What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-19 compared with 2022-07-21 · 126 added, 109 removed, 336 unchanged (41% of the section changed)

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The Company serves virtually every major market around the world, either directly or through participation in Star Alliance ® , the world's largest airline alliance.

Given the more significant impact of the COVID-19 pandemic on our business and operating results in 2020 and 2021, we believe that a comparison of our second quarter 2022 results to second quarter of 2019 results for certain key metrics in this financial overview discussion is more reflective of the impact of the pandemic.

Given the more significant impact of the COVID-19 pandemic on our business and operating results in 2020 and 2021, we believe that a comparison of our third quarter 2022 results to third quarter of 2019 results for certain key metrics in this financial overview discussion is more reflective of the impact of the 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 "Economic and Market Factors" and "Forward-Looking Information" and in Part I, Item 1A.

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The factors and trends that we currently believe are or will be most impactful to our results of operations and financial condition include the following:

the adverse impacts of the ongoing COVID-19 global pandemic;

the adverse impacts of the ongoing COVID-19 global pandemic, including the gradual return of business travel demand to pre-COVID-19 levels;

the execution risks associated with our United Next plan;

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aircraft delivery delays;

the closure of our flying airspace and termination of other operations due to regional conflicts, including the continuation of the suspension of our overflying in Russia airspace as well as third-party general sales agent services in Russia as a result of the Russia-Ukraine military conflict and/or an escalation of the broader economic consequences of the conflict beyond their current scope;

the closure of our flying airspace and termination of other operations due to regional conflicts, including the continuation of the suspension of our overflying in Russian airspace as well as third-party general sales agent services in Russia as a result of the Russia-Ukraine military conflict and an escalation of the broader economic consequences of the conflict beyond their current scope;

and changes in general economic conditions in the markets in which the Company operates, including an economic downturn leading to a decrease in demand for air travel or fluctuations in foreign currency exchange rates that may impact international travel demand.

We continue to monitor the potential favorable or unfavorable impacts of these and other factors on our business, operations,

financial condition and future results of operations, which are dependent on future developments, including as a result of those factors discussed in Item 1A.

We continue to monitor the potential favorable or unfavorable

impacts of these and other factors on our business, operations, financial condition and future results of operations, which are dependent on future developments, including as a result of those factors discussed in Item 1A.

Risk Factors in the 2021 Form 10-K.

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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 operated at approximately 85% of our second quarter 2019 capacity during the second quarter of 2022.

We operated at approximately 90% of our third quarter 2019 capacity during the third quarter of 2022.

At the beginning of the COVID-19 pandemic, we suspended portions of our international operations, but we resumed service to several international destinations as travel restrictions were eased and demand for travel increased.

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 also 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 June 30, 2022, unrestricted cash, cash equivalents and short-term investments totaled $20.1 billion, an increase of approximately $14.6 billion from June 30, 2019.

We had approximately $39.4 billion of debt, finance lease, operating lease and sale-leaseback obligations as of June 30, 2022 (including $4.5 billion that will become due in the next 12 months), up from approximately $20.2 billion as of June 30, 2019.

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

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

As of September 30, 2022, unrestricted cash, cash equivalents and short-term investments totaled $18.7 billion, an increase of approximately $13.6 billion from September 30, 2019.

We had approximately $38.4 billion of debt, finance lease, operating lease and sale-leaseback obligations as of September 30, 2022 (including $4.5 billion that will become due in the next 12 months), up from approximately $18.2 billion as of September 30, 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.

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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.

We continued executing our United Next plan during the second quarter of 2022.

We continued executing our United Next plan during the third quarter of 2022.

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.

Second Quarter 2022 Overview

Relative to the second quarter of 2019, the Company operated approximately 85% of its capacity for the second quarter of 2022 compared to approximately 54% of its capacity in the second quarter of 2021.

Third Quarter 2022 Overview

Relative to the third quarter of 2019, the Company operated approximately 90% of its capacity for the third quarter of 2022 compared to approximately 72% of its capacity in the third quarter of 2021.

Operating revenue.

For the second quarter of 2022, operating revenue increased by $0.7 billion, or 6.2%, versus the second quarter of 2019 and increased by $6.6 billion, or 121.4%, versus the second quarter of 2021 due to the ongoing recovery from the COVID-19 pandemic.

For the third quarter of 2022, operating revenue increased by $1.5 billion, or 13.2%, versus the third quarter of 2019 and increased by $5.1 billion, or 66.2%, versus the third quarter of 2021 due to the ongoing recovery from the

COVID-19 pandemic accompanied by an increase in the average yield.

