UAL Corp. Reports Second-Quarter

CHICAGO, August 1, 2003 - UAL Corporation (OTCBB: UALAQ.OB), the holding company whose primary subsidiary is United Airlines, today reported its second-quarter financial results and released its Monthly Operating Report for June.Ê

UAL`s second-quarter loss was $623 million, or a loss per basic share of $6.26, which includes a net $(147) million in special items described in the notes to the financial tables. This performance compares to a second-quarter 2002 tax-effected loss of $341 million, or a loss per basic share of $6.08, including special items.Ê Excluding $300 million received from the government in compensation for losses related to the Iraq war and $(447) million in special items, UAL’s loss for the second quarter totaled $476 million, or a loss per basic share of $4.79.

“The second quarter began as a severe challenge for United and the industry as a whole, but we saw a particularly positive trend as we moved through the period,” said Glenn Tilton, chairman, president and chief executive officer.Ê “We steadily improved revenue and realized a 4% improvement in domestic passenger unit revenue for June over the same month last year.Ê We also achieved a large decrease in our labor and other costs as we continue to implement our various cost-reduction initiatives,” continued Tilton.Ê “Despite the continued difficult economic environment, the improvement in both revenue and cost is encouraging.”

The Company recorded positive operating cash flow of almost $2 million per day in the quarter, excluding the $300 million in government reimbursement and a $365 million income tax refund the Company received during the quarter.Ê The Company`s cash position increased to $2.3 billion, including $684 million in restricted cash.Ê

In June, for the fifth straight month, United satisfied the covenants of its debtor-in-possession (DIP) financing, which required the Company to achieve a cumulative EBITDAR (earnings before interest, taxes, depreciation, amortization and aircraft rent) loss of no more than $585 million between December 2002 and June 2003.


As the Company continued to reduce unit costs during the quarter, United employees delivered strong operational performance, including:

* On-time departure performance in the quarter was the best in United`s history at 76.9 %.
* Arrivals within 14 minutes of schedule was 86.1% for the quarter, another all-time record for United, compared to 82.3% for the same period last year.
* For January through May 2003, United is #1 in arrivals within 14 minutes of schedule among the six major network carriers, according to the U.S. Department of Transportation.
* For January through May 2003, United had the second fewest passenger complaints among the six major network carriers, also according to US DOT rankings.
* For the first six months of 2003, United recorded its highest customer satisfaction since the Company began studying a set of key customer perception and service metrics in 1996.Ê Performance in all the metrics on which the survey is based, including flight attendant service, check-in efficiency and on-time performance among others, were well above last year`s levels.

During the quarter, United made significant progress enhancing its customer value proposition and improving revenue performance, including:

* Fully restoring United`s transatlantic schedule by June 2, 2003.
* Announcing the phased restoration of United`s Pacific schedules to be completed by September 3, 2003.
* Adding 160 domestic flights to accommodate current strong levels of demand.
* Executing agreements to expand United`s regional jet network and significantly reducing turboprop operations.
* Continuing efforts to further improve United`s Mileage Plus program, already recognized as the industry`s leading frequent flyer program, with well-received marketing initiatives targeting our core business customers, including “Fly Three, Fly Free” and “Travel the World for Free” incentives.
* Introducing Verizon JetConnect onboard e-mail access, online check-in, Easy Update—an industry-leading wireless flight information notification service—and a new, more customer-friendly boarding process.
UAL’s second quarter 2003 operating revenues were $3.1 billion, down 18% compared to second quarter 2002.Ê Passenger revenue for the quarter was down 18% from last year on a 14% decrease in capacity.Ê System passenger unit revenue was 4% lower on a 7% yield decline and a 2.6 point increase in load factor.Ê Traffic decreased 11% year-over-year.Ê United’s load factor for the quarter was 77%.

United’s operating expenses for the quarter were $3.5 billion, down 17% from the same quarter last year.Ê While the Company’s unit cost (operating expenses per available seat mile) decreased 3%, excluding its fuel subsidiary and special items, unit cost decreased 6% year-over-year.Ê This unit cost improvement was among the best in the industry.Ê

Salaries and related costs decreased $543 million or 30% for the quarter.Ê This amount reflects the dramatic reduction in wages, changes in benefits and changes in work rules and productivity improvement associated with United`s new collective bargaining agreements (CBAs), including a benefit of $102 million for the reversal of accruals as a result of contract renegotiations.Ê While capacity was down for the quarter, productivity was up 9% for the quarter year-over-year and in June improved 12% over June 2002.

Aircraft rent was down $73 million or 35% compared to second quarter 2002.Ê United is still in negotiations with respect to a large number of aircraft in its fleet and further savings are expected to be realized as these negotiations are finalized over the next several months.

The Company had an effective tax rate of zero for the second quarter, which makes the Company`s pre-tax loss the same as the Company`s net loss.Ê In the second quarter of 2002, the Company recorded a credit for income taxes of $191 million.

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