NOTE 8 - COMMITMENTS AND CONTINGENCIES

General Guarantees and Indemnifications. In the normal course of business, the Company enters into numerous real estate leasing and aircraft financing arrangements that have various guarantees included in the contracts. These guarantees are primarily in the form of indemnities under which the Company typically indemnifies the lessors and any tax/financing parties against tort liabilities that arise out of the use, occupancy, operation or maintenance of the leased premises or financed aircraft. Currently, the Company believes that any future payments required under these guarantees or indemnities would be immaterial, as most tort liabilities and related indemnities are covered by insurance (subject to deductibles). Additionally, certain leased premises such as fueling stations or storage facilities include indemnities of such parties for any environmental liability that may arise out of or relate to the use of the leased premises.

Legal and Environmental Contingencies. The Company has certain contingencies resulting from litigation and claims incident to the ordinary course of business. Management believes, after considering a number of factors, including (but not limited to) the information currently available, the views of legal counsel, the nature of contingencies to which the Company is subject and prior experience, that the ultimate disposition of these contingencies will not materially affect the Company's consolidated financial position or results of operations.

The Company records liabilities for legal and environmental claims when a loss is probable and reasonably estimable. These amounts are recorded based on the Company's assessments of the likelihood of their eventual disposition. The amounts of these liabilities could increase or decrease in the near term, based on revisions to estimates relating to the various claims.

The Company believes that it will have no financial exposure for claims arising out of the events of September 11, 2001 in light of the provisions of the Air Transportation Safety and System Stabilization Act of 2001 limiting claimants' recoveries to insurance proceeds, the resolution of the majority of the wrongful death and personal injury cases by settlement and the withdrawal of all related proofs of claim from UAL Corporation's Chapter 11 bankruptcy protection.

Trans-Atlantic Joint Venture. Under the revenue-sharing joint venture agreement covering trans-Atlantic routes, payments among participants are based on a formula that compares current period unit revenue performance on trans-Atlantic routes to a historic period or "baseline," which is reset annually. The payments are calculated on a quarterly basis and are subject to a cap. UAL recorded a decrease in passenger revenue of $44 million related to its estimated revenue sharing obligations through the six months ended June 30, 2011.

Contingent Senior Unsecured Notes. UAL would be obligated under an indenture to issue to the Pension Benefit Guaranty Corporation ("PBGC") up to $500 million aggregate principal amount of 8% Contingent Senior Notes (the "8% Notes") in up to eight equal tranches of $62.5 million if certain financial triggering events occur (with each tranche issued no later than 45 days following the end of any applicable fiscal year). A triggering event occurs when UAL's EBITDAR, as defined in the 8% Notes indenture, exceeds $3.5 billion over the prior 12 months ending June 30 or December 31 of any applicable fiscal year. The twelve month measurement periods began with the fiscal year ended December 31, 2009 and will end with the fiscal year ending December 31, 2017. As of June 30, 2011, a triggering event under the 8% Notes indenture occurred and, as a result, UAL is obligated to issue one tranche of $62.5 million of the 8% Notes no later than February 14, 2012. This tranche will mature June 30, 2026, with interest accruing from the triggering event measurement date at a rate of 8% per annum that is payable in cash in semi-annual installments starting June 30, 2012. The tranche of 8% Notes will be callable, at UAL's option, at any time at par, plus accrued and unpaid interest. UAL recorded a liability for the fair value of the $62.5 million tranche in the second quarter of 2011, which totaled $49 million. This $49 million charge is being classified as an integration cost as the financial results of UAL, excluding Continental's results, would not have resulted in a triggering event under the indenture (see Note 10). The amount recorded is net of a discount applied to the future principal and interest payments using market interest rates for similar structured notes. This is the first such occurrence of UAL's obligation to issue a tranche of 8% Notes.

