SEC Filing - United Airlines Holdings, Inc.

UNITED AIR LINES, INC.

THE BOEING COMPANY

/s/ Kathryn A. Mikells

/s/ Nobuko Wiles

Executive Vice President and Chief Financial Officer

Attorney-in-fact

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission File Number	Exact Name of Registrant as Specified in its Charter, Principal Office Address and Telephone Number	State of Incorporation	I.R.S. Employer Identification No
001-06033	UAL Corporation	Delaware	36-2675207
001-11355	United Air Lines, Inc.	Delaware	36-2675206
	77 W. Wacker Drive
	Chicago, Illinois 60601
	(312) 997-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


UAL Corporation		Yes x No ¨
United Air Lines, Inc.		Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


UAL Corporation	Large accelerated filer	¨	Accelerated filer	x

	Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨


United Air Lines, Inc.	Large accelerated filer	¨	Accelerated filer	¨

	Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


UAL Corporation		Yes ¨ No x
United Air Lines, Inc.		Yes ¨ No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.


UAL Corporation		Yes x No ¨
United Air Lines, Inc.		Yes x No ¨

OMISSION OF CERTAIN INFORMATION

United Air Lines, Inc. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format allowed under that General Instruction.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of April 20, 2010.

UAL Corporation

167,870,833 shares of common stock ($0.01 par value)

United Air Lines, Inc.

205 (100% owned by UAL Corporation)

There is no market for United Air Lines, Inc. common stock.

UAL Corporation and Subsidiary Companies and

United Air Lines, Inc. and Subsidiary Companies

Report on Form 10-Q

For the Quarter Ended March 31, 2010


		Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
UAL Corporation:
Condensed Statements of Consolidated Operations (Unaudited)		1
Condensed Statements of Consolidated Financial Position (Unaudited)		2
Condensed Statements of Consolidated Cash Flows (Unaudited)		4

United Air Lines, Inc.:
Condensed Statements of Consolidated Operations (Unaudited)		5
Condensed Statements of Consolidated Financial Position (Unaudited)		6
Condensed Statements of Consolidated Cash Flows (Unaudited)		8

Combined Notes to Condensed Consolidated Financial Statements (Unaudited) (UAL Corporation and United Air Lines, Inc.)		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosures About Market Risk		34
Item 4. Controls and Procedures		35

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		36
Item 1A. Risk Factors		36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 6. Exhibits		36
Signatures		37
Exhibit Index		38

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UAL Corporation and Subsidiary Companies

Condensed Statements of Consolidated Operations (Unaudited)

(In millions, except per share amounts)


	Three Months Ended March 31,
	2010			2009
Operating revenues:
Passenger — United Airlines	$	3,026		$	2,701
Passenger — Regional Affiliates		840			659
Cargo		157			124
Other operating revenues		218			207

		4,241			3,691

Operating expenses:
Aircraft fuel		958			799
Salaries and related costs		948			921
Regional Affiliates		815			671
Purchased services		287			287
Landing fees and other rent		228			221
Aircraft maintenance materials and outside repairs		222			225
Depreciation and amortization		213			233
Distribution expenses		137			118
Aircraft rent		81			88
Cost of third party sales		57			53
Impairments and special items (Note 13)		18			119
Other operating expenses		208			238

		4,172			3,973

Earnings (loss) from operations		69			(282	)

Other income (expense):
Interest expense		(178	)		(134	)
Interest income		1			7
Interest capitalized		2			3
Miscellaneous, net		24			(6	)

		(151	)		(130	)

Loss before income taxes and equity in earnings of affiliates		(82	)		(412	)
Income tax expense (benefit)		1			(29	)

Loss before equity in earnings of affiliates		(83	)		(383	)
Equity in earnings of affiliates, net of tax		1			1

Net loss	$	(82	)	$	(382	)

Loss per share, basic and diluted	$	(0.49	)	$	(2.64	)

See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited).

UAL Corporation and Subsidiary Companies

Condensed Statements of Consolidated Financial Position (Unaudited)

(In millions, except shares)


	March 31, 2010			December 31, 2009
Assets
Current assets:
Cash and cash equivalents	$	3,516		$	3,042
Restricted cash		83			128
Receivables, less allowance for doubtful accounts (2010 — $7; 2009 — $14)		968			743
Senior Notes proceeds receivable (Note 12)		672			—
Aircraft lease deposits maturing within one year		302			293
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2010 — $60; 2009 — $61)		188			197
Deferred income taxes		51			63
Prepaid fuel		307			275
Prepaid expenses and other		433			364

		6,520			5,105

Operating property and equipment:
Owned —
Flight equipment		8,307			8,303
Advances on flight equipment		51			—
Other property and equipment		1,752			1,745

		10,110			10,048
Less — accumulated depreciation and amortization		(2,160	)		(2,010	)

		7,950			8,038

Capital leases:
Flight equipment		2,094			2,096
Other property and equipment		51			51

		2,145			2,147
Less — accumulated amortization		(381	)		(345	)

		1,764			1,802

		9,714			9,840

Other assets:
Intangibles, less accumulated amortization (2010 — $424; 2009 — $408)		2,439			2,455
Restricted cash		210			213
Investments		95			88
Aircraft lease deposits		10			33
Other, net		964			950

		3,718			3,739

	$	19,952		$	18,684

See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited).

UAL Corporation and Subsidiary Companies

Condensed Statements of Consolidated Financial Position (Unaudited)

(In millions, except shares)


	March 31, 2010			December 31, 2009
Liabilities and Stockholders’ Deficit
Current liabilities:
Advance ticket sales	$	2,003		$	1,492
Mileage Plus deferred revenue		1,834			1,515
Accounts payable		887			803
Accrued salaries, wages and benefits		717			701
Long-term debt maturing within one year		579			545
Current obligations under capital leases		493			426
Fuel purchase commitments		307			275
Other		719			716

		7,539			6,473

Long-term debt		7,153			6,378
Long-term obligations under capital leases		1,079			1,194

Other liabilities and deferred credits:
Mileage Plus deferred revenue		2,339			2,720
Postretirement benefit liability		1,937			1,928
Advanced purchase of miles		1,157			1,157
Deferred income taxes		539			551
Other		1,096			1,094

		7,068			7,450

Commitments and contingent liabilities (Note 11)

Stockholders’ deficit:
Preferred stock		—			—
Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 167,479,464 and 167,610,620 shares at March 31, 2010 and December 31, 2009, respectively		2			2
Additional capital invested		3,139			3,136
Retained deficit		(6,038	)		(5,956	)
Stock held in treasury, at cost		(30	)		(28	)
Accumulated other comprehensive income		40			35

		(2,887	)		(2,811	)

	$	19,952		$	18,684

See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited).

UAL Corporation and Subsidiary Companies

Condensed Statements of Consolidated Cash Flows (Unaudited)

(In millions)


	Three Months Ended March 31,
	2010			2009
Cash flows provided (used) by operating activities:
Net loss	$	(82	)	$	(382	)
Adjustments to reconcile to net cash provided (used) by operating activities —
Increase in advance ticket sales		511			238
Depreciation and amortization		213			233
Net change in fuel derivative instruments and related pending settlements		(50	)		(286	)
Asset impairments and special items		18			119
Increase (decrease) in Mileage Plus deferred revenue and advanced purchase of miles		(17	)		92
Decrease in fuel hedge collateral		7			395
Proceeds from lease amendment		—			160
Other, net		(118	)		(143	)

		482			426

Cash flows provided (used) by investing activities:
Additions to property, equipment and deferred software		(51	)		(79	)
Advance deposits on aircraft		(42	)		—
Decrease in restricted cash		10			17
Proceeds from asset dispositions		4			33
Proceeds from asset sale-leasebacks		—			94
Other, net		3			—

		(76	)		65

Cash flows provided (used) by financing activities:
Proceeds from issuance of long-term debt		1,309			134
Repayment of debt		(1,204	)		(238	)
Principal payments under capital leases		(27	)		(48	)
Increase in deferred financing costs		(7	)		(3	)
Proceeds from issuance of common stock		—			63
Decrease in lease deposits		—			22
Other, net		(3	)		(3	)

		68			(73	)

Increase in cash and cash equivalents during the period		474			418
Cash and cash equivalents at beginning of the year		3,042			2,039

Cash and cash equivalents at end of the period	$	3,516		$	2,457

See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited).

United Air Lines, Inc. and Subsidiary Companies

Condensed Statements of Consolidated Operations (Unaudited)

(In millions)


	Three Months Ended March 31,
	2010			2009
Operating revenues:
Passenger — United Airlines	$	3,026		$	2,701
Passenger — Regional Affiliates		840			659
Cargo		157			124
Other operating revenues		220			210

		4,243			3,694


Operating expenses:
Aircraft fuel		958			799
Salaries and related costs		948			921
Regional Affiliates		815			671
Purchased services		287			287
Landing fees and other rent		228			221
Aircraft maintenance materials and outside repairs		222			225
Depreciation and amortization		213			233
Distribution expenses		137			118
Aircraft rent		81			90
Cost of third party sales		57			53
Impairments and special items (Note 13)		18			119
Other operating expenses		207			238

		4,171			3,975

Earnings (loss) from operations		72			(281	)

Other income (expense):
Interest expense		(173	)		(134	)
Interest income		1			7
Interest capitalized		2			3
Miscellaneous, net		24			(6	)

		(146	)		(130	)

Loss before income taxes and equity in earnings of affiliates		(74	)		(411	)
Income tax expense (benefit)		1			(29	)

Loss before equity in earnings of affiliates		(75	)		(382	)
Equity in earnings of affiliates, net of tax		1			1

Net loss	$	(74	)	$	(381	)

See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited).

United Air Lines, Inc. and Subsidiary Companies

Condensed Statements of Consolidated Financial Position (Unaudited)

(In millions, except shares)


	March 31, 2010			December 31, 2009
Assets
Current assets:
Cash and cash equivalents	$	3,510		$	3,036
Restricted cash		83			128
Receivables, less allowance for doubtful accounts (2010 — $7; 2009 — $14)		968			743
Senior Notes proceeds receivable (Note 12)		672			—
Aircraft lease deposits maturing within one year		302			293
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2010 — $60; 2009 — $61)		188			197
Receivables from related parties		100			73
Deferred income taxes		46			57
Prepaid fuel		307			275
Prepaid expenses and other		422			352

		6,598			5,154


Operating property and equipment:
Owned —
Flight equipment		8,307			8,303
Advances on flight equipment		51			—
Other property and equipment		1,752			1,745

		10,110			10,048
Less — accumulated depreciation and amortization		(2,160	)		(2,010	)

		7,950			8,038

Capital leases:
Flight equipment		2,094			2,096
Other property and equipment		51			51

		2,145			2,147
Less — accumulated amortization		(381	)		(345	)

		1,764			1,802

		9,714			9,840


Other assets:
Intangibles, less accumulated amortization (2010 — $424; 2009 — $408)		2,439			2,455
Restricted cash		209			212
Investments		95			88
Aircraft lease deposits		10			33
Other, net		960			943

		3,713			3,731

	$	20,025		$	18,725

See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited).

United Air Lines, Inc. and Subsidiary Companies

Condensed Statements of Consolidated Financial Position (Unaudited)

(In millions, except shares)


	March 31, 2010			December 31, 2009
Liabilities and Stockholder’s Deficit
Current liabilities:
Advance ticket sales	$	2,003		$	1,492
Mileage Plus deferred revenue		1,834			1,515
Accounts payable		891			806
Accrued salaries, wages and benefits		717			701
Long-term debt maturing within one year		579			544
Current obligations under capital leases		493			426
Fuel purchase commitments		307			275
Other		845			821

		7,669			6,580

Long-term debt		6,808			6,033
Long-term obligations under capital leases		1,079			1,194

Other liabilities and deferred credits:
Mileage Plus deferred revenue		2,339			2,720
Postretirement benefit liability		1,937			1,928
Advanced purchase of miles		1,157			1,157
Deferred income taxes		458			469
Other		1,095			1,096

		6,986			7,370

Commitments and contingent liabilities (Note 11)

Stockholder’s deficit:
Common stock at par, $5 par value; authorized 1,000 shares; outstanding 205 at both March 31, 2010 and December 31, 2009		—			—
Additional capital invested		3,403			3,401
Retained deficit		(5,961	)		(5,888	)
Accumulated other comprehensive income		41			35

		(2,517	)		(2,452	)

	$	20,025		$	18,725

See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited).

United Air Lines, Inc. and Subsidiary Companies

Condensed Statements of Consolidated Cash Flows (Unaudited)

(In millions)


	Three Months Ended March 31,
	2010			2009
Cash flows provided (used) by operating activities:
Net loss	$	(74	)	$	(381	)
Adjustments to reconcile to net cash provided (used) by operating activities—
Increase in advance ticket sales		511			238
Depreciation and amortization		213			233
Net change in fuel derivative instruments and related pending settlements		(50	)		(286	)
Asset impairments and special items		18			119
Increase (decrease) in Mileage Plus deferred revenue and advanced purchase of miles		(17	)		92
Decrease in fuel hedge collateral		7			395
Proceeds from lease amendment		—			160
Other, net		(129	)		(146	)

		479			424

Cash flows provided (used) by investing activities:
Additions to property, equipment and deferred software		(51	)		(79	)
Advance deposits on aircraft		(42	)		—
Decrease in restricted cash		10			17
Proceeds from asset dispositions		4			33
Proceeds from asset sale-leasebacks		—			94
Other, net		3			(1	)

		(76	)		64

Cash flows provided (used) by financing activities:
Proceeds from issuance of long-term debt		1,309			134
Repayment of debt		(1,203	)		(237	)
Principal payments under capital leases		(27	)		(48	)
Increase in deferred financing costs		(7	)		(3	)
Capital contribution from parent		—			62
Decrease in lease deposits		—			22
Other, net		(1	)		—

		71			(70	)

Increase in cash and cash equivalents during the period		474			418
Cash and cash equivalents at beginning of the year		3,036			2,033

Cash and cash equivalents at end of the period	$	3,510		$	2,451

See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited).

UAL Corporation and Subsidiary Companies and

United Air Lines, Inc. and Subsidiary Companies

Combined Notes to Condensed Consolidated Financial Statements (Unaudited)

(1) Basis of Presentation

UAL Corporation (together with its consolidated subsidiaries, “UAL”) is a holding company and its principal, wholly-owned subsidiary is United Air Lines, Inc. (together with its consolidated subsidiaries, “United”). We sometimes use the words “we,” “our,” “us,” and the “Company” in this Form 10-Q for disclosures that relate to both UAL and United.

This Quarterly Report on Form 10-Q is a combined report of UAL and United. Therefore, these Combined Notes to Condensed Consolidated Financial Statements (Unaudited) (the “Footnotes”) apply to both UAL and United, unless otherwise noted. As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL.

Interim Financial Statements. The UAL and United unaudited condensed consolidated financial statements (the “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 Company believes that the disclosures presented here are not misleading. The Financial Statements include all adjustments, including asset impairments, severance and normal recurring adjustments, which are considered necessary for a fair presentation of the Company’s financial position and results of operations. Certain historical amounts have been reclassified to conform to the current year’s presentation. These Financial Statements should be read together with the information included in the combined UAL and United Annual Report on Form 10-K for the year ended December 31, 2009 (the “2009 Annual Report”).

Restricted Cash. Restricted cash primarily includes cash collateral associated with workers’ compensation obligations, reserves for institutions that process credit card ticket sales and cash collateral received from fuel hedge counterparties. Industry practice includes classification of restricted cash flows as investing cash flows by some airlines and as operating cash flows by others. Cash flows related to restricted cash activity are classified as investing activities in the Financial Statements because the Company considers restricted cash arising from these activities similar to an investment. The Company’s cash flows associated with its restricted cash balances for the three months ended March 31, 2010 and 2009 were $10 million and $17 million, respectively.

(2) New Accounting Pronouncements, Changes in Estimate and Change in Accounting

In December 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which amends certain concepts related to consolidation of variable interest entities. Among other accounting and disclosure requirements, this guidance replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. The Company’s adoption of this guidance effective January 1, 2010 did not change its conclusions with regard to variable interest entities and did not have an impact on its Financial Statements.

In October 2009, the FASB issued ASU 2009-13, Multiple Deliverable Revenue Arrangements – A Consensus of the FASB Emerging Issues Task Force.” This update provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The Company has not determined the impact of adoption of this guidance on its Financial Statements. This guidance becomes effective January 1, 2011; however, early adoption is permitted.

During the first quarter of 2010, the Company evaluated the impact of its new aircraft purchase commitments on the remaining useful lives and residual values of its B747 and B767 aircraft, which are expected to be replaced by the new aircraft. Based on this evaluation, the Company prospectively adjusted aircraft retirement dates and residual values, resulting in an increase in depreciation expense of approximately $2 million, or $0.01 per share, in the three months ended March 31, 2010. The Company expects an increase in depreciation expense of $24 million, or $0.14 per share, for the year ended December 31, 2010.

The Company follows a deferred revenue accounting policy to record the fair value of its Mileage Plus frequent flyer obligation. The Company defers the portion of the sales proceeds of ticketed revenue on United and our alliance partners, as well as revenue associated with mileage sales to third parties, that represents the estimated air transportation fair value of the miles awarded. This deferred revenue is then recognized when the miles are redeemed. Some of these miles will never be redeemed by Mileage Plus members, and the Company historically recognized an estimate of revenue from the expected expired miles, which is referred to as breakage, over an estimated redemption period. The Company reviews its breakage estimates annually based upon the latest available information regarding mileage redemption and expiration patterns.

During the first quarter of 2010 the Company obtained additional historical data, previously unavailable, which has enabled the Company to refine its estimate of the amount of breakage in the mileage population. This new data enables us to better identify historical differences between certain of our mileage breakage estimates and the amounts that have actually been experienced. As a result, the Company increased its estimate of the number of frequent flyer miles expected to expire. In conjunction with this change in estimate, the Company also adopted a change to the accounting methodology used to recognize Mileage Plus breakage. Both the change in estimate and methodology have been applied prospectively effective January 1, 2010. The new accounting method recognizes breakage as a component of the weighted average redemption rate on actual redemptions as compared to our prior method which recognized a pool of breakage dollars over an estimated redemption period. We believe that this is a preferable change to the accounting methodology for breakage because breakage will be recognized as a component of the rate at which actual miles are redeemed.

This change in accounting resulted in approximately $64 million, or $0.38 per share, of additional passenger revenue recorded in the period ended March 31, 2010. The Company expects similar amounts will continue to be recognized in each of the remaining quarters of 2010.

(3) Company Operational Plans

The Company reduced the size of its workforce and permanently removed 100 aircraft from its Mainline fleet, including its entire B737 fleet and six B747 aircraft. This activity is related to the Company’s Mainline segment. The tables below summarize the accrual activity related to the Company’s implementation of its operational plans.


