##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission
    
    Exact Name of Registrant as Specified in its Charter,
    
    State of
    
    I.R.S. EmployerFile Number
    
    Principal Office Address and Telephone Number
    
    Incorporation
    
    Identification No001-06033
    
    UAL Corporation
    
    Delaware
    
    36-2675207001-11355
    
    United Air Lines, Inc.
    
    Delaware
    
    36-267520677 W. Wacker DriveChicago, Illinois 60601(312) 997-8000
  UAL Corporation
    
    Yes þ No oUnited Air Lines, Inc.
    
    Yes þ No o
  UAL Corporation
    
    Large accelerated filer  þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller 
reporting company)United Air Lines, Inc.
    
    Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller 
reporting company)
  UAL Corporation
    
    Yes o No þUnited Air Lines, Inc.
    
    Yes o No þ
  UAL Corporation
    
    Yes þ No oUnited Air Lines, Inc.
    
    Yes þ No o
  UAL Corporation
    
    128,866,041 shares of common stock ($0.01 par value)United Air Lines, Inc.
    
    205 (100% owned by UAL Corporation)
There is no market for United Air Lines, Inc. common stock.




---



##### 



UAL Corporation and Subsidiary Companies and
United Air Lines, Inc. and Subsidiary Companies

Report on Form 10-Q

For the Quarter Ended September 30, 2008
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3UAL Corporation:Condensed Statements of Consolidated Operations (Unaudited)
    
    
    3Condensed Statements of Consolidated Financial Position (Unaudited)
    
    
    5Condensed Statements of Consolidated Cash Flows (Unaudited)
    
    
    7United Air Lines, Inc.:Condensed Statements of Consolidated Operations (Unaudited)
    
    
    8Condensed Statements of Consolidated Financial Position (Unaudited)
    
    
    10Condensed Statements of Consolidated Cash Flows (Unaudited)
    
    
    12Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
(UAL Corporation and United Air Lines, Inc.)
    
    
    13Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    33Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    54Item 4. Controls and Procedures
    
    
    55PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    56Item1A. Risk Factors
    
    
    57Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    59Item 6. Exhibits
    
    
    59Signatures
    
    
    60Exhibit Index
    
    
    61Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 12.1Exhibit 12.2Exhibit 31.1Exhibit 31.2Exhibit 31.3Exhibit 31.4Exhibit 32.1Exhibit 32.2
   2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 UAL Corporation and Subsidiary Companies
 
 Condensed Statements of Consolidated Operations (Unaudited)
 (In millions, except per share amounts)
 Three Months EndedSeptember 30,2008
    
    
    2007Operating revenues:Passenger  United Airlines
    
    $
    4,280
    
    
    $
    4,225Passenger  Regional Affiliates
    
    
    834
    
    
    
    819Cargo
    
    
    219
    
    
    
    198Special operating items (Note 5)
    
    
    
    
    
    
    45Other operating revenues
    
    
    232
    
    
    
    2405,565
    
    
    
    5,527Operating expenses:Aircraft fuel
    
    
    2,461
    
    
    
    1,324Salaries and related costs
    
    
    1,037
    
    
    
    1,062Regional affiliates
    
    
    882
    
    
    
    751Purchased services
    
    
    327
    
    
    
    344Aircraft maintenance materials and outside repairs
    
    
    256
    
    
    
    295Depreciation and amortization
    
    
    234
    
    
    
    245Landing fees and other rent
    
    
    222
    
    
    
    201Distribution expenses
    
    
    181
    
    
    
    211Aircraft rent
    
    
    115
    
    
    
    102Cost of third party sales
    
    
    75
    
    
    
    68Other impairments and special items (Notes 4 and 5)
    
    
    (9
    )
    
    
    (22
    )Other operating expenses
    
    
    275
    
    
    
    2906,056
    
    
    
    4,871Income (loss) from operations
    
    
    (491
    )
    
    
    656Other income (expense):Interest expense
    
    
    (131
    )
    
    
    (161
    )Interest income
    
    
    24
    
    
    
    71Interest capitalized
    
    
    6
    
    
    
    5Miscellaneous, net
    
    
    (186
    )
    
    
    (6
    )(287
    )
    
    
    (91
    )Income (loss) before income taxes and equity in earnings
of affiliates
    
    
    (778
    )
    
    
    565Income tax expense (benefit)
    
    
    2
    
    
    
    232Income (loss) before equity in earnings of affiliates
    
    
    (780
    )
    
    
    333Equity in earnings of affiliates, net of tax
    
    
    1
    
    
    
    1Net income (loss)
    
    $
    (779
    )
    
    $
    334Earnings (loss) per share, basic
    
    $
    (6.13
    )
    
    $
    2.82Earnings (loss) per share, diluted
    
    $
    (6.13
    )
    
    $
    2.21
 See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
  3




---



##### Table of Contents



UAL Corporation and Subsidiary Companies  Condensed Statements of Consolidated Operations (Unaudited)  (In millions, except per share amounts)
 Nine Months EndedSeptember 30,2008
    
    
    2007Operating revenues:Passenger  United Airlines
    
    $
    11,924
    
    
    $
    11,457Passenger  Regional Affiliates
    
    
    2,346
    
    
    
    2,298Cargo
    
    
    674
    
    
    
    547Special operating items (Note 5)
    
    
    
    
    
    
    45Other operating revenues
    
    
    703
    
    
    
    76615,647
    
    
    
    15,113Operating expenses:Aircraft fuel
    
    
    5,884
    
    
    
    3,571Salaries and related costs
    
    
    3,262
    
    
    
    3,149Regional affiliates
    
    
    2,508
    
    
    
    2,176Purchased services
    
    
    1,047
    
    
    
    980Aircraft maintenance materials and outside repairs
    
    
    868
    
    
    
    860Depreciation and amortization
    
    
    670
    
    
    
    694Landing fees and other rent
    
    
    651
    
    
    
    654Distribution expenses
    
    
    558
    
    
    
    596Aircraft rent
    
    
    314
    
    
    
    307Cost of third party sales
    
    
    204
    
    
    
    238Goodwill impairment (Note 4)
    
    
    2,277
    
    
    
    Other impairments and special items (Notes 4 and 5)
    
    
    214
    
    
    
    (44
    )Other operating expenses
    
    
    816
    
    
    
    83119,273
    
    
    
    14,012Income (loss) from operations
    
    
    (3,626
    )
    
    
    1,101Other income (expense):Interest expense
    
    
    (392
    )
    
    
    (506
    )Interest income
    
    
    100
    
    
    
    191Interest capitalized
    
    
    16
    
    
    
    14Miscellaneous, net
    
    
    (177
    )
    
    
    (7
    )(453
    )
    
    
    (308
    )Income (loss) before income taxes and equity in earnings
of affiliates
    
    
    (4,079
    )
    
    
    793Income tax expense (benefit)
    
    
    (30
    )
    
    
    340Income (loss) before equity in earnings of affiliates
    
    
    (4,049
    )
    
    
    453Equity in earnings of affiliates, net of tax
    
    
    4
    
    
    
    3Net income (loss)
    
    $
    (4,045
    )
    
    $
    456Income (loss) per share, basic
    
    $
    (32.34
    )
    
    $
    3.82Income (loss) per share, diluted
    
    $
    (32.34
    )
    
    $
    3.10
 See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
  4




---



##### Table of Contents



UAL Corporation and Subsidiary Companies
 
 Condensed Statements of Consolidated Financial Position (Unaudited)
 (In millions, except shares)
 September 30,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,931
    
    
    $
    1,259Short-term investments
    
    
    
    
    
    
    2,295Receivables, less allowance for doubtful accounts (2008$24;
2007$27)
    
    
    1,037
    
    
    
    888Prepaid fuel
    
    
    524
    
    
    
    493Fuel hedge collateral deposits
    
    
    354
    
    
    
    Aircraft fuel, spare parts and supplies, less
obsolescence allowance (2008$35; 2007$25)
    
    
    283
    
    
    
    242Deferred income taxes
    
    
    127
    
    
    
    78Restricted cash
    
    
    91
    
    
    
    325Prepaid expenses and other
    
    
    623
    
    
    
    5155,970
    
    
    
    6,095Operating property and equipment:OwnedFlight equipment
    
    
    9,239
    
    
    
    9,335Advances on flight equipment
    
    
    
    
    
    
    102Other property and equipment
    
    
    1,758
    
    
    
    1,66910,997
    
    
    
    11,106Lessaccumulated depreciation and amortization
    
    
    (1,458
    )
    
    
    (1,062
    )9,539
    
    
    
    10,044Capital leases:Flight equipment
    
    
    1,289
    
    
    
    1,449Other property and equipment
    
    
    35
    
    
    
    341,324
    
    
    
    1,483Lessaccumulated amortization
    
    
    (200
    )
    
    
    (168
    )1,124
    
    
    
    1,31510,663
    
    
    
    11,359Other assets:Intangibles, less accumulated amortization (2008$316; 2007$324)
    
    
    2,726
    
    
    
    2,871Goodwill
    
    
    
    
    
    
    2,280Aircraft lease deposits
    
    
    306
    
    
    
    340Restricted cash
    
    
    157
    
    
    
    431Investments
    
    
    92
    
    
    
    122Other, net
    
    
    817
    
    
    
    7224,098
    
    
    
    6,766$
    20,731
    
    
    $
    24,220
 See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
  5




---



##### Table of Contents



UAL Corporation and Subsidiary Companies  Condensed Statements of Consolidated Financial Position (Unaudited)  (In millions, except shares)
 September 30,
    
    
    December 31,2008
    
    
    2007Liabilities and Stockholders EquityCurrent liabilities:Advance ticket sales
    
    $
    2,251
    
    
    $
    1,918Mileage Plus deferred revenue
    
    
    1,381
    
    
    
    1,268Accounts payable
    
    
    821
    
    
    
    877Accrued salaries, wages and benefits
    
    
    785
    
    
    
    896Long-term debt maturing within one year
    
    
    749
    
    
    
    678Fuel purchase commitments
    
    
    524
    
    
    
    493Current obligations under capital leases
    
    
    116
    
    
    
    250Accrued interest
    
    
    115
    
    
    
    141Advanced purchase of miles
    
    
    
    
    
    
    694Distribution payable
    
    
    4
    
    
    
    257Other
    
    
    807
    
    
    
    5077,553
    
    
    
    7,979Long-term debt
    
    
    6,145
    
    
    
    6,415Long-term obligations under capital leases
    
    
    1,049
    
    
    
    1,106Other liabilities and deferred credits:Mileage Plus deferred revenue
    
    
    2,635
    
    
    
    2,569Postretirement benefit liability
    
    
    1,852
    
    
    
    1,829Advanced purchase of miles
    
    
    1,099
    
    
    
    Deferred income taxes
    
    
    660
    
    
    
    638Other
    
    
    1,020
    
    
    
    8957,266
    
    
    
    5,931Commitments and contingent liabilities (Note 15)Mandatorily convertible preferred securities (Note 7)
    
    
    
    
    
    
    371Stockholders equity (deficit) (Note 7):Preferred stock
    
    
    
    
    
    
    Common stock at par, $0.01 par value; authorized
1,000,000,000 shares; outstanding 128,836,041
and 116,921,049 shares at September 30, 2008 and
December 31, 2007, respectively
    
    
    1
    
    
    
    1Additional capital invested
    
    
    2,536
    
    
    
    2,139Retained earnings (deficit)
    
    
    (3,896
    )
    
    
    152Stock held in treasury, at cost
    
    
    (25
    )
    
    
    (15
    )Accumulated other comprehensive income
    
    
    102
    
    
    
    141(1,282
    )
    
    
    2,418$
    20,731
    
    
    $
    24,220
 See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
  6




---



##### Table of Contents



UAL Corporation and Subsidiary Companies
 
 Condensed Statements of Consolidated Cash Flows (Unaudited)
 (In millions)
 Nine Months EndedSeptember 30,2008
    
    
    2007Cash flows provided (used) by operating activities:Net income (loss)
    
    $
    (4,045
    )
    
    $
    456Adjustments to reconcile to net cash provided
(used) by operating activitiesGoodwill impairment
    
    
    2,277
    
    
    
    Other impairments
    
    
    214
    
    
    
    Depreciation and amortization
    
    
    670
    
    
    
    694Increase in advanced purchase of miles
    
    
    405
    
    
    
    27Increase in fuel hedge collateral
    
    
    (378
    )
    
    
    Increase in advance ticket sales
    
    
    333
    
    
    
    577Increase in Mileage Plus deferred revenue
    
    
    179
    
    
    
    187Increase in receivables
    
    
    (156
    )
    
    
    (269
    )Deferred income taxes
    
    
    (29
    )
    
    
    364Other, net
    
    
    280
    
    
    
    (34
    )(250
    )
    
    
    2,002Cash flows provided (used) by investing activities:Net (purchases) sales of short-term investments
    
    
    2,295
    
    
    
    (2,587
    )Decrease in restricted cash
    
    
    508
    
    
    
    59Additions to property and equipment
    
    
    (335
    )
    
    
    (428
    )Proceeds from asset sale leaseback
    
    
    59
    
    
    
    Proceeds from the sale of property and equipment
    
    
    43
    
    
    
    14Proceeds from litigation on advance deposits
    
    
    41
    
    
    
    Purchases of EETC securities
    
    
    
    
    
    
    (76
    )Other, net
    
    
    (35
    )
    
    
    (39
    )2,576
    
    
    
    (3,057
    )Cash flows provided (used) by financing activities:Repayment of Credit Facility
    
    
    (18
    )
    
    
    (995
    )Repayment of other debt
    
    
    (538
    )
    
    
    (1,149
    )Proceeds from issuance of secured notes
    
    
    337
    
    
    
    694Special distribution to common shareholders
    
    
    (253
    )
    
    
    Principal payments under capital leases
    
    
    (209
    )
    
    
    (60
    )Decrease in capital lease deposits
    
    
    154
    
    
    
    Increase in deferred financing costs
    
    
    (118
    )
    
    
    (22
    )Other, net
    
    
    (9
    )
    
    
    18(654
    )
    
    
    (1,514
    )Increase (decrease) in cash and cash equivalents
during the period
    
    
    1,672
    
    
    
    (2,569
    )Cash and cash equivalents at beginning of the period
    
    
    1,259
    
    
    
    3,832Cash and cash equivalents at end of the period
    
    $
    2,931
    
    
    $
    1,263
 See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited).
  7




---



##### Table of Contents



United Air Lines, Inc. and Subsidiary Companies  
 Condensed Statements of Consolidated Operations (Unaudited)  (In millions)
 Three Months EndedSeptember 30,2008
    
    
    2007Operating revenues:Passenger  United Airlines
    
    $
    4,280
    
    
    $
    4,225Passenger  Regional Affiliates
    
    
    834
    
    
    
    819Cargo
    
    
    219
    
    
    
    198Special operating items (Note 5)
    
    
    
    
    
    
    45Other operating revenues
    
    
    273
    
    
    
    2435,606
    
    
    
    5,530Operating expenses:Aircraft fuel
    
    
    2,461
    
    
    
    1,324Salaries and related costs
    
    
    1,036
    
    
    
    1,059Regional affiliates
    
    
    882
    
    
    
    751Purchased services
    
    
    327
    
    
    
    344Aircraft maintenance materials and outside repairs
    
    
    256
    
    
    
    295Depreciation and amortization
    
    
    234
    
    
    
    245Landing fees and other rent
    
    
    222
    
    
    
    201Distribution expenses
    
    
    181
    
    
    
    211Aircraft rent
    
    
    116
    
    
    
    102Cost of third party sales
    
    
    75
    
    
    
    67Other impairments and special items (Notes 4 and 5)
    
    
    (9
    )
    
    
    (22
    )Other operating expenses
    
    
    276
    
    
    
    2916,057
    
    
    
    4,868Income (loss) from operations
    
    
    (451
    )
    
    
    662Other income (expense):Interest expense
    
    
    (132
    )
    
    
    (161
    )Interest income
    
    
    24
    
    
    
    70Interest capitalized
    
    
    6
    
    
    
    5Miscellaneous, net
    
    
    (185
    )
    
    
    (6
    )(287
    )
    
    
    (92
    )Income (loss) before income taxes and equity in
earnings
of affiliates
    
    
    (738
    )
    
    
    570Income tax expense (benefit)
    
    
    3
    
    
    
    234Income (loss) before equity in earnings of affiliates
    
    
    (741
    )
    
    
    336Equity in earnings of affiliates, net of tax
    
    
    1
    
    
    
    1Net income (loss)
    
    $
    (740
    )
    
    $
    337
 See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
  8




---



##### Table of Contents



United Air Lines, Inc. and Subsidiary Companies  Condensed Statements of Consolidated Operations (Unaudited)  (In millions)
 Nine Months EndedSeptember 30,2008
    
    
    2007Operating revenues:Passenger  United Airlines
    
    $
    11,924
    
    
    $
    11,457Passenger  Regional Affiliates
    
    
    2,346
    
    
    
    2,298Cargo
    
    
    674
    
    
    
    547Special operating items (Note 5)
    
    
    
    
    
    
    45Other operating revenues
    
    
    744
    
    
    
    77615,688
    
    
    
    15,123Operating expenses:Aircraft fuel
    
    
    5,884
    
    
    
    3,571Salaries and related costs
    
    
    3,262
    
    
    
    3,145Regional affiliates
    
    
    2,508
    
    
    
    2,176Purchased services
    
    
    1,047
    
    
    
    980Aircraft maintenance materials and outside repairs
    
    
    868
    
    
    
    860Depreciation and amortization
    
    
    670
    
    
    
    694Landing fees and other rent
    
    
    651
    
    
    
    654Distribution expenses
    
    
    558
    
    
    
    596Aircraft rent
    
    
    316
    
    
    
    308Cost of third party sales
    
    
    203
    
    
    
    235Goodwill impairment (Note 4)
    
    
    2,277
    
    
    
    Other impairments and special items (Notes 4 and 5)
    
    
    214
    
    
    
    (44
    )Other operating expenses
    
    
    844
    
    
    
    83119,302
    
    
    
    14,006Income (loss) from operations
    
    
    (3,614
    )
    
    
    1,117Other income (expense):Interest expense
    
    
    (392
    )
    
    
    (506
    )Interest income
    
    
    100
    
    
    
    194Interest capitalized
    
    
    16
    
    
    
    14Miscellaneous, net
    
    
    (177
    )
    
    
    (7
    )(453
    )
    
    
    (305
    )Income (loss) before income taxes and equity in
earnings
of affiliates
    
    
    (4,067
    )
    
    
    812Income tax expense (benefit)
    
    
    (30
    )
    
    
    348Income (loss) before equity in earnings of affiliates
    
    
    (4,037
    )
    
    
    464Equity in earnings of affiliates, net of tax
    
    
    4
    
    
    
    3Net income (loss)
    
    $
    (4,033
    )
    
    $
    467
 See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
  9




---



##### Table of Contents



United Air Lines, Inc. and Subsidiary Companies
 
 Condensed Statements of Consolidated Financial Position (Unaudited)
 (In millions, except shares)
 September 30,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,868
    
    
    $
    1,239Short-term investments
    
    
    
    
    
    
    2,259Receivables, less allowance for doubtful
accounts (2008  $24; 2007  $27)
    
    
    1,031
    
    
    
    880Prepaid fuel
    
    
    524
    
    
    
    493Fuel hedge collateral deposits
    
    
    354
    
    
    
    Aircraft fuel, spare parts and supplies, less
obsolescence allowance (2008  $35; 2007  $25)
    
    
    283
    
    
    
    242Receivables from related parties
    
    
    211
    
    
    
    151Deferred income taxes
    
    
    119
    
    
    
    72Restricted cash
    
    
    91
    
    
    
    291Prepaid expenses and other
    
    
    618
    
    
    
    5136,099
    
    
    
    6,140Operating property and equipment:Owned Flight equipment
    
    
    9,233
    
    
    
    9,329Advances on flight equipment
    
    
    
    
    
    
    91Other property and equipment
    
    
    1,759
    
    
    
    1,66910,992
    
    
    
    11,089Less  accumulated depreciation and amortization
    
    
    (1,458
    )
    
    
    (1,062
    )9,534
    
    
    
    10,027Capital leases:Flight equipment
    
    
    1,289
    
    
    
    1,449Other property and equipment
    
    
    35
    
    
    
    341,324
    
    
    
    1,483Less  accumulated amortization
    
    
    (200
    )
    
    
    (168
    )1,124
    
    
    
    1,31510,658
    
    
    
    11,342Other assets:Intangibles, less accumulated amortization
(2008  $316; 2007  $324)
    
    
    2,726
    
    
    
    2,871Goodwill
    
    
    
    
    
    
    2,280Aircraft lease deposits
    
    
    306
    
    
    
    340Restricted cash
    
    
    152
    
    
    
    431Investments
    
    
    92
    
    
    
    122Other, net
    
    
    807
    
    
    
    7104,083
    
    
    
    6,754$
    20,840
    
    
    $
    24,236
 See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
  10




---



##### Table of Contents



United Air Lines, Inc. and Subsidiary Companies  Condensed Statements of Consolidated Financial Position (Unaudited)  (In millions, except shares)
 September 30,
    
    
    December 31,2008
    
    
    2007Liabilities and Stockholders EquityCurrent liabilities:Advance ticket sales
    
    $
    2,251
    
    
    $
    1,918Mileage Plus deferred revenue
    
    
    1,381
    
    
    
    1,268Accounts payable
    
    
    820
    
    
    
    882Accrued salaries, wages and benefits
    
    
    785
    
    
    
    896Long-term debt maturing within one year
    
    
    748
    
    
    
    678Fuel purchase commitments
    
    
    524
    
    
    
    493Current obligations under capital leases
    
    
    116
    
    
    
    250Accrued interest
    
    
    115
    
    
    
    141Advanced purchase of miles
    
    
    
    
    
    
    694Other
    
    
    1,104
    
    
    
    7237,844
    
    
    
    7,943Long-term debt
    
    
    6,144
    
    
    
    6,412Long-term obligations under capital leases
    
    
    1,049
    
    
    
    1,106Other liabilities and deferred credits:Mileage Plus deferred revenue
    
    
    2,635
    
    
    
    2,569Postretirement benefit liability
    
    
    1,852
    
    
    
    1,829Advanced purchase of miles
    
    
    1,099
    
    
    
    Deferred income taxes
    
    
    576
    
    
    
    555Other
    
    
    1,020
    
    
    
    8957,182
    
    
    
    5,848Commitments and contingent liabilities (Note 15)Parent company mandatorily convertible
preferred securities (Note 7)
    
    
    
    
    
    
    371Stockholders equity (deficit) (Note 7):Common stock at par, $5 par value;
authorized 1,000 shares; outstanding 205
at both September 30, 2008 and December
31, 2007
    
    
    
    
    
    
    Additional capital invested
    
    
    2,396
    
    
    
    2,000Retained earnings (deficit)
    
    
    (3,877
    )
    
    
    415Accumulated other comprehensive income
    
    
    102
    
    
    
    141(1,379
    )
    
    
    2,556$
    20,840
    
    
    $
    24,236
 See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
  11




---



##### Table of Contents



United Air Lines, Inc. and Subsidiary Companies
 
 Condensed Statements of Consolidated Cash Flows (Unaudited)
 (In millions)
 Nine Months EndedSeptember 30,2008
    
    
    2007Cash flows provided (used) by operating activities:Net income (loss)
    
    $
    (4,033
    )
    
    $
    467Adjustments to reconcile to net cash provided
(used) by operating activitiesGoodwill impairment
    
    
    2,277
    
    
    
    Other impairments
    
    
    214
    
    
    
    Depreciation and amortization
    
    
    670
    
    
    
    694Increase in advanced purchase of miles
    
    
    405
    
    
    
    27Increase in fuel hedge collateral
    
    
    (378
    )
    
    
    Increase in advance ticket sales
    
    
    333
    
    
    
    577Increase in Mileage Plus deferred revenue
    
    
    179
    
    
    
    187Increase in receivables
    
    
    (158
    )
    
    
    (271
    )Deferred income taxes
    
    
    (28
    )
    
    
    372Other, net
    
    
    326
    
    
    
    (65
    )(193
    )
    
    
    1,988Cash flows provided (used) by investing activities:Net (purchases) sales of short-term investments
    
    
    2,259
    
    
    
    (2,552
    )Decrease in restricted cash
    
    
    479
    
    
    
    54Additions to property and equipment
    
    
    (335
    )
    
    
    (428
    )Proceeds from asset sale leaseback
    
    
    59
    
    
    
    Proceeds from the sale of property and equipment
    
    
    42
    
    
    
    13Purchases of EETC securities
    
    
    
    
    
    
    (76
    )Other, net
    
    
    (34
    )
    
    
    (39
    )2,470
    
    
    
    (3,028
    )Cash flows provided (used) by financing activities:Repayment of Credit Facility
    
    
    (18
    )
    
    
    (995
    )Repayment of other debt
    
    
    (537
    )
    
    
    (1,148
    )Proceeds from issuance of secured notes
    
    
    337
    
    
    
    694Dividend to parent
    
    
    (258
    )
    
    
    Principal payments under capital leases
    
    
    (209
    )
    
    
    (60
    )Decrease in capital lease deposits
    
    
    154
    
    
    
    Increase in deferred financing costs
    
    
    (118
    )
    
    
    (22
    )Other, net
    
    
    1
    
    
    
    38(648
    )
    
    
    (1,493
    )Increase (decrease) in cash and cash equivalents
during the period
    
    
    1,629
    
    
    
    (2,533
    )Cash and cash equivalents at beginning of the period
    
    
    1,239
    
    
    
    3,779Cash and cash equivalents at end of the period
    
    $
    2,868
    
    
    $
    1,246
 See accompanying Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
  12




---



##### Table of Contents



UAL Corporation and Subsidiary Companies and
United Air Lines, Inc. and Subsidiary Companies
 
 Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
 (1) Basis of Presentation
  Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
 Interim Financial Statements.
 (2) Updates to Significant Accounting Policies
  Accounting for Frequent Flyer Program Miles Sold to Third Parties and the Advanced Purchase of
Miles.
 Condensed Statements of Consolidated Financial Position (Unaudited)
  Air Transportation Element. Condensed Statements of Consolidated Financial Position (Unaudited) Condensed Statements of Consolidated Operations (Unaudited).
 Marketing-related element. Condensed Statements of Consolidated Operations (Unaudited).
  13




---



##### Table of Contents



Other Frequent Flyer Accounting Policies.
    Cash and Cash Equivalents, Short-Term Investments, Restricted Cash.
  (3) Company Operational Plans
  
    
    The Company is significantly reducing mainline domestic and consolidated
capacity. By the fourth quarter of 2008, the Company expects mainline domestic and
consolidated capacity to be down approximately 15% and 11% year-over-year,
respectively. For the full year of 2009, mainline domestic and consolidated capacity
are expected to be approximately 13% and 9% lower than 2008, respectively.
 
