<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 13E-3 THEREUNDER)
UAL CORPORATION
(Name of Issuer)
UAL CORPORATION AND UNITED AIR LINES, INC.
(Name of Persons Filing Statement)
COMMON STOCK, PAR VALUE $5 PER SHARE, OF UAL
(Title of Class of Securities)
902549 5 10 4
(CUSIP Numbers of Classes of Securities)
LAWRENCE M. NAGIN, ESQ.
UAL CORPORATION
P.O. BOX 66100
CHICAGO, ILLINOIS 60666
(708) 952-4000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Persons Filing Statement)
Copies to:
PETER ALLAN ATKINS, ESQ.
THOMAS H. KENNEDY, ESQ.
ERIC L. COCHRAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
This statement is filed in connection with (check the appropriate box):
a. x The filing of solicitation materials or an information statement subject
--- to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. x The filing of a registration statement under the Securities Act of 1933.
---
c. A tender offer.
---
d. None of the above.
---
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. x
---
CALCULATION OF FILING FEE
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Transaction Valuation: $3,677,241,268* Amount of Filing Fee: $735,448.25
- --------------------------------------------------------------------------------
* For purposes of calculating fee only. This amount assumes that the number
of shares of Common Stock, par value $5 per share, of UAL (the "Old
Shares") to be reclassified pursuant to the Plan of Recapitalization (as
defined herein) is 28,926,185. The filing fee is based on the average of
the high and low prices for Old Shares on April 16, 1994 ($127.125).
x Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
--- and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
UAL Corporation and United
Amount previously paid: $700,462.52 Filing parties: Airlines, Inc.
----------- --------------------------
Form or registration no.: Pending Date filed: April 12, 1994
--------- ------------------------------
Amount previously paid: $310,208.41 Filing party: United Airlines, Inc.
----------- ----------------------------
Form or registration no.: 33-57192 Date filed: January 21, 1993
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<PAGE>
INTRODUCTION
This Schedule 13E-3 relates to a recapitalization (the "Recapitalization") of
UAL Corporation, a Delaware corporation (the "Company" or "UAL") pursuant to
the Agreement and Plan of Recapitalization dated as of March 25, 1994 (the
"Plan of Recapitalization") among UAL, the Air Line Pilots Association,
International ("ALPA") and the International Association of Machinists and
Aerospace Workers (the "IAM"). Under the Plan of Recapitalization, each share
of Common Stock, par value $5 per share, of the Company (the "Old Shares") that
is outstanding at the Effective Time (as defined in the Plan of
Recapitalization) will be converted into, and become a right to receive (a)
$25.80 in cash, (b) $15.55 principal amount of Series A Debentures due 2004 of
United Air Lines, Inc., a Delaware corporation and a wholly-owned subsidiary of
UAL ("United") (the "Series A Debentures"), (c) $15.55 principal amount of
Series B Debentures due 2014 of United (the "Series B Debentures" and, together
with the Series A Debentures, the "Debentures"), (d) $31.10 liquidation value
of Series B Preferred Stock, without par value, of the Company (the "Public
Preferred Stock") and (e) one half (0.5) of a share of new Common Stock, par
value $0.01 per share, of the Company (the "New Shares") (collectively, the
"Recapitalization Consideration"). In addition, the Plan of Recapitalization
provides for (1) certain amendments to the Company's Certificate of
Incorporation and Bylaws that will, among other things, effectuate the
Recapitalization and put into place the revised corporate governance structure
contemplated by the Plan of Recapitalization and (2) the issuance of new
classes of preferred stock that will (a) transfer approximately 53% (which,
under certain circumstances may be increased, up to a maximum of approximately
63%) of the common equity and voting power of the Company to employee stock
ownership plans to be established for the benefit of certain groups of
employees and (b) effectuate the corporate governance structure referred to
above by permitting different constituent groups to elect members of the
Company's Board of Directors.
The Plan of Recapitalization further provides for certain amendments to the
existing ALPA collective bargaining agreement and IAM collective bargaining
agreements and the creation of a salaried and management employees cost
reduction program, all of which will become effective at the Effective Time and
are estimated to provide United with $8.2 billion in improved operating
earnings over a twelve year period with a net present value of approximately
$4.9 billion. Furthermore, certain employee benefit plans maintained by the
Company and United will be amended to permit employees to acquire substantial
amounts of the New Shares, Public Preferred Stock and the Debentures.
The Plan of Recapitalization is incorporated by reference as Exhibit 2.1 to
the Registration Statement on Form S-4 filed by UAL and United with the
Securities and Exchange Commission (the "Commission") on the date hereof from
Exhibit 10.1 to UAL's Form 8-K dated March 28, 1994.
This Schedule 13E-3 is being filed jointly by UAL and United. By filing this
Schedule 13E-3, neither UAL nor United concedes that Rule 13e-3 under the
Securities Exchange Act of 1934 (the "Act of 1934") is applicable to the
Recapitalization or any other transactions contemplated by the Plan of
Recapitalization.
The information set forth in the Registration Statement, including the Plan
of Recapitalization and other exhibits, is incorporated in its entirety herein
by reference. The following is a summary cross-reference sheet pursuant to
General Instruction F of Schedule 13E-3, showing the location in the Proxy
Statement/Joint Prospectus that is a part of the Registration Statement and the
Plan of Recapitalization of information required by Schedule 13E-3. To the
extent the requirements of Schedule 13E-3 are met by the Plan of
Recapitalization, no attempt is made in the following cross-reference sheet to
distinguish more limited requirements of the corresponding Form S-4 items which
are also referenced.
1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE CAPTION OR LOCATION IN THE PROXY
13E-3 ITEM STATEMENT/JOINT PROSPECTUS
---------- --------------------------------
<C> <C> <S> <C>
Item 1: Issuer and Class of Security Subject to the Transaction.
(a) Cover Page; SUMMARY OF PROXY
STATEMENT/JOINT PROSPECTUS--The
Company and United
(b) Cover Page; SUMMARY OF PROXY
STATEMENT/JOINT PROSPECTUS--Purpose
of the Meeting; INTRODUCTION--Voting
Rights and Proxy Information
(c) SUMMARY OF PROXY STATEMENT/JOINT
PROSPECTUS--Market Prices of the Old
Shares; Dividends; MARKET PRICES OF
THE SHARES; DIVIDENDS
(d) SUMMARY OF PROXY STATEMENT/JOINT
PROSPECTUS--Market Prices of the Old
Shares; Dividends; MARKET PRICES OF
THE SHARES; DIVIDENDS
(e) Not applicable.
