What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-07-22 compared with 2021-04-22 · 321 added, 157 removed, 563 unchanged (46% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Operating revenue:

20 unchanged sentences

Interest income 12 11 19 37

Unrealized losses on investments, net ( 22 ) ( 319 )

Unrealized gains (losses) on investments, net 147 9 125 ( 310 )

Miscellaneous, net ( 49 ) ( 207 ) ( 68 ) ( 906 )

8 unchanged sentences

(In millions)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net loss $ ( 434 ) $ ( 1,627 ) $ ( 1,791 ) $ ( 3,331 )

8 unchanged sentences

(In millions, except shares)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current assets:

30 unchanged sentences

(In millions, except shares)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

LIABILITIES AND STOCKHOLDERS' EQUITY

7 unchanged sentences

Current maturities of finance leases 144 182

Payroll Support Program deferred credit 1,132 —

Other 819 724

15 unchanged sentences

authorized 1,000,000,000 shares;

outstanding 323,577,438 and 311,845,232 shares at March 31, 2021 and December 31, 2020, respectively

outstanding 323,610,765 and 311,845,232 shares at June 30, 2021 and December 31, 2020, respectively

Additional capital invested 9,042 8,366

8 unchanged sentences

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Operating Activities:

Net cash provided by operating activities $ 447 $ 63

Net cash provided by (used in) operating activities $ 3,122 $ ( 67 )

Cash Flows from Investing Activities:

Capital expenditures ( 444 ) ( 1,959 )

Purchases of short-term and other investments — ( 541 )

Proceeds from sale of short-term and other investments 105 927

Capital expenditures, net of flight equipment purchase deposit returns ( 1,305 ) ( 1,998 )

Purchases of short-term investments — ( 550 )

Proceeds from sale of short-term investments 184 1,774

Other, net 11 14

14 unchanged sentences

Right-of-use assets acquired through operating leases 214 48

Warrants received for entering into agreements with Archer Aviation Inc ("Archer")

Notes receivable and warrants received for entering into agreements

(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:

12 unchanged sentences

Shares Amount

Balance at March 31, 2021 323.6 $ 4 $ 8,923 $ ( 3,834 ) $ 1,239 $ ( 1,126 ) $ 5,206

Net loss — — — — ( 434 ) — ( 434 )

Other comprehensive income — — — — — 12 12

Stock settled share-based compensation — — 68 — — — 68

Warrants issued — — 52 — — — 52

Stock issued for share-based awards, net of shares withheld for tax — — ( 1 ) 2 ( 1 ) — —

Balance at June 30, 2021 323.6 $ 4 $ 9,042 $ ( 3,832 ) $ 804 $ ( 1,114 ) $ 4,904

Balance at December 31, 2020 311.8 $ 4 $ 8,366 $ ( 3,897 ) $ 2,626 $ ( 1,139 ) $ 5,960

4 unchanged sentences

Warrants issued — — 99 — — — 99

Net treasury stock issued for share-based awards 0.8 — ( 54 ) 63 ( 30 ) — ( 21 )

Stock issued for share-based awards, net of shares withheld for tax 0.8 — ( 55 ) 65 ( 31 ) — ( 21 )

Balance at June 30, 2021 323.6 $ 4 $ 9,042 $ ( 3,832 ) $ 804 $ ( 1,114 ) $ 4,904

Balance at March 31, 2020 247.3 $ 3 $ 6,096 $ ( 3,901 ) $ 7,991 $ ( 771 ) $ 9,418

Net loss — — — — ( 1,627 ) — ( 1,627 )

Other comprehensive loss — — — — — ( 488 ) ( 488 )

Stock settled share-based compensation — — 20 — — — 20

Issuance of common stock 43.7 — 1,135 — — — 1,135

Warrants issued — — 57 — — — 57

Stock issued for share-based awards, net of shares withheld for tax — — ( 1 ) 2 1 — 2

Balance at June 30, 2020 291.0 $ 3 $ 7,307 $ ( 3,899 ) $ 6,365 $ ( 1,259 ) $ 8,517

Balance at December 31, 2019 251.2 $ 3 $ 6,129 $ ( 3,599 ) $ 9,716 $ ( 718 ) $ 11,531

2 unchanged sentences

Stock settled share-based compensation — — 42 — — — 42

Issuance of common stock 43.7 — 1,135 — — — 1,135

Repurchases of common stock ( 4.4 ) — — ( 342 ) — — ( 342 )

Net treasury stock issued for share-based awards 0.5 — ( 55 ) 40 ( 4 ) — ( 19 )

Warrants issued — — 57 — — — 57

Stock issued for share-based awards, net of shares withheld for tax 0.5 — ( 56 ) 42 ( 3 ) — ( 17 )

Adoption of new accounting standard (a) — — — — ( 17 ) — ( 17 )

Balance at March 31, 2020 247.3 $ 3 $ 6,096 $ ( 3,901 ) $ 7,991 $ ( 771 ) $ 9,418

Balance at June 30, 2020 291.0 $ 3 $ 7,307 $ ( 3,899 ) $ 6,365 $ ( 1,259 ) $ 8,517

(a) Transition adjustment due to the adoption of Accounting Standards Update No.

4 unchanged sentences

(In millions)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Operating revenue:

30 unchanged sentences

(In millions)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net loss $ ( 434 ) $ ( 1,626 ) $ ( 1,791 ) $ ( 3,330 )

8 unchanged sentences

(In millions, except shares)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current assets:

30 unchanged sentences

(In millions, except shares)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

LIABILITIES AND STOCKHOLDER'S EQUITY

7 unchanged sentences

Current maturities of finance leases 144 182

Payroll Support Program deferred credit 1,132 —

Other 823 728

14 unchanged sentences

authorized 1,000 shares;

issued and outstanding 1,000 shares at both March 31, 2021 and December 31, 2020

issued and outstanding 1,000 shares at both June 30, 2021 and December 31, 2020

Additional capital invested 185 85

8 unchanged sentences

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Operating Activities:

Net cash provided by operating activities $ 426 $ 45

Net cash provided by (used in) operating activities $ 3,101 $ ( 78 )

Cash Flows from Investing Activities:

Capital expenditures ( 444 ) ( 1,959 )

Purchases of short-term investments and other investments — ( 541 )

Proceeds from sale of short-term and other investments 105 927

Capital expenditures, net of flight equipment purchase deposit returns ( 1,305 ) ( 1,998 )

Purchases of short-term investments — ( 550 )

Proceeds from sale of short-term investments 184 1,774

Other, net 11 14

5 unchanged sentences

Dividend to UAL — ( 353 )

Other, net ( 1 ) ( 1 )

Net cash provided by financing activities 7,575 4,588

6 unchanged sentences

Right-of-use assets acquired through operating leases 214 48

Warrants received for entering into agreements with Archer

Notes receivable and warrants received for entering into agreements

(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:

10 unchanged sentences

Other Comprehensive Income (Loss) (Receivable from) Payable to Related Parties, Net Total

Balance at March 31, 2021 $ 117 $ 3,582 $ ( 1,126 ) $ 2,602 $ 5,175

Net loss — ( 434 ) — — ( 434 )

Other comprehensive income — — 12 — 12

Stock-settled share-based compensation 68 — — — 68

Other — — — 51 51

Balance at June 30, 2021 $ 185 $ 3,148 $ ( 1,114 ) $ 2,653 $ 4,872

Balance at December 31, 2020 $ 85 $ 4,939 $ ( 1,139 ) $ 2,043 $ 5,928

4 unchanged sentences

Other — — — 78 78

Balance at June 30, 2021 $ 185 $ 3,148 $ ( 1,114 ) $ 2,653 $ 4,872

Balance at March 31, 2020 $ 10 $ 10,302 $ ( 771 ) $ ( 161 ) $ 9,380

Net loss — ( 1,626 ) — — ( 1,626 )

Other comprehensive loss — — ( 488 ) — ( 488 )

Stock-settled share-based compensation 20 — — — 20

Impact of UAL common stock issuance — — — 1,135 1,135

Other — — — 64 64

Balance at June 30, 2020 $ 30 $ 8,676 $ ( 1,259 ) $ 1,038 $ 8,485

Balance at December 31, 2019 $ — $ 12,353 $ ( 718 ) $ ( 143 ) $ 11,492

3 unchanged sentences

Stock settled share-based compensation 42 — — — 42

Adoption of new accounting standard (a) — ( 17 ) — — ( 17 )

Impact of UAL common stock issuance — — — 1,135 1,135

Other — — — 46 46

Balance at March 31, 2020 $ 10 $ 10,302 $ ( 771 ) $ ( 161 ) $ 9,380

Adoption of new accounting standard (a) — ( 17 ) — — ( 17 )

Balance at June 30, 2020 $ 30 $ 8,676 $ ( 1,259 ) $ 1,038 $ 8,485

(a) Transition adjustment due to the adoption of Accounting Standards Update No.