(In millions)	Severance March 31,						Leased Aircraft March 31,
	2010			2009			2010			2009
Balance at beginning of period	$	45		$	81		$	83		$	16
Payments		(14	)		(16	)		(18	)		9
Accruals		(2	)		(5	)		2			(3	)

Balance at end of period	$	29		$	60		$	67		$	22

The total expected future payments for leased aircraft that were removed from service are $73 million, payable through 2013. Actual lease payments may be less if the Company is able to negotiate early termination of any of its leases. The remaining severance obligations are expected to be paid through the first quarter of 2012.

(4) Per Share Amounts (UAL Only)

UAL basic per share amounts were computed by dividing loss available to common stockholders by the weighted-average number of shares of common stock outstanding. The table below represents the computation of UAL basic and diluted per share amounts and the number of securities that have been excluded from the computation of diluted per share amounts.


	Three Months Ended March 31,
(In millions, except per share)	2010			2009
Basic loss per share:
Loss available to common stockholders (a)	$	(82	)	$	(382	)

Basic weighted average shares outstanding		167.4			144.7

Loss per basic share	$	(0.49	)	$	(2.64	)


Diluted loss per share:
Loss available to common stockholders	$	(82	)	$	(382	)

Diluted weighted average shares outstanding		167.4			144.7

Loss per share, diluted	$	(0.49	)	$	(2.64	)


Potentially dilutive shares excluded from diluted per share amounts:
Stock options	6.2	4.3
Restricted shares (a)	0.4	0.8
4.5% Senior Limited-Subordination Convertible Notes due 2021	22.2	22.2
5% Senior Convertible Notes due 2021	3.4	3.4
6% Senior Convertible Notes due 2029	39.7	—

	71.9	30.7

(a)	Losses are not allocated to participating securities in the computation of loss per common share.

(5) Share-Based Compensation

On April 1, 2010, the Company made a general grant of 1,274,700 restricted stock units to certain of its management employees pursuant to the UAL 2008 Incentive Compensation Plan. These awards vest pro-rata over three years on the anniversary of the grant date. The terms of the awards do not provide for the acceleration of vesting upon retirement. The awards may be settled in cash or common shares at the discretion of the Human Resources Subcommittee of the UAL Board of Directors (the “Board of Directors”). The Company’s intent is to settle the restricted stock units granted on April 1, 2010 in shares.

(6) Income Taxes

For the three months ended March 31, 2010, UAL and United each recorded $1 million of tax expense related to other comprehensive income activity. In the 2010 and 2009 periods, the Company had an insignificant effective tax rate, as compared to the U.S. federal statutory rate of 35%, principally because the tax benefits of the Company’s net operating losses for the periods were almost completely offset by a valuation allowance. As of March 31, 2010 and December 31, 2009, UAL had a valuation allowance of $2,968 million and $3,060 million, respectively. As of March 31, 2010 and December 31, 2009, United had a valuation allowance of $2,882 million and $2,977 million, respectively. The Company’s valuation allowance decreased primarily due to a decrease of approximately $133 million in the deferred tax asset related to postretirement benefits resulting from the March 2010 enactment of the Patient Protection and Affordable Care Act (“HR 3590”) and the Health Care Education and Affordability Reconciliation Act (“HR 4872”) (collectively, the “Acts”).

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income, including the reversals of deferred tax liabilities during the periods in which those temporary differences will become deductible. The Company’s management assesses the realizability of its deferred tax assets and records a valuation allowance for the deferred tax assets when it is more likely than not that a portion, or all, of the deferred tax assets will not be realized. As a result, the Company has a valuation allowance against its deferred tax assets as of March 31, 2010 and December 31, 2009, to reflect management’s assessment regarding the realizability of those assets. The Company expects to continue to maintain a valuation allowance on deferred tax assets until there is sufficient positive evidence of future realization.

The Company’s ability to utilize its net operating loss (“NOL”) carry forward tax benefit may be impaired if the Company were to have a change of ownership within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended. To reduce the possibility of a potential adverse effect on the Company’s ability to utilize its NOL carry forward for federal income tax purposes, the Company’s restated certificate of incorporation contains a 5% ownership limitation (“5% Ownership Limitation”) applicable to all stockholders except the Pension Benefit Guaranty Corporation (“PBGC”). The 5% Ownership Limitation remains effective until February 1, 2011. The Board of Directors has approved an amendment to the UAL restated certificate of incorporation to extend the 5% Ownership Limitation through February 1, 2014. This amendment will be submitted to the Company’s stockholders for approval at the 2010 annual meeting of stockholders. The 5% Ownership Limitation prohibits (i) the acquisition by a single stockholder of shares representing 5% or more of the common stock of UAL and (ii) any acquisition or disposition of common stock by a stockholder that already owns 5% or more of UAL’s common stock, unless prior written approval is granted by the Board of Directors.

(7) Postretirement Plans

The Company provides certain health care benefits, primarily in the U.S., to retirees and eligible dependents, as well as certain life insurance benefits to certain retirees, as shown in the table below. The Company has reserved the right, subject to collective bargaining and other agreements, to modify or terminate the health care and life insurance benefits for both current and future retirees. The curtailment gain in the three month period ended March 31, 2009 is attributed to a reduction in future service for certain of the Company’s postretirement plans due to reductions in workforce. See Note 11, “Commitments, Contingent Liabilities and Uncertainties,” for information regarding contingencies related to the potential impact of the Acts on the Company’s Financial Statements.

The Company’s net periodic benefit cost includes the following components:


(In millions)	Three Months Ended March 31,
(In millions)	2010			2009
Service cost	$	8		$	7
Interest cost		29			29
Expected return on plan assets		(1	)		(1	)
Gain due to curtailment		—			(6	)
Amortization of unrecognized gain and prior service cost		(3	)		(5	)

Net periodic benefit costs	$	33		$	24

(8) Segment Information

The Company manages its business by two reportable segments: Mainline and Regional Affiliates (United Express operations). The table below includes segment information for UAL and United for the three months ended March 31, 2010 and 2009.


(In millions)	Three Months Ended March 31,
(In millions)	2010			2009
UAL segment information
Revenue:
Mainline	$	3,401		$	3,032
Regional Affiliates		840			659

Total	$	4,241		$	3,691

Segment earnings (loss):
Mainline	$	(88	)	$	(280	)
Regional Affiliates		25			(12	)
Impairments and special items (a)		(18	)		(119	)
Less: equity earnings (b)		(1	)		(1	)

Consolidated loss before income taxes and equity in earnings of affiliates	$	(82	)	$	(412	)


United segment information
Revenue:
Mainline	$	3,403		$	3,035
Regional Affiliates		840			659

Total	$	4,243		$	3,694

Segment earnings (loss):
Mainline	$	(80	)	$	(279	)
Regional Affiliates		25			(12	)
Impairments and special items (a)		(18	)		(119	)
Less: equity earnings (b)		(1	)		(1	)

Consolidated loss before income taxes and equity in earnings of affiliates	$	(74	)	$	(411	)

(a)	Asset impairment and special items are only applicable to the Mainline segment.

(b)	Equity earnings are part of the Mainline segment.

(9) Comprehensive Loss

For the three months ended March 31, 2010 and 2009, UAL’s total comprehensive loss was $77 million and $384 million, respectively. For the three months ended March 31, 2010 and 2009, United’s total comprehensive loss was $68 million and $383 million, respectively. Comprehensive loss in the 2010 and 2009 periods primarily includes the amortization of deferred net periodic pension and other postretirement benefit gains that were recorded as a component of accumulated other comprehensive income and changes in the fair value of the Company’s available-for-sale Enhanced Equipment Trust Certificate (“EETC”) investments.

(10) Fair Value Measurements and Derivative Instruments

Fair Value Information. A fair value hierarchy that prioritizes the inputs used to measure fair value has been established by GAAP. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:


Level 1		Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2		Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and other inputs that are observable or can be corroborated by observable market data.

Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The table below presents disclosures about fair value measurements of financial assets and financial liabilities recognized in the Company’s Financial Statements.


			Fair Value Measurements at Reporting Date Using
(In millions)	March 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets and Liabilities Measured at Fair Value on a Recurring Basis:
Financial assets:
Money market funds	$	3,474	$	3,474	$	—	$	—
Noncurrent EETC available-for-sale securities		58		—		—		58
Current fuel derivative purchased call options		117		—		117		—
Current fuel derivative swaps		62		—		62		—

Total financial assets	$	3,711	$	3,474	$	179	$	58


Financial liabilities:
Current fuel derivative instruments	$	2	$	—	$	2	$	—

Total financial liabilities	$	2	$	—	$	2	$	—


			Fair Value Measurements at Reporting Date Using
(In millions)	December 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets and Liabilities Measured at Fair Value on a Recurring Basis:
Financial assets:
Money market funds	$	3,061	$	3,061	$	—	$	—
Noncurrent EETC available-for-sale securities		51		—		—		51
Current fuel derivative purchased call options		94		—		94		—
Current fuel derivative swaps		44		—		44		—

Total financial assets	$	3,250	$	3,061	$	138	$	51


Financial liabilities:
Current fuel derivative instruments	$	5	$	—	$	5	$	—

Total financial liabilities	$	5	$	—	$	5	$	—

The Company records derivative instruments as a derivative asset or liability (on a gross basis) in its Financial Statements, and accordingly records any related collateral on a gross basis. The table below presents the fair value amounts of derivative assets and liabilities and location of amounts recognized in the Company’s Financial Statements.


	Asset Derivatives			Liability Derivatives
(In millions)	Balance Sheet Location	March 31, 2010		Balance Sheet Location	March 31, 2010
Derivatives not receiving hedge accounting treatment:

Fuel contracts due within one year	Receivables	$	179	Other current liabilities	$	2

Total derivatives		$	179		$	2


	Balance Sheet Location	December 31, 2009		Balance Sheet Location	December 31, 2009
Fuel contracts due within one year	Receivables	$	138	Other current liabilities	$	5

Total derivatives		$	138		$	5

Level 3 Financial Assets and Liabilities


	Available-for-Sale Securities
(In millions)	Three Months Ended March 31, 2010
Balance at beginning of year	$	51
Unrealized gains relating to instruments held at reporting date		9
Return of principal		(2	)

Balance at end of period	$	58

As of March 31, 2010, the Company’s EETC securities have an amortized cost basis of $71 million and unrealized losses of $13 million and represent a portion of the Company’s previously issued and outstanding EETC securities which were repurchased in open market transactions in 2007. As of March 31, 2010, these investments have been in an unrealized loss position for a period of over twelve months. However, United has not recognized an impairment loss in earnings related to these securities because United does not intend or expect to be required to sell the securities and expects to recover its entire amortized cost basis. United expects to collect the full principal balance and all related interest payments. All changes in the fair value of these investments have been classified within Accumulated other comprehensive income in the Financial Statements.

Derivative instruments and investments presented in the table above have the same fair value as their carrying value. The table below presents the carrying values and estimated fair values of the Company’s financial instruments not presented in the table above.


	March 31, 2010
(In millions)	Carrying Amount		Fair Value
UAL Long-tem debt (including current portion) (a)	$	7,732	$	8,102
Lease deposits		312		324

(a)	United’s book value and fair value of long-term debt, which exclude the UAL 6% Senior Convertible Notes due 2029, are $7,387 million and $7,264 million, respectively.

Fair value of the above financial instruments was determined as follows.


Description		Fair Value Methodology
Cash, Cash Equivalents, Restricted Cash, Accounts Receivable, Fuel Hedge Collateral Deposits, Accounts Payable and Other Accrued Liabilities		Money market funds are classified within cash and cash equivalents. The carrying amounts approximate fair value because of the short-term maturity of these assets.


Enhanced Equipment Trust Certificates		The EETCs are not actively traded on an exchange. Fair value is based on the trading prices of United’s EETCs or similar EETC instruments issued by other airlines. The Company uses internal models and observable and unobservable inputs to corroborate third party quotes. Because certain inputs are unobservable, the Company categorized inputs to the EETC fair value valuation as Level 3. Significant inputs to the valuation models include contractual terms, risk-free interest rates and credit spreads.

Fuel Derivative Instruments		Derivative contracts are privately negotiated contracts and are not exchange traded. Fair value measurements are estimated using option pricing models that employ observable and unobservable inputs. Inputs to the valuation models include contractual terms, market prices, yield curves, fuel price curves and measures of volatility, among others.

Long-Term Debt		The fair value is based on the quoted market prices for the same or similar issues, discounted cash flow models using appropriate market rates and a pricing model to value conversion rights in UAL’s convertible debt instruments. The Company’s credit risk was considered in estimating fair value.

Derivative Credit Risk and Fair Value

The Company is exposed to credit losses in the event of nonperformance by counterparties to its derivative instruments. The Company enters into master netting agreements with its derivative counterparties. While the Company records derivative instruments on a gross basis, the Company monitors its net derivative position with each counterparty to monitor credit risk. As of March 31, 2010, the Company had a net derivative asset of $179 million with certain of its fuel derivative counterparties; therefore, this amount represents the potential credit-risk loss if these counterparties fail to perform. The Company had a net derivative payable of $2 million with its remaining fuel counterparties at March 31, 2010.

Based on the fair value of the Company’s fuel derivative instruments, our counterparties may require the Company to post collateral when the price of the underlying commodity decreases and we may require our counterparties to provide us with collateral when the price of the underlying commodity increases. The Company was required to post $3 million of cash collateral with certain of its fuel derivative counterparties at March 31, 2010. The Company routinely reviews the credit risk associated with its counterparties which are holding the Company’s collateral and believes its collateral is fully recoverable from its counterparties as of March 31, 2010. The collateral is classified as an Other current asset in the accompanying Financial Statements.

The Company reviews the credit risk associated with its derivative counterparties and may require collateral based on contract terms from its counterparties in the event the Company has a significant net derivative asset with the counterparties. As of March 31, 2010, the Company received $12 million of cash collateral from certain of its fuel derivative counterparties, which the Company has classified as restricted cash.

The Company considered counterparty credit risk in determining the fair value of its financial instruments. The Company considered credit risk to have a minimal impact on fair value because varying amounts of collateral are either provided by or received from United’s hedging counterparties based on current market exposure and the credit-worthiness of the counterparties.

Derivative Instruments

The following section includes additional information regarding derivative instruments not already disclosed above.

Aircraft Fuel Hedges. The Company has a risk management strategy to hedge a portion of its price risk related to projected jet fuel requirements. Jet fuel is one of the Company’s most significant operating expenses. Jet fuel is a commodity with significant price volatility. Prices fluctuate based on market expectations of supply and demand, among other factors. Increases in fuel prices may adversely impact the Company’s financial performance, operating cash flows and financial position as greater amounts of cash may be required to obtain jet fuel for operations. The Company periodically enters into derivative contracts to mitigate the adverse financial impact of potential increases in the price of jet fuel. The Company does not enter into derivative instruments for non-risk management purposes. The Company’s fuel hedges were not accounted for as fair value or cash flow hedges under accounting principles related to hedge accounting during the three months ended March 31, 2010 or 2009. Effective April 1, 2010, the Company designated substantially all of its outstanding fuel derivative contracts, which settle in periods subsequent to June 30, 2010, as cash flow hedges under ASC Topic 815, Derivatives and Hedging.

The following table presents the fuel hedge gains (losses) recognized during the periods presented and their classification in the Financial Statements.


	Mainline Fuel						Nonoperating Income (Expense)					Total
	Three Months Ended March 31,						Three Months Ended March 31,					Three Months Ended March 31,
(In millions)	2010			2009			2010		2009			2010			2009
Fuel hedges (a):
Cash net gains (losses) on settled contracts	$	(15	)	$	(242	)	$	—	$	(81	)	$	(15	)	$	(323	)
Non-cash net mark-to-market gains (losses)		31			191			—		72			31			263

Total fuel hedge gains (losses)	$	16		$	(51	)	$	—	$	(9	)	$	16		$	(60	)

(a)	Fuel hedge gains (losses) are not allocated to Regional Affiliates expense.

As of March 31, 2010, the Company had hedged approximately 3% and 49% of its 2011 and remaining 2010, respectively, expected consolidated fuel consumption with a combination of swaps and purchased call options. The Company’s hedge position at March 31, 2010 consisted of a notional amount of 11 million barrels with purchased call options at a weighted-average crude oil equivalent strike price of $78 per barrel and 11 million barrels with swaps at a crude oil equivalent average price of $78 per barrel.

Fair Value of Nonfinancial Assets

The table below presents disclosures about fair value measurements of nonfinancial assets that were performed during the three month period ended March 31, 2009. The fair values as of the measurement dates are as follows:


(In millions)	Significant Unobservable Inputs (Level 3)		Total Gains/ (Losses) (Level 3)
Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis:
Tradenames	$	460	$	(110	)

The Company estimated the fair value of its tradenames using a discounted cash flow model. The key inputs to the discounted cash flow model were the Company’s historical and estimated future revenues, an assumed royalty rate and discount rate among others. While certain of these inputs are observable, significant judgment was required to select certain inputs from observable and unobservable market data. This fair value measurement was considered a Level 3 measurement. The decrease in fair value of the tradenames was due to lower estimated revenues resulting from the weak economic environment and the Company’s capacity reductions, among other factors. See Note 13, “Asset Impairments and Special Items,” for additional information related to this asset impairment.

(11) Commitments, Contingent Liabilities and Uncertainties

General Guarantees and Indemnifications. In the normal course of business, the Company enters into numerous real estate leasing and aircraft financing arrangements that have various guarantees included in the contracts. These guarantees are primarily in the form of indemnities. In both leasing and financing transactions, the Company typically indemnifies the lessors and any tax/financing parties against tort liabilities that arise out of the use, occupancy, operation or maintenance of the leased premises or financed aircraft. Currently, the Company believes that any future payments required under these guarantees or indemnities would be immaterial, as most tort liabilities and related indemnities are covered by insurance (subject to deductibles). Additionally, certain leased premises such as fueling stations or storage facilities include indemnities of such parties for any environmental liability that may arise out of or relate to the use of the leased premises.

Labor Negotiations. Approximately 82% of United’s employees are represented by various U.S. labor organizations. During the second quarter of 2009, the Company began negotiations with its labor groups as all of United’s domestic labor contracts became amendable during January 2010. Consistent with its contractual commitments, United served “Section 6” notices to all six of its labor unions during April 2009 to commence the collective bargaining process. United has filed for mediation assistance in conjunction with four of its six unions, the Air Line Pilots Association, the Association of Flight Attendants-Communication Workers of America, the International Association of Machinists and Aerospace Workers and the Professional Airline Flight Control Association. These filings were consistent with commitments contained in current labor contracts which provided that the parties would jointly invoke the

mediation services of the National Mediation Board in the event agreements had not been reached by August 1, 2009. While the labor contract with the International Brotherhood of Teamsters also contemplates filing for mediation, the parties have agreed to continue in direct negotiations. The current contract with the International Federation of Professional and Technical Engineers does not contemplate filing for mediation. The outcome of these negotiations may materially impact the Company’s future financial results. However, it is too early in the process to assess the timing or magnitude of the impact, if any.

