UAL Corporation Reports Fourth-Quarter

UAL Corporation, the holding company whose primary subsidiary is United
Airlines, today reported its fourth-quarter 2004 financial results, which
were impacted by high fuel costs and a difficult domestic revenue
environment. UAL reported a fourth-quarter operating loss of $493 million, which
compares with a $134 million operating loss in the fourth quarter of 2003.
UAL reported a net loss of $664 million, or a loss per basic share of
$5.73, which includes $111 million in special items. Excluding the special
items, UAL’s net loss for the fourth quarter totaled $553 million, or a
loss per basic share of $4.77.

Special items in this year’s fourth quarter included a $158 million gain
from the sale of UAL’s remaining shares of Orbitz, $222 million in
reorganization expenses and a $47 million increase in frequent flyer
liability, principally associated with revised estimates.

For the full year 2004, UAL reported a net loss of $1.6 billion, or a loss
per basic share of $14.57, compared to a net loss of $2.8 billion in 2003.
Excluding special items, UAL reported a net loss of $1.2 billion, or a
loss per basic share of $10.74.

“As expected, the industry environment continues to be extremely
difficult,” said Glenn Tilton, chairman, president and chief executive.
“Record fuel prices and pressure on revenue led to unacceptable results.
United has made good progress with more cost reductions already underway.
But as we have said, and as this quarter shows without question, we have
more work to do.”

United’s Restructuring Progress Continues

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Over the last several months, United continued work on its restructuring.
The company has made meaningful progress toward the target of an
incremental $2 billion in savings from labor, non labor and pension costs.
These savings are in addition to the $5 billion in average annual savings
the company has previously announced. As part of the recent restructuring
efforts, United:

—Reached consensual labor agreements with five of its six unions that
are expected to provide the labor cost savings the company needs to
attract exit financing and complete its restructuring. Pending
ratification by the unions, the bankruptcy court has indicated the
agreements will be approved by the court on Jan. 31. The company has
agreed to temporary savings with the International Association of
Machinists, and will work toward having a permanent agreement in place
prior to April 11.—Is in the process of negotiating with its unions
over the next 90 days to attempt to reach a consensual agreement on the
issue of termination and replacement of the company’s pension plans.—Is
reducing United’s fleet to 455 aircraft—68 fewer than United flew in
August 2004 and a reduction of 112 aircraft or nearly 20 percent of the
fleet since 2002.—Sought competitive bids for a portion of its current
United Express capacity.

“We have made further progress in reducing our costs, and will see the
benefits of this in 2005,” said Jake Brace, United’s executive vice
president and chief financial officer. “Nonetheless, there is significant
work still ahead. We continue to believe termination and replacement of
all of our pension plans is necessary for United to successfully exit
Chapter 11 as a competitive, sustainable enterprise.”

Revenue results

UAL’s fourth quarter 2004 operating revenues were $4.0 billion, up 5%
compared to fourth quarter 2003. Load factor increased 0.3 points to 77.2%
as traffic increased 5% on a 4% increase in capacity. During the fourth
quarter, both passenger unit revenue and yield were essentially flat
compared to fourth quarter last year, despite a very difficult revenue
environment.

“While we are clearly not satisfied with United’s revenue performance, we
are pleased with our improved passenger unit revenue performance relative
to our peers,” said John Tague, executive vice president-Marketing, Sales
and Revenue. “United is committed to continuous revenue improvement, and
we are taking significant actions to forward this objective.”

To meet those objectives, the company is undertaking a number of
initiatives, including rebalancing its capacity, optimizing revenue
execution and developing industry-leading customer initiatives.
Specifically, United is:

—Reducing domestic capacity by about 12%, while increasing international
capacity by 14%, for an overall systemwide capacity reduction of 3
percent. The company continues to see strong international results and
growth potential in international markets.—Transforming sales efforts
by bringing in new leadership and a more disciplined approach to corporate
discounts and the company’s commercial selling process that reflects
United’s value to customers and today’s historically low prices.—
Improving cargo service and revenue management, resulting in fourth-
quarter cargo revenues improving 30%.—Developing industry-leading
customer offerings that have helped United’s customer satisfaction reach
an all time high. During 2004, United launched new “p.s. (SM),” premium
transcontinental service between New York and Los Angeles and New York and
San Francisco. United also launched 12 new leisure destinations in the
Caribbean and Mexico, as well as daily nonstop service between Chicago and
Shanghai, San Francisco and Beijing, Chicago and Osaka, and Chicago and
Buenos Aires. In December, United launched the first commercial U.S.
flights to Vietnam in 30 years. Operating expenses

The company continued to implement non labor contract cost reductions, all
of which will deliver savings during 2005. Specifically, United has:

—Undergone initiatives to reduce its costs of sales, including targeting
$200 million in improvements through various distribution initiatives.—
Completed restructuring of all domestic catering agreements.—Negotiated
new agreements for heavy airframe maintenance covering all narrow-body
aircraft.—Completed training of all company pilots and dispatchers in
new fuel efficiency procedures.

“Our focus on improving our costs beyond those enabled by our collective
bargaining agreements is a top priority,” said Pete McDonald, executive
vice president and chief operating officer.

Total operating expenses for the quarter were $4.5 billion, up 14% from
the year-ago quarter on a 4% increase in capacity. Mainline operating
expenses per available seat mile increased 8% from the fourth quarter
2003. Excluding fuel, mainline operating expenses per available seat mile
increased less than 1%. Productivity (available seat miles divided by
employee equivalents) was up 7% for the quarter year-over-year. Fuel
expense was $308 million higher than in the fourth quarter 2003. Average
fuel price for the quarter was $1.45 per gallon (including taxes), up 52%
year-over-year.

The company had an effective tax rate of zero for all periods presented,
which makes UAL’s pre-tax loss the same as its net loss.

Operations Continue to Deliver Outstanding Performance

While United’s focus on revenue improvement and cost reduction work
continues, the company’s operations have consistently delivered excellent
performance metrics for customers throughout 2004:

—Departure :00 performance at 68.7% was better than goal and the
third-best year in our history.—Arrival :14 results were among the best
in company history and remain above industry average for United’s peers.
—Recorded the company’s best year ever as measured by the customers’
definite intent to repurchase and results for exceptional service by
flight attendants, check-in efficiency, reservations and meals.—
Mishandled baggage rate ranking improved sharply in 2004, with United
being one of only two carriers to improve its year-over-year performance.

“Our employees continue to do a great job for our customers, delivering
the best service performance in 2004 in the company’s history,” McDonald
said.
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