(f) Not applicable.
Item 2: Identity and Background. SUMMARY OF PROXY STATEMENT/JOINT
PROSPECTUS--The Company and United
The persons filing this schedule are
the issuer (UAL) and its wholly-
owned subsidiary (United).
(a)-(d) Not applicable.
(e)-(f) None.
(g) Not applicable.
Item 3: Past Contacts, Transactions or Negotiations.
(a) Not applicable.
(b) Not applicable.
Item 4: Terms of the
Transaction.
(a) SUMMARY OF PROXY STATEMENT/JOINT
PROSPECTUS--The Plan of
Recapitalization; THE PLAN OF
RECAPITALIZATION; ELECTION OF
DIRECTORS; DESCRIPTION OF SECURITIES
(b) Not applicable.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE CAPTION OR LOCATION IN THE PROXY
13E-3 ITEM STATEMENT/JOINT PROSPECTUS
---------- --------------------------------
<C> <C> <S>
Item 5: Plans or Proposals of the Issuer or Affiliate
(a) Not applicable.
(b) Not applicable.
(c) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization; SPECIAL
FACTORS--Management Arrangements; THE PLAN
OF RECAPITALIZATION--Revised Governance
Structure; --Terms and Conditions
(d) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization; THE PLAN OF
RECAPITALIZATION--Terms and Conditions;
UNAUDITED PRO FORMA FINANCIAL INFORMATION;
CAPITALIZATION
(e) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization; SPECIAL
FACTORS--Implementation of the "Airline-
Within-an-Airline" (U2)
(f) Not applicable.
(g) Not applicable.
Item 6: Source and Amounts of Funds or Other Consideration.
(a) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization; THE PLAN OF
RECAPITALIZATION--Terms and Conditions
(b) FEES AND EXPENSES
(c) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization; DESCRIPTION OF
THE SECURITIES--The Debentures;--The ESOP
Preferred Stock
(d) Not applicable.
Item 7: Purpose(s), Alternatives, Reasons and Effects.
(a) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
Background of the Recapitalization;
BACKGROUND OF THE PLAN OF RECAPITALIZATION;
SPECIAL FACTORS--Purpose and Structure of
the Recapitalization
(b) BACKGROUND OF THE PLAN OF RECAPITALIZATION
(c) SPECIAL FACTORS--Purpose and Structure of the
Recapitalization
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE CAPTION OR LOCATION IN THE PROXY
13E-3 ITEM STATEMENT/JOINT PROSPECTUS
---------- --------------------------------
<C> <C> <S>
(d) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization; BACKGROUND OF
THE PLAN OF RECAPITALIZATION; SPECIAL
FACTORS--Certain Company Analyses; --Certain
Revenue and Earnings Scenarios; --Effect of
the Recapitalization on Income Statement,
Book Equity and Cash Flow;--Implementation of
the "Airline-Within-an-Airline" (U2); --Unit
Costs; CERTAIN FEDERAL INCOME TAX
CONSEQUENCES
Item 8: Fairness of the Transaction.
(a) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization--Recommendation
of the Board; BACKGROUND OF THE PLAN OF
RECAPITALIZATION; SPECIAL FACTORS--
Recommendation of the Board
(b) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization--Recommendation
of the Board; SPECIAL FACTORS--Recommendation
of the Board
(c) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
Vote Required; INTRODUCTION--Voting Rights
and Proxy Information
(d) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization--Opinions of
Financial Advisors to the Board; SPECIAL
FACTORS--Opinions of the Financial Advisors
to the Board
(e) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization--Recommendation
of the Board; SPECIAL FACTORS--Recommendation
of the Board
(f) Not applicable
Item 9: Reports, Opinions, Appraisals and Certain Negotiations.
(a) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization--Opinions of the
Financial Advisors to the Board; BACKGROUND
OF THE PLAN OF RECAPITALIZATION; SPECIAL
FACTORS--Opinions of the Financial Advisors
to the Board; EXPERTS
(b) SUMMARY OF PROXY STATEMENT/JOINT PROSPECTUS--
The Plan of Recapitalization--Opinions of the
Financial Advisors to the Board; BACKGROUND
OF THE PLAN OF RECAPITALIZATION; SPECIAL
FACTORS--Opinions of the Financial Advisors
to the Board; EXPERTS
(c) INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; Opinions of CS First Boston
Corporation and Lazard Freres & Co. are
attached to the Proxy Statement/Joint
Prospectus as Annexes I and II, respectively
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE CAPTION OR LOCATION IN THE PROXY
13E-3 ITEM STATEMENT/JOINT PROSPECTUS
---------- --------------------------------
<C> <C> <S>
Item 10: Interest in Securities of the Issuer.
(a) SUMMARY OF PROXY STATEMENT/JOINT
PROSPECTUS--Vote Required
(b) Not applicable.
Item 11: Contracts, Arrangements or Understandings with Respect to
the Issuer's Securities.
SUMMARY OF PROXY STATEMENT/JOINT
PROSPECTUS--The Plan of
Recapitalization; THE PLAN OF
RECAPITALIZATION--Terms and
Conditions;--Establishment of
ESOPs;--Revised Governance
Structure; DESCRIPTION OF
SECURITIES
Item 12: Present Intention and Recommendation of Certain Persons with
Regard to the Transaction.
(a) None.
(b) Not applicable.
Item 13: Other Provisions of the Transaction.
(a) SUMMARY OF PROXY STATEMENT/JOINT
PROSPECTUS--The Plan of
Recapitalization--No Appraisal
Rights; INTRODUCTION
(b) Not applicable.
(c) SUMMARY OF PROXY STATEMENT/JOINT
PROSPECTUS--The Plan of
Recapitalization--Conditions to
the Recapitalization; THE PLAN OF
RECAPITALIZATION--Terms and
Conditions--Conditions
Item 14: Financial Information.
(a) INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE; SUMMARY OF PROXY
STATEMENT/JOINT PROSPECTUS--
Selected Consolidated Historical
and Pro Forma Operating
Information; SELECTED
CONSOLIDATED FINANCIAL AND
OPERATING INFORMATION
(b) SUMMARY OF PROXY STATEMENT/JOINT
PROSPECTUS--Selected Consolidated
Historical and Pro Forma
Operating Information; UNAUDITED
PRO FORMA FINANCIAL INFORMATION
Item 15: Persons or Assets Employed, Retained or Utilized.
