NOTE 8—COMMITMENTS AND CONTINGENCIES

Commitments. On April 29, 2013, United entered into an agreement to purchase 30 Embraer EMB175 regional jets, scheduled for delivery in 2014 and 2015.

On June 17, 2013, United entered into supplemental agreements to United’s 787 aircraft purchase agreements with The Boeing Company (“Boeing”) to add to its existing firm order of Boeing 787 widebody aircraft ten Boeing 787-10 aircraft, convert an existing firm order for ten Boeing 787 aircraft into Boeing 787-10 aircraft and make certain other changes to those agreements. On June 19, 2013, United entered into amendments to its A350 purchase agreement with Airbus S.A.S. (“Airbus”) to add to its existing firm order of Airbus A350 widebody aircraft ten Airbus A350-1000 aircraft, convert its existing firm order for 25 Airbus A350-900 aircraft into Airbus A350-1000 aircraft and make certain other changes to the agreement. The Company expects to take delivery of the Boeing 787-10 aircraft and Airbus A350-1000 aircraft between 2018 and 2024.

As of June 30, 2013, UAL and United had the following commitments to purchase aircraft:

UAL Aircraft Commitments. UAL had firm commitments to purchase 100 new Boeing 737 MAX 9 aircraft scheduled for delivery from 2018 through 2025. UAL also had options to purchase additional Boeing 737 MAX 9 aircraft. UAL intends in the future to assign its interest under the purchase agreement for the 737 MAX 9 aircraft to United.

United Aircraft Commitments. United had firm commitments to purchase 199 new aircraft (59 Boeing 787 aircraft, 75 Boeing 737 aircraft, 35 Airbus A350-1000 aircraft, and 30 Embraer EMB175 aircraft) scheduled for delivery from July 1, 2013 through 2025. United also had options and purchase rights for additional aircraft. In the second quarter of 2013, United took delivery of six Boeing 737-900ER. In the remainder of 2013, United expects to take delivery of twelve Boeing 737-900ER aircraft and two Boeing 787-8 aircraft.

United had arranged for EETC financing of 14 Boeing 737-900ER aircraft, six of which were delivered during the second quarter of 2013 and two of which are scheduled to be delivered during the remainder of 2013. United also has arranged for EETC financing of one Boeing 787-8 aircraft and a bank debt financing commitment for one Boeing 737-900ER aircraft scheduled for delivery in the second half of 2013. In addition, United had secured backstop financing commitments from certain of its aircraft manufacturers for a limited number of its future aircraft deliveries, subject to certain customary conditions. However, the Company does not have backstop financing or any financing currently in place for its other firm aircraft orders. Financing will be necessary to satisfy the Company’s capital commitments for its firm order aircraft and other related capital expenditures. The Company can provide no assurance that any financing not already in place for aircraft and spare engine deliveries will be available to the Company on acceptable terms when necessary or at all. See Note 9 of this report for additional information on aircraft financing.

The Company has concluded its discussions with Boeing regarding certain contractual matters, including expected fuel burn, for current and future deliveries of certain Boeing 787 aircraft, and has reached a resolution with Boeing regarding compensation to be received in connection with those matters.

The table below summarizes the capital commitments of UAL and United (including those intended to be assigned from UAL) as of June 30, 2013, which primarily relate to the acquisition of aircraft and related spare engines, aircraft improvements and acquisition of information technology services and assets:


(In billions)
Last six months of 2013	$	1.2
2014		2.5
2015		2.0
2016		2.4
2017		1.4
After 2017		14.0

	$	23.5

Any incremental firm aircraft orders, including through the exercise of purchase options, will increase the total future capital commitments of the Company.

Aircraft Operating Leases and Capacity Purchase Agreements

In May 2013, United entered into a capacity purchase agreement with SkyWest Airlines, Inc. (“SkyWest”), a wholly-owned subsidiary of SkyWest, Inc., to operate 40 Embraer EMB175 aircraft under the United Express brand. SkyWest will purchase these 76-seat aircraft with deliveries in 2014 and 2015. These 40 aircraft are in addition to United’s April 2013 agreement to purchase 30 Embraer EMB175 aircraft, which will be operated by a different United Express carrier.

The table below summarizes the Company’s future payments through the end of the terms of our capacity purchase commitments, excluding variable pass-through costs such as fuel and landing fees, among others. In addition, the table below summarizes the Company’s scheduled future minimum lease payments under aircraft operating leases having initial or remaining noncancelable lease terms of more than one year and includes aircraft rent under capacity purchase agreements, including estimated commitments from the Embraer EMB175 aircraft which will be delivered starting in 2014.


(In millions)	Capacity Purchase Agreements		Aircraft Operating Leases
Last six months of 2013	$	968	$	714
2014		1,722		1,571
2015		1,626		1,355
2016		1,400		1,122
2017		1,278		1,009
After 2017		4,388		2,590

	$	11,382	$	8,361

Facility and Other Operating Leases

In April 2013, United signed a 20-year lease extension with the Port Authority of New York and New Jersey to continue its use of Terminal C1 and C2 at Newark Liberty International Airport (“Newark”). United also committed to invest an additional $150 million in facility upgrades at Newark to enhance the customer experience and efficiency of the operation. The table below summarizes the Company’s scheduled future minimum lease payments under facility operating leases having initial or remaining noncancelable lease terms of more than one year.


(In millions)	Facility and Other Operating Leases
Last six months of 2013	$	594
2014		1,038
2015		900
2016		829
2017		782
After 2017		6,814

	$	10,957

Guarantees and Off-Balance Sheet Financing

Guarantees. United is the guarantor of approximately $1.9 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon. These bonds, issued by various airport municipalities, are payable solely from rentals paid under long-term agreements with the respective governing bodies. The leasing arrangements associated with $1.7 billion of these obligations are accounted for as operating leases with the associated expense recorded on a straight-line basis resulting in ratable accrual of the lease obligation over the expected lease term. The leasing arrangements associated with $180 million of these obligations are accounted for as capital leases. All these bonds are due between 2015 and 2038.

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 obligations of the lenders to take certain limited steps to mitigate the requirement for, or the amount of, such increased costs. At June 30, 2013, the Company had $2.0 billion of floating rate debt and $317 million of fixed rate debt, with remaining terms of up to nine years, that are subject to these increased cost provisions. In several financing transactions involving loans or leases from non-U.S. entities, with remaining terms of up to eight years and an aggregate balance of $2.2 billion, 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.

Credit Facilities. On March 27, 2013, United and UAL entered into a new Credit and Guaranty Agreement (the “Credit Agreement”) as the borrower and guarantor, respectively, that provides United with a $1.0 billion revolving credit facility. As of June 30, 2013, United had its entire capacity of $1.0 billion available under the revolving credit facility. See Note 9 of this report for more information.

Labor Negotiations. As of June 30, 2013, United had approximately 88,000 active employees, of whom approximately 80% were represented by various labor organizations. Having reached a ratified joint collective bargaining agreement with our pilots represented by the Air Line Pilots Association, International, we are currently in the process of negotiating joint collective bargaining agreements with our other major work groups, including our public contact co-workers, technicians, flight attendants and dispatchers.