What changed in this filing

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Item 1. Financial Statements

2023-07-20 compared with 2023-04-20 · 197 added, 113 removed, 477 unchanged (39% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Three Months Ended March 31,

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

2023 2022 2023 2022

Operating revenue:

12 unchanged sentences

Aircraft rent 49 67 105 128

Special charges (credits) 14 ( 8 )

Special charges 859 112 873 104

Other operating expenses 2,017 1,642 3,831 3,093

Total operating expense 12,661 11,234 24,133 20,176

Operating loss ( 43 ) ( 1,376 )

Operating income (loss) 1,517 878 1,474 ( 498 )

Nonoperating income (expense):

2 unchanged sentences

Interest capitalized 42 22 80 46

Unrealized gains on investments, net 24 —

Unrealized gains (losses) on investments, net 84 ( 40 ) 108 ( 40 )

Miscellaneous, net 21 ( 14 ) 62 5

Total nonoperating expense, net ( 130 ) ( 419 ) ( 343 ) ( 795 )

Loss before income tax benefit ( 256 ) ( 1,752 )

Income tax benefit ( 62 ) ( 375 )

Net loss $ ( 194 ) $ ( 1,377 )

Loss per share, basic and diluted $ ( 0.59 ) $ ( 4.24 )

Income (loss) before income tax expense (benefit) 1,387 459 1,131 ( 1,293 )

Income tax expense (benefit) 312 130 250 ( 245 )

Net income (loss) $ 1,075 $ 329 $ 881 $ ( 1,048 )

Earnings (loss) per share, basic $ 3.28 $ 1.01 $ 2.69 $ ( 3.22 )

Earnings (loss) per share, diluted $ 3.24 $ 1.00 $ 2.66 $ ( 3.22 )

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

2 unchanged sentences

(In millions)

Three Months Ended March 31,

Net loss $ ( 194 ) $ ( 1,377 )

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

2023 2022 2023 2022

Net income (loss) $ 1,075 $ 329 $ 881 $ ( 1,048 )

Other comprehensive income (loss), net of tax:

1 unchanged sentence

Investments and other ( 24 ) ( 11 ) ( 3 ) ( 11 )

Total other comprehensive income (loss), net of tax ( 14 ) 5

Total comprehensive loss, net $ ( 208 ) $ ( 1,372 )

Total other comprehensive loss, net of tax ( 58 ) ( 7 ) ( 72 ) ( 2 )

Total comprehensive income (loss), net $ 1,017 $ 322 $ 809 $ ( 1,050 )

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

2 unchanged sentences

(In millions, except shares)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Current assets:

30 unchanged sentences

(In millions, except shares)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

LIABILITIES AND STOCKHOLDERS' EQUITY

17 unchanged sentences

Postretirement benefit liability 641 671

Deferred income taxes 133 —

Other financial liabilities 1,468 844

6 unchanged sentences

authorized 1,000,000,000 shares;

outstanding 327,968,615 and 326,930,321 shares at March 31, 2023 and December 31, 2022, respectively

outstanding 327,979,189 and 326,930,321 shares at June 30, 2023 and December 31, 2022, respectively

Additional capital invested 8,945 8,986

8 unchanged sentences

(In millions)

Three Months Ended

Six Months Ended June 30,

Cash Flows from Operating Activities:

12 unchanged sentences

Net cash used in financing activities ( 1,054 ) ( 1,654 )

Net increase in cash, cash equivalents and restricted cash 611 190

Net increase (decrease) in cash, cash equivalents and restricted cash 2,460 ( 1,401 )

Cash, cash equivalents and restricted cash at beginning of the period 7,421 18,533

19 unchanged sentences

Shares Amount

Balance at March 31, 2023 328.0 $ 4 $ 8,926 $ ( 3,443 ) $ 1,020 $ 161 $ 6,668

Net income — — — — 1,075 — 1,075

Other comprehensive loss — — — — — ( 58 ) ( 58 )

Stock-settled share-based compensation — — 21 — — — 21

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

Balance at June 30, 2023 328.0 $ 4 $ 8,945 $ ( 3,442 ) $ 2,095 $ 103 $ 7,705

Balance at December 31, 2022 326.9 $ 4 $ 8,986 $ ( 3,534 ) $ 1,265 $ 175 $ 6,896

Net loss — — — — ( 194 ) — ( 194 )

Net income — — — — 881 — 881

Other comprehensive loss — — — — — ( 72 ) ( 72 )

