UAL Corporation, the holding company whose primary subsidiary is United Airlines,
has reported financial results for the third quarter ended September 30,
2006.Highlights include:

* UAL reported after-tax net income of $190 million. Excluding
reorganization and special items, this constituted a year-over-year
improvement of $95 million.

  * Basic earnings per share was $1.62 and diluted earnings per share was
$1.30. The company began recording income tax expense which reduced the
quarter’s diluted earnings per share by $0.43.

  * Third quarter operating profit of $335 million was an improvement of
$170 million over the comparable quarter in 2005. Excluding special
items, the year-over-year improvement was $140 million.

  * Continuing revenue and productivity improvements more than offset a $293
million increase in consolidated fuel expense.

  * Operating cash flow totaled $131 million. The company’s cash position
was $4.9 billion at September 30, 2006, including $860 million of
restricted cash.

UAL reported third quarter net income of $190 million. This represents
basic earnings per share of $1.62 and fully diluted earnings per share of
$1.30, with weighted average shares of 115.6 million and 151.1 million,
respectively. The company recorded income tax expense in the quarter and
the eight months ending September 30th of $60 million, which reduced the
quarter’s basic earnings per share by $0.52 and diluted earnings per share
by $0.43.
  In the quarter the company recognized the benefit of ongoing
resolutions of several pre-confirmation contingencies, the largest of which
was a special gain to operating income of $30 million, related to a
reduction in the estimated liability for the secured interest of
bondholders in one of United’s leaseholds at San Francisco International
Airport. In addition, the company recorded a $19 million accrual for
year-end employee incentive programs due to improved earnings expectations,
and recorded an unrealized $26 million loss for marking-to-market hedge
positions in place at the end of the third quarter which will settle in
future quarters.
  Total revenues for the third quarter increased 11 percent to $5.2
billion compared with $4.7 billion in the third quarter of 2005. Despite a
23 percent increase in mainline and regional affiliate fuel expense, total
operating expenses increased by only 8 percent on a 3 percent increase in
consolidated capacity as compared to the third quarter of 2005.
  Operating margin improved to 6.5 percent from 3.5 percent in the
comparable 2005 quarter. Excluding the one-time special operating item,
operating margin improved to 5.9 percent in the third quarter of 2006.
Mainline unit earnings, which is mainline revenue per available seat mile
(RASM) minus mainline operating cost per available seat mile (CASM),
increased 19 percent to 0.74 cents from 0.62 cents a year ago despite
higher fuel costs. Mainline unit earnings excluding fuel expense and the
special item increased 18 percent to 4.34 cents from 3.67 cents.
  Regional affiliates contributed $60 million to operating income, an
improvement of $120 million compared with the third quarter of 2005.
Revenue from regional affiliates continued to grow with a 17 percent
increase over the year ago quarter, a result of growth, network
optimization and a healthy revenue environment. Regional affiliates’
expense declined by 1 percent, despite a 7 percent increase in capacity and
16 percent increase in fuel expense, primarily as a result of restructured
regional carrier agreements.
  “Our management team and our employees continue to press ahead,
executing our core agenda of continuous improvement, controlling costs,
optimizing revenue and improving the customer experience,” said Glenn
Tilton, UAL’s chairman, president and CEO. “Our results underscore our
progress, and we are building momentum, ensuring that our employees and
leadership are completely aligned to deliver value to our customers and
shareholders.”
  For the three and eight months ended September 30, 2006 the successor
company recorded income tax expense of $60 million, whereas such expense
was not recorded in comparable periods for the predecessor company. Income
tax expense was recorded by applying an effective tax rate of 41% to
pre-tax income for the eight months ended September 30, 2006. At September
30, UAL and subsidiaries had substantial net operating loss carry-forwards
available to reduce tax liabilities of future periods. Therefore, the
company does not expect to pay significant amounts of cash taxes in the
near term.
  Despite moving into a seasonally slower period, the company generated
operating cash flow of $131 million, an increase of $147 million year-over-
year. The company ended the quarter with unrestricted cash and short-term
investments of $4.1 billion, and a restricted cash balance of $860 million,
for a total cash balance of $4.9 billion. Unrestricted cash and short-term
investments decreased by $0.1 billion during the quarter due to debt
repayment and capital spending.
  “By focusing on our core business we have delivered two successive
quarters of margin improvement,” said Jake Brace, executive vice president
and chief financial officer. “We are generating cash, and we are making
progress reducing our costs to lessen inflationary pressures.“UAL reported third quarter net income of $190 million. This represents
basic earnings per share of $1.62 and fully diluted earnings per share of
$1.30, with weighted average shares of 115.6 million and 151.1 million,
respectively. The company recorded income tax expense in the quarter and
the eight months ending September 30th of $60 million, which reduced the
quarter’s basic earnings per share by $0.52 and diluted earnings per share
by $0.43.
  In the quarter the company recognized the benefit of ongoing
resolutions of several pre-confirmation contingencies, the largest of which
was a special gain to operating income of $30 million, related to a
reduction in the estimated liability for the secured interest of
bondholders in one of United’s leaseholds at San Francisco International
Airport. In addition, the company recorded a $19 million accrual for
year-end employee incentive programs due to improved earnings expectations,
and recorded an unrealized $26 million loss for marking-to-market hedge
positions in place at the end of the third quarter which will settle in
future quarters.
  Total revenues for the third quarter increased 11 percent to $5.2
billion compared with $4.7 billion in the third quarter of 2005. Despite a
23 percent increase in mainline and regional affiliate fuel expense, total
operating expenses increased by only 8 percent on a 3 percent increase in
consolidated capacity as compared to the third quarter of 2005.
  Operating margin improved to 6.5 percent from 3.5 percent in the
comparable 2005 quarter. Excluding the one-time special operating item,
operating margin improved to 5.9 percent in the third quarter of 2006.
Mainline unit earnings, which is mainline revenue per available seat mile
(RASM) minus mainline operating cost per available seat mile (CASM),
increased 19 percent to 0.74 cents from 0.62 cents a year ago despite
higher fuel costs. Mainline unit earnings excluding fuel expense and the
special item increased 18 percent to 4.34 cents from 3.67 cents.
  Regional affiliates contributed $60 million to operating income, an
improvement of $120 million compared with the third quarter of 2005.
Revenue from regional affiliates continued to grow with a 17 percent
increase over the year ago quarter, a result of growth, network
optimization and a healthy revenue environment. Regional affiliates’
expense declined by 1 percent, despite a 7 percent increase in capacity and
16 percent increase in fuel expense, primarily as a result of restructured
regional carrier agreements.
  “Our management team and our employees continue to press ahead,
executing our core agenda of continuous improvement, controlling costs,
optimizing revenue and improving the customer experience,” said Glenn
Tilton, UAL’s chairman, president and CEO. “Our results underscore our
progress, and we are building momentum, ensuring that our employees and
leadership are completely aligned to deliver value to our customers and
shareholders.”
  For the three and eight months ended September 30, 2006 the successor
company recorded income tax expense of $60 million, whereas such expense
was not recorded in comparable periods for the predecessor company. Income
tax expense was recorded by applying an effective tax rate of 41% to
pre-tax income for the eight months ended September 30, 2006. At September
30, UAL and subsidiaries had substantial net operating loss carry-forwards
available to reduce tax liabilities of future periods. Therefore, the
company does not expect to pay significant amounts of cash taxes in the
near term.
  Despite moving into a seasonally slower period, the company generated
operating cash flow of $131 million, an increase of $147 million year-over-
year. The company ended the quarter with unrestricted cash and short-term
investments of $4.1 billion, and a restricted cash balance of $860 million,
for a total cash balance of $4.9 billion. Unrestricted cash and short-term
investments decreased by $0.1 billion during the quarter due to debt
repayment and capital spending.
  “By focusing on our core business we have delivered two successive
quarters of margin improvement,” said Jake Brace, executive vice president
and chief financial officer. “We are generating cash, and we are making
progress reducing our costs to lessen inflationary pressures.”
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