FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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) (Zip Code)
Registrant's telephone number, including area code (847) 700-4000
------------------------------------------------------------------
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 April 30, 1998
----- --------------
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 March 31, 1998
------------------------------------
Index
- -----
PART I. FINANCIAL INFORMATION Page No.
- ------ --------------------- -------
Item 1. Financial Statements
Condensed Statements of Consolidated 3
Financial Position - as of March 31, 1998
(Unaudited) and December 31, 1997
Statements of Consolidated Operations 4
(Unaudited) - for the three months
ended March 31, 1998
Condensed Statements of Consolidated 6
Cash Flows (Unaudited) - for the three
months ended March 31, 1998
Notes to Consolidated Financial 7
Statements (Unaudited)
Item 2. Management's Discussion and Analysis 10
of Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures 13
About Market Risk
PART II. OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
- ----------
Exhibit Index 16
- -------------
PART I. FINANCIAL INFORMATION
------ ---------------------
Item 1. Financial Statements
United Air Lines, Inc. and Subsidiary Companies
Condensed Statements of Consolidated Financial Position
(In Millions)
<TABLE>
<CAPTION>
March 31,
1998 December 31,
Assets (Unaudited) 1997
- ------ ----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 193 $ 268
Short-term investments 461 509
Receivables, net 1,168 1,049
Related party receivables 26 5
Inventories, net 377 355
Deferred income taxes 242 245
Prepaid expenses and other 378 484
------ ------
2,845 2,915
------ ------
Operating property and equipment:
Owned 14,950 14,196
Accumulated depreciation and
amortization (5,115) (5,116)
------ ------
9,835 9,080
------ ------
Capital leases 2,393 2,319
Accumulated amortization (599) (625)
------ ------
1,794 1,694
------ ------
11,629 10,774
------ ------
Other assets:
Investments in affiliates 241 223
Intangibles, net 699 703
Related party receivables 409 406
Aircraft lease deposits 346 318
Prepaid rent 508 60
Other 721 708
------ ------
2,924 2,418
------ ------
$ 17,398 $ 16,107
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
United Air Lines, Inc. and Subsidiary Companies
Condensed Statements of Consolidated Financial Position
(In Millions)
<TABLE>
<CAPTION>
March 31,
1998 December 31,
Liabilities and Stockholder's Equity (Unaudited) 1997
- ------------------------------------ ----------- ------------
<S> <C> <C>
Current liabilities:
Short-term borrowings $ 119 $ -
Current portions of long-term debt
and capital lease obligations 337 405
Related party debt maturing
within one year 107 97
Advance ticket sales 1,534 1,267
Accounts payable 1,022 1,030
Other 2,466 2,497
------ ------
5,585 5,296
------ ------
Long-term debt 2,775 2,081
------ ------
Long-term obligations under
capital leases 1,742 1,676
------ ------
Other liabilities and deferred credits:
Postretirement benefit liability 1,405 1,361
Deferred gains 1,191 1,210
Other 1,167 1,266
------ ------
3,763 3,837
------ ------
Preferred stock committed to
Supplemental ESOP 600 514
------ ------
Stockholder's equity:
Common stock at par - -
Additional capital invested 29 29
ESOP capital 2,214 2,053
Retained earnings 863 805
Unearned ESOP preferred stock (166) (177)
Other (7) (7)
------ ------
2,933 2,703
------ ------
Commitments and contingent
liabilities (See note)
$ 17,398 $ 16,107
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
United Air Lines, Inc. and Subsidiary Companies
Statements of Consolidated Operations (Unaudited)
(In Millions)
<TABLE>
<CAPTION>
Three Months
Ended March 31
1998 1997
---- ----
<S> <C> <C>
Operating revenues:
Passenger $ 3,565 $ 3,626
Cargo 215 195
Other 264 288
------ ------
4,044 4,109
------ ------
Operating expenses:
Salaries and related costs 1,309 1,240
ESOP compensation expense 258 184
Aircraft fuel 441 554
Commissions 317 364
Purchased services 337 307
Aircraft rent 233 237
Landing fees and other rent 207 222
Depreciation and amortization 191 176
Aircraft maintenance 156 138
Other 478 498
------ ------
3,927 3,920
------ ------
Earnings from operations 117 189