In fact, the Company's TRASM (as defined below) for the month of September was the third best of any month in the Company's history, excluding pandemic months.

Operating expense.

For the second quarter of 2022, operating expense increased by $1.3 billion, or 13.1%, versus the second quarter of 2019 and by $5.5 billion, or 95.7%, versus the second quarter of 2021 mostly due to a $2.6 billion increase in fuel costs, a $1.1 billion in Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") grant in the prior year period that did not repeat and other increased operating costs from flight activity.

For the third quarter of 2022, operating expense increased by $1.5 billion, or 15.3%, versus the third quarter of 2019, mostly due to a $1.5 billion increase in fuel costs, and by $4.7 billion, or 70.1%, versus the third quarter of 2021, mostly due to a $2.0 billion increase in fuel costs, a $1.1 billion Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") grant in the prior year period that did not repeat and other increased operating costs from flight activity.

We expect fuel costs to remain elevated or increase further throughout 2022.

Third Quarter 2022 Outlook

The Company expects its scheduled capacity to be down approximately 11% in the third quarter of 2022 as compared to the same period in 2019.

Total operating revenue and total revenue per available seat mile ("TRASM").

The Company expects total operating revenue to increase approximately 11% and TRASM to increase approximately 24% to 26% in the third quarter of 2022 as compared to the same period in 2019.

Fourth Quarter 2022 Outlook

The Company expects its scheduled capacity to be down approximately 9% to 10% in the fourth quarter of 2022 as compared to the same period in 2019.

Total revenue per available seat mile ("TRASM").

The Company expects TRASM to increase approximately 24% to 25% in the fourth quarter of 2022 as compared to the same period in 2019.

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

The Company expects CASM-ex (a non-GAAP financial measure defined as cost or operating expense per available seat mile ("CASM") excluding fuel, profit sharing, third-party business expense and special charges (credits)) to increase approximately 16% to 17% in the third quarter of 2022 as compared to the same period in 2019.

The Company expects CASM-ex (a non-GAAP financial measure defined as cost or operating expense per available seat mile ("CASM") excluding fuel, profit sharing, third-party business expense and special charges (credits)) to increase approximately 11% to 12% in the fourth quarter of 2022 as compared to the same period in 2019.

Adjusted operating margin.

The Company expects adjusted operating margin (a non-GAAP financial measure defined as operating margin excluding special charges (credits)) of approximately 10% for the third quarter of 2022.

The Company expects adjusted operating margin (a non-GAAP financial measure defined as operating margin excluding special charges (credits)) of approximately 10% for the fourth quarter of 2022.

RESULTS OF OPERATIONS

The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three months ended June 30, 2022, as compared to the corresponding period in 2021.

Second Quarter 2022 Compared to Second Quarter 2021

The Company recorded net income of $329 million for the second quarter of 2022 as compared to a net loss of $434 million for the second quarter of 2021.

The Company considers a key measure of its performance to be operating income, which was $878 million for the second quarter of 2022 as compared to an operating loss of $270 million for the second quarter of 2021.

Significant components of the Company's operating results for the three months ended June 30 are as follows (in millions, except percentage changes):

The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three months ended September 30, 2022, as compared to the corresponding period in 2021.

Third Quarter 2022 Compared to Third Quarter 2021

The Company recorded net income of $942 million for the third quarter of 2022 as compared to net income of $473 million for the third quarter of 2021.

The Company considers a key measure of its performance to be operating income, which was $1.5 billion for the third quarter of 2022 as compared to $1.0 billion for the third quarter of 2021, a $421 million increase year-over-year.

Significant components of the Company's operating results for the three months ended September 30 are as follows (in millions, except percentage changes):

2022 2021 Increase (Decrease) % Change

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Operating expense 11,419 6,713 4,706 70.1

Operating income (loss) 878 (270) 1,148 NM

Operating income 1,458 1,037 421 40.6

Nonoperating expense, net (305) (434) (129) (29.7)

Income tax expense (benefit) 130 (130) 260 NM

Net income (loss) $ 329 $ (434) $ 763 NM

Certain consolidated statistical information for the Company's operations for the three months ended June 30 is as follows:

Income tax expense 211 130 81 62.3

Net income $ 942 $ 473 $ 469 99.2

Certain consolidated statistical information for the Company's operations for the three months ended September 30 is as follows:

2022 2021 Increase (Decrease) % Change

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Fuel gallons consumed (millions) 985 800 185 23.1

Employee headcount, as of June 30

Employee headcount, as of September 30

90,800 85,300 5,500 6.4

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(f) The number of cargo revenue tons transported multiplied by the number of miles flown.