    
    The capacity reductions are being made through reductions in frequencies of
routes and the elimination of unprofitable routes. These actions have resulted in the
closure of a small number of airport operations where United cannot operate profitably
at current fuel prices. Additional airport operations may be closed in future periods.
 
    
    The Company previously announced plans to permanently remove 100 aircraft from
its mainline fleet, including its entire B737 fleet and six B747 aircraft, by the end
of 2009. The B737 aircraft being retired are some of the oldest and least fuel
efficient in the Companys fleet. This planned reduction reflects the Companys efforts
to
eliminate unprofitable capacity and divest the Company of assets that currently do not
provide an acceptable return.
  14




---



##### Table of Contents




    
    United is eliminating its Ted product for leisure markets and will reconfigure
that fleets 56 A320s to include United First seating. The reconfiguration of the Ted
aircraft will occur in stages, with expected completion by year-end 2009. We will
continue to review the deployment of all of our aircraft in various markets and the
overall composition of our fleet to ensure that we are using our assets appropriately
to provide the best available return.
 
    
    In connection with the capacity reductions, the Company is further streamlining
its operations and corporate functions in order to reduce the size of its workforce to
match the size of its operations as further discussed below.
 
    
    The Company also recently entered into an alliance partnership with Continental
Airlines that is expected to create revenue enhancements, costs savings and operational
efficiencies.
  Severance. Employers Accounting for Postemployment Benefitsan
amendment of FASB Statements No. 5 and 43, Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits
  (In millions)Initial accrual at June 30, 2008
    
    $
    82Accruals
    
    
    6Payments
    
    
    (15
    )Balance at September 30, 2008
    
    $
    73
 Condensed Statements of Consolidated
Operations (Unaudited).
  15




---



##### Table of Contents



Aircraft.
 B737s (Mainline)
    
    
    All Other Mainline
    
    
    Total
    
    
    RegionalOwned
    
    
    Leased
    
    
    Total
    
    
    Owned
    
    
    Leased
    
    
    Total
    
    
    Mainline
    
    
    Affiliates
    
    
    TotalAircraft at December 31, 2007 (a)
    
    
    47
    
    
    
    47
    
    
    
    94
    
    
    
    208
    
    
    
    158
    
    
    
    366
    
    
    
    460
    
    
    
    279
    
    
    
    739Removed from operating fleet
    
    
    (21
    )
    
    
    (5
    )
    
    
    (26
    )
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    (27
    )
    
    
    (4
    )
    
    
    (31
    )Transferred from leased to owned (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Aircraft at September 30, 2008  UAL
(c)
    
    
    26
    
    
    
    42
    
    
    
    68
    
    
    
    217
    
    
    
    148
    
    
    
    365
    
    
    
    433
    
    
    
    275
    
    
    
    708Aircraft at September 30, 2008  United
    
    
    25
    
    
    
    43
    
    
    
    68
    
    
    
    217
    
    
    
    148
    
    
    
    365
    
    
    
    433
    
    
    
    275
    
    
    
    708Nonoperating at September 30, 2008 (d)
    
    
    19
    
    
    
    3
    
    
    
    22
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    23
    
    
    
    
    
    
    
    23Contracted for sale/delivery in future
periods at September 30, 2008
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Agreements in principle for aircraft
sales at September 30, 2008
    
    
    14
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    14
 
 (a)
    
    At December 31, 2007, the Company had 113 unencumbered aircraft with a net book
value of $2.0 billion.(b)
    
    During 2008, the Company acquired certain aircraft under existing lease terms.
See Note 16, Debt Obligations and Other Financing Transactions for additional
information related to these conversions.(c)
    
    As of September 30, 2008, 102 aircraft with a net book value of $1.5 billion were
unencumbered. Aircraft expected to be sold under existing agreements in principle
(subject to reaching final documentation and other conditions) with prospective buyers
are considered unencumbered. Aircraft contracted for sale under binding agreements are
considered encumbered.(d)
    
    As of September 30, 2008, nonoperating aircraft and engines, with a book value of
$146 million, are classified as held for sale within other current assets in the
Companys Condensed Statements of Financial Position (Unaudited). Other costs.
 (4) Impairments
 Goodwill and Other
Intangible Assets Accounting
for the Impairment or Disposal of Long-Lived Assets
  Condensed Statements of Consolidated Operations (Unaudited).
 Period Ended September 30, 2008(In millions)
    
    Three Months
    
    
    Nine MonthsGoodwill impairment
    
    $
    
    
    
    $
    2,277Indefinite-lived intangible assets:Codeshare agreements
    
    
    (16
    )
    
    
    44Tradenames
    
    
    
    
    
    
    20Intangible asset impairments
    
    
    (16
    )
    
    
    64Tangible assets:Pre-delivery advance deposits including related
capitalized interest
    
    
    
    
    
    
    105B737 aircraft, B737 spare parts and other
    
    
    
    
    
    
    38Aircraft and related deposit impairments
    
    
    
    
    
    
    143Total impairments
    
    $
    (16
    )
    
    $
    2,484
  16




---



##### Table of Contents



Goodwill
      Indefinite-lived intangible assets
  Long-lived assets
   17




---



##### Table of Contents



, Effective Date of FASB Statement No. 157 Fair Value
Measurements
   (5) Voluntary Reorganization Under Chapter 11 of the United States Bankruptcy Code
 Bankruptcy Considerations. www.pd-ual.com
 Significant Matters Remaining to be Resolved in Chapter 11 Cases.
 (a)
    
    SFO Municipal Bond Secured Interest. HSBC Bank Inc. (HSBC), as trustee for
the 1997 municipal bonds related to San Francisco International Airport (SFO), filed
a complaint against United asserting a security interest in Uniteds leasehold for
portions of its maintenance base at SFO. Pursuant to Section 506(a) of the Bankruptcy
Code, HSBC alleges that it is entitled to be paid the value of that security interest,
which HSBC had claimed was as much as $257 million. HSBC and United went to trial in
April 2006 and the Bankruptcy Court rejected as a matter of law HSBCs $257 million
claim. HSBC subsequently alleged that it was entitled to $154 million, or at a minimum,
approximately $93 million. The parties tried the case and filed post-trial briefs,
which were heard by the Bankruptcy Court. In October 2006, the Bankruptcy Court issued
its written opinion holding that the value of the security interest is approximately
$27 million. United has accrued $27 million plus accrued interest as its estimated
obligation as of September 30, 2008 and December 31, 2007. After the Bankruptcy Court
denied various post-trial motions, both parties appealed to the U.S. District Court for
the Northern District of Illinois (the District Court) and on March 27, 2008, the
District Court affirmed the Bankruptcy Court decision in all respects. HSBC has
appealed the District Courts judgment to the U.S. Court of Appeals for the Seventh
Circuit.
 (b)
    
    LAX Municipal Bond Secured Interest.There is pending litigation before the
District Court regarding the extent to which the Los Angeles International Airport
(LAX) municipal bond debt is entitled to secured status under Section 506(a) of the
Bankruptcy Code. In 2007, the Bankruptcy Court issued its written opinion holding that
the value of the security interest is approximately $33 million. An appeal by both
parties to the District Court resulted in an affirmation of this value on June 13,
2008. United has accrued this amount plus accrued interest as its estimated
obligation at both September 30, 2008 and December 31, 2007. The District Courts
ruling has been appealed to the U.S. Court of Appeals for the Seventh Circuit.
  18




---



##### Table of Contents



Condensed Statements of Consolidated Operations (Unaudited)
 Claims Resolution Process.
  Condensed Statements of Consolidated Financial Position (Unaudited)
 (In millions)Balance at December 31, 2007
    
    $
    98Payments
    
    
    (5
    )Accruals
    
    
    4Balance at September 30, 2008
    
    $
    97
 (6) New Accounting Pronouncements
 Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities
 Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
  19




---



##### Table of Contents



Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement
No. 133 Accounting for Derivative Instruments and Hedging Activities
 Effective
Date of FASB Statement No. 157 Determining the Fair Value of a
Financial Asset When the Market for that Asset is not Active
 (7) Common Stockholders Equity (Deficit) and Mandatorily Convertible Preferred Securities
  Nine Months EndedUAL
    
    September 30, 2008UAL common stock outstanding at beginning of period
    
    
    116,921,049Issuance of UAL common stock upon conversion of preferred stock
    
    
    11,145,812Issuance of UAL common stock to employees
    
    
    363,664Issuance of UAL common stock to creditors
    
    
    765,780Forfeiture of non-vested UAL restricted stock
    
    
    (89,486
    )Treasury shares acquired
    
    
    (270,778
    )UAL common stock outstanding at end of period
    
    
    128,836,041Treasury shares at beginning of period
    
    
    396,595Shares acquired for treasury
    
    
    270,778Treasury shares at end of period
    
    
    667,373
   20




---



##### Table of Contents



(8) Per Share Amounts (UAL Only)
 Earnings per Share
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In millions)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Basic earnings (loss) per share:Net income (loss)
    
    $
    (779
    )
    
    $
    334
    
    
    $
    (4,045
    )
    
    $
    456Preferred stock dividend requirements
    
    
    (1
    )
    
    
    (3
    )
    
    
    (3
    )
    
    
    (8
    )Earnings (loss) available to common stockholders
    
    $
    (780
    )
    
    $
    331
    
    
    $
    (4,048
    )
    
    $
    448Basic weighted average shares outstanding
    
    
    127.3
    
    
    
    117.5
    
    
    
    125.2
    
    
    
    117.3Earnings (loss) per share, basic
    
    $
    (6.13
    )
    
    $
    2.82
    
    
    $
    (32.34
    )
    
    $
    3.82Diluted earnings (loss) per share:Earnings (loss) available to common stockholders
    
    $
    (780
    )
    
    $
    331
    
    
    $
    (4,048
    )
    
    $
    448Effect of 2% preferred securities
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    8Effect of 4.5% senior limited-subordination convertible notes
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    15Effect of 5% convertible notes
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    4Earnings (loss) available to common stockholders including
the effect of dilutive securities
    
    $
    (780
    )
    
    $
    341
    
    
    $
    (4,048
    )
    
    $
    475Basic weighted average shares outstanding
    
    
    127.3
    
    
    
    117.5
    
    
    
    125.2
    
    
    
    117.3Effect of non-vested stock options
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    0.1Effect of non-vested restricted shares
    
    
    
    
    
    
    1.2
    
    
    
    
    
    
    
    1.1Effect of 2% preferred securities
    
    
    
    
    
    
    11.0
    
    
    
    
    
    
    
    11.0Effect of 4.5% senior limited-subordination convertible notes
    
    
    
    
    
    
    20.8
    
    
    
    
    
    
    
    20.8Effect of 5% convertible notes
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    3.2Diluted weighted average shares outstanding
    
    
    127.3
    
    
    
    154.1
    
    
    
    125.2
    
    
    
    153.5Earnings (loss) per share, diluted
    
    $
    (6.13
    )
    
    $
    2.21
    
    
    $
    (32.34
    )
    
    $
    3.10Potentially dilutive shares excluded from diluted per share
amounts:Stock options
    
    
    4.4
    
    
    
    3.9
    
    
    
    4.4
    
    
    
    4.2Restricted shares
    
    
    1.5
    
    
    
    0.8
    
    
    
    1.5
    
    
    
    0.92% preferred securities
    
    
    2.1
    
    
    
    
    
    
    
    4.1
    
    
    
    4.5% senior limited-subordination convertible notes
    
    
    22.2
    
    
    
    
    
    
    
    22.2
    
    
    
    5% convertible notes
    
    
    3.4
    
    
    
    
    
    
    
    3.4
    
    
    
    33.6
    
    
    
    4.7
    
    
    
    35.6
    
    
    
    5.1
 (9) Share-Based Compensation Plans
 2008 Incentive Compensation Plan
   21




---



##### Table of Contents




    
    any options and SARs outstanding as of the date the change of control is
determined to have occurred become fully exercisable and vested, as of immediately
prior to the change of control.
 
    
    all performance units, cash incentive awards and other awards designated as
performance compensation awards will be paid out at the target performance level on a
prorated basis based on the number of days elapsed from the beginning of the
performance period up to and including the change of control.
 
    
    all other outstanding awards are automatically deemed exercisable or vested and
all restrictions and forfeiture provisions related thereto lapse as of immediately
prior to such change of control.
 Compensation Expense
  OptionsOutstanding at beginning of period
    
    
    4,150,093Granted
    
    
    527,900Exercised
    
    
    (6,864
    )Canceled
    
    
    (259,127
    )Outstanding at end of period
    
    
    4,412,002Exercisable (vested) at end of period
    
    
    1,980,767
  Restricted StockNonvested at beginning of period
    
    
    2,017,989Granted
    
    
    358,800Vested
    
    
    (794,654
    )Terminated
    
    
    (89,486
    )Nonvested at end of period
    
    
    1,492,649
 (10) Income Taxes
   22




---



##### Table of Contents



Business Combinations Statements of Consolidated
Operations (Unaudited)
 Share-Based Payment
   (11) Retirement and Postretirement Plans
   23




---



##### Table of Contents



Pension Benefits
    
    
    Other BenefitsThree Months
    
    
    Nine Months
    
    
    Three Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,(In millions)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    2
    
    
    $
    2
    
    
    $
    5
    
    
    $
    7
    
    
    $
    8
    
    
    $
    11
    
    
    $
    24
    
    
    $
    29Interest cost
    
    
    2
    
    
    
    2
    
    
    
    7
    
    
    
    7
    
    
    
    31
    
    
    
    29
    
    
    
    91
    
    
    
    91Expected return on plan assets
    
    
    (2
    )
    
    
    (2
    )
    
    
    (8
    )
    
    
    (7
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (3
    )
    
    
    (3
    )Amortization of unrecognized gain and prior service cost
    
    
    (1
    )
    
    
    1
    
    
    
    (2
    )
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )
    
    
    (12
    )
    
    
    (8
    )Net periodic benefit costs
    
    $
    1
    
    
    $
    3
    
    
    $
    2
    
    
    $
    7
    
    
    $
    34
    
    
    $
    35
    
    
    $
    100
    
    
    $
    109
 (12) Segment Information
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In millions)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007UAL segment informationRevenue:Mainline
    
    $
    4,731
    
    
    $
    4,663
    
    
    $
    13,301
    
    
    $
    12,770United Express
    
    
    834
    
    
    
    819
    
    
    
    2,346
    
    
    
    2,298Special revenue items
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    45Total
    
    $
    5,565
    
    
    $
    5,527
    
    
    $
    15,647
    
    
    $
    15,113Segment income (loss):Mainline
    
    $
    (738
    )
    
    $
    431
    
    
    $
    (1,422
    )
    
    $
    585United Express
    
    
    (48
    )
    
    
    68
    
    
    
    (162
    )
    
    
    122Special revenue items
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    45Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    (2,277
    )
    
    
    Other impairments and special items
    
    
    9
    
    
    
    22
    
    
    
    (214
    )
    
    
    44Less: equity earnings(a)
    
    
    (1
    )
    
    
    (1
    )
    
    
    (4
    )
    
    
    (3
    )Consolidated income (loss) before income taxes and equity in earnings of affiliates
    
    $
    (778
    )
    
    $
    565
    
    
    $
    (4,079
    )
    
    $
    793
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In millions)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007United segment informationRevenue:Mainline
    
    $
    4,772
    
    
    $
    4,666
    
    
    $
    13,342
    
    
    $
    12,780United Express
    
    
    834
    
    
    
    819
    
    
    
    2,346
    
    
    
    2,298Special revenue items
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    45Total
    
    $
    5,606
    
    
    $
    5,530
    
    
    $
    15,688
    
    
    $
    15,123Segment income (loss):Mainline
    
    $
    (698
    )
    
    $
    436
    
    
    $
    (1,410
    )
    
    $
    604United Express
    
    
    (48
    )
    
    
    68
    
    
    
    (162
    )
    
    
    122Special revenue items
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    45Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    (2,277
    )
    
    
    Other impairments and special items
    
    
    9
    
    
    
    22
    
    
    
    (214
    )
    
    
    44Less: equity earnings(a)
    
    
    (1
    )
    
    
    (1
    )
    
    
    (4
    )
    
    
    (3
    )Consolidated income (loss) before income taxes and equity in earnings of affiliates
    
    $
    (738
    )
    
    $
    570
    
    
    $
    (4,067
    )
    
    $
    812
 
 (a)
    
    Equity earnings are part of the Mainline segment.   24




---



##### Table of Contents



(13) Comprehensive Income (Loss)
 Employers Accounting for
Pensions and Other Postretirement Plans an amendment of FASB Statements No. 87, 88, 106 and 132R
 (14) Fair Value Measurements and Derivative Instruments
 Fair Value Information.
 Level 1
    
    Unadjusted quoted prices in active markets that are accessible at
the measurement date for identical, unrestricted assets or
liabilities.
 Level 2
    
    Observable inputs other than quoted prices included in Level 1,
such as quoted prices for similar assets and liabilities in active
markets; quoted prices for identical or similar assets and
liabilities in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data.
 Level 3
    
    Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities.
 Condensed Statements of Consolidated Financial Position
(Unaudited)
 Fair Value Measurements at Reporting Date UsingQuoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significant
    
    
    Totalfor
    
    
    Observable
    
    
    Unobservable
    
    
    Gains/September 30,
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    (Losses)(In millions)
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Level 3) (a)Assets and Liabilities Measured
at Fair Value on a Recurring
Basis:EETC available-for-sale securities
    
    $
    57
    
    
    $
    
    
    
    $
    
    
    
    $
    57
    
    
    $
    (26
    )Fuel derivative receivables
    
    
    13
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    Foreign currency receivables
    
    
    9
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    Total financial assets
    
    $
    79
    
    
    $
    
    
    
    $
    22
    
    
    $
    57
    
    
    $
    (26
    )Total financial
liabilitiesFuel derivative
payables (b)
    
    $
    (243
    )
    
    $
    
    
    
    $
    (210
    )
    
    $
    (33
    )
    
    $
    (33
    )
 
 (a)
    
    During the nine months ended September 30, 2008, changes in the fair value of Level 3 EETC
securities and the Level 3 fuel derivatives are classified within Accumulated other
comprehensive income and Aircraft fuel, respectively, in the Companys financial
statements.(b)
    
    The fair value of the fuel hedge derivatives is recorded in other current and noncurrent
assets and other current and noncurrent liabilities in the Companys Condensed Statements of
Consolidated Financial Position (Unaudited)based on the timing of the contract settlement
dates. As of September 30, 2008, $225 million of the $243 million total fuel derivative
payable was classified as a current liability. See below for further discussion of fuel
derivative gains and losses.  25




---



##### Table of Contents



Level
3 Financial Assets and Liabilities
 Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2008
    
    
    September 30, 2008Available for
    
    
    Net Fuel
    
    
    Available for
    
    
    Net FuelSale
    
    
    Derivative
    
    
    Sale
    
    
    Derivative(In millions)
    
    Securities
    
    
    Payable
    
    
    Securities
    
    
    PayableBalance at beginning of period
    
    $
    
    
    
    $
    (9
    )
    
    $
    
    
    
    $
    Unrealized gains (losses) relating to
instruments held at reporting date
    
    
    (8
    )
    
    
    (24
    )
    
    
    (26
    )
    
    
    (33
    )Return of principal
    
    
    (2
    )
    
    
    
    
    
    
    (8
    )
    
    
    Transfers in (out) of Level 3
    
    
    67
    
    
    
    
    
    
    
    91
    
    
    
    Balance at end of period
    
    $
    57
    
    
    $
    (33
    )
    
    $
    57
    
    
    $
    (33
    )
 Condensed Statements of Consolidated Financial Position
(Unaudited).
  Description
    
    Fair Value MethodologyEnhanced Equipment Trust
Certificates (EETCs)
    
    The EETCs are not actively traded on an exchange. Fair value is
based on the trading prices of similar EETC instruments issued by
other airlines. The Company uses internal models and observable and
unobservable inputs to corroborate third party quotes. Because
certain inputs are unobservable, the Company categorized the EETCs
as Level 3.Fuel Derivative Instruments
    
    Derivative contracts are privately negotiated contracts and are not
exchange traded. Fair value measurements are estimated with option
pricing models that employ observable inputs, except for collars
that are extendable by the counterparty. Because certain of the
inputs utilized to determine the fair value of extendible collars
are unobservable by United, the Company categorized these
extendible contracts as Level 3.Foreign Currency 
Derivative Instruments
    
    Fair value is determined with a formula utilizing observable inputs.
 Aircraft Fuel Hedges.
  26




---



##### Table of Contents



Condensed Statements of Consolidated Operations
(Unaudited).
 Mainline Fuel
    
    
    Non-operating Income (Expense)Three Months
    
    
    Nine Months
    
    
    Three Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,(In millions)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Fuel hedges (a):Gain (loss) arising in period on contracts settled during
the period
    
    $
    (34
    )
    
    $
    8
    
    
    $
    89
    
    
    $
    44
    
    
    $
    (29
    )
    
    $
    
    
    
    $
    (21
    )
    
    $
    Gain (loss) arising in period on open contracts at period-end
    
    
    (263
    )
    
    
    10
    
    
    
    (106
    )
    
    
    13
    
    
    
    (176
    )
    
    
    
    
    
    
    (162
    )
    
    
    Total
    
    $
    (297
    )
    
    $
    18
    
    
    $
    (17
    )
    
    $
    57
    
    
    $
    (205
    )
    
    $
    
    
    
    $
    (183
    )
    
    $
    Fuel hedge cash settlements (b)
    
    $
    39
    
    
    $
    21
    
    
    $
    102
    
    
    $
    44
    
    
    $
    (22
    )
    
    $
    
    
    
    $
    (21
    )
    
    $
    
 
 (a)
    
    Fuel hedge gains (losses) are not allocated to Regional affiliates expense.(b)
    
    Amounts represent cash received (paid) during the period on all fuel hedges (economic and
non-economic). The cash received (paid) differs from gain (loss) on settled trades, because the
gain (loss) on settled trades includes only the gain or loss arising during the current period
(i.e. cash received or paid in the current period may be more or less due to the unrealized
mark-to-market gains or losses realized in prior periods).  Barrels hedged (in 000s)
    
    
    Weighted-average pricePercentage ofProjectedFuel
    
    
    
    
    
    
    
    
    
    
    
    Payment
    
    
    Hedge
    
    
    HedgeRequirements
    
    
    Sold
    
    
    Purchased
    
    
    Sold
    
    
    obligations
    
    
    Protection
    
    
    ProtectionHedged (a)
    
    
    Puts (b)
    
    
    Calls
    
    
    Calls
    
    
    begin at
    
    
    begins at
    
    
    capped atFourth Quarter 2008:3-way collars
    
    
    33
    %
    
    
    6,350
    
    
    
    4,600
    
    
    
    4,600
    
    
    $
    107
    
    
    $
    113
    
    
    $
    133Collars
    
    
    16
    
    
    
    2,550
    
    
    
    2,175
    
    
    NA
    
    
    
    99
    
    
    
    109
    
    
    NATotal
    
    
    49
    
    
    
    8,900
    
    
    
    6,775
    
    
    
    4,600Full Year 2009:3-way collars
    
    
    18
    
    
    
    12,525
    
    
    
    10,350
    
    
    
    10,350
    
    
    
    102
    
    
    
    117
    
    
    
    147Collars
    
    
    3
    
    
    
    2,400
    
    
    
    1,725
    
    
    NA
    
    
    
    108
    
    
    
    119
    
    
    NAPurchased calls
    
    
    5
    
    
    
    
    
    
    
    2,700
    
    
    NA
    
    
    NA
    
    
    
    106
    
    
    NATotal
    
    
    26
    
    
    
