****UNITED STATES SECURITIESAND EXCHANGE COMMISSION****Washington, D.C. 20549**
**FORM 10-Q**
(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE            SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
[  ]  TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d) OF THE            SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 33-21220*
**UNITED AIR LINES, INC.**(Exact name of registrant as specified in its charter)  **Delaware****36-2675206**(Stateor other jurisdiction of(I.R.S.Employerincorporationor organization)IdentificationNo.)  **Location:1200 East Algonquin Road, Elk Grove Township, Illinois                 60007****MailingAddress:  P. O. Box 66100, Chicago, Illinois                                         60666**(Addressof principal executive offices)                                                              (Zip Code)  **Registrant'stelephone number, including area code  (847) 700-4000**
   Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes   X       No
   Indicate the number of shares outstanding of each of the issuer's classesof common stock, as of the latest practicable date.  OutstandingatClassApril30, 2003CommonStock ($5 par value)205
*  Registrantis the wholly owned subsidiary of UAL Corporation (File 1-6033). Registrant became subject to filing periodic reports under the SecuritiesExchange Act of 1934 as a result of a public offering of securities whichbecame effective June 3, 1988 (Registration Nos. 33-21220 and 22-18246).  
United Air Lines, Inc.and Subsidiary Companies Report on Form 10-QFor the Quarter EndedMarch 31, 2003 Index PARTI.FINANCIALINFORMATIONPage No.  Item1. Financial Statements  CondensedStatements of Consolidated Financial Position (Unaudited)- as of March 31, 2003 and December31, 2002 
3  Statementsof Consolidated Operations (Unaudited) - for the threemonths endedMarch 31, 2003 and 2002 
5  CondensedStatements of ConsolidatedCash Flows (Unaudited) -for the three months ended March 31, 2003and 2002 
6  Notesto Consolidated FinancialStatements (Unaudited)7 Item2. Management's Discussion and Analysis of Financial Condition and Resultsof Operations14  Item3. Quantitative and Qualitative Disclosures AboutMarket Risk22    Item4. Controls and Procedures23PARTII.OTHERINFORMATION  Item6. Exhibits and Reports on Form 8-K24 Signatures25 ExhibitIndex26    
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
United Air Lines, Inc. and Subsidiary Companies(Debtor and Debtor-in-Possession)Condensed Statements of Consolidated Financial Position (Unaudited)(In Millions)     March 31December 31Assets20032002   Current assets:  Cash and cash equivalents$ 440 $ 718 Restricted cash492 450 Short-term investments192 311 Receivables, net825 704 Related party receivables99 - Income tax receivables373 373 Inventories, net294 310 Prepaid expenses and other224217 2,9393,083   Operating property and equipment:  Owned19,560 19,540 Accumulated depreciation and amortization(5,448)(5,282) 14,11214,258   Capital leases2,529 2,573 Accumulated amortization(497)(494) 2,0322,079 16,14416,337   Other assets:  Long-term restricted cash140 116 Investments40 80 Intangibles, net383 384 Pension assets1,162 1,162 Aircraft lease deposits803 776 Prepaid rent129 338 Other, net906853 3,5633,709    $22,646$23,129   
See accompanying Notes to Consolidated Financial Statements.  
United Air Lines, Inc. and Subsidiary Companies(Debtor and Debtor-in-Possession)Condensed Statements of Consolidated Financial Position (Unaudited)(In Millions)     March 31December 31Liabilities and Stockholder's Equity20032002   Current liabilities:  Current portions of long-term debt and  capital lease obligations$ 60 $ - Advance ticket sales1,176 1,021 Accrued salaries, wages and benefits1,400 1,490 Accounts payable416 280 Related party accounts payable43 - Other924883 4,0193,674   Long-term debt732700   Other liabilities and deferred credits:  Deferred pension liability4,824 4,661 Postretirement benefit liability1,905 1,809 Deferred income taxes233 225 Other538539 7,5007,234   Liabilities subject to compromise14,147 13,975    Commitments and contingent liabilities (Seenote)     Preferred stock committed to Supplemental ESOP-2   Stockholder's equity:  Common stock at par- - Additional capital invested1,589 1,592 ESOP capital3,987 3,986 Retained deficit(5,141)(3,756)Accumulated other comprehensive income(2,657)(2,661)Receivables from affiliates(1,529)(1,615)Other(1)(2) (3,752)(2,456)    $22,646$ 23,129   
See accompanying Notes to Consolidated Financial Statements. 
United Air Lines, Inc. and Subsidiary Companies(Debtor and Debtor-in-Possession)Statements of Consolidated Operations (Unaudited)(In Millions)  Three Months Ended March 31 20032002Operating revenues:  Passenger$ 2,548 $ 2,758 Cargo164 141 Other 395297 3,1073,196Operating expenses:  Salaries and related costs1,524 1,572 Aircraft fuel571 398 Commissions73 133 Purchased services335 350 Aircraft rent202 212 Landing fees and other rent239 248 Depreciation and amortization232 236 Cost of sales362 270 Aircraft maintenance118 145 Other 319338 3,9753,902   Loss from operations(868)(706)   Other income (expense):  Interest expense(135)(146)Interest capitalized1 11 Interest income16 34 Equity in earnings of affiliates- 1 Non-operating special charges(137)- Reorganization items, net(249)- Gain on sale of investment- 46 Miscellaneous, net(13)(16) (517)(70)   Loss before income taxes(1,385)(776)Credit for income taxes-(280)   Net loss$(1,385)$ (496)   
See accompanying Notes to Consolidated Financial Statements.  
