UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1994 Commission File Number 33-21220*
UNITED AIR LINES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 36-2675206
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 East Algonquin Road, Elk Grove Township, Illinois 60007
Mailing Address: P. O. Box 66100, Chicago, Illinois 60666
(Address of principal executive offices) (Zipcode)
Registrant's telephone number, including area code
(708) 952-4000
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Outstanding at
Class July 31, 1994
Common Stock ($5 par value) 200
* Registrant is the wholly-owned subsidiary of UAL
Corporation (File 1-6033). Registrant became subject to
filing periodic reports under the Securities Exchange Act of
1934 as a result of a public offering of securities which
became effective June 3, 1988 (Registration Nos. 33-21220
and 22-18246).
United Air Lines, Inc. and Subsidiary Companies
Report on Form 10-Q
For the Quarter Ended June 30, 1994
Index
Part I. Financial Information
Item 1. Financial statements:
Condensed statement of consolidated
financial position - as of June 30,
1994 (unaudited) and December 31, 1993
Statement of consolidated operations
(unaudited) - for the three months and six
months ended June 30, 1994 and 1993
Condensed statement of consolidated
cash flows (unaudited) - for the six
months ended June 30, 1994 and 1993
Notes to consolidated financial
statements (unaudited)
Item 2. Management's discussion and analysis
of financial condition and results of
operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Index To Exhibits
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
United Air Lines, Inc. and Subsidiary Companies
Condensed Statement of Consolidated Financial Position
(In Millions)
<TABLE>
<CAPTION>
June 30,
1994 December 31,
Assets (Unaudited) 1993
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,078 $ 285
Short-term investments 649 681
Receivables, net 1,097 1,092
Related party receivables 422 397
Inventories, net 283 277
Deferred income taxes 127 127
Prepaid expenses and other 263 408
3,919 3,267
Operating property and equipment:
Owned 11,071 11,146
Accumulated depreciation and amortization (4,841) (4,678)
6,230 6,468
Capital leases 1,132 1,131
Accumulated amortization (421) (395)
711 736
6,941 7,204
Other assets:
Intangibles, net 769 789
Deferred income taxes 572 570
Other 351 323
1,692 1,682
$12,552 $12,153
See accompanying notes to consolidated financial statements.
</TABLE>
United Air Lines, Inc. and Subsidiary Companies
Condensed Statement of Consolidated Financial Position
(In Millions)
<TABLE>
<CAPTION>
June 30,
1994 December 31,
Liabilities and Shareholder's Equity (Unaudited) 1993
<S> <C> <C>
Current liabilities:
Short-term borrowings $ 269 $ 315
Current portions of long-term debt
and capital lease obligations 199 187
Advance ticket sales 1,314 1,036
Accounts payable 608 632
Other 2,834 2,705
5,224 4,875
Long-term debt 2,581 2,603
Long-term obligations under capital leases 761 824
Other liabilities and deferred credits:
Deferred pension liability 679 571
Postretirement benefit liability 1,105 1,058
Deferred gains 1,355 1,400
Other 180 113
3,319 3,142
Minority interest 43 35
Shareholder's equity 624 674
Commitments and contingent liabilities
(See note)
$12,552 $12,153
See accompanying notes to consolidated financial statements.
</TABLE>
United Air Lines, Inc. and Subsidiary Companies
Statement of Consolidated Operations (Unaudited)
(In Millions)
<TABLE>
<CAPTION>
Three Months
Ended June 30
1994 1993
<S> <C> <C>
Operating revenues:
Passenger $3,102 $2,945
Cargo 168 161
Other operating revenues 222 155
3,492 3,261
Operating expenses:
Salaries and related costs 1,216 1,163
Commissions 360 321
Aircraft fuel 379 439
Rentals and landing fees 380 348
Purchased services 236 251
Depreciation and amortization 177 182
Aircraft maintenance 118 94
Food and beverages 123 75
Personnel expenses 65 62
Advertising and promotion 37 40
Other operating expenses 230 193
3,321 3,168
Earnings from operations 171 93
Other income (expense):
Interest expense (80) (92)
Interest capitalized 9 13
Interest income 18 13
Equity in earnings of affiliates 8 12
Miscellaneous, net (22) (2)
(67) (56)
Earnings before income taxes 104 37
Provision for income taxes 50 10
Net earnings $ 54 $ 27
See accompanying notes to consolidated financial statements.
</TABLE>
United Air Lines, Inc. and Subsidiary Companies
Statement of Consolidated Operations (Unaudited)
(In Millions)
<TABLE>
<CAPTION>
Six Months
Ended June 30
1994 1993
<S> <C> <C>
Operating revenues:
Passenger $5,873 $5,635
Cargo 332 304
Other operating revenues 460 323
6,665 6,262
Operating expenses:
Salaries and related costs 2,418 2,305
Commissions 694 619
Aircraft fuel 749 859
Rentals and landing fees 760 699
Purchased services 454 488
Depreciation and amortization 355 360
Aircraft maintenance 227 187
Food and beverages 214 150
Personnel expenses 124 126
Advertising and promotion 64 75
Other operating expenses 479 408
6,538 6,276
Earnings (loss) from operations 127 (14)
Other income (expense):
Interest expense (161) (184)
Interest capitalized 19 33
Interest income 29 25
Equity in earnings of affiliates 14 15
Miscellaneous, net (44) (29)
(143) (140)
Loss before income taxes, cumulative effect of
accounting change and extraordinary item (16) (154)
Provision (credit) for income taxes 9 (52)
Loss before cumulative effect of accounting
change and extraordinary item (25) (102)
Cumulative effect of accounting change,
net of tax (26) -
Extraordinary loss on early extinguishment
of debt, net of tax - (19)
Net loss $ (51) $ (121)
See accompanying notes to consolidated financial statements.
