Financial Instruments and Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2014

Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The table below presents disclosures about the financial assets and financial liabilities measured at fair value on a recurring basis in the Company’s financial statements (in millions):

	March 31, 2014								December 31, 2013
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	UAL
Cash and cash equivalents	$	3,009	$	3,009	$	—	$	—	$	3,220	$	3,220	$	—	$	—
Short-term investments:
Asset-backed securities		796		—		796		—		694		—		694		—
Corporate debt		667		—		667		—		685		—		685		—
Certificates of deposit placed through an account registry service (“CDARS”)		315		—		315		—		301		—		301		—
Auction rate securities		96		—		—		96		105		—		—		105
U.S. government and agency notes		44		—		44		—		38		—		38		—
Other fixed income securities		97		—		97		—		78		—		78		—
Enhanced equipment trust certificates (“EETC”)		59		—		—		59		61		—		—		61
Fuel derivatives, net		48		—		48		—		104		—		104		—
Foreign currency derivatives		1		—		1		—		1		—		1		—
Restricted cash		389		389		—		—		395		395		—		—
	United
Cash and cash equivalents	$	3,003	$	3,003	$	—	$	—	$	3,214	$	3,214	$	—	$	—
Short-term investments:
Asset-backed securities		796		—		796		—		694		—		694		—
Corporate debt		667		—		667		—		685		—		685		—
CDARS		315		—		315		—		301		—		301		—
Auction rate securities		96		—		—		96		105		—		—		105
U.S. government and agency notes		44		—		44		—		38		—		38		—
Other fixed income securities		97		—		97		—		78		—		78		—
EETC		59		—		—		59		61		—		—		61
Fuel derivatives, net		48		—		48		—		104		—		104		—
Foreign currency derivatives		1		—		1		—		1		—		1		—
Restricted cash		389		389		—		—		395		395		—		—
Convertible debt derivative asset		584		—		—		584		480		—		—		480
Convertible debt option liability		(352)		—		—		(352)		(270)		—		—		(270)

Activity for "Level Three" Financial Assets and Financial Liabilities

The table below presents disclosures about the activity for “Level 3” financial assets and financial liabilities (in millions):

	Three Months Ended March 31,
	2014								2013
	UAL and United				United				UAL and United				United
	Student Loan-Related Auction Rate Securities		EETC		Convertible Debt Supplemental Derivative Asset		Convertible Debt Conversion Option Liability		Student Loan-Related Auction Rate Securities		EETC		Convertible Debt Supplemental Derivative Asset		Convertible Debt Conversion Option Liability
Balance at January 1	$	105	$	61	$	480	$	(270)	$	116	$	63	$	268	$	(128)
Purchases, (sales), issuances and settlements (net)		(10)		(3)		—		—		(10)		(2)		—		—
Gains and (losses):
Reported in earnings:
Realized		1		—		—		—		2		—		—		—
Unrealized		—		—		104		(82)		1		—		145		(81)
Reported in other comprehensive income (loss)		—		1		—		—		(1)		—		—		—
Balance at March 31	$	96	$	59	$	584	$	(352)	$	108	$	61	$	413	$	(209)

Carrying Values and Estimated Fair Values of Financial Instruments

The table below presents the carrying values and estimated fair values of financial instruments not presented in the tables above (in millions):

	Fair Value of Debt by Fair Value Hierarchy Level
	March 31, 2014										December 31, 2013
	Carrying Amount		Fair Value								Carrying Amount		Fair Value
			Total		Level 1		Level 2		Level 3				Total		Level 1		Level 2		Level 3
UAL debt	$	11,276	$	12,536	$	—	$	8,684	$	3,852	$	11,539	$	12,695	$	—	$	8,829	$	3,866
United debt		11,174		12,234		—		8,382		3,852		11,388		12,249		—		8,383		3,866

Fair Value Methodology for Financial Instruments

Fair value of the financial instruments included in the tables above was determined as follows:

Description	Fair Value Methodology
Cash and cash equivalents	The carrying amounts approximate fair value because of the short-term maturity of these assets.
Short-term investments 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) broker quotes obtained by third-party valuation services.
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.
Foreign currency derivatives	Fair 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	Fair 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.
Convertible debt derivative asset and option liability	United used a binomial lattice model to value the conversion options 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.

Level 3

Fair Value Methodology for Financial Instruments

Quantitative Information About Level 3 Fair Value Measurements (in millions)
Item	Fair Value at March 31, 2014			Valuation Technique	Unobservable Input	Range (Weighted Average)
Auction rate securities	$	96		Valuation Service / Broker Quotes	Broker quotes (a)	NA
EETC		59		Discounted Cash Flows	Structure credit risk (b)	4%
Convertible debt derivative asset		584		Binomial Lattice Model	Expected volatility (c) Own credit risk (d)	40% - 60% (41%) 5%
Convertible debt option liability		(352	)	Binomial Lattice Model	Expected volatility (c) Own credit risk (d)	40% - 60% (42%) 5%

(a) Broker quotes obtained by a third-party valuation service.

(b) Represents the credit risk premium of the EETC structure above the risk-free rate that the Company has determined market participants would use when pricing the instruments.

(c) Represents the range in volatility estimates that the Company has determined market participants would use when pricing the instruments.

(d) Represents the range of Company-specific risk adjustments that the Company has determined market participants would use as a model input.