(a) COVER PAGE; SUMMARY OF PROXY
STATEMENT/JOINT PROSPECTUS--The
Plan of Recapitalization--
Opinions of the Financial
Advisors to the Board; SPECIAL
FACTORS--Opinions of the
Financial Advisors to the Board;
THE PLAN OF RECAPITALIZATION--
Terms and Conditions; FEE AND
EXPENSES
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE CAPTION OR LOCATION IN THE PROXY
13E-3 ITEM STATEMENT/JOINT PROSPECTUS
---------- --------------------------------
<C> <C> <S>
(b) SUMMARY OF PROXY STATEMENT/JOINT
PROSPECTUS--The Plan of
Recapitalization; SPECIAL FACTORS--
Opinions of the Financial Advisors to
the Board; --Opinion of Valuation
Firm; INDEPENDENT PUBLIC ACCOUNTANTS;
EXPERTS; LEGAL OPINION; PROXY
SOLICITATION
Item 16: Additional Information None.
Item 17: Material to be Filed as Exhibits
(a)(1) Indenture dated as of July 1, 1991
between United and The Bank of New
York providing for the issuance of
Senior Debt Securities in series
(filed as Exhibit 4(a) of United's
Registration Statement on Form S-3
(No. 33-57192) and incorporated
herein by reference).
(a)(2) Form of Officer's Certificate relating
to United's Series A Debentures due
2004 and United's Series B Debentures
due 2014 (filed as Schedule 1.3 to
Exhibit 10.1 of UAL's Form
8-K dated March 28, 1994 and
incorporated herein by reference).
(b)(1) Presentation to the UAL Corporation
Board of Directors by CS First Boston
Corporation and Lazard Freres & Co.
dated December 16, 1993.
(b)(2) Presentation to the UAL Corporation
Board of Directors by CS First Boston
Corporation and Lazard Freres & Co.
dated December 22, 1993.
(b)(3) Presentation to the UAL Corporation
Board of Directors by CS First Boston
Corporation and Lazard Freres & Co.
dated March 14, 1994.
(c)(1) Same as item filed as Exhibit (a)(1).
(c)(2) Same as Item filed as Exhibit (a)(2).
(c)(3) Proposed Restated Certificate of
Incorporation of UAL Corporation
(filed as Schedule 1.1 to Exhibit
10.1 of UAL's Form 8-K dated March
28, 1994 and incorporated herein by
reference).
(d)(1) Chairman's Letter to Stockholders,
Notice of Meeting of Stockholders and
the Proxy Statement/Joint Prospectus
filed as a part of UAL's and United's
Registration Statement on Form S-4 on
the date hereof and incorporated
herein by reference.
(e) Not applicable.
(f) Not applicable.
</TABLE>
6
<PAGE>
SIGNATURE
After due inquiry, and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
UAL Corporation
/s/ John C. Pope
By: _________________________________
John C. Pope
Director, President and
Chief Operating Officer
Date: April 12, 1994
7
<PAGE>
SIGNATURE
After due inquiry, and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
United Air Lines, Inc.
/s/ John C. Pope
By: _________________________________
John C. Pope
Director, Chairman and
Chief Executive Officer
Date: April 12, 1994
8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S> <C>
99.(a)(1) Indenture dated as of July 1, 1991 between United and The Bank
of New York providing for the issuance of Senior Debt
Securities in series (filed as Exhibit 4(a) of United's
Registration Statement on Form S-3 (No. 33-57192) and
incorporated herein by reference).............................
99.(a)(2) Form of Officer's Certificate relating to United's Series A
Debentures due 2004 and United Series B Debentures due 2014
(filed as Schedule 1.3 to Exhibit 10.1 of UAL's Form 8-K dated
March 28, 1994 and incorporated herein by reference)..........
99.(b)(1) Presentation to the UAL Corporation Board of Directors by CS
First Boston Corporation and Lazard Freres & Co. dated
December 16, 1993.............................................
99.(b)(2) Presentation to the UAL Corporation Board of Directors by CS
First Boston Corporation and Lazard Freres & Co. dated
December 22, 1993.............................................
99.(b)(3) Presentation to the UAL Corporation Board of Directors by CS
First Boston Corporation and Lazard Freres & Co. dated March
14, 1994......................................................
99.(c)(1) Same as Item filed as Exhibit (a)(1)..........................
99.(c)(2) Same as Item filed as Exhibit (a)(2)..........................
99.(c)(3) Proposed Restated Certificate of Incorporation of UAL
Corporation (filed as Schedule 1.1 to Exhibit 10.1 of UAL's
Form 8-K dated March 28, 1994 and incorporated herein by
reference)....................................................
99.(d)(1) Chairman's Letter to Stockholders, Notice of Meeting of
Stockholders and the Proxy Statement/Joint Prospectus filed as
a part of UAL's and United's Registration Statement on Form S-
4 on the date hereof and incorporated herein by reference.....
99.(e) Not applicable................................................
99.(f) Not applicable................................................
</TABLE>
<PAGE>
UAL CORPORATION
PRESENTATION TO THE BOARD OF DIRECTORS
December 16, 1993
CS First Boston Lazard Freres & Co.
<PAGE>
AGENDA
-----------------------------------
[ ] Overview
[ ] Structure and Valuation Issues
[ ] Timetable
<PAGE>
TRANSACTION OVERVIEW
---------------------------------------------------
[ ] Union Coalition ("Coalition") acquires a minimum of a 53% equity
interest in UAL Corporation ("UAL"), in exchange for wage
concessions and work rule changes
- Coalition equity interest may be increased up to 63% if the
average daily stock price for one year, post closing, exceeds
$85.00
[ ] The wage concessions are from three employee groups:
- ALPA
- IAM
- Non-Contract Employees
[ ] The employee investment of $4.548 billion on a net present value
basis (at 10%) is being made in two forms:
- Basic 6-year concession package
- Additional 12-year concession and work rule package designed to
provide longer-term competitive short-haul economics ("U2").
<PAGE>
CONSIDERATION RECEIVED
BY UAL'S SHAREHOLDERS
-------------------------------------------------------
Employee Investment (NPV @ 10%): $4.548 billion
<TABLE>
<CAPTION>
Total Value Value
($ MM) Per Share (1)
------------ -------------
<S> <C> <C>
Special Distribution:
Cash $ 743 $25.72
Debentures 900 31.14
Preferred Stock 900 31.14
------ ------
Special Distribution Total $2,543 $88.00
Common Equity Value
(47% ownership) TBD TBD
----------- ------------
Total Consideration TBD TBD
-----------------------------------------------------------------------
</TABLE>
TBD - To be determined.
(1) Assumes 28.9 million shares outstanding.
<PAGE>
"GIVES / GETS" APPROACH TO VALUATION
($MM except per share data)
--------------------------------------------------------
Example for Illustrative Purposes Only
--------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Total Employee Investment (Present Value at 10%) $ 4,548
Pre-Restructuring Value Per Share
Estimated Normalized Share Price $133
Less Present Value of
Forgone Enhancements 33
----
$100
Shares Outstanding (MM) 28.9
----
Total Pre-Restructuring Value 2,890
Incremental Value-Kitchens
Cash to be Received $119
Present Value of Cost Savings 210
----
Total Incremental Value-Kitchens 330
-------
Total Value $ 7,768
Less: Distribution of Cash & Securities
($88 per share) (2,543)
-------
Residual Market Value (Post Transaction) $ 5,225
=======
Per Share $180.80
=======
47% $ 84.97
=======
</TABLE>
<PAGE>
SPECIAL DISTRIBUTION TERMS
--------------------------------------------------------------------------
Senior Unsecured Debentures
Amount: Tranche A - $450 MM
Tranche B - 450
--------------------
Total $900 MM
Maturity: Tranche A - 10 years
Tranche B - 20 years
Coupon: Tranche A - 10-Year Treasury + ___ - ___ bps
Tranche B - 30-Year Treasury + ___ - ___ bps
Optional Redemption: Non callable for ___ years. Callable at a
premium thereafter, declining to par at the end
of year 10.
Mandatory Redemption: None
<PAGE>
SPECIAL DISTRIBUTION TERMS
--------------------------------------------------------------------
Redeemable Preferred Stock
Amount: $900 MM
Liquidation Value: $900 MM
Maturity: Perpetual
Dividends: _________% of Liquidation Value
Optional Redemption: Non-callable for ________ years. Thereafter
callable at any time at par
Vote: Non-voting unless UAL defaults on six quarterly
dividends, then can elect two additional public
directors
Ranking: Senior to ESOP Preferred
<PAGE>
SPECIAL DISTRIBUTION ISSUES
-----------------------------------------------------------------------
[ ] The cash and securities will be structured as a special distribution
to UAL's shareholders, similar to a recapitalization.
[ ] The debt and preferred stock will be priced to trade at par on a
fully distributed basis.
[ ] Initial coupons for the debt and dividend for the preferred stock
will be determined upon execution of the definitive documentation,
subject to adjustment at the time of the shareholder vote. However,
rates cannot be adjusted more than _________ bp.
[ ] Since the first pricing will not occur until the execution of
definitive documentation, UAL can obtain new ratings prior to
determining rates.
<PAGE>
ADDITIONAL ISSUES FOR BOARD TO CONSIDER
----------------------------------------------------------------------
[ ] Alternatives available to UAL to maximize value
* Restructuring scenarios
* Sale to third party
[ ] Impact of transaction on UAL's access to financing
* Pro forma credit ratios
* Potential ratings downgrade -- cap on securities repricing
* Restrictions on future equity insurance and asset sales
[ ] Time lag between letter agreement and proxy distribution
* "Bring-down" fairness opinion
<PAGE>
CLOSING CONDITIONS
---------------------------------------------------------------
[ ] Negotiation of definitive documentation
[ ] Ratification by ALPA and IAM
[ ] Approval by UAL shareholders
[ ] Listing of pro forma common stock on NYSE
[ ] Termination provisions
<PAGE>
ESOP STRUCTURE
----------------------------------------------------------------
[ ] Coalition acquires UAL's equity through employee trusts/qualified
Employee Stock Ownership Plans ("ESOP")
[ ] ESOP Trust purchases ESOP Preferred Stock with a loan from UAL
[ ] ESOP loan repaid with employer contributions and ESOP Preferred
dividends
[ ] ESOP Preferred Stock allocated to employee accounts equally over
base concession period
[ ] However, employees exercise control over all of their shares
immediately through ESOP Trust
[ ] Allocated shares voted on a confidential pass-through basis and
unallocated shares voted proportionately to allocated shares
[ ] ESOP share allocation:
* ALPA - 46.2%
* IAM - 37.2%
* Non-Contract - 16.6%
<PAGE>
STOCK VALUATION ISSUES - EARNINGS
--------------------------------------------------------------------------
[ ] New accounting regulations governing "Stock Based Compensation"
require:
* Stock compensation expense for periodic stock allocations to be
measured by market value of shares at time of allocation
* Only allocated shares are outstanding for EPS purposes
* Circular relationship between ESOP charge and Company's stock
price, coupled with size of contemplated ESOP, make future
earnings difficult to forecast
* Book earnings will be depressed in early years due to mismatch
between term of concessions (which boost earnings) of 12 years
and shorter period of only 6 years over which ESOP charges occur
* Wall Street equity research community and investors may look
through ESOP charges
<PAGE>
STOCK VALUATION ISSUES - TAX CONSIDERATIONS
-----------------------------------------------------------------------
[ ] Under IRS rules, annual ESOP charges are fixed at the outset and are
based on historical cost
[ ] The tax ESOP charge is based on the original ESOP loan amount
recorded on UAL's balance sheet at the time the ESOP shares were
purchased
<PAGE>
ADDITIONAL VALUATION ISSUES
-------------------------------------------------------------------------
[ ] Majority employee-owned company
* Potential employee conflict between desire for better wages and
increase in stock price
[ ] Restrictions on sale of equity, asset sales and other corporate
decisions
[ ] Corporate governance provisions -- effect on stock
<PAGE>
PROJECTED TIMETABLE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
DATE EVENT
------------------------------------- ------------------------------------------
<S> <C>
December 16 and _____ UAL Board meetings to discuss transaction
If Approved
December _____ ALPA, IAM ratification process
Mid-January 1994 Execution of definitive documentation
Late January 1994 File proxy material with SEC
February to Mid-March 1994 SEC proxy review
Mid-March 1994 Mail proxy material to UAL shareholders
Mid-April 1994 UAL shareholders meeting. If approved, close
shortly thereafter
</TABLE>
<PAGE>
Presentation to the Board of Directors
--------------------------------------------------------------------------
UAL CORPORATION
December 22, 1993
CS First Boston Corporation Lazard Freres & Co.
--------------------------------------------------------------------------
<PAGE>
Agenda
--------------------------------------------------------------------------
[ ] Proposed Transaction
[ ] Valuation of UAL
[ ] Summary
-1-
<PAGE>
Outline of Proposal
--------------------------------------------------------------------------
Amount/Form [ ] ALPA, IAM and salaried/management employees are
"Participating Employees" - AFA provision.
[ ] Minimum 53% equity interest to employees via ESOP
Trusts in exchange for wage concessions and work rule
changes.
[ ] Up to 63% equity interest based on $85/share pivot
point and a 33% market value increase.
[ ] UAL stockholders retain 47%-37% equity interest.
[ ] UAL stockholders receive cash, debentures and preferred
stock in an amount equal to $88 per share.
Voting/Control [ ] 12 directors consisting of five public directors
(elected by public stockholders), four independent
directors (elected by special class of stock held by
independent directors), two union directors and one
salaried/management employee director.
[ ] Asset sale limitations.
[ ] Equity issuance mechanism.
[ ] Sunset provision triggered at less than 20% ESOP equity
interest.
-2-
<PAGE>
Coalition Proposal
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Nominal Terms Valuation
----------------------------- ---------------------------------
Value Value
Total Value Per Total Value Per
($MM) Share/(1)/ ($MM) Share/(1)/
------------ ------------ ------------- -----------------
<S> <C> <C> <C> <C>
Consideration:
Cash $ 743 $25.72 $ 743 $25.72
Debentures 900 $31.14/(2)/ 900 31.14/(4)/
Preferred Stock 900 31.14/(3)/ 900 31.14/(4)/
------ ------ ------ ------
Subtotal $2,543 $88.00 $2,543 $88.00
====== ======
Common Equity Value $2,312-2,370 $80.00-82.00
(47% ownership)
------------ -------------
Total Consideration $4,855-4,913 $168.00-170.00
============ ==============
</TABLE>
----------------------------------------------
/(1)/ Assumes 28.9 million shares outstanding.
/(2)/ Principal amount.
/(3)/ Stated value.
/(4)/ Assumes no limitation by collar.
-3-
<PAGE>
"Gives/Gets" Analysis
--------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
($MM except per share data)
Total Employee Investment (Present Value at 10%) $4,548
Pre-Restructuring Value Per Share
Estimated Normalized Share Price $ 133
Less Present Value of Foregone Enhancements 33
-----
$ 100
Shares Outstanding (MM) 28.9
-----
Total Pre-Restructuring Value 2,890
Incremental Value-Kitchens 330
------
Implied Total Value 7,768
Less: Consideration of Cash & Securities
($88 per share) (2,543)
------
Residual Market Value (Post Transaction) $5,225
======
Implied Value Per Share for Public Shareholders - 47%
(initially) $84.97
======
</TABLE>
-4-
<PAGE>
"Give-Gets" Comparison
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Coalition Proposals
-------------------------
December 22 November 11
----------- -----------
<S> <C> <C>
Major Components
----------------
Employee Investment -
Present Value at 10% $4,548MM $4,259MM
======== ========
Consideration Per Share
Cash $ 25.72 $ 21.60
Debentures 31.14 17.36
Preferred Stock 31.14 26.04
-------- --------
$ 88.00 $ 65.00
Coalition Ownership 53% - 63% 60%
Implied Equity Value
Per Share 85.00 75.00
-------- --------
Implied Total Value
Per Share $ 173.00 $ 140.00
======== ========
</TABLE>
-5-
<PAGE>
Pro Forma Balance Sheet Outlook
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
At December 31, 1993
---------------------------------------
No Transaction Pro
Transaction Adjustments Forma
------------ ------------ -----------
<S> <C> <C> <C>
Cash $ 1,819 $ (743) $ 1,076/(1)/
Total Debt & Capitalized Rents/(2)/ 10,379 900 11,279
Preferred Stock/(3)/ 591 900 900
Common Equity 620 (1,209) (589)
Total Debt/Book Capitalization 89.6% 97.3%
</TABLE>
-------------------------
/(1)/ Excludes proceeds from sale of Kitchens.
/(2)/ Rents of $860.2MM capitalized at 7.5x.
/(3)/ Includes convertible preferred. Assumes conversion of preferred and
contribution into Common Equity for transaction.
-6-
<PAGE>
Accounting Issues - Earnings
--------------------------------------------------------------------------
[ ] New accounting regulations governing "Stock Based Compensation"
require:
- Stock compensation expense for periodic stock allocations to be
measured by market value of shares at time of allocation.
- Only allocated shares are outstanding for EPS purposes.
[ ] Circular relationship between ESOP charge and Company's stock price,
coupled with size of contemplated ESOP, make future earnings
difficult to forecast.
[ ] Book earnings will be depressed in early years due to mismatch between
term of concessions and work rule changes (which boost earnings) of 12
years and shorter period of only 6 years over which ESOP charges
occur.
[ ] Wall Street equity research community and investors may look through
ESOP charges but assume all new stock to be issued is immediately
outstanding.
-7-
<PAGE>
Earnings Outlook
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994E 1995E
-------------------------- ----------------------------
Enhanced Coalition Enhanced Coalition
1993E Status Quo Proposal Status Quo Proposal
----------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 14,254 $14,797 $14,797 $15,800 $15,800
EBITDA/(1)/ 910 1,215 1,560 /(2)/ 1,473 1,982
Margin 6.4% 8.2% 10.5% 9.3% 12.5%
EBIT/(1)/ 189 491 836 /(2)/ 679 1,189
Margin 1.3% 3.3% 5.7% 4.3% 7.5%
Net Income to Common
As Reported (102.9)/(3)/ 284.3 (50.2) 329.4 129.4
One-time ESOP Change 284.3 283.2 329.4 467.3
Earnings per Share
As Reported (4.23) 9.84/(4)/ (1.59)/(5)/ 11.40/(4)/ 3.49/(6)/
One-time ESOP Change 9.84/(4)/ 4.61 /(7)/ 11.40/(4)/ 7.60/(7)/
</TABLE>
---------------------------
/(1)/ Before the ESOP charge.
/(2)/ Excludes $75m of transaction expenses.
/(3)/ Excludes $19 penalty payment for early retirement of debt.
/(4)/ For 28.9 million shares outstanding.
/(5)/ For 31.6 average million shares outstanding.
/(6)/ For 37.1 average million shares outstanding.
/(7)/ For 61.5 million shares outstanding.
-8-
<PAGE>
Debt and Preferred - Terms
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Senior Unsecured Debentures Redeemable Preferred Stock
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Amount: Tranche A - $450MM $900 MM
Tranche B - 450MM ($900 MM liquidation preference)
------
Total $900MM
Maturity: Tranche A - 10 years Perpetual
Tranche B - 20 years
Optional Redemption: To be determined To be determined
Vote: Not applicable Nonvoting unless UAL default
Ranking: Pari passu with outstanding Senior to ESOP Preferred
senior-unsecured debt
</TABLE>
-----------------------------------------------------------------------------
Coupon/Dividend Rate: To be priced to trade at par on a fully
distributed basis. Initially set at execution
of definitive documents, subject to adjustment
five days before closing with up to 75 basis
points increase.
-----------------------------------------------------------------------------
-9-
<PAGE>
Debt and Preferred Valuation Issues
--------------------------------------------------------------------------
Both Securities
[ ] Realization of fully distributed values may take significant time.
[ ] Interest/dividend rate collar is tight and may raise "bring-down"
fairness opinion issues.
. Theoretical analysis suggests valuation impact at approximately
$0.50 per share.
Debt
[ ] Similar publicly traded debt for comparative purposes.
[ ] Decline in credit rating one notch to non-investment grade could put
significant upward pressure on the interest rate required to make debt
trade at par.
[ ] No underwriting to facilitate orderly redistribution.
Perpetual Preferred
[ ] No similar airline security.
[ ] Large issue - limited precedent.
[ ] No underwriting to facilitate orderly redistribution to the largely
retail market for this security.
-10-
<PAGE>
Summary Financial Impact
--------------------------------------------------------------------------
[ ] A summary of UAL's and selected competitor's current senior debt
credit ratings is presented below:
<TABLE>
<CAPTION>
UAL American Delta Southwest
---- -------- ----- ---------
<S> <C> <C> <C> <C>
Standard & Poor's BB BB+ BB A-
Moody's Baa3 Baa3 Ba1 Baa1
</TABLE>
[ ] UAL has been put on Creditwatch by Standard & Poor's with developing
implications.
. S&P has announced publicly that if there is a change in rating,
it will be minor.
[ ] Moody's has said it has placed UAL debt under review for possible
downgrade.
[ ] Duff & Phelps has put UAL on rating watch, direction uncertain.
-11-
<PAGE>
Cash Flow Impact and Creditworthiness
--------------------------------------------------------------------------
[ ] Contracted concessions and anticipated additional savings will
substantially exceed the incremental fixed charges as summarized
below:
<TABLE>
<CAPTION>
Projected
---------
Concessions/(1)/ 1994 1995
---- ----
<S> <C> <C>
"U2" & Additional Savings $446 $520
Employee Investment 26 141
---- ----
$472 $661
==== ====
New Debt - Interest Expense $ 72 $ 72
New Preferred - Dividends 83 83
Less Cash to Reduce Debt/Interest Expense/(2)/ 65 50
---- ----
Incremental Fixed Charges $220 $205
==== ====
Employee Investment/Incremental Fixed Charges 2.1x 3.2x
</TABLE>
-------------------
/(1)/ Before $75MM estimated transaction expenses from Coalition deal.
/(2)/ The numbers indicated are the additional interest expense as a
result of distributing $743 million in cash and, therefore, not
having the ability to reduce debt with this cash. However, these
numbers are somewhat offset by the incremental cash generated from
the concessions that is used to repay debt.
-12-
<PAGE>
Coverage Ratios
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Projected
--------------------------------------------------
1994 1995
------------------------ ------------------------
Estimated No No
1993 Transaction Pro Forma Transaction Pro Forma
---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Indicative Coverage Ratio
-------------------------
EBDRIT/Fixed Charges/(a)/ 1.5x 1.8x 1.8x 2.0x 2.1x
Selected Standard & Poor's Ratios
---------------------------------
EBITDA Interest Coverage/(b)/ 2.9x 5.3x 4.2x 7.1x 5.8x
Funds Flow to Total Debt/(c)/ 9.2% 12.8% 11.9% 14.2% 15.4%
</TABLE>
----------------------
/(a)/ Fixed charges include gross interest expense (interest expense
before subtracting capitalized interest and interest income),
rents and preferred dividends.
/(b)/ Interest expense does not include rent expense.
/(c)/ Interest expense is defined as gross interest expense plus rents.
-13-
<PAGE>
Stock Ownership Adjustment Mechanism - Structure
---------------------------------------------------------------------------
[ ] Designed to bridge the 33% "market value gap" between the two sides.
[ ] Coalition increases ownership from 53% if UAL's average closing stock
price for one year exceeds $85 per share value. Before dilution, to
reach 63%, price is $113.33; post dilution price equals $89.22.
[ ] Until the Coalition reaches its maximum 63% ownership, any market
value appreciation in the first year will be shared in the following
ratio:
- Coalition: 93%
- Existing Shareholders: 7%
[ ] Market value appreciation split effected by issuing the Coalition new
shares and consequently diluting existing UAL shareholders.
-14-
<PAGE>
Key Issue: Pro Forma Equity Trading Valuation
---------------------------------------------------------------------------
[ ] As a substantial portion of the total value to shareholders will be in
common stock, the prospective trading value of the stock is critical.
Preliminary View of Equity Market Perceptions
<TABLE>
<CAPTION>
Positives Issues
<S> <C>
[ ] Excitement about prospects of more [ ] Minority interest in employee-owned
stable company. company arising from governance
structure.
[ ] Enhanced labor relations.
[ ] Adequacy for meeting near- and long-term
[ ] Closer alignment of industry challenges.
shareholder/employee interests.
[ ] Sustainability of no snap-back.
[ ] Reduction in costs and more
flexible work rules to boost [ ] Treatment of ESOP charges and share
competitiveness. allocation by analysts.
[ ] Favorable impact on cash flow.
</TABLE>
-15-
<PAGE>
Equity Valuation
---------------------------------------------------------------------------
Range $80 - 85
<TABLE>
<CAPTION>
Implied Implied
Earnings Per Share 1994 Multiple Range 1995 Multiple Range
------------------------------ ------- -------------- ------ --------------
<S> <C> <C> <C> <C>
As Reported ($1.59) $3.49
$80 - 85 NM - NM 22.9 - 24.4x
Immediate Allocation-Taxed $4.61 $7.60
$80 - 85 17.4 - 18.4x 10.5 - 11.2x
Immediate Allocation-Untaxed $7.86 $14.02
$80 - 85 10.2 - 10.8x 5.7 - 6.1x
Reference Multiples/1/
AMR 13.2x 7.1x
DAL 57.5x 11.8x
UAL 17.6x 8.2x
</TABLE>
------------
/1/ First Call median estimates as of 12/19/93.
-16-
<PAGE>
Tax Consequences to Shareholders
---------------------------------------------------------------------------
[ ] Capital gain (not dividend) treatment on distribution of cash and
debentures.
[ ] Tax deferral on retained common equity interest and distribution of
preferred. Taxable as capital gain when recognized.
[ ] Amount recognized immediately is equal to lesser of (1) total "value"
of consideration package to shareholders (likely based on average of
day one high and low trading values) less shareholder basis or (2) sum
of "values" of distribution cash and debentures portion.
-17-
<PAGE>
Major Steps to Completion
---------------------------------------------------------------------------
[ ] Ratification by ALPA and IAM.
[ ] Identification of new management team and Board.
[ ] Negotiation of definitive documentation.
[ ] "Bring-down" fairness opinions and proxy mailing.
[ ] Approval by UAL shareholders.
-18-
<PAGE>
Agenda
---------------------------------------------------------------------------
[ ] Proposed Transaction
[ ] Valuation of UAL
[ ] Summary
-19-
<PAGE>
UAL: Valuation Range Per Share
---------------------------------------------------------------------------
($Millions)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Methodology CS First Boston Lazard Freres
---------------------------------------------------------------------------
<S> <C> <C> <C>
Discounted Cash Flow $160 - $200 $170 - $210
Unaffected Trading Value 130 - 135 130 - 135
Acquisition Value 120 - 200 N/A
Public Market Comparables NA 140 - 180
Reference Range 160 - 200 150 - 190
Transaction Value $168 - $170
---------------------------------------------------------------------------
</TABLE>
-20-
<PAGE>
Airline Share Prices Graph
---------------------------------------------------------------------------
(Textual description of share price graph for EDGAR transmission. The
following share price graph compares the indexed closing share prices of
the Company's common stock to AMR Corp. and Delta Air Lines Inc. The graph
assumes that the value of the Company's, AMR's and Delta's common stock was
$1.00 at April 30, 1993.)
Airline Share Prices - April 30 to Present
Indexed
Closing
Prices
<TABLE>
<S> <C>
1.15 ___________________________________________________________________________
1.10 ___________________________________________________________________________
1.05 ___________________________________________________________________________
1.00 ___________________________________________________________________________
0.95 ___________________________________________________________________________
0.90 ___________________________________________________________________________
0.85 ___________________________________________________________________________
0.75 ___________________________________________________________________________
30 7 14 21 28 4 11 18 25 2 9 16 23 30 6 13 20 27
May June July Aug.
1993
3 10 17 24 1 8 15 22 29 5 12 19 26 3 10 17
Sep Oct Nov Dec
</TABLE>
--- UAL Corp.
--- AMR Corp.
--- Delta Air Lines Inc.
Source: Tradeline
-21-
<PAGE>
UAL Corp Share Prices Graph
---------------------------------------------------------------------------
(Textual description of UAL share price graph for EDGAR transmission: The
following UAL share price graph tracks the price of UAL common stock from
April 30, 1993 to December 17, 1993.)
UAL Corp Share Prices - April 30 to Present
Prices
<TABLE>
<S> <C>
160.0 __________________________________________________________________________
150.0 __________________________________________________________________________
140.0 __________________________________________________________________________
130.0 __________________________________________________________________________
120.0 __________________________________________________________________________
110.0 __________________________________________________________________________
30 7 14 21 28 4 11 18 25 2 9 16 23 30 6 13 20
May June July Aug.
1993
27 3 10 17 24 1 8 15 22 29 5 12 19 26 3 10 17
Sep Oct Nov Dec
</TABLE>
Source: Tradeline
-22-
<PAGE>
Private Market Value Comments
---------------------------------------------------------------------------
[ ] Strategic acquiror possibilities are limited:
- Acquisition by major U.S. airline likely problematic from anti-trust
perspective.
- Foreign ownership restrictions limit equity stake to 49% and
circumscribe governance ability.
[ ] Financial buyers are unlikely given existing leverage, industry
uncertainty, cyclicality and deal size.
[ ] No buyers have come forward.
[ ] Agreement does not prohibit entertaining offers for Company.
-23-
<PAGE>
Agenda
---------------------------------------------------------------------------
[ ] Proposed Transaction
[ ] Valuation of UAL
[ ] Summary
-24-
<PAGE>
Resolution of Open Issues
from December 16th Board Meeting
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issue Resolution
------------------------------------------------------------------------------------------------
<S> <C>
Meeting with new management . Advisors met with Greenwald on December 21.
- business plan thoughts
- ability to govern within constraints
------------------------------------------------------------------------------------------------
Equity issuance Can sell nonvoting equity anytime, or voting
- normal course equity to extent it doesn't trigger sunset
- emergency provision provision, with 75% Board approval, including
all independent directors; No labor director
required. Financial distress precondition for
voting equity.
------------------------------------------------------------------------------------------------
Nomination of "Public Directors" . Slate to be incorporated into definitive
- involvement of unions documentation.
------------------------------------------------------------------------------------------------
Expense reimbursement . Open
- amount and timing
------------------------------------------------------------------------------------------------
Milestones/Timetable . Union ratification timing - January 31
- union ratification timing . Documentation - March 15
- documentation . Mail Proxy - Mid-May
- process to reach proxy vote . Shareholder vote - Mid-June
- vote . Closing - Mid-June
</TABLE>
-25-
<PAGE>
Summary
---------------------------------------------------------------------------
[ ] Financial
[ ] Governance
[ ] Fairness
-26-
<PAGE>
Presentation to the Board of Directors
---------------------------------------------------------------------------
UAL Corporation
March 14, 1994
CS First Boston Lazard Freres & Co.
