Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS.
UNITED AIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED )
(In millions, except per share amounts)
Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Operating revenue:
Passenger revenue $ 11,653 $ 6,637 $ 28,830 $ 13,319
Cargo 498 519 1,699 1,622
Other operating revenue 726 594 2,026 1,501
Total operating revenue 12,877 7,750 32,555 16,442
Operating expense:
Aircraft fuel 3,755 1,710 9,796 3,793
Salaries and related costs 2,843 2,487 8,466 6,987
Landing fees and other rent 639 652 1,919 1,735
Aircraft maintenance materials and outside repairs 619 346 1,553 917
Depreciation and amortization 610 623 1,832 1,866
Regional capacity purchase 596 520 1,728 1,546
Distribution expenses 482 218 1,101 442
Aircraft rent 65 58 193 165
Special charges (credits) 20 ( 1,098 ) 124 ( 3,423 )
Other operating expenses 1,790 1,197 4,883 3,028
Total operating expense 11,419 6,713 31,595 17,056
Operating income (loss) 1,458 1,037 960 ( 614 )
Nonoperating income (expense):
Interest expense ( 455 ) ( 449 ) ( 1,299 ) ( 1,228 )
Interest capitalized 27 18 73 57
Interest income 104 11 142 30
Unrealized gains (losses) on investments, net 28 ( 34 ) ( 12 ) 91
Miscellaneous, net ( 9 ) 20 ( 4 ) ( 48 )
Total nonoperating expense, net ( 305 ) ( 434 ) ( 1,100 ) ( 1,098 )
Income (loss) before income tax expense (benefit) 1,153 603 ( 140 ) ( 1,712 )
Income tax expense (benefit) 211 130 ( 34 ) ( 394 )
Net income (loss) $ 942 $ 473 $ ( 106 ) $ ( 1,318 )
Earnings (loss) per share, basic $ 2.88 $ 1.46 $ ( 0.33 ) $ ( 4.10 )
Earnings (loss) per share, diluted $ 2.86 $ 1.44 $ ( 0.33 ) $ ( 4.10 )
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In millions)
Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Net income (loss) $ 942 $ 473 $ ( 106 ) $ ( 1,318 )
Other comprehensive income (loss), net of tax:
Employee benefit plans — ( 9 ) 9 17
Investments and other ( 20 ) ( 1 ) ( 31 ) ( 2 )
Total other comprehensive income (loss), net of tax ( 20 ) ( 10 ) ( 22 ) 15
Total comprehensive income (loss), net $ 922 $ 463 $ ( 128 ) $ ( 1,303 )
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
September 30, 2022 December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents $ 11,258 $ 18,283
Short-term investments 7,437 123
Restricted cash 61 37
Receivables, less allowance for credit losses (2022 — $ 28 ; 2021 — $ 28 )
2,034 1,663
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2022 — $ 595 ; 2021 — $ 546 )
1,116 983
Prepaid expenses and other 783 745
Total current assets 22,689 21,834
Operating property and equipment:
Flight equipment 40,867 39,584
Other property and equipment 9,195 8,764
Purchase deposits for flight equipment 2,532 2,215
Total operating property and equipment 52,594 50,563
Less — Accumulated depreciation and amortization ( 20,088 ) ( 18,489 )
Total operating property and equipment, net 32,506 32,074
Operating lease right-of-use assets 4,280 4,645
Other assets:
Goodwill 4,527 4,527
Intangibles, less accumulated amortization (2022 — $ 1,462 ; 2021 — $ 1,544 )
2,772 2,803
Restricted cash 208 213
Deferred income taxes 701 659
Investments in affiliates and other, less allowance for credit losses (2022 — $ 695 ; 2021 — $ 622 )
1,285 1,420
Total other assets 9,493 9,622
Total assets $ 68,968 $ 68,175
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UNITED AIRLINES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
September 30, 2022 December 31, 2021
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,534 $ 2,562
Accrued salaries and benefits 1,841 2,121
Advance ticket sales 8,747 6,354
Frequent flyer deferred revenue 2,642 2,239
Current maturities of long-term debt 2,955 3,002
Current maturities of other financial liabilities 906 834
Current maturities of operating leases 546 556
Current maturities of finance leases 72 76
Other 746 560
Total current liabilities 21,989 18,304
Long-term debt 28,490 30,361
Long-term obligations under operating leases 4,803 5,152
Long-term obligations under finance leases 112 219
Other liabilities and deferred credits:
Frequent flyer deferred revenue 3,936 4,043
Pension liability 1,948 1,920
Postretirement benefit liability 946 1,000
Other financial liabilities 492 863
Other 1,354 1,284
Total other liabilities and deferred credits 8,676 9,110
Commitments and contingencies
Stockholders' equity:
Preferred stock — —
Common stock at par, $ 0.01 par value; authorized 1,000,000,000 shares; outstanding 326,926,963 and 323,810,825 shares at September 30, 2022 and December 31, 2021, respectively
4 4
Additional capital invested 8,970 9,156
Stock held in treasury, at cost ( 3,533 ) ( 3,814 )
Retained earnings 421 625
Accumulated other comprehensive loss ( 964 ) ( 942 )
Total stockholders' equity 4,898 5,029
Total liabilities and stockholders' equity $ 68,968 $ 68,175
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES HOLDINGS, INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In millions)
Nine Months Ended
September 30,
2022 2021
Cash Flows from Operating Activities:
