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Special Charges (Credit) | 9 Months Ended
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Sep. 30, 2020
Other Income and Expenses [Abstract] |
SPECIAL CHARGES (CREDIT) | SPECIAL CHARGES (CREDIT) For the three and nine months ended September 30, special charges (credit), special termination benefits and pension settlement losses, unrealized gains and losses on investments and certain credit losses in the statements of consolidated operations consisted of the following (in millions):
| Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019
CARES Act grant | $ | (1,494) |  |  | $ | — |  |  | $ | (3,083) |  |  | $ | — |
Severance and benefit costs | 350 |  |  | 2 |  |  | 413 |  |  | 14 |
Impairment of assets | 38 |  |  | — |  |  | 168 |  |  | 69 |
(Gains) losses on sale of assets and other special charges | 25 |  |  | 25 |  |  | 35 |  |  | 33 |
Total operating special charges (credit) | (1,081) |  |  | 27 |  |  | (2,467) |  |  | 116 |
Nonoperating special termination benefits and settlement losses | 415 |  |  | — |  |  | 646 |  |  | — |
Nonoperating unrealized (gains) losses on investments | (15) |  |  | (21) |  |  | 295 |  |  | (72) |
Nonoperating credit loss on BRW Term Loan and related guarantee | — |  |  | — |  |  | 697 |  |  | — |
Total nonoperating special charges and unrealized (gains) losses on investments | 400 |  |  | (21) |  |  | 1,638 |  |  | (72) |
Total operating and nonoperating special charges (credit) and unrealized (gains) losses on investments | (681) |  |  | 6 |  |  | (829) |  |  | 44 |
Income tax expense (benefit), net of valuation allowance | 148 |  |  | (2) |  |  | 375 |  |  | (10) |
Total operating and nonoperating special charges (credit) and unrealized (gains) losses on investments, net of income taxes | $ | (533) |  |  | $ | 4 |  |  | $ | (454) |  |  | $ | 34 |
2020 CARES Act grant. During the nine months ended September 30, 2020, the Company received approximately $5.1 billion in funding pursuant to the Payroll Support Program under the CARES Act, which consists of $3.6 billion in a grant and $1.5 billion in an unsecured loan. The Company also recorded $66 million in warrants issued to Treasury, within stockholders' equity, as an offset to the grant income. For the nine months ended September 30, 2020, we recognized $3.1 billion of the grant as a credit to Special charges (credit) with the remaining $453 million recorded as a deferred credit on our balance sheet. We expect to recognize the remainder of the grant income from the Payroll Support Program as Special charge (credit) during the fourth quarter of 2020 as the salaries and wages the grant is intended to offset are incurred. Impairment of assets. During the third quarter of 2020, the Company recorded an impairment of $38 million of the right-of-use asset associated with the embedded aircraft lease in one of our CPA agreements. We review flight equipment and other long-lived assets used in operations for impairment losses when events and circumstances indicate the assets may be impaired. We measure cash flows at the contract level with our CPA partners. This impairment was primarily due to the impact to cash flows from the pandemic and the relatively short remaining term under the CPA agreement. In the first quarter of 2020, in response to decreased demand caused by the COVID-19 pandemic, the Company temporarily grounded certain of its mainline fleet, and those aircraft continue to be temporarily grounded. In the first quarter of 2020, as required under relevant accounting standards, United performed forecasted cash flow analyses and determined that the carrying value of the tested fleets is recoverable from future cash flows expected to be generated by those fleets. To determine whether impairments exist for active and temporarily parked mainline aircraft, we group assets at the fleet-type level. To the extent we make decisions to permanently ground any of our fleet, or our estimates of future cash flows generated by our fleet change, we may be required to record impairment charges in future periods. We update the cash flow analysis each quarter. There were no new impairment indicators related to the temporarily-grounded aircraft in the third quarter of 2020. United assesses its goodwill and intangible assets for potential impairment on an annual basis as of October 1, and on an interim basis if there are indicators that an impairment of goodwill or the intangible assets may have occurred. In the first quarter of 2020, the Company evaluated its goodwill and intangible assets for possible impairments due to the impact of the COVID-19 pandemic on UAL's market capitalization and cash flow projections. For goodwill and certain of its intangible assets, including the Company's China routes, London-Heathrow slots, alliances and the United trade name and logo, the Company performed a quantitative assessment which involved determining the fair value of the asset and comparing that amount to the asset's carrying value and, in the case of goodwill, comparing the Company's fair value to its carrying value. For all other intangible assets, the Company performed a qualitative assessment of whether it was more likely than not that an impairment had occurred. To determine fair value, the Company used discounted cash flow methods appropriate for each asset. Key inputs into the models included forecasted capacity, revenues, fuel costs, other operating costs and an overall discount rate. The assumptions used for future projections include that demand will likely remain suppressed through 2021. These assumptions are inherently uncertain as they relate to future events and circumstances. The Company conducted another intangible asset impairment review in the second quarter of 2020 and in the third quarter of 2020 the Company again performed similar quantitative and qualitative assessments as in first quarter described above. In light of the ongoing impact of the COVID-19 pandemic on both the U.S. and global economies, the significant, sustained impact on the demand for travel and government policies that restrict air travel, the exact timing of the recovery from the COVID-19 pandemic, and the speed at which such recovery could occur, continues to remain uncertain and could result in additional impairment charges in the future. We expect to continue to modify our cost management structure and capacity as the timing of demand recovery becomes more certain. As a result of the impairment assessments, the Company recorded impairment charges of $130 million during the nine months ended September 30, 2020 for its China routes which was primarily caused by the COVID-19 pandemic, the Company's subsequent suspension of flights to China and a further delay in the expected return of full capacity to the China markets. The Company's China routes are subject to usage requirements imposed by the U.S. and Chinese governments. For the summer 2020 season, both governments issued relief from their frequency and slot usage requirements. The Company, therefore, has been able to reduce its mainland China service without violating the governments' rules. The Company is advocating for a continuation of this relief through the winter 2020/2021 season. As of September 30, 2020, the fair value of the China routes was approximately $1.1 billion. No impairments were recorded in the third quarter of 2020. Severance and benefit costs. As announced in July 2020, the Company started the involuntary furlough process earlier this summer when issuing WARN Act notices to 36,000 of its employees. Since then, the Company worked to reduce the total number of furloughs to approximately 13,000 employees by working closely with its union partners, introducing new voluntary options selected by approximately 9,000 employees and proposing creative solutions that would save jobs. This workforce reduction is part of the Company's strategic realignment of its business and new organizational structure as a result of the impacts of the COVID-19 pandemic on the Company's operations and cost structure. The Company recorded $350 million and $413 million during the three and nine months ended September 30, 2020, respectively, related to the workforce reduction and voluntary plans for employee severance, pay continuance from voluntary retirements, and benefits-related costs (and additional costs associated with special termination benefits and settlement losses discussed below). Nonoperating special termination benefits and settlement losses. During the three and nine months ended September 30, 2020, the Company recorded $415 million and $646 million, respectively, of settlement losses related to the Company's primary defined benefit pension plan covering certain U.S. non-pilot employees, and special termination benefits offered, under furlough and voluntary separation programs. See Note 6 to the financial statements included in Part I, Item 1 for additional information. Nonoperating unrealized gains (losses) on investments, net. During the three and nine months ended September 30, 2020, the Company recorded gains of $15 million and losses of $271 million, respectively, primarily for changes in the fair value of its investment in Azul. Also during the nine months ended September 30, 2020, the Company recorded losses of $24 million for the decrease in fair value of the AVH Derivative Assets. Nonoperating credit loss on BRW Term Loan and related guarantee. During the nine months ended September 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 7 and 9 to the financial statements included in Part I, Item 1 for additional information. 2019 Severance and benefit costs. During the three and nine months ended September 30, 2019, the Company recorded management severance of $2 million and $12 million, respectively. During the nine months ended September 30, 2019, the Company recorded $2 million of severance and benefit costs related to a voluntary early-out program for its technicians and related employees represented by the IBT. In the first quarter of 2017, approximately 1,000 technicians and related employees elected to voluntarily separate from the Company and received a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through early 2019. Impairment of assets. During the nine months ended September 30, 2019, the Company recorded a $47 million impairment for aircraft engines removed from operations, an $8 million fair value adjustment for aircraft purchased off lease, a $6 million charge for the early termination of several regional aircraft finance leases and $8 million in other miscellaneous impairments. Nonoperating unrealized gains (losses) on investments, net. During the three and nine months ended September 30, 2019, the Company recorded gains of $25 million and $77 million, respectively, primarily for the change in market value of its investment in Azul. Also, during the three and nine months ended September 30, 2019, the Company recorded losses of $4 million and $5 million, respectively, for the change in fair value of the AVH Derivative Assets.

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -URI http://asc.fasb.org/topic&trid=2175745 + Details
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