Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS.
UNITED AIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED )
(In millions, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Operating revenue:
Passenger revenue $ 4,366 $ 681 $ 6,682 $ 7,746
Cargo 606 402 1,103 666
Other operating revenue 499 392 907 1,042
Total operating revenue 5,471 1,475 8,692 9,454
Operating expense:
Salaries and related costs 2,276 2,170 4,500 5,125
Aircraft fuel 1,232 240 2,083 1,966
Depreciation and amortization 620 618 1,243 1,233
Landing fees and other rent 564 429 1,083 1,052
Regional capacity purchase 547 388 1,026 1,125
Aircraft maintenance materials and outside repairs 302 110 571 544
Distribution expenses 139 31 224 326
Aircraft rent 52 47 107 97
Special charges (credits) ( 948 ) ( 1,449 ) ( 2,325 ) ( 1,386 )
Other operating expenses 957 528 1,831 1,981
Total operating expense 5,741 3,112 10,343 12,063
Operating loss ( 270 ) ( 1,637 ) ( 1,651 ) ( 2,609 )
Nonoperating income (expense):
Interest expense ( 426 ) ( 196 ) ( 779 ) ( 367 )
Interest capitalized 22 17 39 38
Interest income 12 11 19 37
Unrealized gains (losses) on investments, net 147 9 125 ( 310 )
Miscellaneous, net ( 49 ) ( 207 ) ( 68 ) ( 906 )
Total nonoperating expense, net ( 294 ) ( 366 ) ( 664 ) ( 1,508 )
Loss before income tax benefit ( 564 ) ( 2,003 ) ( 2,315 ) ( 4,117 )
Income tax benefit ( 130 ) ( 376 ) ( 524 ) ( 786 )
Net loss $ ( 434 ) $ ( 1,627 ) $ ( 1,791 ) $ ( 3,331 )
Loss per share, basic and diluted $ ( 1.34 ) $ ( 5.79 ) $ ( 5.60 ) $ ( 12.59 )
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In millions)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Net loss $ ( 434 ) $ ( 1,627 ) $ ( 1,791 ) $ ( 3,331 )
Other comprehensive income (loss), net of tax:
Employee benefit plans 12 ( 501 ) 26 ( 542 )
Investments and other — 13 ( 1 ) 1
Total other comprehensive income (loss), net of tax 12 ( 488 ) 25 ( 541 )
Total comprehensive loss, net $ ( 422 ) $ ( 2,115 ) $ ( 1,766 ) $ ( 3,872 )
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
June 30, 2021 December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents $ 20,838 $ 11,269
Short-term investments 230 414
Restricted cash 254 255
Receivables, less allowance for credit losses (2021 — $ 71 ; 2020 — $ 78 )
1,793 1,295
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2021 — $ 518 ; 2020 — $ 478 )
912 932
Prepaid expenses and other 646 635
Total current assets 24,673 14,800
Operating property and equipment:
Flight equipment 39,109 38,218
Other property and equipment 8,683 8,511
Purchase deposits for flight equipment 1,980 1,166
Total operating property and equipment 49,772 47,895
Less — Accumulated depreciation and amortization ( 17,441 ) ( 16,429 )
Total operating property and equipment, net 32,331 31,466
Operating lease right-of-use assets 4,421 4,537
Other assets:
Goodwill 4,527 4,527
Intangibles, less accumulated amortization (2021 — $ 1,519 ; 2020 — $ 1,495 )
2,827 2,838
Restricted cash 216 218
Deferred income taxes 647 131
Investments in affiliates and other, less allowance for credit losses (2021 — $ 606 ; 2020 — $ 522 )
1,407 1,031
Total other assets 9,624 8,745
Total assets $ 71,049 $ 59,548
(continued on next page)
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UNITED AIRLINES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
June 30, 2021 December 31, 2020
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,218 $ 1,595
Accrued salaries and benefits 2,228 1,960
Advance ticket sales 6,960 4,833
Frequent flyer deferred revenue 2,099 908
Current maturities of long-term debt 1,881 1,911
Current maturities of operating leases 583 612
Current maturities of finance leases 144 182
Payroll Support Program deferred credit 1,132 —
Other 819 724
Total current liabilities 18,064 12,725
Long-term debt 32,303 24,836
Long-term obligations under operating leases 4,920 4,986
Long-term obligations under finance leases 250 224
Other liabilities and deferred credits:
Frequent flyer deferred revenue 4,086 5,067
Pension liability 2,501 2,460
Postretirement benefit liability 988 994
Other financial liabilities from sale-leasebacks 1,683 1,140
Other 1,350 1,156
Total other liabilities and deferred credits 10,608 10,817
Commitments and contingencies
Stockholders' equity:
Preferred stock — —
Common stock at par, $ 0.01 par value; authorized 1,000,000,000 shares; outstanding 323,610,765 and 311,845,232 shares at June 30, 2021 and December 31, 2020, respectively
4 4
Additional capital invested 9,042 8,366
Stock held in treasury, at cost ( 3,832 ) ( 3,897 )
Retained earnings 804 2,626
Accumulated other comprehensive loss ( 1,114 ) ( 1,139 )
Total stockholders' equity 4,904 5,960
Total liabilities and stockholders' equity $ 71,049 $ 59,548
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES HOLDINGS, INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In millions)
Six Months Ended June 30,
2021 2020
Cash Flows from Operating Activities:
Net cash provided by (used in) operating activities $ 3,122 $ ( 67 )
Cash Flows from Investing Activities:
Capital expenditures, net of flight equipment purchase deposit returns ( 1,305 ) ( 1,998 )
Purchases of short-term investments — ( 550 )
Proceeds from sale of short-term investments 184 1,774
Other, net 11 14
Net cash used in investing activities ( 1,110 ) ( 760 )
Cash Flows from Financing Activities:
Proceeds from issuance of debt, net of discounts and fees 11,116 4,371
Proceeds from equity issuance 532 1,135
Payments of long-term debt, finance leases and other financing liabilities ( 4,072 ) ( 564 )
Repurchases of common stock — ( 353 )
Other, net ( 22 ) ( 18 )
Net cash provided by financing activities 7,554 4,571
Net increase in cash, cash equivalents and restricted cash 9,566 3,744
Cash, cash equivalents and restricted cash at beginning of the period 11,742 2,868
Cash, cash equivalents and restricted cash at end of the period (a) $ 21,308 $ 6,612
Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through the issuance of debt, finance leases and other $ 761 $ 626
Lease modifications and lease conversions 59 470
Right-of-use assets acquired through operating leases 214 48
Notes receivable and warrants received for entering into agreements
139 —
(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:
Current assets:
Cash and cash equivalents $ 20,838 $ 6,505
Restricted cash — Current 254 34
Restricted cash — Non-Current 216 73
Total cash, cash equivalents and restricted cash $ 21,308 $ 6,612
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (UNAUDITED)
(In millions)
Common
Stock Additional
Capital Invested Treasury Stock Retained Earnings Accumulated
Other Comprehensive Income (Loss) Total
Shares Amount
Balance at March 31, 2021 323.6 $ 4 $ 8,923 $ ( 3,834 ) $ 1,239 $ ( 1,126 ) $ 5,206
Net loss — — — — ( 434 ) — ( 434 )
Other comprehensive income — — — — — 12 12
Stock settled share-based compensation — — 68 — — — 68
Warrants issued — — 52 — — — 52
Stock issued for share-based awards, net of shares withheld for tax — — ( 1 ) 2 ( 1 ) — —
Balance at June 30, 2021 323.6 $ 4 $ 9,042 $ ( 3,832 ) $ 804 $ ( 1,114 ) $ 4,904
Balance at December 31, 2020 311.8 $ 4 $ 8,366 $ ( 3,897 ) $ 2,626 $ ( 1,139 ) $ 5,960
Net loss — — — — ( 1,791 ) — ( 1,791 )
Other comprehensive income — — — — — 25 25
Stock settled share-based compensation — — 100 — — — 100
Issuance of common stock 11.0 — 532 — — — 532
Warrants issued — — 99 — — — 99
Stock issued for share-based awards, net of shares withheld for tax 0.8 — ( 55 ) 65 ( 31 ) — ( 21 )
Balance at June 30, 2021 323.6 $ 4 $ 9,042 $ ( 3,832 ) $ 804 $ ( 1,114 ) $ 4,904
Balance at March 31, 2020 247.3 $ 3 $ 6,096 $ ( 3,901 ) $ 7,991 $ ( 771 ) $ 9,418
Net loss — — — — ( 1,627 ) — ( 1,627 )
Other comprehensive loss — — — — — ( 488 ) ( 488 )
Stock settled share-based compensation — — 20 — — — 20
Issuance of common stock 43.7 — 1,135 — — — 1,135
Warrants issued — — 57 — — — 57
Stock issued for share-based awards, net of shares withheld for tax — — ( 1 ) 2 1 — 2
Balance at June 30, 2020 291.0 $ 3 $ 7,307 $ ( 3,899 ) $ 6,365 $ ( 1,259 ) $ 8,517
Balance at December 31, 2019 251.2 $ 3 $ 6,129 $ ( 3,599 ) $ 9,716 $ ( 718 ) $ 11,531
Net loss — — — — ( 3,331 ) — ( 3,331 )
Other comprehensive loss — — — — — ( 541 ) ( 541 )
Stock settled share-based compensation — — 42 — — — 42
Issuance of common stock 43.7 — 1,135 — — — 1,135
Repurchases of common stock ( 4.4 ) — — ( 342 ) — — ( 342 )
Warrants issued — — 57 — — — 57
Stock issued for share-based awards, net of shares withheld for tax 0.5 — ( 56 ) 42 ( 3 ) — ( 17 )
Adoption of new accounting standard (a) — — — — ( 17 ) — ( 17 )
Balance at June 30, 2020 291.0 $ 3 $ 7,307 $ ( 3,899 ) $ 6,365 $ ( 1,259 ) $ 8,517
(a) Transition adjustment due to the adoption of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses .
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Operating revenue:
Passenger revenue $ 4,366 $ 681 $ 6,682 $ 7,746
Cargo 606 402 1,103 666
Other operating revenue 499 392 907 1,042
Total operating revenue 5,471 1,475 8,692 9,454
Operating expense:
Salaries and related costs 2,276 2,170 4,500 5,125
Aircraft fuel 1,232 240 2,083 1,966
Depreciation and amortization 620 618 1,243 1,233
Landing fees and other rent 564 429 1,083 1,052
Regional capacity purchase 547 388 1,026 1,125
Aircraft maintenance materials and outside repairs 302 110 571 544
Distribution expenses 139 31 224 326
Aircraft rent 52 47 107 97
Special charges (credits) ( 948 ) ( 1,449 ) ( 2,325 ) ( 1,386 )
Other operating expenses 956 527 1,830 1,980
Total operating expense 5,740 3,111 10,342 12,062
Operating loss ( 269 ) ( 1,636 ) ( 1,650 ) ( 2,608 )
Nonoperating income (expense):
Interest expense ( 426 ) ( 196 ) ( 779 ) ( 367 )
Interest capitalized 22 17 39 38
Interest income 12 11 19 37
Unrealized losses on investments, net 147 9 125 ( 310 )
Miscellaneous, net ( 50 ) ( 208 ) ( 69 ) ( 906 )
Total nonoperating expense, net ( 295 ) ( 367 ) ( 665 ) ( 1,508 )
Loss before income tax benefit ( 564 ) ( 2,003 ) ( 2,315 ) ( 4,116 )
Income tax benefit ( 130 ) ( 377 ) ( 524 ) ( 786 )
Net loss $ ( 434 ) $ ( 1,626 ) $ ( 1,791 ) $ ( 3,330 )
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In millions)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Net loss $ ( 434 ) $ ( 1,626 ) $ ( 1,791 ) $ ( 3,330 )
Other comprehensive income (loss), net of tax:
Employee benefit plans 12 ( 501 ) 26 ( 542 )
Investments and other — 13 ( 1 ) 1
Total other comprehensive income (loss), net of tax 12 ( 488 ) 25 ( 541 )
Total comprehensive loss, net $ ( 422 ) $ ( 2,114 ) $ ( 1,766 ) $ ( 3,871 )
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
June 30, 2021 December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents $ 20,838 $ 11,269
Short-term investments 230 414
Restricted cash 254 255
Receivables, less allowance for credit losses (2021 — $ 71 ; 2020 — $ 78 )
1,793 1,295
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2021 — $ 518 ; 2020 — $ 478 )
912 932
Prepaid expenses and other 646 635
Total current assets 24,673 14,800
Operating property and equipment:
Flight equipment 39,109 38,218
Other property and equipment 8,683 8,511
Purchase deposits for flight equipment 1,980 1,166
Total operating property and equipment 49,772 47,895
Less — Accumulated depreciation and amortization ( 17,441 ) ( 16,429 )
Total operating property and equipment, net 32,331 31,466
Operating lease right-of-use assets 4,421 4,537
Other assets:
Goodwill 4,527 4,527
Intangibles, less accumulated amortization (2021 — $ 1,519 ; 2020 — $ 1,495 )
2,827 2,838
Restricted cash 216 218
Deferred income taxes 619 103
Investments in affiliates and other, less allowance for credit losses (2021 — $ 606 ; 2020 — $ 522 )
1,407 1,031
Total other assets 9,596 8,717
Total assets $ 71,021 $ 59,520
(continued on next page)
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UNITED AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
June 30, 2021 December 31, 2020
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 2,218 $ 1,595
Accrued salaries and benefits 2,228 1,960
Advance ticket sales 6,960 4,833
Frequent flyer deferred revenue 2,099 908
Current maturities of long-term debt 1,881 1,911
Current maturities of operating leases 583 612
Current maturities of finance leases 144 182
Payroll Support Program deferred credit 1,132 —
Other 823 728
Total current liabilities 18,068 12,729
Long-term debt 32,303 24,836
Long-term obligations under operating leases 4,920 4,986
Long-term obligations under finance leases 250 224
Other liabilities and deferred credits:
Frequent flyer deferred revenue 4,086 5,067
Pension liability 2,501 2,460
Postretirement benefit liability 988 994
Other financial liabilities from sale-leasebacks 1,683 1,140
Other 1,350 1,156
Total other liabilities and deferred credits 10,608 10,817
Commitments and contingencies
Stockholder's equity:
Common stock at par, $ 0.01 par value; authorized 1,000 shares; issued and outstanding 1,000 shares at both June 30, 2021 and December 31, 2020
— —
Additional capital invested 185 85
Retained earnings 3,148 4,939
Accumulated other comprehensive loss ( 1,114 ) ( 1,139 )
Payable to parent 2,653 2,043
Total stockholder's equity 4,872 5,928
Total liabilities and stockholder's equity $ 71,021 $ 59,520
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES, INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In millions)
Six Months Ended June 30,
2021 2020
Cash Flows from Operating Activities:
Net cash provided by (used in) operating activities $ 3,101 $ ( 78 )
Cash Flows from Investing Activities:
Capital expenditures, net of flight equipment purchase deposit returns ( 1,305 ) ( 1,998 )
Purchases of short-term investments — ( 550 )
Proceeds from sale of short-term investments 184 1,774
Other, net 11 14
Net cash used in investing activities ( 1,110 ) ( 760 )
Cash Flows from Financing Activities:
Proceeds from issuance of debt, net of discounts and fees 11,116 4,371
Proceeds from issuance of parent company stock 532 1,135
Payments of long-term debt, finance leases and other financing liabilities ( 4,072 ) ( 564 )
Dividend to UAL — ( 353 )
Other, net ( 1 ) ( 1 )
Net cash provided by financing activities 7,575 4,588
Net increase in cash, cash equivalents and restricted cash 9,566 3,750
Cash, cash equivalents and restricted cash at beginning of the period 11,742 2,862
Cash, cash equivalents and restricted cash at end of the period (a) $ 21,308 $ 6,612
Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through the issuance of debt, finance leases and other $ 761 $ 626
Lease modifications and lease conversions 59 470
Right-of-use assets acquired through operating leases 214 48
Notes receivable and warrants received for entering into agreements
139 —
(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:
Current assets:
Cash and cash equivalents $ 20,838 $ 6,505
Restricted cash — Current 254 34
Restricted cash — Non-Current 216 73
Total cash, cash equivalents and restricted cash $ 21,308 $ 6,612
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDER'S EQUITY (UNAUDITED)
(In millions)
Additional
Capital Invested Retained Earnings Accumulated
Other Comprehensive Income (Loss) (Receivable from) Payable to Related Parties, Net Total
Balance at March 31, 2021 $ 117 $ 3,582 $ ( 1,126 ) $ 2,602 $ 5,175
Net loss — ( 434 ) — — ( 434 )
Other comprehensive income — — 12 — 12
Stock-settled share-based compensation 68 — — — 68
Other — — — 51 51
Balance at June 30, 2021 $ 185 $ 3,148 $ ( 1,114 ) $ 2,653 $ 4,872
Balance at December 31, 2020 $ 85 $ 4,939 $ ( 1,139 ) $ 2,043 $ 5,928
Net loss — ( 1,791 ) — — ( 1,791 )
Other comprehensive income — — 25 — 25
Stock settled share-based compensation 100 — — — 100
Impact of UAL common stock issuance — — — 532 532
Other — — — 78 78
Balance at June 30, 2021 $ 185 $ 3,148 $ ( 1,114 ) $ 2,653 $ 4,872
Balance at March 31, 2020 $ 10 $ 10,302 $ ( 771 ) $ ( 161 ) $ 9,380
Net loss — ( 1,626 ) — — ( 1,626 )
Other comprehensive loss — — ( 488 ) — ( 488 )
Stock-settled share-based compensation 20 — — — 20
Impact of UAL common stock issuance — — — 1,135 1,135
Other — — — 64 64
Balance at June 30, 2020 $ 30 $ 8,676 $ ( 1,259 ) $ 1,038 $ 8,485
Balance at December 31, 2019 $ — $ 12,353 $ ( 718 ) $ ( 143 ) $ 11,492
Net loss — ( 3,330 ) — — ( 3,330 )
Other comprehensive loss — — ( 541 ) — ( 541 )
Dividend to UAL ( 12 ) ( 330 ) — — ( 342 )
Stock settled share-based compensation 42 — — — 42
Impact of UAL common stock issuance — — — 1,135 1,135
Other — — — 46 46
Adoption of new accounting standard (a) — ( 17 ) — — ( 17 )
Balance at June 30, 2020 $ 30 $ 8,676 $ ( 1,259 ) $ 1,038 $ 8,485
(a) Transition adjustment due to the adoption of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses .
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES HOLDINGS, INC. AND UNITED AIRLINES, INC.
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
United Airlines Holdings, Inc. (together with its consolidated subsidiaries, "UAL" or the "Company") is a holding company, and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, "United"). This Quarterly Report on Form 10-Q is a combined report of UAL and United, including their respective consolidated financial statements. As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United's operating revenues and operating expenses comprise nearly 100% of UAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL's assets, liabilities and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words "we," "our," "us," and the "Company" in this report for disclosures that relate to all of UAL and United.
The UAL and United unaudited condensed consolidated financial statements shown here have been prepared as required by the U.S. Securities and Exchange Commission (the "SEC"). Some information and footnote disclosures normally included in financial statements that comply with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted as permitted by the SEC. The financial statements include all adjustments, including normal recurring adjustments and other adjustments, which are considered necessary for a fair presentation of the Company's financial position and results of operations. The UAL and United financial statements should be read together with the information included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the "2020 Form 10-K"). The Company's quarterly financial data is subject to seasonal fluctuations. Historically its second and third quarter financial results have reflected higher travel demand, and were better than its first and fourth quarter financial results; however, see Part I, Item 2 of this report for additional discussion regarding trends associated with the matters discussed in the " Impact of the COVID-19 Pandemic" section below.
Impact of the COVID-19 Pandemic
The novel coronavirus (COVID-19) pandemic, together with the measures implemented or recommended by governmental authorities and private organizations in response to the pandemic, has had an adverse impact that has been material to the Company's business, operating results, financial condition and liquidity. The full extent of the ongoing impact of COVID-19 on the Company's longer-term operational and financial performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus in different markets, the introduction and spread of new variants of the virus that may be resistant to currently approved vaccines and the continuation of existing or implementation of new government travel restrictions.
Capacity. The Company began experiencing a significant decline in international and domestic travel demand related to COVID-19 during the first quarter of 2020, and this reduction in demand has continued through the date of this report. However, since March 2021, the Company has seen increasing demand for travel both domestically and in countries where entry is permitted. The Company cut, relative to second quarter 2019 capacity, approximately 46 % of its scheduled capacity for the second quarter of 2021 and expects its third quarter scheduled capacity to be down approximately 26 % versus the third quarter of 2019. The Company will continue to monitor booking trends for future travel and adjust its capacity as needed.
Cost Reductions . The Company has identified various permanent structural cost reductions including improvements in labor efficiencies. During the first quarter of 2021, the Company offered voluntary leaves of absences to certain U.S.-based front-line employees. This program included (based on employee group, age and completed years of service) a partially-paid leave of absence with active health care coverage and travel privileges. Employees who separate from the Company after the end of such program receive certain separation benefits, such as post-employment health benefits and travel privileges. Approximately 4,500 employees elected to participate in this program, and it is expected that the majority of them will separate from employment at the end of their leave of absence. See Note 5 and Note 9 of this report for additional information on charges related to these programs.
Liquidity . The Company entered into a number of transactions to improve its liquidity and manage its capital. In the first half of 2021, the Company:
• issued, through a private offering to eligible purchasers, $ 4.0 billion in aggregate principal amount of two series of notes, consisting of $ 2.0 billion in aggregate principal amount of 4.375 % senior secured notes due 2026 (the "2026 Notes") and $ 2.0 billion in aggregate principal amount of 4.625 % senior secured notes due 2029 (the "2029 Notes" and, together with the 2026 Notes, the "Notes," and each a "series" of Notes);
• entered into a new Term Loan Credit and Guaranty Agreement (the "New Term Loan Facility") initially providing term loans (the "New Term Loans") up to an aggregate amount of $ 5.0 billion and a new Revolving Credit and
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Guaranty Agreement (the "New Revolving Credit Facility" and, together with the New Term Loan Facility, the "New Loan Facilities") initially providing revolving loan commitments of up to $ 1.75 billion;
• repaid in full the $ 1.4 billion aggregate principal amount outstanding under the term loan facility (the "2017 Term Loan Facility") included in the Amended and Restated Credit and Guaranty Agreement, dated as of March 29, 2017 (the "Existing Credit Agreement");
• repaid in full the $ 1.0 billion aggregate principal amount outstanding under the revolving credit facility (the "2017 Revolving Credit Facility") included in the Existing Credit Agreement;
• repaid in full the $ 520 million aggregate principal amount outstanding under the Loan and Guarantee Agreement, dated as of September 28, 2020, among United, UAL, the U.S. Treasury Department ("Treasury") and the Bank of New York Mellon, as administrative agent, as amended (the "CARES Act Loan" and, together with the 2017 Term Loan Facility and the 2017 Revolving Credit Facility, the "Existing Loan Facilities"), which was entered into pursuant to the loan program established pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act");
• entered into approximately $ 0.6 billion in new enhanced equipment trust certificates ("EETC"); and
• raised approximately $ 0.5 billion in net cash proceeds from the issuance and sale of UAL common stock.
In addition to the foregoing transactions, United entered into the following agreements with Treasury:
PSP2. On January 15, 2021, United entered into a Payroll Support Program Extension Agreement (the "PSP2 Agreement") with Treasury providing the Company with total funding of approximately $ 3.0 billion, pursuant to the Payroll Support Program established under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021. These funds were used to pay for the wages, salaries and benefits of United employees, including the payment of lost wages, salaries and benefits to returning employees. Approximately $ 2.1 billion was provided as a direct grant and $ 870 million as indebtedness evidenced by a 10 -year senior unsecured promissory note (the "PSP2 Note"). See Note 2 of this report for additional information on the warrants issued in connection with the PSP2 Note and Note 8 of this report for a discussion of the PSP2 Note. As a result of the PSP2 Agreement, the Company offered an opportunity to return to active employment to U.S. employees who were impacted by involuntary furloughs.
PSP3. On April 29, 2021, in connection with the Payroll Support Program established under Section 7301 of the American Rescue Plan Act of 2021, United entered into a Payroll Support Program 3 Agreement (the "PSP3 Agreement") with Treasury providing the Company with total funding of approximately $ 2.8 billion. Approximately $ 2.0 billion was provided as a direct grant and $ 810 million as indebtedness evidenced by a 10 -year senior unsecured promissory note (the "PSP3 Note"). These funds will be used by United exclusively for the continuation of payment of its employee wages, salaries and benefits. See Note 2 of this report for additional information on the warrants issued in connection with the PSP3 Note and Note 8 of this report for a discussion of the PSP3 Note.
United Next . On June 27, 2021, United entered into a supplemental agreement to that certain Purchase Agreement, dated May 15, 2018 with The Boeing Company ("Boeing") for a firm narrowbody aircraft order of 200 Boeing 737 MAX aircraft. The order consists of 150 Boeing 737 MAX 10s and 50 Boeing 737 MAX 8s. Also on June 27, 2021, United entered into an amendment to that certain Purchase Agreement, dated December 3, 2019 with Airbus S.A.S ("Airbus") for a firm narrowbody aircraft order of 70 Airbus A321neo aircraft. The firm orders of 200 Boeing 737 MAX aircraft and 70 Airbus A321neo aircraft are expected to be delivered starting in 2023 through 2028 and 2026, respectively.
