****UNITEDSTATES SECURITIES AND 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, 2004**
**OR**
**[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 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, 2004CommonStock ($5 par value)205
*  Registrantis the wholly owned subsidiary of UAL Corporation (File 1-6033). Registrant became subject to filing periodic reports under the SecuritiesExchange Act of 1934 as a result of a public offering of securities whichbecame effective June 3, 1988 (Registration Nos. 33-21220 and 22-18246).  
United Air Lines, Inc.and Subsidiary Companies Report on Form 10-Q
For the Quarter EndedMarch 31, 2004
Index PARTI.FINANCIALINFORMATIONPage No.  Item1. Financial Statements  CondensedStatements of Consolidated Financial Position (Unaudited) - as of March31, 2004 and December 31, 20033  Statementsof Consolidated Operations (Unaudited) - for the three months ended March31, 2004 and 20035  CondensedStatements of Consolidated Cash Flows (Unaudited) - for the three monthsended March 31, 2004 and 20036  Notesto Consolidated FinancialStatements (Unaudited)7 Item2. Management's Discussion and Analysis of Financial Condition and Resultsof Operations17  Item3. Quantitative and Qualitative Disclosures About
Market Risk25    Item4. Controls and Procedures26PARTII.OTHERINFORMATION  Item6. Exhibits and Reports on Form 8-K27 Signatures28 ExhibitIndex29 
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
United Air Lines, Inc. and Subsidiary Companies
(Debtor and Debtor-in-Possession)
Condensed Statements of Consolidated Financial Position (Unaudited)
(In Millions)
    March 31December 31Assets20042003   Current assets:  Cash and cash equivalents$ 1,365 $ 1,163 Restricted cash661 657 Short-term investments8 52 Receivables, net954 837 Related party receivables- 8 Income tax receivables- 4 Deferred income taxes35 26 Inventories, net207 264 Prepaid expenses and other425409 3,6553,420   Operating property and equipment:  Owned17,948 17,953 Accumulated depreciation and amortization(5,257)(5,108) 12,69112,845   Capital leases2,721 2,721 Accumulated amortization(581)(555) 2,1402,166 14,83115,011   Other assets:  Investments45 47 Intangibles, net382 382 Pension assets904 904 Aircraft lease deposits488 679 Prepaid rent78 79 Other, net651663 2,5482,754    $21,034$21,185   
See accompanying Notes to Consolidated Financial Statements.  
United Air Lines, Inc. and Subsidiary Companies
(Debtor and Debtor-in-Possession)
Condensed Statements of Consolidated Financial Position (Unaudited)
(In Millions)
    March 31December 31Liabilities and Stockholder's Equity20042003   Current liabilities:  Current portions of long-term debt and  capital lease obligations$ 630 $ 689 Advance ticket sales1,669 1,330 Accrued salaries, wages and benefits2,100 2,292 Accounts payable505 492 Related party accounts payable307 211 Other1,056968 6,267 5,982   Long-term obligations under capital leases158163   Other liabilities and deferred credits:  Deferred pension liability4,976 4,747 Postretirement benefit liability1,973 1,924 Deferred income taxes157 150 Other290288 7,3967,109   Liabilities subject to compromise13,908 14,084 Commitments and contingent liabilities (Seenote)     Stockholder's equity:  Common stock at par- - Additional capital invested1,603 1,603 ESOP capital3,9883,988 Retained deficit(7,381)(6,839)Accumulated other comprehensive loss(3,290)(3,290)Receivables from affiliates(1,615)(1,615) (6,695)(6,153)    $21,034$ 21,185   
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 20042003Operating revenues:  Passenger - United Airlines$ 2,933 $ 2,548 Passenger - Regional Affiliates293 - Cargo148 164 Other 252395 3,6263,107Operating expenses:  Salaries and related costs1,241 1,524 Aircraft fuel603 571 Commissions93 73 Purchased services352 335 Aircraft rent138 202 Landing fees and other rent231 239 Depreciation and amortization228 232 Regional affiliates374 - Cost of sales187 362 Aircraft maintenance185 118 Other 297319 3,9293,975   Loss from operations(303)(868)   Other income (expense):  Interest expense(123)(147)Interest capitalized- 1 Interest income22 16 Equity in losses of affiliates(3)- Non-operating special charges- (137)Reorganization items, net(130)(249)Miscellaneous, net(6)(1) (240)(517)   Loss before income taxes(543)(1,385)Credit for income taxes--   Net loss$ (543)$(1,385)   
See accompanying Notes to Consolidated Financial Statements.  
United Air Lines, Inc. and Subsidiary Companies
(Debtor and Debtor-in-Possession)
Condensed Statements of Consolidated Cash Flows (Unaudited)
(In Millions)
 Three Months Ended March 31 20042003Cash and cash equivalents at beginning   of period$ 1,163$ 718   Cash flows from operating activities392(223)   Cash flows from reorganization activities:  Reorganization items, net(130)(249)Write off of Company lease certificates- 215 Increase in liabilities9324 (37)(10)   Cash flows from investing activities:  Additions to property and equipment(60)(36)Proceeds on disposition of property and  equipment7 6 Increase in restricted cash(4)(66)Decrease in short-term investments44 119 Increase in related party receivables(4)(1)Other, net(5)(32) (22)(10)   Cash flows from financing activities:  Proceeds from DIP Financing
Repayment of DIP Financing- 
(62)92 -Repayment of long-term debt(44)(65)Principal payments under capital  lease obligations(169)(53)Decrease in advances/loans with affiliates(4)(10)Aircraft lease deposits, net1481 (131)(35)   Increase (decrease) in cash and cash equivalents202 (278)   Cash and cash equivalents at end of period,  excluding restricted cash$ 1,365$ 440   Cash paid during the period for:  Interest (net of amounts capitalized)$ 157 $ 103    Non-cash transactions:  Net unrealized gain (loss) on investments$ (1)$ (2)
See accompanying Notes to Consolidated Financial Statements.  
United Air Lines, Inc. and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited)
The Company
        United Air Lines, Inc. ("United,""we," "our" or the "Company") is a wholly owned subsidiary of UAL Corporation("UAL").
