Significant Accounting Policies | NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (a) Use of Estimates— (b) Revenue Recognition— Non-refundable Fees charged in association with changes or extensions to non-refundable non-refundable The Company records an estimate of breakage revenue on the flight date for tickets that will expire unused. These estimates are based on the evaluation of actual historical results and forecasted trends. Refundable tickets expire after one year from the date of issuance. The Company recognizes cargo and other revenue as service is provided. Under our capacity purchase agreements (“CPAs”) with regional carriers, we purchase all of the capacity related to aircraft covered by the contracts and are responsible for selling all of the related seat inventory. We record the passenger revenue and related expenses as separate operating revenue and expense in the consolidated statement of operations. 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 material for the years ended December 31, 2017, 2016 and 2015. (c) Frequent Flyer Accounting— non-airline non-travel Miles Earned in Conjunction with Flights When frequent flyers earn miles for flights, the Company recognizes a portion of the ticket sales as revenue when the air transportation occurs and defers a portion of the ticket sale representing the value of the related miles as a multiple-deliverable revenue arrangement. The Company determines the estimated selling price of air transportation 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 rata basis. 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. The Company’s estimated selling price of miles is based on an equivalent ticket value less fulfillment discount, 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’ 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 discount that considers a number of factors, including redemption patterns of various customer groups. Co-branded United has a significant contract, the Second Amended and Restated Co-Branded “Co-Brand co-branded Co-Brand The fair value of the elements is determined using management’s estimated selling price of each element. 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 The Company records passenger revenue related to the air transportation element when the transportation is delivered. The 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 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. Other Information The following table provides additional information related to the frequent flyer program (in millions): Year Ended December 31, Cash Proceeds Other Revenue Recognized Upon Award of Miles Increase in Frequent Flyer Deferred Decrease in of Miles (c) 2017 $ 2,343 $ 1,183 $ 2,025 $ (865) 2016 3,022 1,221 2,050 (249) 2015 2,999 1,050 2,173 (224) (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 decrease in the advance purchase of miles obligation due to cash payments for the sale of miles less than miles awarded to customers. (d) Cash and Cash Equivalents and Restricted Cash— Restricted cash primarily includes cash collateral for letters of credit and collateral associated with obligations for facility leases and workers’ compensation. 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. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statements of consolidated cash flows: UAL United At December 31, At December 31, 2017 2016 2015 2017 2016 2015 Current assets: Cash and cash equivalents $ 1,482 $ 2,179 $ 3,006 $ 1,476 $ 2,173 $ 3,000 Restricted cash included in Prepaid expenses and other 18 — 2 18 — 2 Other assets: Restricted cash 91 124 204 91 124 204 Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows $ 1,591 $ 2,303 $ 3,212 $ 1,585 $ 2,297 $ 3,206 (e) Short-term Investments— available-for-sale available-for-sale (f) Aircraft Fuel, Spare Parts and Supplies— (g) Property and Equipment— Depreciation and amortization of owned depreciable assets is based on the straight-line method over the 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 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, 2017 and 2016, the Company had a carrying value of computer software of $345 million and $356 million, respectively. For the years ended December 31, 2017, 2016 and 2015, the Company’s depreciation expense related to computer software was $117 million, $108 million and $93 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) Maintenance and Repairs— power-by-the-hour (i) Lease Fair Value Adjustments— (j) Regional Capacity Purchase— (k) Advertising— (l) Intangibles— (m) Long-Lived Asset Impairments— (n) Share-Based Compensation— (o) Ticket Taxes— (p) Retirement of Leased Aircraft— (q) Uncertain Income Tax Positions— (r) Labor Costs— (s) Third-Party Business— non-air non-air (t) Recently Issued Accounting Standards— Revenue from Contracts with Customers . Revenue Recognition Statements of Consolidated Operations for the Years Ended December 31, As Reported Adjustment As Adjusted for Adoption of 2017 2016 2017 2016 2017 2016 Operating revenue: Passenger—Mainline $ 26,552 $ 25,414 $ 1,707 $ 1,615 $ 28,259 $ 27,029 Passenger—Regional 5,852 6,043 349 357 6,201 6,400 Total passenger revenue 32,404 31,457 2,056 1,972 34,460 33,429 Cargo 1,035 876 79 58 1,114 934 Other operating revenue 4,297 4,223 (2,087) (2,028) 2,210 2,195 Total operating revenue 37,736 36,556 48 2 37,784 36,558 Operating expenses 34,238 32,218 (21) (12) 34,217 32,206 Operating income 3,498 4,338 69 14 3,567 4,352 Nonoperating expense, net (499) (519) (28) (60) (527) (579) Income before income taxes 2,999 3,819 41 (46) 3,040 3,773 Income tax expense (benefit) 868 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 Sheets as of December 31, As Reported Adjustment As Adjusted for Adoption of 2017 2016 2017 2016 2017 2016 Current assets: Prepaid expenses and other $ 1,051 $ 832 $ 20 $ 20 $ 1,071 $ 852 Other assets: Deferred income taxes — 655 — 48 — 703 Current liabilities: Advance ticket sales 3,876 3,730 64 65 3,940 3,795 Frequent flyer deferred revenue 2,176 2,135 16 14 2,192 2,149 Other 569 1,010 7 79 576 1,089 Other liabilities and deferred credits: Frequent flyer deferred revenue 2,565 2,748 26 (8 ) 2,591 2,740 Advanced purchase of miles — 430 — 3 — 433 Deferred income taxes 225 — (21) — 204 — Stockholders’ equity: Retained earnings 4,621 3,427 (72) (85 ) 4,549 3,342 In 2016, the FASB amended the FASB Accounting Standards Codification and created a new Topic 842, Leases right-of-use Leases In 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments—Overall 825-10) 2016-01”). available-for-sale 2016-01 In 2017, the FASB issued Accounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost 2017-07”). . 2017-07 2017-07 2017-07 Statements of Consolidated Operations for the Years Ended December 31, As Reported Adjustment As Adjusted for Adoption of ASU 2017-07 2017 2016 2017 2016 2017 2016 Operating expense: Salaries and related costs $ 11,045 $ 10,275 $ (104) $ (99 ) $ 10,941 $ 10,176 Special charges 176 638 — 107 176 745 Nonoperating income (expense): Miscellaneous, net 3 (19) (104) 8 (101) (11) In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income 2018-02”). 2018-02 |