Commitments. The table below summarizes the Company's commitments as of June 30, 2011, which primarily relate to the acquisition of aircraft and related spare engines, aircraft improvements and include other commitments primarily to acquire information technology services and assets (in millions):


	UAL		United		Continental Successor
Last Six Months of 2011	$	517	$	178	$	339
2012		1,451		145		1,306
2013		925		59		866
2014		1,089		96		993
2015		1,533		377		1,156
After 2015		7,503		6,837		666

	$	13,018	$	7,692	$	5,326

United Aircraft Commitments. As of June 30, 2011, United had firm commitments to purchase 25 Boeing 787 aircraft and 25 Airbus A350XWB aircraft for delivery from 2016 through 2019. United also has purchase options for 42 Airbus A319 and A320 aircraft and purchase rights for 50 Boeing 787 aircraft and 50 Airbus A350XWB aircraft.

United has secured considerable backstop financing commitments from its aircraft and engine manufacturers, subject to certain customary conditions. However, there is no guarantee that United will be able to obtain any or all of the backstop financing, or any other financing, for the aircraft and engines on acceptable terms when necessary or at all.

Continental Aircraft Commitments. As of June 30, 2011, Continental had firm commitments to purchase 83 new aircraft (58 Boeing 737 aircraft and 25 Boeing 787 aircraft) scheduled for delivery from August 2011 through 2016. Continental took delivery of three Boeing 737 aircraft in the first six months of 2011 and is currently scheduled to take delivery of one additional Boeing 737 aircraft in the remainder of 2011. Continental also has options to purchase 89 additional Boeing aircraft.

Continental has a financing commitment for the Boeing 737 aircraft scheduled for delivery in August 2011 but does not have backstop financing or any other financing currently in place for the other Boeing aircraft on order. Further financing will be necessary to satisfy Continental's capital commitments for its firm order aircraft and other related capital expenditures. Continental can provide no assurance that backstop financing or any other financing not already in place for aircraft deliveries will be available to Continental on acceptable terms when necessary or at all.

Credit Card Processing Agreements. United and Continental have agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of United's and Continental's credit card processing agreements, the financial institutions either require, or under certain circumstances have the right to require, that United and Continental maintain a reserve equal to a portion of advance ticket sales that have been processed by that financial institution, but for which United and Continental have not yet provided the air transportation (referred to as "relevant advance ticket sales").

Under United's and Continental's new combined credit card processing agreement with JPMorgan Chase Bank, N.A. ("JPMorgan Chase") and Paymentech, LLC, United and Continental are required to provide a cash reserve, determined based on the amount of unrestricted cash, cash equivalents and short-term investments ("unrestricted cash balance") held by United and Continental. If United's and Continental's unrestricted cash balance is at or more than $3.5 billion as of any calendar month-end measurement date, the required cash reserve will be $25 million. However, if United's and Continental's unrestricted cash balance is less than $3.5 billion, their required reserve will increase to a percentage of relevant advance ticket sales as summarized in the following table:


Total Unrestricted Cash Balance of United and Continental	Required% of Relevant Advance Ticket Sales (a)
Less than $3.5 billion		25	%
Less than $3.0 billion		50	%

(a)	Represents percentage of advance ticket sales generated by bankcard transactions. As of June 30, 2011, approximately 50% of the combined company's advance ticket sales is generated from bankcard transactions.

Based on United's and Continental's June 30, 2011 unrestricted cash balance, United and Continental were not required to provide cash collateral above the $25 million reserve balance. If the Company is required to post additional cash collateral under the new combined JPMorgan Chase credit card processing agreement as a result of an increase in the required reserve amount, Continental will be required to post additional collateral under its credit card processing agreement with American Express that could be significant.

An increase in the future reserve requirements and the posting of a significant amount of cash collateral as provided by the terms of any of the Company's material credit card processing agreements could materially reduce the Company's liquidity. See Note 17 of the 2010 Annual Report for additional information on the Company's other credit card processing agreements.

Guarantees and Off-Balance Sheet Financing. In the Company's financing transactions that include loans, the Company typically agrees to reimburse lenders for any reduced returns with respect to the loans due to any change in capital requirements and, in the case of loans in which the interest rate is based on the London Interbank Offered Rate ("LIBOR"), for certain other increased costs that the lenders incur in carrying these loans as a result of any change in law, subject in most cases to certain mitigation obligations of the lenders. The following table contains information related to the Company's outstanding debt at June 30, 2011 (in millions):


	UAL		United		Continental
Floating rate debt (a)	$	3,182	$	2,250	$	932
Fixed rate debt (a)		444		213		231
Carrying value of loans/leases from non-U.S. entities (b)		3,499		2,461		1,038

(a)	Remaining terms of up to nine years, subject to these increased cost provisions.

