UAL CORP /DE/, PRE 14A, 2000-03-03

UAL CORP /DE/
PRE 14A, 2000-03-03
AIR TRANSPORTATION, SCHEDULED

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<PAGE>

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

UAL Corporation
- ------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

-------------------------------------------------------------------------

2) Aggregate number of securities to which transaction applies:

-------------------------------------------------------------------------

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

-------------------------------------------------------------------------

4) Proposed maximum aggregate value of transaction:

-------------------------------------------------------------------------

5) Total fee paid:

-------------------------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
----------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------------------------------
3) Filing Party:
----------------------------------------------------
4) Date Filed:
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<PAGE>
[UAL CORPORATION LOGO]

March 23, 2000

DEAR FELLOW OWNER:

Our company ended 1999 with record fourth-quarter financial results, capping
a year of milestones. We unveiled Our United Commitment, a renewed promise to
provide our customers with safe, efficient travel and quality service every time
they fly United. We achieved all of our on-time goals. And, we launched service
improvements, such as Economy Plus-SM-, that enhance customer comfort and build
loyalty.

We also took significant actions to help our stockholders realize the full
value of their investments. We completed the third in a series of share buy-back
programs. We announced plans, to pay stockholder dividends (see details inside).

The coming months will not be without their challenges. As the ESOP
allocation period ends, we must find ways to minimize the impact of
substantially increased compensation-related expenses. Fuel costs continue to
rise. And in a spirit of candor and cooperation, we must reach a successful
conclusion to contract discussions with key segments of our represented
employees. I'm confident that the people of our company, now 100,000 strong, are
united in their dedication to meet these challenges while positioning us for
continuing growth and profitability.

On behalf of the Board of Directors, I'm pleased to invite you to the 2000
Annual Meeting of Stockholders. A notice of the 2000 annual meeting and proxy
statement follows. You will also find your proxy or voting direction card and
the 1999 annual report. This year I am pleased to inform you that you have three
ways to vote your proxy or voting direction card.

1. VOTE BY INTERNET at http://www.harrisbank.com/wproxy

2. VOTE BY PHONE by using the 1-888 number on your proxy or voting
direction card

3. Vote by mail, by signing and dating the PROXY/VOTING DIRECTION CARD
enclosed in this package and returning it in the postage paid envelope
that is provided

Your vote is important. Please take a moment now to vote, even if you plan
to attend the meeting. I encourage you to use the new "vote by internet" option.

Sincerely,

[SIGNATURE]

James E. Goodwin
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT

<TABLE>
<S> <C>
DATE: Thursday, May 18, 2000
TIME: 10:00 a.m.
PLACE: The Auditorium, 8th Floor
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60690
</TABLE>

MATTERS TO BE VOTED ON:

1. Election of the following members of the Board of Directors:

- Five Public Directors, to be elected by holders of Common Stock

- Four Independent Directors, to be elected by holders of Class I Junior
Preferred Stock

- One ALPA Director, to be elected by holders of Class Pilot MEC Junior
Preferred Stock

- One IAM Director, to be elected by holders of Class IAM Junior Preferred
Stock

- One Salaried/Management Employee Director, to be elected by holders of
Class SAM Junior Preferred Stock

2. Approval of amendments to our Restated Certificate of Incorporation for
purposes of dividends

3. Approval of the United Employees Performance Incentive Plan

4. Approval of the UAL Corporation 2000 Incentive Stock Plan

5. Ratification of appointment of independent public accountants

6. Any other matters that may be properly brought before the meeting

Francesca M. Maher
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY

Chicago, Illinois
March 23, 2000
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
GENERAL INFORMATION......................................... 3

VOTING RIGHTS AND PROXY INFORMATION......................... 3

PROPOSAL NO. 1--ELECTION OF DIRECTORS....................... 7
Directors to be Elected by Common Stock................... 7
Directors to be Elected by Other Classes of Stock......... 8

CERTAIN INFORMATION CONCERNING OUR BOARD OF DIRECTORS....... 10
Committees................................................ 10
Compensation Committee Interlocks and Insider
Participation; Certain Relationships and Related
Transactions............................................ 12
Director Compensation..................................... 12

BENEFICIAL OWNERSHIP OF SECURITIES.......................... 14
Certain Beneficial Owners................................. 14
Directors and Executive Officers.......................... 16

UAL CORPORATION RELATIVE MARKET PERFORMANCE................. 17

EXECUTIVE COMPENSATION...................................... 18
UAL Corporation Compensation and Compensation
Administration Committees Report........................ 18
Summary Compensation Table................................ 22
Option Grants in 1999..................................... 23
Aggregated Option Exercises in 1999 and Fiscal Year-End
Option Values........................................... 24
Pension Plan Table........................................ 24
Employment Contracts and Arrangements..................... 25

PROPOSAL NO. 2--APPROVAL OF AMENDMENTS TO OUR RESTATED
CERTIFICATE OF INCORPORATION FOR PURPOSES OF DIVIDENDS.... 26

PROPOSAL NO. 3--APPROVAL OF THE UNITED EMPLOYEES PERFORMANCE
INCENTIVE PLAN FOR PURPOSES OF IRC SECTION 162 (m)........ 27

PROPOSAL NO. 4--APPROVAL OF UAL CORPORATION 2000 INCENTIVE
STOCK PLAN................................................ 31

PROPOSAL NO. 5--APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS............................................... 34

SUBMISSION OF STOCKHOLDER PROPOSALS......................... 34

ANNUAL REPORT............................................... 34

APPENDIX A--CHARTER AMENDMENT............................... A-1

APPENDIX B--FINANCIAL INFORMATION........................... B-1
</TABLE>

2
<PAGE>
PROXY STATEMENT
GENERAL INFORMATION

This Proxy Statement is furnished to you by our Board of Directors in
connection with the solicitation of your proxy to be voted at the annual meeting
of stockholders to be held on Thursday, May 18, 2000. This proxy statement and
the proxy or voting direction card are being mailed to you approximately
March 23, 2000.

VOTING RIGHTS AND PROXY INFORMATION

HOW DO I VOTE?

- VOTE BY INTERNET

This year we are pleased to offer you the choice of voting via the internet
by logging into WWW.HARRISBANK.COM/WPROXY and following the prompts using your
six digit control number located on your proxy or voting direction card. This
vote will be counted immediately and there is no need to send in your proxy or
voting direction card.

- VOTE BY TELEPHONE

The telephone voting procedure is simple and fast. Dial the 1-888 number on
your proxy or voting direction card and listen for further directions. You must
have a touch-tone phone in order to respond to the questions. This vote will be
counted immediately and there is no need to send in your proxy card.

YOU SAVE OUR COMPANY MONEY IF YOU USE THE VOTE BY INTERNET OR TELEPHONE OPTIONS.

- VOTE BY PROXY OR VOTING DIRECTION CARD

Shares eligible to be voted, and for which a properly-signed proxy or
direction card is returned, will be voted in accordance with the instructions
specified on the proxy or voting direction card. If you do not mark any
instructions, your shares will be voted in favor of proposals 1, 2, 3, 4 and 5
for those holding a proxy and in favor of proposals 2, 3, 4 and 5 for those
holding a voting direction card.

WHO IS ENTITLED TO VOTE?

You are entitled to vote if our records show that you held your shares at
the close of business on March 20, 2000. This is known as the record date for
determining who gets notice of the meeting and who gets to vote.

The following chart shows the number of shares of each class of our voting
stock outstanding as of the record date, the number of holders of each class as
of the record date entitled to vote at the

3
<PAGE>
meeting, the aggregate and per share votes for shares of each class for all
matters on which the shares vote, and the class of directors the class is
entitled to elect.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AGGREGATE VOTES VOTING
SHARES NUMBER HOLDERS OF PER FOR
TITLE OF CLASS OUTSTANDING OF VOTES RECORD SHARE DIRECTORS
- ---------------------------------------------------------------------------------------------------
Common Stock [ ] [ ] [ ] 1 Class elects 5
Public
Directors
- ---------------------------------------------------------------------------------------------------
Class P ESOP Voting Junior [ ] [ ] 1 (ESOP Trustee) [ ] --
Preferred Stock
- ---------------------------------------------------------------------------------------------------
Class M ESOP Voting Junior [ ] [ ] 1 (ESOP Trustee) [ ] --
Preferred Stock
- ---------------------------------------------------------------------------------------------------
Class S ESOP Voting Junior [ ] [ ] 1 (ESOP Trustee) [ ] --
Preferred Stock
- ---------------------------------------------------------------------------------------------------
Class Pilot MEC Junior 1 1 1 (ALPA-MEC) 1 Class elects 1
Preferred Stock ALPA Director
- ---------------------------------------------------------------------------------------------------
Class IAM Junior Preferred 1 1 1 (IAM) 1 Class elects 1
Stock IAM Director
- ---------------------------------------------------------------------------------------------------
Class SAM Junior Preferred 3 3 2 (SAM Director 1 Class elects 1
Stock and Senior Vice SAM Director
President-People)
- ---------------------------------------------------------------------------------------------------
Class I Junior Preferred Stock 4 4 4 (Independent 1 Class elects 4
Directors) Independent
Directors
- ---------------------------------------------------------------------------------------------------
</TABLE>

HOW DO ESOP PARTICIPANTS VOTE?

Special voting rules will apply to ESOP participants who hold voting
preferred stock through the ESOP Trustee. The same voting methods apply to ESOP
participants: vote by internet, telephone or mail. Please consult your
accompanying materials for information concerning the voting of these shares.

The Class P, M and S ESOP voting preferred stocks, held by a trust
established under a tax-qualified employee stock ownership plan (called the
qualified ESOP) that have been allocated to individual participants in the ESOP,
will be voted by participants, as named fiduciaries under the Employee
Retirement Income Security Act of 1974 on a confidential pass-through basis. The
ESOP Trustee generally is obligated to vote as instructed by the participants to
whom the voting preferred stock has been allocated, and the outstanding shares
command the entire voting power of each class of voting preferred stock. The
Class P voting stock allocated to former employees who were members of ALPA will
be voted by the ESOP Trustee. The ESOP Trustee will (except as may be required
by law) vote the unallocated or otherwise unvoted shares in this qualified ESOP
in proportions directed by participants who give instructions to the ESOP
Trustee for these shares. Each participant who is an employee has the right to
give directions to the ESOP Trustee in the proportion that the participant's
allocated shares bears to the allocated shares of all participants giving
directions.

Shares held by the ESOP Trustee under a non-qualified employee stock
ownership plan (called the supplemental ESOP) will be voted as instructed by the
administrative committee appointed under the supplemental ESOP. The
administrative committee will consider the views of participants concerning the
vote, but is not required to take any particular action in response to those
views.

4
<PAGE>
WHAT CLASSES OF STOCK VOTE FOR WHICH MATTERS AND WHAT IS THE VOTE REQUIRED?

The holders of common stock; the Class S, M and P voting preferred stocks;
and the Class Pilot MEC, IAM and SAM stocks will vote together as a single class
on all items at the annual meeting except the election of directors. The
presence in person or by proxy of the holders of a majority of the total voting
power of the shares of all the classes outstanding at the record date is
necessary to constitute a quorum at the meeting for all items of business other
than the election of directors. The Class I stock does not vote on any matter
other than the election of the Independent Directors (as defined in our
charter).

The presence in person or by proxy of the holders of a majority of the total
voting power of the outstanding shares entitled to vote on the election of a
particular class of director(s) is necessary to constitute a quorum at the
meeting for voting on that matter.

Under the Delaware General Corporation Law and our charter (1) the
affirmative vote of the holders of the shares of capital stock present in person
or by proxy at the meeting representing a plurality of the votes cast on the
matter will be required to elect the directors to be elected by the applicable
class of capital stock, (2) the affirmative vote of the holders of the shares of
capital stock outstanding on the record date representing a majority of the
votes entitled to be cast on the matter will be required to approve and adopt
the proposed amendments to our charter, and (3) the affirmative vote of the
holders of the shares of capital stock representing a majority of the votes
present in person or by proxy at the meeting and entitled to be cast on the
matter will be required to approve or adopt the other matters in this notice of
meeting and proxy statement.

HOW DO ABSTENTIONS AND BROKER NON-VOTES WORK?

Abstentions will have the effect of a vote against the matters presented for
a vote of the stockholders (other than the election of directors). This is
because abstaining shares are considered present and unvoted, which means they
have the same effect as votes against the matter. Abstentions have no effect on
the election of directors. Broker non-votes will have no effect on the outcome
of the vote on any of the matters presented for your vote, other than the
charter amendments, and will not be counted for purposes of establishing a
quorum. The required vote for the charter amendment is based on the voting power
of total shares outstanding, rather that the shares present or voted, so broker
non-votes will have the effect of a vote against the charter amendment.

HOW DOES THE PROXY VOTING PROCESS WORK?

If the enclosed proxy is voted properly by using the internet or telephone
procedures specified or is properly returned by dating, signing and mailing, the
proxy will be voted at the annual meeting in accordance with the instructions
indicated by it. Our Board does not know of any matters, other than as described
in this notice of annual meeting and proxy statement, that are to come before
the annual meeting. If a proxy is given, the persons named in the proxy will
have authority to vote in accordance with their best judgment on any other
matter that is properly presented at the meeting for action, including any
proposal to adjourn or concerning the conduct of the meeting.

If a quorum is not present at the time the annual meeting is convened for
any particular purpose, or if for any other reason we believe that additional
time should be allowed for the solicitation of proxies, we may adjourn the
meeting with your vote then present. The persons named in the proxy may vote any
shares of capital stock for which they have voting authority in favor of an
adjournment.

HOW IS MY PROXY VOTED IF I DO NOT INDICATE HOW TO VOTE?

If no instructions are indicated, proxies will be voted for (1) the election
of directors of the class on which the shares represented by the proxy are
entitled to vote, (2) the amendments to our Restated

5
<PAGE>
Certificate of Incorporation, (3) United Employees Performance Incentive Plan,
(4) the UAL Corporation 2000 Incentive Stock Plan, and (5) the appointment of
Arthur Andersen LLP.

HOW DO I REVOKE A PROXY?

Any proxy may be revoked by the person giving it at any time before it is
voted. We have not established any specified formal procedure for revoking. A
proxy may be revoked by a later proxy delivered using the internet or telephone
voting procedures or by mail to the Secretary. A proxy may also be revoked by
written notice mailed to the Secretary. Attendance at the Annual Meeting will
not automatically revoke a proxy, but a holder of common stock in attendance may
request a ballot and vote in person, which revokes a prior granted proxy.

HOW ARE PROXIES BEING SOLICITED AND WHO PAYS SOLICITATION EXPENSES?

Proxies are being solicited by and on behalf of the Board. All expenses of
the solicitation, including the cost of preparing and mailing this proxy
statement, will be borne by us. In addition to solicitation by use of mails,
proxies may be solicited by our directors, officers and employees in person or
by telephone or other means of communication. These individuals will not be
additionally compensated, but may be reimbursed for out-of-pocket expenses
associated with solicitation. Arrangements will also be made with custodians,
nominees and fiduciaries for forwarding of proxy solicitation material to
beneficial owners of common stock and voting preferred stock held of record, and
we may reimburse these individuals for their reasonable expenses. To assure the
presence in person or by proxy of the largest number of stockholders possible,
we have engaged Georgeson Shareholder Communications Inc. to solicit proxies on
our behalf. We are paying them a proxy solicitation fee of $7,500 and
reimbursing them for reasonable out-of-pocket expenses.

WHAT DO I NEED TO GET INTO THE ANNUAL MEETING?

- SHAREHOLDERS OF RECORD

If you are a shareholder of record on March 20, 2000 (or your duly appointed
proxy holder), you are entitled to vote and attend the meeting. Certain
procedures have been adopted to ensure that no inconvenience or delays are
caused to the company's shareholders when entering the meeting.

If you are a record holder and do not have an admittance card with you at
the meeting, you will be admitted upon verification of ownership at the
shareholders' registration desk. The admission ticket is located on the lower
portion of your proxy or voting direction card.

- SHAREHOLDERS THROUGH INTERMEDIARIES

Persons who own stock through brokers, trustees, plans or in "street name"
and not directly through ownership of stock certificates are considered
beneficial owners. Beneficial owners of record on March 20, 2000 can obtain
admittance cards only at the shareholders' registration desk by presenting
evidence of common stock ownership. This evidence could be a proxy from the
institution that is the record holder of the stock or your most recent bank or
brokerage firm account statement, along with proper identification.

Requests for proxies or voting direction from brokers, trustees or
fiduciaries should be processed as described in the accompanying materials.

6
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS

Except where you withhold authority, your proxy will be voted at our 2000
Annual Meeting of Stockholders or any adjournments or postponements for the
election of the nominee(s) named below for a term of one year and until their
successors are duly elected and qualified. Incumbent directors will hold office
until the Annual Meeting and until their successors are elected and qualified,
subject to the director's earlier death, retirement or removal. Our Board of
Directors expects all nominees named below to be available for election. "We",
"our", "us" and the "Company" each refers to UAL Corporation.

DIRECTORS TO BE ELECTED BY COMMON STOCK

PUBLIC DIRECTORS

Five Public Directors are to be elected by the holders of Common Stock, par
value $.01 per share. Each nominee was previously elected by the holders of the
common stock (other than Mr. Dutta) and has served continuously as a public
director since the date of his election. The term Public Director is used as
defined in our Restated Certificate of Incorporation (also called our charter).

If a nominee unexpectedly becomes unavailable before election, proxies from
holders of common stock will be voted for the person designated by the Board or
the appropriate Board Committee as required by our charter. No person other than
our directors is responsible for the naming of nominees.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
- ---------------------------------------------------------------------------------------------------------
Rono J. Dutta (1) President (7/99) of the company and its wholly owned 48 7/13/99
subsidiary, United Air Lines, Inc. Senior Vice
President--Planning of United (1994-7/99).
(2) Trustee, The Marsico Investment Fund
- ---------------------------------------------------------------------------------------------------------
James E. Goodwin (1) Chairman and Chief Executive Officer (7/99), 55 1998
President and Chief Operating Officer (1998) of the
company and United. Senior Vice President--North
America (1995-1998). Senior Vice
President--International (1992-1995).
- ---------------------------------------------------------------------------------------------------------
John F. McGillicuddy (1) Retired Chairman and Chief Executive Officer, 69 1984
Chemical Banking Corporation (banking and finance),
for the past five years.
(2) Director, Southern Peru Copper Corporation, USX
Corporation and Young & Rubicam Inc.
- ---------------------------------------------------------------------------------------------------------
James J. O'Connor (1) Retired Chairman and Chief Executive Officer (1998), 63 1984
Unicom Corporation (holding company) and its wholly
owned subsidiary, Commonwealth Edison Company
(supplier of electricity). Chairman and Chief
Executive Officer, Unicom (1994-1998) and
Commonwealth Edison (1980-1998).
(2) Director, American National Can Group, Inc., Corning
Incorporated, Smurfit-Stone Container Corporation
and Tribune Company.
- ---------------------------------------------------------------------------------------------------------
Paul E. Tierney, Jr. (1) General Partner, Darwin Capital Partners (1999) and 57 1990
Managing Member, Development Capital, LLC
(investment management) (1997). Managing Director,
Gollust, Tierney and Oliver, Inc. (investment
banking) (1992-1996).
(2) Director, Liz Claiborne, Inc. and C & B Publishing
PLC.
- ---------------------------------------------------------------------------------------------------------
</TABLE>

7
<PAGE>
DIRECTORS TO BE ELECTED BY OTHER CLASSES OF STOCK

The following classes of directors are to be elected by the holder of
certain classes of our stock other than common stock. THE HOLDERS OF COMMON
STOCK DO NOT VOTE ON THE ELECTION OF THESE DIRECTORS. Each nominee was
previously elected by the holders of the applicable class of our stock and has
served continuously as a director since the first date of his election. If a
nominee unexpectedly becomes unavailable before election, or we are notified
that a substitute nominee has been selected, votes will be cast pursuant to the
authority granted by the proxies from the respective holder(s) for the person
who may be designated as a substitute nominee.

INDEPENDENT DIRECTORS--ELECTED BY HOLDERS OF CLASS I STOCK

Four Independent Directors (as defined in our charter) are to be elected by
the four Independent Directors as the holders of our Class I stock. Each nominee
has been nominated by the Independent Director Nomination Committee and under a
stockholders agreement among the holders of Class I Stock, ALPA, the IAM and us,
each holder has agreed to vote in favor of the nominees. No person, other than
the Independent Director Nomination Committee, is responsible for the naming of
nominees.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
- ----------------------------------------------------------------------------------------------------
John W. Creighton, (1) Retired Chief Executive Officer and President 67 1998
Jr. (1997), Weyerhaeuser Company (forest products).
President (1988-1997) and Chief Executive
Officer (1991-1997), Weyerhaeuser.
(2) Director, Unocal Corporation.
- ----------------------------------------------------------------------------------------------------
Richard D. McCormick (1) Chairman Emeritus (1999) and Chairman 59 1994
(1992-1999), US WEST, Inc. (telecommunications).
President (1986-1998) and Chief Executive
Officer (1991-1998),
US WEST.
(2) Director, Wells Fargo & Company and United
Technologies Corporation.
- ----------------------------------------------------------------------------------------------------
Hazel R. O'Leary (1) Chief Operating Officer (3/1/00), Blaylock & 62 1999
Partners (investment banking). President (1997 -
2/29/00), O'Leary & Associates (energy services
and investment strategy). Secretary (1993-1997),
U.S. Department of Energy (government).
(2) Director, The AES Corporation and ICF Kaiser
International, Inc.
- ----------------------------------------------------------------------------------------------------
John K. Van de Kamp (1) President, Thoroughbred Owners of California 64 1994
(trade association) (1996). Partner, Dewey
Ballantine (law firm) (1991-1996).
- ----------------------------------------------------------------------------------------------------
</TABLE>

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<PAGE>
ALPA DIRECTOR--ELECTED BY CLASS PILOT MEC STOCK

One ALPA Director (as defined in our charter) is to be elected by the United
Airlines Pilots Master Executive Council, ALPA, the holder of our Class Pilot
MEC stock. The ALPA-MEC has nominated and intends to re-elect Frederick C.
Dubinsky as the ALPA Director.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
- ---------------------------------------------------------------------------------------------------
Frederick C. Dubinsky (1) Chairman, ALPA-MEC (labor union) (2000). Captain, 57 1/1/00
B747-400, United, for the past five years.
- ---------------------------------------------------------------------------------------------------
</TABLE>

IAM DIRECTOR--ELECTED BY CLASS IAM STOCK

One IAM Director (as defined in our charter) is to be elected by the
International Association of Machinists and Aerospace Workers, the holder of our
Class IAM stock. The IAM has nominated and intends to re-elect John F. Peterpaul
as the IAM Director.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
- -------------------------------------------------------------------------------------------------
John F. Peterpaul (1) Retired General Vice President, IAM (labor union), for 64 1994
the past five years.
- -------------------------------------------------------------------------------------------------
</TABLE>

SALARIED/MANAGEMENT EMPLOYEE DIRECTOR--ELECTED BY CLASS SAM STOCK

One Salaried/Management Employee Director (as defined in our charter) is to
be elected by the holders of our Class SAM stock, who are Deval L. Patrick, the
Salaried/Management Employee Director, and William P. Hobgood, our Senior Vice
President-People. Mr. Patrick has been nominated for re-election by the "System
Roundtable," a body of salaried and management employees of United empowered to
review issues relating to us and their effect on salaried and management
employees. Under a Stockholders Agreement among the holders of Class SAM stock
and us, each holder has agreed to vote in favor of the System Roundtable
nominee.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NOMINEE (2) OTHER BUSINESS AFFILIATIONS AGE SINCE
- ------------------------------------------------------------------------------------------------------------
Deval L. Patrick (1) Vice President & General Counsel, Texaco Inc. (oil/ energy 43 1997
company) (1999). Partner, Day, Berry & Howard (law firm)
(1997-1999). Assistant Attorney General, Civil Rights
Division, U.S. Department of Justice (law enforcement)
(1994-1997).
- ------------------------------------------------------------------------------------------------------------
</TABLE>

9
<PAGE>
CERTAIN INFORMATION CONCERNING OUR BOARD OF DIRECTORS

Our Board of Directors held a total of 12 meetings in 1999. All directors
attended 75 percent or more of the Board meetings and Board committee meetings
of which they were members.

COMMITTEES

The Board of Directors has Executive, Audit, Compensation, Compensation
Administration, CAP, Labor, Independent Director Nomination, Outside Public
Director Nomination, Pension and Welfare Plans Oversight and Transaction
Committees. Below is a brief description of the functions performed, the number
of meetings held and the names of committee members.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
NAME AND FUNCTIONS OF COMMITTEE MEETINGS IN 1999
- -------------------------------------------------------------------------------------------------------------------------
EXECUTIVE
- - authorized to exercise the powers of the Board in management of our business and affairs, with 7
certain exceptions
- - responsible for safety and security oversight for United
- - reviews Board effectiveness and oversees compensation arrangements for non-employee directors
- - administers the directors plan
- - reviews management succession planning for certain senior positions
- - acts as a search committee and recommends to Board appointment of a successor CEO (requires four
votes, excluding Mr. Goodwin)
- -------------------------------------------------------------------------------------------------------------------------
AUDIT
- - reviews and discusses with management and independent auditors our annual financial statements 2
prior to publication, financial reporting practices and results of annual external audit
- - reviews work of the independent auditors, scope of annual external audit and the auditor's
independence
- - makes annual recommendations to our Board for appointment of independent public accountants for
the coming year
- - reviews the effectiveness of our financial and accounting functions, organization, operations and
management and adequacy of internal accounting controls
- - reviews major accounting policies and significant judgments affecting the financial statements
- - establishes and reviews the adequacy of our code of business conduct and corporate compliance
programs
- - reviews and reassesses adequacy of this committee's charter on an annual basis
- -------------------------------------------------------------------------------------------------------------------------
COMPENSATION
- - reviews and approves compensation and benefits of our officers 12
- - reviews general policy matters relating to compensation and benefits of our non-union employees
- - administers our equity incentive compensation plans, except for responsibilities reserved for the
Compensation Administration Committee
- -------------------------------------------------------------------------------------------------------------------------
COMPENSATION ADMINISTRATION
- - administers our stock option plans and executive compensation programs to the extent these 12
functions cannot or are not appropriate to be performed by the Compensation Committee in light of
any provision of the Internal Revenue Code of 1986, as amended, securities laws or other
applicable laws or regulations
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

10
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
NAME AND FUNCTIONS OF COMMITTEE MEETINGS IN 1999
- -------------------------------------------------------------------------------------------------------------------------
CAP
- - oversees implementation of our Competitive Action Plan to improve United's competitiveness on 3
short-haul routes under which United Shuttle(-Registered Trademark-) was established
- - approves on our behalf any modifications to the Competitive Action Plan, other than those matters
reserved to the Labor Committee
- - approves modifications to Salaried and Management Employee Investment (as defined in our charter)
(vote must include two union directors and all Outside Public Directors, as defined in our
charter)
- -------------------------------------------------------------------------------------------------------------------------
LABOR
- - reviews and approves the entering into of, and modifications and amendments to, collective 6
bargaining agreements to which we are a party, with certain exceptions
- -------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTOR NOMINATION
- - nominates candidates to become Independent Director members of the Board 8
- - fills vacancies in Independent Director positions
- - appoints Independent Directors to serve on Board Committees (nominations and appointments require
vote of majority of Independent Directors plus one union director)
- -------------------------------------------------------------------------------------------------------------------------
OUTSIDE PUBLIC DIRECTOR NOMINATION
- - nominates candidates to become Outside Public Director members of the Board 2
- - fills vacancies in Outside Public Director positions
- - appoints Outside Public Directors to serve on Board Committees
- -------------------------------------------------------------------------------------------------------------------------
PENSION AND WELFARE PLANS OVERSIGHT
- - oversees our compliance with laws governing employee benefit plans that we maintain 2
- -------------------------------------------------------------------------------------------------------------------------
TRANSACTION
- - evaluates and advises the Board on any proposed merger or consolidation of us with or into, the 0
sale, lease or exchange of all or substantially all of our property or assets to, or a significant
business transaction with, any Labor Affiliate (as defined in our charter)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

11
<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMMITTEE MEMBERSHIP
- ----------------------------------------------------------------------------------------------------------------
OUTSIDE PENSION
INDEPENDENT PUBLIC & WELFARE
COMP DIRECTOR DIRECTOR PLANS
AUDIT CAP COMP ADMIN EXECUTIVE NOMINATION LABOR NOMINATION OVERSIGHT TRANSACTION
- ----------------------------------------------------------------------------------------------------------------
John W. Creighton,
Jr. x x x Ch x x
- ----------------------------------------------------------------------------------------------------------------
Frederick C.
Dubinsky x x x x x
- ----------------------------------------------------------------------------------------------------------------
Rono J. Dutta x
- ----------------------------------------------------------------------------------------------------------------
James E. Goodwin x x Ch Ch
- ----------------------------------------------------------------------------------------------------------------
Richard D. McCormick x Ch Ch x x x
- ----------------------------------------------------------------------------------------------------------------
John F. McGillicuddy x x x x Ch
- ----------------------------------------------------------------------------------------------------------------
James J. O'Connor x x x x Ch x x
- ----------------------------------------------------------------------------------------------------------------
Hazel R. O'Leary x x x x x
- ----------------------------------------------------------------------------------------------------------------
Deval L. Patrick x x x
- ----------------------------------------------------------------------------------------------------------------
John F. Peterpaul x x x x x
- ----------------------------------------------------------------------------------------------------------------
Paul E. Tierney, Jr. Ch x x x x
- ----------------------------------------------------------------------------------------------------------------
John K. Van de Kamp x Ch x x Ch x
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Key: x = Current Committee Assignment
Ch = Chairman
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Goodwin and Capt. Dubinsky serve on the Compensation Committee, but not
the Compensation Administration Committee. Mr. Goodwin and Capt. Dubinsky are
employees of ours. Capt. Dubinsky is also the Chairman of the ALPA-MEC and an
officer of ALPA. We and ALPA are parties to a collective bargaining agreement
for our pilots represented by ALPA.

DIRECTOR COMPENSATION

We do not pay directors who are employees of the company additional
compensation for their services as directors. In 1999, compensation for
non-employee directors included the following:

- annual retainer of $18,000

- $900 for each Board and Board committee meeting attended

- annual retainer of $2,700 to committee chairmen (other than chair of
Compensation Administration Committee)

- expenses of attending Board and committee meetings

- 400 shares of common stock each year

- 189 deferred stock units representing common stock each year

Under our stock ownership guidelines, our directors are to keep the 400
shares while they are on the Board. They may also elect to receive some or all
of their cash retainer and fees in common stock, as well as defer their stock
and cash compensation for tax purposes. The deferred stock units are unfunded
and are not settled until after he or she leaves the Board.

We consider it important for our directors to understand our business and
have exposure to our operations and employees. For this reason, we provide free
transportation and free cargo shipment on

12
<PAGE>
United to our directors and their spouse and eligible dependent children. We
reimburse our directors for income taxes resulting from actual use of the travel
and shipment privileges. A director who retires from the Board with at least
five years of company creditable service will receive free travel and cargo
benefits for life, subject to certain exceptions.

The cost of this policy in 1999 for each director, including cash payments
made in February 2000 for income tax liability, was as follows:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NAME COST($) NAME COST($)
- -----------------------------------------------------------------------------------------------
John W. Creighton, Jr. 13,163 James J. O'Connor 41,408
- -----------------------------------------------------------------------------------------------
Frederick C. Dubinsky 0 Hazel R. O'Leary 0
- -----------------------------------------------------------------------------------------------
Rono J. Dutta 12,115 Deval L. Patrick 35,819
- -----------------------------------------------------------------------------------------------
James E. Goodwin 0 John F. Peterpaul 11,462
- -----------------------------------------------------------------------------------------------
Richard D. McCormick 56,946 Paul E. Tierney, Jr. 62,661
- -----------------------------------------------------------------------------------------------
John F. McGillicuddy 23,984 John K. Van de Kamp 30,716
- -----------------------------------------------------------------------------------------------
</TABLE>

13
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES

CERTAIN BENEFICIAL OWNERS

The following table shows the number of shares of our voting securities
owned by any person or group known to us as of March 20, 2000, to be the
beneficial owner of more than 5% of any class of our voting securities.

