What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-07-20 compared with 2023-04-20 · 177 added, 74 removed, 223 unchanged (53% of the section changed)

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aircraft delivery delays;

the lasting effects of the COVID-19 global pandemic and related governmental regulations and restrictions, which we believe will change how our customers fly in ways that we expect to be both positive and negative for the Company, including the lingering impact of the pandemic on the return of business and international travel demand—especially in our China market—to pre-COVID-19 levels;

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

the lasting effects of the COVID-19 global pandemic and related governmental regulations and restrictions, which we believe have changed how our customers fly in ways that we expect to be both positive and negative for the Company, including the lingering impact of the pandemic on the return of business and international travel demand—especially in our China market—to pre-COVID-19 levels;

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

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

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Risk Factors, of the 2022 Form 10-K.

Our future results of operations may be subject to volatility and our growth plans may be

delayed, particularly in the short term, due to the impact of the above factors and trends.

Our future results of operations may be subject to volatility and our growth plans may be delayed, particularly in the short term, due to the impact of

the above factors and trends.

Absent significant and prolonged COVID-19 relapses or global economic disruptions, we believe that the expected long-term increase in travel demand will offset increased costs and that the expected operational challenges can be managed in a manner that will allow us to support increased demand.

RESULTS OF OPERATIONS

The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three months ended March 31, 2023, as compared to the corresponding period in 2022.

First Quarter 2023 Compared to First Quarter 2022

The Company recorded a net loss of $194 million for the first quarter of 2023 as compared to a net loss of $1.4 billion for the first quarter of 2022.

Significant components of the Company's operating results for the three months ended March 31 are as follows (in millions, except percentage changes):

The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three and six months ended June 30, 2023, as compared to the corresponding periods in 2022.

Second Quarter 2023 Compared to Second Quarter 2022

The Company recorded net income of $1.1 billion for the second quarter of 2023 as compared to net income of $329 million for the second quarter of 2022.

The Company considers a key measure of its performance to be operating income, which was $1.5 billion for the second quarter of 2023, as compared to $878 million for the second quarter of 2022, an approximately $639 million increase year-over-year, primarily as a result of increased demand for air travel.

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

2023 2022 Increase (Decrease) % Change

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Operating expense 12,661 11,234 1,427 12.7

Operating loss (43) (1,376) (1,333) (96.9)

Operating income 1,517 878 639 72.8

Nonoperating expense, net (130) (419) (289) (69.0)

Income tax benefit (62) (375) (313) (83.5)

Net loss $ (194) $ (1,377) $ (1,183) (85.9)

Certain consolidated statistical information for the Company's operations for the three months ended March 31 is as follows:

Income tax expense 312 130 182 140.0

Net income $ 1,075 $ 329 $ 746 226.7

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

2023 2022 Increase (Decrease) % Change

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Fuel gallons consumed (millions) 1,062 912 150 16.4

Employee headcount, as of March 31

Employee headcount, as of June 30

99,800 91,200 8,600 9.4

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

(g) CASM excluding fuel, profit sharing, third-party business expense and special charges (credits).

(g) CASM excluding fuel, profit sharing, third-party business expense and special charges.

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

Operating Revenue.

The table below shows year-over-year comparisons by type of operating revenue for the three months ended March 31 (in millions, except for percentage changes):

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

2023 2022 Increase (Decrease) % Change

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Total operating revenue $ 14,178 $ 12,112 $ 2,066 17.1

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

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

Increase (decrease) from 2022:

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Passenger load factor (points) (2.9) 1.8 17.3 0.2 (0.3)

Passenger revenue increased $3.9 billion, or 61.8%, in the first quarter of 2023 as compared to the year-ago period, primarily due to an increase in capacity of 23.4% as well as strength in both yield and passenger load factor.

Cargo revenue decreased $229 million, or 36.5%, in the first quarter of 2023 as compared to the year-ago period, primarily due to lower yields and lower tonnage as a result of increased market capacity and rate pressures.

Other operating revenue increased $166 million, or 28.1%, in the first quarter of 2023 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending and new credit card member acquisitions with the co-branded credit card partner, JPMorgan Chase Bank, N.A., as well as an increase in the purchases of United Club memberships and one-time lounge passes.