Interim Financial Statements
        We prepared the consolidatedfinancial statements shown here as required by the Securities and ExchangeCommission ("SEC"). Some information and footnote disclosures normallyincluded in financial statements that meet generally accepted accountingprinciples have been condensed or omitted as permitted by the SEC. We believethat the disclosures presented here are not misleading. The financial statementsinclude all adjustments (which include only normal recurring adjustments,reorganization items and other special charges described below) that areconsidered necessary for a fair presentation of our financial positionand operating results. These financial statements should be read togetherwith the information included in our most recent Annual Report on Form10-K for the year 2003.
Voluntary Reorganization Under Chapter 11
        *Bankruptcy Proceedings.*OnDecember 9, 2002 (the "Petition Date"), UAL, United and 26 direct and indirectwholly owned subsidiaries filed voluntary petitions to reorganize theirbusinesses under Chapter 11 of the United States Bankruptcy Code in theUnited States Bankruptcy Court for the Northern District of Illinois, EasternDivision (the "Bankruptcy Court"). The Bankruptcy Court is jointly administeringthese cases as "In re: UAL Corporation, et al., Case No. 02-48191." Theconsolidated financial statements shown here include certain subsidiariesthat did not file to reorganize under Chapter 11. The assets and liabilitiesof these subsidiaries are not considered material to theConsolidatedFinancial Statements.
        As required by the BankruptcyCode, the United States Trustee for the Northern District of Illinois hasappointed an official committee of unsecured creditors (the "Creditors'Committee"). The Creditors' Committee and its legal representatives havea right to be heard on all matters that come before the Bankruptcy Courtconcerning our reorganization. There can be no assurance that the Creditors'Committee will support our positions or our plan of reorganization, andany disagreements between the Creditors' Committee and us could protractthe Chapter 11 process, hinder our ability to operate during the Chapter11 process, and delay our emergence from Chapter 11.
        With the exception of ournon-filing subsidiaries, we continue to operate our 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. In general, as debtors-in-possession,we are authorized under Chapter 11 to continue to operate as an ongoingbusiness, but may not engage in transactions outside the ordinary courseof business without the prior approval of the Bankruptcy Court.
        All vendors are being paidfor all goods furnished and services provided after the Petition Date inthe ordinary course of business. However, under Section 362 of the BankruptcyCode, actions to collect most of our pre-petition liabilities are automaticallystayed (except for liabilities relating to certain qualifying aircraft,aircraft engines and other aircraft-related equipment that are leased orsubject to a security interest or conditional sale contract). Under Section1110 of the Bankruptcy Code, actions to collect such aircraft-related pre-petitionliabilities are automatically stayed for 60 days only (our automatic stayended on February 7, 2003), except under two conditions: (a) the debtormay extend the 60-day period by agreement with the relevant financier andwith court approval; or (b) the debtor may agree to perform all of theobligations under the applicable financing and cure any defaults as requiredunder the Bankruptcy Code. If neither of these conditions is met, the financiermay demand the return of the aircraft or take possession of the propertyand enforce any of its contractual rights or remedies to sell, lease orotherwise retain or dispose of such equipment.
        We have negotiated with lessorsand lenders to restructure existing financings to reduce aircraft ownershipcosts to better reflect current market rates. To date, we have reachedagreements in principle with respect to a substantial majority of our financedaircraft. There can be no assurance, however, that those tentative arrangementswill be successfully converted to final contracts. To the extent we areunable to finalize these agreements, there can be no assurance that wewill be able to reach new agreements at comparable economics or that financierswill not repossess aircraft. Either of these outcomes, although unlikely,could have a material adverse affect on our financial and operational performance.
        We have also rejected orabandoned certain surplus aircraft to adjust our fleet size and compositionto more closely match market demand. In addition, as part of on-going negotiationswith financiers, we have converted many long-term financing arrangementsinto short-term operating leases and, in several instances, re-acquiredpreviously rejected aircraft as circumstances warranted.
        Under Section 365 of theBankruptcy Code, we may assume, assume and assign, or reject certain executorycontracts and unexpired leases, including leases of real property, subjectto the approval of the Bankruptcy Court and certain other conditions. Currently,our Section 365 rights to assume, assume and assign, or reject unexpiredleases of non-residential real estate expiring on the earlier of the dateof termination of our exclusive period to file a plan of reorganization(currently, June 30, 2004) or the date of a disclosure statement hearingin connection with a proposed plan of reorganization.
        In general, if we rejectan executory contract, unexpired lease or aircraft, it is treated as apre-petition breach of the lease or contract in question and, subject tocertain exceptions, relieves us of performing any future obligations butentitles the lessor or contract counterparty to a pre-petition generalunsecured claim for damages caused by such deemed breach and accordingly,the counterparty may file a claim against us for such damages. As a result,liabilities subject to compromise have increased, and are likely to increasein the future, as a result of damage claims created by our rejection ofvarious aircraft, executory contracts and unexpired leases. Generally,if we assume an aircraft financing agreement, executory contract or unexpiredlease we are required to cure most existing defaults under such contractor lease. We expect that the assumption of certain executory contractsand unexpired leases may convert liabilities currently shown as subjectto compromise to liabilities not subject to compromise.
        We are currently seekingmodifications to our retiree medical benefit obligations under Section1114 of the Bankruptcy Code. We have proposed modifications which wouldmake the medical benefit plan of those who retired before July 1, 2003the same as the medical benefit plan provided to employees who retire afterthat date. We have also proposed an increase in the amount of contributionsthat most individuals who retired before July 1, 2003 would have to paytowards their medical benefits. While we are currently working with retireerepresentatives to achieve consensual agreements, such an outcome is notassured. If we do not reach consensual agreements, we will seek BankruptcyCourt approval of such modifications. The Bankruptcy Court has issued anorder requiring us to file a motion seeking to modify retiree benefitsby May 21, 2004, with a hearing to follow beginning June 11, 2004, if consensualmodifications have not been reached by such date. There can be no assurance,however, that the Bankruptcy Court will adhere to this schedule or approvesuch modifications.
        To successfully exit Chapter11, we must obtain confirmation by the Bankruptcy Court of a plan of reorganization.A plan of reorganization would, among other things, resolve our pre-petitionobligations and other liabilities subject to compromise, set forth ourrevised capital structure and establish our corporate governance subsequentto exit from bankruptcy. We are currently operating under an "exclusiveperiod" which expires June 30, 2004, during which we are the only partypermitted to file a plan of reorganization. The decision as to when wewill file a plan of reorganization depends on the timing and outcome ofnumerous other ongoing matters in the Chapter 11 process. We expect tofile a plan of reorganization that provides for UAL's emergence from bankruptcy,but there can be no assurance that the Bankruptcy Court will confirm aplan of reorganization or that any such plan will be implemented successfully.