Net cash provided by operating activities $ 4,908 $ 2,336
Cash Flows from Investing Activities:
Capital expenditures, net of flight equipment purchase deposit returns ( 2,280 ) ( 1,571 )
Purchases of short-term and other investments ( 8,384 ) ( 47 )
Proceeds from sale of short-term and other investments 1,061 271
Proceeds from sale of property and equipment 184 25
Other, net ( 23 ) ( 2 )
Net cash used in investing activities ( 9,442 ) ( 1,324 )
Cash Flows from Financing Activities:
Proceeds from issuance of debt, net of discounts and fees 210 11,098
Proceeds from equity issuance — 532
Payments of long-term debt, finance leases and other financing liabilities ( 2,605 ) ( 4,632 )
Other, net ( 77 ) ( 27 )
Net cash provided by (used in) financing activities ( 2,472 ) 6,971
Net increase (decrease) in cash, cash equivalents and restricted cash ( 7,006 ) 7,983
Cash, cash equivalents and restricted cash at beginning of the period 18,533 11,742
Cash, cash equivalents and restricted cash at end of the period (a) $ 11,527 $ 19,725
Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through the issuance of debt, finance leases and other $ — $ 801
Lease modifications and lease conversions 61 111
Right-of-use assets acquired through operating leases 98 627
Investment interests received in exchange for goods and services 93 129
(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:
Current assets:
Cash and cash equivalents $ 11,258 $ 19,256
Restricted cash — Current 61 254
Restricted cash — Non-Current 208 215
Total cash, cash equivalents and restricted cash $ 11,527 $ 19,725
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (UNAUDITED)
(In millions)
Common
Stock Additional
Capital Invested Treasury Stock Retained Earnings (Accumulated Deficit) Accumulated
Other Comprehensive Income (Loss) Total
Shares Amount
Balance at June 30, 2022 326.7 $ 4 $ 8,970 $ ( 3,551 ) $ ( 515 ) $ ( 944 ) $ 3,964
Net income — — — — 942 — 942
Other comprehensive loss — — — — — ( 20 ) ( 20 )
Stock-settled share-based compensation — — 15 — — — 15
Stock issued for share-based awards, net of shares withheld for tax 0.2 — ( 15 ) 18 ( 6 ) — ( 3 )
Balance at September 30, 2022 326.9 $ 4 $ 8,970 $ ( 3,533 ) $ 421 $ ( 964 ) $ 4,898
Balance at December 31, 2021 323.8 $ 4 $ 9,156 $ ( 3,814 ) $ 625 $ ( 942 ) $ 5,029
Net loss — — — — ( 106 ) — ( 106 )
Other comprehensive loss — — — — — ( 22 ) ( 22 )
Stock-settled share-based compensation — — 70 — — — 70
Stock issued for share-based awards, net of shares withheld for tax 3.1 — ( 256 ) 281 ( 98 ) — ( 73 )
Balance at September 30, 2022 326.9 $ 4 $ 8,970 $ ( 3,533 ) $ 421 $ ( 964 ) $ 4,898
Balance at June 30, 2021 323.6 $ 4 $ 9,042 $ ( 3,832 ) $ 804 $ ( 1,114 ) $ 4,904
Net income — — — — 473 — 473
Other comprehensive loss — — — — — ( 10 ) ( 10 )
Stock-settled share-based compensation — — 69 — — — 69
Stock issued for share-based awards, net of shares withheld for tax 0.2 — ( 17 ) 18 ( 6 ) — ( 5 )
Balance at September 30, 2021 323.8 $ 4 $ 9,094 $ ( 3,814 ) $ 1,271 $ ( 1,124 ) $ 5,431
Balance at December 31, 2020 311.8 $ 4 $ 8,366 $ ( 3,897 ) $ 2,626 $ ( 1,139 ) $ 5,960
Net loss — — — — ( 1,318 ) — ( 1,318 )
Other comprehensive income — — — — — 15 15
Stock-settled share-based compensation — — 169 — — — 169
Issuance of common stock 11.0 — 532 — — — 532
Warrants issued — — 99 — — — 99
Stock issued for share-based awards, net of shares withheld for tax 1.0 — ( 72 ) 83 ( 37 ) — ( 26 )
Balance at September 30, 2021 323.8 $ 4 $ 9,094 $ ( 3,814 ) $ 1,271 $ ( 1,124 ) $ 5,431
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions)
Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Operating revenue:
Passenger revenue $ 11,653 $ 6,637 $ 28,830 $ 13,319
Cargo 498 519 1,699 1,622
Other operating revenue 726 594 2,026 1,501
Total operating revenue 12,877 7,750 32,555 16,442
Operating expense:
Aircraft fuel 3,755 1,710 9,796 3,793
Salaries and related costs 2,843 2,487 8,466 6,987
Landing fees and other rent 639 652 1,919 1,735
Aircraft maintenance materials and outside repairs 619 346 1,553 917
Depreciation and amortization 610 623 1,832 1,866
Regional capacity purchase 596 520 1,728 1,546
Distribution expenses 482 218 1,101 442
Aircraft rent 65 58 193 165
Special charges (credits) 20 ( 1,098 ) 124 ( 3,423 )
Other operating expenses 1,789 1,197 4,881 3,027
Total operating expense 11,418 6,713 31,593 17,055
Operating income (loss) 1,459 1,037 962 ( 613 )
Nonoperating income (expense):
Interest expense ( 455 ) ( 449 ) ( 1,299 ) ( 1,228 )
Interest capitalized 27 18 73 57
Interest income 104 11 142 30
Unrealized gains (losses) on investments, net 28 ( 34 ) ( 12 ) 91
Miscellaneous, net ( 9 ) 21 ( 4 ) ( 48 )
Total nonoperating expense, net ( 305 ) ( 433 ) ( 1,100 ) ( 1,098 )
Income (loss) before income tax expense (benefit) 1,154 604 ( 138 ) ( 1,711 )
Income tax expense (benefit) 212 130 ( 33 ) ( 394 )
Net income (loss) $ 942 $ 474 $ ( 105 ) $ ( 1,317 )
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In millions)
Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Net income (loss) $ 942 $ 474 $ ( 105 ) $ ( 1,317 )
Other comprehensive income (loss), net of tax:
Employee benefit plans — ( 9 ) 9 17
Investments and other ( 20 ) ( 1 ) ( 31 ) ( 2 )
Total other comprehensive income (loss), net of tax ( 20 ) ( 10 ) ( 22 ) 15
Total comprehensive income (loss), net $ 922 $ 464 $ ( 127 ) $ ( 1,302 )
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
September 30, 2022 December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents $ 11,258 $ 18,283
Short-term investments 7,437 123
Restricted cash 61 37
Receivables, less allowance for credit losses (2022 — $ 28 ; 2021 — $ 28 )
2,034 1,663
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2022 — $ 595 ; 2021 — $ 546 )
1,116 983
Prepaid expenses and other 783 745
Total current assets 22,689 21,834
Operating property and equipment:
Flight equipment 40,867 39,584
Other property and equipment 9,195 8,764
Purchase deposits for flight equipment 2,532 2,215
Total operating property and equipment 52,594 50,563
Less — Accumulated depreciation and amortization ( 20,088 ) ( 18,489 )
Total operating property and equipment, net 32,506 32,074
Operating lease right-of-use assets 4,280 4,645
Other assets:
Goodwill 4,527 4,527
Intangibles, less accumulated amortization (2022 — $ 1,462 ; 2021 — $ 1,544 )
2,772 2,803
Restricted cash 208 213
Deferred income taxes 673 631
Investments in affiliates and other, less allowance for credit losses (2022 — $ 695 ; 2021 —$ 622 )
1,285 1,420
Total other assets 9,465 9,594
Total assets $ 68,940 $ 68,147
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UNITED AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except shares)
September 30, 2022 December 31, 2021
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 3,534 $ 2,562
Accrued salaries and benefits 1,841 2,121
Advance ticket sales 8,747 6,354
Frequent flyer deferred revenue 2,642 2,239
Current maturities of long-term debt 2,955 3,002
Current maturities of other financial liabilities 906 834
Current maturities of operating leases 546 556
Current maturities of finance leases 72 76
Other 749 563
Total current liabilities 21,992 18,307
Long-term debt 28,490 30,361
Long-term obligations under operating leases 4,803 5,152
Long-term obligations under finance leases 112 219
Other liabilities and deferred credits:
Frequent flyer deferred revenue 3,936 4,043
Pension liability 1,948 1,920
Postretirement benefit liability 946 1,000
Other financial liabilities 492 863
Other 1,355 1,284
Total other liabilities and deferred credits 8,677 9,110
Commitments and contingencies
Stockholder's equity:
Common stock at par, $ 0.01 par value; authorized 1,000 shares; issued and outstanding 1,000 shares at both September 30, 2022 and December 31, 2021
— —
Additional capital invested 387 317
Retained earnings 2,872 2,977
Accumulated other comprehensive loss ( 964 ) ( 942 )
Payable to parent 2,571 2,646
Total stockholder's equity 4,866 4,998
Total liabilities and stockholder's equity $ 68,940 $ 68,147
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES, INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In millions)
Nine Months Ended
September 30,
2022 2021
Cash Flows from Operating Activities:
Net cash provided by operating activities $ 4,834 $ 2,309
Cash Flows from Investing Activities:
Capital expenditures, net of flight equipment purchase deposit returns ( 2,280 ) ( 1,571 )
Purchases of short-term and other investments ( 8,384 ) ( 47 )
Proceeds from sale of short-term and other investments 1,061 271
Proceeds from sale of property and equipment 184 25
Other, net ( 23 ) ( 2 )
Net cash used in investing activities ( 9,442 ) ( 1,324 )
Cash Flows from Financing Activities:
Proceeds from issuance of debt, net of discounts and fees 210 11,098
Proceeds from issuance of parent company stock — 532
Payments of long-term debt, finance leases and other financing liabilities ( 2,605 ) ( 4,632 )
Other, net ( 3 ) —
Net cash provided by (used in) financing activities ( 2,398 ) 6,998
Net increase (decrease) in cash, cash equivalents and restricted cash ( 7,006 ) 7,983
Cash, cash equivalents and restricted cash at beginning of the period 18,533 11,742
Cash, cash equivalents and restricted cash at end of the period (a) $ 11,527 $ 19,725
Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through the issuance of debt, finance leases and other $ — $ 801
Lease modifications and lease conversions 61 111
Right-of-use assets acquired through operating leases 98 627
Investment interests received in exchange for goods and services 93 129
(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:
Current assets:
Cash and cash equivalents $ 11,258 $ 19,256
Restricted cash — Current 61 254
Restricted cash — Non-Current 208 215
Total cash, cash equivalents and restricted cash $ 11,527 $ 19,725
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDER'S EQUITY (UNAUDITED)
(In millions)
Additional
Capital Invested Retained Earnings Accumulated
Other Comprehensive Income (Loss) Payable to Parent Total