(b)	Remaining terms of up to 9 years; the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder to non-U.S. entities to withholding taxes, subject to customary exclusions.

United has guaranteed interest and principal payments on $270 million of the Denver International Airport bonds, which are due in 2032 unless United elects not to extend its equipment and ground lease, in which case the bonds are due in 2023. The bonds were issued in two tranches - approximately $170 million aggregate principal amount of 5.25% discount bonds and $100 million aggregate principal amount of 5.75% premium bonds. The related lease obligation is accounted for as an operating lease with the associated expense recorded on a straight-line basis resulting in ratable accrual of the final $270 million lease obligation over the expected lease term through 2032.

Continental is contingently liable for US Airways' obligations under a lease agreement between US Airways and the Port Authority of New York and New Jersey related to the East End Terminal at LaGuardia Airport. These obligations include the payment of ground rentals to the Port Authority and the payment of other rentals in respect of the full amounts owed on special facilities revenue bonds issued by the Port Authority having an outstanding par amount of $95 million at June 30, 2011, and a final scheduled maturity in 2015. If US Airways defaults on these obligations, Continental would be obligated to cure the default and would have the right to occupy the terminal after US Airways' interest in the lease had been terminated.

Continental is the lessee of real property under long-term leases at a number of airports where it is also the guarantor of approximately $1.7 billion of underlying debt and interest thereon. These leases are typically with municipalities or other governmental entities, which are excluded from the consolidation requirements concerning variable interest entities. To the extent Continental's lease and related guarantee are with a separate legal entity other than a governmental entity, Continental is not the primary beneficiary because the lease terms are consistent with market terms at the inception of the lease and the lease does not include a residual value guarantee, fixed-price purchase option or similar feature. The leasing arrangements associated with approximately $1.5 billion of these obligations are accounted for as operating leases, and the leasing arrangements associated with approximately $190 million of these obligations are accounted for as capital leases.

Credit Facilities. United has a $255 million revolving loan commitment, which matures on February 1, 2012, available under its Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement, dated as of February 2, 2007 (the "Amended Credit Facility"). United used $226 million and $253 million of the commitment capacity for letters of credit at June 30, 2011 and December 31, 2010, respectively. Unless this revolving loan commitment is amended or replaced, these letters of credit will be required to be backed with cash collateral by the fourth quarter of 2011. Through a separate arrangement, United has an additional $150 million available under an unused credit facility that expires in the fourth quarter of 2011.

Labor Negotiations. As of June 30, 2011, UAL and its subsidiaries had approximately 83,000 active employees, of whom approximately 74% were represented by various U.S. labor organizations. United and Continental had approximately 82% and 63%, respectively, of their active employees represented by various U.S. labor organizations. United has been in negotiations for amended collective bargaining agreements with all of its unions since 2009. Consistent with commitments contained in its current labor contracts, United has filed for mediation assistance in conjunction with four of its six unions - the Air Line Pilots Association ("ALPA"), the Association of Flight Attendants - Communication Workers of America ("AFA"), the International Association of Machinists ("IAM") and the Aerospace Workers and the Professional Airline Flight Control Association. The only collective bargaining agreement at Continental that is amendable is with the pilot group.

After the Company's May 2010 merger announcement, ALPA opted to suspend negotiations at both United and Continental to focus on joint negotiations for a new collective bargaining agreement that would apply to the combined company. United and Continental reached agreement with ALPA on a Transition and Process Agreement that provides a framework for conducting pilot operations for the two employee groups until the parties reach agreement on a joint collective bargaining agreement and the carriers obtain a single operating certificate. In August 2010, United and Continental began joint negotiations with ALPA and those negotiations are presently ongoing. In December 2010, ALPA and the Company jointly applied to the National Mediation Board (the "NMB") for mediation assistance for the joint pilot and flight instructor negotiations.