***       **DIP Financing.*Inconnection with the Chapter 11 filings, the Company arranged a debtor-in-possessionsecured financing ("DIP Financing"). The DIP Financing consists of twofacilities, a $300 million facility provided by Bank One N.A. ("Bank OneFacility") and a $1.2 billion facility provided by J.P. Morgan Chase Bank,Citicorp USA, Inc., Bank One, N.A., and The CIT Group/Business Credit,Inc. ("Club Facility"). As of March 31, 2004, we had $240 million in outstandingborrowings under the Bank One Facility and $362 million under the ClubFacility. Repayment of the Bank One Facility began in March 2004 and willbe completed by July 2004. While the Club Facility matures on July 1, 2004,we are currently in negotiations with the Club Facility lenders to extendand modify certain terms of the agreement to more favorable terms as areflection of our improved financial condition.
*        Financial StatementPresentation.*We have prepared the accompanying consolidated financialstatements in accordance with American Institute of Certified Public Accountants'Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by Entitiesin Reorganization Under the Bankruptcy Code," and on a going-concern basis,which assumes continuity of operations, realization of assets and satisfactionof liabilities in the ordinary course of business.
        SOP 90-7 requires that thefinancial statements separate transactions and events that are directlyassociated with the restructuring from the ongoing operations of the business.Accordingly, all transactions (including, but not limited to, all professionalfees, realized gains and losses, and provisions for losses) directly relatedto the reorganization and restructuring of the business are reported separatelyin the financial statements. The Statements of Consolidated FinancialPosition distinguish pre-petition liabilities subject to compromiseboth from those that are not subject to compromise as well as from allpost-petition liabilities. Liabilities subject to compromise are reportedat the amounts expected to be allowed by the Bankruptcy Court, even ifthey may be settled for lesser amounts.
        In addition, as a resultof the Chapter 11 filings, the realization of assets and the satisfactionof liabilities (without substantial adjustments and/or changes in ownership)are subject to uncertainty. While operating as debtors-in-possession underthe protection of Chapter 11 and subject to approval of the BankruptcyCourt and the terms of the applicable DIP Financing covenants, or otherwiseas permitted in the ordinary course of business, we may sell or disposeof assets (including aircraft) and liquidate or settle liabilities forsome amounts other than those reflected in the consolidated financial statements.Further, our plan of reorganization could materially change the amountsand classifications in the historical consolidated financial statements.
        Pursuant to the BankruptcyCode, we have filed schedules with the Bankruptcy Court identifying ourassets and liabilities as of the Petition Date, while our creditors havebeen able to file proofs of claim with the Bankruptcy Court. The totalamount of claims filed with the Bankruptcy Court far exceeds our estimateof ultimate liability. We believe that many of these claims are invalidbecause they are duplicative, are based upon contingencies that have notoccurred, or are otherwise overstated. Differences in amount between claimsfiled by creditors and liabilities shown in our records are being investigatedand resolved in connection with our claims resolution process. That processhas commenced and, in light of the number of claims asserted, will takesignificant time to complete. For this reason, the ultimate number andallowed amounts of such claims cannot yet be determined.
New Accounting Pronouncements - Consolidation of Variable InterestEntities
        Issued in January 2003, FinancialAccounting Standards Board Interpretation No. 46, "Consolidation of VariableInterest Entities" ("FIN 46") and subsequently revised in December 2003with the Financial Accounting Standards Board ("FASB") interpretation ofFIN 46 ("FIN 46R"), requires the "primary beneficiary" of a variable interestentity ("VIE") to include the VIE's assets, liabilities and operating resultsin its consolidated financial statements. FIN 46 also requires the disclosureof information about the VIE's assets and liabilities and the nature, purposeand activities of consolidated VIEs in its financial statements. Additionally,FIN 46R requires disclosure of information about the nature, purpose andactivities for unconsolidated VIEs in which a company holds a significantvariable interest.
        Certain legal entities establishedby various governmental municipalities for the purpose of issuing specialfacility revenue bonds are not subject to the provisions of FIN 46R. Also,certain entities with which the Company has capacity purchase agreementsare not consolidated as these arrangements are not considered VIEs, butrather businesses as defined by FIN 46R, or because United is not consideredthe primary beneficiary of the VIE. We have also evaluated our interestsin VIEs including those related to financing and leasing of aircraft andcertain fuel consortia arrangements that are used to maintain fuel storageand distribution facilities. We have concluded that while the Company holdsinterests in these VIEs, we are not the primary beneficiaries of theseVIEs.
        The provisions of FIN 46Rwere effective immediately for any interest in a VIE acquired after January31, 2003 and beginning in the fourth quarter of 2003 for any interest ina VIE that was acquired before February 1, 2003. The FASB deferred theeffective date of FIN 46R to the first quarter of 2004 for any other interestsin a VIE acquired before February 1, 2003. As of March 31, 2004, we haveadopted FIN 46 and FIN 46R with no impact to our financial statements.
        United has 120 aircraft operatingleases where the lease contains a fair market value purchase option. Theseleases are subject to and will become effective upon the acceptance ofthe leases by United and confirmation of the plan of reorganization. Inaddition, the Company has 94 operating leases that have either fixed priceor fair market value purchase options the majority of which the Companyexpects to renegotiate under the Section 1110 process. United does notguarantee the residual value of these aircraft.
Stock Option Accounting
        We account for stock-basedemployee compensation plans under Accounting Principles Board Opinion No.25, "Accounting for Stock Issued to Employees." We have not incurred anystock-based employee compensation cost for stock options, as all optionsgranted under the 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 SFAS No. 123, "Accounting for Stock-BasedCompensation," the Company's net loss would have been reported as the proforma amounts shown below: (In millions)Three Months  Ended March 31  20042003  Net loss, as reported$ (543)$ (1,385)  Less: Total compensation expensedetermined under    fair value method(2)(5)   $ (545)$ (1,390)  
Income Taxes
        Beginning in the third quarterof 2002, we established a valuation allowance against our net deferredtax asset. Thus, United has a zero percent effective tax rate for both2003 and 2004. As of March 31, 2004, our valuation allowance totaled $2.5billion. Further, we have determined that it is more likely than not thatour gross deferred tax assets, net of valuation allowances at March 31,2004, will be realized through the reversals of existing deferred tax credits.