-----------------------------------------------------------------
<PAGE>
Progress to Date
---------------------------------------------------------------------------
[ ] Union Ratification
[ ] Directors and Officers
[ ] Documentation
- Recapitalization Agreement
- Proxy Statement
[ ] U2 Business Plan
[ ] Opinions
[ ] Rating Agencies
[ ] Shareholder Communications
-1-
<PAGE>
Significant Documentation Issues
---------------------------------------------------------------------------
[ ] Accordion Mechanism
[ ] Treatment of Convertible Preferred
[ ] Share Count/Treasury Stock Method
[ ] Pricing and Terms of the Debentures and Preferred Stock
[ ] Process Issues
-2-
<PAGE>
UAL Stock Price Performance
---------------------------------------------------------------------------
(Textual description of stock price graph for EDGAR transmission: The
following UAL stock price performance graph tracks the price of UAL's
common stock from December 21, 1993 to March 8, 1994.)
UAL Stock Price Performance
<TABLE>
<CAPTION>
Prices
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
150.0 ______________________________________________________
145.0 ______________________________________________________
140.0 ______________________________________________________
135.0 ______________________________________________________
130.0 ______________________________________________________
125.0 ______________________________________________________
21 28 4 11 18 25 1 8 15 22 1 8
December January February March
1993 1994
</TABLE>
-3-
<PAGE>
Airlines' Stock Price Performance
---------------------------------------------------------------------------
(Textual description of stock price performance graph for EDGAR
transmission: The following stock price graph compares the indexed
closing prices of the Company's common stock to the S&P Industrial Index
and the indexed closing prices of AMR common stock and DAL common stock.
The graph assumes that the value of the Company's, DAL's and AMR's common
stock and the index was 1.00 at December 21, 1993. The graph also
indicates the timing of (1) Cat-Lite Phase II, (2) Fed Raises Discount
Rate; and (3) USAir Fare Reduction Plan)
Airlines' Stock Price Performance
<TABLE>
<CAPTION>
Indexed
Closing
Prices
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.10 ______________________________________________________
1.05 ______________________________________________________
1.00 ______________________________________________________
0.95 ______________________________________________________
0.90 ______________________________________________________
0.85 ______________________________________________________
21 28 4 11 18 25 1 8 15 22 1 8
December January February March
1993 1994
</TABLE>
--- S&P Industrials
--- AMR
--- UAL
--- DAL
-4-
<PAGE>
Update on Projections(1)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Millions)
- --------------------------------------------------------------------------------
DECEMBER 22 MARCH 14 PERCENT CHANGE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
1998 $18,750 $18,766 0.1%
1997 17,828 17,838 0.1
1996 16,950 16,978 1.7
1995 15,800 15,794 0.0
1994 14,797 14,727 (0.5)
EBIT
1998 $ 895 $ 921 2.9%
1997 950 952 0.2
1996 855 860 0.6
1995 680 657 (3.4)
1994 491 394 (19.8)
Unlevered Free Cash Flow
1998 $ 682 $ 810 18.8%
1997 197 120 (39.1)
1996 657 591 (10.0)
1995 115 (21) NM
1994 479 419 (12.5)
- --------------------------------------------------------------------------------
</TABLE>
(1) Enhanced Status Quo - Scenario C - Midgrowth case.
-5-
<PAGE>
Wall Street's View of UAL Outlook
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 22 MARCH 14 PERCENT CHANGE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Enhanced Status Quo
1995 EPS $11.40 $9.92 (13.0%)
1994 EPS 9.84 3.76 (61.8)
Wall Street Consensus
1995 EPS/(1)/ $ 9.10 $6.64 (26.9%)
1994 EPS 9.00 7.05 (21.7)
- --------------------------------------------------------------------------------
</TABLE>
(1) Reflects one analyst's (NatWest) projection.
-6-
<PAGE>
Issues Raised by Changing
Business Environment
---------------------------------------------------------------------------
[ ] Impact on Valuation of New Common
- Comparable Multiples
- Higher Interest/Preferred Dividend Burden
[ ] Impact on Valuation of Alternative Scenarios
- Discount Rates
- Terminal Multiples
[ ] Coalition's Perspective on Valuation
-7-
<PAGE>
Shareholder Consideration
in the Recapitalization
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOTAL VALUE VALUE
($MM) PER SHARE/(1)/
- --------------------------------------------------------------------------------
<S> <C> <C>
Consideration
Cash $743 $25.80
Debentures 900 31.10/(2)/
Preferred Stock 900 31.10/(2)/
--- -----
Subtotal $2,543 $88.00
====== ======
Common Equity Value $2,110 - 2,225 $73.00 - 77.00/(3)/
(47% ownership)
Total Consideration $4,653 - 4,768 $161.00 - $165.00
- --------------------------------------------------------------------------------
</TABLE>
(1) Assumes 28.9 million shares outstanding.
(2) Assumes impact of rate ceiling is negligible.
(3) Adjusted $0-$1 for "Accordion" discount.
-8-
<PAGE>
New Common Equity Valuation
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
IMPLIED IMPLIED
1994 MULTIPLE RANGE 1995 MULTIPLE RANGE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
As Reported ($1.36) $1.05
Range $73 - 78 NM - NM NM - NM
Immediate Allocation - Taxed $3.43 $6.63
$73 - 78 21.3x - 22.7x 11.0x - 11.8x
Immediate Allocation - Untaxed $6.57 $12.88
$73 - 78 11.1x - 11.9x 5.7x - 6.1x
Reference Multiples/(1)/
AMR 14.4x 9.7x
DAL NM 12.2x
UAL 17.9x 19.0x
- --------------------------------------------------------------------------------
</TABLE>
(1) First Call median estimates as of 3/10/94.
-9-
<PAGE>
Next Steps
----------------------------------------------------------------------------
[ ] Interest/Preferred Dividend Rate Negotiation
[ ] Execute Definitive Documentation
[ ] File Proxy with SEC
[ ] Marketing Plan
[ ] Resolve Underwriting Issues
-10-
