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UAL Corporation Reports Second Quarter 2008 Results

Taking Action to Offset Record Fuel Costs, and Position Company to Compete

CHICAGO, July 22 /PRNewswire-FirstCall/ -- Driven by a $773 million increase in consolidated fuel expense, UAL Corporation (Nasdaq: UAUA), the holding company whose primary subsidiary is United Airlines, reported a net loss of $2.7 billion or $151 million, excluding certain largely non-cash accounting charges. For the second quarter ended June 30, 2008, the company:

  • Reported basic and diluted loss per share of $1.19 excluding certain largely non-cash accounting charges described below. United's reported GAAP loss per share was $21.47.

  • Recorded $2.6 billion of previously announced accounting charges, including a $2.3 billion non-cash special charge for goodwill impairment.

  • Continued its focus on controlling costs, with mainline cost per available seat mile (CASM), excluding fuel and the above mentioned accounting charges, up 2.6 percent versus the same period in 2007. Mainline CASM for the quarter was up 85.5 percent versus the second quarter of 2007, reflecting a 55.4 percent increase in mainline fuel price per gallon and the significant accounting charges.

  • Strengthened its cash position by raising $90 million through new financings, asset sales and freeing up $130 million in restricted cash. In addition, the company expects to raise $330 million in cash in the third quarter through aircraft financings and the release of restricted cash, resulting in a total cash balance improvement of approximately $550 million.

  • Announced further capacity cuts and the retirement of the entire B737 fleet as well as six B747s. In total, United will retire 100 aircraft and will reduce fourth-quarter mainline domestic capacity 15.5 percent to 16.5 percent year-over-year. In conjunction with the capacity reductions, the company expects to reduce its workforce by approximately 7,000 by year-end 2009.

  • Announced an alliance partnership with Continental Airlines -- a partnership that will create the most comprehensive domestic system by linking networks as well as creating potential for cost savings and operational efficiencies, while simultaneously benefiting customers.

Quarterly Net Loss Driven By Record High Fuel Prices

The company's financial results in the second quarter of 2008 were impacted by previously disclosed largely non-cash accounting charges that, coupled with a $773 million or 54.1 percent increase in consolidated fuel expense, caused the company's net, pre-tax and operating results to be significantly lower year-over-year. The accounting charges include:

  • A non-cash special charge of $2.3 billion for goodwill impairment.

  • Non-cash special charges of $194 million relating to the impairment of B737 aircraft that are being retired from the company's operating fleet, aircraft pre-delivery deposits and certain indefinite-lived intangible assets other than goodwill net of a related tax benefit of $29 million.

  • Severance charges of $82 million related to the staffing reductions that will result from the capacity reductions the company has announced. Cash payments related to severance will be incurred over time as we implement our capacity reduction plans.

  • Other largely non-cash charges of $54 million related to certain projects that have been terminated or deferred and a non-cash adjustment to increase certain employee benefit obligations.

  • A $29 million cash gain from a litigation settlement.

These accounting charges added $2.6 billion of largely non-cash expense to the company's operating costs for the quarter. The company may record additional accounting charges in future quarters related to its capacity reductions, including possible non-cash fleet and property and equipment impairment charges, further intangible asset impairment charges, expenses to terminate early certain facility and aircraft leases and additional severance costs. However, at this time, the company is unable to reasonably estimate the amount and timing of these future charges.

Excluding the above accounting charges, in the second quarter of 2008 the company generated an operating loss of $87 million, versus operating income of $537 million in the year ago period primarily as a result of the significant increase in fuel expense. The company generated a net loss, excluding these accounting charges, of $151 million in the second quarter of 2008, $425 million worse than the second quarter of 2007. Including the impact of these accounting charges, the company reported an operating loss for the quarter of $2.69 billion and a net loss of $2.73 billion.

Excluding a $29 million tax benefit related to the impairment of intangible assets, the company did not recognize any income tax benefit in the second quarter of 2008. Because of its Net Operating Loss carry-forwards, the company expects to pay minimal cash taxes for the foreseeable future.

Despite continued unit revenue growth, and better cost performance compared to its prior guidance, these gains were insufficient to offset the more than 55 percent increase in average fuel price per gallon.

"Our industry is challenged as never before by the unrelenting price of oil, and United is taking aggressive action to offset unprecedented fuel costs and to strengthen the competitiveness of our business," said Glenn Tilton, United president, chairman and CEO. "The elimination of our entire B737 fleet and our alliance with Continental are examples of the different approach we are taking to respond to dramatically changed market conditions to deliver better results for all our stakeholders."

Taking Additional Actions to Address Unprecedented Fuel Costs

While the price of jet fuel has steadily increased over the last few years, the rise in 2008 has been unprecedented, with fuel increasing by more than 37 percent since the beginning of the year. United is executing an aggressive plan to address the skyrocketing cost of fuel by:

  • Sizing the business appropriately for the environment, leading the industry in permanently reducing capacity. United is removing 94 narrowbody aircraft and 6 widebody aircraft from its operations, retiring its entire fleet of B737s in the process.

  • Using its capacity discipline to pass higher commodity costs to customers through fare and fuel surcharge initiatives.

  • Creating new revenue streams by charging for a la carte service, such as checked bags.

  • Reducing costs across the business.

  • Reducing capital expenditures.

United also recently announced a framework agreement to form a unique partnership with Continental Airlines, one that responds to the need for different thinking and solutions in an industry confronted by extraordinary and volatile fuel costs and dramatically changed market conditions. This agreement will result in extensive cooperation, linking networks and services worldwide to the benefit of customers while creating revenue opportunities, cost savings and other operating efficiencies. In addition, Continental plans to join United in the Star Alliance, the largest airline alliance in the world. This week, Continental Airlines, United Airlines and eight other member airlines in the Star Alliance plan to ask the U.S. Department of Transportation (DOT) to allow Continental to join the group of carriers that already hold antitrust immunity. Approval by the DOT would enable Continental, United and the other immunized Star Alliance carriers to work closely together to deliver highly competitive flight schedules, fares and service.

Strengthened Cash Position With $550 Million Raised From New Transactions

During the quarter, the company raised $90 million through new aircraft financing transactions and asset sales and freed up $130 million in restricted cash by replacing it with a $100 million letter of credit.

In addition, early in the third quarter, the company received funds from a $241 million aircraft financing transaction whereby it raised additional debt. The company freed up another $50 million of restricted cash by replacing it with letters of credit worth $34 million. The company also reached agreements in principle for the sale of assets worth approximately $40 million.

As a result of all these actions, the company raised approximately $550 million in cash.

Despite escalating fuel prices, the company generated positive operating and free cash flow during the quarter. The company realized $217 million of operating cash flow and $127 million of free cash flow, defined as operating cash flow less capital expenditures, during the second quarter.

The company reduced total on and off balance sheet debt by $292 million in the quarter to $11.1 billion, despite entering into new debt financing. The company ended the quarter with an unrestricted cash balance of $2.9 billion and a restricted cash balance of $655 million. The company's quarter-end cash balance does not include any cash deposits associated with collateral from its fuel hedge counterparties.

In addition to its strong cash balance, and subsequent to the financings and asset sales previously discussed, the company continues to have over $3 billion in unencumbered hard assets that it can use to further enhance liquidity through asset sales and/or secured financing transactions.

"We continue to take the difficult, but necessary action across the company to reduce our costs, including reducing our workforce by more than 7,000 people," said Jake Brace, United executive vice president and CFO. "We are maintaining our cost guidance for the year even as we dramatically reduce capacity, and are improving our liquidity, ensuring United is well positioned to weather the current environment."