------ ------
Other income (expense):
Interest expense (81) (70)
Interest capitalized 26 24
Interest income 16 11
Equity in earnings of affiliates 22 25
Miscellaneous, net (11) (13)
------ ------
(28) (23)
------ ------
Earnings before income taxes 89 166
Provision for income taxes 32 63
------ ------
Net earnings $ 57 $ 103
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
United Air Lines, Inc. and Subsidiary Companies
Condensed Statements of Consolidated Cash Flows (Unaudited)
(In Millions)
<TABLE>
<CAPTION>
Three Months
Ended March 31
1998 1997
---- ----
<S> <C> <C>
Cash and cash equivalents at
beginning of period $ 268 $ 203
------ ------
Cash flows from operating activities 803 679
------ ------
Cash flows from investing activities:
Additions to property and equipment (893) (308)
Proceeds on disposition of
property and equipment 4 14
Decrease (increase) in short-term
investments 48 (37)
Increase in related party receivables (3) (21)
Other, net (7) -
------ ------
(851) (352)
------ ------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 704 -
Repayment of long-term debt (78) (13)
Principal payments under capital
lease obligations (90) (59)
Purchase of equipment debt certificates
under Company operating leases (664) -
Increase in short-term borrowings 119 -
Aircraft lease deposits (31) (56)
Other, net 13 10
------ ------
(27) (118)
------ ------
Increase (decrease) in cash and
cash equivalents (75) 209
------ ------
Cash and cash equivalents at
end of period $ 193 $ 412
====== ======
Cash paid during the period for:
Interest (net of amounts
capitalized) $ 44 $ 51
Income taxes $ 8 $ 2
Non-cash transactions:
Capital lease obligations incurred $ 161 $ 239
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 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 1997.
Employee Stock Ownership Plans
- ------------------------------
Pursuant to amended labor agreements which provide
for wage and benefit reductions and work-rule changes which
commenced July 1994, UAL has agreed to issue convertible
preferred stock to employees. Note 2 of the Notes to
Consolidated Financial Statements in the 1997 Annual Report
on Form 10-K contains additional discussion of the
agreements, stock to be issued to employees and the related
accounting treatment. Shares earned in 1997 were allocated
in March 1998 as follows: 97,406 shares of Class 2 ESOP
Preferred Stock were contributed to the Non-Leveraged ESOP
and an additional 889,031 shares were allocated in "book
entry" form under the Supplemental Plan. Also, 2,087,531
shares of Class 1 ESOP Preferred Stock were allocated under
the Leveraged ESOP. Finally, an additional 768,493 shares
of Class 1 and Class 2 ESOP Preferred Stock have been
committed to be released by UAL since January 1, 1998.
Income Taxes
- ------------
The provisions for income taxes are based on the
estimated annual effective tax rate, which differs from
the federal statutory rate of 35% principally due to state
income taxes, dividends on ESOP Preferred Stock and
certain nondeductible expenses. Deferred tax assets are
recognized based upon United's history of operating
earnings and expectations for future taxable income.
Long-Term Debt and Lease Obligations
- ------------------------------------
In March 1998, the Company, through a special-purpose
financing entity which 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.
The proceeds from the commercial paper, as well as $60
million from internally generated funds, were used to
refinance $650 million face-value of equipment certificates,
plus accrued interest, supporting leveraged lease transactions
between United and various lessors. While the terms of the
original leases between United and these lessors remain
unchanged, the refinancing transaction effectively
substitutes the commercial paper obligation for future
minimum payments under these leases of $1,003 million, which
are scheduled for payment as follows:
<TABLE>
<CAPTION>
(In millions)
After
1998 1999 2000 2001 2002 2002 Total
---- ---- ---- ---- ---- ---- -----
<C> <C> <C> <C> <C> <C> <C>
$62 $60 $61 $62 $56 $702 $1,003
</TABLE>
Additionally, in connection with the acquisition of one
B747 aircraft, the Company issued $100 million of secured notes
during the quarter.
Other Comprehensive Income
- --------------------------
On January 1, 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" which establishes standards for
displaying comprehensive income and its components in a
full set of general purpose financial statements. The
reconciliation of net income to comprehensive net income is
as follows:
<TABLE>
<CAPTION>
(In millions) Three Months Ended
- ------------- March 31
1998 1997
---- ----
<S> <C> <C>
Net earnings, as reported $ 57 $ 103
Other comprehensive income - (3)
---- ----
Total comprehensive income $ 57 $ 100
==== ====
March 31 December 31
1998 1997
---- ----
Accumulated other comprehensive income
included in other stockholders' equity $ (2) $ (2)
==== ====
</TABLE>
Related Party Transactions
- --------------------------
At March 31, 1998 and December 31, 1997, United had
accounts receivable from UAL of $208 million and $205
million, respectively.
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 March 31, 1998, commitments for the purchase of
property and equipment, principally aircraft, approximated
$8.0 billion, after deducting advance payments. An
estimated $2.0 billion will be spent during the remainder
of 1998, $2.1 billion in 1999, $1.6 billion in 2000 and
$2.3 billion in 2001 and thereafter. The major commitments
are for the purchase of B777, B747, B767, B757, A320 and
A319 aircraft, which are scheduled to be delivered through
2002. The above commitments are part of the Company's plan
to eventually add 68 aircraft to its passenger fleet, thus
increasing the fleet from 571 aircraft at December 31, 1997
to an expected 639 aircraft at the end of 2001.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
United's total of cash and cash equivalents and short-
term investments was $654 million at March 31, 1998,
compared to $777 million at December 31, 1997. Cash flows
from operating activities amounted to $803 million.
Financing activities included principal payments under debt
and capital lease obligations of $78 million and $90
million, respectively, and deposits of an equivalent $31
million in Japanese yen and French francs with certain
banks in connection with the financing of certain capital
lease transactions. Additionally, the Company issued $704
million in long-term debt during the period and used part
of the proceeds to purchase $664 million in debt
certificates under Company operating leases. See "Long-
Term Debt and Lease Obligations" in the Notes to
Consolidated Financial Statements for further details.
Property additions, including aircraft and aircraft
spare parts, amounted to $893 million. Property
dispositions resulted in proceeds of $4 million. In the
first quarter of 1998, United took delivery of one A320,
four A319, three B777, two B757 and one B747 aircraft.
Nine of the aircraft were purchased and two were acquired
under capital leases. In addition, United acquired two
B727 and two DC10-10 aircraft off-lease during the first
quarter and retired eleven B737 and three B747 aircraft.
At March 31, 1998, commitments for the purchase of
property and equipment, principally aircraft, approximated
$8.0 billion, after deducting advance payments. Of this
amount, an estimated $2.0 billion is expected to be spent
during the remainder of 1998. For further details, see
"Contingencies and Commitments" in the Notes to
Consolidated Financial Statements.
RESULTS OF OPERATIONS
- ---------------------
Summary of Results
------------------
United's earnings from operations were $117 million
in the first quarter of 1998, compared to operating
earnings of $189 million in the first quarter of 1997.
United had net earnings in the 1998 first quarter of $57
million compared to net earnings of $103 million in the
same period of 1997.
Specific factors affecting United's consolidated
operations for the first quarter of 1998 are described
below.
First Quarter 1998 Compared with First Quarter 1997.
----------------------------------------------------
Operating revenues decreased $65 million (2%) and
United's revenue per available seat mile (unit revenue)
decreased 4% to 9.83 cents. Passenger revenues decreased
$61 million (2%) due to a 2% decrease in United's revenue
passenger miles and a slight decrease in yield to 12.77
cents. Available seat miles across the system were up 2%
over the first quarter of 1997, resulting in a passenger
load factor decrease of 2.7 points to 67.2%. The following
analysis by market is based on information reported to the
U.S. Department of Transportation:
Latin America revenue passenger miles increased 8%
over the same period last year on an 18% increase in
capacity, with a 5% decrease in yield. Atlantic revenue
passenger miles increased 15% on 18% higher capacity and
yield decreased 3% for the period. In the Pacific, revenue
passenger miles decreased 14% on a 5% decrease in capacity
and yield decreased 6% from the same period last year.
Pacific yields continue to be negatively impacted by the
weakness of the Japanese yen to the dollar, and the effects
of the Asian economic turmoil on demand for travel.
Domestic revenue passenger miles remained unchanged despite
2% higher capacity with a 1% increase in yield, even though
the Federal passenger excise tax was not in effect for most
of the 1997 first quarter.