(g) See "Supplemental Information" below for a reconciliation to CASM, the most directly comparable GAAP measure.

(g) Cost or operating expense per available seat mile ("CASM") excluding fuel, profit sharing, third-party business expense and special charges (credits).

See "Supplemental Information" below for a reconciliation to CASM, the most directly comparable GAAP measure.

Operating Revenue.

The table below shows year-over-year comparisons by type of operating revenue for the three months ended June 30 (in millions, except for percentage changes):

The table below shows year-over-year comparisons by type of operating revenue for the three months ended September 30 (in millions, except for percentage changes):

2022 2021 Increase (Decrease) % Change

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Total operating revenue $ 12,877 $ 7,750 $ 5,127 66.2

The table below presents selected second quarter passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes:

The table below presents selected third quarter passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes:

Increase (decrease) from 2021:

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Passenger load factor (points) 4.6 22.3 47.9 12.5 11.2

Passenger revenue increased $6.5 billion, or 148.0%, in the second quarter of 2022 as compared to the year-ago period, primarily due to the ongoing recovery in air travel that was impacted by the COVID-19 pandemic and strength in the pricing environment as a result of inflationary pressures on fuel prices and other costs.

Cargo revenue decreased $32 million, or 5.3%, in the second quarter of 2022 as compared to the year-ago period, primarily due to lower yields due to an increase in market capacity and a decrease in available cargo space due to higher passenger loads and flight cancellations.

Other operating revenue increased $210 million, or 42.1%, in the second quarter of 2022 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending recovery with the co-branded credit card partner, JPMorgan Chase Bank, N.A.

Passenger revenue increased $5.0 billion, or 75.6%, in the third quarter of 2022 as compared to the year-ago period, primarily due to the ongoing recovery in air travel that was impacted by the COVID-19 pandemic and strength in the pricing environment as a result of inflationary pressures on fuel prices and other costs.

Cargo revenue decreased $21 million, or 4.0%, in the third quarter of 2022 as compared to the year-ago period, primarily due to lower yields as a result of increased market capacity and lower domestic mail volumes.

Other operating revenue increased $132 million, or 22.2%, in the third quarter of 2022 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending recovery with the co-branded credit card partner, JPMorgan Chase Bank, N.A, as well as an increase in the purchases of United Club memberships and lounge passes in the current year.

Operating Expenses.

The table below includes data related to the Company's operating expenses for the three months ended June 30 (in millions, except for percentage changes):

The table below includes data related to the Company's operating expenses for the three months ended September 30 (in millions, except for percentage changes):

2022 2021 Increase (Decrease) % Change

Salaries and related costs $ 2,836 $ 2,276 $ 560 24.6

Aircraft fuel $ 3,755 $ 1,710 $ 2,045 119.6

Salaries and related costs 2,843 2,487 356 14.3

Landing fees and other rent 639 652 (13) (2.0)

Aircraft maintenance materials and outside repairs 619 346 273 78.9

Depreciation and amortization 610 623 (13) (2.1)

Regional capacity purchase 596 520 76 14.6

Aircraft maintenance materials and outside repairs 527 302 225 74.5

Distribution expenses 482 218 264 121.1

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Total operating expenses $ 11,419 $ 6,713 $ 4,706 70.1

Salaries and related costs increased $560 million, or 24.6%, in the second quarter of 2022 as compared to the year-ago period primarily due to an increase in headcount, higher flight activity in the second quarter of 2022 and $108 million of Employee Retention Credits under the CARES Act in the second quarter 2021 that did not occur in the current period, among other factors.

Aircraft fuel expense increased by $2.6 billion, or 209.3%, in the second quarter of 2022 as compared to the year-ago period, due to both a higher average price per gallon of fuel and increased consumption from higher flight activity.

Aircraft fuel expense increased by $2 billion, or 119.6%, in the third quarter of 2022 as compared to the year-ago period, due to both a higher average price per gallon of fuel and increased consumption from higher flight activity.

We expect elevated fuel prices to continue or increase further throughout 2022.

The table below presents the significant changes in aircraft fuel cost per gallon in the three months ended June 30, 2022 as compared to the year-ago period:

The table below presents the significant changes in aircraft fuel cost per gallon in the three months ended September 30, 2022 as compared to the year-ago period:

(In millions) Average price per gallon

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Fuel consumption (gallons) 985 800 23.1 %

Landing fees and other rent increased $104 million, or 18.4%, in the second quarter of 2022 as compared to the year-ago period, primarily due to increases in landed weight volume as a result of increased flight activity.

