental's Form 10-K for the year ended December 31, 1999, Commission file number 1-10323, and incorporated herein by reference)
*^10.90 

UAL

United

 ^10.60UAL
United
Supplemental Agreement No. 15, including side letters, to Purchase Agreement No. 1951, dated January 13, 2000 (filed as Exhibit 10.1 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 2000, Commission file number 1-10323, and incorporated herein by reference)
*^10.91 

UAL

United

 ^10.61UAL
United
Supplemental Agreement No. 16, including side letters, to Purchase Agreement No. 1951, dated March 17, 2000 (filed as Exhibit 10.2 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 2000, Commission file number 1-10323, and incorporated herein by reference)
*^10.92 

UAL

United

 ^10.62UAL
United
Supplemental Agreement No. 17, including side letters, to Purchase Agreement No. 1951, dated May 16, 2000 (filed as Exhibit 10.2 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2000, Commission file number 1-10323, and incorporated herein by reference)
*^10.93 

UAL

United

 ^10.63UAL
United
Supplemental Agreement No. 18, including side letters, to Purchase Agreement No. 1951, dated September 11, 2000 (filed as Exhibit 10.6 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2000, Commission file number 1-10323, and incorporated herein by reference)
*^10.94 

UAL

United

 ^10.64UAL
United
Supplemental Agreement No. 19, including side letters, to Purchase Agreement No. 1951, dated October 31, 2000 (filed as Exhibit 10.20(t) to Continental’sContinental's Form 10-K for the year ended December 31, 2000, Commission file number 1-10323, and incorporated herein by reference)
*^10.95 

UAL

United

 ^10.65UAL
United
Supplemental Agreement No. 20, including side letters, to Purchase Agreement No. 1951, dated December 21, 2000 (filed as Exhibit 10.20(u) to Continental’sContinental's Form 10-K for the year ended December 31, 2000, Commission file number 1-10323, and incorporated herein by reference)
*^10.96 

UAL

United

 ^10.66UAL
United
Supplemental Agreement No. 21, including side letters, to Purchase Agreement No. 1951, dated March 30, 2001 (filed as Exhibit 10.1 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 2001, Commission file number 1-10323, and incorporated herein by reference)

*^10.97 ^10.67UAL
United

UAL

United

Supplemental Agreement No. 22, including side letters, to Purchase Agreement No. 1951, dated May 23, 2001 (filed as Exhibit 10.3 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2001, Commission file number 1-10323, and incorporated herein by reference)
*^10.98 

UAL

United

 ^10.68UAL
United
Supplemental Agreement No. 23, including side letters, to Purchase Agreement No. 1951, dated June 29, 2001 (filed as Exhibit 10.4 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2001, Commission file number 1-10323, and incorporated herein by reference)
*^10.99 

UAL

United

 ^10.69UAL
United
Supplemental Agreement No. 24, including side letters, to Purchase Agreement No. 1951, dated August 31, 2001 (filed as Exhibit 10.11 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2001, Commission file number 1-10323, and incorporated herein by reference)

130

*^10.100 

UAL

United

 ^10.70UAL
United
Supplemental Agreement No. 25, including side letters, to Purchase Agreement No. 1951, dated December 31, 2001 (filed as Exhibit 10.22(z) to Continental’sContinental's Form 10-K for the year ended December 31, 2001, Commission file number1-10323, and incorporated herein by reference)
*^10.101 

UAL

United

 ^10.71UAL
United
Supplemental Agreement No. 26, including side letters, to Purchase Agreement No. 1951, dated March 29, 2002 (filed as Exhibit 10.4 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 2002, Commission file number 1-10323, and incorporated herein by reference)
*^10.102 

UAL

United

 ^10.72UAL
United
Supplemental Agreement No. 27, including side letters, to Purchase Agreement No. 1951, dated November 6, 2002 (filed as Exhibit 10.410.22(ab) to Continental’sContinental's Form 10-Q10-K for the quarteryear ended MarchDecember 31, 2002, Commission file number 1-10323, and incorporated herein by reference)
*^10.103 

UAL

United

 ^10.73UAL
United
Supplemental Agreement No. 28, including side letters, to Purchase Agreement No. 1951, dated April 1, 2003 (filed as Exhibit 10.210.6 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 2003, Commission file number 1-10323, and incorporated herein by reference)
*^10.104 

UAL

United

 ^10.74UAL
United
Supplemental Agreement No. 29, including side letters, to Purchase Agreement No. 1951, dated August 19, 2003 (filed as Exhibit 10.2 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2003, Commission file number 1-10323, and incorporated herein by reference)
*^10.105 