23 unchanged sentences

The novel coronavirus (COVID-19) pandemic, together with the measures implemented or recommended by governmental authorities and private organizations in response to the pandemic, has had an adverse impact that has been material to the Company's business, operating results, financial condition and liquidity.

The Company began experiencing a significant decline in international and domestic demand related to COVID-19 during the first quarter of 2020, and this reduction in demand has continued through the date of this report.

The Company cut, relative to first quarter 2019 capacity, approximately 54 % of its scheduled capacity for the first quarter of 2021.

The full extent of the ongoing impact of COVID-19 on the Company's longer-term operational and financial performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus in different markets, the introduction and spread of new variants of the virus that may be resistant to currently approved vaccines and the continuation of existing or implementation of new government travel restrictions.

The Company began experiencing a significant decline in international and domestic travel demand related to COVID-19 during the first quarter of 2020, and this reduction in demand has continued through the date of this report.

However, since March 2021, the Company has seen increasing demand for travel both domestically and in countries where entry is permitted.

The Company expects its second quarter scheduled capacity to be down approximately 45 % versus the second quarter of 2019.

The full extent of the ongoing impact of COVID-19 on the Company's longer-term operational and financial performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus which may be resistant to currently approved vaccines and the continuation of existing or implementing of new government travel restrictions.

The Company entered into a number of transactions to improve its liquidity.

In the first quarter of 2021, the Company has:

• issued or entered into approximately $ 1.4 billion in new enhanced equipment trust certificate ("EETC") and government loans;

The Company cut, relative to second quarter 2019 capacity, approximately 46 % of its scheduled capacity for the second quarter of 2021 and expects its third quarter scheduled capacity to be down approximately 26 % versus the third quarter of 2019.

The Company will continue to monitor booking trends for future travel and adjust its capacity as needed.

Cost Reductions .

The Company has identified various permanent structural cost reductions including improvements in labor efficiencies.

During the first quarter of 2021, the Company offered voluntary leaves of absences to certain U.S.-based front-line employees.

This program included (based on employee group, age and completed years of service) a partially-paid leave of absence with active health care coverage and travel privileges.

Employees who separate from the Company after the end of such program receive certain separation benefits, such as post-employment health benefits and travel privileges.

Approximately 4,500 employees elected to participate in this program, and it is expected that the majority of them will separate from employment at the end of their leave of absence.

See Note 5 and Note 9 of this report for additional information on charges related to these programs.

The Company entered into a number of transactions to improve its liquidity and manage its capital.

In the first half of 2021, the Company:

• issued, through a private offering to eligible purchasers, $ 4.0 billion in aggregate principal amount of two series of notes, consisting of $ 2.0 billion in aggregate principal amount of 4.375 % senior secured notes due 2026 (the "2026 Notes") and $ 2.0 billion in aggregate principal amount of 4.625 % senior secured notes due 2029 (the "2029 Notes" and, together with the 2026 Notes, the "Notes," and each a "series" of Notes);

• entered into a new Term Loan Credit and Guaranty Agreement (the "New Term Loan Facility") initially providing term loans (the "New Term Loans") up to an aggregate amount of $ 5.0 billion and a new Revolving Credit and

Guaranty Agreement (the "New Revolving Credit Facility" and, together with the New Term Loan Facility, the "New Loan Facilities") initially providing revolving loan commitments of up to $ 1.75 billion;

• repaid in full the $ 1.4 billion aggregate principal amount outstanding under the term loan facility (the "2017 Term Loan Facility") included in the Amended and Restated Credit and Guaranty Agreement, dated as of March 29, 2017 (the "Existing Credit Agreement");

• repaid in full the $ 1.0 billion aggregate principal amount outstanding under the revolving credit facility (the "2017 Revolving Credit Facility") included in the Existing Credit Agreement;

• repaid in full the $ 520 million aggregate principal amount outstanding under the Loan and Guarantee Agreement, dated as of September 28, 2020, among United, UAL, the U.S.

Treasury Department ("Treasury") and the Bank of New York Mellon, as administrative agent, as amended (the "CARES Act Loan" and, together with the 2017 Term Loan Facility and the 2017 Revolving Credit Facility, the "Existing Loan Facilities"), which was entered into pursuant to the loan program established pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act");

• entered into approximately $ 0.6 billion in new enhanced equipment trust certificates ("EETC");

• raised approximately $ 0.5 billion in net cash proceeds from the issuance and sale of UAL common stock.

Furthermore, on January 15, 2021, United entered into a Payroll Support Program Extension Agreement (the "PSP2 Agreement") with the U.S.

Treasury Department ("Treasury") providing the Company with total funding of approximately $ 2.6 billion, pursuant to the Payroll Support Program established under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (the "PSP Extension Law").

In addition to the foregoing transactions, United entered into the following agreements with Treasury:

On January 15, 2021, United entered into a Payroll Support Program Extension Agreement (the "PSP2 Agreement") with Treasury providing the Company with total funding of approximately $ 3.0 billion, pursuant to the Payroll Support Program established under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021.

These funds were used to pay for the wages, salaries and benefits of United employees, including the payment of lost wages, salaries and benefits to returning employees.

Approximately $ 2.1 billion was provided as a direct grant and $ 870 million as indebtedness evidenced by a 10 -year senior unsecured promissory note (the "PSP2 Note").

The Company expects to receive an additional amount of approximately $ 391 million under the PSP2 Agreement, of which $ 117 million is expected to be in the form of an unsecured loan.

See Note 2 of this report for additional information on the warrants issued in connection with the PSP2 Note and Note 8 of this report for a discussion of the PSP2 Note.

As a result of the PSP2 Agreement, the Company offered an opportunity to return to active employment to employees who were impacted by involuntary furloughs.

The American Rescue Plan Act of 2021 ("PSP3") was enacted on March 11, 2021, authorizing Treasury to provide additional assistance to a passenger air carrier or contractor that (1) received financial assistance under the PSP Extension Law;

(2) provided air transportation as of March 31, 2021 and (3) has not conducted involuntary terminations or furloughs or reduced pay rates or benefits between March 31, 2021 and the date on which the air carrier makes certain certifications that will be included in its PSP3 agreement with Treasury.

The Company expects to enter into a PSP3 agreement with Treasury and expects to receive assistance of approximately $ 2.8 billion, of which approximately $ 0.8 billion is expected to be in the form of an unsecured loan.

The Company also expects to issue, to Treasury, warrants to purchase up to approximately 1.5 million shares of UAL common stock at a strike price of $ 53.92 .

During the first quarter of 2021, the Company offered Voluntary Separation Leave ("VSL") programs to certain U.S.

based front-line employees.

The Company offered, based on employee group, age and completed years of service, pay continuation, health care coverage and travel benefits.

Approximately 4,500 employees elected to voluntarily separate from the Company.

See Note 5 and Note 9 of this report for additional information on charges related to these programs.

On April 21, 2021, United issued, through a private offering to eligible purchasers, $ 4.0 billion in aggregate principal amount of two series of notes, consisting of $ 2.0 billion in aggregate principal amount of 4.375 % senior secured notes due 2026 (the "2026 Notes") and $ 2.0 billion in aggregate principal amount of 4.625 % senior secured notes due 2029 (the "2029 Notes" and, together with the 2026 Notes, the "Notes," and each a "series" of Notes).