Aircraft maintenance materials and outside repairs increased $225 million, or 74.5%, in the second quarter of 2022 as compared to the year-ago period, primarily due to higher volumes of flying and increased engine overhauls, airframe checks, and landing gear inductions.

Distribution expenses increased $254 million, or 182.7%, in the second quarter of 2022 as compared to the year-ago period, primarily due to higher credit card fees and higher volumes of global distribution fees as a result of the overall increase in passenger revenue.

Details of the Company's special charges (credits) include the following for the three months ended June 30 (in millions):

Salaries and related costs increased $356 million, or 14.3%, in the third quarter of 2022 as compared to the year-ago period primarily due to an increase in headcount, volume-driven pay from increased flight activity in the third quarter of 2022 and $57 million of employee retention credits under the CARES Act in the third quarter of 2021 that did not occur in the current period, among other factors.

Aircraft maintenance materials and outside repairs increased $273 million, or 78.9%, in the third quarter of 2022 as compared to the year-ago period, primarily due to higher volumes of flying, increased engine overhauls, contractual rate escalations, increased materials purchases and heavy maintenance checks.

Regional capacity purchase increased $76 million, or 14.6%, in the third quarter of 2022 as compared to the year-ago period, primarily due to rate increases under various capacity purchase agreements with regional carriers as a result of the expiration of the CARES Act credits received in the prior year, partially offset by lower regional capacity.

Distribution expenses increased $264 million, or 121.1%, in the third quarter of 2022 as compared to the year-ago period, primarily due to higher credit card fees, higher travel agency commissions and higher volumes of global distribution fees as a result of the overall increase in passenger revenue and impacted by the mix of leisure travel and business travel, which requires the use of higher cost distribution channels and forms of payment.

Details of the Company's special charges (credits) include the following for the three months ended September 30 (in millions):

CARES Act grant $ — $ (1,132)

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See Note 9 to the financial statements included in Part I, Item 1 of this report for additional information on the Company's special charges (credits).

Other operating expenses increased $685 million, or 71.6%, in the second quarter of 2022 as compared to the year ago period, primarily due to increases in ground handling, passenger services, food and beverage offerings, navigation fees and personnel-related costs as a direct result of the increase in flight activity and higher expenditures on information technology services.

Other operating expenses increased $593 million, or 49.5%, in the third quarter of 2022 as compared to the year ago period, primarily due to increases in ground handling, passenger services, food and beverage offerings, navigation fees and personnel-related costs as a direct result of the increase in flight activity and inflationary pressures and higher expenditures on information technology projects and services.

Nonoperating Income (Expense ).

The table below shows year-over-year comparisons of the Company's nonoperating income (expense) for the three months ended June 30 (in millions, except for percentage changes):

The table below shows year-over-year comparisons of the Company's nonoperating income (expense) for the three months ended September 30 (in millions, except for percentage changes):

2022 2021 Increase (Decrease) % Change

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Interest capitalized 27 18 9 50.0

Interest income 33 12 21 175.0

Interest income 104 11 93 NM

Unrealized gains (losses) on investments, net 28 (34) 62 NM

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Total $ (305) $ (434) $ (129) (29.7)

Unrealized losses on investments, net, was $40 million in the second quarter of 2022 as compared to $147 million in unrealized gains in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities.

Interest income increased $93 million in the third quarter of 2022 as compared to the year-ago period, primarily due to higher short-term investments in U.S.

government and agency notes.

See Note 6 to the financial statements included in Part I, Item 1 of this report for additional information.

Unrealized gains on investments, net, was $28 million in the third quarter of 2022 as compared to $34 million in unrealized losses in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities.

See Note 6 to the financial statements included in Part I, Item 1 of this report for information related to these equity investments.

Miscellaneous, net decreased $35 million in the second quarter of 2022 as compared to the year-ago period, primarily due to debt extinguishment and modification fees recorded in 2021 partially offset by higher foreign exchange losses recorded in 2022.

Miscellaneous, net decreased $29 million in the third quarter of 2022 as compared to the year-ago period, primarily due to higher foreign exchange losses recorded in 2022 and adjustments relating to debt extinguishment and modification fees recorded in 2021.

See Note 9 to the financial statements included in Part I, Item 1 of this report for additional information related to debt extinguishment and modification fees.

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See Note 4 to the financial statements included in Part I, Item 1 of this report for information related to income taxes.

First Six Months 2022 Compared to First Six Months 2021

The Company recorded a net loss of $1.0 billion in the first six months of 2022 as compared to a net loss of $1.8 billion in the first six months of 2021.

The Company considers a key measure of its performance to be operating income (loss), which was a $498 million loss for the first six months of 2022, as compared to a $1.7 billion loss for the first six months of 2021, an approximately $1.2 billion decrease year-over-year, primarily as a result of increased demand for air travel.

