Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Exact Name of Registrant as
Specified in its Charter, Principal
Commission Office Address and State of I.R.S. Employer
File Number Telephone Number Incorporation Identification No
001-06033 United Continental Holdings, Inc. Delaware 36-2675207
233 South Wacker Drive
Chicago, Illinois 60606
(872) 825-4000
001-10323 United Airlines, Inc. Delaware 74-2099724
233 South Wacker Drive
Chicago, Illinois 60606
(872) 825-4000
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 York Stock Exchange
United Airlines, Inc. None None
Securities registered pursuant to Section 12(g) of the Act:
United Continental Holdings, Inc. None
United Airlines, Inc. None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
United Continental Holdings, Inc. Yes No
United Airlines, Inc. Yes No
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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 No
United Airlines, Inc. Yes No
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 No
United Airlines, Inc. Yes No
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).
Yes No
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United Continental Holdings, Inc.
United Airlines, Inc. Yes 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.
United Airlines, Inc.
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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. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
United Airlines, Inc. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
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 No
United Airlines, Inc. Yes No
The aggregate market value of voting stock held by non-affiliates of United Continental Holdings, Inc. was $11,107,386,154 as of June 30, 2013. There is no market for United Airlin es, Inc. common stock.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of February 14, 2014.
United Continental Holdings, Inc. 371,556,314 shares of common stock ($0.01 par value)
United Airlines, Inc. 1,000 (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 are therefore filing this form with the reduced disclosure format allowed under that General Instruction.
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Items 10, 11, 12 and 13 of Part III of this Form 10-K are incorporated by reference for United Continental Holdings, Inc. from its definitive proxy statement for its 2014 Annual Meeting of
Stockholders.
,Table of Contents
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, 2013
Page
PART I
Item 1. Business 3
Item 1A. Risk Factors 11
Item 1B. Unresolved Staff Comments 21
Item 2. Properties 22
Item 3. Legal Proceedings 23
Item 4. Mine Safety Disclosures 24
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25
Item 6. Selected Financial Data 27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 53
Item 8. Financial Statements and Supplementary Data 56
Combined Notes to Consolidated Financial Statements 70
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 120
Item 9A. Controls and Procedures 121
Item 9B. Other Information 124
PART III
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Item 10. Directors, Executive Officers and Corporate Governance 124
Item 11. Executive Compensation 125
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 125
Item 13. Certain Relationships, Related Transactions and Director Independence 126
Item 14. Principal Accountant Fees and Services 126
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PART IV
Item 15. Exhibits and Financial Statement Schedules 127
2
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,Table of Contents
This Form 10-K contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements represent the Company’s expectations and beliefs
concerning future events, based on information available to the Company 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’s Discussion and Analysis of Financial Condition and Results of Operations. The
Company disclaims 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.
Overview
United Continental Holdings, Inc. (together with its consolidated subsidiaries, “UAL” or the “Company”) is a holding company and its principal, wholly-
owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”). As UAL consolidates United for financial statement
purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United’s operating revenues and operating expenses
comprise nearly 100% of UAL’s revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL’s assets, liabilities
and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and
any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words “we,”
“our,” “us,” and the “Company” in this report for disclosures that relate to all of UAL and United.
UAL was incorporated under the laws of the State of Delaware on December 30, 1968. Our world headquarters is located at 233 South Wacker Drive,
Chicago, Illinois 60606 (telephone number (872) 825-4000).
The Company’s website is www.unitedcontinentalholdings.com. The information contained on or connected to the Company’s website is not incorporated by
reference into this Annual 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”). Through this website, the Company’s filings with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q,
ST
current reports on Form 8-K, and all amendments to those reports, are accessible without charge 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’s website at www.sec.gov.
On May 2, 2010, UAL Corporation, Continental Airlines, Inc. (together with its consolidated subsidiaries, “Continental”) and JT Merger Sub Inc., a wholly-
owned subsidiary of UAL Corporation, entered into an Agreement and Plan of Merger. On October 1, 2010, JT Merger Sub Inc. merged with and into
Continental, with Continental surviving as a wholly-owned subsidiary of UAL Corporation (the “Merger”). Upon closing of the Merger, UAL Corporation
became the parent company of both United Air Lines, Inc. and Continental and UAL Corporation’s name was changed to United Continental Holdings, Inc.
On March 31, 2013, the Company merged United Air Lines, Inc. into Continental to form one legal entity, and Continental’s name was changed to United
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Airlines, Inc. The financial statements of United Air Lines, Inc. and Continental are now combined at their historical cost for all periods presented beginning
on October 1, 2010, the date on which Continental became a wholly-owned subsidiary of UAL.
Operations
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Network. The Company transports people and cargo through its mainline operations, which use jet aircraft with at least 118 seats, and its regional operations.
See Part I, Item 2, Properties, for a description of the Company’s mainline and regional aircraft.