AXA Assurances I.A.R.D. Mutuelle &
AXA Assurances Vie Mutuelle
21, rue de Chateaudun
75009 Paris France

AXA Courtage Assurance Mutuelle
26, rue Louis le Grand
75002 Paris France

AXA
9 Place Vendome
75001 Paris France

AXA Financial, Inc.
1290 Avenue of the Americas
New York, NY 10104
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Common Stock 3,541,655(4) 6.6% 3%
1345 Avenue of the Americas
New York, NY 10105
- ------------------------------------------------------------------------------------------------------------------
Marsico Capital Management, LLC Common Stock 2,710,726(5) 5.0645% 2.3%
1200 17th Street, Suite 1300
Denver, CO 80202
- ------------------------------------------------------------------------------------------------------------------
United Airlines Pilots Master Executive Class Pilot MEC Junior 1 100% --
Council Preferred Stock
Air Line Pilots Association,
International
6400 Shafer Court, Suite 700
Rosemont, IL 60018
- ------------------------------------------------------------------------------------------------------------------
International Association of Class IAM Junior 1 100% --
Machinists and Aerospace Workers Preferred Stock
District #141
9000 Machinists Place
Upper Marlboro, MD 20772
- ------------------------------------------------------------------------------------------------------------------
Deval L. Patrick Class SAM Junior 2 66.67% --
Texaco Inc. Preferred Stock
2000 Westchester Avenue
White Plains, NY 10650
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

14
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PERCENT OF
TOTAL VOTING
AMOUNT AND POWER
NATURE PERCENT OUTSTANDING
OF BENEFICIAL OF FOR PROPOSALS
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP(1) CLASS 2-5
- ------------------------------------------------------------------------------------------------------------------
William P. Hobgood Class SAM Junior 1 33.33% --
Senior Vice President-People Preferred Stock
United Airlines
P.O. Box 66100
Chicago, IL 60666
- ------------------------------------------------------------------------------------------------------------------
John W. Creighton, Jr. Class I Junior Preferred 1 25% --
Madrona Investments Stock
1000 Second Avenue
Suite 3700
Seattle, WA 98104
- ------------------------------------------------------------------------------------------------------------------
Richard D. McCormick Class I Junior Preferred 1 25% --
US WEST, Inc. Stock
3200 Cherry Creek South Drive
Denver, CO 80209
- ------------------------------------------------------------------------------------------------------------------
Hazel R. O'Leary Class I Junior Preferred 1 25% --
Blaylock & Partners Stock
609 5th Avenue
New York, NY 10017
- ------------------------------------------------------------------------------------------------------------------
John K. Van de Kamp Class I Junior Preferred 1 25% --
Dewey Ballantine Stock
333 S. Hope Street
Los Angeles, CA 90071-3003
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Shares of Class Pilot MEC, Class IAM and Class SAM stock elect one ALPA, IAM
and Salaried/Management Employee Director, respectively, and have one vote
on all matters submitted to the holders of common stock other than the
election of directors. Shares of Class I stock elect four Independent
Directors and do not vote on other matters except as required by law.

(2) Based on Schedule 13G dated February 10, 2000 filed with the SEC, in which
reporting person reported that as of December 31, 1999, (1) as trustee under
the ESOP, it had shared voting power over 5,692,987 shares of Class P ESOP
Voting Junior Preferred Stock representing 25.4% of our voting power,
4,800,892 shares of Class M ESOP Voting Junior Preferred Stock representing
20.4% of our voting power, and 2,131,443 shares of Class S ESOP Voting
Junior Preferred Stock (Class S, P and M voting stocks referred to as the
voting preferred stocks) representing 9.2% of our voting power, and shared
dispositive power over 12,100,463 shares of Class 1 ESOP Convertible
Preferred Stock and 948,036 shares of Class 2 ESOP Convertible Preferred
Stock, each convertible into quadruple that number of shares of common
stock, as well as 5,050 shares of common stock issuable upon conversion of
the voting preferred stocks, and (2) as trustee acting in various fiduciary
capacities, it had sole dispositive power over 226,986 shares of common
stock and sole voting power for 205,446 shares. The reporting person
disclaims beneficial ownership of all shares reported. Voting power of
voting preferred stocks is limited to matters other than the vote for
directors.

(3) Based on Schedule 13G/A (Amendment No. 12) dated February 10, 2000 filed
with the SEC, in which AXA Conseil Vie Assurance Mutuelle, AXA Assurances
I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, and AXA Courtage Assurance
Mutuelle, as a group, AXA and AXA Financial, Inc. (formerly known as The
Equitable Companies Incorporated) reported, as of January 31, 2000, sole
voting power for 1,752,840 shares, shared voting power for 4,301,800 shares
and sole dispositive power for 8,348,850 shares.

(4) Based on Schedule 13G/A (Amendment No. 2) dated February 10, 2000 filed with
the SEC, in which reporting person, on behalf of itself and/or certain
investment advisory clients or discretionary accounts, reported shared
voting and dispositive power for the shares.

(5) Based on Schedule 13G dated February 14, 2000 filed with the SEC, in which
reporting person reported sole voting and dispositive power for the shares.

15
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the number of shares of common stock and of
voting preferred stock held in the ESOP owned as of March 20, 2000, by our
directors, and executive officers included in the Summary Compensation Table,
and by our directors and executive officers as a group. Unless we say otherwise
in a footnote, the owner exercises sole voting and investment power over the
securities (other than unissued securities which ownership we have imputed to
the owner). Some of our directors and executive officers also own shares of
other classes of our preferred stock as shown in the table above.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NAME OF DIRECTOR OR EXECUTIVE OFFICER AND COMMON STOCK PERCENT VOTING PREFERRED STOCK
GROUP BENEFICIALLY OWNED(1) OF CLASS BENEFICIALLY OWNED(2)
- -------------------------------------------------------------------------------------------------------------------------
John W. Creighton, Jr. [4,028] * 0
- -------------------------------------------------------------------------------------------------------------------------
Frederick C. Dubinsky [4,406] * [1,102]
- -------------------------------------------------------------------------------------------------------------------------
Rono J. Dutta [136,496] [ ] [975]
- -------------------------------------------------------------------------------------------------------------------------
James E. Goodwin [280,035] [ ] [1,151]
- -------------------------------------------------------------------------------------------------------------------------
Gerald Greenwald 232,688 [ ] [3,085]
- -------------------------------------------------------------------------------------------------------------------------
Richard D. McCormick [7,690] * 0
- -------------------------------------------------------------------------------------------------------------------------
John F. McGillicuddy 8,297 * 0
- -------------------------------------------------------------------------------------------------------------------------
James J. O'Connor 7,950 * 0
- -------------------------------------------------------------------------------------------------------------------------
Hazel R. O'Leary 910 * 0
- -------------------------------------------------------------------------------------------------------------------------
Deval L. Patrick [2,466] * 0
- -------------------------------------------------------------------------------------------------------------------------
John F. Peterpaul 3,224 * 0
- -------------------------------------------------------------------------------------------------------------------------
Paul E. Tierney, Jr. 38,758 * 0
- -------------------------------------------------------------------------------------------------------------------------
John K. Van de Kamp 3,212 * 0
- -------------------------------------------------------------------------------------------------------------------------
Douglas A. Hacker [259,244] * [1,350]
- -------------------------------------------------------------------------------------------------------------------------
Francesca M. Maher [68,744] * [782]
- -------------------------------------------------------------------------------------------------------------------------
Andrew P. Studdert [113,150] * [631]
- -------------------------------------------------------------------------------------------------------------------------
Directors and Executive Officers as a Group
(16 persons) [ ] [ ] [8,110]
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Less than 1%

(1) This number includes (a) deferred stock units for Creighton [1,892];
McCormick [5,492]; McGillicuddy 5,697; O'Connor 2,150; O'Leary 510; Patrick
[2,465]; Peterpaul 824; Tierney 2,942; and Van de Kamp 3,212 (which reflects
beneficial ownership of common stock represented by deferred stock units
(representing deferred receipt of stock until Board participation ceases)
under the UAL Corporation 1995 Directors Plan); (b) options exercisable
within 60 days of March 20, 2000 for Dutta 90,773; Goodwin 187,424;
Greenwald 1,044,923; Hacker 195,823; Maher 57,825; Studdert 71,998; and for
the group [1,685,741]; (c) common stock issuable upon conversion of ESOP
preferred for Dubinsky [4,406]; Dutta [3,898]; Goodwin [4,603]; Greenwald
[12,342]; Hacker [5,400]; Maher [3,129]; Studdert [2,526]; and for the group
[36,846] (see footnote 2); (d) for Mr. Goodwin, 10,000 held indirectly by
his wife; (e) for Mr. Dutta, [85] held indirectly by a United 401(k) plan
(as of December 31, 1999); and (f) for Ms. Maher, 4,320 held indirectly by
her husband.

(2) Reflects beneficial ownership through the ESOP of (a) Class P Voting Stock
for Mr. Dubinsky, and (b) Class S Voting Stock for Messrs. Dutta, Goodwin,
Hacker, Maher and Studdert, and for directors and executive officers as a
group. Represents less than 1% for each person reported and % for the
group.

16
<PAGE>
UAL CORPORATION
RELATIVE MARKET PERFORMANCE
TOTAL RETURN 1995-1999

[PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------------
UAL Corp 100 204.29 286.12 423.46 273.25 355.07
S&P 500 Index 100 137.58 169.17 225.60 290.08 351.12
D-J Airline Group (1) 100 144.87 160.57 267.85 261.84 257.76
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

Source: Compustat Database

- ------------------------

(1) Alaska Air, AMR, Delta, Southwest, USAirways

17
<PAGE>
EXECUTIVE COMPENSATION

UAL CORPORATION COMPENSATION AND
COMPENSATION ADMINISTRATION COMMITTEES REPORT

WHAT WAS THE COMPANY'S COMPENSATION PHILOSOPHY FOR 1999?

The company's executive compensation program is designed to:

- attract, retain and motivate top quality and experienced officers

- provide industry competitive compensation opportunities

- support a pay-for-performance culture and

- emphasize pay-at-risk.

The company's compensation program provides, among other matters, that it
will be administered in a manner consistent with the philosophy of an
employee-owned company.

WHAT IS THE STRUCTURE OF THE COMPENSATION PROGRAM?

There are three components to the executive compensation program:

- Base salary

- Annual incentive bonuses

- Stock compensation

The compensation program is designed to set total compensation opportunity
(base salary plus annual bonus plus stock options) at the median level, adjusted
for the company's size, of total compensation paid to similarly positioned
executives at the four largest U.S. air carriers (AMR Corporation, Delta Air
Lines, Inc., Northwest Airlines Corporation, and US Airways Group, Inc.).

The program is heavily oriented toward incentive compensation tied to the
annual and longer-term financial performance of the company and to its
longer-term return to stockholders.

HOW ARE BASE SALARIES DETERMINED?

Consistent with the salary increase policy for management employees under
the terms of the ESOP, officers were not awarded salary increases in 1999,
unless an officer was promoted to a position with greater responsibilities. With
the reorganization of officer positions in 1999, four of the officer positions
received promotional increases designed to bring their base salaries into line
with competitive airline industry salaries for their new position. The officers
that received promotional increases are: Jim Goodwin, CEO; Rono Dutta,
President; Doug Hacker, Executive Vice President, Finance and Planning and CFO;
and Andy Studdert, Executive Vice President and COO.

HOW ARE BONUSES DETERMINED?

Under the annual incentive program, an incentive pool is created based upon
the company's earnings. Each year the Compensation Committee approves a schedule
of annual incentive pool funding relative to specified earnings targets.

The CEO recommends to the Compensation Committee incentive awards for each
officer based upon an assessment of the officer's contribution over the
preceding year, taking into account the total funded pool. The assessment is
based upon, among other things, an annual appraisal for each officer of his or
her managerial skills and the performance by him or her of assigned
responsibilities. The CEO also considers corporate performance and industry
competitive data. Awards for the executive officers are made by the Compensation
Committee based on a pre-established formula under the incentive plan. The
non-management members of the Board prepare an evaluation of the CEO that is
discussed

18
<PAGE>
with him, and the Compensation Committee used this evaluation as part of making
the final determination of the CEO's award.

In 2000 each of the executive officers received an incentive compensation
award for 1999 performance, which was granted pursuant to the normal incentive
compensation plan terms according to the formula described above, and for
Mr. Goodwin, pursuant to his employment agreement.

HOW ARE STOCK OPTIONS DETERMINED?

The normal stock compensation program is comprised entirely of annual stock
options. While there are no specific target award levels or weighting of factors
considered in determining stock grants, option grants are determined in
consideration of individual performance and contribution and airline industry
practice, using the same group referred to above for base salary and annual
incentive compensation. The CEO recommends stock option grants for each officer
to the Compensation Administration Committee. This Committee determines stock
awards for the CEO based upon a comparable process and makes a final
determination on stock awards for all other officers.

Stock options may not be granted at less than fair market value on the date
of grant. Stock options carry a 10-year term and typically vest ratably over a
four-year period. The company's stock option plan includes provisions to
preserve, to the maximum extent possible, the deductibility by the company of
amounts awarded under the plan.

The officer compensation program in total is primarily focused on promoting
pay-for-performance and emphasizing pay-at-risk, and heavily oriented toward
stockholder interests through the use of long-term incentives that create a
direct linkage between officer rewards and increased stockholder value. The
long-term incentive component, which is composed totally of stock-based
incentives, represents over half the total income opportunity for the officers.

In 1999, base salaries were below market due to the restrictions imposed by
the ESOP. Stock option awards were therefore increased to provide competitive
total compensation opportunities (i.e., base salary plus annual bonus plus stock
options).

The company's executive officers received a stock option grant in 1999,
subject to the company's normal vesting schedule, in full compliance with
Section 162(m) of the Internal Revenue Code.

DOES THE COMPANY USE RESTRICTED STOCK AS AN ELEMENT OF THE COMPENSATION PROGRAM?

The company has eliminated restricted stock as a component of its normal
compensation program. However, to enable the company to attract high quality
management at the most senior officer levels, sign-on compensation packages for
these officers at the time of hiring may include cash and restricted or other
stock awards in addition to compensation of the types described above. In
addition, restricted stock may be used for a limited number of United employees
in response to compelling business requirements, such as for recruitment,
retention or promotion of key management employees.

Each of Messrs. Dutta, Hacker and Studdert received a restricted stock grant
in 1999 in connection with their promotions. To encourage retention, the
restricted stock vests 100% five years from the grant date.

HOW HAS THE COMPANY RESPONDED TO IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION?

Section 162(m) of the Internal Revenue Code limits the tax deductibility of
compensation in excess of $1 million paid to certain executive officers, unless
the payments are made under plans that satisfy the technical requirements of the
Code and qualify as performance-based pay. The Committee believes that
performance-based pay over $1 million is sometimes required to attract and
retain executives in a competitive marketplace. Stock options are designed so
that the compensation paid will be tax deductible by the company. Incentive
compensation awards for 1999 performance are not tax deductible to the extent
such awards cause the Section 162(m) $1 million compensation limit to be
exceeded. In this proxy statement, stockholders are being asked to approve a
plan for additional shares

19
<PAGE>
for future stock option grants and a plan for incentive awards to maximize our
ability to deduct future incentive compensation paid to the officers covered by
Section 162(m).

To date, there has been no compensation exceeding $1 million in
non-Section 162(m) qualified compensation for any proxy-named officer (other
than for Mr. Goodwin). However, the Committee reserves the right to determine
when and if it is in the company's best interest to forego deductibility.

DOES THE COMPANY REQUIRE ITS OFFICERS TO HOLD STOCK IN THE COMPANY?

To encourage accumulation and retention of common stock by officers,
guidelines have been adopted providing for the minimum ownership of common stock
at the multiples of annual salary ranging from two to five times for the
executive officers. Officers are also expected to retain a portion of the stock
received upon exercise of options or vesting of restricted stock awards until
the value of their holdings equals the specified minimums. Unexercised stock
options, unvested restricted stock and ESOP stock ownership are not recognized
for purposes of these guidelines.

To promote the retention of common stock, receipt of Mr. Goodwin's
restricted share units described below is deferred until his retirement from the
company.

WHAT WAS THE BASIS FOR MR. GREENWALD'S 1999 COMPENSATION?

The compensation package for Mr. Greenwald was established in a five year
employment agreement negotiated by Mr. Greenwald with ALPA and the IAM in 1994.
Due to his retirement effective July 1, 1999, Mr. Greenwald was not eligible for
any increase in base salary, which remained at the July 1998 annual level of
$719,463 for the first half of the year. A pro-rated bonus of $383,356 was paid
to him in 1999 in accordance with his employment agreement.

In connection with Mr. Greenwald's retirement, the company amended his
employment agreement so that his remaining restricted stock award vested
immediately as of the date of his retirement. As a retired CEO, Mr. Greenwald is
being provided with office and secretarial support for five years and club
membership fees for three years.

WHAT WAS THE BASIS FOR MR. GOODWIN'S 1999 COMPENSATION?

The company entered into a five year employment agreement with Mr. Goodwin
effective July 13, 1999.

BASE SALARY. Under his employment agreement, Mr. Goodwin received an
increase in base salary to $725,000 as a result of his promotion to CEO in
July 1999. This increase was awarded to reflect airline industry compensation
commensurate with the new roles and responsibilities he assumed.

ANNUAL BONUS. Under his employment agreement, Mr. Goodwin is eligible to
receive an annual bonus, as CEO, as determined by the Compensation Committee
under the company's annual incentive plan. His target percentage can be no less
than the maximum percentage permitted under the incentive plan (called the
target bonus). He will be entitled to an additional 20% over this target bonus
amount under the plan for superior performance, which may be paid outside the
plan. Mr. Goodwin received an incentive compensation award in 2000 for 1999
performance, which was awarded under the incentive compensation plan terms
according to the formula described above. Mr. Goodwin's incentive award was
based on two components: company performance and individual performance
consistent with the incentive compensation plan. The Compensation Committee
approved the pre-tax profit margin target that the company needed to achieve to
pay incentive compensation awards under the plan. Company earnings for 1999 were
such that allowed for an award under the plan subject to individual performance.
The Committee considered Mr. Goodwin's strong performance in his first year as
CEO of the company and an award was made.

STOCK OPTIONS. Under his employment agreement, Mr. Goodwin received a stock
option grant in 1999 for 167,500 shares of common stock that vests in four equal
annual installments. The amount of

20
<PAGE>
the grant was determined to provide Mr. Goodwin with a total compensation
opportunity in line with the packages received by other CEOs at the major
airlines.

RESTRICTED STOCK. At the time Mr. Goodwin became CEO, in recognition of his
promotion, he was granted 50,000 restricted share units under his employment
agreement that will vest 20% over the next five years. Each unit represents a
right to receive one share of common stock. These restricted share units are
intended to provide additional incentive to Mr. Goodwin, to further align his
interests with stockholders, and to provide him with a total compensation
opportunity in line with the packages received by other CEOs at the major
airlines. Receipt of Mr. Goodwin's restricted share units is deferred until his
retirement from the company.

DO THE COMMITTEES SEEK OUTSIDE, INDEPENDENT ADVICE ON COMPENSATION MATTERS?

The Compensation Committee and Compensation Administration Committee consult
with independent compensation advisors on executive compensation matters. The
Committees also have access to competitive data on compensation levels for
officer positions.

ARE THERE ANY CHANGES TO THE COMPENSATION PROGRAM EXPECTED GOING FORWARD?

The Committee undertook a review of how the company's executive compensation
programs should be revised to better support the future organization, including
the ability to attract and retain highly qualified employees. As a result of
this review, a number of changes were made to the senior management compensation
program for 2000. These changes include:

- Targeting each element of total compensation (i.e., base salary, annual
bonus, stock options) at median levels paid by other major industrial
corporations including but not limited to the other major airlines
comparable to the company in revenue size and scope of operations. For
those executive positions deemed to be unique to the airline industry, the
company will target the median, adjusted for size, of the other major
airlines.

- Enhancing the annual incentive program to include financial, operational,
customer satisfaction and employee satisfaction goals, which will provide
cash compensation opportunities that are aligned with the company's core
objectives.

- Enhancing the deferral program to encourage deferrals of cash compensation
into company stock.

- Maximizing the tax deductibility of compensation paid to our employees
covered by Section 162(m) by submitting to stockholders a new common stock
incentive plan and performance incentive plan.

These changes result in increased base salaries and reduced stock option
awards for the named executive officers for 2000. The Committee believes these
changes reflect the needs of the future organization and will provide a
competitive level of fixed cash compensation, while offering a significant level
of performance-based cash and stock incentive compensation. The overall
objective of the program is to drive performance that leads to an above average
return for all stockholders.

UAL CORPORATION COMPENSATION COMMITTEE

<TABLE>
<S> <C>
Richard D. McCormick, Chairman James J. O'Connor
John W. Creighton, Jr. Deval L. Patrick
Frederick C. Dubinsky John F. Peterpaul
James E. Goodwin

UAL CORPORATION COMPENSATION ADMINISTRATION COMMITTEE

Richard D. McCormick, Chairman James J. O'Connor
John W. Creighton, Jr.
</TABLE>

21
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------------- -------------------------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($)(2) (#) ($)(3)
- ---------------------------- -------- -------- --------------- ------------ ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Greenwald 1999 385,710 383,356 99,685 0 173,500 [183,303]
1998 697,629 725,000 79,723 0 91,550 205,322
1997 670,490 725,000 94,839 0 47,550 427,048

Goodwin 1999 572,843 580,000 446 3,912,500 251,700 [74,824]
1998 306,374 309,500 4,586 0 49,500 76,963
1997 249,712 183,391 904 0 15,250 108,597

Dutta 1999 351,596 280,000 29,542 1,581,250 65,300 [10,522]

Hacker 1999 344,546 245,000 9,001 1,581,250 65,300 [15,397]
1998 311,449 227,400 9,001 0 32,150 85,301
1997 299,470 220,000 10,333 0 15,250 122,116

Studdert 1999 294,311 210,000 7,628 1,581,250 45,800 [12,021]
1998 240,514 186,200 6,135 0 24,150 63,809

Maher 1999 242,338 150,000 9,592 0 42,100 [11,555]
</TABLE>

- ------------------------

<TABLE>
<S> <C> <C>
Greenwald = Gerald Greenwald, Former Chairman and Chief Executive Officer
Goodwin = James E. Goodwin, Chairman and Chief Executive Officer
Dutta = Rono J. Dutta, President
Hacker = Douglas A. Hacker, Executive Vice President and Chief Financial Officer
Studdert = Andrew P. Studdert, Executive Vice President and Chief Operating Officer
Maher = Francesca M. Maher, Senior Vice President, General Counsel and Secretary
</TABLE>

- ------------------------

(1) For Mr. Greenwald, amount includes $22,868 in 1999, $42,120 in 1998, $41,868
in 1997 for term life insurance benefits and $59,302 in 1999, $20,024 in
1998, $15,000 in 1997 for automobile benefits.

(2) The number of shares of restricted stock or units awarded and the number and
value of restricted stock holdings at December 31, 1999 is: Mr. Goodwin,
50,000 units (each unit represents the right to receive a share of common
stock), $3,878,125; each of Messrs. Dutta, Hacker and Studdert, 25,000
shares, $1,939,063. Mr. Goodwin's grant vests in five equal annual
installments beginning July 13, 2000; the others vest 100% five years from
the date of grant. His award is valued as of April 12, 1999 and the others
are valued as of July 13, 1999. No dividends have been paid on the
restricted shares, but the holders have the right to receive any dividends
paid.

(3) Amounts include value of shares of ESOP preferred stock allocated to the
officer's account for 1999, 1998 and 1997 (as applicable) as follows, based
upon the applicable year-end closing price of common stock multiplied by the
number of shares of common stock issuable upon conversion of ESOP preferred
stock: Mr. Greenwald, $ , $105,826, $309,598; Mr. Goodwin, $ ,
$66,253, $97,958; Mr. Dutta, $ ; Mr. Hacker, $ , $71,625,
$115,163; Mr. Studdert, $ , $52,764; and Ms. Maher, $ . Balance
represents compensation for split dollar insurance program premiums and for
Mr. Greenwald, $74,410 of accrued but unused vacation.

22
<PAGE>
OPTION GRANTS IN 1999

This table gives information about stock options we granted during 1999 to
the officers named in the Summary Compensation Table. The hypothetical present
values of stock options granted in 1999 are calculated under a modified
Black-Scholes model, a mathematical formula used to value options. The actual
amount realized upon exercise of stock options will depend upon the amount by
which the market price of common stock on the date of exercise is greater than
the exercise price. The officers will not be able to realize a gain from the
stock options granted unless, during the exercise period, the market price of
common stock is above the exercise price of the options.

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE HYPOTHETICAL
UNDERLYING GRANTED TO OR BASE PRESENT VALUE AT
OPTIONS EMPLOYEES IN PRICE EXPIRATION DATE OF GRANT
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE $(2)
- ---- ------------- ------------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Gerald Greenwald 173,500 8.3 62.7188 2/23/09 3,778,830

James E. Goodwin 84,200 4.0 62.7188 2/23/09 1,833,876
167,500 8.0 78.4688 4/11/09 4,564,375

Rono J. Dutta 65,300 3.1 62.7188 2/23/09 1,422,234

Douglas A. Hacker 65,300 3.1 62.7188 2/23/09 1,422,234

Andrew P. Studdert 45,800 2.2 62.7188 2/23/09 997,524

Francesca M. Maher 42,100 2.0 62.7188 2/23/09 916,938
</TABLE>

- ------------------------

(1) All options become exercisable in four equal annual installments commencing
February 24, 2000, one year from the date of grant, with the exception of
Mr. Goodwin's option granted April 12, 1999, which becomes exercisable in
four equal annual installments beginning July 13, 2000. The options are
transferable, at the officer's election, to certain family members.

(2) To realize hypothetical present values upon the exercise of the options, the
market price would have increased to $84.50 and $105.72 for the
February 24, 1999 and April 12, 1999 grants, respectively. The modified
Black-Scholes model used to calculate the hypothetical values at date of
grant considers a number of factors to estimate the option's present value,
including the stock's historic volatility calculated using the monthly
closing price of common stock over a 55 month period ending February 1999,
the estimated average holding period of the option, interest rates and the
stock's expected dividend yield. The assumptions used in the valuation of
the options were: stock price volatility--.34, holding period--4 years,
interest rate--5.25%, and dividend yield--0%.

THERE IS NO ASSURANCE THAT THE HYPOTHETICAL PRESENT VALUES OF STOCK OPTIONS
PRESENTED IN THE TABLE ABOVE REPRESENT THE ACTUAL VALUES OF THE OPTIONS, AND THE
HYPOTHETICAL VALUES SHOWN SHOULD NOT BE VIEWED AS OUR PREDICTIONS OF THE FUTURE
VALUE OF COMMON STOCK.

23
<PAGE>
AGGREGATED 1999 FY-END OPTION VALUES(1)

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT
OPTIONS AT FY-END (#) FY-END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- ----------------------------
<S> <C> <C> <C>
Gerald Greenwald 945,661/298,939 46,410,118/3,370,434

James E. Goodwin 148,999/306,451 6,758,243/1,633,265

Rono Dutta 83,911/108,539 2,688,494/1,246,357

Douglas A. Hacker 159,961/108,539 6,934,243/1,246,357

Andrew P. Studdert 49,761/78,139 1,370,818/794,281

Francesca M. Maher 38,800/73,600 1,192,315/915,952
</TABLE>

- ------------------------

(1) Options granted prior to July 12, 1994 are exercisable for two shares of
common stock and $84.81 (after adjustment for the 1996 four-for-one stock
split). The value of those options includes the cash amount to be delivered
when exercised. Values measured using common stock closing price on
December 31, 1999 of $77.5625.

PENSION PLAN TABLE

<TABLE>
<CAPTION>
YEARS OF PARTICIPATION
FINAL -----------------------------------------------------------------
AVERAGE PAY 15 20 25 30 35 40
- --------------------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
200,00$0........ $48,000 $64,000 $80,000 $96,000 $ 112,000 $ 128,000
400,000........ 96,000 128,000 160,000 192,000 224,000 256,000
600,000........ 144,000 192,000 240,000 288,000 336,000 384,000
800,000........ 192,000 256,000 320,000 384,000 448,000 512,000
1,000,000...... 240,000 320,000 400,000 480,000 560,000 640,000
1,200,000...... 288,000 384,000 480,000 576,000 672,000 768,000
1,400,000...... 336,000 448,000 560,000 672,000 784,000 896,000
1,600,000...... 384,000 512,000 640,000 768,000 896,000 1,024,000
1,800,000...... 432,000 576,000 720,000 864,000 1,008,000 1,152,000
2,000,000...... 480,000 640,000 800,000 960,000 1,120,000 1,280,000
</TABLE>

This table is based on retirement at age 65 and selection of a straight life
annuity (other annuity options are available, which would reduce the amounts
shown). The amount of the normal retirement benefit under the plan is the
product of 1.6% times years of credited participation in the plan times final
average pay (highest five of last 10 years of covered compensation). The
retirement benefit amount is not offset by the participant's social security
benefit. Compensation used in calculating benefits under the plan includes base
salary and amounts shown as bonus in the Summary Compensation Table. Under the
qualified plan, years of participation for persons named in the compensation
table are as follows: Mr. Goodwin--32 years; Mr. Dutta--14 years;
Mr. Hacker--6 years; Mr. Studdert--4 years; and Ms. Maher--6 years. The amounts
shown do not reflect limitations imposed by the Internal Revenue Code on
retirement benefits that may be paid under plans qualified under the code.
United has agreed to provide under non-qualified plans the portion of the
retirement benefits earned under the pension plan that would otherwise be
subject to code limitations.

We agreed to supplement Mr. Hacker's benefit by granting him credit for one
additional year of service.

24
<PAGE>
EMPLOYMENT CONTRACTS AND ARRANGEMENTS

GREENWALD'S TERMINATION AGREEMENT

In connection with Mr. Greenwald's retirement in 1999, we amended his
employment agreement so that his remaining restricted stock award immediately
vested on July 12, 1999, the end of his employment with us. We agreed to provide
him with office and secretarial support for five years so that he may assist us
as needed with issues originating when he was CEO.

We also agreed to reimburse Mr. Greenwald for three years for club
membership fees and give him title to two cars we provided him and to pay off
lease amounts on those cars. Unless our Board consents otherwise, Mr. Greenwald
agreed for two years not to take a competitive position with a competitor, which
includes advising or consulting with any airline regarding negotiations with us.
If he takes a competitive position, he stops receiving the benefits described
above.

Under his employment agreement, Mr. Greenwald's option grants will continue
to vest under the normal vesting schedules in the option agreements.

GOODWIN'S EMPLOYMENT AGREEMENT

We entered into a five year employment agreement with Mr. Goodwin effective
July 13, 1999. This agreement provides for an annual base salary of $725,000
subject to increases as part of the normal salary program for our senior
executives. Under his employment agreement, Mr. Goodwin is eligible to receive
an annual bonus under the company's Incentive Compensation Plan or other annual
incentive plan. Mr. Goodwin's target percentage can be no less than the maximum
percentage permitted under the incentive plan (called the target bonus). He is
entitled to an additional 20% over this target bonus amount under the plan for
superior performance; provided this extraordinary bonus will be paid outside the
plan.

Under the employment agreement, if the incentive plan is amended or replaced
with a new plan, Mr. Goodwin's incentive award will be determined under the
terms of the new plan; provided that his target percentage and maximum
percentage will be no less than 100% of his base salary with an additional 20%
over the target percentage for superior performance.

As part of the employment agreement, Mr. Goodwin received an option grant of
167,500 shares and 50,000 restricted share units as described in the
Compensation Committee report.

If Mr. Goodwin's employment is terminated by us without "cause," or by him
for "good reason," we will pay him his base salary, any annual bonus and any
earned and vested benefits he may be due through the termination date. We will
also pay Mr. Goodwin a lump sum payment equal to his base salary and target
bonus multiplied by the greater of (1) the remaining term of his agreement or
(2) three years. Mr. Goodwin's participation in United's benefit plans will also
continue for this period. All long term incentive awards will immediately vest
on the termination date and any unvested stock options will continue to vest in
accordance with their terms. With respect to the retirement plan, he will be
credited with additional years of participation, if necessary, so that his years
of participation equal 40 and any benefit payments will not be subject to any
actuarial reduction for early payment.

OFFICER SEVERANCE AGREEMENTS

Each of the proxy-named officers (other than Mr. Goodwin) is party to a
Severance Agreement with the company and United that provides for certain
benefits if the executive's employment with United is (1) involuntarily
terminated without "cause", or (2) constructively terminated due to, among other
things, a substantial adverse alteration of the nature or status of the
officer's responsibilities or a reduction in compensation or benefits. Upon
termination, the officer will be entitled to receive (1) two years base salary
and bonus continuation, (2) benefits continuation for the term, and
(3) continued vesting and exercisability of outstanding stock option grants. The
Severance Agreements terminate on January 13, 2001.

25
<PAGE>
PROPOSAL NO. 2

APPROVAL OF AMENDMENTS TO OUR RESTATED CERTIFICATE OF INCORPORATION FOR PURPOSES
OF DIVIDENDS

The Board of Directors unanimously approved amendments to our Restated
Certificate of Incorporation on October 28, 1999, which allow for the Class 1
and 2 ESOP Preferred Stocks to participate in any dividend on common stock in
the same manner as common stockholders.

THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
CHARTER AMENDMENTS.

A summary of the material provisions of the charter amendments is set forth
below and is qualified in its entirety by reference to the full text of the
attached as Appendix A.

We have announced our intention to begin a dividend program for cash
dividends on common stock beginning in the 2nd quarter of 2000, subject to the
stockholders approving amendments to our charter. Under our charter, the
Class 1 and 2 ESOP Preferred Stocks participate in any dividend on common stock.
However, the Class 1 preferred stock would be paid annually as opposed to the
frequency in which the common stock dividend would be paid.

Our Board thought it was in the best interests of both common stockholders
and employee shareholders that dividends on common stock be paid on the same
dividend payment dates to all stockholders. The amendments facilitate the
administration of the dividend payments. Under the charter amendments, if the
Board declares a quarterly cash dividend on common stock, the common
stockholders would receive the dividend quarterly and the employee shareholders
would participate in the dividend on the same quarterly payment dates. Without
the amendment, the common stockholders would be paid quarterly and the holders
of the Class 1 preferred would be paid annually. Our Board felt it beneficial to
amend our charter to allow the Class 1 and 2 preferred stocks to participate in
any common stock dividend in the same manner as common stockholders (in other
words, to be paid in the same frequency).