    14,925
    
    
    
    14,775
    
    
    
    10,350Total
    
    
    
    
    
    
    23,825
    
    
    
    21,550
    
    
    
    14,950
 
 (a)
    
    As of September 30, 2008, the Company had hedged less than 1% of its 2010 forecasted
fuel consumption.(b)
    
    Certain 3-way collars and collars included in the table above have sold puts with twice
the notional amount of the purchased calls. The Companys exposure to losses, should the positions
settle below the put exercise price, exceeds its potential benefit from price increases
above the purchased call exercise price. The Company classifies gains (losses) resulting from these collar structures as Nonoperating income (expense).  Foreign Exchange.
 (15) Commitments, Contingent Liabilities and Uncertainties
 General Guarantees and Indemnifications.
  27




---



##### Table of Contents



Bankruptcy Matters.
 Legal and Environmental Contingencies.
   Contingent Senior Unsecured Notes.
 Commitments. Condensed Statements of Consolidated Financial Position (Unaudited)
 Municipal Bond Guarantee. Statements of Consolidated Financial Position
  28




---



##### Table of Contents



(16) Debt Obligations and Other Financing Transactions
 Aircraft-related Transactions
     6% Senior Notes due 2031
  Amended Credit Facility
  Amended Credit Facility Collateral
   29




---



##### Table of Contents



Amended Credit Facility Covenants
    Number of
    
    
    
    RequiredPreceding Months Covered
    
    Period Ending
    
    Coverage RatioThree
    
    June 30, 2009
    
    1.0 to 1.0Six
    
    September 30, 2009
    
    1.1 to 1.0Nine
    
    December 31, 2009
    
    1.2 to 1.0Twelve
    
    March 31, 2010
    
    1.3 to 1.0Twelve
    
    June 30, 2010
    
    1.4 to 1.0Twelve
    
    September 30, 2010 and each quarter ending thereafter
    
    1.5 to 1.0
   Credit Card Processing Agreement Covenants
    30




---



##### Table of Contents



Required % ofTotal Unrestricted Cash Balance (a)
    
    Relevant Advance Ticket SalesLess than $2.5 billion
    
    
    15
    %Less than $2.0 billion
    
    
    25
    %Less than $1.0 billion
    
    
    50
    %
 
 (a)
    
    Includes unrestricted cash, cash equivalents and short-term investments.   (17) Co-branded Credit Card Agreement
 Condensed Statements of Consolidated Financial Position (Unaudited)
  Condensed Statements of Consolidated Financial Position (Unaudited).
 Condensed Statements of Consolidated Financial Position (Unaudited)
  31




---



##### Table of Contents



(18) Subsequent Events
 Restricted Cash and Letters of Credit
  Sale Leaseback Agreement
   32




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
 ®
 (SM) ®
 Bankruptcy Matters. Financial Reporting by Entities in Reorganization under
the Bankruptcy Code Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
 Company Operational Plans.
 
    
    The Company is significantly reducing mainline domestic and consolidated
capacity. By the fourth quarter of 2008, the Company expects mainline domestic and
consolidated capacity to be down approximately 15% and 11% year-over-year,
respectively. For the full year of 2009, mainline domestic and consolidated capacity
are expected to be approximately 13% and 9% lower than 2008, respectively.
 
    
    The capacity reductions are being made through reductions in frequencies of
routes and the elimination of unprofitable routes. These actions have resulted in the
closure of a small number of airport operations where United cannot operate profitably
at current fuel prices. Additional airport operations may be closed in future periods.
 
    
    The Company previously announced plans to permanently remove 100 aircraft from
its mainline fleet, including its entire B737 fleet and six B747 aircraft, by the end
of 2009. The B737 aircraft being retired are some of the oldest and least fuel
efficient in the Companys fleet. This planned reduction reflects the Companys efforts
to eliminate unprofitable capacity and divest the Company of assets that currently do
not provide an acceptable return.
 
    
    United is eliminating its Ted product for leisure markets and will reconfigure
that fleets 56 A320s to include United First seating. The reconfiguration of the Ted
aircraft will occur in stages, with expected completion by year-end 2009. We will
continue to review the deployment of all of our aircraft in various markets and the
overall composition of our fleet to ensure that we are using our assets appropriately
to provide the best available return.
  33




---



##### Table of Contents




    
    In connection with the capacity reductions discussed above, the Company is
further streamlining its operations and corporate functions in order to match the size
of its workforce to the size of its operations. The Company anticipates these efforts
will result in a reduction in workforce of approximately 7,000 by the end of 2009. The
workforce reduction is expected to occur through a combination of furloughs and
furlough-mitigation programs, such as early-out options.
 
    
    The Company increased its 2008 cost reduction target by $100 million to
$500 million and has also reduced previously planned 2008 capital expenditures of
$650 million by approximately $200 million.
  Recent Developments.
 
    
    The Company continues its efforts to pass high commodity costs to customers. The Company is
creating new revenue streams through unbundling products, offering new a la carte services and
expanding choices for customers. The Companys existing Travel Options, such as Economy Plus
and Premium Cabin upsell have been extremely successful and the Company continues to implement
new revenue initiatives such as the $15 fee for the first checked bag, announced in June 2008,
and an increase in the service fee to check a second bag on domestic flights from $25 to $50,
announced in September 2008. In addition, various ticket change fees have increased, including
Mileage Plus close-in fees.
    
    The Company is taking action with the objective to maintain adequate liquidity and minimize
its financing costs during this challenging economic environment. Since June 2008, the Company
entered into approximately $450 million of new financing agreements, as described in Liquidity
and Capital ResourcesFinancing Activities, below.
    
    In September 2008, the Company completed an amendment of its marketing services agreement
with its Mileage Plus co-branded bankcard partner and its largest credit card processor to
amend the terms of their existing agreements to, among other things, extend the terms of the
agreements. These agreements immediately increased the Companys cash position by
approximately $1.0 billion, which included a total of $600 million for the advanced purchase
of miles and the licensing extension payment, as well as the release of approximately
$357 million in previously restricted cash for reserves required under the credit card
processing agreement. Approximately $200 million of additional cash receipts are expected over
the next two years based on amended terms of the co-brand agreement as compared to cash that
would have been generated under the terms of the previous co-brand agreement. As part of the
transaction, United has granted a first lien of specified intangible Mileage Plus assets and a
second lien on certain other assets. The term of the amended co-branded agreement is through
December 31, 2017. See the discussion below in Liquidityfor additional terms of this
agreement.
 Continental Alliance
 
    
    In June 2008, United and Continental announced their plan to form a new
partnership that will link the airlines networks and services worldwide to the benefit
of customers, employees and shareholders, creating new revenue opportunities, cost
savings and other efficiencies. In addition, Continental plans to join United and its
19 other partners in the Star Alliance, the most comprehensive airline alliance in the
world. On July 23, 2008, Continental submitted its request to the U.S. Department of
Transportation to allow it to join United, Lufthansa, Air Canada and six other carriers
in their already established anti-trust immunized alliance. This will enable the
immunized carriers to work closely together to establish trans-Atlantic and other
international joint ventures to deliver highly competitive flight schedules, fares and
service.
 
    
    In the U.S. market, where antitrust immunity for solely domestic travel would
not apply, customers will benefit as the two airlines plan to begin broad codesharing,
which eases travel for customers flying on itineraries using
both carriers and cooperation on frequent flyer programs, elite customer recognition and
airport lounges, subject to regulatory notice and Continental exiting certain of its
current alliance relationships.
  34




---



##### Table of Contents




    
    Continentals and Uniteds route networks are highly complementary, with little
overlap, so they add value to each other and to customers who are planning domestic and
international itineraries. Under codesharing, customers will benefit from a coordinated
process for reservations/ticketing, check-in, flight connections and baggage transfer.
Frequent flyer reciprocity will allow members of Continentals OnePass program and
Uniteds Mileage Plus program to earn miles in their accounts when flying on either
partner airline and redeem awards on both carriers.
 
    
    Continentals plans to join the Star Alliance and other planned cooperation are
subject to certain regulatory and other approvals and the termination of certain
contractual relationships, including Continentals existing agreements with SkyTeam
members that restrict its participation in another global alliance.
 Summary of Financial Results.
  Three months ended September 30,
    
    
    Nine months ended September 30,Favorable (unfavorable)
    
    
    
    
    
    
    
    
    
    
    Favorable (unfavorable)(in millions)
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeUAL InformationRevenues
    
    $
    5,565
    
    
    $
    5,432
    
    
    $
    133
    
    
    
    2.4
    
    
    $
    15,647
    
    
    $
    14,943
    
    
    $
    704
    
    
    
    4.7Special revenue items (a)
    
    
    
    
    
    
    45
    
    
    
    (45
    )
    
    
    (100.0
    )
    
    
    
    
    
    
    45
    
    
    
    (45
    )
    
    
    (100.0
    )Revenues due to Mileage Plus policy
change (a)
    
    
    
    
    
    
    50
    
    
    
    (50
    )
    
    
    (100.0
    )
    
    
    
    
    
    
    125
    
    
    
    (125
    )
    
    
    (100.0
    )Total revenues
    
    
    5,565
    
    
    
    5,527
    
    
    
    38
    
    
    
    0.7
    
    
    
    15,647
    
    
    
    15,113
    
    
    
    534
    
    
    
    3.5Mainline fuel purchases (b)
    
    
    2,164
    
    
    
    1,342
    
    
    
    (822
    )
    
    
    (61.3
    )
    
    
    5,867
    
    
    
    3,628
    
    
    
    (2,239
    )
    
    
    61.7Operating fuel hedge (gain)/loss
    
    
    297
    
    
    
    (18
    )
    
    
    (315
    )
    
    
    
    
    
    
    17
    
    
    
    (57
    )
    
    
    (74
    )
    
    
    Regional affiliate fuel expense (c)
    
    
    377
    
    
    
    235
    
    
    
    (142
    )
    
    
    (60.4
    )
    
    
    1,010
    
    
    
    653
    
    
    
    (357
    )
    
    
    54.7Asset impairment charges (d)
    
    
    (16
    )
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    2,484
    
    
    
    
    
    
    
    (2,484
    )
    
    
    Severance and other charges (see below)
    
    
    21
    
    
    
    (22
    )
    
    
    (43
    )
    
    
    
    
    
    
    134
    
    
    
    (44
    )
    
    
    (178
    )
    
    
    Other operating expenses
    
    
    3,213
    
    
    
    3,334
    
    
    
    121
    
    
    
    3.6
    
    
    
    9,761
    
    
    
    9,832
    
    
    
    71
    
    
    
    0.7Nonoperating fuel hedge (gain)/loss
    
    
    205
    
    
    
    
    
    
    
    (205
    )
    
    
    
    
    
    
    183
    
    
    
    
    
    
    
    (183
    )
    
    
    Other nonoperating expense (e)
    
    
    81
    
    
    
    90
    
    
    
    9
    
    
    
    10.0
    
    
    
    266
    
    
    
    305
    
    
    
    39
    
    
    
    12.8Income tax expense (benefit)
    
    
    2
    
    
    
    232
    
    
    
    230
    
    
    
    99.1
    
    
    
    (30
    )
    
    
    340
    
    
    
    370
    
    
    
    Net income (loss)
    
    $
    (779
    )
    
    $
    334
    
    
    $
    (1,113
    )
    
    
    
    
    
    $
    (4,045
    )
    
    $
    456
    
    
    $
    (4,501
    )
    
    
    United net income (loss)
    
    $
    (740
    )
    
    $
    337
    
    
    $
    (1,077
    )
    
    
    
    
    
    $
    (4,033
    )
    
    $
    467
    
    
    $
    (4,500
    )
    
    
    
 
 (a)
    
    These significant items affecting the Companys results of operations are discussed in Results of Operations,below.(b)
    
    Includes fuel hedge gains (losses)  see the summary of the Companys fuel expense in table below.(c)
    
    Regional affiliates fuel expense is classified as part of Regional Affiliates expense in the Companys Condensed
Statements of Consolidated Operations (Unaudited).(d)
    
    As described in Results of Operationsbelow, impairment charges were recorded as a result of interim impairment
testing performed as of May 31, 2008.(e)
    
    Includes equity in earnings of affiliates.  35




---



##### Table of Contents




    
    UAL recorded the following impairment and other charges, as further discussed below,
during the three and nine months ended September 30, 2008:
 Period EndedSeptember 30, 2008Three
    
    
    Nine(In millions)
    
    Months
    
    
    Months
    
    
    Income statement classificationGoodwill impairment
    
    $
    
    
    
    $
    2,277
    
    
    Goodwill impairmentIntangible asset impairments
    
    
    (16
    )
    
    
    64Aircraft and related deposit impairments
    
    
    
    
    
    
    143Other impairments and charges
    
    
    (16
    )
    
    
    207
    
    
    Other impairments and special itemsTotal asset impairments
    
    
    (16
    )
    
    
    2,484Severance
    
    
    6
    
    
    
    88
    
    
    Salaries and related costsEmployee benefit obligation adjustment
    
    
    
    
    
    
    34
    
    
    Salaries and related costsLitigation-related settlement gain
    
    
    
    
    
    
    (29
    )
    
    Other operating expensesCharges related to terminated/deferred projects
    
    
    
    
    
    
    26
    
    
    Purchased servicesNet loss on asset sales
    
    
    8
    
    
    
    8
    
    
    Depreciation and amortizationLease termination and other charges
    
    
    7
    
    
    
    7
    
    
    Other impairments and special itemsSeverance and other charges
    
    
    21
    
    
    
    134Unrealized operating net mark to market losses
    
    
    336
    
    
    
    119
    
    
    Aircraft fuelUnrealized non-operating net mark to market losses
    
    
    183
    
    
    
    162
    
    
    Miscellaneous, netTax expense (benefit) on intangible asset impairments and asset sales
    
    
    3
    
    
    
    (26
    )
    
    Income tax benefitTotal impairments and other charges
    
    $
    527
    
    
    $
    2,873
 
    
    Net income during the three and nine month period ended September 30, 2007 included
benefits of $67 million and $89 million, respectively, due to net decreases in the
accruals for bankruptcy litigation and due to changes in assumptions regarding certain
bankruptcy administrative claims, based on changes in circumstances pertaining to its
contingent liabilities recorded for these matters, as discussed in Note 6, Voluntary
Reorganization Under Chapter 11 of the United States Bankruptcy Code, in Combined
Notes to Condensed Consolidated Financial Statements (Unaudited).
 
    
    In the nine month period ended September 30, 2008, the Company recorded a small
income tax benefit because the goodwill impairment charges were not deductible for
income tax purposes and most of the remaining tax benefit generated during this period
was offset by a valuation allowance. In the three and nine month periods ended
September 30, 2007, UAL recognized income tax expense of $232 million and $340 million,
respectively. In the three and nine month periods ended September 30, 2007, United
recognized income tax expense of $234 million and $348 million, respectively.
 Liquidity.
 UAL
    
    
    UnitedAs of
    
    
    As of
    
    
    As of
    
    
    As ofSeptember 30,
    
    
    December 31,
    
    
    September 30,
    
    
    December 31,(In millions)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Cash and cash equivalents
    
    $
    2,931
    
    
    $
    1,259
    
    
    $
    2,868
    
    
    $
    1,239Short-term investments
    
    
    
    
    
    
    2,295
    
    
    
    
    
    
    
    2,259Restricted cash
    
    
    248
    
    
    
    756
    
    
    
    243
    
    
    
    722Cash, short-term investments & restricted cash
    
    $
    3,179
    
    
    $
    4,310
    
    
    $
    3,111
    
    
    $
    4,220
  36




---



##### Table of Contents



UAL
    
    
    UnitedNine Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net cash provided (used) by operating activities
    
    $
    (250
    )
    
    $
    2,002
    
    
    $
    (193
    )
    
    $
    1,988Net cash provided (used) by investing activities
    
    
    2,576
    
    
    
    (3,057
    )
    
    
    2,470
    
    
    
    (3,028
    )Net cash used by financing activities
    
    
    (654
    )
    
    
    (1,514
    )
    
    
    (648
    )
    
    
    (1,493
    )
 Results of Operations
 Item 3. Quantitative and Qualitative Disclosures
about Market Risk
 Liquidity and Capital Resources Item 3. Quantitative and
Qualitative Disclosures about Market Risk
 Capital Commitments. Condensed Consolidated Statements of Financial Position (Unaudited) Combined Notes to Condensed Consolidated Financial
Statements (Unaudited).
 Contingencies. Combined Notes to Condensed Consolidated Financial Statements (Unaudited).
 Municipal Bond Obligations & Off-Balance Sheet Financing. Condensed Statements of Consolidated Financial Position (Unaudited)
  37




---



##### Table of Contents



Legal and Environmental.
   Results of Operations
  Third Quarter 2008 Compared to Third Quarter 2007
  Overview
  38




---



##### Table of Contents



Operating Revenues.
 Three Months EndedSeptember 30,
    
    
    $
    
    
    %(In millions)
    
    2008
    
    
    2007
    
    
    Change
    
    
    ChangePassengerUnited Airlines
    
    $
    4,280
    
    
    $
    4,225
    
    
    $
    55
    
    
    
    1.3PassengerRegional Affiliates
    
    
    834
    
    
    
    819
    
    
    
    15
    
    
    
    1.8Cargo
    
    
    219
    
    
    
    198
    
    
    
    21
    
    
    
    10.6Special operating items
    
    
    
    
    
    
    45
    
    
    
    (45
    )
    
    
    (100.0
    )Other operating revenues
    
    
    232
    
    
    
    240
    
    
    
    (8
    )
    
    
    (3.3
    )UAL total
    
    $
    5,565
    
    
    $
    5,527
    
    
    $
    38
    
    
    
    0.7United total
    
    $
    5,606
    
    
    $
    5,530
    
    
    $
    76
    
    
    
    1.4
  United2008
    
    Domestic
    
    
    Pacific
    
    
    Atlantic
    
    
    Latin
    
    
    Mainline
    
    
    Express
    
    
    ConsolidatedIncrease (decrease) from 2007:Passenger revenues (in millions)
    
    $
    (24
    )
    
    $
    (52
    )
    
    $
    89
    
    
    $
    5
    
    
    $
    18
    
    
    $
    7
    
    
    $
    25Passenger revenues
    
    
    (0.9
    )%
    
    
    (5.6
    )%
    
    
    13.2
    %
    
    
    4.6
    %
    
    
    0.4
    %
    
    
    0.9
    %
    
    
    0.5
    %Available seat miles (ASMs) (a)
    
    
    (6.2
    )%
    
    
    (8.6
    )%
    
    
    12.0
    %
    
    
    (3.7
    )%
    
    
    (4.0
    )%
    
    
    
    %
    
    
    (3.6
    )%Revenue passenger miles (RPMs) (b)
    
    
    (6.7
    )%
    
    
    (14.2
    )%
    
    
    10.9
    %
    
    
    (5.9
    )%
    
    
    (5.7
    )%
    
    
    (2.4
    )%
    
    
    (5.4
    )%Passenger revenues per ASM (PRASM)
    
    
    5.6
    %
    
    
    3.3
    %
    
    
    1.0
    %
    
    
    8.6
    %
    
    
    4.5
    %
    
    
    0.9
    %
    
    
    4.2
    %Yield (c)
    
    
    6.1
    %
    
    
    9.4
    %
    
    
    1.1
    %
    
    
    12.8
    %
    
    
    6.6
    %
    
    
    3.5
    %
    
    
    6.3
    %Passenger load factor (points) (d)
    
    (0.5
    ) pts.
    
    (5.2
    ) pts.
    
    (0.9
    ) pts.
    
    (1.8
    ) pts.
    
    (1.5
    ) pts.
    
    (1.9
    ) pts.

    
    (1.6
    ) pts.
 
 (a)
    
    ASMs are the number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.(b)
    
    RPMs are the number of scheduled miles flown by revenue passengers.(c)
    
    Yield is a measure of average price paid per passenger mile, which is calculated by
dividing passenger revenues by RPMs. Yields for geographic regions exclude charter revenue
and RPMs.(d)
    
    Passenger load factor is derived by dividing RPMs by ASMs.     39




---



##### Table of Contents



Operating Expenses.
 Three Months EndedSeptember 30,
    
    
    $
    
    
    %(In millions)
    
    2008
    
    
    2007
    
    
    Change
    
    
    ChangeAircraft fuel
    
    $
    2,461
    
    
    $
    1,324
    
    
    $
    1,137
    
    
    
    85.9Salaries and related costs
    
    
    1,037
    
    
    
    1,062
    
    
    
    (25
    )
    
    
    (2.4
    )Regional affiliates
    
    
    882
    
    
    
    751
    
    
    
    131
    
    
    
    17.4Purchased services
    
    
    327
    
    
    
    344
    
    
    
    (17
    )
    
    
    (4.9
    )Aircraft maintenance materials and outside repairs
    
    
    256
    
    
    
    295
    
    
    
    (39
    )
    
    
    (13.2
    )Depreciation and amortization
    
    
    234
    
    
    
    245
    
    
    
    (11
    )
    
    
    (4.5
    )Landing fees and other rent
    
    
    222
    
    
    
    201
    
    
    
    21
    
    
    
    10.4Distribution expenses
    
    
    181
    
    
    
    211
    
    
    
    (30
    )
    
    
    (14.2
    )Aircraft rent
    
    
    115
    
    
    
    102
    
    
    
    13
    
    
    
    12.7Cost of third party sales
    
    
    75
    
    
    
    68
    
    
    
    7
    
    
    
    10.3Other impairment and special items
    
    
    (9
    )
    
    
    (22
    )
    
    
    13
    
    
    
    59.1Other operating expenses
    
    
    275
    
    
    
    290
    
    
    
    (15
    )
    
    
    (5.2
    )UAL total
    
    $
    6,056
    
    
    $
    4,871
    
    
    $
    1,185
    
    
    
    24.3United total
    
    $
    6,057
    
    
    $
    4,868
    
    
    $
    1,189
    
    
    
    24.4
 Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
 $
    
    
    Average price per gallon (in cents)Three Months Ended September 30,%
    
    
    
    
    
    
    
    
    
    
    %(In millions, except per gallon)
    
    2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeMainline fuel purchase cost
    
    $
    2,164
    
    
    $
    1,342
    
    
    
    61.3
    
    
    
    383.7
    
    
    
    225.1
    
    
    
    70.4Net fuel hedge (gains) losses in mainline fuel
    
    
    297
    
    
    
    (18
    )
    
    
    
    
    
    
    52.6
    
    
    
    (3.0
    )
    
    
    Total mainline fuel expense
    
    $
    2,461
    
    
    
    1,324
    
    
    
    85.9
    
    
    
    436.3
    
    
    
    222.1
    
    
    
    96.4Regional affiliates fuel expense (a)
    
    
    377
    
    
    
    235
    
    
    
    60.4
    
    
    
    405.4
    
    
    
    244.8
    
    
    
    65.6UAL system operating fuel expense
    
    $
    2,838
    
    
    $
    1,559
    
    
    
    82.0
    
    
    
    432.0
    
    
    
    225.3
    
    
    
    91.7Net fuel hedge (gains) losses in nonoperating
income(loss)
    
    
    205
    
    
    
    
    
    
    
    Mainline fuel consumption (gallons)
    
    
    564
    
    
    
    596
    
    
    
    (5.4
    )Regional affiliates fuel consumption (gallons)
    
    
    93
    
    
    
    96
    
    
    
    (3.1
    )Total fuel consumption (gallons)
    
    
    657
    
    
    
    692
    
    
    
    (5.1
    )
 
 (a)
    
    Regional affiliate fuel costs are classified as part of Regional affiliate expense.    40




---



##### Table of Contents



Results of Operations 
First Nine Months of 2008 Compared to First Nine Months of 2007
  Other income (expense).
 Three Months Ended
    
    
    Favorable/(Unfavorable)September 30,
    
    
    Change(In millions)
    
    2008
    
    
    2007
    
    
    $
    
    
    %Interest expense
    
    $
    (131
    )
    
    $
    (161
    )
    
    $
    30
    
    
    
    18.6Interest income
    
    
    24
    
    
    
    71
    
    
    
    (47
    )
    
    
    (66.2
    )Interest capitalized
    
    
    6
    
    
    
    5
    
    
    
    1
    
    
    
    20.0Miscellaneous, net:Fuel hedge gains (losses)
    
    
    (205
    )
    
    
    
    
    
    
    (205
    )
    
    
    Other miscellaneous, net
    
    
    19
    
    
    
    (6
    )
    
    
    25
    
    
    
    UAL total
    
    $
    (287
    )
    
    $
    (91
    )
    
    $
    (196
    )
    
    
    (215.4
    )United total
    
    $
    (287
    )
    
    $
    (92
    )
    
    $
    (195
    )
    
    
    (212.0
    )
   41




---



##### Table of Contents



Income Taxes. Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
 First Nine Months of 2008 Compared to First Nine Months of 2007
   Operating Revenues.
 Nine Months EndedSeptember 30,
    
    
    $
    
    
    %(In millions)
    
    2008
    
    
    2007
    
    
    Change
    
    
    ChangePassengerUnited Airlines
    
    $
    11,924
    
    
    $
    11,457
    
    
    $
    467
    
    
    
    4.1PassengerRegional Affiliates
    
    
    2,346
    
    
    
    2,298
    
    
    
    48
    
    
    
    2.1Cargo
    
    
    674
    
    
    
    547
    
    
    
    127
    
    
    
    23.2Special operating items
    
    
    
    
    
    
    45
    
    
    
    (45
    )
    
    
    (100.0
    )Other operating revenues
    
    
    703
    
    
    
    766
    
    
    
    (63
    )
    
    
    (8.2
    )UAL total
    
    $
    15,647
    
    
    $
    15,113
    
    
    $
    534
    
    
    
    3.5United total
    
    $
    15,688
    
    
    $
    15,123
    
    
    $
    565
    
    
    
    3.7
 Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
 United2008
    
    Domestic
    
    
    Pacific
    
    
    Atlantic
    
    
    Latin
    
    
    Mainline
    
    
    Express
    
    
    ConsolidatedIncrease (decrease) from 2007:Passenger revenues (in millions)
    
    $
    77
    
    
    $
    46
    
    
    $
    267
    
    
    $
    40
    
    
    $
    430
    
    
    $
    40
    
    
    $
    470Passenger revenues
    
    
    1.1
    %
    
    
    1.9
    %
    
    
    15.1
    %
    
    
    10.7
    %
    
    
    3.7
    %
    
    
    1.8
    %
    
    
    3.4
    %Available seat miles (ASMs) (a)
    
    
    (5.8
    )%
    
    
    (1.4
    )%
    
    
    13.9
    %
    
    
    (1.1
    )%
    
    
    (1.8
    )%
    
    
    (0.8
    )%
    
    
    (1.7
    )%Revenue passenger miles (RPMs) (b)
    
    
    (7.3
    )%
    
    
    (6.8
    )%
    
    
    11.0
    %
    
    
    (2.6
    )%
    
    
    (4.4
    )%
    
    
    (5.0
    )%
    
    
    (4.5
    )%Passenger revenues per ASM (PRASM)
    
    
    7.3
    %
    
    
    3.4
    %
    
    
    1.0
    %
    
    
    12.0
    %
    
    
    5.7
    %
    
    
    2.6
    %
    
    
    5.2
    %Yield (c)
    
    
    9.0
    %
    
    
    9.0
    %
    
    
    3.1
    %
    
    
    15.1
    %
    
    
    8.6
    %
    
    
    7.1
    %
    
    
    8.3
    %Passenger load factor (points) (d)
    
    (1.5
    ) pts.

    
    (4.4
    ) pts.

    
    (2.1
    ) pts.

    
    (1.3
    ) pts.

    
    (2.2
    ) pts.

    
    (3.3
    ) pts.

    
    (2.3
    ) pts.
 
 (a)
    
    ASMs are the number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.(b)
    
    RPMs are the number of scheduled miles flown by revenue passengers.(c)
    
    Yield is a measure of average price paid per passenger mile, which is calculated by
dividing passenger revenues by RPMs. Yields for geographic regions exclude charter revenue
and RPMs.(d)
    
    Passenger load factor is derived by dividing RPMs by ASMs.   42




---



##### Table of Contents



Results of Operations  Third Quarter of 2008
Compared to Third Quarter of 2007,
  Operating Expenses.
 Nine Months EndedSeptember 30,
    
    
    $
    
    
    %(In millions)
    
    2008
    
    
    2007
    
    
    Change
    
    
    ChangeAircraft fuel
    
    $
    5,884
    
    
    $
    3,571
    
    
    $
    2,313
    
    
    
    64.8Salaries and related costs
    
    
    3,262
    
    
    
    3,149
    
    
    
    113
    
    
    
    3.6Regional affiliates
    
    
    2,508
    
    
    
    2,176
    
    
    
    332
    
    
    
    15.3Purchased services
    
    
    1,047
    
    
    
    980
    
    
    
    67
    
    
    
    6.8Aircraft maintenance materials and outside repairs
    
    
    868
    
    
    
    860
    
    
    
    8
    
    
    
    0.9Depreciation and amortization
    
    
    670
    
    
    
    694
    
    
    
    (24
    )
    
    
    (3.5
    )Landing fees and other rent
    
    
    651
    
    
    
    654
    
    
    
    (3
    )
    
    
    (0.5
    )Distribution expenses
    
    
    558
    
    
    
    596
    
    
    
    (38
    )
    
    
    (6.4
    )Aircraft rent
    
    
    314
    
    
    
    307
    
    
    
    7
    
    
    
    2.3Cost of third party sales
    
    
    204
    
    
    
    238
    
    
    
    (34
    )
    
    
    (14.3
    )Goodwill impairment
    
    
    2,277
    
    
    
    
    
    
    
    2,277
    
    
    
    Other impairment and special items
    
    
    214
    
    
    
    (44
    )
    
    
    258
    
    
    
    Other operating expenses
    
    
    816
    
    
    
    831
    
    
    
    (15
    )
    
    
    (1.8
    )UAL total
    
    $
    19,273
    
    
    $
    14,012
    
    
    $
    5,261
    
    
    
    37.5United total (a)
    
    $
    19,302
    
    
    $
    14,006
    
    
    $
    5,296
    
    
    
    37.8
  $
    
    
    Average price per gallon (in cents)Nine Months Ended September 30,%
    
    
    
    
    
    
    
    
    
    
    %(In millions, except per gallon)
    
    2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeMainline fuel purchase cost
    
    $
    5,867
    
    
    $
    3,628
    
    
    
    61.7
    
    
    
    347.0
    
    
    
    210.2
    
    
    
    65.1Net fuel hedge (gains) losses in mainline fuel
    
    
    17
    
    
    
    (57
    )
    
    
    
    
    
    
    1.0
    
    
    
    (3.3
    )
    
    
    Total mainline fuel expense
    
    $
    5,884
    
    
    
    3,571
    
    
    
    64.8
    
    
    
    348.0
    
    
    
    206.9
    
    
    
    68.2Regional affiliates fuel expense (a)
    
    
    1,010
    
    
    
    653
    
    
    
    54.7
    
    
    
    362.0
    
    
    
    229.9
    
    
    
    57.5UAL system operating fuel expense
    
    $
    6,894
    
    
    $
    4,224
    
    
    
    63.2
    
    
    
    349.9
    
    
    
    210.1
    
    
    
    66.5Net fuel hedge (gains) losses in nonoperating
income(loss)
    
    
    183
    
    
    
    
    
    
    
    Mainline fuel consumption (gallons)
    
    
    1,691
    
    
    
    1,726
    
    
    
    (2.0
    )Regional affiliates fuel consumption (gallons)
    
    
    279
    
    
    
    284
    
    
    
    (1.8
    )Total fuel consumption (gallons)
    
    
    1,970
    
    
    
    2,010
    
    
    
    (2.0
    )
 
 (a)
    
    Regional affiliate fuel costs are classified as part of Regional affiliate expense.  43




---



##### Table of Contents



Combined Notes to Condensed Consolidated Financial Statements
(Unaudited).
    Combined Notes to Condensed Consolidated Financial Statements (Unaudited) Condensed Statements of Consolidated Operations (Unaudited). Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
 (In millions)Goodwill impairment
    
    $
    2,277Indefinite-lived intangible assets
    
    
    64Tangible assets
    
    
    143Total impairments
    
    $
    2,484
 Combined Notes to Condensed Consolidated Financial Statements (Unaudited)
   44




---



##### Table of Contents



Other income (expense).
 Nine Months Ended
    
    
    Favorable/(Unfavorable)September 30,
    
    
    Change(In millions)
    
    2008
    
    
    2007
    
    
    $
    
    
    %Interest expense
    
    $
    (392
    )
    
    $
    (506
    )
    
    $
    114
    
    
    
    22.5Interest income
    
    
    100
    
    
    
    191
    
    
    
    (91
    )
    
    
    (47.6
    )Interest capitalized
    
    
    16
    
    
    
    14
    
    
    
    2
    
    
    
    14.3Fuel hedge gain (loss)
    
    
    (183
    )
    
    
    
    
    
    
    (183
    )
    
    
    Miscellaneous, net
    
    
    6
    
    
    
    (7
    )
    
    
    (13
    )
    
    
    UAL total
    
    $
    (453
    )
    
    $
    (308
    )
    
    $
    (145
    )
    
    
    47.1United total
    
    $
    (453
    )
    
    $
    (305
    )
    
    $
    (148
    )
    
    
    48.5
 Liquidity and Capital
Resources
 Combined Notes to Condensed Consolidated Financial
Statements (Unaudited)
 Income Taxes. Combined Notes to Condensed Consolidated Financial
Statements (Unaudited)
 Liquidity and Capital Resources
  
    
    Higher crude oil prices and the cost and effectiveness of hedging crude oil
prices, as described above in the Overviewand Results of Operationssections, may
require the use of significant liquidity in future periods. Crude oil prices have
been extremely volatile and unpredictable in recent years, and may become more
volatile in future periods due to the current severe dislocations in world financial
markets.
  45




---



##### Table of Contents




    
    In September and October 2008, the price of crude oil has dramatically fallen
from its record high in July 2008. Earlier in 2008, the Company entered into
derivative contracts (including collar strategies) to hedge the risk of future price
increases. As fuel prices fall below the floor of the collars, the Company could
have significant near-term payment obligations at the settlement dates of these
contracts. In addition, the Company has been and may in the future be further
required to provide counterparties with additional cash collateral prior to such
settlement dates. While the Companys results of operations benefit from lower fuel
prices on its unhedged fuel consumption, in the near term, lower fuel prices could
significantly impact liquidity based on the amount of cash settlements and
collateral that may be required. However, over the long-term, lower crude oil prices
will further benefit the Company as the unfavorable hedge contracts terminate and
the Company realizes the benefit of lower jet fuel acquisition costs on a larger
percentage of its fuel consumption. See Note 14, Fair Value Measurements and
Derivative Instruments in Combined Notes to
Condensed Consolidated Financial Statements (Unaudited), as well as Item 3.
Quantitative and Qualitative Disclosures Above Market Risk,for further information
regarding the Companys fuel derivative instruments.
    
    The Companys current operational plans to address increased fuel prices may not
be successful in improving its results of operations and liquidity:
 
    
    The Company may not achieve expected increases in unit revenue
from the capacity reductions announced by the Company and certain of its
competitors. Further, certain of the Companys competitors may not reduce
capacity or may increase capacity; thereby, diminishing our expected benefit
from capacity reductions. The Company may also not achieve expected revenue
improvements from merchandising and fee enhancement initiatives.
    
    Higher fares and poor general economic conditions have had and
may in the future continue to have a significant adverse impact on travel
demand, which may result in a negative impact to revenues.
    
    The Company is using some cash to implement its action plan for
such items as severance payments, lease termination payments, conversion of Ted
aircraft, and facility closure costs, among others. These cash requirements will
reduce the Companys cash available for its ongoing operations and commitments.
 
    
    Negative financial results and other factors may allow certain of our credit
card processors to increase the required reserves on our advance ticket sales. For
example, the Company has a requirement to maintain higher levels of
reserves with one material
card processor should the amount of unrestricted cash, cash
equivalents and short-term investments fall below certain levels. See Note 16, Debt Obligations
and Other Financing Transactions, in Combined Notes to Condensed Consolidated
Financial Statements (Unaudited)for further discussion of these covenants.
    
    Our level of indebtedness, our non-investment grade credit rating, and general
credit market conditions may make it difficult, or impossible, for us to raise capital
to meet liquidity needs and/or may increase our cost of borrowing.
    
    Due to the factors above, and other factors, we may be unable to comply with
our Amended Credit Facility covenant that currently requires the Company to maintain an
unrestricted cash balance of $1.0 billion and will also require the Company, beginning
in the second quarter of 2009, to maintain a minimum ratio of EBITDAR to fixed charges.
If the Company does not comply with these covenants, the lenders may accelerate
repayment of these debt obligations, which would have an adverse impact on the
Companys financial position and liquidity.
    
    If a default occurs under our Amended Credit Facility or other debt
obligations, the cost to cure any such default may materially and adversely impact our
financial position and liquidity, and no assurance can be provided that such a default
will be mitigated or cured.
  46




---



##### Table of Contents




    
    During the three and nine months ended September 30, 2008, the Company completed
several initiatives that increased unrestricted cash by more than $1.0 billion.
These initiatives are described in the section below.
    
    The Company has entered into approximately $450 million of new financing
agreements since June 2008, as described below.
    
    The Company has significant additional unencumbered aircraft that may be used as
collateral to obtain additional financing, as discussed below.
    
    The Company is taking aggressive actions to right-size its business including
significant capacity reductions, disposition of underperforming assets and a
workforce reduction of approximately 7,000 positions, among others.
    
    The Company has additional flexibility to take further actions to right-size its
business should it need to do so.
 Cash
Position.
 UAL
    
    
    UnitedNine Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net cash provided (used) by operating activities
    
    $
    (250
    )
    
    $
    2,002
    
    
    $
    (193
    )
    
    $
    1,988Net cash provided (used) by investing activities
    
    
    2,576
    
    
    
    (3,057
    )
    
    
    2,470
    
    
    
    (3,028
    )Net cash used by financing activities
    
    
    (654
    )
    
    
    (1,514
    )
    
    
    (648
    )
    
    
    (1,493
    )
 UAL
    
    
    UnitedAs of
    
    
    As of
    
    
    As of
    
    
    As ofSeptember 30,
    
    
    December 31,
    
    
    September 30,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Cash and cash equivalents
    
    $
    2,931
    
    
    $
    1,259
    
    
    $
    2,868
    
    
    $
    1,239Short-term investments
    
    
    
    
    
    
    2,295
    
    
    
    
    
    
    
    2,259Restricted cash
    
    
    248
    
    
    
    756
    
    
    
    243
    
    
    
    722Cash, short-term investments & restricted cash
    
    $
    3,179
    
    
    $
    4,310
    
    
    $
    3,111
    
    
    $
    4,220
 Operating Activities.
  47




---



##### Table of Contents



Investing Activities. Credit
Card Processing Agreements
  Results of Operations
  Financing Activities.
 2008 Uses of Cash
 
    
    $253 million was used by UAL for its special distribution to common stockholders during
the first nine months of 2008 (United  $258 million dividend to UAL).
    
    $765 million was used by UAL for scheduled long-term debt and capital lease payments.
    
    In May 2008, United used cash of $109 million in connection with an amendment to its
Amended Credit Facility, as further discussed below.
    
    Capital expenditures were $335 million in the first nine months of 2008, during which
time the Company acquired nine aircraft that were being operated under existing capital
leases. These aircraft were acquired pursuant to existing lease terms. Aircraft lease
deposits of $154 million provided financing cash that was utilized by the Company to make
the final payments due under these lease obligations. These aircraft were previously
recorded as capital lease assets and are now owned assets.
  48




---



##### Table of Contents



2008 Sources of Cash
 
    
    In July 2008, United completed a $241 million credit agreement secured by 26 of the
Companys currently owned and mortgaged A319 and A320 aircraft. Borrowings under the
Agreement were at a variable interest rate based on LIBOR plus a margin. The credit
agreement requires periodic principal and interest payments through its final maturity in
June 2019. The Company may not prepay the loan prior to July 2012. This agreement did not
change the number of the Companys unencumbered aircraft as the Company used available
equity in these previously owned and mortgaged aircraft as collateral for this financing.
    
    In June 2008, United entered into an $84 million loan agreement secured by three
aircraft, including two Airbus A320 and one Boeing B777. Borrowings under the agreement
were at a variable interest rate based on LIBOR plus a margin. The loan requires principal
and interest payments every three months and has a final maturity in June 2015.
 2007 Activity
 
    
    In the first nine months of 2007, the Company made a $1.0 billion prepayment on its Amended Credit
Facility and made $1.1 billion of additional debt payments, which included $590 million
related to the early retirement of debt. The Company prepaid an additional $500 million of
the Amended Credit Facility in December 2007. In addition, the Company completed a $694
million debt issuance, which effectively refinanced the aforementioned early debt
retirement and refinanced three aircraft that had been previously financed through
operating lease agreements.
    Other Investing and Financing Matters.
 Credit Ratings.
 Amended Credit Facility Covenants. Combined Notes to Condensed Consolidated Financial Statements (Unaudited).
   49




---



##### Table of Contents



Credit Card Processing Agreements.
 Combined Notes to Condensed Consolidated Financial Statements (Unaudited).
  Required % ofTotal Unrestricted Cash Balance (a)
    
    Relevant Advance Ticket SalesLess than $2.5 billion
    
    
    15
    %Less than $2.0 billion
    
    
    25
    %Less than $1.0 billion
    
    
    50
    %
 
 (a)
    
    Includes unrestricted cash, cash equivalents and short-term investments.   Critical Accounting Policies
 Managements Discussion and Analysis of Financial Condition and Results of
Operation
 Accounting for Frequent Flyer Program Miles Sold to Third Parties and the Advanced Purchase of
Miles.
 Condensed Statements of Consolidated Financial Position (Unaudited) Combined Notes to Condensed Consolidated Financial
Statements (Unaudited)
   50




---



##### Table of Contents



Air Transportation Element. Condensed
Statements of Consolidated Financial Position (Unaudited) Condensed Statements
of Consolidated Operations (Unaudited).
 Marketing-related element. Condensed Statements of Consolidated Operations (Unaudited).
 Other Frequent Flyer Accounting Policies.
    Impairment Testing.
  Condensed
Statements of Consolidated Operations (Unaudited).
  51




---



##### Table of Contents



Period Ended September 30, 2008(In millions)
    
    Three Months
    
    
    Nine MonthsGoodwill impairment
    
    $
    
    
    
    $
    2,277Indefinite-lived intangible assets:Codeshare agreements
    
    
    (16
    )
    
    
    44Tradenames
    
    
    
    
    
    
    20Intangible asset impairments
    
    
    (16
    )
    
    
    64Tangible assets:Pre-delivery advance deposits including related
capitalized interest
    
    
    
    
    
    
    105B737 aircraft, B737 spare parts and other
    
    
    
    
    
    
    38Aircraft and related deposit impairments
    
    
    
    
    
    
    143Total impairments
    
    $
    (16
    )
    
    $
    2,484
 Goodwill
       52




---



##### Table of Contents



Indefinite-lived intangible assets
  Long-lived assets
 Overview
  , Effective Date of FASB Statement No. 157 Fair Value
Measurements
   Forward-Looking Information
 Managements Discussion and Analysis of Financial Condition and
Results of Operations
   53




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Item 7A. Quantitative
and Qualitative Disclosures About Market Risk Combined Notes to Condensed Consolidated Financial
Statements (Unaudited)
 Cash
and Cash Equivalents
 Commodity Price Risk (Jet Fuel)
  54




---



##### Table of Contents



Combined Notes to Condensed
Consolidated Financial Statements (Unaudited)
 Barrels hedged (in 000s)
    
    
    Weighted-average pricePercentage ofProjectedFuel
    
    
    
    
    
    
    
    
    
    
    
    Payment
    
    
    Hedge
    
    
    HedgeRequirements
    
    
    Sold
    
    
    Purchased
    
    
    Sold
    
    
    obligations
    
    
    Protection
    
    
    ProtectionHedged (a)
    
    
    Puts (b)
    
    
    Calls
    
    
    Calls
    
    
    begin at
    
    
    begins at
    
    
    capped atFourth Quarter 2008:3-way collars
    
    
    33
    %
    
    
    6,350
    
    
    
    4,600
    
    
    
    4,600
    
    
    $
    107
    
    
    $
    113
    
    
    $
    133Collars
    
    
    16
    
    
    
    2,550
    
    
    
    2,175
    
    
    NA
    
    
    
    99
    
    
    
    109
    
    
    NATotal
    
    
    49
    
    
    
    8,900
    
    
    
    6,775
    
    
    
    4,600Full Year 2009:3-way collars
    
    
    18
    
    
    
    12,525
    
    
    
    10,350
    
    
    
    10,350
    
    
    
    102
    
    
    
    117
    
    
    
    147Collars
    
    
    3
    
    
    
    2,400
    
    
    
    1,725
    
    
    NA
    
    
    
    108
    
    
    
    119
    
    
    NAPurchased calls
    
    
    5
    
    
    
    
    
    
    
    2,700
    
    
    NA
    
    
    NA
    
    
    
    106
    
    
    NATotal
    
    
    26
    
    
    
    14,925
    
    
    
    14,775
    
    
    
    10,350Total
    
    
    
    
    
    
    23,825
    
    
    
    21,550
    
    
    
    14,950
 
 (a)
    
    As of September 30, 2008, the Company had hedged less than 1% of its 2010 forecasted
fuel consumption.(b)
    
    Certain 3-way collars and collars included in the table above have sold puts with twice
the notional amount of the purchased calls. The Companys exposure to losses, should the positions
settle below the put exercise price, exceeds its potential benefit from price increases
above the purchased call exercise price. The Company classifies gains (losses) resulting from these collar structures as Nonoperating income (expense).   
 ITEM 4. CONTROLS AND PROCEDURES
    55




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
  In re: UAL Corporation, et. al.
   Combined Notes to Condensed Consolidated Financial Statements
(Unaudited).
 Air Cargo/Passenger Surcharge Investigations
      56




---



##### Table of Contents



United Injunction Against Air Line Pilots Association (ALPA) and Four Individual Defendants
for Unlawful Slowdown Activity under the Railway Labor Act
  
 ITEM 1A. RISK FACTORS.
  Risks Related to the Companys Business
 The Company may not be able to maintain adequate liquidity.
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Combined Notes to Condensed Consolidated Financial Statements (Unaudited) Item 3. Quantitative
and Qualitative Disclosures about Market Risk.
  57




---



##### Table of Contents



Combined Notes to Condensed Consolidated Financial Statements
(Unaudited) .
   Economic and industry conditions constantly change, and negative economic conditions in the United
States and elsewhere may create challenges for us that could have a material adverse effect on our
business and results of operations.
   58




---



##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Total number ofshares purchased
    
    
    Maximum number ofas
    
    
    shares (or approximatepart of publicly
    
    
    dollar value) of sharesTotal number
    
    
    Average price
    
    
    announced
    
    
    that may yet beof shares
    
    
    paid
    
    
    plans
    
    
    purchased under thePeriod
    

purchased (a)
    
    
    per share
    
    
    or programs
    
    
    plans or programs07/01/08
 07/31/08
    
    
    2,037
    
    
    $
    7.86
    
    
    
    
    
    
    
    
    (b)08/01/08
 08/31/08
    
    
    16,232
    
    
    
    8.49
    
    
    
    
    
    
    
    
    (b)09/01/08
 09/30/08
    
    
    376
    
    
    
    13.53
    
    
    
    
    
    
    
    
    (b)Total
    
    
    18,645
    
    
    $
    8.52
    
    
    
    
    
    
    
    
    (b)
 
 (a)
    
    Shares withheld from employees to satisfy certain tax obligations due upon the vesting of
restricted stock.(b)
    
    The UAL Corporation 2006 Management Equity Incentive Plan (MEIP) and the UAL Corporation
2008 Incentive Compensation Plan (the 2008 Plan) provide for the withholding of shares to
satisfy tax obligations due upon the vesting of restricted stock or restricted stock units.
Neither plan specifies a maximum number of shares that may be repurchased. The MEIP was
replaced with the 2008 Plan effective June 12, 2008, but remains in effect for awards granted
prior to June 12, 2008. 
 ITEM 6. EXHIBITS.
   59




---



##### Table of Contents



SIGNATURES
  UAL CORPORATION
(Registrant)Date: October 24, 2008
    By:
    /s/ Frederic F. BraceFrederic F. BraceExecutive Vice President and Chief Financial Officer
(principal financial and accounting officer)UNITED AIR LINES, INC.
(Registrant)Date: October 24, 2008
    By:
    /s/ Frederic F. BraceFrederic F. BraceExecutive Vice President and Chief Financial Officer
(principal financial officer)Date: October 24, 2008
    By:
    /s/ David M. WingDavid M. WingVice President and Controller
(principal accounting officer)  60




---



##### Table of Contents



EXHIBIT INDEX
  10.1
    
    Amendment No. 2 to the UAL Corporation Success Sharing Program 
Performance Incentive Plan10.2
    
    Amendment No. 1 to the UAL Corporation 2006 Director Equity Incentive Plan10.3
    
    Amendment No. 4 dated September 25, 2008 to the Employment Agreement
dated September 5, 2002, among UAL Corporation, United Air Lines, Inc.
and Glenn F. Tilton12.1
    
    UAL Corporation Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Fixed Charges and Preferred Stock Dividend
Requirements12.2
    
    United Air Lines, Inc. Computation of Ratio of Earnings to Fixed Charges
and Ratio of Earnings to Fixed Charges and Preferred Stock Dividend
Requirements31.1
    
    Certification of the Principal Executive Officer of UAL Pursuant to 15
U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)31.2
    
    Certification of the Principal Financial Officer of UAL Pursuant to 15
U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)31.3
    
    Certification of the Principal Executive Officer of United Pursuant to 15
U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)31.4
    
    Certification of the Principal Financial Officer of United Pursuant to 15
U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)32.1
    
    Certification of the Chief Executive Officer and Chief Financial Officer
of UAL Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act
of 2002)32.2
    
    Certification of the Chief Executive Officer and Chief Financial Officer
of United Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley
Act of 2002)
 
 
    
    Indicates management contract or compensatory plan or arrangement.  61