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, 1999
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, 1999
----- --------------
Common Stock ($5 par value) 205
* 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, 1999
------------------------------------
Index
- -----
PART I. FINANCIAL INFORMATION Page No.
- ------ --------------------- -------
Item 1. Financial Statements
Condensed Statements of Consolidated 3
Financial Position - as of March 31, 1999
(Unaudited) and December 31, 1998
Statements of Consolidated Operations 5
(Unaudited) - for the three months
ended March 31, 1999 and 1998
Condensed Statements of Consolidated 6
Cash Flows (Unaudited) - for the three
months ended March 31, 1999 and 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 14
About Market Risk
PART II. OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
- ----------
Exhibit Index 17
- -------------
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,
1999 December 31,
Assets (Unaudited) 1998
- ------ ----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 231 $ 326
Short-term investments 353 360
Receivables, net 1,126 1,134
Related party receivables 250 46
Inventories, net 294 384
Deferred income taxes 257 259
Prepaid expenses and other 341 308
------- -------
2,852 2,817
------- -------
Operating property and equipment:
Owned 16,447 16,125
Accumulated depreciation and
amortization (5,095) (5,174)
------- -------
11,352 10,951
------- -------
Capital leases 2,972 2,702
Accumulated amortization (575) (599)
------- -------
2,397 2,103
------- -------
13,749 13,054
------- -------
Other assets:
Investments in affiliates 328 304
Intangibles, net 672 676
Related party receivables 449 430
Aircraft lease deposits 544 545
Prepaid rent 624 626
Other 454 378
------- -------
3,071 2,959
------- -------
$ 19,672 $ 18,830
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
United Air Lines, Inc. and Subsidiary Companies
Condensed Statements of Consolidated Financial Position
(In Millions)
<TABLE>
<CAPTION>
March 31,
1999 December 31,
Liabilities and Stockholder's Equity (Unaudited) 1998
- ------------------------------------ ----------- ------------
<S> <C> <C>
Current liabilities:
Short-term borrowings $ 50 $ 184
Current portions of long-term debt
capital lease obligations 408 274
Related party debt maturing
within one year 136 128
Advance ticket sales 1,627 1,429
Accounts payable 1,008 1,144
Other 2,653 2,551
5,882 5,710
------- -------
Long-term debt 2,741 2,858
------- -------
Long-term obligations under capital
leases 2,368 2,113
------- -------
Other liabilities and deferred credits:
Deferred pension liability 160 89
Postretirement benefit liability 1,465 1,424
Deferred gains 1,161 1,180
Other 1,106 1,132
------- -------
3,892 3,825
------- -------
Preferred stock committed to
Supplemental ESOP 762 691
------- -------
Stockholder's equity:
Common stock at par - -
Additional capital invested 229 21
ESOP capital 2,721 2,630
Retained earnings 1,183 1,108
Unearned ESOP preferred stock (101) (121)
Accumulated other comprehensive income (3) (2)
Other (2) (3)
------- -------
4,027 3,633
------- -------
Commitments and contingent
liabilities (See note)
$ 19,672 $ 18,830
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
United Air Lines, Inc. and Subsidiary Companies
Statements of Consolidated Operations (Unaudited)
(In Millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1999 1998
---- ----
<S> <C> <C>
Operating revenues:
Passenger $ 3,680 $ 3,565
Cargo 208 215
Other 262 264
------- -------
4,150 4,044
------- -------
Operating expenses:
Salaries and related costs 1,409 1,309
ESOP compensation expense 182 258
Aircraft fuel 395 441
Commissions 283 317
Purchased services 379 337
Aircraft rent 220 233
Landing fees and other rent 227 207
Depreciation and amortization 211 191
Aircraft maintenance 178 156
Other 526 478
------- -------
4,010 3,927
------- -------
Earnings from operations 140 117
------- -------
Other income (expense):
Interest expense (95) (81)
Interest capitalized 19 26
Interest income 11 16
Equity in earnings of affiliates 24 22
Miscellaneous, net 17 (11)
------- -------
(24) (28)
------- -------
Earnings before income taxes 116 89
Provision for income taxes 41 32
------- -------
Net earnings $ 75 $ 57
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
United Air Lines, Inc. and Subsidiary Companies
Condensed Statements of Consolidated Cash Flows (Unaudited)
(In Millions)
<TABLE>
<CAPTION>
Three Months
Ended March 31
--------------
1999 1998
---- ----
<S> <C> <C>
Cash and cash equivalents at
beginning of period $ 326 $ 268
----- -----
Cash flows from operating activities 759 803