We have amended our ESOP to provide, subject to stockholder approval of the
charter amendments, for the pass through to ESOP participants of any cash
dividend on common stock as a participating dividend on ESOP stock. We are
seeking a favorable determination letter from the IRS as to the continued tax
qualified status of the ESOP as a result of the amendment. Subject to our
receipt of the letter and stockholder approval of the charter amendments, if the
Board declared and paid a cash dividend on common stock, we would be able to
take a tax deduction in the amount of the dividend passed through to ESOP
participants. In this regard, if a cash dividend of $1.25 per common share were
paid, we would benefit from a tax deduction of approximately $85 million per
year.

The payment of dividends is contingent upon stockholder approval of the
charter amendments.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF AMENDMENTS TO
OUR RESTATED CERTIFICATE OF INCORPORATION.

26
<PAGE>
PROPOSAL NO. 3

APPROVAL OF UNITED EMPLOYEES PERFORMANCE INCENTIVE PLAN FOR PURPOSES OF IRC
SECTION 162(M)

On December 16, 1999 our Board unanimously adopted the United Employees
Performance Incentive Plan, effective January 1, 2000. This plan replaces our
prior UAL Corporation Incentive Compensation and Profit Sharing Plan and covers
all U. S. management and administrative, and designated international employees
of United and our designated subsidiaries. At the annual meeting our
stockholders will vote on whether to approve the plan as it relates to certain
awards described below.

THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
PLAN. A vote in favor of the Plan will constitute approval under Section 162(m)
of each of the material terms of the Plan, including the performance objectives
described below, for purposes of paying certain designated incentive awards to
covered employees.

BACKGROUND--SECTION 162(M) EXEMPTION

We are asking our stockholders to vote on the plan in order to satisfy the
requirements of Section 162(m) of the Internal Revenue Code.

Section 162(m) limits our ability to deduct compensation that we pay to
certain of our executive employees when determining our federal tax liability.
These limitations apply to compensation in excess of $1 million per year that we
pay to our chief executive officer and each of our four other highest paid
executive officers.

Certain types of compensation are excluded from the calculation of the
$1 million limit in Section 162(m). These include compensation under plans that
are "performance based" and are approved by our stockholders. "Performance
based" compensation under Section 162(m) is compensation based on the attainment
of one or more objective performance goals, the material terms of which are
approved by stockholders.

In order to maximize our ability to deduct compensation (covered awards)
paid to our employees covered by Section 162(m) (covered employees), our Board
requests that the stockholders approve the plan as it relates to payment of
certain designated incentive awards to covered employees. These covered awards
will not be paid to the covered employees if the stockholders do not approve
this proposal at the annual meeting.

SUMMARY DESCRIPTION OF THE UNITED EMPLOYEES PERFORMANCE INCENTIVE PLAN

The following summarizes the material terms of the plan applying to
incentive awards designated by the Compensation Administration Committee
(referred to as the committee) of our Board as covered awards payable to
employees covered by Section 162(m). This summary is qualified in its entirety
by reference to the actual text of the plan.

PURPOSE

The plan is designed to promote our financial interests by providing a means
of attracting and retaining highly qualified employees, motivating these
employees through performance related incentives, and providing incentive
compensation opportunities that are competitive with those of other major
corporations.

27
<PAGE>
ADMINISTRATION

Awards to covered employees that are to be deductible under Section 162(m)
will be administered by the committee, which must consist solely of two or more
"outside directors" within the meaning of Section 162(m).

ELIGIBLE EMPLOYEES

On an annual basis, the committee will select the covered employees who are
eligible to receive a covered award under the plan.

To be entitled to receive an award in a given year, the covered employee
must be actively employed at the time the incentive award is paid, or, in the
case of deferred awards, at the time the award would have been paid but for the
covered employee's deferral election. In its sole discretion, the committee may
pay an award to a terminated covered employee.

LIMITATIONS ON INCENTIVE AWARDS

For each year, the committee will establish a threshold level of pre-tax
profit margin (pre-tax earnings divided by gross revenues) which must be
obtained before awards are made to any covered employees.

In establishing the threshold, pre-tax earnings are determined under
generally accepted accounting principles, but adjusted to exclude items relating
to (a) the UAL Corporation ESOP, (b) our restricted stock plans, (c) for those
years in which we enter into labor contracts with ALPA or the IAM to replace
contracts becoming amendable in 2000, any differential between our projected
labor costs and our actual labor attributable to such contract(s), and (d) any
event or occurrence that, in the judgment of the committee, was not directly
related to our operations or within the reasonable control of our management.
Gross revenues for purposes of calculating the threshold are also determined
under generally accepted accounting principles, but adjusted to exclude any
event or occurrence that, in the judgement of the committee, was not directly
related to our operations or within the reasonable control of our management.

In any event, a covered award payable to a covered employee may not exceed
$3 million for any year.

DETERMINATION OF INCENTIVE AWARDS; PERFORMANCE OBJECTIVES

A covered award payable to a covered employee will be based on performance
objectives established by the committee at the beginning of the year and on the
covered employee's performance for the year.

Prior to the beginning of each year, the committee will establish an
"incentive opportunity" for each covered employee, expressed as a percentage of
their base compensation. The incentive opportunity will be subject to the
attainment of one or more objectively determinable performance objectives
established by the committee for the year. The committee will establish
performance objectives from one or more of the following measures:

- specified levels of growth in, or peer company performance in, or relating
to, customer satisfaction as measured by a company-sponsored customer
survey;

- employee engagement, as measured by a company-sponsored employee survey;

- employee safety;

- employee diversity;

28
<PAGE>
- financial performance, as measured by sales, net income, profits (pre-tax
and after-tax), adjusted pre-tax margin, earnings before interest and
taxes, cash flow, earnings per share, reduction of fixed costs, economic
value added, return on assets, return on capital, return on equity,
shareholder return, cost of capital, debt reductions, productivity
improvements; and

- operational performance, as measured by load factor, passenger yield
management, lost time incidents, baggage handling performance, or on-time
performance.

Performance objectives may be described in terms of company, subsidiary,
major business segment, division or departmental performance. If more than one
performance objective is selected, then the committee will weight each
performance objective for the year. The performance objective(s) may be assigned
specific factors for the attainment of threshold, target or maximum levels of
performance.

Each covered employee is also assigned an individual performance modifier of
120%, subject to reduction by the committee following the end of the year based
on his or her individual performance for the year.

The covered employee's individual performance modifier, together with the
attained performance objective factors, will establish the extent to which each
covered employee is entitled to their incentive opportunity. Because the
performance objective factors and an individual performance modifier may exceed
100%, a covered employee may be entitled to an incentive award in excess of his
or her incentive opportunity for the year.

At the beginning of an award year, the committee may also establish a
covered award for covered employees based solely on attainment of a single
financial performance objective. However, the committee will have complete
discretion to reduce the amount of any such award.

Because covered awards under the plan are subject to the discretion of the
committee and subject to the attainment of the performance objectives, the
benefits or amounts that will be allocated to covered employees under the plan
are not determinable at this time.

PAYMENT OF COVERED AWARDS; ELECTION TO DEFER RECEIPT AND RECEIVE COMMON STOCK

Covered awards will be paid to covered employees in cash as soon as
practicable following the end of each year. Covered employees will be given the
option to defer the receipt of an award to a future year. The deferred award
will be credited with interest at prime, determined and compounded at the end of
each calendar quarter.

Payment of a covered employee's deferred award will be accelerated upon
termination of employment. Payment may also be accelerated upon request in the
event of an unforeseeable emergency, or with a forfeiture of 10% of the amount
distributed.

Each covered employee who elects to defer receipt of his or her award will
have a right to elect to have the award paid in shares of our common stock. The
amount of stock to be distributed will equal the amount of stock that would have
been paid if the award had not been deferred, as adjusted for dividends, stock
splits and changes in fair market value during the deferral period.

20% INDUCEMENT TO ELECT TO RECEIVE UAL CORPORATION STOCK

Each covered employee who (1) elects to defer receipt of an award for at
least five years following the award year, (2) elects to receive that award in
the form of stock, and (3) actually receives the award more than five years
following the award year, will receive an additional stock payment equal to 20%
of the award at the time the deferred award is distributed.

29
<PAGE>
AMENDMENT OR TERMINATION

Our Board may amend or terminate the plan, in whole or in part, from time to
time. With respect to covered employees, the Board or the committee may also
amend the performance objectives selected for a year and may modify the time and
manner for payment of any award prior to its payment, as long as the
modifications are not detrimental to the covered employee.

RECOMMENDATION

Our Board of Directors recommends that you vote FOR approval of the plan as
it relates to the issuance by the committee of covered awards to covered
employees. A vote in favor of the plan will constitute approval, for purposes of
the exemption from Section 162(m), of each of the material terms of the plan,
including the performance objectives described above, and will authorize the
committee to issue designated, "performance based" awards under the plan to
covered employees.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE UNITED EMPLOYEES
PERFORMANCE INCENTIVE PLAN.

30
<PAGE>
PROPOSAL NO. 4

APPROVAL OF UAL CORPORATION 2000 INCENTIVE STOCK PLAN

The grant of stock options is an integral part of our executive incentive
program. As of March 3, 2000, 84,781 shares of our common stock were available
for future grants and awards under the UAL Corporation 1981 Incentive Stock
Plan.

Our Board of Directors has determined that, as a publicly held company, we
need a new incentive stock plan in order to provide incentives to attract and
retain outstanding individuals who are officers or other key executives of the
company and its subsidiaries. On February 24, 2000, our Board unanimously
adopted the UAL Corporation 2000 Incentive Stock Plan. At the annual meeting our
stockholders will vote on whether to approve the plan.

The 2000 plan will become effective only and immediately upon approval by
our stockholders and will continue in effect until terminated by our Board. If
the new plan is approved by stockholders, the 1981 plan will be discontinued,
except as to outstanding grants.

THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
UAL CORPORATION 2000 INCENTIVE STOCK PLAN.

COMPENSATION PHILOSOPHY

We believe it is very important to align the economic well-being of our
senior management with yours and our long-term interests. For this reason, stock
options represent a significant component of compensation for senior management
employees. We believe that our continued ability to offer stock options is
critical to attracting and retaining talented individuals for our senior
management ranks.

ADMINISTRATION

The 2000 plan will be administered by the Compensation Committee or, for
grants intended to be qualified under Section 162(m) of the Internal Revenue
Code or exempt under Section 16 of the securities exchange act, the Compensation
Administration Committee of our Board. Both committees are referred to as the
committee. The form and amount of any grant or award, as well as the time and
conditions of exercise or vesting (as well as any acceleration of the time of
exercise or vesting) are subject to the discretion of the committee.

SHARES SUBJECT TO THE 2000 PLAN

The total number of shares reserved for issuance under the 2000 plan is the
sum of the following:

(1) 8,000,000 newly issued or treasury shares;

(2) 84,781 shares remaining under the 1981 plan; and

(3) any shares represented by options forfeited, cancelled or expired under the
1981 plan or the 2000 plan or which are used to satisfy tax withholding
obligations.

The total amount reserved under this plan will gradually reduce as options
are granted. A grantee may pay the option price with cash or with common stock
that is already owned. When shares are used to pay the option purchase price,
only the net number of shares issued will reduce the amount of shares reserved
under the 2000 plan.

The maximum number of shares issuable under this plan and the number and/or
price of shares subject to any outstanding award may be appropriately adjusted
by the committee to reflect changes in our capitalization by stock dividends,
stock rights, recapitalizations, reorganizations, mergers,

31
<PAGE>
consolidations, combinations, exchanges or other relevant changes in corporate
structure or capitalization.

PARTICIPATION

Based on the recommendations of management, the committee will make grants
to certain officers and key employees (including officers who may also be
directors) of the company or any of its subsidiaries. The number of shares with
respect to which grants may be made under the 2000 plan to any individual during
any one calendar year period is limited to 250,000 (500,000 with respect to
grants made to any employee as a condition of employment), subject to adjustment
for changes in our capitalization.

TERMS OF AWARDS

At the discretion of the committee, participants in the 2000 plan may
receive grants of incentive stock options under IRC Section 422, non-qualified
stock options that are not intended to qualify under Section 422, stock
appreciation rights, or any combination. The committee may allocate up to
8,000,000 shares for issuance of incentive stock options.

Except for stock option awards to certain members of senior management and
as the committee otherwise provides, awards under this plan are generally not
transferable, other than by will or the laws of descent and distribution.

The option price for incentive stock options and non-qualified stock options
may not be less than 100% of the fair market value of our common stock on the
date of grant. The closing price of common stock as reported by the NYSE
composite transaction tape for [MARCH , 2000] was [$ ]. The duration of
options granted under the 2000 plan cannot exceed 10 years.

Stock appreciation rights that may be granted may be exercisable in cash, in
common stock, or in a combination of cash and common stock. These rights may be
granted to any participant in the 2000 plan in connection with or independent of
a non-qualified stock option. Upon exercise, the holder of a stock appreciation
right will receive up to 100% of the appreciation in fair market value of the
shares subject to the stock appreciation right. In the case of a stock
appreciation right that has been granted in connection with a non-qualified
stock option, the appreciation is measured from the option price. Exercise of a
stock appreciation right reduces the number of shares reserved for issuance
under this plan by the number of shares as to which the stock appreciation right
is exercised. There are no stock appreciation rights outstanding.

AMENDMENT AND TERMINATION OF PROGRAM

Our Board may amend the 2000 plan from time to time or terminate it at any
time. However, our Board may not, without the participant's consent, adversely
affect the rights of a participant under any option or stock appreciation right
granted. Unless our Board later extends the 2000 plan, it will automatically
terminate on May 18, 2010 except as to awards outstanding at that date.

FEDERAL INCOME TAX CONSEQUENCES

The Federal income tax consequences to participants in this plan and the
company under the Internal Revenue Code and the regulations thereunder as now in
effect are substantially as follows.

With respect to non-qualified stock options and stock appreciation rights, a
grantee is not deemed to receive any income at the time of grant, nor is his or
her employer entitled to a deduction at that

32
<PAGE>
time. However, when any part of a non-qualified stock option or stock
appreciation right is exercised, the grantee is deemed to have received ordinary
income to the extent of:

(1) in the case of non-qualified stock options, in an amount equal to the
difference between the option price and the fair market value of the shares
acquired upon exercise, and

(2) in the case of stock appreciation rights, in an amount equal to the sum of
the fair market value of the shares and any cash received.

The grantee's employer generally is entitled to a tax deduction in an amount
equal to the amount of ordinary income realized by the optionee.

With respect to incentive stock options, an optionee is not deemed to
receive any income at the time of grant or exercise, and the employer is not
entitled to any deduction. If the grantee disposes of the stock prior to the
expiration of the holding period required by Section 422 of the Internal Revenue
Code, he or she will have ordinary income in the year of disposition equal to
the lesser of:

(1) the excess of the value of the shares on the exercise date over the option
price, or

(2) the excess of the amount received for the shares over the option price.

The employer generally is entitled to a tax deduction at such time in an
amount equal to the amount of ordinary income realized by the grantee. If the
grantee disposes of the stock after expiration of the holding period required by
Section 422 of the Internal Revenue Code, the excess of the amount received for
the shares over the option price will be taxed as long-term capital gain and no
deduction will be available to the employer.

A deduction otherwise available to us for any year with respect to
compensation payable to an executive officer may be denied to the extent that it
exceeds $1,000,000. For these purposes, it is anticipated the grants of options
and stock appreciation rights will generally qualify for an exemption to that
limitation for eligible performance-based compensation.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
UAL CORPORATION 2000 INCENTIVE STOCK PLAN.

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PROPOSAL NO. 5

APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

Our Board, at the recommendation of the Audit Committee, has appointed,
subject to your approval, the firm of Arthur Andersen LLP as independent public
accountants, to examine our financial statements for 2000. It is anticipated
that a representative of Arthur Andersen LLP will be present at the meeting and
will have the opportunity to make a statement, if he or she desires to do so,
and will be available to respond to appropriate questions at that time. If you
do not approve the appointment of Arthur Andersen LLP, our Board will reconsider
the selection of independent public accountants.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS OUR INDEPENDENT PUBLIC ACCOUNTANTS FOR 2000.

SUBMISSION OF STOCKHOLDER PROPOSALS

If a stockholder of record wishes to submit a proposal for inclusion in next
year's proxy statement and proxy card for our 2001 annual meeting, the proposal
must be submitted no later than November 23, 2000 and comply with SEC rules.
Failure to comply with SEC rules will cause your proposal to be excluded from
the proxy materials. All notices must be submitted to Francesca M. Maher,
Secretary, UAL Corporation, P.O. Box 66919, Chicago, Illinois 60666 and must
comply with the SEC rules.

To propose business or nominate a Public Director (as defined in our
charter) at the 2001 annual meeting, proper notice must be submitted by a
stockholder of record no later than January 18, 2001 in accordance with our
by-laws. The notice must contain the information required by the by-laws. No
business proposed by a stockholder can be transacted at the annual meeting, and
no nomination by a stockholder will be considered, unless the notice satisfies
the requirements of the by-laws. If we do not receive notice of any other matter
that you wish to raise at the annual meeting in 2001 on or before January 18,
2001, our bylaws provide that the matter shall not be transacted and the
nomination shall not be considered.

The Outside Public Director Nomination committee considers Public Director
nominees you recommend if submitted in writing to the Committee Chairman at UAL
Corporation, P. O. Box 66919, Chicago, IL 60666. Qualification requirements are
specified in our charter.

ANNUAL REPORT

A copy of our summary Annual Report for the year ended December 31, 1999,
has been mailed to you on or about March 23, 2000 with this proxy statement. Our
audited financial statements, along with other financial information, are
included in the Appendix B to this proxy statement.

Additional copies of the summary Annual Report and this notice of annual
meeting and proxy statement, including the appendix, and accompanying proxy may
be obtained from Georgeson Shareholder Communications Inc., 17 State Street, New
York, New York 10004 or from our Secretary.

A COPY OF OUR FORM 10-K TO THE SEC MAY BE OBTAINED WITHOUT CHARGE BY WRITING
TO FRANCESCA M. MAHER, SECRETARY, UAL CORPORATION, P.O. BOX 66919, CHICAGO,
ILLINOIS 60666. YOU CAN ALSO OBTAIN A COPY OF OUR FORM 10-K AND OTHER PERIODIC
FILINGS FROM THE SEC'S EDGAR DATABASE AT WWW.SEC.GOV.

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APPENDIX A

CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
UAL CORPORATION

UAL CORPORATION, a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

FIRST: That as of October 28, 1999, the Board of Directors of the
Corporation adopted resolutions proposing and declaring advisable that the
Restated Certificate of Incorporation of this Corporation (the "Restated
Certificate") be amended as follows:

(1) that Section 2.18 of Article FOURTH, Part II of the Restated Certificate
shall be amended to read in its entirety as follows:

2.18 "DIVIDEND PAYMENT DATE" means a date on which Participating Dividends
are paid on the Class 1 ESOP Preferred Stock or on the Common Stock.

(2) that Section 2.19 of Article FOURTH, Part II of the Restated Certificate
shall be amended to read in its entirety as follows:

2.19 "DIVIDEND PERIOD" shall mean the period commencing March 31, 2000 or,
if later, the most recent Dividend Payment Date of the Class 1 ESOP Preferred
Stock.

(3) that Section 2.22 of Article FOURTH, Part II of the Restated Certificate
shall be amended to read in its entirety as follows:

2.22 "EXTRAORDINARY DISTRIBUTION" shall mean any single dividend or other
distribution (including by reclassification of shares or recapitalization of the
Corporation, as well as any such dividend or distribution made in connection
with a merger or consolidation in which the Corporation is the continuing
corporation and the Common Stock is not changed or exchanged) to holders of
Common Stock (effected while any of the shares of Class 1 ESOP Preferred Stock
are outstanding) (i) of cash, where the aggregate amount of such single cash
dividend or distribution together with the amount of all cash dividends and
distributions made to holders of Common Stock during the period from the most
recent Extraordinary Distribution Measuring Date until the payment date for such
cash dividend or distribution to holders of Common Stock, when combined with the
aggregate amount of all previous Pro Rata Repurchases during such period (for
this purpose, including only that portion of the aggregate purchase price of
each such Pro Rata Repurchase which is in excess of the Fair Market Value of the
Common Stock repurchased as determined on the Business Day prior to the public
announcement of such Pro Rata Repurchase made during such period), exceeds
twelve and one-half percent (12 1/2%) of the aggregate Fair Market Value of all
shares of Common Stock outstanding on the record date for determining the
shareholders entitled to receive such Extraordinary Distribution and (ii) of any
shares of capital stock of the Corporation (other than shares of Common Stock),
other securities of the Corporation (other than securities of the type referred
to in Sections 6.4(b) and 6.4(c) hereof), evidences of indebtedness of the
Corporation or any other person or any other property (including, without
limitation, shares of capital stock of any subsidiary of the Corporation), or
any combination thereof. The Fair Market Value of any such single dividend or
other distribution that, pursuant to clause (i), constitutes an Extraordinary
Distribution shall for purposes of the first paragraph of Section 6.4(d) hereof
be the sum of the Fair Market Value of such Extraordinary Distribution plus the
amount of any other cash dividends and distributions made within the relevant
period referred to above to holders of Common Stock to the extent such other
dividends and

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distributions were not previously included in the calculation of an adjustment
pursuant to the first paragraph of Section 6.4(d) hereof within such period.

(4) that the following Section 2.22.1 shall be added to Article FOURTH,
Part II of the Restated Certificate:

2.22.1 "EXTRAORDINARY DISTRIBUTION MEASURING DATE" shall mean the
penultimate Business Day in each year, commencing on such penultimate Business
Day in 1999.

(5) that Section 3 of Article FOURTH, Part II of the Restated Certificate
shall be amended to read in its entirety as follows:

SECTION 3. DIVIDENDS.

3.1 The holders of shares of the Class 1 ESOP Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
assets legally available for that purpose, dividends payable in cash at the rate
(per outstanding share of Common Stock) equal to the dividends which would have
been received during the applicable Dividend Period with respect to the shares
of Common Stock which would have been issued upon conversion of the Class 1 ESOP
Preferred Stock had the Class 1 ESOP Preferred Stock been outstanding as Common
Stock at each relevant time in order to receive such dividends (but only to the
extent such dividends do not constitute an Extraordinary Distribution under
clause (i) of the definition thereof), which dividends (hereinafter referred to
as "Participating Dividends") shall be paid in cash, pro-rata to each holder of
Class 1 ESOP Preferred Stock. Such Participating Dividends shall be cumulative
from March 31, 2000, whether or not in any Dividend Period or Periods there
shall be assets of the Corporation legally available for the payment of such
Participating Dividends and whether or not the Board of Directors shall have
declared such Participating Dividends, and shall be payable when, as and if
declared by the Board of Directors, in arrears on Dividend Payment Dates. Each
such Participating Dividend shall be payable in arrears to the holders of record
of shares of the Class 1 ESOP Preferred Stock, as they appear on the stock
records of the Corporation at the close of business on such record dates, which
shall not be more than 60 days nor less than 10 days preceding the Dividend
Payment Dates thereof, as shall be fixed by the Board of Directors. Accrued and
unpaid Participating Dividends for any past Dividend Periods may be declared and
paid at any time, without reference to any Dividend Payment Date, to holders of
record on such date, not exceeding 45 days preceding the payment date thereof,
as may be fixed by the Board of Directors. Holders of the Class 1 ESOP Preferred
Stock shall be entitled to the cumulative Participating Dividend provided in
this Section 3.1 and shall not be entitled to any other dividends in excess
thereof. In the event that an adjustment is made pursuant to the second
paragraph of Section 6.4(d) with respect to shares of Class 1 ESOP Preferred
Stock converted during the applicable Dividend Period, the amount of
Participating Dividend to be paid in accordance with the preceding sentence
shall be reduced by an amount equal to the product of (x) the number of shares
of Common Stock into which such converted shares of Class 1 ESOP Preferred Stock
would have been converted in the absence of such adjustment and (y) the amount
of the cash dividend or distributions per share of Common Stock in respect of
which such adjustment was made.

3.2 Except as provided in Section 3.1, holders of shares of Class 1 ESOP
Preferred Stock shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of cumulative Participating Dividends, as herein
provided, on the Class 1 ESOP Preferred Stock. No interest, or sum of money in
lieu of interest, shall be payable in respect of any Participating Dividend
payment or payments on the Class 1 ESOP Preferred Stock that may be in arrears

3.3 So long as any shares of the Class 1 ESOP Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any other class or series
of stock of the Corporation ranking on a parity with the Class 1 ESOP Preferred
Stock as to the payment of dividends for any period unless full cumulative
Participating

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Dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the
Class 1 ESOP Preferred Stock for all Dividend Periods terminating on or prior to
the date of payment of the dividends on such class or series of parity stock.
When Participating Dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, all dividends declared upon the Class 1
ESOP Preferred Stock and such parity stock shall be declared ratably in
proportion to the respective amounts of Participating Dividends accumulated and
unpaid on the Class 1 ESOP Preferred Stock and dividends accumulated and unpaid
on such parity stock.

3.4 So long as any shares of the Class 1 ESOP Preferred Stock are
outstanding, no dividends (other than (i) the Rights and (ii) dividends or
distributions paid in shares of, or options, warrants, or rights to subscribe
for or purchase shares of, any class or series of stock of the Corporation that
is junior to the Class 1 ESOP Preferred Stock as to the payment of dividends)
shall be declared or paid or set apart for payment or other distribution
declared or made upon any class or series of stock of the Corporation that is
junior to the Class 1 ESOP Preferred Stock as to the payment of dividends, nor
shall any other class or series of stock of the Corporation ranking on a parity
with or junior to the Class 1 ESOP Preferred Stock as to the payment of
dividends or as to distributions upon liquidation, dissolution or winding up of
the Corporation, be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan of the Corporation or any
subsidiary) for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly to the Class 1 ESOP Preferred Stock as to the payment of
dividends and as to distributions upon liquidation, dissolution or winding up of
the Corporation), unless in each case the full cumulative Participating
Dividends on all outstanding shares of the Class 1 ESOP Preferred Stock shall
have been paid or set apart for payment for all past Dividend Periods with
respect to the Class 1 ESOP Preferred Stock and such parity stock.

(6) that Section 6.4(d) of Article FOURTH, Part II of the Restated
Certificate shall be amended to read in its entirety as follows:

(d) In case the Corporation shall, at any time or from time to time while
any of the shares of Class 1 ESOP Preferred Stock are outstanding, make an
Extraordinary Distribution in respect of the Common Stock or effect a Pro Rata
Repurchase of Common Stock, the Conversion Rate in effect immediately prior to
such Extraordinary Distribution or Pro Rata Repurchase shall be adjusted by
multiplying such Conversion Rate by a fraction, the numerator of which shall be
the product of (i) the number of shares of Common Stock outstanding immediately
before such Extraordinary Dividend or Pro Rata Repurchase (minus, in the case of
a Pro Rata Repurchase, the number of shares of Common Stock repurchased by the
Corporation) multiplied by (ii) the Fair Market Value of a share of Common Stock
on the record date with respect to such Extraordinary Distribution or on the
Trading Day immediately preceding the first public announcement by the
Corporation or any of its Affiliates of the intent to effect a Pro Rata
Repurchase, as the case may be, and the denominator of which shall be (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such Extraordinary Distribution or Pro Rata Repurchase multiplied by
(y) the Fair Market Value of a share of Common Stock on the record date with
respect to such Extraordinary Distribution, or on the Trading Day immediately
preceding the first public announcement by the Corporation or any of its
Affiliates of the intent to effect a Pro Rata Repurchase, as the case may be,
minus (ii) the Fair Market Value of the Extraordinary Distribution or the
aggregate purchase price of the Pro Rata Repurchase, as the case may be
(provided that such denominator shall never be less than 1.0); PROVIDED,
HOWEVER, that no Pro Rata Repurchase shall cause an adjustment to the Conversion
Rate unless the amount of all cash dividends and distributions made to holders
of Common Stock during the period from the most recent Extraordinary
Distribution Measuring Date preceding the Effective Date of such Pro Rata
Repurchase, when combined with the aggregate amount of all Pro Rata Repurchases,
including such

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<PAGE>
Pro Rata Repurchase (for all purposes of this Section 7.4(d), including only
that portion of the Fair Market Value of the aggregate purchase price of each
Pro Rata Repurchase which is in excess of the Fair Market Value of the Common
Stock repurchased as determined on the Trading Day immediately preceding the
first public announcement by the Corporation or any of its Affiliates of the
intent to effect each such Pro Rata Repurchase), the Effective Dates of which
fall within such period, exceeds twelve and one-half percent (12 1/2%) of the
aggregate Fair Market Value of all shares of Common Stock outstanding on the
Trading Day immediately preceding the first public announcement by the
Corporation or any of its Affiliates of the intent to effect such Pro Rata
Repurchase. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
Extraordinary Distribution or immediately after the Effective Date of such Pro
Rata Repurchase.

Solely as an adjustment applicable to shares of Class 1 ESOP Preferred Stock
that are being converted into Common Stock as of a given date, and not as a
permanent adjustment to the Conversion Rate, the Conversion Rate in effect
immediately prior to such conversion shall be adjusted by multiplying such
Conversion Rate by a fraction, the numerator of which shall be the product of
(i) the number of shares of Common Stock outstanding immediately before such
conversion multiplied by (ii) the Fair Market Value of a share of Common Stock
on the date of such conversion, and the denominator of which shall be (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such conversion multiplied by (y) the Fair Market Value of a share of
Common Stock on the date of such conversion minus (ii) the Fair Market Value of
the cash dividends and distributions made on or before the date of such
conversion with a record date after the most recent Extraordinary Distribution
Measuring Date upon which Participating Dividends were paid in full, but only to
the extent that such cash dividends and distributions (a) would entitle the
holders of the shares of Class 1 ESOP Preferred Stock outstanding on such
conversion date to a dividend under Section 3.1 that has not been paid and
(b) would not constitute an Extraordinary Distribution (provided that such
denominator shall never be less than 1.0).

(7) that Section 8.2 of Article FOURTH, Part II of the Restated Certificate
shall be amended to read in its entirety as follows:

8.2 The Series A Preferred Stock and the Series B Preferred Stock shall each
be deemed to rank prior to the Class 1 ESOP Preferred Stock both as to the
payment of dividends and as to the distribution of assets upon liquidation,
dissolution or winding up. The Series D Preferred Stock shall be deemed to rank
prior to the Class 1 ESOP Preferred Stock as to the distribution of assets upon
liquidation, dissolution, or winding up. The Class 2 ESOP Preferred Stock shall
be deemed to rank on a parity with the Class 1 ESOP Preferred Stock as to the
payment of dividends and as to amounts distributable upon liquidation,
dissolution or winding up. The Common Stock, the Director Preferred Stocks, the
Voting Preferred Stocks and the Series C Preferred Stock shall each be deemed to
rank junior to the Class 1 ESOP Preferred Stock both as to the payment of
dividends and as to the distribution of assets upon liquidation, dissolution or
winding up.

(8) that Section 2.18 of Article FOURTH, Part III of the Restated
Certificate shall be amended to read in its entirety as follows:

2.18 "DIVIDEND PAYMENT DATE" means a date on which Participating Dividends
are paid on the Class 2 ESOP Preferred Stock or on the Common Stock.

(9) that Section 2.19 of Article FOURTH, Part III of the Restated
Certificate shall be amended to read in its entirety as follows:

2.19 "DIVIDEND PERIOD" shall mean the period commencing March 31, 2000 or,
if later, the most recent Dividend Payment Date of the Class 2 ESOP Preferred
Stock.

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<PAGE>
(10) that Section 2.22 of Article FOURTH, Part III of the Restated
Certificate shall be amended to read in its entirety as follows:

2.22 "EXTRAORDINARY DISTRIBUTION" shall mean any single dividend or other
distribution (including by reclassification of shares or recapitalization of the
Corporation, as well as any such dividend or distribution made in connection
with a merger or consolidation in which the Corporation is the continuing
corporation and the Common Stock is not changed or exchanged) to holders of
Common Stock (effected while any of the shares of Class 2 ESOP Preferred Stock
are outstanding) (i) of cash, where the aggregate amount of such single cash
dividend or distribution together with the amount of all cash dividends and
distributions made to holders of Common Stock during the period from the most
recent Extraordinary Distribution Measuring Date until the payment date for such
cash dividend or distribution to holders of Common Stock, when combined with the
aggregate amount of all previous Pro Rata Repurchases during such period (for
this purpose, including only that portion of the aggregate purchase price of
each such Pro Rata Repurchase which is in excess of the Fair Market Value of the
Common Stock repurchased as determined on the Business Day prior to the public
announcement of such Pro Rata Repurchase made during such period), exceeds
twelve and one-half percent (12 1/2%) of the aggregate Fair Market Value of all
shares of Common Stock outstanding on the record date for determining the
shareholders entitled to receive such Extraordinary Distribution and (ii) of any
shares of capital stock of the Corporation (other than shares of Common Stock),
other securities of the Corporation (other than securities of the type referred
to in Sections 6.4(b) and 6.4(c) hereof), evidences of indebtedness of the
Corporation or any other person or any other property (including, without
limitation, shares of capital stock of any subsidiary of the Corporation), or
any combination thereof. The Fair Market Value of any such single dividend or
other distribution that, pursuant to clause (i), constitutes an Extraordinary
Distribution shall for purposes of the first paragraph of Section 6.4(d) hereof
be the sum of the Fair Market Value of such Extraordinary Distribution plus the
amount of any other cash dividends and distributions made within the relevant
period referred to above to holders of Common Stock to the extent such other
dividends and distributions were not previously included in the calculation of
an adjustment pursuant to the first paragraph of Section 6.4(d) hereof within
such period.