In June 2011, United's maintenance technicians and related employees represented by the International Brotherhood of Teamsters (the "Teamsters") voted against a tentative agreement on a proposed collective bargaining agreement. The Company has since filed with the NMB to proceed with mediated negotiations for a joint collective bargaining agreement for all Teamsters-represented mechanic and related employees. The joint agreement would cover approximately 8,650 active mechanic and related employees located throughout the United States.

Certain unions have filed applications seeking single carrier findings by the NMB for purposes of union representation. When the NMB determines that United and Continental are considered a single carrier, the NMB may order an election if there is a difference in union representation between the employee groups. Until the union representation issues are resolved, the incumbent unions will continue to represent those employee groups they currently represent. In December 2010, ALPA filed for a single carrier finding with the NMB although there is no dispute as to which union represents the pilot groups. There has been no decision on this filing to date. In January 2011, the IAM filed two separate applications seeking single carrier findings by the NMB for fleet service and stores/stock clerk employees. On April 28, 2011, the NMB issued its determination that a single carrier existed for fleet service employees at United and Continental, and on June 13, 2011, the NMB authorized an election for fleet service employees to elect a common representative. This election began on July 7, 2011 and will end on August 11, 2011. On July 2, 2011, the NMB extended the certification of the IAM to stores/stock clerk employees for the combined company due to the larger number of IAM-represented employees at United as compared to Continental.

In January 2011, the AFA filed a single carrier request with the NMB for United and Continental flight attendants. In April 2011, the NMB ruled that United and Continental are now operating as a single carrier for union representation of flight attendants which permitted the NMB to begin the union representation election process for that group. An election was held for the flight attendants and, on June 30, 2011, the NMB certified the AFA as the representative of flight attendants at the combined company. On July 2, 2011, the International Federation of Professional and Technical Engineers filed for a single carrier finding for purposes of union representation among the engineers and related employees at the combined company.

The outcome of labor negotiations may materially impact the Company's future financial results. However, it is too early in the process to assess the timing or magnitude of the impact, if any.

IAH Terminal B Redevelopment Project. In May 2011, UAL, in partnership with the Houston Airport System, announced that it is expected to begin construction of the first phase of a $1 billion terminal improvement project for Terminal B at Bush Intercontinental Airport ("IAH") by the end of 2011. UAL's initial commitment is to construct the first phase of the currently anticipated three-phase project that will create a new Terminal B south concourse dedicated to domestic regional jet operations. UAL's cost of construction of phase one of the project is currently estimated to be approximately $100 million and is expected to be funded by special facilities bonds issued by the City of Houston, which bonds would be guaranteed by UAL and/or one of its subsidiaries and would be payable from the rentals paid by UAL or one of its subsidiaries under a special facilities lease agreement with the City of Houston, or cash. Construction of the remaining phases of the project will be based on demand over the next 7 to 10 years, with phase one currently expected to be completed in late 2013.

Based on a qualitative assessment of the IAH Terminal B Redevelopment Project, given the expectation that UAL and/or one of its subsidiaries would guarantee the special facilities bonds, and the requirement that UAL or one of its subsidiaries fund cost overruns with no stated limits would result in the Company paying more than 90% of the total project costs at a given time, UAL or one of its subsidiaries will be considered the owner of the property during the construction period. Because, for accounting purposes, UAL or one of its subsidiaries would also be considered the owner of the construction project upon its completion, the construction project will be treated as a financing transaction such that the property and related financing will remain on UAL's consolidated balance sheet.

Commitments and Contingencies

NOTE 8 - COMMITMENTS AND CONTINGENCIES

General Guarantees and Indemnifications. In the normal course of business, the Company enters into numerous real estate leasing and aircraft financing arrangements that have various guarantees included in the contracts. These guarantees are primarily in the form of indemnities under which the Company typically indemnifies the lessors and any tax/financing parties against tort liabilities that arise out of the use, occupancy, operation or maintenance of the leased premises or financed aircraft. Currently, the Company believes that any future payments required under these guarantees or indemnities would be immaterial, as most tort liabilities and related indemnities are covered by insurance (subject to deductibles). Additionally, certain leased premises such as fueling stations or storage facilities include indemnities of such parties for any environmental liability that may arise out of or relate to the use of the leased premises.