Capacity Discipline Drives Revenue Growth

The company's focus on capacity discipline and strong revenue management drove continued revenue growth. Total revenues increased by 3.0 percent in the second quarter of 2008 compared to the same period in 2007, as growth in passenger unit revenue and cargo more than offset the year-over-year reduction in capacity. The company's mainline RASM increased by 5.1 percent year-over-year from the second quarter of 2007 due to strong passenger and cargo yield performance partially offset by lower passenger load factors.

The company's cargo business continued its strong performance with a 30.9 percent year-over-year increase in revenue. Higher fuel surcharges, foreign exchange gains and strong yield improvements contributed to the cargo revenue increase.

Total passenger revenues increased by 2.6 percent in the second quarter compared to the prior year as a result of a 7.7 percent gain in consolidated yield, more than offsetting the 3 point decline in system load factor. Mainline domestic PRASM for the quarter increased by 5.9 percent, aided by a 4.8 percent reduction in capacity. International PRASM grew 3.2 percent in the second quarter compared to the same period last year, despite a 3.7 percent increase in international capacity year-over-year. Consolidated PRASM increased 3.9 percent year-over-year.

The company's change to deferred revenue accounting for the Mileage Plus program, from the previous incremental cost method, decreased consolidated passenger revenue by approximately $42 million in the second quarter of 2008. The change to the expiration period for Mileage Plus accounts without activity from 36 to 18 months, which the company instituted in January 2007, did not impact the company's revenue results in the second quarter of 2008, as it did in the second quarter of 2007.

In the second quarter of 2007 deferred revenue accounting increased consolidated passenger revenue by a net $1 million, including $47 million of non-cash revenue recognized from the expiration policy change. In total, these Mileage Plus accounting changes resulted in a net year-over-year decrease in consolidated passenger revenues of $43 million for the second quarter of 2008 compared to the same period in 2007.

As the company no longer follows the incremental cost method of accounting, differences between the two accounting methods are calculated using the company's best estimate of the incremental cost method. Excluding Mileage Plus accounting impacts, consolidated PRASM increased 4.9 percent year-over-year.

Regional affiliate PRASM was up 0.3 percent compared to last year, with a 6.6 percent increase in yield and a 1.1 percent capacity decline. Load factor for regional affiliates decreased 4.7 points in the second quarter of 2008 compared to the second quarter of 2007, while stage length for regional affiliates was up 5.3 percent for the same period.


        Comparison of 2008 Second Quarter Geographic Passenger Revenue
                          Versus 2007 Second Quarter

                           2Q 2008     Passenger
                          Passenger     Revenues      PRASM         ASM(1)
                           Revenue    % Increase/  % Increase/   % Increase/
    Geographic Area      (millions)    (Decrease)   (Decrease)    (Decrease)

    North America           $2,414         0.9%         5.9%        (4.8)%
    Pacific                   $830         1.7%         2.4%        (0.7)%
    Atlantic                  $723        13.0%         0.8%        12.1%
    Latin America             $132        11.2%        16.0%        (4.1)%
      Total Mainline        $4,099         3.3%         4.7%        (1.3)%

    Regional Affiliates       $797        (0.9)%        0.3%        (1.1)%

    Total Consolidated      $4,896         2.6%         3.9%        (1.3)%

    Adjusted
     Consolidated(2)        $4,938         3.5%         4.9%


    (1) ASM (available seat miles)
    (2) Consolidated Passenger Revenue and PRASM adjusted for Mileage Plus
        effects (See Footnote 5[b]).

Focus On Improving Operating Performance

For the twelve month period ending May 31, 2008, the latest available, United ranked fifth among the six major U.S. network carriers in Department of Transportation on-time rankings. As part of the company's efforts to improve performance, it has implemented an operational agenda that stresses the day-to-day actions required to provide a reliable product, deliver good service and maintain industry leading safety standards and practices. To improve reliability performance, the company is increasing crew reserves, increasing average scheduled ground time and improving its arrival readiness at gates. This, coupled with the reduction in ground delays expected to result from the industry-wide cut in capacity as well as the new O'Hare runway that will come online in November, is expected to materially improve the company's on-time performance.

"Our focus and our energy are all about generating a step change in our performance," said John Tague, United executive vice president and COO. "We've set the targets, put the right leaders in place, and we're executing against our plan with a clear understanding of what we need to achieve, how we need to do it, and that we are ultimately accountable for that outcome."

Continued Focus on Cost Control

Mainline CASM increased by 85.5 percent year-over-year to 20.39 cents reflecting the large special charge and other largely non-cash accounting charges that the company took in the second quarter, as well as the steep increase in fuel expense. Second quarter mainline CASM, excluding these charges and fuel, increased by 2.6 percent from the year-ago quarter to 7.80 cents, better than the company's guidance due to lower than expected maintenance costs and an airport rent cost. This result demonstrates United's continued focus on controlling non-fuel costs.


                                  Second Quarter Increase/(Decrease)
                                Mainline                  Consolidated
                                           %                           %
                           2008    2007   Chg.        2008    2007    Chg.
    CASM (cents)          20.39   10.99   85.5%       20.41   11.68   74.7%
    CASM excluding
     accounting charges
     (cents)              13.03   10.99   18.6%       13.81   11.68   18.2%
    CASM excluding fuel
     and accounting
     charges(cents)        7.80    7.60    2.6%        8.23    8.08    1.9%

The company has classified the majority of its various fuel hedging positions as economic hedges for accounting purposes. The company recorded a net gain of $238 million on hedge contracts in the second quarter -- a realized gain of $30 million relating to the current quarter and an unrealized gain of $208 million relating to contracts settling in future periods. The cash benefit of hedging during the quarter was $51 million. These gains were recorded in mainline aircraft fuel expense and resulted in lower fuel expense, than would otherwise be the case, for the second quarter.

The company also recognized a net gain of $22 million from fuel hedges that did not qualify as economic hedges and were therefore reported as non-operating income; $1 million of this gain was realized during the current quarter.

Business Highlights

  • In June, the company announced a new fee of $15 for first checked bags. The company anticipates that this charge along with the $25 second checked bag fee and several other changes to bag fees will generate $275 million of incremental revenue on an annualized basis.

  • United became the first U.S. carrier to offer iPod and iPhone connectivity to its in-flight entertainment system, enabling customers to enjoy their individual content on a 15.4-inch personal television, all while the iPod or iPhone charges. United's entire fleet of international, widebody aircraft are being reconfigured over the next two years with lie-flat seats, on-demand entertainment, and iPod and iPhone connectivity in first and business class.

  • United announced several new codeshare partnerships during the second quarter including new relationships with Hawaiian, Jet Airways and Aer Lingus. These partnerships will significantly expand the number of flights available to United customers in Hawaii, India and Ireland.

  • On June 12, 2008, the company held its annual meeting of shareholders. At the meeting, the company's shareholders overwhelmingly elected each of its directors to a one-year term and also approved an equity incentive plan that will enable United to attract, retain and reward key leaders.

Fresh Start Reporting

Upon emergence from its Chapter 11 reorganization in February 2006, the company adopted fresh-start reporting in accordance with SOP 90-7. The company's emergence resulted in a new reporting entity with no retained earnings or accumulated deficit as of February 1, 2006. Accordingly, the company's financial information shown for periods prior to February 1, 2006, is not comparable to consolidated financial statements presented on or after that date. For further discussion of fresh-start reporting, please refer to the company's 2006 and 2007 Form 10-Ks as filed with the Securities and Exchange Commission (SEC).

To offer additional information for investors, the company has identified certain items consisting only of major non-cash fresh-start reporting and exit-related credits and charges (Note 7). While it is not practical for the company to present information for all items that are not comparable in the pre- and post-exit periods, the company believes that the items identified in Note 7 are the material non-cash fresh-start reporting and exit-related items and that such information is useful to investors in understanding year-over-year performance. These fresh-start and exit-related items are discussed in the company's 2006 and 2007 Form 10-Ks.