UAL

United

 ^10.75UAL
United
Supplemental Agreement No. 30 to Purchase Agreement No. 1951, dated November 4, 2003 (filed as Exhibit 10.23(ae) to Continental’sContinental's Form 10-K for the year ended December 31, 2003, Commission file number 1-10323, and incorporated herein by reference)
*^10.106 

UAL

United

 ^10.76UAL
United
Supplemental Agreement No. 31 to Purchase Agreement No. 1951, dated August 20, 2004 (filed as Exhibit 10.4 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2004, Commission file number 1-10323, and incorporated herein by reference)
*^10.107 

UAL

United

 ^10.77UAL
United
Supplemental Agreement No. 32, including side letters, to Purchase Agreement No. 1951, dated December 29, 2004 (filed as Exhibit 10.21(ag) to Continental’sContinental's Form 10-K for the year ended December 31, 2004, Commission file number1-10323, and incorporated herein by reference)
*^10.108 

UAL

United

 ^10.78UAL
United
Supplemental Agreement No. 33, including side letters, to Purchase Agreement No. 1951, dated December 29, 2004 (filed as Exhibit 10.21(ah) to Continental’sContinental's Form 10-K for the year ended December 31, 2004, Commission file number1-10323, and incorporated herein by reference)
*^10.109 

UAL

United

 ^10.79UAL
United
Supplemental Agreement No. 34 to Purchase Agreement No. 1951, dated June 22, 2005 (filed as Exhibit 10.3 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2005, Commission file number 1-10323, and incorporated herein by reference)
*^10.110 

UAL

United

 ^10.80UAL
United
Supplemental Agreement No. 35 to Purchase Agreement No. 1951, dated June 30, 2005 (filed as Exhibit 10.4 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2005, Commission file number 1-10323, and incorporated herein by reference)
*^10.111 

UAL

United

 ^10.81UAL
United
Supplemental Agreement No. 36 to Purchase Agreement No. 1951, dated July 28, 2005 (filed as Exhibit 10.1 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2005, Commission file number 1-10323, and incorporated herein by reference)

131

*^10.112 

UAL

United

 ^10.82UAL
United
Supplemental Agreement No. 37 to Purchase Agreement No. 1951, dated March 30, 2006 (filed as Exhibit 10.2 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 2006, Commission file number 1-10323, and incorporated herein by reference)
*^10.113 

UAL

United

 ^10.83UAL
United
Supplemental Agreement No. 38 to Purchase Agreement No. 1951, dated June 6, 2006 (filed as Exhibit 10.3 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2006, Commission file number 1-10323, and incorporated herein by reference)
*^10.114 

UAL

United

 ^10.84UAL
United
Supplemental Agreement No. 39 to Purchase Agreement No. 1951, dated August 3, 2006 (filed as Exhibit 10.4 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2006, Commission file number 1-10323, and incorporated herein by reference)

*^10.115 ^10.85UAL
United

UAL

United

Supplemental Agreement No. 40 to Purchase Agreement No. 1951, dated December 5, 2006 (filed as Exhibit 10.23(ao) to Continental’sContinental's Form 10-K for the year ended December 31, 2006, Commission file number 1-10323, and incorporated herein by reference)
*^10.116 

UAL

United

 ^10.86UAL
United
Supplemental Agreement No. 41 to Purchase Agreement No. 1951, dated June 1, 2007 (filed as Exhibit 10.1 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2007, Commission file number 1-10323, and incorporated herein by reference)
*^10.117 

UAL

United

 ^10.87UAL
United
Supplemental Agreement No. 42 to Purchase Agreement No. 1951, dated June 12, 2007 (filed as Exhibit 10.2 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2007, Commission file number 1-10323, and incorporated herein by reference)
*^10.118 

UAL

United

 ^10.88UAL
United
Supplemental Agreement No. 43 to Purchase Agreement No. 1951, dated July 18, 2007 (filed as Exhibit 10.1 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2007, Commission file number 1-10323, and incorporated herein by reference)
*^10.119 

UAL

United

 ^10.89UAL
United
Supplemental Agreement No. 44 to Purchase Agreement No. 1951, dated December 7, 2007 (filed as Exhibit 10.21(as) to Continental’sContinental's Form 10-K for the year ended December 31, 2007, Commission file number 1-10323, and incorporated herein by reference)
*^10.120 

UAL

United

 ^10.90UAL
United
Supplemental Agreement No. 45 to Purchase Agreement No. 1951, dated February 20, 2008 (filed as Exhibit 10.2 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 2008, Commission file number 1-10323, and incorporated herein by reference)
*^10.121 