1 unchanged sentence

Stock issued for share-based awards, net of shares withheld for tax 1.1 — ( 73 ) 92 ( 51 ) — ( 32 )

Balance at June 30, 2023 328.0 $ 4 $ 8,945 $ ( 3,442 ) $ 2,095 $ 103 $ 7,705

Balance at March 31, 2022 326.7 $ 4 $ 8,953 $ ( 3,552 ) $ ( 844 ) $ ( 937 ) $ 3,624

Net income — — — — 329 — 329

Other comprehensive loss — — — — — ( 7 ) ( 7 )

Stock-settled share-based compensation — — 17 — — — 17

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

Balance at June 30, 2022 326.7 $ 4 $ 8,970 $ ( 3,551 ) $ ( 515 ) $ ( 944 ) $ 3,964

Balance at December 31, 2021 323.8 $ 4 $ 9,156 $ ( 3,814 ) $ 625 $ ( 942 ) $ 5,029

Net loss — — — — ( 1,048 ) — ( 1,048 )

Other comprehensive income — — — — — 5 5

Other comprehensive loss — — — — — ( 2 ) ( 2 )

Stock-settled share-based compensation — — 55 — — — 55

Stock issued for share-based awards, net of shares withheld for tax 2.9 — ( 241 ) 263 ( 92 ) — ( 70 )

Balance at March 31, 2022 326.7 $ 4 $ 8,953 $ ( 3,552 ) $ ( 844 ) $ ( 937 ) $ 3,624

Balance at June 30, 2022 326.7 $ 4 $ 8,970 $ ( 3,551 ) $ ( 515 ) $ ( 944 ) $ 3,964

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

2 unchanged sentences

(In millions)

Three Months Ended March 31,

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

2023 2022 2023 2022

Operating revenue:

12 unchanged sentences

Aircraft rent 49 67 105 128

Special charges (credits) 14 ( 8 )

Special charges 859 112 873 104

Other operating expenses 2,016 1,642 3,830 3,092

Total operating expense 12,660 11,234 24,132 20,175

Operating loss ( 43 ) ( 1,375 )

Operating income (loss) 1,518 878 1,475 ( 497 )

Nonoperating income (expense):

2 unchanged sentences

Interest capitalized 42 22 80 46

Unrealized gains on investments, net 24 —

Unrealized gains (losses) on investments, net 84 ( 40 ) 108 ( 40 )

Miscellaneous, net 21 ( 14 ) 62 5

Total nonoperating expense, net ( 130 ) ( 419 ) ( 343 ) ( 795 )

Loss before income tax benefit ( 256 ) ( 1,751 )

Income tax benefit ( 62 ) ( 374 )

Net loss $ ( 194 ) $ ( 1,377 )

Income (loss) before income tax expense (benefit) 1,388 459 1,132 ( 1,292 )

Income tax expense (benefit) 313 129 251 ( 245 )

Net income (loss) $ 1,075 $ 330 $ 881 $ ( 1,047 )

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

2 unchanged sentences

(In millions)

Three Months Ended March 31,

Net loss $ ( 194 ) $ ( 1,377 )

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

2023 2022 2023 2022

Net income (loss) $ 1,075 $ 330 $ 881 $ ( 1,047 )

Other comprehensive income (loss), net of tax:

1 unchanged sentence

Investments and other ( 24 ) ( 11 ) ( 3 ) ( 11 )

Total other comprehensive income (loss), net of tax ( 14 ) 5

Total comprehensive loss, net $ ( 208 ) $ ( 1,372 )

Total other comprehensive loss, net of tax ( 58 ) ( 7 ) ( 72 ) ( 2 )

Total comprehensive income (loss), net $ 1,017 $ 323 $ 809 $ ( 1,049 )

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

2 unchanged sentences

(In millions, except shares)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Current assets:

29 unchanged sentences

(In millions, except shares)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

LIABILITIES AND STOCKHOLDER'S EQUITY

17 unchanged sentences

Postretirement benefit liability 641 671

Deferred income taxes 162 —

Other financial liabilities 1,468 844

5 unchanged sentences

authorized 1,000 shares;

issued and outstanding 1,000 shares at both March 31, 2023 and December 31, 2022

issued and outstanding 1,000 shares at both June 30, 2023 and December 31, 2022

Additional capital invested 435 403

8 unchanged sentences

(In millions)