Legal and Environmental Contingencies. The Company has certain contingencies resulting from litigation and claims incident to the ordinary course of business. Management believes, after considering a number of factors, including (but not limited to) the information currently available, the views of legal counsel, the nature of contingencies to which the Company is subject and prior experience, that the ultimate disposition of these contingencies will not materially affect the Company's consolidated financial position or results of operations.

The Company records liabilities for legal and environmental claims when a loss is probable and reasonably estimable. These amounts are recorded based on the Company's assessments of the likelihood of their eventual disposition. The amounts of these liabilities could increase or decrease in the near term, based on revisions to estimates relating to the various claims.

The Company believes that it will have no financial exposure for claims arising out of the events of September 11, 2001 in light of the provisions of the Air Transportation Safety and System Stabilization Act of 2001 limiting claimants' recoveries to insurance proceeds, the resolution of the majority of the wrongful death and personal injury cases by settlement and the withdrawal of all related proofs of claim from UAL Corporation's Chapter 11 bankruptcy protection.

Trans-Atlantic Joint Venture. Under the revenue-sharing joint venture agreement covering trans-Atlantic routes, payments among participants are based on a formula that compares current period unit revenue performance on trans-Atlantic routes to a historic period or "baseline," which is reset annually. The payments are calculated on a quarterly basis and are subject to a cap. UAL recorded a decrease in passenger revenue of $44 million related to its estimated revenue sharing obligations through the six months ended June 30, 2011.

Contingent Senior Unsecured Notes. UAL would be obligated under an indenture to issue to the Pension Benefit Guaranty Corporation ("PBGC") up to $500 million aggregate principal amount of 8% Contingent Senior Notes (the "8% Notes") in up to eight equal tranches of $62.5 million if certain financial triggering events occur (with each tranche issued no later than 45 days following the end of any applicable fiscal year). A triggering event occurs when UAL's EBITDAR, as defined in the 8% Notes indenture, exceeds $3.5 billion over the prior 12 months ending June 30 or December 31 of any applicable fiscal year. The twelve month measurement periods began with the fiscal year ended December 31, 2009 and will end with the fiscal year ending December 31, 2017. As of June 30, 2011, a triggering event under the 8% Notes indenture occurred and, as a result, UAL is obligated to issue one tranche of $62.5 million of the 8% Notes no later than February 14, 2012. This tranche will mature June 30, 2026, with interest accruing from the triggering event measurement date at a rate of 8% per annum that is payable in cash in semi-annual installments starting June 30, 2012. The tranche of 8% Notes will be callable, at UAL's option, at any time at par, plus accrued and unpaid interest. UAL recorded a liability for the fair value of the $62.5 million tranche in the second quarter of 2011, which totaled $49 million. This $49 million charge is being classified as an integration cost as the financial results of UAL, excluding Continental's results, would not have resulted in a triggering event under the indenture (see Note 10). The amount recorded is net of a discount applied to the future principal and interest payments using market interest rates for similar structured notes. This is the first such occurrence of UAL's obligation to issue a tranche of 8% Notes.

Commitments. The table below summarizes the Company's commitments as of June 30, 2011, which primarily relate to the acquisition of aircraft and related spare engines, aircraft improvements and include other commitments primarily to acquire information technology services and assets (in millions):


	UAL		United		Continental Successor
Last Six Months of 2011	$	517	$	178	$	339
2012		1,451		145		1,306
2013		925		59		866
2014		1,089		96		993
2015		1,533		377		1,156
After 2015		7,503		6,837		666

	$	13,018	$	7,692	$	5,326

United Aircraft Commitments. As of June 30, 2011, United had firm commitments to purchase 25 Boeing 787 aircraft and 25 Airbus A350XWB aircraft for delivery from 2016 through 2019. United also has purchase options for 42 Airbus A319 and A320 aircraft and purchase rights for 50 Boeing 787 aircraft and 50 Airbus A350XWB aircraft.