UAL

United

 ^10.91UAL
United
Supplemental Agreement No. 46 to Purchase Agreement No. 1951, dated June 25, 2008 (filed as Exhibit 10.5 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2008, Commission file number 1-10323, and incorporated herein by reference)
*^10.122 

UAL

United

 ^10.92UAL
United
Supplemental Agreement No. 47 to Purchase Agreement No. 1951, dated October 30, 2008 (filed as Exhibit 10.21(av) to Continental’sContinental's Form 10-K for the year ended December 31, 2008, Commission file number 1-10323, and incorporated herein by reference)
*^10.123 

UAL

United

 ^10.93UAL
United
Supplemental Agreement No. 48 to Purchase Agreement No. 1951, dated January 29, 2009 (filed as Exhibit 10.3 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2009, Commission file number 1-10323, and incorporated herein by reference)

132

*^10.124 

UAL

United

 ^10.94UAL
United
Supplemental Agreement No. 49 to Purchase Agreement No. 1951, dated May 1, 2009 (filed as Exhibit 10.4 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2009, Commission file number 1-10323, and incorporated herein by reference)
*^10.125 

UAL

United

 ^10.95UAL
United
Supplemental Agreement No. 50 to Purchase Agreement No. 1951, dated July 23, 2009 (filed as Exhibit 10.2 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2009, Commission file number 1-10323, and incorporated herein by reference)
*^10.126 

UAL

United

 ^10.96UAL
United
Supplemental Agreement No. 51 to Purchase Agreement No. 1951, dated August 5, 2009 (filed as Exhibit 10.3 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2009, Commission file number 1-10323, and incorporated herein by reference)
*^10.127 

UAL

United

 ^10.97UAL
United
Supplemental Agreement No. 52 to Purchase Agreement No. 1951, dated August 31, 2009 (filed as Exhibit 10.4 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2009, Commission file number 1-10323, and incorporated herein by reference)
*^10.128 

UAL

United

 ^10.98UAL
United
Supplemental Agreement No. 53 to Purchase Agreement No. 1951, dated December 23, 2009 (filed as Exhibit 10.22(bb) to Continental’sContinental's Form 10-K for the year ended December 31, 2009, Commission file number 1-10323, and incorporated herein by reference)
*^10.129 

UAL

United

 ^10.99UAL
United
Supplemental Agreement No. 54 to Purchase Agreement No. 1951, dated March 2, 2010 (filed as Exhibit 10.2 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-10323, and incorporated herein by reference)
*^10.130 

UAL

United

 ^10.100UAL
United
Supplemental Agreement No. 55 to Purchase Agreement No. 1951, dated March 31, 2010 (filed as Exhibit 10.3 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 2010, Commission file number 1-10323, and incorporated herein by reference)
*^10.131 

UAL

United

 ^10.101UAL
United
Supplemental Agreement No. 56 to Purchase Agreement No. 1951, dated August 12, 2010 (filed as Exhibit 10.4 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2010, Commission File Number 1-10323, and incorporated herein by reference)
*^10.132 

UAL

United

 ^10.102UAL
United
Supplemental Agreement No. 57 to Purchase Agreement No. 1951, dated March 2, 2011 (filed as Exhibit 10.1 to UAL’sUAL's Form 10-Q for the quarter ended March 31, 2011, Commission file number 1-6033, and incorporated herein by reference)

*^10.133 

UAL

United

 ^10.103UAL
United
Supplemental Agreement No. 58 to Purchase Agreement No. 1951, dated January 6, 2012 (filed as Exhibit 10.1 to UAL’sUAL's Form 10-Q for the quarter ended March 31, 2012, Commission file number 1-6033, and incorporated herein by reference)
*^10.134 

UAL

United

 ^10.104UAL
United
Supplemental Agreement No. 59 to Purchase Agreement No. 1951, dated July 12, 2012 (filed as Exhibit 10.5 to UAL’sUAL's Form 10-Q for the quarter ended JuneSeptember 30, 2012, Commission file number 1-6033, and incorporated herein by reference)
*^10.135 

UAL

United

 ^10.105UAL
United
Supplemental Agreement No. 60 to Purchase Agreement No. 1951, dated November 7, 2012 (filed as Exhibit 10.2 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.136 

UAL

United

 ^10.106UAL
United
Supplemental Agreement No. 61 to Purchase Agreement No. 1951, dated September 11, 2013 (filed as Exhibit 10.1 for the quarter ended September 30, 2013, Commission file number 1-6033, and incorporated herein by reference)

133

*^10.137 

UAL

United

 ^10.107UAL
United
Supplemental Agreement No. 62 to Purchase Agreement No. 1951, dated January 14, 2015 (filed as Exhibit 10.3 for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference)
*^10.138 