Three Months Ended

Six Months Ended June 30,

Cash Flows from Operating Activities:

12 unchanged sentences

Net cash used in financing activities ( 1,023 ) ( 1,583 )

Net increase in cash, cash equivalents and restricted cash 611 190

Net increase (decrease) in cash, cash equivalents and restricted cash 2,460 ( 1,401 )

Cash, cash equivalents and restricted cash at beginning of the period 7,421 18,533

17 unchanged sentences

Other Comprehensive Income (Loss) Payable to Parent Total

Balance at March 31, 2023 $ 414 $ 3,522 $ 161 $ 2,539 $ 6,636

Net income — 1,075 — — 1,075

Other comprehensive loss — — ( 58 ) — ( 58 )

Stock-settled share-based compensation 21 — — — 21

Other — — — — —

Balance at June 30, 2023 $ 435 $ 4,597 $ 103 $ 2,539 $ 7,674

Balance at December 31, 2022 $ 403 $ 3,716 $ 175 $ 2,571 $ 6,865

Net loss — ( 194 ) — — ( 194 )

Net income — 881 — — 881

Other comprehensive loss — — ( 72 ) — ( 72 )

1 unchanged sentence

Other — — — ( 32 ) ( 32 )

Balance at June 30, 2023 $ 435 $ 4,597 $ 103 $ 2,539 $ 7,674

Balance at March 31, 2022 $ 355 $ 1,600 $ ( 937 ) $ 2,575 $ 3,593

Net income — 330 — — 330

Other comprehensive loss — — ( 7 ) — ( 7 )

Stock-settled share-based compensation 18 — — — 18

Other — — — ( 1 ) ( 1 )

Balance at June 30, 2022 $ 373 $ 1,930 $ ( 944 ) $ 2,574 $ 3,933

Balance at December 31, 2021 $ 317 $ 2,977 $ ( 942 ) $ 2,646 $ 4,998

Net loss — ( 1,047 ) — — ( 1,047 )

Other comprehensive income — — 5 — 5

Other comprehensive loss — — ( 2 ) — ( 2 )

Stock-settled share-based compensation 56 — — — 56

Other — — — ( 72 ) ( 72 )

Balance at March 31, 2022 $ 355 $ 1,600 $ ( 937 ) $ 2,575 $ 3,593

Balance at June 30, 2022 $ 373 $ 1,930 $ ( 944 ) $ 2,574 $ 3,933

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

22 unchanged sentences

Department of Transportation) (in millions):

Three Months Ended March 31,

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

2023 2022 2023 2022

Domestic (U.S.

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however, all credits issued on or before December 31, 2022 have been extended to December 31, 2023.

The Company estimates the value of Advance tickets sales that will expire unused ("breakage") and recognizes revenue in proportion to the usage of the related tickets.

The Company estimates the value of Advance ticket sales that will expire unused ("breakage") and recognizes revenue in proportion to the usage of the related tickets.

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

1 unchanged sentence

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

In the three months ended March 31, 2023 and 2022, the Company recognized approximately $ 3.5 billion and $ 1.9 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods.

In the six months ended June 30, 2023 and 2022, the Company recognized approximately $ 4.6 billion and $ 2.6 billion, respectively, of passenger revenue for tickets that were included in Advance ticket sales at the beginning of those periods.

Ancillary Fees.

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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 $ 892 million and $ 661 million of ancillary fees within passenger revenue in the three months ended March 31, 2023 and 2022, respectively.

The Company recorded $ 1.0 billion and $ 1.9 billion of ancillary fees within passenger revenue in the three and six months ended

June 30, 2023, respectively.

The Company recorded $ 0.9 billion and $ 1.5 billion of ancillary fees within passenger revenue in the three and six months ended June 30, 2022, respectively.

Frequent Flyer Accounting.

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Total Frequent flyer deferred revenue - beginning balance $ 6,860 $ 6,417 $ 6,675 $ 6,282

3 unchanged sentences

Total Frequent flyer deferred revenue - ending balance $ 7,024 $ 6,495 $ 7,024 $ 6,495

In the three months ended March 31, 2023 and 2022, the Company recognized, in Other operating revenue, $ 646 million and $ 519 million, respectively, related to the marketing, advertising, non-travel miles redeemed (net of related costs) and other travel-related benefits of the mileage revenue associated with our various partner agreements including, but not limited to, our JPMorgan Chase Bank, N.A.

In the three and six months ended June 30, 2023, the Company recognized, in Other operating revenue, $ 0.7 billion and $ 1.3 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 $ 0.6 billion and $ 1.1 billion, respectively, in the three and six months ended June 30, 2022, 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 deferred revenue.

We determine the current portion of that account based on expected redemptions in the next 12 months.

NOTE 2 — LOSS PER SHARE

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

Three Months Ended March 31,

Loss available to common stockholders $ ( 194 ) $ ( 1,377 )

Weighted-average shares outstanding, basic and diluted 327.4 325.0

Loss per share, basic and diluted $ ( 0.59 ) $ ( 4.24 )

Potentially dilutive securities (a)

Stock warrants (b) 1.5 1.5

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 June 30, Six Months Ended June 30,

2023 2022 2023 2022

Earnings (loss) available to common stockholders $ 1,075 $ 329 $ 881 $ ( 1,048 )

Basic weighted-average shares outstanding 328.0 326.7 327.7 325.9

Dilutive effect of employee stock awards 1.2 1.7 1.5 —

Dilutive effect of stock warrants (a) 2.3 1.9 2.3 —

Diluted weighted-average shares outstanding 331.5 330.3 331.5 325.9

Earnings (loss) per share, basic $ 3.28 $ 1.01 $ 2.69 $ ( 3.22 )

Earnings (loss) per share, diluted $ 3.24 $ 1.00 $ 2.66 $ ( 3.22 )

Potentially dilutive securities (b)

Stock warrants (a) 1.5 1.5 1.5 1.5

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.

(a) 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 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 March 31, 2023.

All warrants were outstanding as of June 30, 2023.

(b) Weighted-average potentially dilutive securities outstanding excluded from the computation of diluted earnings per share because the securities would have had an antidilutive effect.

On March 3, 2021, the Company entered into an equity distribution agreement (the "Distribution Agreement") with several financial institutions (collectively, the "Managers"), relating to the issuance and sale from time to time by UAL (the "2021 ATM Offering"), through the Managers, of up to 37 million shares of UAL common stock (the "2021 ATM Shares").

5 unchanged sentences

Pension and Other Postretirement Liabilities Investments and Other Deferred Taxes (a) Total

Balance at March 31, 2023 $ 582 $ ( 8 ) $ ( 413 ) $ 161

Changes in value ( 8 ) ( 31 ) 8 ( 31 )

Amounts reclassified to earnings ( 35 ) (b) — 8 ( 27 )

Balance at June 30, 2023 $ 539 $ ( 39 ) $ ( 397 ) $ 103

Balance at December 31, 2022 $ 626 $ ( 35 ) $ ( 416 ) $ 175

1 unchanged sentence

Amounts reclassified to earnings ( 70 ) (b) — 15 ( 55 )

Balance at June 30, 2023 $ 539 $ ( 39 ) $ ( 397 ) $ 103

Balance at March 31, 2022 $ ( 839 ) $ — $ ( 98 ) $ ( 937 )

Changes in value 6 ( 14 ) 2 ( 6 )

Amounts reclassified to earnings ( 1 ) (b) — — ( 1 )

Balance at June 30, 2022 $ ( 834 ) $ ( 14 ) $ ( 96 ) $ ( 944 )

Balance at December 31, 2021 $ ( 847 ) $ — $ ( 95 ) $ ( 942 )

Changes in value 14 ( 14 ) ( 1 ) ( 1 )

Balance at March 31, 2022 $ ( 839 ) $ — $ ( 98 ) $ ( 937 )

Amounts reclassified to earnings ( 1 ) (b) — — ( 1 )

Balance at June 30, 2022 $ ( 834 ) $ ( 14 ) $ ( 96 ) $ ( 944 )

(a) Includes approximately $ 285 million of deferred income tax expense that will not be recognized in net income until the related pension and postretirement benefit obligations are fully extinguished.

3 unchanged sentences

NOTE 4 — INCOME TAXES

The Company's effective tax rates for the three months ended March 31, 2023 and March 31, 2022 were 24.2 % and 21.4 %, respectively.

The provision for income taxes for the three months ended March 31, 2023 is based on the estimated annual effective tax rate, which represents a blend of federal, state and foreign taxes and includes the impact of certain nondeductible items.

The provision for income taxes for the three months ended March 31, 2022 is calculated using a discrete effective tax rate method.