</TABLE>
United Air Lines, Inc. and Subsidiary Companies
Condensed Statement of Consolidated Cash Flows (Unaudited)
(In Millions)
<TABLE>
<CAPTION>
Six Months
Ended June 30
1994 1993
<S> <C> <C>
Cash and cash equivalents at beginning of
period $ 285 $ 454
Cash flows from operating activities 915 587
Cash flows from investing activities:
Additions to property and equipment (178) (853)
Proceeds on disposition of property and
equipment 116 631
Decrease in short-term investments 47 296
Other, net 30 (85)
15 (11)
Cash flows from financing activities:
Repayment of long-term debt (28) (549)
Principal payments under capital
lease obligations (63) (35)
Increase (decrease) in short-term
borrowings (46) 27
(137) (557)
Increase in cash and cash equivalents 793 19
Cash and cash equivalents at end of period $1,078 $ 473
Cash paid during the period for:
Interest (net of amounts capitalized) $ 135 $ 159
Income taxes $ 2 $ 1
Non-cash transactions:
Long-term debt incurred in connection
with additions to equipment $ 12 $ 357
Capital lease obligations incurred $ - $ 69
Unrealized loss on investments $ 3 $ -
See accompanying notes to consolidated financial statements.
</TABLE>
United Air Lines, Inc. and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited)
The Company
United Air Lines, Inc. ("United") is a wholly-owned subsidiary of
UAL Corporation ("UAL").
Interim Financial Statements
The consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to or as permitted by such rules and regulations, although
United believes that the disclosures are adequate to make the
information presented not misleading. In management's opinion, all
adjustments (which include only normal recurring adjustments) necessary
for a fair presentation of the results of operations for the three and
six month periods have been made. These financial statements should be
read in conjunction with the consolidated financial statements and
footnotes thereto included in United's Annual Report on Form 10-K for
the year 1993.
Employee Investment Transaction and Recapitalization
On July 12, 1994, the shareholders of UAL approved a plan of
recapitalization to provide an approximately 55% equity interest in UAL
(subject to increase to up to 63%) to certain employees of United in
exchange for wage concessions and work-rule changes. Pursuant to the
terms of the plan of recapitalization, holders of old UAL common stock
have the right to receive $84.81 per share in cash and the remaining 45%
of the equity in the form of new common stock. In connection with the
recapitalization, United issued $370 million of 10.67% debentures due in
2004 and $371 million of 11.21% debentures due in 2014, paid a dividend
to UAL in the amount of the proceeds and paid an additional $300 million
to UAL. Approximately $130 million of costs that were contingent on UAL
shareholder approval of the recapitalization, including transaction
costs and severance payments to certain former United employees, will be
recorded in the third quarter.
Reclassification
In 1994, United began recording certain air transportation price
adjustments, which were previously recorded as commissions, as
adjustments to revenue. Certain amounts in the Statements of
Consolidated Operations for 1993 have been reclassified to conform with
the current presentation.
Other Income (Expense) - Miscellaneous
Included in "Miscellaneous, net" in the 1994 second quarter and
six-month period were charges of $22 million and $41 million,
respectively, for costs incurred in connection with the employee
investment transaction and recapitalization. Also included were foreign
exchange gains (losses) of $10 million in the 1994 second quarter, $(2)
million in the 1993 second quarter, $9 million in the 1994 six-month
period and $(24) million in the 1993 six-month period.
Income Taxes
The provisions (credits) for income taxes are based on estimated
effective tax rates which differ from the federal statutory rate of 35%
principally due to state income taxes and certain nondeductible
expenses. The estimated effective tax rates for 1994 are based on the
actual effective tax rates, including nondeductible expenses, for the
periods. The effective tax rates for 1993 were based on annual
estimates. Deferred tax assets are recognized based upon United's
history of operating earnings, expectations for the future and potential
tax planning strategies.
Accounting Changes
United adopted Statement of Financial Accounting Standards
("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits,"
effective January 1, 1994. SFAS No. 112 requires recognition of the
liability for postemployment benefits during the period of employment.
Such benefits include company paid continuation of group life insurance
and medical and dental coverage for certain employees after employment
but before retirement. The effect of adopting SFAS No. 112 was a
cumulative charge for recognition of the transition liability of $42
million, before tax benefits of $16 million. The ongoing expenses
related to postemployment benefits will vary based on actual claims
experience.
United also adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective January 1, 1994.
United's investments in such securities are included in "Cash and cash
equivalents" and "Short-term investments." The following information
pertains to United's investments in such securities at June 30, 1994 (in
millions):
<TABLE>
<CAPTION>
Gross Gross
Aggregate Unrealized Unrealized Average
Fair Holding Holding Cost Maturity
Value Gains Losses Basis (Months)
<S> <C> <C> <C> <C> <C>
Available-for-sale:
U.S. government
agency debt
securities $185 $ - $ 2 $187 8
Corporate debt
securities $165 $ - $ 2 $167 11
Other debt
securities $ 56 $ - $ - $ 56 9
Held-to-maturity:
U.S. government
agency debt
securities $ 93 $ - $ - $ 93 4
Corporate debt
securities $744 $ - $ - $744 2
Other debt
securities $475 $ - $ - $475 2
</TABLE>
The net unrealized holding loss on available-for-sale securities
of $4 million has been recorded as a component of shareholders' equity,
net of related tax benefits. The proceeds from sales of
available-for-sale securities were $17 million and $111 million,
respectively, for the three and six months ended June 30, 1994. Such
sales resulted in insignificant gross realized gains and losses, based
on the cost of securities sold. These gains and losses were included in
interest income for the period.
Affiliates
United owns 38% of the Galileo International Partnership
("Galileo") through a wholly-owned subsidiary. United's investment in
Galileo, which owns the Apollo and Galileo computer reservations
systems, is carried on the equity basis. United also owns 77% of the
Apollo Travel Services Partnership ("ATS") and, accordingly, its
accounts are consolidated for 1994 periods. Prior to a September 1993
merger, United owned 50% of the Covia Partnership ("Covia"), one of
Galileo's and ATS's predecessor companies, which was accounted for on
the equity basis.
Under operating agreements with Covia prior to the merger, United
provided certain computer support services for, and purchased computer
reservation services, communications and other information from, Covia.
Revenues derived from the sale of services to Covia amounted to
approximately $5 million in the 1993 second quarter and $17 million in
the 1993 six-month period. The cost to United of services purchased
from Covia amounted to approximately $59 million in the 1993 second
quarter and $117 million in the 1993 six-month period. Under operating
agreements with Galileo subsequent to the merger, United purchases
computer reservation services from Galileo and provides marketing, sales
and communication services to Galileo. Revenues derived from the sale
of services to Galileo amounted to approximately $59 million in the 1994
second quarter and $118 million in the 1994 six-month period. The cost
to United of services purchased from Galileo amounted to approximately
$25 million in the 1994 second quarter and $46 million in the 1994
six-month period.
<TABLE>
<CAPTION>
Summarized financial information of Galileo follows (in millions):
June 30, December 31,
1994 1993
(Unaudited)
<S> <C> <C>
Current assets $188 $141
Non-current assets 447 467
Total assets 635 608
Current liabilities 180 173
Long-term liabilities 427 440
Total liabilities 607 613
Net assets $ 28 $ (5)
Periods Ended June 30, 1994
Three Months Six Months
(Unaudited)
Services revenues $202 $400
Costs and expenses 184 365
Net earnings $ 18 $ 35
</TABLE>
Long-term Debt
In the second quarter of 1993, United retired $500 million of
senior subordinated notes. The notes were scheduled to mature in 1995
($150 million) and 1998 ($350 million). An extraordinary loss of $19
million, net of tax benefits of $9 million, was recorded in the first
quarter of 1993, based on United's stated intention to retire the notes.
Contingencies and Commitments
United 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 United is subject and its prior
experience, that the ultimate disposition of these contingencies is not
expected to materially affect United's consolidated financial position
or results of operations.
At June 30, 1994, commitments for the purchase of property and
equipment, principally aircraft, approximated $4.2 billion, after
deducting advance payments. An estimated $0.5 billion will be spent
during the remainder of 1994, $1.1 billion in 1995, $0.8 billion in
1996, $1.2 billion in 1997, $0.4 billion in 1998, and $0.2 billion after
1998. The major commitments are for the purchase of one B747 aircraft
to be delivered this year and thirty-four B777 aircraft which are
expected to be delivered between 1995 and 1999. These amounts reflect
United's revised capital spending plan and agreements with The Boeing
Company and engine manufacturers, announced in April 1993, to convert
certain aircraft orders into options. Under the terms of the
agreements, if United does not elect to confirm the delivery of these
option aircraft before 1998, it would forfeit significant deposits.
In addition to the B747 and B777 orders, United has arrangements
with Airbus Industrie and International Aero Engines to lease 37 A320
aircraft, which are scheduled for delivery through 1998. At June 30,
1994, United also had options for an additional 174 B737 aircraft, 45
B757 aircraft, 34 B777 aircraft, 49 B747 aircraft, 8 B767 aircraft and
50 A320 aircraft.
Foreign Currency Transactions
In the first quarter of 1994, United entered into a ten-year
foreign currency swap contract to replace existing short-term foreign
currency call options and forward contracts in order to reduce exposure
to currency fluctuations in connection with 33 billion of Japanese
yen-denominated obligations. The call options and forward contracts
replaced by the currency swap expired under their own terms, and the
insignificant loss that resulted was included in income for the quarter,
offsetting the insignificant gain recorded from the related obligations
that were being hedged.
The currency swap contract, which was designated as a hedge,
effectively fixes, at current exchange rates, future principal, interest
and lease payments. The swap contract had a notional amount of $489
million at June 30, 1994 and this notional amount will reduce
periodically as payments are made. The currency swap contract exactly
matches the cash flows and maturities of the obligations and related
interest it is designed to hedge.
Foreign currency gains and losses on the portion of the contract
hedging recorded obligations are included in income currently, exactly
offsetting the foreign currency losses and gains on the obligations.
Foreign currency gains and losses on the portion of the contract hedging
future interest payments are deferred and included in interest as it
accrues. United's theoretical risk in the swap is the cost of replacing
the contract at current market rates in the event of default by the
counterparty; however, United does not anticipate such default since the
counterparty is a major money center bank with an investment grade
rating by all rating agencies. Furthermore, the risk of such default is
mitigated by provisions in the contract which require either party to
post increasing amounts of collateral as either their credit rating
deteriorates or the value of the contract moves against them.
Counterparty credit risk is minimal since currency is exchanged
simultaneously throughout the duration of the contract. The fair value
of the currency swap contract to United at June 30, 1994 was
approximately $57 million based on the reduction in the yen to dollar
exchange rate since United entered into the contract.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Employee Investment Transaction and Recapitalization
On July 12, 1994, the shareholders of UAL approved a plan of
recapitalization that provides an approximately 55% equity interest in
UAL to certain employees of United in exchange for wage concessions and
work-rule changes. The transaction is being implemented through the
creation of Employee Stock Ownership Plans ("ESOPs") for United
employees. The employee interest may increase to up to 63%, depending
on the average market value of UAL common stock in the year after the
transaction closes. Pursuant to the terms of the plan of
recapitalization, holders of old UAL common stock have the right to
receive $84.81 per share in cash and the remaining 45% (subject to
reduction to not less than 37%) of the equity in the form of new common
stock. In connection with the recapitalization, United issued $370
million of 10.67% debentures due in 2004 and $371 million of 11.21%
debentures due in 2014, paid a dividend to UAL in the amount of the
proceeds and paid an additional $300 million to UAL. Approximately $130
million of costs that were contingent on UAL shareholder approval of the
recapitalization, including transaction costs and severance payments to
certain former United employees, will be recorded in the third quarter.
The employee investment transaction is expected to put in place a
lower cost structure and to facilitate the creation of a low-cost
short-haul operation, Shuttle by United. The purpose of these changes
is to create a cost structure which will allow United to compete
effectively against the low-cost carriers currently influencing the
domestic marketplace and improve its long-term financial viability.
However, there can be no assurance that the desired improvements will be
achieved or that the creation of a short-haul operation will be
successful.
As a result of the recapitalization, United's capital structure
became more highly leveraged. With the increase in debt and reduction
in equity resulting from the recapitalization, United's exposure to
certain industry risks could be greater than might have been the case
prior to the recapitalization. In addition, the transaction resulted in
new labor agreements for certain employee groups and a new corporate
governance structure, which was designed to achieve balance between the
various employee-owner groups and public shareholders. The new labor
agreements and governance structure could inhibit management's ability
to alter strategy in a volatile, competitive industry by restricting
certain operating and financing activities, including the sale of assets
or issuance of equity securities and the ability to achieve additional
reductions in wages and benefits. United cannot predict the competitive
response to its new low-cost operation, nor the extent to which its
ability to react to competition will be hampered by the fixed long-term
nature of the agreements that constitute elements of the
recapitalization.
The employee investment transaction and recapitalization will have
an initial adverse effect on United's cash flow as a result of the cash
dividend paid to UAL and certain other recapitalization costs. However,
the transaction is expected to result in an improvement to cash flow
through the term of the employee investment. This improvement is
expected to result from the employee concessions which reduce cash
expenses, partially offset by the additional interest expense on the
debentures and foregone interest on the cash paid to UAL.
The employee investment transaction will reduce United's cash
operating expenses due to wage and benefit reductions, work-rule changes
and the startup of a new short-haul, low-cost operation. These cash
expense reductions will be offset by non-cash compensation charges for
stock periodically committed to be released to employees from the ESOPs
and additional interest expense on the debentures. The amount of the
non-cash compensation expense cannot be predicted, since it is based on
the future fair value of UAL's stock. It is anticipated that tax
provisions (credits) in future periods could be impacted by certain
nondeductible expenses related to the ESOPs. Additionally, timing
differences between book expenses and tax deductions related to the
ESOPs could impact the balance of the deferred tax asset in the future.
Liquidity and Capital Resources
United's total of cash, cash equivalents and short-term
investments increased $761 million in the first six months of 1994 to a
balance of $1.727 billion at June 30, 1994. Cash flows from operating
activities amounted to $915 million. Partially offsetting this was cash
used in financing activities of $137 million, which included principal
payments under capital lease and debt obligations of $63 million and $28
million, respectively, and a $46 million reduction of short-term
borrowings.
In the first six months of 1994, United took delivery of eight
A320 aircraft and one B747 aircraft, which were acquired under operating
leases. Other 1994 property additions, primarily spare parts, amounted
to $187 million, while property dispositions resulted in proceeds of
$122 million.
At June 30, 1994, commitments for the purchase of property and
equipment, principally aircraft, approximated $4.2 billion, after
deducting advance payments. An estimated $0.5 billion will be spent
during the remainder of 1994, $1.1 billion in 1995, $0.8 billion in
1996, $1.2 billion in 1997, $0.4 billion in 1998, and $0.2 billion after
1998. The major commitments are for the purchase of one B747 aircraft
to be delivered this year and thirty-four B777 aircraft which are
expected to be delivered between 1995 and 1999. These amounts reflect
United's revised capital spending plan and agreements with The Boeing
Company and engine manufacturers, announced in April 1993, to convert
certain aircraft orders into options. Under the terms of the
agreements, if United does not elect to confirm the delivery of these
option aircraft before 1998, it would forfeit significant deposits.
In addition to the B747 and B777 orders, United has arrangements
with Airbus Industrie and International Aero Engines to lease 37 A320
aircraft, which are scheduled for delivery through 1998. At June 30,
1994, United also had options for an additional 174 B737 aircraft, 45
B757 aircraft, 34 B777 aircraft, 49 B747 aircraft, 8 B767 aircraft and
50 A320 aircraft. United continually reviews its fleet to determine
whether aircraft acquisitions will be used to expand the fleet or to
replace older aircraft, depending on market and regulatory conditions at
the time of delivery. Funds necessary to finance aircraft acquisitions
are expected to be obtained from internally generated funds, irrevocable
external financing arrangements or other external sources.
At June 30, 1994, UAL and United had an effective shelf
registration statement on file with the Securities and Exchange
Commission to offer up to $1.776 billion of securities, including
secured and unsecured debt, equipment trust and pass through
certificates, equity or a combination thereof. In July 1994, United
issued $741 million of debentures under this shelf in connection with
the employee investment transaction and recapitalization.
United's senior unsecured debt is rated BB by Standard and Poor's
("S & P") and Baa3 by Moody's Investors Service Inc. ("Moody's"). Both
rating agencies affirmed the ratings upon the shareholder approval of
the employee investment transaction. S & P removed the securities from
CreditWatch but believes the outlook is negative due to "concerns about
UAL's ability to achieve planned cost reductions and revenue gains from
[Shuttle by United]." Moody's stated "the outlook for United's ratings,
however, remains negative due to concern over the company's future
financial flexibility."
Results of Operations
United's results of operations for interim periods are not
necessarily indicative of those for an entire year, as a result of
seasonal factors to which United is subject. First and fourth quarter
results are normally affected by reduced travel demand in the fall and
winter and United's operations, particularly at its Chicago and Denver
hubs, are adversely affected by winter weather on occasion.
Prior to the September 1993 merger of the Covia Partnership and
The Galileo Company Limited, United's investments in these companies
were carried on the equity basis. United now owns 77% of Apollo Travel
Services ("ATS"), one of the companies formed in the merger, and its
accounts are consolidated with those of United. As a result, United's
consolidated operating revenues and expenses have increased. In
addition, the sales of flight kitchen assets in late 1993 and early 1994
had the effect of reducing United's salaries and related costs and
increasing, to a lesser degree, catering costs. These changes have
affected the 1994 comparisons to 1993 as indicated in the discussion
below.
In 1994, United began recording certain air transportation price
adjustments, which were previously recorded as commissions, as
adjustments to revenue. Operating revenue and expense amounts and
related operating statistics for 1993 periods have been adjusted to
conform with the current presentation.
The results of operations in the airline business historically
fluctuate significantly in response to general economic conditions.
This is because small fluctuations in yield (passenger revenue per
revenue passenger mile) and cost per available seat mile can have a
significant effect on operating results. United anticipates
industrywide fare levels, increasing low-cost competition, general
economic conditions, fuel costs, international governmental policies and
other factors will continue to affect its operating results.
Due to the delay in the opening of the new Denver International
Airport, United's 1994 operating expenses are not expected to increase
as much as originally anticipated.
The income tax provisions (credits) for 1994 were significantly
impacted by the nondeductibility of certain recapitalization costs and
the statutory change in the deductibility of other expenses.
The significant factors affecting United's consolidated operations
for the second quarter and first six months of 1994 are described below.
Second Quarter 1994 Compared with Second Quarter 1993.
United's results of operations in the second quarter of 1994
improved as compared to 1993. In the second quarter of 1994, United
recorded net earnings of $54 million, compared to 1993 second quarter
net earnings of $27 million.
Operating revenues increased $231 million (7%). Passenger
revenues increased $157 million (5%) due principally to a 7% increase in
revenue passenger miles, partially offset by a 2% decrease in yield to
11.39 cents. Domestic revenue passenger miles increased 6%, Pacific
increased 9% and Atlantic and Latin America each increased 10%.
Available seat miles increased only 1% systemwide, as increases of 5% in
the Pacific and 7% in the Atlantic were offset by decreases of 1% and 2%
on Domestic and Latin American routes, respectively. As a result,
United's system passenger load factor increased 4.2 points to 71.6%.
Domestic passenger load factor increased 4.6 points to 70.4%, and Latin
American passenger load factor increased 6.3 points to 57.3%.
Cargo revenues increased only $7 million (4%), as a slight
increase in freight revenues was partially offset by a decrease in mail
revenues. Other operating revenues increased $67 million (43%)
primarily as a result of the consolidation of ATS and an increase in
fuel sales.
Operating expenses increased $153 million (5%). United's cost per
available seat mile increased 4% to 8.77 cents. Salaries and related
costs increased $53 million (5%) primarily due to higher average wage
rates and higher costs associated with pensions and medical benefits,
partially offset by a lower number of employees as a result of the
flight kitchen sales. Commissions increased $39 million (12%) due
principally to increased travel agency sales and higher freight volumes.
Food and beverages increased $48 million (64%) due to the new catering
arrangements resulting from the flight kitchen sales and increased
passenger volumes. Rentals and landing fees increased $32 million (9%)
as a result of rent associated with new aircraft acquired on operating
leases. Aircraft maintenance increased $24 million (26%) as a result of
higher vendor-provided maintenance due to the timing of certain
maintenance cycles. Other operating expenses increased $37 million
(19%) due to higher fuel sales and the consolidation of ATS.
Aircraft fuel expense decreased $60 million (14%), due to a 13%
decrease in United's average price per gallon of fuel to 56.6 cents and
a 1% decrease in consumption. Purchased services decreased $15 million
(6%), as certain services, principally computer reservations and
communications, are now provided by ATS.
Other expense amounted to $67 million in the second quarter of
1994 compared to $56 million in the second quarter of 1993. Interest
expense decreased $12 million (13%) due primarily to the extinguishment
of $500 million of subordinated debt in 1993. Included in
"Miscellaneous, net" in the second quarter of 1994 was a charge of $22
million for fees and costs incurred in connection with the employee
investment transaction and recapitalization and a $6 million charge for
minority interests in ATS. In addition, the 1994 and 1993 periods
included foreign exchange gains (losses) of $10 million and $(2)
million, respectively.
Six Months 1994 Compared with Six Months 1993.
United's results of operations improved in the 1994 six-month
period as compared to 1993. In the first half of 1994, UAL recorded a
net loss of $51 million, compared to a 1993 six-month net loss of $121
million. The 1994 results include a $26 million cumulative effect
charge for the adoption of Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits," which
United adopted effective January 1, 1994. The 1993 results include an
extraordinary loss of $19 million on the early extinguishment of debt.
Operating revenues increased $403 million (6%). Passenger
revenues increased $238 million (4%) due primarily to a 6% increase in
revenue passenger miles, partially offset by a 1% decrease in yield to
11.60 cents. Domestic revenue passenger miles increased by 1.4 billion
(5%) while International increased by 1.3 billion (7%). Available seat
miles increased only 1% systemwide, as increases of 3% in the Pacific
and 10% in the Atlantic were offset by a slight decrease on Domestic
routes and a decrease of 6% in Latin America. As a result, United's
system passenger load factor increased 3.0 points to 68.6%. Domestic
passenger load factor increased 3.1 points to 66.5% and Latin American
passenger load factor increased 6.9 points to 61.1%.
Cargo revenues increased $28 million (9%), due primarily to
increased freight revenues, as mail revenues decreased slightly.
Freight and mail revenue ton miles increased 5% and 3%, respectively;
however, freight yield increased 10% while mail yield decreased 7%.
Other operating revenues increased $137 million (42%) primarily as a
result of the consolidation of ATS and an increase in fuel sales.
Operating expenses increased $262 million (4%). United's cost per
available seat mile increased 3% to 8.90 cents. Salaries and related
costs increased $113 million (5%) primarily due to higher average wage
rates and higher costs associated with pensions and medical benefits,
partially offset by a lower number of employees as a result of the
flight kitchen sales. Commissions increased $75 million (12%) due
principally to increased travel agency sales and higher freight volumes.
Food and beverages increased $64 million (43%) due to the new catering
arrangements resulting from the flight kitchen sales. An increase of
$61 million (9%) in rentals and landing fees reflects rent associated
with new aircraft acquired on operating leases, as 26 such aircraft were
added to the fleet in the past year. Aircraft maintenance increased $40
million (21%) as a result of higher vendor-provided maintenance. Other
operating expenses increased $71 million (17%) due to higher fuel sales
and the consolidation of ATS.
Aircraft fuel expense decreased $110 million (13%), due to a 12%
decrease in United's average price per gallon of fuel to 57.5 cents and
a 1% decrease in United's consumption. Purchased services decreased $34
million (7%), as certain services, principally computer reservations and
communications, are now provided by ATS.
Other expense amounted to $143 million in the 1994 six-month
period compared to $140 million in 1993. Interest expense decreased $23
million (13%) due primarily to the extinguishment of $500 million of
subordinated debt in 1993. Interest capitalized decreased $14 million
(42%) as a result of lower advance payments on new aircraft. Included
in "Miscellaneous, net" in 1994 were charges of $41 million for fees and
costs incurred in connection with the employee investment transaction
and recapitalization and a $12 million charge for minority interests in
ATS. In addition, the 1994 and 1993 periods included foreign exchange
gains (losses) of $9 million and $(24) million, respectively. In the
second half of 1993, United increased hedging activity which reduced the
impact of foreign exchange rate changes on reported financial results.
Part II
Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3.1 - Restated Certificate of Incorporation, as filed
in Delaware on July 12, 1994.
United Air Lines, Inc.'s indebtedness under
any single instrument does not exceed 10% of
United's total assets on a consolidated
basis. Copies of such instruments will be
furnished to the Securities and Exchange
Commission upon request.
Exhibit 10.1 - Letter Agreement No. 6-1162-
JME-068 dated April 27, 1994 to each of (a)
Agreement dated December 18, 1990 between
The Boeing Company, as seller, and United
Air Lines, Inc., and United Worldwide
Corporation, as buyer, for the acquisition
of Boeing 747-400 aircraft (filed as Exhibit
10.8 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1990,
and incorporated herein by reference;
supplements thereto filed as (i) Exhibits
10.4 and 10.5 to Registrant's Annual Report
on Form 10-K for the year ended December 31,
1991; (ii) Exhibits 10.3, 10.4, 10.5, 10.6
and 10.22 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30,
1993; and (iii) Exhibit 10.3 to Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1993 and incorporated
herein by reference); (b) Agreement dated
April 26, 1989 between The Boeing Company
and United Air Lines, Inc., as amended and
supplemented, for the acquisition of Boeing
757-200 and 737 aircraft (filed as Exhibit
(10)K to Registrant's Annual Report on Form
10-K for the year ended December 31, 1989,
and incorporated herein by reference;
supplements thereto filed as (i) Exhibits
10.12 and 10.13 to Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1991, (ii) Exhibits 10.14,
10.15, 10.16, 10.17, 10.18, 10.19 and 10.22
to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993,
and (iii) Exhibit 10.7 to Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated
herein by reference); (c) Agreement dated
March 1, 1990 between The Boeing Company and
United Air Lines, Inc., as amended and
supplemented, for the acquisition of Boeing
767-300ER aircraft (filed as Exhibit (10)L
to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1989, and
incorporated herein by reference;
supplements thereto filed as (i)
Exhibits 10.7, 10.8, 10.9 and 10.10 to
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991, (ii)
Exhibits 10.7, 10.8, 10.9, 10.10, 10.11,
10.12, 10.13 and 10.22 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993, and (iii)
Exhibit 10.6 to Registrant's Annual Report
on Form 10-K for the year ended December 31,
1993, and incorporated herein by reference);
(d) an amended and restated agreement, dated
March 19, 1992, between The Boeing Company
and United Air Lines, Inc., for the
acquisition of Boeing 737 aircraft (filed as
Exhibit 10.15 to Registrant's Annual Report
on Form 10-K for the year ended December 31,
1992, and incorporated herein by reference;
supplements thereto filed as (i) Exhibits
10.20, 10.21 and 10.22 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993, and (ii)
Exhibit 10.8 to Registrant's Annual Report
on Form 10-K for the year ended December 31,
1993, and incorporated herein by reference).
(Filed with a request for confidential
treatment of certain portions.) (Filed as
Exhibit 10.14 to UAL Corporation's (File No.
1-6033) Form 10-Q for the quarter ended June
30, 1993, and incorporated herein by
reference.)
Exhibit 10.2 - Amendment No. 2 dated April
22, 1994 to A320 Purchase Agreement dated
August 10, 1992 between AVSA, S.A.R.L., as
seller, and United Air Lines, Inc., as
buyer, for the acquisition of Airbus
Industrie A320-200 model aircraft (as
previously amended and supplemented,
"A320-200 Purchase Agreement" (filed as
Exhibit 10.14 to Registrant's Annual Report
on Form 10-K for the year ended December 31,
1992; supplements thereto filed as Exhibits
10.4 and 10.5 to Registrant's Annual Report
on Form 10-K for the year ended December 31,
1993, and incorporated herein by
reference)). (Filed with a request for
confidential treatment of certain portions.)
(Filed as Exhibit 10.15 to UAL Corporation's
(File No. 1-6033) Form 10-Q for the quarter
ended June 30, 1993, and incorporated herein
by reference.)
Exhibit 10.3 - Letter Agreement dated May
19, 1994 to
A320-200 Purchase Agreement between AVSA,
S.A.R.L., as seller, and United Air Lines,
Inc., as buyer. (Filed with a request for
confidential treatment of certain portions.)
(Filed as Exhibit 10.16 to UAL Corporation's
(File No. 1-6033) Form 10-Q for the quarter
ended June 30, 1993, and incorporated herein
by reference.)
Exhibit 12.1 - Computation of Ratio of Earnings To Fixed
Charges.
(b) 1. Form 8-K dated June 2, 1994 - Registrant's parent company,
UAL Corporation, reported entering into an amendment to
Agreement and Plan of Recapitalization, dated as of
March 25, 1994 (the "Amended and Restated Agreement
and Plan of Recapitalization"), with Air Line Pilots
Association, International and the International Association
of Machinists and Aerospace Workers.
2. Form 8-K dated June 10, 1994 - Registrant submitted a
report to incorporate portions of Registrant's parent
company's and Registrant's Preliminary Proxy Statement/Joint
Prospectus.
3. Form 8-K dated June 29, 1994 - Registrant's parent
company reported entering into a second amendment
to the Amended and Restated Agreement and Plan of
Recapitalization.
4. Form 8-K dated July 8, 1994 to report Registrant's parent
company issuing a press release regarding employee
litigation filed against the International Association of
Machinists and Aerospace Workers.
5. Form 8-K dated July 11, 1994 to report that Merrill Lynch
may retain a portion of Registrant's parent company's
Depositary Shares for its own account for investment.
6. Form 8-K dated July 12, 1994 to report Registrant's parent
company issuing a press release announcing the closing of the
employee investment transaction and related transactions.
7. Form 8-K dated July 12, 1994 to report Registrant's parent
company's issuing a press release regarding parent company's
1994 second quarter earnings.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED AIR LINES, INC.
By: /s/ Gerald Greenwald
Gerald Greenwald
Chairman and Chief
Executive Officer
By: /s/ Douglas A. Hacker
Douglas A. Hacker
Senior Vice
President-Finance
(Principal Financial and
Accounting Officer)
Dated: August 12, 1994
Exhibit Index
Exhibit Description
No.
3.1 Restated Certificate of Incorporation
United Air Lines, Inc.'s indebtedness
under any single instrument does not
exceed 10% of United's total assets on
a consolidated basis. Copies of such
instruments will be furnished to the
Securities and Exchange Commission
upon request.
10.1 Letter Agreement No. 6-1162-JME-068
dated April 27, 1994 to each of (a)
Agreement dated December 18, 1990
between The Boeing Company, as seller,
and United Air Lines, Inc., and United
Worldwide Corporation, as buyer, for
the acquisition of Boeing 747-400
aircraft (filed as Exhibit 10.8 to
Registrant's Annual Report on Form
10-K for the year ended December 31,
1990, and incorporated herein by
reference; supplements thereto filed
as (i) Exhibits 10.4 and 10.5 to
Registrant's Annual Report on Form
10-K for the year ended December 31,
1991; (ii) Exhibits 10.3, 10.4, 10.5,
10.6 and 10.22 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993; and (iii)
Exhibit 10.3 to Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1993 and incorporated
herein by reference); (b) Agreement
dated April 26, 1989 between The
Boeing Company and United Air Lines,
Inc., as amended and supplemented, for
the acquisition of Boeing 757-200 and
737 aircraft (filed as Exhibit (10)K
to Registrant's Annual Report on Form
10-K for the year ended December 31,
1989, and incorporated herein by
reference; supplements thereto filed
as (i) Exhibits 10.12 and 10.13 to
Registrant's Annual Report on Form
10-K for the year ended December 31,
1991, (ii) Exhibits 10.14, 10.15,
10.16, 10.17, 10.18, 10.19 and 10.22
to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June
30, 1993, and (iii) Exhibit 10.7 to
Registrant's Annual Report on Form
10-K for the year ended December 31,
1993, and incorporated herein by
reference); (c) Agreement dated March
1, 1990 between The Boeing Company and
United Air Lines, Inc., as amended and
supplemented, for the acquisition of
Boeing 767-300ER aircraft (filed as
Exhibit (10)L to Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1989, and incorporated
herein by reference; supplements
thereto filed as (i) Exhibits 10.7,
10.8, 10.9 and 10.10 to Registrant's
Annual Report on Form 10-K for the
year ended December 31, 1991, (ii)
Exhibits 10.7, 10.8, 10.9, 10.10,
10.11, 10.12, 10.13 and 10.22 to
Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30,
1993, and (iii) Exhibit 10.6 to
Registrant's Annual Report on Form
10-K for the year ended December 31,
1993, and incorporated herein by
reference); (d) an amended and
restated agreement, dated March 19,
1992, between The Boeing Company and
United Air Lines, Inc., for the
acquisition of Boeing 737 aircraft
(filed as Exhibit 10.15 to
Registrant's Annual Report on Form 10-
K for the year ended December 31,
1992, and incorporated herein by
reference; supplements thereto filed
as (i) Exhibits 10.20, 10.21 and 10.22
to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June
30, 1993, and (ii) Exhibit 10.8 to
Registrant's Annual Report on Form 10-
K for the year ended December 31,
1993, and incorporated herein by
reference). (Filed with a request for
confidential treatment of certain
portions.) (Filed as Exhibit 10.14 to
UAL Corporation's (File No. 1-6033)
Form 10-Q for the quarter ended June
30, 1993, and incorporated herein by
reference.)
10.2 Amendment No. 2 dated April 22, 1994
to A320 Purchase Agreement dated
August 10, 1992 between AVSA,
S.A.R.L., as seller, and United Air
Lines, Inc., as buyer, for the
acquisition of Airbus Industrie
A320-200 model aircraft (as previously
amended and supplemented, "A320-200
Purchase Agreement" (filed as Exhibit
10.14 to Registrant's Annual Report on
Form 10-K for the year ended December
31, 1992; supplements thereto filed as
Exhibits 10.4 and 10.5 to Registrant's
Annual Report on Form 10-K for the
year ended December 31, 1993, and
incorporated herein by reference)).
(Filed with a request for confidential
treatment of certain portions.) (Filed
as Exhibit 10.15 to UAL Corporation's
(File No. 1-6033) Form 10-Q for the
quarter ended June 30, 1993, and
incorporated herein by reference.)
10.3 Letter Agreement dated May 19, 1994
to A320-200 Purchase Agreement between
AVSA, S.A.R.L., as seller, and United
Air Lines, Inc., as buyer. (Filed
with a request for confidential
treatment of certain portions.)
(Filed as Exhibit 10.16 to UAL
Corporation's (File No. 1-6033) Form
10-Q for the quarter ended June 30,
1993, and incorporated herein by
reference.)
12.1 Computation of Ratio of Earnings To
Fixed Charges.
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
United Air Lines, Inc.
The present name of the corporation is United Air Lines, Inc.
The corporation was incorporated under the name of UALCo Corporation,
the original Certificate of Incorporation having been filed with the
Secretary of State of Delaware on December 30, 1968. This Restated
Certificate of Incorporation of the corporation, which both restates
and further amends the provisions of the corporation's Certificate of
Incorporation as heretofore amended, restated or supplemented, was
duly adopted by the directors and stockholders of the corporation in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware. The capital of the
corporation will not be reduced under or by reason of any amendment in
the within Restated Certificate of Incorporation.
FIRST. The name of the corporation is
UNITED AIR LINES, INC.
SECOND. The registered office of the corporation in the State
of Delaware is located at 32 Loockerman Square, Suite L-100, in the
City of Dover, County of Kent. The name and address of its
registered agent is The Prentice-Hall Corporation System, Inc., 32
Loockerman Square, Suite L-100, City of Dover, County of Kent,
Delaware 19901.
THIRD. The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the corporation
shall have authority to issue is 1,000 shares of Common Stock, of the par
value of $5 per share.
FIFTH. The number of directors constituting the Board
of Directors shall be that number, not less than one, as shall be
fixed by the by-laws of the corporation.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make,
alter or repeal the by-laws of the corporation.
Wherever the term "Board of Directors" is used in this
Certificate of Incorporation, such term shall mean the Board of
Directors of the corporation; provided, however, that, to the extent
any committee of directors of the corporation is lawfully entitled to
exercise the powers of the Board of Directors, such committee may
exercise any right or authority of the Board of Directors under this
Certificate of Incorporation.
SIXTH. (a) A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit.
(b) Each person who was or is made a party or is threatened
to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact
that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer, of the
Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official
capacity as a director, officer, employee, or agent or in any
other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation
to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to
a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs,
executors and administrators: provided, however, that, except as
provided in paragraph (b) hereof, the Corporation shall indemnity
any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only it such
proceeding (or part thereof) was authorized by the board of
directors of the Corporation. The right to indemnification
conferred in this Article Sixth shall be a contract right and
shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition: provided, however, that, if the Delaware General
Corporation Law requires, the payment of such expenses incurred by
a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this Article
Sixth or otherwise. The Corporation may, by action of its Board
of Directors, provide indemnification to employees and agents of
the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(c) If a claim under paragraph (b) of this Article Sixth is not
paid in full by the Corporation within thirty days after a written
claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or part, the
claimant shall be entitled to be paid also the expense of prosecuting
such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending
any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct
which make it permissible under the Delaware General Corporation Law
for the Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set
forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant has not met such
applicable standard or conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable
standard of conduct.
(d) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final
disposition conferred in this Article Sixth shall not be exclusive of
any other right which any person may have or hereafter acquire under
any statute, provision of the Certification of Incorporation, by-law,
agreement, vote of stockholders or disinterested directors or
otherwise.
(e) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust
or other enterprise against any such expense, liability or loss,
whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Delaware
General Corporation Law.
SEVENTH. The corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by the laws
of Delaware, and all rights and powers conferred herein upon
stockholders and directors are granted subject to this reservation.
The Corporation shall not take any action which, were it
proposed to be taken by UAL Corporation, would require approval in
accordance with Article FIFTH, Section 3 (the "UAL Approval
Sections"), of the Restated Certificate of Incorporation of UAL
Corporation unless the stockholders or the Board of Directors of UAL
Corporation take or have taken such action as would be required under
the UAL Approval Sections were the action proposed to be taken and
taken by UAL Corporation.
IN WITNESS WHEREOF, said United Air Lines, Inc. has caused its
corporate seal to be affixed and this Restated Certificate of
Incorporation to be signed by James M. Guyette, its Executive Vice
President, and Francesca M. Maher, its Vice President - Law and
Corporate Secretary, this 12th day of July, 1994.
UNITED AIR LINES, INC.
By /s/ James M. Guyette
Executive Vice President
[CORPORATE SEAL]
ATTEST:
/s/ Francesca M. Maher
Vice President - Law and
Corporate Secretary
Exhibit 12.1
United Air Lines, Inc. and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Six Months Ended
June 30
1994 1993
(In Millions)
<S> <C> <C>
Earnings:
Loss before income taxes $ (16) $ (154)
Fixed charges, from below 493 541
Interest capitalized (19) (33)
Earnings $ 458 $ 354
Fixed charges:
Interest expense $ 161 $ 184
Portion of rental expense
representative of the
interest factor 332 357
Fixed charges $ 493 $ 541
Ratio of earnings to
fixed charges (a) (a)
(a) Earnings were inadequate to cover fixed charges by $35 million in the
first six months of 1994 and $187 million in the first six months of
1993.
</TABLE>