UAL

United

 ^10.108UAL
United
Supplemental Agreement No. 63 to Purchase Agreement No. 1951, dated May 26, 2015 (filed as Exhibit 10.1 for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference)
*^10.139 

UAL

United

 ^10.109UAL
United
Supplemental Agreement No. 64 to Purchase Agreement No. 1951, dated June 12, 2015 (filed as Exhibit 10.2 for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference)
*^10.140 

UAL

United

 ^10.110UAL
United
Aircraft General Terms Agreement, dated October 10, 1997, by and among Continental and Boeing (filed as Exhibit 10.15 to Continental’sContinental's Form 10-K for the year ended December 31, 1997, Commission File Number 1-10323, and incorporated herein by reference)
*^10.141 

UAL

United

 ^10.111UAL
United
Letter Agreement 6-1162-CHL-048, dated February 8, 2002, by and among Continental and Boeing (filed as Exhibit 10.44 to Continental’sContinental's Form 10-K for the year ended December 31, 2001, Commission file number 1-10323, and incorporated herein by reference)
*^10.142 

UAL

United

 ^10.112UAL
United
Purchase Agreement No. 2484, including exhibits and side letters, dated December 29, 2004, by and among Continental and Boeing (filed as Exhibit 10.27 to Continental’sContinental's Form 10-K for the year ended December 31, 2004, Commission file number 1-10323, and incorporated herein by reference)
*^10.143 

UAL

United

 ^10.113UAL
United
Supplemental Agreement No. 1 to Purchase Agreement No. 2484, dated June 30, 2005 (filed as Exhibit 10.5 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2005, Commission file number 1-10323, and incorporated herein by reference)
*^10.144 

UAL

United

 ^10.114UAL
United
Supplemental Agreement No. 2, including exhibits and side letters, to Purchase Agreement No. 2484, dated January 20, 2006 (filed as Exhibit 10.27(b) to Continental’sContinental's Form 10-K for the year ended December 31, 2005, Commission file number 1-10323, and incorporated herein by reference)
*^10.145 

UAL

United

 ^10.115UAL
United
Supplemental Agreement No. 3 to Purchase Agreement No. 2484, dated May 3, 2006 (filed as Exhibit 10.4 to Continental’sContinental's Form 10-Q for the quarter ended June 30, 2006, Commission file number 1-10323, and incorporated herein by reference)
*^10.146 

UAL

United

 ^10.116UAL
United
Supplemental Agreement No. 4 to Purchase Agreement No. 2484, dated July 14, 2006 (filed as Exhibit 10.5 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2006, Commission file number 1-10323, and incorporated herein by reference)
*^10.147 

UAL

United

 ^10.117UAL
United
Supplemental Agreement No. 5 to Purchase Agreement No. 2484, dated March 12, 2007 (filed as Exhibit 10.1 to Continental’sContinental's Form 10-Q for the quarter ended March 31, 2007, Commission file number 1-10323, and incorporated herein by reference)
*^10.148 

UAL

United

 ^10.118UAL
United
Supplemental Agreement No. 6 to Purchase Agreement No. 2484, dated October 22, 2008 (filed as Exhibit 10.25(f) to Continental’sContinental's Form 10-K for the year ended December 31, 2008, Commission file number 1-10323, and incorporated herein by reference)
*^10.149 

UAL

United

 ^10.119UAL
United
Supplemental Agreement No. 7 to Purchase Agreement No. 2484, dated November 7, 2012 (filed as Exhibit 10.179 to UAL’sUAL's Form 10-K for the year ended December 31, 2012, Commission file number 1-6033, and incorporated herein by reference)

134


*^10.150 ^10.120UAL
United

UAL

United

Supplemental Agreement No. 8 to Purchase Agreement No. 2484, dated June 17, 2013 (filed as Exhibit 10.4 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.151 

UAL

United

 ^10.121UAL
United
Supplemental Agreement No. 9 to Purchase Agreement No. 2484, dated June 6, 2014 (filed as Exhibit 10.4 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2014, Commission file number 1-6033, and incorporated herein by reference)
*^10.152 

UAL

United

 ^10.122UAL
United
Supplemental Agreement No. 10 to Purchase Agreement No. 2484, dated January 14, 2015 (filed as Exhibit 10.4 to UAL’sUAL's Form 10-Q for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference)
*^10.153 

UAL

United

 ^10.123UAL
United
Supplemental Agreement No. 11 to Purchase Agreement No. 2484, dated April 30, 2015 (filed as Exhibit 10.3 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference)
*^10.154 