We determined that applying an estimate of the annual effective tax rate to income or loss for the interim reporting period would not provide a reliable estimate for the three months ended March 31, 2022, since small changes in estimated income would have resulted in significant changes in the estimated annual effective tax rate.

The Company's effective tax rates for the three and six months ended June 30, 2023 were 22.5 % and 22.1 %, respectively.

The Company's effective tax rates for the three and six months ended June 30, 2022 were 28.3 % and 18.9 %, respectively.

The provision for income taxes for the three and six months ended June 30, 2023 is based on the estimated annual effective tax rate, which represents a blend of federal, state and foreign taxes and includes the impact of certain nondeductible items.

The provision for income taxes for the three and six months ended June 30, 2022 was calculated using a discrete effective tax rate method.

We determined that applying an estimate of the annual effective tax rate to income or loss for the interim reporting period would not provide a reliable estimate for the three and six months ended June 30, 2022, since small changes in estimated income would have resulted in significant changes in the estimated annual effective tax rate.

NOTE 5 — EMPLOYEE BENEFIT PLANS

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

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

Pension Benefits Other Postretirement Benefits Affected Line Item

9 unchanged sentences

Total $ 26 $ 53 $ ( 27 ) $ ( 23 )

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

Pension Benefits Other Postretirement Benefits Affected Line Item

in the Statements of

Consolidated Operations

2023 2022 2023 2022

Service cost $ 62 $ 102 $ 2 $ 4 Salaries and related costs

Interest cost 110 94 21 15 Miscellaneous, net

Expected return on plan assets ( 126 ) ( 154 ) ( 1 ) ( 1 ) Miscellaneous, net

Amortization of unrecognized (gain) loss 4 61 ( 19 ) ( 7 ) Miscellaneous, net

Amortization of prior service credit — — ( 56 ) ( 56 ) Miscellaneous, net

Other 1 1 — — Miscellaneous, net

Total $ 51 $ 104 $ ( 53 ) $ ( 45 )

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):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

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

5 unchanged sentences

Asset-backed securities 160 — 160 — 325 — 325 —

Certificates of deposit placed through an account registry service ("CDARS") 73 — 73 — — — — —

Corporate debt — — — — 9 — 9 —

11 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Carrying Amount Fair Value Carrying Amount Fair Value

7 unchanged sentences

Equity Method Investments.

As of March 31, 2023, United holds the following investments, accounted for using the equity method, with a combined carrying value of approximately $ 208 million:

As of June 30, 2023, United holds the following investments, accounted for using the equity method, with a combined carrying value of approximately $ 214 million:

• CommuteAir LLC.

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• Republic Airways Holdings Inc.

United holds a 19 % minority interest in Republic Holdings Inc., which is the parent company of Republic Airways Inc.

United holds a 19 % minority interest in Republic Airways Holdings Inc., which is the parent company of Republic Airways Inc.

("Republic").

4 unchanged sentences

UAV transferred certain of its existing SAF investments to the Fund's portfolio.

As of March 31, 2023, the Company indirectly holds a 49.99 % ownership interest in the Fund.

As of June 30, 2023, the Company indirectly holds a 49.99 % ownership interest in the Fund.

• Blue Blade Energy, LLC ("Blue Blade").

2 unchanged sentences

Other Investments.

As of March 31, 2023, United has equity investments in Avianca Group International Limited, a multinational airline holding company, JetSuiteX, Inc., an independent air carrier doing business as JSX as well as a number of companies with emerging technologies and sustainable solutions.

As of June 30, 2023, United has equity investments in Avianca Group International Limited, a multinational airline holding company, JetSuiteX, Inc., an independent air carrier doing business as JSX as well as a number of companies with emerging technologies and sustainable solutions.

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 March 31, 2023, the carrying value of these investments was $ 413 million.

As of June 30, 2023, the carrying value of these investments was $ 417 million.

NOTE 7 — COMMITMENTS AND CONTINGENCIES

As of March 31, 2023, United had firm commitments and options to purchase aircraft from The Boeing Company ("Boeing") and Airbus S.A.S.

As of June 30, 2023, United had firm commitments to purchase aircraft from The Boeing Company ("Boeing") and Airbus S.A.S.

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

Scheduled Aircraft Deliveries

Contractual Aircraft Deliveries Expected Aircraft Deliveries (b)

Aircraft Type Number of Firm

Commitments (a) Last Nine Months

Commitments (a) Last Six Months

of 2023 2024 After 2024 Last Six Months

of 2023 2024 After 2024

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

(b) Expected aircraft deliveries reflect adjustments communicated by Boeing and Airbus or estimated by United.

