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Employee Benefit Plans
6 Months Ended
Jun. 30, 2011
Employee Benefit Plans

NOTE 4 - EMPLOYEE BENEFIT PLANS

Defined Benefit Pension and Other Postretirement Benefit Plans. The Company's net periodic benefit cost includes the following components (in millions):

 

     Pension Benefits
Three Months Ended
June 30,
    Other Postretirement
Benefits
Three Months Ended
June 30,
 
     2011     2010     2011     2010  

UAL

        

Service cost

   $ 23      $ 2      $ 12      $ 8   

Interest cost

     45        3        32        29   

Expected return on plan assets

     (35     (3     —          (1

Amortization of unrecognized gain and prior service cost

     (7     (1     (1     (3
                                

Net periodic benefit costs

   $ 26      $ 1      $ 43      $ 33   
                                

United

        

Service cost

   $ 2      $ 2      $ 8      $ 8   

Interest cost

     3        3        28        29   

Expected return on plan assets

     (3     (3     —          (1

Amortization of unrecognized gain and prior service cost

     (1     (1     —          (3
                                

Net periodic benefit costs

   $ 1      $ 1      $ 36      $ 33   
                                

Continental (a)

        

Service cost

   $ 21      $ 16      $ 4      $ 3   

Interest cost

     42        40        4        3   

Expected return on plan assets

     (32     (28     —          —     

Amortization of unrecognized (gain) loss and prior service cost

     (6     25        (1     4   
                                

Net periodic benefit costs

   $ 25      $ 53      $ 7      $ 10   
                                

(a) For Continental, the 2011 period represents Successor and the 2010 period represents Predecessor.

 

     Pension Benefits
Six Months Ended
June 30,
    Other Postretirement
Benefits
Six Months Ended
June 30,
 
     2011     2010     2011     2010  

UAL

        

Service cost

   $ 44      $ 3      $ 24      $ 15   

Interest cost

     89        5        63        58   

Expected return on plan assets

     (69     (5     (1     (1

Amortization of unrecognized gain and prior service cost

     (12     (1     (1     (6
                                

Net periodic benefit costs

   $ 52      $ 2      $ 85      $ 66   
                                

United

        

Service cost

   $ 3      $ 3      $ 17      $ 15   

Interest cost

     5        5        56        58   

Expected return on plan assets

     (5     (5     (1     (1

Amortization of unrecognized gain and prior service cost

     (1     (1     —          (6
                                

Net periodic benefit costs

   $ 2      $ 2      $ 72      $ 66   
                                

Continental (a)

        

Service cost

   $ 41      $ 33      $ 7      $ 5   

Interest cost

     84        79        7        7   

Expected return on plan assets

     (64     (55     —          —     

Amortization of unrecognized (gain) loss and prior service cost

     (11     49        (1     8   
                                

Net periodic benefit costs

   $ 50      $ 106      $ 13      $ 20   
                                

(a) For Continental, the 2011 period represents Successor and the 2010 period represents Predecessor.

During the six months ended June 30, 2011, Continental contributed $71 million to its tax-qualified defined benefit pension plans. Continental contributed an additional $33 million to its tax-qualified defined benefit pension plans in July 2011.

Share-Based Compensation. In February 2011, UAL granted share-based compensation awards pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan. These share-based compensation awards include approximately 0.5 million shares of restricted stock that vest pro-rata over three years on the anniversary of the grant date. These awards also include approximately 3.0 million performance-based restricted stock units ("RSUs") (equivalent to approximately 1.9 million RSUs at the target performance level), consisting of approximately 1.2 million RSUs that vest based on UAL's return on invested capital for the period beginning January 1, 2011 and ending December 31, 2013 and 1.8 million RSUs that vest based on the achievement of merger-related goals. Vesting of a portion of the merger incentive RSUs is based on the achievement of certain merger-related milestones and vesting of the remainder of the merger incentive RSUs is based on the achievement of revenue and cost synergies over a three-year performance period ending December 31, 2013. The RSUs will be settled in cash. If the specified performance conditions are achieved, cash payments will be made shortly after the end of the performance period or achievement of the specified merger milestone, as applicable, based on the fair market value of UAL common stock. The Company accounts for the performance-based RSUs as liability awards. The table below presents information related to share-based compensation expense (in millions):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

