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Item 2. Management’s Discussion and Analysis

2024-04-17 compared with 2023-10-18 · 96 added, 230 removed, 189 unchanged (63% of the section changed)

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

Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the "2022 Form 10-K") and in Part II, Item 1A.

Risk Factors in this report.

The Company discusses certain financial measures that are not calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP");

refer to "Supplemental Information" below for further details.

Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "2023 Form 10-K").

The results presented in this report are not necessarily indicative of future operating results.

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

the execution risks associated with our United Next plan;

the execution risks associated with our United Next plan, especially relating to the growth in the scale of our operations as a result of the plan;

the impact on the Company of significant operational challenges by third parties on which we rely;

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aircraft delivery delays;

increasing maintenance expenses;

high interest rates;

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

We continue to monitor the potential favorable or unfavorable impacts of these and other factors on our business, operations, financial condition, future results of operations, liquidity and financial flexibility, which are dependent on future developments, including as a result of those factors discussed in Part I, Item 1A.

Risk Factors, of the 2022 Form 10-K and in Part II, Item 1A.

Risk Factors in this report.

Risk Factors, of the 2023 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.

Governmental Actions

We operate in complex, highly regulated environments in the U.S., the European Union, the UK and other regions around the world.

We operate in complex, highly regulated environments in the U.S., the European Union, the United Kingdom and other regions around the world.

Compliance with laws, regulations, administrative practices and other restrictions or legal requirements in the countries in which we do business is onerous and expensive.

In addition, changes to existing legal requirements, new legal requirements and any failure to comply with legal requirements could negatively impact our business, operations, financial condition, future results of operations, liquidity and financial flexibility by increasing the Company's costs, limiting the Company's ability to offer a product, service or feature to customers, impacting customer demand for the Company's products and services and requiring changes to the Company's supply chain and its business.

In addition, changes to existing legal requirements or the

implementation of new legal requirements and any failure to comply with such legal requirements could negatively impact our business, operations, financial condition, future results of operations, liquidity and financial flexibility by increasing the Company's costs, limiting the Company's ability to offer a product, service or feature to customers, impacting customer demand for the Company's products and services and requiring changes to the Company's supply chain and its business.

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

governmental regulations and restrictions relating to the COVID-19 global pandemic, the lasting effects of 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 to Tel Aviv as a result of the Israeli-Palestinian military conflict and an escalation of the broader economic consequences of the conflicts beyond their current scope;

increased oversight by the Federal Aviation Administration ("FAA") of the Company’s operations in connection with its evaluation of the Company;

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

delays in aircraft certification (especially relating to the 737 MAX 10 aircraft);

increased FAA oversight of the aircraft production process;

and any legal requirement that would result in a reshaping of the benefits that we provide to our consumers through the co-branded credit cards issued by our partner.

Changes in existing applicable legal requirements or new applicable legal requirements and the related interpretations and enforcement practices of them create uncertainty about how such laws and regulations will be interpreted and applied.

Changes in existing applicable legal requirements or new applicable legal requirements as well as the related interpretations and enforcement practices regarding them, create uncertainty about how such laws and regulations will be understood and applied.

As a result, the impact of changing and new legal requirements generally cannot be reasonably predicted and those requirements may ultimately require extensive system and operational changes, be difficult to implement, increase our operating costs and require significant capital expenditures.

RESULTS OF OPERATIONS

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

Third Quarter 2023 Compared to Third Quarter 2022

The Company recorded net income of $1.1 billion for the third quarter of 2023 as compared to $942 million for the third quarter of 2022.

The Company considers a key measure of its performance to be operating income, which was $1.7 billion for the third quarter of 2023, as compared to $1.5 billion for the third quarter of 2022, an approximately $281 million increase year-over-year, primarily as a result of increased demand for air travel and lower fuel costs.

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

The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three months ended March 31, 2024, as compared to the corresponding period in 2023.

First Quarter 2024 Compared to First Quarter 2023

The Company recorded a net loss of $124 million for the first quarter of 2024 as compared to a net loss of $194 million for the first quarter of 2023.

