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Item 7. Management’s Discussion and Analysis

2022-02-18 compared with 2021-03-01 · 274 added, 274 removed, 190 unchanged (74% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Management's discussion and analysis of financial condition and results of operations is provided as a supplement to and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-K and the description of our business and reportable segments in Item 1 above to enhance the understanding of our results of operations, financial condition and cash flows.

This section generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020.

Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 are not included in this Form 10-K and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the U.S.

Securities and Exchange Commission (the "SEC") on March 1, 2021 (the "2020 Annual Report").

Executive Summary

United Airlines Holdings, Inc.

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(together with its consolidated subsidiaries, "United").

The Company's shared purpose is "Connecting People.

Uniting the World." The Company has the most comprehensive route network among North American carriers, including U.S.

mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C.

As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted.

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We sometimes use the words "we," "our," "us," and the "Company" in this report for disclosures that relate to all of UAL and United.

Impact of COVID-19 and Outlook

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.

The decline in demand caused a material deterioration in our revenues in 2020, resulting in a net loss of $7.1 billion.

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, passenger testing requirements, mask mandates or other restrictions on travel, all of which are highly uncertain and cannot be predicted with certainty.

In response to decreased demand, the Company cut, relative to 2019 capacity, approximately 57% of its scheduled capacity for 2020.

In the first quarter of 2021, the Company expects scheduled capacity to be down at least 51% versus the first quarter of 2019.

The Company plans to continue to proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand and expects demand to remain suppressed, relative to 2019 levels, until vaccines for COVID-19 are widely distributed and are effective in curbing the spread of the virus.

In addition, the Company does not currently expect the recovery from COVID-19 to follow a linear path.

As such, the Company's actual flown capacity may differ materially from its currently scheduled capacity.

The Company has taken a number of actions in response to the decreased demand for air travel.

In addition to the schedule reductions discussed above, the Company has:

• reduced its planned capital expenditures and reduced operating expenditures in 2020 (including by postponing projects deemed non-critical to the Company's operations);

• terminated its share repurchase program;

• issued or entered into approximately $13.4 billion in new secured notes, secured term loan facilities and new aircraft financings in 2020, including short term borrowings that were paid in 2020;

• borrowed $1.0 billion under the $2.0 billion revolving credit facility established under the Amended and Restated Credit and Guaranty Agreement (the "Credit Agreement");

• availed itself of financial assistance and/or financing made available by the U.S.

Treasury Department ("Treasury"), as further described below;

• raised approximately $2.1 billion in cash proceeds from the issuance and sale of UAL common stock in 2020;

• entered into agreements to finance certain aircraft currently subject to purchase agreements through sale and leaseback transactions;

• elected to defer the payment of $199 million in payroll taxes incurred through December 31, 2020, as provided by the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), until December 2021, at which time 50% is due, with the remaining amount due December 2022;

• taken a number of actions to reduce employee-related costs, including, among other items, the Company's Chief Executive Officer and President waived 100% of their respective base salaries through the end of 2020, other officers temporarily waived a portion of their base salaries, the Company's non-employee directors waived 100% of their cash

compensation for the second and third quarters of 2020, the Company suspended merit salary increases for 2020 and implemented a temporary four-day work week for management and administrative employees and the Company offered voluntary unpaid leaves of absence.

The Company also entered into an agreement with its pilots to distribute fewer flight hours to a larger number of pilots, while also reaching agreements to provide a path to early retirement and reduce expense through voluntary leave of absence programs.

In addition, and as announced in July 2020, the Company started the involuntary furlough process by issuing Worker Adjustment and Retraining Notification ("WARN") Act notices to 36,000 of its employees.

Since then, the Company worked to reduce the total number of furloughs to approximately 13,000 employees by working closely with its union partners, introducing new voluntary options selected by approximately 9,000 employees and proposing creative solutions that would save jobs.

As a result of the Company's entry into the PSP2 Agreement, as described below, the Company issued recall notices to these furloughed employees and others impacted by furlough mitigation programs.

See the discussion below for more detail about the PSP2 Agreement and the recall process.

The Company continues to focus on reducing expenses and managing its liquidity.

We expect to continue to modify our cost management structure and capacity as the timing of demand recovery becomes more certain.

On March 27, 2020, the President of the United States signed the CARES Act into law.

The CARES Act is intended to respond to the COVID-19 pandemic and its impact on the economy, public health, state and local governments, individuals, and businesses.

The CARES Act also provides supplemental appropriations for federal agencies to respond to the COVID-19 pandemic.

On April 20, 2020, United entered into a Payroll Support Program Agreement (the "PSP Agreement") with Treasury providing the Company with total funding of approximately $5.1 billion pursuant to the Payroll Support Program established under the CARES Act.

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

Approximately $3.6 billion of the $5.1 billion was provided as a direct grant, and approximately $1.5 billion consists of indebtedness evidenced by a 10-year senior unsecured promissory note issued by UAL to Treasury (the "PSP Note").

See Note 2 to the financial statements included in Part II, Item 8 of this report for additional information related to warrants issued in connection with the PSP Note and Note 10 to the financial statements included in Part II, Item 8 of this report for a discussion of the PSP Note.

During 2020, UAL and United entered into a loan and guarantee agreement with Treasury.

The agreement provides for a term loan facility of up to approximately $7.5 billion (the "CARES Act Term Loan Facility") pursuant to the loan program established under Section 4003(b)(1) of the CARES Act (the "Loan Program").

The loans (the "CARES Act Term Loans") may be disbursed in up to three disbursements on or before May 28, 2021.

On September 28, 2020, United borrowed, and recorded as Long-term debt on the Company's consolidated balance sheet, $520 million under the CARES Act Term Loan Facility, the proceeds of which were used to pay certain transaction fees and expenses and for working capital and other general corporate purposes of the Company.

See Note 2 to the financial statements included in Part II, Item 8 of this report for a discussion on warrants issued in connection with the CARES Act Term Loans and Note 10 to the financial statements included in Part II, Item 8 of this report for a discussion of the CARES Act Term Loans.

Under the PSP Agreement and the Loan Program, the Company and its business are subject to certain restrictions, including, but not limited to, restrictions on the payment of dividends and the ability to repurchase UAL's equity securities, requirements to maintain certain levels of scheduled service and certain limitations on executive compensation.

On January 15, 2021, United entered into a Payroll Support Agreement (the "PSP2 Agreement") with 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").

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 $1.9 billion was provided as a direct grant and approximately $753 million consists of indebtedness evidenced by a 10-year senior unsecured promissory note issued by UAL to Treasury (the "PSP2 Note").

As of February 25, 2021, we have received a total of $1.3 billion.

See Note 2 to the financial statements included in Part II, Item 8 of this report for additional information on warrants issued in connection with the PSP2 Note and Note 10 to the financial statements included in Part II, Item 8 of this report for a discussion of the PSP2 Note.

Pursuant to the PSP2 Agreement, the Company is required to comply with certain provisions of the PSP Extension Law, including, among others, the requirement that all funds provided under the Payroll Support Program will be used by United exclusively for the continuation of payment of its U.S.

employee wages, salaries and benefits, including the payment of lost wages, salaries and benefits to returning U.S.

requirements to maintain U.S.

employment levels from the date of the PSP2 Agreement through March 31, 2021;

requirements to recall (as such term is defined in the PSP2 Agreement), any U.S.

employees subject to involuntary termination or furlough between October 1, 2020 and the date of the PSP2 Agreement,

compensate such returning employees for certain lost salary, wages and benefits between December 1, 2020 and the date of the PSP2 Agreement and restore certain rights and protections for such returning employees;

provisions prohibiting certain reductions in U.S.

employee wages, salaries and benefits;

provisions prohibiting the payment of dividends and the repurchase of certain equity until March 31, 2022;

and provisions restricting the payment of certain executive compensation until October 1, 2022.

As a result of the PSP2 Agreement, the Company offered employment, through March 2021, to employees who were impacted by involuntary furloughs.

Because the Company cannot predict with certainty whether it will receive further payroll support from the federal government or when demand for air travel will increase in the short term, the Company is preparing for the possibility that these recalled employees might again be furloughed as soon as the end of the first quarter of 2021.

The Company may record additional costs associated with these actions in the first quarter of 2021.

Also, in order to reduce the number of such furloughs, during the first quarter of 2021, the Company offered voluntary leave and other programs to certain of its frontline employees, the cost of which cannot be estimated at this time.

Our business and operating results for 2021 continued to be significantly impacted by the COVID-19 pandemic.

Given the more significant impact of the pandemic on our business and operating results in 2020, we believe that a comparison of our 2021 results to 2019 for certain key metrics in this financial overview discussion is more reflective of the impact of the COVID-19 pandemic.

Our current expectations described below are forward-looking statements and our actual results and timing may vary materially based on various factors that include, but are not limited to, those discussed below under "Cautionary Statement Regarding Forward-Looking Statements" and in Part I, Item 1A.

Risk Factors , of this Form 10-K.

The Company is unable to reconcile forward-looking projections to accounting principles generally accepted in the United States of America ("GAAP");

refer to "Supplemental Information" below for further details.

Impact of the COVID-19 Pandemic

The 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 has seen increasing demand for travel both domestically and in countries where entry is permitted;

however, as the situation surrounding the COVID-19 pandemic remains fluid, the pandemic has continued to negatively impact travel demand.

It remains difficult to reasonably assess or predict the full extent of the ongoing impact of the COVID-19 pandemic on the Company's longer-term operational and financial performance, which will depend on a number of future developments, many of which are outside the Company's control, such as the ultimate duration of and factors impacting the recovery from the pandemic (including the efficacy and speed of vaccination programs in curbing the spread of the virus in different markets, the efficacy and availability of various treatment options, the introduction and spread of new variants of the virus that may be resistant to currently approved vaccines or treatment options, and the continuation of existing or implementation of new government travel restrictions), customer behavior changes and fluctuations in demand for air travel, among others.

The COVID-19 pandemic and the measures taken in response may continue to impact many aspects of our business, operating results, financial condition and liquidity in a number of ways, including labor shortages (including reductions in available skilled labor and related impacts to the Company's flight schedules and reputation), facility closures and related costs, disruptions to the Company's and its business partners' operations, reduced travel demand and consumer spending, increased fuel and other operating costs, supply chain disruptions, logistics constraints, inflation, volatility in the price of our securities, our ability to access capital markets and volatility in the global economy and financial markets generally.

We have reduced our capacity as we managed through the effects of the COVID-19 pandemic, which in 2021 remained significantly lower than capacity prior to the pandemic and resulted in a significant reduction to our revenue through the date of this report.

We operated at approximately 63% of our full year 2019 capacity during the full year of 2021.

We have delayed a portion of our previously planned capacity increases for full year 2022 and may need to implement further modifications.

The Company is taking steps to be prepared for recovery as demand for travel continues to generally increase, which include investing in innovative technology, focusing on process improvements and implementing the United Next transformative strategy.

We have taken steps to strengthen our financial position during this period of market uncertainty, which has resulted in an increase of our overall debt levels.

As of December 31, 2021, unrestricted cash, cash equivalents and short-term investments totaled $18.4 billion, an increase of approximately $13.5 billion from December 31, 2019.

We had approximately $41.1 billion of debt, finance lease, operating lease and sale-leaseback obligations as of December 31, 2021 (including $4.5 billion that will become due in the next 12 months), up from approximately $20.5 billion as of December 31, 2019.

The Company's recovery from the COVID-19 pandemic has not followed a linear path, and due to the significant uncertainty that remains, its future operating performance, particularly in the short-term, may be subject to volatility.

Risks and uncertainties related to the COVID-19 pandemic are further described in Part I, Item 1A.

Risk Factors— "The COVID-19 pandemic has materially and adversely impacted our business, operating results, financial condition and liquidity.

The full extent of the impact will depend on future developments and how quickly we can return to more normal operations, among other things.

If the impacts from the COVID-19 pandemic extend beyond our assumed timelines, our actual results may vary significantly from our expectations" of this report.

Outlook for Full Year 2022

The Company expects its scheduled capacity for full year 2022 to be down versus 2019.

Adjusted cost per available seat mile ("CASM-ex").

The Company expects full year 2022 CASM-ex (a non-GAAP financial measure defined as CASM excluding fuel, profit sharing, third-party business expense and special charges;

see "Supplemental Information" below) to be higher than 2019.

Strategic Objectives

In the second quarter of 2021, United announced its United Next plan, which we believe will have a transformational effect on the customer experience and earnings power of the business.

It is expected to increase United's average gauge in North America, the total number of available seats per departure, by almost 30% by 2026 versus 2019, as well as significantly lower carbon emissions per seat.

New aircraft will come with a new signature interior that includes seat-back entertainment in every seat, larger overhead bins for every passenger's carry-on bag and the industry's fastest available in-flight WiFi, as well as a bright look-and-feel with LED lighting.

New aircraft are expected to increase North America premium seat counts by 75% per short-haul departure by 2026 versus 2019.

The Company plans to replace older, smaller mainline jets and at least 200 single-class regional jets with larger aircraft, which we expect will lead to significant sustainability benefits compared to older planes:

an expected 11% overall improvement in fuel efficiency and an expected 17-20% lower carbon emission per seat compared to older planes.

We believe United Next will allow us to differentiate our network and segment our products with a greater premium offering, while also maintaining fare competitiveness with low-cost carriers.

Results of Operations

The following discussion provides an analysis of our results of operations and reasons for material changes therein for 2020 as compared to 2019.

See "Results of Operations" in Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2019 Annual Report on Form 10-K, filed with the SEC on February 25, 2020 (the "2019 Annual Report"), for analysis of the 2019 results as compared to 2018.

Select financial data and operating statistics are provided in the tables below:

(in millions) 2021 2020 2019

Operating revenue $ 24,634 $ 15,355 $ 43,259

Operating expense 25,656 21,714 38,958

Operating income (loss) (1,022) (6,359) 4,301

Nonoperating expense, net (1,535) (2,463) (387)

Income tax expense (benefit) (593) (1,753) 905

Net income (loss) $ (1,964) $ (7,069) $ 3,009

2021 2020 2019

Passengers (thousands) (a) 104,082 57,761 162,443

Revenue passenger miles ("RPMs") (millions) (b) 128,979 73,883 239,360

ASMs (millions) 178,684 122,804 284,999

Cargo revenue ton miles (millions) (c) 3,285 2,711 3,329

Passenger load factor (d) 72.2 % 60.2 % 84.0 %

Passenger revenue per available seat mile ("PRASM") 11.30 9.61 13.90

Total revenue per available seat mile ("TRASM") 13.79 12.50 15.18

Average yield per revenue passenger mile ("Yield") (e) 15.66 15.98 16.55

CASM 14.36 17.68 13.67

Average stage length (miles) (f) 1,315 1,307 1,460

Employee headcount, as of December 31 84,100 74,400 95,900

(a) The number of revenue passengers measured by each flight segment flown.

(b) The number of scheduled miles flown by revenue passengers.

(d) RPMs divided by ASMs.

(e) The average passenger revenue received for each revenue passenger mile flown.

(f) Average stage length equals the average distance a flight travels weighted for size of aircraft.

Operating Revenue.

The table below illustrates the year-over-year percentage change in the Company's operating revenues for the years ended December 31 (in millions, except percentage changes):

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Passengers 79.9 % 68.5 % (45.4) % 119.9 % 80.2 %

RPMs (traffic) (64.9) % (75.7) % (81.5) % (62.7) % (69.1) %

ASMs (capacity) (52.8) % (59.9) % (71.8) % (51.8) % (56.9) %

RPMs 86.9 % 71.3 % (55.3) % 107.6 % 74.6 %

ASMs 48.0 % 42.2 % (18.3) % 96.2 % 45.5 %

Passenger load factor (points) 16.7 10.2 (23.9) 3.8 12.0

See Part II, Item 6.

Selected Financial Data, of this report for the definition of these statistics.

Passenger revenue decreased $27.8 billion, or 70.2%, in 2020 as compared to 2019, primarily due to the decrease in demand for air travel as a result of the worldwide spread of COVID-19 and the associated shelter-in-place directives and travel restrictions.

Earlier in 2020, the Company suspended change fees and effective August 30, 2020, the Company eliminated change fees on all standard Economy and Premium cabin tickets for travel within the 50 U.S.

states, Puerto Rico and the U.S.

Virgin Islands.

Also, in December 2020, the Company eliminated change fees on flights from the U.S.

to all international destinations and fees on Basic Economy and all other international travel tickets issued by March 31, 2021.

The elimination of change fees and waivers associated with the COVID-19 pandemic resulted in change fee revenue declining $542 million in 2020 as compared to 2019.

Cargo revenue increased $469 million, or 39.8%, in 2020 as compared to 2019, primarily due to an increase in cargo-only charter flights with higher yields as a result of increased demand for critical goods during the COVID-19 pandemic.

Other operating revenue decreased $553 million, or 22.5%, in 2020 as compared to 2019, primarily due to a decline in mileage revenue from non-airline partners, including the co-branded credit card partner, Chase, and lower revenue from airport lounges due to United Club closures and fewer overall customers utilizing these lounges.

Passenger revenue increased $8.4 billion, or 71.1%, in 2021 as compared to 2020, primarily due to an increase in the demand for air travel as a result of the increased availability of COVID-19 vaccines and the easing of travel and quarantine restrictions in the United States and various other jurisdictions.

Cargo revenue increased $701 million, or 42.5%, in 2021 as compared to 2020, primarily due to stronger yields on freight revenue and higher cargo tonnage from increased wide-body departures of passenger flights as well as cargo-only flights.

Other operating revenue increased $186 million, or 9.8%, in 2021 as compared to 2020, primarily due to an increase in mileage revenue from non-airline partners, including the Company's co-branded credit card partner, JPMorgan Chase Bank, N.A.

Operating Expense.

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Aircraft rent 228 198 30 15.2

Special charges (credit) (2,616) 246 (2,862) NM

Special charges (credits) (3,367) (2,616) 751 NM

Other operating expenses 4,433 3,486 947 27.2

Total operating expenses $ 25,656 $ 21,714 $ 3,942 18.2

Salaries and related costs decreased $2.5 billion, or 21.1%, in 2020 as compared to 2019, primarily due to a 22.4% reduction in employees resulting from voluntary separation programs and furloughs caused by COVID-19, $623 million lower profit sharing and other employee incentives due to the impact of COVID-19 on 2020 results and $180 million in tax credits provided by the Employee Retention Credit under the CARES Act in 2020.

Aircraft fuel expense decreased $5.8 billion, or 64.8%, in 2020 as compared to 2019.

Salaries and related costs increased $44 million, or 0.5%, in 2021 as compared to 2020, primarily due to an increase in front-line employees' wages as a result of higher flight activity, partially offset by a $225 million increase in tax credits provided by the Employee Retention Credit under the CARES Act.

Aircraft fuel expense increased $2.6 billion, or 82.5%, in 2021 as compared to 2020.

The table below presents the significant changes in aircraft fuel cost per gallon for the years ended December 31 (in millions, except percentage changes and per gallon data):

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Average price per gallon $ 2.11 $ 1.57 34.4

Depreciation and amortization increased $200 million, or 8.7%, in 2020 as compared to 2019, primarily due to additions of aircraft, upgrades to aircraft interiors and completion of technology projects.

Landing fees and other rent decreased $416 million, or 16.4%, in 2020 as compared to 2019, primarily due to reduced flying.

A portion of other rents, especially at airport facilities, is fixed in nature and is not impacted by the reduction in flights.

Regional capacity purchase costs decreased $810 million, or 28.4%, in 2020 as compared to 2019, primarily due to reduced regional flying as a result of COVID-19 and reduced rates under certain capacity purchase agreements.

Aircraft maintenance materials and outside repairs decreased $936 million, or 52.2%, in 2020 as compared to 2019, primarily due to a reduction in airframe checks, engine overhauls, expenses associated with power-by-the-hour engine maintenance contracts and line maintenance due to reduced flying.

Distribution expenses decreased $1.2 billion, or 72.2%, in 2020 as compared to 2019, as a result of the overall decrease in passenger revenue due to the COVID-19 pandemic.

Aircraft rent decreased $90 million, or 31.3%, in 2020 as compared to 2019, primarily due to the purchase of leased aircraft.

The table below presents special charges (credit) recorded by the Company during the years ended December 31 (in millions):

Landing fees and other rent increased $289 million, or 13.6%, in 2021 as compared to 2020, primarily due to an increase in the number of flights and passengers.

The increase was not directly proportionate to the volume of activity as some landing fees and other rents are fixed.

Regional capacity purchase costs increased $108 million, or 5.3%, in 2021 as compared to 2020, primarily due to increased regional flying and increased pass-through maintenance costs.

Aircraft maintenance materials and outside repairs increased $458 million, or 53.4%, in 2021 as compared to 2020, primarily due to higher volumes of flying and increased heavy check maintenance events.

Distribution expenses increased $218 million, or 47.5%, in 2021 as compared to 2020, primarily due to higher credit card fees and commissions and a higher volume of global distribution fees as a result of the overall increase in passenger revenue.

Distribution expenses were also impacted by the mix of leisure travel versus business travel, which requires the use of different distribution channels and forms of payment.

The table below presents special charges (credits) recorded by the Company during the years ended December 31 (in millions):

CARES Act grant $ (4,021) $ (3,536)

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(Gains) losses on sale of assets and other special charges 119 27

Total special charges $ (2,616) $ 246

Total special charges (credits) $ (3,367) $ (2,616)

See Note 14 to the financial statements included in Part II, Item 8 of this report for additional information.

Other operating expenses decreased $2.8 billion, or 44.4%, in 2020 as compared to 2019, primarily due to the impacts of COVID-19 on our catering, airport ground handling, navigation fees, technology projects, advertising and crew-related expenses.

Other operating expenses increased $947 million, or 27.2%, in 2021 as compared to 2020, primarily due to increases in ground handling, passenger services and personnel-related costs as a direct result of increased flying and higher expenditures on information technology projects.

Nonoperating Income (Expense).

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Interest income 36 50 (14) (28.0)

Unrealized gains (losses) on investments, net (194) 153 (347) NM

Unrealized gains (losses) on investments, net (34) (194) (160) (82.5)

Miscellaneous, net 40 (1,327) (1,367) NM

Total nonoperating expense, net $ (2,463) $ (387) $ 2,076 NM

Interest expense increased $332 million, or 45.4%, in 2020 as compared to 2019, primarily due to the issuance of new debt in 2020 to provide additional liquidity to the Company during the COVID-19 pandemic.

Interest income decreased $83 million, or 62.4%, in 2020 as compared to 2019, primarily due to a decrease in interest rates.

Unrealized gains (losses) on investments, net decreased $347 million in 2020 as compared to 2019, due to $194 million in losses in 2020 as compared to $153 million in gains in the year-ago period, primarily as a result of a decrease in the market value of the Company's equity investment in Azul and a decrease in the fair value of the Avianca Holdings S.A.

("AVH") share call options, AVH share appreciation rights and AVH share-based upside sharing agreement.

Total nonoperating expense, net $ (1,535) $ (2,463) $ (928) (37.7)

Interest expense increased $594 million, or 55.9%, in 2021 as compared to 2020, primarily due to the issuance of additional debt, mainly in the second half of 2020 and first half of 2021, to provide additional liquidity to the Company during the COVID-19 pandemic.

Unrealized losses on investments, net decreased $160 million in 2021 as compared to 2020, primarily due to the change in the market value of the Company's investments in equity securities.

See Notes 9 and 14 to the financial statements included in Part II, Item 8 of this report for additional information.

Miscellaneous, net increased $1.3 billion in 2020 as compared to 2019, primarily due to credit loss allowances associated with the Company's Term Loan Agreement, with, among others, BRW Aviation Holding LLC and BRW Aviation LLC, and related guarantee and settlement losses and special termination benefits related to furloughs and voluntary separation programs under the Company's non-pilot U.S.

defined benefit pension plan and postretirement medical programs.

Miscellaneous, net expense decreased $1.4 billion in 2021 as compared to 2020, primarily due to the $697 million of credit loss allowances associated with the Company's Term Loan Agreement with, among others, BRW Aviation Holding LLC and BRW Aviation LLC and the related guarantee and $687 million in settlement losses and special termination benefits related to

voluntary separation programs under the Company's defined benefit pension plan covering certain non-pilot U.S.

employees and postretirement medical programs recorded in 2020.

See Notes 7, 8, 13 and 14 to the financial statements included in Part II, Item 8 of this report for additional information.

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As of December 31, 2021, the Company had $18.4 billion in unrestricted cash, cash equivalents and short-term investments, an increase of approximately $6.7 billion from December 31, 2020.

The Company also had approximately $7.0 billion available for borrowing by United under the Loan Program at any time until May 28, 2021 and $1.0 billion available for borrowing by United under the revolving credit facility of the Credit Agreement at any time until April 1, 2022.

The Company has taken a number of actions in response to the significant decline in international and domestic demand for air travel related to COVID-19, as discussed under "Impact of COVID-19 and Outlook" above.

The Company continues to focus on reducing expenses and managing its liquidity.

We expect to continue to modify our cost management structure and capacity as the timing of demand recovery becomes more certain.

On April 20, 2020, United entered into the PSP Agreement with Treasury providing the Company with total funding of approximately $5.1 billion pursuant to the Payroll Support Program established under the CARES Act.

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

During 2020, UAL and United entered into a loan and guarantee agreement with Treasury.

The agreement provides for a CARES Act Term Loan Facility of up to approximately $7.5 billion pursuant to the Loan Program.

The CARES Act Term Loans may be disbursed in up to three disbursements on or before May 28, 2021.

On September 28, 2020, United borrowed $520 million under the CARES Act Term Loan Facility, the proceeds of which were used to pay certain transaction fees and expenses and for working capital and other general corporate purposes of the Company.

On January 15, 2021, United entered into the PSP2 Agreement with Treasury, providing the Company with total funding of approximately $2.6 billion, approximately $1.9 billion as a direct grant and approximately $753 million from the PSP2 Note.

See Note 10 to the financial statements included in Part II, Item 8 of this report for a discussion of the PSP2 Note.

Several of the Company's debt agreements contain covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness and pay dividends on or repurchase stock.

As of December 31, 2020, UAL and United were in compliance with their respective debt covenants.

In addition, in connection with the PSP Agreement, the PSP2 Agreement and the Loan Program, the Company and its business will be subject to certain restrictions.

We have a significant amount of fixed obligations, including debt and leases of aircraft, airport and other facilities, and pension funding obligations.

We believe that our existing cash, cash equivalents and short-term investments, together with cash generated from operations, will be sufficient to satisfy our anticipated liquidity needs for the next twelve months, and we expect to meet our long-term liquidity needs with our anticipated access to the capital markets and projected cash from operations.

We regularly assess our anticipated working capital needs, debt and leverage levels, debt maturities, capital expenditure requirements (including in connection with our capital commitments for our firm order aircraft) and future investments or acquisitions in order to maximize shareholder return, efficiently finance our ongoing operations and maintain flexibility for future strategic transactions.

We also regularly evaluate our liquidity and capital structure to ensure financial risks, adequate liquidity access and lower cost of capital are efficiently managed.

We expect to maintain an elevated level of liquidity in the near term as we navigate through 2022, which may lead to the issuance of additional debt securities, the repurchase or redemption of debt securities prior to maturity or the issuance of common stock, as well as to the pursuit of financing options for our firm aircraft orders and other related capital expenditures consistent with our historical practice prior to the onset of the COVID-19 pandemic.

While we have been able to access the capital markets to meet our significant long-term debt and finance lease obligations and future commitments for capital expenditures, including the acquisition of aircraft and related spare engines, we must return to profitability in order to service our debt and maintain appropriate liquidity levels for our long-term operating needs.

For 2022, the Company expects approximately $5.9 billion of gross capital expenditures (including expenditures for assets acquired through the issuance of debt, finance leases and other financial liabilities).

See Note 13 to the financial statements included in Part II, Item 8 of this report for additional information on commitments.

The Revolving Credit and Guaranty Agreement, under the Term Loan Credit and Guaranty Agreement (the "2021 Term Loan Facility"), provides revolving loan commitments of up to $1.75 billion until April 21, 2025, subject to certain customary conditions.

No borrowings were outstanding under this facility at December 31, 2021.

In addition, the Company has backstop financing commitments available from certain of its aircraft manufacturers for a limited number of its future aircraft deliveries, subject to certain customary conditions.

We have a significant amount of fixed obligations, including debt, leases of aircraft, airport and other facilities, and pension funding obligations.

As of December 31, 2021, the Company had approximately $41.1 billion of debt, finance lease, operating lease and sale-leaseback obligations, including $4.5 billion that will become due in the next 12 months.

In addition, we have substantial noncancelable commitments for capital expenditures, including the acquisition of certain new aircraft and related spare engines.

For 2021, including the impact of the recent Boeing agreement, the Company expects approximately $4.4 billion of gross capital expenditures.

See Note 13 to the financial statements included in Part II, Item 8 of this report for additional information on commitments.

Our 2021 liquidity needs will be met through our existing liquidity levels plus additional debt or equity issuances.

We must return to profitability and/or access the capital markets to meet our significant long-term debt and finance lease obligations and future commitments for capital expenditures, including the acquisition of aircraft and related spare engines.

Financing may be necessary to satisfy the Company's capital commitments for its firm order aircraft and other related capital expenditures.

The Company has backstop financing commitments available from certain of its aircraft manufacturers for a limited number of its future aircraft deliveries, subject to certain customary conditions.

Our debt agreements contain customary terms and conditions as well as various affirmative, negative and financial covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness and pay dividends or repurchase stock.

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

As of December 31, 2021, a substantial portion of the Company's assets, principally aircraft and certain related assets, its loyalty program, route authorities and airport slots, was pledged under various loan and other agreements.

See Note 10 to the financial statements included in Part II, Item 8 of this report for additional information on aircraft financing and other debt instruments.

As of December 31, 2020, a substantial portion of the Company's assets, principally aircraft and certain related assets, its loyalty program, certain route authorities and airport slots, was pledged under various loan and other agreements.

As of December 31, 2020, the Company had unencumbered assets, including aircraft, engines and other physical assets, routes, slots and gates, among other items, available to be pledged as collateral for future financings, if needed.

The following is a discussion of the Company's sources and uses of cash for 2020 as compared to 2019.

See "Liquidity and Capital Resources" in Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2019 Annual Report for a discussion of the Company's sources and uses of cash in 2019 as compared to 2018.

The following table summarizes our cash flow for the years ended December 31 (in millions):

2021 2020 2019

Total cash provided by (used in):

Operating activities $ 2,067 $ (4,133) $ 6,909

Cash flows used by operations for the year ended December 31, 2020 was $4.1 billion compared to $6.9 billion provided by operations in the same period in 2019.

The change is primarily attributable to a $10.7 billion decrease in operating income for 2020 as compared to 2019 caused by the COVID-19 pandemic.

At December 31, 2020, $4.8 billion of current liabilities related to tickets sold to passengers for travel which includes $3.1 billion of credits issued to customers on electronic travel certificates ("ETCs") and future flight credits ("FFCs"), primarily for ticket cancellations, which can be applied towards a purchase of a new ticket.

In April 2020, due to the COVID-19 pandemic, the Company extended the expiration dates of ETCs from 12 months from the date of issuance to 24 months from the date of issuance and extended the expiration of FFCs, for tickets issued between May 1, 2019 and March 31, 2020 to 24 months from the original issue date.

On February 24, 2021, the Company extended the expiration dates for all tickets issued between May 1, 2019 and March 31, 2021 to March 31, 2022.

While we expect many of those passengers to utilize these ETCs and FFCs during 2021, a delay in the recovery from the COVID-19 pandemic could result in a further extension of their expiration dates.

Investing activities (1,672) 50 (4,560)

The Company's capital expenditures, net of flight equipment purchase deposit returns, were $1.7 billion and $4.5 billion in 2020 and 2019, respectively.

The Company's capital expenditures for both years were primarily attributable to the purchase of aircraft, aircraft improvements, facility and fleet-related costs and the purchase of information technology assets.

Maturities and sales of short-term investments provided $2.3 billion of liquidity in 2020.

In December 2019, United issued the AVH Convertible Loan.

For additional information regarding the AVH Convertible Loan, see Note 8 to the financial statements included in Part II, Item 8 of this report.

Financing activities 6,396 12,957 (1,280)

Net increase in cash, cash equivalents and restricted cash $ 6,791 $ 8,874 $ 1,069

See the Statements of Consolidated Cash Flows include in Part II, Item 8 of this report for additional information.

Operating Activities.

Cash flows provided by operating activities for 2021 were higher than 2020 primarily due to improvements in the demand for passenger travel as well as total government grant funding provided under the PSP2 and PSP3 Agreements, discussed below, partially offset by operating losses as a result of the COVID-19 pandemic.

In 2021, United entered into two Payroll Support Program Extension Agreements (collectively, the "PSP2 and PSP3 Agreements") with the U.S.

Treasury Department ("Treasury") providing the Company with total funding of approximately $5.8 billion, pursuant to the Payroll Support Program.

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 who were previously impacted by involuntary furloughs.

Approximately $4.1 billion was provided as a direct grant and $1.7 billion as indebtedness evidenced by two 10-year senior unsecured promissory notes (collectively, the "PSP2 and PSP3 Notes").

See Note 2 to the financial statements included in Part II, Item 8 of this report for additional information on the warrants issued in connection with the PSP2 and PSP3 Notes and Note 10 to such financial statements for a discussion of the PSP2 and PSP3 Notes.

Investing Activities.

Capital expenditures were $2.1 billion and $1.7 billion in 2021 and 2020, respectively, mainly related to advance deposits for future aircraft purchases.

Also, maturities and sales of short-term and other investments provided $0.4 billion of liquidity in 2021 as compared to $2.3 billion in 2020.

Financing Activities.

Significant financing events in 2021 were as follows:

Debt, Finance Lease and Other Financing Liability Principal Payments.

During 2021, the Company made payments for debt, finance leases, and other financing liabilities of $5.2 billion.

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

• repaid in full the $1.0 billion aggregate principal amount outstanding under the revolving credit facility included in the 2017 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, Treasury and the Bank of New York Mellon, as administrative agent, as amended, which was entered into pursuant to the loan program established pursuant to the CARES Act;

• made $1.9 billion of aircraft-related debt principal payments.

Debt Issuances.

During 2020, United received and recorded $16.8 billion from various credit agreements, including the MileagePlus financing, the PSP Note, the CARES Act Term Loan Facility and enhanced equipment trust certificate ("EETC") pass-through trusts established in September 2019 and October 2020.

As of December 31, 2020, United had recorded approximately $159 million of debt to finance the construction of an aircraft maintenance and ground service equipment complex at Los Angeles International Airport.

Debt and Finance Lease Principal Payments.

During the year ended December 31, 2020, the Company made debt and finance lease principal payments of $4.4 billion.

Share Issuance .

During the year ended December 31, 2020, the Company raised approximately $2.1 billion in cash proceeds from the issuance and sale of UAL common stock, par value $0.01 per share, including through "at the market offerings" under an equity distribution agreement (the "Distribution Agreement"), dated June 15, 2020, among the Company, Citigroup Global Markets Inc., BofA Securities, Inc.

Morgan Securities LLC.

(the "ATM Offering").

During the quarter ended December 31, 2020, approximately 20.8 million shares were sold in the ATM Offering at an average price of $46.85 per share, with net proceeds to the Company totaling approximately $968 million.

During the year ended December 31, 2020, approximately 21.4 million shares were sold in the ATM Offering at an average price of $46.70 per share, with net proceeds to the Company totaling approximately $989 million.

As of February 23, 2021, the Company had sold all of the 28 million shares authorized under the ATM Offering, at an average price of $45.82 per share, with net proceeds to the Company of approximately $1.3 billion.

The Board of Directors has authorized the Company to establish a new program providing for the issuance and sale from time to time of up to 37 million additional shares of UAL common stock in "at the market offerings".

See Note 2 to the financial statements included in Part II, Item 8 of this report for more information about these issuances.

Share Repurchases .

In 2020, UAL's Board of Directors terminated the share repurchase program.

In 2020, prior to the termination of the program, UAL repurchased approximately 4 million shares of UAL common stock in open market transactions for $0.3 billion.

See Part II, Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities of this report for additional information.

During 2021, United received and recorded:

• $5.0 billion from the 2021 Term Loan Facility;

• $4.0 billion from two series of notes, consisting of $2.0 billion in aggregate principal amount of 4.375% senior secured notes due 2026 and $2.0 billion in aggregate principal amount of 4.625% senior secured notes due 2029;

• $1.7 billion from the PSP2 and PSP3 Notes;

• $600 million from the enhanced equipment trust certificates ("EETC") pass-through trusts established in February 2021.

See Note 10 to the financial statements included in Part II, Item 8 of this report for additional information.

Share Issuances.

During 2021, the Company raised approximately $532 million in net cash proceeds from the issuance and sale of UAL common stock through "at the market offerings" under equity distribution agreements entered into in June 2020 and March 2021.

Significant financing events in 2020 were as follows:

Debt Issuances .

During 2019, United received and recorded $1.8 billion of proceeds as debt related to EETC offerings created in 2019 to finance the purchase of aircraft.

Also, United received and recorded $350 million of proceeds from the 4.875% Senior Notes due January 15, 2025 and borrowed approximately $105 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2019.

As of December 31, 2019, United had recorded approximately $39 million of debt to finance the construction of an aircraft maintenance and ground service equipment complex at Los Angeles International Airport.

During 2020, United received and recorded $16.8 billion from various credit agreements, including the MileagePlus Financing (as defined in Part I, Item 1A.

Risk Factors, of this report), loans provided under the CARES Act and EETC pass-through trusts established in September 2019 and October 2020.

In 2020, United had recorded approximately $159 million of debt to finance the construction of an aircraft maintenance and ground service equipment complex at Los Angeles International Airport.

Debt and Finance Lease Principal Payments.

During the year ended December 31, 2019, the Company made debt and finance lease principal payments of $1.4 billion.

During 2020, the Company made debt and finance lease principal payments of $4.4 billion.

Share Issuances .

During 2020, the Company raised approximately $2.1 billion in cash proceeds from the issuance and sale of UAL common stock through "at the market offerings" under an equity distribution agreement entered into in June 2020.

Share Repurchases .

The Company used $1.6 billion of cash to purchase approximately 19.2 million shares of its common stock during 2019.

In 2020, UAL's Board of Directors terminated the share repurchase program.

In 2020, prior to the termination of the program, UAL repurchased approximately 4 million shares of UAL common stock in open market transactions for $0.3 billion.

For additional information regarding these Liquidity and Capital Resource matters, see Notes 2, 10, 11 and 13 to the financial statements included in Part II, Item 8 of this report.

For information regarding non-cash investing and financing activities, see the Company's statements of consolidated cash flows.

For a discussion of the Company's sources and uses of cash in 2020 as compared to 2019, see "Liquidity and Capital Resources" in Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2020 Annual Report.

Credit Ratings.

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S&P Moody's Fitch

UAL B+ Ba2 BB-

United B+ * BB-

UAL B+ Ba2 B+

United B+ * B+

*The credit agency does not issue corporate credit ratings for subsidiary entities.

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however, the Company has been able to secure financing with investment grade credit ratings for certain EETCs, term loans and secured bond financings.

Downgrades from these rating levels, among other things, could restrict the availability, or increase the cost, of future financing for the Company.

Downgrades from these rating levels, among other things, could restrict the availability, or increase the cost, of future financing for the Company as well as affect the fair market value of existing debt.

A rating reflects only the view of a rating agency and is not a recommendation to buy, sell or hold securities.

Ratings can be revised upward or downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change.

Other Liquidity Matters

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Commitments and contingencies Note 13

Contractual Obligations.

The Company's business is capital intensive, requiring significant amounts of capital to fund the acquisition of assets, particularly aircraft.

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The Company also often enters into long-term lease commitments with airports to ensure access to terminal, cargo, maintenance and other required facilities.

The table below provides a summary of the Company's material contractual obligations as of December 31, 2020 (in billions):

The table below provides a summary of the Company's current and long-term material cash requirements as of December 31, 2021 (in billions):

2022 2023 2024 2025 2026 After 2026 Total

Long-term debt (a) $ 3.0 $ 2.9 $ 3.9 $ 3.4 $ 5.1 $ 15.6 $ 33.9

Finance lease obligations—principal portion 0.2 0.1 — — — 0.1 0.4

Total debt and finance lease obligations 2.1 4.0 2.7 5.1 3.7 10.1 27.7

Interest on debt and finance lease obligations (b) 1.1 1.0 0.9 0.7 0.5 1.0 5.2

Operating lease obligations 0.8 0.7 0.7 0.7 0.6 4.0 7.5

Sale-leasebacks financial obligations 0.1 0.1 0.1 0.1 0.1 1.5 2.0

Regional CPAs (c) 1.8 1.8 1.7 1.5 1.2 3.1 11.1

Postretirement obligations (d) 0.1 0.1 0.1 0.1 0.1 0.3 0.8

Pension obligations (e) — — 0.2 0.2 0.3 1.5 2.2

Purchase obligations (f) 4.9 2.9 2.8 1.6 2.0 10.1 24.3

Total contractual obligations $ 10.9 $ 10.6 $ 9.2 $ 10.0 $ 8.5 $ 31.6 $ 80.8

Finance leases—principal portion 0.1 0.1 — — — 0.1 0.3

Interest on debt and finance leases (b) 1.4 1.3 1.1 0.9 0.7 1.2 6.6

Operating leases (c) 0.9 0.8 0.8 0.6 0.6 4.0 7.7

Leases not yet commenced (d) — — — — 0.1 0.3 0.4

Sale-leasebacks 0.9 0.1 0.1 0.1 0.1 0.5 1.8

Regional CPAs (e) 2.1 2.1 2.0 1.7 1.5 4.2 13.6

Postretirement benefit payments (f) 0.1 0.1 0.1 0.1 0.1 0.4 0.9

Pension funding (g) — — — — — 1.1 1.1

Capital and other purchases (h) 5.7 6.9 5.0 4.3 3.3 8.9 34.1

Total $ 14.2 $ 14.3 $ 13.0 $ 11.1 $ 11.5 $ 36.3 $ 100.4

(a) Long-term debt presented in the Company's financial statements is net of $513 million of debt discount, premiums and debt issuance costs which are being amortized over the debt terms.

Contractual payments do not include the debt discount, premiums and debt issuance costs.

(b) Includes interest portion of finance lease obligations of $16 million in 2021, $10 million in 2022, $8 million in 2023, $6 million in 2024, $3 million in 2025 and $5 million thereafter.

Interest payments on variable interest rate debt were calculated using London interbank offered rates ("LIBOR") applicable at December 31, 2020.

(c) Represents our estimates of future minimum noncancelable commitments under our CPAs and does not include the portion of the underlying obligations for aircraft and facility rent that is disclosed as part of operating lease obligations.

Amounts also exclude a portion of United's finance lease obligation recorded for certain of its CPAs.

Cash requirements do not include the debt discount, premiums and debt issuance costs.

(b) Future interest payments on variable rate debt were determined using the rates as of December 31, 2021.

See Note 11 to the financial statements included in Part II, Item 8 of this report for information on variable rate and short-term operating leases.

(d) Represents future payments under leases that have not yet commenced and are not included in the consolidated balance sheet.

See Note 11 to the financial statements included in Part II, Item 8 of this report for information on these leases.

(e) Represents our estimates of future minimum noncancelable commitments under our CPAs and does not include the portion of the underlying obligations for aircraft and facility rent that is disclosed as part of operating lease obligations.

Amounts also exclude a portion of United's finance lease obligations recorded for certain of its CPAs.

See Note 11 to the financial statements included in Part II, Item 8 of this report for the significant assumptions used to estimate the payments.

(d) Amounts represent postretirement benefit payments through 2030.

(f) Amounts represent postretirement benefit payments through 2031.

Benefit payments approximate plan contributions as plans are substantially unfunded.

(e) Represents an estimate of the minimum funding requirements as determined by government regulations for United's U.S.

(g) Represents an estimate of the minimum funding requirements as determined by government regulations for United's U.S.

pension plans.

Amounts are subject to change based on numerous assumptions, including the performance of assets in the plans and bond rates.

(f) Represents contractual commitments for firm order aircraft (including the order entered into on February 26, 2021 with Boeing), spare engines and other capital purchase commitments.

(h) Represents contractual commitments for firm order aircraft, spare engines and other capital purchase commitments.

See Note 13 to the financial statements included in Part II, Item 8 of this report for a discussion of our purchase commitments.

Off-Balance Sheet Arrangements.

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity, or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support, or that engages in leasing, hedging or research and development arrangements.

The Company's primary off-balance sheet arrangements include guarantees that are discussed below and variable-rate operating leases.

See Note 11 to the financial statements included in Part II, Item 8 of this report for more information related to variable-rate operating leases.

In addition to the material cash requirements discussed above, the Company has made certain guarantees that could have a material future effect on the Company's cash requirements:

Letters of Credit and Surety Bonds.

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See discussion under Increased Cost Provisions, below, for additional information on increased cost provisions related to the Company's debt.

As of December 31, 2020, United had $12.1 billion principal amount of equipment notes outstanding issued under EETC financings.

Generally, the structure of these EETC financings consists of pass-through trusts created by United to issue pass-through certificates, which represent fractional undivided interests in the respective pass-through trusts and are not obligations of United.

The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes which are issued by United and secured by aircraft and, in certain structures, spare engines and spare parts.

United is responsible for the payment obligations under the equipment notes.

In certain EETC structures, proceeds received from the sale of pass-through certificates are initially held by a depositary in escrow for the benefit of the certificate holders until United issues equipment notes to the trust, which purchases such notes with a portion of the escrowed funds.

These escrowed funds are not guaranteed by United and are not reported as debt on United's consolidated balance sheet because the proceeds held by the depositary are not United's assets.

There were no EETC funds held in escrow as of December 31, 2020.

See Note 10 to the financial statements included in Part II, Item 8 of this report for additional information.

Fuel Consortia.

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The guarantees will expire when the tax-exempt bonds are paid in full, which ranges from 2022 to 2056.

The Company did not record a liability at the time these indirect guarantees were made.

The Company concluded it was not necessary to record a liability for these indirect guarantees.

Increased Cost Provisions.

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Critical accounting policies are defined as those that are affected by significant judgments and uncertainties which potentially could result in materially different accounting under different assumptions and conditions.

The Company has prepared the financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which requires management to make estimates and assumptions that affect the reported amounts in the financial statements.

The Company has prepared the financial statements in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amounts in the financial statements.

Actual results could differ from those estimates under different assumptions or conditions.

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The Company defers amounts related to future travel in its Advance ticket sales liability account.

The Company's Advance ticket sales liability also includes credits issued to customers on ETCs and FFCs, primarily for ticket cancellations, which can be applied towards a purchase of a new ticket.

In April 2020, due to the COVID-19 pandemic, the Company extended the expiration dates of ETCs from 12 months from the date of issuance to 24 months from the date of issuance and extended the expiration of FFCs for tickets issued between May 1, 2019 and March 31, 2020 to 24 months from the original issue date.

On February 24, 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 December 31, 2020, the Company's Advance ticket sales liability included $3.1 billion related to these credits.

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

To determine breakage, the Company uses its historical experience with refundable and nonrefundable expired tickets and other facts, such as recent aging trends, program changes and modifications that could affect the ultimate expiration patterns of tickets.

The Company continues to use its historical experience and most recent trends and program changes to estimate its breakage.

The Company's Advance ticket sales liability also includes credits issued to customers on electronic travel certificates ("ETCs") and future flight credits ("FFCs"), primarily for ticket cancellations, which can be applied towards a purchase of a new ticket.

ETCs are valid up to two years from the date of issuance;

however, all ETCs due to expire prior to December 31, 2022 have been extended until December 31, 2022.

FFCs are valid for 12 months from the original ticket date;

however, all FFCs issued on or before December 31, 2021 have been extended to be valid until December 31, 2022.

As of December 31, 2021, the Company's Advance ticket sales liability included $3.2 billion related to ETCs and FFCs.

The Company estimates the value of Advance ticket sales that will expire unused ("breakage") and recognizes revenue at the scheduled flight date.

To determine breakage, the Company uses its historical experience with expired tickets and other facts, such as recent aging trends, program changes and modifications that could affect the ultimate expiration patterns of tickets.

Given the uncertainty of travel demand caused by COVID-19, a significant portion of the ETCs and FFCs may expire unused in future periods and get recognized as revenue from breakage.

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

Given the uncertainty of travel demand caused by COVID-19, a significant portion of the $3.1 billion related to the ETCs and FFCs may expire unused in future periods and get recognized as breakage.

Also, 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 Advanced ticket liability in current liabilities even though some of the ETCs and FFCs could be used after the next 12 months.

Changes in estimates of breakage are recognized prospectively in proportion to the remaining usage of the related tickets.

Frequent Flyer Accounting.

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Members can also earn miles by purchasing goods and services from our network of non-airline partners.

We have contracts to sell miles to these partners with the terms extending from one to nine years.

We have contracts to sell miles to these partners with the terms extending from one to eight years.

These partners include domestic and international credit card issuers, retail merchants, hotels, car rental companies and our participating airline partners.

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Co-Brand Agreement .

During 2020, the Company entered into a Third Amended and Restated Co-Branded Card Marketing Services Agreement (as amended from time to time, the "Co-Brand Agreement") with its co-branded credit card partner Chase.

The Co-Brand Agreement extended the term of the agreement into 2029 and modified certain other terms, resulting in a different allocation among the separately identifiable performance obligations.

United has a contract (the "Co-Brand Agreement") to sell MileagePlus miles to its co-branded credit card partner JPMorgan Chase Bank USA, N.A.

Chase awards miles to MileagePlus members based on their credit card activity.

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Bag fees and seat upgrades are recorded to Passenger revenue at the time of the associated travel.

We account for all the payments received (including monthly and one-time payments) under the Co-Brand Agreement by allocating them to the separately identifiable performance obligations.

We account for all the payments received under the Co-Brand Agreement by allocating them to the separately identifiable performance obligations.

The fair value of the separately identifiable performance obligations is determined using management's estimated selling price of each component.

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In light of the ongoing impact of the COVID-19 pandemic on both the U.S.

and global economies, the significant, sustained impact on the demand for travel and government policies that restrict air travel, the exact timing of the recovery from the COVID-19 pandemic, and the speed at which such recovery could occur, continues to remain uncertain and could result in additional impairment charges in the future.

We expect to continue to modify our cost management structure and capacity as the timing of demand recovery becomes more certain.

As a result of the impairment assessments, the Company recorded impairment charges of $130 million during 2020 for its China routes which was primarily caused by the COVID-19 pandemic, the Company's subsequent suspension of flights to China and a further delay in the expected return of full capacity to the China markets.

Based on our assessment at year-end, a 10% decline in the fair value of our China routes would not have resulted in an incremental impairment.

See Note 1 and 14 to the financial statements included in Part II, Item 8 of this report for additional information.

and global economies, the significant, sustained impact on the demand for travel and government policies that restrict air travel, the exact timing of a complete recovery from the COVID-19 pandemic, and the speed at which such recovery could occur, continues to remain uncertain.

We recorded impairment charges of $130 million related to our China route indefinite-lived intangible assets during 2020 as a result of the impact of COVID-19.

Adverse changes to our forecasted results caused by COVID-19 or the other factors discussed above could result in additional impairment charges in the future.

See Notes 1 and 14 to the financial statements included in Part II, Item 8 of this report for additional information.

Tax valuation allowance .

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In order to form a conclusion, management considers positive evidence in the form of taxable income in prior carryback years, reversing temporary differences, tax planning strategies and projections of future taxable income during the periods in which those temporary differences become deductible, as well as negative evidence such as historical losses.

Although the Company was in a cumulative loss position at the end of 2020, management determined that the 2020 results were not indicative of future results due to the impact of the COVID-19 pandemic on its operations.

The Company concluded that the positive evidence outweighs the negative evidence, primarily driven by the approval and distribution of COVID-19 vaccines as well as increased confidence with the timing of the recovery.

The Company has $6.6

billion of deferred tax assets, of which $2.3 billion are attributable to federal net operating losses ("NOLs") at December 31, 2020.

The majority of the NOLs do not expire and the Company expects to recognize the NOLs through the reversal of existing deferred tax liabilities of $6.5 billion and projected future taxable income.

Therefore, we have not recorded a valuation allowance on our deferred tax assets other than the capital loss carryforwards and state attributes that have short expiration periods.

While the Company expects to generate sufficient future profits to fully utilize these NOLs, the Company may have to record a valuation allowance against its NOLs if it is unable to generate sufficient taxable income in future periods.

Recording a valuation allowance against our NOLs would not impact our ability to use them.

Although the Company incurred losses in 2021 and 2020, management determined that these results were not indicative of future results due to the impact of the COVID-19 pandemic on its operations.

The Company concluded that the positive evidence outweighs the negative evidence, primarily driven by approval and distribution of COVID-19 vaccines as well as increased confidence with the timing of the recovery.

The Company has $7.5 billion of deferred tax assets,

of which $2.1 billion (tax effected) are attributable to federal net operating losses ("NOLs") at December 31, 2021.

The majority of the NOLs do not expire and the Company expects to realize the benefits of the NOLs through the reversal of certain existing deferred tax liabilities of $6.2 billion and the remaining $1.3 billion (the income tax equivalent to approximately two years of average pre-COVID-19 pre-tax income) through projected future taxable income.

Assumptions about our future taxable income are consistent with the plans and estimates used to manage our business.

Therefore, we have not recorded a valuation allowance on our deferred tax assets other than the capital loss carryforwards and certain state attributes that have short expiration periods.

While the Company expects to generate sufficient future income to fully utilize its deferred tax assets (including NOLs), the Company may have to record a valuation allowance, which could be material, against deferred tax assets if negative evidence such as prolonged losses or reduced forecasted income outweigh positive evidence.

Recording a valuation allowance against our NOLs would not impact our ability to use them to offset cash taxes payable.

However, our ability to use NOLs may be significantly limited due to various circumstances, as discussed in more detail in Part I, Item 1A.

Risk Factors—" The Company's ability to use its net operating loss carryforwards and certain other tax attributes to offset future taxable income for U.S.

federal income tax purposes may be significantly limited due to various circumstances, including certain possible future transactions involving the sale or issuance of UAL common stock, or if taxable income does not reach sufficient levels." Assumptions about our future taxable income are consistent with the plans and estimates used to manage our business.

Management will continue to evaluate future financial performance to determine whether such performance is both sustained and significant enough to provide sufficient evidence to support not recording a valuation allowance on these NOLs.

Any reduction in estimated future taxable income may require additional valuation allowance against the deferred tax assets, which could be material.

As of December 31, 2021, the Company has recorded $183 million of valuation allowance against its capital loss deferred tax assets.

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The Company does not anticipate generating sufficient capital gains to utilize the losses before they expire, therefore, a valuation allowance is necessary as of December 31, 2021.

Additionally, the Company recorded a valuation allowance of $62 million on the state NOL and state tax credit deferred tax assets primarily due to utilization limitations resulting from a prior ownership change.

Forward-Looking Information

Certain statements throughout Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this report are forward-looking and thus reflect the Company's current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance.

Such forward-looking statements are and will be subject to many risks and uncertainties relating to the Company's 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," "remains," "believes," "estimates," "forecast," "guidance," "outlook," "goals", "targets" 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.

Additionally, the Company recorded a valuation allowance of $27 million on certain state deferred tax assets primarily due to state NOLs that have short expiration periods.

Supplemental Information

The Company evaluates its financial performance utilizing various GAAP and non-GAAP financial measures, including CASM-ex.

The Company has provided CASM-ex, a non-GAAP financial measure, which is not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP.

Management believes that adjusting for special charges (credits) is useful to investors because special charges (credits) are not indicative of UAL's ongoing performance.

Management also believes that excluding third-party business expenses, such as maintenance and ground handling for third parties, provides more meaningful disclosure because these expenses are not directly related to UAL's core business.

Management also believes that excluding fuel costs is useful to investors because it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence.

Management also believes that excluding profit sharing allows investors to better understand and analyze UAL's operating cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.

Because this non-GAAP financial measure is not calculated in accordance with GAAP, it should not be considered superior to, and is not intended to be considered in isolation or as a substitute for, the related GAAP financial measure and may not be the same as or comparable to any similarly titled measure presented by other companies due to possible differences in method and in the items being adjusted.

We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

The Company is not providing a target for CASM or a reconciliation for CASM-ex projections to CASM, the most directly comparable GAAP measure, because the Company is unable to predict certain items contained in the GAAP measure without unreasonable efforts and it does not provide a reconciliation of forward-looking measures where it believes such a reconciliation would imply a degree of precision and certainty that could be confusing to investors and is unable to reasonably predict certain items contained in the GAAP measure without unreasonable efforts.

This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred and are out of the Company's control or cannot be reasonably predicted.

For the same reasons, the Company is unable to address the probable significance of the unavailable information.

Forward-looking measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

See "Cautionary Statement Regarding Forward-Looking Statements" below.

Below is a reconciliation of the non-GAAP financial measure (CASM-ex) to the most directly comparable GAAP financial measure (CASM) for the year ended December 31, 2019 (in cents):

CASM (GAAP) 13.67

Special charges (credits) 0.09

Third-party business expenses 0.06

Fuel expense 3.14

Profit sharing 0.17

CASM-ex (Non-GAAP) 10.21

Cautionary Statement Regarding Forward-Looking Statements

This report contains certain "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including in Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere, relating to, among other things, the potential impacts of the COVID-19 pandemic and steps the Company plans to take in response thereto and goals, plans and projections regarding the Company's financial position, results of operations, market position, capacity, fleet, product development, ESG targets and business strategy.

Such forward-looking statements are based on historical performance and current expectations, estimates, forecasts and projections about the Company's future financial results, goals, plans and objectives and involve inherent risks, assumptions and uncertainties, known or unknown, including internal or external factors that could delay, divert or change any of them, that are difficult to predict, may be beyond the Company's control and could cause the Company's future financial results, goals, plans and objectives to differ materially from those expressed in, or implied by, the statements.

Words such as "should," "could," "would," "will," "may," "expects," "plans," "intends," "anticipates," "indicates," "remains," "believes," "estimates," "projects," "forecast," "guidance," "outlook," "goals", "targets" and other words and terms of similar meaning and expression are intended to identify forward-looking statements, although not all forward-looking statements contain such terms.

All statements, other than those that relate solely to historical facts, are forward-looking statements.

Additionally, forward-looking statements include conditional statements and statements that identify uncertainties or trends, discuss the possible future effects of known trends or uncertainties, or that 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, except as required by applicable law.

Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following:

the duration and spread of the ongoing global COVID-19 pandemic and the outbreak of any other disease or similar public health threat and the impact on our business, results of operations and financial condition;

the lenders' ability to accelerate the MileagePlus indebtedness, foreclose upon the collateral securing the MileagePlus indebtedness or exercise other remedies if we are not able to comply with the covenants in the MileagePlus financing agreements;

the effects of borrowing pursuant to the Loan Program under the CARES Act and the effects of the grant and promissory note through the Payroll Support Program under the CARES Act;

the costs and availability of financing;

our significant amount of financial leverage from fixed obligations and ability to seek additional liquidity and maintain adequate liquidity;

our ability to comply with the terms of our various financing arrangements;

our ability to utilize our net operating losses to offset future taxable income;

the material disruption of our strategic operating plan as a result of the COVID-19 pandemic and our ability to execute our strategic operating plans in the long term;

general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets);

risks of doing business globally, including instability and political developments that may impact our operations in certain countries;

demand for travel and the impact that global economic and political conditions have on customer travel patterns;

our capacity decisions and the capacity decisions of our competitors;

competitive pressures on pricing and on demand;

changes in aircraft fuel prices;

disruptions in our supply of aircraft fuel;

our ability to cost-effectively hedge against increases in the price of aircraft fuel, if we decide to do so;

the effects of any technology failures or cybersecurity or significant data breaches;

disruptions to services provided by third-party service providers;

potential reputational or other impact from adverse events involving our aircraft or operations, the aircraft or operations of our regional carriers or our code share partners or the

aircraft or operations of another airline;

our ability to attract and retain customers;

the effects of any terrorist attacks, international hostilities or other security events, or the fear of such events;

the mandatory grounding of aircraft in our fleet;

disruptions to our regional network as a result of the COVID-19 pandemic or otherwise;

the impact of regulatory, investigative and legal proceedings and legal compliance risks;

the success of our investments in other airlines, including in other parts of the world, which involve significant challenges and risks, particularly given the impact of the COVID-19 pandemic;

industry consolidation or changes in airline alliances;

the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers;

costs associated with any modification or termination of our aircraft orders;

disruptions in the availability of aircraft, parts or support from our suppliers;

our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with our union groups;

any disruptions to operations due to any potential actions by our labor groups;

the impact of any management changes;

extended interruptions or disruptions in service at major airports where we operate;

or foreign governmental legislation, regulation and other actions (including Open Skies agreements, environmental regulations and the United Kingdom's withdrawal from the European Union);

the seasonality of the airline industry;

weather conditions;

the costs and availability of aviation and other insurance;

our ability to realize the full value of our intangible assets and long-lived assets;

any impact to our reputation or brand image and other risks and uncertainties set forth under Part I, Item 1A.

the adverse impacts of the ongoing COVID-19 global pandemic on our business, operating results, financial condition and liquidity;

execution risks associated with our strategic operating plan;

changes in our network strategy or other factors outside our control resulting in less economic aircraft orders, costs related to modification or termination of aircraft orders or entry into less favorable aircraft orders, as well as any inability to accept or integrate new aircraft into our fleet as planned;

any failure to effectively manage, and receive anticipated benefits and returns from, acquisitions, divestitures, investments, joint ventures and other portfolio actions;

adverse publicity, harm to our brand, reduced travel demand, potential tort liability and voluntary or mandatory operational restrictions as a result of an accident, catastrophe or incident involving us, our regional carriers, our codeshare partners or another airline;

the highly competitive nature of the global airline industry and susceptibility of the industry to price discounting and changes in capacity, including as a result of alliances, joint business arrangements or other consolidations;

our reliance on a limited number of suppliers to source a majority of our aircraft and certain parts, and the impact of any failure to obtain timely deliveries, additional equipment or support from any of these suppliers;

disruptions to our regional network and United Express flights provided by third-party regional carriers;

unfavorable economic and political conditions in the United States and globally;

reliance on third-party service providers and the impact of any significant failure of these parties to perform as expected, or interruptions in our relationships with these providers or their provision of services;

extended interruptions or disruptions in service at major airports where we operate and space, facility and infrastructure constrains at our hubs or other airports;

geopolitical conflict, terrorist attacks or security events;

any damage to our reputation or brand image;

our reliance on technology and automated systems to operate our business and the impact of any significant failure or disruption of, or failure to effectively integrate and implement, the technology or systems;

increasing privacy and data security obligations or a significant data breach;

increased use of social media platforms by us, our employees and others;

the impacts of union disputes, employee strikes or slowdowns, and other labor-related disruptions on our operations;

any failure to attract, train or retain skilled personnel, including our senior management team or other key employees;

the monetary and operational costs of compliance with extensive government regulation of the airline industry;

current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or arrangement relating to these

costs, liabilities and risks associated with environmental regulation and climate change, including our climate goals;

high and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel;

the impacts of our significant amount of financial leverage from fixed obligations, the possibility we may seek material amounts of additional financial liquidity in the short-term, and the impacts of insufficient liquidity on our financial condition and business;

failure to comply with financial and other covenants governing our debt, including our MileagePlus® financing agreements;

the impacts of the proposed phase out of the London interbank offer rate;

limitations on our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income for U.S.

federal income tax purposes;

our failure to realize the full value of our intangible assets or our long-lived assets, causing us to record impairments;

fluctuations in the price of our common stock;

the impacts of seasonality and other factors associated with the airline industry;

increases in insurance costs or inadequate insurance coverage and other risks and uncertainties set forth under Part I, Item 1A.

Risk Factors, of this report, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC.

The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements.

Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties.

In addition, certain forward-looking outlook provided in this report relies on assumptions about the duration and severity of the COVID-19 pandemic, the timing of the return to a more stable business environment, the volatility of aircraft fuel prices, customer behavior changes and return in demand for air travel, among other things (together, the "Recovery Process").

If the actual Recovery Process differs materially from our assumptions, the impact of the COVID-19 pandemic on our business could be worse than expected, and our actual results may be negatively impacted and may vary materially from our expectations and projections.

It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change.

For instance, we regularly monitor future demand and booking trends and adjust capacity, as needed.

As such, our actual flown capacity may differ materially from currently published flight schedules or current estimations.

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-K

Item 7. Management’s Discussion and Analysis