UAL

United

 ^10.124UAL
United
Amended and Restated Letter Agreement No. 11, dated August 8, 2005, by and among Continental and General Electric Company (filed as Exhibit 10.3 to Continental’sContinental's Form 10-Q for the quarter ended September 30, 2005, Commission file number 1-10323, and incorporated herein by reference)
*^10.155 

UAL

United

Agreement, dated May 7, 2003, by and among Continental and the United States of America, acting through the Transportation Security Administration (filed as Exhibit 10.1 to Continental’s Form 10-Q for the quarter ended June 30, 2003, Commission file number 1-10323, and incorporated herein by reference)
 ^10.125UAL
United
*^10.156

UAL

United

Purchase Agreement No. PA-03784, dated July 12, 2012, between The Boeing Company and United Air Lines, Inc. (filed as Exhibit 10.1 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2012, Commission file number 1-6033, and incorporated herein by reference)
*^10.157 

UAL

United

 ^10.126UAL
United
Supplemental Agreement No. 01 to Purchase Agreement No. PA-03784, dated September 27, 2012 (filed as Exhibit 10.110.2 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2012, Commission file number 1-6033, and incorporated herein by reference)
*^10.158 

UAL

United

 ^10.127UAL
United
Supplemental Agreement No. 02 to Purchase Agreement Number PA-03784, dated March 1, 2013 (filed as Exhibit 10.3 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.159 

UAL

United

 ^10.128UAL
United
Supplemental Agreement No. 03 to Purchase Agreement Number PA-03784, dated June 27, 2013 (filed as Exhibit 10.7 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.160 

UAL

United

 ^10.129UAL
United
Supplemental Agreement No. 04 to Purchase Agreement Number PA-03784, dated September 11, 2013 (filed as Exhibit 10.2 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.161 

UAL

United

 ^10.130UAL
United
Supplemental Agreement No. 05 to Purchase Agreement Number PA-03784, dated March 3, 2014 (filed as Exhibit 10.2 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2014, Commission file number 1-6033 and incorporated herein by reference)

135

*^10.162 

UAL

United

 ^10.131UAL
United
Supplemental Agreement No. 06 to Purchase Agreement Number PA-03784, dated June 6, 2014 (filed as Exhibit 10.3 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2014, Commission file number 1-6033, and incorporated herein by reference)
*^10.163 

UAL

United

 ^10.132UAL
United
Supplemental Agreement No. 07 to Purchase Agreement Number PA-03784, dated May 26, 2015 (filed as Exhibit 10.6 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323 and incorporated herein by reference)
*^10.164 

UAL

United

 ^10.133UAL
United
Supplemental Agreement No. 08 to Purchase Agreement Number PA-03784, dated June 12, 2015 (filed as Exhibit 10.7 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323 and incorporated herein by reference)
 ^10.134UAL
United
Supplemental Agreement No. 9 to Purchase Agreement No. 03784, dated January 20, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.2 to UAL's Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference)
 ^10.135UAL
United
Supplemental Agreement No. 10 to Purchase Agreement No. 03784, dated February 8, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.4 to UAL's Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference)
 ^10.136UAL
United
Supplemental Agreement No. 11 to Purchase Agreement Number No. 03784, dated March 7, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.6 to UAL's Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference)

*^10.165 

 ^10.137UAL


United

Supplemental Agreement No. 12 to Purchase Agreement No. 03784, dated June 24, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.7 to UAL's Form 10-Q for the quarter ended June 30, 2016, Commission file number 1-6033, and incorporated herein by reference)
 
 ^10.138UAL
United
Supplemental Agreement No. 13 to Purchase Agreement No. 03784, dated December 27, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.174 to UAL's Form 10-K for the year ended December 31, 2016, Commission file number 1-6033, and incorporated herein by reference)
 ^10.139UAL
United
Purchase Agreement No. PA-03776, dated July 12, 2012, between The Boeing Company and United Continental Holdings, Inc. (filed as Exhibit 10.3 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2012, Commission file number1-6033, and incorporated herein by reference)
*^10.166 

UAL

United

 ^10.140UAL
United
Supplemental Agreement No. 01 to Purchase Agreement No. 03776, dated June 17, 2013 (filed as Exhibit 10.5 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.167 

UAL

United

 ^10.141UAL
United
Purchase Agreement Assignment to Purchase Agreement No. 03776, dated October 23, 2013, between United Continental Holdings, Inc. and United Airlines, Inc. (filed as Exhibit 10.3 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.168 

UAL

United

 ^10.142UAL
United
Supplemental Agreement No. 02 to Purchase Agreement No. 03776, dated January 14, 2015 (filed as Exhibit 10.5 to UAL’sUAL's Form 10-Q for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference)
*^10.169 