Significant components of the Company's operating results for the six months ended June 30 are as follows (in millions, except percentage changes):

First Nine Months 2022 Compared to First Nine Months 2021

The Company recorded a net loss of $106 million in the first nine months of 2022 as compared to a net loss of $1.3 billion in the first nine months of 2021.

The Company considers a key measure of its performance to be operating income, which was $960 million for the first nine months of 2022, as compared to an operating loss of $614 million for the first nine months of 2021, an approximately $1.6 billion increase year-over-year, primarily as a result of increased demand for air travel.

Significant components of the Company's operating results for the nine months ended September 30 are as follows (in millions, except

percentage changes):

2022 2021 Increase (Decrease) % Change

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Operating expense 31,595 17,056 14,539 85.2

Operating loss (498) (1,651) (1,153) (69.8)

Operating income (loss) 960 (614) 1,574 256.4

Nonoperating expense, net (1,100) (1,098) 2 0.2

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Net loss $ (106) $ (1,318) $ (1,212) (92.0)

Certain consolidated statistical information for the Company's operations for the six months ended June 30 is as follows:

Certain consolidated statistical information for the Company's operations for the nine months ended September 30 is as follows:

2022 2021 Increase (Decrease) % Change

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Fuel gallons consumed (millions) 2,672 1,915 757 39.5

Employee headcount, as of June 30

Employee headcount, as of September 30

90,800 85,300 5,500 6.4

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Operating Revenue.

The table below shows year-over-year comparisons by type of operating revenue for the six months ended June 30 (in millions, except for percentage changes):

The table below shows year-over-year comparisons by type of operating revenue for the nine months ended September 30 (in millions, except for percentage changes):

2022 2021 Increase (Decrease) % Change

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Total operating revenue $ 32,555 $ 16,442 $ 16,113 98.0

The table below presents selected passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes for the six months ended June 30, 2022 compared to the six months ended June 30, 2021:

The table below presents selected passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021:

Increase (decrease) from 2021:

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Passenger load factor (points) 6.6 26.2 36.5 16.1 12.7

Passenger revenue increased $10.5 billion, or 157.1%, in the first six months of 2022 as compared to the year-ago period, primarily due to the ongoing recovery in air travel which was impacted by the COVID-19 pandemic and strength in the pricing environment as a result of inflationary pressures on fuel prices and other costs.

Cargo revenue increased $98 million, or 8.9%, in the first six months of 2022 as compared to the year-ago period, primarily due to higher yields on freight revenue from strong global demand in the first quarter of 2022.

Other operating revenue increased $393 million, or 43.3%, in the first six months of 2022 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending recovery with our co-branded credit card partner, JPMorgan Chase Bank, N.A.

Passenger revenue increased $15.5 billion, or 116.5%, in the first nine months of 2022 as compared to the year-ago period, primarily due to the ongoing recovery in air travel which was impacted by the COVID-19 pandemic and strength in the pricing environment as a result of inflationary pressures on fuel prices and other costs.

Cargo revenue increased $77 million, or 4.7%, in the first nine months of 2022 as compared to the year-ago period, primarily due to higher yields on freight revenue from strong global demand, primarily in the first quarter of 2022.

Cargo revenue was especially high in 2021 due to the limited market capacity, lower passenger load factors and the utilization of cargo-only flights in the first half of 2021.

Other operating revenue increased $525 million, or 35.0%, in the first nine months of 2022 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending recovery with our co-branded credit card partner, JPMorgan Chase Bank, N.A., as well as United Club re-openings and increased member volumes compared to the prior year.

Operating Expenses.

The table below includes data related to the Company's operating expenses for the six months ended June 30 (in millions, except for percentage changes):

The table below includes data related to the Company's operating expenses for the nine months ended September 30 (in millions, except for percentage changes):

2022 2021 Increase (Decrease) % Change

Salaries and related costs $ 5,623 $ 4,500 $ 1,123 25.0

Aircraft fuel $ 9,796 $ 3,793 $ 6,003 158.3

Salaries and related costs 8,466 6,987 1,479 21.2

Landing fees and other rent 1,919 1,735 184 10.6

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Total operating expenses $ 31,595 $ 17,056 $ 14,539 85.2

Salaries and related costs increased $1.1 billion, or 25.0%, in the first six months of 2022 as compared to the year-ago period, primarily due to increased headcount, volume-driven pay from increased flight activity and $348 million of Employee Retention Credits under the CARES Act in the first six months of 2021 that did not occur in the current period, among other factors.

