NOTE 10 - 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,
	2014		2013		2014		2013
Costs associated with permanently grounding Embraer ERJ 135 aircraft	$	66	$	—	$	66	$	—
Severance and benefits		38		—		52		14
Impairment of assets held for disposal		32		—		33		—
Integration-related costs		17		45		51		115
Losses on sale of assets and other special (gains) losses, net		16		—		19		(3)
Additional costs associated with the temporarily grounded Boeing 787 aircraft		—		7		—		18

Special charges		169		52		221		144
Venezuela local currency loss		—		—		21		—
Income tax benefit		—		—		(1)		—

Total operating and nonoperating special charges, net of income taxes	$	169	$	52	$	241	$	144

During the three months ended June 30, 2014, the Company recorded $66 million for the permanent grounding of 21 of the Company’s Embraer ERJ 135 regional aircraft under lease through 2018, which includes an accrual for remaining lease payments and an amount for maintenance return conditions. As a result of the current fuel prices, new Embraer 175 regional jet deliveries and impact of pilot shortages at regional carriers, the Company decided to permanently ground these 21 Embraer ERJ 135 aircraft. The Company continues to operate nine Embraer ERJ 135 aircraft and will assess the possibility of grounding those aircraft when the current capacity purchase contracts end in the fourth quarter of 2014.

During the three and six months ended June 30, 2014, the Company recorded $38 million and $52 million, respectively, related to reductions of management and front-line employees, including from Hopkins International Airport (“Cleveland”), as part of its cost savings initiatives. The Company reduced its average daily departures from Cleveland by over 60 percent during the second quarter. The Company is currently evaluating its options regarding its long-term contractual commitments at Cleveland. The capacity reductions at Cleveland may result in further special charges, which could be significant, related to our contractual commitments.

During the three and six months ended June 30, 2014, the Company recorded $32 million and $33 million, respectively, for charges related primarily to impairment of its flight equipment held for disposal associated with its Boeing 737-300 and 737-500 fleets.

Integration-related costs include compensation costs related to systems integration and training and relocation for employees.

The Company incurred losses on sales of aircraft and other assets and other special losses totaling $16 million and $19 million during the three and six months ended June 30, 2014, respectively.

During the three months ended March 31, 2014, the Company recorded $21 million of losses as part of Nonoperating income (expense): Miscellaneous, net due to ongoing negotiations applicable to funds held in local Venezuelan currency. Approximately $100 million of the Company’s unrestricted cash balance was held as Venezuelan bolivars as of June 30, 2014.

During the six months ended June 30, 2013, the Company recorded $14 million associated with a voluntary program offered by United in which certain flight attendants took an unpaid 13-month leave of absence. The flight attendants continue to receive medical benefits and other Company benefits while on leave under this program. Approximately 1,300 flight attendants opted to participate in the program. In addition, the Company recorded $18 million associated with the temporary grounding of its Boeing 787 aircraft. The charges were comprised of aircraft depreciation expense and dedicated personnel costs that the Company incurred while the aircraft were grounded. Also, the Company recorded a $5 million gain related to a contract termination and $2 million in losses on the sale of assets.

Accruals

The accrual for severance and medical costs was $82 million as of June 30, 2014, compared to $38 million as of June 30, 2013. The severance-related accrual as of June 30, 2014 is expected to be paid through 2015.