Concurrently with the closing of the offering of the Notes, United also entered into a new Term Loan Credit and Guaranty Agreement (the "New Term Loan Facility") initially providing term loans (the "New Term Loans") up to an aggregate amount of $ 5.0 billion and a new Revolving Credit and Guaranty Agreement (the "New Revolving Credit Facility" and, together with the New Term Loan Facility, the "New Loan Facilities") initially providing revolving loan commitments of up to $ 1.75 billion.

United borrowed the full amount of the New Term Loans on April 21, 2021.

United used the net proceeds from the offering of the Notes and borrowings under the New Term Loan Facility (i) to repay in full the $ 1.4 billion aggregate principal amount outstanding under the term loan facility (the "2017 Term Loan Facility") included in the Amended and Restated Credit and Guaranty Agreement, dated as of March 29, 2017 (the "Existing Credit Agreement"), the $ 1.0 billion aggregate principal amount outstanding under the revolving credit facility (the "2017 Revolving Credit Facility") included in the Existing Credit Agreement and the $ 520 million aggregate principal amount outstanding under the Loan and Guarantee Agreement, dated as of September 28, 2020, among United, UAL, Treasury and the Bank of New York Mellon, as administrative agent, as amended (the "CARES Act Loan” and, together with the 2017 Term Loan Facility and the 2017 Revolving Credit Facility, the "Facilities") entered into pursuant to the loan program established pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), (ii) to pay fees and expenses relating to the offering of the Notes and (iii) for United's general corporate purposes.

As a result of such repayments, the Facilities were terminated on April 21, 2021 and no further borrowings may be made thereunder.

See Note 8 of this report for additional information on the Notes and the New Loan Facilities.

As a result of the PSP2 Agreement, the Company offered an opportunity to return to active employment to U.S.

employees who were impacted by involuntary furloughs.

On April 29, 2021, in connection with the Payroll Support Program established under Section 7301 of the American Rescue Plan Act of 2021, United entered into a Payroll Support Program 3 Agreement (the "PSP3 Agreement") with Treasury providing the Company with total funding of approximately $ 2.8 billion.

Approximately $ 2.0 billion was provided as a direct grant and $ 810 million as indebtedness evidenced by a 10 -year senior unsecured promissory note (the "PSP3 Note").

These funds will be used by United exclusively for the continuation of payment of its employee wages, salaries and benefits.

See Note 2 of this report for additional information on the warrants issued in connection with the PSP3 Note and Note 8 of this report for a discussion of the PSP3 Note.

United Next .

On June 27, 2021, United entered into a supplemental agreement to that certain Purchase Agreement, dated May 15, 2018 with The Boeing Company ("Boeing") for a firm narrowbody aircraft order of 200 Boeing 737 MAX aircraft.

The order consists of 150 Boeing 737 MAX 10s and 50 Boeing 737 MAX 8s.

Also on June 27, 2021, United entered into an amendment to that certain Purchase Agreement, dated December 3, 2019 with Airbus S.A.S ("Airbus") for a firm narrowbody aircraft order of 70 Airbus A321neo aircraft.

The firm orders of 200 Boeing 737 MAX aircraft and 70 Airbus A321neo aircraft are expected to be delivered starting in 2023 through 2028 and 2026, respectively.

NOTE 1 - REVENUE

2 unchanged sentences

Department of Transportation) (in millions):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Domestic (U.S.

9 unchanged sentences

In February 2021, the Company extended the expiration dates for all tickets issued between May 1, 2019 and March 31, 2021 to March 31, 2022.

As of March 31, 2021, the Company's Advance ticket sales liability included $ 2.8 billion related to these ETCs and FFCs.

As of June 30, 2021, the Company's Advance ticket sales liability included $ 2.6 billion related to these ETCs and FFCs.

The Company is unable to estimate the amount of the ETCs and FFCs that will be used within the next 12 months and has classified the entire amount of the Advance ticket sales liability in current liabilities even though some of the ETCs could be used after the next 12 months.

Also, the Company is unable to estimate the amount of the June 30, 2021 Advance ticket sales that will be recognized in revenue in 2021 compared to amounts refunded to customers or exchanged into ETCs.

The Company records breakage revenue on the travel date for its estimate of tickets that will expire unused.

2 unchanged sentences

The Company will update its breakage estimates as future information is received.

Also, the Company is unable to estimate the amount of the March 31, 2021 Advance ticket sales that will be recognized in revenue in 2021 compared to amounts refunded to customers or exchanged into ETCs.

In the three months ended March 31, 2021 and 2020, the Company recognized approximately $ 0.7 billion and $ 2.6 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods.

In the three and six months ended June 30, 2021, the Company recognized approximately $ 1.5 billion and $ 1.4 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods.

In the three and six months ended June 30, 2020, the Company recognized approximately $ 0.5 billion and $ 2.8 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods.

Ancillary Fees.

The Company charges fees, separately from ticket sales, for certain ancillary services that are directly related to passengers' travel, such as baggage fees, premium seat fees, inflight amenities fees and other ticket-related fees.

The Company charges fees, separately from ticket sales, for certain ancillary services that are directly related to passengers' travel, such as baggage fees, premium seats, inflight amenities and other ticket-related fees.

These ancillary fees are part of the travel performance obligation and, as such, are recognized as passenger revenue when the travel occurs.

The Company recorded $ 308 million and $ 705 million of ancillary fees within passenger revenue in the three months ended March 31, 2021 and 2020, respectively.

The Company recorded $ 499 million and $ 807 million of ancillary fees within passenger revenue in the three and six months ended June 30, 2021, respectively.

The Company recorded $ 71 million and $ 776 million of ancillary fees within passenger revenue in the three and six months ended June 30, 2020, respectively.

Frequent Flyer Accounting.

The table below presents a roll forward of Frequent flyer deferred revenue (in millions):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Total Frequent flyer deferred revenue - beginning balance $ 6,109 $ 5,488 $ 5,975 $ 5,276

3 unchanged sentences

Total Frequent flyer deferred revenue - ending balance $ 6,185 $ 5,670 $ 6,185 $ 5,670

In the three months ended March 31, 2021 and 2020, the Company recognized, in Other operating revenue, $ 362 million and $ 530 million, respectively, related to the marketing, advertising, non-travel miles redeemed (net of related costs) and other travel-related benefits of the mileage revenue associated with our various partner agreements including, but not limited to, our JPMorgan Chase Bank, N.A.

In the three and six months ended June 30, 2021, the Company recognized, in Other operating revenue, $ 449 million and $ 811 million, respectively, related to the marketing, advertising, non-travel miles redeemed (net of related costs) and other travel-related benefits of the mileage revenue associated with our various partner agreements including, but not limited to, our JPMorgan Chase Bank, N.A.

co-brand agreement.

The Company recognized $ 339 million and $ 869 million, respectively, in the three and six months ended June 30, 2020, related to those agreements.

The portion related to the MileagePlus miles awarded of the total amounts received from our various partner agreements is deferred and presented in the table above as an increase to the frequent flyer liability.

We determine the current portion of our frequent flyer liability based on expected redemptions in the next 12 months.

We determine the current portion of our frequent flyer liability based on expected redemptions in the

next 12 months.

Given the uncertainty in travel demand caused by COVID-19, we currently estimate a large percentage of award redemptions will occur beyond 12 months;

2 unchanged sentences

The computations of UAL's basic and diluted loss per share are set forth below (in millions, except per share amounts):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Loss available to common stockholders $ ( 434 ) $ ( 1,627 ) $ ( 1,791 ) $ ( 3,331 )

5 unchanged sentences

The relative fair value of the PSP2 Warrants was calculated using a Black-Scholes options pricing model, and approximately $ 56 million was recorded within stockholders' equity with an offset to the CARES Act grant credit.

The PSP2 Warrants contain customary anti-dilution provisions, registration rights and are freely transferable.

Pursuant to the terms of the PSP2 Warrants, PSP2 Warrant holders do not have any voting rights.