Cargo revenues increased $20 million (10%) on
increased freight ton miles of 18%. A 4% lower freight
yield was only partially offset by a 3% higher mail yield
for an overall decrease in cargo yield of 3%. Other
operating revenues decreased $24 million (8%) due primarily
to the sale of the Apollo Travel Services Partnership
("ATS") in July 1997, offset by increases in frequent flyer
program partner-related revenues and contract sales to
third parties.
Operating expenses increased $7 million (0.2%) and
United's cost per available seat mile decreased 2%, from
9.72 cents to 9.52 cents, including ESOP compensation
expense. Without the ESOP compensation expense, United's
cost per available seat mile would have been 8.90 cents, a
decrease of 4% from the 1997 first quarter. ESOP
compensation expense increased $74 million (40%),
reflecting the increase in the estimated average fair value
of ESOP stock committed to be released to employees as a
result of UAL's higher common stock price. Aircraft
maintenance increased $18 million (13%) due primarily to an
increase in purchased maintenance as a result of increased
heavy maintenance visits. Purchased services increased $30
million (10%) due to increases in computer reservations
fees, as a result of the sale of ATS, and credit card
discounts. Depreciation and amortization increased $15
million (9%) due to an increase in the number of owned
aircraft and aircraft under capital lease. Salaries and
related costs increased $69 million (6%) due to mid-term
wage adjustments which took place in July 1997 and to
increased staffing in certain customer-oriented positions.
Aircraft fuel decreased $113 million (20%) due to a 21%
decrease in the cost of fuel from 78.3 cents to 61.7 cents
a gallon. Commissions decreased $47 million (13%) due to a
change in the commission structure implemented in the third
quarter of 1997 as well as a slight decrease in
commissionable revenues. Other expenses decreased $20
million (4%) as a result of the sale of ATS.
Other expense amounted to $28 million in the first
quarter of 1998 compared to $23 million in the first
quarter of 1997. Interest expense increased $11 million
(16%) due to the issuance of long-term debt in 1997 and
1998. Interest income increased $5 million (45%) due to
higher average interest rates on investment balances.
LABOR AGREEMENTS
- ----------------
On April 2, 1998, the International Association of
Machinists and Aerospace Workers ("IAM") filed an
application with the National Mediation Board ("NMB")
seeking recognition as the collective-bargaining
representative for United's approximately 19,000 public
contact employees (primarily customer service and
reservations sales and service representatives). The IAM
currently represents approximately 24,000 mechanics, ramp
servicemen, flight dispatch employees and food service
employees at United. The NMB has authorized a mail ballot
election, a process which could take one to two months.
DEPARTMENT OF TRANSPORTATION POLICY STATEMENT
- ---------------------------------------------
On April 10, 1998, the Department of Transportation
("DOT") issued a proposed Statement of the Department of
Transportation's Enforcement Policy Regarding Unfair
Exclusionary Conduct in the Air Transportation Industry.
The proposed policy sets forth tentative findings and
guidelines for use by the DOT in evaluating whether major
carriers' competitive responses to new entry warrant
enforcement action. Under the current DOT schedule,
comments are due by June 9, 1998.
United is evaluating the proposal, but at this time is
unable to determine what form the proposal may take or what
impact, if any, the proposal, if implemented, may have upon
its business.
UNITED-DELTA ALLIANCE
- ---------------------
On April 30, 1998, United announced a tentative, seven-
year bilateral alliance with Delta Air Lines, Inc.
("Delta"), subject to approval of both airlines' pilot
unions. If approved, the alliance would allow code-sharing
between the carriers as well as reciprocal participation in
frequent flyer programs. For comparison purposes, the
companies estimate a combined gross revenue benefit of $600
million if the tentative alliance is fully implemented,
including international code-sharing. The revenue benefits
are expected to accrue roughly equally to each carrier.
This figure assumes no other major U.S. domestic alliances.
The companies expect a positive revenue benefit compared to
today even if other U.S. domestic alliances are completed.
(See "Outlook for 1998" for risk factors which could impact
the expected revenue benefit from this alliance.)
United and Delta initially expect to implement code-
sharing on U.S. domestic flights and would eventually expand
to include international flights in Latin America and the
Pacific, pending agreement of both companies' foreign
alliance partners and the appropriate governments. Europe
is excluded from the tentative agreement because of the
uncertainty and complexity of the European regulatory
environment.
OUTLOOK FOR 1998
- ----------------
In 1998, available seat miles are expected to
increase approximately 2.5%, with total system revenue per
available seat mile being the same as or slightly above
1997's level. Costs per available seat mile excluding ESOP
charges are expected to be about the same as the prior year.
This unit cost forecast assumes the average cost of jet fuel
per gallon is lower in 1998 than in 1997. Industry capacity
increases in international markets and the economic
situation in Asia are forecast to adversely affect
international revenue performance.
For the second quarter, United expects available seat
miles to increase between 2.5% and 3% versus the same period
last year, and expects total system revenue per available
seat mile to decrease by about 0.5% compared to the same
period of 1997. Costs per available seat mile excluding
ESOP charges are expected to be about the same as in the
second quarter of last year.
The information included in the previous paragraphs
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, international revenues, unit revenues,
unit costs and fuel prices include: industry capacity
decisions, the airline pricing environment, fuel prices, the
success of the company's cost-control efforts, actions of
the U.S., foreign and local governments, the Asian economic
environment and travel patterns, foreign currency exchange
rate fluctuations, the economic environment of the airline
industry and the general economic environment. Factors that
could significantly affect revenue benefits with respect to
the proposed alliance transaction with Delta include: the
implementation of alliances by competitors, the outcome of
discussions with both carriers' pilot unions, international
partners, and commuter carriers regarding implementation of
the proposed transaction, actions of the U.S., foreign and
local governments, the economic environment of the airline
industry and the general economic environment.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
For information regarding the Company's exposure to
certain market risks, see Item 7A. Quantitative and
Qualitative Disclosures About Market Risk in United's Annual
Report on Form 10-K for the year 1997. Significant changes
which have occurred since year-end are as follows:
<TABLE>
<CAPTION>
(In millions, except Notional Average Estimated
average contract rates) Amount Contract Rate Fair Value
- ----------------------- ------ ------------- ----------
<S> <C> <C> <C>
Sold put contracts - Crude oil $ 407 $18.61/bbl $ (48)
- Heating oil $ 193 $ 0.52/gal $ (30)
</TABLE>
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
- ------ --------------------------------
(a) Exhibits
A list of exhibits included as part of this Form 10-Q is
set forth in an Exhibit Index which immediately precedes
such exhibits.
(b) No reports on Form 8-K have been filed during the first
quarter of 1998.
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/ Douglas A. Hacker
---------------------
Douglas A. Hacker
Senior Vice President
and Chief Financial
Officer (principal
financial officer)
By: /s/ Frederic F. Brace
---------------------
Frederic F. Brace
Vice President - Finance
(principal accounting
officer)
Dated: May 4, 1998
Exhibit Index
-------------
Exhibit No. Description
- ---------- -----------
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
Exhibit 12.1
United Air Lines, Inc. and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Three Months
Ended
March 31
1998 1997
---- ----
(In Millions)
<S> <C> <C>
Earnings:
Earnings before income taxes $ 89 $ 166
Fixed charges, from below 232 235
Undistributed earnings of affiliates (20) (25)
Interest capitalized (26) (24)
---- ----
Earnings $ 275 $ 352
==== ====
Fixed charges:
Interest expense $ 81 $ 70
Portion of rental expense
representative of the interest factor 151 165
---- ----
Fixed charges $ 232 $ 235
==== ====
Ratio of earnings to fixed charges 1.19 1.50
==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM UNITED AIR LINES, INC.'S STATEMENT OF
CONSOLIDATED OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
1998 AND CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL
POSITION AS OF MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000,000
<S>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<PERIOD-TYPE> 3-MOS
<CASH> 193
<SECURITIES> 461
<RECEIVABLES> 1,194
<ALLOWANCES> 0
<INVENTORY> 377
<CURRENT-ASSETS> 2,845
<PP&E> 17,343
<DEPRECIATION> 5,714
<TOTAL-ASSETS> 17,398
<CURRENT-LIABILITIES> 5,585
<BONDS> 4,517
0
0
<COMMON> 0
<OTHER-SE> 2,933
<TOTAL-LIABILITY-AND-EQUITY> 17,398
<SALES> 0
<TOTAL-REVENUES> 4,044
<CGS> 0
<TOTAL-COSTS> 3,927
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> 89
<INCOME-TAX> 32
<INCOME-CONTINUING> 57
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