Retirement and Postretirement Plans
        In December 2003, the FASBrevised Statement of Financial Accounting Standards No. 132, "Employers'Disclosures about Pensions and Other Postretirement Benefits" ("SFAS 132")effective for all interim periods following December 15, 2003. SFAS 132revises employers' disclosures about pension plans and other postretirementbenefit plans including disclosures made in interim periods. While it doesnot change the measurement or recognition of those plans, it requires additionalinterim disclosures as detailed below.
        Our net periodic benefitcost included the following components for the three months ended March31: (In millions)Pension BenefitsOther Benefits 20042003 20042003 Service cost$ 58 $ 99  $ 11 $ 30  Interest cost 198 275  50 80  Expected return on plan assets(180)(242) (2)(3) Amortization of prior servicecost      including transition obligation/(asset)20 31  (25)(20) Recognized actuarial (gain)/loss2725 2836 Net periodic benefit costs$ 123 $ 188 $ 62$ 123 
        We are currently requiredto contribute approximately $725 million to our pension plans in 2004 aftergiving consideration to the estimated impact of the Pension Funding EquityAct enacted in April 2004. We made $17 million in contributions to ourplans in the three months ended March 31, 2004 and $110 million in contributionsto the plans on April 15, 2004.
Restricted Cash
        At March 31, 2004, Unitedhad $661 million in restricted cash, primarily representing security forworker compensation obligations, security deposits for airport leases andreserves with institutions that process the Company's sales.
Liabilities Subject to Compromise
        Liabilities subject to compromiserefers to obligations which will be accounted for under a plan of reorganization,including claims incurred prior to the Petition Date. They result fromknown or potential claims to be resolved through the Chapter 11 process,and remain subject to future adjustments arising from negotiated settlements,actions of the Bankruptcy Court, rejection of executory contracts and unexpiredleases, the determination as to the value of any collateral securing claims,proofs of claim or other events. To date, such adjustments, as reflectedin reorganization expense, have been material and we anticipate that futureadjustments will be material as well. Payment terms for these amounts willbe established in connection with the Chapter 11 process.
        At March 31, 2004, we hadliabilities subject to compromise of $13.9 billion consisting of:  (In millions)  Long-term debt, including accruedinterest$ 7,539  Aircraft-related accruals anddeferred gains3,302  Capital lease obligations, includingaccrued interest1,783  Intercompany payables and loans261  Accounts payable295  Other 728  $ 13,908
United Express
        United has marketing agreementsunder which independent regional carriers, flying under the United Express("UAX") name, feed passengers to other United-branded flights. During thesecond half of 2003, we reached agreements with several UAX carriers, includingAir Wisconsin Airlines Corporation, Mesa Air Group, SkyWest Airlines andTrans States Airlines to operate select portions of our United Expressservice.
        Historically, we paid ourUAX partner carriers on a fee-per-departure basis and included the revenuesderived from them in passenger revenue, net of expenses. However, the long-termagreements we are currently entering into with these and other UAX carrierschange the previous fee-per-departure arrangement to a fixed rate and capitalreimbursement arrangement. Thus, in accordance with Emerging Issues TaskForce No. 01-08, "Determining Whether an Arrangement Contains a Lease"("EITF 01-08"), we have concluded that the revised agreements are leases.
        EITF 01-08 is effective fornew arrangements or arrangements modified after the beginning of the thirdquarter of 2003. Accordingly, based on the terms in the new agreements,we have begun recording revenues and expenses related to these UAX carriersat gross, rather than net. As we were not able to negotiate a comparable,market-based arrangement with Atlantic Coast Airlines ("ACA"), revenuesand expenses related to ACA will continue to be reflected net in passengerrevenues for the duration of our relationship with ACA. (See "United Express- Atlantic Coast Airlines" in Management's Discussion and Analysis of FinancialCondition and Results of Operations for an update on the United Expressrelationship with ACA.)
        Amounts included in passengerrevenues for the three-month period (which represent only the ACA relationshipin 2004, and all UAX carriers in the prior year) were:  Net revenues (net expenses)(In millions)Three Months Ended March 31 20042003United Express revenues$ 147 $ 309 United Express expenses(177)(404)Net amount in passenger revenues$ (30)$ (95)
Segment Information
        United has a global routenetwork designed to transport passengers and cargo between destinationsin North America, the Pacific, the Atlantic and Latin America. These regionsconstitute United's four reportable segments. For internal management anddecision-making purposes, we have allocated revenues and expenses (as incorporatedin our consolidated financial statements) to these segments as follows: (In millions)Three Months Ended March 31, 2004 United Air Lines, Inc.Reportable North  LatinSegment AmericaPacificAtlanticAmericaTotalRevenue$2,422 $ 624 $  461 $ 119 $ 3,626 Loss before     reorganization items$ (360)$ (18)$ (28) $ (7)$ (413)(In millions)Three Months Ended March 31, 2003 United Air Lines, Inc.Reportable North  LatinSegment AmericaPacificAtlanticAmericaTotalRevenue$ 2,005 $ 577 $ 411 $ 114 $ 3,107 Loss before     special charges     and reorganization items$ (687)$ (150)$ (117)$ (45)$ (999) Three Months Ended  March 31 (In millions)20042003  Total loss for reportable segments$ (413)$ (999)  Special charges- (137)  Reorganization items, net(130)(249)  Total loss before income taxes $ (543)$ (1,385)  
Other Comprehensive Income Total comprehensive income(loss):Three Months  Ended March 31 (In millions)20042003  Net loss$ (543)$ (1,385)  Unrealized gains (losses) - 4   Total comprehensive loss$ (543)$ (1,381)  
Reorganization Items
        In connection with our Chapter11 filings, we recognized $130 million of largely non-cash reorganizationexpenses in the first quarter 2004 and $249 million in the first quarter2003.   Three Months  Ended March 31 (In millions)20042003 Aircraft rejection charges$ 121 $ -  Transfer of lease certificates- 215  Professional fees34 34  Severance and employee retention7 -  Interest income(4)(3) Other (28)3   $ 130$ 249     
        Aircraft rejection chargesinclude our estimate of claims resulting from United's rejection of certainaircraft financing obligations (and return of the associated aircraft)as part of the bankruptcy process.
        In the first quarter of 2003,we renegotiated certain off-balance sheet leases as part of the Section1110 process. Under the terms of the revised leases, we surrendered ourinvestment in the junior portion of the original lease debt to the originalequity participant. As a result, our investment in the corresponding leasecertificates was reduced to zero, resulting in a $215 million non-cashcharge in reorganization items.
Special Charges
        On April 1, 2003, Air Canadafiled 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 non-operating special charge of $137 million inconnection with Air Canada's CCAA filing. The charge included $46 millionfor the impairment of our investment in Air Canada preferred stock and$91 million to record a liability resulting from our guarantee of Air Canadadebt. We consider this liability to be a pre-petition obligation and accordingly,have classified it in liabilities subject to compromise.
Reconciliation of Accruals
        In the period following September11, 2001, we recorded an accrual of $162 million to reflect our estimateof the early termination fees associated with certain contracts. This obligationhas yet to be resolved, and therefore remains included in our overall liabilitiessubject to compromise in its entirety. Following is a reconciliation ofactivity related to the accruals for early termination fees as of March31, 2004 (liabilities are included in subject to compromise):  (In millions)Early termination fees Balance at December 31, 2003$ 162  Accruals-  Payments-  Balance at March 31, 2004$ 162 
Related Party Transactions
        United recognized the followingamounts related to transactions with UAL Loyalty Services, Inc. ("ULS")in 2004 and 2003: (inmillions)ThreeMonths EndedMarch 31 20042003Revenues$82 $93 Commissionexpense and purchased services(13)(12)Interestincome12 11 
        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.
Commitments and Contingencies
        United has certain contingenciesresulting from litigation and claims (including environmental issues) encounteredin the ordinary course of business. Management believes, after consideringa number of factors, including (but not limited to) the views of legalcounsel, the nature of contingencies to which we are subject and priorexperience, that the ultimate disposition of these contingencies will notmaterially affect the Company's consolidated financial position or resultsof operations.
        We record liabilities forlegal and environmental claims against us in accordance with generallyaccepted accounting principles. These amounts are recorded based on ourassessments of the likelihood of their eventual settlements. The amountsof these liabilities could increase or decrease in the near term, basedon revisions to estimates relating to the various claims. In addition,as a result of the bankruptcy filing, as of the Petition Date, virtuallyall pending litigation is stayed, and absent further order of the BankruptcyCourt, no party, subject to certain exceptions, may take any action, againsubject to certain exceptions, to recover on pre-petition claims againstus. Accordingly, we have classified certain of these liabilities as liabilitiessubject to compromise.
        The Company anticipates thatits liability from claims arising from the events of September 11, 2001will be significant; however, we believe that, under federal law, our liabilitywill be limited to our insurance coverage.
        At March 31, 2004, commitmentsfor the purchase of property and equipment, principally aircraft, approximated$1.6 billion, after deducting advance payments. Our current commitmentswould require the payment of an estimated $0.1 billion in 2004, $0.4 billionin each of 2005 and 2006, $0.5 billion in 2007 and $0.2 billion in 2008and thereafter, primarily for the purchase of A319, A320 and B777 aircraft.It is likely that the amount and timing of these obligations will change,and could potentially be eliminated in their entirety. Additionally, thedisposition of advance payments to the manufacturers of $161 million issubject to the ultimate outcome of these discussions.
Item 2.  Management's Discussion and Analysis of FinancialCondition and Results of Operations
Chapter 11 Reorganization
        On December 9, 2002, UAL,United and 26 of its subsidiaries filed voluntary petitions to reorganizetheir businesses under Chapter 11 of the United States Bankruptcy Code.For further details regarding the Chapter 11 Cases, see "Voluntary ReorganizationUnder Chapter 11" in the Notes to Consolidated Financial Statements.In addition, specific information pertaining to our bankruptcy filing maybe obtained through the website www.pd-ual.com.
        We are working towards emergingfrom Chapter 11 in the summer of 2004. That timing depends upon, amongother things, establishment of our post-exit capital structure and financing,as well as the timely and successful confirmation and implementation ofa plan of reorganization. The rights and claims of various creditors andsecurity holders will also be determined by the plan. At this time, itis not possible to predict accurately the effect of the Chapter 11 reorganizationprocess on our business, nor can we make any predictions concerning howcertain claims will be valued in the bankruptcy proceedings. However, wecurrently believe that UAL's presently outstanding equity securities willhave no value and expect that those securities will be canceled under anyproposed plan of reorganization. For this reason, we urge that cautionbe exercised with respect to existing and future investments in any UALequity security.
        We are currently operatingunder an "exclusive period" which expires June 30, 2004, during which weare the only party permitted to file a plan of reorganization. We believethe additional time will ensure that our plan of reorganization reflectsthe actual outcome of issues critical to our restructuring, including ourpending application for a federal loan guarantee from the Air TransportationStabilization Board ("ATSB"), Section 1114 proposed changes to retireemedical benefits, Section 1110 aircraft financing restructuring efforts,municipal bond obligations and the claims resolution process.
      *Federal Loan Guarantee.* In December 2003, we updated ourapplication for a federal loan guarantee from the ATSB in conjunction withreceiving conditional commitments from J.P. Morgan Chase Bank and CiticorpUSA, Inc., for $2 billion in exit financing. These conditional commitmentsexpire on June 30, 2004 and if necessary we expect to, but have no assuranceswe can, extend that date should the ATSB require additional time to reviewour application.
        Based on our projected futureliquidity needs, we believe that $2 billion is the amount needed to optimallyrun our operations and would enable us to achieve and maintain a levelof liquidity comparable to that of the rest of the airline industry, therebyenabling us to effectively compete. Absent an ATSB loan guarantee, ourability to access the capital markets is highly uncertain. As of the dateof this filing, the ATSB has not yet reached a decision on our application.
*        Retiree Medical Benefits.*Aspart of the Chapter 11 process, we are also seeking, under Section 1114of the Bankruptcy Code, to modify the medical benefits we currently provideto our approximately 35,000 retired employees who retired before July 1,2003. We have proposed modifications which would make the medical benefitplan of those who retired before July 1, 2003 the same as the medical benefitplan now provided to employees who retire after that date. We have alsoproposed that most individuals who retired before July 1, 2003 would haveto pay increased contributions towards their coverage. We estimate thatthese modifications would enable us to realize over $250 million in cashsavings over five years. While we are currently working with retiree representativesto achieve consensual agreements, this outcome is not assured. If we donot reach consensual agreements, we will seek Bankruptcy Court approvalof such modifications. The Bankruptcy Court has issued an order requiringus to file a motion to modify retiree benefits by May 21, 2004, with ahearing to follow beginning June 17, 2004, if consensual modificationshave not been reached by such date. There can be no assurance, however,that the Bankruptcy Court will adhere to this schedule or approve suchmodifications.
*        Section 1110 AircraftRestructuring.* Under Section 1110 of the Bankruptcy Code we have negotiatedwith lessors and lenders to restructure existing financings to reduce aircraftownership costs to better reflect current market rates. To date, we havereached agreements in principle with respect to a substantial majorityof our financed aircraft. There can be no assurance, however, that thosetentative arrangements will be successfully converted to final contracts.To the extent we are unable to finalize these agreements, there can beno assurance that we will be able to reach new agreements at comparableeconomics or that financiers will not repossess aircraft. Either of theseoutcomes, although unlikely, could have a material adverse affect on ourfinancial and operational performance.
        In accordance with Section1110 of the Bankruptcy Code, we have also rejected or abandoned certainsurplus aircraft to adjust our fleet size and composition to more closelymatch market demand. As part of ongoing negotiations, we have also, onoccasion, subsequently re-acquired rejected aircraft, under favorable financingarrangements, to optimize our overall cost of aircraft ownership, supportoperational needs and/or to take advantage of marketplace opportunities.In addition, we have converted many longer-term financing arrangementsinto short-term operating leases, and reduced the outstanding obligationsand payment termson other aircraft financings. Through this process, weexpect to achieve cash savings of approximately $900 million annually overthe next five years. (See "Voluntary Reorganization Under Chapter 11" oftheNotes to Consolidated Financial Statements for details on Section1110 of the Bankruptcy Code.)
        *Municipal Bond Obligations.*  At March 31, 2004, we had approximately $1.7 billion in special facilitiesrevenue bonds ("municipal bonds") outstanding that were issued on behalfof United to build or improve airport-related facilities. The Company leasesfacilities at airports pursuant to lease agreements where municipal bondsfunded at least some of the airport-related projects.
        During 2003, we filed fourcomplaints for declaratory judgment and corresponding motions for temporaryrestraining order concerning municipal bonds issued for facilities at theDenver International Airport, the New York City - John F. Kennedy InternationalAirport ("JFK"), the San Francisco International Airport ("SFO"), and theLos Angeles International Airport ("LAX"). In each case, we sought clarificationof our obligations under the applicable municipal bonds, and the protectionof our rights concerning related airport lease agreements at the applicableairport.
        On March 30, 2004, the BankruptcyCourt granted our motions for summary judgment with respect to the JFK,SFO and LAX municipal bonds, holding that our payment obligations relatedto airport improvements at these sites are not obligations arising under"leases" pursuant to Section 365 of the Bankruptcy Code. Based on thisruling, the outstanding $248 million in principal and interest in connectionwith these bonds is considered pre-petition debt. The rights and claimsof these bondholders, therefore, will be determined by our plan of reorganization.
        In our adversary proceedinginvolving the Denver airport, however, the Bankruptcy Court did not grantour motion for summary judgment. Rather, the Bankruptcy Court found thatour payment obligations related to airport improvements at the Denver airport(which represents approximately $261 million of debt) are obligations arisingunder a true lease. In accordance with the Bankruptcy Court's order, wepaid $27 million into escrow (pending the outcome of our appeal) for theApril 2003, October 2003 and April 2004 interest payments related to theDenver airport municipal bonds.
        In April 2004, the defendantsin the SFO and JFK adversary proceedings appealed the Bankruptcy Court'sruling, and we expect the defendants in the LAX adversary proceeding todo the same. Also, in April, United appealed the Bankruptcy Court's rulingwith regard to the Denver airport. At the time of this filing, the BankruptcyCourt has transferred the SFO, JFK and Denver appeals to the Federal DistrictCourt for the Northern District of Illinois. The District Court has notset a schedule for these appeals.
        Similarly, in September 2003,we filed a complaint for declaratory judgment for all seven municipal bondissues relating to our facilities at Chicago O'Hare International Airport("O'Hare") (which represents approximately $601 million in debt), seeking,among other things, a declaration that a certain cross-default provisionin the O'Hare airport lease is unenforceable. At the time of this filing,the Bankruptcy Court has not ruled on this matter. While that case is pendingand as ordered by the Bankruptcy Court, we have paid into escrow paymentstotaling $15 million related to the O'Hare municipal bonds for March, April,May, September, October and November of 2003 and for March and April of2004.
        Pending the Bankruptcy Court'sruling, we are unable to predict what, if any, action might be taken inthe future by either the bondholders or the airport authorities as a resultof United's failure to pay these O'Hare contractual obligations. However,we believe that the Bankruptcy Court's orders substantially reduce therisk of any declared default by providing us an opportunity to make requiredpayments and preserve our rights under the leases.
        *Claims Resolution Process.*As permitted under the bankruptcy process, our creditors have filed proofsof claim with the Bankruptcy Court. The total amount of such claims filedfar exceeds our estimate of ultimate liability. We believe that many ofthese claims are invalid because they are duplicative, are based upon contingencieswhichhave not occurred, have been amended or superseded by later filed claims,or are otherwise overstated. Differences in amount between claims filedby creditors and liabilities shown in our records are being investigatedand resolved in connection with our claims resolution process. While wehave made significant progress to date, we expect this process to continuefor some time and believe that further reductions to the claims registerwill enable us to determine with more precision the likely range of creditordistributions under a proposed plan of reorganization. At this time, theultimate number and allowed amount of such claims cannot be determined.
Pension Legislation
        On April 10, 2004, the Presidentsigned into law the Pension Funding Equity Act of 2004 (the "Act"). TheAct provides temporary pension funding relief for U.S. companies by replacingthe interest rate on the discontinued 30-year Treasury bond with a ratebased on a composite of long-term corporate bonds for years 2004 and 2005,which lowers required pension funding obligations (for United as well asfor most companies that sponsor defined benefit pension plans) during thesetwo years. In addition, the Act permits airlines and steel companies toelect to pay reduced Deficit Reduction Contributions for their under-fundeddefined benefit pension plans, which has the effect of deferring a portionof our previously scheduled 2004 and 2005 pension funding obligations tofuture years.
        In total, the Act reducedour minimum required pension funding obligations from $1.1 billion to $0.7billion in 2004. It may also change the pattern of our 2005 to 2008 contributionsdepending on future economic conditions, asset returns, and interest rates.However, our overall expected funding contributions over the 2004 to 2008time period remains unchanged at approximately $4.1 billion. Significantfuture changes to the Company's demographic mix, funded status, regulatoryrequirements, projected obligations and expected benefit disbursementscould also impact future funding decisions. As a result, actual futurecontributions may differ materially.
        In light of the passage ofthe Act, we withdrew our applications for certain pension funding waivers,which were filed in October 2003 with the Internal Revenue Service.
United Express - Atlantic Coast Airlines
        On April 2, 2004, the Companyand Atlantic Coast Airlines, Inc. ("ACA") agreed to end our United Express("UAX") relationship and entered into a formal transition agreement providingfor an orderly transition of UAX flying and ground handling operationsbetween June 3 and August 4, 2004. On April 16, 2004, the Bankruptcy Courtapproved both the rejection of our United Express agreement with ACA andthe transition agreement.
        As part of our transitionplan, we will replace ACA with a combination of six regional airlines (andsome United Airlines mainline service), who will also assume ground-handlingresponsibilities at Chicago O'Hare, Washington Dulles and the spoke cities.To support this transition, we are expanding our relationship with currentUAX partners Air Wisconsin Airlines Corporation, Mesa Air Group and SkyWestAirlines. We have also entered into new agreements with Chautauqua Airlines,Republic Airlines and Shuttle America to operate thirty-two regional jetsand ten turbo-prop aircraft under the United Express brand.
Results of Operations
*        Summary of Results*.The air travel business is subject to seasonal fluctuations. United's operationsare often adversely affected by winter weather and our first- and fourth-quarterresults normally reflect reduced travel demand. Historically, operatingresults are better in the second and third quarters. However, in the periodssince the September 11 terrorist attacks (which has also seen the eruptionof hostilities in Iraq as well as the emergence of the SARS epidemic inAsia) overall customer demand and hence revenue (as well as typical seasonalitypatterns) have been severely disrupted across the airline industry.
        Not unexpectedly, we experiencedunder-performance in revenues following the Chapter 11 filings in Decemberof 2002. This under-performance accelerated in the first quarter of 2003as weak economic conditions, the outbreak of war in Iraq and aggressivefare competition with low-cost competitors contributed to a 9% drop inpassenger unit revenue in the first quarter of 2003 versus the same periodof 2002 (as compared to a 4% drop for the airline industry overall). Throughoutthe balance of 2003, we implemented a number of marketing, sales, inventorymanagement and pricing actions to restore customer confidence, stimulatedemand and increase revenue. As a result of these actions, we out-performedthe industry in yield, load factor and passenger unit revenue growth performanceduring the first quarter of 2004, as passenger unit revenue grew by 14%,on a 1% increase in capacity, as compared to a 6% increase for the overallairline industry.
        United had an operating lossof $(303) million in the first quarter of 2004, a $565 million improvementover the first quarter of 2003. United's net loss in the first quarterof 2004 was $(543) million, compared to $(1.4) billion in the same periodof 2003.
        During the third quarterof 2003, we began recording revenues and expenses related to certain UnitedExpress carriers at gross, rather than net. See "United Express" in theNotesto Consolidated Financial Statements.
        The first quarter 2004 resultsinclude $130 million in reorganization items recorded in connection withour bankruptcy proceedings and $13 million (included in Miscellaneous,net) to write-down certain non-operating aircraft to their net realizablevalue. The first quarter 2003 results included $249 million in reorganizationitems as well as $137 million of non-cash asset impairments related tothe bankruptcy filing of our Star Alliance partner Air Canada. See "SpecialCharges" in the Notes to Consolidated Financial Statements.
        Specific factors affectingour consolidated operations for the first quarter of 2004 are describedbelow.
        *First Quarter 2004Compared with First Quarter 2003.*  Operating revenues increased$519 million (17%) driven by a 6% rise in traffic and 9% increase in yieldon slightly higher capacity. The following analysis by market is basedon information reported to the U.S. Department of Transportation:  Increase (Decrease) Available SeatRevenue Passenger MilesRevenue Per Revenue Miles (Capacity)(Traffic)Passenger Mile (Yield)Domestic2%4% 9%Pacific(2%)11% 9%Atlantic2% 10% 15%Latin America(13%)(2%)16%System1% 6% 9%
        Cargo revenues decreased$16 million (10%) largely due to a 16% decrease in cargo ton miles. Otheroperating revenues decreased $143 million (36%) primarily as the resultof a $160 million decline in fuel sales to third parties. Passenger revenueswere increased by an out of period adjustment of approximately $60 million.
        Operating expenses decreased$46 million (1%) and United's mainline unit cost (operating expenses, excludingregional affiliates costs per available seat mile) decreased 11%. Salariesand related costs decreased $283 million (19%) primarily due to productivityimprovements enabled by new labor agreements for all employee groups. Aircraftfuel increased $32 million (6%) due to rising fuel prices. Aircraft rentdecreased $64 million (32%) due to the restructuring of aircraft financingsunder Section 1110 of the Bankruptcy Code. Cost of sales decreased $175million (48%) due to lower fuel sales. Aircraft maintenance increased $67million (57%) due to increases in purchased maintenance, including contractedmaintenance and maintenance materials. This increase is largely drivenby higher levels of outsourcing and is slightly offset by lower salarycosts. In line with higher commissionable revenues, commission expenseincreased $20 million (27%).
        Other non-operating expenseamounted to $110 million in the first quarter of 2004, compared to $131million in the first quarter of 2003, excluding non-operating special chargesand reorganization items. Inclusive of non-operating special charges andreorganization items, other non-operating expense amounted to $240 millionin the first quarter of 2004, compared to $517 million in the first quarterof 2003. For details on the special charges and reorganization items, see"Reorganization Items" and "Special Charges" in the Notes to ConsolidatedFinancial Statements.
Liquidity and Capital Resources
        United's total of cash, cashequivalents and short-term investments, including restricted cash, was$2.0 billion at March 31, 2004, compared to $1.9 billion at December 31,2003.
        As of March 31, 2004, wehad $661 million in restricted cash, primarily representing security forworker compensation obligations, security deposits for airport leases andreserves with institutions that process our sales. Prior to 2002, we metmany of these obligations through surety bonds or a secured letter of creditfacility; however, such facilities are more difficult to access and havebecome largely unavailable to us. As a result, we may be required to postadditional cash collateral to support such obligations in the future.
        During the first three monthsof 2004, we generated $455 million of cash from operations excluding a$63 million retro-wage payment for IAM- and AMFA-represented employees($392 million of cash from operations inclusive of the retro-wage payment).Overall, total cash and cash equivalents rose by $202 million during thequarter, as compared to a net cash outflow of $278 million during the sameperiod in 2003.
        During the first three monthsof 2004, we contributed $17 million (and then an additional $110 millionon April 15) towards our 2004 pension obligation. We are required to contributea further $600 million in 2004 to our pension plans. For further detailssee "Retirement and Post-Retirement Plans" in the Notes to ConsolidatedFinancial Statements.
        Property additions, includingaircraft and aircraft spare parts, amounted to $60 million. In the firstthree months of 2004, we re-acquired two B737, one B757, and one B777 aircraft(all of which were previously rejected) and rejected two B737, one B747and one B777 under Section 1110 of the Bankruptcy Code. In addition, twoB767 aircraft were transferred to non-operating status.
        Financing activities includedprincipal payments under debt and capital lease obligations of $44 millionand $169 million, respectively. These amounts represent payments made underSection 1110 elections for aircraft-secured obligations which are currentlyclassified as liabilities subject to compromise. During the first quarterof 2004, we made $62 million in principal and interest payments towardsthe DIP Financing.
        We expect to spend an estimated$0.1 billion during the remainder of 2004 for the purchase of propertyand equipment. At March 31, 2004, commitments for the purchase of propertyand equipment, principally aircraft, approximated $1.6 billion, after deductingadvance payments. For further details, see "Commitments and Contingencies"in the Notes to Consolidated Financial Statements.
Outlook
        Information regarding guidancefor United's 2004 outlook can be obtained from UAL Corporation's QuarterlyReport on Form 10-Q for the quarter ended March 31, 2004.
        Certain statements throughoutManagement'sDiscussion and Analysis of Financial Condition and Results of Operationsare 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 our operationsand business environments that may cause actual results to differ materiallyfrom any future results expressed or implied in such forward-looking statements.Factors that could significantly affect load factor and capacity include,without limitation, the following: our ability to continue as a going concern;our ability to operate pursuant to the terms of the DIP Financing; risksassociated with (i) third parties seeking and obtaining court approvalto terminate or shorten our exclusive period to propose and confirm oneor more plans of reorganization, for the appointment of a Chapter 11 trusteeor to convert the cases to Chapter 7 cases, and (ii) other legal proceedingsassociated with the Chapter 11 process; our ability to obtain court approvalwith respect to motions in the Chapter 11 proceeding prosecuted by us fromtime to time; our ability to develop, prosecute, confirm and consummateone or more plans of reorganization with respect to the Chapter 11 process;the potential adverse impact of the Chapter 11 filings on our liquidityor results of operations; the costs and availability of financing; ourability to execute our business plan; our ability to attract, motivateand/or retain key employees; our ability to attract and retain customers;demand for transportation in the markets in which we operate; general economicconditions; the effects of any hostilities or act of war or any terroristattack; the ability of other air carriers with whom we have alliances orpartnerships to provide the services contemplated by the respective arrangementswith such carriers; the costs and availability of aircraft insurance; thecosts of aviation fuel; the costs associated with security measures andpractices; competitive pressures on pricing (particularly from lower-costcompetitors); government legislation and regulation; and other risks anduncertainties set forth from time to time in our reports to the UnitedStates Securities and Exchange Commission. Consequently, the forward-lookingstatements should not be regarded as representations or warranties by theCompany that such matters will be realized. We disclaim any intent or obligationto update or revise any of the forward-looking statements, whether in responseto new information, unforeseen events, changed circumstances or otherwise. 
Item 3.Quantitative and Qualitative Disclosures About MarketRisk
For information regarding our exposure to certain market risks, seeItem7A. Quantitative and Qualitative Disclosures About Market Risk in United'sAnnual Report on Form 10-K for the year 2003.
Interest Rate Risk -(In millions, except averagecontract rates)NotionalAverageEstimated AmountContract RateFair Value   (Pay)/Receive*Interest rate swap$ 1307.56%$ (29) 
*Estimated fair values represent the amount United wouldpay/receive on March 31, 2004 to terminate the contracts.  
Item 4.  Controls and Procedures
         An evaluation was carriedout under the supervision and with the participation of the Company's management,including the Chief Executive Officer ("CEO") and Chief Financial Officer("CFO"), of the effectiveness of the Company's disclosure controls andprocedures as of March 31, 2004.  Based on that evaluation, the Company'smanagement, including the CEO and CFO, has concluded that the Company'sdisclosure controls and procedures are effective. During the first quarterof 2004, there was no change in the Company's internal control over financialreporting that has materially affected, or is reasonably likely to materiallyaffect, the Company's internal control over financial reporting.  
PART II.  OTHER INFORMATION
Item 6.  Exhibits and 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) Reports on Form 8-K
Form 8-K dated January 27, 2004 attaching the Company's Monthly OperatingReport for the period December 1, 2003 through December 31, 2003.
Form 8-K dated January 27, 2004 attaching the Company's quarterly andannual earnings release.
Form 8-K dated February 26, 2004 attaching the Company's Monthly OperatingReport for the period January 1, 2004 through January 31, 2004.
Form 8-K dated March 25, 2004 attaching the Company's Monthly OperatingReport for the period February 1, 2004 through February 29, 2004.        SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this quarterly report on Form 10-Q for thequarter ended March 31, 2004 to be signed on its behalf by the undersignedthereunto duly authorized on the 30th day of April, 2004.   UNITED AIR LINES,INC. By:  /s/Frederic F. BraceFrederic F. BraceExecutive VicePresident andChief FinancialOfficer(principal financialofficer)  By:  /s/ M. Lynn HughittM. Lynn HughittVice President and Controller(principal accounting officer)   Exhibit Index Exhibit No.Description     12.1Computation of Ratio of Earnings to Fixed Charges   31.1Certification of the Principal Executive OfficerPursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-OxleyAct of 2002)   31.2Certification of the Principal Financial OfficerPursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-OxleyAct of 2002)   32.1Certification of the Chief Executive OfficerPursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)   32.2Certification of the Chief Financial OfficerPursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)         

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