----- -----
Cash flows from investing activities:
Additions to property and equipment (658) (893)
Proceeds on disposition of
property and equipment 113 4
Decrease in short-term investments 7 48
Increase in related party receivables (18) (3)
Other, net (4) (7)
----- -----
(560) (851)
----- -----
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 286 704
Repayment of long-term debt (271) (78)
Principal payments under capital
lease obligations (113) (90)
Purchase of equipment debt certificates
under Company leases (47) (664)
Increase (decrease) in short-term
borrowings (134) 119
Aircraft lease deposits (30) (31)
Other, net 15 13
----- -----
(294) (27)
----- -----
Decrease in cash and cash equivalents (95) (75)
----- -----
Cash and cash equivalents at
end of period $ 231 $ 193
===== =====
Cash paid during the period for:
Interest (net of amounts capitalized) $ 55 $ 44
Income taxes $ 25 $ 8
Non-cash transactions:
Capital lease obligations incurred $ 407 $ 161
Issuance of common stock to
parent company $ 204 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
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 1998.
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 1998 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 1998 were allocated in March 1999
as follows: 123,841 shares of Class 2 ESOP Preferred Stock were
contributed to the Non-Leveraged ESOP and an additional 615,757
shares were allocated in "book entry" form under the
Supplemental Plan. Also, 2,334,370 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, 1999.
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 items.
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.
A reconciliation of the total amounts reported by reportable
segments to the applicable amounts in the financial statements
follows:
<TABLE>
<CAPTION>
(In Millions) Three Months Ended March 31, 1999
- ------------- ---------------------------------
Reportable
Latin Segment Consolidated
Domestic Pacific America Atlantic Total Other Total
-------- ------- ------- -------- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue $2,887 $ 648 $ 206 $ 409 $4,150 $ - $4,150
Fully distributed earnings
before income taxes $ 265 $ 1 $ 16 $ 16 $ 298 $ - $ 298
</TABLE>
<TABLE>
<CAPTION>
(In Millions) Three Months Ended March 31, 1998
- ------------- ---------------------------------
Reportable
Latin Segment Consolidated
Domestic Pacific America Atlantic Total Other Total
-------- ------- ------- -------- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue $2,729 $ 715 $ 224 $ 376 $4,044 $ - $4,043
Fully distributed earnings
before income taxes $ 292 $ (1) $ 31 $ 25 $ 347 $ - $ 347
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31
(In Millions) 1999 1998
- ------------- ---- ----
<S> <C> <C>
Total fully distributed earnings
for reportable segments $ 298 $ 347
Less: ESOP compensation expense 182 258
---- ----
Total earnings before income taxes $ 116 $ 89
==== ====
</TABLE>
Investments in Affiliates
- -------------------------
United owns 33,440,000 common shares, approximately 32
percent, of Galileo International ("Galileo") through a wholly
owned subsidiary. Galileo is one of the world's leading
providers of electronic global distribution services for the
travel industry. United intends to sell approximately 17,500,000
common shares of Galileo in a secondary offering that Galileo has
filed with the Securities and Exchange Commission. United's
ability to sell the shares is subject to various conditions
including the underwriters' ability to reduce the number of
shares to be sold in certain circumstances. This potential sale
would reduce United's holdings in Galileo to 15 percent,
requiring United to discontinue the equity method of accounting
for its investment in Galileo. Equity earnings in Galileo were
$23 million and $20 million for the three-month periods ended
March 31, 1999 and 1998, respectively.
United owns approximately 2.2 million depository certificates
in Equant, a provider of international data network services to
multinational businesses and a single source for global desktop
communications. Each depository certificate represents a
beneficial interest in an Equant common share. These depository
certificates are currently subject to certain transferability
restrictions and are carried at their original cost, which is
nominal. At March 31, 1999, the fair value of United's
investment in Equant is approximately $165 million. Certain of
United's depository certificates are subject to a final
reallocation, however, United does not believe that the number of
depository certificates that it owns will significantly change
after the final reallocation.
Internet Travel Network (ITN) is a leading provider of
internet-based travel planning products tailored to individual,
corporate, travel supplier and travel agency customers. United
has a minority interest in ITN consisting of convertible
preferred stock, warrants and options. United's convertible
preferred stock can be converted into an approximate 25% interest
in ITN common stock. This ownership level can increase to 30% if
all options and warrants are exercised.
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, 1999, commitments for the purchase of
property and equipment, principally aircraft, approximated $7.0
billion, after deducting advance payments. An estimated $2.8
billion will be spent during the remainder of 1999, $1.9 billion
in 2000, $1.9 billion in 2001 and $0.4 billion in 2002 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.
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 $584 million at March 31, 1999, compared to $686
million at December 31, 1998. Cash flows from operating
activities amounted to $759 million. Financing activities
included principal payments under debt and capital lease
obligations of $271 million and $113 million, respectively, and
$30 million in aircraft lease deposits. Additionally, the
Company issued $286 million in long-term debt during the period
to finance the acquisition of aircraft.
Property additions, including aircraft and aircraft spare
parts, amounted to $658 million. Property dispositions resulted
in proceeds of $113 million. In the first quarter of 1999,
United took delivery of one A320, six A319, two B777, two B757,
three B747 and one B767 aircraft. Five of the aircraft were
purchased and ten were acquired under capital leases. In
addition, United acquired two B727 aircraft off-lease during the
first quarter and retired four DC10-10 and three B747 aircraft.
United has certain non-core investments in publicly traded
companies with market values substantially in excess of their
carrying values. It is United's policy to monetize its non-core
investments. In furtherance of this strategy, United announced
its intention to sell up to 17.5 million shares of common stock
in Galileo in a secondary offering by Galileo. The potential
proceeds from this sale will be used to achieve United's
financial goals which include investing in its core business,
improving its creditworthiness and returning cash to
shareholders.
At March 31, 1999, commitments for the purchase of
property and equipment, principally aircraft, approximated $7.0
billion, after deducting advance payments. Of this amount, an
estimated $2.8 billion is expected to be spent during the
remainder of 1999. 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 $140 million in the
first quarter of 1999, compared to operating earnings of $117
million in the first quarter of 1998. United had net earnings
in the 1999 first quarter of $75 million, compared to net
earnings of $57 million in the same period of 1998.
Specific factors affecting United's consolidated
operations for the first quarter of 1999 are described below.
First Quarter 1999 Compared with First Quarter 1998.
----------------------------------------------------
Operating revenues increased $106 million (3%) and
United's revenue per available seat mile (unit revenue)
decreased 0.1% to 9.82 cents. Passenger revenues increased $115
million (3%) due to a 5% increase in United's revenue passenger
miles partially offset by a 2% decrease in yield to 12.54 cents.
Available seat miles across the system were up 2% over the first
quarter of 1998, resulting in a passenger load factor increase
of 1.7 points to 68.9%. 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 5% 6% -%
Pacific (10%) (3%) (7%)
Atlantic 17% 17% (6%)
Latin America (1%) (1%) (7%)
</TABLE>
The pilot action at American Airlines resulted in
additional revenues of $45 million for the quarter. Domestic
unit revenues increased 2% from last year as load factor was 1.2
points higher and yield was flat. Atlantic unit revenues were
down 5% from last year, with yields being down 6% from last year
due to excess industry capacity that impacted the pricing in the
market. Pacific unit revenues were relatively flat year over
year.
Cargo revenues decreased $7 million (3%). A 1% lower
freight yield and a 5% lower mail yield resulted in a decrease
in cargo yield of 3%.
Operating expenses increased $83 million (2%) and United's
cost per available seat mile decreased slightly, from 9.52 cents
to 9.49 cents, including ESOP compensation expense. Without the
ESOP compensation expense, United's cost per available seat mile
would have been 9.06 cents, an increase of 2% from the 1998
first quarter. ESOP compensation expense decreased $76 million
(29%), 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. Aircraft maintenance
increased $22 million (14%) due primarily to an increase in
purchased maintenance as a result of increased heavy maintenance
visits. Purchased services increased $42 million (12%) due
principally to increased computer reservations fees and Y2K
expenses. Depreciation and amortization increased $20 million
(10%) due to an increase in the number of owned aircraft and
aircraft under capital lease. Salaries and related costs
increased $100 million (8%) due to mid-term wage adjustments
which took place in July 1998 and to increased staffing in
certain customer contact positions. Aircraft fuel decreased $46
million (10%) due to a 12% decrease in the cost of fuel from
61.7 cents to 54.4 cents a gallon. Commissions decreased $34
million (11%) due to a change in the commission structure
implemented in the third quarter of 1998 as well as a slight
decrease in commissionable revenues. Aircraft rent decreased
$13 million (6%) due to the aircraft refinancing completed in
the first quarter of 1998.
Other non-operating expense amounted to $24 million in the
first quarter of 1999 compared to $28 million in the first
quarter of 1998. Interest expense increased $14 million (17%)
due to the issuance of long-term debt. Miscellaneous, net
includes $14 million in gains on written yen call options and $7
million of other foreign exchange gains in 1999 compared to $4
million of other foreign exchange losses in 1998.
LABOR AGREEMENTS
- ----------------
On April 23, 1999, United announced a tentative agreement
with the International Association of Machinists and Aerospace
Workers ("IAM") for a contract for 19,000 public contact
employees (primarily customer service and reservations sales and
service representatives). The agreement is subject to
ratification by the affected employees. Management does not
anticipate that this agreement will have a material impact on
the unit cost guidance provided in the "Outlook for 1999"
section.*
UPDATE ON YEAR 2000 READINESS
- -----------------------------
Readers should refer to "Update on Year 2000 Readiness" in
Management's Discussion and Analysis of Financial Condition and
Results of Operations in the 1998 Annual Report on Form 10-K for
background information.
United continues to make steady progress in its Year 2000
remediation program. As discussed below, remediation, testing
and system integration testing of all major systems will be
substantially complete by June 30, 1999.
IT systems. The Company has substantially completed the
remediation and initial system testing of mainframe hardware and
software and other hardware infrastructure including voice and
data networks. In addition, substantially all internally
developed IT software applications have been remediated and
tested.
System integration testing for the mission critical IT
systems is on schedule to be completed by June 30, 1999, while
for all other systems, integration testing will be substantially
complete by June 30, 1999.
Non IT systems. The remediation and testing phase of date-
sensitive, critical non-IT systems is proceeding on schedule and
will be substantially complete by June 30, 1999.
Critical Business Partners. The Company has contacted
substantially all of its Critical Business Partners. For those
partners not having a Year 2000 program in place with a planned
completion date of June 30, 1999, the Company may look for
alternate suppliers.
The results of the study undertaken by the Air Transport
Association ("ATA") to determine the process domestic airports
are using to achieve Year 2000 readiness, shows that most large
domestic airports have made substantial progress towards being
Year 2000 ready. A similar project undertaken by the
International Air Transport Association ("IATA") shows that
although most international airports have made progress during
the past few months, certain key airports are behind schedule.
The Company's aircraft manufacturers have concluded that
there are no safety of flight issues related to the Year 2000
date rollover as to their aircraft.
Concurrent with ensuring that all the systems will be
remediated and tested for the Year 2000 date rollover, the
Company is developing contingency plans for all the systems that
are critical to its operations. These contingency plans are
expected to be completed by June 30, 1999. These contingency
plans, together with the airline readiness reviews planned during
the second quarter of 1999, are designed to reduce the likelihood
that the Company's operations will be interrupted by Year 2000
related issues.
The Company anticipates that project costs will range
between $85 and $90 million, with 35% being capitalized. To date
the Company has incurred $41 million in project costs ($31
million in expense and $10 million in capital). During the 1999
first quarter the Company incurred $13 million in project costs
($8 million in expense and $5 million in capital).
Readers are cautioned that the "Update on Year 2000 Readiness"
section contains forward-looking information. Please see the
"Outlook for 1999" for a list of some factors that could cause
actual results to differ materially from expected results.*
OUTLOOK FOR 1999
- ----------------
Information regarding guidance for United's 1999 outlook
can be obtained from UAL Corporation's Report on Form 10-Q for
the quarter ended March 31, 1999.
Management's Discussion and Analysis of Financial Condition
and Results of Operations contains sections with forward-looking
statements which are identified with an asterisk(*). Information
included in those sections and the "Outlook for 1999" paragraphs
is forward-looking and actual results could differ materially
from expected results. Factors that could significantly impact
expected capacity, international revenues and profits, unit revenues,
fully distributed unit costs and fuel prices include: industry capacity
decisions, the airline pricing environment, fuel prices, the
success of the Company's cost-control efforts, the impact of the
new labor agreement with the IAM, actions of the U.S., foreign
and local governments, willingness of customers to travel, the
Asian economic environment and travel patterns, foreign currency
exchange rate fluctuations, UAL common stock price fluctuations,
the economic environment of the airline industry and the general
economic environment. Some factors that could significantly
impact the Company's expected Year 2000 readiness and the
estimated cost thereof include: the results of the technical
assessment, remediation and testing of date-sensitive systems and
equipment and the ability of critical business partners,
including domestic and international airport authorities,
aircraft manufacturers and the Federal Aviation Administration,
to achieve Year 2000 readiness.
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 1998. Significant changes which have occurred
since year-end are as follows:
Foreign Currency Risk -
<TABLE>
<CAPTION>
(In millions, except average Notional Average Estimated
contract rate) Amount Contract Rate Fair Value
------ ------------- ----------
<S> <C> <C> <C>
Forward exchange contracts
Japanese Yen - Purchased forwards $ 190 105.87 $ (8)
- Sold forwards $ 13 118.28 $ -
Hong Kong Dollar - Sold forwards $ 85 7.87 $ (1)
French Franc - Purchased forwards $ 50 5.05 $ -
Currency options
Japanese Yen - Call options $ 227 127.88 $ (24)
- Put options $ 226 128.80 $ 3
</TABLE>
Price Risk (Aircraft fuel) -
<TABLE>
<CAPTION>
(In millions, except average Notional Average Estimated
contract rate) Amount Contract Rate Fair Value
-------- ------------- ----------
<S> <C> <C> <C>
Purchased call contracts - Crude oil $ 298 $15.39/bbl $ 32
Sold put contracts - Crude oil $ 23 $14.64/bbl $ -
</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) Form 8-K dated January 27, 1999 to report United's
statement on America West Airlines.
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 6, 1999
Exhibit Index
-------------
Exhibit No. Description
- ---------- -----------
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
Exhibit 12
<TABLE>
<CAPTION>
United Air Lines, Inc. and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
Three Months Ended
March 31
------------------
1999 1998
---- ----
(In Millions)
<S> <C> <C>
Earnings:
Earnings before income taxes $ 116 $ 89
Losses of affiliates 2 -
Fixed charges, from below 248 232
Undistributed earnings of affiliates (19) (20)
Interest capitalized (19) (26)
---- ----
Earnings $ 328 $ 275
==== ====
Fixed charges:
Interest expense $ 95 $ 81
Portion of rental expense representative
of the interest factor 153 151
---- ----
Fixed charges $ 248 $ 232
==== ====
Ratio of earnings to fixed charges 1.32 1.19
==== ====
</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, 1999 AND CONDENSED STATEMENT
OF CONSOLIDATED FINANCIAL POSITION AS OF MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000,000
<S>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<PERIOD-TYPE> 3-MOS
<CASH> 231
<SECURITIES> 353
<RECEIVABLES> 1,126
<ALLOWANCES> 0
<INVENTORY> 294
<CURRENT-ASSETS> 2,852
<PP&E> 19,419
<DEPRECIATION> 5,670
<TOTAL-ASSETS> 19,672
<CURRENT-LIABILITIES> 5,882
<BONDS> 5,109
0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 19,672
<SALES> 0
<TOTAL-REVENUES> 4,150
<CGS> 0
<TOTAL-COSTS> 4,010
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> 116
<INCOME-TAX> 41
<INCOME-CONTINUING> 75
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