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NOTE 1 - REVENUE
Revenue by Geography. The table below presents the Company's operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Domestic (U.S. and Canada) $ 3,767 $ 925 $ 5,878 $ 6,003
Atlantic 585 219 995 1,434
Pacific 392 258 700 1,064
Latin America 727 73 1,119 953
Total $ 5,471 $ 1,475 $ 8,692 $ 9,454
Advance Ticket Sales. All tickets sold at any given point in time have travel dates through the next 12 months. The Company defers amounts related to future travel in its Advance ticket sales liability account. The Company's Advance ticket sales liability also includes credits issued to customers on electronic travel certificates ("ETCs") and future flight credits ("FFCs"), primarily for ticket cancellations, which can be applied towards a purchase of a new ticket. In February 2021, the Company extended the expiration dates for all tickets issued between May 1, 2019 and March 31, 2021 to March 31, 2022. As of June 30, 2021, the Company's Advance ticket sales liability included $ 2.6 billion related to these ETCs and FFCs. The Company is unable to estimate the amount of the ETCs and FFCs that will be used within the next 12 months and has classified the entire amount of the Advance ticket sales liability in current liabilities even though some of the ETCs could be used after the next 12 months. Also, the Company is unable to estimate the amount of the June 30, 2021 Advance ticket sales that will be recognized in revenue in 2021 compared to amounts refunded to customers or exchanged into ETCs.
The Company records breakage revenue on the travel date for its estimate of tickets that will expire unused. To determine breakage, the Company uses its historical experience with refundable and nonrefundable expired tickets and other facts, such as recent aging trends, program changes and modifications that could affect the ultimate expiration patterns of tickets. Given the uncertainty of travel demand caused by COVID-19, a significant portion of the ETCs and FFCs may expire unused in future periods and get recognized as breakage. The Company will update its breakage estimates as future information is received.
In the three and six months ended June 30, 2021, the Company recognized approximately $ 1.5 billion and $ 1.4 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods. In the three and six months ended June 30, 2020, the Company recognized approximately $ 0.5 billion and $ 2.8 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods.
Ancillary Fees. The Company charges fees, separately from ticket sales, for certain ancillary services that are directly related to passengers' travel, such as baggage fees, premium seats, inflight amenities and other ticket-related fees. These ancillary fees are part of the travel performance obligation and, as such, are recognized as passenger revenue when the travel occurs. The Company recorded $ 499 million and $ 807 million of ancillary fees within passenger revenue in the three and six months ended June 30, 2021, respectively. The Company recorded $ 71 million and $ 776 million of ancillary fees within passenger revenue in the three and six months ended June 30, 2020, respectively.
Frequent Flyer Accounting. The table below presents a roll forward of Frequent flyer deferred revenue (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Total Frequent flyer deferred revenue - beginning balance $ 6,109 $ 5,488 $ 5,975 $ 5,276
Total miles awarded 360 228 632 787
Travel miles redeemed (Passenger revenue) ( 267 ) ( 34 ) ( 390 ) ( 356 )
Non-travel miles redeemed (Other operating revenue) ( 17 ) ( 12 ) ( 32 ) ( 37 )
Total Frequent flyer deferred revenue - ending balance $ 6,185 $ 5,670 $ 6,185 $ 5,670
In the three and six months ended June 30, 2021, the Company recognized, in Other operating revenue, $ 449 million and $ 811 million, respectively, related to the marketing, advertising, non-travel miles redeemed (net of related costs) and other travel-related benefits of the mileage revenue associated with our various partner agreements including, but not limited to, our JPMorgan Chase Bank, N.A. co-brand agreement. The Company recognized $ 339 million and $ 869 million, respectively, in the three and six months ended June 30, 2020, related to those agreements. The portion related to the MileagePlus miles awarded of the total amounts received from our various partner agreements is deferred and presented in the table above as an increase to the frequent flyer liability. We determine the current portion of our frequent flyer liability based on expected redemptions in the
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next 12 months. Given the uncertainty in travel demand caused by COVID-19, we currently estimate a large percentage of award redemptions will occur beyond 12 months; however, this estimate may change as travel demand and award redemptions become clearer in future periods.
NOTE 2 - LOSS PER SHARE
The computations of UAL's basic and diluted loss per share are set forth below (in millions, except per share amounts):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Loss available to common stockholders $ ( 434 ) $ ( 1,627 ) $ ( 1,791 ) $ ( 3,331 )
Weighted-average shares outstanding, basic and diluted 323.6 280.7 320.1 264.6
Loss per share, basic and diluted $ ( 1.34 ) $ ( 5.79 ) $ ( 5.60 ) $ ( 12.59 )
During the first quarter of 2021, UAL entered into a warrant agreement with Treasury pursuant to which UAL issued to Treasury warrants to purchase up to approximately 2.0 million shares of UAL common stock (the "PSP2 Warrants"). The PSP2 Warrants have a strike price of $ 43.26 per share. The PSP2 Warrants will expire five years after issuance and are exercisable either through net share settlement in cash or in shares of UAL common stock, at UAL's option. The relative fair value of the PSP2 Warrants was calculated using a Black-Scholes options pricing model, and approximately $ 56 million was recorded within stockholders' equity with an offset to the CARES Act grant credit. During the second quarter of 2021, UAL also entered into a warrant agreement with Treasury, pursuant to which UAL issued to Treasury warrants to purchase up to approximately 1.5 million shares of UAL common stock (the "PSP3 Warrants"). The PSP3 Warrants have a strike price of $ 53.92 per share. The PSP3 Warrants will expire five years after issuance and are exercisable either through net share settlement in cash or in shares of UAL common stock, at UAL's option. The relative fair value of the PSP3 Warrants was calculated using a Black-Scholes options pricing model, and approximately $ 43 million was recorded within stockholders' equity with an offset to the CARES Act grant credit.
The PSP2 Warrants and PSP3 Warrants contain customary anti-dilution provisions and registration rights and are freely transferable. Pursuant to the terms of the PSP2 Warrants and PSP3 Warrants, warrant holders do not have any voting rights. As of June 30, 2021 , the Company had the following warrants outstanding:
Warrant Description Number of Shares of UAL Common Stock (in millions) Exercise Price Expiration Dates
PSP1 Warrants (a) 4.8 $ 31.50 4/20/2025 — 9/30/2025
CARES Act Loan Warrants 1.7 31.50 9/28/2025
PSP2 Warrants 2.0 43.26 1/15/2026 — 4/29/2026
PSP3 Warrants 1.5 53.92 4/29/2026 — 6/10/2026
Total 10.0
(a) Warrants issued in connection with the $ 1.5 billion 10 -year senior unsecured promissory note with Treasury provided under the Payroll Support Program of the CARES Act ("PSP1").
On June 15, 2020, UAL entered into an equity distribution agreement with Citigroup Global Markets Inc., BofA Securities, Inc. and J.P. Morgan Securities LLC, relating to the issuance and sale from time to time by UAL (the "2020 ATM Offering"), of up to 28 million shares of UAL common stock. In the first quarter of 2021, the Company sold approximately 7 million shares at an average price of $ 42.98 per share, with net proceeds to the Company of approximately $ 282 million. With these sales, the Company sold all of the shares authorized under the 2020 ATM Offering.
On March 3, 2021, the Company entered into an equity distribution agreement (the "Distribution Agreement") with Morgan Stanley & Co. LLC, AmeriVet Securities, Inc., Barclays Capital Inc., BofA Securities, Inc., BBVA Securities Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Loop Capital Markets LLC and Wells Fargo Securities, LLC (collectively, the "Managers"), relating to the issuance and sale from time to time by UAL (the "2021 ATM Offering"), through the Managers, of up to 37 million shares of UAL common stock (the "2021 ATM Shares"). Sales of the 2021 ATM Shares under the Distribution Agreement may be made in any transactions that are deemed to be "at the market
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offerings" as defined in Rule 415 under the Securities Act of 1933, as amended. Under the terms of the Distribution Agreement, UAL may also sell the 2021 ATM Shares to any Manager, as principal for its own account, at a price agreed upon at the time of sale. If UAL sells the 2021 ATM Shares to a Manager as principal, UAL will enter into a separate terms agreement with such Manager. During the six months ended June 30, 2021, approximately 4 million shares were sold in the 2021 ATM Offering at an average price of $ 57.50 per share, with net proceeds to the Company totaling approximately $ 250 million.
