NOTE 10—SPECIAL ITEMS

Special Revenue. During the second quarter of 2011, the Company modified the previously existing United and Continental co-branded credit card agreements with Chase Bank USA, N.A. This modification resulted in the following one-time adjustment to decrease frequent flyer deferred revenue and increase special revenue in accordance with ASU 2009-13 for the three and six months ended June 30, 2011 as follows (in millions):


	UAL		United		Continental
Special revenue item	$	107	$	88	$	19

Special Charges. For the three and six months ended June 30, special charges consisted of the following (in millions):


	Three Months Ended June 30,								Six Months Ended June 30,
2012	UAL			United		Continental			UAL			United			Continental
Integration-related costs	$	137		$	98	$	39		$	271		$	169		$	102
Voluntary severance and benefits		76			76		—			125			125			—
(Gains) losses on sale of assets and other special charges, net		(7	)		2		(9	)		(26	)		(22	)		(4	)

Subtotal special charges		206			176		30			370			272			98
Income tax benefit		—			—		—			(2	)		—			(2	)

Total special charges, net of income taxes	$	206		$	176	$	30		$	368		$	272		$	96


2011	UAL			United		Continental			UAL			United			Continental
Integration-related costs	$	145		$	90	$	55		$	224		$	164		$	60
(Gains) losses on aircraft sales		1			—		1			(1	)		—			(1	)

Total	$	146		$	90	$	56		$	223		$	164		$	59

Integration-related costs include compensation costs related to systems integration and training, costs to repaint aircraft and other branding activities, costs to write-off or accelerate depreciation on systems and facilities that are no longer used or planned to be used for significantly shorter periods, relocation costs for employees and severance primarily associated with administrative headcount reductions. In addition, financial triggering events under the 8% Notes indenture occurred at both June 30, 2012 and 2011 and as a result, UAL became obligated to issue one tranche of $62.5 million in aggregate principal amount of the 8% Notes with respect to each of these financial triggering events. The obligation to issue these tranches was recorded at their fair values of $48 million and $49 million as of June 30, 2012 and 2011, respectively. Both obligations described above were recorded as integration-related costs because the financial results of UAL, excluding Continental’s results, would not have resulted in triggering events under the 8% Notes indenture.

During the three and six months ended June 30, 2012, the Company recorded $76 million and $125 million of severance and benefits associated with three voluntary employee programs, respectively. During the first quarter of 2012, approximately 400 mechanics offered to retire early in exchange for a cash severance payment that was based on the number of years of service each employee had accumulated. The Company also offered a voluntary leave of absence program that approximately 1,800 flight attendants accepted, which allows for continued medical coverage during the leave of absence period. During the second quarter of 2012, as part of the recently amended collective bargaining agreement with the Association of Flight Attendants, the Company offered a voluntary program for flight attendants at United to retire early in exchange for a cash severance payment. The payments are dependent on the number of years of service each employee has accumulated. Approximately 1,300 flight attendants accepted this program and the Company estimates the amount for this voluntary program to be approximately $76 million.

In addition, the Company sold nine aircraft during the first six months of 2012, of which three were sold during the second quarter. The Company also made adjustments to certain legal reserves.

The Company expects to consolidate its headquarters facilities by the middle of 2013. During the consolidation process, the Company expects to record special charges for accelerated depreciation and lease expense on unused facilities associated with the facility that it vacates. The Company estimates that these charges will be approximately $60 million to $80 million in total, which are expected to be recorded in late 2012 through 2013.

Accruals

The accrual for severance and medical costs was $153 million, $137 million and $16 million related to UAL, United and Continental, respectively, as of June 30, 2012. In addition, the accrual balance of future lease payments on permanently grounded aircraft was $8 million for both UAL and United as of June 30, 2012.

The severance-related accrual as of June 30, 2012, which primarily relates to the integration of United and Continental, is expected to be paid through 2014. Lease payments for grounded aircraft are expected to continue through 2013.

At June 30, 2011, the accrual balance for severance and medical costs was $70 million, $40 million and $30 million, related to UAL, United and Continental, respectively. In addition, the accrual balance of future lease payments on permanently grounded aircraft was $34 million for both UAL and United as of June 30, 2011.