(11) that the following Section 2.22.1 shall be added to Article FOURTH,
Part III of the Restated Certificate in its entirety:

2.22.1 "EXTRAORDINARY DISTRIBUTION MEASURING DATE" shall mean the
penultimate Business Day in each year, commencing on such penultimate Business
Day in 1999.

(12) that Section 3 of Article FOURTH, Part III of the Restated Certificate
shall be amended to read in its entirety as follows:

SECTION 3. DIVIDENDS.

3.1 The holders of shares of the Class 2 ESOP Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
assets legally available for that purpose, dividends payable in cash at the rate
(per outstanding share of Common Stock) equal to the dividends which would have
been received during the applicable Dividend Period with respect to the shares
of Common Stock which would have been issued upon conversion of the Class 2 ESOP
Preferred Stock had the Class 2 ESOP Preferred Stock been outstanding as Common
Stock at each relevant time in order to receive such dividends (but only to the
extent such dividends do not constitute an Extraordinary Distribution under
clause (i) of the definition thereof), which dividends (hereinafter referred to
as "Participating Dividends") shall be paid in cash, pro-rata to each holder of
Class 2 ESOP Preferred Stock. Such Participating Dividends shall be cumulative
from March 31, 2000, whether or not in any Dividend Period or Periods there
shall be assets of the Corporation legally available for the payment of such
Participating Dividends and whether or not the Board of Directors shall have
declared such Participating Dividends, and shall be payable when, as and if
declared by the Board of Directors, in

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<PAGE>
arrears on Dividend Payment Dates. Each such Participating Dividend shall be
payable in arrears to the holders of record of shares of the Class 2 ESOP
Preferred Stock, as they appear on the stock records of the Corporation at the
close of business on such record dates, which shall not be more than 60 days nor
less than 10 days preceding the Dividend Payment Dates thereof, as shall be
fixed by the Board of Directors. Accrued and unpaid Participating Dividends for
any past Dividend Periods may be declared and paid at any time, without
reference to any Dividend Payment Date, to holders of record on such date, not
exceeding 45 days preceding the payment date thereof, as may be fixed by the
Board of Directors. Holders of the Class 2 ESOP Preferred Stock shall be
entitled to the cumulative Participating Dividend provided in this Section 3.1
and shall not be entitled to any other dividends in excess thereof. In the event
that an adjustment is made pursuant to the second paragraph of Section 6.4(d)
with respect to shares of Class 2 ESOP Preferred Stock converted during the
applicable Dividend Period, the amount of Participating Dividend to be paid in
accordance with the preceding sentence shall be reduced by an amount equal to
the product of (x) the number of shares of Common Stock into which such
converted shares of Class 2 ESOP Preferred Stock would have been converted in
the absence of such adjustment and (y) the amount of the cash dividend or
distributions per share of Common Stock in respect of which such adjustment was
made.

3.2 Except as provided in Section 3.1, holders of shares of Class 2 ESOP
Preferred Stock shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of cumulative Participating Dividends, as herein
provided, on the Class 2 ESOP Preferred Stock. No interest, or sum of money in
lieu of interest, shall be payable in respect of any Participating Dividend
payment or payments on the Class 2 ESOP Preferred Stock that may be in arrears

3.3 So long as any shares of the Class 2 ESOP Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any other class or series
of stock of the Corporation ranking on a parity with the Class 2 ESOP Preferred
Stock as to the payment of dividends for any period unless full cumulative
Participating Dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such payment
on the Class 2 ESOP Preferred Stock for all Dividend Periods terminating on or
prior to the date of payment of the dividends on such class or series or parity
stock. When Participating Dividends are not paid in full or a sum sufficient for
such payment is not set apart, as aforesaid, all dividends declared upon the
Class 2 ESOP Preferred Stock and such parity stock shall be declared ratably in
proportion to the respective amounts of Participating Dividends accumulated and
unpaid on the Class 2 ESOP Preferred Stock and dividends accumulated and unpaid
on such parity stock.

3.4 So long as any shares of the Class 2 ESOP Preferred Stock are
outstanding, no dividends (other than (i) the Rights and (ii) dividends or
distributions paid in shares of, or options, warrants, or rights to subscribe
for or purchase shares of, any class or series of stock of the Corporation that
is junior to the Class 2 ESOP Preferred Stock as to the payment of dividends)
shall be declared or paid or set apart for payment or other distribution
declared or made upon any class or series of stock of the Corporation that is
junior to the Class 2 ESOP Preferred Stock as to the payment of dividends, nor
shall any other class or series of stock of the Corporation ranking on a parity
with or junior to the Class 2 ESOP Preferred Stock as to the payment of
dividends or as to distributions upon liquidation, dissolution or winding up of
the Corporation, be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan of the Corporation or any
subsidiary) for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly to the Class 2 ESOP Preferred Stock as to the payment of
dividends and as to distributions upon liquidation, dissolution or winding up of
the Corporation), unless in each case the full cumulative Participating
Dividends on all outstanding shares of the Class 2 ESOP

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Preferred Stock shall have been paid or set apart for payment for all past
Dividend Periods with respect to the Class 2 ESOP Preferred Stock and such
parity stock.

(13) that Section 6.4(d) of Article FOURTH, Part III of the Restated
Certificate shall be amended to read in its entirety as follows:

(d) In case the Corporation shall, at any time or from time to time while
any of the shares of Class 2 ESOP Preferred Stock are outstanding, make an
Extraordinary Distribution in respect of the Common Stock or effect a Pro Rata
Repurchase of Common Stock, the Conversion Rate in effect immediately prior to
such Extraordinary Distribution or Pro Rata Repurchase shall be adjusted by
multiplying such Conversion Rate by a fraction, the numerator of which shall be
the product of (i) the number of shares of Common Stock outstanding immediately
before such Extraordinary Dividend or Pro Rata Repurchase (minus, in the case of
a Pro Rata Repurchase, the number of shares of Common Stock repurchased by the
Corporation) multiplied by (ii) the Fair Market Value of a share of Common Stock
on the record date with respect to such Extraordinary Distribution or on the
Trading Day immediately preceding the first public announcement by the
Corporation or any of its Affiliates of the intent to effect a Pro Rata
Repurchase, as the case may be, and the denominator of which shall be (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such Extraordinary Distribution or Pro Rata Repurchase multiplied by
(y) the Fair Market Value of a share of Common Stock on the record date with
respect to such Extraordinary Distribution, or on the Trading Day immediately
preceding the first public announcement by the Corporation or any of its
Affiliates of the intent to effect a Pro Rata Repurchase, as the case may be,
minus (ii) the Fair Market Value of the Extraordinary Distribution or the
aggregate purchase price of the Pro Rata Repurchase, as the case may be
(provided that such denominator shall never be less than 1.0); PROVIDED,
HOWEVER, that no Pro Rata Repurchase shall cause an adjustment to the Conversion
Rate unless the amount of all cash dividends and distributions made to holders
of Common Stock during the period from the most recent Extraordinary
Distribution Measuring Date preceding the Effective Date of such Pro Rata
Repurchase, when combined with the aggregate amount of all Pro Rata Repurchases,
including such Pro Rata Repurchase (for all purposes of this Section 7.4(d),
including only that portion of the Fair Market Value of the aggregate purchase
price of each Pro Rata Repurchase which is in excess of the Fair Market Value of
the Common Stock repurchased as determined on the Trading Day immediately
preceding the first public announcement by the Corporation or any of its
Affiliates of the intent to effect each such Pro Rata Repurchase), the Effective
Dates of which fall within such period, exceeds twelve and one-half percent
(12 1/2%) of the aggregate Fair Market Value of all shares of Common Stock
outstanding on the Trading Day immediately preceding the first public
announcement by the Corporation or any of its Affiliates of the intent to effect
such Pro Rata Repurchase. Such adjustment shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such Extraordinary Distribution or immediately after the Effective Date of such
Pro Rata Repurchase.

Solely as an adjustment applicable to shares of Class 2 ESOP Preferred Stock
that are being converted into Common Stock as of a given date, and not as a
permanent adjustment to the Conversion Rate, the Conversion Rate in effect
immediately prior to such conversion shall be adjusted by multiplying such
Conversion Rate by a fraction, the numerator of which shall be the product of
(i) the number of shares of Common Stock outstanding immediately before such
conversion multiplied by (ii) the Fair Market Value of a share of Common Stock
on the date of such conversion, and the denominator of which shall be (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such conversion multiplied by (y) the Fair Market Value of a share of
Common Stock on the date of such conversion minus (ii) the Fair Market Value of
the cash dividends and distributions made on or before the date of such
conversion with a record date after the most recent Extraordinary Distribution
Measuring Date upon which Participating Dividends were paid in full, but only to
the extent that such cash dividends and distributions (a) would entitle the
holders of the

A-7
<PAGE>
shares of Class 2 ESOP Preferred Stock outstanding on such conversion date to a
dividend under Section 3.1 that has not been paid and (b) would not constitute
an Extraordinary Distribution (provided that such denominator shall never be
less than 1.0).

(14) that Section 8.2 of Article FOURTH, Part III of the Restated
Certificate shall be amended to read in its entirety as follows:

8.2 The Series A Preferred Stock and the Series B Preferred Stock, shall
each be deemed to rank prior to the Class 2 ESOP Preferred Stock both as to the
payment of dividends and as to the distribution of assets upon liquidation,
dissolution or winding up. The Series D Preferred Stock shall be deemed to rank
prior to the Class 2 ESOP Preferred Stock as to the distribution of assets upon
liquidation, dissolution or winding up. The Class 1 ESOP Preferred Stock shall
be deemed to rank on a parity with the Class 2 ESOP Preferred Stock as to the
payment of dividends and as to amounts distributable upon liquidation,
dissolution or winding up. The Common Stock, the Director Preferred Stocks, the
Voting Preferred Stocks and the Series C Preferred Stock shall each be deemed to
rank junior to the Class 2 ESOP Preferred Stock both as to the payment of
dividends and as to the distribution of assets upon liquidation, dissolution or
winding up.

SECOND: That the foregoing amendment has been duly adopted in accordance
with the provisions of Section 242 of the Delaware General Corporation Law by
the affirmative vote of a majority of the shares of stock of the Corporation
entitled to vote thereon at the annual meeting of stockholders held on
, voting together as a single class.

IN WITNESS WHEREOF, UAL Corporation has caused this Certificate to be signed
and attested by the Corporation's duly authorized officer this day of
, 200 .

<TABLE>
<S> <C> <C>
UAL CORPORATION

By:
-----------------------------------------
Name:
Title:
</TABLE>

<TABLE>
<S> <C> <C>
ATTEST:

By:
---------------------------------------
Name:
Title:
</TABLE>

A-8
<PAGE>
APPENDIX B

UAL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED FINANCIAL INFORMATION
INDEX

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Selected Financial Data and Operating Statistics............ B-2
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. B-3
Quantitative and Qualitative Disclosures About Market
Risk...................................................... B-12
Report of Independent Public Accountants.................... B-14
Statements of Consolidated Operations....................... B-15
Statements of Consolidated Financial Position............... B-16
Statements of Consolidated Cash Flows....................... B-18
Statements of Consolidated Stockholders' Equity............. B-19
Notes to Consolidated Financial Statements.................. B-20
</TABLE>

B-1
<PAGE>
SELECTED FINANCIAL DATA AND OPERATING STATISTICS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AND RATES)
<S> <C> <C> <C> <C> <C>
Operating revenues........................ $ 18,027 $ 17,561 $ 17,378 $ 16,362 $ 14,943
Earnings before extraordinary item........ 1,238 821 958 600 378
Extraordinary loss on early extinguishment
of debt, net of tax..................... (3) -- (9) (67) (29)
Net earnings.............................. 1,235 821 949 533 349
Per share amounts, diluted:
Earnings before extraordinary item...... 9.97 6.83 9.04 5.85 5.23
Extraordinary loss on early
extinguishment of debt................ (0.03) -- (0.09) (0.79) (0.41)
Net earnings............................ 9.94 6.83 8.95 5.06 4.82
Total assets at year-end.................. 20,963 18,559 15,464 12,677 11,641
Long-term debt and capital lease
obligations, including current portion,
and redeemable preferred stock.......... 5,369 5,345 4,278 3,385 4,102

Revenue passengers........................ 87 87 84 82 79
Revenue passenger miles................... 125,465 124,609 121,426 116,697 111,811
Available seat miles...................... 176,686 174,008 169,110 162,843 158,569
Passenger load factor..................... 71.0% 71.6% 71.8% 71.7% 70.5%
Breakeven passenger load factor........... 64.9% 64.9% 66.0% 66.0% 66.1%
Passenger revenue per passenger mile...... 12.5 CENTS 12.4 CENTS 12.6 CENTS 12.4 CENTS 11.8 CENTS
Operating revenue per available seat
mile.................................... 10.2 CENTS 10.1 CENTS 10.3 CENTS 10.0 CENTS 9.4 CENTS
Operating expense per available seat
mile.................................... 9.4 CENTS 9.2 CENTS 9.5 CENTS 9.3 CENTS 8.9 CENTS
Operating expense per available seat mile
excluding ESOP charges.................. 9.0 CENTS 8.8 CENTS 8.9 CENTS 8.9 CENTS 8.6 CENTS
Fuel gallons consumed..................... 3,065 3,029 2,964 2,883 2,822
Average price per gallon of jet fuel...... 57.9 CENTS 59.0 CENTS 69.5 CENTS 72.2 CENTS 59.5 CENTS
</TABLE>

B-2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
This section contains various forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, which are identified with an
asterisk (*). Forward-looking statements represent the Company's expectations
and beliefs concerning future events, based on information available to the
Company on the date of the filing of this Form 10-K. The Company undertakes no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. Factors
that could significantly impact the expected results referenced in the
forward-looking statements are listed in the last paragraph of the section,
"Outlook for 2000."

On July 12, 1994, the stockholders of UAL Corporation ("UAL") approved a
plan of recapitalization that provides an approximately 55% equity and voting
interest in UAL to certain employees of United Air Lines, Inc. ("United") in
exchange for wage concessions and work-rule changes. The employees' equity
interest is being allocated to individual employee accounts through the year
2000 under Employee Stock Ownership Plans ("ESOPs") which were created as part
of the recapitalization. Since the ESOP shares are being allocated over time,
the current ownership interest held in the ESOPs is less than 55%. The entire
ESOP voting interest is currently exercisable, which is voted by the ESOP
trustee at the direction of, and on behalf of, the holders of the ESOP stock.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY--

UAL's total of cash and cash equivalents and short-term investments was
$689 million at December 31, 1999, compared to $815 million at December 31,
1998. Operating activities during the year generated $2.421 billion and the
Company's sale of part of its investments in Galileo International, Inc.
("Galileo") and Equant N.V. ("Equant") provided $828 million in cash proceeds
(see Note 6 "Investments" in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS).
Cash was used primarily to fund net additions to property and equipment.

Property additions, including aircraft, aircraft spare parts, facilities and
ground equipment, amounted to $2.389 billion, while property dispositions
resulted in proceeds of $154 million. In 1999, United took delivery of eight
A319, five A320, seven B747, two B757, five B767 and six B777 aircraft.
Twenty-one of these aircraft were purchased and twelve were acquired under
capital leases. In addition, United acquired two B727 aircraft off-lease during
1999 and retired ten DC10 and six B747 aircraft.

During 1999, the Company made payments of $261 million for the repurchase of
3.8 million shares of common stock. In January 2000, the Company completed its
$300 million 1999 stock repurchase program after acquiring a total of
4.4 million shares. Financing activities also included principal payments under
debt and capital lease obligations of $513 million and $248 million,
respectively. Additionally, the Company issued, and subsequently retired,
$286 million in debt to finance the acquisition of aircraft.

Included in cash and cash equivalents at December 31, 1999 were $89 million
of securities held by third parties under securities lending agreements, as well
as collateral in the amount of 102% of the value of the securities lent. United
is obligated to reacquire the securities at the end of the contract.

As of December 31, 1999, UAL had a working capital deficit of
$2.476 billion as compared to $2.760 billion at December 31, 1998. Historically,
UAL has operated with a working capital deficit and, as in the past, UAL expects
to meet all of its obligations as they become due. In addition, UAL may from
time to time repurchase on the open market, in privately negotiated purchases or
otherwise, its debt and equity securities.

B-3
<PAGE>
United has available approximately $1.7 billion in short-term revolving
credit facilities, as well as a separate $227 million short-term borrowing
facility, as described in Note 8 "Short-Term Borrowings" in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.

PRIOR YEARS. Operating activities in 1998 generated cash flows of
$3.194 billion. Cash was used primarily to fund net additions to property and
equipment of $2.380 billion and to repurchase common stock in the amount of
$459 million. Financing activities also included repayments of long-term debt
totaling $271 million and payments under capital leases of $322 million, as well
as aircraft lease deposits of $154 million. Additionally, the Company issued
$928 million in debt and used part of the proceeds to purchase $693 million in
equipment certificates under Company operating leases.

Operating activities in 1997 generated cash flows of $2.567 billion and the
Company's sale of its interest in the Apollo Travel Services Partnership ("ATS")
provided $539 million in cash proceeds. Cash was used primarily to fund net
additions to property and equipment of $2.729 billion and to repurchase common
stock in the amount of $250 million. Financing activities included the early
extinguishment of $151 million in principal amount of various debt securities,
mandatory repayments of long-term debt totaling $150 million and payments under
capital leases of $147 million. In addition, the Company made payments of
$112 million in aircraft lease deposits and issued $597 million of enhanced pass
through certificates.

CAPITAL COMMITMENTS--

At December 31, 1999, commitments for the purchase of property and
equipment, principally aircraft, approximated $4.4 billion, after deducting
advance payments. Of this amount, an estimated $2.0 billion is due to be spent
in 2000. For further details, see Note 18 "Commitments, Contingent Liabilities
and Uncertainties" in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

CAPITAL RESOURCES--

Funds necessary to finance aircraft acquisitions are expected to be obtained
from internally generated funds, external financing arrangements or other
external sources.

At December 31, 1999, United's senior unsecured debt was rated BB+ by
Standard and Poor's ("S & P") and Baa3 by Moody's Investors Service Inc.
("Moody's"). UAL's Series B preferred stock and redeemable preferred securities
were rated B+ by S & P and Ba3 by Moody's.

RESULTS OF OPERATIONS

SUMMARY OF RESULTS--

UAL's earnings from operations were $1.391 billion in 1999, compared to
operating earnings of $1.478 billion in 1998. UAL's net earnings in 1999 were
$1.235 billion ($9.94 per share, diluted), compared to net earnings of
$821 million in 1998 ($6.83 per share, diluted).

The 1999 earnings include an extraordinary loss of $3 million, after tax, on
early extinguishment of debt, an after-tax gain on the sale of certain of the
Company's investments as described in Note 6 "Investments" in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS of $468 million ($4.19 per share, diluted), as
well as a one-time after-tax charge of $11 million associated with the
write-down of two non-operating B747-200 aircraft ($0.09 per share, diluted).

Management believes that a more complete understanding of UAL's results may
be gained by viewing them on a pro forma, "Fully Distributed" basis. This
approach considers all ESOP shares which will ultimately be distributed to
employees throughout the ESOP period (rather than just the shares committed to
be released) to be immediately outstanding and thus Fully Distributed.
Consistent with this method, the ESOP compensation expense is excluded from
Fully Distributed net earnings, and

B-4
<PAGE>
ESOP convertible preferred stock dividends are not deducted from earnings
attributable to common stockholders. No adjustments are made to Fully
Distributed earnings to reflect future salary increases. A comparison of results
reported on a Fully Distributed basis to results reported under generally
accepted accounting principles (GAAP) is as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------------- -----------------------
GAAP FULLY GAAP FULLY
(DILUTED) DISTRIBUTED (DILUTED) DISTRIBUTED
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Net Income (in millions).............................. $1,235 $1,665 $ 821 $1,308
------ ------ ----- ------
Per Share:
Earnings before B747 write-down, gains on sales and
extraordinary loss................................ $ 5.87 $10.06 $6.83 $10.24
B747 write-down..................................... (0.09) (0.08) -- --
Gains on sales, net................................. 4.19 3.75 -- --
Extraordinary loss, net............................. (0.03) (0.02) -- --
------ ------ ----- ------
$ 9.94 $13.71 $6.83 $10.24
====== ====== ===== ======
</TABLE>

The current relationship of earnings and earnings per share as computed on a
GAAP basis versus a Fully Distributed basis may not be representative of the
relationship in future periods because of various factors. These factors
include: the dependence of ESOP compensation expense on the common stock price;
trends and commitments with respect to wages; and the increasing number of
shares assumed outstanding under the GAAP basis during the remainder of the ESOP
period. During the year 2000, the shares assumed outstanding under the GAAP
basis will approach the number of shares assumed outstanding under the Fully
Distributed basis.

1999 COMPARED WITH 1998--

OPERATING REVENUES. Operating revenues increased $466 million (3%) and
United's revenue per available seat mile (unit revenue) increased 1% to 10.17
cents. Passenger revenues increased $264 million (2%) due to a 1% increase in
United's revenue passenger miles and a 1% increase in yield to 12.48 cents.
Available seat miles across the system were up 2% year over year; however,
passenger load factor decreased 0.6 points to 71.0% as traffic only increased 1%
system-wide. The following analysis by market is based on information reported
to the U.S. Department of Transportation:

<TABLE>
<CAPTION>
INCREASE (DECREASE)
-------------------------------------------------------------------
AVAILABLE SEAT REVENUE PASSENGER MILES REVENUE PER REVENUE
MILES (CAPACITY) (TRAFFIC) PASSENGER MILE (YIELD)
---------------- ----------------------- ----------------------
<S> <C> <C> <C>
Domestic............................... 4% 2% 1%
Pacific................................ (12%) (11%) 3%
Atlantic............................... 14% 14% (7%)
Latin America.......................... (7%) (3%) (3%)
System............................... 2% 1% 1%
</TABLE>

Pacific yields improved as the Asian economies continue to recover. Yields
in other international markets have been impacted by a negative pricing
environment resulting from excess industry capacity.

Cargo revenues decreased $7 million (1%) despite increased freight ton miles
of 5%, as a 4% decline in freight yield combined with a 3% decline in mail
yield. Other operating revenues increased $209 million (19%) due to increases in
frequent flyer program partner related revenues, fuel sales to third parties and
additional revenue related to the Galileo services agreement (see Note 6
"Investments" in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

B-5
<PAGE>
OPERATING EXPENSES. Operating expenses increased $553 million (3%) and
United's cost per available seat mile increased 2% from 9.24 to 9.41 cents,
including ESOP compensation expense. Excluding ESOP compensation expense,
United's 1999 cost per available seat mile would have been 8.98 cents, an
increase of 3% from 1998. ESOP compensation expense decreased $73 million (9%),
reflecting the decrease in the estimated average fair value of ESOP stock
committed to be released to employees as a result of UAL's lower common stock
price. Salaries and related costs increased $329 million (6%) as a result of
increased staffing in customer-contact positions, as well as salary increases
for most labor groups which took effect July 1, 1998. Commissions decreased
$186 million (14%) due to a change in the commission structure implemented in
the third quarter 1998 as well as a slight decrease in commissionable revenues.
In addition, in October 1999, the Company reduced the base commissions for
tickets purchased in the U.S. and Canada to 5%, subject to roundtrip caps of $50
domestic and $100 international. Purchased services increased $70 million (5%)
due to increases in computer reservations fees and year 2000-related expenses.
Depreciation and amortization increased $74 million (9%) due to an increase in
the number of owned aircraft and losses on disposition of aircraft partially
offset by changes in depreciable lives of certain aircraft. In addition, during
the fourth quarter, United wrote-down two B747-200 aircraft to net realizable
value. Aircraft maintenance increased $65 million (10%) due to in increase in
heavy maintenance visits. Other operating expenses increased $235 million (11%)
primarily due to costs associated with fuel sales to third parties.

OTHER INCOME AND EXPENSE. Other income (expense) amounted to $551 million
in income in 1999 compared to $222 million in expense in 1998. Interest
capitalized, primarily on aircraft advance payments, decreased $30 million
(29%). Interest income increased $9 million (15%) due to higher investment
balances. In addition, 1999 included a $669 million gain on the sale of Galileo
stock and a $62 million gain on the sale of Equant stock.

1998 COMPARED WITH 1997--

OPERATING REVENUES. Operating revenues increased $183 million (1%) while
United's revenue per available seat mile (unit revenue) decreased 2% to 10.07
cents. Passenger revenues increased $178 million (1%) due to a 3% increase in
United's revenue passenger miles despite a 1% decrease in yield from 12.55 to
12.36 cents. Available seat miles across the system were up 3% year over year;
however, passenger load factor decreased 0.2 point to 71.6%. The following
analysis by market is based on information reported to the U.S. Department of
Transportation:

<TABLE>
<CAPTION>
INCREASE (DECREASE)
-------------------------------------------------------------------
AVAILABLE SEAT REVENUE PASSENGER MILES REVENUE PER REVENUE
MILES (CAPACITY) (TRAFFIC) PASSENGER MILE (YIELD)
---------------- ----------------------- ----------------------
<S> <C> <C> <C>
Domestic............................... 4% 5% 2%
Pacific................................ (9%) (10%) (13%)
Atlantic............................... 15% 11% (3%)
Latin America.......................... 17% 9% (8%)
System............................... 3% 3% (1%)
</TABLE>

Pacific yields were negatively impacted by the weakness of the Japanese yen
compared to the dollar during the first nine months of 1998, and the continued
effects of the Asian economic turmoil on demand for travel. Yields in other
international markets were impacted by a negative pricing environment resulting
from excess industry capacity and weakened economies.

Cargo revenues increased $21 million (2%) on increased freight ton miles of
6%. A relatively flat freight yield together with a 1% lower mail yield,
resulted in a 1% decrease in cargo yield for the year. Other operating revenues
decreased $16 million (1%) due to the sale of ATS in July 1997, partially offset
by increases in frequent flyer program partner-related revenues and contract
sales to third parties.

B-6
<PAGE>
OPERATING EXPENSES. Operating expenses decreased $36 million (0.2%) and
United's cost per available seat mile including ESOP compensation expense
decreased 3%, from 9.53 cents to 9.24 cents. Without the ESOP compensation
expense, United's cost per available seat mile would have been 8.76 cents, a
decrease of 2% from 1997. ESOP compensation expense decreased $158 million (16%)
reflecting the decrease in the estimated average fair value of stock committed
to the Supplemental ESOP due to UAL's lower common stock price. Purchased
services increased $220 million (17%) due to increases in computer reservations
fees, credit card discounts, communications expense and year 2000-related
spending. Depreciation and amortization increased $69 million (10%) due to an
increase in the number of owned aircraft and an $11 million decrease in gains on
asset sales, from $23 million in 1997 to $12 million in 1998. Salaries and
related costs increased $323 million (6%) due to two mid-term wage adjustments
for ESOP participants which took place in July of 1998 and 1997 and increased
staffing in customer-contact positions. Aircraft fuel decreased $273 million
(13%) as a result of a 15% decrease in the average cost of fuel from 69.5 cents
to 59.0 cents a gallon. Commissions decreased $183 million (12%) due to a change
in the commission structure implemented in the third quarter of 1997 as well as
a slight decrease in commissionable revenues. Aircraft rent decreased
$49 million (5%) as a result of refinancing aircraft under operating lease.

OTHER INCOME AND EXPENSE. Other income (expense) amounted to $222 million
in expense in 1998 compared to $265 million in income in 1997. Interest expense
increased $69 million (24%) in 1998 due to the issuance of long-term debt in
1997 and 1998. Interest income increased $7 million (13%) due to higher
investment balances. In 1998, foreign exchange losses increased $65 million.
Because not all economic hedges qualify as accounting hedges, unrealized gains
and losses may be recognized in income in advance of the actual foreign currency
cash flows. This mismatch of accounting gains and losses and foreign currency
cash flows was especially pronounced during the fourth quarter of 1998 as a
result of the appreciation in value of the Japanese yen, relative to the U.S.
dollar. This mismatch resulted in a pre-tax charge of $52 million which is
included in foreign exchange losses. In addition, 1997 included a $275 million
gain on the sale of ATS and a $103 million gain on the initial public offering
of Galileo stock.

OTHER INFORMATION

LABOR AGREEMENTS AND WAGE ADJUSTMENTS--

On May 27, 1999, United's public contact employees (primarily customer
service and reservations sales and service representatives) ratified the
tentative agreement between the Company and the International Association of
Machinists and Aerospace Workers ("IAM"). The contract provides for an
across-the-board wage increase of 5.5 percent effective April 13, 2000. In
addition, certain employees hired after July 12, 1994 received an immediate
14.5% pay increase and benefits comparable to other affected employees.

The Company's contracts with the Air Line Pilots' Association International
("ALPA") and the IAM become amendable in April and July 2000, respectively. The
Company is currently in the process of negotiating new contracts with ALPA and
the IAM. Wage rates for U.S.-based non-union employees will be adjusted in
April 2000 as well. It is the Company's objective through this wage adjustment
process to provide compensation for its employees that, on average over the life
of the labor contracts, is competitive with peer group compensation. In this
regard, wages for airline employees over the last year have increased at faster
than historical rates.

Coupled with increased staffing levels, these negotiations and wage rate
adjustments are expected to increase the Company's salaries and related costs by
over $750 million (14%) above 1999 levels.* At the same time, once the final
ESOP shares are committed to be released in April 2000, the Company will no
longer record ESOP compensation expense.

B-7
<PAGE>
FOREIGN OPERATIONS--

United generates revenues and incurs expenses in numerous foreign
currencies. These expenses include aircraft leases, commissions, catering,
personnel costs, reservation and ticket office services, customer service
expenses and aircraft maintenance. Changes in foreign currency exchange rates
impact operating income through changes in foreign currency-denominated
operating revenues and expenses. Despite the adverse (favorable) effects a
strengthening (weakening) foreign currency may have on U.S. originating traffic,
a strengthening (weakening) of foreign currencies tends to increase (decrease)
reported revenue and operating income because United's foreign
currency-denominated operating revenue generally exceeds its foreign
currency-denominated operating expense for each currency.

By carrying passengers and cargo in both directions between the U.S. and
almost every major economic region in the world and by selling its services in
each local country, United attempts to mitigate its exposure to fluctuations in
any single foreign currency. The Company's biggest net exposures are typically
for Japanese yen, Hong Kong dollars, Australian dollars and British pounds.
During 1999, yen-denominated operating revenue net of yen-denominated operating
expense was approximately 26 billion yen (approximately $206 million), Hong Kong
dollar-denominated operating revenue net of Hong Kong dollar-denominated
operating expense was approximately 1,299 million Hong Kong dollars
(approximately $166 million), Australian dollar-denominated operating revenue
net of Australian dollar-denominated operating expense was approximately
208 million Australian dollars (approximately $134 million) and British
pound-denominated operating revenue net of British pound-denominated operating
expense was approximately 67 million British pounds (approximately
$109 million).

To reduce the impact of exchange rate fluctuations on United's financial
results, the Company hedges some of the risk of exchange rate volatility on its
anticipated future foreign currency revenues by purchasing put options
(consisting of yen, Euro, Australian dollars and British pounds) and selling
Hong Kong dollar forwards. To reduce hedging costs, the Company sells a
correlation basket option in the four currencies referred to above. United also
attempts to reduce its exposure to transaction gains and losses by converting
excess local currencies generated to U.S. dollars and by entering into currency
forward or exchange contracts. The total notional amount of outstanding currency
options and forward exchange contracts, and their respective fair market values
as of December 31, 1999, are summarized in QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK on page B-12.

United's foreign operations involve insignificant amounts of physical
assets; however, there are sizable intangible assets related to acquisitions of
Atlantic and Latin America route authorities. Operating authorities in
international markets are governed by bilateral aviation agreements between the
United States and foreign countries. Changes in U.S. or foreign government
aviation policies can lead to the alteration or termination of existing air
service agreements that could adversely impact the value of United's
international route authority. Significant changes in such policies could also
have a material impact on UAL's operating revenues and results of operations.

AIRPORT RENTS AND LANDING FEES--

United is charged facility rental and landing fees at virtually every
airport at which it operates. In recent years, many airports have increased or
sought to increase rates charged to airlines as a means of compensating for
increasing demands upon airport revenues. Airlines have challenged certain of
these increases through litigation and in some cases have not been successful.
The Federal Aviation Administration ("FAA") and the DOT have instituted an
administrative hearing process to judge whether rate increases are legal and
valid. However, to the extent the limitations on such charges are relaxed or the
ability of airlines to challenge such charges is restricted, the rates charged
by airports may increase substantially. Management cannot predict the magnitude
of any such increase.