NOTE 3 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The tables below present the components of the Company's accumulated other comprehensive income (loss), net of tax ("AOCI") (in millions):
Pension and Other Postretirement Liabilities Investments and Other Deferred Taxes Total
Balance at March 31, 2021 $ ( 1,084 ) $ 1 $ ( 43 ) $ ( 1,126 )
Changes in value 11 — ( 2 ) 9
Amounts reclassified to earnings 5 (a) — ( 2 ) 3
Balance at June 30, 2021 $ ( 1,068 ) $ 1 $ ( 47 ) $ ( 1,114 )
Balance at December 31, 2020 $ ( 1,102 ) $ 2 $ ( 39 ) $ ( 1,139 )
Changes in value 24 ( 1 ) ( 5 ) 18
Amounts reclassified to earnings 10 (a) — ( 3 ) 7
Balance at June 30, 2021 $ ( 1,068 ) $ 1 $ ( 47 ) $ ( 1,114 )
Balance at March 31, 2020 $ ( 613 ) $ ( 14 ) $ ( 144 ) $ ( 771 )
Changes in value ( 721 ) 17 156 ( 548 )
Amounts reclassified to earnings 77 (a) — ( 17 ) 60
Amounts reclassified to retained earnings — — — —
Balance at June 30, 2020 $ ( 1,257 ) $ 3 $ ( 5 ) $ ( 1,259 )
Balance at December 31, 2019 $ ( 560 ) $ 2 $ ( 160 ) $ ( 718 )
Changes in value ( 770 ) 1 171 ( 598 )
Amounts reclassified to earnings 73 (a) — ( 16 ) 57
Balance at June 30, 2020 $ ( 1,257 ) $ 3 $ ( 5 ) $ ( 1,259 )
(a) This AOCI component is included in the computation of net periodic pension and other postretirement costs (see Note 5 of this report for additional information).
NOTE 4 - INCOME TAXES
The Company's effective tax rates for the three and six months ended June 30, 2021 were 23.0 % and 22.6 %, respectively. The effective tax rates for the three and six months ended June 30, 2020 were 18.8 % and 19.1 %, respectively. The provision for income taxes is based on the estimated annual effective tax rate which represents a blend of federal, state and foreign taxes and includes the impact of certain nondeductible items. The effective tax rates for the three and six months ended June 30, 2021 were impacted by $ 74 million and $ 79 million, respectively, of released valuation allowance related to unrealized capital gains and state attributes. The effective tax rates for the three and six months ended June 30, 2020 were impacted by $ 64 million and $ 130 million, respectively, of valuation allowance related to unrealized capital losses.
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NOTE 5 - EMPLOYEE BENEFIT PLANS
Defined Benefit Pension and Other Postretirement Benefit Plans. The Company's net periodic benefit cost includes the following components for the three months ended June 30 (in millions):
Pension Benefits Other Postretirement Benefits Affected Line Item
in the Statements of
Consolidated Operations
2021 2020 2021 2020
Service cost $ 60 $ 53 $ 3 $ 3 Salaries and related costs
Interest cost 46 56 7 7 Miscellaneous, net
Expected return on plan assets ( 71 ) ( 91 ) ( 1 ) ( 1 ) Miscellaneous, net
Amortization of unrecognized (gain) loss 42 37 ( 7 ) ( 11 ) Miscellaneous, net
Amortization of prior service credit — — ( 31 ) ( 31 ) Miscellaneous, net
Special termination benefits — 35 — 125 Miscellaneous, net
Settlement loss — Voluntary Programs (defined below)
— 71 — — Miscellaneous, net
Other 1 11 — — Miscellaneous, net
Total $ 78 $ 172 $ ( 29 ) $ 92
The Company's net periodic benefit cost includes the following components for the six months ended June 30 (in millions):
Pension Benefits Other Postretirement Benefits Affected Line Item
in the Statements of
Consolidated Operations
2021 2020 2021 2020
Service cost $ 120 $ 107 $ 5 $ 5 Salaries and related costs
Interest cost 92 112 13 14 Miscellaneous, net
Expected return on plan assets ( 142 ) ( 182 ) ( 1 ) ( 1 ) Miscellaneous, net
Amortization of unrecognized (gain) loss 85 72 ( 14 ) ( 22 ) Miscellaneous, net
Amortization of prior service credit — — ( 62 ) ( 62 ) Miscellaneous, net
Special termination benefits — 35 46 125 Miscellaneous, net
Settlement loss — Voluntary Programs (defined below)
— 71 — — Miscellaneous, net
Other 1 14 — — Miscellaneous, net
Total $ 156 $ 229 $ ( 13 ) $ 59
In 2020 and 2021, the Company offered several voluntary leave programs and voluntary separation programs ("Voluntary Programs") to certain eligible employees, which in some cases included a partially-paid leave of absence with active health benefits and travel privileges. Under these Voluntary Programs, employees generally separated (or will separate) from employment with certain post-employment health benefits and travel privileges.
Included in the Voluntary Programs offered during the first quarter of 2021, the Company offered special separation benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees. The subsidies are in the form of a one-time contribution to a notional Retiree Health Account of $ 125,000 for full-time employees and $ 75,000 for part-time employees. As a result, the Company recorded $ 46 million for those additional benefits in the three months ended March 31, 2021.
During the second quarter of 2020, the Company offered Voluntary Programs to its U.S.-based front-line employees, excluding pilots, and management and administrative employees. Included in these Voluntary Programs, the Company offered special separation benefits in the form of additional years of pension service and additional subsidies for retiree medical costs (based on employee group, age and completed years of service). As a result, the Company recorded, in the second quarter of 2020, $ 35 million and $ 125 million, respectively, for those additional benefits. Also, the Company recognized a $ 71 million settlement loss related to the defined benefit pension plan covering certain U.S. non-pilot employees in the second quarter of 2020.
Share-Based Compensation. During the six months ended June 30, 2021, UAL's Board of Directors and stockholders approved the United Airlines Holdings, Inc. 2021 Incentive Compensation Plan (the "2021 Plan"). The 2021 Plan is an incentive compensation plan that allows the Company to use different forms of equity incentives to attract, retain and reward officers and employees. Under the 2021 Plan, the Company may grant: nonqualified stock options; incentive stock options (within the
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meaning of Section 422 of the Internal Revenue Code of 1986); stock appreciation rights ("SARs"); restricted shares; restricted stock units ("RSUs"); performance units; cash incentive awards and other equity-based and equity-related awards. An award (other than an option, SAR or cash incentive award) may provide the holder with dividends or dividend equivalents. The 2021 Plan replaces the United Continental Holdings, Inc. 2017 Incentive Compensation Plan (the "2017 Plan"). Any awards granted under the 2017 Plan prior to the approval of the 2021 Plan remain in effect pursuant to their terms. Awards may not be granted under the 2021 Plan after May 26, 2031.
During the six months ended June 30, 2021, UAL granted share-based compensation awards pursuant to both the 2017 Plan and the 2021 Plan. These share-based compensation awards included 2.9 million RSUs, consisting of 1.3 million time-vested RSUs and 1.6 million short-term performance-based RSUs. A majority of the time-vested RSUs vest equally in 25 % increments every 6 months over a two-year period from the date of grant. The short-term performance-based RSUs vest upon the achievement of established goals based on financial and customer satisfaction metrics for the performance period January 1, 2021 to December 31, 2021. RSUs are generally equity awards settled in stock for domestic employees and liability awards settled in cash for international employees. The cash payments are based on the 20 -day average closing price of UAL common stock immediately prior to the vesting date.
The table below presents information related to share-based compensation (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Share-based compensation expense $ 69 $ 24 $ 103 $ 42
June 30, 2021 December 31, 2020
Unrecognized share-based compensation $ 191 $ 88
NOTE 6 - FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
The table below presents disclosures about the financial assets and liabilities measured at fair value on a recurring basis in UAL's financial statements (in millions):
June 30, 2021 December 31, 2020
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Cash and cash equivalents $ 20,838 $ 20,838 $ — $ — $ 11,269 $ 11,269 $ — $ —
Restricted cash - current 254 254 — — 255 255 — —
Restricted cash - non-current 216 216 — — 218 218 — —
Short-term investments:
Corporate debt 199 — 199 — 330 — 330 —
Asset-backed securities 23 — 23 — 51 — 51 —
U.S. government and agency notes 8 — 8 — 33 — 33 —
Long-term investments:
Equity securities 269 269 — — 205 205 — —
Warrants 176 96 80 — 36 — — 36
Investments presented in the table above have the same fair value as their carrying value.