Aircraft fuel expense increased $4.0 billion, or 190.0%, in the first six months of 2022 as compared to the year-ago period, primarily due to both a higher average price per gallon of fuel and increased consumption from higher flight activity.

Aircraft fuel expense increased $6.0 billion, or 158.3%, in the first nine months of 2022 as compared to the year-ago period, primarily due to both a higher average price per gallon of fuel and increased consumption from higher flight activity.

We expect elevated fuel prices to continue throughout 2022.

The table below presents the significant changes in aircraft fuel cost per gallon in the six months ended June 30, 2022, as compared to the year-ago period:

The table below presents the significant changes in aircraft fuel cost per gallon in the nine months ended September 30, 2022, as compared to the year-ago period:

(In millions) Average price per gallon

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Fuel consumption (gallons) 2,672 1,915 39.5 %

Landing fees and other rent increased $197 million, or 18.2%, in the first six months of 2022 as compared to the year-ago period, primarily due to an increase in capacity-based rent and landing fees.

Aircraft maintenance materials and outside repairs increased $363 million, or 63.6%, in the first six months of 2022 as compared to the year-ago period, primarily due to higher volumes of flying that resulted in increased engine overhauls, airframe checks, and line maintenance.

Distribution expenses increased $395 million, or 176.3%, in the first six months of 2022 as compared to the year-ago period, primarily due to higher credit card fees and commissions and higher volume of global distribution fees as a result of the overall increase in passenger revenue.

Salaries and related costs increased $1.5 billion, or 21.2%, in the first nine months of 2022 as compared to the year-ago period, primarily due to increased headcount, volume-driven pay from increased flight activity and $405 million of employee retention credits under the CARES Act in the first nine months of 2021 that did not occur in the current period, among other factors.

Landing fees and other rent increased $184 million, or 10.6%, in the first nine months of 2022 as compared to the year-ago period, primarily due to an increase in landed weight volume as a result of increased flight activity.

Regional capacity purchase increased $182 million, or 11.8%, in the third quarter of 2022 as compared to the year-ago period, primarily due to rate increases under various capacity purchase agreements with regional carriers as a result of the expiration of the CARES Act credits received in the prior year.

Aircraft maintenance materials and outside repairs increased $636 million, or 69.4%, in the first nine months of 2022 as compared to the year-ago period, primarily due to higher volumes of flying, increased engine overhauls, higher repair volumes, heavy airframe checks and contractual rate escalations.

Distribution expenses increased $659 million, or 149.1%, in the first nine months of 2022 as compared to the year-ago period, primarily due to higher credit card fees, higher travel agency commissions and higher volumes 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 and business travel, which requires the use of different distribution channels and forms of payment.

Details of the Company's special charges (credits) include the following for the six months ended June 30 (in millions):

Details of the Company's special charges (credits) include the following for the nine months ended September 30 (in millions):

CARES Act grant $ — $ (4,021)

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See Note 9 to the financial statements included in Part I, Item 1 of this report for additional information on the Company's special charges (credits).

Other operating expenses increased $1.3 billion, or 68.9%, in the first six months of 2022 as compared to the year-ago period, primarily due to increases in ground handling, passenger services, food and beverage offerings, navigation fees and personnel-related costs as a direct result of the increase in flight activity and higher expenditures on information technology services.

Other operating expenses increased $1.9 billion, or 61.3%, in the first nine months of 2022 as compared to the year-ago period, primarily due to increases in ground handling, passenger services, food and beverage offerings, navigation fees and personnel-related costs as a direct result of the increase in flight activity and inflationary pressures and higher expenditures on information technology projects and services.

Nonoperating Income (Expense).

The following table illustrates the year-over-year dollar and percentage changes in the Company's nonoperating income (expense) for the six months ended June 30 (in millions, except for percentage changes):

The following table illustrates the year-over-year dollar and percentage changes in the Company's nonoperating income (expense) for the nine months ended September 30 (in millions, except for percentage changes):

2022 2021 Increase (Decrease) % Change

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Unrealized gains (losses) on investments, net (12) 91 (103) NM

Miscellaneous, net 5 (68) (73) NM

Miscellaneous, net (4) (48) (44) (91.7)

Total $ (1,100) $ (1,098) $ 2 0.2

Interest expense increased $65 million, or 8.3%, in the first six months of 2022 as compared to the year-ago period, primarily due to higher outstanding long-term debt balances than the year-ago period.

Unrealized losses on investments, net, was $40 million in the first six months of 2022 as compared to $125 million in unrealized gains in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities.

Interest expense increased $71 million, or 5.8%, in the first nine months of 2022 as compared to the year-ago period, primarily due to higher interest rates on variable rate debt.