B-8
<PAGE>
ENVIRONMENTAL AND LEGAL CONTINGENCIES--

United has been named as a Potentially Responsible Party at certain
Environmental Protection Agency ("EPA") cleanup sites which have been designated
as Superfund Sites. United's alleged proportionate contributions at the sites
are minimal; however, at sites where the EPA has commenced litigation, potential
liability is joint and several. Additionally, United has participated and is
participating in remediation actions at certain other sites, primarily airports.
The estimated cost of these actions is accrued when it is determined that it is
probable that United is liable. Environmental regulations and remediation
processes are subject to future change, and determining the actual cost of
remediation will require further investigation and remediation experience.
Therefore, the ultimate cost cannot be determined at this time. However, while
such cost may vary from United's current estimate, United believes the
difference between its accrued reserve and the ultimate liability will not be
material.*

UAL has certain other contingencies resulting from this and other litigation
and claims incident to the ordinary course of business. Management believes,
after considering a number of factors, including (but not limited to) the views
of legal counsel, the nature of such contingencies and prior experience, that
the ultimate disposition of these contingencies is not likely to materially
affect UAL's financial condition, operating results or liquidity.*

YEAR 2000--

UAL completed a successful transition to the Year 2000 as systems performed
without interruption during the rollover from December 31, 1999 to January 1,
2000. As of December 31, 1999, the Company had incurred $81 million in project
costs ($50 million in expense and $31 million in capital.) During 1999, the
Company incurred $52 million in project costs ($26 million in expense and
$26 million in capital.)

AIR CANADA--

On October 19, 1999, the Company announced its intentions, along with
Deutsche Lufthansa AG ("Lufthansa"), to provide a financial package of up to
730 million Canadian dollars for Air Canada. In November, United invested
93 million Canadian ($64 million) in Air Canada's non-voting convertible
preferred shares through an investment partnership owned by UAL (40%) and
Lufthansa (60%).

The remaining UAL investment in Air Canada consists of the purchase from and
subsequent leaseback to Air Canada of three Airbus A330 aircraft, two of which
occurred in 1999, and a commitment by the Company to guarantee a 160 million
Canadian dollar line of credit.

COMMON STOCK DIVIDENDS--

On November 1, 1999, UAL's Board of Directors announced its intention to
begin a dividend program for common stock dividends totaling $1.25 per share in
the year 2000. The payment of dividends is contingent upon stockholder approval
of amendments to the Company's charter, which will be voted on at the UAL annual
meeting in May 2000. If the charter amendment is approved and the Board declares
a dividend, participants in the Company's ESOP plan will be eligible to receive
dividends ($5.00 per year per ESOP share, as each ESOP share is convertible into
four common shares) in the same manner as public stockholders.

NEW ACCOUNTING PRONOUNCEMENTS--

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"), which establishes accounting and
reporting standards requiring that every derivative instrument be

B-9
<PAGE>
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting.

The effective date of SFAS No. 133 has been delayed one year, to fiscal
years beginning after June 15, 2000. The Company plans on adopting SFAS No. 133
in the first quarter of 2001. United is in the process of reviewing its various
contracts to determine which contracts meet the requirements of SFAS No. 133 and
would need to be reflected as derivatives under the standard and accounted for
at fair value. The Company has not yet quantified the impacts of adopting SFAS
No. 133 on the financial statements. However, it could increase volatility in
earnings and other comprehensive income.

In September 1999, the Financial Accounting Standard Board's ("FASB")
Emerging Issues Task Force ("EITF") issued EITF Issue No. 99-13, "Application of
Issue No. 97-10, "The Effect of Lessee Involvement in Asset Construction" and
FASB Interpretation No. 23, Leases of Certain Property Owned by a Governmental
Unit or Authority, to Entities that Enter into Leases with Governmental
Entities" ("EITF 99-13"). EITF 99-13 discusses the application of lease
accounting for property owned by governmental authorities, such as airport
facilities. Historically, airlines have received operating lease treatment for
assets funded by governmental units and separately disclosed the bond guarantee
and lease commitment in the footnotes to the financial statements. EITF 99-13
would require United to apply different guidelines for determining the
accounting treatment for special facility bonds and may result in United's
recording the property and related financing on the balance sheet for future
transactions. The EITF is effective for transactions entered into after
September 23, 1999.

In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements", ("SAB 101"), which provides guidance on the recognition,
presentation and disclosure of revenue in financial statements. Although
SAB 101 does not change existing accounting rules on revenue recognition,
changes in accounting to apply the guidance in SAB 101 may be accounted for as a
change in accounting principle. In the first quarter of 2000, United intends to
change the method it uses to account for the sale of mileage to participating
partners in its Mileage Plus program. Under the new accounting method, a portion
of the revenue from the sale of mileage will be deferred and recognized when
transportation is provided. In accordance with the provisions of SAB 101, United
will recognize a charge for the cumulative effect of a change in accounting
principle in the first quarter of 2000, to reflect application of the accounting
method to prior years.

OUTLOOK FOR 2000--

The Company's revenue performance is expected to benefit from stronger
global economic growth in 2000, as well as the full implementation of Economy
Plus. Total unit revenues are estimated to range between 2% and 4% higher than
1999, driven by improvement in three of the company's four global regions: North
America, Atlantic, Pacific and Latin America.

The Company expects to face two major cost challenges during the year. The
first involves material wage increases consistent with its commitment to provide
competitive compensation to its employees after the ESOP allocation period comes
to a close. In addition, fuel prices are expected to average 71 CENTS per
gallon, including taxes and hedging activity, or 23% above 1999 levels. Fully
distributed unit costs excluding ESOP compensation expense are estimated to be
about 6% higher than 1999, based on system capacity growth just under 3%.

In summary, the Company anticipates 2000 earnings should range between $7.00
and $9.00 per fully distributed share.

B-10
<PAGE>
During the first quarter, the Company expects to benefit from its fuel
hedging activity. Fully distributed unit costs are expected to rise 5%, 2%
excluding fuel. Total unit revenue is expected to increase 2 to 4%, based
primarily on continued healthy demand for travel in the United States and
continued economic recovery in the Pacific. Therefore, the Company expects fully
distributed earnings per share in the first quarter to range from $0.80 to
$1.20.

The information included in the above outlook section, as well as certain
statements made throughout the Management's Discussion and Analysis of Financial
Condition and Results of Operations that are identified by an asterisk (*) is
forward looking and involves risks and uncertainties that could result in actual
results differing materially from expected results. It is not reasonably
possible to itemize all of the many factors and specific events that could
affect the outlook of an airline operating in the global economy. Some factors
that could significantly impact expected capacity, unit revenues, wages, fully
distributed unit costs, fuel prices and fully distributed earnings per share
include: the success of the Company's cost-control efforts, the outcome of
negotiations on new contracts with the union groups, industry capacity
decisions, the airline pricing environment, the economic environment of the
airline industry, fuel prices, actions of the U.S., foreign and local
governments, the Asian economic environment and travel patterns, foreign
currency exchange rate fluctuations and the general economic environment. With
respect to the forward-looking statements set forth in the "Environmental and
Legal Contingencies" section, some of the factors that could affect the ultimate
disposition of these contingencies are changes in applicable laws, the
development of facts in individual cases, settlement opportunities and the
actions of plaintiffs, judges and juries.

B-11
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK-- United's exposure to market risk associated with
changes in interest rates relates primarily to its debt obligations and
short-term investments. United does not use derivative financial instruments in
its investments portfolio. United's policy is to manage interest rate risk
through a combination of fixed and floating rate debt and entering into swap
agreements, depending upon market conditions. A portion of the borrowings are
denominated in foreign currencies which exposes the Company to risks associated
with changes in foreign exchange rates. To hedge against some of this risk, the
Company has placed foreign currency deposits (primarily for Japanese yen, French
francs, German marks and Euros) to meet foreign currency lease obligations
designated in the respective currencies. Since unrealized mark-to-market gains
or losses on the foreign currency deposits are offset by the losses or gains on
the foreign currency obligations, the Company reduces its overall exposure to
foreign currency exchange rate volatility. The fair value of these deposits is
determined based on the present value of future cash flows using an appropriate
swap rate. The fair value of long-term debt is based on the quoted market prices
for the same or similar issues or the present value of future cash flows using a
U.S. Treasury rate that matches the remaining life of the instrument, adjusted
by a credit spread.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATES 1999
---------------------------------------------------------------------- --------------------
FAIR
(IN MILLIONS) 2000 2001 2002 2003 2004 THEREAFTER TOTAL VALUE
------------- -------- -------- -------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash equivalents
Fixed rate...................... $ 231 $ -- $ -- $ -- $ -- $ -- $ 231 $ 231
Avg. interest rate............ 5.27% -- -- -- -- -- 5.27%
Variable rate................. $ 79 $ -- $ -- $ -- $ -- $ -- $ 79 $ 79
Avg. interest rate............ 6.23% -- -- -- -- -- 6.23%
Short term investments
Fixed rate...................... $ 298 $ -- $ -- $ -- $ -- $ -- $ 298 $ 298
Avg. interest rate............ 5.96% -- -- -- -- -- 5.96%
Variable rate................... $ 81 $ -- $ -- $ -- $ -- $ -- $ 81 $ 81
Avg. interest rate............ 6.42% -- -- -- -- -- 6.42%

Foreign currency deposits
Fixed rate--yen deposits........ $ -- $ -- $ -- $ -- $ -- $ 378 $ 378 $ 423
Avg. interest rate............ -- -- -- -- -- 3.07% 3.07%
Fixed rate-FF deposits.......... $ -- $ -- $ -- $ -- $ -- $ 10 $ 10 $ 9
Avg. interest rate............ -- -- -- -- -- 5.61% 5.61%
Fixed rate-DM deposits.......... $ 1 $ 1 $ 1 $ 1 $ 1 $ 162 $ 167 $ 177
Avg. interest rate............ 6.49% 6.49% 6.49% 6.49% 6.49% 6.49% 6.49%
Fixed rate-EUR deposits......... $ -- $ -- $ -- $ -- $ -- $ 27 $ 27 $ 23
Avg. interest rate............ -- -- -- -- -- 4.14% 4.14%

LONG TERM DEBT
U.S. Dollar denominated
Fixed rate debt................. $ 26 $ 27 $ 30 $ 159 $ 279 $ 912 $1,433 $1,542
Avg. interest rate............ 8.18% 8.42% 8.41% 9.47% 10.66% 7.31% 8.26%
Variable rate debt.............. $ 54 $ 56 $ 567 $ 522 $ 23 $ 85 $1,307 $1,307
Avg. interest rate............ 6.28% 6.28% 6.35% 6.12% 6.47% 6.52% 6.26%

Japanese Yen denominated
Fixed rate debt................. $ 12 $ -- $ -- $ -- $ -- $ -- $ 12 $ 12
Avg. interest rate............ 7.50% -- -- -- -- -- 7.50%

<CAPTION>
1998
--------------------
FAIR
(IN MILLIONS) TOTAL VALUE
------------- -------- --------
<S> <C> <C>
ASSETS
Cash equivalents
Fixed rate...................... $ 301 $ 301
Avg. interest rate............ 4.94%
Variable rate................. $ 89 $ 89
Avg. interest rate............ 5.32%
Short term investments
Fixed rate...................... $ 386 $ 386
Avg. interest rate............ 5.48%
Variable rate................... $ 39 $ 39
Avg. interest rate............ 5.47%
Foreign currency deposits
Fixed rate--yen deposits........ $ 330 $ 354
Avg. interest rate............ 3.05%
Fixed rate-FF deposits.......... $ 11 $ 13
Avg. interest rate............ 5.61%
Fixed rate-DM deposits.......... $ 193 $ 198
Avg. interest rate............ 6.49%
Fixed rate-EUR deposits......... $ -- $ --
Avg. interest rate............ --
LONG TERM DEBT
U.S. Dollar denominated
Fixed rate debt................. $1,491 $1,729
Avg. interest rate............ 8.80%
Variable rate debt.............. $1,456 $1,456
Avg. interest rate............ 5.67%
Japanese Yen denominated
Fixed rate debt................. $ 21 $ 23
Avg. interest rate............ 7.50%
</TABLE>

FOREIGN CURRENCY RISK-- United has established a foreign currency hedging
program using currency forwards and currency options to hedge exposure to the
yen, Euro, Australian dollar, British pound and Hong Kong dollar. The goal of
the hedging program is to effectively manage risk associated

B-12
<PAGE>
with fluctuations in the value of the foreign currency, thereby making financial
results more stable and predictable. United does not use currency forwards or
currency options for trading purposes.

<TABLE>
<CAPTION>
NOTIONAL AVERAGE ESTIMATED
(IN MILLIONS, EXCEPT AVERAGE CONTRACT RATES) AMOUNT CONTRACT RATE FAIR VALUE
-------------------------------------------- -------- ------------- --------------
(PAY)/RECEIVE*
<S> <C> <C> <C>
Forward exchange contracts
Japanese Yen-Purchased forwards.......................... $144 101.69 $ (1)
-Sold forwards....................................... $ 62 102.30 $ --
Hong Kong Dollar-Sold forwards........................... $ 91 7.83 $ --
French Franc-Purchased forwards.......................... $ 50 5.05 $ (1)
Euro-Purchased forwards.................................. $117 1.37 $ (5)

Currency options
Japanese Yen-Purchased put options....................... $402 105.07 $ 7
Australian Dollar-Purchased put options.................. $114 0.61 $ --
British Pound-Purchased put options...................... $ 62 1.53 $ --
Euro-Purchased put options............................... $106 0.98 $ 1
Correlation Basket Option-Sold............................. $684 N/A $ (3)
</TABLE>

As of December 31, 1998, United had $215 million of Japanese yen forwards
outstanding with a fair value of $3 million, $315 million yen put options with a
fair value of $4 and $317 million yen call options with a fair value of
$(50) million.

PRICE RISK (AIRCRAFT FUEL)-- At December 31, 1999, the Company had
contracted to purchase approximately 6% of the Company's 2000 fuel requirements
at an average fixed price of $0.51 per gallon. In addition, to a limited extent
United trades short-term heating oil futures and option contracts, which are
immaterial. When market conditions indicate risk reduction is achievable, United
enters into fuel option contracts to reduce its price risk exposure to jet fuel.
As market conditions change, so may United's hedging program. Currently United
purchases call options to provide protection against sharp increases in the
price of aircraft fuel. Through this approach, at December 31, 1999, United had
hedged 75% of the Company's expected 2000 fuel purchases. It is the Company's
intent to be fully hedged for probable jet fuel purchases for year 2000 by the
end of the first quarter.

At December 31, 1998, United had $496 million in purchased call contracts
for crude oil with an estimated fair value of $13 million and $202 million in
sold put contracts for crude oil with an estimated fair value of $(50) million.

*ESTIMATED FAIR VALUES REPRESENT THE AMOUNT UNITED WOULD PAY/RECEIVE ON
DECEMBER 31, 1999 TO TERMINATE THE CONTRACTS.

B-13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and
Board of Directors, UAL Corporation:

We have audited the accompanying statements of consolidated financial
position of UAL Corporation (a Delaware corporation) and subsidiary companies as
of December 31, 1999 and 1998, and the related statements of consolidated
operations, consolidated cash flows and consolidated stockholders' equity for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of UAL
Corporation and subsidiary companies as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with generally accepted
accounting principles.

/s/ Arthur Andersen LLP

ARTHUR ANDERSEN LLP

Chicago, Illinois
February 24, 2000

B-14
<PAGE>
UAL CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Operating revenues:
Passenger................................................. $15,784 $15,520 $15,342
Cargo..................................................... 906 913 892
Other operating revenues.................................. 1,337 1,128 1,144
------- ------- -------
18,027 17,561 17,378
------- ------- -------
Operating expenses:
Salaries and related costs................................ 5,670 5,341 5,018
ESOP compensation expense................................. 756 829 987
Aircraft fuel............................................. 1,776 1,788 2,061
Commissions............................................... 1,139 1,325 1,508
Purchased services........................................ 1,575 1,505 1,285
Aircraft rent............................................. 876 893 942
Landing fees and other rent............................... 949 881 863
Depreciation and amortization............................. 867 793 724
Aircraft maintenance...................................... 689 624 603
Other operating expenses.................................. 2,339 2,104 2,128
------- ------- -------
16,636 16,083 16,119
------- ------- -------
Earnings from operations.................................... 1,391 1,478 1,259
------- ------- -------

Other income (expense):
Interest expense.......................................... (362) (355) (286)
Interest capitalized...................................... 75 105 104
Interest income........................................... 68 59 52
Equity in earnings of affiliates.......................... 37 72 66
Gain on sale of partnership interest...................... -- -- 275
Gain on sale of investments............................... 731 -- 103
Miscellaneous, net........................................ 2 (103) (49)
------- ------- -------
551 (222) 265
------- ------- -------
Earnings before income taxes, distributions on preferred
securities and extraordinary item......................... 1,942 1,256 1,524
Provision for income taxes.................................. 699 429 561
------- ------- -------
Earnings before distributions on preferred securities and
extraordinary item........................................ 1,243 827 963
Distributions on preferred securities, net.................. (5) (6) (5)
Extraordinary loss on early extinguishment of debt, net..... (3) -- (9)
------- ------- -------
Net earnings................................................ $ 1,235 $ 821 $ 949
======= ======= =======
Per share, basic:
Earnings before extraordinary item........................ $ 21.26 $ 12.71 $ 14.98
Extraordinary loss on early extinguishment of debt, net... (0.06) -- (0.15)
------- ------- -------
Net earnings.............................................. $ 21.20 $ 12.71 $ 14.83
======= ======= =======
Per share, diluted:
Earnings before extraordinary item........................ $ 9.97 $ 6.83 $ 9.04
Extraordinary loss on early extinguishment of debt, net... (0.03) -- (0.09)
------- ------- -------
Net earnings.............................................. $ 9.94 $ 6.83 $ 8.95
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

B-15
<PAGE>
UAL CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED FINANCIAL POSITION

(IN MILLIONS)

<TABLE>
<CAPTION>
DECEMBER 31
-------------------
ASSETS 1999 1998
- ------ -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 310 $ 390
Short-term investments.................................. 379 425
Receivables, less allowance for doubtful accounts
(1999--$13; 1998--$22)................................ 1,284 1,138
Aircraft fuel, spare parts and supplies, less
obsolescence allowance (1999--$45; 1998--$39)......... 340 384
Income tax receivables.................................. 32 --
Deferred income taxes................................... 222 256
Prepaid expenses and other.............................. 368 315
------- -------
2,935 2,908
------- -------
Operating property and equipment:
Owned--
Flight equipment........................................ 13,518 12,006
Advances on flight equipment............................ 809 985
Other property and equipment............................ 3,368 3,134
------- -------
17,695 16,125
Less--Accumulated depreciation and amortization......... 5,207 5,174
------- -------
12,488 10,951
------- -------
Capital leases--
Flight equipment........................................ 2,929 2,605
Other property and equipment............................ 93 97
------- -------
3,022 2,702
Less--Accumulated amortization.......................... 645 599
------- -------
2,377 2,103
------- -------
14,865 13,054
------- -------
Other assets:
Investments in affiliates............................... 533 304
Intangibles, less accumulated amortization (1999--$279;
1998--$265)........................................... 568 676
Aircraft lease deposits................................. 594 545
Prepaid rent............................................ 585 631
Other................................................... 883 441
------- -------
3,163 2,597
------- -------
$20,963 $18,559
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

B-16
<PAGE>
UAL CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED FINANCIAL POSITION

(IN MILLIONS)

<TABLE>
<CAPTION>
DECEMBER 31
-------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
- ------------------------------------ -------- --------
<S> <C> <C>
Current liabilities:
Notes payable........................................... $ 61 $ 184
Long-term debt maturing within one year................. 92 98
Current obligations under capital leases................ 190 176
Advance ticket sales.................................... 1,412 1,429
Accounts payable........................................ 967 1,151
Accrued salaries, wages and benefits.................... 1,002 952
Accrued aircraft rent................................... 783 793
Other accrued liabilities............................... 904 885
------- -------
5,411 5,668
------- -------
Long-term debt.............................................. 2,650 2,858
------- -------
Long-term obligations under capital leases.................. 2,337 2,113
------- -------
Other liabilities and deferred credits:
Deferred pension liability.............................. 70 89
Postretirement benefit liability........................ 1,489 1,424
Deferred gains.......................................... 986 1,180
Accrued aircraft rent................................... 395 371
Deferred income taxes................................... 1,147 398
Other................................................... 334 354
------- -------
4,421 3,816
------- -------
Company-obligated mandatorily redeemable
preferred securities of a subsidiary trust................ 100 100
------- -------
Equity put options.......................................... -- 32
------- -------
Preferred stock committed to Supplemental ESOP.............. 893 691
------- -------
Stockholders' equity:
Serial preferred stock (Note 12)........................ -- --
ESOP preferred stock (Note 13).......................... -- --
Common stock at par, $0.01 par value; authorized
200,000,000 shares; issued 65,771,802 shares at
December 31, 1999 and 63,005,869 shares at December 31,
1998................................................... 1 1
Additional capital invested............................. 4,099 3,517
Retained earnings....................................... 2,138 1,028
Unearned ESOP preferred stock........................... (28) (121)
Stock held in treasury, at cost--
Preferred, 10,213,519 depositary shares at December 31,
1999 and December 31, 1998 (Note 12)................... (305) (305)
Common, 14,995,219 shares at December 31, 1999 and
11,201,216 shares at December 31, 1998................. (1,097) (835)
Accumulated other comprehensive income.................. 352 (2)
Other................................................... (9) (2)
------- -------
5,151 3,281
------- -------

Commitments and contingent liabilities (Note 18)............
------- -------
$20,963 $18,559
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

B-17
<PAGE>
UAL CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

(IN MILLIONS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash and cash equivalents at beginning of year.............. $ 390 $ 295 $ 229
------- ------- -------
Cash flows from operating activities:
Net earnings............................................ 1,235 821 949
Adjustments to reconcile to net cash provided by
operating
activities--
ESOP compensation expense............................. 756 829 987
Extraordinary loss on debt extinguishment, net of
tax................................................. 3 -- 9
Gain on sale of partnership interest.................. -- -- (275)
Gain on sale of investments........................... (731) -- (103)
Pension funding less than expense..................... 94 101 43
Deferred postretirement benefit expense............... 65 149 139
Depreciation and amortization......................... 867 793 724
Provision for deferred income taxes................... 590 307 194
Undistributed earnings of affiliates.................. (20) (62) (16)
Increase in receivables............................... (146) (97) (222)
Decrease in other current assets...................... 2 105 --
Increase (decrease) in advance ticket sales........... (17) 162 78
Increase (decrease) in accrued income taxes........... (76) 38 20
Increase (decrease) in accounts payable and accrued
liabilities......................................... (86) 69 16
Amortization of deferred gains........................ (66) (64) (64)
Other, net............................................ (49) 43 88
------- ------- -------
2,421 3,194 2,567
------- ------- -------
Cash flows from investing activities:
Additions to property and equipment................... (2,389) (2,832) (2,812)
Proceeds on disposition of property and equipment..... 154 452 83
Proceeds on disposition of partnership interest....... -- -- 539
Proceeds on sale of investments....................... 828 -- --
Decrease (increase) in short-term investments......... 46 125 (82)
Other, net............................................ (263) (63) (29)
------- ------- -------
(1,624) (2,318) (2,301)
------- ------- -------
Cash flows from financing activities:
Reacquisition of preferred stock...................... -- (3) --
Repurchase of common stock............................ (261) (459) (250)
Proceeds from issuance of long-term debt.............. 286 928 597
Repayment of long-term debt........................... (513) (271) (301)
Principal payments under capital leases............... (248) (322) (147)
Purchase of equipment certificates under Company
operating leases.................................... (47) (693) --
Increase (decrease) in short-term borrowings.......... (123) 184 --
Aircraft lease deposits............................... (20) (154) (112)
Cash dividends........................................ (10) (10) (10)
Other, net............................................ 59 19 23
------- ------- -------
(877) (781) (200)
------- ------- -------
Increase (decrease) in cash and cash equivalents during the
year...................................................... (80) 95 66
------- ------- -------
Cash and cash equivalents at end of year.................... $ 310 $ 390 $ 295
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

B-18
<PAGE>
UAL CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY

(IN MILLIONS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
UNEARNED ACCUMULATED
ADDITIONAL RETAINED ESOP OTHER
PREFERRED COMMON CAPITAL EARNINGS PREFERRED TREASURY COMP
STOCK STOCK INVESTED (DEFICIT) STOCK STOCK INCOME OTHER
--------- -------- ---------- --------- --------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996...... $ -- $1 $2,160 $ (566) $(202) $ (385) $ -- $(13)
--------- -- ------ ------ ----- ------- ---- ----
Year ended December 31, 1997:
Net earnings.................... -- -- -- 949 -- -- -- --
Other comprehensive income, net:
Minimum pension liability
adj......................... -- -- -- -- -- -- (2) --
------ ----
Total comprehensive income...... -- -- -- 949 -- -- (2) --
------ ----
Cash dividends on preferred
stock ($1.44 per Series B
share)........................ -- -- -- (10) -- -- -- --
Common stock repurchases........ -- -- -- -- -- (250) -- --
Issuance and amortization of
ESOP preferred stock.......... -- -- 993 -- (6) -- -- --
ESOP dividend ($8.89 per
share)........................ -- -- 36 (67) 31 -- -- --
Preferred stock committed to
Supplemental ESOP............. -- -- (349) -- -- -- -- --
Other........................... -- -- 36 3 -- (28) -- 6
--------- -- ------ ------ ----- ------- ---- ----
Balance at December 31, 1997...... -- 1 2,876 309 (177) (663) (2) (7)
--------- -- ------ ------ ----- ------- ---- ----
Year ended December 31, 1998:
Net earnings.................... -- -- -- 821 -- -- -- --
Other comprehensive income, net:
Unrealized gains on
securities, net............. -- -- -- -- -- -- 1 --
Minimum pension liability
adj......................... -- -- -- -- -- -- (1) --
------ ----
Total comprehensive income...... -- -- -- 821 -- -- -- --
------ ----
Cash dividends on preferred
stock ($1.44 per Series B
share)........................ -- -- -- (10) -- -- -- --
Common stock repurchases........ -- -- -- -- -- (459) -- --
Issuance and amortization of
ESOP preferred stock.......... -- -- 823 -- 6 -- -- --
ESOP dividend ($8.89 per
share)........................ -- -- 42 (92) 50 -- -- --
Preferred stock committed to
Supplemental ESOP............. -- -- (177) -- -- -- -- --
Other........................... -- -- (47) -- -- (18) -- 5
--------- -- ------ ------ ----- ------- ---- ----
Balance at December 31, 1998...... -- 1 3,517 1,028 (121) (1,140) (2) (2)
--------- -- ------ ------ ----- ------- ---- ----
Year ended December 31, 1999
Net earnings.................... -- -- -- 1,235 -- -- -- --
Other comprehensive income, net:
Unrealized gains on
securities, net............. -- -- -- -- -- -- 354 --
Minimum pension liability
adj......................... -- -- -- -- -- -- -- --
------ ----
Total comprehensive income...... -- -- -- 1,235 -- -- 354 --
------ ----
Cash dividends on preferred
stock ($1.44 per Series B
share)........................ -- -- -- (10) -- -- -- --
Common stock repurchases........ -- -- -- -- -- (261) -- --
Issuance and amortization of
ESOP preferred stock.......... -- -- 740 -- 16 -- -- --
ESOP dividend ($8.89 per
share)........................ -- -- 38 (115) 77 -- -- --
Preferred stock committed to
Supplemental ESOP............. -- -- (201) -- -- -- -- --
Other........................... -- -- 5 -- -- (1) -- (7)
--------- -- ------ ------ ----- ------- ---- ----
Balance at December 31, 1999...... $ -- $1 $4,099 $2,138 $ (28) $(1,402) $352 $ (9)
========= == ====== ====== ===== ======= ==== ====

TOTAL
--------
<S> <C>
Balance at December 31, 1996...... $ 995
------
Year ended December 31, 1997:
Net earnings.................... 949
Other comprehensive income, net:
Minimum pension liability
adj......................... (2)
------
Total comprehensive income...... 947
------
Cash dividends on preferred
stock ($1.44 per Series B
share)........................ (10)
Common stock repurchases........ (250)
Issuance and amortization of
ESOP preferred stock.......... 987
ESOP dividend ($8.89 per
share)........................ --
Preferred stock committed to
Supplemental ESOP............. (349)
Other........................... 17
------
Balance at December 31, 1997...... 2,337
------
Year ended December 31, 1998:
Net earnings.................... 821
Other comprehensive income, net:
Unrealized gains on
securities, net............. 1
Minimum pension liability
adj......................... (1)
------
Total comprehensive income...... 821
------
Cash dividends on preferred
stock ($1.44 per Series B
share)........................ (10)
Common stock repurchases........ (459)
Issuance and amortization of
ESOP preferred stock.......... 829
ESOP dividend ($8.89 per
share)........................ --
Preferred stock committed to
Supplemental ESOP............. (177)
Other........................... (60)
------
Balance at December 31, 1998...... 3,281
------
Year ended December 31, 1999
Net earnings.................... 1,235
Other comprehensive income, net:
Unrealized gains on
securities, net............. 354
Minimum pension liability
adj......................... --
------
Total comprehensive income...... 1,589
------
Cash dividends on preferred
stock ($1.44 per Series B
share)........................ (10)
Common stock repurchases........ (261)
Issuance and amortization of
ESOP preferred stock.......... 756
ESOP dividend ($8.89 per
share)........................ --
Preferred stock committed to
Supplemental ESOP............. (201)
Other........................... (3)
------
Balance at December 31, 1999...... $5,151
======
</TABLE>

See accompanying notes to consolidated financial statements.

B-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) BASIS OF PRESENTATION--UAL Corporation ("UAL") is a holding company
whose principal subsidiary is United Air Lines, Inc. ("United"). The
consolidated financial statements include the accounts of UAL and all of its
majority-owned affiliates (collectively "the Company"). All significant
intercompany transactions are eliminated. Investments in affiliates are carried
on the equity basis. Certain prior-year financial statement items have been
reclassified to conform to the current year's presentation.

(B) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

(C) AIRLINE REVENUES--Passenger fares and cargo revenues are recorded as
operating revenues when the transportation is furnished. The value of unused
passenger tickets is included in current liabilities.

(D) CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS--Cash in excess of
operating requirements is invested in short-term, highly liquid,
income-producing investments. Investments with a maturity of three months or
less on their acquisition date are classified as cash and cash equivalents.
Other investments are classified as short-term investments.

From time to time, United lends certain of its securities classified as cash
and cash equivalents and short-term investments to third parties. United
requires collateral in an amount exceeding the value of the securities and is
obligated to reacquire the securities at the end of the contract. United
accounts for these transactions as secured borrowings rather than sales and does
not remove the securities from the balance sheet. At December 31, 1999, United
was obligated to repurchase $89 million of securities lent to third parties.

At December 31, 1999 and 1998, $406 million and $418 million, respectively,
of investments in debt securities included in cash and cash equivalents and
short-term investments were classified as available-for-sale, and $177 million
and $241 million, respectively, were classified as held-to-maturity. Investments
in debt securities classified as available-for-sale are stated at fair value
based on the quoted market prices for the securities, which does not differ
significantly from their cost basis. Investments classified as held-to-maturity
are stated at cost which approximates market due to their short-term maturities.
The proceeds from sales of available-for-sale securities are included in
interest income for each respective year.

(E) DERIVATIVE FINANCIAL INSTRUMENTS--

FOREIGN CURRENCY--From time to time, United enters into Japanese yen forward
exchange contracts to minimize gains and losses on the revaluation of short-term
yen-denominated liabilities. The yen forwards typically have short-term
maturities and are marked to fair value at the end of each accounting period.
The unrealized mark-to-market gains and losses on the yen forwards generally
offset the losses and gains recorded on the yen liabilities.

United has also entered into forwards and swaps to reduce exposure to
currency fluctuations on yen-, Euro- and French franc-denominated capital lease
obligations. The cash flows of the forwards and swaps mirror those of the
capital leases. The premiums on the forwards and swaps, as measured at
inception, are being amortized over their respective lives as components of
interest expense. Any gains

B-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
or losses realized upon early termination of these forwards and swaps are
deferred and recognized in income over the remaining life of the underlying
exposure.

The Company hedges some of the risks of exchange rate volatility on its
anticipated future yen, Euro, Australian dollar and British pound revenues by
purchasing put options with little or no intrinsic value and on Hong Kong dollar
revenues by entering into forward contracts. The amount and duration of these
options are synchronized with the expected revenues, and thus, the put options
have been designated as a hedge. The premiums on purchased option contracts are
amortized over the lives of the contracts. Unrealized gains on purchased put
option contracts are deferred until contract expiration and then recognized as a
component of passenger revenue. To reduce hedging costs, the Company sells a
correlation basket option in the four currencies referred to above. The
unrealized mark-to-market gains and losses on the correlation options are
included in "Miscellaneous, net", net of premiums received.

INTEREST RATES--United may from time to time, enter into swaps to reduce
exposure to interest rate fluctuations in connection with certain debt, capital
leases and operating leases. The cash flows of the swaps mirror those of the
underlying exposures. The premiums on the swaps, as measured at inception, are
amortized over their respective lives as components of interest expense. Any
gains or losses realized upon the early termination of these swaps are deferred
and recognized in income over the remaining life of the underlying exposure.