3
, Table of Contents
With key global air rights in the United States, Asia-Pacific, Europe, Middle East, Africa, and Latin America, UAL has the world’s most comprehensive
global route network. UAL, through United and its regional carriers, operates an average of more than 5,300 flights a day to more than 360 airports across six
continents from the Company’s hubs at Newark Liberty International Airport (“Newark Liberty”), Chicago O’Hare International Airport (“Chicago O’Hare”),
Denver International Airport (“Denver”), George Bush Intercontinental Airport (“Houston Bush”), Hopkins International Airport (“Cleveland”), Los Angeles
International Airport (“LAX”), A.B. Won Pat International Airport (“Guam”), San Francisco International Airport (“SFO”) and Washington Dulles
International Airport (“Washington Dulles”). In February 2014, the Company announced that it would be reducing its flying from Cleveland in stages
beginning in April 2014. See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, 2014 Outlook of this
report for additional information on Cleveland.
All of the Company’s domestic hubs are located in large business and population centers, contributing to a large amount of “origin and 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 under Alliances below, United is a member of Star Alliance, the world’s largest airline network.
Regional. 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. This regional service complements our operations by carrying traffic that
connects to our mainline service and allows flights to smaller cities that cannot be provided economically with mainline aircraft. Chautauqua Airlines,
Republic Airlines, CommutAir Airlines, ExpressJet Airlines, GoJet Airlines, Mesa Airlines, Shuttle America, SkyWest Airlines (“SkyWest”) and Trans States
Airlines (“Trans States”) are all regional carriers, which operate most of their capacity contracted to United under capacity purchase agreements (“CPAs”)
with United. Under these CPAs, the Company pays the regional carriers contractually-agreed fees (carrier-controlled costs) for operating these flights plus a
variable reimbursement (incentive payment for superior operational performance) based on agreed performance metrics. The fees for carrier-controlled 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 passed through by the regional carrier to the Company
without any markup. In return, the regional carriers operate this capacity 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.
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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”), Silver Airways (“Silver”), 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.
Financial information on the Company’s operating revenues by geographic regions, as reported to the U.S. Department of Transportation (the “DOT”), can be
O
found in Note 18 to the financial statements included in Part II, Item 8 of this report.
Alliances. United has a number of strategic bilateral and multilateral alliances with other airlines, including marketing alliances and joint ventures, which
enhance travel options for customers by providing greater time of
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Exact Name of Registrant as
Specified in its Charter, Principal
Commission Office Address and State of I.R.S. Employer
File Number Telephone Number Incorporation Identification No
001-06033 United Continental Holdings, Inc. Delaware 36-2675207
233 South Wacker Drive
Chicago, Illinois 60606
(872) 825-4000
001-10323 United Airlines, Inc. Delaware 74-2099724
233 South Wacker Drive
Chicago, Illinois 60606
(872) 825-4000
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 York Stock Exchange
United Airlines, Inc. None None
Securities registered pursuant to Section 12(g) of the Act:
United Continental Holdings, Inc. None
United Airlines, Inc. None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
United Continental Holdings, Inc. Yes No
United Airlines, Inc. Yes No
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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 No
United Airlines, Inc. Yes No
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 No
United Airlines, Inc. Yes No
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).
Yes No
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United Continental Holdings, Inc.
United Airlines, Inc. Yes 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.
United Airlines, Inc.
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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. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
United Airlines, Inc. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
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 No
United Airlines, Inc. Yes No
The aggregate market value of voting stock held by non-affiliates of United Continental Holdings, Inc. was $11,107,386,154 as of June 30, 2013. There is no market for United Airlin es, Inc. common stock.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of February 14, 2014.
United Continental Holdings, Inc. 371,556,314 shares of common stock ($0.01 par value)
United Airlines, Inc. 1,000 (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 are therefore filing this form with the reduced disclosure format allowed under that General Instruction.
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Items 10, 11, 12 and 13 of Part III of this Form 10-K are incorporated by reference for United Continental Holdings, Inc. from its definitive proxy statement for its 2014 Annual Meeting of
Stockholders.
,Table of Contents
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, 2013
Page
PART I
Item 1. Business 3
Item 1A. Risk Factors 11
Item 1B. Unresolved Staff Comments 21
Item 2. Properties 22
Item 3. Legal Proceedings 23
Item 4. Mine Safety Disclosures 24
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25
Item 6. Selected Financial Data 27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 53
Item 8. Financial Statements and Supplementary Data 56
Combined Notes to Consolidated Financial Statements 70
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 120
Item 9A. Controls and Procedures 121
Item 9B. Other Information 124
PART III
ST
Item 10. Directors, Executive Officers and Corporate Governance 124
Item 11. Executive Compensation 125
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 125
Item 13. Certain Relationships, Related Transactions and Director Independence 126
Item 14. Principal Accountant Fees and Services 126
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PART IV
Item 15. Exhibits and Financial Statement Schedules 127
2
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,Table of Contents
This Form 10-K contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements represent the Company’s expectations and beliefs
concerning future events, based on information available to the Company 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’s Discussion and Analysis of Financial Condition and Results of Operations. The
Company disclaims 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.
Overview
United Continental Holdings, Inc. (together with its consolidated subsidiaries, “UAL” or the “Company”) is a holding company and its principal, wholly-
owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, “United”). As UAL consolidates United for financial statement
purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United’s operating revenues and operating expenses
comprise nearly 100% of UAL’s revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL’s assets, liabilities
and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and
any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words “we,”
“our,” “us,” and the “Company” in this report for disclosures that relate to all of UAL and United.
UAL was incorporated under the laws of the State of Delaware on December 30, 1968. Our world headquarters is located at 233 South Wacker Drive,
Chicago, Illinois 60606 (telephone number (872) 825-4000).
The Company’s website is www.unitedcontinentalholdings.com. The information contained on or connected to the Company’s website is not incorporated by
reference into this Annual 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”). Through this website, the Company’s filings with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q,
ST
current reports on Form 8-K, and all amendments to those reports, are accessible without charge 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’s website at www.sec.gov.
On May 2, 2010, UAL Corporation, Continental Airlines, Inc. (together with its consolidated subsidiaries, “Continental”) and JT Merger Sub Inc., a wholly-
owned subsidiary of UAL Corporation, entered into an Agreement and Plan of Merger. On October 1, 2010, JT Merger Sub Inc. merged with and into
Continental, with Continental surviving as a wholly-owned subsidiary of UAL Corporation (the “Merger”). Upon closing of the Merger, UAL Corporation
became the parent company of both United Air Lines, Inc. and Continental and UAL Corporation’s name was changed to United Continental Holdings, Inc.
On March 31, 2013, the Company merged United Air Lines, Inc. into Continental to form one legal entity, and Continental’s name was changed to United
O
Airlines, Inc. The financial statements of United Air Lines, Inc. and Continental are now combined at their historical cost for all periods presented beginning
on October 1, 2010, the date on which Continental became a wholly-owned subsidiary of UAL.
Operations
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Network. The Company transports people and cargo through its mainline operations, which use jet aircraft with at least 118 seats, and its regional operations.
See Part I, Item 2, Properties, for a description of the Company’s mainline and regional aircraft.
3
, Table of Contents
With key global air rights in the United States, Asia-Pacific, Europe, Middle East, Africa, and Latin America, UAL has the world’s most comprehensive
global route network. UAL, through United and its regional carriers, operates an average of more than 5,300 flights a day to more than 360 airports across six
continents from the Company’s hubs at Newark Liberty International Airport (“Newark Liberty”), Chicago O’Hare International Airport (“Chicago O’Hare”),
Denver International Airport (“Denver”), George Bush Intercontinental Airport (“Houston Bush”), Hopkins International Airport (“Cleveland”), Los Angeles
International Airport (“LAX”), A.B. Won Pat International Airport (“Guam”), San Francisco International Airport (“SFO”) and Washington Dulles
International Airport (“Washington Dulles”). In February 2014, the Company announced that it would be reducing its flying from Cleveland in stages
beginning in April 2014. See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, 2014 Outlook of this
report for additional information on Cleveland.
All of the Company’s domestic hubs are located in large business and population centers, contributing to a large amount of “origin and 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 under Alliances below, United is a member of Star Alliance, the world’s largest airline network.
Regional. 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. This regional service complements our operations by carrying traffic that
connects to our mainline service and allows flights to smaller cities that cannot be provided economically with mainline aircraft. Chautauqua Airlines,
Republic Airlines, CommutAir Airlines, ExpressJet Airlines, GoJet Airlines, Mesa Airlines, Shuttle America, SkyWest Airlines (“SkyWest”) and Trans States
Airlines (“Trans States”) are all regional carriers, which operate most of their capacity contracted to United under capacity purchase agreements (“CPAs”)
with United. Under these CPAs, the Company pays the regional carriers contractually-agreed fees (carrier-controlled costs) for operating these flights plus a
variable reimbursement (incentive payment for superior operational performance) based on agreed performance metrics. The fees for carrier-controlled 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 passed through by the regional carrier to the Company
without any markup. In return, the regional carriers operate this capacity 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.
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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”), Silver Airways (“Silver”), 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.
Financial information on the Company’s operating revenues by geographic regions, as reported to the U.S. Department of Transportation (the “DOT”), can be
O
found in Note 18 to the financial statements included in Part II, Item 8 of this report.
Alliances. United has a number of strategic bilateral and multilateral alliances with other airlines, including marketing alliances and joint ventures, which
enhance travel options for customers by providing greater time of
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4