Legal and Environmental Contingencies. The Company has certain contingencies resulting from litigation and claims incident to the ordinary course of business. Management believes, after considering a number of factors, including (but not limited to) the information currently available, the views of legal counsel, the nature of contingencies to which the Company is subject and prior experience, that the ultimate disposition of the litigation and claims will not materially affect the Company’s consolidated financial position or results of operations. When appropriate, the Company accrues for these matters based on its assessments of the likely outcomes of their eventual disposition. The amounts of these liabilities could increase or decrease in the near term, based on revisions to estimates relating to the various claims.

The Company anticipates that if ultimately found liable, its damages from claims arising from the events of September 11, 2001, could be significant; however, the Company believes that, under the Air Transportation Safety and System Stabilization Act of 2001, its liability will be limited to its insurance coverage.

The Company continues to analyze whether any potential liability may result from air cargo/passenger surcharge cartel investigations following the receipt of a Statement of Objections that the European Commission (the “Commission”) issued to 26 companies on December 18, 2007. The Statement of Objections sets out evidence related to the utilization of fuel and security surcharges and exchange of pricing information that the Commission views as supporting the conclusion that an illegal price-fixing cartel had been in operation in the air cargo transportation industry. United has provided written and oral responses vigorously disputing the Commission’s allegations against the Company. Nevertheless, United will continue to cooperate with the Commission’s ongoing investigation. Based on its evaluation of all information currently available, the Company has determined that no reserve for potential liability is required and will continue to defend itself against all allegations that it was aware of or participated in cartel activities. However, penalties for violation of European competition laws can be substantial and a finding that the Company engaged in improper activity could have a material adverse impact on its consolidated financial position and results of operations.

Contingent Senior Unsecured Notes. UAL is obligated to issue up to $500 million aggregate principal amount of 8% Contingent Senior Notes (the “8% Notes”) to the PBGC in up to eight equal tranches of $62.5 million (with no more than two tranches issued as a result of each issuance trigger event) upon the occurrence of certain financial triggering events. An issuance trigger event occurs when, among other things, the Company’s earning before income taxes, depreciation, amortization and rent (“EBITDAR”) exceeds $3.5 billion over the prior twelve months ending June 30 or December 31 of any applicable fiscal year, beginning with the fiscal year ended December 31, 2009 and ending with the fiscal year ended December 31, 2017. In certain circumstances, UAL common stock may be issued in lieu of issuance of the 8% Notes.

Commitments. During the first quarter of 2010, the Company executed definitive agreements to purchase 25 Boeing 787-8 Dreamliner aircraft and 25 Airbus A350 XWB aircraft, with future purchase rights for an additional 50 planes of each aircraft type, subject to availability of such aircraft at the time of exercise of the future purchase rights. The 25 Boeing 787-8 Dreamliner aircraft and 25 Airbus A350 XWB aircraft are expected to be delivered between 2016 and 2019. As of March 31, 2010, the Company had commitments of $7.9 billion that would require the payment of an estimated $192 million in the last nine months of 2010, $211 million in 2011, $90 million in 2012, $71 million in 2013, $99 million in 2014 and $7.2 billion thereafter. These capital purchase commitments are primarily for the acquisition of the aforementioned aircraft, aircraft enhancements, information technology assets and the relocation of the Company’s operations center.

The Company has secured considerable backstop financing commitments from its aircraft and engine manufacturers, subject to certain customary conditions. The backstop financing commitments, as well as the Company’s deferral and substitution rights for the aircraft, will allow the Company to manage changing market conditions throughout the aircraft delivery cycle. There is no guarantee that we will be able to obtain any or all of the backstop financing for the aircraft and engines when necessary.

Municipal Bond Guarantees. The Company has guaranteed interest and principal payments on $270 million of the Denver International Airport bonds, which are due in 2032 unless the Company elects not to extend its lease in which case the bonds are due in 2023. The bonds were issued in two tranches—approximately $170 million aggregate principal amount of 5.25% discount bonds and $100 million aggregate principal amount of 5.75% premium bonds. The outstanding bonds and related guarantee are not recorded in the Company’s Financial Statements at March 31, 2010 or December 31, 2009. The related lease expense is recorded on a straight-line basis resulting in ratable accrual of the final $270 million lease obligation over the expected lease term through 2032.

Other Contingencies.

The Company is party to a multiyear services agreement, and is currently in discussions with the counterparty to amend or restructure certain performance obligations. In the event that these discussions are not successful, the counterparty may assert claims for damages, and the Company could incur other costs, which in the aggregate could exceed $100 million. The ultimate outcome of these discussions and the exact amount of the damages and costs, if any, to the Company cannot be predicted with certainty at this time.

In March 2010, the President signed into law comprehensive health care reform legislation under the Acts. The Acts contain provisions which could impact the Company’s accounting for retiree medical benefits in future periods. Other than the reduction of deferred tax assets for postretirement benefits, which was recorded in the first quarter of 2010, the extent of that impact, if any, cannot be determined until regulations are promulgated under the Acts and additional interpretations of the Acts become available. The Company will continue to assess the accounting implications of the Acts as related regulations and interpretations of the Acts become available. Based on the analysis to date of the provisions in the Acts, a re-measurement of the Company’s retiree plan liabilities is not required at this time. In addition, the Company may consider plan amendments in future periods that may have accounting implications.

(12) Debt Obligations and Other Financing Transactions

As of March 31, 2010 and December 31, 2009, assets with a net carrying value of $8.8 billion and $8.0 billion, principally aircraft and related spare parts, route authorities and Mileage Plus intangible assets were pledged under various loan and other agreements.

Credit Facilities

The Company has a $255 million revolving loan commitment available under Tranche A of its Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement, dated as of February 2, 2007 (the “Amended Credit Facility”). The Company used $255 million and $254 million of the Tranche A commitment capacity for letters of credit at March 31, 2010 and December 31, 2009, respectively. In addition, under a separate agreement, the Company had $17 million and $20 million of letters of credit issued as of March 31, 2010 and December 31, 2009, respectively. Through a separate arrangement, the Company has an additional $150 million available under an unused credit facility.

Financing Arrangements

Below is a summary of financing transactions that occurred during the three months ended March 31, 2010. These transactions are more fully described in the Company’s 2009 Annual Report.

In January 2010, United issued the remaining $612 million of equipment notes related to the Series 2009-1 EETCs of which $568 million was used to complete the pre-payment of the remaining principal of the equipment notes issued in connection with the Series 2001-1 EETCs and the remaining proceeds of $44 million, before expenses and accrued interest due on the equipment notes related to the Series 2001-1 EETCs, provided the Company with incremental liquidity. The Company also received $21 million of proceeds from the recent distribution of the Series 2001-1 EETC trust assets upon repayment of the note obligations. During the three months ended March 31, 2010, the Company recorded a gain of $21 million upon receipt of these proceeds.

In January 2010, United also issued the remaining $696 million of equipment notes related to the Series 2009-2 EETCs of which $493 million was used to pre-pay the remaining principal of the equipment notes issued in connection with the Series 2000-2 EETCs and the remaining proceeds of $203 million, before expenses and accrued interest due on the equipment notes related to the Series 2000-2 EETCs, provided the Company with incremental liquidity.

The EETC repayments discussed above, combined with the portion of the Series 2009-1 and 2009-2 issued in 2009, reduced debt principal payments in 2010 and 2011 by approximately $440 million and $275 million, respectively. The equipment notes related to the Series 2009-1 and 2009-2 EETCs are secured by aircraft and have stated interest rates ranging from 9.75% to 12.0%.

In January 2010, the Company also issued $500 million aggregate principal amount of 9.875% Senior Secured Notes due 2013 and $200 million aggregate principal amount of 12.0% Senior Second Lien Notes due 2013 (together, the “Senior Notes”). The Senior Notes are secured by United’s route authority to operate between the United States and Japan and beyond Japan to points in other countries, certain airport takeoff and landing slots and airport gate leaseholds utilized in connection with these routes. During the

three months ended March 31, 2010, the Company pledged certain aircraft, engines, flight simulators and certain domestic slots to secure its obligations under the Amended Credit Facility and to allow the release of the collateral securing the Company’s obligations under the Senior Notes. The Company recorded the Senior Notes proceeds as an other receivable pending perfection of the collateral to secure the Company’s obligations under the Senior Notes. The receivable from the Senior Notes issuances, net of discounts and fees, is separately presented in the Company’s Financial Statements as of March 31, 2010. During April 2010, the Company received $728 million upon perfection of the collateral securing the Company’s obligations under the Senior Notes and satisfaction of certain other customary conditions. These proceeds are net of $28 million of issuance discount and fees and include the return of $56 million that had been placed in escrow by the Company pending completion of the financing. The escrow deposit is included within Prepaid expenses and other in the Company’s Financial Statements.

Amended Credit Facility Covenants

The Company’s Amended Credit Facility requires compliance with certain covenants, including a fixed charge coverage ratio. The required fixed charge coverage ratio was 1.3 to 1.0 for the twelve month period ended March 31, 2010, increasing to 1.4 to 1.0 and 1.5 to 1.0 for the twelve months ending June 2010 and September 2010, respectively. The Company was in compliance with this ratio and all of its Amended Credit Facility covenants as of March 31, 2010.

Although the Company was in compliance with all required financial covenants under the Amended Credit Facility as of March 31, 2010, continued compliance depends on many factors, some of which are beyond the Company’s control, including the overall industry revenue environment and the level of fuel costs. There are no assurances that the Company will continue to comply with its debt covenants under the Amended Credit Facility. Failure to comply with applicable covenants in any reporting period would result in a default under the Amended Credit Facility, which could have a material adverse impact on the Company depending on the Company’s ability to obtain a waiver of, or otherwise mitigate, the impact of the default.

Additional details on the Company’s Amended Credit Facility covenants are available in the 2009 Annual Report.

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 either require, or have the right to require, that United maintain a reserve (“reserve”) equal to a portion of advance ticket sales that have been processed by that financial institution, but for which the Company has not yet provided the air transportation (referred to as “relevant advance ticket sales”).

The Company’s credit card processing agreement with Paymentech and JPMorgan Chase Bank, N.A. contains a cash reserve requirement. The amount of any such cash reserve will be determined based on the amount of unrestricted cash held by the Company as defined under the Amended Credit Facility. If the Company’s unrestricted cash balance is at or more than $2.5 billion as of any calendar month-end measurement date, its required reserve will remain at $25 million. However, if the Company’s unrestricted cash is less than $2.5 billion, its required reserve will increase to a percentage of relevant advance ticket sales. Based on the Company’s March 31, 2010 unrestricted cash balance, the Company was not required to provide cash collateral above the current $25 million reserve balance.

Under the credit card processing agreement with American Express, the Company will be required to provide reserves based primarily on its unrestricted cash balance and net current exposure as of any calendar month-end measurement date. The agreement with American Express permits the Company to provide certain replacement collateral in lieu of cash collateral, as long as the Company’s unrestricted cash is above $1.35 billion. Based on the Company’s unrestricted cash balance at March 31, 2010, the Company was not required to provide any reserves under this agreement.

Additional details on the Company’s credit card processing agreements are available in the 2009 Annual Report.

(13) Asset Impairments and Special Items

In the three months ended March 31, 2010, the Company recorded an asset impairment charge of $17 million which relates to the decrease in value of aircraft related assets.

As of February 28, 2009, the Company performed an interim impairment test of its tradenames due to events and changes in circumstances during the first quarter of 2009 that indicated an impairment might have occurred. The primary factor deemed by management to have constituted a potential impairment triggering event was a significant decline in unit revenues experienced in the first quarter of 2009.

The Company utilized appropriate valuation techniques, as described in Note 10, “Fair Value Measurements and Derivative Instruments,” to estimate the fair value of tradenames as of February 28, 2009, and compared those estimates to related carrying values. During the three months ended March 31, 2009, the Company recorded an impairment charge of $110 million to decrease the carrying value of the tradenames to estimated fair value.

Due to extreme fuel price volatility, the uncertain economic environment, including credit market conditions, as well as other uncertainties, the Company can provide no assurance that a material impairment of its tangible or intangible assets will not occur in a future period. The Company will continue to monitor circumstances and events in future periods to determine whether additional asset impairment testing is warranted.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

UAL Corporation (together with its consolidated subsidiaries, “UAL”), is a holding company and its principal, wholly-owned subsidiary is United Air Lines, Inc. (together with its consolidated subsidiaries, “United”). We sometimes use the words “we,” “our,” “us” and the “Company” in this Form 10-Q for disclosures that relate to both UAL and United. United’s operations consist primarily of the transportation of persons, property and mail throughout the U.S. and abroad. United provides these services through full-sized jet aircraft (which we refer to as its “Mainline” operations), as well as smaller aircraft in its regional operations conducted under contract by “United Express^®” carriers.

United is one of the largest passenger airlines in the world. The Company offers approximately 3,400 flights a day to more than 230 destinations through its Mainline and United Express services, based on its flight schedule from April 2010 to April 2011. United offers approximately 1,100 average daily Mainline departures to approximately 120 destinations in 30 countries and two U.S. territories. United provides regional service, connecting primarily via United’s domestic hubs, through marketing relationships with United Express carriers, which provide approximately 2,300 average daily departures to approximately 180 destinations. United serves virtually every major market around the world, either directly or through its participation in the Star Alliance^®, the world’s largest airline network.

This Quarterly Report on Form 10-Q is a combined report of UAL and United including their respective unaudited condensed consolidated financial statements (the “Financial Statements”). As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL as included within the Combined Notes to Condensed Consolidated Financial Statements (Unaudited) (the “Footnotes”), 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. Therefore, the following qualitative discussion is applicable to both UAL and United, unless otherwise noted. Any significant differences between UAL and United results are separately disclosed and explained. United meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format allowed under that General Instruction.

Recent Developments.

•

During the first quarter of 2010, the Company finalized its aircraft order with The Boeing Company and Airbus S.A.S. through the execution of definitive written agreements. The aircraft order for 25 Boeing 787-8 Dreamliner aircraft and 25 Airbus A350 XWB aircraft, with future purchase rights for an additional 50 planes of each aircraft type, are intended to replace the Company’s international fleet of Boeing 747s and 767s; and

•

During the first quarter of 2010, the Company commenced the reconfiguration of its international B777 fleet with new first and business class premium seats, entertainment systems and other product enhancements. This international premium travel experience features, among other improvements, 180-degree, lie flat beds in first and business class.

Summary of Financial Results. The air travel business is subject to seasonal fluctuations. Historically, the Company’s results of operations are better in the second and third quarters as compared to the first and fourth quarters of each year, since our first and fourth quarter results normally reflect weaker travel demand. In addition, the Company’s results of operations may be impacted by fuel price volatility, adverse weather, air traffic control delays, economic conditions and other factors in any period.

The table below highlights significant changes in the Company’s results in the three months ended March 31, 2010 as compared to the year-ago period. See Results of Operations, below, for additional information regarding year-over-year changes in our financial results. Operating revenues improved in 2010 as compared to 2009 as the Company began to benefit from improved economic conditions, including an increase in business travel and premium service demand. In the 2010 period, consolidated yield increased 12% and consolidated traffic increased 3% despite a similar decrease in capacity, as compared to the year-ago period. The revenue benefit was partially offset by increased consolidated fuel expense, which was primarily due to an increase in market prices for fuel. Impairment charges were more significant in the 2009 period due to an impairment of the Company’s tradenames.


	Three Months Ended March 31,
							Favorable (unfavorable)
(In millions)	2010			2009			$ Change			% Change
UAL Information
Total revenues	$	4,241		$	3,691		$	550		14.9
Mainline fuel purchase cost		974			748			(226	)	(30.2	)
Operating non-cash fuel hedge gains		(31	)		(191	)		(160	)	(83.8	)
Operating cash fuel hedge losses		15			242			227		93.8
Regional Affiliates fuel expense (a)		249			164			(85	)	(51.8	)
Asset impairments, special items and other charges (see below)		20			104			84		80.8
Other operating expenses		2,945			2,906			(39	)	(1.3	)
Nonoperating non-cash fuel hedge gains		—			(72	)		(72	)	(100.0	)
Nonoperating cash fuel hedge losses		—			81			81		100.0
Other nonoperating expense (b)		150			120			(30	)	(25.0	)
Income tax expense (benefit)		1			(29	)		(30	)	—

Net loss	$	(82	)	$	(382	)	$	300		78.5

United Net loss	$	(74	)	$	(381	)	$	307		80.6

(a)	Regional Affiliates’ fuel expense is classified as part of Regional Affiliates expense in the Company’s Financial Statements.

(b)	Includes equity in earnings of affiliates.

Details of significant items impacting the Company’s results include:


	Three Months Ended March 31,
(In millions)	2010			2009			Income statement classification
Intangible asset impairments	$	—		$	110
Aircraft and spare parts impairments		17			—

		17			110
Lease termination and other special items		1			9

Total asset impairments and special items		18			119		Impairments and special items

Severance		(2	)		(5	)	Salaries and related costs
Employee benefit obligation adjustment		—			(32	)	Salaries and related costs
Accelerated depreciation related to early asset retirement		4			22		Depreciation and amortization

Severance and other charges		2			(15	)


Total asset impairments, special items and other charges		20			104


Net operating non-cash fuel hedge gains		(31	)		(191	)	Aircraft fuel
Net nonoperating non-cash fuel hedge gains		—			(72	)	Miscellaneous, net

Total non-cash fuel hedge gains		(31	)		(263	)

Income tax expense (benefit) on impairments and other charges		1			(30	)	Income tax expense (benefit)

Impairments and other charges (net of tax) and non-cash fuel hedge gains/losses	$	(10	)	$	(189	)

The table below shows Mainline fuel and non-fuel unit costs in the first quarter of 2010 as compared to the year-ago period. Fuel costs are mostly uncontrollable by the Company.


	Three Months Ended March 31,				2010 expense per ASM (in cents)	2009 expense per ASM (in cents)	% change per ASM
(In millions, except unit costs)	2010		2009
Mainline ASMs		28,161		29,991

Mainline fuel expense	$	958	$	799	3.40	2.66	27.8
Asset impairments, special items and other charges (see above)		20		104	0.07	0.35	(80.0	)
Other operating expenses		2,379		2,399	8.45	8.00	5.6

Total Mainline operating expense		3,357		3,302	11.92	11.01	8.3
Regional Affiliates expense		815		671

Consolidated operating expense	$	4,172	$	3,973

Liquidity. The following table provides a summary of UAL’s total cash and cash equivalents and restricted cash at March 31, 2010 and December 31, 2009 and net cash provided (used) by operating, financing and investing activities for the three months ended March 31, 2010 and 2009. In April 2010, the Company received net cash of $728 million from the Senior Notes financing discussed below under Liquidity and Capital Resources.


(In millions)	As of March 31, 2010			As of December 31, 2009
Cash and cash equivalents	$	3,516		$	3,042
Restricted cash		293			341

Total cash	$	3,809		$	3,383


	Three Months Ended March 31,
	2010			2009
Net cash provided by operating activities	$	482		$	426
Net cash provided (used) by investing activities		(76	)		65
Net cash provided (used) by financing activities		68			(73	)

UAL’s variation in cash flows from operations in the 2010 period as compared to the prior year was relatively consistent with its results of operations, as further described below under Results of Operations. The improvement in operating cash flows was primarily due to a year-over-year increase in cash from increased passenger and cargo services. Cash operating expenses, including combined cash expenditures for fuel purchases and hedge settlements, were relatively consistent on a year-over-year basis. The 2009 operating cash flows included the receipt of $160 million in 2009 related to the future relocation of its Chicago O’Hare International Airport (“O’Hare”) cargo operations. This cash receipt was classified as an operating cash inflow.

The Company expects its cash flows from operations and its available capital to be sufficient to meet its operating expenses, lease obligations and debt service requirements for the near term; however, the Company’s future liquidity could be impacted by changes in fuel prices, fuel hedge collateral requirements, inability to adequately increase revenues to offset high fuel prices, declines in revenue from reduced demand, failure to meet future debt covenants and other factors. See Liquidity and Capital Resources and Item 3. Quantitative and Qualitative Disclosures about Market Risk, below, for a discussion of these factors and the Company’s significant operating, investing and financing cash flows.

Capital Commitments. During the first quarter of 2010, the Company executed definitive agreements to purchase 25 Boeing 787-8 Dreamliner aircraft and 25 Airbus A350 XWB aircraft, with future purchase rights for an additional 50 planes of each aircraft type, subject to availability of such aircraft at the time of exercise of the future purchase rights. The 25 Boeing 787-8 Dreamliner aircraft and 25 Airbus A350 XWB aircraft are expected to be delivered between 2016 and 2019. As of March 31, 2010, the Company had commitments of $7.9 billion that would require the payment of an estimated $192 million in the last nine months of 2010, $211 million in 2011, $90 million in 2012, $71 million in 2013, $99 million in 2014 and $7.2 billion thereafter. These capital purchase commitments are primarily for the acquisition of the aforementioned aircraft, aircraft enhancements, information technology assets and the relocation of the Company’s operations center.

Contingencies. The following discussion provides an overview of the status of contingencies identified by the Company. For further details on these matters, see Note 11, “Commitments, Contingent Liabilities and Uncertainties,” in the Footnotes.

Labor Negotiations. Approximately 82% of United’s employees are represented by various U.S. labor organizations. During the second quarter of 2009, the Company began negotiations with its labor groups as all of United’s domestic labor contracts became amendable during January 2010. Consistent with its contractual commitments, United served “Section 6” notices to all six of its labor unions during April 2009 to commence the collective bargaining process. United has filed for mediation assistance in conjunction with four of its six unions: the Air Line Pilots Association, the Association of Flight Attendants-Communication Workers of America, the International Association of Machinists and Aerospace Workers and the Professional Airline Flight Control Association. These filings were consistent with commitments contained in current labor contracts which provided that the parties would jointly invoke the mediation services of the National Mediation Board in the event agreements had not been reached by August 1, 2009. While the labor contract with the International Brotherhood of Teamsters also contemplates filing for mediation, the parties have agreed to continue in direct negotiations. The current contract with the International Federation of Professional and Technical Engineers does not contemplate filing for mediation. The outcome of these negotiations may materially impact the Company’s future financial results. However, it is too early in the process to assess the timing or magnitude of the impact, if any.

Municipal Bond Obligations and Off-Balance Sheet Financing. United has guaranteed $270 million of the City and County of Denver, Colorado Special Facilities Airport Revenue Bonds (United Air Lines Project) Series 2007A. These bonds are callable by United. The outstanding bonds and related guarantee are not recorded in the Company’s Financial Statements. However, the related lease agreement is accounted for on a straight-line basis resulting in a ratable accrual of the final $270 million payment over the expected lease term through 2032.

Other Contingencies.

In March 2010, the President signed into law comprehensive health care reform legislation under the Patient Protection and Affordable Care Act (“HR 3590”) and the Health Care Education and Affordability Reconciliation Act (“HR 4872”), (collectively, the “Acts”). The Acts contain provisions which could impact the Company’s accounting for retiree medical benefits in future periods. Other than the reduction of deferred tax assets for postretirement benefits, which was recorded in the first quarter of 2010, the extent of that impact, if any, cannot be determined until regulations are promulgated under the Acts and additional interpretations of the Acts become available. The Company will continue to assess the accounting implications of the Acts as related regulations and interpretations of the Acts become available. Based on the analysis to date of the provisions in the Acts, a re-measurement of the Company’s retiree plan liabilities is not required at this time. In addition, the Company may consider plan amendments in future periods that may have accounting implications.

Legal and Environmental. The Company has certain contingencies resulting from litigation and claims incident to the ordinary course of business. Management believes, after considering a number of factors, including (but not limited to) the information currently available, the views of legal counsel, the nature of contingencies to which the Company is subject and prior experience, that the ultimate disposition of the litigation and claims will not materially affect the Company’s consolidated financial position or results of operations. When appropriate, the Company accrues for these matters based on its assessments of the likely outcomes of their eventual disposition. The amounts of these liabilities could increase or decrease in the near term, based on revisions to estimates relating to the various claims.

The Company continues to analyze whether any potential liability may result from air cargo/passenger surcharge cartel investigations following the receipt of a Statement of Objections that the Commission issued to 26 companies on December 18, 2007. The Statement of Objections sets out evidence related to the utilization of fuel and security surcharges and exchange of pricing information that the Commission views as supporting the conclusion that an illegal price-fixing cartel had been in operation in the air cargo transportation industry. United has provided written and oral responses vigorously disputing the Commission’s allegations against the Company. Nevertheless, United will continue to cooperate with the Commission’s ongoing investigation. Based on its evaluation of all information currently available, the Company has determined that no reserve for potential liability is required and will continue to defend itself against all allegations that it was aware of or participated in cartel activities. However, penalties for violation of European competition laws can be substantial and a finding that the Company engaged in improper activity could have a material adverse impact on its consolidated financial position and results of operations.

Many aspects of United’s operations are subject to increasingly stringent federal, state and local laws protecting the environment. Future environmental regulatory developments, such as in regard to climate change in the U.S. and abroad, could adversely affect operations and increase operating costs in the airline industry. Some climate change laws and regulations that have gone into effect apply to United, including environmental taxes for certain international flights (including the United Kingdom’s Air Passenger Duty), limited greenhouse gas reporting requirements and land-based planning laws which could apply to airports and could affect airlines in certain circumstances. Other areas of developing regulations include the State of California rule-makings regarding air emissions from ground support equipment and federal rule-makings concerning the discharge of deicing fluid and the regulation of aircraft drinking water supplies. In addition, a 2009 EU Directive required EU member countries to enact legislation that would include aviation within the EU’s existing carbon emissions trading scheme, effective in 2012. The legality of applying such a scheme to non-EU airlines has been widely questioned. In December 2009, the Air Transportation Association, joined by United, Continental and American Airlines, filed a lawsuit in the United Kingdom challenging regulations that transpose into UK law the EU emissions trading scheme as applied to U.S. carriers. In addition, non-EU countries are considering filing a formal challenge before the United Nations’ International Civil Aviation Organization with respect to the EU’s inclusion of non-EU carriers. It is not clear whether the emissions trading scheme will withstand such challenges. If the scheme is found to be valid, however, it could significantly increase the costs of carriers operating in the EU (by requiring the purchase of carbon credits), although the precise cost to United is difficult to calculate with any certainty due to a number of variables, and will depend, among other things, on United’s carbon emissions from flights to and from the EU and the price of carbon credits. Actions may be taken in the future by the U.S. government, state governments within the U.S., foreign governments, the International Civil Aviation Organization or by signatory countries through a new global climate change treaty to regulate the emission of greenhouse gases by the aviation industry. The precise nature of any such requirements and their applicability to United are difficult to predict, but the impact to the Company and the aviation industry would likely be adverse and could be significant, including the potential for increased fuel costs, carbon taxes or fees, or a requirement to purchase carbon credits.

Results of Operations

United’s operating revenues and operating expenses comprise nearly 100% of UAL’s revenues and operating expenses. Therefore, the following discussion is applicable to both UAL and United, unless otherwise noted. There were no significant differences between UAL and United results in the 2010 or 2009 periods presented herein.

First Quarter 2010 Compared to First Quarter 2009

As highlighted in the summary of financial results table in Overview above, UAL’s net loss of $82 million for the three months ended March 31, 2010 was a significant improvement as compared to a net loss of $382 million in the year-ago period. The most significant changes were higher revenues in the first quarter of 2010 due to an improvement in the global economy and lower impairment charges in the 2010 period as compared to the year-ago period.

Operating Revenues. The table below illustrates the year-over-year change in UAL and United operating revenues.


	Three Months Ended March 31,				$ Change		% Change
(In millions)	2010		2009		$ Change		% Change
Passenger—United Airlines	$	3,026	$	2,701	$	325	12.0
Passenger—Regional Affiliates		840		659		181	27.5
Cargo		157		124		33	26.6
Other operating revenues		218		207		11	5.3

UAL total	$	4,241	$	3,691	$	550	14.9

United total	$	4,243	$	3,694	$	549	14.9

The table below presents selected UAL and United passenger revenues and operating data from our Mainline segment, broken out by geographic region and from our Regional Affiliates segment (United Express operations), expressed as first quarter period-to-period changes.


	Domestic			Pacific			Atlantic			Latin			Total Mainline			Regional Affiliates			Consolidated
Increase (decrease) from 2009:
Passenger revenues (in millions) (a)	$	108		$	97		$	107		$	13		$	325		$	181		$	506
Passenger revenues		6.7	%		17.9	%		24.5	%		12.6	%		12.0	%		27.5	%		15.1	%
Available seat miles (“ASMs”) (b)		(5.5	)%		(9.9	)%		(1.2	)%		(13.0	)%		(6.1	)%		17.3	%		(3.3	)%
Revenue passenger miles (“RPMs”) (c)		(2.6	)%		4.1	%		6.4	%		(5.9	)%		0.1	%		22.2	%		2.6	%
Passenger revenues per ASM (“PRASM”)		12.9	%		30.8	%		25.9	%		29.4	%		19.3	%		8.7	%		19.0	%
Yield (d)		9.5	%		13.5	%		17.0	%		19.5	%		11.9	%		4.3	%		12.2	%
Passenger load factor (points) (e)		2.4 pts.			11.4 pts.			5.5 pts.			6.2 pts.			5.0 pts.			3.0 pts.			4.7 pts.

(a)

Amounts include $52 million and $12 million of additional revenue within the Mainline and Regional Affiliates segments, respectively, related to the impact of the Company’s change in estimate of the number of frequent flier miles expected to expire. Within the Mainline segment, the $52 million benefit from the change in estimate was allocated to the four geographic regions based on revenue.

(b)	ASMs are the number of seats available for passengers multiplied by the number of miles those seats are flown.

(c)	RPMs are the number of scheduled miles flown by revenue passengers.

(d)	Yield is a measure of the average price paid per passenger mile, which is calculated by dividing passenger revenues by RPMs.

(e)	Passenger load factor is derived by dividing RPMs by ASMs.

Consolidated passenger revenues in the first quarter of 2010 increased $506 million compared to the prior year driven by a 3% increase in traffic on a 3% decrease in capacity as a result of strengthening economic conditions. The traffic increase was driven by the return of business and premium cabin travelers whose higher ticket prices increased average yields by 12%. The international

regions in particular had the largest increases in demand with unit revenues increasing 29% compared to the year-ago period on a 7% decrease in capacity. Premium cabin passengers account for a large share of international revenues and the increase in their volumes has a highly leveraged benefit on the international regions. China and London were two geographic areas with a large increase in unit revenues. In addition, the Company recorded $64 million of additional revenue due to changes in its estimate and methodology related to frequent flyer program accounting as noted in the table, above, and in Critical Accounting Policies, below.

Regional Affiliates revenues increased 28% on 17% higher capacity as some Mainline domestic capacity was moved to United Express during 2009 to better match capacity with market demand. Consolidated domestic revenues increased 13% on a 1% decrease in capacity, resulting in a passenger unit revenue increase of 14%. Consolidated domestic passenger unit revenues also benefited from the return of corporate customers.

Cargo revenues increased by $33 million, or 27%, in the first quarter of 2010 as compared to 2009. The key driver was a rebound in traffic and demand as the economy improved compared to the year-ago period. The Company’s freight ton miles have improved by 45% as compared to the first quarter of 2009, while mail ton miles dropped approximately 8%, for a composite cargo traffic gain of 37%. Strong freight demand coupled with reduced industry capacity has enabled the Company to make numerous tactical rate increases and yield improvements from 2009. However, freight yields for the first quarter of 2010 were 2% below the prior year, partly due to lower fuel surcharges in the current year. The mail yield decline, driven by U.S. international mail deregulation, is more significant at approximately 24% below the first quarter 2009. On a composite basis, cargo yield in the first quarter of 2010 decreased approximately 7% as compared to the prior year.

Operating Expenses. As discussed in Operating Revenues above, Mainline capacity decreased 6% and Regional Affiliates capacity increased 17% in the first quarter of 2010 as compared to the year-ago period. The Mainline capacity reductions had a favorable impact on certain of the Company’s Mainline operating expenses, as further described below. Other significant fluctuations in the Company’s operating expenses are also discussed below. The table below includes data related to UAL and United operating expenses.


	Three Months Ended March 31,				$ Change			% Change
(In millions)	2010		2009		$ Change			% Change
Aircraft fuel	$	958	$	799	$	159		19.9
Salaries and related costs		948		921		27		2.9
Regional Affiliates		815		671		144		21.5
Purchased services		287		287		—		—
Landing fees and other rent		228		221		7		3.2
Aircraft maintenance materials and outside repairs		222		225		(3	)	(1.3	)
Depreciation and amortization		213		233		(20	)	(8.6	)
Distribution expenses		137		118		19		16.1
Aircraft rent		81		88		(7	)	(8.0	)
Cost of third party sales		57		53		4		7.5
Impairments and special items		18		119		(101	)	(84.9	)
Other operating expenses		208		238		(30	)	(12.6	)

UAL total	$	4,172	$	3,973	$	199		5.0

United total	$	4,171	$	3,975	$	196		4.9

Mainline aircraft fuel expense was relatively consistent year-over-year as lower fuel hedge settlements and consumption in 2010 were offset by increased market prices for jet fuel. However, Regional Affiliates fuel expense increased approximately 52% due to a 13% increase in consumption and a 34% increase in the average fuel price. The table below presents the significant changes in Mainline and Regional Affiliates aircraft fuel cost per gallon in the three months ended March 31, 2010 as compared to the year-ago period. See Note 10, “Fair Value Measurements and Derivative Instruments,” in the Footnotes for additional details regarding gains/losses from settled and open positions and unrealized gains and losses as of March 31, 2010. Derivative gains/losses are not allocated to Regional Affiliates fuel expense.


	Three Months Ended March 31,
									Average price per gallon (in cents)
(In millions, except per gallon)	2010			2009			% Change		2010		2009		% Change
Mainline fuel purchase cost	$	974		$	748		30.2		219.4		159.1		37.9
Non-cash fuel hedge gains in Mainline fuel (a)		(31	)		(191	)	(83.8	)	(7.0	)	(40.6	)	(82.8	)
Cash fuel hedge losses in Mainline fuel (a)		15			242		(93.8	)	3.4		51.5		(93.4	)

Total Mainline fuel expense		958			799		19.9		215.8		170.0		26.9
Regional Affiliates fuel expense (b)		249			164		51.8		239.4		178.3		34.3

UAL system operating fuel expense	$	1,207		$	963		25.3		220.3		171.4		28.5


Mainline fuel consumption (gallons)		444			470		(5.5	)
Regional Affiliates fuel consumption (gallons)		104			92		13.0

Total fuel consumption (gallons)		548			562		(2.5	)

(a)	In 2009, the Company incurred additional fuel hedge gains/losses which are classified in nonoperating expense as described below.

(b)	Regional Affiliates fuel costs are classified as part of Regional Affiliates expense.

Salaries and related costs increased $27 million, or 3%, in the first quarter of 2010 as compared to the year-ago period. The Company recorded a $2 million reversal of severance expense during the first quarter of 2010 which related to the Company’s workforce reduction plans and a total decrease to salaries of $37 million from severance and employee benefit adjustments in the first quarter of 2009. In addition, the Company incurred expense of $18 million in 2010 due to on-time performance bonuses for operations employee groups and estimated annual incentive plan expense as compared to $11 million for on-time bonuses recognized in 2009. Salaries also increased due to the impact of annual wage increases. Partially offsetting these increases was the impact of the Company’s reduced workforce in 2010 compared to 2009. The Company had approximately 43,000 average full-time equivalent employees for the three months ended March 31, 2010 as compared to approximately 45,000 average full-time equivalent employees in the year-ago period.

Regional Affiliates expense increased $144 million, or 22%, during the first quarter of 2010 as compared to the same period last year. Regional Affiliates expense increased primarily due to an $85 million increase in Regional Affiliates fuel cost that was driven by a higher average price per gallon of Regional Affiliates jet fuel in 2010 as well as higher jet fuel consumption due to increased traffic, as presented in the fuel table above. Other Regional Affiliates operating expenses also increased due to the addition of Regional Affiliates capacity as compared to the year-ago period. Regional Affiliates operating income was $25 million in the 2010 period, as compared to an operating loss of $12 million in the 2009 period. Regional Affiliates operating results were relatively consistent on a year-over-year basis as the benefits of increased traffic and yield were offset by higher fuel and other operating costs.

Depreciation and amortization decreased $20 million, or 9%, in the first quarter of 2010 primarily due to the removal of spare parts and aircraft from the Company’s fleet throughout 2009.

Distribution expenses increased $19 million, or 16%, in the first quarter of 2010 as compared to the prior year primarily due to increased commissions, credit card fees and global distribution services (“GDS”) fees driven by higher passenger revenues.

In the first quarter of 2010, the Company recorded Impairment and special items of $18 million which primarily relates to the decrease in value of aircraft related assets. In the first quarter of 2009, the Company recorded intangible asset impairment adjustments of $110 million and other special charges of $9 million. The special charges and impairments relate to the Mainline segment and are classified within Impairments and special items in the Company’s Financial Statements. See Note 10, “Fair Value Measurements and Derivative Instruments” and Note 13, “Asset Impairments and Special Items,” in the Footnotes for additional information.

In the first quarter of 2010, other operating expenses decreased by $30 million, or 13%, as compared to the 2009 period, due to better operational performance driving reduced interrupted trip expense and less capacity reducing other variable costs.

Other income (expense). The following table illustrates the year-over-year dollar and percentage changes in UAL and United other income (expense).


	Three Months Ended March 31,						Favorable/(Unfavorable) Change
(In millions)	2010			2009			$			%
Interest expense	$	(178	)	$	(134	)	$	(44	)	32.8
Interest income		1			7			(6	)	(85.7	)
Interest capitalized		2			3			(1	)	(33.3	)
Miscellaneous, net:
Non-cash fuel hedge gains (losses)		—			72			(72	)	(100.0	)
Cash fuel hedge losses		—			(81	)		81		(100.0	)
Other miscellaneous, net		24			3			21		—

UAL total	$	(151	)	$	(130	)	$	(21	)	(16.2	)

United total	$	(131	)	$	(130	)	$	(1	)	(0.8	)

Interest expense increased $44 million, or 33%, compared to the year-ago period primarily due to an increase in debt outstanding during the first quarter of 2010 as compared to debt outstanding during the year-ago period and amortization of debt issuance costs associated with 2009 and 2010 financings. The increase in debt outstanding in 2010 occurred because the Company completed several financings during the year ended December 31, 2009 to enhance its liquidity position due to the weak economy.

Miscellaneous, net increased $21 million from the year-ago period due to the Company’s recognition of a gain related to the repayment of certain of its EETC debt instruments. See Note 12, “Debt Obligations and Other Financing Transactions,” in the Footnotes for additional information.

Liquidity and Capital Resources

As of the date of this Form 10-Q, the Company believes it has sufficient liquidity to fund its operations for the near-term, including liquidity for scheduled repayments of debt and capital lease obligations, capital expenditures, cash deposits required under fuel hedge contracts and other contractual obligations. We expect to meet our near-term liquidity needs from cash flows from operations, cash and cash equivalents on hand, proceeds from financing arrangements using unencumbered assets and proceeds from aircraft sales and sales of other assets, among other sources. While the Company expects to meet its near-term cash requirements, our ability to do so could be impacted by many factors including, but not limited to, the following:

•

Higher jet fuel prices, and the cost and effectiveness of hedging jet fuel prices, may require the use of significant liquidity in future periods. Fuel prices are extremely volatile and unpredictable. As of March 31, 2010, the Company was hedged using purchased call options and swaps. The Company has been, and may in the future be, required to make significant payments at the settlement dates of the hedge contracts if the settlement price is below the fixed swap price. Additionally, the Company has been, and may in the future be, required to provide counterparties with additional cash collateral prior to derivative settlement dates. While the Company’s results of operations benefit from lower fuel prices on its unhedged fuel consumption, the Company may not realize the full benefit of lower fuel prices due to unfavorable fuel hedge cash settlements. In addition, the Company may not be able to increase its revenues in response to higher fuel prices. See Item 3, Quantitative and Qualitative Disclosures About Market Risk, and Note 11, “Fair Value Measurements and Derivative Instruments,” in the Footnotes for further information regarding the Company’s fuel derivative instruments;

•

The Company has limited remaining assets available as collateral for loans and other indebtedness, which may make it difficult to raise additional capital, if necessary. Our level of indebtedness, non-investment grade credit rating and credit market conditions may also make it difficult for us to raise capital to meet liquidity needs and may increase our cost of borrowing. A higher cost of capital could negatively impact our results of operations, financial position and liquidity;

•

Due to the factors above, and other factors, the Company may be unable to comply with its Amended Credit Facility covenants that currently require the Company to maintain an unrestricted cash balance of $1.0 billion and a minimum ratio of EBITDAR to fixed charges. If the Company does not comply with these covenants, the lenders may accelerate repayment of these debt obligations, which would have a material adverse impact on the Company’s financial position and liquidity; and

•

If a default occurs under our Amended Credit Facility or other debt obligations, the cost to cure any such default may materially and adversely impact our financial position and liquidity, and no assurance can be provided that such a default will be mitigated or cured.

UAL’s unrestricted and restricted cash balances were $3.5 billion and $293 million, respectively, at March 31, 2010. In April 2010, the Company received $728 million from the 9.875% Secured Notes due 2013 and the 12.0% Senior Second Lien Notes due 2013 (together, the “Senior Notes”) financing as discussed below. In addition, the Company significantly reduced its 2010 and 2011 contractual commitments from the refinancing of its EETC securities, as described below.

Cash Position and Liquidity. As of March 31, 2010, approximately 25% of the Company’s cash and cash equivalents were invested in money market funds, which primarily invest in U.S. treasury securities, and the remainder was invested in AAA-rated money market funds. There are no withdrawal restrictions at the present time on any of the money market funds in which the Company has invested. We believe credit risk is limited with respect to our money market fund investments. The following table provides a summary of UAL’s net cash provided (used) by operating, investing and financing activities for the three months ended March 31, 2010 and 2009 and total cash position as of March 31, 2010 and December 31, 2009. In April 2010, the Company received net cash of $728 million from a financing which is discussed below.


	Three Months Ended March 31,
(In millions)	2010			2009
Net cash provided by operating activities	$	482		$	426
Net cash provided (used) by investing activities		(76	)		65
Net cash provided (used) by financing activities		68			(73	)


	As of March 31, 2010		As of December 31, 2009
Cash and cash equivalents	$	3,516	$	3,042
Restricted cash		293		341

Total cash	$	3,809	$	3,383

2010 and 2009 Sources and Uses of Cash

Operating Activities. UAL’s cash from operations increased by $56 million in the three months ended March 31, 2010, as compared to the year-ago period. This year-over-year increase was primarily due to increased cash from passenger and cargo services. Cash operating expenses were relatively consistent on a year-over-year basis. Net cash required for fuel in the 2010 period was relatively consistent with the year-ago period because an increase in cash expenditures for Mainline and Regional Affiliates jet fuel purchases was offset by a decrease in operating and nonoperating fuel hedge settlements as shown in the fuel expense table in Results of Operations, above. Operating cash flows in the 2009 period included the receipt of $160 million related to the future relocation of its O’Hare cargo facility.

Investing Activities. UAL’s capital expenditures were $51 million and $79 million in 2010 and 2009, respectively. Capital expenditures in both periods were limited as the Company reduced its spending in 2010 and 2009 by focusing its capital resources only on its highest-value projects due to economic conditions.

In 2009, the Company received investing cash flows of $94 million from a sale-leaseback agreement for nine aircraft. This transaction was accounted for as a capital lease, resulting in non-cash increases to capital lease assets and capital lease obligations during the first quarter of 2009. Other asset sales generated proceeds of $4 million and $33 million during the three months ended March 31, 2010 and 2009, respectively.

Financing Activities. The following are significant financing activities by the Company in the three months ended March 31, 2010 and 2009:

2010 Activity

During the first three months of 2010, the Company generated gross proceeds of approximately $1.3 billion from financing transactions as follows:

In January 2010, United issued the remaining $612 million of equipment notes related to the Series 2009-1 EETCs of which $568 million was used to complete the pre-payment of the remaining principal of the equipment notes issued in connection with the Series 2001-1 EETCs and the remaining proceeds of $44 million, before expenses and accrued interest due on the equipment notes related to the Series 2001-1 EETCs, provided the Company with incremental liquidity. The Company also received $21 million of proceeds from the distribution of the Series 2001-1 EETC trust assets upon repayment of the note obligations.

The EETC repayments, combined with the portion of Series 2009-1 and 2009-2 issued in 2009, reduced the Company’s 2010 and 2011 debt principal payments by approximately $440 million and $275 million, respectively.

In addition to the early retirement of debt, discussed above, UAL used cash of $170 million for scheduled long-term debt and capital lease payments.

See Note 12, “Debt Obligations and Other Financing Transactions,” in the Footnotes for additional information related to the above transactions.

2009 Activity

In March 2009, the Company generated proceeds of $134 million from a mortgage financing secured by certain of the Company’s spare engines. The Company used cash of $286 million during the three months ended March 31, 2009 for scheduled long-term debt and capital lease payments.

In the first quarter of 2009, the Company received net proceeds of $62 million from the issuance of 5.4 million shares of common stock, of which 4.0 million shares were sold during the first quarter of 2009. UAL contributed $62 million to United during the three months ended March 31, 2009.

Other Financing Matters

Secured Notes Issuance. In April 2010, the Company received $672 million, net of the issuance discount and fees, from the January 2010 issuance of $700 million aggregate principal amount of the Senior Notes upon release of the collateral from the Amended Credit Facility securing the Company’s obligations under the Senior Notes and the satisfaction of certain other customary conditions. The Senior Notes are secured by United’s route authorities to operate between the United States and Japan and beyond Japan to points in other countries, certain airport takeoff and landing slots and airport gate leaseholds utilized in connection with these routes. As a part of the offering, these assets, which were previously pledged to secure the Company’s obligations under the Amended Credit Facility, were released and substituted by replacement collateral which consists of aircraft, spare engines, flight simulators and certain domestic slots. The Company received an additional $56 million in April 2010 from the return of cash that had been placed in escrow by the Company pending issuance of the Secured Notes. See Note 12, “Debt Obligations and Other Financing Transactions,” in the Footnotes for additional information.

Encumbered Assets. As of March 31, 2010 and 2009, a substantial portion of the Company’s assets, principally aircraft, spare engines, aircraft spare parts, route authorities and Mileage Plus intangible assets were pledged under various loan and other agreements. After the assets pledged under the Senior Notes issuance, discussed above, were released from the Amended Credit Facility in April 2010, a balance of approximately $200 million in unencumbered assets remains. See Note 12, “Debt Obligations and Other Financing Transactions,” in the Footnotes for additional information on assets provided as collateral by the Company.

Credit Ratings. As of March 31, 2010, the Company had a corporate credit rating of B- (outlook negative) from S&P, a corporate family rating of “Caa1” from Moody’s Investor Services and an issuer default rating of “CCC” from Fitch. These credit ratings are below investment grade levels. Downgrades from these rating levels, among other things, could restrict the availability and/or increase the cost of future financing for the Company.

Other Matters. The Company may, from time to time, make open market purchases of certain of its debt securities or other financing instruments depending on, among other factors, favorable market conditions and the Company’s liquidity position.

The Company has a $255 million revolving loan commitment available under Tranche A of its Amended Credit Facility. As of March 31, 2010 and December 31, 2009, the Company had used $255 million and $254 million, respectively, of the Tranche A commitment capacity for letters of credit. In addition, under a separate agreement, the Company had $17 million and $20 million of letters of credit issued as of March 31, 2010 and December 31, 2009, respectively. Through a separate arrangement, the Company has an additional $150 million available under an unused credit facility.

Amended Credit Facility Covenants. The Company’s Amended Credit Facility requires compliance with certain covenants, including a fixed charge coverage ratio. The required fixed charge coverage ratio was 1.3 to 1.0 for the twelve month period ended March 31, 2010, increasing to 1.4 to 1.0 and 1.5 to 1.0 for the twelve months ending June 2010 and September 2010, respectively. The Company was in compliance with this ratio and all of its Amended Credit Facility covenants as of March 31, 2010.

Additional details on the Company’s Amended Credit Facility covenants are available in the 2009 Annual Report.

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 either require, or have the right to require, that United maintain a reserve (“reserve”) equal to a portion of advance ticket sales that have been processed by that financial institution, but for which the Company has not yet provided the air transportation (referred to as “relevant advance ticket sales”).

Additional details on the Company’s credit card processing agreements are available in the 2009 Annual Report.

Critical Accounting Policies

See “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2009 Annual Report for a detailed discussion of the Company’s critical accounting policies.

Derivative instruments used for aircraft fuel. The Company utilizes derivative instruments to manage the risk of potential increases in the price of aircraft fuel. As of March 31, 2010 and December 31, 2009, the Company had a net derivative asset of $177 million and $133 million, respectively, related to the net fair value of these derivative instruments. Prior to April 1, 2010, the Company did not designate any of these instruments as cash flow hedges under GAAP. Therefore, any increase or decrease in the market value of these instruments was immediately recognized in earnings each period until the contracts settle.

Effective April 1, 2010, the Company designated its existing fuel derivative instrument portfolio as cash flow hedges and intends to designate new contracts as cash flow hedges for accounting purposes, when possible under ASC 815, Derivatives and Hedging. Classification of these instruments as cash flow hedges permits the deferral of the effective portions of gains or losses until contract settlement.

ASC 815 is a complex accounting standard and requires the Company to develop and maintain a significant amount of documentation related to (1) the Company’s fuel hedging program and strategy, (2) statistical analysis supporting a highly correlated relationship between the underlying commodity in the derivative financial instrument and the risk being hedged (i.e., aircraft fuel) on both a historical and prospective basis, and (3) cash flow designation for each hedging transaction executed, to be developed concurrently with the hedging transaction.

Historically, our hedges have settled within approximately one year; therefore, any future deferred gains and losses will be recognized into earnings over a relatively short period of time.

Change in Accounting for Frequent Flyer Program. The Company follows a deferred revenue accounting policy to record the fair value of its Mileage Plus frequent flyer obligation. The Company defers the portion of the sales proceeds of ticketed revenue on United and our alliance partners, as well as revenue associated with mileage sales to third parties, that represents the estimated air transportation fair value of the miles awarded. This deferred revenue is then recognized when the miles are redeemed. Some of these miles will never be redeemed by Mileage Plus members, and the Company historically recognized an estimate of revenue from the expected expired miles, which is referred to as breakage, over an estimated redemption period. The Company reviews its breakage estimates annually based upon the latest available information regarding mileage redemption and expiration patterns.

Forward-Looking Information

Certain statements throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as “expects,” “will,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook” and similar expressions are intended to identify forward-looking statements.

Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this report are based upon information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise.

The Company’s actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: its ability to comply with the terms of its Amended Credit Facility and other financing arrangements; the costs and availability of financing; its ability to maintain adequate liquidity; its ability to execute its operational plans; its ability to control its costs, including realizing benefits from its resource optimization efforts, cost reduction initiatives and fleet replacement programs; its ability to utilize its net operating losses; its ability to attract and retain customers; demand for transportation in the markets in which it operates; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact the economic recession has on customer travel patterns; the increasing reliance on enhanced video-conferencing and other technology as a means of conducting virtual meetings; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aviation fuel and energy refining capacity in relevant markets); its ability to cost-effectively hedge against increases in the price of aviation fuel; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom the Company has alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the costs and availability of aircraft insurance; the costs associated with security measures and practices; industry consolidation; competitive pressures on pricing and on demand; capacity decisions of United and/or its competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements); labor costs; its ability to maintain satisfactory labor relations and the results of the collective bargaining agreement process with its union groups; any disruptions to operations due to any potential actions by its labor groups; weather conditions; and other risks and uncertainties set forth under Item 1A., Risk Factors of the 2009 Annual Report, as well as other risks and uncertainties set forth from time to time in the reports the Company files with the SEC. Consequently, forward-looking statements should not be regarded as representations or warranties by the Company that such matters will be realized.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The discussion below describes changes in our market risks since December 31, 2009. For additional information regarding our exposure to certain market risks, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk in the 2009 Annual Report. See Note 10, “Fair Value Measurements and Derivative Instruments,” in the Footnotes for further information related to the Company’s fuel and foreign currency hedge positions.

Commodity Price Risk (Jet Fuel)—Our results of operations and liquidity may be materially impacted by changes in the price of aircraft fuel and other oil-related commodities and related derivative instruments. When market conditions indicate risk reduction is achievable, United may use commodity option contracts or other derivative instruments to reduce its price risk exposure to jet fuel. The Company’s derivative positions are typically comprised of crude oil, heating oil and jet fuel derivatives. The derivative instruments are designed to provide protection against increases in the price of aircraft fuel. Some derivative instruments may result in hedging losses if the underlying commodity prices drop below specified floors; however, the negative impact of these losses may be offset by the benefit of lower jet fuel acquisition cost. United may adjust its hedging program based on changes in market conditions. At March 31, 2010, the fair value of United’s fuel derivative instruments was a net receivable of $177 million, as compared to a net receivable of $133 million at December 31, 2009.

As of March 31, 2010, the Company had hedged approximately 3% and 49% of its 2011 and remaining 2010, respectively, expected consolidated fuel consumption primarily with a combination of swaps and purchased call options. The Company’s hedge position at March 31, 2010 consisted of a notional amount of 11 million barrels with purchased call options at a weighted-average crude oil equivalent strike price of $78 per barrel and 11 million barrels with swaps at a crude oil equivalent average price of $78 per barrel. All of these derivative instruments mature within 12 months of March 31, 2010. As of December 31, 2009, the Company had hedged 36% of its 2010 consolidated fuel consumption.

The above derivative positions are subject to potential counterparty cash collateral requirements in some circumstances. The Company provided counterparties with cash collateral of $3 million as of March 31, 2010.

ITEM 4. CONTROLS AND PROCEDURES.

UAL and United each maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports UAL and United each file with the SEC is recorded, processed, summarized and reported, within the time periods specified by the SEC’s rules and forms, and is accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. The management of UAL and United, including the Chief Executive Officer and Chief Financial Officer of both UAL and United, performed an evaluation to conclude with reasonable assurance that its disclosure controls and procedures were designed and operating effectively to report the information each company is required to disclose in the reports they file with the SEC on a timely basis. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of both UAL and United have concluded that as of March 31, 2010, the disclosure controls and procedures of both UAL and United were effective.

There were no changes in UAL’s or United’s internal control over financial reporting during their most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, their internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

UAL and United are parties to the legal proceedings described in the 2009 Annual Report.

ITEM 1A. RISK FACTORS.

See Part I, Item 1A., “Risk Factors,” of the 2009 Annual Report for a detailed discussion of the risk factors affecting UAL and United.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table presents repurchases of UAL common stock made in the first quarter of fiscal year 2010.


Period	Total number of shares purchased(a)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares (or approximate dollar value) of shares that may yet be purchased under the plans or programs
01/01/10 – 01/31/10	798	$	12.45	—	(b	)
02/01/10 – 02/28/10	182,242		12.47	—	(b	)
03/01/10 – 03/31/10	—		—	—	(b	)

Total	183,040		12.47	—	(b	)

(a)	Shares withheld from employees to satisfy certain tax obligations due upon the vesting of restricted stock.

(b)	The UAL Corporation 2008 Incentive Compensation Plan provides for the withholding of shares to satisfy tax obligations due upon the vesting of restricted stock or restricted stock units. However, this plan does not specify a maximum number of shares that may be repurchased.

ITEM 6. EXHIBITS.

A list of exhibits included as part of this Form 10-Q is set forth in an Exhibit Index that immediately precedes the exhibits.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.


	UAL CORPORATION
	(Registrant)

Date: April 27, 2010	By:	/s/ Kathryn A. Mikells
		Kathryn A. Mikells Executive Vice President and Chief Financial Officer (principal financial and accounting officer)

	UNITED AIR LINES, INC.
	(Registrant)

Date: April 27, 2010	By:	/s/ Kathryn A. Mikells
		Kathryn A. Mikells Executive Vice President and Chief Financial Officer (principal financial officer)

Date: April 27, 2010	By:	/s/ David M. Wing
		David M. Wing Vice President and Controller (principal accounting officer)

EXHIBIT INDEX

The documents listed below are being filed on behalf of UAL and United as indicated.