AIRCRAFT FUEL--United uses purchased call options to hedge a portion of its
price risk related to aircraft fuel purchases. The purchased call options have
been designated as a hedge. Gains or losses on hedge positions, net of premiums
paid, are recognized upon contract expiration as a component of aircraft fuel
inventory. In addition, to a limited extent, United trades short-term heating
oil futures contracts. Unrealized losses on these contracts are recorded
currently in income while unrealized gains are deferred until contract
expiration. Both gains and losses are recorded as a component of aircraft fuel
expense.

(F) AIRCRAFT FUEL, SPARE PARTS AND SUPPLIES--Aircraft fuel and maintenance
and operating supplies are stated at average cost. Flight equipment spare parts
are stated at average cost less an obsolescence allowance.

(G) OPERATING PROPERTY AND EQUIPMENT--Owned operating property and equipment
is stated at cost. Property under capital leases, and the related obligation for
future lease payments, are initially recorded at an amount equal to the then
present value of those lease payments.

Depreciation and amortization of owned depreciable assets is based on the
straight-line method over their estimated service lives. Leasehold improvements
are amortized over the remaining period of the lease or the estimated service
life of the related asset, whichever is less. Aircraft are depreciated to
estimated salvage values, generally over lives of 4 to 30 years; buildings are
depreciated over lives of 25 to 45 years; and other property and equipment are
depreciated over lives of 3 to 15 years.

Properties under capital leases are amortized on the straight-line method
over the life of the lease, or in the case of certain aircraft, over their
estimated service lives. Lease terms are 10 to 30 years for aircraft and flight
simulators and 25 years for buildings. Amortization of capital leases is
included in depreciation and amortization expense.

B-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Maintenance and repairs, including the cost of minor replacements, are
charged to maintenance expense accounts. Costs of additions to and renewals of
units of property are charged to property and equipment accounts.

(H) INTANGIBLES--Intangibles consist primarily of route acquisition costs
and intangible pension assets (see Note 16, "Retirement and Postretirement
Plans"). Route acquisition costs are amortized over 40 years.

(I) MILEAGE PLUS AWARDS--United accrues the estimated incremental cost of
providing free travel awards earned under its Mileage Plus frequent flyer
program (including awards earned from mileage credits sold) when such award
levels are reached. United, through its wholly owned subsidiary, Mileage Plus
Holdings, Inc., sells mileage credits to participating partners in the Mileage
Plus program. The resulting revenue is recorded in other operating revenues
during the period in which the credits are sold. Effective January 1, 2000, the
Company intends to change the method of accounting for the sale of mileage. See
"New Accounting Pronouncements" in MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

(J) DEFERRED GAINS--Gains on aircraft sale and leaseback transactions are
deferred and amortized over the lives of the leases as a reduction of rental
expense.

(2) EMPLOYEE STOCK OWNERSHIP PLANS AND RECAPITALIZATION

On July 12, 1994, the shareholders of UAL approved a plan of
recapitalization to provide an approximately 55% equity interest in UAL to
certain employees of United in exchange for wage concessions and work-rule
changes. The employees' equity interest is being allocated to individual
employees through the year 2000 under Employee Stock Ownership Plans ("ESOPs")
which were created as a part of the recapitalization.

The ESOPs cover employees represented by the Air Line Pilots' Association,
International, the International Association of Machinists and Aerospace Workers
and U.S. management and salaried employees. The ESOPs include a "Leveraged
ESOP," a "Non-Leveraged ESOP" and a "Supplemental ESOP." Both the Leveraged ESOP
and the Non-Leveraged ESOP are tax-qualified plans while the Supplemental ESOP
is not a tax-qualified plan. Shares are delivered to employees primarily through
the Leveraged ESOP, then through the Non-Leveraged ESOP, and finally, through
the Supplemental ESOP.

The equity interests are being delivered to employees through two classes of
preferred stock (Class 1 and Class 2 ESOP Preferred Stock, collectively "ESOP
Preferred Stock"), and the voting interests are being delivered through three
separate classes of preferred stocks (Class P, M and S Voting Preferred Stock,
collectively, "Voting Preferred Stock"). The Class 1 ESOP Preferred Stock is
being delivered to an ESOP trust in seven separate sales under the Leveraged
ESOP, the last of which occurred on January 5, 2000. Based on Internal Revenue
Code Limitations, shares of the Class 2 ESOP Preferred Stock are either
contributed to the Non-Leveraged ESOP or allocated as "book entry" shares to the
Supplemental ESOP, annually through the year 2000. The classes of preferred
stock are described more fully in Note 13, "ESOP Preferred Stock."

The Leveraged ESOP and Non-Leveraged ESOP are being accounted for under
AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans" ("SOP"). For the Leveraged ESOP, as shares of Class 1 ESOP
Preferred Stock are sold to an ESOP trust, the Company reports the issuance as a
credit to additional capital invested and records a corresponding charge to

B-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) EMPLOYEE STOCK OWNERSHIP PLANS AND RECAPITALIZATION (CONTINUED)
unearned ESOP preferred stock. ESOP compensation expense is recorded for the
average fair value of the shares committed to be released during the period with
a corresponding credit to unearned ESOP preferred stock for the cost of the
shares. Any difference between the fair value of the shares and the cost of the
shares is charged or credited to additional capital invested. For the
Non-Leveraged ESOP, the Class 2 ESOP Preferred Stock is recorded as additional
capital invested as the shares are committed to be contributed, with the
offsetting charge to ESOP compensation expense. The ESOP compensation expense is
based on the average fair value of the shares committed to be contributed. The
Supplemental ESOP is being accounted for under Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees."

Shares of ESOP Preferred Stock are legally released or allocated to employee
accounts as of year-end. Dividends on the ESOP Preferred Stock are also paid at
the end of the year. Dividends on unallocated shares are used by the ESOP to pay
down the loan from UAL and are not considered dividends for financial reporting
purposes. Dividends on allocated shares are satisfied by releasing shares from
the ESOP's suspense account to the employee accounts and are charged to equity.

During 1999, 2,334,370 shares of Class 1 ESOP Preferred Stock, 123,841
shares of Class 2 ESOP Preferred Stock and 2,453,337 shares of Voting Preferred
Stock were allocated to employee accounts, and another 615,757 shares of
Class 2 ESOP Preferred Stock were allocated in the form of "book entry" shares,
effective December 31, 1998. Another 100,180 shares of Class 2 ESOP Preferred
Stock previously allocated in book entry form were issued and either contributed
to the qualified plan or converted and sold on behalf of terminating employees.
At December 31, 1999, the year-end allocation of Class 1 ESOP Preferred Stock to
employee accounts had not yet been completed. There were 2,390,935 shares of
Class 1 ESOP Preferred Stock committed to be released and 130,643 shares held in
suspense by the ESOP as of December 31, 1999. For the Class 2 ESOP Preferred
Stock, 683,038 shares were committed to be contributed to employees at
December 31, 1999. The fair value of the unearned ESOP shares recorded on the
balance sheet at December 31, 1999 and 1998 was $41 million and $141 million,
respectively.

For the Class 2 ESOP Preferred Stock committed to be contributed to
employees under the Supplemental ESOP, employees can elect to receive their
"book entry" shares in cash upon termination of employment. The estimated fair
value of such shares at December 31, 1999 and 1998 was $954 million and
$600 million, respectively.

(3) OTHER INCOME (EXPENSE)--MISCELLANEOUS

Other income (expense)--"Miscellaneous, net" consisted of the following:

<TABLE>
<CAPTION>
(IN MILLIONS) 1999 1998 1997
- ------------- -------- -------- --------
<S> <C> <C> <C>
Foreign exchange gains (losses)............................. $4 $ (84) $(19)
Minority interests.......................................... -- -- (15)
Other....................................................... (2) (19) (15)
-- ----- ----
$2 $(103) $(49)
== ===== ====
</TABLE>

B-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(4) OTHER COMPREHENSIVE INCOME

The following table presents the tax effect of those items included in other
comprehensive income:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1999 1998 1997
------------------------------ ------------------------------ ------------------------------
TAX NET OF TAX NET OF TAX NET OF
(IN MILLIONS) PRE-TAX EFFECT TAX PRE-TAX EFFECT TAX PRE-TAX EFFECT TAX
- ------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized gains on securities
Unrealized holding gains
arising during period...... $547 $(193) $354 $ 1 $ -- $ 1 $ -- $ -- $ --
Minimum pension liability.... -- -- -- (1) -- (1) (4) 2 (2)
---- ----- ---- ---- ----- ---- ---- ----- ----
Total other comprehensive
income....................... $547 $(193) $354 $ -- $ -- $ -- $ (4) $ 2 $ (2)
==== ===== ==== ==== ===== ==== ==== ===== ====
</TABLE>

The components of accumulated other comprehensive income consist of the
following items:

<TABLE>
<CAPTION>
UNREALIZED MINIMUM ACCUMULATED OTHER
(IN MILLIONS) GAINS ON SECURITIES PENSION LIABILITY COMPREHENSIVE INCOME
- ------------- ------------------- ----------------- --------------------
<S> <C> <C> <C>
December 31, 1996.......................... $ -- $ -- $ --
Current period change.................... -- (2) (2)
---- --------- ----
December 31, 1997.......................... -- (2) (2)
Current period change.................... 1 (1) --
---- --------- ----
December 31, 1998.......................... 1 (3) (2)
Current period change.................... 354 -- 354
---- --------- ----
December 31, 1999.......................... $355 $ (3) $352
==== ========= ====
</TABLE>

Unrealized gains on securities primarily represents gains on the Company's
investments in Galileo International, Inc. and Equant N.V. as discussed in
Note 6 "Investments".

(5) PER SHARE AMOUNTS

Basic earnings per share were computed by dividing net income before
extraordinary item by the weighted-average number of shares of common stock
outstanding during the year. In addition, diluted

B-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5) PER SHARE AMOUNTS (CONTINUED)
earnings per share amounts include potential common shares, including common
shares issuable upon conversion of ESOP shares committed to be released.

<TABLE>
<CAPTION>
EARNINGS ATTRIBUTABLE TO COMMON SHAREHOLDERS (MILLIONS) 1999 1998 1997
- ------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Net income before extraordinary item........................ $1,238 $ 821 $ 958
Preferred stock dividends................................... (125) (102) (77)
------ ------ ------
Earnings attributable to common shareholders (Basic and
Diluted).................................................. $1,113 $ 719 $ 881
====== ====== ======

SHARES (MILLIONS)
- ------------------------------------------------------------
Weighted average shares outstanding (Basic)................. 52.3 56.5 58.8
Convertible ESOP preferred stock............................ 58.0 47.1 35.9
Other....................................................... 1.3 1.6 2.7
------ ------ ------
Weighted average number of shares (Diluted)................. 111.6 105.2 97.4
====== ====== ======

EARNINGS PER SHARE
- ------------------------------------------------------------
Basic....................................................... $21.26 $12.71 $14.98
Diluted..................................................... $ 9.97 $ 6.83 $ 9.04
</TABLE>

At December 31, 1999, stock options to purchase 1,334,722 shares of common
stock were outstanding, but were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the common shares.

(6) INVESTMENTS

In June 1999, United sold 17,500,000 common shares of Galileo
International, Inc. ("Galileo") in a secondary offering for $766 million,
resulting in a pre-tax gain of approximately $669 million. This sale reduced
United's holdings in Galileo from 32 percent to approximately 15 percent,
requiring United to discontinue the equity method of accounting for its
investment in Galileo. United has classified its remaining 15,940,000 shares of
Galileo common stock as available-for-sale. The market value of these shares at
December 31, 1999 ($477 million) is reflected in Investments in Affiliates on
the balance sheet and the market value in excess of United's investment is
classified net-of-tax ($253 million) in accumulated other comprehensive income.
The market value of United's investment in Galileo at December 31, 1998 was
$1,455 million. Included in the Company's retained earnings is approximately
$240 million of undistributed earnings of Galileo and its predecessor companies.

In July 1997, United completed the sale of its interest in the Apollo Travel
Services Partnership ("ATS") a 77% owned affiliate whose accounts were
consolidated, to Galileo for $539 million in cash. This transaction resulted in
a pre-tax gain of approximately $405 million. Of this amount, $275 million was
recognized in 1997, $7 million in 1998 and $4 million in 1999. The remaining
balance ($119 million) reduced the basis of the Company's investment in Galileo.

Under operating agreements with Galileo, United purchases computer
reservations services from Galileo and during 1999 and 1998 provided
communications services to Galileo, while during 1997 provided marketing, sales
and communication services to Galileo. Revenues derived from the sale of
services to Galileo amounted to approximately $4 million in 1999, $13 million in
1998 and $159 million in 1997. The cost to United of services purchased from
Galileo amounted to approximately

B-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) INVESTMENTS (CONTINUED)
$170 million in 1999, $170 million in 1998 and $134 million in 1997. In
connection with the sale of ATS, United entered into an additional services
agreement with Galileo under which the Company provides certain marketing and
other services designed to increase the competitiveness of Galileo's business
and to generate additional bookings and revenues for Galileo. In December 1999,
United recognized $14 million in other operating revenues related to the
achievement of improvements in Galileo's air booking revenues as specified in
the agreements.

Prior to the sale to Galileo, ATS contributed the following amounts to the
Company's consolidated results, net of intercompany eliminations and minority
interests:

<TABLE>
<CAPTION>
(IN MILLIONS) YEAR ENDED DECEMBER 31, 1997
- ------------- ----------------------------
<S> <C>
Operating revenues................................. $147
Operating income................................... $ 63
Earnings before income taxes....................... $ 50
</TABLE>

United owns depositary certificates in Equant N.V. ("Equant"), a provider of
international data network services to multinational businesses and a single
source for global desktop communications. Each depositary certificate represents
a beneficial interest in an Equant common share. During the fourth quarter of
1999, transferability restrictions on these shares were removed and the
investment was classified as available-for-sale. The market value in excess of
United's investment is classified net-of-tax ($100 million) in accumulated other
comprehensive income. In December 1999, United sold 709,000 shares of common
stock in Equant in a secondary offering by Equant for $62 million. At
December 31, 1999, the estimated fair value of United's remaining investment in
Equant was approximately $156 million.

GetThere.com is a leading provider of internet-based travel planning
products tailored to individual, corporate, travel supplier and travel agency
customers. During 1999, United invested approximately $51 million in
GetThere.com, resulting in a 28% minority interest in GetThere.com consisting of
common stock, warrants and options. United accounts for its investment in
GetThere.com using the equity method of accounting.

In July 1999, United and Buy.com agreed to form a joint venture
(BuyTravel.com) to sell travel on all major airlines, as well as hotels, car
rentals and cruises via the Internet. Both United and Buy.com will have a
50 percent interest in BuyTravel.com. United also received warrants exercisable
for 2.0 million shares of Buy.com common stock. United will account for its
investment in BuyTravel.com using the equity method of accounting.

In November 1999, United entered into a participation agreement with
Priceline.com to provide inventory to Priceline.com. In exchange, United
received 5.5 million warrants for Priceline.com common stock exercisable in five
years. The participation agreement contains early exercise provisions allowing
United to exercise the warrants if in three years specific performance criteria
are met. The warrants have been valued at $61 million by an investment bank and
are being recognized as passenger revenue over a three-year period. In 1999, the
total revenue recognized was $6 million.

B-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES

In 1999, the alternative minimum tax ("AMT") liability of the Company
exceeded the regular tax liability resulting in additional AMT credits. The
federal income tax liability is the greater of the tax computed using the
regular tax system or the tax under the AMT system. If the regular tax liability
exceeds the AMT liability and AMT credits are available, then AMT credits are
used to reduce the net tax liability to the amount of the AMT liability.

The provision for income taxes is summarized as follows:

<TABLE>
<CAPTION>
(IN MILLIONS) 1999 1998 1997
- ------------- -------- -------- --------
<S> <C> <C> <C>
Current--
Federal................................................. $ 93 $113 $312
State................................................... 16 9 55
---- ---- ----
109 122 367
---- ---- ----
Deferred--
Federal................................................. 536 270 178
State................................................... 54 37 16
---- ---- ----
590 307 194
---- ---- ----
$699 $429 $561
==== ==== ====
</TABLE>

The income tax provision differed from amounts computed at the statutory
federal income tax rate, as follows:

<TABLE>
<CAPTION>
(IN MILLIONS) 1999 1998 1997
- ------------- -------- -------- --------
<S> <C> <C> <C>
Income tax provision at statutory rate...................... $680 $440 $533
State income taxes, net of federal income tax benefit....... 46 30 46
ESOP dividends.............................................. (40) (33) (25)
Nondeductible employee meals................................ 24 24 26
Tax credits................................................. -- (7) (2)
Other, net.................................................. (11) (25) (17)
---- ---- ----
$699 $429 $561
==== ==== ====
</TABLE>

Temporary differences and carryforwards that give rise to a significant
portion of deferred tax assets and liabilities for 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
(IN MILLIONS) ASSETS LIABILITIES ASSETS LIABILITIES
- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Employee benefits, including postretirement
medical and ESOP............................ $ 990 $ 135 $ 964 $ 130
Depreciation, capitalized interest and
transfers of tax benefits................... -- 2,489 -- 1,937
Gains on sale and leasebacks.................. 335 -- 368 --
Rent expense.................................. 435 -- 411 --
AMT credit carryforwards...................... 210 -- 198 --
Other......................................... 758 1,029 773 789
------ ------ ------ ------
$2,728 $3,653 $2,714 $2,856
====== ====== ====== ======
</TABLE>

B-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES (CONTINUED)
At December 31, 1999, UAL and its subsidiaries had $210 million of federal
AMT credits which may be carried forward to reduce the tax liabilities of future
years.

(8) SHORT-TERM BORROWINGS

United has an agreement with a syndicate of banks for a $750 million
revolving credit facility expiring in 2002. Interest on drawn amounts under the
facility is calculated at floating rates based on the London interbank offered
rate ("LIBOR") plus a margin which is subject to adjustment based on certain
changes in the credit ratings of United's long-term senior unsecured debt. Among
other restrictions, the credit facility contains a covenant that restricts
United's ability to grant liens on or otherwise encumber certain identified
assets with a market value of approximately $1.1 billion.

Additionally, United has available $900 million in short-term secured
aircraft financing facilities. Interest on drawn amounts under the facilities is
calculated at floating rates based on LIBOR plus a margin.

At December 31, 1999, United had outstanding $61 million under a separate
short-term borrowing facility, bearing an average interest rate of 5.72%.
Receivables amounting to $233 million were pledged by United to secure repayment
of such outstanding borrowings. The maximum available borrowing amount under
this arrangement is $227 million.

(9) LONG-TERM DEBT

A summary of long-term debt, including current maturities, as of
December 31 is as follows (interest rates are as of December 31, 1999):

<TABLE>
<CAPTION>
(IN MILLIONS) 1999 1998
- ------------- -------- --------
<S> <C> <C>
Secured notes, 5.71% to 8.99%, averaging 6.38%, due
through 2014............................................ $1,229 $1,389
Debentures, 9.00% to 11.21%, averaging 9.98%, due through
2021.................................................... 762 785
Promissory notes, 11.00%, due 2000........................ 1 13
Commercial paper, 6.10%, due through 2003................. 571 591
Special facility bonds, 5.63%, due 2034................... 190 190
------ ------
2,753 2,968
------ ------
Less: Unamortized discount on debt........................ (11) (12)
Current maturities................................... (92) (98)
------ ------
$2,650 $2,858
====== ======
</TABLE>

In addition to scheduled principal payments, in 1999 the Company repaid
$23 million in principal amount of debentures prior to maturity. The debentures
were scheduled to mature through 2021. An extraordinary loss of $3 million, net
of tax benefits of $2 million was recorded reflecting amounts paid in excess of
the debt carrying value.

In March 1998, the Company, through a special-purpose financing entity that
is consolidated, issued $604 million of commercial paper to refinance certain
lease commitments. Although the issued commercial paper has short maturities,
the Company expects to continually rollover this obligation throughout the
5-year life of its supporting liquidity facility or bank standby facility. As
such, the commercial paper is classified as a long-term obligation in the
Company's statement of financial position.

B-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(9) LONG-TERM DEBT (CONTINUED)
In 1997, the California Statewide Communities Development Authority (the
"Authority") issued $190 million in special facilities revenue bonds to finance
the acquisition and construction of certain facilities at the Los Angeles
International Airport which United guarantees payment of under a payment
agreement with the Authority. The bond proceeds are restricted to expenditures
on the Los Angeles facilities and unspent amounts are classified as other assets
in the balance sheet.

At December 31, 1999, United had outstanding a total of $1.307 billion of
long-term debt bearing interest rates at 22 to 47.5 basis points over LIBOR.

Maturities of long-term debt for each of the four years after 2000 are:
2001--$83 million; 2002--$597 million; 2003--$681 million; and
2004--$302 million. Various assets, principally aircraft, having an aggregate
book value of $1.348 billion at December 31, 1999, were pledged as security
under various loan agreements.

(10) LEASE OBLIGATIONS

The Company leases aircraft, airport passenger terminal space, aircraft
hangars and related maintenance facilities, cargo terminals, other airport
facilities, real estate, office and computer equipment and vehicles.

Future minimum lease payments as of December 31, 1999, under capital leases
(substantially all of which are for aircraft) and operating leases having
initial or remaining noncancelable lease terms of more than one year are as
follows:

<TABLE>
<CAPTION>
OPERATING LEASES
----------------------- CAPITAL
(IN MILLIONS) AIRCRAFT NON-AIRCRAFT LEASES
- ------------- -------- ------------ --------
<S> <C> <C> <C>
Payable during --
2000.................................................... $ 912 $ 458 $ 350
2001.................................................... 884 442 445
2002.................................................... 871 401 385
2003.................................................... 912 389 286
2004.................................................... 946 376 296
After 2004.............................................. 9,874 5,628 1,906
------- ------ -------
Total minimum lease payments................................ $14,399 $7,694 3,668
======= ======
Imputed interest (at rates of 5.3% to 12.2%)................ (1,141)
-------
Present value of minimum lease payments..................... 2,527
Current portion............................................. (190)
-------
Long-term obligations under capital leases.................. $ 2,337
=======
</TABLE>

B-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(10) LEASE OBLIGATIONS (CONTINUED)
As of December 31, 1999, United leased 317 aircraft, 76 of which were under
capital leases. These leases have terms of 10 to 26 years, and expiration dates
range from 2000 through 2020.

In connection with the financing of certain aircraft accounted for as
capital leases, United had on deposit at December 31, 1999 an aggregate
39 billion yen ($379 million), 326 million German marks ($167 million),
64 million French francs ($10 million), 27 million Euro ($27 million) and
$11 million in certain banks and had pledged an irrevocable security interest in
such deposits to certain of the aircraft lessors. These deposits will be used to
pay off an equivalent amount of recorded capital lease obligations.

Amounts charged to rent expense, net of minor amounts of sublease rentals,
were $1.412 billion in 1999, $1.385 billion in 1998 and $1.416 billion in 1997.
Included in 1999 rental expense was $11 million in contingent rentals, resulting
from changes in interest rates for operating leases under which the rent
payments are based on variable interest rates.

(11) COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF A
SUBSIDIARY TRUST

In December 1996, UAL Corporation Capital Trust I (the "Trust") issued
$75 million of its 13 1/4% Trust Originated Preferred Securities (the "Preferred
Securities") in exchange for 2,999,304 depositary shares, each representing
1/1000 of one share of Series B 12 1/4% preferred stock (see Note 12).
Concurrent with the issuance of the Preferred Securities and the related
purchase by UAL of the Trust's common securities, the Company issued to the
Trust $77 million aggregate principal amount of its 13 1/4% Junior Subordinated
Debentures (the "Debentures") due 2026. The Debentures are and will be the sole
assets of the Trust. The interest and other payment dates on the Debentures
correspond to the distribution and other payment dates on the Preferred
Securities. Upon maturity or redemption of the Debentures, the Preferred
Securities will be mandatorily redeemed. The Debentures are redeemable at UAL's
option, in whole or in part, on or after July 12, 2004, at a redemption price
equal to 100% of the principal amount to be redeemed, plus accrued and unpaid
interest to the redemption date. Upon the repayment of the Debentures, the
proceeds thereof will be applied to redeem the Preferred Securities.

There is a full and unconditional guarantee by UAL of the Trust's
obligations under the securities issued by the Trust. However, the Company's
obligations are subordinate and junior in right of payment to certain other of
its indebtedness. UAL has the right to defer payments of interest on the
Debentures by extending the interest payment period, at any time, for up to 20
consecutive quarters. If interest payments on the Debentures are so deferred,
distributions on the Preferred Securities will also be deferred. During any
deferral, distributions will continue to accrue with interest thereon. In
addition, during any such deferral, UAL may not declare or pay any dividend or
other distribution on, or redeem or purchase, any of its capital stock.

The fair value of the Preferred Securities at December 31, 1999 and 1998 was
$83 and $90 million, respectively.

(12) SERIAL PREFERRED STOCK

At December 31, 1999, UAL had outstanding 3,203,177 depositary shares, each
representing 1/1000 of one share of Series B 12 1/4% preferred stock, with a
liquidation preference of $25 per depositary share ($25,000 per Series B
preferred share) and a stated capital of $0.01 per Series B preferred share.

B-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(12) SERIAL PREFERRED STOCK (CONTINUED)
Under its terms, any portion of the Series B preferred stock or the depositary
shares is redeemable for cash after July 11, 2004, at UAL's option, at the
equivalent of $25 per depositary share, plus accrued dividends. The Series B
preferred stock is not convertible into any other securities, has no stated
maturity and is not subject to mandatory redemption.

The Series B preferred stock ranks senior to all other preferred and common
stock, except the Preferred Securities, as to receipt of dividends and amounts
distributed upon liquidation. The Series B preferred stock has voting rights
only to the extent required by law and with respect to charter amendments that
adversely affect the preferred stock or the creation or issuance of any security
ranking senior to the preferred stock. Additionally, if dividends are not paid
for six cumulative quarters, the Series B preferred stockholders are entitled to
elect two additional members to the UAL Board of Directors until all dividends
are paid in full. Pursuant to UAL's restated certificate of incorporation, UAL
is authorized to issue a total of 50,000 shares of Series B preferred stock.

During 1998, UAL repurchased 64,300 depositary shares, at an aggregate cost
of $3 million, to be held in treasury.

UAL is authorized to issue up to 15,986,584 additional shares of serial
preferred stock.

(13) ESOP PREFERRED STOCK

The following activity related to UAL's outstanding ESOP preferred stocks
(see Note 2 for a description of the ESOPs):

<TABLE>
<CAPTION>
CLASS 1 ESOP CLASS 2 ESOP ESOP VOTING
------------ ------------ -----------
<S> <C> <C> <C>
Balance December 31, 1996.............................. 6,950,462 644,510 4,422,436
---------- -------- ----------
Shares issued...................................... 1,848,629 242,877 3,073,969
Converted to common................................ (146,473) (81,127) (229,999)
---------- -------- ----------
Balance December 31, 1997.............................. 8,652,618 806,260 7,266,406
---------- -------- ----------
Shares issued...................................... 2,011,812 177,166 3,073,969
Converted to common................................ (213,061) (116,104) (331,620)
---------- -------- ----------
Balance December 31, 1998.............................. 10,451,369 867,322 10,008,755
---------- -------- ----------
Shares issued...................................... 1,955,756 227,689 3,073,969
Converted to common................................ (306,662) (146,975) (457,401)
---------- -------- ----------
Balance December 31, 1999.............................. 12,100,463 948,036 12,625,323
========== ======== ==========
</TABLE>

An aggregate of 17,675,345 shares of Class 1 and Class 2 ESOP Preferred
Stock will be issued to employees under the ESOPs. Each share of ESOP Preferred
Stock is convertible into four shares of UAL common stock and shares are
converted to common as employees retire or otherwise leave the Company. The
stock has a par value of $0.01 per share and is nonvoting. The Class 1 ESOP
Preferred Stock has a liquidation value of $126.96 per share plus all accrued
and unpaid dividends; the Class 2 does not have a liquidation value. The
Class 1 ESOP Preferred Stock provides a fixed annual dividend of $8.8872 per
share, which ceases on March 31, 2000; the Class 2 does not pay a fixed
dividend.

Class P, M and S Voting Preferred Stocks were established to provide the
voting power to the employee groups participating in the ESOPs. Additional
Voting Preferred Stock is issued as shares of the Class 1 and Class 2 ESOP
Preferred Stock are allocated to employees. In the aggregate, 17,675,345

B-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(13) ESOP PREFERRED STOCK (CONTINUED)
shares of Voting Preferred Stock will be issued through the year 2000. The
Voting Preferred Stock outstanding at any time commands voting power for
approximately 55% of the vote of all classes of capital stock in all matters
requiring a stockholder vote, other than for the election of members of the
Board of Directors. The Voting Preferred Stock has a par value and liquidation
preference of $0.01 per share. The stock is not entitled to receive any
dividends and is convertible into .0004 shares of UAL common stock.

Class Pilot MEC, IAM, SAM and I junior preferred stock (collectively
"Director Preferred Stocks") were established to effectuate the election of one
or more members to UAL's Board of Directors. One share each of Class Pilot MEC
and Class IAM junior preferred stock is authorized and issued. The Company is
authorized to issue ten shares each of Class SAM and Class I junior preferred
stock. There are three shares of Class SAM and four shares of Class I issued.
Each of the Director Preferred Stocks has a par value and liquidation preference
of $0.01 per share. The stock is not entitled to receive any dividends and
Class I will be redeemed automatically upon the transfer of the shares to any
person not elected to the Board of Directors or upon the occurrence of the
"Sunset."

(14) COMMON STOCKHOLDERS' EQUITY

Changes in the number of shares of UAL common stock outstanding during the
years ended December 31 were as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Shares outstanding at beginning of year.................. 51,804,653 57,320,486 58,817,480
Stock options exercised.................................. 939,262 382,136 840,100
Shares issued from treasury under compensation
arrangements........................................... 89,745 11,944 28,224
Shares acquired for treasury............................. (3,877,912) (7,237,975) (3,269,393)
Forfeiture of restricted stock........................... (5,800) (7,600) (25,120)
Conversion of ESOP preferred stock....................... 1,814,731 1,316,786 911,300
Other.................................................... 11,904 18,876 17,895
---------- ---------- ----------
Shares outstanding at end of year........................ 50,776,583 51,804,653 57,320,486
========== ========== ==========
</TABLE>

During 1999, 1998 and 1997, the Company repurchased 3,754,802, 7,061,109 and
2,881,092 shares of common stock, respectively, at a total purchase price of
$261 million, $459 million and $250 million, respectively.

(15) STOCK OPTIONS AND AWARDS

The Company has granted options to purchase common stock to various officers
and employees. The option price for all stock options is at least 100% of the
fair market value of UAL common stock at the date of grant. Options generally
vest and become exercisable in four equal, annual installments beginning one
year after the date of grant, and generally expire in ten years.

As a result of the 1994 recapitalization, all outstanding options became
fully vested at the time of the transaction and the holders of such options
became eligible to utilize the cashless exercise features of stock options.
Under a cashless exercise, the Company withholds, at the election of the
optionee, from shares that would otherwise be issued upon exercise, that number
of shares having a fair market value equal to the exercise price and/or related
income taxes. For outstanding options eligible for cashless exercise, changes in
the market price of the stock are charged (credited) to earnings currently. The
expense (credit) recorded for such eligible options was $4 million in 1999, $(7)
million in 1998 and $14 million in 1997.

B-32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock options which were outstanding at the time of the recapitalization are
exercisable for shares of old common stock, each of which is in turn converted
into two shares of new common stock and $84.81 in cash upon exercise. Subsequent
to the recapitalization, the Company granted stock options which are exercisable
for shares of new common stock.

The Company has also awarded shares of restricted stock to officers and key
employees. These shares generally vest over a five-year period and are subject
to certain transfer restrictions and forfeiture under certain circumstances
prior to vesting. Unearned compensation, representing the fair market value of
the stock at the measurement date for the award, is amortized to salaries and
related costs over the vesting period. During 1999 and 1997, respectively,
75,000 and 5,000 shares of restricted stock were issued from treasury. No shares
were issued in 1998. As of December 31, 1999, 154,400 shares were restricted and
still nonvested. Additionally, 277,250 shares were reserved for future awards
under the plan.

SFAS No. 123 ("Accounting for Stock-Based Compensation") establishes a fair
value based method of accounting for stock options. The Company has elected to
continue using the intrinsic value method of accounting prescribed in APB 25, as
permitted by SFAS No. 123. Had compensation cost for awards been determined
based on the fair value at the grant dates consistent with the method of SFAS
No. 123, the Company's net income and earnings per share would have instead been
reported as the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C> <C>
Net income (millions).................................. As reported $1,235 $ 821 $ 949
Pro forma $1,219 $ 812 $ 944

Basic earnings per share............................... As reported $21.20 $12.71 $14.83
Pro forma $20.89 $12.55 $14.75

Diluted earnings per share............................. As reported $ 9.94 $ 6.83 $ 8.95
Pro forma $ 9.79 $ 6.74 $ 8.94
</TABLE>

The weighted-average grant date fair value of restricted shares issued was
$69.51 for shares issued in 1999 and $87.44 for shares issued in 1997. The fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Risk-free interest rate..................................... 5.2% 5.6% 6.4%
Dividend yield.............................................. 0.0% 0.0% 0.0%
Volatility.................................................. 34.0% 32.0% 32.0%
Expected life (years)....................................... 4.0 4.0 4.0
</TABLE>

B-33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock option activity for the past three years was as follows:

<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- ---------------------
WTD AVG WTD AVG WTD AVG
SHARES EXER PRICE SHARES EXER PRICE SHARES EXER PRICE
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Old Share Options:

Outstanding at beginning of year.......... 118,475 $121.64 168,393 $121.65 356,118 $120.80
Exercised................................. (42,125) $130.53 (49,918) $121.67 (187,725) $120.03
------- ------- --------
Outstanding at end of year................ 76,350 $116.74 118,475 $121.64 168,393 $121.65

Options exercisable at year-end........... 76,350 $116.74 118,475 $121.64 168,393 $121.65
</TABLE>

<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
WTD AVG WTD AVG WTD AVG
SHARES EXER PRICE SHARES EXER PRICE SHARES EXER PRICE
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
New Share Options:

Outstanding at beginning of year...... 5,411,836 $45.07 4,749,612 $36.27 4,828,990 $31.64
Granted............................. 2,081,600 $64.29 1,064,200 $81.40 449,100 $77.86
Exercised........................... (855,012) $25.67 (282,300) $28.79 (464,650) $25.58
Terminated.......................... (124,715) $70.74 (119,676) $57.12 (63,828) $57.45
--------- --------- ---------
Outstanding at end of year............ 6,513,709 $53.27 5,411,836 $45.07 4,749,612 $36.27

Options exercisable at year-end....... 3,240,210 $38.26 3,400,607 $29.97 2,518,238 $26.63

Reserved for future grants at
year-end............................ 1,466,019 3,422,904 4,397,428

Wtd avg fair value of options granted
during the year..................... $22.31 $27.95 $27.40
</TABLE>

The following information related to stock options outstanding as of
December 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------- ------------------------------------
WEIGHTED-AVERAGE
RANGE OF OUTSTANDING AT REMAINING WEIGHTED-AVERAGE EXERCISABLE AT WEIGHTED-AVERAGE
EXERCISE PRICES DECEMBER 31, 1999 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1999 EXERCISE PRICE
- ---------------------- ----------------- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Old Share Options:
$91 to 153.......... 76,350 2.0 years $ 116.74 76,350 $ 116.74
New Share Options:
$20 to 29........... 1,940,940 4.6 years $ 22.88 1,940,940 $ 22.88
$37 to 57........... 1,175,747 6.3 years $ 52.69 877,248 $ 52.37
$60 to 69........... 1,918,800 9.2 years $ 62.75 30,000 $ 63.29
$70 to 88........... 1,478,222 8.3 years $ 81.33 392,022 $ 80.96
--------- ---------
6,513,709 3,240,210
</TABLE>

(16) RETIREMENT AND POSTRETIREMENT PLANS

The Company has various retirement plans, both defined benefit and defined
contribution, which cover substantially all employees. The Company also provides
certain health care benefits, primarily in the U.S., to retirees and eligible
dependents, as well as certain life insurance benefits to retirees. The Company
has reserved the right, subject to collective bargaining agreements, to modify
or terminate the health care and life insurance benefits for both current and
future retirees.

B-34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(16) RETIREMENT AND POSTRETIREMENT PLANS (CONTINUED)
The following table sets forth the reconciliation of the beginning and
ending balances of the benefit obligation and plan assets, the funded status and
the amounts recognized in the statement of financial position for the defined
benefit and other postretirement plans as of December 31:

<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(IN MILLIONS)
- ----------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year................... $ 8,038 $7,272 $ 1,626 $ 1,706
Service cost.............................................. 295 276 53 48
Interest cost............................................. 583 533 116 109
Plan participants' contributions.......................... 1 1 7 --
Amendments................................................ 1 1 -- --
Actuarial (gain) loss..................................... (1,161) 274 (254) (169)
Foreign currency exchange rate changes.................... 12 13 --
Benefits paid............................................. (388) (332) (83) (68)
------- ------ ------- -------
Benefit obligation at end of year......................... $ 7,381 $8,038 $ 1,465 $ 1,626
======= ====== ======= =======
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year............ $ 7,654 $6,859 $ 112 $ 107
Actual return on plan assets.............................. 1,255 934 6 8
Employer contributions.................................... 175 187 71 --
Plan participants' contributions.......................... 1 1 7 --
Foreign currency exchange rate changes.................... 4 5 -- --
Benefits paid............................................. (388) (332) (83) (3)
------- ------ ------- -------
Fair value of plan assets at end of year.................. $ 8,701 $7,654 $ 113 $ 112
======= ====== ======= =======
Funded status............................................. $ 1,320 $ (384) $(1,352) $(1,514)
Unrecognized actuarial (gains) losses..................... (1,870) (122) (228) 19
Unrecognized prior service costs.......................... 604 660 -- --
------- ------ ------- -------
Net amount recognized..................................... $ 54 $ 154 $(1,581) $(1,495)
======= ====== ======= =======
AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION
CONSIST OF:
Prepaid (accrued) benefit cost............................ $ 54 $ 154 $(1,581) $(1,495)
Accrued benefit liability................................. (151) (274) -- --
Intangible asset.......................................... 148 271 -- --
Accumulated other comprehensive income.................... 3 3 -- --
------- ------ ------- -------
Net amount recognized..................................... $ 54 $ 154 $(1,581) $(1,495)
======= ====== ======= =======
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate............................................. 8.25% 7.00% 7.00% 7.00%
Expected return on plan assets............................ 9.75% 9.75% 8.00% 8.00%
Rate of compensation increase............................. 4.10% 4.05% -- --
</TABLE>

The assumed health care cost trend rates for gross claims paid were 4.0% and
5.0% for 1999 and 1998, respectively.

B-35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(16) RETIREMENT AND POSTRETIREMENT PLANS (CONTINUED)
The net periodic benefit cost included the following components:

<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------------------ ------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
- ------------------------------------------------------------
Service cost................................................ $295 $276 $232 $ 53 $ 48 $ 44
Interest cost............................................... 583 533 477 116 109 107
Expected return on plan assets.............................. (665) (581) (531) (9) (8) (8)
Amortization of prior service cost including transition
obligation/ (asset)....................................... 57 57 36 -- -- --
Recognized actuarial (gain)/loss............................ 1 9 1 (5) (4) (5)
---- ---- ---- ---- ---- ----
Net period benefit costs.................................... $271 $294 $215 $155 $145 $138
==== ==== ==== ==== ==== ====
</TABLE>

Total pension expense for all retirement plans (including defined
contribution plans) was $285 million in 1999, $304 million in 1998 and
$229 million in 1997.

The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the plans with accumulated benefit obligations in
excess of plan assets were $500 million, $444 million, and $47 million,
respectively, as of December 31, 1999, and $1.688 billion, $1.510 billion, and
$1.118 billion, respectively, as of December 31, 1998.

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one-percentage-point change in
assumed health care trend rate would have the following effects:

<TABLE>
<CAPTION>
1% INCREASE 1% DECREASE
----------- -----------
<S> <C> <C>
(IN MILLIONS)
- ------------------------------------------------------
Effect on total service and interest cost............. $ 28 $ 23
Effect on postretirement benefit obligation........... $186 $154
</TABLE>

Changes in interest rates or rates of inflation may impact the assumptions
used in the valuation of pension obligations and postretirement obligations
including discount rates and rates of increase in compensation, resulting in
increases or decreases in United's pension and postretirement liabilities and
pension and postretirement costs.

(17) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

See QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ("Market Risk
Disclosures") for a discussion of the Company's foreign currency and fuel price
risk management activities, and the fair value of all significant financial
instruments.

CREDIT EXPOSURES OF DERIVATIVES

The Company's theoretical risk in the derivative financial instruments
described in Market Risk Disclosures is the cost of replacing the contracts at
current market rates in the event of default by any of the counterparties.
However, the Company does not anticipate such default as counterparties are
selected based on credit ratings and the relative market positions with each
counterparty are monitored.

B-36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(17) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
FINANCIAL GUARANTEES

Special facility revenue bonds have been issued by certain municipalities to
build or improve airport and maintenance facilities leased by United. Under the
lease agreements, United is required to make rental payments in amounts
sufficient to pay the maturing principal and interest payments on the bonds. At
December 31, 1999, $1.274 billion principal amount of such bonds was
outstanding. As of December 31, 1999, UAL and United had jointly guaranteed
$35 million of such bonds and United had guaranteed $1.258 billion of such
bonds, including accrued interest. The payments required to satisfy these
obligations are included in the future minimum lease payments disclosed in
Note 10, "Lease Obligations."

CONCENTRATIONS OF CREDIT RISK

The Company does not believe it is subject to any significant concentration
of credit risk. Most of the Company's receivables result from sales of tickets
to individuals through geographically dispersed travel agents, company outlets
or other airlines, often through the use of major credit cards. These
receivables are short term, generally being settled shortly after the sale.

(18) COMMITMENTS, CONTINGENT LIABILITIES AND UNCERTAINTIES

The Company has certain contingencies resulting from litigation and claims
(including environmental issues) incident to the ordinary course of business.
Management believes, after considering a number of factors, including (but not
limited to) the views of legal counsel, the nature of contingencies to which the
Company is subject and its prior experience, that the ultimate disposition of
these contingencies is not expected to materially affect UAL's consolidated
financial position or results of operations. UAL records liabilities for legal
and environmental claims against it in accordance with generally accepted
accounting principles. These amounts are recorded based on the Company's
assessments of the likelihood of their eventual settlements. The amounts of
these liabilities could increase or decrease in the near term, based on
revisions to estimates relating to the various claims.

At December 31, 1999, commitments for the purchase of property and
equipment, principally aircraft, approximated $4.4 billion, after deducting
advance payments. An estimated $2.0 billion will be spent in 2000, $1.8 billion
in 2001 and $0.6 billion in 2002. The major commitments are for the purchase of
A319, A320, B747, B767, and B777 aircraft, which are scheduled to be delivered
through 2002. These commitments, combined with aircraft retirements, are part of
the Company's plan to eventually increase the fleet to an expected 645 aircraft
at the end of 2001.

In connection with the construction of the Indianapolis Maintenance Center,
United agreed to spend an aggregate $800 million on capital investments by the
year 2001 and employ at least 7,500 individuals by the year 2004. In the event
such targets are not reached, United may be required to make certain payments to
the city of Indianapolis and state of Indiana.

Approximately 79% of United's employees are represented by various labor
organizations. The labor contracts with the Air Line Pilots' Association and the
International Association of Machinists and Aerospace Workers become amendable
in April and July 2000, respectively. The Company is currently in the process of
negotiating these contracts. The contract with the Association of Flight
Attendants becomes amendable in 2006. See OTHER INFORMATION, "Labor Agreements
and Wage Adjustments" in MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS for details.

B-37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(19) SEGMENT INFORMATION

United has a global route network designed to transport passengers and cargo
between destinations in North America, the Pacific, Latin America and Europe.
These regions constitute United's four reportable segments. The accounting
policies for each of these segments are the same as those described in Note 1,
"Summary of Significant Accounting Policies," except that segment financial
information has been prepared using a management approach which is consistent
with how the Company's management internally disaggregates financial information
for the purpose of making internal operating decisions. UAL evaluates
performance based on United's fully distributed earnings before income taxes.
Revenues are attributed to each reportable segment based on the allocation
guidelines provided by the U.S. Department of Transportation, which classifies
flights between the U.S. and foreign designations as part of each respective
region. A reconciliation of the total amounts reported by reportable segments to
the applicable amounts in the financial statements follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
REPORTABLE
LATIN SEGMENT CONSOLIDATED
DOMESTIC PACIFIC AMERICA ATLANTIC TOTAL OTHER TOTAL
-------- -------- -------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
- ---------------------------------------
Revenue................................ $12,516 $2,691 $787 $1,973 $17,967 $60 $18,027
Interest income........................ 40 14 4 10 68 -- 68
Interest expense....................... 217 79 21 55 372 (10) 362
Equity in earnings of affiliates....... 21 9 2 5 37 -- 37
Depreciation and amortization.......... 550 145 42 115 852 15 867
Fully distributed earnings before
income taxes & gains on sales........ 1,460 171 49 230 1,910 57 1,967
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------
REPORTABLE
LATIN SEGMENT CONSOLIDATED
DOMESTIC PACIFIC AMERICA ATLANTIC TOTAL OTHER TOTAL
-------- -------- -------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
- ---------------------------------------
Revenue................................ $11,997 $2,843 $832 $1,846 $17,518 $43 $17,561
Interest income........................ 33 14 3 8 58 1 59
Interest expense....................... 207 84 22 49 362 (7) 355
Equity in earnings of affiliates....... 41 17 4 10 72 -- 72
Depreciation and amortization.......... 520 145 45 95 805 (12) 793
Fully distributed earnings before
income taxes......................... 1,641 63 68 277 2,049 36 2,085
</TABLE>

B-38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(19) SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------
REPORTABLE
LATIN SEGMENT CONSOLIDATED
DOMESTIC PACIFIC AMERICA ATLANTIC TOTAL OTHER TOTAL
-------- -------- -------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
- ---------------------------------------
Revenue................................ $11,214 $3,552 $824 $1,745 $17,335 $43 $17,378
Interest income........................ 29 13 3 6 51 1 52
Interest expense....................... 166 73 15 36 290 (4) 286
Equity in earnings of affiliates....... 38 17 3 8 66 -- 66
Depreciation and amortization.......... 474 159 38 76 747 (23) 724
Fully distributed earnings before
income taxes & gains on sales........ 1,189 512 109 287 2,097 36 2,133
</TABLE>

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
(IN MILLIONS)
- ------------------------------------------------------------
Total fully distributed earnings for reportable segments.... $1,910 $2,049 $2,097
Gains on sales............................................ 731 -- 378
UAL subsidiary earnings................................... 57 36 36
Less: ESOP compensation expense........................... 756 829 987
------ ------ ------
Total earnings before income taxes, distributions on
preferred securities and extraordinary item............... $1,942 $1,256 $1,524
====== ====== ======
</TABLE>

UAL's operations involve an insignificant level of dedicated revenue
producing assets by reportable segment. The overwhelming majority of UAL's
revenue producing assets can be deployed in any of the four reportable segments.
UAL has significant intangible assets related to the acquisition of its Atlantic
and Latin America route authorities.

(20) STATEMENT OF CONSOLIDATED CASH FLOWS--SUPPLEMENTAL DISCLOSURES

Supplemental disclosures of cash flow information and non-cash investing and
financing activities were as follows:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
(IN MILLIONS)
- ------------------------------------------------------------
Cash paid during the year for:
Interest (net of amounts capitalized)..................... $260 $234 $152
Income taxes.............................................. 296 160 362

Non-cash transactions:
Capital lease obligations incurred........................ 482 701 643
Long-term debt incurred in connection with additions to
equipment............................................... -- -- 185
Note receivables recorded in connection with the sale of
equipment and leasehold improvements.................... -- -- 61
Increase (decrease) in pension intangible assets.......... (126) (15) 200
Net unrealized gain on investment in affiliates........... 356 -- --
</TABLE>

B-39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(21) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
- ---------------------------------------------------
1999:
Operating revenues................................. $4,160 $4,541 $4,845 $4,481 $18,027
Earnings from operations........................... 146 433 619 193 1,391
Earnings before extraordinary item................. 78 672 359 129 1,238
Extraordinary loss on early extinguishment of
debt............................................. -- (3) -- -- (3)
Net earnings....................................... $ 78 $ 669 $ 359 $ 129 $ 1,235
Per share amounts, basic:
Earnings before extraordinary item............... $ 0.91 $12.26 $ 6.18 $ 1.85 $ 21.26
Extraordinary loss on early extinguishment of
debt........................................... -- (0.05) -- -- (0.06)
Net earnings..................................... $ 0.91 $12.21 $ 6.18 $ 1.85 $ 21.20
Net earnings per share, diluted.................... $ 0.44 $ 5.78 $ 2.89 $ 0.84 $ 9.94

1998:
Operating revenues................................. $4,055 $4,442 $4,783 $4,281 $17,561
Earnings from operations........................... 123 470 695 191 1,478
Net earnings....................................... $ 61 $ 282 $ 425 $ 54 $ 821
Earnings per share, basic.......................... $ 0.60 $ 4.43 $ 6.91 $ 0.53 $ 12.71
Earnings per share, diluted........................ $ 0.34 $ 2.44 $ 3.71 $ 0.27 $ 6.83
</TABLE>

The sum of quarterly earnings per share amounts is not the same as annual
earnings per share amounts because of changing numbers of shares outstanding.

During the second quarter of 1999, UAL recognized a pre-tax gain of
$669 million on the sale of a portion of its investment in Galileo.
Additionally, in the fourth quarter 1999, UAL recognized a pre-tax gain of
$62 million on the sale of a portion of its investment in Equant. (See Note 6,
"Investments").

B-40
<PAGE>
EDGAR ONLY APPENDIX

UNITED EMPLOYEES PERFORMANCE INCENTIVE PLAN

I. PURPOSE

A. GENERAL. In an effort to maintain a position of leadership in the
fast-growing and highly competitive business segments in which UAL
Corporation (the "Company") competes, it is necessary to promote
the financial interests of the Company and its Subsidiaries,
including its growth, by attracting and retaining certain highly
qualified employees possessing outstanding ability, motivating
such employees by means of performance related incentives, and
providing incentive compensation opportunities which are
competitive with those of major corporations. The United Employees
Performance Incentive Plan (the "Plan") hereinafter described is
designed to assist the Company in attaining these objectives.

B. PERFORMANCE-BASED COMPENSATION. With respect to Covered Awards,
the Plan is intended to constitute a qualified performance-based
compensation plan under Section 162(m)(4)(C) of the Code and shall
be construed and administered so as to ensure such compliance.

C. DEFERRED AWARDS. With respect to the Plan as it relates to the
payment of Incentive Awards on a deferred basis pursuant to
Paragraph VI(B), such portion of the Plan is intended to be (and
shall be construed and administered as) an employee pension
benefit plan that is unfunded and is maintained by the Company for
a select group of management or highly compensated employees
within the meaning of ERISA.

D. CASH BONUS PLAN. With respect to the Plan as it relates to the
current payment of Incentive Awards pursuant to Paragraph VI(A),
such cash bonus portion of the Plan is not intended to be (and
shall not be construed and administered as) an employee benefit
plan within the meaning of ERISA. Incentive Awards under this Plan
are intended to be discretionary and shall not constitute a part
of an employee's regular rate of pay.

II. PLAN ADMINISTRATION

A. PLAN ADMINISTRATION. The Company or its delegate has the authority
and responsibility to manage and control the general
administration of the Plan, except as to matters expressly
reserved in this Plan to either the Compensation Committee or the
Compensation Administration Committee of the Board of Directors of
the Company (as applicable, the "Committee"). This Plan is not
intended to modify or limit the powers, duties or responsibilities
of either the Board or the Committees as set forth under the UAL
Corporation Restated Certificate of Incorporation. Determinations,
decisions and actions of the Company or, if applicable, the
Committee, in connection with the construction, interpretation,
administration, or application of the Plan will be final,
conclusive, and binding upon any Participant and any person
claiming under or through the Participant. No employee of an
Employer, any member of the Board, any delegate of the Board, or
any member of the Committee will be liable for any determination,
decision, or action made in good faith with respect to the Plan or
any Incentive Award made under the Plan.

B. COMPENSATION COMMITTEE. The Compensation Committee shall have the
sole authority and responsibility to review annually management's
recommendations for the Selected Performance

1
<PAGE>

Objectives and Selected Performance Factors under the Plan, to
select the Selected Performance Objectives and Selected
Performance Factors for an Award Year; and to otherwise administer
Incentive Awards (other than Covered Awards) payable to Officers.

C. COMPENSATION ADMINISTRATION COMMITTEE. The Compensation
Administration Committee shall have the sole authority and
responsibility under the Plan to establish and administer any
Covered Award under the Plan, including establishment of the
Selected Performance Objectives and Selected Performance Factors
for an Award Year.

D. NON-ASSIGNABILITY. A Participant's rights and interests in and to
payment of any Incentive Award under the Plan may not be assigned,
transferred, encumbered or pledged other than by will or the laws
of descent and distribution; and are not subject to attachment,
garnishment, execution or other creditor's processes.

E. AMENDMENT OR TERMINATION. Subject to the UAL Corporation Restated
Certificate of Incorporation, the Plan may at any time be amended,
modified, or terminated, as the Board in its discretion
determines. Such amendment, modification, or termination of the
Plan will not require the consent, ratification, or approval of
any party, including any Participant. The Board or the
Compensation Committee (and the Compensation Administration
Committee in the case of a Covered Award) may amend the Selected
Performance Objectives and/or the Selected Performance Factors as
well as any Incentive Award (including increasing, decreasing or
eliminating any or all Incentive Awards for an Award Year) prior
to the payment of the Award (or the date payment would have been
made but for a Participant's election to defer receipt) to the
extent it deems appropriate for any reason, including compliance
with applicable securities laws, local laws outside the U.S. if
and to the extent international employees are Participants, the
requirements of Section 162(m) of the Code and the pooling of
interests requirements in connection with a merger.
Notwithstanding the foregoing, to the extent the Compensation
Administration Committee has expressly designated an Incentive
Award as a Covered Award, the Compensation Administration
Committee will not have any authority to amend or modify the terms
of any Covered Award in any manner which would impair its
deductibility under Section 162(m) of the Code.

F. NO CONTRACT OF EMPLOYMENT. Neither the Plan, nor any Incentive
Award, constitutes a contract of employment, and participation in
the Plan will not give any employee the right to be retained in
the service of the Company or any Subsidiary or continue in any
position or at any level of compensation.

G. CONTROLLING LAW. This Plan and all determinations made and actions
taken pursuant hereto to the extent not preempted by ERISA or
other federal laws, will be governed and construed by the internal
laws of the State of Illinois, except its laws with respect to
choice of law.

H. BENEFICIARY UPON DEATH. An Incentive Award which has been deferred
pursuant to the provisions of Paragraph VI(B) shall be
transferable at the Participant's death to the beneficiary
designated by the Participant on forms prescribed by and filed
with the Company. If no designation of a beneficiary has been made
or is in effect, an Incentive Award payable to a Participant
following his or her death shall be paid to the Participant's
legal representative and shall be transferable by will or pursuant
to the laws of descent and distribution.

2
<PAGE>

I. COMPLIANCE WITH SECTION 162(m) OF THE CODE. To the extent any
provision of the Plan or an Incentive Award or any action of the
Compensation Committee or the Company as it relates to a Covered
Award, may result in the application of Section 162(m)(1) of the
Code to compensation payable to a Covered Employee, such provision
or action shall be deemed null and void to the extent permitted by
law and deemed advisable to the Compensation Administration
Committee.

J. UNFUNDED, UNSECURED OBLIGATION. A Participant's only interest
under the Plan shall be the right to receive either a cash or
Stock payment for an Incentive Award pursuant to the terms of the
Incentive Award and the Plan. No portion of the amount payable to
a Participant under this Plan shall be held by the Company or any
Subsidiary in trust or escrow or any other form of asset
segregation. To the extent that a Participant acquires a right to
receive a cash or Stock payment under the Plan, such right shall
be no greater than the right of any unsecured, general creditor of
the Company, and no trust in favor of any Participant will be
implied.

H. INTERNATIONAL EMPLOYEES. The Company may in its sole discretion
extend participation in the Plan to international employees who do
not satisfy the definition of Administrative Employee or
Management Employee under this Plan. The terms of the Plan as
applied to such employees shall be as set forth in an Exhibit to
this Plan.

III. DEFINITIONS

Unless the context requires otherwise, the following terms when used with
initial capitalization have the following meanings:

A. ACCOUNT -- A bookkeeping account maintained by the Company in the
name of each Participant, which account shall consist of two
subaccounts, one known as the "Cash Subaccount" and the other as
the "Company Stock Subaccount."

B. ADMINISTRATIVE EMPLOYEE -- An individual (i) who is classified by
an Employer (without regard to any retroactive judicial or
administrative reclassification of such individual) as an
Administrative Employee (on other than a temporary
reclassification basis), (ii) whose employment is for an
indefinite period, (iii) who is employed in an Employer
established job classification not covered by a collective
bargaining agreement, and (iv) who is on the Employer's U.S.
payroll and working regularly in the U.S.

C. AWARD YEAR -- The calendar year for which Incentive Awards, if
any, are calculated under the Plan.

D. BOARD -- The Board of Directors of the Company.

E. CODE -- The Internal Revenue Code of 1986, as from time to
time amended including any related regulations.

F. COMMITTEE - Committee means separately or collectively as
applicable the Compensation Administration Committee and the
Compensation Committee.

G. COMPANY -- UAL Corporation.

3
<PAGE>

H. COMPENSATION -- Compensation means:

1. With respect to a Participant who is not a Key and Senior
Management Employee, the amount of a Participant's taxable
wages for the Award Year, increased by the amount of his or
her pre-tax elective contributions under any qualified Code
Section 401(k) plan or Code Section 125 cafeteria plan
(including any HMO premium deductions) for the Award Year,
and decreased by any Incentive Award received under the Plan
or comparable incentive compensation plan and the amount of
any extraordinary payments such as moving expense
reimbursements, Pride Awards and Code Section 125 cafeteria
plan taxable reimbursements for the Award Year.

2. With respect to a Key and Senior Management Employee,
such Participant's annual base salary actually
received for the Award Year, increased by the amount
of his or her pre-tax elective contributions under
any qualified Code Section 401(k) Plan or Code
Section 125 cafeteria plan (including any HMO premium
deductions), prorated for a partial year's
participation.

I. COMPENSATION ADMINISTRATION COMMITTEE -- The Compensation
Administration Committee is the Compensation Administration
Committee of the Board as set forth in the UAL Corporation
Restated Certificate of Incorporation, or such other committee
appointed by the Board, in accordance with the requirements of the
UAL Corporation Restated Certificate of Incorporation, to exercise
the powers and perform the duties assigned to the Compensation
Administration Committee under this Plan.

J. COMPENSATION COMMITTEE - The Compensation Committee is the
Compensation Committee of the Board as set forth in the UAL
Corporation Restated Certificate of Incorporation, or such other
committee appointed by the Board, in accordance with the
requirements of the UAL Corporation Restated Certificate of
Incorporation, to exercise the powers and perform the duties
assigned to the Compensation Committee under this Plan.

K. COVERED AWARD -- An Incentive Award (i) which will be paid to a
Covered Employee, (ii) which the Compensation Administration
Committee expressly designates as performance-based compensation
intends to be fully deductible under Section 162(m) of the Code,
and (iii) which will be paid following the shareholder approval
required by Section 162(m)(4)(C)(ii) of the Code.

L. COVERED EMPLOYEE -- An individual who is a "covered employee"
within the meaning of Section 162(m)(3) of the Code.

M. EMPLOYER -- The Company, United Air Lines, Inc., and any other
Subsidiary which, with the approval of the Chief Executive Officer
of the Company, has adopted this Plan.

N. ERISA -- The Employee Retirement Income Security Act of 1974, as
from time to time amended, including any related regulations.

O. FAIR MARKET VALUE. The Fair Market Value of a share of Stock on
any date shall be equal to the five-day average of the average of
the high and low prices of a share of Stock reported for New York
Stock Exchange Composite Transactions for the applicable date or,
if there are no such

4
<PAGE>

reported trades for such date, for the last previous date for
which trades were reported, and the four previous dates for which
trades were reported.

P. INCENTIVE AWARD -- The dollar value of an award made to a
Participant as determined under the Plan.

Q. INCENTIVE OPPORTUNITY -- The amount, stated as a percentage of a
Participant's Compensation, determined with respect to an Award
Year (or partial Award Year in the case of participation for a
partial year), that will be included in a Participant's Incentive
Award formula under Paragraph V(A) of the Plan. If a Participant
held more than one eligible position during the Award Year, his or
her Incentive Opportunity will be separately determined based on
each corresponding period of participation. The Incentive
Opportunity for Participants who are Officers will be determined
by the Compensation Committee, subject to the requirement under
Paragraph IX(A) that the Compensation Administration Committee
establish the Incentive Opportunity upon which a Covered Award is
based.

R. INDIVIDUAL PERFORMANCE GOAL -- The performance criteria or
objectives established for a Participant for an Award Year for
purposes of assisting the Company or the Compensation Committee in
determining whether and to what extent an Incentive Award has been
earned by such Participant for such Award Year.

S. INDIVIDUAL PERFORMANCE MODIFIER -- The numerical modifier
(expressed as a percentage) determined for a Participant with
respect to an Award Year, as follows:

1. In the case of a Participant other than a Key and Senior
Management Employee, the Individual Performance Modifier
shall be 100%, provided the Company may reduce such
Individual Performance Modifier based upon an evaluation of
the Participant's performance during the Award Year.

2. In the case of a Participant who is a Key and Senior
Management Employee other than an Officer, the Individual
Performance Modifier shall be determined by the Company and
may be based, in whole or in part, upon an evaluation of the
extent to which such Participant achieved his or her
Individual Performance Goals established for that Award Year.

3. In the case of a Participant who is an Officer other than an
Officer who is to receive a Covered Award, the Individual
Performance Modifier shall be determined by the Compensation
Committee and may be based, in whole or in part, upon an
evaluation of the extent to which such Participant achieved
his or her Individual Performance Goals established for that
Award Year.

4. In the case of a Participant who is to receive a Covered
Award, the Individual Performance Modifier shall in all
cases be 120%, subject to the Compensation Administration
Committee's discretionary authority under Paragraph IX(C) to
reduce the amount of a Covered Award.

5
<PAGE>

A Participant's evaluation under Paragraphs III(S)(l), III(S)(2)
and III(S)(3) above is wholly discretionary and subjective on the
part of the Company or the Compensation Committee as applicable.

T. KEY AND SENIOR MANAGEMENT EMPLOYEE -- Each Covered Employee, each
Officer and each Management Employee who is designated by the
Company as a Key and Senior Management Employee with respect to
the Plan for an Award Year. Designation as a Key and Senior
Management Employee will apply only for the Award Year for which
the designation is made.

U. MANAGEMENT EMPLOYEE -- An individual (i) who is classified by the
Employer (without regard to any retroactive judicial or
administrative reclassification of such individual) as a
Management Employee (on other than a temporary reclassification
basis), (ii) whose employment is for an indefinite period, (iii)
who is employed in an Employer established job classification not
covered by a collective bargaining agreement, and (iv) who is on
the Employer's U.S. payroll and working regularly in the U.S.

V. OFFICER -- Each officer of the Company, each officer of United
Airlines Inc. reporting directly to the Chairman and Chief
Executive Officer of the Company, and each senior officer of the
Company's Subsidiaries designated by the Board.

W. PARTICIPANT -- Each Administrative Employee, Management Employee
or other international employee of an Employer who is designated
as a Participant for an Award Year by the Company or the Committee.

X. PERFORMANCE OBJECTIVES -- One or more objectively determinable
measures established at the beginning of an Award Year related to
specified levels of growth in, or peer company performance in, or
relating to, customer satisfaction as measured by a Company
sponsored customer survey; employee engagement or employee
relations as measured by a Company sponsored employee survey;
employee safety; employee diversity; financial performance as
measured by sales, net income, profits (pre-and after-tax),
adjusted pre-tax margin, earnings before interest and taxes, cash
flow, earnings per share, reduction of fixed costs, economic value
added, return on assets, return on capital, return on equity,
shareholder return, cost of capital, debt reduction, productivity
improvements; and operational performance as measured by load
factor, passenger yield management, lost time incidents, baggage
handling performance, or on-time performance. Performance
Objectives may be described in terms of Company, Subsidiary, major
business segments, division or departmental performance.
Performance Objectives shall be stated in terms of Threshold,
Target and Maximum levels. For other than Covered Awards, the
Company may add other Performance Objectives not specifically
listed above.

Y. PLAN -- The United Employees Performance Incentive Plan, as
evidenced by this written instrument as may be amended from time
to time.

Z. PRE-TAX EARNINGS -- UAL Corporation's pre-tax earnings as
determined under generally accepted accounting principles adjusted
to exclude any items (whether gains or losses) otherwise included
therein relating to (i) the UAL Corporation Employee Stock
Ownership Plan, the UAL Corporation Supplemental ESOP, or the
trusts relating thereto, (ii) the Company's 1988 and 1998
Restricted Stock Plans, (iii) for those Award Years in which the
Company enters into labor contracts with ALPA or the IAM to
replace contracts becoming amendable in 2000, any

6
<PAGE>

differential between the projected labor costs to the Company
attributable to such contract(s) as determined by the Company
prior to such Award Year and the actual labor costs to the Company
attributable to such labor contract(s) and (iv) any event or
occurrence that the Committee determines to be either not directly
related to the operations of the Company or not within the
reasonable control of the Company's management, but only to the
extent such determination would not cause a Covered Award to not
be deductible under Code Section 162(m).

AA. PRE-TAX PROFIT MARGIN -- Pre-Tax Earnings divided by UAL
Corporation's gross revenues as determined under generally
accepted accounting principles adjusted to exclude any items
otherwise included therein relating to any event or occurrence
that the Committee determines to be either not directly related to
the operations of the Company or not within the reasonable control
of the Company's management, but only to the extent such
determination would not cause a Covered Award to not be deductible
under Code Section 162(m).

BB. SELECTED PERFORMANCE FACTORS -- The numerical factors (expressed
as a percentage) established by the Company relating to the Plan's
Selected Performance Objectives for the Award Year and which
correspond to the actual achievement of the Threshold, Target and
Maximum Selected Performance Objectives for such Award Year.
Subject to the provisions of Article IX with respect to a Covered
Award, the Selected Performance Factors as they relate to Officers
shall be established by the Compensation Committee. If the actual
achievement of the Selected Performance Objective for an Award
Year, as determined by the Company (or by the Compensation
Administration Committee in the case of a Covered Award and the
Compensation Committee as it relates to the Incentive Awards for
Officers other than with respect to a Covered Award) shortly after
the Award Year, is between the Threshold and Target or Target and
Maximum Objectives, the Selected Performance Factor will be the
amount determined by linear interpolation between the two
corresponding Threshold, Target or Maximum Selected Performance
Factors.

CC. SELECTED PERFORMANCE OBJECTIVES -- One or more Performance
Objectives selected for an Award Year. Subject to the provisions
of Article IX with respect to a Covered Award, the Compensation
Committee shall establish at the beginning of an Award Year the
Selected Performance Objectives, including the Threshold, Target
and Maximum levels for Officers, other than with respect to a
Covered Award.

DD. STOCK -- Shares of Common Stock of the Company par value $.01 per
share, or any shares into which such shares are changed as
contemplated in Paragraph VI(E)(2)(b).

EE. SUBSIDIARY -- Any entity, corporate or otherwise, in which the
Company, directly or indirectly, owns or controls a greater than
50% interest.

IV. PARTICIPATION

A. PARTICIPANTS. Participants will be determined annually by the
Company or the Committee from among the Management Employees,
Administrative Employees, and other international employees of an
Employer. Designation as a Participant will apply only for the
Award Year for which the designation is made and may include a
partial year.

7
<PAGE>

B. TERMINATION OF EMPLOYMENT. In order to be entitled to receive an
Incentive Award for an Award Year, a Participant must be actively
employed at the time the Incentive Award is paid or, in the case
of a deferred Incentive Award, at the time such Award would have
been paid but for the Participant's election to defer receipt of
the Award; however, the Company (or the Committee, if applicable)
may in its sole discretion pay an Incentive Award to a Participant
who has terminated employment.

V. COMPUTATION OF INCENTIVE AWARDS

A. FORMULA. Subject to Paragraph B, a Participant's Incentive Award
for an Award Year will be an amount equal to the Base Incentive
Award under (1) and, if applicable, the Match Incentive Award
under (2):

1. BASE INCENTIVE AWARD. The Participant's Base Incentive
Award is equal to the product of the following:

(a) The Participant's Incentive Opportunity;

(b) The Participant's Compensation;

(d) The Participant's Individual Performance Modifier.

2. MATCH INCENTIVE AWARD. For any portion of an Incentive
Award, the receipt of which has been deferred pursuant to
Paragraph VI(B) for a period of at least five years
following the Award Year and which is payable in the form of
Stock, the Participant's Incentive Award will include a
Match Incentive Award equal to 20% of such portion of the
Participant's Base Incentive Award determined under (1)
above.

B. COVERED AWARDS. A Covered Award shall be the greater of the
Incentive Award determined under Paragraph A or an Incentive Award
determined solely on the basis of a formula and one or more
financial Performance Objectives as established by the
Compensation Administration Committee prior to the Award Year (or
at such later date as may be permissible under Code Section
162(m)), subject to the Compensation Administration Committee's
discretionary authority under Paragraph IX(C) to reduce the amount
of a Covered Award.

C. CLASSIFICATION CHANGES. Appropriate adjustments and computations,
including computations for a partial Award Year, may be made to
reflect changes in a Participant's job classification, Individual
Performance Modifier, or Selected Performance Factors during an
Award Year. Subject to the provisions of Article IX with respect
to Covered Awards, the Compensation Committee shall determine all
such adjustments and computations relating to Incentive Awards for
Officers.

D. THRESHOLD LIMIT. With respect to each Award Year, the Compensation
Committee will determine before such Award Year a threshold level
of Pre-Tax Profit Margin which must be obtained before any
Incentive Award (other than a Covered Award) may be made to any
Participant for such Award Year. The Compensation Administration
Committee will establish such threshold

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<PAGE>

level of Pre-Tax Profit Margin which must be obtained before any
Covered Award may be made to a Covered Employee for such Award
Year.

VI. PAYMENT OF INCENTIVE AWARDS

A. CASH PAYMENT. Subject to Paragraph B below, payment of Incentive
Awards will be made in cash as soon as practicable following the
end of the Award Year, without interest.

B. ELECTION TO DEFER. A Participant who is a Key and Senior
Management Employee and who is determined by the Company to be
member of a select group of management or highly compensated
employees ("top-hat group") as such group is determined under
Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA may make an
irrevocable election, on or before the earlier of a date
established by the Company or June 30 of the Award Year, to defer
receipt of all or any portion of his or her Incentive Award to a
subsequent calendar year. A Participant's deferred Incentive Award
will be credited to his or her Account as of the date it would
otherwise have been paid in cash and will be adjusted as provided
in Paragraph E below. A Participant's election to defer will
include an election to receive payment of all or a portion of such
deferred Incentive Award in the form of cash or shares of Stock.
If the Company reasonably determines that a Participant no longer
qualifies as a member of a "top-hat group," the Company shall have
the right, in its sole discretion, to (i) terminate any future
deferrals by such Participant under this Plan, and/or (ii)
immediately distribute the Participant's Account balance under the
Plan.

C. TIME FOR PAYMENT OF DEFERRED INCENTIVE AWARD. A Participant who
has made an election to defer his or her Incentive Award will
receive payment of his or her entire Account balance (except as
limited by (3) below) on the earliest of the following:

1. In the calendar year selected by the Participant in
his or her irrevocable written election.

2. As soon as practicable in the calendar year after the
Participant's termination of employment with the Company and
its Subsidiaries for any reason or no reason, provided that
a transfer of employment among the Company or its
Subsidiaries will not be considered a termination of
employment.

3. At the Participant's request and upon the occurrence of an
"Unforeseeable Emergency", provided that a distribution
pursuant to this clause shall not exceed the amount
reasonably needed to satisfy the emergency need. For
purposes of this paragraph, "Unforeseeable Emergency" shall
mean a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident
of the Participant or of his or her dependent (as defined in
Section 152(a) of the Code), loss of the Participant's
property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events
beyond the control of the Participant. The circumstances
that will constitute an Unforeseeable Emergency will depend
upon the facts of each case, but in no case will payment be
made to the extent that such hardship is or may be relieved
(i) through reimbursement or compensation by insurance or
otherwise, (ii) by liquidation of the Participant's assets,
to the extent the liquidation of such assets would not
itself cause severe financial hardship, or (iii) by
cessation of deferrals under the Plan.

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<PAGE>

4. Any other time elected by the Participant, provided that
upon making such an election, the Participant shall be
entitled to receive only 90% of the amounts then credited to
his or her Account under the Plan and shall forfeit the
remaining 10% of such amount.

D. MODIFICATION OF TIME AND MANNER OF PAYMENT. Notwithstanding
anything herein to the contrary and subject to the provisions of
Article IX with respect to a Covered Award, the Compensation
Committee shall have the right, in its discretion, to vary the
manner (including payment in cash in lieu of shares of Stock) and
time for making the distributions provided in Paragraph C above
(but not defer any amount otherwise due), and may make such
distributions in a lump sum or other payment method as it may deem
appropriate, taking into account the Participant's or any
beneficiary's age, health, physical or mental condition,
dependents or lack of dependents, other sources of income or lack
of same, and any other factors deemed relevant, provided, however,
that such accelerated payment is not detrimental to the
Participant. Nothing herein shall be construed to grant the
Participant or any beneficiary the right to elect a modification
of the time for receiving payments hereunder.

E. CREDITING AND ADJUSTMENT OF ACCOUNT BALANCE. The amount of any
Incentive Award a Participant has elected to defer and has elected
to receive in shares of Stock shall be credited to his or her
Company Stock Subaccount by crediting a number of stock units
equal to such amount of the Incentive Award divided by the Fair
Market Value of a share of Stock on the date the Incentive Award
would otherwise have been paid in cash. The balance of the amount
of the deferred Incentive Award shall be credited to his or her
Cash Subaccount. A Participant's Account shall be adjusted as
follows:

1. As of the last day of each calendar quarter (each such date
referred to herein as an "Accounting Date"), the
Participant's Cash Subaccount shall be adjusted as follows:

(a) first, the amount of any distributions made since the
last preceding Accounting Date and attributable to
the Cash Subaccount shall be charged to the Cash
Subaccount;

(b) next, the balance of the Cash Subaccount after
adjustment in accordance with subparagraph (a) above,
shall be credited with interest for the period since
the last preceding Accounting Date computed at the
prime rate as reported by THE WALL STREET JOURNAL in
effect at the end of each calendar quarter during the
deferral period ending on the current Accounting
Date, or if such date is not a business day, for the
next preceding business day, except that, any credit
which occurs after the Accounting Date shall be
credited with interest for only the period following
the credit.

2. The Participant's Company Stock Subaccount shall be
adjusted as follows:

(a) as of the date on which shares of Stock are
distributed to the Participant, the Company Stock
Subaccount shall be charged with an equal number of
stock units; and

(b) as of the payment date for any dividend paid on
Stock, the Company Stock Subaccount shall be credited
with that number of additional stock units which is

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<PAGE>

equal to the number obtained by multiplying the
number of stock units credited to the Company Stock
Subaccount on the dividend record date by the amount
of the cash dividend or the fair market value (as
determined by the Board of Directors) of any dividend
in kind payable on a share of Stock and dividing that
product by the then Fair Market Value of a share of
Stock.

In the event of any merger, consolidation,
reorganization, recapitalization, liquidation,
reclassification, divestiture (including spinoff),
stock split, reverse stock split, combination of
shares, rights offering, exchange, or any other
similar change in the corporate structure or
capitalization of the Company affecting the Stock,
each Participant's Company Stock Subaccount shall be
equitably adjusted in such manner as the Committee
shall determine in its sole judgment. In determining
what adjustment, if any, is appropriate the Committee
may rely on the advice of such experts as it deems
appropriate, including counsel, investment bankers
and the accountants of the Company.

(3) A Participant entitled to a Match Incentive Award under
Paragraph V(A)(2) will receive a credit to his or her
Company Stock Subaccount equal to such Match Incentive
Award, but only if actual receipt of the related Base
Incentive Award is deferred for a period of at least five
years following the Award Year. Such credit will be
effective as of the date the related Base Incentive Award is
credited to the Participant's Company Stock Subaccount and
will be paid to the Participant in the manner and at the
time provided under Paragraph F below.

F. PAYMENT OF ACCOUNT BALANCE. Except as otherwise provided in
Paragraphs II(D) or VI(D), and subject to Article VIII, the
Participant's Account shall be payable to the Participant, as
follows:

1. The cash portion of the Participant's payment shall
be equal to the balance of the Cash Subaccount.

2. The Stock portion of the Participant's payment shall be a
number of shares of Stock equal to the number of Stock units
then credited to the Participant's Company Stock Subaccount,
provided that the Fair Market Value of any fractional share
of Stock shall be paid to the Participant in cash.

G. CLAIM PROCEDURE. For deferred Incentive Awards payable under the
Plan, the Compensation Committee shall establish a claims
procedure consistent with the requirements of ERISA.

H. LIMITATION ON ACTIONS. Unless ERISA specifically provides
otherwise, no civil action arising out of or relating to the
payment of Incentive Awards under this Plan may be commenced by a
Participant or beneficiary after three years from the occurrence
of the facts or circumstances that give rise to, or form the basis
for, such action.

VII. PAYMENT IN SHARES OF STOCK

A. SOURCE OF SHARES OF STOCK. The shares of Stock which shall be
available for payment to Participants pursuant to the Plan shall
be treasury shares (including, in the discretion of the Company,
shares purchased in the open market).

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<PAGE>

B. COMPLIANCE WITH APPLICABLE LAWS. Notwithstanding any other
provision of the Plan, the Company shall have no obligation to
deliver any shares of Stock under the Plan unless such delivery
would comply with all applicable laws and the applicable
requirements of any securities exchange or similar entity, and, in
such event, payment shall be made in the form of cash. Prior to
the delivery of any shares of Stock under the Plan, the Company
may require, among other things, a written statement that the
recipient is acquiring the shares for investment and not for the
purpose of, or with the intention of, distributing the shares. If
the redistribution of shares of Stock is restricted pursuant to
this Paragraph B, the certificates representing such shares may
bear a legend referring to such restrictions.

C. NO SHAREHOLDER RIGHTS. The election to defer receipt of an
Incentive Award and to receive payment in the form of shares of
Stock does not entitle a Participant to any rights (including,
without limitation, voting, transfer and rights to distributions)
of an owner of shares of Stock which relate to the stock units
credited to the Participant's Company Stock Subaccount.

VIII. WITHHOLDING TAXES

Notwithstanding any of the foregoing provisions hereof, an Employer
shall withhold from any payment to be made hereunder such amounts as it
reasonably determines it may be required to withhold under any
applicable federal, state or other law, and transmit such withheld
amounts to the appropriate authorities. If cash payments under this Plan
are not available to meet the withholding requirement, the Participant
shall make available sufficient funds to meet the requirements of such
withholding, and the Employer shall be entitled and authorized to take
such steps as it may deem advisable, including but not limited to,
withholding out of any funds or property due or to become due to the
Participant, in order to have such funds made available to the Employer.

IX. SPECIAL RULES FOR COVERED AWARDS

Notwithstanding any other provision of this Plan to the contrary, the
following provisions shall control with respect to any Covered Award:

A. PREESTABLISHED INCENTIVE OPPORTUNITY AND PERFORMANCE OBJECTIVES.
The Selected Performance Factors, Selected Performance Objectives,
Incentive Opportunity, and the Threshold Limit under Paragraph
V(D) upon which a Covered Award is based or subject shall be
established by the Compensation Administration Committee in
writing not later than 90 days after the commencement of the Award
Year (or period of service as the case may be), provided that the
outcome is substantially uncertain at the time the Compensation
Administration Committee actually establishes such factors and the
objectives upon which they are based (or at such earlier time as
may be required or such later time as may be permissible under
Section 162(m) of the Code). The Compensation Administration
Committee shall not make Covered Awards based on Selected
Performance Objectives not specifically provided under this Plan
if it determines that use of such Performance Objectives would
cause a Covered Award to not be deductible under Code Section
162(m).

B. CERTIFICATION OF PERFORMANCE OBJECTIVES. The Compensation
Administration Committee shall determine and certify in writing
prior to the payment or deferral of a Covered Award whether and

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<PAGE>

to what extent the Selected Performance Objectives referred to in
Paragraph A have been satisfied.

C. DISCRETIONARY REDUCTION OF COVERED AWARD. Notwithstanding the
foregoing, the Compensation Administration Committee may, in its
sole discretion, reduce a Covered Award otherwise determined
pursuant to the Plan.

D. LIMITED ADJUSTMENTS OF SELECTED PERFORMANCE OBJECTIVES. In the
event of (a) any merger, consolidation, reorganization,
recapitalization, liquidation, reclassification, stock dividend,
stock split, reverse stock split, combination of shares, rights
offering, extraordinary dividend or divestiture (including a
spin-off), exchange, or any other similar change in the corporate
structure or capitalization of the Company affecting the Stock, or
(b) any purchase, acquisition, sale or disposition of a
significant amount of assets or a significant business, in each
case with respect to the Company or any other entity whose
performance is relevant to the achievement of any Selected
Performance Objective included in a Covered Award, the
Compensation Administration Committee (or, if the Company is not
the surviving corporation in any such transaction, a committee of
the board of directors of the surviving corporation consisting
solely of two or more "outside directors" within the meaning of
Section 162(m)(4)(C)(i) of the Code) may, without the consent of
any affected Participant, amend or modify the terms of any
outstanding Award that includes any Selected Performance
Objectives based in whole or in part on the financial performance
of the Company (or any Subsidiary or division thereof) or such
other entity so as equitably to reflect such event, such that the
criteria for evaluating such financial performance of the Company
or such other entity (and the achievement of the corresponding
Selected Performance Objectives) will be substantially the same
(as determined by the Compensation Administration Committee or
such committee of the board of directors of the surviving
corporation) following such event as prior to such event;
provided, however, that any such change to any outstanding Covered
Award pursuant to this Paragraph D must be made in such a manner
that it is independently determinable by a hypothetical third
party having knowledge of the relevant facts, and the Compensation
Administration Committee shall take no action pursuant to this
Paragraph D which would constitute an impermissible exercise of
discretion within the meaning of Section 162(m) of the Code, or
would otherwise cause the Covered Award to not be deductible under
Section 162(m) of the Code.

E. CHANGES AFFECTING TIMING. No change shall be made to accelerate
the payment of a Covered Award unless the amount of the Covered
Award is discounted to reasonably reflect the time value of money.
Further, no change shall be made to defer the payment of a Covered
Award unless an increase in the amount paid with respect to such
award is based on a reasonable rate of interest or on the actual
returns on one or more predetermined actual investments (whether
or not assets associated with the amount originally owed are
actually invested therein).

F. MAXIMUM AMOUNT. The maximum amount of any Covered Award, including
the Match Incentive Award under Paragraph (V)(A)(2), payable to
any Covered Employee with respect to an Award Year determined as
of the time the Covered Award is paid or would have been paid
absent an election to defer receipt, shall not exceed $3,000,000.

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<PAGE>
EDGAR ONLY APPENDIX

UAL CORPORATION

2000 INCENTIVE STOCK PLAN

1. PURPOSE. The purpose of the UAL Corporation 2000 Incentive Stock
Plan (the "Plan") is to attract and retain outstanding individuals as
officers and key employees of UAL Corporation (the "Company") and its
subsidiaries, to further align participants' interests with those of the
Company's shareholders through compensation that is based on shares of the
Company's common stock, par value $.01 per share ("Common Stock") and to
furnish incentives to such persons by providing such persons opportunities to
acquire shares of Common Stock or monetary payments based on the value of
such shares or both, on advantageous terms as herein provided.

2. ADMINISTRATION. All benefits granted under the Plan shall be
granted by either the Compensation Administration Committee or the
Compensation Committee of the Board of Directors of the Company (such
committee, as applicable, herein called the "Committee"). The Plan shall be
administered by the Compensation Administration Committee for (I) all grants
with respect to any "officer" as such term is defined in Rule 16a-1(f) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or (II)
any other grant to covered employees for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended and the regulations promulgated
thereunder (the "Code"), to the extent necessary or proper to preserve
deductibility of the compensation expense associated with such grant under
Section 162(m); and by the Compensation Committee for all grants to
participants who are not covered employees under the Code or officers under
Rule 16-1(f) of the Exchange Act. However, a benefit granted under the Plan
shall not be ineffective solely because it is granted by the Compensation
Administration Committee or the Compensation Committee not in accordance with
the preceding sentence. The Committee is authorized to interpret the
provisions of the Plan, to determine the terms and conditions of benefits to
be granted under the Plan and to make all other determinations necessary or
advisable for the administration of the Plan, but only to the extent not
contrary to or inconsistent with the express provisions of the Plan.
Determinations, decisions and actions of the Committee, in connection with
the construction, interpretation, administration, or application of the Plan
will be final, conclusive, and binding upon any participant and any person
claiming under or through the participant. No member of the Committee will be
liable for any determination, decision, or action made in good faith with
respect to the Plan or any benefits granted under the Plan. To the extent
that the Committee determines that the restrictions imposed by the Plan
preclude the achievement of the material purposes of the benefits in
jurisdictions outside the United States, the Committee will have the
authority and discretion to modify those restrictions as the Committee
determines to be necessary or appropriate to conform to applicable
requirements or practices of jurisdictions outside of the United States. This
Plan is not intended to modify or limit the powers, duties or
responsibilities of either the Board of Directors or the Committee as set
forth under the UAL Corporation Restated Certificate of Incorporation.

3. PARTICIPANTS. Participants in the Plan will consist of such
officers or other key employees of the Company and its subsidiaries as the
Committee in its sole discretion may designate from time to time to receive
benefits hereunder. The Committee shall consider such factors as it deems
pertinent in selecting participants and in determining the type and amount of
their respective benefits, including without limitation (i) the financial
condition of the Company; (ii) anticipated profits for the current or future
years; (iii) contributions of participants to the profitability and
development of the Company; and (iv) other compensation provided to
participants.

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<PAGE>

4. TYPES OF BENEFITS. Benefits under the Plan may be granted in any
one or a combination of (a) Incentive Stock Options, (b) Nonqualified Stock
Options, and (c) Stock Appreciation Rights, all as described below.

5. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for
issuance under the Plan the sum of: (i) 8,000,000 shares of Common Stock,
which may be newly issued or treasury shares, (ii) any shares of Common Stock
available for future awards under any prior plan of the Company (the "Prior
Plans") as of May 18, 2000; and (iii) any shares of Common Stock that are
represented by benefits granted under the Plan or any Prior Plans which are
forfeited, expired or canceled without delivery of shares of Common Stock or
which are used to satisfy the applicable tax withholding obligations. All of
such shares described in (i) above may, but need not be issued pursuant to
the exercise of Incentive Stock Options. If the purchase price of any option
granted under the Plan is satisfied by tendering shares of Common Stock to
the Company (either by actual delivery or by attestation), only the number of
shares of Common Stock issued net of the shares of Common Stock tendered
shall be deemed delivered for purposes of determining the maximum number of
shares of Common Stock available for delivery under the Plan. Subject to
Section 15, in no event may the aggregate number of shares of Common Stock,
with respect to which options or Stock Appreciation Rights are granted to any
individual, exceed 250,000 during any one calendar year period; provided,
however, that grants made to any new employee as a condition of employment
may not exceed two times such annual limit during the first year of
employment.

6. INCENTIVE STOCK OPTIONS. Incentive Stock Options will consist of
options to purchase shares of Common Stock that are intended to satisfy the
requirements applicable to "incentive stock options" described in Section
422(b) of the Code or any successor provision. The purchase price for
Incentive Stock Options will not be less than one hundred percent (100%) of
the fair market value of such shares on the date of grant. Incentive Stock
Options will be exercisable over not more than ten (10) years after the date
of grant. The aggregate fair market value (determined on the date of grant)
of the shares of Common Stock with respect to which Incentive Stock Options
are exercisable for the first time in any calendar year (under all option
plans of the Company and its parent and subsidiary corporations) shall not
exceed $100,000.

7. NONQUALIFIED STOCK OPTIONS. Nonqualified Stock Options will
consist of options to purchase shares of Common Stock that are not intended
to satisfy the requirements applicable to "incentive stock options" described
in Section 422(b) of the Code or any successor provision. The purchase price
for Nonqualified Stock Options will not be less than one hundred percent
(100%) of the fair market value of shares on the date of grant. Nonqualified
Stock Options will be exercisable over not more than ten (10) years after the
date of grant.

8. STOCK APPRECIATION RIGHTS. The Committee may, in its discretion,
grant a Stock Appreciation Right to the holder of any Nonqualified Stock Option
granted hereunder. In addition, a Stock Appreciation Right may be granted
independently of and without relation to any stock option. Stock Appreciation
Rights shall be subject to such terms and conditions consistent with the Plan as
the Committee shall impose from time to time, including the following:

(a) A Stock Appreciation Right may be granted with respect to a
Nonqualified Stock Option at the time of its grant or at any time
thereafter up to six (6) months prior to its expiration.

(b) Each Stock Appreciation Right will entitle the holder to elect to
receive in cash up to 100% of the appreciation in fair market
value of the shares subject thereto up to the date the right is
exercised. In the case of a Stock Appreciation Right

2
<PAGE>

issued in relation to a Nonqualified Stock Option, such
appreciation shall be measured from the option price. In the case
of a Stock Appreciation Right issued independently of any stock
option, the appreciation shall be measured from not less than the
fair market value of the Common Stock on the date the right is
granted.

(c) The Committee shall have the discretion to satisfy a participant's
right to receive the amount of cash determined under subparagraph
(b) hereof, in whole or in part, by the delivery of shares of
Common Stock valued as of the date of the participant's election.

(d) In the event of the exercise of a Stock Appreciation Right, the
number of shares reserved for issuance hereunder (and the shares
subject to the related option, if any) shall be reduced by the
number of shares with respect to which the right is exercised.

9. NONTRANSFERABILITY. Except as otherwise provided by the Committee,
each benefit granted under this Plan shall not be transferable other than by
will or the laws of descent and distribution, and shall be exercisable,
during the holder's lifetime, only by the holder.

10. OTHER PROVISIONS. The award of any benefit under the Plan may also
be subject to other provisions (whether or not applicable to the benefit awarded
to any other participant) as the Committee determines appropriate, including,
without limitation, provisions requiring that grants of benefits under the Plan
be evidenced by an agreement (in writing or other form deemed appropriate by the
Committee); provisions concerning vesting; provisions concerning exercise
periods following termination of employment; provisions for the payment of the
purchase price of shares under stock options by delivery of other shares of the
Company having a then market value equal to the purchase price of such shares;
restrictions on resale or other disposition; such provisions as may be
appropriate to comply with federal or state securities laws and stock exchange
requirements; and understandings or conditions as to the participant's
employment in addition to those specifically provided for under the Plan.

11. TERM OF PLAN. Subject to the approval of the shareholders of the
Company at the Company's annual meeting of its shareholders, the Plan shall be
effective as of May 18, 2000 and shall remain in effect as long as any benefits
under it remain outstanding. No benefit shall be granted after May 18, 2010.

12. TAXES. The Company shall be entitled to withhold the amount of any
tax attributable to any amount payable or shares deliverable under the Plan
after giving the person entitled to receive such amount or shares notice as
far in advance as practicable, and the Company may defer making payment or
delivery if any such tax may be pending unless and until indemnified to its
satisfaction.

13. FAIR MARKET VALUE. Unless otherwise determined by the Committee,
the fair market value of the Company's shares of Common Stock as of any date
shall be the mean between the lowest and highest reported sale prices of the
Common Stock on that date on the New York Stock Exchange.

14. LIMITATION OF IMPLIED RIGHTS.

(a) Neither a participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any
assets, funds or property of the Company or any subsidiary
whatsoever, including, without limitation, any specific funds,
assets, or other property which the Company or any subsidiary, in
its sole discretion, may set aside in anticipation of a liability
under the Plan. A participant shall have only a contractual right
to the shares of Common Stock or amounts, if any, payable under
the Plan, unsecured by any assets of the Company or any
subsidiary, and nothing

3
<PAGE>

contained in the Plan shall constitute a guarantee that the assets
of the Company or any subsidiary shall be sufficient to pay any
amounts to any person.

(b) The Plan does not constitute a contract of employment, and
selection as a participant will not give any participating
employee the right to be so retained in the employ of the Company
or any subsidiary, nor any right or claim to any benefit under the
Plan, unless such right or claim has specifically accrued under
the terms of the Plan. Except as otherwise provided in the Plan,
no benefit under the Plan shall confer upon the holder thereof any
rights as a shareholder of the Company prior to the date on which
the individual fulfills all conditions for receipt of such rights.

15. ADJUSTMENT PROVISIONS. In the event of a corporate transaction
involving the Company (including, without limitation, any Common Stock
dividend, Common Stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination or
exchange of shares), the Committee may adjust awards without enlargement or
diminution to preserve the benefits or potential benefits of the awards
intended to be made available under the Plan. Action by the Committee may
include: (i) adjustment of the number and kind of shares which may be
delivered under the Plan; (ii) adjustment of the number and kind of shares
subject to outstanding Awards; (iii) adjustment of the exercise price of
outstanding options and Stock Appreciation Rights; and (iv) any other
adjustments that the Committee determines to be equitable or appropriate.

16. AMENDMENT AND TERMINATION OF PLAN. The Board may amend the Plan
from time to time or terminate the Plan at any time, but no such action,
without the participant's consent, shall adversely affect the rights of a
participant under any option or Stock Appreciation Right granted.

4
<PAGE>

UAL CORPORATION

THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF UAL CORPORATION

P The undersigned, having received the Notice of Annual Meeting and Proxy
Statement, hereby appoints James E. Goodwin, John F. McGillicuddy and
James J. O'Connor, and each of them, as proxies with full power of
R substitution, for and in the name of the undersigned, to vote all shares of
Common Stock of UAL Corporation owned of record by the undersigned on the
O matters listed in this proxy and, in their discretion, on such other
matters as may properly come before the Annual Meeting of Stockholders to
be held at Harris Trust and Savings Bank, 111 West Monroe Street, Chicago,
X IL 60690 on May 18, 2000 at 10:00 a.m. and any adjournments or
postponements thereof, unless otherwise specified herein.

Y This card, or the telephonic or internet voting procedures, when properly
completed, also constitutes voting instructions to the respective Trustees
of the Employees' Stock Purchase Plan, 401(k) Plans and International
Employee Stock Ownership Plans of UAL Corporation or United Air Lines, Inc.
to vote, in person or by proxy, all shares of Common Stock of UAL
Corporation allocated to the accounts of the undersigned held by the
Trustees.

You are encouraged to specify your choices by marking the appropriate oval
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY OVALS IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU VOTE BY PHONE, INTERNET OR SIGN AND RETURN THIS
CARD.

SEE REVERSE SIDE

4967--UAL CORPORATION

- --------------------------------------------------------------------------------
(TRIANGLE) FOLD AND DETACH HERE (TRIANGLE)

YOU CAN VOTE BY TELEPHONE OR INTERNET!
AVAILABLE 24 HOURS A DAY - 7 DAYS A WEEK
Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy. Have this proxy card in hand when you vote.

TO VOTE BY PHONE (WITHIN THE U.S. AND CANADA ONLY)
----------------
- - Call toll free 1-888-457-2964 from a touch tone telephone. There is NO
CHARGE for this call.
- - Enter the six-digit Control Number located below your name and address.
OPTION 1: If you choose to vote as the Board of Directors recommends
on ALL proposals, press 1. When asked, please confirm your
vote by pressing 1 again.
OPTION 2: If you choose to vote on EACH proposal SEPARATELY, press 0
and follow the recorded instructions. Your vote selections
will be repeated and you will have an opportunity to
confirm them.

TO VOTE ON THE INTERNET
-----------------------
- - Go to the following website: www.harrisbank.com/wproxy

- - Enter the information requested on your computer screen, including your
six-digit Control Number located below your name and address, then follow
the voting instructions on the screen.
IF YOU VOTE BY TELEPHONE OR THE INTERNET, DO NOT MAIL
BACK THIS PROXY CARD. PROXIES SUBMITTED BY TELEPHONE OR THE
INTERNET MUST BE RECEIVED BY 12:00 MIDNIGHT,
CENTRAL DAYLIGHT TIME, ON MAY 16, 2000.

THANK YOU FOR VOTING!

<PAGE>

UAL CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.

[ ]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5. IF
THIS CARD CONSTITUTES VOTING INSTRUCTIONS TO A PLAN TRUSTEE, THE TRUSTEE WILL
VOTE AS DESCRIBED IN THE PLAN DOCUMENTS AND ANY ACCOMPANYING MATERIALS. IN THEIR
DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
1. ELECTION OF FIVE PUBLIC DIRECTOR NOMINEES: FOR WITHHOLD FOR ALL 2. APPROVAL OF AMENDMENTS TO
01-Rono J. Dutta, 02- James E. Goodwin, ALL ALL EXCEPT UAL CORPORATION RESTATED
03-John F. McGillicuddy, CERTIFICATE OF
04-James J. O'Connor, INCORPORATION FOR
05-Paul E. Tierney, Jr. PURPOSES OF DIVIDENDS.
FOR AGAINST ABSTAIN
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S): 3. APPROVAL OF THE UNITED
EMPLOYEES PERFORMANCE
INCENTIVE PLAN.
------------------------------------------------------- FOR AGAINST ABSTAIN
4. APPROVAL OF THE UAL
CORPORATION 2000 INCENTIVE
STOCK PLAN.
FOR AGAINST ABSTAIN
5. RATIFICATION OF
THE APPOINTMENT
OF ARTHUR ANDERSEN
LLP AS INDEPENDENT
ACCOUNTANTS.
YES NO
IF PROXY MATERIALS
WERE AVAILABLE
TO YOU ELECTRONICALLY
WOULD YOU USE THIS
OPTION TO RECEIVE
YOUR MATERIALS?

DATED: , 2000

SIGNATURE(S) -------------------------------------------
--------------------------------------------------------
Please sign exactly as your name appears on this proxy.
For joint accounts, each owner should sign. When
signing as attorney, executor, administrator, trustee or
guardian, please give your full title. You revoke all
proxies heretofore given to vote at the Annual
Meeting or any adjournments or postponements.
</TABLE>

TO VOTE BY PHONE OR INTERNET SEE REVERSE SIDE FOR INSTRUCTIONS

- ------------------------------------------------------------------------------
(TRIANGLE) FOLD AND DETACH HERE (TRIANGLE)

ADMISSION TICKET MEETING OF STOCKHOLDERS
------------------------ OF UAL CORPORATION
MAY 18, 2000
10:00 A.M.
[UNITED AIRLINES THE AUDITORIUM, 8TH FLOOR
LOGO] HARRIS TRUST AND SAVINGS BANK
111 WEST MONROE STREET
CHICAGO, IL
-----------------------------

----------------------------------------------------
4967--UAL CORPORATION You must present this ticket to the UAL Corporation
representative at the entrance to the Auditorium
to be admitted to the Annual Meeting.