Balance at June 30, 2022 $ 373 $ 1,930 $ ( 944 ) $ 2,574 $ 3,933
Net income — 942 — — 942
Other comprehensive loss — — ( 20 ) — ( 20 )
Stock-settled share-based compensation 14 — — — 14
Other — — — ( 3 ) ( 3 )
Balance at September 30, 2022 $ 387 $ 2,872 $ ( 964 ) $ 2,571 $ 4,866
Balance at December 31, 2021 $ 317 $ 2,977 $ ( 942 ) $ 2,646 $ 4,998
Net loss — ( 105 ) — — ( 105 )
Other comprehensive loss — — ( 22 ) — ( 22 )
Stock-settled share-based compensation 70 — — — 70
Other — — — ( 75 ) ( 75 )
Balance at September 30, 2022 $ 387 $ 2,872 $ ( 964 ) $ 2,571 $ 4,866
Balance at June 30, 2021 $ 185 $ 3,148 $ ( 1,114 ) $ 2,653 $ 4,872
Net income — 474 — — 474
Other comprehensive loss — — ( 10 ) — ( 10 )
Stock-settled share-based compensation 69 — — — 69
Other — — — ( 6 ) ( 6 )
Balance at September 30, 2021 $ 254 $ 3,622 $ ( 1,124 ) $ 2,647 $ 5,399
Balance at December 31, 2020 $ 85 $ 4,939 $ ( 1,139 ) $ 2,043 $ 5,928
Net loss — ( 1,317 ) — — ( 1,317 )
Other comprehensive income — — 15 — 15
Stock-settled share-based compensation 169 — — — 169
Impact of UAL common stock issuance — — — 532 532
Other — — — 72 72
Balance at September 30, 2021 $ 254 $ 3,622 $ ( 1,124 ) $ 2,647 $ 5,399
The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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UNITED AIRLINES HOLDINGS, INC. AND UNITED AIRLINES, INC.
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
United Airlines Holdings, Inc. (together with its consolidated subsidiaries, "UAL" or the "Company") is a holding company, and its principal, wholly-owned subsidiary is United Airlines, Inc. (together with its consolidated subsidiaries, "United"). This Quarterly Report on Form 10-Q is a combined report of UAL and United, including their respective consolidated financial statements. As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted. United's operating revenues and operating expenses comprise nearly 100% of UAL's revenues and operating expenses. In addition, United comprises approximately the entire balance of UAL's assets, liabilities and operating cash flows. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures, and any significant differences between the operations and results of UAL and United are separately disclosed and explained. We sometimes use the words "we," "our," "us," and the "Company" in this report for disclosures that relate to all of UAL and United.
The UAL and United unaudited condensed consolidated financial statements shown here have been prepared as required by the U.S. Securities and Exchange Commission (the "SEC"). Some information and footnote disclosures normally included in financial statements that comply with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted as permitted by the SEC. The financial statements include all adjustments, including normal recurring adjustments and other adjustments, which are considered necessary for a fair presentation of the Company's financial position and results of operations for interim periods presented. The UAL and United financial statements should be read together with the information included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the "2021 Form 10-K"). The Company's quarterly financial data is subject to seasonal fluctuations. Historically its second and third quarter financial results have reflected higher travel demand, and were better than its first and fourth quarter financial results.
NOTE 1 — REVENUE
Revenue by Geography. The table below presents the Company's operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) (in millions):
Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Domestic (U.S. and Canada) $ 7,718 $ 5,412 $ 20,623 $ 11,290
Atlantic 3,186 1,116 6,756 2,111
Latin America 1,162 849 3,266 1,968
Pacific 811 373 1,910 1,073
Total $ 12,877 $ 7,750 $ 32,555 $ 16,442
Advance Ticket Sales. All tickets sold at any given point in time have travel dates through the next 12 months. 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 future flight credits ("FFCs") and electronic travel certificates ("ETCs"), primarily for ticket cancellations, which can be applied towards a purchase of a new ticket. FFCs and ETCs are valid up to one year from the date of issuance; however, all credits issued on or before December 31, 2022 have been extended to December 31, 2023. The Company is unable to estimate the amount of the FFCs and ETCs that will be used within the next 12 months and has classified the entire amount of the Advance ticket sales liability in current liabilities even though some of the FFCs and ETCs could be used after the next 12 months.
The Company estimates the value of Advance tickets 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 the novel coronavirus ("COVID-19") pandemic, changes in our estimates of FFCs and ETCs that may expire unused could have a significant impact on revenue. Changes in estimates of breakage are recognized prospectively in proportion to the remaining usage of the related tickets.