United has secured considerable backstop financing commitments from its aircraft and engine manufacturers, subject to certain customary conditions. However, there is no guarantee that United will be able to obtain any or all of the backstop financing, or any other financing, for the aircraft and engines on acceptable terms when necessary or at all.

Continental Aircraft Commitments. As of June 30, 2011, Continental had firm commitments to purchase 83 new aircraft (58 Boeing 737 aircraft and 25 Boeing 787 aircraft) scheduled for delivery from August 2011 through 2016. Continental took delivery of three Boeing 737 aircraft in the first six months of 2011 and is currently scheduled to take delivery of one additional Boeing 737 aircraft in the remainder of 2011. Continental also has options to purchase 89 additional Boeing aircraft.

Continental has a financing commitment for the Boeing 737 aircraft scheduled for delivery in August 2011 but does not have backstop financing or any other financing currently in place for the other Boeing aircraft on order. Further financing will be necessary to satisfy Continental's capital commitments for its firm order aircraft and other related capital expenditures. Continental can provide no assurance that backstop financing or any other financing not already in place for aircraft deliveries will be available to Continental on acceptable terms when necessary or at all.

Credit Card Processing Agreements. United and Continental have agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of United's and Continental's credit card processing agreements, the financial institutions either require, or under certain circumstances have the right to require, that United and Continental maintain a reserve equal to a portion of advance ticket sales that have been processed by that financial institution, but for which United and Continental have not yet provided the air transportation (referred to as "relevant advance ticket sales").

Under United's and Continental's new combined credit card processing agreement with JPMorgan Chase Bank, N.A. ("JPMorgan Chase") and Paymentech, LLC, United and Continental are required to provide a cash reserve, determined based on the amount of unrestricted cash, cash equivalents and short-term investments ("unrestricted cash balance") held by United and Continental. If United's and Continental's unrestricted cash balance is at or more than $3.5 billion as of any calendar month-end measurement date, the required cash reserve will be $25 million. However, if United's and Continental's unrestricted cash balance is less than $3.5 billion, their required reserve will increase to a percentage of relevant advance ticket sales as summarized in the following table:


Total Unrestricted Cash Balance of United and Continental	Required% of Relevant Advance Ticket Sales (a)
Less than $3.5 billion		25	%
Less than $3.0 billion		50	%

(a)	Represents percentage of advance ticket sales generated by bankcard transactions. As of June 30, 2011, approximately 50% of the combined company's advance ticket sales is generated from bankcard transactions.

Based on United's and Continental's June 30, 2011 unrestricted cash balance, United and Continental were not required to provide cash collateral above the $25 million reserve balance. If the Company is required to post additional cash collateral under the new combined JPMorgan Chase credit card processing agreement as a result of an increase in the required reserve amount, Continental will be required to post additional collateral under its credit card processing agreement with American Express that could be significant.

An increase in the future reserve requirements and the posting of a significant amount of cash collateral as provided by the terms of any of the Company's material credit card processing agreements could materially reduce the Company's liquidity. See Note 17 of the 2010 Annual Report for additional information on the Company's other credit card processing agreements.

Guarantees and Off-Balance Sheet Financing. In the Company's financing transactions that include loans, the Company typically agrees to reimburse lenders for any reduced returns with respect to the loans due to any change in capital requirements and, in the case of loans in which the interest rate is based on the London Interbank Offered Rate ("LIBOR"), for certain other increased costs that the lenders incur in carrying these loans as a result of any change in law, subject in most cases to certain mitigation obligations of the lenders. The following table contains information related to the Company's outstanding debt at June 30, 2011 (in millions):


	UAL		United		Continental
Floating rate debt (a)	$	3,182	$	2,250	$	932
Fixed rate debt (a)		444		213		231
Carrying value of loans/leases from non-U.S. entities (b)		3,499		2,461		1,038

(a)	Remaining terms of up to nine years, subject to these increased cost provisions.

(b)	Remaining terms of up to 9 years; the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder to non-U.S. entities to withholding taxes, subject to customary exclusions.