Interest income increased $112 million, or 373.3%, in the first nine months of 2022 as compared to the year-ago period, primarily due to higher short-term investments in U.S.

government and agency notes.

See Note 6 to the financial statements included in Part I, Item 1 of this report for additional information.

Unrealized losses on investments, net, was $12 million in the first nine months of 2022 as compared to $91 million in unrealized gains in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities.

See Note 6 to the financial statements included in Part I, Item 1 of this report for information related to these equity investments.

Miscellaneous, net decreased $73 million in the first six months of 2022 as compared to the year-ago period, primarily due to special termination benefits related to voluntary separation programs and debt extinguishment and modification fees recorded in the first six months of 2021 partially offset by higher foreign exchange losses recorded in 2022.

Miscellaneous, net decreased $44 million in the first nine months of 2022 as compared to the year-ago period, primarily due to special termination benefits related to voluntary separation programs and debt extinguishment and modification fees recorded in the first nine months of 2021 partially offset by higher foreign exchange losses recorded in 2022.

See Notes 5 and 9 to the financial statements included in Part I, Item 1 of this report for additional information.

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Current Liquidity

As of June 30, 2022, the Company had $20.1 billion in unrestricted cash, cash equivalents and short-term investments, as compared to $18.4 billion at December 31, 2021.

As of September 30, 2022, the Company had $18.7 billion in unrestricted cash, cash equivalents and short-term investments, as compared to $18.4 billion at December 31, 2021.

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.

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The Revolving Credit Facility is secured by certain route authorities and airport slots and gates.

No borrowings were outstanding under the facility at June 30, 2022.

No borrowings were outstanding under the facility at September 30, 2022.

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

As of June 30, 2022, the Company had approximately $39.4 billion of debt, finance lease, operating lease and sale-leaseback obligations, including $4.5 billion that will become due in the next 12 months.

As of September 30, 2022, the Company had approximately $38.4 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.

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 June 30, 2022, UAL and United were in compliance with their respective debt covenants.

As of June 30, 2022, a substantial portion of the Company's assets, principally aircraft and certain

related assets, its loyalty program, certain route authorities and airport slots and gates, was pledged under various loan and other agreements.

As of September 30, 2022, UAL and United were in compliance with their respective debt covenants.

As of September 30, 2022, a substantial portion of the Company's assets, principally aircraft and certain related assets, its loyalty program, certain route authorities and airport slots and gates, was pledged under various loan and other agreements.

See Note 8 to the financial statements included in Part I, Item 1 of this report for additional information on aircraft financing and other debt instruments.

For 2022, the Company expects approximately $4.7 billion of adjusted capital expenditures (a non-GAAP financial measure defined as GAAP capital expenditures including expenditures for assets acquired through the issuance of debt, finance leases and other financial liabilities).

T he 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.

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.

See "Supplemental Information" for additional information on non-GAAP financial measures and Note 7 to the financial statements included in Part I, Item I of this report for additional information on commitments.

As of June 30, 2022, United had firm commitments and options to purchase aircraft from The Boeing Company ("Boeing") and Airbus S.A.S.

As of September 30, 2022, United had firm commitments and options to purchase aircraft from The Boeing Company ("Boeing") and Airbus S.A.S.

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

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Aircraft Type Number of Firm

Commitments (a) Last Six Months

Commitments (a) Last Three Months

of 2022 2023 After 2023

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or (iii) the aircraft manufacturers are unable to deliver in accordance with the terms of those orders.

Furthermore, Boeing notified United that seven Boeing 737 MAX aircraft and three Boeing 787 aircraft scheduled for delivery in 2022, as shown in the table above, are now expected to deliver in 2023.

The table below summarizes the Company's commitments as of June 30, 2022, which include aircraft and related spare engines, aircraft improvements and non-aircraft capital commitments (in billions):

Last six months of 2022 $ 4.8

Furthermore, Boeing notified United that three Boeing 787 aircraft scheduled for delivery in 2022 and 15 Boeing 737 MAX aircraft scheduled for delivery in 2023, all as shown in the table above, are now expected to deliver in 2023 and 2024, respectively.

In addition to Boeing’s notification, United estimates that seven additional Boeing 737 MAX aircraft scheduled for delivery in 2022, as shown in the table above, will deliver in 2023.

United has an agreement to purchase eight used Bombardier CRJ550 aircraft in the last three months of 2022.

The table below summarizes United's commitments as of September 30, 2022, which include aircraft and related spare engines, aircraft improvements and non-aircraft capital commitments.