UAL

United

 ^10.143UAL
United
Supplemental Agreement No. 03 to Purchase Agreement No. 03776, dated May 26, 2015 (filed as Exhibit 10.4 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference)
*^10.170 

UAL

United

 ^10.144UAL
United
Supplemental Agreement No. 04 to Purchase Agreement No. 03776, dated June 12, 2015 (filed as Exhibit 10.5 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference)
 ^10.145UAL
United
Supplemental Agreement No. 5 to Purchase Agreement No. 03776, dated January 20, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.1 to UAL's Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference)
 ^10.146UAL
United
Supplemental Agreement No. 6 to Purchase Agreement No. 03776, dated February 8, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.3 to UAL's Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference)
 ^10.147UAL
United
Supplemental Agreement No. 7 to Purchase Agreement No. 03776, dated December 27, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.183 to UAL's Form 10-K for the year ended December 31, 2016, Commission file number 1-6033, and incorporated herein by reference)
 ^10.148UAL
United
Supplemental Agreement No. 8, including exhibits and side letters, to Purchase Agreement No. 03776, dated June 7, 2017, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.3 to UAL's Form 10-Q for the quarter ended June 30, 2017, Commission file number 1-6033, and incorporated herein by reference)
 ^10.149UAL
United
Supplemental Agreement No. 9, including exhibits and side letters, to Purchase Agreement No. 03776, dated June 15, 2017, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.4 to UAL's Form 10-Q for the quarter ended June 30, 2017, Commission file number 1-6033, and incorporated herein by reference)
 ^10.150UAL
United
Supplemental Agreement No. 10, including exhibits and side letters, to Purchase Agreement No. 03776, dated as of May 15, 2018, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.2 to UAL's Form 10-Q for the quarter ended June 30, 2018, Commission file number 1-6033, and incorporated herein by reference)
 ^10.151UAL
United
Supplemental Agreement No. 11, including exhibits and side letters, to Purchase Agreement No. 03776, dated as of September 25, 2018, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.1 to UAL's Form 10-Q for the quarter ended September 30, 2018, Commission file number 1-6033, and incorporated herein by reference)

*^10.171 ^10.152UAL
United
Supplemental Agreement No. 12, including exhibits and side letters, to Purchase Agreement No. 03776, dated as of December 12, 2018, between The Boeing Company and United Airlines, Inc.
 

UAL

United

 ^10.153UAL
United
Letter Agreement No. 6-1162-KKT-080, dated July 12, 2012, among Boeing, United Continental Holdings, Inc., United Air Lines, Inc., and Continental Airlines, Inc. (filed as Exhibit 10.4 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2012, Commission file number 1-6033, and incorporated herein by reference)
*^10.172 

UAL

United

 ^10.154UAL
United
Purchase Agreement No. 3860, dated September 27, 2012, between Boeing and United Air Lines, Inc. (filed as Exhibit 10.6 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2012, Commission file number 1-6033, and incorporated herein by reference)
*^10.173 

UAL

United

 ^10.155UAL
United
Supplemental Agreement No. 1 to Purchase Agreement No. 3860, dated June 17, 2013 (filed as Exhibit 10.6 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2013, Commission file number 1-6033, and incorporated herein by reference)
*^10.174 

UAL

United

 ^10.156UAL
United
Supplemental Agreement No. 2 to Purchase Agreement No. 3860, dated December 16, 2013 (filed as Exhibit 10.1 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2014, Commission file number 1-6033, and incorporated herein by reference)

136

*^10.175 

UAL

United

 ^10.157UAL
United
Supplemental Agreement No. 3 to Purchase Agreement No. 3860, dated as of July 22, 2014 (filed as Exhibit 10.3 to UAL’sUAL's Form 10-Q for the quarter ended September 30, 2014, Commission file number 1-6033, and incorporated herein by reference)
*^10.176 

UAL

United

 ^10.158UAL
United
Supplemental Agreement No. 4 to Purchase Agreement No. 3860, dated as of January 14, 2015 (filed as Exhibit 10.6 to UAL’sUAL's Form 10-Q for the quarter ended March 31, 2015, Commission file number 1-6033, and incorporated herein by reference)
*^10.177 

UAL

United

 ^10.159UAL
United
Supplemental Agreement No. 5 to Purchase Agreement No. 3860, dated as of April 30, 2015 (filed as Exhibit 10.8 to UAL’sUAL's Form 10-Q for the quarter ended June 30, 2015, Commission file number 1-10323, and incorporated herein by reference)
^10.178 

UAL

United

 ^10.160UAL
United
Supplemental Agreement No. 6 to Purchase Agreement No. 3860, dated as of December 31, 2015 (filed as Exhibit 10.178 to UAL's Form 10-K for the year ended December 31, 2015, Commission file number 1-6033, and incorporated herein by reference)
 ^10.161UAL
United
Supplemental Agreement No. 7 to Purchase Agreement No. 3860, dated March 7, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.5 to UAL's Form 10-Q for the quarter ended March 31, 2016, Commission file number 1-6033, and incorporated herein by reference)
 ^10.162UAL
United
Letter Agreement to Purchase Agreement No. 3860, dated May 5, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.5 to UAL's Form 10-Q for the quarter ended June 30, 2016, Commission file number 1-6033, and incorporated herein by reference)
^10.163UAL
United
Supplemental Agreement No. 8, including exhibits and side letters, to Purchase Agreement No. 3860, Dated June 15, 2017, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.5 to UAL's Form 10-Q for the quarter ended June 30, 2017, Commission file number 1-6033, and incorporated herein by reference)
 ^10.164UAL
United
Letter Agreement No. UAL-LA-1604287 to Purchase Agreement Nos. 3776, 3784 and 3860, dated December 27, 2016, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.194 to UAL's Form 10-K for the year ended December 31, 2016, Commission file number 1-6033, and incorporated herein by reference)
 ^10.165UAL
United
Supplemental Agreement No. 9, including exhibits and side letters, to Purchase Agreement No. 3860, dated as of May 31, 2018, between The Boeing Company and United Airlines, Inc. (filed as Exhibit 10.3 to UAL's Form 10-Q for the quarter ended June 30, 2018, Commission file number 1-6033, and incorporated herein by reference)
 ^10.166UAL
United
Supplemental Agreement No. 10, including exhibits and side letters, to Purchase Agreement No. 3860, dated as of November 1, 2018, between The Boeing Company and United Airlines, Inc.
 ^10.167UAL
United
Supplemental Agreement No. 11, including exhibits and side letters, to Purchase Agreement No. 3860, dated as of December 12, 2018, between The Boeing Company and United Airlines, Inc.

  *10.17910.168UAL
United

UAL

United

Amended and Restated Credit and Guaranty Agreement, dated as of March 27, 2013,29, 2017, among ContinentalUnited Airlines, Inc. and United Air Lines, Inc., as co-borrowers,borrower, United Continental Holdings, Inc., as parent and a guarantor, the subsidiaries of United Continental Holdings, Inc. from time to time party thereto other than the co-borrowersborrower party thereto from time to time, as guarantors, the lenders party thereto from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.1 to UAL’sUAL's Form 8-K filed March 28, 2013,April 3, 2017, Commission file number 1-6033, and incorporated herein by reference)
 *10.180 

UAL

United

10.169UAL
United
First Amendment, to Credit and Guaranty Agreement, dated as of March 27, 2014November 15, 2017, to Amended and Restated Credit Guaranty Agreement (filed as Exhibit 10.110.219 to UAL’sUAL's Form 10-Q10-K for the quarteryear ended MarchDecember 31, 2014,2017, Commission file number 1-6033, and incorporated herein by reference)
 *10.181 

UAL

United

10.170UAL
United
Second Amendment, to Credit and Guaranty Agreement, dated as of July 25, 2014 (filedMay 16, 2018, to Amended and Restated Credit Guaranty Agreement filed as Exhibit 10.1 to UAL’sUAL's Form 8-K filed September 19, 2014,10-Q for the quarter ended June 30, 2018, Commission file number 1-6033, and incorporated herein by reference)
  *10.182

UAL

United

Third Amendment to Credit and Guaranty Agreement, dated as of September 15, 2014 (filed as Exhibit 10.2 to UAL’s Form 8-K filed September 19, 2014, Commission file number 1-6033, and incorporated herein by reference)
   

Computation of Ratios

 12.1 UALUnited Continental Holdings, Inc. and Subsidiary Companies ComputationList of Ratio of Earnings to Fixed Charges
    12.2UnitedUnited Airlines, Inc. and Subsidiary Companies Computation of Ratio of Earnings to Fixed Charges
Subsidiaries
   

List of Subsidiaries

21
UAL
United

UAL

United

List of United Continental Holdings, Inc. and United Airlines, Inc. Subsidiaries
   
 

Consents of Experts and Counsel

 23.1 
23.1UAL
Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP) for United Continental Holdings, Inc.
 23.2 
23.2United
Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP) for United Airlines, Inc.

137

   
 

Rule 13a-14(a)/15d-14(a) Certifications

 31.1 
31.1UAL
Certification of the Principal Executive Officer of United Continental Holdings, Inc. pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)
 31.2 
31.2UAL
Certification of the Principal Financial Officer of United Continental Holdings, Inc. pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)
 31.3 
31.3United
Certification of the Principal Executive Officer of United Airlines, Inc. pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)
 31.4 
31.4United
Certification of the Principal Financial Officer of United Airlines, Inc. pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)
   
 

Section 1350 Certifications

 32.1 
32.1UAL
Certification of the Chief Executive Officer and Chief Financial Officer of United Continental Holdings, Inc. pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
 32.2 
32.2United
Certification of the Chief Executive Officer and Chief Financial Officer of United Airlines, Inc. pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
   
 

Interactive Data File

 101 

UAL

United

101
UAL
United

The following materials from each of United Continental Holdings, Inc.’s's and United Airlines, Inc.’s's Annual Reports on Form 10-K for the year ended

December 31, 2015,2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Statements of Consolidated Operations, (ii) the Statements of Consolidated Comprehensive Income (Loss), (iii) the Consolidated Balance Sheets, (iv) the Statements of Consolidated Cash Flows, (v) the Statements of Consolidated Stockholders’Stockholders' Equity (Deficit) and (vi) the Combined Notes to Consolidated Financial Statements.

*Previously filed.
†Indicates management contract or compensatory plan or arrangement. Pursuant to Item 601(b)(10), United and Continental areis permitted to omit certain compensation-related exhibits from this report and therefore only UAL is identified as the registrant for purposes of those items.
^Confidential portion of this exhibit has been omitted and filed separately with the SEC pursuant to a request for confidential treatment.

138





SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
UNITED CONTINENTAL HOLDINGS, INC.
UNITED AIRLINES, INC.
(Registrants)
 By:/s/ Gerald Laderman
Gerald Laderman
Executive Vice President and Chief Financial Officer

Date:  February 28, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of United Continental Holdings, Inc. and in the capacities and on the date indicated.
Signature                     Capacity                         
/s/ Oscar MunozChief Executive Officer, Director
Oscar Munoz(Principal Executive Officer)
/s/ Gerald LadermanExecutive Vice President and Chief Financial Officer
Gerald Laderman(Principal Financial Officer)
/s/ Chris KennyVice President and Controller
Chris Kenny(Principal Accounting Officer)
/s/ Carolyn CorviDirector
Carolyn Corvi
/s/ Jane C. GarveyDirector
Jane C. Garvey
/s/ Barney HarfordDirector
Barney Harford
/s/ Michele J. HooperDirector
Michele J. Hooper
/s/ Todd M. InslerDirector
Todd M. Insler

/s/ Walter IsaacsonDirector
Walter Isaacson
/s/ James A.C. KennedyDirector
James A.C. Kennedy
Director
William R. Nuti
/s/ Sito PantojaDirector
Sito Pantoja
/s/ Edward M. PhilipDirector
Edward M. Philip
/s/ Edward L. ShapiroDirector
Edward L. Shapiro
/s/ David J. VitaleDirector
David J. Vitale
/s/ James M. WhitehurstDirector
James M. Whitehurst

Date:February 28, 2019



























Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of United Airlines, Inc. and in the capacities and on the date indicated.

Signature                     Capacity                         
/s/ Oscar MunozChief Executive Officer, Director
Oscar Munoz(Principal Executive Officer)
/s/ Gerald LadermanExecutive Vice President and Chief Financial Officer, Director
Gerald Laderman(Principal Financial Officer)
/s/ Chris KennyVice President and Controller
Chris Kenny(Principal Accounting Officer)
/s/ Gregory L. HartDirector
Gregory L. Hart
/s/ J. Scott KirbyDirector
J. Scott Kirby
Date:  February 28, 2019


Schedule II
Valuation and Qualifying Accounts
For the Years Ended December 31, 2018, 2017 and 2016 
(In millions)
 
Description
Balance at
Beginning of
Period
 
Additions
Charged to
Costs and
Expenses
 Deductions (a) Other 
Balance at
End of
Period
Allowance for doubtful accounts:         
2018$7
 $17
 $16
 $—
 $8
201710
 20
 23
 —
 7
201618
 18
 26
 —
 10
Obsolescence allowance—spare parts:         
2018$354
 $73
 $15
 $—
 $412
2017295
 75
 17
 1
 354
2016235
 61
 16
 15
 295
Valuation allowance for deferred tax assets:         
2018$63
 $2
 $6
 $—
 $59
201768
 11
 27
 11
 63
201648
 47
 27
 —
 68
(a) Deduction from reserve for purpose for which reserve was created.

112