Outlook

In response to higher fuel prices and a weaker domestic economic environment, the company is reducing its capacity for 2008 and 2009 and currently expects the following year-over-year capacity changes:


      Capacity  Third Quarter   Fourth Quarter     Full-year      Full-year
    (Available      2008            2008             2008            2009
     Seat Miles)                                                (versus 2008)
    North
     America   -6.5% to -5.5% -16.5% to -15.5% -8.5% to -7.5% -13.5% to -12.5%
    Inter-
     national  -2.0% to -1.0%  -7.5% to -6.5%  +0.5% to +1.5%  -8.0% to -7.0%
    Mainline   -4.5% to -3.5% -12.5% to -11.5% -5.0% to -4.0% -11.0% to -10.0%
    Express    -0.5% to +0.5%  -3.5% to -2.5%  -2.0% to -1.0%  +6.5% to +7.5%
    Consoli-
     dated
     Domestic  -5.5% to -4.5% -14.0% to -13.0% -7.5% to -6.5% -10.0% to -9.0%
    Consoli-
     dated     -4.0% to -3.0% -11.5% to -10.5% -4.5% to -3.5%  -9.0% to -8.0%


Despite the significant reduction in capacity, the company expects 2008 full-year mainline CASM, excluding fuel, special items and the largely non-cash accounting charges discussed earlier, to increase between 1.5 and 2.5 percent, in line with prior guidance, as a result of its newly expanded $500 million cost reduction program, an increase of $100 million. Mainline CASM, excluding fuel, severance and special items, is anticipated to increase between 1.5 and 2.5 percent in the third quarter of 2008.

As United reduces capacity, it is reducing the number of salaried, management and frontline employees. In addition to the 1,500 or 20 percent reduction in the salaried and management workforce that the company announced last quarter, the company now expects to reduce its frontline workforce by more than 5,500 employees by the end of 2009. United is working to reduce the impact of capacity reductions on employees through voluntary programs.

As previously announced, the company has also set a non-aircraft capital budget of $450 million for 2008, $200 million less than originally planned.

As of July 21, the company had hedged approximately 44 percent of its estimated 2008 third quarter mainline fuel consumption, of which approximately 34 percent is through three-way collars with upside protection beginning on average at a crude equivalent price of $111 per barrel and capped at $127 per barrel, with payment obligations beginning on average at a crude equivalent price below $107 per barrel. The remaining 10 percent is hedged through collars with upside protection beginning at an average crude equivalent price of $111 per barrel with payment obligations on average beginning at crude equivalent price below $100 per barrel.

As of the same date, United had hedged 47 percent of its forecasted mainline fuel consumption for the fourth quarter of 2008, of which 29 percent is through three-way collars with upside protection on average beginning from $113 per barrel and capped at $134 per barrel with payment obligations on average beginning if crude oil drops below $107 per barrel. The remaining 18 percent is hedged through collars with upside protection on average beginning at a crude oil equivalent price of $109 per barrel with payment obligations on average beginning if crude oil drops below $99 per barrel.

As of the same date, United had hedged 14 percent of its forecasted mainline fuel consumption for the full year of 2009, of which 10 percent is through three-way collars with upside protection on average beginning from $121 per barrel and capped at $152 per barrel with payment obligations on average beginning if crude oil drops below $102 per barrel. The remaining 4 percent is hedged through collars with upside protection on average beginning at a crude oil equivalent price of $119 per barrel with payment obligations on average beginning if crude oil drops below $108 per barrel.

The company expects mainline jet fuel price per gallon, including the impact of hedges, to average $4.08 per gallon in the third quarter of 2008.

Notes 5 and 8 to the attached Statements of Consolidated Operations provides a reconciliation of net income or loss reported under GAAP to net income or loss adjusted for special items and accounting charges for all periods presented as well as a reconciliation of other non-GAAP financial measures.

About United

United Airlines (Nasdaq: UAUA) operates more than 3,200* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 965 destinations in 162 countries worldwide. United's 55,000 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com.

*Based on United's flight schedule between Jan. 1, 2008, and Dec. 31, 2008.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements included in this press release are forward-looking and thus reflect the company's current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to the operations and business environment of the company that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Factors that could significantly affect net earnings, revenues, expenses, costs, load factor and capacity include, without limitation, the following: the company's ability to comply with the terms of its credit facility; the costs and availability of financing; the company's ability to execute its business plan; the company's ability to realize benefits from its resource optimization efforts and cost reduction initiatives; the company's ability to attract, motivate and/or retain key employees; the company's ability to attract and retain customers; demand for transportation in the markets in which the company operates; general economic conditions (including interest rates, foreign currency exchange rates, crude oil prices and energy refining capacity in relevant markets); the effects of any hostilities or act of war or any terrorist attack; the ability of other air carriers with whom the company has alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the costs and availability of aircraft insurance; the costs of jet fuel; our ability to cost-effectively hedge against increases in the price of jet fuel; the costs associated with security measures and practices; labor costs; industry consolidation; competitive pressures on pricing and on demand; capacity decisions of United and/or its competitors; U.S. or foreign governmental legislation, regulation and other actions, including the effect of open skies agreements; the company's ability to utilize its net operating losses; the ability of the company to maintain satisfactory labor relations and our ability to avoid any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth from time to time in UAL's reports to the United States Securities and Exchange Commission. Consequently, the forward-looking statements should not be regarded as representations or warranties by the company that such matters will be realized. The company disclaims any intent or obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise.



                   UAL CORPORATION AND SUBSIDIARY COMPANIES
              STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
                   (In millions, except per share amounts)

                                                Three Months Ended      %
                                                     June 30,        Increase/
         (In accordance with GAAP)               2008        2007   (Decrease)
    Operating revenues:
         Passenger - United Airlines           $4,099      $3,968        3.3
         Passenger - Regional Affiliates          797         804       (0.9)
         Cargo                                    237         181       30.9
         Other operating revenues                 238         260       (8.5)
                                                5,371       5,213        3.0
    Operating expenses:
         Aircraft fuel                          1,848       1,206       53.2
         Salaries and related costs (Note 5)    1,179       1,019       15.7
         Regional affiliates (a)                  847         733       15.6
         Purchased services (Note 5)              371         335       10.7
         Aircraft maintenance materials and
          outside repairs                         295         284        3.9
         Depreciation and amortization            216         229       (5.7)
         Landing fees and other rent              199         215       (7.4)
         Distribution expenses                    193         197       (2.0)
         Aircraft rent                            100         105       (4.8)
         Cost of third party sales                 65          77      (15.6)
         Goodwill impairment (Note 5)           2,277         -            -
         Other impairments and special
          items (Note 5)                          223         -            -
         Other operating expenses (Note 5)        252         276       (8.7)
                                                8,065       4,676       72.5

    Earnings (loss) from operations            (2,694)        537          -

    Other income (expense):
         Interest expense                        (126)       (139)      (9.4)
         Interest income                           28          62      (54.8)
         Interest capitalized                       5           4       25.0
         Miscellaneous, net                        28           1         NM
                                                  (65)        (72)      (9.7)

    Earnings (loss) before income taxes and
     equity in earnings of affiliates          (2,759)        465          -
    Income tax expense (benefit) (Note 5)         (29)        192          -

    Earnings (loss) before equity in earnings
     of affiliates                             (2,730)        273          -
    Equity in earnings of affiliates, net
     of tax                                         1           1          -
    Net income (loss)                         $(2,729)       $274          -


    Earnings (loss) per share, basic          $(21.47)      $2.31
    Earnings (loss) per share, diluted        $(21.47)      $1.83

    Weighted average shares, basic              127.1       117.4
    Weighted average shares, diluted            127.1       153.4

    See accompanying notes.