Restricted cash - current — Primarily includes $ 217 million of cash collateral for a standby letter of credit associated with guarantees related to the BRW Term Loan (as defined below). See Note 7 of this report for additional information on the BRW Term Loan and guarantees. The balance also includes amounts to be used for the payment of fees, principal and interest on senior secured notes and a secured term loan facility (the "MileagePlus Financing") secured by substantially all of the assets of Mileage Plus Holdings, LLC, a direct wholly-owned subsidiary of United.
Restricted cash - non-current — Primarily includes collateral associated with the MileagePlus Financing, collateral for letters of credit and collateral associated with facility leases and other insurance-related obligations.
Short-term investments — The short-term investments shown in the table above are classified as available-for-sale. As of June 30, 2021, corporate debt securities have remaining maturities of less than two years , asset-backed securities have remaining maturities of less than one year to approximately nine years and U.S. government and agency notes have maturities of less than one year .
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Equity securities — Equity securities represent United's investment in Azul Linhas Aéreas Brasileiras S.A. ("Azul"), consisting of approximately 8 % of Azul's outstanding preferred shares (representing approximately 2 % of the total capital stock of Azul), and United's ownership of less than 1% of the outstanding Class A common shares of Clear Secure, Inc. (formerly, Alclear, Inc.) ("Clear"). As of June 30, 2021, the carrying value of United's investment in Azul and Clear was $ 238 million and $ 31 million, respectively.
Warrants — Represents vested warrants for the purchase of 2.4 million shares of Class A common shares of Clear and for the purchase of 4.7 million common shares from Archer Aviation Inc. ("Archer"). The initial value of the warrants received from Archer is recorded as a deferred credit that will be recognized as a reduction to the cost of the aircraft received in future periods.
Other fair value information. The table below presents the carrying values and estimated fair values of financial instruments not presented in the tables above (in millions). Carrying amounts include any related discounts, premiums and issuance costs:
June 30, 2021 December 31, 2020
Carrying Amount Fair Value Carrying Amount Fair Value
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Long-term debt $ 34,184 $ 35,798 $ — $ 30,268 $ 5,530 $ 26,747 $ 27,441 $ — $ 21,985 $ 5,456
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,
Equity securities and
Restricted cash (current and non-current) 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, or (c) broker quotes obtained by third-party valuation services.
Other assets Fair value is determined utilizing the Black-Scholes options pricing model or observable market prices.
Long-term 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 or assets.
Avianca Loan . Avianca Holdings S.A. ("AVH") and certain of its affiliates filed voluntary r eorganization proceedings under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York on May 10, 2020 (the "AVH Reorganization Proceedings"). As part of the AVH Reorganization Proceedings, the Company has a debtor-in-possession ("DIP") term loan ("DIP Loan") receivable under the terms of the DIP credit agreement. The DIP Loan is not convertible. It bears paid-in-kind interest at a rate of 14.5 % per annum and has a scheduled maturity date in November 2021. The DIP Loan becomes immediately payable upon AVH's emergence from bankruptcy, in either cash or shares of AVH stock, at AVH's election. As of June 30, 2021, the DIP Loan had a balance of $ 170 million and was recorded in Receivables on the Company's consolidated balance sheet.
Investments in Regional Carriers. United holds investments in several regional carriers that fly or used to fly for the Company as United Express under its capacity purchase agreements ("CPAs"). The combined carrying value of the investments was approximately $ 152 million as of June 30, 2021. United accounts for each investment using the equity method. Each investment and United's ownership stake are listed below.
• Champlain Enterprises, LLC ("Champlain"). United owns a 40 % minority ownership stake in Champlain. Champlain does business as CommutAir. CommutAir currently operates 70 regional aircraft under a CPA that has a term through 2026.
• Republic Airways Holdings Inc. ("Republic"). United holds a 19 % minority interest in Republic. Republic is the parent company of Republic Airways Inc. Republic currently operates 66 regional aircraft under a CPA that has a term through 2029.
• ManaAir, LLC ("ManaAir"). United holds a 49.9 % minority ownership stake in ManaAir. ManaAir is the parent company of ExpressJet Airlines LLC ("ExpressJet"). The Company terminated its CPA with ExpressJet. ExpressJet flew its last commercial flight, on behalf of United, on September 30, 2020.
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Other Investments. United holds other investments that are recorded at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. As of June 30, 2021, United held these major investments:
• Fulcrum BioEnergy, Inc. ("Fulcrum"). United owns approximately 7 % of the preferred shares (representing approximately 6 % of the total capital stock) of Fulcrum, a company that is developing a process for transforming municipal solid waste into transportation fuels, including jet fuel and diesel. As of June 30, 2021, the carrying value of United's investment was $ 51 million.
• Boom Technology, Inc. ("Boom"). United holds vested warrants for the purchase of 568,857 shares of common stock of Boom, a company that is developing aircraft that will fly at supersonic speeds. As of June 30, 2021, the carrying value of the warrants was $ 17 million. United also holds a $ 120 million note receivable from Boom which we recorded at its inception date fair value of $ 41 million. The values of the warrants and the note are recorded as deferred credits that will be recognized as a reduction to the cost of the aircraft received in future periods.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Commitments. As of June 30, 2021, United had firm commitments and options to purchase aircraft from Boeing and Airbus as presented in the table below:
Scheduled Aircraft Deliveries
Aircraft Type Number of Firm
Commitments (a) Last Six Months
of 2021 2022 2023 After 2023
Airbus A321XLR 50 — — — 50
Airbus A321neo 70 — — 16 54
Airbus A350 45 — — — 45
Boeing 737 MAX 380 13 40 122 205
Boeing 787 8 8 — — —
(a) United also has options and purchase rights for additional aircraft.
The aircraft listed in the table above are scheduled for delivery through 2030. To the extent the Company and the aircraft manufacturers with whom the Company has existing orders for new aircraft agree to modify the contracts governing those orders, or to the extent rights are exercised pursuant to the relevant agreements to modify the timing of deliveries, the amount and timing of the Company's future capital commitments could change.
United also has an agreement to purchase six used Boeing 737-700 aircraft, which it intends to sell, with expected delivery dates in 2021. In addition, United has an agreement to purchase 11 used Airbus A319 aircraft, which it intends to sell, with expected delivery dates in 2021 and 2022.
In 2020, United entered into agreements with third parties to finance through sale and leaseback transactions new Boeing model 787 aircraft and Boeing model 737 MAX aircraft subject to purchase agreements between United and Boeing. In connection with the delivery of each aircraft from Boeing, United assigned its right to purchase such aircraft to the buyer, and simultaneous with the buyer's purchase from Boeing, United entered into a long-term lease for such aircraft with the buyer as lessor. Eleven Boeing model aircraft were delivered in the first half of 2021 under these transactions (and each is presently subject to a long-term lease to United). Remaining aircraft in the agreements are scheduled to be delivered in the last six months of 2021. Upon delivery of aircraft in these sale and leaseback transactions in 2021, the Company accounted for seven of these aircraft, which have a repurchase option at a price other than fair value, as part of Flight equipment on the Company's consolidated balance sheet and the related obligation recorded in Other current liabilities and Other financial liabilities from sale-leasebacks (noncurrent) since they do not qualify for sale recognition. The remaining four aircraft that qualified for sale recognition were recorded as Operating lease right-of-use assets and Current/Long-term obligations under operating leases on the Company's consolidated balance sheet after recognition of related gains on such sale.
The table below summarizes United's commitments as of June 30, 2021, which include aircraft and related spare engines, aircraft improvements and all non-aircraft capital commitments (in billions):
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Last six months of 2021 $ 3.1
2022 3.4
2023 7.4
2024 4.7
2025 4.3
After 2025 12.4
$ 35.3
Regional CPAs. The table below summarizes the Company's expected future payments through the end of the terms of our CPAs, excluding aircraft ownership costs and variable pass-through costs such as fuel and landing fees, among others. Our future commitments under our CPAs are dependent on numerous variables, and are, therefore, difficult to predict. We have set forth below estimates based on our current assumptions of our anticipated level of flight activity or any contractual minimum utilization levels if applicable, whichever is higher. Based on these assumptions as of June 30, 2021, our estimated future payments through the end of the terms of our CPAs are presented in the table below (in billions):
Last six months of 2021 $ 1.1
2022 2.1
2023 1.9
2024 1.8
2025 1.5
After 2025 3.7
$ 12.1
Guarantees. As of June 30, 2021, 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 these obligations are accounted for as operating leases recognized on the Company's consolidated balance sheet with the associated expense recorded on a straight-line basis over the expected lease term. All of these bonds are due between 2023 and 2038.
In November 2018, United, as lender, entered into a Term Loan Agreement (the "BRW Term Loan Agreement") with, among others, BRW Aviation Holding LLC and BRW Aviation LLC ("BRW"), as guarantor and borrower, respectively. BRW Aviation Holding LLC and BRW are affiliates of Synergy Aerospace Corporation, and BRW is the majority shareholder of AVH. Pursuant to the BRW Term Loan Agreement, United provided to BRW a $ 456 million term loan (the "BRW Term Loan"). In November 2018, in connection with funding the BRW Term Loan Agreement, the Company entered into an agreement with Kingsland Holdings Limited ("Kingsland"), AVH's largest minority shareholder, pursuant to which, in return for Kingsland's pledge of its 144.8 million common shares of AVH (which are eligible to be converted into the same number of preferred shares, which may be deposited with the depositary for AVH's American Depositary Receipts ("ADRs"), the class of AVH securities that trades on the NYSE, in exchange for 18.1 million ADRs) and its consent to BRW's pledge of its AVH common shares to United under the BRW Term Loan Agreement and related agreements, United (1) granted to Kingsland the right to put its AVH common shares to United at market price on the fifth anniversary of the BRW Term Loan Agreement or upon certain sales of AVH common shares owned by BRW, including upon a foreclosure of United's security interest, and (2) guaranteed BRW's obligation to pay Kingsland the difference if the market price of AVH common shares on the fifth anniversary, or upon any such sale, as applicable, is less than $ 12 per ADR on the NYSE, for an aggregate maximum possible combined put payment and guarantee amount on the fifth anniversary of $ 217 million. Due to AVH's financial uncertainty and subsequent bankruptcy filing in 2019, the Company recorded the full amount of the guarantee as a liability. Additionally, the Company posted $ 217 million as cash collateral for a standby letter of credit in favor of Citibank, N.A. that serves as security for a loan from Citibank to Kingsland (recorded in Restricted cash – current on the Company's consolidated balance sheet). Any drawings under the letter of credit would offset the Company's maximum possible put and guarantee payment to Kingsland by an equal amount. The posting of this collateral, and any potential credit against the Company's put and guarantee payment, are entirely related to the original transactions entered in 2018 and do not represent any new or incremental investment.
As of June 30, 2021, United is the guarantor of $ 113 million of aircraft mortgage debt issued by one of United's regional carriers. The aircraft mortgage debt is subject to similar increased cost provisions as described below for the Company's debt, and the Company would potentially be responsible for those costs under the guarantees.
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Increased Cost Provisions. In United's financing transactions that include loans in which United is the borrower, United 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 with respect to 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, 2021, the Company had $ 13.4 billion of floating rate debt with remaining terms of up to approximately 11 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 approximately 11 years and an aggregate balance of $ 10.2 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.
Labor Negotiations. As of June 30, 2021, the Company had approximately 84,400 employees, of whom approximately 85 % were represented by various U.S. labor organizations. This total includes approximately 4,500 front-line employees who elected to voluntarily separate from the Company pursuant to the first quarter 2021 Company-offered Voluntary Programs but who still remained on pay and benefit continuation as of June 30, 2021.
Credit Card Processing Agreements. The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of the Company's credit card processing agreements, the financial institutions in certain circumstances have the right to require that the Company maintain a reserve equal to a portion of advance ticket sales that has been processed by that financial institution, but for which the Company has not yet provided the air transportation. Such financial institutions may require cash or other collateral reserves to be established or withholding of payments related to receivables to be collected, including if the Company does not maintain certain minimum levels of unrestricted cash, cash equivalents and short-term investments .
NOTE 8 - DEBT
On April 21, 2021, United paid all amounts outstanding under the 2017 Revolving Credit Facility and the 2017 Term Loan Facility, terminated the 2017 Revolving Credit Facility and the 2017 Term Loan Facility and entered into the New Loan Facilities described below. As of June 30, 2021, United had $ 1.75 billion available for borrowing under the New Revolving Credit Facility at any time until April 21, 2025.
EETCs . In February 2021, United created EETC pass-through trusts which issued pass-through certificates. The proceeds from the issuance of the pass-through certificates are used to purchase equipment notes issued by United and secured by its aircraft financed with the proceeds of such notes. The Company records the debt obligation upon issuance of the equipment notes rather than upon the initial issuance of the pass-through certificates. The pass-through certificates represent fractional undivided interests in the respective pass-through trusts and are not obligations of United. The payment obligations under the equipment notes are those of United. Proceeds received from the sale of pass-through certificates are initially held by a depositary in escrow for the benefit of the certificate holders until United issues equipment notes to the trust, which purchases such notes with a portion of the escrowed funds. These escrowed funds are not guaranteed by United and are not reported as debt on our consolidated balance sheet because the proceeds held by the depositary are not United's assets. Certain details of the pass-through trusts with proceeds received from issuance of debt in 2021 are as follows (in millions, except stated interest rate):
EETC Issuance Date Class Face Amount Stated interest rate Total proceeds received from issuance of debt Total debt recorded as of
June 30, 2021
February 2021 B $ 600 4.88 % $ 600 $ 600
PSP2 Note. During the six months ended June 30, 2021, UAL issued an $ 870 million PSP2 Note to Treasury evidencing senior unsecured indebtedness of UAL. The PSP2 Note is guaranteed by United and will mature ten years after issuance on January 15, 2031 (the "PSP2 Note Maturity Date"). If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness of UAL with a principal balance in excess of a specified amount, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP2 Note. UAL may, at its option, prepay the PSP2 Note, at any time, and from time to time, at par. UAL is required to prepay the PSP2 Note upon the occurrence of certain change of control triggering events. The PSP2 Note does not require any amortization and is to be repaid in full on the PSP2 Note Maturity Date. Interest on the PSP2 Note is payable semi-annually in arrears on the last business day of March and September of each year, beginning on March 31, 2021, at a rate of 1.00 % in years 1 through 5, and at the Secured Overnight Financing Rate (SOFR) plus 2.00 % in years 6 through 10.
PSP3 Note. During the second quarter of 2021, UAL issued an $ 810 million PSP3 Note to Treasury evidencing senior unsecured indebtedness of UAL. The PSP3 Note is guaranteed by United and will mature ten years after issuance on April 29, 2031 (the "PSP3 Note Maturity Date"). If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness
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of UAL with a principal balance in excess of a specified amount, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP3 Note. UAL may, at its option, prepay the PSP3 Note, at any time, and from time to time, at par. UAL is required to prepay the PSP3 Note upon the occurrence of certain change of control triggering events. The PSP3 Note does not require any amortization and is to be repaid in full on the PSP3 Note Maturity Date. Interest on the PSP3 Note is payable semi-annually in arrears on the last business day of March and September of each year, beginning on September 30, 2021, at a rate of 1.00 % in years 1 through 5, and at the Secured Overnight Financing Rate (SOFR) plus 2.00 % in years 6 through 10.
Notes . On April 21, 2021, United issued, through a private offering to eligible purchasers, $ 4.0 billion in aggregate principal amount of two series of Notes, consisting of $ 2.0 billion in aggregate principal amount of the 2026 Notes and $ 2.0 billion in aggregate principal amount of the 2029 Notes. The 2026 Notes, issued at a price of 100 % of their principal amount, bear interest at a rate of 4.375 % per annum and will mature on April 15, 2026. The 2029 Notes, issued at a price of 100 % of their principal amount, bear interest at a rate of 4.625 % per annum and will mature on April 15, 2029. The Notes are guaranteed on an unsecured basis by UAL.
New Loan Facilities. Concurrently with the closing of the offering of the Notes, United also entered into the New Loan Facilities, consisting of the New Term Loan Facility initially providing New Term Loans up to an aggregate amount of $ 5.0 billion and the New Revolving Credit Facility initially providing revolving loan commitments of up to $ 1.75 billion. United borrowed the full amount of the New Term Loans on April 21, 2021, which bear interest at a variable rate equal to LIBOR (but not less than 0.75 % per annum) plus a margin of 3.75 % per annum. The principal amount of the New Term Loan Facility must be repaid in consecutive quarterly installments of 0.25 % of the original principal amount thereof with the balance due at maturity. Borrowings under the New Revolving Credit Facility bear interest at a variable rate equal to LIBOR plus a margin of 3.00 % to 3.50 % per annum. United pays a commitment fee equal to 0.75 % per annum on the undrawn amount available under the New Revolving Credit Facility.