In the three and nine months ended September 30, 2022, the Company recognized approximately $ 5.1 billion and $ 3.0 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods. In the three and nine months ended September 30, 2021, the Company recognized approximately $ 2.8 billion and $ 1.6 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods.
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Ancillary Fees. The Company charges fees, separately from ticket sales, for certain ancillary services that are directly related to passengers' travel, such as baggage fees, premium seats, inflight amenities and other ticket-related fees. These ancillary fees are part of the travel performance obligation and, as such, are recognized as passenger revenue when the travel occurs. The Company recorded $ 0.9 billion and $ 2.4 billion of ancillary fees within passenger revenue in the three and nine months ended September 30, 2022, respectively. The Company recorded $ 0.7 billion and $ 1.5 billion of ancillary fees within passenger revenue in the three and nine months ended September 30, 2021, respectively.
Frequent Flyer Accounting. The table below presents a roll forward of Frequent flyer deferred revenue (in millions):
Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Total Frequent flyer deferred revenue - beginning balance $ 6,495 $ 6,185 $ 6,282 $ 5,975
Total miles awarded 705 439 1,848 1,071
Travel miles redeemed ( 601 ) ( 391 ) ( 1,489 ) ( 781 )
Non-travel miles redeemed ( 21 ) ( 16 ) ( 63 ) ( 48 )
Total Frequent flyer deferred revenue - ending balance $ 6,578 $ 6,217 $ 6,578 $ 6,217
In the three and nine months ended September 30, 2022, the Company recognized, in Other operating revenue, $ 0.6 billion and $ 1.7 billion, respectively, related to the marketing, advertising, non-travel miles redeemed (net of related costs) and other travel-related benefits of the mileage revenue associated with our various partner agreements including, but not limited to, our JPMorgan Chase Bank, N.A. MileagePlus co-brand agreement. The Company recognized $ 0.5 billion and $ 1.3 billion, respectively, in the three and nine months ended September 30, 2021, related to those agreements. The portion related to the MileagePlus miles awarded of the total amounts received from our various partner agreements is deferred and presented in the table above as an increase to the frequent flyer liability. We determine the current portion of our frequent flyer liability based on expected redemptions in the next 12 months.
NOTE 2 — EARNINGS (LOSS) PER SHARE
The computations of UAL's basic and diluted earnings (loss) per share are set forth below (in millions, except per share amounts):
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Earnings (loss) available to common stockholders $ 942 $ 473 $ ( 106 ) $ ( 1,318 )
Basic weighted-average shares outstanding 326.8 323.7 326.2 321.3
Dilutive effect of employee stock awards 1.7 3.0 — —
Dilutive effect of stock warrants 1.0 2.3 — —
Diluted weighted-average shares outstanding 329.5 329.0 326.2 321.3
Earnings (loss) per share, basic $ 2.88 $ 1.46 $ ( 0.33 ) $ ( 4.10 )
Earnings (loss) per share, diluted $ 2.86 $ 1.44 $ ( 0.33 ) $ ( 4.10 )
Potentially dilutive securities (a)
Stock warrants (b) 3.5 1.5 3.5 0.7
Employee stock awards 0.7 0.7 0.7 0.7
(a) Weighted-average potentially dilutive securities outstanding excluded from the computation of diluted earnings per share because the securities would have had an antidilutive effect.
(b) Represent warrants issued to the U.S. Treasury Department ("Treasury") pursuant to the payroll support program, including extensions, and the loan program established under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). The Company issued, to Treasury, warrants to purchase up to approximately 10 million shares of UAL common stock at exercise prices ranging from $ 31.50 to $ 53.92 and expiration dates ranging from April 20, 2025 to June 10, 2026. All warrants were outstanding as of September 30, 2022.
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NOTE 3 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The table below presents the components of the Company's accumulated other comprehensive income (loss), net of tax ("AOCI") (in millions):
Pension and Other Postretirement Liabilities Investments and Other Deferred Taxes (a) Total
Balance at June 30, 2022 $ ( 834 ) $ ( 14 ) $ ( 96 ) $ ( 944 )
Changes in value ( 1 ) ( 25 ) 6 ( 20 )
Amounts reclassified to earnings — (b) — — —
Balance at September 30, 2022 $ ( 835 ) $ ( 39 ) $ ( 90 ) $ ( 964 )
Balance at December 31, 2021 $ ( 847 ) $ — $ ( 95 ) $ ( 942 )
Changes in value 13 ( 39 ) 5 ( 21 )
Amounts reclassified to earnings ( 1 ) (b) — — ( 1 )
Balance at September 30, 2022 $ ( 835 ) $ ( 39 ) $ ( 90 ) $ ( 964 )
Balance at June 30, 2021 $ ( 1,068 ) $ 1 $ ( 47 ) $ ( 1,114 )
Changes in value ( 19 ) ( 1 ) 4 ( 16 )
Amounts reclassified to earnings 7 (b) — ( 1 ) 6
Balance at September 30, 2021 $ ( 1,080 ) $ — $ ( 44 ) $ ( 1,124 )
Balance at December 31, 2020 $ ( 1,102 ) $ 2 $ ( 39 ) $ ( 1,139 )
Changes in value 5 ( 2 ) ( 1 ) 2
Amounts reclassified to earnings 17 (b) — ( 4 ) 13
Balance at September 30, 2021 $ ( 1,080 ) $ — $ ( 44 ) $ ( 1,124 )
(a) Includes approximately $ 285 million of deferred income tax expense that will not be recognized in net income until the related pension and other postretirement benefit obligations are fully extinguished. We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to results from operations.