     (a) Regional affiliates expense includes regional aircraft rent expense.
         See Note 2 for more information.

     NM  Not meaningful.



                   UAL CORPORATION AND SUBSIDIARY COMPANIES
              STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
                   (In millions, except per share amounts)

                                                 Six Months Ended       %
                                                     June 30,        Increase/
         (In accordance with GAAP)               2008        2007   (Decrease)
    Operating revenues:
         Passenger - United Airlines           $7,644      $7,232        5.7
         Passenger - Regional Affiliates        1,512       1,479        2.2
         Cargo                                    455         349       30.4
         Other operating revenues                 471         526      (10.5)
                                               10,082       9,586        5.2
    Operating expenses:
         Aircraft fuel                          3,423       2,247       52.3
         Salaries and related costs (Note 5)    2,225       2,087        6.6
         Regional affiliates (a)                1,626       1,425       14.1
         Purchased services (Note 5)              720         636       13.2
         Aircraft maintenance materials and
          outside repairs                         612         565        8.3
         Depreciation and amortization            436         449       (2.9)
         Landing fees and other rent              429         453       (5.3)
         Distribution expenses                    377         385       (2.1)
         Aircraft rent                            199         205       (2.9)
         Cost of third party sales                129         170      (24.1)
         Goodwill impairment (Note 5)           2,277         -            -
         Other impairments and special
          items (Note 5)                          223         (22)         -
         Other operating expenses (Note 5)        541         541          -
                                               13,217       9,141       44.6

    Earnings (loss) from operations            (3,135)        445          -

    Other income (expense):
         Interest expense                        (261)       (345)     (24.3)
         Interest income                           76         120      (36.7)
         Interest capitalized                      10           9       11.1
         Miscellaneous, net                         9          (1)         -
                                                 (166)       (217)     (23.5)

    Earnings (loss) before income taxes and
     equity in earnings of affiliates          (3,301)        228          -
    Income tax expense (benefit) (Note 5)         (32)        108          -

    Earnings (loss) before equity in
     earnings of affiliates                    (3,269)        120          -
    Equity in earnings of affiliates, net
     of tax                                         3           2       50.0
    Net income (loss)                         $(3,266)       $122          -


    Earnings (loss) per share, basic          $(26.33)      $1.00
    Earnings (loss) per share, diluted        $(26.33)      $0.88

    Weighted average shares, basic              124.1       117.2
    Weighted average shares, diluted            124.1       153.1

    See accompanying notes.

     (a) Regional affiliates expense includes regional aircraft rent expense.
         See Note 2 for more information.

     NM  Not meaningful.



                   UAL CORPORATION AND SUBSIDIARY COMPANIES
         CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
                                (In millions)


                      Three Months Ended    %       Six Months Ended     %
                           June 30,      Increase/      June 30,     Increase/
    (In accordance      2008     2007   (Decrease)   2008     2007  (Decrease)
     with GAAP)

    Cash flows
     provided (used)
     by operating
     activities        $217    $1,034     (79.0)     $137    $1,660     (91.7)

    Cash flows
     provided (used)
     by investing
     activities:
      Net (purchases)
       sales of
       short-term
       investments      486    (2,389)        -     2,295    (2,270)        -
      Additions to
       property and
       equipment       (131)      (78)     67.9      (232)     (146)     58.9
      (Increase)
       decrease in
       restricted
       cash (a)          73       (15)        -       101       (24)        -
      Proceeds from
       litigation on
       advance
       deposits          41         -         -        41         -         -
      Proceeds from
       the sale of
       property and
       equipment         14         5     180.0        14        11      27.3
      Other, net        (11)      (12)     (8.3)      (22)      (26)    (15.4)
                        472    (2,489)        -     2,197    (2,455)        -

    Cash flows
     provided (used)
     by financing
     activities:
      Repayment of
       Credit
       Facility           -         -         -        (9)     (986)    (99.1)
      Repayment of
       other debt      (169)     (705)    (76.0)     (351)   (1,023)    (65.7)
      Special
       distribution       -         -         -      (251)       -          -
      Principal
       payments
       under capital
       leases          (188)      (35)    437.1      (200)      (48)    316.7
      Decrease in
       capital lease
       deposits         154         -         -       154        -          -
      Increase in
       deferred
       financing
       costs           (109)       (9)       NM      (111)      (20)    455.0
      Proceeds from
       issuance of
       secured notes     84       694     (87.9)       84       694     (87.9)
      Other, net          -         1    (100.0)      (10)       13         -
                       (228)      (54)    322.2      (694)   (1,370)    (49.3)

    Increase
     (decrease) in
     cash and cash
     equivalents
     during the
     period             461    (1,509)        -     1,640    (2,165)        -
    Cash and cash
     equivalents at
     beginning of
     the period       2,438     3,176     (23.2)    1,259     3,832     (67.1)
    Cash and cash
     equivalents at
     end of the
     period          $2,899    $1,667      73.9    $2,899    $1,667      73.9


    Reconciliation of cash and cash equivalents to
     total cash and cash equivalents, short-term
     investments and restricted cash:

                           As of           %
                          June 30,      Increase/
                       2008     2007   (Decrease)

    Cash and cash
     equivalents     $2,899    $1,667      73.9
    Short-term
     investments          -     2,582    (100.0)
    Restricted
     cash (a)           655       871     (24.8)
    Total cash and
     cash
     equivalents,
     short-term
     investments
     and
     restricted
     cash (b)        $3,554    $5,120     (30.6)


    (a) The Company's restricted cash primarily relates to reserves with
        institutions that process its credit card ticket sales, which
        fluctuate quarterly due to seasonality and the level of advance ticket
        sales, security deposits for airport leases and security for workers'
        compensation obligations, which decreased significantly in the second
        quarter of 2008 due to the posting of letters of credit.
    (b) See Note 5[i] for the Company's computation of free cash flow.

    NM  Not meaningful.



                        CONSOLIDATED NOTES (UNAUDITED)

    (1) UAL Corporation ("UAL" or the "Company") is a holding company whose
        principal subsidiary is United Air Lines, Inc. ("United").  On
        December 9, 2002, UAL, United and twenty-six direct and indirect
        wholly-owned subsidiaries filed Chapter 11 petitions for relief in the
        U.S. Bankruptcy Court for the Northern District of Illinois.  On
        February 1, 2006 (the "Effective Date"), the Company emerged from
        Chapter 11.  In connection with its emergence from Chapter 11
        bankruptcy protection, the Company implemented fresh-start reporting
        in accordance with American Institute of Certified Public Accountants'
        Statement of Position 90-7, "Financial Reporting by Entities in
        Reorganization Under the Bankruptcy Code" on the Effective Date.  The
        application of fresh-start reporting resulted in significant changes
        to the historical financial statements.

    (2) United has contractual relationships with various regional carriers to
        provide regional jet and turboprop service branded as United Express.
        Under these agreements, United pays the regional carriers
        contractually agreed fees for crew expenses, maintenance expenses and
        other costs of operating these flights.  These costs include aircraft
        rents of $103 million and $107 million for the three months ended June
        30, 2008 and 2007, respectively, and $207 million and $214 million for
        the six months ended June 30, 2008 and 2007, respectively, which are
        included in regional affiliate expense in our Statements of
        Consolidated Operations.

    (3) UAL's results of operations include aircraft fuel expense for both
        United mainline jet operations and regional affiliates.  Aircraft fuel
        expense incurred as a result of the Company's regional affiliates'
        operations is reflected in Regional affiliates operating expense.  In
        accordance with UAL's agreement with its regional affiliates, these
        costs are incurred by the Company.



                                Year-Over-Year Impact of Fuel Expense
                            United Mainline and Regional Affiliate Operations

                         Three Months Ended            Six Months Ended
    (In millions,              June 30,      %             June 30,      %
    except per gallon)       2008    2007  Change        2008    2007  Change
    Mainline fuel expense  $1,848  $1,206   53.2       $3,423  $2,247   52.3
    Regional affiliates
     fuel expense             355     224   58.5          633     418   51.4
    United system fuel
     expense               $2,203  $1,430   54.1       $4,056  $2,665   52.2

    Mainline fuel
     consumption (gallons)    571     579   (1.4)       1,127   1,130   (0.3)
    Mainline average jet
     fuel price per gallon
     (in cents)             323.6   208.3   55.4        303.7   198.8   52.8

    Regional affiliates
     fuel consumption
     (gallons)                 94      96   (2.1)         186     188   (1.1)
    Regional affiliates
     average jet fuel
     price per gallon (in
     cents)                 377.7   233.3   61.9        340.3   222.3   53.1

    (4) The tables below set forth certain operating statistics by geographic
        region and the Company's mainline, regional affiliates and
        consolidated operations:

    (% change from prior year)


    Three Months
      Ended
     June 30,   North                                   Regional
       2008    America Pacific Atlantic Latin Mainline Affiliates Consolidated
    Passenger
     revenues    0.9      1.7     13.0  11.2     3.3     (0.9)        2.6
    ASM         (4.8)    (0.7)    12.1  (4.1)   (1.3)    (1.1)       (1.3)
    RPM         (7.1)    (5.6)     7.6  (3.4)   (4.5)    (7.0)       (4.8)
    PRASM        5.9      2.4      0.8  16.0     4.7      0.3         3.9
    Yield [a]    8.6      7.8      4.2  13.5     8.2      6.6         7.7
    Load factor
     (points)   (2.2)    (4.1)    (3.4)  0.6    (2.7)    (4.7)       (3.0)


    Six Months
      Ended
     June 30,   North                                   Regional
       2008    America Pacific Atlantic Latin Mainline Affiliates Consolidated
    Passenger
     revenues    2.3      6.5     16.3  13.6     5.7      2.2         5.1
    ASM         (5.5)     2.4     15.0  (0.1)   (0.7)    (1.2)       (0.7)
    RPM         (7.6)    (2.7)    11.0  (1.2)   (3.7)    (6.4)       (4.0)
    PRASM        8.3      4.0      1.1  13.7     6.4      3.5         6.0
    Yield [a]   10.7      9.4      4.4  15.3     9.8      9.1         9.5
    Load factor
     (points)   (1.8)    (4.1)    (2.9) (0.9)   (2.6)    (4.1)       (2.7)

    [a] Yields for geographic regions exclude charter revenue, industry
        reduced fares, passenger charges and related revenue passenger miles.



                        CONSOLIDATED NOTES (UNAUDITED)

    (5) The Company incurred significant charges related to tangible and
        intangible asset impairments, severance and other charges that
        significantly impacted its results in the three and six months ended
        June 30, 2008. Collectively, these charges are identified as
        "impairments and other charges" in the Regulation G reconciliations
        below.  These items consist of the following:

                                   Three Months    Six Months
                                      Ended          Ended
                                  June 30, 2008   June 30, 2008
                                                                Income
                                                                Statement
                                                                Classification
                   Goodwill impairment $2,277       $2,277      Goodwill
                                                                impairment

          Intangible asset impairments     80           80
      Aircraft and deposit impairments    143          143
                     Other impairments    223          223      Other
                                                                impairments
                                                                and special
                                                                items

                             Severance     82           82      Salaries and
                                                                related costs
              Employee benefit charges     28 (a)       34 (a)  Salaries and
                                                                related costs
    Litigation-related settlement gain    (29)         (29)     Other
                                                                operating
                                                                expenses
            Purchased services charges     26 (b)       26 (b)  Purchased
                                                                services
         Pre-tax impairments and other
                               charges  2,607        2,613
       Tax benefit on intangible asset
                           impairments    (29)         (29)     Income tax
                                                                benefit

    Impairments and other charges, net
                                of tax $2,578       $2,584

    (a) Amount relates to additional charges to adjust certain employee
        benefit obligations.
    (b) Amount relates to expense for certain projects and transactions that
        have been terminated or indefinitely postponed by the Company.

        The Company recorded a special operating expense credit of $22 million
        in the three months ended March 31, 2007 related to bankruptcy
        facility lease secured interest litigation, which remains unresolved
        from the Company's recent reorganization.

        Pursuant to SEC Regulation G, the Company has included the following
        reconciliation of reported non-GAAP financial measures to comparable
        financial measures reported on a GAAP basis.  The Company believes
        that excluding fuel costs from certain measures is useful to investors
        because it provides an additional measure of management's performance
        excluding the effects of a significant cost item over which management
        has limited influence.  The Company also believes that adjusting for
        special items is useful to investors because they are non-recurring
        items not indicative of the Company's on-going performance. In
        addition, the Company adjusts for Mileage Plus impacts for better
        comparison to several of its peers as many still apply the incremental
        cost method of accounting to their loyalty plans.

        The tables below set forth the reconciliation of GAAP and non-GAAP
        financial measures for certain operating statistics that are used in
        determining key indicators such as adjusted passenger revenue per
        revenue passenger mile ("Yield"), operating revenue per available seat
        mile ("RASM"), operating margin, net income (loss) and operating
        expense per available seat mile ("CASM").



                          Three Months Ended         Six Months Ended
                               June 30,         %        June 30,        %
                             2008     2007   Change    2008    2007   Change
    [a] Yield  (In millions)
        Mainline
        Passenger - United
         Airlines            $4,099  $3,968    3.3    $7,644  $7,232    5.7
        Less: industry
         reduced fares and
         passenger charges      (12)    (11)   9.1       (22)    (21)   4.8
        Mainline adjusted
         passenger revenue   $4,087  $3,957    3.3    $7,622  $7,211    5.7
        Mainline revenue
         passenger miles     29,443  30,833   (4.5)   56,370  58,562   (3.7)
        Adjusted mainline
         yield (in cents)     13.88   12.83    8.2     13.52   12.31    9.8

        Consolidated
        Consolidated
         passenger revenue   $4,896  $4,772    2.6    $9,156  $8,711    5.1
        Less: industry
         reduced fares and
         passenger charges      (12)    (11)   9.1       (22)    (21)   4.8
        Consolidated
         adjusted passenger
         revenue             $4,884  $4,761    2.6    $9,134  $8,690    5.1
        Consolidated
         revenue passenger
         miles               32,581  34,207   (4.8)   62,317  64,913   (4.0)
        Adjusted
         consolidated
         yield (in cents)     14.99   13.92    7.7     14.66   13.39    9.5


    [b] PRASM  (In millions)
        Mainline
        Passenger - United
         Airlines            $4,099  $3,968    3.3    $7,644  $7,232    5.7
        Add:  Mileage Plus
         - effect of
         accounting change       35      37   (5.4)       89     150  (40.7)
        Less:  Mileage Plus
         - effect of
         expiration period
         change                 -       (39)(100.0)      -       (62)(100.0)
        Mainline adjusted
         passenger revenue   $4,134  $3,966    4.2    $7,733  $7,320    5.6
        Mainline available
         seat miles          35,394  35,875   (1.3)   69,922  70,410   (0.7)
        Adjusted mainline
         PRASM (in cents)     11.68   11.06    5.6     11.06   10.40    6.3

        Regional Affiliates
        Passenger - Regional
         Affiliates            $797    $804   (0.9)   $1,512  $1,479    2.2
        Add:  Mileage Plus -
         effect of
         accounting change        7       9  (22.2)       18      31  (41.9)
        Less:  Mileage Plus -
         effect of expiration
         period change          -        (8)(100.0)      -       (13)(100.0)
        Regional affiliates
         passenger revenue     $804    $805   (0.1)   $1,530  $1,497    2.2
        Regional affiliates
         available seat
         miles                4,126   4,174   (1.1)    8,007   8,103   (1.2)
        Regional affiliates
         PRASM (in cents)     19.49   19.29    1.0     19.11   18.47    3.5

        Consolidated
        Consolidated
         passenger
         revenues            $4,896  $4,772    2.6    $9,156  $8,711    5.1
        Add:  Mileage Plus -
         effect of
         accounting change       42      46   (8.7)      107     181  (40.9)
        Less:  Mileage Plus -
         effect of expiration
         period change            -     (47)(100.0)        -     (75)(100.0)
        Adjusted
         consolidated
         passenger revenues  $4,938  $4,771    3.5    $9,263  $8,817    5.1
        Consolidated
         available seat
         miles               39,520  40,049   (1.3)   77,929  78,513   (0.7)
        Adjusted
         consolidated PRASM
         (in cents)           12.49   11.91    4.9     11.89   11.23    5.9


                        CONSOLIDATED NOTES (UNAUDITED)

                      Three Months Ended         Six Months Ended
                           June 30,       %          June 30,         %
                        2008      2007  Change   2008      2007     Change

    [c] RASM (In
         millions)
        Mainline
        Consolidated
         operating
         revenues     $5,371    $5,213     3.0  $10,082    $9,586     5.2
        Less:
         Passenger -
         Regional
         Affiliates     (797)     (804)   (0.9)  (1,512)   (1,479)    2.2
        Mainline
         operating
         revenues     $4,574    $4,409     3.7   $8,570    $8,107     5.7
        Mainline
         available
         seat miles   35,394    35,875    (1.3)  69,922    70,410    (0.7)
        Mainline
         RASM
         (in cents)    12.92     12.29     5.1    12.26     11.51     6.5

        Consolidated
        Consolidated
         operating
         revenues     $5,371    $5,213     3.0  $10,082    $9,586     5.2
        Add: Mileage
         Plus - effect
         of accounting
         change           42        46    (8.7)     107       181   (40.9)
        Less: Mileage
         Plus - effect
         of expiration
         period change     -       (47) (100.0)       -       (75) (100.0)
        Adjusted
         consolidated
         operating
         revenues     $5,413    $5,212     3.9  $10,189    $9,692     5.1
        Consolidated
         available
         seat miles   39,520    40,049    (1.3)  77,929    78,513    (0.7)
        Adjusted
         consolidated
         RASM
         (in cents)    13.70     13.01     5.3    13.07     12.34     5.9

    [d] Operating
        Margin
        (In millions)
        Consolidated
         operating
         earnings
         (loss)      $(2,694)     $537       -  $(3,135)     $445       -
        Add (less):
         impairments
         and other
         charges       2,607         -       -    2,613       (22)      -
        Adjusted
         operating
         earnings
         (loss)         $(87)     $537       -    $(522)     $423       -
        Consolidated
         operating
         revenues     $5,371    $5,213     3.0  $10,082    $9,586     5.2
        Operating
         margin
         (loss)
         (percent)     (50.2)     10.3 (60.5) pt. (31.1)      4.6 (35.7) pt.
        Adjusted
         operating
         margin (loss)
         (percent)      (1.6)     10.3 (11.9) pt.  (5.2)      4.4  (9.6) pt.

    [e] Pre-tax
        income (loss)
        (In millions)
        Earnings (loss)
         before income
         taxes and
         equity in
         earnings of
         affiliates  $(2,759)     $465       -  $(3,301)     $228       -
        Add (less):
         impairments
         and other
         charges       2,607         -       -    2,613       (22)      -
        Adjusted
         pre-tax
         earnings
         (loss)        $(152)     $465       -    $(688)     $206       -
        Pre-tax
         earnings
         (loss)
         (percent)     (51.4)      8.9 (60.3) pt. (32.7)      2.4 (35.1) pt.
        Adjusted
         pre-tax
         earnings
         (loss)
         (percent)      (2.8)      8.9 (11.7) pt.  (6.8)      2.1  (8.9) pt.

    [f] Net income (loss)
        (In millions)
        Net income
         (loss)      $(2,729)     $274       -  $(3,266)     $122       -
        Add (less):
         impairments
         and other
         charges       2,607         -       -    2,613       (22)      -
        Add (less):
         income tax
         expense (i)     (29)        -       -      (29)       10       -
        Adjusted net
         income (loss) $(151)     $274       -    $(682)     $110       -

    [g] CASM (In
         millions)
        Mainline
        Consolidated
         operating
         expenses     $8,065    $4,676    72.5  $13,217    $9,141    44.6
        Less: Regional
         affiliates    (847)     (733)    15.6  (1,626)   (1,425)    14.1
        Mainline
         operating
         expenses     $7,218    $3,943    83.1  $11,591    $7,716    50.2
        Mainline
         available seat
         miles        35,394    35,875    (1.3)  69,922    70,410    (0.7)
        Mainline CASM
         (in cents)    20.39     10.99    85.5    16.58     10.96    51.3

        Mainline
         operating
         expenses     $7,218    $3,943    83.1  $11,591    $7,716    50.2
        Add (less):
         impairments and
         other special
         items        (2,607)        -       -   (2,613)       22       -
        Adjusted
         mainline
         operating
         expense      $4,611    $3,943    16.9   $8,978    $7,738    16.0
        Adjusted
         mainline
         CASM
         (in cents)    13.03     10.99    18.6    12.84     10.99    16.8

        Adjusted
         mainline
         operating
         expense      $4,611    $3,943    16.9   $8,978    $7,738    16.0
        Less: mainline
         fuel expense (1,848)   (1,206)   53.2   (3,423)   (2,247)   52.3
        Less: cost of
         third party
         sales -
         UAFC (ii)        (3)      (11)  (72.7)     (3)       (34)  (91.2)
        Adjusted
         mainline
         operating
         expense      $2,760    $2,726     1.2   $5,552    $5,457     1.7
        Adjusted
         mainline CASM
         (in cents)     7.80      7.60     2.6     7.94      7.75     2.5



                        CONSOLIDATED NOTES (UNAUDITED)

                             Three Months Ended      Six Months Ended
                                  June 30,       %       June 30,        %
                               2008     2007  Change   2008     2007   Change
        Consolidated
        Consolidated
         operating expenses    $8,065  $4,676   72.5  $13,217  $9,141    44.6
        Add (less):
         impairments and
          other charges        (2,607)    -        -   (2,613)     22       -
        Adjusted
         consolidated
         operating expenses    $5,458  $4,676   16.7  $10,604  $9,163    15.7
        Consolidated
         available seat
         miles                 39,520  40,049   (1.3)  77,929  78,513    (0.7)
        Adjusted consolidated
         CASM (in cents)        13.81   11.68   18.2    13.61   11.67    16.6

        Consolidated
         operating expenses    $5,458  $4,676   16.7  $10,604  $9,163    15.7
        Less:  fuel expense
         and UAFC(ii)          (2,206) (1,441)  53.1   (4,059) (2,699)   50.4
        Adjusted
         consolidated
         operating expenses    $3,252  $3,235    0.5   $6,545  $6,464     1.3
        Adjusted
         consolidated CASM
         (in cents)              8.23    8.08    1.9     8.40    8.23     2.1

    [h] Operating expenses (In
         millions)
        Consolidated
         operating expenses    $8,065  $4,676   72.5  $13,217  $9,141    44.6
        Add (less):
         impairments and
          other charges        (2,607)    -      -     (2,613)     22    -
        Adjusted operating
         expenses              $5,458  $4,676   16.7  $10,604  $9,163    15.7

    [i] Operating cash flow (In
         millions)
        Operating cash flow      $217  $1,034  (79.0)    $137  $1,660   (91.7)
        Less: capital
         expenditures            (131)    (78)  67.9     (232)   (146)   58.9
        Add: proceeds from
          litigation on
          advance deposits         41       -      -       41       -       -
        Free cash flow           $127    $956  (86.7)    $(54) $1,514  (103.6)

    [j] Loss per share (basic
         and diluted)
        Loss per share -
         GAAP                 $(21.47)                $(26.33)
        Add:  impairments
         and other charges      20.28                   20.82
        Loss per share -
         excluding
          impairment and
          other charges        $(1.19)                 $(5.51)

    (i)  For the six months ended June 30, 2007, the income tax adjustment for
         special items is the difference in the income tax provision on actual
         net income (loss) and the income tax provision on adjusted net income
         (loss), computed using an effective tax rate of 47%. The Company did
         not record a tax benefit on the impairments and special items in the
         2008 period, except for $29 million of tax benefits related to the
         intangible asset impairments, which was calculated using a 36% tax
         rate.
    (ii) Included in UAL's operating expenses are the expenses of United's
         wholly-owned subsidiary United Aviation Fuels Corporation ("UAFC").
         UAFC's expenses are not derived from mainline jet operations;
         therefore, UAL has excluded these expenses from the above reported
         GAAP financial measures.

    NM - Not meaningful.

    (6) The table below sets forth the estimated exit-related and fresh-start
        reporting impacts on the Company's results of operations.



                                           2008 Increase (Decrease)
       (In millions)                       YTD        2Q       1Q
       Revenue impact:                   Estimate  Estimate  Estimate

       Mileage Plus revenue              $(107)     $(42)     $(65)       [a]

       Operating expense impact:
       Share-based compensation             18         7        11        [b]
       Mileage Plus marketing expense        7         2         5        [a]
       Postretirement welfare cost          28        14        14        [c]
       Depreciation and amortization        20        10        10        [d]
       Deferred gain                        36        18        18        [e]
       Total operating expense impact      109        51        58

       Non-operating expense impact:
       Non-cash and fresh-start interest
        expense                             $8        $4        $4        [f]

    [a] In connection with its emergence from Chapter 11 protection effective
        February 1, 2006, the Company adopted fresh-start reporting.
        Accordingly, the Company elected to change its accounting policy from
        an incremental cost basis to a deferred revenue model to measure the
        obligation for the Mileage Plus Frequent Flyer program. Adjustments to
        the obligation are recorded to operating revenues. Historically,
        adjustments were based upon incremental costs and were recorded in
        both operating revenues and advertising expense.

        The deferred revenue model is more volatile than the incremental cost
        basis. Because all miles are now accounted for under the deferred
        revenue model, the amount of revenue recognized is more sensitive to
        the number of miles earned and redeemed during the period than the
        incremental cost basis.



                        CONSOLIDATED NOTES (UNAUDITED)

    [b] In accordance with the plan of reorganization, the Company implemented
        stock-based compensation plans for certain management employees and
        non-employee directors.  The Company adopted SFAS 123R effective
        January 1, 2006 and recorded compensation expense for such plans.

    [c] In accordance with fresh-start reporting, the Company revalued its
        liabilities effective February 1, 2006 to fair value.  As a result,
        all prior period service credits related to postretirement costs were
        eliminated.

    [d] In accordance with fresh-start reporting, the Company revalued its
        assets to fair value effective February 1, 2006.  As a result,
        definite lived intangible asset values increased substantially which
        results in higher associated amortization expense.  In addition, the
        value of the Company's operating property and equipment was
        significantly reduced which results in lower depreciation expense.
        The Company has estimated the net impact of changes in asset values at
        fresh-start on net depreciation and amortization.

    [e] In accordance with fresh-start reporting, the Company revalued its
        liabilities effective February 1, 2006 to fair value.  As a result,
        all deferred gains on aircraft sale/leasebacks were eliminated.

    [f] As a result of fresh-start reporting, the Company recognizes certain
        non-cash interest expenses, including the amortization of
        mark-to-market discounts on all debt and capital leases.


    (7) The following table presents additional detail on the Mileage Plus
        impacts summarized in the table above. These items consist of the
        additional amount of revenue that the Company estimates would have
        been recognized had we continued to apply the incremental cost method
        of accounting after exiting bankruptcy and, for 2007, the estimated
        impact of the change in the expiration period for inactive accounts
        from 36 months to 18 months.  The Company utilizes this adjustment for
        comparison of its performance to its peers, as certain of our peers
        currently still apply the incremental cost method of accounting.


                                            Increase (Decrease)
                                     2008                    2007
      (In millions)           YTD    2Q    1Q     YTD    4Q    3Q    2Q    1Q
      Mainline
      Effect of accounting
       change                (89)   (35)   (54)  (230)  (50)  (30)  (37) (113)
      Effect of expiration
       period change           -     -     -      204   100    42    39    23
      Total Mainline         (89)   (35)   (54)   (26)   50    12     2   (90)

      Regional Affiliates
      Effect of accounting
       change                (18)    (7)   (11)   (47)  (11)   (5)   (9)  (22)
      Effect of expiration
       period change           -     -     -       42    21     8     8     5
      Total Regional
       Affiliates            (18)    (7)   (11)    (5)   10     3    (1)  (17)

      Consolidated
      Effect of accounting
       change               (107)   (42)   (65)  (277)  (61)  (35)  (46) (135)
      Effect of expiration
       period change           -     -     -      246   121    50    47    28
      Total Consolidated    (107)   (42)   (65)   (31)   60    15     1  (107)



                        CONSOLIDATED NOTES (UNAUDITED)

    (8) Pursuant to SEC Regulation G, the Company has included the following
        reconciliation of reported non-GAAP financial measures to comparable
        financial measures reported on a GAAP basis. Further, the Company
        believes that excluding fuel costs from certain measures is useful to
        investors because it provides an additional measure of management's
        performance excluding the effects of a significant cost item over
        which management has limited influence.  The Company also believes
        that adjusting for impairments and other charges is useful to
        investors because they are non-recurring income and/or charges that
        are not indicative of the Company's on-going performance.

        The forecasted fuel amounts shown below were estimated based on
        forecasted jet fuel prices of $4.08 per gallon and $3.54 per gallon
        for the third quarter and the full year of 2008, respectively.


                                          Three Months Ending
                                             September 30,
       Operating expense per ASM -        2008 Estimate  2007       YOY
        CASM (cents)                       Low   High   Actual    % Change

       Mainline operating expense         14.41  14.48  11.28    27.7    28.4
       Less: fuel expense                 (6.58) (6.58) (3.63)   81.3    81.3
       Mainline excluding fuel             7.83   7.90   7.65     2.4     3.3
       Add: impairments and other charges   -      -     0.06  (100.0) (100.0)
       Mainline excluding fuel and
        impairments and other charges      7.83   7.90   7.71     1.5     2.5



                                          Twelve Months Ending
                                              December 31,
       Operating expense per ASM -        2008 Estimate  2007       YOY
        CASM (cents)                       Low   High   Actual    % Change

       Mainline operating expense         15.63  15.71  11.39    37.2    37.9
       Less: fuel expense & cost
        of third -party sales - UAFC      (5.71) (5.71) (3.55)   60.8    60.8
       Mainline excluding fuel             9.92  10.00   7.84    26.5    27.6
       Add: impairments and other charges (1.93) (1.93)  0.03     -       -
       Mainline excluding fuel and
        impairments and other charges      7.99   8.07   7.87     1.5     2.5



                   UAL CORPORATION AND SUBSIDIARY COMPANIES
                    Successor Company Operating Statistics
                    (Mainline and Regional Affiliates (a))

                                             Three Months Ended
                                                  June 30,               %
                                              2008       2007          Change
    Mainline revenue passengers (In
     thousands)                              16,994     18,190         (6.6)

    Revenue passenger miles  - RPM (In
     millions)
      Mainline                               29,443     30,833         (4.5)
      Regional affiliates                     3,138      3,374         (7.0)
        Consolidated                         32,581     34,207         (4.8)

    Available seat miles - ASM (In
     millions)
      Mainline                               35,394     35,875         (1.3)
      Regional affiliates                     4,126      4,174         (1.1)
        Consolidated                         39,520     40,049         (1.3)

    Passenger load factor (percent)
      Mainline                                 83.2       85.9       (2.7) pt.
      Regional affiliates                      76.1       80.8       (4.7) pt.
        Consolidated                           82.4       85.4       (3.0) pt.

    Consolidated operating breakeven
     passenger load factor (percent)             NM       75.8           NM

    Passenger revenue per passenger mile
     - Yield (cents)  [See Note 5a]
      Mainline adjusted                       13.88      12.83          8.2
      Regional affiliates                     25.40      23.83          6.6
        Consolidated adjusted                 14.99      13.92          7.7

    Passenger revenue per available seat
     mile - PRASM (cents) [See Note 5b]
      Mainline                                11.58      11.06          4.7
      Mainline adjusted for Mileage Plus      11.68      11.06          5.6
      Regional affiliates                     19.32      19.26          0.3
      Regional affiliates adjusted for
       Mileage Plus                           19.49      19.29          1.0
        Consolidated                          12.39      11.92          3.9
        Consolidated adjusted for Mileage
         Plus                                 12.49      11.91          4.9

    Operating revenue per available seat
     mile  - RASM (cents)   [See Note 5c]
      Mainline                                12.92      12.29          5.1
      Regional affiliates                     19.32      19.26          0.3
        Consolidated                          13.59      13.02          4.4

    Operating expense per available seat
     mile - CASM (cents)  [See Note 5g]
      Mainline                                20.39      10.99         85.5
      Mainline excluding impairments and
       other charges                          13.03      10.99         18.6
      Mainline excluding impairments and
       other charges, fuel and UAFC            7.80       7.60          2.6
      Regional affiliates                     20.53      17.56         16.9
        Consolidated                          20.41      11.68         74.7
        Consolidated excluding
         impairments and other charges        13.81      11.68         18.2
        Consolidated excluding
         impairments and other charges,
         fuel and UAFC                         8.23       8.08          1.9

    Mainline unit earnings (loss) (cents)
     (b)                                      (7.47)      1.30          -
    Mainline unit earnings excluding
     impairments and other charges,
     fuel and UAFC (cents) (b)                 5.12       4.69          9.2

    Number of aircraft in operating fleet
     at end of period
      Mainline                                  457        460         (0.7)
      Regional affiliates                       276        288         (4.2)
        Consolidated                            733        748         (2.0)

    Other Mainline Statistics
    Mainline average price per gallon of
     jet fuel (cents)                         323.6      208.3         55.4
    Average full-time equivalent
     employees (thousands)                     51.1       51.4         (0.6)
    Mainline ASMs per equivalent employee
     - productivity (thousands)                 693        698         (0.7)
    Average stage length (in miles)           1,395      1,366          2.1
    Fleet utilization (in hours and
     minutes)                                 11:09      11:09          -


    (a) Mainline includes United Air Lines, Inc. scheduled and chartered jet
        operations.  Regional affiliates include operations from regional
        carriers with whom the Company has entered into capacity purchase
        agreements to provide jet and turboprop operations branded as United
        Express.
    (b) Unit earnings are calculated as RASM minus CASM.

     NM - Not meaningful


                   UAL CORPORATION AND SUBSIDIARY COMPANIES
                    Successor Company Operating Statistics
                    (Mainline and Regional Affiliates (a))

                                             Six Months Ended
                                                 June 30,                %
                                             2008       2007           Change
    Mainline revenue passengers (In
     thousands)                              32,244     34,540         (6.6)

    Revenue passenger miles  - RPM (In
     millions)
      Mainline                               56,370     58,562         (3.7)
      Regional affiliates                     5,947      6,351         (6.4)
        Consolidated                         62,317     64,913         (4.0)

    Available seat miles - ASM (In
     millions)
      Mainline                               69,922     70,410         (0.7)
      Regional affiliates                     8,007      8,103         (1.2)
        Consolidated                         77,929     78,513         (0.7)

    Passenger load factor (percent)
      Mainline                                 80.6       83.2       (2.6) pt.
      Regional affiliates                      74.3       78.4       (4.1) pt.
        Consolidated                           80.0       82.7       (2.7) pt.

    Consolidated operating breakeven
     passenger load factor (percent)             NM       78.4           NM

    Passenger revenue per passenger mile
     - Yield (cents)  [See Note 5a]
      Mainline adjusted                       13.52      12.31          9.8
      Regional affiliates                     25.42      23.29          9.1
        Consolidated adjusted                 14.66      13.39          9.5

    Passenger revenue per available seat
     mile - PRASM (cents) [See Note 5b]
      Mainline                                10.93      10.27          6.4
      Mainline adjusted for Mileage Plus      11.06      10.40          6.3
      Regional affiliates                     18.88      18.25          3.5
      Regional affiliates adjusted for
       Mileage Plus                           19.11      18.47          3.5
        Consolidated                          11.75      11.09          6.0
        Consolidated adjusted for Mileage
         Plus                                 11.89      11.23          5.9

    Operating revenue per available seat
     mile  - RASM (cents)   [See Note 5c]
      Mainline                                12.26      11.51          6.5
      Regional affiliates                     18.88      18.25          3.5
        Consolidated                          12.94      12.21          6.0

    Operating expense per available seat
     mile - CASM (cents)  [See Note 5g]
      Mainline                                16.58      10.96         51.3
      Mainline excluding impairments and
       other charges                          12.84      10.99         16.8
      Mainline excluding impairments and
       other charges, fuel and UAFC            7.94       7.75          2.5
      Regional affiliates                     20.31      17.59         15.5
        Consolidated                          16.96      11.64         45.7
        Consolidated excluding
         impairments and other charges        13.61      11.67         16.6
        Consolidated excluding
         impairments and other charges,
         fuel and UAFC                         8.40       8.23          2.1

    Mainline unit earnings (loss) (cents)
     (b)                                      (4.32)      0.55          -
    Mainline unit earnings excluding
     impairments and other charges,
     fuel and UAFC (cents) (b)                 4.32       3.76         14.9

    Number of aircraft in operating fleet
     at end of period
      Mainline                                  457        460         (0.7)
      Regional affiliates                       276        288         (4.2)
        Consolidated                            733        748         (2.0)

    Other Mainline Statistics
    Mainline average price per gallon of
     jet fuel (cents)                         303.7      198.8         52.8
    Average full-time equivalent
     employees (thousands)                     51.9       51.5          0.8
    Mainline ASMs per equivalent employee
     - productivity (thousands)               1,347      1,367         (1.5)
    Average stage length (in miles)           1,404      1,363          3.0
    Fleet utilization (in hours and
     minutes)                                 10:56      11:04         (1.2)


    (a) Mainline includes United Air Lines, Inc. scheduled and chartered jet
        operations.  Regional affiliates include operations from regional
        carriers with whom the Company has entered into capacity purchase
        agreements to provide jet and turboprop operations branded as United
        Express.
    (b) Unit earnings are calculated as RASM minus CASM.

     NM - Not meaningful

SOURCE UAL Corporation

CONTACT: Worldwide Press Office of UAL Corporation, +1-312-997-8640





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