United used the net proceeds from the offering of the Notes and borrowings under the New Term Loan Facility (i) to repay in full all of the Existing Loan Facilities, including the $ 1.4 billion aggregate principal amount outstanding under the 2017 Term Loan Facility, the $ 1.0 billion aggregate principal amount outstanding under the 2017 Revolving Credit Facility and the $ 520 million aggregate principal amount outstanding under the CARES Act Loan, (ii) to pay fees and expenses relating to the offering of the Notes and (iii) for United's general corporate purposes. As a result of such repayments, the Existing Loan Facilities were terminated on April 21, 2021 and no further borrowings may be made thereunder.
The Notes and the New Loan Facilities are secured on a senior basis by security interests granted by United to the collateral trustee for the benefit of the holders of the Notes and the lenders under the New Loan Facilities, among other parties, on the following: (i) all of United's route authorities granted by the U.S. Department of Transportation to operate scheduled service between any international airport located in the United States and any international airport located in any country other than the United States (except Cuba), (ii) United's rights to substantially all of its landing and take-off slots at foreign and domestic airports, including at John F. Kennedy International Airport, LaGuardia Airport and Ronald Reagan Washington National Airport (subject to certain exclusions), and (iii) United's rights to use or occupy space at airport terminals, each to the extent necessary at the relevant time for servicing scheduled air carrier service authorized by an applicable route authority.
As of June 30, 2021, UAL and United were in compliance with their respective debt covenants.
The table below presents the Company's contractual principal payments (not including $ 600 million of unamortized debt discount, premiums and debt issuance costs) at June 30, 2021 under then-outstanding long-term debt agreements (in millions):
Last six months of 2021 $ 1,001
2022 2,967
2023 2,847
2024 3,908
2025 3,378
After 2025 20,683
$ 34,784
NOTE 9 - SPECIAL CHARGES (CREDITS)
For the three and six months ended June 30, special charges (credits), unrealized (gains) losses on investments, debt extinguishment and modification fees, special termination benefits and settlement losses and certain credit losses in the statements of consolidated operations consisted of the following (in millions):
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Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
CARES Act grant $ ( 1,079 ) $ ( 1,589 ) $ ( 2,889 ) $ ( 1,589 )
Impairment of assets 59 80 59 130
Severance and benefit costs 11 63 428 63
(Gains) losses on sale of assets and other special charges 61 ( 3 ) 77 10
Total operating special charges (credits) ( 948 ) ( 1,449 ) ( 2,325 ) ( 1,386 )
Nonoperating unrealized (gains) losses on investments, net ( 147 ) ( 9 ) ( 125 ) 310
Nonoperating debt extinguishment and modification fees 62 — 62 —
Nonoperating special termination benefits and settlement losses — 231 46 231
Nonoperating credit loss on BRW Term Loan and related guarantee — — — 697
Total nonoperating special charges and unrealized (gains) losses on investments, net ( 85 ) 222 ( 17 ) 1,238
Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net ( 1,033 ) ( 1,227 ) ( 2,342 ) ( 148 )
Income tax expense (benefit), net of valuation allowance 203 241 494 227
Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net of income taxes $ ( 830 ) $ ( 986 ) $ ( 1,848 ) $ 79
2021
CARES Act grant. During the six months ended June 30, 2021, the Company received approximately $ 5.8 billion in funding pursuant to the PSP2 Agreement and the PSP3 Agreement, which included an approximately $ 1.7 billion unsecured loan. The Company recorded $ 1.1 billion and $ 2.9 billion as grant income in Special charges (credits) during the three and six months ended June 30, 2021, respectively. The Company also recorded $ 52 million and $ 99 million for the PSP2 Warrants and PSP3 Warrants issued to Treasury as part of the PSP2 Agreement and PSP3 Agreement, within stockholders' equity, as an offset to the grant income in the three and six months ended June 30, 2021, respectively. The Company deferred recognition of $ 1.1 billion of the funds received under the PSP3 Agreement as of June 30, 2021 as the funds can only be used for the payment of eligible salaries, wages and benefits. The Company expects the remainder of the PSP3 Agreement funds will be recognized as income in the third quarter of 2021.
Impairment of assets . During the three and six months ended June 30, 2021, the Company recorded $ 59 million of impairments primarily related to 64 Embraer EMB 145LR aircraft and related engines that United retired from its regional aircraft fleet. The decision to retire these aircraft was triggered by the United Next aircraft order. In February 2021, the Company voluntarily and temporarily removed all 52 Boeing 777-200/200ER aircraft powered by Pratt & Whitney 4000 series engines from its schedule due to an engine failure incident with one of its aircraft. The Company viewed this incident as an indicator of potential impairment. Accordingly, as required under relevant accounting standards, United performed forecasted cash flow analyses and determined that the carrying value of the Boeing 777-200/200ER fleet is expected to be recoverable from future cash flows expected to be generated by that fleet and, consequently, no impairment was recorded .
Severance and benefit costs . During the three and six months ended June 30, 2021, the Company recorded charges of $ 11 million and $ 428 million, respectively, related to pay continuation and benefits-related costs provided to employees who chose to voluntarily separate from the Company. The Company offered, based on employee group, age and completed years of service, pay continuation, health care coverage, and travel benefits. Approximately 4,500 employees elected to voluntarily separate from the Company.
(Gains) losses on sale of assets and other special charges. During the three and six months ended June 30, 2021, the Company recorded charges of $ 61 million and $ 77 million, respectively, primarily related to incentives for certain of its front-line employees to receive a COVID-19 vaccination and the termination of the lease associated with three floors of its headquarters at the Willis Tower in Chicago in the first quarter of 2021.
Nonoperating unrealized losses on investments, net . During the three and six months ended June 30, 2021, the Company recorded $ 90 million of gains related to its equity investments and warrants in the equity of Clear. Clear undertook its initial public stock offering in June 2021. Also during the three and six months ended June 30, 2021, the Company recorded gains of $ 57 million and $ 35 million, respectively, primarily for the change in the market value of its investment in Azul .
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Nonoperating debt extinguishment and modification fees. During the three and six months ended June 30, 2021, the Company recorded $ 62 million of charges for fees and discounts related to the issuance of the New Loan Facilities and the prepayment of the Existing Loan Facilities.
Nonoperating special termination benefits. During the six months ended June 30, 2021, as part of the first quarter Voluntary Programs, the Company recorded $ 46 million of special termination benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees. The subsidies were in the form of a one-time contribution into the employee's Retiree Health Account of $ 125,000 for full-time employees and $ 75,000 for part-time employees.
2020
CARES Act grant. During the three and six months ended June 30, 2020, the Company received approximately $ 4.5 billion in funding pursuant to PSP1, which consisted of a $ 3.2 billion grant and a $ 1.3 billion unsecured loan. The Company recognized $ 1.6 billion of the grant as a credit to Special charges (credit) and $ 57 million in warrants issued to Treasury, within stockholder's equity, as an offset to the grant income.
Impairment of assets. During the three and six months ended June 30, 2020, the Company recorded impairment charges of $ 80 million and $ 130 million, respectively, for its China routes, which was primarily caused by the COVID-19 pandemic and the Company's subsequent suspension of flights to China.
Severance and benefit costs. During the three and six months ended June 30, 2020, the Company recorded $ 63 million related to pay continuation and benefits provided to employees who chose to voluntarily separate from the Company.
Nonoperating unrealized losses on investments, net. During the three and six months ended June 30, 2020, the Company recorded gains of $ 9 million and losses of $ 310 million, respectively. The losses in the six months ended June 30, 2020 were primarily due to the $ 284 million decrease in the market value of the Company's investment in Azul and the $ 24 million decrease in the fair value of the AVH share call options, AVH share appreciation rights and AVH share-based upside sharing agreement.
Nonoperating special termination benefits and settlement losses. During the three and six months ended June 30, 2020, the Company recorded $ 231 million of settlement losses related to the Company's primary defined benefit pension plans covering certain U.S. non-pilot employees, and special termination benefits offered under voluntary leave programs to certain front-line U.S. based employees participating in the non-pilot defined benefit pension plan and postretirement medical programs.
Nonoperating credit loss on BRW Term Loan and related guarantee. During the six months ended June 30, 2020, the Company recorded a $ 697 million expected credit loss allowance for the BRW Term Loan and related guarantee. AVH is currently in bankruptcy. See Notes 6 and 7 of this report for additional information.
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