United Air Lines, Inc. and Subsidiary Companies(Debtor and Debtor-in-Possession)Condensed Statements of Consolidated Cash Flows (Unaudited)(In Millions)  Three Months Ended March 31 20032002Cash and cash equivalents at beginning   of period$ 718$ 1,504   Cash flows from operating activities(223)(96)   Cash flows from reorganizationactivities:  Net loss from reorganization items(249)- Write off of Company lease certificates215 - Increase in liabilities24- (10)-   Cash flows from investing activities:  Additions to property and equipment(36)(27)Proceeds on disposition of propertyand  equipment6 40 Proceeds on sale of investments- 137 Increase in restricted cash(66)(201)Decrease in short-term investments119 308 Increase in related party receivables(1)(2)Other, net(32)27 (10)282   Cash flows from financing activities:  Proceeds from issuance of long-termdebt92 540 Repayment of long-term debt(65)(598)Principal payments under capital  lease obligations(53)(56)Decrease in debt certificatesunder company leases- 525 Decrease in advances/loans withaffiliates(10)(251)Other, net11 (35)161   Increase (decrease) in cash andcash equivalents(278)347   Cash and cash equivalents at endof period,  excluding restricted cash$ 440$ 1,851   Cash paid during the period for:  Interest (net of amounts capitalized)$ 103 $ 114    Non-cash transactions:  Long-term debt incurred in connection  with additions to equipment andother assets$ - $ 487 Net unrealized gain (loss) oninvestments$ (2)$ 2 
See accompanying Notes to Consolidated Financial Statements.   
United Air Lines, Inc. and Subsidiary CompaniesNotes to Consolidated Financial Statements (Unaudited)
The Company
         United Air Lines, Inc.("United" or the "Company") is a wholly owned subsidiary of UAL Corporation("UAL").
Interim Financial Statements
         The consolidated financialstatements included herein have been prepared pursuant to the rules andregulations of the Securities and Exchange Commission. Certain informationand footnote disclosures normally included in financial statements preparedin accordance with generally accepted accounting principles have been condensedor omitted pursuant to or as permitted by such rules and regulations, althoughUnited believes that the disclosures are adequate to make the informationpresented not misleading. In management's opinion, all adjustments (whichinclude only normal recurring adjustments, reorganization items and otherspecial charges described below) necessary for a fair presentation of theresults of operations for the three-month periods have been made. Thesefinancial statements should be read in conjunction with the consolidatedfinancial statements and footnotes thereto included in United's AnnualReport on Form 10-K for the year 2002.
Voluntary Reorganization Under Chapter 11
       *Bankruptcy Proceedings.*On December 9, 2002 (the "PetitionDate"), UAL, United and 26 direct and indirect wholly owned subsidiaries(collectively, the "Debtors") filed voluntary petitions for relief underChapter 11 of the United States Bankruptcy Code in the United States BankruptcyCourt for the Northern District of Illinois, Eastern Division (the "BankruptcyCourt"). The reorganization cases are being jointly administered underthe caption "In re: UAL Corporation, et al., Case No. 02-48191" (the "Chapter11 Cases"). Included in the Consolidated Financial Statements aresubsidiaries that are not party to the Chapter 11 Cases and are not Debtors.The assets and liabilities of such non-filing subsidiaries are not consideredmaterial to the Consolidated Financial Statements.
       The Debtors continue to operate their businesses as "debtors-in-possession"under the jurisdiction of the Bankruptcy Court and in accordance with theapplicable provisions of the Bankruptcy Code, the Federal Rules of BankruptcyProcedure and applicable court orders. All vendors are being paid for allgoods furnished and services provided after the Petition Date. However,under Section 362 of the Bankruptcy Code, the filing of the bankruptcypetition automatically stays most actions against a debtor, including mostactions to collect pre-petition indebtedness or to exercise control overthe property of the debtor's estate. Absent an order of the BankruptcyCourt, substantially all pre-petition liabilities are subject to settlementunder a plan of reorganization to be approved by the Bankruptcy Court.
        Notwithstanding the precedinggeneral discussion of the automatic stay, the Debtors' rights to possessand operate certain qualifying aircraft, aircraft engines and other aircraft-relatedequipment that are leased or subject to a security interest or conditionalsale contract are governed by a particular provision of the BankruptcyCode that specifies different treatment. Under Section 1110 of the BankruptcyCode ("Section 1110"), the automatic stay lasts for only 60 days with respectto eligible property except under two conditions. The debtor may extendthe 60-day period by agreement of the relevant financier, with court approval.Alternatively, the debtor may agree to perform all of the obligations underthe applicable financing and cure any defaults thereunder as required bythe Bankruptcy Code. In the absence of either such arrangement, the financiermay take possession of the property and enforce any of its contractualrights or remedies to sell, lease or otherwise retain or dispose of suchequipment.
        The 60-day period under Section1110 in the Company's Chapter 11 Case expired on February 7, 2003. TheCompany has reached agreements with a significant number of aircraft financiersto extend the automatic stay, in exchange in certain instances for United'sagreement to make specified payments. United also has made elections withrespect to certain other aircraft to cure all existing defaults and topay the contract rates as required by the Bankruptcy Code. With respectto certain aircraft, however, United has taken no action. The contractsfor some of these aircraft are likely to be rejected by United under theBankruptcy Code in the Section 1110 process, which would involve the returnof the aircraft. Additionally, the financiers of such aircraft may seekto repossess the property. Although no such financiers have sought to repossessany United equipment, and although the Company believes that current marketconditions for commercial aircraft make repossession unlikely, there canbe no assurance that United's lenders and lessors will not repossess anyof the applicable aircraft. Repossession of a significant number of aircraftcould result in substantial disruptions to United's operations and couldhave a material adverse effect on the Company's business.
       In order to successfully exit Chapter 11, the Debtors will need to propose,and obtain confirmation by the Bankruptcy Court of, a plan of reorganizationthat satisfies the requirements of the Bankruptcy Code. A plan of reorganizationwould resolve, among other things, the Debtors' pre-petition obligations,set forth the revised capital structure of the newly reorganized entityand provide for its corporate governance subsequent to exit from bankruptcy.On March 21, 2003, the Bankruptcy Court approved the extension to October2003 of UAL's "exclusivity period" during which it is the only party permittedto file a plan of reorganization. Under certain circumstances, the exclusivityperiod could be shortened by two months. The timing of filing a plan ofreorganization by UAL will depend on the timing and outcome of numerousother ongoing matters in the Chapter 11 Cases. Although UAL expects tofile a plan of reorganization that provides for its emergence from bankruptcy,there can be no assurance at this time that a plan of reorganization willbe confirmed by the Bankruptcy Court, or that any such plan will be implementedsuccessfully.
       As required by the Bankruptcy Code, the United States Trustee for the NorthernDistrict of Illinois (the "U.S. Trustee") has appointed an official committeeof unsecured creditors (the "Creditors' Committee"). The Creditors' Committeeand its legal representatives have a right to be heard on all matters thatcome before the Bankruptcy Court with respect to the Debtors. There canbe no assurance that the Creditors' Committee will support the Debtors'positions or the Debtors' plan of reorganization and disagreements betweenthe Debtors and the Creditors' Committee could protract the Chapter 11Cases, could negatively impact the Debtors' ability to operate during theChapter 11 Cases and could delay the Debtors' emergence from Chapter 11.
*       Financial Statement Presentation.*Theaccompanying consolidated financial statements have been prepared in accordancewith American Institute of Certified Public Accountants' Statement of Position90-7 ("SOP 90-7"), "Financial Reporting by Entities in Reorganization Underthe Bankruptcy Code," and on a going-concern basis, which contemplatescontinuity of operations, realization of assets and satisfaction of liabilitiesin the ordinary course of business.
       SOP 90-7 requires that the financial statements for periods subsequentto the filing of a Chapter 11 petition distinguish transactions and eventsthat are directly associated with the reorganization from the operationsof the business. Accordingly, revenues, expenses (including professionalfees), realized gains and losses, and provisions for losses directly associatedwith the reorganization and restructuring of the business are reportedseparately in the financial statements. The Statements of ConsolidatedFinancial Position distinguish pre-petition liabilities subject tocompromise both from those pre-petition liabilities that are not subjectto compromise and from post-petition liabilities. Liabilities subject tocompromise are reported at the amounts expected to be allowed, even ifthey may be settled for lesser amounts.
       In addition, as a result of the Chapter 11 filing, the realization of assetsand satisfaction of liabilities, without substantial adjustments and/orchanges in ownership, are subject to uncertainty. While operating as debtors-in-possessionunder the protection of Chapter 11 of the Bankruptcy Code and subject toapproval of the Bankruptcy Court or otherwise as permitted in the ordinarycourse of business, the Debtors, or some of them, may sell or otherwisedispose of assets and liquidate or settle liabilities for some amountsother than those reflected in the consolidated financial statements. Further,a plan of reorganization could materially change the amounts and classificationsin the historical consolidated financial statements.
       Pursuant to the Bankruptcy Code, the Debtors have filed schedules withthe Bankruptcy Court setting forth the assets and liabilities of the Debtorsas of the Petition Date. Differences between amounts recorded by the Debtorsand claims filed by creditors will be investigated and resolved as partof the Chapter 11 Cases. The deadline for filing proofs of claim with theBankruptcy Court is May 12, 2003, with a limited exception for governmentalentities, which have until June 9, 2003 to file proofs of claim. Accordingly,the ultimate number and allowed amounts of such claims are not presentlyknown.
***       **DIP Financing.*In connection with the filing of theChapter 11 Cases, the Company arranged a debtor-in-possession secured financing(the "DIP Financing"). The DIPFinancing consists of two facilities, a $300 million facility providedby Bank One N.A. ("Bank One Facility") and a $1.2 billion facility providedby J.P. Morgan Chase Bank, Citicorp USA, Inc., Bank One, N.A. and The CITGroup/Business Credit, Inc. ("Club Facility"). The Company has receivedcommitments of $1.0 billion under the Club Facility following the completionof the syndication process for that facility; the balance is conditionedupon the participation of one or more additional lenders approved by theexisting participants. As of March 31, 2003, the Company had borrowed $300million under the Bank One Facility and $492 million under the Club Facility.
New Accounting Pronouncements
        In the first quarter of 2003,the Company adopted Statement of Financial Accounting Standards No. 143,"Accounting for Asset Retirement Obligations" ("SFAS No. 143"), which addressesthe accounting and reporting for obligations associated with the retirementof long-lived assets and associated asset retirement costs. Under SFASNo. 143, the fair value of a liability for an asset retirement obligationmust be recognized in the period in which it is incurred if a reasonableestimate of fair value can be made. In addition, the associated asset retirementcosts are capitalized as part of the carrying amount of the long-livedasset. The adoption of SFAS No. 143 was immaterial to the Company's financialstatements.
Stock Option Accounting
        The Company accounts forstock-based employee compensation plans under Accounting Principles BoardOpinion No. 25, "Accounting for Stock Issued to Employees." No stock-basedemployee compensation cost pertaining to stock options is reflected inthe Company's Statements of Consolidated Operations, as all optionsgranted under those plans had an exercise price equal to the market valueof the underlying common stock on the date of grant.
        If compensation cost forstock-based employee compensation plans had been determined using the fairvalue recognition provisions of Statement of Financial Accounting Standards("SFAS") No. 123, "Accounting for Stock-Based Compensation," the Company'snet loss would have instead been reported as the pro forma amounts indicatedbelow: (In millions, except per share)Three Months  Ended March 31 20032002Net loss, as reported$(1,385)$ (496)Less: Total compensation expensedetermined under  fair value method (net of taxin 2002)(5)(4) $(1,390)$ (500)
Income Taxes
       For 2003, the Company has a zero percent effective tax rate. Beginningin the third quarter of 2002, the Company established a valuation allowanceagainst its net deferred tax asset.
       The Company has determined that it is more likely than not that the grossdeferred tax assets, net of valuation allowances at March 31, 2003, willbe realized through the reversals of existing deferred tax credits.
Restricted Cash
        At March 31, 2003, the Companyhad $632 million in restricted cash, including $140 million in long-termrestricted cash. The cash largelyrepresents security for worker compensation obligations, security depositsfor airport leases and reserves with institutions which process the Company'ssales.
Liabilities Subject toCompromise
        Liabilities subject to compromise refers to liabilities incurred priorto the Petition Date. These amounts represent the Company's estimate ofknown or potential pre-petition claims to be resolved in connection withthe Chapter 11 Cases. Such claims remain subject to future adjustments.Adjustments may result from negotiations, actions of the Bankruptcy Court,rejection of executory contracts and unexpired leases, the determinationas to the value of any collateral securing claims, proofs of claim or otherevents. It is anticipated that such adjustments, if any, would be material.Payment terms for these amounts will be established in connection withthe Chapter 11 Cases.
        At March 31, 2003, the Company had liabilities subject to compromise ofapproximately $14.1 billion which consisted of the following:  (Inmillions)  Long-termdebt, including accrued interest$8,265  Aircraft-relatedaccruals and deferred gains2,432  Capitallease obligations, including accrued interest2,168  Intercompanypayables and loans277  Accountspayable329  Other 676  $14,147   
United Express
         United has marketingagreements under which independent regional carriers, flying under theUnited Express name, feed passengers to United owned and operated flights.United pays these carriers on a fee-per-departure basis and includes therevenues derived from the carriers in passenger revenue, net of expenses.United Express revenues (net of expenses) included in passenger revenueswere $(95) million and $(77) million for the three months ended March 31,2003 and 2002, respectively.
         While the effect onUnited's results, taking into account only the United Express flights,is negative, the Company realizes a significant benefit (not included inthe results shown above) from the traffic provided to United's operationsas a result of these agreements.
Segment Information
         United has a globalroute network designed to transport passengers and cargo between destinationsin North America, the Pacific, the Atlantic and Latin America. These regionsconstitute United's four reportable segments.
         A reconciliation ofthe total amounts reported by reportable segments to the applicable amountsin the financial statements follows: (In Millions)Three Months Ended March 31, 2003     Reportable North  LatinSegment AmericaPacificAtlanticAmericaTotalRevenue$ 2,005 $ 577 $ 411 $ 114 $ 3,107 Loss before income taxes, special     charges and reorganization items$ (687)$ (150)$ (117)$ (45)$ (999)  (In Millions)Three Months Ended March 31, 2002     Reportable North  LatinSegment AmericaPacificAtlanticAmericaTotalRevenue$ 2,131 $ 548 $ 383 $ 134 $  3,196 Loss before income taxes     and gain on sale$ (509)$ (146)$ (117)$ (50)$ (822)   Three Months Ended March 31(In Millions)20032002Total loss for reportable segments$ (999)$ (822)Special charges(137)- Reorganization items, net(249)- Gain on sale-46   Total loss before income taxes$(1,385)$ (776)
Other Comprehensive Income
         Total comprehensiveincome (loss) for the three months ended March 31, 2003 was $(1.4) billioncompared to $(495) million for the first quarter 2002. Other comprehensiveincome consisted of net unrealized gains of $4 million in 2003 and $1 millionin 2002.
Reorganization items
        In connection with the Company'sbankruptcy filing, United recorded $249 million in reorganization expensesin the first quarter 2003. This amount consisted of the following:  (Inmillions)  Write-offof lease certificates$215  Professionalfees34  Interestincome(3) Other 3  $249   
        In the first quarter 2003,United renegotiated certain off-balance sheet leases as part of the Section1110 process. Under the terms of the revised leases, United surrenderedits investment in the junior portion of the original lease debt to theoriginal equity participant. Accordingly, the Company's investment in thecorresponding lease certificates was reduced to zero and the Company recognizeda $215 million non-cash charge in reorganization items.
Special Charges
        *Air Canada.*On April 1, 2003, Air Canada filed for protection under the Companies'Creditors Arrangement Act ("CCAA") of the Canada Business Corporation Act.During the first quarter of 2003, the Company recorded a special chargeof $137 million in connection with Air Canada's CCAA filing. The chargeincluded $46 million for the impairment of the Company's investment inAir Canada preferred stock and $91 million to record a liability for theCompany's guarantee of Air Canada debt. The Company considers this liabilityto be a pre-petition obligation and accordingly, has classified it in liabilitiessubject to compromise.
        In addition, United is theequity holder on three Airbus A330 aircraft that are leased to Air Canadavia a leveraged lease transaction. The Company's net investment in theleveraged lease transaction is approximately $88 million. Although AirCanada has not indicated an intent to reject these leases, should theychoose to reject or renegotiate these leases under the provisions of theCCAA, United would most likely incur a write-off of most or all of thetransaction's value.
Related Party Transactions
        In the first quarter of 2003,United recognized $93 million in revenues from UAL Loyalty Services, Inc.("ULS") and $12 million in commission expense and purchased services paidto ULS. In the first quarter of 2002, United recognized $74 million inrevenues and $16 million in interest income from ULS and $23 million incommission expense and purchased services paid to ULS.
        As a result of the bankruptcyfiling, all intercompany accounts receivable were reclassified to United'sequity and all intercompany accounts payable were reclassified to liabilitiessubject to compromise as of the Petition Date.
Contingencies and Commitments
         United has certaincontingencies resulting from litigation and claims (including environmentalissues) incident to the ordinary course of business. Management believes,after considering a number of factors, including (but not limited to) theviews of legal counsel, the nature of contingencies to which United issubject and its prior experience, that the ultimate disposition of thesecontingencies is not expected to materially affect United's consolidatedfinancial position or results of operations.
         At March 31, 2003,commitments for the purchase of property and equipment, principally aircraft,approximated $1.6 billion, after deducting advance payments. An estimated$0.1 billion will be spent during the remainder of 2003, $0.3 billion in2004 and $0.4 billion in each of 2005, 2006 and 2007. The major commitmentsare for the purchase of A319, A320 and B777 aircraft. The Company is evaluatingthe contracts for these aircraft in light of its financial condition andoperational requirements. 
Item 2.  Management's Discussion and Analysis of FinancialCondition and Results of Operations
Chapter 11 Reorganization
        *Bankruptcy Proceedings.*On December 9, 2002, the Debtors filed voluntary petitions forrelief under Chapter 11 of the United States Bankruptcy Code. For furtherdetails regarding the Chapter 11 Cases, see "Voluntary ReorganizationUnder Chapter 11" in the Notes to Consolidated Financial Statements.
       The Debtors continue to operate their businesses as "debtors-in-possession"under the jurisdiction of the Bankruptcy Court and in accordance with theapplicable provisions of the Bankruptcy Code, the Federal Rules of BankruptcyProcedure and applicable court orders. All vendors are being paid for allgoods furnished and services provided after the Petition Date. However,under Section 362 of the Bankruptcy Code, the filing of the bankruptcypetition automatically stays most actions against a debtor, including mostactions to collect pre-petition indebtedness or to exercise control overthe property of the debtor's estate. Absent an order of the BankruptcyCourt, substantially all pre-petition liabilities are subject to settlementunder a plan of reorganization to be approved by the Bankruptcy Court.Notwithstanding the foregoing, the Debtors' rights to possess and operatecertain qualifying aircraft, aircraft engines and other aircraft-relatedequipment that are leased or subject to a security interest or conditionalsale contract are governed by Section 1110 of the Bankruptcy Code, whichspecifies different treatment. For further information on Section1110 and its impact on the Company, see "Voluntary Reorganization UnderChapter 11" in the Notes to Consolidated Financial Statements.
       In order to successfully exit Chapter 11, the Debtors will need to propose,and obtain confirmation by the Bankruptcy Court of, a plan of reorganizationthat satisfies the requirements of the Bankruptcy Code. A plan of reorganizationwould resolve, among other things, the Debtors' pre-petition obligations,set forth the revised capital structure of the newly reorganized entityand provide for its corporate governance subsequent to exit from bankruptcy.The timing of filing a plan of reorganization by United will depend onthe timing and outcome of numerous other ongoing matters in the Chapter11 Cases. Although United expects to file a plan of reorganization thatprovides for its emergence from bankruptcy, there can be no assurance atthis time that a plan of reorganization will be confirmed by the BankruptcyCourt, or that any such plan will be implemented successfully.
        At this time, it is not possibleto predict accurately the effect of the Chapter 11 reorganization processon the Company's business or when it may emerge from Chapter 11. The Company's future results depend on the timely and successful confirmationand implementation of a plan of reorganization. The rights and claims ofvarious creditors and security holders will be determined by the plan aswell.  No assurance can be given as to what values, if any, will beascribed in the bankruptcy proceedings to each of these constituencies,and it is possible that UAL's equity or UAL and United's other securitieswill be restructured in a manner that will reduce substantially or eliminateany remaining value. Accordingly, the Company urges that appropriate cautionbe exercised with respect to existing and future investments in any ofsuch securities and claims.
Results of Operations
*        Summary of Results*.The air travel business is subject to seasonal fluctuations. United's operationsare often adversely impacted by winter weather and United's first- andfourth-quarter results normally reflect reduced travel demand. Historically,operating results are better in the second and third quarters. However,as a result of the U.S. war with Iraq and the outbreak of Severe AcuteRespiratory Syndrome ("SARS"), the typical seasonal fluctuations are likelyto be disrupted in 2003.
       For the past two years, the Companyhas seen fluctuations in unit revenue relative to the rest of the industry.Immediately following the September 11 terrorist attacks, the Company experienceda significant decline in unit revenue relative to the rest of the industry.In early 2002, year-over-year unit revenues began improving each monthfrom a 14% decline in January to a 4% decline in May, improving its positionrelative to the industry. However, unit revenue growth stalled in the thirdand fourth quarters as demand continued to be weak and yields declined.As is typical with a company in bankruptcy, UAL anticipated a decline inrevenues following the filing of the Chapter 11 Cases in December of 2002.This effect accelerated in the first quarter of 2003. Overall weak economicconditions, the outbreak of war in Iraq and the Company's significant exposureto low cost competition resulted in the Company's 9% drop in passengerunit revenue in the first quarter of 2003 as compared to the same periodof 2002.
        United's loss from operationswas $(868) million in the first quarter of 2003, compared to $(706) millionin the first quarter of 2002. United's net loss was $(1.4) billion comparedto $(496) million in the same period of 2002.
        The 2003 results include$249 million in reorganization items recorded in connection with the Company'sbankruptcy proceedings and $137 million in non-operating special chargesrelated to the Company's investment in Air Canada. See "Special Charges"in the Notes to Consolidated Financial Statements.
        The 2002 loss includes again of $46 million on the sale of the Company's remaining investment inCendant Corporation.
        Specific factors affectingUnited's consolidated operations for the first quarter of 2003 are describedbelow.
        *First Quarter 2003Compared with First Quarter 2002.*  Operating revenues decreased$89 million (3%) and United's revenue per available seat mile (unit revenue)decreased 4% to 8.97 cents. Passenger revenues decreased $210 million (8%)primarily due to a 9% decrease in yield to 10.16 cents. United's availableseat miles across the system increased 1% over the first quarter of 2002;however, passenger load factor decreased 0.5 points to 71.7%. The followinganalysis by market is based on information reported to the U.S. Departmentof Transportation:   Increase (Decrease) Available SeatRevenue Passenger MilesRevenue Per Revenue Miles (Capacity)(Traffic)Passenger Mile (Yield)Domestic2%4%(14%)Pacific5%(5%)-%Atlantic(2%)(5%)(1%)Latin America(13%)(10%)(13%)System1%1%(9%)
        Cargo revenues increased$23 million (16%) due to a 3% increase in cargo ton miles and a 13% increasein yield. Other operating revenues increased $98 million (33%) primarilydue to a $92 million increase in fuel sales to third parties.
        Operating expenses increased$73 million (2%) and United's cost per available seat mile (unit cost)increased 1%, from 11.41 cents to 11.47 cents. Salaries and related costsdecreased $48 million (3%) as decreases in employee headcount as a resultof furloughs and interim wage reductions implemented in the first quarterof 2003 were partially offset by increases to pension and postretirementexpenses. Aircraft fuel increased $173 million (44%) due primarily to a46% increase in the average cost of fuel from 70.6 cents to 103.2 centsa gallon. Commissions decreased $60 million (45%) primarily as a resultof United discontinuing the payment of base commissions on all ticketsissued in the U.S. and Canada effective March 20, 2002, as well as a decreasein commissionable revenues. Cost of sales increased $92 million (34%) primarilydue to increased costs associated with fuel sales to third parties. Aircraftmaintenance decreased $27 million (19%) due to decreases in engine andaircraft repair volumes as a result of reduced flying.
        Other non-operating expenseamounted to $131 million in the first quarter of 2003, compared to $116million in the first quarter of 2002, excluding reorganization items, non-operatingspecial charges and the gain on sale of the Company's investment in Cendant.Interest expense decreased $11 million (8%) as the Company has discontinuedrecording interest expense on all unsecured pre-petition debt. Interestcapitalized decreased $10 million (91%) as a result of lower advance paymentson the acquisition of aircraft. Interest income decreased $18 million (53%)due to lower investment balances and decreased interest rates.
Liquidity and Capital Resources
        United's total of cash, cashequivalents and short-term investments, including restricted cash (bothshort- and long-term), was $1.3 billion at March 31, 2003, compared to$1.6 billion at December 31, 2002.
        Property additions, includingaircraft and aircraft spare parts, amounted to $36 million. In the firstquarter of 2003, United acquired one B757 aircraft off lease.
        Financing activities includedprincipal payments under debt and capital lease obligations of $65 millionand $53 million, respectively. These amounts represent payments made underSection 1110 elections for liabilities included in liabilities subjectto compromise. During the first quarter of 2003, the Company drew down$92 million in cash through letter of credit arrangements under its DIPFinancing.
        In April 2003, the Companyreceived $365 million from the Internal Revenue Service ("IRS") as a resultof the resolution of certain income tax refund claims filed with the IRS.
        On April 16, 2003, the EmergencyWartime Supplemental Appropriations Act ("Wartime Act") was signed intolaw. The legislation includes approximately $3 billion of financial aidfor U.S. air carriers, including United, as follows: $2.4 billion to compensateair carriers for expenses and forgone revenues related to aviation security,including $100 million for reinforcing cockpit doors; suspension of thepassenger and air carrier security fees from June 1, 2003 through September30, 2003; and a one-year extension of government-provided war-risk insuranceto August 2004.
        In addition, the WartimeAct requires that the total compensation of the two most highly compensatedexecutives of certain airlines' (including the Company's) be limited, duringthe period between April 1, 2003 and April 1, 2004, to the annual salarypaid to those officers with respect to the air carrier's fiscal year 2002.Any violation of this provision will require the Company to repay the governmentthe amount of its compensation for airline security fees described above.
        Compensation under the legislationis expected to be received in May 2003 and will be distributed to carriersproportionately, based on the amounts collected by each carrier in passengersecurity and aircraft security fees. While United is still evaluating theprovisions of the bill, the Company currently expects to receive approximately$300 million in compensation.
       As of March 31, 2003, the Company had $632 million in restricted cash (including$140 million in long-term restricted cash) on deposit with various stateand local governments. The cash largely represents security for workercompensation obligations, security deposits for airport leases and reserveswith institutions which process the Company's sales. Prior to 2002, Unitedmet many of these obligations through surety bonds or a secured letterof credit facility; however, many of the bonds have been cancelled andthe letter of credit facility expired in August of 2002. As a result, Unitedhas been and may, in the future, be required to post additional collateralin the form of cash deposits to support these types of obligations.
        At March 31, 2003, commitmentsfor the purchase of property and equipment, principally aircraft, approximated$1.6 billion, after deducting advance payments. Of this amount, an estimated$0.1 billion is expected to be spent during the remainder of 2003. Forfurther details, see "Contingencies and Commitments" in the Notes toConsolidated Financial Statements.
Labor Agreements
        During the first quarterof 2003, the Company presented to its Board of Directors and employeesinformation regarding its plan for transformation (the "Plan"), which outlinesthe fundamental changes to United's strategic direction. The Plan, whichthe Company is working to refine through further collaboration with itsemployees and others, seeks to develop a durable and sustainable businessmodel that will lay the foundation for a company that is successful andcompetitive in the long run. Critical to this transformation are the reductionof costs, the improvement of labor productivity and asset efficiency, andthe enhancement of the Company's customer value proposition.  Theagreements the Company and its unions were able to reach in March and April2003 allow for these kinds of transformational changes.
        In April 2003, United employeesrepresented by various unions ratified tentative agreements between theCompany and their unions to modify their respective collective bargainingagreements ("CBAs"). All of these agreements became effective on May 1,2003 and are six years in duration. When combined with expected savingsof approximately $300 million per year to salaried and management costs(achieved through wage and headcount reductions and benefit changes), theseagreements are expected to reduce the Company's costs by an average ofapproximately $2.5 billion per year versus the current contracts (basedon the size of the airline in the first quarter 2003). In addition to reductionsin pay, all of the contracts allow for improving productivity (throughchanges to work rules) and changes to employees' medical plans (includingincreases to co-payments). The savings are anticipated to increase as thesechanges are implemented and the Company is able to achieve expected productivityimprovements. The Company has developed a robust oversight process to ensurethese significant changes are achieved in a seamless and timely manner.
        Other work-group specificchanges are described below:
       On April 11, 2003, the Air Line Pilots Association, International ("ALPA")ratified a previously announced tentative agreement on a restructured CBA.The CBA reduces pay and benefits and improves productivity (through work-rulechanges) by an average of approximately $1.1 billion per year versus thecurrent contract. As part of these changes, retirement benefits for pilotshave been reduced through a decrease in the Company's contribution to thepilot defined contribution plan and a reduction in the formula for theirdefined benefit plan. The agreement also provides for significantlyenhanced flexibility with respect to regional jets, code share arrangementsand a low-cost product offering. Additionally, the agreement provides forALPA to retain a seat on UAL's Board of Directors.
        On April 11, 2003, the Company'sdispatchers represented by the Professional Airline Flight Control Association("PAFCA") ratified a tentative agreement between PAFCA and the Companyon a restructured CBA, which is expected to reduce costs by an averageof approximately $4.5 million per year versus the previous CBA. The restructuredCBA also changes dispatchers to the Salaried, Management and Public Contactpension plan.
        On April 29, 2003, the flightattendants ratified a tentative agreement between the Company and the Associationof Flight Attendants, AFL-CIO ("AFA") on a restructured CBA, which is expectedto reduce United's costs by an average of approximately $300 million peryear versus the parties' previous CBA. As part of these changes, retirementbenefits for flight attendants are reduced through changes in the AFA pensionplan.
         On April 29, 2003,employees represented by the International Association of Machinists andAerospace Workers ("IAM") District Lodge 141 ratified an agreement betweenthe Company and IAM District Lodge 141 on four restructured CBA's as wellas on a restructured CBA for employees of United's subsidiary Mileage Plus,Inc. The agreements with IAM District Lodge 141 reduce costs by an averageof approximately $450 million per year versus the parties' previous CBA's.On April 29, 2003, employees represented by IAM District Lodge 141M ratifiedagreements between the Company and IAM District Lodge 141M on three restructuredCBA's. The agreements with District Lodge 141M will reduce costs by anaverage of approximately $350 million per year versus the previous CBA's.These agreements also provide the Company increased flexibility with respectto outsourcing and for the IAM to retain a seat on UAL's Board of Directors.
        In addition, all of the agreementsprovide for various common features. These include a Company-wide success-sharingprogram that provides the opportunity for annual payouts tied to the Company'slevel of profitability and performance. The agreements all also providethe Company with an opportunity to introduce a low-cost product offering.UAL also has agreed to include in its plan of reorganization provisionsthat each relevant employee group will receive a distribution of the equity,securities or other consideration provided to the general unsecured creditors.In addition, the Company has agreed, in all of the contracts, that anyplan of reorganization it proposes or supports will provide the relevantemployee group with a distribution of the above-described equity, securitiesor other consideration (as compared to the total distribution providedto all employee groups) that matches the proportion of each employee groups'contribution to total employee cost reductions.
Facilities
        AtMarch 31, 2003, approximately $1.7 billion in special facilities revenuebonds ("municipal bonds") originally issued on behalf of United to buildor improve airport-related facilities were outstanding. The Company leasesfacilities at airports pursuant to lease agreements where municipal bondsfunded at least some of its airport-related projects. Pursuant to the financingagreements entered into by United in connection with such issuance of municipalbonds, the Company is required to make payments in amounts sufficient topay the interest semi-annually with principal payable upon maturity.
        United is not permitted under the Bankruptcy Code to make payments on unsecuredpre-petition debt without providing notice to its creditors and receivingthe approval of the Bankruptcy Court. As United has been advised its municipalbonds are or may be viewed as unsecured (or in certain instances, partiallysecured) pre-petition debt, United cannot make payments thereon withoutfirst meeting the requirements outlined above.****Accordingly, theCompany has classified all of its on-balance sheet municipal bonds as liabilitiessubject to compromise.
        Section 365 of the Bankruptcy Code requires that the Company timely performall of its post-petition obligations under unexpired leases of non-residentialreal property. The Company believes that it is in compliance with all paymentobligations under its lease agreements relating to those airports whereit has municipal bonds outstanding. However, the Company has not made anddoes not intend to make debt service payments or any other payment on anyof the municipal bond issuances issued on behalf of the Company and relatingto domestic airport financings. As a result, under certain of the airportlease agreements, the Company may be considered in default due to the non-paymentof the debt and therefore subject to the default provisions of the leaseagreements with the airports. Possible consequences could include lossof the Company's status as a signatory airline (resulting in increasedrents and landing fees) and loss of the Company's exclusive space agreements.
       The Company has taken a number of steps to mitigate the risks associatedwith this issue.  On March 21, 2003, the Company filed four separateand additional Complaints of Debtor-Plaintiff for Declaratory Judgmentand, in connection therewith, corresponding Motions for Temporary RestrainingOrder with respect to the municipal bonds issuances relating to the facilitiesat the Denver International Airport, the New York City - John F. KennedyInternational Airport, the San Francisco International Airport, and theLos Angeles International Airport, each seeking a clarification of theCompany's obligations under the applicable municipal bonds, and the protectionof its rights under its underlying airport lease agreements at the applicableairport until the Bankruptcy Court decides the merits of each of the abovecomplaints. On March 31, 2003, the Bankruptcy Court entered an order thatrequires each of the above-mentioned actions to give the Company a 15-daynotice and cure period before taking any action to terminate any rightsof United with respect to leases at those airports until such time as theBankruptcy Court enters final orders on United's declaratory judgment actionswith respect to the payment of bonds at those airports. The Companyis unable to predict what, if any, action might be taken in the futureby either the bondholders or the airport authorities as a result of itsfailure to pay these obligations as contractually required. However, theCompany believes that the March 31, 2003 order substantially mitigatesthe risk associated with any deemed default by providing the Company anopportunity to make any required payments and thus preserve its rightsunder its leases.
        In connection with the April6, 2003 schedule reduction, the Company decided to close temporarily theIndianapolis Maintenance Center ("IMC"). On May 2, 2003, United filed amotion in the Bankruptcy Court to reject its lease at IMC in order to makepermanent the closing of the facility. At the same time, United filed amotion to reject its lease at the Oakland Maintenance Center, thus allowingthe Company to close that facility as well.
Outlook for 2003
         Information regardingguidance for United's 2003 outlook can be obtained from UAL Corporation'sReport on Form 10-Q for the quarter ended March 31, 2003.
        Certain statements includedin the above "Outlook" paragraphs, as well as elsewhere throughout Management'sDiscussion and Analysis of Financial Condition and Results of Operations,are forward-looking and thus reflect the Company's current expectationsand beliefs with respect to certain current and future events and financialperformance. Such forward-looking statements are and will be, as the casemay be, subject to many risks and uncertainties relating to the operationsand business environments of the Company that may cause actual resultsto differ materially from any future results expressed or implied in suchforward-looking statements. Factors that could significantly affect netearnings, revenues, expenses, unit costs, fuel, load factor and capacityinclude, without limitation, the following: the Company's ability to continueas a going concern; the Company's ability to operate pursuant to the termsof the DIP Financing; the Company's ability to obtain court approval withrespect to motions in the Chapter 11 proceeding prosecuted by it from timeto time; the Company's ability to develop, prosecute, confirm and consummateone or more plans of reorganization with respect to the Chapter 11 Cases;risks associated with third parties seeking and obtaining court approvalto terminate or shorten the exclusivity period for the Company to proposeand confirm one or more plans of reorganization, for the appointment ofa Chapter 11 trustee or to convert the cases to Chapter 7 cases; the Company'sability to achieve necessary reductions in labor costs; the Company's abilityto obtain and maintain normal terms with vendors and service providers;the Company's ability to maintain contracts that are critical to its operations;the potential adverse impact of the Chapter 11 Cases on the Company's liquidityor results of operations; the costs and availability of financing; theCompany's ability to execute its business plan; the Company's ability toattract, motivate and/or retain key employees; the Company's ability toattract and retain customers; demand for transportation in the marketsin which the Company operates; general economic conditions; the effectsof the war in Iraq and any other hostilities or act of war (in the MiddleEast or elsewhere) or any terrorist attack; the continued impact of SARSon the demand for travel; the ability of other air carriers with whom theCompany has alliances or partnerships to provide the services contemplatedby the respective arrangements with such carriers; the costs and availabilityof aircraft insurance; the costs of aviation fuel; the costs associatedwith existing or future security measures and practices; competitive pressureson pricing (particularly from lower-cost competitors); government legislationand regulation; consumer perceptions of the Company's products; weatherconditions; and other risks and uncertainties set forth from time to timein United's reports to the United States Securities and Exchange Commission.Consequently, the forward-looking statements should not be regarded asrepresentations or warranties by the Company that such matters will berealized. The Company disclaims any intent or obligation to update or reviseany of the forward-looking statements, whether in response to new information,unforeseen events, changed circumstances or otherwise.  
Item 3.Quantitative and Qualitative Disclosures About MarketRisk
For information regarding the Company's exposure to certain market risks,see Item 7A. Quantitative and Qualitative Disclosures About Market Riskin United's Annual Report on Form 10-K for the year 2002.
Interest Rate Risk -(Inmillions, except average contract rates)NotionalAverageEstimated AmountContractRateFairValue   (Pay)/Receive*Interestrate swap$ 1307.56%$ (28)
*Estimated fair values represent the amount United wouldpay/receive on March 31, 2003 to terminate the contracts. 
Item 4.  Controls and Procedures
        Within the 90-day period prior to the filing of this report, an evaluationwas carried out under the supervision and with the participation of theCompany's management, including the Chief Executive Officer ("CEO") andChief Financial Officer ("CFO"), of the effectiveness of our disclosurecontrols and procedures.  Based on that evaluation, the CEO and CFOhave concluded that the Company's disclosure controls and procedures areeffective to ensure that information required to be disclosed by the Companyin reports that it files or submits under the Securities Exchange Act of1934 is recorded, processed, summarized and reported within the time periodsspecified in Securities and Exchange Commission rules and forms. Subsequent to the date of their evaluation, there were no significant changesin the Company's internal controls or in other factors that could significantlyaffect the disclosure controls, including any corrective actions with regardto significant deficiencies and material weaknesses. 

PART II.  OTHER INFORMATION
Item 6.  Exhibitsand Reports on Form 8-K.(a) Exhibits
A list of exhibits included as part of this Form 10-Q is set forth inan Exhibit Index that immediately precedes such exhibits.
(b) There were no Form 8-Ks filed in the first quarter of 2003.    SIGNATURESPursuant to the requirementsof the Securities Exchange Act of 1934, the Registrant has duly causedthis report to be signed on its behalf by the undersigned thereunto dulyauthorized.  UNITEDAIR LINES, INC.By:  /s/ FredericF. Brace FredericF. Brace ExecutiveVice President and ChiefFinancial Officer (principalfinancial officer)     By:  /s/ M. Lynn Hughitt M. Lynn Hughitt Vice President and Controller (principal accounting officer)
Dated:  May 2, 2003
    Exhibit Index ExhibitNo.Description    12.1Computationof Ratio of Earnings to Fixed Charges   99.1Certification of the Principal Executive OfficerPursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-OxleyAct of 2002)  99.2Certification of the Principal Financial OfficerPursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-OxleyAct of 2002)  99.3Certification of the Chief Executive OfficerPursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)  99.4Certification of the Chief Financial OfficerPursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Actof 2002)         

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