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

2024 2023 Increase (Decrease) % Change

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Operating expense 12,440 11,472 968 8.4

Operating income 1,739 1,458 281 19.3

Operating income (loss) 99 (43) 142 NM

Nonoperating expense, net (263) (213) 50 23.5

Income tax expense 348 211 137 64.9

Net income $ 1,137 $ 942 $ 195 20.7

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

Loss before income taxes (164) (256) (92) (35.9)

Income tax benefit (40) (62) (22) (35.5)

Net loss $ (124) $ (194) $ (70) (36.1)

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

2024 2023 Increase (Decrease) % Change

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Cost per ASM ("CASM") (cents) 17.36 17.46 (0.10) (0.6)

CASM-ex (Non-GAAP) (cents) (g) 11.51 11.22 0.29 2.6

Average price per gallon of fuel, including fuel taxes $ 2.88 $ 3.33 $ (0.45) (13.5)

Fuel gallons consumed (millions) 1,025 952 73 7.7

Employee headcount, as of September 30

Employee headcount, as of March 31

104,500 96,300 8,200 8.5

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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.

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 September 30 (in millions, except for percentage changes):

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

2024 2023 Increase (Decrease) % Change

Passenger revenue $ 13,349 $ 11,653 $ 1,696 14.6

Passenger $ 11,313 $ 10,274 $ 1,039 10.1

Cargo 391 398 (7) (1.8)

Other operating revenue 802 726 76 10.5

Other 835 757 78 10.3

Total operating revenue $ 12,539 $ 11,429 $ 1,110 9.7

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

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

Increase (decrease) from 2023:

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Passenger load factor (points) 2.8 1.1 (7.6) (2.7) 0.2

Passenger revenue increased $1.7 billion, or 14.6%, in the third quarter of 2023 as compared to the year-ago period, primarily due to a 15.7% increase in capacity, partially offset by a slight decrease in passenger load factor.

Cargo revenue decreased $165 million, or 33.1%, in the third 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 $76 million, or 10.5%, in the third 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, visitor volume and purchases of one-time lounge passes.

Passenger revenue increased $1.0 billion, or 10.1%, in the first quarter of 2024 as compared to the year-ago period, primarily due to a 9.1% increase in capacity and a 0.7% increase in Yield.

Other operating revenue increased $78 million, or 10.3%, in the first quarter of 2024 as compared to the year-ago period, primarily due to an increase in mileage revenue from non-airline partners, including credit card spending with our co-branded credit card partner, JPMorgan Chase Bank, N.A., as well as increases in the purchases of United Club memberships, visitor volume and purchases of one-time United Club passes.

Operating Expenses.

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

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):

2024 2023 Increase (Decrease) % Change (a)

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Special charges 13 14 (1) NM

Other operating expenses 2,158 1,790 368 20.6

Other 2,148 1,814 334 18.4

Total operating expenses $ 12,440 $ 11,472 $ 968 8.4

(a) NM - Greater than 100% change or otherwise not meaningful.

Salaries and related costs increased $1.1 billion, or 37.7%, in the third quarter of 2023 as compared to the year-ago period, primarily due to approximately 12% increase in headcount from increased flight activity, accruals for pay rate increases related to a new collective bargaining agreement with employees represented by the Air Line Pilots Association ("ALPA"), annual wage rate increases across employee groups and an increase of $293 million in profit sharing expense due to both an increase in pre-tax income and a change in the profit sharing formula as a result of the new pilot agreement.

Aircraft fuel expense decreased by $413 million, or 11.0%, in the third 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 September 30, 2023 as compared to the year-ago period (in millions, except percentage change and per gallon data):

Salaries and related costs increased $610 million, or 18.4%, in the first quarter of 2024 as compared to the year-ago period, primarily due to annual wage rate increases across certain employee groups and an 8.5% increase in headcount largely due to increased flight activity.