Passenger revenue increased $2.2 billion, or 20.1%, in the second quarter of 2023 as compared to the year-ago period, primarily due to an increase in capacity of 17.5% as well as strength in yield, partially offset by a slight decrease in passenger load factor.

Cargo revenue decreased $212 million, or 36.9%, in the second quarter of 2023 as compared to the year-ago period, primarily due to lower yields as a result of increased market capacity and rate pressures.

Other operating revenue increased $105 million, or 14.8%, in the second quarter of 2023 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending with the co-branded credit card partner, JPMorgan Chase Bank, N.A., as well as an increase in the purchases of United Club memberships and one-time lounge passes.

Operating Expenses.

The table below includes data related to the Company's operating expenses for the three months ended March 31 (in millions, except for percentage changes):

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

2023 2022 Increase (Decrease) % Change

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Aircraft rent 49 67 (18) (26.9)

Special charges (credits) 14 (8) 22 NM

Special charges 859 112 747 NM

Other operating expenses 2,017 1,642 375 22.8

Total operating expenses $ 12,661 $ 11,234 $ 1,427 12.7

Salaries and related costs increased $535 million, or 19.2%, in the first quarter of 2023 as compared to the year-ago period, primarily due to a 10.2% increase in headcount, an increase in volume-driven pay from increased flight activity and accruals for pay rate increases related to a potential new collective bargaining agreement with employees represented by the Air Line Pilots Association .

Aircraft fuel expense increased by $944 million, or 42.3%, in the first quarter of 2023 as compared to the year-ago period, due to both a higher average price per gallon of fuel and increased consumption from higher flight activity.

The table below presents the significant changes in aircraft fuel cost per gallon in the three months ended March 31, 2023 as compared to the year-ago period (in millions, except percentage change and per gallon data):

Salaries and related costs increased $874 million, or 30.8%, in the second quarter of 2023 as compared to the year-ago period, primarily due to a 9.4% increase in headcount from increased flight activity, annual wage rate increases, accruals for pay rate increases related to a potential new collective bargaining agreement with employees represented by the Air Line Pilots Association ("ALPA") and an increase of $220 million in profit sharing .

Aircraft fuel expense decreased by $991 million, or 26.0%, in the second quarter of 2023 as compared to the year-ago period, due to a lower average price per gallon of fuel, partially offset by increased consumption from higher flight activity.

The table below presents the significant changes in aircraft fuel cost per gallon in the three months ended June 30, 2023 as compared to the year-ago period (in millions, except percentage change and per gallon data):

2023 2022 Increase (Decrease) % Change

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Average price per gallon $ 2.66 $ 4.18 $ (1.52) (36.4) %

Landing fees and other rent increased $105 million, or 17.2%, in the first quarter of 2023 as compared to the year-ago period, primarily due to increased flying driving higher landed weight volume and higher number of enplaned passengers.

Aircraft maintenance materials and outside repairs increased $295 million, or 72.5%, in the first quarter of 2023 as compared to the year-ago period, primarily due to increased flight activity and increased volumes of both engine overhauls and airframe heavy maintenance checks.

Depreciation expense increased $44 million, or 7.2%, in the first quarter of 2023 as compared to the year-ago period, primarily due to new aircraft inducted into service.

Regional capacity purchase increased $50 million, or 8.8%, in the first quarter of 2023 as compared to the year-ago period despite an 18.3% regional capacity reduction primarily due to rate increases under various capacity purchase agreements with regional carriers.

Distribution expenses increased $177 million, or 78.3%, in the first quarter of 2023 as compared to the year-ago period, primarily due to higher credit card fees, agency commissions and global distribution fees driven by the overall increase in passenger revenue.

Distribution expenses were also impacted by a higher proportion of business travel as compared to leisure travel, which can result in higher cost distribution channels and forms of payment.

Details of the Company's special charges (credits) include the following for the three months ended March 31 (in millions):

Landing fees and other rent increased $97 million, or 14.5%, in the second quarter of 2023 as compared to the year-ago period, primarily due to increased flying driving higher landed weight volume and a higher number of enplaned passengers.

Aircraft maintenance materials and outside repairs increased $159 million, or 30.2%, in the second quarter of 2023 as compared to the year-ago period, primarily due to increased flight activity and increased volumes of both engine overhauls and airframe heavy maintenance checks.