As of March 31, 2021 , the Company had the following warrants outstanding:

During the second quarter of 2021, UAL also entered into a warrant agreement with Treasury, pursuant to which UAL issued to Treasury warrants to purchase up to approximately 1.5 million shares of UAL common stock (the "PSP3 Warrants").

The PSP3 Warrants have a strike price of $ 53.92 per share.

The PSP3 Warrants will expire five years after issuance and are exercisable either through net share settlement in cash or in shares of UAL common stock, at UAL's option.

The relative fair value of the PSP3 Warrants was calculated using a Black-Scholes options pricing model, and approximately $ 43 million was recorded within stockholders' equity with an offset to the CARES Act grant credit.

The PSP2 Warrants and PSP3 Warrants contain customary anti-dilution provisions and registration rights and are freely transferable.

Pursuant to the terms of the PSP2 Warrants and PSP3 Warrants, warrant holders do not have any voting rights.

As of June 30, 2021 , the Company had the following warrants outstanding:

Warrant Description Number of Shares of UAL Common Stock (in millions) Exercise Price Expiration Dates

PSP1 Warrants (a) 4.8 $ 31.50 4/20/2025 — 9/30/2025

CARES Act Loan Warrants (b) 1.7 31.50 9/28/2025

CARES Act Loan Warrants 1.7 31.50 9/28/2025

PSP2 Warrants 2.0 43.26 1/15/2026 — 4/29/2026

PSP3 Warrants 1.5 53.92 4/29/2026 — 6/10/2026

(a) Warrants issued in connection with the $ 1.5 billion 10 -year senior unsecured promissory note with Treasury provided under the Payroll Support Program of the CARES Act ("PSP1").

(b) Warrants issued in connection with the CARES Act Loan.

On June 15, 2020, UAL entered into an equity distribution agreement with Citigroup Global Markets Inc., BofA Securities, Inc.

Morgan Securities LLC, relating to the issuance and sale from time to time by UAL (the "2020 ATM Offering"), of up to 28 million shares of UAL's common stock, par value $ 0.01 per share.

Morgan Securities LLC, relating to the issuance and sale from time to time by UAL (the "2020 ATM Offering"), of up to 28 million shares of UAL common stock.

In the first quarter of 2021, the Company sold approximately 7 million shares at an average price of $ 42.98 per share, with net proceeds to the Company of approximately $ 282 million.

2 unchanged sentences

LLC, AmeriVet Securities, Inc., Barclays Capital Inc., BofA Securities, Inc., BBVA Securities Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co.

Morgan Securities LLC, Loop Capital Markets LLC and Wells Fargo Securities, LLC (collectively, the "Managers"), relating to the issuance and sale from time to time by UAL (the "2021 ATM Offering"), through the Managers, of up to 37 million shares of UAL's common stock, par value $ 0.01 per share (the "2021 ATM Shares").

Sales of the 2021 ATM Shares, if any, under the Distribution Agreement may be made in any transactions that are deemed to be "at the market offerings" as defined in Rule 415 under the Securities Act of 1933, as amended (the "Securities Act").

Sales of the 2021 ATM Shares under the Distribution Agreement may be made in any transactions that are deemed to be "at the market

offerings" as defined in Rule 415 under the Securities Act of 1933, as amended.

Under the terms of the Distribution Agreement, UAL may also sell the 2021 ATM Shares to any Manager, as principal for its own account, at a price agreed upon at the time of sale.

If UAL sells the 2021 ATM Shares to a Manager as principal, UAL will enter into a separate terms agreement with such Manager.

During the quarter ended March 31, 2021, approximately 4 million shares were sold in the 2021 ATM Offering at an average price of $ 57.50 per share, with net proceeds to the Company totaling approximately $ 250 million.

During the six months ended June 30, 2021, approximately 4 million shares were sold in the 2021 ATM Offering at an average price of $ 57.50 per share, with net proceeds to the Company totaling approximately $ 250 million.

NOTE 3 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

1 unchanged sentence

Pension and Other Postretirement Liabilities Investments and Other Deferred Taxes Total

Balance at March 31, 2021 $ ( 1,084 ) $ 1 $ ( 43 ) $ ( 1,126 )

Changes in value 11 — ( 2 ) 9

Amounts reclassified to earnings 5 (a) — ( 2 ) 3

Balance at June 30, 2021 $ ( 1,068 ) $ 1 $ ( 47 ) $ ( 1,114 )

Balance at December 31, 2020 $ ( 1,102 ) $ 2 $ ( 39 ) $ ( 1,139 )

1 unchanged sentence

Amounts reclassified to earnings 10 (a) — ( 3 ) 7

Balance at June 30, 2021 $ ( 1,068 ) $ 1 $ ( 47 ) $ ( 1,114 )

Balance at March 31, 2020 $ ( 613 ) $ ( 14 ) $ ( 144 ) $ ( 771 )

Changes in value ( 721 ) 17 156 ( 548 )

Amounts reclassified to earnings 77 (a) — ( 17 ) 60

Amounts reclassified to retained earnings — — — —

Balance at June 30, 2020 $ ( 1,257 ) $ 3 $ ( 5 ) $ ( 1,259 )

Balance at December 31, 2019 $ ( 560 ) $ 2 $ ( 160 ) $ ( 718 )

1 unchanged sentence

Amounts reclassified to earnings 73 (a) — ( 16 ) 57

Balance at March 31, 2020 $ ( 613 ) $ ( 14 ) $ ( 144 ) $ ( 771 )

Balance at June 30, 2020 $ ( 1,257 ) $ 3 $ ( 5 ) $ ( 1,259 )

(a) This AOCI component is included in the computation of net periodic pension and other postretirement costs (see Note 5 of this report for additional information).

NOTE 4 - INCOME TAXES

The Company's effective tax rate for the three months ended March 31, 2021 and March 31, 2020 was 22.5 % and 19.4 %, respectively.

The Company's effective tax rates for the three and six months ended June 30, 2021 were 23.0 % and 22.6 %, respectively.

The effective tax rates for the three and six months ended June 30, 2020 were 18.8 % and 19.1 %, respectively.

The provision for income taxes is based on the estimated annual effective tax rate which represents a blend of federal, state and foreign taxes and includes the impact of certain nondeductible items.

The first quarter 2020 rate was impacted by a $ 66 million valuation allowance related to unrealized capital losses.

We recognize deferred tax assets to the extent that we

believe these assets are more likely than not to be realized.

The Company's management assesses available positive and negative evidence regarding the Company's ability to realize its deferred tax assets and records a valuation allowance when it is more likely than not that deferred tax assets will not be realized.

On the basis of this evaluation, we continue to maintain a valuation allowance of $ 242 million as of March 31, 2021 which is primarily attributable to deferred tax assets on unrealized capital losses and certain state net operating losses and state credits.

The effective tax rates for the three and six months ended June 30, 2021 were impacted by $ 74 million and $ 79 million, respectively, of released valuation allowance related to unrealized capital gains and state attributes.

The effective tax rates for the three and six months ended June 30, 2020 were impacted by $ 64 million and $ 130 million, respectively, of valuation allowance related to unrealized capital losses.

NOTE 5 - EMPLOYEE BENEFIT PLANS

Defined Benefit Pension and Other Postretirement Benefit Plans.

The Company's net periodic benefit cost includes the following components for the three months ended March 31 (in millions):

The Company's net periodic benefit cost includes the following components for the three months ended June 30 (in millions):

Pension Benefits Other Postretirement Benefits Affected Line Item

8 unchanged sentences

Special termination benefits — 35 — 125 Miscellaneous, net

Settlement loss — Voluntary Programs (defined below)

— 71 — — Miscellaneous, net

Other 1 11 — — Miscellaneous, net

Total $ 78 $ 172 $ ( 29 ) $ 92

As part of a first quarter VSL program, the Company offered special termination benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees.

The subsidies are in the form of a one-time contribution into the employee's Retiree Health Account of $ 125,000 for full-time employees and $ 75,000 for part-time employees.

As a result, the Company recorded $ 46 million for those additional benefits in the first quarter of 2021.