Aircraft fuel expense decreased by $220 million, or 6.9%, in the first quarter of 2024 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 March 31, 2024 as compared to the year-ago period (in millions, except percentage change and per gallon data):

2024 2023 Increase (Decrease) % Change

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Average price per gallon $ 2.88 $ 3.33 $ (0.45) (13.5) %

Landing fees and other rent increased $162 million, or 25.4%, in the third 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 $65 million, or 10.5%, in the third quarter of 2023 as compared to the year-ago period, primarily due to increased flight activity driving higher maintenance materials usage and increased volumes of both engine overhauls and airframe heavy maintenance checks.

Depreciation expense increased $53 million, or 8.7%, in the third quarter of 2023 as compared to the year-ago period, primarily due to new aircraft inducted into service.

Distribution expenses increased $34 million, or 7.1%, in the third 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.

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

Labor contract ratification bonuses $ 1 $ —

(Gains) losses on sale of assets and other special charges 28 20

Special charges $ 29 $ 20

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 $368 million, or 20.6%, in the third 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.

Landing fees and other rent increased $87 million, or 12.1%, in the first quarter of 2024 as compared to the year-ago period, primarily due to rate increases at various airports, terminal expansions and other increases in the number of airport gates and higher landed weight volume due to increased flight activity.

Aircraft maintenance materials and outside repairs increased $71 million, or 10.1%, in the first quarter of 2024 as compared to the year-ago period, primarily due to an increased volume of engine overhauls.

Depreciation expense increased $53 million, or 8.1%, in the first quarter of 2024 as compared to the year-ago period, primarily due to induction of new aircraft and related spare parts and higher obsolescence due to higher inventory levels for expendable parts.

Distribution expenses increased $77 million, or 19.1%, in the first quarter of 2024 as compared to the year-ago period, primarily due to higher credit card fees driven by an increase in passenger revenue and $56 million of commissions that were recorded as contra-revenue in 2023.

Other operating expenses increased $334 million, or 18.4%, in the first quarter of 2024 as compared to the year ago period, primarily as a direct result of the increase in flight activity and the impacts of inflationary pressures.

Other operating expenses include expenditures related to information technology projects and services, food and beverage offerings, passenger services, personnel-related costs and ground handling.

Nonoperating Income (Expense ).

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

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):

2024 2023 Increase (Decrease) % Change

Interest expense $ (454) $ (486) $ (32) (6.6)

Interest income 234 104 130 NM

Interest income 177 170 7 4.1

Interest capitalized 61 38 23 60.5

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Total $ (263) $ (213) $ 50 23.5

Interest expense increased $38 million, or 8.4%, in the third quarter of 2023 as compared to the year-ago period, primarily due to higher interest rates on variable rate debt and new debt issuances in the current period, partially offset by reduced interest expense on the prepayment of $1.0 billion of debt in the second quarter of 2023.

Interest income increased $130 million in the third quarter of 2023 as compared to the year-ago period, primarily due to higher short-term investments in U.S.

government and agency notes.

Unrealized losses on investments, net, was $54 million in the third quarter of 2023 as compared to $28 million in unrealized gains in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities.

Interest expense decreased $32 million, or 6.6%, in the first quarter of 2024 as compared to the year-ago period, primarily due to declining debt balances and lower interest rates on refinanced debt.

Unrealized losses on investments, net, was $37 million in the first quarter of 2024 as compared to $24 million in unrealized gains in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities.

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

Miscellaneous, net changed by $51 million in the first quarter of 2024 as compared to the year-ago period, primarily due to debt extinguishment and modification fees related to the refinancing of the Company's 2021 term loans, higher foreign exchange losses and a decrease in the benefit from the Company's net periodic benefit cost of its pensions and postretirement benefit plans.

I ncome Taxes.

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

First Nine Months 2023 Compared to First Nine Months 2022

The Company recorded net income of $2.0 billion in the first nine months of 2023 as compared to a net loss of $106 million in the first nine months of 2022.

The Company's operating income was $3.2 billion for the first nine months of 2023, as compared to $960 million for the first nine months of 2022, an approximately $2.3 billion increase year-over-year, primarily as a result of increased demand for air travel and lower fuel costs.

