****FORM 10-Q**
SECURITIESAND EXCHANGE COMMISSION
Washington,D.C.  20549
(Mark One)
[X] QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIESEXCHANGE ACT OF 1934
For the quarterlyperiod ended June 30, 2001
OR
[  ] TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIESEXCHANGE ACT OF 1934
For the transitionperiod from __________ to __________
Commissionfile number 33-21220 *  UNITEDAIR LINES, INC.(Exact name of registrant as specified in its charter)  Delaware(State or other jurisdiction ofincorporation or organization)36-2675206(I.R.S. EmployerIdentification No.)  1200 EastAlgonquin Road, Elk Grove Township, Illinois  60007MailingAddress:  P. O. Box 66100, Chicago, Illinois  60666(Addressof principal executive offices)          (Zip Code)  Registrant'stelephone number, including area code  (847) 700-4000 
Indicate bycheck mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.
Yes   X       No
Indicate thenumber of shares outstanding of each of the issuer's classes of commonstock, as of the latest practicable date.  OutstandingatClassJuly31, 2001CommonStock ($5 par value) 205 
*  Registrantis the wholly-owned subsidiary of UAL Corporation (File 1-6033). Registrant became subject to filing periodic reports under the SecuritiesExchange Act of 1934 as a result of a public offering of securities whichbecame effective June 3, 1988 (Registration Nos. 33-21220 and 22-18246).  
United Air Lines, Inc.and Subsidiary Companies Report on Form 10-QFor the Quarter EndedJune 30, 2001
Index PARTI.FINANCIALINFORMATIONPage No.   Item1.   Financial Statements   CondensedStatements of Consolidated Financial Position as of June 30, 2001 (Unaudited)and December 31, 20003  Statementsof Consolidated Operations (Unaudited) - for the six months ended June30, 2001 and 20005  CondensedStatements of Consolidated Cash Flows (Unaudited) - for the six monthsended June 30, 2001 and 20007  Notesto Consolidated Financial Statements (Unaudited)8 Item2.   Management's Discussion and Analysis of Financial Conditionand Results of Operations13   Item3.   Quantitative and Qualitative Disclosures About Market Risk18PARTII.OTHERINFORMATION  Item6.  Exhibits and Reports on Form 8-K19 Signatures20 ExhibitIndex21      
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
United Air Lines, Inc. and Subsidiary CompaniesCondensed Statements of Consolidated Financial Position(In Millions)
 June 30  2001December 31Assets(Unaudited)2000   Current assets:     Cash and cash equivalents$     525 $   1,468    Short-term investments446 655    Receivables, net1,462 1,212    Related party receivables653 553    Income tax receivables270 175    Inventories, net390 424    Prepaid expenses and other   1,120      686    4,866   5,173      Operating property and equipment:     Owned20,604 19,411    Accumulated depreciation and amortization   (5,846)   (5,583)   14,758  13,828      Capital leases3,021 3,155    Accumulated amortization      (628)     (640)     2,393   2,515   17,15116,343      Other assets:     Investments614 416    Intangibles, net655 671    Related party receivables475 467    Aircraft lease deposits659 710    Prepaid rent91 499    Other, net   1,084      790    3,578   3,553    $25,595$25,069   
See accompanying Notes to Consolidated Financial Statements.    
United Air Lines, Inc. and Subsidiary CompaniesCondensed Statements of Consolidated Financial Position(In Millions)
 June 30  2001December 31Liabilities and Stockholder's Equity(Unaudited)2000   Current liabilities:     Current portions of long-term debtand           capital lease obligations$     930 $     438    Related party debt maturing withinone year144 155    Advance ticket sales1,890 1,454    Accrued salaries, wages and benefits1,659 1,508    Accounts payable1,230 1,149    Related party payables224 187    Other   2,306   2,155    8,383   7,046   Long-term debt   4,573   4,740   Long-term obligations under capital leases   2,061   2,261   Other liabilities and deferred credits:     Deferred pension liability306 136    Postretirement benefit liability1,648 1,557    Deferred gains867 912    Deferred income taxes1,170 1,265    Other   1,018      929    5,009   4,799   Commitments and contingent liabilities (Seenote)     Preferred stock committed to Supplemental ESOP     443     571   Stockholder's equity:     Common stock at par- -    Additional capital invested232232    ESOP capital3,563 3,432    Retained earnings1,068 1,833    Accumulated other comprehensiveincome269 163    Other         (6)         (8)    5,126   5,652    $25,595$25,069   
See accompanying Notes to Consolidated Financial Statements.    
United Air Lines, Inc. andSubsidiary CompaniesStatements of ConsolidatedOperations (Unaudited)(In Millions)
    Three Months    EndedJune 30      20012000Operatingrevenues:    Passenger$  4,028 $  4,567   Cargo197 233   Other      423     298   4,648  5,098Operatingexpenses:    Salaries and related costs1,873 1,644   Aircraft fuel693 589   Commissions255 252   Purchased services458 429   Aircraft rent207 223   Landing fees and other rent269 250   Depreciation and amortization268 247   Special charges- 61   Cost of sales344196   Aircraft maintenance200 163   Other     437     447   5,004  4,501   Earnings(loss) from operations  (356)     597   Otherincome (expense):    Interest expense(129)(97)  Interest capitalized22 20   Interest income24 20   Equity in earnings (losses) of affiliates3 (1)  Miscellaneous, net    (15)     (13)     (95)     (71)   Earnings(loss) before income taxes(451)526 Provision(credit) for income taxes  (157)    195   Netearnings (loss)$ (294)$  331   
See accompanying notes toconsolidated financial statements.    
United Air Lines, Inc. andSubsidiary CompaniesStatements of ConsolidatedOperations (Unaudited)(In Millions)
   Six Months   Ended June30     20012000Operatingrevenues:    Passenger$  7,840 $  8,535   Cargo389 450   Other     837     646   9,066  9,631Operatingexpenses:    Salaries and related costs3,722 3,160   Aircraft fuel1,358 1,128   Commissions488 501   Purchased services911 832   Aircraft rent415 446   Landing fees and other rent508 483   Depreciation and amortization520 478   Special charges- 64   Cost of sales651 450   Aircraft maintenance399352   Other     878     858   9,850  8,752   Earnings(loss) from operations   (784)     879   Otherincome (expense):    Interest expense(262)(198)  Interest capitalized45 40   Interest income58 36   Equity in earnings (losses) of affiliates3 (2)  Miscellaneous, net     (33)     (25)    (189)   (149)Earnings(loss) before income taxes       and cumulative effect  (973)730 Provision(credit) for income taxes   (355)    271     Earnings(loss) before cumulative effect(618)459 Cumulativeeffect of accounting change, net         3  (209)Netearnings (loss)$ (615)$  250   
See accompanying notes toconsolidated financial statements.    
United Air Lines, Inc. and Subsidiary CompaniesCondensed Statements of Consolidated Cash Flows (Unaudited)(In Millions)
       Six Months       Ended June 30           20012000Cash and cash equivalents at beginning          of period$ 1,468$   235   Cash flows from operating activities      336  2,127   Cash flows from investing activities:     Additions to property and equipment(1,287)(1,122)   Proceeds on disposition of propertyand           equipment4 6    Decrease (increase) in short-terminvestments209 (204)   Increase in related party receivables(8)(8)   Other, net      (33)    (153) (1,115)(1,481)   Cash flows from financing activities:     Proceeds from issuance of long-termdebt211 200    Repayment of long-term debt(124)(279)   Principal payments under capital           lease obligations(135)(98)   Dividend to parent company(150)-    Decrease in short-term borrowings- (61)   Aircraft lease deposits8 5   Decrease in related party debt(11)      (16)   Other, net       37      12     (164)   (237)   Increase (decrease) in cash and cash equivalents    (943)    409   Cash and cash equivalents at end of period$   525$   644    Cash paid during the period for:     Interest (net of amounts capitalized)$    205 $   157    Income taxes$        - $     16    Non-cash transactions:     Long-term debt incurred in connection           with additions to other assets$    237 $       -    Capital lease obligations incurred$        - $       3    Net unrealized gain (loss) on investments$    105 $ (170)
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(which include only normal recurring adjustments) necessary for a fairpresentation of the results of operations for the three month periods havebeen made.  These financial statements should be read in conjunctionwith the consolidated financial statements and footnotes thereto includedin United's Annual Report on Form 10-K for the year 2000.
Accounting Changes
         Effective January 1,2001, United adopted Statement of Financial Accounting Standards No. 133,"Accounting for Derivative Instruments and Hedging Activities" (SFAS No.133), as amended.  Under SFAS No. 133, all derivatives (includingcertain derivative instruments embedded in other contracts) are recognizedin the balance sheet at fair value and changes in fair value are recognizedimmediately in earnings, unless the derivatives qualify as hedges of futurecash flows.  For derivatives qualifying as hedges of future cash flows,the effective portion of changes in fair value is recorded temporarilyin equity, then recognized in earnings along with the related effects ofthe hedged items.  All ineffective portions of a hedge are recordedin "Miscellaneous, net" as they occur.
         The adoption of SFASNo. 133 resulted in a cumulative credit of $3 million, net of tax, to 2001earnings.
         During the first quarterof 2000, United changed its method of accounting for the sale of mileageto participating partners in its Mileage Plus program, in accordance withStaff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." Under the new accounting method, a portion of the other revenue from thesale of mileage is deferred and recognized as passenger revenue when thetransportation is provided.  Accordingly, United recorded a chargeof $209 million, net of tax, for the cumulative effect of a change in accountingprinciple to reflect the application of the accounting method to prioryears. 
Accounting Policies - Derivative Financial Instruments
*Hedges of Future Cash Flows*
***       **Foreign Currency -*****United enters into forwards andcurrency swaps to reduce exposure to currency fluctuations on Japaneseyen-, Euro- and French franc-denominated capital lease obligations. The cash flows of the forwards and swaps mirror those of the capital leases. These forwards and swaps have been designated as cash flow hedges of theforeign currency denominated lease payments.  For these forwards andswaps, United excludes changes in fair value resulting from changes inthe forward points in its assessment of effectiveness.  Any gainsor losses realized upon early termination of these forwards and swaps arerecorded (net of tax) as a component of other comprehensive income andrecognized in income as the hedged transaction impacts earnings.
         The Company hedgessome of the risks of exchange rate volatility on its anticipated futureJapanese yen, Euro, Canadian dollar, Australian dollar and British poundrevenues by purchasing put options and on Hong Kong dollar revenues byentering into forward contracts.  These options and forwards havea duration of less than one year and the amounts are synchronized withthe expected cash receipts.  Accordingly, the put options and forwardshave been designated as cash flow hedges of the anticipated cash receipts. Changes in the fair value of purchased put option contracts are recordedin other comprehensive income (net of tax) and the effective portion isrecognized as a component of passenger revenue when the underlying hedgedrevenue is recorded.  United excludes, in its assessment of effectiveness,changes in the fair value of these instruments that are a result of changesin their time value.
***        ** AircraftFuel -*United uses crude oil forwards and options to hedge a portionof its price risk related to aircraft fuel purchases.  These contractshave maturity dates of less than one year and have been designated as cashflow hedges of anticipated jet fuel purchases.  These contracts arerecorded at fair value with the changes in fair value, to the extent theyare effective, recorded in other comprehensive income (net of tax), untilthe underlying hedged fuel is consumed.  The Company determines theineffective portion of the fuel forwards and options as the excess of thefair value of the hedge contracts compared to the change in expected cashoutflows for the hedged fuel.  United excludes, in its assessmentof effectiveness, changes in the fair value of these instruments that area result of changes in their time value.
*         Interest Rate -*Unitedis a party to a series of interest rate swaps that convert floating-rateoperating leases to fixed-rate leases.  United has designated theseswaps as cash flow hedges of the floating-rate leases and has recordedthese contracts at fair value with the effective portion recorded as acomponent of other comprehensive income (net of tax).
         The ineffectivenessresulting from the changes in fair value of these aircraft fuel and interestrate hedge positions was immaterial.  There was no ineffectivenessresulting from the changes in fair value of the foreign currency hedgepositions reported in the first six months' earnings.  Amounts excludedfrom the assessment of effectiveness amounted to approximately $3 millionbefore income taxes and were recorded in "Miscellaneous, net."  Noamounts were reclassified to earnings during the first six months in connectionwith forecasted transactions that were no longer considered probable ofoccurrence.
         The following is areconciliation of current period changes (net of tax) of the portion ofstockholders'equity relating to derivatives that qualify as cash flow hedges: (InMillions)(debit)/creditTransitionadjustment as of January 1, 2001$  (4)Currentperiod increase in fair value, net     4Reclassificationsinto earnings, net  (12) Balance as of June 30, 2001$ (12)
        Of this amount, less than $1 million in losses is expected to be recordedinto earnings within the next twelve months.  At June 30, 2001, theterm of derivative instruments hedging variability in cash flows, exceptthose related to payment of variable interest on existing financial instruments,was seventeen years.
*Other Derivative InstrumentsNot Designated as Hedges*
***        **Equity Warrants-*TheCompany may also invest in or receive warrants to purchase securities ofother companies as strategic investments.  Changes in the fair valueof warrants that are not designated as hedge instruments are included in"Miscellaneous, net."
*         Foreign Currency-*From time to time, United enters into Japanese yen forward exchangecontracts to minimize gains and losses on the revaluation of short-termyen-denominated liabilities.  The yen forwards, typically having short-termmaturities, are not designated hedges under SFAS No. 133 and are markedto fair value through the income statement at the end of each accountingperiod.  The unrealized mark-to-market gains and losses generallyoffset the losses and gains recorded on the yen liabilities.
         To reduce hedging costs,the Company sells a correlation option denominated in Japanese yen, Euros,Canadian dollars, Australian dollars and British pounds.  These correlationoptions are not designated as a hedge and the changes in the fair marketvalue of the correlation options are included in "Miscellaneous, net."
Employee Stock Ownership Plans
         Pursuant to amendedlabor agreements which provide for wage and benefit reductions and work-rulechanges which commenced July 1994, UAL agreed to issue convertible preferredstock to employees.  Note 2 of the Notes to Consolidated FinancialStatements in the 2000 Annual Report on Form 10-K contains additionaldiscussion of the agreements, stock issued to employees and the relatedaccounting treatment.  The final allocation of shares occurred inMarch 2001 as follows:  669,966 shares of Class 1 ESOP Preferred Stockwere allocated under the Leveraged ESOP, 167,523 shares of Class 2 ESOPPreferred Stock were contributed to the Non-Leveraged ESOP and an additional20,007 shares were allocated in "book entry" form under the SupplementalPlan.
Income Taxes
         The provision for incometaxes is based on the estimated annual effective tax rate, which differsfrom the federal statutory rate of 35% principally due to state incometaxes and certain nondeductible items.  During the second quarterof 2001, the Company adjusted its estimated annual effective tax rate,as a result of a reduction in the amount of quarterly dividend paymentsto ESOP shareholders and revised estimated pre-tax book losses for theremainder of 2001.
Long-Term Debt
The Company, through a special-purpose financing entity that is consolidated,has issued commercial paper which was classified as long-term debt. The proceeds from the commercial paper were used to refinance certain equipmentcertificates supporting leveraged lease transactions.  The Companyintends to terminate this transaction in the third quarter 2001 using proceedsfrom refinancing the equipment certificates (classified as other currentassets) to pay off the debt, and therefore has reclassified $537 millionin long-term debt to short-term as of June 30, 2001.
Investments
         United owns 15,940,000shares (18%) in Galileo International, Inc. ("Galileo"), a leading providerof electronic global distribution services for the travel industry. On June 18, 2001, Galileo announced that it had reached agreement withCendant Corporation ("Cendant") for Cendant to acquire all of the outstandingcommon stock of Galileo for a combination of stock and cash.  United,as the largest stockholder of Galileo, has entered into an agreement withCendant to support the transaction and has provided Cendant with a proxyto vote the Galileo shares owned by United in favor of the transaction. This transaction, which is subject to regulatory approvals, is expectedto close in the fall of 2001 and would result in a gain to United of approximately$270 million, net of tax, based on the current estimated total proceedsof $33 per share.
Segment Information
         United has a globalroute network designed to transport passengers and cargo between destinationsin North America, the Pacific, the Atlantic and Latin America.  Theseregions constitute United's four reportable segments.
         A reconciliation ofthe total amounts reported by reportable segments to the applicable amountsin the financial statements follows: (In Millions)Three Months Ended June 30, 2001     Reportable      LatinSegment Consolidated DomesticPacificAtlanticAmericaTotalOtherTotalRevenue$ 3,083 $ 748 $  627 $  190 $ 4,648 $     - $ 4,648 Earnings (loss) before         income taxes$  (238)$(121)$  (65)$  (27)$  (451)$     - $  (451)(InMillions)Three Months Ended June 30, 2000     Reportable      LatinSegment Consolidated DomesticPacificAtlanticAmericaTotalOtherTotalRevenue$3,536$ 769$ 597$ 196$5,098$    - $5,098Earningsbefore income       taxesand special charges$   475 $   29$   71 $   12$   587$    - $   587(In Millions)Six Months Ended June 30, 2001     Reportable      LatinSegment Consolidated DomesticPacificAtlanticAmericaTotalOtherTotalRevenue$ 6,035 $ 1,492 $ 1,141 $ 398 $ 9,066 $   - $  9,066 Earnings (loss) before         income taxes $  (558) $  (239) $  (137) $ (39) $  (973) $   - $   (973) (InMillions)Six Months Ended June 30, 2000     Reportable      LatinSegment Consolidated DomesticPacificAtlanticAmericaTotalOtherTotalRevenue$6,726$1,458$1,043$ 404$9,631$    - $9,631Earningsbefore income       taxesand special charges$   639$    50 $    74 $   31$   794$    - $   794  ThreeMonths EndedSixMonths Ended June30June30(InMillions)2001200020012000Totalearnings (loss) for reportable segments$  (451)$   587 $ (973)$   794  Special charges        -    (61)        -     (64)Totalearnings (loss) before income taxes and      cumulative effect of accounting change $ (451)$  526$ (973)$   730     
Other Comprehensive Income
         Total comprehensiveincome (loss) for the three- and six-month periods ending June 30, 2001was $(207) million and $(509) million, respectively, compared to $256 millionand $80 million for the three- and six-month periods ending June 30, 2000,respectively.  Other comprehensive income consisted of net unrealizedgains (losses) of $87 million and $106 million for the three- and six-monthperiods ending June 30, 2001, respectively, and $(75) million and $(170)million for the three- and six-month periods ending June 30, 2000, respectively.
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 June 30, 2001, commitmentsfor the purchase of property and equipment, principally aircraft, approximated$3.8 billion, after deducting advance payments.  An estimated $1.5billion will be spent during the remainder of 2001, $1.7 billion in 2002and $0.6 billion in 2003 and thereafter.  The major commitments arefor the purchase of A319, A320, B767 and B777 aircraft, which are scheduledto be delivered through 2003.  United has no aircraft on order fordelivery beyond 2003.     
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION  AND RESULTS OF OPERATIONS 
US AIRWAYS ACQUISITION
         On May 24, 2000, UALannounced that it had entered into a definitive merger agreement with USAirways Group, Inc. ("US Airways") pursuant to which US Airways would beacquired by UAL.  On July 27, 2001, UAL and US Airways announced thatthey had terminated their merger agreement as a result of regulatory oppositionto the merger.
RESULTS OF OPERATIONS
         The second quarterof 2001 continued to be a challenging quarter for the airline industryand United in particular.  The effects of the weaker economy haveaffected the airline industry more than other areas of the economy, ascorporations reduce their business travel budgets and change their travelbehavior.  United has experienced a significant revenue decline asa result of the decrease in business traffic, which has impacted both unitrevenues and yields.
Summary of Results
         United's loss fromoperations was $(356) million in the second quarter of 2001, compared tooperating earnings of $597 million in the second quarter of 2000. United's net loss was $(294) million, compared to net earnings of $331million in the same period of 2000.
         In the first six monthsof 2001, United's loss from operations was $(784) million, compared tooperating earnings of $879 million in the first six months of 2000. United's net loss before the cumulative effect of an accounting changewas $(618) million, compared to net earnings before the cumulative effectof an accounting change of $459 million in the same period of 2000.
         The 2000 earnings forthe quarter and six months include a special charge of $15 million, netof tax, for seven leased B747-238 aircraft that will continue to be leasedbut will no longer be used for operating purposes beyond 2000 and a specialcharge of $23 million, net of tax, for the retirement of the inflight videosystem on certain B777-222 aircraft, which was replaced by an enhancedand more reliable inflight video system.  In addition, the 2000 earningsfor the six-month period include a special charge of $3 million, net oftax, associated with the asset write-down and losses related to subleaseson non-operating aircraft previously used in the United Express operation.
         Specific factors affectingUnited's consolidated operations for the second quarter and first six monthsof 2001 are described below.
Second Quarter 2001 Compared with Second Quarter 2000.
         Operating revenuesdecreased $450 million (9%) and United's revenue per available seat mile(unit revenue) decreased 10% to 10.40 cents.  Passenger revenues decreased$539 million (12%) primarily due to a 10% decrease in yield to 12.22 cents. United's revenue passenger miles decreased 2%, while available seat milesacross the system increased 1% over the second quarter of 2000, resultingin a decrease to passenger load factor of 2.4 points to 73.2%.  Thefollowing analysis by market is based on information reported to the U.S.Department of Transportation:  Increase (Decrease) Available SeatRevenue Passenger MilesRevenue Per Revenue Miles (Capacity)(Traffic)Passenger Mile (Yield)Domestic  (2%)  (6%)(10%)Pacific  5%  4%  (9%)Atlantic13%  7%  (8%)Latin America(2%)  (3%)  (2%)  System  1%(2%)(10%)
         Cargo revenues decreased$36 million (15%) primarily due to a 16% decrease in cargo ton miles largelyas a result of the discontinuation of freighter operations in the fourthquarter 2000.  Other operating revenues grew $125 million (42%) primarilydue to a $133 million increase in fuel sales to third parties.
         Operating expensesincreased $503 million (11%) and United's cost per available seat mile(unit cost) increased 10%, from 10.21 cents to 11.20 cents.  Salariesand related costs increased $229 million (14%) due to new salary programsimplemented for non-contract employees, contractually-driven increasesfor employees represented by the Air Line Pilots Association, International("ALPA") and the estimated costs of contracts with the International Associationof Machinists and Aerospace Workers ("IAM") which became amendable in 2000and are currently under negotiation.  Aircraft fuel increased $104million (18%) due to an 18% increase in the average cost of fuel from 75.0cents to 88.2 cents a gallon.  Aircraft rent decreased $16 million(7%) as the retirement of older aircraft reduced the number of aircraftunder operating leases.  Depreciation and amortization increased $21million (9%) due to an increase in the number of owned aircraft. Cost ofsales increased $148 million (76%) primarily due to costs associated withfuel sales to third parties.  Aircraft maintenance increased $37 million(23%) as a result of higher volumes of heavy maintenance visits performedby third parties.
         Other non-operatingexpense amounted to $95 million in the second quarter of 2001 comparedto $71 million in the second quarter of 2000.  Interest expense increased$32 million (33%) due to new debt issuances during the latter part of 2000.
Six Months 2001 Compared with Six Months 2000.
         Operating revenuesdecreased $565 million (6%) and United's revenue per available seat mile(unit revenue) decreased 6% to 10.45 cents.  Passenger revenues decreased$695 million (8%) primarily due to a 7% decrease in yield to 12.66 cents. United's revenue passenger miles decreased slightly, while available seatmiles across the system remained unchanged from the first six months of2000; as a result, passenger load factor decreased 1.2 point to 70.8%. The following analysis by market is based on information reported to theU.S. Department of Transportation:   Increase (Decrease) Available SeatRevenue Passenger MilesRevenue Per Revenue Miles (Capacity)(Traffic)Passenger Mile (Yield)Domestic  (4%)  (6%)(7%)Pacific  8%  7%(6%)Atlantic13%  9%(5%)Latin America(4%)  (4%)2%  System  -%(1%)(7%)
         Cargo revenues decreased$61 million (14%) due to a 16% decrease in cargo ton miles as a resultof the discontinuation of freighter operations in the fourth quarter 2000,offset by a 2% increase in yield.  Other operating revenues grew $191million (30%) primarily due to a $178 million increase in fuel sales tothird parties.
         Operating expensesincreased $1.1 billion (13%) and United's cost per available seat mile(unit cost) increased 12%, from 10.11 cents to 11.35 cents.  Salariesand related costs increased $562 million (18%) due to new salary programsimplemented for non-contract employees, contractually-driven increasesfor employees represented by the Air Line Pilots Association, International("ALPA") and the estimated costs of contracts with the International Associationof Machinists and Aerospace Workers ("IAM") which became amendable in 2000and are currently under negotiation.  Aircraft fuel increased $230million (20%) due to a 21% increase in the average cost of fuel from 74.1cents to 89.6 cents a gallon.  Aircraft rent decreased $31 million(7%) as the retirement of older aircraft reduced the number of aircraftunder operating leases.  Depreciation and amortization increased $42million (9%) due to an increase in the number of owned aircraft. Cost of sales increased $201 million (45%) primarily due to costs associatedwith fuel sales to third parties.  Aircraft maintenance increased$47 million (13%) as a result of higher volumes of heavy maintenance visitsperformed by third parties.
         Other non-operatingexpense amounted to $189 million in the first six months of 2001 comparedto $149 million in the first six months of 2000.  Interest expenseincreased $64 million (32%) due to new debt issuances during the latterpart of 2000.  Interest income increased $22 million (61%) as a resultof increased investment balances.  Miscellaneous, net includes $12million in other foreign exchange losses and $4 million in losses on currencyoptions in 2001, compared to $10 million in losses on currency optionsin 2000.
LIQUIDITY AND CAPITAL RESOURCES
         United's total of cashand cash equivalents and short-term investments was $971 million at June30, 2001, compared to $2.1 billion at December 31, 2000.  Cash flowsfrom operating activities amounted to $336 million.  Financing activitiesincluded principal payments under debt and capital lease obligations of$124 million and $135 million, respectively.
         Property additions,including aircraft and aircraft spare parts, amounted to $1.3 billion. In the first six months of 2001, United took delivery of eight A319, sevenA320, one B767 and four B777 aircraft.  All of these aircraft werepurchased.  In addition, United acquired two B757 and one B737 aircraftoff lease during the period and retired three DC10-30 and five B727 aircraft.
         During the second quarterof 2001, United cancelled its $750 million revolving credit facility andreduced the maximum available borrowings under a separate short-term facility from $227 million to $133 million.  There were no borrowings outstandingunder this arrangement at June 30, 2001.
         At June 30, 2001, commitmentsfor the purchase of property and equipment, principally aircraft, approximated$3.8 billion, after deducting advance payments.  Of this amount, anestimated $1.5 billion is expected to be spent during the remainder of2001.  For further details, see "Contingencies and Commitments" inthe Notes to Consolidated Financial Statements.
OTHER INFORMATION
Labor Agreements
        On July 12, 2000, the Company's contracts with the IAM became amendable. The Company has been in negotiations with the IAM since December 1999 fornew contracts.  Since September 2000, the negotiations have been conductedwith the assistance of the National Mediation Board ("NMB").  Underthe terms of the Railway Labor Act, United's current agreements with theIAM remain in effect as negotiations continue.
        On March 30, 2001, the Aircraft Mechanics Fraternal Association ("AMFA")announced that it had received enough authorization cards to request theNMB to conduct an election challenging the IAM for representation of theCompany's mechanics, one of the groups represented by the IAM.  TheNMB is currently reviewing these cards, as well as other issues, to determineif an election should be held.
        The Company's contract with the Association of Flight Attendants ("AFA"),which becomes amendable in 2006, provided for a mid-term compensation conferencebeginning in the first quarter of 2001.  Pursuant to the contract,the Company and the AFA began compensation conference negotiations in February2001 and in April began arbitration proceedings.  On May 10, an arbitrationpanel concluded that United's flight attendants are not entitled to additionalcompensation at this time because United's overall flight attendant costscontinue to exceed an index of flight attendant costs at peer carriersin the U.S. airline industry.
New Accounting Pronouncements
         In June 2001, the FinancialAccounting Standards Board issued Statement of Financial Accounting StandardsNo. 141 "Business Combinations" ("SFAS No. 141") and Statement of FinancialAccounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFASNo. 142").  SFAS No. 141 is effective for combinations initiated afterJune 30, 2001 and requires the use of the purchase method in accountingfor business combinations.  SFAS No. 142 is effective for fiscal yearsbeginning after December 15, 2001 and requires companies to test all goodwilland indefinite-lived intangible assets for impairment and to cease amortizationof such assets.  The Company intends to adopt SFAS No. 142 beginningin the first quarter 2002.  The Company has not yet quantified theimpact of adopting SFAS No. 142 on the financial statements, but it couldresult in significant changes to the classification and recording of intangiblesand amortization expense currently on the books. 
OUTLOOK
        Information regarding guidance for United's outlook can be obtained fromUAL Corporation's Report on Form 10-Q for the quarter ended June 30, 2001.
         Information includedin the "Outlook" paragraphs is forward-looking and involves risks and uncertaintiesthat could result in actual results differing materially from expectedresults.  Forward-looking statements represent the Company's expectationsand beliefs concerning future events, based on information available tothe Company as of the date of this filing.  Some factors that couldsignificantly impact revenues, expenses, unit costs, capacity and earningsinclude, without limitation, the airline pricing environment; industrycapacity decisions; competitors' route decisions; the ultimate outcomeof existing litigation; the success of the Company's cost-reduction efforts;the cost of crude oil and jet fuel; the results of union contract negotiationsand their impact on labor costs and operations; operational disruptionsas a result of bad weather, air traffic control-related difficulties andlabor issues; the growth of e-commerce and off-tariff distribution channels;the effective deployment of customer service tools and resources; actionsof the U.S., foreign and local governments; foreign currency exchange ratefluctuations; the economic environment of the airline industry and theeconomic environment in general.
        Investors should not place undue reliance on the forward-looking informationcontained herein, which speaks only as of the date of this filing. United disclaims any intent or obligation to update or alter any of theforward-looking statements whether in response to new information, unforeseenevents, changed circumstances or otherwise.   
Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK
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 2000.  Significantchanges which have occurred since year-end are as follows:
Foreign Currency Risk -(Inmillions, except average contract rates)NotionalAverageEstimated AmountContractRateFairValue   (Pay)/Receive*Forwardexchange contracts   Japanese Yen - Purchased forwards$    79120.68$   (2)                            - Sold forwards$    43124.36$      -     Hong Kong Dollar - Sold forwards$    75   7.79$      -     French Franc - Purchased forwards$    50   5.05$   (6)     Euro - Purchased forwards$  152   1.27$ (17)    Currencyoptions   Japanese Yen - Purchased put options$   151118.84$    7Australian Dollar - Purchasedput options$     47    0.52$    1British Pound - Purchased putoptions$     58    1.38$    1Euro - Purchased put options$     29    0.88$    1Canadian Dollar - Purchased putoptions$     47    1.58$    -Correlation Basket Option - Sold$  332   N/A$  (4)
Price Risk (Aircraft fuel) -(Inmillions, except average contract rates)NotionalAverageEstimated AmountContractRateFairValue   (Pay)/Receive*Purchasedforward contracts - Crude oil$   45$ 26.64/bbl$  (1)Purchasedforward contracts - Heating oil$   87$ 32.16/bbl$  (4)
*Estimated fair values represent the amount United wouldpay/receive on June 30, 2001 to terminate the contracts.  
PART II.  OTHER INFORMATION

Item 6.  Exhibitsand Reports on Form 8-K.(a)     Exhibits
         A list of exhibitsincluded as part of this Form 10-Q is set forth in an Exhibit Index thatimmediately precedes such exhibits. 
(b)     Form 8-K dated April 18, 2001 to reporta press release reporting first quarter earnings.     
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf bythe undersigned thereunto duly authorized.    UNITED AIR LINES, INC.By: /s/ Douglas A. Hacker     Douglas A. Hacker     Executive Vice President -     Finance and Planning and     Chief Financial Officer     (principal financial officer)     By:/s/M. Lynn Hughitt     M. Lynn Hughitt     Vice President and Controller     (principal accounting officer)     
Dated:  August 9, 2001     Exhibit Index ExhibitNo.Description  12Computationof Ratio of Earnings to Fixed Charges   

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