The Company's net periodic benefit cost includes the following components for the six months ended June 30 (in millions):

Pension Benefits Other Postretirement Benefits Affected Line Item

in the Statements of

Consolidated Operations

2021 2020 2021 2020

Service cost $ 120 $ 107 $ 5 $ 5 Salaries and related costs

Interest cost 92 112 13 14 Miscellaneous, net

Expected return on plan assets ( 142 ) ( 182 ) ( 1 ) ( 1 ) Miscellaneous, net

Amortization of unrecognized (gain) loss 85 72 ( 14 ) ( 22 ) Miscellaneous, net

Amortization of prior service credit — — ( 62 ) ( 62 ) Miscellaneous, net

Special termination benefits — 35 46 125 Miscellaneous, net

Settlement loss — Voluntary Programs (defined below)

— 71 — — Miscellaneous, net

Other 1 14 — — Miscellaneous, net

Total $ 156 $ 229 $ ( 13 ) $ 59

In 2020 and 2021, the Company offered several voluntary leave programs and voluntary separation programs ("Voluntary Programs") to certain eligible employees, which in some cases included a partially-paid leave of absence with active health benefits and travel privileges.

Under these Voluntary Programs, employees generally separated (or will separate) from employment with certain post-employment health benefits and travel privileges.

Included in the Voluntary Programs offered during the first quarter of 2021, the Company offered special separation benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees.

The subsidies are in the form of a one-time contribution to a notional Retiree Health Account of $ 125,000 for full-time employees and $ 75,000 for part-time employees.

As a result, the Company recorded $ 46 million for those additional benefits in the three months ended March 31, 2021.

During the second quarter of 2020, the Company offered Voluntary Programs to its U.S.-based front-line employees, excluding pilots, and management and administrative employees.

Included in these Voluntary Programs, the Company offered special separation benefits in the form of additional years of pension service and additional subsidies for retiree medical costs (based on employee group, age and completed years of service).

As a result, the Company recorded, in the second quarter of 2020, $ 35 million and $ 125 million, respectively, for those additional benefits.

Also, the Company recognized a $ 71 million settlement loss related to the defined benefit pension plan covering certain U.S.

non-pilot employees in the second quarter of 2020.

Share-Based Compensation.

In the three months ended March 31, 2021, UAL granted share-based compensation awards pursuant to the United Continental Holdings, Inc.

2017 Incentive Compensation Plan.

These share-based compensation awards included 2.8 million restricted stock units ("RSUs"), consisting of 1.2 million time-vested RSUs and 1.6 million short-term performance-based RSUs.

The time-vested RSUs vest equally in 25 % increments every 6 months over a two-year period from the date of grant (on August 31st and February 28th).

During the six months ended June 30, 2021, UAL's Board of Directors and stockholders approved the United Airlines Holdings, Inc.

2021 Incentive Compensation Plan (the "2021 Plan").

The 2021 Plan is an incentive compensation plan that allows the Company to use different forms of equity incentives to attract, retain and reward officers and employees.

Under the 2021 Plan, the Company may grant:

nonqualified stock options;

incentive stock options (within the

meaning of Section 422 of the Internal Revenue Code of 1986);

stock appreciation rights ("SARs");

restricted shares;

restricted stock units ("RSUs");

performance units;

cash incentive awards and other equity-based and equity-related awards.

An award (other than an option, SAR or cash incentive award) may provide the holder with dividends or dividend equivalents.

The 2021 Plan replaces the United Continental Holdings, Inc.

2017 Incentive Compensation Plan (the "2017 Plan").

Any awards granted under the 2017 Plan prior to the approval of the 2021 Plan remain in effect pursuant to their terms.

Awards may not be granted under the 2021 Plan after May 26, 2031.

During the six months ended June 30, 2021, UAL granted share-based compensation awards pursuant to both the 2017 Plan and the 2021 Plan.

These share-based compensation awards included 2.9 million RSUs, consisting of 1.3 million time-vested RSUs and 1.6 million short-term performance-based RSUs.

A majority of the time-vested RSUs vest equally in 25 % increments every 6 months over a two-year period from the date of grant.

The short-term performance-based RSUs vest upon the achievement of established goals based on financial and customer satisfaction metrics for the performance period January 1, 2021 to December 31, 2021.

2 unchanged sentences

The table below presents information related to share-based compensation (in millions):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Share-based compensation expense $ 69 $ 24 $ 103 $ 42

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Unrecognized share-based compensation $ 191 $ 88

1 unchanged sentence

The table below presents disclosures about the financial assets and liabilities measured at fair value on a recurring basis in UAL's financial statements (in millions):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3

8 unchanged sentences

Equity securities 269 269 — — 205 205 — —

Other assets 116 — 81 35 36 — — 36

Warrants 176 96 80 — 36 — — 36

Investments presented in the table above have the same fair value as their carrying value.

Restricted cash - current — Primarily includes $ 217 million of cash collateral for a standby letter of credit associated with guarantees related to the BRW Term Loan (as defined below).

3 unchanged sentences

Short-term investments — The short-term investments shown in the table above are classified as available-for-sale.

As of March 31, 2021, corporate debt securities have remaining maturities of less than two years , asset-backed securities have remaining maturities of less than one year to approximately nine years and U.S.

As of June 30, 2021, corporate debt securities have remaining maturities of less than two years , asset-backed securities have remaining maturities of less than one year to approximately nine years and U.S.

government and agency notes have maturities of less than one year .

Equity securities — Equity securities represent United's investment in Azul Linhas Aéreas Brasileiras S.A.

("Azul"), consisting of approximately 8 % of Azul's outstanding preferred shares (representing approximately 2 % of the total capital stock of Azul).

The Company recorded $ 23 million and $ 293 million in losses during the three months ended March 31, 2021 and 2020, respectively, for changes to the fair market value of its equity investment in Azul in Unrealized losses on investments, net in the Company's statements of consolidated operations.

The carrying value of our investment in Azul was $ 182 million at March 31, 2021.

Other assets — The other assets represent warrants provided to United for the purchase of Class B membership units in Alclear Holdings, LLC and warrants for the purchase of shares from Archer.

Investments presented in the table above have the same fair value as their carrying value.

("Azul"), consisting of approximately 8 % of Azul's outstanding preferred shares (representing approximately 2 % of the total capital stock of Azul), and United's ownership of less than 1% of the outstanding Class A common shares of Clear Secure, Inc.

(formerly, Alclear, Inc.) ("Clear").

As of June 30, 2021, the carrying value of United's investment in Azul and Clear was $ 238 million and $ 31 million, respectively.

Warrants — Represents vested warrants for the purchase of 2.4 million shares of Class A common shares of Clear and for the purchase of 4.7 million common shares from Archer Aviation Inc.

The initial value of the warrants received from Archer is recorded as a deferred credit that will be recognized as a reduction to the cost of the aircraft received in future periods.

Other fair value information.

1 unchanged sentence

Carrying amounts include any related discounts, premiums and issuance costs:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Carrying Amount Fair Value Carrying Amount Fair Value

17 unchanged sentences

The DIP Loan becomes immediately payable upon AVH's emergence from bankruptcy, in either cash or shares of AVH stock, at AVH's election.

As of March 31, 2021, the DIP Loan had a balance of $ 164 million and was recorded in Receivables on the Company's consolidated balance sheet.

As of June 30, 2021, the DIP Loan had a balance of $ 170 million and was recorded in Receivables on the Company's consolidated balance sheet.

Investments in Regional Carriers.

United holds investments in several regional carriers that fly or used to fly for the Company as United Express under its capacity purchase agreements ("CPAs").

The combined carrying value of the investments was approximately $ 152 million as of June 30, 2021.

United accounts for each investment using the equity method.

Each investment and United's ownership stake are listed below.

• Champlain Enterprises, LLC ("Champlain").

United owns a 40 % minority ownership stake in Champlain.

Champlain does business as CommutAir.

CommutAir currently operates 70 regional aircraft under a CPA that has a term through 2026.

• Republic Airways Holdings Inc.

("Republic").

United holds a 19 % minority interest in Republic.

Republic is the parent company of Republic Airways Inc.

Republic currently operates 66 regional aircraft under a CPA that has a term through 2029.