Depreciation expense increased $58 million, or 9.5%, in the second quarter of 2023 as compared to the year-ago period, primarily due to new aircraft inducted into service.

Regional capacity purchase increased $32 million, or 5.6%, in the second quarter of 2023 as compared to the year-ago period despite a 15% reduction in regional capacity, primarily due to rate increases under various capacity purchase agreements with regional carriers.

Distribution expenses increased $94 million, or 23.9%, in the second quarter of 2023 as compared to the year-ago period, primarily due to higher credit card fees, agency commissions and global distribution fees driven by the overall increase in passenger revenue.

Distribution expenses were also impacted by a higher proportion of business travel in the current year as compared to leisure travel, which can result in higher cost distribution channels and forms of payment.

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

Labor contract ratification bonuses $ 813 $ —

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

Special charges (credits) $ 14 $ (8)

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

Other operating expenses increased $363 million, or 25.0%, in the first quarter of 2023 as compared to the year ago period, primarily due to increases in ground handling, passenger services, food and beverage offerings, navigation fees and personnel-related costs as a direct result of the increase in flight activity and inflationary pressures and higher expenditures on information technology projects and services.

Special charges $ 859 $ 112

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

Other operating expenses increased $375 million, or 22.8%, in the second quarter of 2023 as compared to the year ago period, primarily due to increases in ground handling, passenger services, food and beverage offerings and consumption, navigation fees and personnel-related costs as a direct result of the increase in flight activity and inflationary pressures and higher expenditures on information technology projects and services.

Nonoperating Income (Expense ).

The table below shows year-over-year comparisons of the Company's nonoperating income (expense) for the three months ended March 31 (in millions, except for percentage changes):

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

2023 2022 Increase (Decrease) % Change

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Interest capitalized 42 22 20 90.9

Unrealized gains on investments, net 24 — 24 NM

Miscellaneous, net 41 19 22 115.8

Unrealized gains (losses) on investments, net 84 (40) 124 NM

Miscellaneous, net 21 (14) 35 NM

Total $ (130) $ (419) $ (289) (69.0)

Interest expense increased $62 million, or 14.6%, in the first quarter of 2023 as compared to the year-ago period, primarily due to higher interest rates on variable rate debt.

Interest income increased $165 million in the first quarter of 2023 as compared to the year-ago period, primarily due to higher short-term investments in U.S.

Interest expense increased $73 million, or 17.4%, in the second quarter of 2023 as compared to the year-ago period, primarily due to higher interest rates on variable rate debt.

Interest income increased $183 million in the second quarter of 2023 as compared to the year-ago period, primarily due to higher short-term investments in U.S.

government and agency notes as well as higher interest rates.

Unrealized gains on investments, net, was $24 million in the first quarter of 2023, primarily due to the change in the market value of the Company's investments in equity securities.

Unrealized gains on investments, net, was $84 million in the second quarter of 2023 as compared to $40 million in unrealized losses in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities.

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

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

First Six Months 2023 Compared to First Six Months 2022

The Company recorded net income of $0.9 billion in the first six months of 2023 as compared to a net loss of $1.0 billion in the first six months of 2022.

The Company's operating income was $1.5 billion for the first six months of 2023, as compared to an operating loss of $498 million for the first six months of 2022, an approximately $2.0 billion increase year-over-year, primarily as a result of increased demand for air travel.

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

2023 2022 Increase (Decrease) % Change

Operating revenue $ 25,607 $ 19,678 $ 5,929 30.1

Operating expense 24,133 20,176 3,957 19.6

Operating income (loss) 1,474 (498) 1,972 NM

Nonoperating expense, net (343) (795) (452) (56.9)

Income tax expense (benefit) 250 (245) 495 NM

Net income (loss) $ 881 $ (1,048) $ 1,929 NM

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

2023 2022 Increase (Decrease) % Change

Passengers (thousands) 78,767 67,256 11,511 17.1

RPMs (millions) 116,073 92,946 23,127 24.9

ASMs (millions) 139,258 115,869 23,389 20.2

Passenger load factor 83.4 % 80.2 % 3.2 pts.