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

2023 2022 Increase (Decrease) % Change

Operating revenue $ 40,091 $ 32,555 $ 7,536 23.1

Operating expense 36,878 31,595 5,283 16.7

Operating income 3,213 960 2,253 NM

Nonoperating expense, net (597) (1,100) (503) (45.7)

Income tax expense (benefit) 598 (34) 632 NM

Net income (loss) $ 2,018 $ (106) $ 2,124 NM

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

2023 2022 Increase (Decrease) % Change

Passengers (thousands) 123,148 106,058 17,090 16.1

RPMs (millions) 183,764 152,033 31,731 20.9

ASMs (millions) 217,606 183,564 34,042 18.5

Passenger load factor 84.4 % 82.8 % 1.6 pts.

PRASM (cents) 16.83 15.71 1.12 7.1

TRASM (cents) 18.42 17.73 0.69 3.9

Yield (cents) 19.93 18.96 0.97 5.1

CTM (millions) 2,265 2,276 (11) (0.5)

CASM (cents) 16.95 17.21 (0.26) (1.5)

CASM-ex (Non-GAAP) (cents) (a) 11.94 11.74 0.20 1.7

Average price per gallon of fuel, including fuel taxes $ 2.97 $ 3.67 $ (0.70) (19.1)

Fuel gallons consumed (millions) 3,146 2,672 474 17.7

Employee headcount, as of September 30

102,000 90,800 11,200 12.3

(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 nine months ended September 30 (in millions, except for percentage changes):

2023 2022 Increase (Decrease) % Change

Passenger revenue $ 36,625 $ 28,830 $ 7,795 27.0

Cargo 1,093 1,699 (606) (35.7)

Other operating revenue 2,373 2,026 347 17.1

Total operating revenue $ 40,091 $ 32,555 $ 7,536 23.1

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

Increase (decrease) from 2022:

Domestic Atlantic Pacific Latin Total

Passenger revenue (in millions) $ 3,143 $ 2,085 $ 2,021 $ 546 $ 7,795

Passenger revenue 16.8 % 35.5 % NM 18.6 % 27.0 %

Average fare per passenger 1.7 % 10.5 % 10.1 % 12.8 % 9.4 %

Yield 4.1 % 10.7 % (1.9) % 11.8 % 5.1 %

PRASM 4.0 % 11.4 % 27.7 % 18.1 % 7.1 %

Passengers 14.9 % 22.6 % NM 5.2 % 16.1 %

RPMs 12.2 % 22.3 % NM 6.1 % 20.9 %

ASMs 12.3 % 21.6 % NM 0.5 % 18.5 %

Passenger load factor (points) (0.1) 0.5 18.9 4.6 1.6

Passenger revenue increased $7.8 billion, or 27.0%, in the first nine months of 2023 as compared to the year-ago period, primarily due to an 18.5% increase in capacity as well as strength in both yield and passenger load factor.

Cargo revenue decreased $606 million, or 35.7%, in the first nine months 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 $347 million, or 17.1%, in the first nine 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 nine months ended September 30 (in millions, except for percentage changes):

2023 2022 Increase (Decrease) % Change

Salaries and related costs $ 10,946 $ 8,466 $ 2,480 29.3

Aircraft fuel 9,336 9,796 (460) (4.7)

Landing fees and other rent 2,283 1,919 364 19.0

Aircraft maintenance materials and outside repairs 2,072 1,553 519 33.4

Depreciation and amortization 1,987 1,832 155 8.5

Regional capacity purchase 1,806 1,728 78 4.5

Distribution expenses 1,406 1,101 305 27.7

Aircraft rent 151 193 (42) (21.8)

Special charges 902 124 778 NM

Other operating expenses 5,989 4,883 1,106 22.7

Total operating expenses $ 36,878 $ 31,595 $ 5,283 16.7

Salaries and related costs increased $2.5 billion, or 29.3%, in the first nine months of 2023 as compared to the year-ago period, primarily due to approximately 12% increase in headcount from increased flight activity, accruals for pay rate increases related to a new collective bargaining agreement with employees represented by ALPA, annual wage rate increases across employee groups and an increase of $513 million in profit sharing expense due to both an increase in pre-tax income and a change in the profit sharing formula as a result of the new pilot agreement .

Aircraft fuel expense decreased $460 million, or 4.7%, in the first nine 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 nine months ended September 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 $ 9,336 $ 9,796 $ (460) (4.7) %

Fuel consumption (gallons) 3,146 2,672 474 17.7 %

Average price per gallon $ 2.97 $ 3.67 $ (0.70) (19.1) %

Landing fees and other rent increased $364 million, or 19.0%, in the first nine 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 $519 million, or 33.4%, in the first nine 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 $155 million, or 8.5%, in the first nine months of 2023 as compared to the year-ago period, primarily due to new aircraft inducted into service.

Regional capacity purchase increased $78 million, or 4.5%, in the first nine months of 2023 as compared to the year-ago period despite an approximately 16% reduction in regional capacity, primarily due to rate increases under various capacity purchase agreements with regional carriers.

Distribution expenses increased $305 million, or 27.7%, in the first nine months of 2023 as compared to the year-ago period, primarily due to higher credit card fees, travel agency commissions and global distribution fees driven by the overall increase in passenger revenue.

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

Labor contract ratification bonuses $ 814 $ —

(Gains) losses on sale of assets and other special charges 88 124

Special charges $ 902 $ 124

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 $1.1 billion, or 22.7%, in the first nine 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 nine months ended September 30 (in millions, except for percentage changes):

2023 2022 Increase (Decrease) % Change

Interest expense $ (1,472) $ (1,299) $ 173 13.3

Interest income 620 142 478 NM

Interest capitalized 128 73 55 75.3

Unrealized gains (losses) on investments, net 54 (12) (66) NM

Miscellaneous, net 73 (4) (77) NM

Total $ (597) $ (1,100) $ (503) (45.7)

Interest expense increased $173 million, or 13.3%, in the first nine months of 2023 as compared to the year-ago period, primarily due to higher interest rates on variable rate debt and new debt issuances in the current period, partially offset by reduced interest expense on the prepayment of $1.0 billion of debt in the second quarter of 2023.

Interest income increased $478 million in the first nine 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 $54 million in the first nine months of 2023 as compared to $12 million in unrealized losses in the year-ago period, primarily due to the change in the market value of the Company's investments in equity securities.

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

Miscellaneous, net changed by $77 million in the first nine months of 2023 as compared to the year-ago period, primarily due to lower foreign exchange losses and higher benefit from the pensions and postretirement benefit plans.

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 September 30, 2023, the Company had $17.1 billion in unrestricted cash, cash equivalents and short-term investments, as compared to $16.4 billion at December 31, 2022.

As of March 31, 2024, the Company had $14.0 billion in unrestricted cash, cash equivalents and short-term investments, as compared to $14.4 billion at December 31, 2023.

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

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

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

The Company has a $1.75 billion revolving credit facility (the "Revolving Credit Facility") expiring April 21, 2025 (subject to customary extension rights).

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

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

As of March 31, 2024, the Company has a $2.87 billion revolving credit facility (the "Revolving Credit Facility"), of which $2.7 billion expires February 15, 2029 and $165 million expires April 21, 2025.

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 September 30, 2023.

No borrowings were outstanding under the Revolving Credit Facility as of March 31, 2024.

On April 16, 2024, the Company increased the revolving loan commitments of the Extending Lenders (as defined in the Revolving Credit Facility) by $100 million.

The revolving loan commitments of the Extending Lenders now equal $2.8 billion and the revolving loan commitments of the 2024 Non-Extending Lenders (as defined in the Revolving Credit Facility) remain $165 million.

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

As of September 30, 2023, the Company had approximately $36.7 billion of debt, finance lease, operating lease and other financial liabilities, including $4.6 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.

As of March 31, 2024, the Company had approximately $34.8 billion of debt, finance lease, operating lease and other financial liabilities, including $4.7 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 September 30, 2023, UAL and United were in compliance with their respective debt covenants.

As of September 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.

As of March 31, 2024, UAL and United were in compliance with their respective debt covenants.

As of March 31, 2024, 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.

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

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

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

See Note 7 to the financial statements included in Part I, Item 1 of this report for additional information on commitments.

As of March 31, 2024, United had firm commitments to purchase aircraft from The Boeing Company ("Boeing") and Airbus S.A.S.

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

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Aircraft Type Number of Firm

Commitments (a) Last Three Months

of 2023 2024 After 2024 Last Three Months

Commitments (a) Last Nine Months

of 2024 2025 After 2025 Last Nine Months

of 2024 2025 After 2025

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737 MAX 8 36 36 — — 19 17 —

737 MAX 9 144 34 40 70 10 44 90

737 MAX 10 167 — — 167 — — 167

A321neo 123 23 38 62 22 24 77

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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.

(b) Expected aircraft deliveries reflect adjustments to contractual delivery schedules as communicated by Boeing and Airbus or estimated by United.

However, aircraft deliveries are subject to a number of variables, as further described in Part I, Item 1A.

Risk Factors of the 2023 Form 10-K, and we cannot guarantee delivery of any particular aircraft at any specific time notwithstanding firm purchase commitments.

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.

On September 28, 2023, United entered into a supplemental agreement with Boeing, pursuant to which United exercised options to purchase 50 Boeing 787-9 aircraft scheduled for delivery between 2028 and 2031 and was granted options to purchase up to an additional 50 Boeing 787 aircraft.

In addition, on September 29, 2023, United entered into an amendment to the A320 Family Purchase Agreement, dated December 19, 2019, as amended, with Airbus, pursuant to which United exercised purchase rights to purchase 60 A321neo aircraft scheduled for delivery between 2028 and 2030 and was granted purchase rights to purchase up to an additional 40 A321neo aircraft.

The table above reflects the number of firm commitments related to these agreements as well as the contractual and expected aircraft deliveries.

The table below summarizes United's firm commitments as of September 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.

On April 14, 2024, the Company entered into confidential arrangements with Boeing with respect to compensation for financial damages incurred in first quarter of 2024 due to the FAA grounding of the Boeing 737 MAX 9 aircraft, and a confidential agreement to accommodate certification delays for the Boeing 737 MAX 10 aircraft.

The compensation provided by Boeing for the grounding damages and in connection with rescheduling deliveries is in the form of credit memos for use on future purchases from Boeing.

The Company plans to account for these arrangements as a reduction to the cost basis of the previously-delivered Boeing 737 MAX 9 aircraft and future deliveries of the MAX 9 and MAX 10 aircraft, which is expected to reduce future depreciation expense associated with these aircraft.

The table below summarizes United's firm commitments as of March 31, 2024, 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 but reflecting the discounts related to future deliveries offered as part of the April 14, 2024 arrangements between United and Boeing.

(in billions)

Last three months of 2023 $ 4.6

Last nine months of 2024 $ 7.1

After 2028 27.1

In April 2024, the Company signed letters of intent to enter into future leasing arrangements with major aircraft leasing companies for 35 Airbus A321neo aircraft with expected deliveries in 2026 and 2027.

Sources and Uses of Cash

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

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

2024 2023 Increase (Decrease)

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Financing activities (1,938) (563) 1,375

Net increase (decrease) in cash, cash equivalents and restricted cash $ 689 $ (7,006) $ 7,695

Net increase in cash, cash equivalents and restricted cash $ 2,350 $ 611 $ 1,739

Operating Activities.

Cash flows provided by operations increased $2.9 billion in the first nine 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.

Cash flows provided by operations decreased $0.3 billion in the first three months of 2024 as compared to the year-ago period, primarily due to changes in various working capital items, including a $0.7 billion increase in employee incentive payments in the first three months of 2024 as compared to the year-ago period, which was partially offset by a $0.3 billion increase in advance ticket sales associated with overall traffic growth in the first three months of 2024 as compared to the year-ago period.

Investing Activities.

Cash flows used in investing activities decreased $4.1 billion in the first nine months of 2023 as compared to the year-ago period, primarily due to a $7.6 billion increase in proceeds from the sale of short-term and other investments, partially offset by a $2.8 billion increase in capital expenditures.

Capital expenditures were primarily attributable to the purchase of aircraft, aircraft improvements and advance deposits for future aircraft purchases.

Cash flows used in investing activities decreased $3.4 billion in the first three months of 2024 as compared to the year-ago period, primarily due to a $3.3 billion decrease in the purchase of short-term and other investments and a $0.5 billion decrease in capital expenditures, which was partially offset by a $0.4 billion decrease in sales of short-term and other investments.

Financing Activities.

Significant financing events in the nine months ended September 30, 2023 were as follows:

Significant financing events in the three months ended March 31, 2024 were as follows:

Debt, Finance Lease and Other Financing Liability Principal Payments .

During the nine months ended September 30, 2023 and 2022, the Company made payments for debt, finance leases, and other financing liabilities of $3.4 billion and $2.6 billion, respectively.

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

During the three months ended March 31, 2024, the Company made payments for debt, finance leases, and other financing liabilities of $5.0 billion, including the $3.9 billion prepayment of its 2021 term loan.

Debt and Other Financing Liabilities Issuances.

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, 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.

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

The Company borrowed the entire term loan commitment available under the new term loan facility in an amount equal to $2.5 billion.

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

Credit Ratings.

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S&P Moody's Fitch

UAL BB- Ba2 B+

United BB- * B+

UAL BB- Ba2 BB-

United BB- * BB-

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

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See "Critical Accounting Policies" in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2023 Form 10-K.

Supplemental Information

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

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

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

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

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.

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) (in cents):

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

CASM (GAAP) 16.27 16.87 16.95 17.21

Fuel expense 4.26 5.55 4.29 5.34

Special charges 0.04 0.03 0.42 0.07

Profit sharing 0.39 0.01 0.24 —

Third-party business expenses 0.07 0.06 0.06 0.06

CASM-ex (Non-GAAP) 11.51 11.22 11.94 11.74

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 I, Item 2.

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-related strategy initiatives 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.

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 plan strategy, product development, ESG-related strategy initiatives 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, commitments, strategies and objectives and involve inherent risks, assumptions and uncertainties, known or unknown, including internal or external factors that could delay, divert or change any of them, that are difficult to predict, may be beyond the Company's control and could cause the Company's future financial results, goals, plans, commitments, strategies and objectives to differ materially from those expressed in, or implied by, the statements.

Words such as "should," "could," "would," "will," "may," "expects," "plans," "intends," "anticipates," "indicates," "remains," "believes," "estimates," "projects," "forecast," "guidance," "outlook," "goals," "targets," "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.

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

Additionally, forward-looking statements include conditional statements and statements that identify uncertainties or trends, discuss the possible future effects of known trends or uncertainties, or that indicate that the future effects of known trends or

uncertainties cannot be predicted, guaranteed or assured.

All forward-looking statements in this report are based upon information available to us on the date of this report.

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execution risks associated with our strategic operating plan;

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

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

any failure to effectively manage, and receive anticipated benefits and returns from, acquisitions, divestitures, investments, joint ventures and other portfolio actions, as well as related costs or other issues, or related exposures to unknown liabilities or other issues or underperformance as compared to our expectations;

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

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

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

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

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

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

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

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

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

geopolitical conflict, terrorist attacks or security events (including the continuation of the suspension of our overflying in Russian airspace as a result of the Russia-Ukraine military conflict and to Tel Aviv as a result of the Israeli-Palestinian military conflict and an escalation of the broader economic consequences of the conflicts beyond their current scope);

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

geopolitical conflict, terrorist attacks or security events (including the suspension of our overflying in Russian airspace as a result of the Russia-Ukraine military conflict and and to Tel Aviv as a result of the Israeli-Hamas military conflict, as well as any escalation of the broader economic consequences of these conflicts beyond their current scope);

any damage to our reputation or brand image;

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

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

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

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

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

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

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

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

costs, liabilities and risks associated with environmental regulation and climate change, and any failure to achieve or demonstrate progress towards our climate goals;

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

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

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

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

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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 Part II, Item 1A.

Risk Factors of this report, and under "Economic and Market Factors" and "Governmental Actions" in Part I, Item 2.

Risk Factors, of the 2023 Form 10-K, and under "Economic and Market Factors" and "Governmental Actions" 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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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