Share-based compensation expense

   $ 14       $ 8       $ 27       $ 21   

 

     June 30, 2011      December 31, 2010  

Unrecognized share-based compensation expense

   $ 63       $ 43   

 

Profit Sharing Plans. Effective for 2011, substantially all employees participate in profit sharing plans, which pay 15% of total pre-tax earnings, excluding special items and stock compensation expense, to eligible employees when pre-tax profit excluding special items, profit sharing expense and stock-based compensation program expense exceeds $10 million. Eligible U.S. co-workers in each participating work group will receive a profit sharing payout using a formula based on the ratio of each qualified co-worker's annual eligible earnings to the eligible earnings of all qualified co-workers in all domestic workgroups. The international profit sharing plan utilizes the same profit sharing payout percentage that is paid out to eligible U.S. co-workers. UAL recorded profit sharing and related payroll tax expense of $90 million in the three and six months ended June 30, 2011. Profit sharing expense is recorded as a component of salaries and related costs in the consolidated statements of operations.

During 2010, United and Continental maintained separate employee profit sharing plans for the employees of each respective subsidiary. During the three and six months ended June 30, 2010, United and Continental Predecessor recorded profit sharing and related payroll tax expense of $63 million and $19 million, respectively.

United Airlines Inc [Member]
 
Employee Benefit Plans

NOTE 4 - EMPLOYEE BENEFIT PLANS

Defined Benefit Pension and Other Postretirement Benefit Plans. The Company's net periodic benefit cost includes the following components (in millions):

 

     Pension Benefits
Three Months Ended
June 30,
    Other Postretirement
Benefits
Three Months Ended
June 30,
 
     2011     2010     2011     2010  

UAL

        

Service cost

   $ 23      $ 2      $ 12      $ 8   

Interest cost

     45        3        32        29   

Expected return on plan assets

     (35     (3     —          (1

Amortization of unrecognized gain and prior service cost

     (7     (1     (1     (3
                                

Net periodic benefit costs

   $ 26      $ 1      $ 43      $ 33   
                                

United

        

Service cost

   $ 2      $ 2      $ 8      $ 8   

Interest cost

     3        3        28        29   

Expected return on plan assets

     (3     (3     —          (1

Amortization of unrecognized gain and prior service cost

     (1     (1     —          (3
                                

Net periodic benefit costs

   $ 1      $ 1      $ 36      $ 33   
                                

Continental (a)

        

Service cost

   $ 21      $ 16      $ 4      $ 3   

Interest cost

     42        40        4        3   

Expected return on plan assets

     (32     (28     —          —     

Amortization of unrecognized (gain) loss and prior service cost

     (6     25        (1     4   
                                

Net periodic benefit costs

   $ 25      $ 53      $ 7      $ 10   
                                

(a) For Continental, the 2011 period represents Successor and the 2010 period represents Predecessor.

 

     Pension Benefits
Six Months Ended
June 30,
    Other Postretirement
Benefits
Six Months Ended
June 30,
 
     2011     2010     2011     2010  

UAL

        

Service cost

   $ 44      $ 3      $ 24      $ 15   

Interest cost

     89        5        63        58   

Expected return on plan assets

     (69     (5     (1     (1

Amortization of unrecognized gain and prior service cost

     (12     (1     (1     (6
                                

Net periodic benefit costs

   $ 52      $ 2      $ 85      $ 66   
                                

United

        

Service cost

   $ 3      $ 3      $ 17      $ 15   

Interest cost

     5        5        56        58   

Expected return on plan assets

     (5     (5     (1     (1

Amortization of unrecognized gain and prior service cost

     (1     (1     —          (6
                                

Net periodic benefit costs

   $ 2      $ 2      $ 72      $ 66   
                                

Continental (a)

        

Service cost

   $ 41      $ 33      $ 7      $ 5   

Interest cost

     84        79        7        7   

Expected return on plan assets

     (64     (55     —          —     

Amortization of unrecognized (gain) loss and prior service cost

     (11     49        (1     8   
                                

Net periodic benefit costs

   $ 50      $ 106      $ 13      $ 20   
                                

(a) For Continental, the 2011 period represents Successor and the 2010 period represents Predecessor.

During the six months ended June 30, 2011, Continental contributed $71 million to its tax-qualified defined benefit pension plans. Continental contributed an additional $33 million to its tax-qualified defined benefit pension plans in July 2011.

Share-Based Compensation. In February 2011, UAL granted share-based compensation awards pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan. These share-based compensation awards include approximately 0.5 million shares of restricted stock that vest pro-rata over three years on the anniversary of the grant date. These awards also include approximately 3.0 million performance-based restricted stock units ("RSUs") (equivalent to approximately 1.9 million RSUs at the target performance level), consisting of approximately 1.2 million RSUs that vest based on UAL's return on invested capital for the period beginning January 1, 2011 and ending December 31, 2013 and 1.8 million RSUs that vest based on the achievement of merger-related goals. Vesting of a portion of the merger incentive RSUs is based on the achievement of certain merger-related milestones and vesting of the remainder of the merger incentive RSUs is based on the achievement of revenue and cost synergies over a three-year performance period ending December 31, 2013. The RSUs will be settled in cash. If the specified performance conditions are achieved, cash payments will be made shortly after the end of the performance period or achievement of the specified merger milestone, as applicable, based on the fair market value of UAL common stock. The Company accounts for the performance-based RSUs as liability awards. The table below presents information related to share-based compensation expense (in millions):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

Share-based compensation expense

   $ 14       $ 8       $ 27       $ 21   

 

     June 30, 2011      December 31, 2010  

Unrecognized share-based compensation expense

   $ 63       $ 43   

 

Profit Sharing Plans. Effective for 2011, substantially all employees participate in profit sharing plans, which pay 15% of total pre-tax earnings, excluding special items and stock compensation expense, to eligible employees when pre-tax profit excluding special items, profit sharing expense and stock-based compensation program expense exceeds $10 million. Eligible U.S. co-workers in each participating work group will receive a profit sharing payout using a formula based on the ratio of each qualified co-worker's annual eligible earnings to the eligible earnings of all qualified co-workers in all domestic workgroups. The international profit sharing plan utilizes the same profit sharing payout percentage that is paid out to eligible U.S. co-workers. UAL recorded profit sharing and related payroll tax expense of $90 million in the three and six months ended June 30, 2011. Profit sharing expense is recorded as a component of salaries and related costs in the consolidated statements of operations.

During 2010, United and Continental maintained separate employee profit sharing plans for the employees of each respective subsidiary. During the three and six months ended June 30, 2010, United and Continental Predecessor recorded profit sharing and related payroll tax expense of $63 million and $19 million, respectively.

Continental Airlines Inc [Member]
 
Employee Benefit Plans

NOTE 4 - EMPLOYEE BENEFIT PLANS

Defined Benefit Pension and Other Postretirement Benefit Plans. The Company's net periodic benefit cost includes the following components (in millions):

 

     Pension Benefits
Three Months Ended
June 30,
    Other Postretirement
Benefits
Three Months Ended
June 30,
 
     2011     2010     2011     2010  

UAL

        

Service cost

   $ 23      $ 2      $ 12      $ 8   

Interest cost

     45        3        32        29   

Expected return on plan assets

     (35     (3     —          (1

Amortization of unrecognized gain and prior service cost

     (7     (1     (1     (3
                                

Net periodic benefit costs

   $ 26      $ 1      $ 43      $ 33   
                                

United

        

Service cost

   $ 2      $ 2      $ 8      $ 8   

Interest cost

     3        3        28        29   

Expected return on plan assets

     (3     (3     —          (1

Amortization of unrecognized gain and prior service cost

     (1     (1     —          (3
                                

Net periodic benefit costs

   $ 1      $ 1      $ 36      $ 33   
                                

Continental (a)

        

Service cost

   $ 21      $ 16      $ 4      $ 3   

Interest cost

     42        40        4        3   

Expected return on plan assets

     (32     (28     —          —     

Amortization of unrecognized (gain) loss and prior service cost

     (6     25        (1     4   
                                

Net periodic benefit costs

   $ 25      $ 53      $ 7      $ 10   
                                

(a) For Continental, the 2011 period represents Successor and the 2010 period represents Predecessor.

 

     Pension Benefits
Six Months Ended
June 30,
    Other Postretirement
Benefits
Six Months Ended
June 30,
 
     2011     2010     2011     2010  

UAL

        

Service cost

   $ 44      $ 3      $ 24      $ 15   

Interest cost

     89        5        63        58   

Expected return on plan assets

     (69     (5     (1     (1

Amortization of unrecognized gain and prior service cost

     (12     (1     (1     (6
                                

Net periodic benefit costs

   $ 52      $ 2      $ 85      $ 66   
                                

United

        

Service cost

   $ 3      $ 3      $ 17      $ 15   

Interest cost

     5        5        56        58   

Expected return on plan assets

     (5     (5     (1     (1

Amortization of unrecognized gain and prior service cost

     (1     (1     —          (6
                                

Net periodic benefit costs

   $ 2      $ 2      $ 72      $ 66   
                                

Continental (a)

        

Service cost

   $ 41      $ 33      $ 7      $ 5   

Interest cost

     84        79        7        7   

Expected return on plan assets

     (64     (55     —          —     

Amortization of unrecognized (gain) loss and prior service cost

     (11     49        (1     8   
                                

Net periodic benefit costs

   $ 50      $ 106      $ 13      $ 20   
                                

(a) For Continental, the 2011 period represents Successor and the 2010 period represents Predecessor.

During the six months ended June 30, 2011, Continental contributed $71 million to its tax-qualified defined benefit pension plans. Continental contributed an additional $33 million to its tax-qualified defined benefit pension plans in July 2011.

Share-Based Compensation. In February 2011, UAL granted share-based compensation awards pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan. These share-based compensation awards include approximately 0.5 million shares of restricted stock that vest pro-rata over three years on the anniversary of the grant date. These awards also include approximately 3.0 million performance-based restricted stock units ("RSUs") (equivalent to approximately 1.9 million RSUs at the target performance level), consisting of approximately 1.2 million RSUs that vest based on UAL's return on invested capital for the period beginning January 1, 2011 and ending December 31, 2013 and 1.8 million RSUs that vest based on the achievement of merger-related goals. Vesting of a portion of the merger incentive RSUs is based on the achievement of certain merger-related milestones and vesting of the remainder of the merger incentive RSUs is based on the achievement of revenue and cost synergies over a three-year performance period ending December 31, 2013. The RSUs will be settled in cash. If the specified performance conditions are achieved, cash payments will be made shortly after the end of the performance period or achievement of the specified merger milestone, as applicable, based on the fair market value of UAL common stock. The Company accounts for the performance-based RSUs as liability awards. The table below presents information related to share-based compensation expense (in millions):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

Share-based compensation expense

   $ 14       $ 8       $ 27       $ 21   

 

     June 30, 2011      December 31, 2010  

Unrecognized share-based compensation expense

   $ 63       $ 43   

 

Profit Sharing Plans. Effective for 2011, substantially all employees participate in profit sharing plans, which pay 15% of total pre-tax earnings, excluding special items and stock compensation expense, to eligible employees when pre-tax profit excluding special items, profit sharing expense and stock-based compensation program expense exceeds $10 million. Eligible U.S. co-workers in each participating work group will receive a profit sharing payout using a formula based on the ratio of each qualified co-worker's annual eligible earnings to the eligible earnings of all qualified co-workers in all domestic workgroups. The international profit sharing plan utilizes the same profit sharing payout percentage that is paid out to eligible U.S. co-workers. UAL recorded profit sharing and related payroll tax expense of $90 million in the three and six months ended June 30, 2011. Profit sharing expense is recorded as a component of salaries and related costs in the consolidated statements of operations.

During 2010, United and Continental maintained separate employee profit sharing plans for the employees of each respective subsidiary. During the three and six months ended June 30, 2010, United and Continental Predecessor recorded profit sharing and related payroll tax expense of $63 million and $19 million, respectively.