PRASM (cents) 16.71 14.82 1.89 12.8

TRASM (cents) 18.39 16.98 1.41 8.3

Yield (cents) 20.05 18.48 1.57 8.5

CTM (millions) 1,499 1,543 (44) (2.9)

CASM (cents) 17.33 17.41 (0.08) (0.5)

CASM-ex (Non-GAAP) (cents) (a) 12.18 12.05 0.13 1.1

Average price per gallon of fuel, including fuel taxes $ 2.98 $ 3.58 $ (0.60) (16.8)

Fuel gallons consumed (millions) 2,014 1,687 327 19.4

Employee headcount, as of June 30

99,800 91,200 8,600 9.4

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

Operating Revenue.

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

2023 2022 Increase (Decrease) % Change

Passenger revenue $ 23,276 $ 17,177 $ 6,099 35.5

Cargo 760 1,201 (441) (36.7)

Other operating revenue 1,571 1,300 271 20.8

Total operating revenue $ 25,607 $ 19,678 $ 5,929 30.1

The table below presents selected passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes for the six months ended June 30, 2023 compared to the six months ended June 30, 2022:

Increase (decrease) from 2022:

Domestic Atlantic Pacific Latin Total

Passenger revenue (in millions) $ 2,530 $ 1,639 $ 1,422 $ 508 $ 6,099

Passenger revenue 21.7 % 54.9 % 217.1 % 27.1 % 35.5 %

Average fare per passenger 5.7 % 14.3 % 13.2 % 22.5 % 15.7 %

Yield 7.6 % 15.1 % (5.1) % 21.9 % 8.5 %

PRASM 7.7 % 19.4 % 51.8 % 31.9 % 12.8 %

Passengers 15.2 % 35.6 % 180.2 % 3.8 % 17.1 %

RPMs 13.1 % 34.7 % 234.2 % 4.3 % 24.9 %

ASMs 13.0 % 29.8 % 109.1 % (3.6) % 20.2 %

Passenger load factor (points) 0.1 2.9 30.5 6.6 3.2

Passenger revenue increased $6.1 billion, or 35.5%, in the first six months of 2023 as compared to the year-ago period, primarily due to an increase in capacity of 20.2% as well as strength in both yield and passenger load factor.

Cargo revenue decreased $441 million, or 36.7%, in the first six months of 2023 as compared to the year-ago period, primarily due to lower yields and tonnage as a result of increased market capacity and rate pressures.

Other operating revenue increased $271 million, or 20.8%, in the first six months of 2023 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending and new credit card member acquisitions with the co-branded credit card partner, JPMorgan Chase Bank, N.A., as well as United Club re-openings and related increases in the purchases of United Club memberships and one-time lounge passes as compared to the year-ago period.

Operating Expenses.

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

2023 2022 Increase (Decrease) % Change

Salaries and related costs $ 7,032 $ 5,623 $ 1,409 25.1

Aircraft fuel 5,994 6,041 (47) (0.8)

Landing fees and other rent 1,482 1,280 202 15.8

Aircraft maintenance materials and outside repairs 1,388 934 454 48.6

Depreciation and amortization 1,324 1,222 102 8.3

Regional capacity purchase 1,214 1,132 82 7.2

Distribution expenses 890 619 271 43.8

Aircraft rent 105 128 (23) (18.0)

Special charges 873 104 769 NM

Other operating expenses 3,831 3,093 738 23.9

Total operating expenses $ 24,133 $ 20,176 $ 3,957 19.6

Salaries and related costs increased $1.4 billion, or 25.1%, in the first six months of 2023 as compared to the year-ago period, primarily due to a 9.4% increase in headcount from increased flight activity, annual wage rate increases, accruals for pay rate increases related to a potential new collective bargaining agreement with employees represented by ALPA and an increase of $220 million in profit sharing.

Aircraft fuel expense decreased $47 million, or 0.8%, in the first six months of 2023 as compared to the year-ago period, primarily due to a lower average price per gallon of fuel, partially offset by increased consumption from higher flight activity.

The table below presents the significant changes in aircraft fuel cost per gallon in the six months ended June 30, 2023, as compared to the year-ago period (in millions, except percentage change and per gallon data):

2023 2022 Increase (Decrease) % Change

Fuel expense $ 5,994 $ 6,041 $ (47) (0.8) %

Fuel consumption (gallons) 2,014 1,687 327 19.4 %

Average price per gallon $ 2.98 $ 3.58 $ (0.60) (16.8) %

Landing fees and other rent increased $202 million, or 15.8%, in the first six months of 2023 as compared to the year-ago period, primarily due to increased flying driving higher landed weight volume and a higher number of enplaned passengers.

Aircraft maintenance materials and outside repairs increased $454 million, or 48.6%, in the first six months of 2023 as compared to the year-ago period, primarily due to increased flight activity and increased volumes of both engine overhauls and airframe heavy maintenance checks.

Depreciation expense increased $102 million, or 8.3%, in the first six months of 2023 as compared to the year-ago period, primarily due to new aircraft inducted into service.

Regional capacity purchase increased $82 million, or 7.2%, in the first six months of 2023 as compared to the year-ago period despite a 17% reduction in regional capacity, primarily due to rate increases under various capacity purchase agreements with regional carriers.

Distribution expenses increased $271 million, or 43.8%, in the first six months of 2023 as compared to the year-ago period, primarily due to higher credit card fees, higher travel agency commissions and higher volumes of global distribution fees as a result of the overall increase in passenger revenue.

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

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

Labor contract ratification bonuses $ 813 $ —

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

Special charges $ 873 $ 104

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

Other operating expenses increased $738 million, or 23.9%, in the first six months of 2023 as compared to the year-ago period, primarily due to increases in ground handling, passenger services, food and beverage offerings and consumption, navigation fees and personnel-related costs as a direct result of the increase in flight activity and inflationary pressures and higher expenditures on information technology projects and services.

Nonoperating Income (Expense).

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

2023 2022 Increase (Decrease) % Change

Interest expense $ (979) $ (844) $ 135 16.0

Interest income 386 38 348 NM

Interest capitalized 80 46 34 73.9

Unrealized gains (losses) on investments, net 108 (40) 148 NM

Miscellaneous, net 62 5 57 NM

Total $ (343) $ (795) $ (452) (56.9)

Interest expense increased $135 million, or 16.0%, in the first six months of 2023 as compared to the year-ago period, primarily due to higher interest rates on variable rate debt.

Interest income increased $348 million in the first six months of 2023 as compared to the year-ago period, primarily due to higher short-term investments in U.S.

government and agency notes.

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

Unrealized gains on investments, net, was $108 million in the first six months of 2023 as compared to $40 million in unrealized losses in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities.

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

Income Taxes.

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

LIQUIDITY AND CAPITAL RESOURCES

Current Liquidity

As of March 31, 2023, the Company had $17.2 billion in unrestricted cash, cash equivalents and short-term investments, as compared to $16.4 billion at December 31, 2022.

As of June 30, 2023, the Company had $19.1 billion in unrestricted cash, cash equivalents and short-term investments, as compared to $16.4 billion at December 31, 2022.

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

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

No borrowings were outstanding under the Revolving Credit Facility at March 31, 2023.

No borrowings were outstanding under the Revolving Credit Facility at June 30, 2023.

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

As of March 31, 2023, the Company had approximately $37.2 billion of debt, finance lease, operating lease and other financial liabilities, including $3.9 billion that will become due in the next 12 months.

As of June 30, 2023, the Company had approximately $37.3 billion of debt, finance lease, operating lease and other financial liabilities, including $4.4 billion that will become due in the next 12 months.

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

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

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

As of March 31, 2023, a substantial portion of the Company's assets, principally aircraft and certain related assets, its loyalty program, certain route authorities and airport slots and gates, was pledged under various loan and other agreements.

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

As of June 30, 2023, a substantial portion of the Company's assets, principally aircraft and certain related assets, its loyalty program, certain route authorities and airport slots and gates, was pledged under various loan and other agreements.

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

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See Note 7 to the financial statements included in Part I, Item I of this report for additional information on commitments.

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.

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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.

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.

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

Sources and Uses of Cash

The following table summarizes our cash flows for the three months ended March 31 (in millions):

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

2023 2022 Increase (Decrease)

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Financing activities (1,054) (1,654) (600)

Net increase in cash, cash equivalents and restricted cash $ 611 $ 190 $ 421

Net increase (decrease) in cash, cash equivalents and restricted cash $ 2,460 $ (1,401) $ 3,861

Operating Activities.

Cash flows provided by operations increased $1.7 billion in the first three months of 2023 as compared to the year-ago period, primarily due to higher profitability as improvements in the demand for air travel continued.

Cash flows provided by operations increased $2.8 billion in the first six months of 2023 as compared to the year-ago period, primarily due to an increase in operating income as improvements in the demand for air travel continued.

Investing Activities.

Cash flows used in investing activities increased $1.5 billion in the first three months of 2023 as compared to the year-ago period, primarily due to an increase in capital expenditures, which were approximately $1.8 billion and $0.4 billion for the three months ended March 31, 2023 and 2022, respectively.

Capital expenditures for the three months ended March 31, 2023 were primarily attributable to the purchase of aircraft, aircraft improvements and advance deposits for future aircraft purchases.

Cash flows used in investing activities decreased $487 million in the first six months of 2023 as compared to the year-ago period, primarily due to an increase in proceeds from the sale of short-term and other investments, partially offset by an increase in capital expenditures, which were approximately $3.3 billion and $1.0 billion for the six months ended June 30, 2023 and 2022, respectively.

Capital expenditures for the six months ended June 30, 2023 were primarily attributable to the purchase of aircraft, aircraft improvements and advance deposits for future aircraft purchases.

Financing Activities.

Significant financing events in the three months ended March 31, 2023 were as follows:

Significant financing events in the six months ended June 30, 2023 were as follows:

Debt, Finance Lease and Other Financing Liability Principal Payments .

During the three months ended March 31, 2023 and 2022, the Company made payments for debt, finance leases, and other financing liabilities of $0.8 billion.

During the six months ended June 30, 2023 and 2022, the Company made payments for debt, finance leases, and other financing liabilities of $2.6 billion and $1.8 billion, respectively.

The payments in the first six months of 2023 included a prepayment of $1.0 billion for a 2021 term loan facility.

Debt and Other Financing Liabilities Issuances.

During the three months ended March 31, 2023, United received and recorded, net of fees, $488 million from aircraft financings.

During the six months ended June 30, 2023, United received and recorded, net of fees, $2.2 billion from aircraft financings.

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

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These credit ratings are below investment grade levels;

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

however, the Company has been able to secure financing with investment grade credit ratings for certain enhanced equipment trust certificates (EETCs), term loans and secured bond

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

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

Management also believes that excluding profit sharing from CASM allows investors to better understand and analyze the Company's operating cost performance and provides a more meaningful comparison of our core operating costs to the airline industry (due to losses, profit sharing was zero for the periods presented below) .

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

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

Below is a reconciliation of the non-GAAP financial measure provided in this report (CASM-ex) to the most directly comparable GAAP financial measure (CASM) for the three months ended March 31 (in cents):

Below is a reconciliation of the non-GAAP financial measure provided in this report (CASM-ex) to the most directly comparable GAAP financial measure (CASM) (in cents):

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

2023 2022 2023 2022

CASM (GAAP) 17.22 17.94 17.33 17.41

Fuel expense 3.84 6.09 4.30 5.21

Special charges 1.17 0.17 0.63 0.09

Profit sharing 0.30 — 0.16 —

Third-party business expenses 0.06 0.06 0.06 0.06

Special charges (credits) 0.03 (0.01)

CASM-ex (Non-GAAP) 11.85 11.62 12.18 12.05

FORWARD-LOOKING INFORMATION

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

Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere, relating to, among other things, goals, plans and projections regarding the Company's financial position, results of operations, market position, capacity, fleet, product development, ESG targets and business strategy.

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

cause the Company's future financial results, goals, plans and objectives to differ materially from those expressed in, or implied by, the statements.

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

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

Risk Factors, of the

2022 Form 10-K, and under "Economic and Market Factors" in Part I, Item 2.

Risk Factors, of the 2022 Form 10-K, and under "Economic and Market Factors" in Part I, Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations, of this report, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC.

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

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

For instance, we regularly

monitor future demand and booking trends and adjust capacity, as needed.

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

2 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis