United Airlines (UAUA)

There were no significant investment gains or losses in 2008 as compared to 2007 during which the Company recorded a $41 million gain on sale of investment, as discussed below under 2007 compared to 2006.

 

The $24 million variance in Miscellaneous, net is primarily due to unfavorable foreign exchange rate fluctuations in 2008.

 

 

UAL’s cash from operations decreased by approximately $3.4 billion in 2008 as compared to 2007. This decrease was primarily due to the increased cash required for fuel purchases and operating and nonoperating cash fuel hedge losses. Mainline and regional affiliate fuel costs increased $3.1 billion in 2008 over 2007 and nonoperating expenses also increased over the same period largely due to cash and non-cash fuel hedge losses. In addition, certain counterparties to our fuel hedge instruments required the Company to provide cash collateral deposits of approximately $965 million in 2008, which negatively impacted our cash flows during this period as compared to 2007 when no similar deposits were required. A decrease in advance ticket sales also negatively impacted operating cash flow in 2008. Partially offsetting the negative impacts were $500 million of proceeds from the advanced purchase of miles by our co-branded credit card partner as part of the amendment of our marketing agreement and $100 million of proceeds from the extension of the license previously granted to our co-branded credit card partner to be the exclusive issuer of Mileage Plus Visa cards through 2017. In 2008, the Company contributed approximately $240 million and $22 million to its defined contribution plans and non-U.S. pension plans, respectively, as compared to contributions of $236 million and $14 million, respectively, in 2007 for these plans.

 

 

Net sales of short-term investments provided cash of $2.3 billion for UAL in 2008 as compared to cash used for net purchases of short-term investments of $2.0 billion in 2007. In 2008, the Company invested most of its excess cash in money market funds, whereas in 2007, excess cash was largely invested in short-term investments such as commercial paper. During 2008, the Company also received $357 million of cash that was previously restricted cash held by the Company’s largest credit card processor. The release of cash was part of an amendment to the Company’s co-branded credit card agreement and largest credit card processor agreement. See Credit Card Processing Agreements, below, for further discussion of the amended agreement and future cash reserve requirements.

 

In 2008, cash expenditures for property, equipment and software totaled approximately $455 million. Additions to property in 2008 also included $20 million of capitalized interest. In 2007, cash expenditures for property and equipment, software and capitalized interest were $639 million, $65 million and $19 million, respectively. This year-over-year decrease is primarily due to the Company’s efforts to optimize its available cash and a reduction in cash used to acquire aircraft as the 2007 capital expenditures included cash used to acquire six aircraft that were previously financed as operating leases, as discussed in 2007 compared to 2006, below.

 

During 2008, the Company generated $94 million from various asset sales including the sale of five B737 aircraft, spare parts, engines and slots. Certain previously existing agreements in principle to sell additional aircraft in 2008 have been terminated.

 

Investing cash of $274 million was generated from aircraft sold under sale-leaseback financing agreements. In 2008, United entered into a $125 million sale-leaseback involving nine previously unencumbered aircraft and a $149 million sale-leaseback involving 15 aircraft. See Note 15, “Lease Obligations,” and Note 16, “Statement of Consolidated Cash Flows—Supplemental Disclosures,” in Combined Notes to Consolidated Financial Statements for additional information related to these transactions. In addition, the Company’s investing cash flows benefited from $41 million of cash proceeds from a litigation settlement resulting in the recognition of a $29 million gain during 2008. The litigation settlement related to pre-delivery advance aircraft deposits.

 

 

UAL’s cash from operations decreased by approximately
$3.4 billion in 2008 as compared to 2007. This decrease was
primarily due to the increased cash required for fuel purchases
and operating and nonoperating cash fuel hedge losses. Mainline
and regional affiliate fuel costs increased $3.1 billion in
2008 over 2007 and nonoperating expenses also increased over the
same period largely due to cash and non-cash fuel hedge losses.
In addition, certain counterparties to our fuel hedge
instruments required the Company to provide cash collateral
deposits of approximately $965 million in 2008, which
negatively impacted our cash flows during this period as
compared to 2007 when no similar deposits were required. A
decrease in advance ticket sales also negatively impacted
operating cash flow in 2008. Partially offsetting the negative
impacts were $500 million of proceeds from the advanced
purchase of miles by our co-branded credit card partner as part
of the amendment of our marketing agreement and
$100 million of proceeds from the extension of the license
previously granted to our co-branded credit card partner to be
the exclusive issuer of Mileage Plus Visa cards through 2017. In
2008, the Company contributed approximately $240 million
and $22 million to its defined contribution plans and
non-U.S. pension
plans, respectively, as compared to contributions of
$236 million and $14 million, respectively, in 2007
for these plans.

 

 

Net sales of short-term investments provided cash of
$2.3 billion for UAL in 2008 as compared to cash used for
net purchases of short-term investments of $2.0 billion in
2007. In 2008, the Company invested most of its excess cash in
money market funds, whereas in 2007, excess cash was largely
invested in short-term investments such as commercial paper.
During 2008, the Company also received $357 million of cash
that was previously restricted cash held by the Company’s
largest credit card processor. The release of cash was part of
an amendment to the Company’s co-branded credit card
agreement and largest credit card processor agreement. See
Credit Card Processing Agreements, below, for further
discussion of the amended agreement and future cash reserve
requirements.

 

In 2008, cash expenditures for property, equipment and software
totaled approximately $455 million. Additions to property
in 2008 also included $20 million of capitalized interest.
In 2007, cash expenditures for property and equipment, software
and capitalized interest were $639 million,
$65 million and $19 million, respectively. This
year-over-year
decrease is primarily due to the Company’s efforts to
optimize its available cash and a reduction in cash used to
acquire aircraft as the 2007 capital expenditures included cash
used to acquire six aircraft that were previously financed as
operating leases, as discussed in 2007 compared to 2006,
below.

 

During 2008, the Company generated $94 million from various
asset sales including the sale of five B737 aircraft, spare
parts, engines and slots. Certain previously existing agreements
in principle to sell additional aircraft in 2008 have been
terminated.

 

Investing cash of $274 million was generated from aircraft
sold under sale-leaseback financing agreements. In 2008, United
entered into a $125 million sale-leaseback involving nine
previously unencumbered aircraft and a $149 million
sale-leaseback involving 15 aircraft. See Note 15,
“Lease Obligations,” and Note 16, “Statement
of Consolidated Cash Flows—Supplemental Disclosures,”
in Combined Notes to Consolidated Financial Statements
for additional information related to these transactions. In
addition, the Company’s investing cash flows benefited from
$41 million of cash proceeds from a litigation settlement
resulting in the recognition of a $29 million gain during
2008. The litigation settlement related to pre-delivery advance
aircraft deposits.