*4.1		Priority Lien Security Agreement, dated as of April 19, 2010, between United Air Lines, Inc. and Wilmington Trust FSB, as collateral trustee (filed as exhibit 4.1. to UAL’s Form 8-K dated April 19, 2010, Commission file number 1-6033, and incorporated herein by reference)

*4.2		Junior Lien Security Agreement, dated as of April 19, 2010, between United Air Lines, Inc. and Wilmington Trust FSB, as collateral trustee (filed as exhibit 4.2 to UAL’s Form 8-K dated April 19, 2010, Commission file number 1-6033, and incorporated herein by reference)

^10.1		Purchase Agreement Number 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.2		Letter Agreement No. 3427-02 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

10.3		Letter Agreement No. 3427-05 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.4		Letter Agreement No. 3427-07 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.5		Letter Agreement No. 6-1162-ELP-0759 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.6		Letter Agreement No. 6-1162-ELP-0760 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.7		Letter Agreement No. 6-1162-ELP-0762 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.8		Letter Agreement No. 6-1162-ELP-0777 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.9		Letter Agreement No. 6-1162-ELP-0778 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.10		Letter Agreement No. 6-1162-ELP-0779 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.11		Letter Agreement No. 6-1162-ELP-0780 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.12		Letter Agreement No. 6-1162-ELP-0781 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.13		Letter Agreement No. 6-1162-ELP-0783 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.14		Letter Agreement No. 6-1162-ELP-0784 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.15		Letter Agreement No. 6-1162-ELP-0785 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.



^10.16		Letter Agreement No. 6-1162-ELP-0786 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.17		Letter Agreement No. 6-1162-ELP-0787 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.18		Letter Agreement No. 6-1162-ELP-0788 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.19		Letter Agreement No. 6-1162-ELP-0790 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.20		Letter Agreement No. 6-1162-ELP-0792 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.21		Letter Agreement No. 6-1162-ELP-0794 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.22		Letter Agreement No. 6-1162-ELP-0795 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

10.23		Letter Agreement No. 6-1162-IRS-0182 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.24		Letter Agreement No. 6-1162-IRS-0183 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.25		Letter Agreement No. 6-1162-IRS-0185 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.26		Letter Agreement No. 6-1162-NIW-2015 to Purchase Agreement No. 3427, dated February 19, 2010, between The Boeing Company and United Air Lines, Inc.

^10.27		Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.28		Letter Agreement No. 1 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.29		Letter Agreement No. 2 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.30		Letter Agreement No. 3 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.31		Letter Agreement No. 4 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.32		Letter Agreement No. 5 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.


^10.33		Letter Agreement No. 6 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.34		Letter Agreement No. 7 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.35		Letter Agreement No. 8 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.36		Letter Agreement No. 9 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.37		Letter Agreement No. 10 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.38		Letter Agreement No. 11 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.39		Letter Agreement No. 12 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

^10.40		Letter Agreement No. 13 to the Airbus A350-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S.A.S and United Air Lines. Inc.

12.1		UAL Corporation Computation of Ratio of Earnings to Fixed Charges

12.2		United Air Lines, Inc. Computation of Ratio of Earnings to Fixed Charges

18		Letter from Ernst & Young LLP, dated April 27, 2010, regarding the change in accounting principle

31.1		Certification of the Principal Executive Officer of UAL Pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)

31.2		Certification of the Principal Financial Officer of UAL Pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)

31.3		Certification of the Principal Executive Officer of United Pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)

31.4		Certification of the Principal Financial Officer of United Pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)

32.1		Certification of the Chief Executive Officer and Chief Financial Officer of UAL Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

32.2		Certification of the Chief Executive Officer and Chief Financial Officer of United Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

*	Previously filed

^	Confidential portion of this exhibit has been omitted and filed separately with the SEC pursuant to a request for confidential treatment.

Purchase Agreement Number 3427

Exhibit 10.1

PURCHASE AGREEMENT NUMBER 3427

between

THE BOEING COMPANY

and

UNITED AIR LINES, INC.

Relating to Boeing Model 787-8 Aircraft


P.A. No. 3427
		BOEING / UNITED PROPRIETARY

TABLE OF CONTENTS


		SA NUMBER
ARTICLES

1.	Quantity, Model and Description

2.	Delivery Schedule

3.	Price	.

4.	Payment

5.	Additional Terms

TABLE

1.	Aircraft Information Table

EXHIBIT

A.	Aircraft Configuration

B.	Aircraft Delivery Requirements and Responsibilities

SUPPLEMENTAL EXHIBITS

AE1.	Escalation Adjustment/Airframe and Optional Features

BFE1	Buyer Furnished Equipment Variables

CS1.	Customer Support Document

EE1.	Engine Escalation/Engine Warranty and Patent Indemnity

SLP1.	Service Life Policy Components

Purchase Agreement No. 3427

between

The Boeing Company

and

United Air Lines, Inc.

This Purchase Agreement No. 3427 between The Boeing Company, a Delaware corporation, (hereinafter referred to as “Boeing”) and United Air Lines, Inc., a Delaware corporation, (hereinafter referred to as “Customer”) (collectively, the “Parties”), relating to the purchase and sale of Model 787-8 aircraft together with all tables, exhibits, supplemental exhibits, letter agreements and other attachments thereto, if any, (Purchase Agreement) incorporates and amends the terms and conditions of the Aircraft General Terms Agreement dated as of February 19, 2010 between the parties, identified as AGTA-UAL (AGTA).

Article 1. Quantity, Model, Description and Inspection. The aircraft to be delivered to Customer will be designated as Model 787-8 aircraft (Aircraft). Boeing will manufacture and sell to Customer Aircraft conforming to the configuration described in Exhibit A in the quantities listed in Table 1 to the Purchase Agreement. Ten (10) months prior to delivery of Customer’s first Aircraft, Boeing will provide Customer a Boeing document defining a customer inspection process appropriate to the 787 manufacturing process (787 Inspection Process) which will apply in lieu of inspection processes traditionally applicable to other models of aircraft and will supersede the provisions of Article 5.2 of the AGTA.

Article 2. Delivery Schedule. The scheduled months of delivery of the Aircraft are listed in the attached Table 1. Exhibit B describes certain responsibilities for both Customer and Boeing in order to accomplish the delivery of the Aircraft.

Article 3. Price.

3.1 Aircraft Basic Price. The Aircraft Basic Price is listed in Table 1 and is subject to escalation in accordance with the terms of this Purchase Agreement.

3.2 Advance Payment Base Prices. The Advance Payment Base Prices listed in Table 1 were [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

Article 4. Payment.

4.1 Boeing acknowledges receipt of a deposit in the amount shown in Table 1 for each Aircraft (Deposit).

4.2 The standard advance payment schedule for the Model 787-8 aircraft requires Customer to make certain advance payments, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] on the effective date of the Purchase Agreement for the Aircraft. Additional advance payments for each Aircraft are due as specified in and on the first business day of the months listed in the attached Table 1.

4.3 For any Aircraft whose scheduled month of delivery is less than twenty-four (24) months from the date of this Purchase Agreement, the total amount of advance payments due for payment upon signing of this Purchase Agreement will include all advance payments which are past due in accordance with the standard advance payment schedule set forth in paragraph 4.2 above.

4.4 Customer will pay the balance of the Aircraft Price of each Aircraft at delivery.

Article 5. Additional Terms.

5.1 Aircraft Information Table. Table 1 consolidates information contained in Articles 1, 2, 3 and 4 with respect to (i) quantity of Aircraft, (ii) applicable Detail Specification, (iii) month and year of scheduled deliveries, (iv) Aircraft Basic Price, (v) escalation factors and (vi) Advance Payment Base Prices and advance payments and their schedules.

5.2 Escalation Adjustment/Airframe and Optional Features. Supplemental Exhibit AE1 contains the applicable airframe and optional features escalation formula.

5.2 Buyer Furnished Equipment Variables. Supplemental Exhibit BFE1 contains vendor selection dates and other variables applicable to the Aircraft.

5.3 Customer Support Variables. Information, training, services and other things furnished by Boeing in support of introduction of the Aircraft into Customer’s fleet are described in Supplemental Exhibit CS1. Supplemental Exhibit CS1 supersedes in its entirety Exhibit B to the AGTA, and, for clarity, all references to Exhibit B to the AGTA shall be deemed to refer to Supplemental Exhibit CS1 to the Purchase Agreement. The level of support to be provided under Supplemental Exhibit CS1 (Entitlements) assumes that at the time of delivery of Customer’s first Aircraft under the

Purchase Agreement, Customer has not taken possession of a 787-8 aircraft whether such 787-8 aircraft was purchased, leased or otherwise obtained by Customer from Boeing or another party. If prior to the delivery of Customer’s first Aircraft, Customer has taken possession of a 787-8 aircraft, Boeing will revise the Entitlements to reflect the level of support normally provided by Boeing to operators already operating such aircraft. Under no circumstances under the Purchase Agreement or any other agreement will Boeing provide the Entitlements more than once to support Customer’s operation of 787-8 aircraft.

5.4 Engine Escalation Variables. Supplemental Exhibit EE1 contains the applicable engine escalation formula, the engine warranty and the engine patent indemnity for the Aircraft.

5.5 Service Life Policy Component Variables. Supplemental Exhibit SLP1 lists the SLP Components covered by the Service Life Policy for the Aircraft. In addition, Part 3 of Exhibit C to the AGTA, entitled, “Service Life Policy.” is superseded in its entirety by Part 3 of Exhibit C to the AGTA, “Service Life Policy,” attached as Exhibit C to to this Purchase Agreement.

5.6 Public Announcement. Boeing reserves the right to make a public announcement regarding Customer’s purchase of the Aircraft upon approval of Boeing’s press release by Customer’s public relations department or other authorized representative.

[The remainder of this page intentionally left blank]

5.7 Negotiated Agreement; Entire Agreement. This Purchase Agreement, including the provisions of Article 8.2 of the AGTA relating to insurance, and Article 11 of Part 2 of Exhibit C of the AGTA relating to DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES, has been the subject of discussion and negotiation and is understood by the parties; the Aircraft Price and other agreements of the parties stated in this Purchase Agreement were arrived at in consideration of such provisions. This Purchase Agreement, including the AGTA, contains the entire agreement between the parties and supersedes all previous proposals, understandings, commitments or representations whatsoever, oral or written, and may be changed only in writing signed by authorized representatives of the parties.

DATED AS OF February 19, 2010

Table 1 - [***]

P. A. 3427

Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:

787-8

502500 pounds

Detail Specification:

[***]

Engine Model/Thrust:

[***]

[***] pounds

Airframe Price Base Year/Escalation Formula:

Jul-08

[***]

Airframe Price:

[***]

Engine Price Base Year/Escalation Formula:

Jul-08

[***]

Optional Features:

[***]

Sub-Total of Airframe and Features:

[***]

Airframe Escalation Data:

Engine Price (Per Aircraft):

[***]

Base Year Index (ECI):

[***]

Aircraft Basic Price (Excluding BFE/SPE):

[***]

Base Year Index (CPI):

[***]

Buyer Furnished Equipment (BFE) Estimate:

[***]

Engine Escalation Data:

Seller Purchased Equipment (SPE) Estimate:

[***]

Base Year Index (ECI):

[***]

Estimated IFE Price at Delivery:

[***]

Base Year Index (CPI):

[***]

[***] Deposit/Aircraft at Proposal Accept:

[***]

[***] represents [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]


		Boeing / United Proprietary		Page 1

Table 1 - [***]

P. A. 3427

Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:

787-8

502500 pounds

Detail Specification:

[

***]

Engine Model/Thrust:

[***]

[***] pounds

Airframe Price Base Year/Escalation Formula:

Jul-08

[***]

Airframe Price:

[***]

Engine Price Base Year/Escalation Formula:

Jul-08

[***]

Optional Features:

[***]

Sub-Total of Airframe and Features:

[***]

Airframe Escalation Data:

Engine Price (Per Aircraft):

[***]

Base Year Index (ECI):

[

***]

Aircraft Basic Price (Excluding BFE/SPE):

[***]

Base Year Index (CPI):

[

***]

Buyer Furnished Equipment (BFE) Estimate:

[***]

Engine Escalation Data:

Seller Purchased Equipment (SPE) Estimate:

[***]

Base Year Index (ECI):

[

***]

Estimated IFE Price at Delivery:

[***]

Base Year Index (CPI):

[

***]

[***] Deposit/Aircraft at Proposal Accept:

[***]

[***] represents [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]


		Boeing / United Proprietary		Page 1

AIRCRAFT CONFIGURATION

between

THE BOEING COMPANY

and

UNITED AIR LINES, INC.

Exhibit A to Purchase Agreement Number 3427

AIRCRAFT CONFIGURATION

Dated February 19, 2010

relating to

BOEING MODEL 787 AIRCRAFT

The Detail Specification is Boeing document number [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]-TBD, dated as of TBD. Such Detail Specification will be comprised of (i) Boeing 787 Airplane Configuration Specification, 787-4102 Rev B, dated July 9, 2007 as it pertains to model 787- 8 aircraft, (ii) changes to such Detail Specification pursuant to Article 4 of the AGTA and (iii) optional features therein selected by Customer (Options) including the effects on Manufacturer’s Empty Weight (MEW) and Operating Empty Weight (OEW). Such Options are set forth in Boeing Customer Specified Option Selection Log and Option Data Pages, configuration file number _[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] (to be supplied by Boeing Customer Integration group), as of TBD date approximately [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] month prior to delivery of the first Aircraft). As soon as practicable, Boeing will furnish to Customer copies of the Detail Specification, which will reflect such selected Options. The Aircraft Basic Price reflects and includes all effects of such Options. A copy of the Detail Specification will be attached to the Exhibit A. Customer may request changes to Detail Specification any time and Boeing may offer such changes subject to Boeing’s pricing and offerability process. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] The Aircraft Basic Price does not include the price effects of any Buyer Furnished Equipment or equipment purchase on behalf of Customer by Boeing at Customer’s request (the “Seller Purchased Equipment”).

Exhibit A to

Purchase Agreement No. 3427

787-8

BASELINE INTERIOR CONFIGURATION



[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

BOEING/UNITED PROPRIETARY

Exhibit A to

Purchase Agreement No. 3427

787-9

BASELINE INTERIOR CONFIGURATION



[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

BOEING/UNITED PROPRIETARY

AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES

between

THE BOEING COMPANY

and

UNITED AIR LINES, INC.

Exhibit B to Purchase Agreement Number 3427

Exhibit B to

Purchase Agreement No. 3427

Page 1

AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES

relating to

BOEING MODEL 787-8 AIRCRAFT

Both Boeing and Customer have certain documentation and approval responsibilities at various times during the construction cycle of Customer’s Aircraft that are critical to making the delivery of each Aircraft a positive experience for both parties. This Exhibit B documents those responsibilities and indicates recommended completion deadlines for the actions to be accomplished.

1. GOVERNMENT DOCUMENTATION REQUIREMENTS.

Certain actions are required to be taken by Customer in advance of the scheduled delivery month of each Aircraft with respect to obtaining certain government issued documentation.

1.1 Airworthiness and Registration Documents.

Not later than 6 months prior to delivery of each Aircraft, Customer will notify Boeing of the registration number to be painted on the side of the Aircraft. In addition, and not later than 3 months prior to delivery of each Aircraft, Customer will, by letter to the regulatory authority having jurisdiction, authorize the temporary use of such registration numbers by Boeing during the pre-delivery testing of the Aircraft.

Customer is responsible for furnishing any Temporary or Permanent Registration Certificates required by any governmental authority having jurisdiction to be displayed aboard the Aircraft after delivery.

1.2 Certificate of Sanitary Construction.

1.2.1 U.S. Registered Aircraft. Boeing will obtain from the United States Public Health Service, a United States Certificate of Sanitary Construction to be displayed aboard each Aircraft after delivery to Customer.

1.2.2 Non-U.S. Registered Aircraft. If Customer requires a United States Certificate of Sanitary Construction at the time of delivery of the Aircraft, Customer will give written notice thereof to Boeing at least 3 months prior to delivery. Boeing will then use its reasonable best efforts to obtain the Certificate from the United States Public Health Service and present it to Customer at the time of Aircraft delivery.

B-1

Exhibit B to

Purchase Agreement No. 3427

Page 2

1.3 Customs Documentation.

1.3.1 Import Documentation. If the Aircraft is intended to be exported from the United States, Customer must notify Boeing not later than 3 months prior to delivery of each Aircraft of any documentation required by the customs authorities or by any other agency of the country of import.

1.3.2 General Declaration - U.S. If the Aircraft is intended to be exported from the United States, Boeing will prepare Customs Form 7507, General Declaration, for execution by U.S. Customs immediately prior to the ferry flight of the Aircraft. For this purpose, Customer will furnish to Boeing not later than 20 days prior to delivery all information required by U.S. Customs and Border Protection, including without limitation (i) a complete crew and passenger list identifying the names, birth dates, passport numbers and passport expiration dates of all crew and passengers and (ii) a complete ferry flight itinerary, including point of exit from the United States for the Aircraft.

If Customer intends, during the ferry flight of an Aircraft, to land at a U.S. airport after clearing Customs at delivery, Customer must notify Boeing not later than 20 days prior to delivery of such intention. If Boeing receives such notification, Boeing will provide to Customer the documents constituting a Customs permit to proceed, allowing such Aircraft to depart after any such landing. Sufficient copies of completed Form 7507, along with passenger manifest, will be furnished to Customer to cover U.S. stops scheduled for the ferry flight.

1.3.3 Export Declaration - U.S. If the Aircraft is intended to be exported from the United States following delivery, and (i) Customer is a non-U.S. customer, Boeing will file an export declaration electronically with U.S. Customs and Border Protection (CBP), or (ii) Customer is a U.S. customer, it is the responsibility of the U.S. customer, as the exporter of record, to file the export declaration with CBP.

2. INSURANCE CERTIFICATES.

Unless provided earlier, Customer will provide to Boeing not later than 30 days prior to delivery of the first Aircraft, a copy of the requisite annual insurance certificate in accordance with the requirements of Article 8 of the AGTA.

B-2

Exhibit B to

Purchase Agreement No. 3427

Page 3

3. NOTICE OF FLYAWAY CONFIGURATION.

Not later than 20 days prior to delivery of the Aircraft, Customer will provide to Boeing a configuration letter stating the requested "flyaway configuration" of the Aircraft for its ferry flight. This configuration letter should include:

(i) the name of the company which is to furnish fuel for the ferry flight and any scheduled post-delivery flight training, the method of payment for such fuel, and fuel load for the ferry flight;

(ii) the cargo to be loaded and where it is to be stowed on board the Aircraft, the address where cargo is to be shipped after flyaway and notification of any hazardous materials requiring special handling;

(iii) any BFE equipment to be removed prior to flyaway and returned to Boeing BFE stores for installation on Customer's subsequent Aircraft;

(iv) a complete list of names and citizenship of each crew member and non-revenue passenger who will be aboard the ferry flight; and

(v) a complete ferry flight itinerary.

4. DELIVERY ACTIONS BY BOEING.

4.1 Schedule of Inspections. All FAA, Boeing, Customer and, if required, U.S. Customs Bureau inspections will be scheduled by Boeing for completion prior to delivery or departure of the Aircraft. Customer will be informed of such schedules.

4.2 Schedule of Demonstration Flights. All FAA and Customer demonstration flights will be scheduled by Boeing for completion prior to delivery of the Aircraft.

4.3 Schedule for Customer's Flight Crew. Boeing will inform Customer of the date that a flight crew is required for acceptance routines associated with delivery of the Aircraft.

B-3

Exhibit B to

Purchase Agreement No. 3427

Page 4

4.4 Fuel Provided by Boeing. Boeing will provide to Customer, without charge, the amount of fuel shown in U.S. gallons in the table below for the model of Aircraft being delivered and full capacity of engine oil at the time of delivery or prior to the ferry flight of the Aircraft.


Aircraft Model		Fuel Provided
737		1,000
747		4,000
757		1,600
767		2,000
777		3,000
787		2,000

4.5 Flight Crew and Passenger Consumables. Boeing will provide reasonable quantities of food, coat hangers, towels, toilet tissue, drinking cups and soap for the first segment of the ferry flight for the Aircraft.

4.6 Delivery Papers, Documents and Data. Boeing will have available at the time of delivery of the Aircraft certain delivery papers, documents and data for execution and delivery. If title for the Aircraft will be transferred to Customer through a Boeing sales subsidiary and if the Aircraft will be registered with the FAA, Boeing will pre-position in Oklahoma City, Oklahoma, for filing with the FAA at the time of delivery of the Aircraft an executed original Form 8050-2, Aircraft Bill of Sale, indicating transfer of title to the Aircraft from Boeing's sales subsidiary to Customer.

4.7 Delegation of Authority. If specifically requested in advance by Customer, Boeing will present a certified copy of a Resolution of Boeing's Board of Directors, designating and authorizing certain persons to act on its behalf in connection with delivery of the Aircraft.

5. DELIVERY ACTIONS BY CUSTOMER.

5.1 Aircraft Radio Station License. At delivery Customer will provide its aircraft radio station license to be placed on board the Aircraft following delivery.

5.2. Aircraft Flight Log. At delivery Customer will provide the aircraft flight log for the Aircraft.

5.3 Delegation of Authority. Customer will present to Boeing at delivery of the Aircraft an original or certified copy of Customer's Delegation of Authority designating and authorizing certain persons to act on its behalf in connection with delivery of the specified Aircraft.

B-4

Exhibit B to

Purchase Agreement No. 3427

Page 5

5.4 TSA Waiver Approval. Should the Aircraft be exported, a TSA waiver approval is required for the ferry flight, unless Customer has a TSA approved program. Customer is responsible for submittal of TSA waiver to the TSA and following up with the TSA for the approval. A copy of the TSA waiver approval is to be provided by Customer to Boeing upon arrival of Customer’s acceptance team at the Boeing delivery center.

B-5

ESCALATION ADJUSTMENT

AIRFRAME AND OPTIONAL FEATURES

between

THE BOEING COMPANY

and

UNITED AIR LINES, INC.

Supplemental Exhibit AE1 to Purchase Agreement Number 3427


P.A. No. 3427		AE1
		BOEING / UNITED PROPRIETARY

United Air Lines, Inc

1. Formula.

Airframe and Optional Features [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] at the signing of this Purchase Agreement and to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] will be determined at [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] in accordance with the following formula:

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

2. Values to be Utilized in the Event of Unavailability.

2.1 If the Bureau of Labor Statistics substantially revises the methodology used for the determination of the values to be used to determine [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] or for any reason has not released values [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] from other Bureau of Labor Statistics data or similar data reported by non-governmental organizations. Such substitute will result in the same adjustment, insofar as possible, as would have been calculated utilizing the original values adjusted for fluctuation during the applicable time period. However, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], the Bureau of Labor Statistics should resume releasing values for the months needed to determine [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

2.2 Notwithstanding Article 2.1 above, if prior to the scheduled delivery month of an Aircraft the Bureau of Labor Statistics changes the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

2.3 In the event escalation provisions are made non-enforceable or otherwise rendered void by any agency of the United States Government, the parties agree, to the extent they may lawfully do so, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

2.4 If within [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], the published index values are revised due to an acknowledged error by the Bureau of Labor Statistics, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].


P.A. No. 3427		AE1
		BOEING / UNITED PROPRIETARY

BUYER FURNISHED EQUIPMENT VARIABLES

between

THE BOEING COMPANY

and

UNITED AIR LINES, INC.

787-8

Supplemental Exhibit BFE1 to Purchase Agreement Number 3427

BFE1

BUYER FURNISHED EQUIPMENT VARIABLES

relating to

BOEING MODEL 787 AIRCRAFT

This Supplemental Exhibit BFE1 contains vendor selection dates, on-dock dates and other requirements applicable to the Aircraft. Such Dates shall be updated pursuant any revisions to the delivery schedule set forth in Table 1 to the Purchase Agreement.

1. Supplier Selection.

Customer will select and notify Boeing of the suppliers of the following items by the following dates:

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

2. Certification Document.

Customer will deliver to Boeing a copy of the FAA Technical Standard Order (TSO) 127a authorization letter or equivalent evidence of certification for Buyer Furnished Equipment [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] no later than [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

3. Import

Customer will insure that Customer’s BFE suppliers provide sufficient information to enable Boeing, when acting as Importer of Record for Customer’s BFE, to comply with all applicable provisions of the U.S. Customs Service.

BFE1-1

4. Delivery Dates and Other Information

On or before 3Q20 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], Boeing will provide to Customer a BFE Requirements On-Dock/Inventory Document (BFE Document) or an electronically transmitted BFE Report which may be periodically revised, setting forth the items, quantities, on-dock dates, shipping instructions relating to the in-sequence installation of BFE. For planning purposes, preliminary BFE on-dock dates are set forth below:


Item				Preliminary On-Dock Dates
				[Month of Delivery:]

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

BFE1-2

787 CUSTOMER SUPPORT DOCUMENT

between

THE BOEING COMPANY

And

UNITED AIR LINES, INC.

Supplemental Exhibit CS1 to Purchase Agreement Number 3427

This document contains:


Part 1:		Boeing Maintenance and Flight Training Programs; Operations Engineering Support

Part 2:		Field and Engineering Support Services

Part 3:		Technical Information and Materials

Part 4:		Alleviation or Cessation of Performance

Part 5:		Protection of Proprietary Information and Proprietary Materials

CS1

787 CUSTOMER SUPPORT DOCUMENT

PART 1: BOEING MAINTENANCE AND FLIGHT TRAINING

PROGRAMS; OPERATIONS ENGINEERING SUPPORT

1. Boeing Training Programs.

Boeing will provide maintenance training, cabin attendant training, and flight training programs to support the introduction of the Aircraft into service as provided in this Supplemental Exhibit CS1.

1.1 Customer is awarded [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] (Training Points) for its purchase of twenty-five (25) firm Aircraft. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] At any time before twenty-four (24) months after delivery of Customer’s last Aircraft (Training Program Period) Customer may exchange Training Points for any of the training courses described on Attachment A at the point values described on Attachment A or for other training Boeing may identify at specified point values. At the end of the Training Program Period any unused Training Points will expire.

1.2 In addition to the training provided in Article 1.1, Boeing will provide to Customer the following training and services:

1.2.1 Flight dispatcher model specific instruction; two (2) classes of six (6) students;

1.2.2 Performance engineer model specific instruction in Boeing’s regularly scheduled courses; schedules are published yearly.

1.2.3 Additional Flight Operations Services:

a. Boeing flight crew personnel to assist in ferrying the first Aircraft to Customer’s main base;

b. Instructor pilots for ninety (90) Man Days (as defined in Article 5.4, below) for revenue service training assistance;

c. An instructor pilot to visit Customer six (6) months after revenue service training to review Customer’s flight crew operations for a two (2) week period.

CS1

If any part of the training described in this Article 1.2 is not completed by Customer within twenty-four (24) months after the delivery of the last Aircraft, Boeing will have no obligation to provide such training./

2. Training Schedule and Curricula.

2.1 Customer and Boeing will together conduct planning conferences approximately twelve (12) months before the scheduled delivery month of the first Aircraft of a model to define and schedule the maintenance, flight training and cabin attendant training programs. At the conclusion of each planning conference the parties will document Customer’s course selection, training schedule, and, if applicable, Training Point application and remaining Training Point balance.

2.2 Customer may also request training by written notice to Boeing identifying desired courses, dates and locations. Within fifteen (15) days of Boeing’s receipt of such request Boeing will provide written response to Customer confirming whether the requested courses are available at the times and locations requested by Customer.

3. Location of Training.

3.1 Boeing will conduct all training at any of its or its wholly-owned subsidiaries’ training facilities equipped for the model of Aircraft. Customer shall decide on the location or mix of locations for training, subject to space being available in the desired courses at the selected training facility on the dates desired.

3.2 If requested by Customer, Boeing will conduct the classroom portions of the maintenance and flight training (except for the Performance Engineer training courses) at a mutually acceptable alternate training site, subject to the following conditions:

3.2.1 Customer will provide acceptable classroom space, simulators (as necessary for flight training) and training equipment required to present the courses;

3.2.2 Customer will pay Boeing’s portal to portal actual expenses for lodging, ground transportation, laundry, baggage handling, communication costs and per diem meal charge for each Boeing instructor for each day, or fraction thereof, that the instructor is away from his home location, including travel time;

3.2.3 Customer will reimburse Boeing for the actual costs of round-trip transportation for Boeing's instructors and the shipping costs of training Materials which must be shipped to the alternate training site;

CS1

3.2.4 Customer will be responsible for all taxes, fees, duties, licenses, permits and similar expenses incurred by Boeing and its employees as a result of Boeing’s providing training at the alternate site or incurred as a result of Boeing providing revenue service training; and

3.2.5 Those portions of training that require the use of training devices not available at the alternate site will be conducted at Boeing’s facility or at some other alternate site. Customer will be responsible for additional expenses, if any, which result from the use of such alternate site.

4. Training Materials.

Training Materials will be provided for each student. Training Materials may be used only for either (i) the individual student’s reference during Boeing provided training and for review thereafter or (ii) Customer’s provision of training to individuals directly employed by the Customer.

5. Additional Terms and Conditions.

5.1 All training will reflect an airplane configuration defined by (i) Boeing’s standard configuration specification for 787 aircraft, (ii) Boeing’s standard configuration specification for the minor model of 787 aircraft selected by Customer, and (iii) any Optional Features selected by Customer from Boeing’s standard catalog of Optional Features. Upon Customer’s request, Boeing may provide training customized to reflect other elements of Customer’s Aircraft configuration subject to a mutually acceptable price, schedule, scope of work and other applicable terms and conditions.

5.2 All training will be provided in the English language. If translation is required, Customer will provide interpreters.

5.3 Customer will be responsible for all expenses of Customer’s personnel except that in the Puget Sound region of Washington State Boeing will transport Customer’s personnel between their local lodgings and Boeing’s training facility.

5.4 Boeing flight instructor personnel will not be required to work more than five (5) days per week, or more than eight (8) hours in any one twenty-four (24) hour period (Man Day), of which not more than five (5) hours per eight (8) hour workday will be spent in actual flying. These foregoing restrictions will not apply to ferry assistance or revenue service training services, which will be governed by FAA rules and regulations.

5.5 Normal Line Maintenance is defined as line maintenance that Boeing might reasonably be expected to furnish for flight crew training at Boeing’s facility, and will include ground support and Aircraft storage in the open, but will not include provision of spare parts. Boeing will provide Normal Line Maintenance services for any

CS1

Aircraft while the Aircraft is used for flight crew training at Boeing’s facility in accordance with the Boeing Maintenance Plan (Boeing document D6-82076) and the Repair Station Operation and Inspection Manual (Boeing document D6-25470). Customer will provide such services if flight crew training is conducted elsewhere. Regardless of the location of such training, Customer will be responsible for providing all maintenance items (other than those included in Normal Line Maintenance) required during the training, including, but not limited to, fuel, oil, landing fees and spare parts.

5.6 If the training is based at Boeing’s facility and the Aircraft is damaged during such training, Boeing will make all necessary repairs to the Aircraft as promptly as possible. Customer will pay Boeing’s reasonable charge, including the price of parts and materials, for making the repairs. If Boeing’s estimated labor charge for the repair exceeds Twenty-Five Thousand U.S. Dollars ($25,000), Boeing and Customer will enter into an agreement for additional services before beginning the repair work.

5.7 If the flight training is based at Boeing’s facility, several airports in the surrounding area may be used, at Boeing’s option. Unless otherwise agreed in the flight training planning conference, it will be Customer’s responsibility to make arrangements for the use of such airports.

5.8 If Boeing agrees to make arrangements on behalf of Customer for the use of airports for flight training, Boeing will pay on Customer’s behalf any landing fees charged by any airport used in conjunction with the flight training. At least thirty (30) days before flight training, Customer will provide Boeing an open purchase order against which Boeing will invoice Customer for any landing fees Boeing paid on Customer’s behalf. The invoice will be submitted to Customer approximately sixty (60) days after flight training is completed, when all landing fee charges have been received and verified. Customer will pay the invoiced amount to Boeing within thirty (30) days of the date of the invoice.

5.9 If requested by Boeing, in order to provide the flight training or ferry flight assistance, Customer will make available to Boeing an Aircraft after delivery to familiarize Boeing instructor or ferry flight crew personnel with such Aircraft. If flight of the Aircraft is required for any Boeing instructor or ferry flight crew member to maintain an FAA license for flight proficiency or landing currency, Boeing will be responsible for the costs of fuel, oil, landing fees and spare parts attributable to that portion of the flight.

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787 CUSTOMER SUPPORT DOCUMENT

PART 2: FIELD AND ENGINEERING SUPPORT SERVICES

1. Field Service Representation.

Boeing will furnish field service representation to advise Customer with respect to the maintenance and operation of the Aircraft (Field Service Representatives).

1.1 Field Service representation will be available at or near Customer’s main maintenance or engineering facility beginning before the scheduled delivery month of the first Aircraft and ending twelve (12) months after delivery of the last Aircraft covered by a specific purchase agreement.

1.2 When a Field Service Representative is positioned at Customer’s facility, Customer will provide, at no charge to Boeing, suitable furnished office space and office equipment, including internet capability for electronic access of data, at the location where Boeing is providing Field Service Representatives. As required, Customer will assist each Field Service Representative with visas, work permits, customs, mail handling, identification passes and formal introduction to local airport authorities.

1.3 Boeing’s Field Service Representatives are assigned to various airports and other locations around the world. Whenever Customer’s Aircraft are operating through any such airport, the services of Boeing’s Field Service Representatives are available to Customer.

2. Engineering Support Services.

2.1 Boeing will, if requested by Customer, provide technical advisory assistance from the Seattle area or at a base designated by Customer as appropriate for any Aircraft or Boeing Product (as defined in Part 1 of Exhibit C of the AGTA). Technical advisory assistance, provided, will include:

2.1.1 Analysis of the information provided by Customer to determine the probable nature and cause of operational problems and suggestion of possible solutions.

2.1.2 Analysis of the information provided by Customer to determine the nature and cause of unsatisfactory schedule reliability and the suggestion of possible solutions.


P.A. No. 3427		CS1
		2-1

		BOEING / UNITED PROPRIETARY

2.1.3 Analysis of the information provided by Customer to determine the nature and cause of unsatisfactory maintenance costs and the suggestion of possible solutions.

2.1.4 Analysis and commentary on Customer’s engineering releases relating to structural repairs not covered by Boeing’s Structural Repair Manual including those repairs requiring advanced composite structure design.

2.1.5 Analysis and commentary on Customer’s engineering proposals for changes in, or replacement of, systems, parts, accessories or equipment manufactured to Boeing’s detailed design. Boeing will not analyze or comment on any major structural change unless Customer’s request for such analysis and comment includes complete detailed drawings, substantiating information (including any information required by applicable government agencies), all stress or other appropriate analyses, and a specific statement from Customer of the substance of the review and the response requested.

2.1.6 One (1) evaluation of Customer’s technical facilities, tools and equipment for servicing and maintaining 787 aircraft, recommendation of changes where necessary and assistance in the formulation of an initial maintenance plan for the introduction of the first Aircraft into service.

2.1.7 Assistance with the analysis and preparation of performance data to be used in establishing operating practices and policies for Customer’s operation of Aircraft.

2.1.8 Assistance with interpretation of the minimum equipment list, the definition of the configuration deviation list and the analysis of individual Aircraft performance.

2.1.9 Assistance with solving operational problems associated with delivery and route-proving flights.

2.1.10 Information regarding significant service items relating to Aircraft performance or flight operations.

2.1.11 Operations engineering support during the ferry flight of an Aircraft.

2.1.12 Assistance in developing an Extended Twin Operations (ETOPs) plan for regulatory approval.


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		BOEING / UNITED PROPRIETARY

2.2 Boeing will, if requested by Customer, perform work on an Aircraft after delivery but prior to the initial departure flight or upon the return of the Aircraft to Boeing’s facility prior to completion of that flight. The following conditions will apply to Boeing’s performance:

2.2.1 Boeing may rely upon the commitment authority of the Customer’s personnel requesting the work.

2.2.2 As title and risk of loss has passed to Customer, the insurance provisions of Article 8.2 of the AGTA apply.

2.2.3 The provisions of the Boeing warranty in Part 2 of Exhibit C of the AGTA apply.

2.2.4 Customer will pay Boeing for requested work not covered by the Boeing warranty, if any.

2.2.5 The DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions in Article 11 of Part 2 of Exhibit C of the AGTA apply.

2.3 Boeing may, at Customer’s request, provide services other than those described in Articles 2.1 and 2.2 of this Supplemental Exhibit CS1 for an Aircraft after delivery, which may include, but not be limited to, retrofit kit changes (kits and/or information), training, flight services, maintenance and repair of Aircraft (Additional Services). Such Additional Services will be subject to a mutually acceptable price, schedule, scope of work and other applicable terms and conditions. The DISCLAIMER AND RELEASE and the EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions in Article 11 of Part 2 of Exhibit C of the AGTA and the insurance provisions in Article 8.2 of the AGTA will apply to any such work. Title to and risk of loss of any such Aircraft will always remain with Customer.


P.A. No. 3427		CS1
		2-3

		BOEING / UNITED PROPRIETARY

787 CUSTOMER SUPPORT DOCUMENT

PART 3: TECHNICAL INFORMATION AND MATERIALS

1. General.

Materials are defined as any and all items that are created by Boeing or a third party, which are provided directly or indirectly from Boeing and serve primarily to contain, convey or embody information. Materials may include either tangible embodiments (for example, documents or drawings), or intangible embodiments (for example, software and other electronic forms) of information but excludes Aircraft Software. Aircraft Software is defined as software that is installed on and used in the operation of the Aircraft.

Customer Information is defined as that data provided by Customer to Boeing which falls into one of the following categories: (i) aircraft operational information (including, but not limited to, flight hours, departures, schedule reliability, engine hours, number of aircraft, aircraft registries, landings, and daily utilization and schedule interruptions for Boeing model aircraft); (ii) summary and detailed shop findings data; (iii) aircraft readiness log data; (iv) non-conformance reports; (v) line maintenance data; (vi) airplane message data, (vii) scheduled maintenance data; and (viii) service bulletin incorporation.

Upon execution by Customer of Boeing’s standard form Customer Services General Terms Agreement and Supplemental Agreement for Electronic Access Boeing will provide to Customer through electronic access certain Materials to support the maintenance and operation of the Aircraft. Such Materials will, if applicable, be prepared generally in accordance with Air Transport Association of America (ATA) iSpec 2200, entitled “Information Standards for Aviation Maintenance.” Materials not covered by Spec 2200 will be provided in a structure suitable for the Material’s intended use. Materials will be in English and in the units of measure used by Boeing to manufacture an Aircraft.

2. Materials Planning Conferences.

Customer and Boeing will conduct planning conferences approximately twelve (12) months before the scheduled delivery month of the first Aircraft in order to mutually determine (i) the Materials to be furnished to Customer in support of the Aircraft, (ii) the Customer Information to be furnished by Customer to Boeing, (iii) the update cycles of the Materials to be furnished to Customer, (iv) the update cycles of the Customer Information to be furnished to Boeing, (v) any Customer preparations necessary for Customer’s transmittal of Customer Information to Boeing, and (vi) any Customer preparations necessary for Customer’s electronic access to the Materials.

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3. Technical Data and Maintenance Information.

Boeing will provide technical data and maintenance information equivalent to that traditionally provided in the following manuals and documents. The format for this data and information is not yet determined in all cases. Whenever possible Boeing will provide such data and information through electronic access.


a)		Flight Operations Information.
		Airplane Flight Manual
		Operations Manual and Checklist
		Weight and Balance Manual
		Dispatch Deviation Procedures Guide and Master Minimum Equipment List
		Flight Crew Training Manual
		Fault Reporting Manual
		Performance Engineer's Manual
		Jet Transport Performance Methods
		FMC Supplemental Data Document
		Operational Performance Software
		ETOPS Guide Vol. III
		Flight Planning and Performance Manual

b)		Maintenance Information.
		Maintenance Manual
		Wiring Diagram Manual
		Systems Schematics Manual
		Structural Repair Manual
		Component Maintenance Manual
		Standard Overhaul Practices Manual
		Standard Wiring Practices Manual
		Non-Destructive Test Manual
		Service Bulletins and Index
		Corrosion Prevention Manual
		Fault Isolation Manual
		Power Plant Buildup Manual (except [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT])
		All Operators Letters
		Service Letters
		Structural Item Interim Advisory
		Combined Index

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		Maintenance Tips
		Configuration Data Base Generator User Guide
		Production Management Data Base
		Baggage/Cargo Loading Manual

c)		Maintenance Planning.
		Maintenance Review Board Report
		Maintenance Planning Data Document
		Maintenance Task Cards and Index
		Maintenance Inspection Intervals Report
		ETOPS Guide Vol. II
		Configuration Maintenance and Procedures for Extended Range Operations

d)		Spares Information.
		Illustrated Parts Catalog
		Standards Books

e)		Airplane & Airport Information.
		Facilities and Equipment Planning Document
		Special Tool & Ground Handling Equipment Drawings & Index
		Supplementary Tooling Documentation
		Illustrated Tool and Equipment List/Manual
		Aircraft Recovery Document
		Airplane Characteristics for Airport Planning Document
		Airplane Rescue and Fire Fighting Document
		Engine Ground Handling Document
		ETOPS Guide Vol. I

f)		Shop Maintenance.
		Service Bulletins
		Component Maintenance Manuals and Index
		Publications Index
		Product Support Supplier Directory
		Supplier Product Support and Assurance Agreements

g)		Fleet Statistical Data and Reporting.
		Fleet Message and Fault Data views, charts, and reports

4. Advance Representative Materials.

Boeing will select all advance representative Materials from available sources and whenever possible will provide them through electronic access. Such advance Materials will be for advance planning purposes only.

CS1

5. Customized Materials.

All customized Materials will reflect the configuration of each Aircraft as delivered.

6. Revisions.

6.1 The schedule for updating certain Materials will be identified in the planning conference. Such updates will reflect changes to Materials developed by Boeing.

6.2 If Boeing receives written notice that Customer intends to incorporate, or has incorporated, any Boeing service bulletin in an Aircraft, Boeing will update Materials reflecting the effects of such incorporation into such Aircraft.

7. Supplier Technical Data.

7.1 For supplier-manufactured programmed airborne avionics components and equipment classified as Seller Furnished Equipment (SFE) which contain computer software designed and developed in accordance with Radio Technical Commission for Aeronautics Document No. RTCA/DO-178B dated December 1, 1992 (with an errata issued on March 26, 1999), or later as available, Boeing will request that each supplier of the components and equipment make software documentation available to Customer.

7.2 The provisions of this Article will not be applicable to items of BFE.

7.3 Boeing will furnish to Customer a document identifying the terms and conditions of the product support agreements between Boeing and its suppliers requiring the suppliers to fulfill Customer’s requirements for information and services in support of the Aircraft.

8. Buyer Furnished Equipment Data.

Boeing will incorporate BFE maintenance information into the customized Materials providing Customer makes the information available to Boeing at least six (6) months prior to the scheduled delivery month of each Aircraft. Boeing will incorporate such BFE maintenance information into the Materials prior to delivery of each Aircraft reflecting the configuration of that Aircraft as delivered. Upon Customer’s request, Boeing may provide update service after delivery to such information subject to the terms of Part 2, Article 2.3 relating to Additional Services. Customer agrees to furnish all BFE maintenance information in Boeing’s standard digital format.

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9. Customer’s Shipping Address.

From time to time Boeing may furnish certain Materials or updates to Materials by means other than electronic access. Customer will specify a single address and Customer shall promptly notify Boeing of any change to that address. Boeing will pay the reasonable shipping costs of the Materials. Customer is responsible for any customs clearance charges, duties, and taxes.

CS1

787 CUSTOMER SUPPORT DOCUMENT

PART 4: ALLEVIATION OR CESSATION OF PERFORMANCE

Boeing will not be required to provide any services, training or other things at a facility designated by Customer if any of the following conditions exist:

1. a labor stoppage or dispute in progress involving Customer;

2. wars or warlike operations, riots or insurrections in the country where the facility is located;

3. any condition at the facility which, in the opinion of Boeing, is detrimental to the general health, welfare or safety of its personnel or their families;

4. the United States Government refuses permission to Boeing personnel or their families to enter into the country where the facility is located, or recommends that Boeing personnel or their families leave the country; or

After the location of Boeing personnel at the facility, Boeing further reserves the right, upon the occurrence of any of such events, to immediately and without prior notice to Customer relocate its personnel and their families.

Boeing will not be required to provide any Materials at a facility designated by Customer if the United States Government refuses permission to Boeing to deliver Materials to the country where the facility is located.

CS1

787 CUSTOMER SUPPORT DOCUMENT

PART 5: PROTECTION OF PROPRIETARY INFORMATION

AND PROPRIETARY MATERIALS

1. General.

All Materials provided by Boeing to Customer and not covered by a Boeing CSGTA or other agreement between Boeing and Customer defining Customer’s right to use and disclose the Materials and included information will be covered by and subject to the terms of the AGTA as amended by the terms of the Purchase Agreement. Title to all Materials containing, conveying or embodying confidential, proprietary or trade secret information (Proprietary Information) belonging to Boeing or a third party (Proprietary Materials), will at all times remain with Boeing or such third party. Customer will treat all Proprietary Materials and all Proprietary Information in confidence and use and disclose the same only as specifically authorized in the AGTA as amended by the terms of the Purchase Agreement.

2. License Grant.

2.1 Boeing grants to Customer a worldwide, non-exclusive, non-transferable license to use and disclose Proprietary Materials in accordance with the terms and conditions of the AGTA as amended by the terms of the Purchase Agreement. Customer is authorized to make copies of Materials (except for Materials bearing the copyright legend of a third party), and all copies of Proprietary Materials will belong to Boeing and be treated as Proprietary Materials under the AGTA as amended by the terms of the Purchase Agreement. Customer will preserve all proprietary legends, and all copyright notices on all Materials and insure the inclusion of those legends and notices on all copies.

2.2 Customer grants to Boeing a perpetual, world-wide, non-exclusive license to use and disclose Customer Information or derivative works thereof in Boeing data and information products and services provided indicia identifying Customer Information as originating from Customer is removed from such Customer Information.

3. Use of Proprietary Materials and Proprietary Information.

Customer is authorized to use Proprietary Materials and Proprietary Information for the purpose of: (a) operation, maintenance, repair, or modification of Customer’s Aircraft for which the Proprietary Materials and Proprietary Information have been specified by Boeing and (b) development and manufacture of training devices and maintenance tools for use by Customer.

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4. Providing of Proprietary Materials to Contractors.

Customer is authorized to provide Proprietary Materials to Customer’s contractors for the sole purpose of maintenance, repair, or modification of Customer’s Aircraft for which the Proprietary Materials have been specified by Boeing. In addition, Customer may provide Proprietary Materials to Customer’s contractors for the sole purpose of developing and manufacturing training devices and maintenance tools for Customer’s use. Before providing Proprietary Materials to its contractor, Customer will first obtain a written agreement from the contractor by which the contractor agrees (a) to use the Proprietary Materials only on behalf of Customer, (b) to be bound by all of the restrictions and limitations of this Part 5, and (c) that Boeing is a third party beneficiary under the written agreement. Customer agrees to provide copies of all such written agreements to Boeing upon request and be liable to Boeing for any breach of those agreements by a contractor. A sample agreement acceptable to Boeing is attached as Appendix VII to the AGTA.

5. Providing of Proprietary Materials and Proprietary Information to Regulatory Agencies.

5.1 When and to the extent required by a government regulatory agency having jurisdiction over Customer or an Aircraft, Customer is authorized to provide Proprietary Materials and to disclose Proprietary Information to the agency for use in connection with Customer’s operation, maintenance, repair, or modification of such Aircraft. Customer agrees to take all reasonable steps to prevent the agency from making any distribution, disclosure, or additional use of the Proprietary Materials and Proprietary Information provided or disclosed. Customer further agrees to notify Boeing immediately upon learning of any (a) distribution, disclosure, or additional use by the agency, (b) request to the agency for distribution, disclosure, or additional use, or (c) intention on the part of the agency to distribute, disclose, or make additional use of Proprietary Materials or Proprietary Information.

5.2 In the event of an Aircraft or Aircraft systems-related incident, the Customer may suspend, or block access to Customer Information pertaining to its Aircraft or fleet. Such suspension may be for an indefinite period of time.

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Attachment A to Supplemental Exhibit CS1 to Purchase Agreement Number 3427

787 TRAINING POINTS MENU


787 Training Courses	Per Class Student Maximum	Total Points Per ClassUAL
Flight
787 Pilot Transition Course	2	[]*
787 Pilot Transition Course during Non-social Sessions UAL	2	[]*
787 Pilot Shortened Transition Course (STAR)	2	[]*
787 Pilot Shortened Transition Course (STAR) during Non-social Sessions UAL	2	[]*
787 Pilot Recurrent Course	2	[]*
787 Pilot Recurrent Course during Non-social Sessions UAL	2	[]*
Additional 787 Four Hour Simulator Session with Alteon Instructor	2	[]*
Additional 787 Ground School Training Day	2	[]*
Cabin Crew
787 Transition + Exits/Doors Courses	12	[]*
Maintenance
787 General Familiarization Maintenance Course	24	[]*
787 Airframe/Powerplant/Electrical/ Avionics Systems Line & Base Maintenance Course	15	[]*
787 Airframe/Powerplant Systems Line & Base Maintenance Course	15	[]*
787 Electrical Systems Line & Base Maintenance Course	15	[]*
787 Avionics Systems Line & Base Maintenance Course	15	[]*
787 JAR 147 Approved B1 Airframe/Powerplant/Electrical Line & Base Maintenance with Avionics Ramp and Transit Maintenance Course	15	[]*
787 JAR 147 Approved B2 Electrical/Avionics Line & Base Maintenance Course	15	[]*

[***] represents [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

Attachment A to Supplemental Exhibit CS1 to Purchase Agreement Number 3427

787 TRAINING POINTS MENU


787 Engine Run-Up & Taxi Course	3	[]*
Maintenance (Continued)
787 Corrosion Prevention & Control Course	10	[]*
787 Aircraft Rigging Course	6	[]*
787 Composite Repair for Technicians Course	8	[]*
787 Composite Repair for Engineers	8	[]*
787 Composite Repair for Inspectors	8	[]*
787 Troubleshooting	6	[]*

Generic Training Courses
Composite/Metal Bond Part I - Introduction to Advanced Composite Materials and Metal Bond Repair	12	[]*
Composite/Metal Bond Part II - Basic Composite Repair for Technicians	12	[]*
Composite/Metal Bond Part III - Advanced Composite Component Repair	12	[]*
Composite/Metal Bond Part IV—Advanced Composite Repair for Technicians	12	[]*
Composite/Metal Bond Part V—Metal Bond Repair for Technicians	12	[]*
Repair of Advanced Composite Structures for Engineers	20	[]*
Composite Repair Design with Practical Application	12	[]*

UAL Points per Class are based upon training conducted according to the standard Boeing training course. Extended or modified courses will require point adjustment to reflect altered work statement or duration.

UAL Non-social Sessions are those in which any part of the session falls between midnight and 06:00 A.M. local time. To qualify for this discount all simulator sessions for a given course must be scheduled as Non-social Sessions.

[***] represents [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

Attachment A to Supplemental Exhibit CS1 to Purchase Agreement Number 3427

787 TRAINING POINTS MENU

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

ENGINE ESCALATION AND

ENGINE WARRANTY

between

THE BOEING COMPANY

and

UNITED AIR LINES, INC.

Supplemental Exhibit EE1 – [CONFIDENTIAL MATERIAL OMITTED AND FILED

SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL

TREATMENT] to Purchase Agreement Number 3427

[***] represents [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

PA_Supp_EX_EE1_[***]_ECI-MFG_CPI_2008_

United Air Lines, Inc.

[***] Series Engines

1. ENGINE ESCALATION.

The Aircraft Basic Price of each Aircraft set forth in Table 1 of the Purchase Agreement includes [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] in accordance with the following formula:

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

2. Values to be Utilized in the Event of Unavailability.

3. Engine Warranty.

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

P.A. No. 3427

PA_Supp_EX_EE1_[***]_ECI-MFG_CPI_2008_

BOEING / UNITED PROPRIETARY

ENGINE ESCALATION AND

ENGINE WARRANTY

between

THE BOEING COMPANY

and

UNITED AIR LINES, INC.

Supplemental Exhibit EE1-[***] to Purchase Agreement Number 3427

[***] represents [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

P.A. No. 3427

PA_Supp_EX_EE1_[***]_ECI-MRG_CPI_2008

BOEING / UNITED PROPRIETARY

United Air Lines, Inc.

[***] Engines

1. ENGINE ESCALATION.

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

2. Values to be Utilized in the Event of Unavailability.

2.1 If the Bureau of Labor Statistics substantially revises the methodology used for the determination of the values to be used to determine [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] or for any reason has not released [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] from other Bureau of Labor Statistics data or similar data reported by non-governmental organizations. Such substitute will result in the same adjustment, insofar as possible, as would have been calculated utilizing the original values adjusted for fluctuation during the applicable time period. However, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] the Bureau of Labor Statistics should resume releasing values for the months needed to determine [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].


P.A. No. 3427		EE1-[***] - 2

PA_Supp_EX_EE1_[***]_ECI-MRG_CPI_2008

BOEING / UNITED PROPRIETARY

United Air Lines, Inc.

[***] Engines

3. Engine Warranty.

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].


P.A. No. 3427		EE1-[***] - 3

PA_Supp_EX_EE1_[***]_ECI-MRG_CPI_2008

BOEING / UNITED PROPRIETARY

SERVICE LIFE POLICY COMPONENTS

between

THE BOEING COMPANY

and

UNITED AIR LINES, INC.

Supplemental Exhibit SLP1 to Purchase Agreement Number 3427

BOEING / UNITED PROPRIETARY

SERVICE LIFE POLICY COMPONENTS

relating to

BOEING MODEL 787 AIRCRAFT

This is the listing of SLP Components for the Aircraft which relate to Part 3, Boeing Service Life Policy of Exhibit C, Product Assurance Document to the AGTA and is a part of Purchase Agreement No. 3427.

Wing.

(a)

Upper and lower wing skins and stiffeners between the forward and rear wing spars.

(b)

Wing spar webs, chords and stiffeners.

(c)

Inspar wing ribs.

(d)

Inspar splice plates and fittings.

(e)

Main landing gear support structure.

(f)

End ribs removable outboard wingbox, including spars and skins.

(g)

Wing center section lower beams, spanwise beams and floor beams, but not the seat tracks attached to floor beams.

(h)

Wing-to-body structural attachments.

(i)

Engine pylon support fittings attached directly to wing primary structure.

(j)

Support structure in the wing for spoilers and spoiler actuators; for aileron hinges and reaction links; and for leading edge devices and trailing edge flaps/flapperon.

(k)

Leading edge device and trailing edge flap support system.

(l)

Aileron leading edge device and trailing edge flap internal, fixed attachment and actuator support structure.

(m)

Winglets (787-3).

BOEING / UNITED PROPRIETARY

Body.

(a)

External surface skins and doublers, longitudinal stiffeners, longerons and circumferential rings and frames between the forward pressure bulkhead and the vertical stabilizer rear spar bulkhead and structural support and enclosure for the APU but excluding all system components and related installation and connecting devices, insulation, lining, and decorative panels and related installation and connecting devices.

(b)

Window and windshield structure but excluding the windows and windshields.

(c)

Fixed attachment structure of the passenger doors, cargo doors and emergency exits, excluding door mechanisms and movable hinge components. Sills and frames around the body openings for the passenger doors, cargo doors and emergency exits, excluding scuff plates and pressure seals.

(d)

Nose wheel well structure, including the wheel well walls, pressure deck, forward and aft bulkheads, and the gear support structure.

(e)

Main gear wheel well pressure deck, bulkheads and landing gear beam structure.