Aircraft commitments are based on contractual scheduled aircraft deliveries without any adjustments for the delays communicated by Boeing or estimated by United.

(in billions)

Last three months of 2022 $ 3.0

After 2026 8.5

Sources and Uses of Cash

The following table summarizes our cash flows for the six months ended June 30 (in millions):

The following table summarizes our cash flows for the nine months ended September 30 (in millions):

2022 2021 Increase (Decrease)

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Operating Activities.

Cash flows provided by operations increased $1.0 billion in the first six months of 2022 as compared to the year-ago period, primarily due to an improvement in operating income (loss) as demand for air travel continued to recover.

Cash flows provided by operations increased $2.6 billion in the first nine months of 2022 as compared to the year-ago period, primarily due to higher profitability as improvements in the demand for air travel continued and an approximately $0.9 billion increase in advance ticket sales associated with the overall travel demand recovery.

Investing Activities.

Cash flows used in investing activities increased $2.8 billion in the first six months of 2022 as compared to the year-ago period, primarily due to the purchase of short-term and other investments.

Cash flows used in investing activities increased $8.1 billion in the first nine months of 2022 as compared to the year-ago period, primarily due to the purchase of short-term and other investments.

Capital expenditures were approximately $2.3 billion and $1.6 billion for the nine months ended September 30, 2022 and 2021, respectively.

Capital expenditures for the nine months ended September 30, 2022 were primarily attributable to the purchase of aircraft and aircraft improvements.

Capital expenditures for the nine months ended September 30, 2021 were primarily attributable to advance deposits for future aircraft purchases.

Financing Activities.

Significant financing events in the six months ended June 30, 2022 were as follows:

Significant financing events in the nine months ended September 30, 2022 and 2021 were as follows:

Debt, Finance Lease and Other Financing Liability Principal Payments .

During the six months ended June 30, 2022, the Company made payments for debt, finance leases, and other financing liabilities of $1.8 billion.

During the six months ended June 30, 2021, the Company made payments for debt, finance leases and other financing liabilities of $4.1 billion, primarily for repayments of $1.4 billion aggregate principal amount outstanding under a 2017 term loan facility, $1.0 billion aggregate principal amount outstanding under a 2017 revolving credit facility and $520 million aggregate principal amount outstanding under a CARES Act loan.

During the nine months ended September 30, 2022, the Company made payments for debt, finance leases, and other financing liabilities of $2.6 billion.

During the nine months ended September 30, 2021, the Company made payments for debt, finance leases and other financing liabilities of $4.6 billion, primarily for repayments of $1.4 billion aggregate principal amount outstanding under a 2017 term loan facility, $1.0 billion aggregate principal amount outstanding under a 2017 revolving credit facility and $520 million aggregate principal amount outstanding under a CARES Act loan.

Debt Issuances.

During the six months ended June 30, 2022, United received and recorded $220 million from aircraft financings.

During the six months ended June 30, 2021, United received and recorded:

During the nine months ended September 30, 2022, United received and recorded $220 million from aircraft financings.

During the nine months ended September 30, 2021, United received and recorded:

• $1.7 billion from senior unsecured notes under the Payroll Support Program Extension Agreements of the CARES Act;

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• $5.0 billion from a new term loan;

• $4.0 billion from the 4.375% senior secured notes due 2026 and 4.625% senior secured notes due 2029.

• $4.0 billion from the issuance of 4.375% senior secured notes due 2026 and 4.625% senior secured notes due 2029.

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

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See "Forward-Looking Information" below.

Below are reconciliations of CASM-ex and adjusted operating margin to the most directly comparable GAAP financial measures (CASM and operating margin, respectively) for the three and six months ended June 30, 2022, June 30, 2021, and June 30, 2019, the three months ended September 30, 2019 and the year ended December 31, 2019 (in cents):

Below are reconciliations of CASM-ex and adjusted operating margin to the most directly comparable GAAP financial measures (CASM and operating margin, respectively) for the three and nine months ended September 30, 2022, September 30, 2021, and September 30, 2019, and the three months and the year ended December 31, 2019 (in cents):

Three Months Ended

June 30, Six Months Ended

June 30, Three Months Ended September 30, Year Ended December 31,

September 30, Nine Months Ended

September 30, Three Months Ended December 31, Year Ended December 31,

2022 2021 2019 2022 2021 2019 2019 2019

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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 I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report, relating to, among other things, the potential impacts of the COVID-19 pandemic and other macroeconomic factors 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 and business strategy.

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," "confident" 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.

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, commitments, strategies 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, commitments, strategies 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," "confident," "optimistic," "dedicated" 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.

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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;

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;

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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.

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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis