****FORM10-Q**
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended September 30, 2002
OR
[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE
SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from __________ to __________
                  Commission file number 33-21220*  
UNITED AIRLINES, INC.(Exact name of registrant as specified in its charter)
    Delaware36-2675206(Stateor other jurisdiction of(I.R.S.Employerincorporationor organization)IdentificationNo.)  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.  OutstandingatClassSeptember30, 2002CommonStock ($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).
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.  
United Air Lines, Inc.and Subsidiary Companies Report on Form 10-QFor the Quarter EndedSeptember 30, 2002
Index PARTI.FINANCIALINFORMATIONPage No. Item1.  Financial Statements  CondensedStatements of Consolidated Financial Position - as of September 30, 2002(Unaudited) and December31, 20013  Statementsof Consolidated Operations (Unaudited) - for the three months endedSeptember 30, 2002 and 20015  CondensedStatements of ConsolidatedCash Flows (Unaudited) -for the nine months ended September 30,2002 and 20017  Notesto Consolidated FinancialStatements (Unaudited)8 Item2.  Management's Discussion and Analysis of Financial Condition andResults of Operations17  Item3.  Quantitative and Qualitative Disclosures About Market Risk27    Item4.  Controls and Procedures28PARTII.OTHERINFORMATION  Item1.  Legal Proceedings29    Item6.  Exhibits and Reports on Form 8-K30 Signatures31 ExhibitIndex32    
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements  
United Air Lines, Inc. and Subsidiary CompaniesCondensed Statements of Consolidated Financial Position (Unaudited)(In Millions)
 September 30December 31Assets20022001   Current assets:     Cash and cash equivalents$    737 $   1,504    Restricted cash333 -    Short-term investments452 852    Receivables, net1,059 1,026    Related party receivables422 536    Income tax receivables368 217    Inventories, net323 329    Deferred income taxes10 278    Prepaid expenses and other     283     634   3,987  5,376      Operating property and equipment:     Owned19,535 19,129    Accumulated depreciation and amortization  (5,142)  (4,702) 14,39314,427      Capital leases2,625 2,766    Accumulated amortization    (502)    (472)    2,123   2,294 16,51616,721   Other assets:     Investments71 236    Intangibles, net385 390    Pension assets1,170 562    Related party receivables1,480 576    Aircraft lease deposits746 667    Prepaid rent303 307    Other, net     717     911   4,872  3,649    $25,375$25,746   
See accompanying Notes to Consolidated Financial Statements. 
United Air Lines, Inc. and Subsidiary CompaniesCondensed Statements of Consolidated Financial Position (Unaudited)(In Millions)
 September 30December 31Liabilities and Stockholder's Equity20022001   Current liabilities:     Notes payable$        - $     133    Current portions of long-term debtand        capital leaseobligations   1,331    1,454    Related party debt maturing withinone year152 162    Advance ticket sales1,352 1,183    Accrued salaries, wages and benefits1,498 1,222    Accounts payable687 1,268    Other  1,949  2,845   6,969  8,267   Long-term debt  7,153  6,674   Long-term obligations under capital leases  1,844  1,943   Other liabilities and deferred credits:     Deferred pension liability2,250 1,241    Postretirement benefit liability1,769 1,690    Deferred gains755 827    Other  1,604  1,598   6,378  5,356   Commitments and contingent liabilities (Seenote)     Preferred stock committed to Supplemental ESOP        3       77   Stockholder's equity:     Common stock at par- -    Additional capital invested1,591 231    ESOP capital3,972 3,898    Accumulated deficit(2,201)(427)   Accumulated other comprehensiveloss(332)(269)   Other       (2)       (4)   3,028  3,429    $25,375$25,746   
See accompanying Notes to Consolidated Financial Statements.  
United Air Lines, Inc. and Subsidiary CompaniesStatements of Consolidated Operations (Unaudited)(In Millions)
 Three Months Ended September 30     20022001Operating revenues:     Passenger$ 3,143 $  3,455    Cargo166 157    Other       336      485    3,645   4,097Operating expenses:     Salaries and relatedcosts1,821 1,880    Aircraft fuel532 655    Commissions109 128    Purchased services364 456    Aircraft rent208 207    Landing fees andother rent257 260    Depreciation andamortization240 258    Aircraft maintenance131 174    Cost of sales292 385    Other390 445    Special charges        -  1,313   4,344  6,161   Loss from operations   (699)(2,064)   Other income (expense):     Interest expense(157)(132)   Interest capitalized5 19    Interest income28 17    Equity in earnings(losses) of affiliates- 2    Non-operating specialcharges- (49)   Airline stabilizationgrant50 391    Miscellaneous, net        1      (41)       (73)      207   Loss before income taxes(772)(1,857)Provision (credit) for incometaxes    139     (678)   Net loss$ (911)$(1,179)
See accompanying Notes to Consolidated Financial Statements.  
United AirLines, Inc. and Subsidiary CompaniesStatementsof Consolidated Operations (Unaudited)(In Millions)
          Nine Months Ended         September 30  20022001Operatingrevenues:    Passenger$ 9,091 $ 11,295   Cargo474 547   Other      981  1,321 10,54613,163Operatingexpenses:    Salaries and related costs5,169 5,602   Aircraft fuel1,397 2,013   Commissions347 616   Purchased services1,067 1,367   Aircraft rent633 623   Landing fees and other rent759 768   Depreciation and amortization723 778   Aircraft maintenance428 573   Cost of sales8541,036   Other1,111 1,322   Special charges         -  1,313 12,48816,011   Lossfrom operations(1,942)(2,848)   Otherincome (expense):    Interest expense(453)(394)  Interest capitalized22 63   Interest income93 74   Equity in earnings of affiliates2 5   Gain on sale of investment46 -   Non-operating special charges- (49)  Airline stabilization grant130 391   Miscellaneous, net     (14)     (72)    (174)      18Lossbefore income taxes and    cumulative effect of accounting change (2,116)(2,830)Creditfor income taxes   (346)(1,033)   Lossbefore cumulative effect of accounting change(1,770)(1,797)Cumulativeeffect of accounting change, net of tax          -        3Netloss$(1,770)$(1,794)   
See accompanyingNotesto Consolidated Financial Statements.   
United Air Lines, Inc. and Subsidiary CompaniesCondensed Statements of Consolidated Cash Flows (Unaudited)(In Millions)
       Nine Months       Ended September30         2002       2001Cash and cash equivalents at beginning      of period$ 1,504$ 1,468   Cash flows from operating activities    (858)     591   Cash flows from investing activities:     Additions to propertyand equipment(110)(1,798)   Proceeds on dispositionof property and       equipment363 167    Proceeds on saleof investments137 -    Increase in restrictedcash(333)-    Decrease in short-terminvestments400 27    Increase in relatedparty receivables(4)(92)   Other, net       1      (25)      454(1,721)   Cash flows from financing activities:     Proceeds from issuanceof long-term debt946 1,982    Repayment of long-termdebt(1,273)(142)   Principal paymentsunder capital       lease obligations(190)(179)   Decrease in short-termborrowings(133)-    Dividends to parentcompany(3)(150)   Decrease in related-partydebt(10)(8)   Decrease in debtcertificates under Company leases290 18    Other, net       10      31     (363)  1,552   Increase (decrease) in cash andcash equivalents    (767)     422   Cash and cash equivalents at endof period,     excluding restrictedcash$    737$ 1,890   Cash paid during the period for:     Interest (net ofamounts capitalized)$    389 $   266    Income taxes$      54 $       1    Non-cash transactions:     Long-term debt incurredin connection       with additions to equipment and other assets$    706 $  232    Net unrealized losson investments$      (6)$   (27)   Increase in pensionintangible assets$    608 $  437 
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").
Basis of Presentation
         The accompanying financialstatements have been prepared assuming that the Company will continue asa going concern.  As more fully discussed in "Liquidity and CapitalResources," the Company may file for bankruptcy if it is unable to raisesufficient liquidity to support its ongoing operations and capital anddebt requirements.  The financial statements do not include any adjustmentsthat might result from a potential bankruptcy filing.
         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 normal recurring adjustments, the special charges describedbelow and a deferred tax valuation allowance described below) necessaryfor a fair presentation of the results of operations for the three- andnine-month periods have been made.  Certain prior-year financial statementitems have been reclassified to conform to the current year's presentation. These financial statements should be read in conjunction with the consolidatedfinancial statements and footnotes thereto included in United's AnnualReport on Form 10-K for the year 2001.
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.  The adoption of SFAS No. 133 resulted in a cumulativecredit of $3 million, net of tax, to first quarter 2001 earnings.
        Effective January 1, 2002, United adopted Statement of Financial AccountingStandards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"). In connection with the adoption, United has discontinued $12 million inannual amortization expense on route acquisition costs, which are indefinite-livedintangible assets.  SFAS No. 142 also requires companies to test intangiblesfor impairment on an annual basis or on an interim basis when a triggeringevent occurs.  During the first quarter, the Company performed aninitial evaluation of its intangibles and determined that the fair valueof its intangibles was in excess of the book value.  In the thirdquarter, the Company reviewed the evaluation of its intangibles and determinedthat the fair value continued to be in excess of the book value.
        The following information relates to United's intangibles at September30, 2002: (Inmillions)GrossCarryingAccumulated AmountAmortizationAmortizedintangible assets     Airport Slots and Gates$ 184$ 166   Other     29        8 $ 213$  174   Unamortizedintangible assets     Routes$ 344    Goodwill        2  $ 346 
        Slots and gates are being amortized on a straight-line basis over the lifeof the related leases.  Other intangibles are being amortized overperiods of 3 to 10 years.  Total amortization expense recognized inthe first nine months of 2002 was $9 million.  The Company expectsto record amortization expense of $11 million for the full year 2002, $8million in 2003, $7 million in 2004 and 2005 and $6 million in 2006.
        Route authorities are rights granted by governments to operate flightsto and from a particular country.  These authorities are very specificand limited, fixed in nature and are rarely available in the marketplace. Accordingly, route authorities are highly valued and sought after assetsby all airlines.  During 2002, United obtained a third-party appraisalof its route authorities which concluded that the market value of theseassets continues to be considerably in excess of the book value.
        Gates, like routes, are highly valued assets that do not frequently comeinto the marketplace.  The Company has no intent to sell these gatesand believes that the market value is in excess of the recorded book value.
         During the third quarter of 2002, United, through a wholly owned subsidiary,purchased an additional 6% interest in the Galileo Japan Partnership ("GJP"),bringing its ownership interest to 56% and requiring the Company to consolidatethe entity.  In connection with the acquisition, United recorded $2million in goodwill representing the excess of the purchase price overthe book value of the assets acquired, based on the preliminary purchaseprice allocation.
        Pro forma results for the three and nine months ended September 30, 2001,assuming the discontinuation of amortization are shown below:  ThreeMonthsNineMonths(Inmillions)EndedEndedLossbefore cumulative effect of accounting   change, as reported$ (1,179)$ (1,797) Amortization of routes, net of tax          2          6Lossbefore cumulative effect of accounting     change, pro forma$ (1,177)$ (1,791)   Netloss, as reported$ (1,179)$ (1,794)  Amortization of routes, net of tax          2          6Netloss, pro forma$ (1,177)$ (1,788)
         Effective January 1,2002, the Company adopted Statement of Financial Accounting Standards No.144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFASNo. 144"), which addresses the accounting and reporting for the impairmentor disposal of long-lived assets.  SFAS No. 144 did not have an effecton the Company's results of operations.  In the third quarter of 2002,the Company evaluated its fleet for impairment in accordance with SFASNo. 144.  Utilizing the Company's current cash flow projections basedon the updated business plan submitted in October to the Air TransportationStabilization Board, as described in "ATSB Loan Application" and appraisalsof aircraft as necessary, managementdetermined that no impairment is required.
Restricted Cash
         At September 30, 2002,the Company had $333 million in restricted cash, which primarily consistsof deposits posted for various states where United is self-insured forworkers' compensation claims.
Income Taxes
         The Company's provisionfor income taxes is based on the estimated annual effective tax rate, whichgenerally differs from the federal statutory rate of 35% principally dueto state income taxes and certain nondeductible items.  In the thirdquarter of 2002, the Company recorded a valuation allowance of $418 millionagainst its deferred tax assets.  In recording the valuation allowance,management considered whether it was more likely than not that some orall of the deferred tax assets would be realized.  This analysis includesconsidering scheduled reversal of deferred tax liabilities, projected futuretaxable income, carryback potential and tax planning strategies.
Long-Term Debt
         During the first quarterof 2002, the Company refinanced approximately $525 million in interim financingthrough a $775 million private debt financing which refinanced certainaircraft.  During the second quarter of 2002, the Company refinancedapproximately $314 million in interim financing to long-term.  Inthe third quarter of 2002, the Company refinanced approximately $238 millionin long-term debt through a sale-leaseback transaction.
Segment Information
         United has a globalroute network designed to transport passengers and cargo between destinationsin North America, the Pacific, the Atlantic and Latin America.  Theseregions constitute United's four reportable segments.
         In accordance withDepartment of Transportation guidelines, the Company allocates passengerand cargo revenues for the North America segment based on the actual flownrevenue for flights with an origin and destination in the U.S.  Passengerand cargo revenue for international segments is based on the actual flownrevenue for flights with an origin or destination in that segment. Other revenues that are not directly associated with a flight (such asRed Carpet Club membership fees) are allocated based on available seatmiles flown in that segment.
         A reconciliation ofthe total amounts reported by reportable segments to the applicable amountsin the financial statements follows: (In Millions)Three Months Ended September 30, 2002     Reportable North  LatinSegment AmericaPacificAtlanticAmericaTotalRevenue$  2,343 $  657 $ 536 $ 109 $  3,645 Loss before income taxes       and gains on sales$  (584)$(136)$ (61)$ (41)$   (822) (In Millions)Three Months Ended September 30, 2001     Reportable North  LatinSegment AmericaPacificAtlanticAmericaTotalRevenue$ 2,636 $ 700 $  594 $  167 $ 4,097 Loss before income taxes       and special charges$  (603)$(137)$  (103)$  (43)$  (886) (In Millions)Nine Months Ended September 30, 2002     Reportable North  LatinSegment AmericaPacificAtlanticAmericaTotalRevenue$ 6,892 $ 1,852$ 1,437 $  365 $ 10,546 Loss before income taxes        and gains on sales$(1,519) $ (406) $ (235) $(132) $ (2,292)  (In Millions)Nine Months Ended September 30, 2001     Reportable North  LatinSegment AmericaPacificAtlanticAmericaTotalRevenue$ 8,672 $ 2,192 $ 1,734 $ 565 $13,163 Loss before income taxes       and special charges$(1,162) $  (375) $  (240) $ (82) $(1,859)   ThreeMonthsNineMonths EndedSeptember 30EndedSeptember 30(InMillions)2002200120022001Totalloss for reportable segments$ (822)$  (886)$(2,292)$(1,859) Special charges - (1,313)- (1,313) Non-operating special charges- (49)- (49) Airline stabilization grant50 391 130 391  Gain on sale       -       -      46        -Totalloss before income taxes and      cumulative effect of accounting change$ (772)$(1,857)$(2,116)$(2,830)
Other Comprehensive Income
         Total comprehensiveincome (loss) is made up of the following:  ThreeMonthsNineMonths EndedSeptember 30EndedSeptember 30(InMillions)2002200120022001Netloss$ (911)$(1,179)$(1,770)$(1,794) Unrealized gains (losses) 11 (133)(6)(27) Minimum pension liability adjustment       - (311)    (57)   (311)Totalcomprehensive loss$ (900)$(1,623)$(1,833)$(2,132)
United Express
        United has marketing agreements under which independent regional carriers,flying under the United Express name, feed passengers to United owned andoperated flights.  United pays these carriers on a fee-per-departurebasis and includes the revenues derived from the carriers in passengerrevenue, net of these expenses.  Amounts included in passenger revenuesfor the three and nine month periods are as follows:  Netrevenues (net expenses)                    (in millions)ThreeMonthsNine Months EndedSeptember 30EndedSeptember 30 2002200120022001                   United Express revenues (net of expenses)$(72)$(41)$(192)$(126)
        While the effect on United's results, taking into account only the UnitedExpress flights, is negative, the Company realizes a significant benefit(not included in the results shown above) from the traffic provided toUnited's operations as a result of these agreements.
        In addition, United has call options on 64 regional jets owned or leasedby these carriers.  The call option is a standard part of the UnitedExpress agreement and is intended to allow United to secure control overregional jets used for United Express flying in the event one of the UnitedExpress agreements is terminated.  The call option reduces this riskif the Company determines that a change of United Express carrier is necessary,particularly due to the significant time lag between order and deliveryof aircraft (such as regional jets made to United's specifications).
        The call options are only exercisable if United maintains a specified creditrating and the United Express carrier fails to meet required operatingand/or financial performance levels for a specified period of time. Due to United's current credit rating, none of the call options would beexercisable at this time.
ULS Transaction
            UALLoyalty Services ("ULS"), a wholly owned subsidiary of UAL, had been United'sagent to market and sell Mileage Plus miles to non-airline business partners. In the first quarter of 2002, UAL made changes to its corporate structurewhich resulted in substantially all of UAL's customer loyalty and marketingprograms (which were previously the responsibility of United) becomingowned and operated by ULS.  These changes were designed to increasethe overall value of UAL's loyalty businesses by focusing management attentionon these activities and enhancing the range of products and services offeredto Mileage Plus members and business partners.
            First,Mileage Plus, Inc. ("MPI") dividended certain assets related to the MileagePlus business to its parent company, Mileage Plus Holdings, Inc. ("MPH"),which was then a wholly owned subsidiary of United.  Immediately thereafter,MPH dividended to United all of the stock of MPI.  United then soldall of the stock of MPH to ULS in consideration for a $900 million unsecuredpromissory note (payable over 12 years and bearing interest at a rate of7% per annum), plus the assumption of the outstanding liability for milespreviously sold to non-airline third parties (approximately $500 million). The purchase price was based on the estimated fair value of MPH, as determinedby the present value of the net future cash flows of the entity.
            Simultaneouslywith the above transactions, United also dividended certain assets associatedwith direct-to-consumer marketing and service businesses.  These includedcertain united.com related assets, certain United Vacations and MileagePlus related assets, and the assets relating to Silver Wings, Cruise4Milesand Sky Mall services.  UAL then made a capital contribution of thesesame assets to ULS.
            MileagePlus participation agreements with other airlines and the customer servicecall centers supporting Mileage Plus members were not included in thesetransactions.  These assets will remain part of MPI and therefore,of United.
            Dueto the related party nature of these transactions, no gain or loss wasrecorded at United, UAL or ULS.  Any differences between the purchaseprice and the book value of the assets was adjusted through equity. As a result of these transactions, United's equity increased approximately$1.4 billion.
            Alsoas a result of these transactions, ULS became responsible for the saleof non-airline miles and retains the gross proceeds (and associated liability)for the sale of those miles.  United, through MPI, retains the rightto sell and the associated liability of the miles awarded for travel onUnited or any of its airline partners.  As Mileage Plus members usemiles earned through means other than air travel to redeem a travel awardon United, ULS will be obligated to compensate United for the value ofthis award travel.  Likewise, United will be obligated to pay ULSfor miles earned through air travel as they are redeemed for any non-airtravel award.  The price of a mile sold between the two entities asa result of these arrangements is expected to be contractually mandatedand fixed.  The initial allocation of the total mileage liabilityand the percentage of miles deemed to be earned through other than airtravel are also expected to be contractually fixed and will be based onspecified market factors.  Terms of these contracts may change basedupon market conditions.
            Itis the intention of both United and ULS that these transactions and theallocation of miles be transparent to Mileage Plus members and partners. While United's passenger and other revenue will be significantly impactedfrom these transactions, the interest and principal repayments on the promissorynote, as well as the anticipated growth in the number and value of United'scustomers and business partners as a result of these relationships, areintended to compensate United for this reduction in revenue.
         In the third quarterof 2002, United recognized $77 million in revenues and $16 million in interestincome from ULS and $10 million in commission expense and purchased servicespaid to ULS.  In the first nine months of 2002, United recognized$242 million in revenues and $47 million in interest income from ULS and$26 million in commission expense and purchased services paid to ULS.
Special Charges Related to September 11
       During the third quarter of 2001, United recorded a special charge of $1.3billion in operating expense and $49 million in non-operating expense foramounts relating to the September 11 terrorist attacks and the resultingimpact on the Company's schedule and operations.
         The special chargein operating expense was made up of the following (in millions):   Amount Special charges:    Aircraft groundings andimpairment$    788   Reduction in force     217   Early termination fees     181   Discontinued capital projects     107   Miscellaneous       20      Total operating special charges$ 1,313   
        After the September 11 terrorist attacks, the Company grounded the B727-200and B737-200 fleets and recorded a charge of $271 million, reflecting thewrite down of the fleets to fair value.
        Due to the changes implemented to United's operations, the Company reviewedits fleet for impairment in accordance with Statement of Financial AccountingStandards No. 121, "Accounting for the Impairment of Long-Lived Assetsand for Long-Lived Assets to be Disposed Of" ("SFAS No. 121").  UnderSFAS No. 121, United's policy is to recognize an impairment charge whenan asset's carrying value exceeds its net undiscounted future cash flowsand its fair market value.  The amount of the charge is the differencebetween the asset's carrying value and fair market value.  Managementdetermined that the estimated net undiscounted future cash flows generatedby its B737-500 and B747-400 fleets would be less than their carrying value. Management estimated the undiscounted future cash flows with models usedby the Company in making fleet and scheduling decisions.  These modelsutilized the Company's projections of passenger yield, fuel costs, laborcosts and other relevant factors for the markets where these aircraft willoperate.  The aircraft in each of these fleets were written down totheir fair market values, as estimated by management using published sources,third-party appraisals and bids received from third parties.  Accordingly,the special charge includes an impairment charge of $517 million for theseaircraft fleets resulting from the anticipated decrease in future cashflows.
         Also as a result of the terrorist attacks, the Company furloughed approximately20,000 employees across all work groups (pilots, flight attendants, mechanics,ramp service, customer service and management and salaried employees). In connection with the furloughs, United accrued severance costs of approximately$217 million, including a one-time curtailment charge relating to the acceleratedrecognition of unrecognized prior service costs for certain of the Company'spension plans.
        Also included in the special charge is $107 million relating to the write-offof capital projects no longer being pursued.  As a direct result ofSeptember 11, management made the decision to terminate all funding andlabor resources for numerous capitalized projects that were in-processprior to September 11 and which did not provide any immediate economicor long-term safety benefits to customers or the airline.  The projectsand related amounts capitalized that were discontinued following September11 included computer system development costs ($48 million), aircraft improvements($33 million), airport facility improvements ($21 million) and other miscellaneousprojects ($5 million).
        After management announced the furlough and the freeze on all capital expenditures,United determined that the Company was unlikely to meet certain commitmentsor provisions of certain executory contracts with third parties. The executory contracts are related to agreements with state and localgovernments ($157 million), aircraft improvements ($11 million) and facilitiesand other ($13 million)
         Additionally, the Company recorded a non-operating special charge of $49million related to certain non-operating aircraft that were leased to others. The fair value of these aircraft was significantly impacted by the eventsof September 11.
         As part of the AirTransportation Safety and System Stabilization Act of 2001 (the "Act")enacted in response to the events of September 11, 2001, the federal governmentmade $5.0 billion in federal grants available to the airline industry. Through September 30, 2002, the Company has received a total of $782 millionin grants under the Act, of which $391 million was received in the thirdquarter of 2001, $261 million in the fourth quarter of 2001, $80 millionin the second quarter of 2002 and $50 million in the third quarter 2002. These amounts represent the Company's total allocation of grant money underthe Act.
         At December 31, 2001,United had accruals of $87 million related to the reduction in force and$171 million related to early termination fees resulting from the September11 terrorist attacks.  During the first, second and third quartersof 2002, the Company made payments of $34 million, $5 million and $2 million,respectively, for severance and related fringe benefits to displaced employees. As passenger demand rebounded faster than anticipated in the first quarterof 2002, the Company increased its scheduled flying beyond planned levelsin April 2002 and again in June 2002.  As a result, the Company determinedthat fewer front-line employees would be permanently displaced, and reversed$25 million of accrued severance and related costs in the first quarter2002 and $19 million in the second quarter.  In addition, the Companypaid $11 million, $34 million and $2 million, respectively, in early terminationfees during the first, second and third quarters, respectively.  Duringthe third quarter, the Company recorded an additional $15 million in earlytermination fees related to commitments to state and local governments. Accordingly, accruals remaining at September 30, 2002 were $139 millionfor early termination fees and $2 million for the reduction in force.
         Through September 30,2002, the Company had received approximately $58 million related to insurancerecoveries on aircraft destroyed by the September 11 attacks and approximately$12 million related to other covered expenses.  The Company anticipatesthat its liability from claims arising from the events of September 11,2001 will be significant, after considering the liability protections providedfor by the Act; however, the Company expects that any amounts paid on suchclaims will be borne by its insurance carriers as claims are resolved and,in any event, the Company believes that, under the Act, its liability willbe limited to its insurance coverage.
        The Company has not incurred any material environmental obligations relatingto September 11.
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 September 30, 2002,commitments for the purchase of property and equipment, principally aircraft,approximated $1.6 billion, after deducting advance payments of $179 million. An estimated $0.2 billion will be spent during the remainder of 2002, $0.5billion in 2004 and $0.9 billion in 2005 and thereafter.  The majorcommitments, which include price escalations, are for the purchase of A319,A320 and B777 aircraft, which are scheduled to be delivered through 2007. As part of its Financial Recovery Plan described below, the Company isexploring opportunities to reduce and/or defer capital spending. As part of these efforts, the Company is currently negotiating with itsaircraft manufacturers to delay future deliveries beyond 2004 and 2005. 
Item 2.  Management's Discussion and Analysis of FinancialCondition and Results of Operations
RESULTS OF OPERATIONS
Summary of Results
         The airline businessis subject to seasonal fluctuations.  United's operations are oftenadversely impacted by winter weather and United's first- and fourth-quarterresults normally reflect reduced travel demand.
         Additionally, beginningin 2001, the weakening U.S. economy had a significant impact on the airlineindustry as corporations reduced their business travel budgets and changedtheir travel behavior.  During the first six months of 2001, the industrybegan experiencing significant revenue declines as a result of the decreasein business traffic, which impacted both unit revenues and yields, particularlyin the domestic markets.  Historically,there has been a strong correlation between airline revenues and GDP andcorporate profitability.  As corporate profitability dropped duringthis period, companies reduced spending on travel.  Since approximately65% to 75% of United's domestic revenues are derived from business travelers,United was disproportionately affected by this decline.
        Subsequent to September 11, United's revenues, yield, revenue passengermiles and available seat miles were significantly impacted by the eventsof September 11 and the resulting reduction in the Company's operations.TheCompany continues to suffer from the weakened revenue environment resultingfrom the events of September 11 and the weak U.S. economy.  Whileyear-over-year unit revenues had been improving each month in 2002 froma 14% decline in January to a 4% decline in May, unit revenue growth inthe third quarter has stalled as demand continues to be weak and yieldsdecline.  System passenger unit revenue for the third quarter wasdown 2% from last year and yields have declined 5% year-over-year.
         In the first quarterof 2002, United and UAL completed a series of transactions which effectivelytransferred the responsibility for all of UAL's customer loyalty and marketingprograms from United to UAL Loyalty Services ("ULS"), a wholly owned subsidiaryof UAL.  (See "ULS Transaction" in the Notes to Consolidated FinancialStatements.)  As a result of these transactions, United's otheroperating revenues decreased by $40 million in the third quarter and $168million in the first nine months of 2002.
         United's loss fromoperations was $(699) million in the third quarter of 2002, compared to$(2.1) billion in the third quarter of 2001.  United's net loss was$(911) million compared to $(1.2) billion in the same period of 2001.