(b) This AOCI component is included in the computation of net periodic pension and other postretirement costs (see Note 5 of this report for additional information).
NOTE 4 — INCOME TAXES
The Company's effective tax rates for the three and nine months ended September 30, 2022 were 18.3 % and 24.3 %, respectively. The effective tax rates for the three and nine months ended September 30, 2021 were 21.6 % and 23.0 %, respectively. The provision for income taxes is based on the estimated annual effective tax rate, which represents a blend of federal, state and foreign taxes and includes the impact of certain nondeductible items.
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NOTE 5 — EMPLOYEE BENEFIT PLANS
Defined Benefit Pension and Other Postretirement Benefit Plans. The Company's net periodic benefit cost includes the following components for the three months ended September 30 (in millions):
Pension Benefits Other Postretirement Benefits Affected Line Item
in the Statements of
Consolidated Operations
2022 2021 2022 2021
Service cost $ 51 $ 59 $ 2 $ 2 Salaries and related costs
Interest cost 47 46 8 6 Miscellaneous, net
Expected return on plan assets ( 76 ) ( 70 ) — — Miscellaneous, net
Amortization of unrecognized (gain) loss 29 42 ( 3 ) ( 7 ) Miscellaneous, net
Amortization of prior service credit — — ( 28 ) ( 30 ) Miscellaneous, net
Other 2 2 — — Miscellaneous, net
Total $ 53 $ 79 $ ( 21 ) $ ( 29 )
The Company's net periodic benefit cost includes the following components for the nine months ended September 30 (in millions):
Pension Benefits Other Postretirement Benefits Affected Line Item
in the Statements of
Consolidated Operations
2022 2021 2022 2021
Service cost $ 153 $ 179 $ 6 $ 7 Salaries and related costs
Interest cost 141 138 23 19 Miscellaneous, net
Expected return on plan assets ( 230 ) ( 212 ) ( 1 ) ( 1 ) Miscellaneous, net
Amortization of unrecognized (gain) loss 90 127 ( 10 ) ( 21 ) Miscellaneous, net
Amortization of prior service credit — — ( 84 ) ( 92 ) Miscellaneous, net
Special termination benefits — — — 46 Miscellaneous, net
Other 3 3 — — Miscellaneous, net
Total $ 157 $ 235 $ ( 66 ) $ ( 42 )
During the first quarter of 2021, the Company offered special separation benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees. The subsidies are in the form of a one-time contribution to a notional Retiree Health Account of $ 125,000 for full-time employees and $ 75,000 for part-time employees. As a result, the Company recorded $ 46 million for those additional benefits.
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NOTE 6 — FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
The table below presents disclosures about the financial assets and liabilities measured at fair value on a recurring basis in UAL's financial statements (in millions):
September 30, 2022 December 31, 2021
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Cash and cash equivalents $ 11,258 $ 11,258 $ — $ — $ 18,283 $ 18,283 $ — $ —
Restricted cash - current 61 61 — — 37 37 — —
Restricted cash - non-current 208 208 — — 213 213 — —
Short-term investments:
U.S. government and agency notes 6,954 — 6,954 — 2 — 2 —
Asset-backed securities 460 — 460 — 26 — 26 —
Corporate debt 23 — 23 — 95 — 95 —
Long-term investments:
Equity securities 156 156 — — 229 229 — —
Investments presented in the table above have the same fair value as their carrying value.
Restricted cash - current — Primarily includes amounts to be used for the payment of fees, principal and interest on senior secured notes and a secured term loan facility (the "MileagePlus Financing") secured by substantially all of the assets of Mileage Plus Holdings, LLC, a direct wholly-owned subsidiary of United.
Restricted cash - non-current — Primarily includes collateral associated with the MileagePlus Financing, collateral for letters of credit and collateral associated with facility leases and other insurance-related obligations.
Short-term investments — The short-term investments shown in the table above are classified as available-for-sale and have remaining maturities of approximately one year or less.
Long-term investments: Equity securities — Represents equity and equity-linked securities (such as vested warrants) that make up United's investments in Azul Linhas Aéreas Brasileiras S.A., Clear Secure, Inc., Archer Aviation Inc. and Eve Holding, Inc.
Other fair value information. The table below presents the carrying values and estimated fair values of financial instruments not presented in the tables above (in millions). Carrying amounts include any related discounts, premiums and issuance costs:
September 30, 2022 December 31, 2021
Carrying Amount Fair Value Carrying Amount Fair Value
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Long-term debt $ 31,445 $ 28,951 $ — $ 24,109 $ 4,842 $ 33,363 $ 34,550 $ — $ 29,088 $ 5,462
Fair value of the financial instruments included in the tables above was determined as follows:
Description Fair Value Methodology
Cash and cash equivalents and Restricted cash (current and non-current) The carrying amounts of these assets approximate fair value.
Short-term investments and Equity securities Fair value is based on (a) the trading prices of the investment or similar instruments, (b) an income approach, which uses valuation techniques to convert future amounts into a single present amount based on current market expectations about those future amounts when observable trading prices are not available, or (c) broker quotes obtained by third-party valuation services.
Long-term debt Fair values were based on either market prices or the discounted amount of future cash flows using our current incremental rate of borrowing for similar liabilities or assets.
Investments in Regional Carriers. As of September 30, 2022, United holds investments in two regional carriers that fly for the Company as United Express under its capacity purchase agreements ("CPAs"). The combined carrying value of the investments was approximately $ 183 million as of September 30, 2022. United accounts for each investment using the equity method.
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Other Investments. United holds equity investments in a number of companies with emerging technologies and sustainable solutions. United also has equity investments in Avianca Group International Limited, a multinational airline holding company, and JetSuiteX, Inc., an independent air carrier doing business as JSX. None of these investments have readily determinable fair values. We account for these investments at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. As of September 30, 2022, the carrying value of these investments was $ 330 million.
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Commitments. 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:
Scheduled Aircraft Deliveries
Aircraft Type Number of Firm
Commitments (a) Last Three Months
of 2022 2023 After 2023
Airbus A321XLR 50 — — 50
Airbus A321neo 70 — 12 58
Airbus A350 45 — — 45
Boeing 737 MAX 353 27 121 205
Boeing 787 7 7 — —
(a) United also has options and purchase rights for additional aircraft.
The aircraft listed in the table above are scheduled for delivery through 2030. The amount and timing of the Company's future capital commitments could change to the extent that: (i) the Company and the aircraft manufacturers, with whom the Company has existing orders for new aircraft, agree to modify the contracts governing those orders; (ii) rights are exercised pursuant to the relevant agreements to modify the timing of deliveries; or (iii) the aircraft manufacturers are unable to deliver in accordance with the terms of those orders. 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 intends to exercise options to purchase, in 2023, eight Boeing 737 MAX aircraft that are currently leased under sale and leaseback arrangements.
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
2023 8.4
2024 6.9
2025 4.4
2026 3.4
After 2026 8.5
$ 34.6
Legal Contingencies. The Company has certain contingencies resulting from litigation and claims incident to the ordinary course of business. As of September 30, 2022, management believes, after considering a number of factors, including (but not limited to) the information currently available, the views of legal counsel, the nature of the contingencies to which the Company is subject and prior experience, that its defenses and assertions in pending legal proceedings have merit and the ultimate disposition of any pending matter will not materially affect the Company's financial position, results of operations or cash flows. The Company records liabilities for legal claims when it is probable that a loss will be incurred and the amount is reasonably estimable. These amounts are recorded based on the Company's assessments of the likelihood of their eventual disposition.
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During the nine months ended September 30, 2022, the Company recorded charges of $ 94 million as a result of a number of recent decisions, including one involving another carrier, that appear to impact the Company's ability to successfully assert, in certain cases, that federal law preempts state and local laws that conflict with union contracts and/or federal requirements.
Guarantees. As of September 30, 2022, United is the guarantor of approximately $ 2.0 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon. These bonds, issued by various airport municipalities, are payable solely from rentals paid under long-term agreements with the respective governing bodies. The leasing arrangements associated with these obligations are accounted for as operating leases recognized on the Company's consolidated balance sheet with the associated expense recorded on a straight-line basis over the expected lease term. All of these bonds are due between 2023 and 2041.
As of September 30, 2022, United is the guarantor of $ 95 million of aircraft mortgage debt issued by one of United's regional carriers. The aircraft mortgage debt is subject to similar increased cost provisions as described below for the Company's debt, and the Company would potentially be responsible for those costs under the guarantees.
Increased Cost Provisions. In United's financing transactions that include loans in which United is the borrower, United typically agrees to reimburse lenders for any reduced returns with respect to the loans due to any change in capital requirements and, in the case of loans with respect to which the interest rate is based on the London Interbank Offered Rate (LIBOR), for certain other increased costs that the lenders incur in carrying these loans as a result of any change in law, subject, in most cases, to obligations of the lenders to take certain limited steps to mitigate the requirement for, or the amount of, such increased costs. At September 30, 2022, the Company had $ 12.8 billion of floating rate debt with remaining terms of up to approximately 10 years that are subject to these increased cost provisions. In several financing transactions involving loans or leases from non-U.S. entities, with remaining terms of up to approximately 10 years and an aggregate balance of $ 9.7 billion, the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder to non-U.S. entities to withholding taxes, subject to customary exclusions.
Credit Card Processing Agreements. The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of the Company's credit card processing agreements, the financial institutions in certain circumstances have the right to require that the Company maintain a reserve equal to a portion of advance ticket sales that has been processed by that financial institution, but for which the Company has not yet provided the air transportation. Such financial institutions may require additional cash or other collateral reserves to be established or additional withholding of payments related to receivables collected if the Company does not maintain certain minimum levels of unrestricted cash, cash equivalents and short-term investments (collectively, "Unrestricted Liquidity"). The Company's level of Unrestricted Liquidity as of September 30, 2022 is substantially in excess of these minimum levels.
Labor . As of September 30, 2022, the Company had approximately 90,800 employees, of whom approximately 85 % were represented by various U.S. labor organizations.
NOTE 8 — DEBT
As of September 30, 2022, we had $ 1.75 billion undrawn and available under our revolving credit facility.
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 September 30, 2022, UAL and United were in compliance with their respective debt covenants.
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The table below presents the Company's contractual principal payments (not including $ 412 million of unamortized debt discount, premiums and debt issuance costs) at September 30, 2022 under then-outstanding long-term debt agreements (in millions):
Last three months of 2022 $ 759
2023 2,929
2024 3,908
2025 3,358
2026 5,148
After 2026 15,755
$ 31,857
During the nine months ended September 30, 2022, United borrowed $ 220 million aggregate principal amount from a financial institution to finance the purchase of aircraft. The notes evidencing these borrowings, which are secured by the related aircraft, mature in 2034 and have interest rates of 4 %.
NOTE 9 — SPECIAL CHARGES (CREDITS)
For the three and nine months ended September 30, operating and nonoperating special charges (credits) and unrealized (gains) losses on investments in the statements of consolidated operations consisted of the following (in millions):
Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
CARES Act grant $ — $ ( 1,132 ) $ — $ ( 4,021 )
Severance and benefit costs — 5 — 433
Impairment of assets — 46 — 105
(Gains) losses on sale of assets and other special charges 20 ( 17 ) 124 60
Total operating special charges (credits) 20 ( 1,098 ) 124 ( 3,423 )
Nonoperating unrealized (gains) losses on investments, net ( 28 ) 34 12 ( 91 )
Nonoperating debt extinguishment and modification fees — ( 12 ) 7 50
Nonoperating special termination benefits — — — 46
Total nonoperating special charges and unrealized (gains) losses on investments, net ( 28 ) 22 19 5
Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net ( 8 ) ( 1,076 ) 143 ( 3,418 )
Income tax (benefit) expense, net of valuation allowance ( 7 ) 274 ( 17 ) 768
Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net of income taxes $ ( 15 ) $ ( 802 ) $ 126 $ ( 2,650 )
2022
(Gains) losses on sale of assets and other special charges. During the three and nine months ended September 30, 2022, the Company recorded $ 20 million and $ 124 million, respectively, of net charges primarily comprised of $ 94 million for various legal matters. See Note 7 of this report for a discussion of the legal matters.
Nonoperating unrealized (gains) losses on investments, net. During the three and nine months ended September 30, 2022, the Company recorded gains of $ 28 million and losses of $ 12 million, respectively.
Nonoperating debt extinguishment and modification fees . During the nine months ended September 30, 2022, the Company recorded $ 7 million of charges primarily related to the early redemption of $ 400 million of its outstanding principal amount of the 4.25% senior notes due 2022.
2021
CARES Act grant. During the nine months ended September 30, 2021, the Company received approximately $ 5.8 billion in funding pursuant to two Payroll Support Program Extension Agreements (collectively, the "PSP2 and PSP3 Agreements") under the CARES Act, which included approximately $ 1.7 billion aggregate principal amount of unsecured promissory notes.
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The Company recorded $ 1.1 billion and $ 4.0 billion as grant income in Special charges (credits) during the three and nine months ended September 30, 2021, respectively. The Company also recorded $ 99 million for warrants to purchase shares of UAL common stock issued to the U.S. Treasury Department as part of the PSP2 and PSP3 Agreements, within stockholders' equity, as an offset to the grant income in the nine months ended September 30, 2021.
Severance and benefit costs . During the three and nine months ended September 30, 2021, the Company recorded charges of $ 5 million and $ 433 million, respectively, related to pay continuation and benefits-related costs provided to employees who chose to voluntarily separate from the Company. The Company offered, based on employee group, age and completed years of service, pay continuation, health care coverage, and travel privileges. Approximately 4,500 employees elected to voluntarily separate from the Company.
Impairment of assets . During the three months ended September 30, 2021, the Company recorded $ 46 million of impairment charges for nine Airbus A319 aircraft and 13 Boeing 737-700 airframes as a result of market conditions for used aircraft. During the nine months ended September 30, 2021, in addition to the third quarter 2021 impairments, the Company recorded $ 59 million of impairments primarily related to 64 Embraer EMB 145LR aircraft and related engines that United retired from its regional aircraft fleet. The decision to retire these aircraft was triggered by the United Next aircraft order.
(Gains) losses on sale of assets and other special charges. During the three months ended September 30, 2021, the Company recorded net gains of $ 17 million primarily related to gains on aircraft sale-leaseback transactions and aircraft component manufacturer credits. During the nine months ended September 30, 2021, the Company recorded net charges of $ 60 million primarily related to incentives for certain of its front-line employees to receive a COVID-19 vaccination and the termination of the lease associated with three floors of its headquarters at the Willis Tower in Chicago in the first quarter of 2021, which were partially offset by the net gains in the third quarter of 2021 described above.
Nonoperating unrealized (gains) losses on investments, net . During the three and nine months ended September 30, 2021, the Company recorded losses of $ 34 million and gains of $ 91 million, respectively .
Nonoperating debt extinguishment and modification fees. During the nine months ended September 30, 2021, the Company recorded $ 50 million of charges for fees and discounts related to the issuance of a new term loan and revolving credit facility and the prepayment of a CARES Act loan and a 2017 term loan and revolving credit facility.
Nonoperating special termination benefits. During the nine months ended September 30, 2021, as part of the first quarter 2021 voluntary leave programs, the Company recorded $ 46 million of special termination benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees. The subsidies were in the form of a one-time contribution into a notional Retiree Health Account of $ 125,000 for full-time employees and $ 75,000 for part-time employees.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.