• ManaAir, LLC ("ManaAir").

United holds a 49.9 % minority ownership stake in ManaAir.

ManaAir is the parent company of ExpressJet Airlines LLC ("ExpressJet").

The Company terminated its CPA with ExpressJet.

ExpressJet flew its last commercial flight, on behalf of United, on September 30, 2020.

Other Investments.

United holds other investments that are recorded at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer.

As of June 30, 2021, United held these major investments:

• Fulcrum BioEnergy, Inc.

United owns approximately 7 % of the preferred shares (representing approximately 6 % of the total capital stock) of Fulcrum, a company that is developing a process for transforming municipal solid waste into transportation fuels, including jet fuel and diesel.

As of June 30, 2021, the carrying value of United's investment was $ 51 million.

• Boom Technology, Inc.

United holds vested warrants for the purchase of 568,857 shares of common stock of Boom, a company that is developing aircraft that will fly at supersonic speeds.

As of June 30, 2021, the carrying value of the warrants was $ 17 million.

United also holds a $ 120 million note receivable from Boom which we recorded at its inception date fair value of $ 41 million.

The values of the warrants and the note are recorded as deferred credits that will be recognized as a reduction to the cost of the aircraft received in future periods.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

As of March 31, 2021, United had firm commitments and options to purchase aircraft from The Boeing Company ("Boeing"), Airbus S.A.S.

("Airbus") and Embraer S.A.

("Embraer") as presented in the table below:

As of June 30, 2021, United had firm commitments and options to purchase aircraft from Boeing and Airbus as presented in the table below:

Scheduled Aircraft Deliveries

Aircraft Type Number of Firm

Commitments (a) Last Nine Months

Commitments (a) Last Six Months

of 2021 2022 2023 After 2023

Airbus A321XLR 50 — — — 50

Airbus A321neo 70 — — 16 54

Airbus A350 45 — — — 45

1 unchanged sentence

Boeing 787 8 8 — — —

Embraer E175 4 4 — —

(a) United also has options and purchase rights for additional aircraft.

The aircraft listed in the table above are scheduled for delivery through 2030.

To the extent the Company and the aircraft manufacturers with whom the Company has existing orders for new aircraft agree to modify the contracts governing those orders, the amount and timing of the Company's future capital commitments could change.

United also has an agreement to purchase seven used Boeing 737-700 aircraft with expected delivery dates in 2021.

To the extent the Company and the aircraft manufacturers with whom the Company has existing orders for new aircraft agree to modify the contracts governing those orders, or to the extent rights are exercised pursuant to the relevant agreements to modify the timing of deliveries, the amount and timing of the Company's future capital commitments could change.

United also has an agreement to purchase six used Boeing 737-700 aircraft, which it intends to sell, with expected delivery dates in 2021.

In addition, United has an agreement to purchase 11 used Airbus A319 aircraft, which it intends to sell, with expected delivery dates in 2021 and 2022.

1 unchanged sentence

In connection with the delivery of each aircraft from Boeing, United assigned its right to purchase such aircraft to the buyer, and simultaneous with the buyer's purchase from Boeing, United entered into a long-term lease for such aircraft with the buyer as lessor.

Ten Boeing model aircraft were delivered in the first quarter of 2021 under these transactions (and each is presently subject to a long-term lease to United).

Remaining aircraft in the agreements are scheduled to be delivered in the last nine months of 2021.

Upon delivery of aircraft in these sale and leaseback transactions in 2021, the Company accounted for six of these aircraft, which have a repurchase option at a price other than fair value, as part of Flight equipment on the Company's consolidated balance sheet and the related obligation recorded in Other current liabilities and Other financial liabilities from sale-leasebacks (noncurrent) since they do not qualify for sale recognition.

Eleven Boeing model aircraft were delivered in the first half of 2021 under these transactions (and each is presently subject to a long-term lease to United).

Remaining aircraft in the agreements are scheduled to be delivered in the last six months of 2021.

Upon delivery of aircraft in these sale and leaseback transactions in 2021, the Company accounted for seven of these aircraft, which have a repurchase option at a price other than fair value, as part of Flight equipment on the Company's consolidated balance sheet and the related obligation recorded in Other current liabilities and Other financial liabilities from sale-leasebacks (noncurrent) since they do not qualify for sale recognition.

The remaining four aircraft that qualified for sale recognition were recorded as Operating lease right-of-use assets and Current/Long-term obligations under operating leases on the Company's consolidated balance sheet after recognition of related gains on such sale.

The table below summarizes United's commitments as of March 31, 2021, which include aircraft and related spare engines, aircraft improvements and all non-aircraft capital commitments (in billions):

Last nine months of 2021 $ 4.0

The table below summarizes United's commitments as of June 30, 2021, which include aircraft and related spare engines, aircraft improvements and all non-aircraft capital commitments (in billions):

Last six months of 2021 $ 3.1

After 2025 12.4

Regional CPAs.

The table below summarizes the Company's expected future payments through the end of the terms of our capacity purchase agreements ("CPAs"), excluding aircraft ownership costs and variable pass-through costs such as fuel and landing fees, among others.

The table below summarizes the Company's expected future payments through the end of the terms of our CPAs, excluding aircraft ownership costs and variable pass-through costs such as fuel and landing fees, among others.

Our future commitments under our CPAs are dependent on numerous variables, and are, therefore, difficult to predict.

We have set forth below estimates based on our current assumptions of our anticipated level of flight activity or any contractual minimum utilization levels if applicable, whichever is higher.

Based on these assumptions as of March 31, 2021, our estimated future payments through the end of the terms of our CPAs are presented in the table below (in billions):

Last nine months of 2021 $ 1.6

Based on these assumptions as of June 30, 2021, our estimated future payments through the end of the terms of our CPAs are presented in the table below (in billions):

Last six months of 2021 $ 1.1

After 2025 3.7

As of March 31, 2021, United is the guarantor of approximately $ 1.9 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon.

As of June 30, 2021, United is the guarantor of approximately $ 1.9 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon.

These bonds, issued by various airport municipalities, are payable solely from rentals paid under long-term agreements with the respective governing bodies.

10 unchanged sentences

The posting of this collateral, and any potential credit against the Company's put and guarantee payment, are entirely related to the original transactions entered in 2018 and do not represent any new or incremental investment.

As of March 31, 2021, United is the guarantor of $ 116 million of aircraft mortgage debt issued by one of United's regional carriers.

As of June 30, 2021, United is the guarantor of $ 113 million of aircraft mortgage debt issued by one of United's regional carriers.

The aircraft mortgage debt is subject to similar increased cost provisions as described below for the Company's debt, and the Company would potentially be responsible for those costs under the guarantees.

1 unchanged sentence

In United's financing transactions that include loans in which United is the borrower, United typically agrees to reimburse lenders for any reduced returns with respect to the loans due to any change in capital requirements and, in the case of loans with respect to which the interest rate is based on the London Interbank Offered Rate (LIBOR), for certain other increased costs that the lenders incur in carrying these loans as a result of any change in law, subject, in most cases, to obligations of the lenders to take certain limited steps to mitigate the requirement for, or the amount of, such increased costs.

At March 31, 2021, the Company had $ 10.4 billion of floating rate debt with remaining terms of up to approximately 12 years that are subject to these increased cost provisions.

At June 30, 2021, the Company had $ 13.4 billion of floating rate debt with remaining terms of up to approximately 11 years that are subject to these increased cost provisions.

In several financing transactions involving loans or leases from non-U.S.

2 unchanged sentences

Labor Negotiations.

As of March 31, 2021, the Company had approximately 84,100 employees, of whom approximately 85 % were represented by various U.S.

As of June 30, 2021, the Company had approximately 84,400 employees, of whom approximately 85 % were represented by various U.S.

labor organizations.

This total includes approximately 4,500 front-line employees who elected to voluntarily separate from the Company pursuant to the first quarter 2021 Company-offered Voluntary Programs but who still remained on pay and benefit continuation as of June 30, 2021.

Credit Card Processing Agreements.

3 unchanged sentences

NOTE 8 - DEBT

As of March 31, 2021, United had $ 1.0 billion available for borrowing under the 2017 Revolving Credit Facility at any time until April 1, 2022 and $ 1.0 billion aggregate principal amount outstanding under the 2017 Revolving Credit Facility.

United also had $ 1.4 billion aggregate principal amount outstanding under the 2017 Term Loan Facility.

On April 21, 2021, United paid all amounts outstanding under the 2017 Revolving Credit Facility and the 2017 Term Loan Facility, terminated the 2017 Revolving Credit Facility and the 2017 Term Loan Facility and entered into the New Loan Facilities described below.

As of June 30, 2021, United had $ 1.75 billion available for borrowing under the New Revolving Credit Facility at any time until April 21, 2025.

In February 2021, United created EETC pass-through trusts which issued pass-through certificates.

6 unchanged sentences

Certain details of the pass-through trusts with proceeds received from issuance of debt in 2021 are as follows (in millions, except stated interest rate):

EETC Issuance Date Class Face Amount Stated interest rate Total proceeds received from issuance of debt Total debt recorded as of March 31, 2021

EETC Issuance Date Class Face Amount Stated interest rate Total proceeds received from issuance of debt Total debt recorded as of

June 30, 2021

February 2021 B $ 600 4.88 % $ 600 $ 600

During the first quarter of 2021, UAL issued a $ 753 million PSP2 Note to Treasury evidencing senior unsecured indebtedness of UAL.

The PSP2 Note is guaranteed by United, and will mature ten years after issuance on January 15, 2031 (the "Maturity Date").

During the six months ended June 30, 2021, UAL issued an $ 870 million PSP2 Note to Treasury evidencing senior unsecured indebtedness of UAL.

The PSP2 Note is guaranteed by United and will mature ten years after issuance on January 15, 2031 (the "PSP2 Note Maturity Date").

If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness of UAL with a principal balance in excess of a specified amount, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP2 Note.

1 unchanged sentence

UAL is required to prepay the PSP2 Note upon the occurrence of certain change of control triggering events.

The PSP2 Note does not require any amortization, and is to be repaid in full on the Maturity Date.

The PSP2 Note does not require any amortization and is to be repaid in full on the PSP2 Note Maturity Date.

Interest on the PSP2 Note is payable semi-annually in arrears on the last business day of March and September of each year, beginning on March 31, 2021, at a rate of 1.00 % in years 1 through 5, and at the Secured Overnight Financing Rate (SOFR) plus 2.00 % in years 6 through 10.

As of March 31, 2021, UAL and United were in compliance with their respective debt covenants.

The table below presents the Company's contractual principal payments (not including $ 533 million of unamortized debt discount, premiums and debt issuance costs) at March 31, 2021 under then-outstanding long-term debt agreements (in millions):

Last nine months of 2021 $ 1,427

After 2025 10,896

During the second quarter of 2021, UAL issued an $ 810 million PSP3 Note to Treasury evidencing senior unsecured indebtedness of UAL.

The PSP3 Note is guaranteed by United and will mature ten years after issuance on April 29, 2031 (the "PSP3 Note Maturity Date").

If any subsidiary of UAL (other than United) guarantees other unsecured indebtedness

of UAL with a principal balance in excess of a specified amount, then such subsidiary shall be required to guarantee the obligations of UAL under the PSP3 Note.

UAL may, at its option, prepay the PSP3 Note, at any time, and from time to time, at par.

UAL is required to prepay the PSP3 Note upon the occurrence of certain change of control triggering events.

The PSP3 Note does not require any amortization and is to be repaid in full on the PSP3 Note Maturity Date.

Interest on the PSP3 Note is payable semi-annually in arrears on the last business day of March and September of each year, beginning on September 30, 2021, at a rate of 1.00 % in years 1 through 5, and at the Secured Overnight Financing Rate (SOFR) plus 2.00 % in years 6 through 10.

On April 21, 2021, United issued, through a private offering to eligible purchasers, $ 4.0 billion in aggregate principal amount of two series of Notes, consisting of $ 2.0 billion in aggregate principal amount of the 2026 Notes and $ 2.0 billion in aggregate principal amount of the 2029 Notes.

8 unchanged sentences

United pays a commitment fee equal to 0.75 % per annum on the undrawn amount available under the New Revolving Credit Facility.

United used the net proceeds from the offering of the Notes and borrowings under the New Term Loan Facility (i) to repay in full all of the Facilities, including the $ 1.4 billion aggregate principal amount outstanding under the 2017 Term Loan Facility, the $ 1.0 billion aggregate principal amount outstanding under the 2017 Revolving Credit Facility and the $ 520 million aggregate principal amount outstanding under the CARES Act Loan, (ii) to pay fees and expenses relating to the offering of the Notes and (iii) for United’s general corporate purposes.

As a result of such repayments, the Facilities were terminated on April 21, 2021 and no further borrowings may be made thereunder.

United used the net proceeds from the offering of the Notes and borrowings under the New Term Loan Facility (i) to repay in full all of the Existing Loan Facilities, including the $ 1.4 billion aggregate principal amount outstanding under the 2017 Term Loan Facility, the $ 1.0 billion aggregate principal amount outstanding under the 2017 Revolving Credit Facility and the $ 520 million aggregate principal amount outstanding under the CARES Act Loan, (ii) to pay fees and expenses relating to the offering of the Notes and (iii) for United's general corporate purposes.

As a result of such repayments, the Existing Loan Facilities were terminated on April 21, 2021 and no further borrowings may be made thereunder.

The Notes and the New Loan Facilities are secured on a senior basis by security interests granted by United to the collateral trustee for the benefit of the holders of the Notes and the lenders under the New Loan Facilities, among other parties, on the following:

2 unchanged sentences

Kennedy International Airport, LaGuardia Airport and Ronald Reagan Washington National Airport (subject to certain exclusions), and (iii) United's rights to use or occupy space at airport terminals, each to the extent necessary at the relevant time for servicing scheduled air carrier service authorized by an applicable route authority.

As of June 30, 2021, UAL and United were in compliance with their respective debt covenants.

The table below presents the Company's contractual principal payments (not including $ 600 million of unamortized debt discount, premiums and debt issuance costs) at June 30, 2021 under then-outstanding long-term debt agreements (in millions):

Last six months of 2021 $ 1,001

After 2025 20,683

NOTE 9 - SPECIAL CHARGES (CREDITS)

For the three months ended March 31, special charges (credits), certain credit losses and unrealized losses on investments in the statements of consolidated operations consisted of the following (in millions):

For the three and six months ended June 30, special charges (credits), unrealized (gains) losses on investments, debt extinguishment and modification fees, special termination benefits and settlement losses and certain credit losses in the statements of consolidated operations consisted of the following (in millions):

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

CARES Act grant $ ( 1,079 ) $ ( 1,589 ) $ ( 2,889 ) $ ( 1,589 )

Severance and benefit costs 417 —

Impairment of assets 59 80 59 130

Severance and benefit costs 11 63 428 63

(Gains) losses on sale of assets and other special charges 61 ( 3 ) 77 10

Total operating special charges (credits) ( 948 ) ( 1,449 ) ( 2,325 ) ( 1,386 )

Nonoperating special termination benefits 46 —

Nonoperating unrealized losses on investments, net 22 319

Nonoperating unrealized (gains) losses on investments, net ( 147 ) ( 9 ) ( 125 ) 310

Nonoperating debt extinguishment and modification fees 62 — 62 —

Nonoperating special termination benefits and settlement losses — 231 46 231

Nonoperating credit loss on BRW Term Loan and related guarantee — — — 697

Total nonoperating special charges and unrealized losses on investments, net 68 1,016

Total operating and nonoperating special charges (credits) and unrealized losses on investments, net ( 1,309 ) 1,079

Total nonoperating special charges and unrealized (gains) losses on investments, net ( 85 ) 222 ( 17 ) 1,238

Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net ( 1,033 ) ( 1,227 ) ( 2,342 ) ( 148 )

Income tax expense (benefit), net of valuation allowance 203 241 494 227

Total operating and nonoperating special charges (credits) and unrealized losses on investments, net of income taxes $ ( 1,018 ) $ 1,065

Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net of income taxes $ ( 830 ) $ ( 986 ) $ ( 1,848 ) $ 79

CARES Act grant.