         In the first nine monthsof 2002, United's loss from operations was $(1.9) billion, compared to$(2.8) billion in the first nine months of 2001.  United's net lossfor 2002 was $(1.8) billion compared to $(1.8) billion before the cumulativeeffect of an accounting change in the same period of 2001.
         The 2002 loss for thethird quarter and nine months includes $50 million and $130 million, respectively,in non-operating income received as compensation under the Air TransportationSafety and System Stabilization Act ("the Act").  Additionally, inthe third quarter of 2002, the Company recorded $418 million in non-cashtax expense to establish a  valuation allowance against its deferredtax asset.  See "Income Taxes" in the Notes to Consolidated FinancialStatements.
         The loss for the firstnine months includes a gain of $46 million on the sale of the Company'sremaining investment in Cendant Corporation.
         The 2001 loss for thequarter and nine months includes a special charge of $1.3 billion in operatingexpense and $49 million in non-operating expense for amounts relating tothe September 11 terrorist attacks, as well as $391 million in compensationreceived under the Act.
         Specific factors affectingUnited's consolidated operations for the third quarter and first nine monthsof 2002 are described below.
Third Quarter 2002 Comparedwith Third Quarter 2001
         Operating revenuesdecreased $452 million (11%) and United's revenue per available seat mile(unit revenue) decreased 4% from 9.52 cents to 9.14 cents.  Passengerrevenues decreased $312 million (9%) due to a 5% decrease in revenue passengermiles and a 5% decrease in yield.  United's available seat miles acrossthe system were down 7% from the third quarter of 2001; however, passengerload factor increased 2.3 points to 75.4%.  The following analysisby market is based on information reported to the U.S. Department of Transportation:  Increase(Decrease) AvailableSeatRevenuePassenger MilesRevenuePer Revenue Miles(Capacity)(Traffic)PassengerMile (Yield)Domestic (2%) 1%(10%)Pacific(12%) (8%) 4%Atlantic(18%)(14%)  8%LatinAmerica(24%)(24%)(11%) System (7%) (5%) (5%)
        Cargo revenues increased $9 million (6%) due to a 3% increase in cargoton miles and a 2% increase in yield.  Other operating revenues decreased$149 million (31%) due to an $86 million decrease in fuel sales to thirdparties and the transfer of revenue from the sale of Mileage Plus milesto ULS.
        Operating expenses decreased $504 million (10%) and United's cost per availableseat mile (unit cost) decreased 3%, from 11.27 cents to 10.90 cents, excludingspecial charges.  Salaries and related costs decreased $59 million(3%) primarily due to the reduction in force implemented after September11, partially offset by the increase to pension and postretirement expenseas a result of the revaluation of the plans and contractual salary increasesfor pilots, flight attendants, mechanics and public contact employees. Aircraft fuel decreased $123 million (19%) due to a 12% decrease in consumptionand an 8% decrease in the average cost of fuel from 86.8 cents to 80.2cents a gallon.  Commissions decreased $19 million (15%) primarilyas a result of a decrease in commissionable revenues.  In addition,on March 20, 2002, United discontinued paying base commissions on all ticketsissued in the U.S. and Canada.  Purchased services decreased $92 million(20%) primarily as a result of volume-driven decreases in GDS (global distributionsystems) and credit card discount fees.  Cost of sales decreased $93million (24%) primarily due to the decreases in costs associated with fuelsales to third parties.  Aircraft maintenance decreased $43 million(25%) due to retirements of older aircraft and a decrease in engine andaircraft repair volumes as a result of reduced flying.  Other operatingexpenses decreased $55 million (12%) due to decreases in crew layover expensesand volume-driven food and beverage costs, offset by increased costs forhull and liability insurance.
        Other non-operating expense amounted to $123 million in the third quarterof 2002, compared to $135 million in the third quarter of 2001, excludingthe effects of the airline stabilization grant money and the non-operatingspecial charges.  Interest expense increased $25 million (19%) dueto new debt issuances and increased borrowing rates.  Interest capitalizeddecreased $14 million (74%) primarily as a result of lower advance paymentson the acquisition of aircraft.  Interest income increased $11 million(65%) due primarily to interest earned from ULS in 2002.  Miscellaneous,net decreased $42 million primarily as a result of lower reserve requirementsfor legal and environmental costs.
Nine Months 2002 Comparedto Nine Months 2001
        Operating revenues decreased $2.6 billion (20%) and United's revenue peravailable seat mile (unit revenue) decreased 7% from 10.14 cents to 9.45cents.  Passenger revenues decreased $2.2 billion (20%) due to an11% decrease in revenue passenger miles and a 10% decrease in yield. United's available seat miles across the system were down 14% from thefirst nine months of 2001; however, passenger load factor increased 2.5points to 74.1%.  The following analysis by market is based on informationreported to the U.S. Department of Transportation:  Increase(Decrease) AvailableSeatRevenuePassenger MilesRevenuePer Revenue Miles(Capacity)(Traffic)PassengerMile (Yield)Domestic(11%) (9%)(12%)Pacific(20%)(10%) (5%)Atlantic(19%)(16%) (1%)LatinAmerica(20%)(25%)(15%) System(14%)(11%)(10%)
        Cargo revenues decreased $73 million (13%) due to a 12% decrease in cargoton miles and a 2% decrease in yield.  Other operating revenues decreased$340 million (26%) due to a $170 million decrease in fuel sales to thirdparties and the transfer of revenues from the sale of Mileage Plus milesto ULS.
        Operating expenses decreased $2.2 billion (15%) and United's cost per availableseat mile (unit cost) decreased 1% from 11.32 cents to 11.20 cents, excludingspecial charges.  Salaries and related costs decreased $433 million(8%) primarily due to the reduction in force implemented after September11, partially offset by the increase in pension and postretirement expensedue to the revaluation of the plans and contractual salary increases forpilots, flight attendants, mechanics and public contact employees. Aircraft fuel decreased $616 million (31%) due to an 18% decrease in consumptionand a 15% decrease in the average price of fuel from 88.7 cents to 75.4cents a gallon.  Commissions decreased $269 million (44%) as a resultof a decrease in commissionable revenues, as well as the result of Uniteddiscontinuing paying base commissions on all tickets issued in the U.S.and Canada, effective March 20, 2002.  Purchased services decreased$300 million (22%) primarily as a result of volume-driven decreases inGDS and credit card discount fees.  Cost of sales decreased $182 million(18%) primarily due to decreases in costs associated with fuel sales tothird parties.  Aircraft maintenance decreased $145 million (25%)due to retirements of older aircraft and a decrease in engine and aircraftrepair volumes as a result of reduced flying.  Other operating expensesdecreased $211 million (16%) due to decreases in crew layover expensesand volume-driven food and beverage costs, offset by increased costs forhull and liability insurance.
        Other non-operating expense amounted to $350 million in the first ninemonths of 2002 compared to $324 million in the same period of 2001, excludingthe airline stabilization grant money, the gain on sale of Cendant sharesand the non-operating special charges.  Interest expense increased$59 million (15%) due to new debt issuances and increased borrowing rates. Interest capitalized decreased $41 million (65%) primarily as a resultof lower advance payments on the acquisition of aircraft.  Interestincome increased $19 million (26%) due primarily to interest earned fromULS in 2002.  Miscellaneous, net decreased $58 million primarily asa result of lower reserve requirements for legal and environmental costs.
LIQUIDITY AND CAPITAL RESOURCES
         United's total of cash,cash equivalents and short-term investments, including restricted cash,was $1.5 billion at September 30, 2002, compared to $2.4 billion at December31, 2001.  Cash flows used in operations amounted to $858 million,including the receipt of $130 million in government grant money.
         As of September 30,2002, United had a working capital deficit of $3.0 billion as comparedto $2.9 billion at December 31, 2001.  Historically, United has operatedwith a working capital deficit and has relied on working capital to funda significant portion of its operations.  Additionally, because theairline industry is a particularly capital intensive industry, airlinesrely heavily on external financing to fund acquisitions of aircraft andequipment.  However, since September 11, United has not been ableto access the public capital markets and has had limited access to privatecapital markets.
         The Company anticipatessignificant cash needs for the remainder of 2002 including nearly $900million in debt maturities due in the fourth quarter and approximately$65 million to fund the first of eight quarterly payments due under thenew contracts for the International Association of Machinists and AerospaceWorkers ("IAM") in December.
         Given the Company'ssubstantial debt repayment requirements for the remainder of 2002, theCompany is currently engaged in active discussions with lenders, suppliersand others to secure alternative sources of capital, which could includedeferring the due dates on some of the upcoming debt maturities. Additionally, in June 2002, the Company filed for federal loan guaranteeswith the Air Transportation Stabilization Board ("ATSB"), requesting aloan of $2.0 billion, with $1.8 billion to be guaranteed by the ATSB. In October 2002, the Company provided an updated business plan to the ATSB. If approved and funded, the loan would help alleviate the liquidity pressurethe Company faces.*  See "ATSB Loan Application" below for furtherdetails.
          While United'scurrent cash reserves are sufficient to repay the debt maturing in thefourth quarter, the cash reserves then remaining would be insufficientto support the Company's ongoing obligations as it continues to generatenegative cash flow from operations.  The Company's main priority isto accomplish an out-of-court recovery plan; however, in the absence offederal loan guarantees, and the cost reductions necessary to achieve them,the Company does not expect to be able to raise sufficient liquidity tosupport its obligations through the end of 2002.*  Accordingly, Unitedis simultaneously preparing for the potential of a Chapter 11 bankruptcyfiling.  Should the Company file for bankruptcy, it is anticipatedthat the labor and other cost reductions required would be deeper and morepermanent than in an out-of-court recovery plan.*
         Financing activitiesduring the first nine months of 2002 included principal payments underdebt and capital lease obligations of $1.3 billion and $190 million, respectively. During the first quarter of 2002, United closed on a $775 million privatedebt financing which refinanced certain aircraft and raised approximately$250 million in additional cash.  During the second quarter of 2002,United arranged long-term financing for approximately $314 million in debtthat had been placed in interim financing facilities.  Also duringthe second quarter, United repaid $133 million in receivables-backed short-termborrowings when certain banks supporting the borrowing program declinedto renew it.  During the third quarter of 2002, United refinanced$238 million in long-term debt through a sale-leaseback transaction thatraised approximately $72 million in additional cash.
         In June 2002, Unitedrepaid $34 million to the Indianapolis Airport Authority, the city of Indianapolisand state of Indiana for failure to reach its capital targets in connectionwith the construction of the Indianapolis Maintenance Center.
         Property additionsin the first nine months of 2002, including aircraft and aircraft spareparts, amounted to $816 million, including $706 million of vendor-financedpurchases.  In the first nine months of 2002, United took deliveryof six A319, thirteen A320 and four B777 aircraft.  All of these aircraftwere purchased.  United also acquired one B757 and seven B737 aircraftoff lease during the period.  Additionally, ten owned aircraft weresold and then leased back under operating leases during the third quarter.
         During the first ninemonths of 2002, United received approximately $580 million in net incometax refunds, part of which was a result of changes in the tax laws. In addition, United paid $290 million in federal transportation taxes thathad been deferred under the Act after the September 11 terrorist attacks.
         During the first ninemonths of 2002, the Company received $137 million in proceeds from thesale of its remaining investment in Cendant Corporation and $130 millionin compensation under the Act.  In the third quarter of 2002, theCompany received approximately $113 million in cash which had been heldin trust under a services agreement with Galileo International (now CendantCorporation).
         Certain of United'ssurety bonds for workers' compensation have been cancelled in various stateswhere United is self-insured.  At September 30, 2002, the Companyhad $333 million in restricted cash, which primarily consists of depositsposted for various states where United is self-insured for workers' compensationclaims.  Additionally, letters of credit under a $150 million securedletter of credit facility that primarily supported workers' compensationclaims began expiring in August 2002, with the last letters of credit expiringin December 2002.  The issuer has indicated that it will not renewthe facility.  In addition, certain of United's surety bonds postedto satisfy United's security deposit obligations under its various airportleases have been cancelled.  As a result, United has been and may,in the future, be required to post collateral in the form of cash depositsin lieu of letters of credit.*
       United's liability insurance for losses resulting from war perils (terrorism,sabotage, hijacking and other similar perils) was cancelled effective September26, 2001.  United obtained replacement coverage, although it is beingcharged significantly higher premiums for this replacement coverage, andthis new coverage is in a substantially reduced amount for claims not involvingaircraft passengers.
        The FAA is providing excess liability coverage for third party war riskliability for losses to persons other than passengers up to two times theairline's limit of liability available prior to September 11, 2001 forrenewable periods up to a year at a time.  United's coverage underthis FAA policy has been renewed through December 15, 2002, and is likelyto be renewed further, subject to the federal government's determinationthat such coverage is necessary to the national interest.
       In addition, United maintains hull war risk insurance which is worldwide,excluding certain countries (to which United does not operate scheduledflights).  This coverage is for war and associated perils, includinghijacking and confiscation.  United experienced a significantly higherpremium for reduced coverage due to the events of September 11.
         The increase in the Company's total insurance premiums is expected to bein excess of $120 million for the full year 2002 as compared to 2001.*
         As a result of continuingdeclines in interest rates and the market value of the assets held in itsdefined benefit pension plans, the Company believes it will be requiredto record an additional significant minimum pension liability as of December31, 2002.  The minimum pension liability would reflect the amountthat the pension plans' accumulated benefit obligation exceeds the plans'assets in excess of amounts previously accrued for pension costs. Although the exact amount of the charge to stockholder's equity is notknown at this time, the amount is likely to be in excess of $1.5 billion(before tax).  This charge to stockholder's equity will not affectthe Company's financial covenants in any of its debt agreements.
         In June 2002, Unitedrevalued its pension and postretirement plans as a result of new laborcontracts for the IAM and policy changes to salaried and management employeebenefits.  These changes will result in approximately $175 millionin additional expense on an annualized basis in 2002.
        United has not made any cash contributions to its defined benefit pensionplan trusts for U.S. based employees in 2001 or 2002.  In lieu ofmaking cash contributions, the Company utilized a portion of its creditbalance to meet the minimum required contribution.  The Company hasa remaining credit balance that is available to be used in 2003; however,once the credit balance is fully utilized, substantial contributions maybe required.  The Company could be required to contribute approximately$5 billion to its defined benefit pension plan trusts by the end of 2008. Future funding requirements are dependent upon factors such as interestrate levels, changes to pension plan benefits, funded status, regulatoryrequirements for funding purposes and the level and timing of asset returnsas compared with the level and timing of expected benefit disbursements. As such, it is not possible to be more specific with respect to requiredcontributions and actual future contributions may differ materially. United's defined benefit pension plans are currently in compliance withall U.S. government funding requirements.
         In conjunction withthe ratification of the contracts for the IAM, the Company has providedcollateral consisting of certain real estate, flight simulators, groundequipment and spare part assets to support the payment of approximately$520 million in retroactive wages due under the contracts in eight quarterlyinstallments commencing December 2002.
         As of September 30,2002, the Company has unencumbered aircraft and spare engines valued atapproximately $3.4 billion.
         Standard & Poor'scredit rating on United's senior unsecured debt is CC, down from B- inJanuary of 2002.  In August 2002, Moody's Investors Service Inc. downgradedits credit ratings on United's senior unsecured debt from Caa1 to Ca. Downgrades of the Company's credit ratings during 2002 have resulted inan increase of $2 million in interest expense for the year 2002. Any additional reductions in United's credit ratings could result in increasedborrowing costs to the Company and might further limit the availabilityof future financing.
         At September 30, 2002,commitments for the purchase of property and equipment, principally aircraft,approximated $1.6 billion, after deducting advance payments.  Of thisamount, an estimated $0.2 billion is expected to be spent during the remainderof 2002.  For further details, see "Contingencies and Commitments"in the Notes to Consolidated Financial Statements.
OTHER INFORMATION
ATSB Loan Application
         In addition to providing$5.0 billion in federal grants under the Act, the federal government made$10.0 billion in loan guarantees available to the airline industry. Under the terms of the Act, the ATSB may guarantee loans if the ATSB determines,in its discretion, that:  (1) the borrower is an air carrier for whichcredit is not reasonably available at the time of the transaction; (2)the intended obligation is prudently incurred; and (3) the guarantee isa necessary part of maintaining a safe, efficient and viable commercialaviation system in the U.S.  The Act also requires the ATSB to ensurethat the government is compensated for the risk assumed in making the guarantees. Additional requirements and factors for consideration by the ATSB in evaluatingany loan guarantee application, set forth in regulations issued by theOffice of Management and Budget pursuant to the Act, include:  (1)that the air carrier has incurred losses as a result of the events of September11, 2001, including losses due to the unavailability of credit or the decreasein demand for services; (2) reasonable assurance that the air carrier willbe able to repay the loan according to its terms; and (3) the adequacyof provisions to protect the government, including the sufficiency of securityfor the loan and the percentage of guarantee requested.
          United believesthat it is an ideal candidate for federal loan guarantees under the termsof the Act and the related regulations.  United's application explainsthat the Company was significantly impacted financially by the events ofSeptember 11, has significant cash needs for the remainder of 2002 andhas had limited access to and continues to be unable to reasonably accessthe capital markets in sufficient amounts.  The Company's applicationproposes an annual guarantee fee payable to the government and substantialcollateral (including aircraft, spare engines, route authorities and slots)that will be available if United does not meet its obligations under theloan and guarantee.
        It is within the discretion of the ATSB to decide whether to issue a guaranteein the amount and on the terms requested or at all.  In evaluatingthe application, the ATSB may also consider whether an equity stake forthe federal government in UAL is required and the extent of relief providedby the Company's stakeholders that would improve United's financial position.
         In response to initialdiscussions with the ATSB, in August the Company began the process of updatingits business plan for submission to the ATSB.  In October, the Companysubmitted an updated business plan which includes details on the Company'sdiscussions with labor groups, lenders and suppliers and outlines plansfor non-labor expense and revenue improvements that United believes makesa compelling case for federal loan guarantees and the Company's abilityto return to financial health and profitability.  See "Financial RecoveryPlan" and "Further Profit Improvement Initiatives" below for further details.
**Financial Recovery Plan**
         In the aftermath ofSeptember 11, and its dramatic impact on the airline industry, the Companydeveloped a four-plank financial recovery plan to get the airline backon the road to financial stability:Reducing the size of the airline and cutting both capital and operatingspending;
Maximizing flight revenue;
Working with employee groups to find further labor savings; and
Implementing a financing plan to support the Company through these turbulenttimes.

         The Company has realizedprogress on executing this plan, including reducing its schedule, furloughingemployees, retiring fleets and making dramatic cuts in capital spending,as well as improvements in operating efficiency.
         In August 2002, theCompany began discussions with its various labor groups regarding its updatedbusiness plan for submission to the ATSB.  In response, the laborgroups formed a coalition (the "Union Coalition") to work together towardachieving the necessary cost savings which would enable the Company toachieve financial stability.
         As part of the Company'supdated business plan submitted to the ATSB in October, the Company andthe Union Coalition have targeted $5.8 billion in labor cost savings overa five and a half year period.  The Company is in ongoing discussionswith the individual coalition members to finalize their component of thelabor cost savings.  Among other things, as part of these discussions,it is also contemplated that employees would receive options on UAL's commonstock as well as participation in a broad-based profit sharing program.
         The Company's updatedbusiness plan incorporates a 12% reduction in capacity and a $1.2 billionreduction in 2003 through 2005 capital spending as compared to the previousbusiness plan.
Further Profit Improvement Initiatives
         Beyond the cost andrevenue improvements contained in the financial recovery plan, United isalso developing a plan to address non-labor expense and revenue improvements. The plan redirects United's core and historic strengths and is designedto lower costs, enhance revenue (both by increasing United's market shareas well as raising yields) and improve the productivity of all of the Company'sassets.  Through the plan, the Company will focus on these key areas:Increasing the efficiency of its route network through actions such ascode shares, alliances and greater deployment of regional jets;
Reducing the cost of sales, such as credit card fees, GDS fees and travelagent costs;
Seizing opportunities to improve the management of air traffic and irregularoperations, thus improving on-time performance and reliability;
Realigning product offerings to ensure they are cost effective, and insome cases, such as Red Carpet Clubs, ensuring they are profitable on theirown; and
Improving processes and productivity, particularly in airports and maintenance,by utilizing more advanced technology.

         The Company expects torealize at least $1.4 billion in annual revenue and expense improvementsby 2004 as a result of these initiatives and has put in place a processfor developing an additional $400 million in savings.*
         However, were the Companyto file for bankruptcy, it is anticipatedthat the Company would need to seek deeper and more permanent cost reductionsfrom labor groups, lenders, suppliers and other stakeholders than are discussedabove and included in the updated business plan submitted to the ATSB.*
US Airways Code Share
         As part of its profitimprovement initiatives, on July 24, 2002, the Company announced a codeshare agreement with US Airways.  The agreement, which is expectedto generate more than $200 million in annual revenue for United, wouldallow both carriers to market service on each other's network, providingsignificant consumer benefits and bringing new revenue and customers totheir route networks.*
         On October 2, 2002,the DOT notified both United and US Airways that it had concluded its reviewof the agreement.  While US Airways has filed for Chapter 11 bankruptcyprotection subsequent to the signing of this agreement, US Airways hassought and obtained an order from the bankruptcy court authorizing it toassume the code sharing agreement.
         Beginning October 14,2002, United and US Airways customers have access to each carriers' airportclubs.  Additionally, in the coming months, customers will be ableto earn and redeem miles on each carriers' frequent flyer program. Code share flights will be phased in starting in the first quarter of 2003.*
OUTLOOK
         Information regardingguidance for United's 2002 outlook can be obtained from UAL Corporation'sReport on Form 10-Q for the quarter ended September 30, 2002.
         Information includedin the above "Outlook" section, as well as information identified withan asterisk (*) 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 net earnings, revenues, expenses, cash balance, cashburn rate, capital spending, load factors and capacity include, withoutlimitation, the economy and the demand for air travel; the higher costsassociated with new airline security directives and any other increasedregulation of air carriers; the significantly higher costs of aircraftinsurance coverage for future claims caused by acts of war, terrorism,sabotage, hijacking and other similar perils, and the extent to which suchinsurance will continue to be available; the ability to raise and the costof financing in light of the September 11 events and the possibility ofany further credit downgrades of the Company; the cost of crude oil andjet fuel; industry capacity decisions; the success of the Company's out-of-courtrecovery plan; the success of the Company's implementation of its financialrecovery plan and further profit improvement initiatives; the outcome ofthe ATSB loan guarantee process;  willingness of customers to travel;the mix of business and leisure fare travel; actions of the U.S., foreignand local governments; the stability of the U.S. economy; any additionalterrorist activity and/or war; the economic environment of the airlineindustry and the economic 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 Disclosures AboutMarket 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 2001.
Interest Rate Risk -(Inmillions, except average contract rates)NotionalAverageEstimated AmountContractRateFairValue   (Pay)/Receive*Interestrate swap$  1307.56%$ (25)
Foreign Currency Risk -(Inmillions, except average contract rates)NotionalAverageEstimated AmountContractRateFairValue   (Pay)/Receive*Forwardexchange contracts       Euro - Purchased forwards$  202   1.28 $    (26)    Currencyoptions   Japanese Yen - Purchased put options$       7 132.53$    -Australian Dollar - Purchasedput options$       7     0.51$    -British Pound - Purchased putoptions$     14    1.37$    -Euro - Purchased put options$     35    0.86$    -Canadian Dollar - Purchased putoptions$     29    1.66$    -Correlation Basket Option - Sold$     92   N/A$    -
Price Risk (Aircraft fuel) -(Inmillions, except average contract rates)NotionalAverageEstimated AmountContractRateFairValue   (Pay)/Receive*Purchasedforward contracts - Crude oil$  131$ 24.22/bbl$  27Purchasedforward contracts - Heating oil$    47$ 28.72/bbl$    7
*Estimated fair values represent the amount United wouldpay/receive on September 30, 2002 to terminate the contracts. 
Item 4.  Controls and Procedures
        Within the 90-day period prior to the filing of this report, an evaluationwas carried out under the supervision and with the participation of theCompany's management, including the Chief Executive Officer ("CEO") andChief Financial Officer ("CFO"), of the effectiveness of our disclosurecontrols and procedures.  Based on that evaluation, the CEO and CFOhave concluded that the Company's disclosure controls and procedures areeffective to ensure that information required to be disclosed by the Companyin reports that it files or submits under the Securities Exchange Act of1934 is recorded, processed, summarized and reported within the time periodsspecified in Securities and Exchange Commission rules and forms. Subsequent to the date of their evaluation, there were no significant changesin the Company's internal controls or in other factors that could significantlyaffect the disclosure controls, including any corrective actions with regardto significant deficiencies and material weaknesses.  
PART II.  OTHER INFORMATION
Item 1.  Legal Proceedings.
Hall d.b.a. Travel Specialists v. United
As previously reported in our Form 10-Q for the period ended June 30,2002 and our Form 10-K for the year ended December 31, 2001, filed March8, 2002, a North Carolina travel agent filed an antitrust class actionsuit against United (and other carriers) initially in state court and thenin federal court in North Carolina following the reduction by United (andother carriers) in November 1999 of commission rates payable to travelagents.  Plaintiffs allege that United and the other carrier-defendantsconspired to fix travel agent commissions in violation of the Sherman Actand seek treble damages and injunctive relief.  Subsequent to thisinitial filing, the case has been expanded by the addition of five newtravel agencies, ARTA, and eight new carrier defendants, including twoStar Alliance carriers.  In addition, the court has allowed the additionof claims related to carriers' commission reduction actions in 1997, 1998,2001, and 2002.  Earlier this year the Court granted plaintiffs' motionto certify the case as a class action consisting of all U.S. (and its possessions)travel agencies.  Discovery is currently proceeding and is set toclose on November 13, 2002.  A trial date has been set for April 28,2003.
Plaintiffs, in a recent filing, have claimed damages, assuming liability,in the amount of approximately $13 billion dollars, although United's allegedshare of this amount has not been determined by plaintiffs.
In addition to the Hall case, United has been named in severalother cases filed in the U.S. and Canada, involving commission rates payableto travel agencies.  These cases are in their early stages. United does not expect the outcome of Hall and the related casesto have any material effect upon UAL's consolidated financial positionor results of operations.
Litigation Associated with September 11 Terrorism
         As previously reportedin our Form 10-Q for the period ended June 30, 2002, twenty-five lawsuitsare pending against United in the U.S. District Court for the SouthernDistrict of New York related to the September 11, 2001 terrorist attacks. The complaints, filed on behalf of passengers and ground victims, seekmonetary damages and allege that United breached its duty of care to thepassengers or the people and businesses on the ground and that the breachcaused the hijacking and subsequent deaths and property destruction.
         United anticipatesthe filing of additional lawsuits related to the September 11 attacks inthe future.  Under federal law, United's financial exposure on allsuch claims is limited to the amount of United's insurance coverage. 
Item 6.  Exhibitsand Reports on Form 8-K.(a) Exhibits
      A list of exhibits included as part ofthis Form 10-Q is set forth in an Exhibit Index that immediately precedessuch exhibits.
(b) There were no Form 8-Ks filed in the third quarter of 2002.    SIGNATURESPursuant to the requirementsof the Securities Exchange Act of 1934, the Registrant has duly causedthis report to be signed on its behalf by the undersigned thereunto dulyauthorized.  UNITEDAIR LINES, INC.By:/s/ Frederic F. BraceFredericF. BraceExecutiveVice President andChiefFinancial Officer(principalfinancial officer)  By:  /s/ M. Lynn HughittM. Lynn HughittVice President and Controller(principal accounting officer)Dated:  October 25, 2002      Exhibit Index ExhibitNo.Description  12.1Computationof Ratio of Earnings to Fixed Charges     

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