The aircraft listed in the table above are scheduled for delivery through 2033.

3 unchanged sentences

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

Airbus notified United that eight Airbus A321neo aircraft scheduled for delivery in 2023, as shown in the table above, are now expected to deliver in 2024 and ten Airbus A321neo aircraft scheduled for delivery in 2024, as shown in the table above, are now expected to deliver in 2025.

Boeing notified United that 37 Boeing 737 MAX aircraft scheduled for delivery in 2023, as shown in the table above, are now expected to deliver in 2024.

Also, United estimates that an additional eleven Boeing 737 MAX aircraft scheduled for delivery in 2023, as shown in the table above, will deliver in 2024 and 30 Boeing 737 MAX aircraft scheduled for delivery in 2024, as shown in table above, will deliver in 2025.

Furthermore, Boeing recently notified United that due to a manufacturing process issue relating to certain Boeing 737 MAX fuselages, six Boeing 737 MAX 8 aircraft scheduled for delivery in the second quarter of 2023, as shown in the table above, will be delayed.

Boeing may inform United that additional Boeing 737 MAX 8 aircraft scheduled for delivery in the third quarter of 2023 may be delayed and/or that certain Boeing 737 MAX aircraft currently expected to be delivered in 2023 may deliver in 2024.

However, at this time, we do not expect these delays to be extensive or to have a significant impact on our capacity plan for 2023.

During the first quarter of 2023, United entered into agreements with third parties to finance through sale and leaseback transactions new Boeing model 737 MAX aircraft subject to purchase agreements between United and Boeing.

During the first half of 2023, United entered into agreements with third parties to finance through sale and leaseback transactions new Boeing model 737 MAX aircraft subject to purchase agreements between United and Boeing.

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

Upon delivery of the aircraft in these sale and leaseback transactions, the Company accounted for these aircraft as part of Flight equipment on the Company's

consolidated balance sheet and the related obligation recorded in Current maturities of other financial liabilities and Other financial liabilities since they did not qualify for sale recognition (failed sale and leaseback).

The table below summarizes United's commitments as of March 31, 2023, 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 and Airbus or estimated by United.

Upon delivery of the aircraft in these sale and leaseback transactions, the Company accounted for these aircraft as part of Flight equipment on the Company's consolidated balance sheet and the related obligation recorded in Current maturities of other financial liabilities and Other financial liabilities since they did not qualify for sale recognition (failed sale and leaseback).

The table below summarizes United's commitments as of June 30, 2023, 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 communicated by Boeing and Airbus or estimated by United.

(in billions)

Last nine months of 2023 $ 8.3

Last six months of 2023 $ 6.8

After 2027 16.6

1 unchanged sentence

In the first quarter of 2023, United amended its CPA agreements with one of its regional carriers to increase the contractually agreed fees (carrier costs) paid to that carrier.

The Company expects to wind down its CPA with Air Wisconsin and terminate operations by early June 2023.

The Company terminated its CPA and related regional flight operations with Air Wisconsin in June 2023.

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

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The actual amounts we pay to our regional operators under CPAs could differ materially from these estimates.

United's estimates of its future payments under all of the CPAs do not include the portion of the underlying obligation for any aircraft leased to a regional carrier or deemed to be leased from other regional carriers and facility rent that are disclosed as part of operating leases above.

For purposes of calculating these estimates, we have assumed (1) the number of block hours flown is based on our anticipated level of flight activity or at any contractual minimum utilization levels if applicable, whichever is higher, (2) that we will reduce the fleet as rapidly as contractually allowed under each CPA, (3) that aircraft utilization, stage length and load factors will remain constant, (4) that each carrier's operational performance will remain at recent historic levels and (5) an annual projected inflation rate.

Based on these assumptions as of March 31, 2023 , our estimated future payments through the end of the terms of our CPAs are presented in the table below :

Based on these assumptions as of June 30, 2023 , our estimated future payments through the end of the terms of our CPAs are presented in the table below :

(in billions)

Last nine months of 2023 $ 1.7

Last six months of 2023 $ 1.1

After 2027 4.0

As of March 31, 2023, United is the guarantor of approximately $ 2.0 billion in aggregate principal amount of tax-exempt special facilities revenue bonds and interest thereon.

As of June 30, 2023, 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.

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All of these bonds are due between 2023 and 2041.

As of March 31, 2023, United is the guarantor of $ 88 million of aircraft mortgage debt issued by one of United's regional carriers.

As of June 30, 2023, United is the guarantor of $ 84 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) or the Secured Overnight Financing Rate (SOFR), for certain other increased costs that the lenders incur in carrying these loans as a

result of any change in law, subject, in most cases, to obligations of the lenders to take certain limited steps to mitigate the requirement for, or the amount of, such increased costs.

At March 31, 2023, the Company had $ 12.9 billion of floating rate debt with remaining terms of up to approximately 12 years that are subject to these increased cost provisions.

At June 30, 2023, the Company had $ 11.6 billion of floating rate debt with remaining terms of up to approximately 12 years that are subject to these increased cost provisions.

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

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entities to withholding taxes, subject to customary exclusions.

As of March 31, 2023, the Company had approximately 96,300 employees, of whom approximately 84 % were represented by various U.S.

As of June 30, 2023, the Company had approximately 99,800 employees, of whom approximately 83 % were represented by various U.S.

labor organizations.

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The agreement becomes amendable in December 2024 and includes a one-year early opener that allows for bargaining on a successor agreement to begin in December 2023.

In April 2023, the Company and the International Association of Machinists & Aerospace Workers ("IAM") reached a tentative agreement covering nearly 30,000 IAM-represented employees in several workgroups.

The agreements, once ratified, will cover IAM-represented employees across our operations and be effective through 2025.

The Company has been in negotiations with its employees represented by the Air Line Pilots Association ("ALPA") regarding a contract that became amendable in January 2019.

Given the recent ratification of a new agreement by the pilot group of another major airline, the Company has determined that it is appropriate to accrue expense in the first quarter 2023 related to a potential new collective bargaining agreement with employees represented by ALPA.

On May 1, 2023, the Company and the International Association of Machinists & Aerospace Workers ("IAM") ratified five contracts covering nearly 30,000 IAM-represented fleet service, passenger service, storekeepers, maintenance instructors and fleet technical instructors and related employees.

The Company recorded a one-time $ 48 million expense in conjunction with the ratification.

Negotiations will continue for agreements to cover security guards in California and central load planners.

The ratified agreements are effective through 2025.

In July 2023, the Company reached an Agreement in Principle ("AIP") with its employees represented by the Air Line Pilots Association ("ALPA") regarding a contract that became amendable in January 2019.

The AIP includes numerous work rule changes and pay rate increases during the four-year term.

The agreement also includes a provision for a one-time payment upon ratification.

In the three and six months ended June 30, 2023, the Company recorded $ 765 million of expenses associated with this AIP relating to wages for 2022 and prior years.

NOTE 8 — DEBT

As of March 31, 2023, we had $ 1.75 billion undrawn and available under our revolving credit facility.

As of June 30, 2023, 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 March 31, 2023, UAL and United were in compliance with their respective debt covenants.

The table below presents the Company's contractual principal payments (not including $ 356 million of unamortized debt discount, premiums and debt issuance costs) at March 31, 2023 under then-outstanding long-term debt agreements (in millions):

Last nine months of 2023 $ 2,167

As of June 30, 2023, UAL and United were in compliance with their respective debt covenants.

Equipment Notes .

On June 20, 2023, the Company and Wilmington Trust, National Association, as subordination agent and pass through trustee (the "Trustee") under a certain pass through trust newly formed by the Company, entered into the Note Purchase Agreement, dated as of June 20, 2023 (the "Note Purchase Agreement").

The Note Purchase Agreement provides for the issuance by the Company of equipment notes (the "Equipment Notes") in the aggregate principal amount of $ 1.3 billion to finance 39 Boeing aircraft delivered new to the Company from August 2022 to May 2023.

Pursuant to the Note Purchase Agreement, the Trustee purchased Equipment Notes issued under a trust indenture and mortgage (each, an "Indenture" and, collectively, the "Indentures") with respect to each aircraft entered into by the Company and Wilmington Trust, National Association, as mortgagee.

Each Indenture provides for the issuance of Equipment Notes in a single series, Series A, bearing interest at the rate of 5.80 % per annum.

The Equipment Notes were purchased by the Trustee, using the proceeds from the sale of Pass Through Certificates, Series 2023-1A (the "Certificates"), issued by a pass through trust newly-formed by the Company to facilitate the financing of the aircraft.

The interest on the Equipment Notes is payable semi-annually on each January 15 and July 15, beginning on January 15, 2024.

The principal payments on the Equipment Notes are scheduled on January 15 and July 15 of each year, beginning on July 15, 2024.

The final payments on the Equipment Notes will be due on January 15, 2036.

In the second quarter of 2023, United prepaid $ 1.0 billion of a 2021 term loan facility.

See Note 9 for information related to charges recorded as a result of this prepayment.

The table below presents the Company's contractual principal payments (not including $ 329 million of unamortized debt discount, premiums and debt issuance costs) at June 30, 2023 under then-outstanding long-term debt agreements (in millions):

Last six months of 2023 $ 1,451

After 2027 14,044

NOTE 9 — SPECIAL CHARGES (CREDITS)

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

NOTE 9 — SPECIAL CHARGES

For the three and six months ended June 30, operating and nonoperating special charges and unrealized (gains) losses on investments in the statements of consolidated operations consisted of the following (in millions):

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Labor contract ratification bonuses $ 813 $ — $ 813 $ —

(Gains) losses on sale of assets and other special charges 46 112 60 104

Total operating special charges (credits) 14 ( 8 )

Nonoperating unrealized gains on investments, net ( 24 ) —

Total operating special charges 859 112 873 104

Nonoperating unrealized (gains) losses on investments, net ( 84 ) 40 ( 108 ) 40

Nonoperating debt extinguishment and modification fees 11 — 11 7

Total nonoperating special charges and unrealized gains on investments, net ( 24 ) 7

Total operating and nonoperating special charges (credits) and unrealized gains on investments, net ( 10 ) ( 1 )

Total nonoperating special charges and unrealized (gains) losses on investments, net ( 73 ) 40 ( 97 ) 47

Total operating and nonoperating special charges and unrealized (gains) losses on investments, net 786 152 776 151

Income tax benefit, net of valuation allowance ( 194 ) ( 10 ) ( 197 ) ( 10 )

Total operating and nonoperating special charges (credits) and unrealized gains on investments, net of income taxes $ ( 13 ) $ ( 1 )

Total operating and nonoperating special charges and unrealized (gains) losses on investments, net of income taxes $ 592 $ 142 $ 579 $ 141

Labor contract ratification bonuses.

During the three and six months ended June 30, 2023, the Company recorded $ 813 million of expense associated with the recently completed AIP with ALPA and ratified contracts with IAM.

See Note 7 for additional information.

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

During the three months ended March 31, 2023, the Company recorded $ 14 million of net charges primarily comprised of accelerated depreciation related to certain of the Company's assets that will be retired early and other gains and losses on the sale of assets.

During the three and six months ended June 30, 2023, the Company recorded $ 46 million and $ 60 million, respectively, of net charges primarily comprised of reserves for various legal matters,

accelerated depreciation related to certain of the Company's assets that will be retired early and other gains and losses on the sale of assets.

Nonoperating unrealized (gains) losses on investments, net.

During the three months ended March 31, 2023, the Company recorded gains of $ 24 million primarily for the change in the market value of its investments in equity securities.

During the three and six months ended June 30, 2023, the Company recorded gains of $ 84 million and $ 108 million, respectively, primarily for the change in the market value of its investments in equity securities.

Nonoperating debt extinguishment and modification fees .

During the three and six months ended June 30, 2023, the Company recorded $ 11 million of charges primarily related to the prepayment of $ 1.0 billion of the outstanding principal amount under a 2021 term loan facility.

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

During the three months ended March 31, 2022, the Company recorded net gains of $ 8 million primarily related to sale-leaseback transactions and the sale of aircraft.

During the three and six months ended June 30, 2022, the Company recorded $ 112 million and $ 104 million, respectively, of net charges primarily comprised of $ 94 million for various legal matters.

Nonoperating unrealized (gains) losses on investments, net.

During the three and six months ended June 30, 2022, the Company recorded losses of $ 40 million, primarily related to the change in the market value of its investments in equity securities.

Nonoperating debt extinguishment and modification fees .

During the three months ended March 31, 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.

During the six months ended June 30, 2022, the Company recorded $ 7 million of charges primarily related to the early redemption of $ 400 million of the outstanding principal amount of its 4.25 % senior notes due 2022.

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

What changed 10-Q

Item 1. Financial Statements