During the three months ended March 31, 2021, the Company received approximately $ 2.6 billion in funding pursuant to the PSP2 Agreement, which included a $ 753 million unsecured loan.

The Company recorded $ 1.8 billion as grant income and $ 47 million for the PSP2 Warrants issued to Treasury as part of the PSP2 Agreement, within stockholders' equity, as an offset to the grant income.

Severance and benefit costs .

During the three months ended March 31, 2021, the Company recorded $ 417 million related to pay continuation and benefits-related costs provided to employees who chose to voluntarily separate from the Company.

The Company offered, based on employee group, age and completed years of service, pay continuation, health care coverage, and travel benefits.

Approximately 4,500 employees elected to voluntarily separate from the Company.

During the six months ended June 30, 2021, the Company received approximately $ 5.8 billion in funding pursuant to the PSP2 Agreement and the PSP3 Agreement, which included an approximately $ 1.7 billion unsecured loan.

The Company recorded $ 1.1 billion and $ 2.9 billion as grant income in Special charges (credits) during the three and six months ended June 30, 2021, respectively.

The Company also recorded $ 52 million and $ 99 million for the PSP2 Warrants and PSP3 Warrants issued to Treasury as part of the PSP2 Agreement and PSP3 Agreement, within stockholders' equity, as an offset to the grant income in the three and six months ended June 30, 2021, respectively.

The Company deferred recognition of $ 1.1 billion of the funds received under the PSP3 Agreement as of June 30, 2021 as the funds can only be used for the payment of eligible salaries, wages and benefits.

The Company expects the remainder of the PSP3 Agreement funds will be recognized as income in the third quarter of 2021.

Impairment of assets .

During the three and six months ended June 30, 2021, the Company recorded $ 59 million of impairments primarily related to 64 Embraer EMB 145LR aircraft and related engines that United retired from its regional aircraft fleet.

The decision to retire these aircraft was triggered by the United Next aircraft order.

In February 2021, the Company voluntarily and temporarily removed all 52 Boeing 777-200/200ER aircraft powered by Pratt & Whitney 4000 series engines from its schedule due to an engine failure incident with one of its aircraft.

The Company viewed this incident as an indicator of potential impairment.

Accordingly, as required under relevant accounting standards only, United performed forecasted cash flow analyses and determined that the carrying value of the Boeing 777-200/200ER fleet is expected to be recoverable from future cash flows expected to be generated by that fleet and, consequently, no impairment was recorded.

Accordingly, as required under relevant accounting standards, United performed forecasted cash flow analyses and determined that the carrying value of the Boeing 777-200/200ER fleet is expected to be recoverable from future cash flows expected to be generated by that fleet and, consequently, no impairment was recorded .

Severance and benefit costs .

During the three and six months ended June 30, 2021, the Company recorded charges of $ 11 million and $ 428 million, respectively, related to pay continuation and benefits-related costs provided to employees who chose to voluntarily separate from the Company.

The Company offered, based on employee group, age and completed years of service, pay continuation, health care coverage, and travel benefits.

Approximately 4,500 employees elected to voluntarily separate from the Company.

(Gains) losses on sale of assets and other special charges.

During the three months ended March 31, 2021, the Company recorded $ 16 million of net charges, driven by charges for the termination of the lease associated with three floors of its headquarters at the Willis Tower in Chicago and utility charges related to the February winter storms in Texas, partially offset by net gains, primarily on sale-leaseback transactions (see Note 7 of this report for additional information on the sale-leaseback transactions).

Nonoperating special termination benefits.

During the three months ended March 31, 2021, as part of a first quarter VSL program, the Company recorded $ 46 million of special termination benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees.

The subsidies are in the form of a one-time contribution into the employee's Retiree Health Account of $ 125,000 for full-time employees and $ 75,000 for part-time employees.

During the three and six months ended June 30, 2021, the Company recorded charges of $ 61 million and $ 77 million, respectively, primarily related to incentives for certain of its front-line employees to receive a COVID-19 vaccination and the termination of the lease associated with three floors of its headquarters at the Willis Tower in Chicago in the first quarter of 2021.

Nonoperating unrealized losses on investments, net .

During the three months ended March 31, 2021, the Company recorded losses of $ 22 million primarily for the decrease in the market value of its investment in Azul.

During the three and six months ended June 30, 2021, the Company recorded $ 90 million of gains related to its equity investments and warrants in the equity of Clear.

Clear undertook its initial public stock offering in June 2021.

Also during the three and six months ended June 30, 2021, the Company recorded gains of $ 57 million and $ 35 million, respectively, primarily for the change in the market value of its investment in Azul .

Nonoperating debt extinguishment and modification fees.

During the three and six months ended June 30, 2021, the Company recorded $ 62 million of charges for fees and discounts related to the issuance of the New Loan Facilities and the prepayment of the Existing Loan Facilities.

Nonoperating special termination benefits.

During the six months ended June 30, 2021, as part of the first quarter Voluntary Programs, the Company recorded $ 46 million of special termination benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees.

The subsidies were in the form of a one-time contribution into the employee's Retiree Health Account of $ 125,000 for full-time employees and $ 75,000 for part-time employees.

CARES Act grant.

During the three and six months ended June 30, 2020, the Company received approximately $ 4.5 billion in funding pursuant to PSP1, which consisted of a $ 3.2 billion grant and a $ 1.3 billion unsecured loan.

The Company recognized $ 1.6 billion of the grant as a credit to Special charges (credit) and $ 57 million in warrants issued to Treasury, within stockholder's equity, as an offset to the grant income.

Impairment of assets.

During the three months ended March 31, 2020, the Company recorded a $ 50 million impairment for its China routes, which was primarily caused by the COVID-19 pandemic and the Company's subsequent suspension of flights to China.

Gains (losses) on sale of other assets and other special charges.

During the three months ended March 31, 2020, the Company recorded a $ 10 million one-time special charge related to the wind-down of the CPA with Trans States Airlines, LLC and $ 3 million for costs related to the transition of fleet types within other regional carrier contracts.

During the three and six months ended June 30, 2020, the Company recorded impairment charges of $ 80 million and $ 130 million, respectively, for its China routes, which was primarily caused by the COVID-19 pandemic and the Company's subsequent suspension of flights to China.

Severance and benefit costs.

During the three and six months ended June 30, 2020, the Company recorded $ 63 million related to pay continuation and benefits provided to employees who chose to voluntarily separate from the Company.

Nonoperating unrealized losses on investments, net.

During the three and six months ended June 30, 2020, the Company recorded gains of $ 9 million and losses of $ 310 million, respectively.

The losses in the six months ended June 30, 2020 were primarily due to the $ 284 million decrease in the market value of the Company's investment in Azul and the $ 24 million decrease in the fair value of the AVH share call options, AVH share appreciation rights and AVH share-based upside sharing agreement.

Nonoperating special termination benefits and settlement losses.

During the three and six months ended June 30, 2020, the Company recorded $ 231 million of settlement losses related to the Company's primary defined benefit pension plans covering certain U.S.

non-pilot employees, and special termination benefits offered under voluntary leave programs to certain front-line U.S.

based employees participating in the non-pilot defined benefit pension plan and postretirement medical programs.

Nonoperating credit loss on BRW Term Loan and related guarantee.

During the three months ended March 31, 2020, the Company recorded a $ 697 million expected credit loss allowance for the BRW Term Loan and related guarantee.

During the six months ended June 30, 2020, the Company recorded a $ 697 million expected credit loss allowance for the BRW Term Loan and related guarantee.

AVH is currently in bankruptcy.

See Notes 6 and 7 of this report for additional information.

Nonoperating unrealized losses on investments, net.

During the three months ended March 31, 2020, the Company recorded losses of $ 319 million primarily for the $ 293 million decrease in the market value of its investment in Azul and $ 24 million for the decrease in fair value of the AVH share call options, AVH share appreciation rights and AVH share-based upside sharing agreement.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements